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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 33-93970
INTERNATIONAL WIRE GROUP, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 43-1705942
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
101 SOUTH HANLEY ROAD, ST. LOUIS, MISSOURI 63105
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (314) 719-1000
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
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 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for at least the past 90 days.
[X] YES [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates of the registrant. (The aggregate market value shall be
computed by reference to the price at which the common equity was sold, or the
average bid and asked prices of such common equity, as of a specified date
within 60 days prior to the date of filing.)
NO ESTABLISHED PUBLISHED PUBLIC TRADING MARKET EXISTS FOR THE COMMON STOCK,
PAR VALUE $.01 PER SHARE, OF INTERNATIONAL WIRE GROUP, INC. ALL OF THE
OUTSTANDING SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE, OF INTERNATIONAL
WIRE GROUP, INC. ARE HELD BY INTERNATIONAL WIRE HOLDING COMPANY.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date (applicable only to
corporate registrants).
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OUTSTANDING AT
CLASS MARCH 25, 1998
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COMMON STOCK 1,000
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DOCUMENTS INCORPORATED BY REFERENCE NONE
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PART I
ITEM 1. BUSINESS
GENERAL
International Wire Group, Inc. (the "Company"), through its subsidiaries,
is engaged in the design, manufacture and marketing of (i) non-insulated bare
and tin-plated copper wire, (ii) insulated copper wire and (iii) wire harnesses.
The Company's products are used by a wide variety of customers primarily in the
appliance, computer and data communications, automotive and industrial equipment
industries.
- Non-insulated copper wire products (or conductors) are used to transmit
digital, video or audio signals or conduct electricity and are sold to a
variety of insulated wire manufacturers.
- Insulated wire products (copper conductors insulated with plastic or
other polymeric compounds) are incorporated in wire harnesses that
control and distribute electrical current in automobiles, trucks and
appliances.
- Wire harnesses (assemblies of wires that are terminated with connectors,
switches or other electrical devices) are sold to the major U.S.
manufacturers of household appliances and utilized in refrigerators,
washers, dryers, ranges and dishwashers.
The principal executive offices of the Company are located at 101 South
Hanley Road, Suite 400, St. Louis, Missouri 63105, and the Company's telephone
number at such address is (314) 719-1000.
The statements in this Annual Report on Form 10-K that relate to future
plans, events or performance are forward-looking statements. Actual results
could differ materially due to a variety of factors and the other risks
described in this Annual Report and the other documents the Company files from
time to time with the Securities and Exchange Commission. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date hereof. The Company undertakes no obligation to publicly
release the result of any revisions to these forward-looking statements that may
be made to reflect events or circumstances after the date hereof or that reflect
the occurrence of unanticipated events.
BACKGROUND
The Company's insulated wire manufacturing and wire harness fabrication
businesses are conducted by its Wirekraft unit, which has been in the business
of manufacturing wire and cable and fabricating wire harnesses for approximately
35 years. Wire harness operations began in 1952 as Burcliff Holdings Corporation
("Burcliff"). The insulated wire activities have their roots as a division of
Bristol Holding Corporation ("Bristol") and were initiated approximately 35
years ago. In 1987, Burcliff was acquired by Kirtland Indiana, Limited
Partnership ("KILP"), a limited partnership organized by Kirtland Capital, a
private investment firm ("Kirtland"). In 1988, Kirtland acquired Bristol and
contributed Bristol's insulated wire business (known as Wirekraft Industries)
into KILP.
In December 1992, an investor group led by Hicks, Muse, Tate and Furst
Incorporated ("Hicks Muse") acquired (the "Original Wirekraft Acquisition") KILP
and renamed the operating entity Wirekraft Industries, Inc. ("Wirekraft"). In
December 1993, Wirekraft purchased the wire manufacturing business of Ristance
Corporation ("Ristance"), a subsidiary of Echlin, Inc. Ristance, a manufacturer
of high temperature insulated copper wire, was subsequently consolidated into
Wirekraft's insulated wire business. This acquisition increased Wirekraft's
capacity as well as its product offering in the automotive, appliance and motor
leadwire markets. In 1994, Wirekraft completed a major expansion of its wire
mill in El Paso, Texas and acquired an insulating facility in Nogales, Mexico.
The El Paso expansion significantly increased the copper wire fabricating
capacity of Wirekraft and provided Wirekraft with a valuable presence in the
Southwestern U.S.
In December 1994, Wirekraft acquired (the "ECM Acquisition") Electro
Componentes de Mexico, S.A. de C.V. ("ECM") and certain related assets from
General Electric Company ("GE"). ECM functioned as the captive appliance wire
harness operation for GE's domestic appliance business. ECM has been integrated
into the wire harness operations of Wirekraft and its Mexican presence provides
Wirekraft
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significant competitive advantages. As part of the acquisition, Wirekraft
entered into an eight-year supply agreement (subsequently extended through 2006)
to supply substantially all of GE's U.S. wire harness requirements for major
kitchen and laundry appliances.
The Company's non-insulated wire manufacturing business is conducted by its
Omega unit. The predecessor of Omega Wire, Inc. ("Omega") began operations in
1973, principally as a manufacturer of copper wire used in appliances and
extension cords. In 1980, Omega acquired Auburn Wire Corporation, which expanded
Omega's product offering to include shielding wire primarily used in computer
and data communications applications. Omega expanded its shielding wire
production capabilities in 1981 by establishing an additional facility in
Hyannis, Massachusetts. In 1988, Omega was acquired by Thomas H. Lee Company and
management. Omega's product offering was expanded further to include braided
wire and textile products with the acquisition of Continental Cordage
Corporation in 1989. In 1991, Omega acquired two manufacturing facilities in New
York from Laribee Wire, a financially distressed competitor. The addition of
these two facilities significantly increased Omega's capacity to manufacture
tinplated wire as well as stranded and bunched wire products. In 1992, Omega
acquired, in exchange for certain equipment and technology, a 20% interest in
Changzhou Omega Wire Co., Ltd., a newly formed joint venture based in The
People's Republic of China. This venture enabled Omega to participate indirectly
in markets outside the U.S. In March 1995, Omega was acquired by an investor
group (including management) led by Hicks Muse (the "Original Omega
Acquisition").
International Wire Holding Company ("Holding"), the sole stockholder of the
Company, and the Company were incorporated in Delaware in April 1995 by Hicks
Muse for the purpose of combining the operations of Wirekraft and Omega (the
"Wirekraft/Omega Combination"). In June 1995, through a series of acquisitions
and mergers, the Company consummated the Wirekraft/Omega Combination with debt
and equity financing valued at $420.6 million.
On March 5, 1996, Wire Technologies, Inc. ("Wire Technologies"), a
wholly-owned subsidiary of the Company, acquired the businesses of Hoosier Wire,
Inc., Dekko Automotive Wire, Inc., Albion Wire, Inc. and Silicones, Inc., a
group of affiliated companies operating together under the trade name Dekko Wire
Technology Group ("Dekko") for total consideration of approximately $173.2
million (the "DWT Acquisition"). Dekko was engaged in the design, manufacture
and marketing of insulated and non-insulated copper wire.
On February 12, 1997, the Company acquired all of the issued and
outstanding common stock of Camden Wire Co., ("Camden") a wholly-owned
subsidiary of Oneida LTD., for total consideration of approximately $65 million
(the "Camden Acquisition"). Camden was engaged in the design, manufacture and
marketing of non-insulated bare and tin-plated copper wire.
PRODUCTS AND MARKETS
The Company is engaged in the design, manufacture and marketing of (i)
non-insulated bare and tin-plated copper wire, (ii) insulated copper wire and
(iii) wire harnesses. The Company's products are used by a variety of end users,
primarily in the appliance, computer and data communications, automotive and
industrial equipment industries. See Note 13 of the Company's Consolidated
Financial Statements for business segment information.
The following is a description of the Company's primary products and
markets served:
Non-Insulated Wire
The Company's non-insulated copper conductors are primarily used to (i)
transmit digital, video and audio signals that generally control motor functions
in appliances and industrial equipment, HVAC systems, safety control systems and
switching equipment and (ii) conduct electricity. The Company's non-insulated
wire products are sold primarily to wire insulators, who apply various
insulating materials to the conductors through an extrusion process. These wire
insulators, in turn, sell the insulated wire to a variety of customers, many of
which are in the computer and data communications industries. Within these
industries, the
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Company's non-insulated wire is generally used in wire and cable products that
(i) connect circuit boards inside personal computers ("PCs"), (ii) join PCs to
peripheral equipment and (iii) link PCs in local area and wide area networks.
The Company also manufactures non-insulated wire which is used in a variety
of industrial markets including appliance, fine wire automotive, mining and mass
transportation. The Company's non-insulated wire is used to transmit power and
signals that generally control (i) motor functions in appliances and industrial
equipment and (ii) ventilation systems, safety control systems and switching
equipment.
The Company manufactures a broad array of non-insulated copper conductors
including the following:
- Single End Wire. Single end wire is an individual wire drawn to the
customer's size requirements ranging from .08 to .002 inches in diameter.
Single end wire is used to transmit digital, video and audio signals or
low voltage current in a variety of wire products used in motor controls,
local area networks, security systems, television or telephone
connections inside homes and buildings, and water sprinkler systems.
Single end wire is capable of transmitting signals or electrical current
only between two distinct end points (terminals) such as between an
on-off switch and the starter to a motor. Single end wire is generally
the least expensive form of wire to produce due to its simple
configuration.
- Stranded Wire. Stranded wire is comprised of a number of single end
wires, twisted together in a specific geometric pattern, where each
individual wire's relative position is preserved throughout the length of
the strand. Like single end wire, stranded wire transmits digital, video
and audio signals or low voltage current but is capable of connecting
multiple terminals. This type of wire is the primary wire used in
appliance and automotive wire harnesses. In addition, stranded wire is
typically used in wire and cable products that (i) connect peripherals
such as printers to a computer, (ii) connect the internal components of a
PC, and (iii) control HVAC, security and other functions inside
buildings.
- Bunched Wire. Bunched wire is comprised of a number of single end wires
that are twisted in a random pattern rather than a specific geometric
pattern. Bunched wire is commonly used for transmission of electrical
current in lighting fixture cords, extension cords and power cords for
portable power hand tools. This type of wire provides improved
flexibility (versus single end wire) while maintaining its ability to
carry electrical currents.
- Shielding Wire. Shielding wire is comprised of varying numbers of single
end wire which are wound together in parallel construction around a
bobbin. Shielding wire does not transmit signals or voltage but rather
shields the signal traveling through the core conductor from outside
interference. This type of wire is primarily used in data communication
applications.
- Cabled Wire and Braided Wire. Cabled wire and braided wire are
combinations of single, bunched or stranded wire twisted together in
various patterns and thickness. These wires transmit electrical current
and are typically used in mining, mass transportation, automotive and
other industrial applications.
Insulated Wire
The Company's insulated wire products are sold primarily to companies that
assemble wire harnesses for installation in automobiles or appliances. The
Company manufactures a diverse array of insulated wire products including the
following:
- PVC Lead Wire and Cable. PVC lead wire and cable is copper wire that has
been insulated with polyvinyl chloride ("PVC"). This product is used
primarily in automotive wire harnesses located behind the instrument
panel or in the vehicle body that control certain functions including
turn signals and air bags.
- JIS Wire. JIS wire is copper wire insulated with PVC that is produced
according to Japanese Industrial Standards ("JIS"). The primary
difference between domestic PVC wire and JIS wire is that JIS wire is
manufactured to metric dimensions and generally has thinner insulation
than products manufactured according to U.S. Society of Automotive
Engineers Standards. JIS wire is used primarily in automotive wire
harnesses located behind the instrument panel or in the vehicle body.
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- XLPE Insulated Wire. Cross-linked polyethylene ("XLPE") wire is copper
wire insulated with polyethylene that is subjected to heat and steam
pressure ("cross-linking") to make the wire resistant to high
temperatures. This product's primary application includes use in high
temperature environments such as the engine compartment of vehicles and
in electric ranges.
- PVC Insulated Cord. PVC insulated cord is insulated wire that is
surrounded with fillers and then jacketed with PVC insulation. This
product is used primarily for wall-plug applications (cord sets) in the
appliance and power tool industries.
- Appliance Wire. Appliance wire is copper wire primarily insulated with
PVC and used in producing harnesses for a variety of appliances. The
Company also manufactures high temperature wire, insulated with silicone,
used primarily in electric ranges and niche applications such as
resistance heaters, motor leads and lighting products.
Wire Harnesses
A wire harness is comprised of an assembly of wires with connectors and
terminals attached to their ends that transmit electricity between two or more
end points. For example, a wire harness used in a washing machine will link the
washing machine's control panel with its other electrical components, such as
the motor. The Company supplies wire harnesses to most of the leading domestic
appliance manufacturers, including GE, Frigidaire, Whirlpool and Amana.
Other Products
The Company also participates in several niche businesses oriented around
its expertise and marketing presence in the appliance industry, including
resistance and appliance heaters. In addition, the Company produces truck
trailer cable assemblies that transmit electrical current from the tractor to
the trailer.
INDUSTRY TRENDS
In recent years several key trends and events developed within the
automotive and appliance industries which caused the Company to develop and
execute new business strategies to maintain customer volume levels and meet
competitive pressures. The trends and events included the implementation of the
North American Free Trade Agreement ("NAFTA"), geographic relocation of
production facilities and changes in customers' ordering patterns to match
just-in-time inventory management practices.
With NAFTA and competitive pressures, the automotive and appliance industry
accelerated the shifting of production of wire harness assemblies to lower cost
Mexican operations. In order to address the market's demands, the Company
purchased ECM in December 1994 and began moving production from the Midwest to
the Southwest and Mexico to retain its long-standing relationship with certain
major customers and to achieve cost efficiencies. As the Company increased the
transition of wire harness production to Mexican facilities it began closing
several domestic wire harness facilities in fiscal 1995.
At the time of the acquisition of KILP in 1992, the automotive marketplace
accepted KILP's manufacturing philosophy and approach to customer service.
KILP's manufacturing philosophy was geared toward meeting long lead-time orders
for large quantities of certain types of automotive insulated wire. However, due
to overall economic trends and changes within the automotive industry, KILP's
customer base began to decrease the number and frequency of long lead-time
orders and increased the number and frequency of short lead-time orders for
small quantities of insulated wire. This allowed customers the ability to
further reduce their on-hand inventories and led to more demanding customer
service expectations and a change in KILP's production philosophy to fill the
small orders and meet stringent delivery schedules. As a result, KILP's
operating costs increased, because shorter production runs created more
downtime, an increased number of setups and higher scrap rates. This shift was a
significant factor in the Company's decision to acquire Dekko, which utilized
product line focused facilities which were geared for shorter production runs
and had a history of superior customer service and on-time delivery operating on
that basis. In addition, several of these facilities were strategically located
near the Southwest and Mexico. As the Company began
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integrating facilities purchased in the DWT Acquisition, it began closing
several insulated wire facilities in fiscal 1996 and relocating production
capacity.
MARKETING AND DISTRIBUTION
The Company sells its products through a combination of direct
(Company-employed) sales people, manufacturer's representatives and
distributors. The Company's sales organization is supported by an internal
marketing staff and customer service groups. Collectively, these departments act
as a bridge between the Company's customers and its production and engineering
staff. The Company's engineers work directly with customers in designing the
wire or wire harness products to the customer's exact specifications. In
addition, engineers work closely with the Company's production managers, quality
supervisors and customer service representatives to ensure the timely delivery
of quality products.
KEY CUSTOMERS
The Company sells its products primarily to major appliance manufacturers,
automotive wire harness manufacturers and copper wire insulators who then sell
to a diverse array of end users. A substantial percentage of the Company's total
sales are to GE. Sales to GE accounted for approximately 14%, 18% and 19% of the
Company's total sales in 1997, 1996 and 1995, respectively. In connection with
the ECM Acquisition, the Company entered into a supply agreement with GE, which
expires December 31, 2006 pursuant to which the Company supplies substantially
all of GE's U.S. wire harness requirements for major kitchen and laundry
appliances.
RAW MATERIALS
The principal raw material used by the Company is copper, which is
purchased in the form of 5/16 inch rod from the major copper producers in North
America. Copper rod prices are based on market prices, which are generally
established by reference to the New York Mercantile Exchange, Inc. ("COMEX")
prices, plus a premium charged to convert copper cathode to copper rod and
deliver it to the required location. As a world traded commodity, copper prices
have historically been subject to fluctuations. However, the Company generally
passes the copper cost through to its customers. Management has no reason to
believe that this practice will change.
Other major raw materials consumed by the Company include PVC resin,
plasticizer, XLPE compound, and a wide variety of electro-mechanical components.
The Company enters into long term supply agreements on a wide variety of
materials consumed. Supplies on all critical materials are currently adequate to
meet market needs.
MANUFACTURING
The Company is committed to the highest quality standards for its products,
a standard maintained in part by continuous improvements to its production
processes and upgrades and investments to its manufacturing equipment. The
Company's equipment can be adapted to satisfy the changing needs of its
customers. The Company maintains advanced quality assurance and testing
equipment to ensure the products it manufactures will consistently meet customer
quality requirements. The following is a description of the Company's
manufacturing facilities and processes for its major product lines.
Non-Insulated Wire. As of December 31, 1997, the Company had ten facilities
dedicated to the production and distribution of non-insulated wire. Five of
these facilities are located in New York, two are located in Arkansas, one
facility is located in Indiana, one facility is located in Texas and one
facility is located in California. The manufacturing of non-insulated wire
consists of three processes: wire drawing, plating and bunching and stranding.
- Wire Drawing Process. Wire drawing involves a multi-step process in which
5/16 inch copper rod is drawn through a series of dies of decreasing
diameters.
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- Plating Process. After being drawn, the Company's wire products may be
plated through an electro-plating process. The Company has the capability
to plate copper wire with tin and other metals. Approximately 30% of the
Company's non-insulated wire products are plated with tin. The plating
process prevents the bare copper from oxidizing and also allows the wire
to be soldered, which is an important quality in many electrical
applications.
- Bunching and Stranding Process. Bunching and stranding is the process of
twisting together single strand wires to form a construction ranging from
seven to over 200 strands. If the wire is bunched, the individual strands
of wire are twisted together in a random pattern. Bunched wire is
typically used in power cords for lights and appliances. Stranded wire is
composed of a number of single end wires twisted together in a specific
geometric pattern where each strand's relative position is maintained
throughout the length of the wire. Stranded wire is typically used in
security systems, audio systems and intercom systems.
Insulated Wire. As of December 31, 1997, the Company had sixteen
manufacturing and distribution facilities used to produce and distribute
insulated wire. Seven of these facilities are located in Indiana, five are
located in Texas, two are located in Alabama, one is located in Mexico and one
is located in the Philippines. The production of insulated wire starts with
non-insulated wire (primarily manufactured internally) and involves the
following two processes:
- Compounding Process. The Company produces PVC, polyethylene, rubber and
silicone insulation formulations from basic components utilizing its own
computerized mixing and blending systems and utilizes purchased
compounds. The Company is capable of producing polymeric insulation
compounds that meet specific customer requirements.
- Extrusion Process. The Company insulates wire products with a polymeric
insulating compound through an extrusion process. Extrusion involves the
feeding, melting and pumping of insulating compounds through a die to
shape it into its final form on the wire. In order to enhance the
insulation properties of certain products, certain polymeric compounds
can be cross-linked chemically after the extrusion process. The Company
has extensive chemical cross-linking capabilities.
Wire Harnesses. As of December 31, 1997, the Company had two wire harness
manufacturing facilities in the U.S., one in Ohio and one in Indiana, two
manufacturing facilities located in Mexico and a distribution facility in Texas.
The manufacturing of wire harnesses involves the following four-step process:
- Cutting and Stripping. Insulated copper wire, obtained primarily from
internal sources, is fed through cutting machines that are programmed to
cut wire to a certain length, strip the end of the wire and attach
terminals or connectors.
- Splicing and Connecting. In the second process, the lengths of wire are
spliced or joined together and additional connectors and/or terminals are
attached. Splicing, like cutting and stripping, lends itself to
automation.
- Harness Assembly. Once these two preparatory stages have been completed,
the cut and spliced wires are brought to the assembly area. Assembly
boards are used to guide each employee on the assembly line in the
placement of designated wires.
- Quality Control. After assembly, each harness is tested for continuity
and analyzed by a trained inspector. Every assembly board is equipped
with 100% continuity testers that are designed into the assembly board.
These testers will pinpoint any defective circuits for repair or rework.
COMPETITION
As a result of the diversity of the Company's product lines, the Company
believes that no single competitor competes with the Company across the entire
spectrum of the Company's product lines. However, in each of the Company's
business segments, the Company experiences competition from at least one major
competitor. The Company competes primarily on the basis of quality, reliability,
price, reputation, customer service and delivery time. The Company believes it
maintains a leading market share position in the non-
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captive (defined as third party purchases from independent suppliers) U.S.
market for each of its business segments.
BACKLOG
Due to the manner in which it processes its orders, the Company has no
significant order backlog. The Company follows the industry practice of
producing its products on an ongoing basis to meet customer demand without
significant delay. Management believes the ability to supply orders in a timely
fashion is a competitive factor in its market, and therefore, attempts to
minimize order backlog to the extent practicable.
PATENTS AND TRADEMARKS
The Company has seven patents, nine registered trademarks and three
trademark applications. The Company does not believe that its competitive
position is dependent on patent protection or that its operations are dependent
on any individual patent or trademark or group of related patents or trademarks.
EMPLOYEES
As of December 31, 1997, the Company employed approximately 7,200 full time
employees, of which approximately 4,400 were located in Mexico and approximately
90 (all located at the Company's plant in Rolling Prairie, Indiana) were
represented by a labor union. The Company's collective bargaining agreement with
the union expires on March 12, 2000. The Company believes that it has a good
relationship with its employees.
ENVIRONMENTAL MATTERS
The Company is subject to a number of federal, state, local and foreign
environmental laws and regulations relating to the storage, handling, use,
emission, discharge, release or disposal of materials into the environment and
the investigation and remediation of contamination associated with such
materials. These laws include, but are not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act, the Water Pollution
Control Act, the Clean Air Act and the Resource Conservation and Recovery Act,
the regulations promulgated thereunder, and any state analogs. The Company's
operations also are governed by laws and regulations relating to employee health
and safety. The Company believes that it is in material compliance with such
applicable laws and regulations and that its existing environmental controls are
adequate. Further, the Company has no current plans for substantial capital
expenditures in this area.
As is the case with most manufacturers, the Company could incur costs
relating to environmental compliance, including remediation costs related to
historical hazardous materials handling and disposal practices at certain
facilities, although it does not believe that such costs would materially and
adversely affect the Company. In the past the Company has undertaken remedial
activities to address on-site soil contamination caused by historic operations.
None of these activities have resulted in any material liability. Currently, the
Company is involved with environmental monitoring activities at its Camden, New
York and Jordan, New York facilities.
The Company currently does not anticipate that compliance with
environmental laws or regulations or the costs to remediate the sites discussed
above will have material adverse effect on the Company's operations, financial
condition or competitive position. As mentioned above, however, the risk of
environmental liability and remediation costs is inherent in the nature of the
Company's business and, therefore, there can be no assurances that material
environmental costs, including remediation costs, will not arise in the future.
In addition, it is possible that future developments (e.g., new regulations or
stricter regulatory requirements) could result in the Company incurring material
costs to comply with applicable environmental laws and regulations.
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ITEM 2. PROPERTIES
The Company uses owned or leased properties as manufacturing facilities,
warehouses and offices throughout the United States, Mexico and the Philippines.
The Company's principal executive offices are located in St. Louis, Missouri.
The Company considers its plants and equipment to be modern and well maintained
and providing adequate production capacity to meet expected demand for its
products. Substantially all of the Company's owned properties are pledged to
secure the Company's indebtedness under the Company's Amended and Restated
Credit Agreement dated as of February 12, 1997, with the Chase Manhattan Bank,
Bankers Trust Company and the other lenders party thereto, as amended (the
"Amended and Restated Credit Agreement").
Listed below are the principal manufacturing and distribution facilities
operated by the Company as of December 31, 1997:
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LOCATION SQUARE FEET OWNED/LEASED PRIMARY PRODUCTS/END USE
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NON-INSULATED WIRE
Camden, NY..................... 450,000 Owned Single End, Bunched, Stranded,
Cabled and Electroplated Wire
Williamstown, NY............... 210,000 Owned Single End, Bunched, Stranded and
Cabled Wire
Bremen, IN..................... 175,000 Owned Bunched Wire
Camden, NY..................... 150,000 Leased Single End, Bunched, Stranded and
Cabled Wire
Pine Bluff, AR................. 130,000 Owned Single End, Bunched, Stranded and
Cabled Wire
Jordan, NY..................... 120,000 Leased Single End, Bunched, Stranded,
Shielding and Cabled Wire
Cazenovia, NY.................. 60,000 Owned Braided Wire
El Paso, TX.................... 57,000 Owned Bunched Wire
Pine Bluff, AR................. 40,000 Owned Shielding, Fine Pigtail and
Braided Wire
Cerritos, CA................... 19,000 Leased Distribution
INSULATED WIRE
Rolling Prairie, IN............ 200,000 Owned Automotive and Appliance
Cebu, Philippines.............. 135,000 Owned Automotive
Avilla, IN..................... 119,000 Owned Appliance
Elkmont, AL.................... 118,000 Owned Automotive
El Paso, TX.................... 101,000 Leased Automotive
El Paso, TX.................... 90,000 Owned Automotive
Corunna, IN.................... 72,000 Owned Appliance
Kendallville, IN............... 61,000 Leased Appliance and Automotive
Kendallville, IN............... 60,000 Owned Appliance and Automotive
El Paso, TX.................... 60,000 Owned Automotive
El Paso, TX.................... 50,000 Leased Distribution
Ardmore, AL.................... 45,000 Owned Automotive
Nogales, Mexico................ 42,000 Leased Automotive
Albion, IN..................... 39,000 Owned Appliance and Automotive
Corunna, IN.................... 32,000 Owned Appliance
El Paso, TX.................... 28,000 Leased Automotive
WIRE HARNESSES
Juarez, Mexico................. 120,000 Leased Appliance
Chihuahua, Mexico.............. 100,000 Owned Appliance
Bucyrus, OH.................... 47,000 Leased Truck Trailers, Farm Machinery
and Appliance
El Paso, TX.................... 38,000 Leased Distribution
Mishawaka, IN.................. 29,000 Owned Appliance, HVAC and Lawn and
Garden
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The leases on the Company's Camden, New York and Jordan, New York
facilities have remaining terms of approximately 14 years. During 1997, the
Company purchased the notes that were collateralized by the Camden and Jordan
properties from an unrelated creditor. The Company negotiated a payment schedule
with the lessor which allows the lessor to retain title to the property until
the termination of the lease at which time, the Company will have the option to
purchase the properties for a nominal purchase price.
The lease on the Company's Juarez, Mexico facility has a remaining term of
approximately five years. The leases on the Company's Bucyrus, Ohio, Nogales,
Mexico and Cerritos, California facilities have remaining terms of approximately
two years. The leases on the Company's Kendallville, Indiana and three insulated
wire facilities in El Paso, Texas have remaining terms of approximately one
year. The Company's wire harness facility in El Paso, Texas has a remaining term
of approximately one year with an option to renew for two additional 3-year
terms.
Additionally, in February 1998, the Company entered into a lease agreement
for a 91,000 square foot production facility in Chihuahua, Mexico. The Company
expects to begin production at this facility in March 1998. The lease has a term
of 10 years.
The Company believes its facilities are suitable for their present and
intended purposes and adequate for the Company's current level of operations.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to various legal proceedings and administrative
actions, all of which are of an ordinary or routine nature incidental to the
operations of the Company. The Company was served with notice of an action
styled Whirlpool Corporation v. Wirekraft Industries, Inc. (Case No.
97-2039-CK-T), initiated in the Second Judicial Circuit of the State of
Michigan, Berrien County Trial Court, Civil Division, on August 8, 1997. The
action relates to a product liability claim related to certain wire harness
products supplied to Whirlpool by one of the Company's predecessors during 1991
and 1992. The complaint filed with respect to such lawsuit does not specify an
amount of damages. The Company is investigating the merits of the claim as well
as the Company's rights of indemnification from involved third-party suppliers
and the Company's related insurance coverage. In the opinion of the Company's
management, all such proceedings and actions should not, individually or in the
aggregate, have a material adverse effect on the Company's results of
operations, financial condition or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders in the fourth
quarter of 1997.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
All of the Company's outstanding common stock is held by Holding and there
is no established public trading market for such. The Company has paid no
dividends to common stockholders since inception and does not have any present
intention to commence payment of any cash dividends. The Company intends to
retain earnings to provide funds for operation and expansion of the Company's
business and to repay outstanding indebtedness. The Company's ability to pay
such dividends is limited by the terms of its Amended and Restated Credit
Agreement and the Indentures relating to its 11 3/4% Senior Subordinated Notes
due 2005, its 14% Senior Subordinated Notes due 2005 and its 11 3/4% Series B
Senior Subordinated Notes due 2005 (collectively, the "Senior Subordinated
Notes").
9
<PAGE> 11
ITEM 6. SELECTED FINANCIAL DATA
THE COMPANY
The selected financial data below presents the financial information for
the seven months ended December 31, 1995 and for the years ended December 31,
1996 and December 31, 1997, as derived from the audited consolidated financial
statements of the Company. The selected financial data should be read in
conjunction with the consolidated financial statements of the Company and notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations," included elsewhere herein.
<TABLE>
<CAPTION>
SEVEN MONTHS
ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1996 1997
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
RESULTS OF OPERATIONS:
Net sales............................................ $ 245,583 $ 546,981 $695,148
Cost of goods sold................................... 195,221 420,823 530,310
Selling, general and administrative expenses......... 17,129 43,885 56,703
Depreciation and amortization........................ 11,020 31,341 36,026
Impairment, unusual and plant closing charges(1)..... 1,750 84,250 2,000
Inventory valuation adjustment(2).................... -- 8,500 8,500
--------- --------- --------
Operating income (loss).............................. 20,463 (41,818) 61,609
Interest expense..................................... (19,931) (43,013) (50,939)
Amortization of deferred financing costs............. (1,468) (3,701) (3,932)
Other (expense) income............................... (158) 312 (103)
--------- --------- --------
Income (loss) before income tax provision and
extraordinary item................................ (1,094) (88,220) 6,635
Income tax provision................................. 2,197 1,262 2,654
--------- --------- --------
Income (loss) before extraordinary item.............. (3,291) (89,482) 3,981
Extraordinary item(3)................................ -- -- (2,991)
--------- --------- --------
Net income (loss)............................ $ (3,291) $ (89,482) $ 990
========= ========= ========
OTHER DATA:
EBITDA, as adjusted(4)............................... $ 33,233 $ 82,273 $108,135
Capital expenditures................................. $ 5,751 $ 15,849 $ 27,760
Total assets......................................... $ 427,920 $ 531,020 $628,048
Long-term obligations (including current
maturities)....................................... $ 338,677 $ 447,667 $523,795
CASH FLOW DATA:
Net cash from (used in) operating activities......... $ 13,334 $ 31,980 $ 33,998
Net cash from (used in) investing activities......... $(346,797) $(176,108) $(86,756)
Net cash from (used in) financing activities......... $ 333,463 $ 144,128 $ 52,758
</TABLE>
- ---------------
(1) Represents charges relating to plant closings in the amounts of $1,750,
$6,000 and $2,000 in the seven months ended December 31, 1995, the year
ended December 31, 1996 and the year ended December 31, 1997, respectively.
In addition, included in the year ended December 31, 1996 are charges to
write-off goodwill principally related to the acquisition of Wirekraft in
the amount of $78,250. See Note 10 to the Company's consolidated financial
statements.
(2) Represents a pre-tax inventory valuation charge to reduce the last in, first
out ("LIFO") valuation of copper in inventory as a result of the decline in
the average price of copper during 1996 and 1997. See Note 4 to the
Company's consolidated financial statements.
(3) The extraordinary item in the year ended December 31, 1997 represents a
$2,991 loss on the early extinguishment of debt (net of income taxes of
$1,995).
(4) As used herein, "EBITDA, as adjusted" is defined as operating income (loss)
adjusted to exclude depreciation, amortization of intangible assets,
impairment, unusual and plant closing charges and other one-time charges.
EBITDA is presented because (i) it is a widely accepted indicator of a
company's ability to incur and service debt and (ii) it is the basis on
which the Company's compliance with certain financial covenants contained in
the Indentures relating to its Senior Subordinated Notes and the Amended and
Restated Credit Agreement is principally determined. However, EBITDA, as
adjusted,
10
<PAGE> 12
does not purport to represent cash provided by operating activities as
reflected in the Company's consolidated statements of cash flow, is not a
measure of financial performance under generally accepted accounting
principles ("GAAP") and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with GAAP.
Also, the measure of EBITDA, as adjusted, may not be comparable to similar
measures reported by other companies. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
WIREKRAFT (PREDECESSOR COMPANY)
The selected financial data presented below presents the financial
information of Wirekraft for the periods indicated. The data for the period
December 22, 1992 through November 30, 1993, the year ended November 30, 1994
and the six months ended May 31, 1995 are derived from the audited consolidated
financial statements of Wirekraft. In connection with the ECM Acquisition, WB
Holdings Inc. became a wholly owned subsidiary of Wirekraft, and, accordingly,
references to Wirekraft shall include WB Holdings Inc. The following information
should be read in conjunction with the audited consolidated financial statements
of Wirekraft and the notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations," included elsewhere herein.
<TABLE>
<CAPTION>
DECEMBER 22,
1992 THROUGH YEAR ENDED SIX MONTHS
NOVEMBER 30, NOVEMBER 30, ENDED MAY 31,
1993(1) 1994 1995
------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
RESULTS OF OPERATIONS:
Net sales................................. $ 181,188 $240,972 $168,053
Cost of goods sold........................ 150,092 201,602 138,851
Selling, general and administrative
expenses............................... 10,582 14,319 13,301
Depreciation and amortization............. 4,496 6,435 6,474
Compensation expense...................... -- -- 895(2)
Expenses related to sale.................. -- -- 501(3)
Expenses related to plant closings........ -- -- 2,000(4)
--------- -------- --------
Operating income.......................... 16,018 18,616 6,031
Interest expense.......................... (8,645) (10,565) (8,020)
Amortization of deferred financing
costs.................................. (1,677) (1,995) (1,657)
--------- -------- --------
Income (loss) before income taxes and
extraordinary item..................... 5,696 6,056 (3,646)
Income tax provision (benefit)............ 3,155 3,023 (2,114)
--------- -------- --------
Income (loss) before extraordinary item... 2,541 3,033 (1,532)
Extraordinary item........................ -- -- (7,835)(5)
--------- -------- --------
Net income (loss)................. $ 2,541 $ 3,033 $ (9,367)
========= ======== ========
OTHER DATA:
EBITDA, as adjusted(6).................... $ 20,514 $ 25,051 $ 15,901
Capital expenditures...................... $ 3,705 $ 6,248 $ 2,914
Total assets.............................. $ 146,671 $178,488 $241,277
Long-term obligations (including current
maturities)............................ $ 93,123 $111,639 $148,386
CASH FLOW DATA:
Net cash from (used in) operating
activities............................. $ 8,620 $ 2,318 $ (3,921)
Net cash from (used in) investing
activities............................. $(115,026) $(18,002) $(47,887)
Net cash from (used in) financing
activities............................. $ 106,646 $ 17,497 $ 51,663
</TABLE>
- ---------------
(1) On December 21, 1992, WB Holdings Inc., through the Original Wirekraft
Acquisition, acquired all of the issued and outstanding common stock of
Bristol and Burcliff.
11
<PAGE> 13
(2) Represents payments to senior management of Wirekraft for the redemption of
employee stock options in connection with the Wirekraft/Omega Combination.
(3) Represents non-recurring expenses of Wirekraft associated with the
Wirekraft/Omega Combination, which included, among other things, brokerage
and legal fees.
(4) Represents expenses related to the closing of certain domestic wire harness
facilities.
(5) The extraordinary item in the six months ended May 31, 1995 represents a
$7,835 loss on early extinguishment of debt (net of income tax of $4,930).
(6) As used herein, "EBITDA, as adjusted" is defined as operating income (loss)
adjusted to exclude depreciation, amortization of intangible assets,
impairment, unusual and plant closing charges and other one-time charges.
EBITDA is presented because (i) it is a widely accepted indicator of a
company's ability to incur and service debt and (ii) it is the basis on
which the Company's compliance with certain financial covenants contained in
the Indentures relating to its Senior Subordinated Notes and the Amended and
Restated Credit Agreement is principally determined. However, EBITDA, as
adjusted, does not purport to represent cash provided by operating
activities as reflected in the Company's consolidated statements of cash
flow, is not a measure of financial performance under GAAP and should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with GAAP. Also, the measure of EBITDA, as adjusted,
may not be comparable to similar measures reported by other companies. An
adjustment was made to EBITDA for the year ended November 30, 1993 in the
amount of $1,455. This adjustment represents charges to operations incurred
by KILP but not assumed by the Company.
12
<PAGE> 14
OMEGA (PREDECESSOR COMPANY)
The selected financial data below presents the financial information of
Omega and its predecessor, THL-Omega Holding Corporation ("THL-Omega") for the
periods indicated. The data for the years ended December 31, 1993 and 1994 and
the three months ended March 31, 1995 are derived from the audited consolidated
financial statements of THL-Omega. The data for the two months ended May 31,
1995, are derived from the audited consolidated financial statements of Omega.
The following information should be read in conjunction with the audited
consolidated financial statements of THL-Omega and Omega and the notes thereto,
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations," included elsewhere herein.
<TABLE>
<CAPTION>
THL-OMEGA OMEGA
------------------------------------- ---------
THREE TWO
MONTHS MONTHS
YEAR-ENDED DECEMBER 31, ENDED ENDED
------------------------ MARCH 31, MAY 31,
1993 1994 1995 1995(1)
--------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net sales.............................. $107,004 $134,457 $38,736 $ 23,295
Cost of goods sold..................... 80,276 98,012 29,401 17,512
Selling, general and administrative
expenses............................ 12,061 10,839 2,651 1,639
Depreciation and amortization.......... 5,191 5,761 1,459 1,233
Compensation expense................... -- -- 9,715(2) --
Expenses related to sale............... -- -- 1,689(3) --
-------- -------- ------- ---------
Operating income (loss)................ 9,476(4) 19,845 (6,179) 2,911
Interest expense....................... (6,026) (5,932) (1,478) (1,797)
Amortization of deferred financing
costs............................... (289) (262) (50) (238)
Other income........................... 772 296 32 --
-------- -------- ------- ---------
Income (loss) before income taxes and
extraordinary item.................. 3,933 13,947 (7,675) 876
Income tax provision................... 1,892 5,787 484 171
-------- -------- ------- ---------
Income (loss) before extraordinary
item................................ 2,041 8,160 (8,159) 705
Extraordinary item..................... -- -- (1,148)(5) (4,044)(6)
-------- -------- ------- ---------
Net income (loss).............. $ 2,041 $ 8,160 $(9,307) $ (3,339)
======== ======== ======= =========
OTHER DATA:
EBITDA, as adjusted(7)................. $ 14,667(4) $ 25,606 $ 6,684 $ 4,144
Capital expenditures................... $ 3,683 $ 8,667 $ 1,597 $ 581
Total assets........................... $ 85,868 $101,675 $97,657 $ 176,659
Long-term obligations (including
current maturities)................. $ 58,174 $ 56,093 $54,615 $ 128,116
CASH FLOW DATA:
Net cash from (used in) operating
activities.......................... $ 10,070 $ 11,064 $ 3,604 $ 4,987
Net cash from (used in) investing
activities.......................... $ (3,683) $ (8,667) $(1,597) $(159,661)
Net cash from (used in) financing
activities.......................... $ (6,380) $ (2,081) $(1,536) $ 154,674
</TABLE>
- ---------------
(1) On March 31, 1995, Omega, through the Original Omega Acquisition, acquired
all of the issued and outstanding common stock of THL-Omega.
(2) Represents payments to senior management for the redemption of stock options
and stock that was issued immediately prior to the Original Omega
Acquisition for consideration less than the fair value.
13
<PAGE> 15
(3) Represents expenses of the sellers associated with the Original Omega
Acquisition.
(4) During 1993 a charge of approximately $3,100 was recorded related to certain
one-time bad debt write-offs. Excluding the effects of this charge,
operating income and EBITDA, as adjusted, would have been $12,576 and
$17,767, respectively.
(5) The extraordinary item in the three months ended March 31, 1995 represents a
$1,148 loss on early extinguishment of debt (net of income taxes of $765).
(6) The extraordinary item in the two months ended May 31, 1995 represents a
$4,044 loss on early extinguishment of debt (net of income taxes of $2,082).
(7) As used herein, "EBITDA, as adjusted" is defined as operating income (loss)
adjusted to exclude depreciation, amortization of intangible assets,
impairment, unusual and plant closing charges and other one-time charges.
EBITDA is presented because (i) it is a widely accepted indicator of a
company's ability to incur and service debt and (ii) it is the basis on
which the Company's compliance with certain financial covenants contained in
the Indentures relating to its Senior Subordinated Notes and the Amended and
Restated Credit Agreement is principally determined. However, EBITDA, as
adjusted, does not purport to represent cash provided by operating
activities as reflected in the Company's consolidated statements of cash
flow, is not a measure of financial performance under GAAP and should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with GAAP. Also, the measure of EBITDA, as adjusted,
may not be comparable to similar measures reported by other companies.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
To facilitate a meaningful comparison, the following discussion and
analysis includes combined results of operations of the Company, Wirekraft,
Omega and ECM for periods prior to the Wirekraft/Omega Combination. These
combined results of operations have not been prepared in accordance with GAAP,
which does not allow for the aggregation of financial data for entities that are
not under common ownership. Nevertheless, management believes that the aggregate
financial information shown below for the periods prior to the Wirekraft/Omega
Combination is helpful in understanding the past operations of the companies
combined in the Wirekraft/Omega Combination. The Company in June 1995, through a
series of mergers and acquisitions, consummated the Wirekraft/Omega Combination.
As a result of certain transactions, including the Wirekraft/Omega Combination,
the Original Omega Acquisition and the ECM Acquisition, the Company incurred
substantial indebtedness and recorded significant amounts of goodwill, which
resulted in interest and amortization expenses for the Company substantially
greater than the interest and amortization expenses incurred by the Company's
predecessors. Additionally, the accounting bases for the Company's predecessors
differ from the accounting bases of the Company. Therefore, the results of
operations data for the Company's predecessors are not directly comparable to
the results of operations data for the Company, and the Company cautions
investors against placing undue reliance on the comparative information
contained herein.
The Company conducts its operations through two segments: (i) wire
products, which includes both non-insulated and insulated wire, and (ii) wire
harness products. The table below sets forth the major components of the results
of operations on a historical combined basis for the five months ended May 31,
1995 and on a historical basis for the seven months ended December 31, 1995, the
year ended December 31, 1996 and the year ended December 31, 1997 and should be
used in reviewing the discussion and analysis of results of operations and
liquidity and capital resources.
Included in fiscal year 1995, and referred to as "Historical Combined
Fiscal Year Ended December 31, 1995," is the five month period ended May 31,
1995 of Wirekraft, the three month period ended March 31, 1995 of THL-Omega, the
two month period ended May 31, 1995 of Omega (collectively referred to as
"Historical Combined Five Months Ended May 31, 1995") and the seven month period
ended December 31,
14
<PAGE> 16
1995 of the Company. The results of operations of Dekko and Camden are not
included in the Historical Combined Fiscal Year Ended December 31, 1995.
Included in the year ended December 31, 1996 is the year ended December 31,
1996 of the Company, which includes the results of operations of Wire
Technologies from March 5, 1996, the date of the DWT Acquisition. The results of
operations of Camden are not included in the year ended December 31, 1996.
Included in the year ended December 31, 1997 is the year ended December 31, 1997
of the Company, which includes the results of operations of Camden from February
12, 1997, the date of the Camden Acquisition.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
PREDECESSORS THE COMPANY
------------ ------------------------------------------
FIVE MONTHS SEVEN MONTHS
ENDED ENDED YEAR ENDED YEAR ENDED
MAY 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997
------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Wire sales..................... $131,831 $161,741 $385,627 $529,718
Wire harness sales............. 77,279 83,842 161,354 165,430
-------- -------- -------- --------
Net sales.............. 209,110 245,583 546,981 695,148
Cost of goods sold............. 167,456 195,221 420,823 530,310
Selling, general and
administrative expenses..... 15,714 17,129 43,885 56,703
Depreciation and
amortization................ 8,313 11,020 31,341 36,026
Impairment, unusual and plant
closing charges............. 2,000 1,750 84,250 2,000
Inventory valuation
adjustment.................. -- -- 8,500 8,500
Compensation expense........... 10,610 -- -- --
Expenses related to sale....... 2,190 -- -- --
-------- -------- -------- --------
Operating income
(loss)............... $ 2,827 $ 20,463 $(41,818) $ 61,609
======== ======== ======== ========
</TABLE>
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Net sales for the year ended December 31, 1997 were $695.1 million,
representing a $148.2 million, or 27.1%, increase over the year ended December
31, 1996. This increase occurred substantially within the wire segment, where
sales increased $144.1 million, or 37.4%, over the year ended December 31, 1996.
This increase was primarily the result of the Camden Acquisition which
contributed $119.3 million to the sales of the Company and growth in most
non-insulated markets served by the Company, including computer and electronics
and industrial. These increases were partially offset by reduced demand for
automotive lead wire and a decline in copper prices. In general, the Company
prices its products based upon a spread over the cost of copper, which results
in a decreased dollar value of sales when copper prices decrease. The average
price of copper based upon the New York Mercantile Exchange, Inc. ("COMEX")
declined to $1.03 per pound over the year ended December 31, 1997 from $1.06 per
pound during the year ended December 31, 1996. Within the wire harness segment,
sales were $165.4 million for the year ended December 31, 1997, representing a
2.5% increase over December 31, 1996. This increase was due to increased
customer demand.
Cost of goods sold as a percentage of sales decreased from 76.9% for the
year ended December 31, 1996 to 76.3% for the year ended December 31, 1997. This
improvement reflected lower current period costs achieved through the transition
of certain wire harness segment business to lower-cost Mexican facilities,
savings realized from plant consolidation actions taken in 1996, and reduced
material and logistic costs as well as the impact of declining copper prices.
Because the Company's products are typically priced at a spread over
15
<PAGE> 17
the cost of copper, a lower copper price leads to a higher gross margin
percentage but generally has no impact on gross margin dollars.
Selling, general and administrative expenses were $56.7 million for the
year ended December 31, 1997 compared to $43.9 million during the year ended
December 31, 1996, an increase of $12.8 million. Expressed as a percentage of
sales, selling, general and administrative expenses increased from 8.0% during
the year ended December 31, 1996 to 8.2% during the year ended December 31,
1997. This increase, as a percentage of sales, was partially attributable to the
effect on net sales of lower copper costs during the year ended December 31,
1997, as compared to the year ended December 31, 1996. Other cost increases
included operating expenses from Dekko for a full year and Camden for
approximately 11 months, volume related items and cost inflation.
Depreciation and amortization was $36.0 million for the year ended December
31, 1997 as compared to $31.3 million for the same period in 1996. The increase
of $4.7 million was the result of depreciation of property, plant and equipment
additions and Camden's assets acquired, amortization of goodwill from the Camden
Acquisition and the depreciation and amortization of goodwill of Dekko for a
full year. The increase was partially offset by lower amortization as the result
of the goodwill impairment charge recorded in 1996. The goodwill impairment
charge was recorded in 1996, resulting from a variety of circumstances described
below. There was no similar charge recorded in 1997.
In the first quarter of 1996, the Company adopted a new business strategy
that had a major impact on its business units. The Company's strategy considered
reducing production costs, moving production to the South and Southwest,
improving customer service and lowering selling, general and administrative
expenses. The Company developed the new strategy and business plan in the first
quarter of 1996, which it finalized in connection with the DWT Acquisition.
The DWT Acquisition was instrumental in the evaluation and implementation
of the new business strategy, due to DWT's strategically sized and located
facilities. With the DWT Acquisition, additional goodwill of $105.0 million was
recorded. With the addition of significant goodwill, the Company believed it was
appropriate to perform a comprehensive review of the carrying value of goodwill.
In addition to the DWT Acquisition, factors that were examined during the
Company's review of the carrying value of goodwill included the changes in the
appliance and automotive industries. These changes include the movement of
appliance harness requirements to Mexican manufacturing facilities and the shift
in automotive harness requirements from large, long lead-time orders to more
frequent, small, short lead-time orders. As a result of these changes, the
Company began to close several of its facilities and undertook its new business
strategy.
Upon completion of its analysis, the Company determined that the carrying
value of goodwill exceeded fair value by approximately $78.2 million. A non-cash
impairment charge of $78.2 million was recorded upon completion of this analysis
in the fourth quarter of 1996. There was no similar charge recorded in 1997.
A $2.0 million and a $6.0 million pre-tax charge to operations,
representing plant shutdown costs, were recorded during the years ended December
31, 1997 and December 31, 1996, respectively. The plant closing costs relate to
shutting down and consolidating wire segment facilities. Pre-tax inventory
valuation charges of $8.5 million were recorded during each of the years ended
December 31, 1997 and December 31, 1996. These charges were the result of an
adjustment of the LIFO valuation of copper in inventory reflecting the decrease
in the copper cost per pound during fiscal 1997 and 1996.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO HISTORICAL COMBINED FISCAL YEAR ENDED
DECEMBER 31, 1995
Net sales for the year ended December 31, 1996 were $547.0 million,
representing a $92.3 million, or 20.3%, increase over the Historical Combined
Fiscal Year Ended December 31, 1995. This increase occurred substantially within
the wire segment, where sales increased $92.1 million, or 31.3%, over the
Historical Combined Fiscal Year Ended December 31, 1995. This increase reflected
$139.7 million of net sales from Wire Technologies, as well as continued growth
in the Company's automotive, cable and control signal market
16
<PAGE> 18
accounts. These increases were partially offset by a decline in copper prices.
In general, the Company prices its products based upon a spread over the cost of
copper, which results in a decreased dollar value of sales when copper prices
decrease. The average price of copper based upon the COMEX declined to $1.06 per
pound over the year ended December 31, 1996 from $1.35 per pound during the
Historical Combined Fiscal Year Ended December 31, 1995. Within the wire harness
segment, sales remained constant at $161.4 million during the year ended
December 31, 1996. This constant level of sales represented strong sales from
most major wire harness customers other than Whirlpool. Sales to Whirlpool
declined during the year due to the expiration of a transition supply agreement
in October 1995.
Cost of goods sold as a percentage of sales decreased from 79.8% to 76.9%
for the year ended December 31, 1996. This decrease was due to the result of
negotiated price reductions for certain purchased materials and the elimination
of the majority of outside purchases of non-insulated wire subsequent to the
Original Omega Acquisition. Wirekraft's purchases of non-insulated wire from
outside suppliers declined as Omega's non-insulated wire production for
Wirekraft increased. In addition, the change in cost of goods sold as a percent
of sales reflected cost reductions achieved within both the wire and wire
harness segments resulting from plant consolidation actions taken in 1995 and
1996, as well as the impact of declining copper prices. Because the Company's
products are typically priced at a spread over the cost of copper, a lower
copper price leads to a higher gross margin percentage but generally has no
impact on gross margin dollars.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO SEVEN MONTHS ENDED DECEMBER 31, 1995
Net sales for the year ended December 31, 1996 were $547.0 million,
representing an increase of $301.4 million over the seven months ended December
31, 1995. This increase included wire segment sales of $223.9 million and wire
harness segment sales of $77.5 million. The increase was primarily the result of
the additional five months of operations of the Company in 1996, as compared to
1995 and the inclusion of $139.7 million of wire segment sales as the result of
the DWT Acquisition in March 1996. These increases were partially offset by a
decline in copper prices. Generally, the Company prices its products based upon
a spread over copper, which results in a decreased dollar value of sales when
copper prices decrease. The average price of copper based upon the COMEX
declined to $1.06 per pound over the year ended December 31, 1996 from $1.35 per
pound during the seven months ended December 31, 1995.
Cost of goods sold as a percentage of sales decreased from 79.5% for the
seven months ended December 31, 1995 to 76.9% for the year ended December 31,
1996. This decrease was due to the result of negotiated price reductions for
certain purchased materials and the elimination of the majority of outside
purchases of non-insulated wire. Wirekraft's purchases of non-insulated wire
from outside sources declined as Omega's non-insulated wire production for
Wirekraft increased. In addition, the change in cost of goods sold as a percent
of sales reflected cost reductions achieved within both the wire and wire
harness segments resulting from plant consolidation actions taken in 1995 and
1996, as well as the impact of declining copper prices. Because the Company's
products are typically priced at a spread over the cost of copper, a lower
copper price leads to a higher gross margin percentage but generally has no
impact on gross margin dollars.
Selling, general and administrative expenses were $43.9 million for the
year ended December 31, 1996 compared to $17.1 million during the seven months
ended December 31, 1995, an increase of $26.8 million. The increase was
primarily the result of the additional five months of operations of the Company
in 1996, as compared to 1995 and the inclusion of $5.7 million of expenses from
the DWT Acquisition. Expressed as a percentage of sales, selling, general and
administrative expenses increased from 7.0% during the seven months ended
December 31, 1995 to 8.0% during the year ended December 31, 1996. This
increase, as a percentage of sales, was partially attributable to the effect on
net sales of higher copper costs during the seven months ended December 31,
1995, as compared to the year ended December 31, 1996. Other cost increases
included volume related items and cost inflation.
Depreciation and amortization was $31.3 million for the year ended December
31, 1996 compared to $11.0 million for the seven months ended December 31, 1995.
This increase of $20.3 million was the result of the additional five months of
operations of the Company in 1996, as compared to 1995, as well as additional
17
<PAGE> 19
depreciation of property, plant and equipment from 1996 additions and the
amortization of goodwill from the DWT Acquisition.
In the first quarter of 1996, the Company adopted a new business strategy
that had a major impact on its business units. The Company's strategy considered
reducing production costs, moving production to the South and Southwest,
improving customer service and lowering selling, general and administrative
expenses. The Company developed the new strategy and business plan in the first
quarter of 1996, which it finalized in connection with the DWT Acquisition.
The DWT Acquisition was instrumental in the evaluation and implementation
of the new business strategy, due to DWT's strategically sized and located
facilities. With the DWT Acquisition, additional goodwill of $105.0 million was
recorded. With the addition of significant goodwill, the Company believed it was
appropriate to perform a comprehensive review of the carrying value of goodwill.
In addition to the DWT Acquisition, factors that were examined during the
Company's review of the carrying value of goodwill included the changes in the
appliance and automotive industries. These changes include the movement of
appliance harness requirements to Mexican manufacturing facilities and the shift
in automotive harness requirements from large, long lead-time orders to more
frequent, small, short lead-time orders. As a result of these changes, the
Company closed certain of its facilities and undertook its new business
strategy.
Upon completion of its analysis, the Company determined that the carrying
value of goodwill exceeded fair value by approximately $78.2 million. A non-cash
impairment charge of $78.2 million was recorded upon completion of the analysis
in the fourth quarter of 1996.
A $6.0 million pre-tax charge to operations was recorded during the year
ended December 31, 1996, representing plant closing costs. The plant closing
costs relate to shutting down and consolidating six facilities. There was a
similar charge of $1.8 million for the seven months ended December 31, 1995. An
$8.5 million pre-tax inventory valuation charge was recorded during the year
ended December 31, 1996. This charge was the result of an adjustment to the LIFO
valuation of copper in inventory reflecting the decrease in the copper cost per
pound during fiscal 1996. There was no similar charge for the seven months ended
December 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital and Cash Flows
For the year ended December 31, 1997, the Company generated $34.0 million
in cash from operations and $6.0 million of net proceeds from the issuance of
long-term debt obligations related to the Camden Acquisition. During 1997, the
Company made net borrowings of $1.1 million under debt obligations, spent $27.8
million on capital projects, used $11.3 million related to financing fees and
used $2.1 million on other financing activities.
In June 1997, the Company generated $157.4 million in proceeds from the
issuance of 11.75% Series B Senior Subordinated Notes due June 2005, net of
financing costs of $5.8 million. The Company applied all net proceeds from this
issuance to repay a portion of the Senior Bank Facility (as hereinafter
defined).
For the year ended December 31, 1996, the Company generated $32.0 million
in cash from operations and $13.0 million of net proceeds from the issuance of
equity securities and long-term debt obligations related to the DWT Acquisition.
During 1996, the Company made net repayments of $21.3 million under debt
obligations, spent $15.8 million on capital projects and used $7.8 million
related to financing fees.
For the Historical Combined Year Ended December 31, 1995, the Company
generated $25.2 million in cash from operations and $23.0 million of net
proceeds from the issuance of equity securities and long-term debt obligations
related to acquisitions. During 1995, the Company made net repayments of $17.6
million under debt obligations ($12.5 million repaid by the predecessor
companies in connection with the Acquisitions), spent approximately $10.5
million on capital projects and used $21.0 million to pay financing fees ($7.0
million of which were incurred in connection with the acquisition of THL-Omega).
18
<PAGE> 20
Financing Arrangements
In connection with the Wirekraft/Omega Combination, the Company issued
$150.0 million principal amount of Senior Subordinated Notes due 2005 (the
"Original 11 3/4% Notes") under an indenture, dated June 12, 1995. The Original
11 3/4% Notes bear interest at the rate of 11.75% per annum, requiring
semi-annual interest payments of $8.8 million on each June 1 and December 1. The
Original 11 3/4% Notes are not subject to any sinking fund requirements.
In connection with the Camden Acquisition, Holding and the Company entered
into the Amended and Restated Credit Agreement with The Chase Manhattan Bank,
Bankers Trust Company and the other lenders party thereto pursuant to which the
Company obtained financing of up to $428.5 million, consisting of an $111.0
million, five year term Tranche A loan, an $115.0 million, seven year term
Tranche B loan, an $127.5 million, eight year term Tranche C loan (collectively,
the "Term Facility") and a $75.0 million revolving loan and letter of credit
(the "Revolver," and together with the "Term Facility," the "Senior Bank
Facility").
The Company issued $150.0 million of 11.75% Series B Senior Subordinated
Notes due June 2005 under an Indenture dated June 17, 1997, priced at 108.75%
for an effective interest rate of 10.15% (the "Series B Notes"). The Series B
Notes bear interest at the rate of 11.75% per annum, requiring a semi-annual
interest payment of $8.8 million on each June 1 and December 1. The Series B
Notes are not subject to any sinking fund requirements.
In connection with the issuance of the Series B Notes, the Company sought
and received the consent of the lenders under the Senior Bank Facility to the
application of the net proceeds from the Series B Notes issuance as described in
the following paragraph and entered into the First Amendment to Amended and
Restated Credit Agreement, dated as of June 17, 1997 (the "First Amendment").
The Company used the net proceeds of the Series B Notes issuance to repay
approximately $157.4 million principal amount of borrowings outstanding under
the Senior Bank Facility (the "Senior Debt Repayment"). The Senior Debt
Repayment was allocated in the following manner: first, approximately $65.5
million was applied to the Tranche A Loan to reduce the aggregate principal
amount outstanding thereunder to $25.0 million; second, approximately $80.5
million was applied to the Tranche B Loan, which was combined with the Tranche C
Loan pursuant to the First Amendment, to reduce the aggregate principal amount
outstanding thereunder to $160.5 million; and third, approximately $11.4 million
was applied to the Revolver to repay in full all amounts outstanding thereunder.
As amended, the Senior Bank Facility provides senior secured financing of up to
$260.5 million, consisting of the $25.0 million Tranche A Loan, the $160.5
million Tranche B Loan and the $75.0 million Revolver.
The Company is obligated to make principal payments in respect of the Term
Facility of $3.5 million in 1998, $4.8 million in 1999, $6.0 million in 2000,
$7.3 million in 2001, $46.4 million in 2002 and $116.6 million in 2003. The
Revolver is available for working capital purposes including letters of credit.
The commitments terminate and all amounts under the Revolver then outstanding
mature in 2002. As of February 27, 1998, there was $183.8 million outstanding
under the Term Facility and $51.2 million of unused borrowing capacity under the
Revolver.
The Company's obligations under the Senior Bank Facility bear interest at
floating rates and require interest payments on varying dates depending on the
interest rate option selected by the Company. At February 27, 1998, the weighted
average interest rate on outstanding borrowings under the Senior Bank Facility
was 7.67%.
The Company has outstanding $5.0 million of 14% Senior Subordinated Notes
due June 1, 2005 (the "14% Notes"). The 14% Notes require a semi-annual interest
payment of $.4 million on each June 1 and December 1. The 14% Notes are not
subject to any sinking fund requirements.
In connection with the Camden Acquisition, the Company assumed debt related
to two Industrial Revenue Bonds (the "IRBs") totaling $15.5 million. The IRBs
are due in August, 2005 and March 2016 in the amounts of $9.0 million and $6.5
million, respectively. The IRBs bear interest at a rate per annum which is
19
<PAGE> 21
tied to the Tax Exempt Money Market Index. Rates change weekly and interest is
paid monthly. The IRBs are collateralized by letters of credit totaling $15.5
million. At February 27, 1998, the effective interest rate on the IRBs was
3.29%.
As of February 27, 1998, the Company had entered into two interest rate
agreements. These agreements provide ceilings of 8.0% on $63.5 million of
indebtedness through May 1998, 7.0% on $32.5 million of indebtedness through
March 1998 and 8.0% on $32.5 million of indebtedness through March 1999.
Liquidity
The principal raw material used in the Company's products is copper. The
market price of copper is subject to significant fluctuations. Working capital
needs change whenever the Company experiences a significant change in copper
prices. A $0.10 per pound change in the price of copper changes the Company's
working capital by approximately $4.5 million. The Company enters into
contractual relationships with most of its customers to adjust it prices based
upon the prevailing market prices on the COMEX. This approach is patterned after
the Company's arrangement with its copper suppliers and is designed to remove
the risk associated with fluctuating copper prices.
As part of the impairment charge in 1996 as more fully described in Note 10
to the Company's financial statements for the year ended December 31, 1997, the
Company accrued $4.2 million for anticipated losses related to product liability
claims associated with the Original Wirekraft Acquisition. These claims are for
a non-wire product in the appliance industry that the Company has not
manufactured since 1992. The Company's policy is to record the probable and
reasonably estimable loss related to product liability claims. In 1996, the
claims significantly increased as a result of the receipt of claims accumulated
by insurance companies related to prior periods. Accordingly, the Company
revised its estimated liability outstanding on actual claims reported and its
estimate of claims incurred but not reported.
The Company continues to review the status of the claims and adjust the
liability accordingly. In developing its estimated liability outstanding on
actual claims reported, the Company considered historic settlement rates. In
determining its estimate of claims incurred but not reported, the Company
considered historical claim levels, amounts relative to total product shipped
and historical settlement rates. The reserve for product liability claims was
$3.4 million and $4.2 million at December 31, 1997 and December 31, 1996,
respectively.
Due to the uncertainties associated with these product claims, the future
cost of final settlement of these claims may differ from the liability currently
accrued. However, in the Company's opinion, the impact of final settlement of
these claims on future operations, financial position and liquidity will not be
material.
The Company's primary sources of liquidity are cash flows from operations
and borrowings under the Revolver, which are subject to a borrowing base
calculation. The major uses of cash in 1998 are expected to be for debt service
requirements and capital expenditures. In 1998, debt service requirements are
estimated at approximately $57 million while capital expenditures are estimated
at approximately $30 million, including an estimated $7 million to complete the
construction of a manufacturing facility in Cebu, Philippines. See Note 12 to
the Company's Consolidated Financial Statements. Management believes that cash
from operating activities, together with available borrowings under the
Revolver, if necessary, should be sufficient to permit the Company to meet these
financial obligations.
IMPACT OF THE YEAR 2000 ISSUE
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.
Based on a previous assessment, the Company determined that it will be
required to replace portions of its software so that its computer systems will
properly utilize dates beyond December 31, 1999. At December 31,
20
<PAGE> 22
1997, the Company estimated that approximately 40 percent of the Company's
systems were Year 2000 compliant, with all systems expected to be compliant by
early 1999. The Company presently believes that with the expected conversions to
new software, the Year 2000 Issue can be mitigated. However, if such conversions
are not made, or are not completed timely, the Year 2000 Issue could have a
material impact on the operations of the Company.
The Company will utilize both internal and external resources to replace
and test the software for Year 2000 modifications. The total cost of the project
is estimated to be approximately $6 million. The majority of the expenditures
relate to the purchase of new software and hardware which will be capitalized
and is being funded through operating cash flows.
The costs of the project and the date on which the Company plans to
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events including the
continued availability of certain resources. However, there can be no guarantee
that these estimates will be achieved and actual results could differ materially
from those plans. Specific factors that might cause such material differences
include, but are not limited to, the availability and cost of personnel trained
in this area, the ability to locate and correct all relevant computer codes, and
similar uncertainties.
21
<PAGE> 23
ITEM 8. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTERNATIONAL WIRE GROUP, INC.
Report of Coopers & Lybrand L.L.P., Independent Public
Accountants............................................ 23
Consolidated Balance Sheets as of December 31, 1997 and
December 31, 1996...................................... 24
Consolidated Statements of Operations for the years ended
December 31, 1997 and December 31, 1996 and the seven
months ended December 31, 1995......................... 25
Consolidated Statements of Stockholders' Equity (Deficit)
for the years ended December 31, 1997 and December 31,
1996 and the seven months ended December 31, 1995...... 26
Consolidated Statements of Cash Flows for the years ended
December 31, 1997 and December 31, 1996 and the seven
months ended December 31, 1995......................... 27
Notes to Consolidated Financial Statements................ 28
Report of Coopers & Lybrand L.L.P., Independent Public
Accountants............................................ 48
Consolidated Financial Statement Schedule for the years
ended December 31, 1997 and December 31, 1996 and the
seven months ended December 31, 1995: Schedule
II -- Valuation and Qualifying Accounts................ 49
WIREKRAFT HOLDINGS CORP. (FORMERLY WB HOLDINGS INC.)
Report of Coopers & Lybrand L.L.P., Independent Public
Accountants............................................ 50
Consolidated Statement of Operations for the six months
ended May 31, 1995..................................... 51
Consolidated Statement of Stockholders' Equity for the six
months ended May 31, 1995.............................. 52
Consolidated Statement of Cash Flows for the six months
ended May 31, 1995..................................... 53
Notes to Consolidated Financial Statements................ 54
OMEGA WIRE CORP.
Report of Coopers & Lybrand L.L.P., Independent Public
Accountants............................................ 60
Consolidated Statement of Operations for the two months
ended May 31, 1995..................................... 61
Consolidated Statement of Stockholders' Equity for the two
months ended May 31, 1995.............................. 62
Consolidated Statement of Cash Flows for the two months
ended May 31, 1995..................................... 63
Notes to Consolidated Financial Statements................ 64
THL-OMEGA HOLDING CORPORATION
Report of Coopers & Lybrand L.L.P., Independent Public
Accountants............................................ 68
Consolidated Statement of Operations and Retained Earnings
for the three months ended March 31, 1995.............. 69
Consolidated Statement of Cash Flows for the three months
ended March 31, 1995................................... 70
Notes to Consolidated Financial Statements................ 71
</TABLE>
22
<PAGE> 24
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
International Wire Group, Inc.:
We have audited the accompanying consolidated balance sheets of
International Wire Group, Inc. and subsidiaries as of December 31, 1997 and
December 31, 1996, and the related consolidated statements of operations,
stockholders' equity (deficit), and cash flows for the years ended December 31,
1997 and December 31, 1996 and the seven months ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of International
Wire Group, Inc. and subsidiaries as of December 31, 1997 and December 31, 1996,
and the consolidated results of their operations and their cash flows for the
years ended December 31, 1997 and December 31, 1996 and the seven months ended
December 31, 1995, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
St. Louis, Missouri
January 30, 1998
23
<PAGE> 25
INTERNATIONAL WIRE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Current assets:
Accounts receivable, less allowance of $2,078 and
$1,363................................................. $ 87,201 $ 71,181
Inventories............................................... 74,406 60,362
Prepaid expenses and other................................ 9,881 5,060
Deferred income taxes..................................... 17,392 4,741
-------- --------
Total current assets.............................. 188,880 141,344
Property, plant and equipment, net.......................... 165,239 118,551
Deferred financing costs, net............................... 23,592 21,222
Intangible assets, net...................................... 242,336 244,655
Other assets................................................ 8,001 5,248
-------- --------
Total assets...................................... $628,048 $531,020
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term obligations............... $ 4,493 $ 20,948
Accounts payable.......................................... 48,761 45,832
Accrued and other liabilities............................. 39,143 33,150
Customers' deposits....................................... 19,978 8,033
Accrued interest.......................................... 4,834 4,648
-------- --------
Total current liabilities......................... 117,209 112,611
Long-term obligations, less current maturities.............. 519,302 426,719
Deferred income taxes....................................... 12,840 14,719
Other long-term liabilities................................. 24,525 12,162
-------- --------
Total liabilities................................. 673,876 566,211
Stockholders' equity (deficit):
Common stock, $.01 par value, 1,000 shares authorized,
issued and outstanding................................. 0 0
Series A senior cumulative exchangeable redeemable
preferred stock, $.01 par value, $25 liquidation value,
400,000 shares authorized at December 31, 1997 and
December 31, 1996 and 0 and 400,000 issued and
outstanding at December 31, 1997 and December 31, 1996,
respectively........................................... -- 4
Contributed capital....................................... 113,717 125,340
Carryover of predecessor basis............................ (67,762) (67,762)
Accumulated deficit....................................... (91,783) (92,773)
-------- --------
Total stockholders' equity (deficit).............. (45,828) (35,191)
-------- --------
Total liabilities and stockholders' equity
(deficit)....................................... $628,048 $531,020
======== ========
</TABLE>
See accompanying notes to the consolidated financial statements
24
<PAGE> 26
INTERNATIONAL WIRE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEVEN MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ -------------
<S> <C> <C> <C>
Net sales............................................... $695,148 $546,981 $245,583
Operating expenses:
Cost of goods sold.................................... 530,310 420,823 195,221
Selling, general and administrative expenses.......... 56,703 43,885 17,129
Depreciation and amortization......................... 36,026 31,341 11,020
Impairment, unusual and plant closing charges......... 2,000 84,250 1,750
Inventory valuation adjustment........................ 8,500 8,500 --
-------- -------- --------
Operating income (loss)................................. 61,609 (41,818) 20,463
Other income (expense):
Interest expense...................................... (50,939) (43,013) (19,931)
Amortization of deferred financing costs.............. (3,932) (3,701) (1,468)
Other, net............................................ (103) 312 (158)
-------- -------- --------
Income (loss) before income tax provision and
extraordinary item.................................... 6,635 (88,220) (1,094)
Income tax provision.................................... 2,654 1,262 2,197
-------- -------- --------
Income (loss) before extraordinary item................. 3,981 (89,482) (3,291)
Extraordinary item -- loss related to early
extinguishment of debt, net of taxes of $1,995........ (2,991) -- --
-------- -------- --------
Net income (loss).................................. $ 990 $(89,482) $ (3,291)
======== ======== ========
</TABLE>
See accompanying notes to the consolidated financial statements
25
<PAGE> 27
INTERNATIONAL WIRE GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996 AND THE
SEVEN MONTHS ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
CARRYOVER OF
COMMON PREFERRED CONTRIBUTED PREDECESSOR ACCUMULATED
STOCK STOCK CAPITAL BASIS DEFICIT TOTAL
------ --------- ----------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Capital contributed............... $ 0 $ 0 $ 81,951 $ -- $ -- $ 81,951
Issuance costs.................... -- -- (900) -- -- (900)
Carryover of predecessor basis.... -- -- -- (67,762) -- (67,762)
Net loss.......................... -- -- -- -- (3,291) (3,291)
--- --- -------- -------- -------- --------
Balance December 31, 1995......... 0 -- 81,051 (67,762) (3,291) 9,998
Capital contributed............... -- -- 35,493 -- -- 35,493
Issuance of preferred stock....... -- 4 9,996 -- -- 10,000
Issuance costs.................... -- -- (1,200) -- -- (1,200)
Net loss.......................... -- -- -- -- (89,482) (89,482)
--- --- -------- -------- -------- --------
Balance December 31, 1996......... 0 4 125,340 (67,762) (92,773) (35,191)
--- --- -------- -------- -------- --------
Capital contributed............... -- -- 451 -- -- 451
Repurchase of stock of Holding.... -- -- (700) -- -- (700)
Conversion of preferred stock to
debt............................ -- (4) (9,996) -- -- (10,000)
Preferred stock dividend.......... -- -- (1,378) -- -- (1,378)
Net income........................ -- -- -- -- 990 990
--- --- -------- -------- -------- --------
Balance December 31, 1997......... $ 0 $-- $113,717 $(67,762) $(91,783) $(45,828)
=== === ======== ======== ======== ========
</TABLE>
See accompanying notes to the consolidated financial statements
26
<PAGE> 28
INTERNATIONAL WIRE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEVEN MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows provided by (used in) operating
activities:
Net income (loss).................................. $ 990 $ (89,482) $ (3,291)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization................... 36,026 31,341 11,020
Impairment and unusual charges.................. -- 78,250 --
Amortization of deferred financing costs........ 3,932 3,701 1,468
Extraordinary loss on early extinguishment of
debt.......................................... 4,986 -- --
Inventory valuation adjustment.................. 8,500 8,500 --
Deferred income taxes........................... 901 3,184 274
Change in assets and liabilities, net of
acquisitions:
Accounts receivable........................... (456) (1,878) 12,094
Inventories................................... (1,835) (3,645) (9,590)
Prepaid expenses and other.................... (6,273) (4,829) (846)
Accounts payable.............................. (9,171) 1,216 1,232
Accrued and other liabilities................. 2,278 2,299 (2,084)
Accrued interest.............................. 186 2,132 2,516
Income taxes payable/refundable............... (2,976) 1,914 778
Other long-term liabilities................... (3,090) (723) (237)
--------- --------- ---------
Net cash from operating activities......... 33,998 31,980 13,334
--------- --------- ---------
Cash flows provided by (used in) investing
activities:
Acquisitions, net of cash.......................... (58,996) (160,259) (341,046)
Capital expenditures............................... (27,760) (15,849) (5,751)
--------- --------- ---------
Net cash used in investing activities...... (86,756) (176,108) (346,797)
--------- --------- ---------
Cash flows provided by (used in) financing
activities:
Equity proceeds.................................... -- 45,039 15,048
Proceeds from issuance of long-term obligations.... 228,125 128,200 337,500
Repayment of long-term obligations................. (162,001) (21,311) (5,085)
Repurchase of stock of Holding..................... (700) -- --
Cash dividends paid on preferred stock............. (1,378) -- --
Financing fees and other........................... (11,288) (7,800) (14,000)
--------- --------- ---------
Net cash from financing activities......... 52,758 144,128 333,463
--------- --------- ---------
Net change in cash and cash equivalents.... -- -- --
Cash and cash equivalents at beginning of the
period............................................. -- -- --
--------- --------- ---------
Cash and cash equivalents at end of the period....... $ -- $ -- $ --
========= ========= =========
</TABLE>
See accompanying notes to the consolidated financial statements
27
<PAGE> 29
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996
AND SEVEN MONTHS ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT SHARE DATA)
1. THE COMPANY
International Wire Group, Inc. ("Group" or the "Company"), a Delaware
corporation, was formed to participate in the transactions contemplated by the
Acquisitions (as described below). On June 12, 1995, Wirekraft Holdings Corp.
("Wirekraft"), Omega Wire Corp. ("Omega"), International Wire Holding Company
("Holding"), the sole common stockholder of Group, Wirekraft Acquisition Company
and certain shareholders of Wirekraft and Omega entered into a series of
acquisitions and mergers (the "Acquisitions") pursuant to which Group acquired
all of the common equity securities (and all securities convertible into such
securities) of Wirekraft and all of the common equity securities of Omega. The
Company has designated June 1, 1995, as the effective date of the Acquisitions
for financial reporting purposes. The Company through its two segments, the Wire
segment and the Harness segment, is engaged in the design, manufacture and
marketing of non-insulated and insulated copper wire and wire harnesses. The
Company's products are used by a wide variety of customers primarily in the
appliance, computer and data communications, automotive and industrial equipment
industries.
The total purchase price of the Acquisitions was approximately $420,591,
which included the redemption of certain equity securities, the retirement of
existing indebtedness of Wirekraft and Omega and the payment of related fees and
costs, is summarized as follows:
<TABLE>
<S> <C>
Redemption of common stock, equity rights, warrants and
options................................................... $104,810
Repayment of existing indebtedness.......................... 275,460
Redemption of preferred stock............................... 26,321
Fees and costs.............................................. 14,000
--------
$420,591
========
</TABLE>
In accordance with EITF 88-16, "Basis in Leveraged Buy Out Transactions,"
the Acquisitions have been accounted for at "predecessor basis". The total
acquisition costs have been allocated to the acquired net assets as follows:
<TABLE>
<S> <C>
Current assets.............................................. $117,504
Property, plant and equipment............................... 83,253
Goodwill.................................................... 209,818
Fees and costs.............................................. 19,000
Other assets................................................ 3,749
Current liabilities......................................... (58,707)
Other liabilities........................................... (21,788)
Carryover predecessor basis................................. 67,762
--------
$420,591
========
</TABLE>
2. DWT AND CAMDEN ACQUISITIONS
On March 5, 1996, Wire Technologies, Inc. ("Wire Technologies"), a
wholly-owned subsidiary of the Company, acquired the businesses of Hoosier Wire,
Inc., Dekko Automotive Wire, Inc., Albion Wire, Inc. and Silicones, Inc., a
group of affiliated companies operating together under the trade name Dekko Wire
Technology Group (the "DWT Acquisition"). The total consideration of $173,239
paid in connection with the DWT Acquisition including fees, expenses and certain
adjustments consisted of (i) cash and (ii) warrants for the purchase of
2,000,000 shares of Common Stock, par value $.01 per share, of Holding. The DWT
28
<PAGE> 30
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Acquisition and the related transaction fees and expenses were funded with (i)
$128,200 of senior debt under the Amended Credit Agreement, (ii) $35,000 from
the issuance of 35,000,000 shares of Common Stock, par value $.01 per share, of
Holding, (iii) $39 from the issuance of 3,888,889 shares of Class A Common
Stock, par value $.01 per share, of Holding, and (iv) $10,000 from the issuance
of 400,000 shares of Series A Senior Cumulative Exchangeable Redeemable
Preferred Stock, par value $.01 per share, of the Company (sold in units
together with warrants for the purchase of shares of Common Stock, par value
$.01 per share, of Holding).
The DWT Acquisition was accounted for using the purchase method of
accounting whereby the total acquisition cost has been allocated to the
consolidated assets and liabilities based upon their estimated respective fair
values. The total acquisition cost is allocated to the acquired net assets as
follows:
<TABLE>
<S> <C>
Current assets.............................................. $ 37,669
Property, plant and equipment............................... 36,020
Goodwill.................................................... 105,041
Other, non-current.......................................... 3,515
Fees and costs.............................................. 7,800
Current liabilities......................................... (15,306)
Other liabilities........................................... (1,500)
--------
$173,239
========
</TABLE>
On February 12, 1997, the Company acquired all of the issued and
outstanding common stock of Camden Wire Co., ("Camden") a wholly-owned
subsidiary of Oneida LTD, for total consideration of approximately $65,000 (the
"Camden Acquisition"). Camden was engaged in the design, manufacture and
marketing of non-insulated bare and tin-plated copper wire.
The total consideration of $65,000 paid in connection with the Camden
Acquisition, including fees and expenses, consisted of (i) cash and (ii) the
assumption of debt related to Industrial Revenue Bonds, a non-cash item. The
cash portion of the consideration paid and the transaction fees and expenses
incurred in connection with the Camden Acquisition were funded with $65,000 of
senior debt under the Amended and Restated Credit Agreement (see Note 7).
The Camden Acquisition was accounted for using the purchase method of
accounting whereby the total acquisition cost has been allocated to the
consolidated assets and liabilities based upon their estimated respective fair
values. The total acquisition cost is allocated to the acquired net assets as
follows:
<TABLE>
<S> <C>
Current assets.............................................. $ 42,844
Property, plant & equipment................................. 44,053
Goodwill.................................................... 4,922
Other, non-current.......................................... 4,313
Fees and costs.............................................. 3,250
Current liabilities......................................... (28,959)
Other liabilities........................................... (5,423)
--------
$ 65,000
========
</TABLE>
Unaudited pro forma results of operations of the Company for the years
ended December 31, 1997, December 31, 1996 and December 31, 1995, are included
below. Such pro forma presentation has been prepared assuming that the Camden
Acquisition and related financing had occurred as of January 1, 1997 and January
1, 1996, respectively, the DWT Acquisition and related financing had occurred as
of January 1, 1996
29
<PAGE> 31
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and January 1, 1995, respectively, and that the Acquisitions (as described in
Note 1) had occurred as of January 1, 1995.
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net sales.......................................... $714,388 $682,246 $601,709
Income (loss) before extraordinary item............ $ 3,654 $(92,213) $ (2,613)
Net income (loss).................................. $ 663 $(92,213) $ (2,613)
</TABLE>
3. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Group and its
wholly owned subsidiaries. All material intercompany balances and transactions
have been eliminated in consolidation.
Revenue Recognition
Sales and related cost of goods sold are included in income when goods are
shipped to customers.
Inventories
Inventories are valued at the lower of cost or market. Cost is determined
using the last-in, first-out ("LIFO") method.
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Depreciation is calculated
using the straight-line method. The average estimated lives utilized in
calculating depreciation are as follows: building -- 25 to 40 years; building
improvements -- 15 years; machinery and equipment -- 3 to 11 years; and
furniture and fixtures -- 5 years. Leasehold improvements are amortized over the
shorter of the term of the respective lease or the life of the respective
improvement. In fiscal 1996, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". SFAS No. 121
requires impairment losses to be recorded on long-lived assets used in
operations when indications of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount.
Intangible Assets
Intangible assets consist principally of goodwill arising from the excess
of cost over the value of net assets acquired which is amortized using the
straight-line method over forty years. In fiscal 1996, the Company completed a
review of the carrying value of goodwill, which resulted in an impairment (see
Note 10). Accumulated amortization aggregated $25,911 and $18,182 at December
31, 1997 and December 31, 1996, respectively.
The Company periodically evaluates goodwill to assess recoverability. The
Company considers various factors in determining if goodwill may be impaired.
These factors include reductions in estimated future cash flows, significant
events impacting the Company's business and changes in the business environment.
The Company further assesses the recoverability of goodwill by comparing the
value of goodwill as indicated by a discounted cash flow analysis to the
carrying value of goodwill. The discounted cash flow analysis consists of
discounted free cash flows for a projection period plus a terminal value, which
is calculated by dividing estimated annual unlevered net income by the weighted
average cost of capital less an assumed growth rate. Upon consideration of these
factors, if the Company determines that an impairment has occurred, the Company
determines the impairment charge by comparing the carrying value of goodwill to
the adjusted fair
30
<PAGE> 32
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
value of the Company, as calculated through a discounted cash flow analysis. In
fiscal 1996, the Company completed a review of the carrying value of goodwill,
which resulted in an impairment charge (see Note 10).
Deferred Financing Costs
Deferred financing costs, consisting of fees and other expenses associated
with the debt financing are amortized over the term of the related debt using
the effective interest method and the straight-line method which approximates
the effective interest method. Accumulated amortization aggregated $9,101 and
$5,169 at December 31, 1997 and December 31, 1996, respectively.
Foreign Currency
For operations in Mexico, the Company's functional currency is the U.S.
dollar. Gains and losses from translation and transactions are determined using
a combination of current and historical rates and are included in net income.
Interest Rate Hedging Arrangement
The Company has entered into interest rate hedging arrangements for the
purpose of hedging against rising interest rates. The fees the Company paid for
these arrangements are included in deferred financing fees and amortized on a
straight-line basis over the life of the arrangements. The arrangements provide
a ceiling interest rate of 8.0% on $63,500 of indebtedness through May 1998 and
$32,500 thereafter through March 1999. The Company estimates that fair value
approximates carrying value of the interest rate hedging arrangements.
Fair Value of Financial Instruments
The Company's financial instruments, excluding the Senior Notes (as
hereinafter defined) are carried at fair value or amounts that approximate fair
value. The Company has estimated the fair value of the Senior Notes using
current market data. At December 31, 1997, the estimated fair market value of
the Senior Subordinated Notes and the Series B Senior Subordinated Notes was
approximately $165,000 and $165,000, respectively. At December 31, 1996, the
estimated fair market value of the Senior Subordinated Notes was $162,000.
Estimates and Assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Statement of Cash Flows
For purposes of the consolidated statement of cash flows, the Company
considers all highly liquid investments purchased with maturities of three
months or less to be cash equivalents. Interest paid for the years ended
December 31, 1997 and December 31, 1996 and seven months ended December 31, 1995
was $50,753, $40,881 and $17,415, respectively. Taxes paid for the year ended
December 31, 1997, refunded, net of payments for the year ended December 31,
1996 and paid for the seven months ended December 31, 1995 were $2,817, $4,073
and $1,145, respectively.
During the years ended December 31, 1997 and December 31, 1996 and seven
months ended December 31, 1995, the Company entered into certain non-cash
investing and financing activities. In 1997, the
31
<PAGE> 33
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company exchanged $10,000 of Series A Senior Cumulative Exchangeable Redeemable
Preferred Stock for debt. In connection with the Acquisitions, certain shares of
Omega and Wirekraft common stock and Class A common stock were exchanged for
shares of Holding common stock. The total amount of shares exchanged was
$66,903.
In fiscal 1997, 1996 and 1995, the Company recorded capital lease
obligations of $0, $2,348 and $680 respectively, for property, plant and
equipment.
Significant Customer
A significant portion of the Company's sales were to a major customer
within the Harness segment. Sales to this customer represented 14%, 18% and 19%
of net sales for the years ended December 31, 1997, December 31, 1996 and the
seven months ended December 31, 1995, respectively.
Recently Issued Accounting Standards
Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income, is effective for years beginning after December 15, 1997.
This statement requires that an enterprise classify items of other comprehensive
income by their nature in the financial statements and display the accumulated
balance of other comprehensive income separately from retained earnings and
additional paid-in capital in the equity section of the balance sheet.
Statement of Financial Accounting Standards No. 131, Disclosures about
Segments of an Enterprise and Related Information, is effective for years
beginning after December 15, 1997. This statement requires that a public
business report financial and descriptive information about its reportable
business segments.
The Company believes that the future adoption of these statements will not
have a significant impact on the results of operations or financial position of
the Company but will require the Company to make additional disclosures.
4. INVENTORIES
The composition of inventories is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Raw materials............................................... $33,983 $26,191
Work-in process............................................. 15,992 14,908
Finished goods.............................................. 24,431 19,263
------- -------
Total inventories................................. $74,406 $60,362
======= =======
</TABLE>
The current cost of inventories at December 31, 1997 approximated the
carrying cost. At December 31, 1996, the current cost was approximately $57,267.
In connection with the decline in the average price of copper, the Company
recorded pre-tax inventory valuation charges of $8,500 and $8,500 for the years
ended December 31, 1997 and December 31, 1996, respectively, to reduce the LIFO
valuation of copper in inventory.
32
<PAGE> 34
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. PROPERTY, PLANT AND EQUIPMENT
The composition of property, plant and equipment is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Land........................................................ $ 4,281 $ 2,797
Buildings and improvements.................................. 47,698 31,546
Machinery and equipment..................................... 199,171 121,013
Construction in progress.................................... 5,977 --
-------- --------
257,127 155,356
Less: accumulated depreciation.............................. (91,888) (36,805)
-------- --------
$165,239 $118,551
======== ========
</TABLE>
6. FINANCING COSTS AND RELATED PARTY TRANSACTIONS
In connection with the Acquisitions, the Company incurred aggregate fees
and costs of $14,000. Costs of $13,100 related to the Senior Notes and Amended
and Restated Credit Agreement (see Note 7) are included in deferred financing
costs and are being amortized over the terms of the related borrowings. Costs of
$900 related to the issuance of Holding's common stock have been deducted from
the proceeds to reduce the carrying value of the common stock. In connection
with the DWT Acquisition, the Company incurred aggregate fees and costs of
$7,800. Costs of $6,600 related to the Amended Credit Agreement (as hereinafter
defined) are included in deferred financing costs and are being amortized over
the terms of the related borrowings. Costs of $1,200 related to the issuance of
Holding's common stock and the Preferred Stock (as defined in Note 8) have been
deducted from the proceeds to reduce the carrying value of the common and
preferred stock. In connection with the Camden Acquisition, the Company incurred
aggregate fees and costs of $3,250 which are included in deferred costs and are
being amortized over the term of the related borrowings. All costs related to
the Amended and Restated Credit Agreement (as hereinafter defined) are included
in deferred financing costs and are being amortized over the terms of the
related borrowings.
In June 1997, the Company refinanced debt under the Amended and Restated
Credit Agreement. Accordingly, the Company recorded an extraordinary loss of
$2,601, net of income tax related to the write-off of deferred financing fees.
In addition, the Company repurchased $5,000 of debt and recorded an
extraordinary loss of $390, net of income tax, related to a prepayment premium.
In connection with the Acquisitions and the related financing, the Company
entered into a Monitoring and Oversight Agreement ("Agreement") with Hicks, Muse
& Co. Partners, L.P. ("Hicks Muse Partners") (an affiliate of the Company)
pursuant to which the Company paid Hicks Muse Partners a cash fee of $3,725 as
compensation for financial advisory services. The fees have been allocated based
upon the issuance proceeds to the debt and equity securities issued in
connection with the Acquisitions. Pursuant to the Agreement, the Company paid
Hicks Muse Partners cash fees of $2,500 and $900 as compensation for financial
advisory services received in connection with the DWT Acquisition and Camden
Acquisition, respectively. The fees paid in connection with the DWT Acquisition
were allocated as deferred financing costs or as a deduction from the cash
proceeds received from the sale of the common stock of Holding and all fees paid
associated with the Camden Acquisition were included in deferred financing
costs. The Agreement further provides that the Company shall pay Hicks Muse
Partners an annual fee of $500, for ten years for monitoring and oversight
services adjusted annually at the end of each fiscal year to an amount equal to
0.1% of the consolidated net sales of the Company, but in no event less than
$500 annually. The obligation under the Agreement and the related deferred
financing costs have been recorded in the consolidated balance sheets.
33
<PAGE> 35
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. LONG-TERM OBLIGATIONS
The composition of long-term obligations at December 31, 1997 is as
follows:
<TABLE>
<CAPTION>
<S> <C>
Amended and Restated Credit Agreement:
Revolving credit facility................................. $ 825
Term facility............................................. 183,750
Senior Subordinated Notes................................... 150,000
Series B Senior Subordinated Notes.......................... 150,000
Series B Senior Subordinated Notes Premium.................. 12,485
Industrial revenue bonds.................................... 15,500
Other....................................................... 11,235
--------
523,795
Less, current maturities.................................... 4,493
--------
$519,302
========
</TABLE>
The schedule of principal payments (excluding amortization of premium) for
long-term obligations at December 31, 1997 is as follows:
<TABLE>
<CAPTION>
<S> <C>
1998........................................................ $ 4,493
1999........................................................ 5,832
2000........................................................ 7,132
2001........................................................ 8,001
2002........................................................ 46,375
Thereafter.................................................. 439,477
--------
Total..................................................... $511,310
========
</TABLE>
During 1997, the Company issued $150,000 of 11.75% Series B Senior
Subordinated Notes due June 2005, priced at 108.75% for an effective interest
rate of 10.15%. The proceeds of this issuance were used to pay down the term
facility of the Amended and Restated Credit Agreement.
Amended and Restated Credit Agreement
In connection with the Series B Senior Subordinated Notes issuance, the
Company amended the Amended and Restated Credit Agreement dated June 17, 1997,
with certain financial institutions. This amendment to the Amended and Restated
Credit Agreement provides senior secured financing of up to $260,500, consisting
of a $25,000 Term A loan and a $160,500 Term B loan (collectively called the
"Term Facility") and a $75,000 revolving loan and letter of credit facility (the
"Revolver"). Mandatory principal payments of the Term Facility are due in
quarterly installments. The final installment on the Term A loan is due
September 30, 2002 at which time the Revolver is also due. The final installment
on the Term B Loan is due September 30, 2003.
Borrowings under the Term A Loan and Revolver bear interest, at the option
of Group, at a rate per annum equal to (a) the Alternate Base Rate (as defined
in the Amended Credit Agreement) plus 0.5% or (b) the Eurodollar Rate (as
defined in the Amended Credit Agreement) plus 1.5%. Borrowings under the Term B
Loan bear interest, at the option of Group, at a rate per annum equal to (a) the
Alternate Base Rate (as defined in the Amended Credit Agreement) plus 1.0% or
(b) the Eurodollar Rate (as defined in the Amended Credit Agreement) plus 2.0%.
The Alternate Base Rate and Eurodollar Rate margins are established quarterly
based on a formula as defined in the Amended and Restated Credit Agreement.
Interest payment dates vary depending on the interest rate option to which the
Term Facility and the Revolver are tied, but generally
34
<PAGE> 36
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
interest is payable quarterly. The Amended and Restated Credit Agreement
contains several financial covenants which, among other things, require Group to
maintain certain financial ratios and restrict Group's ability to incur
indebtedness, make capital expenditures and pay dividends. The weighted average
interest rate on outstanding borrowings was 7.82% and 8.75% at December 31, 1997
and December 31, 1996, respectively.
Senior Subordinated and Series B Senior Subordinated Notes
The Senior Subordinated Notes issued in connection with the Acquisitions
and the Series B Senior Subordinated Notes issued in connection with refinancing
of the Term Facility (collectively called the "Senior Notes") were issued under
similar indentures (the "Indentures") dated June 12, 1995 and June 17, 1997
respectively. The Senior Notes represent unsecured general obligations of Group
and are subordinated to all Senior Debt (as defined in the Indenture) of Group.
The Senior Notes are fully and unconditionally (as well as jointly and
severally) guaranteed on an unsecured, senior subordinated basis by each
subsidiary of the Company (the "Guarantor Subsidiaries") other than Electro
Componentes de Mexico, S.A. de C.V., Wirekraft Industries de Mexico, S.A. de
C.V. and IWG-Philippines, Incorporated (newly formed with no operations) (the
"Non-Guarantor Subsidiaries"). Each of the Guarantor Subsidiaries and
Non-Guarantor Subsidiaries is wholly owned by the Company.
The Senior Notes mature on June 1, 2005. Interest on the Senior Notes is
payable semi-annually on each June 1 and December 1. The Senior Notes bear
interest at the rate of 11.75% per annum. The Senior Notes may not be redeemed
prior to June 1, 2000, except in the event of a Change of Control (as defined)
or Initial Public Offering (as defined) and at such applicable premium (as
defined). The Senior Notes are redeemable, at the Company's option, at the
redemption prices of 105.875% at June 1, 2000, and at decreasing prices to 100%
at June 1, 2003, and thereafter, with accrued interest. In addition, prior to
June 1, 1998, the Company may redeem, within guidelines specified in the
Indenture, up to $100,000 of the Senior Notes with the proceeds of one or more
Equity Offerings (as defined) by the Company or Holding at a redemption price of
110%, with accrued interest.
The Senior Notes restrict, among other things, the incurrence of additional
indebtedness by the Company, the payment of dividends and other distributions in
respect of the Company's capital stock, the payment of dividends and other
distributions by the Company's subsidiaries, the creating of liens on the
properties and the assets of the Company to secure certain subordinated debt and
certain mergers, sales of assets and transactions with affiliates.
Industrial Revenue Bonds
In connection with the Camden Acquisition, the Company assumed debt related
to two Industrial Revenue Bonds (the "IRB's") totaling $15,500. The IRB's are
due in August, 2005 and March, 2016 in the amounts of $9,000 and $6,500,
respectively. The IRB's bear interest at a rate per annum which is tied to the
Tax Exempt Money Market Index which resulted in an effective rate of 3.83% at
December 31, 1997. Rates change weekly and interest is paid monthly. The IRB's
are collateralized by letters of credit totaling $15,500.
8. PREFERRED STOCK
In connection with the DWT Acquisition, the Company issued 400,000 shares
of the Preferred Stock. In accordance with the Certificate of Designation of the
Preferred Stock, cumulative dividends were payable quarterly at the rate of 14%
per annum. At December 31, 1996, dividends in arrears were $1,200 or $2.99 per
share. The Preferred Stock had a liquidation preference of $25.00 per share and
a par value of $.01 per share. In 1997, the Company exchanged all shares of
Preferred Stock for debt and paid all dividends in arrears related to the
Preferred Stock.
35
<PAGE> 37
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. INCOME TAXES
The Company accounts for income taxes in accordance with the provisions of
SFAS No. 109. The provision for income taxes is as follows:
<TABLE>
<CAPTION>
SEVEN
YEAR ENDED YEAR ENDED MONTHS ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Current:
Federal..................................... $ 169 $ -- $ --
State....................................... 776 935 1,262
Foreign..................................... 808 264 661
------- ------ ------
1,753 1,199 1,923
Deferred:
Federal..................................... 1,020 (64) (530)
State....................................... (119) 127 804
------- ------ ------
901 63 274
------- ------ ------
2,654 1,262 2,197
Tax provision on extraordinary item........... (1,995) -- --
------- ------ ------
Total provision............................... $ 659 $1,262 $2,197
======= ====== ======
</TABLE>
Reconciliation between the statutory income tax rate and effective tax rate
is summarized below:
<TABLE>
<CAPTION>
SEVEN MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
U.S. Federal statutory rate.................. $2,324 $(30,877) $ (372)
State taxes, net of federal effect........... 427 690 1,364
Foreign taxes................................ (875) (430) 789
Nondeductible expenses....................... 1,144 31,814 397
Other........................................ (366) 65 19
------ -------- ------
$2,654 $ 1,262 $2,197
====== ======== ======
</TABLE>
36
<PAGE> 38
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of significant temporary differences representing deferred
tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Deferred tax assets:
Accounts receivable reserves............................. $ 720 $ 477
Accrued liabilities not yet deductible................... 2,672 3,497
Inventories.............................................. 8,608 1,205
Net operating loss carry forward......................... 5,077 --
Postretirement benefits.................................. 3,158 --
Other.................................................... 315 227
------- -------
20,550 5,406
Deferred tax liabilities:
Depreciation and amortization............................ 15,998 14,684
Other.................................................... -- 700
------- -------
15,998 15,384
------- -------
Net deferred tax asset (liability)............... $ 4,552 $(9,978)
======= =======
</TABLE>
The Company's net operating loss carryforward expires in periods ranging
from the year 2010 through 2011.
Wirekraft's U.S. income tax returns for the years 1993-1995 are being
reviewed by the Internal Revenue Service. The proposed settlement is being
reviewed by the Joint Tax Committee. The Company believes that the final
settlement will not have a material adverse effect on the future financial
position, operations or cash flows of the Company and that adequate amounts of
taxes and related interest, if any, have been provided.
10. IMPAIRMENT, UNUSUAL AND PLANT CLOSING CHARGES
Commencing in the first quarter of 1996, the Company began a comprehensive
review of the strategic position of its individual business units. The original
goodwill related to the Wirekraft acquisition recognized long-term customer
relationships and plant locations that were strategically sized, located and
customer focused. Due to intense competition in the appliance and automotive
markets and the loss of the portion of business from a major appliance customer
in 1995, the Company developed and executed new business strategies in 1996,
including the DWT Acquisition, to maintain customer volume levels, meet
competitive pressures and address key changes within the marketplace. As a
result, the Company embarked on a major plant consolidation program including
the utilization of facilities purchased in the DWT Acquisition and transitioning
of business from the Midwest to the Southwest and Mexico.
In June of 1995, the Company established a plant closing reserve of $1,750
to shut down and consolidate certain Harness segment facilities. During the
development of the new business strategies in 1996, the Company formulated a
plan to realign the plant capacity through plant closings and consolidations of
wire segment facilities. To that end, the Company charged an additional $6,000
to the reserve through December 31, 1996.
As future costs of the 1996 plan became reasonably estimable, the Company
charged an additional $2,000 to the reserve in 1997 relating to the closure of
plants in the Wire segment. The plant closing reserve includes provisions for
shut-down costs from the period of the plant closure to the date of disposal,
commitment costs for leased property and key personnel and severance related
costs. During 1997, 1996 and
37
<PAGE> 39
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1995, plant closing actions resulted in the reduction of approximately 303, 55
and 45 employees, respectively. There have been ten Harness segment facilities
and four Wire segment facilities closed to date.
The following table summarizes the activity in the plant closing reserve
for the period from June 1, 1995 through December 31, 1997:
<TABLE>
<CAPTION>
SEVEN
YEAR YEAR MONTHS
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Balance, beginning of period.................. $ 2,462 $ 700 $ --
Charges to operations:
Facility shut-down costs.................... 1,875 3,872 731
Lease commitments........................... -- 773 67
Key personnel and severance costs........... 125 1,355 952
------- ------- -------
2,000 6,000 1,750
Costs incurred:
Facility shut-down costs.................... (1,979) (3,017) (339)
Lease commitments........................... (230) (134) (67)
Key personnel and severance costs........... (808) (1,087) (644)
------- ------- -------
(3,017) (4,238) (1,050)
------- ------- -------
Balance, end of period........................ $ 1,445 $ 2,462 $ 700
======= ======= =======
</TABLE>
The Company periodically evaluates the adequacy of the reserve balances and
estimated future expenditures, including assumptions used and the period over
which such costs are expected to be incurred.
In December 1996, the Company completed its review of the carrying value of
goodwill, resulting in an impairment charge of $78,250 for the year ended
December 31, 1996. In determining the goodwill impairment charge, the Company
completed financial projections through the year 2000. These projections reflect
the Company's business strategies and were based on current industry trends,
forecasts and expected developments. A discounted cash flow analysis of the
consolidated entity was used to calculate the fair market value of the Company
and was based upon the Company's acquisition strategy which focuses on the
identification and realization of certain synergies existing between the
acquired businesses. The calculated fair value of the Company is determined as
the sum of discounted free cash flows through the year 2000 plus a terminal
value, which is calculated using a discounted cash flow terminal value approach,
determined by capitalizing unlevered net income in the last year of the
projection by dividing unlevered net income by the weighted average cost of
capital, less an assumed future growth rate. The calculated fair market value
was compared to net tangible assets (net working capital and net property, plant
and equipment). The difference between net tangible assets and the fair market
value was compared to net goodwill to determine the goodwill impairment charge.
In connection with the impairment charge recorded in December 1996, the
Company provided $4,201 for anticipated losses of related to product liability
claims associated with the period preceding the original acquisition of
Wirekraft in 1992. These claims are for a non-wire product in the appliance
industry that the Company has not manufactured since 1992. The Company's policy
is to record the probable and reasonably estimable loss related to product
liability claims. In developing its estimated liability outstanding on actual
claims reported, the Company considered historical settlement rates. The Company
has estimated its liability outstanding on actual claims reported at December
31, 1997 and December 31, 1996 to be $1,971 and $1,500, respectively. In
determining its estimate of claims incurred but not reported, the Company
considered historical claim levels and amounts relative to total product
shipped. Additionally, the Company considered
38
<PAGE> 40
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
historical settlement rates to develop its estimate for incurred but not
reported claims at December 31, 1997 and December 31, 1996 of $1,471 and $2,701,
respectively. Due to the uncertainties associated with these product claims, the
future cost of final settlement of these claims may differ from the liability
currently accrued. However, in the Company's opinion, the impact of final
settlement of these claims on future operations, financial position and cash
flows will not be material.
11. RETIREMENT BENEFITS AND STOCK OPTION PLANS
The Company sponsors a number of defined contribution retirement plans
which provide retirement benefits for eligible employees. Company contribution
expense related to these retirement plans for the years ended December 31, 1997
and December 31, 1996 and seven months ended December 31, 1995 amounted to
approximately $3,442, $1,208 and $902, respectively.
Holding's Qualified and Non-qualified Stock Option Plan (the "Option Plan")
provides for the granting of up to 4,795,322 shares of common stock to officers
and key employees of Holding and the Company. Under the plan, options granted
approximate market value of the common stock at the date of grant. Such options
vest ratably over a five year period commencing on the first anniversary date
after the date of grant, and vested options are exercisable at the discretion of
the committee appointed to administer the Option Plan. Generally, an option may
be exercised only if the holder is an officer or employee of Holding or the
Company at the time of exercise. Options granted under the Option Plan are not
transferable, except by will and the laws of descent and distribution.
Holding and the Company also granted Performance Options ("the Performance
Options") to certain key executives in 1996 and 1995. The Performance Options
are exercisable only on the occurrence of certain events. The exercise price for
the Performance Options is initially equal to $1.00 per share and, effective
each anniversary of the grant date, the per share exercise price for the
Performance Options is equal to the per share exercise price for the prior year
multiplied by 1.09. The Performance Options terminate on the tenth anniversary
date of the date of grant.
In accordance with SFAS No. 123, "Accounting for Stock-Based Compensation",
the Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees", and related Interpretations in accounting for the Option Plan.
Accordingly, no compensation cost has been recognized for the Option Plan and
the Performance Options. There may be compensation expense in future periods
when the Performance Options became exercisable to the extent that the fair
value of the stock exceeds the exercise price of the Performance Options. Had
compensation cost for the Option Plan and the Performance Options been
determined based upon the fair value at the grant date for awards under these
plans consistent with the methodology prescribed under SFAS No. 123, the
Company's net income (loss) would approximate the following:
<TABLE>
<CAPTION>
SEVEN
MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
As reported................................... $990 $(89,482) $(3,291)
Pro forma..................................... $800 $(89,759) $(3,329)
</TABLE>
The minimum value of each option grant is estimated on the date of grant
with the following assumptions in 1997, 1996 and 1995, respectively: (i)
risk-free interest rates ranging from 6.4% to 6.6% in 1997, ranging from 5.9% to
6.5% in 1996 and 5.9% in 1995 and (ii) expected life of 10 years.
39
<PAGE> 41
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts. Additional awards in future years are anticipated.
Changes in the status of the Option Plan are summarized below:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
EXERCISE PRICE OPTIONS OPTIONS
PER SHARE GRANTED VESTED
---------------- ---------- ---------
<S> <C> <C> <C>
June 1, 1995................................ -- -- --
Granted................................... $1.00 3,400,000 --
Vested.................................... -- -- --
----- ---------- ---------
December 31, 1995........................... $1.00 3,400,000 --
Granted................................... $1.02 1,865,249 --
Vested.................................... $1.00 -- 495,249
Forfeitures............................... $1.00 (1,250,000) --
----- ---------- ---------
December 31, 1996........................... $1.01 4,015,249 495,249
Granted................................... $1.40 1,350,000 --
Vested.................................... $1.03 -- 915,000
Forfeitures............................... $1.00 (888,805) (28,805)
----- ---------- ---------
December 31, 1997........................... $1.12 4,476,444 1,381,444
===== ========== =========
</TABLE>
Changes in the status of the Performance Options are summarized below:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
EXERCISE PRICE OPTIONS OPTIONS
PER SHARE GRANTED VESTED
---------------- --------- -------
<S> <C> <C> <C>
June 1, 1995.................................... $ -- -- --
Granted....................................... $1.00 2,966,178 --
----- --------- ----
December 31, 1995............................... $1.00 2,966,178 --
Granted....................................... $1.00 1,236,566 --
----- --------- ----
December 31, 1996............................... $1.06 4,202,744 --
Granted....................................... $ -- -- --
----- --------- ----
December 31, 1997............................... $1.16 4,202,744 --
===== ========= ====
</TABLE>
The weighted average grant-date fair value of options granted during 1997,
1996 and 1995 was $0.35, $0.48 and $0.44 per share, respectively. Of the
4,476,444 options outstanding under the Option Plan at December 31, 1997,
3,375,000 have an exercise at $1.00 per share, 1,350,000 at $1.40 per share and
51,444 at $1.63 per share and have weighted average remaining contractual lives
of between 8 and 10 years. The weighted average exercise price of options vested
at December 31, 1997 is $1.02 per share.
Of the Performance Options outstanding at December 31, 1997, 2,966,178 and
1,235,566 have exercise prices of $1.19 and $1.09 respectively, and have
weighted average remaining contractual lives of between 8 and 9 years.
In addition to the options granted to officers and key employees under the
Option Plan, Holding and the Company also granted options outside of the Option
Plan to purchase 300,000 shares of Holding Common Stock at $1.00 per share to
directors of the Company. These options were issued and vested in 1995.
12. COMMITMENTS AND CONTINGENCIES
The Company leases certain property, transportation vehicles and other
equipment. Total rental expense under operating leases was $5,862, $2,237 and
$1,420 for the years ended December 31, 1997 and
40
<PAGE> 42
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1996 and seven months ended December 31, 1995, respectively. Future
minimum lease payments under capital and operating leases for the years ended
December 31 are:
<TABLE>
<CAPTION>
CAPITAL OPERATING
------- ---------
<S> <C> <C>
1998........................................................ $ 1,391 $3,454
1999........................................................ 1,391 2,236
2000........................................................ 1,355 1,215
2001........................................................ 970 920
2002........................................................ 230 582
Thereafter.................................................. 2,780 --
------- ------
Total minimum lease payments.............................. 8,117 $8,407
======
Less amount representing interest......................... (3,297)
-------
Present value of net minimum lease payments............... $ 4,820
=======
</TABLE>
The Company is subject to legal proceedings and claims which arise in the
normal course of business. In the opinion of management, the ultimate
liabilities with respect to these actions will not have a material adverse
effect on the Company's financial condition, results of operations or cash
flows.
The Company has agreed to participate in an international expansion project
with one of the Wire segment's largest customers. The Company estimates its
financial commitment for property, plant and equipment to be approximately
$13,000 of which approximately $6,000 has been expended as of December 31, 1997.
13. BUSINESS SEGMENT INFORMATION
Certain information concerning the Company's operating segments for the
years ended December 31, 1997 and December 31, 1996 and the seven months ended
December 31, 1995 is presented below. Total revenue by segment includes both
sales to customers and intersegment sales, which are accounted for at prices
charged to customers and eliminated in consolidation.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 WIRE HARNESS CONSOLIDATED
- ------------------------------------------------------ -------- -------- ------------
<S> <C> <C> <C>
Total revenue......................................... $553,925 $165,430
Intersegment sales.................................... 24,207 --
-------- --------
Sales to customers.................................... $529,718 $165,430 $695,148
Operating income...................................... $ 41,261 $ 20,348 $ 61,609
Identifiable assets................................... $536,782 $ 91,266 $628,048
Depreciation and amortization......................... $ 28,589 $ 7,437 $ 36,026
Capital expenditures, net............................. $ 24,961 $ 2,799 $ 27,760
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 WIRE HARNESS CONSOLIDATED
- ------------------------------------------------------ -------- -------- ------------
<S> <C> <C> <C>
Total revenue......................................... $406,026 $161,354
Intersegment sales.................................... 20,399 --
-------- --------
Sales to customers.................................... $385,627 $161,354 $546,981
Operating loss........................................ $(29,443) $(12,375) $(41,818)
Identifiable assets................................... $437,524 $ 93,496 $531,020
Depreciation and amortization......................... $ 24,880 $ 6,461 $ 31,341
Capital expenditures, net............................. $ 13,060 $ 2,789 $ 15,849
</TABLE>
41
<PAGE> 43
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
SEVEN MONTHS ENDED DECEMBER 31, 1995 WIRE HARNESS CONSOLIDATED
- ------------------------------------------------------ -------- -------- ------------
<S> <C> <C> <C>
Total revenue......................................... $167,082 $ 84,288
Intersegment sales.................................... 5,341 446
-------- --------
Sales to customers.................................... $161,741 $ 83,842 $245,583
Operating income...................................... $ 10,937 $ 9,526 $ 20,463
Identifiable assets................................... $295,671 $132,249 $427,920
Depreciation and amortization......................... $ 7,442 $ 3,578 $ 11,020
Capital expenditures, net............................. $ 4,991 $ 760 $ 5,751
</TABLE>
14. GUARANTOR SUBSIDIARIES
The Senior Notes are fully and unconditionally (as well as jointly and
severally) guaranteed on an unsecured, senior subordinated basis by each
subsidiary of the Company (the "Guarantor Subsidiaries") other that Electro
Componentes de Mexico, S.A. de C.V., Wirekraft Industries de Mexico, S.A. de
C.V. and IWG-Philippines, Incorporated (newly formed with no operations) (the
"Non-Guarantor Subsidiaries"). Each of the Guarantor Subsidiaries and
Non-Guarantor Subsidiaries is wholly owned by the Company.
The following condensed, consolidating financial statements of the Company
include the accounts of the Company, the combined accounts of the Guarantor
Subsidiaries and the combined accounts of the Non-Guarantor Subsidiaries. Given
the size of the Non-Guarantor Subsidiaries relative to the Company on a
consolidated basis, separate financial statements of the respective Guarantor
Subsidiaries are not presented because management has determined that such
information is not material in assessing the Guarantor Subsidiaries.
42
<PAGE> 44
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1997
ASSETS
<TABLE>
<CAPTION>
TOTAL
TOTAL NON-
COMPANY GUARANTOR GUARANTOR ELIMINATIONS CONSOLIDATED
-------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash.................................. $ -- $ (226) $ 226 $ -- $ --
Accounts receivable................... -- 86,521 680 -- 87,201
Inventory............................. -- 74,406 -- -- 74,406
Other assets.......................... -- 27,273 -- -- 27,273
-------- -------- ------- --------- --------
Total current assets........ -- 187,974 906 -- 188,880
Property plant and equipment, net..... -- 150,443 14,796 -- 165,239
Intangible assets, net................ 23,592 242,336 -- -- 265,928
Investment in subsidiaries............ 592,643 -- -- (592,643) --
Other assets.......................... -- 5,963 2,038 -- 8,001
-------- -------- ------- --------- --------
Total assets................ $616,235 $586,716 $17,740 $(592,643) $628,048
======== ======== ======= ========= ========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities................... $ 8,334 $106,623 $ 2,252 $ -- $117,209
Long term obligations, less current
maturities.......................... 498,014 21,288 -- -- 519,302
Other long-term liabilities........... -- 37,365 -- -- 37,365
Intercompany (receivable) payable..... 87,953 (97,774) 9,821 -- --
-------- -------- ------- --------- --------
Total liabilities........... 594,301 67,502 12,073 -- 673,876
Stockholder's equity
Common stock........................ 0 -- -- -- 0
Preferred stock..................... -- -- -- -- --
Contributed capital................. 113,717 572,012 138 (572,150) 113,717
Predecessor carryover............... -- (67,762) -- -- (67,762)
Retained earnings................... (91,783) 14,964 5,529 (20,493) (91,783)
-------- -------- ------- --------- --------
Total stockholder's equity
(deficit)................. 21,934 519,214 5,667 (592,643) (45,828)
-------- -------- ------- --------- --------
Total liabilities and
stockholder's equity
(deficit)................. $616,235 $586,716 $17,740 $(592,643) $628,048
======== ======== ======= ========= ========
</TABLE>
43
<PAGE> 45
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
TOTAL
TOTAL NON-
COMPANY GUARANTOR GUARANTOR ELIMINATIONS CONSOLIDATED
-------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales................................. $ -- $695,148 $35,885 $(35,885) $695,148
Operating expenses
Cost of goods sold...................... -- 551,311 14,884 (35,885) 530,310
Selling, general and administrative
expenses............................. -- 44,190 12,513 -- 56,703
Depreciation and amortization........... -- 33,347 2,679 -- 36,026
Impairment, unusual and plant closing
charges.............................. -- 2,000 -- -- 2,000
Inventory valuation adjustment.......... -- 8,500 -- -- 8,500
-------- -------- ------- -------- --------
Operating income (loss)................... -- 55,800 5,809 -- 61,609
Other income (expense).................... (49,753) (1,186) -- -- (50,939)
Interest expense........................
Amortization of deferred financing
fees................................. (3,932) -- -- -- (3,932)
Equity in net income of subsidiaries.... 57,666 -- -- (57,666) --
Other, net.............................. -- (98) (5) -- (103)
-------- -------- ------- -------- --------
Income before income tax provision and
extraordinary item...................... 3,981 54,516 5,804 (57,666) 6,635
Income tax provision...................... -- 1,846 808 -- 2,654
-------- -------- ------- -------- --------
Income before extraordinary item.......... 3,981 52,670 4,996 (57,666) 3,981
Extraordinary item........................ (2,991) -- -- -- (2,991)
-------- -------- ------- -------- --------
Net income...................... $ 990 $ 52,670 $ 4,996 $(57,666) $ 990
======== ======== ======= ======== ========
</TABLE>
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
TOTAL
TOTAL NON-
COMPANY GUARANTOR GUARANTOR ELIMINATIONS CONSOLIDATED
--------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash from operating activities....... $ (53,585) $ 78,917 $ 8,666 $-- $ 33,998
--------- -------- ------- --- ---------
Cash flows provided by (used in)
investing activities:
Acquisition, net of cash............... -- (58,996) -- -- (58,996)
Capital expenditures................... -- (19,062) (8,698) -- (27,760)
--------- -------- ------- --- ---------
Net cash used in investing
activities................... -- (78,058) (8,698) -- (86,756)
--------- -------- ------- --- ---------
Cash flows provided by (used in)
financing activities:
Equity proceeds........................ 331 (451) 120 -- --
Proceeds from issuance of long-term
obligations......................... 228,125 -- -- -- 228,125
Repayment of long-term obligations..... (161,505) (496) -- -- (162,001)
Repurchase of stock of Holding......... (700) -- -- -- (700)
Cash dividends paid on preferred
stock............................... (1,378) -- -- -- (1,378)
Financing fees and other............... (11,288) -- -- -- (11,288)
--------- -------- ------- --- ---------
Net cash from financing
activities................... 53,585 (947) 120 -- 52,758
--------- -------- ------- --- ---------
Net change in cash............. $ -- $ (88) $ 88 $-- $ --
========= ======== ======= === =========
</TABLE>
44
<PAGE> 46
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1996
ASSETS
<TABLE>
<CAPTION>
TOTAL
TOTAL NON-
COMPANY GUARANTOR GUARANTOR ELIMINATIONS CONSOLIDATED
-------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash...................................... $ -- $ (138) $ 138 $ -- $ --
Accounts receivable....................... -- 70,010 1,902 (731) 71,181
Inventory................................. -- 59,648 714 -- 60,362
Other assets.............................. 5,375 4,314 112 -- 9,801
-------- -------- ------- --------- --------
Total current assets............ 5,375 133,834 2,866 (731) 141,344
Property plant and equipment, net......... -- 109,774 8,777 -- 118,551
Intangible assets, net.................... 19,722 246,155 -- -- 265,877
Investment in subsidiaries................ 534,857 -- -- (534,857) --
Other assets.............................. -- 4,368 880 -- 5,248
-------- -------- ------- --------- --------
Total assets.................... $559,954 $494,131 $12,523 $(535,588) $531,020
======== ======== ======= ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities....................... $ 24,620 $ 85,866 $ 2,856 $ (731) $112,611
Long term obligations, less current
maturities.............................. 420,422 6,297 -- -- 426,719
Other long-term liabilities............... 6,081 20,790 10 -- 26,881
Intercompany (receivable) payable......... 76,260 (85,366) 9,106 -- --
-------- -------- ------- --------- --------
Total liabilities............... 527,383 27,587 11,972 (731) 566,211
Stockholders' equity
Common stock............................ -- -- -- -- --
Preferred stock......................... 4 -- -- -- 4
Contributed capital..................... 125,340 572,012 18 (572,030) 125,340
Predecessor carryover................... -- (67,762) -- -- (67,762)
Retained earnings....................... (92,773) (37,706) 533 37,173 (92,773)
-------- -------- ------- --------- --------
Total stockholders' equity
(deficit)..................... 32,571 466,544 551 (534,857) (35,191)
-------- -------- ------- --------- --------
Total liabilities and
stockholders' equity
(deficit)..................... $559,954 $494,131 $12,523 $(535,588) $531,020
======== ======== ======= ========= ========
</TABLE>
45
<PAGE> 47
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
TOTAL
TOTAL NON-
COMPANY GUARANTOR GUARANTOR ELIMINATIONS CONSOLIDATED
--------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales................................ $ -- $546,981 $34,757 $(34,757) $ 546,981
Operating expenses
Cost of goods sold..................... -- 435,164 20,416 (34,757) 420,823
Selling, general and administrative
expenses............................ -- 33,384 10,501 -- 43,885
Depreciation and amortization.......... -- 29,688 1,653 -- 31,341
Impairment, unusual and plant closing
charges............................. -- 84,250 -- -- 84,250
Inventory valuation adjustment......... -- 8,500 -- -- 8,500
--------- -------- ------- -------- ---------
Operating income (loss).................. -- (44,005) 2,187 -- (41,818)
Other income (expense)
Interest expense....................... (41,187) (1,410) (416) -- (43,013)
Amortization of deferred financing
fees................................ (3,701) -- -- -- (3,701)
Equity in net loss of subsidiaries..... (46,794) -- -- 46,794 --
Other, net............................. -- 243 69 -- 312
--------- -------- ------- -------- ---------
Income (loss) before income tax
provision.............................. (91,682) (45,172) 1,840 46,794 (88,220)
Income tax provision..................... (2,200) 3,197 265 -- 1,262
--------- -------- ------- -------- ---------
Net income (loss).............. $ (89,482) $(48,369) $ 1,575 $ 46,794 $ (89,482)
========= ======== ======= ======== =========
</TABLE>
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
TOTAL
TOTAL NON-
COMPANY GUARANTOR GUARANTOR ELIMINATIONS CONSOLIDATED
--------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash from operating activities....... $ 16,189 $ 12,881 $ 2,910 $ -- $ 31,980
--------- -------- ------- ---- ---------
Cash flows provided by (used in)
investing activities:
Acquisition, net of cash............... (160,259) -- -- -- (160,259)
Capital expenditures................... -- (13,048) (2,801) -- (15,849)
--------- -------- ------- ---- ---------
Net cash used in investing
activities................... (160,259) (13,048) (2,801) -- (176,108)
--------- -------- ------- ---- ---------
Cash flows provided by (used in)
financing activities:
Equity proceeds........................ 44,289 750 -- -- 45,039
Proceeds from issuance of long-term
obligations......................... 128,200 -- -- -- 128,200
Repayment of long-term obligations..... (20,619) (692) -- -- (21,311)
Financing fees and other............... (7,800) -- -- -- (7,800)
--------- -------- ------- ---- ---------
Net cash from financing
activities................... 144,070 58 -- -- 144,128
--------- -------- ------- ---- ---------
Net change in cash............. $ -- $ (109) $ 109 $ -- $ --
========= ======== ======= ==== =========
</TABLE>
46
<PAGE> 48
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SEVEN MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
TOTAL
TOTAL NON-
COMPANY GUARANTOR GUARANTOR ELIMINATIONS CONSOLIDATED
--------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales................................ $ -- $245,583 $ 8,240 $(8,240) $ 245,583
Operating expenses
Cost of goods sold..................... -- 198,958 4,503 (8,240) 195,221
Selling, general and administrative
expenses............................ -- 13,259 3,870 -- 17,129
Depreciation and amortization.......... -- 10,927 93 -- 11,020
Impairment, unusual and plant closing
charges............................. -- 1,750 -- -- 1,750
Inventory valuation adjustment......... -- -- -- -- --
--------- -------- ------- ------- ---------
Operating income (loss).................. -- 20,689 (226) -- 20,463
Other income (expense)
Interest expense....................... (18,960) (815) (156) -- (19,931)
Amortization of deferred financing
fees................................ (1,468) -- -- -- (1,468)
Equity in net loss of subsidiaries..... 9,621 -- -- (9,621) --
Other, net............................. -- (158) -- -- (158)
--------- -------- ------- ------- ---------
Income (loss) before income tax
provision.............................. (10,807) 19,716 (382) (9,621) (1,094)
Income tax provision..................... (7,516) 9,053 660 -- 2,197
--------- -------- ------- ------- ---------
Net income (loss).............. $ (3,291) $ 10,663 $(1,042) $(9,621) $ (3,291)
========= ======== ======= ======= =========
</TABLE>
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SEVEN MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
TOTAL
TOTAL NON-
COMPANY GUARANTOR GUARANTOR ELIMINATIONS CONSOLIDATED
--------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash from operating activities....... $ 108 $ 7,945 $ 5,281 $ -- $ 13,334
--------- -------- ------- ---- ---------
Cash flows provided by (used in)
investing activities:
Acquisition, net of cash............... (341,046) -- -- -- (341,046)
Capital expenditures................... -- (5,482) (269) -- (5,751)
--------- -------- ------- ---- ---------
Net cash used in investing
activities................... (341,046) (5,482) (269) -- (346,797)
--------- -------- ------- ---- ---------
Cash flows provided (used in) financing
activities:
Equity proceeds........................ 15,048 -- -- -- 15,048
Proceeds from issuance of long-term
obligations......................... 337,500 -- -- -- 337,500
Repayment of long-term obligations..... -- (450) (4,635) -- (5,085)
Financing fees and other............... (14,000) -- -- -- (14,000)
--------- -------- ------- ---- ---------
Net cash from financing
activities................... 338,548 (450) (4,635) -- 333,463
--------- -------- ------- ---- ---------
Net change in cash............. $ (2,390) $ 2,013 $ 377 $ -- $ --
========= ======== ======= ==== =========
</TABLE>
47
<PAGE> 49
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
International Wire Group, Inc.:
Our report on the consolidated financial statements of International Wire
Group, Inc. and subsidiaries is included on page 23 of this Form 10-K. In
connection with our audits of such financial statements, we have also audited
the related financial statement schedule listed in the index on page 22 of this
Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
St. Louis, Missouri
January 30, 1998
48
<PAGE> 50
INTERNATIONAL WIRE GROUP, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ALLOWANCE FOR DOUBTFUL COLLECTION OF
ACCOUNTS -- DEDUCTED FROM BALANCE AT PREVIOUSLY BALANCE AT
ACCOUNTS RECEIVABLES IN THE BEGINNING WRITTEN OFF END OF
BALANCE SHEET OF PERIOD PROVISION WRITE-OFFS ACCOUNTS ACQUISITIONS PERIOD
--------------------------- ---------- --------- ---------- ------------- ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Seven months ended December
31, 1995................... $ 845 $ 33 $ (53) $35 $ -- $ 860
Year ended December 31,
1996....................... $ 860 $337 $ (71) $12 $225 $1,363
Year ended December 31,
1997....................... $1,363 $888 $(388) $12 $203 $2,078
</TABLE>
49
<PAGE> 51
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Wirekraft Holdings Corp.:
We have audited the accompanying consolidated statements of operations,
stockholders' equity, and cash flows of Wirekraft Holdings Corp. and
subsidiaries (formerly WB Holdings, Inc.) for the six months ended May 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated results of operations and cash flows
of Wirekraft Holdings Corp. and subsidiaries for the six months ended May 31,
1995, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
St. Louis, Missouri
January 27, 1996
50
<PAGE> 52
WIREKRAFT HOLDINGS CORP.
(FORMERLY WB HOLDINGS INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MAY 31,
1995
--------------
(IN THOUSANDS)
<S> <C>
Net sales................................................... $168,053
Operating expenses:
Cost of goods sold........................................ 138,851
Selling, general and administrative....................... 13,301
Depreciation and amortization............................. 6,474
Compensation expense...................................... 895
Expenses related to sale.................................. 501
Expenses related to plant closings........................ 2,000
--------
Operating income............................................ 6,031
Other income (expense):
Interest expense.......................................... (8,020)
Amortization of deferred financing costs.................. (1,657)
--------
Income (loss) before income tax provision and extraordinary
item...................................................... (3,646)
Income tax provision (benefit).............................. (2,114)
--------
Income (loss) before extraordinary item..................... (1,532)
Extraordinary item -- loss due to early extinguishment of
debt, net of income tax of $4,930......................... (7,835)
--------
Net income (loss)................................. $ (9,367)
========
</TABLE>
See accompanying notes to the consolidated financial statements
51
<PAGE> 53
WIREKRAFT HOLDINGS CORP.
(FORMERLY WB HOLDINGS INC.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED MAY 31, 1995
<TABLE>
<CAPTION>
CLASS A ADDITIONAL RETAINED
PREFERRED COMMON COMMON PAID-IN EARNINGS
STOCK STOCK STOCK CAPITAL (DEFICIT) TOTAL
--------- ------ ------- ---------- --------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance November 30, 1994...... -- 200 24 22,576 5,574 28,374
Issuance of preferred stock.... 10 -- -- 24,990 -- 25,000
Issuance of common stock....... -- 3 -- 747 -- 750
Issuance costs................. -- -- -- (300) -- (300)
Net loss....................... -- -- -- -- (9,367) (9,367)
--- ---- --- ------- ------- -------
Balance May 31, 1995........... $10 $203 $24 $48,013 $(3,793) $44,457
=== ==== === ======= ======= =======
</TABLE>
See accompanying notes to the consolidated financial statements
52
<PAGE> 54
WIREKRAFT HOLDINGS CORP.
(FORMERLY WB HOLDINGS INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MAY 31,
1995
--------------
(IN THOUSANDS)
<S> <C>
Cash flows provided by (used in) operating activities:
Net income (loss)......................................... $ (9,367)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Extraordinary item..................................... 12,765
Depreciation and amortization.......................... 6,474
Amortization of deferred financing costs............... 1,493
Accretion of debt discount............................. 164
Deferred income taxes.................................. (4,282)
Change in assets and liabilities, net of acquisitions:
Accounts receivable.................................. (9,863)
Inventories.......................................... (824)
Prepaid expenses and other........................... (166)
Accounts payable..................................... (617)
Accrued and other liabilities........................ 2,628
Accrued interest..................................... 1,276
Income taxes payable/refundable...................... (3,366)
Other long-term liabilities.......................... (236)
--------
Net cash from operating activities................ (3,921)
--------
Cash flows provided by (used in) financing activities:
Acquisitions, net of cash................................. (44,973)
Capital expenditures, net................................. (2,914)
--------
Net cash from investing activities................ (47,887)
--------
Cash flows provided by (used in) financing activities:
Proceeds from issuance of long-term obligations........... 24,000
Equity proceeds........................................... 25,750
Borrowings of long-term obligations....................... 19,639
Repayment of long-term obligations........................ (14,226)
Financing fees and other.................................. (3,500)
--------
Net cash from financing activities................ 51,663
--------
Net change in cash and cash equivalents........... (145)
Cash and cash equivalents at beginning of the period........ 2,053
--------
Cash and cash equivalents at end of the period ............. $ 1,908
========
</TABLE>
See accompanying notes to the consolidated financial statements
53
<PAGE> 55
WIREKRAFT HOLDINGS CORP.
(FORMERLY WB HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED MAY 31, 1995,
(IN THOUSANDS, EXCEPT SHARE DATA)
1. THE COMPANY
WB Holdings Inc. ("Holdings"), a Delaware corporation, was formed to
participate in the December 21, 1992 Acquisition (defined below). Holdings had
no operations prior to December 21, 1992.
On December 2, 1994, Holdings, through a series of mergers, became a wholly
owned subsidiary of Wirekraft Holdings Corp. ("New Holdings" together with
Holdings, the "Company"). Pursuant to the mergers, the existing stockholders of
Holdings exchanged their Holdings securities for New Holdings securities that
have terms identical to the exchanged Holdings securities. New Holdings, a
Delaware corporation, was formed to participate in the acquisition of Electro
Componentes de Mexico S.A. de C.V. ("ECM") as discussed in Note 2. New Holdings
had no operations prior to December 2, 1994. Holdings and New Holdings have a
fiscal year-end of November 30.
On December 21, 1992, Holdings, through a series of acquisitions and
mergers, acquired all of the issued and outstanding common stock of Bristol
Holding Corporation and Burcliff Holdings Corporation, the parent companies of
the general partners of Kirtland Indiana, Limited Partnership for a total
consideration of $116,997 (the "Acquisition"). Through a related series of
mergers after the Acquisition, Bristol Holding Corporation became the surviving
entity. Bristol Holding Corporation was later renamed Wirekraft Industries, Inc.
("Wirekraft") (together with Holdings, the "Company"). Wirekraft through its two
segments, the Wire segment and the Harness segment, is engaged in the
manufacture, design and distribution of insulated wire and wire harnesses used
primarily in the appliance and automobile markets. The Company markets and
distributes its products through a combination of internal sales representatives
and independent sales representatives, selling primarily to original equipment
manufacturers.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of New Holdings
and its wholly owned subsidiary, Holdings. All material intercompany balances
and transactions have been eliminated in consolidation.
Revenue Recognition
Sales and related costs of goods sold are included in income when goods are
shipped to customers.
Inventories
Inventories are valued at the lower of cost or market. Cost is determined
using the last-in, first-out ("LIFO") method.
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Depreciation is calculated
using the straight-line method. The average estimated lives utilized in
calculating depreciation are as follows: building and improvements -- 25 years;
machinery and equipment -- 7 years; and furniture and fixtures -- 5 years.
Leasehold improvements are amortized over the shorter of the term of the
respective lease or life of the respective improvement.
54
<PAGE> 56
WIREKRAFT HOLDINGS CORP.
(FORMERLY WB HOLDINGS INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Intangible Assets
Intangible assets, which consist principally of goodwill arising from the
excess of cost over the value of net assets acquired, are amortized using the
straight-line method over forty years.
Deferred Financing Costs
Deferred financing costs, which consists of fees and other expenses
associated with the debt financing, are amortized over the term of the related
debt using the effective interest method and the straight-line method which
approximates the effective interest method.
Income Taxes
Deferred income taxes are determined using the liability method.
Statement of Cash Flows
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid investments purchased with maturities of three
months or less to be cash equivalents. Interest paid for the six months ended
May 31, 1995 was approximately $6,744. Taxes paid for the six months ended May
31, 1995 was approximately $604.
During the six months ended May 31, 1995, the Company entered into a
capital lease obligation of $4,714 for new equipment.
Fair Value of Financial Instruments
The fair market values of the financial instruments included in the
consolidated financial statements approximate the carrying values of the
financial instruments.
Concentration of Credit Risk
Sales to the Company's five largest customers represented 61% of net sales
for the six months ended May 31, 1995. A significant portion of the Company's
sales are to three major customers within the Harness Segment. Sales to one of
these customers represented 25% of net sales for the six months ended May 31,
1995. The Company has entered into a supply contract with this customer expiring
in 2002. Sales to the Company's two other major customers represented 12% and 7%
of net sales for the six months ended May 31, 1995.
3. FINANCING COSTS AND RELATED PARTY TRANSACTIONS
In connection with the Acquisition and ECM acquisition, the Company
incurred aggregate fees and costs of $11,900. Costs of $11,100 related to the
12% Senior Subordinated Notes due 2003 and Credit Agreement are included in
deferred financing costs and are amortized over the term of the related
borrowings. Costs of $800 related to the issuance of Holding's common stock have
been deducted from the proceeds to reduce the carrying value of the common
stock.
In connection with the Acquisition and the related financing, Holdings and
Wirekraft entered into a Monitoring and Oversight Agreement ("Agreement") with
Hicks, Muse & Co., Incorporated ("Hicks Muse") (an affiliate of the Company)
pursuant to which the Company paid Hicks Muse a financial advisory fee of
$1,725. The fees, which also include $200 paid in connection with the
acquisition of Ristance and $750 paid in connection with the acquisition of ECM,
have been allocated to the Company's debt and equity securities as deferred
financing costs or as a deduction from the cash proceeds received from the sale
of stock. The Agreement further provides that the Company shall pay Hicks Muse
an annual fee of $115 (subject to
55
<PAGE> 57
WIREKRAFT HOLDINGS CORP.
(FORMERLY WB HOLDINGS INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
adjustment), for ten years, for monitoring and oversight services. Such
Agreement was amended and restated in connection with the acquisition of ECM to
increase the annual fee for financial advisory services to $200 (subject to
adjustment). The obligation under the Agreement, as amended, and the related
deferred financing costs have been recorded in the consolidated balance sheet.
4. STOCKHOLDERS' EQUITY
The authorized capital stock of the Company at May 31, 1995 consists of
50,000,000 shares of common stock, 3,000,000 shares of Class A common stock, and
10,000,000 shares of preferred stock. In connection with the financing of the
Acquisition, the Company issued 20,000,000 shares of common stock, 2,402,402
shares of Class A common stock and 1,621,622 warrants to purchase common stock.
Each warrant represents the right to purchase one share of the Company's common
stock for $1.00 per warrant. The warrants expire on December 31, 2002. As of May
31, 1995, no warrants had been exercised. On December 2, 1994, in connection
with the acquisition of ECM, the Company issued 1,000,000 shares of Series A
Senior Preferred Stock and 275,758 shares of common stock.
The Class A common stock may be converted into shares of common stock at
the option of the holder at any time. In addition, shares of the Class A common
stock (i) may be converted into common stock at the option of the Company
effective immediately prior to the occurrence of a Triggering Event (as defined
in the Company's Certificate of Incorporation) or (ii) shall automatically be
converted on December 31, 2002. Such conversions are based on a formula set
forth in the Company's Certificate of Incorporation.
Dividends are payable to holders of the common stock and Class A common
stock in amounts as and when declared by the Company's board of directors,
subject to legally available funds and certain agreements governing the
Company's indebtedness. In the event of any liquidation, dissolution or winding
up of the Company, before any payment or distribution of the assets of the
Company shall be made to the holders of the Class A common stock, each share of
common stock shall be entitled to a liquidation preference based on a formula
set forth in the Company's Certificate of Incorporation. The common stock and
the Class A common stock are entitled to one vote per share on all matters
submitted to a vote of stockholders.
The Company has adopted a qualified and non-qualified incentive stock
option plan (the "Option Plan") for officers and key employees of Holdings. A
total of 1,471,000 shares of the Company's common stock has been reserved for
issuance under the Option Plan. Under the Option Plan, eligible participants may
receive qualified and non-qualified options to purchase shares of the Company's
common stock.
Options are exercisable at such time and on such terms as the committee
appointed to administer the Option Plan (the "Committee") determines. The
exercise price for the options granted under the Option Plan may not be less
than the fair market value of the underlying share, as determined by the
Committee on the date of grant. Generally, an option may be exercised only if
the holder is an officer or employee of the Company at the time of exercise.
Options granted under the Option Plan are not transferable, except by will and
the laws of descent and distribution. During the year ended November 30, 1994,
the Company granted options to purchase 75,000 shares of common stock at $2.74
per share and canceled 235,200 options. No options were exercised during the
year. During the six months ended May 31, 1995, the Company granted options to
purchase 100,000 shares of common stock at $2.74 per share, canceled 188,800
shares and 20,000 options were exercised. At May 31, 1995, there were 764,000
options available for issuance under the Option Plan.
56
<PAGE> 58
WIREKRAFT HOLDINGS CORP.
(FORMERLY WB HOLDINGS INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. INCOME TAXES
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MAY 31, 1995
------------
<S> <C>
Current:
Federal................................................... $ 1,022
State..................................................... 892
Foreign................................................... 254
-------
2,168
-------
Deferred:
Federal................................................... (3,159)
State..................................................... (1,123)
-------
(4,282)
-------
Total............................................. $(2,114)
=======
</TABLE>
Reconciliation between the Federal statutory income tax rate and the
effective tax rate is summarized below:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MAY 31, 1995
------------
<S> <C>
Federal taxes at statutory rate (34%)....................... $(1,240)
State taxes, net of federal effect.......................... 210
Foreign..................................................... (1,468)
Nondeductible assets........................................ 340
Other....................................................... 44
-------
Provision (benefit) for income taxes........................ $(2,114)
=======
</TABLE>
6. PLANT CLOSING EXPENSE
In May 1995, the Company recorded a pre-tax charge to operations of $2,000
to provide for plant closing costs. The Company's decision to shut-down certain
harness segment plants was the result of a customer transitioning certain wire
harness purchases to its own captive operations in Mexico and other third party
suppliers. The plant closing costs include provisions for shutdown costs from
the period of the plant closure to the date of disposal, commitment costs for
leased equipment and severance related costs.
7. RETIREMENT BENEFITS
Employees of Wire division, who are eligible under Section 414(q) of the
Internal Revenue Code, may participate in the profit sharing plan sponsored by
the Company. The plan qualifies under the Internal Revenue Code section 401(k),
and the Company may at its discretion make contributions on a matching or
non-matching basis. Employees of the Wire Division with approximately one year
of service may also participate in a money purchase pension plan sponsored by
the Company. The Company is required to make contributions to the money purchase
pension plan equal to 3% of an employee's eligible compensation as defined in
the plan document. Expense under these two plans amounted to approximately $363
for the six months ended May 31, 1995.
57
<PAGE> 59
WIREKRAFT HOLDINGS CORP.
(FORMERLY WB HOLDINGS INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. LEASES
The Company leases certain of its manufacturing facilities and equipment
under long-term lease agreements with lease terms expiring through February
2004. Rent expense applicable to the noncancelable operating leases aggregated
$505 for the six months ended May 31, 1995.
9. CONTINGENCIES
The Company is subject to various lawsuits and claims with respect to such
matters as patents, product liabilities, government regulations, and other
actions arising in the normal course of business. In the opinion of management,
the ultimate liabilities resulting from such lawsuits and claims will not have a
material adverse effect on the Company's consolidated financial conditions and
results of operations.
10. BUSINESS SEGMENT INFORMATION
Certain information concerning the Company's operating segments for the six
months ended May 31, 1995 and the year ended November 30, 1994 is presented
below. Total revenue by segment includes both sales to customers and
intersegment sales, which are accounted for at prices charged to customers and
eliminated in consolidation.
<TABLE>
<CAPTION>
WIRE HARNESS CONSOLIDATED
------- ------- ------------
<S> <C> <C> <C>
Six Months Ended May 31, 1995
Total revenue...................................... $88,488 $88,620
Intersegment sales................................. 7,807 1,248
------- -------
Sales to customers................................. $80,681 $87,372 $168,053
======= =======
Operating income................................... 1,320 4,711 6,031
Depreciation and amortization...................... 2,534 3,940 6,474
Capital expenditures, net.......................... 1,636 1,278 2,914
</TABLE>
11. SUBSEQUENT EVENT
On June 12, 1995, International Wire Holding Company, through a series of
mergers and acquisitions acquired all of the outstanding common stock of New
Holdings (the "Transaction"). The Company has designated June 1, 1995, as the
effective date of the Transaction for financial reporting purposes. In
connection with the Transaction, the majority of the Company's long-term debt
was repaid, the common stock of New Holdings was redeemed at $51,751, the Series
A Senior Preferred Stock issued as part of the ECM acquisition (see Note 2) was
redeemed at a liquidation value of $26,250 plus accrued dividends of $71 and the
warrants and equity rights were retired at $10,133. As a result of the early
repayment of certain long-term debt, $7,909 of deferred financing costs and
$2,456 of OID were charged off and included as an extraordinary item in the
accompanying Statements of Operations for the six months ended May 31, 1995. In
addition, the Company paid a prepayment penalty of $2,400 to holders of
subordinated notes. This amount has also been included in the accompanying
statements of operations as an extraordinary item. The stock options granted
pursuant to the Company's stock option plan were canceled for payment to the
option holders who received cash. This amount totaled approximately $895 and has
been included in the Statements of Operations as compensation expense for the
six months ended May 31, 1995. In connection with the sale, the Company incurred
expenses of $501 which has been recorded in the Statements of Operations as
expenses related to sale.
58
<PAGE> 60
WIREKRAFT HOLDINGS CORP.
(FORMERLY WB HOLDINGS INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. RESTATEMENT OF FINANCIAL INFORMATION
The Company has restated its previously issued financial statements for the
six months ended May 31, 1995 to reflect certain adjustments. These adjustments
relate primarily to corrections of certain depreciation and interest expenses
and recognition of certain costs associated with plant closings. Additionally,
adjustments were made to correct for the effective tax rate and tax benefit
obtained as a result of the extraordinary item.
The impact of these adjustments on the Company's financial results as
originally reported is summarized below:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDING
MAY 31, 1995
--------------------------
AS REPORTED AS RESTATED
----------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Income (loss) before income taxes and extraordinary item.... $ (1,099) $(3,646)
Net income (loss)........................................... $(14,491) $(9,367)
Retained earnings (deficit)................................. $ (8,917) $(3,793)
</TABLE>
These adjustments are reflected in the Company's accompanying consolidated
statements of operations.
59
<PAGE> 61
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Omega Wire Corp.:
We have audited the accompanying consolidated statements of operations,
stockholders' equity, and cash flows of Omega Wire Corp. and subsidiaries for
the two months ended May 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated results of operations and cash flows
of Omega Wire Corp. and subsidiaries for the two months ended May 31, 1995, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
St. Louis, Missouri
January 27, 1996
60
<PAGE> 62
OMEGA WIRE CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
TWO MONTHS ENDED MAY 31, 1995
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Net sales................................................... $23,295
Operating expenses:
Cost of goods sold........................................ 17,512
Selling, general and administrative....................... 1,639
Depreciation and amortization............................. 1,233
-------
Operating income............................................ 2,911
Other income (expense):
Interest expense.......................................... (1,797)
Amortization of deferred financing costs.................. (238)
-------
Income before income tax provision and extraordinary item... 876
Income tax provision........................................ 171
-------
Income before extraordinary item............................ 705
Extraordinary item -- loss due to early extinguishment of
debt net of income tax of $2,082.......................... (4,044)
-------
Net loss.......................................... $(3,339)
=======
</TABLE>
See accompanying notes to the consolidated financial statements
61
<PAGE> 63
OMEGA WIRE CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
TWO MONTHS ENDED MAY 31, 1995
<TABLE>
<CAPTION>
CLASS A CARRYOVER OF
COMMON COMMON PAID-IN PREDECESSOR ACCUMULATED
STOCK STOCK CAPITAL BASIS DEFICIT TOTAL
------ ------- ------- ------------ ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock....... $420 $41,580 $ -- $ -- $ 42,000
Issuance of Class A common
stock........................ -- 63 -- -- -- 63
Issuance costs................. -- -- (675) -- -- (675)
Carryover of predecessor
basis........................ -- -- -- (20,000) -- (20,000)
Net loss....................... -- -- -- -- (3,339) (3,339)
---- --- ------- -------- ------- --------
Balance May 31, 1995........... $420 $63 $40,905 $(20,000) $(3,339) $ 18,049
==== === ======= ======== ======= ========
</TABLE>
See accompanying notes to the consolidated financial statements
62
<PAGE> 64
OMEGA WIRE CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
TWO MONTHS ENDED MAY 31, 1995
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Cash flows provided by (used in) operating activities:
Net loss.................................................. $ (3,339)
Adjustment to reconcile net loss to net cash provided by
(used in) operating activities:
Extraordinary item..................................... 6,126
Depreciation and amortization.......................... 1,233
Amortization of deferred financing costs............... 238
Deferred income taxes.................................. 120
Change in assets and liabilities, net of acquisitions:
Accounts receivable.................................. 1,528
Inventories.......................................... (510)
Prepaid expenses and other........................... (231)
Accounts payable..................................... 919
Accrued and other liabilities........................ 10
Accrued interest..................................... 952
Income taxes payable/refundable...................... (2,033)
Other long-term liabilities.......................... (26)
---------
Net cash from operating activities................ 4,987
---------
Cash flows provided by (used in) investing activities:
Acquisition, net of cash.................................. (159,080)
Capital expenditures, net................................. (581)
---------
Net cash from investing activities................ (159,661)
---------
Cash flows provided by (used in) financing activities:
Proceeds from issuance of long-term obligations........... 135,000
Contributed capital....................................... 34,653
Repayment of long-term obligations........................ (7,979)
Financing fees and other.................................. (7,000)
---------
Net cash from financing activities................ 154,674
---------
Net change in cash................................ --
Cash at beginning of the period............................. --
---------
Cash at end of the period................................... $ --
=========
</TABLE>
See accompanying notes to the consolidated financial statements
63
<PAGE> 65
OMEGA WIRE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TWO MONTHS ENDED MAY 31, 1995
(IN THOUSANDS, EXCEPT SHARE DATA)
1. THE COMPANY
Omega Wire Corp. ("Omega" or the "Company"), a Delaware corporation, was
formed to participate in the Acquisition (defined below). Omega had no
operations prior to the Acquisition.
On March 31, 1995, Omega acquired all of the issued and outstanding common
stock of THL-Omega Holding Corporation ("THL-Omega") for a total consideration
$167,300 (the "Acquisition"). Omega, through its subsidiaries, is engaged in the
manufacturing and marketing of non-insulated copper wire and cable products. The
Company's products are used by a wide variety of customers primarily in the
automotive and computer and data communications industries. Omega has a fiscal
year-end of December 31.
The total purchase price of the Acquisition of approximately $174,300,
which included the retirement of existing indebtedness and related fees and
costs, is summarized as follows:
<TABLE>
<S> <C>
Cash paid for all issued and outstanding common stock....... $102,762
Cash paid to retire existing indebtedness................... 55,439
Common stock of Omega issued................................ 7,410
Fees and costs.............................................. 8,689
--------
$174,300
========
</TABLE>
The Acquisition was accounted for using the purchase method of accounting
whereby the total acquisition cost has been preliminarily allocated to the
consolidated assets and liabilities based on their estimated respective fair
values. In accordance with EITF 88-16, "Basis in Leveraged Buyout Transactions",
a portion of the Acquisition has been accounted for at "predecessor basis". The
application of predecessor basis reduced stockholders' equity and goodwill by
$20,000. The purchase price allocations are still in process. It is not expected
that the final allocation of the purchase cost will result in a materially
different allocation than is presented herein.
The total acquisition costs have been preliminarily allocated to the
acquired net assets as follows:
<TABLE>
<S> <C>
Current assets.............................................. $ 40,802
Property, plant and equipment............................... 38,974
Goodwill.................................................... 96,701
Fees and costs.............................................. 9,000
Other assets................................................ 54
Current liabilities......................................... (21,906)
Other liabilities........................................... (9,325)
Carryover of predecessor basis.............................. 20,000
--------
$174,300
========
</TABLE>
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Omega and its
wholly owned subsidiaries. All material intercompany balances and transactions
have been eliminated in consolidation.
Revenue Recognition
Sales and related cost of goods sold are included in income when goods are
shipped to customers.
64
<PAGE> 66
OMEGA WIRE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Inventories
Inventories are valued at the lower of cost or market. Cost is determined
using the last-in, first-out ("LIFO") method.
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Depreciation is calculated
using the straight-line method. The average estimated lives utilized in
calculating depreciation are as follows: buildings -- 25 to 40 years; building
improvements 15 years; machinery and equipment -- 3 to 11 years; and furniture
and fixtures -- 5 years. Leasehold improvements are amortized over the shorter
of the term of the respective lease or the life of the respective improvement.
Intangible Assets
Intangible assets consist principally of goodwill arising from the excess
of cost over the value of net assets acquired, which is being amortized using
the straight-line method over forty years. Amortization of intangible assets
amounted to $384 for the two months ended May 31, 1995.
Deferred Financing Costs
Deferred financing costs, consisting of fees and other expenses associated
with the debt financing are amortized over the term of the related debt using
the effective interest method and the straight-line method which approximates
the effective interest method.
Statement of Cash Flows
For purposes of the consolidated statement of cash flows, the Company
considers all highly liquid investments purchased with maturities of three
months or less to be cash equivalents. Interest and taxes paid for the two
months ended May 31, 1995 were $845 and $2, respectively.
In connection with the Acquisition, certain shares of common stock of
THL-Omega were exchanged for common stock of Omega. The total amount of shares
exchanged were $7,410, which was a non-cash investing and financing activity.
3. FINANCING COSTS AND RELATED PARTY TRANSACTIONS
In connection with the Acquisition, the Company incurred aggregate fees and
costs of $7,000. Costs of $6,325 related to the debt financing are being
amortized over the terms of the related borrowings. Costs of $675 related to the
issuance of Omega's common stock have been deducted from the proceeds to reduce
the carrying value of the common stock.
In connection with the Acquisition and obtaining the related financing,
Omega entered into a Monitoring and Oversight Agreement ("Agreement") with
Hicks, Muse & Co. Partners, L.P. ("Hicks Muse") (an affiliate of the Company)
pursuant to which the Company paid Hicks Muse a cash fee of $2,525 as
compensation for financial advisory services. The fees have been allocated to
the debt and equity securities issued in connection with the Acquisition as
deferred financing costs or as a deduction from the cash proceeds received from
the sale of the common stock of Omega. The agreement further provides that the
Company shall pay Hicks Muse an annual fee of $200, for ten years for monitoring
and oversight services adjusted annually at the end of each fiscal year to an
amount equal to 0.1% of the consolidated net sales of the Company, but in no
event less than $200 annually.
65
<PAGE> 67
OMEGA WIRE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. STOCKHOLDERS' EQUITY
The authorized capital stock of the Company consists of 100,000,000 shares
of common stock, 6,333,333 shares of Class A common stock, and 10,000,000 shares
of preferred stock. In connection with the financing of the Acquisition, the
Company issued 42,000,000 shares of common stock and 6,333,333 shares of Class A
common stock.
The Class A common stock may be converted into shares of common stock at
the option of the holder at any time. In addition, shares of the Class A common
stock (i) may be converted into common stock at the option of the Company
effective immediately prior to the occurrence of a Triggering Event (as defined
in the Company's Certificate of Incorporation) or (ii) shall automatically be
converted on March 31, 2005. Such conversions are based on a formula set forth
in the Company's Certificate of Incorporation.
Dividends are payable to holders of the common stock and Class A common
stock in amounts as and when declared by the Company's board of directors,
subject to legally available funds and certain agreements governing the
Company's indebtedness. In the event of any liquidation, dissolution or winding
up of the Company, before any payment or distribution of the assets of the
Company shall be made to the holders of the Class A common stock, each share of
common stock shall be entitled to a liquidation preference based on a formula
set forth in the Company's Certificate of Incorporation. The common stock and
the Class A common stock are entitled to one vote per share on all matters
submitted to a vote of stockholders.
5. INCOME TAXES
The Company accounts for income taxes in accordance with provisions of SFAS
No. 109. The provision for income taxes for the two months ended May 31, 1995 is
as follows:
<TABLE>
<S> <C>
Current:
Federal................................................... $ 51
----
Deferred:
Federal................................................... 55
State..................................................... 65
----
120
----
$171
====
</TABLE>
Reconciliation between the federal statutory income tax rate and the
effective tax rate is summarized below:
<TABLE>
<S> <C>
Federal taxes at statutory rate (34%)....................... $ 297
State taxes, net of federal effect.......................... 43
Other....................................................... (169)
-----
Provision for income taxes.................................. $ 171
=====
</TABLE>
6. RETIREMENT PLANS
The Company has a profit sharing plan covering substantially all employees
of Omega Wire Corp. Contributions are made to a trusteed fund to accumulate as a
retirement benefit for employees. The profit sharing expense amounted to $113
for the two months ended May 31, 1995.
Effective January 1, 1995, the Company implemented a savings plan
permitting substantially all employees to contribute up to 15% of their salary
on a pre-tax basis to any of the six investment options available. There are no
required Company contributions to the plan.
66
<PAGE> 68
OMEGA WIRE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. COMMITMENTS
The Company leases certain property, transportation vehicles and other
equipment under operating leases. Total lease expense for the two months ended
May 31, 1995 was approximately $290.
Under the terms of the agreements in effect at May 31, 1995, the Company
has future minimum lease commitments as follows:
<TABLE>
<S> <C>
1995........................................................ $ 979
1996........................................................ 1,262
1997........................................................ 1,202
1998........................................................ 1,159
1999........................................................ 1,108
Later years................................................. 9,198
-------
Total minimum lease commitments................... $14,908
=======
</TABLE>
8. CONTINGENCIES
The Company is subject to various lawsuits and claims with respect to such
matters as patents, product liabilities, government regulations, and other
actions arising in the normal course of business. In the opinion of management,
the ultimate liabilities resulting from such lawsuits and claims will not have a
material adverse effect on the Company's consolidated financial conditions and
results of operations.
9. SUBSEQUENT EVENT
On June 12, 1995, International Wire Holding Company ("Holdings"), through
a series of mergers and acquisitions acquired all of the outstanding common
stock of the Company in exchange for certain of its common equity securities
(the "Transaction"). In connection with the Transaction the Company has been
renamed "International Wire Group, Inc." The Company has designated June 1,
1995, as the effective date of the Transaction for financial reporting purposes.
In connection with the Transaction the Company's long-term debt was repaid. As a
result of the early repayment of long-term debt, approximately $6,126 of
deferred financing costs were charged off and included as an extraordinary item
in the accompanying Statement of Operations.
10. RESTATEMENT OF FINANCIAL INFORMATION
The Company has restated its previously issued financial statements for the
two months ended May 31, 1995 to reflect adjustments principally related to
correct for the effective tax rate and tax benefit obtained as a result of the
extraordinary items. The impact of these adjustments on the Company's financial
results as originally reported is summarized below:
<TABLE>
<CAPTION>
FOR THE TWO MONTHS ENDING
MAY 31, 1995
--------------------------
AS REPORTED AS RESTATED
----------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Income (loss) before income taxes and extraordinary item.... $ 876 $ 876
Net income (loss)........................................... $(5,750) $(3,339)
Retained earnings (deficit)................................. $(5,750) $(3,339)
</TABLE>
These adjustments are reflected in the Company's accompanying consolidated
statements of operations.
67
<PAGE> 69
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of
THL-Omega Holding Corporation:
We have audited the accompanying consolidated statements of operations and
retained earnings and cash flows of THL-Omega Holding Corporation and its
subsidiaries for the three months ended March 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit of these statements in accordance with generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for the opinion expressed
above.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated results of operations and cash flows
of THL-Omega Holding Corporation and subsidiaries for the three months ended
March 31, 1995, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND, L.L.P.
St. Louis, Missouri
January 27, 1996
68
<PAGE> 70
THL-OMEGA HOLDING CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
THREE MONTHS ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Net sales................................................... $38,736
Costs and expenses:
Cost of products sold..................................... 30,638
Selling expenses.......................................... 1,430
General and administrative expenses....................... 1,493
Compensation expense...................................... 9,715
Expenses related to sale of Company....................... 1,689
-------
Loss from operations........................................ (6,229)
Interest expense............................................ (1,478)
Other income................................................ 32
-------
Loss before income taxes and extraordinary item............. (7,675)
Provision for income taxes.................................. 484
-------
Loss before extraordinary item.............................. (8,159)
Extraordinary item -- loss due to early extinguishment of
debt net of income tax of $765............................ (1,148)
-------
Net loss.................................................... (9,307)
Retained earnings -- beginning of the year.................. 13,284
-------
Retained earnings -- March 31, 1995......................... $ 3,977
=======
</TABLE>
See accompanying notes to the consolidated financial statements
69
<PAGE> 71
THL-OMEGA HOLDING CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Cash flows provided by (used in) operating activities:
Net loss.................................................. $(9,307)
Adjustment to reconcile net loss to net cash provided by
(used in) operating activities:
Extraordinary item..................................... 1,913
Compensation expense................................... 9,715
Depreciation and amortization.......................... 1,509
Change in assets and liabilities:
Accounts receivable.................................. 1,222
Inventories.......................................... 2,826
Prepaid and other current assets..................... (485)
Accounts payable..................................... (3,714)
Accrued expenses..................................... (90)
Income taxes payable................................. (5)
Deferred compensation................................ 20
-------
Net cash from operating activities................ 3,604
-------
Cash flows provided by (used) investing activities:
Capital expenditures, net................................. (1,597)
-------
Net cash from investing activities................ (1,597)
-------
Cash flows provided by (used in) financing activities:
Repayment of long-term debt............................... (1,500)
Net borrowing (repayment) under revolving credit
facility............................................... (656)
Issuance of notes payable, net............................ 678
Redemption of common stock................................ (58)
-------
Net cash from financing activities................ (1,536)
-------
Net increase in cash.............................. 471
Cash at beginning of period................................. 339
-------
Cash at end of period....................................... $ 810
=======
</TABLE>
See accompanying notes to the consolidated financial statements
70
<PAGE> 72
THL-OMEGA HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1995
(IN THOUSANDS)
1. THE COMPANY
THL-Omega Holding Corporation and its subsidiaries ("THL-Omega" or the
"Company") are engaged in the manufacturing and marketing of non-insulated
copper wire and cable products. The Company's products are used by a wide
variety of customers primarily in the automotive and computer and data
communications industries. THL-Omega has a fiscal year-end of December 31.
2. SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The consolidated financial statements include the accounts of THL-Omega and
its wholly owned subsidiaries. All material intercompany balances and
transactions have been eliminated in consolidation.
Revenue Recognition
Sales and related cost of goods sold are included in income when goods are
shipped to customers.
Inventories
Inventories are valued at the lower of cost or market. Cost is determined
primarily using the last-in, first-out ("LIFO") method.
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Depreciation is calculated
using the straight-line method. The average estimated lives utilized in
calculating depreciation are as follows: buildings -- 25 to 40 years; building
improvements -- 15 years; machinery and equipment -- 3 to 11 years; and
furniture and fixtures -- 5 years. Leasehold improvements are amortized over the
shorter of the term of the respective lease or the life of the respective
improvement.
Intangible Assets
Intangible assets consist principally of goodwill arising from the excess
of cost over the value of net assets acquired, which is being amortized using
the straight-line method over forty years.
Deferred Financing Costs
Deferred financing costs, consisting of fees and other expenses associated
with the debt financing are amortized over the term of the related debt using
the effective interest method and the straight-line method which approximates
the effective interest method.
Statement of Cash Flows
For purposes of the consolidated statement of cash flows, the Company
considers all highly liquid investments purchased with maturities of three
months or less to be cash equivalents. Interest and taxes paid for the three
months ended March 31, 1995 were $1,548 and $33, respectively.
71
<PAGE> 73
THL-OMEGA HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. INCOME TAXES
The Company accounts for income taxes in accordance with the provisions of
SFAS No. 109. The provision for income taxes for the three months ended March
31, 1995 is as follows:
<TABLE>
<S> <C>
Current:
Federal................................................... $384
State..................................................... 100
----
$484
====
</TABLE>
Reconciliation between the statutory income tax rate and effective tax rate
for the three months ended March 31, 1995 is summarized below:
<TABLE>
<S> <C>
Statutory U.S. federal tax rate............................. $(2,610)
State taxes, net of federal benefit......................... 66
Amortization on non-deductible goodwill and non-deductible
expenses.................................................. 3,028
-------
$ 484
=======
</TABLE>
4. RETIREMENT PLANS
The Company has a profit sharing plan covering substantially all employees
of THL-Omega. Contributions are made to a trusteed fund to accumulate as a
retirement benefit for employees. The profit sharing expense amounted to $249
for the three months ended March 31, 1995.
5. COMMITMENTS AND CONTINGENCIES
The Company leases certain property, transportation vehicles and other
equipment under operating leases. Rent expense for these operating leases for
the three months ended March 31, 1995 was approximately $433.
Under the terms of the agreements in effect at March 31, 1995, the Company
has future minimum lease commitments as follows:
<TABLE>
<S> <C>
1995........................................................ $ 979
1996........................................................ 1,262
1997........................................................ 1,202
1998........................................................ 1,159
1999........................................................ 1,108
Later years................................................. 9,198
-------
Total minimum lease commitments................... $14,908
=======
</TABLE>
The Company is subject to legal proceedings and claims which arise in the
normal course of business. In the opinion of management, the ultimate
liabilities with respect to these actions will not have a material adverse
effect on the Company's financial condition or results of operations.
6. ACQUISITION
On March 31, 1995, ownership of the Company transferred pursuant to the
terms of a Stock Purchase Agreement. Substantially all of the Company's
long-term debt has been repaid. As a result of the early repayment of certain
long-term debt, $1,013 of deferred financing costs was charged off and included
as an extraordinary item in the accompanying Statement of Operations and
Retained Earnings for the three months
72
<PAGE> 74
THL-OMEGA HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ended March 31, 1995. In addition, the Company paid a prepayment penalty of $900
to holders of the subordinated notes. This amount also has been included in the
accompanying Statement of Operations and Retained Earnings as an extraordinary
item. Immediately prior to the sale of the Company, the Company sold common
stock and granted stock options to certain officers and shareholders for
consideration less than the fair value of the common stock. The difference
between the fair value and the amount paid by the officers and shareholders has
been included in the Statement of Operations and Retained Earnings as
compensation expense for the three months ended March 31, 1995. In connection
with the sale, the Company incurred expenses of $1,689 which has been included
in the Statement of Operations and Retained Earnings as expenses related to the
sale of the Company.
7. RESTATEMENT OF FINANCIAL INFORMATION
The Company has restated its previously issued financial statements for the
three months ended March 31, 1995 to reflect adjustments principally related to
correct for the effective tax rate and tax benefit obtained as a result of the
extraordinary item. The impact of these adjustments on the Company's financial
results as originally reported is summarized below:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDING
MARCH 31, 1995
----------------------------
AS REPORTED AS RESTATED
----------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Income (loss) before income taxes and extraordinary item... $(7,675) $(7,675)
Net income (loss).......................................... $(7,307) $(9,307)
Retained earnings.......................................... $ 5,977 $ 3,977
</TABLE>
These adjustments are reflected in the Company's accompanying consolidated
statements of operations.
73
<PAGE> 75
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON AUDITING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
Set forth below are the names and positions of the directors and executive
officers of Holding and the Company. All directors hold office until the next
annual meeting of stockholders of Holding and the Company, and until their
successors are duly elected and qualified. All officers serve at the pleasure of
the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
James N. Mills................ 60 Chairman of the Board and Chief Executive Officer of Holding and
the Company
Charles W. Tate............... 53 Director of Holding and the Company
Jack D. Furst................. 39 Director of Holding and the Company
John A. Gavin................. 66 Director of Holding and the Company
Thomas P. Danis............... 51 Director of Holding and the Company
Richard W. Vieser............. 70 Director of Holding and the Company
Joseph M. Fiamingo............ 48 Director, President and Chief Operating Officer of Holding and the
Company
Rodney D. Kent................ 50 Director of Holding and the Company, President and Chief Executive
Officer of Omega
David M. Sindelar............. 40 Senior Vice President and Chief Financial Officer of Holding,
Senior Vice President of the Company
Larry S. Bacon................ 51 Senior Vice President -- Human Resources of Holding and the Company
W. Thomas McGhee.............. 61 Secretary and General Counsel of Holding and the Company
Glenn J. Holler............... 50 Vice President -- Finance of the Company
</TABLE>
James N. Mills is Chairman of the Board and Chief Executive Officer of
Holding and the Company and has held such positions since April 1995. Mr. Mills
serves as Chairman of the Board, President and Chief Executive Officer of Mills
& Partners, Inc., a St. Louis-based investment and management services firm. Mr.
Mills is also Chairman of the Board and Chief Executive Officer of Berg
Electronics Corp., Chairman of the Board of Berg Electronics Group, Inc. and
Chairman of the Board and Chief Executive Officer of Viasystems Group, Inc. Mr.
Mills was Chairman of the Board and Chief Executive Officer of Crain Holding
Corp. and Crain Industries, Inc. from August 1995 through December 1997, Jackson
Holding Company and Jackson Products, Inc. from February 1993 through August
1995, Thermadyne Holdings Corporation from February 1989 through February 1995
and Thermadyne Industries, Inc. from 1987 to 1995. Mr. Mills was Executive Vice
President of McGraw-Edison Company, a company engaged in the electronic,
industrial, commercial and automotive industries, from 1978 to 1985, and served
as Industrial Group President and President of the Bussmann Division of the
McGraw-Edison Company from 1980 to 1984.
Charles W. Tate is a director of Holding and the Company and has held such
positions since April 1995. Mr. Tate is President of Hicks Muse. Before joining
Hicks Muse as a Managing Director and Principal in 1991, Mr. Tate had over 19
years of experience in investment and merchant banking with Morgan Stanley & Co.
Incorporated, including ten years in the mergers and acquisitions department and
the last two and one-half years as a managing director in Morgan Stanley & Co.
Incorporated's merchant banking group. Mr. Tate serves as a director of Berg
Electronics Corp., International Home Foods, Inc., Seguros Comercial America,
S.A. de C.V. and Vidrio Formas, S.A.
74
<PAGE> 76
Jack D. Furst is a director of Holding and the Company and has held such
positions since April 1995. Mr. Furst is a Managing Director and Principal of
Hicks Muse and has held such position since 1989. Mr. Furst has approximately 16
years of private equity investment experience. At Hicks Muse, Mr. Furst is
involved in all aspects of its business and has been actively involved in
capital raising and originating, structuring and monitoring of investments. Mr.
Furst is primarily responsible for managing the relationship with Mills &
Partners. Prior to joining Hicks Muse, Mr. Furst was a vice president and
subsequently a partner of Hicks & Haas Incorporated from 1987 to May 1989. From
1984 to 1986, Mr. Furst was a merger and acquisition/corporate finance
specialist for The First Boston Corporation in New York. Before joining First
Boston, Mr. Furst was a financial consultant at Price Waterhouse. Mr. Furst
serves on the board of directors of Cooperative Computing, Inc., Viasystems,
Inc., Hedstrom Corporation and OmniAmerica, Inc.
John A. Gavin is a director of Holding and the Company and has held such
positions since June 1995. Mr. Gavin is the founder and Chairman of the Board of
Gamma Services, an international venture capital and consulting firm established
in 1968, and is the Managing Director of Hicks, Muse, Tate & Furst (Latin
America), Incorporated and has held such position since 1996. From 1987 to 1990,
Mr. Gavin was President of Univisa Satellite Communications, a part of a
Spanish-speaking broadcast network. Prior thereto, Mr. Gavin served as a Vice
President of Atlantic Richfield Company from 1986. From 1981 to 1986, Mr. Gavin
served as the United States Ambassador to Mexico. Mr. Gavin also serves as a
director of Atlantic Richfield Company, Dresser Industries, Inc., Pinkerton's
Inc., and the Hotchkis and Wiley Funds.
Thomas P. Danis is a director of Holding and the Company and has held such
positions since June 1995. Mr. Danis has been Chairman of the Board of AON Risk
services of Missouri, Inc., a company engaged in the insurance brokerage
business, since 1993. In 1979, Mr. Danis co-founded an insurance brokerage firm,
a joint venture with Corroon & Black, which was ultimately purchased by Corroon
& Black in 1984. Mr. Danis also serves as a director of Commerce Bank, N.A.
Richard W. Vieser is a director of Holding and the Company and has held
such positions since September 1995. Mr. Vieser is the retired Chairman of the
Board, Chief Executive Officer and President of Lear Siegler, Inc. (a
diversified manufacturing company), the former Chairman of the Board and Chief
Executive Officer of FL Industries, Inc. and FL Aerospace (formerly Midland-Ross
Corporation), also diversified manufacturing companies, and the former President
and Chief Operating Officer of McGraw-Edison Co. He is also a director of Berg
Electronics Corp., Ceridian Corporation (formerly Control Data Corporation),
Dresser Industries, Inc., INDRESCO Inc., Sybron International Corporation and
Varian Associates, Inc. He also served as a director of Berg Electronics Group,
Inc. until August, 1996.
Joseph M. Fiamingo is a director of Holding and the Company and has held
such positions since October 1996. Mr. Fiamingo also serves as President and
Chief Operating Officer of Holding and the Company and has held such positions
since September 1996. Previously, Mr. Fiamingo held the position of Vice
President of Operations and Technology of the Company from June 1996 and
President and Chief Operating Officer of Wirekraft from October 1995. Prior
thereto, Mr. Fiamingo was employed by General Cable Corporation from 1972 to
1995 where he held various senior management level positions including President
and Vice President and General Manager of several divisions of General Cable and
most recently, Executive Vice President of Operations.
Rodney D. Kent is a director of Holding and the Company and has held such
positions since April 1995. Mr. Kent also serves as President and Chief
Executive Officer of Omega and has held such position since 1983. Mr. Kent
served as Assistant to the President of Omega from 1974 to 1983. Prior to
joining Omega, Mr. Kent was employed with Flexo Wire from 1973 to 1974 and
Camden Wire Company from 1970 to 1973. Mr. Kent also serves as a director of
Oneida Savings Bank.
David M. Sindelar is Senior Vice President and Chief Financial Officer of
Holding and Senior Vice President of the Company and has held such positions
since April 1995. Mr. Sindelar is also Senior Vice President and Chief Financial
Officer of Mills & Partners, Inc., Berg Electronics Corp., Viasystems Group,
Inc., and Senior Vice President of Berg Electronics Group, Inc. Mr. Sindelar was
Senior Vice President and Chief Financial Officer of Crain Industries, Inc. and
Crain Holdings Corp. from August 1995 through December 1997. Mr. Sindelar was
Senior Vice President and Chief Financial Officer of Jackson Holding
75
<PAGE> 77
Company from February 1993 through August 1995. From 1987 to February 1995, Mr.
Sindelar held various other positions at Thermadyne Holdings Corporation
including Senior Vice President and Chief Financial Officer, Vice
President -- Corporate Controller and Controller.
Larry S. Bacon is Senior Vice President -- Human Resources of Holding and
the Company and has held such positions since April 1995. Mr. Bacon is also
Senior Vice President -- Human Resources of Mills & Partners, Inc., Berg
Electronics Corp., Berg Electronics Group, Inc., and Viasystems Group, Inc. Mr.
Bacon was Senior Vice President -- Human Resources of Crain Industries, Inc. and
Crain Holdings Corp. from August 1995 through December 1997. Mr. Bacon was
Senior Vice President -- Human Resources of Jackson Holding Company from
February 1993 through August 1995. Previously, Mr. Bacon was Senior Vice
President -- Human Resources of Thermadyne Holdings Corporation from September
1987 until February 1995.
W. Thomas McGhee is Secretary and General Counsel of Holding and the
Company and has held such positions since April 1995. Mr. McGhee is also a
partner in the law firm of Herzog, Crebs and McGhee and has held that position
since 1987. In addition, Mr. McGhee serves as Secretary and General Counsel of
Berg Electronics Corp., Berg Electronics Group, Inc. and Viasystems Group, Inc.
Mr. McGhee served as Secretary and General Counsel of Crain Industries, Inc. and
Crain Holdings Corp. from August 1995 to December 1997.
Glenn J. Holler is Vice President-Finance of the Company and has held such
position since August 1996. Prior to joining the Company, Mr. Holler was
employed by Vigoro Industries, Inc. as Vice President, Finance from 1994 to 1996
and Moog Automotive, Inc. from 1983 to 1994, most recently as Senior Vice
President, Finance.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the cash and noncash compensation earned by
the Chief Executive Officer and the four other most highly compensated executive
officers of Holding and the Company. Such compensation was paid by or on behalf
of Wirekraft and Omega during the first five months of 1995 and was paid by or
on behalf of the Company during the remaining seven months of 1995, and during
the years ended December 31, 1996 and December 31, 1997. The bonuses included in
the annual compensation for each reported year were paid subsequent to year end.
As of the date hereof, the Company has not granted any stock appreciation
rights.
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<PAGE> 78
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING ALL OTHER
YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
---- --------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
James N. Mills................... 1997 395,000 548,000 -- --
Chairman of the Board and 1996 485,281 548,000 412,188(2) --
Chief Executive Officer of 1995 250,000 97,500 988,725(2) --
Holding
Joseph M. Fiamingo............... 1997 316,502 195,000 -- --
President and Chief Operating 1996 202,166 123,337 600,000(3) --
Officer of Holding and the 1995 32,685 8,500 400,000(3) --
Company
Rodney D. Kent................... 1997 316,960 207,564 -- 153,196(4)
President and Chief Executive 1996 323,911 193,714 -- 142,289(4)
Officer of Omega 1995 285,479 70,000 400,000(3) 129,766(4)
David M. Sindelar................ 1997 169,000 150,000 -- --
Senior Vice President and Chief 1996 201,422 121,000 309,143(2) --
Financial Officer of Holding, 1995 108,833 48,000 741,547(2) --
Senior Vice President of the
Company
Glenn J. Holler.................. 1997 217,579 103,144 -- --
Vice President -- Finance of 1996 86,072 50,000 250,000(3) --
the Company 1995 -- -- -- --
</TABLE>
- ---------------
(1) Holding and the Company provide to certain executive officers, a car
allowance, reimbursement for club memberships, insurance policies and
certain other benefits. The aggregate incremental cost of these benefits to
Holding and the Company for each officer do not exceed the lesser of $50,000
or 10% of the total annual salary and bonus reported for each such officer.
(2) Reflects Performance Options (as hereinafter defined) granted by Holding.
For a description of the material terms of such options, See "-- Benefit
Plans -- Performance Options."
(3) Reflects options to purchase common stock of Holding, par value $0.01 per
share, ("Holding Common Stock") granted under the Option Plan (as
hereinafter defined). The options vest in five equal annual installments
commencing on the first anniversary date of the grant, subject to
acceleration under certain circumstances, including a Change of Control (as
defined in the Option Plan).
(4) Represents (i) $45,792, $45,792, and $43,347 in premiums paid on life
insurance policies for the benefit of Mr. Kent in 1997, 1996 and 1995
respectively and (ii) $47,888, $44,700 and $41,536 in annual deferred
compensation and $59,516, $51,797 and $44,883 in annual interest accruals
thereon earned by Mr. Kent in 1997, 1996 and 1995 respectively, pursuant to
his employment agreement.
OPTION GRANTS IN LAST FISCAL YEAR
There were no options issued to the executive officers named above during
fiscal 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
No options were exercised by the executive officers named above during
fiscal 1997. The following table summarizes the value of unexercised options as
of December 31, 1997. The per share fair market value of the Holding Common
Stock used to make the calculations in the following table is $1.00, which is
the per share price at which Holding Common Stock was sold in connection with
the Wirekraft/Omega Combination and
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<PAGE> 79
the DWT Acquisition. Accordingly, the table indicates that the options had no
value at the end of 1997 because the exercise price was equal to such fair
market value.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS
AT FISCAL YEAR END AT FISCAL YEAR END
SHARES ACQUIRED --------------------------- ---------------------------
ON EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James N. Mills......... 0 0 0 1,400,913 0 0
Joseph M. Fiamingo..... 0 0 280,000 720,000 0 0
Rodney D. Kent......... 0 0 160,000 240,000 0 0
David M. Sindelar...... 0 0 0 1,050,690 0 0
Glenn J. Holler........ 0 0 50,000 200,000 0 0
</TABLE>
EMPLOYMENT AGREEMENTS
James N. Mills Employment Agreement. Mr. James N. Mills entered into an
employment agreement with Holding and the Company on June 12, 1995. Pursuant to
such employment agreement, Mr. Mills will serve as the Chairman of the Board and
Chief Executive Officer of Holding and the Company through June 11, 2000. Mr.
Mills is required to devote such business time and attention to the transaction
of the Company's business as is reasonably necessary to discharge his duties
under the employment agreement. Subject to the foregoing limitation on his
activities, Mr. Mills is free to participate in other business endeavors.
The compensation provided to Mr. Mills under his employment agreement
includes an annual base salary of not less than $300,000, subject to adjustment
at the sole discretion of the Board of Directors of Holding, and such benefits
as are customarily accorded the executives of Holding and the Company for as
long as the employment agreement is in force. In addition, Mr. Mills is entitled
to an annual bonus in an amount to be determined at the sole discretion of the
Board of Directors of Holding.
Mr. Mills' employment agreement also provides that if Mr. Mills' employment
is terminated without cause, Mr. Mills will continue to receive his then current
salary for the longer of the remainder of the employment period or 18 months
following such termination. In addition, Mr. Mills' employment agreement
provides that if Mr. Mills is terminated due to death or disability, Mr. Mills'
estate, heirs, or beneficiaries, as applicable, will receive, in addition to any
other benefits provided under any benefit plan, his then current salary for a
period of 18 months from the date of termination.
Joseph M. Fiamingo Employment Agreement. Mr. Joseph M. Fiamingo entered
into an employment agreement with Holding and the Company on September 25, 1996.
Pursuant to such employment agreement, Mr. Fiamingo will serve as President and
Chief Operating Officer of Holding and the Company through September 24, 1999.
The compensation provided to Mr. Fiamingo under his employment agreement
includes an annual base salary of not less than $260,000, subject to adjustment
at the sole direction of the Board of Directors of Holding, and such benefits as
are customarily accorded the executives of Holding and the Company for as long
as the employment agreement is in force. In addition, Mr. Fiamingo is entitled
to an annual bonus in an amount to be determined by the Chairman of the Board of
Holding of up to sixty-five percent of his base compensation.
Mr. Fiamingo's employment agreement also provides that if Mr. Fiamingo's
employment is terminated without cause, Mr. Fiamingo will continue to receive
his then current salary for the remainder of such employment agreement. In
addition, Mr. Fiamingo's employment agreement provides that if Mr. Fiamingo is
terminated due to death or disability, Mr. Fiamingo's estate, heirs, or
beneficiaries, as applicable, will receive, in addition to any other benefits
provided under any benefit plan, his then current salary for a period of 12
months from the date of termination.
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<PAGE> 80
Rodney D. Kent Employment Agreement. Mr. Kent entered into an employment
agreement with Omega on March 14, 1995. Pursuant to such employment agreement,
Mr. Kent will serve as President and Chief Executive Officer of Omega through
March 28, 1998. Mr. Kent is required to devote substantially all of his business
time and attention to the performance of his duties under the employment
agreement.
The compensation provided to Mr. Kent under his employment agreement
includes an annual base salary of not less than $286,000 for the period ended
March 31, 1996, not less than $302,000 for the period ended March 31, 1997, and
not less than $325,000 thereafter, subject to increase at the sole discretion of
the Board of Directors of Omega, and certain other benefits for as long as the
employment agreement is in force. In addition, during each year of employment,
an additional 15% of the annual base salary is credited to a deferred
compensation account for the benefit of Mr. Kent, which deferred compensation
account is annually credited with an interest accrual of 8% on the balance of
the account for the prior year. Further, Mr. Kent is entitled to an annual bonus
in an amount to be determined at the sole discretion of the Chairman of the
Board of Holding of up to sixty-five percent of his annual base salary.
Mr. Kent's employment agreement also provides that if Mr. Kent's employment
is terminated by Omega without cause or due to disability or death, Mr. Kent or
his estate, heirs or beneficiaries, as applicable, will receive, in addition to
any other benefits provided him or them under any benefit plan, Mr. Kent's then
current salary for a period of 24 months from Mr. Kent's termination without
cause or his disability or death. In the event that Mr. Kent terminates his
employment and receives a bona fide offer of employment from a competitor of the
Company, Mr. Kent will receive, in addition to any other benefits provided under
any benefit plan, Mr. Kent's then current salary for a period of 24 months from
such termination, but only in the event that Omega elects to enforce certain
non-competition provisions of the employment agreement.
David M. Sindelar Employment Agreement. Mr. David M. Sindelar entered into
an employment agreement with Holding and the Company on June 12, 1995. Pursuant
to such employment agreement, Mr. Sindelar will serve as the Senior Vice
President and Chief Financial Officer of Holding and Senior Vice President of
the Company through June 11, 2000. Mr. Sindelar is required to devote such
business time and attention to the transaction of the Company's business as is
reasonably necessary to discharge his duties under the employment agreement.
Subject to the foregoing limitation on his activities, Mr. Sindelar is free to
participate in other business endeavors.
The compensation provided to Mr. Sindelar under his employment agreement
includes an annual base salary of not less than $150,000, subject to adjustment
at the sole discretion of the Board of Directors of Holding, and such benefits
as are customarily accorded the executives of Holding and Senior Vice President
of the Company for as long as the employment agreement is in force. In addition,
Mr. Sindelar is entitled to an annual bonus in an amount to be determined at the
sole discretion of the Board of Directors of Holding.
Mr. Sindelar's employment agreement also provides that if Mr. Sindelar's
employment is terminated without cause, Mr. Sindelar will continue to receive
his then current salary for the longer of the remainder of the employment period
or 18 months following such termination. In addition, Mr. Sindelar's employment
agreement provides that if Mr. Sindelar is terminated due to death or
disability, Mr. Sindelar's estate, heirs, or beneficiaries, as applicable, will
receive, in addition to any other benefits provided under any benefit plan, his
then current salary for a period of 18 months from the date of termination.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Compensation decisions are made by the Board of Directors. Messrs. James N.
Mills, Joseph M. Fiamingo and Rodney D. Kent served as both executive officers
and directors during 1997 and are expected to serve in such capacities in 1998.
COMPENSATION OF DIRECTORS
The directors of Holding and the Company did not receive compensation from
either Holding or the Company for services rendered in that capacity during the
period prior to the effective time of the Wirekraft/Omega Combination. Directors
who are officers, employees or otherwise an affiliate of Holding or
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<PAGE> 81
the Company receive no compensation for their services as directors. Each
director of Holding and the Company who is not also an officer, employee or an
affiliate of Holding or the Company (an "Outside Director") will receive an
annual retainer of $12,000 and a fee of $1,000 for each meeting of the board of
directors at which the director is present. Directors of Holding and the Company
are entitled to reimbursement of their reasonable out-of-pocket expenses in
connection with their travel to and attendance at meetings of the board of
directors or committees thereof.
In 1995, Holding and the Company granted options to purchase 300,000 shares
of Holding Common Stock at $1.00 per share to directors of the Company.
BENEFIT PLANS
Stock Option Plan
Holding's qualified and non-qualified stock option plan (the "Option Plan")
provides for the granting of up to 4,795,322 shares of Holding Common Stock to
officers and key employees of Holding and the Company. Under the Option Plan, as
of February 27, 1998, Holding has granted options to purchase 4,476,444 shares
of Holding common stock, 3,075,000 at $1.00 per share, 1,350,000 at $1.40 per
share and 51,444 at $1.625 per share, the fair market value of Holding Common
Stock at the date of grant as determined by the Board of Directors of Holding.
Such options vest ratably over a five year period commencing on the first
anniversary date after the date of grant, subject to acceleration in the
discretion of the committee appointed to administer the Option Plan in the event
of a Change of Control (as defined in the Option Plan). Generally, an option may
be exercised only if the holder is an officer or employee of Holding or the
Company at the time of exercise. Options granted under the Option Plan are not
transferable, except by will and the laws of descent and distribution. Except as
expressly provided otherwise in any optionee's agreement relating to the grant
of options under the Option Plan, in the event an optionee's employment with
Holding, the Company or a related entity terminates at any time, Holding or its
designees shall have the right to repurchase from the optionee (or optionee's
representatives) (i) the number of shares of Holding Common Stock acquired upon
exercise of an option and (ii) the optionee's right to acquire that number of
shares of Holding Common Stock which an optionee can acquire upon exercise
immediately prior to such repurchase. The purchase price to be paid is
calculated on the basis of the fair market value (as defined in the Option Plan)
of Holding Common Stock multiplied by the number of shares of Holding Common
Stock to be acquired (less the aggregate exercise price in the event such
repurchase option is exercised by Holding with respect to the optionee's right
to acquire Holding Common Stock).
Performance Options
On March 31, 1995, Omega granted options (the "Performance Options") to
purchase 1,958,762 shares of common stock of Omega ("Omega Common Stock"). Mr.
Mills was granted Performance Options to purchase 652,921 shares of Omega Common
Stock, and Performance Options to purchase the remaining 1,305,841 shares of
Omega Common Stock were granted to certain officers of Omega who are also
affiliated with Mills & Partners. In connection with the Acquisitions and
pursuant to the terms of the option agreements (the "Performance Option
Agreements") related to the Performance Options, the Performance Options became
options to purchase an identical number of shares of Holding Common Stock.
On June 12, 1995, the Company granted Performance Options to purchase
1,007,416 shares of Holding Common Stock. Mr. Mills was granted Performance
Options to purchase 335,804 shares of Holding Common Stock, and Performance
Options to purchase the remaining 671,612 shares of Holding Common Stock were
granted to certain officers of the Company who are also affiliated with Mills &
Partners.
On March 5, 1996, the Company granted Performance Options to purchase
1,236,566 shares of Holding Common Stock, Mr. Mills was granted Performance
Options to purchase 412,188 shares of Holding Common Stock, and Performance
Options to purchase the remaining 824,378 shares of Holding Common Stock were
granted to certain officers of the Company who are also affiliated with Mills &
Partners.
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<PAGE> 82
The Performance Options are exercisable only in the event that HM Fund II
has realized an overall rate of return of at least 35% per annum, compounded
annually, on all equity funds invested by it in Holding. Subject to the
foregoing, the Performance Options are exercisable (i) immediately prior to a
Liquidity Event (as hereinafter defined), (ii) concurrently with the
consummation of a Qualified IPO (as hereinafter defined), or (iii) on December
31, 2004 (with respect to the Performance Options granted on March 31, 1995 and
June 12, 1995) or on December 31, 2005 (with respect to the Performance Options
granted on March 5, 1996). Notwithstanding the preceding sentence, the
Performance Option Agreements provide that the Performance Options will not be
exercisable as a result of the consummation of the Acquisitions. A "Liquidity
Event" generally means (i) one or more sales or other dispositions of Holding
Common Stock if, thereafter, the amount of Holding Common Stock owned by Hicks,
Muse, Tate & Furst Equity Fund II, L.P. ("HM Fund II") is reduced by 50%, (ii)
any merger, consolidation or other business combination of Holding pursuant to
which any person or group acquires a majority of the common stock of the
resulting entity, or (iii) any sale of all or substantially all of the assets of
Holding. A "Qualified IPO" means a firm commitment underwritten public offering
of Holding Common Stock for gross proceeds of at least $25.0 million.
The exercise price for the Performance Options is initially equal to $1.00
per share and, effective each anniversary of the grant date, the per share
exercise price for the Performance Options is equal to the per share exercise
price for the prior year multiplied by 1.09. The exercise price of the
Performance Options and the number of shares of Holding Common Stock for which
the Performance Options are exercisable is subject to adjustment in the event of
certain fundamental changes in the capital structure of Holding. The Performance
Options terminate on the tenth anniversary of the date of grant.
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<PAGE> 83
ITEM 12. SECURITIES OWNERSHIP
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of the issued and outstanding shares of common stock of the Company are
held by Holding. The following table sets forth as of February 27, 1998 certain
information regarding the beneficial ownership of the voting securities of
Holding by each person who beneficially owns more than 5% of any class of
Holding voting securities and by the directors and certain executive officers of
Holding, individually, and by the directors and executive officers of Holding as
a group. The Class A Common Stock, par value $0.01 per share, of Holding
("Holding Class A Common Stock") votes together with the Holding Common Stock as
a single class and is entitled to one vote for each share.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED (1)
---------------------------------------------------------------
HOLDING CLASS A
HOLDING COMMON STOCK COMMON STOCK
------------------------ -----------------------
NUMBER OF PERCENT OF NUMBER OF PERCENT OF PERCENT OF
SHARES CLASS SHARES CLASS TOTAL
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
5% STOCKHOLDERS:
HM Parties(2)...................... 116,950,000 100.0% -- -- 90.0%
c/o Hicks, Muse, Tate & Furst
Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Rodney D. Kent(3).................. 5,860,000 5.0% -- -- 4.5%
c/o Omega Wire, Inc.
12 Masonic Avenue
Camden, New York 13316
OFFICERS AND DIRECTORS:
James N. Mills(4).................. 1,702,034 1.5% 13,000,000 100.0% 11.3%
Thomas P. Danis(5)................. 200,000 * -- -- *
Jack D. Furst (2).................. 116,950,000 100.0% -- -- 90.0%
John A. Gavin(6)................... 235,957 * -- -- *
Charles W. Tate(2)................. 116,950,000 100.0% -- -- 90.0%
Rodney D. Kent(3).................. 5,860,000 5.0% -- -- 4.5%
Richard W. Vieser(7)............... 235,957 * -- -- *
Joseph M. Fiamingo(8).............. 280,000 * -- -- *
David M. Sindelar(9)............... -- -- 3,648,482 28.1% 2.8%
Larry S. Bacon(10)................. -- -- 875,507 6.7% *
W. Thomas McGhee(11)............... -- -- 875,505 6.7% *
Glenn J. Holler(12)................ 50,000 * -- -- *
All executive officers and
directors as a group (12
persons)(13).................... 116,950,000 100.0% 13,000,000 100.0% 100.0%
</TABLE>
- ---------------
* Less than one percent.
(1) Holding Class A Common Stock is convertible into Holding Common Stock (i)
at the option of any holder thereof at any time, (ii) at the option of
Holding upon the occurrence of a Triggering Event (as defined below), and
(iii) mandatorily at March 31, 2005. A "Triggering Event" means any sale of
substantially all of the assets of Holding or any merger, consolidation or
other business combination of Holding in which Hicks Muse and its
affiliates cease to own at least 50% of the resulting entity. Each share of
Holding Class A Common Stock is convertible into a fraction of a share of
Holding Common Stock equal to the quotient of (i) the fair market value of
a share of Holding Common Stock at the time of conversion less the sum of
$0.99 plus imputed interest thereon at a rate of 9% per annum, compounded
annually, at the time of conversion, divided by (ii) the fair market value
of a share of Holding Common Stock at the time of conversion. Because the
fraction of a share of Holding Common
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<PAGE> 84
Stock into which Holding Class A Common Stock is convertible is determinable
only at the time of a conversion, shares of Holding Common Stock are not
included in the shares of Holding Common Stock beneficially owned in the
foregoing table.
(2) Includes (i) shares owned of record by HM Fund II, a limited partnership of
which the sole general partner is HM2/GP Partners, L.P., a limited
partnership of which the sole general partner is Hicks, Muse GP Partners,
L.P., a limited partnership of which the sole general partner is Hicks,
Muse, Tate & Furst Fund II Incorporated, a corporation affiliated with
Hicks Muse; (ii) shares owned of record by HM2/Wire/Hunt Partners, L.P.,
HM2/Wire/Sunwestern Partners, L.P. and HM2/Wire/Hubbard Partners, L.P.,
limited partnerships of which the sole general partner is HM2/GP Partners,
L.P.; (iii) shares owned of record by certain individuals that Hicks Muse
has the power to direct the voting of with respect to the election of
directors; and (iv) shares owned of record by certain individuals subject
to an irrevocable proxy in favor of Hicks Muse. Thomas O. Hicks is a
controlling stockholder of Hicks Muse and serves as Chairman of the Board,
President, Chief Executive Officer, Chief Operating Officer and Secretary
of Hicks Muse. Accordingly, Mr. Hicks may be deemed to be the beneficial
owner of Holding Common Stock held by HM Fund II. John R. Muse, Charles W.
Tate, Jack D. Furst, Lawrence D. Stuart, Michael J. Levitt, Alan B. Menkes,
David B. Deniger and Dan H. Blanks are officers, directors and minority
stockholders of Hicks Muse and as such may be deemed to share with Mr.
Hicks the power to vote or dispose of Holding Common Stock held by HM Fund
II. Each of Messrs. Hicks, Muse, Tate, Furst, Stuart, Levitt, Menkes,
Deniger and Blanks disclaims the existence of a group and disclaims
beneficial ownership of Holding Common Stock not respectively owned of
record by him.
(3) Includes 160,000 shares of Holding Common Stock issuable to Mr. Kent upon
exercise of options granted under the Option Plan that are currently
exercisable. Does not include 240,000 shares of Holding Common Stock
issuable to Mr. Kent upon exercise of options granted under the Option Plan
that are not currently exercisable. See "Executive Compensation -- Benefit
Plans -- Option Plan."
(4) Includes shares of Holding Class A Common Stock held by James N. Mills and
shares of Holding Class A Common Stock that Mr. Mills has the power to vote
by proxy. Does not include 1,400,913 shares of Holding Common stock
issuable to Mr. Mills upon the exercise of Performance Options that are not
currently exercisable. See "Executive Compensation -- Benefit
Plans -- Performance Options."
(5) Includes 100,000 shares of Holding Common Stock issuable to Mr. Danis upon
exercise of options granted in 1995 that are currently exercisable. See
"Directors Compensation."
(6) Includes 100,000 shares of Holding Common Stock issuable to Mr. Gavin upon
exercise of options granted in 1995 that are currently exercisable. See
"Directors Compensation."
(7) Includes 100,000 shares of Holding Common Stock issuable to Mr. Vieser upon
exercise of options granted in 1995 that are currently exercisable. See
"Directors Compensation."
(8) Includes 280,000 shares of Holding Common Stock issuable to Mr. Fiamingo
upon exercise of options granted under the Option Plan that are currently
exercisable. Does not include 720,000 shares of holding Common Stock
issuable to Mr. Fiamingo upon exercise of options granted under the option
plan that are not currently exercisable. See "Executive
Compensation -- Benefit Plans -- Option Plan."
(9) Does not include 1,050,690 shares of Holding Common Stock issuable to Mr.
Sindelar upon exercise of Performance Options that are not currently
exercisable. See "Executive Compensation -- Benefit Plans -- Performance
Options."
(10) Does not include 700,457 shares of Holding Common Stock issuable to Mr.
Bacon upon exercise of Performance Options that are not currently
exercisable. See "Executive Compensation -- Benefit Plans -- Performance
Options."
(11) Includes 625,505 shares held of record by the W. Thomas McGhee Revocable
Living Trust and 250,000 shares held of record by the McGhee Family Limited
Partnership, for which Mr. McGhee exercises investment control. Does not
include 700,456 shares of Holding Common Stock issuable to
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<PAGE> 85
Mr. McGhee upon exercise of Performance Options that are not currently
exercisable. See "Executive Compensation -- Benefit Plans -- Performance
Options."
(12) Includes 50,000 shares of Holding Common Stock issuable to Mr. Holler upon
exercise of options granted under the Option Plan that are currently
exercisable. Does not include 200,000 shares of Holding Common Stock
issuable to Mr. Holler upon exercise of options granted under the Option
Plan that are not currently exercisable. See "Executive
Compensation -- Benefit Plans -- Option Plan."
(13) Includes (i) shares of Holding Class A Common Stock held by executive
officers and directors and shares of Holding Class A Common Stock as to
which Hicks Muse has the power to direct the voting of with respect to the
election of directors and which Mr. Mills has the power to vote by proxy
and (ii) 790,000 shares of Holding Common Stock issuable to executives and
directors of the Company upon exercise of options that are currently
exercisable. Does not include 5,652,516 shares of Holding Common Stock
issuable to executive officers of Holding upon the exercise of Performance
Options and options under the Option Plan that are not currently
exercisable. See "Executive Compensation Benefit Plans -- Performance
Options" and "Compensation of Directors."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATIONSHIPS WITH HICKS MUSE
Monitoring and Oversight Agreement
On June 12, 1995, Holding and the Company entered into a ten-year agreement
(the "Monitoring and Oversight Agreement") with Hicks, Muse & Co. Partners, L.P.
("Hicks Muse Partners"), a limited partnership of which the sole general partner
is HM Partners Inc., a corporation affiliated with Hicks Muse, pursuant to which
they paid Hicks Muse Partners a cash financial advisory fee of approximately
$3.7 million upon the closing of the Acquisitions as compensation for its
services as financial advisor for the Acquisitions, pursuant to which they pay
an annual fee of $500,000 for oversight and monitoring services to Holding and
the Company. The annual fee is adjustable at the end of each fiscal year to an
amount equal to 0.1% of the consolidated net sales of the Company, but in no
event less than $500,000. Hicks Muse Partners also will be entitled to receive a
fee equal to 1.5% of the transaction value (as defined) for each add-on
transaction (as defined) in which the Company is involved. The term "transaction
value" means the total value of any add-on transaction, including, without
limitation, the aggregate amount of the funds required to complete the add-on
transaction (excluding any fees payable pursuant to the Monitoring and Oversight
Agreement and any fees, if any, paid to any other person or entity for financial
advisory, investment banking, brokerage, or any other similar services rendered
in connection with such add-on transaction) including the amount of any
indebtedness, preferred stock or similar items assumed (or remaining
outstanding). The term "add-on transaction" means any future proposal for a
tender offer, acquisition, sale, merger, exchange offer, recapitalization,
restructuring, or other similar transaction directly or indirectly involving
Holding, the Company, or any of their respective subsidiaries and any other
person or entity. On March 5, 1996, in connection with the DWT Acquisition,
Holding and the company paid Hicks Muse Partners a cash financial advisory fee
of approximately $2.5 million as compensation for its services as financial
advisor. On February 12, 1997, in connection with the Camden Acquisition,
Holding and the Company paid Hicks Muse Partners a cash financial advisory fee
of approximately $900,000 as compensation for its services as financial advisor.
Messrs. Tate and Furst, directors of Holding and the Company, are each
principals of Hicks Muse Partners. In addition, Holding and the Company have
agreed to indemnify Hicks Muse Partners, its affiliates and shareholders, and
their respective directors, officers, agents, employees and affiliates from and
against all claims, actions, proceedings, demands, liabilities, damages,
judgments, assessments, losses and costs, including fees and expenses, arising
out of or in connection with the services rendered by Hicks Muse Partners in
connection with the Monitoring and Oversight Agreement.
The Monitoring and Oversight Agreement makes available the resources of
Hicks Muse Partners concerning a variety of financial and operational matters.
The services that have been and will continue to be provided by Hicks Muse
Partners could not otherwise be obtained by Holding and the Company without the
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<PAGE> 86
addition of personnel or the engagement of outside professional advisors. In
management's opinion, the fees provided for under this agreement reasonably
reflect the benefits received and to be received by Holding and the Company.
Stockholders Agreement
Each investor in any class of common stock of Holding has entered into a
stockholders agreement (the "Stockholders Agreement"). The Stockholders
Agreement, among other things, grants preemptive rights and certain registration
rights to the parties thereto and contains provisions requiring the parties
thereto to sell their shares of common stock in connection with certain sales of
Holding's common stock by Hicks Muse ("drag-along right") and granting the
parties thereto the right to include a portion of their shares of common stock
in certain sales in which Hicks Muse does not exercise its drag-along rights
("tag-along rights"). In addition, the Stockholders agreement contains an
irrevocable proxy pursuant to which all parties to the Stockholders Agreement
grant to Hicks Muse the power to vote all shares of Holding Common Stock held by
such parties. The Stockholders Agreement terminates on its tenth anniversary
date, although the preemptive rights, drag-along rights and tag-along rights
contained therein terminate earlier upon the consummation of a firm commitment
underwritten public offering of Holding Common Stock.
Notes Repurchase
On June 20, 1997, the Company repurchased $5.0 million in aggregate
principle amount of the Company's 14% Notes due 2005 for 113% of the principle
amount of such notes, plus accrued and unpaid interest, from HM Fund II, and
certain affiliates and principles of Hicks Muse, including Messrs. Tate and
Furst, directors of Holding and the Company.
85
<PAGE> 87
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K.
See Index to Financial Statements on page 22 of this report.
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.1 -- Agreement and Plan of Merger dated as of June 2, 1995,
among Omega Wire Corp., Wirekraft Holdings Corp.,
International Wire Holding Company, International Wire
Group, Inc. and Wirekraft Acquisition Company.(1)
2.2 -- Agreement and Plan of Merger, dated as of March 5, 1996,
among Hoosier Wire, Inc., International Wire Group, Inc.,
and Wire Technologies, Inc.(2)
2.3 -- Asset Purchase Agreement, dated as of March 5, 1996,
among Dekko Automotive Wire, Inc., International Wire
Holding Company, International Wire Group, Inc., and Wire
Technologies, Inc.(2)
2.4 -- Asset Purchase Agreement, dated as of March 5, 1996,
among International Wire Holding Company, International
Wire Group, Inc., and Wire Technologies, Inc.(2)
2.5 -- Asset Purchase Agreement, dated as of March 5, 1996,
among Silicones, International Wire Holding Company,
International Wire Group, Inc., and Wire Technologies,
Inc.(2)
2.6 -- Stock Purchase Agreement dated as of January 2, 1997,
among International Wire Group, Inc., Camden Wire Co.,
Inc. and Oneida Ltd.(6)
3.1 -- Restated Certificate of Incorporation of International
Wire Group, Inc.(4)
3.2 -- By-Laws of International Wire Group, Inc.(1)
4.1 -- Indenture, dated as of June 12, 1995, among International
Wire Group, Inc., as Issuer, the Subsidiary Guarantors
(as therein defined) and IBJ Schroder Bank & Trust
Company, as Trustee.(1)
4.2 -- Form of the 11 3/4% Note (included in Exhibit 4.1,
Exhibit B).
4.3 -- Exchange and Registration Rights Agreement, dated as of
June 12, 1995, among International Wire Group, Inc., the
Subsidiary Guarantors (as therein defined), Chemical
Securities Inc. and BT Securities Corporation.(1)
4.4 -- First Supplemental Indenture, dated as of March 5, 1996,
by and among International Wire Group, Inc., Wire
Technologies, Inc., the subsidiary guarantors party
thereto, and IBJ Schroder Bank & Trust Company, as
Trustee.(2)
4.5 -- Certificate of Designation of Series A Senior Cumulative
Exchangeable Redeemable Preferred Stock of International
Wire Group, Inc.(2)
4.6 -- Second Supplemental Indenture, dated as of December 20,
1996, by International Wire Group, Inc. the subsidiary
guarantors party thereto, and IBJ Schroder Bank and Trust
Company, as Trustee.(5)
4.7 -- Indenture, dated as of February 12, 1997, among
International Wire Group, Inc., as Issuer, the Subsidiary
Guarantors (as therein defined) and IBJ Schroder Bank and
Trust Company, as Trustee.(6)
4.8 -- Form of 14% Note (included in Exhibit 4.7, Exhibit A).
</TABLE>
86
<PAGE> 88
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.9 -- Preferred Stock and Warrant Purchase Agreement dated as
of March 5, 1996, by and among International Wire Holding
Company, International Wire Group, Inc., Chemical Equity
Associates and Hicks, Muse, Tate & Furst Equity Fund II,
L.P.(6)
4.10 -- Third Supplemental Indenture, dated as of February 12,
1997, by and among International Wire Group, Inc., the
subsidiary guarantors party thereto, and IBJ Schroder
Bank and Trust Company, as Trustee.(6)
4.11 -- First Supplemental Indenture, dated as of June 10, 1997,
by and among International Wire Group, Inc., the
subsidiary guarantors party thereto, and IBJ Schroder
Bank and Trust Company, as Trustee.(6)
4.12 -- Indenture, dated as of June 17, 1997, among International
Wire Group, Inc., as Issuer, the Subsidiary Guarantors
(as therein defined) and IBJ Schroder Bank and Trust
Company, as Trustee.(6)
4.13 -- Form of 11 3/4% Series B Note (included in Exhibit 4.11,
Exhibit B)
10.1 -- Parts Sourcing Contract, dated as of December 2, 1994,
among Wirekraft Industries, Inc. and General Electric
Company (Confidential treatment has been granted with
respect to certain portions of this exhibit).(1)
10.2 -- Schedule of Substantially Identical Domestic Subsidiary
Security Agreements.(1)
10.3 -- Agreement of Sublease, dated as of December 31, 1991,
between Oneida County Industrial Development Agency and
OWI Corporation.(1)
10.4 -- Agreement of Sublease, dated as of December 31, 1991,
between Onondaga County Industrial Development Agency and
OWI Corporation.(1)
10.5 -- Sublease Agreement, dated as of March 31, 1994, between
Productos de Control, S.A. de C.V. and Wirekraft
Industries, Inc.(1)
10.6 -- Lease Contract, dated as of August 1, 1994, between
Parques Industriales Mexicanos, S.A. de C.V. and Electro
Componentes de Mexico, S.A. de C.V..(1)
10.7 -- Lease Contract, dated as of March 15, 1998, between
Parques Industriales Mexicanos, S.A. de C.V. and Electro
Componentes de Mexico, S.A. de C.V..*
10.8+ -- Employment Agreement, dated as of June 12, 1995, among
International Wire Holding Company, International Wire
Group Inc. and certain of its subsidiaries and James N.
Mills.(4)
10.9+ -- Employment Agreement, dated as of June 12, 1995, among
International Wire Holding Company, International Wire
Group Inc. and certain of its subsidiaries and David M.
Sindelar.(4)
10.10+ -- Employment Agreement, dated as of March 14, 1995, between
Omega Wire, Inc. and Rodney D. Kent.(1)
10.11+ -- Option Agreement, dated as of March 31, 1995, between
Omega Wire Corp. and James N. Mills.(1)
10.12+ -- Option Agreement, dated as of March 31, 1995, between
Omega Wire Corp. and David M. Sindelar.(1)
10.13+ -- Option Agreement dated as of June 12, 1995, between Omega
Wire Corp. and David M. Sindelar.(1)
10.14+ -- Option Agreement dated as of June 12, 1995, between
International Wire Group, Inc. and David M. Sindelar.(1)
</TABLE>
87
<PAGE> 89
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.15+ -- Option Agreement dated as of August 28, 1995, between
International Wire Group, Inc. and Larry S. Bacon.(3)
10.16 -- Stockholders Agreement dated as of June 12, 1995, among
International Wire Holding Company and the Stockholders
signatories thereto.(1)
10.17 -- Monitoring and Oversight Agreement dated as of June 12,
1995, among International Wire Holding Company,
International Wire Group, Inc. and Hicks, Muse & Co.
Partners, L.P.(1)
10.18+ -- Option Agreement dated as of August 28, 1995 between
International Wire Group, Inc. and W. Thomas McGhee.(3)
10.19+ -- 1995 Stock Option Plan of International Wire Holding
Company.(4)
10.20+ -- Form of Option Agreement of International Wire Holding
Company under 1995 Stock Option Plan.(4)
10.21 -- Agreement dated as of December 29, 1995 among Wirekraft
Industries, Inc. and General Electric Company
(Confidential treatment has been granted with respect to
certain portions of this exhibit).(4)
10.22 -- Amended and Restated Credit Agreement, dated as of
February 12, 1997, among International Wire Group, Inc. ,
International Wire Holding Company, the several lenders
from time to time parties thereto, Chase Manhattan Bank,
as Administrative Agent, and Bankers Trust Company, as
Documentation Agent.(5)
10.23+ -- Employment Agreement, dated as of September 25, 1996,
among International Wire Holding Company and
International Wire Group, Inc. and Joseph M. Fiamingo.(5)
10.24+ -- Option Agreement, dated as of November 5, 1995, between
International Wire Holding Company and Joseph M.
Fiamingo.(5)
10.25+ -- Option Agreement, dated as of November 6, 1996, between
International Wire Holding Company and Joseph M.
Fiamingo.(5)
10.26 -- First Amendment to Amended and Restated Credit Agreement,
dated as of June 17, 1997, among International Wire
Group, Inc., International Wire Holding Company, the
Several Lenders from time to time parties thereto, the
Chase Manhattan Bank, as Administrative Agent, and
Bankers Trust Company, as Documentation Agent.(6)
10.27 -- Second Amendment and Waiver to Amended and Restated
Credit Agreement, dated as of September 29, 1997, among
International Wire Group, Inc., International Wire
Holding Company, the Several Lenders from time to time
parties thereto, the Chase Manhattan Bank, as
Administrative Agent, and Bankers Trust Company, as
Documentation Agent.*
10.28+ -- Option Agreement dated as of August 6, 1996, between
International Wire Holding Company and Glenn J. Holler.*
10.29+ -- Option Agreement dated as of November 8, 1995, between
International Wire Holding Company and Rodney D. Kent.*
21.1 -- Subsidiaries of International Wire Group, Inc.*
27.1 -- Financial Data Schedule*
</TABLE>
- ---------------
(1) Incorporated by reference to the Registration Statement on Form S-1
(33-93970) of International Wire Group, Inc. as declared effective by the
Securities and Exchange Commission on September 29, 1995.
88
<PAGE> 90
(2) Incorporated by reference to the Current Report on Form 8-K of International
Wire Group, Inc. as filed with the Securities Exchange Commission on March
20, 1996.
(3) Incorporated by reference to the Quarterly Report on Form 10-Q of
International Wire Group, Inc. for the fiscal quarter ended September 30,
1995.
(4) Incorporated by reference to the Annual Report on Form 10-K of International
Wire Group, Inc. for the fiscal year ended December 31, 1995.
(5) Incorporated by reference to the Annual Report on Form 10-K of International
Wire Group, Inc. for the fiscal year ended December 31, 1996.
(6) Incorporated by reference to the Registration Statement on Form S-1
(333-26925) of International Wire Group, Inc. as declared effective by the
Securities and Exchange Commission on November 12, 1997.
* Filed herewith.
+ Indicates compensatory plan or arrangement.
(B) REPORT ON FORM 8-K
Neither Holding nor the Company filed any report on Form 8-K with the
Securities and Exchange Commission during the quarter ended December 31, 1997.
89
<PAGE> 91
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
INTERNATIONAL WIRE GROUP, INC.
Date: March 26, 1998
By: /s/ GLENN J. HOLLER
-----------------------------------
Glenn J. Holler
Vice President-Finance
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JAMES N. MILLS Chairman of the Board of March 26, 1998
- ----------------------------------------------------- Directors and Chief
(James N. Mills) Executive Officer
(Principal Executive
Officer)
/s/ DAVID M. SINDELAR Senior Vice President March 26, 1998
- ----------------------------------------------------- and Chief Financial
(David M. Sindelar) Officer (Principal
Financial Officer)
/s/ GLENN J. HOLLER Vice March 26, 1998
- ----------------------------------------------------- President -- Finance
(Glenn J. Holler) (Principal Accounting
Officer)
/s/ THOMAS P. DANIS Director March 26, 1998
- -----------------------------------------------------
(Thomas P. Danis)
/s/ JACK D. FURST Director March 26, 1998
- -----------------------------------------------------
Jack D. Furst
/s/ JOHN A. GAVIN Director March 26, 1998
- -----------------------------------------------------
John A. Gavin
/s/ CHARLES W. TATE Director March 26, 1998
- -----------------------------------------------------
Charles W. Tate
/s/ RICHARD W. VIESER Director March 26, 1998
- -----------------------------------------------------
Richard W. Vieser
</TABLE>
90
<PAGE> 92
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ RODNEY D. KENT Director March 26, 1998
- -----------------------------------------------------
Rodney D. Kent
/s/ JOSEPH M. FIAMINGO Director, President and March 26, 1998
- ----------------------------------------------------- Chief Operating
Joseph M. Fiamingo Officer
</TABLE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS
FILED PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE ACT BY REGISTRANTS
WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE SECURITIES
EXCHANGE ACT
The registrant has not sent to its security holders any annual report to
security holders covering the registrant's last fiscal year or sent any proxy
statement, form of proxy or other proxy soliciting material with respect to any
annual or special meeting of security holders to more than ten of the
registrant's security holders.
91
<PAGE> 93
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.1 -- Agreement and Plan of Merger dated as of June 2, 1995,
among Omega Wire Corp., Wirekraft Holdings Corp.,
International Wire Holding Company, International Wire
Group, Inc. and Wirekraft Acquisition Company.(1)
2.2 -- Agreement and Plan of Merger, dated as of March 5, 1996,
among Hoosier Wire, Inc., International Wire Group, Inc.,
and Wire Technologies, Inc.(2)
2.3 -- Asset Purchase Agreement, dated as of March 5, 1996,
among Dekko Automotive Wire, Inc., International Wire
Holding Company, International Wire Group, Inc., and Wire
Technologies, Inc.(2)
2.4 -- Asset Purchase Agreement, dated as of March 5, 1996,
among International Wire Holding Company, International
Wire Group, Inc., and Wire Technologies, Inc.(2)
2.5 -- Asset Purchase Agreement, dated as of March 5, 1996,
among Silicones, International Wire Holding Company,
International Wire Group, Inc., and Wire Technologies,
Inc.(2)
2.6 -- Stock Purchase Agreement dated as of January 2, 1997,
among International Wire Group, Inc., Camden Wire Co.,
Inc. and Oneida Ltd.(6)
3.1 -- Restated Certificate of Incorporation of International
Wire Group, Inc.(4)
3.2 -- By-Laws of International Wire Group, Inc.(1)
4.1 -- Indenture, dated as of June 12, 1995, among International
Wire Group, Inc., as Issuer, the Subsidiary Guarantors
(as therein defined) and IBJ Schroder Bank & Trust
Company, as Trustee.(1)
4.2 -- Form of the 11 3/4% Note (included in Exhibit 4.1,
Exhibit B).
4.3 -- Exchange and Registration Rights Agreement, dated as of
June 12, 1995, among International Wire Group, Inc., the
Subsidiary Guarantors (as therein defined), Chemical
Securities Inc. and BT Securities Corporation.(1)
4.4 -- First Supplemental Indenture, dated as of March 5, 1996,
by and among International Wire Group, Inc., Wire
Technologies, Inc., the subsidiary guarantors party
thereto, and IBJ Schroder Bank & Trust Company, as
Trustee.(2)
4.5 -- Certificate of Designation of Series A Senior Cumulative
Exchangeable Redeemable Preferred Stock of International
Wire Group, Inc.(2)
4.6 -- Second Supplemental Indenture, dated as of December 20,
1996, by International Wire Group, Inc. the subsidiary
guarantors party thereto, and IBJ Schroder Bank and Trust
Company, as Trustee.(5)
4.7 -- Indenture, dated as of February 12, 1997, among
International Wire Group, Inc., as Issuer, the Subsidiary
Guarantors (as therein defined) and IBJ Schroder Bank and
Trust Company, as Trustee.(6)
4.8 -- Form of 14% Note (included in Exhibit 4.7, Exhibit A).
4.9 -- Preferred Stock and Warrant Purchase Agreement dated as
of March 5, 1996, by and among International Wire Holding
Company, International Wire Group, Inc., Chemical Equity
Associates and Hicks, Muse, Tate & Furst Equity Fund II,
L.P.(6)
4.10 -- Third Supplemental Indenture, dated as of February 12,
1997, by and among International Wire Group, Inc., the
subsidiary guarantors party thereto, and IBJ Schroder
Bank and Trust Company, as Trustee.(6)
4.11 -- First Supplemental Indenture, dated as of June 10, 1997,
by and among International Wire Group, Inc., the
subsidiary guarantors party thereto, and IBJ Schroder
Bank and Trust Company, as Trustee.(6)
</TABLE>
<PAGE> 94
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.12 -- Indenture, dated as of June 17, 1997, among International
Wire Group, Inc., as Issuer, the Subsidiary Guarantors
(as therein defined) and IBJ Schroder Bank and Trust
Company, as Trustee.(6)
4.13 -- Form of 11 3/4% Series B Note (included in Exhibit 4.11,
Exhibit B)
10.1 -- Parts Sourcing Contract, dated as of December 2, 1994,
among Wirekraft Industries, Inc. and General Electric
Company (Confidential treatment has been granted with
respect to certain portions of this exhibit).(1)
10.2 -- Schedule of Substantially Identical Domestic Subsidiary
Security Agreements.(1)
10.3 -- Agreement of Sublease, dated as of December 31, 1991,
between Oneida County Industrial Development Agency and
OWI Corporation.(1)
10.4 -- Agreement of Sublease, dated as of December 31, 1991,
between Onondaga County Industrial Development Agency and
OWI Corporation.(1)
10.5 -- Sublease Agreement, dated as of March 31, 1994, between
Productos de Control, S.A. de C.V. and Wirekraft
Industries, Inc.(1)
10.6 -- Lease Contract, dated as of August 1, 1994, between
Parques Industriales Mexicanos, S.A. de C.V. and Electro
Componentes de Mexico, S.A. de C.V..(1)
10.7 -- Lease Contract, dated as of March 15, 1998, between
Parques Industriales Mexicanos, S.A. de C.V. and Electro
Componentes de Mexico, S.A. de C.V..*
10.8+ -- Employment Agreement, dated as of June 12, 1995, among
International Wire Holding Company, International Wire
Group Inc. and certain of its subsidiaries and James N.
Mills.(4)
10.9+ -- Employment Agreement, dated as of June 12, 1995, among
International Wire Holding Company, International Wire
Group Inc. and certain of its subsidiaries and David M.
Sindelar.(4)
10.10+ -- Employment Agreement, dated as of March 14, 1995, between
Omega Wire, Inc. and Rodney D. Kent.(1)
10.11+ -- Option Agreement, dated as of March 31, 1995, between
Omega Wire Corp. and James N. Mills.(1)
10.12+ -- Option Agreement, dated as of March 31, 1995, between
Omega Wire Corp. and David M. Sindelar.(1)
10.13+ -- Option Agreement dated as of June 12, 1995, between Omega
Wire Corp. and David M. Sindelar.(1)
10.14+ -- Option Agreement dated as of June 12, 1995, between
International Wire Group, Inc. and David M. Sindelar.(1)
10.15+ -- Option Agreement dated as of August 28, 1995, between
International Wire Group, Inc. and Larry S. Bacon.(3)
10.16 -- Stockholders Agreement dated as of June 12, 1995, among
International Wire Holding Company and the Stockholders
signatories thereto.(1)
10.17 -- Monitoring and Oversight Agreement dated as of June 12,
1995, among International Wire Holding Company,
International Wire Group, Inc. and Hicks, Muse & Co.
Partners, L.P.(1)
10.18+ -- Option Agreement dated as of August 28, 1995 between
International Wire Group, Inc. and W. Thomas McGhee.(3)
10.19+ -- 1995 Stock Option Plan of International Wire Holding
Company.(4)
10.20+ -- Form of Option Agreement of International Wire Holding
Company under 1995 Stock Option Plan.(4)
10.21 -- Agreement dated as of December 29, 1995 among Wirekraft
Industries, Inc. and General Electric Company
(Confidential treatment has been granted with respect to
certain portions of this exhibit).(4)
</TABLE>
<PAGE> 95
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.22 -- Amended and Restated Credit Agreement, dated as of
February 12, 1997, among International Wire Group, Inc. ,
International Wire Holding Company, the several lenders
from time to time parties thereto, Chase Manhattan Bank,
as Administrative Agent, and Bankers Trust Company, as
Documentation Agent.(5)
10.23+ -- Employment Agreement, dated as of September 25, 1996,
among International Wire Holding Company and
International Wire Group, Inc. and Joseph M. Fiamingo.(5)
10.24+ -- Option Agreement, dated as of November 5, 1995, between
International Wire Holding Company and Joseph M.
Fiamingo.(5)
10.25+ -- Option Agreement, dated as of November 6, 1996, between
International Wire Holding Company and Joseph M.
Fiamingo.(5)
10.26 -- First Amendment to Amended and Restated Credit Agreement,
dated as of June 17, 1997, among International Wire
Group, Inc., International Wire Holding Company, the
Several Lenders from time to time parties thereto, the
Chase Manhattan Bank, as Administrative Agent, and
Bankers Trust Company, as Documentation Agent.(6)
10.27 -- Second Amendment and Waiver to Amended and Restated
Credit Agreement, dated as of September 29, 1997, among
International Wire Group, Inc., International Wire
Holding Company, the Several Lenders from time to time
parties thereto, the Chase Manhattan Bank, as
Administrative Agent, and Bankers Trust Company, as
Documentation Agent.*
10.28+ -- Option Agreement dated as of August 6, 1996, between
International Wire Holding Company and Glenn J. Holler.*
10.29+ -- Option Agreement dated as of November 8, 1995, between
International Wire Holding Company and Rodney D. Kent.*
21.1 -- Subsidiaries of International Wire Group, Inc.*
27.1 -- Financial Data Schedule*
</TABLE>
- ---------------
(1) Incorporated by reference to the Registration Statement on Form S-1
(33-93970) of International Wire Group, Inc. as declared effective by the
Securities and Exchange Commission on September 29, 1995.
(2) Incorporated by reference to the Current Report on Form 8-K of International
Wire Group, Inc. as filed with the Securities Exchange Commission on March
20, 1996.
(3) Incorporated by reference to the Quarterly Report on Form 10-Q of
International Wire Group, Inc. for the fiscal quarter ended September 30,
1995.
(4) Incorporated by reference to the Annual Report on Form 10-K of International
Wire Group, Inc. for the fiscal year ended December 31, 1995.
(5) Incorporated by reference to the Annual Report on Form 10-K of International
Wire Group, Inc. for the fiscal year ended December 31, 1996.
(6) Incorporated by reference to the Registration Statement on Form S-1
(333-26925) of International Wire Group, Inc. as declared effective by the
Securities and Exchange Commission on November 12, 1997.
* Filed herewith.
+ Indicates compensatory plan or arrangement.
<PAGE> 1
LEASE CONTRACT
LEASE CONTRACT entered into by and between PARQUE INDUSTRIAS DE
AMERICA, S.A. DE C.V., a Mexican corporation having its principal offices in
the City of Chihuahua, State of Chihuahua, Mexico, represented herein by Mr.
Luis Lara Armendariz, in his capacity of Sole Administrator for said
Corporation, hereinafter referred to as the "LESSOR"; and ELECTROCOMPONENTES DE
MEXICO, S.A. DE C. V., represented herein by Mr. Bernard Boone, in his capacity
of General Manager of said Corporation, hereinafter referred to as the
"LESSEE", in accordance with the following:
C L A U S E S:
FIRST -- LEASED PROPERTY:
Under the terms of this Lease Contract, the LESSOR hereby delivers in
lease to the LESSEE, the temporary use and possession of a certain plot of land
and the building for industrial use constructed thereon, situated on Calle
20(a) Numero 3300, Colonia Marmol, in the City of Chihuahua, State of
Chihuahua, Mexico. Said Land consists of a surface area of approximately 23,548
square meters (equivalent to approximately 253,468 square feet) and is shown on
the plan which is attached to this Contract as Exhibit "A".
The building improvements thereon consist of an industrial building
containing a total area of approximately 8,385 square meters (equivalent to
approximately 90,829 square feet), said building and improvements which include
but are not limited to two (2) transformers making a total of 1000 KVA's which
are part of the Leased Property by the LESSEE from the LESSOR ("Building") also
being shown on the plan which is attached to this Contract as Exhibit "A"
(said land and building are herein jointly referred to as the "Leased
Property").
SECOND -- OWNERSHIP OF THE LEASED PROPERTY:
LESSOR has the clear and unrestricted control of the Leased Property
and other common areas, and the LESSEE shall have the quiet enjoyment of same.
Similarly, LESSOR and LESSEE agree that
<PAGE> 2
-2-
as provided by Article 2308 of the Civil Code of the State of Chihuahua, this
Lease Contract shall survive any foreclosure of any lien or mortgage of LESSOR
and that any default in payment of any such lien or mortgage shall in no way
prejudice the terms of this Lease Contract; and that any amendments to such
mortgages or any new mortgages on the Leased Property shall contain a provision
acknowledging the existence and duration of this Lease Contract.
THIRD -- DELIVERY OF THE LEASED PROPERTY:
The LESSOR hereby delivers the Leased Property to LESSEE, for
beneficial occupancy (hereinafter refereed to as the "Beneficial Occupancy") on
February 15, 1998. LESSOR will deliver the Leased Property for final occupancy
on or before March 15, 1998 (hereinafter referred to as the "Effective Date"),
date in which the improvements set forth in Exhibit B (hereinafter referred to
as the "Improvements") shall be completed. Provided however that the payment of
rent hereunder will commence the date of completion of the Improvements by
LESSOR and accepted by LESSEE. Such payment shall be calculated by deducting
from the first month rent hereof an amount equal to one day of rent and until
the delivery and acceptance of the Improvements.
FOURTH -- USE OF THE LEASED PROPERTY:
The LESSEE shall use the Leased Property only for light and clean
industrial operations. Under no conditions whatsoever will the LESSEE be
permitted to use the Leased Property for chemical, nuclear and heavy industrial
operations.
FIFTH -- ASSIGNMENT AND SUBLETTING:
The LESSEE may not sublease the Leased Property or assign this
Contract, unless LESSEE has the express written authorization of LESSOR, which
authorization shall not be unreasonably withheld. LESSEE shall be permitted
to assign this Lease Contract to a company affiliate or subsidiary, provided
however that the Guaranty executed and delivered in favor of LESSOR from
International Wire Group, Inc. will remain in full force and effect during the
term of this Lease Contract and its extension hereof.
<PAGE> 3
-3-
SIXTH -- LEASE RENT:
A. The initial lease term ("Initial Term") shall be for a period of 10
(ten) years beginning on the Effective Date. From the date of completion of the
Improvements as provided in Clause Third hereof, and during the first five years
of the Initial Term, the LESSEE will pay to the LESSOR the amount of $39,056.47
(THIRTY NINE THOUSAND AND FIFTY SIX DOLLARS 47/100), equivalent to forty three
cents per square foot of the Building, per month. From year sixth to tenth of
Initial Term, the LESSEE will pay to the LESSOR the amount of $43,597.92 (FORTY
THREE THOUSAND FIVE HUNDRED NINETY SEVEN AND 92/100), equivalent to forty eight
cents per square foot of the Building, per month, payable in advance the first
day of each month.
B. LESSEE agrees that its obligations under this Clause Sixth A) may
be assigned to a Bank or another financial institution, and upon demand by such
assignee, LESSEE will make such payments directly to assignee, for which
purposes LESSEE may request the documents evidencing registration of the loan
as may correspond.
C. All payments hereunder shall be in U.S. dollars. This payments may
be made in Mexican currency, computed at the exchange rate published in the
Official Gazette of the Federation.
SEVENTH -- TAXES AND UTILITIES:
LESSEE shall be liable for the real estate property tax triggered by
the Leased Property and the Value Added Tax imposed over the rental payments.
The LESSOR will be responsible for the Income Tax levied on any rental income
derived herefrom and the Net Asset Tax.
LESSEE or LESSOR may bring appropriate proceedings in the name of the
LESSOR, the LESSEE or both for contesting the validity of any assessment on the
Leased Property or amount of the taxes imposed thereon, or to recover payment
therefor. Each party shall cooperate with the other with respect to the
proceedings so far as is reasonably necessary. The net amount of any taxes
recovered, after the payment of all expenses in connection therewith,
shall revert to the party incurring the expense.
LESSEE shall also directly contract and pay for all utilities that it
may require. LESSOR represents that all necessary utilities shall be available
at the Building of the Leased Property and the
<PAGE> 4
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LESSEE shall be responsible for any hook-up costs of all such utilities and for
all utility consumption expenses.
EIGHTH -- MAINTENANCE:
Responsibility for maintenance, repair and replacement shall be
governed by the following stipulations:
1. LESSOR shall at all times during the Lease term, maintain and
repair, at its own cost and expense, the foundation of the building, the
structure of the exterior, structure of the floors (excluding sealing),
structure of the roofs, including supporting members.
2. It is the responsibility of the LESSEE to maintain and repair, at
its own cost and expense, the interior and exterior of the Building including
interior and exterior paint, all roofing and flashing, air conditioning and
heating, and such landscaping as may be presently on the land, and the fire
protection system. The maintenance of parking areas and the fire protection
system is the responsibility of the LESSEE, except during the 12 (twelve)
months period after the Effective Date of this Lease Contract, said maintenance
is the responsibility of LESSOR.
3. LESSEE warrants and guarantees that during the term hereof the
Leased Property will be maintained and LESSEE's operation will be conducted in
accordance with the environmental and any other laws of Mexico applicable to
said Building and operations.
4. Notwithstanding any contrary provision of this Lease Contract, if
at any time during the term hereof or any extension thereof any component of
the Lease Property originally provided by LESSOR, which is the obligation of
LESSEE to maintain, requires replacement in the reasonable opinion of a
contract reasonably acceptable to LESSEE and LESSOR, which contract will also
do the replacement, the cost of which component shall be US$50,000 (Fifty
Thousand Dollars) or more ("Major Component"), LESSEE and LESSOR shall share
the cost of such replacement as hereinafter set forth; if the benefit or useful
life of the Major Component extends beyond the term of this Lease (as such term
may be extended by exercise of any options by LESSEE), the useful life of the
Major Component shall be prorated over the remaining portion of the term of the
Lease (as if extended), and LESSEE shall be liable only for the portion of the
<PAGE> 5
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cost which is applicable to the term of the Lease (as if extended). For purpose
of this provision, the useful life of any such Major Component shall be
determined in accordance with generally accepted accounting principles and the
opinion of the manufacturer of installer of such component.
NINTH -- ALTERATIONS:
LESSEE may not change the basic structure, the external appearance or
basic utility services, nor make any major work alterations, without the
express written authorization of LESSOR, which authorization shall not be
unreasonably withheld. LESSEE is hereby authorized to make minor alterations or
modifications to the Leased Property, at its own risk and expense, so long as
said alterations and modifications do not alter or impair the structure of the
Building or the basic nature thereof. Any such minor alterations may in no way
create a greater risk of fire and they must in any case be approved in writing
by the LESSOR's approved insurance carrier.
All fixtures and/or equipment of whatsoever nature ("Trade Fixtures")
as shall have been installed in the Leased Property by LESSEE, not permanently
affixed thereto, shall continue to be the property of LESSEE, and shall be
removed by LESSEE at the expiration or termination of this Lease Contract,
unless the LESSEE receives the written consent of LESSOR, in advance, in each
specific case, that such Trade Fixtures may remain on said property upon
expiration of the Lease Contract.
LESSEE shall at its own cost and expense repair any injury to the
Leased Property resulting from the removal of said Trade Fixtures and shall
deliver the Leased Property to the LESSOR in reasonable good condition of
order, presentation and cleanliness, reasonable wear and tear excepted.
Any construction, alteration or addition to the Building made by the
LESSEE, as well as any fixtures and/or equipment of whatsoever nature as shall
have been permanently installed in the Leased Property by the LESSEE, will be
to the benefit of the Leased Property and will remain there on termination of
the Lease Contract at no cost to LESSOR.
<PAGE> 6
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TENTH - LIABILITIES OF THE PARTIES:
In conformance with applicable law, LESSOR guarantees to LESSEE the
use and peaceful enjoyment of the Leased Property during the full term of the
Lease Contract, and the LESSEE covenants and agrees to use the Leased Property
only for the purposes herein stipulated and in accordance with nature and
intended usage of the Leased Property. The liabilities of the LESSOR and of the
LESSEE, in each case, shall be ruled by the following stipulations:
1. The LESSOR or the LESSEE, respectively, shall be liable for damages
to the Leased Property caused by their own fault or negligence, or that of
their agents, employees or visitors, except for losses commonly insurable by
fire insurance with extended coverage endorsement.
2. The responsibilities of the parties referred to in this Clause,
shall be subject to the provisions of Clause Eleventh of this Contract.
ELEVENTH -- INSURANCE:
1. During the term of the Lease, LESSOR shall contract for and pay the
premiums on a fire insurance policy on the Leased Property (including the
building and improvements thereof) with extended coverage, including insurance
against any loss or damage by fire and against any loss or damage by lightning,
explosion, hurricane and hail, airplanes, vehicles and smoke, earthquake and/or
volcanic eruption, strikes, riots and vandalism and any other risks now or
hereafter embraced by so called "Extended Coverage" (including glass and gas
tank insurance) in amounts sufficient to prevent LESSOR or LESSEE from becoming
a co-insurer under the terms of the applicable policies, but in any event in an
amount not less than one hundred percent of the then "full insurable value"
(replacement value indicated in US$) of the Building and improvements which
exist on the Leased Property. LESSEE shall reimburse LESSOR annually for the
reasonable cost of said insurance. For the purpose of this clause, replacement
value shall be deemed to be the cost of replacing the Building less the cost of
excavations, foundations, and footings and without any deductions for physical
depreciation of the Building. Such "full insurable value" shall be determined
from time to time, but not more frequently than once in every twelve months, by
LESSOR's construction department. If LESSEE disagrees with such determination
of replacement value, LESSEE at its expense may determine
<PAGE> 7
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replacement value by hiring a licensed appraiser and certified by a Mexican
credit institution authorized for that purpose.
2. LESSEE is obligated to contract and to maintain during the term of
this Lease, at its cost and expense, the insurance coverage and policies listed
below:
a) General public liability insurance, covering claims, demands
and actions for injury or death of any person, in an amount not
less than $500,000.00 currency of the United States of America;
and for accidental injury or death of more than one person from
any one accident, and for any liability arising from damages to
property of third parties, with a limit of $100,000.00 currency
of the United States of America to cover all claims, demands, and
actions arising from, related to, or connected with the use by
LESSEE of the Leased Property. LESSOR shall be named as
additional insured under this policy.
b) Insurance against loss or damage by boiler (or compressor)
malfunction or by internal explosion by boiler (compressor), for
any high pressure vessel installed in the Building which is part
of the Leased Property, in such amounts as LESSOR, from time to
time, reasonably requires; and
c) Rental interruption insurance, covering risk of loss of
rentals due to occurrence of any hazard set forth in this clause
in an amount required to pay the rent, taxes and insurance
premiums then required hereunder for a twelve month period.
3. All insurance to be maintained pursuant to this Lease Contract
shall be arranged through a reputable insurance company which has been
previously approved by LESSOR.
LESSEE shall cause such insurance company to promptly furnish LESSOR
with duly executed certificates covering the insurance policies referred to
above. Said certificates of insurance shall provide that the insurance may not
be modified or canceled until after thirty (30) days written notice has been
received by LESSOR, prior to the cancellation or modification. The certificates
should
<PAGE> 8
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also show that the insurance is in force and on the basis of a paid premium.
4. LESSOR hereby waives its right of recovery against LESSEE for
damages caused by fire, explosion and other casualty to any of the Leased
Property to the extent that recovery is made by LESSOR under insurance policies
in effect at the time of loss. LESSEE hereby likewise waives its right of
recovery against LESSOR for damages caused by fire, explosion and other
casualty to the Leased Property if is covered by insurance policies in effect
at the time of loss. This provision does not extend, and the waiver does not
apply, to any damages suffered by either party hereto which are not covered by
the insurance policies above mentioned, or which are under the deductible
thereof.
5. The LESSOR and the LESSEE agree to use good faith efforts to have
any and all fire extended insurance coverage, or any other material damage
insurance, endorsed with a subrogation clause substantially as follows: "This
insurance shall not be invalidated should the insured waive in writing, prior
to a loss, any or all right of recovery against any party for loss occurring to
the property described herein."
6. The LESSOR and LESSEE each waive all claims for recovery from the
other party for any loss or damages (whether or not such loss or damage be
caused by negligence of the other party and notwithstanding any provision
contained in this Lease Agreement to the contrary) to any of its property
insured under valid and collectible insurance policies. The foregoing is
subject to the limitation that this waiver shall apply only when it is
permitted by the applicable insurance policy.
7. All insurance provided for in this Clause shall be effected under
valid and enforceable policies issued by insurers which have been approved by
LESSOR and which are authorized to do business in Mexico, copies of which shall
be provided to LESSOR.
8. All policies of insurance herein provided for shall, to the extent
that LESSOR shall request, contain standard mortgage clauses in favor of the
holders of mortgages on the Leased Property.
9. In case of casualty to the Leased Property resulting in damage or
destruction to the Building, LESSEE shall promptly
<PAGE> 9
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telephone the LESSOR within 24 hours after the casualty occurred and give
written notice thereof to LESSOR. Adjustment proceedings shall be started
immediately by LESSEE.
10. All insurance money paid on account of such damage or destruction,
less the actual cost, fees and expenses, if any, incurred in connection with
adjustment of the loss, shall be made available to the LESSOR or the LESSEE, as
their respective interests appear under this Lease Contract, for the purpose of
restoring, replacing, rebuilding or altering the Building as nearly as
possible to its value, condition and character immediately prior to such damage
or destruction.
TWELFTH -- TERM:
The initial term of this Lease Contract ("Initial Term") shall be for
a period of 10 (ten) years, beginning on March 15, 1998, the Effective Date of
this Contract, during which the LESSEE shall have the undisturbed use and
enjoyment of the Leased Property.
Additionally LESSOR agrees that LESSEE shall have an option to extend
the Initial Term of this Contract for a period of 5 (five) years, (the
"Extended Term") in order to continue leasing under the same terms and
conditions, except the lease price, which will be increased to reflect one-half
(50%) of any increase in the Consumer Price Index (CPI) from the sixth to the
tenth year of the Initial Term. As used herein the Consumer Price Index shall
mean the table "Consumer Price Index for all Urban Consumers", published by the
Bureau of Labor Statistics of the U. S. Department of Labor. The parties agree
to use the column for "All Items" (unadjusted) under such table. If LESSEE
desires to exercise said option, shall notify LESSOR in writing at any time up
to six months prior to the termination of the Initial Term.
THIRTEENTH -- SURRENDER:
LESSEE shall, on the last day of the term of this Lease or upon
earlier termination, surrender and deliver the Leased Property into the
possession and use of the LESSOR without delay, in good order, condition and
repair, except for normal wear and tear due to normal use and the passage of
time, and except for damage by fire or other casualty. All signs, inscriptions,
canopies and installations of like nature made by LESSEE shall be removed at or
prior to the expiration of the term of this Lease.
<PAGE> 10
-10-
All furniture and Trade Fixtures installed by LESSEE shall remain the
property of the LESSEE and shall be removed by LESSEE at any time during or at
the end of the term.
Any personal property which shall remain in the Leased Property after
the termination of the Lease may, at the option of LESSOR, be deemed to have
been abandoned and either may be retained by LESSOR as its property or be
disposed of, without liability, in such manner as LESSOR may see fit.
FOURTEENTH -- HOLDOVER:
In the event this Lease Contract is not duly extended prior to the
termination date, the LESSEE shall at the termination of the Lease by lapse of
time or otherwise, yield up immediate possession to LESSOR, and failing to do
so it will be considered that the Lease Term is extended for an indefinite
period of time during which the LESSEE will pay as rent for the whole time such
possession is withheld a sum equal to twice the daily rental payment by LESSEE
as computed on the last day of the initial or extended term hereof, however the
provisions of this clause shall not be deemed to be a waiver by LESSOR of any
right of reentry as herein set forth; nor shall the receipt of said payment or
any part thereof, operate as waiver of the right of LESSOR to recover the
Leased Property.
FIFTEENTH -- RIGHT TO PERFORM OTHER PARTY'S COVENANTS:
If LESSEE shall at any time fail to perform any one or more of its
agreements made in this Lease Contract, LESSOR, after ten (10) days written
notice to LESSEE (or without notice in the case of an emergency) and without
waiving or releasing LESSEE from any obligation of LESSEE contained in this
Lease Contract, may but shall be under no obligation to perform any act on
LESSEE's part to be performed as provided in this Lease Contract, and may enter
upon the Leased Property for that purpose and take all such actions thereon as
may be necessary therefor. All reasonable sums paid by LESSOR and all
reasonable costs and expenses incurred by LESSOR in connection with the
performance of any such obligation of LESSEE, shall be payable by LESSEE to
LESSOR on demand. The LESSEE will be entitled to the same right with respect to
the obligations breached by the LESSOR.
<PAGE> 11
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If LESSOR shall at any time fail to perform any one or more of its
agreements made in this Lease Contract, LESSEE, after ten (10) days written
notice to LESSOR (or without notice in the case of an emergency) and without
waiving or releasing LESSOR from any obligation of LESSOR contained in this
Lease Contract, may but shall be under no obligation to perform any maintenance
act on LESSOR'S part to be performed as provided in this Lease Contract, and
may enter upon the Leased Property for that purpose and take all such actions
thereon as may be necessary therefor; provided, however, that LESSEE may not
under the authority of this Clause undertake major structural construction or
modification of the Building. All reasonable sums paid by LESSEE and all
reasonable costs and expenses incurred by LESSEE in connection with the
performance of any such obligation of LESSOR, shall be payable by LESSOR to
LESSEE on demand.
SIXTEENTH -- ENTRY ON LEASED PROPERTY BY LESSOR:
LESSEE shall permit LESSOR and its authorized representatives to enter
the Leased Property at all reasonable times for the purpose of inspecting the
same and performing any work therein that may be required of it or that may be
necessary by reason of LESSEE's failure to make repairs or perform such work or
for the purpose of showing the same to prospective purchasers, as well as for
the purpose of determining the hazards of occupancy which may exist and to
instruct the LESSEE as to how to eliminate or reduce such hazards of occupancy,
which reasonable instructions shall be complied with by the LESSEE forthwith.
LESSOR shall exercise its authority under this provision in such a way
so as not to interfere with the business operations of the LESSEE.
SEVENTEENTH -- SUBROGATION:
LESSEE agrees, at the request of LESSOR, to subordinate this Lease
Contract to any mortgage placed upon the Leased Property, provided that the
holder agrees not to disturb the possession and other rights of LESSEE under
this Lease Contract so long as LESSEE continues to perform its obligations
hereunder; and in the event of acquisition of title by said holder through
foreclosure proceedings or otherwise, said holder agrees to accept LESSEE as
tenant of lease and to perform the LESSOR's obligations hereunder (but only
while
<PAGE> 12
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owner of the Leased Property); and LESSEE agrees to recognize such holder or
any other persons acquiring title to the Leased Property. LESSEE and LESSOR
agree to execute and deliver any appropriate instruments necessary to carry out
the agreements contained herein.
EIGHTEENTH -- GUARANTY:
LESSEE (being a subsidiary of International Wire Group) shall obtain
and deliver to LESSOR, at the execution of this Lease Contract, a Guaranty in
substantially the same form of the document attached hereto as Exhibit "C",
duly signed by a representative of International Wire Group, a U. S. A.
corporation, as Guarantor and certified by a Notary Public, whereby Guarantor
shall guaranty to LESSOR compliance by LESSEE with all and each of the
obligations accepted by the LESSEE under this Lease and such guaranty shall be
valid and binding for all the then unexpired terms of this Lease. LESSOR
intends to collaterally assign this Lease to lender. LESSEE and Wire Harness
Industries Inc. agree to sign such documents as are in the form attached hereto
as Exhibit "C", or in such other comparable form as a lender might require.
NINETEENTH -- ASSIGNMENT:
This Lease Contract may be assigned by LESSOR, provided that LESSOR
shall remain liable hereunder.
TWENTIETH -- MODIFICATIONS TO CONTRACTUAL DOCUMENT:
No modification, release or discharge of this Lease Contract or waiver
of any of the provisions hereof shall be of any force or effect except by an
agreement in writing signed by LESSOR and LESSEE.
TWENTY FIRST -- APPLICABLE LAW AND JURISDICTION:
This Lease Contract shall be bound by and subject to the provisions of
the Civil Code of the State of Chihuahua and both parties hereto expressly
submit to the jurisdiction of the Courts of Chihuahua, State of Chihuahua,
Mexico.
<PAGE> 13
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TWENTY SECOND -- ARBITRATION:
Any controversy regarding this Lease Contract will be settled jointly
by the parties through arbitration under the following procedure:
The Arbitration will be subject to the rules of arbitration as set
forth by Mexican Commercial Code. There will be three arbitrator, one
arbitrator to be selected by LESSOR, one to be selected by LESSEE and other
arbitrator to be selected by the two arbitrator so selected by the parties. If
a party fails to nominate the arbitrator within fifteen (15) days from the date
of notification made to it of the other party's request for arbitration, or if
the two arbitrators fail, within fifteen days from the date of their
appointment, to reach agreement on the third arbitrator, then COPARMEX, in the
City of Chihuahua, Chihuahua, will appoint arbitrator that was not nominated by
the failing party, or will appoint the third arbitrator as the case may be. The
place of arbitration will be the City of Chihuahua, Chihuahua, Mexico. The
substantive national law applicable to the arbitration will be that of Mexico.
The language of the arbitration proceedings will be English or Spanish without
the need for translation from one to another of such languages. The award
issued under the paragraph will be final and binding upon the parties.
TWENTY THIRD -- OPTION TO BUY:
LESSEE shall have the option to buy the Leased Property only at the
end of the fifth year and at the end of the tenth year of the Initial Term. In
order to exercise said option to buy, LESSEE, shall notify, in writing to
LESSOR of its intention to buy, within the six months prior to the date to
exercise the option to buy. The purchase price shall be the amount of
US$3,488,000.00 at the end of the fifth year. The purchase price at the end of
the tenth year will be based upon the rent for the Extended Term which rent
will be equal to 15% of the Purchase Price.
TWENTY FOURTH -- NOTICES:
All notices, demands and requests required under this Lease Contract
shall be in writing. All such notices, demands and requests shall be deemed to
have been properly given if served personally or if sent by registered or
certified mail, return receipt requested, addressed to LESSOR or LESSEE as the
case may be, at its respective address last designated by notice to the other
<PAGE> 14
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party for that purpose. Until LESSOR and LESSEE shall designate other
addresses, their addresses shall be as follows:
LESSOR: PARQUE INDUSTRIAS DE AMERICA, S.A. DE C.V.
Attn: Mr. Luis Lara Armendariz
Prolong. Ave. Americas S/N
Parque Industrial Las Americas
Chihuahua, Chih. 31200
and with a copy to:
Terry L. Johnson
Scott & Hulse
13th. Floor, Texas Commerce Bank Building
El Paso, Texas 79901
LESSEE: ELECTROCOMPONENTES DE MEXICO, S.A. DE C.V.
Attn: Mr. Bernard Boone
Chimeneas s/n y Fernando Borreguero
Parque Industrial Juarez
Apdo Postal 1595-D
Ciudad Juarez, Chihuahua, Mexico
and with copy to:
Lic. Humberto Gayou-Madrigal
Paseo San Jeronimo 1665 - Despacho 1
Fraccionamiento San Jeronimo
Ciudad Juarez, Chihuahua., Mexico
TWENTY FOUR -- OFFICIAL TEXT AND TRANSLATION:
The parties execute this Lease Contract in the Spanish language as the
official text, and also execute a translation of this Lease Contract in the
English language. If either party submits Lease Contract to any court or other
authority, the Spanish version shall control in case of any disputes related to
the interpretation of a given section.
Executed in Ciudad Juarez, Chihuahua, Mexico effective as of March
15th, 1998.
LESSOR: LESSEE:
PARQUE INDUSTRIAS DE AMERICA, ELECTROCOMPONENTES DE MEXICO,
S.A. DE C.V. S.A. DE C.V.
<PAGE> 15
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/s/ MR. LUIS LARA ARMENDARIZ /s/ MR. BERNARD BOONE
- ---------------------------- ----------------------------
By: Mr. Luis Lara Armendariz By: Mr. Bernard Boone
Sole Administrator General Manager
Exhibits
A - Plot of Leased Property
B - Improvements of the Leased Property.
C - Guaranty
<PAGE> 16
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[FLOOR PLAN]
<PAGE> 17
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EXHIBIT B
LIST OF IMPROVEMENTS TO THE LEASE PROPERTY
1. - Modification of Restrooms
2. - Addition of 60 parking spaces
3. - Addition of loading docks and extension of truck road
4. - Addition of a diesel storage tank
5. - Resealing production floor
<PAGE> 18
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EXHIBIT C
GUARANTY FROM INTERNATIONAL WIRE GROUP
<PAGE> 19
GUARANTY
THIS GUARANTY (hereinafter referred to as "Guaranty") made effective
March 15th, 1998, by and between International Wire Group, Inc., a U.S.A.
corporation (hereinafter referred to as the "Guarantor"), and PARQUE INDUSTRIAS
DE AMERICA, S.A. DE C.V., a Mexican corporation (hereinafter referred to as the
"Lessor").
P R E M I S E S
WHEREAS, Lessor is the owner of certain real property (hereinafter
referred to as the "Property"), located in Calle 20a Numero 3300, Colonia
Marmol in the City of Chihuahua, State of Chihuahua, Mexico, consisting in an
industrial building with 90,829 sq. ft. approx.;
WHEREAS, Guarantor is the parent of, or an affiliated corporation
with, ELECTROCOMPONENTES DE MEXICO, S.A. DE C.V. (hereinafter referred to as
"Company");
WHEREAS, Guarantor executes this Guaranty in favor of Lessor, to
induce Lessor to enter into that certain lease agreement (hereinafter referred
to as the "Lease Agreement") between Lessor and Company, dated effective March
15th, 1998; and
WHEREAS, Guarantor directly or indirectly receives, utilizes and/or
benefits from, manufactured products or parts made by Company in Mexico, and
therefore Guarantor directly or indirectly benefits from making this Guaranty;
now, therefore, in consideration of the foregoing, and of other good and
valuable consideration, the receipt of which is acknowledged by Guarantor,
IT IS HEREBY AGREED AS FOLLOWS:
1. Guarantor unconditionally guarantees to Lessor, and to Lessor's
successors and assigns, the prompt, full, complete and punctual payment and
performance to Lessor of all of the terms, conditions, covenants, obligations,
liabilities and agreements of
Initials: JF
----
<PAGE> 20
Company as set forth in the Lease Agreement or any renewals, amendments,
expansions, and modifications thereof between Lessor and Company. This Guaranty
extends to and includes any and all interest due or to become due, together
with all reasonable attorney's fees, costs and expenses of collection incurred
by Lessor in connection with any matter covered by this Guaranty. This Guaranty
shall include any liability of Company which shall accrue under the Lease
Agreement for any period preceding as well as any period following the term of
the Lease Agreement. Guarantor represents that Guarantor directly or indirectly
benefits from making this Guaranty.
2. The liability of Guarantor shall continue until payment is made and
performance given pursuant to every obligation of Company now due or hereafter
to become due in accordance with the terms of the Lease Agreement or any
extension thereof, between Lessor and Company, and until payment is made of any
loss or damage incurred by Lessor with respect to any matter covered by this
Guaranty. This Guaranty shall be irrevocable. The obligations of Guarantor
under this Guaranty shall not be released or otherwise affected by reason of
any sublease, assignment, or other transfer of Company's interest under the
Lease Agreement, whether or not Lessor consents to such sublease, assignment,
or other transfer.
3. Guarantor consents, without affecting Guarantor's liability to
Lessor hereunder, that Lessor may, without notice to or consent of Guarantor,
upon such terms as Lessor may deem advisable:
a. Extend, in whole or in part, by renewal or otherwise, any time of
payment or performance on the part of Company, provided for in
the Lease Agreement;
b. Release, surrender, exchange, modify, impair, or extend any
period or duration, or any time for performance, or payment on
the part of Company, required by the Lease Agreement;
c. Settle or compromise any claim of Lessor against Company, or
against any other person, firm or corporation whose obligation
Lessor holds as security for Company's obligation to Lessor under
the Lease Agreement;
2 Initials: JF
----
<PAGE> 21
d. Renew, compromise, extend, accelerate, or otherwise change the
time for payment of, or otherwise change the terms of the
indebtedness or any part thereof under the Lease Agreement,
including increase or decrease of any amount due thereunder or
any level of rent specified therein; or
e. Release or substitute any one or more of Company or Guarantor.
Guarantor hereby ratifies and affirms any such extension, renewal,
release, surrender, exchange, modification, impairment, settlement or
compromise and all such acts shall be binding upon Guarantor who hereby waives
all defense, counterclaims or offsets which Guarantor might have solely by
reason thereof.
4. Guarantor waives:
a. Notice of acceptance of this Guaranty by Lessor;
b. Notice of presentment, notice of nonperformance, notices of
dishonor and notices of the existence, creation or incurring
of new or additional indebtedness or obligations, demands for
payment of performance or protest of any obligations of
Company to Lessor under the Lease Agreement;
c. Notice of the failure of any person, firm or corporation to
pay to Lessor any indebtedness held by Lessor as collateral
security for any obligation of Company to Lessor under the
Lease Agreement;
d. Any right to require Lessor to (i) proceed against Company; (ii)
proceed against or exhaust any security or other lien or right
held by Lessor; or (iii) pursue any other remedy in the power
of Lessor whatsoever;
e. Any requirement that Lessor mitigate damages under the Lease
Agreement;
f. Any defense or right arising by reason of any disability or
lack of authority or power of Company, and Guarantor shall
remain liable hereunder if Company or any other
3 Initials: JF
----
<PAGE> 22
party shall not be liable under the Lease Agreement for such
reason;
g. Any defense, offsets of claims arising from any strikes,
riots, acts of God, shortages of labor or materials, war, or
governmental action or intervention which wholly or partially
frustrates any or all of the purpose for which the Lease
Agreement was entered into;
h. Any defense, offsets or claims arising from any economic or
social conditions in Mexico, or changes in Mexican law,
including without limitation, devaluations or other changes
regarding currency or regarding payment of any rentals under
the Lease Agreement;
i. Any defects in perfection of the assignment and pledge of the
rents by failure to record the Lease Agreement or any
instrument or assignment and pledge in the Public Registry
under Mexican Law;
j. The benefit of any statute of limitations affecting
Guarantor's liability under the Guaranty; and
5. Guarantor's obligation hereunder is primary and independent of
Company's obligations under the Lease Agreement. In the event of any default on
the part of Company as defined in the Lease Agreement, Lessor may at its option
proceed first against Guarantor, jointly and severally, to collect any
obligation covered by this Guaranty, without first proceeding against Company
or any other person, firm or corporation and without first resorting to any
property at any time held by Lessor as collateral security.
6. Until all of Company's obligations in the Lease Agreement are fully
performed, Guarantor: (a) shall have no right of subrogation against Company by
reason of any payments or acts of performance by the Guarantor, in compliance
with the obligations of Guarantor hereunder; (b) waives any right to enforce
any remedy which Guarantor now or hereafter shall have against Company by
reason of any one or more payments or acts of performance in compliance with
the obligations of Guarantor hereunder; and (c) subordinates any liability or
indebtedness of Company now or
4 Initials: JF
----
<PAGE> 23
hereafter held by Guarantor to the obligations of Company to the Lessor under
the Lease Agreement.
7. The liability of Guarantor hereunder shall not be released or
otherwise affected by:
a. The release or discharge of Company in any insolvency,
bankruptcy, reorganization, receivership, or other debtor
relief proceeding involving Company (collectively referred to
herein as "Proceeding for Relief");
b. The impairment, limitation, or modification of the liability
of Company or the estate of Company in any Proceeding for
Relief, or of any remedy for the enforcement of Company's
liability under the Lease Agreement, resulting from the
operation of any law relating to bankruptcy, insolvency, or
similar proceeding or other law or from the decision in any
court;
c. The rejection or disaffirmance of the Lease Agreement in any
Proceeding for Relief;
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment by Company to Lessor under the Lease Agreement
is rescinded or must otherwise be returned by Lessor in a Proceeding for Relief
involving Company, all as though such payment had not been made. Nothing
contained in this Guaranty shall alter any of the rights or remedies of Lessor
against Company.
8. This Guaranty shall be governed by and construed in accordance
with the internal laws of the State of Texas excluding any principles of
conflicts of laws. In any action prosecuted by Lessor for the interpretation
and performance of this Guaranty, Guarantor agrees to and hereby submits
Guarantor to the personal and subject matter jurisdiction of the Federal
District Court of the Western District of Texas, or the State Courts in the
County of El Paso, State of Texas, United States of America. Guarantor
expressly waives the right to any other jurisdiction that Guarantor may have as
a result of Guarantor's present or future domicile, or due to any other cause
whatsoever. At Lessor's request, this Guaranty may be translated into Spanish,
and Guarantor agrees to
5 Initials: JF
----
<PAGE> 24
execute a Spanish language version of this Guaranty; however the English version
shall be determinative in any court proceeding.
GUARANTOR WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN LESSOR AND
GUARANTOR ARISING OUT OF THIS GUARANTY OR ANY OTHER DOCUMENT OR INSTRUMENT
EXECUTED IN CONNECTION HEREWITH OR ANY TRANSACTION RELATED TO THIS GUARANTY.
9. Guarantor agrees to pay to Lessor a reasonable attorney's fee and
all other costs and expenses which may be incurred by Lessor in the collection
or efforts to collect or enforcement of the sums due under this Guaranty. If any
provision hereof shall be deemed invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision herein. If Guarantor is
more than one person or entity, the liability of each such Guarantor shall be
joint and several. Lessor may assign the Guaranty in whole or in part. Guarantor
may not assign this Guaranty in whole or in part without Lessor's prior written
consent; Guarantor shall remain liable for its obligations hereunder unless
released therefrom in writing by Lessor.
10. Guarantor represents and warrants that (a) Guarantor is authorized
to execute and deliver this Guaranty, (b) the person executing this Guaranty is
authorized to execute the same for and on behalf of Guarantor, (c) Guarantor has
all requisite power and authority to enter into this Guaranty, (d) neither the
execution or delivery of this Guaranty, nor the performance of the terms,
conditions or provisions of this Guaranty, constitute a default under, or result
in the creation of any lien pursuant to, any other agreement or instrument under
which Guarantor is obligated, and (e) at the time of execution and delivery of
this Guaranty, nothing exists to impair the effectiveness of the liability of
Guarantor to Lessor hereunder, or to impair the immediate taking effect of this
Guaranty as the sole Agreement between Guarantor and Lessor with respect to
guaranteeing all of Company's obligations to Lessor under the Lease Agreement.
At Lessor's request, Guarantor upon execution hereof, or during the term hereof,
shall be obligated to provide to Lessor a corporate resolution of Guarantor
acknowledging the authority to enter into the Guaranty, and the benefit to
Guarantor of making the Guaranty. At any time during the term of the Lease
Agreement, upon request of Lessor, Guarantor shall be
6 Initials: JF
----
<PAGE> 25
obligated to provide to Lessor an acknowledgment that the Guaranty remains in
effect.
11. Guarantor acknowledges that no special fiduciary or trust
relationship exists between Lessor and Guarantor. Guarantor agrees that no
such special relationship shall exist, unless pursuant to, and only to the
extent set forth in, a written agreement that is signed by Lessor and Guarantor
and that expressly states such special relationship.
12. The rights and remedies of Lessor under this Guaranty, and the
rights and remedies of Lessor created under any other document or applicable
law, are cumulative and may be exercised singly or concurrently, and the
exercise of any one or more of them will not be a waiver of any other. Lessor
may concurrently pursue actions against Guarantor in the United States and in
Mexico, and may recover a judgment in one without waiving its right to pursue
the other, provided however that Lessor shall not obtain double or duplicate
recovery of Lessor's damages.
13. This Guaranty is binding jointly and severally upon Guarantor and
its legal representatives and successors and shall inure to the benefit of
Lessor its legal representatives, successors and assigns, provided however that
Guarantor shall not assign its obligations hereunder.
14. The whole of this Guaranty is set forth herein and there is no
verbal or other written agreement and no understanding or custom affecting the
terms hereof. This Guaranty can be amended only by a written instrument
specifically referencing this Guaranty and executed by both parties hereto.
15. In the event Lessor discounts, collaterally assigns or assigns the
Lease Agreement and the Guaranty to a bank or other lending institution
(hereinafter referred to as "Lender"), Guarantor shall furnish to Lender a
letter stating that Guarantor acknowledges receipt of notice of an assignment
by Lessor of the Guaranty; that the Guaranty is in full force and effect; that
no changes to the Guaranty as originally executed have been made; that
Guarantor will not enter into any modification of the Guaranty without first
obtaining Lender's prior written approval; that Lender may rely solely upon the
Guaranty with respect to Lender's right to receive the rents in accordance with
the terms of the
7 Initials: JF
----
<PAGE> 26
Lease Agreement; and that all payment made thereafter shall be made to Lender
or its assigns in U.S. Dollars, at such times and at such places as directed by
Lender or its assigns. Guarantor shall execute and furnish to Lender such other
acknowledgments, consents or other documents as Lender may reasonably require
in order to facilitate the discount, collateral assignment or assignment of the
Lease Agreement and the Guaranty.
THIS GUARANTY REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES; THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
IN WITNESS WHEREOF, Guarantor has signed this Guaranty effective as of
March 15th, 1998.
GUARANTOR:
International Wire Group Inc.
By: /s/ JOSEPH M. FIAMINGO
--------------------------------------
Printed Name: Joseph M. Fiamingo
--------------------------------------
Its: President
--------------------------------------
Address of Guarantor: International Wire Group, Inc.
--------------------------------------
101 So. Hanley Rd.
--------------------------------------
St. Louis, MO 63105
--------------------------------------
ATTEST:
By: /s/ GLENN J. HOLLER
------------------------------
Printed Name: Glenn J. Holler
------------------------------
Its: VP VP Finance & CFO
------------------------------
8 Initials: JF
----
<PAGE> 27
ACKNOWLEDGMENT
STATE OF MISSOURI )
)
COUNTY OF ST. LOUIS )
This Guaranty was acknowledged before me on the 17th day of February, 1998,
by Joseph M. Fiamingo, of International Wire corporation, on behalf of said
corporation.
Notary's Official Seal:
/s/ THERESA M. JACKSON
-----------------------------
NOTARY PUBLIC IN AND FOR
THE STATE OF MISSOURI
[SEAL]
THERESA MARIE JACKSON
NOTARY PUBLIC, STATE OF MISSOURI
ST. LOUIS COUNTY
MY COMMISSION EXPIRES SEPT. 11, 1999
9 Initials: JF
----
<PAGE> 1
EXHIBIT 10.27
EXECUTION COPY
================================================================================
SECOND AMENDMENT AND WAIVER TO
AMENDED AND RESTATED CREDIT AGREEMENT
among
INTERNATIONAL WIRE GROUP, INC.,
as Borrower,
INTERNATIONAL WIRE HOLDING COMPANY,
as Guarantor,
CAMDEN WIRE CO., INC.,
THE SEVERAL LENDERS
FROM TIME TO TIME PARTIES HERETO,
THE CHASE MANHATTAN BANK,
as Administrative Agent,
and
BANKERS TRUST COMPANY,
as Documentation Agent
-------------------------
CHASE SECURITIES INC.
and
BT SECURITIES CORPORATION,
as Arrangers
-------------------------
DATED AS OF SEPTEMBER 29, l997
================================================================================
<PAGE> 2
SECOND AMENDMENT AND WAIVER
TO AMENDED AND RESTATED CREDIT AGREEMENT
SECOND AMENDMENT AND WAIVER, dated as of September 29, 1997, to the
Amended and Restated Credit Agreement, dated as of February 12, 1997 (as
amended, supplemented or otherwise modified prior to the date hereof, the
"Credit Agreement"), among INTERNATIONAL WIRE GROUP, INC., a Delaware
corporation (the "Borrower"), INTERNATIONAL WIRE HOLDING COMPANY, a Delaware
corporation ("Holdings"), CAMDEN WIRE CO., INC., a New York corporation
("Camden"), the several banks and other financial institutions from time to time
parties thereto (the "Lenders") and THE CHASE MANHATTAN BANK, a New York banking
corporation, as administrative agent for the Lenders thereunder (in such
capacity, the "Administrative Agent"), and BANKERS TRUST COMPANY, as
documentation agent for the Lenders thereunder (in such capacity, the
"Documentation Agent"). Unless otherwise defined herein, terms which are defined
in the Credit Agreement and used herein are so used as so defined.
WITNESSETH:
WHEREAS, the Borrower, Holdings, the Lenders, the Administrative Agent
and the Documentation Agent are parties to the Credit Agreement;
WHEREAS, the Borrower desires to establish the Philippines Project and
to secure Philippines Project Indebtedness (as hereinafter defined) in
connection therewith;
WHEREAS, the Borrower has requested certain amendments to the Credit
Agreement to permit the Philippines Project Indebtedness; and
WHEREAS, the Borrower has requested a waiver of certain provisions of
the Credit Agreement as described below;
NOW THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereto hereby agree as follows:
1. Amendments to Section 1.1 of the Credit Agreement. Section 1.1
of the Credit Agreement is hereby amended by inserting the following new
definitions in the proper alphabetical order:
"Philippines Project": an insulated wire facility located in
the city of Cebu in the Republic of the Philippines."
"Philippines Project Documentation": certain loan, security,
real property lease, supply and other related agreements and documents
entered into by the Borrower, its Subsidiaries or its Affiliates in
connection with the Philippines Project and the terms of which shall
be reasonably satisfactory to the Administrative Agent."
"Philippines Project Indebtedness": up to $18,000,000 in
aggregate of Indebtedness secured by any Foreign Subsidiary from the
Borrower, any Domestic
<PAGE> 3
Page 2
Subsidiary of the Borrower, or a third party (subject to Section
8.2(i)(ii) in the case of any intercompany Indebtedness) for the
purpose of financing the construction and working capital needs of the
Philippines Project and in accordance with the Philippines Project
Documentation."
2. Amendment to Subsection 8.2 of the Credit Agreement. Subsection
8.2(i) of the Credit Agreement is hereby amended by inserting a semicolon at
the end of subsection 8.2(i)(ii), deleting the remainder of subsection 8.2(i)
in its entirety and inserting the following in lieu thereof:
(iii) of ECM and any other Foreign Subsidiary of the
Borrower to local financial institutions for working
capital purposes other than the Philippines Project
Indebtedness and (iv) of any Foreign Subsidiary of the
Borrower for financing under the Philippines Project
Indebtedness; provided that the aggregate principal
amount of Indebtedness described in clauses (i) and
(ii) above plus the aggregate commitments of all
working capital facilities described in subclause (iii)
shall in no event exceed $17,000,000 at any one time
and provided further that the aggregate amount of the
Philippines Project Indebtedness described in subclause
(iv) shall in no event exceed $18,000,000 at any one
time.
3. Amendment to Subsection 8.3 of the Credit Agreement.
Subsection 8.3(p) of the Credit Agreement is hereby amended by deleting the
phrase "subsections 8.2(i)(ii) and (iii)" and inserting in lieu thereof the
phrase "subsections 8.2(i)(ii), (iii) and (iv)".
4. Amendment to Subsection 8.4 of the Credit Agreement. (a)
Subsection 8.4(i) of the Credit Agreement is hereby amended by deleting the
word "and" at the end of said subsection.
(b) Subsection 8.4(j) of the Credit Agreement is hereby amended by
deleting the period at the end of said subsection and inserting in lieu thereof
a semi-colon followed by the word "and".
(c) Subsection 8.4 of the Credit Agreement is hereby amended by
adding the following subsection 8.4(k) immediately after subsection 8.4(j):
"(k) unsecured guarantees of the Philippines Project
Indebtedness, if any."
5. Amendment to Subsection 8.8 of the Credit Agreement. (a)
Subsection 8.8(c) of the Credit Agreement is hereby amended by deleting the
phrase "paragraph (d)" and inserting in lieu thereof the phrase "paragraphs (d)
and (e)".
(b) Subsection 8.8 of the Credit Agreement is hereby amended by
inserting the following subsection 8.8(e) immediately after subsection 8.8(d):
(e) In addition to the Capital Expenditures permitted
pursuant to paragraphs (a), (b) and (d) of this
subsection 8.8, the Borrower and/or any of its
<PAGE> 4
Page 3
Subsidiaries may make Capital Expenditures of up to
$15,000,000 in the aggregate in connection with the
Philippines Project during the Borrower's 1997 and 1998
fiscal years pursuant to the terms of the Philippines
Project Documents.
6. Waiver of Subsection 7.9 of the Credit Agreement. The Lenders
hereby waive the obligation of the Borrower and/or any Domestic Subsidiary to
pledge all property acquired after the Second Amendment Closing Date pursuant
to Subsection 7.9 of the Credit Agreement only to the extent that the Borrower
shall not be required to pledge to the Administrative Agent for the ratable
benefit of the Lenders certain Promissory Notes (as the same may be amended,
supplemented or restated) acquired pursuant to that certain Note Purchase
Agreement issued by Camden Associates, Edon Associates, Onedia Associates,
Jordan Associates, and Onondaga Associates in the aggregate principal amount of
$5,791,831.98 and secured by mortgages on certain properties located in the
Villages of Jordan and Camden, New York.
7. Conditions to Effectiveness of this Amendment and Waiver. The
agreement of each Lender party to this Amendment and Waiver is subject to the
satisfaction of the following conditions precedent:
(a) Amendment and Waiver. The Administrative Agent shall have
received this Amendment and Waiver, executed and delivered by a duly authorized
officer of the Borrower, Holdings and Camden with a counterpart for each
Lender.
(b) Pledged Stock. The Administrative Agent shall have received
issued and outstanding shares of all classes of the Capital Stock of any new
Subsidiary created in connection with the Philippines Project and held by the
Borrower or any of its Subsidiaries to the extent required under Subsection
7.12 of the Credit Agreement.
(c) No Default. No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the transactions
contemplated herein.
(d) Representations and Warranties. Each of the representations
and warranties made by the Credit Parties and their Subsidiaries in or pursuant
to the Loan Documents shall be true and correct in all material respects on and
as of the date hereof as if made on and as of the date hereof, except for any
representation and warranty which is expressly made as of an earlier date,
which representation and warranty shall have been true and correct in all
material respects as of such earlier date.
8. Miscellaneous.
(a) Effect. Except as expressly amended or waived hereby, all of
the representations, warranties, terms, covenants and conditions of the Loan
Documents shall remain unamended and not waived and shall continue to be in
full force in effect.
(b) Counterparts. This Amendment and Waiver may be executed by one
or more of the parties to this Amendment and Waiver on any number of separate
counterparts, and all of
<PAGE> 5
Page 4
said counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Amendment and Waiver signed by all the
parties shall be lodged with the Borrower and the Administrative Agent.
(c) Severability. Any provision of this Amendment and Waiver which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
(d) Integration. This Amendment and Waiver and the other Loan
Documents represent the agreement of the Credit Parties, the Administrative
Agent and the Lenders with respect to the subject matter hereof, and there are
no promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to the subject matter hereof not expressly set
forth or referred to herein or in the other Loan Documents.
(e) GOVERNING LAW. THIS AMENDMENT AND WAIVER AND ANY NOTES AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT AND WAIVER AND ANY
NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH,
THE LAW OF THE STATE OF NEW YORK.
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Amendment and
Waiver to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first written.
INTERNATIONAL WIRE GROUP, INC.,
as Borrower
By: /s/ DAVID J. WEBSTER
--------------------------
Name: David J. Webster
Title: Vice President
INTERNATIONAL WIRE HOLDING
COMPANY, as Guarantor
By: /s/ DAVID J. WEBSTER
--------------------------
Name: David J. Webster
Title: Vice President
CAMDEN WIRE CO., INC.
By: /s/ DAVID J. WEBSTER
--------------------------
Name: David J. Webster
Title: Vice President
THE CHASE MANHATTAN BANK, as
Administrative Agent and as a
Lender, as Swing Line Lender
and as Issuing Lender
By: /s/ TIMOTHY J. STORMO
--------------------------
Name: Timothy J. Stormo
Title: Managing Director
BANKERS TRUST COMPANY
By: /s/
--------------------------
Name:
Title:
<PAGE> 7
AERIES FINANCE LTD.
By: /s/ ANDREW IAN WIGNALL
--------------------------------
Name: Andrew Ian Wignall
Title: Director
THE BANK OF NEW YORK
By: /s/ CHRISTOPHER C. JACOBS
--------------------------------
Name: Christopher C. Jacobs
Title: Assistant Treasurer
BANK OF SCOTLAND
By: /s/ ANNIE CHIN TAT
--------------------------------
Name: ANNIE CHIN TAT
Title: VICE PRESIDENT
BANQUE FRANCAISE DU COMMERCE
EXTERIEUR
By: /s/ DEVIN DOOLEY
--------------------------------
Name: Kevin Dooley
Title: Vice President
By: /s/ WILLIAM C. MAIER
--------------------------------
Name: WILLIAM C. MAIER
Title: VP-GROUP MANAGER
BANQUE PARIBAS
By: /s/ PIERRE-JEAN DE FILIPPIS
--------------------------------
Name: PIERRE-JEAN de FILIPPIS
Title: General Manager
By: /s/ DEANNA C. WALKER
--------------------------------
Name: DEANNA C. WALKER
Title: Assistant Vice President
<PAGE> 8
CAISSE NATIONALE DE CREDIT AGRICOLE
By: /s/ DEAN BALICE
--------------------------------
Name: DEAN BALICE
Title: SENIOR VICE PRESIDENT
BRANCH MANAGER
CERES FINANCE LTD.
By: /s/ DAVID EGGLISHAW
--------------------------------
Name: David Egglishaw
Title: DIRECTOR
DEBT STRATEGIES FUND, INC.
By:
--------------------------------
Name:
Title:
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ J. K. WILLIAMS
--------------------------------
Name:
Title:
HELLER FINANCIAL, INC.
By: /s/ PATRICK HAYES
--------------------------------
Name: PATRICK HAYES
Title: VICE PRESIDENT
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
By: /s/ TAKUYA HONJO
--------------------------------
Name: TAKUYA HONJO
Title: SENIOR VICE PRESIDENT
<PAGE> 9
KZH HOLDING CORPORATION III
By: /s/ VIRGINIA R. CONWAY
-------------------------------------
Name: Virginia R. Conway
Title: Authorized Agent
KZH-CRESCENT CORPORATION
By: /s/ VIRGINIA R. CONWAY
-------------------------------------
Name: Virginia R. Conway
Title: Authorized Agent
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED, NEW YORK BRANCH
By: /s/ SHUICHI TAJIMA
-------------------------------------
Name: Shuichi Tajima
Title: Deputy General Manager
MEDICAL LIABILITY MUTUAL
INSURANCE CO.
By: CHANCELLOR LGT SENIOR SECURED
MANAGEMENT, INC. as Investment
Manager
By: /s/ TIMOTHY DALLEADER
-------------------------------------
Name: Timothy Dalleader
Title: Assistant Vice President
MERRILL LYNCH PRIME RATE PORTFOLIO
By:
-------------------------------------
Name:
Title:
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By:
-------------------------------------
Name:
Title:
<PAGE> 10
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By: /s/ TOSHIHIRO HAYASHI
-----------------------------
Name: Toshihiro Hayashi
Title: Senior Vice President
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By: /s/ PETER J. STEARN
-----------------------------
Name: Peter J. Stearn
Title: Assistant Vice President
PRIME INCOME TRUST
By: /s/ RAFAEL SCOLARI
-----------------------------
Name: RAFAEL SCOLARI
Title: V.P. PORTFOLIO MANAGER
SENIOR DEBT PORTFOLIO
By: BOSTON MANAGEMENT &
RESEARCH, as Investment Advisor
By: /s/ PAYSON F. SWAFFIELD
-----------------------------
Name: Payson F. Swaffield
Title: Vice President
STRATA FUNDING LTD.
By: /s/ DAVID EGGLISHAW
-----------------------------
Name: David Egglishaw
Title: DIRECTOR
<PAGE> 11
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By: /s/ JEFFREY W. MAILLET
-------------------------------
Name: JEFFREY W. MAILLET
Title: Senior Vice President &
Director
DEEPROCK & COMPANY
by: Eaton Vance Management, as
Investment Advisor
By:
-------------------------------
Name:
Title:
CITY NATIONAL BANK
By: /s/ SAMI AMBAR
-------------------------------
Name: Sami Ambar
Title: Vice President
<PAGE> 12
STRATA FUNDING LTD.
By:
-------------------------------
Name:
Title:
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By:
-------------------------------
Name:
Title:
DEEPROCK & COMPANY
by: Eaton Vance Management, as
Investment Advisor
By: /s/ PAYSON F. SWAFFIELD
-------------------------------
Name: Payson F. Swaffield
Title: Vice President
CITY NATIONAL BANK
By:
-------------------------------
Name:
Title:
<PAGE> 13
KZH-SOLEIL CORPORATION (formerly
known as KZH Holding Corporation)
By:
-------------------------------
Name:
Title:
CAPTIVA II FINANCE LTD.
By: /s/ DAVID EGGLISHAW
-------------------------------
Name: David Egglishaw
Title: DIRECTOR
<PAGE> 1
INTERNATIONAL WIRE HOLDING COMPANY
NONSTATUTORY STOCK OPTION AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into between
International Wire Holding Company, a Delaware corporation ("Holdings"), and
the undersigned (the "Holder") in connection with the grant of an Option
(hereinafter defined) under the INTERNATIONAL WIRE HOLDING COMPANY 1995 STOCK
OPTION PLAN (the "Plan").
W I T N E S S E T H:
WHEREAS, the Holder is an employee of Holdings or a subsidiary
corporation thereof (subsidiary corporations sometimes referred to herein as
"Related Entities"; Holdings and the Related Entities are collectively referred
to herein as the "Corporation") in a key position or is an officer and/or
director of the Corporation and Holdings desires to grant the Holder an Option
through the Plan to purchase shares of Stock (hereinafter defined) of Holdings
and Holder desires to accept the Option based upon all of the terms, conditions
and covenants, including but not limited to, Holder agreeing to
confidentiality, non-competition and non-solicitation of employees of the
Corporation.
NOW, THEREFORE, in consideration of these premises, the parties agree
that the following shall constitute the agreement between the Corporation and
the Holder:
1. DEFINITIONS. For purpose of this Agreement, the following
terms shall have the meanings specified below:
1.1 "Board of Directors" shall mean the board of directors of
Holdings.
1.2 "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.3 "Committee" shall mean the committee appointed pursuant to
Section 2 of the Plan or the Board of Directors, if no committee is appointed.
1.4 "Confidential Information" shall mean information disclosed to
or known by the Holder as a direct or indirect consequence of or through the
employment about the Corporation or its respective businesses, products,
practices, customers and suppliers. However, Confidential Information shall
not include under any circumstances any information with respect to the
foregoing matters which is (i) available to the public from a source other than
Holder, (ii) released in writing by the Corporation to the public or
intentionally to persons who are not under a similar obligation of
confidentiality to the Corporation and who are not parties to this Agreement or
a similar agreement, (iii) obtained by Holder from a third party not under a
similar obligation of confidentiality to the Corporation, (iv) required to be
disclosed by any court process or any government or agency or department of any
government, or (v) the subject of a written waiver executed by the Corporation
for the benefit of Holder.
<PAGE> 2
1.5 "Disability" shall be construed under the appropriate
provisions of the long-term disability plan maintained for the benefit of
employees of the Corporation who are regularly employed on a salaried basis.
The determination of a Holder's Disability, and the date of its commencement,
shall be determined in good faith solely by the Committee.
1.6 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
1.7 "Fair Market Value" shall mean, if the Stock is traded on one
or more established markets or exchanges, the average of the opening and
closing prices of the Stock in the primary market or exchange on which the
Stock is traded, and if the Stock is not so traded or the Stock does not trade
on the relevant date, the value as determined in good faith by the Board of
Directors.
1.8 "Securities Act" shall mean the Securities Act of 1933, as
amended.
1.9 "Stock" shall mean Holdings' authorized par value $0.01 per
share Common Stock together with any other securities with respect to which
Options granted hereunder may become exercisable.
2. GRANT OF NONSTATUTORY OPTION. Subject to the terms and
conditions set forth herein, Holdings grants to the Holder an Option (the
"Option") to purchase from Holdings at a price per share (the "Exercise Price")
the number of shares of Stock (the "Option Shares") as both are set out on the
final page hereof subject to adjustments as provided in Paragraph 9 hereof.
The Option is not intended to be an incentive option within the meaning of
Section 422A of the Code.
3. NOTICE OF EXERCISE. This Option may be exercised in
accordance with Paragraph 8, to purchase all or a portion of the applicable
number of Option Shares exercisable by written notice to Holdings as provided
in Paragraph 12, which notice shall:
(a) specify the number of shares of Stock to be purchased at the
Exercise Price;
(b) if the person exercising this Nonstatutory Option is not the
named Holder, contain or be accompanied by evidence satisfactory to the
Committee of such person's right to exercise this Option; and
(c) be accompanied by (i) payment in full of the Exercise Price
in the form of a certified or cashier's check payable to the order of Holdings,
(ii) with the Committee's approval, a promissory note for the full Exercise
Price, (iii) with the Committee's approval, payment in the form of shares of
Stock owned by the Holder which are of at least equal value to the aggregate
exercise price payable in connection with such exercise, (iv) with the
Committee's approval, a share or shares of Stock owned by the Holder and/or
surrendered for actual or deemed multiple exchanges of shares of Option Shares,
or (v) with the Committee's approval, a combination of any of (i) - (iv). The
Committee may grant or withhold its approval under any or all of the foregoing
in its sole and absolute discretion.
-2-
<PAGE> 3
4. INVESTMENT LETTER. Unless there is in effect a registration
statement under the Securities Act, with respect to the issuance of the Option
Shares (and, if required, there is available for delivery a prospectus meeting
the requirements of Section 10(a)(3) of the Securities Act), the Holder (or, in
the event of his death, the person exercising the Option) shall, as a condition
to his right to exercise the Option, deliver to Holdings an agreement or
certificate containing such representations, warranties, and covenants as
Holdings may deem necessary or appropriate to ensure that the issuance of
shares of Stock pursuant to such exercise is not required to be registered
under the Securities Act or any applicable state securities law. It is
understood and agreed that under no circumstance shall Holdings be obligated to
file any registration statement under the Securities Act or any applicable
state securities law to permit exercise of the Option or to issue any Stock in
violation of the Securities Act or any applicable state securities law.
5. TRANSFER AND EXERCISE OF NONSTATUTORY OPTION. The Option is
not transferable by the Holder otherwise than by will or the laws of descent
and distribution, and is exercisable, during the Holder's lifetime, only by the
Holder. The Option may not be assigned, transferred (except by will or the
laws of descent and distribution), pledged, or hypothecated in any way (whether
by operation of law or otherwise) and shall not be subject to execution,
attachment, or similar proceeding. Any attempted assignment, transfer, pledge,
hypothecation, or other disposition of the Option, contrary to the provisions
hereof, and the levy of any attachment or similar proceeding upon the Option,
shall be null and void and without effect.
6. STATUS OF HOLDER. This Agreement is not a contract of
employment and the terms of the Holder's employment shall not be affected
hereby or by any agreement referred to herein except to the extent specifically
so provided herein or therein. Nothing herein shall be construed to impose any
obligation on the Corporation to continue the Holder's employment. The Holder
shall not be deemed a stockholder of Holdings with respect to any of the shares
of Stock subject to this Option, except to the extent that such shares shall
have been purchased and issued. Holdings shall not be required to issue or
transfer any certificates for shares of Stock purchased upon exercise of this
Option until there is compliance with all applicable requirements of law and
this Agreement.
7. NO EFFECT ON CAPITAL STRUCTURE. This Option shall not affect
the right of Holdings to reclassify, recapitalize or otherwise change its
capital or debt structure or to merge, consolidate, convey any or all of its
assets, dissolve, liquidate, windup, or otherwise reorganize and, by acceptance
of this Agreement, Holder agrees that Holder has no standing before any court
to object to or contest any such action.
8. CONDITIONS AND SCHEDULE FOR EXERCISE. Except as otherwise
provided herein, all options shall expire no later than ten (10) years from the
date of this Agreement, which ten (10) year period is the term of this
Agreement. Subject to the provisions of Paragraph 9, Holder shall be entitled
to exercise the options granted herein as follows: (a) twenty percent (20%) of
the Option Shares may be exercised on or after the first anniversary date of
this Agreement, and (b) thereafter, an additional twenty percent (20%) of the
Option Shares shall become exercisable upon or after each of the next four (4)
anniversary dates of this Agreement. Notwithstanding the
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<PAGE> 4
provisions of the immediately preceding sentence, (a) all Option Shares shall
become exercisable immediately prior to a change of Control (as defined in the
Plan) and (b) in the event of the death or determination of Disability of
Holder, an additional twenty percent (20%) of the Option Shares (or such lesser
number as to cause the total shares subject to exercise not to exceed the total
Option Shares) shall become exercisable as of or after the date of death or
date of Disability. There shall not be any pro-rata rating of exercisability
between anniversary dates.
All other provisions of this Agreement to the contrary
notwithstanding, in the event of the termination of Holder's employment with
the Corporation (other than as a result of Holder's death or Disability, or in
the event of termination of Holder's employment without good cause (as defined
in the Plan) or upon retirement (with the Corporation's prior written
consent)), all rights under this Agreement and the Option shall terminate and
shall thereupon be null and void effective upon such termination; provided
however, any shares of Stock obtained through exercise prior to such effective
date in accordance with the terms of this Agreement shall remain the sole and
absolute property of the Holder subject to the Repurchase Right set forth in
Section 19.
In the event of the termination of Holder's employment with the
Corporation as a result of Holder's death or Disability, or in the event of the
termination of Holder's employment without good cause or upon retirement (with
the Corporation's prior written consent), all rights under this Agreement and
the Option shall terminate and shall be null and void effective thirty (30)
days after such termination of employment (during such thirty (30) day period,
Holder shall have the right to exercise Holder's Option with respect to all or
any part of the shares of Stock which such Holder was entitled to purchase
immediately prior to the date of such termination of employment); provided
however any shares of Stock obtained through exercise prior to such effective
date of termination of employment in accordance with the terms of this
Agreement shall remain the sole and absolute property of the Holder.
9. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER, ETC. AND
ACCELERATION OF EXERCISABILITY. In the event that, by reason of any merger,
consolidation, combination, liquidation, reorganization, recapitalization,
stock divided, stock split, split-up, split-off, spin-off, combination of
shares, exchange of shares or other like change in capital structure of
Holdings (collectively, a "Reorganization"), the Stock is substituted,
combined, or changed into any cash, property, or other securities, or the
shares of Stock are changed into a greater or lesser number of shares of Stock,
the number and/or kind of shares and/or, interests subject to an Option and the
Exercise Price or value thereof shall be appropriately adjusted by the
Committee to give appropriate effect to such Reorganization. Any fractional
shares or interests resulting from such adjustment shall be eliminated.
All of the provisions of this Paragraph to the contrary not
withstanding, Holdings shall have the right to grant stock appreciation right
agreements, to issue additional stock options and/or to issue additional shares
of stock. If any such stock appreciation right agreements are granted,
additional stock options issued and/or additional shares of stock are issued to
others out of authorized but unissued shares, even though the result of such
stock appreciation right agreements granted, stock options issued and/or stock
issues dilute either the percentage of
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<PAGE> 5
ownership of the Holder or the value per share of any stock or Option herein
granted and, in any such event, Holder's rights hereunder shall not be
increased in any way.
10. COMMITTEE AUTHORITY. Any question concerning the
interpretation of this Agreement, any adjustments required to be made under
Paragraph 9 of this Agreement, and any controversy which may arise under this
Agreement and/or any paragraph thereof shall be finally determined by the
Committee in its sole and absolute discretion.
11. PLAN CONTROLS. The terms of this Agreement are governed by
the terms of the Plan, which is made a part hereof as if fully set forth
herein, and in the case of any inconsistency between the terms of this
Agreement and the terms of the Plan, the terms of the Plan shall control.
12. NOTICE. Whenever any notice is required or permitted
hereunder, such notice must be in writing and personally delivered, sent by
mail or sent by overnight courier. Any notice required or permitted to be
delivered hereunder shall be deemed to be delivered on the date which it is
personally delivered, or, whether actually received or not, on the third
business day after it is deposited in the United States mail, certified or
registered, postage prepaid or next business day after it is sent by overnight
courier in each case, addressed to the person who is to receive it. Holdings
or Holder may change, at any time and from time to time, by written notice to
the other, the address previously so specified. Until changed in accordance
herewith, Holdings and the Holder specify their respective addresses as set
forth below the signature lines on the last page hereof.
13. CERTIFICATE RETENTION. In the event that Holder gives notice
of exercise in whole or in part in accordance with the provisions of this
Agreement, Holdings shall have the right to demand that the Holder execute and
deliver a Stock Power to Holdings and to then issue the certificate and to hold
the certificate in Holdings' possession together with the Stock Power so to
assure protection of Holdings' Repurchase Right.
14. AWARD INFORMATION CONFIDENTIAL. As partial consideration for
the granting of this Option, the Holder agrees that Holder will keep
confidential all information and knowledge that Holder has relating to the
manner and amount of participation in the Plan; provided, however, that such
information may be disclosed as required by law and may be given in confidence
to the Holder's spouse, tax and financial advisors, or to a financial
institution to the extent that such information is necessary to secure a loan.
15. TAX WITHHOLDING. By acceptance hereof, Holder hereby (i)
agrees to reimburse the Corporation by which Holder is employed for any
federal, state, or local taxes required by any government to be withheld or
otherwise deducted by such Corporation in respect of Holder's exercise of all
or a portion of the Option; (ii) authorizes the Corporation by which the Holder
is employed to withhold from any cash compensation paid to the Holder or in the
Holder's behalf, an amount sufficient to discharge any federal, state, and
local taxes imposed on the Corporation by which the Holder is employed, in
respect of the Holder's exercise of all or a portion of the Option; and (iii)
agrees that Holdings may, in its discretion, hold the stock certificate to
which
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<PAGE> 6
Holdings is entitled upon exercise of the Option as security for the payment of
the aforementioned withholding tax liability, until cash sufficient to pay that
liability has been accumulated, and may, in its discretion, effect such
withholding by retaining shares issuable upon the exercise of the Option having
a fair market value on the date of exercise which is equal (in the judgment of
such corporation) to the amount to be withheld.
16. CONFIDENTIAL INFORMATION. As partial consideration of the
granting of this Option, the Holder agrees that during Holder's employment with
the Corporation or at any time thereafter, irrespective of the time, manner or
cause of the termination of this Agreement, Holder will not directly or
indirectly reveal, divulge, disclose or communicate to any person or entity,
other than authorized officers, directors and employees of the Corporation, in
any manner whatsoever, any Confidential Information of the Corporation or any
direct or indirect subsidiary or parent of the Corporation without the prior
written consent of the Chairman of the Board of Holdings.
17. AGREEMENT NOT TO COMPETE. As partial consideration of the
granting of this Nonstatutory Option, Holder agrees:
(a) TERMINATION FOR CAUSE OR VOLUNTARY TERMINATION. In the event
that the Holder is terminated for Cause or voluntarily terminates employment
with the Corporation prior to the expiration of the term of this Agreement,
Holder hereby agrees that for a period of one (1) year following such
termination, he shall not, either in Holder's own behalf or as a partner,
officer, director, employee, agent or shareholder engage in, invest in or
render services to any person or entity engaged in the businesses in which the
Corporation or any subsidiary of the Corporation is then engaged and situated
within the United States of America. Nothing contained in this Section 17(a)
shall be construed as restricting the Holder's right to sell or otherwise
dispose of any business or investments owned or operated by the Holder as of
the date hereof.
(b) TERMINATION WITHOUT CAUSE OR FOR DISABILITY. In the event
that the employment of the Holder is terminated by the Corporation without
Cause or as a result of the total disability of the Holder, Holder hereby
agrees that only during the period that the Holder accepts continued disability
and/or severance compensation payments from the Corporation, he shall not,
either in Holder's own behalf or as a partner, officer, director, employee,
agent or shareholder engage in, invest in or render services to any person or
entity engaged in the businesses in which the Corporation is then engaged and
situated within the United States of America. Nothing contained in this
Section 17(b) shall be construed as restricting the Holder's right to sell or
otherwise dispose of any business or investments owned or operated by the
Holder as of the date hereof.
18. AGREEMENT NOT TO SOLICIT EMPLOYEES. Holder agrees that, for a
period of two (2) years following the termination of Holder's employment by the
Corporation, Holder shall not, for Holder or on behalf of any business engaged
in a business competitive with the Corporation, solicit or induce, or in any
manner attempt to solicit or induce, any person employed by, or any agent of
the Corporation to terminate employment or agency, as the case may be, with the
Corporation.
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<PAGE> 7
19. REPURCHASE RIGHT. If Holder's employment with the Corporation
terminates for any reason at any time (other than as a result of Holder's death
or Disability, or in the event of termination of Holder's employment without
good cause (as defined in the Plan) or upon retirement (with the Corporation's
prior written consent)), Holdings and/or its designee(s) shall have the option
(the "Purchase Option") to purchase, and if an Option is exercised, Holder (or
the Holder's executor or the administrator of Holder's estate, in the event of
the Holder's death, or Holder's legal representative in the event of the
Holder's incapacity (hereinafter, collectively with such Holder, the
"Grantor")) shall sell to Holdings and/or its assignee(s), all or any portion
(at Holding's Option) of the shares of Stock and/or exercised Options held by
the Grantor (such shares of Stock and exercised Options collectively being
referred to as the "Purchasable Shares").
Holdings shall give notice in writing to the Grantor of the exercise
of the Purchase Option within one (1) year from the date of the termination of
the Holder's employment. Such notice shall state the number of Purchasable
Shares to be purchased and the determination of the Board of Directors of the
Fair Market Value (as defined in the Plan) per share of such Purchasable
Shares. If no notice is given within the time limit specified above, the
Purchase Option shall terminate.
The purchase price to be paid for the Purchasable Shares purchased
pursuant to the Purchase Option shall be, in the case of any Stock, the Fair
Market Value per share times the number of shares being purchased, and in the
case of any Option, the Fair Market Value per share times the number of vested
shares subject to such Options which are being purchased, less the applicable
per share Option exercise price. The purchase price shall be paid in cash.
The closing of such purchase shall take place at Holding's principal executive
offices within ten (10) days after the purchase price has been determined. At
such closing, the Grantor shall deliver to the purchaser(s) the certificates or
instruments evidencing the Purchasable Shares being purchased, duly endorsed
(or accompanied by duly executed stock powers) and otherwise in good form for
delivery, against payment of the purchase price by check of the purchaser(s).
In the event that, notwithstanding the foregoing, the Grantor shall have failed
to obtain the release of any pledge or other encumbrance or any Purchasable
Shares by the scheduled closing date, at the option of Holdings, the closing
shall nevertheless occur on such scheduled closing date, with the cash purchase
price being reduced to the extent of all unpaid indebtedness for which such
Purchasable Shares are then pledged or encumbered.
To assure the enforceability of Holding's rights under this Paragraph
19, each certificate or instrument representing Stock or an Option held by
Holder and/or the certificate or instrument shall bear a conspicuous legend in
substantially the following form:
"THE SHARES [REPRESENTED BY THIS CERTIFICATE] [ISSUABLE PURSUANT TO
THIS AGREEMENT] ARE SUBJECT TO AN OPTION TO REPURCHASE PROVIDED UNDER
THE PROVISIONS OF THE INTERNATIONAL WIRE HOLDING COMPANY 1995 STOCK
OPTION PLAN AND A NONSTATUTORY STOCK OPTION AGREEMENT ENTERED INTO
PURSUANT THERETO. A COPY OF SUCH OPTION PLAN AND
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<PAGE> 8
OPTION AGREEMENT ARE AVAILABLE UPON WRITTEN REQUEST TO THE COMPANY AT
ITS PRINCIPAL EXECUTIVE OFFICES."
Holding's rights under this Section 19 shall terminate upon the
consummation of an underwritten public offering of the Stock, registered and
effective under the Securities Act of 1993, as amended, pursuant to which
Holdings receives aggregate cash sales proceeds, before underwriting discount,
of at least $25 million or such lesser amount as the Committee shall determine.
20. SUCCESSORS. Except as otherwise provided herein, this
Agreement is binding on and enforceable by the heirs, successors, and assigns
of the parties.
21. GOVERNING LAW. This Agreement shall be governed by the laws
of the State of Delaware, except to the extent that Delaware Law is preempted
by Federal Law.
IN WITNESS WHEREOF, Holdings has caused this Agreement to be executed
and the Holder has hereunto set Holder's hand as of the 6th day of August,
1996.
HOLDINGS: INTERNATIONAL WIRE HOLDING COMPANY
By: /s/ JAMES N. MILLS
---------------------------------
James N. Mills
Chairman and Chief Executive Officer
101 South Hanley
St. Louis, Missouri 63105
HOLDER: /s/ GLENN J. HOLLER
---------------------------------
Glenn J. Holler
226 Grimsley Station Bluff Drive
St. Louis, Missouri 63129
Number of Option Shares subject to the grant in Paragraph 2 hereof is two
hundred fifty thousand (250,000) and the Exercise Price is One Dollar ($1.00)
per share.
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<PAGE> 1
EXHIBIT 10.29
INTERNATIONAL WIRE HOLDING COMPANY
NONSTATUTORY STOCK OPTION AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into between
International Wire Holding Company, a Delaware corporation ("Holdings"), and
the undersigned (the "Holder") in connection with the grant of an Option
(hereinafter defined) under the INTERNATIONAL WIRE HOLDING COMPANY 1995 STOCK
OPTION PLAN (the "Plan").
W I T N E S S E T H:
WHEREAS, the Holder is an employee of Holdings or a subsidiary
corporation thereof (subsidiary corporations sometimes referred to herein as
"Related Entities"; Holdings and the Related Entities are collectively referred
to herein as the "Corporation") in a key position or is an officer and/or
director of the Corporation and Holdings desires to grant the Holder an Option
through the Plan to purchase shares of Stock (hereinafter defined) of Holdings
and Holder desires to accept the Option based upon all of the terms, conditions
and covenants, including but not limited to, Holder agreeing to
confidentiality, non-competition and non-solicitation of employees of the
Corporation.
NOW, THEREFORE, in consideration of these premises, the parties agree
that the following shall constitute the agreement between the Corporation and
the Holder:
1. DEFINITIONS. For purpose of this Agreement, the following
terms shall have the meanings specified below:
1.1 "Board of Directors" shall mean the board of directors of
Holdings.
1.2 "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.3 "Committee" shall mean the committee appointed pursuant to
Section 2 of the Plan or the Board of Directors, if no committee is appointed.
1.4 "Confidential Information" shall mean information disclosed to
or known by the Holder as a direct or indirect consequence of or through the
employment about the Corporation or its respective businesses, products,
practices, customers and suppliers. However, Confidential Information shall
not include under any circumstances any information with respect to the
foregoing matters which is (i) available to the public from a source other than
Holder, (ii) released in writing by the Corporation to the public or
intentionally to persons who are not under a similar obligation of
confidentiality to the Corporation and who are not parties to this Agreement or
a similar agreement, (iii) obtained by Holder from a third party not under a
similar obligation of confidentiality to the Corporation, (iv) required to be
disclosed by any court process or any government or agency or department of any
government, or (v) the subject of a written waiver executed by the Corporation
for the benefit of Holder.
<PAGE> 2
1.5 "Disability" shall be construed under the appropriate
provisions of the long-term disability plan maintained for the benefit of
employees of the Corporation who are regularly employed on a salaried basis.
The determination of a Holder's Disability, and the date of its commencement,
shall be determined in good faith solely by the Committee.
1.6 "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
1.7 "Fair Market Value" shall mean, if the Stock is traded on one
or more established markets or exchanges, the average of the opening and
closing prices of the Stock in the primary market or exchange on which the
Stock is traded, and if the Stock is not so traded or the Stock does not trade
on the relevant date, the value as determined in good faith by the Board of
Directors.
1.8 "Securities Act" shall mean the Securities Act of 1933, as
amended.
1.9 "Stock" shall mean Holdings' authorized par value $0.01 per
share Common Stock together with any other securities with respect to which
Options granted hereunder may become exercisable.
2. GRANT OF NONSTATUTORY OPTION. Subject to the terms and
conditions set forth herein, Holdings grants to the Holder an Option (the
"Option") to purchase from Holdings at a price per share (the "Exercise Price")
the number of shares of Stock (the "Option Shares") as both are set out on the
final page hereof subject to adjustments as provided in Paragraph 9 hereof.
The Option is not intended to be an incentive option within the meaning of
Section 422A of the Code.
3. NOTICE OF EXERCISE. This Option may be exercised in
accordance with Paragraph 8, to purchase all or a portion of the applicable
number of Option Shares exercisable by written notice to Holdings as provided
in Paragraph 12, which notice shall:
(a) specify the number of shares of Stock to be purchased at the
Exercise Price;
(b) if the person exercising this Nonstatutory Option is not the
named Holder, contain or be accompanied by evidence satisfactory to the
Committee of such person's right to exercise this Option; and
(c) be accompanied by (i) payment in full of the Exercise Price
in the form of a certified or cashier's check payable to the order of Holdings,
(ii) with the Committee's approval, a promissory note for the full Exercise
Price, (iii) with the Committee's approval, payment in the form of shares of
Stock owned by the Holder which are of at least equal value to the aggregate
exercise price payable in connection with such exercise, (iv) with the
Committee's approval, a share or shares of Stock owned by the Holder and/or
surrendered for actual or deemed multiple exchanges of shares of Option Shares,
or (v) with the Committee's approval, a combination of
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<PAGE> 3
any of (i) - (iv). The Committee may grant or withhold its approval under any
or all of the foregoing in its sole and absolute discretion.
4. INVESTMENT LETTER. Unless there is in effect a registration
statement under the Securities Act, with respect to the issuance of the Option
Shares (and, if required, there is available for delivery a prospectus meeting
the requirements of Section 10(a)(3) of the Securities Act), the Holder (or, in
the event of his death, the person exercising the Option) shall, as a condition
to his right to exercise the Option, deliver to Holdings an agreement or
certificate containing such representations, warranties, and covenants as
Holdings may deem necessary or appropriate to ensure that the issuance of
shares of Stock pursuant to such exercise is not required to be registered
under the Securities Act or any applicable state securities law. It is
understood and agreed that under no circumstance shall Holdings be obligated to
file any registration statement under the Securities Act or any applicable
state securities law to permit exercise of the Option or to issue any Stock in
violation of the Securities Act or any applicable state securities law.
5. TRANSFER AND EXERCISE OF NONSTATUTORY OPTION. The Option is
not transferable by the Holder otherwise than by will or the laws of descent
and distribution, and is exercisable, during the Holder's lifetime, only by the
Holder. The Option may not be assigned, transferred (except by will or the
laws of descent and distribution), pledged, or hypothecated in any way (whether
by operation of law or otherwise) and shall not be subject to execution,
attachment, or similar proceeding. Any attempted assignment, transfer, pledge,
hypothecation, or other disposition of the Option, contrary to the provisions
hereof, and the levy of any attachment or similar proceeding upon the Option,
shall be null and void and without effect.
6. STATUS OF HOLDER. This Agreement is not a contract of
employment and the terms of the Holder's employment shall not be affected
hereby or by any agreement referred to herein except to the extent specifically
so provided herein or therein. Nothing herein shall be construed to impose any
obligation on the Corporation to continue the Holder's employment. The Holder
shall not be deemed a stockholder of Holdings with respect to any of the shares
of Stock subject to this Option, except to the extent that such shares shall
have been purchased and issued. Holdings shall not be required to issue or
transfer any certificates for shares of Stock purchased upon exercise of this
Option until there is compliance with all applicable requirements of law and
this Agreement.
7. NO EFFECT ON CAPITAL STRUCTURE. This Option shall not affect
the right of Holdings to reclassify, recapitalize or otherwise change its
capital or debt structure or to merge, consolidate, convey any or all of its
assets, dissolve, liquidate, windup, or otherwise reorganize and, by acceptance
of this Agreement, Holder agrees that Holder has no standing before any court
to object to or contest any such action.
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<PAGE> 4
8. CONDITIONS AND SCHEDULE FOR EXERCISE. Except as otherwise
provided herein, all options shall expire no later than ten (10) years from the
date of this Agreement, which ten (10) year period is the term of this
Agreement. Subject to the provisions of Paragraph 9, Holder shall be entitled
to exercise the options granted herein as follows: (a) twenty percent (20%) of
the Option Shares may be exercised on or after the first anniversary date of
this Agreement, and (b) thereafter, an additional twenty percent (20%) of the
Option Shares shall become exercisable upon or after each of the next four (4)
anniversary dates of this Agreement. Notwithstanding the provisions of the
immediately preceding sentence, (a) all Option Shares shall become exercisable
immediately prior to a change of Control (as defined in the Plan) and (b) in
the event of the death or determination of Disability of Holder, an additional
twenty percent (20%) of the Option Shares (or such lesser number as to cause
the total shares subject to exercise not to exceed the total Option Shares)
shall become exercisable as of or after the date of death or date of
Disability. There shall not be any pro- rata rating of exercisability between
anniversary dates.
All other provisions of this Agreement to the contrary
notwithstanding, in the event of the termination of Holder's employment with
the Corporation (other than as a result of Holder's death or Disability, or in
the event of termination of Holder's employment without good cause (as defined
in the Plan) or upon retirement (with the Corporation's prior written
consent)), all rights under this Agreement and the Option shall terminate and
shall thereupon be null and void effective upon such termination; provided
however, any shares of Stock obtained through exercise prior to such effective
date in accordance with the terms of this Agreement shall remain the sole and
absolute property of the Holder subject to the Repurchase Right set forth in
Section 19.
In the event of the termination of Holder's employment with the
Corporation as a result of Holder's death or Disability, or in the event of the
termination of Holder's employment without good cause or upon retirement (with
the Corporation's prior written consent), all rights under this Agreement and
the Option shall terminate and shall be null and void effective thirty (30)
days after such termination of employment (during such thirty (30) day period,
Holder shall have the right to exercise Holder's Option with respect to all or
any part of the shares of Stock which such Holder was entitled to purchase
immediately prior to the date of such termination of employment); provided
however any shares of Stock obtained through exercise prior to such effective
date of termination of employment in accordance with the terms of this
Agreement shall remain the sole and absolute property of the Holder.
9. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER, ETC. AND
ACCELERATION OF EXERCISABILITY. In the event that, by reason of any merger,
consolidation, combination, liquidation, reorganization, recapitalization,
stock divided, stock split, split-up, split-off, spin-off, combination of
shares, exchange of shares or other like change in capital structure of
Holdings (collectively, a "Reorganization"), the Stock is substituted,
combined, or changed into any cash, property, or other securities, or the
shares of Stock are changed into a greater or lesser number of shares of Stock,
the number and/or kind of shares and/or, interests subject to an Option and the
Exercise Price or value thereof shall be appropriately adjusted by the
Committee to give
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<PAGE> 5
appropriate effect to such Reorganization. Any fractional shares or interests
resulting from such adjustment shall be eliminated.
All of the provisions of this Paragraph to the contrary not
withstanding, Holdings shall have the right to grant stock appreciation right
agreements, to issue additional stock options and/or to issue additional shares
of stock. If any such stock appreciation right agreements are granted,
additional stock options issued and/or additional shares of stock are issued to
others out of authorized but unissued shares, even though the result of such
stock appreciation right
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<PAGE> 6
agreements granted, stock options issued and/or stock issues dilute either the
percentage of ownership of the Holder or the value per share of any stock or
Option herein granted and, in any such event, Holder's rights hereunder shall
not be increased in any way.
10. COMMITTEE AUTHORITY. Any question concerning the
interpretation of this Agreement, any adjustments required to be made under
Paragraph 9 of this Agreement, and any controversy which may arise under this
Agreement and/or any paragraph thereof shall be finally determined by the
Committee in its sole and absolute discretion.
11. PLAN CONTROLS. The terms of this Agreement are governed by
the terms of the Plan, which is made a part hereof as if fully set forth
herein, and in the case of any inconsistency between the terms of this
Agreement and the terms of the Plan, the terms of the Plan shall control.
12. NOTICE. Whenever any notice is required or permitted
hereunder, such notice must be in writing and personally delivered, sent by
mail or sent by overnight courier. Any notice required or permitted to be
delivered hereunder shall be deemed to be delivered on the date which it is
personally delivered, or, whether actually received or not, on the third
business day after it is deposited in the United States mail, certified or
registered, postage prepaid or next business day after it is sent by overnight
courier in each case, addressed to the person who is to receive it. Holdings
or Holder may change, at any time and from time to time, by written notice to
the other, the address previously so specified. Until changed in accordance
herewith, Holdings and the Holder specify their respective addresses as set
forth below the signature lines on the last page hereof.
13. CERTIFICATE RETENTION. In the event that Holder gives notice
of exercise in whole or in part in accordance with the provisions of this
Agreement, Holdings shall have the right to demand that the Holder execute and
deliver a Stock Power to Holdings and to then issue the certificate and to hold
the certificate in Holdings' possession together with the Stock Power so to
assure protection of Holdings' Repurchase Right.
14. AWARD INFORMATION CONFIDENTIAL. As partial consideration for
the granting of this Option, the Holder agrees that Holder will keep
confidential all information and knowledge that Holder has relating to the
manner and amount of participation in the Plan; provided, however, that such
information may be disclosed as required by law and may be given in confidence
to the Holder's spouse, tax and financial advisors, or to a financial
institution to the extent that such information is necessary to secure a loan.
15. TAX WITHHOLDING. By acceptance hereof, Holder hereby (i)
agrees to reimburse the Corporation by which Holder is employed for any
federal, state, or local taxes required by any government to be withheld or
otherwise deducted by such Corporation in respect of Holder's exercise of all
or a portion of the Option; (ii) authorizes the Corporation by which the Holder
is
-6-
<PAGE> 7
employed to withhold from any cash compensation paid to the Holder or in the
Holder's behalf, an amount sufficient to discharge any federal, state, and
local taxes imposed on the Corporation by which the Holder is employed, in
respect of the Holder's exercise of all or a portion of the Option; and (iii)
agrees that Holdings may, in its discretion, hold the stock certificate to
which Holdings is entitled upon exercise of the Option as security for the
payment of the aforementioned withholding tax liability, until cash sufficient
to pay that liability has been accumulated, and may, in its discretion, effect
such withholding by retaining shares issuable upon the exercise of the Option
having a fair market value on the date of exercise which is equal (in the
judgment of such corporation) to the amount to be withheld.
16. CONFIDENTIAL INFORMATION. As partial consideration of the
granting of this Option, the Holder agrees that during Holder's employment with
the Corporation or at any time thereafter, irrespective of the time, manner or
cause of the termination of this Agreement, Holder will not directly or
indirectly reveal, divulge, disclose or communicate to any person or entity,
other than authorized officers, directors and employees of the Corporation, in
any manner whatsoever, any Confidential Information of the Corporation or any
direct or indirect subsidiary or parent of the Corporation without the prior
written consent of the Chairman of the Board of Holdings.
17. AGREEMENT NOT TO COMPETE. As partial consideration of the
granting of this Nonstatutory Option, Holder agrees:
(a) TERMINATION FOR CAUSE OR VOLUNTARY TERMINATION. In the event
that the Holder is terminated for Cause or voluntarily terminates employment
with the Corporation prior to the expiration of the term of this Agreement,
Holder hereby agrees that for a period of one (1) year following such
termination, he shall not, either in Holder's own behalf or as a partner,
officer, director, employee, agent or shareholder engage in, invest in or
render services to any person or entity engaged in the businesses in which the
Corporation or any subsidiary of the Corporation is then engaged and situated
within the United States of America. Nothing contained in this Section 17(a)
shall be construed as restricting the Holder's right to sell or otherwise
dispose of any business or investments owned or operated by the Holder as of
the date hereof.
(b) TERMINATION WITHOUT CAUSE OR FOR DISABILITY. In the event
that the employment of the Holder is terminated by the Corporation without
Cause or as a result of the total disability of the Holder, Holder hereby
agrees that only during the period that the Holder accepts continued disability
and/or severance compensation payments from the Corporation, he shall not,
either in Holder's own behalf or as a partner, officer, director, employee,
agent or shareholder engage in, invest in or render services to any person or
entity engaged in the businesses in which the Corporation is then engaged and
situated within the United States of America. Nothing contained in this
Section 17(b) shall be construed as restricting the Holder's right to sell or
otherwise dispose of any business or investments owned or operated by the
Holder as of the date hereof.
-7-
<PAGE> 8
18. AGREEMENT NOT TO SOLICIT EMPLOYEES. Holder agrees that, for a
period of two (2) years following the termination of Holder's employment by the
Corporation, Holder shall not, for Holder or on behalf of any business engaged
in a business competitive with the Corporation, solicit or induce, or in any
manner attempt to solicit or induce, any person employed by, or any
-8-
<PAGE> 9
agent of the Corporation to terminate employment or agency, as the case may be,
with the Corporation.
19. REPURCHASE RIGHT. If Holder's employment with the Corporation
terminates for any reason at any time (other than as a result of Holder's death
or Disability, or in the event of termination of Holder's employment without
good cause (as defined in the Plan) or upon retirement (with the Corporation's
prior written consent)), Holdings and/or its designee(s) shall have the option
(the "Purchase Option") to purchase, and if an Option is exercised, Holder (or
the Holder's executor or the administrator of Holder's estate, in the event of
the Holder's death, or Holder's legal representative in the event of the
Holder's incapacity (hereinafter, collectively with such Holder, the
"Grantor")) shall sell to Holdings and/or its assignee(s), all or any portion
(at Holding's Option) of the shares of Stock and/or exercised Options held by
the Grantor (such shares of Stock and exercised Options collectively being
referred to as the "Purchasable Shares").
Holdings shall give notice in writing to the Grantor of the exercise
of the Purchase Option within one (1) year from the date of the termination of
the Holder's employment. Such notice shall state the number of Purchasable
Shares to be purchased and the determination of the Board of Directors of the
Fair Market Value (as defined in the Plan) per share of such Purchasable
Shares. If no notice is given within the time limit specified above, the
Purchase Option shall terminate.
The purchase price to be paid for the Purchasable Shares purchased
pursuant to the Purchase Option shall be, in the case of any Stock, the Fair
Market Value per share times the number of shares being purchased, and in the
case of any Option, the Fair Market Value per share times the number of vested
shares subject to such Options which are being purchased, less the applicable
per share Option exercise price. The purchase price shall be paid in cash.
The closing of such purchase shall take place at Holding's principal executive
offices within ten (10) days after the purchase price has been determined. At
such closing, the Grantor shall deliver to the purchaser(s) the certificates or
instruments evidencing the Purchasable Shares being purchased, duly endorsed
(or accompanied by duly executed stock powers) and otherwise in good form for
delivery, against payment of the purchase price by check of the purchaser(s).
In the event that, notwithstanding the foregoing, the Grantor shall have failed
to obtain the release of any pledge or other encumbrance or any Purchasable
Shares by the scheduled closing date, at the option of Holdings, the closing
shall nevertheless occur on such scheduled closing date, with the cash purchase
price being reduced to the extent of all unpaid indebtedness for which such
Purchasable Shares are then pledged or encumbered.
To assure the enforceability of Holding's rights under this Paragraph
19, each certificate or instrument representing Stock or an Option held by
Holder and/or the certificate or instrument shall bear a conspicuous legend in
substantially the following form:
-9-
<PAGE> 10
"THE SHARES [REPRESENTED BY THIS CERTIFICATE] [ISSUABLE PURSUANT TO
THIS AGREEMENT] ARE SUBJECT TO AN OPTION TO REPURCHASE PROVIDED UNDER
THE PROVISIONS OF THE INTERNATIONAL WIRE HOLDING COMPANY 1995 STOCK
OPTION PLAN AND A NONSTATUTORY STOCK OPTION AGREEMENT ENTERED INTO
PURSUANT THERETO. A COPY OF SUCH OPTION PLAN AND OPTION AGREEMENT ARE
AVAILABLE UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL
EXECUTIVE OFFICES."
Holding's rights under this Section 19 shall terminate upon the
consummation of an underwritten public offering of the Stock, registered and
effective under the Securities Act of 1993, as amended, pursuant to which
Holdings receives aggregate cash sales proceeds, before underwriting discount,
of at least $25 million or such lesser amount as the Committee shall determine.
20. SUCCESSORS. Except as otherwise provided herein, this
Agreement is binding on and enforceable by the heirs, successors, and assigns
of the parties.
21. GOVERNING LAW. This Agreement shall be governed by the laws
of the State of Delaware, except to the extent that Delaware Law is preempted
by Federal Law.
IN WITNESS WHEREOF, Holdings has caused this Agreement to be executed
and the Holder has hereunto set Holder's hand as of the 8th day of November,
1995.
HOLDINGS: INTERNATIONAL WIRE HOLDING COMPANY
By: /s/ JAMES N. MILLS
--------------------------------------
James N. Mills
Chairman and Chief Executive Officer
101 South Hanley
St. Louis, Missouri 63105
HOLDER: /s/ RODNEY D. KENT
--------------------------------------
Rodney D. Kent
3859 Pratt Drive
Oneida Castle, NY 13421
-10-
<PAGE> 11
Number of Option Shares subject to the grant in Paragraph 2 hereof is four
hundred thousand (400,000) and the Exercise Price is One and 00/100 Dollar
($1.00) per share.
-11-
<PAGE> 1
Exhibit 21.1
SUBSIDIARIES OF
INTERNATIONAL WIRE GROUP, INC.
<TABLE>
<CAPTION>
JURISDICTION OF
INCORPORATION OR
SUSIDIARY ORGANIZATION
<S> <C>
Wirekraft Industries, Inc. . . . . . . . . . . . . . Delaware
ECM Holding Company . . . . . . . . . . . . . . . . . Delaware
Wirekraft Employment Company . . . . . . . . . . . . Delaware
Electro Componentes de Mexico, S.A. de C.V. . . . . . Mexico
Wirekraft Industries de Mexico, S.A. de C.V. . . . . Mexico
Omega Wire, Inc. . . . . . . . . . . . . . . . . . . Delaware
OWI Corporation . . . . . . . . . . . . . . . . . . . New York
Wire Technologies, Inc. . . . . . . . . . . . . . . . Indiana
Wire Harness Industries, Inc. . . . . . . . . . . . . Delaware
Camden Wire Company, Inc. . . . . . . . . . . . . . . New York
IWG-Philippines, Inc. . . . . . . . . . . . . . . . . Philippines
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE BODY OF THE ACCOMPANYING FORM 10-K AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 89,279
<ALLOWANCES> 2,078
<INVENTORY> 74,406
<CURRENT-ASSETS> 188,880
<PP&E> 257,127
<DEPRECIATION> 91,888
<TOTAL-ASSETS> 628,048
<CURRENT-LIABILITIES> 117,209
<BONDS> 519,302
0
0
<COMMON> 0
<OTHER-SE> (45,828)
<TOTAL-LIABILITY-AND-EQUITY> 628,048
<SALES> 695,148
<TOTAL-REVENUES> 695,148
<CGS> 530,310
<TOTAL-COSTS> 530,310
<OTHER-EXPENSES> 36,026
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,871
<INCOME-PRETAX> 6,635
<INCOME-TAX> 2,654
<INCOME-CONTINUING> 3,981
<DISCONTINUED> 0
<EXTRAORDINARY> (2,991)
<CHANGES> 0
<NET-INCOME> 990
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
