<PAGE> 1
As filed with the Securities and Exchange Commission on August 11, 1997
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
SAFETY COMPONENTS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 3714 33-0596831
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification Number)
incorporation or organization) Classification Code Number)
</TABLE>
AUTOMOTIVE SAFETY COMPONENTS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 3714 33-0611750
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification Number)
incorporation or organization) Classification Code Number)
</TABLE>
ASCI HOLDINGS GERMANY (DE), INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 3714 33-0727084
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification Number)
incorporation or organization) Classification Code Number)
</TABLE>
ASCI HOLDINGS UK (DE), INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 3714 33-0727081
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification Number)
incorporation or organization) Classification Code Number)
</TABLE>
ASCI HOLDINGS MEXICO (DE), INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 3714 33-0727083
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification Number)
incorporation or organization) Classification Code Number)
</TABLE>
ASCI HOLDINGS CZECH (DE), INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 3714 33-0727080
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification Number)
incorporation or organization) Classification Code Number)
</TABLE>
ASCI HOLDINGS ASIA (DE), INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 3714 33-0757465
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification Number)
incorporation or organization) Classification Code Number)
</TABLE>
VALENTEC INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 3714 54-1658773
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification Number)
incorporation or organization) Classification Code Number)
</TABLE>
GALION, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 3483 33-0611991
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification Number)
incorporation or organization) Classification Code Number)
</TABLE>
<PAGE> 2
VALENTEC SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 3489 33-0618610
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification Number)
incorporation or organization) Classification Code Number)
</TABLE>
SAFETY COMPONENTS FABRIC TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 2221 58-2328795
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification Number)
incorporation or organization) Classification Code Number)
</TABLE>
2160 North Central Road
Fort Lee, NJ 07024
(201) 592-0008
(Address, including zip code, and telephone number,
including area code, of registrant's principal offices)
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JEFFREY J. KAPLAN
2160 North Central Road
Fort Lee, NJ 07024
(201) 592-0008
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
RICHARD A. GOLDBERG, ESQ.
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
(212) 758-9500
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APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Proposed Proposed
Title of Class of Maximum Maximum
Securities Amount Offering Price Aggregate Amount of
to be Registered to be Registered(1) Per Note(1) Offering Price(1) Registration Fee
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10 1/8% Senior
Subordinated Notes Due
2007, Series B, of Safety
Components
International, Inc....... $90,000,000 100% $90,000,000 $27,273
- ---------------------------------------------------------------------------------------------------------------------------
Guarantees of
Automotive Safety
Components
International, Inc....... None(2)
- ---------------------------------------------------------------------------------------------------------------------------
Guarantees of ASCI
Holdings Germany
(DE), Inc............... None(2)
- ---------------------------------------------------------------------------------------------------------------------------
Guarantees of ASCI
Holdings UK (DE),
Inc...................... None(2)
- ---------------------------------------------------------------------------------------------------------------------------
Guarantees of ASCI
Holdings Mexico (DE),
Inc...................... None(2)
- ---------------------------------------------------------------------------------------------------------------------------
Guarantees of ASCI
Holdings Czech (DE),
Inc...................... None(2)
- ---------------------------------------------------------------------------------------------------------------------------
Guarantees of ASCI
Holdings Asia (DE),
Inc...................... None(2)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Guarantees of Valentec
International
Corporation.............. None(2)
- ---------------------------------------------------------------------------------------------------------------------------
Guarantees of Galion,
Inc...................... None(2)
- ---------------------------------------------------------------------------------------------------------------------------
Guarantees of Valentec
Systems, Inc............. None(2)
- ---------------------------------------------------------------------------------------------------------------------------
Guarantees of Safety None(2)
Components Fabric
Technologies, Inc........
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) on the basis of the value of the senior
subordinated notes to be received by the registrant pursuant to the
Exchange Offer described herein on the estimated date of exchange,
, 1997.
(2) No further fee is payable pursuant to Rule 457(n).
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said section 8(a),
may determine.
----------
<PAGE> 4
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED AUGUST 11, 1997
PROSPECTUS
OFFER FOR ANY AND ALL OUTSTANDING
10 1/8% SENIOR SUBORDINATED NOTES DUE 2007, SERIES A
IN EXCHANGE FOR 10 1/8% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
SAFETY COMPONENTS INTERNATIONAL, INC.
The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , unless extended.
---------------------
Safety Components International, Inc., a Delaware corporation (the
"Company"), is hereby offering, upon the terms and subject to the conditions set
forth in this Prospectus and the accompanying Letter of Transmittal (the "Letter
of Transmittal," which together with this Prospectus constitutes the "Exchange
Offer"), to issue $90,000,000 aggregate principal amount of its 10 1/8% Senior
Subordinated Notes due 2007, Series B (the "Exchange Notes") in exchange for a
like principal amount of the issued and outstanding 10 1/8% Senior Subordinated
Notes due 2007, Series A, of the Company (the "Old Notes" and together with the
Exchange Notes, the "Notes").
The Old Notes were sold by the Company on July 24, 1997 to BT
Securities Corporation, BancAmerica Securities, Inc. and Alex. Brown & Sons
Incorporated (the "Initial Purchasers") in a transaction not registered under
the Securities Act of 1933, as amended (the "Securities Act"), in reliance upon
an exemption under the Securities Act (the "Offering"). The Initial Purchasers
subsequently placed the Old Notes (i) with qualified institutional buyers,
within the United States, in reliance upon Rule 144A under the Securities Act
and (ii) to a limited number of institutional "accredited investors," within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act, that agreed
in writing to comply with certain transfer restrictions and other conditions.
Accordingly, the Old Notes may not be reoffered or otherwise transferred in the
United States or to U.S. Persons (as defined in Regulation S under the
Securities Act) unless registered under the Securities Act or unless an
applicable exemption from the registration requirements of the Securities Act is
available. The Offering was conditioned upon, and a significant portion of the
proceeds of the Offering was used to fund, the Company's acquisition of all of
the assets of the Air Restraint and Industrial Fabrics Division of JPS
Automotive L.P. ("JPS"), a subsidiary of Collins & Aikman Corporation (the "JPS
Acquisition"), which was consummated on July 24, 1997. The Old Notes are
designated for trading in the Private Offering, Resales and Trading through
Automated Linkages ("Portal") Market of the National Association of Securities
Dealers, Inc. and are eligible for resale pursuant to Rule 144A under the
Securities Act. After the Exchange Offer, the Old Notes that remain outstanding
will continue to be subject to the restrictions on transfer contained in the
legend thereon and may not be offered or sold except pursuant to an exemption
from, or in a transaction not subject to the registration requirements of, the
Securities Act.
There is no established trading market for the Exchange Notes. The
Initial Purchasers have advised the Company that they presently intend to make a
market in the Exchange Notes as permitted by applicable laws and regulations.
The Initial Purchasers are not obligated, however, to make a market in the
Exchange Notes and any market-making may be discontinued at any time at the sole
discretion of the Initial Purchasers. The Company does not presently intend to
list the Exchange Notes on any securities exchange or to seek approval for
quotation through any automated quotation system. Accordingly, no assurance can
be given as to the liquidity of, or trading markets for, Exchange Notes that an
active public market for the Exchange Notes will develop. See "Risk Factors --
Absence of Established Trading Market." To the extent that a market for the
Exchange Notes does develop, the market value of the Exchange Notes will depend
on market conditions (such as yields on alternative investments, general
economic conditions, the Company's financial condition and other conditions).
Such conditions might cause the Exchange Notes, to the extent that they are
actively traded, to trade at a significant discount from face value.
The terms of the Exchange Notes are identical in all material respects
to the Old Notes, except that (i) the Exchange Notes will bear a Series B
designation and a different CUSIP Number from the Old Notes, (ii) the issuance
of the Exchange Notes will have been registered under the Securities Act and,
therefore, the Exchange Notes will not bear legends restricting the transfer
thereof and (iii) holders of the Exchange Notes will not be entitled to certain
rights of holders of Old Notes under
<PAGE> 5
the Registration Rights Agreement. The Exchange Notes will evidence the same
debt as the Old Notes (which they replace) and will be issued under and be
entitled to the benefits of the Indenture (the "Indenture"), dated as of July
24, 1997, by and among the Company, the Guarantors named therein and IBJ
Schroder Bank & Trust Company, as Trustee (the "Trustee" or the "Exchange
Agent"). See "The Exchange Offer" and "Description of Exchange Notes."
Interest on the Exchange Notes will accrue from the date of original
issuance, i.e., July 24, 1997 (the "Issue Date") thereof, payable semi-annually
in arrears on each of January 15 and July 15 of each year, commencing January
15, 1998 at the rate of 10 1/8% per annum. Holders whose Old Notes are accepted
for exchange will be deemed to have waived the right to receive any interest
accrued on the Old Notes.
The Exchange Notes will be redeemable, in whole or in part, at the
option of the Company on or after July 15, 2002 at the redemption prices set
forth herein, plus accrued interest to the date of redemption. In addition, the
Exchange Notes are not redeemable by the Company prior to July 15, 2002, except
that, at any time on or prior to July 15, 2000, the Company, at its option, may
redeem, with the net cash proceeds of one or more Public Equity Offerings (as
defined) by the Company, up to 25% of the aggregate principal amount of the
Notes originally issued, at a redemption price equal to 110.125% of the
principal amount thereof, plus accrued interest to the date of redemption,
provided that at least 75% of the aggregate principal amount of the Notes
originally issued remains outstanding immediately following such redemption.
Upon a Change of Control (as defined), each holder of Exchange Notes will have
the right to require the Company to repurchase such holder's Exchange Notes at a
price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest to the repurchase date. In addition, the Company will be obligated to
offer to repurchase the Notes at 100% of the principal amount thereof plus
accrued and unpaid interest to the date of repurchase in the event of certain
Asset Sales (as defined). See "Description of the Exchange Notes."
The Exchange Notes will be, and the Old Notes are (i) general unsecured
obligations of the Company and (ii) subordinated in right of payment to all
existing and future Senior Indebtedness (as defined), including, without
limitation, the Company's obligations under the Credit Agreement (as defined),
and to all existing and future indebtedness of the Company's subsidiaries that
are not Guarantors (as defined). The Exchange Notes will rank, and the Old Notes
rank (i) pari passu in right of payment with any future senior subordinated
indebtedness of the Company and (ii) senior in right of payment to all other
subordinated obligations of the Company. The Exchange Notes will be, and the Old
Notes are, unconditionally guaranteed (the "Guarantees") on a senior
subordinated basis by the Company's domestic subsidiaries (the "Guarantors").
The Guarantees are, or will be, as the case may be, general unsecured
obligations of the Guarantors and are, or will be, as the case may be,
subordinated in right of payment to all existing and future Guarantor Senior
Indebtedness (as defined). The Guarantees rank , or will rank, as the case may
be, pari passu with any future senior subordinated indebtedness of the
Guarantors and rank, or will rank, as the case may be, senior in right of
payment to all other subordinated obligations of the Guarantors. As of March 31,
1997, on a pro forma basis after giving effect to the Valentec Acquisition (as
defined), the Offering and the use of proceeds described therein, the Company
and its subsidiaries would have had an aggregate of $17.6 million of Senior
Indebtedness (excluding unused commitments of $27.0 million (excluding
outstanding letters of credit) available under the Credit Agreement) and the
Company's subsidiaries that are not Guarantors would have had approximately $9.8
million of indebtedness outstanding which would rank senior to the Notes. See
"Use of Proceeds," "Unaudited Pro Forma Financial Data" and "Description of the
Credit Agreement."
-----------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING THEIR OLD NOTES.
-----------------------
The current offer and sale of the Exchange Notes are being registered
under the Registration Statement of which this Prospectus forms a part in order
to satisfy certain obligations of the Company contained in the Registration
Rights Agreement (the "Registration Rights Agreement"), dated as of July 24,
1997, between the Company and the Trustee, on behalf of the original purchasers
of the Old Notes and various Exchange Agreements between the Company and holders
of the Old Notes who are a party thereto (collectively, the "Exchange
Agreements"). Based on interpretations by the staff of the Securities and
Exchange Commission (the "Commission") set forth in certain "no-action" letters
issued to third parties
ii
<PAGE> 6
and unrelated to the Company and the Exchange Offer, the Company believes that
Exchange Notes issued pursuant to the Exchange Offer in exchange for Old Notes
may be offered for resale, resold and otherwise transferred by holders thereof
(other than any such holder which is an "affiliate" of the Company 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 Exchange Notes are acquired in the ordinary course of such holders'
business and such holders have no arrangement or understanding with any person
to participate in the distribution of such Exchange Notes in violation of the
provisions of the Securities Act. See "The Exchange Offer -- Resale of the
Exchange Notes." Holders of Old Notes wishing to accept the Exchange Offer must
represent to the Company, as required by the Registration Rights Agreement, that
such conditions have been met. A broker-dealer holding Old Notes may participate
in the Exchange Offer provided that it acquired the Old Notes for its own
account as a result of market-making or other trading activities. Each
broker-dealer (a "Participating Broker-Dealer") that receives Exchange Notes for
its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of Exchange Notes
received in exchange for Old Notes where such Old Notes were acquired by such
Participating Broker-Dealer as a result of market-making or other trading
activities. The Company and the Guarantors have agreed to make available, during
the period required by the Securities Act, a prospectus meeting the requirements
of the Securities Act for use by any Participating Broker-Dealer and other
persons, if any, with similar prospectus delivery requirements for use in
connection with any such resale of Exchange Notes. See "The Exchange Offer --
Purpose and Effect of the Exchange Offer" and "Plan of Distribution."
The Company will accept for exchange Old Notes validly tendered prior
to 5:00 p.m., New York City time, on , 1997, unless extended by the
Company in its sole discretion (the "Expiration Date"). Tenders of Old Notes may
be withdrawn at any time prior to the Expiration Date. The Exchange Offer is
subject to certain customary conditions, but is not conditioned upon any minimum
aggregate principal amount of Old Notes being tendered for exchange. See "The
Exchange Offer -- Certain Conditions to the Exchange Offer."
The Company will not receive any proceeds from the Exchange Offer.
Pursuant to the Registration Rights Agreement, the Company will pay all the
expenses incident to the Exchange Offer (other than any underwriting discounts
or commissions). In the event the Company terminates the Exchange Offer and does
not accept for exchange any Old Notes, the Company will promptly return the Old
Notes to the holders thereof. See "The Exchange Offer."
-----------------------
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
OR THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE GUARANTORS. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE
ACCOMPANYING LETTER OF TRANSMITTAL, NOR ANY EXCHANGE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
iii
<PAGE> 7
UNTIL , 1997 (90 DAYS AFTER COMMENCEMENT OF THE EXCHANGE OFFER),
ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
PROSPECTIVE INVESTORS IN THE EXCHANGE NOTES ARE NOT TO CONSTRUE THE
CONTENTS OF THIS PROSPECTUS AS INVESTMENT, LEGAL OR TAX ADVICE. EACH INVESTOR
SHOULD CONSULT ITS OWN COUNSEL, ACCOUNTANT AND OTHER ADVISORS AS TO LEGAL, TAX,
BUSINESS, FINANCIAL AND RELATED ASPECTS OF THE EXCHANGE NOTES. NEITHER THE
COMPANY NOR ANY OF THE GUARANTORS IS MAKING ANY REPRESENTATION TO ANY
PROSPECTIVE INVESTOR IN THE EXCHANGE NOTES REGARDING THE LEGALITY OF AN
INVESTMENT THEREIN BY SUCH PERSON UNDER APPROPRIATE LEGAL INVESTMENT OR SIMILAR
LAWS.
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B WITH THE STATE OF NEW HAMPSHIRE NOR
THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN
THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT
ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER
ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A
SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY
WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO,
ANY PERSON, SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE
MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATION
INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
The Date of this Prospectus is , 1997
iv
<PAGE> 8
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form S-4 (together
with all amendments thereto referred to herein as the "Registration Statement"
under the Securities Act, with the Commission covering the securities being
offered by this Prospectus. This Prospectus does not contain all the information
set forth or incorporated by reference in the Registration Statement and the
exhibits and schedules relating thereto, certain portions of which have been
omitted as permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the securities offered by this
Prospectus, reference is made to the Registration Statement and the exhibits and
schedules thereto which are on file at the offices of the Commission and may be
obtained upon payment of the fee prescribed by the Commission, or may be
examined without charge at the offices of the Commission. Statements contained
in this Prospectus as to the contents of any contract or other documents
referred to are not necessarily complete, and are qualified in all respects by
such reference.
The Company is currently subject to the informational requirements of
the Exchange Act and in accordance therewith files periodic reports, proxy
statements and other information with the Commission. The Registration
Statement, as well as such periodic reports, proxy statements and other
information, can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington
D.C. 20549; or at its regional offices located at Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can also
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission also
maintains a Web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants, such as the
Company, that file electronically with the Commission. The Company's common
stock, $.01 par value per share (the "Common Stock"), is quoted on the NASDAQ
National Market System ("NASDAQ") and periodic reports, proxy and information
statements and other information concerning the Company can also be inspected at
NASDAQ.
In addition, the Company has agreed that, for so long as any Notes
remain outstanding, it will deliver to the Trustee within 15 days after filing
of the same with the Commission, copies of the quarterly and annual reports and
of the information, documents and other reports, if any, which the Company is
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act. Notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
will file with the Commission, to the extent permitted, and provide the Trustee
and holders with such annual reports and such information, documents and other
reports specified in Sections 13 and 15(d) of the Exchange Act.
v
<PAGE> 9
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and is subject
to, the more detailed information and the consolidated financial statements and
notes thereto appearing elsewhere in this Prospectus. As used herein, unless the
context otherwise requires, the terms the "Company" and "SCI" refer to Safety
Components International, Inc. and its subsidiaries. As used herein, capitalized
terms relating to the terms of the Exchange Notes shall have the respective
meanings ascribed to them in "Description of the Exchange Notes."
This prospectus includes "forward-looking statements" within the
meaning of section 27a of the Securities Act and Section 21e of the United
States Securities Exchange Act of 1934, as amended (the "exchange act"). All
statements other than statements of historical facts included in this
prospectus, including, without limitation, statements regarding the Company's
future financial position, business strategy, budgets, projected costs and plans
and objectives of management for future operations, are forward-looking
statements. In addition, forward-looking statements generally can be identified
by the use of forward-looking terminology such as "may", "will", "expect",
"intend", "estimate", "anticipate", "believe", or "continue" or the negative
thereof or variations thereon or similar terminology. Although the Company
believes that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. Important factors that could cause actual results to differ
materially from the Company's expectations ("cautionary statements") are
disclosed under "risk factors" and elsewhere in this Prospectus, including,
without limitation, in conjunction with the forward-looking statements included
in this Prospectus. All subsequent written and oral forward-looking statements
attributable to the company, or persons acting on its behalf, are expressly
qualified in their entirety by the cautionary statements.
THE COMPANY
SCI is a leading, low-cost independent supplier of automotive airbag
fabric and cushions, with operations in North America, Europe and Asia. The
Company sells airbag fabric domestically and cushions worldwide to all of the
major airbag module integrators that outsource such products. The Company
believes it produces approximately 40% of all airbag fabric utilized in North
America and that it manufactures approximately 10% of all airbag cushions
installed worldwide.
The Company believes the JPS Acquisition represents an important step
in its airbag growth strategy because it will enable the Company to combine
JPS's low-cost operations and strong market position in airbag fabric with its
low-cost operations and strong market position in airbag cushions to exploit
worldwide growth in demand for airbag module systems ("airbags" or "airbag
modules"). According to the automotive research firm, Tier One, the worldwide
market for automotive airbag modules has grown from approximately 3.6 million
installed airbag modules in 1991 to approximately 57.2 million in 1996.
According to the same source, installed airbag modules are projected to more
than double to approximately 123.1 million by the year 2000 as a result of
increasing usage of airbags in Europe and Asia and growth in demand for
side-impact airbags. The Company's pro forma consolidated fiscal 1997 net sales
and Adjusted EBITDA (as defined) were $173.2 million and $23.4 million,
respectively.
As part of its airbag growth strategy, the Company has recently
commenced manufacturing and supplying metal airbag module components to its
customers, further increasing the content per airbag module supplied by the
Company. Airbag fabric, cushions and related metal components accounted for
$130.9 million or 75.6% of pro forma consolidated fiscal 1997 net sales. The
Company believes that it is also, as a result of the JPS Acquisition, a leading
manufacturer of value-added synthetic fabrics used in a variety of niche
industrial and commercial applications such as ballistics luggage, industrial
filtration systems, aircraft escape slides, military tents and certain
industrial apparel. Industrial fabrics accounted for $22.6 million or 13.0% of
pro forma consolidated fiscal 1997 net sales and are produced using the same
machinery that produces airbag fabric. The ability to interchange airbag and
specialty industrial fabrics using the same equipment and similar manufacturing
processes allows the Company to effectively utilize its manufacturing assets and
lower per unit overhead costs. The Company also produces defense related
products, primarily projectiles and other metal components for small to medium
caliber training and tactical ammunition, which accounted for $19.7 million or
11.4% of the Company's pro forma consolidated fiscal 1997 net sales.
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<PAGE> 10
COMPETITIVE STRENGTHS
The Company has developed a strong competitive position in the airbag
fabric and cushion segments of the airbag module market and believes that
additional growth opportunities exist as a result of the following competitive
strengths:
Market Leadership. The Company is a leading independent supplier of
automotive airbag fabric and cushions with operations in North America, Europe
and Asia. The Company believes that it produces approximately 40% of all airbag
fabric sold in North America, the largest market for airbag fabric, and that it
accounts for approximately 10% of the global market for airbag cushions. The
Company supplies airbag fabric to every domestic airbag module integrator that
outsources all or a portion of its airbag fabric requirements, including
AlliedSignal Inc. ("AlliedSignal"), TRW, Inc. ("TRW") and AutoLiv Automotive
Safety Products, Inc. ("AutoLiv") (whose aggregate sales accounted for over 60%
of all domestic airbag modules installed in 1996). The Company also supplies
approximately 70% and 100% of all airbag cushions outsourced by TRW and Petri
Inc. ("Petri"), respectively (whose aggregate sales accounted for approximately
30% of installed modules worldwide in 1996). Moreover, as an established airbag
cushion supplier, the Company believes that certain barriers to entry exist,
such as difficulty in obtaining qualification requirements imposed by
automakers, which will assist the Company in maintaining or increasing market
share by limiting the ability of new suppliers to enter the market.
Low-Cost Producer. The Company is a low-cost producer of automotive
airbag fabric and cushions. Its low-cost position is facilitated by: (i) low
labor rates in various international production facilities; (ii) high levels of
automation in certain production facilities; and (iii) high capacity utilization
rates as a result of interchangeable production processes. In addition, the
Company has recently entered into a joint venture to produce finished airbag
cushions in China, which will enable the Company to take advantage of lower
labor costs as that facility begins commercial production.
Integrated Manufacturing Process. The JPS Acquisition is expected to
result in a more integrated manufacturing process, eventually reducing the
Company's cost of raw materials and providing it with the ability to package
both fabric and cushions in response to customer demand. In addition, the JPS
Acquisition is expected to enable the Company to reduce fabric waste and to
transfer weaving technologies to its airbag cushion production facilities.
Global Manufacturing and Sourcing Capabilities. The Company has airbag
cushion production facilities in Mexico, Germany, the Czech Republic and Wales
and recently established a joint venture for airbag cushion production in China.
The Company believes it benefits from its global manufacturing strategy through:
(i) low labor costs; (ii) customer and geographic diversity; (iii) less
sensitivity to regional economic downturns; and (iv) access to new customers and
the ability to service existing customers in high growth regions such as Europe
and Asia. In addition, the Company believes it has the ability to transfer
weaving technology to certain geographic regions that are not currently being
serviced.
Commitment to Quality and Service. The Company believes its commitment
to quality and customer service is a competitive advantage. As a result of its
stringent emphasis on quality control and its advanced inspection processes, the
Company has attained a near zero defect rate on the production of its airbag
cushions. Most of the Company's facilities meet industry quality standards such
as QS-9000/ISO 9002, and all seven of the Company's plants are expected to be so
certified prior to 1997 year-end. In addition, the Company believes its reliable
on-time delivery performance and advanced research and development capabilities
have resulted in strong customer relationships, which the Company believes will
continue to result in recurring revenues, particularly in light of supplier
qualification requirements and customers' desires to consolidate suppliers.
Ancillary Products and Services. The Company has established strong
positions in various niche fabric markets and has targeted a number of high
growth market segments in which it believes it will be able to gain significant
market share. In addition, the Company will continue to identify new
applications for its airbag manufacturing and machining capabilities and further
diversify into related products to maximize capacity utilization.
GROWTH STRATEGY
The Company has experienced rapid growth in sales and profitability in
recent years due to increased production and outsourcing of airbag cushions by
its airbag module integrator customers. The Company has also recently benefited
from the production of other airbag components in response to increased
outsourcing of such parts by airbag module integrators.
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<PAGE> 11
Installation of airbag modules is expected to double between 1996 and 2000 and
the Company believes that it is well-positioned to benefit from this growth due
to its global presence, low-cost integrated production capabilities and strong
customer relationships. Specific elements of the Company's growth strategy
include:
Enhance Low-Cost Position. The ability to remain a low-cost supplier is
a key element of the Company's automotive airbag growth strategy as it enables
the Company to price its products competitively, gain market share and maintain
or increase profit margins. To enhance its low-cost position, the Company is
evaluating a number of cost reduction opportunities including: (i) consolidating
its European production facilities; (ii) consolidating certain administrative
functions; (iii) reducing labor costs through automation; (iv) reducing
transportation costs; and (v) exploiting economies of scale, particularly as
production volumes increase at its new Czech Republic facility. Labor costs are
also expected to decline as the Chinese joint venture becomes a production
source. In addition, the combination of the Company and the Air Restraint and
Industrial Fabrics Division of JPS also presents opportunities to further reduce
airbag cushion production costs.
Increase Airbag Volumes. The Company has been and believes it will
continue to be successful in attaining product qualification and acceptance
among airbag customers. Airbag cushion sales have increased from 783,000 units
in fiscal year 1994 to 5.2 million units in fiscal year 1997 as a result of
rapid growth in demand for airbag modules in North American and European markets
and the continuing trend among airbag module integrators to purchase airbag
components from third parties, such as the Company, specializing in the
production of those components. The Company believes it is well-positioned to
benefit from the continued strong demand for airbag modules due to its: (i)
low-cost manufacturing strategy; (ii) established relationships with airbag
module integrators; and (iii) its reputation for high product quality standards.
Diversify Production Within Core Competence/Distribution Network. The
Company intends to increase revenues and maximize plant efficiencies by
providing related products to new and existing customers. The Company has
successfully applied its manufacturing expertise to develop new products
utilizing existing manufacturing capabilities. For example, the Company has
expanded from parachute and metal parts production for the military into airbag
cushions and metal products for airbag module integrators. Additionally, as a
result of the JPS Acquisition, the Company is well-positioned to further
diversify its business and exploit additional opportunities for growth by
cross-marketing complementary manufacturing capabilities.
Increase Content Per Airbag Module. The machining operations acquired
through the acquisition of Valentec International Corporation ("Valentec") will
enable the Company to increase the content per airbag module supplied to the
Company's customers. The Company has recently started manufacturing and
assembling end caps and retainer brackets to airbags produced for two of its
largest airbag customers and believes that additional opportunities exist to
increase the amount of content supplied to its customers. This strategy is
intended to benefit the Company's customers by enabling them to consolidate
suppliers while at the same time rendering the Company less dependent on
industry volumes as content per airbag module increases.
Expand Through Strategic Acquisitions. The Company intends to
selectively pursue opportunities to acquire companies that offer complementary
products or services to those industries currently served by the Company. This
will enable existing and future customers to consolidate supply sources by
obtaining a broader range of value added products and services from the Company.
The Company also intends to evaluate new technologies and processes that will
enable it to reduce product costs and/or increase the level of products or
services provided to existing and future customers. The Company will also
continue to evaluate acquisitions and joint ventures that will enable the
Company to further integrate production of airbags and other products.
SIGNIFICANT TRANSACTIONS
The JPS Acquisition. On July 24, 1997, the Company acquired all of the
assets of the Air Restraint/Industrial Fabrics Division (the "Division") of JPS
for $56.3 million in cash (including 18 looms delivered at closing) and the
assumption of certain liabilities, subject to post-closing adjustments. In
addition, the Company made a payment to JPS at the closing to enable it to pay
off existing indebtedness of the Division of approximately $650,000 at the
closing. The Offering was conditioned upon, and a significant portion of the
proceeds of the Offering was used to finance, the JPS Acquisition. Safety
Components Fabric Technologies, Inc., a newly formed wholly-owned subsidiary of
the Company,
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<PAGE> 12
acquired all of the assets under the JPS Acquisition (the Division is sometimes
hereinafter referred to as "JPS" or "SCFT"). SCFT is a leading, low-cost
supplier of airbag fabric in North America and is also a leading manufacturer of
value-added synthetic fabrics used in a variety of niche industrial and
commercial applications. The Company believes the JPS Acquisition represents an
important step in its airbag growth strategy because it will enable the Company
to: (i) combine strong market positions in airbag fabric and cushions; (ii)
integrate low-cost manufacturing capabilities in airbag fabric and cushions to
exploit the worldwide growth in demand for airbag modules; (iii) interchange
airbag and specialty industrial fabrics using the same equipment and
manufacturing processes thereby allowing the Company to effectively utilize its
manufacturing assets; and (iv) enhance and expand its customer base. See
"Business -- Significant Transactions -- The JPS Acquisition."
The Valentec Acquisition. Pursuant to a definitive Stock Purchase
Agreement, effective as of May 22, 1997, the Company acquired in a stock for
stock transaction all of the outstanding capital stock of Valentec (the
"Valentec Acquisition"). Valentec is a high-volume manufacturer of stamped and
precision machined products for the automotive, commercial and defense
industries. The Company believes that Valentec's machining capabilities and
relationships with airbag module integrators will enable the Company to increase
the amount of content per airbag module supplied by the Company. Pursuant to
this strategy, the Company has begun producing end caps and retainer brackets
for two of its larger airbag module customers. In addition, the Company believes
that it will be able to eliminate certain duplicative corporate functions at
Valentec, resulting in improved efficiencies and cost savings. See "Business --
Significant Transactions -- The Valentec Acquisition."
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<PAGE> 13
THE INITIAL OFFERING
Old Notes............... The Old Notes were sold by the Company on
July 24, 1997 to BT Securities Corporation,
BancAmerica Securities, Inc. and Alex. Brown
& Sons Incorporated (the "Initial
Purchasers") pursuant to a Purchase
Agreement dated July 21, 1997 (the "Purchase
Agreement"). The Initial Purchasers
subsequently resold the Old Notes (i) within
the United States to qualified institutional
buyers, in reliance upon Rule 144A under the
Securities Act and (ii) to a limited number
of institutional "accredited investors" that
agreed in writing to comply with certain
transfer restrictions and other conditions.
Registration Rights Pursuant to the Purchase Agreement, the
Agreement............... Company, the Guarantors and the Initial
Purchasers entered into the Registration
Rights Agreement, which grants the holders
of the Old Notes certain exchange and
registration rights. The Exchange Offer is
intended to satisfy such exchange rights
which terminate upon the consummation of the
Exchange Offer.
THE EXCHANGE OFFER
Securities Offered...... $90,000,000 aggregate principal amount of
10 1/8% Senior Subordinated Notes due 2007,
Series B, of the Company.
The Exchange Offer...... $1,000 principal amount of Exchange Notes in
exchange for each $1,000 principal amount of
Old Notes. As of the date hereof,
$90,000,000 aggregate principal amount of
Old Notes are outstanding. The Company will
issue the Exchange Notes to holders on or
promptly after the Expiration Date.
Based on interpretations by the staff of the
Commission set forth in certain "no-action"
letters issued to third parties and
unrelated to the Company and the Exchange
Offer, the Company believes that Exchange
Notes issued pursuant to the Exchange Offer
in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by
holders thereof (other than any such holder
which is an "affiliate" of the Company
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 Exchange Notes are acquired in the
ordinary course of such holders' business
and such holders have no arrangement or
understanding with any person, to
participate in the distribution of such
Exchange Notes in violation of the
provisions of the Securities Act. Holders of
Old Notes wishing to accept the Exchange
Offer must represent to the Company, as
required by the Registration Rights
Agreement, that such conditions have been
met.
A Participating Broker-Dealer holding Old
Notes may participate in the Exchange Offer
provided that it acquired the Old Notes for
its own account as a result of market-making
or other trading activities. Each
Participating Broker-Dealer that receives
Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that
it will deliver a prospectus in connection
with any resale of such Exchange Notes. The
Letter of Transmittal states that by so
acknowledging and by delivering a
prospectus, a Participating Broker-Dealer
will not be deemed to admit that it is an
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<PAGE> 14
"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 Participating
Broker-Dealer in connection with resales of
Exchange Notes received in exchange for Old
Notes where such Old Notes were acquired by
such Participating Broker-Dealer as a result
of market-making or other trading
activities. The Company and the Guarantors
have agreed to make available, during the
period required by the Securities Act, a
prospectus meeting the requirements of the
Securities Act for use by any Participating
Broker-Dealer and other persons, if any,
with similar prospectus delivery
requirements for use in connection with any
such resale of Exchange Notes. See "Plan of
Distribution."
Any holder who tenders in the Exchange Offer
with the intention to participate, or for
the purpose of participating, in a
distribution of the Exchange Notes could not
rely on the position of the staff of the
Commission enunciated in "no-action" letters
and, in the absence of an exemption
therefrom, must comply with the registration
and prospectus delivery requirements of the
Securities Act in connection with any resale
transaction. Failure to comply with such
requirements in such instance may result in
such holder incurring liability under the
Securities Act for which the holder is not
indemnified by the Company.
Expiration Date......... 5:00 p.m., New York City time, on _____ 1997
unless the Exchange Offer is extended, in
which case the term "Expiration Date" means
the latest date and time to which the
Exchange Offer is extended.
Accrued Interest on the Interest on each Exchange Note will accrue
Exchange Notes and the from the Issue Date, i.e., July 24, 1997.
Old Notes............. Holders whose Old Notes are accepted for
exchange will be deemed to have waived the
right to receive any interest accrued on the
Old Notes.
Conditions to the The Exchange Offer is subject to certain
Exchange Offer........ customary conditions, which may be waived by
the Company, but it is not conditioned upon
any minimum aggregate principal amount of
Old Notes being tendered for exchange. See
"The Exchange Offer--Conditions."
Procedures for Tendering Each holder of Old Notes wishing to accept
Old Notes............. the Exchange Offer must complete, sign and
date the accompanying Letter of Transmittal,
or a facsimile thereof, in accordance with
the instructions contained herein and
therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile,
together with the Old Notes and any other
required documents, to the Exchange Agent,
prior to 5:00 p.m., New York City time, on
the Expiration Date at the address set forth
herein. By executing the Letter of
Transmittal, each holder will represent to
the Company, among other things, (i) that
any Exchange Notes to be received by it will
be acquired in the ordinary course of its
business, (ii) that at the time of the
commencement of the Exchange Offer it has no
arrangement or understanding with any person
to participate in the distribution (within
the meaning of Securities Act) of the
Exchange Notes in violation of the
Securities Act, (iii) that it is not an
"affiliate" (as defined in Rule 405
promulgated under the Securities Act) of the
Company, (iv) if such holder is not a
Participating Broker-Dealer, that it is not
engaged in, and does not intend to engage
in, the distribution of Exchange Notes and
(v) if such holder is a Participating
Broker-Dealer that will receive Exchange
Notes for its own account in exchange for
Old Notes that were acquired as a result of
market-making or other trading activities,
6
<PAGE> 15
that it will deliver a prospectus meeting
the requirements of the Securities Act in
connection with any resale of such Exchange
Notes. See "The Exchange Offer--Purpose and
Effect of the Exchange Offer" and
"--Procedures for Tendering."
Untendered Old Notes.... Upon consummation of the Exchange Offer the
provisions of the Registration Rights
Agreement shall continue to apply (i) in the
case of any holders that, in certain
circumstances, become holders of
unregistered Exchange Notes with respect to
Old Notes, (ii) in the case of any holder
that participates in the Exchange Offer and
does not receive Exchange Notes on the date
of the exchange that may be sold without
restriction under state and federal
securities laws (other than due solely to
the status of such holder as an "affiliate"
of the Company within the meaning of the
Securities Act) and (iii) to Exchange Notes
held by Participating Broker-Dealers.
Consequences of The Old Notes that are not exchanged
Failure to Exchange... pursuant to the Exchange Offer will remain
restricted securities. Accordingly, such Old
Notes may be resold only (i) to the Company,
(ii) pursuant to Rule 144A or Rule 144 under
the Securities Act or pursuant to some other
exemption under the Securities Act, (iii)
outside the United States to a foreign
person pursuant to the requirements of Rule
904 under the Securities Act, or (iv)
pursuant to an effective registration
statement under the Securities Act. See "The
Exchange Offer--Consequences of Failure to
Exchange."
Shelf Registration If, (i) because of any change in law or in
Statement............. currently prevailing interpretations of the
staff of the Commission, the Company and the
Guarantors are not permitted to effect an
Exchange Offer, (ii) the Exchange Offer is
not consummated within 135 days of the Issue
Date, (iii) in certain circumstances,
certain holders of unregistered Exchange
Notes so request, or (iv) in the case of any
Holder that participates in the Exchange
Offer, such Holder does not receive Exchange
Notes on the date of the exchange that may
be sold without restriction under state and
federal securities laws (other than due
solely to the status of such Holder as an
affiliate of the Company or any Guarantor
within the meaning of the Securities Act),
then in each case, the Company and the
Guarantors have agreed to (x) promptly
deliver to the holders and the Trustee
written notice thereof and (y) at their sole
expense, (a) as promptly as practicable,
file a shelf registration statement covering
resales of the Notes (the "Shelf
Registration Statement"), (b) use their best
efforts to cause the Shelf Registration
Statement to be declared effective under the
Securities Act and (c) use their best
efforts to keep effective the Shelf
Registration Statement until the earlier of
two years after the Issue Date or such time
as all of the applicable Notes have been
sold thereunder. The Company will, in the
event that a Shelf Registration Statement is
filed, provide to each holder copies of the
prospectus that is a part of the Shelf
Registration Statement, notify each such
holder when the Shelf Registration Statement
for the Notes has become effective and take
certain other actions as are required to
permit unrestricted resales of the Notes. A
Holder that sells Notes pursuant to the
Shelf Registration Statement will be
required to be named as a selling security
holder in the related prospectus and to
deliver a prospectus to purchasers, will be
subject to certain of the civil liability
provisions under the Securities Act in
connection with such sales and will be bound
by the provisions of the Registration Rights
Agreement that are applicable to such holder
(including certain indemnification rights
and obligations).
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<PAGE> 16
Special Procedures for Any beneficial owner whose Old Notes are
Beneficial Owners..... registered in the name of a broker, dealer,
commercial bank, trust company or other
nominee and who wishes to tender should
contact such registered holder promptly and
instruct such registered holder to tender on
such beneficial owner's behalf. If such
beneficial owner wishes to tender on such
owner's own behalf, such owner must, prior
to completing and executing the Letter of
Transmittal and delivering its Old Notes,
either make appropriate arrangements to
register ownership of the Old Notes in such
owner's name or obtain a properly completed
bond power from the registered holder. The
transfer of registered ownership may take
considerable time. The Company will keep the
Exchange Offer open for not less than twenty
business days in order to provide for the
transfer of registered ownership.
Guaranteed Delivery Holders of Old Notes who wish to tender
Procedures............ their Old Notes and whose Old Notes are not
immediately available or who cannot deliver
their Old Notes, the Letter of Transmittal
or any other documents required by the
Letter of Transmittal to the Exchange Agent
(or comply with the procedures for book-
entry transfer) prior to the Expiration Date
must tender their Old Notes according to the
guaranteed delivery procedures set forth in
"The Exchange Offer--Guaranteed Delivery
Procedures."
Withdrawal Rights....... Tenders may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the
Expiration Date.
Acceptance of Old Notes The Company will accept for exchange any and
and Delivery of all Old Notes which are properly tendered in
Exchange Notes........ the Exchange Offer prior to 5:00 p.m., New
York City time, on the Expiration Date. The
Exchange Notes issued pursuant to the
Exchange Offer will be delivered promptly
following the Expiration Date. See "The
Exchange Offer--Terms of the Exchange
Offer."
Certain Federal Income It is anticipated that the exchange of Old
Tax Considerations...... Notes for Exchange Notes pursuant to the
Exchange Offer will not be a taxable event
for United States federal income tax
purposes, because under existing Treasury
regulations, the Exchange Notes will not
differ materially in kind or extent from the
Old Notes. See "The Exchange Offer--Certain
Federal Income Tax Considerations."
Use of Proceeds......... There will be no cash proceeds to the
Company from the exchange pursuant to the
Exchange Offer.
Exchange Agent.......... IBJ Schroder Bank & Trust Company
THE EXCHANGE NOTES
General................. The form and terms of the Exchange Notes are
the same as the form and terms of the Old
notes (which they replace) except that (i)
the Exchange Notes bear a Series B
designation and a different CUSIP Number
from the Old Notes, (ii) the Exchange Notes
have been registered under the Securities
8
<PAGE> 17
Act and, therefore, will not bear legends
restricting the transfer thereof, and (iii)
the holders of Exchange Notes will not be
entitled to certain rights under the
Registration Rights Agreement, including the
provisions providing for an increase in the
interest rate on the Old Notes in certain
circumstances relating to the timing of the
Exchange Offer, which rights will terminate
when the Exchange Offer is consummated. See
"The Exchange Offer--Purpose and Effect of
the Exchange Offer." The Exchange Notes will
evidence the same debt as the Old Notes and
will be entitled to the benefits of the
Indenture. See "Description of Exchange
Notes."
Securities Offered...... $90,000,000 aggregate principal amount of 10
1/8% Senior Subordinated Notes due 2007,
Series B.
Issuer.................. Safety Components International, Inc.
Maturity Date........... July 15, 2007.
Interest Payment Dates.. Interest on the Exchange Notes will accrue
from the Issue Date, July 24, 1997, and will
be payable semi-annually in arrears on each
of January 15 and July 15 of each year,
commencing January 15, 1998.
Optional Redemption..... The Exchange Notes will be redeemable, in
whole or in part, at the option of the
Company on or after July 15, 2002 at the
redemption prices set forth herein, plus
accrued interest to the date of redemption.
In addition, the Exchange Notes are not
redeemable by the Company prior to July 15,
2002, except that, at any time on or prior
to July 15, 2000, the Company, at its
option, may redeem, with the net cash
proceeds of one or more Public Equity
Offerings by the Company, up to 25% of the
aggregate principal amount of the Notes
originally issued, at a redemption price
equal to 110.125% of the principal amount
thereof, plus accrued interest thereon, if
any, to the date of redemption, provided
that at least 75% of the aggregate principal
amount of the Notes originally issued
remains outstanding immediately following
such redemption. See "Description of the
Exchange Notes -- Redemption."
Change of Control....... Upon a Change of Control, each holder of
Exchange Notes will have the right to
require the Company to repurchase such
holder's Exchange Notes at a price equal to
101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the
repurchase date. See "Description of the
Exchange Notes -- Change of Control."
Ranking................. The Exchange Notes will be, and the Old
Notes are (i) general unsecured obligations
of the Company and (ii) subordinated in
right of payment to all existing and future
Senior Indebtedness, including, without
limitation, the Company's obligations under
the Credit Agreement, and to all existing
and future indebtedness of the Company's
subsidiaries that are not Guarantors. The
Exchange Notes will rank, and the Old Notes
rank (i) pari passu in right of payment with
any future senior subordinated indebtedness
of the Company and (ii) senior in right of
payment to all other subordinated
obligations of the Company. As of March 31,
1997, on a pro forma basis after giving
effect to the Valentec Acquisition, the
Offering and the use of proceeds described
therein, the Company and its subsidiaries
would have an aggregate of approximately
$17.6 million of Senior Indebtedness
(excluding unused commitments of $27.0
million (excluding outstanding letters of
credit) available under the Credit
Agreement) which would rank senior to the
Notes.
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<PAGE> 18
See "Use of Proceeds," "Unaudited Pro Forma
Financial Data" and "Description of the
Credit Agreement."
Guarantees.............. The Exchange Notes will be, and the Old
Notes are, unconditionally guaranteed on a
senior subordinated basis by the Guarantors.
The Guarantees are, or will be, as the case
may be, general unsecured obligations of the
Guarantors and are, or will be, as the case
may be, subordinated in right of payment to
all existing and future Guarantor Senior
Indebtedness. The Guarantees rank, or will
rank, as the case may be, pari passu with
any future senior subordinated indebtedness
of the Guarantors and rank, or will rank, as
the case may be, senior in right of payment
to all other subordinated obligations of the
Guarantors. As of March 31, 1997, on a pro
forma basis after giving effect to the
Valentec Acquisition, the Offering and the
use of proceeds described therein, the
Guarantors collectively would have had
approximately $7.8 million of Guarantor
Senior Indebtedness (excluding guarantees of
Senior Indebtedness).
Certain Covenants....... The Indenture contains certain covenants
with respect to the Company and its
subsidiaries that restricts, among other
things, (a) the incurrence of additional
indebtedness, (b) the payment of dividends
and other restricted payments, (c) the
creation of certain liens, (d) the use of
proceeds from sales of assets and subsidiary
stock, (e) sale and leaseback transactions
and (f) transactions with affiliates. The
Indenture also restricts the Company's
ability to consolidate or merge with or
into, or to transfer all or substantially
all of its assets to, another person. In
addition, under certain circumstances, the
Company will be required to offer to
purchase the Exchange Notes, in whole or in
part, at a purchase price equal to 100% of
the principal amount thereof plus accrued
interest to the date of repurchase, with the
proceeds of certain Asset Sales. These
restrictions and requirements are subject to
a number of important qualifications and
exceptions. See "Description of the Exchange
Notes -- Certain Covenants."
For additional information regarding the Notes, see "Description of the Notes."
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. In consideration for issuing the Exchange Notes
contemplated in this Prospectus, the Company will receive Old Notes in like
principal amount, the form and terms of which are the same as the forms and
terms of the Exchange Notes (which replace the Old Notes), except as otherwise
described herein. The Old Notes surrendered in exchange for the Exchange Notes
will be cancelled and cannot be reissued.
The gross proceeds of $90.0 million from the Offering were used to: (i)
consummate the JPS Acquisition, including expenses thereto; (ii) repay the Term
Loan and any amounts then outstanding under the Revolving Credit Facility; (iii)
pay related fees and expenses. The remaining proceeds of the Offering will be
used to purchase a building in South Carolina adjacent to the existing SCFT
facility and for working capital and general corporate purposes. Pending such
uses, the net proceeds of the Offering have been invested in short-term,
interest-bearing securities. See "Use of Proceeds."
RISK FACTORS
Holders of Old Notes should carefully consider the specific factors set
forth under "Risk Factors," as well as the other information and data included
in this Prospectus.
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<PAGE> 19
---------------
The Company was formed as a Delaware corporation on January 12, 1994 as
a wholly-owned subsidiary of Valentec. Immediately prior to the closing of the
Company's initial public offering on May 13, 1994 (the "Initial Public
Offering"), Valentec contributed certain assets to certain subsidiaries of the
Company in return for cash consideration (the "Transfer of Assets"). The
Company's principal office is located at 2160 North Central Road, Fort Lee, NJ
07024 and its telephone number is (201) 592-0008.
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<PAGE> 20
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA
The following table sets forth certain selected historical and
unaudited pro forma financial data of the Company. The historical data as of
March 31, 1995, 1996 and 1997 has been derived from the Consolidated Financial
Statements of the Company. The pro forma data have been derived from the
Unaudited Pro Forma Financial Data of the Company included elsewhere in this
Prospectus. The Unaudited Pro Forma Financial Data does not purport to represent
what the Company's results of operations actually would have been if the
transactions referred to therein had been consummated on the date or for the
periods indicated, or what such results will be for any future date or for any
future period. The information below should be read in conjunction with the
Consolidated Financial Statements of the Company and the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
PRO FORMA
1995(1) 1996(1) 1997(1)(2) 1997(3)
------- ------- ---------- -------
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C>
RESULTS OF OPERATIONS DATA:
Net sales ..................................... $ 51,779 $ 94,942 $ 83,958 $173,208
Gross profit .................................. 7,226 13,034 16,024 28,124
Operating income .............................. 3,176 7,604 8,604 13,459
Interest expense (income), net ................ 126 (197) 1,319 10,563
Income before extraordinary item and cumulative
effect of accounting change(4) ............. 2,133 4,914 3,846 1,055
Net income .................................... 2,133 4,914 2,204 1,055
Net income per share ............................ $ .53 $ .99 $ .44 $ .21
Weighted average number of shares outstanding ... 4,031 4,981 5,027 5,021
OTHER DATA:
EBITDA(5) ..................................... $ 3,919 $ 8,708 $ 12,756 $ 22,217
Adjusted EBITDA(5) ............................ -- -- -- 23,428
Depreciation and amortization ................. 743 1,104 2,391 6,997
Capital expenditures(6) ....................... 2,473 4,588 8,613 10,554
Ratio of adjusted EBITDA to interest expense,
net ........................................ -- -- -- 2.2x
Ratio of net debt to adjusted EBITDA .......... -- -- -- 3.8x
Ratio of earnings to fixed charges(7) ......... 28.1x -- 6.2x 1.2x
Airbag cushion units(8) ....................... 2,116 2,610 5,179 6,194
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents ..................... $ 3,846 $ 12,033 $ 8,320 $ 17,973
Working capital ............................... 8,206 25,050 11,755 34,297
Total assets .................................. 28,311 49,831 73,407 169,566
Total debt .................................... 2,412 3,784 24,381 107,567
Stockholders' equity .......................... 15,971 35,344 35,274 35,274
CASH FLOWS DATA:
Cash flows from operations $ (901) $ (3,500) $ 11,115 NA
Cash flows from investing activities (2,473) (4,588) (32,870) NA
Cash flows from financing activities 7,084 16,555 18,903 NA
</TABLE>
(Footnotes appear on following page)
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<PAGE> 21
- ----------
(1) The Company did not declare dividends during fiscal year 1997, 1996
or 1995.
(2) In August 1996, the Company acquired Phoenix Airbag (as defined).
The transaction was accounted for as a purchase using the purchase method of
accounting.
(3) The Summary Unaudited Pro Forma Financial Data is derived from the
Unaudited Pro Forma Financial Data included elsewhere in this Prospectus. The
pro forma results of operations data for 1997 give effect to: (i) the Valentec
Acquisition; (ii) the JPS Acquisition; (iii) the completion of the Offering and
the application of the net proceeds therefrom; (iv) the Phoenix Acquisition (as
defined); and (v) certain Subsequent Transactions (as defined), as if each had
occurred on April 1, 1996. The related pro forma balance sheet data as of March
31, 1997 gives effect to items (i), (ii), (iii) and (v) as if these had occurred
at March 31, 1997.
(4) Income before extraordinary item and cumulative effect of
accounting change for the year ended March 31, 1997 excludes one-time charges
of: (i) $383,000, net of income taxes, for deferred financing costs written-off
during fiscal year 1997; and (ii) $1.3 million, net of income taxes, due to the
Company's change in accounting for product launch costs from the deferral method
to the expense as incurred method.
(5) EBITDA represents income from operations plus depreciation and
amortization and excludes the current year's impact of previously deferred
product launch costs now expensed due to the accounting principle change made in
fiscal year 1997. EBITDA is presented because it is a widely accepted financial
indicator of a company's ability to service and/or incur indebtedness. However,
EBITDA should not be considered as an alternative to net income as a measure of
operating results or to cash flows from operations as a measure of liquidity in
accordance with generally accepted accounting principles. Adjusted EBITDA
excludes non-recurring costs charged to SCFT of $1.2 million, which consists of
allocated cost of sales and selling, general and administrative expenses from
SCFT.
(6) Pro forma capital expenditures do not include equipment obtained
under capital lease obligations of $1.4 million, 18 looms purchased for $1.5
million, or the building to be purchased for approximately $1.3 million in
connection with the JPS Acquisition. However, capital expenditures include a
non-recurring investment of $7.1 million for pro forma and fiscal year 1997
related to the construction of the Company's new Czech Republic facility, which
was subsequently financed. Excluding this non-recurring investment for the Czech
Republic facility, pro forma and fiscal year 1997 capital expenditures would
have been $3.5 million and $1.5 million, respectively.
(7) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as income before income taxes, plus fixed charges. Fixed
charges consist of net interest expense on all indebtedness including
amortization of deferred debt issuance costs and deferred financing costs.
(8) Pro forma airbag cushion units includes the unit sales of Phoenix
Airbag for the period April 1, 1996 through August 5, 1996. Refer to Note 2 of
Notes to Unaudited Pro Forma Financial Data.
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<PAGE> 22
RISK FACTORS
Prospective investors should carefully consider the following factors
in addition to the other information set forth in this Prospectus before
tendering Old Notes in exchange for Exchange Notes. The risk factors set forth
below are generally applicable to the Old Notes as well as the Exchange Notes.
SUBSTANTIAL LEVERAGE; DEBT SERVICE OBLIGATIONS
The Company is highly leveraged. At March 31, 1997, on a pro forma
basis, after giving effect to the Valentec Acquisition, the Offering and the
application of the net proceeds therefrom to consummate the JPS Acquisition and
repay the Term Loan and the Revolving Credit Facility, the Company would have
had total indebtedness of approximately $107.6 million. See "Capitalization."
The Company may incur additional indebtedness in the future, including Senior
Indebtedness, subject to limitations imposed by the Indenture and the Credit
Agreement. The level of the Company's indebtedness could have important
consequences to holders of the Notes, including: (i) a substantial portion of
the Company's cash flow from operations must be dedicated to debt service and
will not be available for other purposes, (ii) the Company's ability to obtain
additional debt financing in the future for working capital, capital
expenditures or acquisitions may be limited and (iii) the Company's level of
indebtedness could limit its flexibility in reacting to changes in the industry
and economic conditions generally. Certain of the Company's competitors may
currently operate on a less leveraged basis and therefore could have
significantly greater operating and financing flexibility than the Company. The
Company's ability to make payments with respect to the Notes and to satisfy its
other debt obligations will depend on its future operating performance and the
ability to refinance indebtedness, which will be affected by prevailing economic
conditions and financial, business and other factors, certain of which are
beyond the Company's control.
As a result of the issuance of the Old Notes, the Company's interest
expense has increased compared to prior years. The Company believes, based on
current circumstances, that the Company's cash flow, together with available
borrowings under the Credit Agreement, will be sufficient to permit the Company
to meet its operating expenses and to service its debt requirements as they
become due for the foreseeable future. Significant assumptions underly this
belief, including, among other things, that the Company will succeed in
implementing its business strategy and there will be no material adverse
developments in the business, liquidity or capital requirements of the Company.
If the Company is unable to service its indebtedness, it will be forced to adopt
an alternative strategy that may include actions such as reducing or delaying
acquisitions, capital expenditures, selling assets, restructuring or refinancing
its indebtedness or seeking additional equity capital. There can be no
assurance, however, that the Company's business will generate cash flow at or
above projected levels or that any alternative strategies could be effected on
satisfactory terms, if at all. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
Furthermore, repayment of the Notes is dependent upon the Company
refinancing its indebtedness or obtaining new equity capital. There can be no
assurance that the Company will be able to achieve this objective.
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The Indenture restricts, among other things, the Company's ability to:
incur additional indebtedness; incur liens; pay dividends or make certain other
restricted payments; enter into certain transactions with affiliates; incur
indebtedness that is subordinate in right of payment to any Senior Indebtedness
and senior in right of payment to the Notes; impose restrictions on the ability
of a subsidiary to pay dividends or make certain payments to the Company, merge
or consolidate with any other person; or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of the assets of the Company.
See "Description of the Exchange Notes -- Certain Covenants." If the Company
fails to comply with these covenants, it would be in default under the Indenture
and the principal and accrued interest on the Notes would become due and
payable. In addition, the Credit Agreement contains restrictive covenants and
requires the Company to maintain specified financial ratios and satisfy certain
financial tests. The Company's ability to meet such financial ratios and tests
may be affected by events beyond its control, and there can be no assurance that
the Company will meet such tests. A breach of any of these covenants could
result in an event of default under the Credit Agreement. In an event of default
under the Credit Agreement, the lenders thereunder could elect to declare all
amounts borrowed, together with accrued interest, to be
14
<PAGE> 23
immediately due and payable and the lenders under the Credit Agreement could
terminate all commitments thereunder. If any such indebtedness were to be
accelerated, there can be no assurance that the assets of the Company would be
sufficient to repay in full such indebtedness and the other indebtedness of the
Company, including the Notes. In addition, a default under the Credit Agreement
or the instruments governing the Company's other indebtedness could constitute a
cross-default under the Indenture and any instruments governing the Company's
other indebtedness, and a default under the Indenture could constitute a
cross-default under the Credit Agreement and any instruments governing the
Company's other indebtedness. See "Description of the Exchange Notes -- Certain
Covenants" and "Description of the Credit Agreement."
SUBORDINATION OF EXCHANGE NOTES TO SENIOR INDEBTEDNESS
The Exchange Notes will be, and the Old Notes are, subordinated in
right of payment to all existing and future Senior Indebtedness of the Company
and all Guarantor Senior Indebtedness and to all existing and other future
indebtedness of the Company's subsidiaries that are not Guarantors. The Exchange
Notes will be, and the Old Notes are, subordinated in right of payment to all
existing and future secured indebtedness of the Company, including indebtedness
under the Credit Agreement. Under the terms of the Indenture, the Company will
be permitted, upon the satisfaction of certain conditions, to incur additional
secured indebtedness. See "Description of the Credit Agreement," "Description of
the Exchange Notes -- Subordination" and "-- Certain Covenants." As of March 31,
1997, on a pro forma basis after giving effect to the Valentec Acquisition, the
Offering and the application of the estimated net proceeds therefrom to
consummate the JPS Acquisition and repay the Term Loan and the Revolving Credit
Facility, the Company would have had approximately $17.6 million of Senior
Indebtedness outstanding and the Company's subsidiaries that are not Guarantors
would have had approximately $9.8 million of indebtedness outstanding (including
trade payables and current, long-term and other liabilities and excluding the
guarantees by certain of the Company's subsidiaries of the Company's obligations
under the Credit Agreement). The Company expects, subject to certain
restrictions, that it will incur additional Senior Indebtedness, including
Senior Indebtedness under the Credit Agreement, in connection with the
implementation of its airbag growth strategy.
By reason of such subordination, in the event of the liquidation or
insolvency of the Company, creditors of the Company who are not holders of
Senior Indebtedness, including holders of the Notes, may recover less, ratably,
than holders of Senior Indebtedness. The holders of any indebtedness of the
Company's subsidiaries will be entitled to payment of their indebtedness from
the assets of such subsidiaries prior to the holders of any general unsecured
obligations of the Company, including the Notes. If the Company incurs
additional pari passu indebtedness, the holders of such debt would be entitled
to share ratably with the holders of the Notes in any proceeds distributed in
connection with any insolvency, liquidation, reorganization, dissolution or
other winding up of the Company. This will have the effect of reducing the
amount of proceeds paid to holders of the Notes. In addition, no payments may be
made with respect to the principal of or interest on the Notes if a payment
default exists with respect to Designated Senior Indebtedness (as defined) and,
under certain circumstances, no payments may be made with respect to the
principal of or interest on the Notes for certain periods of time if a
non-payment default exists with respect to Designated Senior Indebtedness. See
"Description of the Exchange Notes -- Subordination."
CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for Exchange
Notes pursuant to the Exchange Offer will continue to be subject to the
provisions in the Indenture regarding transfer and exchange of the Old Notes and
the restrictions on transfer of such Old Notes as set forth in the legend
thereon as a consequence of the issuance of the Old Notes pursuant to exemption
from, or in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. In general, the Old Notes
may not be offered or sold, unless registered under the Securities Act and
applicable state securities laws. The Company does not currently anticipate that
it will register Old Notes under the Securities Act. See "The Exchange Offer."
FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES COULD ADVERSELY AFFECT HOLDERS
Issuance of the Exchange Notes in exchange for the Old Notes pursuant
to the Exchange Offer will be made only after a timely receipt by the Company of
such Old Notes, a properly completed and duly executed Letter of Transmittal and
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<PAGE> 24
all other required documents. Therefore, holders of the Old Notes desiring to
tender such Old Notes in exchange for Exchange Notes should allow sufficient
time to ensure timely delivery. The Company is under no duty to give
notification of defects or irregularities with respect to the tenders of Old
Notes for exchange. Old Notes that are not tendered or are tendered but not
accepted will, following the consummation of the Exchange Offer, continue to be
subject to the existing restrictions upon transfer thereof, and, upon
consummation of the Exchange Offer certain registration rights under the
Registration Rights Agreement will terminate. In addition, any holder of Old
Notes who tenders in the Exchange Offer for the purpose of participating in a
distribution of the Exchange Notes may be deemed to have received restricted
securities, and if so, will be required to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. Each Participating Broker-Dealer that receives Exchange
Notes for its own account in exchange for Old Notes, where such Old Notes were
acquired by such Participating 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 Exchange Notes. See "Plan of
Distribution." To the extent that Old Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
Old Notes could be adversely affected. See "The Exchange Offer."
FRAUDULENT CONVEYANCE RISKS; POSSIBLE INVALIDITY OF GUARANTEES
The Company's obligations on the Exchange Notes will be, and the
Company's obligations on the Old Notes are, guaranteed on a joint and several
basis by the Guarantors. The incurrence by the Company and the Guarantors of the
indebtedness evidenced by the Notes, the full and unconditional, joint and
several guarantees by the Guarantors of the Old Notes (the "Old Guarantees") and
the Exchange Notes (the "New Guarantees"), and the use by the Company of the
proceeds of the Old Notes to effect the JPS Acquisition, may be subject to
review under relevant federal and state fraudulent conveyance statutes in a
bankruptcy or reorganization case or a lawsuit by or on behalf of creditors of
the Company or the Guarantors. Under these statutes, if a court were to find
that at the time the Notes, or the Old Guarantees or the New Guarantees
(collectively, the "Guarantees"), as the case may be, were issued, (a) the
Company or any of the Guarantors issued the Notes or a Guarantee with the intent
of hindering, delaying or defrauding current or future creditors or (b)(i) the
Company or any of the Guarantors received less than reasonably equivalent value
or fair consideration for issuing the Notes or a Guarantee, as the case may be,
and (ii) the Company or any such Guarantor, as the case may be, (A) was
insolvent or was rendered insolvent by reason of the JPS Acquisition, the
Offering and the Exchange Offer, (B) was engaged, or was about to engage, in a
business or transaction for which its assets constituted unreasonably small
capital or (C) intended to incur, or believed that it would incur, debts beyond
its ability to pay as such debts matured (as all of the foregoing terms are
defined in or interpreted under the fraudulent conveyance statutes), such court
could void the Notes or such Guarantee, subordinate such obligations to
presently existing and future indebtedness of the Company and such Guarantor or
take other action detrimental to the holders of the Notes, including, under
certain circumstances, invalidating the Notes.
The measure of insolvency for purposes of the foregoing considerations
will vary depending upon the law of the jurisdiction that is being applied in
any such proceeding. Generally, however, the Company and the Guarantors would be
considered insolvent if, at the time they incur or incurred the indebtedness
constituting the Notes or the Guarantees, either (a) the fair market value (or
fair saleable value) of their assets on a going concern basis is less than the
amount required to pay the probable liability on their total existing debts and
liabilities (including contingent liabilities) as they become absolute and
matured or (b) they are incurring debt beyond their ability to pay as such debt
matures.
In addition, the Guarantees may be subject to the claim that, since the
Guarantees were incurred for the benefit of the Company (and only indirectly for
the benefit of the Guarantors), they were incurred for less than reasonably
equivalent value or fair consideration. As described above, a court could
therefore void the Guarantees or subordinate them to other obligations of the
Guarantors.
The Company and the Guarantors believe that, at the time of the
issuance of the Notes and the Guarantees, as the case may be, the Company and
the Guarantors were or will be, as the case may be, (a) neither insolvent nor
rendered insolvent thereby, (b) in possession of sufficient capital to pay their
debts as the same mature or become due and to operate their respective
businesses effectively and (c) incurring debts within their respective abilities
to pay. In reaching the foregoing conclusions, the Company and the Guarantors
have relied upon their analysis of internal cash flow projections and
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<PAGE> 25
estimated values of assets and liabilities of the Company and the Guarantors
(including rights of contribution and indemnification in connection with the
Guarantees). There can be no assurance, however, that a court passing on such
questions would reach the same conclusions. See "Description of the Notes --
Guarantees."
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of Exchange
Notes will have the right to require the Company to repurchase all or a portion
of such holder's Exchange Notes at 101% of the principal amount thereof, plus
accrued and unpaid interest to date of repurchase. If a Change of Control were
to occur, there can be no assurance that the Company would have sufficient
financial resources, or would be able to arrange financing, to pay the
repurchase price for all Exchange Notes tendered by holders thereof. Further,
the provisions of the Indenture may not afford holders of Exchange Notes
protection in the event of a highly leveraged transaction, reorganization,
restructuring, merger or similar transaction involving the Company that may
adversely affect holders of Exchange Notes, if such transaction does not result
in a Change of Control. In addition, the terms of the Credit Agreement may limit
the Company's ability to repurchase any Exchange Notes and will also identify
certain events that would constitute a Change of Control, as well as certain
other events with respect to the Company or certain of its subsidiaries, that
would constitute an event of default under the Credit Agreement. See
"Description of the Credit Agreement." Any future credit agreements or other
agreements relating to other indebtedness to which the Company becomes a party
may contain similar restrictions and provisions. In the event a Change of
Control occurs at a time when the Company is prohibited from repurchasing
Exchange Notes, the Company could seek the consent of its lenders to the
repurchase of Exchange Notes or could attempt to refinance the borrowings that
contain such prohibition. If the Company does not obtain such consent or repay
such borrowing, the Company would remain prohibited from repurchasing Exchange
Notes. In such case, the Company's failure to repurchase tendered Exchange Notes
would constitute an Event of Default under the Indenture, which would, in turn,
constitute a further default under certain of the Company's existing debt
agreements and may constitute a default under the terms of other indebtedness
that the Company may enter into from time to time. See "Description of the
Exchange Notes -- Change of Control."
ABSENCE OF ESTABLISHED TRADING MARKET
The Exchange Notes will constitute a new issue of securities with no
established trading market, and there can be no assurance as to (i) the
liquidity of any such market that may develop, (ii) the ability of holders of
Exchange Notes to sell their Exchange Notes or (iii) the price at which the
holders of Exchange Notes would be able to sell their Exchange Notes. If such a
market were to exist, the Exchange Notes could trade at prices that may be
higher or lower than their principal amount or purchase price, depending on many
factors, including prevailing interest rates, the market for similar notes and
the financial performance of the Company and its subsidiaries. The Company has
been advised by the Initial Purchasers that, following completion of this
offering, they presently intend to make a market in the Exchange Notes. However,
the Initial Purchasers are not obligated to do so, and any market-making
activity with respect to the Exchange Notes may be discontinued at any time
without notice. In addition, such market-making activity will be subject to the
limits imposed by the Securities Act and the Exchange Act. See "Exchange Offer."
There can be no assurance that even following registration of the Exchange Notes
an active trading market will exist for the Exchange Notes, or that such trading
market will be liquid.
RELIANCE ON MAJOR CUSTOMERS
The Company's customers are airbag module integrators, such as TRW and
Petri. Sales of airbag related products to TRW, Petri and AlliedSignal accounted
for approximately 31.2%, 12.8% and 7.6%, respectively, of the Company's pro
forma consolidated fiscal 1997 net sales of airbag related products. The
Company's contracts for airbag cushions and airbag fabric are typically
requirements contracts which do not bind any customer to purchase specified
quantities until such customer has issued a purchase order to the Company. The
Company's agreements with TRW with respect to airbag cushions are driver side
(in North America only) and passenger side airbag requirement contracts which
are subject to termination under certain conditions and which are otherwise
terminable by TRW upon 90 days' prior written notice. The Company and Petri are
parties to an "evergreen" agreement, pursuant to which the parties agree upon
price, quantity, and other terms at the beginning of each calendar year. No
binding obligation exists with respect to renewal of this contract each year. A
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<PAGE> 26
significant reduction of purchases by or the loss of any one of these customers
would have a material adverse effect on the Company. See "Business -- Airbag
Related Products -- Customers."
PRICING OF AUTOMOTIVE AIRBAG MODULES; TRENDS IN INDUSTRY
The continued sale of airbags by the Company is conditioned upon, among
other things, the Company's prices remaining competitive. The Company's
agreements with TRW require the Company to pass along certain cost savings to
TRW. The Company's future profitability will depend on, among other things, its
ability to continue to improve its manufacturing efficiencies and maintain a
cost structure that will enable the Company to offer competitive prices. The
Company anticipates that it will continue to incur capital expenditures to
accomplish these objectives. See "Business -Airbag Related Products --
Customers."
CHARACTERISTICS OF THE AUTOMOTIVE INDUSTRY; SEASONALITY
As a supplier to the automotive industry, the Company's airbag business
is dependent on many factors including the level of vehicle sales in each
market, which are cyclical and dependent on, among other things, the timing of
the introduction of new models of automobiles for which the Company manufactures
airbags, changes in consumer vehicle preferences, governmental regulation of
auto safety, potential work stoppages, adverse weather conditions, potential
problems with obtaining supplies and other risks of production. In addition, the
Company's automotive products business is subject to the seasonal
characteristics of the automotive industry in which there are seasonal shutdowns
in the third and fourth calendar quarters of each year which typically result in
lower shipments of airbags during these quarters. Sluggish consumer spending on
automobiles could have a material adverse impact on the Company. See "Business
- -- Seasonality."
In addition, automotive suppliers such as the Company are under
constant pressure from their major customers to reduce product costs, improve
quality and provide additional design and engineering capabilities. Remaining a
low cost supplier of automotive airbags worldwide constitutes one of the
Company's primary goals. However, there can be no assurance that the Company
will be able to continually improve or maintain its product margins on product
sales to its customers.
According to Tier One, demand for airbag modules is anticipated to
increase over the next few years although it is also anticipated that industry
revenue will flatten during such period due to, among other things, continued
downward pressure on the price of automotive airbag modules and components as a
result of competition and manufacturing efficiencies. Moreover, a significant
portion of the demand for airbag modules is expected to result from increased
demand for side-impact airbag cushions, which require less fabric than the
driver and passenger-side airbag cushions.
COMPETITION
There are several companies, some with greater financial resources than
the Company, which produce or are capable of producing products which compete
with the products manufactured by the Company. These companies include airbag
module integrators, such as TRW, Delphi Interior Lighting ("Delphi") and
AutoLiv, which produce substantial quantities of airbag cushions to satisfy
their own requirements. However, certain barriers to entry exist for potential
new competitors into the airbag business, including switching costs. There can
be no assurance that TRW, Delphi, AutoLiv or other automotive suppliers or
automobile manufacturers will not seek in the future to satisfy more of their
airbag cushion requirements through internal manufacturing capabilities or other
airbag cushion manufacturers. Increased competition, as well as price reductions
of airbag modules, would adversely affect the Company's revenues and
profitability. See "Business -- Airbag Related Products -- Competition" and "--
Customers."
Milliken & Co. ("Milliken") and certain smaller manufacturers compete
with the Company as a supplier of airbag fabric to airbag module integrators. In
addition, certain airbag module integrators, including Takata, Inc. ("Takata"),
produce all airbag fabric used in their airbag manufacturing operations.
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<PAGE> 27
The Company is one of two suppliers under contract with the United
States Army to supply 120 millimeter mortar cartridges. However, the defense
industry is highly competitive and there can be no assurance that other
suppliers will not be awarded contracts for products sold by the Company. See
"Business -- Defense Related Products -- Competition" and "-- Markets and
Customers."
DEPENDENCE ON SUPPLIERS
Under its agreements with TRW and with various branches of the United
States Armed Forces and its prime contractors, such customers must approve the
source of supply of all major components used by the Company. TRW has thus far
approved only one qualified source of supply for certain airbag components. A
prolonged delay in product shipments by the Company's qualified suppliers
combined with a delay in the approval by TRW or the United States Armed Forces
or its prime contractors of alternate qualified suppliers could adversely affect
the Company's operating results. In addition, certain of the Company's suppliers
are also competitors or potential competitors of the Company with respect to the
sale of products directly to the Company's customers. See "Business -- Airbag
Related Products -- Suppliers" and "-- Defense Related Products -- Manufacturing
and Production."
The Company currently plans to vertically integrate its operations by
using the fabric produced by SCFT in the manufacture of its airbags, although
such change in the supply of fabric will not be cost-effective unless it
coincides with a customer's change in its airbag model. There can be no
assurance that the Company's customers will approve the use of SCFT fabric. If
such fabric is approved, there can be no assurance that the Company will be able
to successfully integrate its operations, or that cost savings will result from
such integration. Under industry standards, any fabric lines sold by SCFT must
be certified by each of its customers. In order to use SCFT's fabric in its
airbag cushions for any customer, the Company will be required to certify with
such customer the use of SCFT's fabric in its automotive airbags. Certification
may take an extended period of time, in some cases, up to six months to one
year. Although management of each of SCFT and the Company considers its customer
relationships to be good, there can be no assurance that the required
certifications will be obtained from its customers. If customer certification is
delayed or not obtained, there could be a material adverse effect on the
business of the Company.
Approximately 85% of SCFT's customers have specified the use of E.I.
DuPont de Nemours and Co. ("DuPont") yarn or an equivalent alternative in the
production of SCFT's fabrics. Management of the Company believes that SCFT's
relationship with DuPont is excellent. However, given the superior quality of
DuPont's nylon yarn, if SCFT becomes unable to obtain DuPont yarn, there is no
assurance that SCFT would be able to obtain a yarn of equivalent quality from
another manufacturer or that the failure to obtain an equivalent yarn would not
have a material adverse effect on the business of SCFT or its ability to fill
its customers' orders.
COSTS AND RISKS IN ACQUISITION AND EXPANSION STRATEGY
The Company's future operations and earnings will be largely dependent
upon the Company's ability to integrate the operations of SCFT into the current
operations of the Company. The operations of SCFT vary in scope and type from
the Company's current operations. There can be no assurance that the Company
will be able to successfully integrate such operations with those of the
Company, and a failure to do so would have a material adverse effect on the
Company's financial position, results of operations and cash flows.
Additionally, although the Company does not currently have any agreement or
understanding with respect to any specific acquisition plans, the need to focus
management's attention on integration of new operations, as well as other
factors, may limit the Company's ability to successfully pursue acquisitions or
other opportunities related to its business for the foreseeable future. Also,
successful integration of operations will be subject to numerous contingencies,
some of which are beyond management's control. These contingencies include
general and regional economic conditions, competition and changes in regulation.
The ability of the Company to successfully implement its acquisition
strategy depends upon a number of factors. For example, the Company must
identify acquisition opportunities in the automotive products or related
industries, successfully negotiate, finance and consummate such acquisitions,
comply with applicable regulatory restrictions (including antitrust laws) in the
United States and abroad and integrate the acquired business into the Company.
There can be no
19
<PAGE> 28
assurance that the Company will be able to identify suitable acquisition
candidates at favorable acquisition prices or that it will be able to finance
and consummate any such acquisitions and integrate the acquired business. In
past acquisitions, the Company has been successful in reducing product and
organization costs upon consummation and integration of the acquisitions.
However, there can be no assurance that the Company will be able to integrate
any new acquisitions successfully into its operations and achieve costs savings
from such integration. See "Business -- Growth Strategy."
As the Company expands its airbag business worldwide, it may incur
additional expenses resulting from this expansion, which could adversely affect
the Company's operating profits. For example, the Company operated a temporary
facility in Germany during fiscal year 1995 and two temporary facilities in the
Czech Republic during fiscal year 1997, in order to meet TRW's demand for
airbags, which resulted in the incurrence of additional operating expenses
during this period. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." The Company may experience unanticipated
start-up costs in connection with the establishment of its new manufacturing
facility in the Czech Republic. See "Business -- Growth Strategy" and "-- Airbag
Related Products -- Capacity."
DEPENDENCE ON KEY PERSONS
The Company's continued success may depend to a significant degree upon
the services of Robert A. Zummo, the Chairman of the Board, President and Chief
Executive Officer of the Company. See "Management -- Employment Agreements." The
Company maintains and is the beneficiary under a key man life insurance policy
on Mr. Zummo in the amount of approximately $2.5 million. In addition, the loss
of the services of Thomas W. Cresante, Executive Vice President and Chief
Operating Officer of the Company, and Jeffrey J. Kaplan, Executive Vice
President and Chief Financial Officer of the Company, and the inability to
attract replacements of these key personnel could have a material adverse effect
on the Company. See "Management."
PRODUCT LIABILITY
Through sales of its airbag products, the Company is engaged in a
business which could result in possible claims for injury resulting from the
failure of its products. Recently, there has been increased public attention to
injuries and deaths of children and small adults due to the force of the
inflation of airbags. Although the Company has not been named as a defendant in
any product liability lawsuit nor threatened with any such lawsuit, the Company
has a risk of exposure to product liability claims. Product liability insurance
is maintained, but there can be no assurance that insurance coverage will
continue to be available on terms acceptable to the Company or that such
coverage will be adequate for any liabilities that might be incurred. See
"Business -- Airbag Related Products -- Product Liability."
RISKS OF FOREIGN OPERATIONS
For the year ended March 31, 1997, 21.7% of the Company's pro forma
consolidated net sales was generated outside of the United States. Foreign
operations and exports to foreign markets are subject to a number of special
risks, including, but not limited to, risks with respect to fluctuations in
currency exchange rates, economic and political destabilization, other
disruption of markets, restrictive actions by foreign governments (such as
restrictions on transfer of funds, export duties and quotas, foreign customs and
tariffs and unexpected changes in regulatory environments), changes in foreign
laws regarding trade and investment, difficulty in obtaining distribution and
support, nationalization, the laws and policies of the United States affecting
trade, foreign investment and loans, and foreign tax laws. There can be no
assurance that one or a combination of these factors will not have a material
adverse effect on the Company's ability to increase or maintain its foreign
sales or on its results of operations.
In addition, the Company has significant manufacturing operations in
foreign countries and purchases a portion of its raw materials from foreign
suppliers. The production costs, profit margins and competitive position of the
Company are affected by the strength of the currencies in countries where it
manufactures or purchases goods relative to the strength of the currencies in
countries where its products are sold.
20
<PAGE> 29
Certain of the Company's operations generate net sales and incur
expenses in foreign currencies. The Company's financial results from
international operations may be affected by fluctuations in currency exchange
rates. Certain exchange rate risks to the Company are limited by contractual
clauses in the Company's agreement with TRW for European supply of airbags.
Future fluctuations in certain currency exchange rates could adversely affect
the Company's financial results. See "Business -- Airbag Related Products --
Customers."
ADVERSE EFFECT OF REGULATION AND GOVERNMENT POLICY; ENVIRONMENTAL LAWS
Domestic and foreign political developments and government regulations
and policies directly affect the automotive consumer products and defense
industries in the United States and abroad. Regulations and policies relating to
over-the-highway vehicles include standards established by the United States
Department of Transportation for motor vehicle safety. The modification of
existing laws, regulations or policies, or the adoption of new laws, regulations
or policies, could have an adverse effect on the Company. As a government
contractor, the Company is subject to extensive and complex United States
Government procurement laws and regulations, which provide for ongoing
government reviews of contract procurement, performance and administration,
including routine audits by the Defense Contract Audit Agency (the "DCAA").
Failure to comply with these laws and regulations could subject the Company to
civil and criminal penalties, and under certain circumstances, suspension and
debarment from future government contracts for a specified period of time.
Like similar companies, the Company's operations and properties are
subject to a wide variety of increasingly complex and stringent federal, state,
local and international laws and regulations, including those governing the use,
storage, handling, generation, treatment, emission, release, discharge and
disposal of certain materials, substances and wastes, the remediation of
contaminated soil and groundwater, and the health and safety of employees
(collectively, "Environmental Laws"). Such laws, including but not limited to
those under the Comprehensive Environmental Response Compensation & Liability
Act ("CERCLA" or "Superfund"), may impose joint and several liability and may
apply to conditions at properties presently or formerly owned or operated by an
entity or its predecessors, as well as to conditions at properties at which
wastes or other contamination attributable to an entity or its predecessors have
been sent or otherwise come to be located. The nature of the Company's
operations exposes it to the risk of claims with respect to such matters and
there can be no assurance that violation of such laws have not occurred or will
not occur or that material costs or liabilities will not be incurred in
connection with such claims. Based upon its experience to date, the Company
believes that the future cost of compliance with existing Environmental Laws and
liability for known environmental claims pursuant to such Environmental Laws,
will not have a material adverse effect on the Company's financial position or
results of operations and cash flows. However, future events, such as new
information, changes in existing Environmental Laws or their interpretation, and
more vigorous enforcement policies of regulatory agencies, may give rise to
additional expenditures or liabilities that could be material. See "Business --
Environmental Matters"; Note 8 to Notes to the Company's Consolidated Financial
Statements, Note 7 to Notes to Valentec's Financial Statements, Note 12 to Notes
to JPS' Financial Statements audited by Arthur Andersen LLP and Note 11 to JPS'
Financial Statements audited by Coopers & Lybrand LLP.
CONTROL BY PRINCIPAL STOCKHOLDER
Mr. Zummo beneficially owns approximately 20.2% of the outstanding
Common Stock. Accordingly, Mr. Zummo may have the ability to control the
election of the Company's directors and thus, subject to his fiduciary duties,
direct the future operations of the Company and control other actions requiring
stockholder approval, including certain fundamental corporate transactions such
as a merger or sale of substantially all of the assets of the Company. See
"Security Ownership of Certain Beneficial Owners and Management."
VARIABILITY OF DEFENSE INDUSTRY
The Company's reliance upon defense programs for a significant portion
of its defense related sales has certain inherent risks, including the
uncertainty of domestic economic conditions, dependence on Congressional
appropriations and administrative allotment of funds, changes in governmental
policies which may reflect military and political developments and other factors
characteristic of the defense industry. See "Business -- Defense Related
Products -- Markets and Customers" and "-- United States Government Contracts."
21
<PAGE> 30
As of March 31, 1997, the Company had a defense related backlog of
approximately $24.4 million of which $10.8 million is expected to be completed
before the end of fiscal year 1998. Although the Company believes that the
backlog of approximately $18.6 million from its systems contract for mortar
cartridges ("the Systems Contract") with the United States Army will ultimately
be realized, there can be no assurance that it will be successful in realizing
such revenues. In any event the Company does not believe that its revenues from
the defense related products will be as significant in the future as it has been
historically for the Company.
Changes in the strategic direction of defense spending, the timing of
defense procurements and specific defense program appropriation decisions may
adversely affect the performance of the Company. The precise impact of these
matters will depend on the timing and size of the changes and decisions, and the
Company's ability to mitigate their impact with new business and/or cost
reductions. In view of the continuing uncertainty regarding the size, content
and priorities of the annual Department of Defense budget, the historical
financial information relating to the defense related operations of the Company
may not be indicative of future performance.
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain of the Company's
obligations under the Registration Rights Agreement. The Company will not
receive any cash proceeds from the issuance of the Exchange Notes offered
hereby. In consideration for issuing the Exchange Notes contemplated in this
Prospectus, the Company will receive Old Notes in like principal amount, the
form and terms of which are the same as the forms and terms of the Exchange
Notes (which replace the Old Notes), except as otherwise described herein. The
Old Notes surrendered in exchange for Exchange Notes will be retired and
canceled and cannot be reissued. Accordingly, issuance of the Exchange Notes
will not result in any increase or decrease in the indebtedness of the Company.
As such, no effect has been given to the Exchange Offer in the pro forma
statements or capitalization tables.
The gross proceeds of $90.0 million from the Offering were used to: (i)
consummate the JPS Acquisition, including expenses thereto; (ii) repay the Term
Loan and any amounts then outstanding under the Revolving Credit Facility; (iii)
pay related fees and expenses. The remaining proceeds of the Offering will be
used to purchase a building in South Carolina adjacent to the existing SCFT
facility and for working capital and general corporate purposes. Pending such
uses, the net proceeds of the Offering have been, invested in short-term,
interest-bearing securities. See "Description of the Credit Agreement,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Unaudited Pro Forma
Financial Data" included elsewhere in this Prospectus.
CAPITALIZATION
The following table sets forth the historical capitalization of the
Company as of March 31, 1997 derived from its audited consolidated financial
statements and the unaudited pro forma capitalization of the Company on such
date after giving effect to the Valentec Acquisition, the Offering and the
application of the estimated net proceeds therefrom to consummate the JPS
Acquisition and repay the Term Loan and all amounts then outstanding under the
Revolving Credit Facility. In addition, the unaudited pro forma capitalization
of the Company as of March 31, 1997 also includes the effect of certain
Subsequent Transactions (as defined) described in footnote 2 below. This table
should be read in conjunction with the Financial Statements and "Selected
Historical and Unaudited Pro Forma Financial Data" included elsewhere in this
Prospectus.
22
<PAGE> 31
<TABLE>
<CAPTION>
MARCH 31, 1997
--------------
ACTUAL PRO FORMA
------ ---------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents $ 8,320 $ 17,973
======= ========
Debt:
Credit Facility(1) $20,192 $ --
Capital Lease Obligations 3,369 7,247
Notes offered hereby -- 90,000
Other Debt(2) 820 10,320
------- --------
Total Debt 24,381 107,567
Total Stockholders' Equity 35,274 35,274
------- --------
Total Capitalization $59,655 $142,841
======= ========
</TABLE>
- --------
(1) Actual at March 31, 1997 represented amounts outstanding under a
credit facility that was refinanced subsequent to March 31, 1997 and prior to
the Offering. Such facility was repaid with the proceeds under the Credit
Agreement. See "Management Discussion and Analysis of Financial Condition and
Results of Operations." The credit facility existing under the Credit Agreement
as of the closing of the Offering permits a maximum aggregate borrowing of $27.0
million, all of which (excluding outstanding letters of credit) was available at
the closing of the Offering.
(2) Pro forma amount at March 31, 1997 includes a Czech Republic
facility mortgage note issued to Bank Austria in the amount of $7.5 million
obtained in June 1997, and the assumption of a note payable to Valentec
International Limited ("VIL") for $2.0 million.
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data (the "Unaudited Pro
Forma Financial Data") as of March 31, 1997, and for the year ended March 31,
1997 has been derived by the application of pro forma adjustments to the
financial statements of the Company, Valentec, and the Division. The historical
accounts of JPS as of, and for the twelve months ended, March 29, 1997, are
derived from its audited financial statements as of December 28, 1996 plus the
three month period ended March 29, 1997 less the three month period ended March
31, 1996 included elsewhere in this Prospectus. The pro forma financial data for
the year ended March 31, 1997 gives effect to: (i) the Valentec Acquisition;
(ii) the JPS Acquisition; (iii) the completion of the Offering and application
of the proceeds therefrom; (iv) the Phoenix Acquisition (as defined); and (v)
certain Subsequent Transactions. The pro forma statement of operations data for
the year ended March 31, 1997, gives effect to (i), (ii), (iii), (iv) and (v) as
if each had occurred on April 1, 1996. The related pro forma balance sheet data
gives effect to (i), (ii), (iii) and (v) as if each had occurred on March 31,
1997. The adjustments are described in the accompanying notes. The Unaudited Pro
Forma Financial Data does not purport to represent what the Company's results of
operations actually would have been if those transactions had been consummated
on the date or for the periods indicated, or what such results will be for any
future date or for any future period. The Unaudited Pro Forma Financial Data
should be read in conjunction with "Selected Historical and Unaudited Pro Forma
Financial Data", "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements of the
Company and notes thereto included elsewhere in this Prospectus.
23
<PAGE> 32
SAFETY COMPONENTS INTERNATIONAL, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ACQUISITIONS OFFERING AND OFFERING AND SUBSEQUENT
SCI VALENTEC JPS ACQUISITIONS ACQUISITIONS FINANCING
3/31/97 3/31/97 3/29/97 ADJUSTMENTS TOTALS TRANSACTIONS
------- ------- ------- ----------- ------ ------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net sales ...................... $83,958 $14,026 $65,570 $ 9,654(a) $173,208 $ --
Cost of sales .................. 64,130 12,144 55,127 6,428(b) 137,829 --
Depreciation ................... 2,043 546 2,306 599(b) 5,494 --
Product launch costs ........... 1,761 -- -- -- 1,761 --
------- ------- ------- ------- -------- -----
Gross profit ................. 16,024 1,336 8,137 2,627 28,124 --
Selling and marketing
expenses ..................... 1,375 -- -- 503(c) 1,878 --
General and administrative
expenses ..................... 5,697 1,683 3,229 675(d) 11,284 --
Amortization ................... 348 -- 900 255(e) 1,503 --
------- ------- ------- ------- -------- -----
Income (loss) from
operations ................ 8,604 (347) 4,008 1,194 13,459 --
------- ------- ------- ------- -------- -----
Other expense (income) ......... 444 (538) 332 605(f) 843 --
Interest expense, net .......... 1,319 1,183 499 7,341(g) 10,342 221(i)
------- ------- ------- ------- -------- -----
Income (loss) before
taxes ..................... 6,841 (992) 3,177 (6,752) 2,274 (221)
Provision (benefit) for
income taxes ................. 2,995 (286) 453 (2,076)(h) 1,086 (88)(j)
------- ------- ------- ------- -------- -----
Income (loss) before
extraordinary item and
cumulative effect of
change in accounting
principle ................. $ 3,846 $ (706) $ 2,724 $(4,676) $ 1,188 $(133)
======= ======= ======= ======= ======== =====
Net income (loss) before
Extraordinary item and
cumulative effect of change
in accounting principle
per share ................ $ 0 .77
======= -- -- -- -- --
Weighted average number of
shares outstanding ........... 5,027
======= -- -- -- -- --
OTHER FINANCIAL DATA:
EBITDA(1) ...................... $12,756 $ 199 $ 7,214 $ 2,048 $ 22,217 $ --
Adjusted EBITDA(1) ............. 12,756 199 8,425 2,048 23,428 --
Capital expenditures(2) ........ 8,613 1,116 825 -- 10,554 --
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
---------
<S> <C>
STATEMENT OF OPERATIONS:
Net sales ...................... $173,208
Cost of sales .................. 137,829
Depreciation ................... 5,494
Product launch costs ........... 1,761
--------
Gross profit ................. 28,124
Selling and marketing
expenses ..................... 1,878
General and administrative
expenses ..................... 11,284
Amortization ................... 1,503
--------
Income (loss) from
operations ................ 13,459
--------
Other expense (income) ......... 843
Interest expense, net .......... 10,563
--------
Income (loss) before
taxes ..................... 2,053
Provision (benefit) for
income taxes ................. 998
--------
Income (loss) before
extraordinary item and
cumulative effect of
change in accounting
principle ................. $ 1,055
========
Net income (loss) before
Extraordinary item and
cumulative effect of change
in accounting principle
per share.................. $ 0 .21
Weighted average number of ========
shares outstanding ........... 5,021
OTHER FINANCIAL DATA:
EBITDA(1) ...................... $ 22,217
Adjusted EBITDA(1) ............. 23,428
Capital expenditures(2) ........ 10,554
</TABLE>
- --------
(1) EBITDA represents income from operations plus depreciation and
amortization and excludes the current year's impact of previously deferred
product launch costs now expensed due to the accounting principle change made in
fiscal year 1997. EBITDA is presented because it is a widely accepted financial
indicator of a company's ability to service and/or incur indebtedness. However,
EBITDA should not be considered as an alternative to net income as a measure of
operating results or to cash flows from operations as a measure of liquidity in
accordance with generally accepted accounting principles. Adjusted EBITDA
excludes non-recurring costs charged to jps of $1.2 Million, which consists of
allocated cost of sales and selling, general and administrative expenses from
JPS Automotive L.P.
24
<PAGE> 33
(2) Pro forma capital expenditures do not include equipment obtained under
capital lease obligations of $1.4 million, 18 looms purchased for $1.5 million
and the building to be purchased for approximately $1.3 million in
connection with the JPS Acquisition. However, capital expenditures include a
non-recurring investment of $7.1 million for pro forma and fiscal year 1997
related to the construction of the Company's new Czech Republic facility which
was subsequently financed. Excluding the non-recurring investment for the Czech
Republic facility pro forma and fiscal year 1997 capital expenditures would have
been $3.5 million, and $1.5 million, respectively.
See Unaudited Notes to Pro Forma Financial Data.
25
<PAGE> 34
SAFETY COMPONENTS INTERNATIONAL, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
SUMMARY OF PRO FORMA ADJUSTMENTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
TWELVE
MONTHS
REF ADJUSTMENT MARCH 31, 1997
--- ---------- --------------
<S> <C> <C> <C>
Net sales............................. (a) Revenues of Phoenix prior to August 6, 1996
(date of acquisition) (Note 2).................... $12,381
Eliminate intercompany sales between SCI
and Valentec...................................... (2,727)
--------
9,654
Cost of sales......................... (b) Cost of Sales of Phoenix prior to August 6,
1996 9,155
(Note 2)..........................................
Depreciation for Phoenix prior to acquisition
(Note 2).......................................... 249
Eliminate intercompany cost of sales between
SCI and Valentec.................................. (2,727)
Additional depreciation related to JPS property,
plant and equipment (Note 2)...................... 350
--------
7,027
--------
Increase in gross profit.............. 2,627
--------
Selling and marketing expenses........ (c) Selling and marketing expenses of Phoenix
prior to August 6, 1996 (Note 2).................. 503
General and administrative expenses... (d) General and Administrative expense of
Phoenix prior to August 6, 1996 (Note 2).......... 675
Goodwill amortization................. (e) Amortization of Phoenix goodwill prior to
August 6, 1996 (Note 2) ........................ 153
Amortization of Valentec goodwill (Note 1)........ 527
Eliminate JPS historical goodwill amortization
(Note 1).......................................... (884)
Amortization of JPS goodwill (Note 1)............. 459
--------
255
--------
Increase in operating income.......... 1,194
--------
Other expense (income)................ (f) Elimination of income from Valentec's
investment in SCI (Note 1)........................ 605
Interest expense...................... (g) Increase in interest expense due to Notes issued
in Offering (Notes 1 and 4)....................... 9,113
Increase in interest expense due on note
payable to affiliate (Note 4)..................... 140
Increase in interest expense related to Phoenix
prior to August 6, 1996 (Note 2).................. 83
Increase amortization of deferred financing
costs incurred from KeyBank (Notes 1 and 2) 40
Increase amortization of deferred financing
costs incurred from Offering (Notes 1 and 2) 330
Total Interest Expense Pro Forma.............. 9,706
--------
Eliminate historical interest expense for long-
term debt repaid from Offering proceeds........... (2,365)
Pro Forma Interest Adjustment Required........ 7,341
--------
26
</TABLE>
<PAGE> 35
<TABLE>
<S> <C> <C> <C>
Decrease in income before income
taxes............................... (6,752)
--------
Provision (benefit) for income taxes.. (h) Income tax benefit attributable to additional
interest on Notes issued in Offering (Note 5)..... (2,963)
Income tax benefit attributable to fiscal year
1997 operating losses from Valentec (Note 5)..... (353)
Increase income tax provision to corporate tax
rates for JPS (Note 5)............................ 767
Income taxes of Phoenix prior to August 6, 1996
(Note 5).......................................... 473
--------
(2,076)
--------
Decrease in income before extraordinary
item and cumulative effect of change
in accounting principle............. $(4,676)
=======
</TABLE>
See Unaudited Notes to Pro Forma Financial Data.
27
<PAGE> 36
SAFETY COMPONENTS INTERNATIONAL, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
SUMMARY OF SUBSEQUENT TRANSACTIONS
(IN THOUSANDS)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
TWELVE
MONTHS
REF ADJUSTMENT MARCH 31, 1997
--- ---------- --------------
<S> <C> <C> <C>
Interest Expense.................. (i) Increase in SCI interest expense due to mortgage financing from
Bank Austria (Notes 4 and 6)........................................ $ 563
Increase in SCI interest expense due to new equipment financing
(Notes 4 and 6)..................................................... 160
Increase amortization of deferred financing costs incurred from
Bank Austria (Notes 1 and 2)........................................ 15
Eliminate historical interest expense for long-term debt repaid from
subsequent transactions............................................. (517)
-----
221
Provision (benefit) for income (j) Income tax benefit attributable to additional interest from
taxes............................. subsequent financing transactions (Note 5) (88)
-----
Decrease in net income............ $ 133
=====
</TABLE>
See Unaudited Notes to Pro Forma Financial Data.
28
<PAGE> 37
SAFETY COMPONENTS INTERNATIONAL, INC.
UNAUDITED PRO FORMA BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
OFFERING
HISTORICAL ACQUISITIONS OFFERING AND AND SUBSEQUENT
SCI VALENTEC JPS ACQUISITIONS ACQUISITIONS FINANCING
3/31/97 3/31/97 3/29/97 ADJUSTMENTS TOTALS TRANSACTIONS
------- ------- ------- ----------- ------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents ..... $ 8,320 $ 37 $ 2 $ 6,759 (a) $ 15,118 $2,855(l)
Accounts receivable, net ...... 11,751 2,181 9,949 -- 23,881 --
Inventories ................... 6,378 1,225 9,329 -- 16,932 --
Prepaid and other ............. 870 1,413 282 (972)(b) 1,593 --
------- ------- ------- -------- -------- ------
Total current assets ..... 27,319 4,856 19,562 5,787 57,524 2,855
Property, plant and equipment,
net ......................... 28,295 4,605 23,988 3,427 (c) 60,315 --
Receivable from affiliate ..... 4,348 -- -- (4,348)(d) -- --
Goodwill, net ................. 10,991 -- 15,049 16,464 (e) 42,504 --
Other assets .................. 2,454 11,047 273 (7,106)(f) 6,668 150(m)
------- ------- ------- -------- -------- ------
Total assets ............. $73,407 $20,508 $58,872 $ 14,224 $167,011 $3,005
======= ======= ======= ======== ======== ======
LIABILITIES AND
STOCKHOLDERS' EQUITY
Accounts payable .............. $ 7,792 $ 2,874 $ 3,909 $ -- $ 14,575 $--
Payable to affiliates ......... -- 5,494 167 (5,494)(g) 167 --
Earnout payable ............... 2,211 -- -- -- 2,211 --
Accrued liabilities ........... 2,476 1,945 1,275 -- 5,696 --
Current portion of long-term
obligations ................. 3,085 571 600 (1,902)(h) 2,354 1,079(n)
------- ------- ------- -------- -------- ------
Total current liabilities 15,564 10,884 5,951 (7,396) 25,003 1,079
Long-term obligations ......... 21,296 7,004 197 73,711 (i) 102,208 1,926(o)
Other long-term liabilities ... 1,273 6,146 817 (3,710)(j) 4,526 --
------- ------- ------- -------- -------- ------
Total liabilities .... 38,133 24,034 6,965 62,605 131,737 3,005
------- ------- ------- -------- -------- ------
STOCKHOLDERS' EQUITY:
Preferred stock ............... -- -- -- -- -- --
Common stock .................. 51 22 -- (22)(k) 51 --
Common stock warrants ......... 1 -- -- -- 1 --
Additional paid-in capital .... 30,062 428 51,130 (37,866)(k) 43,754 --
Treasury stock ................ (1,647) -- -- (13,692)(k) (15,339) --
Retained earnings (accumulated
deficit) .................... 9,183 (3,976) 777 3,199 (k) 9,183 --
Cumulative translation
adjustment .................. (2,376) -- -- -- (2,376) --
------- ------- ------- -------- -------- ------
Total stockholders' equity 35,274 (3,526) 51,907 (48,381) 35,274 --
------- ------- ------- -------- -------- ------
Total liabilities and
stockholders' equity ...... $73,407 $20,508 $58,872 $ 14,224 $167,011 $3,005
======= ======= ======= ======== ======== ======
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
---------
<S> <C>
ASSETS
Cash and cash equivalents ..... $ 17,973
Accounts receivable, net ...... 23,881
Inventories ................... 16,932
Prepaid and other ............. 1,593
--------
Total current assets ..... 60,379
Property, plant and equipment,
net ......................... 60,315
Receivable from affiliate ..... --
Goodwill, net ................. 42,504
Other assets .................. 6,818
--------
Total assets ............. $170,016
========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Accounts payable .............. $ 14,575
Payable to affiliates ......... 167
Earnout payable ............... 2,211
Accrued liabilities ........... 5,696
Current portion of long-term
obligations ................. 3,433
--------
Total current liabilities 26,082
Long-term obligations ......... 104,134
Other long-term liabilities ... 4,526
--------
Total liabilities .... 134,742
--------
STOCKHOLDERS' EQUITY:
Preferred stock ............... --
Common stock .................. 51
Common stock warrants ......... 1
Additional paid-in capital .... 43,754
Treasury stock ................ (15,339)
Retained earnings (accumulated
deficit) .................... 9,183
Cumulative translation
adjustment .................. (2,376)
--------
Total stockholders' equity 35,274
--------
Total liabilities and
stockholders' equity ...... $170,016
========
</TABLE>
See Unaudited Notes to Pro Forma Financial Data.
29
<PAGE> 38
SAFETY COMPONENTS INTERNATIONAL, INC.
UNAUDITED PRO FORMA BALANCE SHEET
SUMMARY OF PRO FORMA ADJUSTMENTS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
AS OF
REF ADJUSTMENT MARCH 31, 1997
--- ---------- --------------
<S> <C> <C> <C>
Cash and cash equivalents................... (a) Net proceeds from Notes (Notes 1 and 4)................... $ 90,000
Payment of deferred financing costs for Offering (Notes 1
and 4).................................................... (3,300)
Payment of deferred financing costs to KeyBank (Note 4) (200)
Payment for acquisition fees (Note 1)..................... (1,200)
Purchases of property and equipment from Offering
proceeds (Notes 1 and 3).................................. (1,250)
Paydown of SCI's notes payable from Offering proceeds
(Note 4).................................................. (20,191)
Purchase of JPS (Note 1).................................. (56,300)
Initial payment to VIL in connection with note payable
issued by SCI (Note 1).................................... (800)
--------
6,759
Prepaid and other........................... (b) Reduce Valentec's current portion of deferred tax assets
due to the reduction of deferred tax liability (Note 5)... (762)
Eliminate JPS's current deferred tax assets (Note 5)...... (210)
--------
(972)
--------
Increase in current assets.................. 5,787
--------
Property, plant and equipment,
net....................................... (c) Adjustment to property, plant and equipment to fair value (2,179)
Eliminate accumulated depreciation accounts............... 2,179
Adjustment to machinery and equipment to fair value in
connection with the acquisition of JPS (Notes 1 and 3).... 677
Purchases of property and equipment from debt offering
proceeds (Note 2)......................................... 1,250
Purchased property and equipment from debt offering
proceeds (Notes 1 and 3).................................. 1,500
--------
3,427
Receivable from affiliate................... (d) Eliminate intercompany receivable balance between SCI
and Valentec (Note 1)..................................... (4,348)
Goodwill, net............................... (e) Record goodwill from acquisition of Valentec (Note 1)..... 13,165
Record goodwill from acquisition of JPS (Note 1).......... 18,348
Eliminate historical JPS goodwill (Note 1)................ (15,049)
--------
16,464
Other assets................................ (f) Record debt acquisition costs related to the Notes (Notes
1 and 4).................................................. 3,300
Record deferred financing costs for KeyBank (Note 4)...... 200
Eliminate JPS deferred tax assets (273)
Record SCI's investment in JPS for total cash paid........ 56,900
Eliminate SCI's investment in JPS in consolidation........ (56,900)
Adjustment to Valentec's investment in SCI at fair value
(Notes 1 and 5)........................................... 3,359
Record SCI's investment in Valentec....................... 13,692
Reclass Valentec's investment in SCI as treasury stock
(Note 1).................................................. (13,692)
</TABLE>
30
<PAGE> 39
<TABLE>
<S> <C> <C> <C>
Eliminate SCI's investment in Valentec in consolidation... (13,692)
--------
(7,106)
--------
Increase in total assets.................... $ 14,224
========
</TABLE>
See Unaudited Notes to Pro Forma Financial Data.
31
<PAGE> 40
SAFETY COMPONENTS INTERNATIONAL, INC.
UNAUDITED PRO FORMA BALANCE SHEET
SUMMARY OF PRO FORMA ADJUSTMENTS -- (CONTINUED)
(IN THOUSANDS)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
AS OF
REF ADJUSTMENT MARCH 31, 1997
--- ---------- --------------
<S> <C> <C> <C>
Payable to affiliates................ (g) Eliminate intercompany balance between Valentec and SCI
(Note 1)............................................... $ (4,348)
Replace Valentec's short term note payable to VIL with
SCI's note to VIL (Notes 1 and 4)...................... (1,146)
--------
(5,494)
Current portion of long-term
obligations........................ (h) Record current portion of SCI note payable to VIL
(Notes 1 and 4)........................................ 346
Repayment of SCI's current portion of notes payable to
Bank of America NT&SA (as defined) (Note 4)............ (2,248)
--------
(1,902)
--------
Decrease in current liabilities...... (7,396)
--------
Long-term obligations................ (i) Issuance of Notes (Notes 1 and 4)...................... 90,000
Repayment of SCI's notes payable to Bank of America
NT&SA (Note 4)......................................... (17,943)
Record long term portion of SCI note payable to VIL
(Notes 1 and 4)........................................ 1,654
--------
73,711
Other long-term liabilities.......... (j) Reverse Valentec's deferred tax liability associated
with investment in SCI stock, net of noncurrent
deferred tax assets (Note 5)........................... (2,056)
Replace Valentec's long-term note payable to VIL
with SCI's note to VIL (Notes 1 and 4)................. (1,654)
--------
(3,710)
--------
Increase in total liabilities........ 62,605
--------
Stockholders' equity................. (k) Eliminate Valentec's common stock...................... (22)
Eliminate Valentec's additional paid-in capital........ (428)
Eliminate JPS's historical equity...................... (51,130)
Record treasury stock for SCI stock held by Valentec (13,692)
Issuance of common stock in connection with Valentec
merger................................................. 13,692
Eliminate Valentec's historical accumulated deficit.... 3,976
Eliminate JPS's historical retained earnings........... (777)
--------
Decrease in stockholders' equity..... (48,381)
--------
Increase in total liabilities and
stockholders' equity............... $ 14,224
========
</TABLE>
See Unaudited Notes to Pro Forma Financial Data.
32
<PAGE> 41
SAFETY COMPONENTS INTERNATIONAL, INC.
UNAUDITED PRO FORMA BALANCE SHEET
SUMMARY OF SUBSEQUENT TRANSACTIONS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
AS OF
REF ADJUSTMENT MARCH 31, 1997
--- ---------- --------------
<S> <C> <C> <C>
Cash and cash equivalents (l) Proceeds from equipment refinancing (Notes 4 and 6).......... 850
Proceeds from Bank Austria mortgage (Notes 4 and 6).......... 7,500
Payment of deferred financing costs to Bank Austria
(Notes 4 and 6).............................................. (150)
Repayment of Valentec revolving facility (Notes 4 and 6) (1,424)
Repayment of Valentec term note (Notes 4 and 6).............. (3,921)
--------
2,855
--------
Other assets........................... (m) Record deferred financing costs for Bank Austria (Note 6).... 150
--------
Increase in total assets............... $ 3,005
========
LIABILITIES AND EQUITY
Current portion of long-term
obligations.......................... (n) Record current portion of mortgage with Bank Austria
(Notes 4 and 6).............................................. $ 750
Record current portion of Transamerica equipment
financings (Notes 4 and 6)................................... 329
--------
1,079
--------
Long-term obligations.................. (o) Repayment of Valentec equipment notes (Notes 4 and 6) (1,150)
Repayment of Valentec revolving credit facility (Notes
4 and 6)..................................................... (1,424)
Repayment of Valentec term note (Notes 4 and 6) (3,921)
Record long-term portion of Transamerica equipment
financings (Notes 4 and 6)................................... 1,671
Record long-term portion of mortgage with Bank Austria (Notes 6,750
4 and 6)..................................................... --------
1,926
--------
Increase in total
liabilities.......................... $ 3,005
========
</TABLE>
See Unaudited Notes to Pro Forma Financial Data.
33
<PAGE> 42
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL DATA
NOTE 1 TRANSACTIONS
Valentec Acquisition
Valentec is a high-volume manufacturer of stamped and precision machine
products in the automotive, commercial and defense industries. Immediately prior
to the closing of the Valentec Acquisition, Valentec sold its wholly-owned
subsidiary, VIL for a nominal amount. In connection with the Valentec
Acquisition, the Company assumed a demand note payable to VIL of $800,000 and a
five year term note of $2.0 million (see Note 4) in satisfaction of certain
intercompany obligations between Valentec and VIL. The Company estimates direct
acquisition costs to be approximately $600,000. The stock of the Company,
1,379,200 shares, previously held by Valentec was reacquired and have been
recorded as treasury shares at fair value. Goodwill has been estimated at $13.2
million using the March 31, 1997 balance sheet and will be amortized over 25
years. Subsequent to March 31, 1997, Valentec incurred a loss from operations
and increased certain intercompany liabilities between itself and the Company,
among other fluctuations. As a result, the Company now estimates goodwill to be
approximately $16.8 million as of Valentec's May 22, 1997 balance sheet.
Amortization of goodwill has been included in the accompanying unaudited pro
forma consolidated statements of operations amounting to approximately $527,000
for the year ended March 31, 1997. Additionally, the Company had certain related
transactions, which have been eliminated for pro forma presentation.
JPS Acquisition
On July 24, 1997, the Company acquired all of the assets of the
Division for $56.3 million in cash, including 18 looms (approximated value of
$1.5 million) which were delivered to the Company at closing plus the assumption
of certain liabilities, subject to post-closing adjustments. In addition, the
Company made a payment to JPS at the closing to enable it to pay off existing
indebtedness of the Division of approximately $650,000 at the closing. In
addition, the Company intends to purchase an adjacent building for approximately
$1.3 million. The Company estimates direct acquisition costs to be approximately
$600,000. The JPS Acquisition was accounted for as a purchase, with the excess
of the purchase price over the fair value of the net assets acquired allocated
to goodwill. The Company adjusted property, plant and equipment in the
accompanying historical financial statements of the Division to fair value in
the amount of $677,000. Goodwill has been estimated at $18.3 million and will be
amortized over 40 years. Amortization of goodwill has been included in the
accompanying unaudited pro forma consolidated statements of operations amounting
to approximately $459,000 for the year ended March 31, 1997. Additionally, the
Division had preexisting amortization of goodwill totaling approximately
$884,000 which was reversed from the accompanying unaudited pro forma
consolidated statements of operations.
Notes
The Company incurred approximately $3.3 million of fees and expenses
related to the Offering. Such fees will be deferred and charged to operations
over the expected term of the Notes, not to exceed 10 years.
Interest is payable on the Old Notes, and will be payable on the
Exchange Notes, semi-annually at a rate of 10.125% beginning January 15, 1998,
on a pro forma basis. Included in the unaudited pro forma statement of
operations is $9.1 million of interest expense.
NOTE 2 PRINCIPLES OF ACCOUNTING FOR UNAUDITED PRO FORMA FINANCIAL DATA
The historical consolidated financial statements include the accounts
of the Company and its substantially-owned subsidiaries. The accounts of Phoenix
Airbag GmbH ("Phoenix" or "Phoenix Airbag"), which was acquired by the Company
on August 6, 1996 (the "Phoenix Acquisition"), have been included in the
Company's historical consolidated financial statements beginning August 6, 1996
(date of acquisition). Accordingly, management adjusted, on a pro forma basis,
the historical accounts for Phoenix based on its actual results of operations
for the year ended March 31, 1997.
34
<PAGE> 43
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL DATA -- (CONTINUED)
For the year ended March 31, 1997, the accompanying unaudited pro forma
statements of operations have been adjusted to reflect, on a pro forma basis,
the historical results of Phoenix for a full year, and management's estimates of
costs and expenses for the period April 1, 1996 through August 5, 1996 as
follows (in thousands):
<TABLE>
<S> <C>
Net sales $12,381
Cost of sales 9,155
Depreciation 249
Selling, general and administrative expenses 1,178
Amortization of goodwill 153
Interest expense 83
Income tax expense 473
-------
Increase in net income $ 1,090
=======
Airbag cushion units produced 1,015
=======
</TABLE>
NOTE 3 PROPERTY, PLANT AND EQUIPMENT, NET
Property and equipment has been increased for the proposed purchase of
a building for approximately $1.3 million, equipment for $1.5 million to be used
by SCFT, and the adjustment to fair value of $677,000 of existing equipment at
SCFT. The building and equipment will be purchased with proceeds received from
the Offering. The building will have an estimated useful life of 40 years and
the equipment will have an estimated useful life of 10 years. The accompanying
unaudited pro forma consolidated statements of operations include additional
depreciation amounting to $350,000 for the year ended March 31, 1997, which has
been included as costs of goods sold.
NOTE 4 LONG-TERM OBLIGATIONS
The Credit Agreement with KeyBank provided for a Term Loan (as defined)
of $15.0 million and a Revolving Credit Facility (as defined) of $12.0 million.
The loans under the Credit Agreement will mature on May 31, 2002 and are secured
by substantially all the assets of the Company. Upon completion of the Offering,
the Company used the proceeds to repay the Term Loan and amounts then
outstanding under the Revolving Credit Facility. In connection therewith, the
Company's credit facility with KeyBank was converted into a $27.0 million
revolving credit facility (the "New Credit Facility"), bearing interest at LIBOR
plus 1.00% with a commitment fee of 0.25% for any unused portion, with the
remaining terms and conditions being similar to the previous revolving credit
facility. The Company incurred approximately $200,000 of financing fees in
connection with the KeyBank credit facility. The Credit Agreement contains
certain restrictive covenants that impose limitations upon, among other things,
the Company's ability to change its business; merge, consolidate or dispose of
assets; incur liens; make loans and investments; incur indebtedness; pay
dividends and other distributions; engage in certain transactions with
affiliates; engage in sale and lease-back transactions; enter into lease
agreements; and make capital expenditures.
Effective as of May 22, 1997, the Company completed the acquisition of
Valentec. The Company assumed all of Valentec's outstanding obligations as of
that date, including two term notes of approximately $5.1 million (net of assets
held by the lender), a revolving line of credit of approximately $1.4 million,
as of March 31, 1997 and equipment financings of approximately $1.1 million as
of March 31, 1997. Approximately $6.5 million of such indebtedness described in
this paragraph was retired in May and June 1997 with proceeds received from the
Bank Austria mortgage note (see below).
In connection with the Valentec Acquisition, the Company assumed a
demand note payable to VIL of $800,000 and a five year term note of $2.0
million, payable in 60 monthly installments of approximately $39,600, together
with interest at 7.0% per annum. Interest expense of $140,000 has been included
in the unaudited pro forma statement of operations to reflect this obligation.
35
<PAGE> 44
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL DATA -- (CONTINUED)
On June 4, 1997, the Company secured a $7.5 million mortgage note
facility with Bank Austria. The note is payable in semi-annual installments
through March 31, 2007 and bears an interest rate of 7.5%. The note is secured
by the assets of the Company's Czech Republic facility. The Company increased
interest expense in the accompanying unaudited pro forma statement of operations
by $563,000 for these borrowings as if they were outstanding for the year ended
March 31, 1997.
Deferred Financing Costs
Deferred financing costs, included in other assets, will arise, or
arose, as the case may be, from the issuance of the Notes (see Note 1), the
KeyBank Credit Facility and the subsequent transactions (see Note 6). Costs will
be capitalized and amortized using the effective interest method. Amounts
charged to interest expense in the accompanying unaudited pro forma consolidated
statements of operations amounted to $385,000.
NOTE 5 INCOME TAXES
As discussed in Note 1, in connection with the Valentec Acquisition,
the Company received 1,379,200 treasury shares. The historical financial
statements of Valentec have a carrying value of $10.3 million and a
corresponding deferred income tax liability of $3.4 million. The shares are
recorded at their estimated fair value of $13.7 million, an increase adjustment
of $3.4 million, in the accompanying unaudited pro forma balance sheet. Since
management intends to merge Valentec with the Company in fiscal 1998, no
deferred income tax liability is recorded in the accompanying unaudited pro
forma balance sheet. The Company adjusted the tax provision of the Division as
if it were taxed as a corporation for the twelve months ended March 31, 1997.
The Company also recorded a tax benefit for additional expenses, which are
deductible for income tax purposes and included in the pro forma presentation.
NOTE 6 SUBSEQUENT TRANSACTIONS
Subsequent to the Valentec Acquisition, the Company entered into
certain financing arrangements. On June 4, 1997, the Company secured a $7.5
million mortgage note facility with Bank Austria (see Note 4). The proceeds were
used to repay approximately $6.5 million of debt obligations assumed by the
Company as part of the Valentec Acquisition. In connection with this mortgage,
the Company incurred approximately $150,000 of financing fees. Additionally, the
Company replaced certain existing capital lease obligations with new capital
lease obligations with similar terms. These transactions are collectively known
as the "Subsequent Transactions".
36
<PAGE> 45
SELECTED HISTORICAL AND UNAUDITED PRO FORMA
FINANCIAL DATA
The following selected historical and unaudited pro forma financial
data is derived from, and qualified by reference to, the Company's Consolidated
Financial Statements and the notes thereto. The selected financial data for the
periods from April 28, 1993 through March 31, 1994 and January 1, 1993 through
April 27, 1993 is derived from the combined Automotive and Galion divisions of
Valentec for those periods. The pro forma data have been derived from the
Unaudited Pro Forma Financial Data of the Company included elsewhere in this
Prospectus. The Unaudited Pro Forma Financial Data does not purport to represent
what the Company's results of operations actually would have been if the
transactions referred therein had been consummated on the date or for the
periods indicated, or what such results will be for any future date or for any
future period. The information below should be read in conjunction with the
Consolidated Financial Statements of the Company and the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FOUR ELEVEN
MONTHS MONTHS
JANUARY 1, APRIL 28,
1993 1993 YEAR ENDED MARCH 31,
THROUGH THROUGH --------------------
APRIL 27, MARCH 31, PRO FORMA
1993 1994 1995(1) 1996(1) 1997(1)(2) 1997(3)
---- ---- ------- ------- ---------- -------
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales .............................. $4,580 $22,444 $51,779 $94,942 $83,958 $173,208
Cost of sales .......................... 4,436 18,895 44,553 81,908 67,934 145,084
Gross profit ........................... 144 3,549 7,226 13,034 16,024 28,124
Selling, general and administrative
expenses ............................. 538 2,738 4,050 5,430 7,072 13,162
Operating income (loss) ................ (394) (439) 3,176 7,604 8,604 13,459
Interest expense (income), net ......... 10 235 126 (197) 1,319 10,563
Income (loss) before income taxes ...... (417) (591) 3,416 8,030 6,841 2,053
Income tax provision (benefit) ......... (167) (207) 1,283 3,116 2,995 998
Income before extraordinary item and
cumulative effect of accounting
changes .............................. (250) (384) 2,133 4,914 3,846 1,055
Extraordinary item-- deferred
financing costs (less tax benefit
of $255)(4) .......................... -- -- -- -- (383) --
Cumulative effect of change in
accounting for deferred product launch
costs (less tax benefit of $718)(5) .. -- -- -- -- (1,259) --
Net income ............................. (250) (384) 2,133 4,914 2,204 1,055
------ ------- ------- ------- ------- --------
Net income per share ................... NA NA $ .53 $ .99 $ .44 $ .21
======= ======= ======= ========
Weighted average number of
shares outstanding ................... NA NA 4,031 4,981 5,027 5,021
======= ======= ======= ========
OTHER DATA:
EBITDA(6) .............................. $ (248) $ 1,125 $ 3,919 $ 8,708 $12,756 $ 22,217
Adjusted EBITDA(6) ..................... -- -- -- -- -- 23,428
Depreciation and amortization .......... 146 314 743 1,104 2,391 6,997
Capital expenditures(7) ................ 198 3,710 2,473 4,588 8,613 10,554
Ratio of earnings to fixed
charges(8) ............................. -- -- 28.1x -- 6.2x 1.2 x
Airbag cushion units(9) ................ 61 783 2,116 2,610 5,179 6,194
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents .............. $ 28 $ 31 $ 3,846 $12,033 $ 8,320 $ 17,973
Working capital ........................ 749 1,504 8,206 25,050 11,755 34,297
</TABLE>
37
<PAGE> 46
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Total assets ....................... 4,943 12,837 28,311 49,831 73,407 170,016
Total debt ......................... -- 5,529 2,412 3,784 24,381 107,567
Stockholders' equity ............... -- -- 15,971 35,344 35,274 35,274
Division (deficit) equity .......... (1,223) 866 -- -- -- --
CASH FLOW DATA:
Cash flows from operations ......... $ 193 $ 108 $ (901) $(3,500) $ 11,115 NA
Cash flows from investing activities (198) (3,710) (2,473) (4,588) (32,870) NA
Cash flows from financing activities 20 3,605 7,084 16,555 18,903 NA
</TABLE>
- ----------
(1) The Company did not declare dividends during fiscal year 1997, 1996
or 1995.
(2) In August 1996, the Company acquired Phoenix Airbag. The
transaction was accounted for as a purchase using the purchase method of
accounting.
(3) The pro forma results of operations data for 1997 give effect to:
(i) the Valentec Acquisition; (ii) the JPS Acquisition; (iii) the completion of
the Offering and the application of the net proceeds therefrom; (iv) the Phoenix
Acquisition; and (v) certain Subsequent Transactions, as if each had occurred on
April 1, 1996. The related pro forma balance sheet data as of March 31, 1997
gives effect to items (i), (ii) (iii) and (v) as if these had occurred at March
31, 1997.
(4) As part of the bank refinancing that occurred in fiscal year 1997,
approximately $383,000 in deferred financing costs were charged against
operations, net of certain tax benefits of $255,000.
(5) During fiscal year 1997, the Company changed its accounting for
product launch costs from the deferral method to the expense as incurred method.
The Company recorded the cumulative effect of this change in accounting
principle of approximately $1.3 million, net of certain tax benefits of
$718,000.
(6) EBITDA represents income from operations plus depreciation and
amortization and excludes the current year's impact of previously deferred
product launch costs now expensed due to the accounting principle change made in
fiscal year 1997. EBITDA is presented because it is a widely accepted financial
indicator of a company's ability to service and/or incur indebtedness. However,
EBITDA should not be considered as an alternative to net income as a measure of
operating results or to cash flows from operations as a measure of liquidity in
accordance with generally accepted accounting principles. Adjusted EBITDA
excludes non-recurring costs charged to JPS of $1.2 million, which consists of
allocated cost of sales and selling, general and administrative expenses from
JPS.
(7) Pro forma capital expenditures do not include equipment obtained
under capital lease obligations of $1.4 million, 18 looms purchased for $1.5
million or the building to be purchased for approximately $1.3 million in
connection with the JPS Acquisition. However, capital expenditures include a
non-recurring investment of $7.1 million for pro forma and fiscal year 1997
related to the construction of the Company's new Czech Republic facility, which
was subsequently financed. Excluding this non-recurring investment for the Czech
Republic facility, pro forma and fiscal year 1997 capital expenditures would
have been $3.5 million and $1.5 million, respectively.
(8) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as income before income taxes, plus fixed charges. Fixed
charges consist of net interest expense on all indebtedness including
amortization of deferred debt issuance costs and deferred financing costs. For
the Four Months January 1, 1993 through April 27, 1993 and the Eleven Months
April 28, 1993 through March 31, 1994, earnings were insufficient to cover fixed
charges by $167,000 and $207,000, respectively. In fiscal year 1996, the Company
did not incur fixed charges.
(9) Pro forma airbag cushion units includes the unit sales of Phoenix
Airbag for the period April 1, 1996 through August 5, 1996. Refer to Note 2 of
Notes to Unaudited Pro Forma Financial Data.
38
<PAGE> 47
SELECTED QUARTERLY FINANCIAL DATA
Unaudited quarterly financial information for fiscal years 1996 and
1997 of the Company is set forth below. The Company recorded the cumulative
effect of the change in accounting principle and the extraordinary item during
the fourth quarter of fiscal year 1997. The Company did not restate prior
quarters. During the 1997 fiscal year, the Company changed its accounting for
product launch costs from the deferral method to the expense as incurred
method. Management believes expensing such costs is comparable with its
industry peer group. Expensing such costs as incurred is considered the
preferable method of accounting and, accordingly, management recorded the
cumulative effect of this change in accounting principle totaling $2.0 million
($1.3 million after income taxes or $0.24 per share) effective April 1, 1996,
in accordance with Accounting Principles Board Opinion No. 20. During the
fiscal year ended March 31, 1997, the Company incurred approximately $1.8
million of product launch costs which, under the previously used accounting
method, would have been capitalized to deferred product launch costs. Under the
new accounting policy, such costs were expensed as incurred. During the first
quarter of fiscal year 1997, the Company terminated its line of credit with a
bank and accordingly charged the associated deferred financing costs to
operations as an extraordinary item. The charge was approximately $383,000 (net
of income tax benefit of $255,000). All dollar amounts are in thousands except
per share data.
<TABLE>
<CAPTION>
Quarter Ended
-----------------------------------------------------------------------
June 30, September 30, December 31, March 31, 1996
1995 1995 1995
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fiscal 1996
Revenues.......................................... $23,683 $25,317 $24,447 $21,495
Income from operations............................ $ 1,562 $ 1,952 $ 1,943 $ 2,147
Net income........................................ $ 1,047 $ 1,343 $ 1,297 $ 1,227
Net income per share.............................. $ 0.24 $ 0.26 $ 0.25 $ 0.24
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended
---------------------------------------------------------------------
June 30, September 30, December 31, March 31,
1995 1995 1995 1996
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fiscal 1997
Revenues.......................................... $16,172 $18,877 $24,662 $24,247
Income from operations............................ $ 1,446 $ 2,248 $ 3,150 $ 1,760
Income before extraordinary item and
cumulative effect of accounting change......... $ 853 $ 1,148 $ 1,420 $ 425
Net income........................................ $ 853 $ 1,148 $ 1,420 $(1,217)
Income before extraordinary item and
cumulative effect of accounting
change per share.......................... $ 0.17 $ 0.23 $ 0.28 $ 0.09
Net income per share.............................. $ 0.17 $ 0.23 $ 0.28 $ (0.24)
</TABLE>
39
<PAGE> 48
<TABLE>
<CAPTION>
Amended Quarter Ended
---------------------------------------------------------------------
June 30, September 30, December 31, March 31,
1995 1995 1995 1996
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
AMENDED Fiscal 1997
Revenues.......................................... $16,172 $18,877 $24,662 $24,247
Income from operations............................ $ 1,416 $ 1,971 $ 2,627 $ 2,590
Income before extraordinary item and
cumulative effect of accounting change......... $ 835 $ 982 $ -- $ --
Net (loss) income................................. $ (424) $ 599 $ 1,106 $ 923
Income before extraordinary item and
cumulative effect of accounting
change per share.......................... $ 0.17 $ 0.20 $ -- $ --
Net (loss) income per share....................... $ (0.08) $ 0.12 $ 0.22 $ 0.20
</TABLE>
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<PAGE> 49
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Due to the Company's historical and anticipated growth including growth
through acquisitions, the Company believes that period-to-period comparisons of
its financial results are not necessarily meaningful and should not be relied
upon as an indication of future performance. The following discussion should be
read in conjunction with the Company's consolidated financial statements and
notes thereto appearing herein.
The Company is a leading manufacturer and supplier of airbag cushions
to Tier 1 airbag module suppliers for a variety of automobiles and light trucks.
In fiscal 1997, the Company expanded its production and sales through
its acquisition of Phoenix Airbag in Germany and construction of its
manufacturing facility in the Czech Republic. In May 1997, the Company acquired
Valentec which enables the Company to manufacture and supply additional airbag
system components. Currently, Valentec manufactures metal airbag components
using machinery and stamping processes, among other industrial and commercial
products, which are sold domestically.
In July 1997, the JPS Acquisition was consummated, pursuant to which,
SCFT acquired all of the assets of the Division. The Offering was conditioned
upon, and a significant portion of the proceeds of the Offering were used to
finance, the JPS Acquisition. SCFT is a leading manufacturer of airbag fabric in
North America, as well as other specialty fabrics. Currently, the Company is
required by certain of its customers to purchase airbag fabric from vendors
other than SCFT. Should the Company obtain approval from certain of its vendors
to purchase fabric from SCFT, the Company may improve its overall operating
results.
Change in Accounting Principle and Extraordinary Item
During the 1997 fiscal year, the Company changed its accounting for
product launch costs from the deferral method to the expense as incurred method.
The Company recorded the cumulative effect of this change in accounting
principle in the amount of $2.0 million before income taxes effective April 1,
1996, in accordance with Accounting Principles Board Opinion No. 20. The fiscal
1997 deferred product launch costs of $1.8 million would have been capitalized
under the previously used accounting method rather than expensed as part of
costs of goods sold. The resulting impact of the change, including fiscal 1997's
deferral, totaled $2.3 million after income taxes, or $.46 per share. The
Company's determination was based on the fact that expensing such costs as
incurred is considered the preferable method of accounting and is a more
conservative approach. This change will allow management and its shareholders to
be better able to compare operating performance on a going-forward basis.
Additionally, in connection with a loan agreement with Bank of America
National Trust and Savings Association ("Bank of America NT&SA"), which replaced
the revolving credit with Citicorp US, Inc., the Company recorded an
extraordinary loss of $383,000 (net of income taxes of $255,000), or $0.08 per
share, relating to the write-off of deferred financing costs incurred for the
previous credit facility.
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<PAGE> 50
RESULTS OF OPERATIONS
The following table sets forth certain operating results as a
percentage of net sales for the periods indicated.
<TABLE>
<CAPTION>
Year ended March 31,
--------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of goods sold 86.0 86.3 80.9
Gross profit 14.0 13.7 19.1
Selling, general and administrative expense 7.8 5.7 8.4
Income from operations 6.1 8.0 10.3
Interest expense (income), net 0.2 (0.2) 1.6
Income before extraordinary item and cumulative effect of
change in accounting 4.1 5.2 4.6
Net income 4.1 5.2 2.6
EBITDA 7.6 9.2 15.2
</TABLE>
YEAR ENDED MARCH 31, 1997 COMPARED TO YEAR ENDED MARCH 31, 1996
Net Sales. Net sales decreased by $11.0 million or 11.6% to $84.0
million in fiscal year 1997 compared to fiscal year 1996. The decrease was
primarily attributable to lower revenues in defense related operations partially
offset by an increase in automotive related operations. The decrease in defense
related revenues of $30.7 million reflects the current contract schedule for the
Systems Contract which has been delayed as a result of the failure of one of the
Company's subcontractors to meet the U.S. Army's revised engineering standards
and obtain government process approval for final load, assembly and pack. As a
result of these issues, the U.S. Army has extended the time for delivery and the
Company now anticipates, based upon discussions with the subcontractor and the
U.S. Army, that deliveries will begin in late fiscal 1998. The reduced sales
under the Systems Contract were partially offset by the increased sales of metal
ordnance products. The increase in automotive related sales of $19.7 million was
primarily attributable to the acquisition of Phoenix Airbag, which contributed
approximately $25.4 million, partially offset by lower European sales to TRW.
European sales to TRW decreased as a result of lower unit prices reflecting
redesigned products and lower fabric prices. The Company's sales of passenger
and driver side airbags produced for the North American market decreased by
approximately $242,000, primarily as a result of increased sales to Delphi and
increased sales of driver side bags to TRW, offset by lower sales of passenger
side airbags to TRW.
Gross Profit. Gross profit increased by $3.0 million or 22.9% to $16.0
million in fiscal year 1997 compared to fiscal year 1996. The increase was
primarily attributable to automotive profits, which increased by $5.8 million.
The increase was primarily attributable to increased sales volume in Europe due
to the acquisition of Phoenix Airbag, which contributed approximately $6.9
million to gross profit. This increase was offset by lower margins in North
America and defense related operations. The decrease of approximately $996,000
in North America was primarily the result of the change in accounting principle
discussed above, offset by lower costs due to ongoing cost reduction programs.
The impact of the change in accounting principle was to currently expense
product launch costs, previously deferrable, of $1.8 million. The decrease in
defense related operations of $2.8 million was primarily a result of the delays
due to the Systems Contract discussed earlier.
Gross profit as a percentage of sales increased to approximately 19.1%
for fiscal year 1997 from 13.7% for fiscal year 1996. Exclusive of the impact of
the change in accounting principle, gross profit as a percentage of sales would
have been approximately 21.2% for fiscal year 1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $1.6 million or 30.2% to $7.1 million in
fiscal year 1997 compared to fiscal year 1996. The increase was primarily
attributable to automotive operations, specifically from the acquisition of
Phoenix Airbag, which was approximately $1.9 million, partially offset by lower
costs in the U.K. due to lower sales. Selling, general and administrative
expenses as a percentage
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<PAGE> 51
of sales increased slightly to 8.4% for fiscal year 1997 from 5.7% for fiscal
year 1996. The increase related to the continued expansion of the Company's
automotive and industrial related operations, including additional support
personnel and marketing.
Operating Income. Operating income increased by $1.0 million or 13.2%
to $8.6 million in fiscal year 1997 compared to fiscal year 1996. Operating
income from automotive operations increased by $3.6 million primarily
attributable to the acquisition of Phoenix Airbag, which contributed
approximately $4.8 million. This increase was partially offset by lower
operating income in North America. The decrease of approximately $876,000 in
North America was primarily the result of the change in accounting principle
discussed above, offset by lower costs due to ongoing cost reduction programs.
The impact of the change in accounting principle was to currently expense
product launch costs, which were previously deferred in the comparable period.
The increase in automotive operations was partially offset by a decrease in
defense related operations of $2.6 million which reflected lower sales due to
delays in the current contract schedule for the Systems Contract, partially
offset by improved margins on metal ordnance products, resulting from increased
sales volumes, improved overhead absorption and a change in product mix.
Interest Expense. Interest expense increased $1.2 million or 308.1% to
$1.6 million for fiscal year 1997 compared to fiscal year 1996. This increase
was a direct result of the $20.0 million term loan used for the acquisition of
Phoenix Airbag. The increase of other expense is primarily attributable to
losses on foreign currency transactions.
Income Taxes. The income tax rate applied against pre-tax income was
43.7% for fiscal year 1997 compared to 38.8% for fiscal year 1996. The tax rate
increased as compared to the prior year due to the increasing percentage of
income generated from European operations, which have higher tax rates than U.S.
operations.
Net Income. Net income decreased to $2.2 million for fiscal year 1997
compared to $4.9 million in fiscal year 1996. Net income decreased due to the
impact of the extraordinary item and the cumulative effect of accounting change
as discussed above. Income before extraordinary item and cumulative effect of
accounting change was $3.8 million for fiscal year 1997 compared to $4.9 million
for fiscal year 1996. The decrease was primarily the impact of the change in
accounting principle for product launch costs during fiscal year 1997. These
costs, which were previously deferrable, are currently expensed as incurred. The
impact on fiscal year 1997 was to expense $1.8 million ($1.1 million net of tax
benefit of $704,000) of product launch costs.
EBITDA. EBITDA increased by $4.1 million or 46.5% to $12.8 million in
fiscal year 1997 compared to fiscal year 1996. The increase was the result of
the items mentioned above. EBITDA excludes the current year's impact of
previously deferred product launch costs now expensed due to the accounting
principle change made in fiscal year 1997. These costs would have been excluded
as amortization under the prior accounting treatment, therefore, the change in
accounting principle's impact on fiscal year 1997 has been excluded.
YEAR ENDED MARCH 31, 1996 COMPARED TO YEAR ENDED MARCH 31, 1995
Net Sales. Net sales increased $43.2 million or 83.4% to $94.9 million
in fiscal year 1996 compared to fiscal year 1995. The increase was primarily
attributable to defense related operations, which increased $37.1 million as a
result of significantly higher revenues from the Systems Contract and, to a
lesser extent, increased shipments of metal ordnance components. The increase in
automotive sales was $6.0 million as a result of increased production. The unit
sales from automotive operations increased approximately 23.3% over the prior
year, while overall sales increased by 14.0%. The Company's unit sales continued
to increase reflecting higher sales of both passenger and driver side airbags.
Sales were unfavorably impacted in the current period by the softening U.S.
automotive market and a changing product mix in Europe, and to a lesser extent,
decreases in material prices, delays on certain model year 1996 programs by
certain original equipment manufacturers and the GM labor dispute in the fourth
quarter of fiscal year 1996.
Gross Profit. Gross profit increased by $5.8 million or 80.4% to $13.0
million in fiscal year 1996 compared to fiscal year 1995. The increase was
primarily attributable to defense operations, which increased $4.0 million.
Gross profit increased primarily as a result of higher sales from the Systems
Contract, partially offset by changes in the metal ordnance
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<PAGE> 52
component product mix, with decreased sales of several older, higher margin
defense programs and higher sales of newer, lower margin defense and commercial
programs. The automotive operations increased $1,773,000 for fiscal year 1996.
The improvement in gross profit resulted primarily from the increased sales
volume, and to a lesser extent from greater efficiencies related to higher
levels of production. Gross profit was unfavorably impacted in the current
fiscal year by certain program delays and the General Motors labor dispute in
the fourth fiscal quarter. During the year ended March 31, 1995, the continued
improvement in the gross profit of automotive related North American operations
was partially offset by certain expenses related to the expansion of automotive
related European operations. Specifically, during the year ended March 31, 1995,
TRW accelerated demand for airbags in Europe required the Company to operate, on
a temporary basis, a high cost facility in Germany pending the transfer of
certain manufacturing operations to two Czech subcontractors. Certain costs
relating to the launching of new programs in North America and Europe were
capitalized during this period. During fiscal 1997, the Company changed its
accounting for product launch costs from the deferral method to the expense as
incurred method as described above under "-- Overview -- Change in Accounting
Principle and Extraordinary Item."
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $1.4 million or 34.1% to $5.4 million in
fiscal year 1996 compared to fiscal year 1995. The increase was primarily
attributable to defense related operations, which increased $868,000 in fiscal
year 1996 reflecting increased expenses related to the Systems Contract, higher
bid and proposal costs associated with potential future contracts and higher
corporate overhead expenses. Automotive operations increased $512,000 primarily
from greater expenditures related to the continued expansion of the Company's
automotive operations, including additional support personnel, increased
marketing and professional services and higher corporate overhead expenses,
including increased staffing, legal, accounting and insurance expenses.
Operating Income. Operating income increased by $4.4 million or 139.4%
to $7.6 million in fiscal year 1996 compared to fiscal year 1995. The increase
was primarily attributable to defense related operations, which increased $3.2
million primarily as a result of higher income from the Systems Contract,
partially offset by higher corporate overhead expenses and, to a lesser extent,
lower margins on metal ordnance components. Automotive operations increased $1.3
million primarily as a result from the continued improvement in the
profitability of the manufacturing operations due to higher sales volume and
greater efficiencies, partially offset by increased expenses for administrative,
marketing and professional services supporting the ongoing expansion of the
Company's automotive operations.
Net Income. Net income increased to $4.9 million for fiscal year 1996
compared to $2.1 million in fiscal year 1995 for the reasons discussed above.
EBITDA. EBITDA increased by $4.8 million or 122.2% to $8.7 million in
fiscal year 1996 compared to fiscal year 1995. The increase was the result of
the items mentioned above.
LIQUIDITY AND CAPITAL RESOURCES
As the Company's business grows, its equipment and working capital
requirements will also continue to increase as a result of the anticipated
growth of the automotive and industrial related operations. This growth will be
funded through a combination of cash flow from operations, equipment financing,
revolving credit borrowings and proceeds from the Offering and future public
offerings.
On August 6, 1996 the Company acquired Phoenix Airbag, a major European
airbag cushion manufacturer located in Hildesheim, Germany. The acquisition was
funded through a loan agreement with Bank of America NT&SA. Amounts outstanding
on the Bank of America NT&SA term loan ($17.3 million at March 31, 1997) accrued
interest at 8.79%, and the Bank of America NT&SA revolving credit facility ($2.9
million at March 31, 1997) accrued interest at 8.0%. The proceeds of such loan,
were used to repay and terminate the Bank of America NT&SA facility. Pursuant to
a stock purchase agreement, the Company initially acquired 80% of Phoenix AG's
interest in Phoenix Airbag for a purchase price of approximately $22.0 million,
subject to a net worth adjustment. The Company will acquire the remaining 20%
interest effective December 31, 1998, but is entitled to all of the income of
Phoenix Airbag from the date of the acquisition. The additional purchase price
of up to approximately $7.5 million for the remaining 20% interest is contingent
on Phoenix Airbag meeting certain annual performance targets for the calendar
years 1996 through 1998. Phoenix Airbag met the performance
44
<PAGE> 53
targets for calendar year 1996 and $2.2 million of the contingent purchase price
was paid April 28, 1997. If the annual performance targets for calendar years
1997 and 1998 are not met, the Company will acquire the remaining 20% without
any additional consideration. Additionally, the Company will, under certain
circumstances, be required to provide a bank guaranty, in August 1997, to secure
the payment of up to approximately $4.0 million of the contingent purchase
price.
As of May 21, 1997, the Company, Phoenix Airbag and Automotive Safety
Components International Limited ("ASCIL" and collectively, the "Borrowers")
entered into the Credit Agreement with KeyBank National Association, as
administrative agent ("KeyBank"), and the lending institutions named therein
(the "Credit Agreement"). Prior to the consummation of the Offering, the Credit
Agreement provided for (i) the Term Loan in the principal amount of $15.0
million and (ii) the Revolving Credit Facility in the aggregate principal amount
of $12.0 million (including letter of credit facilities). Upon the consummation
of the Offering, the Company used the proceeds thereof to repay the Term Loan
and amounts then outstanding under the Revolving Credit Facility. In connection
therewith, the Company's credit facility with KeyBank was converted into the New
Credit Facility, bearing interest at LIBOR plus 1.00% with a commitment fee of
0.25% for any unused portion, with the remaining terms and conditions being
similar to the previous revolving credit facility. The Company incurred
approximately $200,000 of financing fees in connection with the KeyBank credit
facility. The indebtedness under the Credit Agreement is secured by
substantially all the assets of the Company. The revolving loans under the
Credit Agreement will mature on May 31, 2002. The Credit Agreement contains
certain restrictive covenants that impose limitations upon, among other things,
the Company's ability to change its business; merge, consolidate or dispose of
assets; incur liens; make loans and investments; incur indebtedness; pay
dividends and other distributions; engage in certain transactions with
affiliates; engage in sale and lease-back transactions; enter into lease
agreements; and make capital expenditures.
The Company generated (used) net cash from operations of $11.1 million,
($3.5) million and ($901,000) in the fiscal years ended March 31, 1997, 1996 and
1995, respectively. The net cash in fiscal year 1997 was used for net capital
expenditures of $8.6 million, while during fiscal years 1996 and 1995 the
Company used an additional $4.6 million and $2.5 million, respectively, for net
capital expenditures. In fiscal year 1997, $24.3 million of net cash was used to
acquire Phoenix Airbag. Net cash provided by financing activities in fiscal year
1997 includes $22.9 million proceeds from the Term Loan, and the net proceeds
from the Revolving Credit Facility, which was used in part to repay $3.8 million
long-term debt and obligations, and purchase of treasury stock. Net cash
provided by financing activities in fiscal year 1996 includes $18.0 million in
proceeds from the sale of common stock and proceeds from long-term debt, which
was used in part to purchase $1.4 million of treasury stock and $94,000 of
common stock warrants. Net cash provided by financing activities in fiscal year
1995 included $14.6 million in proceeds from the sale of common stock, which was
used in part to pay for consideration of transferred assets of $1.9 million,
repay $3.3 million long-term debt and obligations and repay certain intercompany
accounts totaling $2.3 million. These activities resulted in a net decrease in
cash of $3.7 million in fiscal year 1997, a net increase in cash of $8.2 million
in fiscal year 1996, and a net increase in cash of $3.8 million in fiscal year
1995.
Capital expenditures were $8.6 million in fiscal year 1997, compared to
$4.6 million and $2.5 million in fiscal years 1996 and 1995, respectively. In
fiscal year 1997 capital expenditures included the construction of the new
facility in the Czech Republic, and the acquisition of additional equipment to
expand the Company's production capacity worldwide. Capital expenditures for
fiscal year 1998 are estimated to be $8.7 million, which includes $1.2 million
outstanding commitments for capital expenditures for additional property, plant
and equipment from fiscal year 1997. Capital expenditures for fiscal year 1998
include the completion of the Czech facility and the acquisition of additional
equipment to further expand the Company's production capacity worldwide. The
Company expects to fund these capital expenditures through operations and the
New Credit Facility. Pro forma capital expenditures do not include equipment
obtained under capital lease obligations of $1.4 million, 18 looms purchased for
$1.5 million or the building to be purchased for approximately $1.3 million in
connection with the JPS Acquisition. However, capital expenditures include a
non-recurring investment of $7.1 million for pro forma and fiscal year 1997
related to the construction of the Company's new Czech Republic facility, which
was subsequently financed. Excluding this non-recurring investment for the Czech
Republic facility, pro forma and fiscal year 1997 capital expenditures would
have been $3.5 million, and $1.5 million, respectively.
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<PAGE> 54
SEASONALITY AND INFLATION
The automotive and industrial related business is subject to the
seasonal characteristics of the automotive industry in which there are seasonal
plant shutdowns in the third and fourth calendar quarters of each year. Although
the Systems Contract is not seasonal in nature, there will be variations in
revenues from the Systems Contract based upon costs incurred by the Company in
fulfilling the Systems Contract in each quarter. The majority of the defense
operation's ordnance manufacturing for U.S. Government and prime defense
contractors occurs from January through September and there is generally a lower
level of manufacturing and sales during the fourth calendar quarter. The Company
does not believe that its operations to date have been materially affected by
inflation.
BUSINESS
THE COMPANY
The Company, is a leading, low-cost independent supplier of automotive
airbag fabric and cushions, with operations in North America, Europe and Asia.
The Company sells airbag fabric domestically and cushions worldwide to all of
the major airbag module integrators that outsource such products. The Company
believes it produces approximately 40% of all airbag fabric utilized in North
America and that it manufactures approximately 10% of all airbag cushions
installed worldwide.
The Company believes the JPS Acquisition represents an important step
in its airbag growth strategy because it will enable the Company to combine
JPS's low-cost operations and strong market position in airbag fabric with its
low-cost operations and strong market position in airbag cushions to exploit
worldwide growth in demand for airbag module systems ("airbags" or "airbag
modules"). According to the automotive research firm, Tier One, the worldwide
market for automotive airbag modules has grown from approximately 3.6 million
installed airbag modules in 1991 to approximately 57.2 million in 1996.
According to the same source, installed airbag modules are projected to more
than double to approximately 123.1 million by the year 2000 as a result of
increasing usage of airbags in Europe and Asia and growth in demand for
side-impact airbags. The Company's pro forma consolidated fiscal 1997 net sales
and Adjusted EBITDA were $173.2 million and $23.4 million, respectively.
As part of its airbag growth strategy, the Company has recently
commenced manufacturing and supplying metal airbag module components to its
customers, further increasing the content per airbag module supplied by the
Company. Airbag fabric, cushions and related metal components accounted for
$130.9 million or 75.6% of pro forma consolidated fiscal 1997 net sales. The
Company believes that it is also, as a result of the JPS Acquisition, a leading
manufacturer of value-added synthetic fabrics used in a variety of niche
industrial and commercial applications such as ballistics luggage, industrial
filtration systems, aircraft escape slides, military tents and certain
industrial apparel. Industrial fabrics accounted for $22.6 million or 13.0% of
pro forma consolidated fiscal 1997 net sales and are produced using the same
machinery that produces airbag fabric. The ability to interchange airbag and
specialty industrial fabrics using the same equipment and similar manufacturing
processes allows the Company to effectively utilize its manufacturing assets and
lower per unit overhead costs. The Company also produces defense related
products, primarily projectiles and other metal components for small to medium
caliber training and tactical ammunition, which accounted for $19.7 million or
11.4% of the Company's pro forma consolidated fiscal 1997 net sales and $45.9
million or 48.3%, and $8.7 million or 16.8% of the Company's fiscal 1996 and
1995 net sales, respectively.
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<PAGE> 55
COMPETITIVE STRENGTHS
The Company has developed a strong competitive position in the airbag
fabric and cushion segments of the airbag module market and believes that
additional growth opportunities exist as a result of the following competitive
strengths:
Market Leadership. The Company is a leading independent supplier of
automotive airbag fabric and cushions with operations in North America, Europe
and Asia. The Company believes that it produces approximately 40% of all airbag
fabric sold in North America, the largest market for airbag fabric, and that it
accounts for approximately 10% of the global market for airbag cushions. The
Company supplies airbag fabric to every domestic airbag module integrator that
outsources all or a portion of its airbag fabric requirements, including
AlliedSignal, TRW and AutoLiv (whose aggregate sales accounted for over 60% of
all domestic airbag modules installed in 1996). The Company also supplies
approximately 70% and 100% of all airbag cushions outsourced by TRW and Petri,
respectively (whose aggregate sales accounted for approximately 30% of installed
modules worldwide in 1996). Moreover, as an established airbag cushion supplier,
the Company believes that certain barriers to entry exist, such as difficulty in
obtaining qualification requirements imposed by automakers, which will assist
the Company in maintaining or increasing market share by limiting the ability of
new suppliers to enter the market.
Low-Cost Producer. The Company is a low-cost producer of automotive
airbag fabric and cushions. Its low-cost position is facilitated by: (i) low
labor rates in various international production facilities; (ii) high levels of
automation in certain production facilities; and (iii) high capacity utilization
rates as a result of interchangeable production processes. In addition, the
Company has recently entered into a joint venture to produce finished airbag
cushions in China, which will enable the Company to take advantage of lower
labor costs as that facility begins commercial production.
Integrated Manufacturing Process. The JPS Acquisition is expected to
result in a more integrated manufacturing process, eventually reducing the
Company's cost of raw materials and providing it with the ability to package
both fabric and cushions in response to customer demand. In addition, the JPS
Acquisition is expected to enable the Company to reduce fabric waste and to
transfer weaving technologies to its airbag cushion production facilities.
Global Manufacturing and Sourcing Capabilities. The Company has airbag
cushion production facilities in Mexico, Germany, the Czech Republic and Wales
and recently established a joint venture for airbag cushion production in China.
The Company believes it benefits from its global manufacturing strategy through:
(i) low labor costs; (ii) customer and geographic diversity; (iii) less
sensitivity to regional economic downturns; and (iv) access to new customers and
the ability to service existing customers in high growth regions such as Europe
and Asia. In addition, the Company believes it has the ability to transfer
weaving technology to certain geographic regions that are not currently being
serviced.
Commitment to Quality and Service. The Company believes its commitment
to quality and customer service is a competitive advantage. As a result of its
stringent emphasis on quality control and its advanced inspection processes, the
Company has attained a near zero defect rate on the production of its airbag
cushions. Most of the Company's facilities meet industry quality standards such
as QS-9000/ISO 9002, and all seven of the Company's plants are expected to be so
certified prior to 1997 year-end. In addition, the Company believes its reliable
on-time delivery performance and advanced research and development capabilities
have resulted in strong customer relationships, which the Company believes will
continue to result in recurring revenues, particularly in light of supplier
qualification requirements and customers' desires to consolidate suppliers.
Ancillary Products and Services. The Company has established strong
positions in various niche fabric markets and has targeted a number of high
growth market segments in which it believes it will be able to gain significant
market share. In addition, the Company will continue to identify new
applications for its airbag manufacturing and machining capabilities and further
diversify into related products to maximize capacity utilization.
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<PAGE> 56
GROWTH STRATEGY
The Company has experienced rapid growth in sales and profitability in
recent years due to increased production and outsourcing of airbag cushions by
its airbag module integrator customers. The Company has also recently benefited
from the production of other airbag components in response to increased
outsourcing of such parts by airbag module integrators. Installation of airbag
modules is expected to double between 1996 and 2000 and the Company believes
that it is well-positioned to benefit from this growth due to its global
presence, low-cost integrated production capabilities and strong customer
relationships. Specific elements of the Company's growth strategy include:
Enhance Low-Cost Position. The ability to remain a low-cost supplier is
a key element of the Company's automotive airbag growth strategy as it enables
the Company to price its products competitively, gain market share and maintain
or increase profit margins. To enhance its low-cost position, the Company is
evaluating a number of cost reduction opportunities including: (i) consolidating
its European production facilities; (ii) consolidating certain administrative
functions; (iii) reducing labor costs through automation; (iv) reducing
transportation costs; and (v) exploiting economies of scale, particularly as
production volumes increase at its new Czech Republic facility. Labor costs are
also expected to decline as the Chinese joint venture becomes a production
source. In addition, the combination of the Company and the Division also
presents opportunities to further reduce airbag cushion production costs.
Increase Airbag Volumes. The Company has been and believes it will
continue to be successful in attaining product qualification and acceptance
among airbag customers. Airbag cushion sales have increased from 783,000 units
in fiscal year 1994 to 5.2 million units in fiscal year 1997 as a result of
rapid growth in demand for airbag modules in North American and European markets
and the continuing trend among airbag module integrators to purchase airbag
components from third parties, such as the Company, specializing in the
production of those components. The Company believes it is well-positioned to
benefit from the continued strong demand for airbag modules due to its: (i)
low-cost manufacturing strategy; (ii) established relationships with airbag
module integrators; and (iii) reputation for high product quality standards.
Diversify Production Within Core Competence/Distribution Network. The
Company intends to increase revenues and maximize plant efficiencies by
providing related products to new and existing customers. The Company has
successfully applied its manufacturing expertise to develop new products
utilizing existing manufacturing capabilities. For example, the Company has
expanded from parachute and metal parts production for the military into airbag
cushions and metal products for airbag module integrators. Additionally, as a
result of the JPS Acquisition, the Company is well-positioned to further
diversify its business and exploit additional opportunities for growth by
cross-marketing complementary manufacturing capabilities.
Increase Content Per Airbag Module. The machining operations acquired
through the Valentec Acquisition will enable the Company to increase the content
per airbag module supplied to the Company's customers. The Company has recently
started manufacturing and assembling end caps and retainer brackets to airbags
produced for two of its largest airbag customers and believes that additional
opportunities exist to increase the amount of content supplied to its customers.
This strategy is intended to benefit the Company's customers by enabling them to
consolidate suppliers while at the same time rendering the Company less
dependent on industry volumes as content per airbag module increases.
Expand Through Strategic Acquisitions. The Company intends to
selectively pursue opportunities to acquire companies that offer complementary
products or services to those industries currently served by the Company. This
will enable existing and future customers to consolidate supply sources by
obtaining a broader range of value added products and services from the Company.
The Company also intends to evaluate new technologies and processes that will
enable it to reduce product costs and/or increase the level of products or
services provided to existing and future customers. The Company will also
continue to evaluate acquisitions and joint ventures that will enable the
Company to further integrate production of airbags and other products.
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<PAGE> 57
SIGNIFICANT TRANSACTIONS
The JPS Acquisition. On July 24, 1997, the Company acquired all of the
assets of the Division for $56.3 million in cash including 18 looms
(approximated value of $1.5 million) which were delivered to the Company at
closing plus the assumption of certain liabilities, subject to post-closing
adjustments. In addition, the Company made a payment to JPS at the closing to
enable it to pay off existing indebtedness of the Division of approximately
$650,000 at the closing. The Offering was conditioned upon, and a significant
portion of the proceeds of the Offering were used to finance, the JPS
Acquisition, which was consummated on July 24, 1997. SCFT is a leading, low-cost
supplier of airbag fabric in North America and is also a leading manufacturer of
value-added synthetic fabrics used in a variety of niche industrial and
commercial applications. The Company believes the JPS Acquisition represents an
important step in its airbag growth strategy because it will enable the Company
to: (i) combine strong market positions in airbag fabric and cushions; (ii)
integrate low-cost manufacturing capabilities in airbag fabric and cushions to
exploit the worldwide growth in demand for airbag modules; (iii) interchange
airbag and specialty industrial fabrics using the same equipment and
manufacturing processes thereby allowing the Company to effectively utilize its
manufacturing assets; and (iv) enhance and expand its customer base.
The Valentec Acquisition. Pursuant to a definitive Stock Purchase
Agreement, effective as of May 22, 1997, the Company acquired in a stock for
stock transaction all of the outstanding capital stock of Valentec. Valentec is
a high-volume manufacturer of stamped and precision machined products for the
automotive, commercial and defense industries. The Company believes that
Valentec's machining capabilities and relationships with airbag module
integrators will enable the Company to increase the amount of content per airbag
module supplied by the Company. Pursuant to this strategy, the Company has begun
producing end caps and retainer brackets for two of its larger airbag module
customers. In addition, the Company believes that it will be able to eliminate
certain duplicative corporate functions at Valentec, resulting in improved
efficiencies and cost savings.
AIRBAG RELATED PRODUCTS
Airbag and Airbag Fabric Industry
Airbag Module Growth. The worldwide market for airbag modules has grown
rapidly in recent years from approximately 3.6 million installed units in 1991
to approximately 57.2 million in 1996. According to automotive research firm
Tier One, installed module sales are projected to more than double from
approximately 57.2 million in 1996 to 123.1 million in 2000 as a result of
increasing usage of airbags in Europe and Asia and growth in demand for
side-impact bags. The following table summarizes the historical and projected
growth in worldwide unit volume:
<TABLE>
<CAPTION>
HISTORICAL PROJECTED
---------- ---------
(UNITS IN MILLIONS) 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
North America.............. 2.9 4.7 8.5 16.3 22.7 26.4 31.1 35.7 40.1 42.5
Europe..................... 0.2 1.5 4.8 8.4 12.6 17.3 23.7 32.4 39.5 46.5
Asia-Pacific............... 0.5 0.7 3.1 5.9 9.6 13.6 18.8 25.4 30.9 34.1
--- --- ---- ---- ---- ---- ---- ---- ----- -----
Total............ 3.6 6.9 16.4 30.5 44.8 57.2 73.6 93.5 110.5 123.1
=== === ==== ==== ==== ==== ==== ==== ===== =====
</TABLE>
- ----------
Source: Tier One
The North American market is forecasted to increase from 26.4 million
installed modules in 1996 to 42.5 million units in 2000. National Highway
Transportation Safety Administration ("NHTSA") regulations require installation
of driver-side and passenger-side airbags in all U.S. passenger cars beginning
in model year 1998 and on light trucks in model year 1999. Canadian-produced
cars are also being built to these standards, as are all Mexican-built vehicles
that are exported to the United States, Canada and Europe.
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The European airbag module market is forecasted to increase from 17.3
million installed modules in 1996 to 46.5 million in 2000, an increase of 29.2
million. The adoption of airbags in Europe is consumer demand driven rather than
governmentally mandated. The European market is quickly moving towards 100%
installation of driver-side and passenger-side airbags as a result of declining
unit costs and increasing safety consciousness of Europeans. Approximately 21.7%
of the Company's net sales in fiscal year 1997 were from Europe and the Company
believes its three European facilities provide sufficient capacity to service
the projected increase in demand for airbag units in the region.
The Asia-Pacific market, dominated by Japanese and Korean automakers,
is forecasted to increase from 13.6 million installed modules in 1996 to
approximately 34.1 million in 2000. Installation rates on Japanese vehicles are
expected to approach those of the United States by 2000. The Company currently
sells directly to KIA Motors Corp. ("KIA") and the Company's airbag cushions are
currently sold for installation in Toyota, Nissan and Mazda automobile models.
The Company believes that its Chinese joint venture is well-positioned to meet
the increasing requirements of Asian automakers.
Structure of the Airbag Industry. Airbag systems consist of an airbag
module and an electronic control module, which are currently integrated by
automakers into their respective vehicles as illustrated in the chart below.
<TABLE>
<CAPTION>
Tier 1 Suppliers Tier 2 Suppliers Tier 3 Suppliers
- ---------------- ---------------- ----------------
<S> <C> <C>
Airbag Module Inflator Manufacturers Initiator Manufacturers
Integrators
Cushion Suppliers Various Metal Parts
and Material Suppliers
Fabric Manufacturers
</TABLE>
[The flow chart details the three tiered airbag production process.
After production, tier three Initiator Manufacturers sell to tier two Inflator
Manufacturers, tier three Fabric Manufacturers sell to tier two Cushion
Suppliers and tier three Various Metal Parts and Material Suppliers sell to both
tier two Inflator Manufacturers and tier two Cushion Suppliers, along with the
tier one Airbag Module Integrators. Both tier two Inflator Manufacturers and
tier two Cushion Suppliers sell to tier one Airbag Module Integrators. Finally,
the tier one Airbag Module Integrators sell their product to the Automakers.]
- ----------
Source: Tier One
Airbag modules consist of inflators, cushions, housing and trim covers
and are assembled by module integrators, most of whom produce most of the
components required for a complete module. However, as the industry has evolved,
module integrators have increasingly outsourced non-proprietary components such
as cushions to those companies specializing in the production of individual
components. The Company believes that its module integrator customers will
continue to outsource the majority of their cushion requirements as they focus
on the development of proprietary technologies such as inflators and sensors.
Only one of the module integrators currently weaves its own airbag fabric and
the rest purchase fabric from airbag fabric producers such as the Company.
A characteristic of the industry is that certain customers of airbag
cushion suppliers are also competitors. The Company supplies airbag cushions to
module integrators, most of which also produce a portion of their cushion
requirements internally. While none of the module integrators produce airbag
cushions for third parties, the Company may compete with its customers to supply
their own internal cushion requirements. However, most of the Company's
suppliers do not produce cushions for the same car/truck model for which the
Company produces cushions.
Another characteristic of the airbag industry is the existence of
potential barriers to entry. New entrants that wish to produce and supply airbag
cushions must undergo a rigorous qualification process, which can take as long
as three years. The Company believes that in addition to deterring new entrants,
the existence of this qualification process represents
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<PAGE> 59
switching costs for module integrators that are required to assist the new
supplier in meeting automakers' requirements. Additionally, the Company believes
Tier 1 suppliers are, like their automaker customers, trying to limit the number
of suppliers.
Products
The Company's automotive products include passenger, driver side and
side impact airbags manufactured for installation in over 40 car and truck
models sold worldwide; airbag fabric for sale to airbag manufacturers; and
stamped and machined components used in airbag modules, including passenger
airbag retainers that attach the airbag cushion to the module's reaction can, as
well as driver side module products and components used in airbag inflators.
The Company's airbag cushions are produced for installation in over 40
car and truck models including those listed below:
<TABLE>
<CAPTION>
Ford: Chrysler: Opel:
- ----- --------- -----
<S> <C> <C>
Mark VIII Neon Astra
Jaguar XJS Omega
Continental General Motors:
Grand Marquis Porsche:
Crown Victoria Astro (Van)
Safari (Van) 993
CK (Truck)
Toyota: Nissan: Rover:
Lexus DC21 (Truck) 600 Series
Avalon Pathfinder (Truck) Range Rover
Discovery
Mazda: Audi: VW:
626/MX6 A4 Golf
Festiva A6 Passat
Probe T4
Millenia Sharan
Unos Galaxy
Xedos
KIA: BMW: Saab:
Sephia 7 Series 9000
Concord 5 Series
3 Series Mercedes:
E Class
S Class
</TABLE>
Customers
Sales of airbag related products to TRW, Petri and AlliedSignal
accounted for approximately 31.2%, 12.8% and 7.6%, respectively, of the
Company's pro forma consolidated fiscal 1997 net sales of airbag related
products. Sales of airbag cushions to TRW and Petri accounted for approximately
41.8% and 20.4%, respectively, of the Company's pro forma
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<PAGE> 60
consolidated fiscal 1997 net sales of airbag cushions. Sales of airbag fabric to
AlliedSignal and TRW accounted for approximately 30.7% and 22.7%, respectively,
of the Company's pro forma consolidated fiscal 1997 net sales of airbag fabric.
The Company sells its airbag cushions to airbag module integrators for
inclusion in specified model cars generally pursuant to requirements contracts.
Certain of these customers also manufacture airbag cushions to be used in their
production of airbag modules.
The Company's largest airbag fabric customers include TRW,
AlliedSignal, Delphi and AutoLiv and the Company also sells to Reeves, Bradford,
ABC, Mexican Industries and Breed Technologies. Of the four largest domestic
module integrators, three use the Company's airbag fabric and the fourth sources
all of its fabrics internally. The Company sells its fabric either directly to a
module integrator or, in some cases, to a fabricator (such as the Company),
which sells a sewn airbag to the module integrator. Because driver-side fabric
historically has been coated (to prevent the driver's exposure to high
temperatures) before fabrication into airbags, the Company also sells fabric to
coating companies, which then resell the coated fabric to either an airbag
fabricator or module integrator. Sales are either made against purchase orders,
pursuant to releases on open purchase orders, or pursuant to short-term supply
contracts generally having a duration of up to twelve months. The following
describes the Company's contractual relationship with its significant customers.
TRW. The Company has one requirements contract with TRW with respect to
North American airbag cushion requirements and another requirements contract
with respect to TRW's European airbag cushion requirements. Under these
contracts, TRW has agreed to purchase its requirements for airbag cushions for
specific models of automobiles at prices to be agreed upon prior to the
beginning of each model year. Each agreement provides that cost reductions of
the Company will result in price reductions to TRW. Neither agreement requires
the customer to purchase a specified number of airbag cushions. Each agreement
is terminable by the customer on 90 days' prior written notice. The North
American requirements agreement is for driver and passenger side airbag cushions
for specified models in model years 1996 through 1999 and requires the Company
to maintain capacity to manufacture and ship 25.0% more airbag cushions than
actual quantity estimates provided by TRW. The European requirements agreement
contains penalty payments in the event that the Company is delayed in delivering
the airbag cushion quantities required.
The Company also has a one-year supply agreement with TRW, terminating
January 1, 1998, for the supply of airbag fabric.
Petri. The Company's "evergreen" agreement with Petri provides that
prior to commencement of each calendar year the parties will negotiate price,
quantity and other relevant terms of the airbag cushion supply contract for such
calendar year. Petri is under no contractual obligation to enter into such
annual supply agreements with the Company. The Company's agreement with Petri
provides for the supply of all of Petri's airbag cushion requirements, which are
expected to be 3.0 million airbag cushions during fiscal year 1998.
AutoLiv and MST. The Company has also entered into requirements
contracts with MST, which was recently acquired by TRW, and AutoLiv. These
agreements are substantially similar to the Petri contract. Pursuant to the
AutoLiv contract, the Company has agreed to manufacture 390,000 airbag cushions
for model year 1999. Pursuant to the MST contract, the Company expects to
deliver to MST 348,000 airbag cushions during fiscal year 1998.
AlliedSignal. AlliedSignal's supply agreement has a duration of three
years, terminating in 1999 for the supply of all airbag fabric outsourced by
AlliedSignal. The Company cannot predict what the actual quantity requirements
will be under this agreement.
Suppliers
The Company's principal airbag cushion fabric customers generally
approve all suppliers of major airbag components or airbag fabric raw materials,
as the case may be. These suppliers are approved after undergoing a rigorous
qualification process on their products and manufacturing capabilities. In many
cases, only one approved source of supply
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<PAGE> 61
exists for certain airbag components. In the event that a sole source supplier
experiences prolonged delays in product shipments or no longer qualifies as a
supplier, the Company would work together with its customers to identify another
qualified source of supply. Although alternative sources of supply exist, a
prolonged delay in the approval by the Company's customers of any such
alternative sources of supply could adversely affect the Company's operating
results. Under the Company's agreements with its customers, any changes in the
cost of major components are passed through to the customers.
The raw materials for the Company's fabric operations largely consist
of synthetic yarns provided by DuPont, AlliedSignal, Unifi and Hoechst Celanese.
These yarns include nylon, polyester and Nomex. DuPont is the leading supplier
of airbag fabric yarn to both the market and the Company. Approximately 90.0% of
the nylon yarn used in the Company's airbag fabric operations is supplied by
DuPont pursuant to purchase orders or releases on open purchase orders. There is
no underlying supply agreement with DuPont.
Capacity
The Company's Mexican facility has a current capacity to manufacture
5.0 million airbag cushions per year and manufactured 2.3 million passenger side
and driver side airbag cushions in fiscal year 1997. The Company's United
Kingdom facility will have by the end of fiscal year 1998 the capacity to
manufacture approximately 880,000 airbag cushions per year and manufactured
350,000 driver side airbag cushions in fiscal 1997. The Company's German
facility, acquired in the Phoenix Acquisition, manufactured approximately 3.1
million driver side and side impact airbag cushions in fiscal 1997 and has the
current capacity to manufacture 4.1 million airbag cushions per year. The
Company's Czech Republic facility, which began production in 1997, is expected
to produce 1.2 million passenger side and driver side airbag cushions in fiscal
1998, and has a current capacity to manufacture 1.8 million airbag cushions per
year. The Company believes that its present capacity is sufficient to meet its
currently forecasted production for the foreseeable future. Increases in
capacity referenced above are based on capital expenditure programs included in
the Company's fiscal 1998 budget. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
The Company has recently entered into a joint venture agreement for the
production of airbag cushions in China. The Company owns an 80% interest in the
joint venture. The plant and labor for the joint venture is provided by the
Company's joint venture partner. The joint venture has the capacity to produce
approximately 2.0 million airbag cushions per year and commercial production is
expected to commence in June 1998. The Company is contemplating the introduction
of weaving capabilities at this facility through the JPS Acquisition.
The Company's South Carolina facility has a current capacity to
manufacture 31.5 million yards of fabric per year and manufactured 20.3 million
yards of fabric in fiscal 1997. The Company utilizes rapier weaving machines
that are highly versatile in their ability to produce a broad array of specialty
industrial fabrics for use in a large number of applications. In addition, the
Company's machinery and equipment have the capability to weave all types of
yarns specified by airbag module integrators. The ability to easily interchange
the machines between air restraint fabric and other specialty industrial fabrics
allows the Company to maximize returns on plant assets. Since 1993, the Company
has invested $19.4 million in capacity expansion, significant modernization of
its manufacturing facilities and equipment upgrades. In addition, in connection
with the JPS Acquisition, the Company will acquire an adjacent manufacturing
facility and 18 additional looms which are expected to further enhance the
Company's manufacturing capacity and flexibility.
Sales and Marketing
The Company markets and sells airbag cushions through a direct sales
force based in Costa Mesa, California, and airbag fabric through its marketing
and sales force based in Greenville, South Carolina.
Prior to 1996, the Company conducted its airbag cushion sales and
marketing through the efforts of its management and through Champion Sales &
Service Co. ("Champion"), an outside marketing firm engaged by the Company since
May 1992. Champion and Mr. Zummo, the Company's Chief Executive Officer, were
instrumental in establishing the Company's relationship with TRW. The Company is
obligated to pay Champion a commission of 2% on all sales of airbag cushions and
airbag related components respectively, to TRW. The Company believes its
reputation and existing relationships with airbag
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<PAGE> 62
customers diminish the need for an outside marketing firm, and accordingly, the
Company and Champion are in the process of renegotiating the terms of Champion's
Representation Agreement with respect to TRW. Under its current Representation
Agreements with the Company, Champion is restricted from selling or marketing
products of other companies which compete with the products sold by the Company.
The Company's direct sales force includes certain affiliates of Champion.
Competition
The Company competes with several independent suppliers of airbag
cushions in the United States and Europe for sales to airbag module integrators.
The Company also competes with TRW and AutoLiv, each of which are airbag module
integrators that produce a substantial portion of their own airbag cushions for
their own consumption. While TRW does not generally manufacture airbag cushions
for the same vehicle models that the Company manufactures for TRW, AutoLiv
manufactures airbag cushions for the same models that the Company manufactures
for AutoLiv. Most airbag module integrators subcontract a portion of their
requirements for airbag cushions. The Company believes that its good working
relationship with its customers, the Company's high volume and low-cost
manufacturing capabilities, consistency and level of quality products, the
agreements with TRW, the lengthy process necessary to qualify as a supplier to
an automobile manufacturer and the desire in the automotive industry to avoid
changes in established suppliers due to substantial costs of such changes create
certain barriers to entry for potential competitors.
In 1996, the total North American airbag fabric market totaled
approximately $148.0 million, up from $138.0 million in the prior year. The
Company shares this market with another major competitor, Milliken and three
smaller fabric manufacturers. In addition, Takata (which is also known as
Highland Industries), an airbag module integrator, produces fabric for its
airbag cushions. Barriers to entry into this market include the substantial
capital requirements and lengthy lead-times required for certification of a new
participant's fabrics by buyers.
The automotive airbag cushion, airbag fabric and airbag module markets
are highly competitive. Some of the Company's current and potential competitors
have greater financial and other resources than the Company. The Company
competes primarily on the basis of its price, product quality, reliability, and
capability to produce a high volume of many models of passenger side and driver
side airbags. Increased competition, as well as price reductions of airbag
systems, would adversely affect the Company's revenues and profitability. In
addition, the Company believes that its acquisition of JPS will provide it with
some measure of vertical integration, enhancing its ability to compete in the
automotive airbag industry.
Qualification and Quality Control
The Company successfully completed the rigorous process of qualifying
as an airbag supplier to TRW in 1992. Each of the Company's airbag cushions
manufactured for TRW is required to pass design validation and process
validation tests established by the automobile manufacturers and supervised by
TRW relating to the product's design and manufacture. TRW participates in these
design and process validations and must be satisfied with the product's
reliability and performance prior to awarding a production order. The Company
satisfies the QPS-0100 standard set by TRW for design and process validation,
which qualifies it to be a supplier to TRW. The Company underwent similar,
rigorous design validation and process validation tests in order to qualify as a
supplier to AutoLiv, which recently granted a purchase order to the Company.
The Company has extensive quality control systems in its airbag related
manufacturing facilities, including the inspection and testing of all products.
The Company also undertakes process capability studies to determine that the
Company's manufacturing processes have the capability of producing at the
quality levels required by its customers.
The Company's United Kingdom facility operates under TRW's quality
system which meets or exceeds ISO 9000, an international standard for quality.
The Company's German facility also satisfies ISO 9000 standards. This
qualification has enabled the Company's European operations to manufacture
airbag cushions under the Company's agreement with TRW. As is the case in the
United States, however, the automobile manufacturers may conduct their own
design and process validation tests of the Company's operations.
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<PAGE> 63
The Company's airbag fabric operations also seek to maintain a high
level of quality throughout the manufacturing process. The airbag fabric
operations have been certified as a Quality Assurance Approved Supplier by each
of AlliedSignal, TRW, AutoLiv and Mexican Industries. In addition, the airbag
fabric operations' laboratory has obtained Accreditation Against ISO-Guide 25 to
ASTM and DIN Test Methods from the American Association of Laboratory
Accreditation and GP-10 certification from General Motors. Moreover, the Company
is the only airbag fabric manufacturer to have its entire business (not just its
manufacturing facility) certified under QS-9000.
Governmental Regulations
Airbag systems installed in automobiles sold in the United States must
comply with certain government regulations, including Federal Motor Vehicle
Safety Standard 208, promulgated by the United States Department of
Transportation. The Company's customers are required to self-certify that airbag
systems installed in vehicles sold in the United States satisfy these
requirements. The Company's operations are subject to various environmental,
employee safety and wage and transportation related statutes and regulations.
The Company believes that it is in substantial compliance with existing laws and
regulations and has obtained or applied for the necessary permits to conduct its
business operations.
Product Liability
The Company is engaged in a business which could expose it to possible
claims for injury resulting from the failure of products sold by it. Recently,
there has been increased public attention to injuries and deaths of children and
small adults due to the force of the inflation of airbags. To date, however, the
Company has not been named as a defendant in any product liability lawsuit nor
threatened with any such lawsuit. The Company maintains product liability
insurance coverage which management believes to be adequate. However, a
successful claim brought against the Company resulting in a final judgment in
excess of its insurance coverage could have a material adverse effect on the
Company.
INDUSTRIAL FABRIC RELATED PRODUCTS
The Company manufactures a wide array of specialty synthetic fabrics
for consumer and industrial uses. These fabrics include: (i) high-end luggage
fabrics, including "ballistics" fabric used in Hartman and Tumi brands of
luggage; (ii) filtration fabrics used in the aluminum, coal, steel, cement, clay
and brewing industries; (iii) woven fabrics for use by manufacturers of coated
products; (iv) specialty fabrics used in police jackets, protective apparel worn
by firefighters, fuel cells, bomb and cargo chutes, oil containment booms,
aircraft escape slides, gas diaphragms; and (v) release liners used in tire
manufacturing. Sales are made against purchase orders, releases on open purchase
orders, or pursuant to short-term supply contracts of up to twelve months. Sales
of industrial related products accounted for $22.6 million or 13.0% of the
Company's pro forma consolidated fiscal 1997 net sales.
The market for the Company's industrial related products is highly
segmented by product line. Marketing and sales of the Company's industrial
related products is conducted by the Company's marketing and sales staff based
in Greenville, South Carolina.
Manufacturing of these products occurs at the South Carolina facility,
using the same machines that weave the airbag fabrics which enables the Company
to take advantage of demand requirements for the various products with minimal
expenditure on production retooling costs. By manufacturing industrial products
with the same machines that weave airbag fabric, the Company is able to more
effectively utilize capacity at its South Carolina plant and lower per unit
overhead costs.
DEFENSE RELATED PRODUCTS
The Company is a supplier of military ordnance and other related
products as well as of projectiles and other metal components for small to
medium caliber training and tactical ammunition. Sales of defense related
products accounted for $19.7 million or 11.4% of the Company's pro forma
consolidated fiscal 1997 net sales.
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<PAGE> 64
Systems Contract
In September 1994, the Company was awarded the Systems Contract by the
United States Army. The Systems Contract backlog was $18.6 million at March 31,
1997, and the Company expects to reduce such backlog to $10.8 million by late
fiscal 1998. The mortar cartridges sold by the Company to the United States Army
pursuant to the Systems Contract will be utilized in free standing, long-range
artillery weapons in support of infantry units. As a systems integrator, the
Company does not manufacture the mortar cartridges itself, but is a prime
contractor, coordinating the manufacture and assembly of the product components
by various subcontractors. Accordingly, the Systems Contract has not
necessitated a significant investment in capital equipment. As the prime
contractor, the Company is responsible for conducting quality control
inspections and ensuring that the contract is fulfilled in a timely and
efficient manner.
The deliveries of completed mortar cartridges were initially expected
to begin in September 1995, and the Systems Contract was expected to be
completed by September 1996. Due to a delay by one of its subcontractors, the
Company has experienced delays in the shipment of mortar cartridges against the
original shipment schedule. The delay relates to matters between such
subcontractor and the United States Army. As a result of these issues, the
United States Army has extended the time for delivery under the Systems
Contract, and the Company now anticipates that the initial deliveries of mortar
cartridges will commence in late fiscal 1998.
Other
The Company manufactures projectiles and other metal components
primarily for 20 millimeter ammunition and to a lesser extent for 25 and 30
millimeter ammunition used by the United States Armed Forces. This ammunition is
fired from guns mounted on aircraft, naval vessels and armored vehicles. The
metal components manufactured by the Company are shipped to a loading facility,
operated either by the United States Government or a prime defense contractor,
which loads the explosives, assembles the rounds and packages the ammunition for
use. The Company primarily manufactures components that are used in training
rounds, which are similar to tactical rounds but do not contain the same
explosive or incendiary devices contained in tactical rounds. Because of the
continuous use of training ammunition, the majority of the rounds purchased by
the U.S. Armed Forces are training rounds. The U.S. Armed Forces regularly
replenishes its inventory of training ammunition.
Markets and Customers
The Company's defense related sales are made to the United States Armed
Forces, certain prime defense contractors for the United States Armed Forces and
foreign governments or contractors for foreign governments. The Company is a
principal or sole source supplier for many of the projectiles and other metal
components it manufactures. There can be no assurance, however, that other
companies will not begin to manufacture such products in the future and replace
part or all of the sales by the Company of these products.
Manufacturing and Production
The Company manufactures projectiles and other metal components for
inclusion in small to medium caliber ammunition utilizing primarily
multi-spindle screw machines at its manufacturing facility in Galion, Ohio. The
manufacturing process includes the impact extrusion of steel bars to form the
blank or rough form shape of the metal components, the machining of the inside
and outside of the metal components to form their final shape, various heat and
phosphate treatments and painting. The Company believes that its manufacturing
equipment, machinery and processes are sufficient for its current needs and for
its needs in the foreseeable future, with minimal preventive maintenance.
Suppliers
The Company believes that adequate supplies of the raw materials used
in the manufacture of its small to medium caliber products are available from
existing and, in most cases, alternative sources, although the Company is
frequently limited to procuring such materials and components from sources
approved by the United States Government.
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<PAGE> 65
Quality Control
The Company's defense operations employ Statistical Process Controls
extensively throughout its manufacturing process to ensure that required quality
levels are maintained and that products are manufactured in accordance with
specifications. The Company satisfies the United States Government quality
control standard Million-Q-9858A and ISO-9002. Under the Systems Contract, the
Company is responsible for conducting inspections of the subcontractors for the
program to ensure that they meet these same standards.
Competition
The Company competes for contracts with other potential suppliers based
on price and the ability to manufacture superior quality products to required
specifications and tolerances. The Company believes that it has certain
competitive advantages including its high volume, cost-efficient manufacturing
capability, its co-development of new products with its customers, and the
United States Government's inclination to remain with long-term reliable
suppliers. Since the Company's processes do not include a significant amount of
proprietary information, however, there can be no assurance that other companies
will not, in time, be able to duplicate the Company's manufacturing processes.
United States Government Contracts
Virtually all of the Company's defense related contracts, including the
Systems Contract, are firm fixed price contracts with the United States
Government or certain of the United States Government's prime contractors. Under
fixed price contracts, the Company agrees to perform certain work for a fixed
price and, accordingly, realizes all of the benefit or detriment resulting from
decreases or increases in the costs of performing the contract.
A majority of the Company's manufacturing agreements with the United
States Armed Forces and its prime defense contractors are for the provision of
components for a one year term (two years in the case of the Systems Contract),
subject, in certain cases, to the right of the United States Government to renew
the contract for an additional term. Renewals of United States Government
contracts depend upon annual Congressional appropriations and the current
requirements of the United States Armed Forces. See "-- Markets and Customers."
United States Government contracts and contracts with defense contractors are,
by their terms, subject to termination by the United States Government for its
convenience. Fixed price contracts provide for payment upon termination for
items delivered to and accepted by the United States Government, and, if the
termination is for convenience, for payment of the contractor's costs incurred
through the date of termination plus the costs of settling and paying claims by
terminated subcontractors, other settlement expenses and a reasonable profit on
the costs incurred.
SEASONALITY
The Company's automotive products business is subject to the seasonal
characteristics of the automotive industry in which there are seasonal plant
shutdowns in the third and fourth quarters of each calendar year. Although the
Systems Contract is not seasonal in nature, there have been and will continue to
be variations in revenues from the Systems Contract based upon costs incurred by
the Company in fulfilling the Systems Contract in each quarter. The majority of
the Company's manufacturing under its agreements with the United States
Government and prime defense contractors has historically occurred from January
through September and there is generally a lower level of manufacturing and
sales during the fourth quarter of the calendar year.
BACKLOG
The Company does not reflect an order for airbags or airbag fabric in
backlog until it has received a purchase order and a material procurement
release which specifies the quantity ordered and specific delivery dates.
Generally, these orders are shipped within four to eight weeks of receipt of the
purchase order and material release. As a result, the Company does not believe
backlog is a reliable measure of future airbag sales.
57
<PAGE> 66
As of March 31, 1997, the Company had a defense-related backlog of
approximately $24.4 million of which $10.8 million is expected to be completed
before the end of fiscal year 1998. In fiscal 1996, the Company had a
defense-related backlog of approximately $26.3 million.
EMPLOYEES
At June 15, 1997, the Company employed approximately 2,150 employees.
The Company's hourly employees in Mexico are unionized and, in addition, are
entitled to a federally-regulated minimum wage, which is adjusted, at minimum,
every two years. None of the Company's other employees are unionized. The
Company has not experienced any work stoppages related to its work force and
considers its relations with its employees to be good.
ENVIRONMENTAL MATTERS
Like similar companies, the Company's operations and properties are
subject to a wide variety of increasingly complex and stringent federal, state,
local and international laws and regulations, including those governing the use,
storage, handling, generation, treatment, emission, release, discharge and
disposal of certain materials, substances and wastes, the remediation of
contaminated soil and groundwater, and the health and safety of employees
(collectively, "Environmental Laws"). Such laws, including but not limited to,
those under the Comprehensive Environmental Response, Compensation & Liability
Act ("CERCLA" or "Superfund") may impose joint and several liability and may
apply to conditions at properties presently or formerly owned or operated by an
entity or its predecessor as well as to conditions of properties at which wastes
or other contamination attributable to an entity or its predecessor have been
sent or otherwise come to be located. The nature of the Company's operations
exposes it to the risk of claims with respect to such matters and there can be
no assurance that violations of such laws have not occurred or will not occur or
that material costs or liabilities will not be incurred in connection with such
claims. Based upon its experience to date, the Company believes that the future
cost of compliance with existing Environmental Laws and liability for known
environmental claims pursuant to such Environmental Laws, will not have a
material adverse effect on the Company's financial position or results of
operations and cash flows. However, future events, such as new information,
changes in existing Environmental Laws or their interpretation, and more
vigorous enforcement policies of regulatory agencies, may give rise to
additional expenditures or liabilities that could be material.
The Company has identified two areas of underground contamination at
the Company's facility in Galion, Ohio. One area involves a localized plating
solution spill. The second area involves a chlorinated solvent spill in the
vicinity of a former above ground storage area. The Company has retained
environmental consultants to quantify the extent of this problem. Such
environmental consultants estimate that the Company's voluntary plan of
remediation could take three to five years to implement, followed up by annual
maintenance. The consultants also estimate that remediation costs will be
approximately $250,000. However, depending on the actual extent of impact to the
property or more stringent regulatory criteria, these costs could be higher.
Additionally, an underground contamination involving machinery fluids exists at
the Valentec facility in Costa Mesa, California and a site remediation plan has
been approved by the Regional Water Quality Control Board. Such plan will take
approximately five years to implement at an estimated cost of approximately
$368,000. The remediation plan currently includes the simultaneous operation of
a groundwater and vapor extraction system. In addition, JPS has been identified
along with numerous other parties as a Potentially Responsible Party ("PRP") at
the Aquatech Environmental, Inc. Superfund Site. JPS believes that it is a de
minimis party with respect to the site and that future clean-up costs incurred
by JPS will not be material. In the opinion of management, no material
expenditures will be required for its environmental control efforts and the
final outcome of these matters will not have a material adverse effect on the
Company's results of operations or financial position. The Company believes that
it currently is in compliance with applicable environmental regulations in all
material respects. See Note 8 to the Company's Notes to Consolidated Financial
Statements included elsewhere in this Prospectus, Note 7 to Valentec's Notes to
Financial Statements, Note 12 to the Division's Notes to Financial Statements
and Note 11 to the Division's Financial Statements.
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<PAGE> 67
FACILITIES
The Company maintains its corporate headquarters in Costa Mesa,
California. The Company manufactures automotive and industrial products in six
locations, with total plant area of approximately 969,564 square feet (including
administrative, engineering and research and development areas housed at plant
sites). Below is an overview of the Company's manufacturing and office
facilities:
<TABLE>
<CAPTION>
FLOOR AREA OWNED/ LEASE NUMBER OF
LOCATION (SQ. FT.) LEASED EXPIRATION EMPLOYEES
-------- --------- ------ ---------- ---------
<S> <C> <C> <C> <C>
AIRBAG AND INDUSTRIAL FABRICS RELATED
PRODUCTS
Ensenada, Mexico (airbag cushions) 97,000(1) Leased 1998(2) 971
Greenville, South Carolina (airbag and
industrial related fabrics) 445,040(1) Owned NA 371
Germany (airbag cushions) 55,000(3) Leased 1998(4) 248
Czech Republic (airbag cushions) 100,000(5) Owned NA 233
Gwent, Wales (airbag cushions) 20,000(5) Leased 2003 58
Costa Mesa, California (metal airbag
components and defense products) 139,000(6)(7) Leased 1999 173
Otay Mesa, California (warehouse)(8) 7,900 Leased 1998 3
Fort Lee, New Jersey (10) 4,685 Leased 2007 8
DEFENSE(9)
Mount Arlington, New Jersey (defense
systems) 3,600(10) Leased 2000 10
Galion, Ohio (defense products) 97,000(6) Owned NA 75
</TABLE>
- ----------
(1) Office, manufacturing and research and development space.
(2) Lease is subject to two one-year renewal options.
(3) Manufacturing, sales and administration space.
(4) The lease with respect to the 40,000 square feet comprising
manufacturing space expires in 1998. The lease with respect to the
15,000 square feet comprising sales and administrative space expires
in 2001.
(5) Manufacturing and office space.
(6) Manufacturing and administrative space.
(7) Consists of two facilities.
(8) Finished goods distribution center.
(9) Defense related products are also manufactured at the Costa Mesa
facility listed above.
(10) Office space.
PATENTS
The Company holds three patents and three additional patents are
pending. All of such patents relate to technical improvements for enhancement of
product performance with respect to the Company's fabric and industrial related
products. Provided that all requisite maintenance fees are paid, two of the
patents held by the Company expire in 2013 and the third patent held by the
Company expires in 2014.
ENGINEERING, RESEARCH & DEVELOPMENT
The Company's airbag fabric operations have maintained an active design
and development effort focused toward new and enhanced products and
manufacturing processes. The Company specifically designs and engineers its
fabrics to meet its customers' applications and needs. While most design
requirements are originated by the component manufacturer, the Company is
dedicated to improving the quality of existing products, as well as developing
new products for all applications.
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<PAGE> 68
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and members of the Board of Directors of the
Company and their respective ages and positions are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert A. Zummo 56 Chairman of the Board, President and Chief
Executive Officer
Thomas W. Cresante 50 Executive Vice President and Chief Operating
Officer
Jeffrey J. Kaplan 49 Director, Executive Vice President and Chief
Financial Officer
John L. Hakes 57 President, European Operations
Victor Guadagno 57 President, Valentec Systems, Inc.
Paul L. Sullivan 51 President, Automotive Safety Components Asia-
Pacific Ltd.
Richard R. Vande Voorde 52 President, Galion, Inc.
Paul M. Betz 38 Vice President and General Manager, Wells Division
of Valentec International Corporation
George D. Papadopoulos 25 Corporate Controller and Secretary
Daniel R. Smith 28 Treasurer
Joseph J. DioGuardi 57 Director
Francis X. Suozzi 56 Director
Robert J. Torok 66 Director
</TABLE>
Robert A. Zummo. Mr. Zummo has served as Chairman of the Board,
President and Chief Executive Officer of the Company since its inception in
January 1994. Mr. Zummo is also the Chief Executive Officer of Valentec, which
was acquired by the Company in May 1997, and has served in such capacity since
1989. Valentec is a manufacturer of defense-related products and parts for the
computer and medical industries. From 1985 to 1989, Mr. Zummo was President and
Chief Executive Officer of General Defense Corporation, a defense contractor in
Hunt Valley, Maryland, where he previously served as Executive Vice President
and Chief Operating Officer from 1983 to 1985. Mr. Zummo has more than 30 years
experience in the defense and aerospace manufacturing industries.
Thomas W. Cresante. Mr. Cresante has served as Executive Vice
President, Chief Operating Officer of the Company since May 1997. From October
1996 to May 1997, Mr. Cresante served as President of Worldwide Operations of
AlliedSignal-Safety Restraints Systems. From January 1996 to October 1996, Mr.
Cresante served as Vice President of Operations of AlliedSignal- Aerospace
Sector. From January 1990 to May 1995, Mr. Cresante served as Vice President of
Operations of the TRW Inflatable Restraints Division. From January 1984 to
November 1989, Mr. Cresante served as Vice President of Manufacturing of ITT
Hancock, a manufacturer of components and systems for the automotive industry.
Jeffrey J. Kaplan. Mr. Kaplan has served as Executive Vice President,
Chief Financial Officer and a Director of the Company since February 1997. From
October 1993 to February 1997, Mr. Kaplan served as Executive Vice President,
Chief Financial Officer and a Director of International Post Limited ("IPL"), a
leading provider of post-production services for commercial and advertising
markets; and he served as Senior Vice President and Chief Financial Officer of
Video Services Corporation from September 1987 to February 1994 and Senior Vice
President and Chief Financial Officer of Audio Plus Video International, Inc., a
subsidiary of IPL, from September 1987 to February 1997. Mr. Kaplan was a
financial advisor to various public and private companies from September 1985 to
September 1987. From November 1978 until August 1985, Mr. Kaplan was employed by
Clabir Corporation, a New York Stock Exchange listed company, where he last
served as Executive Vice President and Chief Financial Officer.
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<PAGE> 69
John L. Hakes. Mr. Hakes has served as President of the European
Operations since June 1995. Mr. Hakes has also served as a managing director of
VIL since June 1995. Mr. Hakes served as the Chief Executive Officer of Thorn
Security & Electronics, an international manufacturer of military electronics,
fire protection and intrusion control products from 1991 through 1994. From 1986
through 1991, Mr. Hakes served as the Chief Executive Officer of Thorn EMI
Electronics, one of the largest military electronics suppliers to the United
Kingdom Ministry of Defense.
Victor Guadagno. Mr. Guadagno has served as President of Valentec
Systems, Inc. since the inception of the Company's Systems business in 1994 and
has served as Vice President/General Manager of Valentec's Wells Division from
September 1994 until September 1995. Mr. Guadagno joined Valentec in 1986 as
Vice President/General Manager of the Product Development Division, and was
promoted to Vice President of Corporate Marketing in 1989. Prior to joining
Valentec, Mr. Guadagno was President and sole shareholder of Target Research,
Inc., a business engaged in the research and development of ammunition for the
United States Army. Mr. Guadagno began his career as a development engineer with
the United States Army and has over 35 years of experience in the defense
industry, including systems contracting.
Paul L. Sullivan. Mr. Sullivan has served as President of Automotive
Safety Components Asia-Pacific, Ltd. since February 1997. Mr. Sullivan served as
President of the North American Automotive Operations from May 1995 to February
1997, as Vice President and General Manager of the North American Automotive
Division from January 1994 to May 1995, and was Vice President and General
Manager of Valentec's Wells Division from July 1993 to January 1994. From July
1992 to July 1993, Mr. Sullivan was Vice President and General Manager of
Valentec's Kisco Division, a manufacturer of component parts for large caliber
tank ammunition. From December 1990 to June 1992, Mr. Sullivan was plant manager
of the Bussman Division of Cooper Industries, a manufacturer of electrical
protection component parts. From January 1988 to December 1990, Mr. Sullivan was
Operations Manager of Valentec's Kisco Division. Mr. Sullivan has over 25 years
of managerial experience in multi-plant operations in the defense and automotive
industries.
Richard R. Vande Voorde. Mr. Vande Voorde has served as President of
Galion, Inc. since May 1995 and previously served as Vice President and General
Manager of the Company's Galion Division since the inception of the Company.
From 1989 to January 1994 Mr. VandeVoorde served as Executive Vice President of
Valentec Galion. From 1986 to 1989, Mr. Vande Voorde was Vice President of
Finance of Valentec Galion. From November 1983 to June 1986, Mr. Vande Voorde
served as Manager of Accounting Operations of Ideal Electric Company, a division
of Carrier Corporation which manufactured custom-designed electrical generators.
Carrier Corporation is a subsidiary of United Technologies Corporation.
Paul M. Betz. Mr. Betz has served as General Manager of the Wells
Division of Valentec International Corporation since January 1997. Mr. Betz
served as Vice President of Sales and Marketing for both Valentec International
Corporation and Safety Components International, Inc. from October 1995 to
December 1996. From April 1994 to September 1995, Mr. Betz served as Director of
Sales and Marketing for Automated Solutions Incorporated. From July 1982 to
March 1994, Mr. Betz held several engineering, program management and account
management positions with General Motors Corporation, General Electric
Corporation and their joint venture affiliate, FANUC, Ltd. of Japan.
George D. Papadopoulos. Mr. Papadopoulos has served as Corporate
Controller and Secretary of the Corporation since March 1997. From April 1996 to
March 1997, Mr. Papadopoulos served as Corporate Controller of International
Post Limited, a leading provider of post-production services for commercial and
advertising markets. From July 1993 to April 1996, Mr. Papadopoulos was employed
by Arthur Andersen LLP, a leading public accounting firm, serving in various
capacities, the most recent of which was as a Senior Accountant.
Daniel R. Smith. Mr. Smith has served as Treasurer of the Corporation
since March 1997. From July 1991 to March 1997, Mr. Smith was employed by Arthur
Andersen LLP, a leading public accounting firm, as a Manager.
Joseph J. DioGuardi. Mr. DioGuardi has served as a director of the
Company since 1994. Mr. DioGuardi was a member of the United States House of
Representatives from 1985 through 1989, representing the 20th Congressional
District in Westchester County, New York. Since leaving Congress, Mr. DioGuardi
founded and now chairs a non-partisan foundation named "Truth in Government,"
aimed at promoting fiscal responsibility and budgetary reform. Mr. DioGuardi
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<PAGE> 70
is an international spokesman for human rights and is Chairman of the Albanian
American Civic League. Mr. DioGuardi has 22 years of public accounting
experience with Arthur Andersen & Co., serving as Partner from 1972 to 1984. Mr.
DioGuardi is also a director of Neurocorp, Ltd., a publicly held corporation in
the business of utilizing software, databases and medical devices for the
diagnosis and treatment of brain-related disorders.
Francis X. Suozzi. Mr. Suozzi has served as a director of the Company
since 1994. Mr. Suozzi is a director of Valentec. Mr. Suozzi is currently
employed as the treasurer and a senior vice president of Nabisco Holdings
Corporation. Prior to taking this position in March 1995, Mr. Suozzi was a vice
president of RJR Nabisco, Inc., involved in financings and acquisitions. Mr.
Suozzi is also a director of First Intercontinental Group, an investment banking
concern based in Washington, D.C. Prior to forming First Intercontinental Group
in 1991, Mr. Suozzi was Regional Director of Corporate Finance for Gruntal &
Co., a securities firm headquarters in New York City, from 1988 to 1991. From
1975 through 1984, Mr. Suozzi was a director of Avco Community Developers Inc.,
a real estate development company which was publicly traded from 1975 to 1978,
and was also a director of Nashville City Bank from 1979 to 1982.
Robert J. Torok. Mr. Torok has served as a director of the Company
since 1994. Until May 1996, when Mr. Torok retired, Mr. Torok was a Vice
President and Partner of Korn/Ferry International, an executive search firm
based in New York City and had served in such position since 1980. Prior to
1980, Mr. Torok was Senior Vice President of Sikorsky Aircraft, a division of
United Technologies Corporation, a diversified manufacturing company based in
Hartford, Connecticut, where Mr. Torok worked from 1958 to 1980. Mr. Torok has
22 years of experience in engineering, manufacturing and management.
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<PAGE> 71
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid by SCI to the
Chief Executive Officer of the Company and the four other most highly
compensated executive officers of the Company for the Company's fiscal year
ended March 31, 1997 (each person appearing in the table is referred to as a
"Named Executive"). The amounts reflected in the table for the period during
fiscal year 1995 prior to the Company's initial public offering in May 1994
represent an allocation of the total compensation paid by Valentec to the Named
Executives based on an estimate of the portion of time spent by the Named
Executives on matters relating to the Valentec Automotive Division and Valentec
Galion which were transferred to the Corporation immediately prior to the
Initial Public Offering (the "Transfer of Assets").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
NAME AND BONUS OTHER ANNUAL
PRINCIPAL POSITION YEAR SALARY($) ($) COMPENSATION ($)
------------------ ---- --------- --- ----------------
<S> <C> <C> <C> <C>
Robert A. Zummo,............ 1997 297,000 0 0
Chairman of the 1996 275,000 0 0
Board,President and Chief 1995 250,000 0 0
Executive Officer
Victor Guadagno,............ 1997 162,000 0 0
President, Valentec Systems, 1996 150,000 25,000 0
Inc. 1995 132,212 0 0
John L. Hakes............... 1997 164,273 0 0
President, European Operations 1996 147,000 46,500 0
(2)
Paul L. Sullivan,........... 1997 145,000 0 0
President, Automotive Safety 1996 145,918 25,000 0
Components Asia-Pacific, Ltd. 1995 12,079 25,000 0
(3)
W. Hardy Myers,............. 1997 142,000 0 0
President, North American 1996 132,000 40,000 0
Automotive Operations (4) 1995 120,000 50,000 0
</TABLE>
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
AWARDS PAYOUTS
RESTRICTED SECURITIES ALL OTHER
NAME AND STOCK UNDERLYING LTIP COMPENSATION
PRINCIPAL POSITION AWARDS($) OPTIONS(#) PAYOUTS($) ($) (1)
------------------ --------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Robert A. Zummo,............ 0 10,000 0 9,600
Chairman of the 0 10,000 0 7,680
Board,President and Chief 0 50,000 0 8,000
Executive Officer
Victor Guadagno,............ 0 5,000 0 6,000
President, Valentec Systems, 0 15,000 0 6,231
Inc. 0 10,000 0 6,000
John L. Hakes............... 0 10,000 0 0
President, European Operations 0 25,000 0 0
(2)
Paul L. Sullivan,........... 0 5,000 0 6,000
President, Automotive Safety 0 5,000 0 6,000
Components Asia-Pacific, Ltd. 0 25,000 0 6,923
(3)
W. Hardy Myers,............. 0 10,000 0 6,000
President, North American 0 10,000 0 4,800
Automotive Operations (4) 0 50,000 0 6,000
</TABLE>
- ----------
(1) Amount reflects automobile allowances.
(2) Mr. Hakes joined the Company in June 1995.
(3) Mr. Sullivan joined the Company in September 1994. Mr. Sullivan became Vice
President, North American Automotive Operations effective September 26,
1996. Prior to such time, Mr. Sullivan served as President, North American
Automotive Operations.
(4) From February 15, 1997 to the time of Mr. Myers' departure from the Company
in May 1997, Mr. Myers was the President, North America Automotive
Operations, Treasurer and Secretary of the Company. Prior to February 15,
1997, Mr. Myers served as Chief Financial Officer, Treasurer, Secretary and
a director of the Company.
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<PAGE> 72
OPTIONS GRANT IN LAST FISCAL YEAR
The following options were granted to the Named Executives during
fiscal year 1997 under the Company's 1994 Stock Option Plan, as amended.
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ---------- ----------- ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Zummo 10,000 4.23% $14.17 5/10/2001(1) $39,149 $ 86,509
John L. Hakes...... 10,000 4.23% $12.88 5/10/2003(1) $52,435 $122,195
Victor Guadagno.... 5,000 2.12% $12.88 5/10/2006(1) $40,501 $102,637
Paul L. Sullivan... 5,000 2.12% $12.88 5/10/2006(1) $40,501 $102,637
W. Hardy Myers..... 10,000 4.23% $12.88 5/10/2006(1) $81,002 $205,274
</TABLE>
- ----------
(1) Became exercisable in four equal annual installments beginning May 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTIONS
VALUES
The following table summarizes for each of the Named Executives the
number of stock options exercised during the fiscal year ended March 31, 1997,
the aggregate dollar value realized upon exercise, the total number of
unexercised options, if any, held at March 31, 1997 and the aggregate dollar
value of in-the-money, unexercised options, held at March 31, 1997. The value
realized upon exercise is the difference between the fair market value of the
underlying stock on the exercise date and the exercise or base price of the
option. The value of unexercised, in-the-money options at fiscal year-end is the
difference between its exercise or base price and the fair market value of the
underlying stock on March 31, 1997, which was $10.00 per share.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE FISCAL YEAR END (#) AT FISCAL YEAR END ($)
NAME EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------ ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Robert A. Zummo 0 NA 27,500/42,500 *
John L. Hakes...... 0 NA 6,250/28,750 *
Victor Guadagno.... 0 NA 7,500/21,250 *
Paul L. Sullivan... 0 NA 13,750/21,250 *
W. Hardy Myers..... 0 NA 27,500/42,500 *
</TABLE>
- ----------
* None of the options referenced in the chart were in-the-money on March 31,
1997.
EMPLOYMENT AGREEMENTS
Mr. Zummo serves as President and Chief Executive Officer of the
Company pursuant to a five-year employment agreement which became effective upon
the consummation of the Company's Initial Public Offering. The employment
agreement provides that Mr. Zummo will allocate at least 80% of his working
time, attention and energies to the affairs of the Company and the remaining 20%
to Valentec; however, Mr. Zummo has been spending substantially all of his
working time performing services for the Company since the closing of the
Valentec Acquisition. Mr. Zummo's base salary for the
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<PAGE> 73
first year of the term is $250,000, subject to annual increases at the
discretion of the Board of Directors. In addition to the base salary, the
employment agreement provides for an annual incentive bonus. Mr. Zummo was not
awarded a bonus for fiscal 1997. In July 1997, the Compensation Committee of the
Board of Directors approved a bonus to Mr. Zummo of $75,000 contingent upon the
completion of the JPS Acquisition based on Mr. Zummo's performance in connection
with such acquisition. In the event Mr. Zummo's employment is terminated without
"Cause" (as defined in the employment agreement), the Company is required to pay
Mr. Zummo an amount equal to his full salary and incentive bonus in effect for
the year immediately preceding termination for the remainder of the full term.
If Mr. Zummo's employment is terminated by the Company in connection with a
"change in control" (as defined in the employment agreement), the Company is
required to pay Mr. Zummo an amount equal to two times his full salary and bonus
in respect of the year immediately preceding termination. In addition, if Mr.
Zummo's employment agreement is not renewed by the Company after the expiration
of the initial five-year term other than for "Cause," the Company would be
required to continue to pay Mr. Zummo's full salary and incentive bonus in
effect for the year immediately preceding termination for a period of one year
from the time of termination.
Mr. Cresante serves as Executive Vice President and Chief Operating
Officer of the Company pursuant to a three-year employment agreement which
became effective in May 1997. The employment agreement provides that Mr.
Cresante will allocate at least 80% of his working time, attention and energies
to the affairs of the Company and the remaining 20% to Valentec; however, Mr.
Cresante has been spending substantially all of his working time performing
services for the Company since the closing of the Valentec Acquisition. Mr.
Cresante's base salary for the first year of the term is $235,000, subject to
annual increases at the discretion of the Board of Directors. In addition to the
base salary, the employment agreement provides for an annual incentive bonus,
including a minimum bonus of $50,000 for fiscal 1998. Pursuant to the terms of
the employment agreement, Mr. Cresante was awarded options to purchase 225,000
shares of Common Stock issued on May 19, 1997 under the Company's 1994 Stock
Option Plan. The issuance of such options is subject to the conditions set forth
in the employment agreement, including the approval by the stockholders of the
Company of an increase in the number of shares authorized for issuance under the
Company's 1994 Stock Option Plan as may be necessary for the issuance of such
options. In the event Mr. Cresante's employment is terminated without "Cause"
(as defined in the employment agreement), the Company is required to pay Mr.
Cresante an amount equal to his full salary and incentive bonus in effect for
the year immediately preceding termination for the remainder of the full term.
If Mr. Cresante's employment is terminated by the Company in connection with a
"change in control" (as defined in the employment agreement), the Company is
required to pay Mr. Cresante an amount equal to two times his full salary and
incentive bonus in respect of the year immediately preceding termination. In
addition, if Mr. Cresante's employment agreement is not renewed by the Company
after the expiration of the initial three-year term other than for "Cause," the
Company would be required to continue to pay Mr. Cresante's full salary and
incentive bonus in effect for the year immediately preceding termination for a
period of one year from the time of termination.
Mr. Kaplan serves as Executive Vice President and Chief Financial
Officer of the Company pursuant to a three-year employment agreement which
became effective in February 1997. The employment agreement provides that Mr.
Kaplan will allocate at least 80% of his working time, attention and energies to
the affairs of the Company and the remaining 20% to Valentec; however, Mr.
Kaplan has been spending substantially all of his working time performing
services for the Company since the closing of the Valentec Acquisition. Mr.
Kaplan's base salary for the first year of the term is $220,000, subject to
annual increases at the discretion of the Board of Directors. In addition to the
base salary, the employment agreement provides for an annual incentive
bonus,including a minimum bonus of $30,000 for fiscal 1998. Pursuant to the
terms of the employment agreement, Mr. Kaplan was awarded options under the
Company's 1994 Stock Option Plan in accordance with the following schedule: (i)
options to purchase 125,000 shares of Common Stock were issued on February 15,
1997; (ii) options to purchase 50,000 shares of Common Stock were issued on
April 1, 1997 and (iii) options to purchase 50,000 shares of Common Stock are to
be issued on April 1, 1998, unless Mr. Kaplan is not, for any reason, an
employee of the Company on such date. The issuance of such options is subject to
the conditions set forth in the employment agreement, including the approval by
the stockholders of the Company of any increase in the number of shares
authorized for issuance under the Company's 1994 Stock Option Plan as may be
necessary for the issuance of such options. In the event Mr. Kaplan's employment
is terminated without "Cause" (as defined in the employment agreement), the
Company is required to pay Mr. Kaplan an amount equal to his full salary and
incentive bonus in effect for the year immediately preceding termination for the
remainder of the full term. If Mr. Kaplan's employment is terminated by the
Company in connection with a "change in control" (as defined in the employment
agreement), the Company is required to pay Mr. Kaplan an amount equal
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<PAGE> 74
to two times his full salary and incentive bonus in respect of the year
immediately preceding termination. In addition, if Mr. Kaplan's employment
agreement is not renewed by the Company after the expiration of the initial
three-year term other than for "Cause," the Company would be required to
continue to pay Mr. Kaplan's full salary and incentive bonus in effect for the
year immediately preceding termination for a period of one year from the time of
termination.
Mr. Hakes serves as President, European Automotive Operations pursuant
to an employment agreement (the "Hakes Employment Agreement") which became
effective in June 1995. The agreement has an initial term of one year and may be
terminated thereafter on twelve months' notice by either the Company or Mr.
Hakes. Mr. Hakes' base salary for the first year of the term is pound
sterling95,000, and is subject to annual increases at the discretion of the
Board of Directors. In addition to the base salary, the Hakes Employment
Agreement provides for an annual incentive bonus. Mr. Hakes was not awarded a
bonus for fiscal 1997. If Mr. Hakes' employment is terminated by the Company in
connection with "a change in control" (as defined in the Hakes Employment
Agreement), the Company is required to pay Mr. Hakes an amount equal to his full
salary effective on the date of the change in control for a period of one full
year. Pursuant to the Hakes Employment Agreement, Mr. Hakes also provides
services to VIL in return for compensation paid by VIL.
Mr. Guadagno serves as President of Valentec Systems, Inc. pursuant to
a two-year employment agreement which became effective in September 1994, the
term of which was extended to September 1997. Mr. Guadagno's base salary for the
first year of the term was $150,000, and is subject to annual increases at the
discretion of the Board of Directors. In addition to the base salary, the
employment agreement provides for an annual incentive bonus. Mr. Guadagno was
not awarded a bonus for fiscal 1997. In the event Mr. Guadagno's employment is
terminated without "Cause" (as defined in the employment agreement), the Company
would be required to continue to pay Mr. Guadagno's full salary for a period of
twelve months from the time of termination. In addition, if Mr. Guadagno's
employment agreement is not renewed by the Company after the expiration of the
term other than for "Cause," the Company would be required to continue to pay
Mr. Guadagno's full salary for a period of six months from the time of
termination.
Mr. Sullivan serves as President of Automotive Safety Components
Asia-Pacific Ltd. pursuant to a two-year employment agreement which became
effective in September 1994, the term of which was extended to September 1997.
Mr. Sullivan's base salary for the first year of the term is $125,000, subject
to annual increases at the discretion of the Board of Directors. In addition to
the base salary, the employment agreement provides for an annual incentive
bonus. Mr. Sullivan was not awarded a bonus for fiscal 1997. In the event Mr.
Sullivan's employment is terminated without "Cause" (as defined in the
employment agreement), the Company would be required to continue to pay Mr.
Sullivan's full salary for a period of twelve months from the time of
termination. In addition, if Mr. Sullivan's employment agreement is not renewed
by the Company after the expiration of the term other than for "Cause," the
Company would be required to continue to pay Mr. Sullivan's full salary for a
period of six months from the time of termination.
From February 1997 until his departure from the Company in May 1997,
Mr. Myers served as President, North American Automotive Operations, Treasurer
and Secretary of the Company. Prior to February 1997, Mr. Myers served as
Treasurer, Secretary and Chief Financial Officer of the Company pursuant to a
three-year employment agreement which became effective upon the consummation of
the Initial Public Offering. The employment agreement provided that Mr. Myers
would allocate at least 80% of his working time, attention and energies to the
affairs of the Company. Mr. Myers' base salary for the first year of the term
was $150,000, and was subject to annual increases at the discretion of the Board
of Directors. In addition to the base salary, Mr. Myers' employment agreement
provided for an annual incentive bonus. Mr. Myers did not receive a bonus for
fiscal 1997. Pursuant to the employment agreement, in the event Mr. Myers'
employment was terminated without "Cause" (as defined in the employment
agreement), the Company would have been required to pay Mr. Myers an amount
equal to his full salary and incentive bonus in effect for the year immediately
preceding termination for the remainder of the full term of employment. Pursuant
to the employment agreement, if Mr. Myers' employment was terminated by the
Company in connection with a "change in control" (as defined in the employment
agreement), the Company would have been required to pay Mr. Myers an amount
equal to two times his full salary and bonus in respect to the year immediately
preceding termination. The Company has entered into a Consulting Agreement (the
"Consulting Agreement") with Mr. Myers pursuant to which Mr. Myers will provide
consulting services to the Company for a term of one year. As compensation for
such services, Mr. Myers will receive $184,000 paid in twelve monthly
installments; the options previously awarded to Mr. Myers under the Company's
1994 Stock Option Plan have been fully vested pursuant to the Consulting
Agreement and are
66
<PAGE> 75
available for exercise within a ninety day period from the termination date of
the Consulting Agreement; and the Company will provide to Mr. Myers certain
benefits under the Company's benefit plans as well as certain life and health
insurance benefits.
BOARD OF DIRECTORS
Directors who are employees of the Company receive no compensation, as
such, for service as members of the Board. Directors who are not employees of
the Company receive an annual retainer of $15,000 and an attendance fee of
$1,250 for each Board meeting or committee meeting attended in person by that
director and $300 for each telephonic Board meeting or committee meeting in
which such director participated, provided that fees for in-person meetings of
the Board and committees shall not exceed $1,250 per day. All Directors are
reimbursed for expenses incurred in connection with attendance at meetings. See
"-- Directors' Options." Effective as of April 1, 1997, the annual retainer for
directors who are not employees of the Company was increased to $20,000.
STOCK OPTION PLAN
On January 27, 1994, the Board of Directors of the Company adopted, and
the stockholders approved, the 1994 Stock Option Plan of the Company and on May
4, 1996 and July 29, 1996 the Board of Directors approved certain amendments to
the Plan which were subsequently approved by the stockholders (such plan, as
amended, being referred to herein as the "Plan"). The Plan provides for the
issuance of options (each an "Option") to purchase up to 550,000 shares of
Common Stock. Of this total, Options to purchase 510,000 shares may be granted
to officers, key employees and consultants of the Company and Options to
purchase 40,000 shares may be granted to non-employee directors of the Company.
On July 22, 1997, the Board of Directors adopted amendments to the Plan, subject
to stockholder approval at the next annual meeting of stockholders, including an
amendment to increase the aggregate number of shares of Common Stock issuable
under the Plan to 1,050,000, with 1,000,000 of such shares issuable under
Options that may be granted to officers, key employees and consultants of the
Company and 50,000 of such shares issuable under Options that may be granted to
non-employed directors of the Company. As of the date hereof, the Company had
granted Options to purchase 852,499 shares to officers, key employees and
consultants of the Company (of which Options to purchase 400,000 shares have
been issued to officers of the Company subject to approval of the stockholders
of the Company of the amendment to the Plan described above) and Options to
purchase 21,000 shares to non-employee directors of the Company. The Plan is
designed to provide an incentive to officers, key employees, consultants and
non-employee directors of the Company by making available to them an opportunity
to acquire a proprietary interest or to increase their proprietary interest in
the Company. Any Option granted under the Plan which is forfeited, expires or
terminates prior to vesting or exercise will again be available for award under
the Plan. The Stock Option Committee of the Board of Directors administers the
Plan. The terms of specific Options are determined by the Stock Option
Committee. Generally, Options are granted at an exercise price not less than
fair market value of the Common Stock on the date of grant. Each Option is
exercisable during the period or periods specified in the option agreement,
which generally does not exceed ten years from the date of grant.
DIRECTORS' OPTIONS
Each non-employee director receives an Option to purchase 2,500 shares
of Common Stock, vesting in equal installments over a four-year period, in each
calendar year in which he serves as a director of the Company. The exercise
price of the shares of Common Stock subject to Options granted to each non-
employee director is the fair market value of the shares of Common Stock on the
date of grant. Options granted to non-employee directors, with limited
exceptions, may only be exercised within ten years of the date of grant and
while the recipient of the Option is a director of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Suozzi served as a member of the Compensation Committee of the
Board of Directors during fiscal year 1997. Mr. Suozzi is a director of Valentec
and owned approximately 21% of all of the issued and outstanding shares of
Valentec prior to selling all such shares to the Company pursuant to the
Valentec Acquisition. See "Certain Transactions."
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<PAGE> 76
SECURITY OWNERSHIP BY CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table and notes set forth information as of July 15, 1997
Prospectus with respect to the voting securities of the Company beneficially
owned by all person(s) known by the Company to be the beneficial owner of more
than 5% of the Common Stock, by each director of the Company, by each of the
Named Executives and by all directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP COMMON STOCK(1)
------------------------------------ -------------------- ---------------
<S> <C> <C>
Robert A. Zummo(2)(3) 1,021,576(4) 20.2%
Cramer Rosenthal McGlynn, Inc 5.5%
707 Westchester Avenue
White Plains, New York 10604 276,400(5)
FMR Corp
82 Devonshire Street
Boston, Massachusetts 02109 276,200(6) 5.5%
Victor Guadagno(2) 16,250(7) *
John L. Hakes(2) 15,000(7) *
Jeffrey J. Kaplan(2) 0 *
W. Hardy Myers(2) 70,500(8) 1.4%
Paul L. Sullivan(2) 23,000(9) *
Joseph J. DioGuardi(2) 2,250(7) *
Francis X. Suozzi(2)(3) 328,051(10) 6.5%
Robert J. Torok(2) 2,250(7) *
All executive officers and directors as a group
(consisting of 14 individuals)(11) 1,500,127(12) 28.9%
</TABLE>
- ----------
* Less than 1%.
(1) Shares beneficially owned, as recorded in this table, expressed as a
percentage of the shares of Common Stock outstanding, net of treasury
shares. For purposes of computing the percentage of outstanding shares
held by each person or group of persons named in this table, any
securities which such person or group of persons has the right to
acquire within 60 days of the date hereof, is deemed to be outstanding
for purposes of computing the percentage ownership of such person or
persons, but is not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person.
(2) Address for each person is c/o Safety Components International, Inc.,
2160 North Central Road, Fort Lee, NJ 07024.
(3) In connection with the Valentec Acquisition, Messrs. Zummo and Suozzi
entered into an agreement, pursuant to which it was agreed, among other
things, that for a period of three years from the date thereof, Mr.
Suozzi will vote all shares of Common Stock beneficially owned by him
on any manner put to a vote of the shareholders of the Company in the
same manner as recommended by a majority of the Board of Directors of
the Company or if no such recommendation has been made, as directed by
Mr. Zummo; provided, that such agreement shall terminate if Mr. Suozzi
shall cease to be on the Board of Directors (other than as a result of
his resignation).
(4) Includes options which are currently exercisable (or exercisable within
60 days) to purchase 45,000 shares of Common Stock.
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<PAGE> 77
(5) Number of shares beneficially owned by Cramer, Rosenthal McGlynn, Inc.
("CRMI"), an investment company registered under Section 8 of the
Investment Advisers Act of 1940, according to a Schedule 13G filed by
CRMI with the Commission in February 1997.
(6) The information in the table relating to FMR Corp. and the information
in this footnote is from a Schedule 13G filed with the Commission in
February 1997, by FMR Corp., Edward C. Johnson, Abigail P. Johnson,
Fidelity Management & Research Company and Fidelity Management Trust
Company. Fidelity Management & Research Company ("Fidelity"), 82
Devonshire Street, Boston, Massachusetts 02109, a wholly-owned
subsidiary of FMR Corp. and an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940, is the beneficial
owner of 500 shares or 0.01% of the common stock outstanding of Safety
Components International Incorporated ("the Company") as a result of
acting as investment adviser to various investment companies registered
under Section 8 of the Investment Company Act of 1940. Edward C.
Johnson 3d, FMR Corp., through its control of Fidelity, and the funds
each has sole power to dispose of the 500 shares owned by the Funds.
Neither FMR Corp. nor Edward C. Johnson 3d, Chairman of FMR Corp., has
the sole power to vote or direct the voting of the shares of Common
Stock owned directly by the Fidelity Funds, which power resides with
the Funds' Boards of Trustees. Fidelity carries out the voting of the
shares under written guidelines established by the Funds' Boards of
Trustees. Fidelity Management Trust Company, 82 Devonshire Street,
Boston, Massachusetts 02109, a wholly-owned subsidiary of FMR Corp. and
a bank as defined in Section 3(a)(6) of the Securities Exchange Act of
1934, is the beneficial owner of 276,700 shares or 5.49% of the Common
Stock outstanding of the Company as a result of its serving as
investment manager of the institutional account(s). Edward C. Johnson
3d and FMR Corp., through its control of Fidelity Management Trust
Company, each has sole dispositive power over 275,700 shares and sole
power to vote or to direct the voting of 253,900 shares, and no power
to vote or to direct the voting of 21,800 shares of common stock owned
by the institutional account(s) as reported above. Members of the
Edward C. Johnson 3d family and trusts for their benefit are the
predominant owners of Class B shares of common stock of FMR Corp.,
representing approximately 49% of the voting power of FMR Corp. Mr.
Johnson 3d owns 12.0% and Abigail Johnson owns 24.5% of the aggregate
outstanding voting stock of FMR Corp. Mr. Johnson 3d is Chairman of FMR
Corp. and Abigail P. Johnson is a Director of FMR Corp. The Johnson
family group and all other Class B shareholders have entered into a
shareholders' voting agreement under which all Class B shares will be
voted in accordance with the majority vote of Class B shares.
Accordingly, through their ownership of voting common stock and the
execution of the shareholders' voting agreement, members of the Johnson
family may be deemed, under the Investment Company Act of 1940, to form
a controlling group with respect to FMR Corp.
(7) Represents only options which are currently exercisable (or exercisable
within 60 days) to purchase shares of Common Stock.
(8) Includes options which are currently exercisable (or exercisable within
60 days) to purchase 70,000 shares of Common Stock.
(9) Includes options which are currently exercisable (or exercisable within
60 days) to purchase 22,500 shares of Common Stock.
(10) Includes options which are currently exercisable (or exercisable within
60 days) to purchase 2,250 shares of Common Stock.
(11) Includes Mr. Myers who is a Named Executive but departed from the
Company in May 1997.
(12) Includes options which are currently exercisable (or exercisable within
60 days) to purchase 184,250 shares of Common Stock.
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<PAGE> 78
CERTAIN TRANSACTIONS
Pursuant to a definitive Stock Purchase Agreement, dated as of May 22,
1997, the Company acquired (the "Valentec Acquisition") all of the outstanding
stock of Valentec from Robert A. Zummo, Francis X. Suozzi and the Valentec
International Company Employee Stock Ownership Plan (the "ESOP"). Valentec was
the Company's largest shareholder immediately prior to the Valentec Acquisition
owning approximately 27% of the issued and outstanding shares of Common Stock.
Immediately prior to the Valentec Acquisition, Robert A. Zummo, the Chairman of
the Board, the President and Chief Executive Officer of the Company, was also a
director, the President, Chief Executive Officer and owner of approximately 74%
of all of the issued and outstanding shares of Valentec, and Francis X. Suozzi,
a consultant to and a director of Valentec and a director of the Company, was
the owner of approximately 21% of all of the issued and outstanding shares of
Valentec. The consideration paid to the shareholders of Valentec in connection
with the Valentec Acquisition consisted of an aggregate of 1,369,200 newly
issued shares of Common Stock, which is approximately equal to the number of
shares of Common Stock held by Valentec. The shares of Common Stock held by
Valentec have become treasury shares and are not considered outstanding.
Therefore, there has been no increase in the Company's outstanding shares as a
result of the Valentec Acquisition. Messrs. Zummo and Suozzi now beneficially
own, directly, approximately 20% and 6.5%, respectively, of the outstanding
Common Stock of the Company. In addition, Messrs. Zummo and Suozzi and the ESOP
received demand and piggyback registration rights in connection with the
Valentec Acquisition, of which approximately $7.1 million has been repaid or
will be repaid in the near term. The Indebtedness assumed by the Company in
connection with the Valentec Acquisition was approximately $14.7 million as of
May 22, 1997, inclusive of intercompany indebtedness of $4.3 million (which is
eliminated in consolidation) as a result of the Valentec Acquisition. The
indebtedness assumed by the Company included $2.8 million in indebtedness to VIL
of which $800,000 was evidenced by a demand note (of which approximately
$530,000 has been repaid) and $2.0 million is evidenced by a five year note
payable in monthly installments of approximately $40,000. Both such notes bear
interest at 7% per annum. Subsequent to the closing of the Valentec Acquisition
through June 30, 1997, an aggregate of approximately $28,000 in principal and
$12,000 in interest has been paid to VIL by the Company under the five year
note.
The purchase price for the Valentec Acquisition was negotiated between
Valentec and a special committee consisting of independent members of the Board
of Directors of the Company. The special committee was advised by independent
legal counsel and an independent financial advisor. The Company's Board of
Directors received an opinion from the special committee's financial advisor as
to the fairness from a financial point of view of the consideration received by
the Company to the Company's shareholders other than Valentec.
Immediately prior to the Valentec Acquisition, Mr. Zummo acquired the
88.8% equity interest in VIL owned by Valentec for a cash payment of $75,000.
Prior to the Valentec Acquisition, certain agreements and arrangements
existed between the Company and Valentec. Robert A. Zummo has been an officer
and director of Valentec since 1993, and until the Valentec Acquisition, was a
stockholder of Valentec. Until his departure from the Company in May 1997, W.
Hardy Myers was an officer and director of Valentec. Prior to the consummation
of the Valentec Acquisition, Messrs. Zummo, Cresante and Kaplan were required to
spend at least 80% of their working time performing services for the Company
with the remaining portion of their time spent performing services for Valentec
and they were compensated separately by Valentec and the Company for the
respective services rendered as employees to each company. Messrs. Zummo,
Cresante and Kaplan presently spend substantially all of their working time
performing services for the Company. Mr. Hakes, the President of the Company's
European Operations, also provides part time services as a managing director to
VIL pursuant to the Hakes Employment Agreement and is paid separately for such
services by VIL. See "Business -- Significant Transactions" for a description of
the Valentec Acquisition.
Prior to the Valentec Acquisition, the Company purchased from Valentec
metal components for inclusion in its passenger side airbags at prices approved
by the Company's customers for automotive airbags. Purchases by the Company from
Valentec for such components during fiscal year 1995, 1996 and 1997 totalled
$1.3 million, $774,000 and $2.6 million, respectively. Valentec also supplies
directly to such customers metal components for inclusion in airbag systems
manufactured by such customers.
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<PAGE> 79
During the first year following the Initial Public Offering, the
Company believed that it was more cost-efficient to continue to receive certain
of the corporate services described above and certain other services from
Valentec, as opposed to duplicating these services on a stand-alone basis.
Accordingly, the Company and Valentec entered into a corporate services
agreement (the "Corporate Services Agreement") pursuant to which Valentec has
provided certain facilities and services to the Company and its subsidiaries,
including corporate headquarters and financial, accounting and treasury
services. For fiscal year 1995, the Company was charged $145,000 under the
Corporate Services Agreement based upon the cost of such services to Valentec
and the Company's pro rata portion of those costs. For fiscal year 1995, the
Company also provided certain executive services to Valentec, including certain
services rendered on behalf of Valentec by Messrs. Zummo and Myers. The Company
charged Valentec $146,000 for these services. In addition, the Company has
provided certain executive, financial, accounting and treasury services to
Valentec and has charged Valentec for its pro rata portion of those costs. There
was also a joint purchasing of insurance which was arranged and paid for by the
Company and for which Valentec reimbursed the Company for its pro rata share.
For each of fiscal year 1996 and 1997, the Company charged Valentec $659,000 and
$726,000, respectively, for the foregoing services. The Corporate Services
Agreement had an initial term of twelve months, subject to renewal each year
thereafter and was terminable at the Company's option. The Corporate Services
Agreement was terminated in connection with the Valentec Acquisition.
The Company's U.K. subsidiary and VIL are parties to a Shared Services
Agreement, relating to administration financial, engineering and other shared
costs. Payments from the Company to VIL for each of fiscal 1995, 1996 and 1997
were $248,000, $254,000 and $358,000, respectively, under the Shared Services
Agreement.
The Company sub-leases space from VIL for its European automotive
operations pursuant to a separate sub-lease agreement and facility usage
agreement in the U.K. In addition to the lease payments of approximately pound
sterling 70,000 per year under the sub-lease agreement, the facility usage
agreement provides for the Company to be allocated its pro rata portion of the
manufacturing overhead (e.g. utilities, plant security) and general and
administrative expenses of the facility (e.g. purchasing, plant accounting).
These allocations are based primarily on square footage and on volume of
production. The sub-lease and facility usage agreement relating to the European
automotive operation each have an initial term expiring in 2003. Payments from
the Company to VIL under the lease for each of 1995, 1996 and 1997 were
$112,000, $121,000 and $117,000, respectively.
Prior to the Valentec Acquisition, Valentec subcontracted the
manufacture of certain ammunition and automotive components to the Company,
subject to the Company's manufacturing capacity and certain contractual
limitations. Under these subcontracts, the Company was entitled to receive all
compensation relating to the manufacture of such components. The amount paid by
Valentec to the Company under such subcontracts for fiscal year 1995, 1996 and
1997 was $1.0 million, $4.3 million and $104,000, respectively.
Under federal law, the Company and certain of its subsidiaries would be
subject to liability for the consolidated federal income tax liabilities of the
consolidated group during the period when Valentec was the common parent. As
part of the Transfer of Assets, Valentec agreed, however, to indemnify the
Company and such subsidiaries for such federal income tax liability (and certain
state and local tax liabilities) that the Company or any such subsidiary is
actually required to pay. Prior to the Valentec Acquisition and to the extent
that Valentec could offset the taxable income generated by Valentec against
losses, if any, generated by such subsidiaries for periods prior to the Transfer
of Assets, the agreements relating to the Transfer of Assets may have benefited
Valentec insofar as loss carry-forwards which would otherwise have been
available to the Company would be utilized by Valentec.
In connection with the public offering by the Company, Valentec and
certain other stockholders of an aggregate of 1,725,000 shares of Common Stock
consummated in June 1995 (the "1995 Offering"), pursuant to the underwriting
agreement relating to the 1995 Offering, the selling stockholders in the 1995
Offering and the Company agreed to indemnify each other with respect to certain
liabilities, including liabilities under the Securities Act, or to contribute to
payment that such parties may be required to make in respect thereof.
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<PAGE> 80
DESCRIPTION OF THE CREDIT AGREEMENT
As of May 21, 1997, the Company, Phoenix and ASCIL entered into the
Credit Agreement with KeyBank and the lending institutions named therein.
Prior to the Offering, the Credit Agreement provided for (i) a term
loan (the "Term Loan") in the principal amount of $15.0 million and (ii) a
revolving credit facility (the "Revolving Credit Facility") in the aggregate
principal amount of up to $12.0 million (including letter of credit facilities).
Upon completion of the Offering, the Company used the proceeds to repay the Term
Loan and amounts then outstanding under the Revolving Credit Facility. In
connection therewith, the Company's credit facility with KeyBank was converted
into a $27.0 million revolving credit facility (the "New Credit Facility") with
the remaining terms and conditions being similar to the previous revolving
credit facility. In addition, there is a $15 million sublimit on borrowings
under the New Credit Facility for acquisitions, a $7.5 million sublimit on
borrowings under the New Credit Facility by the Company and a $2.0 million
sublimit on borrowings under the New Credit Facility by Phoenix and ASCIL in the
aggregate. The New Credit Facility under the Credit Agreement will mature on May
31, 2002 and is secured by substantially all the assets of the Company.
The New Credit Facility under the Credit Agreement bears interest at
LIBOR plus 1.00% with a commitment fee of 0.25% for any unused portion. The
Credit Agreement also provides for letter of credit fees of not more than 1.25%
of the aggregate face amount of standby and documentary letters of credit under
the Credit Agreement.
The Credit Agreement contains certain restrictive covenants that impose
limitations upon, among other things, the Company's ability to change its
business; merge, consolidate or dispose of assets; incur liens; make loans and
investments; incur indebtedness; pay dividends and other distributions; engage
in certain transactions with affiliates; engage in sale and lease-back
transactions; enter into lease agreements; and make capital expenditures.
The Credit Agreement contains events of default customary for
facilities of its type, including with limitation, the Company's failure to pay
principal, interest, fees or other amounts when due; the Company's breach of any
covenants, representations or warranties; cross-default and cross-acceleration;
bankruptcy, insolvency or similar events involving the Company or its
subsidiaries; the unenforceability of any of the agreements or liens securing
payment of the obligations under the Credit Agreement; and the occurrence or
existence of any event or circumstance which has a material adverse effect upon
the Company as compared with the consolidated financial statements of the
Company as of the end of its fiscal year 1996.
The Company has guaranteed the obligations of Phoenix and ASCIL under
the Credit Agreement. The U.S. subsidiaries of the Company have guaranteed the
obligations of the Borrowers under the Credit Agreement. The Borrowers'
obligations under the Credit Agreement and the U.S. subsidiaries' obligations
under the guarantees are also secured by substantially all of the property of
the Company and its subsidiaries.
DESCRIPTION OF THE EXCHANGE NOTES
The Exchange Notes will be issued as a separate series under the
Indenture. The form and terms of the Exchange Notes are the same as the form and
terms of the Old Notes (which they replace) except that (i) the Exchange Notes
bear a Series B designation and a different CUSIP Number from the Old Notes,
(ii) the Exchange Notes have been registered under the Securities Act and,
therefore, will not bear legends restricting the transfer thereof, and (iii) the
holders of Exchange Notes will not be entitled to certain rights under the
Registration Rights Agreement, including the provisions providing for an
increase in the interest rate on the Old Notes in certain circumstances relating
to the timing of the Exchange Offer, which rights will terminate when the
Exchange Offer is consummated. The following summary of certain provisions of
the Indenture does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the Trust Indenture Act of 1939, as
amended (the "TIA"), and to all of the provisions of the Indenture, including
the definitions of certain terms therein and those terms made a part of the
Indenture by reference to the TIA as in effect on the date of the Indenture. A
copy of the Indenture may be obtained from the Company or the Initial
Purchasers. The definitions of certain capitalized terms used in the following
summary are set forth below under "-- Certain Definitions." For purposes of this
section, references to the "Company" include only the Company and not its
subsidiaries.
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<PAGE> 81
The Old Notes are, and the Exchange Notes will be, unsecured
obligations of the Company, ranking subordinate in right of payment to all
Senior Indebtedness of the Company.
The Exchange Notes will be issued in fully registered form only,
without coupons, in denominations of $1,000 and integral multiples thereof.
Initially, the Trustee will act as Paying Agent ("Paying Agent") and Registrar
for the Old Notes. The Exchange Notes may be presented for registration or
transfer and exchange at the offices of the Registrar, which initially will be
the Trustee's corporate trust office. The Company may change any Paying Agent
and Registrar without notice to holders of the Notes. The Company will pay
principal (and premium, if any) on the notes at the Trustee's corporate office
in New York, New York. At the Company's option, interest may be paid at the
Trustee's corporate trust office or by check mailed to the registered address of
holders. Any Old Notes that remain outstanding after the completion of the
Exchange Offer, together with the Exchange Notes issued in connection with the
Exchange Offer, will be treated as a single class of securities under the
Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $150,000,000.
Old Notes in the aggregate principal amount of $90,000,000 were issued in the
Offering and will mature on July 15, 2007. Additional amounts may be issued in
one or more series from time to time, subject to the limitations set forth under
"Certain Covenants -- Limitation on Incurrence of Additional Indebtness."
Interest on the Exchange Notes will accrue at the rate of 101/8% per annum and
will be payable semiannually in arrears on each January 15 and July 15,
commencing on January 15, 1998, to the persons who are registered holders at the
close of business on the fifteenth day immediately preceding the applicable
interest payment date. Interest on the Exchange Notes will accrue from the Issue
Date.
The Notes will not be entitled to the benefit of any mandatory sinking
fund.
REDEMPTION
Optional Redemption. The Notes will be redeemable, at the Company's
option, in whole at any time or in part from time to time, on and after July 15,
2002, upon not less than 30 nor more than 60 days' notice, at the following
redemption prices (expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period commencing on July 15 of the year set
forth below, plus, in each case, accrued and unpaid interest thereon, if any, to
the date of redemption:
<TABLE>
<CAPTION>
YEAR Percentage
---- ----------
<S> <C>
2002 105.063%
2003 103.797%
2004 102.531%
2005 101.266%
2006 and thereafter 100.000%
</TABLE>
Optional Redemption upon Public Equity Offerings. Notwithstanding the
foregoing, at any time, or from time to time, on or prior to July 15, 2000, the
Company may, at its option, redeem, with the net cash proceeds of one or more
Public Equity Offerings by the Company, up to 25% of the aggregate principal
amount of the Notes originally issued, at a redemption price equal to 110.125%
of the principal amount thereof, plus accrued interest thereon, if any, to the
date of redemption, provided that at least 75% of the aggregate principal amount
of the Notes originally issued remain outstanding immediately following such
redemption. In order to effect the foregoing redemption with the proceeds of any
Public Equity Offering, the Company shall make such redemption not more than 60
days after the consummation of any such Public Equity Offering.
As used herein, "Public Equity Offering" means an underwritten public
offering of Qualified Capital Stock of the Company pursuant to a registration
statement filed with the Commission in accordance with the Securities Act.
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SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any
time, selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which such Notes are listed or, if such Notes are not then listed on
a national securities exchange, on a pro rata basis, by lot or by such method as
the Trustee shall deem fair and appropriate; provided, however, that no Notes of
a principal amount of $1,000 or less shall be redeemed in part; provided
further, however, that if a partial redemption is made with the proceeds of a
Public Equity Offering, selection of the Notes or portions thereof for
redemption shall be made by the Trustee only on a pro rata basis or on as nearly
a pro rata basis as is practicable (subject to DTC procedures), unless such
method is otherwise prohibited. 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 thereof to be
redeemed. A new Note in a principal amount equal to the unredeemed portion
thereof will be issued in the name of the holder thereof upon cancellation of
the original Note. On and after the redemption date, interest will cease to
accrue on Notes or portions thereof called for redemption as long as the Company
has deposited with the Paying Agent funds in satisfaction of the applicable
redemption price pursuant to the Indenture.
SUBORDINATION
The payment of all Obligations on the Old Notes is, and on the Exchange
Notes will be, subordinated in right of payment to the prior payment in full in
cash or Cash Equivalents of all Obligations on Senior Indebtedness whether
outstanding on the Issue Date, or thereafter incurred including, without
limitation, the Company's obligations under the Credit Agreement. Upon any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to creditors upon any liquidation,
dissolution, winding-up, reorganization, assignment for the benefit of creditors
or marshaling of assets of the Company or in a bankruptcy, reorganization,
insolvency, receivership or other similar proceeding relating to the Company or
its property, whether voluntary or involuntary, all Obligations due or to become
due upon all Senior Indebtedness shall first be paid in full in cash or Cash
Equivalents, or such payment duly provided for to the satisfaction of the
holders of Senior Indebtedness, before any payment or distribution of any kind
or character is made on account of any Obligations on the Notes, or for the
acquisition of any of the Notes for cash or property or otherwise. If any
default occurs and is continuing in the payment when due, whether at maturity,
upon any redemption, by declaration or otherwise, of any principal of, interest
on, unpaid drawings for letters of credit issued in respect of, or regularly
accruing fees with respect to, any Senior Indebtedness, no payment of any kind
or character shall be made by or on behalf of the Company or any other Person
(as defined) on its or their behalf with respect to any Obligations on the Notes
or to acquire any of the Notes for cash or property or otherwise.
In addition, if any other event of default occurs and is continuing
with respect to any Designated Senior Indebtedness, as such event of default is
defined in the instrument creating or evidencing such Designated Senior
Indebtedness, permitting the holders of such Designated Senior Indebtedness then
outstanding to accelerate the maturity thereof and if the Representative (as
defined) for the respective issue of Designated Senior Indebtedness gives
written notice of the event of default to the Trustee (a "Default Notice"),
then, unless and until all events of default have been cured or waived or have
ceased to exist or the Trustee receives notice from the Representative for the
respective issue of Designated Senior Indebtedness terminating the Blockage
Period (as defined below), during the 180 days after the delivery of such
Default Notice (the "Blockage Period"), neither the Company nor any other Person
on its behalf shall (x) make any payment of any kind or character with respect
to any Obligations on the Notes or (y) acquire any of the Notes for cash or
property or otherwise. Notwithstanding anything herein to the contrary, in no
event will a Blockage Period extend beyond 180 days from the date the payment on
the Notes was due and only one such Blockage Period may be commenced within any
360 consecutive days. No event of default which existed or was continuing on the
date of the commencement of any Blockage Period with respect to the Designated
Senior Indebtedness shall be, or be made, the basis for commencement of a second
Blockage Period by the Representative of such Designated Senior Indebtedness
whether or not within a period of 360 consecutive days, unless such event of
default shall have been cured or waived for a period of not less than 90
consecutive days (it being acknowledged that any subsequent action, or any
breach of any financial covenants for a period commencing after the date of
commencement of such Blockage Period that, in either case, would give rise to an
event of default pursuant
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to any provisions under which an event of default previously existed or was
continuing shall constitute a new event of default for this purpose).
By reason of such subordination, in the event of the insolvency of the
Company, creditors of the Company who are not holders of Senior Indebtedness,
including the holders of the Notes, may recover less, ratably, than holders of
Senior Indebtedness.
As of March 31, 1997, on a pro forma basis, giving effect to the
Valentec Acquisition and the Offering and the application of the estimated net
proceeds therefrom to consummate the JPS Acquisition and repay the Term Note,
the aggregate amount of Senior Indebtedness outstanding would have been
approximately $17.6 million.
GUARANTEES
Each Guarantor has unconditionally guaranteed, and will unconditionally
guarantee, on a senior subordinated basis, jointly and severally, to each holder
and the Trustee, the full and prompt performance of the Company's obligations
under the Indenture and the Old Notes and Exchange Notes, respectively,
including the payment of principal of and interest on the Old Notes and Exchange
Notes, respectively. The Old Guarantees are, and the New Guarantees will be,
subordinated to Guarantor Senior Indebtedness on the same basis as the Old Notes
are, and the Exchange Notes will be, subordinated to Senior Indebtedness.
The obligations of each Guarantor will be limited to the maximum amount
which, after giving effect to all other contingent and fixed liabilities of such
Guarantor and after giving effect to any collections from or payments made by or
on behalf of any other Guarantor in respect of the obligations of such other
Guarantor under its Guarantee or pursuant to its contribution obligations under
the Indenture, will result in the obligations of such other Guarantor under its
Guarantee not constituting a fraudulent conveyance or fraudulent transfer under
federal or state law. Each Guarantor that makes a payment or distribution under
its Guarantee shall be entitled to a contribution from each other Guarantor in
an amount pro rata, based on the net assets of each Guarantor, determined in
accordance with GAAP.
Each Guarantor may consolidate with or merge into or sell its assets to
the Company or another Guarantor that is a Wholly Owned Restricted Subsidiary
(as defined) without limitation, or with or to the Persons upon the terms and
conditions set forth in the Indenture. See "-- Certain Covenants -- Merger,
Consolidation and Sale of Assets." In the event all of the Capital Stock of a
Guarantor is sold by the Company and/or one or more of its Restricted
Subsidiaries (as defined) and the sale complies with the provisions set forth in
"-- Certain Covenants -- Limitation on Asset Sales," such Guarantor's Guarantee
will be released.
Separate financial statements of the Guarantors are not included herein
because such Guarantors are jointly and severally liable with respect to the
Company's Obligations pursuant to the Notes, but pro forma condensed combined
consolidating financial statements concerning the Company, the Guarantors and
the Company's non-guarantor subsidiaries are included in the notes to the
Financial Statement included herein.
CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control,
each holder will have the right to require that the Company purchase all or a
portion of such holder's Notes pursuant to the offer described below (the
"Change of Control Offer"), at a purchase price equal to 101% of the principal
amount thereof plus accrued and unpaid interest to the date of purchase.
The Indenture provides that, prior to the mailing of the notice
referred to below, but in any event within 30 days following any Change of
Control, the Company covenants to (i) repay in full all indebtedness, and
terminate all commitments, under the Credit Agreement and all other Senior
Indebtedness the terms of which require repayment upon a Change of Control or
offer to repay in full all indebtedness, and terminate all commitments, under
the Credit Agreement and all other such Senior Indebtedness and to repay the
Indebtedness owed to each lender which has accepted such offer or (ii) obtain
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the requisite consents under the Credit Agreement and all other Senior
Indebtedness to permit the repurchase of the Notes as provided below. The
Company shall first comply with the covenant in the immediately preceding
sentence before it shall be required to repurchase Notes pursuant to the
provisions described below. The Company's failure to comply with the immediately
preceding sentence shall be governed by clause (iii), and not clause (iv), of
"Events of Default" below.
Within 30 days following the date upon which a Change of Control
occurs, the Company must send, by first class mail, a notice to each holder at
such holder's last registered address, with a copy to the Trustee, which notice
shall govern the terms of the Change of Control Offer. Such notice shall state,
among other things, the purchase date, which must be no earlier than 30 days nor
later than 45 days from the date such notice is mailed, other than as may be
required by law (the "Change of Control Payment Date"). Holders electing to have
a Note purchased pursuant to a Change of Control Offer will be required to
surrender the Note, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Note completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the third business day
prior to the Change of Control Payment Date.
If a Change of Control Offer is made, there can be no assurance that
the Company will have available funds sufficient to pay the Change of Control
purchase price for all the Notes that might be delivered by holders seeking to
accept the Change of Control Offer. In the event the Company is required to
purchase outstanding Notes pursuant to a Change of Control Offer, the Company
expects that it would need to seek third party financing to the extent it does
not have available funds to meet its purchase obligations. However, there can be
no assurance that the Company would be able to obtain any such financing.
Neither the Board of Directors of the Company nor the Trustee may waive
the covenant relating to a holder's right to repurchase upon a Change of
Control. Restrictions in the Indenture described herein on the ability of the
Company and its Restricted Subsidiaries to incur additional Indebtedness, to
grant liens on its property, to make Restricted Payments and to make Asset Sales
may also make more difficult or discourage a takeover of the Company, whether
favored or opposed by the management of the Company. Consummation of any such
transaction in certain circumstances may require redemption or repurchase of the
Notes, and there can be no assurance that the Company or the acquiring party
will have sufficient financial resources to effect such redemption or
repurchase. Such restrictions and the restrictions on transactions with
Affiliates may, in certain circumstances, make more difficult or discourage any
leveraged buyout of the Company or any of its Subsidiaries by the management of
the Company. While such restrictions cover a wide variety of arrangements which
have traditionally been used to effect highly leveraged transactions, the
Indenture may not afford the holders of Notes protection in all circumstances
from the adverse aspects of a highly leveraged transaction, reorganization,
restructuring, merger or similar transaction.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Change of Control" provisions of the
Indenture by virtue thereof.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness. The Company will
not, and will not cause or permit any of its Restricted Subsidiaries to,
directly or indirectly, create, incur, assume, guarantee, acquire, become
liable, contingently or otherwise, with respect to, or otherwise become
responsible for payment of (collectively, "incur"), any Indebtedness (including,
without limitation, Acquired Indebtedness (as defined)) other than Permitted
Indebtedness (as defined). Notwithstanding the foregoing, if no Default or Event
of Default shall have occurred and be continuing at the time of or as a
consequence of the incurrence of any such Indebtedness, the Company and the
Restricted Subsidiaries may incur Indebtedness (including, without limitation,
Acquired Indebtedness) if on the date of the incurrence of such Indebtedness,
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after giving effect to the incurrence thereof, the Consolidated Fixed Charge
Coverage Ratio (as defined) of the Company is greater than 2.25 to 1.0. No
Indebtedness incurred pursuant to the next preceding sentence shall be included
in calculating any limitation set forth in the definition of Permitted
Indebtedness. Upon the repayment of Indebtedness which may have been incurred
pursuant to more than one provision of this Indenture, the Company may, in its
sole discretion, designate which provision such Indebtedness shall have been
incurred under.
Limitation on Restricted Payments. The Company will not, and will not
cause or permit any of its Restricted Subsidiaries to, directly or indirectly,
(a) declare or pay any dividend or make any distribution (other than dividends
or distributions made to the Company or any Restricted Subsidiary of the Company
and other than any dividend or distribution payable solely in Qualified Capital
Stock of the Company) on or in respect of shares of the Company's Capital Stock
to holders of such Capital Stock; (b) purchase, redeem or otherwise acquire or
retire for value any Capital Stock of the Company or any warrants, rights or
options to purchase or acquire shares of any class of such Capital Stock (other
than the exchange of such Capital Stock or any warrants, rights or options to
acquire shares of any class of Capital Stock of the Company for Qualified
Capital Stock of the Company); (c) other than repayments by any Subsidiary
Guarantor or the Company or repayments from the Company to VIL with respect to
the VIL Note, make any principal payment on, purchase, defease, redeem, prepay,
decrease or otherwise acquire or retire for value, prior to any scheduled final
maturity, scheduled repayment or scheduled sinking fund payment, any
Indebtedness of the Company or a Subsidiary Guarantor that is subordinate or
junior in right of payment to the Notes or such Subsidiary Guarantor's
Guarantee; or (d) make any Investment (other than Permitted Investments) (each
of the foregoing actions set forth in clauses (a), (b), (c) and (d) being
referred to as a "Restricted Payment"), if at the time of such Restricted
Payment or immediately after giving effect thereto, (i) a Default or an Event of
Default shall have occurred and be continuing, or (ii) the Company is not able
to incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) in compliance with the "Limitation on Incurrence of Additional
Indebtedness" covenant above, or (iii) the aggregate amount of all Restricted
Payments (including such proposed Restricted Payment) made subsequent to the
Issue Date (the amount expended for such purposes, if other than in cash, being
the fair market value of such property as determined reasonably and in good
faith by the Board of Directors of the Company) shall exceed the sum of: (v) 50%
of the cumulative Consolidated Net Income (or if cumulative Consolidated Net
Income shall be a loss, minus 100% of such loss) of the Company earned during
the period beginning on the first day of the fiscal quarter including the Issue
Date and ending on the last day of the fiscal quarter ending at least 30 days
prior to the date the Restricted Payment occurs (the "Reference Date") (treating
such period as a single accounting period); plus (w) 100% of the aggregate net
proceeds (including the fair market value of any business or property other than
cash) received by the Company from any Person (other than a Subsidiary of the
Company) from the issuance and sale subsequent to the Issue Date and on or prior
to the Reference Date of Qualified Capital Stock of the Company, including
treasury stock; plus (x) without duplication of any amounts included in clause
(iii)(w) above, 100% of the aggregate net cash proceeds of any equity
contribution received by the Company from a holder of the Company's Capital
Stock (excluding, in the case of clauses (iii)(w) and (x), any net cash proceeds
from a Public Equity Offering to the extent used to redeem the Notes); plus (y)
an amount equal to the net reduction in Investments in Unrestricted Subsidiaries
resulting from dividends, interest payments, repayments of loans or advances, or
other transfers of cash, in each case, to the Company or to any Restricted
Subsidiary of the Company from Unrestricted Subsidiaries (but without
duplication of any such amount included in cumulative Consolidated Net Income of
the Company), or from redesignations of Unrestricted Subsidiaries as Restricted
Subsidiaries (in each case valued as provided in "-- Limitation on Restricted
and Unrestricted Subsidiaries" below), not to exceed, in the case of an
Unrestricted Subsidiary, the amount of Investments previously made by the
Company or any Restricted Subsidiary of the Company in such Unrestricted
Subsidiary and which were treated as a Restricted Payment under the Indenture;
plus (z) an amount which, when aggregated with Investments made under clause
(viii) of the definition of "Permitted Investments," does not exceed $5.0
million.
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph shall not prohibit: (1) the payment of any
dividend or consummation of irrevocable redemption within 60 days after the date
of declaration of such dividend or giving of irrevocable redemption notice if
the dividend or redemption would have been permitted on the date of declaration
or giving of irrevocable redemption notice; (2) if no Default or Event of
Default shall have occurred and be continuing, the acquisition of any shares of
Capital Stock of the Company, either (i) solely in exchange for shares of
Qualified Capital Stock of the Company or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a Subsidiary
of the Company) of shares of Qualified Capital Stock of the Company; (3) if no
Default or Event of Default shall have occurred and be continuing, the
acquisition of any Indebtedness of the Company that is
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subordinate or junior in right of payment to the Notes either (i) solely in
exchange for shares of Qualified Capital Stock of the Company, or (ii) through
the application of net proceeds of a substantially concurrent sale for cash
(other than to a Subsidiary of the Company) of (A) shares of Qualified Capital
Stock of the Company or (B) Refinancing Indebtedness; (4) if no Default or Event
of Default shall have occurred and be continuing, repurchases of Capital Stock
deemed to occur upon the exercise of stock options if such Capital Stock
represents a portion of the exercise price thereof; (5) if no Default or Event
of Default shall have occurred and be continuing, payments by the Company to
repurchase Capital Stock or other securities of the Company from directors,
officers and other employees of the Company or any of its Restricted
Subsidiaries in an aggregate amount not to exceed in any one calendar year the
sum of (A) $500,000 and (B) any amounts permitted to have been paid in any
preceding calendar years under subclause (A) above to the extent such amounts
were not so paid in any such prior calendar years; provided that such payments
shall not exceed $3.0 million in the aggregate; (6) if no Default or Event of
Default shall have occurred and be continuing, payments by the Company to
repurchase Qualified Capital Stock or other securities of the Company for
purposes of making contributions of Qualified Capital Stock of the Company to
employees of the Company pursuant to a qualified retirement plan of the Company
or any of its Subsidiaries; and (7) if no Default or Event of Default shall have
occurred and be continuing, payments by the Company to repurchase Qualified
Capital Stock of the Company in connection with a substantially concurrent
transaction in which the Company reissues such repurchased Qualified Capital
Stock as all or a part of the consideration for the acquisition of property or
assets; provided, however, that such acquisition is consummated within 180 days
of such repurchase. In determining the aggregate amount of Restricted Payments
made subsequent to the Issue Date in accordance with clause (iii) of the
immediately preceding paragraph, amounts expended pursuant to clauses (1),
(2)(ii), (3)(ii)(A) and (7) (to the extent that the value of the Qualified
Capital Stock reissued shall have been included in clause (iii)(w) of the
preceding paragraph) shall be included in such calculation.
Limitation on Restricted and Unrestricted Subsidiaries. The Board of
Directors of the Company may, if no Default or Event of Default shall have
occurred and be continuing or would arise therefrom, designate an Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, however, that (i) any such
redesignation shall be deemed to be an incurrence as of the date of such
redesignation by the Company and its Restricted Subsidiaries of the Indebtedness
(if any) of such redesignated Subsidiary for purposes of "-- Limitation on
Incurrence of Additional Indebtedness" above, and (ii) unless such redesignated
Subsidiary shall not have any Indebtedness outstanding (other than Permitted
Indebtedness), no such designation shall be permitted if immediately after
giving effect to such redesignation and the incurrence of any such additional
Indebtedness, the Company could not incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to "-- Limitation on Incurrence of
Additional Indebtedness" above.
The Board of Directors of the Company also may, if no Default or Event
of Default shall have occurred and be continuing or would arise therefrom,
designate any Restricted Subsidiary to be an Unrestricted Subsidiary if (i) such
designation is at that time permitted under "-- Limitation on Restricted
Payments" above and (ii) immediately after giving effect to such designation,
the Company could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to "-- Limitation of Incurrence of Additional
Indebtedness" above. Any such designation by the Board of Directors of the
Company shall be evidenced to the Trustee by the filing with the Trustee of a
certified copy of the resolution of the Board of Directors of the Company giving
effect to such designation or redesignation and an officers' certificate
certifying that such designation or redesignation complied with the foregoing
conditions and setting forth in reasonable detail the underlying calculations.
The Indenture provides that for purposes of the covenant described
under "-- Limitation on Restricted Payments" above, (i) an "Investment" shall be
deemed to have been made at the time any Restricted Subsidiary of the Company is
designated as an Unrestricted Subsidiary in an amount (proportionate to the
Company's equity interest in such Subsidiary) equal to the net worth of such
Restricted Subsidiary at the time that such Restricted Subsidiary is designated
as an Unrestricted Subsidiary; (ii) at any date, the aggregate amount of all
Restricted Payments made as Investments since the Issue Date shall exclude and
be reduced by an amount (proportionate to the Company's equity interest in such
Subsidiary) equal to the net worth of any Unrestricted Subsidiary at the time
that such Unrestricted Subsidiary is designated as a Restricted Subsidiary, not
to exceed, in the case of any such redesignation of an Unrestricted Subsidiary
as a Restricted Subsidiary, the amount of Investments previously made by the
Company and its Restricted Subsidiaries in such Unrestricted Subsidiary (in each
case (i) and (ii), "net worth" is to be calculated based upon the fair market
value of the assets of such Subsidiary as of
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any such date of designation); and (iii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the time of
such transfer.
The Indenture provides that notwithstanding the foregoing, the Board of
Directors of the Company may not designate any Restricted Subsidiary of the
Company to be an Unrestricted Subsidiary if, after any such designation, (a) the
Company or any Restricted Subsidiary of the Company (i) provides credit support
for, or a guarantee of, any Indebtedness of such Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness) or (ii) is
directly or indirectly liable for any Indebtedness of such Subsidiary or (b)
such Subsidiary owns any Capital Stock of, or holds any Lien on any property of,
the Company or any Restricted Subsidiary of the Company which is not a
Subsidiary of the Subsidiary to be so designated.
The Indenture provides that Subsidiaries of the Company that are not
designated by the Board of Directors of the Company as Restricted or
Unrestricted Subsidiaries will be deemed to be Restricted Subsidiaries of the
Company. Notwithstanding the foregoing, all Subsidiaries of an Unrestricted
Subsidiary will be Unrestricted Subsidiaries.
Limitation on Asset Sales. The Company will not, and will not cause or
permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless
(i) the Company or the applicable Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the fair
market value of the assets sold or otherwise disposed of (as determined in good
faith by the Company's Board of Directors), (ii) at least 75% of the
consideration received by the Company or the Restricted Subsidiary, as the case
may be, from such Asset Sale shall be in the form of cash or Cash Equivalents
and is received at the time of such disposition; and (iii) upon the consummation
of an Asset Sale, the Company shall apply, or cause such Restricted Subsidiary
to apply, the Net Cash Proceeds relating to such Asset Sale within 360 days of
receipt thereof either (A) to prepay any Senior Indebtedness and, in the case of
any Senior Indebtedness under any revolving credit facility, effect a permanent
reduction in the commitment available under such revolving credit facility, (B)
to make an investment in properties and assets that replace the properties and
assets that were the subject of such Asset Sale or in properties and assets that
will be used in the business of the Company and its Restricted Subsidiaries as
existing on the Issue Date or in businesses reasonably related or complementary
thereto (as determined in good faith by the Company's Board of Directors)
("Replacement Assets"), or (C) a combination of prepayment and investment
permitted by the foregoing clauses (iii)(A) and (iii)(B). Pending final
application, the Company or the applicable Restricted Subsidiary may temporarily
reduce Indebtedness under any revolving credit facility or invest in cash or
Cash Equivalents. On the 361st day after an Asset Sale or such earlier date, if
any, as the Board of Directors of the Company or of such Restricted Subsidiary
determines not to apply the Net Cash Proceeds relating to such Asset Sale as set
forth in clauses (iii)(A), (iii)(B) and (iii)(C) of the next preceding sentence
(each, a "Net Proceeds Offer Trigger Date"), such aggregate amount of Net Cash
Proceeds which have not been applied on or before such Net Proceeds Offer
Trigger Date as permitted in clauses (iii)(A), (iii)(B) and (iii)(C) of the next
preceding sentence (each, a "Net Proceeds Offer Amount") shall be applied by the
Company or such Restricted Subsidiary to make an offer to purchase (the "Net
Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date") not less than
30 nor more than 45 days following the applicable Net Proceeds Offer Trigger
Date, from all Holders on a pro rata basis, that amount of Notes equal to the
Net Proceeds Offer Amount at a price equal to 100% of the principal amount of
the Notes to be purchased, plus accrued and unpaid interest thereon, if any, to
the date of purchase; provided, however, that if at any time any non-cash
consideration received by the Company or any Restricted Subsidiary of the
Company, as the case may be, in connection with any Asset Sale is converted into
or sold or otherwise disposed of for cash (other than interest received with
respect to any such non-cash consideration), then such conversion or disposition
shall be deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds
thereof shall be applied in accordance with this covenant. The Company or any
such Restricted Subsidiary of the Company, as the case may be, may defer the Net
Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer Amount
equal to or in excess of $5.0 million resulting from one or more Asset Sales (at
which time, the entire unutilized Net Proceeds Offer Amount, and not just the
amount in excess of $5.0 million, shall be applied as required pursuant to this
paragraph).
Notwithstanding the immediately preceding paragraph, the Company and
its Restricted Subsidiaries will be permitted to consummate an Asset Sale
without complying with such paragraph to the extent (i) at least 75% of the
consideration for such Asset Sale constitutes Replacement Assets and/or Cash
Equivalents and (ii) such Asset Sale is for fair market value; provided,
however, that any consideration not constituting Replacement Assets received by
the Company
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or any of its Restricted Subsidiaries in connection with any Asset Sale
permitted to be consummated under this paragraph shall constitute Net Cash
Proceeds subject to the provisions of the preceding paragraph.
Notice of each Net Proceeds Offer will be mailed to the record Holders
as shown on the register of Holders within 25 days following the Net Proceeds
Offer Trigger Date, with a copy to the Trustee, and shall comply with the
procedures set forth in the Indenture. Upon receiving notice of the Net Proceeds
Offer, Holders may elect to tender their Notes in whole or in part in integral
multiples of $1,000 in exchange for cash. To the extent Holders properly tender
Notes in an amount exceeding the Net Proceeds Offer Amount, Notes of tendering
Holders will be purchased on a pro rata basis (based on amounts tendered). A Net
Proceeds Offer shall remain open for a period of 20 business days or such longer
period as may be required by law. To the extent the amount of Notes tendered is
less than the offer amount, the Company may use the remaining Net Proceeds Offer
Amount for general corporate purposes and such Net Proceeds Offer Amount shall
be reset to zero.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset Sale"
provisions of the Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the "Asset Sale" provisions of the Indenture by virtue
thereof.
Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries. The Company will not, and will not cause or permit any
of its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or permit to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary of the Company to (a) pay dividends or
make any other distributions on or in respect of its Capital Stock; (b) make
loans or advances or to pay any Indebtedness or other obligation owed to the
Company or any other Restricted Subsidiary of the Company; or (c) transfer any
of its property or assets to the Company or any other Restricted Subsidiary of
the Company, except for such encumbrances or restrictions existing under or by
reason of: (1) applicable law; (2) the Indenture; (3) the Credit Agreement; (4)
non-assignment provisions of any contract or any lease governing a leasehold
interest of any Restricted Subsidiary of the Company; (5) any instrument
governing Acquired Indebtedness, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person or the properties or assets of the Person so acquired; (6) agreements
existing on the Issue Date to the extent and in the manner such agreements are
in effect on the Issue Date; or (7) an agreement governing Indebtedness incurred
to Refinance the Indebtedness issued, assumed or incurred pursuant to an
agreement referred to in clause (2), (3), (5) or (6) above; provided, however,
that the provisions relating to such encumbrance or restriction contained in any
such Indebtedness are no less favorable to the Company in any material respect
as determined by the Board of Directors of the Company in their reasonable and
good faith judgment than the provisions relating to such encumbrance or
restriction contained in agreements referred to in such clause (2), (3), (5) or
(6), respectively.
Limitation on Preferred Stock of Restricted Subsidiaries. The Company
will not permit any of its Restricted Subsidiaries to issue any Preferred Stock
(other than to the Company or to a Wholly Owned Restricted Subsidiary of the
Company) or permit any Person (other than the Company or a Wholly Owned
Restricted Subsidiary of the Company) to own any Preferred Stock of any
Restricted Subsidiary of the Company.
Limitation on Liens. The Company will not, and will not cause or permit
any of its Restricted Subsidiaries to, directly or indirectly, create, incur,
assume or permit or suffer to exist any Liens of any kind against or upon any
property or assets of the Company or any of its Restricted Subsidiaries (whether
owned on the Issue Date or acquired after the Issue Date), or any proceeds
therefrom, or assign or otherwise convey any right to receive income or profits
therefrom unless (i) in the case of Liens securing Indebtedness that is
expressly subordinate or junior in right of payment to the Notes or any
Guarantee, the Notes and such Guarantee, as the case may be, are secured by a
Lien on such property, assets or proceeds that is senior in priority to such
Liens and (ii) in all other cases, the Notes and the Guarantees are equally and
ratably secured, except for (A) Liens existing as of the Issue Date to the
extent and in the manner such Liens are in effect on the Issue Date; (B) Liens
securing Senior Indebtedness; (C) Liens securing the Notes and the Guarantees;
(D) Liens of the Company or a Wholly Owned Restricted Subsidiary of the Company
on assets of any Restricted Subsidiary of the Company; (E) Liens
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securing Refinancing Indebtedness which is incurred to Refinance any
Indebtedness which has been secured by a Lien permitted under the Indenture and
which has been incurred in accordance with the provisions of the Indenture;
provided, however, that such Liens (1) are no less favorable to the Holders and
are not more favorable to the lienholders with respect to such Liens than the
Liens in respect of the Indebtedness being Refinanced and (2) do not extend to
or cover any property or assets of the Company or any of its Subsidiaries not
securing the Indebtedness so Refinanced (other than property or assets subject
to Liens under clause (B) above); and (F) Permitted Liens.
Prohibition on Incurrence of Senior Subordinated Debt. The Company will
not, and will not permit any Subsidiary Guarantor to, incur or suffer to exist
Indebtedness that by its terms (or by the terms of any agreement governing such
Indebtedness) is senior in right of payment to the Notes and subordinate in
right of payment to any other Indebtedness of the Company or such Subsidiary
Guarantor, as the case may be.
Merger, Consolidation and Sale of Assets. The Company will not, in a
single transaction or series of related transactions, consolidate or merge with
or into any Person, or sell, assign, transfer, lease, convey or otherwise
dispose of (or cause or permit any Restricted Subsidiary of the Company to sell,
assign, transfer, lease, convey or otherwise dispose of) all or substantially
all of the Company's assets (determined on a consolidated basis for the Company
and its Restricted Subsidiaries) unless: (i) either (1) the Company shall be the
surviving or continuing corporation or (2) the Person (if other than the
Company) formed by such consolidation or into which the Company is merged or the
Person which acquires by sale, assignment, transfer, lease, conveyance or other
disposition the properties and assets of the Company and its Restricted
Subsidiaries substantially as an entirety (the "Surviving Entity") (x) shall be
a corporation organized and validly existing under the laws of the United States
or any State thereof or the District of Columbia and (y) shall expressly assume,
by supplemental indenture (in form and substance satisfactory to the Trustee),
executed and delivered to the Trustee, the due and punctual payment of the
principal of, premium, if any, and interest on all of the Notes and the
performance of every covenant of the Notes, the Indenture and the Registration
Rights Agreement on the part of the Company to be performed or observed, as the
case may be; (ii) immediately after giving effect to such transaction and the
assumption contemplated by clause (i)(2)(y) above (including giving effect to
any Indebtedness and Acquired Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction), the Company or
such Surviving Entity, as the case may be, (1) shall have a Consolidated Net
Worth equal to or greater than the Consolidated Net Worth of the Company
immediately prior to such transaction and (2) shall be able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to
the "-- Limitation on Incurrence of Additional Indebtedness" covenant; (iii)
immediately before and immediately after giving effect to such transaction and
the assumption contemplated by clause (i)(2)(y) above (including, without
limitation, giving effect to any Indebtedness and Acquired Indebtedness incurred
or anticipated to be incurred and any Lien granted in connection with or in
respect of the transaction), no Default or Event of Default shall have occurred
or be continuing; and (iv) the Company or the Surviving Entity, as the case may
be, shall have delivered to the Trustee an officer's certificate and an opinion
of counsel, each stating that such consolidation, merger, sale, assignment,
transfer, lease, conveyance or other disposition and, if a supplemental
indenture is required in connection with such transaction, such supplemental
indenture comply with the applicable provisions of the Indenture and that all
conditions precedent in the Indenture relating to such transaction have been
satisfied.
For purposes of the foregoing, the transfer (by lease, assignment, sale
or otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of the Company the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company shall be deemed to
be the transfer of all or substantially all of the properties and assets of the
Company.
The Indenture provides that upon any consolidation, combination or
merger or any transfer of all or substantially all of the assets of the Company
in accordance with the foregoing, in which the Company is not the continuing
corporation, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, lease or transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture and the Notes with the same effect as if such
surviving entity had been named as such.
Each Subsidiary Guarantor (other than any Subsidiary Guarantor whose
Guarantee is to be released in accordance with the terms of the Guarantee and
the Indenture in connection with any transaction complying with the provisions
of the
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Indenture described under "-- Limitation on Asset Sales") will not, and the
Company will not cause or permit any Subsidiary Guarantor to, consolidate with
or merge with or into any Person other than the Company or another Subsidiary
Guarantor that is a Wholly Owned Restricted Subsidiary unless: (a) the entity
formed by or surviving any such consolidation or merger (if other than the
Subsidiary Guarantor) or to which such sale, lease, conveyance or other
disposition shall have been made is a corporation organized and existing under
the laws of the United States or any state thereof or the District of Columbia;
(b) such entity assumes by execution of a supplemental indenture all of the
obligations of the Subsidiary Guarantor under its Guarantee; (c) immediately
after giving effect to such transaction, no Default or Event of Default shall
have occurred and be continuing; and (d) immediately after giving effect to such
transaction and the use of any net proceeds therefrom on a pro forma basis, the
Company could satisfy the provisions of clause (ii) of the first paragraph of
this covenant. Any merger or consolidation of a Subsidiary Guarantor with and
into the Company (with the Company being the surviving entity) or another
Subsidiary Guarantor that is a Wholly Owned Restricted Subsidiary need only
comply with clause (iv) of the first paragraph of this covenant.
Limitations on Transactions with Affiliates. (a) The Company will not,
and will not cause or permit any of its Restricted Subsidiaries to, directly or
indirectly, enter into or permit to exist any transaction or series of related
transactions (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with, or for the
benefit of, any of its Affiliates (each an "Affiliate Transaction"), other than
(x) Affiliate Transactions permitted under paragraph (b) below and (y) Affiliate
Transactions on terms that are no less favorable to the Company than those that
might reasonably have been obtained or are obtainable in a comparable
transaction at such time on an arm's-length basis from a Person that is not an
Affiliate of the Company or such Restricted Subsidiary. All Affiliate
Transactions (and each series of related Affiliate Transactions which are
similar or part of a common plan) involving aggregate payments or other property
with a fair market value in excess of $5.0 million shall be approved by the
Board of Directors of the Company or such Restricted Subsidiary, as the case may
be, such approval to be evidenced by a Board Resolution stating that such Board
of Directors has determined that such transaction complies with the foregoing
provisions. If the Company or any Restricted Subsidiary of the Company enters
into an Affiliate Transaction (or a series of related Affiliate Transactions
related to a common plan) involving aggregate payments or other property with a
fair market value in excess of $10.0 million, the Company or such Restricted
Subsidiary, as the case may be, shall, prior to the consummation thereof, obtain
a favorable opinion as to the fairness of such transaction or series of related
transactions to the Company or the relevant Restricted Subsidiary, as the case
may be, from a financial point of view, from an Independent Financial Advisor
and file the same with the Trustee.
(b) The restrictions set forth in clause (a) shall not apply to (i)
reasonable fees and compensation paid to and indemnity provided on behalf of,
officers, directors, employees, consultants or agents of the Company or any
Restricted Subsidiary of the Company as determined in good faith by the
Company's Board of Directors or senior management; (ii) transactions between or
among the Company and any of its Wholly Owned Restricted Subsidiaries or between
or among such Wholly Owned Restricted Subsidiaries or between the Company and/or
any Wholly Owned Restricted Subsidiary and Automotive Safety Components
Asia-Pacific Ltd., provided such transactions are not otherwise prohibited by
the Indenture; (iii) any agreement as in effect as of the Issue Date or any
amendment thereto or any transaction contemplated thereby (including pursuant to
any amendment thereto) or in any replacement agreement thereto so long as any
such amendment or replacement agreement is not more disadvantageous to the
Holders in any material respect than the original agreement as in effect on the
Issue Date; and (iv) Restricted Payments permitted by the Indenture.
Additional Subsidiary Guarantees. If the Company or any of its
Restricted Subsidiaries transfers or causes to be transferred, in one
transaction or a series of related transactions, any property to any Restricted
Subsidiary that is not a Subsidiary Guarantor or a Foreign Subsidiary, or if the
Company or any of its Restricted Subsidiaries shall organize, acquire or
otherwise invest in another Restricted Subsidiary that is not a Foreign
Subsidiary, then such transferee or acquired or other Restricted Subsidiary
shall (a) execute and deliver to the Trustee a supplemental indenture in form
reasonably satisfactory to the Trustee pursuant to which such Restricted
Subsidiary shall unconditionally guarantee all of the Company's obligations
under the Notes and the Indenture on the terms set forth in the Indenture and
(b) deliver to the Trustee an opinion of counsel stating that such supplemental
indenture has been duly authorized, executed and delivered by such Restricted
Subsidiary and constitutes a legal, valid, binding and enforceable obligation of
such Restricted Subsidiary; provided, however that any Restricted Subsidiary
acquired on or after the Issue Date which is prohibited from entering into a
Guarantee pursuant to
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restrictions contained in any debt instrument or other agreement in existence at
the time such Restricted Subsidiary was so acquired and was not entered into in
anticipation or contemplation of such acquisition shall not be required to
become a Subsidiary Guarantor so long as any such restriction is in existence
and to the extent of such restriction. After the execution and delivery of such
supplemental indenture, such Restricted Subsidiary shall be a Subsidiary
Guarantor for all purposes of the Indenture.
Conduct of Business. The Company will not, and will not cause or permit
any of its Restricted Subsidiaries to, engage in any businesses other than the
businesses in which the Company is engaged on the Issue Date, giving effect to
the JPS Acquisition, and any businesses reasonably related or complementary
thereto (as determined in good faith by the Company's Board of Directors).
Reports to Holders. The Company will deliver to the Trustee within 15
days after the filing of the same with the Commission, copies of the quarterly
and annual reports and of the information, documents and other reports, if any,
which the Company is required to file with the Commission pursuant to Section 13
or 15(d) of the Exchange Act. Notwithstanding that the Company may not be
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company will file with the Commission, to the extent permitted, and
provide the Trustee and the Holders with such annual reports and such
information, documents and other reports specified in Sections 13 and 15(d) of
the Exchange Act. The Company will also comply with the other provisions of
314(a) of the TIA.
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of
Default":
(i) the failure to pay interest (including Additional
Interest, if any) on any Notes when the same becomes due and payable
and the default continues for a period of 30 days (whether or not such
payment shall be prohibited by the subordination provisions of the
Indenture);
(ii) the failure to pay the principal on any Notes, when such
principal becomes due and payable, at maturity, upon acceleration, upon
redemption or otherwise (including the failure to make a payment to
purchase Notes tendered pursuant to a Change of Control Offer or a Net
Proceeds Offer) (whether or not such payment shall be prohibited by the
subordination provisions of the Indenture);
(iii) a default in the observance or performance of any other
covenant or agreement contained in the Indenture which default
continues for a period of 30 days after the Company receives written
notice specifying the default (and demanding that such default be
remedied) from the Trustee or the Holders of at least 25% of the
outstanding principal amount of the Notes (except in the case of a
default with respect to the "Merger, Consolidation and Sale of Assets"
covenant, which will constitute an Event of Default with such notice
requirement but without such passage of time requirement);
(iv) the failure to pay at final maturity (giving effect to
any applicable grace periods and any extensions thereof) the principal
amount of any Indebtedness of the Company or any Restricted Subsidiary
of the Company, or the acceleration of the final stated maturity of any
such Indebtedness if the aggregate principal amount of such
Indebtedness, together with the principal amount of any other such
Indebtedness in default for failure to pay principal at final maturity
or which has been accelerated, aggregates $5.0 million or more at any
time;
(v) one or more judgments in an aggregate amount in excess of
$5.0 million shall have been rendered against the Company or any of its
Subsidiaries and such judgments remain undischarged, unpaid or unstayed
for a period of 60 days after such judgment or judgments become final
and non-appealable;
(vi) certain events of bankruptcy affecting the Company or any
of its Significant Subsidiaries;
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(vii) any of the Guarantees cease to be in full force and
effect or any of the Guarantees are declared to be null and void or
invalid and unenforceable or any of the Subsidiary Guarantors denies or
disaffirms its liability under its Guarantees (other than by reason of
release of a Subsidiary Guarantor in accordance with the terms of the
Indenture).
If an Event of Default (other than an Event of Default specified in
clause (vi) above) shall occur and be continuing, the Trustee or the Holders of
at least 25% in principal amount of outstanding Notes may declare the principal
of and accrued interest on all the Notes to be due and payable by notice in
writing to the Company and the Trustee specifying the respective Event of
Default and that it is a "notice of acceleration" (the "Acceleration Notice"),
and the same shall become immediately due and payable. If an Event of Default
specified in clause (vi) above occurs and is continuing, then all unpaid
principal of, and premium, if any, and accrued and unpaid interest on all of the
outstanding Notes shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any Holder.
The Indenture provides that, at any time after a declaration of
acceleration with respect to the Notes as described in the preceding paragraph,
the Holders of a majority in aggregate principal amount of the Notes may rescind
and cancel such declaration and its consequences (i) if the rescission would not
conflict with any judgment or decree, (ii) if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of such acceleration, (iii) to the extent the payment
of such interest is lawful, interest on overdue installments of interest and
overdue principal, which has become due otherwise than by such declaration of
acceleration, has been paid, (iv) if the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of an
Event of Default of the type described in clause (vi) of the description above
of Events of Default, the Trustee shall have received an officers' certificate
and an opinion of counsel that such Event of Default has been cured or waived.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto.
The Holders of a majority in aggregate principal amount of the Notes
may waive any existing Default or Event of Default under the Indenture, and its
consequences, except a default in the payment of the principal of or interest on
any Notes.
Holders of the Notes may not enforce the Indenture or the Notes except
as provided in the Indenture and under the TIA. Subject to the provisions of the
Indenture relating to the duties of the Trustee, the Trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the Holders, unless such Holders have
offered to the Trustee reasonable indemnity. Subject to all provisions of the
Indenture and applicable law, the Holders of a majority in aggregate principal
amount of the then outstanding Notes have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee.
Under the Indenture, the Company is required to provide an officers'
certificate to the Trustee promptly upon any such officer obtaining knowledge of
any Default or Event of Default (provided that such officers shall provide such
certification at least annually whether or not they know of any Default or Event
of Default) that has occurred and, if applicable, describe such Default or Event
of Default and the status thereof.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations and the corresponding obligations of the Subsidiary Guarantors
discharged with respect to the outstanding Notes ("Legal Defeasance"). Such
Legal Defeasance means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by the outstanding Notes, except
for (i) the rights of Holders to receive payments in respect of the principal
of, premium, if any, and interest on the Notes when such payments are due, (ii)
the Company's obligations with respect to the Notes concerning issuing temporary
Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payments, (iii) the rights, powers,
trust, duties and immunities of the Trustee and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company and the Subsidiary Guarantors, if any, released with
respect to certain
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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 non-payment, bankruptcy,
receivership, reorganization and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance,
(i) the Company must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders cash in United States dollars, non-callable United States
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, to pay the principal of, premium, if any, and interest on the Notes
on the stated date for payment thereof or on the applicable redemption date, as
the case may be; (ii) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling or (B) since
the date of the Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon such
opinion of counsel shall confirm that, the Holders 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; provided, however, such opinion of counsel will not
be required if all the Notes will become due and payable on the maturity date
within one year or are to be called for redemption within one year under
arrangements satisfactory to the Trustee; (iii) in the case of Covenant
Defeasance, the Company shall have delivered to the Trustee an opinion of
counsel in the United States reasonably acceptable to the Trustee confirming
that the Holders 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 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 (other than a Default or Event of Default resulting from the
incurrence of Indebtedness all or a portion of the proceeds of which will be
used to defease the Notes); (v) such Legal Defeasance or Covenant Defeasance
shall not result in a breach or violation of, or constitute a default under, the
Indenture or any other material agreement or instrument to which the Company or
any of its Restricted Subsidiaries is a party or by which the Company or any of
its Restricted Subsidiaries is bound; (vi) the Company shall have delivered to
the Trustee an officers' certificate stating that the deposit was not made by
the Company with the intent of preferring the Holders over any other creditors
of the Company or with the intent of defeating, hindering, delaying or
defrauding any other creditors of the Company or others; (vii) the Company shall
have delivered to the Trustee an officers' certificate and an opinion of
counsel, each stating that all conditions precedent provided for or relating to
the Legal Defeasance or the Covenant Defeasance, as the case may be, have been
complied with; (viii) the Company shall have delivered to the Trustee an opinion
of counsel to the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; and (ix) certain other customary conditions precedent are satisfied.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Company directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be; (ii)
the Company has paid all other sums payable under the Indenture by the Company;
and (iii) the Company has delivered to the Trustee an officers' certificate and
an opinion of counsel stating that all conditions precedent under the Indenture
relating to the satisfaction and discharge of the Indenture have been complied
with.
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MODIFICATION OF THE INDENTURE
From time to time, the Company, the Subsidiary Guarantors and the
Trustee, without the consent of the Holders, may amend the Indenture for certain
specified purposes, including curing ambiguities, defects or inconsistencies, so
long as such change does not, in the opinion of the Trustee, adversely affect
the rights of any of the Holders in any material respect. In formulating its
opinion on such matters, the Trustee will be entitled to rely on such evidence
as it deems appropriate, including, without limitation, solely on an opinion of
counsel. Other modifications, waivers and amendments of the Indenture may be
made with the consent of the Holders of a majority in principal amount of the
then outstanding Notes issued under the Indenture, except that, without the
consent of each Holder affected thereby, no amendment or waiver may: (i) reduce
the amount of Notes whose Holders must consent to an amendment; (ii) reduce the
rate of or change or have the effect of changing the time for payment of
interest, including defaulted interest, on any Notes; (iii) reduce the principal
of or change or have the effect of changing the fixed maturity of any Notes, or
change the date on which any Notes may be subject to redemption or repurchase,
or reduce the redemption or repurchase price therefor; (iv) make any Notes
payable in money other than that stated in the Notes; (v) make any change in
provisions of the Indenture protecting the right of each Holder to receive
payment of principal of and interest on such Note on or after the due date
thereof or to bring suit to enforce such payment, or permitting Holders of a
majority in principal amount of Notes to waive Defaults or Events of Default;
(vi) amend, change or modify in any material respect the obligation of the
Company to make and consummate a Change of Control Offer in the event of a
Change of Control or make and consummate a Net Proceeds Offer with respect to
any Asset Sale that has been consummated or modify any of the provisions or
definitions with respect thereto; (vii) modify or change any provision of the
Indenture or the related definitions affecting the subordination or ranking of
the Notes or any Guarantee in a manner which adversely affects the Holders in
any material respect; or (viii) release any Subsidiary Guarantor from any of its
obligations under its Guarantee or the Indenture other than in accordance with
the terms of the Indenture.
GOVERNING LAW
The Indenture provides that it, the Notes and the Guarantees are
governed by, and construed in accordance with, the laws of the State of New York
but without giving effect to applicable principles of conflicts of law to the
extent that the application of the law of another jurisdiction would be required
thereby.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event
of Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. During the existence of an Event of Default, the Trustee
will exercise such rights and powers vested in it by the Indenture, and use the
same degree of care and skill in its exercise as a prudent man or woman would
exercise or use under the circumstances in the conduct of his own affairs.
The Indenture and the provisions of the TIA contain certain limitations
on the rights of the Trustee, should it become a creditor of the Company or a
Subsidiary Guarantor, to obtain payments of claims in certain cases or to
realize on certain property received in respect of any such claim as security or
otherwise. Subject to the TIA, the Trustee will be permitted to engage in other
transactions; provided, however, that if the Trustee acquires any conflicting
interest as described in the TIA, it must eliminate such conflict or resign.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in
the Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of
such Person or at the time it merges or consolidates with such Person or any of
its Restricted Subsidiaries or assumed in connection with the acquisition of
assets from such Person, and in each case not incurred by such Person in
connection with, or in anticipation or contemplation of, such Person becoming a
Restricted Subsidiary of such Person or such acquisition, merger or
consolidation.
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"Affiliate" means, with respect to any specified Person, any other
Person who directly or indirectly through one or more intermediaries controls or
is controlled by, or is under common control with, such specified Person. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative of the
foregoing.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary of the Company, or (b) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any Person (other than
a Restricted Subsidiary of the Company) which constitute all or substantially
all of the assets of such Person or comprises any division or line of business
of such Person or any other properties or assets of such Person other than in
the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Company or any of
its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to
any Person other than the Company or a Wholly Owned Restricted Subsidiary of the
Company of (a) any Capital Stock of any Restricted Subsidiary of the Company; or
(b) any other property or assets of the Company or any Restricted Subsidiary of
the Company other than in the ordinary course of business; provided, however,
that Asset Sales shall not include (i) any transaction or series of related
transactions for which the Company or its Restricted Subsidiaries receive
aggregate consideration of less than $3.0 million in any consecutive 12-month
period, (ii) the sale, lease, conveyance, disposition or other transfer of all
or substantially all of the assets of the Company as permitted under "Merger,
Consolidation and Sale of Assets" or any disposition that constitutes a Change
of Control, (iii) disposals or replacements of obsolete equipment in the
ordinary course of business, and (iv) the sale, lease, conveyance, disposition
or other transfer by the Company or any Restricted Subsidiary of assets or
property to one or more Wholly Owned Restricted Subsidiaries in connection with
Investments permitted under the "Limitations on Restricted Payments" covenant.
"Board of Directors" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Capitalized Lease Obligation" means, as to any Person, the obligations
of such Person under a lease that are required to be classified and accounted
for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether voting or nonvoting) of corporate stock,
including each class of Common Stock and Preferred Stock of such Person and (ii)
with respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations issued by,
or unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least
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A-l from S&P or at least P-l from Moody's; (iv) certificates of deposit or
bankers' acceptances maturing within one year from the date of acquisition
thereof issued by any bank organized under the laws of the United States of
America or any state thereof or the District of Columbia or any U.S. branch of a
foreign bank having at the date of acquisition thereof combined capital and
surplus of not less than $250,000,000; (v) repurchase obligations with a term of
not more than seven days for underlying securities of the types described in
clause (i) above entered into with any bank meeting the qualifications specified
in clause (iv) above; and (vi) investments in money market funds which invest
substantially all their assets in securities of the types described in clauses
(i) through (v) above.
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company to any Person or group of related Persons for purposes
of Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates
thereof (whether or not otherwise in compliance with the provisions of the
Indenture); (ii) the approval by the holders of Capital Stock of the Company of
any plan or proposal for the liquidation or dissolution of the Company (whether
or not otherwise in compliance with the provisions of the Indenture); (iii) any
Person or Group other than the Permitted Holder or a Group controlled by the
Permitted Holder shall become the owner, directly or indirectly, beneficially or
of record, of shares representing more than 50% of the aggregate ordinary voting
power represented by the issued and outstanding Capital Stock of the Company; or
(iv) the replacement of a majority of the Board of Directors of the Company from
the directors who constituted the Board of Directors of the Company on the Issue
Date, and such replacement shall not have been approved by a vote of at least a
majority of the Board of Directors of the Company then still in office who
either were members of such Board of Directors on the Issue Date or whose
election as a member of such Board of Directors was previously so approved.
"Common Stock" means, with respect to any Person, any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or non-voting) of such Person's common stock, whether
outstanding on the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.
"Consolidated EBITDA" means, with respect to any Person for any period,
the sum (without duplication) of (i) Consolidated Net Income and (ii) to the
extent Consolidated Net Income has been reduced thereby, (A) all income taxes of
such Person and its Restricted Subsidiaries paid or accrued in accordance with
GAAP for such period (other than income taxes attributable to extraordinary,
unusual or nonrecurring gains or losses or taxes attributable to sales or
dispositions outside the ordinary course of business), (B) Consolidated Interest
Expense and (C) Consolidated Non-cash Charges less any non-cash items increasing
Consolidated Net Income for such period, all as determined on a consolidated
basis for such Person and its Restricted Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to (i) the incurrence or
repayment of any Indebtedness of such Person or any of its Restricted
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter Period and (ii) any
Asset Sales or Asset Acquisitions (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a result of such
Person or one of its Restricted Subsidiaries (including any Person who becomes a
Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming
or otherwise being liable for Acquired Indebtedness and also including any
Consolidated EBITDA (including any pro forma expense and cost reductions
calculated on a basis consistent with Regulation S-X under the Securities Act as
in effect on the Issue Date) (provided that such Consolidated EBITDA shall be
included only to the extent includable pursuant to the definition of
"Consolidated Net Income") attributable
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to the assets which are the subject of the Asset Acquisition or Asset Sale
during the Four Quarter Period) occurring during the Four Quarter Period or at
any time subsequent to the last day of the Four Quarter Period and on or prior
to the Transaction Date, as if such Asset Sale or Asset Acquisition (including
the incurrence, assumption or liability for any such Acquired Indebtedness)
occurred on the first day of the Four Quarter Period. If such Person or any of
its Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a
third Person, the preceding sentence shall give effect to the incurrence of such
guaranteed Indebtedness as if such Person or any Restricted Subsidiary of such
Person had directly incurred or otherwise assumed such guaranteed Indebtedness.
Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio," (1) interest on outstanding Indebtedness determined on a
fluctuating basis as of the Transaction Date and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate per annum
equal to the rate of interest on such Indebtedness in effect on the Transaction
Date; (2) if interest on any Indebtedness actually incurred on the Transaction
Date may optionally be determined at an interest rate based upon a factor of a
prime or similar rate, a eurocurrency interbank offered rate, or other rates,
then the interest rate in effect on the Transaction Date will be deemed to have
been in effect during the Four Quarter Period; and (3) notwithstanding clause
(1) above, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to Interest Swap
Obligations shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense, plus
(ii) the product of (x) the amount of all dividend payments on any series of
Preferred Stock of such Person (other than dividends paid in Qualified Capital
Stock) paid, accrued or scheduled to be paid or accrued during such period times
(y) a fraction, the numerator of which is one and the denominator of which is
one minus the then current effective consolidated federal, state and local tax
rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for
any period, the sum of, without duplication: (i) the aggregate of the interest
expense of such Person and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including without
limitation, (a) any amortization of debt discount, (b) the net costs under
Interest Swap Obligations, (c) all capitalized interest and (d) the interest
portion of any deferred payment obligation; and (ii) the interest component of
Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by such Person and its Restricted Subsidiaries during such period as
determined on a consolidated basis in accordance with GAAP, minus amortization
or write off of deferred financing costs.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided, however, that there shall be excluded therefrom (a) gains
(and losses) on an after-tax effected basis from asset sales or abandonments or
reserves relating thereto, (b) items classified as extraordinary or nonrecurring
gains or losses (including, without limitation, restructuring costs related to
facilities and/or operating line closings) on an after tax effected basis, (c)
the net income or loss of any Person acquired in a "pooling of interests"
transaction accrued prior to the date it becomes a Restricted Subsidiary of the
referent Person or is merged or consolidated with the referent Person or any
Restricted Subsidiary of the referent Person, (d) the net income (but not loss)
of any Restricted Subsidiary of the referent Person to the extent that the
declaration of dividends or similar distributions by that Restricted Subsidiary
of that income is restricted by a contract, operation of law or otherwise, (e)
the net income or loss of any other Person, other than a Subsidiary of the
referent Person, except to the extent (in the case of net income) of cash
dividends or distributions paid to the referent Person, or to a Wholly Owned
Restricted Subsidiary of the referent Person, by such other Person, (f) any
restoration to income of any contingency reserve of an extraordinary,
non-recurring or unusual nature, except to the extent that provision for such
reserve was made out of Consolidated Net Income accrued at any time following
the Issue Date, (g) income or loss attributable to discontinued operations
(including, without limitation, operations disposed of during such period
whether or not such operations were classified as discontinued), (h) in the case
of a successor to the referent Person by consolidation or merger or as a
transferee of the referent Person's assets, any earnings of the successor
corporation prior to such consolidation, merger or transfer of assets and (i)
any amortization or write-off of deferred financing costs.
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"Consolidated Net Worth" means, with respect to any Person, the
consolidated stockholders' equity of such Person, determined on a consolidated
basis in accordance with GAAP, less (without duplication) amounts attributable
to Disqualified Capital Stock of such Person.
"Consolidated Non-cash Charges" means, with respect to any Person for
any period, the aggregate (A) depreciation, (B) amortization, (C) LIFO charges,
(D) the amount of any restructuring reserve or charge, and (E) other non-cash
charges of such Person and its Restricted Subsidiaries reducing Consolidated Net
Income of such Person and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP (excluding for
purposes of clause (C) any such charges which require an accrual of or a reserve
for cash charges for any future period).
"Credit Agreement" means the Credit Agreement dated as of May 21, 1997
among the Company, Phoenix Airbag GmbH and Automotive Safety Components
International, Inc., and as such agreement may be further amended (including any
amendment and restatement thereof), supplemented or otherwise modified from time
to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including increasing the amount of
available borrowings thereunder (provided, however, that such increase in
borrowings is permitted by the "Limitation on Incurrence of Additional
Indebtedness" covenant above) or adding Subsidiaries of the Company as
additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Default" means an event or condition the occurrence of which is, or
with the lapse of time or the giving of notice or both would be, an Event of
Default.
"Designated Senior Indebtedness" means (i) Indebtedness under or in
respect of the Credit Agreement and (ii) any other Indebtedness constituting
Senior Indebtedness or Guarantor Senior Indebtedness which, at the time of
determination, has an aggregate principal amount of at least $2.0 million and is
specifically designated in the instrument evidencing such Senior Indebtedness as
"Designated Senior Indebtedness" or "Guarantor Senior Indebtedness" by the
Company or the applicable Subsidiary Guarantor, as the case may be.
"Disqualified Capital Stock" means that portion of any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof (other than as a result of a Change of Control) on or prior to the final
maturity date of the Notes.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute or statutes thereto.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Credit Agreement) in existence
on the Issue Date, until such amounts are repaid.
"fair market value" means, with respect to any asset or property, the
price which could be negotiated in an arm's- length, free market transaction,
for cash, between a willing seller and a willing and able buyer, neither of whom
is under undue pressure or compulsion to complete the transaction. Fair market
value shall be determined by the Board of Directors of the Company acting
reasonably and in good faith and shall be evidenced by a Board Resolution of the
Board of Directors of the Company.
"Foreign Subsidiary" means any Subsidiary of the Company organized
under the laws of a country or jurisdiction other than the United States, any
state or territory thereof or the District of Columbia.
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"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.
"Guarantor Senior Indebtedness" means, with respect to any Subsidiary
Guarantor, the principal of, premium, if any, and interest (including any
interest accruing subsequent to the filing of a petition of bankruptcy at the
rate provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on any Indebtedness of such
Subsidiary Guarantor, whether outstanding on the Issue Date or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Without limiting the generality
of the foregoing, "Guarantor Senior Indebtedness" shall also include the
principal of, premium, if any, interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, to the extent such interest is an
allowed claim under applicable law) on, and all other amounts owing in respect
of, (x) all monetary obligations of every nature of a Subsidiary Guarantor under
the Credit Agreement, including, without limitation, obligations to pay
principal and interest, reimbursement obligations under letters of credit, fees,
expenses and indemnities, (y) all Interest Swap Obligations and (z) all
obligations under Currency Agreements, in each case whether outstanding on the
Issue Date or thereafter incurred. Notwithstanding the foregoing, "Senior
Indebtedness" shall not include (i) any Indebtedness of a Subsidiary Guarantor
to a Subsidiary of such Subsidiary Guarantor or any Affiliate of such Subsidiary
Guarantor or any of such Affiliate's Subsidiaries, (ii) Indebtedness to, or
guaranteed on behalf of, any shareholder, director, officer or employee of the
Company or any Subsidiary of the Company (including, without limitation, amounts
owed for compensation), (iii) Indebtedness to trade creditors and other amounts
incurred in connection with obtaining goods, materials or services, (iv)
Indebtedness represented by Disqualified Capital Stock, (v) any liability for
federal, state, local or other taxes owed or owing by the Company, (vi)
Indebtedness incurred in violation of the Indenture provisions set forth under
"Limitation on Incurrence of Additional Indebtedness," (vii) Indebtedness which,
when incurred and without respect to any election under Section 1111(b) of Title
11, United States Code is without recourse to the Company and (viii) any
Indebtedness which is, by its express terms, subordinated in right of payment to
any other Indebtedness of a Subsidiary Guarantor.
"Holder" means any holder of Notes.
"Indebtedness" means, with respect to any Person, without duplication,
(i) all Obligations of such Person for borrowed money, (ii) all Obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all Capitalized Lease Obligations of such Person, (iv) all Obligations of
such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business that are not overdue by 90 days or
more or are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted), (v) all Obligations for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (vi) guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (i) through (v) above and clause (viii)
below, (vii) all Obligations of any other Person of the type referred to in
clauses (i) through (vi) which are secured by any lien on any property or asset
of such Person, the amount of such Obligation being deemed to be the lesser of
the fair market value of such property or asset or the amount of the Obligation
so secured, (viii) all Obligations under currency agreements and interest swap
agreements of such Person and (ix) all Disqualified Capital Stock issued by such
Person with the amount of Indebtedness represented by such Disqualified Capital
Stock being equal to the greater of its voluntary or involuntary liquidation
preference and its maximum fixed repurchase price, but excluding accrued
dividends, if any. For purposes hereof, the "maximum fixed repurchase price" of
any Disqualified Capital Stock which does not have a fixed repurchase price
shall be calculated in accordance with the terms of such Disqualified Capital
Stock as if such Disqualified Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to the Indenture, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Capital Stock, such fair market value shall be determined
reasonably and in good faith by the Board of Directors of the issuer of such
Disqualified Capital Stock.
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"Independent Financial Advisor" means a firm (i) which does not, and
whose directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"Interest Swap Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"Investment" means, with respect to any Person, any direct or indirect
loan or other extension of credit (including, without limitation, a guarantee)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any Person. "Investment" shall exclude extensions of trade credit by the
Company and its Restricted Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of the Company or such Restricted
Subsidiary, as the case may be. For the purposes of the "Limitation on
Restricted Payments" covenant, the amount of any Investment shall be the
original cost of such Investment plus the cost of all additional Investments by
the Company or any of its Restricted Subsidiaries, without any adjustments for
increases or decreases in value, or write-ups, write-downs or write-offs with
respect to such Investment, reduced by the payment of dividends or distributions
in connection with such Investment or any other amounts received in respect of
such Investment; provided, however, that no such payment of dividends or
distributions or receipt of any such other amounts shall reduce the amount of
any Investment if such payment of dividends or distributions or receipt of any
such amounts would be included in Consolidated Net Income. If the Company or any
Restricted Subsidiary of the Company sells or otherwise disposes of any Common
Stock of any direct or indirect Restricted Subsidiary of the Company such that,
after giving effect to any such sale or disposition, the Company no longer owns,
directly or indirectly, greater than 50% of the outstanding Common Stock of such
Restricted Subsidiary, the Company shall be deemed to have made an Investment on
the date of any such sale or disposition equal to the fair market value of the
Common Stock of such former Restricted Subsidiary not sold or disposed of.
"Issue Date" means July 24, 1997.
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest) received by the Company or any of its Restricted Subsidiaries from
such Asset Sale net of (a) reasonable out-of-pocket expenses and fees relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees and sales commissions), (b) taxes paid or payable after
taking into account any reduction in consolidated tax liability due to available
tax credits or deductions and any tax sharing arrangements, (c) repayment of
Indebtedness that is required to be repaid in connection with such Asset Sale
and (d) appropriate amounts to be provided by the Company or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against
any liabilities associated with such Asset Sale and retained by the Company or
any Restricted Subsidiary, as the case may be, after such Asset Sale, including,
without limitation, pension and other post- employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Permitted Holder" means Robert A. Zummo and his Affiliates.
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"Permitted Indebtedness" means, without duplication, each of the
following and the Guarantees:
(i) Indebtedness under the Notes issued on the Issue Date and
the Guarantees outstanding on the Issue Date;
(ii) Indebtedness incurred pursuant to the Credit Agreement in
an aggregate principal amount at any time outstanding not to exceed
$27.0 million in the aggregate reduced by any required permanent
repayments pursuant to the provisions set forth under "Certain
Covenants -- Limitation on Asset Sales" (which are accompanied by a
corresponding permanent commitment reduction) thereunder (it being
recognized that a reduction in the borrowing base in and of itself
shall not be deemed a required permanent repayment);
(iii) Interest Swap Obligations of the Company covering
Indebtedness of the Company or any of its Restricted Subsidiaries;
provided, however, that such Interest Swap Obligations are entered into
to protect the Company and its Restricted Subsidiaries from
fluctuations in interest rates on Indebtedness incurred in accordance
with the Indenture to the extent the notional principal amount of such
Interest Swap Obligation does not exceed the principal amount of the
Indebtedness to which such Interest Swap Obligation relates;
(iv) Indebtedness under Currency Agreements; provided,
however, that in the case of Currency Agreements which relate to
Indebtedness, such Currency Agreements do not increase the Indebtedness
of the Company and its Restricted Subsidiaries outstanding other than
as a result of fluctuations in foreign currency exchange rates or by
reason of fees, indemnities and compensation payable thereunder;
(v) Indebtedness of a Restricted Subsidiary to the Company or
to a Wholly Owned Restricted Subsidiary of the Company for so long as
such Indebtedness is held by the Company or a Wholly Owned Restricted
Subsidiary of the Company, in each case subject to no Liens held by any
Person other than the Company or a Wholly Owned Restricted Subsidiary
of the Company; provided, however, that if as of any date any Person
other than the Company or a Wholly Owned Restricted Subsidiary of the
Company owns or holds any such Indebtedness or holds a Lien in respect
of such Indebtedness, such date shall be deemed the incurrence of
Indebtedness not constituting Permitted Indebtedness by the issuer of
such Indebtedness;
(vi) Indebtedness of the Company to a Wholly Owned Restricted
Subsidiary of the Company for so long as such Indebtedness is held by a
Wholly Owned Restricted Subsidiary of the Company, in each case subject
to no Lien; provided, however, that (a) any Indebtedness of the Company
to any Wholly Owned Restricted Subsidiary of the Company that is not a
Subsidiary Guarantor is unsecured and subordinated, pursuant to a
written agreement, to the Company's obligations under the Indenture and
the Notes and (b) if as of any date any Person other than a Wholly
Owned Restricted Subsidiary of the Company owns or holds any such
Indebtedness or a Lien in respect of such Indebtedness, such date shall
be deemed the incurrence of Indebtedness not constituting Permitted
Indebtedness by the Company;
(vii) Indebtedness arising from the honoring by a bank or
other financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; provided,
however, that such Indebtedness is extinguished within two business
days of incurrence;
(viii) Indebtedness of the Company or any of its Restricted
Subsidiaries represented by letters of credit for the account of the
Company or such Restricted Subsidiary, as the case may be, in order to
provide security for workers' compensation claims, payment obligations
in connection with self-insurance or similar requirements in the
ordinary course of business;
(ix) Existing Indebtedness (including Indebtedness of the
Company and its Restricted Subsidiaries under the Notes issued on the
Issue Date) outstanding on the Issue Date;
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(x) additional Capitalized Lease Obligations and Purchase
Money Indebtedness of the Company or any of its Restricted Subsidiaries
not to exceed $10.0 million at any one time outstanding;
(xi) Refinancing Indebtedness;
(xii) Indebtedness permitted by clause (viii) of the
definition of "Permitted Investments"; and
(xiii) additional Indebtedness in an aggregate principal
amount not to exceed $5.0 million at any one time outstanding.
"Permitted Investments" means (i) Investments by the Company or any
Restricted Subsidiary of the Company in any Person that is or will become
immediately after such Investment a Restricted Subsidiary of the Company or that
will merge or consolidate into the Company or a Restricted Subsidiary of the
Company; (ii) Investments in the Company by any Restricted Subsidiary of the
Company; provided, however, that any Indebtedness evidencing such Investment by
a Restricted Subsidiary that is not a Subsidiary Guarantor is unsecured and
subordinated, pursuant to a written agreement, to the Company's obligations
under the Notes and the Indenture; (iii) Investments in cash and Cash
Equivalents; (iv) loans and advances to employees and officers of the Company
and its Restricted Subsidiaries in the ordinary course of business for bona fide
business purposes not in excess of $750,000 at any one time outstanding; (v)
Currency Agreements and Interest Swap Obligations entered into in the ordinary
course of the Company's or its Restricted Subsidiaries' businesses and otherwise
in compliance with the Indenture; (vi) Investments in securities of trade
creditors or customers received pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of such trade creditors or
customers; (vii) Investments made by the Company or its Restricted Subsidiaries
as a result of consideration received in connection with an Asset Sale made in
compliance with the "Limitation on Asset Sales" covenant; and (viii) additional
Investments in (A) unconsolidated joint ventures in businesses reasonably
related or complementary to those of the Company and its Restricted Subsidiaries
(as determined in good faith by the Company's Board of Directors) made in the
ordinary course of business and (B) Unrestricted Subsidiaries in an aggregate
amount for all such Investments made pursuant to this clause (viii) not to
exceed the amount which, when aggregated with Restricted Payments made under
clause (iii)(z) of "Certain Covenants -- Limitation or Restriction on Restricted
Payments", does not exceed $5.0 million.
"Permitted Liens" means the following types of Liens:
(i) Liens in favor of the Trustee in its capacity as trustee
for the Holders;
(ii) Liens securing Indebtedness outstanding under the Credit
Agreement;
(iii) Liens for taxes, assessments or governmental charges or
claims either (a) not delinquent or (b) contested in good faith by
appropriate proceedings and as to which the Company or its Restricted
Subsidiaries shall have set aside on its books such reserves as may be
required pursuant to GAAP;
(iv) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other
Liens imposed by law incurred in the ordinary course of business for
sums not yet delinquent or being contested in good faith, if such
reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made in respect thereof;
(v) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security, including any Lien
securing letters of credit issued in the ordinary course of business
consistent with past practice in connection therewith, or to secure the
performance of tenders, statutory obligations, surety and appeal bonds,
bids, leases, government contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
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(vi) judgment Liens not giving rise to an Event of Default so
long as such Lien is adequately bonded and any appropriate legal
proceedings which may have been duly initiated for the review of such
judgment shall not have been finally terminated or the period within
which such proceedings may be initiated shall not have expired;
(vii) easements, rights-of-way, zoning restrictions and other
similar charges or encumbrances in respect of real property not
interfering in any material respect with the ordinary conduct of the
business of the Company or any of its Restricted Subsidiaries;
(viii) any interest or title of a lessor under any Capitalized
Lease Obligation; provided, however, that such Liens do not extend to
any property or assets which is not leased property subject to such
Capitalized Lease Obligation;
(ix) Liens to secure Purchase Money Indebtedness of the
Company or any Restricted Subsidiary of the Company; provided, however,
that (A) the related Purchase Money Indebtedness shall not exceed the
cost of such property or assets and shall not be secured by any
property or assets of the Company or any Restricted Subsidiary of the
Company other than the property and assets so acquired and (B) the Lien
securing such Indebtedness shall be created within 90 days of such
acquisition;
(x) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person
to facilitate the purchase, shipment or storage of such inventory or
other goods;
(xi) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other
property relating to such letters of credit and products and proceeds
thereof;
(xii) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual or warranty
requirements of the Company or any of its Restricted Subsidiaries,
including rights of offset and set-off;
(xiii) Liens securing Interest Swap Obligations which Interest
Swap Obligations relate to Indebtedness that is otherwise permitted
under the Indenture;
(xiv) Liens securing Indebtedness under Currency Agreements;
and
(xv) Liens securing Acquired Indebtedness incurred in
accordance with the "Limitation on Incurrence of Additional
Indebtedness" covenant; provided, however, that (A) such Liens secured
such Acquired Indebtedness at the time of and prior to the incurrence
of such Acquired Indebtedness by the Company or a Restricted Subsidiary
of the Company and were not granted in connection with, or in
anticipation of, the incurrence of such Acquired Indebtedness by the
Company or a Restricted Subsidiary of the Company and (B) such Liens do
not extend to or cover any property or assets of the Company or of any
of its Restricted Subsidiaries other than the property or assets that
secured the Acquired Indebtedness prior to the time such Indebtedness
became Acquired Indebtedness of the Company or a Restricted Subsidiary
of the Company and are no more favorable to the lienholders than those
securing the Acquired Indebtedness prior to the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary of the
Company.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
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"Purchase Money Indebtedness" means Indebtedness the net proceeds of
which are used to finance the cost (including the cost of construction) of
property or assets acquired in the normal course of business by the Person
incurring such Indebtedness.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Receivables" means any right of payment from or on behalf of any
obligor, whether constituting an account, chattel paper, instrument, general
intangible or otherwise, arising from the financing by the Company or any
Restricted Subsidiary of the Company of merchandise or services, and monies due
thereunder, security in the merchandise and services financed thereby, records
related thereto, and the right to payment of any interest or finance charges and
other obligations with respect thereto, proceeds from claims on insurance
policies related thereto, any other proceeds related thereto, and any other
related rights.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or any
Restricted Subsidiary of the Company of Indebtedness incurred in accordance with
the "Limitation on Incurrence of Additional Indebtedness" covenant (other than
pursuant to clauses (ii), (iii), (iv), (v), (vi), (vii), (viii), (x), (xi),
(xii) or (xiii) of the definition of Permitted Indebtedness), in each case that
does not (1) result in an increase in the aggregate principal amount of
Indebtedness of such Person as of the date of such proposed Refinancing (plus
the amount of any premium required to be paid under the terms of the instrument
governing such Indebtedness and plus the amount of reasonable expenses incurred
by the Company or such Restricted Subsidiary, as the case may be, in connection
with such Refinancing), except to the extent that any such increase in
Indebtedness is otherwise permitted by the Indenture or (2) create Indebtedness
with (A) a Weighted Average Life to Maturity that is less than the Weighted
Average Life to Maturity of the Indebtedness being Refinanced or (B) a final
maturity earlier than the final maturity of the Indebtedness being Refinanced;
provided, however, that (x) if such Indebtedness being Refinanced is
Indebtedness of the Company, then such Refinancing Indebtedness shall be
Indebtedness solely of the Company and (y) if such Indebtedness being Refinanced
is subordinate or junior to the Notes, then such Refinancing Indebtedness shall
be subordinate to the Notes at least to the same extent and in the same manner
as the Indebtedness being Refinanced.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of the Issue Date among the Company, the Subsidiary Guarantors and the
Initial Purchasers.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Indebtedness; provided,
however, that if, and for so long as, any Designated Senior Indebtedness lacks
such a representative, then the Representative for such Designated Senior
Indebtedness shall at all times constitute the holders of a majority in
outstanding principal amount of such Designated Senior Indebtedness in respect
of any Designated Senior Indebtedness.
"Restricted Subsidiary" means, with respect to any Person, any
Subsidiary of such Person which at the time of determination is not an
Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Restricted Subsidiary of the Company of any
property, whether owned by the Company or any Restricted Subsidiary of the
Company at the Issue Date or later acquired, which has been or is to be sold or
transferred by the Company or such Restricted Subsidiary to such Person or to
any other Person from whom funds have been or are to be advanced by such Person
on the security of such property.
"Senior Indebtedness" means the principal of, premium, if any, and
interest (including any interest accruing subsequent to the filing of a petition
of bankruptcy at the rate provided for in the documentation with respect
thereto, whether
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or not such interest is an allowed claim under applicable law) on any
Indebtedness of the Company, whether outstanding on the Issue Date or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Without limiting the generality
of the foregoing, "Senior Indebtedness" shall also include the principal of,
premium, if any, interest (including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in the documentation
with respect thereto, to the extent such interest is an allowed claim under
applicable law) on, and all other amounts owing in respect of, (x) all monetary
obligations of every nature of the Company under the Credit Agreement,
including, without limitation, obligations to pay principal and interest,
reimbursement obligations under letters of credit, fees, expenses and
indemnities, (y) all Interest Swap Obligations and (z) all obligations under
Currency Agreements, in each case whether outstanding on the Issue Date or
thereafter incurred. Notwithstanding the foregoing, "Senior Indebtedness" shall
not include (i) any Indebtedness of the Company to a Subsidiary of the Company
or any Affiliate of the Company or any of such Affiliate's Subsidiaries, (ii)
Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer
or employee of the Company or any Subsidiary of the Company (including, without
limitation, amounts owed for compensation), (iii) Indebtedness to trade
creditors and other amounts incurred in connection with obtaining goods,
materials or services, (iv) Indebtedness represented by Disqualified Capital
Stock, (v) any liability for federal, state, local or other taxes owed or owing
by the Company, (vi) Indebtedness incurred in violation of the Indenture
provisions set forth under "Limitation on Incurrence of Additional
Indebtedness," (vii) Indebtedness which, when incurred and without respect to
any election under Section 1111(b) of Title 11, United States Code is without
recourse to the Company and (viii) any Indebtedness which is, by its express
terms, subordinated in right of payment to any other Indebtedness of the
Company.
"Significant Subsidiary" shall have the meaning set forth in Rule
1.02(w) of Regulation S-X under the Securities Act.
"Subsidiary" means, with respect to any Person, (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Subsidiary Guarantor" means (a) each of the Company's Restricted
Subsidiaries as of the Issue Date other than the Foreign Subsidiaries and (b)
each of the Company's Restricted Subsidiaries that in the future executes a
supplemental indenture in which such Restricted Subsidiary agrees to be bound by
the terms of the Indenture as a Subsidiary Guarantor; provided, however, that
any Person constituting a Subsidiary Guarantor as described above shall cease to
constitute a Subsidiary Guarantor when its Guarantee is released in accordance
with the terms of the Indenture.
"Unrestricted Subsidiary" means any Subsidiary of the Company
designated as such pursuant to and in compliance with "-- Certain Covenants
Limitation on Restricted and Unrestricted Subsidiaries" above. Any such
designation may be revoked by a Board Resolution of the Company delivered to the
Trustee, subject to the provisions of such covenant.
"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 aggregate principal amount of such Indebtedness into (b) the sum of
the total of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" means, with respect to any Person,
any Restricted Subsidiary of such Person of which all the outstanding voting
securities normally entitled to vote in the election of directors are owned by
such Person or any Wholly Owned Restricted Subsidiary of such Person.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were originally sold by the Company on July 24, 1997 to
the Initial Purchasers pursuant to the Purchase Agreement, dated as of July 21,
1994, by and among the Initial Purchasers, the Company and the Guarantors (the
"Purchase Agreement"). The Initial Purchasers subsequently placed the Old Notes
(i) within the United States to qualified institutional buyers in reliance on
Rule 144A under the Securities Act and (ii) to a limited number of institutional
"accredited investors," within the meaning of Rule 501(a) (1), (2), (3) or (7)
under the Securities Act, that agreed in writing to comply with certain transfer
restrictions and other conditions. As a condition to the Purchase Agreement, the
Company, the Guarantors and the Initial Purchasers entered into the Registration
Rights Agreement on the Issue Date pursuant to which the Company agreed, for the
benefit of the holders, that it will at its expense (i) within 30 days after the
Issue Date (the "Filing Date"), file a registration statement on an appropriate
registration form (the "Exchange Offer Registration Statement") with the
Commission with respect to a registered offer (the "Exchange Offer") to exchange
the Old Notes for notes of the Company (the "Exchange Notes"), guaranteed by the
Guarantors, which Exchange Notes will have terms identical to the Old Notes
(except (A) the Exchange Notes will bear a Series B designation and a different
CUSIP Number from the Old Notes, (B) the issuance of the Exchange Notes will
have been registered under the Securities Act and, therefore, the Exchange Notes
will not bear legends restricting the transfer thereof and (C) holders of the
Exchange Notes will not be entitled to certain rights of holders of Old Notes
under the Registration Rights Agreement) and (ii) use its best efforts to cause
the Exchange Offer Registration Statement to be declared effective under the
Securities Act within 105 days after the Issue Date. Upon the Exchange Offer
Registration Statement being declared effective, the Company and the Guarantors
will offer the Exchange Notes (and the related guarantees) in exchange for
surrender of the Old Notes (and the related guarantees). The Company and the
Guarantors will keep the Exchange Offer open for acceptance for not less than 20
business days (or longer if required by applicable law) after the date notice of
the Exchange Offer is mailed to the holders of Old Notes. For each of the Old
Notes surrendered pursuant to the Exchange Offer, the holder who surrendered
such Old Note will receive an Exchange Note having a principal amount equal to
that of the surrendered Old Note. Interest on each Exchange Note will accrue
from the Issue Date.
Under existing interpretations of the Commission contained in several
"no-action" letters to third parties and unrelated to the Company or the
Exchange Offer, the Company believes that holders of the Old Notes (other than
any such holder which is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act) who exchange the Old Notes for Exchange Notes
pursuant to the Exchange Offer generally may offer the Exchange Notes for
resale, resell the Exchange Notes and otherwise transfer the Exchange Notes
without compliance with the registration and prospectus delivery provisions of
the Securities Act; provided, however, that each holder that wishes to exchange
its Old Notes for Exchange Notes will be required to represent (i) that any
Exchange Notes to be received by it will be acquired in the ordinary course of
its business, (ii) that at the time of the commencement of the Exchange Offer it
has no arrangement or understanding with any person to participate in the
distribution (within the meaning of Securities Act) of the Exchange Notes in
violation of the Securities Act, (iii) that it is not an "affiliate" (as defined
in Rule 405 promulgated under the Securities Act) of the Company, (iv) if such
holder is not a Participating Broker-Dealer, that it is not engaged in, and does
not intend to engage in, the distribution of Exchange Notes and (v) if such
holder is a Participating Broker-Dealer that will receive Exchange Notes for its
own account in exchange for Old Notes that were acquired as a result of
market-making or other trading activities, that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such Exchange Notes. The Commission has taken the position that Participating
Broker-Dealers may fulfill their prospectus delivery requirements with respect
to the Exchange Notes (other than a resale of an unsold allotment from the
original sale of the Old Notes) with the Prospectus contained in the Exchange
Offer Registration Statement. The Company and the Guarantors have agreed to make
available, during the period required by the Securities Act, a prospectus
meeting the requirements of the Securities Act for use by Participating
Broker-Dealers and other persons, if any, with similar prospectus delivery
requirements for use in connection with any resale of such Exchange Notes. In
addition, to comply with the securities laws of certain jurisdictions, if
applicable, the Exchange Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdictions or an exemption therefrom
is available and complied with.
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If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the Commission, the Company and the Guarantors
are not permitted to effect an Exchange Offer, (ii) the Exchange Offer is not
consummated within 135 days of the Issue Date, (iii) in certain circumstances,
certain holders of unregistered Exchange Notes so request, or (iv) in the case
of any holder that participates in the Exchange Offer, such holder does not
receive Exchange Notes on the date of the exchange that may be sold without
restriction under state and federal securities laws (other than due solely to
the status of such holder as an affiliate of the Company or any Guarantor within
the meaning of the Securities Act), then in each case, the Company and the
Guarantors will (x) promptly deliver to the holders and the Trustee written
notice (the "Shelf Notice") thereof and (y) at their sole expense, (a) as
promptly as practicable, file a shelf registration statement covering resales of
the Notes (the "Shelf Registration Statement"), (b) use their best efforts to
cause the Shelf Registration Statement to be declared effective under the
Securities Act and (c) use their best efforts to keep effective the Shelf
Registration Statement until the earlier of two years after the Issue Date or
such time as all of the applicable Notes have been sold thereunder. The Company
will, in the event that a Shelf Registration Statement is filed, provide to each
holder copies of the prospectus that it is a part of the Shelf Registration
Statement, notify each such holder when the Shelf Registration Statement for the
Notes has become effective and take certain other actions as are required to
permit unrestricted resales of the Notes. A holder that sells Notes pursuant to
the Shelf Registration Statement will be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement that are applicable to such
holder (including certain indemnification rights and obligations).
If the Company or the Guarantors fails to comply with the above
provision or if the Exchange Offer Registration Statement or the Shelf
Registration Statement fails to become effective, then, as liquidated damages,
additional interest (the "Additional Interest") shall become payable in respect
of the Notes as follows:
(i) if (A) neither the Exchange Offer Registration Statement
nor the Shelf Registration Statement is filed with the Commission
within 30 days following the Issue Date or (B) notwithstanding that the
Company and the Guarantors have consummated or will consummate an
Exchange Offer, the Company and the Guarantors are required to file a
Shelf Registration Statement and such Shelf Registration Statement is
not filed on or prior to the date required by the Registration Rights
Agreement, then commencing on the day after either such required filing
date, Additional Interest shall accrue on the principal amount of the
Notes at a rate of .50% per annum for the first 90 days immediately
following each such filing date, such Additional Interest rate
increasing by an additional .50% per annum at the beginning of each
subsequent 90-day period; or
(ii) if (A) neither the Exchange Offer Registration Statement
nor a Shelf Registration Statement is declared effective by the
Commission within 105 days following the Issue Date or (B)
notwithstanding that the Company and the Guarantors have consummated or
will consummate an Exchange Offer, the Company and the Guarantors are
required to file a Shelf Registration Statement and such Shelf
Registration Statement is not declared effective by the Commission on
or prior to the 76th day following the date such Shelf Registration
Statement was filed, then, commencing on the day after either such
required effective date, Additional Interest shall accrue on the
principal amount of the Notes at a rate of .50% per annum for the first
90 days immediately following such date, such Additional Interest rate
increasing by an additional .50% per annum at the beginning of each
subsequent 90-day period; or
(iii) if (A) the Company and the Guarantors have not exchanged
Exchange Notes for all Notes validly tendered in accordance with the
terms of the Exchange Offer on or prior to the 45th day after the date
on which the Exchange Offer Registration Statement was declared
effective or (B) if applicable, the Shelf Registration Statement has
been declared effective and such Shelf Registration Statement ceases to
be effective at any time prior to the second anniversary of the Issue
Date (other than after such time as all Notes have been disposed of
thereunder), then Additional Interest shall accrue on the principal
amount of the Notes at a rate of .50% per annum for the first 90 days
commencing on (x) the 46th day after such effective date, in the case
of (A) above, or (y) the day such Shelf Registration Statement ceases
to be effective in the case of (B) above, such Additional Interest rate
increasing by an additional .50% per annum at the beginning of each
subsequent 90-day period;
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provided, however, that the Additional Interest rate on the Notes may not exceed
in the aggregate 1.0% per annum; provided, further, however, that (1) upon the
filing of the Exchange Offer Registration Statement or a Shelf Registration
Statement (in the case of clause (i) above), (2) upon the effectiveness of the
Exchange Offer Registration or a Shelf Registration Statement (in the case of
clause (ii) above), or (3) upon the exchange of Exchange Notes for all Notes
tendered (in the case of clause (iii) (A) above), or upon the effectiveness of
the Shelf Registration Statement which had ceased to remain effective (in the
case of clause (iii) (B) above). Additional Interest on the Old Notes as a
result of such clause (or the relevant subclause thereof), as the case may be,
shall cease to accrue.
Any amounts of Additional Interest due pursuant to clause (i), (ii) or
(iii) above will be payable in cash, on the same original interest payment dates
as the Old Notes.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to all the provisions of the Registration Rights
Agreement, a copy of which will be available upon request to the Company.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this
Prospectus and in the Letter of Transmittal, the Company will accept any and all
Old Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Company will issue $1,000 principal amount of
Exchange Notes in exchange for each $1,000 principal amount of outstanding Old
Notes accepted in the Exchange Offer. Holders may tender some or all of their
Old Notes pursuant to the Exchange Offer. However, Old Notes may be tendered
only in integral multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and
terms of the Old Notes except that (i) the Exchange Notes bear a Series B
designation and a different CUSIP Number from the Old Notes, (ii) the Exchange
Notes have been registered under the Securities Act and hence will not bear
legends restricting the transfer thereof and (iii) the holders of the Exchange
Notes will not be entitled to certain rights under the Registration Rights
Agreement, including the provisions providing for an increase in the interest
rate on the Old Notes in certain circumstances relating to the timing of the
Exchange Offer, all of which rights will terminate when the Exchange Offer is
terminated. The Exchange Notes will evidence the same debt as the Old Notes and
will be entitled to the benefits of the Indenture. See "Description of the
Exchange Notes."
As of the date of this Prospectus, $90,000,000 aggregate principal
amount of Old Notes were outstanding. This Prospectus and the Letter of
Transmittal are being mailed to persons who were Holders of Old Notes on the
close of business on the date of this Prospectus.
Holders of Old Notes do not have any appraisal or dissenters' rights
under the General Corporation Law of Delaware or the Indenture in connection
with the Exchange Offer. The Company intends to conduct the Exchange Offer in
accordance with the applicable requirements of the Exchange Act and the rules
and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the Exchange Notes from the Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer 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 of Old Notes
pursuant
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to the Exchange Offer. The Company will pay all charges and expenses, other than
transfer taxes in certain circumstances, in connection with the Exchange Offer.
See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
1997, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
registered Holders an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled expiration
date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "--Conditions"
shall not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent or (ii) to amend the terms of the
Exchange Offer in any manner, whether before or after any tender of the Old
Notes. Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
registered holders.
INTEREST ON THE EXCHANGE NOTES
Interest on the Exchange Notes will accrue from the Issue Date, i.e.,
July 2, 1997, payable semi-annually in arrears on each of January 15 and July 15
of each year, commencing January 15, 1998 at the rate of 101/8% per annum.
Holders whose Old Notes are accepted for exchange will be deemed to have waived
the right to receive any interest accrued on the Old Notes.
PROCEDURES FOR TENDERING
Only a Holder of Old Notes may tender such Old Notes in the Exchange
Offer. To tender in the Exchange Offer, a holder must complete, sign and date
the Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the Old
Notes and any other required documents, to the Exchange Agent prior to 5:00
p.m., New York City time, on the Expiration Date. To be tendered effectively,
the Old Notes, Letter of Transmittal and other required documents must be
completed and received by the Exchange Agent at the address set forth below
under "Exchange Agent" prior to 5:00 p.m., New York City time, on the Expiration
Date. Delivery of the Old Notes may be made by book-entry transfer in accordance
with the procedures described below. Confirmation of such book-entry transfer
must be received by the Exchange Agent prior to the Expiration Date.
By executing the Letter of Transmittal, each holder will make to the
Company the representations set forth above in the second paragraph under the
heading "--Purpose and Effect of the Exchange Offer."
The tender by a holder and the acceptance thereof by the Company will
constitute agreement between such holder and the Company in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE
RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY.
HOLDERS MAY REQUEST THEIR RESPECTIVE
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BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE
ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
register holder to tender on such beneficial owner's behalf. See "Instructions
to Registered Holder and/or Book-Entry Transfer Facility Participant from
Beneficial Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Old Notes tendered pursuant thereto are tendered (i) by a registered
holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution (as defined). In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case may
be, are required to be guaranteed, such guarantee must be by a member firm of
the Medallion System (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Old Notes
with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect to
the Old Notes at the book-entry transfer facility, The Depository Trust Company
(the "Book-Entry Transfer Facility"), for the purpose of facilitating the
Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Old Notes by causing such Book-Entry Transfer
Facility to transfer such Old Notes into the Exchange Agent's account with
respect to the Old Notes in accordance with the Book-Entry Transfer Facility's
procedures for such transfer. Although delivery of the Old Notes may be effected
through book-entry transfer into the Exchange Agent's account at the Book-Entry
Transfer Facility, an appropriate Letter of Transmittal properly completed and
duly executed with any required signature guarantee and all other required
documents must in each case be transmitted to and received or confirmed by the
Exchange Agent at its address set forth below on or prior to the Expiration
Date, or, if the guaranteed delivery procedures described below are complied
with, within the time period provided under such procedures. Delivery of
documents to the Book-Entry Transfer Facility does not constitute delivery to
the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Company in its sole discretion, which determination
will be final and binding. The Company reserves the absolute right to reject any
and all Old Notes not properly tendered or any Old Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right in their sole discretion to waive
any defects, irregularities or conditions of tender as to particular Old Notes.
The Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) 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. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Old Notes, neither the
Company, the Exchange Agent nor any other person shall 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 by the Exchange Agent to the tendering holders, unless otherwise
provided in the Letter of Transmittal, a soon as practicable following the
Expiration Date.
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GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are
not immediately available, (ii) who cannot deliver their Old Notes, the Letter
of Transmittal or any other required documents to the Exchange Agent or (iii)
who cannot complete the procedures for book-entry transfer, prior to the
Expiration Date, may effect a tender if:
(j) the tender is made through an Eligible Institution;
(k) prior to the Expiration Date, the Exchange Agent receives
from such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting
forth the name and address of the holder, the certificate number(s) of such Old
Notes and the principal amount of Old Notes tendered, stating that the tender is
being made thereby and guaranteeing that, within three New York Stock Exchange
trading days after the Expiration Date, the Letter of Transmittal (or facsimile
thereof) together with the certificate(s) representing the Old Notes (or a
confirmation of book-entry transfer of such Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility), and any other documents required
by the Letter of Transmittal will be deposited by the Eligible Institution with
the Exchange Agent; and
(l) such properly completed and executed Letter of Transmittal
(or facsimile thereof), as well as the certificate(s) representing all tendered
Old Notes in proper form for transfer (or a confirmation of book-entry transfer
of such Old Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility), and all other documents required by the Letter of Transmittal are
received by the Exchange Agent upon three New York Stock Exchange trading days
after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery
will be sent to holders who wish to tender their Old Notes according to the
guaranteed delivery procedures set forth above.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange
Offer, the Company will accept, promptly after the Expiration Date, all Old
Notes properly tendered and will issue the Exchange Notes promptly after
acceptance of the Old Notes. See "Conditions" below. For purposes of the
Exchange Offer, the Company will be deemed to have accepted properly tendered
Old Notes for exchange when, as and if the Company has given oral or written
notice thereof to the Exchange Agent. For each Old Note accepted for exchange,
the holder of such Old Note will receive an Exchange Note having a principal
amount equal to that of the surrendered Old Note.
In all cases, issuance of Exchange Notes for Old Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of certificates for such Old Notes or a
timely Book-Entry Confirmation of such Old Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility, a properly completed and duly
executed Letter of Transmittal and all other required documents. If any tendered
Old Notes are not accepted for any reason set forth in the terms and conditions
of the Exchange Offer or if Old Notes are submitted for a greater principal
amount than the holder desires to exchange, such unaccepted or non-exchanged Old
Notes will be returned without expense to the tendering holder thereof (for, in
the case of Old Notes tendered by book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the book-entry
procedures described below, such non-exchanged Old Notes will be credited to an
account maintained with such Book-Entry Transfer Facility) as promptly as
practicable after the expiration or termination of the Exchange Offer.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
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To withdraw a tender of Old Notes in the Exchange Offer, a telegram,
telex, letter or facsimile transmission notice of withdrawal must be received by
the Exchange Agent at its address set forth herein prior to 5:00 p.m., New York
City time, on the Expiration Date. Any such notice of withdrawal must (i)
specify the name of the person having deposited the Old Notes to be withdrawn
(the "Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number(s) and principal amount of such Old Notes, or, in the case of
Old Notes transferred by book-entry transfer, the name and number of the account
at the Book-Entry Transfer Facility to be credited), (iii) be signed by the
holder in the same manner as the original signature on the Letter of Transmittal
by which such Old Notes were tendered (including any required signature
guarantees) or be accompanied by documents of transfer sufficient to have the
Trustee with respect to the Old Notes register the transfer of such Old Notes
into the name of the person withdrawing the tender and (iv) specify the name in
which any such Old Notes are to be registered, if different from that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Exchange Notes will be issued with respect thereto unless
the Old Notes so withdrawn are validly retendered. Any Old Notes which have been
tendered but which are not accepted for exchange will be returned to the holder
thereof without cost to such holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn Old
Notes may be retendered by following one of the procedures described above under
"--Procedures for Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall
not be required to accept for exchange, or exchange Exchange Notes for, any Old
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such Old Notes, if:
(a) any action or proceeding is instituted or threatened in
any court or by any governmental agency which might materially impair the
ability of the Company or the Guarantors to proceed with the Exchange Offer or
any material adverse development has occurred in any existing action or
proceeding with respect to the Company or the Guarantors;
(b) the Exchange Offer violates applicable law or any
applicable interpretation of the staff of the Commission; or
(c) any governmental approval has not been obtained, which
approval the Company and the Guarantors shall deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Company determines in its sole discretion that any of the
conditions are not satisfied, the Company may (i) refuse to accept any Old Notes
and return all tendered Old Notes to the tendering holders, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the expiration of the
Exchange Offer, subject, however, to the rights of holders to withdraw such Old
Notes (see "--Withdrawal of Tenders") or (iii) waive such unsatisfied conditions
with respect to the Exchange Offer and accept all properly tendered Old Notes
which have not been withdrawn. In addition, the Company has reserved the right,
notwithstanding the satisfaction of each of the foregoing conditions, to
terminate or amend the Exchange Offer.
The Exchange Offer is not conditioned upon any minimum aggregate
principal amount of Old Notes being tendered or accepted for exchange.
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EXCHANGE AGENT
IBJ Schroder Bank and Trust Company, which also acts as Trustee under
the Indenture, has been appointed as Exchange Agent for the Exchange Offer.
Questions and requests for assistance, requests for additional copies of this
Prospectus or of the Letter of Transmittal and requests for Notice of Guaranteed
Delivery should be directed to the Exchange Agent addressed as follows:
IBJ SCHRODER BANK & TRUST COMPANY
By Overnight Courier:
One State Street Plaza
New York, NY 10004
Attn: Securities Processing Window
Subcellar One (SC-1)
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission By Hand:
P.O. Box 84 (for Eligible Institutions only): One State Street Plaza
Bowling Green Station (212) 858-2611 New York, NY 10004
New York, NY 10274-0084 Attn: Securities Processing Window
Attn: Reorganization Subcellar One (SC-1)
Operations Department
Confirm by Telephone
(212) 858-2103
</TABLE>
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others to
solicit acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer
will be paid by the Company. Such expenses include fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs, among
others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Old Notes, which is face value, as reflected in the Company's accounting records
on the date of exchange. Accordingly, no gain or loss for accounting purposes
will be recognized by the Company. The expenses of the Exchange Offer will be
amortized over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Old Notes
may be resold only (i) to the Company (upon redemption thereof or otherwise),
(ii) so long as the Old Notes are eligible for resale pursuant to Rule 144A, to
a person inside the United States whom the seller reasonably believes is a
qualified institutional buyer within the meaning of Rule 144A under the
Securities Act in a transaction meeting the requirements of Rule 144A, in
accordance with Rule 144 under the Securities Act, or pursuant to another
exemption from the registration requirements of the Securities Act (and based
upon an opinion of counsel reasonably
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acceptable to the Company), (iii) outside the United States to a foreign person
in a transaction meeting the requirements of Rule 904 under the Securities Act,
or (iv) pursuant to an effective registration statement under the Securities
Act, in each case in accordance with any applicable securities laws of any state
of the United States.
Following the consummation of the Exchange Offer, holders of the Old
Notes who were eligible to participate in the Exchange Offer but who did not
tender their Old Notes will not have any further registration rights, except
with respect to a Shelf Registration Statement in the event that a Shelf Notice
is delivered by the Company, and such Old Notes will continue to be subject to
certain restrictions on transfer. Accordingly, the liquidity of the market for
such Old Notes could be adversely affected.
RESALE OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based on interpretations by
the staff of the Commission set forth in certain "no-action" letters issued to
third parties and unrelated to the Company and the Exchange Offer, the Company
believes that Exchange Notes issued pursuant to the Exchange Offer in exchange
for Old Notes may be offered for resale, resold and otherwise transferred by
holders thereof (other than any such holder which is an "affiliate" of the
Company 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 Exchange Notes are acquired in the ordinary
course of such holders' business and such holders have no intention, nor any
arrangement or understanding with any person, to participate in the distribution
of such Exchange Notes in violation of the provisions of the Securities Act.
However, if any holder acquires Exchange Notes in the Exchange Offer for the
purpose of distributing or participating in a distribution of the Exchange
Notes, such holder cannot rely on the position of the staff of the Commission
enunciated in such "no-action" letters or any similar interpretive letters, and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction, unless an exemption
from registration is otherwise available. Further, each Participating
Broker-Dealer that receives Exchange Notes for its own account in exchange for
Old Notes, where such Old Notes were acquired by such Participating
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 Exchange Notes. As contemplated by these "no-action"
letters and the Registration Rights Agreement, each holder accepting the
Exchange Offer is required to make certain representations to the Company in the
Letter of Transmittal. See "Purpose and Effect of Exchange Offer."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of certain United States federal income
and estate tax consequences to U.S. Holders and Non-U.S. Holders of the Exchange
Offer, and of owning and disposing of the Exchange Notes. The terms "U.S.
Holder" and "Non-U.S. Holder" refer, respectively, to persons that are or are
not classified as United States persons.
As used herein, the term "United States person" means a holder of an
Exchange Note who is a citizen or resident of the United States, or that is a
corporation or other entity taxable as a corporation created or organized in or
under the laws of the United States or any political subdivision thereof, an
estate the income of which is subject to United States federal income taxation
regardless of its source or a trust if (i) a U.S. court is able to exercise
primary supervision over the trust's administration and (ii) one or more U.S.
fiduciaries have the authority to control all of the trust's substantial
decisions.
This discussion does not deal with all aspects of United States federal
income and estate taxation that may be relevant to holders of the Exchange Notes
and does not deal with tax consequences arising under the laws of any foreign,
state or local jurisdiction. It is, moreover, based upon the provisions of
existing law on the date hereof, including, in particular, the Internal Revenue
Code of 1986, as amended (the "Code"), Treasury regulations promulgated
thereunder and other administrative and judicial interpretations thereof, all of
which are subject to change at any time, with or without retroactive effect.
This discussion also generally assumes that each holder holds the Exchange Notes
as capital assets and that any amounts received by a Non-U.S. Holder with
respect to the Exchange Notes are not effectively connected with the conduct by
such Non-U.S. Holder of a trade or business in the United States. Each
prospective holder is advised to consult
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its own tax adviser with respect to current and possible future tax consequences
of acquiring, holding and disposing of the Exchange Notes.
THE EXCHANGE OFFER
The exchange of Old Notes for Exchange Notes pursuant to the Exchange
Offer should not be a taxable event for United States federal income tax
purposes, because under existing Treasury regulations, the Exchange Notes will
not differ materially in kind or extent from the Old Notes. Accordingly, such
exchange will not result in taxable income, gain or loss to a holder, or to the
Company. A holder which participates in the Exchange Offer shall have the same
tax basis and holding period in the Exchange Notes immediately after the
exchange as such holder had in the Old Notes immediately prior to the exchange.
U.S. HOLDERS
Interest on the Exchange Notes. Interest on an Exchange Note will be
taxable to a U.S. Holder as ordinary interest income in accordance with the U.S.
Holder's method of tax accounting at the time that such interest is accrued or
(actually or constructively) received.
Premium and Market Discount. A U.S. Holder of an Exchange Note
purchased at a premium (i.e., a cost greater than its principal amount) may
elect to amortize such premium (as an offset to interest income), using a
constant-yield method, over the remaining term of the Exchange Note. Special
rules apply which may require the amount of premium and the amortization thereof
to be determined with reference to the optional redemption price and date. A
U.S. Holder that elects to amortize such premium must reduce its tax basis in an
Exchange Note by the amount of the premium amortized during the holding period.
With respect to a U.S. Holder that does not elect to amortize bond premium, the
amount of bond premium will continue to be reflected in the U.S. Holder's tax
basis. Therefore, a U.S. Holder that does not elect to amortize such premium,
and that holds the Exchange Note to maturity, will generally be required to
treat the premium as capital loss when the Exchange Note matures.
If a U.S. Holder of an Exchange Note purchases the Exchange Note at an
amount that is less than its principal amount, the Exchange Note generally will
be considered to bear "market discount" in the hands of such U.S. Holder. In
such case, gain realized by the U.S. Holder on the sale, exchange, or retirement
and unrealized appreciation on certain nontaxable dispositions of the Exchange
Note generally will be treated as ordinary interest income to the extent of the
market discount that accrued on the Exchange Note while held by such U.S. Holder
and to the extent it has not previously been included in income (pursuant to an
election by the U.S. Holder to include such market discount in income as it
accrues). In addition, the U.S. Holder may be required to defer the deduction of
a portion of the interest paid on any indebtedness incurred or continued to
purchase or carry the Exchange Note. In general terms, market discount on an
Exchange Note will be treated as accruing ratably over the term of such Exchange
Note, or, at the election of the U.S. Holder, under a constant yield method.
However, a U.S. Holder may elect to include market discount in income on a
current basis as it accrues (on either a ratable or constant yield basis), in
lieu of treating a portion of any gain realized on the sale of an Exchange Note
as ordinary income. If a U.S. Holder so elects, the interest deduction deferral
rule described above will not apply.
Disposition of the Notes. In general, the U.S. Holder of an Exchange
Note will recognize capital gain or loss upon the sale, redemption, retirement
or other disposition of the Exchange Note measured by the difference between the
amount realized (except to the extent attributable to the payment of accrued
interest not previously included in income) and the U.S. Holder's tax basis in
the Exchange Note. A U.S. Holder's tax basis in an Exchange Note generally will
equal the cost of the Exchange Note to the U.S. Holder increased by the amount
of market discount, if any, previously taken into income by the U.S. Holder or
decreased by any amortized bond premium and any payments other than payments of
interest made on such Note. Except to the extent characterized as market
discount the gain or loss on such disposition of the Notes will be capital gain
or loss. The recently-enacted Taxpayer Relief Act (the "Act") of 1997 provides
for the alternative rates of tax dependency on (i) whether the U.S. Holder is an
individual or corporation, (ii) how long the U.S. Holder held the Exchange Note
at the time of disposition, and (iii) the year of disposition (i.e., because the
maximum rate of tax on net capital gains, as defined in the Act, for individuals
is reduced in later years). U.S. Holders are urged to consult their tax advisers
regarding
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the type of capital gain and the tax rates thereon which may be generated upon
the sale or other disposition of an Exchange Note.
NON-U.S. HOLDERS
Payments of Interest. A Non-U.S. Holder will not be subject to United
States federal income tax by withholding or otherwise on payments of interest on
an Exchange Note (provided that the beneficial owner of the Exchange Note
fulfills the statement requirements set forth in applicable Treasury
regulations) unless (A) such Non-U.S. Holder (i) actually or constructively owns
10% or more of the total combined voting power of all classes of stock of the
Company entitled to vote, (ii) is a controlled foreign corporation related,
directly or indirectly, to the Company through stock ownership, or (iii) is a
bank receiving interest described in Section 881(c)(3)(A) of the Code or (B)
such interest is effectively connected with the conduct of a trade or business
by the Non-U.S. Holder in the United States.
Gain on Disposition of the Notes. A Non-U.S. Holder will not be subject
to United States federal income tax by withholding or otherwise on any gain
realized upon the disposition of an Exchange Note unless (i) in the case of a
Non-U.S. Holder who is an individual, such Non-U.S. Holder is present in the
United States for a period or periods aggregating 183 days or more during the
taxable year of the disposition (in which case such individual may be taxed as a
U.S. Holder in any event) or (ii) the gain is effectively connected with the
conduct of a trade or business by the Non-U.S. Holder in the United States.
Effectively Connected Income. To the extent that interest income or
gains on the disposition of the Exchange Notes are effectively connected with
the conduct of a trade or business of the Non-U.S. Holder in the United States,
such income will be subject to United States federal income tax at the same
rates generally applicable to United States persons. Additionally, in the case
of a U.S. Holder which is a corporation, such effectively connected income may
be subject to the United States branch profits tax at the rate of 30% (or lower
treaty rate).
Treaties. A tax treaty between the United States and a country in which
a Non-U.S. Holder is a resident may alter the tax consequences described above.
Estate Tax. Exchange Notes held at the time of death by an individual
holder, who at such time was not a citizen or resident of the United States,
will not be subject to United States federal estate tax, provided that at such
time, (i) the holder did 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; and (ii) payments of interest with respect to the Exchange Notes would not
have been, if received at the time of such individual's death, effectively
connected with the conduct of a United States trade or business by such
individual.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Interest and payments of proceeds from the disposition by certain
non-corporate holders of Exchange Notes may be subject to backup withholding at
a rate of 31%. Such a U.S. Holder generally will be subject to backup
withholding at a rate of 31% unless the recipient of such payment supplies an
accurate taxpayer identification number, as well as certain other information,
or otherwise establishes, in the manner prescribed by law, an exemption from
backup withholding. Any amount withheld under backup withholding is allowable as
a credit against the U.S. Holder's federal income tax upon furnishing the
required information to the Internal Revenue Service.
Generally, backup withholding of United States federal income tax at a
rate of 31% and information reporting may apply to payments of principal,
interest and premium (if any) to Non-U.S. Holders that are not "Exempt
Recipients" and that fail to provide certain information as may be required by
United States law and applicable regulations. The payment of the proceeds of the
disposition of Exchange Notes to or through the United States office of a broker
will be subject to information reporting and backup withholding at a rate of 31%
unless the owner certifies its status as a Non-U.S. Holder under penalties of
perjury or otherwise establishes an exemption. The proceeds of the disposition
by a Non-U.S. Holder of Exchange Notes to or through a foreign office of a
broker will not be subject to backup withholding. However, if such broker
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is a United States person, a controlled foreign corporation for United States
tax purposes, or a foreign person 50% or more of whose gross income from all
sources for a specified three-year period is from activities that are
effectively connected with a United States trade or business, information
reporting will apply unless such broker has documentary evidence (other than
merely a foreign address) in its files of the owner's status as a Non-U.S.
Holder and has no actual knowledge to the contrary. Certain certification
requirements may have to be satisfied in order to avoid backup withholding under
the foregoing rules. Under temporary Treasury regulations, both backup
withholding and information reporting will apply to the proceeds from such
dispositions if the broker has actual knowledge that the payee is a U.S. Holder.
Holders should consult their tax advisors regarding the application of
information reporting and backup withholding in their particular situation and
the availability of an exemption therefrom, and the procedures for obtaining any
such exemption.
BOOK-ENTRY; DELIVERY AND FORM
Except as described in the next paragraph, the Old Notes (and the
related guarantees) are represented by one or more permanent global certificates
in definitive, fully registered form (the "Outstanding Global Notes") and the
Exchange Notes will be issued in the form of one or more, permanent global
certificates in definitive fully registered form (the "Exchange Global Notes").
The term "Global Notes" means the Outstanding Global Note, or the Exchange
Global Note, as the context may require. The Outstanding Global Notes were
deposited on the date of closing of the sale of the Old Notes, and the Exchange
Global Notes will be deposited on the date of closing of the Exchange Offer,
with, or on behalf of, DTC and registered in the name of a nominee of DTC. The
Outstanding Global Notes are subject to certain restrictions on transfer set
forth therein and will bear a legend regarding such restrictions.
Old Notes and Exchange Notes held by "qualified institutional buyers"
(as defined in Rule 144A promulgated under the Securities Act) ("QIBs") or
Accredited Investors who are not QIBs, in each case who elect to take physical
delivery of their certificates instead of holding their interests through the
Global Notes (and which are thus ineligible to trade through DTC) (collectively
referred to herein as the "Non-Global Purchasers") were, or will be, as the case
may be, issued in registered form (the "Certificated Security"). Upon the
transfer to a QIB of any Certificated Security initially issued to a Non- Global
Purchaser, such Certificated Security will, unless the transferee requests
otherwise or the Global Notes have previously been exchanged in whole for
Certificated Securities, be exchanged for an interest in the Global Notes.
The Global Notes. The Company expects that pursuant to procedures
established by DTC (i) upon the issuance of the Global Notes, DTC or its
custodian will credit, on its internal system, the principal amount of Notes of
the individual beneficial interests represented by such Global Notes to the
respective accounts of persons who have accounts with such depositary and (ii)
ownership of beneficial interests in the Global Notes will be shown on, and the
transfer of such ownership will be effected only through, records maintained by
DTC or its nominee (with respect to interests of participants) and the records
of participants (with respect to interests of persons other than participants).
Such accounts initially will be designated by or on behalf of the Initial
Purchasers and ownership of beneficial interests in the Global Notes will be
limited to persons who have accounts with DTC ("participants") or persons who
hold interests through participants. QIBs and Accredited Investors may hold
their interests in the Global Notes directly through DTC if they are
participants in such system, or indirectly through organizations which are
participants in such system.
So long as DTC, or its nominee, is the registered owner or holder of
the Notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by such Global Notes for all purposes
under the Indenture. No beneficial owner of an interest in the Global Notes will
be able to transfer that interest except in accordance with DTC's procedures, in
addition to those provided for under the Indenture with respect to the Notes.
Payments of the principal of, premium (if any) and interest (including
Additional Interest) on the Global Notes will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. None of the Company, the
Trustee or any Paying Agent will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the Global Notes or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interest.
109
<PAGE> 118
The Company expects that DTC or its nominee, upon receipt of any
payment of principal, premium, if any, and interest (including Additional
Interest) on the Global Notes, will credit participants' accounts with payments
in amounts proportionate to their respective beneficial interests in the
principal amount of the Global Notes as shown on the records of DTC or its
nominee. The Company also expects that payments by participants to owners of
beneficial interests in the Global Notes held through such participants will be
governed by standing instructions and customary practice, as is now the case
with securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
participants.
Transfers between participants in DTC will be effected in the ordinary
way through DTC's same-day funds system in accordance with DTC rules and will be
settled in same day funds. If a holder requires physical delivery of a
Certificated Security for any reason, including to sell Notes to persons in
states that require physical delivery of the Notes, or to pledge such
securities, such holder must transfer its interest in the Global Notes, in
accordance with the normal procedures of DTC and with the procedures set forth
in the Indenture.
DTC has advised the Company that it will take any action permitted to
be taken by a holder of Notes (including the presentation of Notes for exchange
as described below) only at the direction of one or more participants to whose
account the DTC interests in the Global Notes are credited and only in respect
of such portion of the aggregate principal amount of Notes as to which such
participant or participants has or have given such direction. However, if there
is an Event of Default under the Indenture, DTC will exchange the Global Notes
for Certificated Securities, which it will distribute to its participants and
which will be legended with respect to transfer restrictions applicable thereto.
DTC has advised the Company as follows: DTC is a limited-purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Notes among participants of DTC,
it is under no obligation to perform such procedures and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Certificated Securities. If DTC is at any time unwilling or unable to
continue as a depositary for the Global Notes and a successor depositary is not
appointed by the Company within 90 days, Certificated Securities will be issued
in exchange for the Global Notes, which certificates will bear the legends with
respect to transfer restrictions applicable thereto.
PLAN OF DISTRIBUTION
Except as provided herein, this Prospectus may not be used for an offer
to resell, resale or other transfer of Exchange Notes.
There is no existing market for the Old Notes. No assurance can be
given as to the liquidity of, or trading markets for, the Exchange Notes.
Based on existing interpretations of the Securities Act by the staff of
the Commission set forth in several no-action letters to third parties, and
subject to the immediately following sentence, the Company believes that the
Exchange Notes issued pursuant to the Exchange Offer may be offered for resale,
resold and otherwise transferred by the holders thereof without further
compliance with the registration and prospectus delivery provisions of the
Securities Act. However, any
110
<PAGE> 119
holder of Old Notes who is an"affiliate" of the Company or who intends to
participate in the Exchange Offer for the purpose of distributing the Exchange
Notes (i) will not be able to rely on the interpretation by the staff of the
Commission set forth in the above-mentioned no-action letters, (ii) will not be
able to tender its Old Notes in the Exchange Offer and (iii) must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any sale or transfer of the Old Notes unless such sale or
transfer is made pursuant to an exemption from such requirements.
Each holder of the Old Notes (other than certain specified holders) who
wishes to exchange Old Notes for Exchange Notes in the Exchange Offer will be
required to represent to the Company, among other things, (i) that any Exchange
Notes to be received by it will be acquired in the ordinary course of its
business, (ii) that at the time of the commencement of the Exchange Offer, it
has no arrangement or understanding with any person to participate in the
distribution (within the meaning of the Securities Act) of the Exchange Notes in
violation of the Securities Act, (iii) that it is not an "affiliate" (as defined
in Rule 405 promulgated under the Securities Act) of the Company, (iv) if such
holder it is not a Participating Broker-Dealer, that is not engaged in, and does
not intend to engage in, the distribution of Exchange Notes and (v) if such
holder is a Participating Broker-Dealer that will receive Exchange Notes for its
own account in exchange for Old Notes that were acquired as a result of
market-making or other trading activities, that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
also states that by acknowledging that it will deliver a prospectus, and by
delivering such a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. The Commission
has taken the position that Participating Broker- Dealers may fulfill their
prospectus delivery requirements with respect to the Exchange Notes (other than
a resale of an unsold allotment from the original sale of the Old Notes) with
the Prospectus contained in the Exchange Offer Registration Statement. The
Company and the Guarantors have agreed to make available, during the period
required by the Securities Act, a prospectus meeting the requirements of the
Securities Act for use by Participating Broker-Dealers and other persons, if
any, with similar prospectus delivery requirements for use in connection with
any resale of such Exchange Notes. In addition, until ____________, 1997, (90
days after the date of this Prospectus), all dealers effecting transactions in
the Exchange Notes may be required to deliver a prospectus.
Each Participating Broker-Dealer that receives Exchange Notes for its
own account pursuant to the Exchange Offer must acknowledge that it will deliver
this Prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer who holds Old Notes acquired for its own
account as a result of market-making activities or other trading activities in
connection with resales of Exchange Notes received in Exchange of Old Notes.
The Company will not receive any proceeds from the exchange of Old
Notes for Exchange Notes, including those exchanged by Participating
Broker-Dealers. Exchange 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 on the Exchange Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, or at prices related
to such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through broker-dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any Exchange Notes. Any broker-dealer
that resells Exchange Notes that were received by it for its own account
pursuant to the Exchange Offer and any person that participates in the
distribution of such Exchange Notes may be deemed an "underwriter" within the
meaning of the Securities Act and any profit on any such resale of Exchange
Notes and any commissions or concessions received by any such broker-dealers may
be deemed to be underwriting compensation under the Securities Act.
For a period of 90 days after the Expiration Date, the Company will
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any Participating Broker-Dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incidental to the Exchange Offer other than discounts or commissions of any
broker-dealers and will indemnify the holders of the Old Notes (including
Participating Broker- Dealers) participating in the Exchange Offer against
certain liabilities, including liabilities under the Securities Act.
By acceptance of this Exchange Offer, each broker-dealer that receives
Exchange Notes for Old Notes pursuant to the Exchange Offer agrees that, upon
receipt of notice from the Company of the happening of any event which makes any
111
<PAGE> 120
statement in this Prospectus untrue in any material respect or which requires
the making of any changes in this Prospectus in order to make the statement
herein not misleading (which notice the Company agrees to deliver promptly to
such broker-dealer), such broker-dealer will suspend the use of this Prospectus
until the Company has amended or supplemented this Prospectus to correct such
misstatement or omission and has furnished copies of the amended or supplemented
Prospectus to such broker-dealer. If the Company gives any such notice to
suspend the use of the Prospectus, it will extend the 90-day period referred to
above by the number of days during the period from and including the date of the
giving of such notice up to and including when broker-dealers shall have
received copies of the supplemented or amended Prospectus necessary to permit
resales of Exchange Notes.
The Company has agreed, pursuant to the Registration Rights Agreement,
to pay all expenses incident to the Exchange Offer (other than any underwriting
discounts or commissions), including reasonable fees and disbursements of one
special counsel for all of the Holders of the Notes. In addition, the Company
and the Guarantors agreed to indemnify the holders of the Notes against certain
liabilities.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
the Company by Shereff, Friedman, Hoffman & Goodman, LLP.
EXPERTS
The consolidated financial statements of Safety Components
International, Inc. as of March 31, 1997 and March 31, 1996 and for the three
years ended March 31, 1997 included in this Prospectus have been audited by
Price Waterhouse LLP, independent accountants, as indicated in their report with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in auditing and accounting. The financial statements of Valentec
International Corporation as of March 31, 1997 and for the year ended March 31,
1997 included in this Prospectus have been audited by Price Waterhouse LLP,
independent accountants, as indicated in their report with respect thereto, and
are included herein in reliance upon the authority of said firm as experts in
auditing and accounting. The financial statements of the Air Restraint/
Industrial Fabrics Division of JPS as of December 28, 1996, and December 31,
1995, and for the period from December 12, 1996 to December 28, 1996, the period
from January 1, 1996 to December 11, 1996, the year ended December 31, 1995, and
the period from June 29, 1994 to January 1, 1995, included in this Prospectus
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in an auditing and
accounting. The financial statements of the Air Restraint/Industrial Fabrics
Division of JPS Textile Group, Inc. for the period from December 26, 1993 to
June 28, 1994 included in this Prospectus have been audited by Coopers & Lybrand
L.L.P., independent accountants, the authority of said firm as experts in
auditing and accounting. The financial statements of Phoenix AG's Airbag
Division as of December 31, 1995, the balance sheet as of December 31, 1994 as
well as the revenues of 1994 included in this Prospectus have been audited by
BDO Deutsche Warentreuhand AG, Hamburg, independent accountants, as indicated in
their report with respect thereto, and are included herein in reliance upon said
firms as experts in auditing and accounting. The consolidated financial
statements of Phoenix Airbag as of August 5, 1996 and for the period from
January 1, 1996 through August 5, 1996, included in this Prospectus have been
audited by Price Waterhouse, GmbH, Hamburg Germany, independent accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in auditing and accounting.
112
<PAGE> 121
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
SAFETY COMPONENTS INTERNATIONAL, INC. CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants.................................................. F-3
Consolidated Balance Sheets as of March 31, 1997 and 1996.......................... F-4
Consolidated Statements of Operations for Each of the Three Years in the Period
Ended March 31, 1997............................................................ F-5
Consolidated Statements of Stockholders' Equity for Each of the Three Years Ended
March 31, 1997.................................................................. F-6
Consolidated Statements of Cash Flows for Each of the Three Years in the Period
Ended March 31, 1997............................................................ F-7
Notes to Consolidated Financial Statements......................................... F-8
VALENTEC INTERNATIONAL CORPORATION FINANCIAL STATEMENTS
Report of Independent Accountants.................................................. F-33
Historical Balance Sheet Excluding Assets and Liabilities of Valentec
International, Ltd. as of March 31, 1997........................................ F-34
Historical Statements of Operations and Accumulated Deficit Excluding Operations of
Valentec International, Ltd. for the Year Ended March 31, 1997.................. F-35
Historical Statements of Cash Flows Excluding Cash Flows of Valentec International,
Ltd. for the Year Ended March 31, 1997.......................................... F-36
Notes to Historical Financial Statements........................................... F-37
JPS AUTOMOTIVE L.P. AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION INTERIM FINANCIAL
STATEMENTS
Balance Sheets as of March 29, 1997 (Unaudited) and December 28, 1996.............. F-49
Statements of Operations for the Period from December 29, 1996, to March 29, 1997
(Unaudited) and the Period from January 1, 1996, to March 30, 1996
(Unaudited)..................................................................... F-50
Statements of Cash Flows for the Period from December 29, 1996, to March 29, 1997
(Unaudited) and the Period from January 1, 1996, to March 30, 1996
(Unaudited)..................................................................... F-51
Notes to Interim Financial Statements.............................................. F-52
JPS AUTOMOTIVE L.P. AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION FINANCIAL STATEMENTS
Report of Independent Public Accountants........................................... F-56
Balance Sheets as of December 28, 1996 and December 31, 1995....................... F-57
Statements of Operations for the Period from December 12, 1996 to December 28, 1996
and the Period from January 1, 1996 to December 11, 1996 and the Year Ended
December 31, 1995 and the period from June 29, 1994, to January 1, 1995......... F-58
Statements of Divisional Equity for the Period from December 12, 1996 to December
28, 1996 and the Period from January 1, 1996 to December 11, 1996 and the Year
Ended December 31, 1995 and the period from June 29, 1994, to January 1, 1995... F-59
Statements of Cash Flows for the Period from December 12, 1996 to December 28, 1996
and the Period from January 1, 1996 to December 11, 1996 and the Year Ended
December 31, 1995 and the period from June 29, 1994, to January 1, 1995......... F-60
Notes to Financial Statements...................................................... F-61
AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION OF JPS TEXTILE GROUP, INC.
Report of Independent Accountants.................................................. F-77
Statement of Income for the Period from December 26, 1993 to June 28, 1994......... F-79
Statement of Divisional Equity for the Period from December 26, 1993 to June 28,
1994............................................................................ F-80
Statement of Cash Flows for the Period from December 26, 1993 to June 28, 1994..... F-81
Notes to Financial Statements...................................................... F-82
</TABLE>
F-1
<PAGE> 122
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PHOENIX AG'S AIRBAG DIVISION
Report of Independent Accountants.................................................. F-89
Balance Sheets as of December 31, 1995 and December 31, 1994....................... F-90
Statement of Operations and Retained (Deficit) Earnings for the Year Ended December
31, 1995........................................................................ F-91
Cash Flow Statement for the Year Ended December 31, 1995 and December 31, 1996..... F-92
Notes to the Accounts.............................................................. F-93
PHOENIX AIRBAG GMBH
Report of Independent Accountants.................................................. F-97
Balance Sheet as of August 5, 1996................................................. F-98
Statement of Operations for the Period from January 1, 1996 to August 5, 1996...... F-99
Statement of Cash Flows for the Period from January 1, 1996 to August 5, 1996...... F-100
Notes to the Financial Statements.................................................. F-101
</TABLE>
F-2
<PAGE> 123
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders
of Safety Components International, Inc.:
In our opinion, the consolidated financial statements of Safety Components
International, Inc. and subsidiaries listed in the accompanying "Index to
Financial Statements" appearing on page F-1, present fairly, in all material
respects, the consolidated financial position of Safety Components
International, Inc. and its subsidiaries as of March 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended March 31, 1997 in conformity with generally
accepted accounting principles. These consolidated financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these consolidated financial statements based on our audits. We
conducted our audits of these consolidated financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
As discussed in Note 2 to the consolidated financial statements, the
Company changed its method of accounting for product launch costs in fiscal year
1997.
PRICE WATERHOUSE LLP
Costa Mesa, California
May 22, 1997 except for Notes 1, 6 and 13, which are as of July 24, 1997
F-3
<PAGE> 124
SAFETY COMPONENTS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1997 AND MARCH 31, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................................. $ 8,320 $12,033
Accounts receivable, net (Notes 2 and 4)............................... 11,751 16,597
Inventories (Notes 2 and 4)............................................ 6,378 5,315
Prepaid and other...................................................... 870 925
------- -------
Total current assets........................................... 27,319 34,870
Property, plant and equipment, net (Notes 2 and 4)....................... 28,295 12,192
Receivable from affiliate (Note 5)....................................... 4,348 17
Intangible assets, net (Note 2).......................................... 10,991 --
Other assets............................................................. 2,454 2,752
------- -------
Total assets................................................... $73,407 $49,831
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................................... $ 7,792 $ 8,066
Earnout payable (Note 1)............................................... 2,211 --
Accrued liabilities.................................................... 2,476 1,057
Current portion of long-term obligations (Note 6)...................... 3,085 697
------- -------
Total current liabilities...................................... 15,564 9,820
Long-term obligations (Note 6)........................................... 21,296 3,087
Other long-term liabilities.............................................. 1,273 1,580
------- -------
Total liabilities.............................................. 38,133 14,487
------- -------
Commitments and contingencies (Note 8)
Stockholders' equity (Notes 3 and 11):
Preferred stock: $.10 par value per share -- 2,000,000 shares
authorized; no shares outstanding at March 31, 1997 and 1996........ -- --
Common stock: $.01 par value per share -- 10,000,000 shares authorized;
5,025,383 and 5,048,500 shares issued and outstanding at March 31,
1997 and 1996, respectively......................................... 51 51
Common stock warrants.................................................. 1 1
Additional paid-in-capital............................................. 30,062 30,058
Treasury stock, 113,492 and 90,000 shares, at March 31, 1997 and 1996,
respectively, at cost............................................... (1,647) (1,379)
Retained earnings...................................................... 9,183 6,979
Cumulative translation adjustment (Note 2)............................. (2,376) (366)
------- -------
Total stockholders' equity..................................... 35,274 35,344
------- -------
Total liabilities and stockholders' equity..................... $73,407 $49,831
======= =======
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 125
SAFETY COMPONENTS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 1997, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net sales (Notes 2 and 5).............................. $ 83,958 $ 94,942 $ 51,779
Cost of sales, excluding depreciation and product
launch costs......................................... 64,130 80,804 43,810
Depreciation........................................... 2,043 1,104 743
Product launch costs (Note 2).......................... 1,761 -- --
---------- ---------- ----------
Gross profit................................. 16,024 13,034 7,226
Selling and marketing expenses......................... 1,375 1,102 894
General and administrative expenses.................... 5,697 4,328 3,156
Amortization of goodwill (Note 2)...................... 348 -- --
---------- ---------- ----------
Income from operations....................... 8,604 7,604 3,176
Other expense (income)................................. 208 (807) (484)
Interest expense....................................... 1,555 381 244
---------- ---------- ----------
Income before income taxes................... 6,841 8,030 3,416
Provision for income taxes (Notes 2 and 7)............. 2,995 3,116 1,283
---------- ---------- ----------
Income before extraordinary item and cumulative effect
of accounting change................................. 3,846 4,914 2,133
Extraordinary item -- financing costs (less tax benefit
of $255) (Note 2).................................... (383) -- --
Cumulative effect of change in accounting for product
launch costs (less tax benefit of $718) (Note 2)..... (1,259) -- --
---------- ---------- ----------
Net income............................................. $ 2,204 $ 4,914 $ 2,133
========== ========== ==========
Earnings per common share (Note 2):
Income before extraordinary item and cumulative
effect of change in accounting.................... $ 0.77 $ 0.99 $ 0.53
Extraordinary item................................... (0.08) -- --
Cumulative effect of change in accounting for
deferred product launch costs..................... (0.25) -- --
---------- ---------- ----------
Net income per share................................. $ 0.44 $ 0.99 $ 0.53
========== ========== ==========
Weighted average number of shares outstanding.......... 5,026,501 4,980,884 4,030,787
========== ========== ==========
</TABLE>
Note: Pro forma amounts assuming the new accounting method is applied
retroactively are reflected in tabular form in Note 2.
See notes to consolidated financial statements.
F-5
<PAGE> 126
SAFETY COMPONENTS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1995, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
COMMON COMMON COMMON ADDITIONAL CUMULATIVE
STOCK STOCK STOCK PAID-IN TREASURY RETAINED TRANSLATION DIVISION
SHARES AMOUNT WARRANTS CAPITAL STOCK EARNINGS ADJUSTMENT EQUITY
--------- ------ --------- ---------- -------- --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31,1994............ 2,400,000 $ 24 $-- $ -- $ -- $ -- $ -- $ 866
Net income for the period from
April 1, 1994 to May 13, 1994... -- -- -- -- -- -- -- 68
Transfer of Assets (Note 3)....... -- -- -- 934 -- -- -- (934)
Capital contribution from Valentec
(Note 3)........................ (100,000) (1) -- -- -- -- -- --
Issuance of common stock (Note
3).............................. 1,760,000 18 -- 12,661 -- -- -- --
Issuance of warrants for 128,000
shares of common stock (Note
3).............................. -- -- 1 -- -- -- -- --
Net income for the period from May
14, 1994 to March 31, 1995...... -- -- -- -- -- 2,065 -- --
Foreign currency translation
adjustment...................... -- -- -- -- -- -- 269 --
--------- --- ------- ------- ------ ------- -----
--
Balance at March 31, 1995........... 4,060,000 41 13,595 -- 2,065 269 --
1
Issuance of common stock.......... 1,078,500 10 16,557 -- -- -- --
--
Purchase of treasury stock........ (90,000) -- -- (1,379) -- -- --
--
Repurchase of warrants for
23,600 shares of common
stock........................... -- -- (94) -- -- -- --
--
Net Income for the year ended
March 31, 1996.................. -- -- -- -- 4,914 -- --
--
Foreign currency translation
adjustment...................... -- -- -- -- -- (635) --
--
--------- --- ------- ------- ------ ------- -----
--
Balance at March 31, 1996........... 5,048,500 51 30,058 (1,379) 6,979 (366) --
1
Issuance of common stock.......... 375 -- 4 -- -- -- --
--
Purchase of treasury stock........ (23,492) -- -- (268) -- -- --
--
Net Income for the year ended
March 31, 1997.................. -- -- -- -- 2,204 -- --
--
Foreign currency translation
adjustment...................... -- -- -- -- -- (2,010) --
--
--------- --- ------- ------- ------ ------- -----
--
Balance at March 31, 1997........... 5,025,383 $ 51 $ 30,062 $(1,647) $ 9,183 $ (2,376) $ --
$ 1
========= === ======= ======= ====== ======= =====
==
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 127
SAFETY COMPONENTS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income................................................. $ 2,204 $ 4,914 $ 2,133
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation............................................ 2,043 1,104 743
Amortization............................................ 348 -- --
Extraordinary item...................................... 638 -- --
Cumulative effect of change in accounting principle..... 1,977 -- --
Deferred income taxes................................... (280) -- --
Changes in operating assets and liabilities:
Accounts receivable................................... 5,968 (9,662) (4,607)
Inventories........................................... 375 532 (3,024)
Prepaid and other current assets...................... 55 (268) (60)
Other assets.......................................... (2,309) (440) (1,500)
Accounts payable...................................... (1,547) 749 4,938
Accrued liabilities................................... 1,643 (429) 476
-------- ------- -------
Net cash provided by (used in) operating
activities....................................... 11,115 (3,500) (901)
-------- ------- -------
Cash Flows From Investing Activities:
Additions to property, plant and equipment................. (8,613) (4,588) (2,473)
Purchase of Phoenix Airbag, net of cash acquired........... (24,257) -- --
-------- ------- -------
Net cash (used in) investing activities............ (32,870) (4,588) (2,473)
-------- ------- -------
Cash Flows From Financing Activities:
Net proceeds from sale of common stock..................... 4 16,568 14,564
Purchase of treasury stock................................. (268) (1,379) --
Repurchase of common stock warrants........................ -- (94) --
Payment to parent company in consideration for transfer of
assets.................................................. -- -- (1,885)
Proceeds from term note.................................... 20,000 -- --
(Repayments) borrowings of debt and long-term
obligations............................................. (3,764) 1,460 (3,269)
Net borrowing on revolving credit facility................. 2,931 -- --
Changes in intercompany accounts........................... -- -- (2,326)
-------- ------- -------
Net cash provided by financing activities.......... 18,903 16,555 7,084
-------- ------- -------
Effect of exchange rate changes on cash...................... (861) (280) 96
-------- ------- -------
Change in cash and cash equivalents.......................... (3,713) 8,187 3,806
Cash and cash equivalents, beginning of period............... 12,033 3,846 40
-------- ------- -------
Cash and cash equivalents, end of period..................... $ 8,320 $12,033 $ 3,846
======== ======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest................................................ $ 1,555 $ 381 $ 134
Income taxes............................................ 1,819 2,344 993
Supplemental disclosure of non-cash transactions:
Equipment acquired under capital lease obligations......... $ 1,430 $ -- $ --
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE> 128
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 ORGANIZATION AND BUSINESS
Safety Components International, Inc. (the "Company" or "SCI") was formed
to acquire certain assets and assume certain liabilities from Valentec
International Corporation ("Valentec Oldco"). Raz Acquisition Corporation
("RAZ") was formed to acquire all of the outstanding common stock of Valentec
Oldco from Insilco Corporation ("Insilco"). Subsequent to the acquisition,
Valentec Oldco was merged into RAZ which subsequently changed its name to
Valentec International Corporation ("Valentec") which was effected on August 27,
1993. The acquisition was accounted for as a purchase. The operations from April
1, 1994 to May 12, 1994 are reflected as division equity in the accompanying
consolidated stockholders' equity. On May 13, 1994, upon the completion of its
initial public offering ("Initial Public Offering"), the Company acquired
certain assets and assumed certain liabilities from Valentec which were
accounted for utilizing the historical bases of Valentec similar to that of a
pooling of interest.
On August 6, 1996, Automotive Safety Components International ("ASCI"), a
wholly-owned subsidiary of the Company, acquired 80% of the outstanding capital
stock of Phoenix Airbag GmbH ("Phoenix Airbag"). Phoenix Airbag was a
corporation organized under the laws of the Republic of Germany, and at the time
of the acquisition, was a wholly-owned subsidiary of Phoenix Aktiengesellschaft
("Phoenix AG") in Hamburg, Germany. The purchase from Phoenix AG was made in
accordance with the terms and conditions of the Agreement Concerning the Sale
and Transfer of all the Shares in Phoenix Airbag GmbH ("Stock Purchase
Agreement") dated June 6, 1996, as amended. The acquisition was completed on
August 5, 1996.
Pursuant to the Stock Purchase Agreement, eighty percent of Phoenix AG's
interest in Phoenix Airbag was acquired for an initial purchase price of $20.0
million, subject to a net worth adjustment which decreased the initial purchase
price by $2.0 million. Additional purchase consideration of up to approximately
$7.0 million for the remaining twenty percent interest is contingent on Phoenix
Airbag meeting certain performance targets during calendar years 1996 through
1998. If the annual targets are met, payments are to be paid annually commencing
April 30, 1997. Phoenix Airbag met its performance target for calendar 1996, and
ASCI paid its first contingent purchase price payment $2.2 million subsequent to
March 31, 1997. Accordingly, such payment is accrued in the accompanying
consolidated balance sheet at March 31, 1997. If the remaining performance
targets are not met, ASCI would acquire the remaining twenty percent without the
payment of any additional consideration. Additionally, ASCI may, under certain
circumstances, be required to provide a bank guaranty to Phoenix AG, in August
1997, to secure the payment of up to approximately $4.8 million of the
contingent purchase price.
The acquisition was accounted for as a purchase. Although ASCI will acquire
the remaining 20% interest effective December 31, 1998, it is entitled to 100%
of the income or losses, risks and rewards of Phoenix Airbag commencing August
6, 1996. Accordingly, all assets and liabilities were reflected at fair value at
the date of acquisition, and no minority interest was recorded in the
accompanying consolidated financial statements for Phoenix AG's remaining 20%
interest. Through March 31, 1997, the cumulative purchase price amounted to
approximately $24.2 million, including $3.1 million of direct acquisition costs.
Management of the Company allocated the purchase consideration for Phoenix
Airbag assets at fair market value, net of liabilities assumed, with the excess
allocated to goodwill. The unaudited pro forma revenues, net income and
F-8
<PAGE> 129
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
net income per common share, assuming the acquisition of Phoenix Airbag was
consummated on April 1, 1996, are as follows (in thousands):
<TABLE>
<CAPTION>
PRO FORMA MARCH 31,
--------------------
1997 1996
------- --------
<S> <C> <C>
Revenues........................................................ $96,339 $128,118
======= ========
Income before extraordinary item and cumulative effect of
accounting change............................................. $ 4,473 $ --
======= ========
Net income...................................................... $ 2,831 $ 5,469
======= ========
Income before extraordinary item and cumulative effect of
accounting change per common share............................ $ 0.89 $ --
======= ========
Net income per common share..................................... $ 0.56 $ 1.10
======= ========
</TABLE>
The Company's Automotive segment manufactures automotive airbags for
specific models of several domestic and foreign automobile manufacturers under
contracts with major airbag systems producers. The Company's Automotive segment
operates in the United States, Europe and Mexico. Through March 31, 1997, the
majority of the Company's sales have been made in the United States. To date,
TRW Vehicle Safety Systems, Inc. ("TRW") and its affiliates have been the
Company's major automotive airbag customer (see Note 2); however, the
acquisition of Phoenix Airbag has significantly diversified the Company's
concentration of sales to this customer and in the United States. In addition,
the Company recently formed a subsidiary to manufacture certain of its products
in a newly constructed facility in the Czech Republic.
The Defense segment consists of two main operating units: Galion and
Systems. Galion manufactures projectiles and other metal components for small to
medium caliber training and tactical ammunition for the U.S. Armed Forces.
Galion also manufactures metal components for use in the automotive and consumer
products industries. Systems was established in June 1994 to serve as the prime
contractor under a $60.0 million systems contract for mortar cartridges (the
"Systems Contract") for the U.S. Army, coordinating the manufacture and assembly
of components supplied by various subcontractors.
Effective as of May 22, 1997, the Company acquired all of the outstanding
stock of Valentec in a stock for stock exchange. Prior to such transaction,
Valentec divested Valentec International Limited ("VIL"), its majority-owned
subsidiary. See Note 13 "Subsequent Events" for further discussion. Valentec is
a high volume manufacturer of stamped and precision machine products in the
automotive, commercial and defense industries, including the manufacture of
belted links for small to medium caliber ammunition and other defense-related
industries.
On July 24, 1997, the Company acquired substantially all of the net assets
of the Air Restraints/Industrial Fabrics Division of JPS Automotive L.P. ("JPS")
for $56.3 million in cash, including the assumption of certain liabilities and
subject to post-closing adjustments (Note 13). In addition, the Company made a
payment to JPS at the closing to enable it to pay off existing indebtedness of
the Division of approximately $650,000 at the closing. The Company will also
incur certain acquisition costs related to the JPS acquisition. JPS is one of
the world's largest manufacturers and suppliers of airbag fabrics as well as
other-value added synthetics fabrics used in a variety of industrial and
commercial applications.
The acquisition of Valentec and JPS were accounted for using the purchase
method of accounting and, accordingly, have been included in the accounts of the
Company as of the respective closing dates of each such acquisition from the
dates of close.
F-9
<PAGE> 130
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The accompanying consolidated financial statements include the accounts of
the majority-owned subsidiaries of Safety Components International, Inc. All
significant intercompany transactions have been eliminated.
Revenue recognition
Revenues are generally recognized as units are shipped to customers.
The Company accounts for certain long-term contracts under the percentage
of completion method, whereby progress toward contract completion is measured on
a cost incurred basis (including direct labor, materials and allocable indirect
manufacturing overhead and general and administrative costs). Losses on
long-term contracts are recognized in the period when such losses are
identified. On certain contracts with the U.S. Government, contract costs,
including indirect costs, are subject to audit and adjustment by negotiations
between the Company and government representatives. Contract revenues have been
recorded in amounts which are expected to be realized upon final settlement
based on historical results.
Annual revenues from major customers
The Company had sales to two customers in fiscal year 1997 aggregating 47%
and 23% of net revenues, respectively. In fiscal year 1996, the Company had
sales from two customers aggregating 48% and 39% of net revenues, respectively.
In fiscal year 1995, the Company had sales to one customer aggregating 83% of
net revenues.
Concentration of credit risk
The Company is subject to a concentration of credit risk consisting of its
trade receivables. At March 31, 1997, two customers accounted for approximately
15% and 17% of its trade receivables, respectively; at March 31, 1996, two
customers accounted for 21% and 51% of its trade receivables, respectively. The
Company performs ongoing credit evaluations of its customers and generally does
not require collateral. The Company evaluates potential losses for uncollectible
accounts and such losses have historically been immaterial and within
management's expectations.
Environmental expenditures
Environmental expenditures that result from the remediation of an existing
condition caused by past operations that will not contribute to current or
future revenues are expensed. Expenditures which extend the life of the related
property or prevent future environmental contamination are capitalized.
Liabilities are recognized for remedial activities when the cleanup is probable
and the cost can be reasonably estimated.
Inventories
Inventories represent direct labor, materials and overhead costs incurred
for products not yet delivered and are stated at the lower of cost (first-in,
first-out) or market.
F-10
<PAGE> 131
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Property, plant and equipment
Property, plant and equipment are stated at cost. Depreciation is
calculated using the straight-line method over the estimated useful lives of the
assets. Leasehold improvements are amortized over the shorter of their estimated
lives or the term of the underlying lease. Estimated useful lives by class of
assets are as follows:
<TABLE>
<S> <C>
Machinery and Equipment................................................ 5 - 10 years
Furniture and Fixtures................................................. 3 - 5 years
Leasehold improvements................................................. 10 - 20 years
Buildings.............................................................. 25 - 40 years
</TABLE>
Expenditures for repairs and maintenance are charged to expense as
incurred. Renewals or betterments of significant items are capitalized. When
assets are sold or otherwise disposed of, the cost and related accumulated
depreciation or amortization are removed from the respective accounts and any
resulting gain or loss is recognized.
The Company assesses the recoverability of long-lived assets by determining
whether the depreciation or amortization of the balances over its remaining life
can be recovered through projected undiscounted cash flows. If there is an
indication of impairment of such assets, the amount of impairment, if any, will
be measured based on projected discounted cash flows and, if available,
comparable market values, and will be charged to operations in the period in
which impairment is determined by management. The methodology that management is
expected to use to project results of operations will be based on a trend line
of expected cash flows generated from the assets in service. No impairment of
assets will be recorded below their estimated net realizable value.
Intangible assets
Intangible and other assets consist of goodwill and patents (see Notes 1
and 3) associated with the acquisition of Phoenix Airbag and are stated at cost
less accumulated amortization. Goodwill and patents are amortized over the
expected periods to be benefited, which have been determined to be between 15
and 25 years, respectively.
The Company assesses the recoverability of intangible assets by determining
whether the amortization of the balances over its remaining life can be
recovered through projected undiscounted cash flows. If there is an indication
of impairment of such assets, the amount of impairment, if any, will be measured
based on projected discounted cash flows and will be charged to operations in
the period in which impairment is determined by management.
Product launch costs
During the 1997 fiscal year, the Company changed its accounting for product
launch costs from the deferral method to the expense as incurred method.
Management believes expensing such costs is comparable with its industry peer
group. Expensing such costs as incurred is considered the preferable method of
accounting and, accordingly, management recorded the cumulative effect of this
change in accounting principle totaling $2.0 million ($1.3 million after income
taxes or $0.25 per share) effective April 1, 1996, in accordance with Accounting
Principles Board Opinion No. 20. During the fiscal year ended March 31, 1997,
the Company incurred approximately $1.8 million of product launch costs which,
under the previously used accounting method, would have been capitalized to
deferred product launch costs. Under the new accounting policy, such costs were
expensed as incurred. The pro forma amounts shown below have been adjusted for
the effect of retroactive application for product launch costs and the related
change in provision for income taxes.
F-11
<PAGE> 132
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pro forma amounts assuming the new accounting method is applied
retroactively are as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
MARCH 31, 1997 MARCH 31, 1996 MARCH 31, 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Income before extraordinary item............. $3,846 -- --
=========== =========== ===========
Income before extraordinary item per common
share................................... $ 0.77 -- --
=========== =========== ===========
Net Income................................... $3,463 $5,017 $ 950
=========== =========== ===========
Net Income per common share................ $ 0.69 $ 1.01 $ 0.24
=========== =========== ===========
</TABLE>
Foreign currency translation
The Company follows the principles of Statement of Financial Accounting
Standards No. 52, "Foreign Currency Translation," ("FAS 52") in accounting for
foreign operations. The financial statements of the Company's subsidiaries,
whose functional currency is the local currency, except the accounts of the
Mexican subsidiary, have been translated into U.S. dollars. Accordingly, all
assets and liabilities outside the United States are translated to U.S. Dollars
at the rate of exchange in effect at the balance sheet date. Income and expense
items are translated at the weighted average exchange rate prevailing during the
period. Translation adjustments are recorded as a separate component of
stockholders' equity. During the year ended March 31, 1997, translation
adjustments, primarily attributable to the Company's German and Czech Republic
subsidiaries, accounted for substantially all of the change in cumulative
translation adjustment activity as reflected in the accompanying consolidated
financial statements.
The financial statements of the Company's subsidiary in Mexico, whose
functional currency is the U.S. Dollar, are remeasured into U.S. Dollars.
Accordingly, monetary assets and liabilities are translated at the rate of
exchange in effect at the balance sheet date and non-monetary assets and
liabilities at historical rates. Income and expense items are translated at a
weighted average exchange rate prevailing during the period, except expenses
related to non-monetary assets and liabilities which are translated at
historical rates. The effect of foreign currency adjustment for this entity is
included in the results of operations. During the reported periods herein, such
amounts were not significant.
Foreign currency transaction gains or losses are reflected in operations.
During the year ended March 31, 1997, transaction losses charged to operations
amounted to $379,000; in 1996 and 1995, such gains and losses were not
significant.
Income taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS
109"). Under the liabilities method specified by FAS 109, the deferred tax
assets and liabilities are measured each year based on the difference between
the financial statement and tax bases of assets and liabilities at the
applicable enacted tax rates. Additionally, a valuation allowance is recorded
for that portion of deferred tax assets for which it is more likely than not
that the assets will not be realized. The deferred tax provision is the result
of changes in the deferred tax assets and liabilities.
Cash equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
F-12
<PAGE> 133
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Fair value of financial instruments
The consolidated financial statements include financial instruments whereby
the fair market value of such instruments may differ from amounts reflected on a
historical basis. Financial instruments of the Company consist of cash deposits,
accounts receivable, advances to affiliates, accounts payable, certain accrued
liabilities, long-term debt and capital leases. The carrying amount of the
Company's long term debt approximates fair market value based on prevailing
market rates. The Company's other financial instruments generally approximate
their fair values at March 31, 1997 and 1996 based on the short-term nature of
these instruments. Advances to affiliates have no readily ascertainable fair
market value and, accordingly, their fair value are not readily determinable.
Deferred financing costs
Costs incurred in connection with financing activities (Note 6), are
capitalized and amortized using the effective interest method, and charged to
interest expense in the accompanying consolidated statements of operations.
Total costs deferred and included in the accompanying consolidated balance
sheets at March 31, 1997 and 1996 were $405,000 and $589,000, respectively.
During fiscal 1997, the Company terminated its line of credit with a bank. Costs
deferred at March 31, 1996 were charged in the accompanying consolidated
statement of operations as an extraordinary item, net of applicable income
taxes.
Earnings per share
Earnings per share amounts have been computed using the weighted average
number of common shares outstanding during each period. In February 1997, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 128, "Earnings per Share" ("FAS 128"). FAS 128 establishes
standards for computing and presenting earnings per share ("EPS"). It replaces
the presentation of primary EPS with a presentation of basic EPS. Basic EPS
excludes dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for the
period. It also requires a reconciliation of the numerator and denominator of
the basic EPS computation to the numerator and denominator of the diluted EPS
computation. Diluted EPS is computed similarly to fully diluted EPS pursuant to
Accounting Principles Board Opinion No. 15. This statement is effective for the
Company beginning with its quarterly period ending December 31, 1997, earlier
adoption is not permitted. Since the Company's capital structure is considered
simple for reporting EPS, the adoption of this principle is not expected to have
a material impact on EPS reporting.
Reclassifications
Certain reclassifications have been made to the consolidated financial
statements for prior periods to conform to the March 31, 1997 presentation.
Use of Estimates
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles, which require management to make
estimates and assumptions that effect the amounts and disclosures reported in
the financial statements and accompanying notes. Significant estimates made by
management include allowances for doubtful accounts receivable, reserves for
inventories, legal actions and environmental issues, and costs to complete on
long term contracts. Actual results could differ from those estimates.
F-13
<PAGE> 134
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3 PUBLIC OFFERINGS
Initial Public Offering
On May 13, 1994, the Company completed its Initial Public Offering by
selling 1.6 million shares of previously unissued common stock at $10.00 per
share (the "Initial Public Offering Price"). In conjunction with the Initial
Public Offering, the underwriter was granted warrants to purchase 128,000 shares
of the Company's common stock at 130% of the Initial Public Offering Price
($13.00) exercisable over a four-year period commencing one year after the
effective date of the registration statement (May 6, 1994). The net proceeds to
the Company from the Initial Public Offering of approximately $14.6 million
(including the proceeds received pursuant to the exercise of the over allotment
option described below) were used to retire the Company's portion of Valentec's
short and long-term debt, pay off its intercompany debt balances with Valentec
(such debt balances were assumed in connection with the transfer of assets
described in Note 1) and pay cash consideration to Valentec for the transfer of
assets. The remaining proceeds have been used to fund the additional growth of
the business. In conjunction with the Initial Public Offering, the underwriter
was granted a 30 day option to purchase up to an aggregate of 240,000 additional
shares (of which 80,000 were to be sold by Valentec) at the Initial Public
Offering Price, less underwriting discounts and accountable expenses. The entire
option was exercised within the 30 day period.
Additional Offering
On June 21, 1995, the Company completed an additional offering (the
"Offering") of 1.5 million shares of common stock at $17.00 per share (the
"Offering Price"), of which the Company sold 1.0 million shares of previously
unissued common stock and Valentec and other selling shareholders sold 500,000
shares. The net proceeds to the Company from the Offering of approximately $16.5
million (including the proceeds received pursuant to the exercise of the over
allotment option described below) has been, and will continue to be, used to
fund the future growth of the business. In conjunction with the Offering, the
underwriter was granted a 30 day option to purchase up to an aggregate of
225,000 additional shares (of which 75,000 shares and 150,000 shares were to be
sold by the Company and Valentec and other selling shareholders, respectively)
at the Offering Price, less underwriting discounts. The entire option was
exercised within the 30 day period.
F-14
<PAGE> 135
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4 COMPOSITION OF CERTAIN CONSOLIDATED BALANCE SHEET COMPONENTS
<TABLE>
<CAPTION>
MARCH 31, 1997 MARCH 31, 1996
-------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Accounts receivable:
Billed receivables.................................... $ 9,152 $ 4,779
Unbilled receivables (net of unliquidated progress
payments of $9,846 and $30,945 in 1997 and 1996,
respectively)...................................... 1,834 8,588
Other................................................. 765 3,230
------- -------
$ 11,751 $ 16,597
======= =======
Inventories:
Raw materials......................................... $ 3,339 $ 2,297
Work-in-process....................................... 2,073 1,958
Finished goods........................................ 966 1,060
------- -------
$ 6,378 $ 5,315
======= =======
Property, plant and equipment:
Land and building..................................... $ 8,435 $ 1,241
Machinery and equipment............................... 18,768 10,001
Furniture and fixtures................................ 2,074 749
Construction in process............................... 2,822 2,373
------- -------
32,099 14,364
Less -- accumulated depreciation and amortization..... (3,804) (2,172)
------- -------
$ 28,295 $ 12,192
======= =======
</TABLE>
NOTE 5 RELATED PARTY TRANSACTIONS
For periods prior to the Initial Public Offering, the Company was allocated
a portion of Valentec's corporate general and administrative expenses (excluding
interest) based on a formula of revenue, fixed assets and payroll costs. In the
opinion of management, the allocation method used was reasonable. Corporate
charges totaled $60,000 for the year ended March 31, 1995. During fiscal years
1997 and 1996, the Company allocated certain of its corporate general and
administrative expenses to Valentec totaling $726,000 and $659,000,
respectively, using a similar basis for allocating expenses as previously
discussed.
The Company purchases certain components used in its products from
affiliates. Purchases from affiliates totaled $2.6 million, $774,000 and $1.3
million for the years ended March 31, 1997, 1996 and 1995, respectively.
The Company sells certain components to affiliates for use in their
products. Sales to affiliates totaled $104,000, $4.3 million and $1.0 million
for the years ended March 31, 1997, 1996 and 1995, respectively.
The Company subleases space from VIL for its European automotive
operations. Sublease payments for the years ended March 31, 1997, 1996 and 1995
were $117,000, $121,000 and $112,000, respectively. In addition, the Company is
allocated its pro-rata portion of certain manufacturing overhead expenses based
on square footage, as well as a pro-rata portion of shared general and
administrative expenses. Such costs totaled $358,000, $254,000 and $248,000 for
the years ended March 31, 1997, 1996 and 1995, respectively.
At March 31, 1997 and 1996, the Company has a receivable from Valentec
aggregating $4.3 million, which was realized through the stock for stock
exchange on May 22, 1997.
F-15
<PAGE> 136
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 LONG-TERM OBLIGATIONS
Long-term obligations outstanding were as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1997 MARCH 31, 1996
-------------- --------------
<S> <C> <C>
Bank of America NT&SA (as defined) term loan and
revolving credit facility, bearing interest at 2.25%
and 2.0% over LIBOR (6.54% at March 31, 1997),
respectively, refinanced May 21, 1997................. $ 20,192 $ --
Note payable, principal due in annual installments of
$205,000 beginning January 12, 1999 to January 12,
2002, with interest at 7.22% in semiannual
installments, secured by assets of the Company's
United Kingdom subsidiary............................. 820 764
Capital equipment notes payable, due in monthly
installments with interest at 9.0% to 11.32% maturing
at various rates through April 2001, secured by
machinery and equipment............................... 3,369 3,020
------- ------
24,381 3,784
Less -- current portion................................. (3,085) (697)
------- ------
$ 21,296 $3,087
======= ======
</TABLE>
On August 1, 1996, the Company entered into a loan agreement with Bank of
America National Trust and Savings Association ("Bank of America NT&SA"). This
credit facility was refinanced on May 21, 1997 as discussed in the following
paragraph. The proceeds provided the Company with financing for the acquisition
of Phoenix Airbag in the form of a $20.0 million acquisition term loan, to be
amortized over a four-year period. The loan agreement also provided for a $5.5
million revolving credit facility and a non-revolving stand-by letter of credit
facility to secure payment, if necessary, for the contingent purchase price for
the acquisition of Phoenix Airbag. The term loan, revolving credit facility and
stand-by letter of credit facility are collectively referred to as the "Bank of
America Facility". Indebtedness under the Bank of America Facility was secured
by substantially all the assets of the Company. Outstanding borrowings on the
Bank of America Facility term loan and revolving credit facility at March 31,
1997 were $17.3 million and $2.9 million, respectively.
On May 21, 1997, the Company, Phoenix Airbag and Automotive Safety
Components International Limited ("ASCIL" collectively, the "Borrowers") entered
into an agreement with KeyBank National Association, as administrative agent
("KeyBank"), and the lending institutions named therein (the "Credit
Agreement"). Prior to the completion of the offering, (the "Offering") of $90
million of 10 1/8 Senior Subordinated Notes of the Company due 2007 (the
"Notes") (see Note 13), the Credit Agreement provided for (i) a term loan in the
principal amount of $15.0 million (the "Term Loan") and (ii) a revolving credit
facility in the aggregate principal amount of $12.0 million (including letter of
credit facilities). Upon completion of the Offering, the Company used the
proceeds to repay the Term Loan and the amounts then outstanding under the
Revolving Credit Facility. In connection therewith, the Company's credit
facility with KeyBank was converted into a $27.0 million revolving credit
facility, bearing interest at LIBOR plus 1.00% with a commitment fee of 0.25%
per annum for any unused portion. The indebtedness under the Credit Agreement is
secured by substantially all the assets of the Company (so long as no default or
event of default shall have occurred and be continuing). The revolving loans
under the Credit Agreement will mature on May 31, 2002. The Credit Agreement
contains certain restrictive covenants that impose limitations upon, among other
things, the Company's ability to change its business; merge, consolidate or
dispose of assets; incur liens; make loans and investments; incur indebtedness;
pay dividends and other distributions; engage in certain transactions with
affiliates; engage in sale and lease-back transactions; enter into lease
agreements; and make capital expenditures.
F-16
<PAGE> 137
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future annual minimum principal payments, under the refinanced terms
through KeyBank at March 31, 1997, as follows (in thousands):
<TABLE>
<S> <C>
1998....................................................... $ 3,085
1999....................................................... 4,019
2000....................................................... 3,811
2001....................................................... 3,739
2002....................................................... 3,617
Thereafter................................................. 6,110
-------
$24,381
=======
</TABLE>
During fiscal year 1997, the Company entered into a sale-leaseback of
certain equipment which is accounted for as a capital lease. The Company
received proceeds (which approximated the carrying value of the asset at the
time of sale) of approximately $1.5 million; no gain or loss was recorded in
connection with this transaction. The agreement requires that specified
machinery and equipment used in the Company's operations be pledged as
collateral, among other criteria. The Company imputed interest at 9% per annum.
Effective as of May 22, 1997, the Company completed the acquisition of
Valentec (Notes 1 and 13). The Company assumed all of Valentec's outstanding
obligations as of that date, including two term notes of approximately $5.1
million, a revolving line of credit of approximately $1.4 million, as of March
31, 1997 and equipment financings of approximately $1.1 million as of March 31,
1997. In addition, the Company assumed a demand note payable to VIL of $800,000
and a five year note payable an aggregate of $2.0 million in connection with
certain intercompany obligations between Valentec and VIL.
On June 4, 1997, the Company obtained a $7.5 million mortgage note facility
with Bank Austria. The note is payable in semi-annual installments of $375,000
beginning September 30, 1997 through March 31, 2007 and bears an interest rate
of 7.5%. The note is secured by the assets of the Company's Czech Republic
facility.
In May and June 1997, the Company paid approximately $6.5 million of the
obligations assumed in the Valentec acquisition with the proceeds of the KeyBank
credit facility, Bank Austria mortgage note and the $2.0 million equipment
financing. The $2.0 million equipment financing bears interest at 9.38% and is
payable monthly beginning July 1, 1997 through July 1, 2002 and is secured by
certain fixed assets of Valentec.
NOTE 7 INCOME TAXES
Income before income taxes comprises the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1997 MARCH 31, 1996 MARCH 31, 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Domestic................................. $2,670 $6,291 $2,379
Foreign.................................. 4,171 1,739 1,037
------ ------ ------
$6,841 $8,030 $3,416
====== ====== ======
</TABLE>
F-17
<PAGE> 138
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The income tax provision comprises the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1997 MARCH 31, 1996 MARCH 31, 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Taxes currently payable:
Federal................................ $ 935 $1,934 $ 602
State.................................. 154 327 114
Foreign................................ 916 124 372
Deferred taxes:
Federal................................ (177) 311 148
State.................................. (49) 47 47
Foreign................................ 1,216 373 --
------ ------ ------
$2,995 $3,116 $1,283
====== ====== ======
</TABLE>
The income tax provision differs from the amount computed by applying the
federal income tax rate to income before income taxes as follows:
<TABLE>
<CAPTION>
MARCH 31, 1997 MARCH 31, 1996 MARCH 31, 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Expected taxes at federal statutory
rate................................... 34% 34% 34%
State income taxes, net of federal
benefits............................... 2 5 5
Foreign earnings taxed at different
rates.................................. 7 -- 1
Change in deferred tax asset valuation
allowance.............................. -- -- (4)
Other, net............................... 1 -- 2
---
-- - -- -
44%
39% 38%
===
=== ===
</TABLE>
The primary components of deferred tax assets and liabilities, included in
other long-term liabilities in the accompanying consolidated balance sheet, are
as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1997 MARCH 31, 1996
-------------- --------------
<S> <C> <C>
Deferred tax assets (liabilities):
Accrued liabilities................................... $ 103 $ 37
Inventory............................................. 193 203
Property, plant and equipment......................... (1,552) (862)
Deferred product launch costs......................... -- (688)
Other................................................. (7) --
------- -------
$ (1,263) $ (1,310)
======= =======
</TABLE>
No taxes have been provided relating to the possible distribution of
approximately $4.2 million of undistributed earnings considered to be
permanently reinvested. The amount of such additional taxes that would be
payable if such earnings were distributed is estimated to be approximately
$950,000.
NOTE 8 COMMITMENTS AND CONTINGENCIES
Operating leases
The Company has noncancelable operating leases for equipment and office
space that expire at various dates through 2002. Certain of the lease payments
are subject to adjustment for inflation, which have been normalized to
operations. The Company incurred rent expense of $927,000, $612,000 and $272,000
for the years ended March 31, 1997, 1996 and 1995, respectively.
F-18
<PAGE> 139
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future annual minimum lease payments for all noncancelable operating leases
as of March 31, 1997 are as follows (in thousands):
<TABLE>
<S> <C>
1998........................................................ $1,130
1999........................................................ 1,068
2000........................................................ 1,092
2001........................................................ 573
2002........................................................ 308
Thereafter.................................................. 403
------
$4,574
======
</TABLE>
Environmental issues
The Company has identified two areas of underground contamination at its
facility in Galion, Ohio. One area involves a localized plating solution spill,
which is currently being handled by the existing waste water treatment system.
The second area involves a chlorinated solvent spill in the vicinity of a former
above ground storage area. The Company has retained environmental consultants to
quantify the extent of this problem. The Company has accrued $243,000 for the
estimated cost of additional testing and remediation which are included in the
long-term liabilities in the accompanying consolidated balance sheet at March
31, 1997. The Company's environmental consultants estimate that the Company's
voluntary plan of remediation will take three to five years to complete. In the
opinion of management, the total remediation costs are not expected to have a
material adverse effect on the Company's results of operations or financial
position. Management's opinion is based on the advice of an independent
consultant on environmental matters.
Legal proceedings
From time to time, the Company is the subject of legal proceedings for
various matters. In management's opinion, there are no material claims currently
pending.
NOTE 9 BUSINESS SEGMENT INFORMATION
The Company's operations have been classified into two business segments:
automotive and defense. See Note 1 for a description of business segments.
F-19
<PAGE> 140
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Summarized financial information by business segment is as follows (in
thousands):
<TABLE>
<CAPTION>
MARCH 31, 1997 MARCH 31, 1996 MARCH 31, 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Net Sales:
Automotive............................. $ 68,827 $ 49,091 $ 43,073
Defense................................ 15,131 45,851 8,706
------- ------- -------
$ 83,958 $ 94,942 $ 51,779
======= ======= =======
Operating income:
Automotive............................. $ 7,255 $ 3,658 $ 2,397
Defense................................ 1,349 3,946 779
------- ------- -------
$ 8,604 $ 7,604 $ 3,176
======= ======= =======
Total assets at period end:
Automotive............................. $ 60,800 $ 21,518 $ 20,429
Defense................................ 8,251 16,924 5,899
Corporate.............................. 4,356 11,389 1,983
------- ------- -------
$ 73,407 $ 49,831 $ 28,311
======= ======= =======
Depreciation and amortization:
Automotive............................. $ 2,036 $ 796 $ 489
Defense................................ 355 308 254
------- ------- -------
$ 2,391 $ 1,104 $ 743
======= ======= =======
Capital expenditures:
Automotive............................. $ 8,092 $ 3,863 $ 1,979
Defense................................ 521 725 494
------- ------- -------
$ 8,613 $ 4,588 $ 2,473
======= ======= =======
</TABLE>
Summarized financial information by geographic area is as follows (in
thousands):
<TABLE>
<CAPTION>
MARCH 31, 1997 MARCH 31, 1996 MARCH 31, 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Net Sales(1):
North America.......................... $ 46,371 $ 77,333 $ 34,274
Europe................................. 37,587 17,609 17,505
------- ------- -------
$ 83,958 $ 94,942 $ 51,779
======= ======= =======
Operating income:
North America.......................... $ 3,089 $ 6,555 $ 3,143
Europe................................. 5,515 1,049 33
------- ------- -------
$ 8,604 $ 7,604 $ 3,176
======= ======= =======
Total assets at period end:
North America.......................... $ 24,930 $ 37,974 $ 16,251
Europe................................. 48,477 11,857 12,060
------- ------- -------
$ 73,407 $ 49,831 $ 28,311
======= ======= =======
</TABLE>
- ---------------
(1) Foreign and domestic sales are representative of amounts reported by
geographic region
F-20
<PAGE> 141
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10 BENEFIT PLAN
SCI participates in Valentec's defined contribution plan qualified under
Section 401(k) of the Internal Revenue Code for eligible employees. The plan
provides for discretionary employer contributions. The Company made no employer
contributions during any of the periods presented in the consolidated financial
statements.
NOTE 11 COMMON STOCK AND STOCK OPTIONS
Common Stock
During fiscal years 1997 and 1996, the Company purchased 23,492 shares and
90,000 shares of common stock, respectively. The shares are held in treasury and
are accounted for at cost. See Note 13 for common stock issued to acquire
Valentec and treasury shares obtained in connection with such acquisition.
Stock Options
In conjunction with the Initial Public Offering, SCI established a stock
option plan ("Plan"). The Plan, as amended, provides for the issuance of options
to purchase an aggregate of 550,000 shares of SCI's common stock to key
officers, employees of SCI or its affiliates, directors and consultants. Each
award is determined by the Compensation Committee of the Board of Directors on
an individual basis, except for awards to non-officer directors, which are
determined pursuant to a formula. The Company accounts for these plans under
Accounting Principles Board Opinion No. 25, under which no compensation cost has
been recognized.
Had compensation cost for these plans been determined consistent with FASB
Statement No. 123, the Company's net income and earnings per share would have
been reduced to the following pro forma amounts (in thousands, except per share
data):
<TABLE>
<CAPTION>
MARCH 31, 1997 MARCH 31, 1996 MARCH 31, 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Net Income:
As Reported................................
$2,204 $4,914 $2,133
------ ------
Pro Forma..................................
$1,941 $4,756 $2,133
------ ------
Net Income Per Share:
As Reported................................
$ 0.44 $ 0.99 $ 0.53
====== ======
Pro Forma..................................
$ 0.39 $ 0.95 $ 0.53
====== ======
</TABLE>
A summary of the status of the Company's stock option plan at March 31,
1997, 1996 and 1995 and changes during the years then ended is presented in the
table and narrative below:
<TABLE>
<CAPTION>
MARCH 31, 1997 MARCH 31, 1996 MARCH 31, 1995
------------------ ------------------ ------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE
OF EXERCISE OF EXERCISE OF EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year......... 288,625 $13.06 210,500 $10.79 -- $ --
Granted.................................. 244,499 11.97 84,500 18.65 243,500 10.68
Exercised................................ (375) 10.00 -- -- -- --
Forfeited................................ (750) 10.00 (6,375) 12.06 (33,000) 10.00
------- ------- -------
Outstanding at end of year............... 531,999 12.57 288,625 13.06 210,500 10.79
------- ----- ------- ----- ------- -----
Exercisable at end of year............... 122,250 12.04 50,750 10.57 -- --
======= ===== ======= ===== ======= =====
Weighted average fair value of options
granted................................ $ 5.48 $ 8.85 $ 4.94
</TABLE>
F-21
<PAGE> 142
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Of the 531,999 options outstanding at March 31, 1997, 200,000 have exercise
prices between $10.00 and $14.88, with a weighted average exercise price of
$10.15 and a weighted average remaining contractual life of 6.1 years; 98,375 of
these options are exercisable with a weighted average exercise price of $10.28.
An additional 87,500 options have exercise prices between $17.13 and $21.00 with
a weighted average exercise price of $19.28 and a weighted average remaining
contractual life of 6.6 years; 23,875 of these options are exercisable with a
weighted average exercise price of $19.30. The remaining 244,499 options have
exercise prices between $10.25 and $14.17 with a weighted average exercise price
of $11.97 and a weighted average remaining contractual life of 9.3 years; none
of these options are currently exercisable. The fair value of each option grant
is estimated on the date of grant using the Black-Scholes option pricing model
with the following weighted-average assumptions used for grants in 1997, 1996
and 1995, respectively: risk-free interest rates of 6.7, 6.5 and 7.2 percent;
dividends for all years; expected lives of 6.2, 6.8 and 6.0 years; and expected
volatility of 32.4 percent for all years.
F-22
<PAGE> 143
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12 SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
In connection with the Offering (see Note 13), the Notes are, and the
Exchange Notes will be, guaranteed on a senior unsecured basis, jointly and
severally, by each of the Company's principal wholly-owned domestic operating
subsidiaries and certain of its indirect wholly-owned subsidiaries (the
"Guarantors"). The condensed consolidating financial statements of the
Guarantors are presented below. Management believes the condensed consolidating
financial statements presented are meaningful in understanding the financial
position, results of operations and cash flows of the Guarantor subsidiaries.
<TABLE>
<CAPTION>
MARCH 31, 1997
----------------------------------------------------------------------
GUARANTOR NONGUARANTOR PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTAL
------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............ $ 13 $ 8,250 $ 57 $ -- $ 8,320
Accounts receivable.................. 5,641 6,081 29 -- 11,751
Inventories.......................... 3,682 2,696 -- -- 6,378
Prepaid and other.................... 123 402 345 -- 870
------- ------- -------- ------- -------
Total current assets......... 9,459 17,429 431 -- 27,319
Property, plant and equipment, net..... 8,075 19,072 1,457 (309) 28,295
Receivable from affiliates............. 1,488 1,179 1,681 4,348
Goodwill............................... -- 10,991 -- -- 10,991
Other assets........................... 6,559 938 3,906 (8,949) 2,454
------- ------- -------- ------- -------
Total assets................. $ 25,581 $ 49,609 $ 7,475 $(9,258) $ 73,407
======= ======= ======== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................... $ 3,268 $ 3,979 $ 545 $ -- $ 7,792
Earnout payable...................... 2,211 -- -- -- 2,211
Accrued liabilities.................. 2,037 2,546 (1,983) (124) 2,476
Intercompany accounts short term..... (3,023) 2,280 743 -- --
Current portion of long-term
obligations....................... 2,832 250 3 -- 3,085
------- ------- -------- ------- -------
Total current liabilities.... 7,325 9,055 (692) (124) 15,564
Long-term obligations.................. 15,920 3,662 1,714 -- 21,296
Other long-term liabilities............ -- 727 546 -- 1,273
Intercompany accounts long term........ (5,871) 26,013 (20,142) -- --
------- ------- -------- ------- -------
Total liabilities............ 17,374 39,457 (18,574) (124) 38,133
------- ------- -------- ------- -------
Commitments and contingencies
Stockholders' equity
Preferred stock: $.10 par value --
2,000,000 shares authorized; no
shares outstanding................ -- -- -- -- --
Common stock; $.01 par value --
10,000,000 shares authorized;
5,025,383 outstanding............. -- 5,578 51 (5,578) 51
Common stock warrants................ -- -- 1 -- 1
Additional paid-in-capital........... -- 2,807 30,062 (2,807) 30,062
Treasury stock....................... -- -- (1,647) -- (1,647)
Cumulative translation adjustment.... -- (2,376) -- -- (2,376)
Retained earnings (accumulated
deficit).......................... 8,207 4,143 (2,418) (749) 9,183
------- ------- -------- ------- -------
Total stockholders' equity... 8,207 10,152 26,049 (9,134) 35,274
------- ------- -------- ------- -------
Total liabilities and
stockholders' equity....... $ 25,581 $ 49,609 $ 7,475 $(9,258) $ 73,407
======= ======= ======== ======= =======
</TABLE>
F-23
<PAGE> 144
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
MARCH 31, 1996
----------------------------------------------------------------------
GUARANTOR NONGUARANTOR PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTAL
------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............ $ 5 $ 1,985 $ 10,010 $ 33 $ 12,033
Accounts receivable.................. 14,502 2,349 -- (254) 16,597
Inventories.......................... 3,625 1,690 -- -- 5,315
Prepaid and other.................... 154 116 349 306 925
------- ------- -------- ------- -------
Total current assets......... 18,286 6,140 10,359 85 34,870
Property, plant and equipment, net..... 7,619 3,683 121 769 12,192
Receivable from affiliates............. (270) 414 (127) -- 17
Goodwill............................... -- 805 -- (805) --
Other assets........................... 1,307 1,063 3,541 (3,159) 2,752
------- ------- -------- ------- -------
Total assets................. $ 26,942 $ 12,105 $ 13,894 $(3,110) $ 49,831
======= ======= ======== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................... $ 6,071 $ 1,756 $ 239 $ -- $ 8,066
Accrued liabilities.................. 3,328 807 (3,384) 306 1,057
Intercompany accounts short term..... -- 45 (45) -- --
Current portion of long-term
obligations....................... 512 185 -- -- 697
------- ------- -------- ------- -------
Total current liabilities.... 9,911 2,793 (3,190) 306 9,820
Long-term obligations.................. 1,956 1,131 -- -- 3,087
Other long-term liabilities............ 20 631 929 -- 1,580
Intercompany accounts long term........ 8,318 2,415 (11,289) 556 --
------- ------- -------- ------- -------
Total liabilities............ 20,205 6,970 (13,550) 862 14,487
------- ------- -------- ------- -------
Commitments and contingencies
Stockholders' equity
Preferred stock: $.10 par value --
2,000,000 shares authorized; no
shares outstanding................ -- -- -- -- --
Common stock; $.01 par value --
10,000,000 shares authorized;
5,025,383 outstanding............. -- 16 51 (16) 51
Common stock warrants................ -- -- 1 -- 1
Additional paid-in-capital........... -- 3,807 30,058 (3,807) 30,058
Treasury stock....................... -- -- (1,379) -- (1,379)
Cumulative translation adjustment.... -- (366) -- -- (366)
Retained earnings (accumulated
deficit).......................... 6,737 1,678 (1,287) (149) 6,979
------- ------- -------- ------- -------
Total stockholders' equity... 6,737 5,135 27,444 (3,972) 35,344
------- ------- -------- ------- -------
Total liabilities and
stockholders' equity....... $ 26,942 $ 12,105 $ 13,894 $(3,110) $ 49,831
======= ======= ======== ======= =======
</TABLE>
F-24
<PAGE> 145
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
MARCH 31, 1995
----------------------------------------------------------------------
GUARANTOR NONGUARANTOR PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTAL
------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............ $ 2,881 $ 66 $ 899 $ -- $ 3,846
Accounts receivable.................. 6,255 17 -- -- 6,272
Inventories.......................... 5,948 -- -- -- 5,948
Prepaid and other.................... 134 281 243 -- 658
------- ---- -------- ------- -------
Total current assets......... 15,218 364 1,142 -- 16,724
Property, plant and equipment, net..... 8,551 353 4 -- 8,908
Receivable from affiliates............. 47 -- 790 -- 837
Goodwill............................... 915 -- -- (915) --
Other assets........................... 1,875 21 946 (1,000) 1,842
------- ---- -------- ------- -------
Total assets................. $ 26,606 $738 $ 2,882 $(1,915) $ 28,311
======= ==== ======== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................... $ 7,276 $ 21 $ 157 $ -- $ 7,454
Accrued liabilities.................. 2,584 263 (1,315) -- 1,532
Intercompany accounts short term..... (157) 131 26 -- --
Current portion of long-term
obligations....................... 369 -- -- -- 369
------- ---- -------- ------- -------
Total current liabilities.... 10,072 415 (1,132) -- 9,355
Long-term obligations.................. 2,043 -- -- -- 2,043
Other long-term liabilities............ 745 -- 197 -- 942
Intercompany accounts long term........ 9,069 -- (9,069) -- --
------- ---- -------- ------- -------
Total liabilities............ 21,929 415 (10,004) -- 12,340
------- ---- -------- ------- -------
Commitments and contingencies
Stockholders' equity
Preferred stock: $.10 par value --
2,000,000 Shares authorized; no
shares outstanding................ -- -- -- -- --
Common stock; $.01 par value --
10,000,000 Shares authorized;
5,025,383 outstanding............. -- 16 41 (16) 41
Common stock warrants................ -- -- 1 -- 1
Additional paid-in-capital........... 1,946 -- 13,595 (1,946) 13,595
Treasury stock....................... -- -- -- -- --
Cumulative translation adjustment.... -- 269 -- -- 269
Retained earnings (accumulated
deficit).......................... 2,731 38 (751) 47 2,065
------- ---- -------- ------- -------
Total stockholders' equity... 4,677 323 12,886 (1,915) 15,971
------- ---- -------- ------- -------
Total liabilities and
stockholders' equity....... $ 26,606 $738 $ 2,882 $(1,915) $ 28,311
======= ==== ======== ======= =======
</TABLE>
F-25
<PAGE> 146
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31, 1997
----------------------------------------------------------------------
GUARANTOR NONGUARANTOR PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTAL
------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net sales.............................. $ 46,371 $ 43,645 $ -- $(6,058) $ 83,958
Cost of sales.......................... 36,722 32,746 -- (5,338) 64,130
Product launch costs................... 1,661 100 -- -- 1,761
Depreciation........................... 1,013 1,030 -- -- 2,043
------- ------- ------- ------- -------
Gross profit................. 6,975 9,769 -- (720) 16,024
Selling and marketing expenses......... 730 366 279 -- 1,375
General and administrative............. 2,390 2,462 1,382 (537) 5,697
Amortization of goodwill............... -- 348 -- -- 348
------- ------- ------- ------- -------
Income form operations....... 3,855 6,593 (1,661) (183) 8,604
Other expense (income)................. (274) 451 (6) 37 208
Interest expense (income).............. 851 1,064 (669) 309 1,555
------- ------- ------- ------- -------
Income before income taxes... 3,278 5,078 (986) (529) 6,841
Provision for income taxes............. 1,244 2,250 (375) (124) 2,995
------- ------- ------- ------- -------
Income before extraordinary item and
cumulative effect of accounting
change............................... 2,034 2,828 (611) (405) 3,846
Extraordinary item..................... -- -- (383) -- (383)
Cumulative effect of change in
accounting for deferred product
launch costs......................... (564) (695) -- -- (1,259)
------- ------- ------- ------- -------
Net income (loss)...................... $ 1,470 $ 2,133 $ (994) $ (405) $ 2,204
======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31, 1996
----------------------------------------------------------------------
GUARANTOR NONGUARANTOR PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTAL
------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net sales.............................. $ 77,333 $ 22,748 $ -- $(5,139) $ 94,942
Cost of sales.......................... 65,782 19,634 -- (4,612) 80,804
Depreciation........................... 797 307 -- -- 1,104
------- ------- ------- ------- -------
Gross profit................. 10,754 2,807 -- (527) 13,034
Selling and marketing expenses......... 1,088 14 -- -- 1,102
General and administrative............. 2,268 1,263 1,324 (527) 4,328
Amortization of goodwill............... -- -- -- -- --
------- ------- ------- ------- -------
Income form operations....... 7,398 1,530 (1,324) -- 7,604
Other expense (income)................. 264 (237) -- (306) (807)
Interest expense (income).............. 736 32 (387) -- 381
------- ------- ------- ------- -------
Income before income taxes... 7,538 1,735 (937) (306) 8,030
Provision for income taxes............. 3,075 442 (401) -- 3,116
------- ------- ------- ------- -------
Net income (loss)...................... $ 4,463 $ 1,293 $ (536) $ (306) $ 4,914
======= ======= ======= ======= =======
</TABLE>
F-26
<PAGE> 147
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31, 1995
----------------------------------------------------------------------
GUARANTOR NONGUARANTOR PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTAL
------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net sales.............................. $ 51,779 $4,371 $ -- $(4,371) $ 51,779
Cost of sales.......................... 44,128 3,606 -- (3,924) 43,810
Depreciation........................... 715 28 -- -- 743
------- ------ ------- ------- -------
Gross profit................. 6,936 737 -- (447) 7,226
Selling and marketing expenses......... 744 -- 150 -- 894
General and administrative............. 1,977 462 1,164 (447) 3,156
Amortization of goodwill............... -- -- -- -- --
------- ------ ------- ------- -------
Income form operations....... 4,215 275 (1,314) -- 3,176
Other expense (income)................. (640) (74) -- 230 (484)
Interest expense (income).............. 307 -- (63) -- 244
------- ------ ------- ------- -------
Income before income taxes... 4,548 349 (1,251) (230) 3,416
Provision for income taxes............. 1,664 119 (500) -- 1,283
------- ------ ------- ------- -------
Net income (loss)...................... $ 2,884 $ 230 $ (751) $ (230) $ 2,133
======= ====== ======= ======= =======
</TABLE>
F-27
<PAGE> 148
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31, 1997
----------------------------------------------------------------------
GUARANTOR NONGUARANTOR PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTAL
------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities................. $ 13,740 $ 5,430 $(1,968) $(6,087) $ 11,115
-------- ------- ------- ------- --------
Cash Flows From Investing Activities:
Additions to property, plant and
equipment......................... (1,468) (6,097) (1,357) 309 (8,613)
Purchase of Phoenix Airbag, net of
cash acquired..................... (24,257) -- -- -- (24,257)
-------- ------- ------- ------- --------
Net cash used in investing
activities................. (25,725) (6,097) (1,357) 309 (32,870)
-------- ------- ------- ------- --------
Cash Flows From Financing Activities:
Net proceeds from sale of stock...... -- -- 4 -- 4
Change in investment in subsidiary... (5,778) -- -- 5,778 --
Purchase of treasury stock........... -- -- (268) -- (268)
Proceeds from term note.............. 20,000 -- -- -- 20,000
(Repayments) borrowing of debt and
long-term obligations............. (3,764) -- -- -- (3,764)
Net borrowing on revolving credit
facility.......................... -- 1,230 1,701 -- 2,931
Changes in intercompany accounts..... 1,535 6,530 (8,065) -- --
-------- ------- ------- ------- --------
Net cash provided by
financing activities....... 11,993 7,760 (6,628) 5,778 18,903
-------- ------- ------- ------- --------
Effect of exchange rate changes on
cash................................. -- (861) -- -- (861)
-------- ------- ------- ------- --------
Change in cash and cash equivalents.... 8 6,232 (9,953) -- (3,713)
Cash and cash equivalents, beginning of
period............................... 5 2,018 10,010 -- 12,033
-------- ------- ------- ------- --------
Cash and cash equivalents, end of
period............................... $ 13 $ 8,250 $ 57 $ -- $ 8,320
======== ======= ======= ======= ========
</TABLE>
F-28
<PAGE> 149
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31, 1996
----------------------------------------------------------------------
GUARANTOR NONGUARANTOR PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTAL
------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities................. $ (2,544) $ 756 $(2,485) $ 773 $ (3,500)
------- ------- ------- ------- -------
Cash Flows From Investing Activities:
Additions to property, plant and
equipment......................... (2,407) (1,279) (133) (769) (4,588)
------- ------- ------- ------- -------
Net cash used in investing
activities................. (2,407) (1,279) (133) (769) (4,588)
------- ------- ------- ------- -------
Cash Flows From Financing Activities:
Net proceeds from sale of stock...... -- 1,861 16,568 (1,861) 16,568
Change in investment in subsidiary... (306) -- (1,865) 2,171 --
Purchase of treasury stock........... -- -- (1,379) -- (1,379)
Repurchase of common stock
warrants.......................... -- -- (94) -- (94)
(Repayments) borrowings of debt and
long-term obligations............. 1,633 (173) -- -- 1,460
Changes in intercompany accounts..... 3,620 (1,838) (1,501) (281) --
------- ------- ------- ------- -------
Net cash provided by
financing activities....... 4,947 (150) 11,729 29 16,555
------- ------- ------- ------- -------
Effect of exchange rate changes on
cash................................. -- (280) -- -- (280)
------- ------- ------- ------- -------
Change in cash and cash equivalents.... (4) (953) 9,111 33 8,187
Cash and cash equivalents, beginning of
period............................... 9 2,938 899 -- 3,846
------- ------- ------- ------- -------
Cash and cash equivalents, end of
period............................... $ 5 $ 1,985 $10,010 $ 33 $ 12,033
======= ======= ======= ======= =======
</TABLE>
F-29
<PAGE> 150
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31, 1995
----------------------------------------------------------------------
GUARANTOR NONGUARANTOR PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTAL
------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities................. $ 1,759 $ 350 $(1,943) $(1,067) $ (901)
------- ----- ------- ------- -------
Cash Flows From Investing Activities:
Additions to property, plant and
equipment......................... (2,294) (175) (4) -- (2,473)
------- ----- ------- ------- -------
Net cash (used in) investing
activities................. (2,294) (175) (4) -- (2,473)
------- ----- ------- ------- -------
Cash Flows From Financing Activities:
Net proceeds from sale of stock...... (230) -- 14,564 230 14,564
Payment to parent company in
consideration for transfer of
assets............................ -- -- (1,885) -- (1,885)
(Repayments) borrowing of debt and
long-term obligations............. (3,269) -- -- -- (3,269)
Changes in intercompany accounts..... 6,909 (230) (9,842) 837 (2,326)
------- ----- ------- ------- -------
Net cash provided by
financing activities....... 3,410 (230) 2,837 1,067 7,084
------- ----- ------- ------- -------
Effect of exchange rate changes on
cash................................. -- 96 -- -- 96
------- ----- ------- ------- -------
Change in cash and cash equivalents.... 2,875 41 890 -- 3,806
Cash and cash equivalents, beginning of
period............................... 6 25 9 -- 40
------- ----- ------- ------- -------
Cash and cash equivalents, end of
period............................... $ 2,881 $ 66 $ 899 $ -- $ 3,846
======= ===== ======= ======= =======
</TABLE>
NOTE 13 SUBSEQUENT EVENTS
Pursuant to a definitive Stock Purchase Agreement, dated as of May 22,
1997, the Company acquired all of the outstanding common stock of Valentec in a
tax-free stock-for-stock exchange. Valentec was the Company's largest
shareholder immediately prior to the acquisition owning approximately 27%, or
1,379,200 shares, of the issued and outstanding shares of the Company's common
stock. In connection with the acquisition, the Company issued the shareholders
of Valentec an aggregate of 1,369,200 newly issued shares of its common stock.
The purchase price for the Valentec acquisition was negotiated between
Valentec and a special committee consisting of independent members of the Board
of Directors of the Company. The special committee was advised by independent
legal counsel and an independent financial advisor. The Company's Board of
Directors received an opinion from the special committee's financial advisor as
to the fairness from a financial point of view of the consideration to be
received by the Company to the Company's shareholders other than Valentec.
The acquisition was accounted for as a purchase. The aggregate purchase
price amounted to approximately $14.3 million, including estimated direct
acquisition costs of approximately $600,000. No adjustments to assets and
liabilities acquired were recorded as their carrying value approximated their
fair value, except for common stock of the Company held by Valentec, in which
these common shares were recorded as treasury shares at market value of $13.7
million. These shares were previously accounted for under the equity method of
accounting for the investment by Valentec. Management intends to merge Valentec
into the Company during fiscal 1998. The excess of the purchase price over the
fair value of the net assets acquired was allocated to goodwill.
F-30
<PAGE> 151
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On July 24, 1997, the Company acquired all of the assets of the Air
Restraint/Industrial Fabrics Division of JPS Automotive L.P. for cash of $56.3
million, including the assumption of certain liabilities, subject to
post-closing adjustments (the "JPS Acquisition"). In addition, the Company made
a payment to APS at the closing to enable it to pay off existing indebtedness of
the Division of approximately $650,000 at the closing. The acquisition was
accounted for as a purchase.
The Company financed the cash portion of the purchase price with a portion
of the proceeds of the Offering. The Notes mature July 15, 2007 and accrue
interest from the date of issuance. Interest is payable semi-annually, in
arrears, on January 15 and July 15 of each year, commencing January 15, 1998.
The Notes are subordinate to all existing indebtedness of the Company and its
subsidiaries and are guaranteed by the domestic subsidiaries of the Company.
The Notes are redeemable, in whole or in part, at the option of the Company
on or after July 15, 2002 at redemption prices ranging from 105.063% to 100.000%
of the principal amount thereof, plus accrued interest to the date of
redemption. In addition, the Notes are not redeemable by the Company prior to
July 15, 2002, except that, at any time on or prior to July 15, 2000, the
Company, at its option, may redeem, with the net cash proceeds of one or more
Public Equity Offerings, as defined, by the Company, up to 25% of the aggregate
principal amount of the Notes originally issued, at a redemption price equal to
110.125% of the principal amount thereof, plus accrued interest thereon, if any,
to the date of redemption provided that at least 75% of the aggregate principal
amount of the Notes originally issued remains outstanding immediately following
such redemption.
Upon a Change of Control, as defined, each holder of Notes will have the
right to require the Company to repurchase such holder's Notes at a price equal
to 101% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the repurchase date.
The provisions of the agreement underlying the Notes contain certain
covenants with respect to the Company and its subsidiaries that restrict, among
other things, (a) the incurrence of additional indebtedness, (b) the payment of
dividends and other restricted payments, (c) the creation of certain liens, (d)
the use of proceeds from sales of assets and subsidiary stock, (e) sale and
leaseback transactions, (f) transactions with affiliates and (g) the Company's
ability to consolidate or merge with or into, or to transfer all or
substantially all of its assets to another person. In addition, under certain
circumstances, the Company will be required to offer to purchase the Notes, in
whole or in part, at a purchase price equal to 100% of the principal amount
thereof plus accrued interest to the date of repurchase with the proceeds of
certain sales of assets.
Additionally, pursuant to the terms of agreements underlying the Notes, the
Company entered into a registration rights agreement (the "Registration Rights
Agreement"), pursuant to which the Company has agreed, for the benefit of
holders of the Notes, that it will, at its expense for the benefit of the
holders, (i) within 30 days after July 24, 1997 (the "Issue Date"), file a
registration statement on an appropriate registration form (the "Exchange Offer
Registration Statement") with the Securities and Exchange Commission with
respect to a registered offer (the "Exchange Offer") to exchange the Notes for
notes of the Company (the "Exchange Notes"), guaranteed by the domestic
subsidiaries of the Company (the "Guarantors"), which will have terms identical
to the Notes, except (A) the Exchange Notes will bear a Series B designation,
(B) the issuance of the Exchange Notes will have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and, therefore, the
Exchange Notes will not bear legends restricting the transfer thereof and (C)
holders of the Exchange Notes will not be entitled to certain rights of holders
of Notes under the Registration Rights Agreement and (ii) use its best efforts
to cause the Exchange Offer Registration Statement to be declared effective
under the Securities Act within 105 days after the Issue Date. Upon the Exchange
Offer Registration Statement being declared effective, the Company and the
Guarantors will offer to all holders of the Notes an opportunity to exchange
their securities for a like principal amount of the Exchange Notes (and the
related guarantees).
F-31
<PAGE> 152
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Unaudited pro forma condensed balance sheet information assuming the
acquisitions and the Senior Subordinated Notes were effected on March 31, 1997
is as follows (in thousands):
<TABLE>
<S> <C>
Current assets............................................ $ 60,379
========
Noncurrent assets......................................... $109,637
========
Current liabilities....................................... $ 26,082
========
Total liabilities......................................... $134,742
========
</TABLE>
Unaudited pro forma condensed consolidated operations information assuming
the acquisitions and the Senior Subordinated Notes (and acquisition of Phoenix
Airbag -- see Note 1) were effected on April 1, 1996 is as follows (in
thousands, except per share data):
<TABLE>
<S> <C>
Revenues.................................................. $173,208
========
Income before extraordinary item and change in accounting
principle............................................... $ 1,055
========
Income per share before extraordinary item and change in
accounting principle.................................... $ 0.21
========
</TABLE>
The unaudited pro forma condensed consolidated operations information is
not necessarily indicative of the actual results which would have been attained
if the acquisitions and the Senior Subordinated Notes would have been
consummated on April 1, 1996.
F-32
<PAGE> 153
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders
and Valentec International Corporation
In our opinion, the financial statements of Valentec International
Corporation listed in the accompanying "Index to Financial Statements" appearing
on page F-1, present fairly, in all material respects, the financial position of
Valentec International Corporation, excluding Valentec International, Ltd. as of
March 31, 1997, and the results of operations and its cash flows for the year
then ended in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting policies used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
Costa Mesa, California
May 22, 1997
F-33
<PAGE> 154
VALENTEC INTERNATIONAL CORPORATION
HISTORICAL BALANCE SHEET
EXCLUDING ASSETS AND LIABILITIES OF
VALENTEC INTERNATIONAL, LTD (NOTE 1)
FOR THE YEAR ENDED MARCH 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash............................................................................. $ 37
Accounts receivable, net of allowance for doubtful accounts of $52............... 2,181
Inventories (Notes 2 and 3)...................................................... 1,225
Deferred income taxes (Notes 2 and 6)............................................ 762
Prepaid expenses and other....................................................... 651
-------
Total current assets..................................................... 4,856
Property and equipment, net of accumulated depreciation of $1,498 (Notes 2 and
3)............................................................................... 4,605
Other assets (Notes 2 and 3)....................................................... 714
Investment in affiliate (Notes 2 and 11)........................................... 10,333
-------
Total assets............................................................. $20,508
=======
LIABILITIES AND CAPITAL DEFICIENCY
Current liabilities:
Accounts payable................................................................. $ 2,874
Payable to affiliate (Note 4).................................................... 4,348
Accrued liabilities (Notes 3 and 7).............................................. 1,945
Current portion of note payable to affiliate (Note 4)............................ 1,146
Current portion of long-term obligations (Note 5)................................ 571
-------
Total current liabilities................................................ 10,884
Long-term obligations (Note 5)................................................... 7,004
Note payable to affiliate (Note 4)............................................... 1,654
Other long-term liabilities (Notes 3 and 7)...................................... 2,436
Deferred income taxes (Notes 2 and 6)............................................ 2,056
-------
Total liabilities........................................................ 24,034
-------
Commitments and contingencies (Note 7)
Capital deficiency (Note 11):
Common stock, $.01 par value per share, 3,000,000 shares authorized;
2,160,000 shares issued and outstanding....................................... 22
Additional paid-in capital....................................................... 428
Accumulated deficit.............................................................. (3,976)
-------
Total capital deficiency................................................. (3,526)
-------
Total liabilities and capital deficiency................................. $20,508
=======
</TABLE>
See notes to financial statements.
F-34
<PAGE> 155
VALENTEC INTERNATIONAL CORPORATION
HISTORICAL STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
EXCLUDING OPERATIONS OF VALENTEC INTERNATIONAL LTD. (NOTE 1)
FOR THE YEAR ENDED MARCH 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Net revenues (Notes 2 and 9):
Trade revenues................................................................... $11,403
Sales to affiliates.............................................................. 2,623
-------
Total revenues........................................................... 14,026
Cost of revenues................................................................... 12,690
-------
Gross profit............................................................. 1,336
Selling and marketing expenses..................................................... 99
General and administrative expenses................................................ 1,584
-------
Operating loss........................................................... (347)
Other expense...................................................................... 67
Interest expense................................................................... 1,183
Income from investment in affiliate (Notes 2 and 11)............................... 605
-------
Loss before income taxes................................................. (992)
Income tax benefit (Notes 2 and 6)................................................. (286)
-------
Net loss................................................................. (706)
Accumulated deficit, beginning of year............................................. (3,270)
-------
Accumulated deficit, end of year................................................... $(3,976)
=======
</TABLE>
See notes to financial statements.
F-35
<PAGE> 156
VALENTEC INTERNATIONAL CORPORATION
HISTORICAL STATEMENT OF CASH FLOWS
EXCLUDING CASH FLOWS OF VALENTEC INTERNATIONAL, LTD. (NOTE 1)
FOR THE YEAR ENDED MARCH 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss......................................................................... $ (706)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization................................................. 546
Net Income from investment in affiliate....................................... (605)
Other......................................................................... 28
Changes in operating assets and liabilities:
Accounts receivable, net.................................................... 1,585
Inventories................................................................. (111)
Deferred income taxes....................................................... (407)
Prepaid expenses and other.................................................. (158)
Accounts payable............................................................ 415
Accrued liabilities......................................................... 415
Reserve for litigation...................................................... (1,176)
-------
Other liabilities........................................................... (2,901)
-------
Net cash used in operating activities......................................... (3,075)
-------
Cash flows from investing activities:
Additions to property and equipment.............................................. (1,116)
Proceeds from sale of fixed assets............................................... 1,119
Proceeds from sale of building................................................... 1,185
-------
Net cash provided by investing activities..................................... 1,188
-------
Cash flows from financing activities:
Net repayments under long-term obligations....................................... (1,193)
Repayment of advances from affiliates............................................ (1,237)
Net Borrowings from affiliates................................................... 3,031
-------
Net cash provided by financing activities..................................... 601
Increase in cash and cash equivalents.............................................. (1,286)
Cash and cash equivalents, beginning of year....................................... 1,323
-------
Cash, end of year.................................................................. $ 37
=======
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest...................................................................... $ 1,199
Income taxes.................................................................. 8
</TABLE>
See notes to financial statements.
F-36
<PAGE> 157
VALENTEC INTERNATIONAL CORPORATION
NOTES TO HISTORICAL FINANCIAL STATEMENTS
EXCLUDING VALENTEC INTERNATIONAL, LTD.
NOTE 1 ORGANIZATION AND BASIS OF PRESENTATION
On April 27, 1993, the management of Valentec International Corporation and
subsidiaries ("Valentec") completed a management buyout (the "Acquisition") from
its parent company, Insilco Corporation. Subsequent to the Acquisition, certain
of Valentec's business entities were transferred into a new subsidiary, Safety
Components International, Inc., ("SCI") which completed its initial public
offering in May 1994. The purchase price for the assets and liabilities retained
by Valentec in May 1994 was $3.7 million with the excess of purchase price over
the fair value of the net assets acquired of $2.8 million allocated to goodwill.
The effects of the acquisition were "pushed down" to Valentec. In fiscal 1996,
goodwill was determined to be unrecoverable and charged to operations.
Effective as of May 22, 1997, Valentec, immediately prior to the close of
its statutory tax-free stock for stock exchange with SCI (Note 11), divested
itself of its 88.8% owned United Kingdom subsidiary, Valentec International
Limited ("VIL"). Accordingly, the accompanying financial statements include only
the assets and liabilities, revenues and expenses of Valentec acquired by SCI
(hereinafter defined as the "Company"). The Company is a manufacturer of stamped
and precision machined products for the automotive, commercial and defense
industries. The Company also manages the acquisition of ordnance systems for
international customers. The Company's manufacturing operations and headquarters
are located in California.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue recognition
Revenues are generally recognized as units are shipped to customers.
The Company accounts for certain long-term contracts under the percentage
of completion method, whereby progress toward contract completion is measured on
a cost-incurred basis (including direct labor, materials and allocable indirect
manufacturing overhead and general and administrative costs). Losses on
long-term contracts are recognized in the period when such losses are
identified. On certain contracts with the U.S. Government, contract costs,
including indirect costs, are subject to audit and adjustment by negotiations
between the Company and government representatives. Contract revenues have been
recorded in amounts which are expected to be realized upon final settlement.
Annual revenues from major customers
The Company had sales from two customers in fiscal year 1997 aggregating
34% and 19% of net revenues, respectively.
Concentration of credit risk
At March 31, 1997, two customers accounted for approximately 31% and 29%,
respectively of its accounts receivable. The Company is potentially subject to a
concentration of credit risk consisting of its accounts receivable. The Company
performs ongoing credit evaluations of its customers and generally does not
require collateral. The Company maintains reserves for potential losses for
uncollectible accounts and such losses have historically been immaterial and
within management's expectations.
Environmental expenditures
Environmental expenditures which extend the life of the related property or
prevent future environmental contamination are capitalized. Expenditures that
result from the remediation of an existing condition caused by past operations
that do not contribute to current or future revenues are expensed. Liabilities
are recognized for remedial activities when the cleanup is probable and the cost
can be reasonably estimated.
F-37
<PAGE> 158
VALENTEC INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
EXCLUDING VALENTEC INTERNATIONAL, LTD.
Inventories
Inventories represent direct labor, materials and overhead costs incurred
for products not yet delivered and are stated at the lower of cost (first-in,
first-out) or market.
Property and equipment
Property and equipment are stated at cost. Depreciation is provided on the
straight-line method over the estimated useful lives of the assets. Estimated
useful lives by class of assets are as follows:
<TABLE>
<S> <C>
Machinery and equipment 5-10 years
Furniture and fixtures 3-5 years
Leasehold improvements 3-10 years or term of lease, whichever is shorter
</TABLE>
Expenditures for repairs and maintenance are charged to expense as
incurred. Renewals or betterments of assets are capitalized. When assets are
sold or otherwise disposed of, the cost and related accumulated depreciation or
amortization are removed from the respective accounts and any resulting gain or
loss is recognized. Depreciation and amortization expense during fiscal 1997
amounted to $546,000.
Long-Lived Assets
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." SFAS No. 121 establishes accounting
standards for the impairment of long-lived assets, certain identifiable
intangibles and goodwill related to those assets to be held and used, and for
long-lived assets and certain identifiable intangibles to be disposed of. SFAS
No. 121 requires that long-lived assets and ceratin identifiable intangibles to
be held and used by an entity be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable and that certain long-lived assets and identifiable intangibles
to be disposed of be reported at the lower of carrying amount or fair value,
less cost of sale.
Investment in affiliate
The Company accounts for its 27% investment in SCI under the equity method
of accounting, whereby the Company recognizes its proportionate share of income
or loss as an adjustment to the carrying value of the investment at historical
cost. At March 31, 1997, the Company owned 1,369,200 shares of SCI's common
stock. The total estimated fair value of the Company's holdings on March 31,
1997 was approximately $13.7 million.
The Company has not included certain financial information of its investee
SCI, as such information is included in the Consolidated Financial Statements of
SCI elsewhere herein.
Income taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS
109"). Under FAS 109, the deferred tax assets and liabilities are measured each
year based on the difference between the financial statement and tax bases of
assets and liabilities at the applicable enacted tax rates when temporary
differences are expected to reverse. Additionally, a valuation allowance is
recorded for that portion of deferred tax assets for which it is more likely
than not that the assets will not be realized. The deferred tax provision
(benefit) is the result of changes in the deferred tax assets and liabilities.
F-38
<PAGE> 159
VALENTEC INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
EXCLUDING VALENTEC INTERNATIONAL, LTD.
Cash equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Fair value of financial instruments
The financial statements include financial instruments whereby the fair
market value of such instruments may differ from amounts reflected on a
historical basis. Financial instruments of the Company consist of cash deposits,
accounts receivable, accounts payable, certain accrued liabilities, long-term
obligations and capital leases. The Company's financial instruments generally
approximate their fair values at March 31, 1997. Payables to affiliates
generally have no market and as a result, have no readily determinable fair
value.
Use of estimates
The financial statements have been prepared in conformity with generally
accepted accounting principles, which require management to make estimates and
assumptions that effect the amounts and disclosures reported in the financial
statements and accompanying notes. Significant estimates made by management
include allowances for doubtful accounts receivable, reserves for inventories,
legal actions and environmental matters, as well as costs to complete on
long-term contracts. Actual results could differ from those estimates.
NOTE 3 COMPOSITION OF CERTAIN BALANCE SHEET COMPONENTS AT MARCH 31, 1997
The composition of certain balance sheet items is as follows (in
thousands):
<TABLE>
<S> <C>
Inventories:
Raw materials.................................... $ 854
Work-in-process.................................. 306
Finished goods................................... 65
--------
$ 1,225
========
Property, plant and equipment:
Land and building................................ $ 74
Machinery and equipment.......................... 4,859
Furniture and fixtures........................... 199
Construction in process.......................... 971
--------
6,103
--------
Less accumulated depreciation and amortization... (1,498)
--------
$ 4,605
========
</TABLE>
F-39
<PAGE> 160
VALENTEC INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
EXCLUDING VALENTEC INTERNATIONAL, LTD.
<TABLE>
<S> <C>
Other assets:
Deposits......................................... $ 571
Other............................................ 143
--------
$ 714
========
Accrued liabilities (Notes 6 and 7):
Reserves for litigation.......................... $ 587
Deferred rent.................................... 232
Reserve for workers compensation................. 201
Income taxes payable............................. 158
Reserve for building repair...................... 150
Reserve for environmental matters................ 150
Other............................................ 467
--------
$ 1,945
========
Other long-term liabilities (Note 7):
Reserve for building repair...................... $ 850
Reserve for litigation........................... 799
Deferred rent.................................... 342
Reserve for environmental matters................ 235
Other............................................ 210
--------
$ 2,436
========
</TABLE>
NOTE 4 RELATED PARTY TRANSACTIONS
The Company sells certain components to affiliates for use in their
products. Sales to affiliates totaled $2.6 million for the year ended March 31,
1997. The Company purchases certain components from affiliates for use in its
products. Purchases from affiliates amounted to $104,000 for the year ended
March 31, 1997.
SCI allocates certain corporate general and administrative expenses to the
Company, such charges were $726,000 for the year ended March 31, 1997. In
addition, SCI has made advances to the Company from time to time. At March 31,
1997, such amount, which is noninterest bearing, was $4.3 million.
At March 31, 1997, the Company has a payable to VIL amounting to $2.8
million as a result of the divestiture of VIL (Notes 1 and 11). Subsequent to
March 31, 1997, certain transactions were effected which resulted in
indebtedness to SCI of $2.5 million in connection with the support of the
operations of the Company and VIL prior to the acquisition of the Company by SCI
effective as of May 22, 1997. In addition, subsequent to March 31, 1997, the
Company assumed a demand note payable to VIL of $800,000 and a 7% note payable
in the aggregate amount of $2 million. The $2 million note is payable monthly
with interest in equal installments over five years.
Future annual principal payments under this note payable to affiliate,
including the demand note of $800,000, at March 31, 1997 are as follows:
<TABLE>
<S> <C>
1998................................................ $1,146
1999................................................ 371
2000................................................ 398
2001................................................ 427
2002 and thereafter................................. 458
------
$2,800
======
</TABLE>
F-40
<PAGE> 161
VALENTEC INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
EXCLUDING VALENTEC INTERNATIONAL, LTD.
NOTE 5 LONG-TERM OBLIGATIONS
Long-term obligations outstanding as of March 31, 1997 are as follows (in
thousands):
<TABLE>
<S> <C>
Revolving credit agreements, as described below............................. $1,424
Term notes, as described below.............................................. 5,071
Capital equipment notes payable, due in monthly installments with interest
rates from 9.28% to 12.75%, maturing at various dates through October
2000, secured by machinery and equipment.................................. 1,080
-------
Total debt.................................................................. 7,575
Less current portion...................................................... (571)
-------
Long-term debt, less current portion........................................ $7,004
=======
</TABLE>
The Company's credit facilities, which were subsequently retired in the
first quarter of fiscal 1998, consisted of the following at March 31, 1997: (1)
a revolving credit agreement, payable at the discretion of the Company with a
$4.0 million maximum limit secured by accounts receivable and inventory with
interest paid monthly at prime plus 2.5% (10.75% at March 31, 1997), (2) a $1.2
million term note, secured by fixed assets with interest paid monthly at prime
plus 2.5% (10.75% at March 31, 1997), and (3) a demand note with a $6.0 million
dollar maximum borrowing capacity with interest paid monthly at LIBOR plus 3%
for working capital advances and libor plus 1% for investment financing.
Substantially all of the assets of the Company were pledged as collateral under
the Company's available credit facilities.
In May and June 1997, subsequent to the completion of the acquisition of
the Company by SCI (Notes 1 and 11), the Company retired its revolving credit
and term notes with the proceeds of a $2.0 million equipment note and a loan
totaling $4.5 million from SCI. The equipment note is payable in equal monthly
installments with an interest rate of 9.38% over five years. The loan received
subsequent to year end from SCI bears no interest, has no defined due date and
is intended by SCI management to be long-term in nature.
Future annual maturities of long-term debt, as affected by the retirement
of the credit facilities through proceeds from the equipment note and SCI, as of
March 31, 1997 are as follows (in thousands):
<TABLE>
<S> <C>
1998................................................ $ 571
1999................................................ 716
2000................................................ 700
2001................................................ 502
2002................................................ 467
Thereafter.......................................... 4,619
------
Total..................................... $7,575
======
</TABLE>
F-41
<PAGE> 162
VALENTEC INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
EXCLUDING VALENTEC INTERNATIONAL, LTD.
NOTE 6 INCOME TAXES
The income tax benefit comprises the following (in thousands):
<TABLE>
<S> <C>
Current:
Federal............................................ $ --
State.............................................. --
-----
Deferred:
Federal............................................ (329)
State.............................................. 43
-----
(286)
-----
$(286)
=====
</TABLE>
The following is a reconciliation of the tax benefit using a Federal
statutory tax rate of 34%:
<TABLE>
<CAPTION>
AMOUNT RATE
-------- ---
<S> <C> <C>
Tax at statutory rate...................... (337,000) (34%)
State income taxes, net.................... (59,000) (6)
Other...................................... 8,000 1
State net operating loss carryforward
limitation............................... 102,000 10
-------- ---
(286,000) (29%)
======== ===
</TABLE>
The Company has the following deferred tax assets (liabilities) (in
thousands):
<TABLE>
<S> <C>
Investment in affiliate............................ $(4,134)
Property and equipment............................. (111)
Accruals and reserves.............................. 1,205
Net operating losses............................... 1,746
Valuation allowance................................ --
-------
Net deferred tax asset(liability).................. $(1,294)
=======
</TABLE>
At March 31, 1997, the Company had Federal and state net operating loss
carryforwards of $4.8 million and $1.7 million, respectively, expiring in
various years beginning in 2002. The amount of net operating losses that may be
utilized in the future may be subject to limitations in the event of a change in
control of the Company, as defined in the Internal Revenue Code.
NOTE 7 COMMITMENTS AND CONTINGENCIES
Operating leases
The Company has noncancellable operating leases for office space and
equipment that expire at various dates through 2000.
F-42
<PAGE> 163
VALENTEC INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
EXCLUDING VALENTEC INTERNATIONAL, LTD.
Future annual minimum lease payments for all noncancellable operating
leases are as follows (in thousands):
<TABLE>
<S> <C>
1998.............................................. $ 906
1999.............................................. 904
2000.............................................. 603
------
Total future annual minimum lease payments.......... $2,413
======
</TABLE>
Certain of the lease payments are subject to adjustment for increases in
utility costs, real estate taxes and inflation. Accordingly, rent expense has
been normalized. The Company incurred rent expense of $868,000 for the year
ended March 31, 1997. At March 31, 1997, deferred rent included in total
liabilities amounted to $574,000.
Environmental issues
The Company has certain environmental contingencies as of March 31, 1997.
Phase I and II investigations have identified certain environmental issues at
its Costa Mesa, California location which will require remediation. The
Company's management estimates that its maximum liability for these
environmental matters, over the life of the remediation program, will be
$385,000. Such amount is included in total liabilities (Note 3) as of March 31,
1997.
No other significant environmental matters are known by management.
Deferred compensation and other matters
The Company has a deferred compensation agreement with the widow of an
officer of a former division. The liability related to this agreement was
approximately $151,000 at March 31, 1997.
Legal proceedings
The Company is subject to various legal actions arising out of the conduct
of its business, relating to product liability. In one case, the plaintiff
contends that the Company's products failed inspection. However, the Company
contends that the design of the products were produced in accordance with the
design specifications. The Company has already received a favorable initial
ruling. In another case, the plaintiff contends that the Company bore
responsibility for the failure of a product to pass first article production
ballistics testing. The matter was resolved in October 1996, resulting in the
Company testing the product and paying for any failing products. The Company
estimates that one lot does not meet specifications and has accrued for the
rework costs. In the opinion of management of the Company, amounts accrued for
assessments and rework of $1.4 million in connection with these matters are
adequate.
The Company is obligated to make certain repairs, including the parking
lot, the roof and structure to the Costa Mesa, California facility prior to the
lease expiration date of 2000. In the opinion of management of the Company,
amounts accrued for repairs for the building of $1.0 million are adequate.
NOTE 8 BENEFIT PLANS
The Company has a defined contribution plan intended to qualify under
Section 401(k) of the Internal Revenue Code for eligible employees. The plan
provides for discretionary employer contributions. The Company made no employer
contributions during any of the periods presented in the financial statements.
F-43
<PAGE> 164
VALENTEC INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
EXCLUDING VALENTEC INTERNATIONAL, LTD.
During the year ended March 31, 1997, the Company established an Employee
Stock Ownership Plan (ESOP). The plan participants include all individuals who
were employed by the Company on January 1, 1996. All participants in the plan
will vest over a five year period from the inception of the plan.
NOTE 9 BUSINESS SEGMENT INFORMATION
The Company's operations have been classified into two business segments:
automotive and defense.
Summarized financial information by business segment as of and for the year
ended March 31, 1997 is as follows (in thousands):
<TABLE>
<S> <C>
Net Sales:
Automotive....................................... $ 9,479
Defense.......................................... 4,547
-------
$14,026
=======
Operating loss:
Automotive....................................... $ (239)
Defense.......................................... (108)
-------
$ (347)
=======
Identifiable assets:
Automotive....................................... $13,945
Defense.......................................... 6,563
-------
$20,508
=======
Depreciation and amortization:
Automotive....................................... $ 371
Defense.......................................... 175
-------
$ 546
=======
Capital expenditures:
Automotive....................................... $ 953
Defense.......................................... 163
-------
$ 1,116
=======
</TABLE>
F-44
<PAGE> 165
VALENTEC INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
EXCLUDING VALENTEC INTERNATIONAL, LTD.
NOTE 10 SUPPLEMENTAL INFORMATION
In connection with the Offering and the Exchange Offer, the Company is or
will be, respectively, a guarantor, and accordingly, the following condensed
financial information is provided:
HISTORICAL BALANCE SHEET
EXCLUDING ASSETS AND LIABILITIES OF VALENTEC INTERNATIONAL, LTD. (NOTE 1)
MARCH 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31,
1996
---------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................ $ 1,323
Accounts receivable, net......................................................... 3,766
Inventories...................................................................... 1,114
Deferred income taxes............................................................ 959
Prepaid expenses and other....................................................... 2,494
-------
Total current assets..................................................... 9,656
Property, plant, and equipment, net................................................ 4,901
Other assets....................................................................... 906
Investment in affiliate............................................................ 9,756
-------
Total assets............................................................. $25,219
=======
LIABILITIES AND CAPITAL DEFICIENCY
Current liabilities:
Accounts payable................................................................. $ 2,459
Payable to affiliates............................................................ 1,317
Accrued liabilities.............................................................. 1,497
Other current liabilities........................................................ 1,297
Current portion of long-term obligations......................................... 4,760
-------
Total current liabilities................................................ 11,330
Long-term obligations.............................................................. 4,008
Notes payable to affiliates........................................................ 4,037
Other long-term liabilities........................................................ 5,249
Deferred income taxes.............................................................. 3,415
-------
Total liabilities........................................................ 28,039
Capital Deficiency:
Common stock, $.01 par value per share, 3,000,000 shares authorized; 2,160,000
shares issued and outstanding................................................. 22
Additional paid-in capital....................................................... 428
Accumulated deficit.............................................................. (3,270)
-------
Total capital deficiency................................................. (2,820)
-------
Total liabilities and capital deficiency................................. $25,219
=======
</TABLE>
F-45
<PAGE> 166
VALENTEC INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
EXCLUDING VALENTEC INTERNATIONAL, LTD.
HISTORICAL STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
EXCLUDING OPERATIONS OF VALENTEC INTERNATIONAL LTD. (NOTE 1)
FOR THE YEARS ENDED MARCH 31, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1996 1995
--------- ---------
<S> <C> <C>
Net revenues........................................................... $19,367 $16,979
Cost of revenues....................................................... 16,778 16,145
------- -------
Gross profit................................................. 2,589 834
Selling and marketing expenses......................................... 226 389
General and administrative expenses.................................... 1,754 2,303
Restructuring charges.................................................. 13,954 --
------- -------
Operating loss............................................... 13,345 (1,858)
Other expense (income)................................................. 366 (549)
Gain on partial sale of investment in affiliate........................ 9,712 8,186
Gain on sale of fixed assets........................................... -- 1,147
Interest expense, net.................................................. 1,132 617
Income from investment in affiliate (Notes 2 and 11)................... 1,343 957
------- -------
Income (loss) before income taxes............................ (3,788) 8,364
Income taxes........................................................... (1,020) 4,629
------- -------
Net income (loss)............................................ (2,768) 3,735
Repurchase of common stock............................................. (575) --
Retained earnings (accumulated deficit) beginning of year.............. 73 (3,662)
------- -------
Retained earnings (accumulated deficit) end of year.................... $(3,270) $ 73
======= =======
</TABLE>
F-46
<PAGE> 167
VALENTEC INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
EXCLUDING VALENTEC INTERNATIONAL, LTD.
HISTORICAL STATEMENT OF CASH FLOWS
EXCLUDING CASH FLOWS OF VALENTEC INTERNATIONAL, LTD. (NOTE 1)
FOR THE YEARS ENDED MARCH 31, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss).................................................... $(2,768) $ 3,735
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Depreciation and amortization..................................... 728 567
Income from investment in affiliate............................... (1,343) (957)
Gain on partial sale of investment in affiliate................... (9,712) (8,186)
Changes in operating assets and liabilities:
Accounts receivable, net........................................ (1,667) 320
Inventories..................................................... 160 (43)
Deferred income taxes........................................... (304) 3,941
Prepaid expenses and other...................................... (842) (672)
Accounts payable................................................ 351 (349)
Accrued liabilities............................................. (436) (800)
Other liabilities............................................... (1,048) (3,826)
------- -------
Net cash used in operating activities........................ (16,881) (6,270)
------- -------
Cash flows from investing activities:
Additions to property and equipment.................................. (700) (1,632)
Proceeds from partial sale of investment in affiliate................ 16,509 1,621
------- -------
Net cash provided by (used in) investing activities.......... 15,809 (11)
------- -------
Cash flows from financing activities:
Net borrowings under long-term obligations........................... 3,284 771
Repurchase of common stock........................................... (625) --
Net borrowings of notes payable to affiliates........................ 138 4,070
Net borrowings from affiliate........................................ (499) 1,537
------- -------
Net cash provided by (used in) financing activities.......... 2,298 6,378
Increase in cash and cash equivalents.................................. 1,226 97
Cash beginning of year................................................. 97 0
------- -------
Cash and cash equivalents, end of year................................. $ 1,323 $ 97
======= =======
</TABLE>
F-47
<PAGE> 168
VALENTEC INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
EXCLUDING VALENTEC INTERNATIONAL, LTD.
NOTE 11 SUBSEQUENT EVENTS
Pursuant to a definitive Stock Purchase Agreement, dated as of May 22,
1997, SCI acquired all of the outstanding common stock of the Company in a
tax-free stock-for-stock exchange. As a condition to the consummation of such
acquisition, the Company divested VIL, the proceeds from which were
insignificant. The Company was SCI's largest shareholder immediately prior to
the acquisition owning approximately 27%, or 1,379,200 shares of the issued and
outstanding shares of the SCI common stock. SCI issued the shareholders of the
Company an aggregate of 1,369,200 newly issued shares of its common stock.
The purchase price for the acquisition of the Company by SCI was negotiated
between the Company and a special committee consisting of independent members of
the Board of Directors of SCI. The special committee was advised by independent
legal counsel and an independent financial advisor as to the fairness from a
financial point of view of the consideration to be received by SCI to SCI's
shareholders other than the Company.
The acquisition was accounted for as a purchase. The aggregate purchase
price amounted to approximately $14.3 million, including direct acquisition
costs of approximately $600,000. The assets and liabilities acquired approximate
their fair value, except for the common stock of SCI held by the Company. These
common shares which were previously accounted for under the equity method of
accounting for the investment by the Company will be recorded as treasury shares
at their estimated fair value of $13.7 million. Management intends to merge the
Company into SCI during fiscal 1998. The excess of the purchase price over the
fair value of the net assets acquired will be allocated to goodwill.
Also see Notes 4 and 5 for additional information regarding subsequent
events.
F-48
<PAGE> 169
JPS AUTOMOTIVE L.P.
AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION
BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 28,
1996
MARCH 29, ------------
1997
---------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash............................................................... $ 2 $ 2
Accounts receivable, net of allowance for doubtful accounts of $160
and $169........................................................ 9,949 9,500
Inventories........................................................ 9,329 7,889
Deferred tax assets................................................ 210 187
Other current assets............................................... 72 116
------- -------
Total current assets....................................... 19,562 17,694
------- -------
Property, plant and equipment:
Land and land improvements......................................... 286 250
Buildings and leasehold improvements............................... 881 881
Machinery, equipment and furnishings............................... 22,874 23,049
Construction in progress........................................... 628 617
------- -------
Total...................................................... 24,669 24,797
Less -- Accumulated depreciation and amortization.................. (681) (105)
------- -------
Property, plant and equipment, net......................... 23,988 24,692
------- -------
Goodwill, net of amortization........................................ 15,049 14,968
------- -------
Other assets......................................................... 273 321
------- -------
$58,872 $ 57,675
======= =======
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities:
Current portion of long-term debt.................................. $ 600 $ 625
Accounts payable................................................... 3,909 3,028
Accounts payable to related parties................................ 167 0
Accrued expenses................................................... 1,275 1,315
------- -------
Total current liabilities.................................. 5,951 4,968
------- -------
Long-term debt....................................................... 197 380
------- -------
Other liabilities.................................................... 817 843
------- -------
Commitments and contingencies (Note 5)
Divisional equity -- Investments and advances from JPS Automotive
L.P................................................................ 51,907 51,484
------- -------
$58,872 $ 57,675
======= =======
</TABLE>
F-49
<PAGE> 170
JPS AUTOMOTIVE L.P.
AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION
STATEMENTS OF OPERATIONS
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
-----------
PERIOD
PERIOD FROM FROM
DECEMBER 29, JANUARY 1,
1996, TO 1996, TO
MARCH 29, MARCH 30,
1997 1996
------------ -----------
<S> <C> <C>
Net sales........................................................... $ 16,691 $16,052
Cost of goods sold.................................................. 14,570 13,732
------- -------
Gross profit........................................................ 2,121 2,320
Selling, general and administrative expenses........................ 754 760
Corporate general and administrative allocated costs................ 187 295
------- -------
Income from operations.............................................. 1,180 1,265
Interest expense.................................................... (22) (31)
Interest expense allocated from JPS Automotive L.P.................. 0 (144)
Other expense, net.................................................. 0 (17)
------- -------
Income before income taxes.......................................... 1,158 1,073
Income tax provision................................................ 442 0
------- -------
Net income.......................................................... $ 716 $ 1,073
======= =======
</TABLE>
F-50
<PAGE> 171
JPS AUTOMOTIVE L.P.
AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
-----------
PERIOD FROM PERIOD FROM
DECEMBER 29, JANUARY 1,
1996, TO 1996, TO
MARCH 29, MARCH 30,
1997 1996
------------ -----------
<S> <C> <C>
Operating activities:
Net income........................................................ $ 716 $ 1,073
Adjustments to reconcile net income to net cash provided by
operating activities --
Deferred income tax provision.................................. 25 0
Depreciation and amortization.................................. 670 839
Debt issuance cost amortization................................ 0 34
Loss on disposal of assets..................................... 0 17
Changes in operating assets and liabilities:
Accounts receivable.......................................... (449) (232)
Inventories.................................................. (1,440) (308)
Accounts payable............................................. 1,048 1,438
Other assets and liabilities................................. (22) (414)
------- -------
Net cash provided by operating activities................. 548 2,447
------- -------
Net cash used in investing activities -- Capital expenditures....... (47) (51)
------- -------
Financing activities:
Net transactions with JPS Automotive L.P. ........................ (293) (734)
Repayment of long-term debt....................................... (208) (1,662)
------- -------
Net cash used in financing activities..................... (501) (2,396)
------- -------
Net change in cash.................................................. 0 0
Cash, beginning of period........................................... 2 3
------- -------
Cash, end of period................................................. $ 2 $ 3
======= =======
</TABLE>
F-51
<PAGE> 172
JPS AUTOMOTIVE L.P.
AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION
NOTES TO INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
1. FINANCIAL STATEMENTS:
The financial statements include the accounts of the Air
Restraint/Industrial Fabrics division of JPS Automotive L.P. and its
subsidiaries ("JPS Automotive"). These financial statements have been prepared
without audit pursuant to Rule 10-01 of Regulation S-X of the Securities and
Exchange Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the accompanying financial
statements reflect all adjustments considered necessary for a fair presentation
of the financial position, results of operations and cash flows. Results of
operations for interim periods are not necessarily indicative of results for the
full year. For further information, refer to the audited financial statements
and notes thereto for the Air Restraint/Industrial Fabrics division of JPS
Automotive for the period December 12, 1996, to December 28, 1996, the period
January 1, 1996, to December 11, 1996, the year ended December 31, 1995 and the
period June 29, 1994 to January 1, 1995.
The 1996 Acquisition
On December 11, 1996, Collins & Aikman Corporation ("C&A"), through its
subsidiaries, acquired JPS Automotive from Foamex International Inc. ("Foamex")
pursuant to an Equity Purchase Agreement dated August 28, 1996, as amended
December 11, 1996 (the "1996 Acquisition"). The purchase price for the 1996
Acquisition was an aggregate of approximately $220 million, subject to
postclosing adjustment, consisting of approximately $195 million of indebtedness
of JPS Automotive and approximately $25 million in cash paid to Foamex. In the
accompanying financial statements, for periods subsequent to the 1996
Acquisition, the Air Restraint/Industrial Fabrics division is referred to as the
"Division."
Immediately prior to the 1996 Acquisition, JPS Automotive was converted
from a Delaware limited partnership into an association which is taxable as a
corporation for federal, state and local income tax purposes. JPS Automotive is
included in the consolidated federal income tax return of C&A. Income taxes for
periods subsequent to the 1996 Acquisition reflect the pushdown of the
Division's impact on the consolidated tax position of C&A.
The 1994 Acquisition
JPS Automotive L.P. was formed on May 17, 1994, for the purpose of
acquiring a 100% ownership interest in JPS Automotive Products Corp. ("Products
Corp."), which was purchased for nominal consideration on May 25, 1994. On June
28, 1994, subsidiaries of Foamex, the owners of all participating interests in
JPS Automotive, made capital contributions to Products Corp. On June 28, 1994,
Products Corp. acquired the assets of the automotive products and industrial
fabrics divisions of JPS Textile Group, Inc. ("JPS Textile") (the "1994
Acquisition"). Effective October 3, 1994, Products Corp. transferred and
assigned substantially all of its assets, subject to substantially all of its
liabilities, to the Predecessor Company, which agreed to assume such
liabilities. In the accompanying financial statements, for periods prior to
December 12, 1996, the Air Restraint/Industrial Fabrics division is referred to
as the "Predecessor Company."
F-52
<PAGE> 173
JPS AUTOMOTIVE L.P.
AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION
NOTES TO INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
2. INVENTORIES:
The components of inventories consist of (in thousands):
<TABLE>
<CAPTION>
MARCH 29, DECEMBER 28,
1997 1996
--------- ------------
<S> <C> <C>
Raw materials and supplies.......................... $ 2,150 $1,975
Work-in-process..................................... 2,621 2,877
Finished goods...................................... 4,558 3,037
------ ------
Total..................................... $ 9,329 $7,889
====== ======
</TABLE>
3. GOODWILL:
Goodwill allocated to the Division from the 1996 Acquisition, representing
the excess of purchase price over the fair value of net assets acquired in the
1996 Acquisition, is being amortized on a straight-line basis over the period of
40 years. The Predecessor Company's allocation of the JPS Automotive goodwill
relating to the 1994 Acquisition was also amortized using the straight-line
method over a 40-year period. Amortization of goodwill for the period from
December 29, 1996, to March 29, 1997, and the period from January 1, 1996, to
March 30, 1996, was $94 thousand and $266 thousand, respectively. Accumulated
amortization at March 29, 1997, was $126 thousand. The carrying value of
goodwill will be reviewed periodically based on the nondiscounted cash flows and
pretax income over the remaining amortization periods. Should this review
indicate that the goodwill balance will not be recoverable, the Division's
carrying value of the goodwill will be reduced. At March 29, 1997, management
believes its goodwill of approximately $15 million was fully recoverable.
4. RELATED-PARTY TRANSACTIONS AND ALLOCATIONS:
JPS Automotive performed certain services and incurred certain costs for
the Division and the Predecessor Company. Services provided include treasury,
risk management, employee benefits, legal services, data processing, credit and
collections and other general corporate services. The costs of the services
provided by JPS Automotive have been allocated to the Division and the
Predecessor Company based upon a combination of estimated use and the relative
sales of the business to the total operations of JPS Automotive. Costs allocated
to the Division and the Predecessor Company for these services were $187
thousand and $295 thousand for the period from December 29, 1996, to March 29,
1997, and the period from January 1, 1996, to March 30, 1996, respectively.
JPS Automotive provided certain management information systems supporting
the manufacturing operations of the Division and the Predecessor Company. The
costs of the services provided by JPS Automotive have been allocated to the
Division and the Predecessor Company based upon estimated use. Costs allocated
to the Division and the Predecessor Company for these services were $63 thousand
and $71 thousand for the period from December 29, 1996, to March 29, 1997, and
the period from January 1, 1996, to March 30, 1996, respectively. These costs
are included in cost of goods sold in the accompanying statements of operations.
The Division and the Predecessor Company used a warehouse owned by the JPS
Automotive Carpet and Trim division to store and distribute certain finished
goods inventory. Costs charged to the Division and the Predecessor Company by
the Carpet and Trim division for rent, utilities and payroll costs associated
with the use of this warehouse were approximately $57 thousand and $58 thousand
for the period from December 29,
F-53
<PAGE> 174
JPS AUTOMOTIVE L.P.
AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION
NOTES TO INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
1996, to March 29, 1997, and the period from January 1, 1996, to March 30, 1996,
respectively. These costs are included in cost of goods sold in the accompanying
statements of operations.
JPS Automotive administered its insurance programs on a corporate-wide
basis and charged its individual participating subsidiaries and divisions based
on estimated claims and loss experience. Costs charged by JPS Automotive to the
Division and the Predecessor Company for automotive and general liability,
workers' compensation and employee group health claims and insurance amounted to
$413 thousand and $344 thousand for the period from December 29, 1996, to March
29, 1997, and the period from January 1, 1996, to March 30, 1996, respectively.
Analysis of Net Transactions with JPS Automotive L.P.
Due to the intent to forgive any net balance in investments and advances to
or from JPS Automotive upon the sale of the Division by JPS Automotive, the net
intercompany balance has been classified as a component of divisional equity in
the accompanying financial statements. Significant components of the net
transactions with JPS Automotive have been summarized as follows (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
-----------
PERIOD FROM PERIOD FROM
DECEMBER 29, JANUARY 1,
1996, TO 1996, TO
MARCH 29, MARCH 30,
1997 1996
------------ -----------
<S> <C> <C>
Cash transactions --
Corporate general and administrative allocated
costs.......................................... $ 187 $ 295
Corporate management information systems allocated
costs.......................................... 63 71
Corporate administered insurance program costs.... 413 344
Change in allocated debt of JPS Automotive........ 0 1,505
Interest expense allocated from JPS Automotive.... 0 144
Net transfers of cash to JPS Automotive........... (956) (3,093)
----- -------
$ (293) $ (734)
===== =======
</TABLE>
Other Related-party Activities of the Division
At March 29, 1997, Collins & Aikman Products Co. ("C&A Products"), a wholly
owned subsidiary of C&A, has pledged the ownership interests in its significant
subsidiaries, including its partnership interests in JPS Automotive, as security
for debt of C&A Products totaling $458 million.
C&A Products currently provides general administrative services to JPS
Automotive pursuant to a preexisting Services Agreement assigned to C&A Products
by Foamex (the "Existing Services Agreement"). In connection with the 1996
Acquisition, C&A currently contemplates an amendment to the Existing Services
Agreement to expressly provide that the services provided by C&A Products will
include certain administrative and management functions previously conducted by
JPS Automotive. For the period from December 29, 1996, to March 29, 1997, the
Division was charged $167 thousand by C&A Products for certain administrative
and management services in accordance with the Existing Services Agreement.
Other Related-party Activities of the Predecessor Company
The Predecessor Company, through JPS Automotive, regularly entered into
transactions with its affiliates in the ordinary course of business.
F-54
<PAGE> 175
JPS AUTOMOTIVE L.P.
AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION
NOTES TO INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
In connection with the 1994 Acquisition, JPS Automotive entered into a
supply agreement (the "Supply Agreement") with Foamex and certain of its
affiliates. Pursuant to the terms of the Supply Agreement, at the option of JPS
Automotive, Foamex purchased certain raw materials which were necessary for the
manufacture of the Predecessor Company's products, and would resell such raw
materials to the Predecessor Company at a price equal to net cost plus
reasonable out-of-pocket expenses. During the period from January 1, 1996, to
March 30, 1996, the Predecessor Company purchased approximately $6.5 million of
raw materials under the Supply Agreement with Foamex.
Prior to the 1996 Acquisition, outstanding borrowings of JPS Automotive
under its term and revolving loan arrangements were allocated, along with the
related interest expense and deferred debt issuance costs, to the Predecessor
Company based on the ratio of the assets of the Predecessor Company which served
as collateral for the debt, which consisted of accounts receivable and
inventory, to the total of the assets of JPS Automotive which served as
collateral for the debt. The Predecessor Company was allocated interest expense
of approximately $144 thousand for the period from January 1, 1996, to March 30,
1996, associated with these borrowings.
5. COMMITMENTS AND CONTINGENCIES:
From time to time, the Division has been involved in various legal
proceedings. Management believes that such litigation is routine in nature and
incidental to the conduct of its business, and that none of such litigation, if
determined adversely to the Division, would have a material adverse effect on
the financial condition or results of operations of the Division.
The Division is subject to various federal, state and local environmental
laws and regulations that (i) affect ongoing operations and may increase capital
costs and operating expenses and (ii) impose liability for the costs of
investigation and remediation and certain other damages related to on-site and
off-site soil and groundwater contamination. The Division believes it has
obtained or applied for the material permits necessary to conduct its business.
To date, compliance with applicable environmental laws has not had and, in the
opinion of management, based on the facts presently known to it, is not expected
to have a material adverse effect on the Division's financial condition or
results of operations.
Although not named as a potentially responsible party for any
environmentally contaminated sites, the Division and the Predecessor Company
accrued environmental costs at March 29, 1997, and March 30, 1996, of
approximately $325 thousand and $350 thousand, respectively; $48 thousand and
$50 thousand of which are included in current liabilities, respectively. In
addition, at March 30, 1996, the Predecessor Company recorded a $75 thousand
receivable for indemnification of environmental liabilities by JPS Textiles, the
former owner of JPS Automotive.
Although it is possible that new information or future events could require
the Division to reassess its potential exposure relating to pending
environmental matters, management believes that, based on the facts presently
known to it, the resolution of such environmental matters will not have a
material adverse effect on the Division's financial condition or results of
operations. The possibility exists, however, that new environmental legislation
may be passed or environmental regulations may be adopted, or other
environmental conditions may be found to exist, that may require expenditures
not currently anticipated which may be material, and there can be no assurance
that the Division has identified or properly assessed all potential
environmental liability arising from its activities or properties.
6. SUBSEQUENT EVENT:
On July 24, 1997, JPS Automotive sold all of the assets of the Division to
Safety Components International, Inc. for $56.3 million, including the
assumption of certain liabilities and subject to postclosing
F-55
<PAGE> 176
JPS AUTOMOTIVE L.P.
AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION
NOTES TO INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
adjustments. In addition, the Company made a payment to JPS at the closing to
enable it to pay off existing indebtedness of the Division of approximately
$650,000 at closing.
F-56
<PAGE> 177
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of JPS Automotive L.P.:
We have audited the accompanying balance sheets of the Air
Restraint/Industrial Fabrics division of JPS Automotive L.P. as of December 28,
1996, and December 31, 1995, and the related statements of operations,
divisional equity and cash flows for the period from December 12, 1996, to
December 28, 1996, the period from January 1, 1996, to December 11, 1996, the
year ended December 31, 1995, and the period from June 29, 1994, to January 1,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Air Restraint/Industrial
Fabrics division of JPS Automotive L.P. as of December 28, 1996, and December
31, 1995, and the results of its operations and its cash flows for the period
from December 12, 1996, to December 28, 1996, the period from January 1, 1996,
to December 11, 1996, the year ended December 31, 1995, and the period from June
29, 1994, to January 1, 1995, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Charlotte, North Carolina,
July 10, 1997, (except with respect
to the matter discussed in Note 16,
as to which the date is July 24, 1997.)
F-57
<PAGE> 178
JPS AUTOMOTIVE L.P.
AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION
BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
------------
DECEMBER 28, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash............................................................. $ 2 $ 3
Accounts receivable, net of allowance for doubtful accounts of
$169
and $317...................................................... 9,500 10,310
Inventories...................................................... 7,889 9,011
Deferred tax assets.............................................. 187 0
Other current assets............................................. 116 211
------- -------
Total current assets..................................... 17,694 19,535
------- -------
Property, plant and equipment:
Land and land improvements....................................... 250 245
Buildings and leasehold improvements............................. 881 2,331
Machinery, equipment and furnishings............................. 23,049 26,104
Construction in progress......................................... 617 1,036
------- -------
Total.................................................... 24,797 29,716
Less -- Accumulated depreciation and amortization................ (105) (2,503)
------- -------
Property, plant and equipment, net....................... 24,692 27,213
------- -------
Goodwill, net of amortization...................................... 14,968 41,054
------- -------
Other assets....................................................... 321 641
------- -------
$ 57,675 $ 88,443
======= =======
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities:
Current portion of long-term debt................................ $ 625 $ 630
Current portion of allocated long-term debt of JPS Automotive
L.P. ......................................................... 0 358
Accounts payable................................................. 3,028 1,893
Accounts payable to related parties.............................. 0 798
Accrued expenses................................................. 1,315 1,675
------- -------
Total current liabilities................................ 4,968 5,354
------- -------
Long-term debt..................................................... 380 954
------- -------
Allocated long-term debt of JPS Automotive L.P. ................... 0 5,842
------- -------
Other liabilities.................................................. 843 746
------- -------
Commitments and contingencies (Notes 10, 12 and 13)................
Divisional equity -- Investments and advances from JPS Automotive
L.P. ............................................................ 51,484 75,547
------- -------
$ 57,675 $ 88,443
======= =======
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
F-58
<PAGE> 179
JPS AUTOMOTIVE L.P.
AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION
STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-----------------------------------------
PERIOD FROM PERIOD FROM PERIOD FROM
DECEMBER 12, JANUARY 1, JUNE 29,
1996, TO 1996, TO YEAR ENDED 1994, TO
DECEMBER 28, DECEMBER 11, DECEMBER 31, JANUARY 1,
1996 1996 1995 1995
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Net sales...................................... $2,110 $ 62,821 $ 73,080 $41,888
Cost of goods sold............................. 1,916 54,679 62,299 33,257
------ ------- ------- -------
Gross profit................................... 194 8,142 10,781 8,631
Selling, general and administrative expenses... 147 3,029 3,347 1,439
Corporate general and administrative allocated
costs........................................ 39 1,028 1,074 399
------ ------- ------- -------
Income from operations......................... 8 4,085 6,360 6,793
Interest expense............................... 0 (100) (165) (110)
Interest expense allocated from JPS Automotive
L.P.......................................... 0 (552) (594) (316)
Other income (expense), net.................... 21 (370) 11 2
------ ------- ------- -------
Income before income taxes..................... 29 3,063 5,612 6,369
Income tax provision........................... 11 0 0 0
------ ------- ------- -------
Net income..................................... $ 18 $ 3,063 $ 5,612 $ 6,369
====== ======= ======= =======
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
F-59
<PAGE> 180
JPS AUTOMOTIVE L.P.
AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION
STATEMENTS OF DIVISIONAL EQUITY
(AMOUNTS IN THOUSANDS)
<TABLE>
<S> <C>
PREDECESSOR COMPANY:
Pushdown of acquisition basis and initial contributions by JPS Automotive
L.P. ........................................................................ $ 69,473
Net income...................................................................... 6,369
Net transactions with JPS Automotive L.P........................................ (2,175)
--------
Balance, January 1, 1995........................................................ 73,667
Net income...................................................................... 5,612
Net transactions with JPS Automotive L.P........................................ (3,732)
--------
Balance, December 31, 1995...................................................... 75,547
Net income...................................................................... 3,063
Net transactions with JPS Automotive L.P........................................ (6,808)
--------
Balance, December 11, 1996...................................................... 71,802
Acquisition of JPS Automotive L.P. by Collins & Aikman Corporation.............. (71,802)
--------
$ 0
========
- --------------------------------------------------------------------------------------------
JPS AUTOMOTIVE:
Pushdown of acquisition basis and initial contributions by partners............. $ 50,050
Net income...................................................................... 18
Net transactions with JPS Automotive L.P........................................ 1,416
--------
Balance, December 28, 1996...................................................... $ 51,484
========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
F-60
<PAGE> 181
JPS AUTOMOTIVE L.P.
AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION
STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-----------------------------------------
PERIOD FROM PERIOD FROM PERIOD FROM
DECEMBER 12, JANUARY 1, JUNE 29,
1996, TO 1996, TO YEAR ENDED 1994, TO
DECEMBER 28, DECEMBER 11, DECEMBER 31, JANUARY 1,
1996 1996 1995 1995
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Operating activities:
Net income................................... $ 18 $ 3,063 $ 5,612 $ 6,369
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities --
Depreciation and amortization............. 137 3,238 2,880 1,212
Debt issuance cost amortization........... 0 128 247 83
Loss on disposal of assets................ 0 322 82 0
Changes in operating assets and
liabilities, net of acquisition:
Accounts receivable..................... (242) 1,052 3,351 (1,747)
Inventories............................. 520 602 781 (285)
Accounts payable........................ (1,876) 2,213 (4,140) 625
Other assets and liabilities............ 27 (237) (692) (727)
------- ------- ------- -------
Net cash provided by (used in)
operating activities............... (1,416) 10,381 8,121 5,530
------- ------- ------- -------
Net cash used in investing
activities -- Capital expenditures........... 0 (829) (4,106) (3,785)
------- ------- ------- -------
Financing activities:
Net transactions with JPS Automotive L.P. ... 1,416 (6,808) (4,429) (2,175)
Proceeds from (repayments of) of long-term
debt, net................................. 0 (2,745) 414 433
------- ------- ------- -------
Net cash provided by (used in)
financing activities............... 1,416 (9,553) (4,015) (1,742)
------- ------- ------- -------
Net change in cash............................. 0 (1) 0 3
Cash, beginning of period...................... 2 3 3 0
------- ------- ------- -------
Cash, end of period............................ $ 2 $ 2 $ 3 $ 3
======= ======= ======= =======
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
F-61
<PAGE> 182
JPS AUTOMOTIVE L.P.
AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION:
The Air Restraint/Industrial Fabrics division of JPS Automotive L.P. and
subsidiaries ("JPS Automotive") operates in the automotive products and
industrial fabrics segments, including the design, manufacture and sale of
airbag fabric for passenger cars and light trucks and other specialty industrial
fabrics.
On December 11, 1996, all of the outstanding equity of JPS Automotive was
acquired from Foamex International, Inc. ("Foamex") by Collins & Aikman
Corporation ("C&A"), through its subsidiaries (the "1996 Acquisition"). (See
Note 3). In the accompanying financial statements, for periods subsequent to the
1996 Acquisition, the Air Restraint/Industrial Fabrics division is referred to
as the "Division."
JPS Automotive was formed on May 17, 1994, for the purpose of acquiring a
100% ownership interest in JPS Automotive Products Corp. ("Products Corp."),
which was purchased for nominal consideration on May 25, 1994. On June 28, 1994,
subsidiaries of Foamex, the owners of all partnership interests in JPS
Automotive, made capital contributions to Products Corp. On June 28, 1994,
Products Corp. acquired the assets of the automotive products and industrial
fabrics divisions of JPS Textile Group, Inc. ("JPS Textile") (the "1994
Acquisition"). Effective October 3, 1994, Products Corp. transferred and
assigned substantially all of its assets, subject to substantially all of its
liabilities, to JPS Automotive, which agreed to assume such liabilities. In the
accompanying financial statements, for the periods from June 29, 1994, through
December 11, 1996, the Air Restraint/Industrial Fabrics division is referred to
as the "Predecessor Company."
2. BASIS OF PRESENTATION:
The Division and the Predecessor Company
The balance sheet as of December 28, 1996, and the statements of
operations, cash flows and divisional equity for the period from December 12,
1996, to December 28, 1996, pertain to the Division. The balance sheet as of
December 31, 1995, and the statements of operations, cash flows and divisional
equity for the period from January 1, 1996, to December 11, 1996, for the year
ended December 31, 1995 and the period from June 29, 1994, to January 1, 1995,
pertain to the Predecessor Company.
Transfers of operating funds between the Division (or the Predecessor
Company) and JPS Automotive occur on a noninterest-bearing basis, with the net
amount of these transfers reflected as investments and advances from JPS
Automotive L.P. in the accompanying financial statements. The net balance in
investments and advances from JPS Automotive L.P. at December 28, 1996, of $51.4
million is classified as divisional equity in the accompanying balance sheet due
to the intent to forgive any net balance in investments and advances from JPS
Automotive L.P. upon the sale of the Division by JPS Automotive.
As indicated above, the accompanying financial statements present the
financial position, results of operations and cash flows of the Division and the
Predecessor Company as if it were a separate entity for all periods presented.
In accordance with Staff Accounting Bulletin ("SAB") No. 54 of the Securities
and Exchange Commission, JPS Automotive's investment in the Division (or the
Predecessor Company) is reflected in the financial statements of the Division
and the Predecessor Company ("pushdown accounting") during the applicable
periods. The accompanying financial statements reflect the allocation of the
purchase price in excess of the net assets acquired on the same basis as in the
financial statements of JPS Automotive.
For the periods up through December 11, 1996, as required by SAB No. 73, a
portion of certain term and revolving bank debt and the related debt issuance
costs and interest expense of JPS Automotive has been allocated to the
Predecessor Company as a result of certain of the Predecessor Company's assets,
which consist of accounts receivable and inventory, serving as security for such
debt. The debt was retired in connection with the 1996 Acquisition (see Note 7).
The allocations have been made based upon the ratio of the assets of the
Predecessor Company which served as collateral for the debt to the total of the
assets of JPS
F-62
<PAGE> 183
JPS AUTOMOTIVE L.P.
AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Automotive which served as collateral for the debt. The average interest rates
on this debt for the period from January 1, 1996, to December 11, 1996, the year
ended December 31, 1995, and the period from June 29, 1994, to January 1, 1995,
were 9.3%, 9.2% and 10.4%, respectively. Interest has not been computed on the
remaining intercompany balances.
JPS Automotive performed certain services and incurred certain costs for
the Division and the Predecessor Company. Services provided include treasury,
risk management, employee benefits, legal services, data processing, credit and
collections and other general corporate services. The costs of the services
provided by JPS Automotive have been allocated to the Division and the
Predecessor Company based upon a combination of estimated use and the relative
sales of the business to the total operations of JPS Automotive. Costs allocated
to the Division and the Predecessor Company for these services were $39
thousand, $1 million, $1.1 million and $399 thousand for the period from
December 12, 1996, to December 28, 1996, the period from January 1, 1996, to
December 11, 1996, the year ended December 31, 1995, and the period from June
29, 1994, to January 1, 1995, respectively. In the opinion of management, the
method of allocating these costs is believed to be reasonable. However, the
costs of these services charged to the Division and the Predecessor Company are
not necessarily indicative of the costs that would have been incurred if the
Division or the Predecessor Company had performed these functions.
JPS Automotive administered its insurance programs on a corporate-wide
basis and charged its individual participating subsidiaries and divisions based
on estimated claims and loss experience. Costs charged by JPS Automotive to the
Division and the Predecessor Company for automotive and general liability,
workers' compensation and employee group health claims and insurance amounted to
$60 thousand, $1.4 million, $1.9 million and $614 thousand in the period from
December 12, 1996, to December 28, 1996, the period from January 1, 1996, to
December 11, 1996, the year ended December 31, 1995, and the period from June
29, 1994 to January 1, 1995, respectively. The accompanying balance sheets
include amounts for automotive and general liability, workers' compensation and
employee group health claims.
Collins & Aikman Products Co. ("C&A Products"), a wholly owned subsidiary
of C&A, currently provides general administrative services to JPS Automotive
pursuant to a preexisting Services Agreement assigned to C&A Products by Foamex
(the "Existing Services Agreement"). For the period from December 12, 1996, to
December 28, 1996, no amounts were paid or accrued by JPS Automotive or the
Division under this agreement.
3. JPS AUTOMOTIVE ACQUISITIONS:
The 1996 Acquisition
As discussed in Note 1, on December 11, 1996, C&A, through its
subsidiaries, acquired JPS Automotive from Foamex pursuant to an Equity Purchase
Agreement dated August 28, 1996, as amended December 11, 1996. The purchase
price for the 1996 Acquisition was an aggregate of approximately $220 million,
subject to postclosing adjustment, consisting of approximately $195 million of
indebtedness of JPS Automotive and approximately $25 million in cash paid to
Foamex.
The 1996 Acquisition has been accounted for as a purchase and, pursuant to
the provisions of SAB No. 54 and the rules of pushdown accounting, the 1996
Acquisition gave rise to a new basis of accounting for JPS Automotive. The
purchase price and related acquisition expenses exceeded the fair value of the
net assets acquired by approximately $126.4 million, which was pushed down and
recorded by JPS Automotive as goodwill and is being amortized over 40 years. The
allocation of the total purchase price to the Division resulted in reported
goodwill of $15.0 million related to the 1996 Acquisition.
In addition to the pushdown of goodwill, adjustments to certain assets and
liabilities of the Predecessor Company were recorded as a result of the 1996
Acquisition and the application of pushdown accounting. A
F-63
<PAGE> 184
JPS AUTOMOTIVE L.P.
AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
comparison of the Division's assets and liabilities after the 1996 Acquisition
to those of the Predecessor Company prior to the 1996 Acquisition is as follows
(in thousands):
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
------------
DECEMBER 11, DECEMBER 12,
1996 1996
------------ ------------
<S> <C> <C>
Current assets..................................... $ 17,828 $ 17,981
Property, plant and equipment, net................. 25,528 24,793
Goodwill........................................... 40,031 15,000
Other assets....................................... 415 332
Current liabilities................................ 8,348 6,891
Long-term debt..................................... 2,947 380
Other liabilities.................................. 705 785
======= =======
</TABLE>
The above December 12, 1996, balances, which are subject to postclosing
adjustment, reflect the revaluation of the Division's assets and liabilities to
their estimated fair values at the date of the 1996 Acquisition.
Unaudited pro forma net income of the Division for the period from January
1, 1996, to December 28, 1996, and for the year ended December 31, 1995,
assuming that the 1996 Acquisition occurred at the beginning of each period,
would have been approximately $3.8 million and approximately $6.4 million,
respectively. The pro forma adjustments, which would not affect net sales,
reflect primarily reduced depreciation, goodwill amortization and interest
expense offset by the pro forma impact of income taxes.
The 1994 Acquisition
On June 28, 1994, JPS Automotive acquired the businesses and assets of the
automotive products and industrial fabrics divisions of JPS Textile. The
acquired assets included property, plant and equipment, inventories and certain
contract rights, as well as certain stock and limited and general partnership
interests in joint ventures. As a part of the 1994 Acquisition, agreements were
reached relating to the purchase of assets, the granting of a reciprocal
easement, a provision for certain services, the supply of certain materials and
the sharing of taxes. The 1994 Acquisition was made pursuant to the terms of an
asset purchase agreement, dated as of May 25, 1994 (the "Asset Purchase
Agreement"), by and among JPS Textile, its affiliates and Foamex. The aggregate
consideration for the 1994 Acquisition was $290.3 million, which included
acquisition costs of $8.3 million and the assumption of long-term debt of $15.6
million. The cost of the acquisition was allocated on the estimated basis of the
fair value of the assets acquired and the liabilities assumed. The acquisition
was funded by (i) the net proceeds from the sale by JPS Automotive of $180
million principal amount of its 11 1/8% Senior Notes due 2001 ("Senior Notes"),
(ii) $90 million in cash and (iii) the net proceeds of $10 million in term loan
borrowings by JPS Automotive. Goodwill was approximately $168 million, which
included 1995 payments of approximately $4.5 million in settlement of certain
matters contained in the Asset Purchase Agreement and a 1995 adjustment of $5.6
million to adjust the original estimated appraised values of property, plant and
equipment. As a result of the allocation of the total purchase price, goodwill
reported by the Predecessor Company from the 1994 Acquisition was $42.6 million,
which included $2.2 million relating to the 1995 payments and adjustments.
F-64
<PAGE> 185
JPS AUTOMOTIVE L.P.
AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Fiscal Year
As a result of the 1996 Acquisition, the Division's fiscal year ends on the
last Saturday of December. Prior to that time, the Predecessor Company's fiscal
year ended on the Sunday closest to the thirty-first day of December.
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from those
estimates.
Cash
The Division and the Predecessor Company were a party to JPS Automotive's
centralized cash management system pursuant to which cash receipts and
disbursements were processed on a combined basis. Accordingly, for financial
reporting purposes, the only amounts presented in the accompanying balance
sheets as cash are petty cash funds, with amounts for unapplied cash receipts
and outstanding disbursement checks presented as a component of divisional
equity.
Inventories
Inventories are stated at the lower of cost or market. The cost of the
inventories is determined on a first-in, first-out basis.
Property, Plant and Equipment
Property, plant and equipment are stated at cost and are depreciated using
the straight-line method over the estimated useful lives of the assets. The
range of useful lives estimated for buildings is 25 to 40 years, and the range
for machinery, equipment and furnishings is 3 to 15 years. Leasehold
improvements are amortized over the shorter of the terms for the respective
leases or the estimated lives of the leasehold improvements. For income tax
reporting purposes, the Division uses accelerated depreciation methods.
Cost of maintenance and repairs is charged to expense as incurred. Renewals
and improvements are capitalized. Upon retirement or other disposition of items
of plant and equipment, cost of items and related accumulated depreciation are
removed from the accounts and any gain or loss is included in operations.
In connection with the 1996 Acquisition, the Division's property, plant and
equipment was recorded at the appraised values reflecting the intended future
use of the facilities and equipment.
Long-Lived Assets
In 1996, the Predecessor Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of." SFAS No. 121 establishes
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles and goodwill related to those assets to be held and
used, and for long-lived assets and certain identifiable intangibles to be
disposed of. SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable and that certain long-lived
assets and identifiable intangibles to be disposed of be reported at the lower
of carrying
F-65
<PAGE> 186
JPS AUTOMOTIVE L.P.
AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
amount or fair value less cost to sell. The adoption of SFAS No. 121 did not
have a material impact on the Predecessor Company's results of operations.
As a result of its ongoing assessment of long-lived assets, during the
period from January 1, 1996, to December 11, 1996, the Predecessor Company
recorded a charge of approximately $117 thousand for the write-down of certain
machinery and equipment to their estimated realizable values as the assets were
assessed by management to have no continuing use. The write-down of machinery
and equipment is included in other income (expense), net in the accompanying
statement of operations.
Debt Issuance Costs
Debt issuance costs recorded by the Predecessor Company reflect an
allocation of certain amounts incurred by JPS Automotive in obtaining financing
under the term and revolving bank debt discussed in Notes 2 and 7. These costs
are amortized over the term of the related debt using the interest method.
Accumulated amortization as of December 31, 1995, was approximately $214
thousand.
In connection with the 1996 Acquisition and the subsequent retirement of
debt, the debt issuance costs allocated to the Division were eliminated as a
result of the application of pushdown accounting (see Notes 2 and 3).
Goodwill
As discussed in Note 3, the acquisition of JPS Automotive by C&A has been
accounted for as a purchase and, pursuant to SAB No. 54 and the rules of
pushdown accounting, gave rise to a new basis of accounting. As a result, a
proportionate share of the JPS Automotive goodwill relating to the 1996
Acquisition was allocated to the Division. The goodwill is being amortized over
a 40-year period, and accumulated amortization as of December 28, 1996, was
approximately $32 thousand. The carrying value of goodwill will be reviewed
periodically based on the undiscounted cash flows and pretax income over the
remaining amortization period. Should this review indicate that the goodwill
balance will not be recoverable, the Division's carrying value of goodwill will
be reduced. At December 28, 1996, management believes the goodwill is fully
recoverable.
The Predecessor Company's allocation of the JPS Automotive goodwill
relating to the 1994 Acquisition was amortized using the straight-line method
over a 40-year period (see Note 3). Accumulated amortization as of December 31,
1995, was approximately $1.6 million.
Environmental Matters
The Division records its best estimate when it believes it is probable that
an environmental liability has been incurred and the amount of loss can be
reasonably estimated. The Division also considers estimates of certain
reasonably possible environmental liabilities in determining the aggregate
amount of environmental reserves. Accruals for environmental liabilities are
generally included in the balance sheet as other noncurrent liabilities at
undiscounted amounts and exclude claims for recoveries from insurance or other
third parties. Accruals for insurance or other third-party recoveries for
environmental liabilities are recorded when it is probable that the claim will
be realized.
Postemployment Benefits
Effective June 29, 1994, the Predecessor Company adopted SFAS No. 112,
"Employers' Accounting for Post-Employment Benefits." Under this method of
accounting, benefits are accrued when it becomes probable that such benefits
will be paid and when sufficient information exists to make reasonable estimates
of the amounts to be paid.
F-66
<PAGE> 187
JPS AUTOMOTIVE L.P.
AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Revenue Recognition
The Division recognizes revenue from product sales when it has shipped the
goods or ownership has been transferred to the customer for goods to be held for
future shipment at the customer's request. The Division generally allows its
customers the right of return only in the case of defective products. The
Division provides a reserve for estimated defective product based on sales.
Income Taxes
Income taxes for all periods are determined in accordance with SFAS No.
109, "Accounting for Income Taxes." SFAS No. 109 requires the use of the
liability method in which deferred income taxes are provided for temporary
differences between the financial reporting and income tax basis of assets and
liabilities using the income tax rates, under existing legislation, expected to
be in effect at the date such temporary differences are expected to reverse.
Immediately prior to the 1996 Acquisition, JPS Automotive was converted
from a Delaware limited partnership into an association which is taxable as a
corporation for federal, state and local income tax purposes. JPS Automotive is
included in the consolidated federal income tax return of C&A. Income taxes for
periods subsequent to the 1996 Acquisition reflect the pushdown of the
Division's impact on the consolidated tax position of C&A.
Prior to the 1996 Acquisition, JPS Automotive, as a limited partnership,
was not subject to federal income taxes and, therefore, no current or deferred
income tax provision has been provided for such taxes in the accompanying
financial statements of the Predecessor Company.
JPS Automotive had a tax-sharing agreement that provided for payment to the
partners of amounts that would be required to be paid if JPS Automotive were a
corporation filing separate income tax returns. At the time of the 1996
Acquisition, Foamex assigned to C&A Products the tax-sharing agreement.
Newly Issued Accounting Standard
In October 1996, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 96-1, "Environmental Remediation
Liabilities." SOP 96-1 provides authoritative guidance on specific accounting
issues related to the recognition, measurement, display and disclosure of
environmental remediation liabilities. SOP 96-1 addresses only those actions
undertaken in response to a threat of litigation or assertion of a claim. It
does not address accounting for pollution control costs with respect to current
operations or for costs of future site restoration on closure required upon
cessation of operations. SOP 96-1 is effective for fiscal years beginning after
December 15, 1996. The Division does not expect that adoption of this standard
will have a material impact on its financial position or results of operations.
5. INVENTORIES:
The components of inventories consist of (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
------------
DECEMBER 28, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Raw materials and supplies......................... $1,975 $2,652
Work-in-process.................................... 2,877 2,325
Finished goods..................................... 3,037 4,034
------ ------
Total.................................... $7,889 $9,011
====== ======
</TABLE>
F-67
<PAGE> 188
JPS AUTOMOTIVE L.P.
AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. ACCRUED EXPENSES:
Accrued expenses are summarized below (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
------------
DECEMBER 28, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Payroll and employee benefits...................... $ 765 $1,109
Property taxes..................................... 413 404
Other.............................................. 137 162
------ ------
Total.................................... $1,315 $1,675
====== ======
</TABLE>
7. LONG-TERM DEBT:
Long-term debt consists of (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
------------
DECEMBER 28, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Equipment financing................................ $1,005 $1,584
Allocation of JPS Automotive term and revolving
loans............................................ 0 6,200
------ ------
Subtotal................................. 1,005 7,784
Less -- Current portion............................ 625 988
------ ------
Long-term debt..................................... $ 380 $6,796
====== ======
</TABLE>
Equipment Financing
Certain equipment has been purchased with financing provided by a financial
institution. Although JPS Automotive is the actual borrower under these
agreements, the liabilities for this financing have been reflected in the
accompanying balance sheets since the liabilities are secured by the Division's
and the Predecessor Company's equipment. The financing agreements bear interest
between 8.05% and 9.67% and amounts are payable in monthly installments.
Interest expense of $0, $100 thousand, $165 thousand and $110 thousand for the
period from December 12, 1996, to December 28, 1996, the period from January 1,
1996, to December 11, 1996, the year ended December 31, 1995, and the period
from June 29, 1994, to January 1, 1995, respectively, is recorded in the
accompanying statements of operations, and the annual cash payments for interest
approximates the amounts expensed. The final installments under the agreements
occur at various dates through December 1998. The Division's future installment
payments are as follows (in thousands):
<TABLE>
<S> <C>
Fiscal year --
1997...................................................... $ 625
1998...................................................... 380
------
$1,005
======
</TABLE>
Allocation of JPS Automotive Term and Revolving Loans
In conjunction with the 1994 Acquisition, JPS Automotive entered into a
credit agreement which provided for loans of up to $35 million, of which $10
million was available as a term loan and up to $25 million was available under a
revolving line of credit. In connection with the 1996 Acquisition, the
outstanding
F-68
<PAGE> 189
JPS AUTOMOTIVE L.P.
AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
borrowings at December 11, 1996, of $9.2 million under the term loan were
repaid. At December 11, 1996, there were no outstanding borrowings under the
revolving line of credit. The credit agreement was subsequently terminated.
As discussed in Note 2, outstanding borrowings of JPS Automotive under the
term and revolving loan arrangements were allocated, along with the related
interest expense and deferred debt issuance costs, to the Predecessor Company
based on the ratio of the assets of the Predecessor Company which served as
collateral for the debt, which consisted of accounts receivable and inventory,
to the total of the assets of JPS Automotive which served as collateral for the
debt. At December 31, 1995, the accompanying balance sheet includes $498
thousand of unamortized deferred debt issuance costs and $6.2 million of debt
allocated to the Predecessor Company associated with these loans. In addition,
the Predecessor Company was allocated interest expense of approximately $552
thousand, $594 thousand and $316 thousand for the period from January 1, 1996,
to December 11, 1996, the year ended December 31, 1995, and the period from June
29, 1994 to January 1, 1995, respectively, associated with these borrowings.
8. EMPLOYEE BENEFIT PLANS:
The 1996 Acquisition did not significantly affect the employee benefit
plans offered to the employees of the Division.
Defined Benefit Pension Plan
Effective January 1, 1995, the Predecessor Company began participating in
the Retirement Pension Plan for Employees of JPS Automotive L.P. (the "Plan")
for salaried and certain hourly employees. Benefits are based on the employees'
final average compensation, years of benefit service, the covered compensation
in effect at retirement and the employees' ages when payment begins. Actuarially
determined calculations for the Division and the Predecessor Company as a
stand-alone entity are included in the accompanying financial statements.
As part of the 1996 Acquisition, the Division recognized all prior service
cost, net losses and minimum liabilities. Accordingly, the period from December
12, 1996, to December 28, 1996, does not reflect any net amortization or
deferrals.
The actuarially determined net periodic pension cost includes the following
components (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-----------------------------
PERIOD FROM PERIOD FROM
DECEMBER 12, JANUARY 1,
1996, TO 1996, TO YEAR ENDED
DECEMBER 28, DECEMBER 11, DECEMBER 31,
1996 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Service cost.................................. $6 $119 $ 62
Interest cost................................. 1 17 4
Actual return on plan assets.................. 0 (6) 0
Net amortization and deferral................. 0 14 4
---
- --
Total............................... $144
$7 $ 70
===
= ==
</TABLE>
Funding of retirement costs for this plan both satisfies the minimum
funding requirements of the Employee Retirement Income Security Act of 1974 and
does not exceed the full funding limitations of the Internal Revenue Code
("IRC") of 1986, as amended. Plan investments consist primarily of cash
equivalents.
F-69
<PAGE> 190
JPS AUTOMOTIVE L.P.
AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the actuarially determined portion of the
Plan's funded status and the amounts recognized in the accompanying balance
sheets as of December 28, 1996, and December 31, 1995 (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
------------
DECEMBER 28, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Actuarial present value of accumulated benefit
obligations --
Vested benefits.......................................... $ (226) $ (89)
Nonvested benefits....................................... (22) (7)
----- -----
Accumulated benefit obligations....................... $ (248) $ (96)
===== =====
Total projected benefit obligations........................ $ (381) $ (127)
Fair value of plan assets.................................. 190 4
----- -----
Plan assets less than projected benefit obligations........ (191) (123)
Unrecognized prior service cost............................ 0 53
Unrecognized net loss...................................... 0 3
Additional minimum liability............................... 0 (26)
----- -----
Accrued pension cost.................................. $ (191) $ (93)
===== =====
</TABLE>
Significant assumptions used in determining the plan's unfunded status are
as follows:
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
------------
DECEMBER 28, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Expected long-term rate of return on plan assets........... 8.0% 8.0%
Discount rate on projected benefit obligations............. 7.5 7.3
Rates of increase in compensation levels (where
applicable).............................................. 4.5 4.3
=== ===
</TABLE>
Defined Contribution Plan
The Division participates in JPS Automotive's defined contribution plan
which qualifies under Section 401(k) of the IRC and covers eligible employees.
Employee contributions are voluntary and subject to certain limitations as
imposed by the IRC. The Division, through JPS Automotive, makes a matching
contribution of 25% of each employee's contribution with a maximum matching
contribution of 1 1/2% of each employee's base compensation. The Predecessor
Company, through JPS Automotive, also provided an additional 25% match of each
employee's contribution to a fund which invested in Foamex common stock with a
maximum contribution of 3% of each employee's base compensation. The
contributions of the Division and the Predecessor Company were approximately $5
thousand for the period from December 12, 1996, to December 28, 1996, $86
thousand for the period from January 1, 1996, to December 11, 1996, $51 thousand
for the year ended December 31, 1995, and $21 thousand for the period from June
29, 1994, to January 1, 1995.
Postretirement Benefits
JPS Automotive provides postretirement health care and life insurance
benefits for eligible employees and retirees of the Division and retirees of the
Predecessor Company. These plans are unfunded, and JPS Automotive retains the
right to modify or eliminate these benefits. Actuarially determined calculations
for the Division and the Predecessor Company as a stand-alone entity are
included in the accompanying financial statements.
F-70
<PAGE> 191
JPS AUTOMOTIVE L.P.
AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The actuarially determined net periodic postretirement benefit cost
includes the following components (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
--------------------------------------------
PERIOD FROM PERIOD FROM PERIOD FROM
DECEMBER 12, JANUARY 1, JUNE 29,
1996, TO 1996, TO YEAR ENDED 1994, TO
DECEMBER 28, DECEMBER 11, DECEMBER 31, JANUARY 1,
1996 1996 1995 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Service cost for benefits earned..... $1 $ 13 $ 12 $ 5
Interest cost on liability........... 2 32 46 26
Net amortization..................... 0 5 0 0
--
--- ---
Net periodic postretirement benefit
cost............................... $3 $ 50 $ 58 $ 31
== === ===
</TABLE>
The following table sets forth the actuarially determined amount of net
postretirement benefit obligation included in the accompanying balance sheets
(in thousands):
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
------------
DECEMBER 28, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Retirees.................................................... $243 $245
Fully eligible active plan participants..................... 143 144
Other active plan participants.............................. 89 90
---- ----
Accumulated postretirement benefit obligation............... 475 479
Unrecognized prior service gain from plan amendments........ 0 (231)
Unrecognized net gain....................................... 0 198
---- ----
Net postretirement benefit obligation....................... $475 $446
==== ====
</TABLE>
As part of the 1996 Acquisition, the Division recognized all previously
unrecognized net gains and losses.
Since JPS Automotive has capped its annual liability per person and all
future cost increases will be passed on to retirees, the annual rate of increase
in health care costs does not affect the Division's postretirement benefit
obligation. The discount rate used in determining the accumulated postretirement
benefit obligation as of December 28, 1996, and December 31, 1995, was 7.5% and
7.8%, respectively.
Postemployment Benefits
JPS Automotive provides certain postemployment benefits to former or
inactive employees of the Division and the Predecessor Company and their
dependents during the time period following employment but before retirement. On
June 29, 1994, the Predecessor Company adopted SFAS No. 112. The Predecessor
Company's adoption of SFAS No. 112 did not have a significant impact on the
consolidated statements of operations. As of December 28, 1996, and December 31,
1995, the Division's and the Predecessor Company's actuarially determined
portion of the liability for postemployment benefits was $26 thousand for each
period and is included in other noncurrent liabilities in the accompanying
balance sheets.
9. INCOME TAXES:
Immediately prior to the 1996 Acquisition, JPS Automotive was converted
from a Delaware limited partnership into an association which is taxable as a
corporation for federal, state and local income tax purposes. JPS Automotive
remains a Delaware limited partnership for all purposes other than federal and
state income taxes.
F-71
<PAGE> 192
JPS AUTOMOTIVE L.P.
AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Division, through JPS Automotive, is included in the consolidated
federal income tax return of C&A. Income taxes for periods subsequent to the
1996 Acquisition reflect the pushdown of the Division's impact on the
consolidated tax position of C&A, which approximate income taxes computed on a
separate return basis. Income taxes for the periods prior to the 1996
Acquisition are provided on a separate return basis. As discussed in Note 4, JPS
Automotive was a party to a tax-sharing agreement with Foamex that was assigned
to C&A Products at the time of the 1996 Acquisition. Although no payments were
made by JPS Automotive to either Foamex or C&A Products under the tax-sharing
agreement as a result of consolidated operations from June 29, 1994, to December
28, 1996, calculation of income taxes on a stand-alone basis for the Division
and the Predecessor Company in accordance with the tax-sharing agreement would
have resulted in obligations to Foamex of approximately $2.0 million for the
period from June 29, 1994, to January 1, 1995, and approximately $270 thousand
for the year ended December 31, 1995. No amounts would have been payable under
the tax-sharing agreement for the period from January 1, 1996, to December 11,
1996.
Components of the provision for income taxes subsequent to the 1996
Acquisition are summarized as follows (in thousands):
<TABLE>
<S> <C>
Federal --
Current...................................................... $ 0
Deferred..................................................... 9
---
9
---
State --
Current...................................................... 0
Deferred..................................................... 2
---
2
---
$11
===
</TABLE>
A reconciliation of the statutory federal income tax rate to the effective
income tax rate is as follows (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-----------------------------------------------
PERIOD FROM PERIOD FROM PERIOD FROM
DECEMBER 12, JANUARY 1, JUNE 29,
1996, TO 1996, TO YEAR ENDED 1994, TO
DECEMBER 28, DECEMBER 11, DECEMBER 31, JANUARY 1,
1996 1996 1995 1995
------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Statutory income tax................ $ 10 $ 1,215 $ 2,099 $ 2,132
State income taxes, net of
federal........................... 1 0 0 0
Permanent difference on partnership
income............................ 0 (1,215) (2,099) (2,132)
--- ------- -------
$ 11 $ 0 $ 0 $ 0
=== ======= =======
</TABLE>
As a result of the change in JPS Automotive's tax status that resulted from
the 1996 Acquisition, deferred tax assets and liabilities are provided on the
temporary differences between the financial reporting and tax bases of the
Division's assets and liabilities. While the equity purchase of JPS Automotive
results in carryover tax basis in the assets, such carryover basis reflects the
fair market value as a result of the deemed taxable sale and revaluation to fair
market value in the hands of the seller just prior to the purchase by C&A
F-72
<PAGE> 193
JPS AUTOMOTIVE L.P.
AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
and its subsidiaries. The components of the net deferred tax assets as of
December 28, 1996, were as follows (in thousands):
<TABLE>
<S> <C>
Deferred tax assets --
Pension and postretirement benefits................................. $253
Other employee benefits............................................. 143
Other liabilities and reserves...................................... 117
----
513
Deferred tax liability -- Goodwill amortization....................... (5)
----
Net deferred tax assets............................................... $508
====
</TABLE>
The above amounts have been classified in the December 28, 1996, balance
sheet as follows (in thousands):
<TABLE>
<S> <C>
Deferred tax assets --
Current............................................................. $187
Noncurrent, included in other noncurrent assets..................... 321
----
$508
====
</TABLE>
10. COMMITMENTS AND CONTINGENCIES:
Operating Leases
The Division is obligated under various noncancelable lease agreements for
rental of machinery and computer equipment which remained outstanding following
the 1996 Acquisition. Many of the leases contain renewal options with varying
terms and escalation clauses that provide for increased rentals based upon
increases in the Consumer Price Index, real estate taxes and lessors' operating
expenses. Total minimum rental commitments required under operating leases at
December 28, 1996, are (in thousands):
<TABLE>
<S> <C>
1997...................................................... $ 92
1998...................................................... 41
1999...................................................... 19
2000...................................................... 7
----
$159
====
</TABLE>
Rental expense charged to operations under operating leases by the Division
approximated $6 thousand for the period from December 12, 1996, to December 28,
1996, $113 thousand for the period from January 1, 1996, to December 11, 1996,
$197 thousand for the year ended December 31, 1995 and $115 thousand for the
period from June 29, 1994, to January 1, 1995. Substantially all such rental
expense represented the minimum rental payments under operating leases.
11. RELATED-PARTY TRANSACTIONS AND ALLOCATIONS:
As discussed in Note 2, JPS Automotive performed certain services and
incurred certain costs for the Division and the Predecessor Company. Services
provided include treasury, risk management, employee benefits, legal services,
data processing, credit and collections, and other general corporate services.
The costs of the services provided by JPS Automotive have been allocated to the
Division and the Predecessor Company based upon a combination of estimated use
and the relative sales of the business to the total operations of JPS
Automotive. Costs allocated to the Division and the Predecessor Company for
these services were $39 thousand, $1 million, $1.1 million and $399 thousand for
the period from December 12, 1996, to December 28,
F-73
<PAGE> 194
JPS AUTOMOTIVE L.P.
AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1996, the period from January 1, 1996, to December 11, 1996, the year ended
December 31, 1995 and the period from June 29, 1994, to January 1, 1995,
respectively.
JPS Automotive provided certain management information systems supporting
the manufacturing operations of the Division and the Predecessor Company. The
costs of the services provided by JPS Automotive have been allocated to the
Division and the Predecessor Company based upon estimated use. Costs allocated
to the Division and the Predecessor Company for these services were $0, $260
thousand, $262 thousand and $115 thousand for the period from December 12, 1996,
to December 28, 1996, the period from January 1, 1996, to December 11, 1996, the
year ended December 31, 1995, and the period from June 29, 1994, to January 1,
1995, respectively. These costs are included in cost of goods sold in the
accompanying statements of operations.
The Division and the Predecessor Company used a warehouse owned by the JPS
Automotive Carpet and Trim division to store and distribute certain finished
goods inventory. Costs charged to the Division and the Predecessor Company by
the Carpet and Trim division for rent, utilities and payroll costs associated
with the use of this warehouse were approximately $20 thousand, $215 thousand,
$118 thousand and $28 thousand for the period from December 12, 1996, to
December 28, 1996, the period from January 1, 1996, to December 11, 1996, the
year ended December 31, 1995, and the period from June 29, 1994, to January 1,
1995, respectively. These costs are included in cost of goods sold in the
accompanying statements of operations.
Analysis of Net Transactions with JPS Automotive L.P.
Due to the intent to forgive any net balance in investments and advances to
or from JPS Automotive upon the sale of the Division by JPS Automotive, the net
intercompany balance has been classified as a component of divisional equity in
the accompanying financial statements. Significant components of the net
transactions with JPS Automotive have been summarized as follows (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
---------------------------------------------
PERIOD FROM PERIOD FROM PERIOD FROM
DECEMBER 12, JANUARY 1, JUNE 29,
1996, TO 1996, TO YEAR ENDED 1994, TO
DECEMBER 28, DECEMBER 11, DECEMBER 31, JANUARY 1,
1996 1996 1995 1995
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Cash transactions --
Corporate general and administrative
allocated costs..................... $ 39 $ 1,028 $ 1,074 $ 399
Corporate management information
systems allocated costs............. 0 260 262 115
Corporate administered insurance
program costs....................... 60 1,400 1,900 614
Change in allocated debt of JPS
Automotive.......................... 0 2,165 (1,199) (1,000)
Interest expense allocated from JPS
Automotive.......................... 0 552 594 316
Net transfers of cash from (to) JPS
Automotive.......................... 1,317 (12,213) (7,060) (2,619)
------ ------- -------
1,416 (6,808) (4,429) (2,175)
Other activity --
Adjustment to goodwill allocation...... 0 0 697 0
------ ------- -------
$1,416 $ (6,808) $ (3,732) $(2,175)
====== ======= =======
</TABLE>
Other Related-party Activities of the Division
At December 28, 1996, C&A Products has pledged the ownership interests in
its significant subsidiaries, including its partnership interests in JPS
Automotive, as security for debt of C&A Products totaling $640.6 million.
F-74
<PAGE> 195
JPS AUTOMOTIVE L.P.
AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
As discussed in Note 2, C&A Products currently provides general
administrative services to JPS Automotive pursuant to the Existing Services
Agreement. In connection with the 1996 Acquisition, C&A currently contemplates
an amendment to the Existing Services Agreement to expressly provide that the
services provided by C&A Products will include certain administrative and
management functions previously conducted by JPS Automotive. For the period from
December 12, 1996, to December 28, 1996, no amounts were paid or accrued by the
Division.
Other Related-party Activities of the Predecessor Company
The Predecessor Company, through JPS Automotive, regularly entered into
transactions with its affiliates in the ordinary course of business.
In connection with the 1994 Acquisition, JPS Automotive entered into a
supply agreement (the "Supply Agreement") with Foamex and certain of its
affiliates. Pursuant to the terms of the Supply Agreement, at the option of JPS
Automotive, Foamex would purchase certain raw materials which were necessary for
the manufacture of the Predecessor Company's products, and resell such materials
to the Predecessor Company at a price equal to net cost plus reasonable
out-of-pocket expenses. During the period from January 1, 1996, to December 11,
1996, the year ended December 31, 1995, and the period from June 29, 1994, to
January 1, 1995, the Predecessor Company purchased $20.2 million, $33 million
and $0, respectively, of raw materials under the Supply Agreement with Foamex.
12. ENVIRONMENTAL:
The Division is subject to various federal, state and local environmental
laws and regulations that (i) affect ongoing operations and may increase capital
costs and operating expenses and (ii) impose liability for the costs of
investigation and remediation and certain other damages related to on-site and
off-site soil and groundwater contamination. The Division believes it has
obtained or applied for the material permits necessary to conduct its business.
To date, compliance with applicable environmental laws has not had and, in the
opinion of management, based on the facts presently known to it, is not expected
to have a material adverse effect on the Division's financial condition or
results of operations.
Although not named as a potentially responsible party for any
environmentally contaminated sites, the Division and the Predecessor Company
accrued environmental costs at December 28, 1996, and December 31, 1995, of
approximately $325 thousand and $354 thousand, respectively, $48 thousand and
$54 thousand of which is included in current liabilities, respectively. In
addition, as of December 31, 1995, JPS Automotive had a receivable of $500
thousand for indemnification of environmental liabilities from JPS Textile,
former owner of JPS Automotive, of which $75 thousand was allocated to and
included in noncurrent assets of the Predecessor Company based on an allocation
of the total JPS Automotive environmental liability. The environmental
receivable was written off during the period from January 1, 1996, to December
11, 1996, as JPS Automotive management believes that the realization of the
receivable established for indemnification is remote.
Although it is possible that new information or future events could require
the Division to reassess its potential exposure relating to pending
environmental matters, management believes that, based on the facts presently
known to it, the resolution of such environmental matters will not have a
material adverse effect on the Division's financial condition or results of
operations. The possibility exists, however, that new environmental legislation
may be passed or environmental regulations may be adopted, or other
environmental conditions may be found to exist, that may require expenditures
not currently anticipated which may be material, and there can be no assurance
that the Division has identified or properly assessed all potential
environmental liability arising from its activities or properties.
F-75
<PAGE> 196
JPS AUTOMOTIVE L.P.
AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
13. LITIGATION:
From time to time, the Division has been involved in various legal
proceedings. Management believes that such litigation is routine in nature and
incidental to the conduct of its business, and that none of such litigation, if
determined adversely to the Division, would have a material adverse effect on
the financial condition or results of operations of the Division.
14. FINANCIAL INSTRUMENTS AND CONCENTRATION OF RISK:
Concentration of Credit Risk
Financial instruments which potentially subject the Division to significant
concentrations of credit risk consist primarily of trade accounts receivable.
The Division's customers operate primarily in the automotive and industrial
fabrics industries. The Division performs ongoing credit evaluations of its
customers and generally does not require collateral. The Division maintains
allowance accounts for potential losses and such losses have been within
management's expectations. The percentage of sales to the three principal
customers were as follows:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
---------------------------------------------
PERIOD FROM PERIOD FROM PERIOD FROM
DECEMBER 12, JANUARY 1, JUNE 29,
1996, TO 1996, TO YEAR ENDED 1994, TO
DECEMBER 28, DECEMBER 11, DECEMBER 31, JANUARY 1,
1996 1996 1995 1995
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Allied Signal.................... 17% 23% 33% 37%
TRW.............................. 11 18 23 23
Travis Textiles.................. 17 7 8 5
== == == ==
</TABLE>
Accounts receivable due from the three principal customers as a percentage
of total accounts receivable are as follows:
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
------------
DECEMBER 28, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Allied Signal.............................................. 21% 30%
TRW........................................................ 14 23
Travis Textiles............................................ 11 6
== ==
</TABLE>
The Division's exposure to credit risk associated with nonpayment by these
customers is affected by conditions or occurrences primarily within the
automotive and industrial fabrics segments. Substantially all trade receivables
from these three customers were current at December 28, 1996.
Disclosure About Fair Value of Financial Instruments
The carrying amounts reported in the balance sheets for the Division's
financial instruments, which consist primarily of accounts receivable, accounts
payable, accrued liabilities and long-term debt approximate fair value based on
the Division's assessment of available market information and appropriate
valuation methodologies. Fair value estimates are made at a specific point in
time, based on relevant market information about the financial instruments.
These estimates are subjective in nature and involve uncertainties and matters
of significant judgment and, therefore, cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
F-76
<PAGE> 197
JPS AUTOMOTIVE L.P.
AIR RESTRAINT/INDUSTRIAL FABRICS DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Reliance on Principal Supplier
One supplier currently supplies substantially all of the Division's
requirements for nylon yarn, the principal raw material used in the Division's
airbag products. While the Division believes that there are adequate alternative
sources of supply from which it could fulfill its nylon yarn requirements, the
unanticipated termination of the current supply arrangement or a prolonged
interruption in shipments could have a material adverse effect on the Division.
15. QUARTERLY FINANCIAL DATA (UNAUDITED):
The quarterly financial data of 1996 and 1995 is as follows (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-------------------------------------
FIRST SECOND THIRD FOURTH FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
1996(1) --
Net sales....................................... $16,052 $17,575 $14,980 $14,214 $ 2,110
Gross profit.................................... 2,320 1,949 1,784 2,089 194
Net income...................................... 1,073 685 373 932 18
======= ======= ======= ======= ======
1995 --
Net sales....................................... $22,753 $18,456 $16,200 $15,671 N/A
Gross profit.................................... 3,291 3,667 1,930 1,893 N/A
Net income...................................... 2,160 2,377 682 393 N/A
======= ======= ======= ======= ======
</TABLE>
- ---------------
(1) The fourth quarter results of the Predecessor Company are through December
11, 1996, and include the $117 thousand write-down of certain machinery and
equipment (see Note 4). The Division's fourth quarter results are only for
the period from December 12, 1996, to December 28, 1996, the period
following the acquisition of JPS Automotive by C&A.
16. SUBSEQUENT EVENT:
On July 24, 1997, JPS Automotive sold all of the assets of the Division to
Safety Components International, Inc. for $56.3 million, including the
assumption of certain liabilities and subject to postclosing adjustments.
F-77
<PAGE> 198
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of
Collins & Aikman Corporation:
We have audited the accompanying statements of income, divisional equity
and cash flows of the Air Restraint/Industrial Fabrics (the "Division") Division
of JPS Textile Group, Inc. ("JPS Textile") for the period from December 26, 1993
to June 28, 1994. These financial statements are the responsibility of the
Division's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
As more fully discussed in Note 2, to these financial statements, the
Division was acquired by Foamex International, Inc. on June 28, 1994 and the
Division subsequently was acquired in 1996 by Collins & Aikman Corporation
("C&A"). In June 1997 C&A entered into a letter of intent to sell the Division.
These financial statements do not include any adjustments arising from such sale
transactions.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations, divisional equity and cash
flows of the Air Restraint/Industrial Fabrics Division of JPS Textile Group,
Inc. from December 26, 1993 to June 28, 1994, in conformity with generally
accepted accounting principles.
Coopers & Lybrand L.L.P.
Spartanburg, South Carolina
July 10, 1997
F-78
<PAGE> 199
AIR RESTRAINT/INDUSTRIAL FABRICS
DIVISION OF JPS TEXTILE GROUP, INC.
STATEMENT OF INCOME
FOR THE PERIOD FROM DECEMBER 26, 1993 TO JUNE 28, 1994
(IN THOUSANDS)
<TABLE>
<S> <C>
Net sales.......................................................................... $40,157
Cost of goods sold................................................................. 33,738
------
Gross profit............................................................. 6,419
Selling, general and administrative expenses....................................... 1,320
Corporate general and administrative allocated costs............................... 908
------
Income from operations................................................... 4,191
Interest expense................................................................... 562
Other expense, net................................................................. 80
------
Income before income taxes............................................... 3,549
Provision for income taxes......................................................... 1,313
------
Net income............................................................... $ 2,236
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-79
<PAGE> 200
AIR RESTRAINT/INDUSTRIAL FABRICS
DIVISION OF JPS TEXTILE GROUP, INC.
STATEMENT OF DIVISIONAL EQUITY
FOR THE PERIOD FROM DECEMBER 26, 1993 TO JUNE 28, 1994
(IN THOUSANDS)
<TABLE>
<S> <C>
Balance, December 25, 1993........................................................ $ 17,831
Net income...................................................................... 2,236
Net transactions with JPS Textile............................................... (1,219)
--------
Balance, June 28, 1994............................................................ $ 18,848
========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-80
<PAGE> 201
AIR RESTRAINT/INDUSTRIAL FABRICS
DIVISION OF JPS TEXTILE GROUP, INC.
STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM DECEMBER 26, 1993 TO JUNE 28, 1994
(IN THOUSANDS)
<TABLE>
<S> <C>
Operating activities:
Net income..................................................................... $ 2,236
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
Depreciation................................................................ 1,086
Loss on disposal of assets.................................................. 82
Deferred taxes.............................................................. 281
Changes in operating assets and liabilities:
Accounts receivable....................................................... (2,134)
Inventories............................................................... (1,760)
Accounts payable.......................................................... 3,824
Accrued expenses.......................................................... 532
Other assets and liabilities.............................................. (13)
-------
Net cash provided by operating activities.............................. 4,134
-------
Net cash (used in) investing activities, capital expenditures.................... (4,364)
-------
Financing activities:
Net transactions with JPS Textile.............................................. (1,219)
Allocated long-term debt (Note 2).............................................. 1,444
-------
Net cash provided by financing activities.............................. 225
-------
Net change in cash..................................................... (5)
Cash, beginning of period........................................................ 5
-------
Cash, end of period.............................................................. $ -0-
=======
Supplemental cash flow information, cash paid for interest....................... $ 562
=======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-81
<PAGE> 202
AIR RESTRAINT/INDUSTRIAL FABRICS
DIVISION OF JPS TEXTILE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
The Air Restraint/Industrial Fabrics Division (the "Division") of JPS
Textile Group, Inc. ("JPS Textile") operates in the automotive products and
industrial fabrics segments, including the design, manufacture and sale of
airbag fabric for passenger cars and light trucks and other specialty industrial
fabrics.
The statements of income, divisional equity and cash flows for the period
from December 26, 1993 to June 28, 1994 pertain to the Division.
2. DIVISION ACQUISITIONS
JPS Automotive L.P. ("JPS Automotive") was formed on May 17, 1994, for the
purpose of acquiring a 100% ownership interest in JPS Automotive Products Corp.
("Products Corp."), which was purchased for nominal consideration on May 25,
1994. On June 28, 1994, subsidiaries of Foamex International, Inc. ("Foamex"),
the owners of all partnership interests in JPS Automotive, made capital
contributions to Products Corp. On June 28, 1994, Products Corp. acquired the
assets of the automotive products and industrial fabrics divisions of JPS
Textile. Effective October 3, 1994, Products Corp. transferred and assigned
substantially all of its assets, subject to substantially all of its
liabilities, to JPS Automotive, which agreed to assume such liabilities. In the
accompanying financial statements, the Air Restraint/Industrial Fabrics division
is referred to as the Division.
On December 11, 1996, all of the outstanding equity of JPS Automotive was
acquired from Foamex by Collins & Aikman Corporation ("C&A"), through its
subsidiaries.
On July 24, 1997, C&A sold all of the assets of the Division to Safety
Components International Inc. for $56.3 million in cash, including the
assumption of certain liabilities and subject to postclosing adjustments. In
addition, Safety Components International, Inc. made a payment to JPS Automotive
at the closing to enable it to pay off existing indebtedness of the Division of
approximately $650,000 at the closing.
Transfers of operating funds between the Division and JPS Textile occur on
a noninterest-bearing basis, with the net amount of these transfers reflected as
investments and advances from JPS Textile. The net balance in investments and
advances from JPS Textile at June 28, 1994 and December 25, 1993 of $18.8 and
$17.8 million, respectively, is classified as divisional equity in the
accompanying balance sheets.
As indicated above, the accompanying financial statements present the
results of operations and cash flows of the Division as if it were a separate
entity for the period presented.
For the period ended June 28, 1994, as required by Staff Accounting
Bulletin No. 73 of the Securities and Exchange Commission, a portion of certain
term and revolving bank debt interest expense of JPS Textile has been allocated
to the Division as a result of certain of the Division's assets, which consist
of accounts receivable and inventory, serving as security for such debt. The
allocations have been made based upon the ratio of the assets of the Division
which served as collateral for such debt to the total of the assets of JPS
Textile which served as collateral for the debt. The average interest rate on
this debt for the period ended June 28, 1994, was approximately 7%. Interest has
not been computed on the remaining intercompany balances.
JPS Textile performed certain services and incurred certain costs for the
Division. Services provided include treasury, risk management, employee
benefits, legal services, data processing, credit and collections and other
general corporate services. The costs of the services provided by JPS Textile
have been allocated to the Division based upon a combination of estimated use
and the relative sales of the business to the total operations of JPS Textile.
Costs allocated to the Division for these services were $908 thousand for the
period ended June 28, 1994. In the opinion of management, the method of
allocating these costs is believed to be
F-82
<PAGE> 203
AIR RESTRAINT/INDUSTRIAL FABRICS
DIVISION OF JPS TEXTILE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
reasonable. However, the costs of these services charged to the Division are not
necessarily indicative of the costs that would have been incurred if the
Division had performed these functions.
F-83
<PAGE> 204
AIR RESTRAINT/INDUSTRIAL FABRICS
DIVISION OF JPS TEXTILE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Estimates
The preparation of the Division financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from those
estimates.
Environmental Matters
The Division records its best estimate when it believes it is probable that
an environmental liability has been incurred and the amount of loss can be
reasonably estimated. The Division also considers estimates of certain
reasonably possible environmental liabilities in determining the aggregate
amount of environmental reserves. Accruals for environmental liabilities are
generally included in the balance sheet as other noncurrent liabilities at
undiscounted amounts and exclude claims for recoveries from insurance or other
third parties. Accruals for insurance or other third-party recoveries for
environmental liabilities are recorded when it is probable that the claim will
be realized.
Revenue Recognition
The Division recognizes revenue from product sales when it has shipped the
goods or ownership has been transferred to the customer for goods to be held for
future shipment at the customer's request. The Division generally allows its
customers the right of return only in the case of defective products. The
Division provides a reserve for estimated defective products based on sales.
Income Taxes
Income taxes for all periods are determined in accordance with SFAS No.109,
"Accounting for Income Taxes". SFAS No.109 requires the use of the liability
method in which deferred income taxes are provided on the temporary differences
between the financial reporting and income tax basis of assets and liabilities
using the income tax rates, under existing legislation, expected to be in effect
at the date such temporary differences are expected to reverse. Income taxes of
the Division for the period ended June 28, 1994 are computed as if it filed a
separate tax return.
Newly Issued Accounting Standard
In October 1996, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 96-1, "Environmental Remediation
Liabilities". SOP 96-1 provides authoritative guidance on specific accounting
issues related to the recognition, measurement, display and disclosure of
environmental remediation liabilities. SOP 96-1 addresses only those actions
undertaken in response to a threat of litigation or assertion of a claim. It
does not address accounting for pollution control costs with respect to current
operations or for costs of future site restoration on closure required upon
cessation of operations. SOP 96-1 is effective for fiscal years beginning after
December 15, 1996. The Division does not expect adoption of this standard will
have a material impact on its financial position or results of operations.
4. BENEFIT PLANS
Defined Benefit Pension Plan
Substantially all of the Division's employees are covered by defined
benefit pension plans sponsored by JPS Textile. The plans provide pension
benefits that are based on the employees' compensation during the last
F-84
<PAGE> 205
AIR RESTRAINT/INDUSTRIAL FABRICS
DIVISION OF JPS TEXTILE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
ten years of employment. The Division's policy is to fund the annual
contribution required by applicable regulations. Expense for the Defined Benefit
Pension Plans was not material.
401(k) Savings Plans
The Division also participated in JPS Textile's salaried employees'
savings, investment and profit-sharing plan which is available to employees
meeting eligibility requirements. The Division's expense was approximately $20
thousand for the period ended June 28, 1994.
Postretirement Benefits
The Division provides postretirement health care and life insurance
benefits for eligible employees and retirees of the Division. These plans are
unfunded, and the Division retains the right to modify or eliminate these
benefits. Actuarially determined calculations for the Division and as a
stand-alone entity are included in the accompanying financial statements.
Expense for the period ended June 28, 1994 totaled approximately $40
thousand.
Since JPS Textile has capped its annual liability per person and all future
cost increases will be passed on to retirees, the annual rate of increase in
health care costs does not affect the Division's postretirement benefit
obligation.
5. INCOME TAXES
The provision for income taxes for the period ended June 28, 1994 includes
the following:
<TABLE>
<S> <C>
Federal:
Current........................................... $ 949
Deferred.......................................... 258
------
1,207
------
State:
Current........................................... 83
Deferred.......................................... 23
------
106
------
$1,313
======
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Division is obligated under various noncancelable lease agreements for
rental of machinery and computer equipment. Many of the leases contain renewal
options with varying terms and escalation clauses that provide for increased
rentals based upon increases in the Consumer Price Index, real estate taxes and
lessors' operating expenses. Total minimum rental commitments required under
operating leases at June 28, 1994 are (in thousands):
<TABLE>
<S> <C>
1995.................................................. $193
1996.................................................. 187
1997.................................................. 181
1998.................................................. 122
1999 and thereafter................................... 4
</TABLE>
F-85
<PAGE> 206
AIR RESTRAINT/INDUSTRIAL FABRICS
DIVISION OF JPS TEXTILE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Rental expense charged to operations under operating leases by the Division
approximated $100 thousand for the period ended June 28, 1994. Substantially all
such rental expense represented the minimum rental payments under operating
leases.
7. RELATED-PARTY TRANSACTIONS AND ALLOCATIONS
As discussed in Note 2, JPS Textile performed certain services and incurred
certain costs for the Division. Services provided include treasury, risk
management, employee benefits, legal services, data processing, credit and
collections, and other general corporate services. The costs of the services
provided by JPS Textile has been allocated to the Division based upon a
combination of estimated use and the relative sales of the business to the total
operations of JPS Textile. Costs allocated to the Division for these services
were approximately $843 thousand for the period ended June 28, 1994. JPS Textile
provided certain management information systems supporting the manufacturing
operations of the Division. The costs of the services provided by JPS Textile
has been allocated to the Division based upon estimated use. Costs allocated to
the Division for these services were $65 thousand for the period ended June 28,
1994. The cost is included in the accompanying statement of income.
The Division used a warehouse owned by JPS Textile to store and distribute
certain finished goods inventory. Costs charged to the Division by JPS Textile
for rent, utilities and payroll costs associated with the use of this warehouse
were approximately $150 thousand for the period ended June 28, 1994. These costs
are included in selling, general and administrative expenses in the accompanying
statement of income.
Analysis of Net Transactions with JPS Textile
The net intercompany balance has been classified as a component of
divisional equity in the accompanying financial statements. Significant
components of the net transactions with JPS Textile have been summarized for the
period ended June 28, 1994 as follows (in thousands):
<TABLE>
<S> <C>
Cash transactions:
Corporate general and administrative allocated costs..................... $ 843
Corporate management information systems allocated costs................. 65
Interest expense allocated from JPS Textile.............................. 373
Change in allocated debt of JPS Textile.................................. (2,138)
Net transfers of cash to JPS Textile..................................... (362)
-------
$(1,219)
=======
</TABLE>
8. ENVIRONMENTAL
The Division is subject to various federal, state and local environmental
laws and regulations that (i) affect ongoing operations and may increase capital
costs and operating expenses and (ii) impose liability for the costs of
investigation and remediation and certain other damages related to on-site and
off-site soil and groundwater contamination. The Division believes it has
obtained or applied for the material permits necessary to conduct its business.
To date, compliance with applicable environmental laws has not had and, in the
opinion of management, based on the facts presently known to it, is not expected
to have a material adverse effect on the Division's financial condition or
results of operations.
Although it is possible that new information or future events could require
the Division to reassess its potential exposure relating to pending
environmental matters, management believes that, based on the facts presently
known to it, the resolution of such environmental matters will not have a
material adverse effect on the Division's financial condition or results of
operations.
F-86
<PAGE> 207
AIR RESTRAINT/INDUSTRIAL FABRICS
DIVISION OF JPS TEXTILE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The possibility exists, however, that new environmental legislation may be
passed or environmental regulations may be adopted, or other environmental
conditions may be found to exist, that may require expenditures not currently
anticipated which may be material, and there can be no assurance that the
Division has identified or properly assessed all potential environmental
liability arising from its activities or properties.
9. LITIGATION
From time to time, the Division has been involved in various legal
proceedings. Management believes that such litigation is routine in nature and
incidental to the conduct of its business, and that none of such litigation, if
determined adversely to the Division, would have a material adverse effect on
the financial condition or results of operations of the Division.
10. CONCENTRATION OF RISK
The Division's customers operate primarily in the automotive and industrial
fabrics industries. The Division performs ongoing credit evaluations of its
customers and generally does not require collateral. The Division maintains
allowance accounts for potential losses and such losses have been within
management's expectations.
The percentage of sales to the three principal customers for the period
ended June 28, 1994, respectively was as follows:
<TABLE>
<S> <C>
Allied Signal........................................... 28%
TRW..................................................... 10
Travis Textiles......................................... 6
</TABLE>
The Division's exposure to credit risk associated with nonpayment by these
customers is affected by conditions or occurrences primarily within the
automotive and industrial fabrics segments. Substantially all trade receivables
from these three customers were current at June 28, 1994.
Reliance on Principal Supplier -- One supplier currently supplies
substantially all of the Division's requirements for nylon yarn, the principal
raw material used in the Division's airbag products. While the Division believes
that there are adequate alternative sources of supply from which it could
fulfill its nylon yarn requirements, the unanticipated termination of the
current supply arrangement or a prolonged interruption in shipments could have a
material adverse effect on the Division.
11. SUBSEQUENT EVENT
On July 24, 1997, C&A sold all of the assets of the Division to Safety
Components International, Inc. for $56.3 million in cash, including the
assumption of certain liabilities and subject to postclosing adjustments. In
addition, Safety Components International, Inc. made a payment to JPS Automotive
at the closing to enable it to pay off existing indebtedness of the Division of
approximately $650,000 at the closing.
F-87
<PAGE> 208
REPORT OF INDEPENDENT ACCOUNTANTS
Board of
Safety Components International
Costa Mesa, California
USA
Audit Opinion
We have audited the accompanying balance sheet of PHOENIX AG's Airbag
Division as of December 31, 1995 and the related statement of operations and a
statement of cash flow for the year then ended and the balance sheet as of
December 31, 1994 as well as the revenues of 1994.
We have conducted our audit in accordance with foreign standards that are
substantially the same as United States Generally Accepted Auditing standards.
It included an examination of the underlying documentation of the PHOENIX AG's
Airbag Division and audit procedures we considered appropriate. The accounting
system was audited by us as the auditors of the PHOENIX AG earlier. In our
opinion on behalf of the annual accounts of PHOENIX AG for the year ended
December 31, 1995 we confirmed that the accounting principles comply with the
German legal requirements.
In our opinion the balance sheet of PHOENIX AG's Airbag Division as of
December 31, 1995, expressed in Deutsche Mark, and the related statement of
income and cash flow 1995, and the balance sheet as of December 31, 1994 as well
as the revenues for the year ended December 31, 1994 as disclosed in the note 15
present fairly the financial position of the airbag division as of December 31,
1995 and comply with the accounting principles of the United States of America.
Hamburg, October 7, 1996
BDO Deutsche Warentreuhand
Aktiengesellschaft
Wirtschaftsprufungsgesellschaft
F-88
<PAGE> 209
FINANCIAL STATEMENTS OF THE YEAR ENDED
DECEMBER 31, 1995 OF PHOENIX AG'S AIRBAG DIVISION
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
NOTES DM DM
----- ------------ ------------
<S> <C> <C> <C>
ASSETS
Current Assets
Inventories.............................................. 3 3,913,485 2,463,787
---------- ----------
Fixed Assets............................................... 4
Intangible fixed assets.................................. 25,712 51,760
Machinery and equipment.................................. 6,334,992 6,103,522
Assets under construction................................ 301,557 0
---------- ----------
6,662,261 6,155,282
---------- ----------
10,575,746 8,619,069
========== ==========
LIABILITIES
Current account PHOENIX AG............................... 8,849,226 9,320,799
Accruals................................................. 5 136,000 123,810
Deferred taxation........................................ 13 1,044,550 1,754,460
---------- ----------
10,029,776 11,199,069
---------- ----------
SHAREHOLDERS EQUITY/(DEFICIT).............................. 6 545,970 (2,580,000)
---------- ----------
10,575,746 8,619,069
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-89
<PAGE> 210
STATEMENT OF OPERATIONS
AND RETAINED (DEFICIT) EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
NOTE DM
---- -----------
<C> <S> <C> <C>
1. Net sales........................................................... 7 43,015,600
2. Cost of sales....................................................... 8 (35,411,735)
-----------
3. Gross profit........................................................ 7,603,865
4. Research and development............................................ 9 (1,223,000)
5. Sales Expenses...................................................... 10 (1,038,000)
6. General and administrative expenses................................. 11 (1,568,300)
-----------
7. Profit before interest and taxes.................................... 3,774,565
8. Interest............................................................ 12 0
9. Taxes............................................................... 13 (648,595)
-----------
10. Net income.......................................................... 3,125,970
11. Retained deficit at the beginning of the year....................... (2,580,000)
-----------
12. Retained earnings at the end of the year............................ 545,970
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-90
<PAGE> 211
CASH FLOW STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
DM
----------
<S> <C>
Net income....................................................................... 3,125,970
Plus depreciation on fixed assets................................................ 2,372,055
Changes in current assets and liabilities
Inventories.................................................................... (1,449,698)
Accruals....................................................................... 12,190
Deferred taxes................................................................. (709,910)
Repayment of current account PHOENIX AG........................................ (471,573)
----------
Net cash provided by operating activities...................................... 2,879,034
Capital expenditures -- Net cash used in investing activities.................... (2,879,034)
----------
Cash at end of the year.......................................................... 0
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-91
<PAGE> 212
NOTES TO THE ACCOUNTS
1. DESCRIPTION OF BUSINESS
The production of sewn airbags was a division of PHOENIX AG in Hildesheim
during the years 1994 and 1995. PHOENIX AG started to produce sewn airbags in
1994 to replace the gummed airbags.
With a founding contract dated November 14, 1995, and with effect from
January 1, 1996, PHOENIX AG transferred its airbag production into a separate
legal entity called Phoenix Airbag GmbH ("Phoenix Airbag"). Phoenix Airbag was
subsequently sold under a contract dated June 6, 1996 and amended on June 28 and
August 6, 1996, with effect from January 1, 1996 to a subsidiary of Safety
Components International, Inc.
2. SIGNIFICANT ACCOUNTING PRINCIPLES
The financial Statements have been prepared in accordance with Generally
Accepted Accounting Principles of the United States of America. The particular
accounting principles adopted are described below.
Due to the fact that the sewn airbag production was only a division within
the PHOENIX AG's business, the balance sheet only includes those assets and
liabilities/accruals which relate directly to the airbag production. Neither
trade debtors nor creditors to suppliers are included.
The financial statements have been prepared under the historical cost
convention and are expressed in German Marks (DM).
The airbag division is potentially subject to a concentration of credit
risk consisting of its trade receivables, relying only on two domestic customers
(Petri AG, MST Automative GmbH).
The financial statements have been prepared in conformity with Generally
Accepted Accounting Principles of the United States of America, which required
management to make estimates and assumptions that effect the amounts and
disclosures reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
All overheads, general and administrative expenses are allocated to the
airbag division based on reasonable cost accounting principles.
3. INVENTORIES
Inventories as of December 31, 1995 and 1994 consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31
------------
1994
DECEMBER 31 ------------
------------
1995 DM
------------
DM
<S> <C> <C>
Raw materials, tools....................................... 1,168,699 751,383
Unfinished goods........................................... 1,213,925 489,947
Finished goods............................................. 1,530,861 1,222,457
--------- ---------
3,913,485 2,463,787
========= =========
</TABLE>
Inventories are valued at the lower of cost or market value net of adequate
provisions for obsolete inventories. Raw materials are valued at weighted
average cost. Unfinished and finished goods are valued at full absorption
costing.
F-92
<PAGE> 213
NOTES TO THE ACCOUNTS -- (CONTINUED)
4. FIXED ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
------------
1994
DECEMBER 31 ------------
------------
1995 DM
------------
DM
<S> <C> <C>
Intangible fixed assets
At cost.................................................... 257,108 254,563
Less accumulated depreciation.............................. (231,396) (202,803)
-------- --------
25,712 51,760
======== ========
</TABLE>
TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
------------
1994
DECEMBER 31 ------------
------------
1995 DM
------------
DM
<S> <C> <C>
At cost
Machinery and equipment.................................. 11,692,525 9,328,091
Furniture, fixtures and office equipment................. 1,222,771 1,051,810
Assets under construction................................ 301,557 0
---------- ----------
13,216,853 10,379,901
---------- ----------
Accumulated depreciation
Machinery and equipment.................................. 5,762,734 3,614,890
Furniture, fixtures and office equipment................. 817,570 661,489
---------- ----------
6,580,304 4,276,379
---------- ----------
Net book value............................................. 6,636,549 6,103,522
========== ==========
</TABLE>
Fixed assets are stated at cost less accumulated depreciation. Depreciation
is provided using the reducing-balance method, applied over the expected useful
life of assets five to ten years. Machinery and equipment is generally
depreciated over a period of ten years. Low value items up to DM 800 are
depreciated 100% during the period of acquisition.
Additions and improvements are capitalized, maintenance and repairs are
expensed when incurred.
5. ACCRUALS
Accruals consist of pension obligation, valued according to German tax
requirements (DM 53,000) and other obligations to employees (DM 83,000).
6. SHAREHOLDERS EQUITY
Shareholders equity includes only retained earnings (deficit). All
investments by PHOENIX AG have been netted by the current account.
7. SALES
Sales include only the production of sewn airbag.
<TABLE>
<CAPTION>
DM
----------
<S> <C>
Gross sales less VAT............................................. 43,350,700
Discounts........................................................ 335,100
----------
43,015,600
==========
</TABLE>
F-93
<PAGE> 214
NOTES TO THE ACCOUNTS -- (CONTINUED)
8. COST OF SALES
<TABLE>
<CAPTION>
DM
----------
<S> <C>
Material......................................................... 21,379,000
Wages............................................................ 8,988,060
Depreciation of fixed assets..................................... 2,372,055
Sundry costs..................................................... 2,672,620
----------
35,411,735
==========
</TABLE>
Sundry costs consist of overheads such as rent for the plant, repair and
maintenance, auxiliary material, energy, proportion of production management and
other services.
9. RESEARCH AND DEVELOPMENT
<TABLE>
<CAPTION>
DM
---------
<S> <C>
Direct costs of airbag............................................ 781,000
Proportion of facilities provided by the central department....... 442,000
---------
1,223,000
=========
</TABLE>
10. SALES EXPENSES
<TABLE>
<CAPTION>
DM
---------
<S> <C>
Wages and salaries................................................ 334,000
Freight and packaging............................................. 519,000
Warehouse......................................................... 180,000
Sundry............................................................ 5,000
---------
1,038,000
=========
</TABLE>
11. GENERAL AND ADMINISTRATIVE EXPENSES
<TABLE>
<CAPTION>
DM
---------
<S> <C>
General overheads allocated to the airbag division such as
managing director of airbag itself................................ 231,000
proportion of PHOENIX AG's management............................. 347,000
purchase department............................................... 132,000
finance, cost- and controlling department......................... 252,000
insurance......................................................... 132,000
duties............................................................ 133,000
logistic and restructure department............................... 136,000
other internal and external services.............................. 205,300
---------
1,568,300
=========
</TABLE>
12. INTEREST
No interest are allocated to the airbag division.
13. TAXES
The income tax charges are calculated as if the airbag division was already
a separate legal entity in 1995 and 1994.
F-94
<PAGE> 215
NOTES TO THE ACCOUNTS -- (CONTINUED)
The tax charges comprise corporation tax and municipal trade tax on income.
Municipal trade tax is a deductible expense for corporation profits tax
purposes. The effective rate for municipal trade tax was 17% in 1995. The
standard rate of corporation tax is 45% of taxable income. This rate will be
reduced to 30% for distributed profits. In consistency with the assumption of
the period January to July 1996 the corporation tax was calculated using the
standard rate.
The net operating loss of 1994 (DM 2,580,000) was netted against pre tax
income of 1995.
Deferred taxes at a rate of 54.4% income taxes were accrued for special
depreciations on fixed assets allowed according to German fiscal law for
investments in the region along the former border to the Deutsche Demokratische
Republik.
<TABLE>
<CAPTION>
DM
---------
<S> <C>
Current income tax 1995......................................... 1,358,505
less reduction of deferred taxes................................ (709,910)
---------
648,595
=========
</TABLE>
14. CONTINGENT LIABILITIES AND COMMITMENTS
As of December 31, 1995 and 1994 there were no contingent liabilities and
commitments.
15. RESULTS OF OPERATIONS OF PHOENIX AG'S AIRBAG DIVISION FOR THE YEAR ENDED
DECEMBER 31, 1994
The following information for the year ended December 31, 1994 includes the
audited revenues and unaudited costs of the airbag product line of Phoenix's
parent, PHOENIX AG. Costs for 1994 have been included for informational purposes
and are unaudited since the airbag division was in the process of being
established and the organizational structure was not designed to segregate costs
between product lines. Costs for 1994 are based on the internal operating
statements of PHOENIX AG. Included in costs are certain adjustments made by
management to allocate common expenditures utilized by the various product lines
located in PHOENIX AG's Hildesheim facility.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1994
DM (000)
-----------------
<S> <C>
Revenues (audited)......................................... 19,718
Costs (unaudited) Cost of sales............................ (18,673)
Research and development................................. (1,559)
Selling, general and administrative...................... (2,010)
Other.................................................... (56)
-------
Income before income taxes................................. (2,580)
Provision for income taxes................................. 0
-------
Net income................................................. (2,580)
=======
</TABLE>
F-95
<PAGE> 216
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Safety Components International, Inc.
Costa Mesa, California
United States of America
1. We have audited the accompanying balance sheet of Phoenix Airbag GmbH,
Hildesheim (a German limited liability company) expressed in Deutsche
Mark as of August 5, 1996 and the related statements of operations, of
stockholders' equity and of cash flows for period from January 1, 1996
to August 5, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
2. We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
3. In our opinion, the financial statements audited by us present fairly,
in all material respects, the financial position of Phoenix Airbag GmbH,
Hildesheim as of August 5, 1996 and the results of its operations and
its cash flows for the period from January 1, 1996 to August 5, 1996, in
conformity with generally accepted accounting principles in the United
States of America.
Hamburg, October 7, 1996
/s/ Price Waterhouse
F-96
<PAGE> 217
PHOENIX AIRBAG GMBH, HILDESHEIM
BALANCE SHEET AS OF AUGUST 5, 1996
<TABLE>
<CAPTION>
AUGUST 5,
1996
NOTES ----------
----- DM
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash..................................................................... 428
Trade accounts receivable................................................ 2,3 6,044,852
Other accounts receivable................................................ 68,888
Inventories.............................................................. 2,4 2,131,377
Phoenix AG current account............................................... 1,5 478,348
===
---
Total current assets....................................................... 8,723,893
===
---
PLANT AND EQUIPMENT........................................................ 2,6
At cost.................................................................. 13,923,472
Less: Accumulated depreciation........................................... (7,239,991)
===
---
Net book value........................................................... 6,683,481
===
---
GOODWILL, LICENSES AND SOFTWARE............................................ 2,7
At cost.................................................................. 257,108
Less: Accumulated depreciation........................................... (244,810)
===
---
Net book value........................................................... 12,298
===
---
15,419,672
=== ==========
LIABILITIES
CURRENT LIABILITIES
Trade accounts payable................................................... 1,886,712
Other accounts payable and accrued liabilities........................... 2,668,500
Taxation................................................................. 8 3,047,000
----------
Total current liabilities.................................................. 7,602,212
----------
LONG-TERM LIABILITIES
Deferred taxation........................................................ 8 752,096
----------
Total liabilities.......................................................... 8,354,308
----------
STOCKHOLDERS' EQUITY
Common stock............................................................. 1 1,500,000
Additional paid-in capital............................................... 3,500,000
Net income for the period................................................ 2,065,364
----------
Total stockholders' equity................................................. 7,065,364
----------
15,419,672
=========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
F-97
<PAGE> 218
PHOENIX AIRBAG GMBH, HILDESHEIM
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JANUARY 1, 1996 TO AUGUST 5, 1996
<TABLE>
<CAPTION>
THE PERIOD ENDED
NOTES AUGUST 5, 1996
----- ----------------
DM
<S> <C> <C>
Net sales............................................................. 2 34,926,270
Cost of sales......................................................... (26,595,873)
-----------
Gross profit.......................................................... 8,330,397
Research and development.............................................. (782,000)
Selling expenses...................................................... (555,234)
General and administrative expenses................................... (2,037,135)
-----------
Profit before interest and taxes...................................... 4,956,028
Interest (net)........................................................ (136,118)
Taxation.............................................................. 8 (2,754,546)
-----------
Net income............................................................ 2,065,364
===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
F-98
<PAGE> 219
PHOENIX AIRBAG GMBH, HILDESHEIM
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 1996 TO AUGUST 5, 1996
<TABLE>
<CAPTION>
THE PERIOD ENDED
AUGUST 5, 1996
----------------
<S> <C>
<CAPTION>
DM
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................................... 2,065,364
----------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization............................................... 1,336,728
Loss on retirement of fixed assets.......................................... 12,704
----------
1,349,432
----------
Changes in current assets and liabilities:
(Increase)/decrease in
Accounts receivable trade and other......................................... (6,113,740)
Inventories................................................................. 1,782,108
Phoenix AG current account.................................................. (9,873,544)
Increase/(decrease) in
Trade accounts payable...................................................... 1,886,712
Other accounts payable and accrued liabilities.............................. 2,532,500
Taxation.................................................................... 3,047,000
----------
(6,739,264)
----------
Net cash used by operating activities......................................... (3,324,468)
----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in fixed assets................................................... (1,382,950)
----------
Net cash used by investing activities......................................... (1,382,950)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Share capital paid in......................................................... 5,000,000
Decrease in deferred taxation................................................. (292,454)
----------
Net cash provided by financing activities..................................... 4,707,546
----------
Increase in cash.............................................................. 428
Cash at beginning of the period............................................... --
----------
Cash at end of the period..................................................... 428
==========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
F-99
<PAGE> 220
PHOENIX AIRBAG GMBH, HILDESHEIM
NOTES TO THE FINANCIAL STATEMENTS
AS OF AUGUST 5, 1996
1. DESCRIPTION OF BUSINESS
With a founding contract ("Einbringungsvertrag") dated November 14, 1995
effective as of January 1, 1996, Phoenix AG transferred its airbag production,
which is located in Hildesheim, Germany, into a separate legal entity called
"Phoenix Airbag GmbH". Phoenix Airbag GmbH was subsequently sold under a
contract dated June 6, 1996 as amended on June 28, 1996 and August 5, 1996 to AB
9607 Verwaltungs GmbH & Co KG, a wholly owned subsidiary of Safety Components
International, Inc. ("SCI"). The transaction closed at the end of business on
August 5, 1996.
At January 1, 1996, only certain assets (ie inventories and fixed assets)
and only some specific business-related liabilities were transferred into the
new GmbH. Cash, trade accounts receivable and trade accounts payable were all
netted into the PHOENIX AG current account.
As Phoenix Airbag GmbH was not a separate legal entity prior to January 1,
1996, the accompanying financial statements were prepared as of December 31,
1995 and the twelve months then ended, which were audited by BDO Deutsche
Warentreuhand AG, based on the assets and liabilities, revenues and expenses
transferred to Phoenix Airbag GmbH.
2. SIGNIFICANT ACCOUNTING POLICIES
a) General
The company maintains its books of record and prepares the financial
statements in Deutsche Mark in accordance with generally accepted accounting
principles in Germany. Certain reclassifications are made to restate the
Company's financial statements in conformity with generally accepted accounting
principles in the United States of America.
b) Financial statement preparation
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
c) Revenue recognition
Sales are recognized at the time when the goods are shipped, net of
discounts granted and VAT.
d) Concentration of credit risk
The Company is potentially subject to a concentration of credit risk
consisting of its trade accounts receivables, a significant portion of which are
due from Petri AG and MST Automotive. The Company performs ongoing credit
evaluations of its customers and generally does not require collateral. The
company maintains reserves for potential losses for uncollectible amounts and
such losses have historically been within management's expectations.
e) Trade accounts receivable
Trade accounts receivable consist of amounts receivable from customers net
of allowances for doubtful accounts and cash discounts.
F-100
<PAGE> 221
PHOENIX AIRBAG GMBH, HILDESHEIM
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
f) Inventories
Inventories consist of raw materials, unfinished and finished goods. Raw
materials are valued at weighted average cost. Unfinished and finished goods are
valued at the lower of full absorption costing and net realisable value.
g) Plant and Equipment
Plant and equipment are stated at cost less accumulated depreciation.
Depreciation is provided using the reducing-balance method over estimated useful
lives of three to ten years. In the past, where allowable, the maximum
accelerated depreciation allowable under German tax laws was recognised.
Additions and improvements are capitalized. Maintenance and repairs are
expensed when incurred. As permitted under German income tax law, the company
charges the acquisition cost of low value items (costs not in excess of DM 800)
to depreciation expense during the year of acquisition.
h) Goodwill, licenses and software
Software acquired from third parties is stated at cost less accumulated
depreciation. Depreciation is provided using the straight line method over
estimated useful lives of three years.
3. TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable as of August 5, 1996 consisted of the following:
<TABLE>
<CAPTION>
AUGUST 5,
1996
---------
DM
<S> <C>
Trade accounts receivable......................... 6,203,852
Allowance for doubtful amounts and cash (159,000)
discounts.......................................
---------
6,044,852
=========
</TABLE>
4. INVENTORIES
Inventories as of August 5, 1996 consisted of the following:
<TABLE>
<CAPTION>
AUGUST 5,
1996
---------
DM
<S> <C>
Raw materials..................................... 1,493,728
Unfinished goods.................................. 318,565
Finished goods.................................... 319,084
---------
2,131,377
=========
</TABLE>
5. PHOENIX AG CURRENT ACCOUNT
As part of the transfer at January 1, 1996 of fixed assets and inventories
and some specific business-related liabilities from Phoenix AG into the newly
founded company, which had a share capital of DM 5,000,000, a current account
liability to Phoenix AG of DM 4,395,196 was set up representing the difference
between the net assets contributed and the Company's share capital. During the
period ended August 5, 1996, this current account was repaid primarily through
the movement on the cashpooling arrangement which still existed between Phoenix
AG and the Company. As per August 5, 1996 the Phoenix AG current account showed
an amount due to the Company of DM 478 348.
F-101
<PAGE> 222
PHOENIX AIRBAG GMBH, HILDESHEIM
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
6. PLANT AND EQUIPMENT
Plant and equipment as of August 5, 1996 consisted of the following:
<TABLE>
<CAPTION>
AUGUST 5,
1996
----------
DM
<S> <C>
At cost
Plant and machinery............................ 12,017,091
Furniture, fixtures and office equipment....... 1,327,268
Assets under construction...................... 579,113
----------
13,923,472
----------
Accumulated Depreciation
Plant and machinery............................ 6,359,240
Furniture, fixtures and office equipment....... 880,751
----------
7,239,991
----------
6,683,481
==========
Net book value
Depreciation expense........................... 1,323,314
==========
</TABLE>
7. GOODWILL, LICENCES AND SOFTWARE
Goodwill, licences and software as of August 5, 1996 consisted of the
following:
<TABLE>
<CAPTION>
AUGUST 5,
1996
---------
DM
<S> <C>
At cost
Software......................................... 257,108
-------
Accumulated Depreciation
Software......................................... 244,810
-------
Net book value..................................... 12,298
=======
Depreciation expense............................. 13,414
=======
</TABLE>
8. TAXATION
In Germany, tax assessments do not become final until the accounting
records and tax returns for the periods concerned have been examined by the tax
authorities. These reviews by the tax authorities have to be carried out within
five years after the year of assessment.
The income tax charge comprises corporation profits tax and municipal trade
tax on income. Municipal trade taxes are also a deductible expense for
corporation profits tax purposes. The effective rate for municipal trade tax on
income in 1996 was 17%. The standard rate of corporation profits tax is 45% of
taxable income but distributed profits qualify for a rate reduction to 30%.
Dividends paid or declared are subject to withholding tax at the rate of 25% of
the gross dividend.
Income taxes for the seven month period to August 5, 1996 have been
calculated as if that seven month period would be the relevant fiscal period.
F-102
<PAGE> 223
PHOENIX AIRBAG GMBH, HILDESHEIM
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
Deferred taxes at a rate of 54.4% were accrued for special depreciations on
fixed assets which were allowed according to German fiscal laws for investments
made in the region along the border to the former German Democratic Republic.
The taxation charge for the 7 month period ended August 5, 1996 consisted
of the following:
<TABLE>
<CAPTION>
DM
---------
<S> <C>
Current income tax................................ 3,047,000
Deferred tax...................................... (292,454)
----------
-
Total tax charge for the period................... 2,754,546
===========
</TABLE>
The movement on the deferred tax account for the 7 month period ended
August 5, 1996 was as follows:
<TABLE>
<CAPTION>
DM
---------
<S> <C>
Deferred tax liability as at January 1, 1996...... 1,044,550
Released to income................................ (292,454)
----------
-
Deferred tax liability as at August 5, 1996....... 752,096
===========
</TABLE>
9. CONTINGENT LIABILITIES AND COMMITMENTS
As of August 5, 1996 the Company had no contingent liabilities or
commitments.
F-103
<PAGE> 224
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED [LOGO] UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION
IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>
Prospectus Summary......................................... 1
Risk Factors............................................... 14
Use of Proceeds............................................ 22
Capitalization............................................. 22
Unaudited Pro Forma Financial Data......................... 23
Selected Quarterly Financial Data.......................... 39
Business................................................... 46
Management................................................. 60
Security Ownership by Certain Beneficial
Owners and Management.................................. 68
Certain Transactions....................................... 70
Description of the Credit Agreement........................ 72
Description of the Exchange Notes.......................... 72
The Exchange Offer......................................... 98
Book-Entry; Delivery and Form.............................. 109
Plan of Distribution....................................... 110
Legal Matters.............................................. 112
Experts.................................................... 112
Index to Consolidated Financial Statements................. F-1
</TABLE>
UNTIL , 1997, (90 DAYS AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE
EXCHANGE NOTES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
[LOGO]
OFFER FOR ALL OUTSTANDING 10-1/8% SENIOR
SUBORDINATED NOTES DUE 2007, SERIES A, IN
EXCHANGE FOR 10-1/8% SENIOR SUBORDINATED NOTES
DUE 2007, SERIES B, WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933,
AS AMENDED
---------------
PROSPECTUS
---------------
The Exchange Agent for the Exchange Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
By Facsimile: (212) 858-2611
Confirmation by Telephone: (212) 858-2103
By Hand/Overnight Courier
IBJ SCHRODER BANK & TRUST COMPANY
ONE STATE STREET
NEW YORK, NEW YORK 10004
ATTENTION: SECURITIES PROCESSING WINDOW,
Subcellar One (SC-1)
By Mail
IBJ SCHRODER BANK & TRUST COMPANY
P.O. BOX 84
BOWLING GREEN STATION
NEW YORK, NEW YORK 10274-0084
ATTENTION: REORGANIZATION OPERATIONS DEPARTMENT
, 1997
<PAGE> 225
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The indemnification of officers and directors of Safety Components
International, Inc. (the "Company") is governed by Section 145 of the Delaware
General Corporation Law (the "DGCL") and the Certificate of Incorporation of the
Company (the "Certificate"). Among other things, the DGCL permits
indemnification of a director, officer, employee or agent of the Company in
civil, criminal, administrative or investigative actions, suits or proceedings
(other than an action by or in the right of the corporation) to which such
person is a party or is threatened to be made a party by reason of the fact of
such relationship with the corporation or the fact that such person is or was
serving in a similar capacity with another entity at the request of the
corporation against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if such person acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, if he
had no reasonable cause to believe his conduct was unlawful. No indemnification
may be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the Delaware Court of Chancery or the court in which the action or
suit was brought determines upon application that, despite the adjudication of
liability but in view of all circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses which such court shall
deem proper. Under the DGCL, to the extent that a director, officer, employee or
agent is successful, on the merits or otherwise, in the defense of any action,
suit or proceeding or any claim, issue or matter therein (whether or not the
suit is brought by or in the right of the corporation), he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith. In all cases in which indemnification is permitted
(unless ordered by a court), it may be made by the corporation only as
authorized in the specific case upon a determination that the applicable
standard of conduct has been met by the party to be indemnified. The
determination must be made by a majority of the directors who were not parties
to the action, suit or proceeding, even though less than a quorum, or if there
are no such directors, or if such directors so direct, by independent legal
counsel in a written opinion, or by the stockholders. The statute authorizes the
corporation to pay expenses (including attorneys' fees) incurred by an officer
or director in advance of a final disposition of a proceeding upon receipt of an
undertaking by or on behalf of the person to whom the advance will be made, to
repay the advances if it shall ultimately be determined that he was not entitled
to indemnification. Such expenses (including attorneys' fees) incurred by other
employees and agents may be paid upon such terms and conditions, if any, as the
Board may determine. The DGCL provides that indemnification and advances of
expenses permitted thereunder are not to be exclusive of any rights to which
those seeking indemnification or advancement of expenses may be entitled under
any By-law, agreement, vote of stockholders or disinterested directors, or
otherwise. The DGCL also authorizes the corporation to purchase and maintain
liability insurance on behalf of its directors, officers, employees and agents
regardless of whether the corporation would have the statutory power to
indemnify such persons against the liabilities insured.
The Certificate the Company provides that the Company shall indemnify
each person who was or is made a party or is threatened to be made a party to or
is involved in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"Proceeding"), by reason of the fact that he or she, or a person of whom he or
she is the legal representative, is or was a director, officer employee or agent
of the Company or is or was serving at the request of the Company as director,
officer employee or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is alleged action in an
official capacity as a director, officer, employee or agent or alleged action in
any other capacity while service as a director, officer, employee or agent, to
the maximum extent authorized by the DGCL, and the same exists or may hereafter
be amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Company to provide broader indemnification rights than
said law permitted the Company to provide prior to such amendment), against all
expense, liability and loss (including attorneys' fees, judgments, fines, excise
taxes or penalties pursuant to the Employee Retirement Income Security Act of
1974, as amended, and amounts paid or to be paid in settlement) reasonably
incurred by such person in connection with
II-1
<PAGE> 226
such proceeding and such indemnification shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of his or her heirs, executors and administrators. The Certificate
provides that the right to indemnification contained therein is a contract right
and includes the right to be paid by the Company for the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that if the DGCL so requires, the payment of such expenses incurred by
a director or officer in advance of the final disposition of a proceeding shall
be made only upon receipt by the Company of an undertaking by or on behalf of
such person to repay all amounts so advanced if it shall ultimately be
determined that such person is not entitled to be indemnified by the Company as
authorized in the Certificate. The Company maintains directors' and officers'
liability insurance ("Liability Insurance") covering certain liabilities
incurred by the directors and officers of the Company in connection with the
performance of their duties.
The Certificate of Incorporation for each of the Guarantors provides
that no director of each such Guarantor shall be personally liable to the
respective Guarantor or such Guarantor's respective stockholders for monetary
damages for breach of a fiduciary duty as a director; provided, however, that to
the extent required by the provisions of Section 102(b)(7) of the DGCL or any
successor statute, or any other laws of the State of Delaware, the provision in
the Certificate of Incorporation of the respective Guarantor shall not eliminate
or limit the liability of a director (i) for any breach of the director's duty
of loyalty to the respective Guarantor or such Guarantor's respective
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL or (iv) for any transaction from which the director derived an improper
personal benefit. If the DGCL hereafter is amended to authorize further
elimination or limitation of the liability of directors, then the liability of a
director of each of the Guarantors, in addition to the limitation on personal
liability provided in the Certificate of Incorporation of the respective
Guarantor, shall be limited to the fullest extent permitted by the amended DGCL.
Any repeal or modification of the indemnification provisions by the stockholders
of each of the Guarantors shall be prospective only, and shall not adversely
affect any limitation on the personal liability of a director of the respective
Guarantor existing as of the time of such repeal or modification. The Liability
Insurance covers certain liabilities incurred by the directors and officers of
the respective Guarantors in connection with the performance of their duties.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
2.1(12) Agreement, dated June 6, 1996, among AB 9607 Verwaltungs GmbH
& Co. KG., Phoenix Aktiengesellschaft and Phoenix Airbag GmbH
(the "Phoenix Purchase Agreement") (confidential treatment
requested as to part)
2.2(12) Amendment Agreement, dated June 28, 1996, to the Phoenix
Purchase Agreement
3.1(1) Certificate of Incorporation of Safety Systems International,
Inc.
3.2(1) Amended and Restated Certificate of Incorporation of Safety
Systems International, Inc.
3.3(1) Certificate of Amendment of the Amended and Restated
Certificate of Incorporation of Safety Systems International,
Inc.
3.4(11) Certificate of Amendment to the Amended and Restated
Certificate of Incorporation of Safety Components
International, Inc. ("Safety Components")
3.5(1) By-laws of Safety Components
3.6 Certificate of Incorporation of Automotive Safety Components
International, Inc. (f/k/a Automotive Safety Systems
International, Inc.)
3.7 Certificate of Amendment to the Certificate of Incorporation
of Automotive Safety Components International, Inc.
("Automotive Safety")
3.8 Bylaws of Automotive Safety
3.9 Certificate of Incorporation of ASCI Holdings Germany (DE),
Inc. ("Holdings Germany")
3.10 Bylaws of Holdings Germany
3.11 Certificate of Incorporation of ASCI Holdings UK (DE), Inc.
3.12 Bylaws of ASCI Holdings UK (DE), Inc.
3.13 Certificate of Incorporation of ASCI Holdings Mexico (DE),
Inc.
II-2
<PAGE> 227
3.14 Bylaws of ASCI Holdings Mexico (DE), Inc.
3.15 Certificate of Incorporation of ASCI Holdings Czech (DE), Inc.
3.16 Bylaws of ASCI Holdings Czech (DE), Inc.
3.17 Certificate of Incorporation of ASCI Holdings Asia (DE), Inc.
3.18 Bylaws of ASCI Holdings Asia (DE), Inc.
3.19 Certificate of Incorporation of Valentec International
Corporation (f/k/a RAZ Acquisition Corporation) ("Valentec")
3.20 Certificate of Amendment to the Certificate of Incorporation
of Valentec International Corporation
3.21 Bylaws of Valentec International Corporation
3.22 Certificate of Incorporation of Galion, Inc. ("Galion")
3.23 Bylaws of Galion, Inc.
3.24 Certificate of Incorporation of Valentec Systems, Inc.
("Valentec Systems")
3.25 Bylaws of Valentec Systems, Inc.
3.26 Certificate of Incorporation of Safety Components Fabric
Technologies, Inc.
3.27 Bylaws of Safety Components Fabric Technologies, Inc.
4.1(2) Warrant Agreement, dated as of May 13, 1994, between Hampshire
Securities Corporation and Safety Components
4.2(15) Registration Rights Agreement, dated as of May 22, 1997, by
and among Safety Components, Robert A. Zummo, Francis X.
Suozzi and the Valentec International Corporation Employee
Stock Ownership Plan
4.3(16) Form of Pledge Agreement, dated as of May 21, 1997, made by
the Pledgors named therein in favor of KeyBank National
Association, as collateral agent for the benefit of the
Secured Creditors (as defined therein)
4.4 Form of Indenture, dated as of July 24, 1997, by and among
Safety Components, the Subsidiary Guarantors named therein and
IBJ Schroder Bank & Trust Company.
4.5 Registration Rights Agreement, dated as of July 24, 1997 by
and among Safety Components, the guarantors named therein, BT
Securities Corporation, Alex Brown & Sons Incorporated and
BancAmerica Securities, Inc.
4.6 Form of 10-1/8% Senior Subordinated Note Due 2007, Series A,
including Form of Guarantee
4.7 Form of 10-1/8% Senior Subordinated Note Due 2007, Series B,
including Form of Guarantee
4.8 Form of Amendment No. 2 to Pledge Agreement, dated as of July
15, 1997, made by the Pledgors named therein in favor of
KeyBank National Association, as collateral agent for the
benefit of the Secured Creditors (as defined therein)
** 5.1 Opinion of Shereff, Friedman, Hoffman & Goodman, LLP
10.2(3) Airbag Purchase Agreement by and between TRW Vehicle Safety
Systems, Inc. and Valentec, dated March 31, 1993 (confidential
treatment granted as to part)
10.3(3) Long-Term Contract for the Supply of Airbags by and between
TRW REPA GmbH and Valentec International Limited ("VIL"),
dated September 20, 1993 (confidential treatment granted as to
part)
10.4(2) Representation Agreement, effective as of May 13, 1994, by and
between Automotive Safety and Champion Sales and Service Co.
("Champion")
*10.5(4) Employment Agreement, effective as of May 13, 1994, between
Safety Components and Robert A. Zummo
*10.6(4) Employment Agreement, effective as of May 13, 1994, between
Safety Components and W. Hardy Myers
*10.7(4) Stock Option Plan of Safety Components
10.8(2) Master Asset Transfer Agreement, dated May 13, 1994, among
Valentec, Safety Components, Galion and Automotive Safety
10.9(2) Asset Purchase Agreement, dated May 13, 1994, between VIL and
Automotive Safety Components International Limited
("Automotive Limited")
10.10(9) Corporate Services Agreement, dated as of April 1, 1995,
between Valentec and Safety Components
10.11(2) Facility Agreement, dated May 13, 1994, between Valentec and
Automotive Safety
10.12(2) Facility Agreement, dated May 13, 1994, between VIL and
Automotive Limited
II-3
<PAGE> 228
10.13(2) Representation Agreement, effective as of May 13, 1994, by and
between Automotive Limited and Champion
10.14(5) Form of Sublease Agreement, dated May 13, 1994, between VIL
and Automotive Limited
*10.15(6) Employment Agreement, dated as of September 29, 1994, by and
between Safety Components and Paul L. Sullivan
10.16(7) Contract DAAA09-94-C-0532 (Systems Contract) between Safety
Components and the U.S. Army (the "Systems Contract")
*10.17(8) Employment Agreement, effective as of September 19, 1994,
between Safety Components and Victor Guadagno
10.18(8) Lease Agreement, dated February 15, 1995, between Inmobiliara
Calibert, S.A. de C.V. and Automotive Safety Components
International SA. de C.V.
10.19(16) Credit Agreement, dated as of March 15, 1996, among Safety
Components, Automotive Safety, Galion, Valentec Systems and
CUSA
10.20(16) Pledge and Security Agreement, dated as of March 15, 1996,
made by Safety Components, Automotive Safety, Galion and
Valentec Systems in favor of CUSA
*10.21(10) Employment Agreement, dated June 1, 1995, between Automotive
Limited and John Laurence Hakes
10.22(10) Underwriting Agreement, dated June 15, 1995, among BT
Securities Corporation, Prime Charter Ltd., Safety Components,
Valentec and the other selling stockholders named therein
10.23(13) Loan Agreement between the Company, Automotive Safety and
Holdings Germany and Bank of America National Trust and
Savings Association, dated August 1, 1996
10.24(14) TRW/SCI Multi Year Agreement, dated as of April 1, 1996, among
TRW Vehicle Safety Systems, Inc., TRW, Inc. and Safety
Components. Confidential treatment requested as to certain
portions of this exhibit. Such portions have been redacted
10.25(14) Exhibits to Credit Agreement, dated as of March 15, 1996,
among Safety Components, Automotive Safety, Galion, Valentec
Systems and Citicorp USA, Inc.
10.26(14) Amendment No. 1 to Loan Agreement among Safety Components,
Automotive Safety, Holdings Germany and Bank of America
National Trust & Savings Association, dated as of September
30, 1996
10.27(14) Amendment No. 2 to Loan Agreement among Safety Components,
Automotive Safety, Holdings Germany and Bank of America
National Trust & Savings Association, dated as of October 31,
1996
10.28(14) Amendment No. 3 to Loan Agreement among Safety Components,
Automotive Safety, Holdings Germany and Bank of America
National Trust & Savings Association, dated as of December 31,
1996
10.29(15) Stock Purchase Agreement, dated as of May 22, 1997, by and
among Robert A. Zummo, Francis X. Suozzi, the Valentec
International Corporation Employee Stock Ownership Plan and
Safety Components
*10.30(16) Employment Agreement, dated as of February 15, 1997, between
Safety Components and Jeffrey J. Kaplan
*10.31(16) Employment Agreement, dated as of May 19, 1997, between Safety
Components and Thomas W. Cresante
10.32(16) Consulting Agreement, dated as of May 31, 1997, between Safety
Components and W. Hardy Myers
10.33(16) Credit Agreement (the "Credit Agreement"), dated as of May 21,
1997, by and among Safety Components, Phoenix Airbag and
Automotive Limited, as borrowers, and KeyBank National
Association, as administrative agent, and the lending
institutions named therein
10.34(16) Form of Subsidiary Guaranty, dated as of May 21, 1997, among
the guarantors named therein, KeyBank National Association, as
administrative agent for itself and the other Lenders (as
defined in the Credit Agreement)
10.35(16) Form of Security Agreement, dated as of May 21, 1997, among
the assignors named therein and KeyBank National Association,
as collateral agent for the benefit of the Secured Creditors
(as defined therein)
10.36(17) Asset Purchase Agreement, dated as of June 30, 1997, between
Safety Components and JPS Automotive L.P.
II-4
<PAGE> 229
10.37 Purchase Agreement, dated as of July 21, 1997, by and among
Safety Components, BT Securities Corporation, Alex Brown &
Sons Incorporated and BancAmerica Securities, Inc.
10.38 Form of Amendment No. 2 to Credit Agreement, dated as of July
15, 1997, by and among Safety Components, Phoenix Airbag and
Automotive Limited, as borrowers, and KeyBank National
Association, as administrative agent, and the lending
institutions named therein
10.39 Form of Amendment No. 2 to Subsidiary Guaranty, dated as of
July 15, 1997, among the guarantors named therein, KeyBank
National Association, as administrative agent for itself and
the other Lenders (as defined in the Credit Agreement)
10.40 Form of Amendment No. 2 to Security Agreement , dated as of
July 15, 1997, among the assignors named therein and KeyBank
National Association, as collateral agent for the benefit of
the Secured Creditors (as defined therein)
12.1 Statement re computation of ratios
21.1 Subsidiaries of Safety Components
23.1 Consents of Price Waterhouse LLP
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Coopers & Lybrand LLP
23.4 Consent of BDO Deutsche Warentreuhand Aktiengesellschaft
24.1 Power of Attorney of officers and directors of the Company
(see Page II-8)
24.2 Power of Attorney of officers and directors of the Guarantors
(see Pages II-9 to II-18)
25.1 Statement of eligibility of Trustee
99.1 Form of Letter of Transmittal with respect to the Exchange
Offer
99.2 Form of Notice of Guaranteed Delivery
99.3 Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and other Nominees
99.4 Letter to Clients
99.5 Instruction to Registered Holder and/or Book Entry Transfer
Participant from Beneficial Owner
99.6 Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9
* Indicates exhibits relating to executive compensation.
** To be filed by amendment.
(1) Incorporated by reference to the Company's Registration Statement on
Form S-1 (the "1994 Registration Statement") filed with the Securities
and Exchange Commission (the "Commission") on February 11, 1994.
(2) Incorporated by reference to the Company's Report on Form 10-K for the
fiscal year ended March 31, 1994, filed with the Commission.
(3) Incorporated by reference to Amendment No. 2 to the 1994 Registration
Statement, filed with the Commission on March 18, 1994.
(4) Incorporated by reference to Amendment No. 3 to the 1994 Registration
Statement, filed with the Commission on April 20, 1994.
(5) Incorporated by reference to Amendment No. 4 to the 1994 Registration
Statement, filed with the Commission on May 3, 1994.
(6) Incorporated by reference to the Company's Report on Form 10-Q for the
quarter ended September 30, 1994 filed with the Commission.
(7) Incorporated by reference to the Company's Report on Form 10-Q for the
quarter ended December 31, 1994, filed with the Commission.
(8) Incorporated by reference to the Company's Report on Form 10-K for the
fiscal year ended March 31, 1995.
II-5
<PAGE> 230
(9) Incorporated by reference to Amendment No. 1 to the Company's
Registration Statement on Form S-1, filed with the Commission on May
19, 1995.
(10) Incorporated by reference to the Company's Report on Form 10-Q for the
quarter ended June 30, 1995.
(11) Incorporated by reference to the Company's Report on Form 10-Q for the
quarter ended September 30, 1995.
(12) Incorporated by reference to the Company's Report on Form 10-K for the
fiscal year ended March 31, 1996.
(13) Incorporated by reference to the Company's Report on Form 10-Q for the
quarter ended June 30, 1996.
(14) Incorporated by reference to the Company's Report on Form 10-Q for the
quarter ended December 31, 1996.
(15) Incorporated by reference to the Company's Current Report on Form 8-K,
filed with the Commission on June 6, 1997.
(16) Incorporated by reference to the Company's Annual Report on Form 10-K,
filed with the Commission on June 30, 1997.
(17) Incorporated by reference to the Company's Current Report on Form 8-K,
filed with the Commission on August 4, 1997.
(b) FINANCIAL STATEMENT SCHEDULES
None.
ITEM 22. UNDERTAKINGS
A. The undersigned registrants hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the 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 the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the 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.
II-6
<PAGE> 231
(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) The undersigned registrants hereby undertake to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within
one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed subsequent
to the effective date of the registration statement through the date of
responding to the request.
(5) The undersigned registrants hereby undertake to supply by
means of a post-effective amendment all information concerning a
transaction, and the company being acquired involved therein, that was
not the subject of and included in this Registration Statement when it
became effective.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrants pursuant to the foregoing provisions, or otherwise, the registrants
have 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 registrants of expenses incurred or
paid by a director, officer or controlling person of the registrants in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
registered, the registrants 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.
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<PAGE> 232
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Safety
Components International, Inc. certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-4 and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City Costa Mesa, State of
California on the 11th day of August, 1997.
SAFETY COMPONENTS INTERNATIONAL, INC.
By: /s/ Robert A. Zummo
--------------------------------
Robert A. Zummo
Chairman of the Board, President
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned whose
signature appears below constitutes and appoints Robert A. Zummo and Jeffrey J.
Kaplan and each of them (with full power of each of them to act alone), his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution for him and on his behalf, and in his name, place and stead, in
any all capacities to execute and sign any and all amendments or post-effective
amendments to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact or any of them or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof and the Registrant hereby confers like authority on its behalf.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
- ------------------ ----- ----
<S> <C> <C>
/s/ Robert A. Zummo Chairman of the Board, August 11, 1997
- --------------------------- President and Chief Executive Officer
Robert A. Zummo (Principal Executive Officer)
/s/ Jeffrey J. Kaplan Executive Vice President, Chief August 11, 1997
- ---------------------------
Jeffrey J. Kaplan Financial Officer and Director
(Principal Financial Officer)
/s/ George D. Papadopoulos Corporate Controller August 11, 1997
-------------------------- and Secretary
George D. Papadopoulos (Principal Accounting Officer)
/s/ Joseph J. DioGuardi Director August 11, 1997
- ---------------------------
Joseph J. DioGuardi
/s/ Francis X. Suozzi Director August 11, 1997
- ---------------------------
Francis X. Suozzi
/s/ Robert J. Torok Director August 11, 1997
- ---------------------------
Robert J. Torok
</TABLE>
II-8
<PAGE> 233
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Galion,
Inc. certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City Costa Mesa, State of California on the 11th day of
August, 1997.
GALION, INC.
By: /s/ Robert A. Zummo
-------------------------------------
Robert A. Zummo
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned whose
signature appears below constitutes and appoints Robert A. Zummo and Jeffrey J.
Kaplan and each of them (with full power of each of them to act alone), his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution for him and on his behalf, and in his name, place and stead, in
any all capacities to execute and sign any and all amendments or post-effective
amendments to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact or any of them or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof and the Registrant hereby confers like authority on its behalf.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
- ------------------ ----- ----
<S> <C> <C>
/s/ Robert A. Zummo President, Chief Executive August 11, 1997
- --------------------------- Officer and Director
Robert A. Zummo (Principal Executive Officer)
/s/ Jeffrey J. Kaplan Executive Vice President, Chief August 11, 1997
- --------------------------- Financial Officer and Director
Jeffrey J. Kaplan (Principal Financial Officer)
/s/ George D. Papadopoulos Corporate Controller August 11, 1997
-------------------------- and Secretary
George D. Papadopoulos (Principal Accounting Officer)
/s/ Francis X. Suozzi Director August 11, 1997
- ---------------------------
Francis X. Suozzi
</TABLE>
II-9
<PAGE> 234
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Valentec
Systems, Inc. certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-4 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City Costa Mesa, State of California on the 11th day of
August, 1997.
VALENTEC SYSTEMS, INC.
By: /s/ Robert A. Zummo
-----------------------
Robert A. Zummo
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned whose
signature appears below constitutes and appoints Robert A. Zummo and Jeffrey J.
Kaplan and each of them (with full power of each of them to act alone), his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution for him and on his behalf, and in his name, place and stead, in
any all capacities to execute and sign any and all amendments or post-effective
amendments to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact or any of them or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof and the Registrant hereby confers like authority on its behalf.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
- ------------------ ----- ----
<S> <C> <C>
/s/ Robert A. Zummo Chief Executive Officer August 11, 1997
- --------------------------- and Director
Robert A. Zummo (Principal Executive Officer)
/s/ Jeffrey J. Kaplan Executive Vice President, Chief August 11, 1997
- --------------------------- Financial Officer and Director
Jeffrey J. Kaplan (Principal Financial Officer)
/s/ George D. Papadopoulos Corporate Controller August 11, 1997
-------------------------- and Secretary
George D. Papadopoulos (Principal Accounting Officer)
</TABLE>
II-10
<PAGE> 235
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, ASCI
Holdings Germany (DE), Inc. certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-4 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City Costa Mesa, State of California on the
11th day of August, 1997.
ASCI HOLDINGS GERMANY (DE), INC.
By: /s/ Robert A. Zummo
---------------------------------
Robert A. Zummo
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned whose
signature appears below constitutes and appoints Robert A. Zummo and Jeffrey J.
Kaplan and each of them (with full power of each of them to act alone), his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution for him and on his behalf, and in his name, place and stead, in
any all capacities to execute and sign any and all amendments or post-effective
amendments to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact or any of them or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof and the Registrant hereby confers like authority on its behalf.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
- ------------------ ----- ----
<S> <C> <C>
/s/ Robert A. Zummo President, Chief Executive August 11, 1997
- --------------------------- Officer and Director
Robert A. Zummo (Principal Executive Officer)
/s/ Jeffrey J. Kaplan Executive Vice President, Chief August 11, 1997
- --------------------------- Financial Officer and Director
Jeffrey J. Kaplan (Principal Financial Officer)
/s/ George D. Papadopoulos Corporate Controller August 11, 1997
- --------------------------- and Secretary
George D. Papadopoulos (Principal Accounting Officer)
</TABLE>
II-11
<PAGE> 236
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, ASCI
Holdings Mexico (DE), Inc. certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-4 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City Costa Mesa, State of California on the
11th day of August, 1997.
ASCI HOLDINGS MEXICO (DE), INC.
By: /s/ Robert A. Zummo
-------------------------------------
Robert A. Zummo
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned whose
signature appears below constitutes and appoints Robert A. Zummo and Jeffrey J.
Kaplan and each of them (with full power of each of them to act alone), his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution for him and on his behalf, and in his name, place and stead, in
any all capacities to execute and sign any and all amendments or post-effective
amendments to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact or any of them or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof and the Registrant hereby confers like authority on its behalf.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
- ------------------ ----- ----
<S> <C> <C>
/s/ Robert A. Zummo President, Chief Executive August 11, 1997
- --------------------------- Officer and Director
Robert A. Zummo (Principal Executive Officer)
/s/ Jeffrey J. Kaplan Executive Vice President, Chief August 11, 1997
- --------------------------- Financial Officer and Director
Jeffrey J. Kaplan (Principal Financial Officer)
/s/ George D. Papadopoulos Corporate Controller August 11, 1997
-------------------------- and Secretary
George D. Papadopoulos (Principal Accounting Officer)
</TABLE>
II-12
<PAGE> 237
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, ASCI
Holdings UK (DE), Inc. certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-4 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City Costa Mesa, State of California on the 11th day of
August, 1997.
ASCI HOLDINGS UK (DE), INC.
By: /s/ Robert A. Zummo
-------------------------------------
Robert A. Zummo
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned whose
signature appears below constitutes and appoints Robert A. Zummo and Jeffrey J.
Kaplan and each of them (with full power of each of them to act alone), his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution for him and on his behalf, and in his name, place and stead, in
any all capacities to execute and sign any and all amendments or post-effective
amendments to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact or any of them or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof and the Registrant hereby confers like authority on its behalf.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
- ------------------ ----- ----
<S> <C> <C>
/s/ Robert A. Zummo President, Chief Executive August 11, 1997
- --------------------------- Officer and Director
Robert A. Zummo (Principal Executive Officer)
/s/ Jeffrey J. Kaplan Executive Vice President, Chief August 11, 1997
- --------------------------- Financial Officer and Director
Jeffrey J. Kaplan (Principal Financial Officer)
/s/ George D. Papadopoulos Corporate Controller August 11, 1997
-------------------------- and Secretary
George D. Papadopoulos (Principal Accounting Officer)
</TABLE>
II-13
<PAGE> 238
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, ASCI
Holdings Czech (DE), Inc. certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-4 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City Costa Mesa, State of California on the
11th day of August, 1997.
ASCI HOLDINGS CZECH (DE), INC.
By: /s/ Robert A. Zummo
-------------------------------------
Robert A. Zummo
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned whose
signature appears below constitutes and appoints Robert A. Zummo and Jeffrey J.
Kaplan and each of them (with full power of each of them to act alone), his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution for him and on his behalf, and in his name, place and stead, in
any all capacities to execute and sign any and all amendments or post-effective
amendments to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact or any of them or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof and the Registrant hereby confers like authority on its behalf.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
- ------------------ ----- ----
<S> <C> <C>
/s/ Robert A. Zummo President, Chief Executive August 11, 1997
- --------------------------- Officer and Director
Robert A. Zummo (Principal Executive Officer)
/s/ Jeffrey J. Kaplan Executive Vice President, Chief August 11, 1997
- --------------------------- Financial Officer and Director
Jeffrey J. Kaplan (Principal Financial Officer)
/s/ George D. Papadopoulos Corporate Controller August 11, 1997
-------------------------- and Secretary
George D. Papadopoulos (Principal Accounting Officer)
</TABLE>
II-14
<PAGE> 239
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, ASCI
Holdings Asia (DE), Inc. certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-4 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City Costa Mesa, State of California on the
11th day of August, 1997.
ASCI HOLDINGS ASIA (DE), INC.
By: /s/ Robert A. Zummo
-------------------------------------
Robert A. Zummo
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned whose
signature appears below constitutes and appoints Robert A. Zummo and Jeffrey J.
Kaplan and each of them (with full power of each of them to act alone), his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution for him and on his behalf, and in his name, place and stead, in
any all capacities to execute and sign any and all amendments or post-effective
amendments to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact or any of them or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof and the Registrant hereby confers like authority on its behalf.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
- ------------------ ----- ----
<S> <C> <C>
/s/ Robert A. Zummo President, Chief Executive August 11, 1997
- --------------------------- Officer and Director
Robert A. Zummo (Principal Executive Officer)
/s/ Jeffrey J. Kaplan Executive Vice President, Chief August 11, 1997
- --------------------------- Financial Officer and Director
Jeffrey J. Kaplan (Principal Financial Officer)
/s/ George D. Papadopoulos Corporate Controller August 11, 1997
-------------------------- and Secretary
George D. Papadopoulos (Principal Accounting Officer)
</TABLE>
II-15
<PAGE> 240
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Automotive
Safety Components International, Inc. certifies that it has reasonable grounds
to believe that it meets all of the requirements for filing on Form S-4 and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City Costa Mesa, State of
California on the 11th day of August, 1997.
AUTOMOTIVE SAFETY COMPONENTS
INTERNATIONAL, INC.
By: /s/ Robert A. Zummo
-------------------------------------
Robert A. Zummo
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned whose
signature appears below constitutes and appoints Robert A. Zummo and Jeffrey J.
Kaplan and each of them (with full power of each of them to act alone), his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution for him and on his behalf, and in his name, place and stead, in
any all capacities to execute and sign any and all amendments or post-effective
amendments to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact or any of them or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof and the Registrant hereby confers like authority on its behalf.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
- ------------------ ----- ----
<S> <C> <C>
/s/ Robert A. Zummo President, Chief Executive August 11, 1997
- --------------------------- Officer and Director
Robert A. Zummo (Principal Executive Officer)
/s/ Jeffrey J. Kaplan Executive Vice President, Chief August 11, 1997
- --------------------------- Financial Officer and Director
Jeffrey J. Kaplan (Principal Financial Officer)
/s/ George D. Papadopoulos Corporate Controller August 11, 1997
-------------------------- and Secretary
George D. Papadopoulos (Principal Accounting Officer)
/s/ Francis X. Suozzi Director August 11, 1997
- ---------------------------
Francis X. Suozzi
</TABLE>
II-16
<PAGE> 241
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Valentec
International Corporation certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-4 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City Costa Mesa, State of California on the
11th day of August, 1997.
VALENTEC INTERNATIONAL CORPORATION
By: /s/ Robert A. Zummo
---------------------------------
Robert A. Zummo
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned whose
signature appears below constitutes and appoints Robert A. Zummo and Jeffrey J.
Kaplan and each of them (with full power of each of them to act alone), his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution for him and on his behalf, and in his name, place and stead, in
any all capacities to execute and sign any and all amendments or post-effective
amendments to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact or any of them or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof and the Registrant hereby confers like authority on its behalf.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
- ------------------ ----- ----
<S> <C> <C>
/s/ Robert A. Zummo President, Chief Executive Officer August 11, 1997
- --------------------------- and Director
Robert A. Zummo (Principal Executive Officer)
/s/ Jeffrey J. Kaplan Executive Vice President, Chief August 11, 1997
- --------------------------- Financial Officer and Director
Jeffrey J. Kaplan (Principal Financial Officer)
/s/ George D. Papadopoulos Corporate Controller August 11, 1997
-------------------------- and Secretary
George D. Papadopoulos (Principal Accounting Officer)
/s/ Francis X. Suozzi Director August 11, 1997
- ---------------------------
Francis X. Suozzi
</TABLE>
II-17
<PAGE> 242
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Safety
Components Fabric Technologies, Inc. certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-4 and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City Costa Mesa, State of
California on the 11th day of August, 1997.
SAFETY COMPONENTS FABRIC TECHNOLOGIES, INC.
By: /s/ Robert A. Zummo
---------------------------------------
Robert A. Zummo
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned whose
signature appears below constitutes and appoints Robert A. Zummo and Jeffrey J.
Kaplan and each of them (with full power of each of them to act alone), his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution for him and on his behalf, and in his name, place and stead, in
any all capacities to execute and sign any and all amendments or post-effective
amendments to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact or any of them or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof and the Registrant hereby confers like authority on its behalf.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
- ------------------ ----- ----
<S> <C> <C>
/s/ Robert A. Zummo President, Chief Executive August 11, 1997
- --------------------------- Officer and Director
Robert A. Zummo (Principal Executive Officer)
/s/ Jeffrey J. Kaplan Executive Vice President, Chief August 11, 1997
- --------------------------- Financial Officer and Director
Jeffrey J. Kaplan (Principal Financial Officer)
/s/ George D. Papadopoulos Secretary August 11, 1997
-------------------------- (Principal Accounting Officer)
George D. Papadopoulos
</TABLE>
II-18
<PAGE> 1
CERTIFICATE OF INCORPORATION
OF
AUTOMOTIVE SAFETY SYSTEMS INTERNATIONAL, INC.
The undersigned, for the purposes of forming a corporation pursuant to
the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY as
follows:
FIRST: The name of the Corporation is: Automotive Safety Systems
International, Inc.
SECOND: The registered office of the Corporation is to be located at 32
Loockerman Square, Suite L-100, in the City of Dover, County of Kent, State of
Delaware, 19901. The name of its registered agent at that address is The
Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The aggregate number of shares of stock which the Corporation
shall have authority to issue is one thousand (1,000) shares, par value $.01 per
share, all of which shall be designated "Common Stock."
FIFTH: The name and mailing address of the Incorporator is:
Richard A. Goldberg, Esq.
c/o Shereff, Friedman, Hoffman & Goodman
919 Third Avenue
New York, New York 10022
SIXTH: In furtherance and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized:
(a) to adopt, amend or repeal the By-Laws of the Corporation
in such manner and subject to such limitations, if any, as shall be set forth in
the By-Laws;
(b) to allot and authorize the issuance of the authorized but
unissued shares of the Corporation, including the declaration of dividends
payable in shares of any class to stockholders of any class; and
(c) to exercise all of the powers of the Corporation, insofar
as the same may lawfully be vested by this certificate in the board of
directors.
<PAGE> 2
SEVENTH: No director shall be personally liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director; provided, however, that to the extent required by the provisions of
Section 102 (b) (7) of the General Corporation Law of the State of Delaware or
any successor provision shall not eliminate or limit the liability of a director
(i) for any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the General Corporation Law of the state of Delaware or (iv) for any transaction
from which the director derived an improper personal benefit. If the General
Corporation Law of the State of Delaware hereafter is amended to authorize the
further elimination or limitation of the liability of directors, then the
liability of a director of the Corporation, in addition to the limitation on
personal liability provided herein, shall be limited to the fullest extent
permitted by the amended General Corporation Law of the State of Delaware. Any
repeal or modification of this paragraph SEVENTH by the stockholders of the
Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
as of the time of such repeal or modification.
IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of
February, 1994.
/s/ Richard A. Goldberg
--------------------------------
Richard A. Goldberg
Sole Incorporator
2
<PAGE> 1
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF AUTOMOTIVE
SAFETY SYSTEMS INTERNATIONAL, INC.
Automotive Safety Systems International, Inc., a corporation organized
and existing under the General Corporation Law of the State of Delaware, DOES
HEREBY CERTIFY as follows:
1. The present name of the corporation is Automotive Safety Systems
International, Inc. (the "Corporation"), which is the name under which the
Corporation was originally incorporated; and the date of filing the original
Certificate of Incorporation of the Corporation with the Secretary of State of
the State of Delaware is February 1, 1994.
2. The amendment of the Certificate of Incorporation herein certified has been
duly adopted by the Corporation's Board of Directors and the sole stockholder
entitled to vote in accordance with the provisions of Sections 141, 228, and 242
of the General Corporation Law of the State of Delaware.
3. The Certificate of Incorporation of the Corporation is hereby amended by
striking out Article First thereof and by substituting in lieu of said Article
the following new Article:
FIRST: Name. The name of the Corporation is Automotive Safety
Components International, Inc.
<PAGE> 2
IN WITNESS WHEREOF, this Certificate of Amendment of the Certificate of
Incorporation has been affirmed and acknowledged this 7th day of February, 1994.
AUTOMOTIVE SAFETY SYSTEMS INTERNATIONAL, INC.
By: /s/ Robert A. Zummo
--------------------------------------
Robert A. Zummo
President and Chief Executive Officer
Attest:
/s/ W. Hardy Myers
- ------------------------------
W. Hardy Myers
Treasurer, Secretary and
Chief Financial Officer
2
<PAGE> 1
BY-LAWS
OF
AUTOMOTIVE SAFETY COMPONENTS INTERNATIONAL, INC.
ARTICLE I
OFFICES
Section 1.1. Registered Office. The registered office of the
Corporation within the State of Delaware shall be located at the principal place
of business in said State of such corporation; or individual acting as the
Corporation's registered agent in the State of Delaware.
Section 1.2. Other Offices. The Corporation may also have offices and
places of business at such other places both within and without the State of
Delaware as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.1. Place of Meetings. All meetings of stockholders shall be
held at the principal office of the Corporation, or at such other place within
or without the State of Delaware as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section 2.2. Annual Meetings. The annual meeting of stockholders for
the election of directors shall be held at such time on such day, other than a
legal holiday, as the Board of Directors in each such year determines. At the
annual meeting, the stockholders entitled to vote
<PAGE> 2
for the election of directors shall elect, by a majority vote of such shares of
stock present or represented at such annual meeting, a Board of Directors and
transact such other business as may properly come before the meeting.
Section 2.3. Special Meetings. Special meetings of stockholders, for
any purpose or purposes, may be called by a majority of the Board of Directors.
Any such request shall state the purpose or purposes of the proposed meeting. At
any special meeting of stockholders, only such business may be transacted as is
related to the purpose or purposes set forth in the notice of such meeting.
Section 2.4. Notice of Meetings. Written notice of every meeting of
stockholders, stating the place, date and hour thereof and, in the case of a
special meeting of stockholders, the purpose or purposes thereof and the person
or persons by whom or at whose direction such meeting has been called and such
notice is being issued, shall be given not less than ten (10) nor more than
sixty (60) days before the date of the meeting, either personally or by mail, by
or at the direction of the Chairman of the Board, Secretary, or the persons
calling the meeting, to each stockholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be given when deposited in
the United States mail, postage prepaid, directed to the stockholder at his
address as it appears on the stock transfer books of the Corporation. Nothing
herein contained shall preclude the stockholders from waiving notice as provided
in Section 4.1 hereof.
Section 2.5. Quorum. The holders of a majority of the issued and
outstanding shares of
2
<PAGE> 3
stock of the Corporation entitled to vote, represented in person or by proxy,
shall be necessary to and shall constitute a quorum for the transaction of
business at any meeting of stockholders. If, however, such quorum shall not be
present or represented at any meeting of stockholders, the stockholders entitled
to vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At any such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. Notwithstanding the foregoing, if after any such adjournment
the Board of Directors shall fix a new record date for the adjourned meeting, or
if the adjournment is for more than thirty (30) days, a notice of such adjourned
meeting shall be given as provided in Section 2.4 of these By-Laws, but such
notice may be waived as provided in Section 4.1 hereof.
Section 2.6. Voting. At each meeting of stockholders, each holder of
record of shares of stock entitled to vote shall be entitled to vote in person
or by proxy, and each such holder shall be entitled to one vote for every share
standing in his name on the books of the Corporation as of the record date fixed
by the Board of Directors or prescribed by law and, if a quorum is present, a
majority of the shares of such stock present or represented at any meeting of
stockholders shall be the vote of the stockholders with respect to any item of
business, unless otherwise provided by any applicable provision of law, by these
By-Laws or by the Certificate of Incorporation.
Section 2.7. Proxies. Every stockholder entitled to vote at a meeting
or by consent
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without a meeting may authorize another person or persons to act for him by
proxy. Each proxy shall be in writing executed by the stockholder giving the
proxy or by his duly authorized attorney. No proxy shall be valid after the
expiration of three (3) years from its date, unless a longer period is provided
for in the proxy. Unless and until voted, every proxy shall be revocable at the
pleasure of the person who executed it, or his legal representatives or assigns
except in those cases where an irrevocable proxy permitted by statute has been
given.
Section 2.8. Consents. Whenever a vote of stockholders at a meeting
thereof is required or permitted to be taken in connection with any corporate
action by any provision of applicable law, the Certificate of Incorporation or
these By-Laws, the meeting, prior notice thereof and vote of stockholders may be
dispensed with if the holders of shares having not less than the minimum number
of votes that would have been necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted
shall consent in writing to the taking of such action. Where corporate action is
taken in such matter by less than unanimous written consent, prompt written
notice of the taking of such action shall be given thereto.
Section 2.9. Stock Records. The Secretary or agent having charge of the
stock transfer books shall make, at least ten (10) days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order and showing
the address of and the number and class and series, if any, of shares held by
each. Such list, for a period of ten (10) days prior to such meeting, shall be
kept at the principal place of business of the Corporation or at the office of
the transfer agent or registrar
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of the Corporation and such other places as required by statute and shall be
subject to inspection by any stockholder at any time during usual business
hours. Such list shall also be produced and kept open at the time and place of
the meeting and shall be subject to the inspection of any stockholder at any
time during the meeting.
ARTICLE III
DIRECTORS
Section 3.1. Number. The number of directors of the Corporation which
shall constitute the entire Board of Directors shall initially be fixed by the
Incorporator and thereafter from time to time by a vote of a majority of the
entire Board and shall be not less than one nor more than five. The first Board
of Directors shall consist of two members.
Section 3.2. Resignation and Removal. Any director may resign at any
time upon notice of resignation to the Corporation. Any director may be removed
at any time by vote of the stockholders then entitled to vote for the election
of directors at a special meeting called for that purpose, either with or
without cause.
Section 3.3. Newly Created Directorship and Vacancies. Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason whatsoever shall be
filled by vote of the Board. If the number of directors then in office is less
than a quorum, such newly created directorships and vacancies may be filled by a
vote of a majority of the directors then in office. Any director elected to fill
a
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vacancy shall be elected until the next meeting of stockholders at which the
election of directors is in the regular course of business, and until his
successor has been elected and qualified.
Section 3.4. Powers and Duties. Subject to the applicable provisions of
law, these ByLaws or the Certificate of Incorporation, but in furtherance and
not in limitation of any rights therein conferred, the Board of Directors shall
have the control and management of the business and affairs of the Corporation
and shall exercise all such powers of the Corporation and do all such lawful
acts and things as may be exercised by the Corporation.
Section 3.5. Place of Meetings. All meetings of the Board of Directors
may be held either within or without the State of Delaware.
Section 3.6. Annual Meetings. An annual meeting of each newly elected
Board of Directors shall be held immediately following the annual meeting of
stockholders, and no notice of such meeting to the newly elected directors shall
be necessary in order to legally constitute the meeting, provided a quorum shall
be present, or the newly elected directors may meet at such time and place as
shall be fixed by the written consent of all of such directors.
Section 3.7. Regular Meetings. Regular meetings of the Board of
Directors may be held upon such notice or without notice, and at such time and
at such place as shall from time to time be determined by the Board.
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Section 3.8. Special Meetings. Special meetings of the Board of
Directors may be called by a majority of the Board of Directors. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the Board of Directors need be specified in the notice or waiver of notice of
such meeting.
Section 3.9. Notice of Meetings. Notice of each special meeting of the
Board (and of each regular meeting for which notice shall be required) shall be
given by the Secretary or an Assistant Secretary and shall state the place, date
and time of the meeting. Notice of each such meeting shall be given orally or
shall be mailed to each director at his residence or usual place of business. If
notice of less than three (3) days is given, it shall be oral, whether by
telephone or in person, or sent by special delivery mail or telegraph. If
mailed, the notice shall be given when deposited in the United States mail,
postage prepaid. Notice of any adjourned meeting, including the place, date and
time of the new meeting, shall be given to all directors not present at the time
of the adjournment, as well as to the other directors unless the place, date and
time of the new meeting is announced at the adjourned meeting. Nothing herein
contained shall preclude the directors from waiving notice as provided in
Section 4.1 hereof.
Section 3.10. Quorum and Voting. At all meetings of the Board of
Directors a majority of the entire Board shall be necessary to and shall
constitute a quorum for the transaction of business at any meeting of directors,
unless otherwise provided by any applicable provision of law, by these By-Laws,
or by the Certificate of Incorporation. The act of a majority of the directors
present at the time of the vote, if a quorum is present at such time, shall be
the act of the
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Board of Directors, unless otherwise provided by an applicable provision of law,
by these ByLaws or by the Certificate of Incorporation. If a quorum shall not be
present at any meeting of the Board of Directors, the directors present thereat
may adjourn the meeting from time to time, until a quorum shall be present.
Section 3.11. Compensation. The Board of Directors, by the affirmative
vote of a majority of the directors then in office, and irrespective of any
personal interest of any of its members, shall have authority to establish
reasonable compensation of all directors for services to the Corporation as
directors, officers or otherwise.
Section 3.12. Books and Records. The directors may keep the books of
the Corporation, except such as are required by law to be kept within the state,
outside of the State of Delaware, at such place or places as they may from time
to time determine.
Section 3.13. Action without a Meeting. Any action required or
permitted to be taken by the Board, or by a committee of the Board, may be taken
without a meeting if all members of the Board or the committee, as the case may
be, consent in writing to the adoption of a resolution authorizing the action.
Any such resolution and the written consents thereto by the members of the Board
or committee shall be filed with the minutes of the proceedings of the Board or
committee.
Section 3.14. Telephone Participation. Any one or more members of the
Board, or any
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committee of the Board, may participate in a meeting of the Board or committee
by means of a conference telephone call or similar communications equipment
allowing all persons participating in the meeting to hear each other at the same
time. Participation by such means shall constitute presence in person at a
meeting.
Section 3.15. Committees of the Board. The Board, by resolution adopted
by a majority of the entire Board, may designate one or more committees, each
consisting of one or more directors. The Board may designate one or more
directors as alternate members of any such committee. Such alternate members may
replace any absent member or members at any meeting of such committee. Each
committee (including the members thereof) shall serve at the pleasure of the
Board and shall keep minutes of its meetings and report the same to the Board.
Except as otherwise provided by law, each such committee, to the extent provided
in the resolution establishing it, shall have and may exercise all the authority
of the Board with respect to all matters. However, no such committee shall have
power or authority to:
(a) amend the Certificate of Incorporation;
(b) adopt an agreement of merger or consolidation;
(c) recommend to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets;
(d) recommend to the stockholders a dissolution of the Corporation or a
revocation of a dissolution;
(e) amend these By-Laws; and unless expressly so provided by resolution
of the Board,
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these By-Laws or by the Certificate of Incorporation, no such committee shall
have power or authority to:
(1) declare a dividend;
(2) authorize the issuance of shares of the Corporation of any
class; or
(3) adopt a certificate of ownership and merger.
ARTICLE IV
WAIVER
Section 4.1. Waiver. Whenever a notice is required to be given by any
provision of law, by these By-Laws, or by the Certificate of Incorporation, a
waiver thereof in writing, whether before or after the time stated therein,
shall be deemed equivalent to such notice. In addition, any stockholder
attending a meeting of stockholders in person or by proxy without protesting
prior to the conclusion of the meeting the lack of notice thereof to him, and
any director attending a meeting of the Board of Directors without protesting
prior to the meeting or at its commencement such lack of notice, shall be
conclusively deemed to have waived notice of such meeting.
ARTICLE V
OFFICERS
Section 5.1. Executive Officers. The officers of the Corporation shall
be a Chief Executive Officer and/or President, a Treasurer and a Secretary. Any
person may hold two or more of such offices. The officers of the Corporation
shall be elected annually (and from time to time by the Board of Directors, as
vacancies occur), at the annual meeting of the Board of
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Directors following the meeting of stockholders at which the Board of Directors
was elected.
Section 5.2. Other Officers. The Board of Directors may appoint such
other officers and agents, including Vice Presidents, Assistant Vice Presidents,
Secretaries, Assistant Secretaries and Assistant Treasurers, as it shall at any
time or from time to time deem necessary or advisable.
Section 5.3. Authorities and Duties. All officers, as between
themselves and the Corporation, shall have such authority and perform such
duties in the management of business and affairs of the Corporation as may be
provided in these By-Laws, or, to the extent not so provided, as may be
prescribed by the Board of Directors.
Section 5.4. Tenure and Removal. The officers of the Corporation shall
be elected or appointed to hold office until their respective successors are
elected or appointed. All officers shall hold office at the pleasure of the
Board of Directors, and any officer elected or appointed by the Board of
Directors may be removed at any time by the Board of Directors for cause or
without cause at any regular or special meeting.
Section 5.5. Vacancies. Any vacancy occurring in any office of the
Corporation, whether because of death, resignation or removal, with or without
cause, or any other reason, shall be filled by the Board of Directors.
Section 5.6. Compensation. The salaries and other compensation of all
officers and
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agents of the Corporation shall be fixed by or in the manner prescribed by the
Board of Directors.
Section 5.7. Chief Executive Officer. The Chief Executive Officer shall
have general supervision of the business and affairs of the Corporation and
shall have such powers and duties as the Board of Directors may from time to
time prescribe. In the absence of the Chairman of the Board, the Chief Executive
Officer shall preside at all meetings of the stockholders and the directors.
Section 5.8. President. The President shall have general charge of the
business and affairs of the Corporation subject to the control of the Board of
Directors and the Chief Executive Officer and in the absence of the Chairman of
the Board and the Chief Executive Officer, the President shall preside at all
meetings of the stockholders and the directors. The President shall perform such
other duties as are properly required of him by the Board of Directors.
Section 5.9. Vice President. Each Vice President, if any, shall perform
such duties as may from time to time be assigned to him by the Board of
Directors.
Section 5.10. Secretary. The Secretary shall attend all meetings of the
stockholders and all meetings of the Board of Directors and shall record all
proceedings taken at such meetings in a book to be kept for that purpose; he
shall see that all notices of meetings of stockholders and meetings of the Board
of Directors are duly given in accordance with the provisions of these ByLaws or
as required by law; he shall be the custodian of the records and of the
corporate seal or seals of the Corporation; he shall have authority to affix the
corporate seal or seals to all
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documents, the execution of which, on behalf of the Corporation, under its seal,
is duly authorized, and when so affixed it may be attested by his signature; and
in general, he shall perform all duties incident to the office of the Secretary
of a corporation, and such other duties as the Board of Directors may from time
to time prescribe.
Section 5.11. Treasurer. The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the
Corporation and shall deposit, or cause to be deposited, in the name and to the
credit of the Corporation, all moneys and valuable effects in such banks, trust
companies, or other depositories as shall from time to time be selected by the
Board of Directors. He shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation; he shall render to the
Chief Executive Officer and the President and to each member of the Board of
Directors, whenever requested, an account of all of his transactions as
Treasurer and of the financial condition of the Corporation; and in general, he
shall perform all of the duties incident to the office of the Treasurer of a
corporation, and such other duties as the Board of Directors may from time to
time prescribe.
Section 5.12. Other Officers. The Board of Directors may also elect or
may delegate to the Chief Executive Officer or the President the power to
appoint such other officers as it may at any time or from time to time deem
advisable, and any officers so elected or appointed shall have such authority
and perform such duties as the Board of Directors, the Chief Executive Officer
or the President, if he shall have appointed them, may from time to time
prescribe.
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ARTICLE VI
PROVISIONS RELATING TO STOCK CERTIFICATES AND STOCKHOLDERS
Section 6.1. Form and Signature. The shares of the Corporation shall be
represented by a certificate signed by the President or any Vice President and
by the Secretary or any Assistant Secretary or the Treasurer or any Assistant
Treasurer, and shall bear the seal of the Corporation or a facsimile thereof.
Each certificate representing shares shall state upon its face (a) that the
Corporation is formed under the laws of the State of Delaware, (b) the name of
the person or persons to whom it is issued, (c) the number of shares which such
certificate represents and (d) the par value, if any, of each share represented
by such certificate.
Section 6.2. Registered Stockholders. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares of stock to receive dividends or other distributions, and to
vote as such owner, and to hold liable for calls and assessments a person
registered on its books as the owner of stock, and shall not be bound to
recognize any equitable or legal claim to or interest in such shares on the part
of any other person.
Section 6.3. Transfer of Stock. Upon surrender to the Corporation or
the appropriate transfer agent, if any, of the Corporation, of a certificate
representing shares of stock duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, and, in the event that the
certificate refers to any agreement restricting transfer of the shares which it
represents, proper evidence of compliance with such agreement, a new certificate
shall be issued to the person entitled thereto, and the old certificate canceled
and the transaction recorded
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upon the books of the Corporation.
Section 6.4. Lost Certificates etc. The Corporation may issue a new
certificate for shares in place of any certificate theretofore issued by it,
alleged to have been lost, mutilated, stolen or destroyed, and the Board may
require the owner of such lost, mutilated, stolen or destroyed certificate, or
his legal representatives, to make an affidavit of the fact and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation on account of the alleged loss,
mutilation, theft or destruction of any such certificate or the issuance of any
such new certificate.
Section 6.5. Record Date. For the purpose of determining the
stockholders entitled to notice of, or to vote at, any meeting of stockholders
or any adjournment thereof, or to express written consent to any corporate
action without a meeting, or for the purpose of determining stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board may fix, in advance, a record date. Such date shall not be more than
sixty (60) nor less than ten (10) days before the date of any such meeting, nor
more than sixty (60) days prior to any other action.
Section 6.6. Regulations. Except as otherwise provided by law, the
Board may make such additional rules and regulations, not inconsistent with
these By-Laws, as it may deem expedient, concerning the issue, transfer and
registration of certificates for the securities of the
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Corporation. The Board may appoint, or authorize any officer or officers to
appoint, one or more transfer agents and one or more registrars and may require
all certificates for shares of capital stock to bear the signature or signatures
of any of them.
ARTICLE VII
GENERAL PROVISIONS
Section 7.1. Dividends and Distributions. Dividends and other
distributions upon or with respect to outstanding shares of stock of the
Corporation may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, bonds, property, or in stock of the
Corporation. The Board shall have full power and discretion, subject to the
provisions of the Certificate of Incorporation or the terms of any other
corporate document or instrument to determine what, if any, dividends or
distributions shall be declared and paid or made.
Section 7.2. Checks, etc. All checks or demands for money and notes or
other instruments evidencing indebtedness or obligations of the Corporation
shall be signed by such officer or officers or other person or persons as may
from time to time be designated by the Board of Directors.
Section 7.3. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its incorporation and the words "Corporate
Seal Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
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Section 7.4. Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors.
Section 7.5. General and Special Bank Accounts. The Board may authorize
from time to time the opening and keeping of general and special bank accounts
with such banks, trust companies or other depositories as the Board may
designate or as may be designated by any officer or officers of the Corporation
to whom such power of designation may be delegated by the Board from time to
time. The Board may make such special rules and regulations with respect to such
bank accounts, not inconsistent with the provisions of these By-Laws, as it may
deem expedient.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER PERSONS
Section 8.1. Indemnification by Corporation. To the extent permitted by
law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment) the Corporation shall indemnify
any person against any and all judgments, fines, and amounts paid in settling or
otherwise disposing of actions or threatened actions, and expenses in connection
therewith, incurred by reason of the fact that he, his testator or intestate is
or was a director or officer of the Corporation or of any other corporation of
any type or kind, domestic or foreign, which he served in any capacity at the
request of the Corporation. To the extent permitted by law, expenses so
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incurred by any such person in defending a civil or criminal action or
proceeding shall at his request be paid by the Corporation in advance of the
final disposition of such action or proceeding.
ARTICLE IX
ADOPTION AND AMENDMENTS
Section 9.1. Power to Amend. These By-Laws may be amended or repealed
and any new By-Laws may be adopted by the Board of Directors; provided that
these By-Laws and any other By-Laws amended or adopted by the Board of Directors
may be amended, may be reinstated, and new By-Laws may be adopted, by the
stockholders of the Corporation entitled to vote at the time for the election of
directors.
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CERTIFICATE OF INCORPORATION
OF
ASCI HOLDINGS GERMANY (DE), INC.
The undersigned, for the purposes of forming a corporation
pursuant to the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY as follows:
FIRST: The name of the Corporation is: ASCI Holdings Germany
(DE), Inc.
SECOND: The registered office of the Corporation is to be
located at 1013 Centre Road, in the City of Wilmington, County of New Castle,
State of Delaware, 19805. The name of its registered agent at that address is
Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware.
FOURTH: The aggregate number of shares of stock which the
Corporation shall have authority to issue is one thousand shares, par value $.01
per share, all of which shall be designated "Common Stock."
FIFTH: The name and mailing address of the Incorporator is:
Ernest S. Wechsler, Esq.
c/o Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
SIXTH: In furtherance and not in limitation of the powers
conferred by statute, the board of directors is expressly authorized:
(a) to adopt, amend or repeal the By-Laws of the Corporation
in such manner and subject to such limitations, if any, as shall be set
forth in the By-Laws;
(b) to allot and authorize the issuance of the authorized but
unissued shares of the Corporation, including the declaration of
dividends payable in shares of any class to stockholders of any class;
and
(c) to exercise all of the powers of the Corporation, insofar
as the same may lawfully be vested by this certificate in the board of
directors.
<PAGE> 2
SEVENTH: No director shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of a fiduciary
duty as a director; provided, however, that to the extent required by the
provisions of Section 102(b)(7) of the General Corporation Law of the State of
Delaware or any successor statute, or any other laws of the State of Delaware,
this provision shall not eliminate or limit the liability of a director (i) for
any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the General Corporation Law of the State of Delaware or (iv) for any transaction
from which the director derived an improper personal benefit. If the General
Corporation Law of the State of Delaware hereafter is amended to authorize the
further elimination or limitation of the liability of directors, then the
liability of a director of the Corporation, in addition to the limitation on
personal liability provided herein, shall be limited to the fullest extent
permitted by the amended General Corporation Law of the State of Delaware. Any
repeal or modification of this paragraph SEVENTH by the stockholders of the
Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
as of the time of such repeal or modification.
IN WITNESS WHEREOF, I have hereunto set my hand this 29th day
of July, 1996.
/s/ Ernest S. Wechsler
--------------------------------------
Ernest S. Wechsler
Sole Incorporator
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<PAGE> 1
BY-LAWS
OF
ASCI HOLDINGS GERMANY (DE), INC.
ARTICLE I
OFFICES
Section 1.1. Registered Office. The registered statutory office of the
Corporation within the State of Delaware shall be located at the principal place
of business in said State of such corporation or individual acting as the
Corporation's registered agent in the State of Delaware.
Section 1.2. Other Offices. The Corporation may also have offices and
places of business at such other places both within and without the State of
Delaware as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.1. Place of Meetings. All meetings of stockholders shall be
held at the principal office of the Corporation, or at such other place within
or without the State of Delaware as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section 2.2. Annual Meetings. The annual meeting of stockholders for
the election of directors shall be held at such time on such day, other than a
legal holiday, as the Board of Directors in each such year determines. At the
annual meeting, the stockholders entitled to vote for the election of directors
shall elect, by a majority vote, a Board of Directors and transact such other
business as may properly come before the meeting.
Section 2.3. Special Meetings. Special meetings of stockholders, for
any purpose or purposes, may be called by a majority of the Board of Directors.
Any such request shall state the purpose or purposes of the proposed meeting. At
any special meeting of stockholders, only such business may be transacted as is
related to the purpose or purposes set forth in the notice of such meeting.
<PAGE> 2
Section 2.4. Notice of Meetings. Written notice of every meeting of
stockholders, stating the place, date and hour thereof and, in the case of a
special meeting of stockholders, the purpose or purposes thereof and the person
or persons by whom or at whose direction such meeting has been called and such
notice is being issued, shall be given not less than ten (10) nor more than
sixty (60) days before the date of the meeting, either personally or by mail, by
or at the direction of the Chairman of the Board, Secretary, or the persons
calling the meeting, to each stockholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be given when deposited in
the United States mail, postage prepaid, directed to the stockholder at his
address as it appears on the stock transfer books of the Corporation. Nothing
herein contained shall preclude the stockholders from waiving notice as provided
in Section 4.1 hereof.
Section 2.5. Quorum. The holders of a majority of the issued and
outstanding shares of stock of the Corporation entitled to vote, represented in
person or by proxy, shall be necessary to and shall constitute a quorum for the
transaction of business at any meeting of stockholders . If, however, such
quorum shall not be present or represented at any meeting of stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At any such adjourned meeting at which a quorum shall be present
or represented, any business may be transacted which might have been transacted
at the meeting as originally noticed. Notwithstanding the foregoing, if after
any such adjournment the Board of Directors shall fix a new record date for the
adjourned meeting, or if the adjournment is for more than thirty (30) days, a
notice of such adjourned meeting shall be given as provided in Section 2.4 of
these By-Laws, but such notice may be waived as provided in Section 4.1 hereof.
Section 2.6. Voting. At each meeting of stockholders, each stockholder
of record of shares of stock entitled to vote shall be entitled to vote in
person or by proxy, and each such holder shall be entitled to one vote for every
share standing in his name on the books of the Corporation as of the record date
fixed by the Board of Directors or prescribed by law and, if a quorum is
present, a majority of the shares of such stock present or represented at any
meeting of stockholders shall be the vote of the stockholders with respect to
any item of business, unless otherwise provided by any applicable provision of
law, by these By-Laws or by the Certificate of Incorporation.
Section 2.7. Proxies. Every stockholder entitled to vote at a meeting
or by consent without a meeting may authorize another person or persons to act
for him by proxy. Each proxy shall be in writing executed by the stockholder
giving the proxy or by his duly authorized attorney. No proxy shall be valid
after the expiration of three (3) years from its date, unless a longer period is
provided for in the proxy. Unless and until voted,
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every proxy shall be revocable at the pleasure of the person who executed it, or
his legal representatives or assigns except in those cases where an irrevocable
proxy permitted by statute has been given.
Section 2.8. Consents. Whenever a vote of stockholders at a meeting
thereof is required or permitted to be taken in connection with any corporate
action by any provision of applicable law, the Certificate of Incorporation or
these By-Laws, the meeting, prior notice thereof and vote of stockholders may be
dispensed with if the holders of shares having not less than the minimum number
of votes that would have been necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted
shall consent in writing to the taking of such action. Where corporate action is
taken in such matter by less than unanimous written consent, prompt notice of
the taking of such action shall be given thereto.
Section 2.9. Stock Records. The Secretary or agent having charge of the
stock transfer books shall make, at least ten (10) days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order and showing
the address of and the number and class and series, if any, of shares held by
each. Such list, for a period of ten (10) days prior to such meeting, shall be
kept at the principal place of business of the Corporation or at the office of
the transfer agent or registrar of the Corporation and such other places as
required by statute and shall be subject to the inspection by any stockholder at
any time during usual business hours. Such list shall also be produced and kept
open at the time and place of the meeting and shall be subject to the inspection
of any stockholder at any time during the meeting.
ARTICLE III
DIRECTORS
Section 3.1. Number. The number of directors of the Corporation which
shall constitute the entire Board of Directors shall initially be fixed by the
Incorporator and thereafter from time to time by a vote of a majority of the
entire Board and shall be not less than one nor more than five. The first Board
of Directors shall consist of two members.
Section 3.2. Resignation and Removal. Any director may resign at any
time upon notice of resignation to the Corporation. Any director may be removed
at any time by vote of the stockholders then entitled to vote for the election
of directors at a special meeting called for that purpose, either with or
without cause.
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Section 3.3. Newly Created Directorship and Vacancies. Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason whatsoever shall be
filled by vote of the Board. If the number of directors then in office is less
than a quorum, such newly created directorships and vacancies may be filled by a
vote of a majority of the directors then in office. Any director elected to fill
a vacancy shall be elected until the next meeting of stockholders at which the
election of directors is in the regular course of business, and until his
successor has been elected and qualified.
Section 3.4. Powers and Duties. Subject to the applicable provisions of
law, these By-Laws or the Certificate of Incorporation, but in furtherance and
not in limitation of any rights therein conferred, the Board of Directors shall
have the control and management of the business and affairs of the Corporation
and shall exercise all such powers of the Corporation and do all such lawful
acts and things as may be exercised by the Corporation.
Section 3.5. Place of Meetings. All meetings of the Board of Directors
may be held either within or without the State of Delaware.
Section 3.6. Annual Meetings. An annual meeting of each newly elected
Board of Directors shall be held immediately following the annual meeting of
stockholders, and no notice of such meeting to the newly elected directors shall
be necessary in order to legally constitute the meeting, provided a quorum shall
be present, or the newly elected directors may meet at such time and place as
shall be fixed by the written consent of all of such directors.
Section 3.7. Regular Meetings. Regular meetings of the Board of
Directors may be held upon such notice or without notice, and at such time and
at such place as shall from time to time be determined by the Board.
Section 3.8. Special Meetings. Special meetings of the Board of
Directors may be called by a majority of the Board of Directors. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the Board of Directors need be specified in the notice or waiver of notice of
such meeting.
Section 3.9. Notice of Meetings. Notice of each special meeting of the
Board (and of each regular meeting for which notice shall be required) shall be
given by the Secretary or an Assistant Secretary and shall state the place, date
and time of the meeting. Notice of each such meeting shall be given orally or
shall be mailed to each director at his residence or usual place of business. If
notice of less than three (3) days is given, it shall be oral, whether by
telephone or in person, or sent by special delivery mail or telegraph. If
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mailed, the notice shall be given when deposited in the United States mail,
postage prepaid. Notice of any adjourned meeting, including the place, date and
time of the new meeting, shall be given to all directors not present at the time
of the adjournment, as well as to the other directors unless the place, date and
time of the new meeting is announced at the adjourned meeting. Nothing herein
contained shall preclude the directors from waiving notice as provided in
Section 4.1 hereof.
Section 3.10. Quorum and Voting. At all meetings of the Board of
Directors a majority of the entire Board shall be necessary to and shall
constitute a quorum for the transaction of business at any meeting of directors,
unless otherwise provided by any applicable provision of law, by these By-Laws,
or by the Certificate of Incorporation. The act of a majority of the directors
present at the time of the vote, if a quorum is present at such time, shall be
the act of the Board of Directors, unless otherwise provided by an applicable
provision of law, by these By-Laws or by the Certificate of Incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, until a
quorum shall be present.
Section 3.11. Compensation. The Board of Directors, by the affirmative
vote of a majority of the directors then in office, and irrespective of any
personal interest of any of its members, shall have authority to establish
reasonable compensation of all directors for services to the Corporation as
directors, officers or otherwise.
Section 3.12. Books and Records. The directors may keep the books of
the Corporation, except such as are required by law to be kept within the state,
outside of the State of Delaware, at such place or places as they may from time
to time determine.
Section 3.13. Action Without a Meeting. Any action required or
permitted to be taken by the Board, or by a committee of the Board, may be taken
without a meeting if all members of the Board or the committee, as the case may
be, consent in writing to the adoption of a resolution authorizing the action.
Any such resolution and the written consents thereto by the members of the Board
or committee shall be filed with the minutes of the proceedings of the Board or
committee.
Section 3.14. Telephone Participation. Any one or more members of the
Board, or any committee of the Board, may participate in a meeting of the Board
or committee by means of a conference telephone call or similar communications
equipment allowing all persons participating in the meeting to hear each other
at the same time. Participation by such means shall constitute presence in
person at a meeting.
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Section 3.15. Committees of the Board. The Board, by resolution adopted
by a majority of the entire Board, may designate one or more committees, each
consisting of one or more directors. The Board may designate one or more
directors as alternate members of any such committee. Such alternate members may
replace any absent member or members at any meeting of such committee. Each
committee (including the members thereof) shall serve at the pleasure of the
Board and shall keep minutes of its meetings and report the same to the Board.
Except as otherwise provided by law, each such committee, to the extent provided
in the resolution establishing it, shall have and may exercise all the authority
of the Board with respect to all matters. However, no such committee shall have
power or authority to:
(a) amend the Certificate of Incorporation;
(b) adopt an agreement of merger or consolidation;
(c) recommend to the stockholders the sale, lease or
exchange of all or substantially all of the
Corporation's property and assets;
(d) recommend to the stockholders a dissolution of the
Corporation or a revocation of a dissolution;
(e) amend these By-Laws; and unless expressly so provided
by resolution of the Board, these By-Laws or by the
Certificate of Incorporation, no such committee shall
have power or authority to:
(1) declare a dividend;
(2) authorize the issuance of shares of the
Corporation of any class; or
(3) adopt a certificate of ownership and merger.
ARTICLE IV
WAIVER
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Section 4.1. Waiver. Whenever a notice is required to be given by any
provision of law, by these By-Laws, or by the Certificate of Incorporation, a
waiver thereof in writing, whether before or after the time stated therein,
shall be deemed equivalent to such notice. In addition, any stockholder
attending a meeting of stockholders in person or by proxy without protesting
prior to the conclusion of the meeting the lack of notice thereof to him, and
any director attending a meeting of the Board of Directors without protesting
prior to the meeting or at its commencement such lack of notice, shall be
conclusively deemed to have waived notice of such meeting.
ARTICLE V
OFFICERS
Section 5.1. Executive Officers. The officers of the Corporation shall
be a Chief Executive Officer and/or President, a Treasurer and a Secretary. Any
person may hold two or more of such offices. The officers of the Corporation
shall be elected annually (and from time to time by the Board of Directors, as
vacancies occur), at the annual meeting of the Board of Directors following the
meeting of stockholders at which the Board of Directors was elected.
Section 5.2. Other Officers. The Board of Directors may appoint such
other officers and agents, including a Vice President, Assistant Vice
Presidents, Secretaries, Assistant Secretaries and Assistant Treasurers, as it
shall at any time or from time to time deem necessary or advisable.
Section 5.3. Authorities and Duties. All officers, as between
themselves and the Corporation, shall have such authority and perform such
duties in the management of business and affairs of the Corporation as may be
provided in these By-Laws, or, to the extent not so provided, as may be
prescribed by the Board of Directors.
Section 5.4. Tenure and Removal. The officers of the Corporation shall
be elected or appointed to hold office until their respective successors are
elected or appointed. All officers shall hold office at the pleasure of the
Board of Directors, and any officer elected or appointed by the Board of
Directors may be removed at any time by the Board of Directors for cause or
without cause at any regular or special meeting.
Section 5.5. Vacancies. Any vacancy occurring in any office of the
Corporation, whether because of death, resignation or removal, with or without
cause, or any other reason, shall be filled by the Board of Directors.
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Section 5.6. Compensation. The salaries and other compensation of all
officers and agents of the Corporation shall be fixed by or in the manner
prescribed by the Board of Directors.
Section 5.7. Chief Executive Officer. The Chief Executive Officer shall
have general supervision of the business and affairs of the Corporation and
shall have such powers and duties as the Board of Directors may from time to
time prescribe. In the absence of the Chairman of the Board, the Chief Executive
Officer shall preside at all meetings of the stockholders and the directors.
Section 5.8. President. The President shall have general charge of the
business and affairs of the Corporation subject to the control of the Board of
Directors and the Chief Executive Officer and in the absence of the Chairman of
the Board and the Chief Executive Officer, the President shall preside at all
meetings of the stockholders and the directors. The President shall perform such
other duties as are properly required of him by the Board of Directors.
Section 5.9. Vice President. Each Vice President, if any, shall perform
such duties as may from time to time be assigned to him by the Board of
Directors.
Section 5.10. Secretary. The Secretary shall attend all meetings of the
stockholders and all meetings of the Board of Directors and shall record all
proceedings taken at such meetings in a book to be kept for that purpose; he
shall see that all notices of meetings of stockholders and meetings of the Board
of Directors are duly given in accordance with the provisions of these By-Laws
or as required by law; he shall be the custodian of the records and of the
corporate seal or seals of the Corporation; he shall have authority to affix the
corporate seal or seals to all documents, the execution of which, on behalf of
the Corporation, under its seal, is duly authorized, and when so affixed it may
be attested by his signature; and in general, he shall perform all duties
incident to the office of the Secretary of a corporation, and such other duties
as the Board of Directors may from time to time prescribe.
Section 5.11. Treasurer. The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the
Corporation and shall deposit, or cause to be deposited, in the name and to the
credit of the Corporation, all moneys and valuable effects in such banks, trust
companies, or other depositories as shall from time to time be selected by the
Board of Directors. He shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation; he shall render to the
Chief Executive Officer and the President and to each member of the Board of
Directors, whenever requested, an account of all of his transactions as
Treasurer and of the financial condition of the Corporation; and in general, he
shall perform all of the duties incident to
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the office of the Treasurer of a corporation, and such other duties as the Board
of Directors may from time to time prescribe.
Section 5.12. Other Officers. The Board of Directors may also elect or
may delegate to the Chief Executive Officer or the President the power to
appoint such other officers as it may at any time or from time to time deem
advisable, and any officers so elected or appointed shall have such authority
and perform such duties as the Board of Directors, the Chief Executive Officer
or the President, if he shall have appointed them, may from time to time
prescribe.
ARTICLE VI
PROVISIONS RELATING TO STOCK CERTIFICATES AND STOCKHOLDERS
Section 6.1. Form and Signature. The shares of the Corporation shall be
represented by a certificate signed by the President or any Vice President and
by the Secretary or any Assistant Secretary or the Treasurer or any Assistant
Treasurer, and shall bear the seal of the Corporation or a facsimile thereof.
Each certificate representing shares shall state upon its face (a) that the
Corporation is formed under the laws of the State of Delaware, (b) the name of
the person or persons to whom it is issued, (c) the number of shares which such
certificate represents and (d) the par value, if any, of each share represented
by such certificate.
Section 6.2. Registered Stockholders . The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares of stock to receive dividends or other distributions, and to
vote as such owner, and to hold liable for calls and assessments a person
registered on its books as the owner of stock, and shall not be bound to
recognize any equitable or legal claim to or interest in such shares on the part
of any other person.
Section 6.3. Transfer of Stock. Upon surrender to the Corporation or
the appropriate transfer agent, if any, of the Corporation, of a certificate
representing shares of stock duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, and, in the event that the
certificate refers to any agreement restricting transfer of the shares which it
represents, proper evidence of compliance with such agreement, a new certificate
shall be issued to the person entitled thereto, and the old certificate canceled
and the transaction recorded upon the books of the Corporation.
Section 6.4. Lost Certificates, etc. The Corporation may issue a new
certificate for shares in place of any certificate theretofore issued by it,
alleged to have been lost, mutilated, stolen or destroyed, and the Board may
require the owner of such lost,
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mutilated, stolen or destroyed certificate, or his legal representatives, to
make an affidavit of that fact and/or to give the Corporation a bond in such sum
as it may direct as indemnity against any claim that may be made against the
Corporation on account of the alleged loss, mutilation, theft or destruction of
any such certificate or the issuance of any such new certificate.
Section 6.5. Record Date. For the purpose of determining the
stockholders entitled to notice of, or to vote at, any meeting of stockholders
or or any adjournment thereof, or to express consent to any corporate action
without a meeting, or for the purpose of determining stockholders entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock, or for the purpose of any other lawful action, the Board
may fix, in advance, a record date. Such date shall not be more than sixty (60)
nor less than ten (10) days before the date of any such meeting, nor more than
sixty (60) days prior to any other action.
Section 6.6. Regulations. Except as otherwise provided by law, the
Board may make such additional rules and regulations, not inconsistent with
these By-Laws, as it may deem expedient, concerning the issue, transfer and
registration of certificates for the securities of the Corporation. The Board
may appoint, or authorize any officer or officers to appoint, one or more
transfer agents and one or more registrars and may require all certificates for
shares of capital stock to bear the signature or signatures of any of them.
ARTICLE VII
GENERAL PROVISIONS
Section 7.1. Dividends and Distributions. Dividends and other
distributions upon or with respect to outstanding shares of stock of the
Corporation may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, bonds, property, or in stock of the
Corporation. The Board shall have full power and discretion, subject to the
provisions of the Certificate of Incorporation or the terms of any other
corporate document or instrument to determine what, if any, dividends or
distributions shall be declared and paid or made.
Section 7.2. Checks, etc. All checks or demands for money and notes or
other instruments evidencing indebtedness or obligations of the Corporation
shall be signed by such officer or officers or other person or persons as may
from time to time be designated by the Board of Directors.
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Section 7.3. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its incorporation and the words "Corporate
Seal Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
Section 7.4. Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors.
Section 7.5. General and Special Bank Accounts. The Board may authorize
from time to time the opening and keeping of general and special bank accounts
with such banks, trust companies or other depositories as the Board may
designate or as may be designated by any officer or officers of the Corporation
to whom such power of designation may be delegated by the Board from time to
time. The Board may make such special rules and regulations with respect to such
bank accounts, not inconsistent with the provisions of these By-Laws, as it may
deem expedient.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER PERSONS
Section 8.1. Indemnification by Corporation. To the extent permitted by
law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment) the Corporation shall indemnify
any person against any and all judgments, fines, and amounts paid in settling or
otherwise disposing of actions or threatened actions, and expenses in connection
therewith, incurred by reason of the fact that he, his testator or intestate is
or was a director or officer of the Corporation or of any other corporation of
any type or kind, domestic or foreign, which he served in any capacity at the
request of the Corporation. To the extent permitted by law, expenses so incurred
by any such person in defending a civil or criminal action or proceeding shall
at his request be paid by the Corporation in advance of the final disposition of
such action or proceeding.
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ARTICLE IX
ADOPTION AND AMENDMENTS
Section 9.1. Power to Amend. These By-Laws may be amended or repealed
and any new By-Laws may be adopted by the Board of Directors; provided that
these ByLaws and any other By-Laws amended or adopted by the Board of Directors
may be amended, may be reinstated, and new By-Laws may be adopted, by the
stockholders of the Corporation entitled to vote at the time for the election of
directors.
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CERTIFICATE OF INCORPORATION
OF
ASCI HOLDINGS U.K. (DE), INC.
The undersigned, for the purposes of forming a corporation
pursuant to the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY as follows:
FIRST: The name of the Corporation is: ASCI Holdings U.K.
(DE), Inc.
SECOND: The registered office of the Corporation is to be
located at 1013 Centre Road, in the City of Wilmington, County of New Castle,
State of Delaware, 19805. The name of its registered agent at that address is
Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware.
FOURTH: The aggregate number of shares of stock which the
Corporation shall have authority to issue is one thousand shares, par value $.01
per share, all of which shall be designated "Common Stock."
FIFTH: The name and mailing address of the Incorporator is:
Ernest S. Wechsler, Esq.
c/o Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
SIXTH: In furtherance and not in limitation of the powers
conferred by statute, the board of directors is expressly authorized:
(a) to adopt, amend or repeal the By-Laws of the Corporation
in such manner and subject to such limitations, if any, as shall be set
forth in the By-Laws;
(b) to allot and authorize the issuance of the authorized but
unissued shares of the Corporation, including the declaration of
dividends payable in shares of any class to stockholders of any class;
and
(c) to exercise all of the powers of the Corporation, insofar
as the same may lawfully be vested by this certificate in the board of
directors.
<PAGE> 2
SEVENTH: No director shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of a fiduciary
duty as a director; provided, however, that to the extent required by the
provisions of Section 102(b)(7) of the General Corporation Law of the State of
Delaware or any successor statute, or any other laws of the State of Delaware,
this provision shall not eliminate or limit the liability of a director (i) for
any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the General Corporation Law of the State of Delaware or (iv) for any transaction
from which the director derived an improper personal benefit. If the General
Corporation Law of the State of Delaware hereafter is amended to authorize the
further elimination or limitation of the liability of directors, then the
liability of a director of the Corporation, in addition to the limitation on
personal liability provided herein, shall be limited to the fullest extent
permitted by the amended General Corporation Law of the State of Delaware. Any
repeal or modification of this paragraph SEVENTH by the stockholders of the
Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
as of the time of such repeal or modification.
IN WITNESS WHEREOF, I have hereunto set my hand this 29th day
of July, 1996.
/s/ Ernest S. Wechsler
----------------------------------------
Ernest S. Wechsler
Sole Incorporator
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<PAGE> 1
BY-LAWS
OF
ASCI HOLDINGS U.K. (DE), INC.
ARTICLE I
OFFICES
Section 1.1. Registered Office. The registered statutory office of the
Corporation within the State of Delaware shall be located at the principal place
of business in said State of such corporation or individual acting as the
Corporation's registered agent in the State of Delaware.
Section 1.2. Other Offices. The Corporation may also have offices and
places of business at such other places both within and without the State of
Delaware as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.1. Place of Meetings. All meetings of stockholders shall be
held at the principal office of the Corporation, or at such other place within
or without the State of Delaware as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section 2.2. Annual Meetings. The annual meeting of stockholders for
the election of directors shall be held at such time on such day, other than a
legal holiday, as the Board of Directors in each such year determines. At the
annual meeting, the stockholders entitled to vote for the election of directors
shall elect, by a majority vote, a Board of Directors and transact such other
business as may properly come before the meeting.
Section 2.3. Special Meetings. Special meetings of stockholders, for
any purpose or purposes, may be called by a majority of the Board of Directors.
Any such request shall state the purpose or purposes of the proposed meeting. At
any special meeting of stockholders, only such business may be transacted as is
related to the purpose or purposes set forth in the notice of such meeting.
<PAGE> 2
Section 2.4. Notice of Meetings. Written notice of every meeting of
stockholders, stating the place, date and hour thereof and, in the case of a
special meeting of stockholders, the purpose or purposes thereof and the person
or persons by whom or at whose direction such meeting has been called and such
notice is being issued, shall be given not less than ten (10) nor more than
sixty (60) days before the date of the meeting, either personally or by mail, by
or at the direction of the Chairman of the Board, Secretary, or the persons
calling the meeting, to each stockholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be given when deposited in
the United States mail, postage prepaid, directed to the stockholder at his
address as it appears on the stock transfer books of the Corporation. Nothing
herein contained shall preclude the stockholders from waiving notice as provided
in Section 4.1 hereof.
Section 2.5. Quorum. The holders of a majority of the issued and
outstanding shares of stock of the Corporation entitled to vote, represented in
person or by proxy, shall be necessary to and shall constitute a quorum for the
transaction of business at any meeting of stockholders . If, however, such
quorum shall not be present or represented at any meeting of stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At any such adjourned meeting at which a quorum shall be present
or represented, any business may be transacted which might have been transacted
at the meeting as originally noticed. Notwithstanding the foregoing, if after
any such adjournment the Board of Directors shall fix a new record date for the
adjourned meeting, or if the adjournment is for more than thirty (30) days, a
notice of such adjourned meeting shall be given as provided in Section 2.4 of
these By-Laws, but such notice may be waived as provided in Section 4.1 hereof.
Section 2.6. Voting. At each meeting of stockholders, each stockholder
of record of shares of stock entitled to vote shall be entitled to vote in
person or by proxy, and each such holder shall be entitled to one vote for every
share standing in his name on the books of the Corporation as of the record date
fixed by the Board of Directors or prescribed by law and, if a quorum is
present, a majority of the shares of such stock present or represented at any
meeting of stockholders shall be the vote of the stockholders with respect to
any item of business, unless otherwise provided by any applicable provision of
law, by these By-Laws or by the Certificate of Incorporation.
Section 2.7. Proxies. Every stockholder entitled to vote at a meeting
or by consent without a meeting may authorize another person or persons to act
for him by proxy. Each proxy shall be in writing executed by the stockholder
giving the proxy or by his duly authorized attorney. No proxy shall be valid
after the expiration of three (3) years from its date, unless a longer period is
provided for in the proxy. Unless and until voted,
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every proxy shall be revocable at the pleasure of the person who executed it, or
his legal representatives or assigns except in those cases where an irrevocable
proxy permitted by statute has been given.
Section 2.8. Consents. Whenever a vote of stockholders at a meeting
thereof is required or permitted to be taken in connection with any corporate
action by any provision of applicable law, the Certificate of Incorporation or
these By-Laws, the meeting, prior notice thereof and vote of stockholders may be
dispensed with if the holders of shares having not less than the minimum number
of votes that would have been necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted
shall consent in writing to the taking of such action. Where corporate action is
taken in such matter by less than unanimous written consent, prompt notice of
the taking of such action shall be given thereto.
Section 2.9. Stock Records. The Secretary or agent having charge of the
stock transfer books shall make, at least ten (10) days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order and showing
the address of and the number and class and series, if any, of shares held by
each. Such list, for a period of ten (10) days prior to such meeting, shall be
kept at the principal place of business of the Corporation or at the office of
the transfer agent or registrar of the Corporation and such other places as
required by statute and shall be subject to the inspection by any stockholder at
any time during usual business hours. Such list shall also be produced and kept
open at the time and place of the meeting and shall be subject to the inspection
of any stockholder at any time during the meeting.
ARTICLE III
DIRECTORS
Section 3.1. Number. The number of directors of the Corporation which
shall constitute the entire Board of Directors shall initially be fixed by the
Incorporator and thereafter from time to time by a vote of a majority of the
entire Board and shall be not less than one nor more than five. The first Board
of Directors shall consist of two members.
Section 3.2. Resignation and Removal. Any director may resign at any
time upon notice of resignation to the Corporation. Any director may be removed
at any time by vote of the stockholders then entitled to vote for the election
of directors at a special meeting called for that purpose, either with or
without cause.
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Section 3.3. Newly Created Directorship and Vacancies. Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason whatsoever shall be
filled by vote of the Board. If the number of directors then in office is less
than a quorum, such newly created directorships and vacancies may be filled by a
vote of a majority of the directors then in office. Any director elected to fill
a vacancy shall be elected until the next meeting of stockholders at which the
election of directors is in the regular course of business, and until his
successor has been elected and qualified.
Section 3.4. Powers and Duties. Subject to the applicable provisions of
law, these By-Laws or the Certificate of Incorporation, but in furtherance and
not in limitation of any rights therein conferred, the Board of Directors shall
have the control and management of the business and affairs of the Corporation
and shall exercise all such powers of the Corporation and do all such lawful
acts and things as may be exercised by the Corporation.
Section 3.5. Place of Meetings. All meetings of the Board of Directors
may be held either within or without the State of Delaware.
Section 3.6. Annual Meetings. An annual meeting of each newly elected
Board of Directors shall be held immediately following the annual meeting of
stockholders, and no notice of such meeting to the newly elected directors shall
be necessary in order to legally constitute the meeting, provided a quorum shall
be present, or the newly elected directors may meet at such time and place as
shall be fixed by the written consent of all of such directors.
Section 3.7. Regular Meetings. Regular meetings of the Board of
Directors may be held upon such notice or without notice, and at such time and
at such place as shall from time to time be determined by the Board.
Section 3.8. Special Meetings. Special meetings of the Board of
Directors may be called by a majority of the Board of Directors. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the Board of Directors need be specified in the notice or waiver of notice of
such meeting.
Section 3.9. Notice of Meetings. Notice of each special meeting of the
Board (and of each regular meeting for which notice shall be required) shall be
given by the Secretary or an Assistant Secretary and shall state the place, date
and time of the meeting. Notice of each such meeting shall be given orally or
shall be mailed to each director at his residence or usual place of business. If
notice of less than three (3) days is given, it shall be oral, whether by
telephone or in person, or sent by special delivery mail or telegraph. If
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mailed, the notice shall be given when deposited in the United States mail,
postage prepaid. Notice of any adjourned meeting, including the place, date and
time of the new meeting, shall be given to all directors not present at the time
of the adjournment, as well as to the other directors unless the place, date and
time of the new meeting is announced at the adjourned meeting. Nothing herein
contained shall preclude the directors from waiving notice as provided in
Section 4.1 hereof.
Section 3.10. Quorum and Voting. At all meetings of the Board of
Directors a majority of the entire Board shall be necessary to and shall
constitute a quorum for the transaction of business at any meeting of directors,
unless otherwise provided by any applicable provision of law, by these By-Laws,
or by the Certificate of Incorporation. The act of a majority of the directors
present at the time of the vote, if a quorum is present at such time, shall be
the act of the Board of Directors, unless otherwise provided by an applicable
provision of law, by these By-Laws or by the Certificate of Incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, until a
quorum shall be present.
Section 3.11. Compensation. The Board of Directors, by the affirmative
vote of a majority of the directors then in office, and irrespective of any
personal interest of any of its members, shall have authority to establish
reasonable compensation of all directors for services to the Corporation as
directors, officers or otherwise.
Section 3.12. Books and Records. The directors may keep the books of
the Corporation, except such as are required by law to be kept within the state,
outside of the State of Delaware, at such place or places as they may from time
to time determine.
Section 3.13. Action Without a Meeting. Any action required or
permitted to be taken by the Board, or by a committee of the Board, may be taken
without a meeting if all members of the Board or the committee, as the case may
be, consent in writing to the adoption of a resolution authorizing the action.
Any such resolution and the written consents thereto by the members of the Board
or committee shall be filed with the minutes of the proceedings of the Board or
committee.
Section 3.14. Telephone Participation. Any one or more members of the
Board, or any committee of the Board, may participate in a meeting of the Board
or committee by means of a conference telephone call or similar communications
equipment allowing all persons participating in the meeting to hear each other
at the same time. Participation by such means shall constitute presence in
person at a meeting.
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Section 3.15. Committees of the Board. The Board, by resolution adopted
by a majority of the entire Board, may designate one or more committees, each
consisting of one or more directors. The Board may designate one or more
directors as alternate members of any such committee. Such alternate members may
replace any absent member or members at any meeting of such committee. Each
committee (including the members thereof) shall serve at the pleasure of the
Board and shall keep minutes of its meetings and report the same to the Board.
Except as otherwise provided by law, each such committee, to the extent provided
in the resolution establishing it, shall have and may exercise all the authority
of the Board with respect to all matters. However, no such committee shall have
power or authority to:
(a) amend the Certificate of Incorporation;
(b) adopt an agreement of merger or consolidation;
(c) recommend to the stockholders the sale, lease or
exchange of all or substantially all of the
Corporation's property and assets;
(d) recommend to the stockholders a dissolution of the
Corporation or a revocation of a dissolution;
(e) amend these By-Laws; and unless expressly so provided
by resolution of the Board, these By-Laws or by the
Certificate of Incorporation, no such committee shall
have power or authority to:
(1) declare a dividend;
(2) authorize the issuance of shares of the
Corporation of any class; or
(3) adopt a certificate of ownership and merger.
ARTICLE IV
WAIVER
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Section 4.1. Waiver. Whenever a notice is required to be given by any
provision of law, by these By-Laws, or by the Certificate of Incorporation, a
waiver thereof in writing, whether before or after the time stated therein,
shall be deemed equivalent to such notice. In addition, any stockholder
attending a meeting of stockholders in person or by proxy without protesting
prior to the conclusion of the meeting the lack of notice thereof to him, and
any director attending a meeting of the Board of Directors without protesting
prior to the meeting or at its commencement such lack of notice, shall be
conclusively deemed to have waived notice of such meeting.
ARTICLE V
OFFICERS
Section 5.1. Executive Officers. The officers of the Corporation shall
be a Chief Executive Officer and/or President, a Treasurer and a Secretary. Any
person may hold two or more of such offices. The officers of the Corporation
shall be elected annually (and from time to time by the Board of Directors, as
vacancies occur), at the annual meeting of the Board of Directors following the
meeting of stockholders at which the Board of Directors was elected.
Section 5.2. Other Officers. The Board of Directors may appoint such
other officers and agents, including a Vice President, Assistant Vice
Presidents, Secretaries, Assistant Secretaries and Assistant Treasurers, as it
shall at any time or from time to time deem necessary or advisable.
Section 5.3. Authorities and Duties. All officers, as between
themselves and the Corporation, shall have such authority and perform such
duties in the management of business and affairs of the Corporation as may be
provided in these By-Laws, or, to the extent not so provided, as may be
prescribed by the Board of Directors.
Section 5.4. Tenure and Removal. The officers of the Corporation shall
be elected or appointed to hold office until their respective successors are
elected or appointed. All officers shall hold office at the pleasure of the
Board of Directors, and any officer elected or appointed by the Board of
Directors may be removed at any time by the Board of Directors for cause or
without cause at any regular or special meeting.
Section 5.5. Vacancies. Any vacancy occurring in any office of the
Corporation, whether because of death, resignation or removal, with or without
cause, or any other reason, shall be filled by the Board of Directors.
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Section 5.6. Compensation. The salaries and other compensation of all
officers and agents of the Corporation shall be fixed by or in the manner
prescribed by the Board of Directors.
Section 5.7. Chief Executive Officer. The Chief Executive Officer shall
have general supervision of the business and affairs of the Corporation and
shall have such powers and duties as the Board of Directors may from time to
time prescribe. In the absence of the Chairman of the Board, the Chief Executive
Officer shall preside at all meetings of the stockholders and the directors.
Section 5.8. President. The President shall have general charge of the
business and affairs of the Corporation subject to the control of the Board of
Directors and the Chief Executive Officer and in the absence of the Chairman of
the Board and the Chief Executive Officer, the President shall preside at all
meetings of the stockholders and the directors. The President shall perform such
other duties as are properly required of him by the Board of Directors.
Section 5.9. Vice President. Each Vice President, if any, shall perform
such duties as may from time to time be assigned to him by the Board of
Directors.
Section 5.10. Secretary. The Secretary shall attend all meetings of the
stockholders and all meetings of the Board of Directors and shall record all
proceedings taken at such meetings in a book to be kept for that purpose; he
shall see that all notices of meetings of stockholders and meetings of the Board
of Directors are duly given in accordance with the provisions of these By-Laws
or as required by law; he shall be the custodian of the records and of the
corporate seal or seals of the Corporation; he shall have authority to affix the
corporate seal or seals to all documents, the execution of which, on behalf of
the Corporation, under its seal, is duly authorized, and when so affixed it may
be attested by his signature; and in general, he shall perform all duties
incident to the office of the Secretary of a corporation, and such other duties
as the Board of Directors may from time to time prescribe.
Section 5.11. Treasurer. The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the
Corporation and shall deposit, or cause to be deposited, in the name and to the
credit of the Corporation, all moneys and valuable effects in such banks, trust
companies, or other depositories as shall from time to time be selected by the
Board of Directors. He shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation; he shall render to the
Chief Executive Officer and the President and to each member of the Board of
Directors, whenever requested, an account of all of his transactions as
Treasurer and of the financial condition of the Corporation; and in general, he
shall perform all of the duties incident to
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the office of the Treasurer of a corporation, and such other duties as the Board
of Directors may from time to time prescribe.
Section 5.12. Other Officers. The Board of Directors may also elect or
may delegate to the Chief Executive Officer or the President the power to
appoint such other officers as it may at any time or from time to time deem
advisable, and any officers so elected or appointed shall have such authority
and perform such duties as the Board of Directors, the Chief Executive Officer
or the President, if he shall have appointed them, may from time to time
prescribe.
ARTICLE VI
PROVISIONS RELATING TO STOCK CERTIFICATES AND STOCKHOLDERS
Section 6.1. Form and Signature. The shares of the Corporation shall be
represented by a certificate signed by the President or any Vice President and
by the Secretary or any Assistant Secretary or the Treasurer or any Assistant
Treasurer, and shall bear the seal of the Corporation or a facsimile thereof.
Each certificate representing shares shall state upon its face (a) that the
Corporation is formed under the laws of the State of Delaware, (b) the name of
the person or persons to whom it is issued, (c) the number of shares which such
certificate represents and (d) the par value, if any, of each share represented
by such certificate.
Section 6.2. Registered Stockholders . The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares of stock to receive dividends or other distributions, and to
vote as such owner, and to hold liable for calls and assessments a person
registered on its books as the owner of stock, and shall not be bound to
recognize any equitable or legal claim to or interest in such shares on the part
of any other person.
Section 6.3. Transfer of Stock. Upon surrender to the Corporation or
the appropriate transfer agent, if any, of the Corporation, of a certificate
representing shares of stock duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, and, in the event that the
certificate refers to any agreement restricting transfer of the shares which it
represents, proper evidence of compliance with such agreement, a new certificate
shall be issued to the person entitled thereto, and the old certificate canceled
and the transaction recorded upon the books of the Corporation.
Section 6.4. Lost Certificates, etc. The Corporation may issue a new
certificate for shares in place of any certificate theretofore issued by it,
alleged to have been lost, mutilated, stolen or destroyed, and the Board may
require the owner of such lost,
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mutilated, stolen or destroyed certificate, or his legal representatives, to
make an affidavit of that fact and/or to give the Corporation a bond in such sum
as it may direct as indemnity against any claim that may be made against the
Corporation on account of the alleged loss, mutilation, theft or destruction of
any such certificate or the issuance of any such new certificate.
Section 6.5. Record Date. For the purpose of determining the
stockholders entitled to notice of, or to vote at, any meeting of stockholders
or or any adjournment thereof, or to express consent to any corporate action
without a meeting, or for the purpose of determining stockholders entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock, or for the purpose of any other lawful action, the Board
may fix, in advance, a record date. Such date shall not be more than sixty (60)
nor less than ten (10) days before the date of any such meeting, nor more than
sixty (60) days prior to any other action.
Section 6.6. Regulations. Except as otherwise provided by law, the
Board may make such additional rules and regulations, not inconsistent with
these By-Laws, as it may deem expedient, concerning the issue, transfer and
registration of certificates for the securities of the Corporation. The Board
may appoint, or authorize any officer or officers to appoint, one or more
transfer agents and one or more registrars and may require all certificates for
shares of capital stock to bear the signature or signatures of any of them.
ARTICLE VII
GENERAL PROVISIONS
Section 7.1. Dividends and Distributions. Dividends and other
distributions upon or with respect to outstanding shares of stock of the
Corporation may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, bonds, property, or in stock of the
Corporation. The Board shall have full power and discretion, subject to the
provisions of the Certificate of Incorporation or the terms of any other
corporate document or instrument to determine what, if any, dividends or
distributions shall be declared and paid or made.
Section 7.2. Checks, etc. All checks or demands for money and notes or
other instruments evidencing indebtedness or obligations of the Corporation
shall be signed by such officer or officers or other person or persons as may
from time to time be designated by the Board of Directors.
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Section 7.3. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its incorporation and the words "Corporate
Seal Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
Section 7.4. Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors.
Section 7.5. General and Special Bank Accounts. The Board may authorize
from time to time the opening and keeping of general and special bank accounts
with such banks, trust companies or other depositories as the Board may
designate or as may be designated by any officer or officers of the Corporation
to whom such power of designation may be delegated by the Board from time to
time. The Board may make such special rules and regulations with respect to such
bank accounts, not inconsistent with the provisions of these By-Laws, as it may
deem expedient.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER PERSONS
Section 8.1. Indemnification by Corporation. To the extent permitted by
law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment) the Corporation shall indemnify
any person against any and all judgments, fines, and amounts paid in settling or
otherwise disposing of actions or threatened actions, and expenses in connection
therewith, incurred by reason of the fact that he, his testator or intestate is
or was a director or officer of the Corporation or of any other corporation of
any type or kind, domestic or foreign, which he served in any capacity at the
request of the Corporation. To the extent permitted by law, expenses so incurred
by any such person in defending a civil or criminal action or proceeding shall
at his request be paid by the Corporation in advance of the final disposition of
such action or proceeding.
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ARTICLE IX
ADOPTION AND AMENDMENTS
Section 9.1. Power to Amend. These By-Laws may be amended or repealed
and any new By-Laws may be adopted by the Board of Directors; provided that
these ByLaws and any other By-Laws amended or adopted by the Board of Directors
may be amended, may be reinstated, and new By-Laws may be adopted, by the
stockholders of the Corporation entitled to vote at the time for the election of
directors.
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CERTIFICATE OF INCORPORATION
OF
ASCI HOLDINGS MEXICO (DE), INC.
The undersigned, for the purposes of forming a corporation
pursuant to the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY as follows:
FIRST: The name of the Corporation is: ASCI Holdings Mexico
(DE), Inc.
SECOND: The registered office of the Corporation is to be
located at 1013 Centre Road, in the City of Wilmington, County of New Castle,
State of Delaware, 19805. The name of its registered agent at that address is
Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware.
FOURTH: The aggregate number of shares of stock which the
Corporation shall have authority to issue is one thousand shares, par value $.01
per share, all of which shall be designated "Common Stock."
FIFTH: The name and mailing address of the Incorporator is:
Ernest S. Wechsler, Esq.
c/o Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
SIXTH: In furtherance and not in limitation of the powers
conferred by statute, the board of directors is expressly authorized:
(a) to adopt, amend or repeal the By-Laws of the Corporation
in such manner and subject to such limitations, if any, as shall be set
forth in the By-Laws;
(b) to allot and authorize the issuance of the authorized but
unissued shares of the Corporation, including the declaration of
dividends payable in shares of any class to stockholders of any class;
and
(c) to exercise all of the powers of the Corporation, insofar
as the same may lawfully be vested by this certificate in the board of
directors.
<PAGE> 2
SEVENTH: No director shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of a fiduciary
duty as a director; provided, however, that to the extent required by the
provisions of Section 102(b)(7) of the General Corporation Law of the State of
Delaware or any successor statute, or any other laws of the State of Delaware,
this provision shall not eliminate or limit the liability of a director (i) for
any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the General Corporation Law of the State of Delaware or (iv) for any transaction
from which the director derived an improper personal benefit. If the General
Corporation Law of the State of Delaware hereafter is amended to authorize the
further elimination or limitation of the liability of directors, then the
liability of a director of the Corporation, in addition to the limitation on
personal liability provided herein, shall be limited to the fullest extent
permitted by the amended General Corporation Law of the State of Delaware. Any
repeal or modification of this paragraph SEVENTH by the stockholders of the
Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
as of the time of such repeal or modification.
IN WITNESS WHEREOF, I have hereunto set my hand this 29th day
of July, 1996.
/s/ Ernest S. Wechsler
----------------------------------
Ernest S. Wechsler
Sole Incorporator
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<PAGE> 1
BY-LAWS
OF
ASCI HOLDINGS MEXICO (DE), INC.
ARTICLE I
OFFICES
Section 1.1. Registered Office. The registered statutory office of the
Corporation within the State of Delaware shall be located at the principal place
of business in said State of such corporation or individual acting as the
Corporation's registered agent in the State of Delaware.
Section 1.2. Other Offices. The Corporation may also have offices and
places of business at such other places both within and without the State of
Delaware as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.1. Place of Meetings. All meetings of stockholders shall be
held at the principal office of the Corporation, or at such other place within
or without the State of Delaware as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section 2.2. Annual Meetings. The annual meeting of stockholders for
the election of directors shall be held at such time on such day, other than a
legal holiday, as the Board of Directors in each such year determines. At the
annual meeting, the stockholders entitled to vote for the election of directors
shall elect, by a majority vote, a Board of Directors and transact such other
business as may properly come before the meeting.
Section 2.3. Special Meetings. Special meetings of stockholders, for
any purpose or purposes, may be called by a majority of the Board of Directors.
Any such request shall state the purpose or purposes of the proposed meeting. At
any special meeting of stockholders, only such business may be transacted as is
related to the purpose or purposes set forth in the notice of such meeting.
<PAGE> 2
Section 2.4. Notice of Meetings. Written notice of every meeting of
stockholders, stating the place, date and hour thereof and, in the case of a
special meeting of stockholders, the purpose or purposes thereof and the person
or persons by whom or at whose direction such meeting has been called and such
notice is being issued, shall be given not less than ten (10) nor more than
sixty (60) days before the date of the meeting, either personally or by mail, by
or at the direction of the Chairman of the Board, Secretary, or the persons
calling the meeting, to each stockholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be given when deposited in
the United States mail, postage prepaid, directed to the stockholder at his
address as it appears on the stock transfer books of the Corporation. Nothing
herein contained shall preclude the stockholders from waiving notice as provided
in Section 4.1 hereof.
Section 2.5. Quorum. The holders of a majority of the issued and
outstanding shares of stock of the Corporation entitled to vote, represented in
person or by proxy, shall be necessary to and shall constitute a quorum for the
transaction of business at any meeting of stockholders . If, however, such
quorum shall not be present or represented at any meeting of stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At any such adjourned meeting at which a quorum shall be present
or represented, any business may be transacted which might have been transacted
at the meeting as originally noticed. Notwithstanding the foregoing, if after
any such adjournment the Board of Directors shall fix a new record date for the
adjourned meeting, or if the adjournment is for more than thirty (30) days, a
notice of such adjourned meeting shall be given as provided in Section 2.4 of
these By-Laws, but such notice may be waived as provided in Section 4.1 hereof.
Section 2.6. Voting. At each meeting of stockholders, each stockholder
of record of shares of stock entitled to vote shall be entitled to vote in
person or by proxy, and each such holder shall be entitled to one vote for every
share standing in his name on the books of the Corporation as of the record date
fixed by the Board of Directors or prescribed by law and, if a quorum is
present, a majority of the shares of such stock present or represented at any
meeting of stockholders shall be the vote of the stockholders with respect to
any item of business, unless otherwise provided by any applicable provision of
law, by these By-Laws or by the Certificate of Incorporation.
Section 2.7. Proxies. Every stockholder entitled to vote at a meeting
or by consent without a meeting may authorize another person or persons to act
for him by proxy. Each proxy shall be in writing executed by the stockholder
giving the proxy or by his duly authorized attorney. No proxy shall be valid
after the expiration of three (3) years from its date, unless a longer period is
provided for in the proxy. Unless and until voted,
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every proxy shall be revocable at the pleasure of the person who executed it, or
his legal representatives or assigns except in those cases where an irrevocable
proxy permitted by statute has been given.
Section 2.8. Consents. Whenever a vote of stockholders at a meeting
thereof is required or permitted to be taken in connection with any corporate
action by any provision of applicable law, the Certificate of Incorporation or
these By-Laws, the meeting, prior notice thereof and vote of stockholders may be
dispensed with if the holders of shares having not less than the minimum number
of votes that would have been necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted
shall consent in writing to the taking of such action. Where corporate action is
taken in such matter by less than unanimous written consent, prompt notice of
the taking of such action shall be given thereto.
Section 2.9. Stock Records. The Secretary or agent having charge of the
stock transfer books shall make, at least ten (10) days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order and showing
the address of and the number and class and series, if any, of shares held by
each. Such list, for a period of ten (10) days prior to such meeting, shall be
kept at the principal place of business of the Corporation or at the office of
the transfer agent or registrar of the Corporation and such other places as
required by statute and shall be subject to the inspection by any stockholder at
any time during usual business hours. Such list shall also be produced and kept
open at the time and place of the meeting and shall be subject to the inspection
of any stockholder at any time during the meeting.
ARTICLE III
DIRECTORS
Section 3.1. Number. The number of directors of the Corporation which
shall constitute the entire Board of Directors shall initially be fixed by the
Incorporator and thereafter from time to time by a vote of a majority of the
entire Board and shall be not less than one nor more than five. The first Board
of Directors shall consist of two members.
Section 3.2. Resignation and Removal. Any director may resign at any
time upon notice of resignation to the Corporation. Any director may be removed
at any time by vote of the stockholders then entitled to vote for the election
of directors at a special meeting called for that purpose, either with or
without cause.
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Section 3.3. Newly Created Directorship and Vacancies. Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason whatsoever shall be
filled by vote of the Board. If the number of directors then in office is less
than a quorum, such newly created directorships and vacancies may be filled by a
vote of a majority of the directors then in office. Any director elected to fill
a vacancy shall be elected until the next meeting of stockholders at which the
election of directors is in the regular course of business, and until his
successor has been elected and qualified.
Section 3.4. Powers and Duties. Subject to the applicable provisions of
law, these By-Laws or the Certificate of Incorporation, but in furtherance and
not in limitation of any rights therein conferred, the Board of Directors shall
have the control and management of the business and affairs of the Corporation
and shall exercise all such powers of the Corporation and do all such lawful
acts and things as may be exercised by the Corporation.
Section 3.5. Place of Meetings. All meetings of the Board of Directors
may be held either within or without the State of Delaware.
Section 3.6. Annual Meetings. An annual meeting of each newly elected
Board of Directors shall be held immediately following the annual meeting of
stockholders, and no notice of such meeting to the newly elected directors shall
be necessary in order to legally constitute the meeting, provided a quorum shall
be present, or the newly elected directors may meet at such time and place as
shall be fixed by the written consent of all of such directors.
Section 3.7. Regular Meetings. Regular meetings of the Board of
Directors may be held upon such notice or without notice, and at such time and
at such place as shall from time to time be determined by the Board.
Section 3.8. Special Meetings. Special meetings of the Board of
Directors may be called by a majority of the Board of Directors. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the Board of Directors need be specified in the notice or waiver of notice of
such meeting.
Section 3.9. Notice of Meetings. Notice of each special meeting of the
Board (and of each regular meeting for which notice shall be required) shall be
given by the Secretary or an Assistant Secretary and shall state the place, date
and time of the meeting. Notice of each such meeting shall be given orally or
shall be mailed to each director at his residence or usual place of business. If
notice of less than three (3) days is given, it shall be oral, whether by
telephone or in person, or sent by special delivery mail or telegraph. If
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mailed, the notice shall be given when deposited in the United States mail,
postage prepaid. Notice of any adjourned meeting, including the place, date and
time of the new meeting, shall be given to all directors not present at the time
of the adjournment, as well as to the other directors unless the place, date and
time of the new meeting is announced at the adjourned meeting. Nothing herein
contained shall preclude the directors from waiving notice as provided in
Section 4.1 hereof.
Section 3.10. Quorum and Voting. At all meetings of the Board of
Directors a majority of the entire Board shall be necessary to and shall
constitute a quorum for the transaction of business at any meeting of directors,
unless otherwise provided by any applicable provision of law, by these By-Laws,
or by the Certificate of Incorporation. The act of a majority of the directors
present at the time of the vote, if a quorum is present at such time, shall be
the act of the Board of Directors, unless otherwise provided by an applicable
provision of law, by these By-Laws or by the Certificate of Incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, until a
quorum shall be present.
Section 3.11. Compensation. The Board of Directors, by the affirmative
vote of a majority of the directors then in office, and irrespective of any
personal interest of any of its members, shall have authority to establish
reasonable compensation of all directors for services to the Corporation as
directors, officers or otherwise.
Section 3.12. Books and Records. The directors may keep the books of
the Corporation, except such as are required by law to be kept within the state,
outside of the State of Delaware, at such place or places as they may from time
to time determine.
Section 3.13. Action Without a Meeting. Any action required or
permitted to be taken by the Board, or by a committee of the Board, may be taken
without a meeting if all members of the Board or the committee, as the case may
be, consent in writing to the adoption of a resolution authorizing the action.
Any such resolution and the written consents thereto by the members of the Board
or committee shall be filed with the minutes of the proceedings of the Board or
committee.
Section 3.14. Telephone Participation. Any one or more members of the
Board, or any committee of the Board, may participate in a meeting of the Board
or committee by means of a conference telephone call or similar communications
equipment allowing all persons participating in the meeting to hear each other
at the same time. Participation by such means shall constitute presence in
person at a meeting.
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Section 3.15. Committees of the Board. The Board, by resolution adopted
by a majority of the entire Board, may designate one or more committees, each
consisting of one or more directors. The Board may designate one or more
directors as alternate members of any such committee. Such alternate members may
replace any absent member or members at any meeting of such committee. Each
committee (including the members thereof) shall serve at the pleasure of the
Board and shall keep minutes of its meetings and report the same to the Board.
Except as otherwise provided by law, each such committee, to the extent provided
in the resolution establishing it, shall have and may exercise all the authority
of the Board with respect to all matters. However, no such committee shall have
power or authority to:
(a) amend the Certificate of Incorporation;
(b) adopt an agreement of merger or consolidation;
(c) recommend to the stockholders the sale, lease or
exchange of all or substantially all of the
Corporation's property and assets;
(d) recommend to the stockholders a dissolution of the
Corporation or a revocation of a dissolution;
(e) amend these By-Laws; and unless expressly so provided
by resolution of the Board, these By-Laws or by the
Certificate of Incorporation, no such committee shall
have power or authority to:
(1) declare a dividend;
(2) authorize the issuance of shares of the
Corporation of any class; or
(3) adopt a certificate of ownership and merger.
ARTICLE IV
WAIVER
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Section 4.1. Waiver. Whenever a notice is required to be given by any
provision of law, by these By-Laws, or by the Certificate of Incorporation, a
waiver thereof in writing, whether before or after the time stated therein,
shall be deemed equivalent to such notice. In addition, any stockholder
attending a meeting of stockholders in person or by proxy without protesting
prior to the conclusion of the meeting the lack of notice thereof to him, and
any director attending a meeting of the Board of Directors without protesting
prior to the meeting or at its commencement such lack of notice, shall be
conclusively deemed to have waived notice of such meeting.
ARTICLE V
OFFICERS
Section 5.1. Executive Officers. The officers of the Corporation shall
be a Chief Executive Officer and/or President, a Treasurer and a Secretary. Any
person may hold two or more of such offices. The officers of the Corporation
shall be elected annually (and from time to time by the Board of Directors, as
vacancies occur), at the annual meeting of the Board of Directors following the
meeting of stockholders at which the Board of Directors was elected.
Section 5.2. Other Officers. The Board of Directors may appoint such
other officers and agents, including a Vice President, Assistant Vice
Presidents, Secretaries, Assistant Secretaries and Assistant Treasurers, as it
shall at any time or from time to time deem necessary or advisable.
Section 5.3. Authorities and Duties. All officers, as between
themselves and the Corporation, shall have such authority and perform such
duties in the management of business and affairs of the Corporation as may be
provided in these By-Laws, or, to the extent not so provided, as may be
prescribed by the Board of Directors.
Section 5.4. Tenure and Removal. The officers of the Corporation shall
be elected or appointed to hold office until their respective successors are
elected or appointed. All officers shall hold office at the pleasure of the
Board of Directors, and any officer elected or appointed by the Board of
Directors may be removed at any time by the Board of Directors for cause or
without cause at any regular or special meeting.
Section 5.5. Vacancies. Any vacancy occurring in any office of the
Corporation, whether because of death, resignation or removal, with or without
cause, or any other reason, shall be filled by the Board of Directors.
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Section 5.6. Compensation. The salaries and other compensation of all
officers and agents of the Corporation shall be fixed by or in the manner
prescribed by the Board of Directors.
Section 5.7. Chief Executive Officer. The Chief Executive Officer shall
have general supervision of the business and affairs of the Corporation and
shall have such powers and duties as the Board of Directors may from time to
time prescribe. In the absence of the Chairman of the Board, the Chief Executive
Officer shall preside at all meetings of the stockholders and the directors.
Section 5.8. President. The President shall have general charge of the
business and affairs of the Corporation subject to the control of the Board of
Directors and the Chief Executive Officer and in the absence of the Chairman of
the Board and the Chief Executive Officer, the President shall preside at all
meetings of the stockholders and the directors. The President shall perform such
other duties as are properly required of him by the Board of Directors.
Section 5.9. Vice President. Each Vice President, if any, shall perform
such duties as may from time to time be assigned to him by the Board of
Directors.
Section 5.10. Secretary. The Secretary shall attend all meetings of the
stockholders and all meetings of the Board of Directors and shall record all
proceedings taken at such meetings in a book to be kept for that purpose; he
shall see that all notices of meetings of stockholders and meetings of the Board
of Directors are duly given in accordance with the provisions of these By-Laws
or as required by law; he shall be the custodian of the records and of the
corporate seal or seals of the Corporation; he shall have authority to affix the
corporate seal or seals to all documents, the execution of which, on behalf of
the Corporation, under its seal, is duly authorized, and when so affixed it may
be attested by his signature; and in general, he shall perform all duties
incident to the office of the Secretary of a corporation, and such other duties
as the Board of Directors may from time to time prescribe.
Section 5.11. Treasurer. The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the
Corporation and shall deposit, or cause to be deposited, in the name and to the
credit of the Corporation, all moneys and valuable effects in such banks, trust
companies, or other depositories as shall from time to time be selected by the
Board of Directors. He shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation; he shall render to the
Chief Executive Officer and the President and to each member of the Board of
Directors, whenever requested, an account of all of his transactions as
Treasurer and of the financial condition of the Corporation; and in general, he
shall perform all of the duties incident to
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the office of the Treasurer of a corporation, and such other duties as the Board
of Directors may from time to time prescribe.
Section 5.12. Other Officers. The Board of Directors may also elect or
may delegate to the Chief Executive Officer or the President the power to
appoint such other officers as it may at any time or from time to time deem
advisable, and any officers so elected or appointed shall have such authority
and perform such duties as the Board of Directors, the Chief Executive Officer
or the President, if he shall have appointed them, may from time to time
prescribe.
ARTICLE VI
PROVISIONS RELATING TO STOCK CERTIFICATES AND STOCKHOLDERS
Section 6.1. Form and Signature. The shares of the Corporation shall be
represented by a certificate signed by the President or any Vice President and
by the Secretary or any Assistant Secretary or the Treasurer or any Assistant
Treasurer, and shall bear the seal of the Corporation or a facsimile thereof.
Each certificate representing shares shall state upon its face (a) that the
Corporation is formed under the laws of the State of Delaware, (b) the name of
the person or persons to whom it is issued, (c) the number of shares which such
certificate represents and (d) the par value, if any, of each share represented
by such certificate.
Section 6.2. Registered Stockholders . The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares of stock to receive dividends or other distributions, and to
vote as such owner, and to hold liable for calls and assessments a person
registered on its books as the owner of stock, and shall not be bound to
recognize any equitable or legal claim to or interest in such shares on the part
of any other person.
Section 6.3. Transfer of Stock. Upon surrender to the Corporation or
the appropriate transfer agent, if any, of the Corporation, of a certificate
representing shares of stock duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, and, in the event that the
certificate refers to any agreement restricting transfer of the shares which it
represents, proper evidence of compliance with such agreement, a new certificate
shall be issued to the person entitled thereto, and the old certificate canceled
and the transaction recorded upon the books of the Corporation.
Section 6.4. Lost Certificates, etc. The Corporation may issue a new
certificate for shares in place of any certificate theretofore issued by it,
alleged to have been lost,
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mutilated, stolen or destroyed, and the Board may require the owner of such
lost, mutilated, stolen or destroyed certificate, or his legal representatives,
to make an affidavit of that fact and/or to give the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
Corporation on account of the alleged loss, mutilation, theft or destruction of
any such certificate or the issuance of any such new certificate.
Section 6.5. Record Date. For the purpose of determining the
stockholders entitled to notice of, or to vote at, any meeting of stockholders
or or any adjournment thereof, or to express consent to any corporate action
without a meeting, or for the purpose of determining stockholders entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock, or for the purpose of any other lawful action, the Board
may fix, in advance, a record date. Such date shall not be more than sixty (60)
nor less than ten (10) days before the date of any such meeting, nor more than
sixty (60) days prior to any other action.
Section 6.6. Regulations. Except as otherwise provided by law, the
Board may make such additional rules and regulations, not inconsistent with
these By-Laws, as it may deem expedient, concerning the issue, transfer and
registration of certificates for the securities of the Corporation. The Board
may appoint, or authorize any officer or officers to appoint, one or more
transfer agents and one or more registrars and may require all certificates for
shares of capital stock to bear the signature or signatures of any of them.
ARTICLE VII
GENERAL PROVISIONS
Section 7.1. Dividends and Distributions. Dividends and other
distributions upon or with respect to outstanding shares of stock of the
Corporation may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, bonds, property, or in stock of the
Corporation. The Board shall have full power and discretion, subject to the
provisions of the Certificate of Incorporation or the terms of any other
corporate document or instrument to determine what, if any, dividends or
distributions shall be declared and paid or made.
Section 7.2. Checks, etc. All checks or demands for money and notes or
other instruments evidencing indebtedness or obligations of the Corporation
shall be signed by such officer or officers or other person or persons as may
from time to time be designated by the Board of Directors.
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Section 7.3. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its incorporation and the words "Corporate
Seal Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
Section 7.4. Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors.
Section 7.5. General and Special Bank Accounts. The Board may authorize
from time to time the opening and keeping of general and special bank accounts
with such banks, trust companies or other depositories as the Board may
designate or as may be designated by any officer or officers of the Corporation
to whom such power of designation may be delegated by the Board from time to
time. The Board may make such special rules and regulations with respect to such
bank accounts, not inconsistent with the provisions of these By-Laws, as it may
deem expedient.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER PERSONS
Section 8.1. Indemnification by Corporation. To the extent permitted by
law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment) the Corporation shall indemnify
any person against any and all judgments, fines, and amounts paid in settling or
otherwise disposing of actions or threatened actions, and expenses in connection
therewith, incurred by reason of the fact that he, his testator or intestate is
or was a director or officer of the Corporation or of any other corporation of
any type or kind, domestic or foreign, which he served in any capacity at the
request of the Corporation. To the extent permitted by law, expenses so incurred
by any such person in defending a civil or criminal action or proceeding shall
at his request be paid by the Corporation in advance of the final disposition of
such action or proceeding.
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ARTICLE IX
ADOPTION AND AMENDMENTS
Section 9.1. Power to Amend. These By-Laws may be amended or repealed
and any new By-Laws may be adopted by the Board of Directors; provided that
these ByLaws and any other By-Laws amended or adopted by the Board of Directors
may be amended, may be reinstated, and new By-Laws may be adopted, by the
stockholders of the Corporation entitled to vote at the time for the election of
directors.
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CERTIFICATE OF INCORPORATION
OF
ASCI HOLDINGS CZECH (DE), INC.
The undersigned, for the purposes of forming a corporation
pursuant to the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY as follows:
FIRST: The name of the Corporation is: ASCI Holdings Czech
(DE), Inc.
SECOND: The registered office of the Corporation is to be
located at 1013 Centre Road, in the City of Wilmington, County of New Castle,
State of Delaware, 19805. The name of its registered agent at that address is
Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware.
FOURTH: The aggregate number of shares of stock which the
Corporation shall have authority to issue is one thousand shares, par value $.01
per share, all of which shall be designated "Common Stock."
FIFTH: The name and mailing address of the Incorporator is:
Ernest S. Wechsler, Esq.
c/o Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
SIXTH: In furtherance and not in limitation of the powers
conferred by statute, the board of directors is expressly authorized:
(a) to adopt, amend or repeal the By-Laws of the Corporation
in such manner and subject to such limitations, if any, as shall be set
forth in the By-Laws;
(b) to allot and authorize the issuance of the authorized but
unissued shares of the Corporation, including the declaration of
dividends payable in shares of any class to stockholders of any class;
and
(c) to exercise all of the powers of the Corporation, insofar
as the same may lawfully be vested by this certificate in the board of
directors.
<PAGE> 2
SEVENTH: No director shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of a fiduciary
duty as a director; provided, however, that to the extent required by the
provisions of Section 102(b)(7) of the General Corporation Law of the State of
Delaware or any successor statute, or any other laws of the State of Delaware,
this provision shall not eliminate or limit the liability of a director (i) for
any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the General Corporation Law of the State of Delaware or (iv) for any transaction
from which the director derived an improper personal benefit. If the General
Corporation Law of the State of Delaware hereafter is amended to authorize the
further elimination or limitation of the liability of directors, then the
liability of a director of the Corporation, in addition to the limitation on
personal liability provided herein, shall be limited to the fullest extent
permitted by the amended General Corporation Law of the State of Delaware. Any
repeal or modification of this paragraph SEVENTH by the stockholders of the
Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
as of the time of such repeal or modification.
IN WITNESS WHEREOF, I have hereunto set my hand this 29th day
of July, 1996.
/s/ Ernest S. Wechsler
-----------------------------------
Ernest S. Wechsler
Sole Incorporator
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<PAGE> 1
BY-LAWS
OF
ASCI HOLDINGS CZECH (DE), INC.
ARTICLE I
OFFICES
Section 1.1. Registered Office. The registered statutory office of the
Corporation within the State of Delaware shall be located at the principal place
of business in said State of such corporation or individual acting as the
Corporation's registered agent in the State of Delaware.
Section 1.2. Other Offices. The Corporation may also have offices and
places of business at such other places both within and without the State of
Delaware as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.1. Place of Meetings. All meetings of stockholders shall be
held at the principal office of the Corporation, or at such other place within
or without the State of Delaware as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section 2.2. Annual Meetings. The annual meeting of stockholders for
the election of directors shall be held at such time on such day, other than a
legal holiday, as the Board of Directors in each such year determines. At the
annual meeting, the stockholders entitled to vote for the election of directors
shall elect, by a majority vote, a Board of Directors and transact such other
business as may properly come before the meeting.
Section 2.3. Special Meetings. Special meetings of stockholders, for
any purpose or purposes, may be called by a majority of the Board of Directors.
Any such request shall state the purpose or purposes of the proposed meeting. At
any special meeting of stockholders, only such business may be transacted as is
related to the purpose or purposes set forth in the notice of such meeting.
<PAGE> 2
Section 2.4. Notice of Meetings. Written notice of every meeting of
stockholders, stating the place, date and hour thereof and, in the case of a
special meeting of stockholders, the purpose or purposes thereof and the person
or persons by whom or at whose direction such meeting has been called and such
notice is being issued, shall be given not less than ten (10) nor more than
sixty (60) days before the date of the meeting, either personally or by mail, by
or at the direction of the Chairman of the Board, Secretary, or the persons
calling the meeting, to each stockholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be given when deposited in
the United States mail, postage prepaid, directed to the stockholder at his
address as it appears on the stock transfer books of the Corporation. Nothing
herein contained shall preclude the stockholders from waiving notice as provided
in Section 4.1 hereof.
Section 2.5. Quorum. The holders of a majority of the issued and
outstanding shares of stock of the Corporation entitled to vote, represented in
person or by proxy, shall be necessary to and shall constitute a quorum for the
transaction of business at any meeting of stockholders . If, however, such
quorum shall not be present or represented at any meeting of stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At any such adjourned meeting at which a quorum shall be present
or represented, any business may be transacted which might have been transacted
at the meeting as originally noticed. Notwithstanding the foregoing, if after
any such adjournment the Board of Directors shall fix a new record date for the
adjourned meeting, or if the adjournment is for more than thirty (30) days, a
notice of such adjourned meeting shall be given as provided in Section 2.4 of
these By-Laws, but such notice may be waived as provided in Section 4.1 hereof.
Section 2.6. Voting. At each meeting of stockholders, each stockholder
of record of shares of stock entitled to vote shall be entitled to vote in
person or by proxy, and each such holder shall be entitled to one vote for every
share standing in his name on the books of the Corporation as of the record date
fixed by the Board of Directors or prescribed by law and, if a quorum is
present, a majority of the shares of such stock present or represented at any
meeting of stockholders shall be the vote of the stockholders with respect to
any item of business, unless otherwise provided by any applicable provision of
law, by these By-Laws or by the Certificate of Incorporation.
Section 2.7. Proxies. Every stockholder entitled to vote at a meeting
or by consent without a meeting may authorize another person or persons to act
for him by proxy. Each proxy shall be in writing executed by the stockholder
giving the proxy or by his duly authorized attorney. No proxy shall be valid
after the expiration of three (3) years from its date, unless a longer period is
provided for in the proxy. Unless and until voted,
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every proxy shall be revocable at the pleasure of the person who executed it, or
his legal representatives or assigns except in those cases where an irrevocable
proxy permitted by statute has been given.
Section 2.8. Consents. Whenever a vote of stockholders at a meeting
thereof is required or permitted to be taken in connection with any corporate
action by any provision of applicable law, the Certificate of Incorporation or
these By-Laws, the meeting, prior notice thereof and vote of stockholders may be
dispensed with if the holders of shares having not less than the minimum number
of votes that would have been necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted
shall consent in writing to the taking of such action. Where corporate action is
taken in such matter by less than unanimous written consent, prompt notice of
the taking of such action shall be given thereto.
Section 2.9. Stock Records. The Secretary or agent having charge of the
stock transfer books shall make, at least ten (10) days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order and showing
the address of and the number and class and series, if any, of shares held by
each. Such list, for a period of ten (10) days prior to such meeting, shall be
kept at the principal place of business of the Corporation or at the office of
the transfer agent or registrar of the Corporation and such other places as
required by statute and shall be subject to the inspection by any stockholder at
any time during usual business hours. Such list shall also be produced and kept
open at the time and place of the meeting and shall be subject to the inspection
of any stockholder at any time during the meeting.
ARTICLE III
DIRECTORS
Section 3.1. Number. The number of directors of the Corporation which
shall constitute the entire Board of Directors shall initially be fixed by the
Incorporator and thereafter from time to time by a vote of a majority of the
entire Board and shall be not less than one nor more than five. The first Board
of Directors shall consist of two members.
Section 3.2. Resignation and Removal. Any director may resign at any
time upon notice of resignation to the Corporation. Any director may be removed
at any time by vote of the stockholders then entitled to vote for the election
of directors at a special meeting called for that purpose, either with or
without cause.
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Section 3.3. Newly Created Directorship and Vacancies. Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason whatsoever shall be
filled by vote of the Board. If the number of directors then in office is less
than a quorum, such newly created directorships and vacancies may be filled by a
vote of a majority of the directors then in office. Any director elected to fill
a vacancy shall be elected until the next meeting of stockholders at which the
election of directors is in the regular course of business, and until his
successor has been elected and qualified.
Section 3.4. Powers and Duties. Subject to the applicable provisions of
law, these By-Laws or the Certificate of Incorporation, but in furtherance and
not in limitation of any rights therein conferred, the Board of Directors shall
have the control and management of the business and affairs of the Corporation
and shall exercise all such powers of the Corporation and do all such lawful
acts and things as may be exercised by the Corporation.
Section 3.5. Place of Meetings. All meetings of the Board of Directors
may be held either within or without the State of Delaware.
Section 3.6. Annual Meetings. An annual meeting of each newly elected
Board of Directors shall be held immediately following the annual meeting of
stockholders, and no notice of such meeting to the newly elected directors shall
be necessary in order to legally constitute the meeting, provided a quorum shall
be present, or the newly elected directors may meet at such time and place as
shall be fixed by the written consent of all of such directors.
Section 3.7. Regular Meetings. Regular meetings of the Board of
Directors may be held upon such notice or without notice, and at such time and
at such place as shall from time to time be determined by the Board.
Section 3.8. Special Meetings. Special meetings of the Board of
Directors may be called by a majority of the Board of Directors. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the Board of Directors need be specified in the notice or waiver of notice of
such meeting.
Section 3.9. Notice of Meetings. Notice of each special meeting of the
Board (and of each regular meeting for which notice shall be required) shall be
given by the Secretary or an Assistant Secretary and shall state the place, date
and time of the meeting. Notice of each such meeting shall be given orally or
shall be mailed to each director at his residence or usual place of business. If
notice of less than three (3) days is given, it shall be oral, whether by
telephone or in person, or sent by special delivery mail or telegraph. If
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mailed, the notice shall be given when deposited in the United States mail,
postage prepaid. Notice of any adjourned meeting, including the place, date and
time of the new meeting, shall be given to all directors not present at the time
of the adjournment, as well as to the other directors unless the place, date and
time of the new meeting is announced at the adjourned meeting. Nothing herein
contained shall preclude the directors from waiving notice as provided in
Section 4.1 hereof.
Section 3.10. Quorum and Voting. At all meetings of the Board of
Directors a majority of the entire Board shall be necessary to and shall
constitute a quorum for the transaction of business at any meeting of directors,
unless otherwise provided by any applicable provision of law, by these By-Laws,
or by the Certificate of Incorporation. The act of a majority of the directors
present at the time of the vote, if a quorum is present at such time, shall be
the act of the Board of Directors, unless otherwise provided by an applicable
provision of law, by these By-Laws or by the Certificate of Incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, until a
quorum shall be present.
Section 3.11. Compensation. The Board of Directors, by the affirmative
vote of a majority of the directors then in office, and irrespective of any
personal interest of any of its members, shall have authority to establish
reasonable compensation of all directors for services to the Corporation as
directors, officers or otherwise.
Section 3.12. Books and Records. The directors may keep the books of
the Corporation, except such as are required by law to be kept within the state,
outside of the State of Delaware, at such place or places as they may from time
to time determine.
Section 3.13. Action Without a Meeting. Any action required or
permitted to be taken by the Board, or by a committee of the Board, may be taken
without a meeting if all members of the Board or the committee, as the case may
be, consent in writing to the adoption of a resolution authorizing the action.
Any such resolution and the written consents thereto by the members of the Board
or committee shall be filed with the minutes of the proceedings of the Board or
committee.
Section 3.14. Telephone Participation. Any one or more members of the
Board, or any committee of the Board, may participate in a meeting of the Board
or committee by means of a conference telephone call or similar communications
equipment allowing all persons participating in the meeting to hear each other
at the same time. Participation by such means shall constitute presence in
person at a meeting.
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Section 3.15. Committees of the Board. The Board, by resolution adopted
by a majority of the entire Board, may designate one or more committees, each
consisting of one or more directors. The Board may designate one or more
directors as alternate members of any such committee. Such alternate members may
replace any absent member or members at any meeting of such committee. Each
committee (including the members thereof) shall serve at the pleasure of the
Board and shall keep minutes of its meetings and report the same to the Board.
Except as otherwise provided by law, each such committee, to the extent provided
in the resolution establishing it, shall have and may exercise all the authority
of the Board with respect to all matters. However, no such committee shall have
power or authority to:
(a) amend the Certificate of Incorporation;
(b) adopt an agreement of merger or consolidation;
(c) recommend to the stockholders the sale, lease or
exchange of all or substantially all of the
Corporation's property and assets;
(d) recommend to the stockholders a dissolution of the
Corporation or a revocation of a dissolution;
(e) amend these By-Laws; and unless expressly so provided
by resolution of the Board, these By-Laws or by the
Certificate of Incorporation, no such committee shall
have power or authority to:
(1) declare a dividend;
(2) authorize the issuance of shares of the
Corporation of any class; or
(3) adopt a certificate of ownership and merger.
ARTICLE IV
WAIVER
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<PAGE> 7
Section 4.1. Waiver. Whenever a notice is required to be given by any
provision of law, by these By-Laws, or by the Certificate of Incorporation, a
waiver thereof in writing, whether before or after the time stated therein,
shall be deemed equivalent to such notice. In addition, any stockholder
attending a meeting of stockholders in person or by proxy without protesting
prior to the conclusion of the meeting the lack of notice thereof to him, and
any director attending a meeting of the Board of Directors without protesting
prior to the meeting or at its commencement such lack of notice, shall be
conclusively deemed to have waived notice of such meeting.
ARTICLE V
OFFICERS
Section 5.1. Executive Officers. The officers of the Corporation shall
be a Chief Executive Officer and/or President, a Treasurer and a Secretary. Any
person may hold two or more of such offices. The officers of the Corporation
shall be elected annually (and from time to time by the Board of Directors, as
vacancies occur), at the annual meeting of the Board of Directors following the
meeting of stockholders at which the Board of Directors was elected.
Section 5.2. Other Officers. The Board of Directors may appoint such
other officers and agents, including a Vice President, Assistant Vice
Presidents, Secretaries, Assistant Secretaries and Assistant Treasurers, as it
shall at any time or from time to time deem necessary or advisable.
Section 5.3. Authorities and Duties. All officers, as between
themselves and the Corporation, shall have such authority and perform such
duties in the management of business and affairs of the Corporation as may be
provided in these By-Laws, or, to the extent not so provided, as may be
prescribed by the Board of Directors.
Section 5.4. Tenure and Removal. The officers of the Corporation shall
be elected or appointed to hold office until their respective successors are
elected or appointed. All officers shall hold office at the pleasure of the
Board of Directors, and any officer elected or appointed by the Board of
Directors may be removed at any time by the Board of Directors for cause or
without cause at any regular or special meeting.
Section 5.5. Vacancies. Any vacancy occurring in any office of the
Corporation, whether because of death, resignation or removal, with or without
cause, or any other reason, shall be filled by the Board of Directors.
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<PAGE> 8
Section 5.6. Compensation. The salaries and other compensation of all
officers and agents of the Corporation shall be fixed by or in the manner
prescribed by the Board of Directors.
Section 5.7. Chief Executive Officer. The Chief Executive Officer shall
have general supervision of the business and affairs of the Corporation and
shall have such powers and duties as the Board of Directors may from time to
time prescribe. In the absence of the Chairman of the Board, the Chief Executive
Officer shall preside at all meetings of the stockholders and the directors.
Section 5.8. President. The President shall have general charge of the
business and affairs of the Corporation subject to the control of the Board of
Directors and the Chief Executive Officer and in the absence of the Chairman of
the Board and the Chief Executive Officer, the President shall preside at all
meetings of the stockholders and the directors. The President shall perform such
other duties as are properly required of him by the Board of Directors.
Section 5.9. Vice President. Each Vice President, if any, shall perform
such duties as may from time to time be assigned to him by the Board of
Directors.
Section 5.10. Secretary. The Secretary shall attend all meetings of the
stockholders and all meetings of the Board of Directors and shall record all
proceedings taken at such meetings in a book to be kept for that purpose; he
shall see that all notices of meetings of stockholders and meetings of the Board
of Directors are duly given in accordance with the provisions of these By-Laws
or as required by law; he shall be the custodian of the records and of the
corporate seal or seals of the Corporation; he shall have authority to affix the
corporate seal or seals to all documents, the execution of which, on behalf of
the Corporation, under its seal, is duly authorized, and when so affixed it may
be attested by his signature; and in general, he shall perform all duties
incident to the office of the Secretary of a corporation, and such other duties
as the Board of Directors may from time to time prescribe.
Section 5.11. Treasurer. The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the
Corporation and shall deposit, or cause to be deposited, in the name and to the
credit of the Corporation, all moneys and valuable effects in such banks, trust
companies, or other depositories as shall from time to time be selected by the
Board of Directors. He shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation; he shall render to the
Chief Executive Officer and the President and to each member of the Board of
Directors, whenever requested, an account of all of his transactions as
Treasurer and of the financial condition of the Corporation; and in general, he
shall perform all of the duties incident to
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<PAGE> 9
the office of the Treasurer of a corporation, and such other duties as the Board
of Directors may from time to time prescribe.
Section 5.12. Other Officers. The Board of Directors may also elect or
may delegate to the Chief Executive Officer or the President the power to
appoint such other officers as it may at any time or from time to time deem
advisable, and any officers so elected or appointed shall have such authority
and perform such duties as the Board of Directors, the Chief Executive Officer
or the President, if he shall have appointed them, may from time to time
prescribe.
ARTICLE VI
PROVISIONS RELATING TO STOCK CERTIFICATES AND STOCKHOLDERS
Section 6.1. Form and Signature. The shares of the Corporation shall be
represented by a certificate signed by the President or any Vice President and
by the Secretary or any Assistant Secretary or the Treasurer or any Assistant
Treasurer, and shall bear the seal of the Corporation or a facsimile thereof.
Each certificate representing shares shall state upon its face (a) that the
Corporation is formed under the laws of the State of Delaware, (b) the name of
the person or persons to whom it is issued, (c) the number of shares which such
certificate represents and (d) the par value, if any, of each share represented
by such certificate.
Section 6.2. Registered Stockholders . The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares of stock to receive dividends or other distributions, and to
vote as such owner, and to hold liable for calls and assessments a person
registered on its books as the owner of stock, and shall not be bound to
recognize any equitable or legal claim to or interest in such shares on the part
of any other person.
Section 6.3. Transfer of Stock. Upon surrender to the Corporation or
the appropriate transfer agent, if any, of the Corporation, of a certificate
representing shares of stock duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, and, in the event that the
certificate refers to any agreement restricting transfer of the shares which it
represents, proper evidence of compliance with such agreement, a new certificate
shall be issued to the person entitled thereto, and the old certificate canceled
and the transaction recorded upon the books of the Corporation.
Section 6.4. Lost Certificates, etc. The Corporation may issue a new
certificate for shares in place of any certificate theretofore issued by it,
alleged to have been lost, mutilated, stolen or destroyed, and the Board may
require the owner of such lost,
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<PAGE> 10
mutilated, stolen or destroyed certificate, or his legal representatives, to
make an affidavit of that fact and/or to give the Corporation a bond in such sum
as it may direct as indemnity against any claim that may be made against the
Corporation on account of the alleged loss, mutilation, theft or destruction of
any such certificate or the issuance of any such new certificate.
Section 6.5. Record Date. For the purpose of determining the
stockholders entitled to notice of, or to vote at, any meeting of stockholders
or or any adjournment thereof, or to express consent to any corporate action
without a meeting, or for the purpose of determining stockholders entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock, or for the purpose of any other lawful action, the Board
may fix, in advance, a record date. Such date shall not be more than sixty (60)
nor less than ten (10) days before the date of any such meeting, nor more than
sixty (60) days prior to any other action.
Section 6.6. Regulations. Except as otherwise provided by law, the
Board may make such additional rules and regulations, not inconsistent with
these By-Laws, as it may deem expedient, concerning the issue, transfer and
registration of certificates for the securities of the Corporation. The Board
may appoint, or authorize any officer or officers to appoint, one or more
transfer agents and one or more registrars and may require all certificates for
shares of capital stock to bear the signature or signatures of any of them.
ARTICLE VII
GENERAL PROVISIONS
Section 7.1. Dividends and Distributions. Dividends and other
distributions upon or with respect to outstanding shares of stock of the
Corporation may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, bonds, property, or in stock of the
Corporation. The Board shall have full power and discretion, subject to the
provisions of the Certificate of Incorporation or the terms of any other
corporate document or instrument to determine what, if any, dividends or
distributions shall be declared and paid or made.
Section 7.2. Checks, etc. All checks or demands for money and notes or
other instruments evidencing indebtedness or obligations of the Corporation
shall be signed by such officer or officers or other person or persons as may
from time to time be designated by the Board of Directors.
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<PAGE> 11
Section 7.3. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its incorporation and the words "Corporate
Seal Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
Section 7.4. Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors.
Section 7.5. General and Special Bank Accounts. The Board may authorize
from time to time the opening and keeping of general and special bank accounts
with such banks, trust companies or other depositories as the Board may
designate or as may be designated by any officer or officers of the Corporation
to whom such power of designation may be delegated by the Board from time to
time. The Board may make such special rules and regulations with respect to such
bank accounts, not inconsistent with the provisions of these By-Laws, as it may
deem expedient.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER PERSONS
Section 8.1. Indemnification by Corporation. To the extent permitted by
law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment) the Corporation shall indemnify
any person against any and all judgments, fines, and amounts paid in settling or
otherwise disposing of actions or threatened actions, and expenses in connection
therewith, incurred by reason of the fact that he, his testator or intestate is
or was a director or officer of the Corporation or of any other corporation of
any type or kind, domestic or foreign, which he served in any capacity at the
request of the Corporation. To the extent permitted by law, expenses so incurred
by any such person in defending a civil or criminal action or proceeding shall
at his request be paid by the Corporation in advance of the final disposition of
such action or proceeding.
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<PAGE> 12
ARTICLE IX
ADOPTION AND AMENDMENTS
Section 9.1. Power to Amend. These By-Laws may be amended or repealed
and any new By-Laws may be adopted by the Board of Directors; provided that
these ByLaws and any other By-Laws amended or adopted by the Board of Directors
may be amended, may be reinstated, and new By-Laws may be adopted, by the
stockholders of the Corporation entitled to vote at the time for the election of
directors.
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<PAGE> 1
CERTIFICATE OF INCORPORATION
OF
ASCI HOLDINGS ASIA (DE), INC.
The undersigned, for the purposes of forming a corporation
pursuant to the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY as follows:
FIRST: The name of the Corporation is: ASCI Holdings Asia
(DE), Inc.
SECOND: The registered office of the Corporation is to be
located at 1013 Centre Road, in the City of Wilmington, County of New Castle,
State of Delaware, 19805. The name of its registered agent at that address is
Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware.
FOURTH: The aggregate number of shares of stock which the
Corporation shall have authority to issue is one thousand shares, par value $.01
per share, all of which shall be designated "Common Stock."
FIFTH: The name and mailing address of the Incorporator is:
Jonathan P. Freedman, Esq.
c/o Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
SIXTH: In furtherance and not in limitation of the powers
conferred by statute, the board of directors is expressly authorized:
(a) to adopt, amend or repeal the By-Laws of the Corporation
in such manner and subject to such limitations, if any, as shall be set
forth in the By-Laws;
(b) to allot and authorize the issuance of the authorized but
unissued shares of the Corporation, including the declaration of
dividends payable in shares of any class to stockholders of any class;
and
(c) to exercise all of the powers of the Corporation, insofar
as the same may lawfully be vested by this certificate in the board of
directors.
<PAGE> 2
SEVENTH: No director shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of a fiduciary
duty as a director; provided, however, that to the extent required by the
provisions of Section 102(b)(7) of the General Corporation Law of the State of
Delaware or any successor statute, or any other laws of the State of Delaware,
this provision shall not eliminate or limit the liability of a director (i) for
any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the General Corporation Law of the State of Delaware or (iv) for any transaction
from which the director derived an improper personal benefit. If the General
Corporation Law of the State of Delaware hereafter is amended to authorize the
further elimination or limitation of the liability of directors, then the
liability of a director of the Corporation, in addition to the limitation on
personal liability provided herein, shall be limited to the fullest extent
permitted by the amended General Corporation Law of the State of Delaware. Any
repeal or modification of this paragraph SEVENTH by the stockholders of the
Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
as of the time of such repeal or modification.
IN WITNESS WHEREOF, I have hereunto set my hand this 30th day
of September, 1996.
/s/ Jonathan P. Freedman
-------------------------------------
Jonathan P. Freedman
Sole Incorporator
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<PAGE> 1
BY-LAWS
OF
ASCI HOLDINGS ASIA (DE), INC.
ARTICLE I
OFFICES
Section 1.1. Registered Office. The registered statutory office of the
Corporation within the State of Delaware shall be located at the principal place
of business in said State of such corporation or individual acting as the
Corporation's registered agent in the State of Delaware.
Section 1.2. Other Offices. The Corporation may also have offices and
places of business at such other places both within and without the State of
Delaware as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.1. Place of Meetings. All meetings of stockholders shall be
held at the principal office of the Corporation, or at such other place within
or without the State of Delaware as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section 2.2. Annual Meetings. The annual meeting of stockholders for
the election of directors shall be held at such time on such day, other than a
legal holiday, as the Board of Directors in each such year determines. At the
annual meeting, the stockholders entitled to vote for the election of directors
shall elect, by a majority vote, a Board of Directors and transact such other
business as may properly come before the meeting.
Section 2.3. Special Meetings. Special meetings of stockholders, for
any purpose or purposes, may be called by a majority of the Board of Directors.
Any such request shall state the purpose or purposes of the proposed meeting. At
any special meeting of stockholders, only such business may be transacted as is
related to the purpose or purposes set forth in the notice of such meeting.
Section 2.4. Notice of Meetings. Written notice of every meeting of
stockholders, stating the place, date and hour thereof and, in the case of a
special meeting of stockholders, the purpose or purposes thereof and the person
or persons by whom or at whose direction such meeting has been called and such
notice is being issued, shall be given not less than ten (10) nor more than
<PAGE> 2
sixty (60) days before the date of the meeting, either personally or by mail, by
or at the direction of the Chairman of the Board, Secretary, or the persons
calling the meeting, to each stockholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be given when deposited in
the United States mail, postage prepaid, directed to the stockholder at his
address as it appears on the stock transfer books of the Corporation. Nothing
herein contained shall preclude the stockholders from waiving notice as provided
in Section 4.1 hereof.
Section 2.5. Quorum. The holders of a majority of the issued and
outstanding shares of stock of the Corporation entitled to vote, represented in
person or by proxy, shall be necessary to and shall constitute a quorum for the
transaction of business at any meeting of stockholders . If, however, such
quorum shall not be present or represented at any meeting of stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At any such adjourned meeting at which a quorum shall be present
or represented, any business may be transacted which might have been transacted
at the meeting as originally noticed. Notwithstanding the foregoing, if after
any such adjournment the Board of Directors shall fix a new record date for the
adjourned meeting, or if the adjournment is for more than thirty (30) days, a
notice of such adjourned meeting shall be given as provided in Section 2.4 of
these By-Laws, but such notice may be waived as provided in Section 4.1 hereof.
Section 2.6. Voting. At each meeting of stockholders, each stockholder
of record of shares of stock entitled to vote shall be entitled to vote in
person or by proxy, and each such holder shall be entitled to one vote for every
share standing in his name on the books of the Corporation as of the record date
fixed by the Board of Directors or prescribed by law and, if a quorum is
present, a majority of the shares of such stock present or represented at any
meeting of stockholders shall be the vote of the stockholders with respect to
any item of business, unless otherwise provided by any applicable provision of
law, by these By-Laws or by the Certificate of Incorporation.
Section 2.7. Proxies. Every stockholder entitled to vote at a meeting
or by consent without a meeting may authorize another person or persons to act
for him by proxy. Each proxy shall be in writing executed by the stockholder
giving the proxy or by his duly authorized attorney. No proxy shall be valid
after the expiration of three (3) years from its date, unless a longer period is
provided for in the proxy. Unless and until voted, every proxy shall be
revocable at the pleasure of the person who executed it, or his legal
representatives or assigns except in those cases where an irrevocable proxy
permitted by statute has been given.
Section 2.8. Consents. Whenever a vote of stockholders at a meeting
thereof is required or permitted to be taken in connection with any corporate
action by any provision of applicable law, the Certificate of Incorporation or
these By-Laws, the meeting, prior notice thereof and vote of stockholders may be
dispensed with if the holders of shares having not less than the minimum number
of votes that would have been necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted
shall consent in writing to the
<PAGE> 3
taking of such action. Where corporate action is taken in such matter by less
than unanimous written consent, prompt notice of the taking of such action shall
be given thereto.
Section 2.9. Stock Records. The Secretary or agent having charge of the
stock transfer books shall make, at least ten (10) days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order and showing
the address of and the number and class and series, if any, of shares held by
each. Such list, for a period of ten (10) days prior to such meeting, shall be
kept at the principal place of business of the Corporation or at the office of
the transfer agent or registrar of the Corporation and such other places as
required by statute and shall be subject to the inspection by any stockholder at
any time during usual business hours. Such list shall also be produced and kept
open at the time and place of the meeting and shall be subject to the inspection
of any stockholder at any time during the meeting.
ARTICLE III
DIRECTORS
Section 3.1. Number. The number of directors of the Corporation which
shall constitute the entire Board of Directors shall initially be fixed by the
Incorporator and thereafter from time to time by a vote of a majority of the
entire Board and shall be not less than one nor more than five. The first Board
of Directors shall consist of two members.
Section 3.2. Resignation and Removal. Any director may resign at any
time upon notice of resignation to the Corporation. Any director may be removed
at any time by vote of the stockholders then entitled to vote for the election
of directors at a special meeting called for that purpose, either with or
without cause.
Section 3.3. Newly Created Directorship and Vacancies. Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason whatsoever shall be
filled by vote of the Board. If the number of directors then in office is less
than a quorum, such newly created directorships and vacancies may be filled by a
vote of a majority of the directors then in office. Any director elected to fill
a vacancy shall be elected until the next meeting of stockholders at which the
election of directors is in the regular course of business, and until his
successor has been elected and qualified.
Section 3.4. Powers and Duties. Subject to the applicable provisions of
law, these By-Laws or the Certificate of Incorporation, but in furtherance and
not in limitation of any rights therein conferred, the Board of Directors shall
have the control and management of the business and affairs of the Corporation
and shall exercise all such powers of the Corporation and do all such lawful
acts and things as may be exercised by the Corporation.
Section 3.5. Place of Meetings. All meetings of the Board of Directors
may be held either within or without the State of Delaware.
<PAGE> 4
Section 3.6. Annual Meetings. An annual meeting of each newly elected
Board of Directors shall be held immediately following the annual meeting of
stockholders, and no notice of such meeting to the newly elected directors shall
be necessary in order to legally constitute the meeting, provided a quorum shall
be present, or the newly elected directors may meet at such time and place as
shall be fixed by the written consent of all of such directors.
Section 3.7. Regular Meetings. Regular meetings of the Board of
Directors may be held upon such notice or without notice, and at such time and
at such place as shall from time to time be determined by the Board.
Section 3.8. Special Meetings. Special meetings of the Board of
Directors may be called by a majority of the Board of Directors. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the Board of Directors need be specified in the notice or waiver of notice of
such meeting.
Section 3.9. Notice of Meetings. Notice of each special meeting of the
Board (and of each regular meeting for which notice shall be required) shall be
given by the Secretary or an Assistant Secretary and shall state the place, date
and time of the meeting. Notice of each such meeting shall be given orally or
shall be mailed to each director at his residence or usual place of business. If
notice of less than three (3) days is given, it shall be oral, whether by
telephone or in person, or sent by special delivery mail or telegraph. If
mailed, the notice shall be given when deposited in the United States mail,
postage prepaid. Notice of any adjourned meeting, including the place, date and
time of the new meeting, shall be given to all directors not present at the time
of the adjournment, as well as to the other directors unless the place, date and
time of the new meeting is announced at the adjourned meeting. Nothing herein
contained shall preclude the directors from waiving notice as provided in
Section 4.1 hereof.
Section 3.10. Quorum and Voting. At all meetings of the Board of
Directors a majority of the entire Board shall be necessary to and shall
constitute a quorum for the transaction of business at any meeting of directors,
unless otherwise provided by any applicable provision of law, by these By-Laws,
or by the Certificate of Incorporation. The act of a majority of the directors
present at the time of the vote, if a quorum is present at such time, shall be
the act of the Board of Directors, unless otherwise provided by an applicable
provision of law, by these By-Laws or by the Certificate of Incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, until a
quorum shall be present.
Section 3.11. Compensation. The Board of Directors, by the affirmative
vote of a majority of the directors then in office, and irrespective of any
personal interest of any of its members, shall have authority to establish
reasonable compensation of all directors for services to the Corporation as
directors, officers or otherwise.
Section 3.12. Books and Records. The directors may keep the books of
the Corporation, except such as are required by law to be kept within the state,
outside of the State of Delaware, at
<PAGE> 5
such place or places as they may from time to time determine.
Section 3.13. Action Without a Meeting. Any action required or
permitted to be taken by the Board, or by a committee of the Board, may be taken
without a meeting if all members of the Board or the committee, as the case may
be, consent in writing to the adoption of a resolution authorizing the action.
Any such resolution and the written consents thereto by the members of the Board
or committee shall be filed with the minutes of the proceedings of the Board or
committee.
Section 3.14. Telephone Participation. Any one or more members of the
Board, or any committee of the Board, may participate in a meeting of the Board
or committee by means of a conference telephone call or similar communications
equipment allowing all persons participating in the meeting to hear each other
at the same time. Participation by such means shall constitute presence in
person at a meeting.
Section 3.15. Committees of the Board. The Board, by resolution adopted
by a majority of the entire Board, may designate one or more committees, each
consisting of one or more directors. The Board may designate one or more
directors as alternate members of any such committee. Such alternate members may
replace any absent member or members at any meeting of such committee. Each
committee (including the members thereof) shall serve at the pleasure of the
Board and shall keep minutes of its meetings and report the same to the Board.
Except as otherwise provided by law, each such committee, to the extent provided
in the resolution establishing it, shall have and may exercise all the authority
of the Board with respect to all matters. However, no such committee shall have
power or authority to:
(a) amend the Certificate of Incorporation;
(b) adopt an agreement of merger or consolidation;
(c) recommend to the stockholders the sale, lease or
exchange of all or substantially all of the
Corporation's property and assets;
(d) recommend to the stockholders a dissolution of the
Corporation or a revocation of a dissolution;
(e) amend these By-Laws; and unless expressly so provided
by resolution of the Board, these By-Laws or by the
Certificate of Incorporation, no such committee shall
have power or authority to:
(1) declare a dividend;
(2) authorize the issuance of shares of the
Corporation of any class; or
(3) adopt a certificate of ownership and merger.
<PAGE> 6
ARTICLE IV
WAIVER
Section 4.1. Waiver. Whenever a notice is required to be given by any
provision of law, by these By-Laws, or by the Certificate of Incorporation, a
waiver thereof in writing, whether before or after the time stated therein,
shall be deemed equivalent to such notice. In addition, any stockholder
attending a meeting of stockholders in person or by proxy without protesting
prior to the conclusion of the meeting the lack of notice thereof to him, and
any director attending a meeting of the Board of Directors without protesting
prior to the meeting or at its commencement such lack of notice, shall be
conclusively deemed to have waived notice of such meeting.
ARTICLE V
OFFICERS
Section 5.1. Executive Officers. The officers of the Corporation shall
be a Chief Executive Officer and/or President, a Treasurer and a Secretary. Any
person may hold two or more of such offices. The officers of the Corporation
shall be elected annually (and from time to time by the Board of Directors, as
vacancies occur), at the annual meeting of the Board of Directors following the
meeting of stockholders at which the Board of Directors was elected.
Section 5.2. Other Officers. The Board of Directors may appoint such
other officers and agents, including a Vice President, Assistant Vice
Presidents, Secretaries, Assistant Secretaries and Assistant Treasurers, as it
shall at any time or from time to time deem necessary or advisable.
Section 5.3. Authorities and Duties. All officers, as between
themselves and the Corporation, shall have such authority and perform such
duties in the management of business and affairs of the Corporation as may be
provided in these By-Laws, or, to the extent not so provided, as may be
prescribed by the Board of Directors.
Section 5.4. Tenure and Removal. The officers of the Corporation shall
be elected or appointed to hold office until their respective successors are
elected or appointed. All officers shall hold office at the pleasure of the
Board of Directors, and any officer elected or appointed by the Board of
Directors may be removed at any time by the Board of Directors for cause or
without cause at any regular or special meeting.
Section 5.5. Vacancies. Any vacancy occurring in any office of the
Corporation, whether because of death, resignation or removal, with or without
cause, or any other reason, shall be filled by the Board of Directors.
<PAGE> 7
Section 5.6. Compensation. The salaries and other compensation of all
officers and agents of the Corporation shall be fixed by or in the manner
prescribed by the Board of Directors.
Section 5.7. Chief Executive Officer. The Chief Executive Officer shall
have general supervision of the business and affairs of the Corporation and
shall have such powers and duties as the Board of Directors may from time to
time prescribe. In the absence of the Chairman of the Board, the Chief Executive
Officer shall preside at all meetings of the stockholders and the directors.
Section 5.8. President. The President shall have general charge of the
business and affairs of the Corporation subject to the control of the Board of
Directors and the Chief Executive Officer and in the absence of the Chairman of
the Board and the Chief Executive Officer, the President shall preside at all
meetings of the stockholders and the directors. The President shall perform such
other duties as are properly required of him by the Board of Directors.
Section 5.9. Vice President. Each Vice President, if any, shall perform
such duties as may from time to time be assigned to him by the Board of
Directors.
Section 5.10. Secretary. The Secretary shall attend all meetings of the
stockholders and all meetings of the Board of Directors and shall record all
proceedings taken at such meetings in a book to be kept for that purpose; he
shall see that all notices of meetings of stockholders and meetings of the Board
of Directors are duly given in accordance with the provisions of these By-Laws
or as required by law; he shall be the custodian of the records and of the
corporate seal or seals of the Corporation; he shall have authority to affix the
corporate seal or seals to all documents, the execution of which, on behalf of
the Corporation, under its seal, is duly authorized, and when so affixed it may
be attested by his signature; and in general, he shall perform all duties
incident to the office of the Secretary of a corporation, and such other duties
as the Board of Directors may from time to time prescribe.
Section 5.11. Treasurer. The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the
Corporation and shall deposit, or cause to be deposited, in the name and to the
credit of the Corporation, all moneys and valuable effects in such banks, trust
companies, or other depositories as shall from time to time be selected by the
Board of Directors. He shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation; he shall render to the
Chief Executive Officer and the President and to each member of the Board of
Directors, whenever requested, an account of all of his transactions as
Treasurer and of the financial condition of the Corporation; and in general, he
shall perform all of the duties incident to the office of the Treasurer of a
corporation, and such other duties as the Board of Directors may from time to
time prescribe.
Section 5.12. Other Officers. The Board of Directors may also elect or
may delegate to the Chief Executive Officer or the President the power to
appoint such other officers as it may at any time or from time to time deem
advisable, and any officers so elected or appointed shall have
<PAGE> 8
such authority and perform such duties as the Board of Directors, the Chief
Executive Officer or the President, if he shall have appointed them, may from
time to time prescribe.
ARTICLE VI
PROVISIONS RELATING TO STOCK CERTIFICATES AND STOCKHOLDERS
Section 6.1. Form and Signature. The shares of the Corporation shall be
represented by a certificate signed by the President or any Vice President and
by the Secretary or any Assistant Secretary or the Treasurer or any Assistant
Treasurer, and shall bear the seal of the Corporation or a facsimile thereof.
Each certificate representing shares shall state upon its face (a) that the
Corporation is formed under the laws of the State of Delaware, (b) the name of
the person or persons to whom it is issued, (c) the number of shares which such
certificate represents and (d) the par value, if any, of each share represented
by such certificate.
Section 6.2. Registered Stockholders . The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares of stock to receive dividends or other distributions, and to
vote as such owner, and to hold liable for calls and assessments a person
registered on its books as the owner of stock, and shall not be bound to
recognize any equitable or legal claim to or interest in such shares on the part
of any other person.
Section 6.3. Transfer of Stock. Upon surrender to the Corporation or
the appropriate transfer agent, if any, of the Corporation, of a certificate
representing shares of stock duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, and, in the event that the
certificate refers to any agreement restricting transfer of the shares which it
represents, proper evidence of compliance with such agreement, a new certificate
shall be issued to the person entitled thereto, and the old certificate canceled
and the transaction recorded upon the books of the Corporation.
Section 6.4. Lost Certificates, etc. The Corporation may issue a new
certificate for shares in place of any certificate theretofore issued by it,
alleged to have been lost, mutilated, stolen or destroyed, and the Board may
require the owner of such lost, mutilated, stolen or destroyed certificate, or
his legal representatives, to make an affidavit of that fact and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation on account of the alleged loss,
mutilation, theft or destruction of any such certificate or the issuance of any
such new certificate.
Section 6.5. Record Date. For the purpose of determining the
stockholders entitled to notice of, or to vote at, any meeting of stockholders
or or any adjournment thereof, or to express consent to any corporate action
without a meeting, or for the purpose of determining stockholders entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock, or for the purpose of any other lawful action, the Board
may fix, in advance, a record date. Such
<PAGE> 9
date shall not be more than sixty (60) nor less than ten (10) days before the
date of any such meeting, nor more than sixty (60) days prior to any other
action.
Section 6.6. Regulations. Except as otherwise provided by law, the
Board may make such additional rules and regulations, not inconsistent with
these By-Laws, as it may deem expedient, concerning the issue, transfer and
registration of certificates for the securities of the Corporation. The Board
may appoint, or authorize any officer or officers to appoint, one or more
transfer agents and one or more registrars and may require all certificates for
shares of capital stock to bear the signature or signatures of any of them.
ARTICLE VII
GENERAL PROVISIONS
Section 7.1. Dividends and Distributions. Dividends and other
distributions upon or with respect to outstanding shares of stock of the
Corporation may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, bonds, property, or in stock of the
Corporation. The Board shall have full power and discretion, subject to the
provisions of the Certificate of Incorporation or the terms of any other
corporate document or instrument to determine what, if any, dividends or
distributions shall be declared and paid or made.
Section 7.2. Checks, etc. All checks or demands for money and notes or
other instruments evidencing indebtedness or obligations of the Corporation
shall be signed by such officer or officers or other person or persons as may
from time to time be designated by the Board of Directors.
Section 7.3. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its incorporation and the words "Corporate
Seal Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
Section 7.4. Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors.
Section 7.5. General and Special Bank Accounts. The Board may authorize
from time to time the opening and keeping of general and special bank accounts
with such banks, trust companies or other depositories as the Board may
designate or as may be designated by any officer or officers of the Corporation
to whom such power of designation may be delegated by the Board from time to
time. The Board may make such special rules and regulations with respect to such
bank accounts, not inconsistent with the provisions of these By-Laws, as it may
deem expedient.
<PAGE> 10
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER PERSONS
Section 8.1. Indemnification by Corporation. To the extent permitted by
law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment) the Corporation shall indemnify
any person against any and all judgments, fines, and amounts paid in settling or
otherwise disposing of actions or threatened actions, and expenses in connection
therewith, incurred by reason of the fact that he, his testator or intestate is
or was a director or officer of the Corporation or of any other corporation of
any type or kind, domestic or foreign, which he served in any capacity at the
request of the Corporation. To the extent permitted by law, expenses so incurred
by any such person in defending a civil or criminal action or proceeding shall
at his request be paid by the Corporation in advance of the final disposition of
such action or proceeding.
ARTICLE IX
ADOPTION AND AMENDMENTS
Section 9.1. Power to Amend. These By-Laws may be amended or repealed
and any new By-Laws may be adopted by the Board of Directors; provided that
these By-Laws and any other By-Laws amended or adopted by the Board of Directors
may be amended, may be reinstated, and new By-Laws may be adopted, by the
stockholders of the Corporation entitled to vote at the time for the election of
directors.
<PAGE> 1
CERTIFICATE OF INCORPORATION
OF
RAZ ACQUISITION CORPORATION
The undersigned, for the purposes of forming a corporation pursuant to
the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY as
follow:
FIRST: The name of the Corporation is: RAZ Acquisition Corporation.
SECOND: The registered office of the Corporation is to be located at 32
Loockerman Square, Suite L-100, in the City of Dover, County of Kent, State of
Delaware, 19901. The name of its registered agent at that address is The
Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
FOURTH: The aggregate number of shares of stock which the Corporation
shall have authority to issue is Two Thousand Five Hundred (2,500), par value
$.01 per share, all of which shall be designated "Common Stock."
FIFTH: The name and mailing address of the Incorporator is:
Nancy A. Naroian
c/o Shereff, Friedman, Hoffman & Goodman
919 Third Avenue
New York, New York 10022
SIXTH: In furtherance and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized:
(a) to adopt, amend or repeal the By-Laws of the Corporation
in such manner and subject to such limitations, if any, as shall be set forth in
the By-Laws;
(b) to allot and authorize the issuance of the authorized but
unissued shares of the Corporation, including the declaration of dividends
payable in shares of any class to stockholders of any class; and
(c) to exercise all of the powers of the Corporation, insofar
as the same may lawfully be vested by this certificate in the board of
directors.
<PAGE> 2
SEVENTH: No director shall be personally liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director; provided, however, that to the extent required by the provisions of
Section 102 (b) (7) of the General Corporation Law of the State of Delaware or
any successor statute, or any other laws of the state of Delaware, this
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the General
Corporation Law of the state of Delaware or (iv) for any transaction from which
the director derived an improper personal benefit. If the General Corporation
Law of the State of Delaware hereafter is amended to authorize the further
elimination or limitation of the liability of directors, then the liability of a
director of the Corporation, in addition to the limitation on personal liability
provided herein, shall be limited to the fullest extent permitted by the amended
General Corporation Law of the State of Delaware. Any repeal or modification of
this paragraph SEVENTH by the stockholders of the Corporation shall be
prospective only, and shall not adversely affect any limitation on the personal
liability of a director of the Corporation existing as of the time of such
repeal or modification.
IN WITNESS WHEREOF, I have hereunto set my hand this 12th day of March,
1993.
/s/ Nancy A. Naroian
----------------------------------
Nancy A. Naroian
Sole Incorporator
2
<PAGE> 1
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
VALENTEC INTERNATIONAL CORPORATION
(Pursuant Section 242)
Valentec International Corporation, a corporation organized and
existing under the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY as follows:
1. The name of the corporation is Valentec International Corporation (the
"Corporation"). The Certificate of Incorporation of the Corporation was filed
with the Secretary of the State of Delaware on March 12, 1993 and a Certificate
of Merger, changing the name of the Corporation from "RAZ Acquisition
Corporation" to "Valentec International Corporation" was filed on April 27,
1993.
2. The amendment of the Certificate of Incorporation herein certified has been
duly adopted by the Corporation's Board of Directors and stockholders entitled
to vote in accordance with the provisions of Sections 141 and 228 of the General
Corporation Law of the State of Delaware.
3. The Certificate of Incorporation of the Corporation is hereby amended by
increasing the number of shares the Corporation is authorized to issue from
2,500 shares, par value $.01 per share, to three million (3,000,000) shares, par
value $.01 per share, all of which shall be designated Common Stock. To effect
such Amendment, Article Fourth thereof is amended to read in entirety as
follows:
FOURTH: The aggregate number of shares of stock which the Corporation
shall have the authority to issue is three million (3,000,000), par
value $.01 per share, all of which shall be designated "Common Stock."
4. This amendment to the Certificate of Incorporation shall be effective on and
as of the date of filing this Certificate of Amendment with the office of the
Secretary of State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment of the Certificate of Incorporation to be executed in its name and by
its President and Chief Executive Officer this 29th day of March, 1996 and that
statements contained herein are affirmed as true under penalties of perjury.
Valentec International Corporation
By: /s/ Robert A. Zummo
-------------------------------------
Name: Robert A. Zummo
Title: President and Chief Executive Officer
<PAGE> 1
BY-LAWS
OF
RAZ ACQUISITION CORPORATION
ARTICLE I
OFFICES
Section 1.1. Registered Office. The registered office of the
Corporation within the State of Delaware shall be located at the principal place
of business in said State of such corporation or individual acting as the
Corporation's registered agent in Delaware.
Section 1.2. Other Offices. The Corporation may also have offices and
places of business at such other places both within and without the State of
Delaware as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.1. Place of Meetings. All meetings of stockholders shall be
held at the principal office of the Corporation, or at such other place within
or without the State of Delaware as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section 2.2. Annual Meetings. The annual meeting of stockholders for
the election of directors shall be held at such time on such day, other than a
legal holiday, as the Board of Directors
<PAGE> 2
in each such year determines. At the annual meeting, the stockholders entitled
to vote for the election of directors shall elect, by a plurality vote, a Board
of Directors and transact such other business as may properly come before the
meeting.
Section 2.3. Special Meetings. Special meetings of stockholders, for
any purpose or purposes, may be called by a majority of the Board of Directors.
Any such request shall state the purpose or purposes of the proposed meeting. At
any special meeting of stockholders, only such business may be transacted as is
related to the purpose or purposes set forth in the notice of such meeting.
Section 2.4. Notice of Meetings. Written notice of every meeting of
stockholders, stating the place, date and hour thereof and, in the case of a
special meeting of stockholders, the purpose or purposes thereof and the person
or persons by whom or at whose direction such meeting has been called and such
notice is being issued, shall be given not less than ten (10) nor more than
sixty (60) days before the date of the meeting, either personally or by mail, by
or at the direction of the Chairman of the Board, Secretary, or the persons
calling the meeting, to each stockholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be given when deposited in
the United States mail, postage prepaid, directed to the stockholder at his
address as it appears on the stock transfer books of the Corporation. Nothing
herein contained shall preclude the stockholders from waiving notice as provided
in Section 4.1 hereof.
Section 2.5. Quorum. The holders of a majority of the issued and
outstanding shares of
<PAGE> 3
stock of the Corporation entitled to vote, represented in person or by proxy,
shall be necessary to and shall constitute a quorum for the transaction of
business at any meeting of stockholders. If, however, such quorum shall not be
present or represented at any meeting of stockholders, the stockholders entitled
to vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At any such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. Notwithstanding the foregoing, if after any such adjournment
the Board of Directors shall fix a new record date for the adjourned meeting, or
if the adjournment is for more than thirty (30) days, a notice of such adjourned
meeting shall be given as provided in Section 2.4 of these By-Laws, but such
notice may be waived as provided in Section 4.1 hereof.
Section 2.6. Voting. At each meeting of stockholders, each holder of
record of shares of stock entitled to vote shall be entitled to vote in person
or by proxy, and each such holder shall be entitled to one vote for every share
standing in his name on the books of the Corporation as of the record date fixed
by the Board of Directors or prescribed by law and, if a quorum is present, a
majority of the shares of such stock present or represented at any meeting of
stockholders shall be the vote of the stockholders with respect to any item of
business, unless otherwise provided by any applicable provision of law, by these
By-Laws or by the Certificate of Incorporation.
Section 2.7. Proxies. Every stockholder entitled to vote at a meeting
or by consent without a meeting may authorize another person or persons to act
for him by proxy. Each proxy shall be in
<PAGE> 4
writing executed by the stockholder giving the proxy or by his duly authorized
attorney. No proxy shall be valid after the expiration of three (3) years from
its date, unless a longer period is provided for in the proxy. Unless and until
voted, every proxy shall be revocable at the pleasure of the person who executed
it, or his legal representatives or assigns except in those cases where an
irrevocable proxy permitted by statute has been given.
Section 2.8. Consents. Whenever a vote of stockholders at a meeting
thereof is required or permitted to be taken in connection with any corporate
action by any provision of statute, the Certificate of Incorporation or these
By-Laws, the meeting, prior notice thereof and vote of stockholders may be
dispensed with if the holders of shares having not less than the minimum number
of votes that would have been necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted
shall consent in writing to the taking of such action. Where corporate action is
taken in such matter by less than unanimous written consent, prompt written
notice of the taking of such action shall be given to those stockholders who
have not consented in writing.
Section 2.9. Stock Records. The Secretary or agent having charge of the
stock transfer books shall make, at least ten (10) days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order and showing
the address of and the number and class and series, if any, of shares held by
each. Such list, for a period of ten (10) days prior to such meeting, shall be
kept at the principal place of business of the Corporation or at the office of
the transfer agent or
<PAGE> 5
registrar of the Corporation and such other places as required by statute and
shall be subject to inspection by any stockholder at any time during usual
business hours. Such list shall also be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any stockholder
at any time during the meeting.
ARTICLE III
DIRECTORS
Section 3.1. Number. The number of directors of the Corporation which
shall constitute the entire Board of Directors shall be fixed from time to time
by a vote of a majority of the entire Board and shall be not less than one nor
more than fifteen. The first Board of Directors shall consist of one member.
Section 3.2. Resignation and Removal. Any director may resign at any
time upon notice of resignation to the Corporation. Any director may be removed
at any time by vote of the stockholders then entitled to vote for the election
of directors at a special meeting called for that purpose, either with or
without cause.
Section 3.3. Newly Created Directorship and Vacancies. Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason whatsoever shall be
filled by vote of the Board. If the number of directors then in office is less
than a quorum, such newly created directorships and vacancies may
<PAGE> 6
be filled by a vote of a majority of the directors then in office. Any director
elected to fill a vacancy shall be elected until the next meeting of
stockholders at which the election of directors is in the regular course of
business, and until his successor has been elected and qualified.
Section 3.4. Powers and Duties. Subject to the applicable provisions of
law, these ByLaws or the Certificate of Incorporation, but in furtherance and
not in limitation of any rights therein conferred, the Board of Director shall
have the control and management of the business and affairs of the Corporation
and shall exercise all such powers of the Corporation and do all such lawful
acts and things as may be exercised by the Corporation.
Section 3.5. Place of Meetings. All meetings of the Board of Directors
may be held either within or without the State of Delaware.
Section 3.6. Annual Meetings. An annual meeting of each newly elected
Board of Directors shall be held immediately following the annual meeting of
stockholders, and no notice of such meeting to the newly elected directors shall
be necessary in order to legally constitute the meeting, provided a quorum shall
be present, or the newly elected directors may meet at such time and place as
shall be fixed by the written consent of all of such directors.
Section 3.7. Regular Meetings. Regular meetings of the Board of
Directors may be held upon such notice or without notice, and at such time and
at such place as shall from time to time be determined by the Board.
<PAGE> 7
Section 3.8. Special Meetings. Special meetings of the Board of
Directors may be called by a majority of the Board of Directors. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the Board of Directors need be specified in the notice or waiver of notice of
such meeting.
Section 3.9. Notice of Meetings. Notice of each special meeting of the
Board (and of each regular meeting for which notice shall be required) shall be
given by the Secretary or an Assistant Secretary and shall state the place, date
and time of the meeting. Notice of each such meeting shall be given orally or
shall be mailed to each director at his residence or usual place of business. If
notice of less than three (3) days is given, it shall be oral, whether by
telephone or in person, or sent by special delivery mail or telegraph. If
mailed, the notice shall be given when deposited in the United States mail,
postage prepaid. Notice of any adjourned meeting, including the place, date and
time of the new meeting, shall be given to all directors not present at the time
of the adjournment, as well as to the other directors unless the place, date and
time of the new meeting is announced at the adjourned meeting. Nothing herein
contained shall preclude the directors from waiving notice as provided in
Section 4.1 hereof.
Section 3.10. Quorum and Voting. At all meetings of the Board of
Directors a majority of the entire Board shall be necessary to and shall
constitute a quorum for the transaction of business at any meeting of directors,
unless otherwise provided by any applicable provision of law, by these By-Laws,
or by the Certificate of Incorporation. The act of a majority of the directors
present at the time of the vote, if a quorum is present at such time, shall be
the act of
<PAGE> 8
the Board of Directors, unless otherwise provided by an applicable provision of
law, by these ByLaws or by the Certificate of Incorporation. If a quorum shall
not be present at any meeting of the Board of Directors, the directors present
thereat may adjourn the meeting from time to time, until a quorum shall be
present.
Section 3.11. Compensation. The Board of Directors, by the affirmative
vote of a majority of the directors then in office, and irrespective of any
personal interest of any of its members, shall have authority to establish
reasonable compensation of all directors for services to the Corporation as
directors, officers or otherwise.
Section 3.12. Books and Records. The directors may keep the books of
the Corporation, except such as are required by law to be kept within the state,
outside of the State of Delaware, at such place or places as they may from time
to time determine.
Section 3.13. Action without a Meeting. Any action required or
permitted to be taken by the Board, or by a committee of the Board, may be taken
without a meeting if all members of the Board or the committee, as the case may
be, consent in writing to the adoption of a resolution authorizing the action.
Any such resolution and the written consents thereto by the members of the Board
or committee shall be filed with the minutes of the proceedings of the Board or
committee.
Section 3.14. Telephone Participation. Any one or more members of the
Board, or any
<PAGE> 9
committee of the Board, may participate in a meeting of the Board or committee
by means of a conference telephone call or similar communications equipment
allowing all persons participating in the meeting to hear each other at the same
time. Participation by such means shall constitute presence in person at a
meeting.
Section 3.15. Committees of the Board. The Board, by resolution adopted
by a majority of the entire Board, may designate one or more committees, each
consisting of one or more directors. The Board may designate one or more
directors as alternate members of any such committee. Such alternate members may
replace any absent member or members at any meeting of such committee. Each
committee (including the members thereof) shall serve at the pleasure of the
Board and shall keep minutes of its meetings and report the same to the Board.
Except as otherwise provided by law, each such committee, to the extent provided
in the resolution establishing it, shall have and may exercise all the authority
of the Board with respect to all matters. However, no such committee shall have
power or authority to:
(a) amend the Certificate of Incorporation;
(b) adopt an agreement of merger or consolidation;
(c) recommend to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets;
(d) recommend to the stockholders a dissolution of the Corporation or a
revocation of a dissolution;
(e) amend these By-Laws; and unless expressly so provided by resolution
of the Board, no such committee shall have power or authority to:
<PAGE> 10
(f) declare a dividend; or
(g) authorize the issuance of shares of the Corporation of any class.
ARTICLE IV
WAIVER
Section 4.1. Waiver. Whenever a notice is required to be given by any
provision of law, by these By-Laws, or by the Certificate of Incorporation, a
waiver thereof in writing, whether before or after the time stated therein,
shall be deemed equivalent to such notice. In addition, any stockholder
attending a meeting of stockholders in person or by proxy without protesting
prior to the conclusion of the meeting the lack of notice thereof to him, and
any director attending a meeting of the Board of Directors without protesting
prior to the meeting or at its commencement such lack of notice, shall be
conclusively deemed to have waived notice of such meeting.
ARTICLE V
OFFICERS
Section 5.1. Executive Officers. The officers of the Corporation shall
be a President, a Treasurer and a Secretary. Any person may hold two or more of
such offices. The officers of the Corporation shall be elected annually (and
from time to time by the Board of Directors, as vacancies occur), at the annual
meeting of the Board of Directors following the meeting of
<PAGE> 11
stockholders at which the Board of Directors was elected.
Section 5.2. Other Officers. The Board of Directors may appoint such
other officers and agents, including a Chief Executive Officer, Vice President,
Assistant Vice Presidents, Secretaries, Assistant Secretaries and Assistant
Treasurers, as it shall at any time or from time to time deem necessary or
advisable.
Section 5.3. Authorities and Duties. All officers, as between
themselves and the Corporation, shall have such authority and perform such
duties in the management of the business and affairs of the Corporation as may
be provided in these By-Laws, or, to the extent not so provided, as may be
prescribed by the Board of Directors.
Section 5.4. Tenure and Removal. The officers of the Corporation shall
be elected or appointed to hold office until their respective successors are
elected or appointed. All officers shall hold office at the pleasure of the
Board of Directors, and any officer elected or appointed by the Board of
Directors may be removed at any time by the Board of Directors for cause or
without cause at any regular or special meeting.
Section 5.5. Vacancies. Any vacancy occurring in any office of the
Corporation, whether because of death, resignation or removal, with or without
cause, or any other reason, shall be filled by the Board of Directors.
<PAGE> 12
Section 5.6. Compensation. The salaries and other compensation of all
officers and agents of the Corporation shall be fixed by or in the manner
prescribed by the Board of Directors.
Section 5.7. President. The President shall have general charge of the
business and affairs of the Corporation and shall preside at all meetings of the
stockholders and the directors. The President shall perform such other duties as
are properly required of him by the Board of Directors.
Section 5.8. Vice President. Each Vice President, if any, shall perform
such duties as may from time to time be assigned to him by the Board of
Directors.
Section 5.9. Secretary. The Secretary shall attend all meetings of the
stockholders and all meetings of the Board of Directors and shall record all
proceedings taken at such meetings in a book to be kept for that purpose; he
shall see that all notices of meetings of stockholders and meetings of the Board
of Directors are duly given in accordance with the provisions of these ByLaws or
as required by law; he shall be the custodian of the records and of the
corporate seal or seals of the Corporation; he shall have authority to affix the
corporate seal or seals to all documents, the execution of which, on behalf of
the Corporation, under its seal, is duly authorized, and when so affixed it may
be attested by his signature; and in general, he shall perform all duties
incident to the office of the Secretary of a corporation, and such other duties
as the Board of Directors may from time to time prescribe.
<PAGE> 13
Section 5.10. Treasurer. The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the
Corporation and shall deposit, or cause to be deposited, in the name and to the
credit of the Corporation, all moneys and valuable effects in such banks, trust
companies, or other depositories as shall from time to time be selected by the
Board of Directors. He shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation; he shall render to the
President and to each member of the Board of Directors, whenever requested, an
account of all of his transactions as Treasurer and of the financial condition
of the Corporation; and in general, he shall perform all of the duties incident
to the office of the Treasurer of a corporation, and such other duties as the
Board of Directors may from time to time prescribe.
Section 5.11. Other Officers. The Board of Directors may also elect or
may delegate to the President the power to appoint such other officers as it may
at any time or from time to time deem advisable, and any officers so elected or
appointed shall have such authority and perform such duties as the Board of
Directors or the President, if he shall have appointed them, may from time to
time prescribe.
ARTICLE VI
PROVISIONS RELATING TO STOCK CERTIFICATES AND STOCKHOLDERS
Section 6.1. Form and Signature. The shares of the Corporation shall be
represented by a certificate signed by the President or any Vice President and
by the Secretary or any
<PAGE> 14
Assistant Secretary or the Treasurer or any Assistant Treasurer, and shall bear
the seal of the Corporation or a facsimile thereof. Each certificate
representing shares shall state upon its face (a) that the Corporation is formed
under the laws of the State of Delaware, (b) the name of the person or persons
to whom it is issued, (c) the number of shares which such certificate represents
and (d) the par value, if any, of each share represented by such certificate.
Section 6.2. Registered Stockholders. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares of stock to receive dividends or other distributions, and to
vote as such owner, and to hold liable for calls and assessments a person
registered on its books as the owner of stock, and shall not be bound to
recognize any equitable or legal claim to or interest in such shares on the part
of any other person.
Section 6.3. Transfer of Stock. Upon surrender to the Corporation or
the appropriate transfer agent, if any, of the Corporation, of a certificate
representing shares of stock duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, and, in the event that the
certificate refers to any agreement restricting transfer of the shares which it
represents, proper evidence of compliance with such agreement, a new certificate
shall be issued to the person entitled thereto, and the old certificate
cancelled and the transaction recorded upon the books of the Corporation.
Section 6.4. Lost Certificates, etc. The Corporation may issue a new
certificate for
<PAGE> 15
shares in place of any certificate theretofore issued by it, alleged to have
been lost, mutilated, stolen or destroyed, and the Board may require the owner
of such lost, mutilated, stolen or destroyed certificate, or his legal
representatives, to make an affidavit of the fact and/or to give the Corporation
a bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation on account of the alleged loss, mutilation, theft
or destruction of any such certificate or the issuance of any such new
certificate.
Section 6.5. Record Date. For the purpose of determining the
stockholders entitled to notice of, or to vote at, any meeting of stockholders
or any adjournment thereof, or to express written consent to any corporate
action without a meeting, or for the purpose of determining stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board may fix, in advance, a record date. Such date shall not be more than
sixty (60) nor less than ten (10) days before the date of any such meeting, nor
more than sixty (60) days prior to any other action.
Section 6.6. Regulations. Except as otherwise provided by law, the
Board may make such additional rules and regulations, not inconsistent with
these By-Laws, as it may deem expedient, concerning the issue, transfer and
registration of certificates for the securities of the Corporation. The Board
may appoint, or authorize any officer or officers to appoint, one or more
transfer agents and one or more registrars and may require all certificates for
shares of capital stock to bear the signature or signatures of any of them.
<PAGE> 16
ARTICLE VII
GENERAL PROVISIONS
Section 7.1. Dividends and Distributions. Dividends and other
distributions upon or with respect to outstanding shares of stock of the
Corporation may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, bonds, property, or in stock of the
Corporation. The Board shall have full power and discretion, subject to the
provisions of the Certificate of Incorporation or the terms of any other
corporate document or instrument to determine what, if any, dividends or
distributions shall be declared and paid or made.
Section 7.2. Checks, etc. All checks or demands for money and notes or
other instruments evidencing indebtedness or obligations of the Corporation
shall be signed by such officer or officers or other person or persons as may
from time to time be designated by the Board of Directors.
Section 7.3. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its incorporation and the words "Corporate
Seal Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
Section 7.4. Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors.
<PAGE> 17
Section 7.5. General and Special Bank Accounts. The Board may authorize
from time to time the opening and keeping of general and special bank accounts
with such banks, trust companies or other depositories as the Board may
designate or as may be designated by any officer or officers of the Corporation
to whom such power of designation may be delegated by the Board from time to
time. The Board may make such special rules and regulations with respect to such
bank accounts, not inconsistent with the provisions of these By-Laws, as it may
deem expedient.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER PERSONS
Section 8.1. Indemnification by Corporation. To the extent permitted by
law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment) the Corporation shall indemnify
any person against any and all judgments, fines, and amounts paid in settling or
otherwise disposing of actions or threatened actions, and expenses in connection
therewith, incurred by reason of the fact that he, his testator or intestate is
or was a director or officer of the Corporation or of any other corporation of
any type or kind, domestic or foreign, which he served in any capacity at the
request of the Corporation. To the extent permitted by law, expenses so incurred
by any such person in defending a civil or criminal action or proceeding shall
at his request be paid by the Corporation in advance of the final disposition of
such action or
<PAGE> 18
proceeding.
ARTICLE IX
ADOPTION AND AMENDMENTS
Section 9.1. Power to Amend. These By-Laws may be amended or repealed
and any new By-Laws may be adopted by the Board of Directors; provided that
these By-Laws and any other By-Laws amended or adopted by the Board of Directors
may be amended, may be reinstated, and new By-Laws may be adopted, by the
stockholders of the Corporation entitled to vote at the time for the election of
directors.
<PAGE> 1
CERTIFICATE OF INCORPORATION
OF
GALION, INC.
The undersigned, for the purposes of forming a corporation pursuant to
the Delaware General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY as follows:
FIRST: The name of the Corporation is: Galion, Inc.
SECOND: The registered office of the Corporation is to be located at 32
Loockerman Square, Suite L-100, in the City of Dover, County of Kent, State of
Delaware, 19901. The name of its registered agent at that address is The
Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
FOURTH: The aggregate number of shares of stock which the Corporation
shall have authority to issue is One Thousand (1,000), par value $.01 per share,
all of which shall be designated "Common Stock."
FIFTH: The name and mailing address of the Incorporator is:
Richard A. Goldberg, Esq.
c/o Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
SIXTH: In furtherance and not in limitation of the powers conferred by
statute, the board of director is expressly authorized:
(a) to adopt, amend or repeal the By-Laws of the Corporation
in such manner and subject to such limitations, if any, as shall be set forth in
the By-Laws;
(b) to allot and authorize the issuance of the authorized but
unissued shares of the Corporation, including the declaration of dividends
payable in shares of any class to stockholders of any class; and
(c) to exercise all of the powers of the Corporation, insofar
as the same may lawfully be vested by this certificate in the board of
directors.
SEVENTH: No director shall be personally liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director; provided, however, that to the extent required by the provisions of
Section 102(b)(7) of the General Corporation Law of the
<PAGE> 2
State of Delaware or any successor statute, or any other laws of the State of
Delaware, this provision shall not eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty to the Corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of the State of Delaware or (iv) for
any transaction from which the director derived an improper personal benefit. If
the General Corporation Law of the State of Delaware hereafter is amended to
authorize the further elimination or limitation of the liability of directors,
then the liability of a director of the Corporation, in addition to the
limitation on personal liability provided herein, shall be limited to the
fullest extent permitted by the amended General Corporation Law of the State of
Delaware. Any repeal or modification of this paragraph SEVENTH by the
stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation existing as of the time of such repeal or modification.
IN WITNESS WHEREOF, I have hereunto set my hand this 6th day of
December, 1993.
/s/ Richard A. Goldberg
------------------------------------
Richard A. Goldberg
Sole Incorporator
<PAGE> 1
BY-LAWS
OF
GALION, INC.
ARTICLE I
OFFICES
Section 1.1. Registered Office. The registered office of the
Corporation within the State of Delaware shall be located at the principal place
of business in said State of such corporation or individual acting as the
Corporation's registered agent in Delaware.
Section 1.2. Other Offices. The Corporation may also have offices and
places of business at such other places both within and without the State of
Delaware as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDER
Section 2.1. Place of Meetings. All meetings of stockholders shall be
held at the principal office of the Corporation, or at such other place within
or without the State of Delaware as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section 2.2. Annual Meetings. The annual meeting of stockholders for
the election of
<PAGE> 2
directors shall be held at such time on such day, other than a legal holiday, as
the Board of Directors in each such year determines. At the annual meeting, the
stockholders entitled to vote for the election of directors shall elect, by a
plurality vote, a Board of Directors and transact such other business as may
properly come before the meeting.
Section 2.3. Special Meetings. Special meetings of stockholders, for
any purpose or purposes, may be called by a majority of the Board of Directors.
Any such request shall state the purpose or purposes of the proposed meeting. At
any special meeting of stockholders, only such business may be transacted as is
related to the purpose or purposes set forth in the notice of such meeting.
Section 2.4. Notice of Meetings. Written notice of every meeting of
stockholders, stating the place, date and hour thereof and, in the case of a
special meeting of stockholders, the purpose or purposes thereof and the person
or persons by whom or at whose direction such meeting has been called and such
notice is being issued, shall be given not less than ten (10) nor more than
sixty (60) days before the date of the meeting, either personally or by mail, by
or at the direction of the President, Secretary, or the persons calling the
meeting, to each stockholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be given when deposited in the United
States mail, postage prepaid, directed to the stockholder at his address as it
appears on the stock transfer books of the Corporation. Nothing herein contained
shall preclude the stockholders from waiving notice as provided in Section 4.1
hereof.
2
<PAGE> 3
Section 2.5. Quorum. The holders of a majority of the issued and
outstanding shares of stock of the Corporation entitled to vote, represented in
person or by proxy, shall be necessary to and shall constitute a quorum for the
transaction of business at any meeting of stockholders. If, however, such quorum
shall not be present or represented at any meeting of stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At any such adjourned meeting at which a quorum shall be present
or represented, any business may be transacted which might have been transacted
at the meeting as originally noticed. Notwithstanding the foregoing, if after
any such adjournment the Board of Directors shall fix a new record date for the
adjourned meeting, or if the adjournment is for more than thirty (30) days, a
notice of such adjourned meeting shall be given as provided in Section 2.4 of
these By-Laws, but such notice may be waived as provided in Section 4.1 hereof.
Section 2.6. Voting. At each meeting of stockholders, each holder of
record of shares of stock entitled to vote shall be entitled to vote in person
or by proxy, and each such holder shall be entitled to one vote for every share
standing in his name on the books of the Corporation as of the record date fixed
by the Board of Directors or prescribed by law and, if a quorum is present, a
majority of the shares of such stock present or represented at any meeting of
stockholders shall be the vote of the stockholders with respect to any item of
business, unless otherwise provided by any applicable provision of law, by these
By-Laws or by the Certificate of Incorporation.
3
<PAGE> 4
Section 2.7. Proxies. Every stockholder entitled to vote at a meeting
or by consent without a meeting may authorize another person or persons to act
for him by proxy in any manner permitted by statute. No proxy shall be valid
after the expiration of three (3) years from its date, unless a longer period is
provided for in the proxy. Unless and until voted, every proxy shall be
revocable at the pleasure of the person who executed it, or his legal
representatives or assigns except in those cases where an irrevocable proxy
permitted by statute has been given.
Section 2.8. Consents. Whenever a vote of stockholders at a meeting
thereof is required or permitted to be taken in connection with any corporate
action by any provision of statute, the Certificate of Incorporation or these
By-Laws, the meeting, prior notice thereof and vote of stockholders may be
dispensed with if the holders of shares having not less than the minimum number
of votes that would have been necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted
shall consent in writing to the taking of such action. Where corporate action is
taken in such matter by less than unanimous written consent, prompt written
notice of the taking of such action shall be given thereto.
Section 2.9. Stock Records. The Secretary or agent having charge of the
stock transfer books shall make, at least ten (10) days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order and showing
the address of and the number and class and series, if any, of shares held by
each. Such list, for a period of ten (10) days prior to such meeting, shall be
kept at the principal place of business of the Corporation or at the office of
the transfer agent or registrar of the corporation and such other places as
required by statute and shall be subject to inspection by any
<PAGE> 5
stockholder at any time during usual business hours. Such list shall also be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any stockholder at any time during the meeting.
ARTICLE III
DIRECTORS
Section 3.1. Number. The number of directors of the Corporation which
shall constitute the entire Board of Directors shall be fixed from time to time
by a vote of a majority of the entire Board and shall be not less than one nor
more than five. The first Board of Directors shall be elected by the
incorporator and shall consist of two (2) members.
Section 3.2. Resignation and Removal. Any director may resign at any
time upon written notice of resignation to the Corporation. Any director may be
removed at any time by vote of the stockholders then entitled to vote for the
election of directors at a special meeting called for that purpose, either with
or without cause.
Section 3.3. Newly Created Directorship and Vacancies. Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason whatsoever shall be
filled by vote of the Board. If the number of directors then in office is less
than a quorum, such newly created directorships and vacancies may be filled by a
vote of a majority of the directors then in office. Any director elected to fill
a
5
<PAGE> 6
vacancy shall be elected until the next meeting of stockholders at which the
election of directors is in the regular course of business, and until his
successor has been elected and qualified.
Section 3.4. Powers and Duties. Subject to the applicable provisions of
law, these ByLaws or the Certificate of Incorporation, but in furtherance and
not in limitation of any rights therein conferred, the Board of Directors shall
have the control and management of the business and affairs of the Corporation
and shall exercise all such powers of the Corporation and do all such lawful
acts and things as may be exercised by the Corporation.
Section 3.5. Place of Meetings. All meetings of the Board of Directors
may be held either within or without the State of Delaware.
Section 3.6. Annual Meetings. An annual meeting of each newly elected
Board of Directors shall be held immediately following the annual meeting of
stockholders, and no notice of such meeting to the newly elected directors shall
be necessary in order to legally constitute the meeting, provided a quorum shall
be present, or the newly elected directors may meet at such time and place as
shall be fixed by the written consent of all of such directors.
Section 3.7. Regular Meetings. Regular meetings of the Board of
Directors may be held upon such notice or without notice, and at such time and
at such place as shall from time to time be determined by the Board.
6
<PAGE> 7
Section 3.8. Special Meetings. Special meetings of the Board of
Directors may be called by a majority of the Board of Directors. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the Board of Directors need be specified in the notice or waiver of notice of
such meeting.
Section 3.9. Notice of Meetings. Notice of each special meeting of the
Board (and of each regular meeting for which notice shall be required) shall be
given by the Secretary or an Assistant Secretary and shall state the place, date
and time of the meeting. Notice of each such meeting shall be given orally or
shall be mailed to each director at his residence or usual place of business. If
notice of less than three (3) days is given, it shall be oral, whether by
telephone or in person, or sent by special delivery mail or telegraph. If
mailed, the notice shall be given when deposited in the United States mail,
postage prepaid. Notice of any adjourned meeting, including the place, date and
time of the new meeting, shall be given to all directors not present at the time
of the adjournment, as well as to the other directors unless the place, date and
time of the new meeting is announced at the adjourned meeting. Nothing herein
contained shall preclude the directors from waiving notice as provided in
Section 4.1 hereof.
Section 3.10. Quorum and Voting. At all meetings of the Board of
Directors a majority of the entire Board shall be necessary to and shall
constitute a quorum for the transaction of business at any meeting of directors,
unless otherwise provided by any applicable provision of law, by these By-Laws,
or by the Certificate of Incorporation. The act of a majority of the directors
present at the time of the vote, if a quorum is present at such time, shall be
the act of the Board of Directors,
7
<PAGE> 8
unless otherwise provided by an applicable provision of law, by these By-Laws or
by the Certificate of Incorporation. If a quorum shall not be present at any
meeting of the Board of Directors, the directors present thereat may adjourn the
meeting from time to time, until a quorum shall be present.
Section 3.11. Compensation. The Board of Directors, by the affirmative
vote of a majority of the directors then in office, and irrespective of any
personal interest of any of its members, shall have authority to establish
reasonable compensation of all directors for services to the Corporation as
directors, officers or otherwise.
Section 3.12. Books and Records. The directors may keep the books of
the Corporation, except such as are required by law to be kept within the state,
outside of the State of Delaware, at such place or places as they may from time
to time determine.
Section 3.13. Action without a Meeting. Any action required or
permitted to be taken by the Board, or by a committee of the Board, may be taken
without a meeting if all members of the Board or the committee, as the case may
be, consent in writing to the adoption of a resolution authorizing the action.
Any such resolution and the written consents thereto by the members of the Board
or committee shall be filed with the minutes of the proceedings of the Board or
committee.
Section 3.14. Telephone Participation. Any one or more members of the
Board, or any committee of the Board, may participate in a meeting of the Board
or committee by means of a
8
<PAGE> 9
conference telephone call or similar communications equipment allowing all
persons participating in the meeting to hear each other at the same time.
Participation by such means shall constitute presence in person at a meeting.
Section 3.15. Committees of the Board. The Board, by resolution adopted
by a majority of the entire Board, may designate one or more committees, each
consisting of one or more directors. The Board may designate one or more
directors as alternate members of any such committee. Such alternate members may
replace any absent member or members at any meeting of such committee. Each
committee (including the members thereof) shall serve at the pleasure of the
Board and shall keep minutes of its meetings and report the same to the Board.
Except as otherwise provided by law, each such committee, to the extent provided
in the resolution establishing it, shall have and may exercise all the authority
of the Board with respect to all matters. However, no such committee shall have
power or authority to:
(a) amend the Certificate of Incorporation (except as provided
by statute);
(b) adopt an agreement of merger or consolidation;
(c) recommend to the stockholders the sale, lease or exchange
of all or substantially all of the Corporation's property and assets;
(d) recommend to the stockholders a dissolution of the
Corporation or a revocation of a dissolution;
(e) amend these By-Laws; and unless expressly so provided by
resolution of the Board, no such committee shall have power or authority to:
(f) declare a dividend;
9
<PAGE> 10
(g) authorize the issuance of shares of the Corporation of any
class; or
(h) adopt a certificate of ownership and merger.
ARTICLE IV
WAIVER
Section 4.1. Waiver. Whenever a notice is required to be given by any
provision of law, by these By-Laws, or by the Certificate of Incorporation, a
waiver thereof in writing, whether before or after the time stated therein,
shall be deemed equivalent to such notice. In addition, any stockholder
attending a meeting of stockholders in person or by proxy without protesting
prior to the conclusion of the meeting the lack of notice thereof to him, and
any director attending a meeting of the Board of Directors without protesting
prior to the meeting or at its commencement such lack of notice, shall be
conclusively deemed to have waived notice of such meeting.
ARTICLE V
OFFICERS
Section 5.1. Executive Officers. The officers of the Corporation shall
be a President, a Treasurer and a Secretary. Any person may hold two or more of
such offices. The officers of the Corporation shall be elected annually (and
from time to time by the Board of Directors, as vacancies occur), at the annual
meeting of the Board of Directors following the meeting of stockholders at which
the Board of Directors was elected.
10
<PAGE> 11
Section 5.2. Other Officers. The Board of Directors may appoint such
other officers and agents, including a Chief Executive Officer, Vice President,
Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers, as it
shall at any time or from time to time deem necessary or advisable.
Section 5.3. Authorities and Duties. All officers, as between
themselves and the Corporation, shall have such authority and perform such
duties in the management of business and affairs of the Corporation as may be
provided in these By-Laws, or, to the extent not so provided, as may be
prescribed by the Board of Directors.
Section 5.4. Tenure and Removal. The officers of the Corporation shall
be elected or appointed to hold office until their respective successors are
elected or appointed. All officers shall hold office at the pleasure of the
Board of Directors, and any officer elected or appointed by the Board of
Directors may be removed at any time by the Board of Directors for cause or
without cause at any regular or special meeting.
Section 5.5. Vacancies. Any vacancy occurring in any office of the
Corporation, whether because of death, resignation or removal, with or without
cause, or any other reason, shall be filled by the Board of Directors.
Section 5.6. Compensation. The salaries and other compensation of all
officers and agents of the Corporation shall be fixed by or in the manner
prescribed by the Board of Directors.
11
<PAGE> 12
Section 5.7. President. The President shall have general charge of the
business and affairs of the Corporation and shall preside at all meetings of the
stockholders and the directors. The President shall perform such other duties as
are properly required of him by the Board of Directors.
Section 5.8. Secretary. The Secretary shall attend all meetings of the
stockholders and all meetings of the Board of Directors and shall record all
proceedings taken at such meetings in a book to be kept for that purpose; he or
she shall see that all notices of meetings of stockholders and meetings of the
Board of Directors are duly given in accordance with the provisions of these
By-Laws or as required by law; he or she shall be the custodian of the records
and of the corporate seal or seals of the Corporation; and in general, he or she
shall perform all duties incident to the office of the Secretary of a
corporation, and such other duties as the Board of Directors may from time to
time prescribe.
Section 5.9. Treasurer. The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the
Corporation and shall deposit, or cause to be deposited, in the name and to the
credit of the Corporation, all moneys and valuable effects in such banks, trust
companies, or other depositories as shall from time to time be selected by the
Board of Directors. The Treasurer shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation; and in
general, he or she shall perform all of the duties incident to the office of the
Treasurer of a corporation, and such other duties as the Board of Directors may
from time to time prescribe.
12
<PAGE> 13
Section 5.10. Other Officers. The Board of Directors may also elect or
may delegate to the President the power to appoint such other officers as it may
at any time or from time to time deem advisable, and any officers so elected or
appointed shall have such authority and perform such duties as the Board of
Directors or the President, if he shall have appointed them, may from time to
time prescribe.
ARTICLE VI
PROVISIONS RELATING TO STOCK CERTIFICATES AND STOCKHOLDERS
Section 6.1. Form and Signature. The shares of the Corporation shall be
represented by a certificate signed by the President and by the Secretary or any
Assistant Secretary or the Treasurer or any Assistant Treasurer, and shall bear
the seal of the Corporation or a facsimile thereof.
Section 6.2. Registered Stockholders. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares of stock to receive dividends or other distributions, and to
vote as such owner, and to hold liable for calls and assessments a person
registered on its books as the owner of stock, and shall not be bound to
recognize any equitable or legal claim to or interest in such shares on the part
of any other person.
Section 6.3. Transfer of Stock. Upon surrender to the Corporation or
the appropriate transfer agent, if any, of the Corporation, of a certificate
representing shares of stock duly endorsed
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or accompanied by proper evidence of succession, assignment or authority to
transfer, and, in the event that the certificate refers to any agreement
restricting transfer of the shares which it represents, proper evidence of
compliance with such agreement, a new certificate shall be issued to the person
entitled thereto, and the old certificate canceled and the transaction recorded
upon the books of the Corporation.
Section 6.4. Lost Certificates, etc. The Corporation may issue a new
certificate for shares in place of any certificate theretofore issued by it,
alleged to have been lost, mutilated, stolen or destroyed, and the Board may
require the owner of such lost, mutilated, stolen or destroyed certificate, or
his legal representatives, to make an affidavit of the fact and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation on account of the alleged loss,
mutilation, theft or destruction of any such certificate or the issuance of any
such new certificate.
Section 6.5. Record Date. In order that the Corporation may determine
the stockholders entitled: (a) to notice of, or to vote at, any meeting of
stockholders or any adjournment thereof, (b) to consent to corporate action in
writing without a meeting, or (c) to receive payment of any dividend or other
distribution or allotment of any rights or to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date. Such
record date shall not (x) precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and (y) (i) in the case of
clause (a) above, shall not be more than sixty (60) nor less than ten (10) days
before the
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date of such meeting, (ii) in the case of clause (b) above, shall not be more
than ten (10) days after the date upon which the resolution fixing the record
date is adopted by the Board of Directors, and (iii) in the case of clause (c)
above, shall not be more than sixty (60) days prior to such action.
Section 6.6. Regulations. Except as otherwise provided by law, the
Board may make such additional rules and regulations, not inconsistent with
these By-Laws, as it may deem expedient, concerning the issue, transfer and
registration of certificates for the securities of the Corporation. The Board
may appoint, or authorize any officer or officers to appoint, one or more
transfer agents and one or more registrars and may require all certificates for
shares of capital stock to bear the signature or signatures of any of them.
ARTICLE VII
GENERAL PROVISIONS
Section 7.1. Dividends and Distributions. Dividends and other
distributions upon or with respect to outstanding shares of stock of the
Corporation may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, bonds, property, or in stock of the
Corporation. The Board shall have full power and discretion, subject to the
provisions of the Certificate of Incorporation or the terms of any other
corporate document or instrument to determine what, if any, dividends or
distributions shall be declared and paid or made.
Section 7.2. Checks, etc. All checks or demands for money and notes or
other
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instruments evidencing indebtedness or obligations of the Corporation shall be
signed by such officer or officers or other person or persons as may from time
to time be designated by the Board of Directors.
Section 7.3. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its incorporation and the words "Corporate
Seal Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
Section 7.4. Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors.
Section 7.5. General and Special Bank Accounts. The Board may authorize
from time to time the opening and keeping of general and special bank accounts
with such banks, trust companies or other depositories as the Board may
designate or as may be designated by any officer or officers of the Corporation
to whom such power of designation may be delegated by the Board from time to
time. The Board may make such special rules and regulations with respect to such
bank accounts, not inconsistent with the provisions of these By-Laws, as it may
deem expedient.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER PERSONS
Section 8.1. Indemnification by Corporation. To the extent permitted by
law, as the
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same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than said law permitted the Corporation to
provide prior to such amendment) the Corporation shall indemnify any person
against any and all judgments, fines, and amounts paid in settling or otherwise
disposing of actions or threatened actions, and expenses in connection
therewith, incurred by reason of the fact that he, his testator or intestate is
or was a director or officer of the Corporation or of any other corporation of
any type or kind, domestic or foreign, which he served in any capacity at the
request of the Corporation. To the extent permitted by law, expenses so incurred
by any such person in defending a civil or criminal action or proceeding shall
at his request be paid by the Corporation in advance of the final disposition of
such action or proceeding.
ARTICLE IX
ADOPTION AND AMENDMENTS
Section 9.1. Power to Amend. These By-Laws may be amended or repealed
and any new By-Laws may be adopted by the Board of Directors; provided that
these By-Laws and any other By-Laws amended or adopted by the Board of Directors
may be amended, may be reinstated, and new By-Laws may be adopted, by the
stockholders of the Corporation entitled to vote at the time for the election of
directors.
17
<PAGE> 1
CERTIFICATE OF INCORPORATION
OF
VALENTEC SYSTEMS, INC.
The undersigned, for the purposes of forming a corporation pursuant to
the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY as
follows:
FIRST: The name of the Corporation is: Valentec Systems, Inc.
SECOND: The registered office of the Corporation is to be located at 32
Loockerman Square, Suite L-100, in the City of Dover, County of Kent, State of
Delaware, 19901. The name of its registered agent at that address is The
Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The aggregate number of shares of stock which the Corporation
shall have authority to issue is one thousand (1,000) shares, par value $.01 per
share, all of which shall be designated "Common Stock."
FIFTH: The name and mailing address of the Incorporator is:
Richard A. Goldberg, Esq.
c/o Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue, 20th Floor
New York, New York 10022
SIXTH: In furtherance and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized:
(a) to adopt, amend or repeal the By-Laws of the Corporation
in such manner and subject to such limitation, if any, as shall be set forth in
the By-Laws;
(b) to allot and authorize the issuance of the authorized but
unissued shares of the Corporation, including the declaration of dividends
payable in shares of any class to stockholders of any class; and
(c) to exercise all of the powers of the Corporation, insofar
as the same may lawfully be vested by this certificate in the board of
directors.
SEVENTH: No director shall be personally liable to the Corporation or
its stockholders for monetary damages for breach of a fiduciary duty as a
director; provided, however, that to the
<PAGE> 2
extent required by the provisions of Section 102(b)(7) of the General
Corporation Law of the State of Delaware or any successor statute, or any other
laws of the State of Delaware, this provision shall not eliminate or limit the
liability of a director (i) for any breach of the director's duty of loyalty to
the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the General Corporation Law of the State of Delaware
or (iv) for any transaction from which the director derived an improper personal
benefit. If the General Corporation Law of the State of Delaware hereafter is
amended to authorize the further elimination or limitation of the liability of
directors, then the liability of a director of the Corporation, in addition to
the limitation on personal liability provided herein, shall be limited to the
fullest extent permitted by the amended General Corporation Law of the State of
Delaware. Any repeal or modification of this paragraph SEVENTH by the
stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation existing as of the time of such repeal or modification.
IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of May,
1994.
/s/ Richard A. Goldberg
------------------------------------
Richard A. Goldberg, Esq.
Sole Incorporator
<PAGE> 1
BY-LAWS
OF
VALENTEC SYSTEMS, INC.
ARTICLE I
OFFICES
Section 1.1. Registered Office. The registered office of the
Corporation within the State of Delaware shall be located at the principal place
of business in said State of such corporation; or individual acting as the
Corporation's registered agent in the State of Delaware.
Section 1.2. Other Offices. The Corporation may also have offices and
places of business at such other places both within and without the State of
Delaware as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.1. Place of Meetings. All meetings of stockholders shall be
held at the principal office of the Corporation, or at such other place within
or without the State of Delaware as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section 2.2. Annual Meetings. The annual meeting of stockholders for
the election of directors shall be held at such time on such day, other than a
legal holiday, as the Board of Directors in each such year determines. At the
annual meeting, the stockholders entitled to vote
<PAGE> 2
for the election of directors shall elect, by a majority vote of such shares of
stock present or represented at such annual meeting, a Board of Directors and
transact such other business as may properly come before the meeting.
Section 2.3. Special Meetings. Special meetings of stockholders, for
any purpose or purposes, may be called by a majority of the Board of Directors.
Any such request shall state the purpose or purposes of the proposed meeting. At
any special meeting of stockholders, only such business may be transacted as is
related to the purpose or purposes set forth in the notice of such meeting.
Section 2.4. Notice of Meetings. Written notice of every meeting of
stockholders, stating the place, date and hour thereof and, in the case of a
special meeting of stockholders, the purpose or purposes thereof and the person
or persons by whom or at whose direction such meeting has been called and such
notice is being issued, shall be given not less than ten (10) nor more than
sixty (60) days before the date of the meeting, either personally or by mail, by
or at the direction of the Chairman of the Board, Secretary, or the persons
calling the meeting, to each stockholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be given when deposited in
the United States mail, postage prepaid, directed to the stockholder at his
address as it appears on the stock transfer books of the Corporation. Nothing
herein contained shall preclude the stockholders from waiving notice as provided
in Section 4.1 hereof.
Section 2.5. Quorum. The holders of a majority of the issued and
outstanding shares of
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stock of the Corporation entitled to vote, represented in person or by proxy,
shall be necessary to and shall constitute a quorum for the transaction of
business at any meeting of stockholders. If, however, such quorum shall not be
present or represented at any meeting of stockholders, the stockholders entitled
to vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At any such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. Notwithstanding the foregoing, if after any such adjournment
the Board of Directors shall fix a new record date for the adjourned meeting, or
if the adjournment is for more than thirty (30) days, a notice of such adjourned
meeting shall be given as provided in Section 2.4 of these By-Laws, but such
notice may be waived as provided in Section 4.1 hereof.
Section 2.6. Voting. At each meeting of stockholders, each holder of
record of shares of stock entitled to vote shall be entitled to vote in person
or by proxy, and each such holder shall be entitled to one vote for every share
standing in his name on the books of the Corporation as of the record date fixed
by the Board of Directors or prescribed by law and, if a quorum is present, a
majority of the shares of such stock present or represented at any meeting of
stockholders shall be the vote of the stockholders with respect to any item of
business, unless otherwise provided by any applicable provision of law, by these
By-Laws or by the Certificate of Incorporation.
Section 2.7. Proxies. Every stockholder entitled to vote at a meeting
or by consent
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<PAGE> 4
without a meeting may authorize another person or persons to act for him by
proxy. Each proxy shall be in writing executed by the stockholder giving the
proxy or by his duly authorized attorney. No proxy shall be valid after the
expiration of three (3) years from its date, unless a longer period is provided
for in the proxy. Unless and until voted, every proxy shall be revocable at the
pleasure of the person who executed it, or his legal representatives or assigns
except in those cases where an irrevocable proxy permitted by statute has been
given.
Section 2.8. Consents. Whenever a vote of stockholders at a meeting
thereof is required or permitted to be taken in connection with any corporate
action by any provision of applicable law, the Certificate of Incorporation or
these By-Laws, the meeting, prior notice thereof and vote of stockholders may be
dispensed with if the holders of shares having not less than the minimum number
of votes that would have been necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted
shall consent in writing to the taking of such action. Where corporate action is
taken in such matter by less than unanimous written consent, prompt written
notice of the taking of such action shall be given thereto.
Section 2.9. Stock Records. The Secretary or agent having charge of the
stock transfer books shall make, at least ten (10) days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order and showing
the address of and the number and class and series, if any, of shares held by
each. Such list, for a period of ten (10) days prior to such meeting, shall be
kept at the principal place of business of the Corporation or at the office of
the transfer agent or registrar
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<PAGE> 5
of the Corporation and such other places as required by statute and shall be
subject to inspection by any stockholder at any time during usual business
hours. Such list shall also be produced and kept open at the time and place of
the meeting and shall be subject to the inspection of any stockholder at any
time during the meeting.
ARTICLE III
DIRECTORS
Section 3.1. Number. The number of directors of the Corporation which
shall constitute the entire Board of Directors shall initially be fixed by the
Incorporator and thereafter from time to time by a vote of a majority of the
entire Board and shall be not less than one nor more than five. The first Board
of Directors shall consist of two members.
Section 3.2. Resignation and Removal. Any director may resign at any
time upon notice of resignation to the Corporation. Any director may be removed
at any time by vote of the stockholders then entitled to vote for the election
of directors at a special meeting called for that purpose, either with or
without cause.
Section 3.3. Newly Created Directorship and Vacancies. Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason whatsoever shall be
filled by vote of the Board. If the number of directors then in office is less
than a quorum, such newly created directorships and vacancies may be filled by a
vote of a majority of the directors then in office. Any director elected to fill
a
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<PAGE> 6
vacancy shall be elected until the next meeting of stockholders at which the
election of directors is in the regular course of business, and until his
successor has been elected and qualified.
Section 3.4. Powers and Duties. Subject to the applicable provisions of
law, these ByLaws or the Certificate of Incorporation, but in furtherance and
not in limitation of any rights therein conferred, the Board of Directors shall
have the control and management of the business and affairs of the Corporation
and shall exercise all such powers of the Corporation and do all such lawful
acts and things as may be exercised by the Corporation.
Section 3.5. Place of Meetings. All meetings of the Board of Directors
may be held either within or without the State of Delaware.
Section 3.6. Annual Meetings. An annual meeting of each newly elected
Board of Directors shall be held immediately following the annual meeting of
stockholders, and no notice of such meeting to the newly elected directors shall
be necessary in order to legally constitute the meeting, provided a quorum shall
be present, or the newly elected directors may meet at such time and place as
shall be fixed by the written consent of all of such directors.
Section 3.7. Regular Meetings. Regular meetings of the Board of
Directors may be held upon such notice or without notice, and at such time and
at such place as shall from time to time be determined by the Board.
6
<PAGE> 7
Section 3.8. Special Meetings. Special meetings of the Board of
Directors may be called by a majority of the Board of Directors. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the Board of Directors need be specified in the notice or waiver of notice of
such meeting.
Section 3.9. Notice of Meetings. Notice of each special meeting of the
Board (and of each regular meeting for which notice shall be required) shall be
given by the Secretary or an Assistant Secretary and shall state the place, date
and time of the meeting. Notice of each such meeting shall be given orally or
shall be mailed to each director at his residence or usual place of business. If
notice of less than three (3) days is given, it shall be oral, whether by
telephone or in person, or sent by special delivery mail or telegraph. If
mailed, the notice shall be given when deposited in the United States mail,
postage prepaid. Notice of any adjourned meeting, including the place, date and
time of the new meeting, shall be given to all directors not present at the time
of the adjournment, as well as to the other directors unless the place, date and
time of the new meeting is announced at the adjourned meeting. Nothing herein
contained shall preclude the directors from waiving notice as provided in
Section 4.1 hereof.
Section 3.10. Quorum and Voting. At all meetings of the Board of
Directors a majority of the entire Board shall be necessary to and shall
constitute a quorum for the transaction of business at any meeting of directors,
unless otherwise provided by any applicable provision of law, by these By-Laws,
or by the Certificate of Incorporation. The act of a majority of the directors
present at the time of the vote, if a quorum is present at such time, shall be
the act of the
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<PAGE> 8
Board of Directors, unless otherwise provided by an applicable provision of law,
by these ByLaws or by the Certificate of Incorporation. If a quorum shall not be
present at any meeting of the Board of Directors, the directors present thereat
may adjourn the meeting from time to time, until a quorum shall be present.
Section 3.11. Compensation. The Board of Directors, by the affirmative
vote of a majority of the directors then in office, and irrespective of any
personal interest of any of its members, shall have authority to establish
reasonable compensation of all directors for services to the Corporation as
directors, officers or otherwise.
Section 3.12. Books and Records. The directors may keep the books of
the Corporation, except such as are required by law to be kept within the state,
outside of the State of Delaware, at such place or places as they may from time
to time determine.
Section 3.13. Action without a Meeting. Any action required or
permitted to be taken by the Board, or by a committee of the Board, may be taken
without a meeting if all members of the Board or the committee, as the case may
be, consent in writing to the adoption of a resolution authorizing the action.
Any such resolution and the written consents thereto by the members of the Board
or committee shall be filed with the minutes of the proceedings of the Board or
committee.
Section 3.14. Telephone Participation. Any one or more members of the
Board, or any
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<PAGE> 9
committee of the Board, may participate in a meeting of the Board or committee
by means of a conference telephone call or similar communications equipment
allowing all persons participating in the meeting to hear each other at the same
time. Participation by such means shall constitute presence in person at a
meeting.
Section 3.15. Committees of the Board. The Board, by resolution adopted
by a majority of the entire Board, may designate one or more committees, each
consisting of one or more directors. The Board may designate one or more
directors as alternate members of any such committee. Such alternate members may
replace any absent member or members at any meeting of such committee. Each
committee (including the members thereof) shall serve at the pleasure of the
Board and shall keep minutes of its meetings and report the same to the Board.
Except as otherwise provided by law, each such committee, to the extent provided
in the resolution establishing it, shall have and may exercise all the authority
of the Board with respect to all matters. However, no such committee shall have
power or authority to:
(a) amend the Certificate of Incorporation;
(b) adopt an agreement of merger or consolidation;
(c) recommend to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets;
(d) recommend to the stockholders a dissolution of the Corporation or a
revocation of a dissolution;
(e) amend these By-Laws; and unless expressly so provided by resolution
of the Board,
9
<PAGE> 10
these By-Laws or by the Certificate of Incorporation, no such committee shall
have power or authority to:
(1) declare a dividend;
(2) authorize the issuance of shares of the Corporation of any
class; or
(3) adopt a certificate of ownership and merger.
ARTICLE IV
WAIVER
Section 4.1. Waiver. Whenever a notice is required to be given by any
provision of law, by these By-Laws, or by the Certificate of Incorporation, a
waiver thereof in writing, whether before or after the time stated therein,
shall be deemed equivalent to such notice. In addition, any stockholder
attending a meeting of stockholders in person or by proxy without protesting
prior to the conclusion of the meeting the lack of notice thereof to him, and
any director attending a meeting of the Board of Directors without protesting
prior to the meeting or at its commencement such lack of notice, shall be
conclusively deemed to have waived notice of such meeting.
ARTICLE V
OFFICERS
Section 5.1. Executive Officers. The officers of the Corporation shall
be a Chief Executive Officer and/or President, a Treasurer and a Secretary. Any
person may hold two or more of such offices. The officers of the Corporation
shall be elected annually (and from time to time by the Board of Directors, as
vacancies occur), at the annual meeting of the Board of
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<PAGE> 11
Directors following the meeting of stockholders at which the Board of Directors
was elected.
Section 5.2. Other Officers. The Board of Directors may appoint such
other officers and agents, including Vice Presidents, Assistant Vice Presidents,
Secretaries, Assistant Secretaries and Assistant Treasurers, as it shall at any
time or from time to time deem necessary or advisable.
Section 5.3. Authorities and Duties. All officers, as between
themselves and the Corporation, shall have such authority and perform such
duties in the management of business and affairs of the Corporation as may be
provided in these By-Laws, or, to the extent not so provided, as may be
prescribed by the Board of Directors.
Section 5.4. Tenure and Removal. The officers of the Corporation shall
be elected or appointed to hold office until their respective successors are
elected or appointed. All officers shall hold office at the pleasure of the
Board of Directors, and any officer elected or appointed by the Board of
Directors may be removed at any time by the Board of Directors for cause or
without cause at any regular or special meeting.
Section 5.5. Vacancies. Any vacancy occurring in any office of the
Corporation, whether because of death, resignation or removal, with or without
cause, or any other reason, shall be filled by the Board of Directors.
Section 5.6. Compensation. The salaries and other compensation of all
officers and
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agents of the Corporation shall be fixed by or in the manner prescribed by the
Board of Directors.
Section 5.7. Chief Executive Officer. The Chief Executive Officer shall
have general supervision of the business and affairs of the Corporation and
shall have such powers and duties as the Board of Directors may from time to
time prescribe. In the absence of the Chairman of the Board, the Chief Executive
Officer shall preside at all meetings of the stockholders and the directors.
Section 5.8. President. The President shall have general charge of the
business and affairs of the Corporation subject to the control of the Board of
Directors and the Chief Executive Officer and in the absence of the Chairman of
the Board and the Chief Executive Officer, the President shall preside at all
meetings of the stockholders and the directors. The President shall perform such
other duties as are properly required of him by the Board of Directors.
Section 5.9. Vice President. Each Vice President, if any, shall perform
such duties as may from time to time be assigned to him by the Board of
Directors.
Section 5.10. Secretary. The Secretary shall attend all meetings of the
stockholders and all meetings of the Board of Directors and shall record all
proceedings taken at such meetings in a book to be kept for that purpose; he
shall see that all notices of meetings of stockholders and meetings of the Board
of Directors are duly given in accordance with the provisions of these ByLaws or
as required by law; he shall be the custodian of the records and of the
corporate seal or seals of the Corporation; he shall have authority to affix the
corporate seal or seals to all
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documents, the execution of which, on behalf of the Corporation, under its seal,
is duly authorized, and when so affixed it may be attested by his signature; and
in general, he shall perform all duties incident to the office of the Secretary
of a corporation, and such other duties as the Board of Directors may from time
to time prescribe.
Section 5.11. Treasurer. The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the
Corporation and shall deposit, or cause to be deposited, in the name and to the
credit of the Corporation, all moneys and valuable effects in such banks, trust
companies, or other depositories as shall from time to time be selected by the
Board of Directors. He shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation; he shall render to the
Chief Executive Officer and the President and to each member of the Board of
Directors, whenever requested, an account of all of his transactions as
Treasurer and of the financial condition of the Corporation; and in general, he
shall perform all of the duties incident to the office of the Treasurer of a
corporation, and such other duties as the Board of Directors may from time to
time prescribe.
Section 5.12. Other Officers. The Board of Directors may also elect or
may delegate to the Chief Executive Officer or the President the power to
appoint such other officers as it may at any time or from time to time deem
advisable, and any officers so elected or appointed shall have such authority
and perform such duties as the Board of Directors, the Chief Executive Officer
or the President, if he shall have appointed them, may from time to time
prescribe.
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ARTICLE VI
PROVISIONS RELATING TO STOCK CERTIFICATES AND STOCKHOLDERS
Section 6.1. Form and Signature. The shares of the Corporation shall be
represented by a certificate signed by the President or any Vice President and
by the Secretary or any Assistant Secretary or the Treasurer or any Assistant
Treasurer, and shall bear the seal of the Corporation or a facsimile thereof.
Each certificate representing shares shall state upon its face (a) that the
Corporation is formed under the laws of the State of Delaware, (b) the name of
the person or persons to whom it is issued, (c) the number of shares which such
certificate represents and (d) the par value, if any, of each share represented
by such certificate.
Section 6.2. Registered Stockholders. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares of stock to receive dividends or other distributions, and to
vote as such owner, and to hold liable for calls and assessments a person
registered on its books as the owner of stock, and shall not be bound to
recognize any equitable or legal claim to or interest in such shares on the part
of any other person.
Section 6.3. Transfer of Stock. Upon surrender to the Corporation or
the appropriate transfer agent, if any, of the Corporation, of a certificate
representing shares of stock duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, and, in the event that the
certificate refers to any agreement restricting transfer of the shares which it
represents, proper evidence of compliance with such agreement, a new certificate
shall be issued to the person entitled thereto, and the old certificate canceled
and the transaction recorded
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upon the books of the Corporation.
Section 6.4. Lost Certificates etc. The Corporation may issue a new
certificate for shares in place of any certificate theretofore issued by it,
alleged to have been lost, mutilated, stolen or destroyed, and the Board may
require the owner of such lost, mutilated, stolen or destroyed certificate, or
his legal representatives, to make an affidavit of the fact and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation on account of the alleged loss,
mutilation, theft or destruction of any such certificate or the issuance of any
such new certificate.
Section 6.5. Record Date. For the purpose of determining the
stockholders entitled to notice of, or to vote at, any meeting of stockholders
or any adjournment thereof, or to express written consent to any corporate
action without a meeting, or for the purpose of determining stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board may fix, in advance, a record date. Such date shall not be more than
sixty (60) nor less than ten (10) days before the date of any such meeting, nor
more than sixty (60) days prior to any other action.
Section 6.6. Regulations. Except as otherwise provided by law, the
Board may make such additional rules and regulations, not inconsistent with
these By-Laws, as it may deem expedient, concerning the issue, transfer and
registration of certificates for the securities of the
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Corporation. The Board may appoint, or authorize any officer or officers to
appoint, one or more transfer agents and one or more registrars and may require
all certificates for shares of capital stock to bear the signature or signatures
of any of them.
ARTICLE VII
GENERAL PROVISIONS
Section 7.1. Dividends and Distributions. Dividends and other
distributions upon or with respect to outstanding shares of stock of the
Corporation may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, bonds, property, or in stock of the
Corporation. The Board shall have full power and discretion, subject to the
provisions of the Certificate of Incorporation or the terms of any other
corporate document or instrument to determine what, if any, dividends or
distributions shall be declared and paid or made.
Section 7.2. Checks, etc. All checks or demands for money and notes or
other instruments evidencing indebtedness or obligations of the Corporation
shall be signed by such officer or officers or other person or persons as may
from time to time be designated by the Board of Directors.
Section 7.3. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its incorporation and the words "Corporate
Seal Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
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Section 7.4. Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors.
Section 7.5. General and Special Bank Accounts. The Board may authorize
from time to time the opening and keeping of general and special bank accounts
with such banks, trust companies or other depositories as the Board may
designate or as may be designated by any officer or officers of the Corporation
to whom such power of designation may be delegated by the Board from time to
time. The Board may make such special rules and regulations with respect to such
bank accounts, not inconsistent with the provisions of these By-Laws, as it may
deem expedient.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER PERSONS
Section 8.1. Indemnification by Corporation. To the extent permitted by
law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment) the Corporation shall indemnify
any person against any and all judgments, fines, and amounts paid in settling or
otherwise disposing of actions or threatened actions, and expenses in connection
therewith, incurred by reason of the fact that he, his testator or intestate is
or was a director or officer of the Corporation or of any other corporation of
any type or kind, domestic or foreign, which he served in any capacity at the
request of the Corporation. To the extent permitted by law, expenses so
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incurred by any such person in defending a civil or criminal action or
proceeding shall at his request be paid by the Corporation in advance of the
final disposition of such action or proceeding.
ARTICLE IX
ADOPTION AND AMENDMENTS
Section 9.1. Power to Amend. These By-Laws may be amended or repealed
and any new By-Laws may be adopted by the Board of Directors; provided that
these By-Laws and any other By-Laws amended or adopted by the Board of Directors
may be amended, may be reinstated, and new By-Laws may be adopted, by the
stockholders of the Corporation entitled to vote at the time for the election of
directors.
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CERTIFICATE OF INCORPORATION
OF
SAFETY COMPONENTS FABRIC TECHNOLOGIES, INC.
The undersigned, for the purposes of forming a corporation
pursuant to the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY as follows:
FIRST: The name of the Corporation is: Safety Components
Fabric Technologies, Inc.
SECOND: The registered office of the Corporation is to be
located at 1013 Centre Road, in the City of Wilmington, County of New Castle,
State of Delaware, 19805. The name of its registered agent at that address is
Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware.
FOURTH: The aggregate number of shares of stock which the
Corporation shall have authority to issue is one thousand shares, par value $.01
per share, all of which shall be designated "Common Stock."
FIFTH: The name and mailing address of the Incorporator are:
George Papadopoulos
c/o Safety Components International, Inc.
3190 Pullman Street
Costa Mesa, California 92626
SIXTH: In furtherance and not in limitation of the powers
conferred by statute, the board of directors is expressly authorized:
(a) to adopt, amend or repeal the By-Laws of the Corporation
in such manner and subject to such limitations, if any, as shall be set
forth in the By-Laws;
(b) to allot and authorize the issuance of the authorized but
unissued shares of the Corporation, including the declaration of
dividends payable in shares of any class to stockholders of any class;
and
(c) to exercise all of the powers of the Corporation, insofar
as the same may lawfully be vested by this certificate in the board of
directors.
<PAGE> 2
SEVENTH: No director shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of a fiduciary
duty as a director; provided, however, that to the extent required by the
provisions of Section 102(b)(7) of the General Corporation Law of the State of
Delaware or any successor statute, or any other laws of the State of Delaware,
this provision shall not eliminate or limit the liability of a director (i) for
any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the General Corporation Law of the State of Delaware or (iv) for any transaction
from which the director derived an improper personal benefit. If the General
Corporation Law of the State of Delaware hereafter is amended to authorize the
further elimination or limitation of the liability of directors, then the
liability of a director of the Corporation, in addition to the limitation on
personal liability provided herein, shall be limited to the fullest extent
permitted by the amended General Corporation Law of the State of Delaware. Any
repeal or modification of this paragraph SEVENTH by the stockholders of the
Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
as of the time of such repeal or modification.
IN WITNESS WHEREOF, I have hereunto set my hand this 15th day
of July, 1997.
--------------------------------------
George Papadopoulos
Sole Incorporator
- 2 -
<PAGE> 1
BY-LAWS
OF
SAFETY COMPONENTS FABRIC TECHNOLOGIES, INC.
ARTICLE I
OFFICES
Section 1.1. Registered Office. The registered statutory office of the
Corporation within the State of Delaware shall be located at the principal place
of business in said State of such corporation or individual acting as the
Corporation's registered agent in the State of Delaware.
Section 1.2. Other Offices. The Corporation may also have offices and
places of business at such other places both within and without the State of
Delaware as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.1. Place of Meetings. All meetings of stockholders shall be
held at the principal office of the Corporation, or at such other place within
or without the State of Delaware as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section 2.2. Annual Meetings. The annual meeting of stockholders for
the election of directors shall be held at such time on such day, other than a
legal holiday, as the Board of Directors in each such year determines. At the
annual meeting, the stockholders entitled to vote for the election of directors
shall elect, by a majority vote, a Board of Directors and transact such other
business as may properly come before the meeting.
Section 2.3. Special Meetings. Special meetings of stockholders, for
any purpose or purposes, may be called by a majority of the Board of Directors.
Any such request shall state the purpose or purposes of the proposed meeting. At
any special meeting of stockholders, only such business may be transacted as is
related to the purpose or purposes set forth in the notice of such meeting.
Section 2.4. Notice of Meetings. Written notice of every meeting of
stockholders, stating the place, date and hour thereof and, in the case of a
special meeting of stockholders, the purpose or purposes thereof and the person
or persons by whom or at whose direction such meeting has been called and such
notice is being issued, shall be given not less than ten (10) nor more than
<PAGE> 2
sixty (60) days before the date of the meeting, either personally or by mail, by
or at the direction of the Chairman of the Board, Secretary, or the persons
calling the meeting, to each stockholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be given when deposited in
the United States mail, postage prepaid, directed to the stockholder at his
address as it appears on the stock transfer books of the Corporation. Nothing
herein contained shall preclude the stockholders from waiving notice as provided
in Section 4.1 hereof.
Section 2.5. Quorum. The holders of a majority of the issued and
outstanding shares of stock of the Corporation entitled to vote, represented in
person or by proxy, shall be necessary to and shall constitute a quorum for the
transaction of business at any meeting of stockholders . If, however, such
quorum shall not be present or represented at any meeting of stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At any such adjourned meeting at which a quorum shall be present
or represented, any business may be transacted which might have been transacted
at the meeting as originally noticed. Notwithstanding the foregoing, if after
any such adjournment the Board of Directors shall fix a new record date for the
adjourned meeting, or if the adjournment is for more than thirty (30) days, a
notice of such adjourned meeting shall be given as provided in Section 2.4 of
these By-Laws, but such notice may be waived as provided in Section 4.1 hereof.
Section 2.6. Voting. At each meeting of stockholders, each stockholder
of record of shares of stock entitled to vote shall be entitled to vote in
person or by proxy, and each such holder shall be entitled to one vote for every
share standing in his name on the books of the Corporation as of the record date
fixed by the Board of Directors or prescribed by law and, if a quorum is
present, a majority of the shares of such stock present or represented at any
meeting of stockholders shall be the vote of the stockholders with respect to
any item of business, unless otherwise provided by any applicable provision of
law, by these By-Laws or by the Certificate of Incorporation.
Section 2.7. Proxies. Every stockholder entitled to vote at a meeting
or by consent without a meeting may authorize another person or persons to act
for him by proxy. Each proxy shall be in writing executed by the stockholder
giving the proxy or by his duly authorized attorney. No proxy shall be valid
after the expiration of three (3) years from its date, unless a longer period is
provided for in the proxy. Unless and until voted, every proxy shall be
revocable at the pleasure of the person who executed it, or his legal
representatives or assigns except in those cases where an irrevocable proxy
permitted by statute has been given.
Section 2.8. Consents. Whenever a vote of stockholders at a meeting
thereof is required or permitted to be taken in connection with any corporate
action by any provision of applicable law, the Certificate of Incorporation or
these By-Laws, the meeting, prior notice thereof and vote of stockholders may be
dispensed with if the holders of shares having not less than the minimum number
of votes that would have been necessary to authorize or take such action at a
meeting at
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which all shares entitled to vote thereon were present and voted shall consent
in writing to the taking of such action. Where corporate action is taken in such
matter by less than unanimous written consent, prompt notice of the taking of
such action shall be given thereto.
Section 2.9. Stock Records. The Secretary or agent having charge of the
stock transfer books shall make, at least ten (10) days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order and showing
the address of and the number and class and series, if any, of shares held by
each. Such list, for a period of ten (10) days prior to such meeting, shall be
kept at the principal place of business of the Corporation or at the office of
the transfer agent or registrar of the Corporation and such other places as
required by statute and shall be subject to the inspection by any stockholder at
any time during usual business hours. Such list shall also be produced and kept
open at the time and place of the meeting and shall be subject to the inspection
of any stockholder at any time during the meeting.
ARTICLE III
DIRECTORS
Section 3.1. Number. The number of directors of the Corporation which
shall constitute the entire Board of Directors shall initially be fixed by the
Incorporator and thereafter from time to time by a vote of a majority of the
entire Board and shall be not less than one nor more than five. The first Board
of Directors shall consist of two members.
Section 3.2. Resignation and Removal. Any director may resign at any
time upon notice of resignation to the Corporation. Any director may be removed
at any time by vote of the stockholders then entitled to vote for the election
of directors at a special meeting called for that purpose, either with or
without cause.
Section 3.3. Newly Created Directorship and Vacancies. Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason whatsoever shall be
filled by vote of the Board. If the number of directors then in office is less
than a quorum, such newly created directorships and vacancies may be filled by a
vote of a majority of the directors then in office. Any director elected to fill
a vacancy shall be elected until the next meeting of stockholders at which the
election of directors is in the regular course of business, and until his
successor has been elected and qualified.
Section 3.4. Powers and Duties. Subject to the applicable provisions of
law, these By-Laws or the Certificate of Incorporation, but in furtherance and
not in limitation of any rights therein conferred, the Board of Directors shall
have the control and management of the business and affairs of the Corporation
and shall exercise all such powers of the Corporation and do all such lawful
acts and things as may be exercised by the Corporation.
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Section 3.5. Place of Meetings. All meetings of the Board of Directors
may be held either within or without the State of Delaware.
Section 3.6. Annual Meetings. An annual meeting of each newly elected
Board of Directors shall be held immediately following the annual meeting of
stockholders, and no notice of such meeting to the newly elected directors shall
be necessary in order to legally constitute the meeting, provided a quorum shall
be present, or the newly elected directors may meet at such time and place as
shall be fixed by the written consent of all of such directors.
Section 3.7. Regular Meetings. Regular meetings of the Board of
Directors may be held upon such notice or without notice, and at such time and
at such place as shall from time to time be determined by the Board.
Section 3.8. Special Meetings. Special meetings of the Board of
Directors may be called by a majority of the Board of Directors. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the Board of Directors need be specified in the notice or waiver of notice of
such meeting.
Section 3.9. Notice of Meetings. Notice of each special meeting of the
Board (and of each regular meeting for which notice shall be required) shall be
given by the Secretary or an Assistant Secretary and shall state the place, date
and time of the meeting. Notice of each such meeting shall be given orally or
shall be mailed to each director at his residence or usual place of business. If
notice of less than three (3) days is given, it shall be oral, whether by
telephone or in person, or sent by special delivery mail or telegraph. If
mailed, the notice shall be given when deposited in the United States mail,
postage prepaid. Notice of any adjourned meeting, including the place, date and
time of the new meeting, shall be given to all directors not present at the time
of the adjournment, as well as to the other directors unless the place, date and
time of the new meeting is announced at the adjourned meeting. Nothing herein
contained shall preclude the directors from waiving notice as provided in
Section 4.1 hereof.
Section 3.10. Quorum and Voting. At all meetings of the Board of
Directors a majority of the entire Board shall be necessary to and shall
constitute a quorum for the transaction of business at any meeting of directors,
unless otherwise provided by any applicable provision of law, by these By-Laws,
or by the Certificate of Incorporation. The act of a majority of the directors
present at the time of the vote, if a quorum is present at such time, shall be
the act of the Board of Directors, unless otherwise provided by an applicable
provision of law, by these By-Laws or by the Certificate of Incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, until a
quorum shall be present.
Section 3.11. Compensation. The Board of Directors, by the affirmative
vote of a majority of the directors then in office, and irrespective of any
personal interest of any of its members, shall have authority to establish
reasonable compensation of all directors for services to
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the Corporation as directors, officers or otherwise.
Section 3.12. Books and Records. The directors may keep the books of
the Corporation, except such as are required by law to be kept within the state,
outside of the State of Delaware, at such place or places as they may from time
to time determine.
Section 3.13. Action Without a Meeting. Any action required or
permitted to be taken by the Board, or by a committee of the Board, may be taken
without a meeting if all members of the Board or the committee, as the case may
be, consent in writing to the adoption of a resolution authorizing the action.
Any such resolution and the written consents thereto by the members of the Board
or committee shall be filed with the minutes of the proceedings of the Board or
committee.
Section 3.14. Telephone Participation. Any one or more members of the
Board, or any committee of the Board, may participate in a meeting of the Board
or committee by means of a conference telephone call or similar communications
equipment allowing all persons participating in the meeting to hear each other
at the same time. Participation by such means shall constitute presence in
person at a meeting.
Section 3.15. Committees of the Board. The Board, by resolution adopted
by a majority of the entire Board, may designate one or more committees, each
consisting of one or more directors. The Board may designate one or more
directors as alternate members of any such committee. Such alternate members may
replace any absent member or members at any meeting of such committee. Each
committee (including the members thereof) shall serve at the pleasure of the
Board and shall keep minutes of its meetings and report the same to the Board.
Except as otherwise provided by law, each such committee, to the extent provided
in the resolution establishing it, shall have and may exercise all the authority
of the Board with respect to all matters. However, no such committee shall have
power or authority to:
(a) amend the Certificate of Incorporation;
(b) adopt an agreement of merger or consolidation;
(c) recommend to the stockholders the sale, lease or
exchange of all or substantially all of the
Corporation's property and assets;
(d) recommend to the stockholders a dissolution of the
Corporation or a revocation of a dissolution;
(e) amend these By-Laws; and unless expressly so provided
by resolution of the Board, these By-Laws or by the
Certificate of Incorporation, no such committee shall
have power or authority to:
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(1) declare a dividend;
(2) authorize the issuance of shares of the
Corporation of any class; or
(3) adopt a certificate of ownership and merger.
ARTICLE IV
WAIVER
Section 4.1. Waiver. Whenever a notice is required to be given by any
provision of law, by these By-Laws, or by the Certificate of Incorporation, a
waiver thereof in writing, whether before or after the time stated therein,
shall be deemed equivalent to such notice. In addition, any stockholder
attending a meeting of stockholders in person or by proxy without protesting
prior to the conclusion of the meeting the lack of notice thereof to him, and
any director attending a meeting of the Board of Directors without protesting
prior to the meeting or at its commencement such lack of notice, shall be
conclusively deemed to have waived notice of such meeting.
ARTICLE V
OFFICERS
Section 5.1. Executive Officers. The officers of the Corporation shall
be a Chief Executive Officer and/or President, a Treasurer and a Secretary. Any
person may hold two or more of such offices. The officers of the Corporation
shall be elected annually (and from time to time by the Board of Directors, as
vacancies occur), at the annual meeting of the Board of Directors following the
meeting of stockholders at which the Board of Directors was elected.
Section 5.2. Other Officers. The Board of Directors may appoint such
other officers and agents, including a Vice President, Assistant Vice
Presidents, Secretaries, Assistant Secretaries and Assistant Treasurers, as it
shall at any time or from time to time deem necessary or advisable.
Section 5.3. Authorities and Duties. All officers, as between
themselves and the Corporation, shall have such authority and perform such
duties in the management of business and affairs of the Corporation as may be
provided in these By-Laws, or, to the extent not so provided, as may be
prescribed by the Board of Directors.
Section 5.4. Tenure and Removal. The officers of the Corporation shall
be elected or appointed to hold office until their respective successors are
elected or appointed. All officers
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shall hold office at the pleasure of the Board of Directors, and any officer
elected or appointed by the Board of Directors may be removed at any time by the
Board of Directors for cause or without cause at any regular or special meeting.
Section 5.5. Vacancies. Any vacancy occurring in any office of the
Corporation, whether because of death, resignation or removal, with or without
cause, or any other reason, shall be filled by the Board of Directors.
Section 5.6. Compensation. The salaries and other compensation of all
officers and agents of the Corporation shall be fixed by or in the manner
prescribed by the Board of Directors.
Section 5.7. Chief Executive Officer. The Chief Executive Officer shall
have general supervision of the business and affairs of the Corporation and
shall have such powers and duties as the Board of Directors may from time to
time prescribe. In the absence of the Chairman of the Board, the Chief Executive
Officer shall preside at all meetings of the stockholders and the directors.
Section 5.8. President. The President shall have general charge of the
business and affairs of the Corporation subject to the control of the Board of
Directors and the Chief Executive Officer and in the absence of the Chairman of
the Board and the Chief Executive Officer, the President shall preside at all
meetings of the stockholders and the directors. The President shall perform such
other duties as are properly required of him by the Board of Directors.
Section 5.9. Vice President. Each Vice President, if any, shall perform
such duties as may from time to time be assigned to him by the Board of
Directors.
Section 5.10. Secretary. The Secretary shall attend all meetings of the
stockholders and all meetings of the Board of Directors and shall record all
proceedings taken at such meetings in a book to be kept for that purpose; he
shall see that all notices of meetings of stockholders and meetings of the Board
of Directors are duly given in accordance with the provisions of these By-Laws
or as required by law; he shall be the custodian of the records and of the
corporate seal or seals of the Corporation; he shall have authority to affix the
corporate seal or seals to all documents, the execution of which, on behalf of
the Corporation, under its seal, is duly authorized, and when so affixed it may
be attested by his signature; and in general, he shall perform all duties
incident to the office of the Secretary of a corporation, and such other duties
as the Board of Directors may from time to time prescribe.
Section 5.11. Treasurer. The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the
Corporation and shall deposit, or cause to be deposited, in the name and to the
credit of the Corporation, all moneys and valuable effects in such banks, trust
companies, or other depositories as shall from time to time be selected by the
Board of Directors. He shall keep full and accurate accounts of receipts and
disbursements in
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books belonging to the Corporation; he shall render to the Chief Executive
Officer and the President and to each member of the Board of Directors, whenever
requested, an account of all of his transactions as Treasurer and of the
financial condition of the Corporation; and in general, he shall perform all of
the duties incident to the office of the Treasurer of a corporation, and such
other duties as the Board of Directors may from time to time prescribe.
Section 5.12. Other Officers. The Board of Directors may also elect or
may delegate to the Chief Executive Officer or the President the power to
appoint such other officers as it may at any time or from time to time deem
advisable, and any officers so elected or appointed shall have such authority
and perform such duties as the Board of Directors, the Chief Executive Officer
or the President, if he shall have appointed them, may from time to time
prescribe.
ARTICLE VI
PROVISIONS RELATING TO STOCK CERTIFICATES AND STOCKHOLDERS
Section 6.1. Form and Signature. The shares of the Corporation shall be
represented by a certificate signed by the President or any Vice President and
by the Secretary or any Assistant Secretary or the Treasurer or any Assistant
Treasurer, and shall bear the seal of the Corporation or a facsimile thereof.
Each certificate representing shares shall state upon its face (a) that the
Corporation is formed under the laws of the State of Delaware, (b) the name of
the person or persons to whom it is issued, (c) the number of shares which such
certificate represents and (d) the par value, if any, of each share represented
by such certificate.
Section 6.2. Registered Stockholders . The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares of stock to receive dividends or other distributions, and to
vote as such owner, and to hold liable for calls and assessments a person
registered on its books as the owner of stock, and shall not be bound to
recognize any equitable or legal claim to or interest in such shares on the part
of any other person.
Section 6.3. Transfer of Stock. Upon surrender to the Corporation or
the appropriate transfer agent, if any, of the Corporation, of a certificate
representing shares of stock duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, and, in the event that the
certificate refers to any agreement restricting transfer of the shares which it
represents, proper evidence of compliance with such agreement, a new certificate
shall be issued to the person entitled thereto, and the old certificate canceled
and the transaction recorded upon the books of the Corporation.
Section 6.4. Lost Certificates, etc. The Corporation may issue a new
certificate for shares in place of any certificate theretofore issued by it,
alleged to have been lost, mutilated, stolen or destroyed, and the Board may
require the owner of such lost, mutilated, stolen or destroyed certificate, or
his legal representatives, to make an affidavit of that fact and/or to give
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the Corporation a bond in such sum as it may direct as indemnity against any
claim that may be made against the Corporation on account of the alleged loss,
mutilation, theft or destruction of any such certificate or the issuance of any
such new certificate.
Section 6.5. Record Date. For the purpose of determining the
stockholders entitled to notice of, or to vote at, any meeting of stockholders
or or any adjournment thereof, or to express consent to any corporate action
without a meeting, or for the purpose of determining stockholders entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock, or for the purpose of any other lawful action, the Board
may fix, in advance, a record date. Such date shall not be more than sixty (60)
nor less than ten (10) days before the date of any such meeting, nor more than
sixty (60) days prior to any other action.
Section 6.6. Regulations. Except as otherwise provided by law, the
Board may make such additional rules and regulations, not inconsistent with
these By-Laws, as it may deem expedient, concerning the issue, transfer and
registration of certificates for the securities of the Corporation. The Board
may appoint, or authorize any officer or officers to appoint, one or more
transfer agents and one or more registrars and may require all certificates for
shares of capital stock to bear the signature or signatures of any of them.
ARTICLE VII
GENERAL PROVISIONS
Section 7.1. Dividends and Distributions. Dividends and other
distributions upon or with respect to outstanding shares of stock of the
Corporation may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, bonds, property, or in stock of the
Corporation. The Board shall have full power and discretion, subject to the
provisions of the Certificate of Incorporation or the terms of any other
corporate document or instrument to determine what, if any, dividends or
distributions shall be declared and paid or made.
Section 7.2. Checks, etc. All checks or demands for money and notes or
other instruments evidencing indebtedness or obligations of the Corporation
shall be signed by such officer or officers or other person or persons as may
from time to time be designated by the Board of Directors.
Section 7.3. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its incorporation and the words "Corporate
Seal Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
Section 7.4. Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors.
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Section 7.5. General and Special Bank Accounts. The Board may authorize
from time to time the opening and keeping of general and special bank accounts
with such banks, trust companies or other depositories as the Board may
designate or as may be designated by any officer or officers of the Corporation
to whom such power of designation may be delegated by the Board from time to
time. The Board may make such special rules and regulations with respect to such
bank accounts, not inconsistent with the provisions of these By-Laws, as it may
deem expedient.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER PERSONS
Section 8.1. Indemnification by Corporation. To the extent permitted by
law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment) the Corporation shall indemnify
any person against any and all judgments, fines, and amounts paid in settling or
otherwise disposing of actions or threatened actions, and expenses in connection
therewith, incurred by reason of the fact that he, his testator or intestate is
or was a director or officer of the Corporation or of any other corporation of
any type or kind, domestic or foreign, which he served in any capacity at the
request of the Corporation. To the extent permitted by law, expenses so incurred
by any such person in defending a civil or criminal action or proceeding shall
at his request be paid by the Corporation in advance of the final disposition of
such action or proceeding.
ARTICLE IX
ADOPTION AND AMENDMENTS
Section 9.1. Power to Amend. These By-Laws may be amended or repealed
and any new By-Laws may be adopted by the Board of Directors; provided that
these By-Laws and any other By-Laws amended or adopted by the Board of Directors
may be amended, may be reinstated, and new By-Laws may be adopted, by the
stockholders of the Corporation entitled to vote at the time for the election of
directors.
10
<PAGE> 1
SAFETY COMPONENTS INTERNATIONAL, INC.,
as Issuer
and
The SUBSIDIARY GUARANTORS named herein
and
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
--------------------------
INDENTURE
Dated as of July 24, 1997
--------------------------
up to $150,000,000
10 1/8% Senior Subordinated Notes due 2007, Series A
10 1/8% Senior Subordinated Notes due 2007, Series B
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- ---------
<S> <C>
310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . 7.10; 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 7.08; 7.10; 11.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 11.03
(c) . . . . . . . . . . . . . . . . . . . . . . . . . 11.03
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . 7.06
(c) . . . . . . . . . . . . . . . . . . . . . . . . . 7.06; 11.02
(d) . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . 4.06; 4.08; 11.02
(b) . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . 7.02; 11.04
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . 7.02; 11.04
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . . 11.05
(f) . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(b)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 7.05; 11.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(a)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . 6.05; 7.01(c)
(e) . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316(a)(last sentence) . . . . . . . . . . . . . . . . . . 2.09
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . 6.04
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 6.07
(c) . . . . . . . . . . . . . . . . . . . . . . . . . 9.04
317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 2.04
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
(c) . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
</TABLE>
- --------------------
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
-i-
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Incorporation by Reference of TIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 1.03. Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.02. Execution and Authentication; Aggregate Principal Amount . . . . . . . . . . . . . . . . . . . 31
SECTION 2.03. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.04. Paying Agent To Hold Assets in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.05. Holder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 2.06. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 2.07. Replacement Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.08. Outstanding Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.09. Treasury Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 2.10. Temporary Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 2.11. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 2.12. Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 2.13. CUSIP Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 2.14. Deposit of Monies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 2.15. Restrictive Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 2.16. Book-Entry Provisions for Global Security . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 2.17. Special Transfer Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 2.18. Liquidated Damages Under Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . 44
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 3.02. Selection of Notes To Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 3.03. Optional Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 3.04. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 3.05. Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
</TABLE>
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<TABLE>
<CAPTION>
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----
<S> <C> <C>
SECTION 3.06. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 3.07. Notes Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 4.02. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 4.03. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 4.04. Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 4.05. Maintenance of Properties and Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 4.06. Compliance Certificate; Notice of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 4.07. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 4.08. Reports to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 4.09. Waiver of Stay, Extension or Usury Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 4.10. Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 4.11. Limitation on Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 4.12. Limitation on Incurrence of Additional Indebtedness. . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 4.13. Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries. . . . . 58
SECTION 4.14. Limitation on Restricted and Unrestricted Subsidiaries . . . . . . . . . . . . . . . . . . . . . 59
SECTION 4.15. Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 4.16. Limitation on Asset Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 4.17. Limitation on Preferred Stock of Restricted Subsidiaries . . . . . . . . . . . . . . . . . . . . 67
SECTION 4.18. Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 4.19. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 4.20. Additional Subsidiary Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 4.21. Prohibition on Incurrence of Senior Subordinated Debt. . . . . . . . . . . . . . . . . . . . . . 69
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 5.02. Successor Corporation Substituted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE SIX
REMEDIES
SECTION 6.01. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 6.02. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 6.03. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 6.04. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 6.05. Control by Majority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 6.06. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 6.07. Right of Holders To Receive Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 6.08. Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 6.09. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 6.11. Undertaking for Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 6.12. Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 7.02. Rights of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 7.03. Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 7.05. Notice of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 7.06. Reports by Trustee to Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 7.07. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 7.08. Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 7.09. Successor Trustee by Merger, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 7.10. Eligibility; Disqualification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 7.11. Preferential Collection of Claims Against the Company. . . . . . . . . . . . . . . . . . . . . . 86
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of Company's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 8.02. Application of Trust Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
SECTION 8.03. Repayment to the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
SECTION 8.04. Reinstatement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 8.05. Acknowledgment of Discharge by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE NINE
MODIFICATION OF THE INDENTURE
SECTION 9.01. Without Consent of Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 9.02. With Consent of Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 9.03. Compliance with TIA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
SECTION 9.04. Revocation and Effect of Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
SECTION 9.05. Notation on or Exchange of Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
SECTION 9.06. Trustee To Sign Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
ARTICLE TEN
SUBORDINATION
SECTION 10.01. Notes Subordinated to Senior Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . 94
SECTION 10.02. Suspension of Payment When Senior Indebtedness is in Default. . . . . . . . . . . . . . . . . . 94
SECTION 10.03. Notes Subordinated to Prior Payment of All Senior Indebtedness on Dissolution, Liquidation or
Reorganization of Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 10.04. Holders To Be Subrogated to Rights of Holders of Senior Indebtedness. . . . . . . . . . . . . . 98
SECTION 10.05. Obligations of the Company Unconditional. . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
SECTION 10.06. Trustee Entitled to Assume Payments Not Prohibited in Absence of Notice. . . . . . . . . . . . 99
SECTION 10.07. Application by Trustee of Assets Deposited with It. . . . . . . . . . . . . . . . . . . . . . . 100
SECTION 10.08. No Waiver of Subordination Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
SECTION 10.09. Holders Authorize Trustee To Effectuate Subordination of Notes. . . . . . . . . . . . . . . . . 101
SECTION 10.10. Right of Trustee to Hold Senior Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . 101
SECTION 10.11. This Article Ten Not To Prevent Events of Default. . . . . . . . . . . . . . . . . . . . . . . 102
SECTION 10.12. No Fiduciary Duty of Trustee to Holders of Senior Indebtedness. . . . . . . . . . . . . . . . . 102
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
SECTION 11.02. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
</TABLE>
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<TABLE>
<S> <C> <C>
SECTION 11.03. Communications by Holders with Other Holders. . . . . . . . . . . . . . . . . . . . . . . . . . 104
SECTION 11.04. Certificate and Opinion as to Conditions Precedent. . . . . . . . . . . . . . . . . . . . . . . 104
SECTION 11.05. Statements Required in Certificate or Opinion. . . . . . . . . . . . . . . . . . . . . . . . . 105
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar. . . . . . . . . . . . . . . . . . . . . . . . . . . 105
SECTION 11.07. Legal Holidays. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
SECTION 11.08. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
SECTION 11.09. No Adverse Interpretation of Other Agreements. . . . . . . . . . . . . . . . . . . . . . . . . 106
SECTION 11.10. No Personal Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
SECTION 11.11. Successors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
SECTION 11.12. Duplicate Originals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
SECTION 11.13. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
ARTICLE TWELVE
GUARANTEE OF NOTES
SECTION 12.01. Unconditional Guarantee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
SECTION 12.02. Limitations on Guarantees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
SECTION 12.03. Execution and Delivery of Guarantee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
SECTION 12.04. Release of a Subsidiary Guarantor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
SECTION 12.05. Waiver of Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
SECTION 12.06. No Set-Off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
SECTION 12.07. Obligations Absolute. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
SECTION 12.08. Obligations Continuing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
SECTION 12.09. Obligations Not Reduced. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
SECTION 12.10. Obligations Reinstated. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
SECTION 12.11. Obligations Not Affected. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
SECTION 12.12. Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
SECTION 12.13. No Obligation To Take Action Against the Company. . . . . . . . . . . . . . . . . . . . . . . . 115
SECTION 12.14. Dealing with the Company and Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
SECTION 12.15. Default and Enforcement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
SECTION 12.16. Amendment, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
SECTION 12.17. Acknowledgment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
SECTION 12.18. Costs and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
SECTION 12.19. No Merger or Waiver; Cumulative Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
SECTION 12.20. Survival of Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
SECTION 12.21. Guarantee in Addition to Other Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . 117
SECTION 12.22. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
SECTION 12.23. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
</TABLE>
-vi-
<PAGE> 8
<TABLE>
<S> <C> <C>
ARTICLE THIRTEEN
SUBORDINATION OF GUARANTEE
SECTION 13.01. Obligations of Guarantors Subordinated to Guarantor Senior Indebtedness . . . . . . . . . . . . 118
SECTION 13.02. Suspension of Guarantee Obligations When Guarantor Senior Indebtedness is in Default . . . . . 118
SECTION 13.03. Guarantee Obligations Subordinated to Prior Payment of All Guarantor Senior Indebtedness
on Dissolution, Liquidation or Reorganization of Such Subsidiary Guarantor . . . . . . . . . 120
SECTION 13.04. Holders of Guarantee Obligations To Be Subrogated to Rights of Holders of Guarantor Senior
Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
SECTION 13.05. Obligations of the Subsidiary Guarantors' Unconditional . . . . . . . . . . . . . . . . . . . . 123
SECTION 13.06. Trustee Entitled To Assume Payments Not Prohibited in Absence of Notice . . . . . . . . . . . . 124
SECTION 13.07. Application by Trustee of Assets Deposited with It . . . . . . . . . . . . . . . . . . . . . . 124
SECTION 13.08. No Waiver of Subordination Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
SECTION 13.09. Holders Authorize Trustee To Effectuate Subordination of Guarantee Obligations . . . . . . . . 126
SECTION 13.10. Right of Trustee to Hold Guarantor Senior Indebtedness . . . . . . . . . . . . . . . . . . . . 126
SECTION 13.11. No Suspension of Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
SECTION 13.12. No Fiduciary Duty of Trustee to Holders of Guarantor Senior Indebtedness . . . . . . . . . . . 127
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
EXHIBIT A - Form of Series A Note . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . A-1
Exhibit B - Form of Series B Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
Exhibit C - Form of Legend for Global Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
Exhibit D - Form of Certificate To Be Delivered in Connection with Transfers to Non-QIB Accredited Investors . . . . D-1
Exhibit E - Form of Certificate To Be Delivered in Connection with Transfers Pursuant to Regulation S . . . . . . . . E-1
Exhibit F - Form of Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>
-vii-
<PAGE> 9
INDENTURE, dated as of July 24, 1997, among Safety Components
International, Inc., a Delaware corporation (the "Company"), each of the
Subsidiary Guarantors named herein, as guarantors, and IBJ Schroder Bank &
Trust Company, as Trustee (the "Trustee").
The Company has duly authorized the creation of an issue of 10 1/8%
Senior Subordinated Notes due 2007, Series A, and 10 1/8% Senior Subordinated
Notes due 2007, Series B, to be issued in exchange for the 10 1/8% Senior
Subordinated Notes due 2007, Series A, pursuant to the Registration Rights
Agreement (as defined herein) and, to provide therefor, the Company has duly
authorized the execution and delivery of this Indenture. All things necessary
to make the Notes (as defined), when duly issued and executed by the Company,
and authenticated and delivered hereunder, the valid obligations of the
Company, and to make this Indenture a valid and binding agreement of the
Company, have been done.
Each party hereto agrees as follows for the benefit of the other parties
and for the equal and ratable benefit of the Holders (as defined) of the
Company's 10 1/8% Senior Subordinated Notes due 2007, Series A and Series B.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary
of such Person or at the time it merges or consolidates with such Person or any
of its Restricted Subsidiaries or assumed in connection with the acquisition of
assets from such Person, and in each case not incurred by such Person in
connection with, or in anticipation or contemplation of, such Person becoming a
Restricted Subsidiary of such Person or such acquisition, merger or
consolidation.
"Additional Interest" shall have the meaning set forth in the
Registration Rights Agreement.
"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under
<PAGE> 10
-2-
common control with, such specified Person. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative of the foregoing.
"Affiliate Transaction" has the meaning provided in Section 4.11.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Agent Members" has the meaning provided in Section 2.16.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary of the Company, or (b) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any Person (other
than a Restricted Subsidiary of the Company) which constitute all or
substantially all of the assets of such Person or comprises any division or
line of business of such Person or any other properties or assets of such
Person other than in the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary
course of business), assignment or other transfer for value by the Company or
any of its Restricted Subsidiaries (including any Sale and Leaseback
Transaction) to any Person other than the Company or a Wholly Owned Restricted
Subsidiary of the Company of (a) any Capital Stock of any Restricted Subsidiary
of the Company; or (b) any other property or assets of the Company or any
Restricted Subsidiary of the Company other than in the ordinary course of
business; provided, however, that Asset Sales shall not include (i) any
transaction or series of related transactions for which the Company or its
Restricted Subsidiaries receive aggregate consideration of less than $3.0
million in any consecutive 12-month period, (ii) the sale, lease, conveyance,
disposition or other transfer of all or substantially all of the assets of the
Company as permitted under Section 5.01 or any disposition that constitutes a
Change of Control, (iii) disposals or replacements of obsolete equipment in the
ordinary course of business,
<PAGE> 11
-3-
and (iv) the sale, lease, conveyance, disposition or other transfer by the
Company or any Restricted Subsidiary of assets or property to one or more
Wholly Owned Restricted Subsidiaries in connection with Investments permitted
under Section 4.10.
"Authenticating Agent" has the meaning provided in Section 2.02.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal, state
or foreign law for the relief of debtors.
"Blockage Period" has the meaning provided in Section 10.02.
"Board of Directors" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means any day other than a Saturday, Sunday or any other
day on which banking institutions in the city of New York are required or
authorized by law or other governmental action to be closed.
"Capitalized Lease Obligation" means, as to any Person, the obligations
of such Person under a lease that are required to be classified and accounted
for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether voting or nonvoting) of corporate stock,
including each class of Common Stock and Preferred Stock of such Person and
(ii) with respect to any Person that is not a corporation, any and all
partnership or other equity interests of such Person.
<PAGE> 12
-4-
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia or any U.S. branch of a foreign bank having at the date of
acquisition thereof combined capital and surplus of not less than $250,000,000;
(v) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (i) above entered into
with any bank meeting the qualifications specified in clause (iv) above; and
(vi) money market funds which invest substantially all their assets in
securities of the types described in clauses (i) through (v) above.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all of the assets of
the Company to any Person or group of related Persons for purposes of Section
13(d) of the Exchange Act (a "Group"), together with any Affiliates thereof
(whether or not otherwise in compliance with the provisions of this Indenture);
(ii) the approval by the holders of Capital Stock of the Company of any plan or
proposal for the liquidation or dissolution of the Company (whether or not
otherwise in compliance with the provisions of this Indenture); (iii) any
Person or Group other than the Permitted Holder or a Group controlled by the
Permitted Holder shall become the owner, directly or indirectly, beneficially
or of record, of shares representing more than 50% of the aggregate ordinary
voting power represented by the issued and outstanding Capital Stock of the
Company; or (iv) the replacement of a majority of the Board of Directors of the
Company from the directors who constituted the Board of Directors of the
Company on the Issue Date, and such replacement shall not have been ap-
<PAGE> 13
-5-
proved by a vote of at least a majority of the Board of Directors of the
Company then still in office who either were members of such Board of Directors
on the Issue Date or whose election as a member of such Board of Directors was
previously so approved.
"Change of Control Offer" has the meaning provided in Section 4.15.
"Change of Control Payment Date" has the meaning provided in Section
4.15.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means, with respect to any Person, any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or non-voting) of such Person's common stock, whether
outstanding on the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means such
successor and also includes for the purposes of any provision contained herein
and required by the TIA any other obligor on the Notes.
"Consolidated EBITDA" means, with respect to any Person for any period,
the sum (without duplication) of (i) Consolidated Net Income and (ii) to the
extent Consolidated Net Income has been reduced thereby, (A) all income taxes
of such Person and its Restricted Subsidiaries paid or accrued in accordance
with GAAP for such period (other than income taxes attributable to
extraordinary, unusual or nonrecurring gains or losses or taxes attributable to
sales or dispositions outside the ordinary course of business), (B)
Consolidated Interest Expense, (C) Consolidated Non-cash Charges, less any
non-cash items increasing Consolidated Net Income for such period, all as
determined on a consolidated basis for such Person and its Restricted
Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated
<PAGE> 14
-6-
Fixed Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed
Charges of such Person for the Four Quarter Period. In addition to and without
limitation of the foregoing, for purposes of this definition, "Consolidated
EBITDA" and "Consolidated Fixed Charges" shall be calculated after giving
effect on a pro forma basis for the period of such calculation to (i) the
incurrence or repayment of any Indebtedness of such Person or any of its
Restricted Subsidiaries (and the application of the proceeds thereof) giving
rise to the need to make such calculation and any incurrence or repayment of
other Indebtedness (and the application of the proceeds thereof), other than
the incurrence or repayment of Indebtedness in the ordinary course of business
for working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the
proceeds thereof), occurred on the first day of the Four Quarter Period and
(ii) any Asset Sales or Asset Acquisitions (including, without limitation, any
Asset Acquisition giving rise to the need to make such calculation as a result
of such Person or one of its Restricted Subsidiaries (including any Person who
becomes a Restricted Subsidiary as a result of the Asset Acquisition)
incurring, assuming or otherwise being liable for Acquired Indebtedness and
also including any Consolidated EBITDA (including any pro forma expense and
cost reductions calculated on a basis consistent with Regulation S-X under the
Securities Act as in effect on the Issue Date) (provided that such Consolidated
EBITDA shall be included only to the extent includable pursuant to the
definition of "Consolidated Net Income" attributable to the assets which are
the subject of the Asset Acquisition or Asset Sale during the Four Quarter
Period) occurring during the Four Quarter Period or at any time subsequent to
the last day of the Four Quarter Period and on or prior to the Transaction
Date, as if such Asset Sale or Asset Acquisition (including the incurrence,
assumption or liability for any such Acquired Indebtedness) occurred on the
first day of the Four Quarter Period. If such Person or any of its Restricted
Subsidiaries directly or indirectly guarantees Indebtedness of a third Person,
the preceding sentence shall give effect to the incurrence of such guaranteed
Indebtedness as if such Person or any Restricted Subsidiary of such Person had
directly incurred or otherwise assumed such guaranteed Indebtedness.
Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio," (1) interest on outstanding Indebtedness determined on
a fluctuating basis as of the Transaction
<PAGE> 15
-7-
Date and which will continue to be so determined thereafter shall be deemed to
have accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; (2) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate,
a eurocurrency interbank offered rate, or other rates, then the interest rate
in effect on the Transaction Date will be deemed to have been in effect during
the Four Quarter Period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense,
plus (ii) the product of (x) the amount of all dividend payments on any series
of Preferred Stock of such Person (other than dividends paid in Qualified
Capital Stock) paid, accrued or scheduled to be paid or accrued during such
period times (y) a fraction, the numerator of which is one and the denominator
of which is one minus the then current effective consolidated federal, state
and local tax rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication: (i) the aggregate of the interest
expense of such Person and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including without
limitation, (a) any amortization of debt discount, (b) the net costs under
Interest Swap Obligations, (c) all capitalized interest and (d) the interest
portion of any deferred payment obligation; and (ii) the interest component of
Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by such Person and its Restricted Subsidiaries during such period as
determined on a consolidated basis in accordance with GAAP, minus amortization
or write-off of deferred financing costs.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided, however, that there shall be excluded therefrom (a) gains
(and losses) on an after-tax effected basis from as-
<PAGE> 16
-8-
set sales or abandonments or reserves relating thereto, (b) items classified as
extraordinary or nonrecurring gains or losses including, without limitation,
restructuring costs related to facilities and/or operating line closings) on an
after tax effected basis, (c) the net income or loss of any Person acquired in
a "pooling of interests" transaction accrued prior to the date it becomes a
Restricted Subsidiary of the referent Person or is merged or consolidated with
the referent Person or any Restricted Subsidiary of the referent Person, (d)
the net income (but not loss) of any Restricted Subsidiary of the referent
Person to the extent that the declaration of dividends or similar distributions
by that Restricted Subsidiary of that income is restricted by a contract,
operation of law or otherwise, (e) the net income or loss of any other Person,
other than a Subsidiary of the referent Person, except to the extent (in the
case of net income) of cash dividends or distributions paid to the referent
Person, or to a Wholly Owned Restricted Subsidiary of the referent Person, by
such other Person, (f) any restoration to income of any contingency reserve of
an extraordinary, non-recurring or unusual nature, except to the extent that
provision for such reserve was made out of Consolidated Net Income accrued at
any time following the Issue Date, (g) income or loss attributable to
discontinued operations (including, without limitation, operations disposed of
during such period whether or not such operations were classified as
discontinued), (h) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets, any
earnings of the successor corporation prior to such consolidation, merger or
transfer of assets and (i) any amortization or write-off of deferred financing
costs.
"Consolidated Net Worth" means, with respect to any Person, the
consolidated stockholders' equity of such Person, determined on a consolidated
basis in accordance with GAAP, less (without duplication) amounts attributable
to Disqualified Capital Stock of such Person.
"Consolidated Non-cash Charges" means, with respect to any Person for any
period, the aggregate (A) depreciation, (B) amortization, (C) LIFO charges, (D)
the amount of any restructuring reserve or charge, and (E) other non-cash
charges of such Person and its Restricted Subsidiaries reducing Consolidated
Net Income of such Person and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP (excluding for
purposes of clause (C) any such charges which require an accrual of or a
reserve for cash charges for any future period).
<PAGE> 17
-9-
"consolidation" means, with respect to any Person, the consolidation of
the accounts of the Restricted Subsidiaries of such Person with those of such
Person, all in accordance with GAAP; provided, however, that "consolidation"
will not include consolidation of the accounts of any Unrestricted Subsidiary
of such Person with the accounts of such Person. The term "consolidated" has a
correlative meaning to the foregoing.
"Corporate Trust Office" means the office of the Trustee at which at any
particular time its corporate trust business shall be principally administered,
which office at the date of execution of this Indenture is located at One State
Street, New York, New York 10004.
"Covenant Defeasance" has the meaning set forth in Section 8.01.
"Credit Agreement" means the Credit Agreement dated as of May 21, 1997
among the Company, Phoenix Airbag GmbH and Automotive Safety Components
International, Inc., and as such agreement may be further amended (including
any amendment and restatement thereof), supplemented or otherwise modified from
time to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including increasing the amount of
available borrowings thereunder (provided, however, that such increase in
borrowings is permitted by Section 4.12) or adding Subsidiaries of the Company
as additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of
Default.
"Defeasance Payment" means any distribution from any defeasance trust
described under Section 8.01.
<PAGE> 18
-10-
"Depository" means The Depository Trust Company, its nominees and
successors.
"Designated Senior Indebtedness" means (i) Indebtedness under or in
respect of the Credit Agreement and (ii) any other Indebtedness constituting
Senior Indebtedness or Guarantor Senior Indebtedness which, at the time of
determination, has an aggregate principal amount of at least $2.0 million and
is specifically designated in the instrument evidencing such Senior
Indebtedness as "Designated Senior Indebtedness" or "Guarantor Senior
Indebtedness" by the Company or the applicable Subsidiary Guarantor, as the
case may be.
"Disqualified Capital Stock" means that portion of any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof (other than as a result of a Change of Control) on or prior to the
final maturity of the Notes.
"Event of Default" has the meaning provided in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto.
"Exchange Notes" means the 10 1/8% Senior Subordinated Notes due 2007,
Series B to be issued in exchange for the Initial Notes pursuant to the
Registration Rights Agreement or, with respect to Initial Notes issued under
this Indenture subsequent to the Issue Date pursuant to Section 2.02, a
registration rights agreement substantially identical to the Registration
Rights Agreement.
"Exchange Offer" has the meaning provided in the Registration Rights
Agreement.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Credit Agreement) in existence
on the Issue Date, until such amounts are repaid.
"fair market value" means, with respect to any asset or property, the
price which could be negotiated in an arm's- length, free market transaction,
for cash, between a willing seller and a willing and able buyer, neither of
whom is under
<PAGE> 19
-11-
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the Board of Directors of the Company acting reasonably
and in good faith and shall be evidenced by a Board Resolution of the Board of
Directors of the Company.
"Foreign Subsidiary" means any Subsidiary of the Company organized under
the laws of a country or jurisdiction other than the United States, any state
or territory thereof or the District of Columbia.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect on the Issue Date.
"Global Note" has the meaning provided in Section 2.01.
"guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness or other obligation of such other Person (whether arising by
virtue of partnership arrangements, or by agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of
assuring in any other manner the obligee of such Indebtedness or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part) (but if in part, only to the extent
thereof); provided, however, that the term "guarantee" shall not include (A)
endorsements for collection or deposit in the ordinary course of business and
(B) guarantees (other than guarantees of Indebtedness) by the Company in
respect of assisting one or more Subsidiaries in the ordinary course of their
respective businesses, including without limitation guarantees of trade
obligations and operating leases, on ordinary business terms. The term
"guarantee" used as a verb has a corresponding meaning.
<PAGE> 20
-12-
"Guarantee" means the guarantee of the obligations under this Indenture
and the Notes by each of the Subsidiary Guarantors as set forth in Article
Twelve.
"Guarantor Senior Indebtedness" means, with respect to any Subsidiary
Guarantor, the principal of, premium, if any, and interest (including any
interest accruing subsequent to the filing of a petition of bankruptcy at the
rate provided for in the documentation with respect thereto, whether or not
such interest is an allowed claim under applicable law) on any Indebtedness of
such Subsidiary Guarantor, whether outstanding on the Issue Date or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Without limiting the
generality of the foregoing, "Guarantor Senior Indebtedness" shall also include
the principal of, premium, if any, interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for
in the documentation with respect thereto, to the extent such interest is an
allowed claim under applicable law) on, and all other amounts owing in respect
of, (x) all monetary obligations of every nature of a Subsidiary Guarantor
under the Credit Agreement, including, without limitation, obligations to pay
principal and interest, reimbursement obligations under letters of credit,
fees, expenses and indemnities, (y) all Interest Swap Obligations and (z) all
obligations under Currency Agreements, in each case whether outstanding on the
Issue Date or thereafter incurred. Notwithstanding the foregoing, "Senior
Indebtedness" shall not include (i) any Indebtedness of a Subsidiary Guarantor
to a Subsidiary of such Subsidiary Guarantor or any Affiliate of such
Subsidiary Guarantor or any of such Affiliate's Subsidiaries, (ii) Indebtedness
to, or guaranteed on behalf of, any shareholder, director, officer or employee
of the Company or any Subsidiary of the Company (including, without limitation,
amounts owed for compensation), (iii) Indebtedness to trade creditors and other
amounts incurred in connection with obtaining goods, materials or services,
(iv) Indebtedness represented by Disqualified Capital Stock, (v) any liability
for federal, state, local or other taxes owed or owing by the Company, (vi)
Indebtedness incurred in violation of Section 4.12, (vii) Indebtedness which,
when incurred and without respect to any election under Section 1111(b) of
Title 11, United States Code is without recourse to the Company and (viii) any
Indebtedness which is, by its express terms, subordinated in right of payment
to any other Indebtedness of a Subsidiary Guarantor.
<PAGE> 21
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"Holder" means any holder of Notes.
"IAI Global Note" means, a permanent global note in registered form
representing the aggregate principal amount of Notes sold to Institutional
Accredited Investors.
"incur" has the meaning set forth in Section 4.12.
"Indebtedness" means, with respect to any Person, without duplication,
(i) all Obligations of such Person for borrowed money, (ii) all Obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all Capitalized Lease Obligations of such Person, (iv) all Obligations of
such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business that are not overdue by 90 days or
more or are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted), (v) all Obligations for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (vi) guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (i) through (v) above and clause (viii)
below, (vii) all Obligations of any other Person of the type referred to in
clauses (i) through (vi) which are secured by any lien on any property or asset
of such Person, the amount of such Obligation being deemed to be the lesser of
the fair market value of such property or asset or the amount of the Obligation
so secured, (viii) all Obligations under currency agreements and interest swap
agreements of such Person and (ix) all Disqualified Capital Stock issued by
such Person with the amount of Indebtedness represented by such Disqualified
Capital Stock being equal to the greater of its voluntary or involuntary
liquidation preference and its maximum fixed repurchase price, but excluding
accrued dividends, if any. For purposes hereof, the "maximum fixed repurchase
price" of any Disqualified Capital Stock which does not have a fixed repurchase
price shall be calculated in accordance with the terms of such Disqualified
Capital Stock as if such Disqualified Capital Stock were purchased on any date
on which Indebtedness shall be required to be determined pursuant to this
Indenture, and if such price is based upon, or measured by, the fair market
value of such Disqualified Capital Stock, such fair market value shall be
determined reasonably and in good faith by the Board of Directors of the issuer
of such Disqualified Capital Stock.
<PAGE> 22
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"Indenture" means this Indenture, as amended or supplemented from time to
time in accordance with the terms hereof.
"Independent Financial Advisor" means a firm (i) which does not, and
whose directors, officers and employees or Affiliates do not, have a direct or
indirect material financial interest in the Company and (ii) which, in the
judgment of the Board of Directors of the Company, is otherwise, independent
and qualified to perform the task for which it is to be engaged.
"Initial Notes" means, collectively, (i) the 10 1/8% Senior Subordinated
Notes due 2007, Series A, of the Company issued on the Issue Date and (ii) one
or more series of 10 1/8% Senior Subordinated Notes due 2007 that are issued
under this Indenture subsequent to the Issue Date pursuant to Section 2.02, in
each case for so long as such securities constitute Restricted Securities.
"Initial Purchasers" means BT Securities Corporation, Alex. Brown & Sons
Incorporated and BancAmerica Securities, Inc.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act.
"interest" means, when used with respect to any Note, the amount of all
interest accruing on such Note, including any applicable defaulted interest
pursuant to Section 2.12 and any Additional Interest pursuant to the
Registration Rights Agreement.
"Interest Payment Date" means the stated maturity of an installment of
interest on the Notes.
"Interest Swap Obligations" means the obligations of any Person pursuant
to any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated
by applying a fixed or a floating rate of interest on the same notional amount
and shall include, without limitation, interest rate swaps, caps, floors,
collars and similar agreements.
<PAGE> 23
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"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.
"Investment" means, with respect to any Person, any direct or indirect
loan or other extension of credit (including, without limitation, a guarantee)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any Person. "Investment" shall exclude extensions of trade credit
by the Company and its Restricted Subsidiaries on commercially reasonable terms
in accordance with normal trade practices of the Company or such Restricted
Subsidiary, as the case may be. For the purposes of Section 4.10, the amount
of any Investment shall be the original cost of such Investment plus the cost
of all additional Investments by the Company or any of its Restricted
Subsidiaries, without any adjustments for increases or decreases in value, or
write-ups, write-downs or write-offs with respect to such Investment, reduced
by the payment of dividends or distributions in connection with such Investment
or any other amounts received in respect of such Investment; provided, however,
that no such payment of dividends or distributions or receipt of any such other
amounts shall reduce the amount of any Investment if such payment of dividends
or distributions or receipt of any such amounts would be included in
Consolidated Net Income. If the Company or any Restricted Subsidiary of the
Company sells or otherwise disposes of any Common Stock of any direct or
indirect Restricted Subsidiary of the Company such that, after giving effect to
any such sale or disposition, the Company no longer owns, directly or
indirectly, greater than 50% of the outstanding Common Stock of such Restricted
Subsidiary, the Company shall be deemed to have made an Investment on the date
of any such sale or disposition equal to the fair market value of the Common
Stock of such former Restricted Subsidiary not sold or disposed of.
"Issue Date" means July 24, 1997.
"Legal Defeasance" has the meaning set forth in Section 8.01.
"Legal Holiday" has the meaning provided in Section 11.07.
<PAGE> 24
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"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"Maturity Date" means July 15, 2007.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest) received by the Company or any of its Restricted Subsidiaries from
such Asset Sale net of (a) reasonable out-of-pocket expenses and fees relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees and sales commissions), (b) taxes paid or payable after
taking into account any reduction in consolidated tax liability due to
available tax credits or deductions and any tax sharing arrangements, (c)
repayment of Indebtedness that is required to be repaid in connection with such
Asset Sale and (d) appropriate amounts to be provided by the Company or any
Restricted Subsidiary, as the case may be, as a reserve, in accordance with
GAAP, against any liabilities associated with such Asset Sale and retained by
the Company or any Restricted Subsidiary, as the case may be, after such Asset
Sale, including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale.
"Net Proceeds Offer" has the meaning set forth in Section 4.16.
"Net Proceeds Offer Amount" has the meaning set forth in Section 4.16.
"Net Proceeds Offer Payment Date" has the meaning set forth in Section
4.16.
"Net Proceeds Offer Trigger Date" has the meaning set forth in Section
4.16.
"Non-U.S. Person" means a person who is not a U.S. person, as defined in
Regulation S.
<PAGE> 25
-17-
"Notes" means, collectively, the Initial Notes, the Private Exchange
Notes, if any, and the Unrestricted Notes, treated as a single class of
securities, as amended or supplemented from time to time in accordance with the
terms of this Indenture, that are issued pursuant to this Indenture.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of the Board of
Directors, the Chief Executive Officer, the President, any Vice President, the
Chief Financial Officer, the Treasurer, the Controller, or the Secretary of
such Person, or any other officer designated by the Board of Directors serving
in a similar capacity and with respect to the Trustee or any agent of the
Trustee, a Trust Officer.
"Officers' Certificate" means a certificate signed by two Officers of the
Company.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee complying with the requirements of
Sections 11.04 and 11.05, as they relate to the giving of an Opinion of
Counsel.
"Paying Agent" has the meaning provided in Section 2.03.
"Permitted Holder" means Robert A. Zummo and his Affiliates.
"Permitted Indebtedness" means, without duplication, each of the
following and the Guarantees:
(i) Indebtedness under the Notes issued on the Issue Date and the
Guarantees outstanding on the Issue Date;
(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed $27.0
million in the aggregate reduced by any required permanent repayments
pursuant to Section 4.16 (which are accompanied by a corresponding
permanent commitment reduction) thereunder (it being recognized that a
reduction in the borrowing base in and of itself shall not be deemed a
required permanent repayment);
<PAGE> 26
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(iii) Interest Swap Obligations of the Company covering Indebtedness
of the Company or any of its Restricted Subsidiaries; provided, however,
that such Interest Swap Obligations are entered into to protect the
Company and its Restricted Subsidiaries from fluctuations in interest
rates on Indebtedness incurred in accordance with this Indenture to the
extent the notional principal amount of such Interest Swap Obligation
does not exceed the principal amount of the Indebtedness to which such
Interest Swap Obligation relates;
(iv) Indebtedness under Currency Agreements; provided, however, that
in the case of Currency Agreements which relate to Indebtedness, such
Currency Agreements do not increase the Indebtedness of the Company and
its Restricted Subsidiaries outstanding other than as a result of
fluctuations in foreign currency exchange rates or by reason of fees,
indemnities and compensation payable thereunder;
(v) Indebtedness of a Restricted Subsidiary of the Company to the
Company or to a Wholly Owned Restricted Subsidiary of the Company for so
long as such Indebtedness is held by the Company or a Wholly Owned
Restricted Subsidiary of the Company, in each case subject to no Liens
held by any Person other than the Company or a Wholly Owned Restricted
Subsidiary of the Company; provided, however, that if as of any date any
Person other than the Company or a Wholly Owned Restricted Subsidiary of
the Company owns or holds any such Indebtedness or holds a Lien in
respect of such Indebtedness, such date shall be deemed the incurrence of
Indebtedness not constituting Permitted Indebtedness by the issuer of
such Indebtedness;
(vi) Indebtedness of the Company to a Wholly Owned Restricted
Subsidiary of the Company for so long as such Indebtedness is held by a
Wholly Owned Restricted Subsidiary of the Company, in each case subject
to no Lien; provided, however, that (a) any Indebtedness of the Company
to any Wholly Owned Restricted Subsidiary of the Company that is not a
Subsidiary Guarantor is unsecured and subordinated, pursuant to a written
agreement, to the Company's obligations under this Indenture and the
Notes and (b) if as of any date any Person other than a Wholly Owned
Restricted Subsidiary of the Company owns or holds any such Indebtedness
or a Lien in respect of such Indebtedness, such date shall be deemed the
incurrence of Indebtedness not constituting Permitted Indebtedness by the
Company;
<PAGE> 27
-19-
(vii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; provided, however,
that such Indebtedness is extinguished within two business days of
incurrence;
(viii) Indebtedness of the Company or any of its Restricted
Subsidiaries represented by letters of credit for the account of the
Company or such Restricted Subsidiary, as the case may be, in order to
provide security for workers' compensation claims, payment obligations in
connection with self-insurance or similar requirements in the ordinary
course of business;
(ix) Existing Indebtedness (including Indebtedness of the Company
and its Restricted Subsidiaries under the Notes issued on the Issue Date)
outstanding on the Issue Date;
(x) additional Capitalized Lease Obligations and Purchase Money
Indebtedness of the Company or any of its Restricted Subsidiaries not to
exceed $10.0 million at any one time outstanding;
(xi) Refinancing Indebtedness;
(xii) Indebtedness permitted by clause (viii) of the definition of
"Permitted Investments"; and
(xiii) additional Indebtedness in an aggregate principal amount not
to exceed $5.0 million at any one time outstanding.
"Permitted Investments" means (i) Investments by the Company or any
Restricted Subsidiary of the Company in any Person that is or will become
immediately after such Investment a Restricted Subsidiary of the Company or
that will merge or consolidate into the Company or a Restricted Subsidiary of
the Company; (ii) Investments in the Company by any Restricted Subsidiary of
the Company; provided, however, that any Indebtedness evidencing such
Investment by a Restricted Subsidiary that is not a Subsidiary Guarantor is
unsecured and subordinated, pursuant to a written agreement, to the Company's
obligations under the Notes and this Indenture; (iii) Investments in cash and
Cash Equivalents; (iv) loans and advances to employees and officers of the
Company and its Restricted Subsidiaries in the
<PAGE> 28
-20-
ordinary course of business for bona fide business purposes not in excess of
$750,000 at any one time outstanding; (v) Currency Agreements and Interest Swap
Obligations entered into in the ordinary course of the Company's or its
Restricted Subsidiaries' businesses and otherwise in compliance with this
Indenture; (vi) Investments in securities of trade creditors or customers
received pursuant to any plan or reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers; (vii)
Investments made by the Company or its Restricted Subsidiaries as a result of
consideration received in connection with an Asset Sale made in compliance with
Section 4.16; and (viii) additional Investments in (A) unconsolidated joint
ventures in businesses reasonably related or complementary to those of the
Company and its Restricted Subsidiaries (as determined in good faith by the
Company's Board of Directors) made in the ordinary course of business and (B)
Unrestricted Subsidiaries in an aggregate amount for all such Investments made
pursuant to this clause (viii) not to exceed the amount which, when aggregated
with Restricted Payments made under clause (iii)(z) of Section 4.10, does not
exceed $5.0 million.
"Permitted Liens" means the following types of Liens:
(i) Liens in favor of the Trustee in its capacity as trustee for
the Holders;
(ii) Liens securing Indebtedness outstanding under the Credit
Agreement;
(iii) Liens for taxes, assessments or governmental charges or
claims either (a) not delinquent or (b) contested in good faith by
appropriate proceedings and as to which the Company or its Restricted
Subsidiaries shall have set aside on its books such reserves as may be
required pursuant to GAAP;
(iv) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens
imposed by law incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been
made in respect thereof;
(v) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social se-
<PAGE> 29
-21-
curity, including any Lien securing letters of credit issued in the
ordinary course of business consistent with past practice in connection
therewith, or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government contracts, performance
and return-of-money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money);
(vi) judgment Liens not giving rise to an Event of Default so long
as such Lien is adequately bonded and any appropriate legal proceedings
which may have been duly initiated for the review of such judgment shall
not have been finally terminated or the period within which such
proceedings may be initiated shall not have expired;
(vii) easements, rights-of-way, zoning restrictions and other
similar charges or encumbrances in respect of real property not
interfering in any material respect with the ordinary conduct of the
business of the Company or any of its Restricted Subsidiaries;
(viii) any interest or title of a lessor under any Capitalized
Lease Obligation; provided, however, that such Liens do not extend to any
property or assets which is not leased property subject to such
Capitalized Lease Obligation;
(ix) Liens to secure Purchase Money Indebtedness of the Company or
any Restricted Subsidiary of the Company; provided, however, that (A) the
related Purchase Money Indebtedness shall not exceed the cost of such
property or assets and shall not be secured by any property or assets of
the Company or any Restricted Subsidiary of the Company other than the
property and assets so acquired and (B) the Lien securing such
Indebtedness shall be created within 90 days of such acquisition;
(x) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other
goods;
(xi) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber
<PAGE> 30
-22-
documents and other property relating to such letters of credit and
products and proceeds thereof;
(xii) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual, or warranty requirements
of the Company or any of its Restricted Subsidiaries, including rights of
offset and set-off;
(xiii) Liens securing Interest Swap Obligations which Interest
Swap Obligations relate to Indebtedness that is otherwise permitted under
this Indenture;
(xiv) Liens securing Indebtedness under Currency Agreements; and
(xv) Liens securing Acquired Indebtedness incurred in accordance
with Section 4.12; provided, however, that (A) such Liens secured such
Acquired Indebtedness at the time of and prior to the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary of the
Company and were not granted in connection with, or in anticipation of, the
incurrence of such Acquired Indebtedness by the Company or a Restricted
Subsidiary of the Company and (B) such Liens do not extend to or cover any
property or assets of the Company or of any of its Restricted Subsidiaries
other than the property or assets that secured the Acquired Indebtedness
prior to the time such Indebtedness became Acquired Indebtedness of the
Company or a Restricted Subsidiary of the Company and are no more favorable
to the lienholders than those securing the Acquired Indebtedness prior to
the incurrence of such Acquired Indebtedness by the Company or a Restricted
Subsidiary of the Company.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Physical Notes" has the meaning provided in Section 2.01.
"Preferred Stock" of any Person means any Capital Stock of such Person
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
<PAGE> 31
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"principal" of any Indebtedness (including the Notes) means the principal
amount of such Indebtedness plus the premium, if any, on such Indebtedness.
"Private Exchange Notes" shall have the meaning provided in the
Registration Rights Agreement.
"Private Placement Legend" means the legend initially set forth on the
Initial Notes in the form set forth in Exhibit A.
"pro forma" means, with respect to any calculation made or required to be
made pursuant to the terms of this Indenture, a calculation in accordance with
Article 11 of Regulation S-X under the Securities Act.
"Property" means, with respect to any Person, any interests of such
Person in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible, including, without limitation, Capital Stock,
partnership interests and other equity or ownership interests in any other
Person.
"Public Equity Offering" means an underwritten public offering of
Qualified Capital Stock of the Company pursuant to a registration statement
filed with the Commission in accordance with the Securities Act.
"Purchase Money Indebtedness" means Indebtedness the net proceeds of
which are used to finance the cost (including the cost of construction) of
property or assets acquired in the normal course of business by the Person
incurring such Indebtedness.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Qualified Institutional Buyer" or "QIB" shall have the meaning specified
in Rule 144A.
"Receivables" means any right of payment from or on behalf of any
obligor, whether constituting an account, chattel paper, instrument, general
intangible or otherwise, arising from the financing by the Company or any
Restricted Subsidiary of the Company of merchandise or services, and monies due
thereunder, security in the merchandise and services financed thereby, records
related thereto, and the right to payment of any interest or finance charges
and other obligations with re-
<PAGE> 32
-24-
spect thereto, proceeds from claims on insurance policies related thereto, any
other proceeds related thereto, and any other related rights.
"Record Date" means the Record Dates specified in the Notes.
"Redemption Date" means, when used with respect to any Note to be
redeemed, the date fixed for such redemption pursuant to this Indenture and the
Notes.
"Redemption Price" means, when used with respect to any Note to be
redeemed, the price fixed for such redemption, including principal and premium,
if any, pursuant to this Indenture and the Notes.
"Reference Date" has the meaning set forth in Section 4.10.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or any
Restricted Subsidiary of the Company of Indebtedness incurred in accordance
with Section 4.12 (other than pursuant to clauses (ii), (iii), (iv), (v), (vi),
(vii), (viii), (x), (xi), (xii) or (xiii) of the definition of Permitted
Indebtedness), in each case that does not (1) result in an increase in the
aggregate principal amount of Indebtedness of such Person as of the date of
such proposed Refinancing (plus the amount of any premium required to be paid
under the terms of the instrument governing such Indebtedness and plus the
amount of reasonable expenses incurred by the Company or such Restricted
Subsidiary, as the case may be, in connection with such Refinancing), except to
the extent that any such increase in Indebtedness is otherwise permitted by
this Indenture or (2) create Indebtedness with (A) a Weighted Average Life to
Maturity that is less than the Weighted Average Life to Maturity of the
Indebtedness being Refinanced or (B) a final maturity earlier than the final
maturity of the Indebtedness being Refinanced; provided, however, that (x) if
such Indebtedness being Refinanced is Indebtedness of the Company, then such
Refinancing Indebtedness shall be Indebtedness solely of the Company and (y) if
such Indebtedness being Refinanced is subordinate or
<PAGE> 33
-25-
junior to the Notes, then such Refinancing Indebtedness shall be subordinate to
the Notes at least to the same extent and in the same manner as the
Indebtedness being Refinanced.
"Registrar" has the meaning provided in Section 2.03.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of the Issue Date among the Company, the Subsidiary Guarantors and the
Initial Purchasers.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Note" means a permanent global note in registered
form representing the aggregate principal amount of Notes sold in reliance on
Regulation S under the Securities Act.
"Related Person" means, with respect to any Person, any other Person
directly or indirectly owning 10% or more of the outstanding voting Common
Stock of such Person (or, in the case of a Person that is not a corporation,
10% or more of the equity interest in such Person).
"Replacement Assets" shall have the meaning set forth in Section 4.16.
"Representative" means the Trustee, agent or representative in respect of
any Designated Senior Indebtedness; provided, however, that if, and for so long
as, any Designated Senior Indebtedness lacks such a representative, then the
Representative for such Designated Senior Indebtedness shall at all times
constitute the holders of a majority in outstanding principal amount of such
Designated Senior Indebtedness in respect of any Designated Senior
Indebtedness.
"Restricted Payment" shall have the meaning set forth in Section 4.10.
"Restricted Security" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act; provided, however, that the Trustee shall
be entitled to request and conclusively rely on an Opinion of Counsel with
respect to whether any Note constitutes a Restricted Security.
"Restricted Subsidiary" means, with respect to any Person, any Subsidiary
of such Person which at the time of determination is not an Unrestricted
Subsidiary.
<PAGE> 34
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"Rule 144A" means Rule 144A under the Securities Act.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of the Company of any
property, whether owned by the Company or any Restricted Subsidiary of the
Company at the Issue Date or later acquired, which has been or is to be sold or
transferred by the Company or such Restricted Subsidiary to such Person or to
any other Person from whom funds have been or are to be advanced by such Person
on the security of such property.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Senior Indebtedness" means the principal of, premium, if any, and
interest (including any interest accruing subsequent to the filing of a
petition of bankruptcy at the rate provided for in the documentation with
respect thereto, whether or not such interest is an allowed claim under
applicable law) on any Indebtedness of the Company, whether outstanding on the
Issue Date or thereafter created, incurred or assumed, unless, in the case of
any particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Notes. Without
limiting the generality of the foregoing, "Senior Indebtedness" shall also
include the principal of, premium, if any, interest (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, to the extent such
interest is an allowed claim under applicable law) on, and all other amounts
owing in respect of, (x) all monetary obligations of every nature of the
Company under the Credit Agreement, including, without limitation, obligations
to pay principal and interest, reimbursement obligations under letters of
credit, fees, expenses and indemnities, (y) all Interest Swap Obligations and
(z) all obligations under Currency Agreements, in each case whether outstanding
on the Issue Date or thereafter incurred. Notwithstanding the foregoing,
"Senior Indebtedness" shall not include (i) any Indebtedness of the Company to
a Subsidiary of the Company or any Affiliate of the Company or any of such
Affiliate's Subsidiaries, (ii) Indebtedness to, or guaranteed on behalf of, any
shareholder, director, officer or employee of the Company or any Subsidiary of
the Company (including, without limitation, amounts owed for compensation),
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(iii) Indebtedness to trade creditors and other amounts incurred in connection
with obtaining goods, materials or services, (iv) Indebtedness represented by
Disqualified Capital Stock, (v) any liability for federal, state, local or
other taxes owed or owing by the Company, (vi) Indebtedness incurred in
violation of the Indenture provisions set forth under Section 4.12, (vii)
Indebtedness which, when incurred and without respect to any election under
Section 1111(b) of Title 11, United States Code is without recourse to the
Company and (viii) any Indebtedness which is, by its express terms,
subordinated in right of payment to any other Indebtedness of the Company.
"Significant Subsidiary" shall have the meaning set forth in Rule 1.02(w)
of Regulation S-X under the Securities Act.
"Subsidiary" means, with respect to any Person, (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Subsidiary Guarantor" means (a) each of the Company's Restricted
Subsidiaries as of the Issue Date other than the Foreign Subsidiaries and (b)
each of the Company's Restricted Subsidiaries that in the future executes a
supplemental indenture in which such Restricted Subsidiary agrees to be bound
by the terms of this Indenture as a Subsidiary Guarantor; provided, however,
that any Person constituting a Subsidiary Guarantor as described above shall
cease to constitute a Subsidiary Guarantor when its Guarantee is released in
accordance with the terms of this Indenture.
"Surviving Entity" shall have the meaning set forth in Section 5.01.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb), as amended, as in effect on the date of this Indenture, except
as otherwise provided in Section 9.03.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the
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provisions of this Indenture and thereafter means such successor.
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer this Indenture, or in the case of a
successor trustee, an officer assigned to the department, division or group
performing the corporation trust work of such successor and assigned to
administer this Indenture.
"U.S. Government Obligations" means direct obligations of, and
obligations guaranteed by, the United States of America for the payment of
which the full faith and credit of the United States of America is pledged.
"U.S. Legal Tender" means such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Unrestricted Notes" means one or more Notes that do not and are not
required to bear the Private Placement legend in the form set forth in Exhibit
A, including, without limitation, the Exchange Notes.
"Unrestricted Subsidiary" means any Subsidiary of the Company designated
as such pursuant to and in compliance with Section 4.14. Any such designation
may be revoked by a Board Resolution of the Company delivered to the Trustee,
subject to the provisions of Section 4.14.
"VIL" means Valentec International Limited.
"VIL Note" means a 7% note of the Company payable to VIL in the amount of
$2.0 million.
"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 aggregate principal amount of such Indebtedness into (b) the sum of
the total of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" means, with respect to any Person,
any Restricted Subsidiary of such Person
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of which all the outstanding voting securities normally entitled to vote in the
election of directors are owned by such Person or any Wholly Owned Restricted
Subsidiary of such Person.
SECTION 1.02. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such provision
is incorporated by reference in, and made a part of, this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company or any other
obligor on the Notes.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule and
not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP of any date of determination;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision; and
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(6) any reference to a statute, law or regulation means that statute,
law or regulation as amended and in effect from time to time and includes
any successor statute, law or regulation; provided, however, that any
reference to the Bankruptcy Law shall mean the Bankruptcy Law as applicable
to the relevant case.
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating.
The Initial Notes, the notation thereon relating to the Guarantees, if
any, and the Trustee's certificate of authentication relating thereto shall be
substantially in the form of Exhibit A hereto, provided, that any Initial Notes
issued in a public offering shall be substantially in the form of Exhibit B
hereto. The Exchange Notes, the notation thereon relating to the Guarantees,
if any, and the Trustee's certificate of authentication relating thereto shall
be substantially in the form of Exhibit B hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
depository rule or usage. The Company and the Trustee shall approve the form
of the Notes and any notation, legend or endorsement on them. Each Note shall
be dated the date of its issuance and shall show the date of its
authentication. Each Note shall have an executed Guarantee endorsed thereon
substantially in the form of Exhibit F hereto.
The terms and provisions contained in the Notes and the Guarantees, if
any, annexed hereto as Exhibits A and B, shall constitute, and are hereby
expressly made, a part of this Indenture and, to the extent applicable, the
Company, the Subsidiary Guarantors, if any, and the Trustee, by their execution
and delivery of this Indenture, expressly agree to such terms and provisions
and to be bound thereby.
Notes offered and sold in reliance on Rule 144A, Notes offered and sold
to institutional "accredited investors" (as defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act) and Notes offered and sold in reliance on
Regulation S shall be issued initially in the form of one or more permanent
global Notes in registered form, substantially in the form set forth in Exhibit
A (the "Global Note"), deposited with the Trustee, as custodian for the
Depository, duly executed by
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the Company (and having an executed Guarantee endorsed thereon) and
authenticated by the Trustee as hereinafter provided and shall bear the legend
set forth in Exhibit C. The aggregate principal amount of the Global Note may
from time to time be increased or decreased by adjustments made on the records
of the Trustee, as custodian for the Depository, as hereinafter provided.
Notes issued in exchange for interests in a Global Note pursuant to
Section 2.16 may be issued and Notes offered and sold in reliance on any other
exemption from registration under the Securities Act other than as described in
the preceding paragraph shall be issued in the form of permanent certificated
Notes in registered form in substantially the form set forth in Exhibit A (the
"Physical Notes").
All Notes offered and sold in reliance on Regulation S shall remain in
the form of a Global Note until the consummation of the Exchange Offer pursuant
to the Registration Rights Agreement; provided, however, that all of the time
periods specified in the Registration Rights Agreement to be complied with by
the Company and the Subsidiary Guarantors have been so complied with.
SECTION 2.02. Execution and Authentication; Aggregate Principal Amount.
Two Officers, or an Officer and an Assistant Secretary of the Company and
each Subsidiary Guarantor, shall sign, or one Officer shall sign and one
Officer or an Assistant Secretary (each of whom shall, in each case, have been
duly authorized by all requisite corporate actions) shall attest to, the Notes
for the Company and the Guarantees for the Subsidiary Guarantors by manual or
facsimile signature.
If an Officer or Assistant Secretary whose signature is on a Note or a
Guarantee was an Officer or Assistant Secretary at the time of such execution
but no longer holds that office or position at the time the Trustee
authenticates the Note, the Note shall nevertheless be valid.
A Note shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Note. The signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
The Trustee shall authenticate (i) Initial Notes for original issue in
the aggregate principal amount not to exceed
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$150,000,000 in one or more series, (ii) Private Exchange Notes from time to
time for issue only in exchange for a like principal amount of Initial Notes
and (iii) Unrestricted Notes from time to time only (A) in exchange for a like
principal amount of Initial Notes or (B) in an aggregate principal amount of
not more than the excess of $150,000,000 over the sum of the aggregate
principal amount of (x) Initial Notes then outstanding, (y) Private Exchange
Notes then outstanding and (z) Unrestricted Notes issued in accordance with
(iii)(A) above, in each case upon a written order of the Company in the form of
an Officers' Certificate of the Company. Each such written order shall specify
the amount of Notes to be authenticated and the date on which the Notes are to
be authenticated, whether the Notes are to be Initial Notes, Private Exchange
Notes or Unrestricted Notes and whether the Notes are to be issued as Physical
Notes or Global Notes or such other information as the Trustee may reasonably
request. The aggregate principal amount of Notes outstanding at any time may
not exceed $150,000,000, except as provided in Sections 2.07 and 2.08.
In the event that the Company shall issue and the Trustee shall
authenticate any Notes issued under this Indenture subsequent to the Issue Date
pursuant to clauses (i) and (iii) of the first sentence of the immediately
preceding paragraph, the Company shall use its reasonable efforts to obtain the
same "CUSIP" number for such Notes as is printed on the Notes outstanding at
such time; provided, however, that if any series of Notes issued under this
Indenture subsequent to the Issue Date is determined, pursuant to an Opinion of
Counsel of the Company in a form reasonably satisfactory to the Trustee to be a
different class of security than the Notes outstanding at such time for federal
income tax purposes, the Company may obtain a "CUSIP" number for such Notes
that is different than the "CUSIP" number printed on the Notes then
outstanding. Notwithstanding the foregoing, all Notes issued under this
Indenture shall vote and consent together on all matters as one class and no
series of Notes will have the right to vote or consent as a separate class on
any matter.
The Trustee may appoint an authenticating agent (the "Authenticating
Agent") reasonably acceptable to the Company to authenticate Notes. Unless
otherwise provided in the appointment, an Authenticating Agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such Authenticating
Agent. An Authenticating Agent has the same rights as an Agent to deal with
the Company or with any Affiliate of the Company.
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The Notes shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency (which shall be located in
the Borough of Manhattan in the City of New York, State of New York) where (a)
Notes may be presented or surrendered for registration of transfer or for
exchange ("Registrar"), (b) Notes may be presented or surrendered for payment
("Paying Agent") and (c) notices and demands to or upon the Company in respect
of the Notes and this Indenture may be served. The Registrar shall keep a
register of the Notes and of their transfer and exchange. The Company may have
one or more co-Registrars and one or more additional paying agents reasonably
acceptable to the Trustee. The term "Paying Agent" includes any additional
Paying Agent. The Company may act as its own Paying Agent, except that for the
purposes of payments on the Notes pursuant to Sections 4.15 and 4.16, neither
the Company nor any Affiliate of the Company may act as Paying Agent.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which agreement shall incorporate the
provisions of the TIA and implement the provisions of this Indenture that
relate to such Agent. The Company shall notify the Trustee of the name and
address of any such Agent. If the Company shall fail to maintain a Registrar
or Paying Agent the Trustee shall act as such.
The Company initially appoints the Trustee as Registrar, Paying Agent and
agent for service of demands and notices in connection with the Notes, until
such time as the Trustee has resigned or a successor has been appointed. Any
of the Registrar, the Paying Agent or any other agent may resign upon 30 days'
notice to the Company.
SECTION 2.04. Paying Agent To Hold Assets in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that such Paying Agent shall hold in trust for the benefit of
the Holders or the Trustee all assets held by the Paying Agent for the payment
of principal of, premium, if any, or interest on, the Notes (whether such
assets have been distributed to it by the Company or any other obligor on the
Notes), and the Company and the Paying Agent shall notify the Trustee of any
Default by the
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Company (or any other obligor on the Notes) in making any such payment. The
Company at any time may require a Paying Agent to distribute all assets held by
it to the Trustee and account for any assets disbursed and the Trustee may at
any time during the continuance of any payment Default, upon written request to
a Paying Agent, require such Paying Agent to distribute all assets held by it
to the Trustee and to account for any assets distributed. Upon distribution to
the Trustee of all assets that shall have been delivered by the Company to the
Paying Agent, the Paying Agent shall have no further liability for such assets.
SECTION 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders and shall otherwise comply with TIA Section 312(a). If the
Trustee is not the Registrar, the Company shall furnish or cause the Registrar
to furnish to the Trustee five (5) Business Days before each Record Date and at
such other times as the Trustee may request in writing a list as of such date
and in such form as the Trustee may reasonably require of the names and
addresses of the Holders, which list may be conclusively relied upon by the
Trustee, and the Company shall otherwise comply with TIA Section 312(a).
SECTION 2.06. Transfer and Exchange.
Subject to Sections 2.16 and 2.17, when Notes are presented to the
Registrar or a co-Registrar with a request to register the transfer of such
Notes or to exchange such Notes for an equal principal amount of Notes or other
authorized denominations, the Registrar or co-Registrar shall register the
transfer or make the exchange as requested if its requirements for such
transaction are met; provided, however, that the Notes presented or surrendered
for registration of transfer or exchange shall be duly endorsed or accompanied
by a written instrument of transfer in form satisfactory to the Company, the
Trustee and the Registrar or co-Registrar, duly executed by the Holder thereof
or his attorney duly authorized in writing. To permit registration of
transfers and exchanges, the Company shall execute and the Trustee shall
authenticate Notes and the Subsidiary Guarantors shall execute Guarantees
thereon at the Registrar's or co- Registrar's request. No service charge shall
be made for any registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer tax, fee or similar
governmental charge payable in connection therewith (other than any such
transfer taxes or
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similar governmental charge payable upon exchanges or transfers pursuant to
Section 2.10, 3.04, 4.15, 4.16 or 9.05, in which event the Company shall be
responsible for the payment of such taxes).
The Registrar or co-Registrar shall not be required to register the
transfer of or exchange of any Note (i) during a period beginning at the
opening of business 15 days before the mailing of a notice of redemption of
Notes and ending at the close of business on the day of such mailing and (ii)
selected for redemption in whole or in part pursuant to Article Three, except
the unredeemed portion of any Note being redeemed in part.
Any Holder of a beneficial interest in a Global Note shall, by acceptance
of such Global Note, agree that transfers of beneficial interests in such
Global Notes may be effected only through a book entry system maintained by the
Holder of such Global Note (or its agent), and that ownership of a beneficial
interest in the Note shall be required to be reflected in a book entry system.
SECTION 2.07. Replacement Notes.
If a mutilated Note is surrendered to the Trustee or if the Holder of a
Note claims that the Note has been lost, destroyed or wrongfully taken, the
Company shall issue and the Trustee shall authenticate a replacement Note and
the Subsidiary Guarantors shall execute a Guarantee thereon if the Trustee's
requirements are met. If required by the Trustee or the Company, such Holder
must provide an indemnity bond or other indemnity of reasonable tenor,
sufficient in the reasonable judgment of the Company, the Subsidiary Guarantors
and the Trustee, to protect the Company, the Subsidiary Guarantors, the Trustee
or any Agent from any loss which any of them may suffer if a Note is replaced.
Every replacement Note shall constitute an additional obligation of the Company
and the Subsidiary Guarantors.
SECTION 2.08. Outstanding Notes.
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those canceled by it, those delivered to it
for cancellation and those described in this Section as not outstanding.
Subject to the provisions of Section 2.09, a Note does not cease to be
outstanding because the Company or any of its Affiliates holds the Note.
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If a Note is replaced pursuant to Section 2.07 (other than a mutilated
Note surrendered for replacement), it ceases to be outstanding unless the
Trustee receives proof satisfactory to it that the replaced Note is held by a
bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender
of such Note and replacement thereof pursuant to Section 2.07.
If on a Redemption Date or the Maturity Date the Paying Agent holds U.S.
Legal Tender or U.S. Government Obligations sufficient to pay all of the
principal, premium, if any, and interest due on the Notes payable on that date
and is not prohibited from paying such money to the Holders thereof pursuant to
the terms of this Indenture, then on and after that date such Notes shall be
deemed not to be outstanding and interest on them shall cease to accrue.
SECTION 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver, consent or notice, Notes owned
by the Company or an Affiliate of the Company shall be considered as though
they are not outstanding, except that for the purposes of determining whether
the Trustee shall be protected in relying on any such direction, waiver or
consent, only Notes which a Trust Officer of the Trustee actually knows are so
owned shall be so considered. The Company shall notify the Trustee, in
writing, when either it or, to its knowledge, any of its Affiliates repurchases
or otherwise acquires Notes, of the aggregate principal amount of such Notes so
repurchased or otherwise acquired and such other information as the Trustee may
reasonably request and the Trustee shall be entitled to rely thereon.
SECTION 2.10. Temporary Notes.
Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes upon receipt of a written
order of the Company in the form of an Officers' Certificate. The Officers'
Certificate shall specify the amount of temporary Notes to be authenticated and
the date on which the temporary Notes are to be authenticated. Temporary Notes
shall be substantially in the form of definitive Notes but may have variations
that the Company consider appropriate for temporary Notes and so indicate in
the Officers' Certificate. Without unreasonable delay, the Company shall
prepare, the Trustee shall authenticate and the Subsidiary Guarantors shall
execute Guarantees on, upon receipt
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of a written order of the Company pursuant to Section 2.02, definitive Notes in
exchange for temporary Notes.
SECTION 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee,
or at the direction of the Trustee, the Registrar or the Paying Agent, and no
one else, shall cancel and, at the written direction of the Company, shall
dispose, in its customary manner, of all Notes surrendered for transfer,
exchange, payment or cancellation. Subject to Section 2.07, the Company may
not issue new Notes to replace Notes that they have paid or delivered to the
Trustee for cancellation. If the Company shall acquire any of the Notes, such
acquisition shall not operate as a redemption or satisfaction of the
Indebtedness represented by such Notes unless and until the same are
surrendered to the Trustee for cancellation pursuant to this Section 2.11.
SECTION 2.12. Defaulted Interest.
The Company will pay interest on overdue principal from time to time on
demand at the rate of interest then borne by the Notes. The Company shall, to
the extent lawful, pay interest on overdue installments of interest (without
regard to any applicable grace periods) from time to time on demand at the rate
of interest then borne by the Notes. Interest will be computed on the basis of
a 360-day year comprised of twelve 30-day months, and, in the case of a partial
month, the actual number of days elapsed.
If the Company defaults in a payment of interest on the Notes, it shall
pay the defaulted interest, plus (to the extent lawful) any interest payable on
the defaulted interest, to the Persons who are Holders on a subsequent special
record date, which special record date shall be the fifteenth day next
preceding the date fixed by the Company for the payment of defaulted interest
or the next succeeding Business Day if such date is not a Business Day. The
Company shall notify the Trustee in writing of the amount of defaulted interest
proposed to be paid on each Note and the date of the proposed payment (a
"Default Interest Payment Date"), and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such defaulted interest or shall make
arrangements satisfactory to the Trustee for such deposit on or prior to the
date of the
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proposed payment, such money when deposited to be held in trust for the benefit
of the Persons entitled to such defaulted interest as provided in this Section;
provided, however, that in no event shall the Company deposit monies proposed
to be paid in respect of defaulted interest later than 11:00 a.m. New York City
time of the proposed Default Interest Payment Date. At least 15 days before the
subsequent special record date, the Company shall mail (or cause to be mailed)
to each Holder, as of a recent date selected by the Company, with a copy to the
Trustee, a notice that states the subsequent special record date, the payment
date and the amount of defaulted interest, and interest payable on such
defaulted interest, if any, to be paid. Notwithstanding the foregoing, any
interest which is paid prior to the expiration of the 30-day period set forth
in Section 6.01(i) shall be paid to Holders as of the regular record date for
the Interest Payment Date for which interest has not been paid. Notwithstanding
the foregoing, the Company may make payment of any defaulted interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Notes may be listed, and upon such notice as may be
required by such exchange.
SECTION 2.13. CUSIP Number.
The Company in issuing the Notes may use a "CUSIP" number, and, if so,
the Trustee shall use the CUSIP number in notices of redemption or exchange as
a convenience to Holders; provided, however, that no representation is hereby
deemed to be made by the Trustee as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Notes, and that reliance may be placed
only on the other identification numbers printed on the Notes. The Company
shall promptly notify the Trustee of any change in the CUSIP number.
SECTION 2.14. Deposit of Monies.
Prior to 11:00 a.m. New York City time on each Interest Payment Date,
Maturity Date, Redemption Date, Change of Control Payment Date and Net Proceeds
Offer Payment Date, the Company shall have deposited with the Paying Agent in
immediately available funds money sufficient to make cash payments, if any, due
on such Interest Payment Date, Maturity Date, Redemption Date, Change of
Control Payment Date and Net Proceeds Offer Payment Date, as the case may be,
in a timely manner which permits the Paying Agent to remit payment to the
Holders on such Interest Payment Date, Maturity Date, Redemption Date, Change
of Control Payment Date and Net Proceeds Offer Payment Date, as the case may
be.
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SECTION 2.15. Restrictive Legends.
Each Global Note and Physical Note that constitutes a Restricted Security
shall bear the legend (the "Private Placement Legend") as set forth in Exhibit
A on the face thereof until after the second anniversary of the later of the
Issue Date and the last date on which the Company or any Affiliate of the
Company was the owner of such Note (or any predecessor security) (or such
shorter period of time as permitted by Rule 144(k) under the Securities Act or
any successor provision thereunder) (or such longer period of time as may be
required under the Securities Act or applicable state securities laws in the
opinion of counsel for the Company, unless otherwise agreed by the Company and
the Holder thereof).
Each Global Note shall also bear the legend as set forth in Exhibit C.
SECTION 2.16. Book-Entry Provisions for Global Security.
(a) The Global Notes initially shall (i) be registered in the name of the
Depository or the nominee of such Depository, (ii) be delivered to the Trustee
as custodian for such Depository and (iii) bear the legend as set forth in
Exhibit C.
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depository, or the Trustee as its custodian, or under the
Global Notes, and the Depository may be treated by the Company, the Trustee and
any Agent of the Company or the Trustee as the absolute owner of such Global
Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Trustee or any Agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Note.
(b) Transfers of a Global Note shall be limited to transfers in whole,
but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in a Global Note may be transferred or
exchanged for Physical Notes in accordance with the rules and procedures of the
Depository and the provisions of Section 2.17. In addi-
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tion, Physical Notes shall be transferred to all beneficial owners in exchange
for their beneficial interests in a Global Note if (i) the Depository notifies
the Company that it is unwilling or unable to continue as Depository for the
Global Notes and a successor depositary is not appointed by the Company within
90 days of such notice or (ii) an Event of Default has occurred and is
continuing and the Registrar has received a written request from the Depository
to issue Physical Notes.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in a Global Note to beneficial owners pursuant to paragraph
(b), the Registrar shall (if one or more Physical Notes are to be issued)
reflect on its books and records the date and a decrease in the principal
amount of such Global Note in an amount equal to the principal amount of the
beneficial interest in the Global Note to be transferred, and the Company shall
execute, the Subsidiary Guarantors shall execute Guarantees on, and the Trustee
shall authenticate and deliver, one or more Physical Notes of like tenor and
amount.
(d) In connection with the transfer of an entire Global Note to
beneficial owners pursuant to paragraph (b) of this Section 2.16, such Global
Note shall be deemed to be surrendered to the Trustee for cancellation, and the
Company shall execute, the Subsidiary Guarantors shall execute Guarantees on
and the Trustee shall authenticate and deliver, to each beneficial owner
identified by the Depository in exchange for its beneficial interest in the
Global Note, an equal aggregate principal amount of Physical Notes of
authorized denominations.
(e) Any Physical Note constituting a Restricted Security delivered in
exchange for an interest in a Global Note pursuant to paragraph (b) or (c) of
this Section 2.16 shall, except as otherwise provided by paragraphs (a)(i)(x)
and (c) of Section 2.17, bear the Private Placement Legend.
(f) The Holder of a Global Note may grant proxies and otherwise authorize
any Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Indenture or the Notes.
SECTION 2.17. Special Transfer Provisions.
(a) Transfers to Non-QIB Institutional Accredited Investors and Non-U.S.
Persons. The following provisions shall apply with respect to the registration
of any proposed transfer
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of a Note constituting a Restricted Security to any Institutional Accredited
Investor which is not a QIB or to any Non- U.S. Person:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is after the
second anniversary of the Issue Date (provided, however, that neither the
Company nor any Affiliate of the Company has held any beneficial interest
in such Note, or portion thereof, at any time on or prior to the second
anniversary of the Issue Date) or (y) (1) in the case of a transfer to an
Institutional Accredited Investor which is not a QIB (excluding Non-U.S.
Persons), the proposed transferee has delivered to the Registrar a
certificate substantially in the form of Exhibit D hereto or (2) in the
case of a transfer to a Non-U.S. Person, the proposed transferor has
delivered to the Registrar a certificate substantially in the form of
Exhibit E hereto; and
(ii) if the proposed transferee is an Agent Member and the Notes to
be transferred consist of Physical Notes which after transfer are to be
evidenced by an interest in the IAI Global Note or Regulation S Global
Note, as the case may be, upon receipt by the Registrar of (x) written
instructions given in accordance with the Depository's and the
Registrar's procedures and (y) the appropriate certificate, if any,
required by clause (y) of paragraph (i) above, the Registrar shall
register the transfer and reflect on its books and records the date and
an increase in the principal amount of the IAI Global Note or Regulation
S Global Note, as to case may be, in an amount equal to the principal
amount of Physical Notes to be transferred, and the Trustee shall cancel
the Physical Notes so transferred; and
(iii) if the proposed transferor is an Agent Member seeking to
transfer an interest in a Global Note, upon receipt by the Registrar of
(x) written instructions given in accordance with the Depository's and
the Registrar's procedures and (y) the appropriate certificate, if any,
required by clause (y) of paragraph (i) above, the Registrar shall
register the transfer and reflect on its books and records the date and
(A) a decrease in the principal amount of the Global Note from which such
interests are to be transferred in an amount equal to the principal
amount of the Notes to be transferred and (B) an increase in the
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principal amount of the IAI Global Note or the Regulation S Global Note,
as the case may be, in an amount equal to the principal amount of the
Notes to be transferred.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Note constituting a
Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer of any Restricted
Security if such transfer is being made by a proposed transferor who has
checked the box provided for on the form of Note stating, or has
otherwise advised the Company and the Registrar in writing, that the sale
has been made in compliance with the provisions of Rule 144A to a
transferee who has signed the certification provided for on the form of
Note stating, or has otherwise advised the Company and the Registrar in
writing, that it is purchasing the Note for its own account or an account
with respect to which it exercises sole investment discretion and that it
and any such account is a QIB within the meaning of Rule 144A, and is
aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company
as it has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is
relying upon its foregoing representations in order to claim the
exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the Notes
to be transferred consist of Physical Notes which after transfer are to
be evidenced by an interest in a Global Note, upon receipt by the
Registrar of written instructions given in accordance with the
Depository's and the Registrar's procedures, the Registrar shall reflect
on its books and records the date and an increase in the principal amount
of such Global Note in an amount equal to the principal amount of the
Physical Notes to be transferred, and the Trustee shall cancel the
Physical Notes so transferred; and
(iii) if the proposed transferor is an Agent Member seeking to
transfer an interest in the IAI Global Note or the Regulation S Global
Note, upon receipt by the Registrar of written instructions given in
accordance with the Depository's and the Registrar's procedures, the
Registrar shall register the transfer and reflect on its books and
<PAGE> 51
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records the date and (A) a decrease in the principal amount of the IAI
Global Note or the Regulation S Global Note, as the case may be, in an
amount equal to the principal amount of the Notes to be transferred and
(B) an increase in the principal amount of the Global Note in an amount
equal to the principal amount of the Notes to be transferred.
(c) Restrictions on Transfer and Exchange of Global Notes.
Notwithstanding any other provisions of this Indenture, a Global Note may not
be transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or any such
nominee to a successor Depository or a nominee of such successor Depository.
(d) Private Placement Legend. Upon the transfer, exchange or replacement
of Notes not bearing the Private Placement Legend, the Registrar shall deliver
Notes that do not bear the Private Placement Legend. Upon the transfer,
exchange or replacement of Notes bearing the Private Placement Legend, the
Registrar shall deliver only Notes that bear the Private Placement Legend
unless (i) the requested transfer is after the second anniversary of the Issue
Date (provided, however, that neither the Company nor any Affiliate of the
Company has held any beneficial interest in such Note, or portion thereof, at
any time prior to or on the second anniversary of the Issue Date), or (ii)
there is delivered to the Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither such
legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act.
(e) General. By its acceptance of any Note bearing the Private Placement
Legend, each Holder of such a Note acknowledges the restrictions on transfer of
such Note set forth in this Indenture and in the Private Placement Legend and
agrees that it will transfer such Note only as provided in this Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.16 or this Section 2.17.
The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time during
the Registrar's normal business hours upon the giving of reasonable written
notice to the Registrar.
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(f) Transfers of Notes Held by Affiliates. Any certificate (i) evidencing
a Note that has been transferred to an Affiliate of the Company within two
years after the Issue Date, as evidenced by a notation on the Assignment Form
for such transfer or in the representation letter delivered in respect thereof
or (ii) evidencing a Note that has been acquired from an Affiliate (other than
by an Affiliate) in a transaction or a chain of transactions not involving any
public offering, shall, until two years after the last date on which the
Company or any Affiliate of the Company was an owner of such Note, in each
case, bear the Private Placement Legend, unless otherwise agreed by the Company
(with written notice thereof to the Trustee).
SECTION 2.18. Liquidated Damages Under Registration Rights Agreement.
Under certain circumstances, the Company shall be obligated to pay
certain liquidated damages to the Holders, all as set forth in Section 5 of the
Registration Rights Agreement. The terms thereof are hereby incorporated herein
by reference.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to Paragraph (5) of the
Notes, it shall notify the Trustee and the Paying Agent in writing of the
Redemption Date and the principal amount of the Notes to be redeemed.
The Company shall give each notice provided for in this Section 3.01 45
days before the Redemption Date (unless a shorter notice period shall be
satisfactory to the Trustee, as evidenced in a writing signed on behalf of the
Trustee), together with an Officers' Certificate stating that such redemption
shall comply with the conditions contained herein and in the Notes. Any such
notice may be cancelled at any time prior to notice of such redemption being
mailed to any Holder and shall thereby be void and of no effect.
<PAGE> 53
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SECTION 3.02. Selection of Notes To Be Redeemed.
In the event that less than all of the Notes are to be redeemed at any
time, selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which such Notes are listed or, if such Notes are not then listed on
a national securities exchange, on a pro rata basis, by lot or by such method
as the Trustee shall deem fair and appropriate; provided, however, that no
Notes of a principal amount of $1,000 or less shall be redeemed in part;
provided, further, however, that if a partial redemption is made with the
proceeds of a Public Equity Offering, selection of the Notes or portions
thereof for redemption shall be made by the Trustee only on a pro rata basis or
on as nearly a pro rata basis as is practicable (subject to DTC procedures),
unless such method is otherwise prohibited. 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
thereof to be redeemed. A new Note in a principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Note. On and after the Redemption Date,
interest will cease to accrue on Notes or portions thereof called for
redemption as long as the Company has deposited with the Paying Agent funds in
satisfaction of the applicable Redemption Price.
SECTION 3.03. Optional Redemption.
The Notes will be redeemable, at the Company's option, in whole at any
time or in part from time to time, on and after July 15, 2002, upon not less
than 30 nor more than 60 days' notice, at the following Redemption Prices
(expressed as percentages of the principal amount thereof) if redeemed during
the twelve-month period commencing on July 15 of the years set forth below,
plus, in each case, accrued and unpaid interest thereon, if any, to the date of
redemption:
<PAGE> 54
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<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.063%
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.797%
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.531%
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.266%
2006 and thereafter . . . . . . . . . . . . . . . . . . . . 100.000%
</TABLE>
Notwithstanding the foregoing, at any time, or from time to time, on or
prior to July 15, 2000, the Company may, at its option, redeem, with the net
cash proceeds of one or more Public Equity Offerings, up to 25% of the
aggregate principal amount of the Notes originally issued at a redemption price
equal to 110.125% of the principal amount thereof, plus accrued interest
thereon, if any, to the date of redemption; provided, that at least 75% of the
aggregate principal amount of the Notes originally issued remain outstanding
immediately following such redemption. In order to effect the foregoing
redemption with the proceeds of any Public Equity Offering, the Company shall
make such redemption not more than 60 days after the consummation of any such
Public Equity Offering.
SECTION 3.04. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date, the
Company shall mail or cause to be mailed a notice of redemption by first class
mail to each Holder of Notes to be redeemed at its registered address, with a
copy to the Trustee and any Paying Agent. At the Company's request, the Trustee
shall give the notice of redemption in the Company's name and at the Company's
expense. The Company shall provide such notices of redemption to the Trustee at
least five days before the intended mailing date.
Each notice of redemption shall identify (including the CUSIP number) the
Notes to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest, if any, to
be paid;
(3) the name and address of the Paying Agent;
(4) the subparagraph of the Notes pursuant to which such redemption is
being made;
<PAGE> 55
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(5) that Notes called for redemption must be surrendered to the Paying
Agent to collect the Redemption Price plus accrued interest, if any;
(6) that, unless the Company defaults in making the redemption payment,
interest on Notes or applicable portions thereof called for redemption ceases
to accrue on and after the Redemption Date, and the only remaining right of
the Holders of such Notes is to receive payment of the Redemption Price plus
accrued interest as of the Redemption Date, if any, upon surrender to the
Paying Agent of the Notes redeemed;
(7) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the Redemption Date, and
upon surrender of such Note, a new Note or Notes in the aggregate principal
amount equal to the unredeemed portion thereof will be issued; and
(8) if fewer than all the Notes are to be redeemed, the identification
of the particular Notes (or portion thereof) to be redeemed, as well as the
aggregate principal amount of Notes to be redeemed and the aggregate
principal amount of Notes to be outstanding after such partial redemption.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the purchase
of Notes.
SECTION 3.05. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.04, such
notice of redemption shall be irrevocable and Notes called for redemption
become due and payable on the Redemption Date and at the Redemption Price plus
accrued interest as of such date, if any. Upon surrender to the Trustee or
Paying Agent, such Notes called for redemption shall be paid at the Redemption
Price plus accrued interest thereon to the Redemption Date, but installments of
interest, the maturity of which is on or prior to the Redemption Date, shall be
payable to Holders of record at the close of business on the relevant record
dates referred to in the Notes. Interest shall accrue on or after the
Redemption Date and shall be payable only if the Company defaults in payment of
the Redemption Price.
<PAGE> 56
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SECTION 3.06. Deposit of Redemption Price.
On or before the Redemption Date and in accordance with Section 2.14, the
Company shall deposit with the Paying Agent U.S. Legal Tender sufficient to pay
the Redemption Price plus accrued interest, if any, of all Notes to be redeemed
on that date. The Paying Agent shall promptly return to the Company any U.S.
Legal Tender so deposited which is not required for that purpose, except with
respect to monies owed as obligations to the Trustee pursuant to Article Seven.
Unless the Company fails to comply with the preceding paragraph and
defaults in the payment of such Redemption Price plus accrued interest, if any,
interest on the Notes to be redeemed will cease to accrue on and after the
applicable Redemption Date, whether or not such Notes are presented for
payment.
SECTION 3.07. Notes Redeemed in Part.
Upon surrender of a Note that is to be redeemed in part, the Trustee
shall authenticate for the Holder a new Note or Notes equal in principal amount
to the unredeemed portion of the Note surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes.
(a) The Company shall pay the principal of, premium, if any, and interest
on the Notes on the dates and in the manner provided in the Notes and in this
Indenture.
(b) An installment of principal of or interest on the Notes shall be
considered paid on the date it is due if the Trustee or Paying Agent (other
than the Company or any of its Affiliates) holds, prior to 11:00 a.m. New York
City time on that date, U.S. Legal Tender designated for and sufficient to pay
the installment in full and is not prohibited from paying such money to the
Holders pursuant to the terms of this Indenture or the Notes.
(c) Notwithstanding anything to the contrary contained in this Indenture,
the Company may, to the extent it is required to do so by law, deduct or
withhold income or other
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similar taxes imposed by the United States of America from principal or
interest payments hereunder.
SECTION 4.02. Maintenance of Office or Agency.
The Company shall maintain the office or agency required under Section
2.03. The Company shall give prior written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 11.02.
SECTION 4.03. Corporate Existence.
Except as otherwise permitted by Article Five, the Company shall do or
cause to be done, at its own cost and expense, all things necessary to preserve
and keep in full force and effect its corporate existence and the corporate
existence of each of its Restricted Subsidiaries in accordance with the
respective organizational documents of each such Restricted Subsidiary and the
material rights (charter and statutory) and franchises of the Company and each
such Restricted Subsidiary; provided, however, that the Company shall not be
required to preserve, with respect to itself, any material right or franchise
and, with respect to any of its Restricted Subsidiaries, any such existence,
material right or franchise, if the Board of Directors of the Company shall
determine in good faith that the preservation thereof is no longer desirable in
the conduct of the business of the Company and its Subsidiaries, taken as a
whole.
SECTION 4.04. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all material taxes, assessments
and governmental charges (including withholding taxes and any penalties,
interest and additions to taxes) levied or imposed upon it or any of its
Subsidiaries or properties of it or any of its Subsidiaries and (ii) all
material lawful claims for labor, materials and supplies that, if unpaid, might
by law become a Lien upon the property of the Company or any of its
Subsidiaries; provided, however, that the Company shall not be required to pay
or discharge or cause to be paid or discharged any such tax, assessment, charge
or claim whose amount, applicability or validity
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is being contested in good faith by appropriate negotiations or proceedings
properly instituted and diligently conducted for which adequate reserves, to
the extent required under GAAP, have been taken.
SECTION 4.05. Maintenance of Properties and Insurance.
(a) The Company shall, and shall cause each of the Restricted
Subsidiaries to, maintain all properties used or useful in the conduct of its
business in good working order and condition (subject to ordinary wear and
tear) and make all necessary repairs, renewals, replacements, additions,
betterments and improvements thereto and actively conduct and carry on its
business; provided, however, that nothing in this Section 4.05 shall prevent
the Company or any of the Restricted Subsidiaries of the Company from
discontinuing the operation and maintenance of any of its properties, if such
discontinuance is (i) in the ordinary course of business pursuant to customary
business terms or (ii) in the good faith judgment of the respective Boards of
Directors or other governing body of the Company or Restricted Subsidiary, as
the case may be, desirable in the conduct of their respective businesses and is
not disadvantageous in any material respect to the Holders.
(b) The Company shall provide or cause to be provided, for itself and
each of the Restricted Subsidiaries of the Company, insurance (including
appropriate self-insurance) against loss or damage of the kinds that, in the
good faith judgment of the Company, are adequate and appropriate for the
conduct of the business of the Company and its Restricted Subsidiaries in a
prudent manner, with reputable insurers.
SECTION 4.06. Compliance Certificate; Notice of Default.
(a) The Company shall deliver to the Trustee, within 120 days after the
end of each of the Company's fiscal years, an Officers' Certificate (provided,
however, that one of the signatories to each such Officers' Certificate shall
be the Company's principal executive officer, principal financial officer or
principal accounting officer), as to such Officers' knowledge, without
independent investigation, of the Company's compliance with all conditions and
covenants under this Indenture (without regard to any period of grace or
requirement of notice provided hereunder) and in the event any Default of the
Company's exists, such Officers shall specify the nature of such Default. Each
such Officers' Certificate shall also no-
<PAGE> 59
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tify the Trustee should the Company elect to change the manner in which it
fixes its fiscal year-end.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the annual financial
statements delivered pursuant to Section 4.08 shall be accompanied by a written
report of the Company's independent certified public accountants (who shall be
a firm of established national reputation) stating (A) that their audit
examination has included a review of the terms of this Indenture and the form
of the Notes as they relate to accounting matters, and (B) whether, in
connection with their audit examination, any Default or Event of Default has
come to their attention and if such a Default or Event of Default has come to
their attention, specifying the nature and period of existence thereof;
provided, however, that, without any restriction as to the scope of the audit
examination, such independent certified public accountants shall not be liable
by reason of any failure to obtain knowledge of any such Default or Event of
Default that would not be disclosed in the course of an audit examination
conducted in accordance with generally accepted auditing standards.
(c) (i) If any Default or Event of Default has occurred and is continuing
or (ii) if any Holder seeks to exercise any remedy hereunder with respect to a
claimed Default under this Indenture or the Notes, the Company shall deliver to
the Trustee, at its address set forth in Section 11.02, by registered or
certified mail or by facsimile transmission followed by hard copy by registered
or certified mail an Officers' Certificate specifying such event, notice or
other action within 10 days of its becoming aware of such occurrence.
SECTION 4.07. Compliance with Laws.
The Company shall comply, and shall cause each of its Subsidiaries to
comply, with all applicable statutes, rules, regulations, orders and
restrictions of the United States of America, all states and municipalities
thereof, and of any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing, in respect of
the conduct of their respective businesses and the ownership of their
respective properties, except for such noncompliances as could not singly or in
the aggregate reasonably be expected to have a material adverse effect on the
financial condition or results of operations of the Company and its
Subsidiaries taken as a whole.
<PAGE> 60
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SECTION 4.08. Reports to Holders.
The Company will deliver to the Trustee within 15 days after filing of
the same with the Commission, copies of the quarterly and annual reports and of
the information, documents and other reports, if any, which the Company is
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act. Notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
will file with the Commission, to the extent permitted, and provide the Trustee
and Holders with such annual reports and such information, documents and other
reports specified in Sections 13 and 15(d) of the Exchange Act. The Company
will also comply with the other provisions of Section 314(a) of the TIA.
SECTION 4.09. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive the Company from paying all or any
portion of the principal of or interest on the Notes as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect
the covenants or the performance of this Indenture; and (to the extent that it
may lawfully do so) the Company hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will
suffer and permit the execution of every such power as though no such law had
been enacted.
SECTION 4.10. Limitation on Restricted Payments.
The Company will not, and will not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly,
(a) declare or pay any dividend or make any distribution (other than
dividends or distributions made to the Company or any Restricted Subsidiary
of the Company and other than any dividend or distribution payable solely in
Qualified Capital Stock of the Company) on or in respect of shares of the
Company's Capital Stock to holders of such Capital Stock;
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(b) purchase, redeem or otherwise acquire or retire for value any Capital
Stock of the Company or any warrants, rights or options to purchase or
acquire shares of any class of such Capital Stock (other than the exchange
of such Capital Stock or any warrants, rights or options to acquire shares
of any class of Capital Stock of the Company for Qualified Capital Stock of
the Company);
(c) other than repayments by any Subsidiary Guarantor or the Company or
repayments from the Company to VIL with respect to the VIL Note, make any
principal payment on, purchase, defease, redeem, prepay, decrease or
otherwise acquire or retire for value, prior to any scheduled final
maturity, scheduled repayment or scheduled sinking fund payment, any
Indebtedness of the Company or a Subsidiary Guarantor that is subordinate or
junior in right of payment to the Notes or such Subsidiary Guarantor's
Guarantee; or
(d) make any Investment (other than Permitted Investments)
(each of the foregoing actions set forth in clauses (a), (b), (c) and (d) being
referred to as a "Restricted Payment"), if at the time of such Restricted
Payment or immediately after giving effect thereto, (i) a Default or an Event
of Default shall have occurred and be continuing, or (ii) the Company is not
able to incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) in compliance with Section 4.12, or (iii) the aggregate amount of
all Restricted Payments (including such proposed Restricted Payment) made
subsequent to the Issue Date (the amount expended for such purposes, if other
than in cash, being the fair market value of such property as determined
reasonably and in good faith by the Board of Directors of the Company) shall
exceed the sum of:
(v) 50% of the cumulative Consolidated Net Income (or if cumulative
Consolidated Net Income shall be a loss, minus 100% of such loss) of the
Company earned during the period beginning on the first day of the fiscal
quarter including the Issue Date and ending on the last day of the fiscal
quarter ending at least 30 days prior to the date the Restricted Payment
occurs (the "Reference Date") (treating such period as a single accounting
period); plus
(w) 100% of the aggregate net proceeds (including the fair market value
of any business or property other than cash) received by the Company from
any Person (other
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than a Subsidiary of the Company) from the issuance and sale subsequent to
the Issue Date and on or prior to the Reference Date of Qualified Capital
Stock of the Company, including treasury stock; plus
(x) without duplication of any amounts included in clause (iii)(w)
above, 100% of the aggregate net cash proceeds of any equity contribution
received by the Company from a holder of the Company's Capital Stock
(excluding, in the case of clause (iii)(w) above and this clause (x), any
net cash proceeds from a Public Equity Offering to the extent used to redeem
the Notes); plus
(y) an amount equal to the net reduction in Investments in Unrestricted
Subsidiaries resulting from dividends, interest payments, repayments of
loans or advances, or other transfers of cash, in each case, to the Company
or to any Restricted Subsidiary of the Company from Unrestricted
Subsidiaries (but without duplication of any such amount included in
cumulative Consolidated Net Income of the Company), or from redesignations
of Unrestricted Subsidiaries as Restricted Subsidiaries (in each case valued
as provided in Section 4.14), not to exceed, in the case of an Unrestricted
Subsidiary, the amount of Investments previously made by the Company or any
Restricted Subsidiary of the Company in such Unrestricted Subsidiary and
which were treated as a Restricted Payment hereunder; plus
(z) an amount which, when aggregated with Investments made under clause
(viii) of the definition of "Permitted Investments," does not exceed $5.0
million.
Notwithstanding the foregoing, the provisions set forth above shall not
prohibit:
(1) the payment of any dividend or consummation of irrevocable
redemption within 60 days after the date of declaration of such dividend or
giving of irrevocable redemption notice if the dividend or redemption would
have been permitted on the date of declaration or giving of irrevocable
redemption notice;
(2) if no Default or Event of Default shall have occurred and be
continuing, the acquisition of any shares of Capital Stock of the Company,
either (i) solely in exchange for shares of Qualified Capital Stock of the
Company or (ii) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a
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Subsidiary of the Company) of shares of Qualified Capital Stock of the
Company;
(3) if no Default or Event of Default shall have occurred and be
continuing, the acquisition of any Indebtedness of the Company that is
subordinate or junior in right of payment to the Notes either (i) solely in
exchange for shares of Qualified Capital Stock of the Company, or (ii)
through the application of net proceeds of a substantially concurrent sale
for cash (other than to a Subsidiary of the Company) of (A) shares of
Qualified Capital Stock of the Company or (B) Refinancing Indebtedness;
(4) if no Default or Event of Default shall have occurred and be
continuing, repurchases of Capital Stock deemed to occur upon the exercise
of stock options if such Capital Stock represents a portion of the exercise
price thereof;
(5) if no Default or Event of Default shall have occurred and be
continuing, payments by the Company to repurchase Capital Stock or other
securities of the Company from directors, officers and other employees of
the Company or any of its Restricted Subsidiaries in an aggregate amount not
to exceed in any one year the sum of (A) $500,000 and (B) any amounts
permitted to have been paid in any preceding years under subclause (A) above
to the extent such amounts were not so paid in any such prior years;
provided that such payments shall not exceed $3.0 million in the aggregate;
(6) if no Default or Event of Default shall have occurred and be
continuing, payments by the Company to repurchase Qualified Capital Stock or
other securities of the Company for purposes of making contributions of
Qualified Capital Stock of the Company to employees of the Company pursuant
to a qualified retirement plan of the Company or any of its Subsidiaries;
and
(7) if no Default or Event of Default shall have occurred and be
continuing, payments by the Company to repurchase Qualified Capital Stock of
the Company in connection with a substantially concurrent transaction in
which the Company reissues such repurchased Qualified Capital Stock as all
or a part of the consideration for the acquisition of property or assets;
provided, however, that such acquisition is consummated with 180 days of
such repurchase.
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In determining the aggregate amount of Restricted Payments made
subsequent to the Issue Date in accordance with clause (iii) of this Section
4.10, amounts expended pursuant to clauses (1), (2)(ii), (3)(ii)(A) and (7) (to
the extent that the value of the Qualified Capital Stock reissued shall have
been included in clause (iii)(w) of this Section 4.10) shall be included in
such calculation.
SECTION 4.11. Limitation on Transactions with Affiliates.
(a) The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, enter into or permit to
exist any transaction or series of related transactions (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with, or for the benefit of, any of its Affiliates
(each an "Affiliate Transaction"), other than (x) Affiliate Transactions
permitted under paragraph (b) of this Section 4.11 and (y) Affiliate
Transactions on terms that are no less favorable to the Company than those that
might reasonably have been obtained or are obtainable in a comparable
transaction at such time on an arm's-length basis from a Person that is not an
Affiliate of the Company or such Restricted Subsidiary. All Affiliate
Transactions (and each series of related Affiliate Transactions which are
similar or part of a common plan) involving aggregate payments or other
property with a fair market value in excess of $5.0 million shall be approved
by the Board of Directors of the Company or such Restricted Subsidiary, as the
case may be, such approval to be evidenced by a Board Resolution stating that
such Board of Directors has determined that such transaction complies with the
foregoing provisions. If the Company or any Restricted Subsidiary of the
Company enters into an Affiliate Transaction (or a series of related Affiliate
Transactions related to a common plan) involving aggregate payments or other
property with a fair market value in excess of $10.0 million, the Company or
such Restricted Subsidiary, as the case may be, shall, prior to the
consummation thereof, obtain a favorable opinion as to the fairness of such
transaction or series of related transactions to the Company or the relevant
Restricted Subsidiary, as the case may be, from a financial point of view, from
an Independent Financial Advisor and file the same with the Trustee.
(b) The restrictions set forth in clause (a) shall not apply to (i)
reasonable fees and compensation paid to and indemnity provided on behalf of,
officers, directors, employees, consultants or agents of the Company or any
Restricted
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Subsidiary of the Company as determined in good faith by the Company's Board of
Directors or senior management; (ii) transactions between or among the Company
and any of its Wholly Owned Restricted Subsidiaries or between or among such
Wholly Owned Restricted Subsidiaries or between the Company and/or any Wholly
Owned Restricted Subsidiary and Automotive Safety Components Asia-Pacific Ltd.,
provided such transactions are not otherwise prohibited hereunder; (iii) any
agreement as in effect as of the Issue Date or any amendment thereto or any
transaction contemplated thereby (including pursuant to any amendment thereto)
or in any replacement agreement thereto so long as any such amendment or
replacement agreement is not more disadvantageous to the Holders in any
material respect than the original agreement as in effect on the Issue Date;
and (iv) Restricted Payments permitted hereunder.
SECTION 4.12. Limitation on Incurrence of Additional Indebtedness.
The Company will not, and will not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee,
acquire, become liable, contingently or otherwise, with respect to, or
otherwise become responsible for payment of (collectively, "incur"), any
Indebtedness (including, without limitation, Acquired Indebtedness) other than
Permitted Indebtedness. Notwithstanding the foregoing, if no Default or Event
of Default shall have occurred and be continuing at the time of or as a
consequence of the incurrence of any such Indebtedness, the Company and the
Restricted Subsidiaries may incur Indebtedness (including, without limitation,
Acquired Indebtedness) if on the date of the incurrence of such Indebtedness,
after giving effect to the incurrence thereof, the Consolidated Fixed Charge
Coverage Ratio of the Company is greater than 2.25 to 1.0. No Indebtedness
incurred pursuant to the next preceding sentence shall be included in
calculating any limitation set forth in the definition of Permitted
Indebtedness. Upon the repayment of Indebtedness which may have been incurred
pursuant to more than one provision of this Indenture, the Company may, in its
sole discretion, designate which provision such Indebtedness shall have been
incurred under.
For purposes of determining any particular amount of Indebtedness under
this Section 4.12, guarantees of Indebtedness otherwise included in the
determination of such amount shall not also be included.
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Indebtedness of a Person existing at the time such Person becomes a
Restricted Subsidiary (whether by merger, consolidation, acquisition of Capital
Stock or otherwise) or is merged with or into the Company or any Restricted
Subsidiary or which is secured by a Lien on an asset acquired by the Company or
a Restricted Subsidiary (whether or not such Indebtedness is assumed by the
acquiring Person) shall be deemed incurred at the time the Person becomes a
Restricted Subsidiary or at the time of the asset acquisition, as the case may
be.
SECTION 4.13. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries.
The Company will not, and will not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or permit to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary of the Company to (a) pay dividends or make any other
distributions on or in respect of its Capital Stock; (b) make loans or advances
or to pay any Indebtedness or other obligation owed to the Company or any other
Restricted Subsidiary of the Company; or (c) transfer any of its property or
assets to the Company or any other Restricted Subsidiary of the Company, except
for such encumbrances or restrictions existing under or by reason of: (1)
applicable law; (2) this Indenture; (3) the Credit Agreement; (4)
non-assignment provisions of any contract or any lease governing a leasehold
interest of any Restricted Subsidiary of the Company; (5) any instrument
governing Acquired Indebtedness, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person or the properties or assets of the Person so acquired; (6)
agreements existing on the Issue Date to the extent and in the manner such
agreements are in effect on the Issue Date; or (7) an agreement governing
Indebtedness incurred to Refinance the Indebtedness issued, assumed or incurred
pursuant to an agreement referred to in clause (2), (3), (5) or (6) above;
provided, however, that the provisions relating to such encumbrance or
restriction contained in any such Indebtedness are no less favorable to the
Company in any material respect as determined by the Board of Directors of the
Company in their reasonable and good faith judgment than the provisions
relating to such encumbrance or restriction contained in agreements referred to
in such clause (2), (3), (5) or (6), respectively.
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SECTION 4.14. Limitation on Restricted and Unrestricted Subsidiaries.
(a) The Board of Directors of the Company may, if no Default or Event of
Default shall have occurred and be continuing or would arise therefrom,
designate an Unrestricted Subsidiary to be a Restricted Subsidiary; provided,
however, that (i) any such redesignation shall be deemed to be an incurrence as
of the date of such redesignation by the Company and its Restricted
Subsidiaries of the Indebtedness (if any) of such redesignated Subsidiary for
purposes of Section 4.12, and (ii) unless such redesignated Subsidiary shall
not have any Indebtedness outstanding (other than Permitted Indebtedness), no
such designation shall be permitted if immediately after giving effect to such
redesignation and the incurrence of any such additional Indebtedness, the
Company could not incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to Section 4.12.
(b) The Board of Directors of the Company also may, if no Default or
Event of Default shall have occurred and be continuing or would arise
therefrom, designate any Restricted Subsidiary to be an Unrestricted Subsidiary
if (i) such designation is at that time permitted under Section 4.10 and (ii)
immediately after giving effect to such designation, the Company could incur
$1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant
to Section 4.12. Any such designation by the Board of Directors of the Company
shall be evidenced to the Trustee by the filing with the Trustee of a certified
copy of the resolution of the Board of Directors of the Company giving effect
to such designation or redesignation and an Officers' Certificate certifying
that such designation or redesignation complied with the foregoing conditions
and setting forth in reasonable detail the underlying calculations.
(c) For purposes of Section 4.10, (i) an "Investment" shall be deemed to
have been made at the time any Restricted Subsidiary of the Company is
designated as an Unrestricted Subsidiary in an amount (proportionate to the
Company's equity interest in such Subsidiary) equal to the net worth of such
Restricted Subsidiary at the time that such Restricted Subsidiary is designated
as an Unrestricted Subsidiary; (ii) at any date, the aggregate amount of all
Restricted Payments made as Investments since the Issue Date shall exclude and
be reduced by an amount (proportionate to the Company's equity interest in such
Subsidiary) equal to the net worth of any Unrestricted Subsidiary at the time
that such Unrestricted Subsidiary is designated as a Restricted Subsidiary, not
to ex-
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ceed, in the case of any such redesignation of an Unrestricted Subsidiary as a
Restricted Subsidiary, the amount of Investments previously made by the Company
and its Restricted Subsidiaries in such Unrestricted Subsidiary (in each case
(i) and (ii) "net worth" is to be calculated based upon the fair market value
of the assets of such Subsidiary as of any such date of designation); and (iii)
any property transferred to or from an Unrestricted Subsidiary shall be valued
at its fair market value at the time of such transfer.
(d) Notwithstanding the foregoing, the Board of Directors of the Company
may not designate any Restricted Subsidiary of the Company to be an
Unrestricted Subsidiary if, after any such designation, (a) the Company or any
Restricted Subsidiary of the Company (i) provides credit support for, or a
guarantee of, any Indebtedness of such Subsidiary (including any undertaking,
agreement or instrument evidencing such Indebtedness) or (ii) is directly or
indirectly liable for any Indebtedness of such Subsidiary or (b) such
Subsidiary owns any Capital Stock of, or holds any Lien on any property of, the
Company or any Restricted Subsidiary of the Company which is not a Subsidiary
of the Subsidiary to be so designated.
Subsidiaries of the Company that are not designated by the Board of
Directors of the Company as Restricted or Unrestricted Subsidiaries will be
deemed to be Restricted Subsidiaries of the Company. Notwithstanding any
provisions of this Section 4.14, all Subsidiaries of an Unrestricted Subsidiary
will be Unrestricted Subsidiaries.
SECTION 4.15. Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder will have the
right to require that the Company purchase all or a portion of such Holder's
Notes pursuant to the offer described below (the "Change of Control Offer"), at
a purchase price equal to 101% of the principal amount thereof plus accrued and
unpaid interest to the date of purchase.
(b) Prior to the mailing of the notice referred to below, but in any
event within 30 days following any Change of Control, the Company covenants to
(i) repay in full all indebtedness, and terminate all commitments, under the
Credit Agreement and all other Senior Indebtedness the terms of which require
repayment upon a Change of Control or offer to repay in full all indebtedness,
and terminate all commitments, under the Credit Agreement and all other such
Senior Indebtedness and to repay the Indebtedness owed to each lender which has
accepted
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such offer or (ii) obtain the requisite consents under the Credit Agreement and
all other Senior Indebtedness to permit the repurchase of the Notes as provided
below. The Company shall first comply with the covenant in the immediately
preceding sentence before it shall be required to repurchase Notes pursuant to
the provisions described below. The Company's failure to comply with the
immediately preceding sentence shall be governed by Section 6.01(iii) and not
Section 6.01(iv).
(c) Within 30 days following the date upon which a Change of Control
occurs, the Company shall send, by first class mail, a notice to each Holder at
such Holder's last registered address, with a copy to the Trustee, which notice
shall govern the terms of the Change of Control Offer. The notice to the
Holders shall contain all instructions and materials necessary to enable such
Holders to tender Notes pursuant to the Change of Control Offer. Such notice
shall state:
(i) that the Change of Control Offer is being made pursuant to this
Section 4.15, that all Notes tendered and not withdrawn will be accepted for
payment and that the Change of Control Offer shall remain open for a period
of 20 Business Days or such longer period as may be required by law;
(ii) the purchase price (including the amount of accrued interest) and
the purchase date (which shall be no earlier than 30 days nor later than 45
days from the date such notice is mailed, other than as may be required by
law) (the "Change of Control Payment Date");
(iii) that any Note not tendered will continue to accrue interest;
(iv) that, unless the Company defaults in making payment therefor, any
Note accepted for payment pursuant to the Change of Control Offer shall cease
to accrue interest after the Change of Control Payment Date;
(v) that Holders electing to have a Note purchased pursuant to a Change
of Control Offer will be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Paying Agent at the address specified in the notice prior
to the close of business on the third Business Day prior to the Change of
Control Payment Date;
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(vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the second Business Day prior to the
Change of Control Payment Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Notes the Holder delivered for purchase and a statement that such Holder is
withdrawing its election to have such Notes purchased;
(vii) that Holders whose Notes are purchased only in part will be issued
new Notes in a principal amount equal to the unpurchased portion of the Notes
surrendered; provided, however, that each Note purchased and each new Note
issued shall be in an original principal amount of $1,000 or integral
multiples thereof; and
(viii) the circumstances and relevant facts regarding such Change of
Control.
On or before the Change of Control Payment Date, the Company shall (i)
accept for payment Notes or portions thereof tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent in accordance with Section
2.14 U.S. Legal Tender sufficient to pay the purchase price plus accrued
interest, if any, of all Notes so tendered and (iii) deliver to the Trustee
Notes so accepted together with an Officers' Certificate stating the Notes or
portions thereof being purchased by the Company. Upon receipt by the Paying
Agent of the monies specified in clause (ii) above and a copy of the Officers'
Certificate specified in clause (iii) above, the Paying Agent shall promptly
mail to the Holders of Notes so accepted payment in an amount equal to the
purchase price plus accrued interest, if any, and the Trustee shall promptly
authenticate and mail to such Holders new Notes equal in principal amount to
any unpurchased portion of the Notes surrendered. For purposes of this Section
4.15, the Trustee shall act as the Paying Agent.
Neither the Board of Directors of the Company nor the Trustee may waive
the provisions of this Section 4.15 relating to the Company's obligation to
make a Change of Control Offer.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of this Section 4.15, the Company shall comply
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with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under the provisions of this Section 4.15 by
virtue thereof.
SECTION 4.16. Limitation on Asset Sales.
(a) The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless:
(i) the Company or the applicable Restricted Subsidiary, as the case may
be, receives consideration at the time of such Asset Sale at least equal to
the fair market value of the assets sold or otherwise disposed of (as
determined in good faith by the Company's Board of Directors);
(ii) at least 75% of the consideration received by the Company or the
Restricted Subsidiary, as the case may be, from such Asset Sale shall be in
the form of cash or Cash Equivalents and is received at the time of such
disposition; and
(iii) upon the consummation of an Asset Sale, the Company shall apply, or
cause such Restricted Subsidiary to apply, the Net Cash Proceeds relating to
such Asset Sale within 360 days of receipt thereof either (A) to prepay any
Senior Indebtedness and, in the case of any Senior Indebtedness under any
revolving credit facility, effect a permanent reduction in the commitment
available under such revolving credit facility, (B) to make an investment in
properties and assets that replace the properties and assets that were the
subject of such Asset Sale or in properties and assets that will be used in
the business of the Company and its Restricted Subsidiaries as existing on
the Issue Date or in businesses reasonably related or complementary thereto
(as determined in good faith by the Company's Board of
Directors)("Replacement Assets") or (C) a combination of prepayment and
investment permitted by the foregoing clauses (iii)(A) through (iii)(B).
Pending final application, the Company or the applicable Restricted
Subsidiary may temporarily reduce Indebtedness under any revolving credit
facility or invest in cash or Cash Equivalents. On the 361st day after an
Asset Sale or such earlier date, if any, as the Board of Directors of the
Company or of such Restricted Subsidiary determines not to apply the Net Cash
Proceeds relating to such Asset Sale as set forth in clauses (iii)(A),
(iii)(B) and (iii)(C) of
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the next preceding sentence (each a "Net Proceeds Offer Trigger Date"), such
aggregate amount of Net Cash Proceeds which have not been applied on or
before such Net Proceeds Offer Trigger Date as permitted in clauses (iii)(A),
(iii)(B) and (iii)(C) of the next preceding sentence (each a "Net Proceeds
Offer Amount") shall be applied by the Company or such Restricted Subsidiary
to make an offer to purchase (a "Net Proceeds Offer") on a date (the "Net
Proceeds Offer Payment Date") not less than 30 nor more than 45 days
following the applicable Net Proceeds Offer Trigger Date, from all Holders on
a pro rata basis, that amount of Notes equal to the Net Proceeds Offer Amount
at a price equal to 100% of the principal amount of the Notes to be
purchased, plus accrued and unpaid interest thereon, if any, to the date of
purchase; provided, however, that if at any time any non-cash consideration
received by the Company or any Restricted Subsidiary of the Company, as the
case may be, in connection with any Asset Sale is converted into or sold or
otherwise disposed of for cash (other than interest received with respect to
any such non-cash consideration), then such conversion or disposition shall
be deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds
thereof shall be applied in accordance with this Section 4.16. The Company or
any such Restricted Subsidiary of the Company, as the case may be, may defer
the Net Proceeds Offer until there is an aggregate unutilized Net Proceeds
Offer Amount equal to or in excess of $5.0 million resulting from one or more
Asset Sales (at which time, the entire unutilized Net Proceeds Offer Amount,
and not just the amount in excess of $5.0 million, shall be applied as
required pursuant to this paragraph).
(b) Notwithstanding the immediately preceding paragraph, the Company and
its Restricted Subsidiaries will be permitted to consummate an Asset Sale
without complying with such paragraph to the extent (i) at least 75% of the
consideration for such Asset Sale constitutes Replacement Assets and/or Cash
Equivalents and (ii) such Asset Sale is for fair market value; provided,
however, that any consideration not constituting Replacement Assets received by
the Company or any of its Restricted Subsidiaries in connection with any Asset
Sale permitted to be consummated under this paragraph shall constitute Net Cash
Proceeds subject to the provisions of the preceding paragraph.
(c) Subject to the deferral of the Net Proceeds Offer contained in clause
(a)(iii) above, each notice of a Net
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Proceeds Offer pursuant to this Section 4.16 shall be mailed or caused to be
mailed, by first class mail, by the Company not more than 25 days after the Net
Proceeds Offer Trigger Date to all Holders at their last registered addresses,
with a copy to the Trustee. The notice shall contain all instructions and
materials necessary to enable such Holders to tender Notes pursuant to the Net
Proceeds Offer and shall state the following terms:
(i) that the Net Proceeds Offer is being made pursuant to this Section
4.16, that all Notes tendered will be accepted for payment; provided,
however, that if the aggregate principal amount of Notes tendered in a Net
Proceeds Offer plus accrued interest at the expiration of such offer exceeds
the aggregate amount of the Net Proceeds Offer, the Company shall select the
Notes to be purchased on a pro rata basis (with such adjustments as may be
deemed appropriate by the Company so that only Notes in denominations of
$1,000 or multiples thereof shall be purchased) and that the Net Proceeds
Offer shall remain open for a period of 20 Business Days or such longer
period as may be required by law;
(ii) the purchase price (including the amount of accrued interest) and
the Net Proceeds Offer Payment Date (which shall be not less than 30 nor more
than 45 days following the applicable Net Proceeds Offer Trigger Date and
which shall be at least five Business Days after the Trustee receives notice
thereof from the Company);
(iii) that any Note not tendered will continue to accrue interest;
(iv) that, unless the Company defaults in making payment therefor, any
Note accepted for payment pursuant to the Net Proceeds Offer shall cease to
accrue interest after the Net Proceeds Offer Payment Date;
(v) that Holders electing to have a Note purchased pursuant to a Net
Proceeds Offer will be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, to
the Paying Agent at the address specified in the notice prior to the close of
business on the third Business Day prior to the Net Proceeds Offer Payment
Date;
(vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the
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second Business Day prior to the Net Proceeds Offer Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the Holder,
the principal amount of the Notes the Holder delivered for purchase and a
statement that such Holder is withdrawing its election to have such Note
purchased; and
(vii) that Holders whose Notes are purchased only in part will be issued
new Notes in a principal amount equal to the unpurchased portion of the Notes
surrendered; provided, however, that each Note purchased and each new Note
issued shall be in an original principal amount of $1,000 or integral
multiples thereof;
On or before the Net Proceeds Offer Payment Date, the Company shall (i)
accept for payment Notes or portions thereof tendered pursuant to the Net
Proceeds Offer which are to be purchased in accordance with item (b)(i) above,
(ii) deposit with the Paying Agent in accordance with Section 2.14 U.S. Legal
Tender sufficient to pay the purchase price plus accrued interest, if any, of
all Notes to be purchased and (iii) deliver to the Trustee Notes so accepted
together with an Officers' Certificate stating the Notes or portions thereof
being purchased by the Company. The Paying Agent shall promptly mail to the
Holders of Notes so accepted payment in an amount equal to the purchase price
plus accrued interest, if any. For purposes of this Section 4.16, the Trustee
shall act as the Paying Agent. The Trustee shall promptly authenticate and mail
to such Holders new Notes equal in principal amount to any unpurchased portion
of the Notes surrendered. Upon the payment of the purchase price for the Notes
accepted for purchase, the Trustee shall return the Notes purchased to the
Company for cancellation. Any monies remaining after the purchase of Notes
pursuant to a Net Proceeds Offer shall be returned within three Business Days
by the Trustee to the Company except with respect to monies owed as obligations
to the Trustee pursuant to Article Seven. For purposes of this Section 4.16,
the Trustee shall act as the Paying Agent.
To the extent the amount of Notes tendered pursuant to any Net Proceeds
Offer is less than the amount of Net Cash Proceeds subject to such Net Proceeds
Offer, the Company may use any remaining portion of such Net Cash Proceeds not
required to fund the repurchase of tendered Notes for general corporate
purposes and such Net Proceeds Offer Amount shall be reset to zero.
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(d) The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the provisions
of this Section 4.16, the Company shall comply with the applicable securities
laws and regulations and shall not be deemed to have breached its obligations
under the provisions of this Section 4.16 by virtue thereof.
SECTION 4.17. Limitation on Preferred Stock of Restricted Subsidiaries.
The Company will not permit any of its Restricted Subsidiaries to issue
any Preferred Stock (other than to the Company or to a Wholly Owned Restricted
Subsidiary of the Company) or permit any Person (other than the Company or a
Wholly Owned Restricted Subsidiary of the Company) to own any Preferred Stock
of any Restricted Subsidiary of the Company.
SECTION 4.18. Limitation on Liens.
The Company will not, and will not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or permit or
suffer to exist any Liens of any kind against or upon any property or assets of
the Company or any of its Restricted Subsidiaries (whether owned on the Issue
Date or acquired after the Issue Date), or any proceeds therefrom, or assign or
otherwise convey any right to receive income or profits therefrom unless (i) in
the case of Liens securing Indebtedness that is expressly subordinate or junior
in right of payment to the Notes or any Guarantee, the Notes and such
Guarantee, as the case may be, are secured by a Lien on such property, assets
or proceeds that is senior in priority to such Liens and (ii) in all other
cases, the Notes and the Guarantees are equally and ratably secured, except for
(A) Liens existing as of the Issue Date to the extent and in the manner such
Liens are in effect on the Issue Date; (B) Liens securing Senior Indebtedness;
(C) Liens securing the Notes and the Guarantees; (D) Liens of the Company or a
Wholly Owned Restricted Subsidiary of the Company on assets of any Restricted
Subsidiary of the Company; (E) Liens securing Refinancing Indebtedness which is
incurred to Refinance any Indebtedness which has been secured by a Lien
permitted under this Indenture and which has been incurred in accordance with
the provisions of this Indenture; provided, however, that such Liens (1) are no
less favorable to the Holders and are not more favorable to the lienhold-
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ers with respect to such Liens than the Liens in respect of the Indebtedness
being Refinanced and (2) do not extend to or cover any property or assets of
the Company or any of its Subsidiaries not securing the Indebtedness so
Refinanced (other than property or assets subject to Liens under clause (B)
above); and (F) Permitted Liens.
SECTION 4.19. Conduct of Business.
The Company will not, and will not cause or permit any of its Restricted
Subsidiaries to, engage in any businesses other than the businesses in which
the Company is engaged on the Issue Date, giving effect to the acquisition by
the Company of all of the assets of the Air Restraint and Industrial Fabrics
Division of JPS Automotive L.P., and any businesses reasonably related or
complementary thereto (as determined in good faith by the Company's Board of
Directors).
SECTION 4.20. Additional Subsidiary Guarantees.
If the Company or any of its Restricted Subsidiaries transfers or causes
to be transferred, in one transaction or a series of related transactions, any
property to any Restricted Subsidiary that is not a Subsidiary Guarantor or a
Foreign Subsidiary, or if the Company or any of its Restricted Subsidiaries
shall organize, acquire or otherwise invest in another Restricted Subsidiary
that is not a Foreign Subsidiary, then such transferee or acquired or other
Restricted Subsidiary shall (a) execute and deliver to the Trustee a
supplemental indenture in form reasonably satisfactory to the Trustee pursuant
to which such Restricted Subsidiary shall unconditionally guarantee all of the
Company's obligations under the Notes and this Indenture on the terms set forth
in this Indenture and (b) deliver to the Trustee an Opinion of Counsel stating
that such supplemental indenture has been duly authorized, executed and
delivered by such Restricted Subsidi-
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ary and constitutes a legal, valid, binding and enforceable obligation of such
Restricted Subsidiary; provided, however, that any Restricted Subsidiary
acquired on or after the Issue Date which is prohibited from entering into a
Guarantee pursuant to restrictions contained in any debt instrument or other
agreement in existence at the time such Restricted Subsidiary was so acquired
which was not entered into in anticipation or contemplation of such acquisition
shall not be required to become a Subsidiary Guarantor so long as any such
restriction is in existence and to the extent of such restriction. After the
execution and delivery of such supplemental indenture, such Restricted
Subsidiary shall be a Subsidiary Guarantor for all purposes of this Indenture.
SECTION 4.21.Prohibition on Incurrence of Senior Subordinated Debt.
The Company will not, and will not permit any Subsidiary Guarantor to,
incur or suffer to exist Indebtedness that by its terms (or by the terms of any
agreement governing such Indebtedness) is senior in right of payment to the
Notes and subordinate in right of payment to any other Indebtedness of the
Company or such Subsidiary Guarantor, as the case may be.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of Assets.
(a) The Company will not, in a single transaction or series of related
transactions, consolidate or merge with or into any Person, or sell, assign,
transfer, lease, convey or otherwise dispose of (or cause or permit any
Restricted Subsidiary of the Company to sell, assign, transfer, lease, convey
or otherwise dispose of) all or substantially all of the Company's assets
(determined on a consolidated basis for the Company and its Restricted
Subsidiaries) unless: (i) either (1) the Company shall be the surviving or
continuing corporation or (2) the Person (if other than the Company) formed by
such consolidation or into which the Company is merged or the Person which
acquires by sale, assignment, transfer, lease, conveyance or other disposition
the properties and assets of the Company and its Restricted Subsidiaries
substantially as an entirety (the "Surviving Entity") (x) shall be a
corporation organized and validly existing under the laws of the United States
or any state thereof or the District of Columbia and (y) shall expressly
assume, by supplemental indenture (in form and substance satisfactory to the
Trustee), executed and delivered to the Trustee, the due and punctual payment
of the principal of, premium, if any, and interest on all of the Notes and the
performance of every covenant of the Notes, this Indenture and the Registration
Rights Agreement on the part of the Company to be performed or observed, as the
case may be; (ii) immediately after giving effect to such transaction and
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the assumption contemplated by clause (i)(2)(y) above (including giving effect
to any Indebtedness and Acquired Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction), the Company or
such Surviving Entity, as the case may be, (1) shall have a Consolidated Net
Worth equal to or greater than the Consolidated Net Worth of the Company
immediately prior to such transaction and (2) shall be able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant
to Section 4.12; (iii) immediately before and immediately after giving effect
to such transaction and the assumption contemplated by clause (i)(2)(y) above
(including, without limitation, giving effect to any Indebtedness and Acquired
Indebtedness incurred or anticipated to be incurred and any Lien granted in
connection with or in respect of the transaction), no Default or Event of
Default shall have occurred or be continuing; and (iv) the Company or the
Surviving Entity, as the case may be, shall have delivered to the Trustee an
officers' certificate and an opinion of counsel, each stating that such
consolidation, merger, sale, assignment, transfer, lease, conveyance or other
disposition and, if a supplemental indenture is required in connection with
such transaction, such supplemental indenture comply with the applicable
provisions hereof and that all conditions precedent in this Indenture relating
to such transaction have been satisfied.
(b) For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of the Company the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
(c) Each Subsidiary Guarantor (other than any Subsidiary Guarantor whose
Guarantee is to be released in accordance with the terms of the Guarantee and
this Indenture in connection with any transaction complying with the provisions
of Section 4.16) will not, and the Company will not cause or permit any
Subsidiary Guarantor to, consolidate with or merge with or into any Person
other than the Company or another Subsidiary Guarantor that is a Wholly Owned
Restricted Subsidiary unless: (a) the entity formed by or surviving any such
consolidation or merger (if other than the Subsidiary Guarantor) or to which
such sale, lease, conveyance or other disposition shall have been made is a
corporation organized and existing under the laws of the United States or any
state thereof or the
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District of Columbia; (b) such entity assumes by execution of a supplemental
indenture all of the obligations of the Subsidiary Guarantor under its
Guarantee; (c) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing; and (d) immediately
after giving effect to such transaction and the use of any net proceeds
therefrom on a pro forma basis, the Company could satisfy the provisions of
clause (ii) of the first paragraph of this Section 5.01. Any merger or
consolidation of a Subsidiary Guarantor with and into the Company (with the
Company being the surviving entity) or another Subsidiary Guarantor that is a
Wholly Owned Restricted Subsidiary need only comply with clause (iv) of
paragraph (a) of this Section 5.01.
SECTION 5.02. Successor Corporation Substituted.
Upon any consolidation, combination or merger or any transfer of all or
substantially all of the assets of the Company in accordance with Section 5.01,
the successor Person formed by such consolidation or into which the Company is
merged or to which such conveyance, lease or transfer is made shall succeed to,
and be substituted for, and may exercise every right and power of, the Company
under this Indenture and the Notes with the same effect as if such successor
had been named as the Company herein and thereafter (except in the case of a
lease) the predecessor corporation will be relieved of all further obligations
and covenants under this Indenture and the Notes.
ARTICLE SIX
REMEDIES
SECTION 6.01. Events of Default.
An "Event of Default" means any of the following events:
(i) the failure to pay interest (including any Additional Interest, if
any) on any Notes when the same becomes due and payable and the default
continues for a period of 30 days (whether or not such payment is prohibited
by Article Ten of this Indenture);
(ii) the failure to pay the principal on any Notes when such principal
becomes due and payable, at maturity,
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upon acceleration, upon redemption or otherwise (including the failure to
make a payment to purchase Notes tendered pursuant to a Change of Control
Offer or a Net Proceeds Offer) (whether or not such payment is prohibited by
Article Ten of this Indenture);
(iii) a default in the observance or performance of any other covenant or
agreement contained in this Indenture which default continues for a period
of 30 days after the Company receives written notice specifying the default
(and demanding that such default be remedied) from the Trustee or the
Holders of at least 25% of the outstanding principal amount of the Notes
(except in the case of a default with respect to Section 5.01, which will
constitute an Event of Default with such notice requirement but without such
passage of time requirement);
(iv) the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount of
any Indebtedness of the Company or any Restricted Subsidiary of the Company,
or the acceleration of the final stated maturity of any such Indebtedness if
the aggregate principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness in default for failure to
pay principal at final maturity or which has been accelerated, aggregates
$5.0 million or more at any time;
(v) one or more judgments in an aggregate amount in excess of $5.0
million shall have been rendered against the Company or any of its
Subsidiaries and such judgments remain undischarged, unpaid or unstayed for
a period of 60 days after such judgment or judgments become final and
non-appealable;
(vi) the Company or any of its Significant Subsidiaries pursuant to or
under or within the meaning of any Bankruptcy Law:
(a) commences a voluntary case or proceeding;
(b) consents to the entry of an order for relief against it in an
involuntary case or proceeding;
(c) consents to the appointment of a Custodian of it or for all or
substantially all of its property;
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(d) makes a general assignment for the benefit of its creditors; or
(e) shall generally not pay its debts when such debts become due or
shall admit in writing its inability to pay its debts generally;
(vii) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(a) is for relief against the Company or any Significant Subsidiary
of the Company in an involuntary case or proceeding,
(b) appoints a Custodian of the Company or any Significant
Subsidiary of the Company for all or substantially all of its Properties,
or
(c) orders the liquidation of the Company or any Significant
Subsidiary of the Company,
and in each case the order or decree remains unstayed and in effect for
60 consecutive days; or
(viii) any of the Guarantees cease to be in full force and effect or
any of the Guarantees are declared to be null and void or invalid and
unenforceable or any of the Subsidiary Guarantors denies or disaffirms its
liability under its Guarantees (other than by reason of release of a
Subsidiary Guarantor in accordance with the terms of this Indenture).
SECTION 6.02. Acceleration.
(a) Upon the happening of an Event of Default specified in Section 6.01
(other than an Event of Default specified in clause (vi) or (vii) of Section
6.01) the Trustee may, or the holders of at least 25% in principal amount of
outstanding Notes may, declare the principal of and accrued interest on all the
Notes to be due and payable by notice in writing to the Company and the Trustee
specifying the respective Event of Default and that it is a "notice of
acceleration," and the same shall become immediately due and payable. If an
Event of Default of the type described in clause (vi) or (vii) of Section 6.01
occurs and is continuing, then all unpaid principal of, and premium, if any,
and accrued and unpaid interest on all of the outstanding Notes shall ipso
facto become and be immedi-
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ately due and payable without any declaration or other act on the part of the
Trustee or any Holder.
(b) At any time after a declaration of acceleration with respect to the
Notes as described in the preceding paragraph, the Holders of a majority in
aggregate principal amount of the Notes then outstanding by written notice to
the Company and the Trustee may rescind and cancel such declaration and its
consequences (i) if the rescission would not conflict with any judgment or
decree, (ii) if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of such
acceleration, (iii) to the extent the payment of such interest is lawful,
interest on overdue installments of interest and overdue principal, which has
become due otherwise than by such declaration of acceleration, has been paid,
(iv) if the Company has paid the Trustee its reasonable compensation and
reimbursed the Trustee for its expenses, disbursements and advances and (v) in
the event of the cure or waiver of an Event of Default of the type described in
clause (vi) or (vii) of Section 6.01, the Trustee shall have received an
Officers' Certificate and an Opinion of Counsel that such Event of Default has
been cured or waived; provided, however, that such counsel may rely, as to
matters of fact, on a certificate or certificates of officers of the Company.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy by proceeding at law or in equity to collect the payment
of the principal of, premium, if any, or interest on the Notes or to enforce
the performance of any provision of the Notes or this Indenture.
All rights of action and claims under this Indenture or the Notes may be
enforced by the Trustee even if it does not possess any of the Notes or does
not produce any of them in the proceeding. A delay or omission by the Trustee
or any Holder in exercising any right or remedy accruing upon an Event of
Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative to the extent permitted by law.
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SECTION 6.04. Waiver of Past Defaults.
Prior to the declaration of acceleration of the Notes, the Holders of not
less than a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may, on behalf of the Holders of all the
Notes, waive any existing Default or Event of Default and its consequences
under this Indenture, except a Default or Event of Default specified in Section
6.01(i) or (ii) or in respect of any provision hereof which cannot be modified
or amended without the consent of the Holder so affected pursuant to Section
9.02. When a Default or Event of Default is so waived, it shall be deemed cured
and shall cease to exist. This Section 6.04 shall be in lieu of Section
316(a)(1)(B) of the TIA and such Section 316(a)(1)(B) of the TIA is hereby
expressly excluded from this Indenture and the Notes, as permitted by the TIA.
SECTION 6.05. Control by Majority.
Subject to Section 2.09, the Holders of the Notes may not enforce this
Indenture or the Notes except as provided in this Article Six and under the
TIA. The Holders of not less than a majority in aggregate principal amount of
the outstanding Notes shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, provided, however, that
the Trustee may refuse to follow any direction (a) that conflicts with any rule
of law or this Indenture, (b) that the Trustee determines may be unduly
prejudicial to the rights of another Holder, or (c) that may expose the Trustee
to personal liability for which reasonable indemnity provided to the Trustee
against such liability shall be inadequate; provided, further, however, that
the Trustee may take any other action deemed proper by the Trustee that is not
inconsistent with such direction or this Indenture. This Section 6.05 shall be
in lieu of Section 316(a)(1)(A) of the TIA, and such Section 316(a)(1)(A) of
the TIA is hereby expressly excluded from this Indenture and the Notes, as
permitted by the TIA.
SECTION 6.06. Limitation on Suits.
No Holder of any Notes shall have any right to institute any proceeding
with respect to this Indenture or the Notes or any remedy hereunder, unless the
Holders of at least 25% in aggregate principal amount of the outstanding Notes
have made written request, and offered reasonable indemnity, to the Trustee to
institute such pro-
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ceeding as Trustee under the Notes and this Indenture, the Trustee has failed
to institute such proceeding within 25 days after receipt of such notice,
request and offer of indemnity and the Trustee, within such 25-day period, has
not received directions inconsistent with such written request by Holders of
not less than a majority in aggregate principal amount of the outstanding
Notes.
The foregoing limitations shall not apply to a suit instituted by a
Holder of a Note for the enforcement of the payment of the principal of,
premium, if any, or interest on, such Note on or after the respective due dates
expressed or provided for in such Note.
A Holder may not use this Indenture to prejudice the rights of any other
Holders or to obtain priority or preference over such other Holders.
SECTION 6.07. Right of Holders To Receive Payment.
Notwithstanding any other provision in this Indenture, the right of any
Holder of a Note to receive payment of the principal of, premium, if any, and
interest on such Note, on or after the respective due dates expressed or
provided for in such Note, or to bring suit for the enforcement of any such
payment on or after the respective due dates, is absolute and unconditional and
shall not be impaired or affected without the consent of the Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default specified in clause (i) or (ii) of Section 6.01
occurs and is continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Company, or any other obligor on the
Notes for the whole amount of the principal of, premium, if any, and accrued
interest remaining unpaid, together with interest on overdue principal and, to
the extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate per annum provided for by
the Notes and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the
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reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents, counsel, accountants and experts) and the Holders allowed in any
judicial proceedings relative to the Company or Restricted Subsidiaries (or any
other obligor upon the Notes), their creditors or their property and shall be
entitled and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same, and any
Custodian in any such judicial proceedings is hereby authorized by each Holder
to make such payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agent and counsel, and any other
amounts due the Trustee under Section 7.07. The Company's payment obligations
under this Section 6.09 shall be secured in accordance with the provisions of
Section 7.07. Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the Notes
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money pursuant to this Article Six it shall
pay out such money in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for interest accrued on the Notes, ratably, without
preference or priority of any kind, according to the amounts due and payable
on the Notes for interest;
Third: to Holders for the principal amounts (including any premium) owing
under the Notes, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for the principal
(including any premium); and
Fourth: the balance, if any, to the Company.
The Trustee, upon prior written notice to the Company, may fix a record
date and payment date for any payment to Holders pursuant to this Section 6.10.
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SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court may in its discretion require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to any suit by the Trustee, any suit by a
Holder pursuant to Section 6.07, or a suit by a Holder or Holders of more than
10% in aggregate principal amount of the outstanding Notes.
SECTION 6.12. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture or any Note and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case the Company, the
Trustee and the Holders shall, subject to any determination in such proceeding,
be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holders shall
continue as though no such proceeding had been instituted.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
may exercise such of the rights and powers vested in it by this Indenture and
shall use the same degree of care and skill in its exercise thereof as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
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(1) The Trustee need perform only those duties as are specifically set
forth in this Indenture and no duties, covenants or obligations of the
Trustee shall be implied in this Indenture.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However, in
the case of any such certificates or opinions that by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
(c) Notwithstanding anything to the contrary herein contained, the
Trustee may not be relieved from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of this
Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it takes
or omits to take in good faith in accordance with a direction received by it
pursuant to Section 6.02, 6.04 or 6.05.
(d) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01 and
Section 7.02.
(f) The Trustee shall not be liable for interest on any money or assets
received by it except as the Trustee may
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agree in writing with the Company. Assets held in trust by the Trustee need not
be segregated from other assets except to the extent required by law.
(g) The Trustee may refuse to perform any duty or exercise any right or
power hereunder unless (i) it is provided adequate funds to enable it to do so
and (ii) it receives indemnity reasonably satisfactory to it against any loss,
liability, fee or expense.
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely and shall be fully protected in acting or
refraining from acting upon any document believed by it to be genuine and to
have been signed or presented by the proper Person. The Trustee need not and
shall not be required to investigate any fact or matter stated in the
document.
(b) Before the Trustee acts or refrains from acting, it may consult with
counsel of its selection and may require an Officers' Certificate or an
Opinion of Counsel, or both, which shall conform to Sections 11.04 and 11.05.
The Trustee shall not be liable for any action it takes or omits to take in
good faith in reliance on such Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action that it takes or omits
to take in good faith which it reasonably believes to be authorized or within
its rights or powers.
(e) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters as
it may see fit, and, if the Trustee shall determine to make such further
inquiry or investigation, it shall be entitled, upon reasonable notice to the
Company, to examine the books, records, and
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premises of the Company, personally or by agent or attorney and to consult
with the officers and representatives of the Company, including the Company's
accountants and attorneys.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee security or indemnity
reasonably satisfactory to the Trustee against the costs, expenses and
liabilities which may be incurred by it in compliance with such request,
order or direction.
(g) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
(h) Delivery of reports, information and documents to the Trustee under
Section 4.08 is for informational purposes only and the Trustee's receipt of
the foregoing shall not constitute constructive notice of any information
contained therein or determinable from information contained therein,
including the Company's compliance with any of their covenants hereunder (as
to which the Trustee is entitled to rely exclusively on Officers'
Certificates).
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Notes and may otherwise deal with the Company, any of their
Subsidiaries, or their respective Affiliates with the same rights it would have
if it were not Trustee. Any Agent may do the same with like rights. However,
the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as
to the validity or adequacy of this Indenture or the Notes, and it shall not be
accountable for the Company's use of the proceeds from the Notes, and it shall
not be responsible for any statement of the Company in this Indenture or any
document entered into or issued in connection with the issuance and sale of the
Notes or any statement in the Notes other than the Trustee's certificate of
authentication.
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SECTION 7.05. Notice of Default.
If a Default or an Event of Default occurs and is continuing and if it is
known to a Trust Officer, the Trustee shall mail to each Holder notice of the
uncured Default or Event of Default within 90 days after obtaining knowledge
thereof. Except in the case of a Default or an Event of Default in payment of
principal of, or interest on, any Note, including an accelerated payment, a
Default in payment on the Change of Control Payment Date pursuant to a Change
of Control Offer or on the Net Proceeds Offer Payment Date pursuant to a Net
Proceeds Offer and a Default in compliance with Article Five hereof, the
Trustee may withhold the notice if and so long as its Board of Directors, the
executive committee of its Board of Directors or a committee of its directors
and/or Trust Officers in good faith determines that withholding the notice is
in the interest of the Holders. The foregoing sentence of this Section 7.05
shall be in lieu of the proviso to Section 315(b) of the TIA and such proviso
to Section 315(b) of the TIA is hereby expressly excluded from this Indenture
and the Notes, as permitted by the TIA.
SECTION 7.06. Reports by Trustee to Holders.
Within 60 days after May 15 of each year beginning with 1997, the Trustee
shall, to the extent that any of the events described in TIA Section 313(a)
occurred within the previous twelve months, but not otherwise, mail to each
Holder a brief report dated as of such date that complies with TIA Section
313(a). The Trustee also shall comply with TIA Sections 313(b), (c) and (d).
A copy of each report at the time of its mailing to Holders shall be
mailed to the Company and filed with the Commission and each stock exchange, if
any, on which the Notes are listed.
The Company shall promptly notify the Trustee if the Notes become listed
on any stock exchange and the Trustee shall comply with TIA Section 313(d).
SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time such compensation
for its services as has been agreed to in writing signed by the Company and the
Trustee. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable out-of-pocket
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disbursements, advances or expenses incurred or made by it in connection with
the performance of its duties under this Indenture. Such expenses shall include
the reasonable fees and expenses of the Trustee's agents, counsel, accountants
and experts.
The Company shall indemnify each of the Trustee (or any predecessor
Trustee) and its agents, employees, stockholders, Affiliates and directors and
officers for, and hold them each harmless against, any and all loss, liability,
damage, claim or expense (including reasonable fees and expenses of counsel),
including taxes (other than taxes based on the income of the Trustee) incurred
by any of them except for such actions to the extent caused by any negligence,
bad faith or willful misconduct on their part, arising out of or in connection
with the acceptance or administration of this trust including the reasonable
costs and expenses of defending themselves against any claim or liability in
connection with the exercise or performance of any of their rights, powers or
duties hereunder. The Trustee shall notify the Company promptly of any claim
asserted against the Trustee for which it may seek indemnity, provided,
however, that failure to so notify the Company shall not release the Company of
its obligations hereunder unless and to the extent such failure results in the
forfeiture by the Company of substantial rights and defenses. At the Trustee's
sole discretion, the Company shall defend the claim and the Trustee shall
cooperate and may participate in the defense; provided, however, that any
settlement of a claim shall be approved in writing by the Trustee if such
settlement would result in an admission of liability by the Trustee or if such
settlement would not be accompanied by a full release of the Trustee for all
liability arising out of the events giving rise to such claim. Alternatively,
the Trustee may at its option have separate counsel of its own choosing and the
Company shall pay the reasonable fees and expenses of such counsel.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all assets or money held or
collected by the Trustee, in its capacity as Trustee, except assets or money
held in trust to pay principal of or premium, if any, or interest on particular
Notes.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(vi) or (vii) occurs, such expenses and the
compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law.
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The provisions of this Section 7.07 shall survive the termination of this
Indenture.
SECTION 7.08. Replacement of Trustee.
The Trustee may resign at any time by so notifying the Company in writing
at least 30 days in advance of such resignation; provided, however, that no
such resignation shall be effective until a successor Trustee has accepted its
appointment pursuant to this Section 7.08. The Holders of a majority in
principal amount of the outstanding Notes may remove the Trustee and appoint a
successor Trustee with the Company's consent, by so notifying the Company and
the Trustee. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent or an order for relief
is entered with respect to the Trustee under any Bankruptcy Law;
(3) a receiver or other public officer takes charge of the Trustee or its
property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall notify each Holder of such event
and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in aggregate
principal amount of the outstanding Notes may appoint a successor Trustee to
replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Immediately after that, the
retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 7.07, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail notice of such
successor Trustee's appointment to each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the re-
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tiring Trustee, the Company or the Holders of at least 10% in aggregate
principal amount of the outstanding Notes may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
Notwithstanding any resignation or replacement of the Trustee pursuant to
this Section 7.08, the Company's obligations under Section 7.07 shall continue
for the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee; provided, however, that
such corporation shall be otherwise qualified and eligible under this Article
Seven.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the requirement
of TIA Sections 310(a)(1), (2) and (5). The Trustee (or, in the case of a
Trustee that is a corporation included in a bank holding company system, the
related bank holding company) shall have a combined capital and surplus of at
least $100 million as set forth in its most recent published annual report of
condition, and have a Corporate Trust Office in the City of New York. In
addition, if the Trustee is a corporation included in a bank holding company
system, the Trustee, independently of such bank holding company, shall meet the
capital requirements of TIA Section 310(a)(2). The Trustee shall comply with
TIA Section 310(b); provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which
other securities, or certificates of interest or participation in other
securities, of the Company are outstanding, if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met. The provisions of TIA
Section 310 shall apply to the Company, as obligor of the Notes.
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SECTION 7.11. Preferential Collection of
Claims Against the Company.
The Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
The provisions of TIA Section 311 shall apply to the Company, as obligor of the
Notes.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of Company's Obligations.
This Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of the
Notes, as expressly provided for in this Indenture) as to all outstanding Notes
when (i) either (a) all Notes theretofore authenticated and delivered (except
lost, stolen or destroyed Notes which have been replaced or paid and Notes for
whose payment money has theretofore been deposited in trust or segregated and
held in trust by the Company and thereafter repaid to the Company or discharged
from such trust) have been delivered to the Trustee for cancellation or (b) all
Notes not theretofore delivered to the Trustee for cancellation have become due
and payable and the Company has irrevocably deposited or caused to be deposited
with the Trustee funds in an amount sufficient to pay and discharge the entire
Indebtedness on the Notes not theretofore delivered to the Trustee for
cancellation, for principal of, premium, if any, and interest on the Notes to
the date of deposit together with irrevocable instructions from the Company
directing the Trustee to apply such funds to the payment thereof at maturity or
redemption, as the case may be; (ii) the Company has paid all other sums
payable under this Indenture by the Company; and (iii) the Company has
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel
stating that all conditions precedent under this Indenture relating to the
satisfaction and discharge of this Indenture have been complied with.
The Company may, at its option and at any time, elect to have its
obligations and the corresponding obligations of the Subsidiary Guarantors
discharged with respect to the outstanding Notes ("Legal Defeasance"). Such
Legal Defeasance means that the Company shall be deemed to have paid and dis-
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charged the entire indebtedness represented by the outstanding Notes, and
satisfied all of its obligations with respect to the Notes, except for (i) the
rights of Holders to receive payments in respect of the principal of, premium,
if any, and interest on the Notes when such payments are due, (ii) the
Company's obligations with respect to the Notes concerning issuing temporary
Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and
the maintenance of an office or agency for payments, (iii) the rights, powers,
trust, duties and immunities of the Trustee and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of this Section
8.01. In addition, the Company may, at its option and at any time, elect to
have the obligations of the Company and the Subsidiary Guarantors, if any,
released with respect to covenants contained in Sections 4.10 through 4.20 and
Article Five ("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 of Covenant Defeasance, those events
described under Section 6.01 (except those events described in Section
6.01(i),(ii),(vi) and (vii)) will no longer constitute an Event of Default with
respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(i) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders cash in United States 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, to pay the principal of, premium, if any, and
interest on the Notes on the stated date for payment thereof or on the
applicable Redemption Date, as the case may be;
(ii) in the case of Legal Defeasance, the Company shall have delivered
to the Trustee an Opinion of Counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Company has received from,
or there has been published by, the Internal Revenue Service a ruling or (B)
since the date of this Indenture, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based thereon
such Opinion of Counsel shall confirm that, the Holders 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
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the same manner and at the same times as would have been the case if such
Legal Defeasance had not occurred; provided, however, such Opinion of Counsel
will not be required if all the Notes will become due and payable on the
maturity date within one year or are to be called for redemption within one
year under arrangements satisfactory to the Trustee;
(iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders 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 or insofar as Events of Default under
Section 6.01(vi) or (vii) are concerned, at any time in the period ending on
the 91st day after the date of deposit (other than a Default or Event of
Default resulting from the incurrence of Indebtedness all or a portion of the
proceeds of which will be used to defease the Notes);
(v) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under this Indenture or any
other material agreement or instrument to which the Company or any of its
Restricted Subsidiaries is a party or by which the Company or any of its
Restricted Subsidiaries is bound;
(vi) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company or others;
(vii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance, as the case may be, have been complied with; provided, however,
that such counsel may rely, as to matters of
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fact, on a certificate or certificates of officers of the Company;
(viii) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; provided, however, that such counsel may rely, as to matters of
fact, on a certificate or certificates of officers of the Company; and
(ix) certain other customary conditions precedent are satisfied.
SECTION 8.02. Application of Trust Money.
The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or U.S.
Government Obligations deposited with it pursuant to Section 8.01, and shall
apply the deposited U.S. Legal Tender and the money from U.S. Government
Obligations in accordance with this Indenture to the payment of the principal
of and interest on the Notes. The Trustee shall be under no obligation to
invest said U.S. Legal Tender or U.S. Government Obligations except as it may
agree in writing with the Company.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Legal Tender or U.S.
Government Obligations deposited pursuant to Section 8.01 or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of outstanding Notes.
SECTION 8.03. Repayment to the Company.
Subject to Section 8.01, the Trustee and the Paying Agent shall promptly
pay to the Company upon request any excess U.S. Legal Tender or U.S. Government
Obligations held by them at any time and thereupon shall be relieved from all
liability with respect to such money. The Trustee and the Paying Agent shall
pay to the Company upon request any money held by them for the payment of
principal or interest that remains unclaimed for one year; provided, however,
that the Trustee or such Paying Agent, before being required to make any
payment, may at the expense of the Company cause to be published once in a
newspaper of general circulation in the City of New York or mail to each Holder
entitled to such money notice that such
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money remains unclaimed and that after a date specified therein which shall be
at least 30 days from the date of such publication or mailing any unclaimed
balance of such money then remaining will be repaid to the Company. After
payment to the Company, Holders entitled to such money must look to the Company
for payment as general creditors unless an applicable law designates another
Person.
SECTION 8.04. Reinstatement.
If the Trustee or Paying Agent is unable to apply any U.S. Legal Tender
or U.S. Government Obligations in accordance with Section 8.01 by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Notes shall
be revived and reinstated as though no deposit had occurred pursuant to Section
8.01 until such time as the Trustee or Paying Agent is permitted to apply all
such U.S. Legal Tender or U.S. Government Obligations in accordance with
Section 8.01; provided, however, that if the Company has made any payment of
interest on or principal of any Notes because of the reinstatement of their
obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the U.S. Legal Tender or U.S.
Government Obligations held by the Trustee or Paying Agent.
SECTION 8.05. Acknowledgment of Discharge by Trustee.
After (i) the conditions of Section 8.01 have been satisfied, (ii) the
Company has paid or caused to be paid all other sums payable hereunder by the
Company and (iii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent referred to in clause (i) above relating to the satisfaction and
discharge of this Indenture have been complied with, the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations under
this Indenture except for those surviving obligations specified in Section
8.01; provided the legal counsel delivering such Opinion of Counsel may rely as
to matters of fact on one or more Officers' Certificates of the Company.
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ARTICLE NINE
MODIFICATION OF THE INDENTURE
SECTION 9.01. Without Consent of Holders.
Notwithstanding Section 9.02, the Company, the Subsidiary Guarantors and
the Trustee may amend, waive or supplement this Indenture without notice to or
consent of any Holder: (a) to cure any ambiguity, defect or inconsistency; (b)
to comply with Section 5.01 of this Indenture; (c) to provide for
uncertificated Notes in addition to certificated Notes; (d) to comply with any
requirements of the Commission in order to effect or maintain the qualification
of this Indenture under the TIA; or (e) to make any change that would provide
any additional benefit or rights to the Holders or that does not adversely
affect the rights of any Holder in any material respect. Notwithstanding the
foregoing, the Trustee and the Company may not make any change that adversely
affects the rights of any Holder under this Indenture without the consent of
such Holder. In formulating its opinion on such matters, the Trustee will be
entitled to rely on such evidence as it deems appropriate, including, without
limitation, solely on an Opinion of Counsel; provided, however, that in
delivering such Opinion of Counsel, such counsel may rely as to matters of
fact, on a certificate or certificates of officers of the Company.
SECTION 9.02. With Consent of Holders.
All other modifications, waivers and amendments of this Indenture may be
made with the consent of the Holders of a majority in principal amount of the
then outstanding Notes, except that, without the consent of each Holder of the
Notes affected thereby, no amendment or waiver may: (i) reduce the amount of
Notes whose Holders must consent to an amendment; (ii) reduce the rate of or
change or have the effect of changing the time for payment of interest,
including defaulted interest, on any Notes; (iii) reduce the principal of or
change or have the effect of changing the fixed maturity of any Notes, or
change the date on which any Notes may be subject to redemption or repurchase,
or reduce the redemption or repurchase price therefor; (iv) make any Notes
payable in money other than that stated in the Notes; (v) make any change in
provisions of this Indenture protecting the right of each Holder to receive
payment of principal of and interest on such Note on or after the due date
thereof or to bring suit to enforce such payment, or permitting Holders of a
majority in principal amount of
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Notes to waive Defaults or Events of Default; (vi) amend, change or modify in
any material respect the obligation of the Company to make and consummate a
Change of Control Offer in the event of a Change of Control or make and
consummate a Net Proceeds Offer with respect to any Asset Sale that has been
consummated or modify any of the provisions or definitions with respect
thereto; (vii) modify or change any provision of this Indenture affecting the
subordination or ranking of the Notes or any Guarantee in a manner which
adversely affects the Holders; or (viii) release any Subsidiary Guarantor from
any of its obligations under its Guarantee or this Indenture other than in
accordance with the terms of this Indenture.
After an amendment, supplement or waiver under this Section 9.02 becomes
effective (as provided in Section 9.04), the Company shall mail to the Holders
affected thereby a notice briefly describing the amendment, supplement or
waiver. Any failure of the Company to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such
supplemental indenture.
SECTION 9.03. Compliance with TIA.
Every amendment, waiver or supplement of this Indenture or the Notes
shall comply with the TIA as then in effect; provided, however, that this
Section 9.03 shall not of itself require that this Indenture or the Trustee be
qualified under the TIA or constitute any admission or acknowledgment by any
party hereto that any such qualification is required prior to the time this
Indenture and the Trustee are required by the TIA to be so qualified.
SECTION 9.04. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a consent to
it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder's Note, even if notation of the consent is not made on any
Note. Subject to the following paragraph, any such Holder or subsequent Holder
may revoke the consent as to such Holder's Note or portion of such Note by
notice to the Trustee or the Company received before the date on which the
Trustee receives an Officers' Certificate certifying that the Holders of the
requisite principal amount of Notes have consented (and not theretofore revoked
such consent) to the amendment, supplement or waiver. An amendment, supplement
or waiver becomes effective upon receipt by the Trustee of such Officers'
Certificate and evidence
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of consent by the Holders of the requisite percentage in principal amount of
outstanding Notes.
The Company may, but shall not be obligated to, fix a Record Date for the
purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which Record Date shall be at least 30 days prior to the
first solicitation of such consent. If a Record Date is fixed, then
notwithstanding the second sentence of the immediately preceding paragraph,
those Persons who were Holders at such Record Date (or their duly designated
proxies), and only those Persons, shall be entitled to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
Record Date. No such consent shall be valid or effective for more than 90 days
after such Record Date unless consents from Holders of the requisite percentage
in principal amount of outstanding Notes required hereunder for the
effectiveness of such consents shall have also been given and not revoked
within such 90 day period.
SECTION 9.05. Notation on or Exchange of Notes.
If an amendment, supplement or waiver changes the terms of a Note, the
Trustee may require the Holder of such Note to deliver it to the Trustee. The
Trustee may place an appropriate notation on the Note about the changed terms
and return it to the Holder. Alternatively, if the Company or the Trustee so
determine, the Company in exchange for the Note shall issue and the Trustee
shall authenticate a new Note that reflects the changed terms.
SECTION 9.06. Trustee To Sign Amendments, Etc.
The Trustee shall execute any amendment, supplement or waiver authorized
pursuant to this Article Nine; provided, however, that the Trustee may, but
shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture. In executing such supplement or waiver the Trustee shall be
entitled to receive indemnity reasonably satisfactory to it, and shall be fully
protected in relying upon an Opinion of Counsel and an Officers' Certificate of
the Company, stating that no event of default shall occur as a result of such
amendment, supplement or waiver and that the execution of any amendment,
supplement or waiver authorized pursuant to this Article Nine is authorized or
permitted by this Indenture; provided the legal counsel delivering such Opinion
of Counsel may rely as to matters of fact on one or more Officers' Certificates
of the
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Company. Such Opinion of Counsel shall not be an expense of the Trustee.
ARTICLE TEN
SUBORDINATION
SECTION 10.01. Notes Subordinated to Senior Indebtedness.
The Company covenants and agrees, and each Holder of the Notes, by its
acceptance thereof, likewise covenants and agrees, that all Notes shall be
issued subject to the provisions of this Article Ten; and each Person holding
any Note, whether upon original issue or upon transfer, assignment or exchange
thereof, accepts and agrees that the payment of all Obligations on the Notes by
the Company shall, to the extent and in the manner herein set forth, be
subordinated and junior in right of payment to the prior payment in full in
cash or Cash Equivalents of all Obligations on Senior Indebtedness, including,
without limitation, the Company's obligations under the Credit Agreement; that
the subordination is for the benefit of, and shall be enforceable directly by,
the holders of Senior Indebtedness, and that each holder of Senior Indebtedness
whether now outstanding or hereafter created, incurred, assumed or guaranteed
shall be deemed to have acquired Senior Indebtedness in reliance upon the
covenants and provisions contained in this Indenture and the Notes.
SECTION 10.02. Suspension of Payment When Senior Indebtedness is in
Default.
(a) If any default occurs and is continuing in the payment when due,
whether at maturity, upon any redemption, by declaration or otherwise, of any
principal or, interest on, unpaid drawings for letters of credit issued in
respect of, or regularly accruing fees with respect to, any Senior
Indebtedness, no payment of any kind or character shall be made by or on behalf
of the Company or any other Person on its or their behalf with respect to any
Obligations on the Notes or to acquire any of the Notes for cash or property or
otherwise. In addition, if any other event of default occurs and is continuing
with respect to any Designated Senior Indebtedness, as such event of default is
defined in the instrument creating or evidencing such Designated Senior
Indebtedness, permitting the holders of such Designated Senior Indebtedness
then outstanding to accelerate the maturity thereof and if the Representative
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for the respective issue of Designated Senior Indebtedness gives notice of the
event of default to the Trustee (a "Default Notice"), then, unless and until
all events of default have been cured or waived or have ceased to exist or the
Trustee receives notice thereof from the Representative for the respective
issue of Designated Senior Indebtedness terminating the Blockage Period (as
defined below), during the 180 days after the delivery of such Default Notice
(the "Blockage Period"), neither the Company nor any other Person on its behalf
shall (x) make any payment of any kind or character with respect to any
Obligations on the Notes or (y) acquire any of the Notes for cash or property
or otherwise. Notwithstanding anything herein to the contrary, in no event
will a Blockage Period extend beyond 180 days from the date the payment on the
Notes was due and only one such Blockage Period may be commenced within any 360
consecutive days. No event of default which existed or was continuing on the
date of the commencement of any Blockage Period with respect to the Designated
Senior Indebtedness shall be, or be made, the basis for commencement of a
second Blockage Period by the Representative of such Designated Senior
Indebtedness whether or not within a period of 360 consecutive days, unless
such event of default shall have been cured or waived for a period of not less
than 90 consecutive days (it being acknowledged that any subsequent action, or
any breach of any financial covenants for a period commencing after the date of
commencement of such Blockage Period that, in either case, would give rise to
an event of default pursuant to any provisions under which an event of default
previously existed or was continuing shall constitute a new event of default
for this purpose).
(b) In the event that, notwithstanding the foregoing, any payment shall
be received by the Trustee or any Holder when such payment is prohibited by
Section 10.02(a), such payment shall be held in trust for the benefit of, and
shall be paid over or delivered to, the holders of Senior Indebtedness (pro
rata to such holders on the basis of the respective amount of Senior
Indebtedness held by such holders) or their respective Representatives, as
their respective interests may appear. The Trustee shall be entitled to rely
on information regarding amounts then due and owing on the Senior Indebtedness,
if any, received from the holders of Senior Indebtedness (or their
Representatives) or, if such information is not received from such holders or
their Representatives, from the Company and only amounts included in the
information provided to the Trustee shall be paid to the holders of Senior
Indebtedness.
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Nothing contained in this Article Ten shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity
of the Notes pursuant to Section 6.02 or to pursue any rights or remedies
hereunder; provided that all Senior Indebtedness thereafter due or declared to
be due shall first be paid in full in cash or Cash Equivalents before the
Holders are entitled to receive any payment of any kind or character with
respect to Obligations on the Notes.
SECTION 10.03. Notes Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation or
Reorganization of Company.
(a) Upon any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to creditors upon
any liquidation, dissolution, winding-up, reorganization, assignment for the
benefit of creditors or marshaling of assets of the Company or in a bankruptcy,
reorganization, insolvency, receivership or other similar proceeding relating
to the Company or its property, whether voluntary or involuntary, all
Obligations due or to become due upon all Senior Indebtedness shall first be
paid in full in cash or Cash Equivalents, or such payment duly provided for to
the satisfaction of the holders of Senior Indebtedness, before any payment or
distribution of any kind or character is made on account of any Obligations on
the Notes, or for the acquisition of any of the Notes for cash or property or
otherwise. Upon any such dissolution, winding-up, liquidation, reorganization,
receivership or similar proceeding, any payment or distribution of assets of
the Company of any kind or character, whether in cash, property or securities,
to which the Holders of the Notes or the Trustee under this Indenture would be
entitled, except for the provisions hereof, shall be paid by the Company or by
any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such payment or distribution, or by the Holders or by the Trustee under
this Indenture if received by them, directly to the holders of Senior
Indebtedness (pro rata to such holders on the basis of the respective amounts
of Senior Indebtedness held by such holders) or their respective
Representatives, or to the trustee or trustees under any indenture pursuant to
which any of such Senior Indebtedness may have been issued, as their respective
interests may appear, for application to the payment of Senior Indebtedness
remaining unpaid until all such Senior Indebtedness has been paid in full in
cash or Cash Equivalents after giving effect to any concurrent payment,
distribution or provision therefor to or for the holders of Senior
Indebtedness.
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(b) To the extent any payment of Senior Indebtedness (whether by or on
behalf of the Company, as proceeds of security or enforcement of any right of
setoff or otherwise) is declared to be fraudulent or preferential, set aside or
required to be paid to any receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar Person under any bankruptcy, insolvency,
receivership, fraudulent conveyance or similar law, then, if such payment is
recovered by, or paid over to, such receiver, trustee in bankruptcy,
liquidating trustee, agent or other similar Person, the Senior Indebtedness or
part thereof originally intended to be satisfied shall be deemed to be
reinstated and outstanding as if such payment has not occurred.
(c) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in
cash, property or securities, shall be received by any Holder when such payment
or distribution is prohibited by this Section 10.03(c), such payment or
distribution shall be held in trust for the benefit of, and shall be paid over
or delivered to, the holders of Senior Indebtedness (pro rata to such holders
on the basis of the respective amount of Senior Indebtedness held by such
holders) or their respective Representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Senior Indebtedness may have
been issued, as their respective interests may appear, for application to the
payment of Senior Indebtedness remaining unpaid until all such Senior
Indebtedness has been paid in full in cash or Cash Equivalents, after giving
effect to any concurrent payment, distribution or provision therefor to or for
the holders of such Senior Indebtedness.
(d) The consolidation of the Company with, or the merger of the Company
with or into, another corporation or the liquidation or dissolution of the
Company following the conveyance or transfer of all or substantially all of its
assets, to another corporation upon the terms and conditions provided in
Article Five hereof and as long as permitted under the terms of the Senior
Indebtedness shall not be deemed a dissolution, winding-up, liquidation or
reorganization for the purposes of this Section if such other corporation
shall, as a part of such consolidation, merger, conveyance or transfer, assume
the Company's obligations hereunder in accordance with Article Five hereof.
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SECTION 10.04. Holders To Be Subrogated to Rights of Holders of Senior
Indebtedness.
Subject to the payment in full in cash or Cash Equivalents of all Senior
Indebtedness, the Holders of the Notes shall be subrogated to the rights of the
holders of Senior Indebtedness to receive payments or distributions of cash,
property or securities of the Company applicable to the Senior Indebtedness
until the Notes shall be paid in full; and, for the purposes of such
subrogation, no such payments or distributions to the holders of the Senior
Indebtedness by or on behalf of the Company or by or on behalf of the Holders
by virtue of this Article Ten which otherwise would have been made to the
Holders shall, as between the Company and the Holders of the Notes, be deemed
to be a payment by the Company to or on account of the Senior Indebtedness, it
being understood that the provisions of this Article Ten are and are intended
solely for the purpose of defining the relative rights of the Holders of the
Notes, on the one hand, and the holders of the Senior Indebtedness, on the
other hand.
SECTION 10.05. Obligations of the Company Unconditional.
Nothing contained in this Article Ten or elsewhere in this Indenture or
in the Notes is intended to or shall impair, as between the Company and the
Holders, the obligation of the Company, which is absolute and unconditional, to
pay to the Holders the principal of and interest on the Notes as and when the
same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of the Holders and creditors of
the Company other than the holders of the Senior Indebtedness, nor shall
anything herein or therein prevent the Trustee or any Holder from exercising
all remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, under this Article Ten of the holders
of Senior Indebtedness in respect of cash, property or Notes of the Company
received upon the exercise of any such remedy. Upon any payment or
distribution of assets or securities of the Company referred to in this Article
Ten, the Trustee, subject to the provisions of Sections 7.01 and 7.02, and the
Holders shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction in which any liquidation, dissolution, winding-up or
reorganization proceedings are pending, or a certificate of the receiver,
trustee in bankruptcy, liquidating trustee or agent or other Person making any
payment or distribution to the Trustee or to the Holders for the purpose of
ascertaining the Persons
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entitled to participate in such payment or distribution, the holders of Senior
Indebtedness and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Article Ten. Nothing in this Article
Ten shall apply to the claims of, or payments to, the Trustee under or pursuant
to Section 7.07. The Trustee shall be entitled to rely on the delivery to it
of a written notice by a Person representing himself or itself to be a holder
of any Senior Indebtedness (or a trustee on behalf of, or other representative
of, such holder) to establish that such notice has been given by a holder of
such Senior Indebtedness or a trustee or representative on behalf of any such
holder.
In the event that the Trustee determines in good faith that any evidence
is required with respect to the right of any Person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article Ten, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article Ten, and if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
SECTION 10.06. Trustee Entitled to Assume Payments Not Prohibited in
Absence of Notice.
The Company shall give prompt written notice to the Trustee of any fact
known to the Company which would prohibit the making of any payment to or by
the Trustee in respect of the Notes pursuant to the provisions of this Article
Ten. Regardless of anything to the contrary contained in this Article Ten or
elsewhere in this Indenture, the Trustee shall not be charged with knowledge of
the existence of any default or event of default with respect to any Senior
Indebtedness or of any other facts which would prohibit the making of any
payment to or by the Trustee unless and until the Trustee shall have received
notice in writing from the Company, or from a holder of Senior Indebtedness or
a Representative therefor, together with proof satisfactory to the Trustee of
such holding of Senior Indebtedness or of the authority of such Representative,
and, prior to the receipt of any such written notice, the Trustee shall be
entitled to assume (in the absence of actual knowledge to the contrary) that no
such facts exist.
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SECTION 10.07. Application by Trustee of Assets Deposited with It.
U.S. Legal Tender or U.S. Government Obligations deposited in trust with
the Trustee pursuant to and in accordance with Sections 8.01 and 8.02 shall be
for the sole benefit of the Holders of the Notes and, to the extent allocated
for the payment of Notes, shall not be subject to the subordination provisions
of this Article Ten. Otherwise, any deposit of assets or securities by or on
behalf of the Company with the Trustee or any Paying Agent (whether or not in
trust) for the payment of principal of or interest on any Notes shall be
subject to the provisions of this Article Ten; provided, however, that if prior
to the second Business Day preceding the date on which by the terms of this
Indenture any such assets may become distributable for any purpose (including,
without limitation, the payment of either principal of or interest on any Note)
the Trustee or such Paying Agent shall not have received with respect to such
assets the notice provided for in Section 10.06, then the Trustee or such
Paying Agent shall have full power and authority to receive such assets and to
apply the same to the purpose for which they were received, and shall not be
affected by any notice to the contrary received by it on or after such date.
The foregoing shall not apply to the Paying Agent if the Company or any
Subsidiary or Affiliate of the Company is acting as Paying Agent. Nothing
contained in this Section 10.07 shall limit the right of the holders of Senior
Indebtedness to recover payments as contemplated by this Article Ten.
SECTION 10.08. No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any Senior Indebtedness
to enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act by any such holder, or by any non-compliance by
the Company with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof any such holder may have or be otherwise
charged with.
(b) Without limiting the generality of subsection (a) of this Section
10.08, the holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders of the
Notes, without incurring responsibility to the Holders of the Notes and without
impairing or releasing the subordination provided in this Article Ten or the
obligations hereunder of the Holders of the Notes to the holders of Senior
Indebtedness, do any one
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or more of the following: (1) change the manner, place, terms or time of
payment of, or renew or alter, Senior Indebtedness or any instrument evidencing
the same or any agreement under which Senior Indebtedness is outstanding; (2)
sell, exchange, release or otherwise deal with any property pledged, mortgaged
or otherwise securing Senior Indebtedness; (3) release any Person liable in any
manner for the collection or payment of Senior Indebtedness; and (4) exercise
or refrain from exercising any rights against the Company and any other Person.
SECTION 10.09. Holders Authorize Trustee To Effectuate Subordination of
Notes.
Each Holder of the Notes by such Holder's acceptance thereof authorizes
and expressly directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effect the subordination provisions contained in
this Article Ten, and appoints the Trustee such Holder's attorney-in-fact for
such purpose, including, in the event of any liquidation, dissolution,
winding-up, reorganization, assignment for the benefit of creditors or
marshaling of assets of the Company tending towards liquidation or
reorganization of the business and assets of the Company, the immediate filing
of a claim for the unpaid balance of such Holder's Notes in the form required
in said proceedings and cause said claim to be approved. If the Trustee does
not file a proper claim or proof of debt in the form required in such
proceeding prior to 30 days before the expiration of the time to file such
claim or claims, then any of the holders of the Senior Indebtedness or their
Representative is hereby authorized to file an appropriate claim for and on
behalf of the Holders of said Notes. Nothing herein contained shall be deemed
to authorize the Trustee or the holders of Senior Indebtedness or their
Representative to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee or the holders of Senior Indebtedness or their Representative to vote
in respect of the claim of any Holder in any such proceeding.
SECTION 10.10. Right of Trustee to Hold Senior Indebtedness.
The Trustee and any agent of the Company or the Trustee shall be entitled
to all the rights set forth in this Article Ten with respect to any Senior
Indebtedness which may at any time be held by it in its individual or any other
capacity to the same extent as any other holder of Senior Indebtedness
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and nothing in this Indenture shall deprive the Trustee or any such agent of
any of its rights as such holder.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article Ten, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness.
Whenever a distribution is to be made or a notice given to holders or
owners of Senior Indebtedness, the distribution may be made and the notice may
be given to their Representative, if any.
SECTION 10.11. This Article Ten Not To Prevent Events of Default.
The failure to make a payment on account of principal of or interest on
the Notes by reason of any provision of this Article Ten will not be construed
as preventing the occurrence of an Event of Default.
Nothing contained in this Article Ten shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity
of the Notes pursuant to Article Six or to pursue any rights or remedies
hereunder or under applicable law, subject to the rights, if any, under this
Article Ten of the holders, from time to time, of Senior Indebtedness.
SECTION 10.12. No Fiduciary Duty of Trustee to Holders of Senior
Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to the holders
of Senior Indebtedness, and it undertakes to perform or observe such of its
covenants and obligations as are specifically set forth in this Article Ten,
and no implied covenants or obligations with respect to the Senior Indebtedness
shall be read into this Indenture against the Trustee. The Trustee shall not be
liable to any such holders (other than for its willful misconduct or gross
negligence) if it shall pay over or deliver to the Holders of Notes or the
Company or any other Person money or assets in compliance with the terms of
this Indenture. Nothing in this Section 10.12 shall affect the obligation of
any Person other than the Trustee to hold such
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payment for the benefit of, and to pay such payment over to, the holders of
Senior Indebtedness or their Representative.
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls.
If any provision of this Indenture limits, qualifies, or conflicts with
another provision which is required to be included in this Indenture by the
TIA, the required provision shall control; provided, however, that this Section
11.01 shall not of itself require that this Indenture or the Trustee be
qualified under the TIA or constitute any admission or acknowledgment by any
party hereto that any such qualification is required prior to the time this
Indenture and the Trustee are required by the TIA to be so qualified.
SECTION 11.02. Notices.
Any notices or other communications required or permitted hereunder shall
be in writing, and shall be sufficiently given if made by hand delivery, by
telex, by telecopier or overnight courier guaranteeing next-day delivery or
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
if to the Company or any Subsidiary Guarantor:
SAFETY COMPONENTS INTERNATIONAL, Inc.
3190 Pullman Street
Costa Mesa, California 92626
Telecopier Number: (714) 662-7649
Attn: Chief Executive Officer
if to the Trustee:
IBJ SCHRODER BANK & TRUST COMPANY
One State Street
New York, New York 10004
Telecopier Number: (212) 858-2952
Attention: Corporate Trust Administration
Each of the Company and the Trustee by written notice to the other may
designate additional or different addresses
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for notices to such Person. Any notice or communication to the Company or the
Trustee shall be deemed to have been given or made as of the date so delivered
if hand delivered; when answered back, if telexed; when receipt is
acknowledged, if faxed; and five (5) calendar days after mailing if sent by
registered or certified mail, postage prepaid (except that a notice of change
of address shall not be deemed to have been given until actually received by
the addressee).
Any notice or communication mailed to a Holder shall be mailed by first
class mail, certified or registered return receipt requested, or by overnight
courier guaranteeing next-day delivery to its address as it appears on the
registration books of the Registrar. Any notice or communication shall be
mailed to any Person as described in TIA Section 313(c), to the extent required
by the TIA.
Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders. If a notice or
communication is mailed in the manner provided above, it is duly given, whether
or not the addressee receives it.
SECTION 11.03. Communications by Holders with Other Holders.
Holders may communicate pursuant to TIA Section 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company,
the Trustee, the Registrar and any other Person shall have the protection of
TIA Section 312(c).
SECTION 11.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate, in form and substance satisfactory
to the Trustee, stating that, in the opinion of the signers, all
conditions precedent to be performed by the Company, if any, provided for
in this Indenture relating to the proposed action have been complied
with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent to be performed by the Company, if
any, provided for in this Indenture relating to the proposed action have
been complied
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with (which counsel, as to factual matters, may rely on an Officers'
Certificate).
SECTION 11.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.06, shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made
such examination or investigation as is reasonably necessary to enable
him to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of each such
Person, such condition or covenant has been complied with.
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules in accordance with the Trustee's
customary practices for action by or at a meeting of Holders. The Paying Agent
or Registrar may make reasonable rules for its functions.
SECTION 11.07. Legal Holidays.
A "Legal Holiday" used with respect to a particular place of payment is a
Saturday, a Sunday or a day on which banking institutions in New York, New York
or at such place of payment are not required to be open. If a payment date is a
Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for
the intervening period.
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SECTION 11.08. Governing Law.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS. Each of the parties hereto agrees to submit to the
jurisdiction of the courts of the State of New York in any action or proceeding
arising out of or relating to this Indenture.
SECTION 11.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 11.10. No Personal Liability.
No director, officer, employee or stockholder, as such, of the Company or
any Subsidiary Guarantor, as such, shall have any liability for any obligations
of the Company or any Subsidiary Guarantor under the Notes, this Indenture, the
Guarantees or the Registration Rights Agreement 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 the issuance of the Notes.
SECTION 11.11. Successors.
All agreements of the Company in this Indenture and the Notes shall bind
their successors. All agreements of the Trustee in this Indenture shall bind
its successors.
SECTION 11.12. Duplicate Originals.
All parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together shall represent the same
agreement.
SECTION 11.13. Severability.
In case any one or more of the provisions in this Indenture or in the
Notes shall be held invalid, illegal or unenforceable, in any respect for any
reason, the validity, legality
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and enforceability of any such provision in every other respect and of the
remaining provisions shall not in any way be affected or impaired thereby, it
being intended that all of the provisions hereof shall be enforceable to the
full extent permitted by law.
ARTICLE TWELVE
GUARANTEE OF NOTES
SECTION 12.01. Unconditional Guarantee.
Subject to the provisions of this Article Twelve, each Subsidiary
Guarantor, if any, hereby, jointly and severally, unconditionally and
irrevocably guarantees, on a senior subordinated basis (such guarantee to be
referred to herein as a "Guarantee") to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns, the
Notes or the obligations of the Company hereunder or thereunder, that: (a) the
principal of, premium, if any, and interest on the Notes (and any Additional
Interest payable thereon) shall be duly and punctually paid in full when due,
whether at maturity, upon redemption at the option of Holders pursuant to the
provisions of the Notes relating thereto, by acceleration or otherwise, and
interest on the overdue principal and (to the extent permitted by law)
interest, if any, on the Notes and all other obligations of the Company or the
Subsidiary Guarantors to the Holders or the Trustee hereunder or thereunder
(including amounts due the Trustee under Section 7.07) and all other
obligations shall be promptly paid in full or performed, all in accordance with
the terms hereof and thereof; and (b) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, the same
shall be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at maturity, by acceleration or
otherwise. Failing payment when due of any amount so guaranteed, or failing
performance of any other obligation of the Company to the Holders under this
Indenture or under the Notes, for whatever reason, each Subsidiary Guarantor
shall be obligated to pay, or to perform or cause the performance of, the same
immediately. An Event of Default under this Indenture or the Notes shall
constitute an event of default under this Guarantee, and shall entitle the
Holders of Notes to accelerate the obligations of the Subsidiary Guarantors
hereunder in the same manner and to the same extent as the obligations of the
Company.
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Each of the Subsidiary Guarantors hereby agrees that its obligations
hereunder shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Notes with respect
to any provisions hereof or thereof, any release of any other Subsidiary
Guarantor, the recovery of any judgment against the Company, any action to
enforce the same, whether or not a Guarantee is affixed to any particular Note,
or any other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor. Each of the Subsidiary Guarantors hereby
waives the benefit of diligence, presentment, demand of payment, filing of
claims with a court in the event of insolvency or bankruptcy of the Company,
any right to require a proceeding first against the Company, protest, notice
and all demands whatsoever and covenants that its Guarantee shall not be
discharged except by complete performance of the obligations contained in the
Notes, this Indenture and this Guarantee. This Guarantee is a guarantee of
payment and not of collection. If any Holder or the Trustee is required by any
court or otherwise to return to the Company or to any Subsidiary Guarantor, or
any custodian, trustee, liquidator or other similar official acting in relation
to the Company or such Subsidiary Guarantor, any amount paid by the Company or
such Subsidiary Guarantor to the Trustee or such Holder, this Guarantee, to the
extent theretofore discharged, shall be reinstated in full force and effect.
Each Subsidiary Guarantor further agrees that, as between it, on the one hand,
and the Holders of Notes and the Trustee, on the other hand, (a) subject to
this Article Twelve, the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article Six hereof for the purposes of this
Guarantee, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby, and (b) in
the event of any acceleration of such obligations as provided in Article Six
hereof, such obligations (whether or not due and payable) shall forthwith
become due and payable by the Subsidiary Guarantors for the purpose of this
Guarantee.
No stockholder, officer, director, employee or incorporator, past,
present or future, of any Subsidiary Guarantor, as such, shall have any
personal liability under this Guarantee by reason of his, her or its status as
such stockholder, officer, director, employee or incorporator.
Each Subsidiary Guarantor that makes a payment or distribution under its
Guarantee shall be entitled to a contribution from each other Subsidiary
Guarantor in an amount pro
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rata, based on the net assets of each Subsidiary Guarantor, determined in
accordance with GAAP.
SECTION 12.02. Limitations on Guarantees.
The obligations of each Subsidiary Guarantor under its Guarantee will be
limited to the maximum amount which, after giving effect to all other
contingent and fixed liabilities of such Subsidiary Guarantor and after giving
effect to any collections from or payments made by or on behalf of any other
Subsidiary Guarantor in respect of the obligations of such other Subsidiary
Guarantor under its Guarantee or pursuant to its contribution obligations under
this Indenture, will result in the obligations of such Subsidiary Guarantor
under its Guarantee not constituting a fraudulent conveyance or fraudulent
transfer under federal or state law.
SECTION 12.03. Execution and Delivery of Guarantee.
To further evidence the Guarantee set forth in Section 12.01, each
Subsidiary Guarantor hereby agrees that a notation of such Guarantee,
substantially in the form of Exhibit F hereto, shall be endorsed on each Note
authenticated and delivered by the Trustee. Such Guarantee shall be executed on
behalf of each Subsidiary Guarantor by either manual or facsimile signature of
two Officers of each Subsidiary Guarantor, each of whom, in each case, shall
have been duly authorized to so execute by all requisite corporate action. The
validity and enforceability of any Guarantee shall not be affected by the fact
that it is not affixed to any particular Note.
Each of the Subsidiary Guarantors hereby agrees that its Guarantee set
forth in Section 12.01 shall remain in full force and effect notwithstanding
any failure to endorse on each Note a notation of such Guarantee.
If an Officer of a Subsidiary Guarantor whose signature is on this
Indenture or a Guarantee no longer holds that office at the time the Trustee
authenticates the Note on which such Guarantee is endorsed or at any time
thereafter, such Subsidiary Guarantor's Guarantee of such Note shall be valid
nevertheless.
The delivery of any Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of any Guarantee set forth in this
Indenture on behalf of each Subsidiary Guarantor.
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SECTION 12.04. Release of a Subsidiary Guarantor.
(a) If no Default exists or would exist under this Indenture, upon the
sale or disposition of all of the Capital Stock of a Subsidiary Guarantor by
the Company or a Restricted Subsidiary of the Company in a transaction
constituting an Asset Sale the Net Cash Proceeds of which are applied in
accordance with Section 4.16, or upon the consolidation or merger of a
Subsidiary Guarantor with or into any Person in compliance with Article Five
(in each case, other than to the Company or an Affiliate of the Company or a
Restricted Subsidiary), or if any Subsidiary Guarantor is dissolved or
liquidated in accordance with this Indenture, or if a Subsidiary Guarantor is
designated an Unrestricted Subsidiary in accordance with Section 4.14, such
Subsidiary Guarantor and each Subsidiary of such Subsidiary Guarantor that is
also a Subsidiary Guarantor shall be deemed released from all obligations under
this Article Twelve without any further action required on the part of the
Trustee or any Holder; provided, however, that each such Subsidiary Guarantor
is sold or disposed of in accordance with this Indenture. Any Subsidiary
Guarantor not so released or the entity surviving such Subsidiary Guarantor, as
applicable, shall remain or be liable under its Guarantee as provided in this
Article Twelve.
(b) The Trustee shall deliver an appropriate instrument evidencing the
release of a Subsidiary Guarantor upon receipt of a request by the Company or
such Subsidiary Guarantor accompanied by an Officers' Certificate and an
Opinion of Counsel certifying as to the compliance with this Section 12.04,
provided the legal counsel delivering such Opinion of Counsel may rely as to
matters of fact on one or more Officers' Certificates.
The Trustee shall execute any documents reasonably requested by the
Company or a Subsidiary Guarantor in order to evidence the release of such
Subsidiary Guarantor from its obligations under its Guarantee endorsed on the
Notes and under this Article Twelve.
Except as set forth in Articles Four and Five and this Section 12.04,
nothing contained in this Indenture or in any of the Notes shall prevent any
consolidation or merger of a Subsidiary Guarantor with or into the Company or
another Subsidiary Guarantor or shall prevent any sale or conveyance of the
property of a Subsidiary Guarantor as an entirety or substantially as an
entirety to the Company or another Subsidiary Guarantor.
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SECTION 12.05. Waiver of Subrogation.
Until this Indenture is discharged and all of the Notes are discharged
and paid in full, each Subsidiary Guarantor hereby irrevocably waives and
agrees not to exercise any claim or other rights which it may now or hereafter
acquire against the Company that arise from the existence, payment, performance
or enforcement of the Company's obligations under the Notes or this Indenture
and such Subsidiary Guarantor's obligations under this Guarantee and this
Indenture, in any such instance including, without limitation, any right of
subrogation, reimbursement, exoneration, contribution, indemnification, and any
right to participate in any claim or remedy of the Holders against the Company,
whether or not such claim, remedy or right arises in equity, or under contract,
statute or common law, including, without limitation, the right to take or
receive from the Company, directly or indirectly, in cash or other property or
by set-off or in any other manner, payment or security on account of such claim
or other rights. If any amount shall be paid to any Subsidiary Guarantor in
violation of the preceding sentence and any amounts owing to the Trustee or the
Holders of Notes under the Notes, this Indenture, or any other document or
instrument delivered under or in connection with such agreements or
instruments, shall not have been paid in full, such amount shall have been
deemed to have been paid to such Subsidiary Guarantor for the benefit of, and
held in trust for the benefit of, the Trustee or the Holders and shall
forthwith be paid to the Trustee for the benefit of itself or such Holders to
be credited and applied to the obligations in favor of the Trustee or the
Holders, as the case may be, whether matured or unmatured, in accordance with
the terms of this Indenture. Each Subsidiary Guarantor acknowledges that it
will receive direct and indirect benefits from the financing arrangements
contemplated by this Indenture and that the waiver set forth in this Section
12.05 is knowingly made in contemplation of such benefits.
SECTION 12.06. No Set-Off.
Each payment to be made by a Subsidiary Guarantor hereunder in respect of
the Obligations shall be payable in the currency or currencies in which such
Obligations are denominated, and shall be made without set-off, counterclaim,
reduction or diminution of any kind or nature.
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SECTION 12.07. Obligations Absolute.
The obligations of each Subsidiary Guarantor hereunder are and shall be
absolute and unconditional and any monies or amounts expressed to be owing or
payable by each Subsidiary Guarantor hereunder which may not be recoverable
from such Subsidiary Guarantor on the basis of a Guarantee shall be recoverable
from such Subsidiary Guarantor as a primary obligor and principal debtor in
respect thereof.
SECTION 12.08. Obligations Continuing.
The obligations of each Subsidiary Guarantor hereunder shall be
continuing and shall remain in full force and effect until all the obligations
have been paid and satisfied in full. Each Subsidiary Guarantor agrees with the
Trustee that it will from time to time deliver to the Trustee suitable
acknowledgments of this continued liability hereunder and under any other
instrument or instruments in such form as counsel to the Trustee may advise and
as will prevent any action brought against it in respect of any default
hereunder being barred by any statute of limitations now or hereafter in force
and, in the event of the failure of a Subsidiary Guarantor so to do, it hereby
irrevocably appoints the Trustee the attorney and agent of such Subsidiary
Guarantor to make, execute and deliver such written acknowledgment or
acknowledgments or other instruments as may from time to time become necessary
or advisable, in the judgment of the Trustee on the advice of counsel, to fully
maintain and keep in force the liability of such Subsidiary Guarantor
hereunder.
SECTION 12.09. Obligations Not Reduced.
The obligations of each Subsidiary Guarantor hereunder shall not be
satisfied, reduced or discharged solely by the payment of such principal,
premium, if any, interest, fees and other monies or amounts as may at any time
prior to discharge of this Indenture pursuant to Article 8 be or become owing
or payable under or by virtue of or otherwise in connection with the Notes or
this Indenture.
SECTION 12.10. Obligations Reinstated.
The obligations of each Subsidiary Guarantor hereunder shall continue to
be effective or shall be reinstated, as the case may be, if at any time any
payment which would otherwise have reduced the obligations of any Subsidiary
Guarantor hereunder (whether such payment shall have been made by or on behalf
of the Company or by or on
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behalf of a Subsidiary Guarantor) is rescinded or reclaimed from any of the
Holders upon the insolvency, bankruptcy, liquidation or reorganization of the
Company or any Subsidiary Guarantor or otherwise, all as though such payment
had not been made. If demand for, or acceleration of the time for, payment by
the Company is stayed upon the insolvency, bankruptcy, liquidation or
reorganization of the Company, all such Indebtedness otherwise subject to
demand for payment or acceleration shall nonetheless be payable by each
Subsidiary Guarantor as provided herein.
SECTION 12.11. Obligations Not Affected.
The obligations of each Subsidiary Guarantor hereunder shall not be
affected, impaired or diminished in any way by any act, omission, matter or
thing whatsoever, occurring before, upon or after any demand for payment
hereunder (and whether or not known or consented to by any Subsidiary Guarantor
or any of the Holders) which, but for this provision, might constitute a whole
or partial defense to a claim against any Subsidiary Guarantor hereunder or
might operate to release or otherwise exonerate any Subsidiary Guarantor from
any of its obligations hereunder or otherwise affect such obligations, whether
occasioned by default of any of the Holders or otherwise, including, without
limitation:
(a) any limitation of status or power, disability, incapacity or
other circumstance relating to the Company or any other person, including
any insolvency, bankruptcy, liquidation, reorganization, readjustment,
composition, dissolution, winding up or other proceeding involving or
affecting the Company or any other person;
(b) any irregularity, defect, unenforceability or invalidity in
respect of any indebtedness or other obligation of the Company or any
other person under this Indenture, the Notes or any other document or
instrument;
(c) any failure of the Company, whether or not without fault on its
part, to perform or comply with any of the provisions of this Indenture
or the Notes, or to give notice thereof to a Subsidiary Guarantor;
(d) the taking or enforcing or exercising or the refusal or neglect
to take or enforce or exercise any right or remedy from or against the
Company or any other Person or their respective assets or the release or
discharge of any such right or remedy;
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(e) the granting of time, renewals, extensions, compromises,
concessions, waivers, releases, discharges and other indulgences to the
Company or any other Person;
(f) any change in the time, manner or place of payment of, or in any
other term of, any of the Notes, or any other amendment, variation,
supplement, replacement or waiver of, or any consent to departure from,
any of the Notes or this Indenture, including, without limitation, any
increase or decrease in the principal amount of or premium, if any, or
interest on any of the Notes;
(g) any change in the ownership, control, name, objects, businesses,
assets, capital structure or constitution of the Company or a Subsidiary
Guarantor;
(h) any merger or amalgamation of the Company or a Subsidiary
Guarantor with any Person or Persons;
(i) the occurrence of any change in the laws, rules, regulations or
ordinances of any jurisdiction by any present or future action of any
governmental authority or court amending, varying, reducing or otherwise
affecting, or purporting to amend, vary, reduce or otherwise affect, any
of the Obligations or the obligations of a Subsidiary Guarantor under its
Guarantee; and
(j) any other circumstance, including release of the Subsidiary
Guarantor pursuant to Section 12.04 (other than by complete, irrevocable
payment) that might otherwise constitute a legal or equitable discharge
or defense of the Company under this Indenture or the Notes or of a
Subsidiary Guarantor in respect of its Guarantee hereunder.
SECTION 12.12. Waiver.
Without in any way limiting the provisions of Section 12.01 hereof, each
Subsidiary Guarantor hereby waives notice of acceptance hereof, notice of any
liability of any Subsidiary Guarantor hereunder, notice or proof of reliance by
the Holders upon the obligations of any Subsidiary Guarantor hereunder, and
diligence, presentment, demand for payment on the Company, protest, notice of
dishonor or non-payment of any of the Obligations, or other notice or
formalities to the Company or any Subsidiary Guarantor of any kind whatsoever.
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SECTION 12.13. No Obligation To Take Action Against the Company.
Neither the Trustee nor any other Person shall have any obligation to
enforce or exhaust any rights or remedies or to take any other steps under any
security for the Obligations or against the Company or any other Person or any
Property of the Company or any other Person before the Trustee is entitled to
demand payment and performance by any or all Subsidiary Guarantors of their
liabilities and obligations under their Guarantees or under this Indenture.
SECTION 12.14. Dealing with the Company and Others.
The Holders, without releasing, discharging, limiting or otherwise
affecting in whole or in part the obligations and liabilities of any Subsidiary
Guarantor hereunder and without the consent of or notice to any Subsidiary
Guarantor, may
(a) grant time, renewals, extensions, compromises, concessions,
waivers, releases, discharges and other indulgences to the Company or any
other Person;
(b) take or abstain from taking security or collateral from the
Company or from perfecting security or collateral of the Company;
(c) release, discharge, compromise, realize, enforce or otherwise
deal with or do any act or thing in respect of (with or without
consideration) any and all collateral, mortgages or other security given
by the Company or any third party with respect to the obligations or
matters contemplated by this Indenture or the Notes;
(d) accept compromises or arrangements from the Company;
(e) apply all monies at any time received from the Company or from
any security upon such part of the Obligations as the Holders may see fit
or change any such application in whole or in part from time to time as
the Holders may see fit; and
(f) otherwise deal with, or waive or modify their right to deal
with, the Company and all other Persons and any security as the Holders
or the Trustee may see fit.
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SECTION 12.15. Default and Enforcement.
If any Subsidiary Guarantor fails to pay in accordance with Section 12.01
hereof, the Trustee may proceed in its name as trustee hereunder in the
enforcement of the Guarantee of any such Subsidiary Guarantor and such
Subsidiary Guarantor's obligations thereunder and hereunder by any remedy
provided by law, whether by legal proceedings or otherwise, and to recover from
such Subsidiary Guarantor the obligations.
SECTION 12.16. Amendment, Etc.
No amendment, modification or waiver of any provision of this Indenture
relating to any Subsidiary Guarantor or consent to any departure by any
Subsidiary Guarantor or any other Person from any such provision will in any
event be effective unless it is signed by such Subsidiary Guarantor and the
Trustee.
SECTION 12.17. Acknowledgment.
Each Subsidiary Guarantor hereby acknowledges communication of the terms
of this Indenture and the Notes and consents to and approves of the same.
SECTION 12.18. Costs and Expenses.
Each Subsidiary Guarantor shall pay on demand by the Trustee any and all
costs, fees and expenses (including, without limitation, legal fees on a
solicitor and client basis) incurred by the Trustee, its agents, advisors and
counsel or any of the Holders in enforcing any of their rights under any
Guarantee.
SECTION 12.19. No Merger or Waiver; Cumulative Remedies.
No Guarantee shall operate by way of merger of any of the obligations of
a Subsidiary Guarantor under any other agreement, including, without
limitation, this Indenture. No failure to exercise and no delay in exercising,
on the part of the Trustee or the Holders, any right, remedy, power or
privilege
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hereunder or under the Indenture or the Notes, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power
or privilege hereunder or under this Indenture or the Notes preclude any other
or further exercise thereof or the exercise of any other right, remedy, power
or privilege. The rights, remedies, powers and privileges in the Guarantee and
under this Indenture, the Notes and any other document or instrument between a
Subsidiary Guarantor and/or the Company and the Trustee are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by law.
SECTION 12.20. Survival of Obligations.
Without prejudice to the survival of any of the other obligations of each
Subsidiary Guarantor hereunder, the obligations of each Subsidiary Guarantor
under Section 12.01 shall survive the payment in full of the Obligations and
shall be enforceable against such Subsidiary Guarantor without regard to and
without giving effect to any defense, right of offset or counterclaim available
to or which may be asserted by the Company or any Subsidiary Guarantor.
SECTION 12.21. Guarantee in Addition to Other Obligations.
The obligations of each Subsidiary Guarantor under its Guarantee and this
Indenture are in addition to and not in substitution for any other obligations
to the Trustee or to any of the Holders in relation to this Indenture or the
Notes and any guarantees or security at any time held by or for the benefit of
any of them.
SECTION 12.22. Severability.
Any provision of this Article Twelve which is prohibited or unenforceable
in any jurisdiction shall not invalidate the remaining provisions and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction unless its
removal would substantially defeat the basic intent, spirit and purpose of this
Indenture and this Article Twelve.
SECTION 12.23. Successors and Assigns.
Each Guarantee shall be binding upon and inure to the benefit of each
Subsidiary Guarantor and the Trustee and the other Holders and their respective
successors and permitted assigns, except that no Subsidiary Guarantor may
assign any of its obligations hereunder or thereunder.
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ARTICLE THIRTEEN
SUBORDINATION OF GUARANTEE
SECTION 13.01. Obligations of Guarantors Subordinated to Guarantor Senior
Indebtedness.
Anything herein to the contrary notwithstanding, each of the Subsidiary
Guarantors, for itself and its successors, and each Holder, by his or her
acceptance of Guarantees, agrees that the payment of all Obligations owing to
the Holders in respect of its Guarantee (collectively, as to any Subsidiary
Guarantor, its "Guarantee Obligations") is subordinated, to the extent and in
the manner provided in this Article Thirteen, to the prior payment in full in
cash or Cash Equivalents, or such payment duly provided for to the satisfaction
of the holders of Guarantor Senior Indebtedness, of all Obligations on
Guarantor Senior Indebtedness of such Subsidiary Guarantor, including without
limitation, the Subsidiary Guarantors' obligations under the Credit Agreement.
This Article Thirteen shall constitute a continuing offer to all Persons
who become holders of, or continue to hold, Guarantor Senior Indebtedness, and
such provisions are made for the benefit of the holders of Guarantor Senior
Indebtedness and such holders are made obligees hereunder and any one or more
of them may enforce such provisions.
SECTION 13.02. Suspension of Guarantee Obligations When Guarantor Senior
Indebtedness is in Default.
(a) If any default occurs and is continuing in the payment when due,
whether at maturity, upon any redemption, by declaration or otherwise, of
any principal or interest on, unpaid drawings for letters of credit
issued in respect of, or regularly accruing fees with respect to, any
Designated Senior Indebtedness of a Subsidiary Guarantor or guaranteed by
a Subsidiary Guarantor (which Designated Senior Indebtedness or
guarantee, as the case may be, constitutes Guarantor Senior Indebtedness
of such Subsidiary Guarantor), no payment of any kind or character shall
be made by or on behalf of the Company or any other Person on its or
their behalf with respect to any Obligations on the Notes or to acquire
any of the Notes for cash or property or otherwise. In addition, if any
other event of default occurs and is continuing with respect to any
Guarantor
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Senior Indebtedness, as such event of default is defined in the
instrument creating or evidencing such Guarantor Senior Indebtedness,
permitting the holders of such Guarantor Senior Indebtedness then
outstanding to accelerate the maturity thereof and if the Representative
for the respective issue of Guarantor Senior Indebtedness gives a Default
Notice, then, unless and until all events of default have been cured or
waived or have ceased to exist or the Trustee receives notice from the
Representative for the respective issue of Guarantor Senior Indebtedness
terminating the Blockage Period, during the Blockage Period, neither the
Company nor any other Person on its behalf shall (x) make any payment of
any kind or character with respect to any Obligations on the Notes or (y)
acquire any of the Notes for cash or property or otherwise.
Notwithstanding anything herein to the contrary, in no event will a
Blockage Period extend beyond 180 days from the date the payment on the
Notes was due and only one such Blockage Period may be commenced within
any 360 consecutive days. No event of default which existed or was
continuing on the date of the commencement of any Blockage Period with
respect to the Guarantor Senior Indebtedness shall be, or be made, the
basis for commencement of a second Blockage Period by the Representative
of such Guarantor Senior Indebtedness whether or not within a period of
360 consecutive days, unless such event of default shall have been cured
or waived for a period of not less than 90 consecutive days (it being
acknowledged that any subsequent action, or any breach of any financial
covenants for a period commencing after the date of commencement of such
Blockage Period, that in either case, would give rise to an event of
default pursuant to any provisions under which an event of default
previously existed or was continuing shall constitute a new event of
default for this purpose).
(b) In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee or any Holder when such payment is
prohibited by Section 13.02(a), such payment shall be held in trust for
the benefit of, and shall be paid over or delivered to, the holders of
Guarantor Senior Indebtedness (pro rata to such holders on the basis of
the respective amount of Guarantor Senior Indebtedness held by such
holders) or their respective Representatives, as their respective
interests may appear. The Trustee shall be entitled to rely on
information regarding amounts then due and owing on the Guarantor Senior
Indebtedness, if any, received from the holders of Guarantor Senior
Indebtedness (or their Representatives) or, if such information is not
received from such holders or their Representatives, from the Company and
only amounts
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included in the information provided to the Trustee shall be paid to the
holders of Guarantor Senior Indebtedness.
Nothing contained in this Article Thirteen shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity
of the Notes pursuant to Section 6.02 or to pursue any rights or remedies
hereunder; provided that all Guarantor Senior Indebtedness thereafter due or
declared to be due shall first be paid in full in cash or Cash Equivalents
before the Holders are entitled to receive any payment of any kind or character
with respect to Obligations on the Notes.
SECTION 13.03. Guarantee Obligations Subordinated to Prior Payment of
All Guarantor Senior Indebtedness on Dissolution,
Liquidation or Reorganization of Such Subsidiary
Guarantor.
Upon any payment or distribution of assets of any Subsidiary Guarantor of
any kind or character, whether in cash, property or securities to creditors
upon any liquidation, dissolution, winding up, reorganization, assignment for
the benefit of creditors or marshaling of assets of such Subsidiary Guarantor,
whether voluntary or involuntary, or in a bankruptcy, reorganization,
insolvency, receivership or other similar proceeding relating to any Subsidiary
Guarantor or its property, whether voluntary or involuntary, but excluding any
liquidation or dissolution of a Subsidiary Guarantor into the Company or into
another Subsidiary Guarantor:
(a) the holders of all Guarantor Senior Indebtedness of such
Subsidiary Guarantor shall first be entitled to receive payments in full
in cash or Cash Equivalents, or such payment duly provided for to the
satisfaction of the holders of Guarantor Senior Indebtedness, of all
amounts payable under Guarantor Senior Indebtedness before the Holders
will be entitled to receive any payment or distribution of any kind or
character on account of the Guarantee of such Subsidiary Guarantor, and
until all Obligations with respect to the Guarantor Senior Indebtedness
are paid in full in cash or Cash Equivalents, or such payment duly
provided for to the satisfaction of the holders of Guarantor Senior
Indebtedness, any distribution to which the Holders would be entitled
shall be made to the holders of Guarantor Senior Indebtedness of such
Subsidiary Guarantor;
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(b) any payment or distribution of assets of such Subsidiary
Guarantor of any kind or character, whether in cash, property or
securities, to which the Holders or the Trustee on behalf of the Holders
would be entitled except for the provisions of this Article Thirteen
shall be paid by the liquidating trustee or agent or other Person making
such a payment or distribution, directly to the holders of Guarantor
Senior Indebtedness of such Subsidiary Guarantor or their
representatives, ratably according to the respective amounts of such
Guarantor Senior Indebtedness remaining unpaid held or represented by
each, until all such Guarantor Senior Indebtedness remaining unpaid shall
have been paid in full in cash or Cash Equivalents, or such payment duly
provided for to the satisfaction of the holders of Guarantor Senior
Indebtedness, after giving effect to any concurrent payment or
distribution to the holders of such Guarantor Senior Indebtedness; and
(c) in the event that, notwithstanding the foregoing, any payment or
distribution of assets of such Subsidiary Guarantor of any kind or
character, whether such payment shall be in cash, property or securities,
and such Subsidiary Guarantor shall have made payment to the Trustee or
directly to the Holders or any Paying Agent in respect of payment of the
Guarantees before all Guarantor Senior Indebtedness of such Subsidiary
Guarantor is paid in full in cash or Cash Equivalents, or such payment
duly provided for to the satisfaction of the holders of Guarantor Senior
Indebtedness, such payment or distribution (subject to the provisions of
Sections 13.06 and 13.07) shall be received, segregated from other funds,
and held in trust by the Trustee or such Holder or Paying Agent for the
benefit of, and shall immediately be paid over by the Trustee (if the
notice required by Section 13.06 has been received by the Trustee) or by
the Holder to, the holders of such Guarantor Senior Indebtedness or their
representatives, ratably according to the respective amounts of such
Guarantor Senior Indebtedness held or represented by each, until all such
Guarantor Senior Indebtedness remaining unpaid shall have been paid in
full in cash or Cash Equivalents, or such payment duly provided for to
the satisfaction of the holders of Guarantor Senior Indebtedness, after
giving effect to any concurrent payment or distribution to the holders of
Guarantor Senior Indebtedness.
Each Subsidiary Guarantor shall give prompt notice to the Trustee prior
to any dissolution, winding-up, total or partial liquidation or total or
reorganization (including, without
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limitation, in bankruptcy, insolvency, or receivership proceedings or upon any
assignment for the benefit of creditors or any other marshaling of such
Subsidiary Guarantor's assets and liabilities).
SECTION 13.04. Holders of Guarantee Obligations To Be Subrogated to
Rights of Holders of Guarantor Senior Indebtedness.
Subject to the payment in full in cash or Cash Equivalents, or such
payment duly provided for to the satisfaction of the holders of Guarantor
Senior Indebtedness, of all Guarantor Senior Indebtedness, the Holders of
Guarantee Obligations of a Subsidiary Guarantor shall be subrogated to the
rights of the holders of Guarantor Senior Indebtedness of such Subsidiary
Guarantor to receive payments or distributions of assets of such Subsidiary
Guarantor applicable to such Guarantor Senior Indebtedness until all amounts
owing on or in respect of the Guarantee Obligations shall be paid in full in
cash or Cash Equivalents, and for the purpose of such subrogation no payments
or distributions to the holders of such Guarantor Senior Indebtedness by or on
behalf of such Subsidiary Guarantor, or by or on behalf of the Holders by
virtue of this Article Thirteen, which otherwise would have been made to the
Holders shall, as between such Subsidiary Guarantor and the Holders, be deemed
to be payment by such Subsidiary Guarantor to or on account of such Guarantor
Senior Indebtedness, it being understood that the provisions of this Article
Thirteen are and are intended solely for the purpose of defining the relative
rights of the Holders, on the one hand, and the holders of such Guarantor
Senior Indebtedness, on the other hand.
If any payment or distribution to which the Holders would otherwise have
been entitled but for the provisions of this Article Thirteen shall have been
applied, pursuant to the provisions of this Article Thirteen, to the payment of
all amounts payable under such Guarantor Senior Indebtedness, then the Holders
shall be entitled to receive from the holders of such Guarantor Senior
Indebtedness any such payments or distributions received by such holders of
such Guarantor Senior Indebtedness in excess of the amount sufficient to pay
all amounts payable under or in respect of such Guarantor Senior Indebtedness
in full in cash or Cash Equivalents, or such payment duly provided for to the
satisfaction of the holders of Guarantor Senior Indebtedness.
Each Holder by purchasing or accepting a Note waives any and all notice
of the creation, modification, renewal, extension
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or accrual of any Guarantor Senior Indebtedness of the Subsidiary Guarantors
and notice of or proof of reliance by any holder or owner of Guarantor Senior
Indebtedness of the Subsidiary Guarantors upon this Article Thirteen and the
Guarantor Senior Indebtedness of the Subsidiary Guarantors shall conclusively
be deemed to have been created, contracted or incurred in reliance upon this
Article Thirteen, and all dealings between the Subsidiary Guarantors and the
holders and owners of the Guarantor Senior Indebtedness of the Subsidiary
Guarantors shall be deemed to have been consummated in reliance upon this
Article Thirteen.
SECTION 13.05. Obligations of the Subsidiary Guarantors' Unconditional.
Nothing contained in this Article Thirteen or elsewhere in this Indenture
or in the Guarantees is intended to or shall impair, as between the Subsidiary
Guarantors and the Holders, the obligation of the Subsidiary Guarantors, which
is absolute and unconditional, to pay to the Holders all amounts due and
payable under the Guarantees as and when the same shall become due and payable
in accordance with their terms, or is intended to or shall affect the relative
rights of the Holders and creditors of the Subsidiary Guarantors other than the
holders of the Guarantor Senior Indebtedness, nor shall anything herein or
therein prevent the Trustee or any Holder from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture,
subject to the rights, if any, under this Article Thirteen, of the holders of
Guarantor Senior Indebtedness in respect of cash, property or securities of the
Subsidiary Guarantors received upon the exercise of any such remedy. Upon any
payment or distribution of assets of any Subsidiary Guarantor referred to in
this Article Thirteen, the Trustee, subject to the provisions of Sections 7.01
and 7.02, and the Holders shall be entitled to rely upon any order or decree
made by any court of competent jurisdiction in which any liquidation,
dissolution, winding-up or reorganization proceedings are pending, or a
certificate of the receiver, trustee in bankruptcy, liquidating trustee or
agent or other Person making any payment or distribution to the Trustee or to
the Holders for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of Guarantor Senior Indebtedness
and other Indebtedness of any Subsidiary Guarantor, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Article Thirteen. Nothing in this
Article Thirteen shall apply to the claims of, or payments to, the Trustee
under or pursuant to Section 7.07. The
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Trustee shall be entitled to rely on the delivery to it of a written notice by
a Person representing himself or itself to be a holder of any Guarantor Senior
Indebtedness (or a trustee on behalf of, or other representative of, such
holder) to establish that such notice has been given by a holder of such
Guarantor Senior Indebtedness or a trustee or representative on behalf of any
such holder.
In the event that the Trustee determines in good faith that any evidence
is required with respect to the right of any Person as a holder of Guarantor
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article Thirteen, the Trustee may request such Person to furnish evidence
to the reasonable satisfaction of the Trustee as to the amount of Guarantor
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article Thirteen, and if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
SECTION 13.06. Trustee Entitled To Assume Payments Not Prohibited in
Absence of Notice.
The Trustee shall not at any time be charged with knowledge of the
existence of any facts that would prohibit the making of any payment to or by
the Trustee unless and until the Trustee or any Paying Agent shall have
received notice thereof from the Company or any Subsidiary Guarantor or from
one or more holders of Guarantor Senior Indebtedness or from any Representative
therefor and, prior to the receipt of any such notice, the Trustee, subject to
the provisions of Sections 7.01 and 7.02, shall be entitled in all respects
conclusively to assume that no such fact exists.
SECTION 13.07. Application by Trustee of Assets Deposited with It.
U.S. Legal Tender or U.S. Government Obligations deposited in trust with
the Trustee pursuant to and in accordance with Sections 8.01 and 8.02 shall be
for the sole benefit of Holders of the Notes and, to the extent allocated for
the payment of Notes, shall not be subject to the subordination provisions of
this Article Thirteen. Otherwise, any deposit of assets or securities by or on
behalf of a Subsidiary Guarantor with the Trustee or any Paying Agent (whether
or not in trust) for payment of the Guarantees shall be subject to the
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provisions of this Article Thirteen; provided, however, that if prior to the
second Business Day preceding the date on which by the terms of this Indenture
any such assets may become distributable for any purpose (including, without
limitation, the payment of either principal of or interest on any Note) the
Trustee or such Paying Agent shall not have received with respect to such
assets the notice provided for in Section 13.06, then the Trustee or such
Paying Agent shall have full power and authority to receive such assets and to
apply the same to the purpose for which they were received, and shall not be
affected by any notice to the contrary received by it on or after such date.
The foregoing shall not apply to the Paying Agent if the Company or any
Subsidiary or Affiliate of the Company is acting as Paying Agent. Nothing
contained in this Section 13.07 shall limit the right of the holders of
Guarantor Senior Indebtedness to recover payments as contemplated by this
Article Thirteen.
SECTION 13.08. No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any Guarantor Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
any Subsidiary Guarantor or by any act or failure to act, by any such holder,
or by any non-compliance by any Subsidiary Guarantor with the terms, provisions
and covenants of this Indenture, regardless of any knowledge thereof any such
holder may have or be otherwise charged with.
(b) Without limiting the generality of subsection (a) of this Section
13.08, the holders of Guarantor Senior Indebtedness may, at any time and from
time to time, without the consent of or notice to the Trustee or the Holders of
the Notes, without incurring responsibility to the Holders of the Notes and
without impairing or releasing the subordination provided in this Article
Thirteen or the obligations hereunder of the Holders of the Notes to the
holders of Guarantor Senior Indebtedness, do any one or more of the following:
(1) change the manner, place, terms or time of payment of, or renew or alter,
Guarantor Senior Indebtedness or any instrument evidencing the same or any
agreement under which Guarantor Senior Indebtedness is outstanding; (2) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Guarantor Senior Indebtedness; (3) release any Person liable
in any manner for the collection or payment of Guarantor Senior Indebtedness;
and (4) exercise or refrain from exercising any rights against the Subsidiary
Guarantors and any other Person.
<PAGE> 134
-126-
SECTION 13.09. Holders Authorize Trustee To Effectuate Subordination of
Guarantee Obligations.
Each Holder of the Guarantee Obligations by its acceptance thereof
authorizes and expressly directs the Trustee on its behalf to take such action
as may be necessary or appropriate to effect the subordination provisions
contained in this Article Thirteen, and appoints the Trustee its
attorney-in-fact for such purpose, including, in the event of any liquidation,
dissolution, winding-up, reorganization, assignment for the benefit of
creditors or marshaling of assets of any Subsidiary Guarantor tending towards
liquidation or reorganization of the business and assets of any Subsidiary
Guarantor, the immediate filing of a claim for the unpaid balance under its or
his Guarantee Obligations in the form required in said proceedings and cause
said claim to be approved. If the Trustee does not file a proper claim or proof
of debt in the form required in such proceeding prior to 30 days before the
expiration of the time to file such claim or claims, then any of the holders of
the Guarantor Senior Indebtedness or their Representative is hereby authorized
to file an appropriate claim for and on behalf of the Holders of said Guarantee
Obligations. Nothing herein contained shall be deemed to authorize the Trustee
or the holders of Guarantor Senior Indebtedness or their Representative to
authorize or consent to or accept or adopt on behalf of any holder of Guarantee
Obligations any plan of reorganization, arrangement, adjustment or composition
affecting the Guarantee Obligations or the rights of any Holder thereof, or to
authorize the Trustee or the holders of Guarantor Senior Indebtedness or their
Representative to vote in respect of the claim of any holder of Guarantee
Obligations in any such proceeding.
SECTION 13.10. Right of Trustee to Hold Guarantor Senior Indebtedness.
The Trustee shall be entitled to all of the rights set forth in this
Article Thirteen in respect of any Guarantor Senior Indebtedness at any time
held by it to the same extent as any other holder of Guarantor Senior
Indebtedness, and nothing in this Indenture shall be construed to deprive the
Trustee of any of its rights as such holder.
SECTION 13.11. No Suspension of Remedies.
The failure to make a payment in respect of the Guarantees by reason of
any provision of this Article Thirteen
<PAGE> 135
-127-
shall not be construed as preventing the occurrence of a Default or an Event of
Default under Section 6.01.
Nothing contained in this Article Thirteen shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity
of the Notes pursuant to Article Six or to pursue any rights or remedies
hereunder or under applicable law, subject to the rights, if any, under this
Article Thirteen of the holders, from time to time, of Guarantor Senior
Indebtedness.
SECTION 13.12. No Fiduciary Duty of Trustee to Holders of Guarantor
Senior Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to the holders
of Guarantor Senior Indebtedness, and it undertakes to perform or observe such
of its covenants and obligations as are specifically set forth in this Article
Thirteen, and no implied covenants or obligations with respect to the Guarantor
Senior Indebtedness shall be read into this Indenture against the Trustee. The
Trustee shall not be liable to any such holders (other than for its willful
misconduct or gross negligence) if it shall pay over or deliver to the holders
of Guarantee Obligations or the Guarantors or any other Person, money or assets
in compliance with the terms of this Indenture. Nothing in this Section 13.12
shall affect the obligation of any Person other than the Trustee to hold such
payment for the benefit of, and to pay such payment over to, the holders of
Guarantor Senior Indebtedness or their Representative.
<PAGE> 136
-128-
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
SAFETY COMPONENTS INTERNATIONAL, INC.
By:
---------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice
President
AUTOMOTIVE SAFETY COMPONENTS
INTERNATIONAL, INC., as Guarantor
By:
---------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice
President
ASCI HOLDINGS GERMANY (DE) INC.,
as Guarantor
By:
---------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice
President
ASCI HOLDINGS UK (DE), INC.,
as Guarantor
By:
---------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice
President
<PAGE> 137
-129-
ASCI HOLDINGS MEXICO (DE), INC.,
as Guarantor
By:
---------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice
President
ASCI HOLDINGS CZECH (DE), INC.,
as Guarantor
By:
---------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice
President
ASCI HOLDINGS ASIA (DE), INC.,
as Guarantor
By:
---------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice
President
VALENTEC INTERNATIONAL CORPORATION, as Guarantor
By:
---------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice
President
GALION, INC., as Guarantor
By:
---------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice
President
<PAGE> 138
-130-
VALENTEC SYSTEMS, INC.,
as Guarantor
By:
---------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice
President
SAFETY COMPONENTS FABRIC TECHNOLOGIES, INC.,
as Guarantor
By:
---------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice
President
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By:
---------------------------------
Name: Luis Perez
Title: Asst. Vice
President
<PAGE> 1
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of July 24, 1997
Among
SAFETY COMPONENTS INTERNATIONAL, INC.
and
THE GUARANTORS NAMED HEREIN
as Issuers
and
BT SECURITIES CORPORATION,
ALEX. BROWN & SONS,
and
BANCAMERICA SECURITIES, INC.
as Initial Purchasers
10 1/8% Senior Subordinated Notes due 2007
- --------------------------------------------------------------------------------
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is dated
as of July 24, 1997, among SAFETY COMPONENTS INTERNATIONAL, INC., a Delaware
corporation (the "Company"), as issuer, AUTOMOTIVE SAFETY COMPONENTS
INTERNATIONAL, INC., ASCI HOLDINGS GERMANY (DE) INC., ASCI HOLDINGS UK (DE),
INC., ASCI HOLDINGS MEXICO (DE), INC., ASCI HOLDINGS CZECH (DE), INC., ASCI
HOLDINGS ASIA (DE), INC., VALENTEC INTERNATIONAL CORPORATION, GALION, INC.,
VALENTEC SYSTEMS, INC. and SAFETY COMPONENTS FABRIC TECHNOLOGIES, INC., as
guarantors (the "Guarantors,") and together with the Company, the "Issuers"),
and BT SECURITIES CORPORATION, ALEX. BROWN & SONS INCORPORATED, and BANCAMERICA
SECURITIES, INC., as initial purchasers (the "Initial Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of July 21, 1997, among the Issuers and the Initial
Purchasers (the "Purchase Agreement"), which provides for the sale by the
Company to the Initial Purchasers of $90,000,000 aggregate principal amount of
the Company's 10 1/8% Senior Subordinated Notes due 2007 (the "Notes"),
guaranteed by the Guarantors (the "Guarantees"). In order to induce the Initial
Purchasers to enter into the Purchase Agreement, the Issuers have agreed to
provide the registration rights set forth in this Agreement for the benefit of
the Initial Purchasers and any subsequent holder or holders of the Notes. The
execution and delivery of this Agreement is a condition to the Initial
Purchasers' obligation to purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4 hereof.
Advice: See the last paragraph of Section 5 hereof.
Agreement: See the introductory paragraphs hereto.
Applicable Period: See Section 2 hereof.
<PAGE> 3
-2-
Effectiveness Date: The 105th day after the Issue Date;
provided, however, that with respect to any Shelf Registration, the
Effectiveness Date shall be the 105th day after the Filing Date with respect
thereto.
Effectiveness Period: See Section 3 hereof.
Event Date: See Section 4 hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2 hereof.
Exchange Offer: See Section 2 hereof.
Exchange Offer Registration Statement: See Section 2 hereof.
Filing Date: (A) If no Exchange Offer Registration Statement
has been filed by the Issuers pursuant to this Agreement, the 30th day after the
Issue Date; provided, however, that if a Shelf Notice is given within 10 days of
the Filing Date, then the Filing Date with respect to the Initial Shelf
Registration shall be the 30th calendar day after the date of the giving of such
Shelf Notice; and (B) in each other case (which may be applicable
notwithstanding the consummation of the Exchange Offer), the 30th day after the
delivery of a Shelf Notice.
Holder: Any holder of a Registrable Note or Registrable Notes.
Indemnified Person: See Section 7(c) hereof.
Indemnifying Person: See Section 7(c) hereof.
Indenture: The Indenture, dated as of July 24, 1997, by and
among the Issuers and IBJ Schroder Bank & Trust Company, as Trustee, pursuant to
which the Notes and the Guarantees are being issued, as the same may be amended
or supplemented from time to time in accordance with the terms thereof.
Initial Purchasers: See the introductory paragraphs hereto.
Initial Shelf Registration: See Section 3(a) hereof.
Inspectors: See Section 5(n) hereof.
Issue Date: July 24, 1997, the date of original issuance of
the Notes.
<PAGE> 4
-3-
Issuers: See the introductory paragraphs hereto.
NASD: See Section 5(s) hereof.
Offering Memorandum: The final offering memorandum of the
Company dated July 21, 1997, in respect of the offering of the Notes.
Participant: See Section 7(a) hereof.
Participating Broker-Dealer: See Section 2 hereof.
Person: An individual, trustee, corporation, partnership,
joint stock company, trust, unincorporated association, union, business
association, firm or other legal entity.
Private Exchange: See Section 2 hereof.
Private Exchange Notes: See Section 2 hereof.
Prospectus: The prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act and any term sheet filed pursuant
to Rule 434 under the Securities Act), as amended or supplemented by any
prospectus supplement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
Purchase Agreement: See the introductory paragraphs hereof.
Records: See Section 5(n) hereof.
Registrable Notes: Each Note upon its original issuance and at
all times subsequent thereto, each Exchange Note as to which Section 2(c)(iv)
hereof is applicable upon original issuance and at all times subsequent thereto
and each Private Exchange Note upon original issuance thereof and at all times
subsequent thereto, until (i) a Registration Statement (other than, with respect
to any Exchange Note as to which Section 2(c)(iv) hereof is applicable, the
Exchange Offer Registration Statement) covering such Note, Exchange Note or
Private Exchange Note has been declared effective by the SEC and such Note,
Exchange Note or such Private Exchange Note, as the case may be, has been
disposed of in accordance with such effective Registration Statement, (ii) such
Note has been exchanged pursuant to the Exchange Offer for an Exchange Note or
Exchange Notes that may be resold without restriction under state and federal
securities laws, (iii) such Note, Exchange Note or Private Exchange
<PAGE> 5
-4-
Note, as the case may be, ceases to be outstanding for purposes of the Indenture
or (iv) such Note, Exchange Note or Private Exchange Note, as the case may be,
may be resold without restriction pursuant to Rule 144 under the Securities Act.
Registration Statement: Any registration statement of the
Company and/or the Guarantors that covers any of the Notes, the Exchange Notes
or the Private Exchange Notes (and the related Guarantees) filed with the SEC
under the Securities Act, including the Prospectus, amendments and supplements
to such registration statement, including post-effective amendments, all
exhibits, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of the issuer of such securities
being free of the registration and prospectus delivery requirements of the
Securities Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144) or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2 hereof.
Shelf Registration: See Section 3(b) hereof.
Subsequent Shelf Registration: See Section 3(b) hereof.
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and the trustee (if
any) under any indenture governing the Exchange Notes and Private Exchange
Notes.
<PAGE> 6
-5-
Underwritten registration or underwritten offering: A
registration in which securities of one or more of the Issuers are sold to an
underwriter for reoffering to the public.
2. Exchange Offer
(a) The Issuers shall file with the SEC, no later than the
Filing Date, a Registration Statement (the "Exchange Offer Registration
Statement") on an appropriate registration form with respect to a registered
offer (the "Exchange Offer") to exchange any and all of the Registrable Notes
for a like aggregate principal amount of notes of the Company, guaranteed by the
Guarantors, that are identical in all material respects to the Notes, except
that the Exchange Notes shall contain no restrictive legend thereon (the
"Exchange Notes"), and which are entitled to the benefits of the Indenture or a
trust indenture which is identical in all material respects to the Indenture
(other than such changes to the Indenture or any such identical trust indenture
as are necessary to comply with the TIA) and which, in either case, has been
qualified under the TIA. The Exchange Offer shall comply with all applicable
tender offer rules and regulations under the Exchange Act and other applicable
law. The Issuers shall use their best efforts to (x) cause the Exchange Offer
Registration Statement to be declared effective under the Securities Act on or
before the Effectiveness Date; (y) keep the Exchange Offer open for at least 20
days (or longer if required by applicable law) after the date that notice of the
Exchange Offer is mailed to Holders; and (z) consummate the Exchange Offer on or
prior to the 45th day following the date on which the Exchange Offer
Registration Statement is declared effective by the SEC. If, after the Exchange
Offer Registration Statement is initially declared effective by the SEC, the
Exchange Offer or the issuance of the Exchange Notes thereunder is interfered
with by any stop order, injunction or other order or requirement of the SEC or
any other governmental agency or court, the Exchange Offer Registration
Statement shall be deemed not to have become effective for purposes of this
Agreement.
Each Holder that participates in the Exchange Offer will be
required, as a condition to its participation in the Exchange Offer, to
represent to the Company in writing (which may be contained in the applicable
letter of transmittal) that any Exchange Notes to be received by it will be
acquired in the ordinary course of its business, that at the time of the
consummation of the Exchange Offer such Holder will have no arrangement or
understanding with any Person to participate in the distribution of the Exchange
Notes in violation of the provisions of the Securities Act, and that such Holder
is not an affiliate of the Company within the meaning of the Securities Act.
Upon consummation of the Exchange Offer in accordance with
this Section 2, the provisions of this Agreement shall continue to apply,
mutatis mutandis, solely with respect to Registrable Notes that are Private
Exchange Notes, Exchange Notes as to which Section 2(c)(iv) is applicable and
Exchange Notes held by Participating Broker-Dealers (as de-
<PAGE> 7
-6-
fined), and the Issuers shall have no further obligation to register Registrable
Notes (other than Private Exchange Notes and other than in respect of any
Exchange Notes as to which clause 2(c)(iv) hereof applies) pursuant to Section 3
hereof.
No securities other than the Exchange Notes and Guarantees
shall be included in the Exchange Offer Registration Statement.
(b) The Issuers shall include within the Prospectus contained
in the Exchange Offer Registration Statement a section entitled "Plan of
Distribution," reasonably acceptable to the Initial Purchasers, which shall
contain a summary statement of the positions taken or policies made by the staff
of the SEC with respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of Exchange Notes received by such broker-dealer in the Exchange
Offer (a "Participating Broker-Dealer"), whether such positions or policies have
been publicly disseminated by the staff of the SEC or such positions or policies
represent the prevailing views of the staff of the SEC. Such "Plan of
Distribution" section shall also expressly permit, to the extent permitted by
applicable policies and regulations of the SEC, the use of the Prospectus by all
Persons subject to the prospectus delivery requirements of the Securities Act,
including, to the extent permitted by applicable policies and regulations of the
SEC, all Participating Broker-Dealers, and include a statement describing the
means by which Participating Broker-Dealers may resell the Exchange Notes in
compliance with the Securities Act.
The Issuers shall use their best efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
Prospectus contained therein in order to permit such Prospectus to be lawfully
delivered by all Persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as is necessary to comply with applicable
law in connection with any resale of the Exchange Notes covered thereby;
provided, however, that such period shall not exceed 45 days after such Exchange
Offer Registration Statement is declared effective (or such longer period if
extended pursuant to the last paragraph of Section 5 hereof) (the "Applicable
Period").
If, prior to consummation of the Exchange Offer, any Holder
holds any Notes acquired by it that have, or that are reasonably likely to be
determined to have, the status of an unsold allotment in an initial
distribution, or any Holder is not entitled to participate in the Exchange
Offer, the Company upon the request of any such Holder shall simultaneously with
the delivery of the Exchange Notes in the Exchange Offer, issue and deliver to
any such Holder, in exchange (the "Private Exchange") for such Notes held by any
such Holder, a like principal amount of notes (the "Private Exchange Notes") of
the Company, guaranteed by the Guarantors, that are identical in all material
respects to the Exchange Notes except for the placement of a restrictive legend
on such Private Exchange Notes. The Private Exchange
<PAGE> 8
-7-
Notes shall be issued pursuant to the same indenture as the Exchange Notes and
bear the same CUSIP number as the Exchange Notes.
In connection with the Exchange Offer, the Issuers shall:
(1) mail, or cause to be mailed, to each Holder of record
entitled to participate in the Exchange Offer a copy of the Prospectus
forming part of the Exchange Offer Registration Statement, together
with an appropriate letter of transmittal and related documents;
(2) use their best efforts to keep the Exchange Offer open for
not less than 20 days after the date that notice of the Exchange Offer
is mailed to Holders (or longer if required by applicable law);
(3) utilize the services of a depositary for the Exchange
Offer with an address in the Borough of Manhattan, The City of New
York;
(4) permit Holders to withdraw tendered Notes at any time
prior to the close of business, New York time, on the last business day
on which the Exchange Offer shall remain open; and
(5) otherwise comply in all material respects with all
applicable laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer
and the Private Exchange, if any, the Issuers shall:
(1) accept for exchange all Registrable Notes validly tendered
and not validly withdrawn pursuant to the Exchange Offer and the
Private Exchange, if any;
(2) deliver to the Trustee for cancellation all Registrable
Notes so accepted for exchange; and
(3) cause the Trustee to authenticate and deliver promptly to
each Holder of Notes, Exchange Notes or Private Exchange Notes, as the
case may be, equal in principal amount to the Notes of such Holder so
accepted for exchange.
The Exchange Offer and the Private Exchange shall not be
subject to any conditions, other than that (i) the Exchange Offer or Private
Exchange, as the case may be, does not violate applicable law or any applicable
interpretation of the staff of the SEC, (ii) no action or proceeding shall have
been instituted or threatened in any court or by any governmental agency which
might materially impair the ability of the Issuers to proceed with the Ex-
<PAGE> 9
-8-
change Offer or the Private Exchange, and no material adverse development shall
have occurred in any existing action or proceeding with respect to the Issuers
and (iii) all governmental approvals shall have been obtained, which approvals
the Issuers deem necessary for the consummation of the Exchange Offer or Private
Exchange.
The Exchange Notes and the Private Exchange Notes shall be
issued under (i) the Indenture or (ii) an indenture identical in all material
respects to the Indenture and which, in either case, has been qualified under
the TIA or is exempt from such qualification and shall provide that the Exchange
Notes shall not be subject to the transfer restrictions set forth in the
Indenture. The Indenture or such indenture shall provide that the Exchange
Notes, the Private Exchange Notes and the Notes shall vote and consent together
on all matters as one class and that none of the Exchange Notes, the Private
Exchange Notes or the Notes will have the right to vote or consent as a separate
class on any matter.
(c) If, (i) because of any change in law or in currently
prevailing interpretations of the staff of the SEC, the Issuers are not
permitted to effect the Exchange Offer, (ii) the Exchange Offer is not
consummated within 135 days of the Issue Date, (iii) any holder of Private
Exchange Notes so requests in writing to the Company within 60 days after the
consummation of the Exchange Offer, or (iv) in the case of any Holder that
participates in the Exchange Offer, such Holder does not receive Exchange Notes
on the date of the exchange that may be sold without restriction under state and
federal securities laws (other than due solely to the status of such Holder as
an affiliate of the Company within the meaning of the Securities Act), then in
the case of each of clauses (i) to and including (iv) of this sentence, the
Company shall promptly deliver to the Holders and the Trustee written notice
thereof (the "Shelf Notice") and shall file a Shelf Registration pursuant to
Section 3 hereof.
3. Shelf Registration
If at any time a Shelf Notice is delivered as contemplated by
Section 2(c) hereof, then:
(a) Shelf Registration. The Issuers shall file with the SEC a
Registration Statement for an offering to be made on a continuous basis pursuant
to Rule 415 covering all of the Registrable Notes not exchanged in the Exchange
Offer, Private Exchange Notes and Exchange Notes as to which Section 2(c)(iv) is
applicable (the "Initial Shelf Registration"). The Issuers shall use their best
efforts to file with the SEC the Initial Shelf Registration on or before the
applicable Filing Date. The Initial Shelf Registration shall be on Form S-1 or
another appropriate form permitting registration of such Registrable Notes for
resale by Holders in the manner or manners designated by them (including,
without limitation, one or more underwritten offerings). The Issuers shall not
permit any securities other than the Registrable
<PAGE> 10
-9-
Notes to be included in the Initial Shelf Registration or any Subsequent Shelf
Registration (as defined below).
The Issuers shall use their best efforts to cause the Initial
Shelf Registration to be declared effective under the Securities Act on or prior
to the Effectiveness Date and to keep the Initial Shelf Registration
continuously effective under the Securities Act until the date which is two
years from the Issue Date (the "Effectiveness Period"), or such shorter period
ending when (i) all Registrable Notes covered by the Initial Shelf Registration
have been sold in the manner set forth and as contemplated in the Initial Shelf
Registration or (ii) a Subsequent Shelf Registration covering all of the
Registrable Notes covered by and not sold under the Initial Shelf Registration
or an earlier Subsequent Shelf Registration has been declared effective under
the Securities Act; provided, however, that the Effectiveness Period in respect
of the Initial Shelf Registration shall be extended to the extent required to
permit dealers to comply with the applicable prospectus delivery requirements of
Rule 174 under the Securities Act and as otherwise provided herein.
(b) Subsequent Shelf Registrations. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be effective for any
reason at any time during the Effectiveness Period (other than because of the
sale of all of the securities registered thereunder), the Issuers shall use
their best efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within 30 days of such cessation
of effectiveness amend the Initial Shelf Registration in a manner to obtain the
withdrawal of the order suspending the effectiveness thereof, or file an
additional "shelf" Registration Statement pursuant to Rule 415 covering all of
the Registrable Notes covered by and not sold under the Initial Shelf
Registration or an earlier Subsequent Shelf Registration (each, a "Subsequent
Shelf Registration"). If a Subsequent Shelf Registration is filed, the Issuers
shall use their best efforts to cause the Subsequent Shelf Registration to be
declared effective under the Securities Act as soon as practicable after such
filing and to keep such subsequent Shelf Registration continuously effective for
a period equal to the number of days in the Effectiveness Period less the
aggregate number of days during which the Initial Shelf Registration or any
Subsequent Shelf Registration was previously continuously effective. As used
herein the term "Shelf Registration" means the Initial Shelf Registration and
any Subsequent Shelf Registration.
(c) Supplements and Amendments. The Issuers shall promptly
supplement and amend any Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Registration Statement or by any underwriter
of such Registrable Notes.
<PAGE> 11
-10-
4. Additional Interest
(a) The Issuers and the Initial Purchasers agree that the Holders will
suffer damages if the Issuers fail to fulfill their obligations under Section 2
or Section 3 hereof and that it would not be feasible to ascertain the extent of
such damages with precision. Accordingly, the Company agrees to pay, as
liquidated damages, additional interest on the Notes ("Additional Interest")
under the circumstances and to the extent set forth below (each of which shall
be given independent effect):
(i) if (A) neither the Exchange Offer Registration Statement
nor the Initial Shelf Registration has been filed on or prior to
the applicable Filing Date or (B) notwithstanding that the Issuers
have consummated or will consummate the Exchange Offer, the Issuers
are required to file a Shelf Registration and such Shelf
Registration is not filed on or prior to the Filing Date applicable
thereto, then, commencing on the day after any such Filing Date,
Additional Interest shall accrue on the principal amount of the
Notes at a rate of 0.50% per annum for the first 90 days
immediately following each such Filing Date, and such Additional
Interest rate shall increase by an additional 0.50% per annum at
the beginning of each subsequent 90-day period; or
(ii) if (A) neither the Exchange Offer Registration Statement
nor the Initial Shelf Registration is declared effective by the SEC
on or prior to the relevant Effectiveness Date or (B)
notwithstanding that the Issuers have consummated or will
consummate the Exchange Offer, the Issuers are required to file a
Shelf Registration and such Shelf Registration is not declared
effective by the SEC on or prior to the Effectiveness Date in
respect of such Shelf Registration, then, commencing on the day
after such Effectiveness Date, Additional Interest shall accrue on
the principal amount of the Notes at a rate of 0.50% per annum for
the first 90 days immediately following the day after such
Effectiveness Date, and such Additional Interest rate shall
increase by an additional 0.50% per annum at the beginning of each
subsequent 90-day period; or
(iii) if (A) the Issuers have not exchanged Exchange Notes for
all Notes validly tendered in accordance with the terms of the
Exchange Offer on or prior to the 45th day after the date on which
the Exchange Offer Registration Statement relating thereto was
declared effective or (B) if applicable, a Shelf Registration has
been declared effective and such Shelf Registration ceases to be
effective at any time during the Effectiveness Period, then
Additional Interest shall accrue on the principal amount of the
Notes at a rate of 0.50% per annum for the first 90 days commencing
on the (x) 46th day after
<PAGE> 12
-11-
such effective date, in the case of (A) above, or (y) the day
such Shelf Registration ceases to be effective in the case of
(B) above, and such Additional Interest rate shall increase by
an additional 0.50% per annum at the beginning of each such
subsequent 90-day period;
provided, however, that the Additional Interest rate on the Notes may not exceed
at any one time in the aggregate 1.0% per annum; provided, further, however,
that (1) upon the filing of the applicable Exchange Offer Registration Statement
or the applicable Shelf Registration as required hereunder (in the case of
clause (i) above of this Section 4), (2) upon the effectiveness of the Exchange
Offer Registration Statement or the applicable Shelf Registration Statement as
required hereunder (in the case of clause (ii) of this Section 4), or (3) upon
the exchange of the applicable Exchange Notes for all Notes tendered (in the
case of clause (iii)(A) of this Section 4), or upon the effectiveness of the
applicable Shelf Registration Statement which had ceased to remain effective (in
the case of (iii)(B) of this Section 4), Additional Interest on the Notes in
respect of which such events relate as a result of such clause (or the relevant
subclause thereof), as the case may be, shall cease to accrue.
(b) The Company shall notify the Trustee within three business
days after each and every date on which an event occurs in respect of which
Additional Interest is required to be paid (an "Event Date"). Any amounts of
Additional Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section
4 will be payable in cash semiannually on each January 15 and July 15 (to the
holders of record on the January 1 and July 1 immediately preceding such dates),
commencing with the first such date occurring after any such Additional Interest
commences to accrue. The amount of Additional Interest will be determined by
multiplying the applicable Additional Interest rate by the principal amount of
the Registrable Notes, multiplied by a fraction, the numerator of which is the
number of days such Additional Interest rate was applicable during such period
(determined on the basis of a 360-day year comprised of twelve 30-day months
and, in the case of a partial month, the actual number of days elapsed), and the
denominator of which is 360.
5. Registration Procedures
In connection with the filing of any Registration Statement
pursuant to Sections 2 or 3 hereof, the Issuers shall effect such registrations
to permit the sale of the securities covered thereby in accordance with the
intended method or methods of disposition thereof, and pursuant thereto and in
connection with any Registration Statement filed by the Issuers hereunder each
of the Issuers shall:
(a) Prepare and file with the SEC prior to the applicable Filing Date,
a Registration Statement or Registration Statements as prescribed by Sections 2
or 3 hereof, and use its best efforts to cause each such Registration Statement
to become effective and remain effective as
<PAGE> 13
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provided herein; provided, however, that, if (1) such filing is pursuant to
Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period relating thereto, before
filing any Registration Statement or Prospectus or any amendments or supplements
thereto, the Issuers shall furnish to and afford the Holders of the Registrable
Notes included in such Registration Statement or each such Participating
Broker-Dealer, as the case may be, their counsel and the managing underwriters,
if any, a reasonable opportunity to review copies of all such documents
(including copies of any documents to be incorporated by reference therein and
all exhibits thereto) proposed to be filed (in each case at least five days
prior to such filing, or such later date as is reasonable under the
circumstances). The Issuers shall not file any Registration Statement or
Prospectus or any amendments or supplements thereto if the Holders of a majority
in aggregate principal amount of the Registrable Notes included in such
Registration Statement, or any such Participating Broker-Dealer, as the case may
be, their counsel, or the managing underwriters, if any, shall reasonably object
on a timely basis.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration Statement or Exchange Offer Registration
Statement, as the case may be, as may be necessary to keep such Registration
Statement continuously effective for the Effectiveness Period or the Applicable
Period, as the case may be; cause the related Prospectus to be supplemented by
any Prospectus supplement required by applicable law, and as so supplemented to
be filed pursuant to Rule 424 (or any similar provisions then in force)
promulgated under the Securities Act; and comply with the provisions of the
Securities Act and the Exchange Act applicable to each of them with respect to
the disposition of all securities covered by such Registration Statement as so
amended or in such Prospectus as so supplemented and with respect to the
subsequent resale of any securities being sold by a Participating Broker-Dealer
covered by any such Prospectus. The Issuers shall be deemed not to have used
their best efforts to keep a Registration Statement effective during the
Effectiveness Period or the Applicable Period, as the case may be, relating
thereto if any Issuer voluntarily takes any action that would result in selling
Holders of the Registrable Notes covered thereby or Participating Broker-Dealers
seeking to sell Exchange Notes not being able to sell such Registrable Notes or
such Exchange Notes during that period unless such action is required by
applicable law or permitted by this Agreement.
(c) If (1) a Shelf Registration is filed pursuant to Section 3 hereof,
or (2) a Prospectus contained in the Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period relating thereto from whom the Company has received
written notice that it will be a Participating Broker-Dealer in the Exchange
Offer, notify the selling Holders of Registrable Notes, or each such
Participating Bro-
<PAGE> 14
-13-
ker-Dealer, as the case may be, their counsel and the managing underwriters, if
any, promptly (but in any event within one day), and confirm such notice in
writing, (i) when a Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to a Registration Statement or any
post-effective amendment, when the same has become effective under the
Securities Act (including in such notice a written statement that any Holder
may, upon request, obtain, at the sole expense of the Issuers, one conformed
copy of such Registration Statement or post-effective amendment including
financial statements and schedules, documents incorporated or deemed to be
incorporated by reference and exhibits), (ii) of the issuance by the SEC of any
stop order suspending the effectiveness of a Registration Statement or of any
order preventing or suspending the use of any preliminary prospectus or the
initiation of any proceedings for that purpose, (iii) if at any time when a
prospectus is required by the Securities Act to be delivered in connection with
sales of the Registrable Notes or resales of Exchange Notes by Participating
Broker-Dealers the representations and warranties of the Issuers contained in
any agreement (including any underwriting agreement) contemplated by Section
5(m) hereof cease to be true and correct in all material respects, (iv) of the
receipt by any Issuer of any notification with respect to the suspension of the
qualification or exemption from qualification of a Registration Statement or any
of the Registrable Notes or the Exchange Notes to be sold by any Participating
Broker-Dealer for offer or sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose, (v) of the happening of any
event, the existence of any condition or any information becoming known that
makes any statement made in such Registration Statement or related Prospectus or
any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires the making of any changes in or
amendments or supplements to such Registration Statement, Prospectus or
documents so that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and that in the case of the Prospectus, it will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, and (vi) of the
Issuers' determination that a post-effective amendment to a Registration
Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3 hereof,
or (2) a Prospectus contained in the Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, use its best efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Registrable Notes or the
Exchange Notes to be sold by any Participating Broker-Dealer, for sale in any
jurisdiction, and, if any such order is issued,
<PAGE> 15
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to use its best efforts to obtain the withdrawal of any such order at the
earliest possible moment.
(e) If a Shelf Registration is filed pursuant to Section 3 and if
requested by the managing underwriter or underwriters (if any), the Holders of a
majority in aggregate principal amount of the Registrable Notes being sold in
connection with an underwritten offering or any Participating Broker-Dealer, (i)
as promptly as practicable incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriter or
underwriters (if any), such Holders, any Participating Broker-Dealer or counsel
for any of them reasonably request to be included therein, (ii) make all
required filings of such prospectus supplement or such post-effective amendment
as soon as practicable after an Issuer has received notification of the matters
to be incorporated in such prospectus supplement or post-effective amendment,
and (iii) supplement or make amendments to such Registration Statement.
(f) If (1) a Shelf Registration is filed pursuant to Section 3 hereof,
or (2) a Prospectus contained in the Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, furnish to each selling Holder of Registrable Notes and
to each such Participating Broker-Dealer who so requests and to their respective
counsel and each managing underwriter, if any, at the sole expense of the
Issuers, one conformed copy of the Registration Statement or Registration
Statements and each post-effective amendment thereto, including financial
statements and schedules, and, if requested, all documents incorporated or
deemed to be incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3 hereof,
or (2) a Prospectus contained in the Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, deliver to each selling Holder of Registrable Notes, or
each such Participating Broker-Dealer, as the case may be, their respective
counsel, and the underwriters, if any, at the sole expense of the Issuers, as
many copies of the Prospectus or Prospectuses (including each form of
preliminary prospectus) and each amendment or supplement thereto and any
documents incorporated by reference therein as such Persons may reasonably
request; and, subject to the last paragraph of this Section 5, the Issuers
hereby consent to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, and the underwriters or agents,
if any, and dealers (if any), in connection with the offering and sale of the
Registrable Notes covered by, or the sale by Participating Broker-Dealers of the
Exchange Notes pursuant to, such Prospectus and any amendment or supplement
thereto.
<PAGE> 16
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(h) Prior to any public offering of Registrable Notes or any delivery
of a Prospectus contained in the Exchange Offer Registration Statement by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, use its best efforts to register or qualify, and to cooperate
with the selling Holders of Registrable Notes or each such Participating
Broker-Dealer, as the case may be, the managing underwriter or underwriters, if
any, and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Notes for offer and sale under the securities or Blue Sky laws of
such jurisdictions within the United States as any selling Holder, Participating
Broker-Dealer, or the managing underwriter or underwriters reasonably request in
writing; provided, however, that where Exchange Notes held by Participating
Broker-Dealers or Registrable Notes are offered other than through an
underwritten offering, the Issuers agree to cause their counsel to perform Blue
Sky investigations and file registrations and qualifications required to be
filed pursuant to this Section 5(h), keep each such registration or
qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and do any and all other
acts or things reasonably necessary or advisable to enable the disposition in
such jurisdictions of the Exchange Notes held by Participating Broker-Dealers or
the Registrable Notes covered by the applicable Registration Statement;
provided, however, that no Issuer shall be required to (A) qualify generally to
do business in any jurisdiction where it is not then so qualified, (B) take any
action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or (C) subject itself to taxation
in excess of a nominal dollar amount in any such jurisdiction where it is not
then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3 hereof,
cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Notes to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company; and enable such
Registrable Notes to be in such denominations and registered in such names as
the managing underwriter or underwriters, if any, or Holders may request.
(j) If (1) a Shelf Registration is filed pursuant to Section 3 hereof,
or (2) a Prospectus contained in the Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, upon the occurrence of any event contemplated by
paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as practicable prepare and
(subject to Section 5(a) hereof) file with the SEC, at the sole expense of the
Issuers, a supplement or post-effective amendment to the Registration Statement
or a supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, or file any other required document so
that, as thereafter delivered to the purchasers of the
<PAGE> 17
-16-
Registrable Notes being sold thereunder or to the purchasers of the Exchange
Notes to whom such Prospectus will be delivered by a Participating
Broker-Dealer, any such Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Notwithstanding the foregoing, the Issuers
shall not be required to amend or supplement a Registration Statement, any
related Prospectus or any document incorporated therein by reference, in the
event that, and for a period not to exceed an aggregate of 60 days in any
calendar year if, (i) an event occurs and is continuing as a result of which the
Shelf Registration would, in the Company's good faith judgment, contain an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, and (ii) (a) the Company determines in its
good faith judgment that the disclosure of such event at such time would have a
material adverse effect on the business, operations or prospects of the Company
or (b) the disclosure otherwise relates to a pending material business
transaction that has not yet been publicly disclosed.
(k) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with certificates for
the Registrable Notes in a form eligible for deposit with The Depository Trust
Company and (ii) provide a CUSIP number for the Registrable Notes.
(l) In connection with any underwritten offering of Registrable Notes
pursuant to a Shelf Registration, enter into an underwriting agreement as is
customary in underwritten offerings of debt securities similar to the Notes in
form and substance reasonably satisfactory to the Company and take all such
other actions as are reasonably requested by the managing underwriter or
underwriters in order to expedite or facilitate the registration or the
disposition of such Registrable Notes and, in such connection, (i) make such
representations and warranties to, and covenants with, the underwriters with
respect to the business of the Company and the subsidiaries of the Company
(including any acquired business, properties or entity, if applicable) and the
Registration Statement, Prospectus and documents, if any, incorporated or deemed
to be incorporated by reference therein, in each case, as are customarily made
by issuers to underwriters in underwritten offerings of debt securities similar
to the Notes, and confirm the same in writing if and when requested in form and
substance reasonably satisfactory to the Company; (ii) obtain the written
opinions of counsel to the Company and written updates thereof in form, scope
and substance reasonably satisfactory to the managing underwriter or
underwriters, addressed to the underwriters covering the matters customarily
covered in opinions reasonably requested in underwritten offerings and such
other matters as may be reasonably requested by the managing underwriter or
underwriters; (iii) use its best efforts to obtain "cold comfort" letters and
updates thereof in form, scope and substance reasonably satisfactory to the
managing underwriter or underwriters from the independent public accountants of
the Company (and, if necessary, any other independent public ac-
<PAGE> 18
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countants of the Company, any subsidiary of the Company or of any business
acquired by the Company for which financial statements and financial data are,
or are required to be, included or incorporated by reference in the Registration
Statement), addressed to each of the underwriters, such letters to be in
customary form and covering matters of the type customarily covered in "cold
comfort" letters in connection with underwritten offerings of debt securities
similar to the Notes and such other matters as reasonably requested by the
managing underwriter or underwriters as permitted by the Statement on Auditing
Standards No. 72; and (iv) if an underwriting agreement is entered into, the
same shall contain indemnification provisions and procedures no less favorable
to the sellers and underwriters, if any, than those set forth in Section 7
hereof (or such other provisions and procedures acceptable to Holders of a
majority in aggregate principal amount of Registrable Notes covered by such
Registration Statement and the managing underwriter or underwriters or agents,
if any). The above shall be done at each closing under such underwriting
agreement, or as and to the extent required thereunder.
(m) If (1) a Shelf Registration is filed pursuant to Section 3 hereof,
or (2) a Prospectus contained in the Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, make available for inspection by any selling Holder of
such Registrable Notes being sold, or each such Participating Broker-Dealer, as
the case may be, any underwriter participating in any such disposition of
Registrable Notes, if any, and any attorney, accountant or other agent retained
by any such selling Holder or each such Participating Broker-Dealer, as the case
may be, or underwriter (collectively, the "Inspectors"), at the offices where
normally kept, during reasonable business hours, all financial and other
records, pertinent corporate documents and instruments of the Company and
subsidiaries of the Company (collectively, the "Records") as shall be reasonably
necessary to enable them to exercise any applicable due diligence
responsibilities, and cause the officers, directors and employees of the Company
and any of its subsidiaries to supply all information reasonably requested by
any such Inspector in connection with such Registration Statement and
Prospectus. Each Inspector shall agree in writing that it will keep the Records
confidential and that it will not disclose any of the Records that the Company
determines, in good faith, to be confidential and notifies the Inspectors in
writing are confidential unless (i) the disclosure of such Records is necessary
to avoid or correct a material misstatement or material omission in such
Registration Statement or Prospectus, (ii) the release of such Records is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction, or (iii) the information in such Records has been made generally
available to the public; provided, however, that prior notice shall be provided
as soon as practicable to the Company of the potential disclosure of any
information by such Inspector pursuant to clauses (i) or (ii) of this sentence
to permit the Company to obtain a protective order (or waive the provisions of
this paragraph (n)) and that such Inspector shall take such actions as are
rea-
<PAGE> 19
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sonably necessary to protect the confidentiality of such information (if
practicable) to the extent such action is otherwise not inconsistent with, an
impairment of or in derogation of the rights and interests of the Holder or any
Inspector.
(n) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a) hereof, as the case may be, to be
qualified under the TIA not later than the effective date of the first
Registration Statement relating to the Registrable Notes; and in connection
therewith, cooperate with the trustee under any such indenture and the Holders
of the Registrable Notes, to effect such changes to such indenture as may be
required for such indenture to be so qualified in accordance with the terms of
the TIA; and execute, and use its best efforts to cause such trustee to execute,
all documents as may be required to effect such changes, and all other forms and
documents required to be filed with the SEC to enable such indenture to be so
qualified in a timely manner.
(o) Comply with all applicable rules and regulations of the SEC and
make generally available to its securityholders with regard to any applicable
Registration Statement, a consolidated earnings statement satisfying the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or
any similar rule promulgated under the Securities Act) no later than 60 days
after the end of any fiscal quarter (or 120 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Registrable Notes are sold to underwriters in a firm commitment
or best efforts underwritten offering and (ii) if not sold to underwriters in
such an offering, commencing on the first day of the first fiscal quarter of the
Company after the effective date of a Registration Statement, which statements
shall cover said 12-month periods.
(p) Upon consummation of the Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Company, in a form customary for
underwritten transactions, addressed to the Trustee for the benefit of all
Holders of Registrable Notes participating in the Exchange Offer or the Private
Exchange, as the case may be, that the Exchange Notes or Private Exchange Notes,
as the case may be, the related Guarantees and the related indenture constitute
legal, valid and binding obligations of the Issuers, enforceable against them in
accordance with their respective terms, subject to customary exceptions and
qualifications.
(q) If the Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Company (or to such
other Person as directed by the Issuer) in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be, the Company shall mark, or cause
to be marked, on such Registrable Notes that such Registrable Notes are being
canceled in exchange for the Exchange Notes or the Private Exchange Notes, as
the case may be; in no event shall such Registrable Notes be marked as paid or
otherwise satisfied.
<PAGE> 20
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(r) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Notes and their respective counsel in connection
with any filings required to be made with the National Association of Securities
Dealers, Inc. (the "NASD").
(s) Use its best efforts to take all other steps reasonably necessary
to effect the registration of the Exchange Notes and/or Registrable Notes
covered by a Registration Statement contemplated hereby.
The Company may require each seller of Registrable Notes as to
which any registration is being effected to furnish to the Company such
information regarding such seller and the distribution of such Registrable Notes
as the Company may, from time to time, reasonably request. The Company may
exclude from such registration the Registrable Notes of any seller so long as
such seller fails to furnish such information within a reasonable time after
receiving such request. Each seller as to which any Shelf Registration is being
effected agrees to furnish promptly to the Company all information required to
be disclosed in order to make the information previously furnished to the
Company by such seller not materially misleading.
If any such Registration Statement refers to any Holder by
name or otherwise as the holder of any securities of the Company, then such
Holder shall have the right to require (i) the insertion therein of language, in
form and substance reasonably satisfactory to such Holder, to the effect that
the holding by such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the securities
covered thereby and that such holding does not imply that such Holder will
assist in meeting any future financial requirements of the Company, or (ii) in
the event that such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force, the
deletion of the reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
Each Holder of Registrable Notes and each Participating
Broker-Dealer agrees by its acquisition of such Registrable Notes or Exchange
Notes to be sold by such Participating Broker-Dealer, as the case may be, that,
upon actual receipt of any notice from the Company of the happening of any event
of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi)
hereof, such Holder will forthwith discontinue disposition of such Registrable
Notes covered by such Registration Statement or Prospectus or Exchange Notes to
be sold by such Holder or Participating Broker-Dealer, as the case may be, until
such Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof, or until
it is advised in writing (the "Advice") by the Company that the use of the
applicable Prospectus may be resumed, and has received copies of any
<PAGE> 21
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amendments or supplements thereto. In the event that the Company shall give any
such notice, the Applicable Period shall be extended by the number of days
during such periods from and including the date of the giving of such notice to
and including the date when each seller of Registrable Notes covered by such
Registration Statement or Exchange Notes to be sold by such Participating
Broker-Dealer, as the case may be, shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof or (y)
the Advice.
6. Registration Expenses
All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuers (other than any underwriting
discounts or commissions) shall be borne by the Company whether or not the
Exchange Offer Registration Statement or any Shelf Registration is filed or
becomes effective or the Exchange Offer is consummated, including, without
limitation, (i) all registration and filing fees (including, without limitation,
(A) fees with respect to filings required to be made with the NASD in connection
with an underwritten offering and (B) reasonable fees and expenses of compliance
with state securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel in connection with Blue Sky qualifications of the
Registrable Notes or Exchange Notes and determination of the eligibility of the
Registrable Notes or Exchange Notes for investment under the laws of such
jurisdictions (x) where the holders of Registrable Notes are located, in the
case of the Exchange Notes, or (y) as provided in Section 5(h) hereof, in the
case of Registrable Notes or Exchange Notes to be sold by a Participating
Broker-Dealer during the Applicable Period)), (ii) printing expenses, including,
without limitation, expenses of printing certificates for Registrable Notes or
Exchange Notes in a form eligible for deposit with The Depository Trust Company
and of printing prospectuses if the printing of prospectuses is requested by the
managing underwriter or underwriters, if any, by the Holders of a majority in
aggregate principal amount of the Registrable Notes included in any Registration
Statement or in respect of Registrable Notes or Exchange Notes to be sold by any
Participating Broker-Dealer during the Applicable Period, as the case may be,
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company and reasonable fees and disbursements of one special
counsel for all of the sellers of Registrable Notes (exclusive of any counsel
retained pursuant to Section 7 hereof), (v) fees and disbursements of all
independent certified public accountants referred to in Section 5(m)(iii) hereof
(including, without limitation, the expenses of any special audit and "cold
comfort" letters required by or incident to such performance), (vi) Securities
Act liability insurance, if the Company desires such insurance, (vii) fees and
expenses of all other Persons retained by the Issuer, (viii) internal expenses
of the Company (including, without limitation, all salaries and expenses of
officers and employees of the Company performing legal or accounting duties),
(ix) the expense of any annual audit, (x) any fees and expenses incurred in
connection with the listing of the securities to be registered on any securities
exchange, and the obtaining of a rating of the securities, in each
<PAGE> 22
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case, if applicable, and (xi) the expenses relating to printing, word processing
and distributing all Registration Statements, underwriting agreements,
indentures and any other documents necessary in order to comply with this
Agreement.
7. Indemnification
(a) Each of the Issuers, jointly and severally, agrees to
indemnify and hold harmless each Holder of Registrable Notes and each
Participating Broker-Dealer selling Exchange Notes during the Applicable Period,
the affiliates, officers, directors, representatives, employees and agents of
each such Person, and each Person, if any, who controls any such Person within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act (each, a "Participant"), from and against any and all losses,
claims, damages, judgments, liabilities and expenses (including, without
limitation, the reasonable legal fees and other expenses actually incurred in
connection with any suit, action or proceeding or any claim asserted) caused by,
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in any Registration Statement (or any amendment
thereto) or Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) or any preliminary prospectus,
or caused by, arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the case of the Prospectus in light of the
circumstances under which they were made, not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with information relating to any Participant furnished to the Company
in writing by such Participant expressly for use therein and with respect to any
preliminary Prospectus, to the extent that any such loss, claim, damage or
liability arises solely from the fact that any Participant sold Notes to a
person to whom there was not sent or given a copy of the Prospectus (as amended
or supplemented) at or prior to the written confirmation of such sale if the
Company shall have previously furnished copies thereof to the Participant in
accordance herewith and the Prospectus (as amended or supplemented) would have
corrected any such untrue statement or omission.
(b) Each Participant agrees, severally and not jointly, to
indemnify and hold harmless the Issuers, their respective affiliates, officers,
directors, representatives, employees and agents of each Issuer and each Person
who controls each Issuer within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act to the same extent (but on a several, and not
joint, basis) as the foregoing indemnity from the Issuers to each Participant,
but only with reference to information relating to such Participant furnished to
the Company in writing by such Participant expressly for use in any Registration
Statement or Prospectus, any amendment or supplement thereto, or any preliminary
prospectus. The liability of any Participant under this paragraph shall in no
event exceed the proceeds received by such Participant from sales of Registrable
Notes or Exchange Notes giving rise to such obligations.
<PAGE> 23
-22-
(c) If any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand shall be brought or
asserted against any Person in respect of which indemnity may be sought pursuant
to either of the two preceding paragraphs, such Person (the "Indemnified
Person") shall promptly notify the Persons against whom such indemnity may be
sought (the "Indemnifying Persons") in writing, and the Indemnifying Persons,
upon request of the Indemnified Person, shall retain counsel reasonably
satisfactory to the Indemnified Person to represent the Indemnified Person and
any others the Indemnifying Persons may reasonably designate in such proceeding
and shall pay the fees and expenses actually incurred by such counsel related to
such proceeding; provided, however, that the failure to so notify the
Indemnifying Persons (i) will not relieve it from any liability under paragraph
(a) or (b) above unless and to the extent such failure results in the forfeiture
by the Indemnifying Person of substantial rights and defenses and (ii) will not,
in any event, relieve the Indemnifying Person from any obligations to any
Indemnified Person other than the indemnification obligation provided in
paragraphs (a) and (b) above. In any such proceeding, any Indemnified Person
shall have the right to retain its own counsel, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Person unless (i) the
Indemnifying Persons and the Indemnified Person shall have mutually agreed to
the contrary, (ii) the Indemnifying Persons shall have failed within a
reasonable period of time to retain counsel reasonably satisfactory to the
Indemnified Person or (iii) the named parties in any such proceeding (including
any impleaded parties) include both any Indemnifying Person and the Indemnified
Person or any affiliate thereof and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them. It is understood that the Indemnifying Persons shall not, in
connection with such proceeding or separate but substantially similar related
proceeding in the same jurisdiction arising out of the same general allegations,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all Indemnified Persons, and that all such fees and
expenses shall be reimbursed promptly as they are incurred. Any such separate
firm for the Participants and such control Persons of Participants shall be
designated in writing by Participants who sold a majority in interest of
Registrable Notes and Exchange Notes sold by all such Participants and shall be
reasonably acceptable to the Company, and any such separate firm for the
Issuers, their affiliates, officers, directors, representatives, employees and
agents and such control Persons of such Issuer shall be designated in writing by
such Issuer and shall be reasonably acceptable to the Holders.
The Indemnifying Persons shall not be liable for any
settlement of any proceeding effected without its prior written consent (which
consent shall not be unreasonably withheld or delayed), but if settled with such
consent or if there be a final non-appealable judgment for the plaintiff for
which the Indemnified Person is entitled to indemnification pursuant to this
Agreement, each of the Indemnifying Persons agrees to indemnify and hold
harmless each Indemnified Person from and against any loss or liability by
reason of such
<PAGE> 24
-23-
settlement or judgment. No Indemnifying Person shall, without the prior written
consent of the Indemnified Persons (which consent shall not be unreasonably
withheld or delayed), effect any settlement or compromise of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party, or indemnity could have been sought hereunder by such
Indemnified Person, unless such settlement (A) includes an unconditional written
release of such Indemnified Person, in form and substance reasonably
satisfactory to such Indemnified Person, from all liability on claims that are
the subject matter of such proceeding and (B) does not include any statement as
to an admission of fault, culpability or failure to act by or on behalf of such
Indemnified Person.
(d) If the indemnification provided for in the first and
second paragraphs of this Section 7 is for any reason unavailable to, or
insufficient to hold harmless, an Indemnified Person in respect of any losses,
claims, damages or liabilities referred to therein, then each Indemnifying
Person under such paragraphs, in lieu of indemnifying such Indemnified Person
thereunder and in order to provide for just and equitable contribution, shall
contribute to the amount paid or payable by such Indemnified Person as a result
of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect (i) the relative benefits received by the Indemnifying
Person or Persons on the one hand and the Indemnified Person or Persons on the
other from the offering of the Notes or (ii) if the allocation provided by the
foregoing clause (i) is not permitted by applicable law, not only such relative
benefits but also the relative fault of the Indemnifying Person or Persons on
the one hand and the Indemnified Person or Persons on the other in connection
with the statements or omissions or alleged statements or omissions that
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof) as well as any other relevant equitable considerations. The relative
fault of the parties shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Issuers on the one hand or such Participant or such other
Indemnified Person, as the case may be, on the other, the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission, and any other equitable considerations appropriate
in the circumstances.
(e) The parties agree that it would not be just and equitable
if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Participants were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages, judgments, liabilities and expenses referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any reasonable legal or other expenses actually
incurred by such Indemnified Person in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 7, in no
<PAGE> 25
-24-
event shall a Participant be required to contribute any amount in excess of the
amount by which proceeds received by such Participant from sales of Registrable
Notes or Exchange Notes, as the case may be, exceeds the amount of any damages
that such Participant has otherwise been required to pay or has paid by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or contribution under
this Section 7 shall be paid by the Indemnifying Person to the Indemnified
Person as such losses, claims, damages, liabilities or expenses are incurred.
The indemnity and contribution agreements contained in this Section 7 and the
representations and warranties of the Issuers set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Holder or any person who controls a
Holder, the Issuer, its directors, officers, employees or agents or any person
controlling an Issuer, and (ii) any termination of this Agreement.
(g) The indemnity and contribution agreements contained in
this Section 7 will be in addition to any liability which the Indemnifying
Persons may otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A
Each of the Issuers covenants and agrees that it will file the
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the SEC thereunder in a timely manner
in accordance with the requirements of the Securities Act and the Exchange Act
and, if at any time such Issuer is not required to file such reports, such
Issuer will, upon the request of any Holder or beneficial owner of Registrable
Notes, make available such information necessary to permit sales pursuant to
Rule 144A under the Securities Act. Each of the Issuers further covenants and
agrees, for so long as any Registrable Notes remain outstanding that it will
take such further action as any Holder of Registrable Notes may reasonably
request, all to the extent required from time to time to enable such holder to
sell Registrable Notes without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144(k) and Rule 144A under the
Securities Act, as such Rules may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the SEC.
<PAGE> 26
-25-
9. Underwritten Registrations
If any of the Registrable Notes covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will manage the offering will
be selected by the Holders of a majority in aggregate principal amount of such
Registrable Notes included in such offering and shall be reasonably acceptable
to the Issuer.
No Holder of Registrable Notes may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Notes on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
10. Miscellaneous
(a) No Inconsistent Agreements. The Issuers have not, as of
the date hereof, and the Issuers shall not, after the date of this Agreement,
enter into any agreement with respect to any of its securities that is
inconsistent with the rights granted to the Holders of Registrable Notes in this
Agreement or otherwise conflicts with the provisions hereof. The rights granted
to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Issuers' other issued
and outstanding securities under any such agreements. The Issuers will not enter
into any agreement with respect to any of their securities which will grant to
any Person piggy-back registration rights with respect to any Registration
Statement.
(b) Adjustments Affecting Registrable Notes. The Issuers shall
not, directly or indirectly, take any action with respect to the Registrable
Notes as a class that would adversely affect the ability of the Holders of
Registrable Notes to include such Registrable Notes in a registration undertaken
pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, otherwise than with the
prior written consent of (I) the Company and (II)(A) the Holders of not less
than a majority in aggregate principal amount of the then outstanding
Registrable Notes and (B) in circumstances that would adversely affect the
Participating Broker-Dealers, the Participating Broker-Dealers holding not less
than a majority in aggregate principal amount of the Exchange Notes held by all
Participating Broker-Dealers; provided, however, that Section 7 and this Section
10(c) may not be amended, modified or supplemented without the prior written
consent of each Holder and each Participating
<PAGE> 27
-26-
Broker-Dealer (including any person who was a Holder or Participating
Broker-Dealer of Registrable Notes or Exchange Notes, as the case may be,
disposed of pursuant to any Registration Statement) affected by any such
amendment, modification or supplement. Notwithstanding the foregoing, a waiver
or consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders of Registrable Notes whose
securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect, impair, limit or compromise the rights of other
Holders of Registrable Notes may be given by Holders of at least a majority in
aggregate principal amount of the Registrable Notes being sold pursuant to such
Registration Statement.
(d) Notices. All notices and other communications (including,
without limitation, any notices or other communications to the Trustee) provided
for or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or facsimile:
(i) if to a Holder of the Registrable Notes or any
Participating Broker-Dealer, at the most current address of
such Holder or Participating Broker-Dealer, as the case may
be, set forth on the records of the registrar under the
Indenture.
(ii) if to the Issuers, at the address as follows:
c/o Safety Components International, Inc.
3190 Pullman Street
Costa Mesa, California 92626
Facsimile No.: (714) 662-7649
Attention: President
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; one business
day after being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee at
the address and in the manner specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto, the Holders and the Participating Broker-Dealers.
<PAGE> 28
-27-
(f) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO
SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(i) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(j) Securities Held by the Company or Its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Notes is required hereunder, Registrable Notes held by the Company or its
affiliates (as such term is defined in Rule 405 under the Securities Act) shall
not be counted in determining whether such consent or approval was given by the
Holders of such required percentage.
(k) Third-Party Beneficiaries. Holders of Registrable Notes
and Participating Broker-Dealers are intended third-party beneficiaries of this
Agreement, and this Agreement may be enforced by such Persons.
(l) Entire Agreement. This Agreement, together with the
Purchase Agreement and the Indenture, is intended by the parties as a final and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein and any and all prior
oral or written agreements, representations, or war-
<PAGE> 29
-28-
ranties, contracts, understandings, correspondence, conversations and memoranda
between the Holders on the one hand and the Issuers on the other, or between or
among any agents, representatives, parents, subsidiaries, affiliates,
predecessors in interest or successors in interest with respect to the subject
matter hereof and thereof are merged herein and replaced hereby.
<PAGE> 30
-29-
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
The Company:
SAFETY COMPONENTS INTERNATIONAL,
INC.
By: /s/ Jeffrey Kaplan
-------------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice President
The Guarantors:
---------------
AUTOMOTIVE SAFETY COMPONENTS
INTERNATIONAL, INC.,
as Guarantor
By: /s/ Jeffrey Kaplan
-------------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice President
ASCI HOLDINGS GERMANY (DE) INC.,
as Guarantor
By: /s/ Jeffrey Kaplan
-------------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice President
<PAGE> 31
-30-
ASCI HOLDINGS UK (DE), INC.,
as Guarantor
By: /s/ Jeffrey Kaplan
-----------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice President
ASCI HOLDINGS MEXICO (DE), INC.,
as Guarantor
By: /s/ Jeffrey Kaplan
-----------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice President
ASCI HOLDINGS CZECH (DE), INC.,
as Guarantor
By: /s/ Jeffrey Kaplan
-----------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice President
ASCI HOLDINGS ASIA (DE), INC.,
as Guarantor
By: /s/ Jeffrey Kaplan
-----------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice President
<PAGE> 32
-31-
VALENTEC INTERNATIONAL
CORPORATION,
as Guarantor
By: /s/ Jeffrey Kaplan
-----------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice President
GALION, INC.,
as Guarantor
By: /s/ Jeffrey Kaplan
-----------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice President
VALENTEC SYSTEMS, INC.,
as Guarantor
By: /s/ Jeffrey Kaplan
-----------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice President
SAFETY COMPONENTS FABRIC
TECHNOLOGIES, INC.,
as Guarantor
By: /s/ Jeffrey Kaplan
-----------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice President
<PAGE> 33
-32-
The foregoing Agreement is hereby confirmed
and accepted as of the date first
above written.
BT SECURITIES CORPORATION,
ALEX. BROWN & SONS INCORPORATED
BANCAMERICA SECURITIES, INC.,
as Initial Purchasers
By: BT Securities Corporation
By: /s/ Gerry McConnell
--------------------------------------
Name: Gerry McConnell
Title: Vice President
<PAGE> 1
[FORM OF SERIES A NOTE]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501 (a) (1), (2), (3), OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (2)
AGREES THAT IT WILL NOT, PRIOR TO THE DATE THAT IS TWO YEARS AFTER THE LATER OF
THE ORIGINAL ISSUE DATE OF THIS SECURITY AND THE LAST DATE ON WHICH THE COMPANY
OR ANY AFFILIATED PERSON OF THE COMPANY WAS THE OWNER OF THIS SECURITY, RESELL
OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES
TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS
FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS
ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT
TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS
SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND
THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER
OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
A-1
<PAGE> 2
CUSIP No.:
SAFETY COMPONENTS INTERNATIONAL, INC.
10 1/8% SENIOR SUBORDINATED NOTE DUE 2007, SERIES A
No.
SAFETY COMPONENTS INTERNATIONAL, INC., a Delaware corporation
(the "Company," which term includes any successor entities), for value received
promises to pay to or registered assigns the principal sum of Dollars
on July 15, 2007.
Interest Payment Dates: January 15 and July 15, commencing
January 15, 1998
Record Dates: January 1 and July 1
Reference is made to the further provisions of this Note
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
SAFETY COMPONENTS INTERNATIONAL,
INC.
By:_______________________________
Name:
Title:
By:_______________________________
Name:
Title:
Dated: July 24, 1997
A-2
<PAGE> 3
Certificate of Authentication
This is one of the 10 1/8% Senior Subordinated Notes due 2007, Series
A, referred to in the within-mentioned Indenture.
IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
By:__________________________
Authorized Signatory
Date of Authentication: July 24, 1997
A-3
<PAGE> 4
(REVERSE OF SECURITY)
10 1/8% Senior Subordinated Note due 2007, Series A
Capitalized terms used and not otherwise defined herein shall
have the meanings ascribed to them in the Indenture, dated as of July 24, 1997
(the "Indenture"), and as amended from time to time, by and among Safety
Components International, Inc., a Delaware corporation (the "Company"), the
Subsidiary Guarantors named therein and IBJ Schroder Bank & Trust Company, as
trustee (the "Trustee").
(1) Interest. The Company promises to pay interest on the
principal amount of this Note at the rate per annum shown above. Interest on the
Notes will accrue from the most recent date on which interest has been paid or,
if no interest has been paid, from July 24, 1997. The Company will pay interest
semi-annually in arrears on each Interest Payment Date, commencing January 15,
1998. Interest will be computed on the basis of a 360-day year of twelve 30-day
months and, in the case of a partial month, the actual number of days elapsed.
The Company shall pay interest on overdue principal and on
overdue installments of interest from time to time on demand at the rate borne
by the Notes and on overdue installments of interest (without regard to any
applicable grace periods) to the extent lawful.
(2) Method of Payment. The Company shall pay interest on the
Notes (except defaulted interest) to the Persons who are the registered Holders
at the close of business on the Record Date immediately preceding the Interest
Payment Date even if the Notes are cancelled on registration of transfer or
registration of exchange (including pursuant to an Exchange Offer (as defined in
the Registration Rights Agreement)) after such Record Date. Holders must
surrender Notes to a Paying Agent to collect principal payments. The Company
shall pay principal and premium, if any, and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts ("U.S. Legal Tender"). However, the Company may pay principal and
premium, if any, and interest by check payable in such U.S. Legal Tender. The
Company may deliver any such interest payment to the Paying Agent or to a Holder
at the Holder's registered address.
(3) Paying Agent and Registrar. Initially, the Trustee will
act as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-Registrar without notice to the Holders.
(4) Indenture. The Company issued the Notes under the
Indenture. This Note is one of a duly authorized issue of Notes of the Company
designated as its 10 1/8% Senior Subordinated Notes due 2007, Series A (the
"Initial Notes"), limited (except as otherwise provided in the Indenture) in
aggregate principal amount to $150,000,000 which may be issued under the
Indenture. The Notes include the Initial Notes, the Private Exchange Notes and
the Unrestricted Notes, as defined below, issued in exchange for the Initial
Notes pursuant to the
A-4
<PAGE> 5
Registration Rights Agreement. The Initial Notes, the Private Exchange Notes and
the Unrestricted Notes are treated as a single class of securities under the
Indenture. 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
(15 U.S. Code Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date
of the Indenture. Notwithstanding anything to the contrary herein, the Notes are
subject to all such terms, and Holders of Notes are referred to the Indenture
and the TIA for a statement of such terms. The Notes are general unsecured
obligations of the Company. Payment on each Note is guaranteed on a senior basis
by the Subsidiary Guarantors pursuant to Article 12 of the Indenture. Each
Holder, by accepting a Note, agrees to be bound by all of the terms and
provisions of the Indenture, as the same may be amended from time to time in
accordance with its terms.
(5) Redemption. The Notes are redeemable, at the Company's
option, in whole at any time or in part from time to time, on and after July 15,
2002, upon not less than 30 nor more than 60 days' notice, at the following
Redemption Prices (expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period commencing on July 15 of the years set
forth below, plus, in each case, accrued and unpaid interest thereon, if any, to
the date of redemption:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2002 105.063%
2003 103.797%
2004 102.531%
2005 101.266%
2006 and thereafter 100.000%
</TABLE>
Notwithstanding the foregoing, at any time, or from time to
time, on or prior to July 15, 2000, the Company may, at its option, redeem, with
the net cash proceeds of one or more Public Equity Offerings by the Company, up
to 25% of the aggregate principal amount of the Notes originally issued at a
redemption price equal to 110.125% of the principal amount thereof, plus accrued
interest thereon, if any, to the date of redemption, provided that at least 75%
of the aggregate principal amount of the Notes originally issued remain
outstanding immediately following such redemption. In order to effect the
foregoing redemption with the proceeds of any Public Equity Offering, the
Company shall make such redemption not more than 60 days after the consummation
of any such Public Equity Offering.
(6) Notice of Redemption. Notice of redemption will be mailed
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. Notes in denominations larger
than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the
redemption of the Notes called for redemption shall have been deposited with the
Paying Agent for redemption on such Redemption Date, then, unless the Company
defaults in the payment of such Redemption Price
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<PAGE> 6
plus accrued interest, if any, the Notes called for redemption will cease to
bear interest from and after such Redemption Date and the only right of the
Holders of such Notes will be to receive payment of the Redemption Price plus
accrued interest, if any.
(7) Offers to Purchase. Sections 4.15 and 4.16 of the
Indenture provide that, after certain Asset Sales and upon the occurrence of a
Change of Control, and subject to further limitations contained therein, the
Company will make an offer to purchase certain amounts of the Notes in
accordance with the procedures set forth in the Indenture.
(8) Registration Rights. Pursuant to the Registration Rights
Agreement among the Company, the Subsidiary Guarantors and the Initial
Purchasers, the Company and the Subsidiary Guarantors will be obligated to
consummate an exchange offer pursuant to which the Holder of this Note shall
have the right to exchange this Note for the Company's 10 1/8% Senior
Subordinated Notes due 2007, Series B (the "Unrestricted Notes"), which will be
registered under the Securities Act, in like principal amount and having terms
identical in all material respects as the Initial Notes. The Holders of the
Initial Notes shall be entitled to receive certain additional interest payments
in the event such exchange offer is not consummated and upon certain other
conditions, all pursuant to and in accordance with the terms of the Registration
Rights Agreement.
(9) Denominations; Transfer; Exchange. The Notes are in
registered form, without coupons, and (except Notes issued as payment of
Interest) in denominations of $1,000 and integral multiples of $1,000. A Holder
shall register the transfer of or exchange of Notes in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
required by law or as permitted by the Indenture. The Registrar need not
register the transfer of or exchange of any Notes or portions thereof selected
for redemption except for the unredeemed portion of any Note being redeemed in
part.
(10) Persons Deemed Owners. The registered Holder of a Note
shall be treated as the owner of it for all purposes.
(11) Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for one year, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
(12) Discharge Prior to Redemption or Maturity. If the Company
at any time deposits with the Trustee U.S. Legal Tender or U.S. Government
Obligations sufficient to pay the principal of and interest on the Notes to
redemption or maturity and complies with the other provisions of the Indenture
relating thereto, the Company will be discharged from certain provisions of the
Indenture and the Notes (including certain covenants, but including, under
A-6
<PAGE> 7
certain circumstances, their obligation to pay the principal of and interest on
the Notes but without affecting the rights of the Holders to receive such
amounts from such deposits).
(13) Amendment; Supplement; Waiver. Subject to certain
exceptions set forth in the Indenture, the Indenture or the Notes may be amended
or supplemented with the written consent of the Holders of not less than a
majority in aggregate principal amount of the Notes then outstanding, and any
past Default or Event of Default or noncompliance with any provision may be
waived with the written consent of the Holders of not less than a majority in
aggregate principal amount of the Notes then outstanding. Without notice to or
consent of any Holder, the parties thereto may amend or supplement the Indenture
or the Notes to, among other things, cure any ambiguity, defect or
inconsistency, provide for uncertificated Notes in addition to or in place of
certificated Notes, comply with any requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the TIA or comply
with Section 5.01 of the Indenture or make any other change that does not
adversely affect the rights of any Holder of a Note in any material respect.
(14) Restrictive Covenants. The Indenture imposes certain
limitations on the ability of the Company and the Restricted Subsidiaries to,
among other things, incur additional Indebtedness, make payments in respect of
its Capital Stock or certain indebtedness, make certain Investments, create or
incur liens, enter into transactions with Affiliates, create dividend or other
payment restrictions affecting Restricted Subsidiaries, issue Preferred Stock of
its Restricted Subsidiaries, and on the ability of the Company to merge or
consolidate with any other Person or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of the Company's and its
Restricted Subsidiaries' assets or adopt a plan of liquidation. Such limitations
are subject to a number of important qualifications and exceptions. Pursuant to
Section 4.06 of the Indenture, the Company must annually report to the Trustee
on compliance with such limitations.
(15) Subordination. The Notes are subordinated in right of
payment, in the manner and to the extent set forth in the Indenture, to the
prior payment in full in cash or Cash Equivalents of all Obligations on Senior
Indebtedness of the Company, whether outstanding on the date of the Indenture or
thereafter created, incurred, assumed or guaranteed. Each Holder by its
acceptance hereof agrees to be bound by such provisions and authorizes and
expressly directs the Trustee, on its behalf, to take such action as may be
necessary or appropriate to effectuate the subordination provided for in the
Indenture and appoints the Trustee its attorney-in-fact for such purposes.
(16) Successors. When a successor assumes, in accordance with
the Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor, subject to certain exceptions, will be released from
those obligations.
(17) Defaults and Remedies. Except as set forth in the
Indenture, if an Event of Default occurs and is continuing, the Trustee or the
Holders of not less than 25% in principal amount of Notes then outstanding may
declare all the Notes to be due and payable in the manner,
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<PAGE> 8
at the time and with the effect provided in the Indenture. Holders of Notes may
not enforce the Indenture or the Notes except as provided in the Indenture. The
Trustee is not obligated to enforce the Indenture or the Notes unless it has
received indemnity reasonably satisfactory to it. The Indenture permits, subject
to certain limitations therein provided, Holders of a majority in aggregate
principal amount of the Notes then outstanding to direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of Notes
notice of any continuing Default or Event of Default (except a Default in
payment of principal or interest when due, for any reason or a Default in
compliance with Article Five of the Indenture) if it determines that withholding
notice is in their interest.
(18) Trustee Dealings with Company. The Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with the Company, its Subsidiaries or
their respective Affiliates as if it were not the Trustee.
(19) No Recourse Against Others. No partner, director,
officer, employee or stockholder, as such, of the Company or any Subsidiary
Guarantor, as such, shall have any liability for any obligations of the Company
or any Subsidiary Guarantor under the Notes, the Indenture, the Guarantees or
the Registration Rights Agreement 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 the issuance of the Notes.
(20) Guarantees. This Note will be entitled to the benefits of
certain Guarantees, if any, made for the benefit of the Holders. Reference is
hereby made to the Indenture for a statement of the respective rights,
limitations of rights, duties and obligations thereunder of the Subsidiary
Guarantors, the Trustee and the Holders.
(21) Authentication. This Note shall not be valid until the
Trustee or Authenticating Agent manually signs the certificate of authentication
on this Note.
(22) Governing Law. This Note and the Indenture shall be
governed by and construed in accordance with the laws of the State of New York,
as applied to contracts made and performed within the State of New York, without
regard to principles of conflict of laws. Each of the parties hereto and the
Holders agree to submit to the jurisdiction of the courts of the State of New
York in any action or proceeding arising out of or relating to this Note.
(23) Abbreviations and Defined Terms. Customary abbreviations
may be used in the name of a Holder of a Note or an assignee, such as: TEN COM
(= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
(24) CUSIP Numbers. Pursuant to a recommendation promulgated
by the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP
A-8
<PAGE> 9
numbers to be printed on the Notes as a convenience to the Holders of the Notes.
No representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.
The Company will furnish to any Holder of a Note upon written
request and without charge a copy of the Indenture, which has the text of this
Note. Requests may be made to: SAFETY COMPONENTS INTERNATIONAL, INC., 3190
Pullman Street, Costa Mesa, California 92626.
A-9
<PAGE> 10
GUARANTEE
For value received, the undersigned hereby unconditionally
guarantees, as principal obligor and not only as a surety, to the Holder of this
Note the cash payments in United States dollars of principal of, premium, if
any, and interest on this Note (and including Additional Interest payable
thereon) in the amounts and at the times when due and interest on the overdue
principal, premium, if any, and interest, if any, of this Note, if lawful, and
the payment or performance of all other obligations of the Company under the
Indenture or the Notes, to the Holder of this Note and the Trustee, all in
accordance with and subject to the terms and limitations of this Note, Article
Twelve of the Indenture and this Guarantee. This Guarantee will become effective
in accordance with Article Twelve of the Indenture and its terms shall be
evidenced therein. The validity and enforceability of any Guarantee shall not be
affected by the fact that it is not affixed to any particular Note.
Capitalized terms under but not defined herein shall have the
meanings ascribed to them in the Indenture dated as of July 24, 1997, among
Safety Components International, Inc., a Delaware corporation, the Subsidiary
Guarantors named therein and IBJ Schroder Bank & Trust Company, as trustee (the
"Trustee"), as amended or supplemented (the "Indenture").
The obligations of the undersigned to the Holders of Notes and
to the Trustee pursuant to this Guarantee and the Indenture are expressly set
forth in Article Twelve of the Indenture and reference is hereby made to the
Indenture for the precise terms of the Guarantee and all of the other provisions
of the Indenture to which this Guarantee relates.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW. Each Subsidiary Guarantor hereby agrees to
submit to the jurisdiction of the courts of the State of New York in any action
or proceeding arising out of or relating to this Guarantee.
This Guarantee is subject to release upon the terms set forth
in the Indenture.
IN WITNESS WHEREOF, each Subsidiary Guarantor has caused its
Guarantee to be duly executed.
Date: __________________________
[NAME OF SUBSIDIARY GUARANTOR],
as Guarantor
By: _______________________________
Name:
Title:
A-10
<PAGE> 1
[FORM OF SERIES B NOTE]
CUSIP No.:
SAFETY COMPONENTS INTERNATIONAL, INC.
10 1/8% SENIOR SUBORDINATED NOTE DUE 2007, SERIES B
No.
SAFETY COMPONENTS INTERNATIONAL, INC., a Delaware corporation
(the "Company," which term includes any successor entities), for value received
promises to pay to or registered assigns the principal sum
of Dollars on July 15, 2007.
Interest Payment Dates: January 15 and July 15, commencing
January 15, 1998
Record Dates: January 1 and July 1
Reference is made to the further provisions of this Note
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
SAFETY COMPONENTS INTERNATIONAL,
INC.
By:
----------------------------------
Name:
Title:
By:
----------------------------------
Name:
Title:
Dated:
B-1
<PAGE> 2
Certificate of Authentication
This is one of the 10 1/8% Senior Subordinated Notes due 2007, Series
B, referred to in the within-mentioned Indenture.
IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
By:
---------------------------
Authorized Signatory
Date of Authentication:
B-2
<PAGE> 3
(REVERSE OF SECURITY)
10 1/8% Senior Subordinated Note due 2007, Series B
Capitalized terms used and not otherwise defined herein shall
have the meanings ascribed to them in the Indenture, dated as of July 24, 1997
(the "Indenture"), and as amended from time to time, by and among Safety
Components International, Inc., a Delaware corporation (the "Company"), the
Subsidiary Guarantors named therein and IBJ Schroder Bank & Trust Company, as
trustee (the "Trustee").
(1) Interest. The Company promises to pay interest on the
principal amount of this Note at the rate per annum shown above. Interest on the
Notes will accrue from the most recent date on which interest has been paid or,
if no interest has been paid, from July 24, 1997. The Company will pay interest
semi-annually in arrears on each Interest Payment Date, commencing January 15,
1998. Interest will be computed on the basis of a 360-day year of twelve 30-day
months and, in the case of a partial month, the actual number of days elapsed.
The Company shall pay interest on overdue principal and on
overdue installments of interest from time to time on demand at the rate borne
by the Notes and on overdue installments of interest (without regard to any
applicable grace periods) to the extent lawful.
(2) Method of Payment. The Company shall pay interest on the
Notes (except defaulted interest) to the Persons who are the registered Holders
at the close of business on the Record Date immediately preceding the Interest
Payment Date even if the Notes are cancelled on registration of transfer or
registration of exchange (including pursuant to an Exchange Offer (as defined in
the Registration Rights Agreement)) after such Record Date. Holders must
surrender Notes to a Paying Agent to collect principal payments. The Company
shall pay principal and premium, if any, and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts ("U.S. Legal Tender"). However, the Company may pay principal and
premium, if any, and interest by check payable in such U.S. Legal Tender. The
Company may deliver any such interest payment to the Paying Agent or to a Holder
at the Holder's registered address.
(3) Paying Agent and Registrar. Initially, the Trustee will
act as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-Registrar without notice to the Holders.
(4) Indenture. The Company issued the Notes under the
Indenture. This Note is one of a duly authorized issue of Notes of the Company
designated as its 10 1/8% Senior Subordinated Notes due 2007, Series B (the
"Unrestricted Notes"), limited (except as otherwise provided in the Indenture)
in aggregate principal amount to $150,000,000 which may be issued under the
Indenture. The Notes include the 101/8 % Senior Subordinated Notes Due 2007,
Series A (the "Initial Notes"), the Private Exchange Notes and the Unrestricted
Notes, issued in
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<PAGE> 4
exchange for the Initial Notes pursuant to the Registration Rights Agreement.
The Initial Notes, the Private Exchange Notes and the Unrestricted Notes are
treated as a single class of securities under the Indenture. 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 (15 U.S. Code Sections
77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture.
Notwithstanding anything to the contrary herein, the Notes are subject to all
such terms, and Holders of Notes are referred to the Indenture and the TIA for a
statement of such terms. The Notes are general unsecured obligations of the
Company. Payment on each Note is guaranteed on a senior basis by the Subsidiary
Guarantors pursuant to Article 12 of the Indenture. Each Holder, by accepting a
Note, agrees to be bound by all of the terms and provisions of the Indenture, as
the same may be amended from time to time in accordance with its terms.
(5) Redemption. The Notes are redeemable, at the Company's
option, in whole at any time or in part from time to time, on and after July 15,
2002, upon not less than 30 nor more than 60 days' notice, at the following
Redemption Prices (expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period commencing on July 15 of the years set
forth below, plus, in each case, accrued and unpaid interest thereon, if any, to
the date of redemption:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2002 105.063%
2003 103.797%
2004 102.531%
2005 101.266%
2006 and thereafter 100.000%
</TABLE>
Notwithstanding the foregoing, at any time, or from time to
time, on or prior to July 15, 2000, the Company may, at its option, redeem, with
the net cash proceeds of one or more Public Equity Offerings by the Company, up
to 25% of the aggregate principal amount of the Notes originally issued at a
redemption price equal to 110.125% of the principal amount thereof, plus accrued
interest thereon, if any, to the date of redemption, provided that at least 75%
of the aggregate principal amount of the Notes originally issued remain
outstanding immediately following such redemption. In order to effect the
foregoing redemption with the proceeds of any Public Equity Offering, the
Company shall make such redemption not more than 60 days after the consummation
of any such Public Equity Offering.
(6) Notice of Redemption. Notice of redemption will be mailed
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. Notes in denominations larger
than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the
redemption of the Notes called for redemption shall have been deposited with the
Paying Agent for redemption on such Redemption Date, then, unless the Company
defaults in the payment of such Redemption Price
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<PAGE> 5
plus accrued interest, if any, the Notes called for redemption will cease to
bear interest from and after such Redemption Date and the only right of the
Holders of such Notes will be to receive payment of the Redemption Price plus
accrued interest, if any.
(7) Offers to Purchase. Sections 4.15 and 4.16 of the
Indenture provide that, after certain Asset Sales and upon the occurrence of a
Change of Control, and subject to further limitations contained therein, the
Company will make an offer to purchase certain amounts of the Notes in
accordance with the procedures set forth in the Indenture.
(8) Denominations; Transfer; Exchange. The Notes are in
registered form, without coupons, and (except Notes issued as payment of
Interest) in denominations of $1,000 and integral multiples of $1,000. A Holder
shall register the transfer of or exchange of Notes in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
required by law or as permitted by the Indenture. The Registrar need not
register the transfer of or exchange of any Notes or portions thereof selected
for redemption except for the unredeemed portion of any Note being redeemed in
part.
(9) Persons Deemed Owners. The registered Holder of a Note
shall be treated as the owner of it for all purposes.
(10) Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for one year, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
(11) Discharge Prior to Redemption or Maturity. If the Company
at any time deposits with the Trustee U.S. Legal Tender or U.S. Government
Obligations sufficient to pay the principal of and interest on the Notes to
redemption or maturity and complies with the other provisions of the Indenture
relating thereto, the Company will be discharged from certain provisions of the
Indenture and the Notes (including certain covenants, but including, under
certain circumstances, their obligation to pay the principal of and interest on
the Notes but without affecting the rights of the Holders to receive such
amounts from such deposits).
(12) Amendment; Supplement; Waiver. Subject to certain
exceptions set forth in the Indenture, the Indenture or the Notes may be amended
or supplemented with the written consent of the Holders of not less than a
majority in aggregate principal amount of the Notes then outstanding, and any
past Default or Event of Default or noncompliance with any provision may be
waived with the written consent of the Holders of not less than a majority in
aggregate principal amount of the Notes then outstanding. Without notice to or
consent of any Holder, the parties thereto may amend or supplement the Indenture
or the Notes to, among other things, cure any ambiguity, defect or
inconsistency, provide for uncertificated Notes in addition to or in place
B-5
<PAGE> 6
of certificated Notes, comply with any requirements of the Commission in order
to effect or maintain the qualification of the Indenture under the TIA or comply
with Section 5.01 of the Indenture or make any other change that does not
adversely affect the rights of any Holder of a Note in any material respect.
(13) Restrictive Covenants. The Indenture imposes certain
limitations on the ability of the Company and the Restricted Subsidiaries to,
among other things, incur additional Indebtedness, make payments in respect of
its Capital Stock or certain indebtedness, make certain Investments, create or
incur liens, enter into transactions with Affiliates, create dividend or other
payment restrictions affecting Restricted Subsidiaries, issue Preferred Stock of
its Restricted Subsidiaries, and on the ability of the Company to merge or
consolidate with any other Person or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of the Company's and its
Restricted Subsidiaries' assets or adopt a plan of liquidation. Such limitations
are subject to a number of important qualifications and exceptions. Pursuant to
Section 4.06 of the Indenture, the Company must annually report to the Trustee
on compliance with such limitations.
(14) Subordination. The Notes are subordinated in right of
payment, in the manner and to the extent set forth in the Indenture, to the
prior payment in full in cash or Cash Equivalents of all Obligations on Senior
Indebtedness of the Company, whether outstanding on the date of the Indenture or
thereafter created, incurred, assumed or guaranteed. Each Holder by its
acceptance hereof agrees to be bound by such provisions and authorizes and
expressly directs the Trustee, on its behalf, to take such action as may be
necessary or appropriate to effectuate the subordination provided for in the
Indenture and appoints the Trustee its attorney-in-fact for such purposes.
(15) Successors. When a successor assumes, in accordance with
the Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor, subject to certain exceptions, will be released from
those obligations.
(16) Defaults and Remedies. Except as set forth in the
Indenture, if an Event of Default occurs and is continuing, the Trustee or the
Holders of not less than 25% in principal amount of Notes then outstanding may
declare all the Notes to be due and payable in the manner, at the time and with
the effect provided in the Indenture. Holders of Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. The Trustee is not
obligated to enforce the Indenture or the Notes unless it has received indemnity
reasonably satisfactory to it. The Indenture permits, subject to certain
limitations therein provided, Holders of a majority in aggregate principal
amount of the Notes then outstanding to direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of Notes notice of any
continuing Default or Event of Default (except a Default in payment of principal
or interest when due, for any reason or a Default in compliance with Article
Five of the Indenture) if it determines that withholding notice is in their
interest.
(17) Trustee Dealings with Company. The Trustee under the
Indenture, in its
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<PAGE> 7
individual or any other capacity, may become the owner or pledgee of Notes and
may otherwise deal with the Company, its Subsidiaries or their respective
Affiliates as if it were not the Trustee.
(18) No Recourse Against Others. No partner, director,
officer, employee or stockholder, as such, of the Company or any Subsidiary
Guarantor, as such, shall have any liability for any obligations of the Company
or any Subsidiary Guarantor under the Notes, the Indenture, the Guarantees or
the Registration Rights Agreement 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 the issuance of the Notes.
(19) Guarantees. This Note will be entitled to the benefits of
certain Guarantees, if any, made for the benefit of the Holders. Reference is
hereby made to the Indenture for a statement of the respective rights,
limitations of rights, duties and obligations thereunder of the Subsidiary
Guarantors, the Trustee and the Holders.
(20) Authentication. This Note shall not be valid until the
Trustee or Authenticating Agent manually signs the certificate of authentication
on this Note.
(21) Governing Law. This Note and the Indenture shall be
governed by and construed in accordance with the laws of the State of New York,
as applied to contracts made and performed within the State of New York, without
regard to principles of conflict of laws. Each of the parties hereto and the
Holders agree to submit to the jurisdiction of the courts of the State of New
York in any action or proceeding arising out of or relating to this Note.
(22) Abbreviations and Defined Terms. Customary abbreviations
may be used in the name of a Holder of a Note or an assignee, such as: TEN COM
(= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
(23) CUSIP Numbers. Pursuant to a recommendation promulgated
by the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes as a convenience to the Holders
of the Notes. No representation is made as to the accuracy of such numbers as
printed on the Notes and reliance may be placed only on the other identification
numbers printed hereon.
The Company will furnish to any Holder of a Note upon written
request and without charge a copy of the Indenture, which has the text of this
Note. Requests may be made to: SAFETY COMPONENTS INTERNATIONAL, INC., 2160 North
Central Road, Fort Lee, New Jersey 07204.
B-7
<PAGE> 8
GUARANTEE
For value received, the undersigned hereby unconditionally
guarantees, as principal obligor and not only as a surety, to the Holder of this
Note the cash payments in United States dollars of principal of, premium, if
any, and interest on this Note (and including Additional Interest payable
thereon) in the amounts and at the times when due and interest on the overdue
principal, premium, if any, and interest, if any, of this Note, if lawful, and
the payment or performance of all other obligations of the Company under the
Indenture or the Notes, to the Holder of this Note and the Trustee, all in
accordance with and subject to the terms and limitations of this Note, Article
Twelve of the Indenture and this Guarantee. This Guarantee will become effective
in accordance with Article Twelve of the Indenture and its terms shall be
evidenced therein. The validity and enforceability of any Guarantee shall not be
affected by the fact that it is not affixed to any particular Note.
Capitalized terms under but not defined herein shall have the
meanings ascribed to them in the Indenture dated as of July 24, 1997, among
Safety Components International, Inc., a Delaware corporation, the Subsidiary
Guarantors named therein and IBJ Schroder Bank & Trust Company, as trustee (the
"Trustee"), as amended or supplemented (the "Indenture").
The obligations of the undersigned to the Holders of Notes and
to the Trustee pursuant to this Guarantee and the Indenture are expressly set
forth in Article Twelve of the Indenture and reference is hereby made to the
Indenture for the precise terms of the Guarantee and all of the other provisions
of the Indenture to which this Guarantee relates.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW. Each Subsidiary Guarantor hereby agrees to
submit to the jurisdiction of the courts of the State of New York in any action
or proceeding arising out of or relating to this Guarantee.
This Guarantee is subject to release upon the terms set forth
in the Indenture.
IN WITNESS WHEREOF, each Subsidiary Guarantor has caused its
Guarantee to be duly executed.
Date:
----------------------------
[NAME OF SUBSIDIARY GUARANTOR],
as Guarantor
By:
------------------------------------
Name:
Title:
B-8
<PAGE> 1
FORM OF AMENDMENT NO. 2 TO PLEDGE AGREEMENT
THIS AMENDMENT, dated as of July 15, 1997, by (i) each of the Pledgors
which is a party to the Pledge Agreement referred to below (the "ORIGINAL
PLEDGORS") and (ii) KEYBANK NATIONAL ASSOCIATION, a national banking
association, as Collateral Agent under the Pledge Agreement (herein, together
with its successors and assigns in such capacity, the "PLEDGEE"):
PRELIMINARY STATEMENTS:
(1) The Original Pledgors have heretofore entered into the Pledge
Agreement, dated as of May 21, 1997, in favor of the Collateral Agent as the
Pledgee thereunder, as amended by Amendment No. 1 to Pledge Agreement dated as
of June 2, 1997 (as so amended, the "PLEDGE AGREEMENT"; with the terms defined
therein, or the definitions of which are incorporated therein, being used herein
as so defined).
(2) The parties hereto desire to amend certain of the terms and
provisions of the Pledge Agreement, all as more fully set forth below.
NOW, THEREFORE, the parties hereby agree as follows:
1. ADDITIONS TO ANNEX A. Annex A to the Pledge Agreement is amended by
the addition of the following information:
<TABLE>
<CAPTION>
NAME OF JURISDICTION PERCENTAGE OF NAMES AND JURISDICTIONS JURISDICTIONS
SUBSIDIARY WHERE OUTSTANDING STOCK ADDRESSES WHERE WHERE
AND ORGANIZED OR OTHER EQUITY OF QUALIFIED AS SUBSTANTIAL
TYPE OF INTERESTS OWNED MINORITY A FOREIGN ASSETS
ORGANIZATION (INDICATING HOLDERS, CORPORATION LOCATED
WHETHER OWNED BY IF ANY OR
THE BORROWER OR A OTHER ENTITY
SPECIFIED
SUBSIDIARY)
- ------------ -------------- ------------------- --------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Safety Delaware 100% owned by the N/A California South
Components Company Carolina
Fabric South
Technologies, Carolina
Inc.
</TABLE>
<PAGE> 2
2. ADDITIONS TO ANNEX B. Annex B to the Pledge Agreement is amended by
the addition of the following information:
<TABLE>
<CAPTION>
NAME OF TYPE NUMBER
ISSUING OF OF CERTIFICATE PERCENTAGE
CORPORATION SHARES SHARES NO. OWNED
- ------------- -------- -------- ------------- ------------
<S> <C> <C> <C> <C>
Safety common stock 100 1 100%
Components
Fabric
Technologies,
Inc.
</TABLE>
3. RATIFICATIONS. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Security Agreement, and except as expressly modified and superseded
by this Amendment, the terms and provisions of the Pledge Agreement are ratified
and confirmed and shall continue in full force and effect.
4. MISCELLANEOUS. The terms and provisions of sections 20
[Waiver; Amendment], 22 [Miscellaneous] and 23 [Waiver of Jury Trial] of the
Pledge Agreement are hereby incorporated into this Amendment as if set forth in
full herein, except that references in such incorporated terms and provisions to
"this Agreement", "herein", "hereby" and words of similar import shall be deemed
to refer to this Amendment instead of the Pledge Agreement. This Amendment may
be executed by the parties hereto separately in counterparts, each of which
shall be an original and all of which together shall constitute one and the same
agreement.
[The balance of this page is intentionally blank.]
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
SAFETY COMPONENTS INTERNATIONAL, INC.
BY:______________________________
EXECUTIVE VICE PRESIDENT
AUTOMOTIVE SAFETY COMPONENTS
INTERNATIONAL, INC.
BY:______________________________
EXECUTIVE VICE PRESIDENT
ASCI HOLDINGS GERMANY (DE), INC.
BY: ______________________________
EXECUTIVE VICE PRESIDENT
ASCI HOLDINGS CZECH (DE), INC.
BY:______________________________
EXECUTIVE VICE PRESIDENT
ASCI HOLDINGS MEXICO (DE), INC.
BY:______________________________
EXECUTIVE VICE PRESIDENT
ASCI HOLDINGS U.K. (DE), INC.
BY:______________________________
EXECUTIVE VICE PRESIDENT
ASCI HOLDINGS ASIA (DE), INC.
BY: ______________________________
EXECUTIVE VICE PRESIDENT
<PAGE> 4
KEYBANK NATIONAL ASSOCIATION,
AS COLLATERAL AGENT AND PLEDGEE
BY:______________________________
VICE PRESIDENT
<PAGE> 1
SAFETY COMPONENTS INTERNATIONAL, INC.
$90,000,000
10 1/8% SENIOR SUBORDINATED NOTES DUE 2007
PURCHASE AGREEMENT
July 21, 1997
BT Securities Corporation
Alex. Brown & Sons Incorporated
BancAmerica Securities, Inc.
c/o BT Securities Corporation
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Ladies and Gentlemen:
Safety Components International, Inc. (the "Company"), a
Delaware corporation, and the Guarantors (as defined) hereby confirm their
agreement with you (the "Initial Purchasers"), as set forth below.
1. The Securities. Subject to the terms and conditions herein
contained, the Company proposes to issue and sell to the Initial Purchasers
$90,000,000 aggregate principal amount of the Company's 10 1/8% Senior
Subordinated Notes due 2007 (the "Notes"). The Notes will be guaranteed
(collectively, the "Guarantees") on a senior subordinated basis by each of the
Company's Subsidiaries listed on the signature pages hereof (collectively, and
together with any subsidiary that in the future executes a supplemental
indenture pursuant to which such subsidiary agrees to guarantee the Notes, the
"Guarantors"). The Notes and the Guarantees are collectively referred to herein
as the "Securities". The Securities are to be issued under an indenture (the
"Indenture") dated as of July 24 1997 by and among the Company, the Guarantors
and IBJ Schroder Bank & Trust Company, as trustee (the "Trustee").
The Securities are being offering in connection with the
Company's acquisition of the assets of the Air Restraints and Industrial Fabrics
Division of JPS Automotive L.P.
<PAGE> 2
-2-
("JPS") pursuant to an asset purchase agreement, dated as of June 30, 1997 (the
"JPS Acquisition").
The Securities will be offered and sold to you without being
registered under the Securities Act of 1933, as amended (the "Act"), in reliance
on exemptions therefrom.
In connection with the sale of the Securities, the Company has
prepared a preliminary offering memorandum dated July 1, 1997 (the "Preliminary
Memorandum") and a final offering memorandum dated July 21, 1997 (the "Final
Memorandum," the Preliminary Memorandum and the Final Memorandum each herein
being referred to as a "Memorandum") setting forth or including a description of
the terms of the Securities, the terms of the offering of the Securities, a
description of the Company and any material developments relating to the Company
occurring after the date of the most recent historical financial statements
included therein.
The Company understands that the Initial Purchasers propose to
make an offering of the Notes only on the terms and in the manner set forth in
the Final Memorandum and Section 8 hereof as soon as the Initial Purchasers deem
advisable after this Agreement has been executed and delivered, to persons in
the United States whom the Initial Purchasers reasonably believe to be qualified
institutional buyers ("Qualified Institutional Buyers" or "QIBs") as defined in
Rule 144A under the Act, as such rule may be amended from time to time ("Rule
144A"), in transactions under Rule 144A, to a limited number of other
institutional "accredited investors" ("Accredited Investors") as defined in Rule
501(a)(1), (2), (3) and (7) under Regulation D of the Act in private sales
exempt from registration under the Act, and outside the United States to certain
persons in reliance on Regulation S under the Act.
The Initial Purchasers and their direct and indirect
transferees of the Securities will be entitled to the benefits of the
Registration Rights Agreement, substantially in the form attached hereto as
Exhibit A (the "Registration Rights Agreement"), pursuant to which the Company
and the Guarantors have agreed, among other things, to file a registration
statement (the "Registration Statement") with the Securities and Exchange
Commission (the "Commission") registering the Exchange Notes (as defined in the
Registration Rights Agreement) under the Act.
2. Representations and Warranties of the Company. The Company
and each of the Guarantors, subject to the limit on maximum liability contained
in the Guarantees, jointly and severally, represents and warrants to and agrees
with each of the Initial Purchasers that:
(a) Neither the Final Memorandum nor any amendment or
supplement thereto as of the date thereof and at all times subsequent
thereto up to the Closing Date
<PAGE> 3
-3-
(as defined in Section 3 below) contained or contains any untrue
statement of a material fact or omitted or omits to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that
the representations and warranties set forth in this Section 2(a) do
not apply to statements or omissions made in reliance upon and in
conformity with information relating to any of the Initial Purchasers
furnished to the Company in writing by the Initial Purchasers expressly
for use in the Preliminary Memorandum, the Final Memorandum or any
amendment or supplement thereto.
(b) As of the Closing Date, the Company will have the
authorized, issued and outstanding capitalization set forth in the
Final Memorandum; all of the outstanding shares of capital stock of the
Company and each of its significant subsidiaries within the meaning of
Regulation S-X (each, a "Subsidiary" and collectively, the
"Subsidiaries") have been, and as of the Closing Date will be, duly
authorized and validly issued, are fully paid and nonassessable and
were not issued in violation of any preemptive or similar rights; all
of the outstanding shares of capital stock of the Subsidiaries will be
free and clear of all liens, encumbrances, equities and claims or
restrictions on transferability (other than those created pursuant to
the Credit Agreement (as defined) and those imposed by the Act and the
securities or "Blue Sky" laws of certain jurisdictions) or voting;
except as set forth in the Final Memorandum, there are no (i) options,
warrants or other rights to purchase (other than options granted in
1995 by Valentec International Corporation to Citibank, N.A. to
purchase 10,000 shares of common stock), (ii) agreements or other
obligations to issue or (iii) other rights to convert any obligation
into, or exchange any securities for, shares of capital stock of or
ownership interests in the Company or any of the Subsidiaries
outstanding. Except for the Company's direct and indirect interests in
the Subsidiaries and in other wholly owned subsidiaries, the Company
does not own, directly or indirectly, any shares of capital stock or
any other equity or long-term debt securities or have any equity
interest in any firm, partnership, joint venture or other entity other
than as described in the Final Memorandum.
(c) Each of the Company and the Subsidiaries is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has all requisite corporate or other
power and authority to own its properties and conduct its business as
now conducted and as described in the Final Memorandum; each of the
Company and the Subsidiaries is duly qualified to do business and is in
good standing in all other jurisdictions where the ownership or leasing
of its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified would not,
individually or in the aggregate, have a material adverse effect on the
general affairs, management,
<PAGE> 4
-4-
business, condition (financial or otherwise), prospects or results of
operations of the Company and the Subsidiaries, taken as a whole (any
such event, a "Material Adverse Effect").
(d) Each of the Company and the Guarantors has all requisite
corporate power and authority to execute, deliver and perform each of
its obligations under the Notes, the Exchange Notes, the Private
Exchange Notes (each as defined in the Registration Rights Agreement)
and the Guarantees. The Notes, when issued, will be in the form
contemplated by the Indenture. The Notes, the Exchange Notes and the
Private Exchange Notes have each been duly and validly authorized by
the Company and, when executed by the Company and authenticated by the
Trustee in accordance with the provisions of the Indenture and, in the
case of the Notes, when delivered to and paid for by the Initial
Purchasers in accordance with the terms of this Agreement, will have
been duly executed, issued and delivered and will constitute valid and
legally binding obligations of the Company (assuming the due
authorization, execution and delivery of the Indenture by the Trustee
and the due authorization and delivery of the Notes by the Trustee in
accordance with the Indenture), entitled to the benefits of the
Indenture, and enforceable against the Company in accordance with their
terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, and (ii) general principles of equity and
the discretion of the court before which any proceeding therefor may be
brought (regardless of whether such enforcement is considered in a
proceeding in equity or at law).
(e) The Guarantees have been duly and validly authorized by
each Guarantor, and when executed and delivered by such Guarantor, will
constitute the valid and legally binding obligations of such Guarantor,
entitled to the benefits of the Indenture, enforceable against each of
them in accordance with their terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity and the discretion of the court before
which any proceeding therefor may be brought (regardless of whether
such enforcement is considered in a proceeding in equity or at law).
(f) Each of the Company and the Guarantors has all requisite
corporate power and authority to execute, deliver and perform its
obligations under the Indenture. The Indenture meets the requirements
for qualification under the Trust Indenture Act of 1939, as amended
(the "TIA"). The Indenture has been duly and validly authorized by each
of the Company and the Guarantors and, when executed and delivered in
accordance with its terms (assuming the due authorization, execution
and delivery by the Trustee), will have been duly executed and
delivered and will constitute a
<PAGE> 5
-5-
valid and legally binding agreement of each of the Company and the
Guarantors, enforceable against each of them in accordance with its
terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of equity and
the discretion of the court before which any proceeding therefor may be
brought (regardless of whether such enforcement is considered in a
proceeding in equity or at law).
(g) Each of the Company and the Guarantors has all requisite
corporate power and authority to execute, deliver and perform its
obligations under the Registration Rights Agreement. The Registration
Rights Agreement has been duly and validly authorized by each of the
Company and the Guarantors and, when executed and delivered by the
Company and each of the Guarantors (assuming due authorization,
execution and delivery by the other parties thereto), will have been
duly executed and delivered and will constitute a valid and legally
binding agreement of each of the Company and the Guarantors,
enforceable against each of them in accordance with its terms, except
that (A) the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of
the court before which any proceeding therefor may be brought
(regardless of whether such enforcement is considered in a proceeding
in equity or at law) and (B) any rights to indemnity or contribution
thereunder may be limited by federal and state securities laws and
public policy considerations.
(h) Each of the Company and the Guarantors has all requisite
corporate power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions
contemplated hereby. This Agreement and the consummation by the Company
and the Guarantors of the transactions contemplated hereby have been
duly and validly authorized by each of the Company and the Guarantors.
This Agreement has been duly executed and delivered by each of the
Company and the Guarantors.
(i) No consent, approval, authorization or order of any court
or governmental agency or body, or third party is required for the
performance of this Agreement by the Company and the Guarantors or the
consummation by them of the other transactions contemplated hereby,
except such (i) as have been obtained or made, (ii) as would not have a
Material Adverse Effect, (iii) as would not materially adversely affect
the validity of this Agreement, the Notes, the Indenture or the
Registration Rights Agreement and (iv) such as may be required under
state securities or "Blue Sky" laws in connection with the purchase and
resale of the Securities by the Initial Purchasers and except with
respect to the registration of the Exchange Notes and Pri-
<PAGE> 6
-6-
vate Exchange Notes, if applicable, pursuant to the Registration Rights
Agreement and the qualification of the Indenture under the TIA. Neither
the Company nor any of the Subsidiaries is (i) in violation of its
certificate of incorporation or bylaws, (ii) in breach or violation of
any statute, judgment, decree, order, rule or regulation applicable to
any of them or any of their respective properties or assets, except for
any such breach or violation which would not, individually or in the
aggregate, have a Material Adverse Effect, or (iii) in breach of or
default under (nor has any event occurred which, with notice or passage
of time or both, would constitute a default under) or in violation of
any of the terms or provisions of any indenture, mortgage, deed of
trust, loan agreement, note, lease, license, franchise agreement,
permit, certificate, contract or other agreement or instrument to which
any of them is a party or to which their respective properties or
assets are subject (collectively, "Contracts"), except for any such
breach, default, violation or event which would not, individually or in
the aggregate, have a Material Adverse Effect.
(j) The execution, delivery and performance by the Company and
the Guarantors of this Agreement, the Indenture, the Notes, the
Guarantees, the Exchange Notes, the Private Exchange Notes and the
Registration Rights Agreement, the consummation of the transactions
contemplated hereby and thereby, the fulfillment of the terms hereof
and thereof, the consummation of the JPS Acquisition and the amendment
to the Credit Agreement (as defined) will not conflict with or
constitute or result in a breach of or a default under (or an event
which with notice or passage of time or both would constitute a default
under) or violation of or cause an acceleration of any obligation
under, or result in the imposition or creation of (or the obligation to
create or impose) a lien on any property or assets of the Company or
any Subsidiary with respect to (i) the terms or provisions of any
Contract, except for any such conflict, breach, violation, default or
event which would not, individually or in the aggregate, have a
Material Adverse Effect, (ii) the certificate of incorporation or
bylaws of the Company or any of the Subsidiaries, or (iii) (assuming
compliance with all applicable state securities or "Blue Sky" laws and
assuming the accuracy of the representations and warranties of the
Initial Purchasers in Section 8 hereof) any statute, judgment, decree,
order, rule or regulation of any court or governmental agency or body
applicable to the Company, the Subsidiaries or any of their respective
properties or assets, except for any such conflict, breach or violation
which would not, individually or in the aggregate, have a Material
Adverse Effect.
(k) Each of the Indenture, the Notes, the Exchange Notes, the
Guarantees and the Registration Rights Agreement conforms in all
material respects to the description thereof in the Final Memorandum.
<PAGE> 7
-7-
(l) The consolidated financial statements of the Company and
the related notes thereto included in the Final Memorandum present
fairly in all material respects the financial position, results of
operations and cash flows of the Company at the dates and for the
periods to which they relate and have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis,
except as otherwise stated therein, and comply as to form in all
material respects with the applicable accounting requirements of the
Act and the rules and regulations thereunder. To the Company's
knowledge, the financial statements of JPS and the related notes
thereto included in the Final Memorandum present fairly in all material
respects the financial position, results of operations and cash flows
of JPS at the dates and for the periods to which they relate and have
been prepared in accordance with generally accepted accounting
principles applied on a consistent basis, except as otherwise stated
therein, and comply as to form in all material respects with the
applicable accounting requirements of the Act and the rules and
regulations thereunder. The financial statements of Valentec and the
related notes thereto included in the Final Memorandum present fairly
in all material respects the financial position, results of operations
and cash flows of Valentec at the dates and for the periods to which
they relate and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis, except as
otherwise stated therein, and comply as to form in all material
respects with the applicable accounting requirements of the Act and the
rules and regulations thereunder. The financial statements of Phoenix
AG's Airbag Division and the related notes thereto included in the
Final Memorandum present fairly in all material respects the financial
position, results of operations and cash flows of Phoenix AG's Airbag
Division at the dates and for the periods to which they relate and have
been prepared in accordance with generally accepted accounting
principles applied on a consistent basis, except as otherwise stated
therein, and comply as to form in all material respects with the
applicable accounting requirements of the Act and the rules and
regulations thereunder. The financial statements of Phoenix Airbag GmbH
and the related notes thereto included in the Final Memorandum present
fairly in all material respects the financial position, results of
operations and cash flows of Phoenix Airbag GmbH at the dates and for
the periods to which they relate and have been prepared in accordance
with generally accepted accounting principles applied on a consistent
basis, except as otherwise stated therein, and comply as to form in all
material respects with the applicable accounting requirements of the
Act and the rules and regulations thereunder. The summary and selected
financial and statistical data included in the Final Memorandum present
fairly in all material respects the information shown therein and have
been prepared and compiled on a basis consistent with the audited
financial statements included therein, except as otherwise stated
therein, and comply as to form in all material respects with the
applicable accounting requirements of the Act and the rules and
regulations thereunder. Each of Price Waterhouse LLP,
<PAGE> 8
-8-
BDO Siedman and Arthur Anderson, LLP is an independent public
accounting firm as required by the Act and the rules and regulations
thereunder.
(m) (i) The pro forma financial statements (including the
notes thereto) included in the Final Memorandum (A) comply as to form
in all material respects with the applicable requirements of Regulation
S-X promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), (B) have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements and (C) have been properly computed on the bases described
therein, and (ii) the assumptions used in the preparation of the pro
forma financial statements included in the Final Memorandum are
reasonable and the adjustments used therein are appropriate to give
effect to the transactions or circumstances referred to therein.
(n) Except as set forth in the Final Memorandum, there is not
pending or, to the best knowledge of the Company, threatened any
action, suit, proceeding, inquiry or investigation to which the Company
or any of the Guarantors is a party, or to which any of their
properties or assets are subject, before or brought by any court,
arbitrator or governmental agency or body, which, if determined
adversely to the Company or any such Subsidiary, would, individually or
in the aggregate, have a Material Adverse Effect, or which seeks to
restrain, enjoin, prevent the consummation of or otherwise challenge
the issuance or sale of the Securities to be sold hereunder or the
consummation of the other transactions described in the Final
Memorandum.
(o) Each of the Company and the Subsidiaries owns or possesses
adequate licenses or other rights to use all patents, trademarks,
service marks, trade names, copyrights and know-how necessary to
conduct the businesses operated by it as described in the Final
Memorandum except where the failure to own or possess such of the
foregoing would not have a Material Adverse Effect, and neither the
Company nor any of the Subsidiaries has received any notice of
infringement of or conflict with (or knows of no such infringement of
or conflict with) asserted rights of others with respect to any
patents, trademarks, service marks, trade names, copyrights or know-how
which, if such assertion of infringement or conflict were sustained,
would, individually or in the aggregate, have a Material Adverse
Effect.
(p) Each of the Company and the Subsidiaries possesses all
licenses, permits, certificates, consents, orders, approvals and other
authorizations from, and has made or will have made all declarations
and filings with, all federal, state, local and other governmental
authorities, all self-regulatory organizations and all courts and other
tribunals presently required or necessary to own or lease, as the case
may be, and to operate its properties and to carry on its business as
set forth in the Final Memorandum ("Permits"), except where the failure
to obtain such Permits would not, individu-
<PAGE> 9
-9-
ally or in the aggregate, have a Material Adverse Effect; each of the
Company and the Subsidiaries has fulfilled and performed all of its
obligations with respect to such Permits and no event has occurred
which allows, or after notice or lapse of time would allow, revocation
or termination thereof or results in any other material impairment of
the rights of the holder of any such Permit except where such
revocation, termination or impairment would not have a Material Adverse
Effect; and neither the Company nor any Subsidiary has received any
notice of any proceeding relating to revocation or modification of any
such Permit, except as described in the Final Memorandum and except
where such revocation or modification would not, individually or in the
aggregate, have a Material Adverse Effect.
(q) Since the respective dates as of which information is
given in the Final Memorandum, except as described therein, there has
been no material adverse change or any fact, taken by itself, known to
the Company which could reasonably be expected to result in a material
adverse change, in the general affairs, management, business, condition
(financial or otherwise) or results of operations of the Company and
its Subsidiaries taken as a whole, whether or not arising from
transactions in the ordinary course of business, or any loss of, or
damage to, properties (whether or not insured) which could reasonably
be expected to affect materially and adversely the general affairs,
management, business, condition (financial or otherwise) or results of
operations of the Company and its Subsidiaries taken as a whole. Since
the date of the latest balance sheet presented in the Final Memorandum,
except as expressly disclosed in the Final Memorandum, neither the
Company nor any of its Subsidiaries has (i) incurred or undertaken any
liabilities or obligations, direct or contingent, that are material to
the Company and its Subsidiaries taken as a whole other than capital
equipment leases in the ordinary course of business consistent with
past practice, (ii) entered into any material transaction not in the
ordinary course of business and consistent with past practice or (iii)
declared or paid any dividend or made any distribution on any shares of
its capital stock or redeemed, purchased or otherwise acquired or
agreed to redeem, purchase or otherwise acquire any shares of its
capital stock.
(r) Each of the Company and Subsidiaries has filed all
necessary federal, state and foreign income and franchise tax returns,
except where the failure to so file such returns would not,
individually or in the aggregate, have a Material Adverse Effect, and
has paid all taxes shown as due thereon; and other than tax
deficiencies which the Company or any of the Subsidiaries is contesting
in good faith and for which the Company or such Subsidiary has provided
adequate reserves, there is no tax deficiency that has been asserted
against the Company or any Subsidiary that would have, individually or
in the aggregate, a Material Adverse Effect.
<PAGE> 10
-10-
(s) The statistical and market-related data included in the
Final Memorandum are based on or derived from sources which the Company
believes to be reliable and accurate.
(t) Neither the Company nor any of the Subsidiaries nor any
agent acting on their behalf has taken or will take any action that
might cause this Agreement or the sale of the Securities to violate
Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System, in each case as in effect, or as the same may hereafter
be in effect, on the Closing Date.
(u) Each of the Company and the Subsidiaries has good title to
all personal property described in the Final Memorandum as being owned
by it, good and valid title to all real property described in the Final
Memorandum as being owned by it and good and valid title to a leasehold
estate in the real and personal property described in the Final
Memorandum as being leased by it free and clear of all liens, charges,
encumbrances or restrictions, except as described in the Final
Memorandum or to the extent the failure to have such title or the
existence of such liens, charges, encumbrances or restrictions would
not, individually or in the aggregate, have a Material Adverse Effect.
All leases, contracts and agreements to which the Company or any
Subsidiary is a party or by which the Company or such Subsidiary is
bound are valid and enforceable against the Company or such Subsidiary,
to the knowledge of the Company are valid and enforceable against the
other party or parties thereto and are in full force and effect with
only such exceptions as would not, individually or in the aggregate,
have a Material Adverse Effect.
(v) There are no legal or governmental proceedings involving
or affecting the Company, any of the Subsidiaries or any of their
respective properties or assets which would be required to be described
in a prospectus pursuant to the Act that are not described in the Final
Memorandum, nor are there any material contracts or other documents
which would be required to be described in a prospectus pursuant to the
Act that are not described in the Final Memorandum.
(w) Except as described in the Final Memorandum or as would
not, individually or in the aggregate, have a Material Adverse Effect,
(A) each of the Company and the Subsidiaries is in compliance with and
not subject to liability under applicable Environmental Laws, (B) each
of the Company and the Subsidiaries has made all filings and provided
all notices required under any applicable Environmental Law, and has
and is in compliance with all Permits required under any applicable
Environmental Laws and each of them is in full force and effect, (C)
there is no civil, criminal or administrative action, suit, demand,
claim, hearing, notice of violation, investigation, proceeding, notice
or demand letter or request for information pending or, to the
<PAGE> 11
-11-
knowledge of the Company, threatened against the Company or any
Subsidiary under any Environmental Law, (D) no lien, charge,
encumbrance or restriction has been recorded under any Environmental
Law with respect to any assets, facility or property owned, operated,
leased or controlled by the Company or any Subsidiary, (E) neither the
Company nor any Subsidiary has received notice that it has been
identified as a potentially responsible party under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), or any comparable state law and (F) no property or
facility of the Company or any Subsidiary is (i) listed or proposed for
listing on the National Priorities List under CERCLA or (ii) listed in
the Comprehensive Environmental Response, Compensation, Liability
Information System List promulgated pursuant to CERCLA, or on any
comparable list maintained by any state or local governmental
authority.
For purposes of this Agreement, "Environmental Laws" means the
common law and all applicable federal, state and local laws or
regulations, codes, orders, decrees, judgments or injunctions issued,
promulgated, approved or entered thereunder, relating to pollution or
protection of public or employee health and safety or the environment,
including, without limitation, laws relating to (i) emissions,
discharges, releases or threatened releases of hazardous materials,
into the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), (ii)
the manufacture, processing, distribution, use, generation, treatment,
storage, disposal, transport or handling of hazardous materials, and
(iii) underground and aboveground storage tanks, and related piping,
and emissions, discharges, releases or threatened releases therefrom.
(x) There is no strike, labor dispute, slowdown or work
stoppage with the employees of the Company or the Subsidiaries which is
pending or, to the knowledge of the Company, threatened, which would
have a Material Adverse Effect.
(y) Each of the Company and the Subsidiaries carries insurance
in such amounts and covering such risks as is adequate for the conduct
of its business and the value of its properties.
(z) Neither the Company nor any Subsidiary has any liability
for any prohibited transaction within the meaning of Section 406 of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
or funding deficiency within the meaning of Section 302 of ERISA or any
complete or partial withdrawal liability under Section 4201 of ERISA
with respect to any pension, profit sharing or other plan which is
subject to ERISA to which the Company or any Subsidiary makes or ever
has made a contribution and in which any employee of the Company or any
Subsidiary is or has ever been
<PAGE> 12
-12-
a participant. With respect to such plans, each of the Company and the
Subsidiaries is in compliance in all material respects with all
applicable provisions of ERISA.
(aa) Each of the Company and the Subsidiaries (i) makes and
keeps accurate books and records and (ii) maintains internal accounting
controls which provide reasonable assurance that (A) transactions are
executed in accordance with management's authorization, (B)
transactions are recorded as necessary to permit preparation of its
financial statements and to maintain accountability for its assets, (C)
access to its assets is permitted only in accordance with management's
authorization and (D) the reported accountability for its assets is
compared with existing assets at reasonable intervals.
(bb) Neither the Company nor any Subsidiary will be an
"investment company" or "promoter" or "principal underwriter" for an
"investment company," as such terms are defined in the Investment
Company Act of 1940, as amended, and the rules and regulations
thereunder.
(cc) Except as set forth on Exhibit A hereto, no holder of
securities of the Company (other than the Registrable Notes (as defined
in the Registration Rights Agreement)) will be entitled to have such
securities registered under the registration statements required to be
filed by the Company pursuant to the Registration Rights Agreement
other than as expressly permitted thereby.
(dd) Immediately after the consummation of the transactions
contemplated by this Agreement, the fair value and present fair
saleable value of the assets of the Company and the Subsidiaries, on a
consolidated basis, will exceed the sum of their consolidated stated
liabilities and identified contingent liabilities (after giving effect,
in the case of each of the Guarantors, to the limitations contained in
each Guarantee); neither the Company nor any of the Subsidiaries is, or
will be after giving effect to the execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated
hereby, (a) left with unreasonably small capital with which to carry on
its business as it is proposed to be conducted, (b) unable to pay its
debts (contingent or otherwise) as they mature or (c) otherwise
insolvent.
(ee) Neither the Company nor any of the Subsidiaries nor any
of their respective Affiliates (as defined in Rule 501(b) of Regulation
D under the Act) has directly, or through any agent, (i) sold, offered
for sale, solicited offers to buy or otherwise negotiated in respect of
any "security" (as defined in the Act) which is or could be integrated
with the sale of the Securities in a manner that would require the
registration under the Act of the Securities or (ii) engaged in any
form of general solicitation or general advertising (as those terms are
used in Regulation D under the Act) in connection with the of-
<PAGE> 13
-13-
fering of the Securities or in any manner involving a public offering
within the meaning of Section 4(2) of the Act.
(ff) Assuming the accuracy of the representations and
warranties of the Initial Purchasers in Section 8 hereof, it is not
necessary in connection with the offer, sale and delivery of the
Securities to the Initial Purchasers in the manner contemplated by this
Agreement to register any of the Securities under the Act or to qualify
the Indenture under the TIA.
(gg) No securities of the Company are of the same class
(within the meaning of Rule 144A under the Act) as the Securities and
listed on a national securities exchange registered under Section 6 of
the Exchange Act, or quoted in a U.S. automated inter-dealer quotation
system.
(hh) Neither the Company nor any Subsidiary has taken, nor
will take, directly or indirectly, any action designed to, or that
might be reasonably expected to, cause or result in stabilization or
manipulation of the price of the Securities
(ii) Neither the Company nor the Subsidiaries, nor any of
their respective Affiliates (as defined in Rule 501(b) of Regulation D
under the Act) or any person acting on any of their behalf (other than
the Initial Purchasers as to which the Company and the Subsidiaries
make no representation) has engaged in any directed selling efforts (as
that term is defined in Regulation S under the Act ("Regulation S"))
with respect to the Securities; the Company and its respective
Affiliates and any person acting on any of their behalf (other than the
Initial Purchasers as to which the Company and the Subsidiaries make no
representation) have complied with the offering restrictions
requirement of Regulation S.
(jj) On June 30, 1997, the Company entered into the JPS
Acquisition Agreement to acquire the assets of JPS from Collins &
Aikman Corporation on the terms described in the Final Memorandum.
Any certificate signed by any officer of the Company or any
Subsidiary and delivered to any Initial Purchaser or to counsel for the Initial
Purchasers shall be deemed a joint and several representation and warranty by
the Company and each of the Subsidiaries to each Initial Purchaser as to the
matters covered thereby.
3. Purchase, Sale and Delivery of the Securities. On the basis
of the representations, warranties, agreements and covenants herein contained
and subject to the terms and conditions herein set forth, the Company and the
Guarantors agree to issue and sell to the Initial Purchasers, and each of the
Initial Purchasers agrees, acting severally and not jointly, to
<PAGE> 14
-14-
purchase the Securities, at 97% of their principal amount, in the respective
principal amounts set forth opposite their names on Schedule I hereto.
One or more certificates in definitive form for the Securities
that the Initial Purchasers have agreed to purchase hereunder, and in such
denomination or denominations and registered in such name or names as the
Initial Purchasers request upon notice to the Company at least 48 hours prior to
the Closing Date, shall be delivered by or on behalf of the Company to the
Initial Purchasers, against payment by or on behalf of the Initial Purchasers of
the purchase price therefor by wire transfer of immediately available funds
payable to such account or account as the Company shall specify prior to the
Closing Date, or by such means as the parties hereto shall agree prior to the
Closing Date. Such delivery of and payment for the Securities shall be made at
the offices of Shereff, Friedman, Hoffman and Goodman, LLP, 919 Third Avenue,
New York, New York, at 10:00 A.M., New York time, on July 24, 1997, or at such
other place, time or date as the Initial Purchasers and the Company may agree
upon, such time and date of delivery against payment being herein referred to as
the "Closing Date." The Company will make such certificate or certificates for
the Securities available for checking and packaging by the Initial Purchasers at
the offices of BT Securities Corporation in New York, New York or such other
place as BT Securities Corporation may designate, at least 24 hours prior to the
Closing Date.
4. Offering by the Initial Purchasers. The Initial Purchasers
propose to make an offering of the Securities at the price and upon the terms
set forth in the Final Memorandum as soon as practicable after this Agreement is
entered into and as in the sole judgment of the Initial Purchasers is advisable.
5. Covenants of the Company. The Company and the Guarantors
covenant and agree with each of the Initial Purchasers that:
(a) The Company will not amend or supplement the Final
Memorandum or any amendment or supplement thereto of which the Initial
Purchasers and counsel to the Initial Purchasers shall not previously
have been advised and furnished a copy for a reasonable period of time
prior to the proposed amendment or supplement and as to which the
Initial Purchasers shall not have given their consent, which consent
shall not be unreasonably withheld. The Company will promptly, upon the
reasonable request of the Initial Purchasers or counsel for the Initial
Purchasers, make any amendments or supplements to the Preliminary
Memorandum or the Final Memorandum that may be necessary or advisable
in connection with the resale of the Securities by the Initial
Purchasers.
(b) The Company and the Guarantors will cooperate with the
Initial Purchasers in arranging for the qualification of the Securities
for offering and sale under
<PAGE> 15
-15-
the securities or "Blue Sky" laws of such jurisdictions as the Initial
Purchasers may designate and will continue such qualification in effect
for as long as may be necessary to complete the resale of the
Securities by the Initial Purchasers; provided, however, that in
connection therewith the Company shall not be required to qualify as a
foreign corporation or to execute a general consent to service of
process in any jurisdiction or subject the Company to any tax in any
such jurisdiction where it is not then so subject.
(c) If, at any time prior to the completion of the
distribution by the Initial Purchasers of the Notes or the Private
Exchange Notes, any event occurs or information becomes known as a
result of which the Final Memorandum as then amended or supplemented
would include an untrue statement of a material fact, or omit to state
a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, or if
for any other reason it is necessary at any time to amend or supplement
the Final Memorandum in order to comply with applicable law, the
Company will promptly notify the Initial Purchasers thereof and will
prepare, at the Company's expense, an amendment to the Final Memorandum
that corrects such statement or omission or effects such compliance.
(d) The Company will, without charge, provide to the Initial
Purchasers and to counsel for the Initial Purchasers as many copies of
the Preliminary Memorandum and the Final Memorandum or any amendment or
supplement thereto as the Initial Purchasers may reasonably request.
(e) The Company will apply the net proceeds from the sale of
the Securities substantially as set forth under "Use of Proceeds" in
the Final Memorandum.
(f) For so long as any Securities remain outstanding, the
Company will furnish to the Initial Purchasers copies of all reports
and other communications (financial or otherwise) furnished by the
Company to the Trustee or the holders of the Securities and, as soon as
available, copies of any reports or financial statements furnished to
or filed by the Company with the Commission or any national securities
exchange on which any class of securities of the Company may be listed.
(g) Prior to the Closing Date, the Company will furnish to the
Initial Purchasers, as soon as they have been prepared by or are
available to the Company, a copy of any unaudited interim consolidated
financial statements of the Company for any period subsequent to the
period covered by its most recent financial statements appearing in the
Final Memorandum.
(h) None of the Company, the Guarantors nor any of their
respective Affiliates will sell, offer for sale or solicit offers to
buy or otherwise negotiate in respect
<PAGE> 16
-16-
of any "security" (as defined in the Act) that could be integrated with
the sale of the Securities in a manner that would require the
registration under the Act of the Securities.
(i) Neither the Company nor any Guarantor will, nor will the
Company permit any of the Subsidiaries to, engage in any form of
general solicitation or general advertising (as those terms are used in
Regulation D under the Act) in connection with the offering of the
Securities or in any manner involving a public offering within the
meaning of Section 4(2) of the Act.
(j) For so long as any of the Securities remain outstanding,
the Company will make available, upon request, to any holder of such
Securities and any prospective purchasers thereof the information
specified in Rule 144A(d)(4) under the Act, unless the Company is then
subject to Section 13 or 15(d) of the Exchange Act.
(k) Each of the Company and the Guarantors will use its best
efforts to (i) permit the Securities to be designated PORTAL securities
in accordance with the rules and regulations adopted by the National
Association of Securities Dealers, Inc. (the "NASD") relating to
trading in the Private Offerings, Resales and Trading through Automated
Linkages market (the "PORTAL Market") and (ii) permit the Securities to
be eligible for clearance and settlement through The Depository Trust
Company.
(l) In connection with any Notes offered and sold in an
offshore transaction (as defined in Regulation S), the Company will not
register any transfer of such Notes not made in accordance with the
provisions of Regulation S and will not, except in accordance with the
provisions of Regulation S, if applicable, issue any such Notes in the
form of definitive securities.
6. Expenses. The Company agrees to pay all costs and expenses
incident to the performance of its obligations under this Agreement, whether or
not the transactions contemplated herein are consummated or this Agreement is
terminated pursuant to Section 11 hereof, including all costs and expenses
incident to: (i) the printing, word processing or other production of documents
with respect to such transactions, including any costs of printing the
Preliminary Memorandum and the Final Memorandum and any amendments or
supplements thereto, and any "Blue Sky" memoranda, (ii) all arrangements
relating to the delivery to the Initial Purchasers of copies of the foregoing
documents, (iii) the fees and disbursements of the counsel, the accountants and
any other experts or advisors retained by the Company, (iv) the preparation
(including printing), issuance and delivery to the Initial Purchasers of any
certificates evidencing the Securities, (v) the qualification of the Securities
under state securities and "Blue Sky" laws, including filing fees and reasonable
fees and disbursements of counsel for the Initial Purchasers relating thereto,
(vi) the expenses of the Company in connection with
<PAGE> 17
-17-
any meetings with prospective investors in the Securities, (vii) the fees and
expenses of the Trustee, including fees and expenses of its counsel, and (viii)
all expenses and listing fees incurred in connection with the application for
quotation of the Securities on the PORTAL Market and (ix) any fees charged by
investment rating agencies for the rating of the Securities. If the issuance and
sale of the Securities provided for herein is not consummated because any
condition to the obligations of the Initial Purchasers set forth in Section 7
hereof is not satisfied, because this Agreement is terminated pursuant to
Section 11 hereof or because of any failure, refusal or inability on the part of
the Company or any Guarantor to perform all obligations and satisfy all
conditions on its part to be performed or satisfied hereunder (other than solely
by reason of a default by the Initial Purchasers of their obligations hereunder
after all conditions hereunder have been satisfied in accordance herewith), the
Company will promptly reimburse the Initial Purchasers upon demand for all
reasonable out-of-pocket expenses (including fees, disbursements and charges of
Cahill Gordon & Reindel, counsel for the Initial Purchasers) that shall have
been incurred by the Initial Purchasers in connection with the proposed purchase
and sale of the Securities.
7. Conditions of the Initial Purchasers' Obligations. The
obligation of the Initial Purchasers to purchase and pay for the Securities
shall, in their sole discretion, be subject to the satisfaction or waiver of the
following conditions on or prior to the Closing Date:
(a) On the Closing Date, the Initial Purchasers shall have
received the opinion, dated as of the Closing Date and addressed to the
Initial Purchasers, of Shereff, Friedman, Hoffman & Goodman, LLP,
counsel for the Company, in form and substance satisfactory to counsel
for the Initial Purchasers, to the effect that:
(i) Each of the Company and the Guarantors is duly
incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to own, lease and
operate its properties and to conduct its business as
described in the Final Memorandum. Each of the Company and the
Guarantors is duly qualified as a foreign corporation and in
good standing in each jurisdiction where the ownership or
leasing of its properties or the conduct of its business
requires such qualification, except where the failure to be so
qualified would not, individually or in the aggregate, have a
Material Adverse Effect.
(ii) The Company has the authorized capitalization as
set forth in the Final Memorandum; all of the outstanding
shares of capital stock of the Subsidiaries are owned,
directly or indirectly, by the Company, free and clear of all
liens, encumbrances, equities and claims or restrictions on
transferability (other than those imposed by the Act and the
securities or "Blue Sky" laws of certain jurisdictions) or
voting.
<PAGE> 18
-18-
(iii) To the knowledge of such counsel, except as set
forth in the Final Memorandum, (A) no options, warrants or
other rights to purchase from the Company or any Subsidiary
shares of capital stock or ownership interests in the Company
or any Subsidiary are outstanding (other than options granted
in 1995 by Valentec International Corporation to Citibank,
N.A. to purchase 10,000 shares of common stock), (B) no
agreements or other obligations of the Company or any
Subsidiary to issue, or other rights to cause the Company or
any Subsidiary to convert, any obligation into, or exchange
any securities for, shares of capital stock or ownership
interests in the Company or any Subsidiary are outstanding
and, (C) no holder of securities of the Company or any
Subsidiary (other than the Registrable Notes) is entitled to
have such securities registered under a registration statement
filed by the Company pursuant to the Registration Rights
Agreement (other than as set forth on Exhibit A hereto).
(iv) Each of the Guarantors has all requisite
corporate power and authority to execute, deliver and perform
its obligations under the Indenture and the Guarantees; the
Indenture is in sufficient form for qualification under the
TIA; the Indenture has been duly and validly authorized,
executed and delivered by each of the Company and the
Guarantors, and (assuming the due authorization, execution and
delivery thereof by the Trustee) constitutes the valid and
legally binding agreement of the Company and each of the
Guarantors, enforceable against each of them in accordance
with its terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally
and (ii) general principles of equity and the discretion of
the court before which any proceeding therefor may be brought
(regardless of whether such enforcement is considered in a
proceeding in equity or at law).
(v) The Notes are in the form contemplated by the
Indenture. The Notes have each been duly and validly
authorized, executed and delivered by the Company and, when
paid for by the Initial Purchasers in accordance with the
terms of this Agreement (assuming the due authorization,
execution and delivery of the Indenture by the Trustee and due
authentication and delivery of the Notes by the Trustee in
accordance with the Indenture), will constitute the valid and
legally binding obligations of the Company, entitled to the
benefits of the Indenture, and enforceable against the Company
in accordance with their terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other
similar laws now or hereafter in effect relating to creditors'
rights gener-
<PAGE> 19
-19-
ally and (ii) general principles of equity and the discretion
of the court before which any proceeding therefor may be
brought (regardless of whether such enforcement is considered
in a proceeding in equity or at law).
(vi) The Guarantees are in the form contemplated by
the Indenture. The Guarantees have been duly and validly
authorized, executed and delivered by each Guarantor and
(assuming the due authorization, execution and delivery of the
Indenture by the Trustee and due authentication and delivery
of the Notes by the Trustee in accordance with the Indenture)
constitute the valid and legally binding obligations of each
Guarantor, entitled to the benefits of the Indenture,
enforceable against each of them in accordance with their
terms, except that the enforcement thereof may be subject to
(i) bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws now or hereafter
in effect relating to creditors' rights generally and (ii)
general principles of equity and the discretion of the court
before which any proceeding therefor may be brought
(regardless of whether such enforcement is considered in a
proceeding in equity or at law). No opinion is expressed with
respect to the effectiveness or enforceability against third
parties of the Guarantees.
(vii) The Exchange Notes and the Private Exchange
Notes and the Guarantees to be endorsed on them have been duly
and validly authorized by the Company and each of the
Guarantors, as the case may be, and when the Exchange Notes
and the Private Exchange Notes have been duly executed and
delivered by the Company and the Guarantees have been duly
executed and delivered by the Guarantors, each in accordance
with the terms of the Registration Rights Agreement and the
Indenture (assuming the due authorization, execution and
delivery of the Indenture by the Trustee and due
authentication and delivery of the Exchange Notes and the
Private Exchange Notes by the Trustee in accordance with the
Indenture), will constitute the valid and legally binding
obligations of the Company and the Guarantors, respectively,
entitled to the benefits of the Indenture, and enforceable
against the Company and the Guarantors, respectively, in
accordance with their terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other
similar laws now or hereafter in effect relating to creditors'
rights generally and (ii) general principles of equity and the
discretion of the court before which any proceeding therefor
may be brought (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
<PAGE> 20
-20-
(viii) Each of the Company and the Guarantors has all
requisite corporate power and authority to execute, deliver
and perform its obligations under the Registration Rights
Agreement; the Registration Rights Agreement has been duly and
validly authorized, executed and delivered by the Company and
the Guarantors, and (assuming due authorization, execution and
delivery thereof by the Initial Purchasers) constitutes the
valid and legally binding agreement of the Company and the
Guarantors enforceable against each of them in accordance with
its terms, except that (A) the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally
and (ii) general principles of equity and the discretion of
the court before which any proceeding therefor may be brought
(regardless of whether such enforcement is considered in a
proceeding in equity or at law) and (B) any rights to
indemnity or contribution thereunder may be limited by federal
and state securities laws and public policy considerations.
(ix) Each of the Company and the Guarantors has all
requisite corporate power and authority to execute, deliver
and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby; this
Agreement and the consummation by the Company and the
Guarantors of the transactions contemplated hereby have been
duly and validly authorized by the Company and the Guarantors.
This Agreement has been duly executed and delivered by each of
the Company and the Guarantors.
(x) The Indenture, the Notes, the Exchange Notes,
the Guarantees and the Registration Rights Agreement conform
as to legal matters in all material respects to the
descriptions thereof contained in the Final Memorandum.
(xi) To the knowledge of such counsel, no legal or
governmental proceedings are pending or, to the knowledge of
such counsel, threatened to which the Company or any Guarantor
is a party or to which the property or assets of the Company
or any Guarantor is subject which would be required under the
Act to be described in a registration statement or in a
prospectus and are not described in the Final Memorandum, or
which seek to restrain, enjoin, prevent the consummation of or
otherwise challenge the issuance or sale of the Notes to be
sold hereunder or the consummation of the other transactions
described in the Final Memorandum.
(xii) To the knowledge of such counsel, neither the
Company nor any Guarantor is in violation of its certificate
of incorporation or bylaws, ex-
<PAGE> 21
-21-
cept for any such breach, default, violation or event which
would not, individually or in the aggregate, have a Material
Adverse Effect.
(xiii) The execution, delivery and performance of
this Agreement, the Indenture, the Registration Rights
Agreement, the consummation of the transactions contemplated
hereby and thereby (including, without limitation, the
issuance and sale of the Notes to the Initial Purchasers) the
consummation of the JPS Acquisition and the amendment to the
Credit Agreement will not conflict with or constitute or
result in a breach or a default under (or an event which with
notice or passage of time or both would constitute a default
under) or violation of or cause an acceleration of any
obligation under, or result in the imposition or creation of
(or the obligation to create or impose) a lien on any property
or assets of the Company or any Guarantor with respect to (i)
the terms or provisions of any of the terms or provisions of
any contract described in the Final Memorandum (such
contracts, the "Material Contracts"), except for any such
conflict, breach, violation, default or event which would not,
individually or in the aggregate, have a Material Adverse
Effect, (ii) the certificate of incorporation or bylaws of the
Company or any Guarantor, or (iii) (assuming compliance with
all applicable state securities or "Blue Sky" laws and
assuming the accuracy of the representations and warranties of
the Initial Purchasers in Section 8 hereof) any statute,
judgment, decree, order, rule or regulation known to such
counsel to be applicable to the Company or any Guarantor and
to transactions of the type contemplated by the Final
Memorandum, except for any such conflict, breach or violation
which would not, individually or in the aggregate, have a
Material Adverse Effect.
(xiv) To the knowledge of such counsel, no consent,
approval, authorization or order of any governmental authority
is required for the issuance and sale by the Company of the
Notes to the Initial Purchasers or the other transactions
contemplated in this Agreement, except (i) in connection with
the registration under the Act of the Notes, and the Private
Exchange Notes, if applicable, pursuant to the Registration
Rights Agreement, (ii) the qualification of the Indenture
under the TIA in connection with the issuance of the Notes, or
(iii) such consents, approvals, authorizations, orders,
registrations, filings, qualifications, licenses and permits
(x) as have been obtained and made, (y) as may be required
under state securities or blue sky laws, as to which such
counsel need express no opinion, or (x) as would not, if not
obtained, have a Material Adverse Effect.
(xv) None of the Company or the Guarantors is, or
immediately after the sale of the Notes to be sold hereunder
and the application of the pro-
<PAGE> 22
-22-
ceeds from such sale (as described in the Final Memorandum
under the caption "Use of Proceeds") will be, an "investment
company" as such term is defined in the Investment Company Act
of 1940, as amended.
(xvi) No registration under the Act of the Notes is
required in connection with the sale of the Notes to the
Initial Purchasers as contemplated by this Agreement and the
Final Memorandum or in connection with the initial resale of
the Notes by the Initial Purchasers in accordance with Section
8 of this Agreement, and prior to the commencement of the
Exchange Offer (as defined in the Registration Rights
Agreement) or the effectiveness of the Shelf Registration
Statement (as defined in the Registration Rights Agreement),
the Indenture is not required to be qualified under the TIA,
in each case assuming (i) that the purchasers who buy such
Notes in the initial resale thereof are QIBs or Accredited
Investors, (ii) the accuracy of the Initial Purchasers'
representations in Section 8 and those of the Company
contained in this Agreement regarding the absence of a general
solicitation in connection with the sale of such Notes to the
Initial Purchasers and the initial resale thereof, (iii) the
due performance by the Initial Purchasers of the agreements
set forth in Section 8 hereof and the offering and transfer
procedures set forth in the Final Memorandum, and (iv) the
accuracy of the representations made by each Accredited
Investor who purchases Notes in the initial resale as set
forth in the Final Memorandum.
(xvii) Neither the consummation of the transactions
contemplated by this Agreement nor the sale, issuance,
execution or delivery of the Notes will violate Regulation G,
T, U or X of the Board of Governors of the Federal Reserve
System.
At the time the foregoing opinion is delivered, such counsel
shall additionally state that it has participated in conferences with
officers and other representatives of the Company, representatives of
the independent public accountants for the Company, representatives of
the Initial Purchasers and counsel for the Initial Purchasers, at which
conferences the contents of the Final Memorandum and related matters
were discussed, and, although it has not independently verified and is
not passing upon and assumes no responsibility for the accuracy,
completeness or fairness of the statements contained in the Final
Memorandum (except to the extent specified in subsection 7(a)(x)), no
facts have come to its attention which lead it to believe that the
Final Memorandum, on the date thereof or at the Closing Date, contained
an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
contained therein, in the light of the circumstances under which they
were made, not misleading (it being understood that such firm need
express no opinion with respect to the financial statements and related
notes thereto
<PAGE> 23
-23-
and the other financial, statistical, accounting, reserve and well data
included in the Final Memorandum). The opinion of such counsel
described in this Section shall be rendered to the Initial Purchasers
at the request of the Company and shall so state therein.
References to the Final Memorandum in this subsection (a)
shall include any amendment or supplement thereto prepared in
accordance with the provisions of this Agreement at the Closing Date.
References to Material Adverse Effect in this subsection (a) shall not
include prospects of the Company and the Subsidiaries, taken as a
whole.
In rendering such opinion, such counsel may state that they
express no opinion as to the laws of any jurisdiction other than the
federal laws of the United States and the laws of the States of New
York and Delaware. Such counsel may also state that with respect to
opinions as to the laws of jurisdictions other than Delaware and New
York, such counsel has relied on the opinion of local counsel of the
Company. Such counsel may also state that, insofar as such opinion
involves factual matters, such counsel have relied, to the extent they
deem proper, upon certificates of officers of the Company and
certificates of public officials; provided that such certificates have
been provided to the Initial Purchasers.
(b) On the Closing Date, the Initial Purchasers shall have
received the opinions, dated as of the Closing Date and addressed to the Initial
Purchasers, of Beiten, Burkhardt, Mitt & Wegener, special German counsel for the
foreign subsidiaries and Bryan, Gonzales, Vargas y Gonzales Baz, S.C. Abogados,
special Mexican counsel for the foreign subsidiaries, each in form and substance
satisfactory to counsel for the Initial Purchasers substantially to the effect
that:
(i) Each of the foreign subsidiaries is duly
incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to own, lease and
operate its properties and to conduct its business as
described in the Final Memorandum.
(ii) No legal or governmental proceedings are pending
or, to the knowledge of such counsel, threatened to which any
foreign subsidiary is a party or to which the property or
assets of such foreign subsidiary is subject which would be
required under the Act to be described in a registration
statement or in a prospectus and are not described in the
Final Memorandum, or which seek to restrain, enjoin, prevent
the consummation of or otherwise chal-
<PAGE> 24
-24-
lenge the issuance or sale of the Notes to be sold hereunder
or the consummation of the other transactions described in the
Final Memorandum.
(iii) To the knowledge of such counsel, no foreign
subsidiary is (i) in violation of its incorporation documents
or (ii) in breach or default under (nor has any event occurred
which, with notice or passage of time or both, would
constitute a default under) or in violation of any of the
terms or provisions of any contract described in the Final
Memorandum (such contracts, the "Material Contracts"), except
for any such breach, default, violation or event which would
not, individually or in the aggregate, have a Material Adverse
Effect.
(iv) The execution, delivery and performance of this
Agreement, the Indenture, the Registration Rights Agreement,
the consummation of the transactions contemplated hereby and
thereby (including, without limitation, the issuance and sale
of the Notes to the Initial Purchasers), the consummation of
the JPS Acquisition and the amendment to the Credit Agreement
will not conflict with or constitute or result in a breach or
a default under (or an event which with notice or passage of
time or both would constitute a default under) or violation of
or cause an acceleration of any obligation under, or result in
the imposition or creation of (or the obligation to create or
impose) a lien on any property or assets of any foreign
subsidiary with respect to (i) the terms or provisions of any
Material Contract, except for any such conflict, breach,
violation, default or event which would not, individually or
in the aggregate, have a Material Adverse Effect, (ii) the
incorporation documents of such foreign subsidiary, or (iii)
(assuming compliance with all applicable state securities or
"Blue Sky" laws and assuming the accuracy of the
representations and warranties of the Initial Purchasers in
Section 8 hereof) any statute, judgment, decree, order, rule
or regulation known to such counsel to be applicable to any
foreign subsidiary and to transactions of the type
contemplated by the Final Memorandum, except for any such
conflict, breach or violation which would not, individually or
in the aggregate, have a Material Adverse Effect.
(v) To the knowledge of such counsel, the foreign
subsidiaries have obtained all Permits necessary to conduct
the businesses now or proposed to be conducted by them as
described in the Final Memorandum, the lack of which would,
individually or in the aggregate, have a Material Adverse
Effect; each of the foreign subsidiaries has fulfilled and
performed all of its obligations with respect to such Permits
and no event has occurred which allows, or after notice or
lapse of time would allow, revocation or termination thereof
or results in any other material impairment of the rights of
the holder of any such
<PAGE> 25
-25-
Permit, except for any such revocation or termination which
would not have a Material Adverse Effect.
The opinion of such counsel described in this Section shall be rendered
to the Initial Purchasers at the request of the Company and shall so state
therein. References to the Final Memorandum in this subsection (b) shall include
any amendment or supplement thereto prepared in accordance with the provisions
of this Agreement at the Closing Date. References to Material Adverse Effect in
this subsection (b) shall not include prospects of the Company and the
Subsidiaries, taken as a whole. Such counsel may state that, insofar as such
opinion involves factual matters, such counsel have relied, to the extent they
deem proper, upon certificates of officers of the Company and certificates of
public officials; provided that such certificates have been provided to the
Initial Purchasers.
(c) The Initial Purchasers shall have received an opinion,
dated the Closing Date, of Cahill Gordon & Reindel, counsel for the
Initial Purchasers, with respect to certain legal matters relating to
this Agreement, and such other related matters as the Initial
Purchasers may reasonably require. In rendering such opinion, Cahill
Gordon & Reindel shall have received and may rely upon such
certificates and other documents and information as they may reasonably
request to pass upon such matters.
(d) The Initial Purchasers shall have received from Price
Waterhouse LLP, independent public accountants for the Company, comfort
letters, dated the date hereof and the Closing Date, in form and
substance reasonably satisfactory to the Initial Purchasers and counsel
for the Initial Purchasers.
(e) The representations and warranties of the Company and the
Guarantors contained in this Agreement shall be true and correct in all
material respects on and as of the Closing Date as if made on and as of
the Closing Date; each of the Company and the Guarantors shall have
performed in all material respects all covenants and agreements and
satisfied all conditions on its part to be performed or satisfied
hereunder at or prior to the Closing Date; and, except as set forth in
the Final Memorandum (exclusive of any amendment or supplement thereto
after the date hereof) subsequent to the date of the most recent
financial statements in such Final Memorandum, there shall have been no
event or development that, individually or in the aggregate, has or
would be reasonably likely to have a Material Adverse Effect.
(f) The issuance and sale of the Securities pursuant to this
Agreement shall not be enjoined (temporarily or permanently) and no
restraining order or other injunctive order shall have been issued or
any action, suit or proceeding shall have been commenced with respect
to this Agreement before any court or governmental authority.
<PAGE> 26
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(g) The Initial Purchasers shall have received certificates,
dated the Closing Date, signed on behalf of the Company by its
Executive Vice President and its Secretary to the effect that:
(i) The representations and warranties of the
Company and the Guarantors in this Agreement are true and
correct in all material respects as if made on and as of the
Closing Date, and each of the Company and the Guarantors has
performed in all material respects all covenants and
agreements and satisfied all conditions on its part to be
performed or satisfied hereunder at or prior to the Closing
Date;
(ii) At the Closing Date, since the date hereof or
since the date of the most recent financial statements in the
Final Memorandum (exclusive of any amendment or supplement
thereto after the date hereof), no event or events have
occurred, no information has become known nor does any
condition exist that, individually or in the aggregate, would
have a Material Adverse Effect; and
(iii) The sale of the Securities hereunder has not
been enjoined (temporarily or permanently).
(h) On the Closing Date, the Initial Purchasers shall have
received the Registration Rights Agreement executed by the Company and
the Guarantors and such agreement shall be in full force and effect at
all times from and after the Closing Date.
(i) The Indenture shall have been duly executed and delivered
by the Company and the Trustee, and the Notes and the Guarantees shall
have been duly executed by the Company and the Guarantors,
respectively, and the Notes shall have been duly authenticated by the
Trustee.
(j) The Initial Purchasers shall have received a true and
correct copy of the JPS Acquisition Agreement and any amendments
thereto, and there shall have been no material amendments, alterations,
modifications or waivers of any provisions of the JPS Acquisition
Agreement since the date of this Agreement; all conditions to effect
the JPS Acquisition set forth in the JPS Acquisition Agreement shall
have been satisfied without waiver, other than such conditions the
waiver of which would not have a Material Adverse Effect.
(k) The Initial Purchasers shall have received a true and
correct copy of the Company's Credit Agreement, dated as of May 21,
1997 (the "Credit Agreement"), as amended, and, except as described in
(k) below and in the Final Memorandum, there
<PAGE> 27
-27-
shall have been no material amendments, alterations, modifications or
waivers of any provisions of the Credit Agreement, and there exists as
of the date hereof and on and as of the Closing Date (after giving
effect to the transactions contemplated by this Agreement and the
application of the proceeds received by the Company from the sale of
the Notes) no condition that would constitute a Default or an Event of
Default (each as defined in the Credit Agreement) under the Credit
Agreement.
(l) The Company has provided evidence to the Initial
Purchasers, satisfactory to the Initial Purchasers, to the effect that
on or before the Closing Date, the Credit Agreement shall have been
converted as set forth under the caption "Description of the Credit
Agreement" in the Final Memorandum, which evidence shall be in form and
substance reasonably satisfactory to the Initial Purchasers.
(m) On or before the Closing Date, the Initial Purchasers and
counsel for the Initial Purchasers shall have received such further
documents, certificates and schedules or instruments relating to the
business, corporate, legal and financial affairs of the Company as they
shall have heretofore reasonably requested from the Company and the
Guarantors.
All such documents, opinions, certificates and schedules or
instruments delivered pursuant to this Agreement will comply with the provisions
hereof only if they are reasonably satisfactory in all material respects to the
Initial Purchasers and counsel for the Initial Purchasers. The Company shall
furnish to the Initial Purchasers such conformed copies of such documents,
opinions, certificates and schedules or instruments in such quantities as the
Initial Purchasers shall reasonably request.
8. Offering of Securities; Restrictions on Transfer. Each of
the Initial Purchasers represents and warrants (as to itself only) that it is a
QIB. Each of the Initial Purchasers agrees with the Company (as to itself only)
that (i) it has not and will not solicit offers for, or offer or sell, the
Securities by any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Act; and (ii) it has
and will solicit offers for the Securities only from, and will offer the
Securities only to (A) in the case of offers inside the United States, (x)
persons whom the Initial Purchasers reasonably believe to be QIBs or, if any
such person is buying for one or more institutional accounts for which such
person is acting as fiduciary or agent, only when such person has represented to
the Initial Purchasers that each such account is a QIB, to whom notice has been
given that such sale or delivery is being made in reliance on Rule 144A, and, in
each case, in transactions under Rule 144A or (y) a limited number of other
institutional investors reasonably believed by the Initial Purchasers to be
Accredited Investors that, prior to their purchase of the Securities, deliver to
the Initial Purchasers a letter containing the representations and agreements
set forth in Annex A
<PAGE> 28
-28-
to the Final Memorandum and (B) in the case of offers outside the United States,
to persons other than U.S. persons ("foreign purchasers," which term shall
include dealers or other professional fiduciaries in the United States acting on
a discretionary basis for foreign beneficial owners (other than an estate or
trust)); provided, however, that in the case of this clause (B), in purchasing
such Securities such persons are deemed to have represented and agreed as
provided under the caption "Transfer Restrictions" contained in the Final
Memorandum.
9. Indemnification and Contribution. (a) The Company and the
Guarantors agree, jointly and severally, to indemnify and hold harmless the
Initial Purchasers and the affiliates, directors, officers, agents,
representatives and employees of the Initial Purchasers, and each other person,
if any, who controls any Initial Purchaser within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act, against any losses, claims, damages
or liabilities, joint or several, to which any Initial Purchaser or any such
affiliate, director, officer, agent, representative, employee or controlling
person may become subject under the Act, the Exchange Act or otherwise, insofar
as any such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement
of any material fact contained in (A) any Memorandum or any
amendment or supplement thereto or (B) any application or
other document, or any amendment or supplement thereto,
executed by the Company or any Guarantor or based upon written
information furnished by or on behalf of the Company or any
Guarantor filed in any jurisdiction in order to qualify the
Securities under the securities or "Blue Sky" laws thereof or
filed with any securities association or securities exchange
(each, an "Application"); or
(ii) the omission or alleged omission to state, in
any Memorandum or any amendment or supplement thereto, or any
Application, a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading,
and will reimburse, as incurred, the Initial Purchasers and each such affiliate,
director, officer, agent, representative and employee and each such controlling
person for any legal or other expenses reasonably incurred by the Initial
Purchasers, such affiliate, director, officer, agent, representative or employee
or such controlling person in connection with investigating, defending against
or appearing as a third-party witness in connection with any such loss, claim,
damage, liability or action; provided, however, that the Company and the
Guarantors will not be liable (i) in any such case to the extent that any such
loss, claim, damage, or liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
any Memorandum or any amendment or supplement thereto, or any Application, in
reliance upon and in conformity with written information furnished to the
<PAGE> 29
-29-
Company by the Initial Purchasers specifically for use therein or (ii) with
respect to the Preliminary Memorandum, to the extent that any such loss, claim,
damage or liability arises solely from the fact that the Initial Purchasers sold
Securities to a person to whom there was not sent or given a copy of the Final
Memorandum (as amended or supplemented) at or prior to the written confirmation
of such sale if the Company shall have previously furnished copies thereof to
the Initial Purchasers in accordance with Section 5(d) hereof and the Final
Memorandum (as amended or supplemented) would have corrected any such untrue
statement or omission. This indemnity agreement will be in addition to any
liability that the Company and the Guarantors may otherwise have to the
indemnified parties. The Company and the Guarantors shall not be liable under
this subsection (a) for any settlement of any claim or action effected without
their consent, which consent shall not be unreasonably withheld or delayed.
The Initial Purchasers shall not, without the prior written
consent of the Company and the Guarantors, effect any settlement or compromise
of any pending or threatened proceeding in respect of which the Company and the
Guarantors are or could have been a party, or indemnity could have been sought
hereunder by the Company and the Guarantors, unless such settlement (A) includes
an unconditional written release of the Company and the Guarantors, in form and
substance reasonably satisfactory to the Company and the Guarantors, from all
liability on claims that are the subject matter of such proceeding and (B) does
not include any statement as to an admission of fault, culpability or failure to
act by or on behalf of the Company or the Guarantors.
(b) The Initial Purchasers agree, severally and not jointly,
to indemnify and hold harmless the Company and the Guarantors, their respective
affiliates, directors, officers, agents, representatives and employees and each
other person, if any, who controls the Company and the Guarantors within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act against any
losses, claims, damages or liabilities to which the Company or any Guarantor or
any such affiliate, director, officer, agent, representative, employee or
controlling person may become subject under the Act, the Exchange Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in any Memorandum or any
amendments or supplement thereto, or any Application or (ii) the omission or the
alleged omission to state therein a material fact required to be stated in any
Memorandum or any amendment or supplement thereto, or any Application, or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information concerning such Initial Purchaser furnished
to the Company by such Initial Purchaser specifically for use therein; and,
subject to the limitation set forth immediately preceding this clause, will
reimburse, as incurred, any legal or other expenses reasonably incurred by the
Company or any Guarantor or any such af-
<PAGE> 30
-30-
filiate, director, officer, agent, representative, employee or controlling
person in connection with investigating or defending against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action in respect thereof. This indemnity agreement will be in addition to
any liability that the Initial Purchasers may otherwise have to the indemnified
parties. The Initial Purchasers shall not be liable under this Section 9 for any
settlement of any claim or action effected without their consent, which consent
shall not be unreasonably withheld or delayed.
The Company and the Guarantors shall not, without the prior
written consent of the Initial Purchasers, effect any settlement or compromise
of any pending or threatened proceeding in respect of which any Initial
Purchaser is or could have been a party, or indemnity could have been sought
hereunder by any Initial Purchaser, unless such settlement (A) includes an
unconditional written release of the Initial Purchasers, in form and substance
reasonably satisfactory to the Initial Purchasers, from all liability on claims
that are the subject matter of such proceeding and (B) does not include any
statement as to an admission of fault, culpability or failure to act by or on
behalf of any Initial Purchaser.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action for which such indemnified
party is entitled to indemnification under this Section 9, such indemnified
party will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 9, notify the indemnifying party of the commencement
thereof in writing; but the omission to so notify the indemnifying party (i)
will not relieve it from any liability under subsection (a) or (b) above unless
and to the extent such failure results in the forfeiture by the indemnifying
party of substantial rights and defenses and (ii) will not, in any event,
relieve the indemnifying party from any obligations to any indemnified party
other than the indemnification obligation provided in subsections (a) and (b)
above. In case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party; provided, however, that if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party shall
have been advised by counsel that there may be one or more legal defenses
available to it and/or other indemnified parties that are different from or
additional to those available to the indemnifying party, or (iii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after receipt by the indemnifying party of notice of the institution of
such action, then, in each such case, the indemnifying party shall not have the
right to direct the defense of such action on behalf of such indemnified party
or parties and such indemnified party or parties shall have the right to select
separate counsel to defend such action on behalf of such indem-
<PAGE> 31
-31-
nified party or parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof and approval
by such indemnified party of counsel appointed to defend such action, the
indemnifying party will not be liable to such indemnified party under this
Section 9 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the immediately preceding
sentence (it being understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (in addition to local counsel) in any one action or separate
but substantially similar actions in the same jurisdiction arising out of the
same general allegations or circumstances, designated by BT Securities
Corporation in the case subsection (a) of this Section 9 or the Company in the
case of subsection (b) of this Section 9, representing the indemnified parties
under such subsection (a) or subsection (b), as the case may be, who are parties
to such action or actions) or (ii) the indemnifying party has authorized in
writing the employment of counsel for the indemnified party at the expense of
the indemnifying party. After such notice from the indemnifying party to such
indemnified party, the indemnifying party will not be liable for the costs and
expenses of any settlement of such action effected by such indemnified party
without the prior written consent of the indemnifying party (which consent shall
not be unreasonably withheld), unless such indemnified party waived in writing
its rights under this Section 9, in which case the indemnified party may effect
such a settlement without such consent.
(d) In circumstances in which the indemnity agreement
provided for in the preceding subsections of this Section 9 is unavailable to,
or insufficient to hold harmless, an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof), each
indemnifying party, in order to provide for just and equitable contribution,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the Securities or (ii) if
the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the indemnifying party or parties on the one hand and the indemnified party on
the other in connection with the statements or omissions or alleged statements
or omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof). The relative benefits received by the Company and
the Guarantors on the one hand and any Initial Purchaser on the other shall be
deemed to be in the same proportion as the total proceeds from the offering
(before deducting expenses) received by the Company bear to the total discounts
and commissions received by such Initial Purchaser. The relative fault of the
parties shall be determined by reference to, among other things, whether
<PAGE> 32
-32-
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company and the Guarantors on the one hand, or such Initial Purchaser on the
other, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission or alleged
statement or omission, and any other equitable considerations appropriate in the
circumstances. The Company, the Guarantors and the Initial Purchasers agree that
it would not be just and equitable if the amount of such contribution were
determined by pro rata or per capita allocation or by any other method of
allocation that does not take into account the equitable considerations referred
to in the first sentence of this subsection (d). Notwithstanding any other
provision of this subsection (d), no Initial Purchaser shall be obligated to
make contributions hereunder that in the aggregate exceed the total discounts,
commissions and other compensation received by such Initial Purchaser under this
Agreement, less the aggregate amount of any damages that such Initial Purchaser
has otherwise been required to pay by reason of the untrue or alleged untrue
statements or the omissions or alleged omissions to state a material fact, and
no person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this subsection
(d), each affiliate, director, officer, agent, representative and employee of an
Initial Purchaser and each person, if any, who controls an Initial Purchaser
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
shall have the same rights to contribution as the Initial Purchasers, and each
affiliate, director, officer, agent, representative and employee of the Company
and the Guarantors and each person, if any, who controls the Company or an
Guarantor within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, shall have the same rights to contribution as the Company and the
Guarantors.
10. Survival Clause. The respective representations,
warranties, agreements, covenants, indemnities and other statements of the
Company, the Guarantors, their officers and the Initial Purchasers set forth in
this Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement shall remain in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company, the Guarantors, any of their
officers or directors, the Initial Purchasers or any controlling person referred
to in Section 9 hereof and (ii) delivery of and payment for the Securities. The
respective agreements, covenants, indemnities and other statements set forth in
Sections 6, 9 and 15 hereof shall remain in full force and effect, regardless of
any termination or cancellation of this Agreement.
11. Termination. (a) This Agreement may be terminated in the
sole discretion of the Initial Purchasers by notice to the Company given prior
to the Closing Date in the event that the Company or any of the Guarantors shall
have failed, refused or been unable to perform, in all material respects, all
obligations and satisfy all conditions on its part to be performed or satisfied
hereunder at or prior thereto or, if at or prior to the Closing Date:
<PAGE> 33
-33-
(i) either (x) the Company or any Guarantor shall have
sustained any loss or interference with respect to its businesses or
properties from fire, flood, hurricane, accident or other calamity,
whether or not covered by insurance, or from any strike, labor dispute,
slow down or work stoppage or any legal or governmental proceeding,
which loss or interference, in the sole judgment of the Initial
Purchasers, has had or has a Material Adverse Effect, or (y) there
shall have been, in the sole judgment of the Initial Purchasers, any
event or development that, individually or in the aggregate, has or
could be reasonably likely to have a Material Adverse Effect (including
without limitation a change in control of the Company), except in each
case as described in the Final Memorandum (exclusive of any amendment
or supplement thereto);
(ii) trading in securities generally on the New York Stock
Exchange, the American Stock Exchange or the NASDAQ National Market
shall have been suspended or maximum or minimum prices shall have been
established on any such exchange or market;
(iii) a banking moratorium shall have been declared by New
York or United States authorities;
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, or (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or any other national or international
calamity or emergency or (C) any material change in the financial
markets of the United States that, in the case of (A), (B) or (C) above
and in the sole judgment of the Initial Purchasers, makes it
impracticable or inadvisable to proceed with the offering or the
delivery of the Securities as contemplated by the Final Memorandum; or
(v) any securities of the Company shall have been downgraded
or placed on any "watch list" for possible downgrading by any
nationally recognized statistical rating organization.
(b) Termination of this Agreement pursuant to this Section 11
shall be without liability of any party to any other party except as provided in
Section 10 hereof.
12. Information Supplied by the Initial Purchasers. The
statements set forth in the last paragraph of the cover page and the third,
fifth, sixth and seventh paragraphs of the section entitled "Private Placement"
constitute the only information furnished by the Initial Purchasers to the
Company for the purposes of Sections 2(a) and 9 hereof.
<PAGE> 34
-34-
13. Notices. All communications hereunder shall be in writing
and, if sent to the Initial Purchasers, shall be mailed or delivered or
telecopied and confirmed in writing to BT Securities Corporation, One Bankers
Trust Plaza, 130 Liberty Street, New York, New York 10006, Attention: Corporate
Finance Department, and if sent to the Company or the Guarantors, shall be
mailed, delivered or telecopied and confirmed in writing to the Company at: 3190
Pullman Street, Costa Mesa, California 92626, Attention: President.
14. Successors. This Agreement shall inure to the benefit of
and be binding upon the Initial Purchasers, the Company, the Guarantors and
their respective successors, assigns and legal representatives, and nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any other person any legal or equitable right, remedy or claim under or in
respect of this Agreement, or any provisions herein contained; this Agreement
and all conditions and provisions hereof being intended to be and being for the
sole and exclusive benefit of the Initial Purchasers, the Company, the
Guarantors and their respective successors, assigns and legal representatives
and for the benefit of no other person except that (i) the indemnities of the
Company and the Guarantors contained in Section 9 of this Agreement shall also
be for the benefit of the affiliates, directors, officers, agents,
representatives and employees of the Initial Purchasers and any person or
persons who control any of the Initial Purchasers within the meaning of Section
15 of the Act or Section 20 of the Exchange Act and (ii) the indemnities of the
Initial Purchasers contained in Section 9 of this Agreement shall also be for
the benefit of the affiliates, directors, officers, agents, representatives and
employees of the Company and the Guarantors and any person or persons who
control the Company or any Guarantor within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act. No purchaser of any of the Securities from
the Initial Purchasers will be deemed a successor because of such purchase.
15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAW.
16. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE> 35
-35-
If the foregoing correctly sets forth our understanding,
please indicate your acceptance thereof in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement among the
Company, the Guarantors and the Initial Purchasers.
Very truly yours,
THE COMPANY:
SAFETY COMPONENTS
INTERNATIONAL, INC.
By: /s/Jeffrey Kaplan
---------------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice President
THE GUARANTORS:
AUTOMOTIVE SAFETY
COMPONENTS INTERNATIONAL,
INC., as Guarantor
By: /s/Jeffrey Kaplan
---------------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice President
ASCI HOLDINGS GERMANY (DE)
INC., as Guarantor
By: /s/Jeffrey Kaplan
---------------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice President
<PAGE> 36
-36-
ASCI HOLDINGS UK (DE), INC.
, as Guarantor
By: /s/Jeffrey Kaplan
---------------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice President
ASCI HOLDINGS MEXICO (DE),
INC.
, as Guarantor
By: /s/Jeffrey Kaplan
---------------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice President
ASCI HOLDINGS CZECH (DE), INC.
, as Guarantor
By: /s/Jeffrey Kaplan
---------------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice President
ASCI HOLDINGS ASIA (DE), INC.
, as Guarantor
By: /s/Jeffrey Kaplan
---------------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice President
<PAGE> 37
-37-
VALENTEC INTERNATIONAL
CORPORATION
, as Guarantor
By: /s/Jeffrey Kaplan
---------------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice President
GALION, INC.
, as Guarantor
By: /s/Jeffrey Kaplan
---------------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice President
VALENTEC SYSTEMS, INC.
,as Guarantor
By: /s/Jeffrey Kaplan
---------------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice President
SAFETY COMPONENTS FABRIC
TECHNOLOGIES, INC.
, as Guarantor
By: /s/Jeffrey Kaplan
---------------------------------------
Name: Jeffrey Kaplan
Title: Executive Vice President
<PAGE> 38
-38-
The foregoing Agreement is hereby confirmed
and accepted as of the date first above written.
BT SECURITIES CORPORATION
By: /s/ Gerry McConnell
------------------------------------
Name: Gerry McConnell
Title: Vice President
ALEX. BROWN & SONS INCORPORATED
By: /s/Barry W. Ridings
------------------------------------
Name: Barry W. Ridings
Title: Managing Director
BANCAMERICA SECURITIES, INC.
By: /s/Mark Dawley
------------------------------------
Name: Mark Dawley
Title: Senior Managing Director
<PAGE> 1
SAFETY COMPONENTS INTERNATIONAL, INC.
PHOENIX AIRBAG GmbH & CO. KG
And
AUTOMOTIVE SAFETY COMPONENTS INTERNATIONAL LIMITED
as Borrowers
And
THE LENDERS NAMED HEREIN
as Lenders
And
KEYBANK NATIONAL ASSOCIATION
as Administrative Agent
------------------------
FORM OF AMENDMENT NO. 2
dated as of
July 15, 1997
to
CREDIT AGREEMENT
dated as of
May 21, 1997
------------------------
<PAGE> 2
FORM OF AMENDMENT NO. 2 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 2 TO CREDIT AGREEMENT, dated as of July 15, 1997, is
made among SAFETY COMPONENTS INTERNATIONAL, INC., a Delaware corporation
(herein, together with its successors and assigns, the "COMPANY" or a
"BORROWER"); PHOENIX AIRBAG GMBH & CO. KG., a company organized under the laws
of the Federal Republic of Germany (herein, together with its successors and
assigns, the "GERMAN BORROWER" or a "BORROWER"), AUTOMOTIVE SAFETY COMPONENTS
INTERNATIONAL LIMITED, a company organized under the laws of the United Kingdom
(herein, together with its successors and assigns, the "BRITISH BORROWER" or a
"BORROWER"); and KEYBANK NATIONAL ASSOCIATION, a national banking association,
as administrative agent (the "ADMINISTRATIVE AGENT") for the Lenders under the
Credit Agreement (hereafter defined):
PRELIMINARY STATEMENTS:
(1) The Borrowers, the Lenders named therein, and the Administrative
Agent entered into the Credit Agreement, dated as of May 21, 1997, as amended by
Amendment No. 1 to Credit Agreement, dated as of June 2, 1997 (as so amended,
the "CREDIT AGREEMENT"; with the terms defined therein, or the definitions of
which are incorporated therein, being used herein as so defined).
(2) The Borrowers, such Administrative Agent and the Lenders party
hereto desire to amend certain of the terms and provisions of the Credit
Agreement, all as more fully set forth below.
NOW, THEREFORE, the parties hereby agree as follows:
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT.
1.1 MODIFICATION OF CERTAIN ANNEXES. Effective on the Effective Date
(as hereinafter defined), Annex II, III, IV, V and VII to the Credit Agreement
are amended to read in their entirety as set forth on Annex II, III, IV, V and
VII hereto, respectively.
1.2 TERMINATION OF TERM LOAN COMMITMENT; INCREASE OF REVOLVING
COMMITMENT; RE-DESIGNATION OF OUTSTANDING TERM LOANS AS REVOLVING LOANS.
Effective on the Effective Date, (a) the Total Term Loan Commitment is
terminated, (b) the Total Revolving Commitment is increased from $12,000,000 to
$27,000,000 (and the Revolving Commitment of KeyBank on Annex I to the Credit
Agreement is amended to change it from $12,000,000 to $27,000,000), and (c)
after giving effect to all payments thereof on or prior to the Effective Date,
any remaining outstanding Term Loans are re-designated as outstanding Revolving
Loans of the Company.
1.3 REVOLVING FACILITY. Effective on the Effective Date, section 2.1(b)
of the Credit Agreement is amended to read in its entirety as follows:
(b) REVOLVING FACILITY. Loans under the Revolving Facility
(each a "REVOLVING LOAN" and, collectively, the "REVOLVING LOANS"): (i)
may be incurred by any Borrower, PROVIDED that (A) Revolving Loans made
to the Company to finance (or refinance Indebtedness originally
incurred to finance) Permitted Acquisitions of businesses directly
related to the automotive airbag industry may not be incurred in an
aggregate principal amount in excess of $15,000,000 and may only be
incurred after July 24, 1997, if at the time of incurrence the Company
would be in compliance with the covenants contained in sections 9.7 and
9.8 based on pro forma combined financial statements for the most
recently completed four fiscal quarters, which acquisitions permitted
by this clause (i) shall not require the consent of the Required
Lenders or Lenders specified in the definition of Permitted
Acquisition, and (B) the principal amount of the Revolving Loans of the
German Borrower and the British Borrower may not exceed, in the
aggregate for both such Borrowers, $2,000,000 at any time; (ii) may be
made at any time and from time to time on and after the Initial
Borrowing Date and prior to the Maturity Date; (iii) except as
otherwise provided, may, at the option of the applicable Borrower, be
incurred and maintained as, or converted into, Revolving Loans which
are Prime Rate Loans, or Eurocurrency Loans denominated in Dollars or
<PAGE> 3
in an Alternative Currency, PROVIDED that all Revolving Loans made as
part of the same Borrowing shall, unless otherwise specifically
provided herein, consist of Revolving Loans of the same currency and
Type; (iv) may be repaid or prepaid and reborrowed in accordance with
the provisions hereof; and (v) shall not exceed for any Lender at any
time outstanding that aggregate principal amount which, when added to
the product at such time of (A) such Lender's Revolving Facility
Percentage, TIMES (B) the aggregate Letter of Credit Outstandings,
equals the Revolving Commitment of such Lender at such time. Revolving
Loans to the Company which are Eurocurrency Loans may only be
denominated in Dollars. For the avoidance of doubt, as of July 24,
1997, $0 aggregate principal amount of Revolving Loans incurred to
finance or refinance Permitted Acquisitions were outstanding. Revolving
Loans made to the Company to finance (or refinance Indebtedness
originally incurred to finance) Permitted Acquisitions may not be
reborrowed unless repaid or prepaid in full within six months of the
date such Revolving Loans are first incurred.
1.4 COMPLIANCE WITH ERISA. Effective on the Effective Date, section
7.14 of the Credit Agreement is amended by adding in the last sentence thereof
following "writing," and "except for the Health Care Plan for Employees and
Dependents under the Group Protection Plan for Employees and the Term Life
Insurance Plan under the Group Protection Plan for Employees."
1.5 INDEBTEDNESS. Effective on the Effective Date, section 9.4 of the
Credit Agreement is amended by changing the amount "$5,000,000" which appears in
clause (d) thereof to "$90,000,000", and the Lenders consent to the issuance by
the Company of $90,000,000 aggregate original principal amount of its Senior
Subordinated Notes due 2007 (and any Exchange Notes issued pursuant to the
Registration Rights Agreement entered into in connection therewith).
1.6 TOTAL SENIOR FUNDED DEBT/EBITDA RATIO. Effective on the Effective
Date, section 9.7 of the Credit Agreement is amended to read in its entirety as
follows:
9.7. TOTAL SENIOR FUNDED DEBT/EBITDA RATIO. The Company will not at any
time permit the ratio of (i) the amount of Total Senior Funded Debt at such time
to (ii) EBITDA for any Testing Period to be less than the ratio shown below for
any applicable period:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
June 30, 1997 through 2.50 to 1.00
March 31, 1998
April 1, 1998 through 2.00 to 1.00
September 30, 1998
October 1, 1998 through 1.50 to 1.00
May 31, 2002
</TABLE>
1.7 FIXED CHARGE COVERAGE RATIO. Effective on the Effective Date,
section 9.8 of the Credit Agreement is amended to read in its entirety as
follows:
<PAGE> 4
9.8. FIXED CHARGE COVERAGE RATIO. The Company will not permit its Fixed
Charge Coverage Ratio for any Testing Period to be less than the ratio shown
below for any applicable period:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
June 30, 1997 through 1.00 to 1.00
December 31, 1998
January 1, 1999 through 1.10 to 1.00
March 31, 1999
April 1, 1999 through 1.15 to 1.00
March 31, 2000
April 1, 2000 through 1.25 to 1.00
May 31, 2002
</TABLE>
1.8 CAPITAL EXPENDITURES. Effective on the Effective Date, section 9.9
of the Credit Agreement is amended by changing the amount "$8,000,000" which
appears therein to "$10,000,000".
1.9 MINIMUM CONSOLIDATED NET WORTH. Effective on the Effective Date,
section 9.11 of the Credit Agreement is amended by changing the amount
"$37,000,000" which appears therein to "$35,000,000".
1.10 TOTAL SENIOR FUNDED DEBT. Effective on the Effective Date, section
1.1 of the Credit Agreement is amended by adding the following definition in
proper alphabetical order:
"TOTAL SENIOR FUNDED DEBT" shall mean Total Indebtedness less
the outstanding balance of the Indebtedness permitted by section 9.4(d).
1.11 AMORTIZATION OF REVOLVING LOANS FOR PERMITTED ACQUISITIONS, ETC.
Effective on the Effective Date, (i) section 5.2(i) of the Credit Agreement is
redesignated as section 5.2(j), and (ii) new section 5.2(i) is added to the
Credit Agreement, reading as follows:
(i) Any Revolving Loans incurred by the Company to finance (or
refinance Indebtedness incurred to finance) any Permitted Acquisition
which are not repaid or prepaid in full within six months of the date
first incurred ("AMORTIZING REVOLVING LOANS"), shall be subject to
mandatory prepayment as provided below. On the last Business Day of
each March, June, September and December, commencing with the first
such date which follows the twelve month anniversary of the date any
Amortizing Revolving Loan was first incurred, the Company shall prepay
a principal amount thereof equal to 5% of the outstanding principal
amount thereof which was outstanding on such twelve month anniversary
date, with a final prepayment of principal in the amount of the entire
remaining principal amount thereof being due and payable on the
Maturity Date. Each such prepayment shall be accompanied by interest on
the amount prepaid accrued to the date of prepayment, and any voluntary
prepayment by the Company of any such Amortizing Revolving Loans shall
be applied to the mandatory installment payment amounts in inverse
order of maturity.
SECTION 2. AMENDMENTS TO OTHER CREDIT DOCUMENTS AND
ADDITIONAL CREDIT DOCUMENTS.
2.1 PLEDGE AGREEMENT. On the Effective Date, the Credit Parties named
therein and the Collateral Agent shall enter into Amendment No. 2 to Pledge
Agreement, substantially in the form attached hereto as Exhibit A (AMENDMENT NO.
2 TO PLEDGE AGREEMENT), and the additional stock to be pledged thereunder shall
be pledged to the Collateral Agent as provided therein.
<PAGE> 5
2.2 SECURITY AGREEMENT. On the Effective Date, the Credit Parties named
therein and the Collateral Agent shall enter into Amendment No. 2 to Security
Agreement, substantially in the form attached hereto as Exhibit B (AMENDMENT NO.
2 TO SECURITY AGREEMENT).
2.3 SUBSIDIARY GUARANTY. On the Effective Date, the Credit Parties
named therein and the Administrative Agent shall enter into Amendment No. 2 to
Subsidiary Guaranty, substantially in the form attached hereto as Exhibit C
(AMENDMENT NO. 2 TO SUBSIDIARY GUARANTY).
2.4 CONSENT TO AMENDMENTS. The Lenders party hereto and the
Administrative Agent hereby consent to the execution and delivery of Amendment
No. 2 to Pledge Agreement, Amendment No. 2 to Security Agreement, and Amendment
No. 2 to Subsidiary Guaranty, and to the amendments effected thereby.
2.5 SOUTH CAROLINA MORTGAGE. On the Effective Date, Safety Components
Fabric Technologies, Inc. shall enter into an Open End Mortgage, Assignment of
Leases and Security Agreement substantially in the form attached hereto as
Exhibit D (the "MORTGAGE").
2.6 PATENT AND TRADEMARK ASSIGNMENTS. On the Effective Date, Safety
Components Fabric Technologies, Inc. shall enter into a Collateral Assignment of
Patents and Security Agreement substantially in the form attached hereto as
Exhibit E (the "PATENT ASSIGNMENT")and a Collateral Assignment of Trademarks and
Security Agreement substantially in the form attached hereto as Exhibit F (the
"TRADEMARK ASSIGNMENT").
2.7 FILINGS, RECORDINGS, ETC. Promptly following the Effective Date,
the Company will at its expense cause any and all UCC financing statements,
notices of secured transactions and other filings and recordings considered by
the Collateral Agent to be necessary or desirable in connection with the grant
of the security interests pursuant to Amendment No. 1 to Pledge Agreement,
Amendment No. 1 to Security Agreement, the Mortgage, the Patent Assignment and
the Trademark Assignment to be executed, delivered, made, filed and/or otherwise
effected.
SECTION 3. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants as follows:
3.1 JPS ACQUISITION AND PRIVATE PLACEMENT. (a) The Company has
delivered to the Administrative Agent prior to the execution of this Amendment a
true, correct and complete copy of the Asset Purchase Agreement made and entered
into as of June 30, 1997 by and between JPS Automotive, L.P. and the Company
(the "ASSET PURCHASE AGREEMENT") relating to the acquisition by the Company of
the air restraint and technical products division of JPS Automotive, L.P. There
are no "side letters" or similar documents which purport to modify or waive any
of the terms or conditions of the Asset Purchase Agreement.
(b) The Company has delivered to the Administrative Agent prior to the
execution of this Amendment true, correct and complete copies of all of the
documents relating the private placement (collectively, the "PRIVATE PLACEMENT
DOCUMENTS") of an aggregate principal amount of $80,000,000 Senior Subordinated
Notes, Due 2007 (the "SENIOR SUBORDINATED NOTES"). There are no "side letters"
or similar documents which purport to modify or waive any of the terms or
conditions of the Private Placement Documents. On or prior to the Effective
Date, the Company has completed the private placement of the Senior Subordinated
Notes and has received the net proceeds thereof.
(c) On or prior to the Effective Date, the transactions contemplated by
the Asset Purchase Agreement have been consummated in accordance with all legal
requirements and the terms and provisions of the Asset Purchase Agreement and
any other documents contemplated thereby without any material waiver or other
modifications which have not been approved by the Administrative Agent.
3.2 AUTHORIZATION, VALIDITY AND BINDING EFFECT. This Amendment has been
duly authorized by all necessary corporate action on the part of each Borrower,
has been duly executed and delivered by a duly authorized officer or officers
<PAGE> 6
of each Borrower, and constitutes the valid and binding agreement of each
Borrower, enforceable against such Borrower in accordance with its terms.
3.3 REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT. The
representations and warranties of the Company contained in the Credit Agreement,
as amended hereby, are true and correct on and as of the date hereof as though
made on and as of the date hereof, except to the extent that such
representations and warranties expressly relate to a specified date, in which
case such representations and warranties are hereby reaffirmed as true and
correct when made.
3.4 NO EVENT OF DEFAULT, ETC. No condition or event has occurred or
exists which constitutes or which, after notice or lapse of time or both, would
constitute an Event of Default.
3.5 COMPLIANCE. Each Borrower is in full compliance with all covenants
and agreements contained in the Credit Agreement, as amended hereby, and the
other Credit Documents to which it is a party.
SECTION 4. RATIFICATIONS.
The terms and provisions set forth in this Amendment shall modify and
supersede all inconsistent terms and provisions set forth in the Credit
Agreement, and except as expressly modified and superseded by this Amendment,
the terms and provisions of the Credit Agreement are ratified and confirmed and
shall continue in full force and effect.
SECTION 5. BINDING EFFECT.
This Amendment shall become effective on the date (the "EFFECTIVE
DATE") the following conditions shall have been satisfied:
(a) this Amendment shall have been executed by each Borrower
and the Administrative Agent, and counterparts hereof as so executed
shall have been delivered to the Administrative Agent;
(b) the Acknowledgment and Consent appended hereto shall have
been executed by the Credit Parties named therein, and counterparts
thereof as so executed shall have been delivered to the Administrative
Agent;
(c) the Administrative Agent shall have been notified by
Lenders constituting the Required Lenders that such Lenders have
executed this Amendment (which notification may be by facsimile or
other written confirmation of such execution);
(d) Amendment No. 2 to Pledge Agreement, Amendment No. 2 to
Security Agreement, Amendment No. 2 to Subsidiary Guaranty, the
Mortgage, the Patent Assignment and the Trademark Assignment shall each
have been duly executed and delivered and shall each be in full force
and effect;
(e) the transactions contemplated by the Asset Purchase
Agreement have been consummated in accordance with all legal
requirements and the terms and provisions of the Asset Purchase
Agreement and any other documents contemplated thereby without any
waiver or other modifications which have not been approved by the
Administrative Agent;
(f) the Company has completed the private placement of the
Senior Subordinated Notes and in accordance with all legal requirements
and the terms and provisions of the Private Placement Documents without
any waiver or other modifications which have not been approved by the
Administrative Agent has received the net proceeds thereof;
(g) the Company has repaid the outstanding principal of and
interest on the Term Loan in full in immediately available funds;
<PAGE> 7
and thereafter this Amendment shall be binding upon and inure to the benefit of
the Borrowers, the Administrative Agent, and each Lender and their respective
permitted successors and assigns. After this Amendment becomes effective, the
Administrative Agent will promptly furnish a copy of this Amendment to each
Lender and the Company on behalf of each Borrower and confirm the specific
Effective Date hereof.
SECTION 6. MISCELLANEOUS.
6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made in this Amendment shall survive the execution and delivery of
this Amendment, and no investigation by the Administrative Agent or any Lender
or any subsequent Loan or other Credit Event shall affect the representations
and warranties or the right of any Agent or any Lender to rely upon them.
6.2 REFERENCE TO CREDIT AGREEMENT. The Credit Agreement and any and all
other agreements, instruments or documentation now or hereafter executed and
delivered pursuant to the terms of the Credit Agreement as amended hereby, are
hereby amended so that any reference therein to the Credit Agreement shall mean
a reference to the Credit Agreement as amended hereby.
6.3 PERMITTED ACQUISITION. Keybank National Association, as sole
Lender, hereby approves the acquisition of the air restraint and technical
products division of JPS Automotive, L.P. as contemplated by the Asset Purchase
Agreement as a Permitted Acquisition under the Credit Agreement.
6.4 EXPENSES. As provided in the Credit Agreement, but without limiting
any terms or provisions thereof, the Company agrees to pay on demand all
reasonable costs and expenses incurred by the Administrative Agent in connection
with the preparation, negotiation, and execution of this Amendment, including
without limitation the reasonable costs and fees of the Administrative Agent's
special legal counsel, regardless of whether this Amendment becomes effective in
accordance with the terms hereof, and all reasonable costs and expenses incurred
by the Administrative Agent or any Lender in connection with the enforcement or
preservation of any rights under the Credit Agreement, as amended hereby.
6.5 SEVERABILITY. Any term or provision of this Amendment held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Amendment and the effect thereof shall be
confined to the term or provision so held to be invalid or unenforceable.
6.6 APPLICABLE LAW. This Amendment shall be governed by and construed
in accordance with the laws of the State of New York.
6.7 HEADINGS. The headings, captions and arrangements used in this
Amendment are for convenience only and shall not affect the interpretation of
this Amendment.
6.8 ENTIRE AGREEMENT. This Amendment is specifically limited to the
matters expressly set forth herein. This Amendment and all other instruments,
agreements and documentation executed and delivered in connection with this
Amendment embody the final, entire agreement among the parties hereto with
respect to the subject matter hereof and supersede any and all prior
commitments, agreements, representations and understandings, whether written or
oral, relating to the matters covered by this Amendment, and may not be
contradicted or varied by evidence of prior, contemporaneous or subsequent oral
agreements or discussions of the parties hereto. There are no oral agreements
among the parties hereto relating to the subject matter hereof or any other
subject matter relating to the Credit Agreement.
6.9 COUNTERPARTS. This Amendment may be executed by the parties hereto
separately in one or more counterparts, each of which when so executed shall be
deemed to be an original, but all of which when taken together shall constitute
one and the same agreement.
<PAGE> 8
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered
as of the date first above written.
SAFETY COMPONENTS INTERNATIONAL, INC.
BY:
-----------------------------------
EXECUTIVE VICE PRESIDENT
AUTOMOTIVE SAFETY COMPONENTS
INTERNATIONAL LIMITED
BY:
-----------------------------------
EXECUTIVE VICE PRESIDENT
PHOENIX AIRBAG GMBH & CO. KG.,
BY ITS GENERAL PARTNER, PHOENIX AIRBAG
VERWALTUNGS GMBH
BY:
-----------------------------------
ATTORNEY-IN-FACT
KEYBANK NATIONAL ASSOCIATION,
INDIVIDUALLY AND AS
ADMINISTRATIVE AGENT
BY:
-----------------------------------
EXECUTIVE VICE PRESIDENT
<PAGE> 1
FORM OF AMENDMENT NO. 2 TO SUBSIDIARY GUARANTY
THIS AMENDMENT, dated as of July 15, 1997, by (i) each of the
Guarantors which is a party to the Subsidiary Guaranty referred to below (the
"ORIGINAL GUARANTORS"); (ii) the following additional Subsidiary of the Company:
SAFETY COMPONENTS FABRIC TECHNOLOGIES, INC., a [Delaware] corporation (together
with its successors and assigns, the "ADDITIONAL SUBSIDIARY GUARANTOR"); and
(iii) KEYBANK NATIONAL ASSOCIATION, a national banking association, as
Administrative Agent (the "ADMINISTRATIVE AGENT" ) under the Credit Agreement
referred to in the Subsidiary Guaranty identified below:
PRELIMINARY STATEMENTS:
(1) The Original Guarantors have heretofore entered into the Subsidiary
Guaranty, dated as of May 21, 1997, in favor of the Administrative Agent, as
amended by Amendment No. 1 to Subsidiary Guaranty dated as of June 2, 1997 (as
so amended, the "Subsidiary Guaranty"; with the terms defined therein, or the
definitions of which are incorporated therein, being used herein as so defined).
(2) The parties hereto desire to amend certain of the terms and
provisions of the Subsidiary Guaranty, all as more fully set forth below.
NOW, THEREFORE, the parties hereby agree as follows:
1. JOINDER OF ADDITIONAL SUBSIDIARY GUARANTOR. Effective upon the
execution and delivery of this Amendment, the Additional Subsidiary Guarantor
hereby joins in and becomes a party to the Subsidiary Guaranty, as amended
hereby, as a Guarantor thereunder as fully as if it had been an original
signatory to the Subsidiary Guaranty. All representations, warranties,
covenants, agreements and waivers contained in the Subsidiary Guaranty, as
amended hereby, applicable to Guarantors thereunder shall apply to the
Additional Subsidiary Guarantor from and after the date of execution and
delivery of this Amendment.
2. ADDITIONS TO SCHEDULE 1. Schedule 1 to the Subsidiary Guaranty is
amended by the addition of the following information:
Safety Components Fabric Technologies, Inc.
c/o Safety Components International, Inc.
3190 Pullman Street
Costa Mesa, CA 92626
Attn: Chief Financial Officer
3. RATIFICATIONS. The terms and provisions set forth in this Amendment
shall modify and supersede all inconsistent terms and provisions set forth in
the Subsidiary Guaranty, and except as expressly modified and superseded by this
Amendment, the terms and provisions of the Subsidiary Guaranty are ratified and
confirmed and shall continue in full force and effect.
<PAGE> 2
4. MISCELLANEOUS. The terms and provisions of sections 13, 14, 15, 16,
20, 22, 23 and 24 of the Subsidiary Guaranty are hereby incorporated into this
Amendment as if set forth in full herein, except that references in such
incorporated terms and provisions to "this Guaranty", "herein", "hereby" and
words of similar import shall be deemed to refer to this Amendment instead of
the Subsidiary Guaranty.
[The balance of this page is intentionally blank.]
<PAGE> 3
The laws of South Carolina provide that in any real estate foreclosure
proceeding a defendant against whom a personal judgment is taken or asked may
within thirty days after the sale of the mortgaged property apply to the court
for an order of appraisal. The statutory appraisal value as approved by the
court would be substituted for the high bid and may increase the amount of any
deficiency owing in connection with the transaction. EACH OF THE UNDERSIGNED
HEREBY WAIVES AND RELINQUISHES THE STATUTORY APPRAISAL RIGHTS WHICH MEANS THE
HIGH BID AT THE JUDICIAL FORECLOSURE SALE WILL BE APPLIED TO THE DEBT REGARDLESS
OF ANY APPRAISED VALUE OF THE MORTGAGED PROPERTY.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
AUTOMOTIVE SAFETY COMPONENTS
INTERNATIONAL, INC.
BY:____________________________________
EXECUTIVE VICE PRESIDENT
ASCI HOLDINGS GERMANY (DE), INC.
BY:____________________________________
EXECUTIVE VICE PRESIDENT
ASCI HOLDINGS CZECH (DE), INC.
BY:____________________________________
EXECUTIVE VICE PRESIDENT
ASCI HOLDINGS MEXICO (DE), INC.
BY:____________________________________
EXECUTIVE VICE PRESIDENT
ASCI HOLDINGS U.K. (DE), INC.
BY:____________________________________
EXECUTIVE VICE PRESIDENT
<PAGE> 4
ASCI HOLDINGS ASIA (DE), INC.
BY:____________________________________
EXECUTIVE VICE PRESIDENT
<PAGE> 1
FORM OF AMENDMENT NO. 2 TO SECURITY AGREEMENT
THIS AMENDMENT, dated as of July 15, 1997, by (i) each of the Assignors
which is a party to the Security Agreement referred to below (the "ORIGINAL
ASSIGNORS"); and (ii) the following additional Subsidiary of the Company: SAFETY
COMPONENTS FABRIC TECHNOLOGIES, INC., a Delaware corporation (together with its
successors and assigns, the "ADDITIONAL ASSIGNOR"); with (iii) KEYBANK NATIONAL
ASSOCIATION, a national banking association, as Collateral Agent (the
"COLLATERAL AGENT") under the Security Agreement identified below:
PRELIMINARY STATEMENTS:
(1) The Original Assignors have heretofore entered into the Security
Agreement, dated as of May 21, 1997, in favor of the Collateral Agent, as
amended by Amendment No. 1 to Security Agreement dated as of June 2, 1997 (as so
amended, the "SECURITY AGREEMENT"; with the terms defined therein, or the
definitions of which are incorporated therein, being used herein as so defined).
(2) The parties hereto desire to amend certain of the terms and
provisions of the Security Agreement, all as more fully set forth below.
NOW, THEREFORE, the parties hereby agree as follows:
1. JOINDER OF ADDITIONAL ASSIGNOR. Effective upon the execution and
delivery of this Amendment, the Additional Assignor hereby joins in and becomes
a party to the Security Agreement, as amended hereby, as an Assignor thereunder
as fully as if it had been an original signatory to the Security Agreement. All
representations, warranties, covenants, agreements and waivers contained in the
Security Agreement, as amended hereby, applicable to Assignors thereunder shall
apply to the Additional Assignor from and after the date of execution and
delivery of this Amendment.
2. AMENDMENT TO SECTION 1.1. Section 1.1 of the Security Agreement is
amended by adding a new subsection (d) which reads in its entirety as follows:
(d) Notwithstanding the foregoing, no security interest is granted
under this Agreement with respect to Equipment of which Safety Components Fabric
Technologies, Inc. ("SCFT") is the Assignor and which is subject on the
effective date of Amendment No. 2 to the Security Agreement to (i) the Loan and
Security Agreement dated as of June 28, 1994 by and between JPS Automotive
Products Corp. and The CIT Group/Equipment Financing, Inc. as assigned to SCFT
(the "CIT Agreement") or (ii) any secured installment purchase contract that by
its terms prohibits the creation of additional liens on such Equipment unless
consent has been obtained and the Company shall use its reasonable efforts to
obtain such consent, it being understood that the Company shall not be required
to pay more than a nominal fee for such consent. Upon the payment of all amounts
owing under the CIT Agreement on any Equipment or
<PAGE> 2
under such installment purchase agreement of SCFT or the removal of any
prohibition on the creation of a lien on the Equipment subject thereto, such
Equipment shall constitute Collateral hereunder.
3. ADDITIONS TO ANNEX A. Annex A to the Security Agreement is amended
by the addition of the following information as to existing financing
statements:
<TABLE>
<CAPTION>
NAME AND ADDRESS NAME AND PLACE OF FILING RECORD INFO. COLLATERAL
OF DEBTOR ADDRESS OF FILING (STATE DESCRIPTION
SECURED PARTY AND DEPT. OR
COUNTY)
<S> <C> <C> <C> <C>
JPS Converter and The CIT Greenville Recorded: 11/01/96 Referencing Doc. No.
Industrial Corp. Group/Equipment County, SC Doc. #: 964451 913349
Dunean Plant Financing, Inc.
Emory Street 270 Park Avenue
Greenville, SC New York, NY
29602
JPS Converter and The CIT Greenville Recorded: 08/30/94 Amending Doc. No.
Industrial Corp. Group/Equipment County, SC Doc. #: L336587 913349
Dunean Plant Financing, Inc.
Emory Street 1211 Avenue of
Greenville, SC the Americas
29602 New York, NY
10036
JPS Converter and The CIT Greenville Recorded: 06/29/92 Specific Equipment
Industrial Corp. Group/Equipment County, SC Doc. #: 92-1853 described on attached
Dunean Plant Financing, Inc. exhibit
Emory Street 270 Park Avenue
Greenville, SC New York, NY
29602
JPS Converter and The CIT Greenville Recorded: 11/01/91 Specific Equipment
Industrial Corp. Group/Equipment County, SC Doc. #: 913349 described on attached
Dunean Plant Financing, Inc. exhibit
Emory Street 270 Park Avenue
Greenville, SC New York, NY
29602
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C> <C> <C>
JPS Converter and The CIT Greenville Recorded: 12/24/92 Specific Equipment
Industrial Corp. Group/Equipment County, SC Doc. #: 92-3587 described on attached
Dunean Apparel Financing, Inc. exhibit
Plant 1211 Avenue of
Dunean Industrial the Americas
Plant New York, NY
Emory Street 10036
Greenville, SC 29602
JPS Converter and The CIT Greenville Recorded: 08/12/93 Specific Equipment
Industrial Corp. Group/Equipment County, SC Doc. #: 93-2212 described on attached
Dunean Apparel Financing, Inc. exhibit
Plant 1211 Avenue of
Dunean Industrial the Americas
Plant 21st Floor
Emory Street New York, NY
Greenville, SC 29602 10036
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NAME AND ADDRESS OF PLACE OF FILING FILING RECORD COLLATERAL
DEBTOR SECURED PARTY (STATE INFO. DESCRIPTION
AND DEPT. OR
COUNTY)
<S> <C> <C> <C> <C>
JPS Converter and The CIT Greenville Recorded: 01/04/95 Specific Equipment
Industrial Corp. Group/Equipment County, SC Doc. #: 95-0017 described on attached
Dunean Apparel Financing, Inc. exhibit
Plant 1211 Avenue of the
Dunean Industrial Americas
Plant 21st Floor
Emory Street New York, NY
Greenville, SC 29602 10036
JPS Converter and The CIT Greenville Recorded: 08/30/94 Amendment to Doc
Industrial Corp. Group/Equipment County, SC Doc. #: L336587 #92-3587 replacing
Dunean Plant Financing, Inc. old Exhibit B
Emory Street 1211 Avenue of the
Greenville, SC 29602 Americas
New York, NY
10036
JPS Automotive The CIT Greenville Recorded: 06/30/94 Specific Equipment
Products Corp. Group/Equipment County, SC Doc. #: 94-1782 described on attached
Dunean Plant Financing, Inc. exhibit
Emory Street 1211 Avenue of the
Greenville, SC 29602 Americas
21st Floor
New York, NY
10036
JPS Automotive, L.P. The CIT Greenville Recorded: 10/18/94 Specific Equipment
Dunean Plant Group/Equipment County, SC Doc. #: 94-2790 described on attached
Emory Street Financing, Inc. exhibit
Greenville, SC 29602 1211 Avenue of the
Americas
21st Floor
New York, NY
10036
</TABLE>
<PAGE> 5
4. ADDITIONS TO ANNEX B. Annex B to the Security Agreement is amended
by the addition of the following information as to the chief executive office
(and the registered office, if a corporation) of the Additional Assignor:
<TABLE>
<CAPTION>
NAME ADDRESS
<S> <C>
Safety Components Fabric Technologies, Inc. c/o Safety Components International, Inc.
3190 Pullman Street
Costa Mesa, CA 92626
</TABLE>
5. ADDITIONS TO ANNEX C. Annex C to the Security Agreement is amended
by the addition of the following information as to location of Inventory and
Equipment of the Additional Assignor:
<TABLE>
<CAPTION>
NAME ADDRESS
<S> <C>
Safety Components Fabric Technologies, Inc. 3190 Pullman Street
Costa Mesa, CA 92626
Dunean Plant
30 Emory Street
Greenville, SC 29605
Taylors Plant
P.O. Box 7
Mill Street
Taylors, SC 29687
</TABLE>
6. ADDITIONS TO ANNEX E. Annex E to the Security Agreement is amended
by the addition of the following information as to trademarks:
<TABLE>
<CAPTION>
MARK TRADEMARK NO./APPLICATION NO.
<S> <C>
Interlochen Application No. 74/735,020
</TABLE>
<PAGE> 6
7. ADDITIONS TO ANNEX F. Annex F to the Security Agreement is amended
by the addition of the following information as to patents:
<TABLE>
<CAPTION>
MARK PATENT NO./APPLICATION NO.
<S> <C>
Air Bag for Use in a Motor Vehicle and Method Patent No. 5,566,434
of Producing Same Issued: 10/22/96
Expiration: 6/15/2014
Air Bag for Use in a Motor Vehicle and Method Patent No. 5,630,261
of Producing Same Issued: 5/20/97
Expiration: 6/15/2014
Air Bag Having Panels with Different Patent No. 5,542,703
Permeabilities Issued: 08/06/96
Expiration: 6/15/2014
Vehicle Air Bag Fabric and Method of Making Application No. 08/787,743
Same Filed: 1/24/97
Release Liner and Method of Using Same Application No. 08/656,661
Filed: 5/31/96
Firefighter Garment Utilizing Improved High- Application No. 08/683,578
Lubricity Lining Material Filed: 7/15/96
</TABLE>
8. RATIFICATIONS. The terms and provisions set forth in this Amendment
shall modify and supersede all inconsistent terms and provisions set forth in
the Security Agreement, and except as expressly modified and superseded by this
Amendment, the terms and provisions of the Security Agreement are ratified and
confirmed and shall continue in full force and effect.
9. MISCELLANEOUS. The terms and provisions of sections 10.2 [Waiver;
Amendment], 10.4 [Successors and Assigns], 10.5 [Headings Descriptive], 10.6
[Severability], 10.7 [Governing Law], and 11 [Waiver of Jury Trial] of the
Security Agreement are hereby incorporated into this Amendment as if set forth
in full herein, except that references in such incorporated terms and provisions
to "this Agreement", "herein", "hereby" and words of similar import shall be
deemed to refer to this Amendment instead of the Security Agreement. This
Amendment may be executed by the parties hereto separately in counterparts, each
of which shall be an original and all of which together shall constitute one and
the same agreement.
[The balance of this page is intentionally blank.]
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
SAFETY COMPONENTS INTERNATIONAL, INC.
BY:_______________________________________
EXECUTIVE VICE PRESIDENT
AUTOMOTIVE SAFETY COMPONENTS INTERNATIONAL, INC.
BY:_______________________________________
EXECUTIVE VICE PRESIDENT
ASCI HOLDINGS GERMANY (DE), INC.
BY:_______________________________________
EXECUTIVE VICE PRESIDENT
ASCI HOLDINGS CZECH (DE), INC.
BY:_______________________________________
EXECUTIVE VICE PRESIDENT
ASCI HOLDINGS MEXICO (DE), INC.
BY:_______________________________________
EXECUTIVE VICE PRESIDENT
ASCI HOLDINGS U.K. (DE), INC.
BY:_______________________________________
EXECUTIVE VICE PRESIDENT
ASCI HOLDINGS ASIA (DE), INC.
BY:_______________________________________
EXECUTIVE VICE PRESIDENT
<PAGE> 8
VALENTEC SYSTEMS, INC.
BY:_______________________________________
EXECUTIVE VICE PRESIDENT
GALION, INC.
BY:_______________________________________
EXECUTIVE VICE PRESIDENT
VALENTEC INTERNATIONAL CORPORATION
BY:_______________________________________
EXECUTIVE VICE PRESIDENT
SAFETY COMPONENTS FABRIC TECHNOLOGIES, INC.
BY:_______________________________________
EXECUTIVE VICE PRESIDENT
KEYBANK NATIONAL ASSOCIATION,
AS COLLATERAL AGENT
BY:_______________________________________
VICE PRESIDENT
<PAGE> 1
SAFETY COMPONENTS INTERNATIONAL, INC.
RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS)
<TABLE>
<CAPTION>
Four Months
January 1, 1993 Eleven Months April Year Ended March 31,
through April 27, 28, 1993 through Pro Forma
1993 March 31, 1994 1995 1996 1997 March 31, 1997
---- -------------- ---- ---- ---- --------------
<S> <C> <C> <C> <C> <C> <C>
Fixed Charges:
Interest expense (income), net $ 10 $ 235 $ 126 $ (197) $ 1,319 $10,563
----- ------- ------ ------- ------- -------
Earnings:
Income (loss) before income taxes (417) (591) 3,416 8,030 6,841 2,053
Add back fixed charges 10 235 126 (197) 1,319 10,563
----- ------- ------ ------- ------- -------
(407) (356) 3,542 7,833 8,160 12,616
Ratio of earnings to fixed charges (1)
-- -- 28.1x -- 6.2x 1.2x
</TABLE>
(1) For the Four Months January 1, 1993 through April 27, 1993 and the
Eleven Months April 28, 1993 through March 31, 1994, earnings were
insufficient to cover fixed charges by $167,000 and $207,000,
respectively. In fiscal year 1996, the Company did not incur fixed
charges.
<PAGE> 1
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
NAME OF SUBSIDIARY JURISDICTION WHERE NAMES UNDER WHICH SUBSIDIARY DOES
ORGANIZED BUSINESS
<S> <C> <C>
Galion, Inc. Delaware Valentec Galion
Valentec Galion, Inc.
Galion, a Division of Valentec International
Corporation
Valentec Systems, Inc. Delaware
ASCI Holdings Germany (DE), Inc. Delaware
ASCI Holdings Mexico (DE), Inc. Delaware
ASCI Holdings UK (DE), Inc. Delaware
ASCI Holdings Czech (DE), Inc. Delaware
ASCI Holdings Asia (DE), Inc. Delaware
Phoenix Airbag Verwaltungs GmbH Germany
Phoenix Airbag GmbH & Co. KG Germany
Automotive Safety Components
International S.A. de C.V. Mexico
Automotive Safety Components United Kingdom
International Limited
Automotive Safety Components Asia -
Pacific Ltd.
Automotive Safety Components Czech Republic
International, s.r.o.
Automotive Safety Components Delaware Valentec Automotive
International, Inc. Valentec Wells
Valentec International Corporation Delaware Valentec Wells, Inc.
Valentec Wells Division of Valentec
International Corp.
Safety Components Fabric Technologies, Delaware
Inc.
</TABLE>
<PAGE> 1
The Board of Directors of
Safety Components International, Inc.
We agree to the inclusion in the Prospectus for $90,000,000 of Senior
Subordinated Notes, of our report, dated October 7, 1996, on our audit of the
financial statements of Phoenix Airbag GmbH. We also consent to the use of our
name under "Experts".
/s/ Price Waterhouse GmbH
- ----------------------------------
Price Waterhouse GmbH
August 11, 1997
Wirtschaftsprufungsgesellschaft
<PAGE> 2
The Board of Directors of
Safety Components International, Inc.
We hereby consent to the inclusion in the Prospectus constituting part of this
Registration Statement on Form S-4 of our report, dated May 22, 1997, relating
to the financial statements of Valentec International Corporation, excluding
Valentec International, Ltd., which appear in such prospectus. We also consent
to the references to us under the heading "Experts" in such prospectus.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
August 11, 1997
Costa Mesa, California
<PAGE> 3
The Board of Directors of
Safety Components International, Inc.
We hereby consent to the inclusion in the Prospectus constituting part of this
Registration Statement on Form S-4 of our report, dated May 22, 1997, except for
Notes 1, 6 and 13 which are as of July 24, 1997, relating to the consolidated
financial statements of Safety Components International, Inc. and subsidiaries,
which appear in such prospectus. We also consent to the references to us under
the heading "Experts" in such prospectus.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
August 11, 1997
Costa Mesa, California
<PAGE> 1
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our report
dated July 10, 1997 (except with respect to the matter discussed in Note 16, as
to which the date is July 24, 1997), and to all references to our Firm, included
in or made a part of this Registration Statement.
/s/ ARTHUR ANDERSEN LLP
-----------------------
ARTHUR ANDERSEN LLP
Charlotte, North Carolina
August 7, 1997
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of our
report dated July 10, 1997, on our audit of the statements of income, divisional
equity and cash flows for the period from December 26, 1993 to June 28, 1994 of
the Air Restraint/Industrial Fabrics Division of JPS Textile Group, Inc.
/s/ COOPERS & LYBRAND LLP
-------------------------
COOPERS & LYBRAND LLP
Spartanburg, SC
August 11, 1997
<PAGE> 1
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our report
and to all references to our Firm included in or made a part of this
Registration Statement.
/s/ BDO Deutsche Warentreuhand
Aktiengesellschaft
--------------------------------
BDO Deutsche Warentreuhand
Aktiengesellschaft
Wirtschaftsprufungsgesellschaft
Hamburg
August 7, 1997
<PAGE> 1
- -----------------------------------------------------------------------------
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)
--
--------
IBJ SCHRODER BANK & TRUST COMPANY
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
New York 13-5375195
(Jurisdiction of incorporation (I.R.S. Employer
or organization if not a U.S. national bank) Identification
No.)
One State Street, New York, New York 10004
(Address of principal executive offices) (Zip Code)
</TABLE>
IBJ SCHRODER BANK & TRUST COMPANY
One State Street
New York, New York 10004
(212) 858-2000
(Name, address and telephone number of agent for service)
SAFETY COMPONENTS INTERNATIONAL, INC.
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C>
Delaware 33-0596831
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.
</TABLE>
<PAGE> 2
AUTOMOTIVE SAFETY COMPONENTS INTERNATIONAL, INC.
(Exact name of obligor as specified in its charter)
Delaware 33-0611750
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ASCI HOLDINGS GERMANY (DE), INC.
(Exact name of obligor as specified in its charter)
Delaware 33-0727084
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ASCI HOLDINGS UK (DE), INC.
(Exact name of obligor as specified in its charter)
Delaware 33-0727081
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ASCI HOLDINGS MEXICO (DE), INC.
(Exact name of obligor as specified in its charter)
Delaware 33-0727083
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ASCI HOLDINGS CZECH (DE), INC.
(Exact name of obligor as specified in its charter)
Delaware 33-0727080
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ASCI HOLDINGS ASIA (DE), INC.
(Exact name of obligor as specified in its charter)
Delaware 33-0757465
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
<PAGE> 3
VALENTEC INTERNATIONAL CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 54-1658773
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
GALION, INC.
(Exact name of obligor as specified in its charter)
Delaware 33-0611991
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
VALENTEC SYSTEMS, INC.
(Exact name of obligor as specified in its charter)
Delaware 33-0618610
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
SAFETY COMPONENTS FABRIC TECHNOLOGIES, INC.
(Exact name of obligor as specified in its charter)
Delaware 58-2328795
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2160 North Central Road
Fort Lee, NJ 07024 07024
(Address of principal executive offices) (Zip Code)
----------------
10 1/8% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B
OF SAFETY COMPONENTS INTERNATIONAL, INC.
(Title of Indenture Securities)
- --------------------------------------------------------------------------------
<PAGE> 4
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.
New York State Banking Department
Two Rector Street, New York, New York
Federal Deposit Insurance Corporation
Washington, D.C.
Federal Reserve Bank of New York Second District
33 Liberty Street
New York, New York
(b) Whether it is authorized to exercise corporate trust powers.
Yes
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee.
Defaults by the Obligor.
(a) State whether there is or has been a default with respect to the
securities under this indenture. Explain the nature of any such
default.
None
(b) If the trustee is a trustee under another indenture under which
any other securities, or certificates of interest or participation
in any other securities, of the obligor are outstanding, or is
trustee for more than one outstanding series of securities under
the indenture, state whether there has been a default under such
indenture or series, identify the indenture or series affected,
and explain the nature of any such default.
None
<PAGE> 5
Item 13. Defaults by the Obligor.
(a) State whether there is or has been a default with respect to
the securities under this indenture. Explain the nature of
any such default.
Not Applicable
(b) If the trustee is a trustee under another indenture under
which any other securities, or certificates of interest or
participation in any other securities, of the obligor are
outstanding, or is trustee for more than one outstanding
series of securities under the indenture, state whether there
has been a default under any such indenture or series,
identify the indenture or series affected, and explain the
nature of any such default.
Not Applicable
Item 16. List of exhibits.
List below all exhibits filed as part of this statement of
eligibility.
*1. A copy of the Charter of IBJ Schroder Bank & Trust Company
as amended to date. (See Exhibit 1A to Form T-1, Securities
and Exchange Commission File No. 22-18460).
*2. A copy of the Certificate of Authority of the trustee to
Commence Business (Included in Exhibit 1 above).
*3. A copy of the Authorization of the trustee to exercise
corporate trust powers, as amended to date (See Exhibit 4 to
Form T-1, Securities and Exchange Commission File No.
22-19146.
*4. A copy of the existing By-Laws of the trustee, as amended to
date (See Exhibit 4 to Form T-1, Securities and Exchange
Commission File No. 22-19146).
5. Not Applicable.
<PAGE> 6
6. The consent of United States institutional trustee required by
Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority.
* The Exhibits thus designated are incorporated herein by reference as exhibits
hereto. Following the description of such Exhibits is a reference to the copy
of the Exhibit heretofore filed with the Securities and Exchange Commission,
to which there have been no amendments or changes.
<PAGE> 7
NOTE
In answering any item in this Statement of Eligibility which relates to matters
peculiarly within the knowledge of the obligor and its directors or officers,
the trustee has relied upon information furnished to it by the obligor.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the trustee of
all facts on which to base responsive answers to Item 2, the answer to said
Item are based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an amendment
to this Form T-1.
Pursuant to General Instruction B, the trustee has responded to Items 1, 2 and
16 of this form since to the best knowledge of the trustee, the obligor is not
in default under any indenture under which the applicant is trustee.
<PAGE> 8
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
IBJ Schroder Bank & Trust Company, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of 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 8th day of August 1997.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Max Volmar
----------------------------
Max Volmar
Vice President
<PAGE> 9
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939, as amended, in connection with the issue by SAFETY COMPONENTS
INTERNATIONAL, INC. of its 10 1/8% SENIOR SUBORDINATED NOTES DUE 2007, SERIES
B, we hereby consent that reports of examinations by Federal, State,
Territorial, or District authorities may be furnished by such authorities to
the Securities and Exchange commission upon request therefor.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Max Volmar
----------------------------
Max Volmar
Vice President
Dated: August 8, 1997
<PAGE> 10
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ SCHRODER BANK & TRUST COMPANY
OF NEW YORK, NEW YORK
AND FOREIGN AND DOMESTIC SUBSIDIARIES
REPORT AS OF MARCH 31, 1997
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
IN THOUSANDS
--------------
<S> <C> <C>
ASSETS
Cash and balance due from depository institutions:
Noninterest-bearing balances and currency and coin................................. $ 37,521
Interest-bearing balances.......................................................... $ 325,073
Securities: Held-to-maturity securities............................................. $ 177,447
Available-for-sale securities........................................... $ 47,358
Federal funds sold and securities purchased under
agreements to resell in domestic office of the bank
and of its Edge and Agreement subsidiaries and in IBFs:
Federal Funds sold and Securities purchased under agreements to resell............. $ 75,273
Loans and lease financing receivables:
Loans and leases, net of unearned income............................... $1,820,213
LESS: Allowance for loan and lease losses.............................. $ 58,785
LESS: Allocated transfer risk reserve.................................. $ -0-
Loans and leases, net of unearned income, allowance, and reserve................... $1,761,428
Trading assets held in trading accounts.............................................. $ 602
Premises and fixed assets (including capitalized leases)............................. $ 3,817
Other real estate owned.............................................................. $ 202
Investments in unconsolidated subsidiaries and associated companies.................. $ -0-
Customers' liability to this bank on acceptances outstanding......................... $ 310
Intangible assets.................................................................... $ -0-
Other assets......................................................................... $ 74,528
TOTAL ASSETS......................................................................... $2,503,559
</TABLE>
<PAGE> 11
LIABILITIES
<TABLE>
<S> <C> <C>
Deposits:
In domestic offices ........................................................................ $ 792,944
Noninterest-bearing .......................................................... $ 260,196
Interest-bearing ............................................................. $ 394,562
In foreign offices, Edge and Agreement subsidiaries, and IBFs .............................. $1,149,176
Noninterest-bearing .......................................................... $ 13,875
Interest-bearing ............................................................. $1,135,301
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBFs:
Federal Funds purchased and Securities sold under agreements to repurchase ................. $ 344,500
Demand notes issued to the U.S. Treasury ..................................................... $ 30,000
Trading Liabilities .......................................................................... $ 178
Other borrowed money:
a) With a remaining maturity of one year or less ........................................... $ 23,037
b) With a remaining maturity of more than one year ......................................... $ 4,958
Mortgage indebtedness and obligations under capitalized leases ............................... $ -0-
Bank's liability on acceptances executed and outstanding ..................................... $ 310
Subordinated notes and debentures ............................................................ $ -0-
Other liabilities ............................................................................ $ 71,245
TOTAL LIABILITIES ............................................................................ $2,278,162
Limited-life preferred stock and related surplus ............................................. $ -0-
EQUITY CAPITAL
Perpetual preferred stock and related surplus ................................................ $ -0-
Common stock ................................................................................. $ 29,649
Surplus (exclude all surplus related to preferred stock) ..................................... $ 217,008
Undivided profits and capital reserves ....................................................... $ (21,223)
Net unrealized gains (losses) on available-for-sale securities ............................... $ 37
Cumulative foreign currency translation adjustments .......................................... $ -0-
TOTAL EQUITY CAPITAL ......................................................................... $ 225,397
TOTAL LIABILITIES AND EQUITY CAPITAL ......................................................... $2,503,559
</TABLE>
<PAGE> 1
LETTER OF TRANSMITTAL
SAFETY COMPONENTS INTERNATIONAL, INC.
OFFER FOR ANY AND ALL OUTSTANDING
10-1/8% SENIOR SUBORDINATED NOTES DUE 2007, SERIES A
IN EXCHANGE FOR
10-1/8% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B
PURSUANT TO THE PROSPECTUS, DATED ___________, 1997.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _________,
1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO
5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
BY MAIL:
IBJ Schroder Bank & Trust Company
P.O. Box 84
Bowling Green Station
New York, NY 10274-0084
Attn: Reorganization Operations Department
<TABLE>
<S> <C> <C>
BY OVERNIGHT DELIVERY: FACSIMILE TRANSMISSION NUMBER: BY HAND:
IBJ Schroder Bank & Trust Company (212) 858-2611 IBJ Schroder Bank & Trust Company
One State Street One State Street
New York, NY 10004 CONFIRM BY TELEPHONE: New York, NY 10004
Attn: Securities Processing Window (212) 858-2103 Attn: Securities Processing Window
Subcellar One (SC-1) Subcellar One (SC-1)
---------------
FOR INFORMATION CALL:
(212) 858-2103
---------------
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges that it has received and reviewed the
Prospectus, dated ___________, 1997 (the "Prospectus"), of Safety Components
International, Inc., a Delaware corporation (the "Company"), and this Letter of
Transmittal (the "Letter"), which together constitute the Company's offer to
exchange any and all outstanding 10-1/8% Senior Subordinated Notes Due 2007,
Series A (the "Old Notes") of the Company for a like aggregate principal amount
of 10-1/8% Senior Subordinated Notes Due 2007, Series B (the "Exchange Notes";
and, together with the Old Notes, the "Notes") of the Company from the holders
("Holders") thereof (the "Exchange Offer").
For each Old Note accepted for exchange, the Holder of such Old Note
will receive an Exchange Note having a principal amount equal to that of the
surrendered Old Note. The terms of the Exchange Notes are identical in all
material respects to the Old Notes, except that (i) the Exchange Notes will bear
a Series B designation and a different CUSIP Number from the Old Notes, (ii) the
issuance of the Exchange Notes will have been registered under the Securities
Act of
1
<PAGE> 2
1933, as amended (the "Securities Act"), and, therefore, the Exchange Notes will
not bear legends restricting the transfer thereof and (iii) Holders of the
Exchange Notes will not be entitled to certain registration rights relating to
the Old Notes. The Exchange Notes, and the Old Notes remaining after the
Exchange Offer, mature on July 15, 2007. Interest on the Exchange Notes will
accrue from the date of original issuance thereof, payable semi-annually in
arrears on each of January 15 and July 15 of each year, commencing January 15,
1998 at the rate of 10-1/8% per annum. Holders whose Old Notes are accepted for
exchange will be deemed to have waived the right to receive any interest accrued
on the Old Notes. The Exchange Notes will be redeemable, in whole or in part, at
the option of the Company, on or after July 15, 2002 at the redemption prices
set forth therein, plus accrued interest to the date of redemption. See
"Description of Exchange Notes" section of the Prospectus.
The Company reserves the right, at any time or from time to time, to
extend the Exchange Offer at its discretion, in which event the term "Expiration
Date" shall mean the latest time and date to which the Exchange Offer is
extended. The Company shall notify the Holders of the Old Notes of any extension
by means of a press release or other public announcement prior to 9:00 A.M., New
York City time, on the next business day after the previously scheduled
Expiration Date.
The Exchange Offer is not conditioned upon any minimum aggregate
principal amount of Old Notes being tendered or accepted for exchange. However,
the Exchange Offer is subject to certain conditions. Please see the Prospectus
under the section entitled "The Exchange Offer--Conditions."
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 or acceptance of the Exchange Offer would not be in compliance with the
laws of such jurisdiction.
This Letter is to be completed by a Holder of Old Notes either if
certificates are to be forwarded herewith or if a tender of certificates for Old
Notes, if available, is to be made by book-entry transfer to the account
maintained by IBJ Schroder Bank & Trust Company (the "Exchange Agent") at the
Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the
procedures set forth in "The Exchange Offer -- Procedures for Tendering" section
of the Prospectus. Holders of Old Notes whose certificates are not immediately
available, or who are unable to deliver their certificates or confirmation of
the book-entry tender of their Old Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility (a "Book-Entry Confirmation") and all other
documents required by this Letter to the Exchange Agent on or prior to the
Expiration Date, must tender their Old Notes according to the guaranteed
delivery procedures set forth in "The Exchange Offer -- Guaranteed Delivery
Procedures" section of the Prospectus. See Instruction 1. Delivery of documents
to the Book-Entry Transfer Facility does not constitute delivery to the Exchange
Agent.
The undersigned has completed the appropriate boxes below and signed
this Letter to indicate the action the undersigned desires to take with respect
to the Exchange Offer.
2
<PAGE> 3
List below the Old Notes to which his Letter relates. If the space
provided below is inadequate, the Certificate numbers and principal amount of
Old Notes should be listed on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
DESCRIPTION OF OLD NOTES 1 2 3
Aggregate
Principal Amount Principal
Certificate of Amount
Names(s) and Address(es) of Registered Holders(s) Number(s)* Old Notes(s) Tendered**
<S> <C> <C> <C>
Total
</TABLE>
* Need not be completed if Old Notes are being tendered by book-entry
transfer.
** Unless otherwise indicated in this column, a holder will be deemed to
have tendered ALL of the Old Notes represented by the Old Notes
indicated in column 2. See Instruction 2.
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPETE THE FOLLOWING:
Name of Tendering Institution
Account Number Transaction Code Number
-------------------- -----------
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)
--------------------------------------
Window Ticket Number (if any)
--------------------------------------
Date of Execution of Notice of Guaranteed Delivery
-------------------
Name of Institution which guaranteed delivery
-----------------------
If Delivered by Book-Entry Transfer, Complete the Following:
Account Number Transaction Code Number
-------------------- -----------
/ / CHECK HERE IF YOU ARE BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO:
Name:
---------------------------------------------------------------
Address:
------------------------------------------------------------
3
<PAGE> 4
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount of Old
Notes indicated above. Subject to, and effective upon, the acceptance for
exchange of the Old Notes tendered hereby, the undersigned hereby sells, assigns
and transfers to, or upon the order of, the Company all right, title and
interest in and to such Old Notes as are being 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 Company) with respect to the tendered Old
Notes with the full power of substitution to (i) deliver certificates for such
Old Notes to the Company and deliver all accompanying evidences of transfer and
authenticity to, or upon the order of, the Company, (ii) present such Old Notes
for transfer on the books of the Company and (iii) receive for the account of
the Company 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 to be
irrevocable from and after the Expiration Date and coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that the Company 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 accepted by the Company. The
undersigned hereby further represents that any Exchange Notes acquired in
exchange for Old Notes tendered hereby will have been acquired in the ordinary
course of business of the undersigned, that the undersigned has no arrangement
or understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of such Exchange Notes in violation of the
Securities Act and that the undersigned is not an "affiliate," (as defined in
Rule 405 under the Securities Act) of the Company.
The undersigned agrees that acceptance of any tendered Old Notes by the
Company and the issuance of Exchange Notes in exchange therefor will constitute
performance in full by the Company of its obligations under the Registration
Rights Agreement (as defined in the Prospectus) and that the Company will have
no further obligations or liabilities thereunder (except in limited
circumstances).
The undersigned also acknowledges as follows: This Exchange Offer is being
made in reliance on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") set forth in certain "no-action" letters issued to
third parties and unrelated to the Company and the Exchange Offer, and based on
such interpretations, the Company believes that the Exchange 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 such
holder that is an "affiliate" of the Company 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
Exchange Notes are acquired in the ordinary course of such holders' business and
such holders have no arrangement or understanding with any person to participate
in the distribution of such Exchange Notes in violation of the provisions of the
Securities Act. Any Holder who tenders in the Exchange Offer with the intention
to participate, or for the purpose of participating, in a distribution of the
Exchange Notes could not rely on the position of the staff of the Commission
enunciated in "no-action" letters and, in the absence of an exemption therefrom,
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. Failure to comply with
such requirements in such instance may result in such Holder incurring liability
under the Securities Act for which the Holder is not indemnified by the Company.
However, the undersigned acknowledges that the Company has not sought its own
no-action letter and there can be no assurance that the staff of the Commission
would make a similar determination with respect to the Exchange Offer as in such
other circumstances.
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
Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Old Notes that were acquired as a
result of market-making or other trading activities, it acknowledges that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange 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
above-referenced prospectus may be the prospectus relating to the Exchange Offer
only if it contains a plan of distribution with respect to such resale
transactions (but need not name the undersigned or disclose the amount of
Exchange Notes held by the undersigned).
4
<PAGE> 5
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company or the Exchange Agent to be necessary or
desirable to complete the sale, assignment and transfer of the Old Notes
tendered hereby. All authority conferred or agreed to be conferred in this
Letter and every obligation of the undersigned hereunder shall be binding upon
the successors, assigns, heirs, executors, administrators, trustees in
bankruptcy and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned. This
tender may be withdrawn only in accordance with the procedures set forth in "The
Exchange Offer -- Withdrawal Rights" section of the Prospectus.
For purposes of this Exchange Offer, the Company shall be deemed to have
accepted validly tendered Old Notes when, as and if the Company has given oral
and written notice thereof to the Exchange Agent.
The undersigned understands that tenders of the Old Notes pursuant to any
one of the procedures described under "The Exchange Offer--Procedures for
Tendering" in the Prospectus and in the Instructions hereto will constitute a
binding agreement between the undersigned and the Company in accordance with the
terms and subject to the conditions set forth herein and in the Prospectus.
The undersigned recognizes that under certain circumstances set forth in
the Prospectus under "The Exchange Offer -- Conditions" the Company will not be
required to accept for exchange any of the Old Notes tendered. Old Notes not
accepted for exchange or withdrawn will be returned (or, in the case of Old
Notes tendered by book-entry transfer through the Book-Entry Transfer Facility,
will promptly be credited to an account maintained at the Book-Entry Transfer
Facility), without expense, to the undersigned at the address set forth below
unless otherwise indicated under "Special Delivery Instructions" below as
promptly as practicable after the Expiration Date.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please deliver the Exchange Notes (and, if applicable,
substitute certificates representing Old Notes for any Old Notes not exchanged)
in the name of the undersigned or, in the case of a book-entry delivery of Old
Notes, please credit the account indicated above maintained at the Book-Entry
Transfer Facility. Similarly, unless otherwise indicated under the box entitled
"Special Delivery Instructions" below, please send the Exchange Notes (and, if
applicable, substitute certificates representing Old Notes for any Old Notes not
exchanged) to the undersigned at the address shown above in the box entitled
"Description of Old Notes."
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS
SET FORTH IN SUCH BOX ABOVE.
5
<PAGE> 6
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(Complete Accompanying Substitute Form W-9)
Dated: , 1997
--------------------------- ------------------
x , 1997
--------------------------- ------------------
x , 1997
--------------------------- ------------------
Signature(s) by Owner Date
Area Code and Telephone Number
--------------------------------------
If a holder is tendering any Old Notes, this Letter must be signed
by the registered holder(s) as the name(s) appear(s) on the certificate(s)
for the Old Notes or by any person(s) authorized to become registered
holder(s) by endorsements and documents transmitted herewith. If signature
is by a trustee, executor, administrator, guardian, officer or other
person acting in a fiduciary or representative capacity, please set forth
full title. See Instruction 3.
Name(s):
------------------------------------------------------------
------------------------------------------------------------
(Please Type or Print)
Capacity:
------------------------------------------------------------
Address:
------------------------------------------------------------
------------------------------------------------------------
(Including Zip Code)
SIGNATURE GUARANTEE
(if required by Instruction 3)
Signature(s) Guaranteed by
an Eligible Institution:
------------------------------------------------
(Authorized Signature)
------------------------------------------------------------
(Title)
------------------------------------------------------------
(Name and Firm)
6
<PAGE> 7
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 3 and 4)
To be completed ONLY if certificates for Old Notes not exchanged and/or
Exchange Notes are to be issued in the name of and sent to someone other than
the person or persons whose signature(s) appear(s) on this Letter above, or if
Old Notes delivered by book-entry transfer which are not accepted for exchange
are to be returned by credit to an account maintained at the Book-Entry Transfer
Facility other indicated above.
Issue: Exchange Notes and/or Old Notes to:
Name(s)
-------------------------------------------------------------
(Please Type or Print)
-------------------------------------------------------------
(Please Type or Print)
Address
-------------------------------------------------------------
-------------------------------------------------------------
(Zip Code)
(Complete Substitute Form W-9)
Credit unexchanged Old Notes delivered by
book-entry transfer to the Book-Entry
Transfer Facility account set forth below.
-------------------------------------------------------------
(Book-Entry Transfer Facility
Account Number, if applicable)
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3 and 4)
To be completed ONLY if certificates for Old Notes not exchanged and/or
Exchange Notes are to be sent to someone other than the person or persons whose
signature(s) appear(s) on this Letter above or to such person or persons at an
address other than shown in the box entitled "Description of Old Notes" on this
Letter above.
Issue: Exchange Notes and/or Old Notes to:
Name(s)
-------------------------------------------------------------
(Please Type or Print)
-------------------------------------------------------------
(Please Type or Print)
Address
-------------------------------------------------------------
-------------------------------------------------------------
(Zip Code)
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATES FOR
OLD NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE
NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO
5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING ANY
BOX ABOVE.
7
<PAGE> 8
INSTRUCTIONS
Forming Part of the Terms and Conditions of the
Exchange Offer for any and all outstanding
10-1/8% Senior Subordinated Notes Due 2007
in Exchange for
10-1/8% Senior Subordinated Notes Due 2007, Series B
of Safety Components International, Inc.
1. DELIVERY OF THIS LETTER AND NOTES; GUARANTEED DELIVERY PROCEDURES.
This Letter is to be completed by noteholders either if certificates
are to be forwarded herewith or if tenders are to be made pursuant to the
procedures for delivery by book-entry transfer set forth in "The Exchange Offer
- -- Procedures for Tendering" section of the Prospectus. Certificates for all
physically tendered Old Notes, or Book-Entry Confirmation, as the case may be,
as well as a properly completed and duly executed Letter (or manually signed
facsimile hereof) and any other documents required by this Letter, must be
reviewed by the Exchange Agent at the address set forth herein on or prior to
the Expiration Date, or the tendering holder must comply with the guaranteed
delivery procedures set forth below.
Noteholders whose certificates for Old Notes are not immediately
available or who cannot deliver their certificates and all other required
documents to the Exchange Agent on or prior to the Expiration Date, or who
cannot complete the procedure for book-entry transfer on a timely basis, may
tender their Old Notes pursuant to the guaranteed delivery procedures set forth
in "The Exchange Offer -- Guaranteed Delivery Procedures" section of the
Prospectus. Pursuant to such procedures (i) such entry must be made through an
Eligible Institution, (ii) prior to the Expiration Date, the Exchange Agent must
receive from such Eligible Institution a properly completed and duly executed
Letter (or a facsimile thereof) and Notice of Guaranteed Delivery, substantially
in the form provided by the Company (by telegram, telex, facsimile transmission,
mail or hand delivery), setting forth the name and address of the holder of Old
Notes and the amount of Old Notes tendered, setting forth the tender is being
made thereby and guaranteeing that within five New York Stock Exchange ("NYSE")
trading days after the date of execution of the Notice of Guaranteed Delivery,
the certificates for all physically tendered Old Notes, or a Book-Entry
Confirmation, and any other documents required by the Letter will be deposited
by the Eligible Institution with the Exchange Agent, and (iii) the certificates
for all physically tendered Old Notes, in proper form for transfer, or Book-
Entry Confirmation as the case may be, and all other document required by this
Letter, are received by the Exchange Agent within five NYSE trading days after
the date of execution of the Notice of Guaranteed Delivery.
The method of delivery of this Letter, the Old Notes and all other
required documents is at the election and risk of the tendering holders, but the
delivery will be deemed made only when actually received or confirmed by the
Exchange Agent. If Old Notes are sent by mail, it is suggested that the mailing
be made sufficiently in advance of the Expiration Date to permit delivery to the
Exchange Agent prior to 5 p.m., New York City time, on the Expiration Date.
See "The Exchange Offer" section of the Prospectus.
2. TENDER BY HOLDER; PARTIAL TENDERS.
Only a Holder of Old Notes may tender such Old Notes in the Exchange
Offer. Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered Holder promptly and instruct such
registered Holder to tender on behalf of such beneficial owners. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing this Letter and delivering such owner's Old
Notes, either make appropriate arrangements to register ownership of the Old
Notes in such owner's name or obtain a properly completed bond power from the
registered Holder. The transfer of registered ownership may take considerable
time.
Tenders of Old Notes will be accepted only in denominations of $1,000
or integral multiples thereof. If less than all of the Old Notes evidenced by a
submitted certificate are to be tendered, the tendering holder(s) should fill in
the aggregate principal amount of Old Notes to be tendered in the box above
entitled "Description of Old Notes -- Principal
8
<PAGE> 9
Amount tendered." A reissued certificate representing the balance of nontendered
Old Notes will be sent to such tendering Holder (except in the case of
book-entry tenders), unless otherwise provided in the appropriate box on this
Letter promptly after the Expiration Date. All of the Old Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
3. SIGNATURES OF THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURES.
If this Letter is signed by the registered holder of the Old Notes
tendered hereby, the signature must correspond exactly with the name as written
on the face of the certificates without any change whatsoever.
If any tendered Old Notes are owned of record by two or more joint
owners, all such owners must sign this Letter.
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter as there are different registrations of certificates.
When this Letter is signed by the registered holder or holders of the
Old Notes specified herein and tendered hereby, no endorsements of certificates
or separate bond powers are required. If, however, the Exchange Notes are to be
issued, or any untendered Old Notes are to be reissued, to a person other than
the registered holder, then endorsements of any certificates transmitted hereby
or separate bond powers are required. Signatures on such certificate(s) must be
guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder
or holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name or names of the registered holder or holders appear(s) on
the certificate(s) and signatures on such certificate(s) must be guaranteed by
an Eligible Institution.
If this Letter or any certificates or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must be
submitted.
ENDORSEMENTS ON CERTIFICATES FOR OLD NOTES OR SIGNATURES ON BOND POWERS
REQUIRED BY THIS INSTRUCTION 3 MUST BE GUARANTEED BY A FIRM WHICH IS A MEMBER OF
A REGISTERED NATIONAL SECURITIES EXCHANGE OR A MEMBER OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC. OR BY A COMMERCIAL BANK OR TRUST COMPANY
HAVING AN OFFICE OR CORRESPONDENT IN THE UNITED STATES (AN "ELIGIBLE
INSTITUTION").
SIGNATURES ON THIS LETTER NEED NOT BE GUARANTEED BY AN ELIGIBLE
INSTITUTION, PROVIDED THE OLD NOTES ARE TENDERED: (i) BY A REGISTERED HOLDER OF
OLD NOTES (WHICH TERM, FOR PURPOSES OF THE EXCHANGE OFFER, INCLUDES ANY
PARTICIPANT IN THE BOOK-ENTRY TRANSFER FACILITY SYSTEM WHOSE NAME APPEARS ON A
SECURITY POSITION LISTING AS THE HOLDER OF SUCH OLD NOTES TENDERED) WHO HAS NOT
COMPLETED THE BOX ENTITLED "SPECIAL ISSUANCE INSTRUCTIONS" OR "SPECIAL DELIVERY
INSTRUCTIONS" ON THIS LETTER, OR (ii) FOR THE ACCOUNT OF AN ELIGIBLE
INSTITUTION.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders of Old Notes should indicate in the applicable box
the name and address to which Exchange Notes issued pursuant to the Exchange
Offer and/or substitute certificates evidencing Old Notes not exchanged are to
be issued or sent, if different from the name or address of the person signing
this Letter. In the case of issuance in a different name, the employer
identification or social security number of the person named must also be
indicated. Noteholders tendering Old Notes by book-entry transfer may request
that Old Notes not exchanged be credited to such account maintained at the
Book-Entry Transfer Facility as such noteholder may designate hereon. If no such
instructions are given, such Old Notes not exchanged will be returned to the
name or address of the person signing this Letter.
9
<PAGE> 10
5. TAX IDENTIFICATION NUMBER.
Federal income tax law generally requires that a tendering holder whose
Old Notes are accepted for exchange must provide the Company (as payor) with
such holder's correct Taxpayer Identification Number ("TIN") on Substitute Form
W-9 below, which in the case of a tendering holder who is an individual, is his
or her social security number. If the Company is not provided with the current
TIN or an adequate basis for an exemption, such tendering holder may be subject
to a $50 penalty imposed by the Internal Revenue Service. In addition, delivery
to such tendering holder of Exchange Notes may be subject to backup withholding
in an amount equal to 31% of all reportable payments made after the exchange. If
withholding results in an overpayment of taxes, a refund may be obtained.
Exempt holders of Old Notes (including, among others, all corporations
and certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed Guidelines of Certification of Taxpayer
Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for
additional instructions.
To prevent backup withholding, each tendering holder of Old Notes must
provide its correct TIN by completing the "Substitute Form W-9" set forth below,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN) and that (i) the holder is exempt from backup withholding, or (ii) the
holder has not been notified by the Internal Revenue Service that such holder is
subject to backup withholding as a result of a failure to report all interest or
dividends or (iii) the Internal Revenue Service has notified the holder that
such holder is no longer subject to backup withholding. If the tendering holder
of Old Notes is a nonresident alien or foreign entity not subject to backup
withholding, such holder must give the Company a completed Form W-8, Certificate
of Foreign Status. These forms may be obtained from the Exchange Agent. If the
Old Notes are in more than one name or are not in the name of the actual owner,
such holder should consult the W-9 Guidelines for information on which TIN to
report. If such holder does not have a TIN, such holder should consult the W-9
Guidelines for instructions on applying for a TIN, check the box in Part 2 of
the Substitute Form W-9 and write "applied for" in lieu of its TIN. Note:
Checking this box and writing "applied for" on the form means that such holder
has already applied for a TIN or that such holder intends to apply for one in
the near future. If such holder does not provide its TIN to the Company within
60 days, backup withholding will begin and continue until such holder furnishes
its TIN to the Company.
6. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the
transfer of Old Notes to it or its order pursuant to the Exchange Offer. If,
however, Exchange Notes and/or substitute Old Notes not exchanged 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, or if a transfer tax is imposed for any reason other than the
transfer of Old Notes to the Company or its order pursuant to the Exchange
Offer, the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted herewith, the amount of such transfer taxes will be billed directly to
such tendering holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES SPECIFIED IN THIS LETTER.
7. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive satisfaction of any or
all conditions enumerated in the Prospectus.
8. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Old Notes, by execution of this Letter, shall
waive any right to receive notice of the acceptance of their Old Notes for
exchange.
10
<PAGE> 11
Neither the Company, the Exchange Agent nor any other person is
obligated to give notice of any defect or irregularity with respect to any
tender of Old Notes nor shall any of them incur any liability for failure to
give any such notice.
9. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES.
Any holder whose Old Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests
for additional copies of the Prospectus and this Letter, may be directed to the
Exchange Agent, at the address and telephone number indicated above.
11
<PAGE> 12
PART 1-PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND CERTIFY BY
SIGNING AND DATING BELOW
SUBSTITUTE
FORM W-9
Department of the Treasury
- -----------------------------------------------
Social Security Number
or
- -----------------------------------------------
Employer Identification Number
or
- -----------------------------------------------
Individual Taxpayer Identification Number
Payer's Request for Taxpayer
Identification Number (TIN)
PART 2-Check the box if you are NOT subject to backup withholding under
the provisions of Section 3406(a)(1)(C) of the Internal Revenue Code
because (1) you have not been notified that you are subject to backup
withholding as a result of failure to report all interest or dividends
or (2) the IRS has notified you that you are no longer subject to
backup withholding. / /
CERTIFICATION-UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE
INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT AND COMPLETE.
PART 3 -
Awaiting TIN / /
SIGNATURE DATE , 1997
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACK-UP
WITHHOLDING OF 31% OF ALL REPORTABLE PAYMENTS MADE TO YOU PURSUANT TO
THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM
W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE
IF YOU CHECKED THE BOX IN PART 3 OF
SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number to the payor, 31% of all
payments made to me pursuant to the Exchange Offer shall be retained until I
provide a taxpayer identification number to the payor and that, if I do not
provide my taxpayer identification number within sixty (60) days, such retained
amounts shall be remitted to the Internal Revenue Service as a backup
withholding and 31% of all reportable payments made to me thereafter will be
withheld and remitted to the Internal Revenue Service until I provide a number.
DATE: , 1997
- ---------------------------------- ----------------------------
Signature
12
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
SAFETY COMPONENTS INTERNATIONAL, INC.
OFFERING FOR ANY AND ALL OUTSTANDING
10-1/8% SENIOR SUBORDINATED NOTES DUE 2007, SERIES A
IN EXCHANGE FOR
10-1/8% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B
PURSUANT TO THE PROSPECTUS, DATED ____________, 1997.
As set forth in the Prospectus dated ____________, 1997 (as the same
may be amended from time to time, the "Prospectus") of Safety Components
International, Inc. (the "Company") under the caption "The Exchange Offer --
Guaranteed Delivery Procedures," and in the accompanying Letter of Transmittal
(the "Letter of Transmittal") and Instruction 1 thereto, this form or one
substantially equivalent hereto must be used to accept the Company's offer (the
"Exchange Offer") to exchange any and all outstanding 10-1/8% Senior
Subordinated Notes Due 2007, Series A (the "Old Notes") of the Company for a
like aggregate principal amount of 10-1/8% Senior Subordinated Notes Due 2007,
Series B (the "Exchange Notes") of the Company from the holders ("Holders")
thereof if (i) certificates representing the Old Notes to be exchanged are not
immediately available or (ii) the procedures for book-entry transfer cannot be
completed prior to the Expiration Date (as defined below). This form, properly
completed and duly executed, may be delivered by mail or hand delivery or
transmitted, via facsimile, to IBJ Schroder Bank & Trust Company (the "Exchange
Agent") as set forth below. All capitalized terms used herein but not defined
herein shall have the meanings ascribed to them in the Prospectus.
THE EXCHANGE OFFER WILL EXPIRE AT 5 P.M., NEW YORK CITY TIME, ON ___________,
1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO
5 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
The Exchange Agent for the Exchange offer is:
BY MAIL:
IBJ Schroder Bank & Trust Company
P.O. Box 84
Bowling Green Station
New York, NY 10274-0084
Attn: Reorganization Operations Department
<TABLE>
<S> <C> <C>
BY OVERNIGHT DELIVERY: FACSIMILE TRANSMISSION NUMBER: BY HAND:
IBJ Schroder Bank & Trust Company (212) 858-2611 IBJ Schroder Bank & Trust Company
One State Street One State Street
New York, NY 10004 CONFIRM BY TELEPHONE: New York, NY 10004
Attn: Securities Processing Window (212) 858-2103 Attn: Securities Processing Window
Subcellar One (SC-1) Subcellar One (SC-1)
---------------
FOR INFORMATION CALL:
(212) 858-2103
---------------
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on
the Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter of
Transmittal.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tender(s) to the Company, upon the terms and
subject to the conditions set forth in the Prospectus and the Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Old Notes set forth below pursuant to the guaranteed delivery procedures set
forth in the Prospectus under the caption "The Exchange Offer -- Guaranteed
Delivery Procedures."
All authority herein conferred or agreed to be conferred by this Notice
of Guaranteed Delivery shall survive the death or incapacity of the undersigned
and every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
PLEASE SIGN AND COMPLETE
Signatures of Registered Holder(s) or Authorized
Signatory:
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
Name(s) of Registered Holder(s):
-----------------------------------
---------------------------------------------------------
---------------------------------------------------------
Principal Amount of Old Notes Tendered:
----------------------------
Date:
---------------------------------------------------------
Address:
---------------------------------------------------------
Area Code and Telephone No.:
----------------------------------------
If Notes will be delivered by book-entry transfer, check
trust company below:
/ / The Depository Trust Company
Depository Account No:
-----------------------------------------
<PAGE> 3
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly as
their name(s) appear on certificates for Old Notes or on a security position
listing as the owner of Old Notes, or by person(s) authorized to become
Holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. 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 provide the following information.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
---------------------------------------------------------
---------------------------------------------------------
Capacity:
---------------------------------------------------------
Address(es):
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
Do not send Old Notes with this form. Old Notes should be sent to the Exchange
Agent together with a properly completed and duly executed Letter of
Transmittal.
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a member firm of a registered national securities exchange or
of the National Association of Securities Dealers, Inc. or a commercial bank or
trust company having an office or a correspondent in the United States, hereby
guarantees that, within five New York Stock Exchange trading days from the date
of this Notice of Guaranteed Delivery, a properly completed and duly executed
Letter of Transmittal (or a facsimile thereof), together with certificates
representing the Old Notes tendered hereby in proper form for transfer (or
confirmation of the book-entry transfer of such Old Notes into the Exchange
Agent's account at a Book-Entry Transfer Facility, pursuant to the procedure for
book-entry transfer set forth in the Prospectus under the caption "The Exchange
Offer -- Procedures for Tendering"), and required documents will be deposited by
the undersigned with the Exchange Agent.
Name of Firm:
-------------------------- ------------------------------
Authorized Signature
Address: Name:
------------------------------- ----------------------------
Title:
------------------------------- ----------------------------
Area Code and Telephone No. Date:
------------ ----------------------------
DO NOT SEND OLD NOTES WITH THIS FORM. ACTUAL SURRENDER OF OLD
NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND
VALIDLY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
<PAGE> 1
Offer for any and all Outstanding
10 1/8% Senior Subordinated Notes Due 2007, Series A
In Exchange for
10 1/8% Senior Subordinated Notes Due 2007, Series B
of Safety Components International, Inc.
Pursuant to the Prospectus
dated _______, 1997
___________, 1997
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We are enclosing herewith the materials listed below relating to the
offer by Safety Components International, Inc. (the "Company") to exchange, upon
the terms and subject to the conditions set forth in the Prospectus dated
_________, 1997 (the "Prospectus") and in the related Letter of Transmittal (the
"Letter of Transmittal," together with the Prospectus, the "Exchange Offer"),
any and all outstanding 10 1/8% Senior Subordinated Notes Due 2007, Series A
("Old Notes") of the Company for a like aggregate principal amount of 10 1/8%
Senior Subordinated Notes Due 2007, Series B of the Company.
Enclosed herewith are copies of the following documents:
1. The Prospectus;
2. The Letter of Transmittal for your use and for the information of
your clients, together with guidelines of the Internal Revenue Service for
Certification of Taxpayer Identification Number on Substitute Form W-9 providing
information relating to backup federal income tax withholding;
3. Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if the Old Notes and all other required documents cannot be delivered on
or prior to the Expiration Date;
4. Instruction to Registered Holder and/or Book-Entry Transfer
Participant from Beneficial Owner; and
5. A form of letter which may be sent to your clients for whose account
you hold the Old Notes in your name or in the name of a nominee, accompanying
the instruction form referred to above, for obtaining such clients' instructions
with regard to the Exchange Offer;
PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON __________, 1997, UNLESS EXTENDED. WE URGE YOU TO CONTACT YOUR
CLIENTS AS PROMPTLY AS POSSIBLE.
The Exchange Offer is not conditioned upon any minimum number of Old
Notes being tendered.
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to the Company that (i) any Exchange Notes acquired in exchange for
Old Notes pursuant to the Exchange Offer are being acquired in the ordinary
course of business of such holder, (ii) such holder has no arrangement or
understanding with any person to participate in the distribution (within the
meaning of the Securities Act of 1933, as amended (the "Securities Act")) of
such Exchange Notes, (iii) if such holder is not a broker-dealer, such holder is
not engaged in, and does not intend to engage in, a distribution of Exchange
Notes and (iv) such holder is not an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act. If the tendering holder is a
broker-dealer that will receive Exchange Notes for its own account in exchange
for Old Notes that were acquired as a result of market-making or other trading
activities, it acknowledges that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
<PAGE> 2
Exchange Notes. By acknowledging that it will deliver and by delivering a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes, such broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act.
The enclosed Instruction to Registered Holder and/or Book-Entry
Transfer Participant from Beneficial Owner contains an authorization by the
beneficial owners of the Old Notes for you to make the foregoing
representations.
The Company will not pay any fees or commissions to any broker or
dealer or other person (other than the Exchange Agent (as defined below)) for
soliciting tenders of the Old Notes pursuant to the Exchange Offer. The Company
will pay or cause to be paid any transfer taxes payable on the transfer of Old
Notes to it, except as otherwise provided in Instruction 6 of the enclosed
Letter of Transmittal.
Additional copies of the enclosed materials may be obtained from IBJ
Schroder Bank & Trust Company (the "Exchange Agent"), at its address and
telephone number set forth on the back cover of the enclosed Prospectus.
Very truly yours,
Safety Components International, Inc.
2
<PAGE> 1
Offer for any and all Outstanding
10-1/8 % Senior Subordinated Notes Due 2007, Series A
In Exchange for
10-1/8 % Senior Subordinated Notes Due 2007, Series B
of Safety Components International, Inc.
__________, 1997
TO OUR CLIENTS:
Enclosed for your consideration is the Prospectus dated _______, 1997
(as the same may be amended from time to time, the "Prospectus") and a related
Letter of Transmittal (the "Letter of Transmittal," together with the
Prospectus, the "Exchange Offer") relating to the offer by Safety Components
International, Inc. (the "Company") to exchange any and all outstanding 10 1/8%
Senior Subordinated Notes Due 2007, Series A of the Company for a like aggregate
principal amount of 10 1/8% Senior Subordinated Notes Due 2007, Series B of the
Company.
Please Note that the Exchange Offer will expire at 5:00 p.m., New York
City time, on _______________, 1997, unless extended.
The Exchange Offer is not conditioned upon any minimum number of Old
Notes being tendered.
WE ARE THE REGISTERED HOLDER OF THE OLD NOTES HELD BY US FOR YOUR
ACCOUNT. A TENDER OF ANY SUCH OLD NOTES CAN BE MADE ONLY BY US AS THE REGISTERED
HOLDER AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED
TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER OLD NOTES
HELD BY US FOR YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish us to
tender any or all of the Old Notes held by us for your account, pursuant to the
terms and conditions set forth in the Exchange Offer. We also request that you
confirm that we may on your behalf make the representations contained in the
Letter of Transmittal that are to be made with respect to you as beneficial
owner.
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to the Company that (i) any Exchange Notes acquired in exchange for
Old Notes pursuant to the Exchange Offer are being acquired in the ordinary
course of business of such holder, (ii) such holder has no arrangement or
understanding with any person to participate in the distribution (within the
meaning of the Securities Act of 1933, as amended (the "Securities Act")) of
such Exchange Notes, (iii) if such holder is not a broker-dealer, such holder is
not engaged in, and does not intend to engage in, a distribution of Exchange
Notes and (iv) such holder is not an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act. If the tendering holder is a
broker-dealer that will receive Exchange Notes for its own account in exchange
for Old Notes that were acquired by it as a result of market-making or other
trading activities, it acknowledges that it will deliver a prospectus meeting
the requirements of the Securities Act in connection with any resale of such
Exchange Notes. By acknowledging that it will deliver and by delivering a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes, such broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act.
Very truly yours,
<PAGE> 1
Instruction to Registered Holder and/or Book
Entry Transfer Participant from Beneficial Owner
for
Tender of 10-1/8 Senior Subordinated Notes Due 2007, Series A
in Exchange for
10-1/8 Senior Subordinated Notes Due 2007, Series B
OF SAFETY COMPONENTS INTERNATIONAL, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
__________________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE").
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME
PRIOR TO THE EXPIRATION DATE.
Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated
______________, 1997 (the "Prospectus") of Safety Components International,
Inc., a Delaware corporation (the "Company"), and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), that together constitute the
Company's offer (the "Exchange Offer") to exchange any and all outstanding 101/8
Senior Subordinated Notes Due 2007, Series A (the "Old Notes") of the Company
for a like aggregate principal amount of 10-1/8 Senior Subordinated Notes Due
2007, Series B (the "Exchange Notes") of the Company. Capitalized terms used but
not defined herein have the meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry
transfer facility participant, as to the action to be taken by you relating to
the Exchange Offer with respect to the Old Notes held by you for the account of
the undersigned.
The aggregate face amount of the Old Notes held by you for the account
of the undersigned is (FILL IN AMOUNT):
$___________________ of the 10-1/8 Senior Subordinated Notes Due 2007,
Series A.
With respect to the Exchange Offer, the undersigned hereby instructs
you (CHECK APPROPRIATE BOX):
/ / To TENDER the following Old Notes held by you for the account of
the undersigned (INSERT PRINCIPAL AMOUNT OF OLD NOTES TO BE TENDERED (IF ANY)):
$____________________
/ / Not to TENDER any Old Notes held by you for the account of the
undersigned.
<PAGE> 2
If the undersigned instructs you to tender the Old Notes held by you
for the account of the undersigned, it is understood that you are authorized to
make, on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representations and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including, but not limited to, the representations, that (i)
any Exchange Notes acquired in exchange for Old Notes pursuant to the Exchange
Offer are being acquired in the ordinary course of business of the undersigned,
(ii) the undersigned has no arrangement or understanding with any person to
participate in the distribution (within the meaning of the Securities Act of
1933, as amended (the "Securities Act")) of such Exchange Notes, (iii) if the
undersigned is not a broker-dealer, the undersigned is not engaged in, and does
not intend to engage in, a distribution of Exchange Notes and (iv) the
undersigned is not an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act. If the undersigned is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making or other trading activities, it
acknowledges that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Notes. By
acknowledging that it will deliver and by delivering a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes, the undersigned is not deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
SIGN HERE
Name of beneficial owner(s):
--------------------------------------------------
Signature(s):
----------------------------------------------------------------
Name(s) (please print):
---------------------------------------------------
Address:
----------------------------------------------------------------------
Telephone Number:
-----------------------------------------------------------
Taxpayer Identification or Social Security Number:
---------------------------
Date:
----------------------------------------------------------------------
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYOR --
Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. Individual Taxpayer identification numbers have
nine digits and are used solely for tax purposes by individuals who are required
to have a taxpayer identification number but who do not have one, and are not
eligible to obtain a Social Security number. The table below will help determine
the number to give the Payor.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
GIVE THE GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT IDENTIFICATION FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF NUMBER OF
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. An individual's account The individual 8. Sole proprietorship The Owner(4)
account
2. Two or more individuals (joint The actual owner of the 9. A valid trust, estate, or Legal entity (Do not
account) account or, if combined pension trust furnish the identifying
funds, any one of the number of the personal
individuals(1) representative or trustee
unless the legal entity
itself is not designated
in the account title.)(5)
3. Husband and wife (joint The actual owner of the 10. Corporate account The Corporation
account) account or, if joint funds,
either person(1)
4. Custodian account of a minor The minor(2) 11. Religious, charitable, or The organization
(Uniform Gift to Minors Act) educational organization
account
5. Adult and minor (joint the adult or, if the minor is 12. Partnership account held The partnership
account) the only contributor, the in the name of the
minor(1) business
6. Account in the name of The ward, minor, or 13. Association, club or The organization
guardian or committee for a incompetent person(3) other tax-exempt
designated ward, minor, or organization
incompetent person
7. a. The usual revocable The grantor-trustee(1) 14. A broker or registered The broker or nominee
savings trust account nominee
(grantor is also trustee)
b. So-called trust account The actual owner(1) 15. Account with the The public entity
that is not a legal or Department of
valid trust under State Agriculture in the name
law of a public entity (such
as a State or local
governmental school
district or prison) that
receives agricultural
program payments
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish
such person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
1
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
W-7, Application for Individual Taxpayer Identification Number or Form SS-4,
Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of
1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to Partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
- Payments of patronage dividends where the account received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You
may be subject to backup withholding if this interest is $600 or more
and is paid in the course of the payer's trade or business and you have
not provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt interest dividends
under section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage
dividends that are not subject to information reporting are also not subject to
backup withholding. For details, see the regulations under sections 6041,
6041A(a), 6045, and 6050A.
PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1993, payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
