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As filed with the Securities and Exchange Commission Pursuant to Rule 424(b)(3)
Registration No. 333-57671
- --------------------------------------------------------------------------------
BREED Technologies, Inc.
Offer to Exchange all of its Outstanding
9 1/4% Senior Subordinated Notes due 2008
for 9 1/4% Senior Subordinated Notes
that have been registered under the Securities Act of 1933
----------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON APRIL 12, 1999, UNLESS EXTENDED
----------------
Breed Technologies, Inc., a Delaware corporation (the "Company"), hereby
offers (the "Exchange Offer"), upon the terms and subject to the conditions
set forth in this Prospectus and the accompanying Letter of Transmittal
relating to the Exchange Offer (the "Letter of Transmittal"), to exchange
$1,000 principal amount of its 9 1/4% Senior Subordinated Notes due 2008 (the
"New Notes"), which will be registered under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to a Registration Statement of which
this Prospectus is a part, for each $1,000 principal amount of its outstanding
9 1/4% Senior Subordinated Notes due 2008 (the "Old Notes," and, together with
the New Notes, the "Notes"), of which an aggregate of $330,000,000 in
principal amount is outstanding as of the date of this Prospectus. The form
and terms of the New Notes are identical in all material respects to the form
and terms of the Old Notes, except for certain transfer restrictions and
registration rights relating to the Old Notes and except that, because the
Exchange Offer was not consummated by October 25, 1998, the rate at which the
Old Notes bear interest has been increased pursuant to the terms of the
Registration Rights Agreement (as defined herein). See "Exchange Offer;
Registration Rights." The Old Notes were originally issued and sold (the
"Offering") by the Company in a private placement to NationsBanc Montgomery
Securities LLC and Prudential Securities Incorporated (the "Initial
Purchasers") on April 28, 1998 (the "Closing Date") and were resold by the
Initial Purchasers in transactions exempt from, or not subject to, the
registration requirements under the Securities Act.
The New Notes mature on April 15, 2008, unless previously redeemed. Interest
on the New Notes will be payable semiannually on April 15 and October 15 of
each year, commencing October 15, 1998. The New Notes will be redeemable, in
whole or in part, at the option of the Company at any time on or after April
15, 2003, at the redemption prices set forth herein, plus accrued and unpaid
interest to the date of redemption. In addition, at any time on or prior to
April 15, 2001, the Company may redeem New Notes with the net proceeds of one
or more equity offerings at a redemption price equal to 109.25% of the
principal amount thereof, plus accrued and unpaid interest to the date of
redemption, provided that at least 65% of the aggregate principal amount of
New Notes issued remains outstanding after each such redemption. Upon a Change
of Control (as defined herein), the Company will be required to make an offer
to repurchase all outstanding New Notes at a price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest to the date of
repurchase. See "Description of the Notes."
(continued on next page)
See "Risk Factors" beginning on page 13 for a discussion of certain factors
that should be considered in connection with the Exchange Offer and an
investment in the New Notes offered hereby.
----------------
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.
----------------
The date of this Prospectus is March 12, 1999
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(continued from cover page)
The New Notes will be general unsecured obligations of the Company,
subordinated in right of payment to all existing and future Senior
Indebtedness (as defined herein) of the Company, including indebtedness
incurred pursuant to the New Credit Facility (as defined herein). The New
Notes will rank pari passu in right of payment with all future senior
subordinated indebtedness of the Company, if any, and will rank senior in
right of payment to all future subordinated indebtedness of the Company, if
any. The New Notes will be guaranteed, on a senior subordinated basis, by the
active domestic subsidiaries of the Company (the "Subsidiary Guarantors")
other than BTI Capital Trust and certain domestic subsidiaries owned by a
foreign subsidiary of the Company. The New Notes will be effectively
subordinated in right of payment to all indebtedness and other liabilities
(including trade payables) of the Company's subsidiaries that are not
Subsidiary Guarantors. As of December 31, 1998, the Company and the Subsidiary
Guarantors had $528.0 million of indebtedness outstanding ranking senior to
the New Notes (excluding $15.6 million in letters of credit). As of December
31, 1998, the Company's subsidiaries that are not Subsidiary Guarantors had an
aggregate of $269.9 million of accounts payable and third-party indebtedness
outstanding. See "Description of the Notes--Subordination."
The Company will accept for exchange any and all validly tendered Old Notes
on or prior to 5:00 p.m., New York City time, on April 12, 1999 (if and as
extended, the "Expiration Date"). Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date. See "The
Exchange Offer."
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement.
Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, the Company believes the New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by any holder thereof (other than broker-dealers, as set
forth below, and any such holder that is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
holder's business and that such holder has no arrangement or understanding
with any person to participate in the distribution of such New Notes. Any
holder who tenders in the Exchange Offer with the intention to participate, or
for the purpose of participating, in a distribution of the New Notes or who is
an affiliate of the Company may not rely upon such interpretations by the
staff of the Commission and, in the absence of an exemption therefrom, must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any secondary resale transaction. Holders of
Old Notes wishing to accept the Exchange Offer must represent to the Company
in the Letter of Transmittal (as defined herein) that such conditions have
been met.
Each broker-dealer (other than an affiliate of the Company) that receives
New Notes for its own account pursuant to the Exchange Offer must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. This Prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Old Notes where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company has
agreed that, starting on the Expiration Date and ending on the close of
business 180 days after the Expiration Date, it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution." Any broker-dealer who is an affiliate of the Company
may not rely on such no-action letters and must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
a secondary resale transaction
The Company will not receive any proceeds from this Exchange Offer. No
dealer-manager is being used in connection with this Exchange Offer. See "Use
of Proceeds" and "Plan of Distribution."
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith, files
reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information filed by the Company may be
examined without charge at, or copies obtained upon payment of prescribed fees
from, the Public Reference Section of the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549 and are also available for
inspection and copying at the regional offices of the Commission located at
Seven World Trade Center, New York, New York 10048 and at 500 West Madison
Street, Chicago, Illinois 60661-2511. Information regarding the operation of
the public reference facilities of the Commission may be obtained by calling
the Commission at 1-800-SEC-0330. The Commission also maintains a web site
that contains reports, proxy statements and other information regarding
registrants that file electronically with the Commission. The address of such
site is http://www.sec.gov. The Common Stock of the Company is listed on The
New York Stock Exchange under the symbol "BDT." Information about the Company
can also be inspected at the offices of the New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Registration Statement", which term shall encompass all amendments,
exhibits, annexes and schedules thereto) pursuant to the Securities Act, and
the rules and regulations promulgated thereunder, covering the New Notes being
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement. For further information with respect to the
Company and the New Notes offered in the Exchange Offer, reference is made to
the Registration Statement. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete. 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 document or matter
involved, and each such statement is qualified in its entirety by such
reference. The Registration Statement, including the exhibits thereto, can be
inspected and copied at the public reference facilities maintained by the
Commission and its regional offices at the locations listed above.
As a result of the filing of the Registration Statement with the Commission,
the Subsidiary Guarantors (as defined herein) will become subject to the
informational requirements of the Exchange Act, and in accordance therewith
will be required to file periodic reports and other information with the
Commission. The Company intends to request the Commission to conditionally
exempt the Subsidiary Guarantors from the informational requirements of the
Exchange Act pursuant to Staff Accounting Bulletin No. 53 and Rule 12(h) of
the Exchange Act. In the event that neither the Company nor any Subsidiary
Guarantor is subject to the informational requirements of the Exchange Act,
the Company will be required under the Indenture (as defined herein) to
continue to file with the Commission the annual and quarterly reports,
information, documents or other reports, including, without limitation,
reports on Forms 10-K, 10-Q and 8-K, which would be required pursuant to the
information requirements of the Exchange Act.
INCORPORATION BY REFERENCE
The following documents have been filed with the Commission and are
incorporated herein by reference: (a) the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1998, as amended on October 1, 1998; (b)
the Company's Quarterly Reports on Form 10-Q for the quarters ended September
30, 1998 and December 31, 1998; (c) the information set forth under the
captions "2. Selected Historical Combined Financial Information of SRS" and
"3. Management's Discussion and Analysis of Financial Condition and Results of
Operations--SRS" in the Company's Current Report on Form 8-K dated June 15,
1998; (d) the Company's Current Report on Form 8-K/A filed on January 13,
1998; and (e) the Company's Current Reports on Form 8-K filed on August 31,
1998, September 4, 1998, September 18, 1998, September 21, 1998, November 5,
1998 and March 9, 1999.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the Exchange Offer shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be
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deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the request of such person, a copy of any or all
of the foregoing documents incorporated herein by reference, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into such documents). Requests for such documents should be
submitted in writing to Stuart Boyd, Esq., Vice President- Legal Affairs,
Breed Technologies, Inc., 5300 Old Tampa Highway, P.O. Box 33050, Lakeland,
Florida 33807, or by telephone at 941-668-6000.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and historical and pro forma
financial statements and notes thereto included or incorporated by reference in
this Prospectus. Unless the context otherwise requires, (i) references to
"BREED" or the "Company" are to Breed Technologies, Inc. and its direct and
indirect subsidiaries (including SRS), (ii) references to "SRS" are to the
safety restraint systems business of AlliedSignal Inc. ("AlliedSignal")
acquired by the Company on October 30, 1997 (the "SRS Acquisition"), (iii)
references to any "fiscal" year of the Company or of SRS refer to the Company's
or SRS's fiscal year ended or ending June 30 or December 31, respectively, in
such year, and (iv) references to the "model year" of automobiles mean the
twelve-month period generally commencing on September 1 of the prior year,
although specific model years may vary by manufacturer and vehicle.
The Company
The Company is a worldwide leader in the design, development, manufacture and
sale of all of the components used in complete, integrated occupant protection
systems and components. Its principal products include sensors, electronics and
related software, airbag modules and inflators, seat belt systems and steering
wheels. These products are used in over 400 vehicle models manufactured by over
45 automobile manufacturers ("OEMs"), including General Motors ("GM"), Fiat,
Ford, Chrysler, Suzuki and most of the world's largest OEMs.
The Company's goal is to become the leading worldwide supplier of complete,
integrated occupant protection systems, which consist of (i) sensors and
electronics (including crash and occupant protection sensors, electronics and
related software), (ii) airbag modules (consisting primarily of airbags and
inflators), (iii) seatbelt systems (including pretensioners and retractors) and
(iv) steering wheels. To accomplish this goal, the Company has pursued
strategic acquisitions, acquiring eleven companies since August 1994. On
October 30, 1997, the Company consummated its largest acquisition to date, the
SRS Acquisition, for an aggregate purchase price of $710.0 million in cash. SRS
is the largest independent supplier of seatbelt systems and the third largest
independent supplier of airbag systems in the United States and is a leading
supplier of seat belts and airbag systems to OEMs worldwide. The SRS
Acquisition expanded the Company's capabilities by adding seatbelt systems and
complementary airbag technology, which should enable the Company to supply
complete, integrated occupant protection systems to OEMs on a worldwide basis.
In addition, in December 1997 the Company and Siemens Aktiengessellschaft
("Siemens") agreed to form a joint venture, BSRS Restraint Systems
International GmbH & Co. KG ("BSRS"), pursuant to a joint venture agreement. In
connection with BSRS, Siemens made a $115.0 million equity investment in the
Company (the "Siemens Investment"), the proceeds of which were used to finance
a portion of the purchase price of the SRS Acquisition. BSRS provides for the
worldwide research, development, engineering, assembly and marketing of
integrated occupant protection systems incorporating at least one component
manufactured by each of the Company and Siemens (a "JV System"). The Company
expects that components comprising JV Systems will continue to be produced
separately by Siemens and the Company but will be sold by BSRS under trade
names owned by it. The Company and Siemens completed formation of BSRS in June
1998.
The Company was incorporated under the laws of the State of Delaware in 1986.
The Company's principal executive offices are located at 5300 Old Tampa
Highway, P.O. Box 33050, Lakeland, Florida 33807-3050 and its telephone number
is (941) 668-6000.
5
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The Exchange Offer
Securities Offered.......... $330,000,000 aggregate principal amount of 9 1/4%
Senior Subordinated Notes due 2008, which have
been registered under the Securities Act (the
"New Notes," and together with the Old Notes, the
"Notes"). See "Description of the Notes."
The Exchange Offer.......... Pursuant to the Exchange Offer, New Notes will be
issued in exchange for a like principal amount of
Old Notes that are validly tendered and not
withdrawn. Holders of Old Notes whose Old Notes
are not tendered and accepted in the Exchange
Offer will continue to hold such Old Notes and
will be entitled to all the rights and
preferences and will be subject to the
limitations applicable thereto under the
Indenture governing the Old Notes and the New
Notes.
Resale...................... Based on interpretations by the staff of the
Commission set forth in no-action letters issued
to third parties, the Company believes the New
Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale,
resold and otherwise transferred by any holder
thereof (other than broker-dealers, as set forth
below, and any such holder that is an "affiliate"
of the Company or any Subsidiary Guarantor within
the meaning of Rule 405 under the Securities Act)
without compliance with the registration and
prospectus delivery provisions of the Securities
Act, provided that such New Notes are acquired in
the ordinary course of such holder's business and
that such holder is not participating in, does
not intend to participate in, and has no
arrangement or understanding with any person to
participate in the distribution of such New
Notes. Any holder who tenders in the Exchange
Offer with the intention to participate, or for
the purpose of participating, in a distribution
of the New Notes or who is an affiliate of the
Company or any Subsidiary Guarantor may not rely
upon such interpretations by the staff of the
Commission and, in the absence of an exemption
therefrom, must comply with the registration and
prospectus delivery requirements of the
Securities Act in connection with any secondary
resale transaction. Failure to comply with such
requirements in such instance may result in such
holder incurring liabilities under the Securities
Act for which the holder is not indemnified by
the Company. Each broker-dealer (other than an
affiliate of the Company or any Subsidiary
Guarantor) that receives New Notes for its own
account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The
Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the
Securities Act. The Company has agreed that,
starting on the Expiration Date and ending on the
close of business 180 days after the Expiration
Date, it will make this Prospectus available to
any broker-dealer for use in connection with any
such
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resale. See "Plan of Distribution." Any broker-
dealer who is an affiliate of the Company or any
Subsidiary Guarantor may not rely on such no-
action letters and must comply with the
registration and prospectus delivery requirements
of the Securities Act in connection with a
secondary resale transaction. The Exchange Offer
is not being made to, nor will the Company accept
surrenders for exchange from, holders of Old
Notes in any jurisdiction in which this Exchange
Offer or the acceptance thereof would not be in
compliance with the securities or blue sky laws
of such jurisdiction.
Expiration Date.............
The Exchange Offer will expire at 5:00 p.m., New
York City time, on April 12, 1999, unless
extended, in which case the term "Expiration
Date" shall mean the latest date and time to
which the Exchange Offer is extended.
Conditions to the Exchange The Exchange Offer is subject to certain
Offer....................... customary conditions, which may be waived by the
Company. See "The Exchange Offer--Conditions of
the Exchange Offer." The Exchange Offer is not
conditioned upon any minimum principal amount of
Old Notes being tendered.
Procedures for Tendering
Old Notes................... Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or a facsimile thereof,
together with such Old Notes and any other
required documentation to IBJ Whitehall Bank &
Trust Company, the Exchange Agent, at the address
set forth herein and therein. By executing the
Letter of Transmittal, each holder will represent
to the Company that, among other things, the New
Notes acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of business
of the person receiving such New Notes, whether
or not such person is the holder, that neither
the holder nor any such other person is
participating in, intends to participate in or
has an arrangement or understanding with any
person to participate in the distribution of such
New Notes and that neither the holder nor any
such other person is an "affiliate" of the
Company or any Subsidiary Guarantor within the
meaning of Rule 405 under the Securities Act or,
that if such holder or other person is an
affiliate of the Company or any Subsidiary
Guarantor, such holder or other person will
comply with the registration and prospectus
delivery requirements of the Securities Act to
the extent applicable. See "The Exchange Offer--
Terms of the Exchange Offer--Procedures for
Tendering Old Notes" and "The Exchange Offer--
Terms of the Exchange Offer--Guaranteed Delivery
Procedures."
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Special Procedures for
Beneficial Owners........... Any beneficial owner whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender such Old Notes in the
Exchange Offer should contact such registered
holder promptly and instruct such registered
holder to tender on such beneficial owner's
behalf. If such beneficial owner wishes to tender
on his own behalf, such owner must, prior to
completing and executing the Letter of
Transmittal and delivering his Old Notes, either
make appropriate arrangements to register
ownership of the Old Notes in such owner's name
or obtain a properly completed bond power from
the registered holder. The transfer of registered
ownership may take considerable time and may not
be able to be completed prior to the Expiration
Date. See "The Exchange Offer--Terms of the
Exchange Offer--Procedures for Tendering Old
Notes."
Guaranteed Delivery
Procedures.................. Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes,
the Letter of Transmittal or any other documents
required by the Letter of Transmittal to the
Exchange Agent prior to the Expiration Date, or
who cannot complete the procedure for book-entry
transfer on a timely basis, must tender their Old
Notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer--
Terms of the Exchange Offer--Guaranteed Delivery
Procedures."
Acceptance of Old Notes and
Delivery of New Notes....... Subject to certain conditions (as described more
fully in "The Exchange Offer--Conditions of the
Exchange Offer"), the Company will accept for
exchange any and all Old Notes that are properly
tendered in the Exchange Offer and not withdrawn,
prior to 5:00 p.m., New York City time, on the
Expiration Date. The New Notes issued pursuant to
the Exchange Offer will be delivered as promptly
as practicable following the Expiration Date.
Withdrawal Rights........... Except as otherwise provided herein, tenders of
Old Notes may be withdrawn at any time prior to
5:00 p.m., New York City time, on the Expiration
Date. See "The Exchange Offer--Terms of the
Exchange Offer--Withdrawal of Tenders of Old
Notes."
Certain Federal Income Tax
Considerations.............. For a discussion of certain federal income tax
considerations relating to the exchange of the
New York Notes for the Old Notes, see "Certain
Federal Income Tax Considerations."
Exchange Agent..............
IBJ Whitehall Bank & Trust Company is the
Exchange Agent. The address, telephone number and
facsimile number of the Exchange Agent are set
forth in "The Exchange Offer--Exchange Agent."
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Consequences of Failure to
Exchange Old Notes.......... Holders of Old Notes who do not exchange their
Old Notes for New Notes pursuant to the Exchange
Offer will continue to be subject to the
restrictions on transfer of such Old Notes as set
forth in the legend thereon as a consequence of
the issuance of the Old Notes pursuant to
exemptions from, or in transactions not subject
to, the registration requirements of the
Securities Act and applicable sate securities
laws. In general, the Old Notes may not be
offered or sold, unless registered under the
Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the
Securities Act and applicable state securities
laws. The Company does not currently anticipate
that it will register Old Notes under the
Securities Act. See "Description of the Notes--
Registration Rights."
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Summary of Terms of New Notes
The Exchange Offer applies to $330,000,000 aggregate principal amount of Old
Notes. The form and terms of the New Notes will be identical in all material
respects to the form and terms of the Old Notes except that (i) the New Notes
will be registered under the Securities Act and, therefore, will not bear
legends restricting the transfer thereof and (ii) holders of the New Notes will
not be entitled to certain rights of holders of Old Notes under the
Registration Rights Agreement, which will terminate upon consummation of the
Exchange Offer. The New Notes will evidence the same debt as the Old Notes,
will be entitled to the benefits of the Indenture and will be treated as a
single class thereunder with any Old Notes that remain outstanding.
Securities Offered.......... $330,000,000 aggregate principal amount of the
Company's 9 1/4% Senior Subordinated Notes Due
2008, which have been registered under the
Securities Act.
Maturity Date............... April 15, 2008.
Interest Payment Dates...... April 15 and October 15 of each year, commencing
October 15, 1998.
Guarantees.................. The Company's payment obligations under the Notes
will be jointly and severally guaranteed on a
senior subordinated basis (the "Subsidiary
Guarantees") by the Company's existing and future
active domestic subsidiaries (the "Subsidiary
Guarantors") other than BTI Capital Trust and
certain domestic subsidiaries owned by a foreign
subsidiary of the Company, subject to certain
limitations. The Subsidiary Guarantees will be
subordinated to all senior indebtedness of the
Subsidiary Guarantors. See "Description of the
Notes--Subsidiary Guarantees."
Optional Redemption......... The Notes are redeemable, in whole or in part, at
the option of the Company, at any time on or
after April 15, 2003 at the redemption prices set
forth herein, plus accrued and unpaid interest to
the date of redemption. In addition, at any time
on or prior to April 15, 2001, the Company may,
at its option, redeem Notes with the net proceeds
of one or more Equity Offerings, at a redemption
price equal to 109.25% of the principal amount
thereof, plus accrued and unpaid interest to the
date of redemption, provided that at least 65% of
the aggregate principal amount of Notes issued
remains outstanding after each such redemption.
See "Description of the Notes--Optional
Redemption."
Ranking..................... The Notes are general unsecured obligations of
the Company subordinated in right of payment to
all existing and future Senior Indebtedness of
the Company, including indebtedness incurred
pursuant to the New Credit Facility. The Notes
rank pari passu in right of payment with all
future senior subordinated indebtedness of the
Company, if any, and will rank senior in right of
payment to all future subordinated indebtedness
of the Company, if any. The Notes are guaranteed,
on a senior subordinated basis, by the Subsidiary
Guarantors and effectively subordinated in right
of payment to all indebtedness and other
liabilities (including trade payables) of the
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<PAGE>
Company's subsidiaries that are not Subsidiary
Guarantors. As of December 31, 1998, the Company
and the Subsidiary Guarantors had $528.0 million
of Indebtedness outstanding ranking senior to the
Notes (excluding $15.6 million in letters of
credit). As of December 31, 1998, the Company's
subsidiaries that are not Subsidiary Guarantors
had an aggregate of $269.9 million of accounts
payable and third-party indebtedness outstanding.
See "Description of the Notes--Subordination."
The Indenture dated as of April 28, 1998,
pursuant to which the Old Notes were, and the New
Notes will be, issued (the "Indenture") permits
the Company and its subsidiaries to incur
additional indebtedness, including Senior
Indebtedness, subject to certain limitations. See
"Capitalization" and "Description of the Notes--
Subordination."
Change of Control........... Upon a Change of Control, the Company is
required, subject to certain conditions, to offer
to repurchase all outstanding Notes at a purchase
price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if
any, to the date of repurchase. See "Description
of the Notes--Change of Control."
Certain Covenants........... The Indenture contains certain covenants that,
among other things, restricts the Company and its
Restricted Subsidiaries (as defined herein) with
respect to: (i) the incurrence of additional
debt; (ii) restricted payments; (iii) asset
sales; (iv) transactions with affiliates; (v)
dividend and other payment restrictions affecting
Restricted Subsidiaries; (vi) certain liens; and
(vii) certain consolidations, mergers or sales of
assets. All of these restrictions are subject to
a number of important limitations and
qualifications. See "Description of the Notes--
Covenants."
Exchange Offer; Holders of New Notes (other than as set forth
Registration Rights......... below) are not entitled to any registration
rights with respect to the New Notes. Pursuant to
a Registration Rights Agreement (the
"Registration Rights Agreement") between the
Company and the Initial Purchasers, the Company
agreed, for the benefit of the holders of Old
Notes, to file an Exchange Offer Registration
Statement. The Registration Statement of which
this Prospectus is a part constitutes the
Exchange Offer Registration Statement (as defined
herein). Under certain circumstances, certain
holders of Notes (including holders who may not
participate in the Exchange Offer or who may not
freely resell New Notes received in the Exchange
Offer) may require the Company to file, and cause
to become effective, a shelf registration
statement under the Securities Act, which would
cover resales of Notes by such Holders. The
interest rate on the Notes is subject to increase
under certain circumstances if the Company is not
in compliance with its obligations under the
Registration Rights Agreement. See "Exchange
Offer; Registration Rights."
Use of Proceeds............. The Company will not receive any proceeds from
the Exchange Offer. All of the net proceeds from
the Offering, together with borrowings under a
new $675.0 million revolving credit facility with
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<PAGE>
NationsBank and certain other lenders (the "New
Credit Facility"), were used (i) to repay all
borrowings outstanding under the Bridge Credit
Facility (which aggregated to approximately
$800.0 million on the Closing Date) and (ii) for
general corporate purposes. See "Use of
Proceeds." The Offering and the use of the net
proceeds therefrom, together with borrowings
under the New Credit Facility, to repay all
borrowings outstanding under the Bridge Credit
Facility are referred to herein as the
"Refinancing of the Bridge Credit Facility."
Risk Factors................
See "Risk Factors" as well as the other
information set forth in this Prospectus for a
discussion of certain factors that should be
considered by Holders of Old Notes before making
a decision to tender Old Notes in the Exchange
Offer.
Ratio of Earnings to Fixed Charges
The following table sets forth for the periods indicated the consolidated
ratio of earnings to fixed charges of the Company. For purposes of computing
the ratio of earnings to fixed charges, earnings consist of earnings before
income taxes and extraordinary item plus fixed charges. Fixed charges consist
of interest expense, whether expensed or capitalized, amortization of debt
issuance costs and an estimated portion of rental expense that is
representative of the interest factor in such rentals.
<TABLE>
<CAPTION>
Year Ended June 30, Pro Forma
------------------------------------ Year Ended Six Months Ended
1994 1995 1996 1997 1998 June 30, 1998 December 31, 1998
----- ----- ----- ---- ---- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
53.1x 92.7x 33.8x 2.0x (1) (1) (2)
</TABLE>
- --------
(1) During fiscal 1998, the Company incurred repositioning, impairment and
certain other special charges aggregating $387.1 million incurred during
the three months ended December 31, 1997 and, as a result, earnings were
insufficient to cover fixed charges by $408.9 million for fiscal 1998. On a
pro forma basis, fiscal 1998 earnings were insufficient to cover fixed
charges by $416.5 million.
(2) During the six months ended December 31, 1998, the Company's earnings were
insufficient to cover fixed charges by $52.4 million.
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<PAGE>
RISK FACTORS
An investment in the Notes involves a high degree of risk. Prospective
investors should carefully consider the following risk factors, in addition to
the other information set forth in this Prospectus or incorporated by
reference herein, in evaluating an investment in the Notes.
Substantial Leverage. The Company has been and will continue to be, highly
leveraged. As of December 31, 1998, the Company's consolidated indebtedness
was $907.2 million and its stockholders' deficit was $61.6 million. Pro forma
for the SRS Transactions and the Refinancing of the Bridge Credit Facility,
earnings were insufficient to cover fixed charges by $416.5 million for fiscal
1998. The Indenture and the New Credit Facility permit the Company and its
subsidiaries to incur additional indebtedness, subject to certain limitations.
The degree to which the Company is leveraged could have important consequences
for the holders of the Notes, including, but not limited to, the following:
(i) a substantial portion of the Company's cash flow from operations must be
dedicated to the payment of principal and interest on its indebtedness and
will not be available for other purposes; (ii) the Company's ability to obtain
additional financing in the future for working capital, capital expenditures,
acquisitions or other purposes may be impaired; (iii) the Company's leverage
may increase its vulnerability to economic downturns and limit its ability to
withstand competitive pressures; and (iv) the Company's ability to capitalize
on significant business opportunities may be limited.
The ability of the Company to meet its debt service obligations will depend
on the future operating performance and financial results of the Company,
which will be subject in part to factors beyond the control of the Company.
Although management believes that the Company's cash flow will be adequate to
meet its interest and principal payments, there can be no assurance that the
Company will continue to generate earnings in the future sufficient to cover
its fixed charges. If the Company is unable to generate earnings in the future
sufficient to cover its fixed charges and is unable to borrow sufficient funds
under either the New Credit Facility or from other sources, it may be required
to refinance all or a portion of its existing debt (including the Notes) or to
sell all or a portion of its assets. There can be no assurance that a
refinancing would be possible, nor can there be any assurance as to the timing
of any asset sales or the proceeds that the Company could realize therefrom.
In addition, the terms of the New Credit Facility and the Indenture restrict
the Company's ability to sell assets and the use of the proceeds therefrom.
If for any reason, including a shortfall in anticipated operating results or
proceeds from asset sales, the Company were unable to meet its debt service
obligations, it would be in default under the terms of the New Credit
Facility. In the event of such a default, the lenders under the New Credit
Facility could elect to declare all of such indebtedness immediately due and
payable, including accrued and unpaid interest, and to terminate their
commitments with respect to funding obligations under the New Credit Facility.
In addition, such lenders could proceed against their collateral, which
consists of substantially all of the domestic assets of the Company. Any
default with respect to the New Credit Facility could result in a default
under other indebtedness or result in a bankruptcy of the Company. Such
defaults could delay or preclude payment of principal of, or interest on, the
Notes. See "Description of the Notes--Subordination."
Waiver of Potential Defaults under the New Credit Facility; Need to Amend
New Credit Facility. On April 28, 1998, the Company entered into the New
Credit Facility. See "Description of New Credit Facility." At December 31,
1998, the Company had an aggregate of $528.0 million of borrowings outstanding
under the New Credit Facility, which bore interest at a weighted average rate
of 7.48% per annum at such date, and had aggregate borrowing availability
thereunder of $54.4 million. Because the Company would have been in violation
of the net worth covenant in the New Credit Facility as of December 30, 1998,
the Company obtained a waiver of this covenant from the lenders that was
effective from December 30, 1998 through February 12, 1999 (the "First
Waiver"). Pursuant to the First Waiver, the maximum borrowing availability
under the Company's Revolving Credit Facility was decreased from $150.0
million (including letters of credit) to $110.0 million (including letters of
credit).
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<PAGE>
On February 11, 1999, the Company obtained a new waiver (the "Second
Waiver") of such net worth covenant as well as a waiver of an event of default
that existed due to the Company's failure to register certain securities as
required under certain agreements to which it is a party. The Second Waiver is
effective from February 13, 1999 through March 30, 1999. In connection with
the Second Waiver, the maximum borrowing availability under the Revolving
Credit Facility was increased to $125.0 million (including letters of credit).
As of February 15, 1999, the Company had an aggregate of $570.9 million of
borrowings outstanding under the New Credit Facility (including $82.9 million
of borrowings under the Revolving Credit Facility). Additionally, $15.6
million of letters of credit were outstanding under the Revolving Credit
Facility leaving an aggregate borrowing availability thereunder of $26.5
million. The Company paid the lenders fees aggregating $1.3 million in
connection with the Second Waiver. The Company is not currently in violation
of any covenants contained in the New Credit Facility.
The Company is in the process of negotiating an amendment to the loan
agreement relating to the net worth covenant and the existing event of default
as well as certain other financial covenants. The Company is not currently in
violation of these other financial covenants but anticipates that, to the
extent such covenants are not amended, it will be in violation of the two
provisions presently waived as of March 31, 1999 and certain other financial
covenants by June 30, 1999. The Company anticipates that in connection with
any such amendment, borrowing availability under the Revolving Credit Facility
will be restored to $150.0 million. Although the Company believes that it will
be able to negotiate the necessary amendments with its lenders, there can be
no assurance that it will be able to do so. Any amendment to the New Credit
Facility must be approved by the lenders holding more that 50% of the
commitments and borrowings outstanding under the New Credit Facility. In the
absence of a further waiver or an amendment to the New Credit Facility, after
March 30, 1999, the lenders would be entitled to exercise all of their rights
under the loan agreement including, without limitation, declaring all amounts
outstanding under the New Credit Facility immediately due and payable and/or
exercising their rights with respect to the collateral securing the New Credit
Facility, which consists of, among other things, substantially all of the real
and personal property of the Company and its subsidiaries.
If the Company is unable to obtain a further waiver or amendment to the New
Credit Facility, the Company may not have sufficient cash to meet its working
capital, debt service and capital expenditure needs beyond March 30, 1999, in
which case, the Company may be required to obtain financing from other
sources. There can be no assurance that such financing will be available or,
if available, that it will be on terms satisfactory to the Company.
Consequently, the inability to obtain any such waiver, amendment or
alternative financing would have a material adverse effect on the Company's
financial condition and results of operations.
Integration and Management of Acquired Businesses. Since August 1994, the
Company has completed eleven acquisitions, including the SRS Acquisition in
October 1997. The SRS Acquisition was significantly larger than any
acquisition previously completed by the Company and represents a substantial
increase in the scope of the Company's business. The Company has limited
experience in the design, development, manufacture and sale of seatbelt
systems, which represent a significant portion of the SRS business. Pro forma
for the SRS Acquisition, seatbelt system sales would have accounted for 29.5%
of the Company's fiscal 1998 net sales. There can be no assurance that the
Company will be able to successfully integrate the operations of SRS or the
other recently acquired businesses into the Company's operations. In
particular, the Company may experience (i) difficulty in assimilating the
operations and personnel of the acquired companies, (ii) disruption of the
Company's ongoing business, (iii) the inability of management to maximize the
financial and strategic position of the Company by the successful
incorporation of acquired products or technologies into the Company's
offerings, (iv) difficulty in the maintenance of uniform standards, controls,
procedures and policies and (v) the impairment of relationships with employees
and customers.
In addition, the Company has committed to a plan to reposition and combine
certain of its manufacturing and sales and engineering facilities and, in
connection with such plan, incurred a repositioning charge of $177.0
14
<PAGE>
million during the three months ended December 31, 1997. Any failure on the
part of the Company to successfully implement its repositioning program or
integrate and manage the operations of SRS or the other recently acquired
businesses could have a material adverse effect on the Company's financial
condition and results of operations. The Company has little history of
operations on a combined basis with SRS and the other recently acquired
businesses.
Risks Associated with Siemens Joint Venture. When fully operational over the
next several years, BSRS is expected to assume the sales and marketing, as
well as the research, development and engineering, functions for the Company's
integrated occupant protection systems and components. As a result, because
BSRS will employ the personnel responsible for such functions, the Company
expects to substantially reduce its sales and marketing and research,
development and engineering staff. In the event that BSRS is terminated, there
can be no assurance that the Company will be able to rehire a sufficient
number of such personnel and any inability to do so could have a material
adverse effect on the Company. Further, all significant operating decisions
regarding BSRS must be approved by Siemens and the Company. In the event of a
deadlock regarding material operating decisions, either party may sell their
interest in BSRS to the other or BSRS may be terminated. If the Company sells
its interest in BSRS or BSRS is otherwise terminated, the Company will likely
no longer have access to Siemens' expertise in sensors and electronics, which
may materially adversely affect the Company's ability to develop next
generation, intelligent, integrated occupant protection systems. Any failure
to develop such systems would adversely affect the Company's competitive
position and could have a material adverse effect on the Company's financial
condition and results of operations.
Pursuant to the joint venture agreement relating to BSRS, the Company and
Siemens are required to fund the operations of BSRS pursuant to an operating
budget to be agreed upon by the parties. The New Credit Facility and the Notes
restrict the amount that the Company can invest in BSRS. The New Credit
Facility limits the Company's investments in BSRS to $10.0 million in fiscal
1999 and 2000 and $15.0 million in each year thereafter provided that the
Company may make investments in BSRS in excess of the specified amounts
beginning in fiscal 2000 and thereafter if, after adding such specified
amounts to consolidated fixed charges (as defined in the New Credit Facility),
the Company is in compliance with the covenants in the New Credit Facility.
Any inability to make sufficient investments in BSRS could have a material
adverse effect on the operations of BSRS. See "Description of New Credit
Facility" and "Description of the Notes--Covenants--Restricted Payments."
Dependence on the Development of New Products. In recent years, automotive
occupant protection systems have changed significantly, based on changes in
government regulations, the demand by OEMs and consumers for improved systems
and rapid advances in the technology underlying these systems. The Company
believes that occupant protection systems will continue to change rapidly,
with industry participants seeking to develop and introduce intelligent
occupant protection systems that will be able to react differently to
particular crash situations and to make improvements in other components of
occupant protection systems. The Company believes that its future success will
depend in part on its ability to enhance its existing products and to develop
new products that meet changing government regulatory requirements and satisfy
OEM and consumer requirements, particularly requirements for intelligent
occupant protection systems. There can be no assurance that the Company will
meet these objectives and any failure to do so could have a material adverse
effect on the Company's financial condition and results of operations. See
"Business--Research and Development."
Reliance on Major Customers. Pro forma for the SRS Acquisition, sales to
Fiat, GM, Chrysler and Ford represented approximately 20%, 19%, 19% and 16%,
respectively, of the Company's net sales for fiscal 1998. These customers are
not committed to purchase any specified quantities of products from the
Company and there can be no assurance that these customers will continue to
purchase products from the Company at levels consistent with previous
purchases. A significant decline in sales of the Company's products to these
customers would have a material adverse effect on the Company's financial
condition and results of operations. See "Business--Customers."
15
<PAGE>
Effects of Likely Price Decreases. The Company anticipates that the prices
of automotive occupant protection systems and components such as those sold by
the Company will continue to decline over the next several years as a result
of competitive pressures and OEM requirements. The Company's future
profitability, therefore, will depend, among other things, on its ability to
continue to reduce its per-unit costs and maintain a cost structure,
internally and with its suppliers, that will enable it to offer competitive
prices. There can be no assurance that the Company will be successful in doing
so.
Dependence on the Automotive Industry. Sales of products to the automotive
industry have accounted for substantially all of the Company's net sales. The
automobile market is cyclical and dependent on general economic conditions.
Future declines in car production in the United States or in markets outside
the United States could have a material adverse effect on the Company's
financial condition and results of operations. In addition, most of the
Company's customers are unionized and may, from time to time, experience labor
disruptions. Any disruption in production by one or more of the Company's
customers could have an adverse effect on the Company's financial condition
and results of operations.
Government Regulation. The North American market for automotive occupant
protection systems has been significantly affected by federal safety
regulations and the Company believes that such regulations will continue to
have a significant effect on this market. Specifically, the rapid installation
of driver-side and passenger-side airbags was initially caused in the United
States by federal safety regulations. Recently, there has been negative
publicity concerning airbag performance, particularly the performance of
passenger-side airbags, and it is possible that federal safety regulations
will be revised in response to the concerns raised. It is difficult to predict
the nature of any such regulatory changes or the impact of such changes on the
Company's financial condition and results of operations.
Product Liability. The sale of the Company's products entails an inherent
risk of product liability claims. Although the Company maintains product
liability insurance covering certain types of claims, the Company's policies
are subject to substantial deductibles and there can be no assurance that the
coverage limits of the Company's insurance policies will be adequate or that
any particular loss will be covered. Such insurance can be expensive and in
the future may not be available on acceptable terms, if at all. A successful
claim brought against the Company not covered by the Company's insurance or
resulting in a recovery in excess of its insurance coverage could have a
material adverse effect on the Company's financial condition and results of
operations.
Warranty and Recall Exposure. The Company warrants to its OEM customers that
its products are free from defects and that they meet certain OEM designated
specifications. The OEMs in turn offer product warranties to the purchasers of
vehicles. In some instances of common complaint, the automobile manufacturer
will institute a vehicle recall or will be required by a governmental agency
to conduct a recall. As a result, from time to time, the Company has received
claims against it and requests for payment from its OEM customers to remedy
complaints made by the purchasers of vehicles. There can be no assurance that
the Company will not incur substantial warranty or recall expense in the
future. Such complaints and the related expenses could have a material adverse
effect on the Company's relationship with its OEM customers and on its
financial condition and results of operations.
Potential Fluctuations in Quarterly Results. The Company's quarterly
operating results may vary significantly depending on factors such as the
timing of significant orders, the level of sales by automobile manufacturers,
disruptions caused by labor disputes and the seasonal patterns of its
customers, especially those located in Europe. A large portion of the
Company's expenses are fixed and cannot be adjusted in response to a shortfall
in quarterly revenues. There can be no assurance that the Company will operate
profitably in any quarter.
Long Lead Times for Sales. The Company typically competes for new business
at the beginning of the development of new vehicle models and upon the
redesign of existing models by its customers. New model
16
<PAGE>
development generally begins three to five years prior to the marketing of
such models to the public. As a result of the relatively long lead times
required for sales of automotive occupant protection systems and components,
it may be difficult for the Company to obtain new sales to replace any
unexpected decline in sales to existing customers. The failure of the Company
to obtain new business for new models or to retain or increase business on
redesigned existing models could adversely affect the Company's financial
condition and results of operations.
Competition. The markets for automotive occupant protection systems and
components are highly competitive. Increased competition could result in price
reductions and loss of market share, which would adversely affect the
Company's financial condition and results of operations. Many of the Company's
current and potential competitors have greater financial and other resources
than the Company. There can be no assurance that the Company will be able to
continue to compete successfully with its existing competitors or will be able
to compete successfully with new competitors. See "Business--Competition."
Risks Associated with International Sales. Pro forma for the SRS
Acquisition, international sales accounted for approximately 40% of the
Company's net sales in fiscal 1998. The Company expects that international
sales will continue to account for a significant portion of its business in
the future. The Company's ability to compete effectively outside the United
States will depend on its ability to develop the relationships and, if demand
requires, additional facilities necessary to service international customers.
In addition, the Company's financial results attributable to international
sales may be affected by fluctuations in currency exchange rates, increases in
duty rates, difficulties in obtaining export licenses, trade and tariff
regulations, political instability, difficulties or delays in collecting
accounts receivable and difficulties in staffing and managing international
operations. Pro forma for the SRS Acquisition, sales in Asia accounted for
approximately 4.1% of the Company's net sales for fiscal 1998. In recent
months, certain Asian currencies have been devalued significantly in relation
to the U.S. dollar and financial markets in Asia have experienced significant
turmoil. There can be no assurance that the Company's sales in Asia will not
be materially adversely affected by such developments.
Dependence on Key Personnel. The Company's success depends to a significant
extent upon the continued services of its executive officers and other key
management. The loss of the services of any one or more of such key personnel
could have a material adverse effect on the Company and there can be no
assurance that the Company would be able to find suitable replacements for
such key personnel.
Dependence on Suppliers. Certain key components used in the Company's
products, such as restraints control modules and certain hybrid inflators, are
currently purchased from single sources. In addition, the Company subcontracts
the manufacture of certain of its subassemblies to third parties. The
inability to obtain sufficient sources of components or subassemblies as
required, or to obtain or develop alternative sources at competitive prices
and quality if and as required in the future, could result in delays in
product shipments or increase the Company's supply costs, either of which
would adversely affect the Company's financial condition and results of
operations.
Patents and Proprietary Technology. The Company relies on a number of
patents, trade secrets and non-disclosure agreements to protect its
technology. There can be no assurance that any patents now or hereafter owned
by the Company will afford protection against competitors which develop
similar technology. In addition, upon expiration of such patents, competitors
may develop and sell products based on technologies similar or equivalent to
those currently covered by the Company's patents. In addition, the laws of
some foreign countries do not protect the Company's patents and other
proprietary rights to the same extent as do the laws of the United States.
There can be no assurance that the steps taken by the Company to protect its
proprietary rights will be adequate to prevent imitation of its products or
technology, that the Company's proprietary information will not become known
to competitors, that the Company can effectively protect its rights to
unpatented proprietary information or that the Company's competitors will not
independently develop products or technologies that are
17
<PAGE>
superior to the Company's products or technologies without infringing on the
Company's intellectual property rights. Although the Company believes that its
products and technology do not infringe on the proprietary rights of others,
there can be no assurance that third parties will not assert infringement
claims in the future.
Safety and Environmental Considerations. Sodium azide, which is used in the
propellant for certain of the Company's inflators, is flammable and has
exhibited toxicity in laboratory animal tests. In addition, the manufacture of
propellant containing sodium azide, as well as primers used in certain of the
Company's products, entails certain hazards. The Company's method of
production limits the quantity of these energetic materials in process at any
one time and utilizes certain safety measures. Notwithstanding these
precautions, the Company has on occasion experienced fires and explosions at
its manufacturing facilities. Although the Company's facilities and processes
are designed in a manner intended to minimize risks associated with the use of
energetic materials such as sodium azide and primers, there can be no
assurance that the Company will not encounter additional incidents or safety
issues relating to the use and manufacture of these energetic materials. The
Company also uses various other hazardous and toxic substances in its
manufacturing processes, including certain solvents, lubricants, sodium azide
and pyrotechnic materials. The inadvertent release of any of these substances
into the environment could subject the Company to significant liability for
clean-up costs or fines, which could have a material adverse effect on the
Company's financial condition and results of operations. Additionally, the
Company may be required to make significant expenditures to ensure that the
Company's facilities and operations continue to satisfy environmental
regulations and these regulations may change significantly in the future.
Risks Relating to Year 2000. Based on recent assessments, the Company has
determined that it will be required to modify or replace portions of its
software and hardware so that its computer systems will properly utilize dates
beyond December 31, 1999. The Company has also queried its important suppliers
and customers that do not share information systems with the Company. To date,
the Company is not aware of any Year 2000 problems of its suppliers and
customers that would materially impact the Company's results of operations or
financial condition. However, there can be no assurance that the Company's
suppliers and customers will be Year 2000 compliant, and any such failure on
their part could adversely impact the Company. During fiscal 1998, the Company
incurred approximately $1.0 million of costs in connection with implementing
its Year 2000 program. The Company estimates that it will spend an additional
$6.0 million to complete its Year 2000 program. There can be no assurance that
the cost to complete the Company's Year 2000 program will not materially
exceed the Company's expectations. In addition, to the extent that any
material Year 2000 problem is not remedied by the Company in a timely manner,
such problem could have a material adverse effect upon the Company's results
of operations and financial condition.
Control of the Company by Principal Stockholders. As of February 16, 1999,
Allen K. Breed and Johnnie Cordell Breed and trusts established for their
benefit beneficially owned approximately 46.3% of the outstanding Common Stock
of the Company. As a result, Mr. and Mrs. Breed are able to exercise control
over the Company's affairs through their ability to elect all of the directors
of the Company and control the vote on all matters requiring stockholder
approval. There can be no assurance that the interests of Mr. and Mrs. Breed
and those of the holders of the Notes will not conflict.
Limitation on Subsidiary Guarantees; Fraudulent Conveyance Concerns. The
issuance of a Subsidiary Guarantee by a Subsidiary Guarantor may be subject to
review under federal or state fraudulent conveyance laws in the event of the
bankruptcy or other financial difficulty of such Subsidiary Guarantor.
Depending upon the standard applied in connection with such review, such
review could result in the indebtedness evidenced by a Subsidiary Guarantee
being voided or subordinated to all other indebtedness of such Subsidiary
Guarantor (in addition to the senior indebtedness of such Subsidiary Guarantor
to which such Subsidiary Guarantee is expressly subordinated), and could
result in payments previously made in respect of such Subsidiary Guarantee
being returned to such Subsidiary Guarantor.
18
<PAGE>
For example, under applicable law, if a court, in a lawsuit by an unpaid
creditor or representative of creditors of a Subsidiary Guarantor, were to
find that when such Subsidiary Guarantor incurred the indebtedness evidenced
by its Subsidiary Guarantee, such Subsidiary Guarantor (a)(i) was insolvent or
was rendered insolvent by reason of such incurrence, (ii) was engaged in a
business or transaction for which the assets remaining with such Subsidiary
Guarantor constituted unreasonably small capital or (iii) intended to incur,
or believed (or reasonably should have believed) that it would incur,
indebtedness beyond its ability to pay such indebtedness as it matures and (b)
received less than reasonably equivalent value or fair consideration for the
incurrence of such indebtedness, then the Subsidiary Guarantee could be
voided, or claims in respect of the Subsidiary Guarantee could be subordinated
to all other Indebtedness of such Subsidiary Guarantor. In addition, any
amounts previously paid by a Subsidiary Guarantor pursuant to a Subsidiary
Guarantee could be voided and required to be returned to such Subsidiary
Guarantor, or to a fund for the benefit of the creditors of such Subsidiary
Guarantor. The measure of insolvency for purposes of the foregoing
considerations will vary depending upon the law of the jurisdiction being
applied. Generally, however, a Subsidiary Guarantor would be considered
insolvent if (i) the sum of its debts, including contingent liabilities, is
greater than the saleable value of all of its assets at a fair valuation or if
the present fair saleable value of its assets is less than the amount that
would be required to pay its probable liability on its existing debts,
including contingent liabilities, as they become absolute and matured or (ii)
it could not pay its debts as they become due.
A court will likely find that a Subsidiary Guarantor did not receive fair
consideration or reasonably equivalent value for its guarantee to the extent
that its liability thereunder exceeds any direct benefit it received from the
issuance of the Notes. Each Subsidiary Guarantee will limit the liability of
the Subsidiary Guarantor thereunder to the maximum amount that it could pay
without the guarantee being deemed a fraudulent transfer. There can be no
assurance that this limitation will be effective. If this limitation is not
effective, the issuance of a Subsidiary Guarantee by a Subsidiary Guarantor
could be deemed to render insolvent such Subsidiary Guarantor. If this
limitation is effective, there can be no assurance that the limited amount so
guaranteed would be sufficient to pay amounts owed under the Notes in full.
Subordination of the Notes and the Subsidiary Guarantees. The Notes and the
Subsidiary Guarantees are unsecured, general obligations of the Company and
the Subsidiary Guarantors, respectively, subordinated in right of payment to
all existing and future senior indebtedness of the Company and the Subsidiary
Guarantors, including Indebtedness under the New Credit Facility. As of
December 31, 1998, the Company and the Subsidiary Guarantors had approximately
$528.0 million of Indebtedness outstanding ranking senior to the Notes
(excluding $15.6 million in letters of credit), and the Company had $54.4
million of additional borrowing availability under the New Credit Facility
(which reflects $15.6 million in outstanding letters of credit) all of which
would be Senior Indebtedness. In the event of the bankruptcy, liquidation or
reorganization of the Company or a Subsidiary Guarantor, the assets of the
Company or such Subsidiary Guarantor would be available to pay obligations on
the Notes only after all senior indebtedness of the Company or such Subsidiary
Guarantor, as the case may be, has been repaid in full. Consequently,
sufficient assets may not exist to pay amounts due on the Notes. In addition,
the subordination provisions of the Indenture provide that no cash payments
may be made with respect to the Notes during the continuance of a payment
default under certain Senior Indebtedness of the Company. Furthermore, if
certain nonpayment defaults exist with respect to certain Senior Indebtedness,
the holders of such Senior Indebtedness would be able to prevent payments on
the Notes for certain periods of time. See "Description of the Notes--
Subordination."
None of the Company's foreign subsidiaries are Subsidiary Guarantors, and
the Notes are effectively subordinated in right of payment to all indebtedness
and other liabilities (including trade payables) of these subsidiaries. As of
December 31, 1998, the Company's subsidiaries that are not Subsidiary
Guarantors had approximately $269.9 million of accounts payable and third-
party indebtedness outstanding. The right of the Company to receive assets of
any of its subsidiaries that are not Subsidiary Guarantors upon liquidation or
reorganization of such subsidiary are subordinated to the claims of that
subsidiary's creditors (including trade creditors), except to the extent the
Company itself is recognized as a creditor of such subsidiary. See
"Description of the Notes--Subordination."
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Consequences of Failure to Exchange and Requirements for Transfer of New
Notes. Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. In general, the Old Notes
may not be offered or sold, unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register Old Notes under the Securities Act.
Based on interpretations by the staff of the Commission, set forth in no-
action letters issued to third parties, the Company believes the New Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by any holder thereof (other than
broker-dealers, as set forth below, and any such holder that is an "affiliate"
of the Company or a Subsidiary Guarantor within the meaning of Rule 405 under
the Securities Act) without compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such New Notes are
acquired in the ordinary course of such holder's business and such holder is
not participating in, does not intend to participate in and has no arrangement
or understanding with any person to participate in the distribution of such
New Notes. Any holder who tenders in the Exchange Offer with the intention to
participate, or for the purpose of participating, in a distribution of the New
Notes or who is an affiliate of the Company or a Subsidiary Guarantor may not
rely upon such interpretations by the staff of the Commission and, in the
absence of an exemption therefrom, must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
secondary resale transaction. Holders of Old Notes wishing to accept the
Exchange Offer must represent to the Company in the Letter of Transmittal that
such conditions have been met. Each broker-dealer (other than an affiliate of
the Company or a Subsidiary Guarantor) that receives New Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that, starting
on the Expiration Date and ending on the close of business 180 days after the
Expiration Date, it will make this Prospectus available to any broker-dealer
for use in connection with any such resale. See "Plan of Distribution". Any
broker-dealer who is an affiliate of the Company or any Subsidiary Guarantor
may not rely on such no-action letters and must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
a secondary resale transaction. Following the Exchange Offer, none of the
Notes will be entitled to the contingent increase in interest rate provided
for (in the event of a failure to consummate the Exchange Offer in accordance
with the terms of the Registration Rights Agreement) pursuant to the Old
Notes.
Restrictions Imposed by the New Credit Facility and the Indenture. The New
Credit Facility and the Indenture contain a number of significant covenants
that, among other things, restrict the ability of the Company to dispose of
assets, incur additional indebtedness, repay other indebtedness, pay
dividends, make certain investments or acquisitions, including investments in
the Siemens Joint Venture, repurchase or redeem capital stock, engage in
mergers or consolidations, or engage in certain transactions with subsidiaries
and affiliates and otherwise restrict corporate activities. There can be no
assurance that such restrictions will not adversely affect the Company's
ability to finance its future operations or capital needs or engage in other
business activities (including, without limitation, pursuing the Siemens Joint
Venture) that may be in the best interest of the Company. In addition, the New
Credit Facility also requires the Company to maintain compliance with certain
financial ratios. The ability of the Company to comply with such ratios may be
affected by events beyond the Company's control. A breach of any of these
covenants or the inability of the Company to comply with the required
financial ratios could result in a default under the New Credit Facility. In
the event of any such default, the lenders under the New Credit Facility could
elect to declare all borrowings outstanding under the New Credit Facility to
be due and payable, to require the Company to apply all of its available cash
to repay such borrowings or to prevent the Company from making debt service
payments on the Notes. If the Company were unable to
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repay any such borrowings when due, the lenders could proceed against their
collateral. If the indebtedness under the New Credit Facility or the Notes
were to be accelerated, there can be no assurance that the assets of the
Company would be sufficient to repay such indebtedness in full. See
"Description of the Notes" and "Description of New Credit Facility."
Change of Control and Possible Inability to Repurchase Notes. The Indenture
requires the Company, in the event of a Change of Control, to make an offer to
purchase all outstanding Notes at a price equal to 101% of the principal
amount thereof, plus accrued and unpaid interest to the date of repurchase.
The New Credit Facility restricts such a purchase and such an offer would
require the approval of the lenders thereunder. In addition, certain events
involving a change of control may be an event of default under the New Credit
Facility or other indebtedness of the Company that may be incurred in the
future. Accordingly, the right of the holders of the Notes to require the
Company to repurchase the Notes may be of limited value if the Company cannot
obtain the required approval under the New Credit Facility. In addition, even
if such approval were obtained, there can be no assurance that the Company
will have the financial resources necessary to purchase the Notes upon a
Change of Control. Failure to offer to repurchase the Notes under such
circumstances, however, would constitute an event default under the Indenture.
See "Description of the Notes--Repurchase at the Option of Holders--Change of
Control."
Lack of Public Market for the New Notes. The New Notes will constitute a new
issuance of securities for which there is currently no trading market. The New
Notes will not be listed on any securities exchange and the Company does not
intend to seek approval for quotation through any automated quotation system.
No assurance can be given that an active public or other market will develop
for the New Notes or as to the liquidity of or the trading market for the New
Notes. If a trading market does not develop or is not maintained, holders of
the New Notes may experience difficulty in reselling the New Notes or may be
unable to sell them at all. If a market for the New Notes develops, any such
market may cease to continue at any time. If a public trading market develops
for the New Notes, future trading prices of the New Notes will depend on many
factors, including, among other things, prevailing interest rates, the
Company's results of operations and the market for similar securities and
other factors, including the financial condition of the Company.
THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
The Old Notes were sold by the Company on April 28, 1998 to the Initial
Purchasers in reliance on Section 4(2) of the Securities Act. The Initial
Purchasers offered and sold the Old Notes only (i) to "qualified institutional
buyers" (as defined in Rule 144A) in compliance with Rule 144A, (ii) to a
limited number of other institutional "accredited investors" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act) that, prior to their
purchase of Old Notes, delivered to the Initial Purchasers a letter containing
certain representations and agreements and (iii) to certain persons in
offshore transactions in reliance on Regulations under the Securities Act.
In connection with the sale of the Old Notes, the Company and the Initial
Purchasers entered into the Registration Rights Agreement, which generally
requires the Company (i) to cause the Old Notes to be registered under the
Securities Act or (ii) to file with the Commission the Exchange Offer
Registration Statement with respect to the Exchange Offer. The Exchange Offer
is being made pursuant to the Registration Rights Agreement to satisfy the
Company's obligations thereunder with regard to the Notes. The term "holder"
with respect to the Exchange Offer means any person in whose name Old Notes
are registered on the trustee's books or any other person who has obtained a
properly completed bond power from the registered holder, or any person whose
Old Notes are held of record by The Depository Trust Company ("DTC") who
desires to deliver such Old Note, by book-entry transfer at DTC.
Based on interpretations by the staff of the Commission set forth in no-
action letters issued to third parties, the Company believes the New Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by any holder thereof (other than
broker-dealers, as set forth
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below, and any such holder that is an "affiliate" of the Company or any
Subsidiary Guarantor within the meaning of Rule 405 under the Securities Act)
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that such New Notes are acquired in the ordinary
course of such holder's business and that such holder is not participating in,
does not intend to participate in, and has no arrangement or understanding
with any person to participate in the distribution of such New Notes. Any
holder who tenders in the Exchange Offer with the intention to participate, or
for the purpose of participating, in a distribution of the New Notes or who is
an affiliate of the Company or any Subsidiary Guarantor may not rely upon such
interpretations by the staff of the Commission and, in the absence of an
exemption therefrom, must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any secondary resale
transaction. Failure to comply with such requirements in such instance may
result in such holder incurring liabilities under the Securities Act for which
the holder is not indemnified by the Company. Each broker-dealer (other than
an affiliate of the Company or any Subsidiary Guarantor) that receives New
Notes for its own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus in connection with any resale of such New Notes.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. The Company has agreed
that, starting on the Expiration Date and ending on the close of business 180
days after the Expiration Date, it will make the Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution." Any broker-dealer who is an affiliate of the Company may not
rely on such no-action letters and must comply with the registration and
prospectus delivery requirements in connection with a secondary resale
transaction.
The Exchange Offer is not being made to, nor will the Company accept
surrenders for exchange from, holders of Old Notes in any jurisdiction in
which this Exchange Offer or the acceptance thereof would not be in compliance
with the securities or blue sky laws of such jurisdiction.
By tendering in the Exchange Offer, each holder of Old Notes will represent
to the Company that, among other things, (i) the New Notes acquired pursuant
to the Exchange Offer are being obtained in the ordinary course of business of
the person receiving such New Notes, whether or not such person is the holder,
(ii) neither the holder of Old Notes nor any such other person is
participating in, intends to participate, or has an arrangement or
understanding with any person to participate in the distribution of such New
Notes, (iii) neither the holder nor any such other person is an "affiliate" of
the Company or any Subsidiary Guarantor within the meaning of Rule 405 under
the Securities Act or, if such holder is an "affiliate," that such holder will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable, (iv) if the holder is not a broker-
dealer, that neither the holder nor any such other person is engaged in or
intends to engage in the distribution of such New Notes, or (v) if such holder
is a broker-dealer, that will receive New Notes for its own account in
exchange for Old Notes, that the Old Notes to be exchanged for the New Notes
were acquired by it as a result of market-making activities or other trading
activities and acknowledges that it will deliver a prospectus in connection
with any resale of such New Notes.
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Old Notes are urged to
consult their financial and tax advisors in making their own decisions on
whether to participation in the Exchange Offer.
Terms of the Exchange Offer
General. Upon the terms and subject to the conditions set forth in this
Prospectus and in the Letter of Transmittal, the Company will accept any and
all Old Notes validly tendered and not withdrawn prior to 5:00 p.m., New York
City time, on the Expiration Date. Subject to the minimum denomination
requirements of the New Notes, the Company will issue $1,000 principal amount
of New Notes in exchange for each $1,000 principal amount of outstanding Old
Notes accepted in the Exchange Offer. Holders may tender some or all of their
Old Notes pursuant to the Exchange Offer. However, Old Notes may be tendered
only in amounts that are integral multiples of $1,000 principal amount.
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<PAGE>
The form and terms of the New Notes will be identical in all material
respects to the form and terms of the Old Notes except that (i) the New Notes
will be registered under the Securities Act and, therefore, will not bear
legends restricting the transfer thereof and (ii) holders of the New Notes
will not be entitled to certain rights of holders of Old Notes under the
Registration Rights Agreement, which will terminate upon consummation of the
Exchange Offer. The New Notes will evidence the same debt as the Old Notes,
will be entitled to the benefits of the Indenture and will be treated as a
single class thereunder with any Old Notes that remain outstanding. The
Exchange Offer is not conditioned upon any minimum aggregate principal amount
of Old Notes being tendered for exchange.
As of the date of this Prospectus, $330,000,000 aggregate principal amount
of the Old Notes is outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about March 15, 1999 to registered
Holders of Old Notes.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the Delaware General Corporation Law or the Indenture in connection with the
Exchange Offer. The Company intends to conduct the Exchange Offer in
accordance with the provisions of the Registration Rights Agreement and the
applicable requirements of the Exchange Act and the rules and regulations of
the Commission thereunder. Old Notes which are not tendered for exchange in
the Exchange Offer will remain outstanding and interest thereon will continue
to accrue.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purposes of receiving the New Notes from the Company. If any tendered
Old Notes are not accepted for exchange because of an invalid tender, the
occurrence of certain other events set forth herein or otherwise, certificates
for any such unaccepted Old Notes will be returned, without expense, to the
tendering holder thereof as promptly as practicable after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "--Fees and Expenses."
Expiration Date; Extensions; Amendments. The term "Expiration Date" shall
mean 5:00 p.m., New York City time, on April 12, 1999, unless the Company, in
its sole discretion, extends the Exchange Offer, in which case the term
"Expiration Date" shall mean the latest date and time to which the Exchange
Offer is extended. Although the Company has no current intention to extend the
Exchange Offer, the Company reserves the right to extend the Exchange Offer at
any time and from time to time by giving oral or written notice to the
Exchange Agent and by timely public announcement communicated, unless
otherwise required by applicable law or regulation, by making a release to the
Dow Jones News Service. During any extension of the Exchange Offer, all Old
Notes previously tendered pursuant to the Exchange Offer and not withdrawn
will remain subject to the Exchange Offer. The date of the exchange of the New
Notes for Old Notes will be the first New York Stock Exchange trading day
following the Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "--Conditions"
shall not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent or (ii) to amend the terms of
the Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral
or written notice thereof to the registered holders. If the Exchange Offer is
amended in any manner determined by the Company to constitute a material
change, the Company will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the registered holders, and
the Company will extend the Exchange Offer for a period of time, depending
upon the significance of the amendment and the manner of disclosure to the
registered holders, if the Exchange Offer would otherwise expire during such
period.
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<PAGE>
In all cases, issuance of the New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of a properly completed and duly executed Letter of
Transmittal and all other required documents; provided, however, that the
Company reserves the absolute right to waive any conditions of the Exchange
Offer or defects or irregularities in the tender of Old Notes. If any tendered
Old Notes are not accepted for any reason set forth in the terms and
conditions of the Exchange Offer or if Old Notes are submitted for a greater
principal amount than the holder desires to exchange, such unaccepted or non-
exchanged Old Notes or substitute Old Notes evidencing the unaccepted portion,
as appropriate, will be returned without expense to the tendering holder (or,
in the case of Old Notes tendered by book-entry transfer into the Exchange
Agent's account at DTC pursuant to the book-entry transfer into the Exchange
Agent's account at DTC pursuant to the book-entry procedures described below,
such non-exchanged Old Notes will be credited to an account maintained with
DTC), unless otherwise provided in the Letter of Transmittal, as promptly as
practicable after the expiration or termination of the Exchange Offer.
Interest on the New Notes. Holders of Old Notes that are accepted for
exchange will not receive accrued interest thereon at the time of exchange.
However, each New Note will bear interest from the most recent date to which
interest has been paid on the Old Notes or New Notes, or if no interest has
been paid on the Old Notes or New Notes, from April 28, 1998.
Procedures for Tendering Old Notes. The tender to the Company of Old Notes
by a holder thereof pursuant to one of the procedures set forth below will
constitute an agreement between such holder and the Company in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal. A holder of the Old Notes may tender such Old Notes by (i)
properly completing and signing a Letter of Transmittal or a facsimile thereof
(all reference in this Prospectus to a Letter of Transmittal shall be deemed
to include a facsimile thereof) and delivering the same, together with any
corresponding certificate or certificates representing the Old Notes being
tendered (or confirmation of a book-entry transfer of such Old Notes into the
Exchange Agent's account at DTC pursuant to the book-entry procedures
described below) and any required signature guarantees, to the Exchange Agent
at its address set forth in the Letter of Transmittal on or prior to the
Expiration Date (or complying with the procedure for book-entry transfer
described below) or (ii) complying with the guaranteed delivery procedures
described below.
If tendered Old Notes are registered in the name of the signer of the Letter
of Transmittal and the New Notes to be issued in exchange therefor are to be
issued (and any untendered Old Notes are to be reissued) in the name of the
registered holder (which term, for the purposes described herein, shall
include any participant in DTC (also referred to as a book-entry facility)
whose name appears on a security listing as the owner of Old Notes), the
signature of such signer need not be guaranteed. In any other case, the
tendered Old Notes must be endorsed or accompanied by written instruments of
transfer in form satisfactory to the Company and duly executed by the
registered holder and the signature on the endorsement or instrument of
transfer must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., a commercial bank or trust company having an office or correspondent in
the United States or an "eligible guarantor institution" as defined by Rule
17Ad-15 under the Exchange Act (any of the foregoing hereinafter referred to
as an "Eligible Institution"). If the New Notes or Old Notes not exchanged are
to be delivered to an address other than that of the registered holder
appearing on the note register for the Old Notes, the signature in the Letter
of Transmittal must be guaranteed by an Eligible Institution.
THE METHOD OF DELIVERY OF OLD NOTES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE
HOLDER. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL,
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE
SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
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The Company understands that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish an account with respect to the
Old Notes at DTC for the purpose of facilitating the Exchange Offer, and
subject to the establishment thereof, any financial institution that is a
participant in DTC's system may make book-entry delivery of Old Notes by
causing DTC to transfer such Old Notes into the Exchange Agent's account with
respect to the Old Notes in accordance with DTC's procedure for such transfer.
Although delivery of the Old Notes may be effected through book-entry transfer
into the Exchange Agent's account at DTC, an appropriate Letter of Transmittal
with any required signature guarantee and all other required documents must in
each case be transmitted to and received or confirmed by the Exchange Agent at
the address set forth in the Letter of Transmittal on or prior to the
Expiration Date, or, if the guaranteed delivery procedures described below are
complied with, within the time period provided under such procedures.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at DTC), is received by the
Exchange Agent or (ii) a Notice of Guaranteed Delivery or letter, telegram or
facsimile transmission to similar effect (as provided below) from an Eligible
Institution is received by the Exchange Agent. Issuances of New Notes in
exchange for Old Notes tendered pursuant to a Notice of Guaranteed Delivery or
letter, telegram or facsimile transmission to similar effect (as provided
below) by an Eligible Institution will be made only against submission of a
duly signed Letter of transmittal (and any other required documents) and
deposit of the tendered Old Notes (or confirmation of a book-entry transfer of
such Old Notes into the Exchange Agent's account at DTC pursuant to the book-
entry procedures described below).
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Old Notes will be
determined by the Company, whose determination will be final and binding. The
Company reserves the absolute right to reject any and all tenders not in
proper form or the acceptance for exchange of which may, in the opinion of the
Company's counsel, be unlawful. The Company also reserves the absolute right
to waive any of the conditions of the Exchange Offer or any defect or
irregularity in the tender of any Old Notes. None of the Company, the Exchange
Agent or any other person will be under any duty to give notification of any
defects or irregularities in tenders or incur any liability for failure to
give any such notification. Any Old Notes received by the Exchange Agent that
are not validly tendered and as to which the defects or irregularities have
not been cured or waived, or if Old Notes are submitted in principal amount
greater than the principal amount of Old Notes being tendered by such
tendering holder, such unaccepted or non-exchanged Old Notes will be returned
by the Exchange Agent to the tendering holder, unless otherwise provided in
the Letter of Transmittal, as soon as practicable following the Expiration
Date.
In addition, the Company reserves the right in its sole discretion (i) to
purchase or make offers for any Old Notes that remain outstanding subsequent
to the Expiration Date and (ii) to the extent permitted by applicable law, to
purchase Old Notes in the open market, in privately negotiated transactions or
otherwise. The terms of any such purchases or offers will differ from the
terms of the Exchange Offer.
Book Entry Transfer. The Company understands that the Exchange Agent will
make a request promptly after the date of this Prospectus to establish an
account with respect to the Old Notes at DTC for the purpose of facilitating
the Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in DTC's system may make book-entry delivery
of Old Notes by causing DTC to transfer such Old Notes into the Exchange
Agent's account with respect to the Old Notes in accordance with DTC's
procedure for such transfer. Although delivery of the Old Notes may be
effected through book-entry transfer into the Exchange Agent's account at DTC,
an appropriate Letter of Transmittal with any required signature guarantee and
all other required documents must in each case be transmitted to and received
or confirmed by the Exchange Agent at the address set forth in the Letter of
Transmittal on or prior to the Expiration Date, or, if the guaranteed delivery
procedures described below are compiled with, within the time period provided
under such procedures.
Guaranteed Delivery Procedures. If the holder desires to participate in the
Exchange Offer and such holder's Old Notes are not immediately available, or
time will not permit such holder's Old Notes or other
25
<PAGE>
required documents to reach the Exchange Agent before the Expiration Date, or
the procedure for book-entry transfer cannot be completed on a timely basis, a
tender may be effected if (i) the tender is made through an Eligible
Institution, (ii) on or prior to the Expiration Date, the Exchange Agent has
received from an Eligible Institution a properly completed and duly executed
Letter of Transmittal (or facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by the Company (by telegram,
telex, facsimile transmission, mail or hand delivery), setting forth the name
and address of the tendering holder, the name(s) in which the Old Notes are
registered, the certificate number(s) of the Old Notes to be tendered and the
amount tendered, and stating that the tender is being made thereby and
guaranteeing that, within three New York Stock Exchange trading days after the
date of execution of the Notice of Guaranteed Delivery, such Old Notes, in
proper form for transfer (or a confirmation of book-entry transfer of such Old
Notes into the Exchange Agent's account at DTC), will be delivered by such
Eligible Institution together with any other documents required by the Letter
of Transmittal and (iii) the certificates for all physically tendered Old
Notes, in proper form for transfer, or a confirmation of book-entry transfer
such Old Notes into the Exchange Agent's account at DTC, as the case may be,
and all other documents required by the Letter of Transmittal are received by
the Exchange Agent within three New York Stock Exchange Trading Days after the
date of execution of the Notice of Guaranteed Delivery. Unless Old Notes being
tendered by the above-described method are deposited with the Exchange Agent
within the time period set forth above (accompanied or preceded by a properly
completed Letter of Transmittal and any other required documents), The Company
may, at its option, reject the tender. Copies of a Notice of Guaranteed
Delivery which may be used by Eligible Institutions for the purposes described
in this paragraph are available from the Exchange Agent.
Terms and Conditions of the Letter of Transmittal. The Letter of Transmittal
contains, among other things, the following terms and conditions, which are
part of the Exchange Offer.
The party tendering Old Notes for exchange (the "Transferor") exchanges,
assigns and transfers the Old Notes to the Company and irrevocably constitutes
and appoints the Exchange Agent as the Transferor's true and lawful agent and
attorney-in-fact with respect to such tendered Old Notes, with full power of
substitution, among other things, to cause the Old Notes to be assigned,
transferred and exchanged. The Transferor represents and warrants that it has
full power and authority to tender, exchange, assign and transfer the Old
Notes and to acquire New Notes issuable upon the exchange of such tendered Old
Notes, and that, when the same are accepted for exchange, the Company will
acquire good and unencumbered title to the tendered Old Notes, free and clear
of all liens, restrictions, charges and encumbrances and adverse claims. The
Transferor also warrants that it will, upon request, execute and deliver any
additional documents deemed by the Company to be necessary or desirable to
complete and give effect to the transactions contemplated by the Letter of
Transmittal. All authority conferred by the Transferor will survive the death,
bankruptcy or incapacity of the Transferor and every obligation of the
Transferor shall be binding upon the heirs, personal representatives,
executors, administrators, successors, assigns, trustees in bankruptcy and
other legal representatives of such Transferor.
By executing a Letter of Transmittal, each holder will make to the Company
the representations set forth above under the heading "--Purpose and Effect of
the Exchange Offer."
Withdrawal of Tenders of Old Notes. Tenders of Old Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time,
on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Old Notes to be withdrawn (the
"Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Old Notes), (iii)
contain a statement that such holder is withdrawing his election to have such
Old Notes exchanged, (iv) be signed by the Holder in the same manner as the
original signature on the Letter of Transmittal by which such Old Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the
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Trustee with respect to the Old Notes register the transfer of such Old Notes
in the name of the person withdrawing the tender and (v) specify the name in
which any such Old Notes are to be registered, if different from that of the
Depositor. If Old Notes have been tendered pursuant to the procedure for book-
entry transfer, any notice of withdrawal must specify the name and number of
the account at DTC. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Company,
whose determination shall be final and binding on all parties. Any Old Notes
so withdrawn will be deemed not to have been validly tendered for purposes of
the Exchange Offer and no New Notes will be issued with respect thereto unless
the Old Notes so withdrawn are validly retendered. Any Old Notes which have
been tendered but which are not accepted for exchange will be returned to the
holder thereof without cost to such holder (or, in the case of Old Notes
tendered by book-entry transfer into the Exchange Agent's account at DTC
pursuant to the book-entry transfer procedures described above, such Old Notes
will be credited to an account maintained with DTC for the Old Notes) as soon
as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following
one of the procedures described above under "--Procedures for Tendering Old
Notes" at any time prior to the business day prior to the Expiration Date.
Conditions of the Exchange Offer
Notwithstanding any other term of the Exchange Offer, or any extension of
the Exchange Offer, the Company shall not be required to accept for exchange,
or exchange New Notes for, any Old Notes, and may terminate the Exchange offer
as provided therein before the acceptance of such Old Notes, if:
(a) any statute, rule or regulation shall have been enacted, or any
action shall have been taken by any court or governmental authority which,
in the reasonable judgment of the Company, seeks to or would prohibit,
restrict or otherwise render illegal consummation of the Exchange Offer; or
(b) any change, or any development involving a prospective change, in the
business or financial affairs of the Company or any of its subsidiaries has
occurred which, in the sole judgment of the Company, might materially
impair the ability of the Company to proceed with the Exchange Offer or
materially impair the contemplated benefits of the Exchange Offer to the
Company, or
(c) there shall occur a change in the current interpretations by the
staff of the Commission which, in the Company's reasonable judgment, might
materially impair the Company's ability to proceed with the Exchange Offer.
If the Company determines in its sole discretion that any of the above
conditions is not satisfied, the Company may (i) refuse to accept any Old
Notes and return all tendered Old Notes to the tendering holders, (ii) extend
the Exchange Offer and retain all Old Notes tendered prior to the Expiration
Date, subject, however, to the right of holders to withdraw such Old Notes
(see "--Terms of the Exchange Offer--Withdrawal of Tenders of Old Notes") or
(iii) waive such unsatisfied conditions with respect to the Exchange Offer and
accept all validly tendered Old Notes which have not been withdrawn. If such
waiver constitutes a material change to the Exchange Offer, the Company will
promptly disclose such waiver by means of a prospectus supplement that will be
distributed to the registered holders, and the Company will extend the
Exchange Offer for a period of time, depending upon the significance of the
waiver and the manner of disclosure to the registered holders, if the Exchange
Offer would otherwise expire during such period.
27
<PAGE>
Exchange Agent
IBJ Whitehall Bank & Trust Company has been appointed as Exchange Agent for
the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notices of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
By Hand or Overnight Courier: By Registered or Certified Mail:
IBJ Whitehall Bank & Trust Company IBJ Whitehall Bank & Trust Company
One State Street P.O. Box 84
New York, New York 10004 Bowling Green Station
New York, New York 10274-0084
Attn: Securities Processing Window
Subcellar One (SC-1) Attn: Reorganization Operations
Department
By Facsimile Transmission (for Eligible Distributions only):
(212) 858-2611
Confirm by Telephone:
(212) 858-2103
For information with respect to the Exchange Offer, call
Luis Perez of the Exchange Agent:
(212) 858-2815
Fees and Expenses
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telecopy, telephone or in person by officers and regular
employees of the Company and its affiliates. No additional compensation will
be paid to any such officers and employees who engage in soliciting tenders.
The Company has not retained any dealer-manager or other soliciting agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others soliciting acceptance of the Exchange Offer. The Company,
however, will pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith. The Company may also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus, the Letter of
Transmittal and related documents to the beneficial owners of the Old Notes
and in handling or forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer will be
paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and transfer agent and registrar, accounting and legal fees and printing
costs, among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of the Old Notes pursuant to the Exchange Offer. If, however, New Notes, or
Old Notes for principal amounts not tendered or accepted for exchange, are to
be delivered to, or are to be issued in the name of, any person other than the
registered holder of the Old Notes tendered or if a transfer tax is imposed
for any reason other than the exchange of the Old Notes
28
<PAGE>
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with the Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
holder.
Consequences of Failure to Exchange
The Old Notes that are not exchanged for New Notes pursuant to the Exchange
Offer will remain restricted securities within the meaning of Rule 144 of the
Securities Act. Accordingly, such Old Notes may be resold only (i) to the
Company or any subsidiary thereof, (ii) inside the United States to a
qualified institutional buyer in compliance with rule 144A, (iii) inside the
United States to an institutional accredited investor that, prior to such
transfer, furnishes to the Trustee a signed letter containing certain
representations and agreements relating to the restrictions on transfer of the
Old Notes (the form of which letter can be obtained from the Trustee) and, if
such transfer is in respect of an aggregate principal amount of Old Notes at
the time of transfer of less than $100,000, an opinion of counsel acceptable
to the Company that such transfer is in compliance with the Securities Act,
(iv) outside the United States in compliance with Rule 904 under the
Securities Act, (v) pursuant to the exemption from registration provided by
Rule 144 under the Securities Act (if available) or (vi) pursuant to an
effective registration statement under the Securities Act. The liquidity of
the Old Notes could be adversely affected by the Exchange Offer.
Accounting Treatment
The New Notes would be recorded at the same carrying value as the Old Notes,
as reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Company. The costs of the Exchange Offer and the unamortized expenses related
to the issuance of the Old Notes will be amortized over the term of the New
Notes.
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer. The net
proceeds from the Offering were approximately $318.4 million. The Company used
(i) approximately $287.3 million of the net proceeds from the Offering,
together with the net proceeds of borrowings of approximately $525.0 million
under the New Credit Facility, to repay all borrowings outstanding under a
bridge credit facility used to finance the SRS Acquisition, which aggregated
$800.0 million (excluding $10.0 million in letters of credit) on the Closing
Date and (ii) approximately $31.1 million of the net proceeds for general
corporate purposes.
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<PAGE>
DESCRIPTION OF THE NOTES
General
The New Notes are to be issued under the Indenture, dated as of April 28,
1998 (the "Indenture"), among the Company, the Subsidiary Guarantors referred
to below and IBJ Schroder Bank & Trust Company, currently known as IBJ
Whitehall Bank & Trust Company, trustee (the "Trustee"). The Indenture is
subject to and governed by the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). The form and terms of the New Notes are identical in
all material respects to the form and terms of the Old Notes, except that the
New Notes will be registered under the Securities Act and, therefore, will not
bear legends restricting transfer thereof. The New Notes will evidence the
same debt as the Old Notes and will be treated as a single class under the
Indenture with any Old Notes that remain outstanding. The Old Notes and New
Notes are herein collectively referred to as the "Notes".
The following summary of the material provisions of the Indenture does not
purport to be complete and is subject to, and qualified in its entirety by,
reference to the provisions of the Indenture, including the definitions of
certain terms contained therein and those terms made part of the Indenture by
reference to the Trust Indenture Act. For definitions of certain capitalized
terms used in the following summary, see "Certain Definitions" below. A copy
of the Indenture and the form of Notes have been filed as exhibits to the
Registration Statement of which this Prospectus forms a part.
Principal, Maturity and Interest
The Notes mature on April 15, 2008, are limited initially in aggregate
principal amount to $330,000,000 and will be unsecured senior subordinated
obligations of the Company. The Indenture provides for the issuance of up to
$100.0 million aggregate principal amount of additional Notes having identical
terms and conditions to the Notes (the "Additional Notes"), subject to
compliance with the covenants contained in the Indenture. Any Additional Notes
will be part of the same issue as the Notes offered hereby and will vote on
all matters with the Notes offered hereby. For purposes of this "Description
of the Notes," reference to the Notes does not include Additional Notes. No
offering of any such Additional Notes is being or will in any manner be deemed
to be made by this Prospectus. In addition, there can be no assurance as to
when or whether the Company will issue any such Additional Notes or as to the
aggregate principal amount of such Additional Notes.
Each Note bears interest at the rate set forth on the cover page hereof from
April 28, 1998 or from the most recent interest payment date to which interest
has been paid or duly provided for, payable semiannually on April 15 and
October 15 in each year, commencing October 15, 1998, until the principal
thereof is paid or duly provided for, to the person in whose name the Note (or
any predecessor Note) is registered at the close of business on the April 1 or
October 1 next preceding such interest payment date. Interest is computed on
the basis of a 360-day year comprised of twelve 30-day months.
The principal of and premium, if any, and interest on the Notes is payable,
and the Notes are exchangeable and transferable, at the office or agency of
the Company in The City of New York maintained for such purposes (which
initially will be the office of the Trustee located at One State Street, New
York, New York 10004); provided, however, that, at the option of the Company,
interest may be paid by check mailed to the address of the Person entitled
thereto as such address appears in the security register. The Notes will be
issued only in registered form without coupons and only in denominations of
$1,000 and any integral multiple thereof. No service charge will be made for
any registration of transfer or exchange or redemption of Notes, but the
Company may require payment in certain circumstances of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
therewith.
As of the Closing Date, all of the Company's Subsidiaries (including BTI
Capital Trust) were Restricted Subsidiaries. However, under certain
circumstances, the Company will be able to designate current and future
Subsidiaries as Unrestricted Subsidiaries, subject to certain limitations.
Unrestricted Subsidiaries will not be subject to many of the restrictive
covenants set forth in the Indenture.
The Notes are not be entitled to the benefit of any sinking fund.
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<PAGE>
Subordination
The Notes are unsecured senior subordinated obligations of the Company. The
Notes are, to the extent set forth in the Indenture, subordinate in right of
payment to the prior payment in full of all present and future Senior
Indebtedness. Upon any payment or distribution of assets of the Company to
creditors upon any liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors, marshalling of assets or any
bankruptcy, insolvency or similar proceedings of the Company, whether
voluntary or involuntary (except in connection with the consolidation or
merger of the Company or its liquidation or dissolution following the
conveyance, transfer or lease of its properties and assets substantially as an
entirety, upon the terms and conditions described under "Consolidation, Merger
and Sale of Assets"), the holders of Senior Indebtedness will first be
entitled to receive payment in full, in cash or cash equivalents, of all
amounts due or to become due on or in respect of such Senior Indebtedness
(including interest accruing after the commencement of any such proceeding at
the rate specified in the applicable Senior Indebtedness) before the Holders
of Notes are entitled to receive any payment or distribution of any kind with
respect to the Notes or on account of the purchase or redemption or other
acquisition of Notes by the Company or any Subsidiary of the Company. In the
event that, notwithstanding the foregoing, the Trustee or the Holder of any
Note receives any payment or distribution of assets of the Company of any kind
or character (excluding equity or subordinated securities of the Company
provided for in a plan of reorganization or readjustment that, in the case of
subordinated securities, are subordinated in right of payment to all Senior
Indebtedness to at least the same extent as the Notes are so subordinated),
before all the Senior Indebtedness is paid in full, then such payment or
distribution will be held in trust for the holders of Senior Indebtedness and
will be required to be paid over or delivered forthwith to the trustee in
bankruptcy or other Person making payment or distribution of assets of the
Company for application to the payment of all Senior Indebtedness remaining
unpaid, to the extent necessary to pay the Senior Indebtedness in full.
The Company may not make any payments on account of the Notes or on account
of the purchase or redemption or other acquisition of Notes if a default in
the payment of principal of (or premium, if any) or interest on Designated
Senior Indebtedness has occurred and is continuing or a default in the payment
when due of any other obligation under the New Credit Facility has occurred
and is continuing (a "Senior Payment Default"). In addition, if any default
(other than a Senior Payment Default) has occurred and is continuing with
respect to any Designated Senior Indebtedness permitting the holders thereof
(or a trustee or agent on behalf thereof) to accelerate the maturity thereof
(a "Senior Nonmonetary Default") and the Company and the Trustee have received
written notice thereof from the agent under the New Credit Facility or from an
authorized Person on behalf of any holder of Designated Senior Indebtedness,
then the Company may not make any payments on account of the Notes or on
account of the purchase or redemption or other acquisition of Notes for a
period (a "blockage period") commencing on the date the Company and the
Trustee receive such written notice (a "Blockage Notice") and ending on the
earliest of (x) 179 days after the date on which the applicable Blockage
Notice is received unless a Senior Payment Default has occurred and is
continuing at the end of such 179-day period, (y) the date, if any, on which
the Designated Senior Indebtedness to which such default relates is discharged
or such default is waived or otherwise cured and (z) the date, if any, on
which such blockage period has been terminated by written notice to the
Company or the Trustee from the agent under the New Credit Facility or from
the Person who gave the Blockage Notice. However, the Company may make
payments on the Notes without regard to the foregoing if the Company and the
Trustee receive written notice approving such payment from a representative of
the Designated Senior Indebtedness affected by such Senior Payment Default or
Senior Nonmonetary Default. In any event, not more than one blockage period
may be commenced during any period of 360 consecutive days, and there must be
a period of at least 181 consecutive days in each period of 360 consecutive
days when no blockage period is in effect. No Senior Nonmonetary Default that
existed or was continuing on the date of the commencement of any blockage
period with respect to the Designated Senior Indebtedness initiating such
blockage period will be, or can be, made the basis for the commencement of a
subsequent blockage period, unless such default has been cured or waived for a
period of not less than 90 consecutive days. In the event that,
notwithstanding the foregoing, the Company makes any payment to the Trustee or
the Holder of any Note prohibited by these blockage provisions, then such
payment will be held in trust for the holders of Senior Indebtedness and will
be required to be paid over and delivered forthwith to the
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<PAGE>
holders of the Senior Indebtedness remaining unpaid, to the extent necessary
to pay in full all the Senior Indebtedness.
Whenever the Company is prohibited from making any payment on or in respect
of the Notes, the Company will also be prohibited from making, directly or
indirectly, any legal defeasance or covenant defeasance of the Notes as
described under "--Legal Defeasance and Covenant Defeasance" and from making
any payment of any kind on account of the redemption, purchase or other
acquisition of the Notes.
The Subsidiary Guarantees are, to the extent set forth in the Indenture,
subordinated in right of payment to the prior payment in full of all senior
debt of the Subsidiary Guarantors, upon terms substantially comparable to the
subordination of the Notes to all Senior Indebtedness.
The subordination provisions described above will cease to be applicable to
the Notes upon any defeasance or covenant defeasance of the Notes as described
under "--Legal Defeasance and Covenant Defeasance."
As a result of the subordination provisions described above, in the event of
an insolvency, bankruptcy, reorganization or liquidation of the Company,
creditors of the Company who are holders of Senior Indebtedness may recover
more, ratably, than the holders of the Notes, and assets which would otherwise
be available to pay obligations in respect of the Notes will be available only
after all Senior Indebtedness has been paid in full, and there may not be
sufficient assets remaining to pay amounts due on any or all of the Notes. See
"Risk Factors--Subordination of the Notes and the Subsidiary Guarantees."
At December 31, 1998 the Company had $528.0 million of Senior Indebtedness
outstanding (all of which was secured) and the Company had additional
borrowing availability of $54.4 million under the New Credit Facility (which
reflects $15.6 million in outstanding letters of credit), all of which would
be secured Senior Indebtedness, if borrowed. The terms of the Indenture permit
the Company and its Restricted Subsidiaries to incur additional Senior
Indebtedness, subject to certain limitations, including Indebtedness that may
be secured by Liens on property of the Company and its Restricted
Subsidiaries. See the discussion below under the captions "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Disqualified Stock" and
"--Certain Covenants--Liens." In addition, the Notes are effectively
subordinated to all existing and future indebtedness and other liabilities
(including trade payables) of the Company's subsidiaries that are not
Subsidiary Guarantors (the "Non-Guarantor Subsidiaries"). As of December 31,
1998, the Company's Non-Guarantor Subsidiaries had $269.9 million of accounts
payable and third-party indebtedness outstanding. See "Risk Factors--
Subordination of the Notes and the Subsidiary Guarantees."
Subsidiary Guarantees
Payment of the principal of and premium, if any, and interest on the Notes,
when and as the same become due and payable, is guaranteed, jointly and
severally, on an unsecured senior subordinated basis by the Subsidiary
Guarantors referred to below. The Subsidiary Guarantees are, to the extent set
forth in the Indenture, be subordinated in right of payment to the prior
payment in full of all senior indebtedness of the Subsidiary Guarantors, upon
terms substantially comparable to the subordination of the Notes to all Senior
Indebtedness. The obligations of each Subsidiary Guarantor under its
Subsidiary Guarantee are limited so as not to constitute a fraudulent
conveyance under applicable law. See "Risk Factors--Limitation on Subsidiary
Guarantees: Fraudulent Conveyance Concerns."
The Indenture requires that each active Domestic Restricted Subsidiary
(other than BTI Capital Trust and any Domestic Subsidiary that is owned by a
Foreign Subsidiary) be a Subsidiary Guarantor, as well as each other
Restricted Subsidiary that guarantees any other Indebtedness of the Company or
of a Domestic Restricted Subsidiary.
Subject to the provisions of the following paragraph, the Indenture provides
that no Subsidiary Guarantor may consolidate with or merge with or into any
other Person or convey, sell, assign, transfer, lease or
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<PAGE>
otherwise dispose of its properties and assets substantially as an entirety to
any other Person (other than the Company or another Subsidiary Guarantor)
unless: (a) the Person formed by or surviving such consolidation or merger (if
other than such Subsidiary Guarantor) or to which such properties and assets
are transferred assumes all of the obligations of such Subsidiary Guarantor
under the Indenture and its Subsidiary Guarantee, pursuant to a supplemental
indenture in form and substance reasonably satisfactory to the Trustee and (b)
immediately after giving effect to such transaction, no Default or Event of
Default has occurred and is continuing.
The Indenture provides that, in the event of (a) a conveyance, sale,
assignment, transfer or other disposition of all of the Capital Stock of a
Subsidiary Guarantor to a Person that is not an Affiliate of the Company (by
way of merger, consolidation or otherwise), (b) a conveyance, sale,
assignment, transfer or other disposition of all or substantially all of the
assets of such Subsidiary Guarantor to a Person that is not an Affiliate of
the Company (by way of merger, consolidation or otherwise) or (c) the
designation of such Subsidiary Guarantor as an Unrestricted Subsidiary, in any
such case in compliance with the terms of the Indenture, then such Subsidiary
Guarantor will be deemed automatically and unconditionally released and
discharged from all of its obligations under its Subsidiary Guarantee without
any further action on the part of the Trustee or any Holder of the Notes;
provided that the Net Cash Proceeds of such sale, transfer or other
disposition (if any) are applied in accordance with the covenant described
under the caption "--Repurchase at the Option of Holders--Asset Sales."
Optional Redemption
Except as provided below, the Notes are not be redeemable at the Company's
option prior to April 15, 2003. Thereafter, the Notes are redeemable at the
election of the Company, as a whole or from time to time in part, on not less
than 30 nor more than 60 days' prior notice to the Holders at the following
redemption prices (expressed as percentages of principal amount) set forth
below, together with accrued and unpaid interest, if any, to the redemption
date (subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date), if redeemed
during the 12-month period beginning on April 15, of the years indicated
below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2003.............................................................. 104.625%
2004.............................................................. 103.083
2005.............................................................. 101.542
2006 and thereafter............................................... 100.000
</TABLE>
Notwithstanding the foregoing, at any time or from time to time prior to
April 15, 2001, the Company may redeem, on one or more occasions, up to 35% of
the sum of (i) the initial aggregate principal amount of the Notes and (ii)
the initial aggregate principal amount of any Additional Notes with the net
proceeds of one or more Equity Offerings at a redemption price equal to
109.25% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date); provided that, immediately after giving effect to such redemption, at
least 65% of the initial aggregate principal amount of the Notes (including
any Additional Notes) remains outstanding; provided further that such
redemptions occur within 90 days of the date of closing of the related Equity
Offering.
If less than all the Notes or Additional Notes, if any, are to be redeemed,
the particular Notes to be redeemed will be selected not more than 60 days
prior to the redemption date by the Trustee by lot or such other method as the
Trustee deems fair and appropriate.
Mandatory Redemption
Except as set forth below under "Repurchase at the Option of Holders," the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Notes.
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<PAGE>
Repurchase at the Option of Holders
Change of Control
If a Change of Control occurs at any time, then each Holder will have the
right to require that the Company purchase such Holder's Notes and Additional
Notes, if any, in whole or in part in integral multiples of $1,000, at a
purchase price in cash equal to 101% of the principal amount of such Notes and
Additional Notes, if any, plus accrued and unpaid interest, if any, to the
date of purchase, pursuant to the offer described below (the "Change of
Control Offer") and the other procedures set forth in the Indenture.
Within 30 days following any Change of Control, the Company will notify the
Trustee thereof and give written notice of such Change of Control to each
Holder of Notes and Additional Notes by first-class mail, postage prepaid, at
its address appearing in the security register, stating, among other things,
(i) the purchase price and the purchase date, which will be a Business Day no
earlier than 30 days nor later than 60 days from the date such notice is
mailed or such later date as is necessary to comply with requirements under
the Exchange Act; (ii) that any Note or Additional Note not tendered will
continue to accrue interest; (iii) that, unless the Company defaults in the
payment of the purchase price, any Notes or Additional Notes accepted for
payment pursuant to the Change of Control Offer will cease to accrue interest
after the Change of Control purchase date; and (iv) certain other procedures
that a Holder must follow to accept a Change of Control Offer or to withdraw
such acceptance.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the purchase price for all
of the Notes and Additional Notes that might be tendered by Holders of the
Notes and Additional Notes, if any, seeking to accept the Change of Control
Offer. The New Credit Facility restricts such a purchase of Notes and
Additional Notes, if any, by the Company prior to full repayment of
Indebtedness under the New Credit Facility and a Change of Control Offer would
require the approval of the lenders thereunder. In addition, certain events
involving a Change of Control may be an event of default under the New Credit
Facility or other indebtedness of the Company that may be incurred in the
future. Accordingly, the right of the Holders of the Notes and Additional
Notes, if any, to require the Company to repurchase the Notes and Additional
Notes, if any, may be of limited value if the Company cannot obtain the
required approval under the New Credit Facility. There can be no assurance
that in the event of a Change in Control the Company will be able to obtain
the necessary consents from the lenders under the New Credit Facility to
consummate a Change of Control Offer. The failure of the Company to make or
consummate the Change of Control Offer or pay the applicable Change of Control
purchase price when due would result in an Event of Default and would give the
Trustee and the Holders of the Notes and Additional Notes, if any, the rights
described under "Events of Default and Remedies." See "Risk Factors--Change of
Control and Possible Inability to Repurchase Notes."
The existence of a Holder's right to require the Company to purchase such
Holder's Notes or Additional Notes, if any, upon a Change of Control may deter
a third party from acquiring the Company in a transaction that constitutes a
Change of Control.
The definition of "Change of Control" in the Indenture is limited in scope.
The provisions of the Indenture may not afford Holders of Notes or Additional
Notes, if any, the right to require the Company to repurchase such Notes or
Additional Notes, if any, in the event of a highly leveraged transaction or
certain transactions with the Company's management or its affiliates,
including a reorganization, restructuring, merger or similar transaction
involving the Company (including, in certain circumstances, an acquisition of
the Company by management or its affiliates) that may adversely affect Holders
of the Notes or Additional Notes, if such transaction is not a transaction
defined as a Change of Control. See "Certain Definitions" below for the
definition of "Change of Control." A transaction involving the Company's
management or its affiliates, or a transaction involving a recapitalization of
the Company, would result in a Change of Control if it is the type of
transaction specified in such definition.
The Company will comply with the applicable tender offer rules including
Rule 14e-l under the Exchange Act, and any other applicable securities laws
and regulations in connection with a Change of Control Offer.
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<PAGE>
Asset Sales
(a) The Company will not, and will not permit any Restricted Subsidiary to,
engage in any Asset Sale unless (i) the consideration received by the Company
or such Restricted Subsidiary for such Asset Sale is not less than the fair
market value of the assets sold (as determined by the Board of Directors of
the Company, whose good faith determination will be conclusive) and (ii) the
consideration received by the Company or the relevant Restricted Subsidiary in
respect of such Asset Sale consists of at least 75% (A) cash or cash
equivalents or (B) the assumption by the transferee of Indebtedness of the
Company or a Restricted Subsidiary that is senior to or pari passu with the
Notes or the Subsidiary Guarantees, as the case may be, and release of the
Company or such Restricted Subsidiary from all liability on such Indebtedness,
or a combination of the foregoing.
(b) If the Company or any Restricted Subsidiary engages in an Asset Sale,
the Company may, at its option, within 12 months after such Asset Sale, (i)
apply all or a portion of the Net Cash Proceeds to the permanent reduction of
amounts outstanding under the New Credit Facility or other credit facility
referred to in clause (i) of the definition of Permitted Indebtedness or to
the repayment of other Senior Indebtedness of the Company or a Restricted
Subsidiary or (ii) invest (or enter into a legally binding agreement to
invest) all or a portion of such Net Cash Proceeds in properties and assets to
replace the properties and assets that were the subject of the Asset Sale or
in properties and assets that will be used in businesses of the Company or its
Restricted Subsidiaries, as the case may be, existing on the Closing Date. If
any such legally binding agreement to invest such Net Cash Proceeds is
terminated, the Company may, within 90 days of such termination or within 12
months of such Asset Sale, whichever is later, invest such Net Cash Proceeds
as provided in clause (b)(i) or (b)(ii) (without regard to the parenthetical
contained in such clause (b)(ii)) above. The amount of such Net Cash Proceeds
not so used as set forth above in this paragraph (b) constitutes "Excess
Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $5,000,000, the
Company will, within 30 days thereafter, make an offer to purchase from all
Holders of Notes and Additional Notes, if any, and from the holders of any
Pari Passu Indebtedness, to the extent required by the terms thereof, on a pro
rata basis, in accordance with the procedures set forth in the Indenture or
the agreements governing any such Pari Passu Indebtedness, the maximum
principal amount (expressed as a multiple of $1,000) of the Notes and
Additional Notes, if any, and any such Pari Passu Indebtedness that may be
purchased with the Excess Proceeds. The offer price as to each Note and
Additional Note, if any, and any such Pari Passu Indebtedness will be payable
in cash in an amount equal to (solely in the case of the Notes and Additional
Notes) 100% of the principal amount of such Note and Additional Note, if any,
and (solely in the case of Pari Passu Indebtedness) no greater than 100% of
the principal amount (or accreted value, as applicable) of such Pari Passu
Indebtedness, plus in each case accrued and unpaid interest, if any, to the
date of repurchase. To the extent that the aggregate principal amount of Notes
and Additional Notes, if any, and any such Pari Passu Indebtedness tendered
pursuant to an excess proceeds offer is less than the Excess Proceeds, the
Company may use the portion of the Excess Proceeds not required to be used to
repurchase the Notes and Additional Notes and such Pari Passu Indebtedness for
general corporate purposes. If the aggregate principal amount of Notes and
Additional Notes, if any, and any such Pari Passu Indebtedness validly
tendered and not withdrawn by holders thereof exceeds the Excess Proceeds, the
Notes and Additional Notes and any such Pari Passu Indebtedness to be
purchased will be selected on a pro rata basis (based upon the principal
amount of Notes and Additional Notes and the principal amount or accreted
value of such Pari Passu Indebtedness tendered by each holder). Upon
completion of such offer to purchase, the amount of Excess Proceeds will be
reset to zero.
Certain Covenants
Restricted Payments
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, take any of the following actions:
(a) declare or pay any dividend on, or make any distribution to holders
of, any shares of the Capital Stock of the Company or any Restricted
Subsidiary, other than (i) dividends or distributions payable solely
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in Qualified Equity Interests, (ii) dividends or distributions by a
Restricted Subsidiary payable to the Company or another Restricted
Subsidiary or (iii) pro rata dividends or distributions on common stock of
a Restricted Subsidiary held by minority stockholders, provided that such
dividends do not in the aggregate exceed the minority stockholders' pro
rata share of such Restricted Subsidiary's net income from the first day of
the Company's fiscal quarter during which the Closing Date occurred;
(b) purchase, redeem or otherwise acquire or retire for value, directly
or indirectly, any shares of Capital Stock (or any options, warrants or
other rights to acquire shares of Capital Stock) of (i) the Company or any
Unrestricted Subsidiary or (ii) any Restricted Subsidiary held by any
Affiliate of the Company (other than, in either case, any such Capital
Stock owned by the Company or any of its Restricted Subsidiaries);
(c) make any principal payment on, or repurchase, redeem, defease or
otherwise acquire or retire for value, prior to any scheduled principal
payment, sinking fund payment or maturity, Pari Passu Indebtedness or any
Subordinated Indebtedness (except a payment of principal at Stated
Maturity), or make any payment on or in respect of the Convertible
Debentures; or
(d) make any Investment (other than a Permitted Investment) in any Person
(such payments or other actions described in (but not excluded from)
clauses (a) through (d) being referred to as "Restricted Payments"), unless
at the time of, and immediately after giving effect to, the proposed
Restricted Payment:
(i) no Default or Event of Default has occurred and is continuing,
(ii) the Company could incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the first
paragraph of the covenant described under the caption "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Disqualified
Stock," and
(iii) the aggregate amount of all Restricted Payments declared or
made after the Closing Date does not exceed the sum of:
(A) 50% of the aggregate Consolidated Net Income of the Company
during the period (taken as one accounting period) from the first
day of the Company's fiscal quarter during which the Closing Date
occurred to the last day of the Company's most recently ended fiscal
quarter for which internal financial statements are available at the
time of such proposed Restricted Payment (or, if such aggregate
cumulative Consolidated Net Income is a loss, minus 100% of such
amount), plus
(B) the aggregate net proceeds, including the fair market value of
property other than cash (as determined by the Board of Directors,
whose good faith determination will be conclusive), received by the
Company after the Closing Date from the issuance or sale (other than
to a Subsidiary) of, or as a capital contribution in respect of,
Qualified Equity Interests of the Company (excluding from this
computation proceeds of an Equity Offering received by the Company
that are used by it to redeem Notes as discussed above), plus
(C) the aggregate net proceeds, including the fair market value of
property other than cash (as determined by the Board of Directors,
whose good faith determination will be conclusive), received by the
Company after the Closing Date from the issuance or sale (other than
to a Subsidiary) of debt securities or Disqualified Stock that have
been converted into or exchanged for Qualified Stock of the Company,
together with the aggregate net cash proceeds received by the
Company at the time of such conversion or exchange, plus
(D) $10.0 million.
Notwithstanding the foregoing, the Company and its Restricted Subsidiaries
may take any of the following actions, so long as, with respect to clauses
(e), (f), (g) and (j) below, no Default or Event of Default has occurred and
is continuing or would occur:
(a) The payment of any dividend within 60 days after the date of
declaration thereof, if at the declaration date such payment would not have
been prohibited by the foregoing provision.
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(b) The repurchase, redemption or other acquisition or retirement for
value of any shares of Capital Stock of the Company, in exchange for, or
out of the net cash proceeds of a substantially concurrent issuance and
sale (other than to a Subsidiary) of, Qualified Equity Interests of the
Company.
(c) The purchase, redemption, defeasance or other acquisition or
retirement for value of any Pari Passu Indebtedness or Subordinated
Indebtedness in exchange for, or out of the net cash proceeds of a
substantially concurrent issuance and sale (other than to a Subsidiary) of
Qualified Equity Interests of the Company.
(d) The purchase, redemption, defeasance or other acquisition or
retirement for value of Pari Passu Indebtedness or Subordinated
Indebtedness in exchange for, or out of the net cash proceeds of a
substantially concurrent issuance or sale (other than to a Subsidiary) of,
Subordinated Indebtedness, so long as the Company or a Restricted
Subsidiary would be permitted to refinance such original Subordinated
Indebtedness with such new Subordinated Indebtedness pursuant to clause
(xiv) of the definition of Permitted Indebtedness.
(e) The repurchase of any Subordinated Indebtedness at a purchase price
not greater than 101% of the principal amount of such Subordinated
Indebtedness in the event of a "change of control" in accordance with
provisions similar to the "Change of Control" covenant; provided that,
prior to or simultaneously with such repurchase, the Company has made the
Change of Control Offer as provided in such covenant with respect to the
Notes and has repurchased all Notes validly tendered for payment in
connection with such Change of Control Offer.
(f) The payment of dividends or other distributions on the Preferred
Securities (and corresponding payments of interest on the Convertible
Debentures in an amount equal to the amount of such dividends or other
distributions) on or prior to March 31, 1999; and the payment of such
dividends or other distributions (and such corresponding payments of
interest) after March 31, 1999, provided that, immediately after giving
effect to any such payment made after March 31, 1999, the Company could
incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the first paragraph of the covenant described
under the caption "--Incurrence of Indebtedness and Issuance of
Disqualified Stock."
(g) Loans or advances to officers, directors and employees of the Company
or any of its Restricted Subsidiaries made in the ordinary course of
business after the Closing Date in an amount not to exceed $5.0 million in
the aggregate at any one time outstanding.
(h) The acquisition by a Receivables Subsidiary in connection with a
Receivables Program of Capital Stock of a Trust or other Person established
by such Receivables Subsidiary in connection with such Receivables Program.
(i) Payments or distributions to stockholders pursuant to appraisal
rights in respect of up to 10% of the Capital Stock of the Company or any
Restricted Subsidiary required by law in connection with a consolidation,
merger or transfer of assets that complies with the covenant described
under "--Consolidation, Merger and Sale of Assets" below.
(j) The purchase, redemption, defeasance or other acquisition or
retirement for value of Capital Stock of the Company or any Restricted
Subsidiary from employees, former employees, directors or former directors
of the Company or any such Restricted Subsidiary (or permitted transferees
of such employees, former employees, directors or former directors or their
respective estates) pursuant to any employment agreement, management equity
subscription agreement or stock option agreement, provided that the
aggregate price paid for all such repurchased, redeemed, defeased or
acquired or retired shares of Capital Stock does not exceed $2.0 million in
any 12-month period.
The payments described in clauses (b), (c), (e), (f) and (g) of this
paragraph will be Restricted Payments that will be permitted to be taken in
accordance with this paragraph but will reduce the amount that would otherwise
be available for Restricted Payments under the foregoing clause (iii) of the
first paragraph of this covenant and the payments described in clauses (a) and
(d) of this paragraph will be Restricted Payments that will be permitted to be
taken in accordance with this paragraph and will not reduce the amount that
would
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otherwise be available for Restricted Payments under the foregoing clause
(iii) of the first paragraph of this covenant.
For the purpose of making any calculations under the Indenture, (i) if a
Restricted Subsidiary is designated an Unrestricted Subsidiary, the Company
will be deemed to have made an Investment in amount equal to the fair market
value or net book value of the net assets of such Restricted Subsidiary at the
time of such designation as determined by the Board of Directors of the
Company, whose good faith determination will be conclusive, (ii) any property
transferred to or from an Unrestricted Subsidiary will be valued at fair
market value at the time of such transfer, as determined by the Board of
Directors of the Company, whose good faith determination will be conclusive
and (iii) subject to the foregoing, the amount of any Restricted Payment, if
other than cash, will be determined by the Board of Directors of the Company,
whose good faith determination will be conclusive.
If the aggregate amount of all Restricted Payments calculated under the
first paragraph of this covenant includes an Investment in an Unrestricted
Subsidiary or other Person that thereafter becomes a Restricted Subsidiary,
the aggregate amount of all Restricted Payments calculated under the first
paragraph of this covenant will be reduced by the lesser of (x) the net asset
value of such Subsidiary at the time it becomes a Restricted Subsidiary and
(y) the initial amount of such Investment.
If an Investment resulted in the making of a Restricted Payment, the
aggregate amount of all Restricted Payments calculated under this covenant
will be reduced by the amount of any net reduction in such Investment
(resulting from the payment of interest or dividends, loan repayment, transfer
of assets or otherwise), to the extent such net reduction is not included in
the Company's Consolidated Net Income; provided that the total amount by which
the aggregate amount of all Restricted Payments may be reduced may not exceed
the lesser of (x) the cash proceeds received by the Company and its Restricted
Subsidiaries in connection with such net reduction and (y) the initial amount
of such Investment.
In computing Consolidated Net Income of the Company for purposes of the
foregoing clause (iii)(A) of the first paragraph of this covenant, (i) the
Company may use audited financial statements for the portions of the relevant
period for which audited financial statements are available on the date of
determination and unaudited financial statements and other current financial
data based on the books and records of the Company for the remaining portion
of such period and (ii) the Company will be permitted to rely in good faith on
the financial statements and other financial data derived from the books and
records of the Company that are available on the date of determination. If the
Company makes a Restricted Payment that, at the time of the making of such
Restricted Payment, would in the good faith determination of the Company be
permitted under the requirements of the Indenture, such Restricted Payment
will be deemed to have been made in compliance with the Indenture
notwithstanding any subsequent adjustments made in good faith to the Company's
financial statements affecting Consolidated Net Income of the Company for any
period.
Incurrence of Indebtedness and Issuance of Disqualified Stock.
The Company will not, and will not permit any Restricted Subsidiary to,
create, issue, assume, guarantee or in any manner become directly or
indirectly liable for the payment of, or otherwise incur (collectively,
"incur") any Indebtedness (including Acquired Indebtedness) or issue any
Disqualified Stock, except that the Company or a Restricted Subsidiary may
incur Indebtedness or issue Disqualified Stock if, at the time of such event,
the Fixed Charge Coverage Ratio for the immediately preceding four full fiscal
quarters for which internal financial statements are available, taken as one
accounting period, would have been equal to at least 2.0 to 1.0.
In making the foregoing calculation for any four-quarter period that
includes the Closing Date, pro forma effect will be given to the Refinancing
of the Bridge Credit Facility, as if such transactions had occurred at the
beginning of such four-quarter period. In addition (but without duplication),
in making the foregoing calculation, pro forma effect will be given to: (i)
the incurrence of such Indebtedness and (if applicable) the application of the
net proceeds therefrom, including to refinance other Indebtedness, as if such
Indebtedness was incurred and
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the application of such proceeds occurred at the beginning of such four-
quarter period, (ii) the incurrence, repayment or retirement of any other
Indebtedness by the Company or its Restricted Subsidiaries since the first day
of such four-quarter period as if such Indebtedness was incurred, repaid or
retired at the beginning of such four-quarter period, (iii) if such four-
quarter period ends before December 31, 1998, the SRS Acquisition as if such
Acquisition occurred at the beginning of such four-quarter period and (iv) the
acquisition (whether by purchase, merger or otherwise) or disposition (whether
by sale, merger or otherwise) of any other company, entity or business (as
defined in Rule 11-01 under Article 11 of Regulation S-X under the Securities
Act) acquired or disposed of by the Company or any Restricted Subsidiary, as
the case may be, since the first day of such four-quarter period, as if such
acquisition or disposition occurred at the beginning of such four-quarter
period and, (v) any pro forma expenses and cost reductions calculated on a
basis consistent with Regulation S-X under the Securities Act attributable to
any acquisition referred to in the foregoing clause (iv). In making a
computation under the foregoing clause (i) or (ii), (A) interest on
Indebtedness bearing a floating interest rate will be computed as if the rate
in effect on the date of computation had been the applicable rate for the
entire period (taking into account any Hedging Obligations applicable to such
Indebtedness if such Hedging Obligations have a remaining term at the date of
determination in excess of 12 months), (B) if such Indebtedness bears, at the
option of the Company, a fixed or floating rate of interest, interest thereon
will be computed by applying, at the option of the Company, either the fixed
or floating rate and (C) the amount of Indebtedness under a revolving credit
facility will be computed based upon the average daily balance of such
Indebtedness during such four-quarter period.
Notwithstanding the foregoing, the Company may, and may, to the extent
expressly permitted below, permit the Restricted Subsidiaries to, incur any of
the following Indebtedness ("Permitted Indebtedness"):
(i) Indebtedness of the Company or any Restricted Subsidiary under the
New Credit Facility or one or more other credit facilities in an aggregate
principal amount at any one time outstanding not to exceed the greater of
(x) $675.0 million or (y) the amount of the Borrowing Base, less in either
case (A) any amounts applied to the permanent reduction of the New Credit
Facility or any such other credit facility pursuant to the covenant
described under the caption "--Repurchase at the Option of Holders--Asset
Sales" and (B) the amount of Indebtedness of all Receivables Subsidiaries
then outstanding in excess of $150.0 million.
(ii) Indebtedness of the Company or any Restricted Subsidiary outstanding
on the Closing Date, other than Indebtedness described under clause (i)
above or clause (xii) below.
(iii) Indebtedness owed by the Company to any Wholly Owned Restricted
Subsidiary or owed by any Restricted Subsidiary to the Company or a Wholly
Owned Restricted Subsidiary (provided that such Indebtedness is held by the
Company or such Wholly Owned Restricted Subsidiary); provided, however,
that any Indebtedness of the Company owing to any such Wholly Owned
Restricted Subsidiary is unsecured and subordinated in right of payment
from and after such time as the Notes shall become due and payable (whether
at Stated Maturity, acceleration, or otherwise) to the payment and
performance of the Company's obligations under the Notes.
(iv) Indebtedness represented by the Notes (other than the Additional
Notes, if any) and the Subsidiary Guarantees.
(v) Indebtedness of the Company or any Restricted Subsidiary in respect
of Hedging Obligations incurred in the ordinary course of business.
(vi) Capitalized Lease Obligations of the Company or any Restricted
Subsidiary, provided that the aggregate amount of Indebtedness under this
clause (vi) and clause (vii) below does not exceed 3.5% of the total assets
of the Company and its consolidated subsidiaries at any one time
outstanding.
(vii) Indebtedness of the Company or any Restricted Subsidiary under
purchase money mortgages or secured by purchase money security interests so
long as (x) such Indebtedness is not secured by any property or assets of
the Company or any Restricted Subsidiary other than the property and assets
so acquired and (y) such Indebtedness is created within 90 days of the
acquisition of the related property;
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provided that the aggregate amount of Indebtedness under this clause (vii)
and clause (vi) above does not exceed 3.5% of the total assets of the
Company and its consolidated subsidiaries at any one time outstanding.
(viii) Indebtedness of the Company or any Restricted Subsidiary
consisting of guarantees, indemnities or obligations in respect of purchase
price adjustments in connection with the acquisition or disposition of
assets, including, without limitation, shares of Capital Stock.
(ix) Guarantees by any Restricted Subsidiary (A) of Indebtedness referred
to in clause (i) above or (B) made in accordance with the provisions of the
covenant described under the caption "--Certain Covenants--Guarantees of
Indebtedness by Restricted Subsidiaries."
(x) Indebtedness of the Company or any Restricted Subsidiary, not
otherwise permitted by the first paragraph under this covenant and any
other clause of this definition, in an aggregate principal amount not to
exceed $20.0 million at any one time outstanding.
(xi) Indebtedness incurred by a Receivable Subsidiary, other than
Indebtedness described in clause (iii) above, in an amount not exceeding
95% of the aggregate unpaid balance of the Receivables and Related Assets
of such Receivables Subsidiary at the time of such incurrence pursuant to a
Receivables Program, provided that, after giving effect thereto, if the
aggregate amount of Indebtedness incurred by all Receivable Subsidiaries
under this clause (xi) then outstanding exceeds $150.0 million, the Company
could incur $1.00 of Indebtedness under the foregoing clause (i).
(xii) Indebtedness of one or more Foreign Subsidiaries under one or more
credit facilities in an aggregate principal amount at any one time
outstanding not to exceed $140 million.
(xiii) Guarantees by the Company of Indebtedness of any Restricted
Subsidiary, that was permitted to be incurred by another provision of this
covenant.
(xiv) Any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") of any
outstanding Indebtedness, other than Indebtedness incurred pursuant to
clause (i), (iii), (v), (vi), (vii), (ix), (x), (xi), (xii) or (xiii)
above, including any successive refinancings thereof, so long as (A) any
such new Indebtedness is in a principal amount that does not exceed the
principal amount so refinanced, plus the amount of any premium required to
be paid in connection with such refinancing pursuant to the terms of the
Indebtedness refinanced or the amount of any premium reasonably determined
by the Company as necessary to accomplish such refinancing, plus the amount
of the expenses of the Company reasonably estimated to be incurred in
connection with such refinancing, (B) in the case of any refinancing of
Subordinated Indebtedness of the Company or any Subsidiary Guarantors, such
new Indebtedness is made subordinate to the Notes or the Subsidiary
Guarantees, as the case may be, at least to the same extent as the
Indebtedness being refinanced and (C) such refinancing Indebtedness does
not have a Weighted Average Life less than the Weighted Average Life of the
Indebtedness being refinanced and does not have a final scheduled maturity
earlier than the final scheduled maturity, or permit redemption at the
option of the holder earlier than the earliest date of redemption at the
option of the holder, of the Indebtedness being refinanced.
Liens
The Company will not, and will not permit any Subsidiary Guarantor to,
create, incur, affirm or suffer to exist any Lien of any kind securing any
Pari Passu Indebtedness or Subordinated Indebtedness (including any
assumption, guarantee or other liability with respect thereto by any
Subsidiary Guarantor) upon any property or assets (including any intercompany
notes) of the Company or any Subsidiary Guarantor now owned or acquired in the
future, or any income or profits therefrom, unless the Notes are directly
secured equally and ratably with (or prior to in the case of Subordinated
Indebtedness) the obligation or liability secured by such Lien, and except for
any Lien securing Acquired Indebtedness created prior to the incurrence of
such Indebtedness by the Company or any Subsidiary Guarantor, provided that
any such Lien extends only to the assets that were subject
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to such Lien securing such Acquired Indebtedness prior to the related
acquisition by the Company or the Subsidiary Guarantor.
Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of any Restricted Subsidiary to (a) pay dividends, in cash or otherwise, or
make any other distributions on or in respect of its Capital Stock, (b) pay
any Indebtedness owed to the Company or any other Restricted Subsidiary, (c)
make loans or advances to the Company or any other Restricted Subsidiary or
(d) transfer any of its properties or assets to the Company or any other
Restricted Subsidiary, except for such encumbrances or restrictions existing
under or by reason of any of the following:
(i) Any agreement that was in effect on the Closing Date.
(ii) Customary non-assignment provisions of any lease governing a
leasehold interest of the Company or any Restricted Subsidiary.
(iii) The refinancing or successive refinancings of Indebtedness incurred
under the agreements that were in effect on the Closing Date, so long as
such encumbrances or restrictions are no less favorable to the Company or
any Restricted Subsidiary than those contained in such original agreement.
(iv) Any agreement or other instrument of a Person acquired by the
Company or any Restricted Subsidiary in existence at the time of such
acquisition (but not created in contemplation thereof), which encumbrance
or restriction is not applicable to any Person, or the properties or assets
of any Person, other than the Person, or the property or assets of the
Person, so acquired.
(v) Any agreement providing for the incurrence of Indebtedness by a
Restricted Subsidiary in compliance with the covenant described under the
caption "--Incurrence of Indebtedness and Issuance of Disqualified Stock,"
provided that such Restricted Subsidiary is or becomes a Subsidiary
Guarantor.
(vi) Contained in any agreement pursuant to which Indebtedness was issued
if (A) the encumbrance or restriction applies only in the event of a
payment default or a default with respect to a financial covenant contained
in such Indebtedness, (B) the encumbrance or restriction is not materially
more disadvantageous to the Holders of the Notes than is customary in
comparable financings (as determined by the Company) and (C) the Company
determines that any such encumbrance or restriction will not materially
affect the Company's ability to make principal or interest payments on the
Notes.
(vii) In the case of clause (d) above, any security agreements or
mortgages securing Indebtedness of a Restricted Subsidiary to the extent
such encumbrance or restriction restricts the transfer of the property
subject to such security agreements or mortgages.
(viii) Purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in
clause (d) above on the property so acquired.
(ix) Provisions with respect to the disposition or distribution of assets
or property in joint venture agreements and other similar agreements.
(x) Any agreement entered into by a Restricted Subsidiary that provides
for the sale or disposition of all or substantially all of the Capital
Stock or assets of such Restricted Subsidiary pending the closing of such
sale or disposition.
Limitation on Layering Indebtedness
The Company and each Subsidiary Guarantor will not, directly or indirectly,
incur or otherwise permit to exist any Indebtedness that is subordinate in
right of payment to any Indebtedness of the Company or such Subsidiary
Guarantor, as the case may be, unless such Indebtedness is also pari passu
with, or subordinate in right of payment to, the Notes or the Subsidiary
Guarantee issued by such Subsidiary Guarantor, as the case may be, or
subordinate in right of payment to the Notes or such Subsidiary Guarantee, as
the case may be.
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Consolidation, Merger and Sale of Assets
The Company may not consolidate with or merge with or into any other Person
(whether or not the Company is the surviving Person) or, directly or
indirectly, convey, sell, assign, transfer, lease or otherwise dispose of all
or substantially all of its properties or assets (determined on a consolidated
basis for the Company and its Subsidiaries taken as a whole), in one
transaction or a series of related transactions, unless each of the following
conditions is satisfied:
(a) Either (i) the Company is the surviving corporation or (ii) the
Person (if other than the Company) formed by such consolidation or into
which the Company is merged or the Person that acquires by conveyance,
sale, assignment, transfer, lease or other disposition the properties and
assets of the Company substantially as an entirety (the "Surviving Entity")
(A) is a corporation, partnership or trust organized and validly existing
under the laws of the United States, any state thereof or the District of
Columbia and (B) expressly assumes, by a supplemental indenture in form
reasonably satisfactory to the Trustee, all of the Company's obligations
under the Indenture and the Notes.
(b) Immediately after giving effect to such transaction, no Default or
Event of Default has occurred and is continuing.
(c) Immediately after giving effect to such transaction on a pro forma
basis, the Consolidated Net Worth of the Company (or of the Surviving
Entity if the Company is not the continuing obligor under the Indenture) is
equal to or greater than the Consolidated Net Worth of the Company
immediately prior to such transaction.
(d) Immediately after giving effect to such transaction on a pro forma
basis (on the assumption that the transaction occurred at the beginning of
the most recently ended four full fiscal quarter period for which internal
financial statements are available), the Company (or the Surviving Entity
if the Company is not the continuing obligor under the Indenture) could
incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the first paragraph of the covenant described
under the caption "--Certain Covenants--Incurrence of Indebtedness and
Issuance of Disqualified Stock."
(e) If the Company is not the continuing obligor under the Indenture,
each Subsidiary Guarantor, unless it is the other party to the transaction
described above, has by supplemental indenture, upon the reasonable request
of the Trustee, confirmed that its Subsidiary Guarantee applies to the
Surviving Entity's obligations under the Indenture and the Notes.
(f) The Company delivers, or causes to be delivered, to the Trustee, in
form and substance reasonably satisfactory to the Trustee, an officers'
certificate and an opinion of counsel, each stating that such transaction
complies with the requirements of the Indenture.
In the event of a merger of a Wholly Owned Restricted Subsidiary into the
Company, the Company need not comply with the foregoing clauses (c) and (d).
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries that constitutes all or substantially all of the properties and
assets of the Company on a consolidated basis, will be deemed to be the
transfer of all or substantially all of the properties and assets of the
Company.
In the event of any transaction described in and complying with the
conditions listed in the first paragraph of this covenant in which the Company
is not the continuing obligor under the Indenture, the Surviving Entity will
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture, and thereafter the Company will, except in
the case of a lease, be discharged from all its obligations and covenants
under the Indenture and Notes.
Transactions with Affiliates
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into or suffer to exist any transaction with, or
for the benefit of, any Affiliate of the Company, unless (a) such transaction
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is on terms that are no less favorable to the Company or such Restricted
Subsidiary, as the case may be, than those that could have been obtained in an
arm's length transaction with third parties who are not Affiliates and (b)
either (i) with respect to any transaction or series of related transactions
involving aggregate payments in excess of $2,000,000, but less than
$10,000,000, the Company delivers a resolution of the Board of Directors of
the Company set forth in an officers' certificate to the Trustee certifying
that such transaction or transactions comply with clause (a) above and that
such transaction or transactions have been approved by the Board of Directors
(including a majority of the Disinterested Directors) of the Company or (ii)
with respect to a transaction or series of related transactions involving
aggregate payments equal to or greater than $10,000,000, the Company delivers
(x) an officers' certificate to the Trustee certifying that such transaction
or transactions have been approved by the Board of Directors (including a
majority of the Disinterested Directors) of the Company and (y) a written
opinion from a nationally recognized investment banking firm or an independent
financial advisor of national standing to the effect that such transaction or
transactions are fair to the Company or such Restricted Subsidiary from a
financial point of view.
The foregoing covenant will not restrict any of the following:
(A) Transactions among the Company and/or its Restricted Subsidiaries.
(B) The Company from paying reasonable and customary regular compensation
or fees to, or entering into customary expense reimbursement,
indemnification or similar arrangements with, directors and officers of the
Company or any Restricted Subsidiary.
(C) So long as Siemens is not an Affiliate of the Company, transactions
with the Siemens Joint Venture provided such transactions are either (i) in
accordance with the terms and provisions of the Joint Venture Agreement,
(ii) in accordance with the operating budget of the Siemens Joint Venture,
which operating budget has been adopted and approved in accordance with the
terms of the Joint Venture Agreement or (iii) approved by the Company and
Siemens.
(D) Transactions permitted by the provisions of the covenant described
under the caption "--Certain Covenants--Restricted Payments."
(E) Transactions between a Receivables Subsidiary and any Person in which
the Receivables Subsidiary has an Investment.
(F) In the case of joint ventures (other than the Siemens Joint Venture)
in which the Company has an interest, so long as other parties to the joint
venture that are not Affiliates of the Company own at least 50% of the
equity of such joint venture, transactions between such joint venture and
the Company or any Restricted Subsidiary.
Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries
The Company will not sell, and will not permit any Restricted Subsidiary,
directly or indirectly, to issue or sell any shares of Capital Stock of a
Restricted Subsidiary (including options, warrants or other rights to purchase
shares of such Capital Stock) except (a) to the Company or a Wholly Owned
Restricted Subsidiary, (b) issuances or sales to foreign nationals of shares
of Capital Stock of Foreign Restricted Subsidiaries, to the extent required by
applicable law, or issuances or sales to directors of directors' qualifying
shares, (c) if, immediately after giving effect to such issuance or sale,
neither the Company nor any of its Subsidiaries owns any shares of Capital
Stock of such Restricted Subsidiary (including options, warrants or other
rights to purchase shares of such Capital Stock) or (d) if, immediately after
giving effect to such issuance or sale, such Restricted Subsidiary would no
longer constitute a Restricted Subsidiary and any remaining Investment in such
Person would have been permitted to be made under the covenant described under
the caption "--Certain Covenants--Restricted Payments" if made on the date of
such issuance or sale.
The Company will not permit any Restricted Subsidiary that is a Subsidiary
Guarantor to issue Preferred Stock.
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Payments for Consent
The Indenture provides that neither the Company nor any of its Restricted
Subsidiaries will, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder for
or as an inducement to any consent, waiver or amendment of any of the terms or
provisions of the Indenture or the Notes unless such consideration is offered
to be paid or is paid to all Holders that consent, waive or agree to amend in
the time frame set forth in the solicitation documents relating to such
consent, waiver or agreement.
Guarantees of Indebtedness by Restricted Subsidiaries
All of the Company's active Domestic Restricted Subsidiaries are Subsidiary
Guarantors. As described above, the Indenture permits, under certain
circumstances, the release and discharge of the Subsidiary Guarantee issued by
a Subsidiary Guarantor.
In addition, except with respect to the guarantee by a Foreign Restricted
Subsidiary of the payment of Indebtedness of another Foreign Restricted
Subsidiary, the Company will not permit any Restricted Subsidiary that is not
a Subsidiary Guarantor, directly or indirectly, to guarantee, assume or in any
other manner become liable for the payment of any Indebtedness of the Company
or any Indebtedness of any other Restricted Subsidiary, unless (a) such
Restricted Subsidiary simultaneously executes and delivers a supplemental
indenture providing for a guarantee of payment of the Notes by such Restricted
Subsidiary and (b) with respect to any guarantee of Subordinated Indebtedness
by a Restricted Subsidiary, any such guarantee is subordinated to such
Restricted Subsidiary's guarantee with respect to the Notes at least to the
same extent as such Subordinated Indebtedness is subordinated to the Notes,
provided that the foregoing provision will not be applicable to any guarantee
by any Restricted Subsidiary that existed at the time such Person became a
Restricted Subsidiary and was not incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary.
Any guarantee by a Restricted Subsidiary of the Notes pursuant to the
preceding paragraph may provide by its terms that it will be automatically and
unconditionally released and discharged upon (i) any sale, exchange or
transfer to any Person not an Affiliate of the Company of all of the Company's
and the Restricted Subsidiaries' Capital Stock in, or all or substantially all
the assets of, such Restricted Subsidiary (which sale, exchange or transfer is
not prohibited by the Indenture), (ii) the release or discharge of the
guarantee that resulted in the creation of such guarantee of the Notes, except
a discharge or release by or as a result of payment under such guarantee or
(iii) the designation of such Restricted Subsidiary as an Unrestricted
Subsidiary in accordance with the terms of the Indenture.
Unrestricted Subsidiaries
(a) The Board of Directors of the Company may designate any Subsidiary
(including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary so long as (i) neither the Company nor any Restricted
Subsidiary is directly or indirectly liable for any Indebtedness of such
Subsidiary, (ii) no default with respect to any Indebtedness of such
Subsidiary would permit (upon notice, lapse of time or otherwise) any holder
of any other Indebtedness of the Company or any Restricted Subsidiary to
declare a default on such other Indebtedness or cause the payment thereof to
be accelerated or payable prior to its stated maturity, (iii) any Investment
in such Subsidiary made as a result of designating such Subsidiary an
Unrestricted Subsidiary will not violate the provisions of the covenant
described under the caption "--Certain Covenants--Restricted Payments," (iv)
neither the Company nor any Restricted Subsidiary has a contract, agreement,
arrangement, understanding or obligation of any kind, whether written or oral,
with such Subsidiary other than those that might be obtained at the time from
Persons who are not Affiliates of the Company and (v) neither the Company nor
any Restricted Subsidiary has any obligation to subscribe for additional
shares of Capital Stock or other equity interest in such Subsidiary, or to
maintain or preserve such Subsidiary's financial condition or to cause such
Subsidiary to achieve certain levels of operating results.
(b) The Board of Directors of the Company may designate any Unrestricted
Subsidiary as a Restricted Subsidiary; provided that (i) no Default or Event
of Default has occurred and is continuing following such
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designation and (ii) the Company could incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the first
paragraph of the covenant described under the caption "--Certain Covenants--
Incurrence of Indebtedness and Issuance of Disqualified Stock" (treating any
Indebtedness of such Unrestricted Subsidiary as the incurrence of Indebtedness
by a Restricted Subsidiary).
Reports
The Company is required to file on a timely basis with the Commission, to
the extent such filings are accepted by the Commission and whether or not the
Company has a class of securities registered under the Exchange Act, the
annual reports, quarterly reports and other documents that the Company would
be required to file if it were subject to Section 13 or 15(d) of the Exchange
Act. The Company is also be required (a) to supply to the Trustee and each
Holder of Notes, or supply to the Trustee for forwarding to each such Holder,
without cost to such Holder, copies of such reports and documents within 15
days after the date on which the Company files such reports and documents with
the Commission or the date on which the Company is required to file such
reports and documents and (b) if filing such reports and documents with the
Commission is not accepted by the Commission or is prohibited under the
Exchange Act, to supply at the Company's cost copies of such reports and
documents to any prospective Holder of Notes promptly upon written request.
Events of Default and Remedies
Each of the following are "Events of Default" under the Indenture:
(a) Default in the payment of any interest on any Note when it becomes
due and payable, and continuance of such default for a period of 30 days
(whether or not prohibited by the subordination provisions of the
Indenture).
(b) Default in the payment of the principal of (or premium, if any, on)
any Note when due (whether or not prohibited by the subordination
provisions of the Indenture).
(c) Failure to perform or comply with the Indenture provisions described
under the captions "--Repurchase at the Option of the Holders--Change of
Control," "--Repurchase at the Option of the Holders--Asset Sales" or "--
Certain Covenants--Consolidation, Merger and Sale of Assets."
(d) Default in the performance, or breach, of any covenant or agreement
of the Company or any Subsidiary Guarantor contained in the Indenture or
any Subsidiary Guarantee (other than as contemplated by clauses (a), (b)
and (c) above) and continuance of such default or breach for a period of 60
days after written notice has been given to the Company by the Trustee or
to the Company and the Trustee by the Holders of at least 25% in aggregate
principal amount of the Notes then outstanding.
(e) An event of default has occurred under any mortgage, bond, indenture,
loan agreement or other document evidencing Indebtedness of the Company or
any Significant Subsidiary, which Indebtedness has an aggregate outstanding
principal amount of $10,000,000 or more, and such default (i) results in
the acceleration of such Indebtedness prior to its Stated Maturity or (ii)
constitutes a failure to make any payment when due of any such
Indebtedness.
(f) Failure by the Company or any of its Restricted Subsidiaries to pay
one or more final judgments the uninsured portion of which exceeds in the
aggregate $10,000,000, which judgment or judgments are not paid, discharged
or stayed for a period of 60 days.
(g) Any Subsidiary Guarantee issued by a Significant Subsidiary ceases to
be in full force and effect or is declared null and void or any Subsidiary
Guarantor denies that it has any further liability under any Subsidiary
Guarantee, or gives notice to such effect (other than by reason of the
termination of the Indenture or the release of any such Subsidiary
Guarantee in accordance with the Indenture), and such condition has
continued for a period of 30 days after written notice of such failure
requiring the Subsidiary Guarantor and the Company to remedy the same has
been given (x) to the Company by the Trustee or (y) to the Company and the
Trustee by the Holders of 25% in aggregate principal amount of the Notes
then outstanding.
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(h) The occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to the Company or any Significant Subsidiary.
If an Event of Default (other than as specified in clause (h) above) occurs
and is continuing, the Trustee or the Holders of not less than 25% in
aggregate principal amount of the Notes then outstanding may, and the Trustee
at the request of such Holders will, declare the principal of, and accrued and
unpaid interest on, all of the outstanding Notes immediately due and payable
and, upon any such declaration, such principal and interest will become due
and payable immediately.
If an Event of Default specified in clause (h) above occurs and is
continuing, then the principal of all of the outstanding Notes will ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Holder of Notes.
At any time after a declaration of acceleration under the Indenture, but
before a judgment or decree for payment of the money due has been obtained by
the Trustee, the Holders of a majority in aggregate principal amount of the
outstanding Notes, by written notice to the Company and the Trustee, may
rescind such declaration and its consequences if (i) the Company has paid or
deposited with the Trustee a sum sufficient to pay (A) all overdue interest on
all Notes, (B) all unpaid principal of (and premium, if any, on) any
outstanding Notes that has become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Notes, (C) to the
extent that payment of such interest is lawful, interest upon overdue interest
and overdue principal at the rate borne by the Notes and, (D) all sums paid or
advanced by the Trustee under the Indenture and the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel;
and (ii) all Events of Default, other than the non-payment of amounts of
principal of (or premium, if any, on) or interest on the Notes that have
become due solely by such declaration of acceleration, have been cured or
waived. No such rescission will affect any subsequent default or impair any
right consequent thereon.
No Holder has any right to institute any proceeding with respect to the
Indenture or any remedy thereunder, unless the Holders of at least 25% in
aggregate principal amount of the outstanding Notes have made written request,
and offered reasonable indemnity, to the Trustee to institute such proceeding
within 60 days after receipt of such notice and the Trustee, within such 60-
day period, has not received directions inconsistent with such written request
by Holders of a majority in aggregate principal amount of the outstanding
Notes. Such limitations do not apply, however, to a suit instituted by a
Holder for the enforcement of the payment of the principal of, premium, if
any, or interest on such Note on or after the respective due dates expressed
in such Note.
The Holders of not less than a majority in aggregate principal amount of the
outstanding Notes may, on behalf of the Holders of all of the Notes, waive any
past defaults under the Indenture, except a default in the payment of the
principal of (and premium, if any) or interest on any Note, or in respect of a
covenant or provision that under the Indenture cannot be modified or amended
without the consent of the Holder of each Note outstanding.
If a Default or an Event of Default occurs and is continuing and is known to
the Trustee, the Trustee will mail to each Holder of the Notes notice of the
Default or Event of Default within 90 days after the occurrence thereof.
Except in the case of a Default or an Event of Default in payment of principal
of (and premium, if any, on) or interest on any Notes, the Trustee may
withhold the notice to the Holders of the Notes if a committee of its trust
officers in good faith determines that withholding such notice is in the
interests of the Holders of the Notes.
The Company is required to furnish to the Trustee annual statements as to
the performance by the Company and the Subsidiary Guarantors of their
respective obligations under the Indenture and as to any default in such
performance. The Company is also required to notify the Trustee within five
days of any Default.
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Legal Defeasance or Covenant Defeasance
The Company may, at its option and at any time, terminate the obligations of
the Company and any Subsidiary Guarantors with respect to the outstanding
Notes ("defeasance"). Such defeasance means that the Company will be deemed to
have paid and discharged the entire Indebtedness represented by the
outstanding Notes, except for (i) the rights of Holders of outstanding Notes
to receive payments in respect of the principal of (and premium, if any, on)
and interest on such Notes when such payments are due, (ii) the Company's
obligations to issue temporary Notes, register the transfer or exchange of any
Notes, replace mutilated, destroyed, lost or stolen Notes, maintain an office
or agency for payments in respect of the Notes and segregate and hold such
payments in trust, (iii) the rights, powers, trusts, duties and immunities of
the Trustee and (iv) the defeasance provisions of the Indenture. In addition,
the Company may, at its option and at any time, elect to terminate the
obligations of the Company and any Subsidiary Guarantor with respect to
certain covenants set forth in the Indenture and described under "--Certain
Covenants" above, and any omission to comply with such obligations would not
constitute a Default or an Event of Default with respect to the Notes
("covenant defeasance").
In order to exercise either defeasance or covenant defeasance, (a) the
Company must irrevocably deposit or cause to be deposited with the Trustee, as
trust funds in trust, specifically pledged as security for, and dedicated
solely to, the benefit of the Holders of the Notes, money in an amount, or
U.S. Government Obligations (as defined in the Indenture) that through the
scheduled payment of principal and interest thereon will provide money in an
amount, or a combination thereof, sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay and discharge the
principal of (and premium, if any, on) and interest on the outstanding Notes
at maturity (or upon redemption, if applicable) of such principal or
installment of interest; (b) no Default or Event of Default has occurred and
is continuing on the date of such deposit or, insofar as an event of
bankruptcy under clause (h) of "Events of Default" above is concerned, at any
time during the period ending on the 91st day after the date of such deposit;
(c) such defeasance or covenant defeasance may not result in a breach or
violation of, or constitute a default under, the Indenture or any material
agreement or instrument to which the Company or any Subsidiary Guarantor is a
party or by which it is bound; (d) in the case of defeasance, the Company must
deliver to the Trustee an opinion of counsel stating that the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling, or since the date hereof there has been a change in applicable federal
income tax law, to the effect, and based thereon such opinion must confirm
that, the Holders of the outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such defeasance and will
be subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such defeasance had not
occurred; (e) in the case of covenant defeasance, the Company must have
delivered to the Trustee an opinion of counsel to the effect that the Holders
of the Notes outstanding will not recognize income, gain or loss for federal
income tax purposes as a result of such covenant defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such covenant defeasance had not
occurred; and (f) the Company must have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that all conditions
precedent provided for relating to either the defeasance or the covenant
defeasance, as the case may be, have been complied with.
Satisfaction and Discharge
Upon the request of the Company, the Indenture will cease to be of further
effect (except as to surviving rights of registration of transfer or exchange
of the Notes, as expressly provided for in the Indenture) and the Trustee, at
the expense of the Company, will execute proper instruments acknowledging
satisfaction and discharge of the Indenture when (a) either (i) all the Notes
theretofore authenticated and delivered (other than destroyed, lost or stolen
Notes that have been replaced or paid and Notes that have been subject to
defeasance under "--Legal Defeasance and Covenant Defeasance") have been
delivered to the Trustee for cancellation or (ii) all Notes not theretofore
delivered to the Trustee for cancellation (A) have become due and payable, (B)
will become due and payable at maturity within one year or (C) are to be
called for redemption within one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the Trustee in the name, and
at the expense, of the Company, and the Company has irrevocably deposited or
caused to be deposited with the
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Trustee funds in trust for the purpose in an amount sufficient to pay and
discharge the entire indebtedness on such Notes not theretofore delivered to
the Trustee for cancellation, for principal (and premium, if any, on) and
interest on the Notes to the date of such deposit (in the case of Notes that
have become due and payable) or to the Stated Maturity or redemption date, as
the case may be; (b) the Company has paid or caused to be paid all sums
payable under the Indenture by the Company; and (c) the Company has delivered
to the Trustee an officers' certificate and an opinion of counsel, each
stating that all conditions precedent provided in the Indenture relating to
the satisfaction and discharge of the Indenture have been complied with.
Amendment, Supplement and Waiver
Modifications and amendments of the Indenture and any Subsidiary Guarantee
may be made by the Company, any affected Subsidiary Guarantor and the Trustee
with the consent of the Holders of a majority in aggregate outstanding
principal amount of the Notes; provided, however, that no such modification or
amendment may, without the consent of the Holder of each outstanding Note
affected thereby,
(a) change the Stated Maturity of the principal of, or any installment of
interest on, any Note, or reduce the principal amount thereof or the rate of
interest thereon or any premium payable upon the redemption thereof, or change
the place of payment where, or the coin or currency in which any Note or any
premium or the interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment after the Stated Maturity thereof
(or, in the case of redemption, on or after the Redemption Date);
(b) reduce the percentage in principal amount of outstanding Notes, the
consent of whose Holders is required for any such amendment or for any waiver
of compliance with certain provisions of, or certain defaults and their
consequences provided for under, the Indenture;
(c) waive a default in the payment of principal of, or premium, if any, or
interest on the Notes or reduce the percentage or aggregate principal amount
of outstanding Notes the consent of whose Holders is necessary for waiver of
compliance with certain provisions of the Indenture or for waiver of certain
defaults; or
(d) modify any of the provisions of the Indenture relating to the
subordination of the Notes or the Subsidiary Guarantees in a manner materially
adverse to the Holders.
The Holders of a majority in aggregate principal amount of the Notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture.
Without the consent of any Holders, the Company and the Trustee, at any time
and from time to time, may enter into one or more indentures supplemental to
the Indenture for any of the following purposes: (a) to evidence the
succession of another Person to the Company and the assumption by any such
successor of the covenants of the Company in the Indenture and in the Notes;
or (b) to add to the covenants of the Company for the benefit of the Holders,
or to surrender any right or power herein conferred upon the Company; or (c)
to add additional Events of Default; or (d) to provide for uncertificated
Notes in addition to or in place of the certificated Notes; or (e) to evidence
and provide for the acceptance of appointment under the Indenture by a
successor Trustee; or (f) to secure the Notes or any Subsidiary Guarantee; or
(g) to cure any ambiguity, to correct or supplement any provision in the
Indenture that may be defective or inconsistent with any other provision in
the Indenture, or to make any other provisions with respect to matters or
questions arising under the Indenture, provided that such actions pursuant to
this clause (g) do not adversely affect the interests of the Holders in any
material respect; or (h) to comply with any requirements of the Commission in
order to maintain the qualification of the Indenture under the Trust Indenture
Act.
Concerning the Trustee
IBJ Whitehall Bank & Trust Company, the Trustee under the Indenture, is the
initial paying agent, exchange agent and registrar for the Notes.
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The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. Under the Indenture, the Holders of a majority in
outstanding principal amount of the Notes will have the right to direct the
time, method and place of conducting any proceeding for exercising any remedy
available to the Trustee, subject to certain exceptions. If an Event of
Default has occurred and is continuing, the Trustee will exercise such rights
and powers vested in it under the Indenture and use the same degree of care
and skill in its exercise as a prudent Person would exercise under the
circumstances in the conduct of such Person's own affairs.
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee thereunder,
should it become a creditor of the Company, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of
any such claims, as security or otherwise. The Trustee is permitted to engage
in other transactions; provided, however, that, if it acquires any conflicting
interest (as defined), it must eliminate such conflict upon the occurrence of
an Event of Default or else resign.
Governing Law
The Indenture, the Notes and the Subsidiary Guarantees are governed by, and
construed in accordance with, the laws of the State of New York.
Book-Entry, Delivery and Form
Except as set forth below under "Certificated Notes", the New Notes sold
will be issued in the form of one Global Note (the "Global Note"). The Global
Note will be deposited with the Trustee as custodian for The Depository Trust
Company (the "Depositary") and registered in the name of Cede & Co., as
nominee of the Depositary (such nominee being referred to herein as the
"Global Note Holder"). Except as set forth below, the Global Note may be
transferred, in whole and not in part, only to the Depository or another
nominee of the Depository. Investors may hold their beneficial interests in
the Global Note directly through the Depository if they have an account with
the Depository or indirectly through organizations that have accounts with the
Depository.
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the
"Participants" or the "Depositary's Participants") and to facilitate the
clearance and settlement of transactions in such securities between
Participants through electronic book-entry changes in accounts of its
Participants. The Depositary's Participants include securities brokers and
dealers (including the Initial Purchasers), banks and trust companies,
clearing corporations and certain other organizations. Access to the
Depositary's system is also available to other entities such as banks,
brokers, dealers and trust companies (collectively, the "Indirect
Participants" or the "Depositary's Indirect Participants") that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only through the Depositary's
Participants or the Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Note, the Depositary will credit the
accounts of Participants with portions of the principal amount of the Global
Note and (ii) ownership of the Notes evidenced by the Global Note will be
shown on, and the transfer of ownership thereof will be effected only through,
records maintained by the Depositary (with respect to the interests of the
Depositary's Participants), the Depositary's Participants and the Depositary's
Indirect Participants. Prospective purchasers are advised that the laws of
some states require that certain Persons take physical delivery in definitive
form of securities that they own. Consequently, the ability to own, transfer
or pledge Notes evidenced by the Global Note will be limited to such extent.
For certain other restrictions on the transferability of the Notes, see
"Notice to Investors."
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole Holder under the Indenture of
the related New Notes evidenced by the Global Note.
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Beneficial owners of the related New Notes evidenced by the Global Note will
not be considered the owners or Holders thereof under the New Notes and the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or liability for any
aspect of the records of the Depositary or for maintaining, supervising or
reviewing any records of the Depositary relating to the Notes.
Payments in respect of the principal of and premium, if any, and interest on
New Notes registered in the name of the Global Note Holder on the applicable
record date will be payable by the Trustee to or at the direction of the
Global Note Holder in its capacity as the registered Holder under the
Indenture. Under the terms of the Indenture, the Company and the Trustee may
treat the Persons in whose names Notes, including the Global Note, are
registered as the owners thereof for the purpose of receiving such payments.
Consequently, neither the Company nor the Trustee has or will have any
responsibility or liability for the payment of such amounts to beneficial
owners of any Notes. The Company believes, however, that it is currently the
policy of the Depositary to immediately credit the accounts of the relevant
Participants with such payments, in amounts proportionate to their respective
holdings of beneficial interests in the relevant security as shown on the
records of the Depositary. Payments by the Depositary's Participants and the
Depositary's Indirect Participants to the beneficial owners of New Notes will
be governed by standing instructions and customary practice and will be the
responsibility of the Depositary's Participants or the Depositary's Indirect
Participants.
Certificated Notes
The New Notes represented by the Global Note are exchangeable for
certificated New Notes in registered, definitive form (the "Certificated
Notes") of like tenor as such Notes if (i) the Company notifies the Trustee in
writing that the Depositary is no longer willing or able to act as a
depositary and the Company is unable to locate a qualified successor within 90
days or (ii) the Company, at its option, notifies the Trustee in writing that
it elects to change the issuance of Notes in the form of Certificated
Securities under the Indenture upon surrender by the Global Note Holder of its
Global Note.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
Certain Definitions
"Acquired Indebtedness" means Indebtedness of a Person (a) existing at the
time such Person is merged with or into the Company or becomes a Restricted
Subsidiary or (b) assumed in connection with the acquisition of assets from
such Person; provided that any Indebtedness of such Person that is redeemed,
defeased, retired or otherwise repaid at the time of or immediately upon
consummation of the transaction by which such Person is merged with or into
the Company, becomes a Restricted Subsidiary or such assets are acquired from
such Person will not be Acquired Indebtedness.
"Affiliate" means, with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of this
definition, "control," when used with respect to any specified Person, means
the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing. Notwithstanding the foregoing, no Person (other
than the Company or any Subsidiary of the Company) in whom a Receivables
Subsidiary makes an Investment in connection with a Receivables Program shall
be deemed to be an Affiliate of the Company or any of its Subsidiaries solely
by reason of such Investments.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition (including, without limitation, by way of merger, consolidation or
sale and leaseback transaction) (collectively, a "transfer") by the Company or
a Restricted Subsidiary, directly or indirectly, in one or a series of related
transactions, of (a) any
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Capital Stock of any Restricted Subsidiary (other than directors' qualifying
shares or shares required by applicable law to be held by a Person other than
the Company or a Restricted Subsidiary), (b) all or substantially all of the
properties and assets of the Company and its Restricted Subsidiaries
representing a division or line of business or (c) any other properties or
assets of the Company or any Restricted Subsidiary, other than in the ordinary
course of business. For the purposes of this definition, the term "Asset Sale"
does not include any transfer of properties or assets (i) that is governed by
the provisions of the Indenture described under "--Certain Covenants--
Consolidation, Merger and Sale of Assets," (ii) between or among the Company
and its Restricted Subsidiaries pursuant to transactions that do not violate
any other provision of the Indenture, (iii) to any Person to the extent it
constitutes a Restricted Payment that is permitted under the covenant
described under the caption "--Certain Covenants--Restricted Payments," (iv)
consisting of inventory or worn out, obsolete or permanently retired equipment
and facilities, (v) consisting of Receivables and Related Assets transferred
pursuant to a Receivables Program, (vi) the gross proceeds of which (exclusive
of indemnities) do not exceed $1.0 million in connection with any transfer,
(vii) that are the subject of the Gallino Disposition or (viii) that
constitutes a Permitted Investment.
"Banks" means the banks and other financial institutions that from time to
time are lenders under the New Credit Facility.
"Borrowing Base" means, as of any date, an amount equal to the sum of (a)
80% of the face amount of the accounts receivable owned by the Company and its
Restricted Subsidiaries (other than any Receivables Subsidiary) and (b) 60% of
the book value of all inventory owned by the Company and its Restricted
Subsidiaries, all calculated on a consolidated basis and in accordance with
GAAP as of the last day of the immediately preceding fiscal quarter for which
internal financial statements are available on such date.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in New York are authorized or
obligated by law or executive order to close.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" of any Person means any and all shares, partnership
interests, participations, rights in or other equivalents of, or interest in,
the equity of such Person, but excluding any debt securities convertible into
such equity.
"Change of Control" means the occurrence of any of the following events:
(a) Any Person or "group" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than one or more Permitted Holders, is or
becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a Person will be deemed to have "beneficial
ownership" of all securities that such Person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than a majority of the voting power
of all classes of Voting Stock of the Company.
(b) During any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election to such Board of Directors,
or whose nomination for election by the stockholders of the Company, was
approved by a vote of 66 2/3% of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in
office.
(c) The Company is liquidated or dissolved or adopts a plan of
liquidation or dissolution, other than a transaction that complies with the
provisions described under "--Certain Covenants--Consolidation, Merger and
Sales of Assets."
"Closing Date" means the date on which the Notes are originally issued under
the Indenture.
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"Consolidated EBITDA" means, for any period, the sum of, without
duplication, Consolidated Net Income for such period, plus (or, in the case of
clause (e) below, plus or minus) the following items to the extent included in
computing Consolidated Net Income for such period (a) Fixed Charges for such
period, plus (b) the federal, state, local and foreign income tax expense of
the Company and its Restricted Subsidiaries for such period, plus (c) the
depreciation and amortization expense of the Company and its Restricted
Subsidiaries for such period, plus (d) one time charges associated with cash
disruption costs not to exceed $15.0 million in fiscal year 1998 and $15.0
million in fiscal year 1999, plus (e) any other non-cash charges for such
period and minus non-cash credits for such period, other than non-cash charges
or credits resulting from changes in prepaid assets or accrued liabilities in
the ordinary course of business plus (f) the December 1997 Charges; provided
that income tax expense, depreciation and amortization expense and non-cash
charges and credits of a Restricted Subsidiary will be included in
Consolidated EBITDA only to the extent (and in the same proportion) that the
net income of such Restricted Subsidiary was included in calculating
Consolidated Net Income for such period.
"Consolidated Net Income" means, for any period, the net income (or net
loss) of the Company and its Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP, adjusted to the
extent included in calculating such net income or loss by excluding (a) any
net after-tax extraordinary gains or losses (less all fees and expenses
relating thereto), (b) any net after-tax gains or losses (less all fees and
expenses relating thereto) attributable to Asset Sales, (c) the net income
(but not the net loss) of any Person (other than the Company or a Restricted
Subsidiary), in which the Company or any Restricted Subsidiary has an equity
interest, except that the aggregate amount of dividends or other distributions
actually paid to the Company or any Restricted Subsidiary in cash during such
period will be included in such Consolidated Net Income, (d) the net income
(or loss) of any Person acquired by the Company or any Restricted Subsidiary
in a "pooling of interests" transaction attributable to any period prior to
the date of such acquisition, (e) the net income (but not the net loss) of any
Restricted Subsidiary to the extent that the declaration or payment of
dividends or similar distributions by such Restricted Subsidiary of such net
income is at the date of determination restricted, directly or indirectly,
except that the aggregate amount of such net income that could be paid to the
Company or a Restricted Subsidiary thereof by loans, advances, intercompany
transfers, principal repayments or otherwise will be included in such
Consolidated Net Income and (f) dividends paid or accrued on the Preferred
Securities or any other Preferred Stock issued by the Company or any
Restricted Subsidiary; provided, however, that, so long as the Company retains
a minority investment in the Siemens Joint Venture, Consolidated Net Income
for any period will include the Company's proportionate share of the net
income or net loss of the Siemens Joint Venture for such period determined as
if the Siemens Joint Venture were accounted for by the Company on an equity
accounting basis in accordance with GAAP and, provided further that
notwithstanding the foregoing proviso, if the Siemens Joint Venture generates
net income for any period, the amount of such net income that is included in
Consolidated Net Income for such period may not exceed the aggregate amount of
(i) dividends or other distributions plus (ii) other payments by the Siemens
Joint Venture under any management agreement, royalty agreement or other
similar arrangement, in either case actually paid to the Company or any
Restricted Subsidiary in cash during such period.
"Consolidated Net Worth" means, at any date of determination, stockholders'
equity of the Company and its Restricted Subsidiaries as set forth on the most
recently available quarterly or annual consolidated balance sheet of the
Company and its Restricted Subsidiaries, less any amounts attributable to
Disqualified Stock or any equity security convertible into or exchangeable for
Indebtedness, the cost of treasury stock and the principal amount of any
promissory notes receivable from the sale of the Capital Stock of the Company
or any of its Restricted Subsidiaries and less, to the extent included in
calculating such stockholders' equity of the Company and its Restricted
Subsidiaries, the stockholders' equity attributable to Unrestricted
Subsidiaries, each item to be determined in conformity with GAAP (excluding
the effects of foreign currency adjustments under Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 52).
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) all Senior Indebtedness under the
New Credit Facility and (ii) any other issue of Senior Indebtedness or
refinancing thereof permitted by the definition of Senior Indebtedness, having
a principal amount of at least $25.0 million.
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"Disinterested Director" means, with respect to any transaction or series of
transactions in respect of which the Board of Directors is required to deliver
a resolution of the Board of Directors, to make a finding or otherwise take
action under the Indenture, a member of the Board of Directors who does not
have any material direct or indirect financial interest in or with respect to
such transaction or series of transactions.
"Disqualified Stock" means any class or series of Capital Stock that, either
by its terms, or by the terms of any security into which it is convertible or
exchangeable or by contract or otherwise (a) is, or upon the happening of an
event or passage of time would be, required to be redeemed prior to one year
after the final Stated Maturity of the Notes, (b) is redeemable at the option
of the holder thereof at any time prior to one year after such final Stated
Maturity or (c) at the option of the holder thereof, is convertible into or
exchangeable for debt securities at any time prior to one year after such
final Stated Maturity; provided that any Capital Stock that would not
constitute Disqualified Stock but for provisions therein giving holders
thereof the right to cause the issuer thereof to repurchase or redeem such
Capital Stock upon the occurrence of an "asset sale" or "change of control"
occurring prior to the Stated Maturity of the Notes will not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are no more favorable to the holders of such
Capital Stock than the provisions contained in the covenants described under
the captions "--Repurchase at the Option of Holders--Asset Sales" and "--
Repurchase at the Option of Holders--Change of Control" and such Capital Stock
specifically provides that the issuer will not repurchase or redeem any of
such stock pursuant to such provision prior to the Company's repurchase of
such of the Notes as are required to be repurchased pursuant to the covenants
described under the captions "--Repurchase at the Option of Holders--Asset
Sales" and "--Repurchase at the Option of Holders--Change of Control."
"Domestic Subsidiary" means any Subsidiary whose jurisdiction of
incorporation, organization or formation is the United States, any state
thereof or the District of Columbia.
"Equity Offering" means an offer and sale by the Company of its common stock
(which is Qualified Stock) to one or more Persons other than a Subsidiary.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fixed Charges" means, for any period, without duplication, the sum of (a)
the amount that, in conformity with GAAP, would be set forth opposite the
caption "interest expense" (or any like caption) on a consolidated statement
of operations of the Company and its Restricted Subsidiaries for such period,
including, without limitation, (i) amortization of debt discount, (ii) the net
cost of interest rate contracts (including amortization of discounts), (iii)
the interest portion of any deferred payment obligation, (iv) amortization of
debt issuance costs and (v) the interest component of Capitalized Lease
Obligations, plus (b) cash dividends paid on Preferred Stock and Disqualified
Stock by the Company and any Restricted Subsidiary (to any Person other than
the Company and its Restricted Subsidiaries), including cash dividends on the
Preferred Securities, plus (c) all interest on any Indebtedness of any Person
guaranteed by the Company or any of its Restricted Subsidiaries; provided,
however, that Fixed Charges will not include (i) any gain or loss from
extinguishment of debt, including the write-off of debt issuance costs and
(ii) the fixed charges of a Restricted Subsidiary to the extent (and in the
same proportion) that the net income of such Subsidiary was excluded in
calculating Consolidated Net Income pursuant to clause (e) of the definition
thereof for such period.
"Fixed Charge Coverage Ratio" means, for any period, the ratio of (a)
Consolidated EBITDA for such period to (b) Fixed Charges for such period.
"Foreign Subsidiary" means any Subsidiary other than a Domestic Subsidiary.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied,
that are in effect on the Closing Date.
"guarantee" means, as applied to any obligation, (a) a guarantee (other than
by endorsement of negotiable instruments for collection in the ordinary course
of business), direct or indirect, in any manner, of all or any part of such
obligation and (b) an agreement, direct or indirect, contingent or otherwise,
the practical effect of which
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is to assure in any way the payment or performance (or payment of damages in
the event of non-performance) of all or any part of such obligation,
including, without limitation, the payment of amounts drawn down under letters
of credit.
"Hedging Obligations" means the obligations of any Person under (i) interest
rate swap agreements, interest rate cap agreements and interest rate collar
agreements and (ii) other agreements or arrangements designed to protect such
Person against fluctuations in interest rates or the value of foreign
currencies.
"Holder" means the Person in whose name a Note is, at the time of
determination, registered on the Registrar's books.
"Indebtedness" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and
whether or not contingent, (a) every obligation of such Person for money
borrowed, (b) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, (c) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person (other than up to $10.0
million of obligations at any time outstanding with respect to letters of
credit securing obligations entered into the ordinary course of business of
such Person to the extent such letters are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed not later than the fifth
Business Day following receipt of a demand for reimbursement following payment
on the letter of credit), (d) every obligation of such Person issued or
assumed as the deferred purchase price of property or services, (e) the amount
of every Capitalized Lease Obligation of such Person, (f) all Disqualified
Stock of such Person valued at its maximum fixed repurchase price (including,
without duplication, accrued and unpaid dividends), (g) all obligations of
such Person under or in respect of Hedging Obligations and (h) every
obligation of the type referred to in clauses (a) through (g) of another
Person and all dividends of another Person the payment of which, in either
case, such Person has guaranteed. For purposes of this definition, the
"maximum fixed repurchase price" of any Disqualified Stock that does not have
a fixed repurchase price will be calculated in accordance with the terms of
such Disqualified Stock as if such Disqualified Stock were repurchased on any
date on which Indebtedness is required to be determined pursuant to the
Indenture, and if such price is based upon, or measured by, the fair market
value of such Disqualified Stock, such fair market value will be determined in
good faith by the board of directors of the issuer of such Disqualified Stock.
Notwithstanding the foregoing, trade accounts payable and accrued liabilities
arising in the ordinary course of business and any liability for federal,
state or local taxes or other taxes owed by such Person will not be considered
Indebtedness for purposes of this definition.
"Investment" in any Person means (a) any direct or indirect advance, loan or
other extension of credit (including, without limitation, by way of guarantee
or similar arrangement) or capital contribution to such Person, the purchase
or other acquisition of any Capital Stock, Indebtedness or other securities
issued by such Person, the acquisition (by purchase or otherwise) of all or
substantially all of the business or assets of such Person, or the making of
any investment in such Person, (b) the designation of any Restricted
Subsidiary as an Unrestricted Subsidiary, (c) the transfer of any assets or
properties from the Company or a Restricted Subsidiary to an Unrestricted
Subsidiary, other than the transfer of assets or properties made in the
ordinary course of business and (d) the fair market value of the Capital Stock
(or any other Investment), held by the Company or any of its Restricted
Subsidiaries, of (or in) any Person that has ceased to be a Restricted
Subsidiary, including, without limitation, by reason of any transaction
permitted by clause (d) of the covenant described under the caption "--Certain
Covenants--Limitation on Issuances and Sales of Capital Stock of Restricted
Subsidiaries." Investments exclude extensions of trade credit on commercially
reasonable terms in accordance with normal trade practices.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
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"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or cash equivalents, including payments in respect
of deferred payment obligations, but only as and when received, in the form
of, or stock or other assets when disposed of for, cash or cash equivalents
(except to the extent that such obligations are financed or sold with recourse
to the Company or any Restricted Subsidiary), net of (a) brokerage commissions
and other fees and expenses (including fees and expenses of legal counsel,
accountants and investment banks) related to such Asset Sale, (b) provisions
for all taxes payable or required to be accrued in accordance with GAAP as a
result of such Asset Sale, (c) payments made to retire Indebtedness where
payment of such Indebtedness is secured by a Lien on the assets that are the
subject of such Asset Sale, (d) amounts required to be paid to any Person
(other than the Company or any Restricted Subsidiary) owning a beneficial
interest in the assets that are subject to the Asset Sale and (e) appropriate
amounts to be provided by the Company or any Restricted Subsidiary, as the
case may be, as a reserve required in accordance with GAAP against any
liabilities associated with such Asset Sale and retained by the seller after
such Asset Sale, including pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities
under any indemnification obligations associated with such Asset Sale.
"New Credit Facility" means the credit agreement dated as of April 28, 1998
between the Company, NationsBank, N.A., as agent, and the Banks, as such
agreement may be amended, restated, supplemented, refinanced or otherwise
modified from time to time, which credit agreement is incorporated by
reference as an exhibit to the Registration Statement of which this Prospectus
forms a part.
"Pari Passu Indebtedness" means any Indebtedness of the Company or any
Subsidiary Guarantor, whether outstanding at the date of the Indenture or
incurred thereafter, that ranks pari passu in right of payment with the Notes
or any Subsidiary Guarantee, as the case may be.
"Permitted Holder" means (i) Allen K. Breed and Johnnie Cordell Breed, any
trust existing solely for the benefit of Allen K. Breed and/or Johnnie Cordell
Breed and the estate or any executor, administrator, conservator or other
legal representative of Allen K. Breed or Johnnie Cordell Breed and (ii)
Siemens and its Affiliates.
"Permitted Investments" means any of the following:
(a) Investments in (i) securities with a maturity of one year or less
issued or directly and fully guaranteed or insured by the United States or
any agency or instrumentality thereof (provided that the full faith and
credit of the United States is pledged in support thereof); (ii)
certificates of deposit or acceptances with a maturity of one year or less
of any financial institution that is a member of the Federal Reserve System
having combined capital and surplus of not less than $500,000,000; (iii)
commercial paper with a maturity of one year or less issued by a
corporation that is not an Affiliate of the Company and is organized under
the laws of any state of the United States or the District of Columbia and
having the highest rating obtainable from Moody's Investors Service, Inc.
or Standard & Poor's Ratings Services and (iv) money market mutual funds
that invest substantially in securities of the type described in the
preceding clauses (i) through (iii).
(b) Investments by the Company or any Restricted Subsidiary in another
Person, if as a result of such Investment such other Person (i) becomes a
Restricted Subsidiary or (ii) is merged or consolidated with or into, or
transfers or conveys all or substantially all of its assets to, the Company
or a Restricted Subsidiary.
(c) Investments by the Company or any of the Restricted Subsidiaries in
any one of the other of them.
(d) Investments in existence on the Closing Date.
(e) Investments made as a result of the receipt of non-cash consideration
in an Asset Sale permitted under the covenant described under the caption
"--Repurchase at the Option of Holders--Asset Sales."
(f) Investments in assets owned or used in the ordinary course of
business.
(g) Investments in any Person in the form of a capital contribution of
the Company's common stock.
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(h) Property and assets, including cash, constituting the Company's
initial contribution to the Siemens Joint Venture pursuant to the Joint
Venture Agreement, and other Investments in the Siemens Joint Venture that
do not exceed, during any fiscal quarterly period, an amount equal to 9% of
the net sales of the Company and its consolidated subsidiaries for the
immediately preceding fiscal quarterly period determined in accordance with
GAAP.
(i) Other Investments that do not exceed $10.0 million in the aggregate
at any time outstanding.
(j) Any acquisition of assets, Capital Stock or other securities to the
extent made in exchange for the issuance of Capital Stock (other than
Disqualified Stock) of the Company.
(k) Investments in securities of trade creditors or customers received
pursuant to any plan or reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers.
(l) Investments by the Company or a Restricted Subsidiary in a
Receivables Subsidiary.
"Person" means any individual, corporation, limited or general partnership,
joint venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred or preference stock, whether now outstanding or issued
after the Closing Date, and including, without limitation, all classes and
series of preferred or preference stock of such Person.
"Qualified Equity Interest" means any Qualified Stock and all warrants,
options or other rights to acquire Qualified Stock (but excluding any debt
security that is convertible into or exchangeable for Capital Stock).
"Qualified Stock" of any Person means any and all Capital Stock of such
Person, other than Disqualified Stock.
"Receivables and Related Assets" means accounts receivable, instruments,
chattel paper, obligations, general intangibles and other similar assets,
including interests in merchandise or goods, the sale or lease of which give
rise to the foregoing, related contractual rights, guarantees, insurance
proceeds, collections, other related assets and proceeds of all of the
foregoing.
"Receivables Program" means, with respect to any Person, any accounts
receivable securitization program pursuant to which such Person, directly or
indirectly, pledges, sells or otherwise transfers or encumbers its accounts
receivable, including to a trust, limited liability company, special purpose
entity or other similar entity.
"Receivables Subsidiary" means a Wholly Owned Restricted Subsidiary of the
Company (i) created for the purpose of financing receivables created in the
ordinary course of business of the Company and its Restricted Subsidiaries and
(ii) the sole assets of which consist of Receivables and Related Assets of the
Company and its Restricted Subsidiaries and related Permitted Investments.
"Restricted Subsidiary" means any Subsidiary other than an Unrestricted
Subsidiary and includes BTI Capital Trust.
"Senior Indebtedness" means the principal of and premium, if any, and
interest on (including interest accruing after the filing of a petition
initiating any proceeding pursuant to any bankruptcy law, whether or not
allowed) and other amounts due on or in connection with any Indebtedness of
the Company (other than the Notes or Pari Passu Indebtedness), whether
outstanding on the date of the Indenture or thereafter incurred, unless, in
the case of any particular Indebtedness, the instrument creating or evidencing
the same or pursuant to which the same is outstanding expressly provides that
such Indebtedness will be subordinate in right of payment to any Indebtedness
or other general unsecured obligations of the Company. Without limiting the
generality of the foregoing, "Senior Indebtedness" includes the principal of
and premium, if any, and interest (including interest accruing after the
occurrence of an event of default or after the filing of a petition initiating
any proceeding
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pursuant to any bankruptcy law, whether or not allowed) on all obligations of
every nature of the Company from time to time owed to the Banks under the New
Credit Facility, provided, however, that any Indebtedness under any
refinancing, refunding or replacement of the New Credit Facility will not
constitute Senior Indebtedness to the extent that the Indebtedness thereunder
is by its express terms subordinate to any other Indebtedness of the Company.
Notwithstanding the foregoing, "Senior Indebtedness" will not include (a)
Indebtedness evidenced by the Notes, (b) Indebtedness that is expressly
subordinate or junior in right of payment to any Indebtedness of the Company,
(c) Indebtedness that, when incurred and without respect to any election under
Section 1111(b) of Title 11, United States Code, is without recourse to the
Company, (d) Indebtedness that is represented by Disqualified Stock, (e)
Indebtedness for goods, materials or services purchased in the ordinary course
of business or Indebtedness consisting of trade payables or other current
liabilities (other than Indebtedness in respect of any services rendered by or
purchased from, or current liabilities owing to, banks or financial
institutions or the current portion of any long-term Indebtedness that would
constitute Senior Indebtedness but for the operation of this clause (e)), (f)
Indebtedness of or amounts owed by the Company for compensation to employees
or for services rendered to the Company, (g) any liability for foreign,
federal, state, local or other taxes owed or owing by the Company, (h)
Indebtedness of the Company to a Subsidiary of the Company or any other
Affiliate of the Company or any of such Affiliate's Subsidiaries, (i) that
portion of any Indebtedness that, at the time of the incurrence, is incurred
by the Company in violation of the Indenture and (j) amounts owing under
leases (other than Capital Lease Obligations).
"Significant Subsidiary" means any Restricted Subsidiary of the Company that
would be a "Significant Subsidiary" of the Company within the meaning of Rule
1-02 under Regulation S-K promulgated by the Commission as such Rule is in
effect on the date of the Indenture.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is
due and payable and, when used with respect to any other Indebtedness, means
the date specified in the instrument governing such Indebtedness as the fixed
date on which the principal of such Indebtedness or any installment of
interest thereon is due and payable, and will not, in either case, include any
contingent obligations to repay, redeem or repurchase any such interest or
principal prior to the date originally scheduled for the payment thereof.
"Subordinated Indebtedness" means Indebtedness of the Company or a
Subsidiary Guarantor that is subordinated in right of payment to the Notes or
the Subsidiary Guarantee issued by such Subsidiary Guarantor, as the case may
be.
"Subsidiary" means any Person a majority of the equity ownership or Voting
Stock of which is at the time owned, directly or indirectly, by the Company
and/or one or more Subsidiaries of the Company.
"Subsidiary Guarantee" means a guarantee of the Notes by a Restricted
Subsidiary in accordance with the provisions of the Indenture.
"Subsidiary Guarantor" means any Restricted Subsidiary that issues a
Subsidiary Guarantee.
"Unrestricted Subsidiary" means (a) any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary in accordance with the
covenant described under the caption "--Certain Covenants--Unrestricted
Subsidiaries" and (b) any Subsidiary of an Unrestricted Subsidiary.
"Voting Stock" means any class or classes of Capital Stock pursuant to which
the holders thereof have the general voting power under ordinary circumstances
to elect at least a majority of the board of directors, managers or trustees
of any Person (irrespective of whether or not, at the time, stock of any other
class or classes has, or might have, voting power by reason of the happening
of any contingency).
"Weighted Average Life" means, as of the date of determination with respect
to any Indebtedness or Disqualified Stock, the quotient obtained by dividing
(a) the sum of the products of (i) the number of years from
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the date of determination to the date or dates of each successive scheduled
principal or liquidation value payment of such Indebtedness or Disqualified
Stock, respectively, multiplied by (ii) the amount of each such principal or
liquidation value payment by (b) the sum of all such principal or liquidation
value payments.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary, all of
the outstanding Capital Stock (other than directors' qualifying shares or
shares of Foreign Restricted Subsidiaries required to be owned by foreign
nationals pursuant to applicable law) of which is owned, directly or
indirectly, by the Company.
EXCHANGE OFFER; REGISTRATION RIGHTS
In connection with the original issuance and sale of the Old Notes, the
Initial Purchasers and their assignees became entitled to the benefits of the
Registration Rights Agreement. Pursuant to the Registration Rights Agreement,
the Company agreed that it would, for the benefit of the holders of the Notes,
at the expense of the Company (i) file on or prior to the 60th calendar day
following the Closing Date the Registration Statement of which this Prospectus
forms a part (the "Exchange Offer Registration Statement") with the Commission
with respect to a registered offer to exchange the Old Notes for the New Notes
and (ii) use its best efforts to cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act on or prior to the
150th calendar day following the Closing Date and (iii) use its best efforts
to consummate the Exchange Offer on or prior to the 180th calendar day
following the Closing Date. Promptly after the Exchange Offer Registration
Statement is declared effective, the Company will offer the New Notes in
exchange for surrender of the Old Notes. The Company will keep the Exchange
Offer open for not less than 20 business days (or longer if required by
applicable law) after the date notice of the Exchange Offer is mailed to the
holders of the Notes. For each Old Note tendered to the Company pursuant to
the Exchange Offer and not validly withdrawn by the holder thereof, the holder
of such Old Note will receive a New Note having a principal amount equal to
the principal amount of such surrendered Note.
Based on existing interpretations of the Securities Act by the staff of the
Commission set forth in several no-action letters to third parties, and
subject to the immediately following sentence, the Company believes that the
New Notes may be offered for resale, resold and otherwise transferred by the
holders thereof without further compliance with the registration and
prospectus delivery provisions of the Securities Act. However, any purchaser
of Notes who is an "affiliate" of the Company or who intends to participate in
the Exchange Offer for the purpose of distributing the Exchange Notes (i) will
not be able to rely on the interpretation by the staff of the Commission set
forth in the above-mentioned no-action letters, (ii) will not be able to
tender its Old Notes in the Exchange Offer and (iii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or transfer of the Old Notes unless such sale or
transfer is made pursuant to an exemption from such requirements.
Each holder of the Old Notes who wishes to exchange such Old Notes for the
New Notes in the Exchange Offer will be required to represent that (i) it is
not an affiliate of the Company, (ii) any New Notes to be received by it will
be acquired in the ordinary course of its business and (iii) at the time of
commencement of the Exchange Offer, it has no arrangement with any person to
participate in the distribution (within the meaning of the Securities Act) of
the New Notes. In addition, in connection with any resales of New Notes, any
broker-dealer (a "Participating Broker") who acquired the New Notes for its
own account as a result of market-making activities or other trading
activities must deliver a prospectus meeting the requirements of the
Securities Act. The Commission has taken the position that the Participating
Brokers may fulfill their prospectus delivery requirements with respect to the
New Notes (other than a resale of an unsold allotment from the original sale
of the Notes) with the prospectus contained in the Exchange Offer Registration
Statement. Under the Registration Rights Agreement, the Company is required to
allow the Participating Brokers to use the prospectus contained in the
Exchange Offer Registration Statement in connection with the resale of such
New Notes.
In the event that any changes in law or applicable interpretations of the
staff of the Commission do not permit the Company to effect the Exchange
Offer, or if for any reason the Exchange Offer is not consummated
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within 180 calendar days of the Closing Date or in certain other
circumstances, the Company will, at its expense, (i) as promptly as
practicable, and in any event on or prior to 60 calendar days after such
filing obligation arises, file with the Commission a shelf registration
statement (the "Shelf Registration Statement") covering resales of the Old
Notes or the New Notes, as the case may be, (ii) use its best efforts to cause
the Shelf Registration Statement to be declared effective under the Securities
Act on or prior to 60 calendar days after such filing occurs and (iii) keep
effective the Shelf Registration Statement until two years after its effective
date (or such shorter period that will terminate when all the Notes covered
thereby have been sold pursuant thereto or in certain other circumstances),
subject to certain exceptions. The Company will, in the event of the filing of
a Shelf Registration Statement, provide to each holder of the Notes covered by
the Shelf Registration Statement copies of the prospectus that is a part of
the Shelf Registration Statement, notify each such holder when the Shelf
Registration Statement for the Notes has become effective and take certain
other actions as are required to permit unrestricted resales of the Old Notes
or the New Notes, as the case may be. A holder of selling such Old Notes or
New Notes pursuant to the Shelf Registration Statement generally will be
required to be named as a selling security holder in the related prospectus
and to deliver a prospectus to the purchaser, will be subject to certain of
the civil liability provisions under the Securities Act in connection with
such sales and will be bound by the provisions of the Registration Rights
Agreement that are applicable to such holder (including certain
indemnification obligations). In addition, each holder of the Notes will be
required to deliver certain information to be used in connection with the
Shelf Registration Statement in order to have its Notes included in the Shelf
Registration Statement.
In the event that either (a) the Exchange Offer Registration Statement is
not filed with the Commission on or prior to the 60th calendar day following
the Closing Date or (b) the Exchange Offer is not consummated or a Shelf
Registration Statement is not declared effective on or prior to the 180th
calendar day following the Closing Date, the interest rate borne by the Notes
will be increased by 0.25% per annum for the first 90 days following the 60-
day period referred to in clause (a) above or the 180-day period referred to
in clause (b) above. Such interest will increase by an additional 0.25% per
annum at the beginning of each subsequent 90-day period in the case of clause
(a) or clause (b) above; provided, however, that in no event will the interest
rate borne by the Notes be increased by more than 1.5%. Upon the filing of the
Exchange Offer Registration Statement, the consummation of the Exchange Offer
or the effectiveness of a Shelf Registration Statement, as the case may be,
the interest rate borne by the Notes from the date of such filing,
consummation or effectiveness, as the case may be, will be reduced to the
original interest rate set forth on the cover of this Prospectus; provided,
however, that if after any such reduction in interest rate, a different event
specified in clause (a) or (b) above occurs, the interest rate may again be
increased pursuant to the foregoing provisions.
The Registration Statement of which this Prospectus forms a part constitutes
the Exchange Offer Registration Statement under the Registration Rights
Agreement. The Company filed the Registration Statement on June 24, 1998.
Because the Exchange Offer had not been consummated or a Shelf Registration
declared effective on or prior to the date 180 days after the Closing Date as
required under the Registration Rights Agreement, the interest rate borne by
the Old Notes increased in accordance with the provisions of the Registration
Rights Agreement. The Exchange Offer was not completed on or prior to such
date because the Commission was reviewing certain periodic reports previously
filed by the Company. The Commission has now completed its review and the
interest rate borne by the Old Notes (and new Notes, as the case may be) will
be reduced to the original interest rate (9 1/4%) on the Expiration Date.
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DESCRIPTION OF NEW CREDIT FACILITY
The following is a summary of the material terms and conditions of the New
Credit Facility, which has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. This summary does not purport
to be a complete description of the New Credit Facility and is subject to its
detailed provisions and various documents entered into in connection with the
New Credit Facility.
The New Credit Facility is available to the Company and, to the extent
approved by NationsBank, as administrative agent for the New Credit Facility,
certain foreign subsidiaries of the Company. Borrowings under the New Credit
Facility were used to repay a portion of the amounts outstanding under the
Bridge Credit Facility, to pay fees and expenses relating to the Refinancing
of the Bridge Credit Facility, and for working capital and general corporate
purposes.
The New Credit Facility consists of (1) a revolving credit facility of up to
$150.0 million (the "Revolving Credit Facility"), (2) a term loan in the
amount of $325.0 million (or other amount, as provided below) ("Term Loan A")
and (3) a term loan in the amount of $200.0 million (or other amount, as
provided below) ("Term Loan B", and together with Term Loan A, the "Term
Loans"). The Revolving Credit Facility includes (a) a $25.0 million sublimit
for the issuance of standby letters of credit, (b) a $75.0 million sublimit
for foreign currency denominated borrowings and (c) a $20.0 million sublimit
for swing line loans to be provided by NationsBank ("Swing Line Loans"). All
amounts outstanding under the Revolving Credit Facility are payable on the
sixth anniversary of the closing of the New Credit Facility. Term Loan A is
payable in quarterly installments, subject to annual amortization, based on a
principal amount equal to $325.0 million, ranging from $27.5 million for the
fiscal 1999 to $97.5 million for the fiscal 2004. Term Loan B is payable in
annual installments, subject to annual amortization, based on a principal
amount equal to $200.0 million, ranging from $1.3 million for the fiscal 1999
to $96.3 million for the fiscal 2006.
Interest accrues on the loans made under the Revolving Credit Facility
(other than Swing Line Loans) and on Term Loan A at either LIBOR (adjusted for
any reserves) plus a specified margin ranging from 1.125% to 2.125%, or the
base rate, which is the higher of NationsBank's prime rate and the federal
funds rate plus 0.50% (the "Base Rate"), plus a specified margin ranging from
0.125% to 1.125%, at the Company's option. Interest accrues on Term Loan B at
either LIBOR (adjusted for any reserves) plus a specified margin ranging from
1.375% to 2.375%, or the Base Rate plus a specified margin ranging from 0.625%
to 1.375%, at the Company's option. Swing Line Loans bear interest at the Base
Rate plus a specified margin ranging from 0.125% to 1.125%. The applicable
margins are determined by reference to a leverage ratio of the Company and its
subsidiaries. The post-default rate on outstanding loans is 2.000% above the
otherwise applicable rate of interest.
The aggregate amount outstanding under the New Credit Facility will be
prepaid by amounts equal to the net proceeds, or a specified portion thereof,
from certain indebtedness and equity issuances and specified asset sales by
the Company and its subsidiaries, and by a specified percentage of cash flow
in excess of certain expenditures, costs and payments. The Company may at its
option reduce the amount available under the New Credit Facility to the extent
such amounts are unused or prepaid in certain minimum amounts, provided that
any holder of Term Loan B shall have, under certain circumstances, the right
to refuse to permit the Company to optionally prepay all or any portion of
Term Loan B.
In connection with the Closing of the New Credit Facility, the Company paid
certain administrative and arranging fees to NationsBank. In addition, the
Company paid certain annual administration fees to NationsBank for its own
account as well as a commitment fee and certain fees relating to letters of
credit to NationsBank for its own account and the account of the other lenders
under the New Credit Facility.
The New Credit Facility is secured by a security interest in substantially
all of the real and personal property, tangible and intangible, of the Company
and its domestic subsidiaries as well as a pledge of all of the stock of such
domestic subsidiaries, a pledge of not less than 65% of the voting stock and
all of the non-voting common stock of each direct foreign subsidiary of the
Company and each direct foreign subsidiary of each
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domestic subsidiary of the Company, and a pledge of all of the capital stock
of any subsidiary of a subsidiary of the Company that is a borrower under the
New Credit Facility. The security interest, other than the pledge of stock,
will be released if the unsecured long-term indebtedness of the Company has
received certain minimum ratings or the leverage ratio of the Company and its
subsidiaries has decreased below a certain threshold. The New Credit Facility
is guaranteed by all of the domestic subsidiaries of the Company.
The New Credit Facility contains a number of significant covenants that,
among other things, restrict the ability of the Company to dispose of assets,
incur additional indebtedness, prepay other indebtedness, pay dividends,
repurchase or redeem capital stock, enter into certain investments or create
new subsidiaries, enter into sale and lease-back transactions, make certain
acquisitions, engage in mergers or consolidations, create liens, make capital
expenditures, or engage in certain transactions with affiliates, and that
otherwise restrict corporate and business activities. In addition, under the
New Credit Facility, the Company is required to comply with specified
financial ratios and tests, including minimum net worth test, a fixed charge
coverage ratio, an interest coverage ratio and a leverage ratio.
The Company has obtained the First Waiver and the Second Waiver relating to
the net worth covenant and the existing event of default under the New Credit
Facility that are effective through March 30, 1999. Having obtained the First
Waiver and the Second Waiver, the Company is not currently in violation of
these provisions or any other financial covenants contained in the New Credit
Facility but anticipates that, to the extent such covenants are not amended,
it will be in violation of the two provisions presently waived as of March 31,
1999 and certain other financial covenants by June 30, 1999. The Company is in
the process of negotiating an amendment to the New Credit Facility relating to
the net worth covenant, the existing event of default and certain other
financial covenants. There can be no assurance that the Company will be able
to obtain the necessary amendments. See "Risk Factors--Waiver of Potential
Defaults Under the New Credit Facility; Need to Amend New Credit Facility."
DESCRIPTION OF PREFERRED SECURITIES
On November 25, 1997, the Company sold $257.7 million of the Convertible
Debentures to BTI Capital Trust which, concurrently therewith, sold $250.0
million aggregate liquidation amount of Preferred Securities (which are
guaranteed by the Company) in a private transaction under Rule 144A under the
Securities Act. The Preferred Securities represent preferred undivided
beneficial interests in the assets of BTI Capital Trust (the "Trust"), which
consist solely of the Convertible Debentures. The Company owns, directly or
indirectly, all the common securities (the "Common Securities" and, together
with the Preferred Securities, the "Trust Securities") representing individual
undivided beneficial interests in the assets of the Trust.
Holders of the Preferred Securities are entitled to receive cumulative cash
distributions at an annual rate of 6.5% of the liquidation amount of $50 per
Preferred Security, accruing from, and including, November 25, 1997, the date
of issuance of the Preferred Securities, and payable quarterly in arrears on
February 15, May 15, August 15 and November 15 of each year, commencing
February 15, 1998 (the "Distributions"). Each Preferred Security is
convertible on or after January 25, 1998, at the option of the holder into
shares of Common Stock, at the rate of 2.1973 shares of Common Stock for each
Preferred Security (equivalent to a conversion price of $22.755 per share of
Common Stock), subject to adjustment in certain circumstances.
The payment of Distributions out of moneys held by the Trust and payments on
liquidation of the Trust or the redemption of Preferred Securities are
guaranteed by the Company (the "Preferred Securities Guarantee"). The
Preferred Securities Guarantee covers payments of Distributions and other
payments on the Preferred Securities only if and to the extent that the
Company has made a payment of principal or other payments on the Convertible
Debentures held by the Trust as its sole assets. The obligations of the
Company under the Preferred Securities Guarantee rank (i) subordinate and
junior in right of payment to all other liabilities of the Company except any
liabilities that may be pari passu expressly by their terms, (ii) pari passu
with the most senior preferred or preference stock, if any, issued from time
to time by the Company, and with any guarantee now or hereafter entered into
by the Company and (iii) senior to the Common Stock.
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The Convertible Debentures are redeemable by the Company, in whole or in
part, from time to time, on or after November 25, 2000, or at any time, in
whole or in part, in certain circumstances upon the occurrence of certain
specified tax events. If the Company redeems any Convertible Debentures, the
proceeds from such redemption will be applied to redeem a like amount of Trust
Securities. The Preferred Securities will be redeemed upon maturity of the
Convertible Debentures on November 15, 2027. Upon the repayment of the
Convertible Debentures, the proceeds from such repayment will be applied to
redeem a like amount of Trust Securities. In addition, upon the occurrence of
certain special events arising from a change in laws or a change in legal
interpretation regarding tax or investment company matters, unless the
Convertible Debentures are redeemed, the Trust shall be dissolved, with the
result that the Convertible Debentures will be distributed to the holders of
the Trust Securities, on a pro rata basis, in lieu of any cash distribution.
In the event of the involuntary or voluntary dissolution, winding up or
termination of the Trust, after satisfaction of liabilities to creditors of
the Trust as required by applicable law, the holders of the Preferred
Securities will be entitled to receive for each Preferred Security, a
liquidation amount of $50 plus accrued and unpaid Distributions thereon to the
date of payment, unless, in connection with such dissolution, winding-up or
termination of the Trust, the Convertible Debentures are distributed to the
holders of the Preferred Securities.
The Company has the right to defer payments of interest on the Convertible
Debentures by extending the interest payment period on the Convertible
Debentures at any time (so long as no event of default has occurred and is
continuing under the indenture applicable to the Convertible Debentures) for
up to 20 consecutive quarters (each, an "Extension Period"); provided that no
such Extension Period may extend beyond the maturity date of the Convertible
Debentures. If interest payments are so deferred, Distributions on the
Preferred Securities will also be deferred. During any Extension Period,
Distributions on the Preferred Securities will continue to accrue with
interest thereon (to the extent permitted by applicable law) at an annual rate
of 6.50% per annum, compounded quarterly. Additionally, during any Extension
Period, holders of Preferred Securities will be required to include deferred
interest income in the form of original issue discount ("OID") in their gross
income for United States federal income tax purposes in advance of receipt of
cash distributions with respect to such deferred interest payments. The
Company has no current intention of exercising its right to defer payments of
interest by extending the interest payment period on the Convertible
Debentures.
Generally, the holders of the Preferred Securities will not have any voting
rights.
On March 19, 1998, the Company filed a shelf registration statement (the
"Preferred Securities Shelf Registration Statement") to cover resales of the
Preferred Securities, the Convertible Debentures and the Common Stock issuable
upon conversion of the Preferred Securities and the Convertible Debentures.
The Preferred Securities Shelf Registration Statement has been declared
effective. The Company has agreed to use its best efforts to maintain the
effectiveness of the Preferred Securities Shelf Registration Statement until
November 19, 1999 except that it will be permitted to suspend the use of the
Preferred Securities Shelf Registration Statement during certain periods under
certain circumstances.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is based upon current provisions of the Internal
Revenue Code of 1986, as amended, applicable Treasury regulations, proposed
Treasury regulations, judicial authority and administrative rulings and
practice. There can be no complete assurance that the Internal Revenue Service
(the "Service") will agree with the conclusions stated herein, and no ruling
from the Service has been or will be sought. Legislative, judicial or
administrative changes or interpretations may be forthcoming that could alter
or modify the statements set forth herein. Any such changes or interpretations
may or may not be retroactive and could affect the tax consequences to
holders. Certain holders (including insurance companies, tax-exempt
organizations, financial institutions, broker-dealers, foreign corporations
and persons who are not citizens or residents of the United States) may be
subject to special rules not discussed below. The Company recommends that each
holder consult such holder's own tax advisor as to the particular consequences
of exchanging such holder's Old Notes for New Notes, including the
applicability and effect of any state, local or foreign tax laws.
The exchange of Old Notes for New Notes pursuant to the Exchange Offer will
not be treated as an "exchange" for federal income tax purposes because the
New Notes do not differ materially in kind or extent from the Old Notes.
Accordingly, (i) holders will not recognize taxable gain or loss upon the
receipt of New Notes in exchange for Old Notes in the Exchange Offer, (ii) the
holding period for a New Note received in the Exchange Offer will include the
holding period of the Old Note surrendered in exchange therefor, and (iii) the
adjusted tax basis of a New Note immediately after the exchange will be the
same as the adjusted tax basis of the Old Note surrendered in exchange
therefor.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Notes where such
Notes were acquired as a result of market-making activities or other trading
activities. The Company has agreed that, starting on the Expiration Date, it
will make this Prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale. In addition, until
such date, all dealers effecting transactions in the New Notes may be required
to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from
any such broker-dealer and/or the purchasers of any such New Notes. Any
broker-dealer that resells New Notes that were received by it for its own
account pursuant to the Exchange Offer may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
the New Notes and any commissions or concessions received by any such persons
may be deemed to be underwriting compensation under the Securities Act. The
Letter of Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such
documents in a Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer (including the expenses of one counsel
for all of the holders of Old Notes) other than commissions or concessions of
any brokers or dealers and transfer taxes and will indemnify the holders of
the Old Notes (including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.
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LEGAL MATTERS
The legality of the New Notes offered hereby will be passed upon for the
Company by King & Spalding, New York, New York.
EXPERTS
The consolidated financial statements of Breed Technologies, Inc. and
subsidiaries at June 30, 1998 and 1997 for each of the three years in the
period ended June 30, 1998, appearing in the Company's Annual Report on Form
10-K/A for the year ended June 30, 1998 and incorporated by reference
elsewhere herein have been audited by Ernst & Young LLP, independent certified
public accountants, as set forth in their reports thereon incorporated by
reference herein which, as to 1997, is based in part on the report of KPMG
S.p.A., independent auditors. The financial statements referred to above are
incorporated by reference herein in reliance upon such reports given upon the
authority of such firms as experts in accounting and auditing.
The combined financial statements of Safety Restraint Systems, a division of
AlliedSignal Inc., as of December 31, 1995 and 1996 and for each of the three
years in the period ended December 31, 1996 incorporated by reference in this
Prospectus from the Company's Current Report on Form 8-K/A filed on January
13, 1998 have been so incorporated in reliance on the report (which contains
an explanatory paragraph relating to Safety Restraint Systems' transactions
and relationships with AlliedSignal Inc.) of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
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No person is authorized in connection with the exchange offer made hereby to
give any information or to make any representation not contained or incorpo-
rated by reference in this Prospectus or the accompanying Letter of Transmit-
tal, and, if given or made, such information or representation must not be re-
lied upon as having been authorized by the Company. Neither this Prospectus
nor the accompanying Letter of Transmittal nor all of them together constitute
an offer to sell or a solicitation of an offer to buy any securities offered
hereby to any person in any jurisdiction in which it is unlawful to make such
offer or solicitation to such person. Neither the delivery of this Prospectus
nor the accompanying Letter of Transmittal nor all of them together, nor any
sale made hereunder shall under any circumstances imply that the information
herein is correct as of any date subsequent to the date hereof.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Available Information...................................................... 3
Incorporation by Reference................................................. 3
Prospectus Summary......................................................... 5
Risk Factors............................................................... 13
The Exchange Offer......................................................... 21
Use of Proceeds............................................................ 29
Description of the Notes................................................... 30
Exchange Offer; Registration Rights........................................ 58
Description of New Credit Facility......................................... 60
Description of Preferred Securities........................................ 61
Certain United States Federal Income Tax Considerations.................... 63
Plan of Distribution....................................................... 63
Legal Matters.............................................................. 64
Experts.................................................................... 64
</TABLE>
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[BREED LOGO]
BREED TECHNOLOGIES, INC.
Offer to Exchange
all of its Outstanding
9 1/4% Senior Subordinated Notes
due 2008
For
9 1/4% Senior Subordinated Notes
due 2008
That Have Been Registered
Under the
Securities Act of 1933
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Prospectus
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