<PAGE>
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.
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 10, 1997
7,500,000 SHARES
[LOGO]
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------
Of the 7,500,000 shares of Common Stock of Essex International Inc. offered,
6,000,000 shares are being offered hereby in the United States and 1,500,000
shares are being offered in a concurrent international offering outside the
United States. The initial public offering price and the aggregate underwriting
discount per share will be identical for both offerings. See "Underwriting".
Of the 7,500,000 shares of Common Stock offered, 3,750,000 shares are being
sold by the Company and 3,750,000 shares are being sold by the Selling
Stockholders. See "Principal and Selling Stockholders". The Company will not
receive any of the proceeds from the sale of the shares being sold by the
Selling Stockholders.
Prior to this offering, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering price
per share will be between $17.00 and $20.00. For factors to be considered in
determining the initial public offering price, see "Underwriting".
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.
The Company has been approved to list the Common Stock on the New York Stock
Exchange, subject to notice of issuance, under the symbol "SXC".
--------------------
THESE 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.
--------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) COMPANY(2) STOCKHOLDERS
---------------- ---------------- ---------------- --------------------
<S> <C> <C> <C> <C>
Per Share.................... $ $ $ $
Total(3)..................... $ $ $ $
</TABLE>
- --------------------------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting".
(2) Before deducting estimated expenses of $ payable by the Company.
(3) The Company and the Selling Stockholders have granted the U.S. Underwriters
an option for 30 days to purchase up to an additional 250,000 and 650,000
shares, respectively, at the initial public offering price per share, less
the underwriting discount, solely to cover over-allotments. Additionally,
the Company and the Selling Stockholders have granted the International
Underwriters a similar option with respect to an additional 225,000 shares
as part of a concurrent International Offering. If such options are
exercised in full, the total initial public offering price, underwriting
discount, proceeds to Company and proceeds to the Selling Stockholders will
be $ , $ , $ and $ , respectively. See "Underwriting".
--------------------
The shares offered hereby are offered severally by the U.S. Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that certificates
for the shares will be ready for delivery in New York, New York, on or about
, 1997, against payment therefor in immediately available funds.
GOLDMAN, SACHS & CO. SMITH BARNEY INC.
DONALDSON, LUFKIN & JENRETTE LEHMAN BROTHERS
SECURITIES CORPORATION
------------------
The date of this Prospectus is , 1997.
<PAGE>
[Collage of pictures showing products manufactured by the Company and a
manufacturing facility, a map of the United States showing the locations of the
Company's domestic manufacturing plants and service centers, a stylized version
of "Essex" and the following text "Essex is a leading North American producer of
electric wire and cable products, and is included in the Fortune 1,000 list of
industrial and service companies. Essex is supported by an extensive
distribution system, as well as 28 manufacturing facilities in 16 states, which
produce a broad product line that includes magnet wire, building wire,
automotive wire, industrial wire, specialty wiring assemblies, communications
wire and electrical insulation materials".]
The Company intends to furnish to its stockholders annual reports containing
audited financial statements for each fiscal year of the Company.
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN THE
COMMON STOCK, AND IMPOSITION OF PENALTY BIDS, DURING AND AFTER THE OFFERING. FOR
A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS
INCLUDED ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE
INFORMATION IN THIS PROSPECTUS (I) ASSUMES THAT THE OVER-ALLOTMENT OPTIONS
GRANTED TO THE U.S. UNDERWRITERS AND THE INTERNATIONAL UNDERWRITERS WILL NOT BE
EXERCISED, (II) GIVES EFFECT TO A ONE-FOR-TWO REVERSE STOCK SPLIT (THE "STOCK
SPLIT") AND A RECLASSIFICATION OF THE COMPANY'S TWO EXISTING CLASSES OF COMMON
STOCK INTO A SINGLE CLASS OF COMMON STOCK (THE "RECLASSIFICATION"), EACH TO BE
EFFECTED PRIOR TO, OR SIMULTANEOUSLY WITH, THE CONSUMMATION OF THE OFFERINGS,
(III) TREATS THE SHARES OF COMMON STOCK UNDERLYING THE WARRANTS (AS DEFINED
HEREIN) IN THE MANNER DESCRIBED UNDER THE CAPTION "CERTAIN RELATIONSHIPS AND
RELATED PARTY TRANSACTIONS--THE REDEMPTION" AND (IV) ASSUMES NO EXERCISE OF
OPTIONS AFTER MARCH 24, 1997. UNLESS THE CONTEXT OTHERWISE INDICATES, THE TERM
"COMPANY" REFERS TO ESSEX INTERNATIONAL INC. ("ESSEX INTERNATIONAL") (FORMERLY
KNOWN AS BCP/ESSEX HOLDINGS INC.), AND ITS CONSOLIDATED SUBSIDIARIES, INCLUDING
ITS WHOLLY OWNED SUBSIDIARY, ESSEX GROUP, INC. ("ESSEX"), AND THEIR RESPECTIVE
PREDECESSORS.
THE COMPANY
The Company is a leading North American developer, manufacturer and
distributor of copper electrical wire and cable products. Founded in 1930, the
Company serves over 11,000 worldwide customers in a wide range of industrial
markets from its 28 manufacturing facilities and 48 service centers located
throughout the United States and Canada. Since 1993, the Company has
significantly strengthened its market positions through expanded sales efforts
and acquisitions, and has improved its manufacturing capacity and production
efficiencies through capital expenditure and productivity improvement programs.
As a result of these efforts, from 1993 to 1996, the Company's net sales volumes
grew at a compound annual growth rate ("CAGR") of approximately 8%, generating
$1.3 billion net sales in 1996, while its earnings before interest, taxes,
depreciation and amortization ("EBITDA") grew at a CAGR of 22%, from $77 million
in 1993 to $140 million in 1996, and its net income grew from a loss of $14.2
million in 1993 to a profit of $36.3 million in 1996. (With respect to EBITDA,
see footnote (g) in "Selected Consolidated Financial and Operating Data").
The Company organizes its operating activities into the following principal
areas:
MAGNET WIRE PRODUCTS (29% of 1996 net sales)--The Company's magnet wire
products are used in a wide variety of motors, coils, relays, generators,
solenoids and transformers by the electrical equipment and electronics
industries. Annual industry data since 1991 has shown that the Company's magnet
wire products have had the highest quality in the industry (as measured by
customer returns). As a result of significantly increasing its sales volumes of
magnet wire products in recent years while focusing on higher value-added
products and controlling costs, the gross margins of the Company's magnet wire
business have increased substantially.
BUILDING WIRE AND CABLE PRODUCTS (37% of 1996 net sales)--The Company
produces a wide range of copper building wire products for the commercial,
industrial and residential markets. These products are marketed primarily to
electrical distributors throughout the United States and Canada for ultimate use
by electrical contractors and "do-it-yourself" consumers. Approximately
two-thirds of the Company's net sales of these products is attributable to
remodeling and repair activity and the balance to new nonresidential and
residential construction.
COMMUNICATIONS WIRE AND CABLE PRODUCTS (13% of 1996 net sales)--The
Company's communications wire products consist of outside plant ("OSP") voice
communication copper wire and cable products for the "local loop" segment of the
telecommunication system and voice and data communication copper wire and cable
products for the premise segment of the telecommunication system. Copper-
3
<PAGE>
based wire is the most widely used medium for voice and data transmission in the
local loop and in homes and offices, due in part to its significant installed
base, lower installation cost and ease of repair.
OTHER PRODUCTS AND ACTIVITIES (21% of 1996 net sales)--The Company
manufactures and markets a wide range of automotive and industrial electrical
wire products and maintains a distribution business for the sale and
distribution of its magnet wire and related third-party-manufactured products.
The Company produces automotive wire and cable products (7% of 1996 net sales)
for sale to suppliers of automotive original equipment. Such products include
primary wire for use in engine harnesses, ignition wire and battery cable.
Industrial wire and cable products (5% of 1996 net sales) consist of appliance
wire, motor lead wire, submersible pump cable, power cable, flexible cord, power
supply cords, welding cable and recreational vehicle wire. The Company's
distribution business provides a sales channel to both small manufacturers of
original equipment motors and motor repair markets for some of the Company's
magnet wire products, as well as third-party-manufactured products that
complement the Company's magnet wire products. During 1996, third-party products
constituted 9% of net sales, while 20% of the Company's magnet wire products
were sold through this sales channel.
STRATEGY
The Company has established a strategy that is designed to capitalize on its
competitive strengths and position it to pursue opportunities for future growth.
The tenets of this strategy are:
- CAPITALIZE ON SIZE AND SCOPE OF OPERATIONS--The Company believes that it
is one of the largest electrical wire and cable producers in the United States
based on net sales. The Company believes that the size and scope of its
operations provide it with efficiencies in manufacturing, purchasing and
distribution and with the resources necessary to meet the increasing
technological demands of the market. The Company intends to enhance these
competitive advantages by continuing to expand its operations through internal
growth and acquisitions. The electrical copper wire and cable industry in North
America has undergone significant consolidation in the past ten years as a
result of increased demand for product quality and lower cost products that in
turn has necessitated substantial capital spending and development of
sophisticated technical capabilities by market participants.
- ENHANCE STRONG MARKET POSITIONS--The Company is focusing on improving its
leading or significant market positions in North America for its major product
categories and capitalizing on the advantages of its size. The Company believes
that it is one of two leading producers in each of the magnet wire and building
wire markets based on net sales. Recent acquisitions in magnet wire
distribution, building wire and industrial wire have enhanced the Company's
market positions in these businesses. The Company intends to maintain and
enhance its market positions through internal growth and continued participation
in future industry consolidation.
- MAINTAIN LEADERSHIP IN QUALITY AND PRODUCTIVITY--The Company employs
advanced technologies in manufacturing processes and product development and
intends to continue investing in manufacturing equipment and facilities and to
expand its continuous improvement programs in order to maintain its leadership
in quality and productivity. The Company believes that its wire and cable
products, which have earned numerous customer quality awards, are among the
highest in quality in the industry. Since 1992, the Company has invested
approximately $140 million in capital programs and has expanded its continuous
improvement programs in order to improve the quality of its products and
increase the cost efficiency and capacity of its production facilities. The
Company also has lowered cost levels by pursuing a high level of vertical
integration through internal production of its principal raw materials. In 1996,
the Company produced over 85% of its copper rod, magnet wire enamel and rubber
insulation materials and 70% of its PVC insulation requirements. As a result,
the Company believes that it is among the lowest cost domestic producers in each
of its business lines. A key productivity measure, annual copper equivalent
pounds shipped per employee, has increased by 21% from 1991 to 1996.
4
<PAGE>
- CAPITALIZE ON INDUSTRY GROWTH OPPORTUNITIES--The Company believes that, as
consumers continue to adapt to technological advances in both the home and the
workplace, the technical specifications of the "smart" home and office will
generate increased demand for certain electrical wire and cable products. The
Company believes that it is well positioned to capitalize on this growth due to
its significant market positions, strong name recognition and size. Growth in
the magnet wire business is expected to be driven by increasing demand for
devices containing electric motors in the home and in automobiles, along with
continuing consumer and government pressure for higher energy efficiency from
these devices (energy efficient motors utilize materially more magnet wire per
unit than do their traditional counterparts). Growth in the building wire
business is expected to come primarily from increasing repair and remodeling
activity, as well as from new commercial, industrial and residential
construction. Both new construction and remodeling activity is being affected by
the increased number of circuits and amperage handling capacity needed to
support the increasing demand for electrical services. The Company believes that
its communications wire and cable business will benefit from the increasing
number of outside telephone lines into and inside homes and offices and the
increasing quality demands placed on these lines to facilitate escalating data
transmission from the growing number of computers, facsimile machines and
Internet devices. In the automotive business, the Company believes that the
increasing production of cars and trucks with motorized or electrical options
will translate into increased demand for higher quality, thinner-gauge wire
products to take advantage of their lighter weights and greater efficiency.
- PURSUE ACQUISITION OPPORTUNITIES--Consistent with its historical emphasis
on vertical integration, breadth of product line and technological innovation,
the Company continuously evaluates opportunities to benefit further from its
manufacturing, purchasing and distribution capabilities, expand its customer
base, reduce costs and enter new markets through acquisitions, investments,
joint ventures and other strategic alliances. Since a major recapitalization in
1995 (the "1995 Refinancing"), which provided the Company with substantial
financial and operating flexibility, the Company has acquired three major
businesses: the distribution business of Avnet Inc. in October 1995
("Brownell"); the Canadian building wire business of BICC Phillips, Inc. in
March 1996 ("BICC Canada"); and the building and industrial wire businesses of
Triangle Wire & Cable, Inc. ("Triangle") in October 1996. The Company believes
that each of these businesses provides operating synergy that complements the
Company's existing manufacturing, distribution and administrative capabilities,
and each has met or exceeded financial and operating expectations since its
respective acquisition date. In addition, in May 1995, the Company entered into
a joint venture in India with Finolex Cable LTD for the development and
production of copper rod and other wire products for the domestic Indian market
and recently established a joint venture with Raychem Corp. for the production
and sale of high performance wire products for the automotive industry. The
Company is currently evaluating several acquisition opportunities consistent
with its business strategy, although it has not reached agreement with any third
parties at this time.
- EXPAND INTERNATIONAL BUSINESS--Historically, the Company's production and
distribution emphasis has focused on North America, primarily the U.S. market.
Management anticipates that while the Company will remain focused on the U.S.
market, it expects to increase its efforts in expanding its customer base in
Canada and Mexico, where the Company believes demand for electrical wire and
cable products will grow significantly over the next few years. Management also
expects to establish a preliminary presence in certain developing economies,
particularly in locations that have been targeted by the Company's customers for
their own expansion.
MANAGEMENT AND COMPANY HISTORY
The Company's senior management team, including its business unit managers,
possesses a high level of experience in the wire and cable industry. The eight
most senior officers average 21 years of related industry experience, with an
average of over 17 years with the Company. The equity interest of management and
present and former employees in the Company (15.7% on a fully diluted basis
(13.7%
5
<PAGE>
after giving effect to the Offerings)) helps ensure that the interests of
management are aligned with those of the Company's other stockholders.
The Company was acquired (the "Acquisition") in a merger in October 1992 by
the existing stockholders. The existing stockholders of the Company and their
equity interests on a fully diluted basis are Bessemer Holdings, L.P. ("BHLP")
and certain affiliated investment partnerships (BHLP and such affiliated
investment partnerships are collectively referred to herein as the "BH Group")
(58.9%), certain present and former employees (15.7%), certain affiliated
investment limited partnerships of The Goldman Sachs Group, L.P. (collectively,
the "GS Partnerships") (12.4%), affiliates of Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJSC" and together with its affiliates, "DLJ") (9.2%)
and Chase Equity Associates ("CEA") (3.7%). After giving effect to the
Offerings, BH Group, present and former employees, the GS Partnerships, DLJ and
CEA will beneficially own equity interests of 53.6%, 13.7%, 6.9%, 1.2% and 1.8%,
respectively, on a fully diluted basis. In connection with the Acquisition, the
GS Partnerships and DLJ were granted warrants (the "Warrants") to purchase up to
1,120,551.5 and 1,712,817.5 shares of Common Stock, respectively, at an exercise
price of $5.71514 per share. The GS Partnerships will sell all their Warrants to
the Underwriters, and DLJ will sell 1,475,658 of its Warrants to the
Underwriters, in each case, at a purchase price of $12.02 per Warrant (assuming
an initial public offering price of $18.50 per share, the mid-point of the range
of initial public offering prices set forth on the cover page of this
Prospectus). The Company will then redeem these Warrants for an aggregate of
1,794,172 shares of Common Stock. The remaining 237,159 Warrants will also be
sold by DLJ to the Underwriters if the Underwriters' over-allotment options are
exercised in full. See "Certain Relationships and Related Party
Transactions--The Redemption".
The Company's principal executive offices are located at 1601 Wall Street,
Fort Wayne, Indiana 46802, telephone (219) 461-4000.
6
<PAGE>
THE OFFERINGS (a)
<TABLE>
<S> <C>
Shares of Common Stock offered by the
Company(b)................................. 3,750,000 shares
U.S. Offering.............................. 3,000,000 shares
International Offering..................... 750,000 shares
Shares of Common Stock offered by the Selling
Stockholders(c)............................ 3,750,000 shares
U.S. Offering.............................. 3,000,000 shares
International Offering..................... 750,000 shares
Total Common Stock to be outstanding after
the Offerings(d)........................... 29,718,348 shares
Use of Proceeds.............................. The proceeds of the Offerings payable to the
Company will be used to repay approximately
$63.2 million principal amount of outstanding
indebtedness under the Essex Term Loan and
Essex Revolving Credit Agreement (each as
defined herein). The Company will not receive
any proceeds from the sale of Common Stock by
the Selling Stockholders. See "Use of
Proceeds".
Proposed NYSE Stock Symbol................... "SXC"
</TABLE>
- ------------------------
(a) The offering of 6,000,000 shares of Common Stock initially being offered in
the United States (the "U.S. Offering") and the concurrent offering of
1,500,000 shares of Common Stock initially being offered outside the United
States (the "International Offering") are collectively referred to as the
"Offerings". The underwriters for the U.S. Offering (the "U.S.
Underwriters") and the underwriters for the International Offering (the
"International Underwriters") are collectively referred to as the
"Underwriters".
(b) If the Underwriters' over-allotment options are exercised in full, the
Company will offer and sell an additional 312,500 shares of Common Stock.
(c) Includes 1,794,172 shares of Common Stock to be received upon the redemption
of 2,596,209.5 Warrants. See "Certain Relationships and Related Party
Transactions--The Redemption." If the Underwriters' over-allotment options
are exercised in full, certain of the Selling Stockholders will offer and
sell, including shares to be received upon redemption of 237,159 Warrants,
an additional 812,500 shares of Common Stock.
(d) Does not include 2,775,072 shares of Common Stock issuable pursuant to
options outstanding prior to the Offerings and up to 237,159 Warrants that
will be outstanding if the Underwriters' over-allotment options are not
exercised in full. See "Management--Aggregated Option/SAR Exercises in Last
Fiscal Year and Year-End Option/SAR Values" and 'Certain Relationships and
Related Party Transactions -- The Redemption.".
RISK FACTORS
Prospective purchasers of the Common Stock should carefully consider the
factors set forth under "Risk Factors" immediately following this Prospectus
Summary as well as the other information set forth in this Prospectus.
7
<PAGE>
SUMMARY FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA AND COPPER PRICES)
The following table sets forth (i) summary combined historical consolidated
financial data of the Company for the twelve months ended December 31, 1992
(which includes historical consolidated financial data of the Company prior to
the Acquisition ("Predecessor") for the nine-month period ended September 30,
1992, and historical consolidated financial data of the Company after the
Acquisition for the three-month period ended December 31, 1992), (ii) selected
historical consolidated financial data of the Company for the years ended
December 31, 1993, 1994, 1995 and 1996 and as of December 31, 1996 and (iii) as
adjusted and supplementary pro forma financial data as of and for the year ended
December 31, 1996, assuming the use of the net proceeds of Offerings as
described under "Use of Proceeds". Combined summary financial data presented
below for the 12-month period ended December 31, 1992 were derived from audited
consolidated financial statements of the Company and Predecessor not included in
this Prospectus. The summary consolidated financial data presented below for the
year ended December 31, 1993, were derived from audited consolidated financial
statements not included in this Prospectus. The summary consolidated financial
data presented below for the years ended December 31, 1994, 1995 and 1996, and
as of December 31, 1996, were derived from the Consolidated Financial Statements
of the Company included elsewhere in this Prospectus. This data should be read
in conjunction with "Use of Proceeds", "Capitalization", "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements included elsewhere herein.
<TABLE>
<CAPTION>
COMBINED(a)
---------------
TWELVE MONTHS
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, ------------------------------------------------------
1992 1993 1994 1995 1996
--------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.............................. $ 909,351 $ 868,846 $ 1,010,075 $ 1,201,650 $ 1,332,049
Cost of goods sold..................... 780,148 745,875 846,611 1,030,511 1,102,460
Selling and administrative expense..... 80,590 75,748 85,209 93,401 121,054
Other (income) expense, net (b)........ (305) (196) 1,114 1,032 2,045
Unusual items (c)...................... 18,139 -- -- -- --
--------------- ------------ ------------ ------------ ------------
Income from operations................. 30,779 47,419 77,141 76,706 106,490
Interest expense....................... 50,645 56,723 60,155 49,055 39,994
--------------- ------------ ------------ ------------ ------------
Income (loss) before income taxes and
extraordinary charge................. (19,866) (9,304) 16,986 27,651 66,496
Provision (benefit) for income taxes... (4,022) 1,552 9,500 14,380 28,988
--------------- ------------ ------------ ------------ ------------
Income (loss) before extraordinary
charge............................... (15,844) (10,856) 7,486 13,271 37,508
Extraordinary charge net of income tax
benefit (d).......................... 122 3,367 -- 2,971 1,183
--------------- ------------ ------------ ------------ ------------
Net income (loss)...................... $ (15,966) (14,223) 7,486 10,300 36,325
---------------
---------------
Preferred stock redemption premium..... -- -- -- (4,185)
Preferred stock dividend requirement... (5,186) (6,008) (6,962) (4,248)
Accretion of preferred stock........... (671) (687) (703) (2,024)
Increase in fair value of common stock
subject to put....................... -- -- -- (3,547)
------------ ------------ ------------ ------------
Net income (loss) applicable to common
stock................................ $ (20,080) $ 791 $ 2,635 $ 22,321
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Pro forma income (loss) per share (e):
Pro forma income (loss) before
extraordinary charge............... $ (.40) $ .27 $ .48 $ 1.33
Extraordinary charge net of income
tax benefit........................ (.12) -- (.11) (.04)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Pro forma net income (loss).......... $ (.52) $ .27 $ .37 $ 1.29
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Shares used in computing pro forma net
income (loss) per share.............. 27,556,662 27,646,286 27,971,092 28,224,862
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Supplementary pro forma income before
extraordinary charge (f)............. $ 41,199
------------
------------
Supplementary pro forma income per
share before extraordinary charge
(e).................................. $ 1.29
------------
------------
Shares used in computing supplementary
pro forma income before extraordinary
charge (f)........................... 31,974,862
------------
------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
--------- ------------
BALANCE SHEET DATA:
Working capital......................................................................... $ 231,707 $ 240,928
Total assets............................................................................ 842,755 842,142
Long-term debt (including current portion).............................................. 432,916 369,704
Stockholders' equity.................................................................... 146,090 221,560
</TABLE>
<TABLE>
<CAPTION>
COMBINED(a)
---------------
TWELVE MONTHS
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, ------------------------------------------
1992 1993 1994 1995 1996
--------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA (g)........................................ $ 74,388 $ 77,028 $ 108,314 $ 110,502 $ 140,224
Capital expenditures.............................. $ 31,180 $ 26,167 $ 30,109 $ 28,555 $ 25,569
Copper equivalent pounds shipped (h).............. 492,350 517,607 553,220 551,447 643,800
Average COMEX copper price per pound.............. $ 1.03 $ 0.85 $ 1.07 $ 1.35 $ 1.06
Net cash provided by operating activities......... 31,326 60,616 41,672 89,754 64,581
Net cash used for investing activities (i)........ (152,010) (30,785) (30,118) (50,466) (104,716)
Net cash provided by (used for) financing
activities (j).................................. 132,662 (28,569) (5,120) (53,031) 41,369
</TABLE>
- ------------------------
(a) Represents a combination of the Company's three month period ended December
31, 1992 and Predecessor's nine month period ended September 30, 1992. Such
combined results are not necessarily indicative of the results for the full
year, due to the effects of the Acquisition and related refinancings and the
concurrent adoption of Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes". Financial data of the Company as of October
1, 1992, and thereafter reflect the Acquisition using the purchase method of
accounting, and, accordingly, the purchase price was allocated to assets and
liabilities based upon their estimated fair values. However, to the extent
that the Company's management had a continuing investment interest in the
Company's common stock, such fair values (and contributed stockholders'
equity) were reduced proportionately to reflect the continuing interest
(approximately 10%) at the prior historical cost basis.
(b) Includes interest income of $186, $269, $247, $409 and $210 for 1992, 1993,
1994, 1995 and 1996, respectively. Also includes write-offs related to fixed
asset disposals occurring in the normal course of business.
(c) In connection with the Acquisition, Predecessor recorded certain
merger-related expenses of $18,139, consisting primarily of bonus and option
payments to certain employees and certain merger fees and expenses that were
charged to Predecessor's operations in the nine months ended September 30,
1992.
(d) During 1992, the Company repurchased outstanding indebtedness of Essex
resulting in an extraordinary charge of $122, net of applicable income tax
benefit. During 1993, the Company recognized extraordinary charges of
$3,055, net of applicable tax benefit, representing the write-off of
unamortized debt issuance costs associated with the termination of the
Company's term credit facility under its former credit agreement, and $312,
net of applicable tax benefit, representing the net loss resulting from the
redemption of indebtedness of Essex. During 1995 and 1996, the Company
recognized extraordinary charges of $2,971 and $1,183, respectively, net of
applicable tax benefit, representing the write-offs of unamortized debt
issuance cost associated with the termination of the Company's former credit
agreements.
(e) See Note 1 to the Consolidated Financial Statements.
(f) Adjustments to net income before extraordinary charge used in the
calculation of supplementary pro forma net income before extraordinary
charge per common share for the year ended December 31, 1996 are as follows:
(i) $2,595, net of tax, representing reduced interest expense due to the
assumed repayment of the Essex Term Loan ($29,497) and a portion of the
indebtedness under the Essex Revolving Credit Agreement ($33,716) from the
net proceeds of the Offerings; (ii) $677, net of tax, representing reduced
interest expense on the indebtedness under the Essex Revolving Credit
Agreement due to lower interest rates under the Restated Credit Agreement
and (iii) $419, net of tax, representing the elimination of 1996 deferred
financing expense associated with the Essex Term Loan. The change in shares
used to compute supplementary pro forma income per share is attributable to
the 3,750,000 shares of common stock offered by the Company in the
Offerings.
(g) EBITDA is defined as earnings before net interest, income taxes,
depreciation and amortization. In 1992, EBITDA also includes an add-back of
$18,139 for unusual items. See note (c) above. EBITDA is presented because
it is a widely accepted financial indicator of a company's ability to incur
and service debt. However, EBITDA should not be considered in isolation or
as a substitute for net income or cash flow data prepared in accordance with
generally accepted accounting principles or as a measure of a company's
profitability or liquidity. Also, the EBITDA definition used herein may not
be comparable to similarly titled measures reported by other companies.
(h) Copper equivalent pounds include aluminum pounds which have been converted
to a copper pound basis.
(i) Includes the costs associated with the BICC Canada and Triangle
acquisitions of approximately $7,631 and $71,764, respectively, in 1996 and
the acquisition of Brownell in 1995 at a total cost of $24,934.
(j) Includes the redemption of the Company's Senior Discount Debentures due
2004 in 1995 at a total cost of $272,850.
9
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING
FACTORS SHOULD BE CONSIDERED CAREFULLY BY PROSPECTIVE INVESTORS IN EVALUATING
THE COMPANY BEFORE PURCHASING ANY COMMON STOCK OFFERED HEREBY. THIS PROSPECTUS
INCLUDES "FORWARD-LOOKING STATEMENTS". 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 IN THIS
PROSPECTUS, INCLUDING BELOW UNDER "RISK FACTORS". 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.
SUBSTANTIAL LEVERAGE
The Company has, and after giving effect to the Offerings and the
application of the proceeds therefrom will continue to have, on a consolidated
basis, substantial indebtedness and significant debt service obligations. After
giving pro forma effect to the Offerings and the application of the proceeds
therefrom, the Company's aggregate notes payable to banks plus long-term debt
would have been $400.6 million as of December 31, 1996. The Company's ratio of
debt to total capital would have been approximately 0.64 to 1 at December 31,
1996, after giving pro forma effect to the Offerings and the application of the
proceeds therefrom.
The degree to which the Company is leveraged could have important
consequences to holders of the Common Stock, including the following: (i) the
Company's ability to obtain additional financing for working capital, capital
expenditures, acquisitions, general corporate purposes or other purposes may be
impaired in the future; (ii) a substantial portion of the Company's cash flow
from operations must be dedicated to the payment of principal and interest on
its indebtedness, thereby reducing the funds available to the Company for other
purposes; (iii) certain of the Company's borrowings are, and will continue to
be, at variable rates of interest, which exposes the Company to the risk of
increased interest rates; (iv) the indebtedness that following the Offerings
will be outstanding under the Restated Credit Agreement (as defined in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity, Capital Resources and Financial Condition") is secured by
substantially all the assets of the Company; (v) the Company may be
substantially more leveraged than certain of its competitors, and this may place
the Company at a competitive disadvantage; and (vi) the Company's substantial
degree of leverage may hinder its ability to adjust rapidly to changing market
conditions and could make it more vulnerable in the event of a downturn in
general economic conditions or a downturn in its business.
INTEGRATING ACQUISITIONS AND MANAGING GROWTH
The Company has recently completed several acquisitions of complementary
businesses, and its business strategy involves pursuing opportunities to grow
its business both internally and through selective acquisitions, investments,
joint ventures and strategic alliances. The Company's ability to implement its
growth strategy depends, in part, on its success in making such acquisitions,
investments, joint ventures and strategic alliances on satisfactory terms and
successfully integrating them, including its recent acquisitions of Brownell,
BICC Canada and Triangle, into the Company's operations. Implementation of the
Company's growth strategy may impose significant strains on the Company's
management, operating systems and financial resources. Failure by the Company to
manage its growth, or unexpected difficulties encountered during expansion,
could have a material adverse impact on the Company's results of operations,
cash flows or financial condition.
10
<PAGE>
ADVANCING TECHNOLOGY
The Company believes that incorporating technological advancements in its
product development and manufacturing processes is important to remaining
competitive in each of its business units. For example, the demand for more
energy-efficient products, as well as lighter and smaller products, is
necessitating the engineering of more efficient and lighter components,
including wire and cable components included in these products. There can be no
assurance that the Company will successfully introduce new products or product
enhancements that will meet with commercial acceptance, or that its existing
technology will not be superceded by new technological breakthroughs introduced
by competitors. The commercial development of fiber optics has had and is
expected to continue to have an adverse effect on the Company's copper
communications wire business unit, and in particular its OSP products. Future
technological developments could materially adversely affect the Company's
results of operations, cash flows and financial condition.
COMPETITION
The manufacture and sale of copper wire and cable products is highly
competitive, and some of the Company's competitors may have greater financial
resources than the Company. The Company competes with at least one major
competitor with respect to each of its business units. No single competitor,
however, competes with the Company across the entire spectrum of the Company's
product lines. Many of the Company's products are made to industry
specifications and therefore may be fungible with competitors' products.
Accordingly, the Company is subject to competition in many markets on the basis
of price, delivery time, customer service and its ability to meet specialty
needs. In addition, the Company has been subject to competition from foreign
manufacturers from time to time and such competition may continue in the future.
Although foreign manufacturers do not presently constitute an important source
of competition, there can be no assurance that this will continue to be the case
in the future.
INTERNATIONAL EXPANSION
To date, a substantial majority of the Company's sales have been made in the
North American market, where the Company believes it has substantial expertise
and experience. The Company intends, however, to pursue international
opportunities for growth. International expansion will create new challenges for
the Company's management. If the Company is successful in increasing its
international business, it may encounter new risks that have not traditionally
been encountered, including potential political, social and economic
instability. In addition, risks associated with fluctuations between the U.S.
dollar, which is the reporting currency in the Company's financial statements,
and the local currencies in which the Company may transact business, may be
encountered. There can be no assurance that expansion of the Company's
operations to international markets will not have any adverse consequences for
the Company's results of operations, cash flows or financial condition.
COMPLIANCE WITH ENVIRONMENTAL REGULATIONS
The Company is subject to federal, state and local environmental protection
laws and regulations governing its operations and use, handling, disposal and
remediation of hazardous substances currently or formerly used by the Company. A
risk of environmental liability is inherent in the current and former
manufacturing activities of the Company in the event of a release or discharge
of a hazardous substance generated by the Company. Under certain environmental
laws, the Company could be held jointly and severally responsible for the
remediation of any hazardous substance contamination at its facilities and at
third party waste disposal sites and could also be held liable for any
consequences arising out of human exposure to such substances or other
environmental damage. The Company has been named as a potentially responsible
party in proceedings that involve environmental remediation. The Company has
also been named as a defendant in lawsuits alleging exposure to asbestos in the
11
<PAGE>
Company's products. See "Business--Legal and Environmental Matters". There can
be no assurance that the costs of complying with environmental, health and
safety laws in its current operations or the liabilities arising from past
releases of, or exposure to, hazardous substances, will not result in future
expenditures by the Company that could materially and adversely affect the
Company's results of operations, cash flows or financial condition.
COPPER PRICES
Net sales of the Company are heavily influenced by the price of copper, the
Company's major raw material. The Company's net income has limited exposure to
the price of copper, however, as the Company has historically been able to pass
through copper price increases and decreases to its customers on a current or
slightly delayed basis. In addition, the Company has generally been able to
match its copper purchases with its production requirements and minimize copper
cathode and rod inventories. However, no assurance can be given that the Company
will be able to pass through price increases in the future.
MANUFACTURING CAPACITY
The Company is currently operating its manufacturing facilities at high
utilization rates. In order to meet growing customer demand, the Company will
need to invest in additional manufacturing equipment. Failure to have new
equipment operational in a timely manner or shut-downs of existing capacity due
to breakdowns or other reasons could adversely affect the Company's results of
operations, cash flows and financial condition.
HOLDING COMPANY STRUCTURE; RESTRICTIONS ON THE PAYMENT OF DIVIDENDS; ESSEX
INTERNATIONAL'S DEPENDENCE ON DIVIDENDS FROM ESSEX TO MEET CASH REQUIREMENTS
Essex International is a holding company whose operations are and will be
conducted solely through Essex, its wholly owned subsidiary. Essex International
has no independent operations, virtually no assets other than its ownership of
the outstanding common stock of Essex (all of which will be pledged to the
lenders under the Restated Credit Agreement (as defined herein)) and no
independent means of generating cash flow. Therefore, Essex International is and
will continue to be dependent on the cash flow of Essex to meet its obligations.
At present, Essex International's cash requirements are not significant. The
Essex Revolving Credit Agreement, the Essex Senior Note Indenture (as defined in
"Description of Certain Indebtedness"), and the Restated Credit Agreement will,
after the consummation of the Offerings, restrict the ability of Essex to
declare and pay dividends and to make other distributions to Essex
International. Subject to the availability of an alternative financing source,
Essex International's ability to meet its cash obligations in the future will be
dependent upon Essex' ability to pay dividends, to loan, or otherwise advance or
transfer funds to Essex International in sufficient amounts. Additionally, the
Essex Revolving Credit Agreement does, and the Restated Credit Agreement will,
after consummation of the Offerings, prohibit the Company from paying dividends
to its common stockholders. See "Description of Certain Indebtedness--Restated
Credit Agreement".
PRINCIPAL STOCKHOLDERS
After the Offerings, BH Group will own approximately 59.0% ((53.6% on a
fully diluted basis), and 58.1% (53.2% on a fully diluted basis) if the
Underwriters' over-allotment option is exercised in full) of the outstanding
Common Stock. In addition, after consummation of the Offerings, members of the
Company's Board of Directors will be affiliated with BH Group. As long as BH
Group continues to own in the aggregate a large percentage of the outstanding
shares of Common Stock, it will have practical control over the composition of
the Board of Directors of the Company, over the outcome of any corporate
12
<PAGE>
transaction or other matter submitted to the stockholders for approval,
including mergers, consolidations and the sale of all or substantially all the
Company's assets, and over a change in control of the Company. See "Management",
"Principal and Selling Stockholders" and "Certain Relationships and Related
Party Transactions".
BENEFITS OF THE OFFERINGS TO CURRENT SECURITYHOLDERS
The Offerings will provide significant benefits to the current
securityholders of the Company, including the creation of a public market for
the Common Stock and the receipt of $ in proceeds by the GS
Partnerships, $ in proceeds by DLJ and $ in proceeds by CEA.
ANTI-TAKEOVER PROVISIONS
The Company's Second Amended and Restated Certificate of Incorporation (the
"Restated Certificate"), which will be effective upon consummation of the
Offerings, and the Amended and Restated By-laws (the "By-laws"), contain certain
provisions that may have the effect of discouraging, delaying or preventing a
change in control of the Company or unsolicited acquisition proposals that a
stockholder might consider favorable, including provisions authorizing the
issuance of "blank check" preferred stock, limiting the persons who may call
special meetings of stockholders, limiting stockholder action by written
consent, establishing advance notice requirements for nominations for election
to the Board of Directors of the Company or for proposing matters that can be
acted upon at stockholders meetings, providing for a Board of Directors with
staggered, three-year terms and requiring super-majority voting to effect
certain amendments to the Restated Certificate and the By-laws.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of Common Stock after the Offerings
could adversely affect the market price of the Common Stock and could impair the
Company's ability to raise capital through the sale of equity securities. Upon
completion of the Offerings, the Company will have 29,718,348 shares of Common
Stock outstanding. Of these shares, the 7,500,000 shares sold in the Offerings
will be freely transferable without restriction under the Securities Act of 1933
(the "Securities Act"), unless they are held by "affiliates" of the Company as
that term is used under the Securities Act.
The remaining 22,218,348 outstanding shares were sold by the Company in
reliance on exemptions from the registration requirements of the Securities Act,
are restricted securities within the meaning of Rule 144 under the Securities
Act ("Rule 144") and may not be resold in the absence of registration under the
Securities Act or an available exemption therefrom. The Company, each of the
Company's directors and executive officers, BH Group, each Selling Stockholder
and certain other stockholders of the Company have agreed not to sell or
otherwise dispose of any shares of Common Stock for the 180-day period after the
date of this Prospectus without the prior written consent of Goldman, Sachs & Co
("Goldman Sachs"). Any shares subject to such lock-up agreements may be released
at any time without notice by Goldman Sachs. See "Underwriting". Additionally,
each stockholder (other than BHLP and certain of its affiliates) has agreed not
to sell any of its Common Stock for 90 days after the effective date of the
Registration Statement of which this Prospectus is a part (the "Effective Date")
pursuant to either the Management Stockholders Agreement or the Registration
Rights Agreement (as defined in "Certain Relationships and Related Party
Transactions" and "Shares Eligible for Future Sale-Other Initial Shareholders"
respectively). Thus none of these shares of Common Stock will be eligible for
sale in the public market immediately upon the Effective Date. Beginning 90 days
after the Effective Date, approximately 1,836,936 of these shares (including
shares subject to vested options) will become eligible for sale subject to the
provisions of Rule 144 and Rule 701 (all of which will be eligible, under Rule
144(k), for sale without limitation as to volume and manner of sale). Beginning
180 days after the date of this Prospectus, approximately 15,995,933 additional
shares, shares subject to vested options and Warrants will become eligible for
sale subject to the provisions of Rule 144 or Rule 701 (3,747,768.5 of which
will
13
<PAGE>
be eligible, under Rule 144(k), for sale without limitation as to volume and
manner of sale). See "Shares Eligible for Future Sale".
Additionally, the Company intends to file a registration statement covering
all shares of Common Stock issuable in the future under the Stock Option Plan
(as defined herein) (an aggregate of 1,034,844 shares). Any shares issued upon
exercise of such options will be eligible for sale in the public market after
the effective date of such registration statement, subject to any contractual
restrictions.
BH Group has the right, pursuant to the Management Stockholders Agreement,
to require that the Company register, pursuant to the Securities Act, any or all
of its shares of Common Stock. BH Group is not restricted in the number of times
it may require the Company to register its shares of Common Stock. Pursuant to
the BH Group Registration Rights Agreement (as defined in "Shares Eligible for
Future Sale--BH Group"), BH Group will also have the right to require the
Company to prepare and file with the Securities and Exchange Commission (the
"SEC"), a "shelf" registration statement covering offers and sales in accordance
with Rule 415 under the Securities Act of some or all of the Common Stock held
by BH Group. Pursuant to the Registration Rights Agreement, the GS Partnerships
and DLJ each have the ability to require the Company to register any or all of
the shares of Common Stock or Warrants held by them pursuant to the Securities
Act. The GS Partnerships and DLJ each have the unqualified right to make two
such demands and a qualified right to make one additional demand. The GS
Partnerships, DLJ and CEA also have the right to "piggyback", or include their
Common Stock and, as of October 9, 1997 their Warrants, if any, in any
registration of Common Stock made by the Company. Pursuant to the Management
Stockholders Agreement, certain employee stockholders have the right to
"piggyback" onto certain registrations of Common Stock (i) demanded by BH Group
or (ii) for primary offerings by the Company. The existence of the registration
rights described above could have an adverse effect on the market price of the
Common Stock, could impair the Company's ability to raise capital through the
sale of equity securities and may involve added costs and complexity in the
event the Company or any holder of registration rights desires to register
shares of Common Stock in the future. See "Certain Relationships and Related
Party Transactions--Management Stockholders Agreement" and "Shares Eligible for
Future Sale--Piggyback Registration Rights".
DILUTION
Persons purchasing shares of Common Stock in the Offerings will incur
immediate and substantial dilution in net tangible book value per share.
Assuming an initial public offering price of $18.50 per share (the midpoint of
the range of initial public offering prices set forth on the cover page of this
Prospectus), purchasers of shares in the Offerings will experience dilution of
$15.55 per share. See "Dilution".
NO PRIOR MARKET FOR THE COMMON STOCK; POSSIBLE VOLATILITY OF SHARE PRICE
Prior to the Offerings there has been no public market for the Common Stock
and there can be no assurance that an active trading market will develop upon
completion of the Offerings or, if it does develop, that such market will be
sustained. The initial public offering price of the Common Stock will be
determined by negotiation among the Company, the Selling Stockholders and the
representatives of the Underwriters, and may not be representative of the price
that will prevail in the open market. See "Underwriting" for a discussion of the
factors to be considered in determining the initial public offering price.
The market price of the Common Stock after the Offerings may be
significantly affected by factors such as quarterly variations in the Company's
results of operations, the announcement of new products or product enhancements
by the Company or its competitors, technological innovation by the Company or
its competitors and general market conditions specific to particular industries.
Such fluctuations may adversely affect the market price of the Common Stock.
14
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
by the Company hereby are estimated to be approximately $63.2 million, after
deducting the estimated underwriting discount, transaction fees and expenses of
the Offerings payable by the Company. The Company will not receive any proceeds
from the sale of Common Stock by the Selling Stockholders. The net proceeds to
the Company of the Offerings will be used to repay in full the Essex Term Loan
($29.5 million) and repay a portion of the indebtedness under the Essex
Revolving Credit Agreement ($33.7 million). The Essex Term Loan and the Essex
Revolving Credit Agreement mature in May 2000 and October 2001, respectively,
and currently bear interest at average per annum rates of 9.31% and 6.85%,
respectively. Borrowings under the Essex Term Loan were used to redeem other
indebtedness as part of the 1995 Refinancing. Borrowings under the Essex
Revolving Credit Agreement were used to refinance the Company's prior revolving
credit agreement ($127.5 million) and to finance the acquisition of Triangle
($71.8 million). See "Description of Certain Indebtedness--Restated Credit
Agreement".
DIVIDEND POLICY
No dividends have been paid by the Company on the Common Stock in the prior
two fiscal years and the Company does not anticipate paying dividends in the
foreseeable future. Any determination to pay cash dividends in the future will
be at the discretion of the Company's Board of Directors and will depend upon
the Company's results of operations, financial condition, contractual
restrictions and other factors deemed relevant at that time by the Company's
Board of Directors.
The ability of the Company to pay dividends on the Common Stock is dependent
upon the ability of Essex to pay dividends, or otherwise loan, advance or
transfer funds, to the Company. Both the Restated Credit Agreement and the Essex
Senior Note Indenture impose limitations on the ability of Essex to pay
dividends or make other payments to the Company and the Restated Credit
Agreement also prohibits the Company from paying dividends to its common
stockholders. See "Description of Certain Indebtedness--Restated Credit
Agreement--Negative Covenants".
15
<PAGE>
DILUTION
Dilution is the amount by which the offering price paid by the purchasers of
the Common Stock offered hereby will exceed the net tangible book value per
share of Common Stock after the Offerings. Net tangible book value per share is
determined at any date by subtracting the total liabilities of the Company from
the total book value of the tangible assets of the Company and dividing the
difference by the number of shares of Common Stock deemed to be outstanding at
such date.
The net tangible book value of the Company on December 31, 1996, was
approximately $24.7 million. Net tangible book value per share represents the
amount of total tangible assets less the amount of total liabilities divided by
the total number of shares of Common Stock outstanding. After giving effect to
the receipt of approximately $63.2 million of estimated net proceeds of the sale
by the Company of 3,750,000 shares of Common Stock pursuant to the Offerings
(assuming a public offering price of $18.50 per share, the midpoint of the range
of initial public offering prices set forth on the cover page of this
Prospectus), the pro forma net tangible book value of the Company at December
31, 1996, would have been approximately $88.0 million or $2.95 per share. This
change represents an immediate increase in pro forma net tangible book value of
$2.00 per share to the existing stockholders and an immediate dilution of $15.55
per share to new investors purchasing shares of Common Stock in the Offerings.
The following table illustrates the substantial and immediate dilution to new
investors:
<TABLE>
<CAPTION>
PER SHARE
--------------------
<S> <C> <C>
Initial public offering price per share (a)............................. $ 18.50
Net tangible book value per share before the Offerings.............. $ .95
Increase per share attributable to new
investors......................................................... 2.00
---------
Pro forma net tangible book value per share after the Offerings......... 2.95
---------
Dilution per share to new investors (b)(c).............................. $ 15.55
---------
---------
</TABLE>
- ------------------------
(a) Before deducting underwriting discounts and estimated transaction fees and
expenses of $6.2 million to be paid by the Company in connection with the
Offerings.
(b) Dilution is determined by subtracting net tangible book value per share
after the Offerings from the amount assumed paid by a new investor per share
of Common Stock.
(c) Assuming the Underwriters' over-allotment options are exercised in full, pro
forma net tangible book value of the Company after the Offerings would be
$3.10 per share, the immediate increase in pro forma net tangible book value
of shares owned by the existing stockholders would be $2.15 per share and
the immediate dilution to new investors would be $15.40 per share.
The following table summarizes the difference between existing stockholders
(determined as if the Offerings had occurred on December 31, 1996 and including
in their holdings the total number (1,958,066) of shares of Common Stock
issuable upon redemption of Warrants) and new investors with respect to the
number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the average price paid per share (assuming
the Underwriters' over-allotment
16
<PAGE>
options are not exercised and an initial public offering price of $18.50 per
share, the midpoint of the range of initial public offering prices set forth on
the cover page of this Prospectus).
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------------------- -------------------------------- AVERAGE PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
------------- -------------- ---------------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
New investors (a)................... 3,750,000 12.6% $ 69,375,000 30.0% $ 18.50
Existing stockholders (a)(b)........ 26,014,623 87.4 162,173,000 70.0 6.23
------------- ------- ---------------- -------
Total............................... 29,764,623 100.0% $ 231,548,000 100.0%
------------- ------- ---------------- -------
------------- ------- ---------------- -------
</TABLE>
- ------------------------
(a) Sales by the Selling Stockholders in the Offerings will reduce the number of
shares held by existing stockholders, and shares issuable upon redemption of
Warrants, to 22,264,623 shares, and will increase the number of shares held
by new investors to 7,500,000 shares. See "Principal and Selling
Stockholders".
(b) Does not include 961,105 shares of Common Stock that the Underwriters have
the option to purchase from the Company and the Selling Shareholders to
cover over-allotments, if any, or 1,034,844 shares of Common Stock reserved
for issuance under the Company's Stock Option Plan (as defined herein). See
"Management--Stock Option Plan" and "Underwriting".
The foregoing tables and discussion assume no exercise of options after
December 31, 1996 and exclude (i) 2,870,975 shares issuable upon exercise of
options outstanding as of December 31, 1996 having a weighted average exercise
price of $3.52 per share under the Company's Stock Option Plan, (ii) 730,000
shares issuable upon exercise of options granted on January 30, 1997 in
connection with the Company's 1996 performance and to maintain management's
equity interest in the Company as a result of the increase in total Common Stock
outstanding following the 1996 Private Offering, (iii) 1,034,844 additional
shares authorized for issuance under the Company's Stock Option Plan and (iv)
237,159 shares issuable upon the Warrants at an exercise price of $5.72 per
share that may be sold to the Underwriters pursuant to the Underwriters'
over-allotment options. To the extent that outstanding options are exercised,
there will be further dilution to new investors. See "Capitalization",
"Management-- Compensation of Directors and Executive Officers",
"Management--Stock Option Plan", and Note 8 to the Consolidated Financial
Statements.
17
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of December 31, 1996, and on an as-adjusted basis after giving effect
to the Offerings and the application of the net proceeds of the Company
therefrom. The table should be read in conjunction with "Use of Proceeds",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
----------- ---------------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash................................................................................ $ 4,429 $ 4,329
----------- ---------------
----------- ---------------
Notes payable and current portion of long-term debt................................. $ 42,489 $ 33,413
Long-term debt:
Essex Revolving Credit Agreement.................................................. 179,900 148,454
Essex Term Loan(a)................................................................ 31,766 --
Essex Senior Notes................................................................ 200,000 200,000
Essex Sale and Leaseback Agreement................................................ 21,250 21,250
----------- ---------------
432,916 369,704
Less: current portion......................................................... 11,576 2,500
----------- ---------------
Total long-term debt................................................................ 421,340 367,204
Common stock subject to put:(b)
1,262,602 shares issued and outstanding........................................... 12,626 --
Stockholders' equity:
Common Stock, par value $.01 per share; 150,000,000 shares authorized, 22,793,955
shares issued and outstanding, actual; 29,600,729 shares issued and outstanding,
as adjusted (c)................................................................. 228 296
Additional paid-in capital........................................................ 139,145 214,915
Carryover of predecessor basis (d)................................................ (15,259) (15,259)
Retained earnings................................................................. 21,976 21,608
----------- ---------------
Total stockholders' equity.......................................................... 146,090 221,560
----------- ---------------
Total capitalization.......................................................... $ 622,545 $ 622,177
----------- ---------------
----------- ---------------
</TABLE>
- ------------------------
(a) As of February 28, 1997, the outstanding balance of the Essex Term Loan was
$29,497. Such amount is expected to be repaid upon receipt of the net
proceeds of the Offerings.
(b) Following the Offerings, it is expected that shares of Common Stock subject
to put, if any, will not be material.
(c) Excludes 2,870,975 shares of Common Stock reserved for issuance pursuant to
the exercise of options outstanding as of January 1, 1997, at a weighted
average exercise price of $3.52 per share, of which options to purchase
1,828,475 shares of Common Stock were then exercisable, and 237,159 shares
of Common Stock issuable upon exercise of the Warrants, at an exercise price
of $5.72 per share, that may be sold to the Underwriters pursuant to the
Underwriters' over-allotment options. On January 30, 1997, the Company
granted 730,000 additional options at an exercise price of $10.00 per share
in respect of 1996 performance and to maintain management's equity interest
in the Company as a result of the increase in total Common Stock outstanding
following the 1996 Private Offering. From December 31, 1996, to and
including March 24, 1997, 167,619 shares have been issued upon exercise of
outstanding options. See "Management--Stock Option Plan".
(d) Reflects effect of Predecessor's cost basis carried forward from time of
Acquisition.
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA AND COPPER PRICES)
The following table sets forth (i) selected combined historical consolidated
financial data of the Company as of and for the twelve months ended December 31,
1992 (which includes historical consolidated financial data of the Company prior
to the Acquisition ("Predecessor") for the nine-month period ended September 30,
1992, and historical consolidated financial data of the Company after the
Acquisition for the three-month period ended December 31, 1992), (ii) selected
historical consolidated financial data of the Company as of and for the years
ended December 31, 1993, 1994, 1995 and 1996 and (iii) supplementary pro forma
financial data for the year ended December 31, 1996, assuming the use of the net
proceeds of the Offerings as described under "Use of Proceeds". Combined
selected financial data presented below as of and for the 12-month period ended
December 31, 1992 were derived from audited consolidated financial statements of
the Company and Predecessor not included in this Prospectus. The selected
consolidated financial data presented below as of December 31, 1993 and 1994 and
for the year ended December 31, 1993 were derived from audited consolidated
financial statements not included in this Prospectus. The selected consolidated
financial data presented below as of December 31, 1995 and 1996 and for the
years ended December 31, 1994, 1995 and 1996 were derived from the Consolidated
Financial Statements of the Company included elsewhere in this Prospectus. This
data should be read in conjunction with "Use of Proceeds", "Capitalization",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements included elsewhere herein.
<TABLE>
<CAPTION>
COMBINED(a)
---------------
TWELVE MONTHS
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, ------------------------------------------------------
1992 1993 1994 1995 1996
--------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales....................................... $ 909,351 $ 868,846 $ 1,010,075 $ 1,201,650 $ 1,332,049
Cost of goods sold.............................. 780,148 745,875 846,611 1,030,511 1,102,460
Selling and administrative expense.............. 80,590 75,748 85,209 93,401 121,054
Other (income) expense, net (b)................. (305) (196) 1,114 1,032 2,045
Unusual items (c)............................... 18,139 -- -- -- --
--------------- ------------ ------------ ------------ ------------
Income from operations.......................... 30,779 47,419 77,141 76,706 106,490
Interest expense................................ 50,645 56,723 60,155 49,055 39,994
--------------- ------------ ------------ ------------ ------------
Income (loss) before income taxes and
extraordinary charge.......................... (19,866) (9,304) 16,986 27,651 66,496
Provision (benefit) for income taxes............ (4,022) 1,552 9,500 14,380 28,988
--------------- ------------ ------------ ------------ ------------
Income (loss) before extraordinary charge....... (15,844) (10,856) 7,486 13,271 37,508
Extraordinary charge net of income tax benefit
(d)........................................... 122 3,367 -- 2,971 1,183
--------------- ------------ ------------ ------------ ------------
Net income (loss)............................... $ (15,966) (14,223) 7,486 10,300 36,325
---------------
---------------
Preferred stock redemption premium.............. -- -- -- (4,185)
Preferred stock dividend requirement............ (5,186) (6,008) (6,962) (4,248)
Accretion of preferred stock.................... (671) (687) (703) (2,024)
Increase in fair value of common stock subject
to put........................................ -- -- -- (3,547)
------------ ------------ ------------ ------------
Net income (loss) applicable to common stock.... $ (20,080) $ 791 $ 2,635 $ 22,321
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Pro forma income (loss) per share (e):
Pro forma income (loss) before extraordinary
charge...................................... $ (.40) $ .27 $ .48 $ 1.33
Extraordinary charge net of income tax
benefit..................................... (.12) -- (.11) (.04)
------------ ------------ ------------ ------------
Pro forma net income (loss)................... $ (.52) $ .27 $ .37 $ 1.29
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Shares used in computing pro forma net income
(loss) per share.............................. 27,556,662 27,646,286 27,971,092 28,224,862
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Supplementary pro forma income before
extraordinary charge (f)...................... $ 41,199
------------
------------
Supplementary pro forma income per share before
extraordinary charge (e)...................... $ 1.29
------------
------------
Shares used in computing supplementary pro forma
income before extraordinary charge (f)........ 31,974,862
------------
------------
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
COMBINED (A)
TWELVE MONTHS
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, ------------------------------------------
1992 1993 1994 1995 1996
--------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................................... $ 133,048 $ 176,001 $ 221,480 $ 171,166 $ 231,707
Total assets...................................... 716,196 712,051 750,930 746,063 842,755
Long-term debt (including current portion)........ 420,052 428,942 458,960 412,750 432,916
Redeemable preferred stock........................ 28,603 34,460 41,155 48,820 --
Stockholders' equity.............................. 78,499 59,667 60,828 64,300 146,090
OTHER DATA:
EBITDA (g)........................................ $ 74,388 $ 77,028 $ 108,314 $ 110,502 $ 140,224
Capital expenditures.............................. $ 31,180 $ 26,167 $ 30,109 $ 28,555 $ 25,569
Copper equivalent pounds shipped (h).............. 492,350 517,607 553,220 551,447 643,800
Average COMEX copper price per pound.............. $ 1.03 $ 0.85 $ 1.07 $ 1.35 $ 1.06
Net cash provided by operating activities......... 31,326 60,616 41,672 89,754 64,581
Net cash used for investing activities (i)........ (152,010) (30,785) (30,118) (50,466) (104,716)
Net cash provided by (used for) financing
activities (j).................................. 132,662 (28,569) (5,120) (53,031) 41,369
</TABLE>
- ------------------------
(a) Represents a combination of the Company's three month period ended December
31, 1992 and Predecessor's nine month period ended September 30, 1992. Such
combined results are not necessarily indicative of the results for the full
year, due to the effects of the Acquisition and related refinancings and the
concurrent adoption of Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes". Financial data of the Company as of October
1, 1992, and thereafter reflect the Acquisition using the purchase method of
accounting, and, accordingly, the purchase price was allocated to assets and
liabilities based upon their estimated fair values. However, to the extent
that the Company's management had a continuing investment interest in the
Company's common stock, such fair values (and contributed stockholders'
equity) were reduced proportionately to reflect the continuing interest
(approximately 10%) at the prior historical cost basis.
(b) Includes interest income of $186, $269, $247, $409 and $210 for 1992, 1993,
1994, 1995 and 1996, respectively. Also includes write-offs related to fixed
asset disposals occurring in the normal course of business.
(c) In connection with the Acquisition, Predecessor recorded certain
merger-related expenses of $18,139, consisting primarily of bonus and option
payments to certain employees and certain merger fees and expenses that were
charged to Predecessor's operations in the nine months ended September 30,
1992.
(d) During 1992, the Company repurchased outstanding indebtedness of Essex
resulting in an extraordinary charge of $122, net of applicable income tax
benefit. During 1993, the Company recognized extraordinary charges of
$3,055, net of applicable tax benefit, representing the write-off of
unamortized debt issuance costs associated with the termination of the
Company's term credit facility under its former credit agreement, and $312,
net of applicable tax benefit, representing the net loss resulting from the
redemption of indebtedness of Essex. During 1995 and 1996, the Company
recognized extraordinary charges of $2,971 and $1,183, respectively, net of
applicable tax benefit, representing the write-offs of unamortized debt
issuance cost associated with the termination of the Company's former credit
agreements.
(e) See Note 1 to the Consolidated Financial Statements.
(f) Adjustments to net income before extraordinary charge used in the
calculation of supplementary pro forma net income before extraordinary
charge per common share for the year ended December 31, 1996 are as follows:
(i) $2,595, net of tax, representing reduced interest expense due to the
assumed repayment of the Essex Term Loan ($29,497) and a portion of the
indebtedness under the Essex Revolving Credit Agreement ($33,716) from the
net proceeds of the Offerings; (ii) $677, net of tax, representing reduced
interest expense on the indebtedness under the Essex Revolving Credit
Agreement due to lower interest rates under the Restated Credit Agreement
and (iii) $419, net of tax, representing the elimination of 1996 deferred
financing expense associated with the Essex Term Loan. The change in shares
used to compute supplementary pro forma income per share is attributable to
the 3,750,000 shares of common stock offered by the Company in the
Offerings.
(g) EBITDA is defined as earnings before net interest, income taxes,
depreciation and amortization. In 1992, EBITDA also includes an add-back of
$18,139 for unusual items. See note (c) above. EBITDA is presented because
it is a widely accepted financial indicator of a company's ability to incur
and service debt. However, EBITDA should not be considered in isolation or
as a substitute for net income or cash flow data prepared in accordance with
generally accepted accounting principles or as a measure of a company's
profitability or liquidity. Also, the EBITDA definition used herein may not
be comparable to similarly titled measures reported by other companies.
(h) Copper equivalent pounds include aluminum pounds which have been converted
to a copper pound basis.
(i) Includes the costs associated with the BICC Canada and Triangle
acquisitions of approximately $7,631 and $71,764, respectively, in 1996, and
the acquisition of Brownell in 1995 at a total cost of $24,934.
(j) Includes the redemption of the Company's Senior Discount Debentures due
2004 in 1995 at a total cost of $272,850.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company, founded in 1930, is a leading developer, manufacturer and
marketer of electrical wire and cable products. Among the Company's products are
magnet wire for electromechanical devices such as motors, transformers and
electrical controls; building wire for commercial and residential applications;
copper voice and data communication wire; automotive wire and specialty wiring
assemblies for automobiles and trucks; and industrial wire for applications in
appliances, construction and recreational vehicles. The Company's operations at
December 31, 1996 included 28 domestic manufacturing facilities and employed
approximately 4,800 persons.
As a result of the flexibility allowed by the 1995 Refinancing, the Company
embarked upon an opportunistic acquisition strategy. As a result of several
recent acquisitions, the Company has consolidated its market position in its
core products. The acquisition of certain assets of Avnet Inc.'s distribution
operation in 1995 (the "Brownell Acquisition") considerably strengthened the
Company's distribution business, particularly with respect to value-added magnet
wire products supplied to smaller customers. The acquisition of the building
wire assets of BICC Canada in 1996 expanded the Company's presence in the
Canadian building wire market. The recent acquisition of certain assets of
Triangle (the "Triangle Acquisition") has significantly expanded the Company's
building wire and industrial wire business units. The Triangle Acquisition is
expected to strengthen both the building wire and industrial wire business, and
thus the product mix of the Company will shift somewhat toward those two units.
The impact of sales and net income from those business units is thus expected to
have a proportionately greater effect on the Company in the future than in the
past.
Although net sales are heavily influenced by the price of copper, the
Company's major raw material, the Company's profitability is generally not
significantly affected by changes in copper prices, because the Company
generally has been able to pass on its cost of copper to its customers, and the
Company attempts to match its copper purchases with its production requirements,
thereby minimizing copper cathode and rod inventories. In the short term,
however, pronounced changes in the price of copper may tend to affect gross
profits within the building wire product line, because such changes affect cost
of goods sold more quickly than those changes can be reflected in the pricing of
building wire products. See "Business--Metals Operations".
The Company believes that it is only affected by inflation to the extent
that the economy in general is affected. Should inflationary pressures drive
costs higher, the Company believes that general industry price increases would
sustain operating results, although there can be no assurance that this will be
the case. In addition, the Company believes that its sensitivity to downturns in
its primary markets is less significant than it might otherwise be due to its
diverse customer base, broad product line and its strategy of attempting to
match its copper purchases with its needs.
21
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth for each of the years in the three-year
period ended December 31, 1996, the dollar amounts and percentages of sales of
each of the Company's major product lines:
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS, EXCEPT FOR COPPER PRICE)
-------------------------------------------------------------------
1994(A) 1995(A) 1996
--------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Magnet wire............................................ $ 306.9 30% $ 388.2 32% $ 388.8 29%
Building wire.......................................... 390.0 39 406.1 34 487.1 37
Communication wire..................................... 119.3 12 177.5 15 166.8 13
Automotive wire........................................ 82.8 8 97.3 8 91.2 7
Industrial wire........................................ 63.1 6 63.4 5 71.0 5
Other(b)............................................... 48.0 5 69.2 6 127.1 9
---------- --- ---------- --- ---------- ---
Total.................................................. $ 1,010.1 100% $ 1,201.7 100% $ 1,332.0 100%
---------- --- ---------- --- ---------- ---
---------- --- ---------- --- ---------- ---
Average COMEX copper price per pound................... $ 1.07 $ 1.35 $ 1.06
</TABLE>
- ------------------------
(a) Due to a reorganization in the third quarter of 1995, certain 1994 and 1995
product line sales have been reclassified.
(b) Includes sales of third-party manufactured products, including electrical
insulating products, electric motors, motor repair parts and pump seals,
sold through the Company's distribution business unit.
The following table sets forth for each of the years in the three-year
period ended December 31, 1996, the percentage relationship of net sales to
certain income statement items:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1994 1995 1996
--------- --------- ---------
Net sales......................................................................... 100.0% 100.0% 100.0%
Cost of goods sold................................................................ 83.8 85.8 82.8
Selling and administrative expense................................................ 8.4 7.8 9.1
Other expense, net................................................................ 0.1 0.1 0.1
--------- --------- ---------
Income from operations............................................................ 7.7 6.3 8.0
Interest expense.................................................................. 6.0 4.0 3.0
--------- --------- ---------
Income before income taxes and extraordinary charge............................... 1.7 2.3 5.0
Provision for income taxes........................................................ 1.0 1.2 2.2
--------- --------- ---------
Income before extraordinary charge................................................ 0.7 1.1 2.8
Extraordinary charge--debt retirement, net of income tax benefit.................. -- 0.2 0.1
--------- --------- ---------
Net income........................................................................ 0.7% 0.9% 2.7%
--------- --------- ---------
--------- --------- ---------
</TABLE>
1996 COMPARED WITH 1995
Net sales for 1996 were $1,332.0 million or 10.8% greater than in 1995,
resulting primarily from improved sales volumes and increased sales attributable
to the Brownell Acquisition in September 1995 and the Triangle Acquisition in
October 1996, partially offset by lower copper prices. The 1996 daily average
COMEX copper price was 21.5% lower than in 1995. Sales volumes for 1996 exceeded
1995 by 16.9%. Improved sales volumes resulted primarily from increased demand
for the Company's magnet wire, building wire and industrial wire products.
Sales of magnet wire in 1996 were essentially equal to those in 1995,
reflecting increased sales volumes offset by declining copper prices. Improved
sales volumes were attributable to increased demand for magnet wire in the
electric motor and transformer markets due in part to the increased use of
magnet wire for increased energy efficiency. Sales increases were also a result
of increased sales to distributors.
22
<PAGE>
Building wire sales for 1996 increased as compared to 1995 due primarily to
an increase in sales volumes, product pricing (without regard to copper costs)
and incremental sales attributable to the Triangle Acquisition, partially offset
by a decline in copper prices. Building wire market demand exhibited continued
growth during 1996 on the strength of new non-residential construction and
sustained expansion of the repair and remodeling segment of the market. The
Company believes that this growth in demand was the leading cause for the
improvement in market prices during the second half of 1996 over the depressed
market conditions of 1995 and the first half of 1996. No assurance, however, can
be given that such favorable market conditions will continue in 1997.
Communication wire sales for 1996 were below those in 1995 due to the
decrease in copper prices partially offset by increased sales of premise wire
products. Premise wire sales were up 21.2% with volume up 31.5% as compared to
1995, reflecting continued strong growth in this segment of the communication
wire market. OSP sales volumes were 8.6% lower than 1995, reflecting, in part, a
decline in export sales, as the Company focused on strong domestic markets. The
Company believes that decreases in the domestic OSP copper wire market may lead
to reduced margins in the communications wire business unit in the future.
Automotive wire sales in 1996 were below those in 1995 due to the decrease
in copper prices partially offset by improved sales volumes as North American
new car and light truck sales volume increased just over 1% in 1996. Industrial
wire sales in 1996 were above those in 1995 by 12.0% due to an increase in sales
volume partially offset by the decline in copper prices. The increase in sales
volume was partially due to incremental sales attributable to the Triangle
Acquisition. Other sales in 1996 increased significantly over 1995 due to the
effect of inclusion of full-year sales from the Brownell Acquisition.
Cost of goods sold for 1996 was 7.0% higher than in 1995 due primarily to
higher sales volumes and increased sales attributable to the Brownell
Acquisition and the Triangle Acquisition, partially offset by lower copper
prices. The Company's cost of goods sold as a percentage of net sales was 82.8%
and 85.8% in 1996 and 1995, respectively. Cost of goods sold as a percentage of
net sales decreased compared to 1995 due primarily to the marked decline in
copper costs, improved building wire product pricing (without regard to copper
costs), a change in product mix associated with the Brownell Acquisition, which
tends to distribute more value-added products, and higher manufacturing volumes,
leading to increased manufacturing efficiency.
Selling and administrative expenses for 1996 were 29.6% above 1995, due
primarily to increased selling, distribution and administrative expenses
attributable to the Brownell Acquisition, the Triangle Acquisition and increased
distribution and commission expenses due to higher sales volumes experienced
during 1996.
Interest expense in 1996 was 18.5% lower than in 1995 due primarily to the
redemption (the "Debenture Redemption") on May 15, 1995 of all Essex
International's outstanding Senior Discount Debentures due 2004 (the
"Debentures"). The Debentures, which bore interest at 16% per annum, were
refinanced primarily with bank debt carrying significantly lower rates of
interest. See "--Liquidity, Capital Resources and Financial Condition". The
Company's average interest rate decreased from 10.4% in 1995 to 8.6% in 1996 due
to the Debenture Redemption.
Income tax expense was 43.6% of pretax income in 1996 compared with 52.0%
for 1995. The effective income tax rate of the Company was higher than the
approximate statutory rate of 40.0% due to the effect of the amortization of
excess of cost over net assets acquired in the Acquisition, which is not
deductible for income tax purposes.
The Company recorded net income of $36.3 million for 1996 compared to net
income of $10.3 million in 1995. The 1996 and 1995 results include extraordinary
charges of $1.2 million and $3.0 million, respectively ($2.0 million and $5.0
million, respectively, before applicable tax benefit) for the write-off of
unamortized deferred debt expense associated with the Company's former revolving
credit agreements. In 1996, a former revolving credit agreement was terminated
in connection with the Triangle Acquisition.
23
<PAGE>
In 1995, a former revolving credit agreement was terminated in connection with
the Debenture Redemption.
1995 COMPARED WITH 1994
Net sales for 1995 were $1,201.7 million or 19.0% higher than 1994,
reflecting primarily a marked increase in product prices and higher sales from
the Company's distribution business due to the Brownell Acquisition. Sales
volumes in 1995 approximated those experienced in 1994. Higher product prices
were essentially the result of a significant increase in copper costs. Average
COMEX copper prices in 1995 rose approximately 26.2% from 1994 and,
notwithstanding the magnitude of the price increase, was generally passed on to
customers through product pricing.
Sales of magnet wire increased approximately 26.5% over those in 1994,
driven by higher copper prices, improved pricing and growth in sales volumes.
Magnet wire sales volumes and product pricing improved during 1995 due to
increased demand for the Company's magnet wire products by distributors and
original equipment manufacturers.
Building wire sales in 1995 increased approximately 4.1% over 1994,
reflecting a combination of higher copper prices, lower sales volumes and a
steep decline in product pricing. Building wire product pricing (without regard
to copper costs) declined materially, and sales volumes also declined, although
to a lesser extent, due to competitive pricing pressures, excess capacity and
liquidation of inventories by distributors as a result of the significant
increase in copper prices in 1995.
Communication wire sales in 1995 improved approximately 48.8% over those in
1994 due to higher copper prices and domestic sales volumes and strengthening
product prices. Premise wire sales were up 54.1% with volumes 42.6% higher as
compared to 1994 while OSP sales were up 66% with volume up 11.6%. Export sales
were essentially flat between 1995 and 1994. The Company believes that
communication wire pricing strengthened due to significantly higher demand for
copper communication wire products coupled with a decline in industry
manufacturing capacity.
The Company's automotive wire sales volume in 1995 was up over 1994 by
approximately 8.2%, although North American new car and light truck sales volume
increased just over 2% in 1995. This improvement in sales volume was the result
of a marked increase in sales to other automotive accounts and, to a lesser
degree, improved sales to the Company's principal automotive wire customer. See
"Business--Product Lines--Automotive Wire". Other sales increased approximately
44.2%, attributable to the Brownell Acquisition.
Cost of goods sold increased 21.7% in 1995 compared with 1994 due primarily
to increased copper and other material costs and increased distribution costs
attributable to the Brownell Acquisition. The Company's cost of goods sold as a
percentage of net sales was 85.8% and 83.8% in 1995 and 1994, respectively. Cost
of goods sold as a percentage of net sales in 1995 was higher compared to 1994
due primarily to substantially higher copper prices and declining building wire
product pricing partially offset by lower manufacturing costs resulting from
continued capital investments and higher manufacturing volumes in the
communication and automotive business units.
Selling and administrative expenses in 1995 were 9.6% higher than 1994 due
primarily to increased overhead expenses attributable to the Brownell
Acquisition in the amount of approximately $5.1 million and to increased sales
commissions associated with higher sales.
Interest expense in 1995 was 18.5% lower than in 1994 due primarily to the
Redemption. The Company's average interest rate decreased from 12.6% in 1994 to
10.4% in 1995 due to the Redemption.
Income tax expense was 52.0% and 55.9% of pretax income in 1995 and 1994,
respectively. The effective income tax rate of the Company was higher than the
approximate statutory rate of 40.0% due to the effect of the amortization of
excess of cost over net assets acquired in the Acquisition, which is not
deductible for income tax purposes.
24
<PAGE>
The Company recorded net income of $10.3 and $7.5 million in 1995 and 1994,
respectively. The 1995 results include an extraordinary charge of $3.0 million
($5.0 million before applicable tax benefit) for the write-off of unamortized
debt issuance costs associated with the Company's former credit agreement which
was terminated in connection with the Redemption.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
GENERAL
Essex International is a holding company with no operations and virtually no
assets other than its ownership of the outstanding common stock of Essex. All
such stock is pledged, however, to the lenders under the Essex Revolving Credit
Agreement and, after the Offerings, will be pledged to the lenders under the
Restated Credit Agreement. Accordingly, Essex International's ability to meet
its cash obligations is dependent on Essex's ability to pay dividends, to loan,
or to otherwise advance or transfer funds to Essex International in amounts
sufficient to service Essex International's cash obligations.
Essex International expects that it may receive certain cash payments from
Essex from time to time to the extent cash is available and to the extent it is
permitted under the terms of the Restated Credit Agreement and the Senior Note
Indenture. Such payments may include (i) an amount necessary under the tax
sharing agreement between Essex and Essex International to enable Essex
International to pay Essex' taxes as if computed on an unconsolidated basis;
(ii) an annual management fee to an affiliate of BHLP of up to $1.0 million;
(iii) amounts necessary to repurchase management stockholders' shares of Common
Stock under certain specified conditions; and (iv) certain other amounts to meet
ongoing expenses of Essex International (such amounts are considered to be
immaterial both individually and in the aggregate because Essex International
has no operations, other than those conducted through Essex, or employees). To
the extent Essex makes any such payments, it will do so out of operating cash
flow, borrowings under the Restated Credit Agreement or other sources of funds
it may obtain in the future subject to the terms of the Restated Credit
Agreement and the Essex Senior Note Indenture.
The Company's financial position at December 31, 1996, was highly leveraged.
The Company's aggregate notes payable to banks plus long-term debt was $463.8
million, and its stockholders' equity was $158.7 million. The resulting ratio of
debt to stockholders' equity improved to 2.9 to 1 at December 31, 1996, from 3.6
to 1 at December 31, 1995.
CREDIT FACILITIES AND LINES OF CREDIT
The Company maintains the following credit facilities: (i) a $370.0 million
revolving credit agreement dated as of October 31, 1996, by and among Essex,
Essex International, the Lenders named therein, and The Chase Manhattan Bank, as
administrative agent (the "Essex Revolving Credit Agreement") that will be
amended and restated (the "Restated Credit Agreement") effective upon the
consummation of the Offerings; (ii) a $60.0 million senior unsecured note
agreement, dated as of April 12, 1995, by and among Essex, Essex International,
as guarantor, the Lenders named therein and The Chase Manhattan Bank, as
administrative agent (the "Essex Term Loan"); (iii) a $25.0 million agreement
and lease, dated as of April 12, 1995, by and between Essex and Mellon Financial
Services Corporation #3 (the "Essex Sale and Leaseback Agreement"); (iv) a $12.0
million (Canadian dollar) credit agreement by and between a subsidiary of Essex,
and the Bank of Montreal (the "Canadian Credit Agreement"); and (v) bank lines
of credit with various lending banks that provide for unsecured borrowings for
working capital of up to $25.0 million.
The Restated Credit Agreement, to be entered into in connection with the
Offerings, will provide for up to $370.0 million in revolving loans, subject to
specified percentages of eligible assets and reduced by outstanding borrowings
under the Canadian Credit Agreement and unsecured bank lines of credit. The
Restated Credit Agreement also will provide a $25.0 million letter of credit
subfacility. The Restated Credit Agreement will terminate on October 31, 2001.
The Restated Credit Agreement loans will bear floating rates of interest, at the
Company's option, at bank prime plus 0.0 to 0.50% or a reserve adjusted
25
<PAGE>
LIBOR rate plus 0.375 to 1.50%. The effective interest rate can be reduced by
0.375% to 1.125% if certain specified financial conditions are achieved. The
average interest rate on borrowings under the Essex Revolving Credit Agreement
during the fourth quarter of 1996 was 7.16%. At December 31, 1996, the amount of
revolving credit available to the Company was $61.7 million based upon the Essex
Revolving Credit Agreement borrowing base of $272.5 million, reduced by
outstanding borrowings under (i) the Essex Revolving Credit Agreement ($179.9
million), (ii) unsecured bank lines of credit ($25.0 million) and (iii) the
Canadian Credit Agreement ($5.9 million). During 1996, average borrowings under
the Company's revolving credit facilities were $163.4 million compared to $92.1
million in 1995.
The $29.5 million outstanding as of February 28, 1997 under the Essex Term
Loan is to be repaid in full with the proceeds of the Offerings.
The Essex Sale and Leaseback Agreement provided $25.0 million for the sale
and leaseback of certain of the Company's fixed assets. The lease obligation has
a seven-year term expiring in May 2002. The principal component of the rental is
paid quarterly, with the amount of each of the first 27 payments equal to 2.5%
of lessor's cost of the equipment, and the balance due at the final payment. The
interest component is paid on the unpaid principal balance and is calculated by
lessor at LIBOR plus 2.5%. The effective interest rate can be reduced by 0.25%
to 1.125% if certain specified financial conditions are achieved.
As of December 31, 1996, $5.9 million (US dollars) was outstanding under the
Canadian Credit Agreement and included as notes payable to banks in the
Company's financial statements. The Canadian Credit Agreement bears interest at
rates slightly higher than the Restated Credit Agreement and terminates on May
30, 1997, although it may be extended for successive one-year periods upon the
mutual consent of the subsidiary and the lending bank.
The Company had $25 million outstanding under bank lines of credit as of
December 31, 1996. Such amount is included in notes payable to banks in the
Company's Consolidated Balance Sheets. These lines of credit bear interest at
rates subject to agreement between the Company and the lending banks. At
December 31, 1996, such rates of interest averaged 7.6%.
CASH FLOW AND WORKING CAPITAL
In general, the Company requires liquidity for working capital, capital
expenditures, debt repayments, interest and taxes. Of particular significance to
the Company are its working capital requirements that increase whenever it
experiences strong incremental demand in its business or a significant rise in
copper prices. Historically, the Company has satisfied its liquidity
requirements through a combination of funds generated from operating activities
together with funds available under its credit facilities. Based upon historical
experience and the availability of funds under its credit facilities, the
Company expects that its usual sources of liquidity will be sufficient to enable
it to meet its cash requirements for working capital, capital expenditures, debt
repayments, interest and taxes for the remainder of 1997.
OPERATING ACTIVITIES. Net cash provided by operating activities in 1996 was
$64.6 million, compared to $89.8 million in 1995. The decrease in cash provided
by operating activities was primarily attributable to an increase in inventories
to accommodate higher sales volumes, net of the Triangle Acquisition, and slower
growth in accounts payable partially offset by a reduction in accounts
receivable attributable to a marked decline in copper prices.
INVESTING ACTIVITIES. Capital expenditures of $25.6 million in 1996 were
$3.0 million less than in 1995. In 1996, approximately $5.5 million was invested
in magnet wire ovens to improve quality and increase manufacturing productivity.
Capital expenditures in 1997 are expected to be approximately 40% above 1996
levels and will be used for modernization projects to enhance efficiency and
expand capacity. At December 31, 1996, approximately $5.5 million was committed
to outside vendors for capital expenditures. The Restated Credit Agreement will
impose limitations on capital expenditures, business acquisitions and
investments. See "Description of Certain Indebtedness--Restated Credit
Agreement".
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The costs of the BICC Canada and Triangle acquisitions, approximately $7.6
million and $71.8 million, respectively, including related expenses, were
financed from proceeds received under the Company's revolving credit agreements
applicable at the time. Future cash requirements of these operations are
expected to be satisfied through the Company's traditional sources of liquidity,
as previously discussed.
FINANCING ACTIVITIES. On July 15, 1996, the Company redeemed all its
outstanding 15% Series B Cumulative Redeemable Exchangeable Preferred Stock (the
"Series B Preferred Stock") at $27.041 per share, or $59.3 million in the
aggregate, including related redemption expenses. This was financed by the
Company through a private offering of 5,930,000 shares of Common Stock to
certain of its common stockholders and their affiliates at $10 per share. In
December 1996, the private offering (the "1996 Private Offering") was extended
to certain management employees of the Company, who collectively purchased
437,708.5 shares of Common Stock at $10 per share.
LONG-TERM LIQUIDITY CONSIDERATIONS
Regarding long-term liquidity, the Essex Senior Notes (as defined in
"Description of Certain Indebtedness") mature in 2003 and are expected to be
replaced by similar financing at that time. The terms of the Essex Sale and
Leaseback Agreement include a balloon payment of $8.1 million in 2002. The
Restated Credit Agreement does not require repayment until its termination in
October 2001. The Company expects that its traditional sources of liquidity will
enable it to meet its long-term cash requirements for working capital, capital
expenditures, interest and taxes, as well as its debt repayment obligations
under the Essex Sale and Leaseback Agreement.
The Company's operations involve the use, disposal and cleanup of certain
substances regulated under environmental protection laws. The Company has
accrued $0.9 million for environmental remediation and restoration costs. The
accrual is based upon management's best estimate of the Company's exposure in
light of relevant available information, including the allocations and remedies
set forth in applicable consent decrees, third-party estimates of remediation
costs, the estimated ability of other potentially responsible parties to pay
their proportionate share of remediation costs, the nature of each site and the
number of participating parties. Subject to the difficulty in estimating future
environmental costs, the Company expects that any sum it may have to pay in
connection with environmental matters in excess of the amounts recorded or
disclosed will not have a material adverse effect on its financial position,
results of operations or cash flows. See "Business--Legal and Environmental
Matters" for further discussion of the Company's environmental liabilities.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company, to a limited extent, uses forward fixed price contracts and
derivative financial instruments to manage foreign currency exchange and
commodity price risks. To protect the Company's anticipated cash flows from the
risk of adverse foreign currency exchange fluctuations for firm sales and
purchase commitments, the Company enters into foreign currency forward exchange
contracts. Copper, the Company's principal raw material, experiences marked
fluctuations in market prices, thereby subjecting the Company to copper price
risk with respect to copper purchases on fixed customer sales contracts.
Derivative financial instruments in the form of copper futures and forward
contracts are utilized by the Company to reduce those risks. The Company does
not hold or issue financial instruments for investment or trading purposes. The
Company is exposed to credit risk in the event of nonperformance by
counterparties to foreign exchange forward contracts, metal forward price
contracts and metals futures contracts, but the Company does not anticipate
nonperformance by any of these counterparties. The amount of such exposure is
generally the unrealized gains, if any, with respect to the underlying
contracts.
27
<PAGE>
BUSINESS
The Company is a leading North American developer, manufacturer and
distributor of copper electrical wire and cable products. Founded in 1930, the
Company serves over 11,000 worldwide customers in a wide range of industrial
markets from its 28 manufacturing facilities and 48 service centers located
throughout the United States and Canada. Since 1993, the Company has
significantly strengthened its market positions through expanded sales efforts
and acquisitions and has improved its manufacturing capacity and production
efficiencies through capital expenditure and productivity improvement programs.
As a result of these efforts, from 1993 to 1996, the Company's net sales volumes
grew at a CAGR of approximately 8%, generating $1.3 billion in net sales in
1996, while its EBITDA grew at a CAGR of 22%, from $77 million in 1993 to $140
million in 1996, and its net income grew from a loss of $14.2 million in 1993 to
a profit of $36.3 million in 1996. (With respect to EBITDA, see footnote (g) in
"Selected Consolidated Financial and Operating Data").
The Company organizes its operating activities into the following principal
areas:
MAGNET WIRE PRODUCTS (29% of 1996 net sales)--The Company's magnet wire
products are used in a wide variety of motors, coils, relays, generators,
solenoids and transformers by the electrical equipment and electronics
industries. Annual industry data since 1991 has shown that the Company's magnet
wire products have the highest quality in the industry (as measured by customer
returns). As a result of significantly increasing its sales volumes of magnet
wire products in recent years while focusing on higher value-added products and
controlling costs, the gross margins of the Company's magnet wire business have
increased substantially.
BUILDING WIRE AND CABLE PRODUCTS (37% of 1996 net sales)--The Company
produces a wide range of copper building wire and related wire products for the
commercial, industrial and residential markets. These products are marketed
primarily to electrical distributors throughout the United States and Canada for
ultimate use by electrical contractors and "do-it-yourself" consumers.
Approximately two-thirds of the Company's net sales of these products is
attributable to remodeling and repair activity and the balance to new
nonresidential and residential construction.
COMMUNICATIONS WIRE AND CABLE PRODUCTS (13% of 1996 net sales)--The
Company's communications wire products consist of OSP voice communication copper
wire and cable products for the "local loop" segment of the telecommunication
system and voice and data communication copper wire and cable products for the
premise segment of the telecommunication system. Copper-based wire is the most
widely used medium for voice and data transmission in the local loop and in
homes and offices, due in part to its significant installed base, lower
installation cost and ease of repair.
OTHER PRODUCTS AND ACTIVITIES (21% of 1996 net sales)--The Company
manufactures and markets a wide range of automotive and industrial electrical
wire products and maintains a distribution business for the sale and
distribution of its magnet wire and related third-party-manufactured products.
The Company produces automotive wire and cable products (7% of 1996 net sales)
for sale to suppliers of automotive original equipment. Such products include
primary wire for use in engine harnesses, ignition wire and battery cable.
Industrial wire and cable products (5% of 1996 net sales) consist of appliance
wire, motor lead wire, submersible pump cable, power cable, flexible cord, power
supply cords, welding cable and recreational vehicle wire. The Company's
distribution business provides a sales channel to both small manufacturers of
original equipment motors and motor repair markets for some of the Company's
magnet wire products, as well as third-party-manufactured products that
complement the Company's magnet wire products. During 1996, third-party products
constituted 9% of net sales, while 20% of the Company's magnet wire products
were sold through this sales channel.
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<PAGE>
STRATEGY
The Company has established a strategy that is designed to exploit its
competitive strengths and position it to pursue opportunities for future growth.
The key tenets of this strategy are:
- CAPITALIZE ON SIZE AND SCOPE OF OPERATIONS--The Company believes that it
is one of the largest electrical wire producers in the United States based
on net sales. The Company believes that the size and scope of its
operations provide it with efficiencies in manufacturing, purchasing and
distribution and with the resources necessary to meet the increasing
technological demands of the market. The Company intends to enhance these
competitive advantages by continuing to expand its operations through
internal growth and acquisitions. The electrical copper wire and cable
industry in North America has undergone significant consolidation in the
past ten years as a result of increased demand for product quality and
lower cost products that in turn has necessitated substantial capital
spending and development of sophisticated technical capabilities by market
participants.
- ENHANCE STRONG MARKET POSITIONS--The Company is focusing on improving its
leading or significant market positions in North America for its major
product categories and capitalizing on the advantages of its size. The
Company believes that it is one of two leading producers in each of the
magnet wire and building wire market based on net sales. Recent
acquisitions in magnet wire distribution, building wire and industrial
wire have enhanced the Company's market positions in these businesses. The
Company intends to maintain and enhance its market positions through
internal growth and continued participation in future industry
consolidation.
- MAINTAIN LEADERSHIP IN QUALITY AND PRODUCTIVITY--The Company employs
advanced technologies in manufacturing processes and product development
and intends to continue investing in manufacturing equipment and
facilities and to expand its continuous improvement programs in order to
maintain its leadership in quality and productivity. The Company believes
that its wire and cable products, which have earned numerous customer
quality awards, are among the highest in quality in the industry. Since
1992, the Company has invested approximately $140 million in capital
programs and has expanded its continuous improvement programs in order to
improve the quality of its products and increase the cost efficiency and
capacity of its production facilities. The Company also has lowered cost
levels by pursuing a high level of vertical integration through internal
production of its principal raw materials. In 1996, the Company produced
over 85% of its copper rod, magnet wire enamel and rubber insulation
materials and 70% of its PVC insulation requirements. As a result, the
Company believes that it is among the lowest cost domestic producers in
each of its business lines. A key productivity measure, annual copper
equivalent pounds shipped per employee, has increased by 21% from 1991 to
1996.
- CAPITALIZE ON INDUSTRY GROWTH OPPORTUNITIES--The Company believes that, as
the consumer continues to adapt to technological advances in both the home
and the workplace, the technical specifications of the "smart" home and
office will generate increased demand for certain electrical wire and
cable products. The Company believes that it is well positioned to
capitalize on this growth due to its significant market positions, strong
name recognition and size. Growth in the magnet wire business is expected
to be driven by increasing demand for devices containing electric motors
in the home and in automobiles, along with continuing consumer and
government pressure for higher energy efficiency from these devices
(energy efficient motors utilize materially more magnet wire per unit than
do their traditional counterparts). Growth in the building wire business
is expected to come primarily from increasing repair and remodeling
activity, as well as from new residential, commercial and industrial
construction. Both new construction and remodeling activity is being
affected by the increased number of circuits and amperage handling
capacity needed to support the increasing demand for electrical services.
The Company believes that its communications wire and cable business will
benefit from the increasing number of outside telephone lines into and
inside homes and offices and the increasing quality demands placed on
these lines to facilitate escalating data transmission from the growing
number of computers, facsimile machines and Internet devices. In the
automotive business, the Company
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<PAGE>
believes that the increasing production of cars and trucks with motorized
or electrical options will translate into increased demand for higher
quality, thinner-gauge wire products to take advantage of their lighter
weights and greater efficiency.
- PURSUE ACQUISITION OPPORTUNITIES-- Consistent with its historical emphasis
on vertical integration, breadth of product line and technological
innovation, the Company continuously evaluates opportunities to benefit
further from its manufacturing, purchasing and distribution capabilities,
expand its customer base, reduce costs and enter new markets through
acquisitions, investments, joint ventures and other strategic alliances.
Since the 1995 Refinancing, which provided the Company with substantial
financial and operating flexibility, the Company has acquired three major
businesses: the distribution business of Brownell; the Canadian building
wire business of BICC Canada in March 1996; and the building and
industrial wire businesses of Triangle in October 1996. The Company
believes that each of these businesses provides operating synergy which
complements the Company's existing manufacturing, distribution and
administrative capabilities, and each has met or exceeded financial and
operating expectations since its respective acquisition date. In addition,
in May 1995, the Company entered into a joint venture in India with
Finolex Cable LTD for the development and production of copper rod and
other wire products for the domestic Indian market and recently
established a joint venture with Raychem Corp. for the production and sale
of high performance wire products for the automotive industry. The Company
is currently evaluating several acquisition opportunities consistent with
its business strategy, although it has not reached agreement with any
third parties at this time.
- EXPAND INTERNATIONAL BUSINESS--Historically, the Company's production and
distribution emphasis has focused on North America, primarily the U.S.
market. Management anticipates that while the Company will remain focused
on the U.S. market, it expects to increase its efforts in expanding its
customer base in Canada and Mexico, where the Company believes demand for
electrical wire and cable products will grow significantly over the next
few years. Management also expects to establish a preliminary presence in
certain developing economies, particularly in locations that have been
targeted by the Company's customers for their own expansion.
MANAGEMENT AND COMPANY HISTORY
The Company's senior management team, including its business unit managers,
possesses a high level of experience in the wire and cable industry. The eight
most senior officers average 21 years of related industry experience, with an
average of over 17 years with the Company. The equity interest of management and
present and former employees (15.7% on a fully diluted basis 13.7% after giving
effect to the Offerings)) in the Company helps ensure that the interests of
management are aligned with those of the Company's other stockholders.
The Company was founded in 1930. From 1974 until February 1988 it was
operated as a wholly owned subsidiary of United Technologies Corporation
("UTC"). On February 29, 1988, the Company was purchased from UTC by The Morgan
Stanley Leveraged Equity Fund II, L.P., certain directors and members of
management of the Company and others (the "1988 Acquisition"). In October 1992,
the Company was acquired in the Acquisition by the existing stockholders. The
existing stockholders of the Company and their equity interests on a fully
diluted basis are BH Group (58.9%), certain present and former employees
(15.7%), the GS Partnerships (12.4%), DLJ (9.2%) and CEA (3.7%). After giving
effect to the Offerings, BH Group, present and former employees, the GS
Partnerships, DLJ and CEA will beneficially own equity interests of 53.6%,
13.7%, 6.9%, 1.2% and 1.8%, respectively, on a fully diluted basis. In
connection with the Acquisition, the GS Partnerships and DLJ were granted
Warrants to purchase up to 1,120,551.5 and 1,712,817.5 shares of Common Stock,
respectively, at an exercise price of $5.71514 per share. The GS Partnerships
will sell all their Warrants to the Underwriters, and DLJ will sell 1,475,658 of
its Warrants to the Underwriters, in each case, at a purchase price of $12.02
per Warrant (assuming an initial public offering price of $18.50 per share, the
mid-point of the range of initial public offering prices set forth on the cover
page of this Prospectus). The Company will then redeem these Warrants for an
aggregate of 1,794,172 shares of Common Stock. The remaining 237,159 Warrants
will
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<PAGE>
also be sold by DLJ to the Underwriters if the Underwriters' over-allotment
options are exercised in full. If the over-allotment options are exercised in
full by the Underwriters, none of the Warrants will be outstanding after the
Offerings (see "Certain Relationships and Related Party Transactions--The
Redemption").
PRODUCT LINES
The following table sets forth for each of the years in the three-year
period ended December 31, 1996, the dollar amounts and percentages of sales of
each of the Company's major product lines:
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS, EXCEPT FOR COPPER PRICE)
----------------------------------------------------------------
1994 (a) 1995 (a) 1996
-------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Magnet wire............................. $ 306.9 30% $ 388.2 32% $ 388.8 29%
Building wire........................... 390.0 39 406.1 34 487.1 37
Communication wire...................... 119.3 12 177.5 15 166.8 13
Automotive wire......................... 82.8 8 97.3 8 91.2 7
Industrial wire......................... 63.1 6 63.4 5 71.0 5
Other(b)................................ 48.0 5 69.2 6 127.1 9
--------- --- --------- --- --------- ---
Total................................... $ 1,010.1 100% $ 1,201.7 100% $ 1,332.0 100%
--------- --- --------- --- --------- ---
--------- --- --------- --- --------- ---
Average COMEX copper price per pound.... $ 1.07 $ 1.35 $ 1.06
</TABLE>
- ------------------------
(a) Due to a reorganization in the third quarter 1995, certain 1994 and 1995
product line sales have been reclassified.
(b) Includes sales of third-party manufactured products, including electrical
insulating products, electric motors, motor repair parts and pump seals,
sold through the Company's distribution business unit.
The Company classifies its operations into business units based on the
markets served. An overview of each business unit and the product lines
contained therein is set forth below.
MAGNET WIRE
INDUSTRY. The independent domestic supply of magnet wire has experienced
continued growth since 1990 and was, by Company estimates, approximately 790
million copper equivalent pounds sold in 1996. Growth in the magnet wire
business is being driven by the increasing demand for electrical devices
containing motors for the home and automobile, along with continuing consumer
and government pressure for higher energy efficiency from these devices (energy
efficient motors utilize materially more magnet wire per unit than traditional
counterparts). Strong consumer demand for greater numbers of electrical
convenience items in homes, offices and vehicles has resulted in increased sales
of household appliances and increased use of electric motors in vehicles.
Due to the substantial capital costs associated with magnet wire production,
the importance to original equipment manufacturers of a reputation for quality
and the stringent technological requirements and the cost efficiencies achieved
by larger magnet wire producers, significant industry consolidation has occurred
during the past ten years. In addition, the percentage of U.S. magnet wire
produced by independent magnet wire manufacturers such as the Company has grown
as the manufacturing capacity of captive magnet wire producers (electrical
equipment manufacturers who internally produce their own magnet wire) has been
reduced as a result of outsourcing over the last several years. Consequently, as
a result of the Company's efforts to maintain and enhance its manufacturing
capabilities, product development efforts and cost efficiencies through capital
spending and its continuous improvement programs, the Company believes that it
has positioned itself as one of the two leading independent domestic producers
of magnet wire based on sales.
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<PAGE>
PRODUCTS. The Company's magnet wire business unit offers a comprehensive
product line, including over 500 types of magnet wire used in a wide variety of
electromagnetic devices, such as motors, transformers, control devices, relays,
generators and solenoids, for household and automotive applications. Household
products requiring magnet wire include major appliances (dishwashers, dryers,
refrigerators and washing machines), small kitchen appliances (blenders, can
openers and mixers), lawn tools (hedge trimmers, lawn mowers and power tools)
and other products such as air conditioning units, humidifiers, security
systems, overhead lighting and pole/pad distribution transformers. Automotive
products requiring magnet wire include alternators, anti-lock braking systems,
dashboard gauges, wiper motors and power controls (antenna, seat, steering and
windows).
The Company has received ISO 9001 and 9002 and QS9000 certification at all
its magnet wire manufacturing facilities.
SALES AND DISTRIBUTION. The Company's magnet wire products are sold to
original equipment manufacturers, motor repair shops, coil manufacturers and
independent distributors. Products are marketed nationally through a direct
sales force and the Company's distribution business unit. In 1996, approximately
three-fourths of the Company's magnet wire sales were made directly to end users
and approximately one-fourth were made through distributors.
BUILDING WIRE
INDUSTRY. The Company estimates that the domestic building wire market was
approximately 1.3 billion copper equivalent pounds sold in 1996. Increased
industry sales volume in recent years has resulted primarily from the level of
repair and remodel activity, as well as new nonresidential and residential
construction. For 1996, approximately two-thirds of industry sales volume was
attributable to repair and remodel activity and one-third to new construction.
Demand is also influenced by growth in electrical needs.
The building wire industry has experienced significant consolidation in
recent years, declining from approximately 28 manufacturers in 1980 to seven
primary manufacturers in 1996. The Company believes this consolidation is due
primarily to cost efficiencies achieved by the larger building wire producers as
they capitalize on the benefits of vertical integration and of manufacturing,
purchasing and distribution economies of scale. The Company has been an active
participant in this industry consolidation with the purchase of the Canadian
assets of BICC Canada in 1996 and the Triangle Acquisition in 1996. See
"--Recent Acquisitions". The Company believes that it is one of the two leading
domestic manufacturers of building wire based on sales.
PRODUCTS. The Company's building wire business unit, which began
manufacturing building wire in 1933, develops, manufactures and markets a
complete line of building wire. These products include a wide variety of
thermoplastic and thermoset insulated wires for the commercial and industrial
building markets and service entrance cable, underground feeder wire and
nonmetallic jacketed wire and cable for the residential market.
SALES AND DISTRIBUTION. The Company sells its building wire products
nationally through a direct sales force and a large network of manufacturers
representatives to a large and diverse customer base, consisting primarily of
electrical distributors and consumer product retailers. The Company maintains
numerous stocking locations across the United States and Canada to facilitate
distributors' "just-in-time" inventory practices. The ultimate end users of the
Company's building wire products are electrical contractors and "do-it-yourself"
consumers.
COMMUNICATION WIRE
INDUSTRY. The Company focuses on two segments of the communication wire
market: (i) outside plant ("OSP") wire and cable for voice communication in the
local loop segment of telephone networks and (ii) premise wire and cable for
voice and data communication in homes and offices for local area computer
networks ("LANs") and other applications. The Company believes that the domestic
copper
32
<PAGE>
OSP market was approximately $0.6 billion in 1996 and that the domestic copper
premise wire market was approximately $1.1 billion in 1996.
The local loop segment of the telecommunication network connects homes and
offices to the nearest telephone company switch or central office. Although
other transmission media, such as fiber optic cable, are extensively used for
long distance and trunk lines, copper wire and cable, with its lower
installation cost and ease of repair, is the most widely used medium for
transmission in the local loop, which comprises approximately 160 million
residential and business access lines across the United States. As a result of
consolidation in the OSP copper wire industry, total industry capacity has been
reduced and the number of manufacturers has declined. Demand for OSP wire in the
local loop should benefit from the increasing demand for multiple residential
access lines, as more households install additional access lines for multiple
telephone lines, facsimile machines, access to the Internet and for home
offices.
Premise wire is used within buildings to connect telecommunication devices
(telephones, facsimile machines and computer modems) to the telecommunications
network and to establish LANs. Rapid technological advances in communication and
computer systems have created increasing demand for greater bandwidth
capabilities in data transmission cable products. The Company expects demand for
enhanced premise wire products to increase significantly in the future,
particularly as office buildings are upgraded to accommodate advanced network
requirements. In addition, the Company believes that increasing demand for
multiple residential access lines will increase demand for premise wire. The
demand for product quality and the rapid pace of technological change have
necessitated significant capital investments by manufacturers.
PRODUCTS. Although the Company continues to have a strong presence in the
OSP market based on sales, it has begun to shift its focus to the premise wire
market, which provides potentially greater growth opportunities than the OSP
market. Sales volumes of the Company's premise wire products have grown at a
CAGR of 50% since 1992. The Company is developing new products in the OSP
segment, such as broad band "extra terrestrial" OSP cable to support new
technologies, and in the premise segment, such as enhanced category five wire
for high-speed LAN applications.
SALES AND DISTRIBUTION. While a significant amount of OSP wire has
historically been sold directly to domestic telephone companies, recently the
Company has focused its sales of both OSP and premise wire to domestic and
international distributors and representatives who in turn resell to
contractors, international and domestic telephone companies and private overseas
contractors for installation in the industrial, commercial and residential
markets.
AUTOMOTIVE WIRE
INDUSTRY. The automotive primary wire market has experienced strong growth
over the last decade due to higher production levels of new vehicles and the
significant increase in the installation of electrical options in vehicles,
which deliver increased safety, convenience and engine performance to the
consumer. These electrical options include power windows, supplemental restraint
systems, digital displays, keyless entry, traction control, electronic
suspension and anti-lock brakes. According to the Copper Development
Association, the total content of copper wire per vehicle has grown from
approximately 10 pounds in 1982 to approximately 24 pounds in 1992 and is
expected to grow to approximately 27 pounds by 1998.
The increasing demand for copper wire content in vehicles has created strong
demand for thinner-gauge wire, which in turn requires significant manufacturing
sophistication. The Company and its major competitors also face stringent
demands by automotive manufacturers to improve cost efficiency. These factors
have resulted in higher levels of capital investment and stable product pricing,
as well as industry consolidation.
PRODUCTS. The Company's automotive wire products include primary wire for
use in engine harnesses, ignition wire, battery cable and specialty wiring
assemblies. Through a joint venture with
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<PAGE>
Raychem Corp., the Company has begun to market a high-temperature resistant,
thinner-gauge automotive wire designed to meet future specialized needs of the
automotive industry.
SALES AND DISTRIBUTION. The Company sells automotive wire products
primarily to tier one motor vehicle manufacturer suppliers. The Company has
diversified its customer base for automotive wire products through steadily
improving product quality and increased productivity achieved through process
improvements.
Historically, the automotive division of UTC ("UTA") has been the principal
customer for the unit's automotive products, although sales to UTA have declined
in relative terms due to the expansion of the unit's overall customer base. UTA
accounted for approximately 50%, 48% and 40% of the Company's automotive wire
revenues in 1994, 1995 and 1996, respectively. Currently, the Company is in the
midst of a three-year contract with UTA, which expires in October 1997. The
Company and UTA are currently discussing an extension of this contract. Although
the Company expects to be able to extend this contract on reasonable terms, no
assurance can be given that this contract will be extended or, if extended that
it will be on the same terms as the current contract. The loss of UTA as a
customer could materially and adversely affect the Company's automotive wire
business unit.
INDUSTRIAL WIRE
INDUSTRY. The domestic industrial wire market is estimated by the Company
to be approximately $1.0 billion. Significant factors influencing the growth of
this industry include the construction or expansion of manufacturing plants,
mine expansion and consumer spending for hard goods. Due to the diversity of
product offerings within this industry, the Company's competition is fragmented
across the product lines and markets served by the industrial wire business
unit. The Company's acquisition of Triangle continues the recent industry trend
toward consolidation. See "--Recent Acquisitions".
PRODUCTS. The Company's industrial wire business unit develops,
manufactures and markets a broad line of industrial wire and cable products,
including appliance wire, motor lead wire, submersible pump cable, power cable,
bulk flexible cord, power supply cord sets, welding cable and recreational
vehicle wire.
SALES AND DISTRIBUTION. The Company sells industrial wire and cable
products on a nationwide basis, primarily to appliance and power tool
manufacturers, suppliers of electrical and electronic original equipment
manufacturers, electrical distributors and welding products distributors.
Distribution is done by a Company sales force and a large network of
manufacturers representatives.
RECENT ACQUISITIONS
The 1995 Refinancing provided the Company with additional financial
flexibility to pursue an active acquisition strategy. Consequently, the Company
has recently acquired several businesses to consolidate its market position in
its core products and realize further benefits from the Company's extensive
manufacturing and distribution capabilities.
In March 1996, the Company acquired the Canadian building and industrial
wire business of BICC Canada. This acquisition increased the Company's presence
in Canada and expanded its building wire product line.
The Brownell Acquisition in 1995 significantly increased the Company's
distribution business, particularly of magnet wire. Brownell had previously
served markets similar to the Company's existing magnet wire distribution
operations, but had purchased all of its products from third party suppliers.
The acquired assets were absorbed into an existing distribution unit now known
as "Essex Brownell". Products sold through Essex Brownell include magnet wire
and other products manufactured by the Company and items purchased from
third-party manufacturers, including electrical motors, electrical insulation
products, motor repair parts and pump seals. Of particular significance, Essex
Brownell provides the Company with an expanded sales channel to small original
equipment motor manufacturers and the motor repair markets.
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<PAGE>
The Triangle Acquisition, completed in October 1996, was the most
significant acquisition in the Company's recent history. As a result, the
Company increased the size of its building and industrial wire business units,
added manufacturing capacity and broadened the Company's product offerings. The
Company has realized cost savings through the elimination of duplicative
selling, general and administrative expenses and through purchasing economies of
scale. The Company also plans to further improve manufacturing efficiencies by
increasing the product focus of certain manufacturing facilities. The
integration of the Triangle manufacturing facilities has proceeded smoothly and
the contribution to the Company's revenues and net income has exceeded the
Company's expectations.
MANUFACTURING PROCESS
Copper rod is the base component for most of the Company's wire products.
The Company buys copper cathode from a variety of producers and dealers and also
reclaims and reprocesses high grade scrap copper from its own operations and
those of other copper wire producers. After the rod is manufactured at the
Company's continuous casting facilities, it is shipped to Company manufacturing
facilities where it is processed into the wire and cable products produced and
sold by the Company. See "--Metals Operations" for a discussion of the Company's
copper rod production.
The manufacturing processes for all the Company's wire and cable products
require that the copper rod be drawn and insulated. Certain products also
require that the drawn copper wire be "bunched" or "cabled" prior to being
insulated.
WIRE DRAWING. Wire drawing is the process of reducing the metal conductor
diameter by pulling it through a converging die until the specified product size
is attained. Since the reduction is limited by the breaking strength of the
metal conductor, this operation is repeated several times internally within the
machine. As the wire becomes smaller, less pulling force is required. Therefore,
machines operating in specific size ranges are required. Take-up containers or
spools are generally large, allowing one person to operate several machines.
BUNCHING. Bunching is the process of twisting together single wire strands
to form a concentric construction ranging from seven to over 200 strands. The
major purpose of bunching is to provide improved flexibility while maintaining
current carrying capacity.
CABLING. Cabling is the process of twisting individual bunched conductors
to form a conductor core. Cabling allows for the production of a very flexible
conductor which is useful in the production of larger products such as welding
cable, battery cable and mining cable. Cabling can also twist together insulated
conductors to form a multi-conductor product.
INSULATING. The magnet wire insulating materials (enamels) that are
manufactured by the Company's chemical processing facility are polymeric
materials produced by one of two methods. One method involves the blending of
commercial resins that are dissolved in various solvents and then modified with
catalysts, pigments, cross-linking agents and dyes. The other method involves
synthesizing polymer resins to desired molecular weights in reactor systems and
blending these polymers with solvent, catalysts and additives to form enamels.
The enamelling process used in the manufacture of some magnet wire involves
applying several thin coats of liquid enamel and evaporating the solvent in
baking chambers. Some enamels require a specific chemical reaction in the baking
chamber to fully cure the film. Enamels are generally applied to the wires in
excess and are then metered off with dies or rollers; other applications apply
only the required amount of liquid enamel.
Most other wire products are insulated and jacketed with either
thermoplastic or thermoset compounds that are applied to the metal conductor
through an extrusion process. Extrusion involves the feeding, melting and
pumping of a compound through a die to shape it into final form as it is applied
to
35
<PAGE>
the wire. The Company has the capability to manufacture both types of jacketing
and insulating compounds.
Once the wire is fabricated, it is packaged and shipped to regional service
centers, stocking agents or directly to customers.
METALS OPERATIONS
Copper is the primary component of the Company's overall cost structure,
comprising approximately 54% of the Company's 1996 total cost of goods sold. Due
to the critical nature of copper to its business, the Company has centrally
organized its metals operations. Through centralization, the Company carefully
manages its copper procurement, internal distribution, manufacturing and scrap
recycling processes.
The Company's metals operations are vertically integrated in the production
of copper rod. The Company believes that only a few of its competitors are able
to match this capability. The Company manufactures most of its copper rod
requirements and purchases the remainder from various suppliers.
COPPER PROCUREMENT. The Company's copper procurement activities are
centralized. In 1996, the Company purchased approximately 285,000 tons of
copper, entirely from North American copper producers and metals merchants.
To ensure a steady supply of copper, the Company contracts with copper
producers and metals merchants. Most contracts have a one-year term. Pricing
provisions vary, but are normally based on the COMEX price, plus a premium.
Premiums cover transportation and payment terms. Additionally, the Company
utilizes COMEX fixed price futures contracts to manage its commodity price risk.
The Company does not hold or issue such contracts for trading purposes.
Historically, the Company has had adequate supplies of copper available to
it from producers and merchants, both foreign and domestic. Competition from
other users of copper has not affected the Company's ability to meet its copper
procurement requirements. However, no assurance can be given that the Company
will be able to procure adequate supplies of copper to meet its future needs.
COPPER ROD PRODUCTION. The production of copper rod is an essential part of
the Company's manufacturing process and strategy. By manufacturing its own rod,
the Company is able to maintain greater control over the cost and quality of
this critical raw material.
Copper rod is manufactured in a continuous casting process in which high
quality copper cathodes are melted in a shaft furnace. The resultant molten
copper is transferred to a holding furnace and then transferred directly onto a
casting wheel, where it is cooled and subsequently rolled into copper rod. The
rod is subjected to numerous quality control tests to assure that it meets the
high quality standards of the Company's products. Finally, the rod is packaged
for shipment via an automatic in-line coiling and packaging device.
The Company's rod production facilities are strategically located near its
major wire producing plants to minimize freight costs. From its five continuous
casting units, the Company has the capability to produce approximately 85% of
its rod requirements, while purchasing the balance from external sources.
External rod purchases are used to cover rod requirements at manufacturing
locations where shipping the Company-produced rod is not cost effective and when
the Company's rod requirements exceed its production capacity.
COPPER SCRAP RECLAMATION. The Company's Metals Processing Center receives
clean, high quality copper scrap from the Company's magnet wire plants. Copper
scrap is processed in rotary furnaces, which also have refining capability to
remove impurities. The Company uses a continuous casting process to convert
scrap material directly into copper rod. Manufacturing cost economies,
particularly in
36
<PAGE>
the form of energy savings, result from this direct conversion technique.
Additionally, management believes that internal reclamation of scrap copper
provides greater control over the cost to recover the Company's principal
manufacturing by-product. The Company also, from time to time, obtains magnet
wire scrap from other copper wire producers and processes it along with the
internally generated scrap.
EXPORTS
Sales of exported goods approximated $52.7 million, $55.5 million and $85.8
million for the years ended December 31, 1994, 1995 and 1996, respectively.
Building wire, magnet wire and communication cables are the Company's primary
exports. Canada and Mexico are the primary export destinations.
BACKLOG; RETURNS
The Company has no significant order backlog, because it follows the
industry practice of producing its products on an ongoing basis to meet customer
demand without significant delay. The Company believes that the ability to
supply orders in a timely fashion is a competitive factor in the markets in
which it operates. Historically, returns have had no material adverse effect on
the Company's results of operations.
COMPETITION
In each of the Company's businesses, the Company experiences competition
from at least one major competitor. However, due to the diversity of the
Company's product lines as a whole, no single competitor competes with the
Company across the entire spectrum of the Company's product lines. Thus, the
Company's diversity of products and diversity of end users insulate it from
adverse conditions in any one business unit or any one product line. Many of the
Company's competitors do not have such diversity.
As a result of consolidation in the magnet wire industry, the Company
estimates that the three largest independent magnet wire producers represented
over 85% of copper equivalent pounds shipped in 1996. The building wire industry
also has experienced significant consolidation, from approximately 28
manufacturers in 1980 to approximately seven in 1996. The Company has been an
active participant in this industry consolidation with the purchase of the
Canadian building wire assets of BICC Canada and the Triangle Acquisition in
1996. The Company believes that it is one of two leading producers in each of
the magnet wire and building wire markets based on sales.
Many of the Company's products are made to industry specifications, and are
therefore essentially fungible with those of competitors. Accordingly, in these
markets the Company is subject to competition on the basis of price, delivery
time, customer service and its ability to meet specialty needs. The Company
believes that it enjoys strong customer relations resulting from its long
participation in the industry, its emphasis on customer service, its commitment
to quality control, its reliability and its substantial production resources.
The Company's distribution networks enable it to compete effectively with
respect to delivery time. From time to time the Company has experienced reduced
margins in certain markets due to unfavorable market conditions. During 1995 and
the first half of 1996, building wire product pricing (without regard to copper
costs) declined materially, and sales volumes also declined, although to a
lesser extent, due to competitive pricing pressures, excess capacity and
liquidation of inventories by distributors as a result of the significant
increase in copper prices in 1995 and early 1996. The communication wire
business unit also experienced reduced margins in 1994. Expected decreases in
the domestic OSP copper wire market demand may lead to reduced margins in the
communication wire business over the next few years.
37
<PAGE>
ENVIRONMENTAL COMPLIANCE
The Company does not believe that compliance with environmental laws and
regulations will have a material effect on the level of capital expenditures of
the Company or its business, financial condition, cash flows or results of
operations. The Company does not currently anticipate material capital
expenditures for environmental control facilities. No material expenditures
relating to these matters were made in 1994, 1995 or 1996. In connection with
the 1988 Acquisition and associated stock purchase agreement with UTC dated
January 15, 1988, UTC indemnified the Company with respect to certain
environmental liabilities. See "--Legal and Environmental Matters."
EMPLOYEES
As of December 31, 1996, the Company employed approximately 1,700 salaried
and 3,100 hourly employees in 35 states. Labor unions represent approximately
49% of the Company's work force. Collective bargaining agreements expire at
various times between 1997 and 2000. Contracts covering approximately one-third
of the Company's unionized work force will expire at various times during 1997.
The Company believes that it will be able to renegotiate its contracts covering
such unionized employees on terms that will not be materially adverse to it.
However, no assurance can be given to that effect. The Company believes that its
relations with both unionized and nonunionized employees have been satisfactory.
PROPERTIES
At December 31, 1996 the Company operated 28 manufacturing facilities in 16
states. Except as indicated below, all of the facilities are owned by the
Company, and will be subject to certain liens granted to the lenders pursuant to
the Restated Credit Agreement. The Company believes that its facilities and
equipment are reasonably suited to its needs and are properly maintained and
adequately insured.
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<PAGE>
The following table sets forth certain information with respect to the
manufacturing facilities of the Company at December 31, 1996:
<TABLE>
<CAPTION>
SQUARE
OPERATION LOCATION FEET
- -------------------------------------------- --------------------- -------------
<S> <C> <C> <C>
Magnet Wire................................. Charlotte, NC 26,000 (Leased)
Fort Wayne, IN 181,000
Franklin, IN 35,000(a)
Franklin, TN 289,000 (Leased)
Kendallville, IN 88,000
Rockford, IL 319,000
Vincennes, IN 267,000
Building Wire............................... Anaheim, CA 174,000
Columbia City, IN 400,000
Lithonia, GA 144,000
Pauline, KS 501,000
Sikeston, MO 189,000
Tiffin, OH 260,000
Communication Wire.......................... Chester, SC 218,000
Hoisington, KS 239,000
Automotive Wire............................. Kosciusko, MS 90,000(b)
Marion, IN 50,000
Orleans, IN 425,000
Industrial Wire............................. Florence, AL 129,000
Lafayette, IN 350,000
Pana, IL 110,000
Pawtucket, RI 412,000
Phoenix, AZ 34,000
Insulation.................................. Newmarket, NH 132,000
(2 facilities)
Rutland, VT 61,000
Metals Processing........................... Columbia City, IN 75,000
Jonesboro, IN 56,000
</TABLE>
- ------------------------
(a) The total square footage of the Franklin, IN, facility is approximately
70,000, of which 35,000 square feet is leased to Femco (as described below).
(b) Approximately 30,000 square feet is leased.
In addition to the facilities described in the table above, the Company owns
or leases 48 service centers throughout the United States and Canada to
facilitate the sale and distribution of its products. The Company owns and
maintains executive and administrative offices in Fort Wayne, Indiana.
The Company believes that its plants are generally adequate to service the
requirements of its customers. Overall, the Company's plants are substantially
utilized. The extent of current utilization is generally consistent with
historical patterns, and, in the view of management, is satisfactory. The
Company does not view any of its plants as being underutilized, except for
Lafayette, Indiana, which just completed a major capacity expansion to make it
the focus plant for industrial wire products. Most plants operate on 24
hour-a-day schedules, on either a five day or seven day per week basis. During
1996, the Company's facilities operated in excess of 90% capacity.
The property in Franklin, Indiana, is a magnet wire manufacturing facility
occupied by both the Company and a joint venture ("Femco") between the Company
and the Furukawa Electric Company, LTD., Tokyo, Japan. Half of the Franklin,
Indiana, building is leased to Femco, which manufactures and
39
<PAGE>
markets magnet wire with special emphasis on products required by Japanese
manufacturers with production facilities in the United States.
LEGAL AND ENVIRONMENTAL MATTERS
The Company is engaged in certain routine litigation arising in the ordinary
course of business. While the outcome of litigation can never be predicted with
certainty, the Company does not believe that any of its existing litigation,
either individually or in the aggregate, will have a material adverse effect
upon its business, financial condition, cash flows or results of operations.
The Company's operations are subject to environmental laws and regulations
in each of the jurisdictions in which it operates governing, among other things,
emissions into the air, discharges to waters, the use, handling and disposal of
hazardous substances and the investigation and remediation of soil and
groundwater contamination, both on-site at Company facilities and at off-site
disposal locations. On-site contamination at certain Company facilities is the
result of historic disposal activities, including activities attributable to
Company operations and those occurring prior to the use of a facility by the
Company. Off-site liability includes clean-up responsibilities at various sites,
to be remedied under federal or state statutes, for which the Company has been
identified by the United States Environmental Protection Agency (the "EPA") (or
the equivalent state agency) as a Potentially Responsible Party ("PRP"). Certain
environmental laws have been construed to impose liability for the entire cost
of remediation at a site upon a PRP without regard to fault or the lawfulness of
the disposal activity.
Once the Company has been named as a PRP, it estimates the extent of its
potential liability based upon its past experience with similar sites and a
number of factors, including, among other things, the number and financial
viability of other identified PRPs, the total anticipated cost of the
remediation and the relative contribution by the Company, in volume and type, of
waste at the site. Most of the sites for which the Company is currently named as
a PRP are covered by an indemnity (the "general indemnity") from UTC that was
granted in connection with the 1988 Acquisition. Pursuant to the general
indemnity, UTC agreed to indemnify the Company against losses incurred under any
environmental protection and pollution control laws or resulting from or in
connection with damage or pollution to the environment arising from events,
operations or activities of the Company prior to February 29, 1988, or from
conditions or circumstances existing at or prior to February 29, 1988. In order
to be covered by the general indemnity, the condition, event, and circumstance
must have been known to UTC prior to February 29, 1988. The sites covered by the
general indemnity are handled directly by UTC, and all payments required to be
made are paid directly by UTC. These sites are all mature sites where
allocations have been settled and remediation is well underway or has been
completed. The Company is not aware of any inability or refusal on the part of
UTC to pay amounts that are owing under the general indemnity or any disputes
between the Company and UTC concerning matters covered by the general indemnity.
UTC also provided an additional environmental indemnity, referred to as the
"basket indemnity". This indemnity relates to liabilities arising from
environmental events, conditions or circumstances existing at or prior to
February 29, 1988, that only became known to UTC in the five-year period
commencing February 29, 1988. As to such liabilities, the Company is responsible
for the first $4.0 million incurred. Thereafter, UTC has agreed to indemnify the
Company fully for any liabilities in excess of $4.0 million. The Company is
currently named as a PRP at three sites which meet the criteria for the basket
indemnity. Those sites are Fisher Calo Chemical and Solvents Corporation,
Kingsbury, IN ("Fisher Calo"); Organic Chemicals, Inc., Grandville, MI; and USS
Lead Refinery Inc., East Chicago, IL. Based on records showing very small
quantities of material shipped to Organic Chemicals Inc. and USS Lead Refinery
Inc., the Company has determined that its liability, if any, for these sites
will be de minimis. At Fisher Calo, the Company entered into a consent decree
that defined its share as 0.25% and established an expected liability of $0.1
million, which has been accrued. Expenses at these three sites, up to $4.0
million, will be incurred by the Company rather than UTC, as the basket has not
been exhausted under the basket indemnity.
40
<PAGE>
In addition, there are five sites where the Company is either named as a PRP
or a defendant in a civil lawsuit which are not covered by the general indemnity
or the basket indemnity. They are Ascon Landfill, Huntington Beach, CA; A-1
Disposal Corp., Allegan County, MI; Angola Soya Co., Angola, IN; Milford Mill,
Beaver County, UT; and Uniontown Landfill, Uniontown, IN. Ascon Landfill was an
oil percolation refining center. The Company received a request for information
from the California Department of Toxic Substance Control in 1994 and replied
that it has no records linking the Company to the site. A-1 Disposal Corp.
stored and treated hazardous waste. The Company was one of a number of PRPs who
entered into a consent decree with the Michigan Department of Natural Resources
to clean the site. The Company has paid its assessment for the remediation.
Although the shares and sources of funding for five-year monitoring expenses
have not been established, the Company believes that its share will be minimal.
Angola Soya was a solvent reclamation facility in the 1950s and 1960s. After
receiving notice in 1994 alleging that its spent solvent drums had been
identified at the site, the Company cooperated with the Indiana Department of
Environmental Management to conduct a limited removal of certain of these drums.
No further activity by the Company is expected to be required there. The Milford
Mill site was a copper mill used by the Company in the early 1970s. The Company
is one of four PRPs notified by the EPA. The EPA conducted a removal action at
the site and incurred $0.2 million in costs, for which it is currently seeking
reimbursement from the PRPs. The Uniontown Landfill is the subject of a civil
lawsuit in which the Company is one of several defendants sued by the owner of
the landfill to recover alleged site investigation and groundwater remediation
costs. The Company does not believe that it is responsible for any disposal at
this site and is vigorously defending itself. The Company has provided a reserve
in the amount of $0.9 million to cover environmental contingencies. This accrual
is based on management's best estimate of the Company's exposure in light of
relevant available information, including the allocations and remedies set forth
in applicable consent degrees, third party estimates of remediation costs,
actual remediation costs incurred, the probable ability of other PRPs to pay
their proportionate share of remediation costs, the conditions at each site and
the number of participating parties. The Company currently does not believe that
any of the environmental proceedings in which it is involved and for which it
may be liable will individually or in the aggregate have a material adverse
effect upon its business, financial condition, cash flows or results of
operations. There can be no assurance that future developments will not alter
this conclusion. None of the cases described above involves sanctions, fines or
administrative penalties against the Company.
Since approximately 1990, the Company has been named as a defendant in a
number of product liability lawsuits brought by electricians and other skilled
tradesmen claiming injury from exposure to asbestos found in electrical wire
products produced a number of years ago. During 1996, the number of cases filed
against the Company increased to 95, involving approximately 400 claims. The
Company's strategy is to defend these cases vigorously. The Company believes
that its liability, if any, in these matters and the related defense costs will
not have a material adverse effect either individually or in the aggregate upon
its business, financial condition, cash flows or results of operations. There
can be no assurance, however, that future developments will not alter this
conclusion.
41
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information concerning the people who will
serve as directors and executive officers of the Company following the Offerings
(ages as of January 31, 1997):
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------- --- --------------------------------------------------------
<S> <C> <C>
EXECUTIVE OFFICERS:
Steven R. Abbott............ 49 President and Chief Executive Officer; Director
Robert J. Faucher........... 52 Executive Vice President
Dominic A. Lucenta.......... 43 Senior Vice President
Charles W. McGregor......... 55 Executive Vice President
Debra F. Minott............. 41 Senior Vice President, General Counsel and Secretary
Curtis A. Norton............ 51 Senior Vice President
David A. Owen............... 50 Executive Vice President, Treasurer and Chief Financial
Officer
Gregory R. Schriefer........ 44 Executive Vice President
DIRECTORS:
Rodney A. Cohen............. 35 Director
Stuart S. Janney, III....... 48 Director
Robert D. Lindsay........... 42 Director
Ward W. Woods............... 54 Director; Chairman of the Board
</TABLE>
Mr. Joseph H. Gleberman, age 39, is a current director of the Company but
has notified the Board of Directors that, effective prior to the consummation of
the Offerings, he will resign from the Board of Directors. Mr. Gleberman is a
Managing Director of Goldman, Sachs & Co. He joined the firm in 1982 in the
Mergers and Acquisitions Department. In 1990 he became a Partner of the firm. He
serves as a director of Applied Analytical Industries, Inc, Biofeld, Inc. and
Diagnostic Holdings, Inc. Mr. Gleberman has been a director of the Company since
February, 1994.
With the exception of Mr. Gleberman, the persons designated as directors in
tabular form above are all the current directors of the Company. Within three
months of the date of this Prospectus, one outside director will be appointed to
the Board and within one year of the date of this Prospectus, a second outside
director will be appointed to the Board and these two outside directors will
comprise a majority of the members of the audit and stock option committees of
the Board of Directors.
The Restated Certificate provides for a Board of Directors divided into
three classes, with one class to be elected each year to serve for a three-year
term. Concurrent with, or immediately prior to, the consummation of the
Offerings, all directors will be elected to either class A, B or C. Mr. Cohen
and Mr. Janney will be Class A directors, Mr. Lindsay and Mr. Woods Class B
directors and Mr. Abbott will be a Class C director. The term of the initial
Class A directors will expire at the Company's first annual meeting of
stockholders following the date of this Prospectus. The term of the initial
Class B directors will expire at the Company's second annual meeting of
stockholders following the date of this Prospectus, while the term of the
initial Class C directors will expire at the Company's third annual meeting of
stockholders following the date of this Prospectus.
Each executive officer of the Company serves at the pleasure of the Board of
Directors.
STEVEN R. ABBOTT was appointed President and Chief Executive Officer of the
Company and Essex on February 26, 1996, and has been a director since February
1996. He was President of the Wire and Cable Sector of Essex from September 1995
to February 1996 and President of the Wire and Cable
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<PAGE>
Division of Essex from September 1993 to September 1995. He was President of the
Magnet Wire and Insulation Division from 1987 to 1993. Mr. Abbott has been
employed by the Company since 1967.
ROBERT J. FAUCHER was appointed Executive Vice President of the Company in
March 1997. He was appointed Executive Vice President of Essex in September
1995. He was President of the Engineered Products Division of Essex from January
1992 to September 1995 and Vice President, Operations in the Industrial Products
Division of Essex from June 1988 to January 1992. Mr. Faucher joined the Company
in 1985 as Vice President, Planning.
DOMINIC A. LUCENTA was appointed Senior Vice President of the Company in
March 1997. He was appointed Senior Vice President in charge of Human Resources
of Essex in April 1994. From October 1992 to April 1994 he was Vice President of
Human Resources and from 1990 to 1992 he was Director of Human Resources for
various divisions of Essex. He was director of Risk Management from 1988 to
1990. He joined the Company in 1979.
CHARLES W. MCGREGOR was appointed Executive Vice President of the Company
in March 1997. He was appointed Executive Vice President of Essex in October
1996. He was President of the Magnet Wire and Insulation Sector of Essex from
September 1995 to October 1996. He was President of the Magnet Wire and
Insulation Division of Essex from September 1993 to September 1995 and prior to
that was Director of Manufacturing for the Division from 1987 to 1993. Mr.
McGregor has been employed by Essex since 1970.
DEBRA F. MINOTT was appointed Senior Vice President of the Company in March
1997 and was appointed Vice President, General Counsel and Secretary of the
Company in April 1995. She was appointed Senior Vice President and General
Counsel of Essex in October 1994 and was appointed Secretary of Essex in April
1995. She has been employed by the Company since October 1994. From September
1983 to October 1994, Ms. Minott held various legal positions at Eli Lilly &
Company.
CURTIS A. NORTON was appointed Senior Vice President of the Company in
March 1997. He was appointed Senior Vice President in charge of Corporate
Support Operations of Essex in April 1996. He was Vice President of Corporate
Support Operations from September 1995 to April 1996. He was Vice President of
Purchasing from April 1994 to September 1995 and Director of Purchasing from
1989 to 1994. Mr. Norton has been employed by the Company since 1981.
DAVID A. OWEN was appointed Executive Vice President of the Company in
March 1997. He was appointed Vice President, Treasurer and Chief Financial
Officer of the Company in March 1993. He was appointed Executive Vice President
and Chief Financial Officer of Essex in March 1994. He had been appointed Vice
President--Finance and Chief Financial Officer of Essex in March 1993, and
Treasurer of Essex in April 1992. Prior to that time, Mr. Owen was Director,
Treasury and Financial Services for Essex. Mr. Owen has been employed by the
Company since 1976.
GREGORY R. SCHRIEFER was appointed Executive Vice President of the Company
in March 1997. He was appointed Executive Vice President of Essex in October
1996. He was Vice President and General Manager of Building Wire Products from
September 1995 to October 1996 and was Vice President, Manufacturing of the Wire
and Cable Division from April 1994 to September 1995. Mr. Schriefer has been
employed in various positions with the Company since 1981.
RODNEY A. COHEN has been a director of the Company since March 1996. Mr.
Cohen is a member of the limited liability company that is the general partner
of each of the partnerships comprising BH Group. Since July 1993, Mr. Cohen has
been a principal of a partnership affiliated with BHLP, to which Essex and the
Company paid the fees described in "Certain Relationships and Related Party
Transactions". From September 1991 to July 1993, he was a principal of BSC, a
principal limited partner in two of the partnerships comprising BH Group. Prior
to joining BSC, Mr. Cohen was an associate in the Mergers
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<PAGE>
and Acquisitions Department of Morgan Stanley & Co. Incorporated. Mr. Cohen is
also a director of a number of private companies. Mr. Cohen was nominated to the
Board by BH Group.
STUART S. JANNEY, III was elected a director of the Company in March 1997.
Mr. Janney was elected in January 1995 as Chairman of the Board of Directors of
Bessemer Securities, LLC ("BSLLC"), Bessemer Securities Corporation ("BSC"), the
Bessemer Group Incorporated, Bessemer Trust Company, N.A. and Bessemer Trust
Company of Florida. BSLLC is the principal limited partner in one, and BSC is
the principal limited partner in two of the partnerships comprising the BH
Group. Prior to January 1995, Mr. Janney was with Alex. Brown & Sons
Incorporated, where he spent nine years, most recently as Managing Director and
head of asset management. Mr. Janney is a director of Graphic Controls
Corporation and a number of private companies, foundations and institutions. Mr.
Janney was nominated to the Board by BH Group.
ROBERT D. LINDSAY is the sole shareholder and president of a corporation
that is a manager of a limited liability company that is the general partner of
each of the partnerships comprising BH Group. He is also the sole shareholder of
corporations that are general partners of a partnership affiliated with BHLP to
which the Company paid the fees described in "Certain Relationships and Related
Party Transactions". Mr. Lindsay was Managing Director of BSC from January 1991
to June 1993. Prior to joining BSC, Mr. Lindsay was a Managing Director in the
Merchant Banking Division of Morgan Stanley & Co. Incorporated. He is the
Chairman of the Board of Metropolitan International, Inc., and a director of
Stant Corporation and several private companies. Mr. Lindsay has been a director
of the Company since October 1992. Mr. Lindsay was nominated to the Board by BH
Group.
WARD W. WOODS is Chairman of the Board of Directors of Essex International.
Mr. Woods is the sole shareholder and president of a corporation that is the
principal manager of a limited liability company that is the general partner of
each of the partnerships comprising BH Group. He is also the sole shareholder of
corporations that are the managing general partners of a partnership affiliated
with BHLP to which the Company paid the fees described in "Certain Relationships
and Related Party Transactions". Mr. Woods is President and Chief Executive
Officer of BSLLC and BSC. Mr. Woods joined BSC in 1989. For ten years prior to
joining BSC, Mr. Woods was a senior partner of Lazard Freres & Co. LLC, an
investment banking firm. He is Chairman of the Board of Stant Corporation. He is
a director of Boise Cascade Corporation, Freeport-McMoran Copper & Gold, Inc.,
Graphic Controls Corporation, Kelley Oil & Gas Corporation and several private
companies. Mr. Woods has been a director of the Company since October 1992. Mr.
Woods was nominated to the Board by BH Group.
Each of the current executive officers of the Company is listed above.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Directors of the Company currently receive no compensation for their service
as directors, other than reimbursement of expenses incidental to attendance at
meetings of the Board of Directors or committees thereof. After the consummation
of the Offerings, it is expected that directors will be granted a stipend by the
Board for their service as directors of $25,000 per director per year plus
$1,000 for attendance at each meeting of the Board of Directors or any committee
therof (which payments may be payable, in whole or in part, in options to
purchase shares of Common Stock), plus reimbursement of expenses incidental to
attendance at meetings of the Board of Directors or committees thereof. The
following table sets forth the cash and non-cash compensation paid by or
incurred on behalf of the Company to its Chief Executive Officer and the four
other most highly compensated executive officers for each of the three years
ended December 31, 1996.
44
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
ANNUAL ----------------------
COMPENSATION NUMBER OF SECURITIES
-------------------- UNDERLYING OPTIONS/ ALL OTHER
SALARY BONUS SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)(A)
- ----------------------------------------- --------- --------- --------- ---------------------- ---------------
<S> <C> <C> <C> <C> <C>
Steven R. Abbott......................... 1996 287,993 600,000 125,000 27,531
President and Chief Executive Officer 1995 193,757 250,000 37,500 12,999
(b) 1994 182,502 200,000 60,000 8,306
Stanley C. Craft (c)..................... 1996 325,008 0 0 15,155
1995 310,004 450,000 50,000 27,905
1994 293,763 400,000 75,000 22,174
Charles W. McGregor...................... 1996 167,001 275,000 40,000 11,356
Executive Vice President 1995 157,503 210,000 32,500 9,684
1994 132,504 165,000 50,000 7,787
David A. Owen............................ 1996 167,001 250,000 37,500 9,195
Executive Vice President and Chief 1995 157,503 185,000 25,000 8,120
Financial Officer 1994 145,257 165,000 50,000 6,894
Robert J. Faucher........................ 1996 167,001 250,000 50,000 11,972
Executive Vice President 1995 157,503 175,000 25,000 11,356
1994 149,379 145,000 50,000 8,568
Gregory R. Schriefer..................... 1996 129,510 225,000 57,500 11,062
Executive Vice President
</TABLE>
- ------------------------
(a) All Other Compensation in 1996 consists of Company contributions to the
defined contribution and deferred compensation plans on behalf of the
executive officer and imputed income on excess Company-paid life insurance
premiums. The following table identifies and quantifies these amounts for
the named executive officers:
<TABLE>
<CAPTION>
S.R. S.C. C.W. D.A. R.J. G.R.
ABBOTT CRAFT MCGREGOR OWEN FAUCHER SCHRIEFER
--------- --------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Company matching under the defined
contribution and deferred compensation
plans.................................... $ 25,700 $ 9,750 $ 8,498 $ 7,478 $ 10,335 $ 10,635
Imputed income on excess life insurance
premiums................................. 1,831 5,405 2,858 1,717 1,637 427
--------- --------- ----------- --------- --------- -----------
Total...................................... $ 27,531 $ 15,155 $ 11,356 $ 9,195 $ 11,972 $ 11,062
--------- --------- ----------- --------- --------- -----------
--------- --------- ----------- --------- --------- -----------
</TABLE>
(b) Mr. Abbott was appointed President and Chief Executive Officer of the
Company and Essex on February 26, 1996.
(c) Mr. Craft served as President and Chief Executive Officer of the Company
from October 1992 until February 26, 1996, and also of Essex from March 1992
until February 26, 1996.
45
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL RATES
OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM (A)
-------------------------------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO
OPTIONS/SARS EMPLOYEES IN EXERCISE OR
GRANTED RESPECT OF LAST BASE PRICE EXPIRATION
NAME (#)(B) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- --------------------------- -------------- ------------------- ------------- ---------- --------- -----------
Steven R. Abbott........... 125,000 15.3 10.00 1/30/07 786,118 1,992,178
Stanley C. Craft........... 0 0 -- -- 0 0
Charles W. McGregor........ 40,000 4.9 10.00 1/30/07 251,558 637,497
David A. Owen.............. 37,500 4.6 10.00 1/30/07 235,835 597,653
Robert J. Faucher.......... 50,000 6.1 10.00 1/30/07 314,447 796,871
Gregory R. Schriefer....... 57,500 7.0 10.00 (c) 361,614 916,402
</TABLE>
- ------------------------
(a) The potential realizable value assumes a per-share market price at the time
of the grant to be approximately $10.00 with an assumed rate of appreciation
of 5% and 10%, respectively, compounded annually for 10 years. These values
are provided pursuant to the rules and regulations of the Commission. No
assurance can be given as to the appreciation, if any, of the Common Stock.
(b) In October 1996 options to purchase 87,500 shares of Common Stock were
granted. Such options become exercisable on October 1, 1999. In January 1997
options to purchase 730,000 shares of Common Stock were granted to maintain
management's equity interest in the Company as a result of the increase in
total Common Stock outstanding following the 1996 Private Offering and in
respect of performance for the year ended December 31, 1996 (see "--Stock
Option Plan"). Such options become exercisable on January 30, 1998.
(c) Options to purchase 25,000 and 32,500 shares of Common Stock granted in
October 1996 and January 1997, respectively, expire on October 1, 2006 and
January 30, 2007, respectively.
The following table details the December 31, 1996, year-end estimated value
of each named executive officer's unexercised stock options. All unexercised
options are to purchase the number of shares of Common Stock indicated, although
the Board of Directors may require that, in lieu of the exercise of any
Roll-over Options (as defined under "--Stock Option Plan"), such options be
surrendered without payment of the exercise price, in which case the number of
shares issuable upon exercise of such Roll-over Options shall be reduced by the
quotient of (A) the aggregate exercise price otherwise payable upon such
exercise and (B) the amount paid for each share of the Company's common stock in
the Acquisition, in each case as adjusted for any stock splits or other similar
corporate transactions. See "Stock Option Plan".
46
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES ACQUIRED YEAR-END (#) YEAR-END ($)
ON VALUE REALIZED EXERCISABLE (E)/ EXERCISABLE (E)/
NAME EXERCISE (#) ($) UNEXERCISABLE (U)(A) UNEXERCISABLE (U)(B)
- ------------------------------------ ----------------- ----------------- ----------------------- ---------------------
<S> <C> <C> <C> <C>
Steven R. Abbott -- -- 149,000(E) 1,141,811 (E)
222,500(U) 417,774(U)
Stanley C. Craft -- -- 311,500(E) 2,413,197(E)
125,000(U) 535,608(U)
Charles W. McGregor -- -- 35,250(E) 233,561(E)
122,500(U) 353,501(U)
David A. Owen -- -- 38,500(E) 258,811(E)
112,500(U) 321,365(U)
Robert J. Faucher -- -- 85,000(E) 624,811(E)
125,000(U) 321,365(U)
Gregory R. Schriefer -- -- 10,225(E) 80,550(E)
67,500(U) 42,849(U)
</TABLE>
- ------------------------
(a) The options to purchase Common Stock granted in 1997 with respect to the
1996 Private Offering and 1996 performance become exercisable on January 30,
1998. The options to purchase Common Stock granted in 1995 and 1996 become
exercisable three years from the date of grant. All other options granted
prior to those issued in 1995 are currently exercisable.
(b) The estimated value of in-the-money stock options held at the end of 1996
assumes a per-share fair market value of approximately $10.00 and per-share
exercise prices of $2.00, $2.50 and $5.72, as applicable.
PENSION PLANS. The Company provides benefits under a defined benefit
pension plan (the "Pension Plan") and a supplemental executive retirement plan
(the "SERP"). The following table illustrates the estimated annual normal
retirement benefits at age 65 that will be payable under the Pension Plan and
SERP.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REMUNERATION 15 20 25 30 35
- -------------- ----------- ----------- ----------- ----------- -----------
125,000..... $ 28,125 $ 37,500 $ 46,875 $ 56,250 $ 65,625
150,000..... 33,750 45,000 56,250 67,500 78,750
175,000..... 39,375 52,500 65,625 78,750 91,875
200,000..... 45,000 60,000 75,000 90,000 105,000
225,000..... 50,625 67,500 84,375 101,250 118,125
250,000..... 56,250 75,000 93,750 112,500 131,250
300,000..... 67,500 90,000 112,500 135,000 157,500
400,000..... 90,000 120,000 150,000 180,000 210,000
450,000..... 101,250 135,000 168,750 202,500 236,250
500,000..... 112,500 150,000 187,500 225,000 262,500
</TABLE>
47
<PAGE>
The remuneration utilized in calculating the benefits payable under the
Pension Plan and the SERP is the compensation reported in the Summary
Compensation Table under the captions Salary and Bonus. The formula utilizes the
remuneration for the five consecutive plan years within the ten completed
calendar years preceding the participant's retirement date that produces the
highest final average earnings.
As of December 31, 1996, the years of credited service under the Pension
Plan for each of the executive officers named in the Summary Compensation Table
were as follows: Mr. Abbott, twenty-seven years and seven months; Mr. Craft,
twenty-seven years and nine months; Mr. Owen, twenty years and eight months; Mr.
McGregor, twenty-six years and eleven months; Mr. Faucher, twenty-four years and
six months; and Mr. Schriefer, fifteen years and three months.
The benefits listed in the Pension Plan Table are based on the formula in
the Pension Plan using a straight-life annuity and are subject to an offset of
50% of the participant's annual unreduced Primary Insurance Amount under Social
Security. In addition, benefits for credited service for years prior to 1974 are
calculated using the formula in effect at that time and would reflect a lesser
benefit than outlined in the Pension Plan Table for those years. Benefits under
the Pension Plan are also offset by benefits to which the participant is
entitled under any defined benefit plan of UTC (other than accrued benefits
transferred to the Pension Plan).
STOCK OPTION PLAN
Grants of options to purchase Common Stock have been made to management and
employees of the Company pursuant to, and are subject to the provisions of, an
Amended and Restated Stock Option Plan, as amended (the "Stock Option Plan"),
and individual stock option agreements. Options granted prior to January 1, 1997
are exercisable: (i) in full, upon the third anniversary of the grant of the
options; (ii) in full, upon the death, retirement or disability of the optionee;
(iii) in part, upon the occurrence of a Company Sale (as defined below), in
which case the option becomes exercisable in a portion equal to the percentage
of the Company's then outstanding voting stock transferred pursuant to the
transactions constituting the Company Sale; and (iv) in part, upon the sale by
BH Group of 25% or more of the then outstanding Common Stock, in which case the
option becomes exercisable in a portion equal to the percentage of the Company's
then outstanding common stock sold by BH Group pursuant to the sale. Options
granted on January 30, 1997, in connection with the Company's 1996 performance
and to maintain management's equity interest in the Company as a result of the
increase in total Common Stock outstanding following the 1996 Private Offering
are exercisable: (i) in full, upon the first anniversary of the grant of the
options and (ii) in full or in part, as described in clauses (ii), (iii) and
(iv) of the prior sentence. Options granted after January 30, 1997, are
exercisable: (i) in full, upon the third anniversary of the grant of the
options, provided that during the second year the option is outstanding it may
be exercised as to not more than one-third (1/3) of the total number of shares
covered by the option and during the third year the option is outstanding it may
be exercised as to, cumulatively, not more than two-thirds (2/3) of the total
number of shares covered by the option, (ii) in full, upon the death, retirement
or disability of the optionee and (iii) in full upon the occurrence of a Change
in Control (as defined below).
Such options are generally not transferable. For the purposes of the Stock
Option Plan, a "Company Sale" is deemed to have occurred if any person (other
than BH Group) becomes the beneficial owner of 50% or more of the combined
voting power of the Company's securities or acquires substantially all the
assets of Essex International or Essex. For the purposes of the Stock Option
Plan, "Change of Control" has the same meaning as under the Termination Benefits
Agreement (as defined under "-- Termination Benefits Agreement").
The Board of Directors of the Company may require that certain options
granted in connection with the Acquisition (the "Roll-over Options") be
surrendered and cancelled without payment of the exercise price. In this event,
the optionee is entitled to receive a number of shares of Common Stock equal to
the number specified in the grant, reduced by the quotient of (A) the aggregate
exercise price otherwise payable upon such exercise divided by (B) the amount
paid for each share of the Company's common
48
<PAGE>
stock in the Acquisition, in each case as adjusted for any stock splits or other
similar corporate transactions.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Lindsay, Woods and Gleberman are currently members of the
Compensation Committee of the Board of Directors. Subsequent to the Offerings,
the Board of Directors expects to replace two of such directors with outside
directors. The Compensation Committee fixes the compensation paid to the
Company's executive officers, based in part on the recommendation of Mr. Abbott.
See "--Directors and Executive Officers" and footnote (k) of "Principal and
Selling Stockholders" for a description of the relationship between Messrs.
Lindsay and Woods and BH Group and the information set forth under the caption
"Certain Relationships and Related Party Transactions" for a description of
certain transactions between the Company and BH Group.
TERMINATION BENEFITS AGREEMENT
Prior to the consummation of the Offerings, the Company will enter into
agreements (each a "Termination Benefits Agreement") with each of Messrs.
Abbott, Faucher, Lucenta, McGregor, Norton, Owen and Schriefer and with Mrs.
Minott (each an "Executive") providing for certain benefits (the "Termination
Benefits") if the Executive's employment is terminated by the Company or by the
Company's successor following a Change-in-Control (as defined therein) other
than termination (a) by reason of the Executive's death, (b) by reason of the
executives "disability" (as defined therein), (c) as a result of reaching the
retirement age of 65 or (d) for "cause" (as defined therein).
The Company is also obligated to pay Termination Benefits if, following a
Change-in-Control during the term of the agreement, the Executive terminates his
or her employment for "good reason." Good reason includes: (i) the assignment of
duties that are materially inconsistent with the Executive's duties prior to the
Change-in-Control; (ii) a reduction in the Executive's annual salary from that
in effect immediately prior to the Change-in-Control; (iii) failure to maintain
incentive compensation programs for such Executive; (iv) failure to maintain
benefit programs for such Executive; (v) the relocation of the Executive's place
of employment to a place other than the metropolitan area of the Company office
where the Executive was located immediately prior to the Change-in-Control,
except for required travel on the Company's business in accordance with past
practice; (vi) the failure by the Company to obtain an agreement from any
successor to assume and agree to perform the Termination Benefits Agreement;
(vii) failure to reappoint the Executive to the corporate offices held
immediately prior to the Change-in-Control; (viii) a request by the Company or
the person obtaining control of the Company in a Change-of-Control for the
resignation of the Executive; (ix) if terminated, failure to terminate the
Executive's employment in accordance with the Termination Benefits Agreement;
(x) any request by the Company for the Executive to participate in an unlawful
act and (xi) breach by the Company of any provision of the Termination Benefits
Agreement.
The Termination Benefits consist of a payment from the Company to the
Executive of a multiple of the Executive's current annual base salary and
incentive compensation bonus paid within the 12 months preceding the
Change-of-Control. The multiples are as follows: Mr. Abbott three times; and for
the remaining named Executives, two times. The Termination Benefits Agreements
run for a two-year term that automatically extends for one additional year prior
to the start of the second year of the term until notice that the term will not
be extended is provided to the other party. Notwithstanding the prior sentence,
the term of the Termination Benefits Agreement will run for two years from the
time of any Change-of-Control during the term of the Agreement.
The Termination Benefits Agreement also provides that the applicable
Executive will keep confidential all confidential information of the Company and
will not, during the two years following the Executive's termination, solicit
any employee of the Company to leave the Company's employment.
49
<PAGE>
For the purposes of the Termination Benefits Agreements, "Change-in-Control"
means the occurrence of any of the following during the term of the agreement:
(a) any person other than the BH Group acquires 35% or more of the voting power
or common stock of the Company (other than by an acquisition from or by the
Company or any employee benefit plan sponsored by the Company or any Permitted
Reorganization (as defined below)) and owns a greater percentage of the voting
power or common stock of the Company than does the BH Group; (b) a change in the
Company's Board of Directors occurs with the result that the members of the
Board on the Effective Date (the "Incumbent Directors") no longer constitute a
majority of such Board of Directors, provided that any person becoming a
director (other than a director whose initial assumption of office occurs as a
result of either an actual or threatened election contest or other threatened
solicitation of proxies or consents by or on behalf of a person other than the
Board of Directors) whose election or nomination for election was supported by a
majority of the then Incumbent Directors shall be considered an Incumbent
Director for purposes hereof; (c) the stockholders of the Company approve a
reorganization, merger or consolidation of the Company, unless following such
transaction, (i) more than 50% of the voting power and common stock of the
surviving entity is beneficially owned by the prior stockholders of the Company,
in substantially the same proportions as before the transaction, (ii) at least a
majority of the Board of Directors of the surviving entity were members of the
Incumbent Board prior to such transaction and (iii) no person other than the BH
Group acquires 35% or more of the voting power or common stock of the Company
and a greater percentage of the voting power or common stock of the Company than
has the BH Group (a transaction complying with the requirements of this clause
(c) is referred to herein as a "Permitted Reorganization"); or (d) the
stockholders of the Company approve the sale of all or substantially all of the
property or assets of the Company other than in a Permitted Reorganization. A
Change-in-Control will not occur as a result of the Offerings.
50
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock (i) immediately prior to the Offerings and (ii) as
adjusted to reflect the sale of shares in the Offerings by (a) each person known
by the Company to be the beneficial owner of more than 5% of the outstanding
shares of Common Stock, (b) each of the Company's directors following the
Offerings, (c) each named executive officer, (d) all directors and executive
officers of the Company following the Offerings as a group and (e) each Selling
Stockholder. Unless otherwise noted in the footnotes to the table, the persons
named in the table have sole voting and investment power with respect to all
shares of Common Stock indicated as being beneficially owned by them.
<TABLE>
<CAPTION>
PRIOR TO OFFERINGS (a) AFTER THE OFFERINGS
---------------------------- --------------------------------
<S> <C> <C> <C> <C> <C>
SHARES TO BE
NUMBER OF PERCENT SOLD IN THE NUMBER OF
NAME SHARES OWNERSHIP OFFERINGS SHARES PERCENT OWNERSHIP
- ------------------------------------------------ ------------- ------------- ------------- ------------- -----------------
DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL
STOCKHOLDERS:
Steven R. Abbott(b)(c)(d)....................... 306,000.0 1.3 0 306,000.0 1.0
Rodney A. Cohen(e).............................. 0.0 * 0 0 *
Robert J. Faucher(b)(c)(f)...................... 191,488.5 * 0 191,488.5 *
Stuart S. Janney, III(e)........................ 0.0 * 0 0 *
Robert D. Lindsay(e)............................ 0.0 * 0 0 *
Charles W. McGregor(b)(c)(g).................... 73,623.0 * 0 73,623.0 *
David A. Owen(b)(c)(h).......................... 80,914.0 * 0 80,914.0 *
Gregory R. Schriefer(b)(c)(i)................... 41,593.5 * 0 41,593.5 *
Ward Woods(e)................................... 0.0 * 0 0 *
All directors and executive officers as a group
(12 persons(j))............................... 18,359,795.0 74.8 0 18,359,795.0 61.0
Bessemer Holdings, L.P.(b)(k)(l)(m)............. 17,548,165.5 72.6 0 17,548,165.5 59.0
SELLING STOCKHOLDERS:
The Goldman Sachs Group, L.P.(n)(o)............. 3,707,724.0 14.7 1,117,500 2,244,056.0 7.6
DLJ International Partners, C.V.(p)(q).......... 2,743,962.5 10.6 1,908,159 379,933.5 1.3
Chase Equity Associates(r)(s)................... 1,104,869.0 4.6 517,098 587,771.0 2.0
John L. Cox..................................... 50,048.5 * 25,000 25,048.5 *
Stanley C. Craft................................ 386,500.0 1.6 75,000 311,500.0 1.0
David O. McMahan................................ 66,745.0 * 18,745 48,000.0 *
James S. Tyler.................................. 24,998.0 * 8,498 16,500.0 *
Frederick M. Zinser............................. 226,055.0 * 80,000 146,055.0 *
</TABLE>
- ------------------------
* Represents holdings of less than one percent.
(a) Prior to the Offerings, there were 27,007,545.5 shares of Common Stock
outstanding, including 2,833,369 shares of Common Stock issuable upon
exercise of the Warrants. Percentages have been calculated assuming, in the
case of each person or group listed, the exercise of all warrants and
options owned (that are exercisable within sixty days following the date of
this Prospectus) by each such person or group, respectively, but not the
exercise of any warrants or options owned by any other person or group
listed.
(b) All shares of Common Stock owned by executive officers, employees, former
employees and retirees of the Company, or their respective estates (a total
of 1,902,824.5 shares), currently are subject to a proxy held by BHLP. This
proxy will terminate upon consummation of the Offerings. Pursuant to the
terms of certain option agreements, the aggregate number of shares issuable
upon exercise of such options can be reduced. See "Management--Stock Option
Plan".
(c) The address for each of these beneficial owners is c/o Essex International
Inc., 1601 Wall Street, Fort Wayne, Indiana 46802.
(d) Includes 149,000 shares issuable upon exercise of options held by Mr.
Abbott, 136,500 of which, pursuant to the applicable option agreement, may
be reduced to 88,076 shares.
(e) The address for each of these directors is c/o BHLP, 630 Fifth Avenue, New
York, NY 10111.
(f) Includes 85,000 shares issuable upon exercise of options held by Mr.
Faucher, 72,500 of which, pursuant to the applicable option agreement, may
be reduced to 45,598 shares.
(g) Includes 35,250 shares issuable upon exercise of options held by Mr.
McGregor, 22,750 of which, pursuant to the applicable option agreement, may
be reduced to 14,438.5 shares.
(h) Includes 38,500 shares issuable upon exercise of options held by Mr. Owen,
26,000 of which, pursuant to the applicable option agreement, may be reduced
to 16,420 shares.
(i) Includes 10,225 shares issuable upon exercise of options held by Mr.
Schriefer that, pursuant to the applicable option agreement, may be reduced
to 6,428 shares.
(j) Consists of the 17,548,165.5 shares of Common Stock owned by BH Group,
that, together with the shares described below, may be deemed to be
beneficially owned by Messrs. Woods, Lindsay and Cohen (which
51
<PAGE>
beneficial ownership is disclaimed by Messrs. Woods, Lindsay and Cohen--see
footnote (k) below), 449,379.5 shares of Common Stock owned by the executive
officers of Essex International included in this group, 362,250 shares of
Common Stock issuable to the executive officers of Essex International
included in this group upon exercise of options which, pursuant to the
applicable option agreements, may be reduced and excludes 1,453,445 shares
of Common Stock, along with 1,411,106 shares of Common Stock issuable upon
exercise of options (also subject to reduction) owned by other employees,
former employees and retirees of the Company.
(k) BHLP is a limited partnership the only activity of which is to make private
structured investments. The primary limited partner of BHLP is BSC. Each of
Messrs. Woods and Lindsay, directors of the Company, and Mr. Michael B.
Rothfeld, is a sole shareholder of a corporation that is a manager and
controls a family partnership that is a member of the limited liability
company that is the sole general partner of BHLP. Mr. Cohen, a director of
the Company, also is a member of that limited liability company. That
limited liability company is also the sole general partner of six other
limited partnerships that hold in the aggregate 4,175,173 additional shares
of Common Stock (see footnote (l) below). Mr. Janney is a director of BSC
and BSLLC. BSC is a principal limited partner of BHLP and Bessec Holdings,
L.P. BSLLC is a principal limited partner of Bessec Holdings, L.P. (see
footnote (l) below). In addition, Messrs. Woods, Lindsay and Rothfeld are
the sole shareholders of corporations that are the general partners of, and
Mr. Cohen is a principal of, the partnership affiliated with BHLP to which
the Company paid the fees described in "Certain Relationships and Related
Party Transactions". Mr. Woods is the President and Chief Executive Officer
of BSLLC and BSC. Each of Messrs. Woods, Lindsay, Rothfeld and Cohen
disclaims beneficial ownership of the shares of Common Stock owned or
controlled by BHLP and such other limited partnerships.
(l) The share ownership figure for BHLP includes 20,202 shares held by Bessemer
Holdings Special Situations, L.P., 1,140,562.5 shares held by BGE Partners,
L.P., 1,036,875 shares held by BNE Partners, L.P., 1,140,562.5 shares held
by BTE Partners, L.P., 599,500 shares held by BCE Partners, L.P. and 237,471
shares held by Bessec Holdings, L.P., affiliates of BHLP.
(m) The address for BHLP is 630 Fifth Avenue, New York, NY 10111.
(n) Represents in the aggregate 2,587,172.5 shares of Common Stock and warrants
to purchase 1,120,551.5 shares of Common Stock owned by the GS Partnerships,
of which affiliates of The Goldman Sachs Group, L.P. ("GS Group") are the
general partner or managing general partner, including (i) 2,532,493 shares
of Common Stock and warrants to purchase 1,092,538 shares of Common Stock
owned by GS Capital Partners, L.P., (ii) 34,120 shares of Common Stock and
warrants to purchase 17,480.5 shares of Common Stock owned by Stone Street
Fund 1992, L.P. and (iii) 20,559.5 shares of Common Stock and warrants to
purchase 10,533 shares of Common Stock owned by Bridge Street Fund 1992,
L.P. The GS Partnerships share voting and investment authority with certain
of their affiliates. GS Group disclaims beneficial ownership of the shares
owned by the GS Partnerships to the extent interests in such partnerships
are owned by persons other than GS Group and its affiliates. If the
Underwriters' over-allotment options are exercised in full, the GS
Partnerships will sell an additional 382,500 shares of Common Stock and will
have 1,861,556 shares of Common Stock after the Offerings, representing 6.3%
of the outstanding shares of the Common Stock after the Offerings.
(o) The address for GS Group and the GS Partnerships is 85 Broad Street, New
York, NY 10004.
(p) Represents in the aggregate 1,031,145 shares of Common Stock and Warrants to
purchase 1,712,817.5 shares of Common Stock owned by DLJ International
Partners, C.V. and its affiliates, including (i) 1,031,145 shares of Common
Stock owned by DLJ International Partners, C.V., (ii) Warrants to purchase
942,437 shares of Common Stock owned by DLJ Merchant Banking Partners, L.P.,
(iii) Warrants to purchase 457,867.5 shares of Common Stock owned by DLJ
Merchant Banking Funding, Inc. and (iv) Warrants to purchase 312,513 shares
of Common Stock owned by DLJ First ESC LLC. If the Underwriters'
over-allotment options are exercised in full, DLJ International Partners,
C.V. and its affiliates will sell an additional 142,774 shares of Common
Stock and 237,159 Warrants, which will be redeemed in exchange for 163,895
shares of Common Stock, and DLJ International Partners, C.V. and such
affiliates will have no remaining shares of Common Stock or Warrants
outstanding after the Offerings.
(q) The address for DLJ International Partners, C.V. is c/o John P. Gorsiraweg
6, Willemstad, Curacao, Netherlands Antilles, and the address for the other
affiliates of DLJSC is 277 Park Avenue, New York, NY 10172.
(r) The share ownership figure for CEA does not include 599,500 shares of Common
Stock in which CEA has an indirect ownership interest through its limited
partnership interest in BCE Partners, L.P. If the Underwriters' over-
allotment options are exercised in full, CEA will sell an additional 123,331
shares of Common Stock and will have 464,440 shares of Common Stock after
the Offerings, representing 1.6% of the outstanding shares of Common Stock
after the Offerings.
(s) The address for CEA is 380 Madison Avenue, New York, NY 10017.
With the exception of Mr. Joseph H. Gleberman, the persons listed in the
table above under the subheading "Directors, Executive Officers and Principal
Stockholders" (other than Bessemer Holdings, L.P.) are all the current directors
and executive officers of the Company. Mr. Gleberman, whose address is c/o
Goldman, Sachs & Co., 85 Broad Street, New York, NY 10004, is a current director
of the Company but has notified the Board of Directors that, effective prior to
the consummation of the Offerings, he will resign from the Board of Directors.
Mr. Gleberman does not beneficially own any shares of the Company's Common
Stock.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
ADVISORY SERVICES
The Company incurred advisory fees of approximately $1.0 million for each
year during the three-year period ending December 31, 1996, payable to an
advisory partnership that is an affiliate of BHLP. Pursuant to an advisory
services agreement among Essex International, Essex and the advisory
partnership, Essex agreed to pay such affiliate an annual advisory fee of $1.0
million. The agreement is terminable by any party on 30 days prior notice to the
other parties. See footnote (k) of "Principal and Selling Stockholders" for a
description of the relationship of Messrs. Woods, Lindsay and Cohen, directors
of the Company, to such BHLP affiliate.
Pursuant to an engagement letter dated July 22, 1992, as amended by a letter
agreement dated October 9, 1992 (collectively, the "Engagement Letter"), DLJSC
and Goldman Sachs acted as underwriters in the offering of the Essex Senior
Notes in 1993, and in such capacity received aggregate underwriting discounts
and commissions of $5.3 million. The Engagement Letter will terminate effective
upon the consummation of the Offerings, other than the indemnification and
contribution obligations thereunder.
1996 PRIVATE OFFERING
In July 1996, the Board of Directors of the Company approved the 1996
Private Offering which consisted of an offering of shares of Common Stock to
certain stockholders of the Company and certain limited partnerships affiliated
with BH Group at $10.00 per share of Common Stock. BH Group, the GS Partnerships
and CEA purchased an aggregate of 5,930,000 shares of Common Stock at that
price. DLJ, also a stockholder of the Company, elected not to purchase shares of
Common Stock at that price in the 1996 Private Offering. In December 1996, as
part of the 1996 Private Offering, certain management employees of the Company,
including each executive officer, purchased an aggregate of 437,708.5 shares of
Common Stock at $10.00 per share of Common Stock.
WARRANT AGREEMENT
In connection with the Acquisition, the Company (as successor to B E
Acquisition Corporation), the GS Partnerships and DLJ entered into a Warrant
Agreement (the "Warrant Agreement"), dated as of October 9, 1992. Set forth
below is a summary of certain terms of the Warrant Agreement.This summary does
not purport to be complete and is subject to, and is qualified in its entirety
by, the Warrant Agreement, which is filed as an exhibit to the Registration
Statement of which this Prospectus is a part. Capitalized terms used under this
caption but not defined have the meanings given to them in the Warrant
Agreement.
NUMBER. Following the Offerings, there will be Warrants outstanding to
purchase 237,159 shares of Common Stock (no Warrants will be outstanding if the
Underwriters' over-allotment options are exercised in full).
EXERCISE PRICE. The Warrants are exercisable for a cash payment of $5.72
per share.
EXERCISABILITY. The Warrants are exercisable at any time prior to their
expiration date.
ANTI-DILUTION PROVISIONS. The Warrant Agreement contains customary
anti-dilution provisions, including upon the occurrence of stock dividends or
stock splits and stock issuances at less than the Current Market Price (as
defined in the Warrant Agreement) or less than the Exercise Price.
EXPIRATION. The Warrants expire on October 9, 2004.
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THE REDEMPTION
At or prior to the closing of the Offerings, the GS Partnerships will sell
all their Warrants to the Underwriters and DLJ will sell 1,475,658 of its
Warrants to the Underwriters, DLJ may also sell up to 237,159 Warrants to the
Underwriters in connection with the exercise of the Underwriters' over-allotment
options. The Warrants obtained by the Underwriters from the GS Partnerships and
from DLJ will be redeemed by the Company at or prior to the closing of the
Offerings for a number of shares of Common Stock equal to the number of shares
underlying the Warrants reduced by the product of the number of shares
underlying the Warrants, and a fraction, the numerator of which is $5.72 per
share and the denominator of which is the initial public offering price per
share (or 1,794,172 shares, assuming an initial public offering price of $18.50
per share, the mid-point of the range of initial public offering prices set
forth on the cover page of this Prospectus). All such shares of Common Stock
obtained by the Underwriters as a result of the redemption of the Warrants will
be offered by the Underwriters in the Offerings. Unless the context otherwise
requires, shares of Common Stock sold in the Offerings by the Underwriters as a
result of the redemption of Warrants are treated as if the corresponding number
of shares of Common Stock were sold by the GS Partnerships or DLJ. The
redemption of the Warrants by the Company as described in this paragraph is
referred to herein as the "Redemption".
BH Group, the GS Partnerships, DLJ and CEA have various rights to require
the registration of their shares of Common Stock. See "Shares Eligible for
Future Sale--Registration Rights".
MANAGEMENT STOCKHOLDERS AGREEMENT
The members of Essex's management who are stockholders of the Company (each
a "Management Stockholder") are each parties to the Management Stockholders and
Registration Rights Agreement dated as of October 9, 1992, as amended (the
"Management Stockholders Agreement"), which relates to the ownership of their
Common Stock. All Common Stock held by a Management Stockholder, whether
obtained before, as a result of, or subsequent to, the Offerings, is subject to
the Management Stockholders Agreement.
Set forth below is a summary of certain terms of the Management Stockholders
Agreement. The summary does not purport to be complete and is subject to, and is
qualified in its entirety by, the Management Stockholders Agreement, which is
filed as an exhibit to the Registration Statement of which this Prospectus is a
part.
TRANSFER RESTRICTIONS. The Management Stockholders Agreement provides that
Management Stockholders may not transfer, sell, assign, pledge, hypothecate or
otherwise dispose of (collectively, "Transfer") any of their Common Stock except
as provided in the Management Stockholders Agreement. This restriction will
expire 90 days after the closing of the Offerings.
RIGHT OF FIRST REFUSAL. If any Management Stockholder receives a bona fide
offer to purchase any of his or her Common Stock, such Management Stockholder
may Transfer such Common Stock only after offering such Common Stock first to
the Company and then, if not accepted by the Company, to BH Group, in each case
on the same terms and conditions as the bona fide offer. This restriction will
expire 90 days after the closing of the Offerings.
TAG-ALONG RIGHTS. Subject to certain exceptions, if at any time BH Group
proposes to sell to a third party or parties, directly or indirectly (other than
in a public offering), any shares of Common Stock, then provision will be made
whereby each Management Stockholder will be given the right to sell an equal
proportion of his or her Common Stock to such third party or parties on terms
identical to those applicable to such proposed sale.
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PUT OPTIONS. Subject to certain exceptions, including those related to the
Company's credit facilities, if any Management Stockholder's employment with the
Company is terminated prior to the Offerings, then such Management Stockholder
or his or her estate will have the right for one year following the date of
termination of employment to sell to the Company (or its designee) any or all
shares of Common Stock then held by such Management Stockholder or his or her
estate for their fair market value if the termination was due to the death,
disability or retirement of the Management Stockholder or for the lower of fair
market value and the price paid for the shares of Common Stock by the Management
Stockholder, if the termination was for a reason other than the death,
disability or retirement of the Management Stockholder.
REGISTRATION RIGHTS. Management Stockholders have the right to "piggyback"
or include their Common Stock in any registration of Common Stock (i) demanded
by BH Group or any other stockholder (unless the Company is contractually
prohibited from granting such piggyback rights) or (ii) for a primary offering
by the Company (other than any registration relating to employee benefit or
similar plans or acquisitions of companies by the Company), subject to the right
of the managing underwriter to restrict the size of the registration if the
number of shares requested to be sold by Management Stockholders would have an
adverse effect on the offering. BH Group may demand registration of Common Stock
held by it at any time. These provisions will survive the Offerings.
TERMINATION. The Management Stockholders Agreement (other than with respect
to pending purchases and sales) will terminate thirty days following BH Group
ceasing to have beneficial ownership of 7,000,000 shares of Common Stock.
LIMITATIONS ON LIABILITY OF OFFICERS AND DIRECTORS
The Restated Certificate and the By-laws provide broadly for indemnification
of the officers and directors of the Company. The Restated Certificate provides
that no director shall be personally liable to the Company or any of its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the Delaware General Corporation Law or (iv) for any
transaction from which the director derived an improper personal benefit. The
effect of the provision in the Restated Certificate is to eliminate the right of
the Company and its stockholders (through stockholders' derivative suits on
behalf of the Company) to recover monetary damages against a director for breach
of the fiduciary duty of care as a director (including breaches resulting from
negligent or grossly negligent behavior) except in the situations described in
clauses (i) through (iv) above. This provision does not limit or eliminate the
rights of the Company or any stockholder to seek non-monetary relief such as an
injunction or recession in the event of a breach of a director's duty of care.
The By-laws also provide a broad right of indemnification to the directors,
officers, employees and agents of the Company. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors or
officers pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the Commission, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
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DESCRIPTION OF CAPITAL STOCK
Upon consummation of the Offerings, the authorized capital stock of the
Company will consist of 150,000,000 shares of Common Stock, par value $.01 per
share, and 5,000,000 shares of preferred stock, par value $.01 per share
("Preferred Stock").
PREFERRED STOCK
No shares of Preferred Stock are currently outstanding and no shares of
Preferred Stock will be outstanding immediately after the closing of the
Offerings. The Board of Directors has the authority, without further action by
the stockholders, to issue up to 5,000,000 shares of Preferred Stock in one or
more series and to fix the rights, preferences, qualifications, limitations and
restrictions of each such series. Although it presently has no intention to do
so, the Board of Directors, without stockholder approval, could issue Preferred
Stock with voting, conversion or other rights that could adversely affect the
voting power of the holders of Common Stock and that could have certain
anti-takeover effects.
COMMON STOCK
As of December 31, 1996, there were 24,056,557.5 shares of Common Stock
outstanding and held of record by approximately 73 stockholders.
Holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Such stockholders
have no right to cumulate their votes in the election of directors. Subject to
preferences that may be applicable to any outstanding shares of Preferred Stock,
holders of Common Stock are entitled to receive ratably such dividends as may be
declared by the Board of Directors out of funds legally available therefor. In
the event of a liquidation, dissolution or winding up of the Company, holders of
Common Stock are entitled to share ratably in all assets remaining after payment
of liabilities and liquidation preferences of any outstanding shares of
Preferred Stock. Holders of Common Stock have no right to convert their Common
Stock into any other securities. There are no redemption or sinking fund
provisions applicable to the Common Stock. All outstanding shares of Common
Stock are, and all shares of Common Stock to be outstanding upon completion of
the Offerings will be, duly authorized, validly issued, fully paid and
nonassessable.
After the consummation of the Offerings, BH Group will beneficially own
approximately 59.0% of the Common Stock (53.6% on a fully diluted basis) or
58.1% (53.2% on a fully diluted basis), assuming that the Underwriters'
over-allotment options are exercised in full. As long as BH Group continues to
own in the aggregate a large percentage of the outstanding shares of Common
Stock, BH Group will have the power to elect the entire Board of Directors of
the Company and, in general, to determine (without the consent of the Company's
other stockholders) the outcome of any corporate transaction or other matter
submitted to the stockholders for approval, including mergers, consolidations
and the sale of all or substantially all of the Company's assets, to prevent or
cause a change in control of the Company, and to approve substantially all
amendments to the Restated Certificate. See "Risk Factors--Principal
Stockholders".
CERTAIN ANTI-TAKEOVER MATTERS
The Restated Certificate and By-laws will, upon consummation of the
Offerings, include a number of provisions that may have the effect of
encouraging persons considering unsolicited tender offers or other unilateral
takeover proposals to negotiate with the Board of Directors rather than pursue
non-negotiated takeover attempts. These provisions include:
CLASSIFIED BOARD OF DIRECTORS. The Restated Certificate provides for a
Board of Directors divided into three classes, with one class to be elected each
year to serve for a three-year term. As a result, at least two annual meetings
of stockholders may be required for the stockholders to change a majority of
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the Board of Directors. In addition, the stockholders of the Company can only
remove directors for cause. The classification of directors and the inability of
stockholders to remove directors without cause will make it more difficult to
change the composition of the Board of Directors, but will promote a continuity
of existing management.
ADVANCE NOTICE REQUIREMENTS. The By-laws establish advance notice
procedures with regard to stockholder proposals relating to the nomination of
candidates for election as directors or new business to be brought before
meetings of stockholders of the Company. These procedures provide that notice of
such stockholder proposals must be timely given in writing to the Secretary of
the Company prior to the meeting at which the action is to be taken. Generally,
to be timely, notice must be received at the principal executive offices of the
Company not less than 60 days nor more than 90 days prior to the meeting. The
notice must contain certain information specified in the By-laws.
SPECIAL MEETINGS OF STOCKHOLDERS. The By-laws deny stockholders the right
to call a special meeting of stockholders. The By-laws provide that special
meetings of the stockholders may be called only by the Company's Chief Executive
Officer or a majority of the Board of Directors.
WRITTEN CONSENT OF STOCKHOLDERS. The Restated Certificate requires all
stockholder actions to be taken by a vote of the stockholders at an annual or
special meeting, unless the action is approved by a majority of the Board of
Directors. In case of such approval, the action may be taken by written consent
of the number of stockholders otherwise required for approval of such action,
subject to compliance with the notice and other requirements of the Restated
Certificate and By-laws.
AMENDMENT OF BY-LAWS AND CHARTER. The By-laws and the Restated Certificate
require the approval of 66 2/3% of the voting shares for amending any By-law or
those provisions of the Restated Certificate described in this section. These
provisions will make it more difficult to dilute the anti-takeover effects of
the By-laws and Restated Certificate.
BLANK CHECK PREFERRED STOCK. The Restated Certificate provides for
5,000,000 authorized shares of Preferred Stock, none of which has been issued.
The existence of authorized but unissued Preferred Stock may enable the Board of
Directors to render more difficult or to discourage an attempt to obtain control
of the Company by means of a merger, tender offer, proxy contest or otherwise.
For example, if in the due exercise of its fiduciary obligations, the Board of
Directors were to determine that a takeover proposal is not in the Company's
best interests, the Board of Directors could cause shares of Preferred Stock to
be issued without stockholder approval in one or more private offerings or other
transactions that might dilute the voting or other rights of the proposed
acquirer or insurgent stockholder or stockholder group. In this regard, the
Restated Certificate grants the Board of Directors broad power to establish the
rights and preferences of authorized and unissued Preferred Stock. The issuance
of shares of Preferred Stock pursuant to the Board of Directors' authority
described above could decrease the amount of earnings and assets available for
distribution to holders of Common Stock and adversely affect the rights and
powers, including voting rights, of such holders and may have the effect of
delaying, deferring or preventing a change in control of the Company. The Board
of Directors currently does not intend to seek stockholder approval prior to any
issuance of Preferred Stock, unless otherwise required by law.
LISTING
The Company has been approved to list the Common Stock on the New York Stock
Exchange, subject to notice of issuance, under the symbol "SXC".
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is The Bank of New
York. Its address is 101 Barclay Street, New York, NY 10286, and its telephone
number is (212) 815-2454.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
RESTATED CREDIT AGREEMENT
In October 1996, Essex International and Essex entered into the Essex
Revolving Credit Agreement with the lenders named therein and The Chase
Manhattan Bank, as Administrative Agent. Prior to the Effective Date, the Essex
Revolving Credit Agreement will be amended and restated as the Restated Credit
Agreement, which amendment and restatement will become effective on the
consummation of the Offerings.
Set forth below is a summary of certain terms of the Restated Credit
Agreement. The summary does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the Restated Credit Agreement, which
is included as an exhibit to the Registration Statement of which this Prospectus
is part. For the purposes of the following discussion, capitalized terms used
therein and not otherwise defined have the meanings given to them in the
Restated Credit Agreement.
GENERAL. The Restated Credit Agreement provides for up to $370.0 million in
revolving loans, subject to specified percentages of eligible assets and reduced
by outstanding borrowings under the Company's Canadian Credit Agreement and
unsecured bank lines of credit. The Restated Credit Agreement also provides a
$25.0 million letter of credit subfacility and terminates on October 31, 2001.
As of December 31, 1996, the Company had outstanding borrowings of $179.9
million under the Essex Revolving Credit Agreement and $61.7 million of undrawn
capacity based upon the Borrowing Base at that time of $272.5 million, reduced
by outstanding borrowings under (i) the Essex Revolving Credit Agreement ($179.9
million), (ii) unsecured bank lines of credit ($25.0 million) and (iii) the
Canadian Credit Agreement ($5.9 million).
The Restated Credit Agreement is secured by all the capital stock of Essex
and substantially all the Company's assets and real property.
PREPAYMENTS. The Restated Credit Agreement may be repaid by the Company at
any time without penalty. The Restated Credit Agreement is subject to mandatory
prepayment if certain amounts outstanding under the Restated Credit Agreement
exceed the Borrowing Base or the Senior Note Indenture Revolving Credit
Incurrence Limit. At December 31, 1996, the Borrowing Base was $272.5 million
and the Senior Note Indenture Revolving Credit Incurrence Limit was $269.5
million.
INTEREST RATE. Loans under the Restated Credit Agreement bear interest at
rates, depending on the type of loan incurred, of (i) adjusted LIBOR plus a
spread based on certain financial ratios, which spread ranges from 0.375% to
1.500% or (ii) bank prime plus a spread based on certain financial ratios, which
spread ranges from 0% to 0.500%. The effective interest rate can be reduced by
0.375% to 1.125%, if certain specified financial conditions are achieved.
FEES. Commitment fees during the revolving loan period are 0.125%, 0.150%,
0.200%, 0.250%, 0.300%, or 0.375% of the average daily unused portion of the
available credit based upon the Company's Leverage Ratio. The Company's Leverage
Ratio as of December 31, 1996, was 3.07 to 1.00.
NEGATIVE COVENANTS. The Company is required to maintain a ratio of
Consolidated Current Assets to Consolidated Current Liabilities of 2.00 to 1.00.
As of December 31, 1996, this ratio was 2.45 to 1.00. The Company is required to
maintain Consolidated Net Worth of not less than the sum of, subject to certain
adjustments, (a) $80 million, (b) 50% of the Company's Consolidated Net Income,
(c) 100% of the Net Cash Proceeds of any Common Equity Offering by the Company
and (d) 100% of any capital contribution made to the Company by one of its
stockholders. As of December 31, 1996, the Company's Consolidated Net Worth was
$158.7 million or 152% of that required to be maintained.
The Restated Credit Agreement also requires the maintenance of an Interest
Coverage Ratio of not less than 2.00 to 1.00, a Leverage Ratio prior to March
31, 1998, of not more than 5.00 to 1.00 decreasing
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to 4.00 to 1.00 by March 31, 2000, and a Senior Secured Leverage Ratio prior to
March 31, 1998, of not more than 3.00 to 1.00 decreasing to 2.25 to 1.00 by
March 31, 2000. As of December 31, 1996, the Company's Interest Coverage Ratio,
Leverage Ratio and Senior Secured Leverage Ratio were 3.73 to 1.00, 3.07 to 1.00
and 1.37 to 1.00, respectively.
The Restated Credit Agreement contains other customary covenants, including
covenants on the incurrence of indebtedness, liens and guarantees, mergers,
sales of assets, lease obligations, investments and, with certain exceptions,
prepayment of indebtedness and transactions with affiliates. Capital
Expenditures are generally limited to $40.0 million per year plus any unspent
carry over from prior years. The Restated Credit Agreement also restricts the
payment of dividends by Essex to the Company and prohibits the payment of
dividends by Essex International to its stockholders.
EVENTS OF DEFAULT. The Restated Credit Agreement contains customary events
of default, including a failure to pay principal or interest, a material
inaccuracy of a representation or warranty, a failure to comply with certain
covenants, a default on other indebtedness in excess of $5.0 million, any
Security Document ceasing to be in full force and effect and the entry of
certain unbonded or unstayed judgments or decrees against the Company of $2.0
million or more. In addition, it is an event of default (i) if BH Group
beneficially owns less than 20%, on a fully diluted basis, of the voting power
for the election of directors of the Company, (ii) if any person or group (other
than BH Group), has the power to vote a greater percentage of the voting power
for the election of directors of the Company than does the BH Group, (iii) if
any person or group, other than a group consisting solely of BH Group, DLJ, the
GS Partnerships and certain officers or employees of the Company have acquired
the power to exercise a controlling influence over the management of policies of
the Company or (iv) if a Change of Control (as defined in the Essex Senior Note
Indenture) occurs. In the case of an event of default, all revolving credit
commitments may terminate and all amounts outstanding under the Essex Revolving
Credit Agreement may become due and payable. The Offerings will not trigger an
event of default.
SENIOR NOTES
In May 1993, Essex issued $200 million aggregate principal amount of notes
(the "Essex Senior Notes") pursuant to an indenture (the "Essex Senior Note
Indenture") between Essex and NBD Bank, National Association, as trustee. Set
forth below is a summary of certain terms of the Essex Senior Note Indenture.
The summary does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, the Essex Senior Note Indenture, which is
included as an exhibit to the Registration Statement of which this Prospectus is
part. For the purposes of the following discussion, capitalized terms used
therein and not otherwise defined have the meanings given to them in the Essex
Senior Note Indenture.
GENERAL. The Essex Senior Notes bear interest at 10% per annum, payable
semiannually and are due in May 2003. The Essex Senior Notes are general
unsecured obligations of Essex limited to $200 million aggregate principal
amount.
REDEMPTION. At the option of the Company, the Essex Senior Notes may be
redeemed, commencing in May 1998, in whole or in part, at redemption prices
ranging from 103.75% in 1998 to 100% in 2001, in each case plus accrued and
unpaid interest.
COVENANTS. The Essex Senior Note Indenture contains customary covenants.
The Essex Senior Note Indenture restricts the incurrence of Debt by the Company
unless the Company has an EBITDA Coverage Ratio of greater than than 2.0 to 1.0
or unless another exemption is available. At December 31, 1996, the Company had
a 3.73 to 1.0 EBITDA Coverage Ratio. The Essex Senior Note Indenture also
restricts the issuance of Debt by each of the Company's subsidiaries to the sum
of (i) 50% of the book value of such subsidiary's inventory (before giving
effect to any LIFO Reserve) and (ii) 80% of the book value of such subsidiary's
accounts receivable (subject to certain exceptions). At December 31, 1996,
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Essex could have incurred $269.5 million of Debt under such provision.
Dividends, distributions and repurchases of capital stock also are limited under
the Essex Senior Note Indenture to 50% of the Company's Consolidated Net Income
plus the Net Cash Proceeds of certain equity issuances. At December 31, 1996,
the Company could not have paid any dividends due to the Limitation on
Restricted Payments provision. The Essex Senior Note Indenture also restricts
the incurrence of secured debt, sale and leaseback transactions, sales of assets
and transactions with affiliates.
EVENTS OF DEFAULT. The Essex Senior Note Indenture contains customary
events of default, including a failure to pay principal or interest, a payment
default with respect to, or the acceleration of, other indebtedness in excess of
$10.0 million, the entry of certain unstayed judgements in excess of $10.0
million and certain events of bankruptcy or insolvency.
CHANGE OF CONTROL. Upon a Change in Control (as defined below), each holder
of the Essex Senior Notes will have the right to require Essex to repurchase all
or any part of such holder's Senior Notes at a repurchase price equal to 101% of
the principal amount thereof, plus accrued and unpaid interest. "Change of
Control" is defined in the Essex Senior Note Indenture as (i) the acquisition by
any person (other than BH Group, the GS Partnerships, DLJ and certain other
stockholders) of more than 35% of the Company's Voting Stock or (ii) during any
two-year period, the directors who were on the Company's Board of Directors at
the beginning of such period (and any directors elected by, or whose nomination
was approved by, the Board) ceasing for any reason to constitute a majority of
the Board then in office. The Offerings will not cause a Change of Control (as
defined in the Essex Senior Note Indenture).
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offerings, the Company will have outstanding
29,718,348 shares of Common Stock. In addition, the Company will have
outstanding options granted under the Stock Option Plan to purchase up to
1,685,475 shares of Common Stock (which pursuant to applicable option agreements
may be reduced to 1,115,071 shares). All the shares of Common Stock sold in the
Offerings will be freely transferable without restriction or further
registration under the Securities Act, except those shares owned by "affiliates"
of the Company (as such term is defined in Rule 144). The remaining 22,218,348
shares of Common Stock will be "restricted securities" within the meaning of
Rule 144 and may not be sold in the absence of registration under the Securities
Act or an available exemption therefrom (such as Rule 144). If the Underwriters'
over-allotment options are not exercised in full, there will be up to 237,159
Warrants outstanding after the completion of the Offerings. These Warrants will
be transferable, subject to the lock-up arrangements described below,
immediately after the Offerings, without restriction pursuant to Rule 144(k).
Any shares of Common Stock received upon exercise of the Warrants for cash will
constitute "restricted securities", but will be entitled to the benefits of the
registration rights described below under "Registration Rights--Other Initial
Shareholders". Any shares of Common Stock received upon any "cashless exercise"
or other redemption of the Warrants (I.E., by the surrender of Warrants with a
value equal to the exercise price) will, subject to the lock-up arrangements
described below, be transferable without restriction pursuant to Rule 144(k).
There will also be 1,685,475 shares of Common Stock subject to vested options
(which pursuant to applicable option agreements may be reduced to 1,115,071
shares) that, subject to the lock-up arrangements described below will be
transferable 90 days after the Effective Date pursuant to Rule 701. The Company
and its directors and executive officers, certain of its employees, BH Group and
the Selling Stockholders have agreed, subject to certain exceptions, not to
sell, offer or agree to sell, or otherwise dispose of, directly or indirectly,
any shares of Common Stock, any security substantially similar to the Common
Stock or any security exchangeable for, or convertible into, shares of Common
Stock or any such substantially similar security for a period of at least 180
days after the date of this Prospectus, without the prior written consent of
Goldman Sachs. Additionally, each stockholder (other than BHLP and certain of
its affiliates) has agreed not to sell any of its Common Stock for 90 days after
the effective date of the Registration Statement of which this Prospectus is a
part (the "Effective Date"), pursuant to either the Management Stockholders
Agreement or the Registration Rights Agreement.
In general, under Rule 144 as currently in effect, a stockholder (or
stockholders whose securities are aggregated) who (together with predecessor
holders who were not affiliates) has beneficially owned shares of Common Stock
that are treated as restricted securities for at least one year from the date
such shares were acquired from the Company or an affiliate thereof, is entitled
to sell, within any three-month period, a number of shares that does not exceed
the greater of (i) 1% of the then outstanding shares of Common Stock or (ii) the
average weekly trading volume of the then outstanding shares of Common Stock
during the four calendar weeks preceding the date on which notice of such sale
was filed with the Commission under Rule 144. Sales under Rule 144 are also
subject to certain provisions relating to the manner and notice of sale and the
availability of current public information about the Company. In addition,
affiliates of the Company must comply with the restrictions and requirements of
Rule 144 (other than the one-year holding period requirement) in order to sell
shares of Common Stock that are not restricted securities (such as shares
acquired by affiliates in the public market). Commencing two years after the
acquisition of restricted securities from the Company or an affiliate, a holder
of such restricted securities who is not an affiliate at the time of the sale
and has not been an affiliate for at least three months prior to such sale would
be entitled, pursuant to Rule 144(k), to sell such securities immediately
without regard to the volume limitations and other conditions described above.
Any employee, officer or director of the Company who acquired his or her
shares prior to the Effective Date at a time when the Company was not subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act or who
holds vested options as of the Effective Date, pursuant to a written
61
<PAGE>
compensatory plan or contract is entitled to rely on the resale provisions of
Rule 701. Rule 701 permits non-affiliates to sell their Rule 701 shares without
having to comply with the public information, holding period, volume limitation
or notice provisions of Rule 144 and permits affiliates to sell their Rule 701
shares without having to comply with Rule 144's holding period restrictions, in
each case commencing 90 days after the Effective Date.
Excluding the shares of Common Stock offered pursuant to the Offerings,
22,218,348 shares of Common Stock are outstanding and were sold by the Company
in reliance on exemptions from the registration requirements of the Securities
Act and thus are restricted securities within the meaning of Rule 144. None of
these shares of Common Stock will be eligible for sale in the public market
immediately upon the Effective Date due to "lock-up" provisions in the
Registration Rights Agreement, the Management Stockholders Agreement and
"lock-up" agreements with the Underwriters. Beginning 90 days after the
Effective Date, approximately 1,836,936 of the restricted shares (including
865,942 shares subject to vested options) will become eligible for sale subject
to the provisions of Rule 144 and Rule 701 (all of which will be eligible, under
Rule 701 and Rule 144(k), for sale without limitation as to volume or manner of
sale), upon the expiration of agreements not to sell such shares entered into
between the Company and holders of such stock. In addition, beginning 180 days
after the date of this Prospectus, approximately 15,758,774 of the restricted
shares (including 249,129 shares subject to vested options) will become eligible
for sale subject to the provisions of Rule 144 and Rule 701 (3,510,609.5 of
which will be eligible, under Rule 701 and Rule 144(k), for sale without
limitation as to volume or manner of sale (including 249,129 shares subject to
vested options)), upon the expiration of agreements not to sell such shares
entered into between Underwriters and holders of such stock.
The Company intends to file a registration statement on Form S-8 covering
all shares of Common Stock issuable in the future under the Stock Option Plan
(an aggregate of 1,034,844 shares). Any shares issued upon exercise of such
options will be eligible for sale in the public market after the effective date
of such registration statement, subject to any contractual restrictions.
In connection with the 1996 Private Offering, the Company issued 6,367,708.5
shares of Common Stock. All such shares are restricted securities. Pursuant to
Rule 144, 5,300,000 shares will be available for sale in the public market,
subject to the restrictions of Rule 144, on July 3, 1997, and 437,708.5 shares
will be available for sale in the public market, subject to the restrictions of
Rule 144, on December 27, 1997. The remaining 630,000 shares will be sold in the
Offerings.
In addition, during fiscal 1996, the Company issued options to certain
employees under the Stock Option Plan to purchase approximately 462,500 shares
of Common Stock. All such options are subject to a vesting schedule that
provides for vesting (i) in full on the third anniversary of the date the
options were granted, (ii) in full upon the death, retirement or disability of
the optionee and (iii) in part, upon certain sales of Common Stock by
significant stockholders. See "Management--Stock Option Plan".
On January 30, 1997, the Company issued options to certain employees under
the Stock Option Plan to purchase approximately 730,000 shares of Common Stock.
Such options were granted in connection with the Company's 1996 performance and
to maintain management's equity interest in the Company as a result of the
increase in total Common Stock outstanding following the 1996 Private Offering.
All such options are subject to a vesting schedule that provides for vesting (i)
in full on the first anniversary of the date the options were granted, (ii) in
full upon the death, retirement or disability of the optionee and (iii) in part,
upon certain sales of Common Stock by significant stockholders. See
"Management--Stock Option Plan".
Prior to the Offerings, there has been no market for the Common Stock, and
no prediction can be made as to the effect, if any, that future public sales of
shares or the availability of shares for future sale, will have on the market
price prevailing from time to time. Nevertheless, sales of substantial amounts
of Common Stock in the public market, or the perception that such sales could
occur, could have an
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<PAGE>
adverse impact on the market price of the Common Stock and could impair the
Company's future ability to raise capital through the sale of equity securities.
As a result of the ability of BH Group, the GS Partnerships and DLJ and in
certain circumstances, CEA to require the Company to register any or all of
their shares in certain circumstances means that all their 20,522,765 shares of
Common Stock and 237,159 Warrants could be available for sale in the public
market as early as 180 days after the date of this Prospectus. While
stockholders subject to the Management Stockholders Agreement do not have demand
registration rights thereunder, their ability to piggyback on other registered
offerings means that all their 1,710,095.5 shares of Common Stock could be
available for sale in the public market as early as 180 days after the date of
this Prospectus.
REGISTRATION RIGHTS
BH GROUP
Pursuant to the Management Stockholders Agreement, BH Group has the right to
require that the Company register any or all of its shares of Common Stock in a
registered offering pursuant to the Securities Act. Expenses, other than
underwriters discounts and commissions, incurred in connection with such
registration are to be paid by the Company. The Company also is required to
indemnify BH Group against certain liabilities, including liabilities arising
under the Securities Act. BH Group is not restricted in the number of times it
may require the Company to register its shares of Common Stock.
Pursuant to a Registration Rights Agreement to be entered into prior to the
Offerings (the "BH Group Registration Rights Agreement"), between BH Group and
the Company, BH Group will have the right to require the Company, at the
Company's expense, to prepare and file with the SEC and keep continuously
effective, a "shelf" registration statement covering offers and sales in
accordance with Rule 415 of the Securities Act, or any similar rule that may be
adopted by the SEC, that covers some or all of BH Group's Common Stock. The
Company also will be required to indemnify BH Group against certain liabilities,
including liabilities arising under the Securities Act.
After the consummation of the Offerings, it is expected that the BH Group
Registration Rights Agreement will cover 17,548,166 shares of Common Stock.
OTHER INITIAL SHAREHOLDERS
In connection with the Acquisition, DLJ, the GS Partnerships and CEA
(together with certain transferees, the "Other Initial Shareholders") entered
into a Registration Rights Agreement with the Company (the "Registration Rights
Agreement"). Set forth below is a summary of certain terms of the Registration
Rights Agreement. The summary does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, the Registration Rights
Agreement, which is filed as an exhibit to the Registration Statement of which
this Prospectus is a part.
DEMAND REGISTRATION RIGHTS. Pursuant to the Registration Rights Agreement,
the GS Partnerships and DLJ each have the ability to require (a "Demand") the
Company to register any or all of the shares of Common Stock or Warrants held by
it in a public offering pursuant to the Securities Act. The GS Partnerships
(collectively) and DLJ each have the right to make two Demands plus an
additional Demand where the offering includes 10% of the Common Shares
outstanding immediately after the Acquisition having an aggregate offering price
of at least $35 million. Under certain circumstances, the number of shares and
aggregate price requirements discussed in the immediately preceding sentence can
be reduced to 7.5% of the Common Stock outstanding immediately after the
Acquisition having an aggregate offering price of at least $26.25 million.
Demand registrations are subject to the right of the managing underwriter to
restrict the size of the registration if the number of shares and, if
applicable, Warrants, requested to be sold could not be sold within a price
range acceptable to the selling stockholders.
63
<PAGE>
PIGGYBACK REGISTRATION RIGHTS. Pursuant to the Registration Rights
Agreement, the Other Initial Shareholders have the right to "piggyback" or
include their Common Stock in any registration of Common Stock made by the
Company, subject to the right of the managing underwriter to restrict the size
of the registration if the number of shares requested to be sold by the
piggyback stockholders would have an adverse effect on the offering.
The Registration Rights Agreement also provides that the Other Initial
Shareholders have the right to piggyback or include their Warrants in any
registration made by the Company of warrants to purchase Common Stock, and as of
October 9, 1997, the right to piggyback their Warrants in any registration of
Common Stock made by the Company, subject in each case to the right of the
managing underwriter to restrict the size of the registration if the number of
Warrants and shares requested to be sold by the piggyback stockholders would
have an adverse effect on the offering.
EXPENSES. Expenses, other than underwriters discounts and commissions,
incurred in connection with such Demand or piggyback registration pursuant to
the Registration Rights Agreement are to be paid by the Company. The Company
also has agreed to indemnify the Other Initial Shareholders against certain
liabilities, including those arising under the Securities Act.
SHARES COVERED. After the consummation of the Offerings, the Demand
registration rights in the Registration Rights Agreement will cover 2,386,830
shares of Common Stock and Warrants to purchase 237,159 shares of Common Stock
and the "piggyback" rights in such agreement will cover such shares plus an
additional 587,771 shares of Common Stock.
PIGGYBACK REGISTRATION RIGHTS
Pursuant to the Management Stockholders Agreement, Management Stockholders
have the right to "piggyback" or include certain of their Common Stock in any
registration of Common Stock (i) demanded by BH Group (unless the Company is
contractually prohibited from granting such piggyback rights) or (ii) for a
primary offering by the Company (other than any registration relating to
employee benefit or similar plans or acquisitions of companies by the Company),
subject to the right of the managing underwriter to restrict the size of the
registration if the number of shares requested to be sold by Management
Stockholders would have an adverse effect on the offering. Expenses, other than
underwriters discounts and commissions, incurred in connection with the
piggyback registration are to be paid by the Company.
After the consummation of the Offerings, the "piggyback" rights in the
Management Stockholders Agreement will cover 1,695,582 shares of Common Stock.
CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS OF COMMON STOCK
GENERAL
The following is a general discussion of United States Federal income and
estate tax consequences of the ownership and disposition of Common Stock by a
holder who is not a United States person (a "Non-U.S. Holder"), as defined
below. This discussion does not address all aspects of United States Federal
income and estate taxes and does not address any foreign, state or local tax
consequences. Furthermore, this discussion is based on provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), existing, temporary and
proposed regulations promulgated thereunder and administrative and judicial
interpretations thereof, all as in effect or proposed on the date hereof and all
of which are subject to change, possibly with retroactive effect, or different
interpretations. Each prospective purchaser of Common Stock is advised to
consult a tax advisor with respect to current and possible future U.S. Federal
income and estate tax consequences of holding and disposing of Common Stock as
well as any tax consequences that may arise under the laws of any state, local,
foreign or other taxing
64
<PAGE>
jurisdiction. For purposes of this summary, a "U.S. Holder" with respect to
Common Stock is (i) an individual who is a citizen or resident of the United
States, (ii) a corporation or other entity taxable as a corporation created or
organized in the United States or under the laws of the United States or of any
state thereof (including the District of Columbia), or (iii) an estate or trust
the income of which is includable in gross income for United States Federal
income tax purposes regardless of its source and a "Non-U.S. Holder" is any
person other than a U.S. Holder.
DISTRIBUTIONS
Distributions on the shares of Common Stock (other than distributions in
redemption of the shares of Common Stock subject to section 302(b) of the Code)
will constitute dividends for Federal income tax purposes to the extent paid
from current or accumulated earnings and profits of the Company (as determined
under Federal income tax principles). Dividends paid to a Non-U.S. Holder of
Common Stock that are not effectively connected with a U.S. trade or business of
the Non-U.S. Holder will be subject to United States withholding tax at a 30%
rate or such lower rate as may be specified by an applicable income tax treaty.
Moreover, under United States Treasury regulations which are currently in
effect, withholding is generally imposed on the gross amount of the
distribution, without regard to whether the corporation has sufficient earnings
and profits to cause the distribution to be a dividend for Federal income tax
purposes. Dividends that are effectively connected with the conduct of a trade
or business within the United States or, if a tax treaty applies, are
attributable to a U.S. permanent establishment of the non-U.S. Holder, are
exempt from United States Federal withholding tax but are subject to United
States Federal income tax on a net income basis at applicable graduated
individual or corporate rates. Any such dividends effectively connected with the
conduct of a trade or business within the U.S. or attributable to a U.S.
permanent establishment received by a foreign corporation may, under certain
circumstances, be subject to an additional "branch profits tax" at a 30% rate or
such lower rate as may be specified by an applicable income tax treaty. Certain
certification and disclosure requirements must be complied with in order to be
exempt from withholding under the effectively connected income or permanent
establishment exemptions.
Under current United States Treasury regulations, dividends paid to an
address outside the United States are presumed to be paid to a resident of such
country for purposes of the withholding discussed above, and, under the current
interpretation of United States Treasury regulations, for purposes of
determining the applicability of a tax treaty rate. Under proposed United States
Treasury regulations (the "Proposed Regulations") not currently in effect,
however, a Non-U.S. Holder of Common Stock would be required to satisfy
applicable certification and other requirements to qualify for withholding at an
applicable treaty rate. The Proposed Regulations would require a Non-U.S. Holder
to file a beneficial owner withholding certificate, e.g., a Form W-8, to obtain
the lower treaty rate. In addition, under the Proposed Regulations, in the case
of Common Stock held by a foreign partnership, (x) the certification requirement
would generally be applied to the partners of the partnership and (y) the
partnership would be required to provide certain information, including a United
States taxpayer identification number. The Proposed Regulations also provide
look-through rules for tiered partnerships. The Proposed Regulations would apply
to dividends paid after December 31, 1997, subject to certain transitional
rules. It is not certain whether, or in what form, the Proposed Regulations will
be adopted as final regulations.
A Non-U.S. Holder of Common Stock may obtain a refund of any excess amounts
withheld by filing an appropriate claim for refund with the Internal Revenue
Service (the "IRS").
GAIN ON DISPOSITION OF COMMON STOCK
A Non-U.S. Holder will generally not be subject to United States Federal
income tax with respect to gain recognized on a sale or other disposition of
Common Stock unless (i) the gain is effectively connected with a trade or
business of the Non-U.S. Holder in the United States, (ii) in the case of a Non-
U.S. Holder who is an individual and holds Common Stock as a capital asset, such
holder is present in
65
<PAGE>
the United States for 183 or more days in the taxable year of the sale or other
disposition and certain other conditions are met, or (iii) the Company is or has
been a "U.S. real property holding corporation" for United States Federal income
tax purposes at any time during the five-year period ending on the date of the
disposition, or, if shorter, the period during which the Non-U.S. Holder held
the Common Stock (the "applicable period"), and the Non-U.S. Holder owns,
actually or constructively, at any time during the applicable period more than
five percent of the Common Stock. The Company believes that it is not currently
a "U.S. real property holding corporation" for Federal income tax purposes.
FEDERAL ESTATE TAX
Common Stock held by an individual Non-U.S. Holder at the time of death will
be included in such holder's gross estate for United States Federal estate tax
purposes, unless an applicable estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
Under Treasury regulations, the Company must report annually to the IRS and
to each Non-U.S. Holder the amount of dividends paid to such holder and the tax
withheld with respect to such dividends. These information reporting
requirements apply even if withholding was not required because the dividends
were effectively connected with a U.S. trade or business in the United States of
the Non-U.S. Holder or withholding was reduced or eliminated by an applicable
income tax treaty. Copies of the information returns reporting such dividends
and withholding may also be made available to the tax authorities in the country
in which the Non-U.S. Holder resides under the provisions of an applicable
income tax treaty.
Backup withholding (which generally is a withholding tax imposed at the rate
of 31% on certain payments to persons that fail to furnish certain information
under the United States information reporting requirements) will generally not
apply to dividends paid to Non-U.S. Holders that either are subject to the U.S.
withholding tax, whether at 30% or a reduced treaty rate, or that are exempt
from such withholding because such dividends constitute effectively connected
income. See discussion under "Distributions" above for rules regarding Proposed
Regulations reporting requirements to avoid backup withholding. As a general
matter, information reporting and backup withholding will not apply to a payment
by or through a foreign office of a foreign broker of the proceeds of a sale of
Common Stock effected outside the United States. However, information reporting
requirements (but not backup withholding) will apply to a payment by or through
a foreign office of a broker of the proceeds of a sale of Common Stock effected
outside the United States where that broker (i) is a United States person, (ii)
is a foreign person that derives 50% or more of its gross income for certain
periods from the conduct of a trade or business in the United States or (iii) is
a "controlled foreign corporation" as defined in the Code (generally, a foreign
corporation controlled by certain United States shareholders), unless the broker
has documentary evidence in its records that the holder is a Non-U.S. Holder and
certain conditions are met or the holder otherwise establishes an exemption.
Payment by a United States office of a broker of the proceeds of a sale of
Common Stock is subject to both backup withholding and information reporting
unless the holder certifies to the payor in the manner required as to its
non-United States status under penalties of perjury or otherwise establishes an
exemption.
Amounts withheld under the backup withholding rules do not constitute a
separate United States Federal income tax. Rather, any amounts withheld under
the backup withholding rules will be refunded or allowed as a credit against the
holder's United States Federal income tax liability, if any, provided the
required information or appropriate claim for refund is filed with the IRS.
THE FOREGOING DISCUSSION IS A SUMMARY OF THE PRINCIPAL UNITED STATES FEDERAL
INCOME AND ESTATE TAX CONSEQUENCES OF THE OWNERSHIP, SALE OR OTHER DISPOSITION
OF THE COMMON STOCK BY NON-UNITED STATES HOLDERS. ACCORDINGLY, INVESTORS ARE
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<PAGE>
URGED TO CONSULT WITH THEIR TAX ADVISORS WITH RESPECT TO THE UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF COMMON STOCK
INCLUDING THE APPLICATION AND EFFECT OF THE LAWS OF ANY STATE, LOCAL, FOREIGN OR
OTHER TAXING JURISDICTION.
VALIDITY OF COMMON STOCK
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Cravath, Swaine & Moore, New York, New York and for the
Underwriters by Sullivan & Cromwell, New York, New York.
EXPERTS
The consolidated financial statements of the Company at December 31, 1995
and 1996, and for each of the three years in the period ended December 31, 1996,
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a registration statement on Form S-1 (the
"Registration Statement") pursuant to the Securities Act of 1933 (the
"Securities Act"), covering the Common Stock offered hereby. This Prospectus
does not contain all of the information set forth in the Registration Statement.
Certain parts are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement and the
exhibits and schedules filed as a part thereof. Statements made in this
Prospectus as to the contents of any contract, agreement or other document are
summaries of the material terms of such contract, agreement or document. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved. The Registration Statement
(including the exhibits and schedules thereto) filed with the Commission by the
Company may be inspected and copied (as prescribed rates) at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and at the regional offices of the Commission
maintained at Seven World Trade Center, 13th Floor, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661,
or through the World Wide Web (http:// www.sec.gov). The Commission maintains a
web site at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission.
The Company is not currently subject to the informational requirements of
the Securities Exchange Act of 1934 (the "Exchange Act"). As a result of the
Offerings, the Company will become subject to the informational requirements of
the Exchange Act. The Company will fulfill its obligations with respect to such
requirements by filing periodic reports with the Commission. In addition, the
Company will furnish its stockholders with annual reports containing audited
financial statements certified by its independent public accountants and
quarterly reports for the first three quarters of each fiscal year containing
unaudited summary financial information.
67
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
BCP/ESSEX HOLDINGS INC.
<S> <C>
Report of Independent Auditors..................................................... F-2
Consolidated Balance Sheets as of December 31, 1996 and 1995....................... F-3
Consolidated Statements of Income for each of the three years in the period ended
December 31, 1996................................................................ F-4
Consolidated Statements of Cash Flows for each of the three years in the period
ended December 31, 1996.......................................................... F-5
Notes to Consolidated Financial Statements......................................... F-6
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
BCP/Essex Holdings Inc.
We have audited the accompanying consolidated balance sheets of BCP/Essex
Holdings Inc. as of December 31, 1996 and 1995 and the related consolidated
statements of income and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of BCP/Essex
Holdings Inc. at December 31, 1996 and 1995 and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Indianapolis, Indiana
January 28, 1997, except for Note 13,
as to which the date is February 19, 1997.
F-2
<PAGE>
BCP/ESSEX HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
IN THOUSANDS OF DOLLARS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 3,195 $ 4,429
Accounts receivable (net of allowance of $3,930 and $5,239)........ 154,584 189,717
Inventories........................................................ 166,076 217,643
Other current assets............................................... 10,545 12,147
--------- ---------
Total current assets............................................. 334,400 423,936
Property, plant and equipment, net................................... 270,546 280,489
Excess of cost over net assets acquired (net of accumulated
amortization of $13,221 and $17,388)............................... 129,943 126,619
Other intangible assets and deferred costs (net of accumulated
amortization of $3,102 and $4,501)................................. 9,187 7,417
Other assets......................................................... 1,987 4,294
--------- ---------
$ 746,063 $ 842,755
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to bank.............................................. $ 11,760 $ 30,913
Current portion of long-term debt.................................. 24,734 11,576
Accounts payable................................................... 66,797 71,243
Accrued liabilities................................................ 44,598 63,346
Deferred income taxes.............................................. 15,345 15,151
--------- ---------
Total current liabilities........................................ 163,234 192,229
Long-term debt....................................................... 388,016 421,340
Deferred income taxes................................................ 66,809 58,043
Other long-term liabilities.......................................... 10,081 12,427
Redeemable preferred stock ($0.01 par value, shares outstanding,
1995-- 2,033,782 and 1996--none)................................... 48,820 --
Common stock subject to put ($0.01 par value, shares outstanding,
1995--840,393 and 1996--1,262,602)................................. 4,803 12,626
Stockholders' equity:
Class A common stock ($0.01 par value, shares outstanding,
1995--16,818,707 and 1996--22,194,455.5)......................... 168 222
Class B common stock ($0.01 par value, shares outstanding,
1995--none and 1996--599,500).................................... -- 6
Additional paid in capital......................................... 85,779 139,145
Carryover of Predecessor basis..................................... (15,259) (15,259)
Retained earnings (deficit)........................................ (6,388) 21,976
--------- ---------
Total stockholders' equity....................................... 64,300 146,090
--------- ---------
$ 746,063 $ 842,755
--------- ---------
--------- ---------
</TABLE>
See Notes to Consolidated Financial Statements
F-3
<PAGE>
BCP/ESSEX HOLDINGS INC.
CONSOLIDATED STATEMENTS OF INCOME
IN THOUSANDS OF DOLLARS, EXCEPT FOR
SHARE DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1994 1995 1996
---------- -------------- ----------
<S> <C> <C> <C>
Net sales........................................ $1,010,075 $ 1,201,650 $1,332,049
Cost of goods sold............................... 846,611 1,030,511 1,102,460
Selling and administrative expenses.............. 85,209 93,401 121,054
Other expense, net............................... 1,114 1,032 2,045
---------- -------------- ----------
Income from operations........................... 77,141 76,706 106,490
Interest expense................................. 60,155 49,055 39,994
---------- -------------- ----------
Income before income taxes and extraordinary
charge......................................... 16,986 27,651 66,496
Provision for income taxes....................... 9,500 14,380 28,988
---------- -------------- ----------
Income before extraordinary charge............... 7,486 13,271 37,508
Extraordinary charge--debt retirement, net of
income tax benefit............................. -- 2,971 1,183
---------- -------------- ----------
Net income....................................... $ 7,486 $ 10,300 $ 36,325
---------- -------------- ----------
---------- -------------- ----------
Net income....................................... $ 7,486 $ 10,300 $ 36,325
Preferred stock redemption premium............... -- -- (4,185)
Preferred stock dividend requirement............. (6,008) (6,962) (4,248)
Accretion of preferred stock..................... (687) (703) (2,024)
Increase in fair value of common stock subject to
put............................................ -- -- (3,547)
---------- -------------- ----------
Net income applicable to common stock............ $ 791 $ 2,635 $ 22,321
---------- -------------- ----------
---------- -------------- ----------
Pro forma income per share:
Pro forma income before extraordinary charge..... $ .27 $ .48 $ 1.33
Extraordinary charge............................. -- (.11) (.04)
---------- -------------- ----------
Pro forma net income............................. $ .27 $ .37 $ 1.29
---------- -------------- ----------
---------- -------------- ----------
</TABLE>
See Notes to Consolidated Financial Statements
F-4
<PAGE>
BCP/ESSEX HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
IN THOUSANDS OF DOLLARS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.............................................. $ 7,486 $ 10,300 $ 36,325
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization......................... 31,420 34,205 33,944
Non cash interest expense............................. 38,813 16,466 1,935
Non cash pension expense.............................. 2,328 1,947 3,021
Provision for losses on accounts receivable........... 1,332 676 1,175
Provision (benefit) for deferred income taxes......... (8,388) 486 (7,417)
Loss on disposal of property, plant and equipment..... 1,354 2,610 1,679
Loss on repurchase of debt............................ 187 4,951 1,971
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable.......... (27,160) (10,665) 6,288
(Increase) decrease in inventories.................. (4,515) 3,762 (16,109)
Increase in accounts payable and accrued
liabilities....................................... 6,837 15,193 6,531
Net (increase) decrease in other assets and
liabilities....................................... (8,022) 9,823 (4,762)
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES........... 41,672 89,754 64,581
--------- --------- ---------
INVESTING ACTIVITIES
Additions to property, plant and equipment.............. (30,109) (28,555) (25,569)
Proceeds from disposal of property, plant and
equipment............................................. 227 2,419 533
Acquisitions............................................ -- (24,934) (79,395)
Other investments....................................... (236) (459) (285)
Issuance of equity interest in a subsidiary............. -- 1,063 --
--------- --------- ---------
NET CASH USED FOR INVESTING ACTIVITIES.............. (30,118) (50,466) (104,716)
--------- --------- ---------
FINANCING ACTIVITIES
Proceeds from long term debt............................ 106,000 428,390 493,900
Repayment of long term debt............................. (106,396) (215,640) (473,734)
Proceeds from notes payable to banks.................... -- 160,030 537,550
Repayment of notes payable to banks..................... -- (148,270) (518,397)
Repurchase of debentures................................ (4,745) (272,850) --
Debt issuance costs..................................... -- (4,691) (2,350)
Proceeds from exercised stock options................... 21 -- --
Preferred stock redemption.............................. -- -- (59,277)
Common stock issuance................................... -- -- 63,677
--------- --------- ---------
NET CASH PROVIDED BY (USED FOR) FINANCING
ACTIVITIES........................................ (5,120) (53,031) 41,369
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...... 6,434 (13,743) 1,234
Cash and cash equivalents at beginning of year............ 10,504 16,938 3,195
--------- --------- ---------
Cash and cash equivalents at end of year.................. $ 16,938 $ 3,195 $ 4,429
--------- --------- ---------
--------- --------- ---------
</TABLE>
See Notes to Consolidated Financial Statements
F-5
<PAGE>
BCP/ESSEX HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT PER
SHARE DATA)
NOTE 1 ACQUISITIONS AND SIGNIFICANT ACCOUNTING POLICIES
ACQUISITION OF ESSEX AND THE COMPANY
On February 29, 1988, MS/Essex Holdings Inc. ("Predecessor" or "the
Company"), acquired Essex Group, Inc. ("Essex") from United Technologies
Corporation ("UTC") (the "1988 Acquisition"). The outstanding common stock of
the Company was beneficially owned by The Morgan Stanley Leveraged Equity Fund
II, L.P., certain directors and members of management of the Company and Essex,
and others.
On October 9, 1992, the Company was acquired (the "Acquisition") by merger
(the "Merger") of BE Acquisition Corporation ("BE") with and into the Company
with the Company surviving under the name BCP/Essex Holdings Inc. ("Successor"
or "the Company"). BE was a newly organized Delaware corporation formed for the
purpose of effecting the Acquisition. Shareholders of BE included Bessemer
Holdings, L.P. (an affiliate and successor in interest to Bessemer Capital
Partners, L.P. ("BHLP")), management and other employees of Essex and certain
other investors. As a result of the Merger, the stockholders of BE became
stockholders of the Company. The effects of the Acquisition and Merger resulted
in a new basis of accounting reflecting estimated fair values for assets and
liabilities as of October 1, 1992. However, to the extent that the Company's
management had a continuing investment interest in the Company's common stock,
such fair values and contributed stockholders' equity (denoted as carryover of
Predecessor basis on the Consolidated Balance Sheets) were reduced
proportionately to reflect the continuing interest (approximately 10%) at the
prior historical cost basis.
ACQUISITION OF BUSINESS
On October 31, 1996, Essex acquired substantially all of the assets and
certain liabilities of Triangle Wire and Cable, Inc. of Lincoln, Rhode Island
and its Canadian affiliate, FLI Royal Wire and Cable ("Triangle"), related to
the sales, marketing, manufacturing and distribution of electrical wire and
cable. The acquisition included four manufacturing facilities which produce a
broad range of building and industrial wire and cable. The total purchase price
for the net assets of Triangle, including acquisition costs, was $71,764. The
acquisition was financed from proceeds received under Essex' revolving credit
agreement.
The acquisition was recorded under the purchase method of accounting and
accordingly, the results of operations of Triangle for the two-month period
ended December 31, 1996 are included in the accompanying consolidated financial
statements. The purchase price has been allocated to assets acquired and
liabilities assumed based on their respective fair values at the date of
acquisition. The allocation of the purchase price, which is preliminary, is
summarized as follows:
<TABLE>
<S> <C>
Current assets.................................................... $ 73,343
Property, plant and equipment..................................... 14,181
Current liabilities............................................... (17,304)
Deferred taxes.................................................... 1,544
---------
$ 71,764
---------
---------
</TABLE>
F-6
<PAGE>
BCP/ESSEX HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 ACQUISITIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The following unaudited pro forma consolidated financial information for the
Company for 1995 and 1996 are presented assuming the acquisition had occurred on
January 1, 1995:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Net sales.......................................... $1,505,196 $1,561,224
Income before extraordinary charge................. 11,809 40,049
Net income......................................... 8,838 38,866
Net income per share............................... $ .32 $ 1.38
</TABLE>
The pro forma consolidated financial information does not purport to present
what the Company's consolidated results of operations would actually have been
if the acquisition had occurred on January 1, 1995 and is not intended to
project future results of operations.
CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary Essex and Essex' majority-owned subsidiaries.
All intercompany accounts and transactions have been eliminated. The Company is
a holding company with no operations and has virtually no assets other than its
ownership of all the outstanding stock of Essex.
USE OF ESTIMATES
The consolidated financial statements were prepared in conformity with
generally accepted accounting principles thereby requiring management to make
estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from
those estimates.
NATURE OF OPERATIONS
The Company, through Essex, operates in one industry segment. Essex
develops, manufactures and markets electrical wire and cable and insulation
products. Essex' principal products in order of revenue are: building wire for
the construction industry; magnet wire for electromechanical devices such as
motors, transformers and electrical controls; voice and data communication wire
and cable; automotive wire and specialty wiring assemblies for automobiles and
trucks; and industrial wire for applications in construction, appliances and
recreational vehicles. Essex' customers are principally located throughout the
United States, without significant concentration in any one region or any one
customer. Essex performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral.
CASH AND CASH EQUIVALENTS
All highly liquid investments with a maturity of three months or less at the
date of purchase are considered to be cash equivalents.
INVENTORIES
Inventories are stated at cost, determined principally on the last-in,
first-out ("LIFO") method, which is not in excess of market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost and depreciated over
estimated useful lives using the straight-line method.
F-7
<PAGE>
BCP/ESSEX HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 ACQUISITIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENTS IN JOINT VENTURE
Investments in joint ventures are stated at cost adjusted for the Company's
share of undistributed earnings or losses.
EXCESS OF COST OVER NET ASSETS ACQUIRED
Excess of cost over net assets acquired primarily represents the excess of
the Company's purchase price over the fair value of the net assets acquired in
the Acquisition, and is being amortized by the straight-line method over 35
years. The Company's excess of cost over net assets acquired is assessed for
potential impairment whenever existing facts and circumstances indicate the
carrying value of those assets may not be recoverable. The assessment process
consists of estimating the future undiscounted cash flows of the businesses for
which the excess of cost over net assets acquired relates and comparing the
resultant amount to their carrying value to determine if an impairment has
occurred. If an impairment has occurred, an impairment loss would be recognized
for the excess of the carrying value over the fair value, as measured on a
discounted cash flow basis, of the excess of cost over net assets acquired.
OTHER INTANGIBLE ASSETS AND DEFERRED COSTS
Other intangible assets and deferred costs consist primarily of deferred
debt issuance costs and are being amortized over the lives of the applicable
debt instruments using the straight line or bonds outstanding method and charged
to operations as additional interest expense.
OTHER LONG-TERM LIABILITIES
Other long-term liabilities consist primarily of accrued liabilities under
the Essex sponsored defined benefit pension plans for salaried and hourly
employees and the supplemental executive retirement plan.
RECOGNITION OF REVENUE
Substantially all revenue is recognized at the time the product is shipped.
PRO FORMA NET INCOME PER SHARE
Pro forma per share data is computed based upon the weighted average number
of common and common equivalent shares, including common stock subject to put
outstanding for all periods presented. Common equivalent shares include
outstanding stock options and warrants. Common equivalent shares are not
included in the per share calculation where the effect of their inclusion would
be antidilutive, except that, in accordance with the Securities and Exchange
Commission requirements, common and common equivalent shares issued during the
twelve-month period immediately preceding the filing of the proposed initial
public offering have been included in the calculation of pro forma income per
common and common equivalent share as if they were outstanding for all periods,
using the treasury stock method and an assumed initial public offering price.
RECLASSIFICATION
Certain 1994 and 1995 amounts have been reclassified to conform with the
current year presentation.
F-8
<PAGE>
BCP/ESSEX HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 INVENTORIES
The components of inventories are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
Finished goods........................................ $ 146,821 $ 171,213
Raw materials and work in process..................... 52,366 56,840
--------- ---------
199,187 228,053
LIFO reserve.......................................... (33,111) (10,410)
--------- ---------
$ 166,076 $ 217,643
--------- ---------
--------- ---------
</TABLE>
Principal elements of cost included in inventories are copper, other
purchased materials, direct labor and manufacturing overhead. Inventories valued
using the LIFO method amounted to $161,449 and $210,454 at December 31, 1995 and
1996, respectively.
NOTE 3 PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
Land.................................................. $ 8,877 $ 9,386
Buildings and improvements............................ 87,704 95,600
Machinery and equipment............................... 240,257 272,621
Construction in process............................... 18,049 14,990
--------- ---------
354,887 392,597
Less accumulated depreciation......................... 84,341 112,108
--------- ---------
$ 270,546 $ 280,489
--------- ---------
--------- ---------
</TABLE>
NOTE 4 ACCRUED LIABILITIES
Accrued liabilities include the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
Salaries, wages and employee benefits.................... $ 15,566 $ 20,271
Amounts due customers.................................... 5,860 11,381
Other.................................................... 23,172 31,694
--------- ---------
$ 44,598 $ 63,346
--------- ---------
--------- ---------
</TABLE>
F-9
<PAGE>
BCP/ESSEX HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 NOTES PAYABLE AND LONG-TERM DEBT
Notes payable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
Bank lines of credit..................................... $ 11,760 $ 25,000
Canadian credit facility................................. -- 5,913
--------- ---------
$ 11,760 $ 30,913
--------- ---------
--------- ---------
</TABLE>
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
10% Senior notes...................................... $ 200,000 $ 200,000
Revolving loan........................................ 135,000 179,900
Term loan............................................. 54,000 31,766
Lease obligation...................................... 23,750 21,250
--------- ---------
412,750 432,916
Less current portion.................................. 24,734 11,576
--------- ---------
$ 388,016 $ 421,340
--------- ---------
--------- ---------
</TABLE>
ESSEX BANK FINANCING
In connection with the Triangle acquisition, Essex terminated its former
revolving credit agreement dated as of April 12, 1995 (the "Former Essex
Revolving Credit Agreement") and entered into a new revolving credit agreement,
dated October 31, 1996, by and among Essex, the Company, the Lenders named
therein, and The Chase Manhattan Bank, as administrative agent (the "Essex
Revolving Credit Agreement"). The Essex Revolving Credit Agreement expires in
2001 and provides for up to $370,000 in revolving loans, subject to specified
percentages of eligible assets, reduced by outstanding borrowings under Essex'
Canadian credit agreement and unsecured bank lines of credit ($5,913 and
$25,000, respectively, at December 31, 1996), as described below. Essex
recognized an extraordinary charge of $1,183 ($1,971 before applicable income
tax benefit) in 1996 for the write-off of unamortized deferred debt expense
associated with the termination of the Former Essex Revolving Credit Agreement.
Essex Revolving Credit Agreement loans bear floating rates of interest, at
Essex' option, at bank prime plus 1.25% or a reserve adjusted Eurodollar rate
(LIBOR) plus 2.25%. The effective interest rate can be reduced by 0.25% to
1.50%, in 0.25% increments, if certain specified financial conditions are
achieved. Commitment fees during the revolving loan period are .250%, .375% or
.5% of the average daily unused portion of the available credit based upon
certain specified financial conditions. At December 31, 1995 and 1996, the
incremental borrowing rate under the Former Essex Revolving Credit Agreement and
the Essex Revolving Credit Agreement, including applicable margins, approximated
9.00% and 8.75%, respectively. Indebtedness under the Essex Revolving Credit
Agreement is guaranteed by the Company and all of Essex' subsidiaries, and is
secured by a pledge of the capital stock of Essex and its subsidiaries and by a
first lien on substantially all assets.
The Essex Revolving Credit Agreement also provides a $25,000 letter of
credit subfacility. Essex' ability to borrow under the Essex Revolving Credit
Agreement is restricted by the financial covenants
F-10
<PAGE>
BCP/ESSEX HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 NOTES PAYABLE AND LONG-TERM DEBT (CONTINUED)
contained therein as well as those contained in the Essex Term Loan, as defined
in the second succeeding paragraph, and by certain debt limitation covenants
contained in the indenture under which the 10% Senior Notes due 2003 (the "Essex
Senior Notes") were issued (the "Essex Senior Note Indenture").
The Essex Revolving Credit Agreement contains various covenants which
include, among other things: (a) the maintenance of certain financial ratios and
compliance with certain financial tests and limitations; (b) limitations on
investments and capital expenditures; (c) limitations on cash dividends paid;
and (d) limitations on leases and the sale of assets. Through December 31, 1996,
Essex fully complied with all of the financial ratios and covenants contained in
the Essex Revolving Credit Agreement.
Essex and its subsidiaries also maintain three additional credit facilities
consisting of: (i) a $60.0 million senior unsecured note agreement, dated as of
April 12, 1995 by and among Essex, the Company, as guarantor, the lenders named
therein and The Chase Manhattan Bank, as administrative agent the ("Essex Term
Loan"); (ii) a $25.0 million agreement and lease dated as of April 12, 1995 by
and between Essex and Mellon Financial Services Corporation #3 (the "Essex Sale
and Leaseback Agreement"); and (iii) a $12.0 million (Canadian dollar) credit
agreement by and between an Essex subsidiary and a Canadian chartered bank (the
"Canadian Credit Agreement").
On May 12, 1995 Essex borrowed the full amount available under the Essex
Term Loan and the Essex Sale and Leaseback Agreement. These funds, together with
available cash and borrowings under the Former Essex Revolving Credit Agreement,
were paid to the Company in the form of a cash dividend ($238,748) and repayment
of a portion of an intercompany liability ($34,102) totaling $272,850. The
Company applied such funds to redeem all of its outstanding 16% Senior Discount
Debentures due 2004 (the "Debentures") at 100% of their principal amount of
$272,850 on May 15, 1995. In connection with the Debenture redemption, Essex
terminated its previous credit agreement and recognized an extraordinary charge
of $2,971 ($4,951 before applicable income tax benefit) in the second quarter
1995 for the write-off of unamortized deferred debt expense.
The Essex Term Loan provides an aggregate $60.0 million in term loans, and
is to be repaid in 20 equal quarterly installments, subject to the loan's excess
cash provision, through May 15, 2000. The Essex Term Loan bears floating rates
of interest at bank prime plus 2.75% or LIBOR plus 3.75%. The Essex Term Loan
requires 50% of excess cash, as defined, to be applied against the outstanding
term loan balance. The 1996 excess cash repayment of $12.4 million, based on
1995 results, resulted in remaining principal payments of 17 equal quarterly
installments of $2.3 million. Amounts repaid with respect to the excess cash
provisions may not be reborrowed. There are no requirements for an excess cash
payment to be made for 1996 results.
The Essex Sale and Leaseback Agreement provides $25,000 for the sale and
leaseback of certain of Essex' fixed assets. The Essex Sale and Leaseback
Agreement has a seven-year term expiring in May 2002. The principal component of
the rental is paid quarterly, with the amount of each of the first 27 payments
equal to 2.5% of lessor's cost of the equipment, and the balance is due at the
final payment. The interest component is paid on the unpaid principal balance
and is calculated by lessor at LIBOR plus 2.5%. The effective interest rate can
be reduced by 0.25% to 1.125% if certain specified financial conditions are
achieved. The fixed assets subject to the Essex Sale and Leaseback Agreement
(all of which are machinery and equipment) are included in property, plant and
equipment in the Consolidated
F-11
<PAGE>
BCP/ESSEX HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 NOTES PAYABLE AND LONG-TERM DEBT (CONTINUED)
Balance Sheets and have a gross cost of $30,882 and accumulated amortization of
$4,139 at December 31, 1996.
Borrowings under the Canadian Credit Agreement are restricted to meeting the
working capital requirements of the subsidiary and are collateralized by the
subsidiary's accounts receivable. As of December 31, 1996, $5.9 million was
outstanding under the Canadian Credit Agreement and denoted as notes payable to
banks in the Consolidated Balance Sheets. The Canadian Credit Agreement bears
interest at rates similar to the Essex Revolving Credit Agreement and terminates
one year from its effective date of May 30, 1996, although it may be extended
for successive one year periods upon the mutual consent of the subsidiary and
lending bank.
Essex also has bank lines of credit which provide unsecured borrowings for
working capital of up to $25,000 of which $11,760 and $25,000 were outstanding
at December 31, 1995 and 1996, respectively, and denoted as notes payable to
banks in the Consolidated Balance Sheets. These lines of credit bear interest at
rates subject to agreement between Essex and the lending banks. At December 31,
1995 and 1996 such rates of interest averaged 6.7% and 7.6%, respectively.
ESSEX SENIOR NOTES
At December 31, 1995 and 1996, $200,000 aggregate principal amount of the
Essex Senior Notes were outstanding. The Essex Senior Notes bear interest at 10%
per annum payable semiannually and are due in May 2003. The Essex Senior Notes
rank PARI PASSU in right of payment with all other senior indebtedness of Essex.
To the extent that any other senior indebtedness of Essex is secured by liens on
the assets of Essex, the holders of such senior indebtedness will have a claim
prior to any claim of the holders of the Essex Senior Notes as to those assets.
At the option of Essex, the Essex Senior Notes may be redeemed, commencing
in May 1998 in whole, or in part, at redemption prices ranging from 103.75% in
1998 to 100% in 2001. Upon a Change in Control, as defined in the Essex Senior
Note Indenture, each holder of Essex Senior Notes will have the right to require
Essex to repurchase all or any part of such holder's Essex Senior Notes at a
repurchase price equal to 101% of the principal amount thereof. The Essex Senior
Note Indenture contains various covenants which include, among other things,
limitations on debt, on the sale of assets, and on cash dividends paid. Through
December 31, 1996 Essex fully complied with all of the financial ratios and
covenants contained in the Essex Senior Note Indenture.
THE COMPANY'S SENIOR DISCOUNT DEBENTURES
In May 1989, the Company issued $342,000 aggregate principal amount
($135,117 aggregate proceeds amount) of its Debentures. In connection with the
Acquisition and Merger, the Debentures were valued at an effective annual
interest rate of 14.25% through May 1995. The Debentures accreted to their full
face value (an aggregate principal amount of $272,850) on May 15, 1995. On May
15, 1995 the Company redeemed all of its outstanding Debentures at 100% of their
principal amount with cash received from Essex in the form of a cash dividend
and repayment of a portion of an intercompany liability totalling $272,850.
OTHER
Essex capitalized interest costs of $132, $565 and $558 in 1994, 1995 and
1996, respectively, with respect to qualifying assets.
Total interest paid was $20,826, $32,312 and $38,284 in 1994, 1995 and 1996,
respectively.
F-12
<PAGE>
BCP/ESSEX HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 NOTES PAYABLE AND LONG-TERM DEBT (CONTINUED)
Aggregate annual maturities of long-term debt for the next five years are:
<TABLE>
<S> <C>
1997............................................................. $ 11,576
1998............................................................. 11,576
1999............................................................. 11,576
2000............................................................. 7,038
2001............................................................. 182,400
</TABLE>
The year 2001 includes repayment of the Essex Revolving Credit Agreement in
the amount of $179,900.
F-13
<PAGE>
BCP/ESSEX HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
Deferred tax liabilities:
Property, plant and equipment.......................... $ 68,553 $ 60,519
Inventory.............................................. 28,485 30,114
Other.................................................. 3,844 4,502
--------- ---------
Total deferred tax liabilities....................... 100,882 95,135
Deferred tax assets:
Accrued liabilities.................................... 6,650 8,252
Alternative minimum tax credit carryforward............ 1,384 --
Other.................................................. 10,694 13,689
--------- ---------
Total deferred tax assets............................ 18,728 21,941
--------- ---------
Net deferred tax liabilities......................... $ 82,154 $ 73,194
--------- ---------
--------- ---------
</TABLE>
The components of income tax expense are:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal...................................... $ 14,542 $ 8,560 $ 29,468
State........................................ 3,346 5,334 6,937
Deferred (Credit):
Federal...................................... (7,887) 2,382 (5,805)
State........................................ (501) (1,896) (1,612)
--------- --------- ---------
$ 9,500 $ 14,380 $ 28,988
--------- --------- ---------
--------- --------- ---------
</TABLE>
Total income taxes paid were $11,712, $15,989 and $32,656 in 1994, 1995 and
1996, respectively.
F-14
<PAGE>
BCP/ESSEX HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 INCOME TAXES (CONTINUED)
Principal differences between the effective income tax rate and the
statutory federal income tax rate are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Statutory federal income tax rate................... 35.0% 35.0% 35.0%
State and local taxes, net of federal benefit....... 10.9 7.9 5.2
Excess of cost over net assets acquired
amortization...................................... 8.4 5.1 2.1
Other, net.......................................... 1.6 4.0 1.3
--- --- ---
Effective income tax rate........................... 55.9% 52.0% 43.6%
--- --- ---
--- --- ---
</TABLE>
In connection with the Acquisition and Merger in 1992, The Company elected
not to step up its tax bases in the assets acquired. Accordingly, the income tax
bases in the assets acquired have not been changed from pre-1988 Acquisition
values. Depreciation and amortization of the higher allocated financial
statement bases are not deductible for income tax purposes, thus increasing the
effective income tax rate reflected in the consolidated financial statements.
NOTE 7 RETIREMENT BENEFITS
Essex sponsors two defined benefit retirement plans for substantially all
salaried and hourly employees. Essex also has a supplemental executive
retirement plan which provides retirement benefits based on the same formula as
in effect under the salaried employees' plan, but which only takes into account
compensation in excess of amounts that can be recognized under the salaried
employees' plan. Salaried plan retirement benefits are generally based on years
of service and the employee's compensation during the last several years of
employment. Hourly plan retirement benefits are based on hours worked and years
of service with a fixed dollar benefit level. Essex' funding policy is based on
an actuarially determined cost method allowable under Internal Revenue Service
regulations, the projected unit credit method. Pension plan assets consist
principally of fixed income and equity securities and cash and cash equivalents.
The components of net periodic pension cost for the plans are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Service cost--benefits earned during the
period......................................... $ 2,964 $ 2,365 $ 3,377
Interest costs on projected benefit obligation... 3,643 3,923 4,715
Actual return on plan assets..................... 2,409 (13,597) (5,123)
Net amortization and deferral.................... (6,458) 9,751 268
--------- --------- ---------
Net periodic pension cost........................ $ 2,558 $ 2,442 $ 3,237
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-15
<PAGE>
BCP/ESSEX HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 RETIREMENT BENEFITS (CONTINUED)
The following table summarizes the funded status of these pension plans and
the related amounts that are recognized in the Consolidated Balance Sheets:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested................................................ $ 42,052 $ 44,726
Nonvested............................................. 3,656 3,804
--------- ---------
Accumulated benefit obligation........................ 45,708 48,530
Effect of projected future salary increases........... 17,195 17,690
--------- ---------
Projected benefit obligation.......................... 62,903 66,220
Plan assets at fair value............................... 55,447 60,131
--------- ---------
Projected benefit obligation in excess of fair value of
plan assets........................................... (7,456) (6,089)
Unrecognized net gain................................... (1,312) (5,131)
Unrecognized prior service cost......................... (326) (299)
--------- ---------
Pension liability recognized in balance sheets.......... $ (9,094) $ (11,519)
--------- ---------
--------- ---------
</TABLE>
Certain actuarial assumptions were revised in 1995 and 1996 resulting in an
increase of $13,262 and a decrease of $5,345, respectively, in the projected
benefit obligation.
Following is a summary of significant actuarial assumptions used:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Discount rates......................................... 8.5% 7.0% 7.5%
Rates of increase in compensation levels............... 5.0% 5.0% 5.0%
Expected long-term rate of return on assets............ 9.0% 9.0% 9.0%
</TABLE>
In addition to the defined benefit retirement plans as detailed above, Essex
also sponsors defined contribution savings plans which cover substantially all
salaried and non-union hourly employees of Essex and certain other hourly
employees, represented by collective bargaining agreements, who negotiate this
benefit into their contract. The purpose of these savings plans is generally to
provide additional financial security during retirement by providing employees
with an incentive to make regular savings. Essex' contributions to the defined
contribution plans totalled $1,088, $1,123 and $1,194 in 1994, 1995 and 1996,
respectively.
Essex also sponsors an unfunded, nonqualified deferred compensation plan
which permits certain key management employees to annually elect to defer a
portion of their compensation and earn a guaranteed interest rate on the
deferred amounts. The total amount of participant deferrals and accrued
interest, which is reflected in other long-term liabilities, was $609 and $1,234
at December 31, 1995 and 1996, respectively.
F-16
<PAGE>
BCP/ESSEX HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 REDEEMABLE PREFERRED STOCK, COMMON STOCK SUBJECT TO PUT AND STOCKHOLDERS'
EQUITY
Following is an analysis of redeemable preferred stock, common stock subject
to put and stockholders' equity:
<TABLE>
<CAPTION>
STOCKHOLDERS' EQUITY
----------------------------------------------------------------
COMMON STOCK
REDEEMABLE SUBJECT TO PUT COMMON STOCK ADDITIONAL CARRYOVER OF RETAINED
PREFERRED ---------------------- ----------------------- PAID-IN PREDECESSOR EARNINGS
STOCK SHARES AMOUNT SHARES AMOUNT CAPITAL BASIS (DEFICIT)
------------- --------- ----------- ---------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1993........... $ 34,460 1,016,189 $ 5,808 16,559,793 $ 165 $ 98,935 $ (15,259) $ (24,174)
Net income....... -- -- -- -- -- -- -- 7,486
Preferred stock
dividend....... 6,008 -- -- -- -- (6,008) -- --
Accretion of
preferred
stock.......... 687 -- -- -- -- (687) -- --
Expiration of put
rights......... -- (58,444) (334) 58,444 1 333 -- --
Stock options
exercised...... -- -- -- 10,250 -- 36 -- --
------------- --------- ----------- ---------- ----- ----------- ------------- -----------
Balance at
December 31,
1994........... 41,155 957,745 5,474 16,628,487 166 92,609 (15,259) (16,688)
Net income....... -- -- -- -- -- -- -- 10,300
Preferred stock
dividend....... 6,962 -- -- -- -- (6,962) -- --
Accretion of
preferred
stock.......... 703 -- -- -- -- (703) -- --
Expiration of put
rights......... -- (117,352) (671) 117,352 1 670 -- --
Stock options
exercised...... -- -- -- 72,868 1 165 -- --
------------- --------- ----------- ---------- ----- ----------- ------------- -----------
Balance at
December 31,
1995........... 48,820 840,393 4,803 16,818,707 168 85,779 (15,259) (6,388)
Net income....... -- -- -- -- -- -- -- 36,325
Issuance of
common stock... -- 437,709 4,377 5,930,000 59 59,241 -- --
Preferred stock
dividend....... 4,248 -- -- -- -- (1,906) -- (2,342)
Accretion of
preferred
stock.......... 2,024 -- -- -- -- (179) -- (1,845)
Preferred stock
redemption..... (55,092) -- -- -- -- (411) -- (3,774)
Expiration of put
rights......... -- (15,500) (101) 15,500 -- 101 -- --
Stock options
exercised...... -- -- -- 29,748 1 67 -- --
Increase in fair
value.......... -- -- 3,547 -- -- (3,547) -- --
------------- --------- ----------- ---------- ----- ----------- ------------- -----------
Balance at
December 31,
1996........... $ -- 1,262,602 $ 12,626 22,793,955 $ 228 $ 139,145 $ (15,259) $ 21,976
------------- --------- ----------- ---------- ----- ----------- ------------- -----------
------------- --------- ----------- ---------- ----- ----------- ------------- -----------
<CAPTION>
TOTAL
---------
<S> <C>
Balance at
December 31,
1993........... $ 59,667
Net income....... 7,486
Preferred stock
dividend....... (6,008)
Accretion of
preferred
stock.......... (687)
Expiration of put
rights......... 334
Stock options
exercised...... 36
---------
Balance at
December 31,
1994........... 60,828
Net income....... 10,300
Preferred stock
dividend....... (6,962)
Accretion of
preferred
stock.......... (703)
Expiration of put
rights......... 671
Stock options
exercised...... 166
---------
Balance at
December 31,
1995........... 64,300
Net income....... 36,325
Issuance of
common stock... 59,300
Preferred stock
dividend....... (4,248)
Accretion of
preferred
stock.......... (2,024)
Preferred stock
redemption..... (4,185)
Expiration of put
rights......... 101
Stock options
exercised...... 68
Increase in fair
value.......... (3,547)
---------
Balance at
December 31,
1996........... $ 146,090
---------
---------
</TABLE>
The authorized capital stock of the Company consists of (i) 150,000,000
shares of common stock divided into two classes consisting of Class A Common
Stock, par value $.01 per share (the "Class A Stock"), and Class B Common Stock,
par value $.01 per share ("Class B Stock"), and (ii) 5,000,000
F-17
<PAGE>
BCP/ESSEX HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 REDEEMABLE PREFERRED STOCK, COMMON STOCK SUBJECT TO PUT AND STOCKHOLDERS'
EQUITY (CONTINUED)
shares of preferred stock, par value $.01 per share of which 3,100,000 shares
have been designated Series A Cumulative Redeemable Exchangeable Preferred Stock
due 2004 (the "Series A Preferred Stock") and Series B Cumulative Redeemable
Exchangeable Preferred Stock due 2004 (the "Series B Preferred Stock"
collectively the "Redeemable Preferred Stock"). The aggregate number of
Redeemable Preferred Stock that may be issued and outstanding at any one time is
3,100,000 shares. As of December 31, 1996 there were 23,457,057.5 shares of
Class A Stock outstanding, 599,500 shares of Class B Stock outstanding and no
shares of Series B Preferred Stock or Series A Preferred Stock outstanding.
COMMON STOCK AND OPTIONS
All shares of Class A common stock and Class B common stock are identical
and entitle holders of each to the same rights and privileges, except that
holders of Class B common stock have no voting rights other than to vote on any
amendment, repeal or modification of any provision of the certificate of
incorporation that adversely affects the powers, preferences or special rights
of holders of Class B common stock. The conversion ratio between Class B common
stock and Class A common stock and vice versa is one to one. The rights and
terms of the Class A common stock and the Class B common stock are more fully
described in the Company's certificate of incorporation. Upon the consummation
of the IPO (see Note 13), there will only be one class of common stock
outstanding as a result of a reclassification in which each share of Class A
common stock and each share of Class B common stock will be reclassified into
one share of common stock.
The members of Essex management who are stockholders of the Company
("Management Stockholders") are subject to agreements that impose certain
restrictions and grant rights on their ownership and transfer of the Company's
stock. Management Stockholders are generally prohibited from transferring shares
of common stock of the Company owned by them before an initial public offering
by the Company (or any successor thereto). Such shares are subject to the right
of first refusal by the Company or BHLP. Any Management Stockholder who
terminates employment with Essex for reasons other than retirement, disability
or death has a limited right, for one year from the date of termination, to
require the Company to repurchase all the stockholder's shares of common stock
of the Company at the lesser of the purchase price paid by such stockholder or
fair market value, as defined. Any Management Stockholder who retires from
Essex, dies or becomes disabled has a limited right, for one year from the date
of termination, to require the Company to repurchase all the stockholder's
shares of common stock of the Company at fair market value, as defined. The
shares of Common Stock that are subject to these repurchase requirements have
been classified as common stock subject to put at their estimated fair value in
the accompanying balance sheet. Changes to the fair value of common stock
subject to put are recorded as adjustments to additional paid-in capital. The
Company has a right to repurchase such shares at fair market value, as defined,
for one year following employment for any reason. Such rights of both the
Company and the stockholder expire upon an initial public offering. Management
Stockholders also have certain "piggyback" registration rights in the event that
the Company registers shares of its common stock for sale under the Securities
Act of 1933.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("FAS 123") encourages, but does not require companies
to record compensation cost for stock-based employee compensation plans at fair
value. The Company has chosen to continue to account for
F-18
<PAGE>
BCP/ESSEX HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 REDEEMABLE PREFERRED STOCK, COMMON STOCK SUBJECT TO PUT AND STOCKHOLDERS'
EQUITY (CONTINUED)
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"), and related Interpretations. Under APB 25, because the
exercise prices of the Company's stock options are based upon fair value of the
stock at the date of each grant, no compensation expense has been recorded in
connection with the issuance of stock options. A public market does not exist
for the Company's common stock; therefore, the fair value, as approved by the
Board of Directors of the Company, was based upon factors such as sales prices
in the most recent transactions and appropriate earnings multiples.
Grants of options to purchase common stock of the Company have been made to
management and employees of Essex pursuant to, and are subject to the provisions
of, an Amended and Restated Stock Option Plan and individual stock option
agreements. The Amended and Restated Stock Option Plan provides for the issuance
of up to 4,798,144 shares of the Company's common stock. All options granted
have ten year terms and vest and become fully exercisable over periods of one to
three years of continued employment. The number of shares for which all options
are exercisable and the exercise price therefore may be reduced by the Board of
Directors of the Company in accordance with a specified formula.
Pro forma information regarding net income and earnings per share is
required by FAS 123, and has been determined as if the Company had accounted for
its stock options issued in 1995 and 1996 under the fair value method of that
Statement. The fair value for these options was estimated as of the date of
grant using a "minimum value" method acceptable for nonpublic companies. The
effect of applying FAS 123's fair value method to the Company's stock-based
awards results in net income and earnings per share that are not materially
different from amounts reported. Because FAS 123 is applicable only to options
granted subsequent to December 31, 1994, its effect will not be fully reflected
until 1997.
Option valuation models require the input of highly subjective assumptions.
Because the Company's stock options have characteristics significantly different
from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion the existing models do not necessarily provide a reliable single measure
of the fair value of its stock options.
A summary of the Company's stock option activity, and related information
follows:
<TABLE>
<CAPTION>
1994 1995 1996
------------------------ ------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- ------------- --------- ------------- --------- -------------
Outstanding-beginning of
year....................... 1,998,300 $ 2.06 2,153,800 $ 2.34 2,464,175 $ 2.94
Granted...................... 165,750 5.72 432,500 5.72 462,500 6.52
Exercised.................... (10,250) 2.10 (113,375) 2.04 (46,200) 2.04
Forfeited.................... -- -- (8,750) 5.72 (9,500) 5.72
--------- ----- --------- ----- --------- -----
Outstanding-end of year...... 2,153,800 $ 2.34 2,464,175 $ 2.94 2,870,975 $ 3.52
--------- ----- --------- ----- --------- -----
--------- ----- --------- ----- --------- -----
Exercisable at end of year... 1,988,050 $ 2.06 1,874,675 $ 2.06 1,828,475 $ 2.06
</TABLE>
F-19
<PAGE>
BCP/ESSEX HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 REDEEMABLE PREFERRED STOCK, COMMON STOCK SUBJECT TO PUT AND STOCKHOLDERS'
EQUITY (CONTINUED)
As of December 31, 1996 there were 1,618,000 options at $2.00 per share
exercise price, 210,475 options at $2.50 exercise price, 955,000 options at
$5.72 per share exercise price and 87,500 options at $10.00 per share exercise
price outstanding to purchase shares of the Company's common stock. The
weighted-average remaining contractual life of those options is 6.7 years. In
January 1997 the Company issued options to purchase 730,000 shares of the
Company's common stock at a $10.00 exercise price. Such options were granted in
connection with the 1996 private offering to certain management employees and
with regard to the Company's 1996 performance.
PREFERRED STOCK AND WARRANTS
On July 3, 1996, the Company called for redemption all of its outstanding
Redeemable Preferred Stock. The Redeemable Preferred Stock was redeemed at the
close of business on July 15, 1996, at a redemption price of $26.875 per share,
plus accrued and unpaid dividends through the redemption date of $0.166 per
share, for a total redemption price of $27.041 per share or $59,277 in the
aggregate including redemption expenses.
The redemption of the outstanding Redeemable Preferred Stock was financed by
the Company through a private offering of 5,930,000 shares of its common stock
to certain of its current common stockholders and their affiliates. In December
1996, the private offering was extended to certain management employees of Essex
who, collectively, purchased 437,708.5 shares of common stock. These offerings
were not registered under the Securities Act of 1933, and such common stock may
not be offered or sold in the United States absent such registration or an
applicable exemption from registration.
In connection with the Acquisition and Merger in 1992 and related issuance
of the Series A Preferred Stock, 2,833,369 warrants to purchase the Company's
common stock (the "Warrants") were issued. The Series A Preferred Stock and
Warrants were recorded at their estimated fair values of which $4,250 was
assigned to the Warrants. The excess of the liquidation preference value over
the carrying value of the Series A Preferred Stock of $4,250, was being accreted
by periodic charges to paid in capital. Such liquidation preference became fully
accreted upon the redemption of the redeemable preferred stock.
The Warrants, of which there were 2,833,369 outstanding at December 31,
1996, are presently exercisable and represent the right to purchase an aggregate
of approximately 10% of the fully diluted common stock of the Company (based on
the common equity, warrants and options outstanding as of December 31, 1996).
The Warrants are exercisable at $5.72 per share and expire on October 9, 2004.
NOTE 9 RELATED PARTY TRANSACTIONS
Advisory services fees of $1,000 were paid to an affiliate of BHLP for 1994,
1995 and 1996, respectively. It is expected that financial advisory fees to an
affiliate of BHLP will continue to be paid for such services in the future.
NOTE 10 DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE INFORMATION
Essex, to a limited extent, uses forward fixed price contracts and
derivative financial instruments to manage foreign currency exchange and
commodity price risks. Essex does not hold or issue financial
F-20
<PAGE>
BCP/ESSEX HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE INFORMATION (CONTINUED)
instruments for investment or trading purposes. Essex is exposed to credit risk
in the event of nonperformance by counterparties for foreign exchange forward
contracts, metal forward price contracts and metals futures contracts, but Essex
does not anticipate nonperformance by any of these counterparties. The amount of
such exposure is generally the unrealized gains within the underlying contracts.
FOREIGN EXCHANGE RISK MANAGEMENT
Essex engages in the sale and purchase of goods and services which
periodically require payment or receipt of amounts denominated in foreign
currencies. To protect Essex' related anticipated cash flows from the risk of
adverse foreign currency exchange fluctuations for firm sales and purchase
commitments, Essex enters into foreign currency forward exchange contracts. At
December 31, 1995 Essex had Deutschemark forward exchange sales contracts of
$1,145 and purchase contracts of $886. At December 31, 1996, Essex had no
Deutschemark forward exchange sales contracts but did have $138 of purchase
contracts. The fair value of such contracts approximated the contract amount.
Foreign currency gains or losses resulting from Essex' operating and hedging
activities are recognized in earnings in the period in which the hedged currency
is collected or paid. The related amounts due to or from counterparties are
included in other liabilities or other assets.
COMMODITY PRICE RISK MANAGEMENT
Copper, Essex' principal raw material, experiences marked fluctuations in
market prices, thereby subjecting Essex to copper price risk with respect to
copper purchases and to firm and anticipated customer sales contracts.
Derivative financial instruments in the form of copper futures contracts are
utilized by Essex to reduce those risks.
Purchase or "long" contracts are utilized by Essex to hedge firm and
anticipated sales contracts while sales or "short" contracts are employed with
respect to "carryover" copper purchases. Copper carryover purchases represent
that portion of Essex' current month's copper purchase commitments priced at the
current month's average New York Commodity Exchange, Inc. ("COMEX") price, but
not delivered until the following month. Short contracts are utilized to
mitigate risk that copper prices, at the time of copper receipt, are likely to
be below the average COMEX price of the incoming copper carryover.
Purchase contracts at December 31, 1995 and 1996 totalled 14.7 and 42.5
million copper pounds, respectively, with contract amounts of $17,100 and
$42,000 and estimated fair values of $16,900 and $41,300, respectively. There
are no sales contracts at December 31, 1996. Sales contracts at December 31,
1995 totalled 13.5 million copper pounds, with a contract amount of $16,600 and
a fair value of $16,300. Deferred and unrealized gains or losses on these
futures contracts ($100 gain and $700 loss at December 31, 1995 and 1996,
respectively) are included within other assets and will be recognized in
earnings in the period in which the hedged copper is sold to customers and the
underlying contracts are liquidated, when a sale is no longer expected to occur
or when the carryover copper is received.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments, exclusive of certain forward contracts
and futures contracts as discussed above, generally consist of cash and cash
equivalents and long-term debt. The carrying
F-21
<PAGE>
BCP/ESSEX HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE INFORMATION (CONTINUED)
amounts of the Company's cash and cash equivalents approximated fair value at
December 31, 1995 and 1996 while the carrying amount of the Essex Senior Notes
exceeded fair value by approximately $4,000 at December 31, 1995 and was less
than fair value by approximately $8,000 at December 31, 1996. Fair values with
respect to the Company's foreign currency forward exchange contracts and copper
futures contracts are determined based on quoted market prices.
NOTE 11 CONTINGENT LIABILITIES AND COMMITMENTS
There are various claims and pending legal proceedings against Essex
including environmental matters and other matters arising out of the ordinary
course of its business. Pursuant to the 1988 Acquisition, UTC agreed to
indemnify Essex against all losses (as defined) resulting from or in connection
with damage or pollution to the environment and arising from events, operations,
or activities of Essex prior to February 29, 1988 or from conditions or
circumstances existing at February 29, 1988. Except for certain matters relating
to permit compliance, Essex is fully indemnified with respect to conditions,
events or circumstances known to UTC prior to February 29, 1988. The sites
covered by this indemnity are handled directly by UTC and all payments required
to be made are paid directly by UTC. The amounts related to this environmental
contingency are not material to Holding's consolidated financial statements. UTC
also provided a second environmental indemnity which deals with losses related
to environmental events, conditions or circumstances existing at or prior to
February 29, 1988, which only became known in the five year period commencing
February 29, 1988. As to any such losses, Essex is responsible for the first
$4,000 incurred. Management and its legal counsel periodically review the
probable outcome of pending proceedings and the costs reasonably expected to be
incurred. Essex accrues for these costs when it is probable that a liability has
been incurred and the amount of the loss can be reasonably estimated. After
consultation with counsel, in the opinion of management, the ultimate cost to
Essex, exceeding amounts provided, will not materially affect its consolidated
financial position, cash flows or results of operations. There can be no
assurance, however, that future developments will not alter this conclusion.
Since approximately 1990, Essex has been named as a defendant in a limited
number of product liability lawsuits brought by electricians and other skilled
tradesmen claiming injury from exposure to asbestos found in electrical wire
products produced a number of years ago. During 1996, the number of cases filed
against Essex increased to 95 involving approximately 400 claims. Essex'
strategy is to defend these cases vigorously. Essex believes that its liability,
if any, in these matters and the related defense costs will not have a material
adverse effect either individually or in the aggregate upon its business,
financial condition, cash flows or results of operations. There can be no
assurance, however, that future developments will not alter this conclusion.
At December 31, 1996, Essex had purchase commitments of 747.6 million pounds
of copper. This is not expected to be either a quantity in excess of needs or at
prices in excess of amounts that can be recovered upon sale of the related
copper products. The commitments are to be priced based on the COMEX price in
the contractual month of shipment except for 26.6 million pounds of copper that
have been priced at fixed amounts through forward purchase contracts covered by
customer sales agreements at copper prices at least equal to Essex' copper
commitment.
At December 31, 1996, Essex had committed $5,547 to outside vendors for
certain capital projects.
F-22
<PAGE>
BCP/ESSEX HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11 CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED)
Essex occupies space and uses certain equipment under lease arrangements.
Rent expense was $6,912, $7,478 and $8,941 under such arrangements for 1994,
1995 and 1996, respectively. Rental commitments at December 31, 1996 under
long-term noncancellable operating leases were as follows:
<TABLE>
<CAPTION>
REAL ESTATE EQUIPMENT TOTAL
----------- ------------- ---------
<S> <C> <C> <C>
1997.................................................... $ 3,096 $ 2,730 $ 5,826
1998.................................................... 2,962 2,514 5,476
1999.................................................... 3,003 1,866 4,869
2000.................................................... 2,704 996 3,700
2001.................................................... 2,562 681 3,243
After 2001.............................................. 10,696 683 11,379
----------- ------------- ---------
$ 25,023 $ 9,470 $ 34,493
----------- ------------- ---------
----------- ------------- ---------
</TABLE>
NOTE 12 QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1995 1ST QTR 2ND QTR 3RD QTR 4TH QTR
- ------------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales........................................ $ 289,649 $ 288,534 $ 308,288 $ 315,179
Gross margin..................................... 42,426 37,598 44,765 46,350
Income before extraordinary charge............... 3,071 1,015 6,086 3,099
Net income (loss)(a)............................. 3,071 (1,956) 6,086 3,099
Pro forma income (loss) per share (see Note 1):
Pro forma income (loss) before extraordinary
charge....................................... $ .11 $ .04 $ .22 $ .11
Extraordinary charge........................... -- (.11) -- --
--------- --------- --------- ---------
Pro forma net income (loss).................... $ .11 $ (.07) $ .22 $ .11
--------- --------- --------- ---------
--------- --------- --------- ---------
<CAPTION>
1996 1ST QTR 2ND QTR 3RD QTR 4TH QTR
- ------------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales........................................ $ 308,410 $ 337,533 $ 328,777 $ 357,329
Gross margin..................................... 49,759 52,891 58,964 67,975
Income before extraordinary charge............... 6,390 7,596 11,582 11,940
Net income (b)................................... 6,390 7,596 11,582 10,757
Pro forma income per share (see Note 1):
Pro forma income before extraordinary charge... $ .23 $ .27 $ .41 $ .42
Extraordinary charge........................... -- -- -- (.04)
--------- --------- --------- ---------
Pro forma net income........................... $ .23 $ .27 $ .41 $ .38
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
- ------------------------
(a) In the second quarter 1995, Essex recognized an extraordinary charge of
$2,971 ($.11 per share), net of applicable income tax benefit of $1,980,
representing the write-off of unamortized deferred debt expense in
connection with the termination of its former credit agreement.
F-23
<PAGE>
BCP/ESSEX HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12 QUARTERLY FINANCIAL DATA (UNAUDITED) (CONTINUED)
(b) In the fourth quarter 1996, Essex recognized an extraordinary charge of
$1,183 ($.04 per share), net of applicable income tax benefit of $788,
representing the write-off of unamortized deferred debt expense in
connection with the termination of its former credit agreement.
NOTE 13 SUBSEQUENT EVENT
On February 19, 1997 the Company filed a Registration Statement with the
Securities and Exchange Commission for an initial public offering ("IPO") of its
common stock. The proceeds to the Company from the IPO will be used to repay, in
full, the remaining amounts outstanding under the Essex Term Loan and repay a
portion of borrowings outstanding under the Essex Revolving Credit Agreement.
Prior to, or simultaneous with, the consummation of the IPO, the Company will
effect a one for two reverse stock split. All common shares and per share
amounts have been adjusted retroactively to give effect to the reverse stock
split.
F-24
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Stockholders have agreed to sell to each of the U.S.
Underwriters named below (the "U.S. Underwriters"), and each of such U.S.
Underwriters, for whom Goldman, Sachs & Co., Smith Barney Inc., Donaldson,
Lufkin & Jenrette Securities Corporation and Lehman Brothers Inc. are acting as
representatives, has severally agreed to purchase from the Company and the
Selling Stockholders, the respective number of shares of Common Stock and
Warrants set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF NUMBER OF
UNDERWRITER COMMON STOCK WARRANTS
- ------------------------------------------------------------ ------------------ -----------
<S> <C> <C>
Goldman, Sachs & Co.........................................
Smith Barney Inc............................................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Lehman Brothers Inc.........................................
---------- -----------
Total................................................... 4,564,663 2,076,968
---------- -----------
---------- -----------
</TABLE>
The Warrants will not be sold to the public; rather, the Company will redeem
the Warrants for shares of Common Stock and such shares will be sold to the
public. See "Certain Relationships and Related Party Transactions--The
Redemption".
Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares of Common Stock
and Warrants, if any are taken.
The U.S. Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at such
price less a concession of $ per share. The U.S. Underwriters may allow, and
such dealers may re-allow, a concession not in excess of $ per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time to
time be varied by the representatives.
The Company and the Selling Stockholders have entered into an underwriting
agreement (the "International Underwriting Agreement") with the Underwriters of
the international offering (the "International Underwriters") providing for the
concurrent offer and sale of 1,500,000 shares of Common Stock in an
international offering outside the United States. The offering price and
aggregate underwriting discounts and commissions per share for the two offerings
are identical. The closing of the offering made hereby is a condition to the
closing of the international offering, and vice versa. The representatives of
the International Underwriters are Goldman Sachs International, Smith Barney
Inc., Donaldson, Lufkin & Jenrette Securities Corporation and Lehman Brothers
International (Europe).
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the Offerings, each of the U.S.
Underwriters named herein has agreed that, as a part of the distribution of the
shares offered hereby and subject to certain exceptions, it will offer, sell or
deliver the shares of Common Stock, directly or indirectly, only in the United
States of America (including the States and the District of Columbia), its
territories, its possessions and other areas subject to its jurisdiction (the
"United States") and to U.S. persons, which term shall mean, for purposes of
this paragraph: (a) any individual who is a resident of the United States or (b)
any corporation, partnership or
U-1
<PAGE>
other entity organized in or under the laws of the United States or any
political subdivision thereof and whose office most directly involved with the
purchase is located in the United States. Each of the International Underwriters
has agreed or will agree pursuant to the Agreement Between that, as a part of
the distribution of the shares offered as a part of the international offering,
and subject to certain exceptions, it will (i) not, directly or indirectly,
offer, sell or deliver shares of Common Stock (a) in the United States or to any
U.S. persons or (b) to any person whom it believes intends to reoffer, resell or
deliver the shares in the United States or to any U.S. persons and (ii) cause
any dealer to whom it may sell such shares at any concession to agree to observe
a similar restriction.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall be
the initial public offering price, less an amount not greater than the selling
concession.
The Company and the Selling Stockholders have granted the U.S. Underwriters
an option exercisable for 30 days after the date of this Prospectus to purchase
up to an aggregate of 900,000 additional shares of Common Stock, which includes
up to 131,116 shares of Common Stock subject to Warrants, solely to cover
over-allotments, if any. If the U.S. Underwriters exercise their over-allotment
option, the U.S. Underwriters have severally agreed, subject to certain
conditions, to purchase approximately the same percentage thereof that the
number of shares and Warrants to be purchased by each of them, as shown in the
foregoing table, bears to the 4,564,663 shares of common Stock and 2,076,968
Warrants. The Common Stock and Warrants will be sold in the same proportion as
the total number of shares of Common Stock bears to the total number of shares
of Common Stock to be received upon redemption of the Warrants. The Company and
the Selling Stockholders have granted the International Underwriters a similar
option to purchase up to an aggregate of 225,000 additional shares of Common
Stock, which includes up to 32,779 shares of Common Stock subject to Warrants.
Certain holders of shares of Common Stock and Warrants, including the
Selling Stockholders, have agreed that, during the period beginning from the
date of this Prospectus and continuing to and including the date 180 days after
the date of the Prospectus, they will not offer, sell, contract to sell, grant
any option to sell, transfer or otherwise dispose of, directly or indirectly,
shares of Common Stock, securities substantially similar to the Common Stock, or
securities exchangeable for or convertible into shares of Common Stock or any
substantially similar security without the prior written consent of Goldman,
Sachs & Co., except for the shares of Common Stock and Warrants offered in
connection with the Offerings. The Company has agreed, with certain limited
exceptions, that, during the period beginning from the date of this Prospectus
and continuing to and including the date 180 days after the date of the
Prospectus, it will not offer, sell, contract to sell, grant any option to sell,
transfer or otherwise dispose of, directly or indirectly, or file a registration
statement relating to, shares of Common Stock, securities substantially similar
to the Common Stock, or securities exchangeable for or convertible into shares
of Common Stock or any substantially similar security (other than pursuant to
employee stock option plans existing, or upon the conversion or exchange of
convertible or exchangeable securities outstanding, on the date of this
Prospectus) without the prior written consent of Goldman, Sachs & Co., except
for the shares of Common Stock and Warrants offered in connection with the
Offerings.
At the Company's request, the Underwriters have reserved up to $5 million in
aggregate value of shares of Common Stock (the "Directed Shares") for sale at
the initial public offering price to employees of the Company who have advised
the Company of their desire to participate in its future growth. This represents
approximately 3 1/2% of the shares offered hereby. The number of shares of
Common Stock available for sale to the general public will be reduced to the
extent of sales of Directed Shares. Any Directed Shares not so purchased will be
offered by the Underwriters on the same basis as all other shares offered
hereby.
U-2
<PAGE>
Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price will be negotiated among the Company,
the Selling Stockholders and the representatives of the U.S. Underwriters and
the International Underwriters. Among the factors to be considered in
determining the initial public offering price of the Common Stock, in addition
to prevailing market conditions, will be the Company's historical performance,
estimates of the business potential and earnings prospects of the Company, an
assessment of the Company's management and the consideration of the above
factors in relation to market valuation of companies in related businesses.
The Company has been approved to list the Common Stock on the New York Stock
Exchange, subject to notice of issuance, under the symbol "SXC". In order to
meet one of the requirements for listing the Common Stock on the New York Stock
Exchange, the U.S. Underwriters have undertaken to sell lots of 100 or more
shares to a minimum of 2,000 beneficial holders.
During and after the Offerings, the Underwriters may purchase and sell the
Common Stock in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions
created in connection with the Offerings. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing or retarding a decline
in the market price of the Common Stock; and syndicate short positions involve
the sale by the Underwriters of a greater number of shares of Common Stock than
they are required to purchase from the Company and the Selling Stockholders
(including the shares received from the Company upon the redemption of the
Warrants purchased from the Selling Stockholders) in the Offerings. The
Underwriters also may impose a penalty bid, whereby selling concessions allowed
to syndicate members or other broker-dealers in respect of the Common Stock sold
in the Offerings for their account may be reclaimed by the syndicate if such
securities are repurchased by the syndicate in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise affect the
market price of the Common Stock which may be higher than the price that might
otherwise prevail in the open market. These transactions may be effected on the
New York Stock Exchange, in the over-the-counter market or otherwise, and these
activities, if commenced, may be discontinued at any time.
The Company, Essex and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act.
Affiliates of Goldman, Sachs & Co. (the GS Partnerships) own over 10% of the
outstanding shares of Common Stock (on a fully diluted basis). Affiliates of
Donaldson, Lufkin & Jenrette Securities Corporation also own over 10% of the
outstanding shares of Common Stock (assuming exercise of such affiliates'
Warrants but not the Warrants or options of any other stockholder). See
"Principal and Selling Stockholders". As a result, this offering will be made in
compliance with the applicable provisions of Conduct Rule 2720 of the National
Association of Securities Dealers, Inc. Accordingly, the initial public offering
price can be no higher than that recommended by a "qualified independent
underwriter" meeting certain standards. In accordance with this requirement,
Smith Barney Inc. is serving in such role and will recommend a price in
compliance with the requirements of Rule 2720. Smith Barney Inc., in its role as
qualified independent underwriter, has performed due diligence investigations
and reviewed and participated in the preparation of this Prospectus and the
Registration Statement of which this Prospectus forms a part. In addition, the
Underwriters may not confirm sales to any discretionary account without the
prior specific written approval of the customer.
Joseph H. Gleberman, a Managing Director of Goldman, Sachs & Co., currently
serves as a director of the Company. He will resign from the Board of Directors
effective prior to the consummation of the Offerings. See "Management--Directors
and Executive Officers".
This Prospectus may be used by underwriters and dealers in connection with
offers and sales of the Common Stock, including shares initially sold in the
International Offering, to persons located in the United States.
U-3
<PAGE>
- ----------------------------------------------
----------------------------------------------
- ----------------------------------------------
----------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary....................... 3
Risk Factors............................. 10
Use of Proceeds.......................... 15
Dividend Policy.......................... 15
Dilution................................. 16
Capitalization........................... 18
Selected Consolidated Financial and
Operating Data......................... 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 21
Business................................. 28
Management............................... 42
Principal and Selling Stockholders....... 51
Certain Relationships and Related Party
Transactions........................... 53
Description of Capital Stock............. 56
Description of Certain Indebtedness...... 58
Shares Eligible for Future Sale.......... 61
Certain United States Federal Tax
Consequences To Non-United States
Holders of Common Stock................ 64
Validity of Common Stock................. 67
Experts.................................. 67
Available Information.................... 67
Index to Financial Statements............ F-1
Underwriting............................. U-1
</TABLE>
------------------------
THROUGH AND INCLUDING , 1997 (THE 25TH DAY AFTER THE DATE OF
THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, 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.
7,500,000 SHARES
ESSEX
INTERNATIONAL
INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------------
[LOGO]
------------------------
GOLDMAN, SACHS & CO.
SMITH BARNEY INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LEHMAN BROTHERS
REPRESENTATIVES OF THE UNDERWRITERS
- ----------------------------------------------
----------------------------------------------
- ----------------------------------------------
----------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below is a table of the registration fee for the Securities and
Exchange Commission, the filing fee for the National Association of Securities
Dealers, Inc., the listing fee for the New York Stock Exchange and estimates of
all other expenses to be incurred in connection with the issuance and
distribution of the securities described in this Registration Statement, other
than underwriting discounts and commissions:
<TABLE>
<S> <C>
SEC registration fee............................................. $ 52,273
NASD filing fee.................................................. 17,750
NYSE listing fee................................................. *
Printing and engraving expenses.................................. *
Legal fees and expenses.......................................... *
Accounting fees and expenses..................................... *
Transfer agent and registrar fees................................ *
Miscellaneous.................................................... *
---------
Total............................................................ $
---------
---------
</TABLE>
- ------------------------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant is empowered by Section 145 of the General Corporation Law of
the State of Delaware (the "Delaware Corporation Law"), subject to the
procedures and limitations therein, to indemnify any person against expenses
(including attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with any
threatened, pending or completed action, suit or proceeding in which such person
is made a party by reason of such person being or having been a director,
officer, employee or agent of the Registrant. The statute provides that
indemnification pursuant to its provisions is not exclusive of other rights of
indemnification to which a person may be entitled under any By-law, agreement,
vote of stockholders or disinterested directors, or otherwise. The By-laws of
the Registrant provide for indemnification by the Registrant of its directors
and officers to the fullest extent permitted by the Delaware Corporation Law.
The foregoing statements are subject to the detailed provisions of the
Delaware Corporation Law, the Registrant's Amended and Restated Certificate of
Incorporation and the Registrant's By-laws.
Article X of the Registrant's By-laws allows the Registrant to maintain
director and officer liability insurance on behalf of any person who is or was a
director or officer of the Registrant or is or was serving, serves or served as
a director, partner, officer, agent or employee at another corporation,
partnership, joint venture, trust or other enterprise at the request of the
Registrant.
Pursuant to Section 102(b)(7) of the Delaware Corporation Law, Article X of
the Second Amended and Restated Certificate of Incorporation of the Registrant
provides that no director shall be personally liable to the Registrant or any of
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Registrant or its stockholders, (ii) for acts or omissions not in
good faith or that involve intentional misconduct or a knowing violation of law,
(iii) pursuant to Section 174 of the Delaware General Corporation Law or (iv)
for any transaction from which the director derived an improper personal
benefit.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On July 3, 1996, the Registrant issued an aggregate of 5,930,000 shares of
Common Stock to certain of its current stockholders and their affiliates
(including 1,362,298 shares of Common Stock to Bessemer Holdings, L.P., 400,000
shares of Common Stock to an affiliate of Goldman, Sachs & Co. and 230,000
shares of Common Stock to Chase Equity Associates, a California Limited
Partnership) at the price of $10.00 per share (after adjusting for a reverse
stock split). On December 27, 1996, in connection with this offering, the
Registrant issued an additional 437,708.5 shares of Common Stock to certain
management employees of the Registrant at the price of $10.00 per share (after
adjusting for a reverse stock split). The integrated offering, with an aggregate
offering price of $63,677,080, was made pursuant to Rule 506 of Regulation D of
the Securities Act, being an offering made by an issuer to no more than 35
purchasers (as defined) without any general solicitation and otherwise pursuant
to the requirements of Rule 506.
In January 1996, the Registrant granted to employees, in connection with
1995 performance, options to purchase up to 375,000 shares of Common Stock at an
exercise price of $5.72 per share. In October 1996, the Registrant granted to
employees options to purchase up to 87,500 shares of Common Stock at an exercise
price of $10.00 per share. In January 1997, the Registrant granted to employees,
in connection with 1996 performance and the 1996 private stock offering
described in the preceding paragraph, options to purchase up to 730,000 shares
of Common Stock at an exercise price of $10.00 per share.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
*1.1 --Form of U.S. Underwriting Agreement
*1.2 --Form of International Underwriting Agreement
2.1 --Agreement and Plan of Merger, dated as of July 24, 1992, between B E Acquisition Corporation and the
Registrant (then known as MS/Essex Holdings, Inc.), incorporated by reference to Exhibit 2.1 to the
Registrant's Current Report on Form 8-K, filed with the Securities and Exchange Commission (the
"Commission") on August 10, 1992 (Commission File No. 1-10211)
2.2 --Amendment dated as of October 1, 1992, to the Agreement and Plan of Merger between B E Acquisition
Corporation and the Registrant, incorporated by reference to Exhibit 2.2 to the Registrant's Current
Report on Form 8-K, filed with the Commission on October 26, 1992 (Commission File No. 1-10211)
2.3 --Stock Purchase Agreement, dated January 15, 1988, between the Registrant (then known as MS/Essex
Holdings Inc.) and United Technologies Corporation, incorporated by reference to Exhibit 2.02 to
Essex Group, Inc.'s Registration Statement on Form S-1, filed with the Commission on March 24, 1988
(Commission File No. 33-20825)
3.1 --Form of Second Amended and Restated Certificate of Incorporation of the Registrant
3.2 --Conformed Restated Certificate of Incorporation of the Registrant, incorporated by reference to
Exhibit 3.1 to the Registrant's Quarterly Report on Form 10-Q, filed with the Commission on November
13, 1996 (Commission File No. 1-10211)
3.3 --Form of By-laws of the Registrant
4.1 --Stock and Warrant Subscription Agreement dated as of October 9, 1992, among B E Acquisition
Corporation, certain affiliates of Donaldson, Lufkin & Jenrette, Inc., certain affiliates of Goldman,
Sachs & Co. and Chemical Equity Associates, A California Limited Partnership, incorporated by
reference to Exhibit 4.3 to the Registrant's Current Report on Form 8-K, filed with the Commission on
October 26, 1992 (Commission File No. 1-10211)
4.2 --Warrant Agreement dated as of October 9, 1992, among B E Acquisition Corporation, certain affiliates
of Donaldson, Lufkin & Jenrette, Inc. and certain affiliates of Goldman, Sachs & Co., incorporated by
reference to Exhibit 4.5 to the Registrant's Current Report on Form 8-K, filed with the Commission on
October 26, 1992 (Commission File No. 1-10211)
4.3 --Amendment No. 2 dated as of June 5, 1995 to the Stock and Warrant Subscription Agreement dated as of
October 9, 1992 among the Registrant, certain affiliates of Donaldson, Lufkin & Jenrette, Inc.,
certain affiliates of Goldman, Sachs & Co., and Chemical Equity Associates, A California Limited
Partnership incorporated by reference to Exhibit 4.04 of the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996, filed with the Commission on February 19, 1997
(Commission File No. 1-10211)
4.4 --Indenture dated as of May 7, 1993, among Essex Group, Inc. and NBD Bank, National
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
Association, as trustee under which the 10% Senior Notes Due 2003 are outstanding, incorporated by
reference to Exhibit 4.1 to the Essex Registration Statement on Pre-Effective Amendment No. 1 to Form
S-2 (Commission File No. 33-59488)
<C> <S>
4.5 --Amended and Restated Credit Agreement, dated as of October 31, 1996, among the Registrant, Essex
Group, Inc., the lenders named therein and The Chase Manhattan Bank, as administrative agent
4.6 --Credit Agreement dated as of October 31, 1996, among the Registrant, Essex Group, Inc., the lenders
named therein and The Chase Manhattan Bank, as administrative agent, incorporated by reference to
Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q, filed with the Commission on November
13, 1996 (Commission File No. 1-10211)
4.7 --Senior Unsecured Note Agreement dated as of April 12, 1995, among the Registrant, as guarantor, Essex
Group, Inc., the lenders named therein and The Chase Manhattan Bank, as administrative agent,
incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q, filed
with the Commission on May 12, 1995 (Commission File No. 1-10211)
4.8 --Agreement and Lease dated as of April 12, 1995, between Mellon Financial Services Corporation #3 and
Essex Group, Inc., incorporated by reference to Exhibit 10.3 to the Registrant's Quarterly Report on
Form 10-Q, filed with the Commission on May 12, 1995 (Commission File No. 1-10211)
*5 --Opinion of Cravath, Swaine & Moore
9.1 --Management Stockholders and Registration Rights Agreement dated as of October 9, 1992, among B E
Acquisition Corporation, Bessemer Capital Partners, L.P. and certain employees of the Registrant's
subsidiaries, incorporated by reference to Exhibit 28.3 to the registrant's Current Report on Form
8-K, filed with the Commission on October 26, 1992 (Commission File No. 1-10211)
9.2 --Form of Irrevocable Proxy dated as of October 9, 1992, granted to Bessemer Capital Partners, L.P. by
certain employees of the Registrant's subsidiaries, incorporated by reference to Exhibit 28.4 to the
Registrant's Current Report on Form 8-K, filed with the Commission on October 26, 1992 (Commission
File No. 1-10211)
9.3 --Form of Irrevocable Proxy dated December 1996, granted to Bessemer Holdings, L.P. by certain
employees of the Registrant's subsidiaries, incorporated by reference to Exhibit 9.06 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, filed with the
Commission on February 19, 1997 (Commission File No. 1-10211)
9.4 --Amendment No. 1 dated as of July 3, 1996, to the Management Stockholders Agreement, incorporated by
reference to Exhibit 9.04 to the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, filed with the Commission on February 19, 1997 (Commission File No. 1-10211)
9.5 --Amendment No. 2 dated as of December 11, 1996, to the Management Stockholders Agreement, incorporated
by reference to Exhibit 9.05 to the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, filed with the Commission on February 19, 1997 (Commission File No. 1-10211)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
9.6 --Termination, Amendment and Approval Agreement
10.1 --Engagement Letter dated July 22, 1992 between Bessemer Capital Partners, L.P. and Donaldson, Lufkin &
Jenrette Securities Corporation, incorporated by reference to Exhibit 10.10 to the Essex Annual
Report on Form 10-K for the fiscal year ended December 31, 1992 (Commission File No. 1-7418)
10.2 --Amendment dated October 9, 1992 among Bessemer Capital Partners, L.P., B E Acquisition Corporation,
Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co., to Engagement Letter
dated July 22, 1992 among Bessemer Capital Partners, L.P. and Donaldson, Lufkin & Jenrette Securities
Corporation, incorporated by reference to Exhibit 10.11 to the Essex Annual Report on Form 10-K for
the fiscal year ended December 31, 1992 (Commission file No. 1-74181)
10.3 --Advisory Services Agreement dated as of December 15, 1992, among Bessemer Capital Partners, L.P., the
Registrant and Essex Group, Inc. incorporated by reference to Exhibit 10.15 to the registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1992 (Commission File No. 1-10211)
10.4 --Form of Registration Rights Agreement between Bessemer Holdings, L.P. and the Registrant
10.5 --Form of Termination Benefits Agreement
10.6 --Registration Rights Agreement ("Registration Rights Agreement") dated as of October 9, 1992, among B
E Acquisition Corporation, certain affiliates of Donaldson, Lufkin & Jenrette, Inc., certain
affiliates of Goldman, Sachs & Co., and Chemical Equity Associates, A California Limited Partnership,
incorporated by reference to Exhibit 28.2 to the Registrant's Current Report on Form 8-K, filed with
the Commission on October 26, 1992 (Commission File No. 1-10211)
10.7 --Amendment No. 1 dated as of June 5, 1995, to the Registration Rights Agreement incorporated by
reference to Exhibit 99.02 of the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, filed with the Commission on February 19, 1997 (Commission File No. 1-10211)
10.8 --Amended and Restated Stock Option Plan ("Stock Option Plan") of the Registrant, incorporated by
reference to Exhibit 4.7 to the Registrant's Current Report on Form 8-K, filed with the Commission on
October 26, 1992 (Commission File No. 1-10211)
10.9 --Amendment No. 1 to the Stock Option Plan, incorporated by reference to Exhibit 99.04 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, filed with the
Commission on February 19, 1997 (Commission File No. 1-10211)
10.10 --Form of Amendment No. 2 to Stock Option Plan
11.1 --Pro forma earnings per share
**21.1 --Subsidiaries of the Registrant
23.1 --Consent of Ernst & Young LLP
*23.2 --Consent of Cravath, Swaine & Moore
**24. --Powers of Attorney (included in signature page of previous filing)
</TABLE>
II-5
<PAGE>
- ------------------------
* To be filed by amendment
** Previously filed
(b) Schedule(s):
Schedule I--Parent Company Only Condensed Financial Statements
Schedule II--Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing of the Offerings, certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Fort Wayne,
State of Indiana, on April 10, 1997.
<TABLE>
<S> <C> <C>
ESSEX INTERNATIONAL INC.
(Registrant)
By: /s/ DAVID A. OWEN
------------------------------------------
David A. Owen
EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL
OFFICER AND TREASURER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------- ------------------------------------- -----------------
<C> <S> <C>
* President, Chief Executive Officer April 10, 1997
- --------------------------------- and Director (Principal Executive
Steven R. Abbott Officer)
/s/ DAVID A. OWEN Executive Vice President, Chief April 10, 1997
- --------------------------------- Financial Officer and Treasurer
David A. Owen (Principal Financial and Accounting
Officer)
* Director April 10, 1997
- ---------------------------------
Rodney A. Cohen
Director
- ---------------------------------
Stuart S. Janney, III
* Director April 10, 1997
- ---------------------------------
Robert D. Lindsay
* Director April 10, 1997
- ---------------------------------
Joseph H. Gleberman
* Director April 10, 1997
- ---------------------------------
Ward W. Woods
*By: /S/ DAVID A. OWEN
- ---------------------------------
David A. Owen
Attorney-In-Fact
</TABLE>
II-7
<PAGE>
SCHEDULE I
BCP/ESSEX HOLDINGS INC.
PARENT COMPANY ONLY CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1996
----------- -----------
<S> <C> <C>
IN THOUSANDS OF DOLLARS
ASSETS
Cash and cash equivalents............................................................... $ 38 $ 1,530
Refundable income taxes................................................................. 3,062 1,211
Due from Essex Group, Inc. ............................................................. 384 5,153
Investment in Essex Group, Inc.......................................................... 114,678 151,066
----------- -----------
$ 118,162 $ 158,960
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued liabilities..................................................................... $ 239 $ 244
Redeemable preferred stock.............................................................. 48,820 --
Common stock subject to put............................................................. 4,803 12,626
Stockholders' equity:
Common stock ....................................................................... 168 228
Additional paid in capital ......................................................... 85,779 139,145
Carryover of Predecessor basis ..................................................... (15,259) (15,259)
Retained earnings (deficit)......................................................... (6,388) 21,976
----------- -----------
64,300 146,090
----------- -----------
$ 118,162 $ 158,960
----------- -----------
----------- -----------
</TABLE>
See Note to Condensed Financial Statements
S-1
<PAGE>
SCHEDULE I
(CONTINUED)
BCP/ESSEX HOLDINGS INC.
PARENT COMPANY ONLY CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1994 1995 1996
--------- -------------- ---------
<S> <C> <C> <C>
IN THOUSANDS OF DOLLARS
------------------------------------
Costs and Expenses:
Interest expense ....................................................... $ 36,165 $ 14,476 $ --
Other expense, net ..................................................... (280) 47 63
--------- -------------- ---------
Loss before income taxes, equity in earnings of subsidiary, and
extraordinary charge ................................................... (35,885) (14,523) (63)
Income tax benefit ....................................................... (13,200) (5,300) --
--------- -------------- ---------
Loss before equity in earnings of subsidiary and extraordinary charge..... (22,685) (9,223) (63)
Equity in earnings of Essex Group, Inc. before extraordinary charge ...... 30,171 22,494 37,571
--------- -------------- ---------
Income before extraordinary charge ....................................... 7,486 13,271 37,508
Equity in Essex Group, Inc. extraordinary charge-net of income tax
benefit................................................................. -- 2,971 1,183
--------- -------------- ---------
Net income ............................................................... $ 7,486 $ 10,300 $ 36,325
--------- -------------- ---------
--------- -------------- ---------
</TABLE>
See Note to Condensed Financial Statements
S-2
<PAGE>
SCHEDULE I
(CONTINUED)
BCP/ESSEX HOLDINGS INC.
PARENT COMPANY ONLY CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1994 1995 1996
---------- -------------- ------------
<S> <C> <C> <C>
IN THOUSANDS OF DOLLARS
OPERATING ACTIVITIES
Net income........................................................... $ 7,486 $ 10,300 $ 36,325
Adjustments to reconcile net income to cash provided by operating
activities:
Equity in earnings of Essex Group, Inc............................. (30,171) (19,523) (36,388)
Non cash interest expense.......................................... 36,183 14,476 --
Provision for deferred income taxes................................ 575 1,511 --
Loss on repurchase of debt......................................... 187 -- --
Changes in operating assets and liabilities:
Increase (decrease) in accounts payable and accrued liabilities.... 2,262 (3,708) 73
(Increase) decrease in amount due from Essex Group, Inc............ (14,616) 32,595 (4,769)
(Increase) decrease in other assets................................ 2,704 (1,555) 1,851
---------- -------------- ------------
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES............. 4,610 34,096 (2,908)
---------- -------------- ------------
FINANCING ACTIVITIES
Preferred stock redemption........................................... -- -- (59,277)
Common stock issuance................................................ -- -- 63,677
Dividend received from Essex Group, Inc.............................. -- 238,748 --
Proceeds from exercised stock options................................ 21 -- --
Repurchase of senior discount debentures............................. (4,745) (272,850) --
---------- -------------- ------------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES............. (4,724) (34,102) 4,400
---------- -------------- ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................... (114) (6) 1,492
Cash and cash equivalents at beginning of year....................... 158 44 38
---------- -------------- ------------
Cash and cash equivalents at end of year............................. $ 44 $ 38 $ 1,530
---------- -------------- ------------
---------- -------------- ------------
</TABLE>
See Note to Condensed Financial Statements
S-3
<PAGE>
SCHEDULE I
(CONTINUED)
BCP/ESSEX HOLDINGS INC.
PARENT COMPANY ONLY CONDENSED FINANCIAL STATEMENTS
NOTE TO CONDENSED FINANCIAL STATEMENTS
Detailed notes to consolidated financial statements of BCP/Essex Holdings
Inc. ("Holdings") are included beginning on page F-6.
Holdings is beneficially owned by Bessemer Holdings, L.P., members of
management, other current and former employees of Essex Group, Inc. ("Essex")
and certain other investors. Holdings is the holding company for Essex. The
principal asset of Holdings is all of the outstanding common stock of Essex. The
investment in Essex is accounted for using the equity method for this
presentation. All of such stock is pledged to the lenders of Essex under bank
financing agreements. Generally, Holdings has no source of income other than the
earnings, if any, of Essex.
Holdings and Essex file a consolidated U.S. federal income tax return. Under
a tax sharing agreement, Essex' aggregate income tax liability is calculated as
if it were to file a separate return with its subsidiaries.
S-4
<PAGE>
SCHEDULE II
BCP/ESSEX HOLDINGS INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1994 1995 1996
--------- -------------- ---------
<S> <C> <C> <C>
IN THOUSANDS OF DOLLARS
Allowance for doubtful accounts:
Balance at beginning of year .............................................. $ 2,811 $ 3,537 $ 3,930
Provision.................................................................. 1,332 676 1,782
Write-offs ................................................................ (900) (476) (738)
Recoveries ................................................................ 294 193 265
--------- ------- ---------
Balance at end of year .................................................... $ 3,537 $ 3,930 $ 5,239
--------- ------- ---------
--------- ------- ---------
</TABLE>
S-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ---------
<C> <S>
*1.1 --Form of U.S. Underwriting Agreement
*1.2 --Form of International Underwriting Agreement
2.1 --Agreement and Plan of Merger, dated as of July 24, 1992, between B E Acquisition Corporation and the
Registrant (then known as MS/Essex Holdings, Inc.), incorporated by reference to Exhibit 2.1 to the
Registrant's Current Report on Form 8-K, filed with the Securities and Exchange Commission (the
"Commission") on August 10, 1992 (Commission File No. 1-10211)
2.2 --Amendment dated as of October 1, 1992, to the Agreement and Plan of Merger between B E Acquisition
Corporation and the Registrant, incorporated by reference to Exhibit 2.2 to the Registrant's Current
Report on Form 8-K, filed with the Commission on October 26, 1992 (Commission File No. 1-10211)
2.3 --Stock Purchase Agreement, dated January 15, 1988 between the Registrant (then known as MS/Essex
Holdings Inc.) and United Technologies Corporation, incorporated by reference to Exhibit 2.02 to
Essex Group, Inc.'s Registration Statement on Form S-1, filed with the Commission on March 24, 1988
(Commission File No. 33-20825)
3.1 --Form of Second Amended and Restated Certificate of Incorporation of the Registrant
3.2 --Conformed Restated Certificate of Incorporation of the Registrant, incorporated by reference to
Exhibit 3.1 to the Registrant's Quarterly Report on Form 10-Q, filed with the Commission on November
13, 1996 (Commission File No. 1-10211)
3.3 --Form of By-laws of the Registrant
4.1 --Stock and Warrant Subscription Agreement dated as of October 9, 1992, among B E Acquisition
Corporation, certain affiliates of Donaldson, Lufkin & Jenrette, Inc., certain affiliates of Goldman,
Sachs & Co. and Chemical Equity Associates, A California Limited Partnership, incorporated by
reference to Exhibit 4.3 to the Registrant's Current Report on Form 8-K, filed with the Commission on
October 26, 1992 (Commission File No. 1-10211)
4.2 --Warrant Agreement dated as of October 9, 1992, among B E Acquisition Corporation, certain affiliates
of Donaldson, Lufkin & Jenrette, Inc. and certain affiliates of Goldman, Sachs & Co., incorporated by
reference to Exhibit 4.5 to the Registrant's Current Report on Form 8-K, filed with the Commission on
October 26, 1992 (Commission File No. 1-10211)
4.3 --Amendment No. 2 dated as of June 5, 1995 to the Stock and Warrant Subscription Agreement dated as of
October 9, 1992 among the Registrant, certain affiliates of Donaldson, Lufkin & Jenrette, Inc.,
certain affiliates of Goldman, Sachs & Co., and Chemical Equity Associates, A California Limited
Partnership incorporated by reference to Exhibit 4.04 of the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996, filed with the Commission on February 19, 1997
(Commission File No. 1-10211)
4.4 --Indenture dated as of May 7, 1993, among Essex Group, Inc. and NBD Bank, National Association, as
trustee under which the 10% Senior Notes Due 2003 are outstanding, incorporated by reference to
Exhibit 4.1 to the Essex Registration Statement on Pre-Effective Amendment No. 1 to Form S-2
(Commission File No. 33-59488)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ---------
<C> <S>
4.5 --Amended and Restated Credit Agreement, dated as of October 31, 1996, among the Registrant, Essex
Group, Inc., the lenders named therein and The Chase Manhattan Bank, as administrative agent
4.6 --Credit Agreement dated as of October 31, 1996, among the Registrant, Essex Group, Inc., the lenders
named therein and The Chase Manhattan Bank, as administrative agent, incorporated by reference to
Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q, filed with the Commission on November
13, 1996 (Commission File No. 1-10211)
4.7 --Senior Unsecured Note Agreement dated as of April 12, 1995, among the Registrant, as guarantor, Essex
Group, Inc., the lenders named therein and The Chase Manhattan Bank, as administrative agent,
incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q, filed
with the Commission on May 12, 1995 (Commission File No. 1-10211)
4.8 --Agreement and Lease dated as of April 12, 1995, between Mellon Financial Services Corporation #3 and
Essex Group, Inc., incorporated by reference to Exhibit 10.3 to the Registrant's Quarterly Report on
Form 10-Q, filed with the Commission on May 12, 1995 (Commission File No. 1-10211)
*5 --Opinion of Cravath, Swaine & Moore
9.1 --Management Stockholders and Registration Rights Agreement dated as of October 9, 1992, among B E
Acquisition Corporation, Bessemer Capital Partners, L.P. and certain employees of the Registrant's
subsidiaries, incorporated by reference to Exhibit 28.3 to the registrant's Current Report on Form
8-K, filed with the Commission on October 26, 1992 (Commission File No. 1-10211)
9.2 --Form of Irrevocable Proxy dated as of October 9, 1992, granted to Bessemer Capital Partners, L.P. by
certain employees of the Registrant's subsidiaries, incorporated by reference to Exhibit 28.4 to the
Registrant's Current Report on Form 8-K, filed with the Commission on October 26, 1992 (Commission
File No. 1-10211)
9.3 --Form of Irrevocable Proxy dated December 1996, granted to Bessemer Holdings, L.P. by certain
employees of the Registrant's subsidiaries, incorporated by reference to Exhibit 9.06 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, filed with the
Commission on February 19, 1997 (Commission File No. 1-10211)
9.4 --Amendment No. 1 dated as of July 3, 1996, to the Management Stockholders Agreement, incorporated by
reference to Exhibit 9.04 to the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, filed with the Commission on February 19, 1997 (Commission File No. 1-10211)
9.5 --Amendment No. 2 dated as of December 11, 1996, to the Management Stockholders Agreement, incorporated
by reference to Exhibit 9.05 to the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, filed with the Commission on February 19, 1997 (Commission File No. 1-10211)
9.6 --Termination, Amendment and Approval Agreement
10.1 --Engagement Letter dated July 22, 1992 between Bessemer Capital Partners, L.P. and Donaldson, Lufkin &
Jenrette Securities Corporation, incorporated by reference to Exhibit 10.10 to the Essex Annual
Report on Form 10-K for the fiscal year ended December 31, 1992 (Commission File No. 1-7418)
10.2 --Amendment dated October 9, 1992 among Bessemer Capital Partners, L.P., B E
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ---------
Acquisition Corporation, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs &
Co., to Engagement Letter dated July 22, 1992 among Bessemer Capital Partners, L.P. and Donaldson,
Lufkin & Jenrette Securities Corporation, incorporated by reference to Exhibit 10.11 to the Essex
Annual Report on Form 10-K for the fiscal year ended December 31, 1992 (Commission file No. 1-74181)
<C> <S>
10.3 --Advisory Services Agreement dated as of December 15, 1992, among Bessemer Capital Partners, L.P., the
Registrant and Essex Group, Inc. incorporated by reference to Exhibit 10.15 to the registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1992 (Commission File No. 1-10211)
10.4 --Form of Registration Rights Agreement between Bessemer Holdings, L.P. and the Registrant
10.5 --Form of Termination Benefits Agreement
10.6 --Registration Rights Agreement ("Registration Rights Agreement") dated as of October 9, 1992, among B
E Acquisition Corporation, certain affiliates of Donaldson, Lufkin & Jenrette, Inc., certain
affiliates of Goldman, Sachs & Co., and Chemical Equity Associates, A California Limited Partnership,
incorporated by reference to Exhibit 28.2 to the Registrant's Current Report on Form 8-K, filed with
the Commission on October 26, 1992 (Commission File No. 1-10211)
10.7 --Amendment No. 1 dated as of June 5, 1995, to the Registration Rights Agreement incorporated by
reference to Exhibit 99.02 of the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, filed with the Commission on February 19, 1997 (Commission File No. 1-10211)
10.8 --Amended and Restated Stock Option Plan ("Stock Option Plan") of the Registrant, incorporated by
reference to Exhibit 4.7 to the Registrant's Current Report on Form 8-K, filed with the Commission on
October 26, 1992 (Commission File No. 1-10211)
10.9 --Amendment No. 1 to the Stock Option Plan, incorporated by reference to Exhibit 99.04 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, filed with the
Commission on February 19, 1997 (Commission File No. 1-10211)
10.10 --Form of Amendment No. 2 to Stock Option Plan
11.1 --Pro forma earnings per share
**21.1 --Subsidiaries of the Registrant
23.1 --Consent of Ernst & Young LLP
*23.2 --Consent of Cravath, Swaine & Moore
**24. --Powers of Attorney (included in signature page of previous filing)
</TABLE>
- ------------------------
* To be filed by amendment
** Previously filed.
<PAGE>
Exhibit 3.1
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ESSEX INTERNATIONAL INC.
Essex International Inc. (the "Corporation"), a corporation organized
and existing under the laws of the State of Delaware, does hereby certify as
follows:
FIRST: The name of the Corporation is Essex International Inc. The
Corporation was originally incorporated under the name MS/Essex Group Inc., and
the original Certificate of Incorporation (the "Original Certificate") of the
Corporation was filed with the Secretary of State of the State of Delaware on
February 16, 1988. By Restated Certificate of Incorporation of the Corporation
(the "Restated Certificate") filed with the Secretary of State of the State of
Delaware on October 9, 1992, the name of the Corporation was changed to
BCP/Essex Holdings Inc. By Certificate of Amendment of Restated Certificate of
Incorporation (the "Certificate of Amendment") of the Corporation filed with the
Secretary of State of the State of Delaware on April 10, 1997, the name of the
Corporation was changed to Essex International Inc.
SECOND: Pursuant to Sections 242, 245 and 228 of the General
Corporation Law of the State of Delaware, this Second Amended and Restated
Certificate of Incorporation restates and integrates and further amends the
provisions of the Restated Certificate and the Certificate of Amendment.
THIRD: The Restated Certificate and the Certificate of Amendment are
hereby amended and restated to read in their entirety as follows:
ARTICLE I
NAME
The name of the corporation is ESSEX INTERNATIONAL INC. (the
"Corporation").
ARTICLE II
REGISTERED OFFICE AND AGENT
The street address of the registered office of the Corporation in the
State of Delaware is 1013 Centre Road, in the City of Wilmington, County of New
Castle, Delaware 19805.
<PAGE>
2
The name of the registered agent of the Corporation at that address is
Corporation Service Company.
ARTICLE III
MAILING ADDRESS
The mailing address of the Corporation is 1601 Wall Street, Fort
Wayne, IN 46802.
ARTICLE IV
DURATION
This Corporation shall exist perpetually.
ARTICLE V
PURPOSE
The purpose or purposes of the Corporation are:
(a) to conduct any lawful business, to exercise any lawful purpose and
power, and to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the State of
Delaware; and
(b) in general, to possess and exercise all the powers and privileges
granted by the General Corporation Law of the State of Delaware or any
other law of Delaware or by this Second Amended and Restated Certificate of
Incorporation together with any power incidental thereto, so far as such
powers and privileges are necessary or convenient to the conduct, promotion
or attainment of the business or purposes of the Corporation.
ARTICLE VI
CAPITAL STOCK
SECTION 6.01. AUTHORIZED CAPITAL STOCK. The maximum number of shares
of capital stock that the Corporation shall have authority to issue is One
Hundred Fifty-five Million (155,000,000) shares, consisting of Five Million
(5,000,000) shares of preferred stock, par value $0.01 per share (the "Preferred
Stock"), and One Hundred Fifty Million (150,000,000) shares of common stock, par
value $0.01 per share (the "Common Stock"). The number of
<PAGE>
3
authorized shares of any of the Preferred Stock or the Common Stock may be
increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority in voting
power of the stock of the Corporation entitled to vote thereon irrespective of
the provisions of Section 242(b)(2) of the General Corporation Law of the State
of Delaware (or any successor provision thereto), and no vote of the holders of
any of the Preferred Stock or the Common Stock voting separately as a class
shall be required therefor. Each share of Class A Common Stock and Class B
Common Stock established by the Restated Certificate shall be reclassified to a
share of Common Stock, effective as of the time (the "Effective Time") of
effectiveness of this Second Amended and Restated Certificate of Incorporation.
All references herein to the "Common Stock" shall refer to the Common Stock
being established hereby. Effective as of the Effective Time, every two shares
of Common Stock outstanding immediately prior to such time shall, without any
act on the part of the respective holders thereof, be reclassified into one
share of Common Stock.
SECTION 6.02. PREFERRED STOCK. The Board of Directors is hereby
expressly authorized, by resolution or resolutions, to provide, out of the
unissued shares of Preferred Stock, for series of Preferred Stock and, with
respect to each such series, to fix the number of shares constituting such
series and the designation of such series, the voting powers (if any) of the
shares of such series, and the preferences and relative, participating, optional
or other special rights, if any, and any qualifications, limitations or
restrictions thereof, of the shares of such series. The powers, preferences and
relative, participating, optional and other special rights of each series of
Preferred Stock, and the qualifications, limitations or restrictions thereof, if
any, may differ from those of any and all other series at any time outstanding.
SECTION 6.03. COMMON STOCK. (a) The Common Stock shall be subject
to the express terms of the Preferred Stock and any series thereof.
(b) Each share of Common Stock shall entitle the holder thereof to
one vote upon all matters upon which stockholders have the right to vote,
including the election of directors; PROVIDED, HOWEVER, that, except as
otherwise required by law, holders of Common Stock, as such, shall not be
entitled to vote on any amendment to this Second Amended and Restated
Certificate of Incorporation (including any Certificate of Designations relating
to any series of Preferred Stock) that relates solely to the terms of one or
more outstanding series of Preferred Stock if the holders of such affected
series are entitled, either separately or together with the holders of one or
more other such series,
<PAGE>
4
to vote thereon pursuant to this Second Amended and Restated Certificate of
Incorporation (including any Certificate of Designation relating to any series
of Preferred Stock) or pursuant to the General Corporation Law of the State of
Delaware.
(c) Subject to the preferential and other dividend rights applicable
to Preferred Stock and except as otherwise provided in this Second Amended and
Restated Certificate of Incorporation, holders of Common Stock shall be entitled
to such dividends and other distributions in cash, stock or property of the
Corporation as may be declared thereon by the Board of Directors from time to
time out of assets or funds of the Corporation legally available therefor. Any
dividend or distribution on Common Stock shall be payable on shares of Common
Stock on a pro rata basis.
(d) In the event of any voluntary or involuntary liquidation,
distribution or winding up of the Corporation, after distribution in full of any
preferential or other amounts to be distributed to the holders of shares of
Preferred Stock, the holders of shares of Common Stock shall be entitled to
receive all of the remaining assets of the Corporation available for
distribution to its stockholders, ratably in proportion to the number of shares
of Common Stock held by them.
ARTICLE VII
BOARD OF DIRECTORS
SECTION 7.01. NUMBER AND TERMS. The number of directors that shall
constitute the whole Board of Directors shall be determined in the manner
provided in the By-laws of the Corporation. The Board of Directors shall be
divided into three classes, designated Class A, Class B and Class C, which shall
be as nearly equal in number as possible. The initial directors of Class A
shall hold office for a term expiring at the first annual meeting following
effectiveness of this Article VII; the initial directors of Class B shall be
elected to hold office for a term expiring at the second annual meeting
following effectiveness of this Article VII and the initial directors of Class C
shall be elected to hold office for a term expiring at the third annual meeting
following effectiveness of this Article VII. Beginning with the first annual
meeting following effectiveness of this Article VII, directors shall be chosen
for a term of three years to succeed those whose terms then expire and shall
hold office until the third following annual meeting of stockholders and until
election of their respective successors.
<PAGE>
5
SECTION 7.02. VACANCIES. Any vacancy on the Board of Directors,
whether arising through death, resignation or removal of a director or through
an increase in the number of directors, shall be filled by a majority vote of
all remaining directors. The term of office of any director elected to fill
such a vacancy shall expire at the expiration of the term of office of directors
of the class in which the vacancy occurred.
SECTION 7.03. OTHER PROVISIONS. Notwithstanding any other provision
of this Article VII, and except as otherwise required by law, whenever the
holders of any one or more series of Preferred Stock or other securities of the
Corporation shall have the right, voting separately as a class, to elect one or
more directors of the Corporation, the term of office, the filling of vacancies
and other features of such directorships shall be governed by the terms of this
Second Amended and Restated Certificate of Incorporation applicable thereto, and
unless the terms of this Second Amended and Restated Certificate of
Incorporation expressly provide otherwise, such directorship shall be in
addition to the number of directors provided in the By-laws and such director
shall not be classified. Elections of directors need not be by written ballot
unless the By-laws of the Corporation shall so provide.
ARTICLE VIII
BY-LAWS
The power to adopt, alter, amend or repeal the By-laws of the
Corporation shall be vested in the Board of Directors. The stockholders of the
Corporation may adopt, amend or repeal the By-laws of the Corporation only by
the affirmative vote of holders of at least 66 2/3% of the combined voting power
of the then outstanding shares of stock of all classes and series of the
Corporation entitled to vote generally on matters requiring the approval of
stockholders (the "Voting Stock").
ARTICLE IX
STOCKHOLDER MEETINGS
Any action required or permitted to be taken by the stockholders of
the Corporation must be taken at a duly called and noticed meeting of
stockholders and may not be taken by consent in writing, unless such action
requiring or permitting stockholder approval is approved by a majority of the
directors then in office. An action required or permitted to be taken by the
stockholders which has been approved by a majority of the directors may be taken
by
<PAGE>
6
consent in writing if the consent is signed by the record holders of no less
than the Voting Stock that would otherwise be required for approval of such
action.
ARTICLE X
LIABILITY OF DIRECTORS
No director shall be personally liable to the Corporation or any of
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (a) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (b) for acts or omissions not in
good faith or that involve intentional misconduct or a knowing violation of law,
(c) pursuant to Section 174 of the General Corporation Law of the State of
Delaware or (d) for any transaction from which the director derived an improper
personal benefit. Any repeal or modification of this Article X by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification with respect to acts or omissions occurring prior to such repeal
or modification.
ARTICLE XI
INDEMNITY
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he or she is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts in connection with such action, suit or
proceeding, in accordance with the laws of the State of Delaware, and to the
full extent permitted by such laws except as the By-laws of the Corporation may
otherwise provide. Such indemnification shall not be deemed exclusive of any
other rights to which those seeking indemnification may be entitled under any
By-law, agreement, vote of stockholders or disinterested directors or otherwise,
including insurance purchased and maintained by the Corporation, both as to
action in his or her official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and
<PAGE>
7
administrators of such a person. Such indemnification shall include the
advancement of expenses.
ARTICLE XII
SECTION 203 OF THE DELAWARE
GENERAL CORPORATION LAW
The Corporation expressly elects not to be governed by Section 203 of
the General Corporation Law of the State of Delaware.
ARTICLE XIII
AMENDMENTS
The provisions set forth in Articles VI, VII, VIII, IX, X, XI and XII
and in this Article XIII may not be repealed, rescinded, altered or amended, and
no other provision may be adopted which is inconsistent therewith or impairs in
any way the operation or effect thereof, except by the affirmative vote of
holders of not less than 66 2/3% of the Voting Stock.
Consistent with the preceding sentence, the Corporation reserves the
right to adopt, repeal, rescind, alter or amend in any respect any provision
contained in this Second Amended and Restated Certificate of Incorporation as
prescribed by applicable law.
FOURTH: That the foregoing amendment has been duly adopted in
accordance with the provisions of Sections 242, 245 and 228 of the General
Corporation Law of the State of Delaware.
FIFTH: That the foregoing amendment shall become effective at
10:00 am, Dover time, on April , 1997.
IN WITNESS WHEREOF, the Corporation has caused this Second Amended and
Restated Certificate of Incorporation to be executed in its corporate name as of
this th day of April, 1997.
ESSEX INTERNATIONAL INC.,
by
------------------------
Name:
Title:
<PAGE>
Exhibit 3.3
As approved and adopted
by the Board of Directors
as of April __, 1997
AMENDED AND RESTATED BY-LAWS
OF
ESSEX INTERNATIONAL INC.
ARTICLE I
MEETINGS OF STOCKHOLDERS
SECTION 1.01. ANNUAL MEETING. Subject to the Delaware General Corporation
Law, the annual meeting of the stockholders of this Corporation for the election
of directors and for the transaction of any proper business shall be held at the
time and place designated by the Board of Directors (the "Board") of the
Corporation.
SECTION 1.02. SPECIAL MEETINGS. Special meetings of the stockholders
shall be held when called by the Chief Executive Officer or by a majority of the
Board of Directors. Special meetings may not be called by any other person.
Written notice of a special meeting pursuant to Section 1.04 shall be given to
all stockholders entitled to vote at such meeting not less than 10 nor more than
60 days before the date of the meeting. Each such special meeting shall be held
at such date and time as requested by the person or persons calling the meeting
within the limits fixed by law. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
SECTION 1.03. PLACE. Meetings of stockholders may be held in the State of
Delaware or outside the State of Delaware.
SECTION 1.04. NOTICE. Written notice stating the place, date and time of
the meeting and, in the case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered not less than 10 nor more than
60 days before the meeting, either personally or by first class mail, by or at
the direction of the President, the Secretary, or the officer or persons calling
the meeting to each stockholder of record entitled to vote at such meeting. If
mailed, such notice shall be effective when deposited in the United States mail
addressed to the stockholder at his address as it appears on the Corporation's
current record of stockholders.
SECTION 1.05. NOTICE OF ADJOURNED MEETINGS. When a meeting is adjourned
to another time or place, it shall not be necessary to give any notice of the
adjourned meeting if the time and place to which the meeting is adjourned are
announced at the meeting at which the adjournment is taken,
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2
and at the adjourned meeting any business may be transacted that might have been
transacted on the original date of the meeting. If, however, the adjournment is
for more than 30 days, or if, after the adjournment, the Board of Directors
fixes a new record date for the adjourned meeting, a notice of the adjourned
meeting shall be given as provided in Section 4 herein to each stockholder of
record on the new record date entitled to vote at such meeting.
SECTION 1.06. NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS. Except as
may otherwise be provided herein, or in the Second Amended and Restated
Certificate of Incorporation in connection with rights to elect directors under
specified circumstances which may be granted to the holders of any series of
Preferred Stock, nominations for the election of directors and the proposal of
business to be considered by the stockholders may be made by the Board or any
stockholder of record entitled to vote at the meeting and who complies with the
notice procedures set forth in this By-law.
For nominations or other business to be properly brought before an annual
meeting by a stockholder, the stockholder must have given timely notice thereof
in writing to the Secretary of the Corporation and such other business must
otherwise be a proper matter for stockholder action. Except as otherwise
provided by applicable law, to be timely, a stockholder's notice must be
delivered to the Secretary of the Corporation at the Corporation's principal
executive offices not later than the close of business on the 60th day, nor
earlier than the close of business on the 90th day, prior to the first
anniversary of the preceding year's annual meeting; PROVIDED, HOWEVER, that in
the event that the date of the annual meeting is more than 30 days before or
60 days after such anniversary date, notice by the stockholder must be so
delivered not earlier than the close of business on the later of the 60th day
prior to such meeting or the l0th day following the day on which public
announcement of the date of such meeting is made by the Corporation. In no
event shall public announcement of an adjournment of an annual meeting commence
a new time period for giving of a stockholder's notice as described above.
Such stockholder's notice shall set forth: (a) as to each person whom the
stockholder proposes to nominate for election to the Board of Directors, all
information relating to such person required to be disclosed in solicitation of
proxies for election of directors pursuant to Regulation 14A under the
Securities Exchange Act of 1934 (including such person's written consent to
being named in the proxy statements as a nominee and to serving as a director
if
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3
elected); (b) as to any other business that the stockholder proposes to bring
before the meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the meeting and
any material interest in such business of such stockholder and the beneficial
owner, if any, on whose behalf the nomination or proposal is made; and (c) as to
the stockholder giving notice and the beneficial owner, if any, on whose behalf
the nomination or proposal is made (i) the name and address of such stockholder,
as they appear on the Corporation's books, and of such beneficial owner and
(ii) the class and number of shares of the Corporation which are owned
beneficially and of record by such stockholder and beneficial owner. Notice of
nominations which are proposed by the Board shall be given by the Chairman, the
President or the Secretary of the Corporation on behalf of the Board.
The chairperson of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he or she should so determine, he or she shall so
declare to the meeting and the defective nomination shall be disregarded.
SECTION 1.07. FIXING RECORD DATE. For the purpose of determining
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any distribution, or
in order to make a determination of stockholders for any other purpose, the
Board of Directors may fix in advance a date as the record date for any
determination of stockholders, such date in any case to be not more than 60 days
and, in case of a meeting of stockholders, not less than 10 days prior to the
date on which the particular action requiring such determination of stockholders
is to be taken.
If the stock transfer books are not closed and no record date is fixed for
the determination of stockholders entitled to notice or to vote at an annual or
special meeting of stockholders, or stockholders entitled to receive payment of
a distribution, the date on which notice of the meeting is mailed or the date on
which the resolution of the Board of Directors declaring such distribution is
adopted, as the case may be, shall be the record date for such determination of
stockholders.
When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this section, such determination shall
apply to any adjournment thereof, unless the Board of Directors fixes a new
record date for the adjourned meeting. A new record date
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4
must be fixed if the meeting is adjourned to a date more than 120 days after the
date fixed for the original meeting.
SECTION 1.08. VOTING RECORD. The officers or agent having charge of the
stock transfer books for shares of the Corporation shall make, at least 10 days
before each meeting of stockholders, a complete alphabetical list of the
stockholders entitled to vote at such meeting or any adjournment thereof,
arranged by voting group with the address of and the number and class and
series, if any, of shares held by each. The list, for a period of 10 days prior
to such meeting, shall be available for inspection at the principal office of
the Corporation, or at the office of the transfer agent or registrar of the
Corporation or at a place identified in the meeting notice in the city where the
meeting will be held. Upon written demand to the Corporation, any stockholder
or his agent or attorney shall be entitled to inspect the list at any time
during usual business hours. The 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 or his agent or attorney at any time during the meeting.
If the requirements of this section have not been substantially complied
with, the meeting, on demand of any stockholder in person or by proxy, shall be
adjourned until the requirements are complied with. If no such demand is made,
failure to comply with the requirements of this section shall not affect the
validity of any action taken at such meeting.
SECTION 1.09. STOCKHOLDER QUORUM AND VOTING. A majority of all then
outstanding shares of voting stock entitled to vote, represented in person or by
proxy, shall constitute a quorum at a meeting of stockholders. When a specified
item of business is required to be voted on by a class or series of stock, a
majority of the shares of such class or series shall constitute a quorum for the
transaction of such item of business by that class or series.
If a quorum is present, the affirmative vote of the majority of the shares
represented at the meeting and entitled to vote on the subject matter shall be
the act of the stockholders unless otherwise provided by law or by the Second
Amended and Restated Certificate of Incorporation.
After a quorum has been established at a stockholders' meeting, the
subsequent withdrawal of stockholders, so as to reduce the number of
stockholders entitled to vote at the
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5
meeting below the number required for a quorum, shall not affect the validity of
any action taken at the meeting or any adjournment thereof.
SECTION 1.10. VOTING OF SHARES. Shares of stock of this Corporation owned
directly or indirectly by another corporation the majority of the voting stock
of which is owned, directly or indirectly, by this Corporation are not entitled
to vote, and shall not be counted in determining the total number of outstanding
shares at any given time.
A stockholder or the stockholder's attorney-in-fact may vote either in
person or by proxy executed in writing by the stockholder or his duly authorized
attorney-in-fact.
At each election for directors every stockholder entitled to vote at such
election shall have the right to vote, in person or by proxy, the number of
votes represented by the shares owned by him for as many persons as there are
directors to be elected at that time and for whose election he has a right to
vote.
Shares standing in the name of another corporation, domestic or foreign,
may be voted by the officer, agent, or proxy designated by the By-laws of the
corporate stockholder; or, in the absence of any applicable By-law, by such
person as the board of directors of the corporate stockholder may designate.
Proof of such designation may be made by presentation of a certified copy of the
By-laws or other instrument of the corporate stockholder. In the absence of any
such designation, or in case of conflicting designation by the corporate
stockholder, the chairman of the board, president, any vice president, secretary
and treasurer of the corporate stockholder shall be presumed to possess, in that
order, authority to vote such shares.
Shares held by an administrator, executor, guardian, personal
representative, or conservator may be voted by him, either in person or by
proxy, without a transfer of such shares into his name. Shares standing in the
name of a trustee may be voted by him, either in person or by proxy, but no
trustee shall be entitled to vote shares held by him without a transfer of such
shares into his name or the name of his nominee.
Shares held by or under the control of a receiver, trustee in bankruptcy
proceedings or an assignee for the benefit of creditors, may be voted by such
receiver, trustee or assignee, without the transfer thereof into the name of
such receiver, trustee or assignee.
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6
A stockholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee or his nominee shall be entitled to vote the shares so
transferred.
On and after the date on which written notice of redemption of redeemable
shares has been mailed to the holders thereof and a sum sufficient to redeem
such shares has been deposited with a bank, trust company or other financial
institution, with irrevocable instruction and authority to pay the redemption
price to the holders thereof upon surrender of certificates therefor, such
shares shall not be entitled to vote on any matter and shall not be deemed to be
outstanding shares.
SECTION 1.11. WRITTEN CONSENT OF STOCKHOLDERS. Any action required or
permitted to be taken by the stockholders of the Corporation must be effected at
a duly called annual or special meeting of the stockholders, unless such action
is approved by a majority of the Board of Directors. In the event of such
approval, such action may be taken without a meeting, without prior notice and
without a vote if a consent in writing, setting forth the action so taken, shall
be signed by the holders of outstanding shares having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting of stockholders at which all shares entitled to vote thereon were
present and voted, provided that all requirements of law and the Second Amended
and Restated Certificate of Incorporation have been satisfied. To be effective,
the executed written consent of the stockholders must be delivered to the
Corporation within 60 days of the date the earliest written consent is received
by the Corporation. If any class of shares is entitled to vote thereon as a
class, such written consent shall be required of the holders of a majority of
the shares of each class of shares entitled to vote thereon.
SECTION 1.12. WAIVER OF NOTICE OF MEETINGS OF STOCKHOLDERS. Notice of a
meeting of the stockholders need not be given to any stockholder who signs a
Waiver of Notice either before or after the meeting. Attendance of a
stockholder at a meeting shall constitute a waiver of notice of such meeting and
waiver of any and all objections to the place of the meeting, the time of the
meeting, the manner in which it has been called or convened, or the matters
considered at a meeting except when a stockholder states, at the beginning of
the meeting, any objection to the transaction of business because the meeting is
not lawfully called or convened, or except when a stockholder objects to
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7
considering a particular matter that is not within the purposes described in the
meeting notice.
Neither the business to be transacted at, nor the purpose of, any regular
or special meeting of the stockholders need be specified in any written Waiver
of Notice of such meeting.
ARTICLE II
DIRECTORS
SECTION 2.01. FUNCTION. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the Corporation shall be
managed under the direction of, the Board of Directors.
SECTION 2.02. QUALIFICATION. Directors must be natural persons who are
18 years of age or older, but need not be residents of this state or
stockholders of this Corporation.
SECTION 2.03. COMPENSATION. The Board of Directors shall have authority
to fix the compensation of directors.
SECTION 2.04. DUTIES OF DIRECTORS. A director shall perform his duties as
a director, including his duties as a member of any committee of the board upon
which he may serve, in good faith, in a manner he reasonably believes to be in
the best interests of the Corporation, and with such care as an ordinarily
prudent person in a like position would use under similar circumstances.
In performing his duties, a director shall be entitled to rely on
information, opinions, reports or statements, including financial statements and
other financial data, in each case prepared or presented by:
(a) one or more officers or employees of the Corporation whom the director
reasonably believes to be reliable and competent in the matters presented;
(b) counsel, public accountants or other persons as to matters which the
director reasonably believes to be within such person's professional or expert
competence; or
(c) a committee of the Board upon which he does not serve, duly designated
in accordance with a provision of the Second Amended and Restated Certificate of
Incorporation or the By-laws, as to matters within its designated authority,
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8
which committee the director reasonably believes to merit confidence.
A director shall not be considered to be acting in good faith if he has
knowledge concerning the matter in question that would cause such reliance
described above to be unwarranted.
In discharging his duties, a director may consider such factors as the
director deems relevant, including the long-term prospects and interests of the
Corporation and its stockholders, and the social, economic, legal, or other
effects of any action on the employees, suppliers, customers of the Corporation
or its subsidiaries, the communities and society in which the Corporation or its
subsidiaries operate, and the economy of the state and the nation.
A person who performs his duties in compliance with this section shall have
no liability by reason of being or having been a director of the Corporation.
SECTION 2.05. PRESUMPTION OF ASSENT. A director of the Corporation who is
present at a meeting of its Board of Directors or a committee of the Board of
Directors at which action on any corporate matter is taken shall be presumed to
have assented to the action taken unless (a) he objects at the beginning of the
meeting (or promptly upon his arrival) to holding it or transacting specified
business at the meeting; or (b) he votes against such action or abstains from
voting in respect thereto.
SECTION 2.06. NUMBER. Except as may otherwise be provided pursuant to the
Second Amended and Restated Certificate of Incorporation in connection with
rights to elect directors which may be granted to the holders of any series of
Preferred Stock, the number of directors that shall constitute the whole Board
shall be fixed from time to time exclusively pursuant to a resolution adopted by
a majority of the Board of Directors. The directors, other than those who may
be elected by the holders of any shares of Preferred Stock under specified
circumstances, shall be divided, with respect to the time for which they
severally hold office, into three classes, as nearly equal in number as is
reasonably possible, with the term of office of the first class to expire at the
first annual meeting of stockholders following effectiveness of these By-laws,
the term of office of the second class to expire at the second annual meeting of
stockholders following effectiveness of these By-laws and the term of office of
the third class to expire at the third annual meeting of stockholders following
effectiveness of these By-laws, with each director to hold
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9
office until his successor has been duly elected and qualified. At each annual
meeting of stockholders, commencing with the first annual meeting following
effectiveness of these By-laws, (i) directors elected to succeed those directors
whose terms shall expire shall be elected for a term of office of three years,
to expire at the third succeeding annual meeting of stockholders after their
election, each director to hold office until his successor shall have been duly
elected and qualified, and (ii) if authorized by a resolution of the Board of
Directors, directors may be elected to fill any vacancy on the Board of
Directors, regardless of how such vacancy shall have been created.
SECTION 2.07. ELECTION OF DIRECTORS. Except as may otherwise be provided
pursuant to the Second Amended and Restated Certificate of Incorporation in
connection with the rights to elect directors under specified circumstances
which may be granted to the holders of any series of Preferred Stock, and except
as otherwise provided pursuant to Section 2.08, directors shall be elected by
stockholders of the Corporation. Except as otherwise provided by applicable
law, at each election the persons receiving the greatest number of votes, up to
the number of directors then to be elected, shall be the persons then elected.
Each director shall serve until his successor is elected and qualified or until
his death, resignation or removal. The election of directors is subject to any
provisions relating thereto contained in the Second Amended and Restated
Certificate of Incorporation.
SECTION 2.08. VACANCIES. Except as may otherwise be provided pursuant the
Second Amended and Restated Certificate of Incorporation in connection with
rights to elect additional directors under specified circumstances which may be
granted to the holders of any series of Preferred Stock, newly created
directorships resulting from any increase in the number of directors, or any
vacancies on the Board of Directors resulting from death, resignation, removal
or other causes, shall be filled solely by the affirmative vote of a majority of
the remaining directors then in office, even though less than a quorum of the
Board of Directors. Any director elected in accordance with the preceding
sentence shall hold office until such director's successor shall have been
elected and qualified or until such director's death, resignation or removal,
whichever first occurs. No decrease in the number of directors constituting the
Board shall shorten the term of any incumbent director.
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10
SECTION 2.09. RESIGNATION OF DIRECTORS. Any director of the Corporation
may resign at any time by giving written notice to the Chairman of the Board or
to the Secretary of the Corporation. The resignation of any director shall take
effect at the time specified therein; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
SECTION 2.10. REMOVAL OF DIRECTORS. Subject to the right to elect
directors under specified circumstances which may be granted pursuant to the
Second Amended and Restated Certificate of Incorporation to the holders of any
series of Preferred Stock and unless otherwise provided by law, any director may
be removed from office without cause only by the affirmative vote of the holders
of at least 66 2/3% of the voting power of the then outstanding shares of voting
stock, voting together as a single class.
SECTION 2.11. QUORUM AND VOTING. A majority of the number of directors
fixed by these By-laws or by resolution of the Board of Directors shall
constitute a quorum for the transaction of business. The act of the majority of
the directors present at a meeting at which a quorum is present shall be the act
of the Board of Directors.
SECTION 2.12. DIRECTOR CONFLICTS OF INTEREST. No contract or other
transaction between this Corporation and one or more of its directors or any
other corporation, firm, association or entity in which one or more of the
directors are directors or officers or are financially interested, shall be
either void or voidable because of such relationship or interest or because such
director or directors are present at the meeting of the Board of Directors or a
committee thereof which authorizes, approves or ratifies such contract or
transaction or because his or their votes are counted for such purpose, if:
(a) the fact of such relationship or interest is disclosed or known to the
Board of Directors or committee which authorizes, approves or ratifies the
contract or transaction by a vote or consent sufficient for the purpose without
counting the votes or consents of such interested directors; or
(b) the fact of such relationship or interest is disclosed or known to the
stockholders entitled to vote and they authorize, approve or ratify such
contract or transaction by vote or written consent; or
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11
(c) the contract or transaction is fair and reasonable as to the
Corporation at the time it is authorized by the Board, a committee or the
stockholders.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors of a committee thereof which
authorizes, approves or ratifies such contract or transaction.
SECTION 2.13. EXECUTIVE AND OTHER COMMITTEES. The Board of Directors may,
by resolution adopted by a majority of the full Board of Directors, designate
from among its members an executive committee and one or more other committees
each of which, to the extent provided in such resolution, shall have and may
exercise all the powers and authority of the Board of Directors, except that no
committee shall have the authority to:
(a) approve, adopt or recommend to stockholders, any action or matter
expressly required by the General Corporation Law of the State of Delaware to be
submitted to stockholders for approval; or
(b) adopt, amend or repeal any By-law of the Corporation.
The Board of Directors, by resolution adopted in accordance with this
section, may designate one or more directors as alternate members of any such
committee, who may act in the place and stead of any absent or disqualified
member or members at any meeting of such committee. In the absence or
disqualification of a member of a committee, the member or members present at
any meeting and not disqualified from voting, whether or not such member or
members constitute a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in the place of any such absent or
disqualified member.
SECTION 2.14. CHANGES IN COMMITTEES: RESIGNATIONS, REMOVALS AND VACANCIES.
The Board of Directors shall have power at any time to change or remove the
members of, to fill vacancies in, and to discharge any committee created
pursuant to these By-laws, either with or without cause. Any member of any such
committee may resign at any time by giving written notice to the Board or the
Chairman of the Board or the Secretary. Such resignation shall take effect upon
receipt of such notice or at any later time specified therein; and, unless
otherwise specified therein, acceptance of such resignation shall not be
necessary to make it effective. Any vacancy in any committee, whether arising
from death, resignation, an increase in the number of
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12
committee members or any other cause, shall be filled by the Board of Directors
in the manner prescribed in these By-laws for the original appointment of the
members of such committee.
SECTION 2.15. PLACE OF MEETINGS. Regular and special meetings by the
Board of Directors may be held within or without the State of Delaware.
SECTION 2.16. TIME, NOTICE AND CALL OF MEETINGS. Regular meetings of the
Board of Directors shall be held at times and places specified by the Board of
Directors without notice of the date, time, place or purpose of the meeting.
Written notice of the date, time and place of special meetings of the Board of
Directors shall be given to each director at least 2 days before the meeting.
The notice need not describe the purpose of the special meeting. In addition to
any other regular meetings, a regular meeting of the Board of Directors shall be
held, without other notice than this By-law, immediately after and at the same
place as the annual meeting of stockholders.
Notice of a meeting of the Board of Directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting and waiver of any and all objections to the place of the meeting,
the time of the meeting, or the manner in which it has been called or convened,
except when a director states, at the beginning of the meeting, any objection to
the transaction of business because the meeting is not lawfully called or
convened.
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.
A majority of the directors present, whether or not a quorum exists, may
adjourn any meeting of the Board of Directors to another time and place. Notice
of any such adjourned meeting shall be given to the directors who were not
present at the time of the adjournment and, unless the time and place of the
adjourned meeting are announced at the time of the adjournment, to the other
directors.
Meetings of the Board of Directors may be called by the Chairman of the
Board, by the President of the Corporation, or by any two directors.
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Members of the Board of Directors may participate in a meeting of such
board by means of a conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other at
the same time. Participation by such means shall constitute presence in person
at a meeting.
SECTION 2.17. ACTION WITHOUT A MEETING. Any action required to be taken
at a meeting of the directors of the Corporation, or any action which may be
taken at a meeting of the directors or a committee thereof, may be taken
without a meeting if a consent in writing, setting forth the action to be
taken, signed by all of the directors, or all the members of the committee, as
the case may be, is filed in the minutes of the proceedings of the Board or of
the committee. Such consent shall have the same effect as a unanimous vote and
may be described as such in any document.
ARTICLE III
OFFICERS
SECTION 3.01. OFFICERS. The officers of this Corporation shall consist of
a President, a Chairman of the Board, a Secretary and a Treasurer, each of whom
shall be elected by the Board of Directors, and shall serve until their
successors are chosen and qualify. The Corporation may also have one or more
Vice Presidents, and one or more Assistant Secretaries, each of whom shall be
elected by the Board of Directors. Such other officers and assistant officers
and agents as may be deemed necessary may be elected or appointed by the Board
of Directors from time to time.
Any two or more offices may be held by the same person. The failure to
elect a President, Chairman of the Board, Secretary or Treasurer shall not
affect the existence of this Corporation.
SECTION 3.02. DUTIES. The following officers of this Corporation shall
have the following duties:
The President shall be the chief executive officer of the Corporation,
shall have general and active management of the business and affairs of the
Corporation subject to the directions of the Board of Directors, and shall
preside at all meetings of the stockholders and, unless a Chairman of the Board
of Directors has been elected and is present, shall preside at all meetings of
the Board of Directors.
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The Chairman of the Board of Directors shall preside at all meetings of the
Board of Directors.
The Secretary shall have custody of, and maintain, all the corporate
records except the financial records, shall have the authority to execute any
and all documents in connection with intellectual property matters, including,
but not limited to, Powers of Attorney, Appointment of Resident Agent forms and
any other documents which are required in connection with the intellectual
property matters of the Corporation, shall prepare the minutes of all meetings
of the stockholders and Board of Directors, shall authenticate records of the
Corporation; shall send all notices of meetings out, and shall perform such
other duties as may be prescribed by the Board of Directors or the President.
The Treasurer shall have custody of all corporate funds and financial
records, shall keep full and accurate accounts of receipts and disbursements and
render accounts thereof at the annual meetings of stockholders and whenever else
required by the Board of Directors or the President, and shall perform such
other duties as may be prescribed by the Board of Directors or the President.
SECTION 3.03. REMOVAL OF OFFICERS. Any officer or agent elected or
appointed by the Board of Directors may be removed by the Board at any time with
or without cause.
Removal of any officer shall be without prejudice to the contract rights,
if any, of the person so removed; however, election or appointment of an officer
or agent shall not of itself create contract rights.
SECTION 3.04. RESIGNATION OF OFFICERS. An officer may resign at any time
by delivering notice to the Corporation. A resignation is effective when the
notice is delivered unless the notice specifies a later effective date. If a
resignation is made effective at a later date and the Corporation accepts the
future effective date, the Board of Directors may fill the pending vacancy
before the effective date if the Board of Directors provides that the successor
does not take office until the effective date.
ARTICLE IV
STOCK CERTIFICATES
SECTION 4.01. ISSUANCE. Every holder of shares in this Corporation shall
be entitled to have a certificate,
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representing all shares to which he is entitled. The Board of Directors may
authorize shares to be issued for consideration consisting of any tangible or
intangible property or benefit to the Corporation, including cash, promissory
notes, services performed, promises to perform services evidenced by a written
contract, or other securities of the Corporation.
Before the Corporation issues shares, the Board of Directors must determine
that the consideration received for shares to be issued is adequate. The
determination by the Board of Directors is conclusive insofar as the adequacy of
consideration for the issuance of shares relates to whether the shares are
validly issued, fully paid and nonassessable. When it cannot be determined that
outstanding shares are fully paid and nonassessable, there shall be a conclusive
presumption that such shares are fully paid and nonassessable if the Board of
Directors makes a good faith determination that there is no substantial evidence
that the full consideration for such shares has not been paid.
When the Corporation receives the consideration for which the Board of
Directors authorized the issuance of shares, the shares issued therefor are
fully paid and nonassessable. Consideration in the form of a promise to pay
money or a promise to perform services is received by the Corporation at the
time of the making of the promise, unless the agreement specifically provides
otherwise.
SECTION 4.02. FORM. Certificates representing shares in this Corporation
shall be signed by the President or any Vice President and the Secretary or any
Assistant Secretary and may be sealed with the seal of this Corporation or a
facsimile thereof. The signatures of the President or any Vice President and
the Secretary or any Assistant Secretary may be facsimiles if the certificate is
manually signed on behalf of a transfer agent or a registrar, other than the
Corporation itself or an employee of the Corporation. In case any officer who
signed or whose facsimile signature has been placed upon such certificate shall
have ceased to be such officer before such certificate is issued, it may be
issued by the Corporation with the same effect as if he were such officer at the
date of its issuance.
Each certificate representing shares shall state upon the face thereof:
the name of the Corporation; that the Corporation is organized under the laws of
the State of Delaware; the name of the person or persons to whom issued; the
number and class of shares; and the designation of the series, if any, which
such certificate represents.
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SECTION 4.03. TRANSFER OF STOCK. Transfer of shares of the Corporation
shall be made only on the stock transfer books of the Corporation by the holder
of record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary of the Corporation,
and on surrender for cancellation of the certificate of such shares. The person
in whose name shares stand on the books of the Corporation shall be deemed by
the Corporation to be the owner thereof for all purposes.
SECTION 4.04. LOST, STOLEN, OR DESTROYED CERTIFICATES. The Corporation
shall issue a new stock certificate in the place of any certificate previously
issued if the holder of record of the certificate (a) makes proof in affidavit
form that it has been lost, destroyed or wrongfully taken; (b) requests the
issue of a new certificate before the Corporation has notice that the
certificate has been acquired by a purchaser for value in good faith and without
notice of any adverse claim; (c) gives bond in such form as the Corporation may
direct to indemnify the Corporation, the transfer agent and registrar against
any claim that may be made on account of the alleged loss, destruction or theft
of a certificate; and (d) satisfies any other reasonable requirements imposed by
the Corporation.
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 5.01. CONTRACTS. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
SECTION 5.02. LOANS. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
SECTION 5.03. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by such officer or officers, agent or
agents, of the Corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
<PAGE>
17
SECTION 5.04. DEPOSITS. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board of Directors
may select.
ARTICLE VI
BOOKS AND RECORDS
SECTION 6.01. BOOKS AND RECORDS. The Corporation shall keep as permanent
records, in accordance with applicable law, minutes of all meetings of its
stockholders and Board of Directors, a record of all actions taken by the
stockholders or Board of Directors without a meeting, a record of all actions
taken by a committee of the Board of Directors in place of the Board of
Directors on behalf of the Corporation, and such books or records and accounts
as may be necessary for the proper conduct of the business of the Corporation.
SECTION 6.02. INSPECTION OF BOOKS AND RECORDS. The Board of Directors
and, unless otherwise specified by the Board, the Chairman of the Board and the
President shall, subject to applicable law, have the sole power to determine
from time to time whether and to what extent and at what times and places and
under what conditions and regulations the accounts, books and records of the
Corporation, or any of them, shall be open to the inspection of the
stockholders; and, except as specifically conferred by law, no stockholder shall
have any right to inspect any account, book, record or document of the
Corporation, unless and until authorized to do so by the Board or, unless
otherwise specified by the Board, by order of the Chairman of the Board or by
the President.
ARTICLE VII
DISTRIBUTIONS, SHARE DIVIDENDS AND SHARE OPTIONS
SECTION 7.01. DISTRIBUTIONS. The Board of Directors of this Corporation
may, from time to time, authorize and the Corporation may pay distributions to
the stockholders. A distribution is a direct or indirect transfer of money or
other property (except the Corporation's own shares) or incurrence of
indebtedness by the Corporation to or for the benefit of the stockholders in
respect of any of its shares. A distribution may be in the form of a
declaration or payment of a dividend; a purchase, redemption, or other
<PAGE>
18
acquisition of shares; a distribution of indebtedness; or otherwise.
No distribution may be made if, after giving it effect:
(a) the Corporation would not be able to pay its debts as they become due
in the usual course of business; or
(b) the Corporation's total assets would be less than the sum of its total
liabilities plus the amount that would be needed, if the Corporation were to be
dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution of stockholders whose preferential rights are superior to those
receiving the distribution.
If the Board of Directors does not fix the record date for determining
stockholders entitled to a distribution (other than one involving a purchase,
redemption, or other acquisition of the Corporation's shares), it is the date
the Board of Directors authorizes the distribution.
The Board of Directors may base a determination that a distribution is not
prohibited either on financial statements prepared on the basis of accounting
practices and principles that are reasonable in the circumstances or on a fair
valuation or other method that is reasonable in the circumstances. In the case
of any distribution based upon such a valuation, each such distribution shall be
identified as a distribution based upon a current valuation of assets, and the
amount per share paid on the basis of such valuation shall be disclosed to the
stockholders concurrent with their receipt of the distribution.
SECTION 7.02. SHARE DIVIDENDS. Unless the Second Amended and Restated
Certificate of Incorporation provides otherwise, shares may be issued pro rata
and without consideration to the Corporation's stockholders or to the
stockholders of one or more classes or series. An issuance of shares under this
section is a share dividend.
Shares of one class or series may not be issued as a share dividend in
respect of shares of another class or series unless:
(a) the Second Amended and Restated Certificate of Incorporation so
authorizes;
(b) a majority of the votes entitled to be cast by the class or series to
be issued approves the issue; or
<PAGE>
19
(c) there are no outstanding shares of the class or series to be issued.
If the Board of Directors does not fix the record date for determining
stockholders entitled to a share dividend, it is the date the Board of Directors
authorizes the share dividend.
SECTION 7.03. SHARE OPTIONS. Unless the Second Amended and Restated
Certificate of Incorporation provides otherwise, the Corporation may issue
rights, options or warrants for the purchase of its shares. The Board of
Directors shall determine the terms upon which the rights, options or warrants
are issued, their form and content, and the consideration for which the shares
are to be issued.
The terms and conditions of stock rights and options that are created and
issued by the Corporation, or its successor, and that entitle the holders
thereof to purchase from the Corporation shares of any class or classes, whether
authorized but unissued shares, treasury shares or shares to be purchased or
acquired by the Corporation, may include restrictions or conditions that
preclude or limit the exercise, transfer, receipt or holding of such rights or
options by any person or persons, including any person or persons owning or
offering to acquire a specified number or percentage of the outstanding common
shares or other securities of the Corporation, or any transferee or transferees
of any such person or persons, or that invalidate or void such rights or options
held by any such person or persons or any such transferee or transferees.
ARTICLE VIII
CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall have
inscribed thereon the name of the Corporation and such other words and figures
and in such design as may be prescribed by the Board of Directors, and may be
facsimile, engraved, printed or an impression, or other type seal.
<PAGE>
20
ARTICLE IX
FISCAL YEAR
The fiscal year of the Corporation shall, by resolution, be determined by
the Board of Directors.
ARTICLE X
Indemnification of Directors,
OFFICERS, EMPLOYEES AND AGENTS
SECTION 10.01. ACTION AGAINST PARTY BECAUSE OF CORPORATE POSITION. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Corporation) by reason of the fact that he
is or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, partner, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees and disbursements,
inclusive of any appeal), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such claim, action,
suit or proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any claim, action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of NOLO
CONTENDERE or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner that he reasonably believed
to be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful.
SECTION 10.02. ACTION BY OR IN THE RIGHT OF CORPORATION. The Corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the Corporation to procure a judgment in its favor by reason of the fact that
he is or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, partner, officer,
employee or agent of another corporation,
<PAGE>
21
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees and disbursements, inclusive of any appeal) actually
and reasonably incurred by him in connection with the defense or settlement of
such claim, action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall 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 a court of
competent jurisdiction (the "Court") in which such claim, action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court
shall deem proper.
SECTION 10.03. REIMBURSEMENT IF SUCCESSFUL. To the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Sections 10.01 or 10.02, or in defense of any claims, issue or matter
therein, he shall be indemnified against expenses (including attorneys fees and
disbursements, inclusive of any appeal) actually and reasonably incurred by him
in connection therewith, notwithstanding that he has not been successful (on the
merits or otherwise) on any other claim, issue or matter in any such claim,
action, suit or proceeding.
SECTION 10.04. AUTHORIZATION. Any indemnification under Sections 10.01
and 10.02 (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in Sections 10.01 and
10.02. Such determination shall be made (a) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (b) if such a quorum is not obtainable, or, even
if obtainable, a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (c) by the stockholders.
SECTION 10.05. ADVANCED REIMBURSEMENT. Expenses (including attorneys'
fees and disbursements, inclusive of any appeal) incurred in defending a civil
or criminal action, suit or proceeding may be paid by the Corporation in advance
of the final disposition of such action, suit or
<PAGE>
22
proceeding as authorized by the Board of Directors in the specific case upon
receipt of an undertaking by or on behalf of the director, officer, employee or
agent to repay such amount unless it shall ultimately be determined that he is
entitled to be indemnified by the Corporation as authorized in this Article.
SECTION 10.06. INDEMNIFICATION NOT EXCLUSIVE. The indemnification
provided by this Article shall be deemed exclusive of any other rights to which
those indemnified may be entitled under any statute, rule of law, provision of
the Second Amended and Restated Certificate of Incorporation, By-law, agreement,
vote of stockholders or disinterested directors, or otherwise, both as to action
in his official capacity and as to action in another capacity, while holding
such office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person. Where such other provision
provides broader rights of indemnification than these By-laws, said other
provision shall control.
SECTION 10.07. INSURANCE. The Corporation shall have power to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, partner, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article.
ARTICLE XI
AMENDMENT
Except as otherwise provided herein, these By-laws may be altered, amended
or repealed or new By-laws may be adopted by the stockholders or by the Board of
Directors at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
By-laws be contained in the notice of such special meeting; PROVIDED, HOWEVER,
that in the case of amendments by stockholders, notwithstanding any other
provisions of these By-laws or any other provision of law that might otherwise
permit a lesser vote or no vote, but in addition to any affirmative vote of the
holders
<PAGE>
23
of any particular class or series of the capital stock required by law, the
Second Amended and Restated Certificate of Incorporation or these By-laws, the
affirmative vote of the holders of at least 66 2/3% of all then outstanding
shares of voting stock of the Corporation, voting together as a single class,
shall be required to alter, amend or repeal any provision of these By-laws.
ARTICLE XII
EMERGENCY BY-LAWS
SECTION 12.01. EMERGENCY BY-LAWS. The Board of Directors may adopt
By-laws to be effective only in an emergency. An emergency exists for the
purposes of this section if a quorum of the Corporation's directors cannot
readily be assembled because of some catastrophic event. The emergency By-laws,
which are subject to amendment or repeal by the stockholders, may make all
provisions necessary for managing the Corporation during an emergency,
including:
(a) procedures for calling a meeting of the Board of Directors;
(b) quorum requirements for the meeting; and
(c) designation of additional or substitute directors.
SECTION 12.02. LINE OF SUCCESSION. The Board of Directors, either before
or during such emergency, may provide, and from time to time modify, lines of
succession in the event that during such emergency any or all officers or agents
of the Corporation are for any reason rendered incapable of discharging their
duties.
SECTION 12.03. GOVERNING BY-LAWS. All provisions of these By-laws
consistent with the emergency By-laws remain effective during the emergency.
The emergency By-laws are not effective after the emergency ends.
SECTION 12.04. EFFECT OF CORPORATION ACTION. Corporate action taken in
good faith in accordance with the emergency By-laws:
(a) binds the Corporation; and
(b) may not be used to impose liability on a corporate
director, officer, employee or agent.
<PAGE>
24
ARTICLE XIII
EFFECTIVE DATE
These By-laws shall be effective as of and after the time of effectiveness
of the Corporation's Second Amended and Restated Certificate of Incorporation.
<PAGE>
Exhibit 4.5
AMENDED AND RESTATED CREDIT AGREEMENT
CREDIT AGREEMENT, dated as of October 31, 1996, as amended and
restated as of March 31, 1997, among BCP/ESSEX HOLDINGS INC., a Delaware
corporation ("BCP HOLDINGS"), ESSEX GROUP, INC., a Michigan corporation (the
"COMPANY"), the several banks and other financial institutions from time to time
parties to this Agreement (the "LENDERS"; individually a "LENDER") and THE CHASE
MANHATTAN BANK, a New York banking corporation, as administrative agent for the
Lenders hereunder (the "ADMINISTRATIVE AGENT").
W I T N E S S E T H :
WHEREAS, pursuant to the Credit Agreement, dated as of October 31,
1996 (the "EXISTING CREDIT AGREEMENT"), among BCP Holdings, the Company, the
lenders parties thereto and The Chase Manhattan Bank, as Administrative Agent,
such lenders thereto have agreed to extend credit to the Company;
WHEREAS, BCP Holdings and the Company have requested that the Existing
Credit Agreement be amended and restated as hereinafter provided;
WHEREAS, the Lenders and the Administrative Agent are willing to agree
to such amendment and restatement; and
WHEREAS, it is the intent of the parties hereto that this Agreement
not constitute a novation of the obligations and liabilities existing under the
Existing Credit Agreement or evidence repayment of all or any of such
obligations and liabilities and that this Agreement amend and restate in its
entirety the Existing Credit Agreement and re-evidence the obligations of BCP
Holdings and the Company outstanding thereunder;
NOW, THEREFORE, the parties hereto hereby agree that on the Amendment
and Restatement Effective Date the Existing Credit Agreement will be amended and
restated in its entirety as follows:
SECTIONS 1.1 THROUGH 11.17 (OTHER THAN SECTIONS 11.8, 11.11, 11.12 AND
11.17)
Sections 1.1 through 11.17 (other than Sections 11.8, 11.11, 11.12 and
11.17) of the Existing Credit Agreement, in each case with their respective
existing Section designations, are hereby incorporated herein by reference as
if set forth in full herein, except that, for purposes of such incorporation by
reference:
a. Section 1.1 of the Existing Credit Agreement shall be deemed
amended by (i) deleting the definitions of "AGREEMENT", "APPLICABLE MARGIN",
"LEVEL" and "MAXIMUM INVESTMENT AMOUNT" in their entirety and (ii) inserting the
following definitions in correct alphabetical order:
<PAGE>
"AGREEMENT": this Amended and Restated Credit Agreement, as further
amended, supplemented or otherwise modified from time to time.
"AMENDMENT AND RESTATEMENT EFFECTIVE DATE": the date on which each of
the conditions precedent specified in Section 5.3 shall have been
satisfied.
"APPLICABLE MARGIN": for each Type of Revolving Credit Loan, on
any date, the rate per annum set forth below opposite the Level then in
effect:
LEVEL EURODOLLAR LOANS ABR LOANS
------------- ---------------- ---------
I 0.375% 0%
II 0.500% 0%
III 0.625% 0%
IV 0.750% 0%
V 1.125% 0.125%
VI 1.500% 0.500%
"LEVEL": as of any date of determination, the level set forth
below then in effect, as determined in accordance with the following
provisions of this definition:
LEVEL LEVERAGE RATIO
---------------- ---------------------------------
I Less than or equal to 2.00 to 1.0
II Less than or equal to 2.50 to 1.0
III Less than or equal to 3.00 to 1.0
IV Less than or equal to 3.50 to 1.0
V Less than or equal to 4.00 to 1.0
VI Greater than 4.00 to 1.0
For the purposes of this definition, the Level shall be determined as at
the end of each of the first three quarterly periods of each fiscal year of
Holdings and as at the end of each fiscal year of Holdings, for the period
(a "LEVEL TEST PERIOD") of four consecutive fiscal quarters ending on the
last day of such quarterly period or fiscal year, as the case may be, based
on the relevant financial statements delivered pursuant to Section 6.1;
changes in the Level shall become effective on the date on which such
financial statements are delivered to the Lenders (but in any event not
later than the 50th day after the end of each of the first three quarterly
periods of each fiscal year or the 105th day after the end of each fiscal
year, as the case may be) and shall remain in effect until the next change
to be effected pursuant to this definition, PROVIDED, that, on the
Amendment and Restatement Effective Date, the Level shall be determined in
accordance with the financial information provided in the Compliance
Certificate delivered pursuant to Section 5.3(f), and PROVIDED, FURTHER,
that if any financial statements referred to above are not delivered within
the time periods specified above, then, until such financial statements are
delivered, the Level as at the end of the fiscal period that would have
been covered thereby shall be deemed to be Level VI.
<PAGE>
3
"MAXIMUM INVESTMENT AMOUNT": as of any date of determination, the
amount set forth below opposite the Level then in effect:
LEVEL AMOUNT
------------ ----------------------
I $100,000,000
II 100,000,000
III 100,000,000
IV 80,000,000
V 60,000,000
VI 40,000,000
"OFFERING": any public equity offering effected pursuant to the
Registration Statement on Form S-1, filed with the Securities and Exchange
Commission on February 19, 1997, as Registration No. 333-22043, and as the
same may be amended, supplemented or otherwise modified from time to time.
b. Section 1.1 of the Existing Credit Agreement shall be deemed
amended by (i) deleting clause (g) of the definition of "INDEBTEDNESS" in its
entirety and (ii) substituting in lieu thereof the following new clause (g):
"(g) all obligations of such Person to purchase, redeem, retire or
otherwise acquire for value any Capital Stock of such Person or any
warrants, rights or options to acquire such Capital Stock, except for any
purchases, redemptions, retirements or other acquisitions payable solely in
shares of common stock of Holdings,"
c. Section 2 of the Existing Credit Agreement shall be deemed amended
by replacing Section 2.4(a) thereof with the following new Section 2.4(a):
"2.4 FEES. (a) The Company agrees to pay to the Administrative Agent
a commitment fee for the account of the Lenders for the period from and
including the Amendment and Restatement Effective Date to the Revolving
Credit Termination Date, computed at a rate equal to (i) 0.125% per annum
on any date on which Level I is in effect, (ii) 0.150% per annum on any
date on which Level II is in effect, (iii) 0.200% per annum on any date on
which Level III is in effect, (iv) 0.250% per annum on any date on which
Level IV is in effect,, (v) 0.300% per annum on any date on which Level V
is in effect or (vi) 0.375% per annum on any date on which Level VI is in
effect, on the average daily amount of the Available Revolving Credit
Commitment of each Lender during the period for which payment is made,
payable quarterly in arrears on the last day of each March, June, September
and December and on the Revolving Credit Termination Date or such earlier
date as the Revolving Credit Commitments shall terminate as provided
herein, commencing on the first of such dates to occur after the Amendment
and Restatement Effective Date. It is understood that commitment fees
accruing through the Amendment and Restatement Effective Date shall be
calculated in the manner specified in the Existing Credit Agreement prior
to giving effect to this Agreement."
<PAGE>
4
d. Section 4 of the Existing Credit Agreement shall be deemed amended
by (i) (A) adding the phrase "and December 31, 1996" after the date
"December 31, 1995" contained in the first sentence of Section 4.1(b) of the
Existing Credit Agreement and (B) adding the phrase ", as supplemented by the
1997 budget delivered to the Lenders on December 20, 1996," after the date
"September 12, 1996" contained in Section 4.1(c) of the Existing Credit
Agreement and (ii) adding thereto the following new Section 4.24:
"4.24 REPRESENTATIONS AND WARRANTIES ON AMENDMENT AND RESTATEMENT
EFFECTIVE DATE. Each of the representations and warranties made by
Holdings or the Company in Sections 4.1 through 4.23 is true and correct on
and as of the Amendment and Restatement Effective Date, as if made on and
as of the Amendment and Restatement Effective Date."
e. Section 5 of the Existing Credit Agreement shall be deemed amended
by adding thereto the following new Section 5.3:
"5.3 CONDITIONS TO AMENDMENT AND RESTATEMENT EFFECTIVE DATE. The
Amendment and Restatement Effective Date shall be the date of satisfaction
of the following conditions precedent:
(a) AGREEMENT. The Administrative Agent shall have received
(a) counterparts hereof, executed by all of the parties listed on the
signature pages hereof, and (b) in the case of each Lender and each
Existing Lender (as defined in Section 11.19), an Addendum to this
Agreement executed by such Lender or Existing Lender. Prior to the
Amendment and Restatement Effective Date, the Administrative Agent
shall deliver to the Lenders a replacement Schedule 1.1A to the Credit
Agreement setting forth the allocations of Revolving Credit
Commitments to the Lenders.
(b) CLOSING CERTIFICATE. The Administrative Agent shall have
received a fully executed certificate of each of the Company and
Holdings dated the Amendment and Restatement Effective Date,
substantially in the form of Exhibit H, with appropriate insertions
and attachments.
(c) LEGAL OPINIONS. The Administrative Agent shall have
received the executed legal opinions of Cravath, Swaine & Moore,
counsel to the Company and the general counsel to the Company,
substantially in the form of the opinions of such counsel rendered on
the Effective Date with changes therein to reflect that such opinions
are in respect of this Agreement and are rendered on the Amendment and
Restatement Effective Date.
(d) CONSUMMATION OF THE OFFERING. The Offering shall have been
consummated on satisfactory terms, the Net Cash Proceeds thereof
received by Holdings shall equal at least $50,000,000 and the entire
amount of such Net Cash Proceeds shall have been applied to prepay
outstanding Senior Unsecured Term Loans and Revolving Credit Loans.
(e) LOAN DOCUMENT REAFFIRMATION. Each Subsidiary of the Company
shall have executed a reaffirmation of its obligations under the Loan
Documents to which it is a party.
<PAGE>
5
(f) DELIVERY OF THE COMPLIANCE CERTIFICATE. The Company shall
have delivered a Compliance Certificate for the most recent period
ended December 31, 1996, which Compliance Certificate shall include
financial information giving effect on a PRO FORMA basis to the
Offering and the application of proceeds thereof."
f. Section 7 of the Existing Credit Agreement shall be deemed amended
by replacing Section 7.13 with the following new Section 7.13:
"7.13 CORPORATE DOCUMENTS. Amend its certificate of incorporation
(except (a) to increase the number of authorized shares of common stock,
(b) to the extent necessary to consummate the BCP/Company Merger or (c) as
described in the registration statement for the Offering)."
g. The amount "$25,000,000" in Section 7.2(o) of the Existing Credit
Agreement shall be deemed to be the amount "$50,000,000".
h. References in the Existing Credit Agreement to "the date hereof",
"the date of this Agreement" and similar references shall in each case be deemed
to be references to the date "October 31, 1996."
i. Section 8 of the Existing Credit Agreement shall be deemed amended
by (i) deleting paragraph (j) thereof and (ii) substituting in lieu thereof the
following new paragraph (j):
"(j) (i) The Bessemer Group in the aggregate shall cease to
beneficially own (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission), directly or indirectly, securities representing at
least 20% on a fully diluted basis of the ordinary voting power for the
election of directors of Holdings; (ii) any Person or group (within the
meaning of Rule 13d-5 of the Securities and Exchange Commission), other
than any Person or group consisting solely of one or more members of the
Bessemer Group, Investors and directors, officers or employees (or former
directors, officers or employees) of Holdings or any of its Subsidiaries,
shall, directly or indirectly, have the power to vote or direct the voting
of securities representing a greater percentage of the ordinary voting
power for the election of directors of Holdings than securities then
beneficially owned by Bessemer Group; (iii) any Person or group, other than
any Person or group consisting solely of member of the Bessemer Group,
Investors and directors, officers or employees (or former directors,
officers or employees) of Holdings or any of its Subsidiaries, shall have
acquired, by contract or otherwise, the power to exercise directly or
indirectly a controlling influence over the management or policies of
Holdings; (iv) Holdings shall cease to own and control, of record and
beneficially, directly, 100% of each class of outstanding Capital Stock of
the Company free and clear of all Liens (except Liens created by the
Holdings Pledge Agreement); (v) the Company shall issue any Capital Stock
(or any security convertible into any of its Capital Stock) that is not
pledged to Administrative Agent for the benefit of the Lenders; or (vi) at
any time that any Senior Notes are outstanding, a "CHANGE OF CONTROL" (as
defined in the Senior Note Indenture) shall occur;
<PAGE>
6
j. Section 11.2 of the Existing Credit Agreement shall be deemed
amended by replacing the following information:
"Chase Agent Bank Services Group
Grand Central Tower
140 East 45th Street
New York, New York 10017
Attention: Jesus Sang
Telecopy: 212-622-0122"
with:
"The Chase Manhattan Bank
c/o Loan Agency Services Group
One Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Attention: Jesus Sang
Telecopy: 212-552-5662"
SECTIONS 11.8, 11.11, 11.12 AND 11.17
11.8 COUNTERPARTS. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts (including
by facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged with the Company and the
Administrative Agent.
11.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
11.12 SUBMISSION TO JURISDICTION; WAIVERS. Each of Holdings and the
Company hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to Holdings
or the Company, as the case may
<PAGE>
7
be, at its address set forth in Section 11.2 or at such other address of
which the Administrative Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this Section 11.12 any special, exemplary, punitive or consequential
damages.
11.17 INTEGRATION. THIS AGREEMENT REPRESENTS THE ENTIRE AGREEMENT OF
HOLDINGS, THE COMPANY, THE ADMINISTRATIVE AGENT AND THE LENDERS WITH RESPECT TO
THE SUBJECT MATTER HEREOF, WHICH AGREEMENT MAY NOT BE CONTRADICTED BY EVIDENCE
OF ANY PRIOR OR CONTEMPORANEOUS ORAL AGREEMENT BETWEEN OR AMONG ANY OF THE
PARTIES HERETO, AND THERE ARE NO PROMISES, UNDERTAKINGS, REPRESENTATIONS OR
WARRANTIES BY THE ADMINISTRATIVE AGENT OR ANY LENDER RELATIVE TO THE SUBJECT
MATTER HEREOF NOT EXPRESSLY SET FORTH OR REFERRED TO HEREIN OR IN THE OTHER LOAN
DOCUMENTS.
SECTIONS 11.18 THROUGH 11.19
11.18 SCHEDULES AND EXHIBITS. Schedules 1.1A, 1.1B, 1.1C, 4.1(b),
4.5, 4.8, 4.9, 4.16, 4.20(b), 4.20(c), 5.1(g), 7.2(c), 7.3(f), 7.7(a) and 7.11
and Exhibits A through L of the Existing Credit Agreement are hereby
incorporated by reference as Schedules 1.1A, 1.1B, 1.1C, 4.1(b), 4.5, 4.8, 4.9,
4.16, 4.20(b), 4.20(c), 5.1(g), 7.2(c), 7.3(f), 7.7(a) and 7.11 and Exhibits A
through L hereto, respectively. For purposes of such incorporation by
reference, such Exhibits shall be deemed modified to incorporate any other
modifications made pursuant to this Agreement.
11.19 EXISTING LENDERS. Each Lender which after the Amendment and
Restatement Effective Date no longer holds Loans or a Revolving Credit
Commitment (an "EXISTING LENDER") is executing this Agreement (through an
Addendum) solely for the purpose of acknowledging that its rights and
obligations in respect of its Loans and Revolving Credit Commitment will
terminate on the Amendment and Restatement Effective Date upon repayment in full
(or purchase by another Lender) of all amounts owing to it under the Existing
Credit Agreement on the Amendment and Restatement Effective Date. The
modifications effected by this Agreement are being approved by Lenders holding
100% of the Revolving Credit Commitments after giving effect to the repayment of
the Loans and the termination of the Revolving Credit Commitments of the
Existing Lenders (or purchase of any such Loans or Revolving Credit Commitments
by other Lenders) on the Amendment and Restatement Effective Date.
<PAGE>
8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective proper and duly authorized
officers as of the day and year first above written.
BCP/ESSEX HOLDINGS, INC.
By: /s/ DAVID A. OWEN
----------------------------------
Name: David A. Owen
Title: Vice President, Treasurer
ESSEX GROUP, INC.
By: /s/ DAVID A. OWEN
---------------------------
Name: David A. Owen
Title: Executive Vice President, Treasurer
THE CHASE MANHATTAN BANK, as Administrative Agent
By: /s/ LAWRENCE PALUMBO, JR.
----------------------------------
Name: L. Palumbo
Title: Vice President
<PAGE>
LENDER ADDENDUM
The undersigned Lender (i) agrees to all of the provisions of the
Amended and Restated Credit Agreement dated as of March 31, 1997, among
BCP/Essex Holdings, Inc., a Delaware corporation, Essex Group Inc., a Michigan
corporation (the "COMPANY"), the several banks and other financial institutions
from time to time parties thereto (the "LENDERS"; individually a "LENDER") and
The Chase Manhattan Bank, a New York banking corporation, as Administrative
Agent for the Lenders, thereunder (as the same may be further amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT")
and (ii) becomes a party thereto, as a Lender, with an obligation to make
Revolving Credit Loans to the Company in an aggregate principal amount not to
exceed the amount of its Revolving Credit Commitment as set forth opposite the
undersigned Lender's name in Schedule 1.1A to the Credit Agreement, as such
amount may be changed from time to time as provided in the Credit Agreement.
Capitalized terms defined in the Credit Agreement shall have their respective
defined meanings herein.
Name of
Lender: BANK OF AMERICA ILLINOIS
By: /s/ PATRICIA DELGRANDE
------------------------------
Name: Patricia DelGrande
Title: Managing Director
As of March 31, 1997
<PAGE>
LENDER ADDENDUM
The undersigned Lender (i) agrees to all of the provisions of the
Amended and Restated Credit Agreement dated as of March 31, 1997, among
BCP/Essex Holdings, Inc., a Delaware corporation, Essex Group Inc., a Michigan
corporation (the "COMPANY"), the several banks and other financial institutions
from time to time parties thereto (the "LENDERS"; individually a "LENDER") and
The Chase Manhattan Bank, a New York banking corporation, as Administrative
Agent for the Lenders, thereunder (as the same may be further amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT")
and (ii) becomes a party thereto, as a Lender, with an obligation to make
Revolving Credit Loans to the Company in an aggregate principal amount not to
exceed the amount of its Revolving Credit Commitment as set forth opposite the
undersigned Lender's name in Schedule 1.1A to the Credit Agreement, as such
amount may be changed from time to time as provided in the Credit Agreement.
Capitalized terms defined in the Credit Agreement shall have their respective
defined meanings herein.
Name of
Lender: THE BANK OF NEW YORK
By: /s/ JOHN R. CIULLA
----------------------------------
Name: John R. Ciulla
Title: Assistant Vice President
As of March 31, 1997
<PAGE>
LENDER ADDENDUM
The undersigned Lender (i) agrees to all of the provisions of the
Amended and Restated Credit Agreement dated as of March 31, 1997, among
BCP/Essex Holdings, Inc., a Delaware corporation, Essex Group Inc., a Michigan
corporation (the "COMPANY"), the several banks and other financial institutions
from time to time parties thereto (the "LENDERS"; individually a "LENDER") and
The Chase Manhattan Bank, a New York banking corporation, as Administrative
Agent for the Lenders, thereunder (as the same may be further amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT")
and (ii) becomes a party thereto, as a Lender, with an obligation to make
Revolving Credit Loans to the Company in an aggregate principal amount not to
exceed the amount of its Revolving Credit Commitment as set forth opposite the
undersigned Lender's name in Schedule 1.1A to the Credit Agreement, as such
amount may be changed from time to time as provided in the Credit Agreement.
Capitalized terms defined in the Credit Agreement shall have their respective
defined meanings herein.
Name of
Lender: THE BANK OF NOVA SCOTIA
By: /s/ F. C. H. ASHBY
--------------------------------
Name: F.C.H. Ashby
Title: Senior Manager Loan Operations
As of March 31, 1997
<PAGE>
LENDER ADDENDUM
The undersigned Lender (i) agrees to all of the provisions of the
Amended and Restated Credit Agreement dated as of March 31, 1997, among
BCP/Essex Holdings, Inc., a Delaware corporation, Essex Group Inc., a Michigan
corporation (the "COMPANY"), the several banks and other financial institutions
from time to time parties thereto (the "LENDERS"; individually a "LENDER") and
The Chase Manhattan Bank, a New York banking corporation, as Administrative
Agent for the Lenders, thereunder (as the same may be further amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT")
and (ii) becomes a party thereto, as a Lender, with an obligation to make
Revolving Credit Loans to the Company in an aggregate principal amount not to
exceed the amount of its Revolving Credit Commitment as set forth opposite the
undersigned Lender's name in Schedule 1.1A to the Credit Agreement, as such
amount may be changed from time to time as provided in the Credit Agreement.
Capitalized terms defined in the Credit Agreement shall have their respective
defined meanings herein.
Name of
Lender: COMERICA BANK
By: /s/ PHILLIP A. COOSAIA
----------------------------
Name: Phillip A. Coosaia
Title: Vice President
As of March 31, 1997
<PAGE>
LENDER ADDENDUM
The undersigned Lender (i) agrees to all of the provisions of the
Amended and Restated Credit Agreement dated as of March 31, 1997, among
BCP/Essex Holdings, Inc., a Delaware corporation, Essex Group Inc., a Michigan
corporation (the "COMPANY"), the several banks and other financial institutions
from time to time parties thereto (the "LENDERS"; individually a "LENDER") and
The Chase Manhattan Bank, a New York banking corporation, as Administrative
Agent for the Lenders, thereunder (as the same may be further amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT")
and (ii) becomes a party thereto, as a Lender, with an obligation to make
Revolving Credit Loans to the Company in an aggregate principal amount not to
exceed the amount of its Revolving Credit Commitment as set forth opposite the
undersigned Lender's name in Schedule 1.1A to the Credit Agreement, as such
amount may be changed from time to time as provided in the Credit Agreement.
Capitalized terms defined in the Credit Agreement shall have their respective
defined meanings herein.
Name of
Lender: NBD BANK, N.A.
By: /s/ JOHN C. OTHESON
-----------------------------
Name: John C. Otheson
Title: Vice President
As of March 31, 1997
<PAGE>
LENDER ADDENDUM
The undersigned Lender (i) agrees to all of the provisions of the
Amended and Restated Credit Agreement dated as of March 31, 1997, among
BCP/Essex Holdings, Inc., a Delaware corporation, Essex Group Inc., a Michigan
corporation (the "COMPANY"), the several banks and other financial institutions
from time to time parties thereto (the "LENDERS"; individually a "LENDER") and
The Chase Manhattan Bank, a New York banking corporation, as Administrative
Agent for the Lenders, thereunder (as the same may be further amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT")
and (ii) becomes a party thereto, as a Lender, with an obligation to make
Revolving Credit Loans to the Company in an aggregate principal amount not to
exceed the amount of its Revolving Credit Commitment as set forth opposite the
undersigned Lender's name in Schedule 1.1A to the Credit Agreement, as such
amount may be changed from time to time as provided in the Credit Agreement.
Capitalized terms defined in the Credit Agreement shall have their respective
defined meanings herein.
Name of
Lender: THE LONG-TERM CREDIT BANK OF
JAPAN, LIMITED, New York Branch
By: /s/ SHUICHI TAJIMA
-----------------------------------
Name: Shuichi Tajima
Title: Deputy General Manager
As of March 31, 1997
<PAGE>
LENDER ADDENDUM
The undersigned Lender (i) agrees to all of the provisions of the
Amended and Restated Credit Agreement dated as of March 31, 1997, among
BCP/Essex Holdings, Inc., a Delaware corporation, Essex Group Inc., a Michigan
corporation (the "COMPANY"), the several banks and other financial institutions
from time to time parties thereto (the "LENDERS"; individually a "LENDER") and
The Chase Manhattan Bank, a New York banking corporation, as Administrative
Agent for the Lenders, thereunder (as the same may be further amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT")
and (ii) becomes a party thereto, as a Lender, with an obligation to make
Revolving Credit Loans to the Company in an aggregate principal amount not to
exceed the amount of its Revolving Credit Commitment as set forth opposite the
undersigned Lender's name in Schedule 1.1A to the Credit Agreement, as such
amount may be changed from time to time as provided in the Credit Agreement.
Capitalized terms defined in the Credit Agreement shall have their respective
defined meanings herein.
Name of
Lender: NATIONSBANK, N.A.
By: /s/ VALERIE C. MILLS
---------------------------
Name: Valerie C. Mills
Title: Sr. Vice President
As of March 31, 1997
<PAGE>
LENDER ADDENDUM
The undersigned Lender (i) agrees to all of the provisions of the
Amended and Restated Credit Agreement dated as of March 31, 1997, among
BCP/Essex Holdings, Inc., a Delaware corporation, Essex Group Inc., a Michigan
corporation (the "COMPANY"), the several banks and other financial institutions
from time to time parties thereto (the "LENDERS"; individually a "LENDER") and
The Chase Manhattan Bank, a New York banking corporation, as Administrative
Agent for the Lenders, thereunder (as the same may be further amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT")
and (ii) becomes a party thereto, as a Lender, with an obligation to make
Revolving Credit Loans to the Company in an aggregate principal amount not to
exceed the amount of its Revolving Credit Commitment as set forth opposite the
undersigned Lender's name in Schedule 1.1A to the Credit Agreement, as such
amount may be changed from time to time as provided in the Credit Agreement.
Capitalized terms defined in the Credit Agreement shall have their respective
defined meanings herein.
Name of
Lender: FORT WAYNE NATIONAL BANK
By: /s/ ROBERT C. MARSHALL
-------------------------------
Name: Robert C. Marshall
Title: Vice President
As of March 31, 1997
<PAGE>
LENDER ADDENDUM
The undersigned Lender (i) agrees to all of the provisions of the
Amended and Restated Credit Agreement dated as of March 31, 1997, among
BCP/Essex Holdings, Inc., a Delaware corporation, Essex Group Inc., a Michigan
corporation (the "COMPANY"), the several banks and other financial institutions
from time to time parties thereto (the "LENDERS"; individually a "LENDER") and
The Chase Manhattan Bank, a New York banking corporation, as Administrative
Agent for the Lenders, thereunder (as the same may be further amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT")
and (ii) becomes a party thereto, as a Lender, with an obligation to make
Revolving Credit Loans to the Company in an aggregate principal amount not to
exceed the amount of its Revolving Credit Commitment as set forth opposite the
undersigned Lender's name in Schedule 1.1A to the Credit Agreement, as such
amount may be changed from time to time as provided in the Credit Agreement.
Capitalized terms defined in the Credit Agreement shall have their respective
defined meanings herein.
Name of
Lender: MELLON BANK, N.A.
By: /s/ ROGER N. STANIER
-------------------------
Name: Roger N. Stanier
Title: Vice President
As of March 31, 1997
<PAGE>
LENDER ADDENDUM
The undersigned Lender (i) agrees to all of the provisions of the
Amended and Restated Credit Agreement dated as of March 31, 1997, among
BCP/Essex Holdings, Inc., a Delaware corporation, Essex Group Inc., a Michigan
corporation (the "COMPANY"), the several banks and other financial institutions
from time to time parties thereto (the "LENDERS"; individually a "LENDER") and
The Chase Manhattan Bank, a New York banking corporation, as Administrative
Agent for the Lenders, thereunder (as the same may be further amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT")
and (ii) becomes a party thereto, as a Lender, with an obligation to make
Revolving Credit Loans to the Company in an aggregate principal amount not to
exceed the amount of its Revolving Credit Commitment as set forth opposite the
undersigned Lender's name in Schedule 1.1A to the Credit Agreement, as such
amount may be changed from time to time as provided in the Credit Agreement.
Capitalized terms defined in the Credit Agreement shall have their respective
defined meanings herein.
Name of
Lender: NATIONAL CITY BANK OF INDIANA
By: /s/ REAGAN K. RICK
-----------------------
Name: Reagan K. Rick
Title: Vice President
As of March 31, 1997
<PAGE>
LENDER ADDENDUM
The undersigned Lender (i) agrees to all of the provisions of the
Amended and Restated Credit Agreement dated as of March 31, 1997, among
BCP/Essex Holdings, Inc., a Delaware corporation, Essex Group Inc., a Michigan
corporation (the "COMPANY"), the several banks and other financial institutions
from time to time parties thereto (the "LENDERS"; individually a "LENDER") and
The Chase Manhattan Bank, a New York banking corporation, as Administrative
Agent for the Lenders, thereunder (as the same may be further amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT")
and (ii) becomes a party thereto, as a Lender, with an obligation to make
Revolving Credit Loans to the Company in an aggregate principal amount not to
exceed the amount of its Revolving Credit Commitment as set forth opposite the
undersigned Lender's name in Schedule 1.1A to the Credit Agreement, as such
amount may be changed from time to time as provided in the Credit Agreement.
Capitalized terms defined in the Credit Agreement shall have their respective
defined meanings herein.
Name of
Lender: UNITED STATES NATIONAL BANK OF OREGEON
By: /s/ CHRIS J. KARLIN
----------------------------
Name: Chris J. Karlin
Title: Vice President
As of March 31, 1997
<PAGE>
LENDER ADDENDUM
The undersigned Lender (i) agrees to all of the provisions of the
Amended and Restated Credit Agreement dated as of March 31, 1997, among
BCP/Essex Holdings, Inc., a Delaware corporation, Essex Group Inc., a Michigan
corporation (the "COMPANY"), the several banks and other financial institutions
from time to time parties thereto (the "LENDERS"; individually a "LENDER") and
The Chase Manhattan Bank, a New York banking corporation, as Administrative
Agent for the Lenders, thereunder (as the same may be further amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT")
and (ii) becomes a party thereto, as a Lender, with an obligation to make
Revolving Credit Loans to the Company in an aggregate principal amount not to
exceed the amount of its Revolving Credit Commitment as set forth opposite the
undersigned Lender's name in Schedule 1.1A to the Credit Agreement, as such
amount may be changed from time to time as provided in the Credit Agreement.
Capitalized terms defined in the Credit Agreement shall have their respective
defined meanings herein.
Name of
Lender: NORWEST BANK INDIANA, NATIONAL
ASSOCIATION
By: /s/ SOOK-JA HANSEN
---------------------------
Name: Sook-Ja Hansen
Title: Assistant Vice President
As of March 31, 1997
<PAGE>
LENDER ADDENDUM
The undersigned Lender (i) agrees to all of the provisions of the
Amended and Restated Credit Agreement dated as of March 31, 1997, among
BCP/Essex Holdings, Inc., a Delaware corporation, Essex Group Inc., a Michigan
corporation (the "COMPANY"), the several banks and other financial institutions
from time to time parties thereto (the "LENDERS"; individually a "LENDER") and
The Chase Manhattan Bank, a New York banking corporation, as Administrative
Agent for the Lenders, thereunder (as the same may be further amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT")
and (ii) becomes a party thereto, as a Lender, with an obligation to make
Revolving Credit Loans to the Company in an aggregate principal amount not to
exceed the amount of its Revolving Credit Commitment as set forth opposite the
undersigned Lender's name in Schedule 1.1A to the Credit Agreement, as such
amount may be changed from time to time as provided in the Credit Agreement.
Capitalized terms defined in the Credit Agreement shall have their respective
defined meanings herein.
Name of
Lender: VAN KAMPEN AMERICAN CAPITAL PRIME RATE
INCOME TRUST
By: /s/ BRIAN W. GOOD
--------------------------
Name: Brian W. Good
Title: Vice President
As of March 31, 1997
<PAGE>
LENDER ADDENDUM
The undersigned Lender (i) agrees to all of the provisions of the
Amended and Restated Credit Agreement dated as of March 31, 1997, among
BCP/Essex Holdings, Inc., a Delaware corporation, Essex Group Inc., a Michigan
corporation (the "COMPANY"), the several banks and other financial institutions
from time to time parties thereto (the "LENDERS"; individually a "LENDER") and
The Chase Manhattan Bank, a New York banking corporation, as Administrative
Agent for the Lenders, thereunder (as the same may be further amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT")
and (ii) becomes a party thereto, as a Lender, with an obligation to make
Revolving Credit Loans to the Company in an aggregate principal amount not to
exceed the amount of its Revolving Credit Commitment as set forth opposite the
undersigned Lender's name in Schedule 1.1A to the Credit Agreement, as such
amount may be changed from time to time as provided in the Credit Agreement.
Capitalized terms defined in the Credit Agreement shall have their respective
defined meanings herein.
Name of
Lender: BANK OF MONTREAL
By: /s/ ANGELO A. BARONE
---------------------------
Name: Angelo A. Barone
Title: Directorr
As of March 31, 1997
<PAGE>
LENDER ADDENDUM
The undersigned Lender (i) agrees to all of the provisions of the
Amended and Restated Credit Agreement dated as of March 31, 1997, among
BCP/Essex Holdings, Inc., a Delaware corporation, Essex Group Inc., a Michigan
corporation (the "COMPANY"), the several banks and other financial institutions
from time to time parties thereto (the "LENDERS"; individually a "LENDER") and
The Chase Manhattan Bank, a New York banking corporation, as Administrative
Agent for the Lenders, thereunder (as the same may be further amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT")
and (ii) becomes a party thereto, as a Lender, with an obligation to make
Revolving Credit Loans to the Company in an aggregate principal amount not to
exceed the amount of its Revolving Credit Commitment as set forth opposite the
undersigned Lender's name in Schedule 1.1A to the Credit Agreement, as such
amount may be changed from time to time as provided in the Credit Agreement.
Capitalized terms defined in the Credit Agreement shall have their respective
defined meanings herein.
Name of
Lender: KEY BANK NATIONAL ASSOCIATION
By: /s/ RICHARD A. POWL
-------------------------
Name: Richard A. Powl
Title: VP
As of March 31, 1997
<PAGE>
LENDER ADDENDUM
The undersigned Lender (i) agrees to all of the provisions of the
Amended and Restated Credit Agreement dated as of March 31, 1997, among
BCP/Essex Holdings, Inc., a Delaware corporation, Essex Group Inc., a Michigan
corporation (the "COMPANY"), the several banks and other financial institutions
from time to time parties thereto (the "LENDERS"; individually a "LENDER") and
The Chase Manhattan Bank, a New York banking corporation, as Administrative
Agent for the Lenders, thereunder (as the same may be further amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT")
and (ii) becomes a party thereto, as a Lender, with an obligation to make
Revolving Credit Loans to the Company in an aggregate principal amount not to
exceed the amount of its Revolving Credit Commitment as set forth opposite the
undersigned Lender's name in Schedule 1.1A to the Credit Agreement, as such
amount may be changed from time to time as provided in the Credit Agreement.
Capitalized terms defined in the Credit Agreement shall have their respective
defined meanings herein.
Name of
Lender: BHF-BANK AKTIENGELSELLSCHAFT
By: /s/ ANTHONY HEYMAN /s/ LINDA PACE
---------------------------------------------
Name: Anthony Heyman Linda Pace
Title: A.T. A.V.P.
As of March 31, 1997
<PAGE>
LENDER ADDENDUM
The undersigned Lender (i) agrees to all of the provisions of the
Amended and Restated Credit Agreement dated as of March 31, 1997, among
BCP/Essex Holdings, Inc., a Delaware corporation, Essex Group Inc., a Michigan
corporation (the "COMPANY"), the several banks and other financial institutions
from time to time parties thereto (the "LENDERS"; individually a "LENDER") and
The Chase Manhattan Bank, a New York banking corporation, as Administrative
Agent for the Lenders, thereunder (as the same may be further amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT")
and (ii) becomes a party thereto, as a Lender, with an obligation to make
Revolving Credit Loans to the Company in an aggregate principal amount not to
exceed the amount of its Revolving Credit Commitment as set forth opposite the
undersigned Lender's name in Schedule 1.1A to the Credit Agreement, as such
amount may be changed from time to time as provided in the Credit Agreement.
Capitalized terms defined in the Credit Agreement shall have their respective
defined meanings herein.
Name of
Lender: CAISSE NATIONALE DE CREDIT AGRICOLE
By: /s/ DAVID BOUHL
----------------------------------
Name: David Bouhl, F.V.P.
Title: Head of Corporate Banking
Chicago
As of March 31, 1997
<PAGE>
Exhibit 9.6
TERMINATION, AMENDMENT AND APPROVAL AGREEMENT (the
"Agreement"), dated as of April 1, 1997, among BESSEMER
HOLDINGS, L.P. (as successor to Bessemer Capital Partners,
L.P.), ("BHLP"), BESSEC HOLDINGS, L.P., BESSEMER HOLDINGS
SPECIAL SITUATIONS, L.P., BGE PARTNERS, L.P., BNE PARTNERS,
L.P., BTE PARTNERS, L.P. and BCE PARTNERS, L.P.
(collectively, the "BHLP Affiliates", and together with
BHLP, the "BH Group"), GOLDMAN, SACHS & CO. ("Goldman"), GS
CAPITAL PARTNERS, L.P., STONE STREET FUND 1992, L.P. and
BRIDGE STREET FUND 1992, L.P. (collectively, the "GS
Partnerships"), DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION ("DLJSC"), DLJ FIRST ESC L.L.C., DLJ MERCHANT
BANKING FUNDING, INC., DLJ MERCHANT BANKING PARTNERS, L.P.
and DLJ INTERNATIONAL PARTNERS, C.V. (collectively, the "DLJ
Partnerships"), CHASE EQUITY ASSOCIATES, L.P. (formerly
Chemical Equity Associates, A California Limited
Partnership) ("CEA") and BCP/ESSEX HOLDINGS INC. (as
successor to B E Acquisition Corporation) (the "Company").
WHEREAS the BH Group, the GS Partnerships, the DLJ Partnerships, CEA
and the Company are parties to an Investors Shareholders Agreement, dated as of
October 9, 1992 (as amended, the "Investor Shareholders Agreement");
WHEREAS the GS Partnerships, the DLJ Partnerships, CEA and the Company
are parties to a Stock and Warrant Subscription Agreement, dated as of October
9, 1992 (as amended, the "Stock and Warrant Subscription Agreement");
WHEREAS BHLP, DLJSC, Goldman and the Company are parties to an
Engagement Letter, dated July 22, 1992 (as amended by letter agreement dated
October 9, 1992) (the "Engagement Letter");
WHEREAS the Company is proposing to register for public sale, Company
common stock (the "Offering"), all as more fully described in the Registration
Statement on Form S-1, filed with the Securities and Exchange Commission on
February 19, 1997, as Registration No. 333-22043, as the
<PAGE>
2
same may be amended, supplemented or otherwise modified from time to time;
WHEREAS concurrent with the consummation of the Offering, the parties
hereto wish to terminate certain of their respective rights and obligations
under (i) the Investor Shareholders Agreement, (ii) the Stock and Warrant
Subscription Agreement and (iii) the Engagement Letter;
WHEREAS the capitalization of the Company currently provides for two
classes of common stock, which classes will be reclassified (the
"Reclassification") into a single class of common stock in connection with the
Offering; and
WHEREAS concurrent with the consummation of the Offering, CEA wishes
to approve the Reclassification.
NOW, THEREFORE, the parties hereby agree as follows:
1. Subject to paragraph 6 hereof, the Investor Shareholders Agreement
is hereby terminated.
2. The parties hereby waive (x) any pre-emptive rights they might have
in connection with the Company common stock offered in the Offering and (y) any
rights of first offer they might have in regard to sales of either (i) Company
common stock or (ii) warrants to purchase Company common stock, in each case
made by stockholders of the Company in connection with the Offering.
3. Subject to paragraph 6 hereof, Article VII of the Stock and Warrant
Subscription Agreement is hereby deleted.
4. Subject to paragraph 6 hereof, the Engagement Letter, other than
the indemnification and contribution obligations thereunder, is hereby
terminated.
5. Subject to paragraph 6 hereof, CEA hereby approves the
Reclassification.
<PAGE>
3
6. This Agreement shall be effective as of the closing date of the
Offering provided that (i) the DLJ Partnerships are permitted to sell, in the
aggregate, at least 250,000 shares of Company common stock in the Offering
(determined after giving effect to the proposed reverse stock split and treating
the sale of a warrant to purchase one share of Company common stock as the sale
of one share of Company common stock), (ii) following the Offering, the GS
Partnerships beneficially own, in the aggregate, not more than 9.9% of the
outstanding shares of Company common stock and (iii) following the Offering, CEA
beneficially owns not more than 4.9% of the outstanding shares of Company common
stock. In the event that the Offering is not consummated by July 1, 1997, or in
the event that the conditions provided in the immediately preceding sentence are
not satisfied, this Agreement shall be null and void as if it had never been
executed.
7. This Agreement may be signed in any number of counterparts, each of
which shall be an original and all of which together shall constitute the same
instrument, with the same effect as if the signatures thereto and hereto were
upon the same instrument.
<PAGE>
4
8. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York, regardless of the law that might be
applied under applicable principles of conflicts of law.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by their authorized representatives as of the date first above written.
BESSEMER HOLDINGS, L.P.,
by KYLIX HOLDINGS L.L.C.,
its general partner,
by DEMAREST CORPORATION,
a manager,
by /s/ Robert D. Lindsay
-----------------------
Name: Robert D. Lindsay
Title: President
BESSEC HOLDINGS, L.P.,
by KYLIX HOLDINGS L.L.C.,
its general partner,
by DEMAREST CORPORATION,
a manager,
by /s/ Robert D. Lindsay
-----------------------
Name: Robert D. Lindsay
Title: President
<PAGE>
5
BESSEMER HOLDINGS SPECIAL SITUATIONS,
L.P.,
by KYLIX HOLDINGS L.L.C.,
its general partner,
by DEMAREST CORPORATION,
a manager,
by /s/ Robert D. Lindsay
-----------------------
Name: Robert D. Lindsay
Title: President
BGE PARTNERS, L.P.,
by KYLIX HOLDINGS L.L.C.,
its general partner,
by DEMAREST CORPORATION,
a manager,
by /s/ Robert D. Lindsay
-----------------------
Name: Robert D. Lindsay
Title: President
BNE PARTNERS, L.P.,
by KYLIX HOLDINGS L.L.C.,
its general partner,
by DEMAREST CORPORATION,
a manager,
by /s/ Robert D. Lindsay
-----------------------
Name: Robert D. Lindsay
Title: President
<PAGE>
6
BTE PARTNERS, L.P.,
by /s/ Ed Smith
----------------------
Name: Ed Smith
Title: Authorized Signatory
BCE PARTNERS, L.P.,
by KYLIX HOLDINGS L.L.C.,
its general partner,
by DEMAREST CORPORATION,
a manager,
by /s/ Robert D. Lindsay
------------------------
Name: Robert D. Lindsay
Title: President
GOLDMAN, SACHS & CO.,
by /s/
------------------------
Name:
Title:
GS CAPITAL PARTNERS, L.P.,
by GS ADVISORS, L.P.,
its general partner,
by GS ADVISORS, INC.,
its general partner,
by /s/
------------------------
Name:
Title:
<PAGE>
7
STONE STREET FUND 1992, L.P.,
by STONE STREET PERFORMANCE CORP.,
its managing general partner,
by C.H. Skodinski
----------------------------
Name: C.H. Skodinski, V.P.
Title:
BRIDGE STREET FUND 1992, L.P.,
by STONE STREET PERFORMANCE CORP.,
its managing general partner,
by C.H. Skodinski
----------------------------
Name: C.H. Skodinski, V.P.
Title:
DONALDSON, LUFKIND & JENRETTE SECURITIES
CORPORATION,
by /s/ Ivy Dodes
-------------------------
Name: Ivy Dodes
Title: Vice President
DLJ FIRST ESC L.L.C.,
by DLJ LBO PLANS MANAGEMENT
CORPORATION, a manager,
by /s/ Ivy Dodes
-------------------------
Name: Ivy Dodes
Title: Vice President
<PAGE>
8
DLJ MERCHANT BANKING FUNDING, INC.,
by /s/ Ivy Dodes
-------------------------
Name: Ivy Dodes
Title: Vice President
DLJ MERCHANT BANKING PARTNERS, L.P.,
by DLJ MERCHANT BANKING, INC.,
its managing general partner,
by /s/ Ivy Dodes
-------------------------
Name: Ivy Dodes
Title: Vice President
DLJ INTERNATIONAL PARTNERS, C.V.,
by DLJ OFFSHORE MANAGEMENT, N.V.,
its resident general partner,
by PIERSON TRUST (CURACAO) N.V.,
its managing director,
by /s/ Ivy Dodes
-------------------------
Name: Ivy Dodes
Title: Vice President
CHASE EQUITY ASSOCIATES, L.P.,
by CHASE VENTURE PARTNERS,
its general partner,
by /s/ John O'Connor
-------------------------
Name: John O'Connor
Title: General Partner
<PAGE>
9
BCP/ESSEX HOLDINGS INC.,
by /s/ Steven R. Abbott
-----------------------------
Name: Steven R. Abbott
Title: President & Chief
Executive Officer
<PAGE>
Exhibit 10.4
REGISTRATION RIGHTS AGREEMENT, dated as of April [ ],
1997, among ESSEX INTERNATIONAL INC., a Delaware corporation
("ESI"), BESSEMER HOLDINGS, L.P., a Delaware limited
partnership ("BHLP"), BESSEC HOLDINGS, L.P., a Delaware
limited partnership, BESSEMER HOLDINGS SPECIAL SITUATIONS,
L.P., a Delaware limited partnership, BGE PARTNERS, L.P., a
Delaware limited partnership, BNE PARTNERS, L.P., a Delaware
limited partnership, BTE PARTNERS, L.P., a Cayman Islands
limited partnership and BCE PARTNERS, L.P., a Delaware limited
partnership.
WHEREAS ESI is in the process of offering certain of its shares of
common stock, par value $0.01 per share ("Common Stock") to the public in a
public offering (the "Offering"), as described in the Registration Statement on
Form S-1 filed with the Securities and Exchange Commission ("SEC") on February
19, 1997, as Registration No. 333-22043;
WHEREAS BHLP and certain of its affiliates will continue to own Common
Stock the sale of which is restricted under Federal securities laws; and
WHEREAS ESI has agreed to provide, or to cause certain other issuers
to provide, registration rights with respect to the Common Stock owned by BHLP
and certain of its affiliates, and any other securities issued to BHLP or
certain of its affiliates by ESI or an associated entity.
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:
SECTION 1. DEFINITIONS. As used in this Agreement, the following
terms have the following meanings:
"AFFILIATE" of any Person means any Person that, directly or
indirectly through one or more intermediaries, controls, is controlled by or is
under common control with such 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. For the purposes of this Agreement, (a)
each limited partner of each Initial Holder shall be considered an Affiliate of
BHLP and (b) neither ESI nor any person controlled by ESI shall be considered to
be an Affiliate of BHLP.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time.
<PAGE>
2
"FORM S-3" means Form S-3 under the Securities Act or any successor
form or any similar form that permits incorporation by reference of reports
filed by ESI under the Exchange Act.
"INITIAL HOLDER" means each of the parties hereto, other than ESI.
"INVESTOR SHAREHOLDERS AGREEMENT" means the Investors Shareholders
Agreement, dated as of October 9, 1992, among the Company and certain
shareholders named therein, as amended from time to time.
"MANAGING UNDERWRITERS" means the Underwriter or Underwriters that
manage or lead an underwritten offering.
"MANAGEMENT STOCKHOLDERS AGREEMENT" means the Management Stockholders
and Registration Rights Agreement, dated as of October 9, 1992, among the
Company and certain management purchasers named therein, as amended from time to
time.
"PERSON" means any individual, partnership, corporation, trust or
other entity.
"PROSPECTUS" means the prospectus included in any Registration
Statement (including a prospectus that discloses information previously omitted
from a prospectus filed as part of an effective registration statement in
reliance upon Rule 430A under the Securities Act), as amended or supplemented by
any prospectus supplement with respect to the terms of the offering of any
portion of the Registrable Securities covered by such Registration Statement,
and all amendments and supplements to the prospectus, including post-effective
amendments and including any documents incorporated by reference in any of the
above described documents.
"REGISTRABLE SECURITIES" means all Securities then beneficially owned
by BHLP and any of its Affiliates.
"REGISTRATION PERIOD" has the meaning set forth in Section 2(b)
hereof.
"REGISTRATION STATEMENT" means any registration statement filed by ESI
with the SEC under the Securities Act that covers some or all Registrable
Securities, and any amendments or supplements thereto, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all documents and other materials incorporated by reference
therein, including a Shelf Registration Statement.
"SECURITIES" means Common Stock as well as any other shares of capital
stock or other securities into which Common Stock or any Securities are
reclassified or changed, including by reason of a merger, consolidation,
reorganization or recapitalization or otherwise are distributed with respect to
Common Stock or any Securities.
<PAGE>
3
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time.
"SHELF REGISTRATION" means a registration effected pursuant to
Section 2 hereof.
"SHELF REGISTRATION STATEMENT" means a "shelf" registration statement
filed by ESI pursuant to the provisions of Section 2 hereof with the SEC
covering offers and sales in accordance with Rule 415 under the Securities Act,
or any similar rule that may be adopted by the SEC (whether or not ESI is then
eligible to use Form S-3), that covers some or all of the Registrable
Securities, and any amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"UNDERWRITER" means any underwriter of Registrable Securities in
connection with an offering thereof pursuant to a Registration Statement.
SECTION 2. SHELF REGISTRATION. (a) Upon written demand (a "Demand")
by BHLP, ESI shall prepare and, not later than 60 days after the date of such
demand, shall file with the SEC, and thereafter shall cause to be declared
effective under the Securities Act as soon as practicable, a Shelf Registration
Statement relating to the Registrable Securities in a manner elected by BHLP and
set forth in such Shelf Registration Statement. No securities other than
Registrable Securities shall be included in any such initial Shelf Registration
Statement or any additional Shelf Registration Statement with respect thereto
without the consent of BHLP; PROVIDED, HOWEVER, that securities held by parties
to the Management Stockholders Agreement (other than the Company) may be
included as a result of incidental or "piggyback" registration rights granted by
ESI to such parties but only if securities held by parties to the Investors
Shareholders Agreement (other than any Initial Holder) are included in the
initial Shelf Registration Statement or any additional Shelf Registration
Statement.
(b) Subject to Section 5 hereof, ESI shall use its best efforts to
keep the Shelf Registration Statement continuously effective during the period
(the "Registration Period") from the date a Registration Statement is declared
effective by the SEC until all Registrable Securities have been sold or can be
sold without restriction, including volume and manner of sale restrictions,
under the Securities Act; PROVIDED, HOWEVER, that ESI's obligation to keep the
Shelf Registration Statement continuously effective during the Registration
Period shall terminate 90 days after the date upon which the Initial Holders'
beneficial ownership of ESI common stock drops below 10% of the outstanding
shares of ESI common stock..
(c) Without limiting the foregoing, ESI shall be deemed not to have
used its best efforts to keep the Shelf Registration Statement effective during
the Registration Period if ESI voluntarily takes any action or fails to take any
action that would result in (i) BHLP or any of its Affiliates not being able to
offer and sell
<PAGE>
4
Registrable Securities under the Shelf Registration Statement, (ii) such Shelf
Registration Statement failing to comply as to form with the applicable
requirements of the Securities Act or (iii) any Prospectus forming a part of any
Shelf Registration Statement containing an untrue statement of a material fact
or omitting to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading unless,
in each case, (x) such action or failure to take action is required by
applicable law, rule, regulation, or legal proceeding or (y) such action or
failure to take action is permitted by Section 5 hereof.
(d) Subject to Section 5 hereof, if the Shelf Registration Statement
ceases to be effective for any reason at any time during the Registration
Period, ESI shall use its best efforts to obtain the prompt withdrawal of any
order suspending the effectiveness thereof, and shall (i) within 5 days of such
cessation of effectiveness, amend the Shelf Registration Statement in a manner
reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or (ii) file an additional Shelf Registration Statement
subsequent to the expired or ineffective Shelf Registration Statement covering
the Registrable Securities. If any additional Shelf Registration Statement is
filed, ESI shall cause such Shelf Registration Statement to be declared
effective as soon as practicable after such filing and to keep such Shelf
Registration Statement continuously effective for the remainder of the
Registration Period. As used herein, the term "Shelf Registration Statement"
means any initial Shelf Registration Statement and any additional or subsequent
Shelf Registration Statement filed as contemplated by this Section.
(e) Subject to Section 5 hereof, ESI shall immediately supplement and
amend any Shelf Registration Statement if (i) required by the SEC or the rules,
regulations or instructions applicable to such Shelf Registration Statement
(including to cause all information in such Shelf Registration Statement to
conform in all respects to all information contained in reports filed by ESI
with the SEC pursuant to the Exchange Act), (ii) otherwise required by, or
advisable under, the Securities Act or (iii) reasonably requested by BHLP or by
the Managing Underwriters with respect to an underwritten offering of such
Registrable Securities.
(f) As soon as practicable after determining that any Registrable
Securities have not been included in a Shelf Registration Statement, ESI shall
file a subsequent Shelf Registration Statement covering all such unregistered
Registrable Securities that includes a combined Prospectus permitting the
inclusion in such Prospectus of all Registrable Securities, including
Registrable Securities included in a previously filed Registration Statement;
PROVIDED, HOWEVER, that no such subsequent Shelf Registration Statement need be
filed for Registrable Securities representing less than 10% of the then
outstanding Common Stock of ESI unless BHLP informs ESI that BHLP or any of its
Affiliates currently intends to sell such Registrable Securities.
(g) If at any time or from time to time BHLP or any of its Affiliates
desires to sell Registrable Securities in an underwritten offering pursuant to
the Shelf
<PAGE>
5
Registration Statement, the Underwriters, including the Managing Underwriter,
shall be selected by BHLP.
(h) If ESI is, at the time of any Demand, not permitted to file a
Shelf Registration Statement, or if at any time during the Registration Period
ESI is not permitted to maintain a Shelf Registration Statement, ESI shall use
its best efforts to, upon demand, provide BHLP and its Affiliates with
substantially identical registration rights to the fullest extent permitted by
law in a manner consistent with this Section and Sections 4 and 5 hereof.
SECTION 3. REGISTRATION RIGHTS IN OTHER AGREEMENTS. The registration
rights granted in this Agreement shall be in addition to any other registration
rights granted by ESI to the parties hereto (other than ESI) in any other
agreement.
SECTION 4. REGISTRATION PROCEDURES. In connection with any
Registration Statement the following provisions shall apply:
(a) ESI shall furnish to BHLP and its counsel prior to the filing
thereof with the SEC, a copy of any such Registration Statement (including any
preliminary prospectus contained therein), and each amendment thereto and each
amendment or supplement, if any, to the Prospectus included therein or document
to be incorporated by reference therein and shall reflect in each such document,
when so filed with the SEC, such reasonable comments as BHLP may propose.
(b) ESI shall ensure that (i) any such Registration Statement and any
amendment thereto and any Prospectus forming part thereof and any amendment or
supplement thereto complies as to form in all material respects with the
Securities Act, (ii) any such Registration Statement and any amendment thereto
does not, when it becomes effective, 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 not misleading and (iii) subject to Section 5
hereof, any Prospectus forming part of any such Registration Statement, and any
amendment or supplement to such Prospectus, does not include 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 other than, in clauses (ii) and (iii), any such untrue
statement or omission made therein in reliance upon and conformity with written
information furnished to ESI by or on behalf of BHLP or any of its Affiliates
specifically for inclusion therein.
(c) ESI shall promptly advise BHLP and, if requested by BHLP,
promptly confirm such advice in writing:
(i) when any such Registration Statement and any amendment or
supplement thereto has been filed with the SEC and when any such
Registration Statement or any post-effective amendment thereto has become
effective;
<PAGE>
6
(ii) of any request by the SEC for amendments or supplements to any
such Registration Statement or the Prospectus included therein or for
additional information;
(iii) of the issuance by the SEC of any stop order suspending the
effectiveness of any such Registration Statement or the initiation of any
actions or proceedings for that purpose;
(iv) of the receipt by ESI of any notification with respect to the
suspension of the qualification of the Registrable Securities included
therein for sale in any jurisdiction or the initiation or threatening of
any action or proceeding for such purpose; and
(v) of the happening of any event that requires the making of any
changes in any such Registration Statement or Prospectus so that, as of
such date, the statements therein are not misleading and do not omit to
state a material fact required to be stated therein or necessary (in the
case of the Prospectus, in light of the circumstances under which they were
made) to make the statements therein not misleading.
(d) ESI shall use its best efforts to obtain the withdrawal of any
order suspending the effectiveness of any such Registration Statement at the
earliest possible time.
(e) ESI shall furnish to BHLP and its counsel, without charge, other
than incremental out-of-pocket costs, a copy of each Registration Statement and
any and all post-effective amendments thereto, including financial statements
and schedules, and all exhibits thereto (including those incorporated therein by
reference).
(f) ESI shall furnish BHLP and its counsel, without charge, copies of
any and all transmittal letters or other correspondence with the SEC or any
other governmental entity relating to a Registration Statement or the public
offering of ESI's securities.
(g) ESI shall, during the Registration Period, deliver to BHLP,
without charge, other than incremental out-of-pocket costs, as many copies of
the Prospectus (including each preliminary Prospectus) included in such
Registration Statement and any amendment or supplement thereto as such Person
may reasonably request; and subject to Section 5 hereof, ESI consents to the use
of the Prospectus or any amendment or supplement thereto by each such Person in
connection with the offering and sale of the Registrable Securities covered by
the Prospectus or any amendment or supplement thereto.
(h) Prior to any offering of Registrable Securities pursuant to any
Registration Statement, ESI shall use its best efforts to register or qualify or
cooperate with BHLP and its counsel in connection with the registration or
qualification of such Registrable Securities for offer and sale under the
securities, Blue Sky or similar laws
<PAGE>
7
of such jurisdictions as BHLP requests, and ESI shall use its best efforts to do
any and all other acts or things necessary or advisable to enable the offer and
sale in such jurisdictions of the Registrable Securities covered by such
Registration Statement; PROVIDED, HOWEVER, that ESI shall not be required to
qualify generally to do business in any jurisdiction where it is not then so
qualified or to take any action that would subject it to general service of
process or to taxation in any such jurisdiction where it is not then so subject.
(i) ESI shall cooperate with BHLP and its Affiliates to facilitate
the timely preparation and delivery of certificates representing Registrable
Securities to be sold pursuant to any Registration Statement free of any
restrictive legends and in such denominations and registered in such names as
requested prior to such sales.
(j) Subject to Section 5 hereof, at any time and from time to time
upon the occurrence of any event contemplated by paragraph (c)(v) above, ESI
shall promptly prepare and file with the SEC, a post-effective amendment to any
Registration Statement or an amendment or supplement to the related Prospectus
and file any other required document so that, as thereafter delivered to
purchasers of the Registrable Securities offered thereby, the Prospectus will
not include an untrue statement of a material fact or omit to state any material
fact necessary (in the case of the Prospectus, in the light of the circumstances
under which they were made) to make the statement therein not misleading.
(k) ESI shall comply with all applicable rules and regulations of the
SEC and shall make generally available to BHLP as soon as practicable after the
effective date of the applicable Registration Statement an earnings statement
satisfying the provisions of Section 11(a) of the Securities Act and Rule 158
under the Securities Act.
(l) BHLP and its Affiliates shall furnish to ESI such information
regarding their proposed distribution of Registrable Securities as ESI may from
time to time reasonably require for inclusion in any Registration Statement
covering the sale of Registrable Securities. Such information at the time any
Registration Statement and any amendment thereto becomes effective, and at the
time any Prospectus or supplement thereto previously reviewed by BHLP forming a
part of any Registration Statement is delivered in any offering of Registrable
Securities, shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary (in the case of
the Prospectus, in light of the circumstances which the were made) to make the
statements therein not misleading. BHLP shall advise ESI and, if requested by
ESI, confirm such advice in writing in the event that BHLP becomes aware of the
happening of any event that requires the making of any changes in a Registration
Statement or Prospectus so that as of such dates the statements therein provided
by BHLP and its Affiliates specifically for inclusion therein are not misleading
and do not omit to state a material fact required to be stated therein or
necessary (in the case of the Prospectus, in light of the circumstances under
which they were made) to make the statements therein not misleading.
<PAGE>
8
(m) Subject to Section 5 hereof, ESI shall, upon request, promptly
incorporate in a Prospectus or Prospectus supplement or post-effective amendment
to a Registration Statement, such information, if any, as the Managing
Underwriters, BHLP and ESI reasonably agree should be included therein and shall
make all required filings of such Prospectus or Prospectus supplement or
post-effective amendment as soon as practicable following notification of the
matters to be incorporated in such Prospectus or Prospectus supplement or
post-effective amendment, and ESI shall print and deliver copies of such amended
Prospectus or Prospectus supplement to all purchasers of such Registrable
Securities.
(n) If requested by BHLP in connection with the offering and sale of
Registrable Securities pursuant to a Registration Statement, ESI shall enter
into one or more underwriting agreements with the Managing Underwriters selected
in accordance with Section 2(g) hereof. Any such underwriting agreement shall
contain such indemnities and other agreements as are then customarily included
in underwriting agreements relating to secondary public offerings; PROVIDED,
HOWEVER, that in no event shall the indemnification provisions and procedures in
such underwriting agreements be less favorable to the Managing Underwriters than
those contained in Section 7 hereof.
(o) ESI shall: (i) make reasonably available for inspection during
normal business hours by BHLP, any Underwriter participating in any disposition
pursuant to a Registration Statement, and any attorney, accountant or other
agent or representative retained by BHLP or any such Underwriter all relevant
financial and other records, pertinent corporate documents and properties of ESI
and its subsidiaries; (ii) cause ESI's officers, directors and employees to
supply all relevant information reasonably requested by BHLP or any such
Underwriter, attorney, accountant, agent or representative in connection with
any such Registration Statement as is customary for similar due diligence
examinations; PROVIDED, HOWEVER, that any information that is designated in
writing by ESI as confidential at the time of delivery of such information shall
be kept confidential by BHLP or any such Underwriter, attorney, accountant,
agent or representative, unless (x) disclosure is, in the opinion of counsel to
the disclosing party, required to be made in connection with a court proceeding
or required by law or (y) such information becomes available to the public
generally or through a third party without an accompanying obligation of
confidentiality; (iii) make such representations and warranties to the holders
of Registrable Securities registered thereunder and the Underwriters, if any, in
form, substance and scope as are customarily made by issuers to Underwriters in
secondary public underwritten offerings; (iv) obtain opinions of counsel to ESI
and updates thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the Managing Underwriters, if any) addressed
to each selling holder of Registrable Securities and the Underwriters, if any,
covering such matters as are customarily covered in opinions requested in
underwritten secondary public offerings by an affiliate and such other matters
as may be reasonably requested by such holders of Registrable Securities and
Underwriters; (v) obtain "cold comfort" letters and updates thereof from the
independent certified public accountants of ESI (and, if necessary, any other
independent certified public accountants of any
<PAGE>
9
subsidiary of ESI or of any business acquired by ESI for which financial
statements and financial data are, or are required to be, included in a
Registration Statement), addressed to each holder of Registrable Securities and
the Underwriters, if any, in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with underwritten
secondary public offerings by an affiliate; and (vi) deliver such documents and
certificates as may be reasonably requested by BHLP and the Managing
Underwriters, if any, including those to evidence compliance with Section 4(i)
hereof and with any customary condition contained in the underwriting agreement
or other agreement entered into by ESI. The foregoing action set forth in
clauses (iii), (iv), (v) and (vi) of this Section 4(o) shall be performed at
(A) the effectiveness of such Registration Statement and each post-effective
amendment thereto and (B) each closing under any underwriting or similar
agreement as and to the extent required thereunder. The foregoing action set
forth in clauses (ii), (iv) and (v) of this Section 4(o) shall also be performed
at least annually if requested by BHLP or as reasonably requested in light of
the need for amendments and supplements to Registration Statements.
(p) ESI shall cause all Registrable Securities to be listed on each
securities exchange or quoted through each automated interdealer quotation
system on which similar securities of ESI are then listed or quoted.
SECTION 5. SUSPENSION OF OFFERINGS IN CERTAIN CIRCUMSTANCES. ESI
shall be entitled for the period referred to below to postpone the filing of
any Registration Statement or the taking of any other action (including those
actions required by Section 2 or 4(m) hereof) otherwise required to be
prepared, filed or taken by it pursuant to Sections 2 and 4 hereof or to direct
the suspension of any public offering, sale or distribution of Registrable
Securities if the Board of Directors of ESI (the "Board") determines in good
faith that any disclosure that would be required in connection therewith would
have a material adverse effect on ESI or any financing, acquisition,
disposition, merger, business combination, corporate reorganization, or other
transaction or development involving ESI or any subsidiary of ESI (a "Business
Development Determination"). Such postponement or direction shall continue
until such time as the Board determines that the preparation or filing of such
Registration Statement or the taking of any such action or such public
offering, sale or distribution would no longer have a material adverse effect
on ESI or any such transaction but shall not, in any event, exceed 30 days for
any particular Business Development Determination or 90 days for all Business
Development Determinations during any twelve month period. No Business
Development Determination shall occur within 90 days of the expiration of a
postponement or suspension caused by another Business Development
Determination. The Board shall, as promptly as practicable, give BHLP written
notice of any Business Development Determination.
SECTION 6. REGISTRATION EXPENSES. ESI shall bear all out-of-pocket
costs and expenses incurred in connection with Sections 2 and 4 hereof,
including fees and disbursement of counsel and accountants for it and the
holders of Registrable Securities, printing, messenger and delivery expenses and
all SEC, NASD and Blue
<PAGE>
10
Sky filing fees (including those payable by any Underwriters); PROVIDED HOWEVER,
that such expenses shall exclude any brokerage fees or underwriting discounts
and fees.
SECTION 7. INDEMNIFICATION AND CONTRIBUTION. (a) INDEMNIFICATION OF
THE PARTIES (OTHER THAN ESI). In the case of any offering or sale of
Registrable Securities covered by this Agreement, ESI shall indemnify and hold
harmless BHLP and its Affiliates and each person affiliated with or retained by
any of them and who may be subject to liability under any applicable securities
laws, against any and all losses, claims, damages or liabilities to which they
or any of them may become subject under the Securities Act or any other statute
or common law of the United States of America or political subdivision thereof,
or any other country or political subdivision thereof or otherwise, including,
subject to Section 7(c) hereof, any amount paid in settlement of any litigation
commenced or threatened (including any amounts paid pursuant to or in settlement
of claims made under customary indemnification or contribution provisions of any
underwriting or similar agreement entered into by BHLP or its Affiliates in
connection with any offering or sale of Registrable Securities), and shall,
subject to Section 7(c) hereof, promptly reimburse them, as and when incurred,
for any legal fees or disbursements or other expenses incurred by them in
connection with investigating any claims and defending any actions, insofar as
any such losses, claims, damages, liabilities or actions shall arise out of or
shall be based upon any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement (or in any preliminary or
final Prospectus included therein) or other offering document relating to the
offering and sale of such Registrable Securities, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary (in the case of a Prospectus, in light of the circumstances in which
they were made) to make the statements therein not misleading; PROVIDED,
HOWEVER, that ESI will not be liable in any case to the extent that any such
loss, claim, damage, liability or action arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written information
furnished to ESI by or on behalf of BHLP or its Affiliates specifically for
inclusion therein, including any such information furnished pursuant to
Section 4(l) hereof.
(b) INDEMNIFICATION OF ESI. In the case of any offering or sale of
Securities covered by this Agreement, each holder of Registrable Securities that
sells such Registrable Securities pursuant to a Registration Statement shall
indemnify and hold harmless ESI and each person, if any, who controls ESI within
the meaning of Section 15 of the Securities Act, each person affiliated with or
retained by ESI and who may be subject to liability under any applicable
securities laws, and each of ESI's directors and those officers of ESI who shall
have signed any Registration Statement, offering memorandum or other offering
document, against any and all losses, claims, damages or liabilities to which
they or any of them may become subject under the Securities Act or any other
statute or common law of the United States of America or political subdivision
thereof, or any other country or political subdivision thereof or otherwise,
including, subject to Section 7(c) hereof, any amount paid in settlement of any
litigation commenced or threatened (including any
<PAGE>
11
amounts paid pursuant to or in settlement of claims made under customary
indemnification or contribution provisions of any underwriting or similar
agreement entered into by ESI in connection with any offering or sale of
Registrable Securities pursuant to this Agreement), and shall, subject to
Section 7(c) hereof, promptly reimburse them, as and when incurred, for any
legal fees or disbursements or other expenses incurred by them in connection
with investigating any claims and defending any actions, insofar as any such
losses, claims, damages, liabilities or actions shall arise out of or shall be
based upon any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement (or in any preliminary or final
Prospectus included therein) or other offering document relating to the offering
and sale of such Registrable Securities, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary (in the
case of a Prospectus, in light of the circumstances in which they were made) to
make the statements therein not misleading; PROVIDED, HOWEVER, that BHLP and its
Affiliates shall not be liable in any case, except to the extent such loss,
claim, damage, liability or action arises out of or is based upon written
information solely relating to BHLP or its Affiliates furnished to ESI by or on
behalf of BHLP or its Affiliates specifically for inclusion in any Registration
Statement, any preliminary Prospectus or Prospectus contained in such
Registration Statement, any offering memorandum or other offering document, or
any amendment thereof or supplement thereto, including any such information
furnished pursuant to Section 4(l) hereof.
(c) PROCEDURE FOR INDEMNIFICATION. Each party indemnified under
paragraph (a) or (b) of this Section 7, shall, promptly after receipt of notice
of the commencement of any action against such indemnified party in respect of
which indemnity may be sought, notify the indemnifying party in writing of the
commencement thereof. The omission of any indemnified party so to notify an
indemnifying party of such action shall not relieve the indemnifying party from
any liability in respect of such action that it may have to such indemnified
party on account of the indemnity agreement contained in paragraph (a) or (b) of
this Section 7, except to the extent that the indemnifying party was or is
actually prejudiced thereby, and in no event shall relieve the indemnifying
party from any other liability that it may have to such indemnified party to the
extent the indemnifying party has not actually been prejudiced thereby. In case
any such action shall be brought against any indemnified party and such
indemnified party shall notify an indemnifying party of the commencement
thereof, the indemnifying party shall 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. If the indemnifying party so assumes the defense
thereof, it may not agree to any settlement of any such action as the result of
which any remedy or relief, other than monetary damages for which the
indemnifying party shall be responsible hereunder, shall be applied to or
against the indemnified party, without the prior written consent of the
indemnified party. An indemnifying party may not assume or jointly assume the
defense of an action if in the reasonable judgment of the indemnified party a
conflict of interest may exist between the indemnifying party and such
indemnified party with respect to such action. An indemnifying party who is not
entitled to, who elects not to, or who has
<PAGE>
12
not appointed counsel reasonably satisfactory to the indemnified party within a
reasonable time to, assume the defense of an action shall be obligated to pay
the fees and expenses of counsel for the indemnified party; PROVIDED, HOWEVER,
that the indemnifying party shall not be obligated to pay the fees and the
expenses of more than one counsel (plus local counsel if necessary) for all
parties who may be indemnified by such indemnifying party with respect to such
action, unless in the reasonable judgment of any indemnified party a conflict of
interest exists between such indemnified party and any other indemnified party
with respect to such action. If the indemnifying party does not assume the
defense of an action, it shall be bound by any settlement to which the
indemnified party agrees, irrespective of whether the indemnifying party
consents thereto; PROVIDED, HOWEVER, that if the indemnifying party does not
assume the defense of an action because of a conflict of interest that prevented
it from doing so, then the indemnifying party shall be bound by any settlement
to which the indemnified party agrees and to which the indemnifying party
consents (which consent shall not be unreasonably withheld). If any settlement
of any claim is effected by the indemnified party prior to commencement of any
action relating thereto, the indemnifying party shall be bound thereby only if
it has consented in writing thereto. In any action with respect to which the
indemnifying party has assumed the defense thereof, the indemnified party shall
continue to be entitled to participate in the defense thereof, with counsel of
its own choice; PROVIDED, HOWEVER, that the indemnifying party shall be relieved
of the obligation hereunder to reimburse the indemnified party for the costs of
such counsel.
SECTION 8. RECAPITALIZATIONS; SPIN-OFFS AND SIMILAR TRANSACTION. If
ESI distributes, or any subsidiary or affiliate of ESI distributes, to BHLP or
any of its Affiliates, any capital stock or other securities of an issuer other
than ESI, ESI shall, or shall cause the issuer of such securities to, grant to
BHLP and its Affiliates, registration rights with respect to such capital stock
or other securities substantially the same as the registration rights granted
pursuant to this Agreement with respect to the Registrable Securities.
SECTION 9. MISCELLANEOUS. (a) NO INCONSISTENT AGREEMENTS. ESI has
not as of the date hereof taken any actions in accordance with or entered into
and except as expressly permitted by Section 4 hereof ESI shall not from the
date hereof until the expiration of the Registration Period take any actions in
accordance with or enter into, any agreement or arrangement with respect to any
class of its securities that limits or interferes with or is inconsistent with
the rights granted to BHLP and its Affiliates herein or otherwise conflicts with
the provisions hereof.
(b) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may be amended, qualified, modified
or supplemented only by means of a written instrument executed by the affected
party or parties (it being understood that any such amendment executed by BHLP
shall bind all holders of Registrable Securities and no holders of Registrable
Securities other than BHLP may execute any such instrument without BHLP's
consent).
<PAGE>
13
(c) ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned or transferred,
in whole or in part, by any of the parties hereto, except that BHLP or any of
its Affiliates may assign, in whole or in part, any or all its rights,
interests, and obligations under this Agreement to any Affiliate of BHLP, and
such Affiliate may assign any or all its rights, interests and obligations under
this Agreement to another such Affiliate or to BHLP, but no such assignment
shall relieve any party hereto of any of its obligations under this Agreement.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of, and be enforceable by, the parties and their respective
successors and assigns. Any attempted assignment or transfer in violation of
this Section 9(c) shall be void.
(d) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which taken
together shall be considered one and the same agreement, it being understood
that the parties need not sign the same counterpart.
(e) INTERPRETATION. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof. Whenever the words "included", "includes" or "including" are
used in this Agreement they shall be deemed to be followed by the words "without
limitation".
(f) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York applicable to
agreements made and to be performed in New York, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law.
(g) CONSENT TO JURISDICTION. Each of the parties hereto irrevocably
submits to the exclusive jurisdiction of the United States District Court for
the Southern District of New York located in the borough of Manhattan in the
City of New York, or if such court does not have jurisdiction, the Supreme Court
of the State of New York, New York County, for the purposes of any suit, action
or other proceeding arising out of this Agreement or any transaction
contemplated hereby. Each of the parties hereto further agrees that service of
any process, summons, notice or document by U.S. registered mail to such party's
respective address set forth in Section 9(h) hereof (as it may be changed from
time to time) shall be effective service of process for any action, suit or
proceeding in New York with respect to any matters to which it has submitted to
jurisdiction as set forth above in the immediately preceding sentence. Each of
the parties hereto irrevocably and unconditionally waives any objective to the
laying of venue of any action, suit or proceeding arising out of this Agreement
or the transactions contemplated hereby in (a) the United States District Court
for the Southern District of New York or (b) the Supreme Court of the State of
New York, New York County, and hereby further irrevocably and unconditionally
waives and agrees not to plead or claim in any such court that any such action,
suit or proceeding brought in any such court has been brought in an inconvenient
forum.
<PAGE>
14
(h) NOTICES. All notices, requests and other communications hereunder
shall be in writing (including fax) and shall be sent, delivered or mailed,
addressed, or faxed to the following address (or to such address as any party
may specify as its own by giving notice in accordance herewith):
(a) if to ESI, to:
Essex International Inc.
1601 Wall Street
Fort Wayne, IN 46802
Tel: (219) 461-4439
Fax: (219) 461-4565
Attention: Debra F. Minott, Esq.
with a copy to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
Tel: (212) 474-1293
Fax: (212) 474-3700
Attention: Richard Hall, Esq.
(b) if to any party hereto other than ESI, to such party c/o:
Bessemer Holdings, L.P.
630 Fifth Avenue
New York, NY 10111
Tel: (212) 708-9217
Fax: (212) 969-9032
Attention: Robert D. Lindsay
with a copy to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
Tel: (212) 474-1293
Fax: (212) 474-3700
Attention: Richard Hall, Esq.
<PAGE>
15
Each such notice, request or other communication shall be given (i) by hand
delivery, (ii) by nationally recognized courier service or (iii) by fax, receipt
confirmed. Each such notice, request or communication shall be effective (A) if
delivered by hand or by nationally recognized courier service, when delivered at
the address specified in this Section 9(h) (or in accordance with the latest
unrevoked written direction from such party) and (B) if given by fax, when such
fax is transmitted to the fax number specified in this Section 9(h) (or in
accordance with the latest unrevoked written direction from such party), and the
appropriate confirmation is received.
(i) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.
IN WITNESS WHEREOF, the parties hereto, by their duly authorized
representatives, have caused this Agreement to be executed as of the day and
year first above written.
ESSEX INTERNATIONAL INC.,
by
-------------------------------
Name:
Title:
BESSEMER HOLDINGS, L.P.,
by KYLIX HOLDINGS L.L.C.,
its general partner,
by DEMAREST CORPORATION,
a manager,
by
---------------------------------
Name: Robert D. Lindsay
Title: President
<PAGE>
16
BESSEC HOLDINGS, L.P.,
by KYLIX HOLDINGS L.L.C.,
its general partner,
by DEMAREST CORPORATION,
a manager,
by
---------------------------------
Name: Robert D. Lindsay
Title: President
BESSEMER HOLDINGS SPECIAL SITUATIONS,
L.P.,
by KYLIX HOLDINGS L.L.C.,
its general partner,
by DEMAREST CORPORATION,
a manager,
by
---------------------------------
Name: Robert D. Lindsay
Title: President
BGE PARTNERS, L.P.,
by KYLIX HOLDINGS L.L.C.,
its general partner,
by DEMAREST CORPORATION,
a manager,
by
---------------------------------
Name: Robert D. Lindsay
Title: President
<PAGE>
17
BNE PARTNERS, L.P.,
by KYLIX HOLDINGS L.L.C.,
its general partner,
by DEMAREST CORPORATION,
a manager,
by
---------------------------------
Name: Robert D. Lindsay
Title: President
BTE PARTNERS, L.P.,
by
---------------------------------
Name: Ed Smith
Title: Authorized Signatory
BCE PARTNERS, L.P.,
by KYLIX HOLDINGS L.L.C.,
its general partner,
by DEMAREST CORPORATION,
a manager,
by
---------------------------------
Name: Robert D. Lindsay
Title: President
<PAGE>
Exhibit 10.5
TERMINATION BENEFITS AGREEMENT
This Termination Benefits Agreement ("Agreement") is made and entered
into as of , 1997 by and between
BCP/Essex Holdings Inc., a Delaware corporation (hereinafter
referred to as the "Corporation"), and , a resident
of the State of Indiana (hereinafter referred to as "Employee").
W I T N E S S E T H
WHEREAS, Employee is now serving as __________ of the Corporation and
as ________ of the Corporation's subsidiary, Essex Group, Inc. ("Essex"); and
WHEREAS, the Corporation believes that Employee has made valuable
contributions to the productivity and profitability of the Corporation and
Essex; and
WHEREAS, the Corporation desires to encourage Employee to continue to
make such contributions and not to seek or accept employment elsewhere; and
WHEREAS, the Corporation, therefore, desires to assure Employee of
certain benefits in case of any termination or significant redefinition of the
terms of his employment with the Corporation subsequent to any Change in Control
of the Corporation.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants herein contained and the mutual benefits herein provided, the
Corporation and Employee hereby agree as follows:
1. The term of this Agreement shall be from the date hereof through
December 31, 1998; provided, however, that such term shall be automatically
extended for an additional year on December 31, 1997 and on December 31 of each
year thereafter unless either party hereto gives written notice to the other
party not to so extend prior to November 30 of the year before which the
Agreement would otherwise terminate. Notwithstanding the foregoing, if a
<PAGE>
Change in Control of the Corporation (as defined in Section 2 below) shall occur
prior to the expiration of the original term or any extensions of the term of
this Agreement, then the term of this Agreement shall automatically become a
term of two (2) years commencing on the date of any such Change in Control.
2. As used in this Agreement, "Change in Control" of the Corporation
means any of the following that occurs during the term of this Agreement:
(A) The acquisition by any individual, entity or group (a "Person")
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) other than
Bessemer Holdings, L.P. ("BHLP"), or any affiliate of BHLP (collectively,
"the BH Group") of (X) beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act as in effect from time to time)
of thirty-five percent (35%) or more of either (a) the then outstanding
shares of common stock of the Corporation or (b) the combined voting
power of the then outstanding voting securities of the Corporation
entitled to vote generally in the election of directors and (Y)
beneficial ownership of a greater percentage than the BH Group of either
(a) the then outstanding shares of common stock of the Corporation or (b)
the combined voting power of the then outstanding voting securities of
the Corporation entitled to vote generally in the election of directors;
provided, however, that the following acquisitions shall not constitute
an acquisition of control: (i) any acquisition directly from the
Corporation (excluding an acquisition by virtue of the exercise of a
conversion privilege), (ii) any acquisition by the Corporation, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Corporation or any corporation controlled by the
Corporation, or (iv) any acquisition by any corporation pursuant to a
reorganization, merger or consolidation, if, following such
reorganization, merger or consolidation, the conditions described in
clauses (i), (ii) and (iii) of subsection (C) of this Section 2 are
satisfied;
(B) Individuals who, as of the date hereof or, in the event of an
initial public offering of equity securities of the Corporation or Essex
pursuant to an
2
<PAGE>
effective registration statement under the Securities Act of 1933, as
amended, other than in connection with any employee benefit or similar
plan (an "IPO"), the date that the IPO is closed, constitute the Board of
Directors of the Corporation (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board of Directors of the
Corporation (the "Board"); provided, however, that any individual
becoming a director subsequent to the date hereof or the date of the IPO
whose election, or nomination for election by the Corporation's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption
of office occurs as a result of either an actual or threatened election
contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board;
(C) Approval by the shareholders of, and the consummation by, the
Corporation of a reorganization, merger or consolidation, in each case,
unless, following such reorganization, merger or consolidation, (i) more
than fifty percent (50%) of, respectively, the then outstanding shares of
common stock of the corporation resulting from such reorganization,
merger or consolidation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
outstanding Corporation common stock and outstanding Corporation voting
securities immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their ownership,
immediately prior to such reorganization, merger or consolidation, of the
outstanding Corporation common stock and outstanding Corporation voting
securities, as the case may be, (ii) no Person (excluding the
Corporation, any employee benefit plan or related trust of the
Corporation or such corporation resulting from such reorganization,
merger or consolidation and any Person
-3-
<PAGE>
beneficially owning, immediately prior to such reorganization, merger or
consolidation, directly or indirectly, thirty-five percent (35%) or more
of the outstanding Corporation common stock or outstanding voting
securities of the Corporation, as the case may be) beneficially owns,
directly or indirectly, (X) thirty-five percent (35%) or more of, either
the then outstanding shares of common stock of the corporation resulting
from such reorganization, merger or consolidation or the combined voting
power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and (Y) a
greater percentage than the BH Group of either the then outstanding
shares of common stock of the corporation resulting from such
reorganization, merger or consolidation or the combined voting power of
the then outstanding voting securities of such corporation entitled to
vote generally in the election of directors and (iii) at least a
majority of the members of the board of directors of the corporation
resulting from such reorganization, merger or consolidation were members
of the Incumbent Board at the time of the execution of the initial
agreement providing for such reorganization, merger or consolidation;
or
(D) Approval by the shareholders of the Corporation of (i) a
complete liquidation or dissolution of the Corporation or (ii) the sale
or other disposition of all or substantially all of the assets of the
Corporation, other than to a corporation with respect to which following
such sale or other disposition (a) more than fifty percent (50%) of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or indirectly, by all
or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the outstanding Corporation common
stock and outstanding Corporation voting securities immediately prior to
such sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other disposition, of
the outstanding Corporation common stock and outstanding Corporation
voting securities, as the case may be, (b) no Person (excluding the
Corporation and any employee benefit plan
-4-
<PAGE>
or related trust of the Corporation or such corporation and any Person
beneficially owning, immediately prior to such sale or other disposition,
directly or indirectly, thirty-five percent (35%) or more of the
outstanding Corporation common stock or outstanding Corporation voting
securities, as the case may be) beneficially owns, directly or
indirectly, (X) thirty-five percent (35%) or more of, either the then
outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors and
(Y) beneficial ownership of a greater percentage than the BH Group of
either the then outstanding shares of common stock of such corporation
or the combined voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the election of
directors and (c) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent Board at the
time of the execution of the initial agreement or action of the Board
providing for such sale or other disposition of assets of the
Corporation.
3. The Corporation shall provide Employee with the benefits set forth
in Section 6 of this Agreement upon any termination of Employee's employment
during the term of this Agreement by the Corporation following a Change in
Control for any reason except the following:
(A) Termination by reason of Employee's death.
(B) Termination by reason of Employee's "disability". For purposes
hereof, "disability" shall be defined as Employee's inability by reason
of illness or other physical or mental disability to perform the duties
required by his employment for any consecutive One Hundred Eighty (180)
day period, provided that notice of any termination by the Corporation
because of Employee's "disability" shall have been given to Employee
prior to the resumption by him of the performance of such duties.
(C) Termination upon Employee reaching his normal retirement date,
which for purposes of this Agreement shall be deemed to be the end of the
month during which employee reaches sixty-five (65) years of age.
-5-
<PAGE>
(D) Termination for "cause". As used in this Agreement, the term
"cause" means fraud, dishonesty, theft of corporate assets, or other
gross misconduct by Employee. Notwithstanding the foregoing, Employee
shall not be deemed to have been terminated for cause unless and until
there shall have been delivered to him a copy of a resolution duly
adopted by the affirmative vote of not less than a majority of the entire
membership of the Corporation's Board at a meeting called and held for
the purpose (after reasonable notice to such Employee and an opportunity
for such Employee, together with his counsel, to be heard before such
Board), finding that, in the good faith opinion of such Board, Employee
was guilty of conduct constituting "cause" and specifying the particulars
thereof in detail.
4. The Corporation shall also provide Employee with the benefits set
forth in Section 6 of this Agreement upon any termination of Employee's
employment with the Corporation during the term of this Agreement, at Employee's
option, after a Change in Control followed by the happening of any one of the
following events:
(A) Without Employee's express written consent, the assignment of
Employee to any duties that, in Employee's reasonable judgment, are
materially inconsistent with his positions, duties, responsibilities or
status with the Corporation immediately prior to the Change in Control or
a substantial reduction of his duties or responsibilities that, in
Employee's reasonable opinion, does not represent a promotion from his
position, duties or responsibilities immediately prior to the Change in
Control.
(B) A reduction by the Corporation in Employee's salary from the
level of such salary immediately prior to the Change in Control.
(C) The failure by the Corporation to continue in effect any
incentive, bonus or other compensation plan in which Employee
participates, including but not limited to any stock option plan or
incentive compensation program, unless an equitable arrangement (embodied
in an ongoing substitute or alternative plan), has been made with respect
to such plan in connection with the Change in Control, or the failure by
the
-6-
<PAGE>
Corporation to continue Employee's participation therein, or any action by
the Corporation that would directly or indirectly materially reduce
Employee's participation therein.
(D) The failure by the Corporation to continue to provide Employee
with benefits that collectively are substantially similar to those
enjoyed by Employee or to which Employee was entitled at the time of a
Change in Control.
(E) The Corporation's requiring Employee to be based anywhere other
than the metropolitan area where the Corporation office at which he was
based immediately prior to the Change in Control was located, except for
required travel on the Corporation's business in accordance with the
Corporation's past management practices.
(F) Any failure of the Corporation to obtain the assumption of the
obligation to perform this Agreement by any successor as contemplated in
Section 10 hereof.
(G) Any failure by the Corporation or its shareholders, as the case
may be, to reappoint or reelect Employee to a corporate office held by
him immediately prior to the Change in Control or his removal from any
such office excluding any seat held at such time on the Corporation's
Board of Directors.
(H) The effectiveness of a resignation, tendered at any time, either
before or after a Change in Control and regardless of whether formally
characterized as voluntary or otherwise, by Employee of any corporate
office held by him immediately prior to the Change in Control except any
seat held at such time on the Corporation's Board of Directors, at the
request of the Corporation or at the request of any Person obtaining
control of the Corporation in such Change in Control.
(I) Any purported termination of the Employee's employment which is
not effected pursuant to a Notice of Termination satisfying the
requirements of Section 5 hereof (and, if applicable, Section 3(D)
hereof); and for purposes of this Agreement, no such purported
termination shall be effective.
-7-
<PAGE>
(J) Any request by the Corporation that Employee participate in an
unlawful act.
(K) Any breach by the Corporation of any of the provisions of this
Agreement or any failure by the Corporation to carry out any of its
obligations hereunder.
Notwithstanding anything in this Section 4 to the contrary, Employee's right to
terminate Employee's employment pursuant to this Section 4 shall not be affected
by Employee's incapacity due to physical or mental illness. Employee's right to
obtain the benefits of Section 6 of this Agreement pursuant to this Section 4 is
conditioned upon Employee exercising his option to terminate his employment
within 180 days of one of the events described in this Section 4.
5. Any termination of Employee's employment with the Corporation as
contemplated by Section 3 hereof (except subsection 3(A)) or by Employee as
contemplated by Section 4 hereof shall be communicated by written "Notice of
Termination" to the other party hereto. Any "Notice of Termination" given by
Employee pursuant to Section 4 or given by the Corporation in connection with a
termination as to which the Corporation believes it is not obligated to provide
Employee with benefits set forth in Section 6 hereof shall indicate the specific
provisions of this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for such
termination.
6. Subject to the conditions and exceptions set forth in Section 3
and Section 4 hereof, the following benefits, less any amounts required to be
withheld therefrom under any applicable federal, state or local income tax,
other tax, or social security laws or similar statutes, shall be paid to
Employee upon any termination of his employment with the Corporation subsequent
to a Change in Control:
(A) Within thirty (30) days following such a termination, Employee
shall be paid, at his then effective salary, for services performed
through the date of his termination. In addition, any earned but unpaid
amount of any bonus or incentive payment shall be paid to Employee within
thirty (30) days following the termination of his employment.
-8-
<PAGE>
(B) Within thirty (30) days following such a termination, Employee
shall be paid a lump sum payment of an amount equal to _____ (_) times
Employee's "Base Amount." For purposes hereof, Base Amount is defined as
Employee's annual base salary at the time of the Change in Control plus
the cash incentive compensation actually paid to the Employee during the
12 months prior to the Change in Control.
(C) Employee acknowledges and agrees that payment in accordance with
subsections 6 (A) and 6 (B) shall be deemed to constitute a full
settlement and discharge of any and all obligations of the Corporation to
Employee arising out of his employment with the Corporation and the
termination thereof, except for any vested rights Employee may then have
under any insurance, pension, supplemental pension, thrift, employee
stock ownership, or stock option plans sponsored or made available by the
Corporation.
7. The Corporation is aware that upon the occurrence of a Change in
Control the Board of Directors or a shareholder of the Corporation may then
cause or attempt to cause the Corporation to refuse to comply with its
obligations under this Agreement, or may cause or attempt to cause the
Corporation to institute, or may institute, litigation seeking to have this
Agreement declared unenforceable, or may take or attempt to take other action to
deny Employee the benefits intended under this Agreement. In these
circumstances, the purpose of this Agreement could be frustrated. It is the
intent of the Corporation that Employee not be required to incur the expenses
associated with the enforcement of his rights under this Agreement by litigation
or other legal action, nor be bound to negotiate any settlement of his rights
hereunder, because the cost and expense of such legal action or settlement would
substantially detract from the benefits intended to be extended to Employee
hereunder. Accordingly, if following a Change in Control it should appear to
Employee that the Corporation has failed to comply with any of its obligations
under this Agreement or in the event that the Corporation or any other person
takes any action to declare this Agreement void or unenforceable, or institutes
any litigation or other legal action designed to deny, diminish or to recover
from Employee the benefits entitled to be provided to the Employee hereunder,
and that Employee has complied with all of his obligations under this Agreement,
the Corporation irrevocably
-9-
<PAGE>
authorizes Employee from time to time to retain counsel of his choice, at the
expense of the Corporation as provided in this Section 7, to represent Employee
in connection with the initiation or defense of any litigation or other legal
action, whether such action is by or against the Corporation or any director,
officer, shareholder, or other person affiliated with the Corporation, in any
jurisdiction. Notwithstanding any existing or prior attorney-client
relationship between the Corporation and such counsel, the Corporation
irrevocably consents to Employee entering into an attorney-client relationship
with such counsel, and in that connection the Corporation and Employee agree
that a confidential relationship shall exist between Employee and such counsel.
The reasonable fees and expenses of counsel selected from time to time by
Employee as hereinabove provided shall be paid or reimbursed to Employee by the
Corporation on a regular, periodic basis upon presentation by Employee of a
statement or statements prepared by such counsel in accordance with its
customary practices, up to a maximum aggregate amount of One Hundred Thousand
Dollars ($100,000). Any legal expenses incurred by the Corporation by reason of
any dispute between the parties as to enforceability of or the terms contained
in this Agreement as provided by this Section 7, notwithstanding the outcome of
any such dispute, shall be the sole responsibility of the Corporation, and the
Corporation shall not take any action to seek reimbursement from Employee for
such expenses. Notwithstanding any limitation contained in this Section 7 to
the contrary, Employee shall be entitled to payment or reimbursement of legal
expenses in excess of One Hundred Thousand Dollars ($100,000) if the expenses
were incurred as a result of a dispute under this Agreement in which Employee
obtains a final judgment in his favor from a court of competent jurisdiction or
his claim is settled by the Corporation prior to the rendering of a judgment by
such a court.
8. Employee is not required to mitigate the amount of benefit
payments to be made by the Corporation pursuant to this Agreement by seeking
other employment or otherwise, nor shall the amount of any benefit payments
provided for in this Agreement be reduced by any compensation earned by Employee
as a result of employment by another employer or which might have been earned by
Employee had Employee sought such employment, after the date of termination of
his employment with the Corporation or otherwise.
-10-
<PAGE>
9. In order to induce the Corporation to enter into this Agreement,
Employee hereby agrees as follows:
(A) He will keep confidential and not improperly divulge for the
benefit of any other party any of the Corporation's confidential
information and business secrets including, but not limited to,
confidential information and business secrets relating to such matters as
the Corporation's finances, operations and customer lists. All of the
Corporation's confidential information and business secrets shall be the
sole and exclusive property of the Corporation.
(B) For a period of two years after Employee's employment with the
Corporation ceases, Employee shall not either on his own account or for
any other person, firm or company solicit or endeavor to cause any
employee of the Corporation to leave his employment or to induce or
attempt to induce any such employee to breach any employment agreement
with the Corporation.
In the event of a breach or threatened breach by Employee of the provisions of
this Section 9, the Corporation shall be entitled to an injunction restraining
Employee from committing or continuing such breach. Nothing herein contained
shall be construed as prohibiting the Corporation from pursuing any other
remedies available to it for such breach or threatened breach including the
recovery of damages from Employee. The covenants of this Section 9 shall run
not only in favor of the Corporation and its successors and assigns, but also in
favor of its subsidiaries and their respective successors and assigns and shall
survive the termination of this Agreement.
10. The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation, to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform it if no such
succession had taken place. Failure of the Corporation to obtain such agreement
prior to the effectiveness of any such succession during the term of this
Agreement shall be a breach of this Agreement and shall entitle Employee to
compensation from the Corporation in the same amount and on the same terms as
Employee would be entitled hereunder if he were to terminate his employment
-11-
<PAGE>
pursuant to Section 4 hereof, except that for purposes of implementing the
foregoing, the date on which succession becomes effective shall be deemed the
date of termination of Employee's employment with the Corporation. As used in
this Agreement, "Corporation" shall mean corporation as hereinbefore defined and
any successor to the business or assets of it as aforesaid which executes and
delivers the agreement provided for in this Section 10 or which otherwise
becomes bound by all of the terms and provisions of this Agreement by operation
of law.
11. Should Employee die while any amounts are payable to him
hereunder, this Agreement shall inure to the benefit of and be enforceable by
Employee's executors, administrators, heirs, distributees, devisees and legatees
and all amounts payable hereunder shall be paid in accordance with the terms of
this Agreement to Employee's devisee, legatee or other designee or if there be
no such designee, to his estate.
12. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been given when delivered or mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to Employee:
-----------------------------
-----------------------------
-----------------------------
If to the Corporation:
BCP/Essex Holdings Inc.
1601 Wall Street
Fort Wayne, Indiana 46802
Attention: General Counsel
or to such other address as any party may have furnished to the other party in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
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<PAGE>
13. The validity, interpretation, and performance of this Agreement
shall be governed by the laws of the State of Indiana. The parties agree that
all legal disputes regarding this Agreement will be resolved in Fort Wayne,
Indiana, and irrevocably consent to service of process in such City for such
purpose.
14. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
signed by Employee and the Corporation. No waiver by any party hereto at any
time of any breach by any other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or any prior or subsequent time. No agreements or representation, oral
or otherwise, express or implied, with respect to the subject matter hereof have
been made by any party which are not set forth expressly in this Agreement.
15. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
16. This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original but all of which together will constitute
one and the same Agreement.
17. This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder, except as provided in
Section 10 and Section 11 above. Without limiting the foregoing, Employee's
right to receive payments hereunder shall not be assignable or transferable
whether by pledge, creation of a security interest or otherwise, other than a
transfer by his Will or by the laws of descent and distribution as set forth in
Section 11 hereof, and in the event of any attempted assignment or transfer
contrary to this Section 17, the Corporation shall have no liability to pay any
amount so attempted to be assigned or transferred.
Any benefits payable under this Agreement shall be paid solely from
the general assets of the Corporation. Neither Employee nor Employee's
beneficiary shall have
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<PAGE>
interest in any specific assets of the Corporation under the terms of this
Agreement. This Agreement shall not be considered to create an escrow account,
trust fund or other funding arrangement of any kind or a fiduciary relationship
between Employee and the Corporation.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the day and year first above set forth.
BCP/ESSEX HOLDINGS INC.
By:
-------------------------------------
Name:
-----------------------------------
Its:
-----------------------------------
----------------------------------------
Name:
---------------------------------
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<PAGE>
ESSEX INTERNATIONAL INC.
AMENDMENT NO. 2 TO
AMENDED AND RESTATED STOCK OPTION PLAN
The Essex International Inc. Amended and Restated Stock Option Plan
(the "Plan"), is hereby amended as follows:
1. Exhibit A of the Plan is hereby deleted in its entirety and
replaced with Exhibit A hereto.
2. Except as set forth in Paragraph 1 above, all other provisions of
the Plan shall remain unchanged.
3. The changes set forth in this Amendment shall be and hereby are
incorporated in the Amended and Restated Stock Option Plan.
Date Amendment adopted by Board of Directors:
<PAGE>
EXHIBIT A to
Amended and Restated
Stock Option Plan
STOCK OPTION AGREEMENT dated as of,
, between ESSEX
INTERNATIONAL INC., a Delaware corporation (the "COMPANY"),
and the employee of the Company or a Subsidiary of the
Company whose name appears on the signature page hereof, to
whom an Option has been granted hereunder (the
"OPTIONEE").WHEREAS the Company wishes to afford the
Optionee the opportunity to purchase shares of Common Stock,
par value $0.01 per share, of the Company;
WHEREAS the Company wishes to carry out the Amended and Restated Stock
Option Plan of the Company (the "PLAN"); and
WHEREAS the Company's Board of Directors (the "BOARD") or a Committee
of the Board appointed to administer the Plan, has determined that it would be
to the advantage and in the best interests of the Company and its stockholders
to grant the Option provided for herein to the Optionee as an inducement to
remain in the service of the Company or its Subsidiaries and as an incentive for
increased efforts during such service, and has advised the Company thereof and
instructed the undersigned officers to issue said Option.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
Capitalized terms used but not defined herein shall have the meanings
given them in the Plan. Whenever the following terms are used in this Agreement
they shall have the meaning specified below unless the context clearly indicates
to the contrary.
"CHANGE IN CONTROL" has the meaning given to it in Section 3(f).
"OPTION" means the option to purchase Shares granted under this
Agreement.
<PAGE>
3
"OPTION DATE" means the date of grant of the Option.
"OPTION SHARES" means Shares issued pursuant to the exercise of the
Option.
"SECRETARY" means the Secretary of the Company.
"SHARES" means shares of Common Stock, par value $0.01 per share, of
the Company.
ARTICLE II
GRANT OF OPTION
SECTION 2.01. GRANT OF OPTION. In consideration of the Optionee's
services to the Company, on the date hereof the Company irrevocably grants to
the Optionee the Option to purchase any part or all of the aggregate number of
Shares stated on Schedule I attached hereto upon the terms and conditions set
forth in this Agreement.
SECTION 2.02. EXERCISE PRICE. The purchase price of the Shares
covered by the Option shall be the per share amount, without commission or other
charge, set forth in Schedule I hereto and shall hereinafter be referred to as
the "EXERCISE PRICE".
SECTION 2.03. CONSIDERATION TO THE COMPANY. In consideration of the
granting of this Option by the Company, the Optionee agrees to render faithful
and efficient service to the Company or a Subsidiary with such duties and
responsibilities as the Company shall from time to time prescribe. Nothing in
this Agreement or in the Plan shall confer upon the Optionee any right to
continue in the employ of the Company or any Subsidiary or shall interfere with
or restrict in any way the rights of the Company and its Subsidiaries, which are
hereby expressly reserved, to discharge the Optionee at any time for any reason
whatsoever.
SECTION 2.04. ADJUSTMENTS IN OPTION. The number of Shares for which
options are granted specified in Section 2.01 hereof, the Exercise Price
specified in Section 2.02 hereof and the Option itself are subject to certain
adjustments as set forth in the Plan in the event of specified changes in the
capital structure of the Company.
<PAGE>
4
SECTION 2.05. AGREEMENT SUBJECT TO PLAN. Unless expressly stated
otherwise herein, this Agreement shall be subject to the terms and provisions of
the Plan.
ARTICLE III
PERIOD OF EXERCISABILITY
SECTION 3.01. COMMENCEMENT OF EXERCISABILITY. (a) The Option
granted under this Agreement shall become exercisable:
(i) in full, upon the third anniversary of the Option Date; PROVIDED,
HOWEVER, that from and including the first anniversary of the Option Date
to but excluding the second anniversary thereof, the Option may be
exercised as to not more than one-third (1/3) of the total number of Shares
covered by the Option, and from and including the second anniversary of the
Option Date to but excluding the third anniversary thereof, the Option may
be exercised as to, cumulatively, not more than two-thirds (2/3) of the
total number of Shares covered by the Option;
(ii) in full, upon the death, Disability or Retirement of the
Optionee;
(iii) in full, upon the occurrence of a Change in Control.
(b) Notwithstanding anything contained herein to the contrary, the
Option shall not be exercisable, no issuance or transfer of Option Shares may be
made to the Optionee, and any attempt to exercise the Option or to transfer any
Option Shares to the Optionee shall be void and of no effect, unless and until
(i) a registration statement under the Securities Act of 1933, as amended, has
been duly filed and declared effective pertaining to the Option Shares, and the
Option Shares have been duly qualified under applicable state securities or
"blue sky" laws, if applicable or (ii) the Committee, in its sole discretion,
determines that such registration or qualification is not required as a result
of the availability of an exemption from registration or qualification under
such laws.
(c) Without limiting the foregoing, if at any time the Board shall
determine, in its sole discretion, that the listing, registration or
qualification of the Option Shares under any state or Federal law or on any
securities exchange or the consent or approval of any governmental
<PAGE>
5
regulatory body is desirable as a condition of, or in connection with, delivery
or purchase of Option Shares, the Option may not be exercised in whole or in
part unless such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable to the
Board.
(d) Anything to the contrary in this Agreement or the Plan
notwithstanding, no Shares shall be delivered upon the exercise of an Option or
otherwise transferred, if the Board, in its sole discretion, shall deem it
necessary or advisable to (i) restrict the delivery of Option Shares to
accredited investors within the meaning of applicable Federal and state
securities laws, or (ii) delay such delivery in order to ensure compliance with
applicable Federal and state securities laws.
(e) Upon the Optionee's termination of employment, any Option that
has not become exercisable, in accordance with Section 3.01(a) of this
Agreement, shall become null and void immediately upon such termination of
employment.
(f) For the purposes of this Agreement, "CHANGE IN CONTROL" means any
of the following that occurs while any Option granted hereunder is outstanding:
(i) the acquisition by any Person other than Bessemer Holdings, L.P.
("BHLP"), or any affiliate of BHLP (collectively, the "BH GROUP") of (x)
beneficial ownership (as defined in the Plan) of thirty-five percent (35%)
or more of either the then outstanding Shares or the combined voting power
of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors and (y) beneficial ownership of a
greater percentage than the BH Group of either the then outstanding Shares
or the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors;
PROVIDED, HOWEVER, that the following acquisitions shall not constitute an
acquisition of control: (1) any acquisition directly from the Company
(excluding an acquisition by virtue of the exercise of a conversion
privilege), (2) any acquisition by the Company, (3) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any company controlled by the Company, or (4) any acquisition by
any company pursuant to a reorganization, merger or consolidation, if,
following such reorganization, merger or consolidation, the
<PAGE>
6
conditions described in clauses (x), (y) and (y) of subsection (iii) of
this Section 3.01(f) are satisfied;
(ii) individuals who, as of the date hereof or, in the event of an
initial public offering of equity securities of the Company or Essex
pursuant to an effective registration statement under the Securities Act of
1933, as amended, other than in connection with an employee benefit or
similar plan (an "IPO"), the date that the IPO is closed, constitute the
Board (the "INCUMBENT BOARD") cease for any reason to constitute at least a
majority of the Board; PROVIDED, HOWEVER, that any individual becoming a
director subsequent to the date hereof or the date of the IPO whose
election, or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of either
an actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Securities Exchange Act of
1934) or other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board;
(iii) approval by the shareholders of, and the consummation by, the
Company of a reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or consolidation, (x) more than fifty
percent (50%) of, respectively, the then outstanding shares of common stock
of the company resulting from such reorganization, merger or consolidation
and the combined voting power of the then outstanding voting securities of
such company entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the outstanding Shares and outstanding Company voting
securities immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their ownership,
immediately prior to such reorganization, merger or consolidation, of the
outstanding Shares and outstanding Company voting securities, as the case
may be, (y) no Person (excluding the Company, any employee benefit plan or
related trust of the Company or such company resulting from such
reorganization, merger or consolidation and
<PAGE>
7
any Person beneficially owning, immediately prior to such reorganization,
merger or consolidation, directly or indirectly, thirty-five percent (35%)
or more of the outstanding Shares or outstanding voting securities of the
Company, as the case may be) beneficially owns, directly or indirectly, (A)
thirty-five percent (35%) or more of, either the then outstanding shares of
common stock of the company resulting from such reorganization, merger or
consolidation or the combined voting power of the then outstanding voting
securities of such company entitled to vote generally in the election of
directors and (B) a greater percentage than the BH Group of either the then
outstanding shares of common stock of the company resulting from such
reorganization, merger or consolidation or the combined voting power of the
then outstanding voting securities of such company entitled to vote
generally in the election of directors and (z) at least a majority of the
members of the board of directors of the company resulting from such
reorganization, merger or consolidation were members of the Incumbent Board
at the time of the execution of the initial agreement providing for such
reorganization, merger or consolidation; or
(iv) approval by the shareholders of the Company of (x) a complete
liquidation or dissolution of the Company or (y) the sale or other
disposition of all or substantially all of the assets of the Company, other
than to a company with respect to which following such sale or other
disposition (A) more than fifty percent (50%) of, respectively, the then
outstanding shares of common stock of such company and the combined voting
power of the then outstanding voting securities of such company entitled to
vote generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the outstanding
Shares and outstanding Company voting securities immediately prior to such
sale or other disposition in substantially the same proportion as their
ownership, immediately prior to such sale or other disposition, of the
outstanding Shares and outstanding Company voting securities, as the case
may be, (B) no Person (excluding the Company and any employee benefit plan
or related trust of the Company or such company and any Person beneficially
owning, immediately prior to such sale or other disposition, directly or
indirectly, thirty-five percent (35%) or more of the outstanding Shares or
outstanding Company voting securities, as the case may
<PAGE>
8
be) beneficially owns, directly or indirectly, (X) thirty-five percent
(35%) or more of, either the then outstanding shares of common stock of
such company and the combined voting power of the then outstanding voting
securities of such company entitled to vote generally in the election of
directors and (Y) beneficial ownership of a greater percentage than the BH
Group of either the then outstanding shares of common stock of such company
or the combined voting power of the then outstanding voting securities of
such company entitled to vote generally in the election of directors and
(C) at least a majority of the members of the board of directors of such
company were members of the Incumbent Board at the time of the execution of
the initial agreement or action of the Board providing for such sale or
other disposition of assets of the Company.
SECTION 3.02. DURATION OF EXERCISABILITY. The Option, once it
becomes exercisable pursuant to Section 3.01(a), shall remain exercisable until
it becomes unexercisable under Section 3.03 hereof or the Plan. In addition, if
any portion or all of the Option is canceled according to this Agreement or the
Plan, then such portion or all of the Option shall not be exercisable.
SECTION 3.03. EXPIRATION OF OPTION. Except as otherwise provided in
this Section or by the Board or the Committee, in the event that the Optionee's
employment with the Company terminates for any reason other than death,
Disability or Retirement, the Option, if and to the extent that such Option is
exercisable at the time of such termination, may be exercised within 30 days
after such termination and shall expire and cease to be exercisable after such
30-day period; PROVIDED, HOWEVER, that in the event of the death of the Optionee
within such 30-day period, the Option may be exercised by the Estate of the
Optionee at any time within 180 days after the Optionee's death. In the event
of the death or Disability of the Optionee or a Change in Control, the Option
shall be exercisable, if and to the extent that such Option is exercisable at
such time (taking into account any acceleration of exercisability that may have
occurred) through the Expiration Date (as defined below) of the Option. In the
event of the Retirement of the Optionee, the Option shall be exercisable, if and
to the extent that such Option is exercisable at the time of such Retirement,
within three years after the date of the Optionee's Retirement and shall expire
and cease to be exercisable after such three-year period. In no event shall the
Option be exercisable
<PAGE>
9
later than the tenth anniversary (the "EXPIRATION DATE") of the Option Date.
SECTION 3.04. NONTRANSFERABILITY OF OPTION. The Option or any
portion thereof shall not be transferable (by operation of law or otherwise) by
the Optionee (or his Estate) except pursuant to (i) the cancellation of the
Option in compliance with Section 5(c) of the Plan or (ii) a transfer upon the
death of the Optionee to his Estate by will or the laws of descent and
distribution, provided that in each case such transfer is effected in compliance
with the Plan.
ARTICLE IV
EXERCISE OF OPTIONS
SECTION 4.01. PARTIAL EXERCISE. Any exercisable portion of the
Option, or (if then wholly exercisable) the entire Option, may be exercised in
whole or in part at any time prior to the time when the Option or portion
thereof becomes unexercisable or expires under Section 3.03 hereof or the Plan;
PROVIDED, HOWEVER, that each partial exercise shall be for not less than the
number of Shares stated on Schedule I attached hereto and shall be for whole
Shares only.
SECTION 4.02. MANNER OF EXERCISE. The Option, or any exercisable
portion thereof, may be exercised by the Optionee or, upon his death, his Estate
solely by delivery to the Secretary or his office of all the following prior to
the time when the Option or such portion becomes unexercisable under
Section 3.03 hereof or the Plan:
(a) notice in writing signed by the Optionee or his Estate,
stating that the Option or a portion thereof is thereby exercised;
(b) full payment (by any means specified in paragraph (b) of
Section 7 of the Plan) for the Shares with respect to which such
Option or portion is exercised;
(c) full payment to the Company (by any means specified in
Section 11 of the Plan) of all amounts which, under Federal, state or
local law, it is required to withhold upon exercise of the Option; and
(d) in the event the Option or a portion thereof shall be exercised
pursuant to Section 4.01 by the
<PAGE>
10
Estate of the Optionee, upon his death, evidence satisfactory to the
Company of the right of the Estate to exercise the Option.
SECTION 4.03. CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. The
Shares deliverable upon the exercise of the Option, or any portion thereof, may
be either previously authorized but unissued Shares or issued Shares which have
been reacquired by the Company. Such Shares shall be fully paid and
nonassessable. The Company shall not be required to issue or deliver any
certificate or certificates for Shares purchased upon the exercise of the Option
or a portion thereof prior to fulfillment of all the following conditions:
(a) the admission of such Shares to listing on all stock
exchanges on which the Shares are then listed;
(b) the completion of any registration or other qualification of
such Shares under any Federal or state Securities laws or under
rulings or regulations of the Securities and Exchange Commission or of
any other governmental regulatory body, which the Committee shall, in
its absolute discretion, deem necessary or advisable;
(c) the obtaining of any approval or other clearance from any
Federal or state governmental agency which the Committee shall, in its
absolute discretion, determine to be necessary or advisable; and
(d) the lapse of such reasonable period of time following the
exercise of the Option as the Committee may from time to time
establish for reasons of administrative convenience.
SECTION 4.04. RIGHTS AS STOCKHOLDER. The Optionee or his Estate
shall not be, or have any of the rights or privileges of, a stockholder of the
Company in respect of any Shares purchasable upon the exercise of any part of
the Option unless and until certificates representing such Shares shall have
been issued by the Company to the Optionee or his Estate.
<PAGE>
11
ARTICLE V
OTHER PROVISIONS
SECTION 5.01. APPLICABLE LAW. The laws of the State of New York
shall govern the interpretation, validity and performance of the terms of this
Agreement, without regard to its principles of conflicts of law.
SECTION 5.02. SEVERABILITY. The invalidity, illegality or
unenforceability of one or more of the provisions of this Agreement in any
jurisdiction shall not affect the validity, legality or enforceability of the
remainder of this Agreement in such jurisdiction or the validity, legality or
enforceability of this Agreement, including any such provision, in any other
jurisdiction, it being intended that all rights and obligations of the parties
hereunder shall be enforceable to the fullest extent permitted by law.
SECTION 5.03. HEADINGS. The headings and captions contained herein
are for convenience of reference only and shall not control or affect the
meaning or construction of any provision hereof.
SECTION 5.04. NOTICES. All notices and other communications provided
for herein shall be dated and in writing and shall be deemed to have been duly
given when delivered, if delivered personally or sent by registered or certified
mail, return receipt requested, postage prepaid and when received if delivered
otherwise, to the party to whom it is directed as follows:
If to the Company at:
Essex International Inc.
in care of Bessemer Holdings, L.P.
630 Fifth Avenue
New York, New York 10111
Attention: Robert D. Lindsay
with a copy to:
Essex Group, Inc.
1601 Wall Street
P.O. Box 1601
Fort Wayne, IN 46801-1601
Attention: General Counsel
<PAGE>
12
and if to the Optionee at the address given beneath his signature hereto with a
copy to Essex Group, Inc., 1601 Wall Street, P.O. Box 1601, Fort Wayne, Indiana,
46801-1601, Attention: General Counsel. The Optionee or the Company may change
the address to which notices, statements, instructions or other documents are to
be sent to such party by written notice to the other party in accordance
herewith. Any notice which is required to be given to the Optionee's Estate
shall be given to the executor, administrator, or other representative of the
Optionee's Estate if such representative has previously informed the Company of
his status and address by written notice in accordance herewith.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ESSEX INTERNATIONAL INC.,
by
-----------------------
Name:
Title:
OPTIONEE:
by
-----------------------
Name:
Title:
<PAGE>
EXHIBIT 11.1
BCP/ESSEX HOLDINGS INC.
CALCULATION OF PRO FORMA NET INCOME PER COMMON SHARE
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
IN THOUSANDS OF DOLLARS, --------------------------------------------------------------
EXCEPT PER SHARE DATA 1993 1994 1995 1996
- ------------------------------------------------ -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Income (loss) before extraordinary charge....... $ (10,856) $ 7,486 $ 13,271 $ 37,508
Extraordinary charge-net of income tax
benefit........................................ 3,367 -- 2,971 1,183
-------------- -------------- -------------- --------------
Net income (loss) used in calculation pro forma
of net income per common share(a).............. $ (14,223) $ 7,486 $ 10,300 $ 36,325
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Weighted average common shares outstanding...... 23,943,692 23,943,776 23,969,567 24,040,438
Common shares issuable in respect to common
stock equivalents, with a dilutive effect...... 3,612,970 3,702,510 4,001,525 4,184,424
-------------- -------------- -------------- --------------
Weighted average number of common and common
equivalent shares(b)........................... 27,556,662 27,646,286 27,971,092 28,224,862
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Pro forma income (loss) per common and common
equivalent share (c):
Pro forma income (loss) before extraordinary
charge...................................... $ (.40) $ .27 $ .48 $ 1.33
Extraordinary charge.......................... (.12) -- (.11) (.04)
-------------- -------------- -------------- --------------
Pro forma net income (loss)..................... $ (.52) $ .27 $ .37 $ 1.29
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
- ------------------------
(a) In accordance with Securities and Exchange Commission requirements, common
shares and common equivalent shares issued during the twelve-month period
preceding the Offerings have been included in the calculation of income per
common share and per common equivalent share as if they were outstanding for
all periods. Because the proceeds of the common stock issued in July 1996
were used to redeem all outstanding preferred stock, the preferred stock
redemption premium, the preferred stock dividend requirement, and accretion
of preferred stock that appear on the income statement as reductions to net
income have been excluded from this calculation. In addition, because it is
expected that shares of common stock subject to put, if any, will not be
material following the Offerings, the adjustment to the fair value of common
stock subject to put that appears on the income statement as a reduction to
net income has also been excluded from this calculation.
(b) Pro forma per share data is computed based upon the weighted average number
of common and common equivalent shares, including common stock subject to
put, outstanding for all periods presented. Common equivalent shares include
outstanding stock options and warrants. Common equivalent shares are not
included in the per share calculation where the effect of their inclusion
would be antidilutive, except that, in accordance with the Securities and
Exchange Commission requirements, common and common equivalent shares issued
during the twelve-month period immediately preceding the filing of the
proposed initial public offering have been included in the calculation of
pro forma income per common and common equivalent share as if they were
outstanding for all periods, using the treasury stock method and an assumed
initial public offering price of $18.50 per share.
(c) The computation of fully diluted income (loss) per share has not been
presented herein since the per share amounts do not differ from the primary
computation outlined above.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated January 28, 1997 (except for Note 13, as to which
the date is February 19, 1997). In Amendment No. 2 to the Registration Statement
(Form S-1 No. 333-22043) and related Prospectus of BCP/Essex Holdings Inc. for
the registration of 8,625,000 shares of its common stock.
We have audited the consolidated financial statements of BCP/Essex Holdings
Inc. as of December 31, 1996 and 1995 and for each of the three years in the
period ended December 31, 1996 and have issued our report thereon dated January
28, 1997 (except Note 13, as to which the date is February 19, 1997). Our audits
also included the financial statement schedules listed in Item 16(b) of this
Registration Statement. These schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
Ernst & Young LLP
Indianapolis, Indiana
April 9, 1997
