SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 26, 1998
Commission File Number 0-23938
SAFETY COMPONENTS INTERNATIONAL, INC
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
2160 North Central Road, New Jersey, 07024
(Address and zip code of principal executive offices)
33-0596831
(IRS Employer Identification Number)
(201) 592-0008
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding twelve months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of the issuer's common stock, $.01 par value
per share, as of November 11, 1998, was 5,125,816.
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
PART I
FINANCIAL INFORMATION
The unaudited consolidated financial information at September 26, 1998 and
for the thirteen and twenty-six week period ended September 26, 1998 and the
audited consolidated financial information at March 28, 1998 relate to Safety
Components International, Inc. and its subsidiaries.
ITEM 1. FINANCIAL STATEMENTS PAGE
Consolidated Balance Sheets as of September 26, 1998
and March 28, 1998 3
Consolidated Statements of Operations for the
thirteen weeks ended September 26, 1998 and the
three months ended September 30, 1997 4
Consolidated Statements of Operations for the
twenty-six weeks ended September 26, 1998 and the
six months ended September 30, 1997 5
Consolidated Statements of Cash Flows for the
twenty-six weeks ended September 26, 1998 and the
six months ended September 30, 1997 6
Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 14
ITEM 3. QUANTATIVE AND QUALATATIVE DISCLOSURES
ABOUT MARKET RISK 19
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 20
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 21
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 21
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 21
ITEM 5. OTHER INFORMATION 21
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 22
2
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
September 26, March 28,
1998 1998
------------ --------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents .................................. $ 3,095 $ 6,049
Accounts receivable, net ................................... 44,493 39,208
Inventories ................................................ 24,633 19,935
Receivable from affiliate................................... 2,996 -
Prepaid and other .......................................... 4,224 4,196
-------- --------
Total current assets .......................... 79,441 69,388
Property, plant and equipment, net ...................................... 73,563 66,279
Receivable from affiliate ............................................... - 1,206
Intangible assets, net .................................................. 59,736 55,923
Other assets ............................................................ 5,570 6,101
-------- --------
Total assets .................................. $218,310 $198,897
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................... $22,223 $23,009
Earnout payable ............................................ 1,707 1,958
Accrued liabilities ........................................ 9,703 12,558
Current portion of long-term obligations ................... 4,100 2,375
-------- --------
Total current liabilities ..................... 37,733 39,900
Long-term obligations ................................................... 39,512 24,739
Senior subordinated debt ................................................ 90,000 90,000
Other long-term liabilities ............................................. 5,671 5,064
-------- --------
Total liabilities ............................. 172,916 159,703
-------- --------
Commitments and contingencies
Stockholders' equity:
Preferred stock: $.10 par value per share - 2,000,000 shares
authorized; no shares outstanding at
September 26, 1998 and March 28, 1998, respectively.. - -
Common stock: $.01 par value per share - 10,000,000 shares
authorized; 6,618,508 and 6,538,075 shares issued and
5,125,816 and 5,045,383 shares outstanding at
September 26, 1998 and March 28, 1998, respectively.. 66 65
Common stock warrants ...................................... 1 1
Additional paid-in-capital ................................. 45,129 44,040
Treasury stock, 1,492,692 shares at September 26, 1998
and March 28, 1998 respectively, at cost ............ (15,439) (15,439)
Retained earnings .......................................... 17,542 15,191
Cumulative translation adjustment .......................... (1,905) (4,664)
-------- --------
Total stockholders' equity .................... 45,394 39,194
-------- --------
Total liabilities and stockholders' equity .... $218,310 $198,897
======== ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Thirteen Three
Weeks Ended Months Ended
September 26, September 30,
1998 1997
------------- -------------
<S> <C> <C>
Net sales ...................................................... $53,059 $42,728
Cost of sales, excluding depreciation .......................... 42,736 34,106
Depreciation ................................................... 1,811 1,333
------- -------
Gross profit ...................................... 8,512 7,289
Selling and marketing expenses ................................. 677 623
General and administrative expenses ............................ 2,519 2,133
Amortization of goodwill ....................................... 575 404
------- -------
Income from operations ............................ 4,741 4,129
Other expense(income), net...................................... 30 (70)
Interest expense ............................................... 2,993 2,165
------- -------
Income before income taxes ........................ 1,718 2,034
Provision for income taxes ..................................... 911 752
------- -------
Net income ..................................................... $ 807 $ 1,282
======= =======
Net income per share, basic .................................... $ 0.16 $ 0.26
======= =======
Net income per share, assuming dilution ........................ $ 0.16 $ 0.25
======= =======
Weighted average number of shares outstanding, basic ........... 5,119 5,021
======= =======
Weighted average number of shares outstanding, assuming dilution 5,195 5,109
======= =======
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share and per share data)
<TABLE>
<CAPTION>
Twenty-Six Six
Weeks Ended Months Ended
September 26, September 30,
1998 1997
------------- -------------
<S> <C> <C>
Net sales ...................................................... $104,508 $70,357
Cost of sales, excluding depreciation .......................... 83,054 55,262
Depreciation ................................................... 3,677 2,138
------- -------
Gross profit ...................................... 17,777 12,957
Selling and marketing expenses ................................. 1,324 911
General and administrative expenses ............................ 5,090 4,296
Amortization of goodwill ....................................... 1,135 589
------- -------
Income from operations ............................ 10,228 7,161
Other expense, net.............................................. 78 89
Interest expense ............................................... 5,796 2,647
------- -------
Income before income taxes ........................ 4,354 4,425
Provision for income taxes ..................................... 2,004 1,708
------- -------
Net income ..................................................... $ 2,350 $ 2,717
======= =======
Net income per share, basic .................................... $ 0.46 $ 0.54
======= =======
Net income per share, assuming dilution ........................ $ 0.45 $ 0.54
======= =======
Weighted average number of shares outstanding, basic ........... 5,093 5,021
======= =======
Weighted average number of shares outstanding, assuming dilution 5,200 5,064
======= =======
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Twenty-Six Six
Weeks Ended Months Ended
September 26, September 30,
1998 1997
------------- -------------
<S> <C> <C>
Net cash (used in) provided by operating activities ............. $ (7,655) $ 4,979
-------- --------
Cash Flows From Investing Activities:
Additions to property, plant and equipment ............. (9,873) (6,626)
Additional consideration and costs for Phoenix Airbag .. (1,958) (2,455)
Acquisition costs of Valentec .......................... (502) (809)
Advances to Valentec prior to acquisition............... - (1,215)
Acquisition costs of SCFTI.............................. (242) (57,582)
-------- -------
Net cash used in investing activities ............. (12,575) (68,687)
-------- -------
Cash Flows From Financing Activities:
Net proceeds from Notes................................. - 86,265
Proceeds from KeyBank term note ........................ - 15,000
Proceeds from Bank Austria mortgage .................... - 7,500
Proceeds from Transamerica financing ................... - 2,000
Repayment of Bank of America NT&SA term note ........... - (16,812)
Repayment of KeyBank term note.......................... - (15,000)
Proceeds of KeyBank equipment note...................... 10,000 -
Excersise of stock options.............................. 951 50
Repayments of debt and long-term obligations............ (1,327) (9,309)
Net(repayments) borrowing on revolving credit facility.. 7,824 (2,931)
-------- -------
Net cash provided by financing activities.......... 17,448 66,763
-------- -------
Effect of exchange rate changes on cash ......................... (172) (786)
-------- -------
Change in cash and cash equivalents ............................. (2,954) 2,269
Cash and cash equivalents, beginning of period .................. 6,049 8,320
-------- -------
Cash and cash equivalents, end of period ........................ $ 3,095 $10,589
======== =======
Supplemental disclosure of cash flow information:
Cash paid during period for:
Interest .............................................. $ 5,710 $ 863
Income taxes .......................................... 361 $ 193
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Organization and Basis of Presentation
The consolidated financial statements included herein have been prepared by
Safety Components International, Inc. ("SCI" or the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted from this report, as is permitted by such rules
and regulations; however, SCI believes that the disclosures are adequate to make
the information presented not misleading. It is suggested that these
consolidated financial statements be read in conjunction with the audited
consolidated financial statements and notes thereto included in the Company's
Form 10-K for the year ended March 28, 1998. The Company has experienced, and
expects to continue to experience, variability in net sales and net income from
quarter to quarter. Therefore, the results of the interim periods presented
herein are not necessarily indicative of the results to be expected for any
other interim period or the full year. In the opinion of management, the
information furnished reflects all adjustments, all of which are of a normal
recurring nature, necessary for a fair presentation of the results for the
reported interim periods.
Effective as of May 22, 1997, the Company acquired all of the outstanding
capital stock of Valentec International Corporation ("Valentec") in a tax free
stock-for-stock exchange (the "Valentec Acquisition"). Valentec is a high-volume
manufacturer of stamped and precision-machined products for the automotive,
commercial and defense industries. Valentec was the Company's largest
shareholder immediately prior to the Valentec Acquisition owning approximately
27%, or 1,379,200 shares of the issued and outstanding shares of common stock,
$.01 par value per share, of the Company (the "Common Stock"). In connection
with the Valentec Acquisition, the Company issued an aggregate of 1,369,200
newly issued shares of Common Stock to the shareholders of Valentec. The
Valentec Acquisition was accounted for as a purchase. The purchase price
aggregated approximately $15.2 million, including estimated direct acquisition
costs of approximately $1.4 million. In addition, the Company advanced Valentec
approximately $1.3 million for the purpose of funding operations prior to the
Valentec Acquisition. The operations of Valentec are included in the accounts of
the Company for the entire twenty-six week period ended September 26, 1998 and
beginning on May 22, 1997 for the six month period ended September 30, 1997.
Management of the Company allocated the purchase consideration for Valentec
assets, net of liabilities assumed, at fair market value, with the excess
allocated to goodwill. Goodwill of $19.9 million will be amortized over
twenty-five years on a straight-line basis.
On July 24, 1997, the Company, through a newly-formed, wholly-owned
subsidiary, Safety Components Fabric Technologies, Inc. ("SCFTI"), acquired
("the JPS Acquisition") all of the assets and assumed certain liabilities of the
Air Restraint/Technical Fabrics Division of JPS Automotive L.P. SCFTI is a
leading, low-cost supplier of airbag fabric in North America and is also a
leading manufacturer of value-added technical fabrics used in a variety of niche
industrial and commercial applications. The JPS Acquisition was accounted for as
a purchase. The purchase price aggregated approximately $58.9 million, after
giving effect to post-closing adjustments. The purchase price also included the
repayment of approximately $650,000 of capital lease obligations, direct
acquisition costs of approximately $1.0 million, and approximately $1.2 million
for the purchase of a building in conjunction with the JPS Acquisition. The
operations of SCFTI are included in the accounts of the Company for the entire
thirteen and twenty-six week periods ended September 26, 1998 and beginning on
July 24, 1997 for the three and six-month periods ended September 30, 1997.
Management of the Company allocated the purchase consideration for SCFTI assets,
net of liabilities assumed, at fair market value, with the excess allocated to
goodwill. Goodwill of $19.2 million will be amortized over forty years based on
a straight line method.
7
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Additionally, on December 22, 1997, the Company acquired all of the issued
and outstanding capital stock of CSSC, Inc. (formerly known as Champion Sales
and Service Company) ("Champion") for an aggregate amount of $3.4 million
including direct acquisition costs of approximately $125,000 (the "Champion
Transaction"). In conjunction with the Champion Transaction, the Company entered
into a management services agreement with the former shareholders of Champion.
The terms of such management services agreement prohibits the Champion
shareholders from competing with certain businesses of the Company for a period
of five years. Each such management services agreement also provides that the
Company has the option, in its sole discretion, to extend the non-competition
period for three successive five-year periods, upon payment of a nominal
extension fee. Accordingly, the Company has allocated the purchase consideration
to these non-compete agreements. In connection with the Champion Transaction,
the Company also entered into a definitive Put Agreement (the "Put Transaction")
with an associate of Champion (the "Associate") who had the right to a portion
of any of the sales commissions actually received by Champion. Pursuant to the
Put Transaction, the Associate has the option to put to the Company, subject to
certain conditions, all of the issued and outstanding capital stock of Duchi &
Associates, Inc., an affiliated entity, for a put price of $740,000. The Put
Transaction will include (as a condition to its exercise), a twenty year
management services agreement and non-compete agreement between the Company and
the Associate. The Company believes that the Put Transaction will be exercised,
and accordingly, has recorded $740,000 as an intangible asset and accrued for
the Put Transaction as part of accrued liabilities, during fiscal year 1998. The
Associate had not exercised his put option as of September 26, 1998.
NOTE 2 COMPOSITION OF CERTAIN CONSOLIDATED BALANCE SHEET COMPONENTS
(in thousands)
<TABLE>
<CAPTION>
September 26, 1998 March 28, 1998
------------------ --------------
<S> <C> <C>
Accounts receivable:
Billed receivables $ 34,217 $29,034
Unbilled receivables (net of unliquidated progress
payments of $12,686 and $12,795 at September 26, 1998 and
March 28, 1998, respectively) 7,686 8,759
Other 2,590 1,415
------- -------
$44,493 $39,208
======= =======
Inventories:
Raw materials $ 6,917 $ 6,072
Work-in-process 11,307 6,743
Finished goods 6,409 7,120
------- -------
$24,633 $19,935
======= =======
Property, plant and equipment:
Land and building $ 9,816 $ 9,134
Machinery and equipment 76,300 65,846
------- -------
86,116 74,980
Less - accumulated depreciation and amortization (12,553) (8,701)
------- -------
$73,563 $66,279
======= =======
</TABLE>
8
<PAGE>
NOTE 3 LONG-TERM OBLIGATIONS (in thousands)
<TABLE>
<CAPTION>
September 26, 1998 March 28, 1997
------------------ --------------
<S> <C> <C>
Senior Subordinated Notes due July 15, 2007, bearing
interest at 10 1/8% $90,000 $ 90,000
KeyBank and Fleet Bank revolving credit facility due
May 5, 2002, bearing interest at 1.0% over LIBOR 22,000 14,176
KeyCorp equipment note due July 10, 2005, bearing interest
at 7.09% 10,000 -
Bank Austria mortgage note, due March 31, 2007, bearing
interest at 1.0% over LIBOR 6,750 7,125
Note payable, principal due in annual installments of $212
beginning January 12, 1999 to January 12, 2002, with
interest at 7.22% in semiannual installments, secured by
assets of the Company's United Kingdom subsidiary 848 847
Capital equipment notes payable, due in monthly installment
with interest at 8.53% to 16.0% maturing at various rates
through June 2002, secured by machinery and equipment 4,014 4,966
-------- --------
133,612 117,114
Less - current portion (4,100) (2,375)
-------- --------
$129,512 $114,739
======== ========
</TABLE>
On July 24, 1997, the Company issued $90.0 million aggregate principal
amount of its 10 1/8% Senior Subordinated Notes due 2007, Series A (the "Old
Notes") to BT Securities Corporation, Alex. Brown & Sons Incorporated and
BancAmerica Securities, Inc. in a transaction not registered under the
Securities Act of 1933, as amended, in reliance upon an exemption thereunder
(the "Debt Offering"). On September 2, 1997, the Company commenced an offer to
exchange (the "Exchange Offer", together with the Debt Offering, the "Offering")
the Old Notes for $90.0 million aggregate principal amount of its 10 1/8% Senior
Subordinated Notes due 2007, Series B (the "Exchange Notes", together with the
Old Notes, the "Notes"). All of the Old Notes were exchanged for Exchange Notes
pursuant to the terms of the Exchange Offer, which expired on October 1, 1997.
Interest on the Notes accrue from July 24, 1997 and is payable semi-annually in
arrears on each of January 15 and July 15 of each year. The Company made a
semi-annual interest payment on July 15, 1998 to the holders for an aggregate of
$4.6 million. The Company has also accrued through September 26, 1998, as part
9
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
of accrued liabilities, approximately $1.9 million of interest, which is due on
January 15, 1999 as part of the next semi-annual payment. The Company incurred
approximately $3.9 million of fees and expenses related to the Offering. Such
fees have been deferred and will be charged to operations over the expected term
of the Notes, not to exceed 10 years. The Notes are general unsecured
obligations of the Company and are subordinated in right of payment to all
existing and future Senior Indebtedness (as defined in the Indenture pursuant to
which the Notes were issued) and to all existing and future indebtedness of the
Company's subsidiaries that are not Guarantors (as defined herein). All of the
Company's direct and indirect wholly-owned domestic subsidiaries are Guarantors
The Company, Phoenix Airbag Gmbh & Co. KG ("Phoenix Airbag") and Automotive
Safety Components International Limited entered into an agreement with KeyBank
National Association, as administrative agent ("KeyBank"), dated as of May 21,
1997 as amended to date (the "Credit Agreement"). The Credit Agreement, as
amended, consists of a $40.0 million revolving credit facility for a five year
term ( $22.0 million outstanding as of September 26, 1998), bearing interest at
LIBOR (5.38672% as of September 26, 1998) plus 1.00% with a commitment fee of
0.25% per annum for any unused portion. The initial proceeds from KeyBank were
used to repay the Bank of America NT&SA term loan and revolving credit. KeyBank
was subsequently repaid with the proceeds from the Offering. The Company
incurred approximately $470,000 of financing fees and related costs. These costs
have been deferred and will be charged to operations over the expected term of
the Credit Agreement not to exceed 5 years. On July 30, 1998, the Company and
KeyBank entered into Amendment No. 3 to the Credit Agreement to increase the
limits on certain capital expenditures and lease covenants. On October 9, 1998,
the Company entered into Amendment No. 4 to the Credit Agreement, which
increased the revolving credit facility from $27.0 million to $40.0 million, and
added Fleet Bank as a member of the bank syndicate. KeyBank and Fleet Bank each
provide fifty percent of the financing available under the Credit Agreement and
KeyBank will remain as acting agent. The Company has used and will continue to
use the revolving credit facility to fund working capital. Letters of credit
outstanding were $4.2 million and $3.4 million at September 26, 1998 and March
28, 1998, respectively. The indebtedness under the Credit Agreement is secured
by substantially all the assets of the Company. The Credit Agreement contains
certain restrictive covenants that impose limitations upon, among other things,
the Company's ability to change its business; merge; consolidate or dispose of
assets; incur liens; make loans and investments; incur indebtedness; pay
dividends and other distributions; engage in certain transactions with
affiliates; engage in sale and lease-back transactions; enter into lease
agreements; and make capital expenditures.
On July 10, 1998, the Company entered into a $10.0 million financing
arrangement with KeyCorp Leasing, a division of Key Corporate Capital Inc.
("KeyCorp"). The Company applied the entire proceeds to satisfy outstanding
indebtedness under the KeyBank revolving credit facility, thereby increasing the
availability under the revolving credit facility. The KeyCorp financing
agreement has a seven-year term, bears interest at 7.09%, and requires monthly
payments of $150,469, secured by certain equipment located at SCFTI.
10
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
On June 4, 1997, the Company secured a $7.5 million mortgage note facility
with Bank of Austria. The note is payable in semi-annual installments of
$375,000 through March 31, 2007 and bears interest at 1.0% over LIBOR. The note
is secured by the assets of the Company's Czech Republic facility. The Company
incurred approximately $437,000 of financing fees and related costs. These costs
have been deferred and will be charged to operations over the expected term of
the note not to exceed 5 years.
During fiscal year 1997, the Company entered into a sale-leaseback of
certain equipment which is accounted for as a capital lease. The Company
received proceeds (which approximated the carrying value of the asset at the
time of sale) of approximately $1.5 million; no gain or loss was recorded in
connection with this transaction. The agreement requires that specified
machinery and equipment used in the Company's operations be pledged as
collateral, among other criteria. The Company imputed interest at 9% per annum.
NOTE 4 - RECONCILIATION TO DILUTED EARNINGS PER SHARE (in thousands)
The following data show the amounts used in computing earnings per share and the
effect on income and the weighted average number of shares of dilutive potential
common stock.
<TABLE>
<CAPTION>
Thirteen Three Months Twenty-Six Six Months
Weeks Ended Ended Weeks Ended Ended
September 26, 1998 September 30, 1997 September 26, 1998 September 30, 1997
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Net Income $ 807 $1,282 $2,350 $2,717
===== ====== ====== ======
Weighted average number of
common shares used in basic
earnings per share 5,119 5,021 5,093 5,021
Effect of dilutive securities:
Stock options 72 86 98 42
Warrants 4 2 9 1
----- ----- ----- -----
Weighted average number of
common shares and dilutive
potential common stock used
in diluted earnings per share 5,195 5,109 5,200 5,064
===== ===== ===== =====
</TABLE>
Options on approximately 286,000 and 96,000 shares of common stock were not
included in computing diluted earnings per share as of September 26, 1998 and
September 30, 1997, respectively, because their effects were antidilutive.
11
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 5 - COMPREHENSIVE INCOME (in thousands)
During the first quarter of fiscal year 1999, the Company adopted SFAS No.
130, "Reporting Comprehensive Income", which became effective for fiscal years
beginning after December 15, 1997. This Statement requires disclosure of
comprehensive income, defined as the total of net income and all other non-owner
changes in equity, which under generally accepted accounting principles, are
recorded directly to the stockholders' equity section of the consolidated
balance sheet and, therefore bypass net income. In SCI's case, the non-owner
changes in equity relate to the tax benefit from stock options exercised and the
foreign currency translation adjustment. Comprehensive income is as follows:
<TABLE>
<CAPTION>
Thirteen Three Months Twenty-Six Six Months
Weeks Ended Ended Weeks Ended Ended
September 26, 1998 September 30, 1997 September 26, 1998 September 30, 1997
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Net Income $ 807 $1,282 $2,350 $2,717
Tax benefit from stock
options exercised 25 10 137 10
Foreign currency
translation adjustment 2,691 57 2,759 (847)
------ ------ ------ ------
Comprehensive income $3,523 $1,349 $5,246 $1,880
====== ====== ====== ======
</TABLE>
NOTE 6 - UNAUDITED PRO FORMA INFORMATION
The unaudited pro forma revenues, net income and net income per common share,
assuming that each of: (i) the Valentec Acquisition; (ii) the JPS Acquisition;
(iii) the completion of the debt offering (Note 3) and application of the
proceeds therefrom; and (iv) the Champion Transaction was consummated on April
1, 1997 are as follows below, in thousands, except per share data. The unaudited
pro forma information does not purport to represent what the Company's results
of operations actually would have been if those transactions had been
consummated on the date or for the periods indicated, or what such results will
be for any future date or for any future period.
Pro Forma Pro Forma
September 30, March 28,
1997 1998
------------- --------------
(unaudited) (unaudited)
Revenues $48,309 $194,635
Net sales $ 1,063 $ 5,420
Net income per common share, basic $ 0.21 $ 1.08
Net income per common share, assuming dilution $ 0.21 $ 1.05
12
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 7 - SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
The Notes are guaranteed on a senior unsecured basis, jointly and severally, by
each of the Company's principal wholly-owned domestic operating subsidiaries and
certain of its indirect domestic wholly-owned subsidiaries (the "Guarantors").
Certain condensed consolidating information of the guarantors are presented
below as of September 26, 1998.
<TABLE>
<CAPTION>
----------------------------------------------------------------------
GUARANTOR NONGUARANTOR PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTAL
------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Current assets................ $ 58,367 $ 18,810 $ 2,264 $ - $ 79,441
======= ======= ======= ====== =======
Total assets.................. $148,610 $ 64,634 $ 13,708 $(8,642) $218,310
======= ======= ======= ====== =======
Current liabilities........... $ 32,631 $ 19,037 $(13,935) $ - $ 37,733
======= ======= ======= ====== =======
Total liabilities............. $128,523 $ 50,136 $ (5,743) $ - $172,916
======= ======= ======= ====== =======
Revenues...................... $ 74,003 $ 33,585 $ - $(3,080) $104,508
======= ======= ======= ====== =======
Gross Profit.................. $ 11,723 $ 6,054 $ - $ - $ 17,777
======= ======= ======= ====== =======
Income from operations........ $ 7,439 $ 4,913 $ (2,124) $ - $ 10,228
======= ======= ======= ====== =======
Income before taxes........... $ 8,101 $ 3,690 $ (7,437) $ - $ 4,354
======= ======= ======= ====== =======
Net Income.................... $ 4,795 $ 2,022 $ (4,467) $ - $ 2,350
======= ======= ======= ====== =======
</TABLE>
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
SECOND QUARTER ENDED SEPTEMBER 26, 1998 COMPARED TO SECOND QUARTER ENDED
SEPTEMBER 30, 1997
Net Sales. Net sales increased by $10.3 million or 24.2% to $53.1 million
for the second quarter of fiscal year 1999 compared to the second quarter of
fiscal year 1998. The increase was primarily attributable to increased sales
volumes of $5.5 million in the European automotive operations, primarily Phoenix
Airbag. The remaining increase in sales during the second quarter of fiscal year
1999 was due to the inclusion of the operations of SCFTI for the entire
three-month period of fiscal 1999 and higher sales in the defense operations due
to the resumption in delivery under the Company's 120 millimeter mortar systems
contract with the U.S. Army. SCFTI was acquired on July 24, 1997 and included in
the Company's entire second quarter of fiscal year 1999 whereas in the second
quarter of fiscal year 1998 SCFTI was only included for approximately two
months. Sales at SCFTI were approximately $3.4 million higher for the second
quarter of fiscal year 1999. The increase in sales was offset by the effects of
the GM strike on the company during the second quarter of fiscal year 1999 as
well as price reductions to the company's customers. Sales of airbag fabric,
cushions and metal components to suppliers of General Motors were significantly
reduced during the second quarter of fiscal year 1999. The total impact on sales
of the GM strike during the second quarter of fiscal year 1999 was approximately
$4.3 million.
Gross Profit. Gross profit increased by $1.2 million or 16.8% to $8.5
million for the second quarter of fiscal year 1999 compared to the second
quarter of fiscal year 1998. The increase was primarily attributable to the
inclusion of operations of SCFTI for the entire second quarter of fiscal year
1999, which contributed approximately $584,000 to gross profit. The remaining
increase was attributable to the increased shipments of the defense operations,
which were partially offset by lower margins in Europe due to price reductions.
The impact of the General Motors strike on gross profit was approximately $1.1
million during the second quarter of fiscal year 1999. The impact was not only
the loss of gross margin from lost sales during the second quarter of fiscal
year 1999 but also the cost of additional personnel hired for the ramp up of
certain programs that were delayed. These newly trained employees were not laid
off in anticipation of a timely ending to the strike.
Gross profit as a percentage of sales decreased to approximately 16.0% for
the second quarter of fiscal year 1999 from 17.1% for the second quarter of
fiscal year 1998. The decrease as a percentage of sales was due to the
historically lower gross margins at SCFTI. The textile industry generally
produces margins in the range of 13% to 14% due to the capital intensive
production process.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $440,000 or 16.0% to $3.2 million for the
second quarter of fiscal year 1999 compared to the second quarter of fiscal year
1998. The increase was primarily attributable to the acquisitions of SCFTI and
Valentec. Selling, general and administrative expenses as a percentage of sales
decreased to 6.0% for the second quarter of fiscal year 1999 from 6.5% for the
second quarter of fiscal year 1998 due to the increased sales volumes.
Operating Income. Operating income increased by $612,000 or 14.8% to $4.7
million for the second quarter of fiscal year 1999 compared to the second
quarter of fiscal year 1998. The increase was primarily attributable to the
increased sales volumes of the European automotive operations, higher sales in
the defense operations under the Company's 120 millimeter mortar systems
contract with the U.S. Army and the inclusion of SCFTI for the entire second
quarter of fiscal year 1999. These increases were offset by the unfavorable
impact of the General Motors strike of approximately $1.1 million.
14
<PAGE>
Interest Expense. Interest expense increased $828,000 to $3.0 million for
the second quarter of fiscal year 1999 compared to the second quarter of fiscal
year 1998. This increase was primarily attributable to the issuance of the Notes
(as defined herein) the proceeds of which were used primarily to acquire SCFTI.
Income Taxes. The income tax rate applied against pre-tax income was 53.0%
for the second quarter of fiscal year 1999 compared to 37.0% for the second
quarter of fiscal year 1998. The tax rate was lower during the second quarter of
fiscal year 1998 due to the reversal of foreign tax reserves no longer needed
during that period.
Net Income. Net income decreased to $807,000 for the second quarter of
fiscal year 1999 compared to $1.3 million for the second quarter of fiscal year
1998. This decrease is a result of the items discussed above, most notably the
General Motors strike which was a reduction to net income of approximately
$650,000.
TWENTY-SIX WEEKS ENDED SEPTEMBER 26, 1998 COMPARED TO SIX MONTHS ENDED
SEPTEMBER 30, 1997
Net Sales. Net sales increased by $34.2 million or 48.5% to $104.5 million
for the first twenty-six weeks of fiscal year 1999 compared to the first six
months of fiscal year 1998. The increase was primarily attributable to increased
sales volume in North America due to the inclusion of the operations of SCFTI
and Valentec for the full twenty-six week period. SCFTI was acquired on July 24,
1997 and included in the Company's entire first twenty-six weeks of fiscal year
1999 whereas in the first six months of fiscal year 1998 SCFTI was only included
for approximately two months. Sales at SCFTI were approximately $22.8 million
higher for the first twenty-six weeks of fiscal year 1999. Valentec was acquired
effective as of May 22, 1997 and included in the Company's entire twenty-six
weeks of fiscal year 1999 whereas in the first six months of fiscal year 1998
Valentec was included for approximately four months. Sales at Valentec increased
approximately $2.2 million for the first twenty-six weeks of fiscal year 1999.
The remaining increase in sales during the first twenty-six weeks of fiscal year
1999 was due to increased volumes in the European automotive operations, of
approximately $5.9 million, and higher sales in the defense operations of
approximately $7.0 million due to the resumption in delivery under the Company's
120 millimeter mortar systems contract with the U.S. Army. The increase in sales
was offset in part by the effects of the General Motors strike and price
decreases to the Company's customers. Sales of airbag fabric, cushions and metal
components to suppliers of General Motors were significantly reduced during the
first twenty-six weeks of fiscal year 1999. The total impact on sales of the GM
strike during the first twenty-six weeks of fiscal year 1999 was approximately
$4.5 million.
Gross Profit. Gross profit increased by $4.8 million or 37.2% to $17.8
million for the first twenty-six weeks of fiscal year 1999 compared to the first
six months of fiscal year 1998. The increase was primarily attributable to the
inclusion of the operations of SCFTI for the entire first twenty-six weeks of
fiscal year 1999, which contributed approximately $3.7 million to gross profit.
The remaining increase was attributable to the increased shipments of the
defense operations, which were partially offset by lower margins in Europe due
to price reductions. The impact of the General Motors strike on gross profit was
approximately $1.3 million during the first twenty-six weeks of fiscal year
1999. The impact was not only the loss of gross margin from lost sales during
the period, but also the cost of additional personnel hired for the ramp up of
certain programs that were delayed. These newly trained employees were not laid
off in anticipation of a timely ending to the strike.
15
<PAGE>
Gross profit as a percentage of sales decreased to approximately 17.0% for
the first twenty-six weeks of fiscal year 1999 from 18.4% for the first six
months of fiscal year 1998. The decrease as a percentage was due to the
historically lower gross margins at SCFTI. The textile industry generally
produces margins in the range of 13% to 14% due to the capital intensive
production process.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $1.2 million or 23.2% to $6.4 million for
the first twenty-six weeks of fiscal year 1999 compared to the first six months
of fiscal year 1998. The increase was primarily attributable to the acquisitions
of SCFTI and Valentec. Selling, general and administrative expenses as a
percentage of sales decreased to 6.1% for the first twenty-six weeks of fiscal
year 1999 from 7.4% for the first six months of fiscal year 1998 due to the
increased sales volumes.
Operating Income. Operating income increased by $3.1 million or 42.8% to
$10.2 million for the first twenty-six weeks of fiscal year 1999 compared to the
first six months of fiscal year 1998. The increase was primarily attributable to
the inclusion of SCFTI and Valentec for the entire first twenty-six weeks of
fiscal year 1999, which contributed approximately $2.5 million. The remaining
increase was due to the increased sales volumes in Europe and higher sales in
the defense operations under the Company's 120 millimeter mortar systems
contract with the U.S. Army. These increases were offset by the unfavorable
impact of the General Motors strike of approximately $1.3 million.
Interest Expense. Interest expense increased $3.1 million to $5.8 million
for the first twenty-six weeks of fiscal year 1999 compared to the first six
months of fiscal year 1998. This increase was primarily attributable to the
issuance of the Notes, the proceeds of which were used primarily to acquire
SCFTI.
Income Taxes. The income tax rate applied against pre-tax income was 46.0%
for the first twenty-six weeks of fiscal year 1999 compared to 38.6% for the
first six months of fiscal year 1998. The tax rate was lower during the first
six months of fiscal year 1998 due to the reversal of foreign tax reserves no
longer needed during that period. Additionally, the tax rate has increased as a
percentage during the first twenty-six weeks of fiscal year 1999 due to the
non-deductible goodwill amortization at Valentec.
Net Income. Net income decreased to $2.4 million for the first twenty-six
weeks of fiscal year 1999 compared to $2.7 million for the first six months of
fiscal year 1998. This decrease is a result of the items discussed above, most
notably the General Motors strike which was a reduction to net income of
approximately $750,000.
LIQUIDITY AND CAPITAL RESOURCES
As the Company's business continues to grow, its equipment and working
capital requirements are also expected to continue to increase. The Company
expects to fund this growth through a combination of cash flow from operations,
equipment financing, revolving credit borrowings and the proceeds from potential
future Company public offerings.
The Company, Phoenix Airbag Gmbh & Co. ("Phoenix Airbag") and Automotive
Safety Components International Limited entered into an agreement with KeyBank
National Association, as administrative agent ("KeyBank"), dated as of May 21,
1997 as amended to date (the "Credit Agreement"). The Credit Agreement, as
amended, consists of a $40.0 million revolving credit facility for a five year
term ($22.0 million outstanding as of September 26, 1998), bearing interest at
LIBOR (5.38672% as of September 26, 1998) plus 1.00% with a commitment fee of
0.25% per annum for any unused portion. The Company incurred approximately
$470,000 of financing fees and related costs. These costs have been deferred and
will be charged to operations over the expected term of the Credit Agreement not
to exceed 5 years. On July 30, 1998, the Company and KeyBank entered into
Amendment No. 3 to the Credit Agreement to increase the limits on certain
capital expenditures and lease covenants. On October 9, 1998,
16
<PAGE>
the Company entered into Amendment No. 4 to the Credit Agreement, which
increased the revolving credit facility from $27.0 million to $40.0 million, and
added Fleet Bank as a member of the bank syndicate. KeyBank and Fleet Bank each
provide fifty percent of the financing available under the Credit Agreement and
KeyBank will remain as acting agent. The Company has used and expects to
continue to use the revolving credit facility to fund working capital. Letters
of credit outstanding were $4.2 million at September 26, 1998. The indebtedness
under the Credit Agreement is secured by substantially all the assets of the
Company. The Credit Agreement contains certain restrictive covenants that impose
limitations upon, among other things, the Company's ability to change its
business; merge; consolidate or dispose of assets; incur liens; make loans and
investments; incur indebtedness; pay dividends and other distributions; engage
in certain transactions with affiliates; engage in sale and lease-back
transactions; enter into lease agreements; and make capital expenditures.
On July 10, 1998, the Company entered into a $10.0 million financing
arrangement with KeyCorp Leasing, a division of Key Corporate Capital Inc.
("KeyCorp"). The Company applied the entire proceeds to satisfy outstanding
indebtedness under the KeyBank revolving credit facility, thereby increasing the
availability under the revolving credit facility. The KeyCorp financing
agreement has a seven-year term, bears interest at 7.09%, and requires monthly
payments of $150,469, secured by certain equipment located at SCFTI.
On July 24, 1997, the Company issued $90.0 million aggregate principal
amount of its 10 1/8% Senior Subordinated Notes due 2007, Series A (the "Old
Notes") to BT Securities Corporation, Alex. Brown & Sons Incorporated and
BancAmerica Securities, Inc. in a transaction not registered under the
Securities Act of 1933, as amended, in reliance upon an exemption thereunder
(the "Debt Offering"). On September 2, 1997, the Company commenced an offer to
exchange (the "Exchange Offer", together with the Debt Offering, the "Offering")
the Old Notes for $90.0 million aggregate principal amount of its 10 1/8% Senior
Subordinated Notes due 2007, Series B (the "Exchange Notes", together with the
Old Notes, the "Notes"). All of the Old Notes were exchanged for Exchange Notes
pursuant to the terms of the Exchange Offer, which expired on October 1, 1997.
Interest on the Notes accrues from July 24, 1997 and is payable semi-annually in
arrears on each of January 15 and July 15 of each year. The Company made a
semi-annual interest payment on July 15, 1998 to the holders for an aggregate of
$4.6 million. The Company has also accrued through September 26, 1998, as part
of accrued liabilities, approximately $1.9 million of interest, which is due on
January 15, 1999 as part of the next semi-annual payment. The Company incurred
approximately $3.9 million of fees and expenses related to the Offering. Such
fees have been deferred and will be charged to operations over the expected term
of the Notes, not to exceed 10 years. The Notes are general unsecured
obligations of the Company and are subordinated in right of payment to all
existing and future Senior Indebtedness (as defined in the Indenture pursuant to
which the Notes were issued) and to all existing and future indebtedness of the
Company's subsidiaries that are not Guarantors. All of the Company's direct and
indirect wholly-owned domestic subsidiaries are Guarantors.
During the first twenty-six weeks of fiscal year 1999, net cash used by
operations was $7.7 million. Such cash used was substantially for the payments
of interest related to the Notes and income taxes. Cash used by investing
activities was $12.6 million, of which $9.9 million was used for the acquisition
of additional equipment to expand the Company's production capacity worldwide.
The Company also paid additional consideration in connection with the
acquisition of Phoenix Airbag, which consisted of $2.0 million earn-out accrued
at the end of fiscal year 1998. In addition, the Company incurred certain costs
in connection with the acquisitions of Valentec and SCFTI of approximately
$502,000 and $242,000, respectively. Net cash provided by financing activities
in the first twenty-six weeks of fiscal year 1999 was $17.4 million.
Additionally, the Company has experienced increases in accounts receivable and
inventories as the Company has increased production for new airbag cushion
programs recently awarded and set into production. These activities resulted in
a net decrease in cash of $3.0 million in the first twenty-six weeks of fiscal
year 1999.
17
<PAGE>
YEAR 2000 COMPLIANCE
The Year 2000 issue is the result of computer programs written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices or
engage in similar normal business activities.
State of Readiness and Cost
The Company relies on systems developed by other parties in regard to its
business, accounting and operational software. The Company believes that its
significant business, accounting and operations software are year 2000
compliant. Additionally, the Company is currently assessing the impact of this
issue on its manufacturing equipment.
The Company is currently evaluating its management information systems
including information technology ("IT") and non-IT computerized systems and has
prepared a plan for Year 2000 compliance. This evaluation is expected to be
completed by March 1999. The Company is currently in the process of upgrading
its accounting and manufacturing software systems. The Company expects that the
new systems should be Year 2000 compliant. The costs of achieving Year 2000
compliance are not expected to have a material impact on the Company's business,
operations or financial condition.
Risk
The Company relies on third party suppliers for raw materials, utilities,
and other critical services. The Company's operations could be affected by the
interruption of significant suppliers. The Company is in the process of
evaluating the status of suppliers' compliance with year 2000 issues and is in
the process of determining alternatives and contingency plan requirements. The
cost of this evaluation is expected to be nominal, however, there can be no
assurance that such cost will not be material. In the event that its current
vendors are unable to certify that they will be Year 2000 compliant by the
middle of calendar 1999 or if such suppliers are unable to certify that their
failure to be Year 2000 will not adversely affect the Company, the Company will
be reviewing its alternatives with respect to other vendors. There can be no
assurance that the Company will be able to find suppliers which are acceptable
to the Company and its customers.
The Company also is dependent on customers for sales and for cashflow.
Interruptions in customers' operations due to Year 2000 problems could result in
decreased revenue, increased inventory and cash flow reductions. The Company has
initiated efforts to evaluate its customers' Year 2000 risks, as well as
developing alternative sales strategies. The cost of this evaluation is expected
to be nominal, however, there can be no assurance that such cost will not be
material.
18
<PAGE>
Based on information known to date, the Company believes that the most
reasonably likely worst-case Year 2000 scenario would entail a significant
interruption in its business, including disruption in the manufacturing and
delivery of its products due to the inability to obtain critical raw materials
and supplies, and loss of revenue due to disruptions in its customers'
operations. The Company could also be significantly affected by the failure of
infrastructure services such as electricity and telephone service. Despite the
Company's efforts in regard to the Year 2000 issue, the Company is unable to
quantify the effect of any such failure or the Year 2000 scenario referenced
above and no assurance can be given that the Company's business, financial
condition or results of operations will not be materially adversely affected by
the failure of its systems and applications or those operated by other parties
to properly manage dates beyond 1999.
Contingency Plans
Given that the upgrading of its accounting and manufacturing software
systems is expected to be completed by the middle of calendar 1999, the Company
has not prepared a contingency plan pertaining to its information systems and
does not currently believe that a contingency plan is necessary. The Company is
in the process of developing a contingency plan based on its evaluation of
significant suppliers and customers in regard to Year 2000 compliance. The
contingency plan includes the identification of backup suppliers, broadening the
customer base and stockpiling raw materials in the months before Year 2000.
The above discussion may contain forward-looking statements that involve
risks and uncertainties, including, but not limited to, the impact of
competitive products and pricing, product demand and market condition risks, the
ability of Safety Components to realize anticipated cost savings and earnings
projections by Valentec; the ability of the Company to satisfy customers on
timeliness and quality; labor strikes; the ability of the Company to realize the
remaining proceeds under the Systems Contract; the continued performance by
SCFTI at or above historical levels; world-wide economic conditions; dependence
of revenues upon several major module suppliers and pricing pressures.
ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK.
Not Applicable.
19
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Valentec International Corporation, LLC, a
wholly-owned limited liability company of the Company, as
successor in interest to Valentec International Corporation
("Valentec"), which was acquired by the Company in May 1997,
has been the subject of an investigation by the Department of
Justice regarding a bid-rigging and kickbacks scheme alleged
to have occurred between 1988 and 1992. The Department of
Justice Antitrust Division contended that former subsidiaries
or divisions of the former Valentec participated in such
misconduct in part through the actions of a former marketing
agent and former employees, in order to obtain certain
government contracts. The Government also contended that
Valentec was liable for the acts of its predecessors on a
theory of successor corporate criminal liability. The
Government contended that the alleged kickbacks were made
through the former Valentec Kisco and Valentec Galion
operations while those operations were owned and operated by
the former Valentec from the late 1980's through 1992, prior
to the 1993 leveraged buy-out of Valentec by Robert A. Zummo,
the President and Chief Executive Officer of the Company. No
officer or director of the Company or its subsidiaries was
alleged to have participated in, or known about, such conduct.
The Company has no recourse against the entity which owned
Valentec during the operative time period due to contractual
restrictions in the purchase agreement between Mr. Zummo and
such entity. The Company determined that it is in its best
interest to settle such matter in order to avoid the costs and
distractions associated with contesting the Department of
Justice's legal theories on successor liability. Therefore, a
plea agreement was negotiated with the Antitrust Division of
the Department of Justice (the "Plea Agreement"), pursuant to
which Valentec entered a plea, as the successor to the former
Valentec Galion division, to a one-count criminal information
of participating in a combination and conspiracy to suppress
competition in violation of the Sherman Antitrust Act, 15
U.S.C.ss.1, and agreed to pay a $500,000 fine, of which half
was paid in September 1998 and the balance is due in December
1998. The Plea Agreement also includes an agreement by the
Government not to further criminally prosecute the Company,
its subsidiaries, or any of their respective officers,
directors or employees as to the alleged bid-rigging and
kickback scheme. The Plea Agreement does not release the
Company or Valentec from potential civil claims that might be
asserted by the United States Department of Justice Civil
Division against Valentec arising out of the Government's
investigation of conduct that is alleged to have occurred in
the time frame prior to Mr. Zummo's 1993 leveraged buy-out of
Valentec. The Company has had preliminary discussions with the
Civil Division regarding the resolution of such potential
civil claims. No understanding has yet been reached as to such
potential civil claims.
20
<PAGE>
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its 1998 Annual Meeting of
Stockholders on September 9, 1998.
At the Annual Meeting, Robert A. Zummo and Jeffrey J.
Kaplan were elected Class III directors of the Company. The
number of shares of the Company's common stock voted in favor
of the election of Messrs. Zummo and Kaplan were 4,400,871 and
4,401,371, respectively, and the number of such shares
withheld were 196,425 and 195,925, respectively. In addition,
the following other directors continued as such after the
Annual Meeting: Joseph J. DioGuardi, Francis X. Suozzi and
Robert J. Torok.
At the Annual Meeting, the Company's stockholders
also voted to (i) approve the amendments to the Company's 1994
Stock Option Plan (the "Plan") to reallocate the number of
shares of the Company's common stock issuable under the Plan
to officers, key employees and consultants on the one hand and
non-employee directors on the other hand from 1,000,000 and
50,000 shares in the aggregate, respectively, to 975,000 and
75,000 shares in the aggregate, respectively, (ii) approve the
adoption of the Safety Components International, Inc. Senior
Management Incentive Plan (the "SMIP"), (iii) approve the
adoption of the Safety Components International, Inc. Stock
Appreciation Rights Award Plan (the "SAR Plan"); and (iv)
ratify the appointment of Arthur Andersen LLP as independent
accountants for fiscal year 1999.
The vote on items (i) through (iv) above was as follows:
Item FOR AGAINST ABSTAIN
- ------------------ --------- ------- -------
Amendments to Plan 2,990,104 289,736 18,530
Adoption of SMIP 3,166,246 108,744 23,380
Adoption of SAR Plan 3,125,531 151,359 21,480
Ratification of appointment 4,581,931 10,985 4,380
of Accountants
ITEM 5. OTHER INFORMATION
Not applicable.
21
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit No. Exhibits
----------- ------------------------------------------------
10.1 Form of Amendment No. 3 to Credit Agreement
10.2 Form of Amendment No. 4 to Credit Agreement
10.3 Form of Amendment No. 3 to Subsidiary Agreement
10.4 Form of Amendment No. 3 to Pledge Agreement
10.5 Form of Amendment No. 3 to Security Agreement
10.6 Form of Employment Agreement
10.7 Form of KeyCorp Master Equipment Lease Agreement
27 Financial Data Schedule, which is submitted
electronically to the Securities and Exchange
Commission for information only and not filed.
(b) Reports on Form 8-K
-------------------
Not applicable.
SIGNATURE(S)
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
SAFETY COMPONENTS INTERNATIONAL, INC.
(Registrant)
DATED: November 12, 1998 BY: /s/ JEFFREY J. KAPLAN
----------------------------
Jeffrey J. Kaplan
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
22
AMENDMENT NO. 3 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 3 TO CREDIT AGREEMENT (this "Amendment"), dated as
of July 30, 1998, is made among SAFETY COMPONENTS INTERNATIONAL, INC., a
Delaware corporation (herein, together with its successors and assigns, the
"Company" or a "Borrower"); PHOENIX AIRBAG GmbH & CO. K.G., a company organized
under the laws of the Federal Republic of Germany (herein, together with its
successors and assigns, the "German Borrower" or a "Borrower"), AUTOMOTIVE
SAFETY COMPONENTS INTERNATIONAL LIMITED, a company organized under the laws of
the United Kingdom (herein, together with its successors and assigns, the
"British Borrower" or a "Borrower"); and KEYBANK NATIONAL ASSOCIATION, a
national banking association, as administrative agent (the "Administrative
Agent") for the Lenders under the Credit Agreement (hereafter defined):
PRELIMINARY STATEMENTS:
(1) The Borrowers, the Lenders named therein, and the Administrative
Agent entered into the Credit Agreement, dated as of May 21, 1997, as amended by
Amendment No. 1 thereto, dated as of June 2, 1997, and Amendment No. 2 thereto,
dated as of July 15, 1997 (as so amended and in effect immediately prior to the
effective date of this Amendment, the "Credit Agreement"; with the terms defined
therein, or the definitions of which are incorporated therein, being used herein
as so defined).
(2) The Borrowers, such Administrative Agent and the Lenders party
hereto desire to amend certain of the terms and provisions of the Credit
Agreement, all as more fully set forth below.
NOW, THEREFORE, the parties hereby agree as follows:
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT.
1.1. Annex II. Effective on the Effective Date (as defined below),
Annex II to the Credit Agreement is amended by the deletion of the information
regarding Valentec International Corporation and the addition of the following
information:
<TABLE>
<CAPTION>
Name of Type of Jurisdiction Where Percentage of Outstanding Stock
Subsidiary Organization Organized or ther Equity Interests Owned
---------- ------------ ------------------ (Indicating hether owned by the
Borrower or a specified Subsidiary)
-----------------------------------
<S> <C> <C> <C>
CSSC, Inc. corporation Arizona 100% by the Company
Valentec International limited liability company Delaware 100% by the Company
Corporation, LLC
</TABLE>
1.2. Capital Expenditures. Effective on the Effective Date, section 9.9
of the Credit Agreement is amended in its entirety as follows:
9.9 Capital Expenditures. The Company will not, and will not
permit any of its Subsidiaries to, make or incur Consolidated Capital
Expenditures during the Company's fiscal year ended March 28,
1
<PAGE>
1998 in an aggregate amount in excess of $14,200,000, and during any fiscal year
of the Company thereafter in an aggregate amount in excess of $14,000,000.
1.3. Certain Leases. Effective on the Effective Date, clause (b) of
section 9.10 of the Credit Agreement is amended by changing the amount
"$5,000,000" which appears therein to "$12,000,000".
SECTION 2. AMENDMENTS TO OTHER CREDIT DOCUMENTS.
2.1. Pledge Agreement. On the Effective Date, the Credit Parties named
therein and the Collateral Agent shall enter into Amendment No. 3 to Pledge
Agreement, substantially in the form attached hereto as Exhibit A ("Amendment
No. 3 to Pledge Agreement"), and the additional stock to be pledged thereunder
shall be pledged to the Collateral Agent as provided therein.
2.2. Security Agreement. On the Effective Date, the Credit Parties
named therein and the Collateral Agent shall enter into Amendment No. 3 to
Security Agreement, substantially in the form attached hereto as Exhibit B
("Amendment No. 3 to Security Agreement").
2.3. Subsidiary Guaranty. On the Effective Date, the Credit Parties
named therein and the Administrative Agent shall enter into Amendment No. 3 to
Subsidiary Guaranty, substantially in the form attached hereto as Exhibit C
("Amendment No. 3 to Subsidiary Guaranty").
2.4. Consent to Amendments. The Lenders party hereto and the
Administrative Agent hereby consent to the execution of Amendment No. 3 to
Pledge Agreement, Amendment No. 3 to Security Agreement, and Amendment No. 3 to
Subsidiary Guaranty, and the amendments effected thereby.
2.5. Filings, Recordings, etc. Promptly following the Effective Date,
the Borrower will at its expense cause and/or cooperate with the Collateral
Agent in causing any and all UCC financing statements, notices of secured
transactions and other filings and recordings considered by the Collateral Agent
to be necessary or desirable in connection with the grant of the security
interests pursuant to Amendment No. 3 to Pledge Agreement and Amendment No. 3 to
Security Agreement to be executed, delivered, made, filed and/or otherwise
effected.
SECTION 3. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants as follows:
3.1. Authorization, Validity and Binding Effect. This Amendment has
been duly authorized by all necessary corporate action on the part of each
Borrower, has been duly executed and delivered by a duly authorized officer or
officers of each Borrower, and constitutes the valid and binding agreement of
each Borrower, enforceable against such Borrower in accordance with its terms.
3.2. Representations and Warranties True and Correct. The
representations and warranties of the Company contained in the Credit Agreement
are true and correct on and as of the date hereof as though made on and as of
the date hereof, except as set forth on Schedule 1 hereto and except to the
extent that such representations and warranties expressly relate to a specified
date, in which case such representations and warranties are hereby reaffirmed as
true and correct when made.
3.3. No Event of Default, etc. No condition or event has occurred or
exists which constitutes or which, after notice or lapse of time or both, would
constitute an Event of Default.
3.4. Compliance. Each Borrower is in full compliance with all covenants
and agreements contained in the Credit Agreement, as amended hereby, and the
other Credit Documents to which it is a party.
2
<PAGE>
SECTION 4. RATIFICATIONS.
Except as expressly modified and superseded by this Amendment, the
terms and provisions of the Credit Agreement are ratified and confirmed and
shall continue in full force and effect.
SECTION 5. BINDING EFFECT.
This Amendment shall become effective on the date (the "Effective
Date") the following conditions shall have been satisfied:
(a) this Amendment shall have been executed by each Borrower
and the Administrative Agent, and counterparts hereof as so executed
shall have been delivered to the Administrative Agent;
(b) the Acknowledgment and Consent appended hereto shall have
been executed by the Credit Parties named therein, and counterparts
thereof as so executed shall have been delivered to the Administrative
Agent;
(c) the Acknowledgment appended hereto shall have been
executed by the Company and shall have been delivered to the
Administrative Agent;
(d) the Administrative Agent shall have been notified by
Lenders constituting the Required Lenders that such Lenders have
executed this Amendment (which notification may be by facsimile or
other written confirmation of such execution);
(e) Amendment No. 3 to Pledge Agreement, Amendment No. 3 to
Security Agreement and Amendment No. 3 to Subsidiary Guaranty shall each have
been duly executed and delivered and shall each be in full force and effect;
and thereafter this Amendment shall be binding upon and inure to the benefit of
the Borrowers, the Administrative Agent, and each Lender and their respective
permitted successors and assigns. After this Amendment becomes effective, the
Administrative Agent will promptly furnish a copy of this Amendment to each
Lender and the Company on behalf of each Borrower and confirm the specific
Effective Date hereof.
SECTION 6. MISCELLANEOUS.
6.1. Survival of Representations and Warranties. All representations
and warranties made in this Amendment shall survive the execution and delivery
of this Amendment, and no investigation by the Administrative Agent or any
Lender or any subsequent Loan or other Credit Event shall affect the
representations and warranties or the right of any Agent or any Lender to rely
upon them.
6.2. Reference to Credit Agreement. The Credit Agreement and any and
all other agreements, instruments or documentation now or hereafter executed and
delivered pursuant to the terms of the Credit Agreement as amended hereby, are
hereby amended so that any reference therein to the Credit Agreement shall mean
a reference to the Credit Agreement as amended hereby.
6.3. Expenses. As provided in the Credit Agreement, but without
limiting any terms or provisions thereof, the Company shall pay on demand all
reasonable costs and expenses incurred by the Administrative Agent in connection
with the preparation, negotiation, and execution of this Amendment, including
without limitation the reasonable costs and fees of the Administrative Agent's
special legal counsel, regardless of whether this Amendment becomes effective in
accordance with the terms hereof, and all reasonable costs and expenses incurred
by the Administrative Agent or any Lender in connection with the enforcement or
preservation of any rights under the Credit Agreement, as amended hereby.
3
<PAGE>
6.4. Severability. Any term or provision of this Amendment held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Amendment and the effect thereof shall be
confined to the term or provision so held to be invalid or unenforceable.
6.5. Applicable Law. This Amendment shall be governed by and construed
in accordance with the laws of the State of New York.
6.6. Headings. The headings, captions and arrangements used in this
Amendment are for convenience only and shall not affect the interpretation of
this Amendment.
6.7. Entire Agreement. This Amendment is specifically limited to the
matters expressly set forth herein. This Amendment and all other instruments,
agreements and documentation executed and delivered in connection with this
Amendment embody the final, entire agreement among the parties hereto with
respect to the subject matter hereof and supersede any and all prior
commitments, agreements, representations and understandings, whether written or
oral, relating to the matters covered by this Amendment, and may not be
contradicted or varied by evidence of prior, contemporaneous or subsequent oral
agreements or discussions of the parties hereto. There are no oral agreements
among the parties hereto relating to the subject matter hereof or any other
subject matter relating to the Credit Agreement.
6.8. Counterparts. This Amendment may be executed by the parties hereto
separately in one or more counterparts, each of which when so executed shall be
deemed to be an original, but all of which when taken together shall constitute
one and the same agreement.
[The balance of this page is intentionally blank.]
4
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered
as of the date first above written.
SAFETY COMPONENTS INTERNATIONAL, INC.
By:________________________
Executive Vice President
AUTOMOTIVE SAFETY COMPONENTS INTERNATIONAL LIMITED
By:________________________
Executive Vice President
PHOENIX AIRBAG GmbH & CO. K.G., by its General
Partner, Phoenix Airbag Verwaltungs GmbH
By:________________________
Attorney-in-Fact
KEYBANK NATIONAL ASSOCIATION,
individually and as Administrative Agent
By:________________________
Senior Vice President
5
<PAGE>
Schedule 1 to Amendment No. 3
to Credit Agreement
In connection with the merger of Valentec International Corporation, a
former wholly-owned subsidiary of the Company, with and into Valentec
International Corporation, LLC, a wholly-owned limited liability company of the
Company ("Valentec LLC"), with Valentec LLC as the surviving company, Valentec
LLC is in the process of refiling and/or amending certain applications to do
business in various states.
6
<PAGE>
ACKNOWLEDGMENT AND CONSENT
For the avoidance of doubt, and without limitation of the intent and
effect of sections 6 and 10 of the Subsidiary Guaranty (as such term is defined
in the Credit Agreement referred to in the Amendment No. 3 to Credit Agreement
(the "Amendment"), to which this Acknowledgment and Consent is appended), each
of the undersigned hereby unconditionally and irrevocably (i) acknowledges
receipt of a copy of the Credit Agreement and the Amendment, and (ii) consents
to all of the terms and provisions of the Credit Agreement as amended by the
Amendment.
Capitalized terms which are used herein without definition shall have
the respective meanings ascribed thereto in the Credit Agreement referred to
herein. This Acknowledgment and Consent is for the benefit of the Lenders, the
Administrative Agent, the Collateral Agent, and any Hedge Creditor (as defined
in the Subsidiary Guaranty) which may be a third party beneficiary of the
Subsidiary Guaranty, the Pledge Agreement, the Security Agreement or the
Open-End Mortgage, Assignment of Leases and Security Agreement, in its capacity
as such third party beneficiary under any Credit Document, and their respective
successors and assigns. No term or provision of this Acknowledgment and Consent
may be modified or otherwise changed without the prior written consent of the
Administrative Agent, given as provided in the Credit Agreement. This
Acknowledgment and Consent shall be binding upon the successors and assigns of
each of the undersigned. This Acknowledgment and Consent may be executed by any
of the undersigned in separate counterparts, each of which shall be an original
and all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the undersigned has duly executed and
delivered this Acknowledgment and Consent as of the date of the Amendment
referred to herein.
AUTOMOTIVE SAFETY COMPONENTS INTERNATIONAL, INC.
By:________________________
Executive Vice President
ASCI HOLDINGS GERMANY (DE), INC.
By:________________________
Executive Vice President
ASCI HOLDINGS CZECH (DE), INC.
By:________________________
Executive Vice President
ASCI HOLDINGS MEXICO (DE), INC.
By:________________________
Executive Vice President
1
<PAGE>
ASCI HOLDINGS U.K (DE), INC.
By:________________________
Executive Vice President
ASCI HOLDINGS ASIA (DE), INC.
By:________________________
Executive Vice President
VALENTEC SYSTEMS, INC.
By:________________________
Executive Vice President
GALION, INC.
By:________________________
Executive Vice President
VALENTEC INTERNATIONAL CORPORATION, LLC
By:________________________
Executive Vice President
SAFETY COMPONENTS FABRIC TECHNOLOGIES, INC.
By:________________________
Executive Vice President
CSSC, INC.
By:________________________
Executive Vice President
2
<PAGE>
ACKNOWLEDGMENT
The undersigned is a party to that certain Pledge Agreement dated as of
May 21, 1997 made by the undersigned and the other pledgors party thereto in
favor of KeyBank National Association, as Collateral Agent (as amended, the
"Pledge Agreement"). The undersigned hereby unconditionally and irrevocably
acknowledges (i) the pledge pursuant to the Pledge Agreement of its membership
interest in Valentec International Corporation, LLC, a Delaware limited
liability company ("Valentec"), successor by merger to Valentec International
Corporation, a Delaware corporation, and that (ii) Valentec constitutes a
Pledged Entity (as defined in the Pledge Agreement) and its membership interest
in Valentec constitutes a Pleged Equity Interest (as defined in the Pledge
Agreement) thereunder.
Capitalized terms which are used herein without definition shall have
the respective meanings ascribed thereto in the Credit Agreement referred to
herein. This Acknowledgment is for the benefit of the Lenders, the
Administrative Agent, the Collateral Agent, and any Hedge Creditor (as defined
in the Pledge Agreement) which may be a third party beneficiary of the Pledge
Agreement, in its capacity as such third party beneficiary under any Credit
Document, and their respective successors and assigns. No term or provision of
this Acknowledgment may be modified or otherwise changed without the prior
written consent of the Administrative Agent, given as provided in the Credit
Agreement. This Acknowledgment and Consent shall be binding upon the successors
and assigns of the undersigned.
IN WITNESS WHEREOF, the undersigned has duly executed and delivered
this Acknowledgment as of July 30, 1998.
SAFETY COMPONENTS INTERNATIONAL,INC.
By:________________________
Executive Vice President
3
<PAGE>
-------------------------------------
EXHIBIT A
FORM OF
AMENDMENT NO. 3 TO PLEDGE AGREEMENT
-------------------------------------
4
<PAGE>
-------------------------------------
EXHIBIT B
FORM OF
AMENDMENT NO. 3 TO SECURITY AGREEMENT
-------------------------------------
5
<PAGE>
-------------------------------------
EXHIBIT C
FORM OF
AMENDMENT NO. 3 TO SUBSIDIARY GUARANTY
-------------------------------------
6
<PAGE>
-------------------------------------------------------------------------
SAFETY COMPONENTS INTERNATIONAL, INC.
PHOENIX AIRBAG GmbH & CO. KG
And
AUTOMOTIVE SAFETY COMPONENTS INTERNATIONAL LIMITED
as Borrowers
And
THE LENDERS NAMED HEREIN
as Lenders
And
KEYBANK NATIONAL ASSOCIATION
as Administrative Agent
---------------------
AMENDMENT NO. 3
dated as of
July 30, 1998
to
CREDIT AGREEMENT
dated as of
May 21, 1997
---------------------
-------------------------------------------------------------------------
7
SAFETY COMPONENTS INTERNATIONAL, INC.
PHOENIX AIRBAG GmbH & CO. KG
And
AUTOMOTIVE SAFETY COMPONENTS INTERNATIONAL LIMITED
as Borrowers
And
THE LENDERS NAMED HEREIN
as Lenders
And
KEYBANK NATIONAL ASSOCIATION
as Administrative Agent
-------------------
AMENDMENT NO. 4
dated as of
October 9, 1998
to
CREDIT AGREEMENT
dated as of
May 21, 1997
-------------------
<PAGE>
AMENDMENT NO. 4 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 4 TO CREDIT AGREEMENT (this "Amendment"), dated as of
October 9, 1998, is made among SAFETY COMPONENTS INTERNATIONAL, INC., a Delaware
corporation (herein, together with its successors and assigns, the "Company" or
a "Borrower"); PHOENIX AIRBAG GmbH & CO. K.G., a company organized under the
laws of the Federal Republic of Germany (herein, together with its successors
and assigns, the "German Borrower" or a "Borrower"), AUTOMOTIVE SAFETY
COMPONENTS INTERNATIONAL LIMITED, a company organized under the laws of the
United Kingdom (herein, together with its successors and assigns, the "British
Borrower" or a "Borrower"); the Lenders party hereto, and KEYBANK NATIONAL
ASSOCIATION, a national banking association, as administrative agent (the
"Administrative Agent") for the Lenders under the Credit Agreement (hereafter
defined):
PRELIMINARY STATEMENTS:
(1) The Borrowers, the Lenders named therein, and the Administrative
Agent entered into the Credit Agreement, dated as of May 21, 1997, as amended by
Amendment No. 1 thereto, dated as of June 2, 1997, Amendment No. 2 thereto,
dated as of July 15, 1997, and Amendment No. 3 thereto, dated as of July 30,
1998 (as so amended and in effect immediately prior to the effective date of
this Amendment, the "Credit Agreement"; with the terms defined therein, or the
definitions of which are incorporated therein, being used herein as so defined).
(2) The Borrowers, such Administrative Agent and the Lenders party
hereto desire to amend certain of the terms and provisions of the Credit
Agreement, all as more fully set forth below
NOW, THEREFORE, the parties hereby agree as follows:
SECTION 1. AMENDMENT TO CREDIT AGREEMENT.
1.1. Increase in Commitments. Effective on the Effective Date (as
defined below), Annex 1 to the Credit Agreement is hereby amended and restated
in its entirety as set forth on Annex I hereto.
SECTION 2. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants as follows:
2.1. Authorization, Validity and Binding Effect. This Amendment has
been duly authorized by all necessary corporate action on the part of each
Borrower, has been duly executed and delivered by a duly authorized officer or
officers of each Borrower, and constitutes the valid and binding agreement of
each Borrower, enforceable against such Borrower in accordance with its terms
2.2. Representations and Warranties True and Correct. The
representations and warranties of the Company contained in the Credit Agreement
are true and correct on and as of the date hereof as though made on and as of
the date hereof, except as set forth on Schedule 1 hereto and except to the
extent that such representations and warranties expressly relate to a specified
date, in which case such representations and warranties are hereby reaffirmed as
true and correct when made
1
<PAGE>
2.3. No Event of Default, etc. No condition or event has occurred or
exists which constitutes or which, after notice or lapse of time or both, would
constitute an Event of Default.
2.4. Compliance. Each Borrower is in full compliance with all covenants
and agreements contained in the Credit Agreement, as amended hereby, and the
other Credit Documents to which it is a party.
2.5. Year 2000 Computer Matters. (a) The Company and its Subsidiaries
are in the process of (i) conducting a comprehensive review and assessment or
all areas of their business that could be adversely affected by the "Y2K issue"
(that is, the risk that computer applications used by the Company and its
Subsidiaries may be unable to recognize and perform properly date- sensitive
functions involving certain dates prior to and any date after December 31,
1999), which review and assessment has included, or will include, without
limitation, written inquiry of each of the Company's and its Subsidiaries' key
suppliers, vendors and customers with whom there is regular electronic
communication via access to computer networks or systems, (ii) developing a
detailed plan and timeline for addressing the Y2K issue, and (iii) to date,
implementing that plan in accordance with that timetable.
(b) Based on such review and program, (i) the Company reasonably
believes that the Y2K issue is not reasonably likely to have a Material Adverse
Effect and (ii) the Company reasonably anticipates that all computer
applications that are material to its business and the business of its
Subsidiaries will on a timely basis be able to perform properly date-sensitive
functions for all dates before and after January 1, 2000 (i.e., be "Y2K
compliant").
SECTION 3. RATIFICATIONS.
Except as expressly modified and superseded by this Amendment, the
terms and provisions of the Credit Agreement are ratified and confirmed and
shall continue in full force and effect.
SECTION 4. BINDING EFFECT.
This Amendment shall become effective on the date (the "Effective
Date") the following conditions shall have been satisfied:
(a) this Amendment shall have been executed by each Borrower
and the Administrative Agent, and counterparts hereof as so executed
shall have been delivered to the Administrative Agent;
(b) the Acknowledgment and Consent appended hereto shall have
been executed by the Credit Parties named therein, and counterparts
thereof as so executed shall have been delivered to the Administrative
Agent;
(c) the Administrative Agent shall have been notified by all
of the Lenders that such Lenders have executed this Amendment (which
notification may be by facsimile or other written confirmation of such
execution);
(d) the Administrative Agent shall have received an opinion of
counsel to the Borrowers covering such matters incident to the
transactions contemplated hereby as the Administrative Agent may
reasonably request, such opinion to be in form and substance
satisfactory to the Administrative Agent;
2
<PAGE>
(e) the Borrower shall have executed and delivered to the
Administrative Agent for the account of Fleet Bank each appropriate
Note to be executed by each Borrower required to reflect the Commitment
of Fleet Bank provided for in this Amendment;
(f) the Administrative Agent shall have received, in
sufficient quantity for the Administrative Agent and the Lenders,
certified copies of resolutions of the Board of Directors of the
Company approving this Amendment, and of all documents evidencing other
necessary corporate action and governmental approvals, if any, with
respect to the execution, delivery and performance by the Company of
this Amendment;
and thereafter this Amendment shall be binding upon and inure to the benefit of
the Borrowers, the Administrative Agent, and each Lender and their respective
permitted successors and assigns. After this Amendment becomes effective, the
Administrative Agent will promptly furnish a copy of this Amendment to each
Lender and the Company on behalf of each Borrower and confirm the specific
Effective Date hereof.
SECTION 5. MISCELLANEOUS.
5.1. Survival of Representations and Warranties. All representations
and warranties made in this Amendment shall survive the execution and delivery
of this Amendment, and no investigation by the Administrative Agent or any
Lender or any subsequent Loan or other Credit Event shall affect the
representations and warranties or the right of any Agent or any Lender to rely
upon them.
5.2. Reference to Credit Agreement. The Credit Agreement and any and
all other agreements, instruments or documentation now or hereafter executed and
delivered pursuant to the terms of the Credit Agreement as amended hereby, are
hereby amended so that any reference therein to the Credit Agreement shall mean
a reference to the Credit Agreement as amended hereby.
5.3. Expenses. As provided in the Credit Agreement, but without
limiting any terms or provisions thereof, the Company shall pay on demand all
reasonable costs and expenses incurred by the Administrative Agent in connection
with the preparation, negotiation, and execution of this Amendment, including
without limitation the reasonable costs and fees of the Administrative Agent's
special legal counsel, regardless of whether this Amendment becomes effective in
accordance with the terms hereof, and all reasonable costs and expenses incurred
by the Administrative Agent or any Lender in connection with the enforcement or
preservation of any rights under the Credit Agreement, as amended hereby.
5.4. Severability. Any term or provision of this Amendment held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Amendment and the effect thereof shall be
confined to the term or Provision so held to be invalid or unenforceable.
5.5. Applicable Law. This Amendment shall be governed by and construed
in accordance with the laws of the State of New York
5.6. Headings. The headings, captions and arrangements used in this
Amendment are for convenience only and shall not affect the interpretation of
this Amendment.
5.7. Entire Agreement. This Amendment is specifically limited to the
matters expressly set forth herein. This Amendment and all other instruments,
agreements and documentation executed and delivered in connection with this
Amendment embody the final, entire agreement among the parties hereto with
3
<PAGE>
respect to the subject matter hereof and supersede any and all prior
commitments, agreements, representations and understandings, whether written or
oral, relating to the matters covered by this Amendment, and may not be
contradicted or varied by evidence of prior, contemporaneous or subsequent oral
agreements or discussions of the parties hereto. There are no oral agreements
among the parties hereto relating to the subject matter hereof or any other
subject matter relating to the Credit Agreement.
5.8. Counterparts. This Amendment may be executed by the parties hereto
separately in one or more counterparts, each of which when so executed shall be
deemed to be an original, but all of which when taken together shall constitute
one and the same agreement.
[The balance of this page is intentionally blank.]
4
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered
as of the date first above written.
SAFETY COMPONENTS
INTERNATIONAL, INC.
By:_________________________________
Executive Vice President
AUTOMOTIVE SAFETY COMPONENTS
INTERNATIONAL LIMITED
By:_________________________________
Executive Vice President
PHOENIX AIRBAG GmbH & CO. K.G., by
its General Partner, Phoenix Airbag
Verwaltungs GmbH
By:_________________________________
Managing Director
FLEET BANK
By:_________________________________
Vice President
KEYBANK NATIONAL ASSOCIATION,
individually and as
Administrative Agent
By:_________________________________
Senior Vice President
<PAGE>
AMENDMENT NO. 3 TO SUBSIDIARY GUARANTY
THIS AMENDMENT, dated as of July 30, 1998, by (i) each of the
Guarantors which is a party to the Subsidiary Guaranty referred to below (the
"Original Guarantors"); (ii) the following additional Subsidiary of the Company,
CSSC, INC., an Arizona corporation (together with its successors and assigns,
the "Additional Subsidiary Guarantor"); and (iii) KEYBANK NATIONAL ASSOCIATION,
a national banking association, as Administrative Agent (the "Administrative
Agent") under the Credit Agreement referred to in the Subsidiary Guaranty
identified below:
PRELIMINARY STATEMENTS:
(1) The Original Guarantors have heretofore entered into the Subsidiary
Guaranty, dated as of May 21, 1997, in favor of the Administrative Agent as
amended by Amendment No. 1 thereto, dated as of June 2, 1997, and Amendment No.
2 thereto, dated as of July 15, 1997, (as so amended, the "Subsidiary Guaranty";
with the terms defined therein, or the definitions of which are incorporated
therein, being used herein as so defined).
(2) The parties hereto desire to amend certain of the terms and
provisions of the Subsidiary Guaranty, all as more fully set forth below.
NOW, THEREFORE, the parties hereby agree as follows:
1. Joinder of Additional Subsidiary Guarantor. Effective upon the
execution and delivery of this Amendment, the Additional Subsidiary Guarantor
hereby joins in and becomes a party to the Subsidiary Guaranty, as amended
hereby, as a Guarantor thereunder as fully as if it had been an original
signatory to the Subsidiary Guaranty. All representations, warranties,
covenants, agreements and waivers contained in the Subsidiary Guaranty, as
amended hereby, applicable to Guarantors thereunder shall apply to the
Additional Subsidiary Guarantor from and after the date of execution and
delivery of this Amendment.
2. Additions to Schedule 1. Schedule 1 to the Subsidiary Guaranty is
amended by the addition of the following information:
CSSC, Inc.
c/o Safety Components International, Inc.
2160 N. Central Road
Fort Lee, New Jersey 07024
Attn: Chief Financial Officer
3. Ratifications. The terms and provisions set forth in this Amendment
shall modify and supersede all inconsistent terms and provisions set forth in
the Subsidiary Guaranty, and except as expressly modified and superseded by this
Amendment, the terms and provisions of the Subsidiary Guaranty are ratified and
confirmed and shall continue in full force and effect.
4. Miscellaneous. The terms and provisions of sections 13, 14, 15, 16,
20, 22, 23 and 24 of the Subsidiary Guaranty are hereby incorporated into this
Amendment as if set forth in full herein, except that references in such
incorporated terms and provisions to "this Guaranty", "herein", "hereby" and
words of similar import shall be deemed to refer to this Amendment instead of
the Subsidiary Guaranty.
[The balance of this page is intentionally blank.]
1
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
AUTOMOTIVE SAFETY COMPONENTS
INTERNATIONAL, INC.
By: _________________________________
Executive Vice President
ASCI HOLDINGS GERMANY (DE), INC.
By: _________________________________
Executive Vice President
ASCI HOLDINGS CZECH (DE), INC.
By: _________________________________
Executive Vice President
ASCI HOLDINGS MEXICO (DE), INC.
By: _________________________________
Executive Vice President
ASCI HOLDINGS U.K. (DE), INC.
By: _________________________________
Executive Vice President
ASCI HOLDINGS ASIA (DE), INC.
By: _________________________________
Executive Vice President
VALENTEC SYSTEMS, INC.
By: _________________________________
Executive Vice President
2
<PAGE>
GALION, INC.
By: _________________________________
Executive Vice President
VALENTEC INTERNATIONAL CORPORATION, LLC
By: _________________________________
Executive Vice President
SAFETY COMPONENTS FABRIC TECHNOLOGIES, INC.
By: _________________________________
Executive Vice President
CSSC, INC.
By: _________________________________
Executive Vice President
KEYBANK NATIONAL ASSOCIATION,
as Administrative Agent
By: _________________________________
Vice President
AMENDMENT NO. 3 TO PLEDGE AGREEMENT
THIS AMENDMENT, dated as of July 30, 1998, by (i) each of the Pledgors
which is a party to the Pledge Agreement referred to below (the "Original
Pledgors") and (ii) KEYBANK NATIONAL ASSOCIATION, a national banking
association, as Collateral Agent under the Pledge Agreement (herein, together
with its successors and assigns in such capacity, the "Pledgee"):
PRELIMINARY STATEMENTS:
(1) The Original Pledgors have heretofore entered into the Pledge
Agreement, dated as of May 21, 1997, in favor of the Collateral Agent as the
Pledgee thereunder as amended by Amendment No. 1 thereto, dated as of June 2,
1997, and Amendment No. 2 thereto, dated as of July 15, 1997 (as so amended, the
"Pledge Agreement"; with the terms defined therein, or the definitions of which
are incorporated therein, being used herein as so defined).
(2) The parties hereto desire to amend certain of the terms and
provisions of the Pledge Agreement, all as more fully set forth below.
NOW, THEREFORE, the parties hereby agree as follows:
1. Additions to Annex A. Annex A to the Pledge Agreement is amended by
the addition of the following information:
<TABLE>
<CAPTION>
=====================================================================================================================
Name of Jurisdiction Percentage of Names and Jurisdictions Jurisdictions
Subsidiary Where Outstanding Stock Addresses Where Where
and Type of Organized or other Equity of Minority Qualified as Substantial
Organization Interests Owned Holders, a foreign Assets
(Indicating whether if Any corporation or Located
owned by the other entity
Borrower or a
specified Subsidiary)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CSSC, Inc. Arizona 100% owned by the N/A None None
Company
=====================================================================================================================
</TABLE>
2. Additions to Annex B. Annex B to the Pledge Agreement is amended by
the addition of the following information:
<TABLE>
<CAPTION>
=================================================================================================
Name of Type Number
Issuing of of Certificate Percentage
Corporation Shares Shares No. Owned
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CSSC, Inc. common stock 130 101 100%
130 102
250 103
250 104
=================================================================================================
</TABLE>
3. Ratifications. The terms and provisions set forth in this Amendment
shall modify and supersede all inconsistent terms and provisions set forth in
the Security Agreement, and except as expressly modified and
1
<PAGE>
superseded by this Amendment, the terms and provisions of the Pledge Agreement
are ratified and confirmed and shall continue in full force and effect.
4. Miscellaneous. The terms and provisions of sections 20 [Waiver;
Amendment], 22 [Miscellaneous] and 23 [Waiver of Jury Trial] of the Pledge
Agreement are hereby incorporated into this Amendment as if set forth in full
herein, except that references in such incorporated terms and provisions to
"this Agreement", "herein", "hereby" and words of similar import shall be deemed
to refer to this Amendment instead of the Pledge Agreement. This Amendment may
be executed by the parties hereto separately in counterparts, each of which
shall be an original and all of which together shall constitute one and the same
agreement.
[The balance of this page is intentionally blank.]
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
SAFETY COMPONENTS INTERNATIONAL, INC.
By: _________________________________
Executive Vice President
AUTOMOTIVE SAFETY COMPONENTS INTERNATIONAL, INC.
By: _________________________________
Executive Vice President
ASCI HOLDINGS GERMANY (DE), INC.
By: __________________________________
Executive Vice President
ASCI HOLDINGS CZECH (DE), INC.
By: ________________________
Executive Vice President
ASCI HOLDINGS MEXICO (DE), INC.
By: ________________________
Executive Vice President
ASCI HOLDINGS U.K. (DE), INC.
By: ________________________
Executive Vice President
ASCI HOLDINGS ASIA (DE), INC.
By: ________________________
Executive Vice President
3
<PAGE>
KEYBANK NATIONAL ASSOCIATION, as Collateral
Agent and Pledgee
By: _______________________
Vice President
4
<PAGE>
AMENDMENT NO. 3 TO SECURITY AGREEMENT
THIS AMENDMENT, dated as of July 30, 1998, by (i) each of the Assignors
which is a party to the Security Agreement referred to below (the "Original
Assignors"); and (ii) the following additional Subsidiary of the Company: CSSC,
INC., an Arizona corporation (together with its successors and assigns, the
"Additional Assignor"); with (iii) KEYBANK NATIONAL ASSOCIATION, a national
banking association, as Collateral Agent (the "Collateral Agent") under the
Security Agreement identified below:
PRELIMINARY STATEMENTS:
(1) The Original Assignors have heretofore entered into the Security
Agreement, dated as of May 21, 1997, in favor of the Collateral Agent as amended
by Amendment No. 1 thereto, dated as of June 2, 1997, and Amendment No. 2
thereto, dated as of July 15, 1997 (as amended, the "Security Agreement"; with
the terms defined therein, or the definitions of which are incorporated therein,
being used herein as so defined).
(2) The parties hereto desire to amend certain of the terms and
provisions of the Security Agreement, all as more fully set forth below.
NOW, THEREFORE, the parties hereby agree as follows:
1. Joinder of Additional Assignor. Effective upon the execution and
delivery of this Amendment, the Additional Assignor hereby joins in and becomes
a party to the Security Agreement, as amended hereby, as an Assignor thereunder
as fully as if it had been an original signatory to the Security Agreement. All
representations, warranties, covenants, agreements and waivers contained in the
Security Agreement, as amended hereby, applicable to Assignors thereunder shall
apply to the Additional Assignor from and after the date of execution and
delivery of this Amendment.
2. Amendments to Annex B. Annex B to the Security Agreement is amended
and restated in its entirety as follows:
<TABLE>
<CAPTION>
ASSIGNOR ADDRESS
- ----------------------------------------------- -----------------------------------------
<S> <C>
Safety Components International, Inc. 2160 N. Central Road
Fort Lee, New Jersey 07024
Automotive Safety Components International, Inc. c/o Safety Components International, Inc.
2160 N. Central Road
Fort Lee, New Jersey 07024
Galion, Inc. c/o Safety Components International, Inc.
2160 N. Central Road
Fort Lee, New Jersey 07024
Valentec Systems, Inc. c/o Safety Components International, Inc.
2160 N. Central Road
Fort Lee, New Jersey 07024
ASCI Holdings Germany (DE), Inc. c/o Safety Components International, Inc.
2160 N. Central Road
Fort Lee, New Jersey 07024
ASCI Holdings U.K. (DE), Inc. c/o Safety Components International, Inc.
2160 N. Central Road
Fort Lee, New Jersey 07024
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
ASSIGNOR ADDRESS
- ------------------------------------------- -----------------------------------------
<S> <C>
ASCI Holdings Mexico (DE), Inc. c/o Safety Components International, Inc.
2160 N. Central Road
Fort Lee, New Jersey 07024
ASCI Holdings Czech (DE), Inc. c/o Safety Components International, Inc.
2160 N. Central Road
Fort Lee, New Jersey 07024
Valentec International Corporation, LLC c/o Safety Components International, Inc.
2160 N. Central Road
Fort Lee, New Jersey 07024
ASCI Holdings Asia (DE), Inc. c/o Safety Components International, Inc.
2160 N. Central Road
Fort Lee, New Jersey 07024
Safety Components Fabric Technologies, Inc. c/o Safety Components International, Inc.
2160 N. Central Road
Fort Lee, New Jersey 07024
CSSC, Inc. c/o Safety Components International, Inc.
2160 N. Central Road
Fort Lee, New Jersey 07024
</TABLE>
3. Ratifications. The terms and provisions set forth in this Amendment
shall modify and supersede all inconsistent terms and provisions set forth in
the Security Agreement, and except as expressly modified and superseded by this
Amendment, the terms and provisions of the Security Agreement are ratified and
confirmed and shall continue in full force and effect.
4. Miscellaneous. The terms and provisions of sections 10.2 [Waiver;
Amendment], 10.4 [Successors and Assigns], 10.5 [Headings Descriptive], 10.6
[Severability], 10.7 [Governing Law], and 11 [Waiver of Jury Trial] of the
Security Agreement are hereby incorporated into this Amendment as if set forth
in full herein, except that references in such incorporated terms and provisions
to "this Agreement", "herein", "hereby" and words of similar import shall be
deemed to refer to this Amendment instead of the Security Agreement. This
Amendment may be executed by the parties hereto separately in counterparts, each
of which shall be an original and all of which together shall constitute one and
the same agreement.
[The remainder of this page is intentionally left blank.]
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
SAFETY COMPONENTS INTERNATIONAL, INC.
By: ________________________
Executive Vice President
AUTOMOTIVE SAFETY COMPONENTS INTERNATIONAL, INC.
By: ________________________
Executive Vice President
ASCI HOLDINGS GERMANY (DE), INC.
By: ________________________
Executive Vice President
ASCI HOLDINGS CZECH (DE), INC.
By: ________________________
Executive Vice President
ASCI HOLDINGS MEXICO (DE), INC.
By: ________________________
Executive Vice President
ASCI HOLDINGS U.K. (DE), INC.
By: ________________________
Executive Vice President
ASCI HOLDINGS ASIA (DE), INC.
By: ________________________
Executive Vice President
3
<PAGE>
VALENTEC SYSTEMS, INC.
By: ________________________
Executive Vice President
GALION, INC.
By: ________________________
Executive Vice President
VALENTEC INTERNATIONAL CORPORATION, LLC
By: ________________________
Executive Vice President
SAFETY COMPONENTS FABRIC TECHNOLOGIES, INC.
By: ________________________
Executive Vice President
CSSC, Inc.
By: ________________________
Executive Vice President
KEYBANK NATIONAL ASSOCIATION, as Collateral Agent
By: ___________________________
Vice President
4
AGREEMENT
THIS AGREEMENT (this "Agreement") dated as of the 1st day of June 1998 (the
"Effective Date"), is made and entered into by and between Safety Components
International, Inc., a Delaware corporation (the "Company"), and Stephen Duerk
("Employee").
W I T N E S S E T H :
WHEREAS, Employee is currently employed as the Company's Vice President and
President, North American Automotive Group;
WHEREAS, the Company desires to continue to employ Employee in such
positions; and
WHEREAS, Employee desires to accept such continued employment upon the
terms set forth in this Agreement.
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the adequacy and
receipt of which are hereby acknowledged, the parties agree as follows:
1. Employment. The Company hereby continues to employ Employee and
Employee hereby accepts continued employment with the Company as of the
Effective Date for the Term (as defined below), in the position and with the
duties and responsibilities set forth in Section 3 below, and upon the other
terms and subject to the conditions hereinafter stated.
2. Term. Except as otherwise specifically provided in Section 7 below,
the term of Employee's employment under this Agreement (the "Term") shall
commence as of the Effective Date, and shall continue until the second (2nd)
anniversary thereof, subject to the terms and conditions of this Agreement.
3. Position, Duties, Responsibilities and Services.
3.1 Position; Duties and Responsibilities. During the Term,
Employee shall serve as the Company's Vice President and President, North
American Automotive Group, with responsibility for Safety Components Fabric
Technologies, Inc. ("SCFTI") and Automotive Safety Components International,
Inc. ("ASCI"), each a wholly-owned subsidiary of the Company, or such other
office and position as is assigned to him during the Term by the Board of
Directors (the "Board") of the Company and shall be responsible for the duties
attendant to such offices, which duties will be generally consistent with his
position as an executive officer of the Company, and such other managerial
duties and responsibilities with the Company, its subsidiaries or divisions as
may be assigned by the President and Chief Executive Officer of the Company (the
"CEO"), the Executive Vice President and Chief Financial Officer of the Company
(the "CFO") or the Board. Employee shall be subject to the supervision and
control of the CEO and the CFO and the provisions of the By-Laws of the Company.
3.2 Services to be Provided. During the Term, Employee shall
(i) devote all of his working time, attention and energies to the affairs of the
Company and its subsidiaries and divisions, (ii) use his best efforts to promote
its and their best interests, (iii) faithfully and diligently perform his duties
and responsibilities hereunder, and (iv) comply with and be bound by the
Company's operational policies, procedures and practices from time to time in
effect during the Term.
4. Compensation.
4.1 Base Salary. Employee shall be paid a base salary (the
"Base Salary") at an annual rate of one hundred seventy five thousand ($175,000)
dollars, payable at such intervals as the other executive officers of the
Company are paid, but in any event at least on a monthly basis. The Base Salary
shall be subject to increase by the Compensation Committee of the Board (the
"Committee"), in its sole discretion, upon the recommendation of the CEO or the
CFO, taking into account merit, corporate and individual performance and general
business conditions, including changes in the cost of living index. Such
increase, if any, shall be effective on the first day of each fiscal year of the
Company of each year during the Term commencing in 1999.
4.2 Bonus Compensation. Employee shall also be entitled to an
annual performance-related bonus (the "Bonus Compensation"), commencing with the
Company's fiscal year ended March 27, 1999 (the "1999 Fiscal Year"), subject to
and in accordance with the terms of the Management Incentive Plan of the Company
(the "Plan"). The annual Bonus Compensation shall be up to 90% of the Base
Salary paid to Employee in the immediately preceding fiscal year based upon the
achievement by SCFTI and ASCI of targets to be fixed each year by the Committee.
5. Employment Benefits.
5.1 Benefit Programs. During the Term, Employee shall be
entitled to participate in and receive benefits made available now or hereafter
to all executive officers of the Company under all benefit programs,
arrangements or perquisites of the Company including, but not limited to,
pension and other retirement plans, hospitalization, surgical, dental and major
medical coverage, short and long term disability and life insurance.
5.2 Vacation. During the Term, Employee shall be entitled to
such vacation with pay during each year of his employment hereunder consistent
with the policies of the Company, but in no event less than four (4) weeks in
any such calendar year (pro-rated as necessary for partial calendar years during
the Term); provided, however, that the vacation days taken do not interfere with
the operations of the Company. Such vacation may be taken, in Employee's
discretion, at such time or times as are not inconsistent with the reasonable
business needs of the Company. Employee shall not be entitled to any additional
compensation in the event that Employee, for whatever reason, fails to take such
vacation during any year of his employment hereunder. Employee shall also be
entitled to all paid holidays given by the Company to its executive officers.
5.3 Car Allowance. During the Term, the Company shall pay
Employee, on the first day of each month, a monthly automobile allowance of
$500.00 to pay for the costs associated with Employee's local transportation
expenses.
5.4 Country Club Membership. The Company will, promptly
following the submission of documentation reasonably satisfactory to the
Company, reimburse Employee for monthly country club membership fees of up to
$185.00 (subject to reasonable increases in the ordinary course) paid by
Employee during the Term.
6. Expenses. During the Term, the Company shall reimburse Employee upon
presentation of appropriate vouchers or receipts and in accordance with the
Company's expense reimbursement policies for executive officers, for all
reasonable travel and entertainment expenses incurred by Employee in connection
with the performance of his duties under this Agreement.
7. Consequences of Termination of Employment.
7.1 Death. In the event of the death of Employee during the
Term, Employee's employment hereunder shall be terminated as of the date of his
death and Employee's designated beneficiary, or, in the absence of such
designation, the estate or other legal representative of the Employee
(collectively, the "Estate") shall be paid, Employee's unpaid Base Salary
through the month in which the death occurs and any unpaid Bonus Compensation to
the extent payable under the terms of the Plan. The Estate shall be entitled to
all other death benefits, if any, in accordance with the terms of the Company's
benefit programs and plans.
7.2 Disability. In the event Employee shall be unable to
render the services or perform his duties hereunder by reason of illness, injury
or incapacity (whether physical, mental, emotional or psychological) for a
period of either (i) ninety (90) consecutive days or (ii) one hundred eighty
(180) days in any consecutive three hundred sixty-five (365) day period, the
Company shall have the right to terminate Employee's employment under this
Agreement by giving Employee ten (10) days' prior written notice. If Employee's
employment hereunder is so terminated, Employee shall be paid, in addition to
payments under any disability insurance policy in effect, Employee's unpaid Base
Salary through the month in which the termination occurs, plus Bonus
Compensation to the extent payable under the Plan.
7.3 Termination of Employment of Employee by the Company for
Cause.
(a) Nothing herein shall prevent the Company from
terminating Employee's employment under this Agreement for Cause. In the event
Employee is terminated for Cause, Employee shall be paid his unpaid Base Salary
(but no Bonus Compensation) through the month in which the termination occurs.
The term "Cause," as used herein, shall mean (i) Employee's willful misconduct
or fraud in the performance of his duties hereunder; (ii) the continued failure
or refusal of Employee to carry out any reasonable request of the CEO, CFO or
the Board for the provision of services hereunder; (iii) the material breach of
this Agreement by Employee; or (iv) the entering of a plea of guilty or nolo
contendere to or the conviction of Employee for a felony or any other criminal
act involving moral turpitude, dishonesty, theft or unethical business conduct,
including, without limitation, violations of State or Federal securities laws or
regulations.
(b) Termination of employment of Employee pursuant
to this Section 7.3 shall be made by delivery to Employee of a letter from the
CEO or the CFO generally setting forth a description of the conduct which
provides the basis for a termination of employment of Employee for Cause.
7.4 Termination of Employment Other than for Cause, Death or
Disability.
(a) Termination. The Employee's employment under
this Agreement may be terminated (i) by the Company (in addition to termination
pursuant to Sections 7.1, 7.2 or 7.3 above) at any time and for any reason, (ii)
by the Employee at any time and for any reason or (iii) upon the expiration of
the Term.
(b) Severance and Non-Competition Payments.
(1) If this Agreement is terminated by the
Company, other than as a result of death or disability of Employee or for Cause
(and other than in connection with a Change of Control (as defined below)), the
Company shall pay the Employee a severance and non-competition payment equal to
the Base Salary for twelve (12) months (but no Bonus Compensation). Such
severance and non-competition payment shall be payable in twelve (12) equal
monthly installments commencing on the first day of the month following
termination.
(2) In the event of a termination of
employment by the Company following a Change of Control, the Company shall pay
the Employee a severance and non-competition payment equal to two (2) times the
sum of the Base Salary plus the Bonus Compensation in respect of the year
immediately preceding the year of termination. Such severance and
non-competition payment shall be payable in a lump sum on the first day of the
month following the termination.
(3) For purposes of this Agreement, a
"Change of Control" means and includes each of the following: (i) the
acquisition, in one or more transactions, of beneficial ownership (within the
meaning of Rule 13d-3 of the rules and regulations promulgated under the
Securities and Exchange Act of 1934, as amended (the "Rules & Regulations")) by
any person or entity or any group of persons or entities who constitute a group
(within the meaning of Section 13(d)(3) of the Rules and Regulations) (other
than Robert A. Zummo, a member of his immediate family, a trust or similar
estate planning vehicle established by Mr. Zummo, or an entity in which Mr.
Zummo owns, directly or indirectly, a majority of the equity securities or
voting rights), of any securities of the Company such that, as a result of such
acquisition, such person, entity or group either (A) beneficially owns (within
the meaning of Rule l3d-3 of the Rules and Regulations), directly or indirectly,
more than 30% of the Company's outstanding voting securities entitled to vote on
a regular basis for a majority of the members of the Board or (B) otherwise has
the ability to elect, directly or indirectly, a majority of the members of the
Board; (ii) a change in the composition of the Board such that a majority of the
members of the Board are not Continuing Directors (as defined below); or (iii)
the closing date of a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which results in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 80% of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation; (iv) the
stockholders of the Company approve a plan of complete liquidation of the
Company; or (v) the closing date of the sale or disposition by the Company (if
consummated in more than one transaction, the initial closing date) of all or
substantially all of the Company's assets, following shareholder approval of
such sale or disposition. Notwithstanding the foregoing, the preceding events
shall not be deemed to be a Change of Control if, prior to any transaction or
transactions causing such change, a majority of the Continuing Directors shall
have voted not to treat such transaction or transactions as resulting in a
Change of Control.
(4) For purposes of this Agreement,
"Continuing Director" shall mean, as of any date of determination, any member of
the Board who (i) was a member of the Board on the date hereof or (ii) was
nominated for election or elected to such board with the affirmative vote of a
majority of the Continuing Directors who were members of the Board at the time
of such nomination or election.
(5) If this Agreement is not renewed beyond
the Term by the parties hereto solely as a result of the refusal by the Company
to extend the term, the Company shall pay Employee a severance and
non-competition payment equal to the Base Salary for twelve (12) months (but no
Bonus Compensation). Such severance and non-competition payment shall be payable
in equal monthly installments commencing on the first day of the month after
expiration of the Term.
(6) If Employee terminates his employment
voluntarily prior to the expiration of the Term, Employee shall be paid his
unpaid Base Salary (but no Bonus Compensation) through the date of such
termination.
8. Confidential information; Inventions.
8.1 The Employee agrees not to use, disclose or make
accessible to any other person, firm, partnership, corporation or any other
entity any Confidential Information (as defined below) pertaining to the
business of the Company or any entity controlling, controlled by or under common
control with the Company (each an "Affiliate") except (i) while employed by the
Company, in the business of and for the benefit of the Company or its Affiliates
or (ii) when required to do so by a court of competent jurisdiction, by any
governmental agency having supervisory authority over the business of the
Company or its Affiliates, or by any administrative body or legislative body
(including a committee thereof) with jurisdiction to order the Company or its
Affiliates to divulge, disclose or make accessible such information. For
purposes of this Agreement, "Confidential Information" shall mean non-public
information concerning the Company's financial data, statistical data, strategic
business plans, product development (or other proprietary product data),
customer and supplier lists, customer and supplier information, pricing data,
information relating to governmental relations, discoveries, practices,
processes, methods, trade secrets, developments (as defined below) marketing
plans and other non-public, proprietary and confidential information of the
Company or its Affiliates, that, in any case, is not otherwise generally
available to the public and has not been disclosed by the Company, or its
Affiliates, as the case may be, to others not subject to confidentiality
agreements. In the event the Employee's employment is terminated hereunder for
any reason, he immediately shall return to the Company all Confidential
Information in his possession.
8.2 Employee shall make full and prompt disclosure to the
Company of all inventions, improvements, ideas, concepts, discoveries, methods,
developments, software and works of authorship, whether or not copyrightable,
trademarkable or licensable, which are created, made, conceived or reduced to
practice by Employee in the course of or in connection with his services with
the Company, whether or not during normal working hours or on the premises of
the Company (all of which are collectively referred to in this Agreement as
"Developments"). All Developments shall be the sole property of the Company, and
Employee hereby assigns to the Company, without further compensation, all of his
rights, title and interests in and to the Developments and any and all related
patents, patent applications, copyrights, copyright applications, trademarks and
trade names in the United States and elsewhere.
8.3 Employee shall assist the Company in obtaining,
maintaining and enforcing patent, copyright and other forms of legal protection
for intellectual property in any country. Upon the request of the Company,
Employee shall sign all applications, assignments, instruments and papers and
perform all acts necessary or desired by the Company in order to protect its
rights and interests in any Developments.
8.4 The Employee and the Company agree that this covenant
regarding Confidential Information and Developments is a reasonable covenant
under the circumstances, and further agree that if, in the opinion of any court
of competent jurisdiction, such covenant is not reasonable in any respect, such
court shall have the right, power and authority to excise or modify such
provision or provisions of this covenant as to the court shall appear not
reasonable and to enforce the remainder of the covenant as so amended. The
Employee agrees that any breach of the covenant contained in this Section 8
would irreparably injure the Company and/or its Affiliates. Accordingly, the
Employee agrees that the Company and/or its Affiliates, in addition to pursuing
any other remedies it or they may have in law or in equity, may obtain an
injunction against the Employee from any court having jurisdiction over the
matter, restraining any further violation of this Section 8.
8.5 The provisions of this Section 8 shall extend for the Term
and shall further extend for the greater of (x) the period in which severance
and non-competition payments are made pursuant to this Agreement or (y) two
years from the date this Agreement is terminated. The provisions of this Section
8 shall survive any termination of this Agreement.
9. Non-Competition; Non-Solicitation.
9.1 The Employee agrees that during the Non-Competition Period
(as defined in Section 9.4 below), without the prior written consent of the
Company: (a) he shall not, directly or indirectly, either as principal, manager,
agent, consultant, officer, director, greater than two (2%) percent holder of
any class or series of equity securities, partner, investor, lender or employee
or in any other capacity, carry on, be engaged in or have any financial interest
in or otherwise be connected with, any entity which is now or at the time, has
material operations which are engaged in any business activity competitive
(directly or indirectly) with the business of the Company or its Affiliates
(currently (i) the manufacture and sale of (x) automotive airbag fabric and
cushions, (y) value-added synthetic fabrics used in a variety of niche
industrial and commercial applications and (z) metal airbag, industrial and
ordnance components and (ii) systems integration and manufacturing for ordnance
programs) including, for these purposes, any business in which, at the
termination of his employment, there was a bona fide intention on the part of
the Company or its Affiliates to engage in the future; and (b) he shall not, on
behalf of any competing entity, directly or indirectly, have any dealings or
contact with any suppliers or customers of the Company or its Affiliates.
9.2 During the Non-Competition Period, Employee agrees that,
without the prior written consent of the Company (and other than on behalf of
the Company), Employee shall not, on his own behalf or on behalf of any person
or entity, directly or indirectly, hire or solicit the employment of any
employee who has been employed by the Company or its Affiliates at any time
during the six (6) months immediately preceding such date of hiring or
solicitation.
9.3 The Employee and the Company agree that the covenants of
non-competition and non-solicitation are reasonable covenants under the
circumstances, and further agree that if, in the opinion of any court of
competent jurisdiction such covenants are not reasonable in any respect, such
court shall have the right, power and authority to excise or modify such
provision or provisions of these covenants as to the court shall appear not
reasonable and to enforce the remainder of these covenants as so amended. The
Employee agrees that any breach of the covenants contained in this Section 9
would irreparably injure the Company and/or its Affiliates. Accordingly, the
Employee agrees that the Company and/or its Affiliates, in addition to pursuing
any other remedies it or they may have in law or in equity, may obtain an
injunction against the Employee from any court having jurisdiction over the
matter, restraining any further violation of this Section 9.
9.4 The provisions of this Section 9 shall extend for the Term
and shall further extend for one year from the date of such termination (herein
referred to as the "Non-Competition Period"). The provisions of this Section 9
shall survive any termination of this Agreement
10. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered personally or sent
by facsimile transmission, overnight courier, or certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally or sent by facsimile transmission (provided that a
confirmation copy is sent by overnight courier), one day after deposit with an
overnight courier, or if mailed, five (5) days after the date of deposit in the
United States mails, as follows:
To the Company: Safety Components International, Inc.
2160 North Central Road
Fort Lee, NJ 07024
Telephone: (201) 592-0008
Telecopy: (201) 592-7501
Attention: Jeffrey J. Kaplan
To Employee: Mr. Stephen Duerk
204 Anders Avenue
Mauldin, SC 29662
Telephone: (864) 458-7703
Telecopy: (864) 458-8992
11. Entire Agreement. This Agreement contains the entire agreement
between the parties hereto with respect to the matters contemplated herein and
supersedes all prior agreements or understandings among the parties related to
such matters.
12. Binding Effect. Except as otherwise provided herein, this Agreement
shall be binding upon and inure to the benefit of the Company and its successors
and assigns and upon Employee. "Successors and assigns" shall mean, in the case
of the Company, any successor pursuant to a merger, consolidation, or sale, or
other transfer of all or substantially all of the assets or common stock of the
Company.
13. No Assignment. This Agreement shall not be assignable or otherwise
transferable by Employee. The Company shall have the right to assign this
Agreement to any successor or any Affiliate which agrees to be bound by the
terms hereof.
14. Amendment or Modification; Waiver. No provision of this Agreement
may be amended or waived unless such amendment or waiver is agreed to in
writing, signed by Employee and by an officer of the Company thereunto duly
authorized. Except as otherwise specifically provided in this Agreement, no
waiver by either party hereto of any breach by the other party hereto of any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of a similar or dissimilar provision or condition at
the same or at any prior or subsequent time.
15. Governing Law. The validity, interpretation, construction,
performance and enforcement of this Agreement shall be governed by the internal
laws of the State of Delaware, without regard to its conflicts of law rules.
16. Titles. Titles to the Sections in this Agreement are intended
solely for convenience and no provision of this Agreement is to be construed by
reference to the title of any Section.
17. Counterparts. This Agreement may be executed in one or more
counterparts, which together shall constitute one agreement. It shall not be
necessary for each party to sign each counterpart so long as each party has
signed at least one counterpart.
18. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms and
provisions of this Agreement in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.
SAFETY COMPONENTS INTERNATIONAL, INC.
By:
------------------------------------
Name: Jeffrey J. Kaplan
Title: Executive Vice President
and Chief Financial Officer
------------------------------------
Stephen Duerk
Master Equipment Lease Agreement
THIS MASTER EQUIPMENT LEASE AGREEMENT dated as of July 10, 1998 is made
by and between KEYCORP LEASING, A DIVISION OF KEY CORPORATE CAPITAL INC., having
an address at 54 State Street, Albany, New York 12207 ("Lessor"), and SAFETY
COMPONENTS INTERNATIONAL, INC., a Delaware corporation with its principal place
of business at 2160 N. Central Road, Fort Lee, NJ 07024 ("Lessee").
TERMS AND CONDITIONS OF LEASE
1. Lease. Lessor hereby leases to Lessee, and Lessee hereby leases from
Lessor, the Equipment, subject to and upon the terms and conditions set forth
herein. Each Equipment Schedule shall constitute a separate and enforceable
lease incorporating all the terms and conditions of this Master Equipment Lease
Agreement as if such terms and conditions were set forth in full in such
Equipment Schedule. In the event that any term or condition of any Equipment
Schedule conflicts with or is inconsistent with any term or condition of this
Master Equipment Lease Agreement, the terms and conditions of the Equipment
Schedule shall govern.
2. Disclaimer of Warranties. LESSOR MAKES NO (AND SHALL NOT BE DEEMED
TO HAVE MADE ANY) WARRANTIES, EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER,
INCLUDING, WITHOUT LIMITATION, THE DESIGN, OPERATION OR CONDITION OF, OR THE
QUALITY OF THE MATERIAL, EQUIPMENT OR WORKMANSHIP IN, THE EQUIPMENT, ITS
MERCHANTABILITY OR ITS FITNESS FOR ANY PARTICULAR PURPOSE, THE STATE OF TITLE
THERETO OR ANY COMPONENT THERETO, THE ABSENCE OF LATENT OR OTHER DEFECTS
(WHETHER OR NOT DISCOVERABLE), AND LESSOR HEREBY DISCLAIMS THE SAME; IT BEING
UNDERSTOOD THAT THE EQUIPMENT IS LEASED TO LESSEE "AS IS" AND ALL SUCH RISKS, IF
ANY, ARE TO BE BORNE BY LESSEE. NO DEFECT IN, OR UNFITNESS OF, THE EQUIPMENT, OR
ANY OF THE OTHER FOREGOING MATTERS, SHALL RELIEVE LESSEE OF THE OBLIGATION TO
PAY RENT OR OF ANY OTHER OBLIGATION HEREUNDER. LESSEE HAS MADE THE SELECTION OF
THE EQUIPMENT FROM THE SUPPLIER BASED ON ITS OWN JUDGMENT AND EXPRESSLY
DISCLAIMS ANY RELIANCE UPON ANY STATEMENTS OR REPRESENTATIONS MADE BY LESSOR.
LESSOR IS NOT RESPONSIBLE FOR ANY REPAIRS, SERVICE, MAINTENANCE OR DEFECT IN THE
EQUIPMENT OR THE OPERATION THEREOF. IN NO EVENT SHALL LESSOR BE LIABLE FOR ANY
INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES (WHETHER UNDER THE UCC OR OTHERWISE),
INCLUDING, WITHOUT LIMITATION, ANY LOSS, COST OR DAMAGE TO LESSEE OR OTHERS
ARISING FROM ANY OF THE FOREGOING MATTERS, INCLUDING, WITHOUT LIMITATION,
DEFECTS, NEGLIGENCE, DELAYS, FAILURE OF DELIVERY OR NON-PERFORMANCE OF THE
EQUIPMENT. ANY WARRANTY BY THE SUPPLIER IS HEREBY ASSIGNED TO LESSEE BY LESSOR
WITHOUT RECOURSE. SUCH WARRANTY SHALL NOT RELEASE LESSEE FROM ITS OBLIGATION TO
LESSOR TO PAY RENT, TO PERFORM ALL OTHER OBLIGATIONS HEREUNDER AND TO KEEP,
MAINTAIN AND SURRENDER THE EQUIPMENT IN THE CONDITION REQUIRED BY SECTIONS 12
AND 13 HEREOF. Lessee's execution and delivery of a Certificate of Acceptance
shall be conclusive evidence as between Lessor and Lessee that the Items of
Equipment described therein are in all of the foregoing respects satisfactory to
Lessee, and Lessee shall not assert any claim of any nature whatsoever against
Lessor based on any of the foregoing matters; provided, however, that nothing
contained herein shall in any way bar, reduce or defeat any claim that Lessee
may have against the Supplier or any other person (other than Lessor).
3. Non-cancelable lease. This lease is a net lease and lessee's
obligation to pay rent and perform its obligations hereunder are absolute,
irrevocable and unconditional under any and all circumstances whatsoever and
shall not be subject to any right of set off, counterclaim, deduction, defense
or other right which lessee may have against the supplier, lessor or any other
party. Lessee shall have no right to terminate (except as expressly provided
herein) or cancel this lease or to be released or discharged from its obligation
hereunder for any reason whatsoever, including, without limitation, defects in,
destruction of, damage to or
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interference with any use of the equipment (for any reason whatsoever,
including, without limitation, war, act of god, strike or governmental
regulation), the invalidity, illegality or unenforceability (or any allegation
thereof) of this lease or any provision hereof, or any other occurrence
whatsoever, whether similar or dissimilar to the foregoing, whether foreseen or
unforeseen.
4. Definitions. Unless the context otherwise requires, as used in this
Lease, the following terms shall have the respective meanings indicated below
and shall be equally applicable to both the singular and the plural forms
thereof:
(a) "Applicable Law" shall mean all applicable Federal, state,
local and foreign laws (including, without limitation, any Environmental Law,
industrial hygiene and occupational safety or similar laws), ordinances,
judgments, decrees, injunctions, writs and orders of any Governmental Authority
and rules, regulations, orders, licenses and permits of any Governmental
Authority.
(b) "Appraisal Procedure" shall mean the following procedure for
obtaining an appraisal of the Fair Market Sales Value or the Fair Market Rental
Value. Lessor shall provide Lessee with the names of three independent
Appraisers. Within ten (10) business days thereafter, Lessee shall select one of
such Appraisers to perform the appraisal. The selected Appraiser shall be
instructed to perform its appraisal based upon the assumptions specified in the
definition of Fair Market Sales Value or Fair Market Rental Value, as
applicable, and shall complete its appraisal within twenty (20) business days
after such selection. Any such appraisal shall be final, binding and conclusive
on Lessee and Lessor and shall have the legal effect of an arbitration award.
Lessee shall pay the fees and expenses of the selected Appraiser.
(c) "Appraiser" shall mean a person engaged in the business of
appraising property who has at least ten years' experience in appraising
property similar to the Equipment.
(d) "Authorized Signer" shall mean those officers of Lessee, set
forth on an incumbency certificate (in form and substance satisfactory to
Lessor) delivered by Lessee to Lessor, who are authorized and empowered to
execute this Lease, the Equipment Schedules and all other documents the
execution of which is contemplated hereby.
(e) "Certificate of Acceptance" shall mean a certificate of
acceptance, in form and substance satisfactory to Lessor, executed and delivered
by Lessee in accordance with Section 7 hereof indicating, among other things,
that the Equipment described therein has been accepted by Lessee for all
purposes of this Lease.
(f) "Default" shall mean any event or condition which, with the
passage of time or the giving of notice, or both, would constitute an Event of
Default.
(g) "Environmental Law" shall mean any federal, state, or local
statute, law, ordinance, code, rule, regulation, or order or decree regulating,
relating to or imposing liability upon a person in connection with the use,
release or disposal of any hazardous, toxic or dangerous substance, waste, or
material as same may relate to the Equipment or its operation.
(h) "Equipment" shall mean an item or items of personal property
designated from time to time by Lessee which are described on an Equipment
Schedule and which are being or will be leased by Lessee pursuant to this Lease,
together with all replacement parts, additions and accessories incorporated
therein or affixed thereto.
(i) "Equipment Group" shall consist of all Items of Equipment
listed on a particular Equipment Schedule.
(j) "Equipment Location" shall mean the location of the Equipment,
as set forth on an Equipment Schedule, or such other location (approved by
Lessor) as Lessee shall from time to time specify in writing.
(k) "Equipment Schedule" shall mean each equipment lease schedule
from time to time executed by Lessor and Lessee with respect to an Equipment
Group, pursuant to and incorporating by reference all of the terms and
conditions of this Master Equipment Lease Agreement.
(l) "Event of Default" shall have the meaning specified in Section
22 hereof.
(m) "Fair Market Rental Value" or "Fair Market Sale Value" shall
mean the value of each Item of Equipment for lease or sale, unless otherwise
specified herein as determined between Lessor and Lessee, or, if Lessor and
Lessee are unable to agree, pursuant to the Appraisal Procedure, which would be
obtained in an arms-length transaction between an informed and willing lessor or
seller (under no compulsion to lease or sell) and an informed and willing lessee
or buyer (under no compulsion to lease or purchase). In determining the Fair
Market
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Rental Value or Fair Market Sale Value of the Equipment, (a) such Fair Market
Rental Value or Fair Market Sale Value shall be calculated on the assumption
that the Equipment is in the condition and repair required by Sections 12 and 13
hereof, and (b) there shall be excluded from the calculation thereof the value
of any upgrades and attachments made pursuant to Section 14 hereof in which the
Lessor does not own an interest; provided, howeve , that, unless otherwise
provided in such Section 22, for purposes of Section 22 of the Lease, Fair
Market Sale Value of the Equipment shall be determined based upon the actual
facts and circumstances then prevailing without regard to the assumptions in
clause (a) above.
(n) "Governmental Action" shall mean all authorizations, consents,
approvals, waivers, filings and declarations of any Governmental Authority,
including, without limitation, those environmental and operating permits
required for the ownership, lease, use and operation of the Equipment.
(o) "Governmental Authority" shall mean any foreign, Federal,
state, county, municipal or other governmental authority, agency, board or
court.
(p) "Guarantor" shall mean any guarantor of Lessee's obligations
hereunder.
(q) "Item of Equipment" shall mean each item of the Equipment.
(r) "Late Payment Rate" shall mean an annual interest rate equal
to the lesser of 18% or the maximum interest rate permitted by Applicable Law.
(s) "Lease", "hereof", "herein" and "hereunder" shall mean, with
respect to an Equipment Group, this Master Equipment Lease Agreement and the
Equipment Schedule on which such Equipment Group is described, including all
addenda attached thereto and made a part thereof.
(t) "Lien" shall mean all mortgages, pledges, security interests,
liens, encumbrances, claims or other charges of any kind whatsoever.
(u) "Purchase Agreement" shall mean any purchase agreement or
other contract entered into between the Supplier and Lessee for the acquisition
of the Equipment to be leased hereunder.
(v) "Related Equipment Schedule" shall have the meaning set forth
in Section 27 hereof.
(w) RESERVED.
(x) RESERVED.
(y) "Rent" shall mean the periodic rental payments due hereunder
for the leasing of the Equipment, as set forth on the Equipment Schedules, and,
where the context hereof requires, all such additional amounts as may from time
to time be payable under any provision of this Lease.
(z) "Rent Commencement Date" shall mean, with respect to an
Equipment Group, the date on which Lessor disburses funds for the purchase of
such Equipment Group, as determined by Lessor in its sole discretion.
(aa) "Rent Payment Date" with respect to an Equipment Group, shall
have the meaning set forth in the Equipment Schedule associated therewith.
(ab) "Stipulated Loss Value" shall mean, as of any Rent Payment
Date and with respect to an Item of Equipment, the amount determined by
multiplying the Total Cost for such Item of Equipment by the percentage
specified in the applicable Stipulated Loss Value Supplement opposite such Rent
Payment Date.
(ac) "Stipulated Loss Value Supplement" with respect to an
Equipment Group, shall have the meaning set forth in the Equipment Schedule
associated therewith.
(ad) "Supplier" shall mean the manufacturer or the vendor of the
Equipment, as set forth on each Equipment Schedule.
(ae) "Term" shall mean the Initial Term, as defined in Section 8
hereof, and any Renewal Term, as defined in Section 8 hereof.
(af) "Total Cost" shall mean, with respect to an Item of
Equipment, (1) the acquisition cost of such Item of Equipment (including
Lessor's capitalized costs), as set forth on the Equipment Schedule on which
such Item of Equipment is described, or (2) if no such acquisition cost is
specified, the Supplier's invoice price for such Item of Equipment plus Lessor's
capitalized costs, or (3) if no such acquisition cost is specified and no such
invoice price is obtainable, an allocated price for such Item of Equipment based
on the Total Cost of all Items of Equipment set forth on the Equipment Schedule
on which such Item of Equipment is described, as determined by Lessor in its
sole discretion.
5. Supplier not an agent. Lessee understands and agrees that (i)
neither the supplier, nor any sales representative or other agent of the
supplier, is (1) an agent of lessor or (2) authorized to make or alter any term
or condition of this lease, and
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(ii) no such waiver or alteration shall vary the terms of this lease unless
expressly set forth herein.
6. Ordering Equipment. Lessee has selected and ordered the Equipment
from the Supplier and, if appropriate, has entered into a Purchase Agreement
with respect thereto. Lessor shall accept an assignment from Lessee of Lessee's
rights, but none of Lessee's obligations, under any such Purchase Agreement.
Lessee shall arrange for delivery of the Equipment so that it can be accepted in
accordance with Section 7 hereof. If an Item of Equipment is subject to an
existing Purchase Agreement between Lessee and the Supplier, Lessee warrants
that such Item of Equipment has not been delivered to Lessee as of the date of
the Equipment Schedule applicable thereto. If Lessee causes the Equipment to be
modified or altered, or requests any additions thereto prior to the Rent
Commencement Date, Lessee (i) acknowledges that any such modification,
alteration or addition to an Item of Equipment may affect the Total Cost, taxes,
purchase and renewal options, if any, Stipulated Loss Value and Rent with
respect to such Item of Equipment, and (ii) hereby authorizes Lessor to adjust
such Total Cost, taxes, purchase and renewal options, if any, Stipulated Loss
Value and Rent as appropriate. Lessee hereby authorizes Lessor to complete each
Equipment Schedule with the serial numbers and other identification data of the
Equipment Group associated therewith, as such data is received by Lessor.
7. Delivery and acceptance. Upon acceptance for lease by lessee of any
equipment delivered to lessee and described in any equipment schedule, lessee
shall execute and deliver to lessor a certificate of acceptance. Lessor shall
have no obligation to advance funds for the purchase of the equipment unless and
until lessor shall have received a certificate of acceptance relating thereto
executed by lessee. Such certificate of acceptance shall constitute lessee's
acknowledgment that such equipment (a) was received by lessee, (b) is
satisfactory to Lessee in all respects and is acceptable to Lessee for lease
hereunder, (c) is suitable for Lessee's purposes, (d) is in good order, repair
and condition, (e) has been installed and operates properly, and (f) is subject
to all of the terms and conditions of this Lease (including, without limitation,
Section 2 hereof).
8. Term; Survival. With respect to any Item of Equipment, unless
otherwise specified thereon, the initial term of this Lease (the "Initial Term")
shall commence on the date on which such Item of Equipment is delivered to
Lessee, and, unless earlier terminated as provided herein, shall expire on the
final Rent Payment Date for such Item of Equipment. With respect to an Item of
Equipment, any renewal term of this Lease (individually, a "Renewal Term"), as
contemplated hereby, shall commence immediately upon the expiration of the
Initial Term or any prior Renewal Term, as the case may be, and, unless earlier
terminated as provided herein, shall expire on the date on which the final
payment of Rent is due and paid hereunder. All obligations of Lessee hereunder
shall survive the expiration, cancellation or other termination of the Term
hereof.
9. Rent. With respect to Each Item of Equipment, Lessee shall pay the
Rent set forth on the Equipment Schedule applicable to such Item of Equipment,
commencing on the Rent Commencement Date, and, unless otherwise set forth on
such Equipment Schedule, on the same day of each payment period thereafter for
the balance of the Term. Rent shall be due whether or not Lessee has received
any notice that such payments are due. All Rent shall be paid to Lessor at its
address set forth on the Equipment Schedule, or as otherwise directed by Lessor
in writing.
(a) INTERIM LEASE PAYMENT. (i) Section 4(z) of the Master Lease
("Definitions") is hereby deleted in its entirety and the following is
substituted in its place:
(z) "Rent Commencement Date" shall mean the first day of the month
following the Interim Term Commencement Date.
(ii) Section 4 of the Master Lease ("Definitions") is hereby
amended to add the following definition(s):
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"Interim Term Commencement Date" shall mean, with respect to an
Equipment Group, the date on which Lessor disburses funds for the purchase of
such Equipment Group, as determined by Lessor in its sole discretion.
(iii) Section 6 of the Master Lease ("Ordering Equipment") is
hereby amended to delete the term "Rent Commencement Date" and to substitute the
term "Interim Term Commencement Date" in its place.
(iv) Section 22(a)(9) of the Master Lease ("Events of Default;
Remedies") is hereby amended to delete the term "Rent Commencement Date" and to
substitute the phrase "Rent Commencement Date or Interim Term Commencement Date,
as the case may be," in its place.
10. Location; Inspection; Labels. The Equipment shall be delivered to
the Equipment Location and shall not be removed therefrom without Lessor's prior
written consent. Lessor shall have the right to enter upon the Equipment
Location and inspect the Equipment at any reasonable time. Lessor may, without
notice to Lessee, remove the Equipment if the Equipment is, in the opinion of
Lessor, being used beyond its capacity or is in any manner improperly cared for,
abused or misused. At Lessor's request, Lessee shall affix labels stating that
the Equipment is owned by Lessor permanently in a prominent place on the
Equipment and shall keep such labels in good repair and condition.
11. Use; Alterations. Lessee shall use the Equipment lawfully and only
in the manner for which it was designed and intended and so as to subject it
only to ordinary wear and tear. Lessee shall comply with all Applicable Law.
Lessee shall immediately notify Lessor in writing of any existing, pending or
threatened investigation, inquiry, claim or action by any Governmental Authority
in connection with any Applicable Law or Governmental Action which could
adversely affect the Equipment or this Lease. Lessee, at its own expense, shall
make such alterations, additions or modifications or improvements to the
Equipment as may be required from time to time to meet the requirements of
Applicable Law or Governmental Action. Except as otherwise permitted herein,
Lessee shall not make any alterations, additions, modifications or improvements
to the Equipment without Lessor's prior written consent.
12. Repairs and Maintenance. Lessee, at Lessee's own cost and expense,
shall (a) keep the Equipment in good repair, good operating condition and
working order and in compliance with the manufacturer's specifications, and (b)
enter into and keep in full force and effect during the Term hereof a
maintenance agreement with the manufacturer of the Equipment, or a
manufacturer-approved maintenance organization, to maintain, service and repair
the Equipment so as to keep the Equipment in as good operating condition and
working order as it was when it first became subject to this Lease and in
compliance with the manufacturer's specifications. Upon Lessor's request, Lessee
shall furnish Lessor with an executed copy of any such maintenance agreement. An
alternate source of maintenance may be used by Lessee with Lessor's prior
written consent. Lessee, at its own cost and expense and within a reasonable
period of time, shall replace any part of any Item of Equipment that becomes
worn out, lost, stolen, destroyed, or otherwise rendered permanently unfit or
unavailable for use (whether or not such replacement is covered by the aforesaid
maintenance agreement), with a replacement part of the same manufacture, value,
remaining useful life and utility as the replaced part immediately preceding the
replacement (assuming that such replaced part is in the condition required by
this Lease). Such replacement part shall be free and clear of all Liens.
Notwithstanding the foregoing, this paragraph shall not apply to any Loss or
Damage (as defined in Section 16 hereof) of any Item of Equipment.
13. Return of Equipment. Upon the expiration (subject to Section 32
hereof and except as otherwise provided in an Equipment Schedule) or earlier
termination of this Lease, Lessee, at its sole expense, shall return the
Equipment to Lessor by delivering such Equipment F.A.S. or F.O.B. to such
location or such carrier (packed for shipping) as Lessor shall specify. Lessee
agrees that the Equipment, when returned, shall be in the condition required by
Section 12 hereof. All components of the Equipment shall have been properly
serviced, following the manufacturer's written operating and servicing
procedures, such that the Equipment is eligible for a manufacturer's standard,
full service maintenance contract without Lessor's incurring any expense to
repair or rehabilitate the Equipment. If, in the opinion of Lessor, any Item of
Equipment fails to meet the standards set forth above, Lessee agrees to pay on
demand all costs and expenses incurred in connection with repairing such Item of
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Equipment and restoring it so as to meet such standards, assembling and
delivering such Item of Equipment. If Lessee fails to return any Item of
Equipment as required hereunder, then, all of Lessee's obligations under this
Lease (including, without limitation, Lessee's obligation to pay Rent for such
Item of Equipment at the rental then applicable under this Lease) shall continue
in full force and effect until such Item of Equipment shall have been returned
in the condition required hereunder.
14. Equipment Upgrades/Attachments. In addition to the requirements of
Section 11 hereof, Lessee, at its own expense, may from time to time add or
install upgrades or attachments to the Equipment during the Term; provided, that
such upgrades or attachments (a) are readily removable without causing material
damage to the Equipment, (b) do not materially adversely affect the Fair Market
Sale Value, the Fair Market Rental Value, residual value, productive capacity,
utility or remaining useful life of the Equipment, and (c) do not cause such
Equipment to become "limited use property" within the meaning of Revenue
Procedure 76-30, 1976-2 C.B. 647 (or such other successor tax provision), as of
the applicable delivery date or the time of such upgrade or attachment. Any such
upgrades or attachments which are not required by Section 11 hereof and which
can be removed without causing damage to or adversely affecting the condition of
the Equipment, or reducing the Fair Market Sale Value, the Fair Market Rental
Value, residual value, productive capacity, utility or remaining useful life of
the Equipment shall remain the property of Lessee; and upon the expiration or
earlier termination of this Lease and provided that no Event of Default exists,
Lessee may, at its option, remove any such upgrades or attachments and, upon
such removal, shall restore the Equipment to the condition required hereunder.
15. Sublease and assignment. (a) without lessor's prior written
consent, lessee shall not (i) assign, transfer, pledge, hypothecate or otherwise
dispose of this lease, the equipment or any interest therein, or (ii) sublet or
lend the equipment to, or permit the equipment to be used by, anyone other than
lessee or lessee's qualified employees.
(b) lessor, at any time with or without notice to lessee, may sell,
transfer, assign and/or grant a security interest in this lease, any equipment
schedule or any item of equipment. In any such event, any such purchaser,
transferee, aSsignee or secured party shall have and may exercise all of
lessor's rights hereunder with respect to the items to which any such sale,
transfer, assignment and/or security interest relates, and lessee shall not
assert against any such purchaser, transferee, assignee or secured party any
defense, counterclaim or offset that lessee may have against lessor. Lessee
acknowledges that no such sale, transfer, assignment and/or security interest
will materially change Lessee's duties hereunder or materially increase its
burdens or risks hereunder. Lessee agrees that upon written notice to Lessee of
any such sale, transfer, assignment and/or security interest, Lessee shall
acknowledge receipt thereof in writing and shall comply with the directions and
demands of Lessor's successor or assign.
16. Loss of or Damage to Equipment. (a) Lessee shall bear the entire
risk of loss, theft, destruction, disappearance of or damage to any and all
Items of Equipment ("Loss or Damage") from any cause whatsoever during the Term
hereof until the Equipment is returned to Lessor in accordance with Section 13
hereof. No Loss or Damage shall relieve Lessee of the obligation to pay Rent or
of any other obligation under this Lease.
(b) In the event of Loss or Damage to any Item of Equipment,
Lessee, at the option of Lessor, shall within thirty (30) days following such
Loss or Damage: (1) place such Item of Equipment in good condition and repair,
in accordance with the terms hereof; (2) replace such Item of Equipment with
replacement equipment (acceptable to Lessor) in as good condition and repair,
and with the same value, remaining useful economic life and utility, as such
replaced Item of Equipment immediately preceding the Loss or Damage (assuming
that such replaced Item of Equipment is the condition required by this Lease),
which replacement equipment shall be free and clear of all Liens; or (3) pay to
Lessor the sum of (i) all Rent due and owing hereunder with respect to such Item
of Equipment (at the time of such payment) plus (ii) the Stipulated Loss Value
as of the Rent Payment Date next following the date of such Loss or Damage with
respect to such Item of Equipment, as set forth on the Schedule applicable
thereto. Upon Lessor's receipt of the payment required under subsection (3)
above, Lessee shall be entitled to Lessor's interest in such Item of Equipment,
in its then condition and location, "as is" and "where is", without any
warranties, express or implied. If Lessee replaces the Item of Equipment
pursuant to subsection (b) above, title to such replacement equipment shall
immediately (and without further act) vest in Lessor and thereupon shall be
deemed to constitute Items of Equipment and be fully subject to this Lease as if
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originally leased hereunder. If Lessee fails to either restore or replace the
Item of Equipment pursuant to subsection (1) or (2) above, respectively, Lessee
shall make the payment under subsection (3) above.
17. Insurance. (a) Lessee, at all times during the Term hereof (until
the Equipment shall have been returned to Lessor) and at Lessee's own cost and
expense, shall maintain (1) insurance against all risks of physical loss or
damage to the Equipment (including theft and collision for Equipment consisting
of motor vehicles) in an amount not less than the full replacement value thereof
or the Stipulated Loss Value thereof, whichever is greater, and (2) commercial
general liability insurance (including blanket contractual liability coverage
and products liability coverage) for personal and bodily injury and property
damage in an amount satisfactory to Lessor.
(b) All insurance policies required hereunder shall (1) require 30
days' prior written notice of cancellation or material change in coverage to
Lessor (any such cancellation or change, as applicable, not being effective
until the thirtieth (30th) day after the giving of such notice); (2) name
"KeyCorp and its subsidiaries and affiliated companies, including Key Corporate
Capital Inc." as an additional insured under the public liability policies and
name Lessor as sole loss payee under the property insurance policies; (3) not
require contributions from other policies held by Lessor; (4) waive any right of
subrogation against Lessor; (5) in respect of any liability of any of Lessor,
except for the insurers' salvage rights in the event of a Loss or Damage, waive
the right of such insurers to set-off, to counterclaim or to any other
deduction, whether by attachment or otherwise, to the extent of any monies due
Lessor under such policies; (6) not require that Lessor pay or be liable for any
premiums with respect to such insurance covered thereby; (7) be in full force
and effect throughout any geographical areas at any time traversed by any Item
of Equipment; and (8) contain breach of warranty provisions providing that, in
respect of the interests of Lessor in such policies, the insurance shall not be
invalidated by any action or inaction of Lessee or any other person (other than
Lessor) and shall insure Lessor regardless of any breach or violation of any
warranty, declaration or condition contained in such policies by Lessee or by
any other person (other than Lessor). Prior to the first date of delivery of any
Item of Equipment hereunder, and thereafter not less than 15 days prior to the
expiration dates of the expiring policies theretofore delivered pursuant to this
Section, Lessee shall deliver to Lessor a duplicate original of all policies (or
in the case of blanket policies, certificates thereof issued by the insurers
thereunder) for the insurance maintained pursuant to this Section.
18. General Tax Indemnification. Lessee shall pay when due and shall
indemnify and hold Lessor harmless from and against (on an after-tax basis) any
and all taxes, fees, withholdings, levies, imposts, duties, assessments and
charges of any kind and nature (together with interest and penalties
thereon)(including, without limitation, sales, use, gross receipts, personal
property, ad valorem, business and occupational, franchise, value added,
leasing, leasing use, documentary, stamp or other taxes) imposed upon or against
Lessor, Lessor's assigns, Lessee or any Item of Equipment by any Governmental
Authority with respect to any Item of Equipment or the manufacturing, ordering,
sale, purchase, shipment, delivery, acceptance or rejection, ownership, titling,
registration, leasing, subleasing, possession, use, operation, removal, return
or other dispossession thereof or upon the rents, receipts or earnings arising
therefrom or upon or with respect to this Lease, excepting only all Federal,
state and local taxes on or measured by Lessor's net income (other than income
tax resulting from making any alterations, improvements, modifications,
additions, upgrades, attachments, replacements or substitutions by Lessee).
Whenever this Lease terminates as to any Item of Equipment, Lessee shall, upon
written request by Lessor, advance to Lessor the amount determined by Lessor to
be the personal property or other taxes on said item which are not yet payable,
but for which Lessee is responsible, provided Lessor provides Lessee with copies
of tax bills supporting Lessor's request.
19. Lessor's Right to Perform for Lessee. If Lessee fails to perform or
comply with any of its obligations contained herein, Lessor may (but shall not
be obligated to do so) itself perform or comply with such obligations, and the
amount of the reasonable costs and expenses of Lessor incurred in connection
with such performance or compliance, together with interest on such amount at
the Late Payment Rate, shall be payable by Lessee to Lessor upon demand. No such
performance or compliance by Lessor shall be deemed a waiver of the rights and
remedies of Lessor or any assignee of Lessor against Lessee hereunder or be
deemed to cure the default of Lessee hereunder.
20. Delinquent Payments; Interest. If Lessee fails to pay any Rent or
other sums under this Lease when the same becomes due, Lessee shall pay to
Lessor a late charge equal to five percent (5%) of such delinquent amount. Such
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late charge shall be payable by Lessee upon demand by Lessor and shall be deemed
Rent hereunder. In no event shall such late charge exceed the maximum amounts
permitted under Applicable Law.
21. Personal Property; Liens. Lessor and Lessee hereby agree that the
Equipment is, and shall at all times remain, personal property notwithstanding
the fact that any Item of Equipment may now be, or hereafter become, in any
manner affixed or attached to real property or any improvements thereon. Lessee
shall at all times keep the Equipment free and clear from all Liens. Lessee
shall (i) give Lessor immediate written notice of any such Lien, (ii) promptly,
at Lessee's sole cost and expense, take such action as may be necessary to
discharge any such Lien, and (iii) indemnify and hold Lessor, on an after-tax
basis, harmless from and against any loss or damage caused by any such Lien.
22. Events of Default; Remedies. (a) As used herein, the term "Event of
Default" shall mean any of the following events: (1) Lessee fails to pay any
Rent within ten (10) days after the same shall have become due; (2) Lessee or
any Guarantor becomes insolvent or makes an assignment for the benefit of its
creditors; (3) a receiver, trustee, conservator or liquidator of Lessee or any
Guarantor or of all or a substantial part of Lessee's or such Guarantor's assets
is appointed with or without the application or consent of Lessee or such
Guarantor, respectively; (4) a petition is filed by or against Lessee or any
Guarantor under any bankruptcy, insolvency or similar legislation; (5) Lessee or
any Guarantor violates or fails to perform any provision of either this Lease or
any other loan, lease or credit agreement or any acquisition or purchase
agreement with Lessor or any other party; (6) Lessee violates or fails to
perform any covenant or representation made by Lessee herein; (7) any
representation or warranty made herein or in any Lease, certificate, financial
statement or other statement furnished to Lessor shall prove to be false or
misleading in any material respect as of the date on which the same was made;
(8) Lessee makes a bulk transfer of furniture, furnishings, fixtures or other
equipment or inventory; or (9) there is a material adverse change in Lessee's or
any Guarantor's financial condition since the first Rent Commencement Date of
any Equipment Schedule executed in connection herewith. An Event of Default with
respect to any Equipment Schedule hereunder shall, at Lessor's option,
constitute an Event of Default for all Equipment Schedules hereunder and any
other agreements between Lessor and Lessee.
(b) Upon the occurrence of an Event of Default, Lessor may do one
or more of the following as Lessor in its sole discretion shall elect: (1)
proceed by appropriate court action or actions, either at law or in equity, to
enforce performance by Lessee of the applicable covenants of this Lease or to
recover damages for the breach thereof; (2) sell any Item of Equipment at public
or private sale; (3) hold, keep idle or lease to others any Item of Equipment as
Lessor in its sole discretion may determine; (4) by notice in writing to Lessee,
terminate this Lease, without prejudice to any other remedies hereunder; (5)
demand that Lessee, and Lessee shall, upon written demand of Lessor and at
Lessee's expense forthwith return all Items of Equipment to Lessor or its order
in the manner and condition required by, and otherwise in accordance with all of
the provisions of this Lease, except those provisions relating to periods of
notice; (6) enter upon the premises of Lessee or other premises where any Item
of Equipment may be located and, without notice to Lessee and with or without
legal process, take possession of and remove all or any such Items of Equipment
without liability to Lessor by reason of such entry or taking possession, and
without such action constituting a termination of this Lease unless Lessor
notifies Lessee in writing to such effect; (7) by written notice to Lessee
specifying a payment date, demand that Lessee pay to Lessor, and Lessee shall
pay to Lessor, on the payment date specified in such notice, as liquidated
damages for loss of a bargain and not as a penalty, any unpaid Rent due prior to
the payment date specified in such notice plus whichever of the following
amounts Lessor, in its sole discretion, shall specify in such notice (together
with interest on such amount at the Late Payment Rate from the payment date
specified in such notice to the date of actual payment): (i) an amount, with
respect to an Item of Equipment, equal to the Rent payable for such Item of
Equipment for the remainder of the then current Term thereof, after discounting
such Rent to present worth as of the payment date specified in such notice on
the basis of a per annum rate of discount equal to five percent (5%) from the
respective dates upon which such Rent would have been paid had this Lease not
been terminated; or (ii) the Stipulated Loss Value, computed as of the payment
date specified in such notice or, if such payment date is not a Rent Payment
Date, the Rent Payment Date next following the payment date specified in such
notice (provided, however, that, with respect to any Item of Equipment returned
to or repossessed by Lessor, the amount recoverable under this clause (ii) shall
be reduced (but not below zero) by an amount equal to the Fair Market Sales
Value (taking into account its actual condition) of such Item of Equipment; (8)
cause Lessee, at its expense, to promptly assemble any and all Items of
Equipment and return the same to Lessor at such place as Lessor may designate in
8
<PAGE>
writing; and (9) exercise any other right or remedy available to Lessor under
applicable law or proceed by appropriate court action to enforce the terms
hereof or to recover damages for the breach hereof or to rescind this Lease. In
addition, Lessee shall be liable, except as otherwise provided above, for any
and all unpaid Rent due hereunder before or during the exercise of any of the
foregoing remedies, and for legal fees and other costs and expenses incurred by
reason of the occurrence of any Event of Default or the exercise of Lessor's
remedies with respect thereto, including without limitation the repayment in
full of any costs and expenses necessary to be expended in repairing any Item of
Equipment in order to cause it to be in compliance with all maintenance and
regulatory standards imposed by this Lease. If an Event of Default occurs, to
the fullest extent permitted by law, Lessee hereby waives any right to notice of
sale and further waives any defenses, rights, offsets or claims against Lessor
because of the manner or method of sale or disposition of any Items of
Equipment. None of Lessor's rights or remedies hereunder are intended to be
exclusive of, but each shall be cumulative and in addition to any other right or
remedy referred to hereunder or otherwise available to Lessor or its assigns at
law or in equity. No express or implied waiver by Lessor of any Event of Default
shall constitute a waiver of any other Event of Default or a waiver of any of
Lessor's rights.
23. Notices. All notices and other communications hereunder shall be in
writing and shall be transmitted by hand, overnight courier or certified mail
(return receipt requested), postage prepaid. Such notices and other
communications shall be addressed to the respective party at the address set
forth above or at such other address as any party may from time to time
designate by notice duly given in accordance with this Section. Such notices and
other communications shall be effective upon receipt.
24. General Indemnification. Lessee shall pay, and shall indemnify and
hold Lessor harmless on an after-tax basis from and against, any and all
liabilities, causes of action, claims, suits, penalties, damages, losses, costs
or expenses (including attorneys' fees), obligations, liabilities, demands and
judgments, and Liens, of any nature whatsoever (collectively, a "Liability")
arising out of or in any way related to: (a) this Lease or any other written
agreement entered into in connection with the transactions contemplated hereby
and thereby (including, without limitation, a Purchase Agreement, if any) or any
amendment, waiver or modification of any of the foregoing or the enforcement of
any of the terms hereof or any of the foregoing, (b) the manufacture, purchase,
ownership, selection, acceptance, rejection, possession, lease, sublease,
operation, use, maintenance, documenting, inspection, control, loss, damage,
destruction, removal, storage, surrender, sale, use, condition, delivery,
nondelivery, return or other disposition of or any other matter relating to any
Item of Equipment or any part or portion thereof (including, in each case and
without limitation, latent or other defects, whether or not discoverable, any
claim for patent, trademark or copyright infringement and any and all
Liabilities in any way relating to or arising out of injury to persons,
properties or the environment or any and all Liabilities based on strict
liability in tort, negligence, breach of warranties or violations of any
regulatory law or requirement, (c) a failure to comply fully with any
Environmental Law with respect to the Equipment or its operation or use, and (d)
Lessee's failure to perform any covenant, or breach of any representation or
warranty, hereunder; provided, that the foregoing indemnity shall not extend to
the Liabilities to the extent resulting solely from the gross negligence or
willful misconduct of Lessor. Lessee shall deliver promptly to Lessor (i) copies
of any documents received from the United States Environmental Protection Agency
or any state, county or municipal environmental or health agency and (ii) copies
of any documents submitted by Lessee or any of its subsidiaries to the United
States Environmental Protection Agency or any state, county or municipal
environmental or health agency concerning the Equipment or its operation.
25. Severability; Captions. Any provision of this Lease or any
Equipment Schedule which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability shall not invalidate or render
unenforceable such provision in any other jurisdiction. Captions are intended
for convenience or reference only, and shall not be construed to define, limit
or describe the scope or intent of any provisions hereof.
26. Lessor's Expense. Lessee shall pay all costs and expenses of
Lessor, including attorneys' fees and the fees of any collection agencies,
incurred by Lessor in enforcing any of the terms, conditions or provisions
hereof or in protecting Lessor's rights hereunder.
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<PAGE>
27. Related Equipment Schedules. In the event that any Item of
Equipment covered under any Equipment Schedule hereunder may become attached or
affixed to, or used in connection with, Equipment covered under another
Equipment Schedule hereunder (a "Related Equipment Schedule"), Lessee agrees
that, if Lessee elects to exercise a purchase or renewal option under any such
Equipment Schedule, or if Lessee elects to return the Equipment under any such
Equipment Schedule pursuant to Section 13 hereof, then Lessor, in its sole
discretion, may require that all Equipment leased under all Related Equipment
Schedules be similarly disposed of.
28. Financial and Other Data. During the Term hereof, Lessee shall
furnish Lessor, as soon as available and in any event within 60 days after the
end of each quarterly period (except the last) of each fiscal year, and, as soon
as available and in any event within 120 days after the last day of each fiscal
year, financial statements of Lessee and each Guarantor, in each case certified
by an independent public accountant if customarily available or requested.
Lessee shall also furnish such other financial reports, information or data as
Lessor may reasonably request from time to time.
29. Commitment Fee Requirement. An amount equal to the first periodic
Payment of rent must accompany each lessee proposal for an equipment schedule
hereunder. This commitment fee is non-refundable; provided, however, that, upon
Lessor's acceptance of Lessee's proposal to enter into such Equipment Schedule,
such commitment fee shall be applied to the first periodic payment of Rent
thereunder.
30. No Affiliation with the Supplier. Lessee hereby represents and
warrants to Lessor that, except as previously disclosed in writing to Lessor,
neither Lessee nor any of its officers or directors (if a corporation) or
partners (if a partnership) has, directly or indirectly, any financial interest
in the Supplier.
31. Representations and Warranties of Lessee. Lessee represents and
warrants that: (a) Lessee is a corporation duly organized and validly existing
in good standing under the laws of the state of its incorporation; (b) the
execution, delivery and performance of this Lease and all related instruments
and documents: (1) have been duly authorized by all necessary corporate action
on the part of Lessee, (2) do not require the approval of any stockholder,
partner, trustee, or holder of any obligations of Lessee except such as have
been duly obtained, and (3) do not and will not contravene any law, governmental
rule, regulation or order now binding on Lessee, or the charter or by-laws of
Lessee, or contravene the provisions of, or constitute a default under, or
result in the creation of any lien or encumbrance upon the property of Lessee
under, any indenture, mortgage, contract or other agreement to which Lessee is a
party or by which it or its property is bound; (c) this Lease and all related
instruments and documents, when entered into, will constitute legal, valid and
binding obligations of Lessee enforceable against Lessee in accordance with the
terms thereof; (d) there are no pending actions or proceedings to which Lessee
is a party, and there are no other pending or threatened actions or proceedings
of which Lessee has knowledge, before any court, arbitrator or administrative
agency, which, either individually or in the aggregate, would adversely affect
the financial condition of Lessee, or the ability of Lessee to perform its
obligations hereunder; (e) Lessee is not in default under any obligation for the
payment of borrowed money, for the deferred purchase price of property or for
the payment of any rent under any lease agreement which, either individually or
in the aggregate, would have the same such effect; (f) under the laws of the
state(s) in which the Equipment is to be located, the Equipment consists solely
of personal property and not fixtures; (g) the financial statements of Lessee
(copies of which have been furnished to Lessor) have been prepared in accordance
with generally acceptable accounting principles consistently applied ("GAAP"),
and fairly present Lessee's financial condition and the results of its
operations as of the date of and for the period covered by such statements, and
since the date of such statements there has been no material adverse change in
such conditions or operations; (h) the address stated above is the chief place
of business and chief executive office, or in the case of individuals, the
primary residence, of Lessee; (i) Lessee does not conduct business under a
trade, assumed or fictitious name; and (j) the Equipment is being leased
hereunder solely for business purposes and that no item of Equipment will be
used for personal, family or household purposes.
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<PAGE>
32. Renewal And Purchase Options. With respect to an Equipment Schedule
and the Equipment Group set forth thereon, Lessee shall have the purchase and
renewal options set forth in such Equipment Schedule.
33. Lessee's Waivers. To the extent permitted by Applicable Law, Lessee
hereby waives (a) any and all rights and remedies which it may now have or which
at any time hereafter may be conferred upon it by statute (including, without
limitation, Article 2A of the Uniform Commercial Code, as applicable) or
otherwise, (1) which may limit or modify Lessor's rights or remedies hereunder,
(2) to terminate, cancel, quit, repudiate or surrender this Lease, except as
expressly provided herein; (3) to reject, revoke acceptance or accept partial
delivery of the Equipment; (4) to recover damages from Lessor for any breach of
warranty or for any other reason provided, however, that no such waiver shall
preclude Lessee from asserting any such claim against Lessor in a separate cause
of action; or (5) to setoff or deduct all or any part of any claimed damages
resulting from Lessor's default, if any, under this Lease.
34. Ucc filings. Lessee hereby appoints lessor or its assignee as its
true and lawful attorney in fact, irrevocably and coupled with an interest, to
execute and file on behalf of lessee all ucc financing statements which in
lessor's sole discretion are necessary or proper to secure lessor's interest in
the equipment in all applicable jurisdictions.
35. Miscellaneous. Time is of the essence with respect to this Lease.
Any failure of Lessor to require strict performance by Lessee or any waiver by
Lessor of any provision herein shall not be construed as a consent or waiver of
any provision of this Lease. Neither this Lease nor any Equipment Schedule may
be amended except by a writing signed by Lessor and Lessee. This Lease and each
Equipment Schedule shall be binding upon, and inure to the benefit of, the
parties hereto, their permitted successors and assigns. This Lease will be
binding upon Lessor only if executed by a duly authorized officer or
representative of Lessor at Lessor's address set forth above. This Lease, and
all other documents (the execution and delivery of which by Lessee is
contemplated hereunder), shall be executed on Lessee's behalf by Authorized
Signers of lessee. This lease is being delivered in the state of new york and
shall be governed by, and construed in accordance with, the laws of the state of
new york, including all matters of construction, validity and performance.
36. Jury trial waiver. Lessor and lessee hereby waive trial by jury in
any action or proceeding to which lessor or lessee may be parties arising out of
or in any way pertaining to this lease. This waiver is made knowingly, willingly
and voluntarily by the lessor and the lessee who each acknowledge that no
representations have been made by any individual to induce this waiver of trial
by jury or in any way to modify or nullify its effect.
37. More than One Lessee. If more than one person or entity executes
this Lease, each Equipment Schedule, and all addenda or other documents executed
in connection herewith or therewith, as "Lessee," the obligations of "Lessee"
contained herein and therein shall be deemed joint and several and all
references to "Lessee" shall apply both individually and jointly.
38. Quiet Enjoyment. So long as no Event of Default has occurred and is
continuing, Lessee shall peaceably hold and quietly enjoy the Equipment without
interruption by Lessor or any person or entity claiming through Lessor.
39. Entire Agreement. This Lease, together with all Equipment
Schedules, riders and addenda executed by Lessor and Lessee collectively
constitute the entire understanding or agreement between Lessor and Lessee with
respect to the leasing of the Equipment, and there is no understanding or
agreement, oral or written, which is not set forth herein or therein. By
initialing below, Lessee hereby further acknowledges the conditions of this
Section 39.
Lessee's Initials:_______
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40. Execution in Counterparts. This Master Equipment Lease Agreement
may be executed in several counterparts, each of which shall be an original and
all of which shall constitute but one and the same instrument.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease as of
the day and year first above written.
<TABLE>
<CAPTION>
Lessor: Lessee:
<S> <C>
KEYCORP LEASING, SAFETY COMPONENTS INTERNATIONAL, INC.
A DIVISION OF KEY CORPORATE CAPITAL INC.
By: ________________________________________ By: _____________________________________
Name: Name:
Title: Title:
</TABLE>
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<PAGE>
Equipment Schedule No. 01
EQUIPMENT SCHEDULE NO. 01 dated as of July 10, 1998 (this "Schedule")
between KEYCORP LEASING, A DIVISION OF KEY CORPORATE CAPITAL INC. ("Lessor"),
and SAFETY COMPONENTS INTERNATIONAL, INC., a Delaware corporation ("Lessee").
I N T R O D U C T I O N :
Lessor and Lessee have heretofore entered into that certain Master
Equipment Lease Agreement dated as of June 2, 1998 (the "Master Lease"; the
Master Lease and this Schedule hereinafter collectively referred to as, this
"Lease"). Unless otherwise defined herein, capitalized terms used herein shall
have the meanings specified in the Master Lease. The Master Lease provides for
the execution and delivery of a Schedule substantially in the form hereof for
the purpose of confirming the acceptance and lease of the Equipment under this
Lease as and when delivered by Lessor to Lessee in accordance with the terms
thereof and hereof.
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. EQUIPMENT. Pursuant to the terms and conditions of this Lease,
Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the
equipment listed on Exhibit A attached hereto (the "Equipment"). The aggregate
Total Cost of such Equipment is $10,000,000.00.
2. TERM. The Initial Term of this Lease with respect to the Equipment
described on this Schedule shall commence on the date on which such Equipment is
delivered to Lessee, and, unless earlier terminated as provided herein, shall
expire on a date which is eighty four (84) months after the Rent Commencement
Date (the "Initial Term Expiration Date").
3. RENT PAYMENT DATES; RENT. (a) The Rent set forth in Section 3(b)(ii)
hereof shall be adjusted (pursuant to Section 3(c) hereof) with each change in
the Actual Index (as hereinafter defined).
(b) Lessee hereby agrees to pay Rent for the Equipment as follows:
(i) For the period commencing on the Interim Rent Commencement
Date (as defined below) and ending on the day before the Rent
Commencement Date, Lessee shall pay Interim Rent in an amount equal to
$ $5,015.64 per day, and agrees that with respect to the Equipment
described on this Schedule, the following modifications are hereby
made to the Master Lease: (a) "Rent Commencement Date" shall mean,
with respect to an Equipment Group, the first (1st) day of October,
(b) "Interim Rent Commencement Date" shall mean, with respect to an
Equipment Group, the date on which Lessor disburses funds for the
purchase of such Equipment Group, as determined by Lessor in its sole
discretion, (c) Section 6 of the Master Lease ("Ordering Equipment")
is hereby amended to delete the term "Rent Commencement Date" and to
substitute the term "Interim Rent Commencement Date" in its place and
(d) Section 22(a)(9) of the Master Lease ("Events of Default;
Remedies") is hereby amended to delete the term "Rent Commencement
Date" and to substitute the phrase "Rent Commencement Date or Interim
Rent Commencement Date, as the case may be," in its place.
(ii) Throughout the Initial Term in eighty four(84)consecutive
monthly installments payable in arrears commencing on the first day of
the second month following the Rent Commencement Date and on the same
day each month thereafter (each, a "Rent Payment Date"). Each such
installment of Rent shall be in an amount equal to $150,469.20.
(c) Lessee and Lessor agree that each Rent payment (other than Interim
Rent Payments) hereunder shall be increased or decreased (but not below zero),
as the case may be, by the Rent Differential (as hereinafter defined) as
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<PAGE>
follows: if, as of any Rent Payment Date, (i) the Rent Differential is greater
than zero, the amount of Rent due on such Rent Payment Date shall be increased
by such Rent Differential, and (ii) the Rent Differential is less than zero, the
amount of Rent due on such Rent Payment Date shall be decreased by such Rent
Differential.
(d) As used herein, the following terms shall have the respective
meanings indicated below:
(i) "Assumed Index" shall mean five and six thousand five hundred
sixty three ten thousandths percent (5.6563%).
(ii) "Actual Index" shall mean, as of the date of determination,
the London interbank offered rate for deposits in United States
dollars having a maturity of one month which appears in the "Money
Rates" section of The Wall Street Journal, published on the business
day on, or immediately prior to, the 28th day of the month immediately
preceding such calendar month. If the Actual Index is no longer
available, Lessor will choose a new index which is based upon
comparable information and will give Lessee notice of such new "Actual
Index."
(iii) "Daily Equivalent" shall mean, as of the date of determination,
the product of the following formula:
Daily Equivalent = Actual Index - Assumed Index X Net Investment Balance
----------------------------
360
(iv) "Net Investment Balance" shall mean, as of the date of
determination, the outstanding balance (initially calculated using the
Assumed Index (plus one hundred twenty five (125) basis points)
reflected on Lessor's lease accounting system (which assumes a 360 day
year consisting of twelve 30 day months), for the Rent Payment Date
immediately preceding such day or, if such day is a Rent Payment Date,
for such Rent Payment Date.
(v) "Rent Differential" shall mean, with respect to any Rent
Payment Date, the sum of all Daily Equivalents (calculated on the
basis of a 360 day year consisting of twelve 30 day months) for the 30
day month to which such Rent Payment Date relates
4. EQUIPMENT LOCATION; BILLING ADDRESS. The Equipment described on this
Schedule shall be located at, and except as otherwise provided in this Lease,
shall not be removed from, the following address: 40 Emory St., Greenville, SC
29605. The billing address of Lessee is as follows: SAFETY COMPONENTS
INTERNATIONAL, INC., 2160 N. Central Road, Fort Lee, NJ 07024.
5. LESSEE'S PURCHASE AND RENEWAL OPTIONS. Lessee shall have the
purchase and renewal options set forth on the End of Lease Options Addendum
attached hereto and made a part hereof.
6. STIPULATED LOSS VALUE. There are no Stipulated Loss Values or
Stipulated Loss Value Supplements applicable to the Equipment described on this
Schedule.
7. SECURITY AGREEMENT. To secure the prompt payment and performance as
and when due of all obligations and indebtedness of Lessee, now existing or
hereafter created, to Lessor pursuant to this Lease or otherwise, Lessee hereby
grants to Lessor a security interest in the Equipment and all accessions,
substitutions and replacements thereto and therefor, and proceeds (cash and
non-cash), including, without limitation, insurance proceeds thereof (but
without power of sale). In furtherance of the foregoing, Lessee shall execute
and deliver to Lessor, to be recorded at Lessee's expense, Uniform Commercial
Code financing statements, statements of amendment and statements of
continuation as reasonably may be required by Lessor to perfect and maintain
perfected the security interest granted by Lessee herein.
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<PAGE>
8. MODIFICATIONS TO MASTER LEASE. In addition to the modifications set
forth in Section 5 hereof, with respect to the Equipment described on this
Schedule, the Master Lease shall be modified as follows:
(a) The following shall be inserted as the penultimate
sentence of Section 11 of the Master Lease ("Use; Alterations"):
All such alterations, additions, modifications or improvements
immediately, and without further act, shall be deemed to constitute Items of
Equipment and be fully subject to this Lease as if originally leased hereunder.
(b) The following shall be inserted as the penultimate
sentence of Section 12 of the Master Lease ("Repairs and Maintenance"):
Upon installation, attachment or incorporation in, on or into
such Item of Equipment, such replacement part immediately, and without further
act, shall be deemed to constitute an Item of Equipment and be fully subject to
this Lease as if originally leased hereunder.
(c) Section 16(b) of the Master Lease ("Loss of or Damage to
Equipment") is hereby amended to delete subsection "(3)" and substitute the
following in its place:
(3) pay to Lessor an amount, with respect to such Item of
Equipment, equal to the Rent payable for such Item of Equipment for the
remainder of the Term, after discounting such Rent to present worth on the basis
of a per annum rate of discount equal to five percent (5%) from the respective
dates upon which such Rent would have been paid had the Loss or Damage not
occurred.
(d) Section 16(b) of the Master Lease ("Loss of or Damage to
Equipment") is hereby amended to delete the second to last sentence and
substitute the following in its place:
If Lessee replaces the Item of Equipment pursuant to
subsection (b) above, such replacement equipment shall
immediately (and without further act) be deemed to constitute
Items of Equipment and be fully subject to this Lease as if
originally leased hereunder.
(e) Section 17(a) of the Master Lease ("Insurance") is hereby
amended to delete subsection "(1)" and substitute the following in its place:
(1) insurance against all risks of physical loss or damage to
the Equipment (including theft and collision for Equipment
consisting of motor vehicles) in an amount not less than the
full replacement value thereof.
(f) As used in Section 22(a) of the Master Lease ("Events of
Default"), the term "Event of Default" shall also mean any of the following
events: (1) a change in control occurs in Lessee or any Guarantor; or (2) the
death or dissolution of Lessee or any Guarantor.
(g) Section 22(b) of the Master Lease ("Events of Default") is
hereby amended to delete subsection "(7)" and substitute the following in its
place:
(7) by written notice to Lessee specifying a payment date, may
demand that Lessee pay to Lessor, and Lessee shall pay to
Lessor, on the payment date specified in such notice, as
liquidated damages for loss of a bargain and not as a penalty,
any unpaid Rent due prior to the payment date specified in
such notice plus the following amount which Lessor shall
specify in such notice (together with interest on such amount
at the Late Payment Rate from the payment date specified in
such notice to the date of actual payment): an amount, with
respect to an Item of Equipment, equal to the Rent payable for
such Item of Equipment for the remainder of the then current
Term thereof, after discounting such Rent to present worth as
of the payment date specified in such notice on the basis of a
per annum rate of discount equal to five percent (5%) from the
respective dates upon which such Rent would have been paid had
this Lease not been canceled or terminated.
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<PAGE>
(h) Section 22(b) of the Master Lease ("Events of Default") is
hereby amended as follows: (1) with respect to Section 22(b)(4), the word
"terminate" is hereby deleted and the words "cancel or terminate" are hereby
substituted in its place; and (2) with respect to Section 22(b)(6), the word
"termination" is hereby deleted and the words "cancellation or termination" are
hereby substituted in its place.
9. GOVERNING LAW. This Schedule is being delivered in the State of New
York and shall in all respects be governed by, and construed in accordance with,
the laws of the State of New York, including all matters of construction,
validity and performance.
10. COUNTERPARTS. This Schedule may be executed in any number of
counterparts, each executed counterpart constituting an original but all
together one and the same instrument.
11. PERSONAL PROPERTY TAX. (a) Lessee recognizes that, pursuant to
Section 18 of the Master Lease, it is Lessee's responsibility to include, if
required by Applicable Law, all equipment financed under this Lease in Lessee's
personal property tax returns and, if necessary, to pay any resulting property
tax bills. Lessor and Lessee acknowledge that personal property tax policies
vary from state to state and that, where uncertainty exists as to a particular
state's policies, Lessee shall contact its attorneys or financial advisors (who
may be familiar with such state's personal property tax policy) for advice. It
is expressly acknowledged by Lessee that Lessor has made no warranties,
statements or representations as to such personal property tax matters, and
Lessee hereby disclaims any reliance on any such warranties, statements or
representations made by Lessor with respect thereto.
(b) Unless otherwise directed in writing by Lessor or otherwise
required by law, Lessee will list itself as owner of all Items of Equipment for
property tax purposes. Except in those jurisdictions in which Lessor is required
to list itself as owner of all such Items of Equipment, upon receipt by Lessee
of any property tax bill pertaining to such Items of Equipment from the
appropriate taxing authority, Lessee will promptly pay all such taxes when due.
In those jurisdictions in which Lessor is required to list itself as owner of
all such Items of Equipment, upon receipt by Lessee of any property tax bill
pertaining to such Items of Equipment, Lessee will promptly forward to Lessor
such property tax bill and related payment. Upon receipt by Lessor of any such
property tax bill and related payment, Lessor will pay such tax.
12. ADDITIONAL ADDENDA. In addition to the End of Lease Options
Addendum, please see the following addenda to this Schedule, attached hereto and
made a part hereof, for additional terms and conditions governing the leasing of
the Equipment described on this Schedule: Memorandum of Lease and Security
Agreement.
13. MORE THAN ONE LESSEE. If more than one person or entity executes
this Schedule, and all addenda or other documents executed in connection
herewith, as "Lessee," the obligations of "Lessee" contained herein and therein
shall be deemed joint and several and all references to "Lessee" shall apply
both individually and jointly.
14. RELATIONSHIP TO MASTER LEASE; FURTHER ASSURANCES. This Schedule
shall be construed in connection with and as part of the Lease, and all terms
and conditions contained in the Master Lease are hereby incorporated herein by
reference with the same force and effect as if such terms and conditions were
fully stated herein. By execution of this Schedule, Lessee and Lessor reaffirm
all terms and conditions of the Master Lease except as they may be modified
hereby. To the extent that any of the terms and conditions of this Schedule are
contrary to or inconsistent with any terms and conditions of the Master Lease,
the terms And conditions of this schedule shall govern. Lessee hereby certifies
to lessor that the representations and warranties made by lessee in the master
lease (including, without limitation, section 31 thereof) are true and correct
in all material respects as of the date of this schedule with the same effect as
though made on and as of such date. Lessee shall take such additional actions
16
<PAGE>
and execute and deliver such additional documents as lessor shall deem necessary
from time to time to effectuate the terms of the lease.
IN WITNESS WHEREOF, Lessor and Lessee have caused this Schedule to be
duly executed and delivered on the day and year first above written.
<TABLE>
<CAPTION>
Lessor: Lessee:
<S> <C>
KEYCORP LEASING, SAFETY COMPONENTS INTERNATIONAL, INC.
A DIVISION OF KEY CORPORATE CAPITAL INC.
By: ________________________________________ By: _____________________________________
Name: Name:
Title: Title:
</TABLE>
Counterpart no. 1 Of 1 serially numbered manually executed counterparts. To the
extent that this document constitutes chattel paper under the uniform commercial
code, no security interest may be created through the transfer and possession of
any counterpart other than counterpart no. 1.
17
<PAGE>
Exhibit A
(EQUIPMENT DESCRIPTION)
Lease: Equipment Schedule No. 01 dated as of July 10, 1998 to Master
Equipment Lease Agreement Dated as of July 10, 1998
Lessor: KEYCORP LEASING, A DIVISION OF KEY CORPORATE CAPITAL INC.
Lessee: SAFETY COMPONENTS INTERNATIONAL, INC.
QTY EQUIPMENT DESCRIPTION
- --- ---------------------
7 DORNIER RAPIER WEAVING MACHINES
TYPE: HTV4 / SD
WIDTH: 200CM
WITH: STAUBLI MECHANICAL DOBBY, TYPE 2237/S
12 SHAFTS INSTALLED
GROB 6 BANK DROPPER BOX, ELTEX ELECTRONIC WEFT MONITORING
THERMO CUTTERS, SAVI-TECH FILLING FEEDER, MECHANICAL LET-OFF
800 LOOM BEAMS, DROP WIRES, HARNESS FRAMES WITH HEDDLES
AMD REED, ALEXCO OFF-LOOM TAKE-UP CENTER WIND
LOEPFE-MILL MASTER LOOM MONITORING SYSTEM
VOLTAGE: 480V/3/60
YEAR: 1989
50 DORNIER RAPIER WEAVING MACHINES
TYPE: HTV5/SD
WIDTH: 230 CM
WITH: STAUBLI ELECTRONIC DOBBY, TYPE 2667
GROB 6 BANK DROPPER BOX, ELTEX ELECTRONIC WEFT MONITORING
THERMO CUTTERS, SAVI-TECH FILLING FEEDERS, ELECTRONIC LET-OFF
HI-MOUNT STANDS FOR 1,000 MM LOOM BEAM, DROP WIRES
HARNESS FRAMES WITH HEDDLES AND REED, ALEXCO OFF-LOOM
TAKE -UP
LOEPFE "MILL MASTER" LOOM MONITORING SYSTEM
VOLTAGE: 480/3/60
YEAR: 12- 1989 -20 SHAFT DOBBY
10- 1991 -12 SHAFT DOBBY
28- 1992 -12 SHAFT DOBBY
58 DORNIER RAPIER WEAVING MACHINES
TYPE: STV4/SD
WIDTH: 230 CM
WITH: STAUBLI ELECTRONIC DOBBY, TYPE 2117, WITH 8 SHAFTS
GROB 6 BANK DROPPER BOX, ELTEX ELECTRONIC WEFT MONITORING
THERMO CUTTERS, SAVI-TECH FILLING FEEDERS, ELECTRONIC LET-OFF
HI-MOUNT STANDS FOR 1,000 MM LOOM BEAM DROP WIRES
18
<PAGE>
HARNESS FRAME WITH HEDDLES AND REED, ALEXCO OFF-LOOM
TAKE-UP
LOEPFE "MILL MASTER" LOOM MONITORING SYSTEM
VOLTAGE: 480/3/60
YEAR: 34- 1993
24- 1994
30 DORNIER RAPIER WEAVING MACHINES
TYPE: HTVS4/SD- 12
WIDTH: 210 CM
WITH: STAUBLE ELECTRONIC DOBBY, TYPE 2667/RS WITH 12 SHAFTS
GROB 6 BANK DROPPER BOX, ELTEX ELECTRONIC WEFT MONITORING
THERMO CUTTERS, SAVI-TECH FILLING FEEDERS, ELECTRONIC LET-OFF
HI-MOUNT STANDS FOR 1,000 MM LOOM BEAM, DROP WIRES
HARNESS FRAME WITH HEDDLES AND REED, ALEXCO OFF-LOOM
TAKE UP
LOEPFE "MILL MASTER" LOOM MONITORING SYSTEM
VOLTAGE: 480V/3/60
YEAR: 1995
26 DORNIER RAPIER WEAVING MACHINES
TYPE: HTVS4/SD
WIDTH: 240 CM
WITH: STAUBLI ELECTRONIC DOBBY, TYPE 2667 WITH 12 SHAFTS
GROB 6 BANK DROPPER BOX, ELTEX ELECTRONIC WEFT MONITORING
THERMO CUTTERS, SAVI-TECH FILLING FEEDERS, ELECTRONIC LET-OFF
HI-MOUNT STANDS FOR 1,000 MM LOOM BEAM, DROP WIRES
HARNESS FRAMES WITH HEDDLES AND REED. ALEXCO OFF-LOOM
TAKE-UP
LOEPFE "MILL MASTER" MONITORING SYSTEM
VOLTAGE: 480V/3/60
YEAR: 1994
18 DORNIER RAPIER WEAVING MACHINES
TYPE: HTVS4/SD24
WIDTH: 220 CM
WITH:(4) COLOR STAUBLI ELECTRONIC DOBBY, TYPE 2660 WITH 28 SHAFTS
GROB 6 BANK DROPPER BOX, ELTEX ELECTRONIC WEFT MONITORING
THERMO CUTTERS, SAVI-TECH FILLING FEEDERS, ELECTRONIC LET-OFF
800 MM LOOM BEAMS, DROP WIRES, HARNESS FRAMES WITH HEDDLES
AND REED, ALEXCO OFF-LOOM TAKE-UP
LOEPFE "MILL MASTER" LOOM MONITORING SYSTEM
VOLTAGE: 480V/3/60
YEAR: 1994
S/N 'S 35005, 35006, 35007, 35008, 35009, 35010, 35011, 35012,
35013, 35014, 35015, 35016, 35017, 35018, 35019, 35020, 35021,
35022
1 SCOURING RANGE, GREENVILLE MACHINERY, YEAR 1993, 98" WIDE WITH:
(1) SCRAY AND RAILWAY SEWING
(4) SCOURING AND RINSING BOXES, 7 ROLLS ON BOTTOM, NIPS
(1) VACUUM PUMP, 75HP, 7V SLOTS
(1) "S" FRAME BATCHER, D/C
(1) RANGE DRIVE
(4) MIX TANKS, 500 GAL., STEAM JACKETED
19
<PAGE>
1 TENTER DRYING RANGE, 95" WIDE, YEAR 1993, WITH:
(1) "A" FRAME UNWIND
(1) GUIDED UNROLL, CENTER SHAFT
(1) COMPENSATOR AND PULL ROLL
(1) "WEFTROL" WEFT STRAIGHTENER
(1) PAD, 20" ROLLS, RUBBER/STAINLESS
(1) M&W TENTER, COMBINATION CLIP AND PIN, HORIZONTAL RETURN, GAS
FIRED, 90' HOUSE, 4 PENTHOUSES, 120" TENTER
(1) PULL ROLL AND COMPENSATOR
(1) ACCUMULATOR, 24 ROLLS ON TOP
(1) PULL ROLL
(1) "A" FRAME BATCHER
(1) RANGE DRIVE
1 KLEINWEFERS SCOURING RANGE, YEAR 1998, 110" WIDE, WITH:
(1) "A" FRAME LET-OFF
(1) CENTERWIND LET-OFF AND TENSION ROLLS, RAILWAY SEWING
(MERROW)
(1) SPREADER ROLL
(1) DRY VACUUM FABRIC CLEANING UNIT WITH OSPREY COLLECTOR,
15HP
(1) SCOURING AND RINSING BOXES WITH NIPS
(1) VACUUM PUMP, 100 HP WITH 6 VACUUM SLOTS
(1) "A" FRAME BATCHER D/C
(1) RANGE DRIVE
1 DOUBLE LET-OFF
1 PULL ROLL ASSEMBLY
1 SEWING SYSTEM
1 SKYWING ASSEMBLY WITH COMPENSATOR AND GUIDERS
1 VACUUM SYSTEM FOR LINT REMOVAL
1 ENCLOSED 21 YARD SINGLE LACED SATURATOR
6 ENCLOSED 21 YARD SINGLE LACED WASHERS
1 VACUUM EXTRACTION SYSTEM
1 "A" FRAME SURFACE BATCHER
1 600 GALLON TANK WITH MIXER
1 AC RANGE DRIVE
1 LOT OF CONNECTING EQUIPMENT
1 FLOW CONTROL SYSTEM FOR WATER
1 FLOW MONITOR SYSTEM FOR CHEMICAL
1 CHEMICAL SPIKE TANK
1 PIPING FOR SPIKE TANK
1 DRAIN HEADER FOR SCOURING RANGE
1 PIPING TO 600 GALLON MIX TANK
20
<PAGE>
Certificate Of Secretary
Of
SAFETY COMPONENTS INTERNATIONAL, INC.
I, __________________________, the duly elected and qualified Secretary
of SAFETY COMPONENTS INTERNATIONAL, INC., (the "Corporation"), do hereby
certify:
a. That attached hereto as Exhibit A are complete and correct copies of
resolutions adopted by the Board of Directors of the Corporation, authorizing
the actions referred to therein; said resolutions constitute all of the
resolutions adopted by such Board of Directors relating to such matters; such
resolutions have not been in any way modified, amended, annulled, rescinded or
revoked and are in full force and effect as of the date hereof; and
b. The persons listed in Exhibit B attached hereto are duly qualified
and acting officers of the Corporation, holding on the date hereof the offices
set forth opposite their names and the signatures appearing opposite their names
are the genuine signatures of such officers.
IN WITNESS WHEREOF, I have hereunto signed my name this day of
_______________, 19____.
_______________________________
Secretary
21
<PAGE>
Exhibit A
RESOLUTION OF THE BOARD OF DIRECTORS OF
SAFETY COMPONENTS INTERNATIONAL, INC.
DATED ___________, 19___
WHEREAS, the Board of Directors of SAFETY COMPONENTS INTERNATIONAL,
INC. (the "Corporation") desire that the Corporation enter into an equipment
leasing transaction with KeyCorp Leasing, a Division of Key Corporate Capital
Inc. ("KCL") as lessor, for the purpose of leasing the equipment (the
"Equipment") described in a Master Equipment Lease Agreement and various
equipment schedules and other documents (including, without limitation, interim
funding documents and bills of sale) from time to time entered into with respect
thereto (collectively, the "Lease");
NOW, THEREFORE, BE IT RESOLVED, that (i) the execution and delivery of
the Lease by the Corporation and the financing of the acquisition of the
Equipment are hereby authorized, approved, ratified and confirmed in all
respects, (ii) if the Corporation owns the Equipment, the sale of the Equipment
to KCL is hereby authorized, approved, ratified and confirmed in all respects,
and (iii) the Corporation hereby is, and the Authorized Officers (as defined
below) hereby are, authorized and empowered to negotiate and enter into the
Lease and such other documents, (including, without limitation, interim funding
documents and bills of sale) as may be necessary, advisable, or proper in
connection with the above transaction, and be it;
FURTHER RESOLVED, that _____________________________, the
________________________ of the Corporation, and _____________________________,
the _____________________________ of the Corporation (herein the "Authorized
Officers") be, and hereby are, authorized to execute and deliver the Lease and
any and all certificates, documents, instruments or other papers as may be
necessary or desirable in order to consummate the transactions therein
contemplated, and that all actions heretofore taken or taken hereinafter by the
Authorized Officers in furtherance of the actions herein authorized are
ratified, confirmed, adopted and approved in all respects.
22
<PAGE>
<TABLE>
<CAPTION>
Exhibit B
INCUMBENCY CERTIFICATE
<S> <C> <C>
Name: Office: Signature:
- ------------------------- ------------------------- -------------------------
- ------------------------- ------------------------- -------------------------
- ------------------------- ------------------------- -------------------------
- ------------------------- ------------------------- -------------------------
- ------------------------- ------------------------- -------------------------
- ------------------------- ------------------------- -------------------------
- ------------------------- ------------------------- -------------------------
- ------------------------- ------------------------- -------------------------
</TABLE>
23
<PAGE>
This is a certificate acknowledging
acceptance of the equipment for
purposes of the below-referenced lease.
This is not a delivery receipt.
LESSEE ACKNOWLEDGMENT
(Certificate of Acceptance)
Lessee Name: SAFETY COMPONENTS INTERNATIONAL, INC.
All the items of Equipment covered by Equipment Schedule 01 to Master
Equipment Lease Agreement dated as of July 10, 1998 (the "Lease") between
KeyCorp Leasing, a Division of Key Corporate Capital Inc., as lessor ("KCL"),
and the undersigned, as lessee, (a) were received by the undersigned, (b) are
satisfactory to the undersigned in all respects and are acceptable to the
undersigned for lease under the Lease, (c) are suitable for the undersigned's
purposes, (d) are in good order, repair and condition, (e) have been installed
and operate properly, and (f) are subject to all of the terms and conditions of
the Lease (including, without limitation, Section 3 thereof).
To the extent that Article 2A ("Article 2A") of the Uniform Commercial
Code ("UCC") applies to the characterization of the Lease, the undersigned
hereby agree(s) that the Lease is a "Finance Lease" as defined therein. The
undersigned acknowledge(s): (i) that the undersigned has selected the "Supplier"
(as defined in the UCC) and has directed KCL to purchase the Equipment from the
Supplier in connection with the Lease, and (ii) that the undersigned has been
informed in writing in the Lease, before the undersigned's execution of thereof,
that the undersigned is entitled under Article 2A to the promises and
warranties, including those of any third party, provided to KCL by the Supplier
in connection with or as part of the Purchase Agreement (as defined in the
Lease), and that the undersigned may communicate with the Supplier and receive
an accurate and complete statement of those promises and warranties, including
any disclaimers and limitations of them or of remedies.
Dated: ______________, 19____
SAFETY COMPONENTS INTERNATIONAL, INC.
By: _____________________________________
Name:
Title:
24
<PAGE>
End of Lease Options Addendum
(Dollar Purchase Option)
THIS END OF LEASE OPTIONS ADDENDUM is executed in connection with and
made a part of, Equipment Schedule Number 01 to Master Equipment Lease Agreement
dated as of July 10, 1998 as it relates to such Equipment Schedule
(collectively, the "Lease"). Unless otherwise specified herein, all capitalized
terms shall have the meanings ascribed to them in the Lease. Lessor and Lessee
hereby agree as follows:
LESSEE'S PURCHASE AND RENEWAL OPTIONS. With respect to the Equipment described
on this Schedule, Section 32 of the Master Lease ("Renewal and Purchase
Options") is hereby deleted in its entirety and the following is substituted in
its place:
On the Initial Term Expiration Date, Lessee shall pay to Lessor
an amount equal to $1.00. Upon payment in full by Lessee of all Rent
(and all other sums) payable to Lessor hereunder, Lessor shall release
its interest in the Equipment.
Except as modified hereby, all of the terms, covenants and conditions
of the Lease shall remain in full force and effect and are in all respects
hereby ratified and affirmed.
IN WITNESS WHEREOF, Lessor and Lessee have executed this End of Lease
Options Addendum as of July 10, 1998.
<TABLE>
<CAPTION>
Lessor: Lessee:
<S> <C>
KEYCORP LEASING, SAFETY COMPONENTS INTERNATIONAL, INC.
A DIVISION OF KEY CORPORATE CAPITAL INC.
By: ________________________________________ By: _____________________________________
Name: Name:
Title: Title:
</TABLE>
26
<PAGE>
Interim Rent Addendum - Non-Tax
THIS INTERIM RENT ADDENDUM is executed in connection with and made a
part of, Equipment Schedule Number 01 to Master Equipment Lease Agreement dated
as of June 2, 1998 as it relates to such Equipment Schedule (collectively, the
"Lease"). Unless otherwise specified herein, all capitalized terms shall have
the meanings ascribed to them in the Lease. Lessor and Lessee hereby agree as
follows:
1. MODIFICATIONS TO MASTER LEASE. With respect to the Equipment
described on this Schedule, the following modifications are hereby made to the
Master Lease:
(a) Section 4(z) of the Master Lease ("Definitions") is hereby deleted
in its entirety and the following is substituted in its place:
(z) "Rent Commencement Date" shall mean, with respect to an
Equipment Group, the first (1st) day of the first month following
the date of the Certificate of Acceptance for such Equipment
Group.
(b) Section 4 of the Master Lease ("Definitions") is hereby amended to
add the following definition(s):
"Interim Rent Commencement Date" shall mean, with respect to an
Equipment Group, the date on which Lessor disburses funds for the
purchase of such Equipment Group, as determined by Lessor in its
sole discretion.
(c) Section 6 of the Master Lease ("Ordering Equipment") is hereby
amended to delete the term "Rent Commencement Date" and to substitute the term
"Interim Rent Commencement Date" in its place.
(d) Section 22(a)(9) of the Master Lease ("Events of Default;
Remedies") is hereby amended to delete the term "Rent Commencement Date" and to
substitute the phrase "Rent Commencement Date or Interim Rent Commencement Date,
as the case may be," in its place.
2. INTERIM RENT. Lessee hereby agrees to pay Rent for the period
commencing on the Interim Rent Commencement Date and ending on the day before
the Rent Commencement Date in an amount equal to $4,990.25 per day.
Except as modified hereby, all of the terms, covenants and conditions
of the Lease shall remain in full force and effect and are in all respects
hereby ratified and affirmed.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Interim Rent
Addendum as of June 2, 1998.
<TABLE>
<CAPTION>
Lessor: Lessee:
<S> <C>
KEYCORP LEASING, SAFETY COMPONENTS INTERNATIONAL, INC.
A DIVISION OF KEY CORPORATE CAPITAL INC.
By: ________________________________________ By: _____________________________________
Name: Name:
Title: Title:
</TABLE>
25
<PAGE>
Prepayment Addendum
This Prepayment Addendum is executed in connection with and made a part
of, Equipment Schedule 01, to Master Equipment Lease Agreement dated as of June
2, 1998 as it relates to such Equipment Schedule (collectively, the "Lease").
Unless otherwise specified herein, all capitalized terms shall have the meanings
ascribed to them in the Lease. Lessor and Lessee hereby agree as follows:
So long as no Default or Event of Default shall have occurred and be
continuing and Lessee shall have given Lessor at least ninety (90) days
but not more than one hundred eighty (180) days prior written notice,
Lessee shall have the option to prepay the Lease on any Rent Payment
Date occurring after the date which is twelve (12) months after the
Rent Commencement Date (each, a "Prepayment Date") for an amount (the
"Prepayment Amount") equal to (1) any unpaid Rent and all other amounts
due on or before such Prepayment Date, plus (2) an amount equal to the
Rent payable for the remainder of the Initial Term, after discounting
such future Rent to present worth as of such Prepayment Date on the
basis of a per annum rate of discount equal to year two (2) an amount
equal to four percent (4%), year three (3) an amount equal to three
percent (3%), year four (4) an amount equal to two percent (2%), year
five (5) an amount equal to one percent (1%), and year six (6) and
seven (7) an amount equal to zero percent (0%) from the respective
dates upon which such Rent would have been paid had this Lease not been
prepaid (the "Present Value Future Rents"), plus (3) any applicable
sales taxes. Payment of the Prepayment Amount, together with all other
amounts due and owing by Lessee under the Lease (including, without
limitation, Rent) on or before the Prepayment Date, shall be made on
the Prepayment Date in immediately available funds. Thereafter, upon
Lessee's written request, Lessor shall deliver to Lessee a bill of sale
transferring to Lessee all right, title and interest of Lessor in and
to the Equipment ON AN "AS IS" "WHERE IS" BASIS, WITHOUT ANY
WARRANTIES, EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER. If Lessee
shall fail to pay all amounts required to be paid under the Lease on
the Prepayment Date, the Lease shall continue in full force and effect
and Lessee agrees to reimburse Lessor for all reasonable attorneys
fees, costs, expenses and liabilities incurred in connection therewith.
Except as modified hereby, all of the terms, covenants and conditions
of the Lease shall remain in full force and effect and are in all respects
hereby ratified and affirmed.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Prepayment
Addendum as of July 10, 1998.
<TABLE>
<CAPTION>
Lessor: Lessee:
<S> <C>
KEYCORP LEASING, SAFETY COMPONENTS INTERNATIONAL, INC.
A DIVISION OF KEY CORPORATE CAPITAL INC.
By: ________________________________________ By: _____________________________________
Name: Name:
Title: Title:
</TABLE>
27
<PAGE>
Security Agreement
THIS SECURITY AGREEMENT is made as of July 10, 1998, by SAFETY
COMPONENTS INTERNATIONAL, INC. ("Grantor"), in favor of KEYCORP LEASING. A
DIVISION OF KEY CORPORATE CAPITAL INC. ("KCL").
RECITALS
A. KCL and Grantor entered into that certain Master Equipment Lease
Agreement dated as of July 10, 1998. Said Master Equipment Lease Agreement,
together with all Equipment Schedules executed from time to time in connection
therewith (the "Leases"). The Leases, together with all Addenda, Amendments and
related documents are hereinafter collectively referred to as the "Lease
Documents".
B. It is a condition precedent to the obligation of KCL under the
Leases that Grantor shall have granted the security interests contemplated by
this Agreement.
NOW, THEREFORE, in consideration of the foregoing the undersigned
agrees as follows:
(1) Defined Terms. Capitalized terms not otherwise defined
herein shall have the meanings defined in the Leases.
(2) Grant of Security Interests. Grantor hereby grants to KCL a
security interest all of Grantor's right, title and interest in the
following property and interests in property, whether now owned or
hereafter acquired subject only to a security interest in favor of
KeyBank, National Association ("KeyBank").:
2.1 all accounts, including, but not limited to, all present and
future rights of whatever nature and however evidenced of Grantor to payment of
monies or other consideration, including all such rights relating to goods sold
or leased or for services rendered, which are not evidenced by instruments or
chattel paper, and whether or not earned by performance (collectively,
"Accounts");
2.2 all present and future contract rights, general intangibles
(including, but not limited to, tax and duty refunds, registered and
unregistered patents, trademarks, service marks, copyrights, trade names,
applications for the foregoing, trade secrets, goodwill, processes, drawings,
blueprints, customer lists, licenses (whether as licensor or licensee), choses
in action and other claims and existing and future leasehold interests in
equipment, real estate and fixtures), chattel paper, documents, instruments,
letters of credit, bankers' acceptances, guaranties, documents of title, drafts,
checks, bonds, notes or other negotiable and nonnegotiable instruments, bills of
exchange, insurance policies and any other writings evidencing a monetary
obligation or security interest in or a lease of personal property;
2.3 all present and future monies, securities, credit balances,
deposits, deposit accounts, certificates of deposit and other property of
Grantor now or hereafter held or received by or in transit to KCL or its
affiliates or at any other depository or other institution from or for the
account of Grantor, whether for safekeeping, pledge, custody, transmission,
collection or otherwise (excluding, however, deposit accounts in which the only
funds are those withheld from employees for the purpose of paying payroll taxes
or those collected as sales tax in amounts appropriate for payment to local,
state or federal taxing authorities in accordance with applicable law), and all
present and future liens, security interests, rights, remedies, title and
interest in, to and in respect of Accounts and other Collateral, including,
28
<PAGE>
without limitation, (a) rights and remedies under or relating to guaranties,
contracts of suretyship, letters of credit and credit and other insurance
related to the Collateral, (b) rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party, (c) goods described in invoices, documents, contracts
or instruments with respect to, or otherwise representing or evidencing,
Accounts or other Collateral, including, without limitation, returned,
repossessed and reclaimed goods, and (d) deposits by and property of account
debtors or other persons securing the obligations of account debtors;
2.4 inventory, including, but not limited to, all of Grantor's
now owned and hereafter existing or acquired raw materials, work in process,
finished goods and all other inventory of whatsoever kind or nature, wherever
located (the "Inventory");
2.5 equipment, including, but not limited to, all of Grantor's
rolling stock, vehicles, textile equipment, machinery, computers and computer
hardware and software (whether owned or licensed), vehicles, tools, furniture,
fixtures, all attachments, accessions and property now or hereafter affixed
thereto or used in connection therewith, and substitutions, upgrades and
replacements thereof, and wherever located (the "Equipment");
2.6 all other goods and personal property of Grantor, whether
tangible or intangible and whether now or hereafter owned or existing, leased,
consigned by or to, or acquired by, Grantor, and wherever located;
2.7 records, including, but not limited to, all of Grantor's
present and future books of account of every kind or nature, purchase and sale
agreements, invoices, ledger cards, bills of lading and other shipping evidence,
statements, correspondence, memoranda, credit files and other data relating to
the Collateral or any account debtor, together with the tapes, disks, diskettes
and other data and software storage media and devices, file cabinets or
containers in or on which the foregoing are stored (including any rights of
Grantor with respect to the foregoing maintained with or by any other person)
(the "Records"); and
2.8 all products and proceeds of the foregoing, in any form,
including, without limitation, insurance proceeds and all claims against third
parties for loss or damage to or destruction of any or all of the foregoing.
The foregoing are referred to herein as the "Collateral."
3. Obligations Secured. The security interest in the Collateral is
given to secure the full and timely performance by Grantor of all indebtedness,
liabilities and obligations of Grantor owing to KCL now existing or hereafter
arising pursuant to the terms of or in connection with the Leases, Lease
Documents or any other agreements, documents, or instruments now or hereafter
entered into by Grantor in connection therewith or in connection with the
transactions contemplated thereby, and all other liabilities and obligations of
the Grantor to KCL, howsoever evidenced, of every kind and description,
including those indirect, contingent, to become due or hereafter arising, and
all of Grantor's existing and future obligations owed to KeyBank, all of the
foregoing, as the same may be amended, renewed and/or restated from time to time
(collectively, the "Secured Obligations"). Amounts realized from Collateral
shall be applied first against fees, expenses and indemnities due KCL under the
Leases and the other Lease Documents; and secondly, against obligations of
Grantor in such order and manner as KCL shall determine in its sole discretion.
4. Grantor Remains Liable. Anything herein to the contrary
notwithstanding (a) Grantor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to perform
all of its duties and obligations thereunder to the same extent as if this
Agreement had not been executed, (b) the exercise by KCL of any of the rights
hereunder shall not release Grantor from any of its duties or obligations under
the contracts and agreements included in the Collateral, and (c) KCL shall have
no obligation or liability under the contracts and agreements included in the
Collateral by reason of this Agreement, nor shall KCL be obligated to perform
any of the obligations or duties of Grantor thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder.
5. Representations and Warranties. Grantor represents and warrants as
follows:
29
<PAGE>
5.1 Except as otherwise provided for on any Exhibit A attached
hereto and any Inventory in transit, all of the Inventory and Equipment is
located at the Equipment Locations specified in the Leases, and the chief place
of business and chief executive office of Grantor and the office where Grantor
keeps its Records concerning the Collateral shall be located at the address
specified for Grantor as its principal place of business in the Lease Documents.
Except as permitted under the Leases, Grantor will not move the location of its
chief executive offices unless Grantor shall have given prior written notice of
such a move to KCL and unless KCL's security interest therein continues at all
times to be perfected as a lien of first priority subject only to the lien of
KeyBank enforceable against all third parties in all jurisdictions as security
for full and timely performance of the Secured Obligations.
5.2 Except for the security interest created by this Agreement
and the security interest created by any agreement between Grantor and KeyBank,
Grantor owns the Collateral free and clear of any lien. No effective financing
statement or other instrument similar in effect covering all or any part of the
Collateral is on file in any filing or recording office in any state or
jurisdiction.
5.3 Upon the filing of the UCC-1 financing statements and KCL's
receipt of any applicable motor vehicle endorsements on the titles thereto, this
Agreement will create a valid and perfected security interest in the Collateral,
securing the payment of the Secured Obligations.
5.4 No authorization, approval or other action by, and no notice
to or filing or registration with, any governmental authority or regulatory body
is required either (i) for the grant by Grantor of the security interest granted
hereby or for the execution, delivery or performance of this Agreement by
Grantor or (ii) for the perfection of or the exercise by KCL of its rights and
remedies hereunder, other than the filing of the UCC-1 financing statements.
6. Further Assurances.
6.1 Grantor agrees that from time to time, at the expense of
Grantor, Grantor will promptly execute and deliver all further instruments and
documents, and take all further action, that may be reasonably necessary or
desirable, or that KCL may reasonably request, in order to perfect and protect
any security interest granted or purported to be granted hereby or to enable KCL
to exercise and enforce its rights and remedies hereunder with respect to any
Collateral. Without limiting the generality of the foregoing, Grantor will, upon
KCL's request, execute and file such financing or continuation statements, or
amendments thereto, deliver certificates of title to motor vehicles, and such
other instruments or notices, as may be reasonably necessary or desirable, or as
KCL may request, in order to perfect and preserve the security interests granted
or purported to be granted hereby.
6.2 Grantor hereby authorizes KCL to file one or more financing
or continuation statements, and amendments thereto, relative to all or any part
of the Collateral without the signature of Grantor where permitted by law.
6.3 Grantor will furnish to KCL from time to time statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as KCL may reasonably request, all in
reasonable detail.
7. As to Collateral. Grantor shall:
7.1 Comply with the requirements of the Leases relating to
location of Collateral (other than Inventory in transit).
7.2 Pay promptly when due all taxes imposed upon, and all claims
(including claims for labor, materials and supplies) against, the Collateral,
except to the extent the validity thereof is being contested in good faith.
30
<PAGE>
7.3 Grantor shall operate and maintain the tangible Collateral
in good order, repair and operating condition, will promptly make all repairs,
renewals and replacements necessary to so maintain the Collateral and will not
cause or allow any of the Collateral to be misused or wasted or to deteriorate,
reasonable wear and tear excepted.
7.4 Grantor will ensure that its use of the Collateral will
comply with all applicable laws, ordinances, and regulations of Governmental
Authorities.
8. Transfers and Other Liens. Grantor shall not:
8.1 Sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral except in the ordinary course of business or as
permitted under the Leases.
8.2 Create or suffer to exist any lien upon or with respect to
any of the Collateral, except for the security interest created by this
Agreement and the security interest in favor of KeyBank.
9. KCL Appointed Attorney-in-Fact. Grantor hereby irrevocably appoints
KCL as Grantor's attorney-in-fact, with full authority in the place and stead of
Grantor and in the name of Grantor or otherwise, from time to time in KCL's
discretion, to take any action and to execute any instrument which KCL may deem
necessary or advisable to accomplish the purposes of this Agreement, including
without limitation:
9.1 to ask, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral,
9.2 to receive, endorse and collect any drafts, documents of
title, or other instruments or documents in connection with clause 9.1 above,
and
9.3 to file any claims or take any action or institute any
proceedings which KCL may deem necessary or desirable to enforce the rights of
KCL with respect to any of the Collateral.
10. KCL May Perform. If Grantor fails to perform any agreement
contained herein, KCL may itself perform, or cause performance of, such
agreement, and the expenses of KCL incurred in connection therewith shall be
payable by Grantor under Section 16.
11. KCL's Duties. The powers conferred on KCL hereunder and under the
Leases are solely to protect its interest in the Collateral and shall not impose
any duty upon it to exercise any such powers. Except for the safe custody of any
Collateral in its possession and the accounting for moneys actually received by
it hereunder, KCL shall have no duty as to any Collateral or as to the taking of
any necessary steps to preserve rights against prior parties, or any other
rights pertaining to any Collateral.
12. Release of Collateral, Etc. The obligations of Grantor shall not
be affected by the release or substitution of any collateral or by the release
of or any renewal or extensions of time to any party to any instrument,
obligation or liability secured hereby or to which Grantor is a party. KCL shall
not be bound to resort to or to exhaust its recourse or take any action against
other parties or other collateral. Grantor hereby waives presentment, demand,
protest, notice of protest and notice of nonacceptance or non-payment with
respect to any indebtedness, obligation or liability secured hereby.
13. Books and Records; Inspection. Grantor agrees to maintain full and
accurate books of account prepared and maintained in accordance with GAAP
covering the Collateral and to deliver to KCL, upon request, such of the Records
as relate to the Collateral, including, without limitation, copies of all
invoices, shipping documents, contracts, orders, order acknowledgments,
correspondence and other instruments and papers in Grantor's possession. KCL
shall at all reasonable times have free access to Grantor's ledger, books of
account and other Records evidencing or relating to the Collateral and the right
to make and retain copies or memoranda of same, and shall at all reasonable
31
<PAGE>
times have the right to be present at Grantor's place of business to receive all
communications and remittances relating to the Collateral.
14. Inspection of Collateral; Insurance. KCL may inspect the
Collateral and the Records pertaining to the Collateral at reasonable times and
intervals and may for this purpose enter any premises upon which the Collateral
is located. Grantor will continuously maintain, or cause to be continuously
maintained in the name of "KeyCorp and its subsidiaries and affiliated
companies, including Key Corporate Capital Inc.", public liability and property
insurance on all Collateral by insurers approved by KCL against such risks, in
such amounts, and with such terms as are customary in the industry and
reasonably acceptable to KCL or as otherwise provided in the Leases.
15. Waivers. This Agreement shall not be qualified or supplemented by
course of dealing. No waiver or modification by KCL of any of the terms and
conditions hereof shall be effective unless in writing signed by KCL. No waiver
nor indulgence by KCL as to any required performance by Grantor shall constitute
a waiver as to any required performance or other obligations of Grantor
hereunder.
16. Expenses Incurred by KCL. KCL is not required to, but KCL may, at
its option, pay any tax, insurance premium, filing or recording fees, or other
charges payable by Grantor hereunder or under any other Lease Document and any
such amount shall bear interest from the date of payment until repaid at the
Late Payment Rate set forth in the Leases and shall be secured hereby. Such
amounts shall be repayable by Grantor on demand and Grantor's obligation to make
such repayment shall constitute an additional Secured Obligation.
17. Assignment and Successors. KCL, at any time with or without notice
to Grantor, may sell, transfer, grant participations in, assign and/or grant a
security interest in any or all of KCL's right, title and interest in and to the
Secured Obligations, the Lease Documents, or in KCL's interest in any item of
Collateral. In any such event, any such purchaser, transferee, assignee or
secured party shall have and may exercise all of KCL's rights hereunder or
thereunder, and GRANTOR SHALL NOT ASSERT AGAINST ANY SUCH PURCHASER, TRANSFEREE,
ASSIGNEE OR SECURED PARTY ANY DEFENSE, COUNTERCLAIM OR OFFSET THAT GRANTOR MAY
HAVE AGAINST KCL. Grantor agrees that upon written notice to Grantor of any such
sale, transfer, assignment and/or security interest, Grantor shall acknowledge
receipt thereof in writing and shall comply with the reasonable directions and
demands of such purchaser, transferee, assignee or secured party. All
obligations, rights, power and privileges herein provided shall inure to the
benefit of the assignee to the extent of such assignment. This Agreement inures
to the benefit of KCL and its successors and assigns, and shall bind the
successors and assigns of Grantor. Grantor may not assign its rights and
obligations hereunder without the prior written consent of KCL.
18. Events of Default. Each of the following shall constitute an Event
of Default under this Agreement:
18.1 Failure of Grantor to make any payment when due on the
Leases or under the Lease Documents;
18.2 Failure of Grantor to comply with or to perform any other
term, obligation, covenant or condition contained in the Leases, the
Lease Documents or this Agreement or in any other agreement between KCL
or any of KCL's parents, subsidiaries or affiliates and Grantor, which
default continues following ten (10) days notice thereof to Lessee;
18.3 Any warranty, representation or statement made or
furnished to KCL by or on behalf of Grantor under this Agreement is
false or misleading in any material respect, either now or at the time
made or furnished.; or
18.4 The Lease, this Agreement or any of the Lease Documents
cease to be in full force and effect (including failure of any
collateral documents to create a valid and perfected security interest
or lien) at any time and for any reason.
19. General Remedies. If an Event of Default shall occur, KCL shall
have all remedies provided by the Leases, the Lease Documents and by law and
without limiting the generality of the foregoing or the remedies provided in any
other section hereof or in any other Lease Document, shall have the following
remedies:
19.1 The remedies of a secured party under the Uniform
Commercial Code;
19.2 The right to sell all or part of the Collateral and make
application of all proceeds or sums due on the Collateral as it may elect in its
sole discretion;
19.3 The right to enter any premises where any of the
Collateral is situated and take possession of such Collateral without notice or
demand and without legal proceedings;
19.4 The right to exercise and enforce all of Grantor's rights
under any contracts relating to the Collateral to which Grantor is a party or of
which Grantor is a beneficiary; and
19.5 All other remedies which may be available in law or
equity.
19.6 At the request of KCL, Grantor will assemble the
Collateral and make it available to KCL at such places as are designated by KCL.
To the extent that notice of sale shall be required by law to be given, Grantor
agrees that a period of ten (10) days from the time the notice is sent shall be
a reasonable period of notification of a sale or other disposition of Collateral
by KCL, and that any notice or other communication from KCL to Grantor pursuant
to this Agreement or required by any statute may be given in the manner provided
in the Leases. All such notices and communications if duly given or made shall
be effective as provided in the Leases.
19.7 Grantor agrees to pay on demand the amount of all expenses
incurred by KCL in protecting and realizing on the Collateral and Grantor
further agrees that if this Agreement or any Secured Obligation is referred to
an attorney for protecting or defending the priority of KCL's interest in the
Collateral or for collecting or realizing thereon, Grantor shall pay all of
KCL's reasonable expenses, including without limitation, reasonable attorneys'
fees (including time charges of counsel that are employees of KCL) and costs and
expenses of title search and all court costs and costs of public officials.
Grantor further agrees that its obligation to pay such amounts shall bear
interest from the date payment is demanded by KCL until repaid at the Late
Payment Rate set forth in the Lease Documents and shall be secured hereby.
20. Hold Harmless. Grantor will indemnify and hold KCL harmless from
all liability, loss, damage or expense, including reasonable attorneys' fees and
costs, that KCL may incur in complying with or enforcing the terms of this
Agreement or the Secured Obligations. The covenants set forth in this Section 20
shall survive the termination of this Agreement.
21. Severability. In case any one or more of the provisions contained
in this Agreement is invalid, illegal or unenforceable in any respect in any
jurisdiction, the validity, legality and enforceability of such provision or
provisions will not in any way be affected or impaired thereby in any other
jurisdiction, and the validity, legality and enforceability of the remaining
provisions contained herein will not in any way be affected or impaired thereby.
22. Governing Law and Venue. This Agreement shall be construed and
enforced in accordance with the internal laws of the State of New York, except
where the location of Collateral requires that the creation, validity,
perfection, or enforcement of the security interests provided for herein be
governed by the laws of the United States or the jurisdiction where such
Collateral is located.
23. Jury trial waiver. KCL and grantor hereby waive trial by jury in
any action or proceeding to which kcl or grantor may be parties arising out of
or in any way pertaining to the lease documents or secured obligations. This
waiver is made knowingly, willingly and voluntarily by kcl and the grantor who
32
<PAGE>
each acknowledge that no representations have been made by any individual to
induce this waiver of trial by jury or in any way to modify or nullify its
effect.
24. More than One Grantor. If more than one person or entity executes
this Agreement, each of the other Lease Documents, and all addenda or other
documents executed in connection herewith or therewith, as "Grantor" or "Lessee"
, the obligations of Grantor contained herein and therein shall be deemed joint
and several and all references to "Grantor" shall apply both individually and
jointly.
25. Entire Agreement. This Agreement, together with the other Lease
Documents, collectively constitute the entire understanding or agreement between
KCL and Grantor with respect to the matters contained herein and therein, and
there is no understanding or agreement, oral or written, which is not set forth
herein or therein.
26. Execution in Counterparts. This Agreement may be executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, Grantor has executed this Agreement as of the date
and year first above written.
<TABLE>
<CAPTION>
Secured Party: Grantor:
<S> <C>
KEYCORP LEASING, SAFETY COMPONENTS INTERNATIONAL, INC
A DIVISION OF KEY CORPORATE CAPITAL INC.
By: ______________________________ By: ______________________________
Name: Name:
Title: Title:
</TABLE>
33
<PAGE>
EXHIBIT A
TO
SECURITY AGREEMENT
All of the Collateral is located at the Equipment Locations specified in the
Leases and the chief place of business and chief executive office of Grantor and
the office where Grantor keeps its Records concerning the Collateral is located
at the address specified for Grantor as its principal place of business in the
Guaranty.
34
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME FILED AS
PART OF THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF
INCOME.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-27-1999
<PERIOD-END> SEP-26-1998
<CASH> 3,095
<SECURITIES> 0
<RECEIVABLES> 44,833
<ALLOWANCES> 340
<INVENTORY> 24,633
<CURRENT-ASSETS> 79,441
<PP&E> 86,116
<DEPRECIATION> 12,553
<TOTAL-ASSETS> 218,310
<CURRENT-LIABILITIES> 37,733
<BONDS> 90,000
0
0
<COMMON> 66
<OTHER-SE> 45,328
<TOTAL-LIABILITY-AND-EQUITY> 218,310
<SALES> 104,508
<TOTAL-REVENUES> 104,508
<CGS> 86,731
<TOTAL-COSTS> 86,731
<OTHER-EXPENSES> 78
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,796
<INCOME-PRETAX> 4,354
<INCOME-TAX> 2,004
<INCOME-CONTINUING> 2,350
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,350
<EPS-PRIMARY> .46
<EPS-DILUTED> .45
</TABLE>
