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Registration No. 333-40481
As filed with the Securities and Exchange Commission on December 18, 1997
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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The DII Group, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 3679 84-1224426
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation Industrial Identification No.)
organization) Classification Code Number)
6273 Monarch Park Place, Thomas J. Smach
Suite 200 Chief Financial Officer
Niwot, CO 80503 6273 Monarch Park Place,
(303) 652-2221 Suite 200
(Address, including zip Niwot, CO 80503
code, and telephone (303) 652-2221
number, including area (Name, address,
code, of including zip code, and
Registrant's principal telephone number,
executive offices) including area code,
of agent for service)
----------------------
Copies to:
Jeffrey N. Ostrager, Esq.
Curtis, Mallet-Prevost, Colt &
Mosle
101 Park Avenue
New York, New York 10178-0061
(212) 696-6000
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Approximate date of commencement of proposed sale
of the securities to the public:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. |_|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|_____________________
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|____________________
----------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay the effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
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PROSPECTUS
THE DII GROUP, INC.
OFFER TO EXCHANGE
$1,000 in principal amount of
its 8.50% Senior Subordinated Notes due 2007
which have been registered under the Securities Act
for each $1,000 in principal amount of its outstanding
8.50% Senior Subordinated Notes due 2007
of which $150,000,000 principal amount is outstanding
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON JANUARY 22, 1998, UNLESS EXTENDED
The DII Group, Inc. (the "DII Group" or the "Company") hereby offers, upon the
terms and subject to the conditions set forth in this Prospectus (the
"Prospectus") and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange $1,000 in principal amount of its 8.50% Senior
Subordinated Notes due 2007 (the "New Notes"), which exchange has been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to the Exchange Offer Registration Statement (as defined herein) of
which this Prospectus constitutes a part, for each $1,000 in principal amount of
its outstanding 8.50% Senior Subordinated Notes due 2007 (the "Old Notes") (the
"Exchange Offer"). The New Notes and the Old Notes are sometimes collectively
referred to herein as the "Notes." See "Description of the Notes." As of the
date hereof, $150,000,000 aggregate principal amount of Old Notes are
outstanding. The Exchange Offer is being made pursuant to the terms of a
registration rights agreement dated September 16, 1997 (the "Registration Rights
Agreement") entered into among the Company and Salomon Brothers Inc, Donaldson,
Lufkin & Jenrette Securities Corporation and BT Alex. Brown Incorporated
(together, the "Initial Purchasers") pursuant to the terms of the Purchase
Agreement dated September 16, 1997, between the Company and the Initial
Purchasers (the "Purchase Agreement").
The Company will accept for exchange any and all Old Notes that are validly
tendered prior to 5:00 p.m., New York City time, on the date the Exchange Offer
expires, which will be Janaury 22, 1998, unless the Exchange Offer is 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. The Exchange Offer is
not conditioned upon any minimum principal amount of Old Notes being tendered
for exchange. However, the Exchange Offer is subject to the terms and provisions
of the Registration Rights Agreement. See "The Exchange Offer."
The New Notes will be obligations of the Company entitled to the benefits of the
indenture pursuant to which the Notes were issued (the "Indenture"). 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 issuance of the New Notes
will have been registered under the Securities Act and, therefore, the New Notes
will not bear legends restricting the transfer thereof and (ii) the holders of
New Notes will not be entitled to further registration rights under the
Registration Rights Agreement and rights under certain circumstances to Special
Interest (as defined), which rights will be satisfied or will terminate when the
Exchange Offer is consummated. See "The Exchange Offer." The New Notes are being
offered in order to satisfy certain obligations of the Company under the
Registration Rights Agreement. The New Notes evidence the same debt as the Old
Notes (which they replace). In addition, the New Notes and the Old Notes will be
treated as one series of securities under the Indenture.
See "Risk Factors" beginning on page 15 for a discussion of certain factors that
should be considered by holders who tender their Old Notes in the Exchange
Offer.
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 December 18, 1997.
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The Notes will mature on September 15, 2007. Interest on the Notes is
payable semiannually on March 15 and September 15 of each year, beginning on
March 15, 1998, to the registered holders of the Notes at the close of business
on the preceding March 1 or September 1, as the case may. Each New Note will
bear interest at a rate of 8.50% per annum from the most recent interest payment
date to which interest has been paid on the Old Note surrendered in exchange
therefor or, if no interest has been paid on such Old Note, from September 19,
1997. See "Description of the Notes--General."
The Notes will be redeemable, in whole or in part, at the option of the
Company, at any time on or after September 15, 2002, at the redemption prices
set forth herein, plus accrued and unpaid interest, if any, to the date of
redemption. In addition, at any time and from time to time prior to September
15, 2000, the Company may redeem in the aggregate up to 35% of the original
principal amount of the Notes with the proceeds of one or more Public Equity
Offerings (as defined), at a redemption price of 108.500% of the principal
amount to be redeemed, plus accrued and unpaid interest, if any, to the
redemption date, provided that at least 65% of the original principal amount of
the Notes remains outstanding after each such redemption. Upon a Change of
Control (as defined), each holder of Notes will have the right, subject to
certain restrictions and conditions, to require the Company to repurchase all or
any part of such holder's Notes at a purchase price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of purchase. See "Description of the Notes."
The Notes will be unsecured obligations of the Company, subordinate in
right of payment to all existing and future Senior Debt (as defined) of the
Company. The Notes will rank pari passu with any future Senior Subordinated Debt
(as defined) and senior to all existing and future junior subordinated debt of
the Company. The Notes will be structurally subordinated to all existing and
future debt and other liabilities of the Company's subsidiaries. As of September
28, 1997, the Company had outstanding approximately $14.7 million of Senior
Debt, $150.0 million of Senior Subordinated Debt and $86.25 million of junior
subordinated debt, and the Company's subsidiaries had outstanding approximately
$147.3 million of debt and other liabilities (excluding debt included within the
definition of Senior Debt, debt between subsidiaries and debt owed by any
subsidiary to the Company). The Indenture permits the Company and its
subsidiaries to incur significant amounts of additional debt and other
liabilities, including Senior Debt, Senior Subordinated Debt and secured debt.
See "Capitalization," "Description of Certain Existing Debt" and "Description of
the Notes."
The Company is making the Exchange Offer in reliance on the position of
the staff of the Securities and Exchange Commission (the "Commission") as set
forth in certain no-action letters addressed to other parties in other
transactions. However, the Company has not sought its own no-action letter and
there can be no assurance that the staff of the Commission would make a similar
determination with respect to the Exchange Offer as in such other circumstances.
Under existing Commission interpretations, the New Notes would be freely
transferable by holders of the Old Notes other than affiliates of the Company
after the Exchange Offer without further registration under the Securities Act
if the holder of the New Notes represents that it is acquiring the New Notes in
the ordinary course of its business, that it has no arrangement or understanding
with any person to participate in the distribution of the New Notes and that it
is not an affiliate of the Company, as such terms are interpreted by the
Commission, provided that broker-dealers receiving New Notes in the Exchange
Offer (each an "Exchanging Dealer") will have a prospectus delivery requirement
with respect to resales of such Exchange Notes. Any holder who participates in
the Exchange Offer for the purpose of participating in a distribution of the New
Notes may not rely on the position of the staff of the Commission as set forth
in these no-action letters and would have to 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. A secondary resale
transaction in the United States by a holder who is using the Exchange Offer to
participate in the distribution of New Notes must be covered by a registration
statement containing the selling security holder information required by Item
507 of Regulation S-K of the Securities Act.
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. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to
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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
on the 180th day 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."
Holders of Old Notes not tendered and accepted in the Exchange Offer
will continue to hold such Old Notes and will be entitled to all the rights
and benefits and will be subject to the limitations applicable thereto under
the Indenture and with respect to transfer under the Securities Act. See
"The Exchange Offer."
There has not previously been any public market for the Old Notes or the
New Notes. The Company presently does not intend to apply for listing of the New
Notes on any securities exchange or to seek approval for quotation through any
automated quotation system. The Old Notes are currently eligible for trading in
The Portal Market of the Nasdaq Stock Market, Inc. However, there can be no
assurance that an active public market for the New Notes will develop. The
Company has been advised by the Initial Purchasers that, following completion of
the Exchange Offer, they currently intend to make a market in the New Notes;
however, the Initial Purchasers are not obligated to do so and any market-making
activities with respect to the New Notes may be discontinued at any time without
notice. No assurance can be given as to the liquidity of the trading market for
the New Notes, or, in the case of Old Notes that are not exchanged, for the Old
Notes following the Exchange Offer or for Old Notes that are covered by a
registration statement relating to their resale. See "Risk Factors--Risk Factors
Relating to the Notes--Lack of Public Trading Market for the Notes; Volatility
of Notes."
This Prospectus, together with the Letter of Transmittal, is being sent
to all registered holders of Old Notes as of December 19, 1997. The Company
will not receive any proceeds from the Exchange Offer. No
underwriter is being used in connection with the Exchange Offer. See "Use of
Proceeds" and "Plan of Distribution."
This Prospectus incorporates documents by reference which are not
presented herein or delivered herewith. These documents are available upon
request from The DII Group, Inc., 6273 Monarch Park Place, Suite 200, Niwot,
Colorado 80503, Investor Relations Department, telephone number (303) 652-2221.
See "Information Incorporated by Reference." In order to ensure timely delivery
of the documents, any request should be made by five business days prior to the
Expiration Date.
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TABLE OF CONTENTS
Page
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Available Information...........................5
Information Incorporated by Reference..........5
Prospectus Summary..............................7
Risk Factors...................................15
Use of Proceeds................................20
Capitalization.................................21
Selected Consolidated Financial Data...........22
The Exchange Offer.............................24
Business.......................................33
Certain Transactions and Relationships.........43
Description of Certain Existing Debt...........45
Description of the Notes.......................47
Certain Federal Income Tax Considerations .....75
Plan of Distribution...........................77
Legal Matters..................................78
Experts........................................78
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AVAILABLE INFORMATION
The Company is currently subject to the periodic reporting and
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and, in accordance therewith files reports, proxy and
information statements and other information with the Commission. Such reports,
proxy and information statements and other information may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's Regional Offices located at Seven World Trade Center, 13th Floor,
New York, New York 10048 and at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such materials also can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission also maintains a
website at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants (including the Company)
that file electronically with the Commission. Material filed by the Company may
also be inspected at the offices of the National Association of Securities
Dealers, Inc., Market Listing Section, 1735 K Street, N.W., Washington, D.C.
20006. The Company has agreed that, whether or not it is subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, for so long
as any of the Notes remains outstanding, it will file with the Commission
(unless the Commission does not permit such filing) and provide to holders of
the Notes and the Trustee the annual reports and the information, documents and
reports that are specified in Sections 13 and 15(d) of the Exchange Act and
applicable to a U.S. corporation subject to such Sections.
The Company has filed with the Commission a Registration Statement on Form
S-4 (together with all amendments, exhibits, schedules and supplements thereto,
the "Exchange Offer Registration Statement") under the Securities Act with
respect to the New Notes offered hereby. This Prospectus, which forms a part of
the Exchange Offer Registration Statement, does not contain all the information
set forth in the Exchange Offer Registration Statement, certain parts of which
have been omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the New
Notes, reference is made to the Exchange Offer Registration Statement.
Statements contained in this Prospectus as to the contents of certain documents
are not necessarily complete, in each instance reference is made to the copy of
the document filed as an exhibit to the Exchange Offer Registration Statement,
and each such statement shall be deemed qualified in its entirety by such
reference. The Exchange Offer Registration Statement (and the exhibits and
schedules thereto) can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549; and at the Commission's regional offices at Suite 1400,
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661-2511, and
Seven World Trade Center, 13th Floor, New York, New York 10048. Copies of such
material can also be obtained from the Commission at prescribed rates through
its Public Reference Section at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission (File No.
0-21374) pursuant to the Exchange Act are incorporated by reference in this
Prospectus:
1. The Company's Proxy Statement for its 1997 Annual Meeting of
Stockholders, dated April 7, 1997.
2. The Company's Annual Report on Form 10-K for the fiscal year ended
December 29, 1996.
3. The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 30, 1997, June 29, 1997 and September 28, 1997.
4. The Company's Current Reports on Form 8-K, dated August 29, 1997,
September 10, 1997, September 17, 1997 and December 9, 1997.
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In addition, all reports and other documents subsequently filed by the
Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date of this Prospectus and prior to the termination of the offering shall
be deemed to be incorporated by reference in this Prospectus from the date of
filing of such documents. Any statement contained in this Prospectus or in a
document incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed document that is also or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such 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,
including any beneficial owner of the Notes, upon the written or oral request of
such person, a copy of any or all of the documents that are incorporated herein
by reference (other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference into such documents or this Prospectus).
Requests for such documents should be directed to The DII Group, Inc., 6273
Monarch Park Place, Suite 200, Niwot, Colorado 80503, Investor Relations
Department, telephone number: (303) 652-2221.
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER MADE HEREBY
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS OR IN THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION NOT CONTAINED HEREIN MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY. THE EXCHANGE OFFER IS NOT BEING MADE
TO, NOR WILL THE COMPANY ACCEPT SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD
SECURITIES IN ANY JURISDICTION IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE
THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY EXCHANGE MADE
PURSUANT HERETO SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION SET FORTH HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Company's Condensed Consolidated Financial Statements and
the notes thereto and Consolidated Financial Statements and the notes thereto
included in or incorporated by reference in this Prospectus. Prospective
investors should carefully consider the factors set forth under the caption
"Risk Factors." Unless the context otherwise requires, references in this
Prospectus to the DII Group or the Company are to the DII Group and its
consolidated subsidiaries. On August 22, 1996, the Company changed its fiscal
year end from December 31 to the Sunday nearest to December 31, beginning with
the fiscal year ended December 29, 1996. Accordingly, the Company's Consolidated
Financial Statements incorporated by reference in this Prospectus are presented
for fiscal years ended December 29, 1996 and December 31 for years prior to
1996, and for the nine-month periods ended September 28, 1997 and September 29,
1996. The merger on August 22, 1996 of Orbit Semiconductor, Inc. ("Orbit") with
a wholly-owned subsidiary of the Company (the "Orbit Merger") was accounted for
as a pooling-of-interests, and accordingly, the Company's Consolidated Financial
Statements for all prior periods have been restated to reflect the operations of
Orbit. Capitalized terms not defined in this "Prospectus Summary" have the
meanings given them elsewhere in this Prospectus.
The Company
Overview
The DII Group is a leading provider of electronics design and
manufacturing services which operates through a global network of independent
business units. These business units are uniquely linked to provide the
following related products and services to original equipment manufacturers
("OEMs"): design and manufacturing of custom microelectronics; design and
manufacturing of prototype printed circuit boards; high volume production of
printed circuit boards; assembly of printed circuit boards; process tooling;
machines tools; in-circuit and functional test hardware and software; and final
systems assembly. By offering comprehensive and integrated design and
manufacturing services, the Company believes that it is better able to develop
long-term relationships with its customers, expand into new markets and enhance
its profitability. Key customers of the Company include: 3 Com Corporation, EMC
Corporation, Hewlett-Packard Company ("Hewlett-Packard"), International Business
Machines Corporation ("IBM"), Lifescan, Inc. (a subsidiary of Johnson &
Johnson), Motorola, Inc., Silicon Graphics Inc., Symbios Logic, Inc., The
Foxboro Company and The Square D Company. For the 1996 fiscal year and the
nine-month period ended September 28, 1997, the Company had net sales of
approximately $458.9 million and $534.0 million, respectively, EBITDA of
approximately $56.7 million and $52.7 million, respectively, and net income of
approximately $10.0 million and $22.6 million, respectively.
As a result of the growing capital-intensive nature of the manufacturing
process for electronic products coupled with the greater need for more
sophisticated design and manufacturing processes, OEMs have turned increasingly
to outside providers of electronics design and manufacturing services.
Utilization of such outside providers enables the OEMs to focus their efforts on
research, development, and marketing. Other significant benefits of using
outsourcing services include: reduced time-to-market, reduced capital
investment, access to leading-edge manufacturing technology, design services,
improved inventory management and purchasing power, and access to worldwide
manufacturing sources. The Company believes that many OEMs now view outside
design and manufacturing service providers as strategic partners. According to a
leading industry source, the global contract electronics manufacturing ("CEM")
industry is forecasted to grow at a compounded annual rate of 27% through 1999,
resulting in total industry revenues of approximately $117.0 billion in 1999.
Approximately 65% and 60% of the Company's net sales were derived from its CEM
assembly and distribution operations for the nine-month period ended September
28, 1997 and the 1996 fiscal year, respectively.
The Company's principal executive offices are located at 6273 Monarch
Place, Suite 200, Niwot, Colorado 80503, and the Company's telephone number is
(303) 652-2221.
Strategy
The Company's strategy is to be the fastest and most comprehensive
provider of custom electronics design and manufacturing services, ranging from
microelectronics design and fabrication through the final assembly of finished
products for OEM customers. The Company seeks to establish "partnerships" with
its customers through involvement in the early stages of their product
development by providing comprehensive and integrated design and manufacturing
services. Key elements of the Company's strategy include:
Integrated business units: The Company's products and services are
delivered to customers through its network of business units. By offering
a broad range of integrated products and services that extends from custom
microelectronics design and production, through printed circuit board
("PCB") design and fabrication, to final systems assembly and in-circuit
and functional testing, the Company is able to secure more fully
integrated projects which provide opportunities to enhance volume and
profitability.
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Networked marketing strategies: The Company markets its products and
services to customers through its individual business units and through
linked marketing in order to provide fully integrated custom design and
manufacturing solutions to its customers. Through the integration of
design and manufacturing solutions offered by the Company's network of
business units, the Company provides customer specific products and
services to reduce customer time-to-market and decrease total
manufacturing costs.
Global presence: The Company offers design and manufacturing capabilities
in the three major electronics markets of the world (North America, Europe
and Asia). The Company currently maintains various design and
manufacturing facilities throughout the United States (New York, Rhode
Island, Florida, Illinois, Texas, Colorado, California and Minnesota); in
Puebla and Guadalajara, Mexico; Cork, Ireland; Essex, England; Singapore;
and Malacca, Malaysia. These regional facilities provide the size and
flexibility required to meet the needs of smaller customers and the global
reach required for larger customers. Acquisitions have played an important
role in the expansion of the Company's global presence, and the Company
expects to continue to pursue acquisitions in its efforts to expand its
global reach.
Customer relationships: The DII Group companies target customers in
fast-growing industry sectors that require complex outsourcing solutions
together with minimum time-to-market. This enhances the Company's ability
to realize higher margins on its products and services.
Technology and manufacturing leadership: The Company seeks to maintain
technological leadership in order to secure partnerships with customers in
the early stages of their product development and to support their design
and manufacturing requirements. In addition, the Company continues to
invest in high-technology equipment, enabling the DII Group companies to
accept increasingly complex orders which provides opportunities to enhance
volume and profitability.
Products and Services
The Company provides the following related products and services to
customers in the global electronics manufacturing industry:
Systems Assembly--The Company assembles complex electronic circuits and
provides final system configuration services on a high and low volume
contract basis. This product line accounted for 65% of the Company's net
sales for the nine-month period ended September 28, 1997 and 60%, 64% and
70% of the Company's net sales for the 1996, 1995 and 1994 fiscal years,
respectively.
Interconnect Technologies--The Company provides design and engineering
services for printed circuit assemblies and manufactures high density,
complex multilayer printed circuit boards on a quick-turn and high-volume
production basis. This product line accounted for 16% of the Company's net
sales for the nine-month period ended September 28, 1997, 16% and 14% of
the Company's net sales for the 1996 and 1995 fiscal years, respectively,
and less than 10% of the Company's net sales for the 1994 fiscal year.
Custom Microelectronics--The Company provides semiconductor design,
manufacturing and engineering support services to its OEM customers. The
Company provides cost-effective gate array conversion services,
mixed-signal design and production capabilities as well as
high-reliability manufacturing and quick-turn and low-volume manufacturing
services, utilizing a combination of its internal fabrication capabilities
and its external foundry suppliers, thereby using a "fab/fabless"
manufacturing approach. This product line accounted for 10% of the
Company's net sales for the nine-month period ended September 28, 1997 and
14%, 16% and 20% of the Company's net sales for the 1996, 1995 and 1994
fiscal years, respectively.
Process Technologies--The Company manufactures surface mount printed
circuit board solder cream stencils on a quick-turn basis; designs and
manufactures in-circuit and functional test software and hardware on a
quick-turn basis; manufactures depaneling systems that route individual
printed circuit boards from an assembled master panel in the final step of
the electronics assembly process; and manufactures automation solutions
for the transfer of bare printed circuit boards and assembled circuits
through the entire manufacturing process, including final box-build
assembly. This product line accounted for 10% of the Company's net sales
for the 1996 fiscal year and less than 10% of the Company's net sales for
the nine-month period ended September 28, 1997 and the 1995 and 1994
fiscal years.
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The Prior Offering
The outstanding $150.0 million principal amount of Old Notes were sold by
the Company to the Initial Purchasers on September 19, 1997, pursuant to the
Purchase Agreement. The Initial Purchasers subsequently resold the Old Notes in
reliance on Rule 144A under the Securities Act. The Company and the Initial
Purchasers also entered into the Registration Rights Agreement pursuant to which
the Company granted certain registration rights for the benefit of the holders
of the Old Notes. The Exchange Offer is intended to satisfy certain of the
Company's obligations under the Registration Rights Agreement with respect to
the Old Notes. See "The Exchange Offer."
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The Exchange Offer
The Exchange Offer............ Up to $150.0 million aggregate principal amount
of New Notes are being offered in exchange for
a like aggregate principal amount of Old Notes.
Old Notes may be tendered for exchange in whole
or in part in integral multiples of $1,000 in
principal amount.
The Exchange Offer is not being made to, nor
will the Company accept surrenders of Old Notes
for exchange from, holders thereof in any
jurisdiction in which the Exchange Offer or the
acceptance thereof would not be in compliance
with the securities or blue sky laws of such
jurisdiction.
Resale........................ Based on an interpretation by the staff of the
Commission set forth in no-action letters
issued to third parties, the Company believes
the New Notes would be freely transferable by
holders other than affiliates of the Company
after the Exchange Offer without further
registration under the Securities Act if the
holder represents that it is acquiring the New
Notes in the ordinary course of its business,
that it has no arrangement or understanding
with any person to participate in the
distribution of the New Notes and that it is
not an affiliate of the Company, as such terms
are interpreted by the Commission, provided
that Exchanging Dealers will have a prospectus
delivery requirement with respect to resales of
such New Notes. Any holder who participates in
the Exchange Offer for the purpose of
participating in a distribution of the New
Notes may not rely on the position of the staff
of the Commission as set forth in these
no-action letters and would have to comply with
the registration and prospectus delivery
requirements of the Securities Act in
connection with any secondary resale
transaction, unless an exemption from
registration is otherwise available. 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. A secondary
resale transaction in the United States by a
holder who is using the Exchange Offer to
participate in the distribution of New Notes
must be covered by a registration statement
containing the selling security holder
information required by Item 507 of Regulation
S-K of the Securities Act. The Company has not
sought its own no-action letter and there can
be no assurance that the staff of the
Commission would make a similar determination
with respect to the Exchange Offer as in the
above no-action letters.
Each broker-dealer that receives New Notes for
its own account in exchange for Old Notes must
acknowledge that it will deliver a prospectus
in connection with any resale of such New
Notes. See "Plan of Distribution." 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 on the 180th day 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."
Expiration Date............... The Exchange Offer will expire at 5:00 p.m.,
New York City time, on January 22, 1998
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<PAGE> 12
, unless extended, in which case the
term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is
extended. See "The Exchange Offer--Terms of the
Exchange Offer--Expiration Date; Extensions;
Amendments."
Accrued Interest on the New
Notes and the Old Notes..... Each New Note will bear interest from the most
recent interest payment date to which interest
has been paid on the Old Note surrendered in
exchange therefor, or, if no interest has been
paid on such Old Note, from September 19, 1997.
Conditions to the
Exchange Offer ............. The Exchange Offer is subject to certain
conditions which may be waived by the Company.
See "The Exchange Offer--Terms of the Exchange
Offer--Conditions of the Exchange Offer." The
Exchange Offer is not conditioned upon any
minimum principal amount of Old Notes being
tendered for exchange.
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 Chase
Manhattan Bank and Trust Company, National
Association, as exchange agent (the "Exchange
Agent"), at the address set forth herein and
therein. Persons holding Old Notes through DTC
and wishing to accept the Exchange Offer must
do so pursuant to DTC's Automated Tender Offer
Program ("ATOP"), by which each tendering
participant will agree to be bound by the
Letter of Transmittal.
By executing a Letter of Transmittal, a holder
will represent to the Company that, among other
things, (i) any New Notes being to be received
by it will be acquired in the ordinary course
of its business, (ii) at the time of
commencement of the Exchange Offer it has no
arrangement or understanding with any person to
participate in the distribution (within the
meaning of the Securities Act) of the New
Notes, (iii) it is not an "affiliate" of the
Company, as defined in Rule 405 of the
Securities Act, or if it is an affiliate, it
will comply with the registration and
prospectus delivery requirements of the
Securities Act to the extent applicable, (iv)
it has full power and authority to tender,
exchange, sell, assign and transfer the
tendered Old Notes, (v) the Company will
acquire good, marketable and unencumbered title
to the tendered Old Notes, free and clear of
all liens, restrictions, charges and
encumbrances, and (vi) the Old Notes tendered
for exchange are not subject to any adverse
claims or proxies. As indicated above, each
broker-dealer that receives New Notes for its
own account in exchange for Old Notes must
acknowledge that it will deliver a prospectus
in connection with any resale of such New
Notes. See "The Exchange Offer--Terms of the
Exchange Offer--Procedures for Tendering Old
Notes" and "--Resales of the New Notes."
Letters of Transmittal and other required
documents should not be sent to the Company.
Such documents should only be sent to the
Exchange Agent. Questions regarding how to
tender and requests for information should be
directed to the Exchange Agent. See "The
Exchange Offer--Terms of the Exchange
Offer--The Exchange Agent."
Untendered Old Notes.......... Following the consummation of the Exchange
Offer, holders of Old Notes
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<PAGE> 13
eligible to participate but who do not tender
their Old Notes will not have any further
exchange rights and such Old Notes will
continue to be subject to certain restrictions
on transfer. Accordingly, the liquidity of the
market for such Old Notes could be adversely
affected.
Consequences of Failure to
Exchange.................... The Old Notes that are not exchanged pursuant
to the Exchange Offer will remain restricted
securities. Accordingly, such Old Notes may be
resold only (i) to the Company, (ii) pursuant
to Rule 144A or Rule 144 under the Securities
Act or pursuant to some other exemption under
the Securities Act, (iii) outside the United
States to a foreign person pursuant to the
requirements of Rule 904 under the Securities
Act, or (iv) pursuant to an effective
registration statement under the Securities
Act. See "The Exchange Offer--Terms of the
Exchange Offer--Consequences of Failure to
Exchange."
Suspension of Exchange Offer
Registration Statement...... The Company may suspend the availability and
use of the Exchange Offer Registration
Statement for one period not to exceed 30 days
following the consummation of the Exchange
Offer for valid business reasons (not including
avoidance of the Company's obligations under
the Registration Rights Agreement). See "The
Exchange Offer--Terms of the Exchange
Offer--Suspension of Exchange Offer
Registration Statement."
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 either make appropriate
arrangements to register ownership of the Old
Notes in the beneficial owner's name, so that
the beneficial owner can tender on his or her
own behalf, or instruct such registered holder
to tender on such beneficial owner's behalf.
Such a 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 such Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date (or comply with the procedures
for book-entry transfer), must tender their Old
Notes according to the guaranteed delivery
procedures set forth under "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 under "The Exchange Offer--Terms of
the Exchange Offer--Conditions of the Exchange
Offer"), the Company will accept for exchange
any and all Old Notes 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.
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<PAGE> 14
Withdrawal Rights............. 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
consequences relating to the exchange of Old
Notes for New Notes and the purchase, ownership
and disposition of New Notes, see "Certain
Federal Income Tax Considerations."
Exchange Agent................ Chase Manhattan Bank and Trust Company,
National Association, is the Exchange Agent.
The address, telephone number and facsimile
number of the Exchange Agent are set forth
under "The Exchange Offer--Terms of
the Exchange Offer--The Exchange Agent."
Use of Proceeds............... There will be no cash proceeds to the Company
from the exchange pursuant to the Exchange
Offer. See "Use of Proceeds."
The New Notes
The following summary of certain terms of the New Notes is not complete
and is qualified by all of the terms contained in the New Notes and in the
Indenture. 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 issuance of
the New Notes will have been registered under the Securities Act and, therefore,
the New Notes will not bear legends restricting the transfer thereof and (ii)
the holders of New Notes will not be entitled to further registration rights
under the Registration Rights Agreement and rights under certain circumstances
to Special Interest (as defined), which rights will be satisfied or will
terminate when the Exchange Offer is consummated. For a more detailed
description of the terms of the New Notes, see "Description of the Notes."
Securities Offered............ $150.0 million principal amount of 8.50% Senior
Subordinated Notes due 2007.
Maturity...................... September 15, 2007.
Interest Payment Dates........ March 15 and September 15 of each year,
commencing March 15, 1998.
Subordination................. The New Notes will be, as the Old Notes (which
they replace) are, unsecured obligations of the
Company, subordinate in right of payment to all
existing and future Senior Debt (as defined) of
the Company. The New Notes will rank, as the
Old Notes (which they replace) rank, pari passu
with any future Senior Subordinated Debt (as
defined) and senior to all existing and future
junior subordinated debt of the Company. The
New Notes will be, as the Old Notes (which they
replace) are, structurally subordinated to all
existing and future debt and other liabilities
of the Company's subsidiaries. As of September
28, 1997, the Company had outstanding
approximately $14.7 million of Senior Debt,
$150.0 million of Senior Subordinated Debt and
$86.25 million of junior subordinated debt, and
the Company's subsidiaries had outstanding
approximately $147.3 million of debt and other
liabilities (excluding debt included within the
definition of Senior Debt, debt between
subsidiaries and debt owed by any subsidiary to
the Company). The Indenture permits the Company
and its subsidiaries to incur significant
amounts of additional debt and other
liabilities, including Senior Debt, Senior
Subordinated Debt and secured debt. See
"Capitalization," "Description of Certain
Existing Debt" and "Description of the Notes."
13
<PAGE> 15
Optional Redemption........... The New Notes will be redeemable, in whole or
in part, at the option of the Company, at any
time on or after September 15, 2002, at the
redemption prices set forth herein, plus
accrued and unpaid interest, if any, to the
date of redemption. In addition, at any time
and from time to time prior to September 15,
2000, the Company may redeem in the aggregate
up to 35% of the original principal amount of
the Notes (defined as the Old Notes together
with the New Notes) with the proceeds of one or
more Public Equity Offerings, at a redemption
price of 108.500% of the principal amount to be
redeemed, plus accrued and unpaid interest, if
any, to the redemption date, provided that at
least 65% of the original principal amount of
the Notes remains outstanding after each such
redemption. See "Description of the
Notes--Optional Redemption."
Sinking Fund.................. None.
Change of Control............. Upon a Change of Control, each holder of New
Notes will have the right, subject to certain
restrictions and conditions, to require the
Company to repurchase all or any part of such
holder's Notes at a purchase price equal to
101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the
date of the purchase. See "Description of the
Notes--Repurchase at the Option of Holders Upon
a Change of Control."
Certain Covenants............. The Indenture contains certain covenants that,
among other things, limit the ability of the
Company and its Restricted Subsidiaries to: (a)
Incur additional Debt; (b) make Restricted
Payments; (c) create Liens; (d) issue or sell
Capital Stock of Restricted Subsidiaries; (e)
engage in Asset Sales; (f) restrict
distributions from Restricted Subsidiaries; (g)
engage in transactions with Affiliates; (h)
Incur layered Debt; or (i) in the case of the
Company, merge, consolidate or sell all or
substantially all its Property. The covenants
are subject to a number of significant
exceptions and qualifications. See "Description
of the Notes."
Risk Factors
Prospective investors should carefully consider the factors set forth in
"Risk Factors" as well as the other information set forth or incorporated by
reference in this Prospectus before tendering the Old Notes in exchange for the
New Notes.
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<PAGE> 16
RISK FACTORS
Prospective investors should consider carefully the following factors as
well as the other information included or incorporated by reference in this
Prospectus, which may be generally applicable to the Old Notes as well as the
New Notes, before tendering Old Notes in exchange for New Notes.
Risk Factors Relating to the Company and its Business
Acquisitions; Management of Growth
The Company has actively pursued acquisitions in furtherance of its
strategy to be the fastest and most comprehensive provider of custom electronics
design and manufacturing services. Such acquisitions involve numerous risks,
including difficulties in assimilating the operations, technologies, and
products and services of the acquired companies, the diversion of management's
attention from other business concerns, risks of entering markets in which the
Company has no or limited direct prior experience and where competitors in such
markets have stronger market positions, and the potential loss of key employees
of the acquired company. There can be no assurance that the Company will be able
to successfully integrate newly-acquired businesses including Orbit and the
Company's recently acquired printed circuit board fabrication facility in
Austin, Texas (the "Austin PCB Fab"). See "Business--Acquisitions." Such a
failure could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company also continues to
experience rapid internal growth and expansion, and with continued expansion, it
may become more difficult for the Company's management to manage geographically
dispersed operations. The Company's failure to effectively manage growth could
have a material adverse effect on the Company's results of operations.
Dependence on Electronics Industry
The electronics industry is subject to rapid technological change, product
obsolescence and price competition. In addition, the electronics industry, and
especially the semiconductor sector, has historically been cyclical and subject
to significant economic downturns at various times, characterized by diminished
product demand, accelerated erosion of average selling prices and overcapacity.
These factors, which may affect the electronics industry in general, or any of
the Company's major customers in particular, could have a material adverse
effect on the Company's operating results. The future success of the Company's
businesses will depend largely upon its ability to enhance its existing, or to
develop or acquire, new products and manufacturing processes in order to keep
pace with changing technology and industry standards and meet the changing needs
of customers. There can be no assurance that the Company will be able to keep
pace with the rapidly changing technological trends. The introduction by
competitors of new technologies or the emergence of new industry standards and
customer requirements could render the Company's existing products and processes
obsolete, unmarketable or no longer competitive.
Customer Concentration
At any given time, certain customers may account for significant portions
of the Company's business. See "Business--Marketing and Customer Profile." The
Company also has concentrations of credit risk in accounts receivables and
inventory for its top ten customers. In addition, the percentage of the
Company's sales to its major customers may fluctuate from period to period.
Significant reductions in sales to any of the Company's major customers as well
as period to period fluctuations in sales to such customers could have a
material adverse effect on the Company's operating results. Through its
subsidiary, Multilayer Technology, Inc. ("Multek"), the Austin PCB Fab currently
serves principally IBM, with which the Company has a three-year supply
agreement. Although Multek has begun to implement a sales and marketing program
for the Austin PCB Fab, there can be no assurance that Multek will succeed in
expanding the customer base for the Austin PCB Fab beyond its dependence on IBM.
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<PAGE> 17
The Company has few material firm long-term commitments or volume
guarantees from its customers. In addition, customer orders can be cancelled and
volume levels can be changed or delayed. From time to time, some of the
Company's customers have terminated their manufacturing arrangements with the
Company, and other customers have reduced or delayed the volume of design and
manufacturing services performed by the Company. The timely replacement of
cancelled, delayed or reduced contracts with new business cannot be assured, and
termination of a manufacturing relationship or change, reduction or delay in
orders could have a material adverse effect on the Company's operating results.
Factors Affecting Operating Results
The Company's operating results may be affected by a number of factors
including the economic conditions in the markets the Company serves; price and
product competition; the level of volume and the timing of orders; product mix;
the amount of automation existing on specific manufacturing projects;
efficiencies achieved by inventory management; fixed asset utilization; the
level of experience in manufacturing a particular product; customer product
delivery requirements; shortages of components or experienced labor; the
integration of acquired businesses; start-up costs associated with adding new
geographical locations; expenditures required for research and development; and
failure to introduce, or lack of market acceptance of new processes, services,
technologies and products on a timely basis. In addition, the level of sales can
greatly shift based on whether certain projects are contracted on a turnkey
basis where the Company purchases materials, versus on a consignment basis where
materials are provided by the customer. Recent operating results have been
adversely affected by the Orbit acquisition.
Components; Reliance on Limited Suppliers
The Company works with customers and suppliers to minimize the impact of
component shortages. The Company orders raw materials and components based on
purchase orders received and accepted, and maintains minimal levels of inventory
that are not identified for use in filling specific orders. Raw material and
component shortages have had, and are expected to have, from time to time,
short-term adverse effects on the Company's business, including impact due to
price fluctuations and delayed shipments. Significant shortages of raw materials
or components used by the Company's operating units would have a material
adverse effect on the Company's results of operations. In addition, the
Company's operating units depend on a limited number of suppliers for many of
the raw materials and components used in their products and services. The
interruption of supply from such suppliers could adversely affect the Company's
operations.
Substantial Capital Requirements; Effects of Leverage
The Company makes, and will continue to make, substantial capital
expenditures in furtherance of its growth and expansion and in order to remain
competitive in the rapidly changing electronics industry and to achieve and
maintain technological leadership. The Company's capital expenditures were
approximately $27.2 million in 1996. The Company anticipates that its capital
expenditures will total approximately $70.0 million in 1997. This aggregate
amount includes approximately $30.6 million used in connection with additional
capital equipment acquired for Orbit's 6-inch, 0.6 micron process facility. The
Company's 1998 capital expenditures are currently estimated to be in the range
of $45.0 to $55.0 million. In addition, the Company has made and will continue
to make acquisitions in furtherance of its growth and expansion strategy. The
Company spent approximately $8.2 million for acquisitions in 1996 and has spent
approximately $54.0 million for acquisitions in 1997, including approximately
$46.1 million for the acquisition of the Austin PCB Fab. The Company intends to
continue its acquisition strategy and it is possible that future acquisitions
may be significant. The Company intends to finance its capital expenditures and
acquisitions in 1997 and 1998 and its debt service obligations with funds
provided by internally generated cash flows, existing cash reserves, leasing
capabilities, borrowings under the Senior Credit Agreement (as defined) and with
the net proceeds of the Notes. If actual funds available from these sources are
less than anticipated or the Company's capital needs are greater than
anticipated, the Company may seek additional equity or debt financing.
16
<PAGE> 18
There can be no assurance, however, that financing alternatives will be
available to meet such requirements. Even if such alternative financing is
available, there can be no assurance that the terms of such financing will be
acceptable to the Company or that such financing will be permitted under the
Senior Credit Agreement or the Indenture. As of September 28, 1997, the
Company's total debt was $252.5 million (including $150.0 million principal
amount of the Notes and $86.25 million principal amount of its 6% Convertible
Subordinated Notes due 2002 (the "Convertible Notes") and excluding unused
commitments under the Senior Credit Agreement). The Indenture permits the
Company to incur significant amounts of additional debt. The Company's increased
leverage could adversely affect the Company's ability to obtain future financing
on acceptable terms or to otherwise withstand adverse business and economic
developments and compete effectively. If acceptable or permitted financing is
not available, the Company's expansion and growth activities, including any
required expenditures in respect of technology up-grades, may be significantly
curtailed.
Competition
The Company competes against numerous domestic and foreign companies. The
Company also faces competition from current and prospective OEM customers that
evaluate the Company's capabilities against the merits of manufacturing their
products internally. Because of the Company's wide range of products and
services, some of the Company's contract electronics manufacturing ("CEM")
competitors are also customers of the Company. Certain of the Company's
competitors have substantially greater manufacturing, financial, research and
development, and marketing resources than the Company. To remain competitive,
the Company will be required to continue to make substantial capital outlays in
order to develop and provide technologically advanced manufacturing services,
maintain quality levels, offer flexible delivery schedules, deliver finished
products on a reliable basis, and compete favorably on the basis of price. In
addition, as the Company continues to expand its operations, some of its CEM
competitors may decide to place orders with companies with which they are in
less direct competition.
International Operations
The Company offers outsourcing capabilities in the three major electronics
markets of the world (North America, Europe and Asia). The Company's
international operations generated approximately 40% of net sales for the
nine-month period ended September 28, 1997 and approximately 25%, 32% and 28% of
net sales for the 1996, 1995 and 1994 fiscal years, respectively. The Company's
international operations subject the Company to the risks of doing business
abroad, including currency fluctuations, export duties, import controls and
trade barriers, restrictions on the transfer of funds, greater difficulty in
accounts receivable collection, burdens of complying with a wide variety of
foreign laws and, in certain parts of the world, social and political
instability, any of which could have a material adverse effect on the Company's
financial position and results of operations.
Environmental Matters
The Company is subject to a variety of environmental regulations relating
to the use, storage and disposal of hazardous chemicals used during its
manufacturing processes. While the Company believes that it is currently in
material compliance with environmental regulations, any failure to comply with
present and future regulations could subject the Company to future liabilities.
Such regulations could restrict the Company's ability to expand its facilities
or could require the Company to acquire costly equipment or to incur other
significant expenses to comply with environmental regulations. The imposition of
more stringent environmental requirements, the results of future testing at the
Company's facilities, or a determination that the Company is potentially
responsible for remediation at other sites where problems are not presently
known, could result in expenditures in excess of amounts currently estimated to
be required for such matters. See "Business--Environmental Regulation."
Risk Factors Relating to the Notes
Subordination of Notes; Holding Company Structure
The Notes are subordinated in right of payment to all existing and future
Senior Debt of the Company, including debt under the Senior Credit Agreement,
will rank pari passu with any future Senior Subordinated Debt of the Company,
and will rank senior to all existing and future junior subordinated debt of the
Company, including the
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<PAGE> 19
Convertible Notes. The Notes are unsecured and are effectively subordinated to
any secured debt of the Company, including the debt under the Senior Credit
Agreement. The Notes are obligations exclusively of the Company and not of any
of its subsidiaries, and are structurally subordinated to all debt and other
liabilities of the Company's subsidiaries, including the claims of trade
creditors and creditors holding guarantees issued by such subsidiaries and
claims of preferred stockholders, if any, of such subsidiaries. As of September
28, 1997, the Company had outstanding approximately $14.7 million of Senior
Debt, $150.0 million of Senior Subordinated Debt and $86.25 million of junior
subordinated debt, and the Company's subsidiaries had approximately $147.3
million of debt and other liabilities outstanding (excluding debt included
within the definition of Senior Debt, debt between subsidiaries and debt owed by
any subsidiary to the Company).
The Company is a holding company. As a result, its cash flow and ability
to service debt and other obligations, including the Notes, will depend upon the
earnings of its subsidiaries and the distribution of those earnings to the
Company, or upon loans or other payments of funds by the subsidiaries to the
Company. The holders of the Notes will have no direct claims against such
subsidiaries. The payment of dividends and the making of loans and advances to
the Company by its subsidiaries are dependent upon the earnings of those
subsidiaries and are subject to statutory, contractual and other restrictions
and various business considerations. In addition, to the extent that the
earnings of the Company's foreign subsidiaries have been subject to foreign tax
at rates that are lower than the then prevailing U.S. corporate tax rates, a
distribution of such earnings as a dividend to the Company or any of its U.S.
subsidiaries would be subject to U.S. corporate taxes. Any right of the Company
to receive assets of any of its subsidiaries upon their bankruptcy, liquidation
or reorganization (and the consequent right of the holders of the Notes to
participate in those assets) will be structurally subordinated to the claims of
that subsidiary's creditors.
The Company and its subsidiaries have other liabilities, including
contingent liabilities, which may be significant. Although the Indenture
contains limitations on the amount of additional debt the Company and the
Restricted Subsidiaries may incur, the amounts of such debt could be significant
and, in any case, a substantial portion of such debt may be Senior Debt, debt of
the Company's subsidiaries or secured debt.
Compliance With Restrictive Covenants
The Senior Credit Agreement and the 1995 Indenture (as defined), which
governs the Convertible Notes, impose financial and other restrictions on the
Company and its subsidiaries, including limitations on the incurrence of
additional debt, on investments and limitations on the sale of assets. The
Senior Credit Agreement also requires the Company to maintain and meet certain
financial ratios and tests. There can be no assurance that these requirements
will be met in the future. If they are not, or if other defaults or events of
default occur under the Senior Credit Agreement or the 1995 Indenture, (i) all
amounts due thereunder could become immediately due and payable, or (ii) the
lenders under the Senior Credit Agreement or the holders of Convertible Notes,
as the case may be, could be entitled to declare the debt outstanding thereunder
immediately due and payable. Additionally, non-payment of amounts due under the
Notes, or the occurrence of other defaults or Events of Default under the
Indenture for the Notes, could constitute defaults or events of default under
the Senior Credit Agreement or the 1995 Indenture. See "Description of Certain
Existing Debt" and "Description of the Notes."
Change of Control
Upon the occurrence of a Change of Control, each holder of Notes will have
the right to require the Company to repurchase all or any part of such holder's
Notes at a price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of purchase. The occurrence of certain of
the events which constitute a Change of Control would also entitle holders of
Convertible Notes to redeem their Convertible Notes, and would constitute an
event of default under the Senior Credit Agreement, pursuant to which the
lenders thereunder could declare all amounts outstanding under the Senior Credit
Agreement to be immediately due and payable. In addition, any payments under or
in respect of the Notes or the Convertible Notes would be subordinate in right
of payment to any amounts due under the Senior Credit Agreement. The Company's
failure to purchase the Notes or the Convertible Notes would constitute an Event
of Default under the Indenture and an event of default under the 1995 Indenture,
and would constitute a further event of default under the Senior Credit
Agreement. In the event of a Change of Control, there can be no assurance that
the Company and its subsidiaries would have sufficient financial resources
available to
18
<PAGE> 20
satisfy all of their obligations under the Senior Credit Agreement, the Notes
and the Convertible Notes. See "Description of Certain Existing Debt" and
"Description of the Notes--Repurchase at the Option of Holders Upon a Change of
Control." The definition of "Change of Control" in the Indenture includes a
sale, lease, conveyance or other disposition or transfer of "all or
substantially all" the Company's assets. Although there is a developing body of
case law interpreting the phrase "substantially all," there is no precise
established definition of the phrase under applicable law. Accordingly, the
ability of a holder of Notes to require the Company to repurchase such Notes as
a result of a sale, lease, conveyance or other disposition or transfer of less
than all the assets of the Company may be uncertain.
Lack of Public Trading Market for the Notes; Volatility of Notes
There has not previously been any public market for the Old Notes or the
New Notes. No assurance can be given as to the liquidity of the trading market
for the New Notes, or, in the case of Old Notes that are not exchanged, for the
Old Notes following the Exchange Offer or for Old Notes that are covered by a
registration statement relating to their resale. The Company presently does not
intend to apply for listing of the New Notes on any securities exchange or to
seek approval for quotation through any automated quotation system. The Old
Notes are currently eligible for trading in The Portal Market of the Nasdaq
Stock Market, Inc. However, there can be no assurance that an active public
market for the New Notes will develop. The Company has been advised by the
Initial Purchasers that, following completion of the Exchange Offer, they
currently intend to make a market in the New Notes; however, the Initial
Purchasers are not obligated to do so and any market-making activities with
respect to the New Notes may be discontinued at any time without notice.
The liquidity of, and trading market for, the Old Notes or the New Notes
also may be adversely affected by general declines in the market for similar
securities. Such a decline may adversely affect such liquidity and trading
markets independent of the financial performance of, and prospects for, the
Company.
Forward-Looking Statements
This Prospectus contains "forward-looking statements" within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act. Such
forward-looking statements, including those statements contained under the
captions "Prospectus Summary" and "Business," involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Among the factors that could cause actual
results to differ materially from those reflected in any forward-looking
statement contained in this Prospectus are: general economic and business and
market conditions, dependence on the electronics industry, changes in product
demand, changes in competition, customer concentration, the ability of the
Company to integrate acquired businesses or complete future acquisitions,
interest rate fluctuations, risks associated with international operations,
dependence on suppliers, changes in or failure to comply with governmental
regulations, including environmental laws, the ability of the Company to obtain
adequate financing in the future and other factors indicated in this Prospectus.
See "Risk Factors" and "Business." The Company assumes no obligation to update
any forward-looking statements contained in this Prospectus.
19
<PAGE> 21
USE OF PROCEEDS
The Company will not receive any proceeds from the issuance of the New
Notes offered hereby. In consideration for issuing the New Notes as contemplated
in this Prospectus, the Company will receive in exchange a like principal amount
of Old Notes. Accordingly, the Old Notes surrendered in exchange for New Notes
will not result in any increase in the indebtedness of the Company.
20
<PAGE> 22
CAPITALIZATION
The following table sets forth the capitalization of the Company at
September 28, 1997. The table should be read in conjunction with the Company's
Condensed Consolidated Financial Statements and the notes thereto and
Consolidated Financial Statements and the notes thereto, incorporated by
reference in this Prospectus.
At September
28, 1997
----------------------
(Dollars in thousands)
Cash and cash equivalents: ................................ $ 94,441
=========
Total debt (including current maturities):
Financing obligations(1) ................................ $ 14,737
8.50% Senior Subordinated Notes due 2007 ............... 150,000
6% Convertible Subordinated Notes due 2002(2) ........... 86,250
Notes payable to sellers of businesses acquired(3) ...... 1,523
---------
Total debt .......................................... 252,510
---------
Stockholders' equity(4):
Preferred stock, $0.01 par value; 5,000,000 shares
authorized; none issued ............................... --
Common stock, $0.01 par value; 45,000,000 shares
authorized; 25,220,020 issued ......................... 252
Additional paid-in capital .............................. 100,886
Retained earnings ....................................... 97,355
Cumulative foreign currency translation adjustments ..... (4,078)
Deferred stock compensation ............................. (3,459)
---------
Total stockholders' equity ........................... 190,956
---------
Total capitalization ................................ $ 443,466
=========
- ----------
(1) Financing obligations include the Company's current installments of
long-term financing obligations of $6,360 as of September 28, 1997.
Borrowings of up to $80,000 are available under the Company's
line-of-credit which matures in June 2002. See "Description of Certain
Existing Debt--Senior Credit Agreement."
(2) See "Description of Certain Existing Debt--Convertible Notes."
(3) Notes payable to sellers of businesses acquired as of September 28, 1997
represents deferred purchase price payments which are due in April 1999.
(4) Outstanding Common Stock excludes, as of September 28, 1997, (i) 4,600,000
shares reserved for issuance upon conversion of the Convertible Notes,
(ii) 3,093,500 shares subject to outstanding options and performance
shares awarded under the Company's stock option and incentive plans, and
(iii) 2,847,396 shares reserved for issuance under the Company's Senior
Executive Performance Bonus Plan, Stock Incentive Plan, Employee Stock
Purchase Plan and Non-Employee Directors' Stock Compensation Plan. The
number of shares of Common Stock outstanding and the exclusions specified
in this footnote reflect the Stock Split that was effected on September 2,
1997 in the form of the issuance of a 100% stock dividend.
21
<PAGE> 23
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial information for the 52 weeks ended
December 29, 1996 and the years ended December 31, 1995, 1994, 1993 and 1992
presented below is derived from the audited Consolidated Financial Statements of
the Company. The selected consolidated financial information for the nine months
ended September 28, 1997 and September 29, 1996 is derived from unaudited
Condensed Consolidated Financial Statements. In the opinion of management of the
Company, the unaudited consolidated financial data presented below provide all
adjustments, which include only normal recurring adjustments, necessary for a
fair presentation of the results of operations for the periods specified. Such
results, however, are not necessarily indicative of the results which may be
expected for the full fiscal year. The following information should be read in
conjunction with the Company's Condensed Consolidated Financial Statements and
the notes thereto and Consolidated Financial Statements and the notes thereto,
incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
For the nine months ended For the fiscal years ended
-------------------------- ----------------------------------------------------
Sept. 28, Sept. 29,
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(Unaudited)
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Income Data(1):
Net sales ..................................... $534,041 $336,241 $458,893 $396,978 $258,464 $165,339 $126,558
Cost of sales ................................. 441,880 271,104 372,110 319,572 218,591 38,943 108,419
-------- -------- -------- -------- -------- -------- --------
Gross profit ................................ 92,161 65,137 86,783 77,406 39,872 26,396 18,139
Selling, general and administrative expenses .. 51,424 35,219 48,540 38,851 21,717 14,494 10,597
Non-recurring charges(2) ...................... -- 4,649 15,032 -- 6,995 -- --
Net interest expense (income) ................. 5,270 3,257 4,535 2,037 (873) (20) 427
Amortization of intangibles ................... 2,762 2,355 3,118 2,481 778 50 --
Other, net .................................... 919 (616) (115) (180) (341) 522 31
-------- -------- -------- -------- -------- -------- --------
Income from continuing operations before
income taxes and extraordinary item ......... 31,786 20,273 15,673 34,217 11,596 11,350 7,084
Net income .................................... $ 22,572 $ 13,163 $ 10,035 $ 22,946 $ 8,803 $ 7,962 $ 6,778
Other Data(1):
Depreciation and amortization ................. $ 15,605 $ 15,935 $ 19,990 $ 16,096 $ 9,071 $ 6,356 $ 5,195
Capital expenditures .......................... 106,103 20,026 33,274 40,697 21,081 13,719 4,824
EBITDA(3) ..................................... 52,661 44,114 56,730 52,350 31,894 17,686 14,051
Net cash provided (used) by operating
activities .................................. 41,660 17,746 24,355 26,087 (3,091) 11,157 10,166
Net cash provided (used) by investing
activities .................................. (111,464) (21,901) (35,054) (35,658) (36,705) (48,583) (3,139)
Net cash provided (used) by financing
activities .................................. $139,331 $(17,545) $(19,848) $ 50,381 $ 39,608 $ 48,353 $ (2,938)
Ratio of EBITDA to net
interest expense(3)(4) ...................... 10.0x 13.5x 12.5x 25.7x N/M N/M 32.9x
Ratio of total debt to EBITDA(3)(5) ........... 4.8 2.3 2.0 2.2 1.5x 0.3x 0.4
Ratio of net debt to EBITDA(3)(6) ............. 3.0 1.5 1.5 1.2 1.0 N/M N/M
Ratio of earnings to fixed charges(3)(7) ...... 5.7 4.9 3.2 7.1 10.0 19.4 10.8
Cash dividends declared per share(8) .......... $ -- $ -- $ -- $ -- $ -- $ -- $ 0.09
Income from continuing operations before
extraordinary item per share(8) .............. $ 0.87 $ 0.52 $ 0.40 $ 0.98 $ 0.41 $ 0.48 $ 0.35
Balance Sheet Data (end of period)(1):
Total assets $589,268 $322,675 $335,851 $327,311 $211,460 $124,158 $ 54,835
6% Convertible Subordinated Notes(9) ......... 86,250 86,250 86,250 86,250 -- -- --
Long-term obligations, excluding 6% Convertible
Subordinated Notes(10) ...................... 166,260 9,646 14,200 11,536 31,872 3,747 2,356
Total stockholders' equity .................... 190,956 160,596 159,037 145,549 118,452 93,539 26,884
Book value per share(8) ....................... $ 7.57 $ 6.74 $ 6.65 $ 6.38 $ 5.38 $ 4.90 $ 1.86
</TABLE>
(Footnotes on following page)
22
<PAGE> 24
(Footnotes to previous page)
(1) Effective May 21, 1993, Dover Corporation ("Dover"), the former parent of
the Company, distributed to its stockholders all of the then outstanding
shares of the Company (the "Spin-off"). See Note 2 to the Company's
Consolidated Financial Statements incorporated by reference in this
Prospectus for acquisition information. In the fourth quarter of 1996, the
Company increased the estimated useful lives of certain equipment from
four years to six years to better reflect the useful lives of the assets
and conform to industry-wide practice. The effects of this change in
accounting estimate were to decrease fiscal 1996 depreciation expense by
approximately $1,500 and to increase fiscal 1996 net income by
approximately $1,020.
(2) The Company recorded a non-recurring pre-tax charge of $12,100 in 1994 of
which $5,105 was included in cost of sales. The Company also recorded a
non-recurring pre-tax charge of $16,532 in 1996 which consisted of $4,649
of Orbit Merger costs and $11,883 of write-downs associated with a
facility closure of which $1,500 was included in cost of sales.
(3) EBITDA is calculated by adding net interest, provision for income tax,
depreciation, amortization, extraordinary items and nonrecurring charges
to net income. EBITDA is presented because it is a widely accepted
financial indicator of a company's ability to service debt. The Company
believes that EBITDA, while providing useful information, should not be
considered in isolation or as a substitute for net income as an indicator
of operating performance or as an alternative to cash flow as a measure of
liquidity in accordance with generally accepted accounting principles
("GAAP"). In addition, EBITDA as presented is not necessarily comparable
with similarly titled measures of other companies.
(4) The ratio of EBITDA to net interest expense is calculated by dividing
EBITDA by net interest expense and is an alternative measure of the
Company's ability to cover debt service costs, exclusive of principal
requirements. Because the Company had net interest income in each of the
1994 and 1993 fiscal years, this ratio is not meaningful ("N/M") for such
fiscal years.
(5) The ratio of total debt to EBITDA is calculated by dividing the total debt
by EBITDA and is a measure of the Company's ability to service its
financing obligations.
(6) The ratio of net debt to EBITDA is calculated by dividing total debt less
cash and cash equivalents by EBITDA. Because the Company had net cash in
fiscal 1993 and an immaterial amount of net debt in fiscal 1992, this
ratio is not material for the 1993 and 1992 fiscal years.
(7) For purposes of calculating the ratio of earnings to fixed charges,
earnings are calculated by adding fixed charges to earnings from
continuing operations before income taxes and extraordinary item. The
Company's fixed charges are comprised of interest expense, amortization of
debt issuance costs and the interest component of rental expense.
(8) All per share amounts have been adjusted to give retroactive effect to a
two-for-one stock split effected in the form of a stock dividend
distributed on September 2, 1997 to shareholders of record as of August
15, 1997 (the "Stock Split"). The per share data for the 1993 and 1992
fiscal years are presented on a pro forma basis as if the Spin-off had
occurred on January 1 of the respective periods.
(9) On October 11, 1995, the Company issued $86,250 of 6% Convertible
Subordinated Notes due 2002 (the "Convertible Notes") which convert, at
any time at the option of the holders, into common stock, par value $.01
per share, of the Company ("Common Stock") at a conversion price (the
"Conversion Price") of $18.75 per share (after giving effect to the Stock
Split). Beginning October 15, 1998, the Company may call the Convertible
Notes at an initial redemption price of 103.429%, plus accrued and unpaid
interest. Recent closing market prices of the Common Stock have been
higher than the Conversion Price. Upon conversion, the holders of the
Convertible Notes would become equity holders of the Company and total
long-term debt would decrease by $86,250.
(10) Long-term obligations include long-term financing obligations (including
capital lease obligations) and notes payable to sellers of businesses
acquired. Long-term obligations as of September 28, 1997 include the
$150,000 principal amount of Old Notes.
23
<PAGE> 25
THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
The Old Notes were issued and transferred by the Company to the Initial
Purchasers on September 19, 1997 pursuant to the Purchase Agreement. The Initial
Purchasers subsequently resold the Old Notes in reliance on Rule 144A under the
Securities Act. The Company has agreed pursuant to the Registration Rights
Agreement with the Initial Purchasers, for the benefit of the holders of the Old
Notes, that the Company will, at its cost, (a) not later than 60 days after the
date of original issuance of the Old Notes, file the Exchange Offer Registration
Statement with the Commission with respect to the Exchange Offer for the Old
Notes and (b) use its reasonable best efforts to cause the Exchange Offer
Registration Statement to be declared effective under the Securities Act not
later than 120 days after the date of original issuance of the Old Notes. Upon
the effectiveness of the Exchange Offer Registration Statement, the Company will
promptly commence the Exchange Offer. The Company will use its best efforts to
keep the Exchange Offer open for not less than 30 days (or longer if required by
applicable law) after the date notice of the Exchange Offer is mailed to the
holders of the Old Notes. The Exchange Offer is intended to satisfy the
Company's exchange offer obligations under the Registration Rights Agreement.
The Exchange Offer is not being made to, nor will the Company accept
surrenders of Old Notes for exchange from, holders thereof in any jurisdiction
in which the Exchange Offer or the acceptance thereof would not be in compliance
with the securities or blue sky laws of such jurisdiction.
For each Old Note surrendered to the Company pursuant to the Exchange
Offer, the holder of such Old Note will receive a New Note having a principal
amount equal to that of the surrendered Old Note. Interest on each New Note will
accrue from the last interest payment date on which interest was paid on the Old
Note surrendered in exchange therefor or, if no interest has been paid on such
Old Note, from September 19, 1997. Accordingly, registered holders of New Notes
on the relevant record date for the first interest payment date following the
consummation of the Exchange Offer will receive interest accruing from the most
recent date to which interest has been paid on the Old Notes, or, if no interest
has been paid, from September 19, 1997. Old Notes accepted for exchange will
cease to accrue interest from and after the date of consummation of the Exchange
Offer. Holders whose Old Notes are accepted for exchange will not receive any
payment in respect of interest on such Old Notes otherwise payable on any
interest payment date the record date for which occurs on or after consummation
of the Exchange Offer. In the event that (i) applicable interpretations of the
staff of the Commission do not permit the Company to effect the Exchange Offer,
(ii) for any other reason the Exchange Offer Registration Statement is not
declared effective within 120 days after the date of the original issuance of
the Old Notes or the Exchange Offer is not consummated within 150 days after the
original issuance of the Old Notes, (iii) the Initial Purchasers so request with
respect to Old Notes not eligible to be exchanged for New Notes in the Exchange
Offer or (iv) any holder of Old Notes (other than an Initial Purchaser) is not
eligible to participate in the Exchange Offer or does not receive freely
tradeable New Notes in the Exchange Offer other than by reason of such holder
being an affiliate of the Company (it being understood that the requirement that
an Exchanging Dealer deliver the prospectus contained in the Exchange Offer
Registration Statement in connection with sales of New Notes shall not result in
such New Notes being not "freely tradeable"), the Company will, at its cost, (a)
as promptly as practicable, file a Shelf Registration Statement covering resales
of the Old Notes or the New Notes, as the case may be, (b) use its best efforts
to cause the Shelf Registration Statement to be declared effective under the
Securities Act and (c) use its best efforts to keep the Shelf Registration
Statement effective until two years after its effective date (or until one year
after such effective date if such Shelf Registration Statement is filed at the
request of an Initial Purchaser). The Company will, in the event a Shelf
Registration Statement is filed, among other things, provide to each holder for
whom such Shelf Registration Statement was filed copies of the prospectus which
is a part of the Shelf Registration Statement, notify each such holder when the
Shelf Registration Statement 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 selling such Old Notes or New Notes pursuant
to the Shelf Registration Statement generally would be required to be named as a
selling security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement which are applicable to such
holder (including certain indemnification obligations). The Company may suspend
(A) the use of the Shelf Registration Statement for a period not to exceed 30
days in any three-month period or two periods not to exceed an aggregate of 60
days in any 12-month period and (B) the use of the Exchange Offer Registration
Statement for one period not to exceed 30 days following the
24
<PAGE> 26
consummation of the Exchange Offer, in each case, under certain circumstances
relating to pending corporate developments, public filings with the Commission
and similar events.
If (a) on or prior to the 60th day following the date of original issuance
of the Old Notes, neither the Exchange Offer Registration Statement nor the
Shelf Registration Statement has been filed with the Commission, (b) on or prior
to the 120th day following the date of original issuance of the Old Notes, the
Exchange Offer Registration Statement has not been declared effective, (c) on or
prior to the 150th day following the date of original issuance of the Old Notes,
neither the Exchange Offer has been consummated nor the Shelf Registration
Statement has been declared effective, or (d) after either the Exchange Offer
Registration Statement or the Shelf Registration Statement has been declared
effective, such Exchange Offer Registration Statement ceases to be effective or
usable (subject to certain exceptions) in connection with resales of Old Notes
or New Notes in accordance with and during the periods specified in the
Registration Rights Agreement (each such event referred to in clauses (a)
through (d), a "Registration Default"), interest ("Special Interest") will
accrue on the principal amount of the Old Notes and the New Notes (in addition
to the stated interest on the Old Notes and the New Notes) from and including
the date on which the first such Registration Default shall occur to but
excluding the date on which all Registration Defaults have been cured. Special
Interest will accrue at a rate of 0.25% per annum during the 90-day period
immediately following the occurrence of the first such Registration Default and
shall increase by 0.25% per annum at the end of each subsequent 90-day period,
but in no event shall such rate exceed 1.00% per annum.
Holders of the Old Notes will be required to make certain representations
to the Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information to
be used in connection with the Shelf Registration Statement within the time
periods set forth in the Registration Rights Agreement in order to have their
Old Notes included in the Shelf Registration Statement and benefit from the
provisions regarding Special Interest set forth above.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all the provisions of the Registration Rights Agreement, a copy
of which is incorporated by reference as an exhibit to the Exchange Offer
Registration Statement of which this Prospectus is a part.
Following the consummation of the Exchange Offer, holders of the Old Notes
who were eligible to participate in the Exchange Offer but who did not tender
their Old Notes will not have any further exchange rights and such Old Notes
will continue to be subject to certain restrictions on transfer. Accordingly,
the liquidity of the market for such Old Notes could be adversely affected.
Terms of the Exchange Offer
General. The Company hereby offers, upon the terms and subject to the
conditions set forth herein, and in the accompanying Letter of Transmittal, to
exchange $1,000 in principal amount of New Notes for each $1,000 in principal
amount of Old Notes. The Company will accept for exchange any and all Old Notes
that are validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Exchange Offer is not conditioned upon any
minimum principal amount of Old Notes being tendered for exchange. However, the
Exchange Offer is subject to the terms and provisions of the Registration Rights
Agreement. See "--Conditions of the Exchange Offer."
Old Notes may be tendered only in multiples of $1,000. Subject to the
foregoing, holders may tender less than the aggregate principal amount
represented by the Old Notes held by them, provided that they appropriately
indicate this fact on the applicable Letter of Transmittal accompanying the
tendered Old Notes (or so indicate pursuant to the procedures for book-entry
transfer).
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 issuance of
the New Notes will have been registered under the Securities Act and, therefore,
the New Notes will not bear legends restricting the transfer thereof and (ii)
the holders of New Notes will not be entitled to further registration rights
under the Registration Rights Agreement and rights under certain circumstances
to Special Interest (as defined), which rights will be satisfied or will
terminate when the Exchange
25
<PAGE> 27
Offer is consummated. The New Notes will evidence the same debt as the Old Notes
(which they replace) and will be entitled to the benefits of the Indenture.
As of the date of this Prospectus, $150.0 million aggregate principal
amount of Old Notes were outstanding. Solely for reasons of administration (and
for no other purpose), the Company has fixed the close of business on December
16, 1997 as the record date (the "Exchange Record Date") for purposes of
determining the persons to whom this Prospectus and the Letter of Transmittal
will be mailed initially. Only a holder of the Old Notes or such holders' legal
representative or attorney-in-fact may participate in the Exchange Offer. There
will be no fixed record date for determining holders of the Old Notes entitled
to participate in the Exchange Offer.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the General Corporation Law of the State of Delaware or the Indenture in
connection with the Exchange Offer. The Company intends to conduct the Exchange
Offer in accordance with the applicable requirements of the Exchange Act and the
rules and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given notice (confirmed in writing) of such
acceptance to the Exchange Agent. The Exchange Agent will act as agent for the
tendering holders for the purpose of receiving the New Notes from the Company.
If any tendered and not validly withdrawn Old Notes are not accepted for
exchange because of an invalid tender, the occurrence of certain other events
set forth herein or otherwise, any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date. Any Old Notes that remain untendered shall remain
outstanding and continue to accrue interest but will not retain any exchange
rights under the Registration Rights Agreement.
The New Notes issued pursuant to the Exchange Offer will be delivered as
promptly as practicable following the Expiration Date.
Expiration Date; Extensions; Amendments. The Expiration Date shall be
January 22, 1998, at 5:00 p.m., New York City time, unless extended, in which
case the Expiration Date shall be the latest date and time to which the Exchange
Offer is extended.
In order to extend the Exchange Offer, the Company will notify the
Exchange Agent of any extension by oral or written notice and will make a public
announcement thereof, each prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date.
The Company reserves the right in its sole discretion (but subject to the
Registration Rights Agreement), (i) to delay accepting any Old Notes, (ii) to
extend the Exchange Offer, and (iii) to amend the terms of the Exchange Offer in
any manner. If the Exchange Offer is amended in a manner determined by the
Company to constitute a material change, the Company will (i) promptly disclose
such amendment by means of a prospectus supplement that will be distributed to
the registered holders of the Old Notes, and (ii) advise any Exchanging Dealer
that has provided in writing to the Company a telephone or facsimile number and
address for notices, and, if requested by any such Exchanging Dealer, confirm
such advice in writing, of the happening of such a change (which advice will be
accompanied by an instruction to suspend the use of this Prospectus until the
requisite changes have been made).
Interest on the New Notes. Interest on each New Note will accrue from the
last interest payment date on which interest was paid on the Old Note
surrendered in exchange therefor or, if no interest has been paid on such Old
Note, from September 19, 1997. Accordingly, registered holders of New Notes on
the relevant record date for the first interest payment date following the
consummation of the Exchange Offer will receive interest accruing from the most
recent date to which interest has been paid on the Old Notes, or, if no interest
has been paid, from September 19, 1997. Old Notes accepted for exchange will
cease to accrue interest from and after the date of consummation of the Exchange
Offer. Holders whose Old Notes are accepted for exchange will not receive any
payment in respect of interest on such Old Notes otherwise payable on any
interest payment date the record date for which occurs on or after consummation
of the Exchange Offer.
26
<PAGE> 28
Procedures for Tendering Old Notes. The tender of a holder's Old Notes as
set forth below and the acceptance thereof by the Company will constitute a
binding agreement between the tendering holder and the Company upon the terms
and subject to the conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal or Agent's Message (as defined). Only a
holder of Old Notes may tender such Old Notes in the Exchange Offer. Except as
set forth below, a holder who wishes to tender Old Notes for exchange pursuant
to the Exchange Offer must surrender such Old Notes to the Exchange Agent prior
to 5:00 p.m., New York City time, on the Expiration Date, together with either
(i) a properly completed and duly executed Letter of Transmittal, including all
other documents required by such Letter of Transmittal, for receipt by the
Exchange Agent at the address set forth in this Prospectus or (ii) a computer
generated message (an "Agent's Message"), transmitted by means of DTC's ATOP
system and received by the Exchange Agent, in which such holder acknowledges and
agrees to be bound by the terms of the applicable Letter of Transmittal.
By executing the Letter of Transmittal or Agent's Message, each holder
will make to the Company the representations set forth below in the third
paragraph under the heading "--Resales of the New Notes." In connection with a
book-entry transfer, each participant will confirm that it makes the
representations and warranties contained in the Letter of Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL OR AGENT'S
MESSAGES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND SOLE RISK OF
THE HOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED.
INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT THE HOLDER USE AN OVERNIGHT
OR HAND DELIVERY SERVICE. IN ALL SUCH CASES, SUFFICIENT TIME SHOULD BE ALLOWED
TO ASSURE TIMELY DELIVERY. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT
TO THE COMPANY.
Any financial institution that is a participant in the Book-Entry Transfer
Facility System of DTC may make book-entry delivery of the Old Notes by causing
DTC to transfer such Old Notes into the Exchange Agent's account in accordance
with DTC's procedures for such transfer. In connection with a book-entry
transfer, a Letter of Transmittal need not be transmitted to the Exchange Agent,
provided that the book-entry transfer procedure transferring such Old Notes must
be complied with prior to 5:00 p.m., New York City time, on the Expiration Date.
Any Old Notes presented to the Exchange Agent for exchange pursuant to the
Exchange Offer shall be exchanged for New Notes of equal principal amount upon
surrender to the Exchange Agent of the Old Notes to be exchanged; provided that
the Old Notes so surrendered for exchange are accompanied by the Letter of
Transmittal duly executed by the holder and are duly endorsed or accompanied by
a written instrument of transfer in form satisfactory to the Company, Chase
Manhattan Bank and Trust Company, National Association, acting as trustee under
the Indenture, or any successor named in accordance therewith (the "Trustee")
and the Exchange Agent and duly executed by the holder thereof or such holder's
attorney who shall be duly authorized in writing to execute such document on the
behalf of such holder. Whenever any Old Notes are so surrendered for exchange,
the Company shall execute, and the Trustee shall authenticate and deliver to the
surrendering holder thereof, New Notes in the same aggregate principal amount as
the Old Notes so surrendered as promptly as practicable following the Expiration
Date.
Each signature on a Letter of Transmittal or a notice of withdrawal, as
the case may be, must be guaranteed by an Eligible Institution (as defined
below) unless the Old Notes surrendered for exchange pursuant thereto are
tendered (i) by a registered holder (as defined below) of the Old Notes who has
not completed either the box entitled "Special Issuance Instructions" or the box
entitled "Special Delivery Instructions" in the applicable Letter of
Transmittal, or (ii) for the account of an Eligible Institution. In the event
that a signature on a Letter of Transmittal or a notice of withdrawal, as the
case may be, is required to be guaranteed, such guarantee must be by a firm that
is a member of a registered national securities exchange or the National
Association of Securities Dealers, Inc., a commercial bank or trust company
having an office or correspondent in the United States or otherwise be an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Exchange Act (collectively, the "Eligible Institutions"). If the applicable
Letter of Transmittal is signed by a person other than the registered holder of
the Old Notes, the Old Notes surrendered for exchange must either (i) be
endorsed by the registered holder, with the signature thereon guaranteed by an
Eligible Institution or (ii) be accompanied by a bond power, in satisfactory
form as determined by the Company in its sole discretion, duly executed by the
registered holder, with
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<PAGE> 29
the signature thereon guaranteed by an Eligible Institution. The term
"registered holder" as used herein with respect to the Old Notes means any
person in whose name the Old Notes are registered on the books of the registrar
under the Indenture.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the Old Notes tendered for exchange will
be determined by the Company in its sole discretion, which determination shall
be final and binding. The Company reserves the absolute right to reject any and
all Old Notes not properly tendered and to reject any Old Notes the Company's
acceptance of which might, in the judgment of the Company or its counsel, be
unlawful. The Company also reserves the absolute right to waive any defects or
irregularities or conditions of the Exchange Offer as to particular Old Notes
either before or after the Expiration Date (including the right to waive the
ineligibility of any holder who seeks to tender Old Notes in the Exchange
Offer). The interpretation of the terms and conditions of the Exchange Offer
(including the Letter of Transmittal and the instructions thereto) by the
Company shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes for exchange must be
cured within such period of time as the Company shall determine. The Company
will use reasonable efforts to give notification of defects or irregularities
with respect to tenders of Old Notes for exchange but shall not incur any
liability for failure to give such notification. Tenders of the Old Notes will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Old Notes received by the Exchange Agent that are not
properly tendered and as to which the defects of irregularities have not been
cured or waived will be returned by the Exchange Agent to the tendering holders
without expense to the tendering holders as promptly as practicable after the
Expiration Date.
If any Letter of Transmittal, endorsement, bond power, power of attorney
or any other documents required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company, in its sole discretion, of such
person's authority to so act must be submitted.
Any beneficial owner of the Old Notes (a "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 Old Notes in the Exchange
Offer must contact such registered holder promptly and either make appropriate
arrangements to register ownership of the Old Notes in the Beneficial Owner's
name, so that the Beneficial Owner can tender on his or her own behalf, or
instruct such registered holder to tender on such Beneficial Owner's behalf. If
such Beneficial Owner wishes to tender directly and is the Beneficial Owner of
an Old Note in certificated form, such Beneficial Owner must, prior to
completing and executing the Letter of Transmittal and tendering Old Notes, make
appropriate arrangements to register ownership of the Old Notes in such
Beneficial Owner's name. Beneficial Owners should be aware that the transfer of
registered ownership may take considerable time.
The Exchange Agent will make a request to establish an account with
respect to the Old Notes at the Book-Entry Transfer Facility (as described in
the Letter of Transmittal) of DTC for the purposes of the Exchange Offer (the
"Book-Entry Transfer Facility") promptly after the date of this Prospectus. Any
financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account in accordance with DTC's ATOP procedures for the transfer.
Holders of Old Notes who are unable to deliver confirmation of the book-entry
tender of their Old Notes into the Exchange Agent's account at the Book-Entry
Transfer Facility or any other documents required by the Letter of Transmittal
to the Exchange Agent on or prior to the Expiration Date must tender their Old
Notes according to the guaranteed delivery procedures described below. Although
delivery of the Old Notes may be effected through book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility, unless an Agent's
Message is received by the Exchange Agent, in compliance with ATOP, an
appropriate Letter of Transmittal properly completed and duly executed with any
required signature guarantee and all other required documents must in each case
be transmitted to and received or confirmed by the Exchange Agent at its address
set forth below on or prior to the Expiration Date, or, if the guaranteed
delivery procedures described below are complied with, within the time period
provided under such procedures. Delivery of documents to the Book-Entry Transfer
Facility does not constitute delivery to the Exchange Agent.
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<PAGE> 30
Guaranteed Delivery Procedures. Holders who wish to tender their Old Notes
and (i) whose Old Notes are not immediately available or (ii) who cannot deliver
their Old Notes or any other documents required by the Letter of Transmittal to
the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration
Date (or who cannot complete the procedure for book-entry transfer on a timely
basis) may tender their Old Notes according to the guaranteed delivery
procedures set forth in the Letter of Transmittal. Pursuant to such procedures:
(i) such tender must be made by or through an Eligible Institution, (ii) on or
prior to the Expiration Date, the Exchange Agent must have received from the
Eligible Institution an applicable, properly completed and duly executed Notice
of Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number or
numbers of the tendered Old Notes, and the principal amount of tendered Old
Notes, stating that the tender is being made thereby and guaranteeing that,
within three business days after the Expiration Date, a Letter of Transmittal
together with the tendered Old Notes (or confirmation of a book-entry transfer
of such Old Notes into the Exchange Agent's account at DTC), and any other
required documents will be deposited by the Eligible Institution with the
Exchange Agent, and (iii) such properly completed and executed Letter of
Transmittal and all documents required thereby, and the tendered Old Notes in
proper form for transfer (or confirmation of a book-entry transfer of such Old
Notes into the Exchange Agent's account at DTC), must be received by the
Exchange Agent within three business days after the Expiration Date. Any holder
who wishes to tender Old Notes pursuant to the guaranteed delivery procedures
described above must ensure that the Exchange Agent receives the Notice of
Guaranteed Delivery relating to such Old Notes prior to 5:00 p.m., New York City
time, on the Expiration Date. 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.
Withdrawal of Tenders of Old Notes. Tenders of the Old Notes may be
withdrawn by delivery of a written notice to the Exchange Agent, at its address
set forth herein and in the Letter of Transmittal, at any time 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, as applicable, or, in the case of Old Notes transferred by book-entry
transfer, the name and number of the account at the Book-Entry Transfer Facility
to be credited), (iii) be signed by the holder in the same manner as the
original signatures on the Letter of Transmittal by which such Old Notes were
tendered (including any required signature guarantee) or be accompanied by a
bond power in the name of the person withdrawing the tender, in satisfactory
form as determined by the Company in its sole discretion, duly executed by the
registered holder, with the signature thereon guaranteed by an Eligible
Institution together with the other documents required upon transfer by the
Indenture, and (iv) specify the name in which such Old Notes are to be
re-registered, if different from the Depositor, pursuant to such documents of
transfer. All questions as to the validity, form and eligibility (including time
of receipt) of such notices will be determined by the Company, in its sole
discretion. The Old Notes so withdrawn will be deemed not to have been validly
tendered for exchange for the purposes of the Exchange Offer. Any Old Notes that
have been tendered for exchange but that are withdrawn will be returned to the
holder thereof without cost to such holder as soon as practicable after
withdrawal. Properly withdrawn Old Notes may be retendered by following one of
the procedures described under "--Procedures for Tendering Old Notes" at any
time on or prior to the Expiration Date.
Conditions of the Exchange Offer. Notwithstanding any other terms 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 herein 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, would prohibit, restrict or otherwise
render illegal consummation of the Exchange Offer; or
(b) 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.
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<PAGE> 31
If the Company makes a good faith determination that any of the above
conditions are not satisfied, the Company may (i) refuse to accept any Old Notes
and return all tendered Old Notes to the tendering holders, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the Expiration Date,
subject, however, to the right of holders to withdraw such Old Notes (see
"--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 that have not been withdrawn. If such waiver constitutes a material
change to the Exchange Offer, the Company will (i) promptly disclose such waiver
by means of a supplement to this Prospectus that will be distributed to the
registered holders; (ii) advise any Exchanging Dealer that has provided in
writing to the Company a telephone or facsimile number and address for notices,
and, if requested by any such Exchanging Dealer, confirm such advice in writing,
of the happening of such a change (which advice will be accompanied by an
instruction to suspend the use of this Prospectus until the requisite changes
have been made); and (iii) 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.
Consequences of Failure to Exchange. The Old Notes that are not exchanged
for New Notes pursuant to the Exchange Offer will remain restricted securities.
Accordingly, such Old Notes may be resold only (i) to the Company (upon
redemption thereof or otherwise), (ii) so long as the Old Notes are eligible for
resale pursuant to Rule 144A, to a person inside the United States whom the
seller reasonably believes is a qualified institutional buyer within the meaning
of Rule 144A under the Securities Act in a transaction meeting the requirements
of Rule 144A, in accordance with Rule 144 under the Securities Act, or pursuant
to another exemption from the registration requirements of the Securities Act
(and based upon an opinion of counsel reasonably acceptable to the Company),
(iii) outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Securities Act, or (iv) pursuant to an
effective registration statement under the Securities Act, in each case in
accordance with any applicable securities laws of any state of the United
States.
Suspension of Exchange Offer Registration Statement. The Company may
suspend the availability and use of the Exchange Offer Registration Statement
for one period not to exceed 30 days following the consummation of the Exchange
Offer for valid business reasons (not including avoidance of the Company's
obligations under the Registration Rights Agreement) including the acquisition
or divestiture of assets, public filings with the Commission, pending corporate
developments and similar events.
The Exchange Agent. Chase Manhattan Bank and Trust Company, National
Association, is the Exchange Agent. All tendered Old Notes, executed Letters of
Transmittal and other related documents should be directed to the Exchange
Agent. Questions and requests for assistance and requests for additional copies
of this Prospectus, the Letter of Transmittal and other related documents should
be addressed to the Exchange Agent as follows:
Chase Manhattan Bank and Trust Company,
National Association
c/o Texas Commerce Bank
Corporate Trust Services
1201 Main Street, 18th Floor
Dallas, Texas 75202
Attention: Frank Ivins
(confidential)
Phone: 214-672-5678
Fax: 214-672-5746
Delivery to an address other than as set forth above, or transmission of
instructions via a facsimile number other than the one set forth above, will not
constitute a valid delivery.
Fees and Expenses. All expenses incurred in connection with the
performance of the Company's obligations under the Registration Rights Agreement
will be borne by the Company. The Company has agreed to pay all expenses
incident to the Exchange Offer other than commissions or concessions of any
brokers or dealers and will indemnify the holders of the Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
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<PAGE> 32
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
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.
Brokerage Fees and Transfer Taxes. Holders who tender their Old Notes for
exchange will not be obligated to pay brokerage commissions or fees, or, subject
to the instructions in the Letter of Transmittal, any transfer taxes in
connection therewith, except that holders who instruct the Company to register
New Notes in the name of, or request that Old Notes not tendered or not accepted
in the Exchange Offer be returned to, a person other than the tendering holder
will be responsible for the payment of any applicable transfer tax.
Resales of the New Notes. Based on an interpretation by the staff of the
Commission set forth in no-action letters issued to third parties, the Company
believes the New Notes would be freely transferable by holders of the Old Notes
(other than "affiliates" of the Company within the meaning of Rule 405 under the
Securities Act) after the Exchange Offer without further registration under the
Securities Act if the holder of the New Notes represents that it is acquiring
the New Notes in the ordinary course of its business, that it has no arrangement
or understanding with any person to participate in the distribution of the New
Notes and that it is not an affiliate of the Company, as such terms are
interpreted by the Commission, provided that Exchanging Dealers will have a
prospectus delivery requirement with respect to resales of such New Notes. Any
holder who participates in the Exchange Offer for the purpose of participating
in a distribution of the New Notes may not rely on the position of the staff of
the Commission as set forth in these no-action letters or any similar
interpretive letters and would have to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
secondary resale transaction, unless an exemption from registration is otherwise
available. 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. A secondary resale transaction in the
United States by a holder who is using the Exchange Offer to participate in the
distribution of New Notes must be covered by a registration statement containing
the selling security holder information required by Item 507 of Regulation S-K
of the Securities Act. The Company has not sought its own no-action letter and
there can be no assurance that the staff of the Commission would make a similar
determination with respect to the Exchange Offer as in the above no-action
letters.
Each broker-dealer that receives New Notes for its own account in exchange
for Old Notes must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. See "Plan of Distribution." 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 on the 180th day after
the Expiration Date, it will make this Prospectus available to any broker-dealer
for use in connection with any such resale. In addition, to comply with the
securities or blue sky laws of certain jurisdictions, if applicable, the New
Notes may not be offered or sold unless they have been registered or qualified
for sale in such jurisdictions or an exemption from registration or
qualification is available and complied with.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Company in the Letter of Transmittal that by executing a Letter of
Transmittal, a holder will represent to the Company that, among other things,
(i) any New Notes to be received by it will be acquired in the ordinary course
of its business, (ii) at the time of commencement of the Exchange Offer it has
no arrangement or understanding with any person to participate in the
distribution (within the meaning of the Securities Act) of the New Notes, (iii)
it is not an "affiliate" of the Company, as defined in Rule 405 of the
Securities Act, or if it is an affiliate, it will comply with the registration
and prospectus delivery requirements of the Securities Act to the extent
applicable, (iv) it has full power and authority to tender, exchange, sell,
assign and transfer the tendered Old Notes, (v) the Company will acquire good,
marketable and unencumbered title to the tendered Old Notes, free and clear of
all liens, restrictions, charges and encumbrances, and (vi) the Old Notes
tendered for exchange are not subject to any adverse claims or proxies. As
indicated above, each broker-dealer that receives a New Note for its own account
in exchange for Old Notes must acknowledge that it will deliver a
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<PAGE> 33
Prospectus in connection with any resale of such New Notes. For a description of
the procedures for such resales by Exchanging Dealers, see "Plan of
Distribution."
Other. Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holder of the Notes are urged to consult
their financial and tax advisors in making their own decision on what action to
take.
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<PAGE> 34
BUSINESS
Overview
The Company is a leading provider of electronics design and manufacturing
services which operates through a global network of independent business units.
These business units are uniquely linked to provide the following related
products and services to OEM customers: design and manufacturing of custom
microelectronics ; design and manufacturing of prototype printed circuit boards;
high volume production of printed circuit boards; assembly of printed circuit
boards; process tooling; machines tools; in-circuit and functional test hardware
and software; and final systems assembly. By offering comprehensive and
integrated design and manufacturing services, the Company believes that it is
better able to develop long-term relationships with its customers, expand into
new markets and enhance its profitability. Key customers of the Company include:
3 Com Corporation, EMC Corporation, Hewlett-Packard, IBM, Lifescan, Inc. (a
subsidiary of Johnson & Johnson), Motorola, Inc., Silicon Graphics Inc., Symbios
Logic, Inc., The Foxboro Company and The Square D Company.
The Company provides its value-added services through the following
operating companies:
Dovatron assembles complex electronic circuits and provides final system
configuration services to its OEM customers;
DSI designs and engineers printed circuit boards;
Multek manufactures high density, complex multilayer printed circuit
boards;
Orbit designs and manufactures quick-turn customer specific integrated
circuits;
TTI Testron designs and manufactures in-circuit and functional test
software and hardware on a quick-turn basis;
IRI and Chemtech manufacture surface mount printed circuit board solder
cream stencils on a quick-turn basis;
Cencorp manufactures depaneling systems that route individual printed
circuit boards from an assembled master panel in the final step of the
electronics assembly process; and
PCT manufactures automation solutions for the transfer of bare printed
circuit board and assembled circuits through the entire manufacturing
process, including final box-build assembly.
The Company was incorporated in March 1993 as Dovatron International,
Inc., in order to serve as a holding company to effectuate the Spin-off of
Dover's electronics outsourcing business which occurred on May 21, 1993. On
January 31, 1996, the Company changed its name from "Dovatron International,
Inc." to "The DII Group, Inc." The Company's Common Stock is traded on the
Nasdaq Stock Market under the symbol "DIIG."
Industry Background
As a result of the growing capital-intensive nature of the manufacturing
process for electronic products coupled with the greater need for more
sophisticated design and manufacturing processes, OEMs have turned increasingly
to outside providers of electronics design and manufacturing services.
Utilization of such outside providers enables the OEMs to focus their efforts on
research, development and marketing. Other significant benefits of using
outsourcing services include: reduced time-to-market, reduced capital
investment, access to leading-edge manufacturing technology, design services,
improved inventory management and purchasing power, and access to worldwide
manufacturing sources. The Company believes that many OEMs now view outside
design and manufacturing service providers as strategic partners.
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Industry information regarding the Company's three primary product lines
follows:
Systems Assembly
The assembly of printed circuit boards involves the attachment of various
electronic components, such as integrated circuits, capacitors, resistors, and
processors, to printed circuit boards. Low price and high quality are now
considered to be entry level standards for companies in the industry. World
class contract manufacturers have expanded their services beyond printed circuit
board assembly and test to include both front-end services, such as design and
engineering, materials management and fabrication, and back-end services, such
as system assembly, integration and distribution/fulfillment. Successful
contract manufacturers are becoming increasingly important in helping OEMs to
introduce new products faster, more frequently and with a greater number of
features than in previous product generations. As a result, some production
volumes are smaller with shorter lead times for products targeted at specialized
niche markets. The ability to provide OEMs with product design capabilities,
quick-turn prototyping and complete solutions will be critical to the future
success of the contract manufacturers' relationships with OEMs.
A leading industry source estimates that the contract manufacturing
industry generated revenues of approximately $45.6 billion in 1995 and forecasts
revenues of approximately $117.0 billion in 1999, a compounded annual growth
rate of approximately 27%. The Company believes that contract manufacturers who
can meet the increasingly stringent cycle time, quality and technology needs of
customers in fast-growing, high value-added industry sectors will grow at a
marginally faster rate than the overall CEM market.
Interconnect Technologies
Printed circuit boards are the base used to interconnect the
microprocessors, integrated circuits, capacitors, resistors, and other
components critical to the operation of electronic equipment. Printed circuit
boards are generally made of rigid fiberglass, rigid paper or thin flexible
plastic. In recent years, the trend in the electronics industry has generally
been to increase the speed and performance of components, while reducing their
size. This advancement in component technology has driven the change in printed
circuit board design to higher density printed circuits. Multek has invested in
the advanced engineering systems and process equipment needed to meet these
density requirements.
Based upon industry sources, the domestic market for all printed circuit
boards in 1996 was approximately $7.4 billion and is forecasted to grow to
approximately $9.7 billion by the end of 2000, a compounded annual growth rate
of 7%. These industry sources estimate that the domestic market for high
performance printed circuit boards in 1996 was approximately $589 million and
should grow to approximately $1,126 million by the end of 2000, a compounded
annual growth rate of 18%.
Custom Microelectronics
Logic circuits are found in virtually every electronic system. Logic
circuits are utilized in a wide range of business and consumer applications
including medical devices, computers, calculators, communications equipment,
watches, automotive parts and defense-related products. Most logic functions
must be designed to fit each application in order to meet unique design
requirements and to allow for differentiation of the particular end-product to
provide advantages over the products of competitors. Although application
specific standard products are effective in providing rapid time-to-market
advantages, they typically do not allow system designers to provide product
differentiation. As a result, system designers typically utilize application
specific integrated circuits ("ASICs") that provide the specific logic component
required for a specific electronic system. The ASIC market can be segmented into
three areas: semicustom (MOS and bipolar gate arrays and linear arrays), custom
(cell-based and full custom), and programmable logic devices (including field
programmable gate arrays). Orbit participates in the ASIC market by providing
cost-effective gate array conversion and mixed-signal (analog/digital) design
services and wafer fabrication services. Orbit provides reduced cost and
increased speed-to-market advantages to its customers through its three primary
customer programs: ENCORE! (which allows customers to convert their integrated
circuit designs into Orbit digital gate arrays); mixed-signal design
(analog/digital) (which permits the rapid development of custom analog/digital
ASICs); and wafer fabrication (which includes additional programs based on
Orbit's independent manufacturing capabilities).
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A leading industry source estimates that 1995 worldwide merchant
semiconductor sales amounted to $148.1 billion and will increase to $370.8
billion in 2000, a compounded annual growth rate of 20%. This source estimates
that the 1995 sales of ASICs amounted to $15.7 billion and will increase to
$31.6 billion in 2000, a compounded annual growth rate of 15%. The market for
electronically programmable logic circuits was estimated by this source to be
$1.8 billion in 1995 and is estimated to increase at a compounded annual growth
rate of 20% to $4.4 billion in 2000.
Strategy
The Company's strategy is to be the fastest and most comprehensive
provider of custom electronics design and manufacturing services, ranging from
microelectronics design and fabrication through the final assembly of finished
products for OEM customers. The Company seeks to establish "partnerships" with
its customers through involvement in the early stages of their product
development by providing integrated design and manufacturing services. Key
elements of the Company's strategy include:
Integrated business units: The Company's products and services are
delivered to customers through its network of business units. By offering
a broad range of integrated products and services that extends from custom
microelectronics design and production, through printed circuit board
design and fabrication, to final systems assembly and in-circuit and
functional testing, the Company is able to secure more fully integrated
projects which provide opportunities to enhance volume and profitability.
Networked marketing strategies: The Company markets its products and
services to customers through its individual business units and through
linked marketing in order to provide fully integrated custom design and
manufacturing solutions to its customers. Through the integration of
design and manufacturing solutions offered by the Company's network of
business units, the Company provides customer specific products and
services to reduce customer time-to-market and decrease total
manufacturing costs.
Global presence: The Company offers design and manufacturing capabilities
in the three major electronics markets of the world (North America, Europe
and Asia). The Company currently maintains various design and
manufacturing facilities throughout the United States (New York, Rhode
Island, Florida, Illinois, Texas, Colorado, California and Minnesota); in
Puebla and Guadalajara, Mexico; Cork, Ireland; Essex, England; Singapore;
and Malacca, Malaysia. These regional facilities provide the size and
flexibility required to meet the needs of smaller customers and the global
reach required for larger customers. Acquisitions have played an important
role in the expansion of the Company's global presence, and the Company
expects to continue to pursue acquisitions in its efforts to expand its
global reach.
Customer relationships: The DII Group companies target customers in
fast-growing industry sectors that require complex outsourcing solutions
together with minimum time-to-market. This enhances the Company's ability
to realize higher margins on its products and services.
Technology and manufacturing leadership: The Company seeks to maintain
technological leadership in order to secure partnerships with customers in
the early stages of their product development and to support their design
and manufacturing requirements. In addition, the Company continues to
invest in high-technology equipment, enabling the DII Group companies to
accept increasingly complex orders which provides opportunities to enhance
volume and profitability.
Acquisitions
The Company has actively pursued acquisitions in furtherance of its
strategy to be the fastest and most comprehensive provider of custom electronics
design and manufacturing services, ranging from microelectronics design and
fabrication through the final assembly of finished products for OEM customers.
The Company's acquisitions have enabled the Company to provide more integrated
outsourcing technology solutions with time-to-market and lower cost advantages.
Acquisitions have also played an important part in expanding the Company's
presence in the global electronics marketplace. Since 1994, the Company has made
the following acquisitions to expand its geographic presence and enhance its
value-added design and manufacturing capabilities:
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Transaction Date Products or Services
- ----------- ---- --------------------
Systems Assembly
CEM assets of The Square D Company November 1995 Assembly of printed
circuit boards
Sistemas Inteligentes Ceretronik, July 1994 Assembly of printed
S.A. de C.V. (Mexico) circuit boards
CEM business of The Thielen Group, Inc. May 1994 Assembly of printed
circuit boards
Interconnect Technologies
Printed circuit board manufacturing August 1997 High volume printed
assets of International Business circuit board
Machines Corporation fabrication
Design Solutions, Inc. June 1997 Design and engineering
of printed circuit
boards
Printed circuit board manufacturing December 1995 Quick-turn prototype
assets of Unisys Corporation complex multilayer
printed circuit
boards
Multilayer Technology, Inc. September 1994 Quick-turn prototype
complex multilayer
printed circuit
boards
Custom Microelectronics
Microelectronics fabrication assets November 1996 Custom microelectronics
of Paradigm Technology, Inc.
Orbit Semiconductor, Inc. August 1996 Design and manufacture
of custom
microelectronics
products
Process Technologies
Process Control Technologies, Inc. April 1997 Continuous flow
solutions for printed
circuit boards and
final product
assembly
Chemtech (UK) Limited April 1996 Quick-turn stencils
TTI Testron, Inc. August 1995 In-circuit and
functional test
equipment
Test Technology Pte. Ltd. (Singapore) September 1994 In-circuit and
functional test
software and hardware
By enhancing the Company's capability to provide a wide range of related
electronics design and manufacturing services to a global market that is
increasingly dependent on outsourcing providers, these acquisitions have enabled
the Company to enhance its competitive position as a leading provider of
comprehensive outsourcing technology solutions.
Products and Services
The Company provides the following related products and services to
customers in the global electronics manufacturing industry:
Systems Assembly--The Company assembles complex electronic circuits and
provides final system configuration (CEM) on a high and low volume
contract basis through Dovatron International ("Dovatron"). This product
line accounted for 65% of the Company's net sales for the nine-month
period ended September 28, 1997 and 60%, 64% and 70% of the Company's net
sales for the 1996, 1995 and 1994 fiscal years, respectively.
Interconnect Technologies--The Company provides design and engineering
services for printed circuit assemblies through Design Solutions, Inc.
("DSI") and manufacturers high density, complex multilayer printed circuit
boards on a quick-turn and high-volume production basis through Multek.
This product line
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accounted for 16% of the Company's net sales for the nine-month period
ended September 28, 1997, 16% and 14% of the Company's net sales in fiscal
1996 and 1995, respectively, and less than 10% of the Company's net sales
in fiscal 1994.
Custom Microelectronics--Through Orbit, the Company provides semiconductor
design, manufacturing and engineering support services to its OEM
customers. Orbit provides cost-effective gate array conversion services,
mixed-signal design and production capabilities as well as
high-reliability manufacturing and quick-turn and low-volume manufacturing
services, utilizing a combination of its internal fabrication capabilities
and its external foundry suppliers, thereby using a "fab/fabless"
manufacturing approach. This product line accounted for 10% of the
Company's net sales for the nine-month period ended September 28, 1997,
and 14%, 16% and 20% of the Company's net sales for the 1996, 1995 and
1994 fiscal years, respectively.
Process Technologies--The Company manufactures surface mount printed
circuit board solder cream stencils on a quick-turn basis through IRI
International ("IRI") and Chemtech (UK) Limited ("Chemtech"); designs and
manufactures in-circuit and functional test software and hardware on a
quick-turn basis through TTI Testron; manufactures depaneling systems that
route individual printed circuit boards from an assembled master panel in
the final step of the electronics assembly process through Cencorp; and
manufactures automation solutions for the transfer of bare printed circuit
boards and assembled circuits through the entire manufacturing process,
including final box-build assembly, through Process Control Technologies,
Inc. ("PCT"). This product line accounted for 10% of the Company's net
sales for the 1996 fiscal year, and less than 10% of the Company's net
sales for the nine-month period ended September 28, 1997 and for the 1995
and 1994 fiscal years.
With the above core competencies, the Company has the ability to provide
customers with a total design and manufacturing outsourcing solution. The
Company's ability to offer fully-integrated solutions with value-added front-and
back-end product and process development capabilities coupled with global volume
assembly capabilities provides customers with significant speed-to-market and
product cost improvements.
Manufacturing
The Company provides initial prototype and follow-on high volume
manufacturing services on both a turnkey basis, where the Company purchases
materials, and on a consignment basis, where materials are provided by the
customer. The level of the Company's sales revenue is subject to significant
shifting, based on whether orders are being filled on a turnkey or on a
consignment basis. Because the Company obtains firm purchase orders from its
customers, the customers typically bear the inventory cost risk associated with
purchases of materials by the Company in connection with orders to be filled on
a turnkey basis. Because OEM customers typically do not make firm orders for
delivery of products more than 30 to 90 days in advance of delivery, and since
orders may be rescheduled or cancelled by customers, the Company does not
believe that the backlog of expected product sales covered by firm purchase
orders is a meaningful measure of future sales. Manufacturing information
regarding the Company's three primary product lines follows:
Systems Assembly
Through Dovatron, the Company produces complex printed circuit board
assemblies using both surface mount ("SMT") and pin through-hole ("PTH")
interconnection technologies. The assembly of printed circuit boards involves
the attachment of various electronic components, such as integrated circuits,
capacitors, resistors, and processors, to printed circuit boards. SMT is a
method of assembling printed circuit boards whereby components are fixed
directly onto the surface of the board instead of being inserted and soldered
into plated holes on the board (the latter method being PTH). SMT offers the
advantages of miniaturization and significant cost reductions. The higher
density achieved through SMT also allows for shorter signal lengths, with
resulting increases in signal speed potential and thermal performance.
Dovatron's manufacturing processes also include the more advanced assembly
processes of Ball Grid Array ("BGA") and Chip on Board ("COB") technologies. BGA
technology utilizes packaged semiconductor die where the electrical connection
from within the package is terminated on the outer surface of the package using
solder alloy in the
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shape of a partial sphere. A BGA package, rather than using pins for leads,
mounts to the printed circuit board using the balls located on the underside of
the package. COB technology utilizes unpackaged or "bare" semiconductor die
which are wire bonded onto the surface of the printed circuit board and then
sealed with an epoxy.
Dovatron employs a multi-disciplined engineering team which provides
design and manufacturing support to customers. In addition, Dovatron conducts
design-for-manufacturability reviews and, when appropriate, recommends design
changes to reduce manufacturing costs or lead times, increase manufacturing
yields and the quality of the printed circuit boards or finished assemblies, and
enhance the ability to automate assembly.
Dovatron has expanded its services beyond printed circuit board assembly
and test to include both front-end services, such as engineering, materials
management and fabrication, and back-end services, such as system assembly,
integration and distribution/fulfillment. Quality remains a key focus, and all
seven of Dovatron's global manufacturing facilities are ISO 9002 certified.
Interconnect Technologies
Through Multek, the Company manufactures high density, complex multilayer
printed circuit boards. The manufacturing of printed circuit boards involves
several steps: etching the circuit image on copper-clad epoxy laminate, pressing
the laminates together to form a panel, drilling holes and depositing copper or
other conductive material onto the board to form the inter-layer electrical
connections, and cutting the panels to shape.
Multilayering, which involves the placing of multiple layers of electrical
circuitry on a single printed circuit board, expands the number of circuits and
components that can be contained on the interconnect product and increases the
operating speed of the system by reducing the distance the electrical signal
must travel. The manufacturing of complex multilayer interconnect products often
requires the use of sophisticated circuit interconnections between layers
(called "blind or buried vias") and adherence to strict electrical
characteristics to maintain consistent circuit transmission speeds (referred to
as "controlled impedance"). These technologies require very tight lamination and
etching tolerances.
Through the use of specialized materials such as polyimide, teflon, and
reflon hybrids, Multek achieves multilayer circuit counts to 68 layers. Multek
employs state-of-the-art manufacturing processes by working closely with
equipment suppliers, many of which use Multek as a beta site for new
technologies being introduced to the marketplace. Multek is ISO 9002 certified.
Multek's August 18, 1997 acquisition of the Austin PCB Fab provides Multek with
the capability to support its customers' follow-on higher volume requirements.
Custom Microelectronics
Through Orbit, the Company manufactures customer specific integrated
circuits on a quick-turn basis. The manufacture of Orbit's products is a complex
process involving a number of precise steps, including wafer fabrication,
assembly, burn-in, dicing, packaging and final test. Semiconductor manufacturing
cost per unit is primarily a function of die size (since the potential number of
good die per wafer increases with reduced die size), number of mask layers, and
the yield of acceptable die produced on each wafer. Other contributing factors
include wafer size, number of fabrication steps, equipment utilization, process
complexity and cleanliness. Larger wafer sizes and smaller process geometries
generally result in lower costs through higher production yields.
Orbit is continually engaged in efforts to enhance its production
processes to reduce its manufacturing costs and to increase capacity
utilization. Orbit is in the process of transitioning its manufacturing and test
operations from its 4-inch, 1.2 micron wafer fabrication facility to its 6-inch,
0.6 micron fabrication facility. This new facility, with larger wafer sizes and
finer geometries, is expected to result in lower manufacturing costs which
should allow for more competitive pricing. In addition, Orbit has entered into
"fabless" manufacturing agreements with external foundries which supply Orbit
with larger wafers in higher volumes and denser geometries than can be produced
in its 6-inch, 0.6 micron wafer fabrication facility.
Orbit performs wafer fabrication in a highly controlled, clean environment
to minimize dust and other yield and quality limiting contaminants.
Notwithstanding the highly controlled manufacturing operations, equipment does
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not consistently perform flawlessly and minute impurities, defects in the
photomasks, or other difficulties in the process may cause a substantial
percentage of the wafers to be rejected or individual circuits to be
nonfunctional. The success of Orbit's manufacturing operations will largely be
dependent on its ability to minimize such impurities and to maximize its yield
of acceptable, high-quality integrated circuits. In this regard, Orbit employs
rigorous quality controls throughout the manufacturing, screening, and testing
processes to ensure that its manufacturing procedures and products achieve the
objective quality standards that have been presented for the semiconductor
manufacturing industry. Orbit's operations meet the quality standards of its
customers, some of whom are governed by the requirements established by the
United States Food and Drug Administration and the Department of Defense. Orbit
is ISO 9001 certified.
Marketing and Customer Profile
The Company markets its products and services through advertisements,
technical articles and press releases that appear regularly in a variety of
trade publications, as well as through the dissemination of Company brochures,
data sheets and technical information. Additionally, the Company participates in
various industry trade shows on a regular basis. Individual products and
services are marketed to customers though direct sales personnel and independent
manufacturers' representatives. The DII Group's sales and marketing functions
link the DII Group companies to provide fully integrated custom design and
manufacturing solutions to its customers. Through the integration of design and
manufacturing solutions offered by the Company's network of business units, the
DII Group companies provide customer specific products and services to reduce
customer time-to-market and decrease total manufacturing costs. By participating
in the early stages of high velocity product development with customers in
targeted, fast-growing industry sectors, the Company believes it can develop
long-term relationships with its customers, expand into new markets and enhance
profitability.
The Company generates international revenues from international sales
through its regional manufacturing facilities in Mexico, Europe and Southeast
Asia. The Company's international operations generated approximately 40% of
total net sales for the nine-month period ended September 28, 1997 and 25%, 32%
and 28% of total net sales for the 1996, 1995 and 1994 fiscal years,
respectively. See Note 12 to the Company's Consolidated Financial Statements
incorporated by reference in this Prospectus.
At any given time, certain customers may account for significant portions
of the Company's business. Hewlett-Packard accounted for 16% of net sales during
the nine-month period ended September 28, 1997. No other customer accounted for
more than 10% of net sales during the nine-month period ended September 28,
1997. Standard Microsystems Corporation ("SMC") accounted for 10% and 24% of net
sales for the 1995 and 1994 fiscal years, respectively. Seagate Technology Inc.
accounted for 13% and 10% of net sales for the 1995 and 1994 fiscal years,
respectively. No other customer accounted for more than 10% of net sales for the
1995 and 1994 fiscal years, and no customer accounted for more than 10% of net
sales for the 1996 fiscal year. The Company's top ten customers accounted for
49% of net sales for the nine-month period ended September 28, 1997 and 43%, 46%
and 55% of net sales for the 1996, 1995 and 1994 fiscal years, respectively.
Although management believes that the Company serves a diverse range of
customers and markets, the Company's contracts generally do not provide the
Company with firm long-term volume purchase commitments. In addition, from time
to time, some of the Company's customers have terminated their manufacturing
arrangements with the Company, and other customers have significantly reduced or
delayed the volume of design, engineering and manufacturing services performed
by the Company. Any such termination of a manufacturing relationship or change,
reduction or delay in orders could have a material adverse affect on the
Company's operating results. See "Risk Factors--Customer Concentration" for a
discussion of certain risks relating to the concentration of the Company's
customer base, including with respect to sales to IBM from the Austin PCB Fab.
The Company seeks a well-balanced customer profile across most sectors of
the electronics industry in order to reduce exposure due to a downturn in any
particular sector. The primary sectors within the electronics industry served by
the Company are data communications, office automation, computer and
peripherals, telecommunications, industrial, instrumentation, and medical.
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Suppliers
The Company works with customers and suppliers to minimize the impact of
component shortages. The Company orders raw materials and components based on
purchase orders received and accepted, and maintains minimal levels of inventory
that are not identified for use in filling specific orders. Raw material and
component shortages have had, and are expected to have, from time to time,
short-term adverse effects on the Company's business, including impact due to
price fluctuations and delayed shipments. Significant shortages of raw materials
or components used by the Company's operating units would have a material
adverse effect on the Company's results of operations. In addition, the
Company's operating units depend on a limited number of suppliers for many of
the raw materials used in their products and services. The interruption of
supply from such suppliers could adversely affect the Company's operations.
Competition
Today's technology marketplace is more competitive than ever. In an
environment characterized by compressed product life cycles, global competition,
rapid technological change, increasingly stringent quality and service
expectations, and constant profit margin pressure due to unrelenting price
pressure, OEMs have a growing need to limit asset risks, improve returns on
invested capital, and most importantly, focus their resources on their own core
competencies of product development and marketing. These factors place
corresponding competitive pressures on the outsourcing industry.
The Company competes against numerous domestic and foreign companies. The
Company also faces competition from current and prospective OEM customers who
evaluate the Company's capabilities against the merits of manufacturing their
products internally. Because of the Company's wide range of products and
services, some of the Company's CEM competitors are also customers of the
Company. Certain of the Company's competitors have substantially greater
manufacturing, financial, research and development, and marketing resources than
the Company. To remain competitive, the Company must continue to make
substantial capital outlays in order to develop and provide technologically
advanced design and manufacturing services, maintain quality levels, offer
flexible delivery schedules, deliver finished products on a reliable basis, and
compete favorably on the basis of price. In addition, as the Company continues
to expand its operations, some of its CEM competitors may decide to place orders
with companies with which they are in less direct competition.
Competition in the electronics outsourcing industry is based upon
technology, service, design and manufacturing capability, quality, price, and
the ability to deliver finished products on an expeditious and reliable basis.
In order to differentiate itself in this intensely competitive market, the
Company has adopted and pursues a strategy to be the fastest and most
comprehensive provider of custom electronics design and manufacturing services,
ranging from micro-electronics design and fabrication through the final assembly
of finished products for OEM customers.
Environmental Regulation
The Company's operations are subject to certain federal, state and local
regulatory requirements relating to the use, storage, discharge and disposal of
hazardous chemicals used during its manufacturing processes. The Company
believes that it is currently operating in compliance in all material respects
with applicable regulations and does not believe that costs of compliance with
these laws and regulations will have a material effect upon its capital
expenditures, earnings or competitive position.
The Company has joined together with other potentially responsible parties
("PRPs") to negotiate with the New York Department of Environmental Conservation
(NYDEC) concerning the performance of a remedial investigation/feasibility study
at a former disposal site, the Robin Steel Site. In connection therewith, the
Company executed the Robin Steel Site PRP Participation Agreement. The Company's
share under the Agreement is less than 2%. A consent order concerning the
performance of a remedial investigation/feasibility study (RI/FS) was signed on
July 22, 1997 with the NYDEC.
As a result of a series of evaluations initiated by the Company, the
Company has become aware of certain environmental conditions that require
remedial action at a formerly owned facility in Kirkwood, New York and a
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facility which is owned and leased out to a third party in Binghamton, New York.
In the case of the Binghamton facility, the contamination was the result of
leakage from an underground storage tank used by a former owner; while in the
case of the Kirkwood facility, the evaluations found traces of a chemical
solvent used in a manufacturing process. The Company has hired an environmental
engineering firm to undertake certain remedial actions. In August 1995, the
NYDEC contacted the Company to enter into discussions regarding a remedial
investigation/feasibility study ("RI/FS") and RI/FS Orders for both sites. The
Company is negotiating with the NYDEC with respect to remedial
investigation/feasibility studies and the necessity, if any, for RI/FS Orders.
The ultimate outcome of these matters cannot, at this time, be predicted
in light of the uncertainties inherent in these matters. Based upon the facts
and circumstances currently known, management cannot estimate the most likely
loss or the maximum loss for these matters. The Company has accrued the minimum
estimated costs, which amounts are immaterial, associated with these matters in
its Consolidated Financial Statements incorporated by reference in this
Prospectus.
The Company determines the amount of its accruals for environmental
matters by analyzing and estimating the range of possible costs in light of
information currently available. The imposition of more stringent standards or
requirements under environmental laws or regulations, the results of future
testing and analysis undertaken by the Company at its operating facilities, or a
determination that the Company is potentially responsible for remediations at
other sites, could result in expenditures in excess of amounts currently
estimated to be required for such matters. No assurance can be given that actual
costs will not exceed amounts accrued or that costs will not be incurred with
respect to sites where problems are not currently known. Further, there can be
no assurance that additional environmental matters will not arise in the future.
Employees
The Company employs approximately 6,200 employees worldwide, the majority
of whom are engaged in manufacturing operations. Approximately 1,000 employees
at the Cork, Ireland and Puebla, Mexico facilities are subject to collective
bargaining agreements. The Company believes that its relations with its
employees are good.
Patents and Trademarks
The Company holds patents and also owns certain registered trademarks. The
Company does not believe that such patents and trademarks are material to its
business.
The Company has devoted significant resources to develop its current level
of expertise, and believes that its unpatented proprietary know-how and
processes are valuable assets that have been and will continue to be important
to the Company's business. The Company relies primarily on a combination of
nondisclosure agreements and other contractual provisions, as well as the
confidentiality and loyalty of its employees, to protect its know-how processes.
The failure of the Company to protect its material know-how and processes could
have a material adverse effect on the Company's business and results of
operations. Furthermore, there can be no assurance that the steps taken by the
Company will be adequate to protect its proprietary rights or that a competitor
will not independently develop know-how or processes similar or superior to
those of the Company.
Although the Company does not believe that its manufacturing processes
infringe on the intellectual property rights of third parties, there can be no
assurance that third parties will not assert infringement claims against the
Company. If any such claims arise, the Company will evaluate its merits, and may
seek a license from the claimant. There can be no assurance that licenses, if
needed by the Company, would be obtained on acceptable terms, that litigation
would not occur or that damages for past infringement by the Company, if any,
would not be material. Litigation, which could result in substantial cost to and
diversion of resources of the Company, could be necessary to enforce
intellectual property rights of the Company or to defend the Company against
infringement claims. The failure to obtain necessary licenses or the advent of
litigation could have a material adverse effect on the Company's business,
financial condition and results of operations.
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Properties
The Company currently occupies the following facilities:
Square Owned/
Location by Product Line Footage Leased
- ------------------------ ------- ------
Systems Assembly:
Anaheim, California................................. 63,000 Leased
Binghamton, New York................................ 110,000 Owned
Clearwater, Florida................................. 60,000 Owned
Cork, Ireland....................................... 20,000 Leased
Cork, Ireland....................................... 100,000 Owned
Guadalajara, Mexico................................. 60,000 Leased
Longmont, Colorado.................................. 70,000 Owned
Malacca, Malaysia................................... 40,000 Leased
Puebla, Mexico...................................... 44,000 Owned
Interconnect Technologies:
Austin, Texas....................................... 696,000 Leased(1)
Endicott, New York.................................. 400 Leased
Fremont, California................................. 3,000 Leased
Irvine, California.................................. 60,000 Owned
Roseville, Minnesota................................ 68,000 Leased
Santa Barbara, California........................... 5,000 Leased
Custom Microelectronics:
San Jose, California................................ 61,800 Leased
Sunnyvale, California............................... 50,300 Leased
Sunnyvale, California............................... 28,100 Owned
Process Technologies:
Addison, Illinois................................... 25,000 Leased
Buffalo Grove, Illinois............................. 9,000 Leased
Essex, United Kingdom............................... 14,000 Leased
Gardena, California................................. 10,000 Leased
Johnson City, New York.............................. 20,000 Leased
Longmont, Colorado.................................. 14,000 Leased
Milpitas, California................................ 10,000 Leased
Orlando, Florida.................................... 15,000 Leased
Penang, Malaysia.................................... 1,200 Leased
Richardson, Texas................................... 9,000 Leased
Singapore........................................... 13,300 Leased
Tustin, California.................................. 12,000 Leased
Woonsocket, Rhode Island............................ 20,000 Owned
Corporate Headquarters:
Niwot, Colorado..................................... 7,000 Leased
---------
Total......................................... 1,719,100
=========
- ----------
(1) Includes 693,000 square feet occupied by the Austin PCB Fab purchased from
IBM which is located in an undivided facility owned by IBM. The Company is
currently leasing from IBM the portion of the undivided facility that
relates to the Austin PCB Fab. IBM has agreed to seek a subdivision of its
Austin, Texas property, and upon the grant of such subdivision, to grant to
the Company a fee title to the portion of the property currently being
leased by the Company. If IBM's request for a subdivision is not granted,
the Company will continue to lease the Austin space under a ninety-nine
year prepaid lease.
Additional facilities of 50,000 square feet located in Binghamton, New
York and a 26,300 square foot facility located in Sunnyvale, California are
being leased to third parties. The Company also leases small amounts of office
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space in Atlanta, Georgia and Philadelphia, Pennsylvania. The Company believes
that its facilities are well-maintained and suitable for their respective
operations and have sufficient capacity to accommodate the expected growth of
the Company in the foreseeable future.
Legal Proceedings
In June 1997, a complaint was filed in the District Court of Boulder,
Colorado against the Company and three of its officers and directors. An amended
complaint was filed on September 5, 1997. The lawsuit purports to be brought on
behalf of a class of persons who purchased the Company's common stock during the
period from April 1, 1996 through September 8, 1996 and claims violations of
Colorado law based on allegedly false and misleading statements made in
connection with the offer, sale or purchase of the Company's common stock at
allegedly artificially inflated prices, including statements made prior to the
Company's acquisition of Orbit. The complaint seeks compensatory and other
damages as well as equitable relief. On October 15, 1997, the Company filed a
motion to dismiss the amended complaint. On September 8, 1997, a similar
complaint, alleging violations of Federal securities laws based on the same
allegedly false and misleading statements, purportedly on behalf of the same
class of persons, was filed in the U.S. District Court for the District of
Colorado against the Company and the same officers and directors. On November
10, 1997, the Company filed a motion to dismiss the Federal action. Both actions
were brought by the same plaintiffs' law firm as the Orbit action discussed
below. The Company believes that the claims asserted in both actions are without
merit and intends to defend against such claims vigorously. There has been no
discovery from the Company in either action and neither court has yet set a
trial date.
A class action complaint for violations of federal securities law was
filed against Orbit and three of its officers in 1995, in the U.S. District
Court for the Northern District of California. An amended complaint was filed on
March 25, 1996. The amended complaint was dismissed on November 12, 1996, with
leave to amend only as to certain specified claims relating to the statements
made by securities analysts. On January 21, 1997, a second amended complaint was
filed. The second amended complaint seeks relief under Section 10(b) and 20(a)
of the Exchange Act and Rule 10b-5 promulgated thereunder. The second amended
complaint seeks compensatory and other damages as well as equitable relief. On
September 2, 1997, Orbit filed its answer to the second amended complaint
denying responsibility for the actions of securities analysts and further
denying that it misled the securities market. The court has not yet set a trial
date, but third party discovery is ongoing.
In addition to the above matters, the Company is involved in certain other
litigation arising in the ordinary course of business. Although management is of
the opinion that none of these matters will have a material adverse effect on
the consolidated financial position or results of operations of the Company, the
ultimate outcome of these matters cannot, at this time, be predicted in light of
the uncertainties inherent in litigation. See Note 10 to the Company's
Consolidated Financial Statements incorporated by reference in this Prospectus
for details of the Company's contingencies and environmental matters.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
During the second quarter of 1996, a promissory note (the "IMS Note")
evidencing indebtedness of Integrated Multimedia Solutions, Inc. ("IMS") to the
Company was restructured and written-down from $1.2 million to $1.0 million. The
maturity date of the IMS Note was also extended until the fourth quarter of
1997. In consideration for the restructuring, IMS reconfirmed its obligation to
the Company and a portion of the collateral securing the note was escrowed for
the benefit of the Company. IMS is an affiliate of Thomas Group, Inc. Mr.
Alexander W. Young, a director of the Company, was Chairman of IMS until
September 15, 1994 and is President, Chief Operating Officer and a director of
Thomas Group, Inc.
The Company made loans to certain of its executives in order to enable the
executives to satisfy their tax obligations in connection with the vesting of
their performance shares in 1996 and 1997. The loans were advanced in January
1996 and April 1997. Interest on the loans accrues at a rate of 5.7% per annum
and 6.5% per annum, respectively. As of September 28, 1997, the aggregate amount
of principal and interest outstanding with respect to the executives was as
follows: Ronald R. Budacz, $0.6 million; Carl R. Vertuca, Jr., $0.4 million;
Ronald R. Snyder, $0.2 million; Carl A. Plichta, $0.3 million; Thomas J. Smach,
$0.2 million; Steven C. Schlepp, $0.2 million; and Mark
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D. Herbst, $0.1 million. The loans will be forgiven in proportionate
installments on January 1 of 1998, 1999, 2000 and 2001.
Messrs. Ronald R. Budacz and Carl R. Vertuca, Jr., Chairman and Chief
Executive Officer and Executive Vice President of the Company, respectively,
have leased to the Company usage of a resort property located in Arrowhead,
Colorado for purposes of holding corporate meetings and other corporate
purposes. The terms of the lease provide for usage for a period of 80 days per
year at a rental rate of $0.2 million. The lease is for a period of five years
commencing September 1, 1997. The Company believes that the terms of the lease
are comparable to those that would be entered into between unrelated parties on
an arms'-length basis.
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DESCRIPTION OF CERTAIN EXISTING DEBT
The summaries contained herein of certain provisions of the debt of the
Company do not purport to be complete and are qualified in their entirety by
reference to the provisions of the various agreements which are filed as
exhibits with the Commission.
Senior Credit Agreement
General. The Company and certain of its U.S. subsidiaries (the
"Borrowers") are parties to a Loan Agreement, dated as of April 4, 1996 and
amended as of December 20, 1996 and August 1, 1997 (the "Senior Credit
Agreement"), with Norwest Bank Colorado, N.A., as lender and agent ("Norwest"),
and The Chase Manhattan Bank, Harris Trust and Savings Bank and NBD Bank, as
lenders, pursuant to which the lenders have agreed to make available to the
Borrowers, until June 30, 2002, an $80 million revolving credit facility.
Borrowings under the Senior Credit Agreement may be made in the form of (i)
loans to be disbursed to or at the direction of the Borrowers or (ii) letters of
credit. Funds available under the Senior Credit Agreement may be used for
working capital and other general corporate purposes, including acquisitions. As
of September 28, 1997, there were no borrowings outstanding under the Senior
Credit Agreement. Following the application of the net proceeds of the offering
of the Old Notes, the Company has $80.0 million of available borrowing capacity
under the Senior Credit Agreement.
Interest Rate. Interest payable on loans made under the Senior Credit
Agreement may be fixed at (i) a fluctuating Base Rate per annum or (ii) the
LIBOR Rate. The Base Rate in effect from time to time is equal to the greater of
(x) Norwest's prime rate less 0.5%, and (y) the Federal Funds Rate plus 1.0%.
The LIBOR Rate is equal to the Eurodollar Rate plus an applicable margin which
ranges from 1.0% to 1.5% based on the Company's ratio of EBITDA (as defined in
the Senior Credit Agreement) to fixed charges for the applicable determination
period. The Eurodollar Rate is determined by Norwest by dividing (x) the rate
published on page 3750 of Telerate (or if unavailable, a substantially
comparable source) by (y) a percentage equal to 100% minus the applicable
reserve percentage published by the Board of Governors of the Federal Reserve
System.
Security. The Borrowers' obligations under the Senior Credit Agreement are
secured by (i) the pledge of substantially all the assets of the Borrowers and
the Company's other U.S. subsidiaries, (ii) the pledge of 100% of the issued and
outstanding stock of the Company's U.S. subsidiaries, and (iii) guaranties
issued by certain of the Company's U.S. subsidiaries.
Certain Covenants. Loans under the Senior Credit Agreement may not be
used, directly or indirectly, to redeem any of the Company's Convertible Notes.
In addition, the Borrowers and their respective subsidiaries must observe
certain financial covenants and certain additional restrictions, including
restrictions on their ability to (i) incur debt, (ii) create liens on their
properties and assets, (iii) make investments in businesses outside the
Company's Industry (as defined in the Senior Credit Agreement), (iv) merge or
consolidate with other entities, (v) pay dividends or make distributions, (vi)
repurchase or redeem capital stock, and (vii) dispose of their assets.
Prepayments. The Borrowers may voluntarily prepay all or any portion of
the balance outstanding under the Revolving Facility at any time, without
penalty, except that a prepayment premium would apply if a LIBOR Rate loan were
prepaid on a date other than the end of the interest period specified for such
loan. The Senior Credit Agreement does not contain any mandatory prepayment
provisions.
Events of Default. Events of Default under the Senior Credit Agreement
include (i) nonpayment of any amounts due under the Senior Credit Agreement,
(ii) non-payment of principal or interest due under, or any other default under,
any other debt of a Borrower in an aggregate principal amount in excess of $2
million, (iii) the occurrence of a Change in Control (as defined in the Senior
Credit Agreement), (iv) certain events of bankruptcy or insolvency, and (v) the
occurrence of a material adverse change in any Borrower's financial condition or
business or operations.
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Convertible Notes
General. On October 11, 1995 the Company issued $86.25 million aggregate
principal amount of 6% Convertible Subordinated Notes (the "Convertible Notes"),
with a maturity date of October 15, 2002. Interest on the Convertible Notes is
paid semiannually on April 15 and October 15 of each year. The Convertible Notes
are not listed on any securities exchange, but are eligible for trading in The
Portal Market of The Nasdaq Stock Market, Inc.
Conversion. At the option of the holder thereof, each Convertible Note,
unless previously redeemed, is convertible into shares of Common Stock of the
Company, at a conversion price of $18.75 per share (after adjustment for the
Stock Split that was effected on September 2, 1997), subject to adjustment in
certain events.
Redemption. The Convertible Notes are redeemable, in whole or in part, at
the option of the Company, at any time on and after October 15, 1998, at
redemption prices ranging from 103.429% to 100% of their face value (beginning
on October 15, 2001), plus accrued and unpaid interest. Upon the occurrence of a
Designated Event as defined in the indenture governing the Convertible Notes
(the "1995 Indenture") each holder of Convertible Notes will have the right,
subject to certain restrictions and conditions, to require the Company to
purchase all or any part of such holder's Convertible Notes at a purchase price
equal to 101% of the principal amount thereof, plus accrued and unpaid interest
to the date of purchase. A Designated Event is defined in the 1995 Indenture as
a Change of Control (as defined in the 1995 Indenture) or a Termination of
Trading (which would occur if the Common Stock ceased to be listed for trading
on a United States national securities exchange or to be approved for trading on
an established automated over-the-counter trading market in the United States).
Ranking. The Convertible Notes are unsecured obligations of the Company
and are subordinate in right of payment to all Senior Debt (as defined in the
1995 Indenture) of the Company, and are structurally subordinated to all debt
and other liabilities of the Company's subsidiaries. The 1995 Indenture contains
no limitation on the incurrence of Senior Debt or other liabilities by the
Company or its subsidiaries. Senior Debt is defined as all Indebtedness (as
defined in the 1995 Indenture, which generally speaking, includes obligations
for or under borrowed money, capitalized leases, letters of credit, deferred
purchase price of assets and hedging arrangements) of the Company, whether
outstanding on the date of the 1995 Indenture or subsequently incurred, unless
the instrument creating or evidencing the Indebtedness expressly provides that
such Indebtedness is not senior in right of payment to the Convertible Notes.
Restrictions on Mergers, Consolidations and Disposition of Assets. The
1995 Indenture provides that the Company may not consolidate or merge with or
into another entity, or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its properties or assets, unless (i) the
Company is the surviving or continuing corporation or the consolidated or
successor entity is a U.S. corporation; (ii) the consolidated or successor
entity (if other than the Company and including an entity that acquires the
assets of the Company) assumes all the obligations of the Company under the 1995
Indenture; and (iii) immediately after such transaction no Default or Event of
Default (each as defined in the 1995 Indenture) exists.
Events of Default. Events of Default under the 1995 Indenture include (i)
nonpayment of any amounts due under the Convertible Notes, (ii) non-payment of
amounts due under, or any other default under and which results in acceleration
of, any other Indebtedness (as defined in the 1995 Indenture) for borrowed money
of the Company which Indebtedness is of an aggregate principal amount in excess
of $10 million, (iii) failure to comply with the restrictions relating to
mergers, consolidations and disposition of assets, and (iv) certain events of
bankruptcy or insolvency.
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DESCRIPTION OF THE NOTES
The New Notes will be issued under the Indenture dated as of September 19,
1997, between the Company and Chase Manhattan Bank and Trust Company, National
Association, as trustee (the "Trustee"). A copy of the Indenture is available
upon request to the Company at the address set forth under "Available
Information." The following summaries of certain provisions of the Indenture do
not purport to be complete and are subject, and are qualified in their entirety
by reference, to the Trust Indenture Act of 1939 (the "1939 Act") and to all the
provisions of the New Notes and the Indenture, including the definitions therein
of certain terms. For purposes of this Section, references to the "Company"
shall mean The DII Group, Inc., excluding its subsidiaries. Capitalized terms
used in this Section and not otherwise defined below have the respective
meanings assigned to them in the Indenture.
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 issuance of
the New Notes will have been registered under the Securities Act and, therefore,
the New Notes will not bear legends restricting the transfer thereof and (ii)
the holders of New Notes will not be entitled to further registration rights
under the Registration Rights Agreement and rights under certain circumstances
to Special Interest (as defined), which rights will be satisfied or will
terminate when the Exchange Offer is consummated. See "The Exchange Offer." The
New Notes and the Old Notes are sometimes collectively referred to herein as the
"Notes." The Indenture provides for the issuance of up to $150.0 million of
Notes and additional notes (as part of the same or an additional series) from
time to time in aggregate principal amounts of not less than $10.0 million and
not more than $50.0 million in the aggregate. Such additional notes will be
identical to the Notes in all respects other than issue prices and issuance
dates.
General
The Notes will mature on September 15, 2007, and will be limited to an
aggregate principal amount of $200 million. The Old Notes were issued in an
aggregate principal amount of $150.0 million. The Notes will bear interest at
the rate per annum set forth on the cover page of this Prospectus from September
19, 1997, or from the most recent interest payment date to which interest has
been paid, payable semiannually on March 15 and September 15 of each year,
beginning on March 15, 1998, to the Persons who are registered holders of the
Notes at the close of business on the preceding March 1 or September 1, as the
case may be. Interest will be computed on the basis of a 360-day year comprised
of twelve 30-day months.
Principal of, and premium, if any, and interest on, the Notes will be
payable in immediately available funds, and the Notes will be exchangeable and
transferable, at an office or agency of the Company, one of which will be
maintained for such purpose in the City of New York (which initially will be the
corporate trust office of the Trustee); provided, however, that payment of
interest may be made at the option of the Company by check mailed to the Person
entitled thereto at the address of such Person as shown on the Security
Register. The Notes will be issued only in fully registered form without
coupons, in denominations of $1,000 or any integral multiple thereof. No service
charge will be made for any registration of transfer or exchange of Notes,
except for any tax or other governmental charge that may be imposed in
connection therewith.
Subordination
The Notes will be senior subordinated unsecured obligations of the
Company. The payment of the principal of, and premium, if any, and interest on,
the Notes will be subordinated in right of payment, as set forth in the
Indenture, to the payment when due of all Senior Debt of the Company. The Notes
will rank subordinate in right of payment to all existing and future Senior
Debt, pari passu with any future Senior Subordinated Debt and senior to all
existing and future junior subordinated debt of the Company. As of September 28,
1997, the Company's outstanding Senior Debt was $14.7 million (excluding $80.0
million in unused commitments under the Senior Credit Agreement), the Company's
outstanding Senior Subordinated Debt was $150.0 million, and the Company's
outstanding junior subordinated debt was $86.25 million.
In addition, all existing and future debt and other liabilities of the
Company's Subsidiaries, including the claims of trade creditors, secured
creditors and creditors holding debt and guarantees issued by such Subsidiaries,
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<PAGE> 49
and claims of preferred stockholders, if any, of such Subsidiaries, will be
effectively senior to the Notes. The total balance sheet liabilities of the
Company's Subsidiaries (excluding debt included within the definition of Senior
Debt, debt between subsidiaries and debt owed by any subsidiary to the Company),
as of September 28, 1997, was $147.3 million. Although the Indenture contains
limitations on the amount of additional Debt which the Company and its
Restricted Subsidiaries may Incur, the amounts of such Debt could be substantial
and, in any case, a significant portion of such Debt may be Senior Debt, Debt of
Subsidiaries (which will be effectively senior in right of payment to the Notes)
or Senior Subordinated Debt. The Notes also will be effectively subordinated to
any secured debt of the Company to the extent of the value of the assets
securing such debt. See "--Certain Covenants--Limitation on Debt."
The Notes are obligations exclusively of the Company. Since all the
operations of the Company are conducted through its Subsidiaries, the cash flow
and the consequent ability to service debt of the Company, including the Notes,
are dependent upon the earnings of its Subsidiaries and the distribution of
those earnings to, or upon loans or other payments of funds by those
Subsidiaries to, the Company. The payment of dividends and the making of loans
and advances to the Company by its Subsidiaries could be subject to statutory
and contractual restrictions, are dependent upon the earnings of those
Subsidiaries and are subject to various business considerations. In addition, to
the extent that the earnings of the Company's foreign Subsidiaries have been
subject to foreign tax at rates that are lower than the then-prevailing U.S.
corporate tax rates, a distribution of such earnings as a dividend to the
Company would be subject to U.S. corporate taxes.
The Company may not pay principal of, or premium, if any, or interest on,
the Notes or make any deposit pursuant to the provisions described under
"--Defeasance" and may not repurchase, redeem or otherwise retire any Notes
(collectively, "pay the Notes") if (a) any principal, premium or interest in
respect of any Senior Debt is not paid within any applicable grace period
(including at maturity) or (b) any other default on Senior Debt occurs and the
maturity of such Senior Debt is accelerated in accordance with its terms,
unless, in either case, (i) the default has been cured or waived and any such
acceleration has been rescinded or (ii) such Senior Debt has been paid in full;
provided, however, that the Company may pay the Notes without regard to the
foregoing if the Company and the Trustee receive written notice approving such
payment from the Representative of such Senior Debt. During the continuance of
any default (other than a default described in clause (a) or (b) of the
preceding sentence) with respect to any Designated Senior Debt pursuant to which
the maturity thereof may be accelerated immediately without further notice
(except such notice as may be required to effect such acceleration) or after the
expiration of any applicable grace periods, the Company may not pay the Notes
for a period (a "Payment Blockage Period") commencing upon the receipt by the
Company and the Trustee of written notice of such default from the
Representative of the holders of any Designated Senior Debt specifying an
election to effect a Payment Blockage Period (a "Payment Blockage Notice") and
ending 179 days thereafter (unless such Payment Blockage Period is earlier
terminated (a) by written notice to the Trustee and the Company from the
Representative which gave such Payment Blockage Notice, (b) because such default
is no longer continuing or (c) because such Designated Senior Debt has been
repaid in full). Notwithstanding the provisions described in the immediately
preceding sentence, unless the holders of such Designated Senior Debt or the
Representative of such holders have accelerated the maturity of such Designated
Senior Debt and not rescinded such acceleration, the Company may (unless
otherwise prohibited as described in the first sentence of this paragraph)
resume payments on the Notes after the end of such Payment Blockage Period. Not
more than one Payment Blockage Notice with respect to all issues of Designated
Senior Debt may be given in any consecutive 360-day period, irrespective of the
number of defaults with respect to one or more issues of Designated Senior Debt
during such period.
Upon any payment or distribution of the assets of the Company upon a total
or partial liquidation, dissolution or winding up of the Company or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its Property, the holders of Senior Debt will be
entitled to receive payment in full before the holders of the Notes are entitled
to receive any payment of principal of, or premium, if any, or interest on, the
Notes. In addition, until the Senior Debt is paid in full, any distribution to
which holders of the Notes would be entitled but for the subordination
provisions of the Indenture will be made to holders of the Senior Debt, except
that holders of Notes may receive and retain shares of stock and any debt
securities that are subordinated to Senior Debt to at least the same extent as
the Notes. In the event that, notwithstanding the foregoing, the holder of any
Note receives any payment or distribution of assets of the Company (except as
set forth
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<PAGE> 50
in the preceding sentence) before all Senior Debt is paid in full, then such
payment or distribution shall be held in trust for the holders of Senior Debt
and will be required to be paid over to them to the extent necessary to pay the
Senior Debt in full.
By reason of such subordination provisions, in the event of bankruptcy or
similar proceedings relating to the Company, holders of Senior Debt and other
creditors of the Company, even if the Notes are pari passu with their claims,
may recover more, ratably, than the holders of the Notes. In such event, after
giving effect to such subordination, there may be insufficient assets or no
assets remaining to pay interest or principal on the Notes.
Payment from the money or the proceeds of U.S. Government Obligations held
in any defeasance trust pursuant to the provisions described under
"--Defeasance" will not be subordinated to any Senior Debt or subject to the
restrictions of the subordination provisions described above.
See "Risk Factors--Risk Factors Relating to the Company and its
Business--Substantial Capital Requirements; Effects of Leverage", "--Risk
Factors Relating to the Notes--Subordination of Notes; Holding Company
Structure," and "Description of Certain Existing Debt."
Optional Redemption
The Notes will not be redeemable at the option of the Company prior to
September 15, 2002. Thereafter, the Notes will be redeemable at the option of
the Company, in whole or in part, on not less than 30 nor more than 60 days'
prior notice, at the following redemption prices (expressed as percentages of
principal amount), 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), if redeemed during
the 12-month period commencing on September 15 of each of the years set forth
below:
Redemption
Year Price
---- -----
2002.................................................. 104.250%
2003.................................................. 102.833%
2004.................................................. 101.417%
2005 and thereafter................................... 100.000%
In the event that, prior to September 15, 2000, the Company receives
proceeds from one or more Public Equity Offerings, the Company may at its
election use all or a portion of such proceeds to redeem up to a maximum of 35%
of the original aggregate principal amount of the Notes at a redemption price
equal to 108.500% of the principal amount thereof, plus accrued and unpaid
interest thereon, 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, however, that after giving effect to
any such redemption, at least 65% of the original aggregate principal amount of
the Notes remains outstanding. Any such redemption shall be made within 75 days
of such Public Equity Offering upon not less than 30 nor more than 60 days'
notice mailed to each holder of Notes being redeemed and otherwise in accordance
with the procedures set forth in the Indenture.
On and after any redemption date, interest will cease to accrue on the
Notes or portions thereof called for redemption unless the Company shall fail to
deposit with the paying agent on the redemption date the funds necessary to
redeem such Notes.
Sinking Fund
There will be no mandatory sinking fund payments for the Notes.
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Repurchase at the Option of Holders Upon a Change of Control
Upon the occurrence of a Change of Control, each holder of Notes shall
have the right to require the Company to repurchase all or any part of such
holder's Notes pursuant to the offer described below (the "Change of Control
Offer") at a purchase price (the "Change of Control Purchase Price") equal to
101% of the principal amount thereof, plus accrued and unpaid interest thereon,
if any, to the purchase date (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date).
Within 30 days following any Change of Control, the Company shall (a)
cause a notice of the Change of Control Offer to be sent at least once to the
Dow Jones News Service or similar business news service in the United States and
(b) send, by first-class mail, with a copy to the Trustee, to each holder of
Notes, at such holder's address appearing in the Security Register, a notice
stating: (i) that a Change of Control has occurred and a Change of Control Offer
is being made pursuant to the covenant entitled "Repurchase at the Option of
Holders Upon a Change of Control" and that all Notes timely tendered will be
accepted for payment; (ii) the Change of Control Purchase Price and the purchase
date, which shall be, subject to any contrary requirements of applicable law, a
Business Day no earlier than 30 days nor later than 60 days from the date such
notice is mailed (the "Change of Control Payment Date"); (iii) that any Note (or
portion thereof) accepted for payment (and duly paid on the Change of Control
Payment Date) pursuant to the Change of Control Offer shall cease to accrue
interest after the Change of Control Payment Date; (iv) that any Notes (or
portions thereof) not tendered will continue to accrue interest; (v) the
circumstances and relevant facts regarding such Change of Control (including
information with respect to pro forma historical income, cash flow and
capitalization after giving effect to the Change of Control); and (vi) the
procedures that holders of Notes must follow in order to tender their Notes (or
portions thereof) for payment and the procedures that holders of Notes must
follow in order to withdraw an election to tender Notes (or portions thereof)
for payment.
The Company will comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the purchase of Notes pursuant to the covenant
described hereunder. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the covenant described hereunder,
the Company will comply with the applicable securities laws and regulations and
will not be deemed to have breached its obligations under the covenant described
hereunder by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
the Company and the Initial Purchasers. Management has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that the Company would decide to do so in the future. Subject to certain
covenants described below, the Company could, in the future, enter into certain
transactions, including acquisitions, refinancings or other recapitalizations,
that would not constitute a Change of Control under the Indenture, but that
could increase the amount of debt outstanding at such time or otherwise affect
the Company's capital structure or credit ratings.
The definition of Change of Control includes a phrase relating to the
sale, assignment, lease, conveyance, disposition or transfer of "all or
substantially all" the Company's assets. Although there is a developing body of
case law interpreting the phrase "substantially all," there is no precise
established definition of the phrase under applicable law. Accordingly, the
ability of a holder of Notes to require the Company to repurchase such Notes as
a result of a sale, assignment, lease, conveyance, disposition or transfer of
less than all the assets of the Company may be uncertain.
The occurrence of certain of the events that constitute a Change of
Control under the Indenture would constitute a default under the Senior Credit
Agreement, and the Company is required to make an offer to repurchase the
Convertible Notes upon the occurrence of such events. Future debt of the Company
may contain prohibitions of certain events which would constitute a Change of
Control or require such debt to be repurchased upon a Change of Control.
Moreover, the exercise by the holders of their right to require the Company to
repurchase the Notes could cause a default under existing or future debt of the
Company, even if the Change of Control itself does not, due to the financial
effect of such repurchase on the Company. Finally, the Company's ability to pay
cash to the holders of Notes upon a repurchase may be limited by the Company's
then existing
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financial resources. There can be no assurance that sufficient funds will be
available when necessary to make any required repurchases. The Company's failure
to purchase the Notes in connection with a Change of Control would result in a
default under the Indenture which may, in turn, constitute a default under the
Company's other debt. If such other debt constitutes Designated Senior Debt, the
subordination provisions in the Indenture would likely restrict payment to the
holders of the Notes. The provisions under the Indenture relative to the
Company's obligation to make an offer to repurchase the Notes as a result of a
Change of Control may be waived or modified (at any time prior to the occurrence
of such Change of Control) with the written consent of the holders of a majority
in principal amount of the Notes. See "Description of Certain Existing Debt."
Certain Covenants
Limitation on Debt. The Company shall not, and shall not permit any
Restricted Subsidiary to, Incur, directly or indirectly, any Debt, unless after
giving pro forma effect to the application of the proceeds thereof, no Default
or Event of Default would occur as a consequence of such Incurrence or be
continuing following such Incurrence and either such Debt is (a) Debt of the
Company, provided that, after giving pro forma effect to the Incurrence of such
Debt and the application of the proceeds thereof, the Consolidated Interest
Coverage Ratio would be greater than 2.00 to 1.00, (b) Debt of the Company
evidenced by the Notes or (c) Permitted Debt of the Company or any Restricted
Subsidiary.
The term "Permitted Debt" is defined to include any and all of the
following:
(a) Debt under the Credit Facility, provided that the aggregate
principal amount of all such Debt under the Credit Facility, together with
all Debt Incurred pursuant to clause (k) of this paragraph in respect of
Debt previously Incurred pursuant to this clause (a), at any one time
outstanding does not exceed the greater of (i) $80 million, which amount
shall be permanently reduced by the amount of Net Available Cash used to
repay Debt under the Credit Facility, and not subsequently reinvested in
Additional Assets or used to purchase Notes, pursuant to the covenant
described below under "--Limitation on Asset Sales," and (ii) the sum of
(A) 75% of the book value of the inventory of the Company and its
Restricted Subsidiaries and (B) 85% of the book value of the accounts
receivable of the Company and its Restricted Subsidiaries, in each case as
of the end of the most recent fiscal quarter (ending at least 30 days
prior to the date of determination) for which financial statements of the
Company have been provided to the holders of Notes pursuant to the
covenant described under "--SEC Reports";
(b) Capital Expenditure Debt, provided that (i) the aggregate
principal amount of such Debt does not exceed the Fair Market Value (on
the date of the Incurrence thereof) of the Property acquired, constructed
or leased and (ii) after giving pro forma effect to the Incurrence of such
Debt, the Company would have been able to Incur $1.00 of additional Debt
pursuant to clause (a) of the first paragraph of this covenant;
(c) Debt of the Company owing to and held by any Wholly Owned
Subsidiary or Debt of any Restricted Subsidiary issued to and held by the
Company or any Wholly Owned Subsidiary; provided, however, that any
subsequent issue or transfer of Capital Stock or other event that results
in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned
Subsidiary or any subsequent transfer of any such Debt (except to the
Company or a Wholly Owned Subsidiary) shall be deemed, in each case, to
constitute the Incurrence of such Debt by the issuer thereof;
(d) Debt under Interest Rate Agreements entered into by the Company
or any Restricted Subsidiary for the purpose of limiting interest rate
risk in the ordinary course of the financial management of the Company or
such Restricted Subsidiary and not for speculative purposes, provided that
the obligations under such agreements are directly related to payment
obligations on Debt otherwise permitted by the terms of this covenant;
(e) Debt under Currency Exchange Protection Agreements entered into
by the Company or any Restricted Subsidiary for the purpose of limiting
currency exchange rate risks directly related to
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transactions entered into by the Company or such Restricted Subsidiary in
the ordinary course of business and not for speculative purposes;
(f) Acquired Debt, provided that after giving pro forma effect to
the Incurrence of such Debt, the Company would have been able to Incur
$1.00 of additional Debt pursuant to clause (a) of the first paragraph of
this covenant;
(g) Debt in connection with one or more standby letters of credit or
performance, surety or appeal bonds issued in the ordinary course of
business or pursuant to self-insurance obligations and not in connection
with the borrowing of money or the obtaining of advances or credit;
(h) Debt outstanding on the Issue Date not otherwise described in
clauses (a) through (g) above;
(i) Debt in an aggregate principal amount, together with all other
Permitted Debt of Restricted Subsidiaries (other than under clause (j)
below), at any one time outstanding not to exceed the product of 2.0 times
the aggregate amount of EBITDA for the period of the most recent four
consecutive fiscal quarters ending at least 30 days prior to the date such
Debt is Incurred, provided that, after giving pro forma effect to the
Incurrence of such Debt, the Company would have been able to incur $1.00
of additional Debt pursuant to clause (a) of the first paragraph of this
covenant;
(j) Debt in an aggregate principal amount at any one time
outstanding not to exceed $50 million;
(k) Permitted Refinancing Debt Incurred in respect of Debt Incurred
pursuant to clause (a) or (b) of the immediately preceding paragraph or
clause (a), (b), (f) and (h) above, subject, in the case of clause (a)
above, to the limitation set forth in the proviso thereto; and
(l) Debt consisting of obligations in respect of purchase price
adjustments, indemnities or Guarantees of the same or similar matters in
connection with the acquisition or disposition of Property.
Notwithstanding the immediately foregoing paragraph, (a) the Company shall
not Incur any Permitted Debt if the proceeds thereof are used, directly or
indirectly, to Refinance (i) any Subordinated Obligations unless such Permitted
Debt shall be subordinated to the Notes to at least the same extent as such
Subordinated Obligations or (ii) any Senior Subordinated Debt unless such
Permitted Debt shall be Senior Subordinated Debt or shall be subordinated to the
Notes and (b) the Company shall not permit any Restricted Subsidiary to Incur
any Permitted Debt if the proceeds are used, directly or indirectly, to
Refinance any Subordinated Obligations or any Senior Subordinated Debt.
For purposes of determining compliance with this covenant, in the event
that an item of Debt meets the criteria of more than one of the categories of
Permitted Debt described in clauses (a) through (l) above or is entitled to be
Incurred pursuant to the first paragraph of this covenant, the Company shall, in
its sole discretion, classify such item of Debt in any manner that complies with
this covenant and such item of Debt will be treated as having been Incurred
pursuant to only one such clause or pursuant to the first paragraph hereof.
Limitation on Restricted Payments. The Company shall not make, and shall
not permit any Restricted Subsidiary to make, directly or indirectly, any
Restricted Payment if at the time of, and after giving pro forma effect to, such
proposed Restricted Payment,
(a) a Default or Event of Default shall have occurred and be
continuing,
(b) the Company could not Incur at least $1.00 of additional Debt
pursuant to clause (a) of the first paragraph of the covenant described
under "--Limitation on Debt," or
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(c) the aggregate amount of such Restricted Payment and all other
Restricted Payments declared or made since the Issue Date (the amount of
any Restricted Payment, if made other than in cash, to be based upon Fair
Market Value) would exceed an amount equal to the sum of:
(i) 50% of the aggregate amount of Consolidated Net Income
accrued during the period (treated as one accounting period) from
and after the first day of the fiscal quarter following the end of
the most recent fiscal quarter ended immediately prior to the Issue
Date to the end of the most recent fiscal quarter ending at least 30
days prior to the date of such Restricted Payment (or if the
aggregate amount of Consolidated Net Income for such period shall be
a deficit, minus 100% of such deficit),
(ii) Capital Stock Sale Proceeds,
(iii) the amount by which Debt (including the Convertible
Notes but excluding all other Subordinated Obligations) of the
Company or any Restricted Subsidiary is reduced on the Company's
balance sheet upon the conversion or exchange (other than by a
Subsidiary of the Company) subsequent to the Issue Date of any Debt
of the Company or any Restricted Subsidiary convertible or
exchangeable for Capital Stock (other than Disqualified Stock) of
the Company (less the amount of any cash or other Property
distributed by the Company or any Restricted Subsidiary upon such
conversion or exchange),
(iv) an amount equal to the sum of (i) the net reduction in
Investments in any Person other than the Company or a Restricted
Subsidiary resulting from dividends, repayments of loans or advances
or other transfers of Property, in each case to the Company or any
Restricted Subsidiary from such Person, and (ii) the portion
(proportionate to the Company's equity interest in such Subsidiary)
of the Fair Market Value of the net assets of an Unrestricted
Subsidiary at the time such Unrestricted Subsidiary is designated a
Restricted Subsidiary; provided, however, that the foregoing sum
shall not exceed, in the case of any Person, the amount of
Investments previously made (and treated as a Restricted Payment) by
the Company or any Restricted Subsidiary in such Person, and
(v) $15 million.
Notwithstanding the foregoing limitation, the Company may:
(a) pay dividends on its Capital Stock within 60 days of the
declaration thereof if, on said declaration date, such dividends could
have been paid in compliance with the Indenture; provided, however, that
at the time of such payment of such dividend, no other Default or Event of
Default shall have occurred and be continuing (or result therefrom);
provided further, however, that such dividend shall be included in the
calculation of the amount of Restricted Payments;
(b) purchase, repurchase, redeem, legally defease, acquire or retire
for value Capital Stock of the Company or Subordinated Obligations in
exchange for, or out of the proceeds of the substantially concurrent sale
of, Capital Stock of the Company (other than Disqualified Stock and other
than Capital Stock issued or sold to a Subsidiary of the Company or an
employee stock ownership plan or trust established by the Company or any
of its Subsidiaries for the benefit of their employees); provided,
however, that (i) such purchase, repurchase, redemption, legal defeasance,
acquisition or retirement shall be excluded in the calculation of the
amount of Restricted Payments and (ii) the Net Cash Proceeds from such
sale shall be excluded from the calculation of the amount of Capital Stock
Sale Proceeds; and
(c) purchase, repurchase, redeem, legally defease, acquire or retire
for value any Subordinated Obligations in exchange for, or out of the
proceeds of the substantially concurrent sale of, Permitted Refinancing
Debt; provided, however, that such purchase, repurchase, redemption, legal
defeasance,
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acquisition or retirement for value shall be excluded in the calculation
of the amount of Restricted Payments;
(d) repurchase shares of, or options to purchase shares of, common
stock of the Company or any of its Subsidiaries from employees, former
employees, directors or former directors of the Company or any of its
Subsidiaries (or permitted transferees of such employees, former
employees, directors or former directors), pursuant to the terms of
agreements (including employment agreements) or plans (or amendments
thereto) approved by the Board of Directors of the Company under which
such individuals purchase or sell or are granted the option to purchase or
sell, shares of such common stock; provided, however, that (i) the
aggregate amount of such repurchases shall not exceed $2 million in any
calendar year and (ii) at the time of such repurchase, no other Default or
Event of Default shall have occurred and be continuing (or result
therefrom); provided further, however, that such repurchases shall be
included in the calculation of the amount of Restricted Payments; and
(e) upon the occurrence of a Change of Control and within 60 days
after the completion of the offer to purchase the Notes pursuant to the
covenant described under "Repurchase at the Option of Holders Upon a
Change of Control" (including the purchase of all Notes tendered), any
purchase or redemption of Subordinated Obligations required pursuant to
the terms thereof as a result of such Change of Control; provided,
however, that at the time of, and after giving pro forma effect to, such
purchase or redemption, (i) no other Default or Event of Default shall
have occurred and be continuing (or result therefrom) and (ii) the Company
could Incur at least $1.00 of additional Debt pursuant to clause (a) of
the first paragraph of the covenant described under "--Limitation on
Debt"; provided further, however, that such purchases or redemptions shall
be included in the calculation of the amount of Restricted Payments.
Limitation on Liens. The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, Incur or suffer to exist, any
Lien (other than Permitted Liens) upon any of its Property (including Capital
Stock of a Restricted Subsidiary), whether owned at the Issue Date or thereafter
acquired, or any interest therein or any income or profits therefrom, unless (a)
if such Lien secures Senior Subordinated Debt, the Notes are secured on an equal
and ratable basis with such Debt or (b) if such Lien secures Subordinated
Obligations, such Lien shall be subordinated to a Lien securing the Notes in the
same Property as that securing such Lien to the same extent as such Subordinated
Obligations are subordinated to the Notes.
Limitation on Issuance or Sale of Capital Stock of Restricted
Subsidiaries. The Company shall not (a) sell, pledge, hypothecate or otherwise
dispose of any shares of Capital Stock of a Restricted Subsidiary or (b) permit
any Restricted Subsidiary to, directly or indirectly, issue or sell or otherwise
dispose of any shares of its Capital Stock other than (i) directors' qualifying
shares, (ii) to the Company or a Wholly Owned Subsidiary or (iii) a disposition
of shares of Capital Stock of a Restricted Subsidiary (which shares, in the case
of a Significant Subsidiary, shall represent 100% of the outstanding shares of
such Capital Stock) that complies with the covenant described under
"--Limitation on Asset Sales" or (iv) a pledge of shares of Capital Stock of a
Restricted Subsidiary to the extent constituting a Permitted Lien and any
subsequent disposition of such shares pursuant to the exercise of rights granted
to the pledgee in connection with such pledge.
Limitation on Asset Sales. The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, consummate any Asset Sale
unless (a) the Company or such Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the Fair
Market Value of the Property subject to such Asset Sale; (b) at least 75% of the
consideration paid to the Company or such Restricted Subsidiary in connection
with such Asset Sale is in the form of cash or cash equivalents or the
assumption by the purchaser of liabilities of the Company (other than
liabilities of the Company that are by their terms subordinated to the Notes) or
of any Restricted Subsidiary (including liabilities of a Restricted Subsidiary
whose stock is acquired by such purchaser) as a result of which the Company and
the Restricted Subsidiaries are no longer liable for such liabilities; and (c)
the Company delivers an Officers' Certificate to the Trustee certifying that
such Asset Sale complies with clauses (a) and (b).
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The Net Available Cash (or any portion thereof) from Asset Sales may be
applied by the Company or a Restricted Subsidiary, to the extent the Company or
such Restricted Subsidiary elects (or is required by the terms of any Debt), (a)
to prepay, repay, legally defease or purchase Senior Debt of the Company or Debt
of any Restricted Subsidiary (excluding in each such case Debt owed to the
Company or an Affiliate of the Company); or (b) to reinvest in Additional Assets
(including by means of an Investment in Additional Assets by a Restricted
Subsidiary with Net Available Cash received by the Company or another Restricted
Subsidiary); provided, however, that in connection with any prepayment,
repayment, legal defeasance or purchase of Debt pursuant to clause (a) above,
the Company or such Restricted Subsidiary shall retire such Debt and shall cause
the related loan commitment (if any) to be permanently reduced by an amount
equal to the principal amount so prepaid, repaid, legally defeased or purchased.
Any Net Available Cash from an Asset Sale not applied in accordance with
the preceding paragraph within twelve months from the date of the receipt of
such Net Available Cash shall constitute "Excess Proceeds." When the aggregate
amount of Excess Proceeds exceeds $5 million (taking into account income earned
on such Excess Proceeds, if any), the Company will be required to make an offer
to purchase (the "Prepayment Offer") the Notes which offer shall be in the
amount of the Excess Proceeds, on a pro rata basis according to principal
amount, at a purchase price equal to 100% of the principal amount thereof plus
accrued and unpaid interest thereon, if any, to the Purchase Date (as defined
below), subject to the right of holders of record on the relevant record date to
receive interest due on the relevant interest payment date, in accordance with
the procedures (including prorating in the event of oversubscription) set forth
in the Indenture. To the extent that any portion of the amount of Net Available
Cash remains after compliance with the preceding sentence and provided that all
holders of Notes have been given the opportunity to tender their Notes for
purchase as described in the following paragraph in accordance with the
Indenture, the Company or such Restricted Subsidiary may use such remaining
amount for any purpose permitted by the Indenture and the amount of Excess
Proceeds will be reset to zero.
Within five Business Days after the Company is obligated to make a
Prepayment Offer as described in the preceding paragraph, the Company shall send
a written notice, by first-class mail, to the holders of Notes (the "Prepayment
Offer Notice"), accompanied by such information regarding the Company and its
Subsidiaries as the Company in good faith believes will enable such holders to
make an informed decision with respect to such Prepayment Offer. The Prepayment
Offer Notice shall state, among other things, (a) that a Prepayment Offer is
being made pursuant to the covenant entitled "--Limitation on Asset Sales," and
that all Notes timely tendered will be accepted for payment (subject to
proration), (b) that any Note (or any portion thereof) accepted for payment (and
duly paid on the Purchase Date) pursuant to the Prepayment Offer shall cease to
accrue interest after the Purchase Date, (c) the purchase price and purchase
date, which shall be a Business Day no earlier than 30 days nor later than 60
days from the date the Prepayment Offer Notice is mailed (the "Purchase Date"),
(d) the aggregate principal amount of Notes (or portions thereof) to be
purchased, (e) that any Notes (or portions thereof) not tendered will continue
to accrue interest and (f) the procedures that holders of Notes must follow in
order to tender their Notes (or portions thereof) for payment and the procedures
that holders of Notes must follow in order to withdraw an election to tender
Notes (or portions thereof) for payment.
The Company will comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Notes pursuant to the covenant
described hereunder. To the extent that the provisions of any securities laws or
regulations conflict with provisions of the covenant described hereunder, the
Company will comply with the applicable securities laws and regulations and will
not be deemed to have breached its obligations under the covenant described
hereunder by virtue thereof.
Limitation on Restrictions on Distributions from Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective, or enter into any agreement with any Person that would cause to
become effective, any consensual encumbrance or restriction 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, or pay any Debt
or other obligation owed, to the Company or any other Restricted Subsidiary, (b)
make any loans or advances to the Company or any other Restricted Subsidiary or
(c) transfer any of its Property to the Company or any other Restricted
Subsidiary.
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The foregoing limitations will not apply (i) with respect to clauses (a), (b)
and (c), to encumbrances and restrictions (A) in existence under or by reason of
any agreements in effect on the Issue Date, (B) relating to Debt of a Restricted
Subsidiary and existing at such Restricted Subsidiary at the time it became a
Restricted Subsidiary if such encumbrance or restriction was not created in
connection with or in anticipation of the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a Restricted
Subsidiary or was acquired by the Company, (C) relating to Debt of a Restricted
Subsidiary so long as such encumbrance or restriction is no less favorable to
the holders of the Notes than those under the Credit Facility as in effect on
the Issue Date, (D) relating to Debt of a Restricted Subsidiary which has fully
and unconditionally guaranteed, by supplemental indenture in form satisfactory
to the Trustee, executed and delivered to the Trustee by such Restricted
Subsidiary, the due and punctual performance and observance of all the
obligations (financial or otherwise) of the Company under the Indenture and the
Notes, provided that such guarantee may be subordinated to senior Debt of such
Restricted Subsidiary to the same extent and on the same terms as the Notes are
subordinated to Senior Debt of the Company and may provide for the release of
such Guarantee upon the discharge of such Debt, (E) relating to borrowings under
a foreign currency credit facility established for the benefit of a Restricted
Subsidiary organized outside the laws of the United States of America or any
State thereof or the District of Columbia, provided that such encumbrances and
restrictions apply only with respect to such Restricted Subsidiary and only if
an event of default has occurred and is continuing under such credit facility
and are otherwise customary for similar foreign currency credit facilities, (F)
relating to any special purpose, bankruptcy remote Wholly Owned Subsidiary
formed for the purpose of borrowing against receivables or inventory of the
Company and its Subsidiaries pursuant to a Credit Facility or (G) which result
from the Refinancing of Debt Incurred pursuant to an agreement referred to in
the immediately preceding clauses (i)(A) and (B) above or in clauses (ii)(A) and
(B) below, provided such encumbrance or restriction is no less favorable to the
holders of Notes than those under the agreement evidencing the Debt so
Refinanced, and (ii) with respect to clause (c) only, to encumbrances and
restrictions (A) that limit the right of the debtor to transfer or dispose of
the Property securing such Debt, provided that such Debt is permitted to be
Incurred and secured pursuant to the covenants described under "--Limitation on
Debt" and "--Limitation on Liens," (B) in connection with an acquisition of
Property, so long as such encumbrance or restriction relates solely to the
Property so acquired and was not created in connection with or in anticipation
of such acquisition, (C) resulting from customary provisions restricting
subletting or assignment of leases or customary provisions in other agreements
that restrict assignment of such agreements or rights thereunder or (D)
customary restrictions contained in asset sale agreements limiting the transfer
of such Property pending the closing of such sale.
Limitation on Transactions with Affiliates. The Company shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly, conduct
any business or enter into or suffer to exist any transaction or series of
transactions (including the purchase, sale, transfer, assignment, lease,
conveyance or exchange of any Property or the rendering of any service) with, or
for the benefit of, any Affiliate of the Company (an "Affiliate Transaction"),
unless (a) the terms of such Affiliate Transaction are no less favorable to the
Company or such Restricted Subsidiary, as the case may be, than those that could
be obtained in a comparable arm's-length transaction with a Person that is not
an Affiliate of the Company or such Restricted Subsidiary, (b) with respect to
an Affiliate Transaction involving aggregate payments or value in excess of $1
million, the terms of such Affiliate Transaction are set forth in writing, (c)
with respect to an Affiliate Transaction involving aggregate payments or value
in excess of $2 million, the Board of Directors of the Company (including a
majority of the disinterested members of such Board of Directors) approves such
Affiliate Transaction and, in its good faith judgment, determines that such
Affiliate Transaction complies with clauses (a) and (b) of this paragraph as
evidenced by a Board Resolution promptly delivered to the Trustee and (d) with
respect to an Affiliate Transaction involving aggregate payments or value in
excess of $10 million, the Company obtains a written opinion from an Independent
Appraiser to the effect that such Affiliate Transaction is fair, from a
financial point of view, to the Company or such Restricted Subsidiary, as the
case may be.
Notwithstanding the foregoing limitation, Affiliate Transactions shall not
include:
(i) any transaction or series of transactions between the
Company and one or more of its Restricted Subsidiaries or between
two or more of its Restricted Subsidiaries, provided that no more
than 5% of the total voting power of the Voting Stock (on a fully
diluted basis) in any of
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such Restricted Subsidiaries is beneficially owned by an Affiliate
of the Company (other than a Restricted Subsidiary);
(ii) any Restricted Payment permitted to be made pursuant to
the covenant described under "--Limitation on Restricted Payments;"
(iii) the payment of compensation (including amounts paid
pursuant to employee benefit plans) for the personal services of
executive officers and directors of the Company or any of the
Restricted Subsidiaries, so long as the Board of Directors of the
Company or any Restricted Subsidiary in good faith shall have
approved the terms thereof and deemed the services theretofore or
thereafter to be performed for such compensation to be fair
consideration therefor (it being understood that such approval and
determination shall not require a written opinion from an
Independent Appraiser); and
(iv) the payment of reasonable fees to directors of the
Company or such Restricted Subsidiary who are not employees of the
Company or any Restricted Subsidiary.
Limitation on Layered Debt. The Company shall not Incur, directly or
indirectly, any Debt which is subordinate or junior in right of payment to any
Senior Debt unless such Debt is Senior Subordinated Debt or is expressly
subordinated in right of payment to Senior Subordinated Debt.
Designation of Restricted and Unrestricted Subsidiaries. The Board of
Directors of the Company may designate any Subsidiary of the Company or any
Restricted Subsidiary to be an Unrestricted Subsidiary if (a) the Subsidiary to
be so designated does not own any Capital Stock or Debt of, or own or hold any
Lien on any Property of, the Company or any other Restricted Subsidiary, (b) the
Subsidiary to be so designated is not obligated under any Debt, Lien or other
obligation that, if in default, would result (with the passage of time or notice
or otherwise) in a default on any Debt of the Company or of any Restricted
Subsidiary and (c) either (i) the Subsidiary to be so designated has total
assets of $1,000 or less or (ii) such designation is effective immediately upon
such entity becoming a Subsidiary of the Company or any Restricted Subsidiary.
Unless so designated as an Unrestricted Subsidiary, any Person that becomes a
Subsidiary of the Company or of any Restricted Subsidiary will be classified as
a Restricted Subsidiary; provided, however, that such Subsidiary shall not be
designated a Restricted Subsidiary and shall be automatically classified as an
Unrestricted Subsidiary if (A) such Subsidiary is a Subsidiary of a Restricted
Subsidiary (other than a Wholly Owned Subsidiary) or (B) either of the
requirements set forth in clauses (x) and (y) of the immediately following
paragraph will not be satisfied after giving pro forma effect to such
classification. Except as provided in the first sentence of this paragraph, no
Restricted Subsidiary may be redesignated as an Unrestricted Subsidiary.
The Board of Directors of the Company may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary if, immediately after giving pro forma
effect to such designation, (x) the Company could Incur at least $1.00 of
additional Debt pursuant to clause (a) of the first paragraph of the covenant
described under "--Limitation on Debt" and (y) no Default or Event of Default
shall have occurred and be continuing or would result therefrom.
Any such designation or redesignation by the Board of Directors of the
Company will be evidenced to the Trustee by filing with the Trustee a Board
Resolution giving effect to such designation or redesignation and an Officers'
Certificate (a) certifying that such designation or redesignation complies with
the foregoing provisions and (b) giving the effective date of such designation
or redesignation, such filing with the Trustee to occur within 45 days after the
end of the fiscal quarter of the Company in which such designation or
redesignation is made (or, in the case of a designation or redesignation made
during the last fiscal quarter of the Company's fiscal year, within 90 days
after the end of such fiscal year).
Merger, Consolidation and Sale of Property
The Company shall not merge, consolidate or amalgamate with or into any
other Person (other than a merger of a Wholly Owned Subsidiary into the Company)
or sell, transfer, assign, lease, convey or otherwise
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dispose of all or substantially all its Property in any one transaction or
series of transactions unless: (a) the Company shall be the surviving Person
(the "Surviving Person") or the Surviving Person (if other than the Company)
formed by such merger, consolidation or amalgamation or to which such sale,
transfer, assignment, lease, conveyance or disposition is made shall be a
corporation organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia; (b) the Surviving Person
(if other than the Company) expressly assumes, by supplemental indenture in form
satisfactory to the Trustee, executed and delivered to the Trustee by such
Surviving Person, the due and punctual payment of the principal of, and premium,
if any, and interest on, all the Notes, according to their tenor, and the due
and punctual performance and observance of all the covenants and conditions of
the Indenture to be performed by the Company; (c) in the case of a sale,
transfer, assignment, lease, conveyance or other disposition of all or
substantially all the Company's Property, such Property shall have been
transferred as an entirety or virtually as an entirety to one Person; (d)
immediately before and after giving effect to such transaction or series of
transactions on a pro forma basis (and treating, for purposes of this clause (d)
and clauses (e) and (f) below, any Debt which becomes, or is anticipated to
become, an obligation of the Surviving Person or any Restricted Subsidiary as a
result of such transaction or series of transactions as having been Incurred by
the Surviving Person or such Restricted Subsidiary at the time of such
transaction or series of transactions), no Default or Event of Default shall
have occurred and be continuing; (e) immediately after giving effect to such
transaction or series of transactions on a pro forma basis, the Company or the
Surviving Person, as the case may be, would be able to Incur at least $1.00 of
additional Debt under clause (a) of the first paragraph of the covenant
described under "--Certain Covenants--Limitation on Debt;" (f) immediately after
giving effect to such transaction or series of transactions on a pro forma
basis, the Surviving Person shall have a Consolidated Net Worth in an amount
which is not less than the Consolidated Net Worth of the Company immediately
prior to such transaction or series of transactions; and (g) the Company shall
deliver, or cause 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 and the supplemental indenture,
if any, in respect thereto comply with this provision and that all conditions
precedent herein provided for relating to such transaction have been satisfied.
The Surviving Person shall succeed to, and be substituted for, and may
exercise every right and power of the Company under the Indenture, and the
predecessor Company in the case of a sale, transfer, assignment, lease,
conveyance or other disposition shall not be released from the obligation to pay
the principal of, and premium, if any, and interest on, the Notes.
SEC Reports
Notwithstanding that the Company may not be required to remain subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act, the
Company shall file with the Commission and provide the Trustee and holders of
the Notes with such annual reports and such information, documents and other
reports as are specified in Sections 13 and 15(d) of the Exchange Act and
applicable to a U.S. corporation subject to such Sections, such information,
documents and other reports to be so filed and provided at the times specified
for the filing of such information, documents and reports under such Sections;
provided, however, that the Company shall not be so obligated to file such
reports with the Commission if the Commission does not permit such filings.
Events of Default
Events of Default in respect of the Notes as set forth in the Indenture
include: (a) failure to make the payment of any interest on the Notes when the
same becomes due and payable, and such failure continues for a period of 30
days; (b) failure to make the payment of any principal of, or premium, if any,
on, any of the Notes when the same becomes due and payable at its Stated
Maturity, upon acceleration, redemption, optional redemption, required
repurchase or otherwise; (c) failure to comply with the covenant described above
under "--Merger, Consolidation and Sale of Property"; (d) failure to comply with
any other covenant or agreement in the Notes or in the Indenture (other than a
failure which is the subject of the foregoing clause (a), (b) or (c)) and such
failure continues for 30 days after written notice is given to the Company as
provided below; (e) a default under any Debt by the Company or any Restricted
Subsidiary which results in acceleration of the maturity of such Debt, or
failure to pay any such Debt at maturity, in an amount greater than $10 million
or its foreign currency
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equivalent (the "cross acceleration provisions"); (f) any judgment or judgments
for the payment of money in an uninsured aggregate amount in excess of $10
million or its foreign currency equivalent shall be rendered against the Company
or any Restricted Subsidiary and shall not be waived, satisfied or discharged
for any period of 30 consecutive days during which a stay of enforcement shall
not be in effect (the "judgment default provisions"); and (g) certain events
involving bankruptcy, insolvency or reorganization of the Company or any
Restricted Subsidiary (the "bankruptcy provisions").
A Default under clause (d) is not an Event of Default until the Trustee or
the holders of not less than 25% in principal amount of the Notes then
outstanding notify the Company of the Default and the Company does not cure such
Default within the time specified after receipt of such notice. Such notice must
specify the Default, demand that it be remedied and state that such notice is a
"Notice of Default."
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any event which with the giving of notice and the lapse of time would become an
Event of Default, its status and what action the Company is taking or proposes
to take with respect thereto.
The Indenture provides that if an Event of Default with respect to the
Notes (other than an Event of Default resulting from certain events involving
bankruptcy, insolvency or reorganization with respect to the Company or any
Restricted Subsidiary) shall have occurred and be continuing, the Trustee or the
registered holders of not less than 25% in aggregate principal amount of the
Notes then outstanding may declare to be immediately due and payable the
principal amount of all the Notes then outstanding, plus accrued but unpaid
interest to the date of acceleration. In case an Event of Default resulting from
certain events of bankruptcy, insolvency or reorganization with respect to the
Company or any Restricted Subsidiary shall occur, such amount with respect to
all the Notes shall be due and payable immediately without any declaration or
other act on the part of the Trustee or the holders of the Notes. After any such
acceleration, but before a judgment or decree based on acceleration is obtained
by the Trustee, the registered holders of a majority in aggregate principal
amount of the Notes then outstanding may, under certain circumstances, rescind
and annul such acceleration if all Events of Default, other than the nonpayment
of accelerated principal, premium or interest, have been cured or waived as
provided in the Indenture.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the holders of the Notes, unless
such holders shall have offered to the Trustee reasonable indemnity. Subject to
such provisions for the indemnification of the Trustee, the holders of a
majority in aggregate principal amount of the Notes then outstanding will have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee or exercising any trust or power conferred
on the Trustee with respect to the Notes.
No holder of Notes will have any right to institute any proceeding with
respect to the Indenture, or for the appointment of a receiver or trustee, or
for any remedy thereunder, unless (a) such holder has previously given to the
Trustee written notice of a continuing Event of Default, (b) the registered
holders of at least 25% in aggregate principal amount of the Notes then
outstanding have made written request and offered reasonable indemnity to the
Trustee to institute such proceeding as trustee and (c) the Trustee shall not
have received from the registered holders of a majority in aggregate principal
amount of the Notes then outstanding a direction inconsistent with such request
and shall have failed to institute such proceeding within 60 days. However, such
limitations do not apply to a suit instituted by a holder of any Note for
enforcement of payment of the principal of, and premium, if any, or interest on,
such Note on or after the respective due dates expressed in such Note.
Amendments and Waivers
Subject to certain exceptions, the Indenture may be amended with the
consent of the registered holders of a majority in aggregate principal amount of
the Notes then outstanding (including consents obtained in connection with a
tender offer or exchange offer for the Notes) and any past default or compliance
with any provisions may
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also be waived (except a default in the payment of principal, premium or
interest and certain covenants and provisions of the Indenture which cannot be
amended without the consent of each holder of an outstanding Note) with the
consent of the registered holders of at least a majority in aggregate principal
amount of the Notes then outstanding. However, without the consent of each
holder of an outstanding Note, no amendment may, among other things, (a) reduce
the amount of Notes whose holders must consent to an amendment, (b) reduce the
rate of or extend the time for payment of interest on any Note, (c) reduce the
principal of or extend the Stated Maturity of any Note, (d) make any Note
payable in money other than that stated in the Note, (e) impair the right of any
holder of the Notes to receive payment of principal of and interest on such
holder's Notes on or after the due dates therefor or to institute suit for the
enforcement of any payment on or with respect to such holder's Notes, (f)
release any security interest that may have been granted in favor of the holders
of the Notes, (g) reduce the premium payable upon the redemption or repurchase
of any Note as described under "--Optional Redemption" or "--Repurchase at the
Option of Holders upon a Change of Control," (h) at any time after a Change of
Control has occurred, change the time at which the Change of Control Offer must
be made or at which the Notes must be repurchased pursuant to such Change of
Control Offer or (i) make any change in the subordination provisions of the
Indenture that would adversely affect the holders of the Notes.
Without the consent of any holder of the Notes, the Company and the
Trustee may amend the Indenture to cure any ambiguity, omission, defect or
inconsistency, to provide for the assumption by a successor corporation of the
obligations of the Company under the Indenture, to provide for uncertificated
Notes in addition to or in place of certificated Notes (provided that the
uncertificated Notes are issued in registered form for purposes of Section
163(f) of the Code, or in a manner such that the uncertificated Notes are
described in Section 163(f)(2)(B) of the Code), to add Guarantees with respect
to the Notes, to secure the Notes, to add to the covenants of the Company for
the benefit of the holders of the Notes or to surrender any right or power
conferred upon the Company, to make any change that does not adversely affect
the rights of any holder of the Notes, to make any change to the subordination
provisions of the Indenture that would limit or terminate the benefits available
to any holder of Senior Debt under such provisions or to comply with any
requirement of the Commission in connection with the qualification of the
Indenture under the Trust Indenture Act. However, no amendment may be made to
the subordination provisions of the Indenture that adversely affects the rights
of any holder of Senior Debt then outstanding unless the holders of such Senior
Debt (or their Representative) consent to such change.
The consent of the holders of the Notes is not necessary under the
Indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to each registered holder of the Notes at such holder's address
appearing in the Security Register a notice briefly describing such amendment.
However, the failure to give such notice to all holders of the Notes, or any
defect therein, will not impair or affect the validity of the amendment.
Defeasance
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under the covenants
described under "--Repurchase at the Option of Holders Upon a Change of Control"
and "--Certain Covenants," the operation of the cross acceleration provisions,
the bankruptcy provisions with respect to Restricted Subsidiaries and the
judgment default provisions described under "--Events of Default" above and the
limitations contained in clauses (e) and (f) under the first paragraph of
"--Merger, Consolidation and Sale of Property" above ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its prior
exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the Notes
may not be accelerated because of an Event of Default with respect thereto. If
the Company exercises its covenant defeasance option, payment of the Notes may
not be accelerated because of an Event of Default specified in clause (d) (with
respect to the
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covenants described under "--Certain Covenants"), (e), (f) or (g) (with respect
only to Restricted Subsidiaries in the case of clauses (e) and (f)) under
"--Events of Default" above or because of the failure of the Company to comply
with clauses (e) and (f) of the first paragraph under "--Merger, Consolidation
and Sale of Property" above.
In order to exercise either defeasance option, the Company must, among
other things, irrevocably deposit in trust (the "defeasance trust") with the
Trustee money or U.S. Government Obligations for the payment of principal and
interest on the Notes to maturity or redemption, as the case may be, and must
comply with certain other conditions, including delivery to the Trustee of an
Opinion of Counsel to the effect that holders of the Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of such deposit
and defeasance and will be subject to Federal income tax on the same amounts and
in the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred (and, in the case of legal defeasance
only, such Opinion of Counsel must be based on a ruling of the Internal Revenue
Service or other change in applicable Federal income tax law).
Certain Definitions
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms as well as any other capitalized terms used herein for which no
definition is provided.
"Acquired Debt" means Debt of a Person existing at the time such Person
became a Restricted Subsidiary or assumed in connection with the acquisition of
Property and not incurred in connection with or in anticipation of the
transaction or series of related transactions pursuant to which such Person
became a Restricted Subsidiary or such Property was acquired.
"Additional Assets" means (a) any Property (other than cash, cash
equivalents and securities) to be owned by the Company or any Restricted
Subsidiary and used in a Related Business; or (b) Capital Stock of a Person that
becomes a Restricted Subsidiary as a result of the acquisition of such Capital
Stock by the Company or another Restricted Subsidiary from any Person other than
an Affiliate of the Company; provided, however, that, in the case of clause (b),
such Restricted Subsidiary is primarily engaged in a Related Business.
"Affiliate" of any specified Person means (a) any other Person, directly
or indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person or (b) any other Person who is a director or
officer of (i) such specified Person, (ii) any Subsidiary of such specified
Person or (iii) any Person described in clause (a) above. For the purposes of
this definition, "control" when used with respect to any 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. For purposes of the covenants described under "--Certain
Covenants--Limitation on Asset Sales," "--Limitation on Transactions with
Affiliates" and the definition of the term "Additional Assets" only, "Affiliate"
shall also mean any beneficial owner of shares representing 5% or more of the
total voting power of the Voting Stock (on a fully diluted basis) of the Company
or of rights or warrants to purchase such Voting Stock (whether or not currently
exercisable) and any Person who would be an Affiliate of any such beneficial
owner pursuant to the first sentence hereof.
"Asset Sale" means any sale, lease, transfer, issuance or other
disposition (or series of related sales, leases, transfers, issuances or
dispositions) by the Company or any Restricted Subsidiary, including any
disposition by means of a merger, consolidation or similar transaction (each
referred to for the purposes of this definition as a "disposition"), of (a) any
shares of Capital Stock of a Restricted Subsidiary (other than directors'
qualifying shares or shares required by applicable law to be held by a Person
other than the Company or any Restricted Subsidiary), (b) all or substantially
all the assets of any division or line of business of the Company or any
Restricted Subsidiary or (c) any other assets of the Company or any Restricted
Subsidiary outside of the ordinary course of business of the Company or such
Restricted Subsidiary (other than, in the case of (a), (b) and (c) above, (i)
any disposition by a Restricted Subsidiary to the Company or by the Company or a
Restricted Subsidiary to a Wholly Owned Subsidiary, (ii) for purposes of the
covenant described under "--Certain Covenants--Limitation on Asset Sales"
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only, any disposition that constitutes a Restricted Payment permitted by the
covenant described under "--Certain Covenants--Limitation on Restricted
Payments," (iii) any disposition effected in compliance with the covenant
described under "--Merger, Consolidation and Sale of Property," and (iv) any
disposition of Property having, together with other Property disposed of
pursuant to the same transaction or any related transactions, an aggregate Fair
Market Value of less than $5 million).
"Attributable Debt" in respect of any Sale and Leaseback Transaction
means, at any date of determination, (a) if such Sale and Leaseback Transaction
is a Capital Lease Obligation, the amount of Debt represented thereby according
to the definition of the term "Capital Lease Obligation" and (b) in all other
instances, the present value (discounted at the interest rate borne by the
Notes, compounded annually) of the total obligations of the lessee for rental
payments during the remaining term of the lease included in such Sale and
Leaseback Transaction (including any period for which such lease has been
extended).
"Average Life" means, as of any date of determination, with respect to any
Debt or Preferred Stock, the quotient obtained by dividing (a) the sum of the
product of the numbers of years (rounded to the nearest one-twelfth of one year)
from the date of determination to the dates of each successive scheduled
principal payment of such Debt or redemption or similar payment with respect to
such Preferred Stock multiplied by the amount of such payment by (b) the sum of
all such payments.
"Business Day" means each day which is not a Legal Holiday.
"Capital Expenditure Debt" means Debt Incurred by any Person to finance a
capital expenditure so long as (a) such capital expenditure is or should be
included as an addition to "Property, plant and equipment" in accordance with
GAAP and (b) such Debt is Incurred within 180 days of the date such capital
expenditure is made.
"Capital Lease Obligations" means any obligation under a lease that is
required to be capitalized for financial reporting purposes in accordance with
GAAP; and the amount of Debt represented by such obligation shall be the
capitalized amount of such obligations determined in accordance with GAAP; and
the Stated Maturity thereof shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty. For purposes of
"--Certain Covenants--Limitation on Liens," a Capital Lease Obligation shall be
deemed secured by a Lien on the Property being leased.
"Capital Stock" means, with respect to any Person, any and all shares or
other equivalents (however designated) of corporate stock, partnership interests
or any other participation, right, warrant, option or other interest in the
nature of an equity interest in such Person, including Preferred Stock, but
excluding any debt security convertible or exchangeable into such equity
interest.
"Capital Stock Sale Proceeds" means the aggregate Net Cash Proceeds
received by the Company from the issue or sale (other than to a Subsidiary of
the Company or an employee stock ownership plan or trust established by the
Company or any of its Subsidiaries for the benefit of their employees) by the
Company of any class of its Capital Stock (other than Disqualified Stock) after
the Issue Date.
"Change of Control" means the occurrence of any of the following events:
(a) if any "Person" or "group" (as such terms are used in Sections
13(d)(3) and 14(d)(2) of the Exchange Act or any successor provision to
either of the foregoing) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act, except that a Person will be deemed to
have "beneficial ownership" of all shares that any such Person has the
right to acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of 35% or more of the
total voting power of all classes of the Voting Stock of the Company; or
(b) the sale, transfer, assignment, lease, conveyance or other
disposition, directly or indirectly, of all or substantially all the
assets of the Company and its Restricted Subsidiaries, considered as a
whole
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(other than a disposition of such assets as an entirety or virtually as an
entirety to a Wholly Owned Subsidiary) shall have occurred, or the Company
merges, consolidates or amalgamates with or into any other Person or any
other Person merges, consolidates or amalgamates with or into the Company,
in any such event pursuant to a transaction in which the outstanding
Voting Stock of the Company is reclassified into or exchanged for cash,
securities or other Property, other than any such transaction where (i)
the outstanding Voting Stock of the Company is reclassified into or
exchanged for Voting Stock of the surviving corporation and (ii) the
holders of the Voting Stock of the Company immediately prior to such
transaction own, directly or indirectly, not less than a majority of the
Voting Stock of the surviving corporation immediately after such
transaction and in substantially the same proportion as before the
transaction; or
(c) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of the
Company (together with any new directors whose election or appointment by
such Board 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 such Board of Directors then in
office; or
(d) the stockholders of the Company shall have approved any plan of
liquidation or dissolution of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Interest Coverage Ratio" means, as of any date of
determination, the ratio of (a) the aggregate amount of EBITDA for the period of
the most recent four consecutive fiscal quarters ending at least 30 days prior
to such determination date to (b) Consolidated Interest Expense for such four
fiscal quarters; provided, however, that (i) if the Company or any Restricted
Subsidiary has Incurred any Debt since the beginning of such period that remains
outstanding or if the transaction giving rise to the need to calculate the
Consolidated Interest Coverage Ratio is an Incurrence of Debt, or both,
Consolidated Interest Expense for such period shall be calculated after giving
effect on a pro forma basis to such Debt as if such Debt had been Incurred on
the first day of such period and the discharge of any other Debt repaid,
repurchased, legally defeased or otherwise discharged with the proceeds of such
new Debt as if such discharge had occurred on the first day of such period, (ii)
if since the beginning of such period the Company or any Restricted Subsidiary
shall have repaid, repurchased, legally defeased or otherwise discharged any
Debt with Capital Stock Sale Proceeds, Consolidated Interest Expense for such
period shall be calculated after giving effect on a pro forma basis to such
discharge as if such discharge had occurred on the first day of such period,
(iii) if since the beginning of such period the Company or any Restricted
Subsidiary shall have made any Asset Sale or if the transaction giving rise to
the need to calculate the Consolidated Interest Coverage Ratio is an Asset Sale,
or both, EBITDA for such period shall be reduced by an amount equal to the
EBITDA (if positive) directly attributable to the Property which is the subject
of such Asset Sale for such period, or increased by an amount equal to the
EBITDA (if negative) directly attributable thereto for such period, in either
case as if such Asset Sale had occurred on the first day of such period and
Consolidated Interest Expense for such period shall be reduced by an amount
equal to the Consolidated Interest Expense directly attributable to any Debt of
the Company or any Restricted Subsidiary repaid, repurchased, legally defeased
or otherwise discharged with respect to the Company and its continuing
Restricted Subsidiaries in connection with such Asset Sale for such period, as
if such Asset Sale had occurred on the first day of such period (or, if the
Capital Stock of any Restricted Subsidiary is sold, by an amount equal to the
Consolidated Interest Expense for such period directly attributable to the Debt
of such Restricted Subsidiary to the extent the Company and its continuing
Restricted Subsidiaries are no longer liable for such Debt after such sale),
(iv) if since the beginning of such period the Company or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment in any
Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary) or
an acquisition of Property, including any acquisition of Property occurring in
connection with a transaction causing a calculation to be made hereunder, which
constitutes all or substantially all of an operating unit of a business, EBITDA
and Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto (including the Incurrence of any Debt) as if
such Investment or acquisition occurred on the first day of such period and (v)
if since the beginning of
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such period any Person (that subsequently became a Restricted Subsidiary or was
merged with or into the Company or any Restricted Subsidiary since the beginning
of such period) shall have made any Asset Sale, Investment or acquisition of
Property that would have required an adjustment pursuant to clause (iii) or (iv)
above if made by the Company or a Restricted Subsidiary during such period,
EBITDA and Consolidated Interest Expense for such period shall be calculated
after giving pro forma effect thereto as if such Asset Sale, Investment or
acquisition of Property occurred on the first day of such period. For purposes
of this definition, whenever pro forma effect is to be given to an acquisition
of Property, the amount of income or earnings relating thereto and the amount of
Consolidated Interest Expense associated with any Debt incurred in connection
therewith, the pro forma calculations shall be determined in good faith by a
responsible financial or accounting Officer of the Company and as further
contemplated by the definition of the term "pro forma." If any Debt bears a
floating rate of interest and is being given pro forma effect, the interest
expense on such Debt shall be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period (taking into
account any Interest Rate Agreement applicable to such Debt if such Interest
Rate Agreement has a remaining term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Restricted Subsidiaries, plus, to
the extent not included in such total interest expense, and to the extent
Incurred by the Company or its Restricted Subsidiaries, (a) interest expense
attributable to capital leases, (b) amortization of debt discount and debt
issuance cost (other than debt issuance costs incurred in connection with the
offering of the Old Notes, the Exchange Offer for the Old Notes or the filing of
the Shelf Registration Statement for the Old Notes), (c) capitalized interest,
(d) non-cash interest expenses, (e) commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing, (f) net costs associated with Hedging Obligations (including
amortization of fees), (g) Redeemable Dividends, (h) Preferred Stock dividends
in respect of all Preferred Stock of Restricted Subsidiaries held by Persons
other than the Company or a Wholly Owned Subsidiary, (i) interest incurred in
connection with Investments in discontinued operations, (j) interest actually
paid on any Debt of any other Person that is Guaranteed by the Company or any
Restricted Subsidiary and (k) the cash contributions to any employee stock
ownership plan or similar trust to the extent such contributions are used by
such plan or trust to pay interest or fees to any Person (other than the
Company) in connection with Debt Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income (loss) of
the Company and its consolidated Subsidiaries; provided, however, that there
shall not be included in such Consolidated Net Income (a) any net income (loss)
of any Person (other than the Company) if such Person is not a Restricted
Subsidiary, except that (i) subject to the exclusion contained in clause (d)
below, the Company's equity in the net income of any such Person for such period
shall be included in such Consolidated Net Income up to the aggregate amount of
cash distributed by such Person during such period to the Company or a
Restricted Subsidiary as a dividend or other distribution (subject, in the case
of a dividend or other distribution to a Restricted Subsidiary, to the
limitations contained in clause (c) below) and (ii) the Company's equity in a
net loss of any such Person other than an Unrestricted Subsidiary for such
period shall be included in determining such Consolidated Net Income, (b) for
the purposes of the covenant described under "--Certain Covenants --Limitation
of Restricted Payments" only, any net income (loss) of any Person acquired by
the Company or any of its consolidated Subsidiaries in a pooling of interests
transaction for any period prior to the date of such acquisition, (c) any net
income (loss) of any Restricted Subsidiary if such Restricted Subsidiary is
subject to restrictions, directly or indirectly, on the payment of dividends or
the making of distributions, directly or indirectly, to the Company, except that
(i) subject to the exclusion contained in clause (d) below, the Company's equity
in the net income of any such Restricted Subsidiary for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash that
could have been distributed by such Restricted Subsidiary consistent with such
restriction during such period to the Company or another Restricted Subsidiary
as a dividend or other distribution (subject, in the case of a dividend or other
distribution to another Restricted Subsidiary, to the limitation contained in
this clause) and (ii) the Company's equity in a net loss of any such Restricted
Subsidiary for such period shall be included in determining such Consolidated
Net Income, (d) any gain (or loss) realized upon the sale or other disposition
of any Property of the Company or any of its consolidated Subsidiaries
(including pursuant to any Sale and Leaseback Transaction) which is not sold or
otherwise disposed of in the ordinary course of business and any gain (or loss)
realized upon the sale or other disposition of any Capital Stock of any Person,
(e) any extraordinary gain or loss, (f) the cumulative effect of a change in
accounting principles and (g) any non-cash compensation expense realized for
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grants of performance shares, stock options or other stock awards to officers,
directors and employees of the Company or any Restricted Subsidiary.
Notwithstanding the foregoing, for the purposes of the covenant described under
"--Certain Covenants--Limitation on Restricted Payments" only, there shall be
excluded from Consolidated Net Income any dividends, repayments of loans or
advances or other transfers of assets from Unrestricted Subsidiaries to the
Company or a Restricted Subsidiary to the extent such dividends, repayments or
transfers increase the amount of Restricted Payments permitted under such
covenant pursuant to clause (c)(iv) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
consolidated balance sheet of the Company and its Restricted Subsidiaries as of
the end of the most recent fiscal quarter of the Company ending at least 30 days
prior to the taking of any action for the purpose of which the determination is
being made, as (a) the par or stated value of all outstanding Capital Stock of
the Company plus (b) paid-in capital or capital surplus relating to such Capital
Stock plus (c) any retained earnings or earned surplus less (i) any accumulated
deficit and (ii) any amounts attributable to Disqualified Stock.
"Credit Facility" means, with respect to the Company or any Restricted
Subsidiary, one or more debt or commercial paper facilities with banks or other
institutional lenders (including the Senior Credit Agreement) providing for
revolving credit loans, terms loans, receivables or inventory financing
(including through the sale of receivables or inventory to such lenders or to
special purpose, bankruptcy remote entities formed to borrow from such lenders
against such receivables or inventory) or trade letters of credit.
"Currency Exchange Protection Agreement" means, in respect of a Person,
any foreign exchange contract, currency swap agreement, currency option or other
similar agreement or arrangement designed to protect such Person against
fluctuations in currency exchange rates.
"Debt" means, with respect to any Person on any date of determination
(without duplication), (a) the principal of and premium (if any) in respect of
(i) debt of such Person for money borrowed and (ii) debt evidenced by notes,
debentures, bonds or other similar instruments for the payment of which such
Person is responsible or liable; (b) all Capital Lease Obligations of such
Person and all Attributable Debt in respect of Sale and Leaseback Transactions
entered into by such Person; (c) all obligations of such Person issued or
assumed as the deferred purchase price of Property, all conditional sale
obligations of such Person and all obligations of such Person under any title
retention agreement (but excluding trade accounts payable arising in the
ordinary course of business); (d) all obligations of such Person for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction (other than obligations with respect to letters of
credit securing obligations (other than obligations described in (a) through (c)
above) entered into in the ordinary course of business of such Person to the
extent such letters of credit are not drawn upon or, if and to the extent drawn
upon, such drawing is reimbursed no later than the third Business Day following
receipt by such Person of a demand for reimbursement following payment on the
letter of credit); (e) the amount of all obligations of such Person with respect
to the redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of such Person, any Preferred Stock (but
excluding, in each case, any accrued dividends); (f) all obligations of the type
referred to in clauses (a) through (e) of other Persons and all dividends of
other Persons for the payment of which, in either case, such Person is
responsible or liable, directly or indirectly, as obligor, guarantor or
otherwise, including by means of any Guarantee; (g) all obligations of the type
referred to in clauses (a) through (f) of other Persons secured by any Lien on
any Property of such Person (whether or not such obligation is assumed by such
Person), the amount of such obligation being deemed to be the lesser of the
value of such Property or the amount of the obligation so secured; and (h) to
the extent not otherwise included in this definition, Hedging Obligations of
such Person. The amount of Debt of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such date.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Debt" means any Senior Debt which has, at the time of
determination, an aggregate principal amount outstanding of at least $25 million
(including the amount of all undrawn commitments and
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matured and contingent reimbursement obligations pursuant to letters of credit
thereunder) that is specifically designated in the instrument evidencing such
Senior Debt and is designated in a notice delivered by the Company to the
holders or a Representative of the holders of such Senior Debt and in an
Officers' Certificate delivered to the Trustee as "Designated Senior Debt" of
the Company for purposes of the Indenture.
"Disqualified Stock" means, with respect to any Person, Redeemable Stock
of such Person as to which (i) the maturity, (ii) mandatory redemption or (iii)
redemption, conversion or exchange at the option of the holder thereof, occurs,
or may occur, on or prior to the first anniversary of the Stated Maturity of the
Notes; provided, however, that Redeemable Stock in such Person that would not
otherwise be characterized as Disqualified Stock under this definition shall not
constitute Disqualified Stock if such Redeemable Stock is convertible or
exchangeable into Debt solely at the option of the issuer thereof; provided
further, however, that any Capital Stock that would not constitute Disqualified
Stock but for the provisions thereof giving holders thereof the right to require
such Person 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 shall 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 covenants described under "--Certain
Covenants--Limitation on Asset Sales" and "--Repurchase at the Option of Holders
Upon a Change of Control" and such Capital Stock specifically provides that (a)
such Person shall not repurchase or redeem any such Capital Stock pursuant to
such provisions prior to such Person having repurchased all the Notes that are
required to be repurchased pursuant to such covenants and (b) no default, event
of default or similar occurrence under the terms of such Capital Stock shall
result from such Person not so repurchasing or redeeming any such Capital Stock
because of the prohibition described in the preceding clause (a).
"EBITDA" means, for any period, an amount equal to, for the Company and
its consolidated Restricted Subsidiaries, (a) the sum of Consolidated Net Income
for such period plus the following to the extent reducing Consolidated Net
Income for such period: (i) the provision for taxes based on income or profits
or utilized in computing net loss, (ii) Consolidated Interest Expense, (iii)
depreciation expense, (iv) amortization of intangibles and (v) any other
non-cash items reducing Consolidated Net Income (other than items that will
require cash payments and for which an accrual or reserve is, or is required by
GAAP to be, made), minus (b) all non-cash items increasing Consolidated Net
Income for such period. Notwithstanding the foregoing, the provision for taxes
based on the income or profits of, and the depreciation and amortization of, a
Restricted Subsidiary shall be added to Consolidated Net Income to compute
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
and only if a corresponding amount would be permitted at the date of
determination to be dividend to the Company by such Restricted Subsidiary
without prior approval (that has not been obtained), pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to such Restricted
Subsidiary or its stockholders.
"Event of Default" has the meaning set forth under "--Events of Default."
"Exchange Act" means the Securities Exchange Act of 1934.
"Fair Market Value" means, with respect to any Property, the price which
could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction.
"GAAP" means United States generally accepted accounting principles as in
effect on the Issue Date, including those set forth (a) in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants, (b) in the statements and pronouncements of the
Financial Accounting Standards Board, (c) in such other statements by such other
entity as approved by a significant segment of the accounting profession and (d)
the rules and regulations of the Commission governing the inclusion of financial
statements (including pro forma financial statements) in periodic reports
required to be filed pursuant to Section 13 of the Exchange Act, including
opinions and pronouncements in staff accounting bulletins and similar written
statements from the accounting staff of the Commission.
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"Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America or any state thereof (including any agency or instrumentality thereof)
for the payment of which the full faith and credit of the United States of
America or such state is pledged and which are not callable or redeemable at the
issuer's option, provided that, in the case of any such state, (a) the long-term
debt of such state is rated "A-3" or "A-" or higher according to Moody's
Investors Service, Inc. or Standard & Poor's Ratings Service (or such similar
equivalent rating by at least one "nationally recognized statistical rating
organization" (as defined in Rule 436 under the Securities Act)) and (b) such
obligations mature within 365 days of the date of acquisition thereof.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Debt of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (a) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt of such other Person (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase assets, goods,
securities or services, to take-or-pay or to maintain financial statement
conditions or otherwise) or (b) entered into for the purpose of assuring in any
other manner the obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include (a) endorsements
for collection or deposit in the ordinary course of business or (b) a
contractual commitment by one Person to invest in another Person for so long as
such Investment is reasonably expected to constitute a "Permitted Investment"
under clause (b) of the definition of Permitted Investments. The term
"Guarantee" used as a verb has a corresponding meaning.
"Hedging Obligation" of any Person means any obligation of such Person
pursuant to any Interest Rate Agreement, Currency Exchange Protection Agreement
or any other similar agreement or arrangement.
"Incur" means, with respect to any Debt or other obligation of any Person,
to create, issue, incur (by merger, conversion, exchange or otherwise), extend,
assume, Guarantee or become liable in respect of such Debt or other obligation
or the recording, as required pursuant to GAAP or otherwise, of any such Debt or
obligation on the balance sheet of such Person (and "Incurrence" and "Incurred"
shall have meanings correlative to the foregoing); provided, however, that a
change in GAAP that results in an obligation of such Person that exists at such
time, and is not theretofore classified as Debt, becoming Debt shall not be
deemed an Incurrence of such Debt; provided further, however, that solely for
purposes of determining compliance with "--Certain Covenants--Limitation on
Debt," amortization of debt discount shall not be deemed to be the Incurrence of
Debt, provided that in the case of Debt sold at a discount, the amount of such
Debt Incurred shall at all times be the aggregate principal amount at Stated
Maturity.
"Independent Appraiser" means an investment banking firm of national
standing or any third party appraiser of national standing, provided that such
firm or appraiser is not an Affiliate of the Company.
"Interest Rate Agreement" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement designed to protect against fluctuations in interest rates.
"Investment" by any Person means any direct or indirect loan (other than
advances to customers in the ordinary course of business that are recorded as
accounts receivable on the balance sheet of such Person), advance or other
extension of credit or capital contribution (by means of transfers of cash or
other Property (other than, for purposes of the definition of "Restricted
Payment" only, Capital Stock of the Company which is not Disqualified Stock) to
others or payments for Property or services for the account or use of others, or
otherwise) to, or Incurrence of a Guarantee of any obligation of, or purchase or
acquisition of Capital Stock, bonds, notes, debentures or other securities or
evidence of Debt issued by, any other Person. For purposes of the covenant
described under "--Certain Covenants--Designation of Restricted and Unrestricted
Subsidiaries," the definition of "Restricted Payment" and the covenant described
under "--Certain Covenants--Limitation on Restricted Payments," "Investment"
shall include the portion of the Fair Market Value of the net assets of any
Subsidiary of the Company that is proportionate to the Company's equity interest
in such Subsidiary at the time that such Subsidiary is designated an
Unrestricted Subsidiary; provided, however, that upon a redesignation of such
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Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue
to have a permanent "Investment" in an Unrestricted Subsidiary equal to an
amount (if positive) equal to (a) the Company's "Investment" in such Subsidiary
at the time of such redesignation less (b) the portion of the Fair Market Value
of the net assets of such Subsidiary that is proportionate to the Company's
equity interest in such Subsidiary at the time of such redesignation. In
determining the amount of any Investment made by transfer of any Property other
than cash, such Property shall be valued at its Fair Market Value at the time of
such Investment.
"Issue Date" means the date on which the Old Notes were initially issued.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York.
"Lien" means, with respect to any Property of any Person, any mortgage or
deed of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever on or with respect to such Property (including any Capital Lease
Obligation, conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing or any Sale and
Leaseback Transaction).
"Net Available Cash" from any Asset Sale means cash payments received
therefrom (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as
and when received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Debt or other obligations relating to such
Properties or received in any other noncash form), in each case net of (a) all
legal, title and recording tax expenses, commissions and other fees and expenses
incurred, and all Federal, state, provincial, foreign and local taxes required
to be accrued as a liability under GAAP, as a consequence of such Asset Sale,
(b) all payments made on any Debt which is secured by any Property subject to
such Asset Sale, in accordance with the terms of any Lien upon or other security
agreement of any kind with respect to such Property, or which must by its terms,
or in order to obtain a necessary consent to such Asset Sale, or by applicable
law, be repaid out of the proceeds from such Asset Sale, (c) all distributions
and other payments required to be made to minority interest holders in
Subsidiaries or joint ventures as a result of such Asset Sale and (d) the
deduction of appropriate amounts provided by the seller as a reserve, in
accordance with GAAP, against any liabilities associated with the Property
disposed in such Asset Sale and retained by the Company or any Restricted
Subsidiary after such Asset Sale.
"Net Cash Proceeds" means, with respect to any issuance or sale of Capital
Stock, the cash proceeds of such issuance or sale, net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Officer" means the Chief Executive Officer, the President, the Chief
Financial Officer or any Vice President of the Company.
"Officers' Certificate" means a certificate signed by two Officers of the
Company, at least one of whom shall be the principal executive officer or
principal financial officer of the Company, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"Permitted Investment" means any Investment by the Company or a Restricted
Subsidiary in (a) any Restricted Subsidiary or any Person that will, upon the
making of such Investment, become a Restricted Subsidiary, provided that the
primary business of such Restricted Subsidiary is a Related Business; (b) any
Person if as a result of such Investment such Person is merged or consolidated
with or into, or transfers or conveys all or substantially all its Property to,
the Company or a Restricted Subsidiary, provided that such Person's primary
business is a Related Business; (c) Temporary Cash Investments; (d) receivables
owing to the Company or a Restricted
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Subsidiary, if created or acquired in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms; provided,
however, that such trade terms may include such concessionary trade terms as the
Company or such Restricted Subsidiary deems reasonable under the circumstances;
(e) payroll, travel and similar advances to cover matters that are expected at
the time of such advances ultimately to be treated as expenses for accounting
purposes and that are made in the ordinary course of business; (f) loans and
advances to employees made in the ordinary course of business consistent with
past practices of the Company or such Restricted Subsidiary, as the case may be,
provided that such loans and advances do not exceed $5 million at any one time
outstanding; (g) stock, obligations or other securities received in settlement
of debts created in the ordinary course of business and owing to the Company or
a Restricted Subsidiary or in satisfaction of judgments; (h) any Person to the
extent such Investment represents the non-cash portion of the consideration
received in connection with an Asset Sale consummated in compliance with the
covenant described under "--Certain Covenants--Limitation on Asset Sales"; and
(i) other Investments made for Fair Market Value that do not exceed $10 million
outstanding at any one time in the aggregate.
"Permitted Liens" means:
(a) Liens securing Senior Debt;
(b) Liens to secure Permitted Debt permitted to be incurred under
clause (a) of the second paragraph of the covenant described under
"--Certain Covenants--Limitation on Debt";
(c) Liens to secure Permitted Debt permitted to be Incurred under
clause (b) of the second paragraph of the covenant described under
"--Certain Covenants--Limitation on Debt," provided that any such Lien may
not extend to any Property of the Company or any Restricted Subsidiary,
other than the Property acquired, constructed or leased with the proceeds
of such Permitted Debt and any improvements or accessions to such
Property;
(d) Liens for taxes, assessments or governmental charges or levies
on the Property of the Company or any Restricted Subsidiary if the same
shall not at the time be delinquent or thereafter can be paid without
penalty, or are being contested in good faith and by appropriate
proceedings, provided that any reserve or other appropriate provision that
shall be required in conformity with GAAP shall have been made therefor;
(e) Liens imposed by law, such as carriers', warehousemen's and
mechanics' Liens and other similar Liens on the Property of the Company or
any Restricted Subsidiary arising in the ordinary course of business and
securing payment of obligations which are not more than 60 days past due
after notice thereof or are being contested in good faith and by
appropriate proceedings;
(f) Liens on the Property of the Company or any Restricted
Subsidiary Incurred in the ordinary course of business to secure
performance of obligations with respect to statutory or regulatory
requirements, performance or return-of-money bonds, surety bonds or other
obligations of a like nature and Incurred in a manner consistent with
industry practice, in each case which are not Incurred in connection with
the borrowing of money, the obtaining of advances or credit or the payment
of the deferred purchase price of Property and which do not in the
aggregate impair in any material respect the use of Property in the
operation of the business of the Company and its Restricted Subsidiaries
taken as a whole;
(g) Liens securing Acquired Debt; provided, however, that any such
Lien may not extend to any Property of the Company or any Restricted
Subsidiary, other than the Property secured at the time such Acquired Debt
was Incurred by the Company or a Restricted Subsidiary and other than
Property of any Restricted Subsidiary which is a direct Subsidiary of the
Restricted Subsidiary, if any, which Incurred such Acquired Debt; provided
further, however, that any such Lien shall not have been Incurred in
anticipation
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of or in connection with the transaction or series of transactions
pursuant to which such Acquired Debt was so Incurred;
(h) Pledges or deposits by the Company or any Restricted Subsidiary
under workmen's compensation laws, unemployment insurance laws or similar
legislation, or good faith deposits in connection with bids, tenders,
contracts (other than for the payment of Debt) or leases to which the
Company or any Restricted Subsidiary is party, or deposits to secure
public or statutory obligations of the Company, or deposits for the
payment of rent, in each case Incurred in the ordinary course of business;
(i) Easements, building restrictions and such other encumbrances or
charges against real Property as are of a nature generally existing with
respect to properties of a similar character;
(j) Liens incurred to secure appeal bonds and judgment and
attachment Liens, in each case in connection with litigation or legal
proceedings that are being contested in good faith by appropriate
proceedings so long as reserves have been established to the extent
required by GAAP as in effect at such time and so long as such Liens do
not encumber assets by an aggregate amount (together with the amount of
any unstayed judgments against the Company or any Restricted Subsidiary)
in excess of $10 million;
(k) Liens existing on the Issue Date not otherwise described in
clauses (a) through (j) above;
(l) Liens not otherwise described in clauses (a) through (k) above
on the Property of any Restricted Subsidiary to secure any Debt permitted
to be Incurred by such Restricted Subsidiary pursuant to the covenant
described under "--Certain Covenants--Limitation on Debt"; or
(m) Liens on the Property of the Company or any Restricted
Subsidiary to secure any Refinancing, in whole or in part, of any Debt
secured by Liens referred to in clause (a), (b), (c), (g), (k) or (l);
provided, however, that any such Lien shall be limited to all or part of
the same Property that secured the original Lien (together with
improvements and accessions to such Property) and the aggregate principal
amount of Debt that is secured by such Lien shall not be increased to an
amount greater than the sum of (i) the outstanding principal amount, or,
if greater, the committed amount, of the Debt secured by Liens described
under clause (a), (b), (c), (g), (k), or (l) at the time the original Lien
became a Permitted Lien under the Indenture and (ii) an amount necessary
to pay any premiums, fees and other expenses incurred by the Company or
any Restricted Subsidiary in connection with such Refinancing.
"Permitted Refinancing Debt" means any Debt that Refinances any other
Debt, including any successive Refinancings, so long as (a) such Debt is in an
aggregate principal amount (or if Incurred with original issue discount, an
aggregate issue price) not in excess of the sum of (i) the aggregate principal
amount (or if Incurred with original issue discount, the aggregate accreted
value) then outstanding of the Debt being Refinanced and (ii) an amount
necessary to pay any fees and expenses, including premiums and defeasance costs,
related to such Refinancing, (b) the Average Life of such Debt is equal to or
greater than the Average Life of the Debt being Refinanced, (c) the Stated
Maturity of such Debt is no earlier than the Stated Maturity of the Debt being
Refinanced and (d) such Debt is subordinated in right of payment to Senior Debt
or the Notes to at least the same extent, if any, as the Debt being Refinanced;
provided, however, that Permitted Refinancing Debt shall not include (A) Debt of
a Subsidiary that Refinances Debt of the Company or (B) Debt of the Company or a
Restricted Subsidiary that Refinances Debt of an Unrestricted Subsidiary.
"Person" means any individual, corporation, company (including any limited
liability company), partnership, joint venture, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Preferred Stock" means any Capital Stock of a Person, however designated,
which entitles the holder thereof to a preference with respect to the payment of
dividends, or as to the distribution of assets upon any voluntary or involuntary
liquidation or dissolution of such Person, over shares of any other class of
Capital Stock issued by such Person.
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"pro forma" means, with respect to any calculation made or required to be
made pursuant to the terms hereof, a calculation performed in accordance with
Article 11 of Regulation S-X promulgated under the Securities Act, as
interpreted by the Company after consultation with the independent certified
public accountants of the Company.
"Property" means, with respect to any Person, any interest of such Person
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible, including Capital Stock in, and other securities of, any other
Person.
"Public Equity Offering" means an underwritten primary public offering of
common stock of the Company pursuant to an effective registration statement
under the Securities Act.
"Redeemable Dividend" means, for any dividend in respect of Redeemable
Stock, the quotient of such dividend divided by the difference between one and
the maximum statutory federal income tax rate (expressed as a decimal number
between 1 and 0) then applicable to the issuer of such Redeemable Stock.
"Redeemable Stock" means, with respect to any Person, any Capital Stock
that by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or otherwise (a) matures or is mandatorily
redeemable pursuant to a sinking fund obligation or otherwise, (b) is or may
become redeemable or repurchaseable at the option of the holder thereof, in
whole or in part, or (c) is convertible or exchangeable for Debt or Disqualified
Stock.
"Refinance" means, in respect of any Debt, to refinance, extend, renew,
refund, repay, prepay, redeem, defease or retire, or to issue other Debt, in
exchange or replacement for, such indebtedness. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Related Business" means any business, related, ancillary or complementary
to the businesses of the Company and the Restricted Subsidiaries on the Issue
Date.
"Representative" means the trustee, agent or representative expressly
authorized to act in such capacity, if any, for an issue of Senior Debt.
"Restricted Payment" means (a) any dividend or distribution (whether made
in cash, securities or other Property) declared or paid on or with respect to
any shares of Capital Stock of the Company or any Restricted Subsidiary
(including any payment in connection with any merger or consolidation with or
into the Company or any Restricted Subsidiary), except for any dividend or
distribution which is made solely to the Company or a Restricted Subsidiary
(and, if such Restricted Subsidiary is not a Wholly Owned Subsidiary, to the
other shareholders of such Restricted Subsidiary on a pro rata basis or on a
basis that results in the receipt by the Company or a Restricted Subsidiary of
dividends or distributions of greater value than it would receive on a pro rata
basis) or any dividend or distribution payable solely in shares of Capital Stock
(other than Redeemable Stock) of the Company; (b) the purchase, repurchase,
redemption, acquisition or retirement for value of any Capital Stock of the
Company or any Affiliate of the Company (other than a Restricted Subsidiary) or
any securities exchangeable for or convertible into any such Capital Stock,
including the exercise of any option to exchange any Capital Stock (other than
for or into Capital Stock of the Company that is not Disqualified Stock); (c)
the purchase, redemption, repurchase, defeasance, acquisition or retirement for
value, prior to any scheduled maturity, scheduled sinking fund or mandatory
redemption payment, of any Subordinated Obligation (other than the purchase,
repurchase or other acquisition of any Subordinated Obligation purchased in
anticipation of satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of acquisition); or
(d) any Investment (other than Permitted Investments) in any Person.
"Restricted Subsidiary" means (a) any Subsidiary of the Company after the
Issue Date unless such Subsidiary shall have been designated an Unrestricted
Subsidiary as permitted or required pursuant to "--Certain
Covenants--Designation of Restricted and Unrestricted Subsidiaries" and (b) an
Unrestricted Subsidiary which is
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redesignated as a Restricted Subsidiary as permitted pursuant to "--Certain
Covenants--Designation of Restricted and Unrestricted Subsidiaries."
"Sale and Leaseback Transaction" means any arrangement relating to
Property now owned or hereafter acquired whereby the Company or a Restricted
Subsidiary transfers such Property to another Person and the Company or a
Restricted Subsidiary leases it from such Person.
"Securities Act" means the Securities Act of 1933.
"Senior Debt" means (a) all obligations consisting of the principal,
premium, if any, and accrued and unpaid interest (including interest accruing on
or after the filing of any petition in bankruptcy or for reorganization relating
to the Company to the extent post-filing interest is allowed in such proceeding)
in respect of (i) Debt of the Company for borrowed money and (ii) Debt of the
Company evidenced by notes, debentures, bonds or other similar instruments
permitted under the Indenture for the payment of which the Company is
responsible or liable; (b) all Capital Lease Obligations of the Company; (c) all
obligations of the Company (i) for the reimbursement of any obligor on any
letter of credit, bankers' acceptance or similar credit transaction, (ii) under
Hedging Obligations or (iii) issued or assumed as the deferred purchase price of
Property and all conditional sale obligations of the Company and all obligations
under any title retention agreement permitted under the Indenture; and (d) all
obligations of other Persons of the type referred to in clauses (a) and (b) for
the payment of which the Company is responsible or liable as Guarantor;
provided, however, that Senior Debt does not include (A) Debt of the Company
that is by its terms subordinate or pari passu in right of payment to the Notes,
including any Senior Subordinated Debt or any Subordinated Obligations; (B) any
Debt Incurred in violation of the provisions of the Indenture; (C) accounts
payable or any other obligations of the Company to trade creditors created or
assumed by the Company in the ordinary course of business in connection with the
obtaining of materials or services (including Guarantees thereof or instruments
evidencing such liabilities); (D) any liability for Federal, state, local or
other taxes owed or owing by the Company; (E) any obligation of the Company to
any Subsidiary; or (F) any obligations with respect to any Capital Stock.
"Senior Subordinated Debt" means the Notes and any other subordinated Debt
of the Company that specifically provides that such Debt is to rank pari passu
with the Notes and is not subordinated by its terms to any other subordinated
Debt or other obligation of the Company which is not Senior Debt.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the Commission, substituting 20 percent for 10
percent each place it appears therein.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Obligation" means any Debt of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Notes pursuant to a written agreement to that
effect.
"Subsidiary" of any specified Person means any corporation, partnership,
joint venture, association or other business entity, whether now existing or
hereafter organized or acquired, (a) in the case of a corporation, of which at
least 50% of the total voting power of the Voting Stock is held by such
first-named Person or any of its Subsidiaries and such first-named Person or any
of its Subsidiaries has the power to direct the management, policies and affairs
thereof; or (b) in the case of a partnership, joint venture, association, or
other business entity, with respect to which such first-named Person or any of
its Subsidiaries has the power to direct or cause the direction of the
management and policies of such entity by contract or otherwise if in accordance
with GAAP such entity is consolidated with the first named Person for financial
statement purposes.
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"Temporary Cash Investments" means any of the following: (a) Investments
in Government Obligations, (b) Investments in time deposit accounts,
certificates of deposit and money market deposits maturing within 180 days of
the date of acquisition thereof issued by a bank or trust company which is
organized under the laws of the United States of America or any state thereof or
any foreign country recognized by the United States of America, which bank or
trust company has capital, surplus and undivided profits aggregating in excess
of $500 million or its foreign currency equivalent and a long-term debt rating
"A-3" or "A-" or higher according to Moody's Investors Service, Inc. or Standard
& Poor's Ratings Service (or such similar equivalent rating by at least one
"nationally recognized statistical rating organization" (as defined in Rule 436
under the Securities Act)), (c) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause (a)
entered into with a bank meeting the qualifications described in clause (b)
above, (d) Investments in commercial paper, maturing not more than 90 days after
the date of acquisition, issued by a corporation (other than an Affiliate of the
Company) organized and in existence under the laws of the United States of
America with a rating at the time as of which any Investment therein is made of
"P-1" (or higher) according to Moody's Investors Service, Inc. or "A-1" (or
higher) according to Standard & Poor's Ratings Service (or such similar
equivalent rating by at least one "nationally recognized statistical rating
organization" (as defined in Rule 436 under the Securities Act)) and (e)
Investments in money market funds all of whose assets are comprised of
securities of the types described in clauses (a) through (d) above.
"Unrestricted Subsidiary" means (a) any Subsidiary of the Company in
existence on the Issue Date that is not a Restricted Subsidiary; (b) any
Subsidiary of an Unrestricted Subsidiary; and (c) any Subsidiary of the Company
that is designated after the Issue Date as an Unrestricted Subsidiary as
permitted pursuant to "--Certain Covenants--Designation of Restricted and
Unrestricted Subsidiaries" and not thereafter redesignated as a Restricted
Subsidiary as permitted pursuant thereto.
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof.
"Wholly Owned Subsidiary" means, at any time, a Restricted Subsidiary all
the Voting Stock of which (except directors' qualifying shares) is at such time
owned, directly or indirectly, by the Company and its other Wholly Owned
Subsidiaries.
Book-Entry System
The New Notes will initially be issued in the form of one or more New
Notes in registered, global form without interest coupons (the "Global
Securities"). Accordingly, The Depository Trust Company ("DTC") or its nominee
will initially be the sole registered holder of the New Notes for all purposes
under the Indenture.
Upon the issuance of a Global Security, DTC or its nominee will credit the
accounts of Persons holding through it with the respective principal amounts of
the New Notes represented by such Global Security acquired by such Persons.
Ownership of beneficial interests in a Global Security will be limited to
Persons that have accounts with DTC ("participants") or Persons that may hold
interests through participants. Ownership of beneficial interests by
participants in a Global Security will be shown on, and the transfer of that
ownership interest will be effected only through, records maintained by DTC for
such Global Security. Ownership of beneficial interests in such Global Security
by Persons that hold through participants will be shown on, and the transfer of
that ownership interest within such participant will be effected only through,
records maintained by such participant.
Payment of principal and interest on New Notes represented by any such
Global Security will be made in immediately available funds to DTC or its
nominee, as the case may be, as the sole registered owner and the sole holder of
the New Notes represented thereby for all purposes under the Indenture. The
Company has been advised by DTC that upon receipt of any payment of principal
of, or interest on, any Global Security, DTC will immediately credit, on its
book-entry registration and transfer system, the accounts of participants with
payments in amounts proportionate to their respective beneficial interests in
the principal or face amount of such Global
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Security as shown on the records of DTC. Payments by participants to owners of
beneficial interests in a Global Security held through such participants will be
governed by standing instructions and customary practices as is now the case
with securities held for customer accounts registered in "street name" and will
be the sole responsibility of such participants.
A Global Security may not be transferred except as a whole by DTC or a
nominee of DTC to a nominee of DTC. A Global Security is exchangeable for
certificated Notes only if (a) DTC notifies the Company that it is unwilling or
unable to continue as a depositary for such Global Security or if at any time
DTC ceases to be a clearing agency registered under the Exchange Act, (b) the
Company executes and delivers to the Trustee a notice that such Global Security
shall be so transferable, registrable and exchangeable, and such transfers shall
be registrable, or (c) there shall have occurred and be continuing a Default or
an Event of Default with respect to the New Notes represented by such Global
Security. Any Global Security that is exchangeable for certificated Notes
pursuant to the preceding sentence will be transferred to, and registered and
exchanged for, certificated Notes in authorized denominations and registered in
such names as DTC or any successor depositary holding such Global Security may
direct. Subject to the foregoing, a Global Security is not exchangeable, except
for a Global Security of like denomination to be registered in the name of DTC
or any successor depositary or its nominee. In the event that a Global Security
becomes exchangeable for certificated Notes, (a) certificated Notes will be
issued only in fully registered form in denominations of $1,000 or integral
multiples thereof, (b) payment of principal of, and premium, if any, and
interest on, the certificated Notes will be payable, and the transfer of the
certificated Notes will be registrable, at the office or agency of the Company
maintained for such purposes and (c) no service charge will be made for any
registration of transfer or exchange of the certificated Notes, although the
Company may require payment of a sum sufficient to cover any tax or governmental
charge imposed in connection therewith.
So long as DTC or any successor depositary for a Global Security, or any
nominee, is the registered owner of such Global Security, DTC or such successor
depositary or nominee, as the case may be, will be considered the sole owner or
holder of the New Notes represented by such Global Security for the purposes of
receiving payment on the New Notes and receiving notices, and for all other
purposes, under the Indenture and the New Notes. Beneficial interests in New
Notes will be evidenced only by, and transfers thereof will be effected only
through, records maintained by DTC or any successor depositary and its
participants. Cede & Co. has been appointed as the nominee of DTC. Except as
provided above, owners of beneficial interests in a Global Security will not be
entitled to and will not be considered the holders thereof for any purposes
under the Indenture. Accordingly, each Person owning a beneficial interest in a
Global Security must rely on the procedures of DTC or any successor depositary,
and, if such Person is not a participant, on the procedures of the participant
through which such Person owns its interest, to exercise any rights of a holder
under the Indenture. The Company understands that under existing industry
practices, in the event that the Company requests any action of holders or that
an owner of a beneficial interest in a Global Security desires to give or take
any action which a holder is entitled to give or take under the Indenture, DTC
or any successor depositary would authorize the participants holding the
relevant beneficial interest to give or take such action and such participants
would authorize beneficial owners owning through such participants to give or
take such action or would otherwise act upon the instructions of beneficial
owners owning through them.
DTC has advised the Company that DTC is a limited-purpose trust company
organized under the Banking Law of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered under the
Exchange Act. DTC was created to hold the securities of its participants and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. DTC's participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations some of whom (and/or their representatives) own DTC. Access to
DTC's book-entry system is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
Governing Law
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The Indenture and the Notes are governed by and construed in accordance
with the internal laws of the State of New York without reference to principles
of conflicts of law.
The Trustee
Chase Manhattan Bank and Trust Company, National Association, is the
Trustee under the Indenture. Chase Manhattan Bank and Trust Company, National
Association, is an affiliate of The Chase Manhattan Bank, a lender under the
Senior Credit Agreement.
Effective November 15, 1997, Chase Trust Company of California, The Chase
Manhattan Trust Company of California, National Association, and Chase Trust
Company, National Association consolidated pursuant to Section 215(a) of the
National Bank Act under the charter of Chase Trust Company, National
Association, with the name "Chase Manhattan Bank and Trust Company, National
Association" and with its head office in Los Angeles, California. Chase
Manhattan Bank and Trust Company, National Association, is a wholly owned
subsidiary of its registered bank holding company, The Chase Manhattan
Corporation, a Delaware corporation. Pursuant to the Indenture, following such
consolidation, Chase Manhattan Bank and Trust Company, National Association
became the successor Trustee without any further act.
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such of the 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.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain U.S. federal income tax
considerations relevant to holders of the New Notes and to the exchange of Old
Notes for New Notes. This discussion is based upon the Internal Revenue Code of
1986, as amended to the date of this Prospectus (the "Code"), Treasury
Regulations, Internal Revenue Service ("IRS") rulings and judicial decisions now
in effect, all of which are subject to change at any time, possibly with
retroactive effect, or may, at any time, be subject to different
interpretations. This discussion does not purport to deal with all aspects of
federal income taxation that may be relevant to a particular investor's decision
to purchase, hold or dispose of the New Notes, and it is not intended to be
wholly applicable to all categories of investors, some of which, such as dealers
in securities, banks, insurance companies, tax-exempt organizations and non-U.S.
persons, may be subject to special rules. Moreover, this discussion does not
relate to New Notes held as a hedge against currency risks or as part of a
straddle, as part of a "synthetic security" or other integrated investment
(including a "conversion transaction") comprised of a New Note and one or more
other investments, or held by a holder whose functional currency is not the U.S.
dollar. In addition, this discussion is limited to persons that hold the New
Notes as a "capital asset" within the meaning of Section 1221 of the Code.
HOLDERS OF THE NEW NOTES ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE
ACQUISITION, OWNERSHIP AND DISPOSITION OF THE NEW NOTES, AND THE EXCHANGE OF OLD
NOTES FOR NEW NOTES.
Exchange Offer
The Company believes that the exchange of Old Notes for New Notes pursuant
to the Exchange Offer will not be treated as an "exchange" for U.S. federal
income tax purposes because the New Notes will not be considered to differ
materially in kind or extent from the Old Notes. Rather, the New Notes received
by a holder will be treated as a continuation of the Old Notes in the hands of
such holder. As a result, there will be no federal income tax consequence to
holders exchanging Old Notes for New Notes pursuant to the Exchange Offer.
Tax Consequences to U.S. Holders
For purposes of this summary, a U.S. Holder is any beneficial owner that
is, for United States federal income tax purposes (i) a citizen or resident of
the United States, (ii) a corporation, or other entity taxable as a corporation
created or organized in or under the laws of the United States, or any political
subdivision thereof, (iii) an estate the income of which is includible in gross
income for U.S. federal income tax purposes regardless of source or (iv) a trust
if a court within the United States is able to exercise primary supervision over
the administration of the trust and one or more U.S. persons have the authority
to control all substantial decisions of the trust.
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<PAGE> 77
Interest Income
A U.S. Holder will recognize ordinary income when it receives or accrues
interest on the Notes in accordance with such U.S. Holder's method of tax
accounting. A U.S. Holder may be entitled to treat interest income on the Notes
as "investment income" for purposes of computing certain limitations concerning
the deductibility of investment interest expense.
If any Special Interest is paid on the Notes as a result of a Registration
Default, such Special Interest should be includible in the U.S. Holder's income
as ordinary interest income as it becomes fixed or is paid in accordance with
such U.S. Holder's usual method of tax accounting. It is possible, however, that
the Internal Revenue Service (the "IRS") may take a different position, in which
case U.S. Holders might be required to include such Special Interest in income
prior to receipt regardless of their usual method of tax accounting.
Disposition of Notes
Upon the sale, exchange, retirement or other taxable disposition of a
Note, a U.S. Holder will recognize gain or loss equal to the difference between
the amount realized on the sale, exchange or retirement (other than amounts
representing accrued and unpaid interest) and such U.S. Holder's adjusted tax
basis in the Note. A U.S. Holder's adjusted tax basis in a Note will be equal to
such U.S. Holder's cost for the Note, decreased by any principal payments
previously received by such U.S. Holder with respect to such Note. Any such gain
or loss will be capital gain or loss and will be long-term, mid-term or
short-term (and subject to taxation at different capital gains rates) depending,
respectively, upon whether the U.S. Holder has held the Note for more than 18
months, more than 12 months but no more than 18 months, or no more than 12
months. Subject to certain limited exceptions, capital losses cannot be used to
offset ordinary income.
A cash basis U.S. Holder that sells a Note between interest payment dates
will be required to treat an amount equal to accrued but unpaid interest through
the date of sale as ordinary interest income.
Tax Consequences to Foreign Holders
For purposes of this discussion, a "Foreign Holder" is any beneficial
owner that is not a U.S. Holder.
A Foreign Holder generally will not be subject to United States federal
income or withholding taxes on payments of principal or interest on the Notes so
long as, in the case of interest, the Foreign Holder (i) is not actually or
constructively a "10 percent shareholder" of the Company or a "controlled
foreign corporation" with respect to which the Company is "related" (directly or
indirectly) through stock ownership within the meaning of the Code, and (ii)
provides an appropriate statement, signed under penalties of perjury, certifying
that the beneficial owner of the Note is not a U.S. Holder and providing that
foreign Holder's name and address. If the information provided in this statement
changes, the foreign person must so inform the Company within 30 days of such
change. The statement generally must be provided in the year a payment of
interest occurs or in either of the two preceding years. If the foregoing
conditions are not satisfied, then interest paid on the Notes will be subject to
U.S. withholding tax at a rate of 30 percent, unless such rate is reduced or
eliminated pursuant to an applicable tax treaty.
Any capital gain a Foreign Holder realizes on the sale, redemption,
retirement or other taxable disposition of a Note will be exempt from U.S.
federal income and withholding tax, provided that (i) the gain is not
effectively connected with the Foreign Holder's conduct of a trade or business
in the United States, and (ii) in the case of a Foreign Holder that is an
individual, the Foreign Holder is not present in the United States for 183 days
or more in the taxable year and certain other requirements are satisfied.
If the interest, gain or other income a Foreign Holder recognizes on a
Note is effectively connected with the Foreign Holder's conduct of a trade or
business in the United States, the Foreign Holder (although exempt from
withholding tax previously discussed if an appropriate statement is furnished)
generally will be subject to U.S. federal income tax on the interest, gain or
other income at regular federal income tax rates. In addition, if the
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<PAGE> 78
Foreign Holder is a foreign corporation, it may be subject to a branch profits
tax equal to 30 percent of its "effectively connected earnings and profits," as
adjusted for certain items, unless it qualifies for a lower rate under an
applicable tax treaty.
Backup Withholding
A holder of Notes may be subject to "back-up withholding" at a rate of 31%
with respect to certain "reportable payments," including interest payments and,
under certain circumstances, principal payments on the Notes and proceeds of the
sale or other disposition of a Note before maturity. These back-up withholding
rules apply if the holder, among other things (i) fails to furnish a social
security number or other taxpayer identification number ("TIN") certified under
penalties of perjury within a reasonable time after the request therefor, (ii)
furnishes an incorrect TIN, (iii) fails to report properly interest or
dividends, or (iv) under certain circumstances, fails to provide a certified
statement, signed under penalties of perjury, that the TIN furnished is the
correct number and that such holder is not subject to back-up withholding. A
holder who does not provide the Company with its correct TIN also may be subject
to penalties imposed by the IRS. Any amount withheld from a payment to a holder
under the back-up withholding rules is creditable against the holder's federal
income tax liability, provided the required information is furnished to the IRS.
Back-up withholding will not apply, however, with respect to payments made to
certain holders, including corporations, tax-exempt organizations and certain
foreign persons, provided their exemption from back-up withholding is properly
established.
The Company will report to the holders of Notes and to the IRS the amount
of any "reportable payments" for each calendar year and the amount of tax
withheld, if any, with respect to such payments.
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 Old Notes where
such Old Notes were acquired as a result of market-marking activities or other
trading activities. The Company has agreed that, starting on the Expiration Date
and ending on the close of business on the 180th day after 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.
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 and any broker or dealer that participates in the
distribution of such New Notes may be deemed to be an "underwriter" within the
meaning of the Securities Act and any profit on any such resale of 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 one year
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 the Letter of Transmittal. The
Company has agreed to pay all expenses incident to the Exchange Offer other than
commissions or concessions of any brokers or dealers and will indemnify the
holders of the Notes (including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.
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<PAGE> 79
There has not previously been any public market for the New Notes. The
Company presently does not intend to apply for listing of the New Notes on any
securities exchange or to seek approval for quotation through any automated
quotation system. The Company has been advised by the Initial Purchasers that
they intend to make a market in the New Notes; however, they are not obligated
to do so and any market-making activities with respect to the New Notes may be
discontinued at any time without notice. Therefore, there can be no assurance
that an active market for the New Notes will develop or as to the liquidity of
any such market.
LEGAL MATTERS
The validity of the New Notes will be passed upon by Curtis,
Mallet-Prevost, Colt & Mosle, New York, New York, counsel for the Company.
EXPERTS
The consolidated financial statements of the Company as of December 29,
1996 and December 31, 1995, and for the 52 weeks ended December 29, 1996, and
each of the years in the two-year period ended December 31, 1995, have been
incorporated by reference herein and in the Registration Statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
On September 4, 1997, the engagement of KPMG Peat Marwick LLP as the
Company's principal accountants was terminated, and Deloitte & Touche LLP was
engaged as the Company's principal accountants. During the Company's two most
recent fiscal years and the subsequent interim periods preceding such dismissal,
there were no disagreements with KPMG Peat Marwick LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedures which disagreements if not resolved to their satisfaction
would have caused them to make reference thereof in connection with their
reports.
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<PAGE> 80
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
In accordance with Section 102(b)(7) of the Delaware General Corporation
Law (the "DGCL"), the Restated Certificate of Incorporation of the Company
contains a provision to limit the personal liability of the directors of the
Company for violations of their fiduciary duties. This provision eliminates each
director's liability to the Company or its stockholders for monetary damages
except (i) for any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL providing for liability of directors for unlawful payment of dividends
or unlawful stock purchases or redemption, or (iv) for any transaction from
which the director derived an improper personal benefit. The effect of this
provision is to eliminate the personal liability of directors for monetary
damages for actions involving a breach of their fiduciary duty of care,
including any such actions involving gross negligence.
Section 145 of the DGCL provides that a corporation may indemnify any
person, including officers and directors, who are, or are threatened to be made,
parties to any threatened, pending or completed legal action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of such corporation, by reason of the fact that
such person was an officer, director, employee or agent of such corporation, or
is or was serving at the request of such corporation as a director, officer,
employee or agent of another corporation. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding, provided such officer, director, employee or agent acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
corporation's best interests and, for criminal proceedings, had no reasonable
cause to believe that his conduct was unlawful. A Delaware corporation may
indemnify officers and directors in an action by or in the right of the
corporation under the same conditions, except that no indemnification is
permitted without judicial approval if the officer or director is adjudged to be
liable to the corporation. Where an officer or director is successful on the
merits or otherwise in defense of any action referred to above, the corporation
must indemnify him against the expenses which such officer or director actually
or reasonably incurred. The Restated Bylaws of the Company provide for
indemnification of the officers and directors' to the fullest extend permitted
by the DGCL. In addition, the Company maintains officers' and directors'
liability insurance which insures against liabilities that officers and
directors of the Company may incur in such capacities.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits
Exhibit Number
- --------------
2.1 -- Asset Purchase Agreement with Test Technology Pte Ltd dated
September 19, 1994 (incorporated by reference to Exhibit 2.1 of
the Company's Report on Form 8-K dated September 21, 1994, File
No. 0-21374).
2.2 -- Stock Purchase Agreement with Multilayer Technology, Inc.,
George Schreyer and Marina Schreyer dated September 20, 1994
(incorporated by reference to Exhibit 2.2 of the Company's
Report on Form 8-K dated September 21, 1994, File No. 0-21374).
2.3 -- Stock Purchase Agreement with the shareholders of Sistemas
Inteligentes Ceretronik S.A. de C.V. dated June 23, 1994
(incorporated by reference to Exhibit 2.3 of the Company's
Report on Form 8-K dated September 21, 1994, File No. 0-21374).
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2.4 -- Asset Purchase Agreement with Thielen Group, Inc. dated May 11,
1994 (incorporated by reference to Exhibit 2.4 of the Company's
Report on Form 8-K dated September 21, 1994, File No. 0-21374).
2.5 -- Put/Call Agreement with George Schreyer dated September 20, 1994
(incorporated by reference to Exhibit 2.5 of the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1994, File No. 0-21374).
2.6 -- Agreement and Plan of Merger by and among The DII Group, Inc.,
DII Merger Corp. and Orbit Semiconductor, Inc., dated as of June
9, 1996 (incorporated by reference to Annex A to the Joint Proxy
Statement/Prospectus contained in the Company's Registration
Statement on Form S-4, No. 333-6789).
**2.7 -- Purchase Agreement, dated as of August 5, 1997, by and among
International Business Machines Corporation, a New York
corporation, Multilayer Tek, L.P., a Texas limited partnership
and The DII Group, Inc., a Delaware corporation (incorporated by
reference to Exhibit 2.1 of the Company's Report on Form 8-K
dated August 29, 1997).
2.8 -- Exhibit A to the Purchase Agreement filed as Exhibit 2.7 to this
Registration Statement - Assignment and Assumption Agreement
(incorporated by reference to Exhibit 2.2 of the Company's
Report on Form 8-K dated August 29, 1997).
**2.9 -- Exhibit C to the Purchase Agreement filed as Exhibit 2.7 to this
Registration Statement - Lease (incorporated by reference to
Exhibit 2.3 of the Company's Report on Form 8-K dated August 29,
1997).
**2.10 -- Exhibit E to the Purchase Agreement filed as Exhibit 2.7 to this
Registration Statement - Project Operations Agreement
(incorporated by reference to Exhibit 2.4 of the Company's
Report on Form 8-K dated August 29, 1997).
+2.11 -- Exhibit F to the Purchase Agreement filed as Exhibit 2.7 to this
Registration Statement - Supply Agreement (incorporated by
reference to Exhibit 2.5 of the Company's Report on Form 8-K
dated August 29, 1997).
2.12 -- Exhibit G to the Purchase Agreement filed as Exhibit 2.7 to this
Registration Statement - Bill of Sale (incorporated by reference
to Exhibit 2.6 of the Company's Report on Form 8-K dated August
29, 1997).
2.13 -- Exhibit H to the Purchase Agreement filed as Exhibit 2.7 to this
Registration Statement - Special Warranty Deed (incorporated by
reference to Exhibit 2.7 of the Company's Report on Form 8-K
dated August 29, 1997).
3.1 -- Restated Certificate of Incorporation of the Company, together
with the Certificate of Amendment of the Restated Certificate of
Incorporation of the Company (incorporated by reference to
Exhibit 3.1 of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, File No. 0-21374).
3.2 -- Restated Bylaws of the Company, as amended (incorporated by
reference to Exhibit 3.2 of the Company's Annual Report on Form
10-K for the fiscal year ended December 29, 1996, File No.
0-21374).
4.1 -- Purchase Agreement -- 6% Convertible Subordinated Notes Due 2002
dated October 5, 1995 (incorporated by reference to Exhibit 4.1
of the Company's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1995, File No. 0-21374).
4.2 -- Indenture, dated as of October 11, 1995 between the Company and
The Chase Manhattan Bank, N.A., as trustee (incorporated by
reference to Exhibit 4.2 of the Company's Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 1995,
File No. 0-21374).
4.3 -- Registration Agreement, dated as of October 5, 1995 between the
Company and Salomon Brothers Inc as the initial purchaser
(incorporated by reference to Exhibit 4.3 of the Company's
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Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1995, File No. 0-21374).
4.4 -- Indenture, dated as of September 19, 1997, between the Company
and Chase Manhattan Bank and Trust Company, National
Association, as Trustee (incorporated by reference to Exhibit
4.1 of the Company's Quarterly Report on Form 10-Q for the
quarterly period ended September 28, 1997, File No. 0-21374).
4.5 -- Registration Rights Agreement, dated as of September 16, 1997,
among the Company and Salomon Brothers Inc, Donaldson, Lufkin &
Jenrette Securities Corporation, and BT Alex. Brown Incorporated
(incorporated by reference to Exhibit 4.3 of the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 28, 1997, File No. 0-21374).
4.6 -- Purchase Agreement, dated as of September 16, 1997, among the
Company and Salomon Brothers Inc, Donaldson, Lufkin & Jenrette
Securities Corporation, and BT Alex. Brown Incorporated
(incorporated by reference to Exhibit 4.2 of the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 28, 1997, File No. 0-21374).
4.7 -- Form of security representing the New Notes (included as Exhibit
A to Indenture filed as Exhibit 4.4 to this Registration
Statement).
5.1 -- Opinion of Curtis, Mallet-Prevost, Colt & Mosle as to the
validity of the New Notes.
10.1 -- Distribution Agreement dated as of May 4, 1993, between the
Company and Dover Corporation (incorporated by reference to
Exhibit 10.1 of the Company's Registration Statement on Form
S-1, as amended, No. 33-71138).
10.2 -- Tax Sharing Agreement dated as of May 4, 1993, between the
Company and Dover Corporation (incorporated by reference to
Exhibit 10.2 of the Company's Registration Statement on Form
S-1, as amended, No. 33-71138).
10.3 -- Employee Matters Agreement dated as of May 4, 1993, between the
Company and Dover Corporation (incorporated by reference to
Exhibit 10.3 of the Company's Registration Statement on Form
S-1, as amended, No. 33-71138).
++10.4 -- Form of Severance Agreement (incorporated by reference to
Exhibit 10.6 of the Company's Registration Statement on Form 10,
as amended, File No. 0-21374).
10.5 -- Rights Agreement dated as of May 4, 1993, between The Company
and Norwest Bank Minnesota, N.A., as Rights Agent (incorporated
by reference to Exhibit 10.5 of the Company's Registration
Statement on Form S-1, as amended, No. 33-71138).
++10.6 -- Agreement, dated August 16, 1991, by and between Standard
Microsystems and Dover Electronics Manufacturing (now called The
DII Group, Inc.) (incorporated by reference to Exhibit 10.8 of
the Company's Registration Statement on Form 10, as amended,
File No. 0-21374).
++10.7 -- 1993 Stock Option Plan (incorporated by reference to Exhibit
10.8 of the Company's Registration Statement on Form S-1, as
amended, No. 33-71138).
++10.8 -- 1994 Stock Incentive Plan (incorporated by reference to Exhibit
10.9 of the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993, File No. 0-21374).
++10.9 -- 1994 Employee Stock Purchase Plan (incorporated by reference
Exhibit 10.10 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993, File No. 0-21374).
++10.10 -- Savings and Deferred Profit Sharing Plan (incorporated by
reference to Exhibit 10.4 of the Company's Registration
Statement on Form 10, as amended, File No. 0-21374).
++10.11 -- Amendments to the Savings and Deferred Profit Sharing Plan
(incorporated by reference to Exhibit 10.11 of the Company's
Annual Report on Form 10-K for the fiscal year ended December
29, 1996, File No. 0-21374).
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++10.12 -- Dovatron Ireland Limited Defined Contribution Plan (incorporated
by reference to Exhibit 10.5 of the Company's Registration
Statement on Form 10, as amended, File No. 0-21374).
++10.13 -- Form of Performance Share Agreement pursuant to the 1994 Stock
Incentive Plan (incorporated by reference to Exhibit 10.16 of
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, File No. 0-21374).
++10.14 -- Non-Employee Director's Stock Compensation Plan (incorporated by
reference to Exhibit B of the Company's Proxy Statement for the
Company's 1996 Annual Meeting of Stockholders, File No.
0-21374).
++10.15 -- Senior Executive Performance Bonus Plan (incorporated by
reference to Exhibit A of the Company's Proxy Statement for the
Company's 1996 Annual Meeting of Stockholders, File No.
0-21374).
10.16 -- Loan Agreement -- $60,000,000 Revolving Line of Credit dated
April 4, 1996 between The DII Group, Inc. and Norwest Bank
Colorado, N.A., The Chase Manhattan Bank, N.A., Harris Trust and
Savings Bank, and NBD Bank (incorporated by reference to Exhibit
10.1 of the Company's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1996, File No. 0-21374).
10.17 -- First Amendment to Loan Agreement dated December 20, 1996
(incorporated by reference to Exhibit 10.1 of the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
March 30, 1997).
10.18 -- Second Amendment to the $80,000,000 Revolving Line of Credit
dated August 1, 1997 between The DII Group, Inc. and Norwest
Bank Colorado, N.A., The Chase Manhattan Bank, N.A., Harris
Trust and Savings Bank, and NBD Bank (incorporated by reference
to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q
for the quarterly period ended September 28, 1997, File No.
0-21374).
10.19 -- Third Amendment to the $80,000,000 Revolving Line of Credit
dated September 15, 1997 between The DII Group, Inc. and Norwest
Bank Colorado, N.A., The Chase Manhattan Bank, Harris Trust and
Savings Bank, and NBD Bank (incorporated by reference to Exhibit
10.2 of the Company's Quarterly Report on Form 10-Q for the
quarterly period ended September 28, 1997, File No. 0-21374).
+10.20 -- Agreement dated as of February 17, 1997, by and between Hewlett-
Packard and Dovatron International, Inc. (incorporated by
reference to Exhibit 10.2 of the Company's Quarterly Report
on Form 10-Q for the quarterly period ended March 30, 1997).
++10.21 -- The DII Group, Inc. Deferred Compensation Plan (incorporated by
reference to Exhibit 10.3 of the Company's Quarterly Report on
Form 10-Q for the quarterly period ended March 30, 1997).
++10.22 -- The DII Group, Inc. Performance Share Agreement (incorporated
by reference to Exhibit 10.4 of the Company's Quarterly Report
on Form 10-Q for the quarterly period ended March 30, 1997).
++10.23 -- Employment Agreement dated as of January 1, 1997 between The
DII Group, Inc. and Ronald R. Budacz (incorporated by reference
to Exhibit 10.5 of the Company's Quarterly Report on Form 10-Q
for the quarterly period ended March 30, 1997).
++10.24 -- Employment Agreement dated as of January 1, 1997 between The
DII Group, Inc. and Carl R. Vertuca, Jr. (incorporated by
reference to Exhibit 10.6 of the Company's Quarterly Report on
Form 10-Q for the quarterly period ended March 30, 1997).
++10.25 -- Employment Agreement dated as of January 1, 1997 between The
DII Group, Inc. and Ronald R. Snyder (incorporated by
reference to Exhibit 10.7 of the Company's Quarterly Report on
Form 10-Q for the quarterly period ended March 30, 1997).
++10.26 -- Employment Agreement dated as of January 1, 1997 between The
DII Group, Inc. and Dermott O'Flanagan (incorporated by
reference to Exhibit 10.8 of the Company's Quarterly Report on
Form 10-Q for the quarterly period ended March 30, 1997).
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<PAGE> 84
++10.27 -- Amendment to the Senior Executive Severance Agreement dated as
of January 1, 1997 between The DII Group, Inc. and Ronald R.
Budacz (incorporated by reference to Exhibit 10.9 of the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended March 30, 1997).
++10.28 -- Amendment to the Senior Executive Severance Agreement dated as
of January 1, 1997 between The DII Group, Inc. and Carl R.
Vertuca, Jr. (incorporated by reference to Exhibit 10.10 of the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended March 30, 1997).
++10.29 -- Amendment to the Senior Executive Severance Agreement dated as
of January 1, 1997 between The DII Group, Inc. and Ronald R.
Snyder (incorporated by reference to Exhibit 10.11 of the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended March 30, 1997).
++10.30 -- Amendment to the Senior Executive Severance Agreement dated as
of January 1, 1997 between The DII Group, Inc. and Dermott
O'Flanagan (incorporated by reference to Exhibit 10.12 of the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended March 30, 1997).
++10.31 -- First Amendment to Employment Agreement dated as of August 12,
1997 between The DII Group, Inc. and Ronald R. Budacz
(incorporated by reference to Exhibit 10.3 of the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 28, 1997, File No. 0-21374).
++10.32 -- First Amendment to Employment Agreement dated as of August 12,
1997 between The DII Group, Inc. and Carl R. Vertuca, Jr.
(incorporated by reference to Exhibit 10.4 of the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 28, 1997, File No. 0-21374).
++10.33 -- First Amendment to Employment Agreement dated as of August 12,
1997 between The DII Group, Inc. and Ronald R. Snyder
(incorporated by reference to Exhibit 10.5 of the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 28, 1997, File No. 0-21374).
++10.34 -- Employment Agreement dated as of January 1, 1997 between The DII
Group, Inc. and Carl. A. Plichta (incorporated by reference to
Exhibit 10.6 of the Company's Quarterly Report on Form 10-Q for
the quarterly period ended September 28, 1997, File No.
0-21374).
++10.35 -- First Amendment to Employment Agreement dated as of August 12,
1997 between The DII Group, Inc. and Carl A. Plichta
(incorporated by reference to Exhibit 10.7 of the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 28, 1997, File No. 0-21374).
*12.1 -- Computation of Ratio of Earnings to Fixed Charges.
*21.1 -- List of Subsidiaries of the Company.
II-5
<PAGE> 85
23.1 -- Consent of KPMG Peat Marwick LLP.
23.2 -- Consent of Curtis, Mallet-Prevost, Colt & Mosle (included in
Exhibit 5.1).
* 24.1 -- Powers of attorney (included on the signature pages hereof).
* 25.1 -- Statement of eligibility of the Trustee.
* 99.1 -- Form of Letter of Transmittal.
* 99.2 -- Form of Notice of Guaranteed Delivery.
----------
* Previously filed.
** Schedules were not included but will be furnished supplementally to
the Commission upon request.
+ Confidential treatment has been granted as to portions of this
exhibit.
++ Management contract or compensatory plan.
(b) Financial Statement Schedules
None
Item 22. Undertakings
The undersigned registrant hereby undertakes:
A. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
1. To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
2. To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in the volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of a
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement;
3. To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
Provided, however, that paragraphs A.1 and A.2 do not apply if the
registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs
is contained in periodic reports filed by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the registration statement.
B. That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effect amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
C. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
II-6
<PAGE> 86
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-7
<PAGE> 87
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Niwot, State of Colorado,
on the 18th day of December, 1997.
The DII Group, Inc.
By: /s/ Thomas J. Smach
----------------------------
Name: Thomas J. Smach
Title: Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
* Chairman and Chief December 18, 1997
- ------------------------------ Executive Officer
Ronald R. Budacz
/s/ Carl R. Vertuca, Jr. Director, Executive December 18, 1997
- ------------------------------ President--Finance,
Carl R. Vertuca, Jr. Administration and
Corporate Development
/s/ Thomas J. Smach Chief Financial Officer December 18, 1997
- ------------------------------ (Principal Financial
Thomas J. Smach Officer and Principal
Accounting Officer)
* Director December 18, 1997
- ------------------------------
Robert L. Brueck
* Director December 18, 1997
- ------------------------------
Gary P. Kennedy
II-8
<PAGE> 88
* Director December 18, 1997
- ------------------------------
Constantine S. Macricostas
* Director December 18, 1997
- ------------------------------
Gerard T. Wrixon, Ph.D.
* Director December 18, 1997
- ------------------------------
Alexander W. Young
*By /s/ Thomas J. Smach
- ------------------------------
Thomas J. Smach
Attorney-in-Fact
II-9
<PAGE> 89
Exhibit Index
Exhibit Number
- --------------
2.1 -- Asset Purchase Agreement with Test Technology Pte Ltd dated
September 19, 1994 (incorporated by reference to Exhibit 2.1 of
the Company's Report on Form 8-K dated September 21, 1994, File
No. 0-21374).
2.2 -- Stock Purchase Agreement with Multilayer Technology, Inc.,
George Schreyer and Marina Schreyer dated September 20, 1994
(incorporated by reference to Exhibit 2.2 of the Company's
Report on Form 8-K dated September 21, 1994, File No. 0-21374).
2.3 -- Stock Purchase Agreement with the shareholders of Sistemas
Inteligentes Ceretronik S.A. de C.V. dated June 23, 1994
(incorporated by reference to Exhibit 2.3 of the Company's
Report on Form 8-K dated September 21, 1994, File No. 0-21374).
2.4 -- Asset Purchase Agreement with Thielen Group, Inc. dated May 11,
1994 (incorporated by reference to Exhibit 2.4 of the Company's
Report on Form 8-K dated September 21, 1994, File No. 0-21374).
2.5 -- Put/Call Agreement with George Schreyer dated September 20, 1994
(incorporated by reference to Exhibit 2.5 of the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1994, File No. 0-21374).
2.6 -- Agreement and Plan of Merger by and among The DII Group, Inc.,
DII Merger Corp. and Orbit Semiconductor, Inc., dated as of June
9, 1996 (incorporated by reference to Annex A to the Joint Proxy
Statement/Prospectus contained in the Company's Registration
Statement on Form S-4, No. 333-6789).
**2.7 -- Purchase Agreement, dated as of August 5, 1997, by and among
International Business Machines Corporation, a New York
corporation, Multilayer Tek, L.P., a Texas limited partnership
and The DII Group, Inc., a Delaware corporation (incorporated by
reference to Exhibit 2.1 of the Company's Report on Form 8-K
dated August 29, 1997).
2.8 -- Exhibit A to the Purchase Agreement filed as Exhibit 2.7 to this
Registration Statement - Assignment and Assumption Agreement
(incorporated by reference to Exhibit 2.2 of the Company's
Report on Form 8-K dated August 29, 1997).
**2.9 -- Exhibit C to the Purchase Agreement filed as Exhibit 2.7 to this
Registration Statement - Lease (incorporated by reference to
Exhibit 2.3 of the Company's Report on Form 8-K dated August 29,
1997).
**2.10 -- Exhibit E to the Purchase Agreement filed as Exhibit 2.7 to this
Registration Statement - Project Operations Agreement
(incorporated by reference to Exhibit 2.4 of the Company's
Report on Form 8-K dated August 29, 1997).
+2.11 -- Exhibit F to the Purchase Agreement filed as Exhibit 2.7 to this
Registration Statement - Supply Agreement (incorporated by
reference to Exhibit 2.5 of the Company's Report on Form 8-K
dated August 29, 1997).
2.12 -- Exhibit G to the Purchase Agreement filed as Exhibit 2.7 to this
Registration Statement - Bill of Sale (incorporated by reference
to Exhibit 2.6 of the Company's Report on Form 8-K dated August
29, 1997).
2.13 -- Exhibit H to the Purchase Agreement filed as Exhibit 2.7 to this
Registration Statement - Special Warranty Deed (incorporated by
reference to Exhibit 2.7 of the Company's Report on Form 8-K
dated August 29, 1997).
<PAGE> 90
3.1 -- Restated Certificate of Incorporation of the Company, together
with the Certificate of Amendment of the Restated Certificate of
Incorporation of the Company (incorporated by reference to
Exhibit 3.1 of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, File No. 0-21374).
3.2 -- Restated Bylaws of the Company, as amended (incorporated by
reference to Exhibit 3.2 of the Company's Annual Report on Form
10-K for the fiscal year ended December 29, 1996, File No.
0-21374).
4.1 -- Purchase Agreement -- 6% Convertible Subordinated Notes Due 2002
dated October 5, 1995 (incorporated by reference to Exhibit 4.1
of the Company's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1995, File No. 0-21374).
4.2 -- Indenture, dated as of October 11, 1995 between the Company and
The Chase Manhattan Bank, N.A., as trustee (incorporated by
reference to Exhibit 4.2 of the Company's Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 1995,
File No. 0-21374).
4.3 -- Registration Agreement, dated as of October 5, 1995 between the
Company and Salomon Brothers Inc as the initial purchaser
(incorporated by reference to Exhibit 4.3 of the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1995, File No. 0-21374).
4.4 -- Indenture, dated as of September 19, 1997, between the Company
and Chase Manhattan Bank and Trust Company, National
Association, as Trustee (incorporated by reference to Exhibit
4.1 of the Company's Quarterly Report on Form 10-Q for the
quarterly period ended September 28, 1997, File No. 0-21374).
4.5 -- Registration Rights Agreement, dated as of September 16, 1997,
among the Company and Salomon Brothers Inc, Donaldson, Lufkin &
Jenrette Securities Corporation, and BT Alex. Brown Incorporated
(incorporated by reference to Exhibit 4.3 of the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 28, 1997, File No. 0-21374).
4.6 -- Purchase Agreement, dated as of September 16, 1997, among the
Company and Salomon Brothers Inc, Donaldson, Lufkin & Jenrette
Securities Corporation, and BT Alex. Brown Incorporated
(incorporated by reference to Exhibit 4.2 of the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 28, 1997, File No. 0-21374).
4.7 -- Form of security representing the New Notes (included as Exhibit
A to Indenture filed as Exhibit 4.4 to this Registration
Statement).
5.1 -- Opinion of Curtis, Mallet-Prevost, Colt & Mosle as to the
validity of the New Notes.
<PAGE> 91
10.1 -- Distribution Agreement dated as of May 4, 1993, between the
Company and Dover Corporation (incorporated by reference to
Exhibit 10.1 of the Company's Registration Statement on Form
S-1, as amended, No. 33-71138).
10.2 -- Tax Sharing Agreement dated as of May 4, 1993, between the
Company and Dover Corporation (incorporated by reference to
Exhibit 10.2 of the Company's Registration Statement on Form
S-1, as amended, No. 33-71138).
10.3 -- Employee Matters Agreement dated as of May 4, 1993, between the
Company and Dover Corporation (incorporated by reference to
Exhibit 10.3 of the Company's Registration Statement on Form
S-1, as amended, No. 33-71138).
++10.4 -- Form of Severance Agreement (incorporated by reference to
Exhibit 10.6 of the Company's Registration Statement on Form 10,
as amended, File No. 0-21374).
10.5 -- Rights Agreement dated as of May 4, 1993, between The Company
and Norwest Bank Minnesota, N.A., as Rights Agent (incorporated
by reference to Exhibit 10.5 of the Company's Registration
Statement on Form S-1, as amended, No. 33-71138).
++10.6 -- Agreement, dated August 16, 1991, by and between Standard
Microsystems and Dover Electronics Manufacturing (now called The
DII Group, Inc.) (incorporated by reference to Exhibit 10.8 of
the Company's Registration Statement on Form 10, as amended,
File No. 0-21374).
++10.7 -- 1993 Stock Option Plan (incorporated by reference to Exhibit
10.8 of the Company's Registration Statement on Form S-1, as
amended, No. 33-71138).
++10.8 -- 1994 Stock Incentive Plan (incorporated by reference to Exhibit
10.9 of the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993, File No. 0-21374).
++10.9 -- 1994 Employee Stock Purchase Plan (incorporated by reference
Exhibit 10.10 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993, File No. 0-21374).
++10.10 -- Savings and Deferred Profit Sharing Plan (incorporated by
reference to Exhibit 10.4 of the Company's Registration
Statement on Form 10, as amended, File No. 0-21374).
++10.11 -- Amendments to the Savings and Deferred Profit Sharing Plan
(incorporated by reference to Exhibit 10.11 of the Company's
Annual Report on Form 10-K for the fiscal year ended December
29, 1996, File No. 0-21374).
<PAGE> 92
++10.12 -- Dovatron Ireland Limited Defined Contribution Plan (incorporated
by reference to Exhibit 10.5 of the Company's Registration
Statement on Form 10, as amended, File No. 0-21374).
++10.13 -- Form of Performance Share Agreement pursuant to the 1994 Stock
Incentive Plan (incorporated by reference to Exhibit 10.16 of
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, File No. 0-21374).
++10.14 -- Non-Employee Director's Stock Compensation Plan (incorporated by
reference to Exhibit B of the Company's Proxy Statement for the
Company's 1996 Annual Meeting of Stockholders, File No.
0-21374).
++10.15 -- Senior Executive Performance Bonus Plan (incorporated by
reference to Exhibit A of the Company's Proxy Statement for the
Company's 1996 Annual Meeting of Stockholders, File No.
0-21374).
10.16 -- Loan Agreement -- $60,000,000 Revolving Line of Credit dated
April 4, 1996 between The DII Group, Inc. and Norwest Bank
Colorado, N.A., The Chase Manhattan Bank, N.A., Harris Trust and
Savings Bank, and NBD Bank (incorporated by reference to Exhibit
10.1 of the Company's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1996, File No. 0-21374).
10.17 -- First Amendment to Loan Agreement dated December 20, 1996
(incorporated by reference to Exhibit 10.1 of the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
March 30, 1997).
10.18 -- Second Amendment to the $80,000,000 Revolving Line of Credit
dated August 1, 1997 between The DII Group, Inc. and Norwest
Bank Colorado, N.A., The Chase Manhattan Bank, N.A., Harris
Trust and Savings Bank, and NBD Bank (incorporated by reference
to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q
for the quarterly period ended September 28, 1997, File No.
0-21374).
10.19 -- Third Amendment to the $80,000,000 Revolving Line of Credit
dated September 15, 1997 between The DII Group, Inc. and Norwest
Bank Colorado, N.A., The Chase Manhattan Bank, Harris Trust and
Savings Bank, and NBD Bank (incorporated by reference to Exhibit
10.2 of the Company's Quarterly Report on Form 10-Q for the
quarterly period ended September 28, 1997, File No. 0-21374).
+10.20 -- Agreement dated as of February 17, 1997, by and between Hewlett-
Packard and Dovatron International, Inc. (incorporated by
reference to Exhibit 10.2 of the Company's Quarterly Report
on Form 10-Q for the quarterly period ended March 30, 1997).
++10.21 -- The DII Group, Inc. Deferred Compensation Plan (incorporated by
reference to Exhibit 10.3 of the Company's Quarterly Report on
Form 10-Q for the quarterly period ended March 30, 1997).
++10.22 -- The DII Group, Inc. Performance Share Agreement (incorporated
by reference to Exhibit 10.4 of the Company's Quarterly Report
on Form 10-Q for the quarterly period ended March 30, 1997).
++10.23 -- Employment Agreement dated as of January 1, 1997 between The
DII Group, Inc. and Ronald R. Budacz (incorporated by reference
to Exhibit 10.5 of the Company's Quarterly Report on Form 10-Q
for the quarterly period ended March 30, 1997).
++10.24 -- Employment Agreement dated as of January 1, 1997 between The
DII Group, Inc. and Carl R. Vertuca, Jr. (incorporated by
reference to Exhibit 10.6 of the Company's Quarterly Report on
Form 10-Q for the quarterly period ended March 30, 1997).
++10.25 -- Employment Agreement dated as of January 1, 1997 between The
DII Group, Inc. and Ronald R. Snyder (incorporated by
reference to Exhibit 10.7 of the Company's Quarterly Report on
Form 10-Q for the quarterly period ended March 30, 1997).
++10.26 -- Employment Agreement dated as of January 1, 1997 between The
DII Group, Inc. and Dermott O'Flanagan (incorporated by
reference to Exhibit 10.8 of the Company's Quarterly Report on
Form 10-Q for the quarterly period ended March 30, 1997).
++10.27 -- Amendment to the Senior Executive Severance Agreement dated as
of January 1, 1997 between The DII Group, Inc. and Ronald R.
Budacz (incorporated by reference to Exhibit 10.9 of the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended March 30, 1997).
++10.28 -- Amendment to the Senior Executive Severance Agreement dated as
of January 1, 1997 between The DII Group, Inc. and Carl R.
Vertuca, Jr. (incorporated by reference to Exhibit 10.10 of the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended March 30, 1997).
++10.29 -- Amendment to the Senior Executive Severance Agreement dated as
of January 1, 1997 between The DII Group, Inc. and Ronald R.
Snyder (incorporated by reference to Exhibit 10.11 of the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended March 30, 1997).
++10.30 -- Amendment to the Senior Executive Severance Agreement dated as
of January 1, 1997 between The DII Group, Inc. and Dermott
O'Flanagan (incorporated by reference to Exhibit 10.12 of the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended March 30, 1997).
++10.31 -- First Amendment to Employment Agreement dated as of August 12,
1997 between The DII Group, Inc. and Ronald R. Budacz
(incorporated by reference to Exhibit 10.3 of the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 28, 1997, File No. 0-21374).
++10.32 -- First Amendment to Employment Agreement dated as of August 12,
1997 between The DII Group, Inc. and Carl R. Vertuca, Jr.
(incorporated by reference to Exhibit 10.4 of the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 28, 1997, File No. 0-21374).
++10.33 -- First Amendment to Employment Agreement dated as of August 12,
1997 between The DII Group, Inc. and Ronald R. Snyder
(incorporated by reference to Exhibit 10.5 of the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 28, 1997, File No. 0-21374).
++10.34 -- Employment Agreement dated as of January 1, 1997 between The DII
Group, Inc. and Carl. A. Plichta (incorporated by reference to
Exhibit 10.6 of the Company's Quarterly Report on Form 10-Q for
the quarterly period ended September 28, 1997, File No.
0-21374).
++10.35 -- First Amendment to Employment Agreement dated as of August 12,
1997 between The DII Group, Inc. and Carl A. Plichta
(incorporated by reference to Exhibit 10.7 of the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 28, 1997, File No. 0-21374).
*12.1 -- Computation of Ratio of Earnings to Fixed Charges.
*21.1 -- List of Subsidiaries of the Company.
<PAGE> 93
23.1 -- Consent of KPMG Peat Marwick LLP.
23.2 -- Consent of Curtis, Mallet-Prevost, Colt & Mosle (included in
Exhibit 5.1).
*24.1 -- Powers of attorney (included on the signature pages hereof).
*25.1 -- Statement of eligibility of the Trustee.
*99.1 -- Form of Letter of Transmittal.
*99.2 -- Form of Notice of Guaranteed Delivery.
----------
* Previously filed.
** Schedules were not included but will be furnished supplementally to
the Commission upon request.
+ Confidential treatment has been granted as to portions of this
exhibit.
++ Management contract or compensatory plan.
<PAGE> 1
Exhibit 5.1
CURTIS, MALLET-PREVOST, COLT & MOSLE
ATTORNEYS AND COUNSELLORS AT LAW
<TABLE>
<CAPTION>
<S> <C> <C>
1801 K Street, N.W., Suite 1205 L Two Throgmorton Avenue
Washington, DC 20006-1301 101 PARK AVENUE London EC2N 2DL
Telephone 202-452-7373 Telephone 44-171-638-7957
Facsimile 202-452-7333 NEW YORK, NEW YORK 10178-0061 Facsimile 44-171-638-5512
TELEPHONE 212-696-6000
2 Houston Center Facsimile 212-697-1559 15, rue d'Astorg
909 Fannin Street, Suite 3725 E-Mail [email protected] 75008 Paris
Houston, TX 77010-1010 Voice Mail 212-696-6028 Telephone 33-1-42-66-39-10
Telephone 713-759-9555 Facsimile 33-1-42-66-39-62
Facsimile 713-759-0712
Staufenstrasse 42
One Gateway Center, Suite 403 60323 Frankfurt am Main
Newark, NJ 07102-5311 Telephone 49-69-971-4420
Telephone 201-622-0605 Facsimile 49-69-17-33-99
Facsimile 201-622-5646
401 St. George's Building
Ruben Dario 281, Piso 9 Two Ice House Street
Col. Bosque de Chapultepec Central, Hong Kong
11580 Mexico, D.F., Mexico Telephone 852-2845-0200
Telephone 525-282-0444 Facsimile 852-2868-2801
Facsimile 525-282-0637
</TABLE>
December 18, 1997
The DII Group, Inc.
6273 Monarch Park Place, Suite 200
Niwot, CO 80503
Gentlemen:
We have acted as special counsel for The DII Group, Inc., a
Delaware corporation (the "Company"), with respect to the preparation of a
Registration Statement on Form S-4 (Registration Statement No. 333-40481, as
amended, hereinafter the "Registration Statement") filed with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Act"), relating to an offer to exchange (the "Exchange Offer")
$1,000 in principal amount of its 8.50% Senior Subordinated Notes due 2007 which
exchange will have been registered under the Act (the "New Notes") for each
$1,000 in principal amount of its outstanding 8.50% Senior Subordinated Notes
due 2007 (the "Old Notes"), of which $150 million principal amount is
outstanding.
In connection herewith, we have examined the Restated
Certificate of Incorporation, the Restated By-laws and minute books of the
Company, the Registration Statement and all exhibits thereto, including the
Indenture, dated as of September 19, 1997 (the "Indenture") between the Company
and Chase Manhattan Bank and Trust Company, National Association, as trustee
(the "Trustee"), and such other documents as we have considered necessary.
In rendering this opinion, we have assumed, without any
independent investigation or verification of any kind, the genuineness of all
signatures, the authenticity of all documents
<PAGE> 2
submitted to us as originals and the conformity to authentic original documents
of all documents submitted to us as certified, conformed or photostatic or
facsimile copies. We also have assumed that the Indenture has been duly
authorized, executed and delivered by the Trustee.
Based upon such examination, it is our opinion that the New
Notes, upon valid tender of the Old Notes to Chase Manhattan Bank and Trust
Company, National Association, as exchange agent for the Exchange Offer and
issuance of the New Notes in exchange for such tendered Old Notes in accordance
with the terms of the Indenture and the Registration Statement, will constitute
legal, valid and binding obligations of the Company entitled to the benefits of
the Indenture, subject, as to enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting creditors' rights
generally from time to time in effect and general principles of equity, whether
enforcement is considered in a proceeding in equity or at law, and to the
discretion of the court before which any proceeding therefor may be brought.
We hereby consent to the reference to our name in the
Registration Statement and in the related Prospectus under the caption "Legal
Matters" and to the use of the foregoing opinion as an exhibit to the
Registration Statement. In giving this consent, we do not hereby admit that we
are within the category of persons whose consent is required under Section 7 of
the Act, or the rules and regulations of the Commission thereunder.
We are giving this opinion to the Company, and no person other
than the Company may rely upon it.
Very truly yours,
/s/ Curtis, Mallet-Prevost, Colt &
Mosle
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS
THE DII GROUP, INC.:
We consent to the use of our report dated January 28, 1997, incorporated by
reference in the registration statement on Form S-4 of the DII Group, Inc. and
subsidiaries, and to the reference to our firm under the heading "Experts" in
the prospectus.
KPMG PEAT MARWICK LLP
Denver, Colorado
December 17, 1997
