UNITED STATES
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 June 26, 1999
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 August 10, 1999, was 5,136,316.
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
PART I
FINANCIAL INFORMATION
The unaudited consolidated financial information at June 26, 1999 and for
the thirteen week period ended June 27, 1998 and the audited consolidated
financial information at March 27, 1999 relate to Safety Components
International, Inc. and its subsidiaries.
ITEM 1. FINANCIAL STATEMENTS PAGE
Consolidated Balance Sheets as of June 26, 1999 and
March 27, 1999 3
Consolidated Statements of Operations for the
thirteen weeks ended June 26, 1999 and
June 27, 1998 4
Consolidated Statements of Cash Flows for the
thirteen weeks ended June 26, 1999 and
June 27, 1998 5
Notes to Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 12
ITEM 3. QUANTATIVE AND QUALATATIVE DISCLUSURES
ABOUT MARKET RISK 14
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 15
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 15
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 15
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 15
ITEM 5. OTHER INFORMATION 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 15
2
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share and per share data)
<TABLE>
<CAPTION>
June 26, March 27,
1999 1999
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................................. $ 17,433 $ 10,607
Accounts receivable, net .............................................. 46,807 47,284
Receivable from affiliate ............................................. 1,169 4,583
Inventories ........................................................... 17,743 21,445
Prepaid and other ..................................................... 5,878 6,296
------- -------
Total current assets........................................... 89,030 90,215
Property, plant and equipment, net ...................................... 71,332 68,747
Intangible assets, net .................................................. 56,799 57,796
Other assets ............................................................ 6,268 6,094
------- -------
Total assets................................................... $223,429 $222,852
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................................... $ 24,602 $ 28,093
Earnout payable ....................................................... 1,600 2,111
Accrued liabilities.................................................... 18,124 15,993
Current portion of long-term obligations .............................. 3,955 3,769
------- -------
Total current liabilities...................................... 48,281 49,966
Long-term obligations ................................................... 55,578 53,195
Senior subordinated debt ................................................ 90,000 90,000
Other long-term liabilities ............................................. 3,993 3,776
------- -------
Total liabilities.............................................. 197,852 196,937
------- -------
Commitments and contingencies
Stockholders' equity :
Preferred stock: $.10 par value per share -- 2,000,000 shares
authorized; no shares outstanding at March 27, 1999 and
March 28, 1998, respectively......................................... -- --
Common stock: $.01 par value per share -- 10,000,000 shares authorized;
6,629,008 and 6,538,075 shares issued and 5,136,316 and 5,094,216
shares outstanding at March 27, 1999 and March 28, 1998, respectively 66 66
Common stock warrants.................................................. 51 1
Additional paid-in-capital............................................. 44,963 44,963
Treasury stock, 1,492,692 at March 27, 1999 and March 28, 1998,
at cost................................................................ (15,439) (15,439)
Retained earnings...................................................... 2,944 2,325
Accumulated other comprehensive income:
Cumulative tax benefit from stock options exercised.................... 205 205
Cumulative translation adjustment ..................................... (7,213) (6,206)
------- -------
Accumulated other comprehensive income............................. (7,008) (6,001)
Total stockholders' equity..................................... 25,577 25,915
------- -------
Total liabilities and stockholders' equity..................... $223,429 $222,852
======= =======
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share and per share data)
<TABLE>
<CAPTION>
Thirteen Thirteen
Weeks Ended Weeks Ended
June 26, 1999 June 27, 1998
------------- -------------
<S> <C> <C>
Net Sales ...................................................... $63,845 $51,449
Cost of sales, excluding depreciation .......................... 52,841 40,318
Depreciation ................................................... 2,127 1,866
------- -------
Gross profit ...................................... 8,877 9,265
Selling and marketing expenses ................................. 782 647
General and administrative expenses ............................ 2,875 2,571
Research and development expenses............................... 223 -
Amortization of goodwill ....................................... 575 560
------- -------
Income from operations ............................ 4,422 5,487
Other expense .................................................. 8 44
Interest expense ............................................... 3,423 2,807
------- -------
Income before income taxes ........................ 991 2,636
Provision for income taxes ..................................... 371 1,093
------- -------
Net income ..................................................... $ 620 $ 1,543
======= =======
Net income per share, basic .................................... $ 0.12 $ 0.30
======= =======
Net income per share, assuming dilution ........................ $ 0.12 $ 0.30
======= =======
Weighted average number of shares outstanding, basic ........... 5,136 5,068
======= =======
Weighted average number of shares outstanding, assuming dilution 5,166 5,224
======= =======
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Thirteen Thirteen
Weeks Ended Weeks Ended
June 26, 1999 June 27, 1998
------------- -------------
<S> <C> <C>
Net cash provided by (used in) operating activities ............. $ 9,932 $ (623)
-------- --------
Cash Flows From Investing Activities:
Additions to property, plant and equipment ............. (4,779) (5,595)
Additional consideration and costs for Phoenix Airbag .. (444) (1,958)
Acquisition costs and andvances for Valentec ........... - (135)
Acquisition costs for JPS .............................. - (133)
-------- --------
Net cash used in investing activities ............. (5,223) (7,821)
-------- --------
Cash Flows From Financing Activities:
Proceeds from Deutsche Bank mortgage ................... 2,907 -
Net proceeds from sale of common stock ................. - 520
Repayments of debt and long-term obligations............ (1,078) (776)
Net borrowing on revolving credit facility ............. 700 7,124
-------- --------
Net cash provided by financing activities ......... 2,529 6,868
-------- --------
Effect of exchange rate changes on cash ......................... (412) (89)
-------- --------
Change in cash and cash equivalents ............................. 6,826 (1,665)
Cash and cash equivalents, beginning of period .................. 10,607 6,049
-------- --------
Cash and cash equivalents, end of period ........................ $ 17,433 $ 4,384
======== ========
Supplemental disclosure of cash flow information:
Cash paid during period for:
Interest .............................................. $ 966 $ 474
Income taxes .......................................... - 341
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
<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 27, 1999. 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.
NOTE 2 COMPOSITION OF CERTAIN CONSOLIDATED BALANCE SHEET COMPONENTS
(in thousands)
<TABLE>
<CAPTION>
June 26, 1999 March 27, 1999
----------------- --------------
<S> <C> <C>
Accounts receivable:
Billed receivables $ 41,673 $43,520
Unbilled receivables (net of unliquidated progress
payments of $1,457 and $472 at June 26, 1999 and
March 27, 1999, respectively) 3,949 2,690
Other 1,185 1,074
------- -------
$46,807 $47,284
======= =======
Inventories:
Raw materials $ 7,434 $ 6,805
Work-in-process 5,818 6,973
Finished goods 4,491 7,667
------- -------
$17,743 $21,445
======= =======
Property, plant and equipment:
Land and building $10,734 $10,583
Machinery and equipment 66,293 66,557
Furniture and fixtures 3,865 2,608
Construction in progress 8,450 4,994
------- -------
89,342 84,742
Less - accumulated depreciation and amortization (18,010) (15,995)
------- -------
$71,332 $68,747
======= =======
</TABLE>
6
<PAGE>
NOTE 3 LONG-TERM OBLIGATIONS (in thousands)
<TABLE>
<CAPTION>
June 26, 1999 March 28, 1997
------------------ --------------
<S> <C> <C>
Senior Subordinated Notes due July 15, 2007, bearing
interest at 10 1/8% $90,000 $ 90,000
KeyBank revolving credit facility due May 05, 2002, bearing
interest at 3.0% over LIBOR 37,900 37,200
KeyCorp equipment note due July 10, 2005 bearing interest 8,917 9,210
at 7.09%
Bank Austria mortgage note, due March 31, 2007, bearing
interest at 1.0% over LIBOR 6,000 6,375
Deutsche Bank mortgage note, due at various dates during 2,907 -
the period May 31, 2007 through March 21, 2019, bearing
interest rates ranging from 3.5% through 5.25%
Note payable, principal due in annual installments of $198
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 595 608
Capital equipment notes payable, due in monthly installments
with interest at 8.02% to 16.0% maturing at various rates
through June 2002, secured by machinery and equipment 3,214 3,571
-------- --------
149,533 146,964
Less - current portion (3,955) (3,769)
-------- --------
$145,578 $143,195
======== ========
</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
7
<PAGE>
Subordinated Notes due 2007, Series B (the "Exchange Notes", together with the
Old Notes, the "Notes"). All of the Old Notes were exchanged for the 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 both semi-annual interest payments during fiscal year 1999 to the
holders for an aggregate of $9.2 million. The Company had also accrued as of
June 26, 1999, as part of accrued liabilities, approximately $4.1 million of
interest, which was paid July 15, 1999 as part of the second 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. Subject to exceptions for specified Permitted Indebtedness, the
Company may not incur additional Indebtedness under the terms of such Indenture
unless certain conditions are met. The Company intends to meet its working
capital needs and capital expenditures through a combination of internally
generated cash flows from operations, Permitted Indebtedness and/or public or
private equity offerings.
The Company, ASCI GmbH 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 consists of a $40.0 million
revolving credit facility for a five year term ($37.9 million outstanding as of
August 10, 1999), bearing interest at LIBOR (5.3% as of June 26, 1999) plus 3.0%
with a commitment fee of .375% 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 facility. 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 are being charged to
operations over the expected term of the Credit Agreement not to exceed 5 years.
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 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 remains as acting agent.
On June 24, 1999, the Company entered into Amendment No. 6 to the Credit
Agreement, which among other covenants requires the Company to earn $30.0
million of EBITDA (as such term is defined in the Credit Agreement) in fiscal
year 2000. Such covenant is tested monthly based upon cumulative targets for the
year. Covenants for Fixed Charge Coverage, Interest Coverage and Minimum Net
Income are also based on the $30.0 million EBITDA target. In addition, the
interest rate was increased to LIBOR plus 3.0% and the commitment fee was
increased to .375%. The Company issued to the Lenders ten-year warrants to
acquire 20,000 shares of the Company's common stock at current market value per
share. The Company, using the Black-Sholes pricing model, calculated the fair
market value of the warrants at approximately $50,000. Additionally, the Company
will be subject, as of June 24, 2000, to a Senior Funded Debt to EBITDA ratio
covenant of 1.5 to 1.0 and a Minimum Consolidated Net Worth covenant. In
addition, under Amendment No. 6 to the Credit Agreement the Lenders waived
8
<PAGE>
certain financial covenants for periods through the date of such amendment.
The interest rate will increase 1.0% on July 1, 2000 and an additional 1.0% for
each quarter thereafter if the Company does not refinance the Credit Agreement
by such dates. In addition, if the Company refinances the Credit Agreement by
December 31, 1999, the 20,000 warrants will be returned to the Company. However,
if the Company does not refinance the Credit Agreement by July 1, 2000, the
Company is required to issue an additional 30,000 ten-year warrants to the
Lenders at the then current market value per share. Letters of credit
outstanding were $2.1 million at August 10, 1999. As of June 26, 1999 there was
no availability under the Credit Agreement. The indebtedness under the Credit
Agreement is secured by substantially all the assets of the Company.
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 a fixed rate of 7.09% via an
interest swap agreement, requires monthly payments of $150,469, and is secured
by certain equipment located at SCFTI. The rate swap is considered immaterial to
the Company's financial position at June 26, 1999.
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.
On April 1, 1999, the Company secured a $2.9 million mortgage note facility
with Deutsche Bank to purchase a facility in Bavendstedt, Germany. The note is
secured by the real estate in Germany acquired through the mortgage and is
further secured by a guarantee issued by Safety Components.
9
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 Thirteen
Weeks Ended Weeks Ended
June 26, 1999 June 27, 1998
------------- -------------
<S> <C> <C>
Net income $ 620 $1,543
====== ======
Weighted average number of
common shares used in basic
earnings per share 5,136 5,068
Effect of dilutive securities:
Stock options 29 142
Warrants 1 14
----- -----
Weighted average number of
common shares and dilutive
potential common stock used
in diluted earnings per share 5,166 5,224
===== =====
</TABLE>
Options on approximately 978,000 and 599,000 shares of common stock were
not included in computing diluted earnings per share as of June 26, 1999 and
June 27, 1998, respectively, because their effects were antidilutive. Warrants
to purchase 104,400 shares of Common Stock were not included in computing
diluted earnings per share as of June 27, 1998 because their effects were
antidilutive.
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:
Thirteen Thirteen
Weeks Ended Weeks Ended
June 26, 1999 June 27, 1998
------------- -------------
Net Income $ 620 $1,543
Tax benefit from stock options exercised - 112
Foreign currency translation adjustment (1,007) 68
------ ------
Comprehensive income $ (387) $1,723
====== ======
10
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 6 - 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 June 26, 1999.
<TABLE>
<CAPTION>
----------------------------------------------------------------------
GUARANTOR NONGUARANTOR PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTAL
------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Current assets................ $ 52,209 $ 23,481 $ 13,340 $ - $ 89,030
======= ======= ======= ====== =======
Total assets.................. $141,541 $ 68,203 $ 22,679 $(8,994) $223,429
======= ======= ======= ====== =======
Current liabilities........... $ 33,102 $ 26,978 $(11,802) $ 3 $ 48,281
======= ======= ======= ====== =======
Total liabilities............. $136,375 $ 59,539 $ 1,935 $ 3 $197,852
======= ======= ======= ====== =======
Revenues...................... $ 42,538 $ 23,442 $ - $(2,135) $ 63,845
======= ======= ======= ====== =======
Gross Profit.................. $ 5,514 $ 3,308 $ (57) $ 112 $ 8,877
======= ======= ======= ====== =======
Income from operations........ $ 3,227 $ 2,302 $ (1,395) $ 288 $ 4,422
======= ======= ======= ====== =======
Income before taxes........... $ 3,509 $ 1,583 $ (4,422) $ 321 $ 991
======= ======= ======= ====== =======
Net Income.................... $ 2,184 $ 767 $ (2,682) $ 351 $ 620
======= ======= ======= ====== =======
</TABLE>
11
<PAGE>
Note 7 Business Segment Information
The Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" in fiscal year 1999. The Company's
operations have been classified into two operating segments: (i) Automotive -
The Company manufactures airbag fabric and cushions and metal components for
several domestic and foreign automobile manufacturers under contracts with major
airbag systems integrators. Included in Automotive are technical fabric
products, which are produced using similar production processes; and (ii)
Defense - The Company acts as a systems integrator for the U.S. Army,
coordinating the manufacture and assembly of components supplied by various
subcontractors. The Company's Defense Operations also manufactures projectiles
and other metal components for small to medium caliber training and tactical
ammunition for the U.S. Armed Forces and contractors within the defense
business.
The Company evaluates performance and allocates resources based on earnings
(operating income) before interest, taxes, depreciation, and amortization
("EBITDA"). The Company's reportable segments are differentiated by product. The
reportable segments are each managed separately because they manufacture
distinct products with different production processes. Summarized financial
information by business segment is as follows (in thousands):
Thirteen Thirteen
Weeks Ended Weeks Ended
June 26, 1999 June 27, 1998
------------- -------------
Revenues from external customers:
Airbag cushions $33,187 $20,803
Airbag fabric 12,741 12,451
Technical fabric 6,617 6,003
Metal components 1,274 2,877
------- -------
Automotive $53,819 $42,134
======= =======
Systems integrator $ 6,311 $ 5,816
Metal components 3,715 3,499
------- -------
Defense $10,026 $ 9,315
======= =======
EBITDA:
Automotive $ 7,306 $ 7,762
Defense 1,068 1,198
Corporate (1,250) (1,047)
------- -------
$ 7,124 $ 7,913
======= =======
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
During the first quarter of fiscal 2000 the Company, through its wholly-owned
subsidiary, Automotive Safety Components GmbH & Co. KG, purchased a facility in
Bavendstedt, Germany in consideration of approximately DM 5.5 million
(approximately $3.0 million). The entire purchase price has been financed from
the proceeds of a loan agreement with Deutsche Bank. The Company expects that
the layout of the new German facility will allow it to conduct its operations in
Germany in a more efficient and cost effective manner. During the first quarter
the company made substantial progress moving to the new facility and expects to
complete the move by the middle of fiscal 2000. The Company has been able to
retain a majority of the employees who worked in the old facility thereby
leaving intact a knowledge base for the future manufacture of airbags. The
decision to remain in Germany is based on current and anticipated program
delivery commitments.
First Quarter Ended June 26, 1999 Compared to First Quarter June 27, 1998
Net Sales. Net sales increased by $12.4 million or 24.1% to $63.8 million
for the first quarter of fiscal year 2000 compared to the first quarter of
fiscal year 1999. The increase was primarily attributable to increased sales
volumes in the automotive operations. The North American automotive operations
increased $3.4 million or 11% and the European automotive operations increased
$7.6 million or 55% compared to the first quarter of fiscal year 1999. The
remaining increase in sales during the first quarter of fiscal year 2000 was due
to increased sales of $1.4 million or 18.7% in the defense operations primarily
from deliveries of programs from the company's Galion, Ohio facility. This
increase was partially offset by decreased sales of Valentec. The Company
anticipates that results of its operations for its second quarter, typically the
Company's weakest fiscal quarter due to the customary shutdown of its automotive
plants, will also be negatively affected by continued poor performance of its
noncore metal components and defense businesses. As a result, the Company
expects to incur a loss for the second quarter of fiscal 2000, but also expects
that its third and fourth fiscal quarters will show marked improvement over its
first quarter as the benefits of its high volume awards and cost reduction
programs are realized. The Company is considering strategic alternatives
regarding its noncore operations so that it can concentrate on building the
Company's more profitable automotive operations.
Gross Profit. Gross profit decreased by $.4 million or 4.2% to $8.9 million
for the first quarter of fiscal year 2000 compared to the first quarter of
fiscal year 1999. The decrease was primarily attributable to product mix at
SCFTI and lower sales at Valentec, partially offset by increased gross profit in
the European automotive and defense operations.
Gross profit as a percentage of sales decreased to approximately 13.9% for
the first quarter of fiscal year 2000 from 18% for the first quarter of fiscal
year 1999. The decrease as a percentage of sales was due to the items discussed
above.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $.4 million or 13.6% to $3.7 million for
the first quarter of fiscal year 2000 compared to the first quarter of fiscal
13
<PAGE>
year 1999. Selling costs increased $0.4 million due to increased commissions in
the North American airbag operations and an increase in sales personnel at SCFTI
and Valentec. Selling, general and administrative expenses as a percentage of
sales decreased to 5.7% for the first quarter of fiscal year 2000 from 6.3% for
the first quarter of fiscal year 1999.
Research and Development Expenses. Research and development expenses
increased by $0.2 million or 100.0% to $.2 million for the first quarter of
fiscal year 2000 compared to the first quarter of fiscal year 1999. Research and
development costs at Valentec during the first quarter of fiscal year 2000 of
approximately $0.15 million were incurred in connection with the development of
proprietary products for the automotive industry. Valentec has developed a high
performance exhaust system, under its Zummo Performance Products business line
anticipated to be sold through retail and wholesale channels. The remaining
research and development costs were incurred at SCFTI in its technical fabrics
division.
Operating Income. Operating income decreased by $1.1 million or 19.4% to
$4.4 million for the first quarter of fiscal year 2000 compared to the first
quarter of fiscal year 1999. The decrease was primarily attributable to the
items discussed above.
Interest Expense. Interest expense increased $0.6 million to $3.4 million
for the first quarter of fiscal year 2000 compared to the first quarter of
fiscal year 1999. This increase was primarily attributable to the increase in
debt under the Company's revolving credit facility and capitalized lease
financing.
Income Taxes. The income tax rate applied against pre-tax profit was 37.4%
for the first quarter of fiscal year 2000 compared to 41.5% against pre-tax
income for the first quarter of fiscal year 1999. The tax rate was lower during
the first quarter of fiscal year 2000 due to foreign tax benefits recognized
during that period.
Net Income. Net income decreased to $.6 million for the first quarter of
fiscal year 2000 compared to income of $1.5 million for the first quarter of
fiscal year 1999. This decrease was a result of the items discussed above.
Liquidity and Capital Resources
The Company's equipment and working capital requirements will continue to
increase as a result of the anticipated growth of the Automotive Operations.
This growth is expected to be funded through a combination of cash flows from
operations, equipment financing, and the proceeds from potential future public
or private equity-related offerings.
The Company, ASCI GmbH 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 consists of a $40.0 million
revolving credit facility for a five year term ($37.9 million outstanding as of
August 10, 1999), bearing interest at LIBOR (5.3% as of June 26, 1999) plus 3.0%
with a commitment fee of .375% per annum for any unused portion. 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
(collectively, the "Lenders") each provide fifty percent of the financing
available under the Credit Agreement and KeyBank remains as acting agent. On
June 24, 1999, the Company entered into Amendment No. 6 to the Credit Agreement,
which among other covenants requires the Company to earn $30.0 million of EBITDA
(as such term is defined in the Credit Agreement) in fiscal year 2000. Such
covenant is tested monthly based upon cumulative targets for the year. Covenants
for Fixed Charge Coverage, Interest Coverage and Minimum Net Income are also
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based on the $30.0 million EBITDA target. In addition, the interest rate was
increased to LIBOR plus 3.0% and the commitment fee was increased to .375%. The
Company issued to the Lenders ten-year warrants to acquire 20,000 shares of the
Company's common stock at current market value per share. The Company using the
Black-Scholes pricing model, calculated the fair market value of the warrants at
approximately $50,000. Additionally, the Company will be subject, as of June 24,
2000, to a Senior Funded Debt to EBITDA ratio covenant of 1.5 to 1.0 and a
Minimum Consolidated Net Worth covenant. In addition, under Amendment No. 6 to
the Credit Agreement the Lenders waived certain financial covenants for periods
through the date of such amendment. The interest rate will increase 1.0% on July
1, 2000 and an additional 1.0% for each quarter thereafter if the Company does
not refinance the Credit Agreement by such dates. In addition, if the Company
refinances the Credit Agreement by December 31, 1999, the 20,000 warrants will
be returned to the Company. However, if the Company does not refinance the
Credit Agreement by July 1, 2000, the Company is required to issue an additional
30,000 ten-year warrants to the Lenders at the then current market value per
share. Letters of credit outstanding were $2.1 million at June 26, 1999. As of
June 26, 1999 there was no availability under the Credit Agreement. 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 a fixed rate of 7.09% via an
interest swap agreement, requires monthly payments of $150,469, and is secured
by certain equipment located at SCFTI. The rate swap is considered immaterial to
the Company's financial position at June 26, 1999.
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 both
semi-annual interest payments during fiscal year 1999 to the holders for an
aggregate of $9.2 million. The Company has accrued as of June 26, 1999, as part
of accrued liabilities, approximately $4.1 million of interest, which was due
and paid July 15, 1999 as part of the second semi-annual payment. The Company
15
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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.
The Indenture pursuant to which the notes were issued contains certain
restrictive covenants, including a limitation upon the Company's ability to
incur additional Indebtedness. Subject to exceptions for specified Permitted
Indebtedness, the Company may not incur additional Indebtedness under the terms
of such Indenture unless certain conditions are met, including without
limitation, that the Consolidated Fixed Charge Coverage Ratio (as such terms are
defined in the Indenture) of the Company be greater than 2.25 to 1.0. At June
26, 1999, such ratio was 0.9 to 1.0. Funds available to the Company under
Permitted Indebtedness includes (i) Capitalized Lease Obligations and Purchase
Money Indebtedness (as such terms are defined in the Indenture), not to exceed
$10.0 million at any one time outstanding and (ii) additional Indebtedness (as
defined in the Indenture), in an aggregate principal amount not to exceed $5.0
million at any one time. The Company has used approximately $2.9 million of such
$10.0 million allowance to purchase a building in Germany, which qualifies as
Capitalized Lease Obligations as of August 10, 1999. The Company has not used
any of the additional Indebtedness as of August 10, 1999. The Company intends to
meet its working capital needs and capital expenditures through a combination of
internally generated cash flows from operations, Permitted Indebtedness and/or
public or private equity offerings. The inability of the Company to generate
sufficient cash from operations or to obtain such funds from debt or equity
financing could have a material adverse effect on the Company's financial
condition.
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.
On April 1, 1999, the Company secured a $2.9 million mortgage note facility
with Deutsche Bank to purchase a facility in Bavendstedt, Germany. The note is
secured by the real estate in Germany acquired through the mortgage and is
further secured by a guarantee issued by Safety Components.
During the first quarter of fiscal 2000, net cash provided by operations
was $9.9 million, cash used by investing activities was $5.2 million of which
cash used for capital expenditures was $4.8 million. The Company also paid
approximately $444,000 for additional consideration in connection with the
acquisition of ASCI GmbH, representing part of the $2.1 million earn-out accrual
at the end of fiscal year 1999. The Company will pay the final earn-out payment
during fiscal 2000. Net cash provided by financing activities in the first
quarter of fiscal year 2000 was $2.5 million, was obtained primarily from the
proceeds of a mortgage agreement with Deutsche Bank to finance the purchase of
the Company's new facility located in Bavendstedt, Germany. These activities
resulted in a net increase in cash of $6.8 million in the first quarter of
fiscal year 2000.
Under an agreement with Brera SCI, LLC, the Company is required to pay
Brera an Alternative Transaction Fee of $1.75 million in the event the Company
enters into an agreement regarding, or consummates, certain transactions,
including a sale of certain securities, prior to November 4, 1999.
The Company's capital budget for the remaining three quarters of fiscal
year 2000 is approximately $5.4 million. These capital expenditures will be used
to purchase additional machinery and equipment worldwide.
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.
16
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State of Readiness and Cost
The Company relies on systems developed by other parties in regard to its
business, accounting and operational software. Based on its evaluation, the
Company believes that its significant business, accounting and operations
hardware and software are year 2000 compliant.
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 fall
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 cash flow.
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.
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 fall 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 ability of the
Company to obtain financing for working capital and to fund capital
expenditures; the impact of competitive products and pricing, dependence of
revenues upon several major module suppliers; worldwide economic conditions; the
results of cost savings programs being implemented; domestic and international
17
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automotive industry trends; the marketplace for airbag related products; the
ability of the Company to effectively control costs and to satisfy customers on
timeliness and quality; approval of automobile manufacturers of airbag cushions
currently in production; pricing pressures; labor strikes; the continued
performance by SCFTI at or above historical levels, the ability of Safety
Components to realize anticipated cost savings and earnings projections by
Valentec; and the ability to successfully identify strategic alternatives for
the Company's noncore operations or otherwise return such operations to
profitability.
ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK.
To the extent that amounts borrowed under the Credit Agreement are
outstanding, the Company has market risk relating to such amounts because the
interest rates under the Credit Agreement are variable.
The Company's operations in Germany, the UK and the Czech Republic expose
the Company to currency exchange rates risks. Currently, the Company does not
enter into any hedging arrangements to reduce this exposure. The Company is not
aware of any facts or circumstances that would significantly impact such
exposures in the near-term. If, however, there was a sustained decline of these
currencies versus the U.S. dollar, then the consolidated financial statements
could be materially adversely effected.
18
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On June 24, 1999 the Company issued to its revolving credit facility
lenders, KeyBank and Fleet Bank, ten-year warrants to acquire 20,000 shares of
the Company's common stock at the current market value per share. The warrants
were issued as consideration for bank financing services performed relating to
the Company's revolving credit facility. Such an issuance of securities by an
issuer not involving a public offering is an exempt transaction pursuant to
section 4(2) of the Securities Act of 1933.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit No. Exhibits
----------- ------------------------------------------------
10.58 Form of Amendment No. 6 to Credit Agreement, dated
as of June 23, 1999 by and among Safety Components
International, Inc., Automotive Safety Components
International GmbH & Co. KG, Automotive Safety
Components International Limited, as borrowers,
and KeyBank National Association, as
Administrative Agent, and the lending institutions
named therein.
10.59 Warrant Agreement, dated as of June 23, 1999, by
and among Safety Components International, Inc.,
KeyBank National Association and Fleet Bank.
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: August 10, 1999 BY: /s/ JEFFREY J. KAPLAN
----------------------------
Jeffrey J. Kaplan
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
19
AMENDMENT NO. 6 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 6 TO CREDIT AGREEMENT, dated as of June 23, 1999 (this
"Amendment"), is made among the following:
(i) SAFETY COMPONENTS INTERNATIONAL, INC., a Delaware corporation
(herein, together with its successors and assigns, the "Company" or a
"Borrower");
(ii) AUTOMOTIVE SAFETY COMPONENTS INTERNATIONAL GmbH & CO. K.G.
(formerly 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"),
(iii) 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");
(iv) each of the financial institutions signatory hereto as a
Lender (herein, together with their successors and assigns,
individually a "Lender" and collectively, the "Lenders"); and
(v) KEYBANK NATIONAL ASSOCIATION, a national banking association,
as administrative agent (the "Administrative Agent") for the Lenders
under the Credit Agreement:
PRELIMINARY STATEMENTS:
(1) The Borrowers, the Lenders, and the Administrative Agent have
previously entered into the Credit Agreement, dated as of May 21, 1997, as
amended by (i) Amendment No. 1 thereto, dated as of June 2, 1997, (ii) Amendment
No. 2 thereto, dated as of July 15, 1997, (iii) Amendment No. 3 thereto, dated
as of July 30, 1998, (iv) Amendment No. 4 thereto, dated as of October 9, 1998
and (v) Amendment No. 5 thereto, dated as of February 9, 1999 (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 have requested the Administrative Agent and the
Lenders to modify certain of the financial covenants contained in the Credit
Agreement and certain of the other 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. Definitions. On and as of the Effective Date of this Amendment
provided for in section 5 hereof, section 1.1 of the Credit Agreement is amended
by adding in proper alphabetical order or by amending in their entirety, as
applicable, the following terms:
"Adjusted Fixed Charge Coverage Ratio" shall mean, for any Testing
Period, the ratio of (i) EBITDA plus cash and Cash Equivalents of the Company
and its Subsidiaries as of the end of such Testing Period to (ii) the sum of (A)
Total Cash Interest Expense, (B) scheduled or mandatory repayments, prepayments
or redemptions of the principal of Indebtedness (including required reductions
in committed credit facilities), (C) without duplication of any amount included
under the preceding clause (B), scheduled payments representing the principal
portion of Capitalized Lease Obligations, (D) Dividends, (E) Consolidated
Capital Expenditures and (F) provision for taxes based on income and franchise
taxes, in each case for such Testing Period.
"Amendment No. 6" shall mean Amendment No. 6 to Credit Agreement, dated
as of June 23, 1999, among the Borrowers, the Lenders named therein, and the
Administrative Agent.
"Amendment No. 6 Effective Date" shall mean the "Effective Date" as
defined in Amendment No. 6.
"Applicable Commitment Fee Rate" shall mean 37.50 basis points per
annum.
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"Applicable Eurocurrency Margin" shall mean in the case of any
Revolving Loan which is a Eurocurrency Loan, (i) from and including the
Amendment Closing Date referenced in Amendment No. 6 through June 30, 2000, 300
basis points per annum and (ii) thereafter, in accordance with the terms of the
Interest Rate/Fee Letter.
"Applicable Prime Rate Margin" shall mean in the case of any Revolving
Loan which is a Prime Rate Loan, (i) from and including the Amendment Closing
Date referenced in Amendment No. 6 through June 30, 2000, 50 basis points per
annum and (ii) thereafter, in accordance with the terms of the Interest Rate/Fee
Letter.
"Approved Business Plan" shall mean the one year business plan of the
Company and its Subsidiaries, including financial projections for fiscal year
2000, delivered to the Lenders on or about May 20, 1999.
"Domestic Subsidiary" shall mean any Subsidiary organized under the
laws of the United States of America, any State thereof, the District of
Columbia, or any United States possession, the chief executive office and
principal place of business of which is located in, and which conducts the
majority of its business within, the United States of America and its
territories and possessions.
"EBIT" shall mean for any period, (A) the sum of the amounts for such
period of, without duplication, (i) Consolidated Net Income (exclusive of the
effect thereon of any foreign currency translation adjustments made thereto),
(ii) provisions for taxes based on income and franchise taxes and (iii) Total
Interest Expense less (B) gains on sales of assets (excluding sales in the
ordinary course of business) and extraordinary gains plus (C) extraordinary
losses and other non-cash charges, all as determined for the Company and its
Subsidiaries on a consolidated basis in accordance with GAAP.
"EBITDA" shall mean for any period, (A) the sum of the amounts for such
period of, without duplication, (i) Consolidated Net Income (exclusive of the
effect thereon of any foreign currency translation adjustments made thereto),
(ii) provisions for taxes based on income and franchise taxes, (iii) Total
Interest Expense and (vi) depreciation and amortization less (B) gains on sales
of assets (excluding sales in the ordinary course of business) and extraordinary
gains plus (C) extraordinary losses and other non-cash charges, all as
determined for the Company and its Subsidiaries on a consolidated basis in
accordance with GAAP.
"Interest Coverage Ratio" shall mean, for any Testing Period, the ratio
of (i) EBIT to (ii) Total Cash Interest Expense.
"Interest Rate/Fee Letter" shall mean the letter agreement dated as of
the date of Amendment No. 6, among the Borrowers, the Administrative Agent and
the Lenders, as the same may be from time to time further amended, modified
and/or supplemented.
"Notice Office" shall mean the office of the Administrative Agent at
711 Westchester Avenue, White Plains, New York 10604, Attention: Brendan
Sachtjen (telephone: (914) 681-8301; facsimile: (914) 681-8350), or such other
office, located in a city in the United States Eastern Time Zone, as the
Administrative Agent may designate to the Company from time to time.
"Subordinated Notes" shall have the meaning provided in section
10.1(d).
"Testing Period" shall mean for any determination a single period
consisting of the four consecutive fiscal quarters of the Company then last
ended (whether or not such quarters are all within the same fiscal year), except
that if a particular provision of this Agreement indicates that a Testing Period
shall be of a different specified duration, such Testing Period shall consist of
the particular month, months, fiscal quarter or quarters then last ended which
are so indicated in such provision.
"Total Cash Interest Expense" shall mean total cash interest expense
(including that which is capitalized and that attributable to Capital Leases) of
the Company and its Subsidiaries on a consolidated basis with respect to all
outstanding Indebtedness of the Company and its Subsidiaries, including, without
limitation, all commissions, discounts and other fees and charges owed with
respect to letters of credit and net costs under Hedge Agreements, all as
determined in accordance with GAAP.
2
<PAGE>
1.2. Effect of Foreign Currency Exchange Rates. On and as of the
Effective Date of this Amendment, a new section 1.5 is added to the Credit
Agreement, reading in its entirety as follows:
1.5. Effect of Foreign Currency Exchange Rates on Covenant
Calculations. For purposes of calculating the financial covenants
contained in sections 9.7 through 9.11 of this Agreement, the budgeted
foreign currency exchange rates attached to Amendment No. 6 as Exhibit
A shall be used to determine Consolidated Net Income with respect to
any Foreign Subsidiary.
1.3. Commitments for Loans. On and as of the Effective Date of this
Amendment, no Borrower may incur additional Revolving Loans or request any
Letters of Credit. Revolving Loans outstanding on the Effective Date of this
Amendment may, at the option of the applicable Borrower, be maintained as, or
converted into, Revolving Loans which are Prime Rate Loans or Eurocurrency Loans
denominated in Dollars or an Alternative Currency, provided that all Revolving
Loans part of the same Borrowing shall consist of Revolving Loans of the same
currency and Type, may be repaid or prepaid in accordance with the provisions of
the Credit Agreement, and shall not exceed for any Lender at any time
outstanding the aggregate principal amount which, when added to the product at
such time of (A) such Lender's Revolving Facility Percentage times (B) the
aggregate Letter of Credit Outstandings, equals the Revolving Commitment of such
Lender at such time. Revolving Loans to the Company which are Eurocurrency Loans
may only be denominated in Dollars.
1.4. Interest on Loans. On and as of the Effective Date of this
Amendment, section 2.7 of the Credit Agreement is amended to read in its
entirety as follows:
2.7. Interest on Loans. (a) The unpaid principal amount of
each Loan which is a Prime Rate Loan shall bear interest from the date
of the Borrowing thereof until maturity (whether by acceleration or
otherwise) at a fluctuating rate per annum which shall at all times be
equal to the Applicable Prime Rate Margin for such Loan plus the Prime
Rate in effect from time to time.
(b) The unpaid principal amount of each Loan which is a
Eurocurrency Loan shall bear interest from the date of the Borrowing
thereof until maturity (whether by acceleration or otherwise) at a rate
per annum which shall at all times be the Applicable Eurocurrency
Margin for such Loan plus the relevant Eurocurrency Rate.
(c) Notwithstanding the above provisions, if a Default under
section 10.1(a) or Event of Default is in existence, all outstanding
amounts of principal and, to the extent permitted by law, all overdue
interest, in respect of each Loan shall thereafter bear interest,
payable on demand, at a rate per annum equal to 2% per annum above the
interest rate otherwise applicable thereto. If any amount (other than
the principal of and interest on the Loans) payable by any Borrower
under the Credit Documents is not paid when due, such amount shall
thereafter bear interest, payable on demand, at a rate per annum equal
to the Prime Rate in effect from time to time plus 2% per annum.
(d) Interest shall accrue from and including the date of any
Borrowing to but excluding the date of any prepayment or repayment
thereof and shall be payable, in respect of each Loan, (i) monthly in
arrears on the last Business Day of each month and (ii) on any
prepayment or conversion (on the amount prepaid or converted), at
maturity (whether by acceleration or otherwise) and, after such
maturity, on demand.
(e) All computations of interest hereunder shall be made in
accordance with section 13.7(b).
(f) Each Reference Bank agrees to furnish the Administrative
Agent timely information for the purpose of determining the
Eurocurrency Rate for any Borrowing consisting of Eurocurrency Loans.
If any one or more of the Reference Banks shall not timely furnish such
information, the Administrative Agent shall determine the Eurocurrency
Rate on the basis of timely information furnished by the remaining
Reference Banks. The Administrative Agent upon determining the interest
rate for any Borrowing shall promptly notify the Company (on behalf of
any applicable Borrower) and the Lenders thereof.
1.5. Effectiveness of Pricing Change. All Loans outstanding on or after
the Amendment Closing Date provided for in section 5 of this Amendment shall
reflect any increase in the interest margin applicable thereto which is provided
for in section 1.4 of this Amendment for all periods from and after the
Amendment Closing Date. The
CL: 406182v7
3
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increase in the Applicable Commitment Fee Rate effected pursuant to this
Amendment shall be effective for all periods from and after the Amendment
Closing Date.
1.6. Field Audit and Collateral Monitoring Expenses. Effective on and
as of the Effective Date, section 4.1(d) of the Credit Agreement is amended by
adding the following at the end thereof:
The Company will pay to the Collateral Agent such fees as the
Collateral Agent may from time to time invoice at its standard rates
for field audit and other examinations and reviews conducted from time
to time of the Company's and its Domestic Subsidiaries' inventory and
eligible receivables and other aspects of the Company's assets,
liabilities and operations, and the Company will also reimburse the
Collateral Agent for all reasonable out-of-pocket costs and expenses
incurred by the Collateral Agent in connection therewith, including,
without limitation, reasonable fees, costs and expenses of independent
auditors, appraisers, equipment brokers, and other professionals
employed by the Collateral Agent in connection therewith; provided that
unless a Default or Event of Default then exists and is continuing, the
Company shall not be required to reimburse the Collateral Agent for
more than two field audits in any fiscal year. Such invoices shall be
paid promptly and in any event within 20 days after the date of
submission to the Company. The Administrative Agent may debit the
Company's master concentration account to the extent any such invoices
remain unpaid after 20 days.
1.7. Voluntary Reduction of Commitments. On and as of the Effective
Date of this Amendment, section 4.2 of the Credit Agreement is amended to read
in its entirety as follows:
4.2 Termination or Reduction of Commitments. The Borrowers
shall have no right to terminate the Total Revolving Commitment or the
Total Commitment unless (i) contemporaneously therewith all Revolving
Loans and Unpaid Drawings are paid or prepaid in full, together with
accrued interest thereon, and (ii) after giving effect thereto there
are no Letter of Credit Outstandings.
1.8. Mandatory Adjustments of Commitments, etc. On and as of the
Effective Date of this Amendment, section 4.3 of the Credit Agreement is amended
in its entirety to read as follows:
4.3. Mandatory Adjustments of Commitments, etc. (a) The Total
Revolving Commitment (and the Revolving Commitment of each Lender)
shall terminate on the earlier of (i) the Maturity Date and (ii) the
date on which a Change of Control occurs.
(b) The Total Revolving Commitment shall be permanently
reduced at the time that any voluntary prepayment of Revolving Loans is
made pursuant to section 5.1, in an amount equal to such prepayment.
Any such reduction shall be applied to proportionately and permanently
reduce the Revolving Commitment of each Lender.
(c) The Total Revolving Commitment shall be permanently
reduced at the time that any mandatory prepayment of Revolving Loans
would be made pursuant to section 5.2(c), (d), (e) or (g) if Revolving
Loans were then outstanding in the full amount of the Total Revolving
Commitment, in an amount at least equal to the required prepayment of
principal of Revolving Loans which would be required to be made in such
circumstance. Any such reduction shall be applied to proportionately
and permanently reduce the Revolving Commitment of each Lender. The
Company will provide at least three Business Days' prior written notice
(or telephonic notice confirmed in writing) to the Administrative Agent
at its Notice Office (which notice the Administrative Agent shall
promptly transmit to each of the Lenders), of any reduction of the
Total Revolving Commitment pursuant to this section 4.3(d), specifying
the date and amount of the reduction.
1.9. Voluntary Prepayments. On and as of the Effective Date of this
Amendment, section 5.1 of the Credit Agreement is amended to read in its
entirety as follows:
5.1. Voluntary Prepayments. Any Borrower shall have the right
to prepay any of its Revolving Loans, in whole or in part, without
premium or penalty, from time to time on the following terms and
conditions: (i) such Borrower (or the Company on its behalf) shall give
the Administrative Agent at the Notice Office written or telephonic
notice (in the case of telephonic notice, promptly confirmed in writing
if so requested by the Administrative Agent) of its intent to prepay
the Revolving Loans, the amount of such
4
<PAGE>
prepayment and (in the case of Eurocurrency Loans) the specific
Borrowing(s) pursuant to which made, which notice shall be received by
the Administrative Agent by (x) 11:00 A.M. (local time at the Notice
Office) three Business Days prior to the date of such prepayment, in
the case of any prepayment of Eurocurrency Loans, or (y) 12:00 noon
(local time at the Notice Office) on the date of such prepayment, in
the case of any prepayment of Prime Rate Loans, and which notice shall
promptly be transmitted by the Administrative Agent to each of the
affected Lenders; (ii) each partial prepayment of any Borrowing shall
be in an aggregate principal of at least $100,000 or an integral
multiple of $100,000 in excess thereof, in the case of Loans which are
Prime Rate Loans, and at least $100,000 or an integral multiple of
$100,000 in excess thereof, in the case of Loans which are Eurocurrency
Loans, provided that no partial prepayment of Eurocurrency Loans made
pursuant to a Borrowing shall reduce the aggregate principal amount of
the Loans outstanding pursuant to such Borrowing to an amount less than
the Minimum Borrowing Amount applicable thereto; (iii) each prepayment
in respect of any Revolving Loans made pursuant to a Borrowing shall be
applied pro rata among such Loans; and (iv) each prepayment of
Eurocurrency Loans pursuant to this section 5.1 on any date other than
the last day of the Interest Period applicable thereto shall be
accompanied by any amounts payable in respect thereof under section
2.10.
1.10. Mandatory Prepayments and Scheduled Repayments. On and as of the
Effective Date of this Amendment, sections 5.2(a) and (b) of the Credit
Agreement are amended to read in their entirety as follows:
5.2 Mandatory Prepayments and Scheduled Repayments. (a) If on
any date (after giving effect to any other payments on such date) the
sum of (i) the aggregate outstanding principal amount of Revolving
Loans plus (ii) the aggregate amount of Letter of Credit Outstandings,
exceeds the Total Revolving Commitment as then in effect, the Borrowers
shall prepay on such date that principal amount of Revolving Loans and,
after Revolving Loans have been paid in full, Unpaid Drawings, in an
aggregate amount equal to such excess. If, after giving effect to the
prepayment of Revolving Loans and Unpaid Drawings, the aggregate amount
of Letter of Credit Outstandings exceeds the Total Revolving Commitment
as then in effect the Company shall pay to the Administrative Agent an
amount in cash and/or Cash Equivalents equal to such excess and the
Administrative Agent shall hold such payment as security for the
obligations of the Company hereunder pursuant to a cash collateral
agreement to be entered into in form and substance reasonably
satisfactory to the Administrative Agent and the Company (which shall
permit certain investments in Cash Equivalents satisfactory to the
Administrative Agent and the Company until the proceeds are applied to
the secured obligations).
(b) [Reserved]
1.11. Affirmative Covenants. On and as of the Effective Date of this
Amendment, section 8.1 of the Credit Agreement is amended by (i) inserting the
following paragraphs (c) and (d) immediately following section 8.1(b), (ii)
re-designating the remaining paragraphs as appropriate, (iii) amending section
8.1(e) (as so redesignated) to read in its entirety as set forth below, and (iv)
inserting a new paragraph (k) immediately following section 8.1(j) (as so
redesignated):
(c) Monthly Financial Statements. Within 20 days after the end
of each calendar month in each fiscal year of the Company, the
unaudited condensed consolidated and consolidating balance sheets of
the Company and its consolidated Subsidiaries as at the end of such
month and the related unaudited condensed consolidated and
consolidating statement of income for such month and such portion of
the fiscal year ended with the last day of such month, which shall be
certified on behalf of the Company by the Chief Financial Officer or
other Authorized Officer of the Company, subject to changes resulting
from normal year-end audit adjustments, and together with such balance
sheets and statements of income, a comparison of the year to date
results against the Approved Business Plan and the financial
projections delivered in connection therewith, with detailed
explanations of any variance from such Approved Business Plan and
projections of greater than 5%.
(d) Information as to Collateral. Within 20 days after the end
of each calendar month, (i) a written report, reasonably satisfactory
in form and scope to the Administrative Agent, as to the inventory,
accounts receivable and accounts payable of the Company and its
Subsidiaries, setting forth the type, amount, value, location and aging
of inventory and accounts receivable as of the end of such month, such
report to detail the information as to inventory and receivables as set
forth on Exhibit B to Amendment No. 6 and (ii) such other financial
information related to the foregoing as the Administrative Agent may
reasonably request.
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<PAGE>
(e) Officer's Compliance Certificates. (i) At the time of the
delivery of the financial statements provided for in sections 8.1(a),
(b) and (c), a certificate on behalf of the Company of the Chief
Financial Officer or other Authorized Officer of the Company to the
effect that, (A) to the best knowledge of the Company, no Default or
Event of Default exists or, if any Default or Event of Default does
exist, specifying the nature and extent thereof, which certificate
shall be substantially in the form attached as Exhibit C to Amendment
No. 6 and shall set forth the calculations required to establish
compliance with the provisions of sections 9.4, 9.5, 9.6, 9.7, 9.8,
9.9, 9.10 and 9.11 of this Agreement (to the extent that such sections
contain provisions that require measurement as of the date for which
the certificate is delivered) and (B) to the best knowledge of the
Company, no default or event of default under the Indenture relating to
the Subordinated Notes exists, and if any such default or event of
default does exist, specifying the nature and extent thereof and (ii)
at the time of the delivery of the financial statements provided for in
section 8.1(c), a certificate on behalf of the Company of the Chief
Financial Officer or other Authorized Officer of the Company showing
the amount of cash and Cash Equivalents held by the Company and its
Subsidiaries as of the end of the previous month, detailing the
location of such cash and Cash Equivalents by particular account and
country.
(k) Notice of Defaults. Immediately, and in any event within
two Business Days after the Company obtains knowledge thereof, notice
of the occurrence of any Default (as defined in the Subordinated Notes
or the Indenture related thereto).
1.12. Acquisitions and Dispositions. On and as of the Effective Date of
this Amendment, the following is added at the end of section 9.2 of the Credit
Agreement:
Notwithstanding anything to the contrary contained above in this
section 9.2, from and after June 1, 1999, the Company shall not, and
shall not permit any Subsidiary to, (i) without the prior written
consent of all of the Lenders, make or otherwise effect any Acquisition
or (ii) make or otherwise effect any Asset Sale involving property with
a fair value, together with the fair market value of all property
subject to an Asset Sale after June 1, 1999, in excess of $100,000
unless (x) at least 90% of the proceeds from such sale are received in
cash, (y) the Company notifies the Administrative Agent in writing no
later than ten days after such Asset Sale and (z) proceeds from such
Asset Sale in excess of $100,000 are deposited immediately upon receipt
in the special deposit account described in section 7.4 of Amendment
No. 6.
1.13. Liens. On and as of the Effective Date of this Amendment, section
9.3 of the Credit Agreement is amended by amending paragraph (k) thereof to read
in its entirety as follows:
(k) Liens (i) placed upon Real Property, improvements thereto,
equipment or machinery used in the ordinary course of business of the
Company or any Subsidiary at the time of (or within 270 days after) the
acquisition or completion of construction thereof by the Company or any
such Subsidiary to secure Indebtedness incurred to pay all or a portion
of the purchase price or construction cost thereof or (ii) existing on
property or other assets at the time acquired by the Company or any
Subsidiary or on assets of a person at the time such person first
becomes a Subsidiary of the Company (other than any such Liens which
were created at the time of or in contemplation of the acquisition of
such assets or person by the Company or any of its Subsidiaries);
provided (A) in the case of any such acquisition of a person, any such
Lien attaches only to the property and assets of such person, (B) in
the case of any such acquisition of property or assets by the Company
or any Subsidiary, any such Lien attaches only to the property and
assets so acquired or constructed and not to any other property or
assets of the Company or any Subsidiary, and (C) the Indebtedness
secured by any such Lien is permitted by sections 9.4(c), 9.4(e) or
9.4(j).
1.14. Indebtedness. On and as of the Effective Date of this Amendment,
section 9.4 of the Credit
Agreement is amended to read in its entirety as follows:
9.4 Indebtedness. The Company will not, and will not permit
any of its Subsidiaries to, contract, create, incur, assume or suffer
to exist any Indebtedness of the Company or any of its Subsidiaries,
except:
(a) Indebtedness incurred pursuant to this Agreement and
the other Credit Documents;
(b) Indebtedness of Automotive Safety Components
International, s.r.o., a Foreign Subsidiary, in the original aggregate
principal amount of approximately $7,500,000 (or the equivalent in any
applicable
6
<PAGE>
currency or currencies), used to finance Real Property, improvements
and related properties subject to Liens permitted by section 9.3(j),
and an unsecured guaranty by the Company of such Indebtedness; and any
refinancing, extension, renewal or refunding of any such Indebtedness
not involving an increase in the principal amount thereof or a
reduction of more than 10% in the remaining weighted average life to
maturity thereof (computed in accordance with standard financial
practice);
(c) Indebtedness of the Company or any Subsidiary (i) subject
to Liens permitted by section 9.3(k), provided that the aggregate
principal amount of such Indebtedness incurred in any fiscal year shall
not exceed an amount equal to 80% of Consolidated Capital Expenditures
for such year; and any refinancing, extension, renewal or refunding of
any such Indebtedness not involving an increase in the principal amount
thereof or a reduction of more than 10% in the remaining weighted
average life to maturity thereof (computed in accordance with standard
financial practice);
(d) unsecured Subordinated Indebtedness of the Company in the
aggregate principal amount of up to $5,000,000 (or such larger amount
as may be approved by the Required Lenders), having a weighted average
life to maturity (computed in accordance with standard financial
practice) at the time of incurrence thereof in excess of 5 years,
incurred pursuant to a public offering, Rule 144A offering or private
placement with institutional investors, of the Company's subordinated
unsecured debt securities;
(e) to the extent not otherwise permitted pursuant to the
foregoing clauses, Indebtedness of the Company and its Foreign
Subsidiaries not in excess of $5,000,000 (or the equivalent in any
applicable currency or currencies) outstanding at any time, which
Indebtedness may be secured solely by accounts receivable located
outside of the United States;
(f) Existing Indebtedness, to the extent not otherwise
permitted pursuant to the foregoing clauses; and any refinancing,
extension, renewal or refunding of any such Existing Indebtedness not
involving an increase in the principal amount thereof or a reduction of
more than 10% in the remaining weighted life to maturity thereof
(computed in accordance with standard financial practice);
(g) Indebtedness of the Company or any Subsidiary under
Hedge Agreements;
(h) Indebtedness of the Company to any of its Subsidiaries,
and Indebtedness of any of the Company's Subsidiaries to the Company or
to another Subsidiary of the Company, in each case to the extent
permitted under section 9.5;
(i) Guaranty Obligations permitted under section 9.5; and
(j) Indebtedness of (A) the Company or any Domestic Subsidiary
in respect of Capital Leases for assets acquired by the Company or any
Domestic Subsidiary after March 27, 1999 or (B) any Foreign Subsidiary
in respect of Capital Leases for assets acquired by such Foreign
Subsidiary after March 27, 1999, provided that the aggregate principal
portion of such Capital Leases may not exceed $6,500,000.
1.15. Dividends. On and as of the Effective Date of this Amendment,
section 9.6 of the Credit Agreement is amended to read in its entirety as
follows:
9.6 Dividends, etc. The Company will not declare or pay any
dividends (other than dividends payable solely in equivalent shares of
capital stock of the Company) on, or make any other distribution or
payment on account of (other than in shares of the capital stock of the
Company), and the Company will not, and will not permit any of its
Subsidiaries to, purchase, redeem, retire or otherwise acquire, any
shares of any class of the capital stock of the Company, whether now or
hereafter outstanding (all of the foregoing, "Dividends").
1.16. Total Senior Funded Debt/EBITDA Ratio; Minimum EBITDA; Minimum
Net Income. On and as of the Effective Date of this Amendment, section 9.7 of
the Credit Agreement is amended to read in its entirety as follows:
7
<PAGE>
9.7. (a) Total Senior Funded Debt/EBITDA Ratio. The Company
will not at any time permit the ratio of (i) the amount of Total Senior
Funded Debt at such time to (ii) EBITDA for its Testing Period then
most recently ended to be greater than the ratio shown below for any
applicable period:
Period Ratio
Any Testing Period ended on or after the 1.50 to 1.00
fiscal quarter ended on or nearest to June 30,
2000
(b) Required Minimum Cumulative EBITDA. The Company will not
at any time permit cumulative EBITDA from March 28, 1999 through any
Testing Period indicated below to be less than the amount set forth
opposite such Testing Period:
Testing Period Cumulative Minimum
EBITDA
Month ending on or nearest to $2,300,000
April 30, 1999
Month ending on or nearest to $4,300,000
May 31, 1999
Month ending on or nearest to $6,000,000
June 30, 1999
Month ending on or nearest to $8,000,000
July 31, 2000
Month ending on or nearest to August 31, $9,400,000
1999
Month ending on or nearest to September 30, $11,200,000
1999
Month ending on or nearest to October 31, $14,700,000
1999
Month ending on or nearest to November 30, $18,000,000
1999
Month ending on or nearest to December 31, $19,800,000
1999
Month ending on or nearest to January 31, $23,000,000
2000
Month ending on or nearest to February 28, $26,400,000
2000
Month ending on or nearest to March 31, $30,000,000
2000
8
<PAGE>
(c) Minimum Cumulative Net Income. The Company will not permit
(i) its cumulative Consolidated Net Loss from March 28, 1999 through
the fiscal quarter ending on or nearest to June 30, 1999 to be greater
than $500,000, (ii) its cumulative Consolidated Net Loss from March 28,
1999 through the period of two fiscal quarters ending on or nearest to
September 30, 1999 to be greater than $1,600,000, (iii) its cumulative
Consolidated Net Loss from March 28, 1999 through the period of three
fiscal quarters ending on or nearest to December 31, 1999 to be greater
than $625,000 and (iv) its cumulative Consolidated Net Income from
March 28, 1999 through the period of four fiscal quarters ending on or
nearest to March 31, 2000 to be less than $1,000,000.
1.17. Adjusted Fixed Charge Coverage Ratio; Fixed Charge Coverage
Ratio; Interest Coverage Ratio. On and as of the Effective Date of this
Amendment, section 9.8 of the Credit Agreement is amended to read in its
entirety as follows:
9.8. (a) Adjusted Fixed Charge Coverage Ratio. The Company will not
permit its Adjusted Fixed Charge Coverage Ratio for any Testing Period to be
less than the ratio shown below for any applicable period:
Period Ratio
Testing Period for the fiscal quarter ending 2.15 to 1.00
on or nearest to June 30, 1999
Testing Period for the two fiscal quarters 0.90 to 1.00
ending on or nearest to September 30, 1999
Testing Period for the three fiscal quarters 1.20 to 1.00
ending on or nearest to December 31, 1999
Testing Period for the four fiscal quarters .95 to 1.00
ending on or nearest to March 31, 2000
(b) Fixed Charge Coverage Ratio. The Company will not permit
its Fixed Charge Coverage Ratio for any Testing Period to be less than
the ratio shown below for any applicable period:
Period Ratio
- ----------------------------------------- ------------
Any Testing Period ended on or after the 1.25 to 1.00
fiscal quarter ended on or nearest to June 30,
2000
(c) Interest Coverage Ratio. The Company will not permit its
Interest Coverage Ratio for any Testing Period to be less than the
ratio shown below for any applicable period:
Period Ending Ratio
- ---------------------------------------------- ------------
Testing Period for the fiscal quarter ended on 2.00 to 1.00
or nearest to June 30, 1999
Testing Period for the two fiscal quarters 0.70 to 1.00
ended on or nearest to September 30, 1999
Testing Period for the three fiscal quarters 1.25 to 1.00
ended on or nearest to December 31, 1999
Any Testing Period thereafter 1.20 to 1.00
9
<PAGE>
1.18. Capital Expenditures. On and as of the Effective Date of this
Amendment, section 9.9 of the Credit Agreement is amended to read 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 following fiscal periods of the Company, in an
aggregate amount in excess of (a) during the fiscal year ending on or
nearest to March 31, 1999, $14,000,000, (b) during the fiscal year
ending on or nearest to March 31, 2000, $12,000,000, and (c) during any
subsequent fiscal year, $12,000,000.
1.19. Certain Leases. On and as of the Effective Date of this
Amendment, section 9.10 of the Credit Agreement is amended to read in its
entirety as follows:
9.10. Certain Leases. The Company will not (a) permit the
aggregate payments (excluding any property taxes, insurance or
maintenance obligations paid by the Company and its Subsidiaries as
additional rent or lease payments) by the Company and its Subsidiaries
on a consolidated basis under agreements to rent or lease any personal
property for a period exceeding 12 months (including any renewal or
similar option periods), other than pursuant to Capital Leases, to
exceed $1,000,000 is any fiscal year of the Company; or (b) permit the
aggregate fair value of property leased by the Company and/or its
Subsidiaries pursuant to one or more Capital Leases from any single
lessor (or related group of lessors), determined at the time of any
applicable Capital Leases, to exceed $10,000,000.
1.20. Minimum Consolidated Net Worth. On and as of the Effective Date
of this Amendment, section 9.11 of the Credit Agreement is amended to read in
its entirety as follows:
9.11. Minimum Consolidated Net Worth. The Company will not, at
any time subsequent to June 30, 2000, permit its Consolidated Net
Worth, without regard to foreign currency translation adjustments for
any period, to be less than the Company's Consolidated Net Worth as of
the last day of the fiscal year ended on or nearest to March 31, 1999,
except that effective as of the end of the Borrower's fiscal quarter
ended on or nearest to June 30, 1999, and as of the end of each fiscal
quarter thereafter, the foregoing amount (as it may from time to time
be increased as herein provided) shall be increased by 100% of
Consolidated Net Income for the fiscal quarter ended on such date, if
any (there being no reduction in the case of any such Consolidated Net
Income which reflects a deficit).
1.21. Events of Default. On and as of the Effective Date of this
Amendment, section 10.1 of the Credit Agreement is amended by amending paragraph
(d) thereof to read in its entirety as follows:
(d) Cross Default Under Other Agreements: the Company or any
of its Subsidiaries shall (i) default in any payment of principal or
interest with respect to the Company's 101/8% Senior Subordinated Notes
due 2007 (the "Subordinated Notes") or any other Indebtedness (other
than the Obligations) owing to any Lender or any of its Affiliates or
having an unpaid principal amount of $1,000,000 or greater, and such
default shall continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such Indebtedness,
or (ii) default in the observance or performance of any agreement or
condition relating to the Subordinated Notes or any other such
Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto (and all grace periods applicable to such
observance, performance or condition shall have expired), or any other
event shall occur or condition exist, the effect of which default or
other event or condition is to cause, or to permit the holder or
holders of the Subordinated Notes or any other such Indebtedness (or a
trustee or agent on behalf of such holder or holders) to cause any such
Indebtedness to become due prior to its stated maturity; or the
Subordinated Notes or any other such Indebtedness of the Company or any
of its Subsidiaries shall be declared to be due and payable, or shall
be required to be prepaid (other than by a regularly scheduled required
prepayment or redemption, prior to the stated maturity thereof); or
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<PAGE>
1.22. Notices. On and as of the Effective Date of this Amendment,
section 13.3 of the Credit Agreement is amended to read in its entirety as
follows:
13.3 Notices. Except as otherwise expressly provided herein,
all notices and other communications provided for hereunder shall be in
writing (including telegraphic, telex, facsimile transmission or cable
communication) and mailed, telegraphed, telexed, transmitted, cabled or
delivered, (a) if to any Borrower, to such Borrower at 2160 N. Central
Road, Ft. Lee, New Jersey 07024, Attention: Jeffrey J. Kaplan,
Executive Vice President & Chief Financial Officer (facsimile: (201)
592-7501); (b) if to any Lender, at its address specified for such
Lender on Annex I to the Credit Agreement; (c) if to the Administrative
Agent, at its Notice Address; or (d) at such other address as shall be
designated by any party in a written notice to the other parties
hereto. All such notices and communications shall be mailed,
telegraphed, telexed, telecopied, or cabled or sent by overnight
courier, and shall be effective when received.
1.23. Modification of Certain Annexes. On and as of the Effective Date
of this Amendment, (i) Annexes I, II, III, V, VI and VII to the Credit Agreement
are amended to read in their entirety as the same are set forth in Exhibit D to
Amendment No. 6 and (ii) Annex IV to the Credit Agreement is amended by the
addition of the following information:
<TABLE>
<CAPTION>
Name and Address of Name and Address of Secured Place of Filing Filing Collateral
Debtor Party Records Designation
Information
<S> <C> <C> <C> <C>
Automotive Safety KeyCorp Leasing, Secretary of 8/11/98 Equipment
Components, Inc. a Division of Key Corporate State of New 1853975 and Proceeds
2160 N. Central Road Capital, Inc. Jersey
Fort Lee, NJ 07024 54 State Street, 9th Floor
Albany, NY 12207
</TABLE>
SECTION 2. WAIVERS.
2.1. Waivers. On the Effective Date, the Administrative Agent and the
Lenders waive (i) any default occasioned under the Credit Agreement as a result
of the failure of the Company, prior to the Effective Date of Amendment No. 6,
to comply with any financial covenants contained therein as in effect
immediately prior to the effectiveness of this Amendment No. 6 and (ii) any
default occasioned under the Credit Agreement as a result of the existence of
the junior lien created by the Master Equipment Lease Agreement dated as of July
10, 1998, between KeyCorp Leasing, a division of Key Corporate Capital, Inc. and
the Company, and each Lender hereby consents to the existence and continuation
of such Lien on the Collateral.
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. Except as set
forth on Exhibit E to this Amendment, the representations and warranties of the
Company contained in the Credit Agreement, as amended hereby, are true and
correct on and as of the date hereof as though made on and as of the date
hereof, except to the extent that such representations and warranties expressly
relate only 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 a Default or an Event of Default.
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<PAGE>
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.
3.5. Recent Financial Statements. The Company has furnished to the
Lenders and the Administrative Agent complete and correct copies of the proposed
final and definitive audited consolidated balance sheets of the Company and its
consolidated subsidiaries as of the end of its fiscal years ended on or nearest
to March 31, 1999 and the related proposed final and definitive audited
consolidated statements of income, shareholders' equity, and cash flows of the
Company and its consolidated subsidiaries for the fiscal year then ended,
accompanied by the proposed final and definitive unqualified report thereon of
the Company's independent accountants, as proposed to be filed with the SEC. All
such financial statements have been prepared in accordance with GAAP,
consistently applied (except as stated therein), and fairly present the
financial position of the Company and its consolidated subsidiaries as of the
respective dates indicated and the consolidated results of their operations and
cash flows for the respective periods indicated, subject to any minor
adjustments, none of which will involve a Material Adverse Effect.
3.6. Financial Projections. The financial projections included in the
Approved Business Plan were prepared on behalf of the Company in good faith
after taking into account the existing and historical levels of business
activity of the Company and its Subsidiaries, known trends, including general
economic trends, and all other information, assumptions and estimates considered
by management of the Company and its Subsidiaries to be pertinent thereto. Such
financial projections were considered by management of the Company, as of such
date of preparation, to be realistically achievable; provided, that no
representation or warranty is made as to the impact of future general economic
conditions or as to whether the Company's projected consolidated results as set
forth in such financial projections will actually be realized. No facts are
known to the Company at the date hereof which, if reflected in such financial
projections, would result in a material adverse change in the assets,
liabilities, results of operations or cash flows reflected therein.
3.7. No Domestic Unencumbered Real Property Owned in Fee. At the date
hereof neither the Company nor any Domestic Subsidiary owns in fee any Real
Property which is not subject to the Lien of a Security Document.
3.8. Prior Credit Events Permitted by Indenture, etc. All Loans
incurred under the Credit Agreement and outstanding on the date hereof, and all
Letters of Credit issued under the Credit Agreement and outstanding on the date
hereof, were incurred or issued in compliance with all applicable provisions of
the Indenture, dated as of July 24, 1997 (the "Indenture"), relating to the
Subordinated Notes. After giving effect to this Amendment, the Revolving Loans
from time to time outstanding under the Credit Agreement, and the Letters of
Credit from time to time outstanding under the Credit Agreement, will constitute
"Permitted Indebtedness", as defined in the Indenture, or are otherwise
permitted under Section 4.12 of the Indenture. No Collateral has been granted to
the Collateral Agent by any Credit Party as security for the Obligations in
violation of any of the terms or provisions of the Indenture. The execution,
delivery and performance of this Amendment by the Company and the other
Borrowers, and the consummation by the Credit Parties of the transactions
contemplated hereby, does not and will not involve any breach or violation of
any of the terms or provisions of the Indenture, and does not and will not
result in an Event of Default thereunder. Both at the date hereof and after
giving effect to the transactions contemplated by this Amendment, no Event of
Default has occurred and is continuing under, and as defined in, the Indenture.
After giving effect to this Amendment, the Revolving Loans and reimbursement
obligations in respect of Letters of Credit constitute "Senior Indebtedness", as
defined in the Indenture.
SECTION 4. RATIFICATIONS.
The terms and provisions set forth in this Amendment shall modify and
supersede all inconsistent terms and provisions set forth in the Credit
Agreement, and except as expressly modified and superseded by this Amendment,
the terms and provisions of the Credit Agreement are ratified and confirmed and
shall continue in full force and effect.
SECTION 5. CONDITIONS; BINDING EFFECT.
This Amendment shall become effective as of, and with retroactive
effect to, March 27, 1999 (the "Effective Date"), if and only if, on a Business
Day (the "Amendment Closing Date") or before June 24, 1999, all of the following
conditions shall have been satisfied:
12
<PAGE>
(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 each
Lender that such Lender has executed this Amendment (which notification
may be by facsimile or other written confirmation of such execution);
(d) the Company shall have paid to the Administrative Agent,
in immediately available funds, for the pro rata account of and for
immediate distribution to the Lenders in accordance with their
Commitments, a nonrefundable amendment fee as consideration for the
execution and delivery of this Amendment, in the aggregate amount
specified in the Interest Rate/Fee Letter as being payable on the
Amendment Closing Date;
(e) the Administrative Agent shall have received, in
sufficient quantity for the Administrative Agent and the Lenders, a
Solvency Certificate of the Chief Financial Officer of the Company,
dated on or shortly prior to the Amendment Closing Date and otherwise
substantially in the form attached to the Credit Agreement as Exhibit
H;
(f) the Administrative Agent and each of the Lenders shall
have received complete and correct copies of the consolidated balance
sheet of the Company and its Subsidiaries as of March 27, 1999 and the
related consolidated statements of income, shareholders' equity and
cash flow of the Company and its consolidated Subsidiaries for the
fiscal year then ended, accompanied by the compliance certificate
required by section 8.1(c);
(g) the Administrative Agent and each of the Lenders shall
have received a copy of the Approved Business Plan, and each of the
Lenders shall be satisfied, in its sole discretion, with the Approved
Business Plan;
(h) the Company shall have delivered evidence satisfactory to
the Administrative Agent and the Lenders in their sole discretion that
the Net Loss of the Company, before provision for taxes, for the fiscal
year ending on or nearest to March 31, 1999 is not greater than
$(16,000,000);
(i) the Administrative Agent shall have received an opinion,
addressed to the Administrative Agent and each of the Lenders, dated as
of the Amendment Closing Date, from Swidler Berlin Shereff Friedman
LLP, counsel to the Company, covering such matters incident to the
transactions contemplated hereby as the Administrative Agent may
require, such opinion to be in form and substance satisfactory to the
Administrative Agent;
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. CERTAIN ADDITIONAL PROVISIONS;
RELEASE OF ANY CLAIMS BY BORROWER
AND OTHER CREDIT PARTIES.
6.1. Confirmation of Certain Outstanding Amounts. The Borrowers, the
Administrative Agent and the Lenders hereby acknowledge and agree that, as of
the close of business on June 18, 1999, $37,900,000 aggregate principal amount
of Revolving Loans was outstanding under the Credit Agreement, all of which was
denominated in Dollars, and the Letter of Credit Outstandings consisted of
$2,064,949, all of which was denominated in Dollars.
13
<PAGE>
6.2. Circumstances of Amendment; No Duress, etc. The Company and each
other Credit Party each hereby represents and warrants to, and stipulates,
covenants and agrees with, the Administrative Agent and the Lenders that: (i) no
representations, warranties, statements, promises or inducements, oral or
written, have been made by the Administrative Agent, any Lender, or any of their
respective officers, directors, employees, agents, representatives, consultants,
advisors, counsel or Affiliates, to any Credit Party (or any of its officers,
directors, employees, agents, representatives, consultants, advisors, counsel or
Affiliates) concerning the existence or absence of any Default or Event of
Default under the Credit Agreement, as amended by this Amendment, or the
likelihood that the Company will be able to remain in compliance with the
financial and other covenants contained in the Credit Agreement, as amended by
this Amendment, for any period of time or under any particular set of
circumstances, foreseen or unforeseen, or concerning any future willingness or
unwillingness of the Lenders to hereafter grant any waivers under the Credit
Agreement or to hereafter enter into any further or subsequent amendments,
supplements or other modifications thereof or of any of the other Credit
Documents or any agreements or instruments referred to therein; (ii) this
Amendment, the other Credit Documents, and all of the other agreements,
instruments, certificates and documents to which any Credit Party is a party or
which have been delivered on its behalf in connection herewith, have been
executed and delivered voluntarily after due deliberation by officers of the
Company and the other Credit Parties, consultations by the Company and the other
Credit Parties with Swidler Berlin Shereff Friedman, LLP, counsel for the
Company and the other Credit Parties, and negotiations between the Company and
the other Credit Parties, on the one hand, and the Administrative Agent and the
Lenders on the other hand; (iii) neither the Administrative Agent, nor any
Lender, nor any of their respective officers, directors, employees, agents,
representatives, consultants, advisors, counsel or Affiliates, has exerted or
attempted to exert any improper or unlawful pressure, or has in any way induced
or attempted to induce, through coercion, threats, unreasonable demands or
requirements, or other improper or unlawful means, any particular or general
conduct or course of action on the part of the Company or any of the other
Credit Parties (including the execution and delivery of this Amendment and the
other agreements, instruments, certificates and documents contemplated hereby),
which the Company and the other Credit Parties had not freely and independently
determined to be prudent, proper and appropriate under the circumstances; and
(iv) without limitation of the foregoing, the Company and each of the other
Credit Parties has, to the extent deemed necessary or advisable in its or their
sole discretion, been advised and assisted by its or their counsel, Swidler
Berlin Shereff Friedman, LLP, in connection with the negotiation of this
Amendment and the consideration of any and all legal matters related hereto or
to the other Credit Documents or the transactions and circumstances related
thereto.
6.3. Release. In order to induce the Lenders to enter into this
Amendment, effective as of the Amendment Closing Date, the Company and each of
the other Credit Parties each hereby agrees to release, and does hereby release
and discharge, and each further agrees not to make any claim for, or assert in
any proceeding, by way of claim or counterclaim, or by way of defense or set-off
or otherwise, any and all claims, damages, losses, expenses, liabilities,
obligations, defenses, recoupments, objections, actions and causes of action,
that any Credit Party may now or as of such Amendment Closing Date have, whether
known or unknown, of every nature and to all extent whatsoever, whether based on
negligence, fraud, misrepresentation, undue or improper influence, or
interference in business operations, opportunities or other contracts, or tort,
strict liability, contract or other conduct or action or failure to act, against
the Administrative Agent, any Lender, or any of their respective officers,
directors, employees, agents, representatives, consultants, advisors, counsel or
Affiliates, on account of or in any way, directly or indirectly, touching,
concerning, arising out of or founded upon or related to, the Credit Documents,
including Amendment No. 6, or the transactions contemplated thereby, or the
lending or other banking relationships related thereto, or any actions or
failure to act in connection therewith; provided that the foregoing release will
not extend to any claim arising after the Amendment Closing Date to the extent
that such claim is based on conduct of the Administrative Agent or any Lender
occurring after the Amendment Closing Date. The Credit Parties acknowledge and
agree that they understand that the Administrative Agent and the Lenders would
not have entered into this Amendment but for, among other things, the provisions
of this section 6.3. The Company and each of the other Credit Parties hereby
confirms that it has agreed to the provisions of this section 6.3 freely and of
its own volition, with full knowledge of the effect and extent of the various
releases, waivers and agreements herein contained and of the importance to the
Administrative Agent and the Lenders thereof, and after having had an
opportunity to discuss this matter with its own counsel, freely selected by it.
SECTION 7. CERTAIN ADDITIONAL COVENANTS.
From and after the Amendment Closing Date, the Company will comply with
the following additional covenants, and the Company and the other Borrowers
agree that breach of any of the following additional covenants
14
<PAGE>
will constitute an immediate Event of Default under the Credit Agreement without
the necessity of any notice from the Administrative Agent or any Lender with
regard thereto:
7.1. Lockbox Arrangements. (a) On or before the Amendment Closing Date,
the Company will establish deposit accounts with, and enter into lockbox
agreements with, the Collateral Agent, and cause each of its Domestic
Subsidiaries to do likewise, all of which arrangements shall be satisfactory in
form and substance to the Collateral Agent. Any such deposit accounts with the
Collateral Agent shall be considered a Cash Collateral Account as provided in
the Security Agreement.
(b) On or before the Amendment Closing Date, the Company will cause all
funds to be paid to the Borrower and its Domestic Subsidiaries by customers,
account debtors and others to be paid to said lockboxes and deposited in said
accounts with the Collateral Agent.
(c) No later than the Amendment Closing Date, the Company will cease
using deposit accounts, (other than the payroll or petty cash accounts detailed
by Company and Subsidiary on Exhibit F to this Amendment) and any lockbox
arrangements with any financial institution other than the Collateral Agent, and
cause each of its Domestic Subsidiaries to do likewise, it being understood that
the Company and its Domestic Subsidiaries may continue using controlled
disbursement accounts with other financial institutions as and to the extent
permitted by the Collateral Agent, acting in its reasonable discretion.
(d) Such lockbox agreements with the Collateral Agent shall provide,
among other things, that once the Company and its Domestic Subsidiaries shall
have so established such lockbox agreements and deposit accounts with the
Collateral Agent, and funds shall be received by the Collateral Agent as
contemplated thereby, (A) if no Default under section 10.1(a) of the Credit
Agreement or Event of Default shall have occurred and be continuing, the
Collateral Agent will immediately release such funds so received by it to or as
directed by the Company, or (B) if a Default under section 10.1(a) of the Credit
Agreement or Event of Default shall have occurred and be continuing, the
Collateral Agent shall have sole and complete dominion over all funds so
received and shall, on a daily or similar frequent basis, promptly apply such
funds to the Loans and other obligations secured by the Security Agreement, and
after all Loans and other obligations secured by the Security Agreement have
been satisfied and the Total Commitment has been terminated, release any surplus
remaining to the Borrower or to whomsoever shall be lawfully entitled thereto.
7.2. Establishment of Special Deposit Account with Collateral Agent.
Within five Business Days following the Amendment Closing Date, the Company will
convert to cash the entire cash and money market fund balances currently held by
the Company and its Domestic Subsidiaries in its accounts with brokers, mutual
funds and other investment firms (other than the payroll or petty cash accounts
described on Exhibit F to this Amendment), the current value of which accounts
has been disclosed to the Lenders, and transfer such resulting cash balances, by
wire transfer of immediately available funds, to a special deposit account
established with the Collateral Agent (which special deposit account shall be
considered a Cash Collateral Account as provided in the Security Agreement) from
which the Company may make such payments as it may elect, provided that the
Collateral Agent reserves the right, at any time, to require the Company to, and
the Company agrees that it will, if the Collateral Agent so exercises such
right, pledge such special deposit account and all proceeds thereof to the
Collateral Agent, and grant the Collateral Agent sole dominion and control
thereof, as collateral for the equal and ratable security of the Obligations and
any other obligations secured by the Security Agreement.
7.3. Concentration Account. The Company and its Subsidiaries shall make
arrangements, which arrangements shall be satisfactory in form and substance to
the Collateral Agent, to cause, on and after the Amendment Closing Date, all
cash and other funds on deposit in any deposit account (other than the payroll
accounts described on Exhibit F to this Amendment) at the end of any Business
Day, to the extent such funds exceed $25,000 in the aggregate, to be deposited
into the Company's master concentration account with KeyBank, account number
3238 9000 5099.
7.4. Establishment of Sale Proceeds Account with Collateral Agent.
Within five Business Days following the Amendment Closing Date, the Company will
establish with the Collateral Agent a special deposit account (which special
deposit account shall be considered a Cash Collateral Account as provided in the
Security Agreement) into which the Company shall deposit, immediately upon the
receipt thereof, (i) Cash Proceeds in excess of $250,000 received from any one
or more Asset Sales on or after June 1, 1999 and (ii) proceeds received from any
one or more sales of the capital stock (or other equity interests) of any
Subsidiary or on account of the merger or consolidation of any Subsidiary with a
person that is not a Subsidiary of the Company. In addition, at the end of each
fiscal quarter of
15
<PAGE>
the Company, the Company shall deposit into the special deposit account cash in
an amount equal to the difference, if any, between (A) actual cash and Cash
Equivalents held by the Company and its Subsidiaries as of such date and (B)
150% of the cash and Cash Equivalents projected to be held on such date by the
Company and its Subsidiaries in the financial projections contained in the
Approved Business Plan. Funds deposited in such special deposit account may be
released at the sole discretion of the Lenders upon application therefor by the
Company for use by the Company to purchase, construct or otherwise acquire
capital assets to be used in the business of the Company or its Subsidiaries.
7.5. Lien Searches, etc. The Company will promptly and in any event
within 45 days following the Amendment Closing Date, cause its counsel to
deliver to the Lenders and the Administrative Agent complete UCC, judgment and
lien (including tax liens) searches against the Company and each of the Domestic
Subsidiaries and their respective properties, including copies of all pertinent
filings, in all jurisdictions in the United States in which the Borrower or any
of its Domestic Subsidiaries has its chief executive or registered office,
maintains an office or owns or leases property, together with a chart
summarizing in reasonable detail all such filings, including the name of the
secured party, the filing office, filing number and filing date, and the
collateral covered.
7.6. Machinery and Equipment Appraisal. The Company, at its own cost
and expense, will promptly and in any event (i) no later than August 1, 1999,
deliver to the Administrative Agent a comprehensive schedule of all machinery
and equipment owned by the Company and its Subsidiaries, including make, model,
date of manufacture, serial number, location, indication of whether owned or
leased, and description of related indebtedness, if any, and (ii) no later than
September 1, 1999, deliver to the Lenders and the Administrative Agent an
appraisal of the orderly liquidation value and forced liquidation value of the
machinery and equipment owned by the Company and its Domestic Subsidiaries and
located in the United States, and an inventory valuation analysis with respect
to all Inventory owned by the Company and its Domestic Subsidiaries and located
in the United States, such appraisal and valuation to be satisfactory in form
and substance to the Administrative Agent and prepared by an independent
appraiser selected and engaged by the Administrative Agent and the Lenders.
SECTION 8. MISCELLANEOUS.
8.1. Successors and Assigns. This Amendment shall be binding upon and
inure to the benefit of the Borrowers, each Lender and the Administrative Agent
and their respective permitted successors and assigns.
8.2. Amendments, Waivers. No term or provision included in this
Amendment (including specifically, but without limitation, this section 8.2 and
the amendments to the Credit Agreement effected by this Amendment), nor any term
or provision of the Credit Agreement or any of the other Credit Documents, as
from time to time in effect, nor any term or provision of any of the other
agreements or instruments related to any of the foregoing, may be changed,
amended or otherwise modified, nor may performance thereof be waived, except
pursuant to a written instrument signed by each Borrower and all of the Lenders.
8.3. 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.
8.4. 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.
8.5. Expenses. Without limiting any terms or provisions of the Credit
Agreement, the Company agrees to pay on demand all reasonable costs and expenses
incurred by the Administrative Agent and/or any of the Lenders (including,
without limitation, reasonable out-of-pocket costs and expenses of any special
counsel for the Administrative Agent or any individual Lender; and reasonable
costs and expenses of appraisers, consultants, surveyors, independent
accountants, financial advisors, and lien and title searches and policies of
title insurance), in connection with (i) the preparation, negotiation, and
execution of this Amendment, any other documents referred to herein and any
subsequent proposed amendments to, or waivers of, the Credit Agreement or any of
the other Credit Documents, (ii) the enforcement or preservation of any rights
under the Credit Agreement and/or the other Credit Documents, as the same may
from time to time be in effect, (iii) any analysis of the financial condition of
the Company and its Subsidiaries, their
16
<PAGE>
properties, assets, operations, and/or the collateral position of the Lenders,
and/or (iv) the administration of the Credit Agreement and the other Credit
Documents, as the same may from time to time be in effect. The Administrative
Agent may debit the Company's master concentration account to the extent any
such invoices remain unpaid after 20 days.
8.6. 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.
8.7. Applicable Law. This Amendment shall be governed by and construed
in accordance with the laws of the State of New York.
8.8. Headings. The headings, captions and arrangements used in this
Amendment are for convenience only and shall not affect the interpretation of
this Amendment.
8.9. 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.
8.10. Further Assurances. Without limitation of any of the obligations
of the Company or any of its Subsidiaries under this Amendment or any of the
Credit Documents, the Company will, and will cause each of its Subsidiaries to,
at the expense of the Company, make, execute, endorse, acknowledge, file and/or
deliver to the Administrative Agent, the Collateral Agent and/or the Lenders,
from time to time, all such agreements, mortgages, deeds of trust, trust deeds,
security agreements, pledge agreements, collateral assignments, conveyances,
financing statements, transfer endorsements, powers of attorney, certificates,
and other assurances or instruments, and take such further lawful steps and
actions, as the Administrative Agent may consider reasonably necessary or
appropriate in order to give full effect to the intent and provisions of this
Amendment and the other Credit Documents.
8.11. Jury Trial Waiver, Limitations of Liability, etc. For the
avoidance of doubt, the parties confirm that the provisions of section 13.8(c),
section 13.17, 13.18, 13.19 and 13.20 of the Credit Agreement apply to this
Amendment and the transactions contemplated hereby as fully as if such
provisions had been set forth in full in this Amendment.
8.12. 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.
[Signatures are on the following page.]
17
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered
as of the date first above written.
<TABLE>
<CAPTION>
SAFETY COMPONENTS INTERNATIONAL, KEYBANK NATIONAL ASSOCIATION,
INC. individually and as Administrative Agent
<S> <C>
By: /s/Jeffrey J. Kaplan By: /s/Brendan Sachtjen
- --------------------------------- -------------------------
Executive Vice President Senior Vice President
AUTOMOTIVE SAFETY COMPONENTS FLEET BANK
INTERNATIONAL LIMITED
By: /s/Jeffrey J. Kaplan By: /s/Andrew J. Maidman
- --------------------------------- ---------------------
Executive Vice President Vice President
AUTOMOTIVE SAFETY COMPONENTS
INTERNATIONAL GmbH & CO. K.G.,
by its General Partner, Phoenix Airbag
Verwaltungs GmbH
By:By: /s/Jeffrey J. Kaplan
- -----------------------------
Attorney in Fact
</TABLE>
18
<PAGE>
ANNEX I
INFORMATION AS TO LENDERS
<TABLE>
<CAPTION>
Name of Lender Commitment Domestic Lending Office Eurocurrency Lending Office
- --------------- -------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
KeyBank National Revolving Loan KeyBank National Association KeyBank National Association
Association Commitment: 711 Westchester Avenue 711 Westchester Avenue
White Plains, NY 10604 White Plains, NY 10604
$20,000,000
Contacts/Notification Methods:
711 Westchester Avenue
White Plains, NY 10604
Attn: Brendan Sachtjen
Fax: (914) 681-8350
Brendan Sachtjen
Senior Vice President
Direct Dial: (914) 681-8301
Contacts for Borrowings,
Payments:
Kathy Maldonado
Administrative Assistant
Direct Dial: (914) 681-8300
Fax: (914) 681-8350
Payment Instructions:
ABA # 021 300 077
Attn:
Ref: Safety Components
International, Inc.
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fleet Bank Revolving Loan Fleet Bank Eurocurrency Lending Office
Commitment: 1 Federal Street
Boston, MA 02211
$20,000,000
Contacts/Notification Methods:
777 Main Street
Mail Stop: CT/MOH21A
Hartford, CT 06115
Attn: Andrew Maidman
Direct Dial: (860) 986-4572
Fax: (860) 986-2435
Contacts for Borrowings,
Payments:
Sonia Echevarria
777 Main Street
Mail Stop: CT/MOH21B
Hartford, CT 06115
Direct Dial: (860) 986-7789
Fax: (860) 986-7624
Payment Instructions:
ABA # 021300019
Account # 1510351-03102
Attn: Sonia Echevarria
Ref: Safety Components
International, Inc.
</TABLE>
2
<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 each of such terms is
defined in the Credit Agreement referred to in the Amendment No. 6 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, (ii)
consents to all of the terms and provisions of the Credit Agreement as amended
by the Amendment, and (iii) joins in and agrees to be bound by all of the terms
and provisions and releases provided in section 6 of the Amendment which are
applicable to the Credit Parties, as fully as if the undersigned had been a
signatory to 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 or any Security 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.
ASCI HOLDINGS GERMANY (DE), INC.
ASCI HOLDINGS CZECH (DE), INC.
ASCI HOLDINGS MEXICO (DE), INC.
ASCI HOLDINGS U.K (DE), INC.
ASCI HOLDINGS ASIA (DE), INC.
VALENTEC SYSTEMS, INC.
GALION, INC.
VALENTEC INTERNATIONAL
CORPORATION, LLC
SAFETY COMPONENTS FABRIC
TECHNOLOGIES, INC.
CSSC, INC.
ASCI HOLDINGS POLAND (DE), INC.
ASCI HOLDINGS BRAZIL (DE), INC.
By: /s/Jeffrey J. Kaplan
----------------------------
Executive Vice President
of each of the above
1
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
AUTOMOTIVE SAFETY COMPONENTS INTERNATIONAL GmbH & CO. K.G.
AUTOMOTIVE SAFETY COMPONENTS INTERNATIONAL LIMITED
as Borrowers
And
THE LENDERS NAMED HEREIN
as Lenders
And
KEYBANK NATIONAL ASSOCIATION
as Administrative Agent
---------------------
AMENDMENT NO. 6
dated as of
June 23, 1999
to
CREDIT AGREEMENT
dated as of
May 21, 1997
---------------------
2
WARRANT AGREEMENT
Between
SAFETY COMPONENTS INTERNATIONAL, INC.
KEYBANK NATIONAL ASSOCIATION
and
FLEET BANK
-------------------------
Dated as of June 23, 1999
<PAGE>
WARRANT AGREEMENT ("this Agreement"), dated as of June 23, 1999, by and
among SAFETY COMPONENTS INTERNATIONAL, INC., a Delaware corporation (together
with any successors and assigns, the "Company"), KEYBANK NATIONAL ASSOCIATION
and FLEET BANK (each of KeyBank National Association and Fleet Bank
individually, an "Initial Holder" and together the "Initial Holders").
WHEREAS, the Company and certain of its subsidiaries and the Initial
Holders have previously entered into that certain Credit Agreement, dated as of
May 21, 1997, as amended by (i) Amendment No. 1 thereto, dated as of June 2,
1997, (ii) Amendment No. 2 thereto, dated as of July 15, 1997, (iii) Amendment
No. 3 thereto, dated as of July 30, 1998, (iv) Amendment No. 4 thereto, dated as
of October 9, 1998 and (v) Amendment No. 5 thereto, dated as of February 9, 1999
(as so amended, the "Credit Agreement"); and
WHEREAS, the Company has requested that the Initial Holders agree to
modify certain of the terms and provisions of the Credit Agreement by entering
into a further amendment of the Credit Agreement; and
WHEREAS, the Company proposes to issue up to 50,000 Warrants to the
Initial Holders pro rata (each a "Warrant," together the "Warrants") for the
purchase of an aggregate (subject to adjustment as herein provided) of 50,000
shares of its common stock, par value $.01 per share (the "Common Stock"),
pursuant to the Interest Rate/Fee Letter Agreement, dated June 23, 1999 (as
amended, supplemented, restated or otherwise modified from time to time, the
"Fee Letter"), by and among the Company and the Initial Holders of the Warrants
and as further consideration for the amendment to the Credit Agreement. Subject
to section 9 hereof, each Warrant entitles the holder thereof to purchase one
share of Common Stock. The shares of Common Stock deliverable upon exercise of
the Warrants are referred to herein as the "Warrant Shares."
NOW, THEREFORE, in consideration of the foregoing and for the purpose
of defining the terms and provisions of the Warrants and the respective rights
and obligations thereunder of the Company and the registered owners of the
Warrants and any security into which they may be exchanged (the "Holders"), the
parties hereby agree as follows:
SECTION 1. CERTAIN DEFINED TERMS; REPRESENTATIONS OF INITIAL
HOLDER.
1.1. Certain Defined Terms.
"Act" means the Securities Act of 1933, as amended from time to time,
and the rules and regulations of the SEC promulgated thereunder.
"Business Day" means a day other than (i) a Saturday or Sunday, (ii)
any day on which banking institutions located in the City of New York, New York
are required or authorized by law or local proclamation to close or (iii) a day
on which the New York Stock Exchange is closed.
"Current Market Price" has the meaning provided in section 9.1(e) of
this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and the rules and regulations of the SEC promulgated
thereunder.
"NASD" means the National Association of Securities Dealers, Inc.
"Prospectus" means the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Securities
covered by the Registration Statement and by all other amendments and
supplements
CL: 406188v6
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to the prospectus, including post-effective amendments and all material
incorporated by reference in such prospectus.
"Registrable Securities" means the Warrants, the Warrant Shares and any
other securities issued or issuable with respect to the Warrants or the Warrant
Shares by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization, provided that a security ceases to be a Registrable Security
when it is no longer a Transfer Restricted Security.
"Registration Statement" means any registration statement of the
Company filed with the SEC under the Act which covers the transfer of
Registrable Securities pursuant to the provisions of this Agreement, including
the Prospectus, amendments and supplements to such Registration Statement,
including post-effective amendments, and all exhibits and all material
incorporated by reference in such Registration Statement.
"SEC" means the Securities and Exchange Commission.
"Transfer Restricted Securities" means a Warrant or Warrant Share,
until such Warrant or Warrant Share (i) has been transferred under the Act in
accordance with a Registration Statement covering it or (ii) is sold pursuant to
Rule 144 under the Act.
1.2. Representations of Initial Holders. Each of the Initial Holders,
severally and not jointly, hereby represent and warrant to the Company as
follows:
(a) The Initial Holder has been afforded (i) the opportunity
to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the Warrants
and the merits and risks of investing in the Warrants and (ii) access
to information about the Company and the Company's financial condition,
results of operations, business, properties, management and prospects,
sufficient to enable it to evaluate its investment in the Warrants.
(b) The Initial Holder represents that the Initial Holder will
hold the Warrants for its own account for investment and not with a
view to distribution except in compliance with the Act. The Initial
Holder acknowledges that the Warrants have not been registered under
the Act or the securities laws of any state, and this Agreement is
being made in reliance upon an exemption from registration under the
Act for an offer and sale of securities that does not involve a public
offering.
(c) The Initial Holder is an accredited investor within the
meaning of Rule 501(a) of Regulation D promulgated under the Act.
SECTION 2. FORM OF WARRANT; EXECUTION; REGISTRATION.
2.1. Form of Warrant; Execution of Warrants. The certificates
evidencing the Warrants (the "Warrant Certificates") shall be in registered form
only and shall be in the form set forth as Exhibit A hereto. The Warrant
Certificates shall be signed on behalf of the Company by its Chairman of the
Board, President or one of its Vice Presidents. The signature of any such
officers on the Warrant Certificates may be manual or facsimile.
Any Warrant Certificate may be signed on behalf of the Company by any
person who, at the actual date of the execution of such Warrant Certificate,
shall be a proper officer of the Company to sign such Warrant Certificate,
although at the date of the execution of this Warrant Agreement any such person
was not such officer.
CL: 406188v6
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Each Warrant Certificate shall be dated the date it is executed by the
Company either upon initial issuance or upon division, exchange, substitution or
transfer.
2.2. Registration. The Warrant Certificates shall be numbered and shall
be registered on the books of the Company (the "Warrant Register") as they are
issued. The Company shall be entitled to treat the registered owner of any
Warrant as the owner in fact thereof for all purposes and shall not be bound to
recognize any equitable or other claim to or interest in such Warrant on the
part of any other person.
SECTION 3. TRANSFER AND EXCHANGE OF WARRANTS.
3.1. Transfers. Subject to sections 3.2, 11 and 12 hereof and the
receipt of such documentation as the Company may reasonably require, the Company
shall from time to time register the transfer of any outstanding Warrants upon
the records to be maintained by it for that purpose, upon surrender of the
Certificate or Certificates evidencing such Warrants duly endorsed or
accompanied (if required by it) by a written instrument or instruments of
transfer in form reasonably satisfactory to the Company, duly executed by the
registered Holder or Holders thereof or by the duly appointed legal
representative thereof or by a duly authorized attorney. Subject to the terms of
this Agreement, each Warrant Certificate may be exchanged for another Warrant
Certificate or Certificates entitling the Holder thereof to purchase a like
aggregate number of Warrant Shares as the Warrant Certificate or Certificates
surrendered then entitle such Holder to purchase. Any Holder desiring to
exchange a Warrant Certificate or Certificates shall make such request in
writing delivered to the Company and shall surrender, duly endorsed or
accompanied (if so required by the Company) by a written instrument or
instruments of transfer in form reasonably satisfactory to the Company, the
Warrant Certificate or Certificates to be so exchanged. Upon registration of
transfer, the Company shall issue and deliver by certified mail a new Warrant
Certificate or Certificates to the persons entitled thereto.
No service charge shall be made for any exchange or registration of
transfer of a Warrant Certificate or of Warrant Certificates, but the Company
may require payment of a sum sufficient to cover any stamp tax or other tax or
other governmental charge that is imposed in connection with any such exchange
or registration of transfer.
3.2. Restrictions on Transfer. As long as the Company has a class of
securities registered under the Exchange Act, each Holder shall be permitted to
transfer any Warrant (and the rights relating thereto under this Agreement) only
to an Affiliate (as such term is defined in the Exchange Act) of such Holder.
SECTION 4. TERM OF WARRANTS; EXERCISE OF WARRANTS; COMPLIANCE
WITH GOVERNMENT REGULATIONS; REDEMPTION.
4.1. Term of Warrants. Subject to the terms of this Agreement, each
Holder shall have the right, which may be exercised at any time on or after the
date on which the Warrant Certificate was issued until 5:00 p.m., New York City
time, on the tenth anniversary of such date (the "Exercise Period"), to receive
from the Company the number of Warrant Shares that the Holder may at the time be
entitled to receive upon exercise of such Warrants and the Warrant Shares issued
to a Holder upon exercise of its Warrants shall be duly authorized, validly
issued, fully paid, nonassessable and not subject to any preemptive rights. Each
Warrant not exercised prior to the expiration of the Exercise Period shall
become void, and all rights thereunder and all rights in respect thereof under
this Agreement shall cease as of such time.
4.2. Exercise of Warrants. During the Exercise Period, each Holder may,
subject to this Agreement, exercise from time to time some or all of the
Warrants evidenced by its Warrant Certificate(s) by (i) surrendering to the
Company such Certificate(s) with the form of election to purchase on the reverse
thereof duly filled in and signed and (ii) paying to the Warrant Agent for the
account of the Company a purchase price per Warrant Share, equal to the Current
Market Price of the Common Stock on the date the applicable Warrants are issued,
as such price may thereafter have been adjusted pursuant to section 9 hereof
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(the "Exercise Price"), for the number of Warrant Shares in respect of which
such Warrants are exercised. Warrants shall be deemed exercised on the date such
Warrant Certificate(s) are surrendered to the Company and (unless such exercise
is a Cashless Exercise) tender of payment of the Exercise Price is made. Payment
of the aggregate Exercise Price shall be made in cash by wire transfer of
immediately available funds to the Company or by certified or official bank
check or checks to the order of the Company or by any combination thereof.
Notwithstanding the above, a Warrant may also be exercised solely by the
surrender of the Warrant Certificate, and without the payment of the Exercise
Price in cash, for such number of Warrant Shares equal to the product of (x) the
number of Warrant Shares for which such Warrant is exercisable with payment of
the Exercise Price as of the date of exercise and (y) the Cashless Exercise
Ratio. For purposes of this Agreement, the "Cashless Exercise Ratio" shall equal
a fraction, the numerator of which is the excess of the Current Market Price per
share of Common Stock on the date of exercise (calculated as set forth in
section 9.1(e) hereof) over the Exercise Price per share of Common Stock of the
Warrant as of the date of exercise and the denominator of which is the Current
Market Price per share of Common Stock on the date of exercise (calculated as
set forth in section 9.1(e) hereof). An exercise of a Warrant in accordance with
the immediately preceding sentences is herein called a "Cashless Exercise." Upon
surrender of a Warrant Certificate evidencing more than one Warrant in
connection with the Holder's option to elect a Cashless Exercise, such Holder
shall specify the number of Warrants to be exercised pursuant to such Cashless
Exercise, and the number of Warrant Shares deliverable upon such Cashless
Exercise shall be equal to the number of Warrant Shares for which such Warrants
are so exercised multiplied by the Cashless Exercise Ratio. All provisions of
this Agreement shall be applicable with respect to a Cashless Exercise of less
than the full number of Warrants evidenced by the surrendered Warrant
Certificate.
Upon the exercise of any Warrants in accordance with this Agreement,
the Company shall issue and cause to be delivered with all reasonable dispatch,
and in any event within five Business Days thereafter, to or upon the written
order of the Holder and in such name or names as the Holder may designate, a
certificate or certificates for the number of full Warrant Shares issuable upon
the exercise of such Warrants and shall take such other actions at its sole
expense as are necessary to complete the exercise of the Warrants (including,
without limitation, payment of any cash with respect to fractional interest
required under section 10 hereof). The certificate or certificates representing
such Warrant Shares shall be deemed to have been issued and any person so
designated to be named therein shall be deemed to have become a holder of record
of such Warrant Shares as of the date the Warrants are exercised thereunder.
Each Warrant Share, when issued upon exercise of the Warrants, shall be duly
authorized, validly issued, fully paid and nonassessable and shall not have been
issued in violation of any preemptive rights.
In the event that less than all of the Warrants evidenced by a Warrant
Certificate are exercised, the Holder thereof shall be entitled to receive a new
Warrant Certificate or Certificates as specified by such Holder evidencing the
remaining Warrant or Warrants, and the Company shall issue and deliver the
required new Warrant Certificate or Certificates evidencing such remaining
Warrant or Warrants pursuant to the provisions of this section 4.2 and of
section 3 hereof.
4.3. Compliance with Government Regulations; Qualification under the
Securities Laws.
(a) The Company covenants that if any shares of Common Stock
required to be reserved for purposes of exercise of Warrants require,
under any federal or state law or applicable governing rule or
regulation or any national securities exchange, registration with or
approval of any governmental authority, or listing on any such national
securities exchange, before such shares may be issued upon exercise the
Company shall, unless the Company has received an opinion of counsel to
the effect that such registration is not then permitted by such laws,
in good faith and as expeditiously as possible use its best efforts to
cause such shares to be duly so registered or approved, or listed on
such national securities exchange, as the case may be, provided that in
no event shall such shares of Common Stock be issued, and the exercise
of all Warrants shall be suspended, and the Holders promptly notified
in writing of such suspension, for the period during
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which such registration, approval or listing is required but not in
effect, provided further, that the Exercise Period shall be extended
one day for each day (or portion thereof) that any such suspension is
in effect. Notwithstanding the foregoing, any suspension resulting
solely from a failure to list the shares of Common Stock shall be
effective for a period not to exceed 90 days and the Company shall take
all necessary steps so the listing of such shares shall not be
necessary.
(b) The Company will register or otherwise qualify the shares
of Common Stock issuable upon exercise of the Warrants pursuant to the
provisions of the Act and pursuant to applicable state securities laws.
SECTION 5. PAYMENT OF TAXES.
The Company will pay all documentary stamp and other like taxes, if
any, attributable to the initial issuance and delivery of Warrant Shares upon
the exercise of Warrants, provided that the Company shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in the
issue or delivery of any Warrant Shares in a name other than that of the Holder
of the Warrants being exercised.
SECTION 6. MUTILATED OR MISSING WARRANT CERTIFICATES.
In the event that any Warrant Certificate shall be mutilated, lost,
stolen or destroyed, the Company shall issue and deliver in exchange and
substitution for and upon cancellation of the mutilated Warrant Certificate or
in lieu of and substitution for the Warrant Certificate lost, stolen or
destroyed, a new Warrant Certificate of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction of such Warrant
Certificate and an indemnity or bond, if requested by the Company, also
reasonably satisfactory to it. An applicable for such a substitute Warrant
Certificate shall also comply with such other reasonable procedures as the
Company may reasonably require.
SECTION 7. RESERVATION OF WARRANT SHARES.
The Company shall have reserved, and shall at all times keep reserved,
out of its authorized Common Stock, free of all preemptive rights, a number of
shares of Common Stock sufficient to provide for the exercise of the rights of
purchase represented by the outstanding Warrants. The transfer agent for the
Common Stock and every subsequent or other transfer agent for any shares of the
Company's capital stock issuable upon the exercise of the Warrants (each, a
"Transfer Agent") will be and are hereby irrevocably authorized and directed at
all times to reserve such number of authorized shares as shall be required for
such purpose. The Company will keep a copy of this Agreement on file with each
Transfer Agent. The Company will supply the Transfer Agent with duly executed
stock certificates for Warrant Shares required to honor outstanding Warrants
upon exercise thereof in accordance with the terms of this Agreement. The
Company covenants that all Warrant Shares which may be issued upon exercise of
Warrants are or will be duly authorized and will, upon issuance thereof as
provided herein, be validly issued, fully paid, nonassessable and free of
preemptive rights and free of all taxes, liens, charges, encumbrances and
security interests. The Company will supply its Transfer Agents with duly
executed stock certificates for such purposes and will itself provide or
otherwise make available any cash which may be payable as provided in section 10
hereof. The Company will furnish to its Transfer Agent a copy of all notices of
adjustments and certificates related thereto, transmitted to each Holder
pursuant to section 9.3 hereof.
Before taking any action that would reduce the Exercise Price pursuant
to section 9, the Company will take any and all corporate action that may be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable Warrant Shares at the Exercise Price as so adjusted.
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SECTION 8. STOCK EXCHANGE LISTINGS.
The Company shall use its best efforts to list the Warrant Shares on
each national securities exchange on which the Common Stock may at any time be
listed, if any, subject to official notice of issuance upon the exercise of the
Warrants, and shall use its best efforts to maintain such listing, so long as
any of the Common Stock shall be so listed. Any such listing and inclusion shall
be at the Company's sole expense.
SECTION 9. ADJUSTMENT OF EXERCISE PRICE; NUMBER OF WARRANT SHARES
AND SHARES OF CAPITAL STOCK INTO WHICH WARRANTS ARE
EXERCISABLE.
The number and kind of securities purchasable upon the exercise of each
Warrant, and the Exercise Price, shall be subject to adjustment from time to
time upon the happening of certain events, as hereinafter described.
9.1. Mechanical Adjustments. The number of Warrant Shares purchasable
upon the exercise of each Warrant and the Exercise Price shall be subject to
adjustment as follows:
(a) Adjustment for Change in Capital Stock. In case the
Company shall (i) pay a dividend on its outstanding shares of Common
Stock in shares of Common Stock or make a distribution of shares of
Common Stock on its outstanding shares of Common Stock, (ii) subdivide
its outstanding shares of Common Stock, (iii) combine its outstanding
shares of Common Stock into a smaller number of shares of Common Stock,
(iv) make a distribution on its outstanding shares of Common Stock in
shares of its capital stock other than Common Stock or (v) issue, by
reclassification of its shares of Common Stock, other securities of the
Company (including any such reclassification in connection with a
consolidation or merger in which the Company is the surviving entity),
the number of Warrant Shares purchasable upon exercise of each Warrant
immediately prior thereto shall be adjusted so that the Holder of each
Warrant shall be entitled to receive the kind and number of Warrant
Shares or other securities of the Company which such Holder would have
owned or have been entitled to receive upon the happening of any of the
events described above had such Warrant been exercised immediately
prior to the happening of such event or any record date with respect
thereto. If a Holder is entitled to receive shares of two or more
classes of capital stock of the Company pursuant to the foregoing upon
exercise of Warrants, the allocation of the adjusted Exercise Price
between such classes of capital stock shall be determined reasonably
and in good faith by the Board of Directors of the Company. After such
allocation, the exercise privilege and the Exercise Price with respect
to each class of capital stock shall thereafter be subject to
adjustment on terms substantially identical to those applicable to
Common Stock in this section 9. An adjustment made pursuant to this
paragraph (a) shall become effective immediately after the record date
for such event or, if none, immediately after the effective date of
such event. Such adjustment shall be made successively whenever such an
event is made.
(b) Adjustment for Rights Issue. In case the Company shall
issue rights, options or warrants (collectively, "Rights") to all
holders of its outstanding Common Stock entitling them to subscribe for
or purchase shares of Common Stock at a Price Per Share (as defined in
paragraph (e) below) that is lower at the record date mentioned below
than the then Current Market Price (as defined in paragraph (e) below)
per share of Common Stock, the number of Warrant Shares thereafter
purchasable upon the exercise of each Warrant shall be determined by
multiplying the number of Warrant Shares theretofore purchasable upon
exercise of each Warrant by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding on the date of
issuance of such Rights plus the additional Number of Shares (as
defined in paragraph (e) below) of Common Stock offered for
subscription or purchase in connection with such Rights and the
denominator of which shall be the number of shares of Common Stock
outstanding on the date of
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issuance of such Rights plus the number of shares which the aggregate
Proceeds (as defined in paragraph (e) below) received or receivable by
the Company upon exercise of such Rights would purchase at the Current
Market Price per share of Common Stock at such record date. Such
adjustments shall be made whenever Rights are issued, and shall become
effective immediately after the record date for the determination of
shareholders entitled to receive Rights.
(c) Adjustment for Other Distributions. (i) In case the
Company shall distribute to all holders of its shares of Common Stock
(x) evidences of its indebtedness or assets (excluding cash dividends
or distributions payable out of the consolidated net income of the
Company earned after the date hereof (as described in accordance with
generally accepted accounting principles as in effect immediately prior
to such event) and dividends or distributions referred to in paragraph
(a) above or (y) Rights (excluding those referred to in paragraph (b)
above) or convertible, exchangeable or exercisable securities
(collectively, "Convertible Securities") containing the right to
subscribe for or purchase debt securities or assets or securities of
the Company (such assets and securities as set forth in clauses (x) and
(y) above, collectively, "Assets"), then in each case the number of
Warrant Shares thereafter purchasable upon the exercise of each Warrant
shall be determined by multiplying the number of Warrant Shares
theretofore purchasable upon the exercise of each Warrant by a
fraction, the numerator of which shall be the Current Market Price per
share of Common Stock on the date of such distribution and the
denominator of which shall be such Current Market Price per share of
Common Stock less the fair value as of such record date as determined
reasonably and in good faith by the Board of Directors of the Company
of the portion of the Assets applicable to one share of Common Stock.
Such adjustment shall be made whenever any such distribution is made,
and shall become effective on the date of distribution retroactive to
the record date for the determination of shareholders entitled to
receive such distribution.
(ii) No adjustment shall be made pursuant to this paragraph
(c) unless, on the record date for such distribution, the Current
Market Price per share of Common Stock exceeds the fair market value of
the Assets applicable to each outstanding share of Common Stock. In the
event, and each time, that the Company distributes Assets to all
holders of its Common Stock and the Current Market Price per share of
Common Stock on the record date for such distribution is less than or
equal to the fair market value of the Assets applicable to each share
of outstanding Common Stock on such date, the Company shall either (x)
distribute Assets to the Holders of record on the record date for such
distribution when such Assets are distributed to the holders of Common
Stock as though all then outstanding Warrants had been exercised for
the number of Warrant Shares for which such Warrants are then
exercisable as of such record date or (y) irrevocably deposit Assets in
the amount distributable under clause (x) above in trust with a
reputable and financially sound trustee (a "Trustee") for the sole and
exclusive benefit of the Holders, subject only to the interests of the
Company as set forth in the last sentence of this paragraph. If the
Company elects to distribute Assets to the Holders, the Company shall,
on the date Assets are distributed to holders of Common Stock,
distribute to each Holder the Assets that such Holder would have been
entitled to receive on such date if such Holder had exercised its then
outstanding Warrants for the number of Warrant Shares for which such
Warrants are then exercisable immediately prior to the record date for
such distribution. If, however, the Company elects to deposit the
Assets due Holders in trust, the Company shall, on the fifth Business
Day after the date of the making of the distribution of such Assets to
holders of Common Stock, irrevocably deposit in trust with a Trustee
the Assets that all Holders would have been entitled to receive on such
date if all of their then outstanding Warrants had been exercised for
the number of Warrant Shares for which such Warrants are then
exercisable immediately prior to the record date for such distribution;
and each Holder shall be entitled upon exercise of Warrants to receive
the Warrant Shares then issuable upon exercise thereof, the Assets
deposited in trust in respect of such Holder's Warrants, and the
interest and dividends paid on such Assets since being placed in trust
plus all other assets, securities, money and other items of value
declared or distributed in respect of such Assets to the holders
thereof since the date the Company
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was obligated hereunder to deposit such Assets in trust. In the event
any Warrants have not been exercised by 5:00 p.m., New York City time,
on the last day of the Exercise Period, any Assets or other trust
assets shall be delivered over to the Company.
(d) Adjustment for Common Stock Issue. In case the Company
shall issue shares of its capital stock, shares of its Common Stock,
Rights containing the right to subscribe for or purchase shares of
Common Stock Convertible Securities with respect to Common Stock or
Rights to subscribe for or purchase such Convertible Securities
(collectively, the "Securities") (excluding the issuance of (i) shares,
Rights or Convertible Securities issued in any of the transactions
described in paragraph (a), (b) or (c) above, (ii) Warrant Shares
issued upon exercise of the Warrants and (iii) Securities to officers,
directors or employees of the Company as incentive compensation
pursuant to incentive compensation plans adopted by the Company at a
Price Per Share of Common Stock, in the case of the issuance of Common
Stock, or at a Price Per Share of Common Stock initially deliverable
upon conversion or exercise or exchange of such Securities, in each
case, together with any other consideration received by the Company in
connection with such issuance, more than 10% lower than the then
Current Market Price per share of Common Stock on the date the Company
fixed the offering, conversion or exercise or exchange price of such
additional shares, then the number of Warrant Shares thereafter
purchasable upon the exercise of each Warrant shall be determined by
multiplying the number of Warrant Shares theretofore purchasable upon
exercise of each Warrant by a fraction, the numerator of which shall be
the total number of shares of Common Stock outstanding on such date
plus the additional number of Shares of Common Stock offered for
subscription or purchase and the denominator of which shall be the
number of shares of Common Stock outstanding on such date plus the
number of shares of Common Stock which the aggregate Proceeds of the
total amount of Securities so offered would purchase at the Current
Market Price Per Share of Common Stock at such record date. In case the
Company shall issue and sell Securities for a consideration consisting,
in whole or in part, of property other than cash or its equivalent,
then in determining the "Price Per Share" of Common Stock and the
"consideration received by the Company" for purposes of the first
sentence and the immediately preceding sentence of this paragraph (d),
the Board of Directors of the Company shall reasonably and in good
faith determine the fair value of such property. The determination of
whether any adjustment is required under this paragraph (d), by reason
of the sale and issuance of any Securities and the amount of such
adjustment, if any, shall be made at such time and not at the
subsequent time of issuance of shares of Common Stock upon the
exercise, conversion or exchange of Securities.
(e) Current Market Price; Price Per Share. (i) For the purpose
of any computation under section 4.2 hereof or this section 9.1, the
current market price per share of Common Stock at any date shall be the
closing price for the day preceding the date of such computation (the
"Current Market Price"). The closing price for such day shall be (x) if
the Common Stock shall be then listed or admitted to trading on the New
York Stock Exchange, the closing price on the NYSE Consolidated Tape
(or any successor composite tape reporting transactions on the New York
Stock Exchange) or, if such a composite tape shall not be in use or
shall not report transactions in the Common Stock, or if the Common
Stock shall be listed on a stock exchange other than the New York Stock
Exchange, the last reported sales price regular way or, in case no such
reported sale takes place on such day, the average of the closing bid
and asked prices regular way for such day, in each case on the
principal national securities exchange on which the shares of Common
Stock are listed or admitted to trading (which shall be the national
securities exchange on which the greatest number of shares of the
Common Stock has been traded during such day) or (y) if the Common
Stock is not listed or admitted to trading, the average of the closing
bid and asked prices of the Common Stock in the over-the-counter market
as reported by National Association of Securities Dealers Automated
Quotations ("NASDAQ") or NASDAQ/NMS or comparable system then in use
or, if not so reported, the average of the closing bid and asked prices
as furnished by two members of the NASD selected reasonably and in good
faith from time to time by the Board of Directors for that purpose. In
the
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absence of one or more such quotations, the Current Market Price per
share of the Common Stock shall be determined reasonably and in good
faith by the Board of Directors of the Company.
(ii) For purposes of this section 9.1, "Price Per Share" shall
be defined and determined according to the following formula:
P = R
N
where
P = Price Per Share,
R = the "Proceeds received or receivable by the Company," which
(i) in the case of shares of Common Stock, is the total amount
received or receivable by the Company in consideration for the
issuance and sale of such shares, (ii) in the case of Rights
or of Convertible Securities with respect to shares of Common
Stock, is the total amount received or receivable by the
Company in consideration for the issuance and sale of Rights
or such Convertible Securities plus the minimum aggregate
amount of additional consideration, other than the surrender
of such Convertible Securities, payable to the Company upon
exercise, conversion or exchange thereof and (iii) in the case
of Rights to subscribe for or purchase such Convertible
Securities, is the total amount received or receivable by the
Company in consideration for the issuance and sale of such
Rights plus the minimum aggregate amount of additional
consideration, other than the surrender of such Convertible
Securities, payable upon the conversion or exchange or
exercise of such Convertible Securities, provided that in each
case the proceeds received or receivable by the Company shall
be the net cash proceeds after deducting therefrom any
compensation paid or discount allowed in the sale,
underwriting or purchase thereof by underwriters or dealers or
others performing similar services, and
N = the "Number of Shares," which (i) in the case of Common
Stock, is the number of shares issued, (ii) in the case of
Rights or of Convertible Securities with respect to shares of
Common Stock, is the maximum number of shares of Common Stock
initially issuable upon exercise, conversion or exchange
thereof and (iii) in the case of Rights to subscribe for or
purchase such Convertible Securities, is the maximum number of
shares of Common Stock initially issuable upon conversion,
exchange or exercise of such Convertible Securities.
(f) When De Minimis Adjustment May Be Deferred. No adjustment
in the number of Warrant Shares purchasable hereunder shall be required
unless such adjustment would require an increase or decrease of at
least one percent (1%) in the number of Warrant Shares purchasable upon
the exercise of each Warrant, provided that any adjustments that by
reason of this paragraph (f) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment.
All calculations shall be made to the nearest one-thousandth of a
Warrant Share and the nearest cent.
(g) Other Dilutive Events. In case any event shall occur as to
which the provisions of paragraphs (b), (c) or (d) of this section 9.1
are not strictly applicable but the failure to make an
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adjustment would not fairly protect the purchase rights represented by
this Agreement and the Warrants in accordance with the essential intent
and principles of those paragraphs, then, in each such case, the
Company shall appoint a firm of independent certified public
accountants of recognized national standing (which may be the regular
independent auditors of the Company), which shall give their opinion
upon the adjustment, if any, on a basis consistent with the essential
intent and principles established in such sections, necessary to
preserve, without dilution, the purchase rights represented by this
Agreement and the Warrants. Upon receipt of such opinion, the Company
will promptly mail a copy thereof to the Holders and shall make the
adjustments described therein.
(h) Adjustment in Exercise Price. Whenever the number of
Warrant Shares purchasable upon the exercise of each Warrant is
adjusted as herein provided, the Exercise Price payable upon exercise
of each Warrant immediately prior to such adjustment shall be adjusted
by multiplying such Exercise Price by a fraction, the numerator of
which shall be the number of Warrant Shares purchasable upon the
exercise of each Warrant immediately prior to such adjustment and the
denominator of which shall be the number of Warrant Shares purchasable
immediately thereafter.
(i) When No Adjustment Required. No adjustment in the number
of Warrant Shares purchasable upon the exercise of each Warrant need be
made under paragraphs (b), (c) and (d) of this section 9.1 if the
Company issues or distributes to each Holder of Warrants the Rights,
Convertible Securities, Securities, evidences of indebtedness or assets
referred to in those paragraphs that each Holder of Warrants would have
been entitled to receive had the Warrants been exercised for the number
of Warrant Shares for which Warrants are then exercisable prior to the
happening of such event or the record date with respect thereto. No
adjustment in the number of Warrant Shares purchasable upon the
exercise of each Warrant need be made for sales of Common Stock
pursuant to a Company plan for reinvestment of dividends or interest.
No adjustment need be made for a change in the par value or to no par
value of Warrant Shares, provided that the Exercise Price shall at no
time be less than the par value of the Common Stock of the Company. The
Company will take appropriate action to assure that the par value of
Warrant Shares shall not exceed $.01, and to reduce the par value of
its Common Stock from time to time as necessary so that such par value
shall not be more than the Exercise Price then in effect.
(j) Shares of Common Stock. For all purposes of this
Agreement, the term "shares of Common Stock" shall mean (i) the class
of stock designated as the Common Stock of the Company at the date of
this Agreement or (ii) any other class of stock resulting from
successive changes or reclassifications of such shares consisting
solely of changes in par value, or from par value to no par value, or
from no par value to par value. In the event that, at any time, as a
result of an adjustment made pursuant to paragraph (a) above, the
Holders shall become entitled to purchase any securities of the Company
other than shares of Common Stock, thereafter the number of such other
shares so purchasable upon exercise of each Warrant and the Exercise
Price of such shares shall be subject to adjustment from time to time
in a manner and on terms substantially identical to the provisions with
respect to the Warrant Shares contained in paragraphs (a) through (i)
above, and the provisions of this Agreement with respect to the Warrant
Shares shall apply on like terms to any such other securities.
(k) Expiration of Rights, etc. Upon the expiration of any
Rights or conversion or exchange or exercise rights, if any thereof
shall not have been exercised, the Exercise Price and the number of
Warrant Shares purchasable upon the exercise of each Warrant shall,
upon such expiration, be readjusted and shall thereafter be such as it
would have been had it been originally adjusted (or had the original
adjustment not been required, as the case may be) as if (A) the only
shares of Common Stock so issued were the shares of Common Stock, if
any, actually issued or sold
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upon the exercise of such Rights or conversion or exchange or exercise
rights and (B) such shares of Common Stock, if any, were issued or sold
for the consideration actually received by the Company upon such
exercise plus the aggregate consideration, if any, actually received by
the Company for the issuance, sale or grant of all of such Rights or
conversion or exchange or exercise rights whether or not exercised,
provided that no such readjustment shall have the effect of increasing
the Exercise Price or decreasing the number of Warrant Shares
purchasable upon the exercise of each Warrant by any amount in excess
of the amount of the adjustment initially made in respect of the
issuance, sale or grant of such Rights or conversion or exchange or
exercise rights.
9.2. Voluntary Adjustment by the Company. The Company may, at its
option, at any time during the term of the Warrants, reduce the then current
Exercise Price to any amount deemed appropriate by the Board of Directors of the
Company, provided that the Company may not in any case increase the Exercise
Price pursuant to this section 9.2, and provided further, that if the Company
elects to reduce the then current Exercise Price, such reduction shall remain in
effect for at least a 30-day period, after which time the Company may, at its
option, reinstate the Exercise Price in effect immediately prior to such
reduction, provided, however, that notice of such option to reinstate shall have
been given to the Holders of the Warrants prior to such reduction.
9.3. Notice of Adjustment. Whenever the number of Warrant Shares
purchasable upon the exercise of each Warrant or the Exercise Price of Warrant
Shares is adjusted as herein provided, the Company shall promptly mail at its
sole expense by first class mail, postage prepaid, to each Holder notice of such
adjustment or adjustments and a certificate of the Chief Financial Officer of
the Company setting forth the number of Warrant Shares purchasable upon the
exercise of each Warrant and the Exercise Price of Warrant Shares after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth in reasonable detail the computations by which such
adjustment was made.
9.4. Preservation of Purchase Rights upon Merger or Consolidation. In
case of any consolidation of the Company with or merger of the Company with or
into another entity or the sale of all or substantially all the Company's
assets, the Company or such successor entity shall execute and deliver to the
Holders an agreement that each Holder shall have the right thereafter, upon
payment of the Exercise Price in effect immediately prior to such action, to
purchase upon exercise of each Warrant the kind and amount of shares and other
securities and property (including cash) that such Holder would have owned or
have been entitled to receive after the happening of such consolidation or
merger or sale of assets had such Warrant been exercised immediately prior to
such action. The Company shall at its sole expense mail by first class mail,
postage prepaid, to each Holder notice of the execution of any such agreement.
Such agreement shall provide for adjustments, which shall be substantially
identical to the adjustments provided for in this section 9. In addition, the
Company shall not merge or consolidate with or into any other entity or enter
into any agreement to sell all or substantially all of its assets unless the
successor entity (if not the Company) shall expressly assume, by supplemental
agreement executed and delivered to the Holders, and satisfactory to the
Holders, the due and punctual performance and observance of each and every
covenant and condition of this Agreement to be performed and observed by the
Company. The provisions of this section 9.4 shall similarly apply to successive
consolidations or mergers.
9.5. No Impairment of Holder's Rights. The Company shall not, by
amendment of its Certificate of Incorporation or through any consolidation,
merger, reorganization, transfer of assets, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms hereof or of the Warrants, but shall at all
times in good faith carry out all such terms and take all such action as may be
necessary or appropriate in order to protect the rights of the Holders against
dilution or other impairment. Without limiting the generality of the foregoing,
the Company (a) shall not permit the par value of any shares of stock receivable
upon the exercise of the Warrants to exceed the amount payable therefor upon
such exercise, (b) shall take all such action as may be necessary or appropriate
in order that the Company may validly and legally issue, free from preemptive
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rights, fully paid and nonassessable shares of stock upon the exercise of all
Warrants from time to time outstanding and (c) shall not take any action that
results in any adjustment of the Exercise Price if the total number of shares of
Common Stock issuable after the action upon the exercise of all the Warrants
would exceed the total number of shares of Common Stock then authorized by the
Company's Certificate of Incorporation and available for the purpose of issue
upon such exercise.
9.6. Statement on Warrants. Irrespective of any adjustments in the
Exercise Price of the number or kind of shares purchasable upon the exercise of
the Warrants, Warrants theretofore or thereafter issued may continue to express
the same price and number and kind of shares as are stated in the Warrants
initially issuable pursuant to this Agreement.
SECTION 10. FRACTIONAL INTERESTS.
The Company shall not be required to issue fractional Warrant Shares on
the exercise of Warrants. If more than one Warrant shall be exercised at the
same time by the same Holder, the number of full Warrant Shares which shall be
issuable upon such exercise shall be computed on the basis of the aggregate
number of Warrants so exercised. If any fraction of a Warrant Share would,
except for the provisions of this section 10, be issuable on the exercise of any
Warrant, the Company shall pay an amount in cash equal to the closing price for
one share of Common Stock on the date the Warrant Certificate is presented for
exercise (determined in accordance with the second sentence of section 9.1(e)(i)
hereof) multiplied by such fraction.
SECTION 11. NO RIGHTS AS STOCKHOLDERS; NOTICES TO HOLDERS.
Nothing contained in this Agreement or in any of the Warrants shall be
construed as conferring upon the Holders or their transferees the right to vote
or to receive dividends or the consent or to receive notice as stockholders in
respect of any meeting of stockholders for the election of directors of the
Company or any other matter, or any rights whatsoever as stockholders of the
Company.
In case:
(a) the Company shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for
or purchase shares of Common Stock or of any other subscription rights
or warrants; or
(b) the Company shall authorize the distribution to all
holders of shares of Common Stock of evidences of its indebtedness or
assets (other than cash dividends); or
(c) of any consolidation or merger to which the Company is a
party and for which approval of any shareholders of the Company is
required, or of the conveyance or transfer of a substantial portion of
the properties and assets of the Company for which approval of any
shareholders of the Company is required, or of any reclassification or
change of Common Stock issuable upon exercise of the Warrants (other
than change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or
combination), or a tender offer or exchange offer for shares of Common
Stock; or
(d) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company; or
(e) the Company proposes to take any action which would
require an adjustment of the Exercise Price pursuant to section 9
hereof;
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then the Company shall cause to be given to each Holder at its address appearing
on the Warrant Register, at least twenty (20) days prior to the applicable
record date hereinafter specified, or promptly in the case of events for which
there is no record date, by first class mail, postage prepaid, a written notice
stating (i) the date as of which the holders of record of shares of Common Stock
entitled to receive any such rights, options, warrants or distribution are to be
determined, (ii) the initial expiration date set forth in any tender offer or
exchange offer for shares of Common Stock, or (iii) the date on which any such
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation, winding up or action is expected to become effective or
consummated, as well as the date as of which it is expected that holders or
record of shares of Common Stock shall be entitled to exchange such shares for
securities or other property, if any, deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation, winding
up or action. The failure to give the notice required by this section 11 or any
defect therein shall not affect the legality or validity of any distribution,
right, option, warrant, reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation, winding up or action, or the vote upon any
of the foregoing.
SECTION 12. SEC REGISTRATION.
12.1. SEC Restrictions. Each Holder represents and warrants to the
Company that it will not transfer any Warrants or Warrant Shares (unless such
Warrants or Warrant Shares were previously transferred pursuant to an effective
registration statement under the Act) except pursuant to (i) an effective
registration statement under the Act, (ii) to the extent applicable, Rule 144
under the Act (or any similar rule under the Act relating to the disposition of
restricted securities as defined thereunder) or (iii) an opinion of counsel,
reasonably satisfactory to the Company, to the effect that an exemption from
registration under the Act is available in connection with such transfer.
12.2. Certificates To Bear Legends. The Warrant Certificates shall
initially bear the following legend, by which each Holder shall be bound.
"THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES
OF COMMON STOCK OR OTHER SECURITIES ISSUABLE UPON EXERCISE
THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), (ii) TO THE EXTENT APPLICABLE,
RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT
RELATING TO THE DISPOSITION OF SECURITIES) OR (iii) AN OPINION
OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY, TO THE
EFFECT THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS
AVAILABLE IN CONNECTION WITH SUCH SALE.
The Warrant Shares or other securities issued upon exercise of the
Warrants shall initially, unless previously issued pursuant to an effective
registration statement under the Act, bear the following legend, by which the
holder thereof shall be bound;
"THE SHARES OR OTHER SECURITIES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i)
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), (ii) TO THE EXTENT
APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER
THE ACT RELATING TO THE DISPOSITION OF SECURITIES) OR (iii) AN
CL: 406188v6
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OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY, TO
THE EFFECT THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT
IS AVAILABLE IN CONNECTION WITH SUCH SALE.
12.3. Registration Statements.
(a) Piggyback Registration Rights. In the event the Company
proposes to file a registration statement under the Act prior to the
last day of the Exercise Period with respect to an offering of any
class of equity security for the Company's account and/or for the
account of others (other than in connection with an exchange offer or a
registration statement on Form S-4 or S-8 or other similar registration
statements not available to register securities so requested to be
included) which registration statement the Company believes will be or
become effective at any time on or after the first day of the Exercise
Period, the Company shall in each case give written notice of such
proposed filing to each Holder of Registrable Securities in each case
at least 30 days before the earlier of the anticipated or the actual
effective date of the Registration Statement and at least 10 days
before the initial filing of such Registration Statement. Such notice
shall offer to such Holders the opportunity to include in such
Registration Statement such number of Registrable Securities as they
may request. Holders desiring inclusion of Registrable Securities in
such registration statement shall so inform the Company by written
notice, given within 10 days of the giving of such notice by the
Company in accordance with the provisions of Section 15 hereof. The
Company shall permit, or shall cause the managing underwriter or
underwriters of a proposed offering to permit, the Holders of
Registrable Securities requested to be included in the Registration
Statement to include the transfer of such securities in the proposed
offering on the same and conditions as applicable to securities of the
Company, if any, included therein for the account of any person other
than the Company and the holders of Registrable Securities and in any
event on such terms as are customary for holders of securities of a
company to be offered in a public underwritten offering by selling
security holders, provided that to the extent the terms of this
Agreement are applicable, the terms of this Agreement shall control.
Notwithstanding the foregoing, if any such managing underwriter or
underwriters shall advise the Company and the Holders of Registrable
Securities in writing that, in its opinion, the distribution of
securities by holders thereof, including all or a portion of Regis
trable Securities, requested to be included in the registration
statement concurrently with the securities being registered by the
Company would materially adversely affect the distribution of the
securities by the Company for its own account, then the Company will
include in the registration, to the extent of the number of securities
that the Company is so advised can be sold in the offering, first,
securities proposed by the Company to be sold for its own account and,
second, Registrable Securities and securities of the Company held by
any other holders thereof whose rights to have securities of the
Company included in the registration pre-date those of the Holders of
Registrable Securities, pro rata on the basis of the number of
securities so proposed to be sold and so requested to be included. The
Company, in its sole discretion, may decide to suspend any offering
under, or to terminate, any such registration statement at any time.
(b) No Holder of Registrable Securities may participate in any
underwritten registration hereunder unless such Holder (i) agrees to
sell such Holder's Registrable Securities on the basis provided in any
underwriting arrangements approved by the Holders of not less than a
majority of the Registrable Securities and (ii) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of
such underwriting arrangements.
12.4. Registration Procedures. In connection with any Registration
Statement, the Company shall effect such registrations to permit the offering
and sale of the Registrable Securities in accordance with
CL: 406188v6
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the intended method or methods of disposition thereof, and pursuant thereto the
Company shall as expeditiously as possible:
(a) Before filing a Registration Statement, any amendments or
supplements thereto or to any related Prospectus (including documents
that would be incorporated or deemed to be incorporated therein by
reference, including such documents, filed under the Exchange Act that
would be incorporated therein by reference), the Company shall afford
promptly to the Holders of the Registrable Securities covered by the
Registration Statement, their counsel and the managing underwriter or
underwriters, if any, an opportunity to review copies of all such
documents proposed to be filed a reasonable time prior to the proposed
filing thereof. The Company shall not file any Registration Statement
or Prospectus or any amendments or supplements thereto if the Holders
of the Registrable Securities covered by such Registration Statement,
their counsel, or the managing underwriter or underwriters, if any,
shall reasonably object in writing. The objections of such Persons
shall be deemed to be reasonable if such Registration Statement,
amendment, Prospectus or supplement, as applicable, as proposed to be
filed, contains a material misstatement or omission, or fails to comply
with the applicable requirements of the Act.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep such Registration Statement continuously effective
for the time periods prescribed hereby; cause the related Prospectus to
be supplemented by any required prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 (or any similar
provisions then in force) under the Act; and comply with the provisions
of the Act and the Exchange Act to the disposition of all securities
covered by such Registration Statement as so amended or in such
prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities, their
counsel and the managing underwriter or underwriters, if any, promptly
(but in any event within five Business Days), and confirm such notice
in writing, (i) when a Prospectus or any prospectus supplement or
post-effective amendment has been filed, and, with respect to the
Registration Statement or any post-effective amendment, when the same
has become effective (including in such notice a written statement that
any Holder may, upon request, obtain, without charge, one conformed
copy of such Registration Statement or post-effective amendment,
including all financial statements, schedules and exhibits thereto),
(ii) of the issuance by the SEC of any stop order suspending the
effectiveness of such Registration Statement or of any order preventing
or suspending the use of any preliminary pro spectus or the initiation
or threatening of any proceedings for that purpose, (iii) if, at any
time when a prospectus is required by the Act to be delivered in
connection with sales of the Registrable Securities, the
representations and warranties of the Company (or, if applicable, any
subsidiary of the Company) contained in any agreement (including any
underwriting agreement) contemplated by section 12.4(m) below, to the
knowledge of the Company, cease to be true and correct in any material
respect, (iv) of the receipt by the Company (or, if applicable, any
subsidiary of the Company) of any notification with respect to (A) the
suspension of the qualification or exemption from qualification of the
Registration Statement or any of the Registrable Securities covered
thereby for offer or sale in any jurisdiction or (B) the initiation or
threatening of any proceeding for such purpose, (v) of the happening of
any event or information becoming known that requires the making of any
changes in such Registration Statement, Prospectus or documents so
that, in the case of such Registration Statement, it will not contain
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading and, in the case of the Prospectus, it will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading and (vi) of the Company's reasonable determination
that a post-effective amendment to such Registration Statement would be
appropriate.
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<PAGE>
(d) Use every reasonable effort to prevent the issuance of any
order suspending the effectiveness of the Registration Statement or of
any order preventing or suspending the use of a Prospectus or
suspending the qualification (or exemption from qualification) of any
of the Registrable Securities covered thereby for sale in any
jurisdiction, and, if any such order is issued, to obtain the
withdrawal of any such order at the earliest possible moment.
(e) If requested by the managing underwriter or underwriters,
if any, or the Holders of a majority of the Registrable Securities
being sold in connection with an underwritten offering, (i) promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter or underwriters, if any, or
such Holders reasonably request to be included therein to comply with
applicable law, (ii) make all required filings of such prospectus
supplement or such post-effective amendment as soon as practicable
after the Company (and, if applicable, a subsidiary of the Company) has
received notification of the matters to be incorporated in such
prospectus supplement or post-effective amendment and (iii) supplement
or make amendments to such Registration Statement.
(f) Furnish to each Holder of Registrable Securities who so
requests and to counsel for the holders of Registrable Securities and
each managing underwriter, if any, without charge, one conformed copy
of the Registration Statement and each post-effective amendment
thereto, including all financial statements, schedules and exhibits,
and of all documents incorporated or deemed to be incorporated therein
by reference.
(g) Deliver to each Holder of Registrable Securities, their
counsel and each underwriter, if any, without charge, as many copies of
each Prospectus (including each form of prospectus) and each amendment
or supplement thereto as such persons may reasonably request; and
subject to the last paragraph of this Section 12.4, the Company hereby
consents to the use of each such Prospectus and each amendment or
supplement thereto by each of the holders of Registrable Securities and
the underwriter or underwriters or agents, if any, in connection with
the offering and sale of the Registrable Securities covered by such
Prospectus and any amendment or supplement thereto.
(h) Prior to any offering of Registrable Securities, to
register or qualify, and cooperate with the holders of Registrable
Securities, the underwriter or underwriters, if any, and their
respective counsel in connection with the registration or qualification
(or exemption from such registration or qualification) of, such
Registrable Securities for offer and sale under the securities or Blue
Sky laws of such jurisdictions within the United States as may be
reasonably requested by the Holders of Registrable Securities, or as
the managing underwriter or underwriters reasonably request in writing;
keep each such registration or qualification (or exemption therefrom)
effective during the period during which the Registration Statement is
required to be kept effective and do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions
of the securities covered thereby, provided that the Company will not
be required to (A) qualify generally to do business in any jurisdiction
where it is not then so qualified, (B) take any action that would
subject it to general service of process in any such jurisdiction where
it is not then so subject or (C) become subject to taxation in any
jurisdiction where it is not then so subject.
(i) Cooperate with the Holders of Registrable Securities and
the managing underwriter or underwriters, if any, to facilitate the
timely preparation and delivery of certificates representing
Registrable Securities to be sold, which certificates shall not bear
any restrictive legends whatsoever and shall be in a form eligible for
deposit with The Depository Trust Company ("DTC"); and enable such
Registrable Securities to be in such denominations and registered in
such names as the managing underwriter or underwriters, if any, or
Holders may reasonably request at least two Business Days prior to any
sale of Registrable Securities in a firm commitment underwritten public
offering.
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(j) Use its best efforts to cause the Registrable Securities
covered by the Registration Statement to be registered with or approved
by such other governmental agencies or authorities within the United
States as may be necessary to enable the seller or sellers thereof or
the underwriter or underwriters, if any, to complete the transfer of
such Registrable Securities.
(k) Upon the occurrence of any event contemplated by section
12.4(c)(v) or 12.4(c)(vi) above, as promptly as practicable prepare a
supplement or post-effective amendment to the Registration Statement or
a supplement to the related Prospectus or any document incorporated or
deemed to be incorporated therein by reference, and, subject to section
12.4(a) hereof, file such with the SEC so that, as thereafter delivered
to the purchasers of Registrable Securities being sold thereunder, such
Prospectus will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading and will otherwise comply
with law.
(l) Prior to the effective date of the Registration Statement,
(i) provide the registrar for the Warrant Shares or such other
Registrable Securities with printed certificates for such securities
which certificates shall not bear any restrictive legends whatsoever
and shall be in a form eligible for deposit with DTC and (ii) provide a
CUSIP number for such securities.
(m) Enter into an underwriting agreement in form, scope and
substance as is customary in underwritten offerings and take all such
other actions as are reasonably requested by the managing underwriter
or underwriters in order to expedite or facilitate the registration and
transfer of such Registrable Securities in any underwritten offering to
be made of the Registrable Securities in accordance with this Agreement
and in connection therewith, (i) make such representations and
warranties to the underwriter or underwriters with respect to the
business of the Company and the subsidiaries of the Company and the
Registration Statement, Prospectus and documents, if any, incorporated
or deemed to be incorporated by reference therein, in each case in
form, substance and scope as are customarily made by issuers to
underwriters in underwritten offerings, and confirm the same if and
when requested; (ii) obtain "cold comfort" letters and updates thereof
(which letters and updates shall be reasonably satisfactory in form,
scope and substance to the managing underwriter or underwriters) from
the independent certified public accountants of the Company and, if
necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company
for which financial statements and financial data are, or are required
to be, included in the Registration Statement, addressed to each of the
underwriters, such letters to be in customary form and covering matters
of the type customarily covered in "cold comfort" letters in connection
with underwritten offerings; and (iii) if an underwriting agreement is
entered into, assume that such underwriting agreement contains
indemnification provisions and procedures no less favorable to the
Holders than those set forth in section 12.6 hereof (or such other
provisions and procedures acceptable to Holders of a majority of
Registrable Securities covered by such Registration Statement and the
managing underwriter or underwriters or agents) with respect to all
parties to be indemnified pursuant to said section; and (iv) obtain
opinions of counsel to the Company (and, if applicable, the
subsidiaries of the Company) and updates thereof (which counsel and
opinions (in form, scope and substance) shall be reasonably
satisfactory to the Holders and, if in connection with an underwritten
offering, to the managing underwriter or underwriters), covering the
matters customarily covered in opinions requested in public offerings
and such other matters as may be reasonably requested. The above shall
be done at each closing under such underwriting agreement, or as and to
the extent required thereunder.
(n) Make available for inspection by a representative of the
Holders of Registrable Securities being sold, any underwriter
participating in any such disposition of Registrable Securities, if
any, and any attorney or accountant retained by such representative of
the holders or underwriter (collectively, the "Inspectors"), at the
offices where normally kept, during reasonable business
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hours, all financial and other records, pertinent corporate documents
and properties of the Company and the subsidiaries of the Company, and
cause the officers, directors and employees of the Company and the
subsidiaries of the Company to supply all information in each case
reasonably requested by any such Inspector in connection with such
Registration Statement.
(o) Comply with all applicable rules and regulations of the
SEC and make generally available to its securityholders earnings
statements satisfying the provisions of section 11(a) of the Act and
Rule 158 thereunder (or any similar rule promulgated under the Act) no
later than 45 days after the end of any 12-month period (or ninety days
after the end of any 12-month period if such period is a fiscal year
(1) commencing at the end of any fiscal quarter in which Registrable
Securities are sold to an underwriter or to underwriters in a firm
commitment or best efforts underwritten offering and (ii) if not sold
to an underwriter or to underwriters in such an offering, commencing on
the first day of the first fiscal quarter of the Company after the
effective date of the Registration Statement, which statements shall
cover said 12-month periods.
Each seller of Registrable Securities as to which any
registration is being effected agrees, as a condition to the
registration obligations with respect to such Holder provided herein,
to furnish to the Company, as the Company may, from time to time,
reasonably request in writing, (i) such information specified in item
507 of Regulation S-K under the Act, (ii) if such Holder's plan of
distribution includes any manner of offer or sale other than ordinary
course sales in the public markets through brokers at ordinary rates of
commission, such information as is required by item 508 of Regulation
S-K and (iii) such information otherwise required by the Act or the
SEC, for use in connection with any Registration Statement or
Prospectus or preliminary Prospectus included therein. The Company may
exclude from such registration the Registrable Securities of any seller
who unreasonably fails to furnish such information within a reasonable
time after receiving such request. If the identity of a seller of
Registrable Securities is to be disclosed in the Registration
Statement, such seller shall be permitted to include all information
regarding such seller as it shall reasonably request.
Each Holder of Registrable securities agrees by acquisition of
such Registrable Securities that, upon receipt of any notice from the
Company of the happening of any event of the kind described in section
12.4(c)(ii), 12.4(c)(iv), 12.4(c)(v), or 12.4(c)(vi), such Holder will
forthwith discontinue transfer of such Registrable Securities covered
by the Registration Statement or Prospectus until such Holder's receipt
of the copies of the supplemented or amended Prospectus contemplated by
section 12.4(k), or until it is advised in writing by the Company that
the use of the applicable prospectus may be resumed, and has received
copies of any amendments or supplements thereto, and, if so directed by
the Company, such Holder will deliver to the Company or destroy all
copies, other than permanent file copies, then in such Holder's
possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice.
12.5. Registration Expenses. All fees and expenses incident to the
performance of or compliance with the provisions of section 12 of this Agreement
by the Company shall be borne by the Company whether or not the Registration
statement is filed or becomes effective, including, without limitation, (i) all
registration fees (including, without limitation, (A) fees with respect to
filings required to be made with the NASD in connection with an underwritten
offering and (B) fees and expenses of compliance with state securities or Blue
Sky laws (including, without limitation, fees and disbursements of counsel for
the underwriter or underwriters in connection with Blue Sky qualifications of
the Registrable Securities and determination of the eligibility of the
Registrable Securities for investment under the laws of such juris dictions as
provided in section 12.4(h)), (ii) reasonable printing expenses (including,
without limitation, expenses of printing certificates for Registrable Securities
in a form eligible for deposit with DTC and of printing prospectuses if the
printing of prospectuses is requested by the managing underwriter or
underwriters, if any, or, in respect of Registrable Securities, by the Holders
of a majority of Registrable
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<PAGE>
Securities included in any Registration Statement), (iii) fees and disbursements
of all independent certified public accountants referred to in section
12.4(m)(ii) (including, without limitation, the expenses of any special audit
and "cold comfort" letters required by or incident to such performance), (iv)
the fees and expenses of one "qualified independent underwriter" or other
independent appraiser participating in an offering pursuant to Schedule E to the
By-laws of the NASD, (v) liability insurance under the Act, if the Company so
desires such insurance, (vi) fees and expenses of all attorneys, advisors,
appraisers and other persons retained by the Company or any subsidiary of the
Company, (vii) internal expenses of the Company and the subsidiaries of the
Company (including, without limitation, all salaries and expenses of officers
and employees of the Company and the subsidiaries of the Company performing
legal or accounting duties), (viii) the expense of any annual audit, (ix) the
fees and expenses incurred in connection with the listing of the securities to
be registered on any securities exchange and (x) the expenses relating to
printing, word processing and distributing all Registration Statements,
underwriting agreements, securities sales agreements and any other documents
necessary in order to comply with this Agreement.
12.6. Indemnification.
(a) Indemnification by the Company. The Company shall, without
limitation as to time, indemnify and hold harmless each Holder and each
holder of Registrable Securities, the officers, directors, agents,
investment advisors and employees of each of them, each person who
controls any such person (within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act) and the officers, directors, agents
and employees of each such controlling person (individually, an
"Indemnified Party") from and against any and all losses, liabilities,
claims, damages and expenses whatsoever (and actions in respect
thereof) (including but not limited to attorneys' fees and any and all
expenses whatsoever incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of any claim
asserted or in any action, proceeding or litigation), joint or several,
to which they or any of them may become subject under the Act, the
Exchange Act or other Federal or state statutory law or regulation, at
common law or otherwise, insofar an such losses, liabilities, claims,
damages or expenses (or actions in respect thereof) arise out of or are
based upon a breach of any representation, warranty or covenant made by
the Company in this Agreement or based upon any untrue statement or
alleged untrue statement of a material fact contained in any
Registration Statement, preliminary Prospectus or Prospectus, or in any
supplement thereto or amendment thereof, or arise out of or are based
upon the omission or alleged omission to; state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Indemnified Party for
any legal or other expenses reasonably incurred by the Indemnified
Party in connection with investigating or defending against such loss,
claim, damage, liability or action as such expenses are incurred;
provided, however, that the Company will not be liable in any such case
the extent, but only to the extent, that any such loss, liability,
claim, damage or expense arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Indemnified
Party expressly for use therein; and provided further, that the Company
shall not be liable to any Indemnified Party under the indemnity
agreement in this section 12.6(a) with respect to any Registration
Statement, preliminary Prospectus or Prospectus, or any supplement
thereto or amendment thereof, to the extent that any such loss, claim,
judgment, liability or expense results solely from an untrue statement
of material fact contained in, or the omission of any material fact
from, such Registration Statement, preliminary Prospectus or
Prospectus, or any supplement thereto or amendment thereof, which
untrue statement or omission was corrected in the Prospectus or any
supplement thereto or amendment thereof, if the Company shall sustain
the burden of proving that the Indemnified Party sold Registrable
Securities to the person alleging such loss, claim, damage or liability
without sending or giving, at or prior to the written confirmation of
such sale, a copy of the Prospectus, as amended, to correct any
misstatement or omission, if the Company had previously furnished
copies
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thereof to the Indemnified Party. This indemnity agreement will be in
addition to any liability that the Company may otherwise have,
including under this Agreement. The Company acknowledges that the
information provided pursuant to the second paragraph of section
12.4(o) of this Agreement that is included in any Registration
Statement, preliminary Prospectus or Prospectus, or any supplement
thereto or amendment thereof, constitutes the only information relating
to a Holder that will be furnished in writing to the Company by the
Holder expressly for inclusion in a Registration Statement, preliminary
Prospectus or Prospectus, or any supplement thereto or amendment
thereof.
(b) Indemnification by Holders of Registrable Securities. Each
Holder of Registrable Securities severally, and not jointly, hereby
agrees to indemnify and hold harmless the Company and any underwriter
and each person, if any, who controls the Company and any underwriter
within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, and each other Holder against any losses, liabilities,
claims, damages and expenses whatsoever (and actions in respect
thereof) (including but not limited to attorneys' fees and any and all
expenses whatsoever, and any and all amounts paid in settlement of any
claim asserted or in any action, proceeding or litigation), joint or
several, to which they or any of them may become subject under the Act,
the Exchange Act or other federal or state statutory law or regulation,
at common law or otherwise, insofar as such losses, liabilities,
claims, damages or expenses (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in any Registration Statement, any related
preliminary Prospectus or Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in
each case to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made therein in reliance
upon and in conformity with written information furnished to the
Company by such Holder (or its related Indemnified Party) expressly for
use therein; provided, however, that in no event shall the liability of
any Holder of Registrable Securities hereunder be, or be claimed by the
Company to be, greater in amount than the dollar amount of the proceeds
(net of payment of all expenses) received by such Holder upon the sale
of Registrable Securities pursuant to such Registration Statement
giving rise to such indemnification obligation. The Company
acknowledges that the information provided pursuant to the second
paragraph of section 12.4(o) of this Agreement that is included in any
Registration Statement, preliminary Prospectus or Prospectus, or any
supplement thereto or amendment thereof constitutes the only
information relating to a holder that will be furnished in writing to
the Company by the Holder expressly for inclusion in a Registration
Statement, preliminary Prospectus or Prospectus, or any supplement to
or amendment thereof. This indemnity will be in addition to any
liability that such Holder may otherwise have, including under this
Agreement.
(c) Conduct of Indemnification Proceedings. Promptly after
receipt by an indemnified party under paragraph (a) or (b) of this
section 12.6 of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such paragraph, notify each party
against whom indemnification is to be sought in writing of the
commencement thereof (but the failure so to notify an indemnifying
party shall not relieve it from any liability which it may have under
this section 12.6, except to the extent that it has been prejudiced in
any material respect by such failure, or from any liability which it
may otherwise have). In case any such action is brought against any
indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein, and to the extent it may elect by written notice
delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense
thereof with counsel reasonably satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnified party or parties shall
have the right to employ its or their own counsel in any such case, but
the fees and expenses of such counsel shall be at the expense of such
20
<PAGE>
indemnified party or parties unless (i) the employment of such counsel
shall have been authorized in writing by the indemnifying parties in
connection with the defense of such action, (ii) the indemnifying
parties shall not have employed counsel to have charge of the defense
of such action within a reasonable time after notice of commencement of
the action, or (iii) such indemnified party or parties shall have
reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to one or all
of the indemnifying parties (in which case the indemnifying parties
shall not have the right to direct the defense of such action on behalf
of the indemnified party or parties). The Company shall not, in
connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more
then one separate firm of attorneys (in addition to any local counsel)
at any time for such indemnified parties, which firm shall be
designated by the Holders of a majority of the Registrable Securities
then outstanding. Anything in this subsection to the contrary
notwithstanding, an Indemnifying Party shall not be liable for any
settlement of any claim or action effected without its written consent;
provided, however, that such consent was not unreasonably withhold.
(d) Contribution. In order to provide for contribution in
circumstances in which the indemnification provided for in this section
12.6 is for any reason held to be unavailable to any indemnified party
or is insufficient to hold harmless such indemnified party hereunder,
then each applicable indemnifying party shall contribute to the
aggregate losses, claims, damages, liabilities and expenses of the
nature contemplated by such indemnification provisions (including any
investigation, legal and other expenses incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or
any claims asserted, but after deducting, in the case of losses,
claims, damages, liabilities and expenses suffered by the Company, any
contribution received by the Company from persons, other than any
Indemnified Parties, who may also be liable for contribution, including
persons who control the Company any within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act) to which such
indemnifying party may be subject, in such proportion as is appropriate
to reflect the relative fault of such indemnifying party in connection
with the statements or omissions which resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the indemnifying
parties shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by the indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and each Holder agree
that it would not be just and equitable if contribution pursuant to
this section 12.6(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the
equitable considerations referred to above. Notwithstanding the
provisions of this section 12.6(d), (i) an indemnifying party that is a
Holder of Registrable Securities shall not be required to contribute
any amount in excess of the amount by which the total price at which
the Registrable Securities sold by such indemnifying party and
distributed to the public were offered to the public exceeds the amount
of any damages that such indemnifying party has otherwise paid or
required to pay by reasons of such untrue or alleged untrue statement
or omission or alleged omission and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this section
12.6(d), each person, if any, who controls any Holder within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act
shall have the same rights to contribution as such Holder, and each
person, if any, who controls the Company within the meaning of Section
15 of the Act or Section 20(a) at the Exchange Act shall have the same
rights to contribution as the Company, subject in each case to clauses
(i) and (ii) of this section 12.6(d). Any party entitled to
contribution will, promptly after receipt of notice of commencement of
any action, suit or proceeding against such party in respect of which a
claim for
21
<PAGE>
contribution may be made against another party or parties under this
section 12.6(d), notify such party or parties from whom contribution
may be sought. but the omission to so notify such party or parties
shall not relieve the party or parties from whom contribution may be
sought from any obligation it or they may have under this section 12.6
or otherwise. No party shall be liable for contribution with respect to
any action or claim settled without its written consent; provided,
however, that such written consent was not unreasonably withheld.
(e) Other Indemnities. The indemnity, contribution and expense
reimbursement obligations under this section 12.6 shall be in addition
to any liability each indemnifying person may otherwise have.
12.7. Rule 144. The Company shall file the reports required to be filed
by it under the Act and the Exchange Act and the rules and regulations adopted
by the SEC thereunder in a timely manner. The Company further covenants that it
will take such further action as any holder of Registrable Securities may
reasonably request, all to the extent required from time to time to enable such
holder to sell Registrable Securities without registration under the Act within
the limitation of the exemptions provided by (a) Rule 144 and Rule 144A under
the Act, as such Rules may be amended from time to time, or (b) any similar rule
or regulation hereafter adopted by the SEC. Upon the request of any holder of
Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with the foregoing requirements.
SECTION 13. PAYMENT IN U.S. CURRENCY.
All payments required to be made hereunder shall be made in lawful
money of the United States of America.
SECTION 14. IDENTITY OF TRANSFER AGENT.
The name and address of the Company's Transfer Agent as of the date
hereof is Continental Stock Transfer & Trust Company, 2 Broadway, New York, New
York 10004. Forthwith upon the appointment of any subsequent or other Transfer
Agent for the Common Stock, or any other shares of the Company's capital stock
issuable upon the exercise of the Warrants, the Company shall provide each
Holder with a statement setting forth the name and address of such Transfer
Agent.
SECTION 15. NOTICES.
Any notice pursuant to this Agreement by the Company to any Holder, or
by any Holder to the Company, shall be in writing and shall be delivered in
person or by facsimile transmission, or mailed first class, postage prepaid, (a)
to the Company, at its offices at 2160 N. Central Road, Fort Lee, New Jersey
07024, Attention: Jeffrey J. Kaplan, Telecopier No.: (201) 592-7502, or (b) to
KeyBank National Association, at its offices at 711 Westchester Avenue, White
Plains, New York 10604, Attention: Brendan Sachtjen, Telecopier No.: (914)
681-8350, or (c) to Fleet Bank, 777 Main Street, Mail Stop: CT/MOH21A, Hartford,
Connecticut 06115, Attention: Andrew Maidman, Telecopier No.: (860) 986-2435.
Each party hereto may from time to time change the address to which notices to
it are to be delivered or mailed hereunder by notice to the other party.
Any notice mailed pursuant to this Agreement by the Company to the
Holders shall be in writing and shall be mailed first class, postage prepaid, or
otherwise delivered to such Holders at their respective addresses in the Warrant
Register. Any Holder may change its address by notice to the Company given in
accordance with this section 15.
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SECTION 16. FURNISHING INFORMATION.
So long as the Warrants remain outstanding, the Company shall cause its
annual report to stockholders and any quarterly or other financial reports
furnished by it to stockholders to be mailed within five days to the Holders, at
their addresses as set forth in the Warrant Register.
SECTION 17. SUPPLEMENTS AND AMENDMENTS.
The Company and the Holders of a majority of the Warrants may amend
this Agreement from time to time.
SECTION 18. SUCCESSORS.
All the covenants and provisions of this Agreement by or for the
benefit of the Company and the Holders shall bind and inure to the benefit of
their respective successors hereunder.
SECTION 19. APPLICABLE LAW.
THIS AGREEMENT AND EACH WARRANT ISSUED HEREUNDER SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.
SECTION 20. BENEFITS OF THIS AGREEMENT.
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company and the Holders any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, its successors and the Holders of the
Warrants.
SECTION 21. COUNTERPARTS.
This Agreement may be executed in any number of counterparts; each of
such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.
SECTION 22. CAPTIONS.
The captions of the sections and subsections of this Agreement have
been inserted for convenience only and shall have no substantive effect.
[Signatures are on the following page.]
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
as of the date first above written.
SAFETY COMPONENTS KEYBANK NATIONAL ASSOCIATION
INTERNATIONAL, INC.
By: /s/ Jeffrey J. Kaplan By: /s/ Brendan Sachtjen
- ---------------------------- --------------------------
Executive Vice President Senior Vice President
FLEET BANK
By: /s/ Andrew J. Maidman
---------------------------
Vice President
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EXHIBIT A
[Form of Warrant Certificate]
[Face]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON
STOCK OR OTHER SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
(ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR
RULE UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES) OR (iii)
AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY, TO THE
EFFECT THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE
IN CONNECTION WITH SUCH SALE.
No. ______ Warrants
Warrant Certificate
SAFETY COMPONENTS INTERNATIONAL, INC.
This Warrant Certificate certifies that , or registered assigns, is the
registered holder of Warrants expiring on [the tenth anniversary of the issue
date] (the "Warrants") to purchase Common Stock, par value $.01 per share (the
"Common Stock"), of Safety Components International, Inc., a Delaware
corporation (the "Company"). Each Warrant entitles the registered holder upon
exercise on or after the date hereof and on or before 5:00 p.m. New York City
Time on [the tenth anniversary of the issue date], to receive from the Company
one fully paid and nonassessable share of Common Stock (each such share, a
"Warrant Share") at the exercise price of [Current Market Price as defined in
the Warrant Agreement described on the reverse of this certificate] per share
(the "Exercise Price") payable (i) in cash or (ii) by certified or official bank
check. The Warrants represented by this Warrant Certificate may be exercised
upon surrender of this Warrant Certificate and payment of the Exercise Price at
the office of the Company designated for such purpose, but only subject to the
conditions set forth herein and in the Warrant Agreement referred to on the
reverse hereof.
In the alternative, Warrants may be exercised without the exchange of
funds pursuant to the net exercise provisions of section 4.2 of the Warrant
Agreement. The number of Warrant Shares issuable upon exercise of the Warrants
and the Exercise Price are subject to adjustment upon the occurrence of certain
events set forth in the Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., New York City Time, on
[the tenth anniversary of the issue date] and, to the extent not exercised by
such time, such Warrants shall expire.
This Warrant is subject to redemption at the option of the Company
after the third anniversary of the initial date of issuance of the Warrants if
certain conditions relating to the market price of the Common Stock are met, as
set forth in the Warrant Agreement.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.
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This Warrant Certificate shall be governed by and construed in
accordance with the internal laws of the State of New York.
IN WITNESS WHEREOF, Safety Components International, Inc. has caused
this Warrant Certificate to be signed by its duly authorized officer.
Dated: , ____
SAFETY COMPONENTS INTERNATIONAL, INC.
By:
Title:
2
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[Form of Warrant Certificate]
[Reverse]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring on [the tenth anniversary of the issue
date], entitling the holder on exercise to receive shares of Common Stock, par
value $.01 per share, of the Company (the "Common Stock"), and are issued or to
be issued pursuant to a Warrant Agreement dated as of June __, 1999 (the
"Warrant Agreement"), among the Company, KeyBank National Association and Fleet
Bank, which Warrant Agreement is hereby incorporated by reference in and made a
part of this instrument and is hereby referred to for a description of the
rights, limitation of rights, obligations, duties and immunities thereunder of
the Company and the holders (the words "holders" or "holder" meaning the
registered holders or registered holder) of the Warrants. A copy of the Warrant
Agreement may be obtained by the holder hereof upon written request to the
Company. Capitalized terms used herein without definition shall have the
meanings ascribed to them in the Warrant Agreement.
Warrants may be exercised at any time on or after the date hereof and
on or before 5:00 p.m., New York City Time, on [the tenth anniversary of the
issue date]. The holder of Warrants evidenced by this Warrant Certificate may
exercise them by surrendering this Warrant Certificate, with the form of
election to purchase set forth hereon properly completed and executed, together
with payment of the Exercise Price (i) in cash or (ii) by certified or official
bank check. In the alternative, Warrants may be issued without the exchange of
funds pursuant to the net exercise provisions of section 4.2 of the Warrant
Agreement. In the event that upon any exercise of Warrants evidenced hereby the
number of Warrants exercised shall be less than the total number of Warrants
evidenced hereby, there shall be issued to the holder hereof or his assignee a
new Warrant Certificate evidencing the number of Warrants not exercised. No
adjustment shall be made for any dividends on any Common Stock issuable upon
exercise of this Warrant.
The Warrant Agreement provides that upon the occurrence of certain
events the number of shares of Common Stock issuable upon the exercise of each
Warrant and the Exercise Price shall be adjusted. No fractions of a share of
Common Stock will be issued upon the exercise of any Warrant, but the Company
will pay the cash value thereof determined as provided in the Warrant Agreement.
The holders of the Warrants are entitled to certain registration rights
with respect to the Warrants and the Common Stock purchasable upon exercise of
the Warrants. Said registration rights are set forth in full in the Warrant
Agreement.
Warrant Certificates, when surrendered at the office of the Company by
the registered holder thereof in person or by legal representative or attorney
duly authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Company, a new Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company may deem and treat the registered holder(s) hereon as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, of any distribution to the holder(s) hereof, and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Neither the Warrants nor this Warrant Certificate entitles any holder hereof to
any rights of a stockholder of the Company, except as otherwise provided in the
Warrant Agreement.
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Form of Election to Purchase
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise Warrants
containing the right, represented by this Warrant Certificate, to receive shares
of Common Stock and herewith (check item) tenders payment for such shares to the
order of Safety Components International, Inc. in the amount of [market price]
per share of Common Stock in accordance with the terms hereof, as follows:
|_| $_______ in cash or by certified or official bank check to the
order of Safety Components International, Inc.; or
|_| By surrender of Warrant Shares having a Current Market Value (as
defined in the Warrant Agreement) of $ . ---------------------------
The undersigned requests that a certificate for such shares be
registered in the name of _________________ , whose address is
___________________, and that such shares be delivered to____________________ ,
whose address is___________________ .
If said numbers of shares is less than all of the shares of Common
Stock purchasable hereunder, the undersigned requests that a new Warrant
Certificate for Warrants representing the remaining balance of such Warrants be
registered in the name of , whose address is , and that such Warrant Certificate
be delivered to______________________________ , whose address
is____________________________. .
Signature
Date:
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ASSIGNMENT FORM
To assign this Warrant, fill in the form below: (I) (we) assign and
transfer this Warrant to:
(Insert Assignee's Social Security or Tax Identification Number)
(Print or type Assignee's name, address and zip code)
and irrevocably appoint to transfer this Warrant on the books of the Company.
The agent may substitute another to act for him.
Date:
Your Signature:
(Sign exactly as your name appears on the face of this
Warrant)
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C> <C>
SECTION 1. CERTAIN DEFINED TERMS; REPRESENTATIONS OF INITIAL HOLDER........................................1
1.1. Certain Defined Terms...........................................................................1
1.2. Representations of Initial Holders..............................................................2
SECTION 2. FORM OF WARRANT; EXECUTION; REGISTRATION........................................................2
2.1. Form of Warrant; Execution of Warrants..........................................................2
2.2. Registration....................................................................................3
SECTION 3. TRANSFER AND EXCHANGE OF WARRANTS...............................................................3
3.2. Restrictions on Transfer........................................................................3
SECTION 4. TERM OF WARRANTS; EXERCISE OF WARRANTS; COMPLIANCE WITH
GOVERNMENT REGULATIONS; REDEMPTION..............................................................3
4.1. Term of Warrants................................................................................3
4.2. Exercise of Warrants............................................................................3
4.3. Compliance with Government Regulations; Qualification under the Securities Laws.................4
SECTION 5. PAYMENT OF TAXES................................................................................5
SECTION 6. MUTILATED OR MISSING WARRANT CERTIFICATES.......................................................5
SECTION 7. RESERVATION OF WARRANT SHARES...................................................................5
SECTION 8. STOCK EXCHANGE LISTINGS.........................................................................6
SECTION 9. ADJUSTMENT OF EXERCISE PRICE; NUMBER OF WARRANT SHARES AND
SHARES OF CAPITAL STOCK INTO WHICH WARRANTS ARE EXERCISABLE
...............................................................................................6
9.1. Mechanical Adjustments..........................................................................6
(a) Adjustment for Change in Capital Stock.................................................6
(b) Adjustment for Rights Issue............................................................6
(c) Adjustment for Other Distributions.....................................................7
(d) Adjustment for Common Stock Issue......................................................8
(e) Current Market Price; Price Per Share..................................................8
(f) When De Minimis Adjustment May Be Deferred.............................................9
(g) Other Dilutive Events..................................................................9
(h) Adjustment in Exercise Price..........................................................10
(i) When No Adjustment Required...........................................................10
(j) Shares of Common Stock................................................................10
(k) Expiration of Rights, etc.............................................................10
9.2. Voluntary Adjustment by the Company............................................................11
9.3. Notice of Adjustment...........................................................................11
9.4. Preservation of Purchase Rights upon Merger or Consolidation...................................11
9.5. No Impairment of Holder's Rights...............................................................11
9.6. Statement on Warrants..........................................................................12
SECTION 10. FRACTIONAL INTERESTS...........................................................................12
SECTION 11. NO RIGHTS AS STOCKHOLDERS; NOTICES TO HOLDERS..................................................12
</TABLE>
i
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<TABLE>
<CAPTION>
<S> <C>
SECTION 12. SEC REGISTRATION...............................................................................13
12.1. SEC Restrictions...............................................................................13
12.2. Certificates To Bear Legends...................................................................13
12.3. Registration Statements........................................................................14
12.4. Registration Procedures........................................................................14
12.5. Registration Expenses..........................................................................18
12.6. Indemnification................................................................................19
(a) Indemnification by the Company........................................................19
(b) Indemnification by Holders of Registrable Securities..................................20
(c) Conduct of Indemnification Proceedings................................................20
(d) Contribution..........................................................................21
(e) Other Indemnities.....................................................................22
12.7. Rule 144.......................................................................................22
SECTION 13. PAYMENT IN U.S. CURRENCY............................................................................22
SECTION 14. IDENTITY OF TRANSFER AGENT.....................................................................22
SECTION 15. NOTICES........................................................................................22
SECTION 16. FURNISHING INFORMATION.........................................................................23
SECTION 17. SUPPLEMENTS AND AMENDMENTS....................................................................23
SECTION 18. SUCCESSORS.....................................................................................23
SECTION 19. APPLICABLE LAW.................................................................................23
SECTION 20. BENEFITS OF THIS AGREEMENT.....................................................................23
SECTION 21. COUNTERPARTS...................................................................................23
SECTION 22. CAPTIONS.......................................................................................23
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
DEFINITION LIST
SECTION
<S> <C>
Act.............................................................................................................1.1
Agreement..............................................................................................Introduction
Assets......................................................................................................9.1.(c)
Business Day....................................................................................................1.1
Cashless Exercise...............................................................................................4.2
Cashless Exercise Ratio.........................................................................................4.2
Common Stock...........................................................................................Introduction
Company................................................................................................Introduction
Convertible Securities......................................................................................9.1.(c)
Credit Agreement.......................................................................................Introduction
Current Market Price........................................................................................9.1.(e)
DTC.........................................................................................................12.4(i)
Exchange Act....................................................................................................1.1
Exercise Period.................................................................................................4.1
Exercise Price..................................................................................................4.2
Fee Letter.............................................................................................Introduction
Holders................................................................................................Introduction
Indemnified Party..........................................................................................12.6.(a)
Initial Holder.........................................................................................Introduction
Initial Holders........................................................................................Introduction
Inspectors..................................................................................................12.4(n)
NASD............................................................................................................1.1
NASDAQ......................................................................................................9.1.(e)
Number of Shares............................................................................................9.1.(e)
Price Per Share.............................................................................................9.1.(e)
Prospectus......................................................................................................1.1
Registrable Securities..........................................................................................1.1
Registration Statement..........................................................................................1.1
Rights......................................................................................................9.1.(b)
SEC.............................................................................................................1.1
Securities..................................................................................................9.1.(d)
Shares of Common Stock......................................................................................9.1.(j)
Transfer Agent....................................................................................................7
Transfer Restricted Securities..................................................................................1.1
Trustee.....................................................................................................9.1.(c)
Warrant................................................................................................Introduction
Warrant Certificates............................................................................................2.1
Warrant Register................................................................................................2.2
Warrant Shares.........................................................................................Introduction
Warrants...............................................................................................Introduction
</TABLE>
iii
<PAGE>
<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> 3-MOS
<FISCAL-YEAR-END> MAR-27-1999
<PERIOD-END> JUN-26-1999
<CASH> 17,433
<SECURITIES> 0
<RECEIVABLES> 47,148
<ALLOWANCES> 341
<INVENTORY> 17,743
<CURRENT-ASSETS> 89,030
<PP&E> 89,343
<DEPRECIATION> 18,011
<TOTAL-ASSETS> 223,429
<CURRENT-LIABILITIES> 48,281
<BONDS> 90,000
0
0
<COMMON> 66
<OTHER-SE> 44,963
<TOTAL-LIABILITY-AND-EQUITY> 223,429
<SALES> 63,845
<TOTAL-REVENUES> 63,845
<CGS> 54,968
<TOTAL-COSTS> 54,968
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,423
<INCOME-PRETAX> 991
<INCOME-TAX> 371
<INCOME-CONTINUING> 620
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 620
<EPS-BASIC> .12
<EPS-DILUTED> .12
</TABLE>
