Filed pursuant to rule 424(b)(3)
Registration File No: 333-86394-33
PROSPECTUS
COLLINS & AIKMAN PRODUCTS CO.
EXCHANGE OFFER
FOR
$500,000,000 AGGREGATE PRINCIPAL AMOUNT
OF
10 3/4% SENIOR NOTES DUE 2011
----------------------------
Terms of Exchange Offer:
o Expires 5:00 p.m., New York City time, on July 17, 2002 unless extended.
o Subject to certain customary conditions which may be waived by us.
o All outstanding 10 3/4% Senior Notes due 2011 that are validly tendered and
not withdrawn will be exchanged.
o Tenders of outstanding notes may be withdrawn any time prior to the
expiration of this exchange offer.
o The exchange of the outstanding notes will not be a taxable exchange for
U.S. federal income tax purposes.
o We will not receive any cash proceeds from the exchange offer.
o The terms of the notes to be issued in exchange for the outstanding notes
are substantially identical to the outstanding notes, except for certain
transfer restrictions and registration rights relating to the outstanding
notes.
o Any outstanding notes not validly tendered will remain subject to existing
transfer restrictions.
SEE "RISK FACTORS," BEGINNING ON PAGE 7, FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS BEFORE TENDERING THEIR OUTSTANDING
NOTES IN THE EXCHANGE OFFER.
There has not been previously any public market for the exchange notes
that will be issued in the exchange offer. We do not intend to list the
exchange notes on any national stock exchange or on the Nasdaq National Market.
There can be no assurance that an active market for such exchange notes will
develop.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
---------------------
The date of this prospectus is June 17, 2002.
In making your investment decision, you should rely only on the
information contained in or incorporated by reference into this prospectus. We
have not authorized anyone to provide you with any other information. If you
receive any other information, you should not rely on it.
You should not assume that the information contained or incorporated by
reference in this prospectus is accurate as of any date other than the date on
the front cover of this prospectus.
TABLE OF CONTENTS
PAGE
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SUMMARY ............................ 1
RISK FACTORS ....................... 7
FORWARD-LOOKING
STATEMENTS ...................... 19
RATIO OF EARNINGS TO FIXED
CHARGES ......................... 20
THE EXCHANGE OFFER ................. 21
USE OF PROCEEDS .................... 29
DESCRIPTION OF OUR OTHER
DEBT ............................ 30
DESCRIPTION OF PRODUCTS
PREFERRED STOCK ................. 33
DESCRIPTION OF THE
EXCHANGE NOTES .................. 37
MATERIAL UNITED STATES
FEDERAL INCOME TAX
CONSIDERATIONS .................. 74
PLAN OF DISTRIBUTION ............... 77
LEGAL MATTERS ...................... 77
EXPERTS ............................ 77
WHERE YOU CAN FIND
ADDITIONAL INFORMATION .......... 78
INCORPORATION OF
DOCUMENTS BY REFERENCE .......... 79
UNAUDITED PRO FORMA
FINANCIAL INFORMATION ........... 80
---------------------
Collins & Aikman Products Co. is a Delaware corporation. Our principal
executive offices are located at 250 Stephenson Highway, Troy, Michigan 48083
and our telephone number at that address is (248) 824-2500.
Unless the context otherwise requires, all information in this prospectus
which refers to (a) "Products" or the "Company" refers only to Collins & Aikman
Products Co., (b) "C&A Corporation," "C&A," "our parent" or "our parent
company" refers only to our parent, Collins & Aikman Corporation, unless the
context requires otherwise, and (c) "Collins & Aikman," "we," "us" or "our"
refers to Collins & Aikman Products Co. and its subsidiaries.
i
SUMMARY
OUR COMPANY
We are a global leader in the design, engineering and manufacturing of
automotive interior components, including instrument panels, fully assembled
cockpit modules, floor and acoustic systems, automotive fabric, interior trim
and convertible top systems. We have the number one or two North American
market share position, in terms of sales, in eight out of nine major automotive
interior categories. We are also the largest North American supplier of
convertible top systems, in terms of sales. Our sales are diversified among
North American, European and South American automotive original equipment
manufacturers, or OEMs, and Tier I integrators. Tier I integrators are direct
suppliers to OEMs of integrated modules, such as a complete seat, door or
cockpit. In 2001, we manufactured components for approximately 90% of all light
vehicle production platforms. We have over 25,000 employees and more than 120
plants and facilities in North America, Europe and South America. Our pro forma
2001 North American sales accounted for approximately 28.9% of the
approximately $7.6 billion of total sales in the North American markets in
which we participate.
In February 2001, Heartland Industrial Partners, L.P. acquired a
controlling interest in C&A. Since the investment, we have pursued acquisitions
that have furthered a strategy of serving as a prime contractor to both Tier I
integrators, which are shifting capital and emphasis away from interior
components manufacturing and towards electronics and the delivery of fully
integrated interior modules, and to OEMs, which continue to increase their
outsourcing of complete interior manufacturing.
o On July 3, 2001, we acquired the Becker Group, a leading supplier of
plastic components to the automotive industry.
o On September 21, 2001, we acquired Joan Automotive Industries, a leading
supplier of bodycloth to the automotive industry, and the assets of
Joan's affiliated automotive yarn dyeing operation, Western Avenue Dyers,
L.P.
o On December 20, 2001, we acquired the Textron Automotive Company's Trim
division (TAC-Trim), one of the largest suppliers of instrument panels
and fully assembled cockpit modules and a major automotive plastics
manufacturer of interior and exterior trim components in North America,
Europe and South America.
The combination of Collins & Aikman, Becker, Joan and TAC-Trim created one
of the industry's largest and most broadly based manufacturers of automotive
interior components, systems and modules. We have the capability to supply
diverse combinations of stylistically matched, functionally engineered and
acoustically integrated interior trim components, systems and modules and
market interior products to customers through a single "global commercial
operations" group, which supplies products from three primary categories:
plastic components and cockpits, carpet and acoustics and automotive fabrics.
In addition, we continue to market our convertible top systems through the Dura
convertible group.
1
SUMMARY OF THE EXCHANGE OFFER
Registration Rights......... You are entitled to exchange your outstanding
notes for freely tradeable exchange notes with
substantially identical terms. The exchange offer
is intended to satisfy your exchange rights.
After the exchange offer is complete, you will no
longer be entitled to any exchange or
registration rights with respect to your
outstanding notes. Accordingly, if you do not
exchange your outstanding notes, you will not be
able to reoffer, resell or otherwise dispose of
your outstanding notes unless you comply with the
registration and prospectus delivery requirements
of the Securities Act, or there is an exemption
available.
The Exchange Offer.......... We are offering to exchange $1,000 principal
amount of our 10 3/4% Senior Notes due 2011,
which have been registered under the Securities
Act, for $1,000 principal amount of our
outstanding 10 3/4% Senior Notes due 2011,
which were issued in a private offering on
December 20, 2001. As of the date of this
prospectus, there are $500.0 million principal
amount at maturity of outstanding notes. We
will issue exchange notes promptly after the
expiration of the exchange offer.
Resales..................... We believe that the exchange notes issued in
the exchange offer may be offered for resale,
resold or otherwise transferred by you without
compliance with the registration and prospectus
delivery requirements of the Securities Act,
provided that:
o you are acquiring the exchange notes in the
ordinary course of your business;
o you are not participating, do not intend to
participate and have no arrangement or
understanding with any person to participate
in a distribution of the exchange notes; and
o you are not an "affiliate" of ours.
If you do not meet the above criteria you will
have to comply with the registration and
prospectus delivery requirements of the
Securities Act in connection with any reoffer,
resale or other disposition of your exchange
notes.
Each broker or dealer that receives exchange
notes for its own account in exchange for
outstanding notes that were acquired as a result
of market-making or other trading activities
must acknowledge that it will deliver this
prospectus in connection with any sale of
exchange notes.
Expiration Date............. 5:00 p.m., New York City time, on July 17,
2002, unless we extend the expiration date.
Conditions to the
Exchange Offer.............. The exchange offer is subject to certain
customary conditions, which may be waived by us.
The exchange offer is not conditioned upon any
minimum principal amount of outstanding notes
being tendered.
2
Procedures for Tendering
Outstanding Notes.......... If you wish to tender outstanding notes, you
must complete, sign and date the letter of
transmittal, or a facsimile of it, in accordance
with its instructions and transmit the letter of
transmittal, together with your notes to be
exchanged and any other required documentation,
to BNY Midwest Trust Company, who is the exchange
agent, at the address set forth in the letter of
transmittal to arrive by 5:00 p.m., New York City
time, on the expiration date. See "The Exchange
Offer--Procedures for Tendering Outstanding
Notes." By executing the letter of transmittal,
you will represent to us that you are acquiring
the exchange notes in the ordinary course of your
business, that you are not participating, do not
intend to participate and have no arrangement or
understanding with any person to participate in
the distribution of exchange notes, and that you
are not an "affiliate" of ours. See "The Exchange
Offer--Procedures for Tendering Outstanding
Notes."
Special Procedures for
Beneficial Holders......... If you are the beneficial holder of outstanding
notes that are registered in the name of your
broker, dealer, commercial bank, trust company or
other nominee, and you wish to tender in the
exchange offer, you should contact the person in
whose name your outstanding notes are registered
promptly and instruct such person to tender on
your behalf. See "The Exchange Offer--Outstanding
Notes."
Guaranteed Delivery
Procedures.................. If you wish to tender your outstanding notes and
you cannot deliver such notes, the letter of
transmittal or any other required documents to
the exchange agent before the expiration date,
you may tender your outstanding notes according
to the guaranteed delivery procedures set forth
in "The Exchange Offer--Guaranteed Delivery
Procedures."
Withdrawal Rights........... Tenders may be withdrawn at any time before
5:00 p.m., New York City time, on the expiration
date.
Acceptance of Outstanding
Notes and Delivery of
Exchange Notes.............. Subject to certain conditions, we will accept for
exchange any and all outstanding notes which are
properly tendered in the exchange offer before
5:00 p.m., New York City time, on the expiration
date. The exchange notes will be delivered
promptly after the expiration date. See "The
Exchange Offer--Terms of the Exchange Offer."
Certain Federal Income Tax
Considerations............. The exchange of outstanding notes for exchange
notes will not be a taxable event for federal
income tax purposes. You will not recognize any
taxable gain or loss as a result of exchanging
outstanding notes for exchange notes, and you
will have the same tax basis and holding period
in the exchange notes as you had in the
outstanding notes immediately before the
exchange. See "Certain Federal Income Tax
Considerations."
3
Use of Proceeds............. We will not receive any proceeds from the
issuance of the exchange notes.
Exchange Agent.............. BNY Midwest Trust Company is serving as exchange
agent in connection with the exchange offer. The
address, telephone number and facsimile number of
the exchange agent are set forth in "The Exchange
Offer--Exchange Agent."
4
SUMMARY OF THE EXCHANGE NOTES
The following summary is not intended to be complete. For a more detailed
description of the exchange notes, see "Description of the Exchange Notes."
Issuer...................... Collins & Aikman Products Co.
Notes Offered............... $500,000,000 aggregate principal amount of
10 3/4% Senior Notes due 2011.
Maturity Date............... The notes will mature on December 31, 2011.
Interest Rate and
Payment Dates............... The notes will accrue interest from the last
interest payment date on which interest was paid
on the outstanding notes surrendered in exchange
therefore or, if no interest has been paid on the
outstanding notes, from December 20, 2001 at the
rate of 10 3/4% per year. Interest on the
exchange notes will be payable semi-annually in
arrears on each June 30 and December 31,
commencing on June 30, 2002.
Optional Redemption......... We may redeem some or all of the exchange notes
at any time on or after December 31, 2006, at a
redemption price equal to 100% of the principal
amount plus a premium declining ratably to par,
plus accrued and unpaid interest, if any.
In addition, prior to December 31, 2004, we may
redeem up to 35% of the aggregate principal
amount of the exchange notes with the proceeds
of certain equity offerings at a redemption
price equal to 110.75% of the principal amount
of the notes, plus accrued and unpaid interest,
if any.
Change of Control........... If we experience a change of control, we may be
required to offer to purchase the exchange notes
at a purchase price equal to 101% of the
principal amount, plus accrued and unpaid
interest, if any. We might not be able to pay you
the required price for exchange notes you present
us at the time of a change of control because our
new senior credit facilities or other
indebtedness may prohibit payment or we might not
have enough funds at that time.
Ranking; Guarantees......... The exchange notes will be unsecured and will
rank equal in right of payment with all of our
existing and future unsecured and unsubordinated
obligations.
C&A and each of our existing wholly owned
domestic subsidiaries (other than our
receivables, insurance and charitable
subsidiaries) will guarantee the exchange notes
on a senior basis. Future domestic subsidiaries
may also be required to guarantee these notes.
The guarantee of the obligations under the
exchange notes will be general unsecured
obligations of the guarantors and will rank
equal in right of payment with all of their
existing and future unsecured and unsubordinated
debt. Our existing 11 1/2% senior subordinated
notes are guaranteed on a senior subordinated
basis by the guarantors of the exchange notes
offered hereby.
5
Restrictive Covenants....... The exchange notes will be issued under an
indenture with BNY Midwest Trust Company, as
trustee. The indenture governing the exchange
notes will contain covenants that will limit the
ability of Products and the ability of our
restricted subsidiaries to, among other things:
o incur or guarantee additional indebtedness;
o pay dividends or make other distributions or
repurchase or redeem our stock;
o make investments;
o sell assets;
o create liens;
o enter into agreements restricting our
restricted subsidiaries' ability to pay
dividends;
o enter into transactions with affiliates; and
o consolidate, merge or sell all or
substantially all of our assets.
These covenants are subject to important
exceptions and qualifications, which are
described under the heading "Description of the
Notes" in this prospectus.
----------------
RISK FACTORS
You should consider carefully the information set forth in the section of
this prospectus entitled "Risk Factors" and all the other information provided
to you in this prospectus in deciding whether to invest in the notes.
6
RISK FACTORS
You should carefully consider each of the risks described below, together
with all of the other information contained in this prospectus, before deciding
to invest in the notes.
RISKS RELATED TO OUR BUSINESS
DEMAND IN THE AUTOMOTIVE INDUSTRY IS SIGNIFICANTLY DEPENDENT ON THE U.S.
AND THE GLOBAL ECONOMIES AND OUR BUSINESS AND PROFITABILITY ARE EXPOSED TO
CURRENT AND FUTURE UNCERTAINTIES.
Our financial performance depends, in large part, on conditions in the
global automotive markets that we serve and, generally, on the U.S. and global
economies. Demand in the automotive industry fluctuates in response to overall
economic conditions and is particularly sensitive to changes in interest rate
levels, consumer confidence and fuel costs. In our largest market, the North
American automotive market, reported results from our customers in 2001 reflect
lower sales volumes and lower prices for new vehicles than in 2000. This is
reflected in our lower sales and operating margins for 2001. The September 11th
terrorist attacks, recession and other recent developments have adversely
affected consumer confidence throughout the U.S. and much of the world. These
developments have exacerbated the uncertainty in our markets and their future
impact on us is difficult to predict. Any sustained weakness in demand or
continued downturn in the economy generally would have a material adverse
effect on us.
Our sales are also impacted by retail inventory levels and our customers'
production schedules. In 2001, our OEM customers significantly reduced their
production and inventory levels and reduced their orders from us due to the
uncertain economic environment. In this environment, we cannot predict future
production rates and inventory levels and the sustainability of any recovery.
In addition, we have historically experienced sales declines during the OEMs'
scheduled shut-downs, which usually occur during the third calendar quarter.
Continued uncertainty and other unexpected fluctuations may have a material
adverse effect on us.
THE BASE OF CUSTOMERS WHICH WE SERVE IS CONCENTRATED, AND THE LOSS OF
BUSINESS FROM A MAJOR CUSTOMER OR THE DISCONTINUATION OF PARTICULAR VEHICLE
MODELS COULD REDUCE OUR SALES AND HARM OUR PROFITABILITY.
Because of the relative importance of a few large customers and the high
degree of concentration of OEMs in the automotive industry, our business is
exposed to a high degree of risk related to customer concentration.
DaimlerChrysler AG, General Motors Corporation and Ford Motor Company and their
respective affiliates were our three largest customers and they directly or
indirectly accounted for approximately 29%, 22% and 19% of our 2001 net sales,
respectively. A loss of significant business from, or adverse performance by,
any of these customers would be harmful to our profitability, thereby making it
more difficult for us to make payments on the notes. Although we receive
purchase orders from most of our customers, these purchase orders typically
provide for the supply of a customer's annual requirements for a particular
model or assembly plant, renewable on a year-to-year basis, rather than for the
purchase of a specific quantity of products. It is not possible for us to
predict the level of new production for 2002 car sales. The loss of business
with respect to significant vehicle models could also have a material adverse
effect on us.
There is substantial and continuing pressure from automotive manufacturers
to reduce costs, including costs associated with outside suppliers like us. For
example, OEM customers in the automotive industry attempted to impose price
decreases and givebacks throughout 2001. Such attempted price decreases are
generally in the 3% to 8% range. Several reductions have been agreed to, and
others are currently being negotiated with OEMs and pressures may increase if
overall economic and industry conditions do not improve. We attempt to resist
such downward pricing pressure, while trying to preserve our business
relationships with these customers, but such pricing pressure may have a
material adverse effect on us. At the same time, it is difficult for us to
offset these downward pricing pressures through alternative, less costly
sources of raw materials. In addition, throughout 2001, suppliers engaged in
supplying products in the automotive industry have attempted to impose price
increases on their customers. As a result, we have experienced pricing pressure
from our suppliers. We cannot assure you that we will not be materially and
adversely affected by these substantial and continuing pricing pressures.
7
THE PRICES THAT WE CAN CHARGE SOME OF OUR CUSTOMERS ARE PREDETERMINED AND
WE BEAR THE RISK OF COSTS IN EXCESS OF OUR ESTIMATES.
Sales contracts with some of our customers require us to provide our
products at predetermined prices. In some cases, these prices decline over the
course of the contract. The costs that we incur in fulfilling these contracts
may vary substantially from our initial estimates. Unanticipated cost increases
may occur as a result of several factors, including increases in the costs of
labor, components or materials. In some cases, we may be permitted to pass on
to our customers the cost increases associated with specific materials. Cost
overruns that we cannot pass on to our customers could materially and adversely
affect us.
WE MAY NOT BE ABLE TO SUCCESSFULLY INTEGRATE OUR ACQUIRED OPERATIONS OR
REALIZE THE INTENDED BENEFITS OF OUR ACQUISITIONS.
Our future operations and cash flow will depend largely upon our ability
to integrate our Becker, Joan and TAC-Trim acquisitions, achieve the strategic
operating objectives for these acquisitions and realize significant synergies
and cost savings as a result. The Becker, Joan and TAC-Trim acquisitions
account for 49 of our over 120 plants and facilities and approximately 12,500
of our approximately 25,000 employees. TAC-Trim individually accounts for 41 of
our plants and facilities and approximately 12,000 of our employees located
across seven different countries, including two countries where we did not
previously operate. We have not previously undertaken an integration process as
large or complex as the integration plans required by these three acquisitions
collectively or by the TAC-Trim acquisition individually. In order to succeed,
we will need to:
o realize projected synergies and cost savings on a timely basis;
o consolidate information technologies;
o capitalize on our increased purchasing power;
o effectively control the progress of our integration process and
associated costs;
o consolidate our program management, research and development and
engineering operations;
o capitalize on our prime contractor strategy and the opportunities
afforded by our broader products offering; and
o maintain strong relationships with Tier I integrators and OEMs.
To the extent we have misjudged the nature and extent of industry trends
or our competition, we may have difficulty in achieving our operating and
strategic objectives. In addition, our integration activities will place
substantial demands on our management, operational resources and financial and
internal control systems. Our future operating results will depend upon our
ability to implement and improve our operating and financial controls and to
combine, train and manage our employee base. There is a risk that the diversion
of management attention, particularly in a difficult operating environment,
will affect our sales and the attention that our management can devote to this
and other operational, financial and strategic issues. In addition, in some of
our past non-U.S. acquisitions, we have encountered integration and systems
difficulties typical of foreign transactions which have given rise to material
weaknesses. See "Change in Accountants" in our Annual Report on Form 10-K for
the year ended December 31, 2001, which is incorporated herein by reference.
Since TAC-Trim involves significant foreign operations, we cannot assure you
that we will not encounter similar difficulties going forward. All statements
concerning the benefits, cost savings and synergies we expect to realize from
the Transactions are forward-looking statements.
Some of the benefits we expect to derive from our acquisitions include
contractual and other relationships with customers and suppliers. We may not be
able to preserve all of these relationships and some of our anticipated
contractual relationships may cease following the acquisitions.
WE MAY PURSUE ADDITIONAL ACQUISITIONS THAT FURTHER OUR CURRENT STRATEGIES.
We may selectively identify and acquire other businesses with
complementary products, manufacturing capabilities or geographic markets and we
expect to continually evaluate such opportunities. We
8
cannot assure you that any business acquired by us will be successfully
integrated with our operations or prove to be complementary in the manner
expected or profitable. We could incur further indebtedness in connection with
our acquisition strategy and increase our leverage. We could acquire companies
and operations in geographic markets, including foreign markets, in which we do
not currently operate. Acquisitions outside of North America may present unique
difficulties and increase our exposure to the risks attendant to international
operations. The process of integrating acquired companies and operations into
our existing operations may result in unforeseen operating difficulties and may
require significant financial resources that would otherwise be available for
the ongoing development or expansion of existing operations. Any failure at
successfully executing an acquisition could materially and adversely affect us.
OUR CAPITAL RESOURCES MAY BE INADEQUATE IF WE ARE UNABLE TO SUCCESSFULLY
INTEGRATE OUR ACQUIRED BUSINESSES OR IF ECONOMIC CONDITIONS WORSEN.
As a substantially larger company with higher debt levels, our liquidity
requirements will exceed historical levels and we will need to effectively
manage our cash position and working capital levels. In particular, since we
expect significantly greater sales of cockpit modules over the next several
years, we will need to make substantial capital and other investments to meet
our customer requirements. To the extent that the integration of our acquired
businesses is not accomplished in accordance with our expectations, economic
conditions in the automotive industry worsen, we utilize our revolving credit
capacity for acquisitions or otherwise or we are unable to renew our
receivables facility at its maturity, we may be faced with inadequate
liquidity. Additional sources of liquidity may include additional debt, but our
debt instruments may not permit us to incur additional debt, and we may be
unable to secure equity or other financing. This could have a material adverse
effect on us.
WE MAY INCUR UNANTICIPATED CONTINGENT LIABILITIES AS A RESULT OF THE
ACQUISITIONS AND WE MAY EXPERIENCE UNANTICIPATED LIABILITIES ASSOCIATED WITH
FORMER DISCONTINUED OPERATIONS.
We may incur unforeseen environmental, tax, pension, litigation or other
liabilities in connection with the Acquisitions or we may underestimate the
known liabilities. If such liabilities materialize or are greater than we
estimate, they could have a material adverse effect on us. In addition, we have
significant responsibilities related to some of our formerly owned businesses,
or discontinued operations, such as those relating to post-retirement,
casualty, environmental, product liability, lease and other matters. Based upon
the information presently available to us and our insurance coverage, we do not
believe that any of these liabilities will have a material adverse effect upon
our financial condition or results of operations, however, we could be
incorrect in our assumptions and the extent of those contingent liabilities of
which we are aware may exceed our expectations and there may be other such
liabilities of which we presently have no knowledge. See Item 1, "Business --
Environmental Matters" and Item 3, "Legal Proceedings" in our Annual Report on
Form 10-K for the year ended December 31, 2001, which is incorporated herein by
reference.
IF WE ARE UNABLE TO MEET FUTURE CAPITAL REQUIREMENTS, OUR COMPETITIVE
POSITION MAY BE ADVERSELY AFFECTED.
In securing new business, we are typically required to expend significant
amounts of capital for engineering, development, tooling and other costs.
Generally, we seek to recoup these costs through pricing over time, but we may
be unsuccessful due to competitive pressures and other market constraints or if
a customer ceases production of a particular vehicle. We believe that we will
be able to fund capital expenditures through cash flow from operations,
borrowings under our new credit facilities and sales of receivables under our
new receivables facility. We cannot assure you that we will have adequate funds
to make all the necessary capital expenditures or that the amount of future
capital expenditures will not be materially in excess of our anticipated
expenditures. If we are unable to make necessary capital expenditures, our
business and our competitive position will be materially and adversely
affected.
RECENT TRENDS AMONG OUR CUSTOMERS WILL INCREASE COMPETITIVE PRESSURES IN OUR
BUSINESSES.
In recent years, the competitive environment among suppliers to the
vehicle manufacturers in the automotive industry has changed significantly as
these manufacturers have sought to outsource more
9
vehicular components, modules and systems and to use on-line auctions in order
to obtain further price reductions. In addition, these sectors have experienced
substantial consolidation as OEMs have sought to lower costs, improve quality
and increasingly purchase complete systems and modules rather than separate
components. This consolidation has caused, and its continuation will continue
to amplify, the pricing pressures outlined above in the discussion of the
concentration of our customers. Our competitive strategy will be to position
ourselves as the prime contractor of choice to both Tier I integrators and OEM
assembly plants by supplying a full spectrum of integrated interior trim
components. This strategy presents the risk that some of our customers may be
competitors of ours in certain products as well. If our business strategy is
unsuccessful or our new products fail to gain acceptance with our targeted
customers, it would have a material adverse effect on us.
Furthermore, the trend toward consolidation among automotive parts
suppliers is resulting in a smaller number of large suppliers like us who
benefit from purchasing and distribution economies of scale. If we cannot
achieve the cost savings and operational improvements expected from our prime
contractor business strategy or such savings and improvements are not
sufficient to allow us to compete favorably in the future with other larger,
consolidated companies, we will be materially and adversely affected.
OUR STRATEGY MAY NOT SUCCEED IF ANTICIPATED OUTSOURCING FAILS TO OCCUR DUE TO
UNION CONSIDERATIONS.
Because of the economic benefits inherent in outsourcing to suppliers and
the costs associated with reversing a decision to purchase automotive interior
systems and components from an outside supplier, automotive manufacturers'
commitments to purchasing automotive interior systems and components from
outside suppliers, particularly on a just-in-time basis, are contemplated to
increase. However, under the contracts currently in effect in the United States
and Canada between each of Ford, General Motors and DaimlerChrysler and the
United Auto Workers ("UAW") and the Canadian Auto Workers ("CAW"), in order for
any of such automotive manufacturers to obtain from external sources components
that it currently produces, it must first notify the UAW or the CAW of such
intention. If the UAW or the CAW objects to the proposed outsourcing, some
agreement will have to be reached between the UAW or the CAW and the automotive
manufacturer. Factors that will normally be taken into account by the UAW, the
CAW and the automotive manufacturer include:
o whether the proposed new supplier is technologically more advanced than
the automotive manufacturer;
o whether the new supplier is unionized;
o whether cost benefits exist; and
o whether the automotive manufacturer will be able to reassign union
members whose jobs are being displaced to other jobs within the same
factories.
In the event that outsourcing does not occur for any reason, it may have a
material adverse effect on us.
OUR PRODUCTS ARE SUBJECT TO CHANGING TECHNOLOGY, WHICH COULD PLACE US AT A
COMPETITIVE DISADVANTAGE RELATIVE TO ALTERNATIVE PRODUCTS INTRODUCED BY
COMPETITORS.
We believe that our customers rigorously evaluate their suppliers on the
basis of product quality, price competitiveness, technical expertise and
development capability, new product innovation, reliability and timeliness of
delivery, product design capability, manufacturing expertise, operational
flexibility, customer service and overall management. Our success will depend
on our ability to continue to meet our customers' changing specifications with
respect to these criteria. We may, therefore, require significant ongoing and
recurring additional capital expenditures and investment in research and
development, manufacturing and other areas to remain competitive. We cannot
assure you that we will be able to achieve the technological advances or
introduce new products that may be necessary to remain competitive. Further, we
cannot assure you that any technology developed by us can be adequately
protected such that we can maintain a competitive advantage.
10
WE DEPEND ON THE SERVICES OF OTHER KEY INDIVIDUALS AND RELATIONSHIPS, THE
LOSS OF WHICH WOULD MATERIALLY HARM US.
Our success will depend, in part, on the efforts of our executive officers
and other key employees. In addition, our future success will depend on, among
other factors, our ability to attract and retain other qualified personnel. The
loss of the services of any of our key employees or the failure to attract or
retain employees could have a material adverse effect on us. Our largest
stockholder, Heartland Industrial Partners, provides us with valuable
strategic, operational and financial guidance. If, for any reason, such
guidance ceased, it could have a material adverse effect upon us as well.
WE MAY BE SUBJECT TO WORK STOPPAGES AT OUR FACILITIES OR THOSE OF OUR
PRINCIPAL CUSTOMERS WHICH COULD SERIOUSLY IMPACT THE PROFITABILITY OF OUR
BUSINESS.
As of April 1, 2002, approximately 55% of our global work force was
unionized. If our unionized workers were to engage in a strike, work stoppage
or other slowdown in the future, we could experience a significant disruption
of our operations, which could have a material adverse effect on us.
Many OEMs and their suppliers have unionized work forces. Work stoppages
or slowdowns experienced by OEMs or their suppliers could result in slowdowns
or closures of assembly plants where our products are included in assembled
vehicles. For example, over the past four years, there have been labor strikes
against General Motors that have resulted in work stoppages at General Motors.
Furthermore, organizations responsible for shipping our customers' products may
be impacted by occasional strikes staged by the unions representing
transportation employees. Any interruption in the delivery of our customers'
products would reduce demand for our products and could have a material adverse
effect on us.
A GROWING PORTION OF OUR REVENUE MAY BE DERIVED FROM INTERNATIONAL
SOURCES, WHICH EXPOSES US TO ADDITIONAL UNCERTAINTY AND MAY MAKE IT MORE
DIFFICULT TO MAKE PAYMENTS ON THE NOTES.
Approximately 20% of our 2001 sales were derived from shipments to
destinations outside of the United States and Canada. As part of our business
strategy, we intend to expand our international operations and customer base.
Sales outside of the U.S. and Canada, particularly sales to emerging markets,
are subject to other various risks, including:
o governmental embargoes or foreign trade restrictions such as antidumping
duties,
o changes in U.S. and foreign governmental regulations,
o tariffs,
o fuel duties,
o other trade barriers,
o the potential for nationalization of enterprises,
o economic downturns,
o inflation,
o environmental laws and regulations,
o political, economic and social instability,
11
o foreign exchange risk, and
o difficulties in receivable collections and dependence on foreign
personnel and foreign unions.
In addition, there are tax inefficiencies in repatriating cash flow from
non-U.S. subsidiaries. To the extent such repatriation is necessary for us to
meet our debt service or other obligations, this will adversely affect us.
International operations are frequently conducted through joint venture
arrangements that can materially limit our operational and financial control of
the business. We acquired interests in two foreign joint ventures as part of
the TAC-Trim acquisition, one of which is 50% owned by us while the other one
is majority owned and publicly traded in Brazil. We do not expect to have the
ability to access the cash flow of these two joint ventures for the foreseeable
future and we may have significant funding requirements in the future with
respect to the 50% joint venture.
WE MAY INCUR MATERIAL LOSSES AND COSTS AS A RESULT OF PRODUCT LIABILITY
AND WARRANTY CLAIMS THAT MAY BE BROUGHT AGAINST US.
We face an inherent business risk of exposure to product liability claims
in the event that the use of our current and formerly manufactured or sold
products results, or is alleged to result, in bodily injury and/or property
damage. We cannot assure you that we will not experience any material product
liability losses in the future or that we will not incur significant costs to
defend such claims. We cannot assure you that our product liability insurance
coverage will be adequate for any liabilities that may ultimately be incurred
or that it will continue to be available on terms acceptable to us. In
addition, if any of our products are or are alleged to be defective, we may be
required to participate in a government-required or OEM-instituted recall
involving such products. Each vehicle manufacturer has its own policy regarding
product recalls and other product liability actions relating to its suppliers.
However, as suppliers become more integrally involved in the vehicle design
process and assume more of the vehicle assembly functions, vehicle
manufacturers are increasingly looking to their suppliers for contribution when
faced with product liability claims. A successful claim brought against us in
excess of our available insurance coverage or a requirement to participate in a
product recall may have a material adverse effect on our business.
In the ordinary course of our business, contractual disputes over
warranties can arise. In the past five years or more, we have not been required
to make any material payments in respect of warranty claims. In most cases,
financial responsibility for warranty costs are contractually retained by our
customer so long as the customers' specifications are met, but we may
nonetheless be subjected to requests for cost sharing or pricing adjustments as
a part of our commercial relationship with the customer. Recently, an employee
of one OEM suggested that the OEM may seek significant cost sharing from us for
a warranty matter relating to an instrument panel manufactured by TAC-Trim that
has been subject to a collaborative process of problem resolution and
management between TAC-Trim and the customer since spring 2000. In this
instance, the work order explicitly excludes TAC-Trim from financial
responsibility for warranty matters. However, we cannot assure you that we will
not be required to financially address this issue or other significant warranty
claims in the future.
OUR BUSINESS MAY BE MATERIALLY AND ADVERSELY AFFECTED BY COMPLIANCE
OBLIGATIONS AND LIABILITIES UNDER ENVIRONMENTAL LAWS AND REGULATIONS.
We are subject to federal, state, local and foreign environmental, and
health and safety, laws and regulations that:
o affect ongoing operations and may increase capital costs and operating
expenses in order to maintain compliance with such requirements; and
o impose liability relating to contamination at our facilities, and at
other locations such as former facilities, facilities where we have sent
wastes for treatment or disposal, and other properties to which we (or a
company or business for which we are responsible) are linked. Such
liability may include, for example, investigation and clean-up of the
contamination, personal injury and property damage caused by the
contamination, and damages to natural resources. Some of these
liabilities may be imposed without regard to fault, and may also be joint
and several (which can result in a liable party being held responsible
for the entire obligation, even where other parties are also liable).
12
We are legally or contractually responsible or alleged to be responsible
for the investigation and remediation of contamination at various sites, and
for personal injury or property damages, if any, associated with such
contamination. At some of these sites we have been notified that we are a
potentially responsible party under the federal Superfund law or similar state
laws. Other sites at which we may be responsible for contamination may be
identified in the future, including with respect to divested and acquired
businesses.
We have incurred, and expect to continue to incur, substantial costs to
satisfy our compliance obligations and discharge our liabilities under
environmental laws and regulations. While, based on the information presently
known to us, we do not expect environmental costs or contingencies to have a
material adverse effect on us, we may learn new information concerning existing
matters or discover new matters that could materially and adversely affect us.
In addition, evolving environmental, and health and safety, laws and
regulations may be adopted or imposed. We can give no assurance that we will
not incur material environmental costs or liabilities in the future. See Item
1, "Business -- Environmental Matters" and Item 3, "Legal Proceedings" in our
Annual Report on Form 10-K for the year ended December 31, 2001, which is
incorporated herein by reference.
WE ARE CONTROLLED BY HEARTLAND, WHOSE INTERESTS IN OUR BUSINESS MAY BE
DIFFERENT THAN YOURS.
As of March 31, 2002, on a pro forma basis for our June 2002 offering of
16 million shares of our common stock, Heartland and its affiliates
beneficially own approximately 32.3% of C&A's outstanding shares of common
stock. By reason of their share ownership and certain shareholders agreements,
Heartland and its affiliates are able to strongly influence or effectively
control actions to be taken by our stockholders or directors, including the
election of at least seven members of C&A's Board of Directors, amendments to
C&A's certificate of incorporation and by-laws and approval of significant
corporate transactions, including mergers and sales of substantially all of our
assets.
Pursuant to one stockholders agreement, Heartland, Blackstone Capital
Partners L.P. ("Blackstone"), Wasserstein L.L.C. ("Wasserstein") and certain of
their various affiliates have agreed to vote their shares to ensure that seven
members of C&A's Board of Directors will be designated by Heartland, so long as
Heartland continues to beneficially own at least 25% of the common stock owned
by it as of the date of the stockholders agreement. Blackstone and Wasserstein
have separately and unilaterally relinquished their rights to designate
directors under this stockholders agreement. Charles E. Becker and the other
former Becker stockholders are also party to a stockholders agreement pursuant
to which they have agreed to vote their shares for designees of Heartland
representing a majority of C&A's Board of Directors. Heartland currently has
seven designees on C&A's 15 member Board of Directors. In addition, Textron has
the right to designate an additional member of C&A's Board of Directors, which
it has presently chosen not to exercise. You should consider that the interests
of Heartland as an equity investor will likely differ from yours in material
respects. See "Certain Relationships and Related Transactions," "Executive
Officers of the Company" and "Security Ownership of Management and Principal
Stockholders" in the proxy statement for our annual meeting to be held in 2002,
which sections are incorporated herein by reference.
THERE MAY BE RISKS RELATED TO OUR PRIOR USE OF ARTHUR ANDERSEN LLP AS OUR
INDEPENDENT PUBLIC ACCOUNTANT.
The consolidated financial statements of C&A for the years ended December
31, 2000 and December 25, 1999, included in the Annual Report on Form 10-K for
the year ended December 31, 2001, as amended, and incorporated by reference
into this prospectus supplement, to the extent and for the periods indicated in
their report, have been audited by Arthur Andersen LLP, independent public
accountants. Arthur Andersen LLP has not consented to the incorporation by
reference of their report in this prospectus and we have dispensed with the
requirement to file their consent in reliance upon Rule 437a of the Securities
Act of 1933. Since Arthur Andersen LLP has not consented to the incorporation
by reference of their report in this prospectus, you will not be able to
recover against Arthur Andersen LLP under Section 11 of the Securities Act of
1933 for any untrue statements of a material fact contained in the financial
statements audited by Arthur Andersen LLP or any omissions to state a material
fact required to be stated therein.
13
The felony conviction of Arther Andersen LLP may adversely affect Arthur
Andersen LLP's ability to satisfy any claims arising from the provision of
auditing services to us, including claims that may arise out of Arthur Andersen
LLP's audit of our financial statements incorporated by reference in this
prospectus, and may impede our access to the capital markets after completion of
this offering. Arthur Andersen LLP, which audited our financial statements
incorporated by reference in this prospectus for the years ended December 25,
1999 and December 30, 2000, was convicted on June 15, 2002 of federal
obstruction of justice arising from the government's investigation of Enron
Corp. Arthur Andersen LLP has indicated that it intends to appeal the
conviction. Should we seek to access the public capital markets after we
complete this offering, SEC rules will require us to include or incorporate by
reference in any prospectus three years of audited financial statements. The
SEC's current rules would require us to present audited financial statements for
one or more fiscal years audited by Arthur Andersen LLP. If the SEC ceases
accepting financial statements audited by Arthur Andersen LLP, we could be
unable to access the public capital markets unless PricewaterhouseCoopers LLP,
our current independent accounting firm, or another independent accounting firm,
is able to audit the financial statements originally audited by Arthur Andersen
LLP. Any delay or inability to access the public capital markets caused by these
circumstances could have a material adverse effect on our business,
profitability and growth prospects.
WE HAD PREVIOUSLY REPORTED MATERIAL WEAKNESSES WHICH MAY REQUIRE FURTHER
RESOLUTION.
We note that, as a result of its 1999 audit, Arthur Andersen LLP reported
material weaknesses in C&A's internal control systems. The identified
conditions specifically related to four of our foreign locations, most of which
had been recently acquired. These weaknesses were primarily attributable to the
effects of implementing a new computer system as part of our acquisition
integration strategy and Year 2000 compliance efforts. Issues at these
locations primarily related to the detail records supporting the general ledger
and staff training needs. As a result, in 2000, we committed significant
resources to addressing the issues, including the re-implementation of certain
systems, implementing an internal audit function and replacing controllers at
three of the four locations. We made significant progress in addressing these
issues; however, Arthur Andersen LLP continued to report material weaknesses
following its 2000 audit because two of these four foreign locations were
assessed as continuing to have similar material weaknesses as in 1999.
Improvement efforts at these locations were hampered by personnel turnover and
continuing acquisition integration efforts. Arthur Andersen LLP did not modify
its report on our 1999 and 2000 audited financial statements as a consequence
of these material weaknesses. These items are no longer material weaknesses,
but they remain as items to be worked on and may require further resolution.
RISKS RELATED TO THE EXCHANGE NOTES
WE MAY NOT BE ABLE TO MANAGE OUR BUSINESS AS WE MIGHT OTHERWISE DUE TO OUR HIGH
DEGREE OF LEVERAGE.
We have indebtedness that is substantial in relation to our stockholders'
equity and cash flow. At March 31, 2002, on a pro forma basis for our June 2002
offering of 16,000,000 shares of our common stock and the application of the
proceeds thereof, we would have had $1,331.6 million of outstanding long-term
debt. Our percentage of total debt and Products preferred stock to total
capitalization was 75.2% at March 31, 2002 on such pro forma basis. As of March
31, 2002, we would have had an additional $100 million of unutilized borrowing
capacity under our revolving credit facility and lines of credit and $209.8
million of unutilized amounts under our receivables facility. The degree to
which we are leveraged will have important consequences, including the
following:
o our ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions, business development efforts
or general corporate purposes may be impaired;
o a substantial portion of our cash flow from operations will be dedicated
to the payment of interest and principal on our indebtedness, dividends
on the Products preferred stock, and capital and operating lease expense,
thereby reducing the funds available to us for other purposes;
o our operations are restricted by our debt instruments and the terms of
the Products preferred stock, which contain material financial and
operating covenants, and those restrictions will limit, among other
things, our ability to borrow money in the future for working capital,
capital expenditures, acquisitions or other purposes;
14
o indebtedness under our new senior credit facilities and the financing
cost associated with our receivables facility will be at variable rates
of interest, which makes us vulnerable to increases in interest rates;
o our leverage may place us at a competitive disadvantage as compared with
our less leveraged competitors;
o our leverage will make us more vulnerable in the event of a downturn in
general economic conditions or in any of our businesses; and
o our flexibility in planning for, or reacting to, changes in our business
and the industry in which we operate may be limited.
Our ability to service or refinance, when required, the Products preferred
stock and our debt, lease and other obligations will depend principally upon
our future operating performance, which will be affected by prevailing economic
conditions and financial, business and other factors, many of which are beyond
our control. See the information under the headings "Description of Our Other
Debt" and "Description of Products Preferred Stock" in this prospectus and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" in C&A's Annual Report on Form
10-K for the year ended December 31, 2001 and Quarterly Report on Form 10-Q for
the quarter ended March 31, 2002, in each case as amended, which are
incorporated herein by reference.
RESTRICTIONS IN OUR NEW SENIOR CREDIT FACILITIES AND UNDER THE INDENTURE
GOVERNING OUR 11 1/2% SENIOR SUBORDINATED NOTES AND THE INDENTURE GOVERNING THE
EXCHANGE NOTES AND THE TERMS OF THE PRODUCTS REDEEMABLE PREFERRED STOCK LIMIT
OUR ABILITY TO TAKE CERTAIN ACTIONS.
Our new senior credit facilities, the indenture governing our 11 1/2%
senior subordinated notes and the indenture governing the exchange notes and
the terms of the Products redeemable preferred stock contain covenants that
restrict, among other things, our ability to:
o pay dividends or redeem or repurchase certain capital stock;
o incur additional indebtedness and grant liens;
o make acquisitions and joint venture investments;
o sell assets; and
o make capital expenditures.
Our new senior credit facilities also require us to comply with financial
covenants relating to, among other things, interest coverage and leverage. In
addition, our new accounts receivable facility contains certain covenants
similar to those in our new senior credit facilities and include requirements
regarding the purchase and sale of receivables. We cannot assure you, however,
that we will be able to satisfy these covenants in the future or that we will
be able to respond to difficult operating conditions or competitive conditions
or pursue our business strategies within the constraints of these covenants. If
we cannot comply, we will be in default and unable to access required liquidity
from our revolving credit and receivables facilities, with the potential
adverse consequences described below. In addition, the value of the exchange
notes may be materially and adversely affected. Our new accounts receivable
facility contains concentration limits with respect to the percentage of
receivables we can sell from any particular customer as well. The concentration
limits are based on the credit ratings of such customer. While we will
implement credit hedging strategies to offset this risk, if one or more of our
customers were to have their credit ratings downgraded, the amount of
receivables of such customers that we could sell may be decreased and we could
be materially and adversely affected. Products' redeemable preferred stock also
contains covenants that govern us and, while there are no financial maintenance
covenants and the consequences of noncompliance do not require an early
redemption of Products' redeemable preferred stock, we would be materially and
adversely affected financially and otherwise by the terms of Products'
redeemable preferred stock were we to be in breach of its terms.
Our ability to comply with many of our covenants may be affected by events
beyond our control, including prevailing economic, financial and industry
conditions. The breach of our covenants could result
15
in an event of default under our new senior credit facilities, the indenture
governing our 11 1/2% senior subordinated notes or the indenture governing the
exchange notes, which could cause an event of default under our accounts
receivable facility and our capital and operating leases. Such a breach would
permit the lenders under our new senior credit facilities to declare all amounts
borrowed thereunder to be due and payable, and the commitments of the lenders to
make further extensions of credit could be terminated. In addition, such a
breach may cause a termination of our new accounts receivable facility. If we
were unable to secure a waiver or repay such indebtedness, our secured lenders
could proceed against their collateral. We also rent material operating assets
under leases, including assets used in the TAC-Trim business, which could be
terminated in the event of a payment default under our debt instruments, which
could disrupt our business and have a material adverse effect on us. We do not
currently expect that alternative sources of financing will be available to us
under these circumstances on attractive terms, or possibly at all.
YOUR RIGHT TO ENFORCE REMEDIES IS LIMITED BY THE RIGHTS OF SECURED
CREDITORS AND CLAIMS OF HOLDERS OF EXCHANGE NOTES WILL EFFECTIVELY RANK JUNIOR
TO CLAIMS OF SECURED CREDITORS.
The exchange notes will not be secured by any of our assets. Our
obligations under our new credit facilities are secured by substantially all
the assets of C&A and Products and each existing and subsequently acquired or
organized wholly owned domestic subsidiary (other than our receivables and
insurance subsidiaries). In addition, our Canadian subsidiaries will pledge
their assets to secure Canadian borrowings under our new revolving credit
facility. If we become insolvent or are liquidated, or if payment under our new
credit facilities is accelerated, the lenders under our new credit facilities
would be entitled to exercise the remedies available to a secured lender under
applicable law. Claims of note holders will effectively rank junior with
respect to those assets that are pledged to secure our new credit facilities
and other secured debt. At December 31, 2001, we had $400.0 million of debt at
Products and its Subsidiaries that was secured by assets under our senior
credit facilities, and our liabilities in respect of certain equipment
operating leases have been secured by other assets as well. The indenture
governing the exchange notes limits but does not prohibit further liens to
secure senior debt. Therefore, regardless of whether the exchange notes are
subordinated, our bank lenders or other secured creditors will have a claim on
certain assets before holders of the exchange notes.
CLAIMS OF NOTEHOLDERS WILL BE STRUCTURALLY SUBORDINATE TO CLAIMS OF
CREDITORS OF OUR FOREIGN SUBSIDIARIES AND OTHER NON-GUARANTORS SINCE THEY WILL
NOT GUARANTEE THE EXCHANGE NOTES.
The exchange notes will not be guaranteed by any of our non-U.S.
subsidiaries or our non-wholly owned domestic subsidiaries or our receivables,
insurance or charitable subsidiaries. Claims of holders of the exchange notes
will be structurally subordinate to the claims of creditors of these
non-guarantors, including trade creditors. Without limiting the generality of
the foregoing, claims of holders of the exchange notes will be structurally
subordinate to claims of the lenders under our senior credit facility to the
extent of the guarantees by non-wholly owned domestic subsidiaries of the new
credit facilities. All obligations of our non-guarantor subsidiaries will have
to be satisfied before any of the assets of such subsidiaries would be
available for distribution, upon a liquidation or otherwise, to us or a
guarantor of the exchange notes. In addition, our future domestic subsidiaries
may not be required to guarantee our credit facilities and as such would not be
required to be guarantors in respect of the exchange notes, although their
ability to incur debt may depend upon us adding them as a guarantor. If we make
any additional subsidiaries guarantors in respect of the exchange notes, they
will likely be required to be made guarantors in respect of our existing 11 1/2%
senior subordinated notes.
As of December 31, 2001, non-guarantor subsidiaries had debt and current
liabilities of $238.9 million (excluding guarantees of our credit facilities).
While our obligations under our credit facilities are also not guaranteed by our
non-U.S. subsidiaries, our Canadian subsidiaries are permitted to directly
borrow up to the equivalent of approximately $75 million of revolving credit
borrowings under our credit facilities. The lenders under our senior credit
facility have guarantees from each of our domestic subsidiaries (other than
receivables, insurance and charitable subsidiaries), not only our wholly owned
domestic subsidiaries. We also have non-U.S. joint ventures and subsidiaries in
which we own less than 100% of the equity so that, in addition to the
structurally senior claims of creditors of those subsidiaries, claims of our
joint
16
venture partners or other shareholders would need to be satisfied on a
proportionate basis with us. These non-U.S. joint ventures and less than wholly
owned subsidiaries are subject to restrictions on their ability to distribute
cash to us in their financing or other agreements and, as such, we may not be
able to access their cash flow to service our debt obligations, including in
respect of the exchange notes.
WE MAY BE PREVENTED FROM FINANCING, OR MAY NOT HAVE THE ABILITY TO RAISE
FUNDS NECESSARY TO FINANCE, THE CHANGE OF CONTROL OFFER REQUIRED BY THE
INDENTURE GOVERNING OUR 11 1/2% SENIOR SUBORDINATED NOTES AND THE INDENTURE
GOVERNING THE EXCHANGE NOTES.
Upon certain change of control events, each holder of exchange notes and
our existing 11 1/2% notes may require us to repurchase all or a portion of our
11 1/2% notes and the exchange notes at a purchase price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of repurchase. Our ability to comply with these obligations upon a change of
control event will be prohibited by the terms of our new senior credit
facilities. Certain change of control events constitute events of default under
our new senior credit facilities and termination events under our new
receivables facility and, absent a consent or waiver, we would be required to
repay all amounts owed by us under our new senior credit facilities and wind
down our new receivables facility. We cannot assure you that we would be able
to repay amounts outstanding under our new credit facilities or replace our new
receivables facility. The source of funds for any purchase of notes would be
our available cash or cash generated from other sources, including borrowings,
sales of assets, sales of equity or funds provided by an existing or new
controlling person. We cannot assure you that any of these sources will be
available. Any requirement to offer to purchase any outstanding notes may
result in our having to refinance all or part of our outstanding debt or obtain
necessary consents under our other debt instruments to repurchase the notes,
which we may not be able to do. In such case, our failure to purchase notes
following a change of control could separately constitute an event of default
under various debt instruments, including the indenture governing the exchange
notes. In addition, even if we were able to refinance such debt, such financing
may be on terms unfavorable to us. Certain terms of Products' redeemable
preferred stock may make it more difficult to refinance our existing 11 1/2%
senior subordinated notes and the exchange notes, although the remedies of the
holders thereof are limited to the right to designate directors of Products and
to increased dividend rates. See "Description of Products Preferred Stock."
FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO
VOID SUBSIDIARY GUARANTEES AND REQUIRE NOTEHOLDERS TO RETURN PAYMENTS RECEIVED
FROM SUBSIDIARY GUARANTORS.
Creditors of any business are protected by fraudulent conveyance laws
which differ among various jurisdictions, and these laws may apply to the
issuance of the guarantees by our subsidiaries. A guarantee may be voided by a
court, or subordinated to the claims of other creditors, if:
o that guarantee was incurred by a subsidiary with actual intent to
hinder, delay or defraud any present or future creditor of the
subsidiary, or
o that subsidiary did not receive fair consideration -- or reasonably
equivalent value -- for issuing its guarantee, and the subsidiary:
-- was insolvent or was rendered insolvent by reason of issuing the
guarantee,
-- was engaged or about to engage in a business or transaction for which
the remaining assets of the subsidiary constituted unreasonably small
capital, or
-- intended to incur, or believed that it would incur, debts beyond its
ability to pay as they matured.
We cannot be certain as to the standard that a court would use to determine
whether or not the guarantor subsidiaries were solvent upon issuance of the
guarantee or, regardless of the actual standard applied by the court, that the
issuance of the guarantee of the exchange notes would not be voided. If a
guarantee of a subsidiary was voided as a fraudulent conveyance or held
unenforceable for any other reason, holders of the exchange notes would be
solely our creditors and creditors of our other subsidiaries that have
guaranteed the exchange notes. The exchange notes then would be effectively
subordinated to all obligations of that subsidiary. To the extent that the
claims of the holders of the exchange notes against
17
any subsidiary were subordinated in favor of other creditors of such subsidiary,
such other creditors would be entitled to be paid in full before any payment
could be made on the exchange notes. If one or more of the guarantees are voided
or subordinated, we cannot assure you that after providing for all prior claims,
there would be sufficient assets remaining to satisfy the claims of holders of
the exchange notes.
Based upon financial and other information, we believe that the exchange
notes and the guarantees are being incurred for proper purposes and in good
faith and that we are and each subsidiary is solvent and will continue to be
solvent after this offering is completed, will have sufficient capital for
carrying on its business after such issuance and will be able to pay its debts
as they mature. We cannot assure you, however, that a court reviewing these
matters would agree with us. A legal challenge to a guarantee on fraudulent
conveyance grounds may focus on the benefits, if any, realized by the
subsidiary as a result of our issuance of the exchange notes.
FAILURE TO EXCHANGE YOUR OUTSTANDING NOTES WILL LEAVE THEM SUBJECT TO TRANSFER
RESTRICTIONS.
If you do not exchange your outstanding notes for exchange notes, you will
continue to be subject to the restrictions on transfer of your outstanding
notes set forth in their legend because the outstanding notes were issued
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act. In general, outstanding notes
may not be offered or sold, unless registered under the Securities Act , except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. We currently do not
anticipate registering the outstanding notes under the Securities Act. As
outstanding notes are tendered and accepted in the exchange offer, the
aggregate principal amount of outstanding notes will decrease, which will
decrease their liquidity.
YOU CANNOT BE SURE AN ACTIVE TRADING MARKET FOR THE EXCHANGE NOTES WILL
DEVELOP.
There is no established trading market for the exchange notes. Although
the initial purchasers have informed us that they currently intend to make a
market in the exchange notes, they have no obligation to do so and may
discontinue making a market at any time without notice.
The exchange notes have been designated as eligible for trading in the
PORTAL market. However, we do not intend to apply for listing or quotation of
the exchange notes on any securities exchange or through Nasdaq. The liquidity
of any market for the exchange notes will depend upon the number of holders of
the exchange notes, our performance, the market for similar securities, the
interest of securities dealers in making a market in the exchange notes and
other factors. A liquid trading market may not develop for the exchange notes.
If a market develops for the exchange notes, it may have limited or no
liquidity.
YOU MUST COMPLY WITH THE PROCEDURES FOR THE EXCHANGE OFFER IN ORDER TO RECEIVE
THE EXCHANGE NOTES.
You are responsible for complying with all exchange offer procedures. You
will only receive exchange notes in exchange for your outstanding notes if,
prior to the expiration date, you deliver the following to the exchange agent:
o certificate for the outstanding notes or a book-entry confirmation of a
book-entry transfer of the outstanding notes into the exchange agent's
account with The Depository Trust Company;
o the letter of transmittal (or facsimile thereof), properly completed and
duly executed by you, together with any required signature guarantees;
and
o other documents required by the letter of transmittal.
You should allow sufficient time to ensure that the exchange agent
receives all required documents before the expiration date. Neither we nor the
exchange agent has any duty to inform you of defects or irregularities with
respect to the tender of your outstanding notes for exchange notes. See "The
Exchange Offer."
18
FORWARD-LOOKING STATEMENTS
This prospectus contains "forward-looking" information, as that term is
defined by the federal securities laws, about our financial condition, results
of operations and business. You can find many of these statements by looking
for words such as "may," "will," "expect," "anticipate," "believe," "estimate"
and similar words used in this prospectus.
These forward-looking statements are subject to numerous assumptions,
risks and uncertainties (including trade relations and competition). Because
the statements are subject to risks and uncertainties, actual results may
differ materially from those expressed or implied by the forward-looking
statements. We caution readers not to place undue reliance on the statements,
which speak only as of the date of this prospectus.
The cautionary statements set forth above should be considered in
connection with any subsequent written or oral forward-looking statements that
we or persons acting on our behalf may issue. We do not undertake any
obligation to review or confirm analysts' expectations or estimates or to
release publicly any revisions to any forward-looking statements to reflect
events or circumstances after the date of this prospectus or to reflect the
occurrence of unanticipated events.
Risks and uncertainties that could cause actual results to vary materially
from those anticipated in the forward-looking statements included in this
prospectus include general economic conditions in the market in which we
operate and industry-based factors such as:
o declines in the North American, South American and European automobile
and light truck builds,
o labor costs and strikes at our major customers and at our facilities,
o changes in consumer preferences,
o dependence on significant automotive customers,
o the level of competition in the automotive supply industry and pricing
pressure from automotive customers and
o risks associated with conducting business in foreign countries.
In addition, factors more specific to us could cause actual results to
vary materially from those anticipated in the forward-looking statements
included in this prospectus such as substantial leverage, limitations imposed
by our debt instruments, our ability to successfully integrate acquired
businesses including actions we have identified as providing cost saving
opportunities, and pursue our prime contractor business strategy and our
customer concentration.
Our divisions may also be affected by changes in the popularity of
particular vehicle models or particular interior trim packages or the loss of
programs on particular vehicle models.
We disclose important factors that could cause our actual results to
differ materially from our expectations under "Risk Factors." These cautionary
statements qualify all forward-looking statements attributable to us or persons
acting on our behalf. When we indicate that an event, condition or circumstance
could or would have an adverse effect on us, we mean to include effects upon
our business, financial and other conditions, results of operations and ability
to make payments on the notes.
19
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for each of the periods indicated
is as follows:
FISCAL YEAR ENDED(1) THREE MONTHS ENDED
-------------------------------------------------------------------------- ------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 25, DECEMBER 26, DECEMBER 27, MARCH 31, MARCH 31,
2001 2000 1999 1998 1997 2001 2002
-------------- -------------- -------------- -------------- -------------- -------------- ---------------
Ratio of earnings to
fixed charges (2) ..... 0.32x(3) 1.02x 0.98x(4) 1.05x 1.02x 0.4x(5) 1.00x(6)
- ----------
(1) Fiscal year 2000 was a 53-week year. All other years were 52 weeks.
(2) For purposes of calculating the ratio of earnings to fixed charges,
earnings represents income or loss from continuing operations before
income taxes, exclusive of income or loss from minority interest and
equity method investments, plus fixed charges, plus amortization of
capitalized interest and income distributions from equity method
investments, less capitalized interest. Fixed charges include interest
expense (including amortization of deferred financing costs), capitalized
interest, and the portion of operating rental expense which management
believes is representative of the interest component of rent expense
(assumed to be 33%).
(3) For the year ended December 31, 2001, additional earnings of $68 million
would have been required to make the ratio 1.00x during the period.
(4) For the fiscal year ended 1999, additional earnings of $1.7 million would
have been required to make the ratio 1.00x during the period.
(5) For the three months ended March 31, 2001, additional earnings of $15.1
million would have been required to make the ratio 1.00x during the
period.
(6) For the three months ended March 31, 2002, additional earnings of $0.1
million would have been required to make the ratio 1.00x during the
period.
20
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
Exchange Offer Registration Statement. We issued the outstanding notes on
December 20, 2001. The initial purchasers have advised us that they
subsequently resold the outstanding notes to "qualified institutional buyers"
in reliance on Rule 144A under the Securities Act and to certain persons in
offshore transactions in reliance on Regulation S under the Securities Act. As
a condition to the offering of the outstanding notes, we entered into a
registration rights agreement dated December 20, 2001, pursuant to which we
agreed, for the benefit of all holders of the outstanding notes, at our own
expense, to use our reasonable best efforts to do the following:
(1) to file the registration statement of which this prospectus is a
part with the Commission,
(2) keep the registration statement effective until the closing of the
exchange offer, and
(3) complete the exchange offer not later than 60 days after the date
on which the exchange offer registration statement was declared
effective by the Commission.
We also agreed that promptly upon the registration statement being
declared effective, we would offer to all holders of the outstanding notes an
opportunity to exchange the outstanding notes for the exchange notes. Further,
we agreed to keep the exchange offer open for acceptance for not less than the
minimum period required under applicable federal and state securities laws. For
each outstanding note validly tendered pursuant to the exchange offer and not
withdrawn, the holder of the outstanding note will receive an exchange note
having a principal amount equal to that of the tendered outstanding note.
Interest on each exchange note will accrue from the last date on which interest
was paid on the tendered outstanding note in exchange therefor or, if no
interest was paid on such outstanding note, from the issue date.
Transferability. We issued the outstanding notes on December 20, 2001 in a
transaction exempt from the registration requirements of the Securities Act and
applicable state securities laws. Accordingly, the outstanding notes may not be
offered or sold in the United States unless registered or pursuant to an
applicable exemption under the Securities Act and applicable state securities
laws. Based on no-action letters issued by the staff of the Commission with
respect to similar transactions, we believe that the exchange notes issued
pursuant to the exchange offer in exchange for outstanding notes may be offered
for resale, resold and otherwise transferred by holders of notes who are not
our affiliates without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that:
(1) any exchange notes to be received by the holder were acquired in
the ordinary course of the holder's business;
(2) at the time of the commencement of the exchange offer the holder
has no arrangement or understanding with any person to participate
in the distribution (within the meaning of the Securities Act) of
the exchange notes; and
(3) the holder is not an "affiliate" of ours, as defined in Rule 405
under the Securities Act, or, if it is an affiliate, that it will
comply with the registration and prospectus delivery requirements
of the Securities Act to the extent applicable.
However, we have not sought a no-action letter with respect to the
exchange offer and we cannot assure you that the staff of the Commission would
make a similar determination with respect to the exchange offer. Any holder who
tenders his outstanding notes in the exchange offer with any intention of
participating in a distribution of exchange notes (1) cannot rely on the
interpretation by the staff of the Commission, (2) will not be able to validly
tender outstanding notes in the exchange offer and (3) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transactions.
In addition, each broker-dealer that receives exchange notes for its own
account pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such
21
exchange notes. The letter of transmittal accompanying this prospectus states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is acting in the capacity of an "underwriter"
within the meaning of Section 2(11) of the Securities Act. This prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of exchange notes received in exchange
for outstanding notes where the outstanding notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. Pursuant to the registration rights agreement, we agreed to make
this prospectus available to any such broker-dealer for use in connection with
any such resale.
Shelf Registration Statement. If applicable interpretations of the staff
of the SEC do not permit us to effect the exchange offer, we will use our
reasonable best efforts to cause to become effective a shelf registration
statement relating to resales of notes and to keep that shelf registration
statement effective until the expiration of the time period referred to in Rule
144(k) under the Securities Act, or such shorter period that will terminate
when all notes covered by the shelf registration statement have been sold.
Products will, in the event of such a shelf registration, provide to each
noteholder copies of a prospectus, notify each noteholder when the shelf
registration statement has become effective and take certain other actions to
permit resales of notes. A noteholder that sells notes under the shelf
registration statement generally will be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with those sales and will be bound by the
provisions of the applicable registration rights agreement that are applicable
to such a noteholder (including certain indemnification obligations).
This summary of the provisions of the registration rights agreement in the
preceding paragraphs does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the
registration rights agreement, a copy of which has been filed as an exhibit to
the registration statement of which this prospectus forms a part.
TERMS OF THE EXCHANGE OFFER
Upon satisfaction or waiver of all the conditions of the exchange offer,
we will accept any and all outstanding notes properly tendered and not
withdrawn prior to the expiration date and will issue the exchange notes
promptly after acceptance of the outstanding notes. See "--Conditions to the
Exchange Offer" and "Procedures for Tendering Private Notes." We will issue
$1,000 principal amount of exchange notes in exchange for each $1,000 principal
amount of outstanding notes accepted in the exchange offer. As of the date of
this prospectus, $500,000,000 aggregate principal amount of the notes are
outstanding. Holders may tender some or all of their outstanding notes pursuant
to the exchange offer. However, outstanding notes may be tendered only in
integral multiples of $1,000.
The exchange notes are identical to the outstanding notes except for the
elimination of certain transfer restrictions, registration rights, restrictions
on holding notes in certificated form and liquidated damages provisions. The
exchange notes will evidence the same debt as the outstanding notes and will be
issued pursuant to, and entitled to the benefits of, the indenture pursuant to
which the outstanding notes were issued and will be deemed one issue of notes,
together with the outstanding notes.
This prospectus, together with the letter of transmittal, is being sent to
all registered holders and to others believed to have beneficial interests in
the outstanding notes. Holders of outstanding notes do not have any appraisal
or dissenters' rights under the indenture in connection with the exchange
offer. We intend to conduct the exchange offer in accordance with the
applicable requirements of the Securities Act, the Exchange Act and the rules
and regulations of the Commission promulgated thereunder.
For purposes of the exchange offer, we will be deemed to have accepted
validly tendered private notes when, and as if, we have given oral or written
notice thereof to the exchange agent. The exchange agent will act as our agent
for the purpose of distributing the exchange notes from us to the tendering
holders. If we do not accept any tendered outstanding notes because of an
invalid tender, the occurrence of certain other events set forth in this
prospectus or otherwise, we will return the unaccepted outstanding notes,
without expense, to the tendering holder thereof as promptly as practicable
after the expiration date.
22
Holders who tender private notes in the exchange offer will not be
required to pay brokerage commissions or fees or, except as set forth below
under "--Transfer Taxes," transfer taxes with respect to the exchange of
outstanding notes pursuant to the exchange offer. We will pay all charges and
expenses, other than certain applicable taxes, in connection with the exchange
offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "expiration date" shall mean 5:00 p.m., New York City time, on
July 17, 2002, unless we, in our sole discretion, extend the exchange offer, in
which case the term "expiration date" shall mean the latest date and time to
which the exchange offer is extended. In order to extend the exchange offer, we
will notify the exchange agent by oral or written notice and each registered
holder by means of press release or other public announcement of any extension,
in each case, prior to 9:00 a.m., New York City time, on the next business day
after the previously scheduled expiration date. We reserve the right, in our
sole discretion, (1) to delay accepting any outstanding notes, (2) to extend
the exchange offer, (3) to terminate the exchange offer if the conditions set
forth below under "--Conditions" shall not have been satisfied, or (4) to amend
the terms of the exchange offer in any manner. We will notify the exchange
agent of any delay, extension, termination or amendment by oral or written
notice. We will additionally notify each registered holder of any amendment. We
will give to the exchange agent written confirmation of any oral notice.
EXCHANGE DATE
As soon as practicable after the close of the exchange offer we will
accept for exchange all outstanding notes properly tendered and not validly
withdrawn prior to 5:00 p.m., New York City time, on the expiration date in
accordance with the terms of this prospectus and the letters of transmittal.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the exchange offer, and subject to
our obligations under the registration rights agreement, we (1) shall not be
required to accept any outstanding notes for exchange, (2) shall not be
required to issue exchange notes in exchange for any outstanding notes and (3)
may terminate or amend the exchange offer if, at any time before the acceptance
of such exchange notes for exchange, the exchange offer will violate any
applicable law or any applicable interpretation of the staff of the Commission.
The foregoing conditions are for our sole benefit and may be asserted by
us regardless of the circumstances giving rise to any such condition or may be
waived by us in whole or in part at any time and from time to time in our sole
discretion. Our failure at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right and such right shall be deemed
an ongoing right which may be asserted at any time and from time to time.
In addition, we will not accept for exchange any outstanding notes
tendered, and no exchange notes will be issued in exchange for any such
outstanding notes if at such time any stop order shall be threatened by the
Commission or be in effect with respect to the registration statement of which
this prospectus is a part or the qualification of the indenture under the Trust
Indenture Act of 1939, as amended.
The exchange offer is not conditioned on any minimum aggregate principal
amount of outstanding notes being tendered for exchange.
CONSEQUENCES OF FAILURE TO EXCHANGE
Any outstanding notes not tendered pursuant to the exchange offer will
remain outstanding and continue to accrue interest. The outstanding notes will
remain "restricted securities" within the meaning of the Securities Act.
Accordingly, prior to the date that is one year after the later of the issue
date and the last date on which we or any of our affiliates was the owner of
the outstanding notes, the outstanding notes may be resold only (1) to us, (2)
to a person who the seller reasonably believes is a "qualified institutional
buyer" purchasing for its own account or for the account of another "qualified
institutional
23
buyer" in compliance with the resale limitations of Rule 144A, (3) to an
Institutional Accredited Investor that, prior to the transfer, furnishes to the
trustee a written certification containing certain representations and
agreements relating to the restrictions on transfer of the notes (the form of
this letter can be obtained from the trustee), (4) pursuant to the limitations
on resale provided by Rule 144 under the Securities Act, (5) pursuant to the
resale provisions of Rule 904 of Regulation S under the Securities Act, (6)
pursuant to an effective registration statement under the Securities Act, or
(7) pursuant to any other available exemption from the registration
requirements of the Securities Act, subject in each of the foregoing cases to
compliance with applicable state securities laws. As a result, the liquidity of
the market for non-tendered outstanding notes could be adversely affected upon
completion of the exchange offer. The foregoing restrictions on resale will no
longer apply after the first anniversary of the issue date of the outstanding
note or the purchase of the outstanding notes from us or an affiliate.
FEES AND EXPENSES
We will not make any payments to brokers, dealers or others soliciting
acceptances of the exchange offer. The principal solicitation is being made by
mail; however, additional solicitations may be made in person or by telephone
by our officers and employees.
Expenses incurred in connection with the exchange offer will be paid by
us. Such expenses include, among others, the fees and expenses of the trustee
and the exchange agent, accounting and legal fees, printing costs and other
miscellaneous fees and expenses.
ACCOUNTING TREATMENT
We will not recognize any gain or loss for accounting purposes upon the
consummation of the exchange offer. We will amortize the expenses of the
exchange offer as additional interest expense over the term of the exchange
notes.
PROCEDURES FOR TENDERING OUTSTANDING NOTES
The tender of outstanding notes pursuant to any of the procedures set
forth in this prospectus and in the letter of transmittal will constitute a
binding agreement between the tendering holder and us in accordance with the
terms and subject to the conditions set forth in this prospectus and in the
letter of transmittal. The tender of outstanding notes will constitute an
agreement to deliver good and marketable title to all tendered outstanding
notes prior to the expiration date free and clear of all liens, charges,
claims, encumbrances, interests and restrictions of any kind.
Except as provided below under the heading "--Guaranteed Delivery
Procedures," unless the outstanding notes being tendered are deposited by you
with the exchange agent prior to the expiration date and are accompanied by a
properly completed and duly executed letter of transmittal, we may, at our
option, reject the tender. Issuance of exchange notes will be made only against
deposit of tendered outstanding notes and delivery of all other required
documents. Notwithstanding the foregoing, DTC participants tendering through
its Automated Tender Offer Program ("ATOP") will be deemed to have made valid
delivery where the exchange agent receives an agent's message prior to the
expiration date.
Accordingly, to properly tender outstanding notes, the following
procedures must be followed:
Notes held through a Custodian. Each beneficial owner holding outstanding
notes through a DTC participant must instruct the DTC participant to cause its
outstanding notes to be tendered in accordance with the procedures set forth in
this prospectus.
Notes held through DTC. Pursuant to an authorization given by DTC to the
DTC participants, each DTC participant holding outstanding notes through DTC
must (1) electronically transmit its acceptance through ATOP, and DTC will then
edit and verify the acceptance, execute a book-entry delivery to the exchange
agent's account at DTC and send an agent's message to the exchange agent for
its acceptance, or (2) comply with the guaranteed delivery procedures set forth
below and in a notice of guaranteed delivery. See "--Guaranteed Delivery
Procedures--Notes held through DTC."
24
The exchange agent will (promptly after the date of this prospectus)
establish accounts at DTC for purposes of the exchange offer with respect to
outstanding notes held through DTC. Any financial institution that is a DTC
participant may make book-entry delivery of interests in outstanding notes into
the exchange agent's account through ATOP. However, although delivery of
interests in the outstanding notes may be effected through book-entry transfer
into the exchange agent's account through ATOP, an agent's message in
connection with such book-entry transfer, and any other required documents,
must be, in any case, transmitted to and received by the exchange agent at its
address set forth under "--Exchange Agent," or the guaranteed delivery
procedures set forth below must be complied with, in each case, prior to the
expiration date. Delivery of documents to DTC does not constitute delivery to
the exchange agent. The confirmation of a book-entry transfer into the exchange
agent's account at DTC as described above is referred to herein as a
"Book-Entry Confirmation."
The term "agent's message" means a message transmitted by DTC to, and
received by, the exchange agent and forming a part of the book-entry
confirmation, which states that DTC has received an express acknowledgment from
each DTC participant tendering through ATOP that such DTC participants have
received a letter of transmittal and agree to be bound by the terms of the
letter of transmittal and that we may enforce such agreement against such DTC
participants.
Cede & Co., as the holder of the global note, will tender a portion of the
global note equal to the aggregate principal amount due at the stated maturity
for which instructions to tender are given by DTC participants.
By tendering, each holder and each DTC participant will represent to us
that, among other things, (1) it is not an affiliate of ours, (2) it is not a
broker-dealer tendering outstanding notes acquired directly from us for its own
account, (3) it is acquiring the exchange notes in its ordinary course of
business and (4) it is not engaged in, and does not intend to engage in, and
has no arrangement or understanding with any person to participate in, a
distribution of the exchange notes.
We will not accept any alternative, conditional, irregular or contingent
tenders (unless waived by us). By executing a letter of transmittal or
transmitting an acceptance through ATOP, as the case may be, each tendering
holder waives any right to receive any notice of the acceptance for purchase of
its outstanding notes.
We will resolve all questions as to the validity, form, eligibility
(including time of receipt) and acceptance of tendered outstanding notes, and
such determination will be final and binding. We reserve the absolute right to
reject any or all tenders that are not in proper form or the acceptance of
which may, in the opinion of our counsel, be unlawful. We also reserve the
absolute right to waive any condition to the exchange offer and any
irregularities or conditions of tender as to particular outstanding notes. Our
interpretation of the terms and conditions of the exchange offer (including the
instructions in the letter of transmittal) will be final and binding. Unless
waived, any irregularities in connection with tenders must be cured within such
time as we shall determine. We, along with the exchange agent, shall be under
no duty to give notification of defects in such tenders and shall not incur
liabilities for failure to give such notification. Tenders of outstanding notes
will not be deemed to have been made until such irregularities have been cured
or waived. Any outstanding notes received by the exchange agent that are not
properly tendered and as to which the irregularities have not been cured or
waived will be returned by the exchange agent to the tendering holder, unless
otherwise provided in the letter of transmittal, as soon as practicable
following the expiration date.
LETTERS OF TRANSMITTAL AND OUTSTANDING NOTES MUST BE SENT ONLY TO THE
EXCHANGE AGENT. DO NOT SEND LETTERS OF TRANSMITTAL OR OUTSTANDING NOTES TO US
OR DTC.
The method of delivery of outstanding notes, letters of transmittal, any
required signature guaranties and all other required documents, including
delivery through DTC and any acceptance through ATOP, is at the election and
risk of the persons tendering and delivering acceptances or letters of
transmittal and, except as otherwise provided in the applicable letter of
transmittal, delivery will be deemed made only
25
when actually received by the exchange agent. If delivery is by mail, it is
suggested that the holder use properly insured, registered mail with return
receipt requested, and that the mailing be made sufficiently in advance of the
expiration date to permit delivery to the exchange agent prior to the
expiration date.
GUARANTEED DELIVERY PROCEDURES
Notes held through DTC. DTC participants holding outstanding notes through
DTC who wish to cause their outstanding notes to be tendered, but who cannot
transmit their acceptances through ATOP prior to the expiration date, may cause
a tender to be effected if:
(1) guaranteed delivery is made by or through a firm or other entity
identified in Rule 17Ad-15 under the Exchange Act, including:
o a bank;
o a broker, dealer, municipal securities dealer, municipal
securities broker, government securities dealer or government
securities broker;
o a credit union;
o a national securities exchange, registered securities
association or clearing agency; or
o a savings institution that is a participant in a Securities
Transfer Association recognized program;
(2) prior to the expiration date, the exchange agent receives from any
of the above institutions a properly completed and duly executed
notice of guaranteed delivery (by mail, hand delivery, facsimile
transmission or overnight courier) substantially in the form
provided with this prospectus; and
(3) book-entry confirmation and an agent's message in connection
therewith are received by the exchange agent within three NYSE
trading days after the date of the execution of the notice of
guaranteed delivery.
Notes held by Holders. Holders who wish to tender their outstanding notes
but (1) whose outstanding notes are not immediately available and will not be
available for tendering prior to the expiration date, or (2) who cannot deliver
their outstanding notes, the letter of transmittal, or any other required
documents to the exchange agent prior to the expiration date, may effect a
tender if:
o the tender is made by or through any of the above-listed institutions;
o prior to the expiration date, the exchange agent receives from any
above-listed institution a properly completed and duly executed notice of
guaranteed delivery, whether by mail, hand delivery, facsimile
transmission or overnight courier, substantially in the form provided
with this prospectus; and
o a properly completed and executed letter of transmittal, as well as the
certificate(s) representing all tendered outstanding notes in proper form
for transfer, and all other documents required by the letter of
transmittal, are received by the exchange agent within three NYSE trading
days after the date of the execution of the notice of guaranteed
delivery.
WITHDRAWAL RIGHTS
You may withdraw tenders of outstanding notes, or any portion of your
outstanding notes, in integral multiples of $1,000 principal amount due at the
stated maturity, at any time prior to 5:00 p.m., New York City time, on the
expiration date. Any outstanding notes properly withdrawn will be deemed to be
not validly tendered for purposes of the exchange offer.
Notes held through DTC. DTC participants holding outstanding notes who
have transmitted their acceptances through ATOP may, prior to 5:00 p.m., New
York City time, on the expiration date, withdraw the instruction given thereby
by delivering to the exchange agent, at its address set forth under
26
"--Exchange Agent," a written, telegraphic or facsimile notice of withdrawal of
such instruction. Such notice of withdrawal must contain the name and number of
the DTC participant, the principal amount due at the stated maturity of
outstanding notes to which such withdrawal relates and the signature of the DTC
participant. Receipt of such written notice of withdrawal by the exchange agent
effectuates a withdrawal.
Notes held by Holders. Holders may withdraw their tender of outstanding
notes, prior to 5:00 p.m., New York City time, on the expiration date, by
delivering to the exchange agent, at its address set forth under "--Exchange
Agent," a written, telegraphic or facsimile notice of withdrawal. Any such
notice of withdrawal must (1) specify the name of the person who tendered the
outstanding notes to be withdrawn, (2) contain a description of the outstanding
notes to be withdrawn and identify the certificate number or numbers shown on
the particular certificates evidencing such outstanding notes and the aggregate
principal amount due at the stated maturity represented by such outstanding
notes and (3) be signed by the holder of such outstanding notes in the same
manner as the original signature on the letter of transmittal by which such
outstanding notes were tendered (including any required signature guaranties),
or be accompanied by (x) documents of transfer in a form acceptable to us, in
our sole discretion, and (y) a properly completed irrevocable proxy that
authorized such person to effect such revocation on behalf such holder. If the
outstanding notes to be withdrawn have been delivered or otherwise identified
to the exchange agent, a signed notice of withdrawal is effective immediately
upon written, telegraphic or facsimile notice of withdrawal even if physical
release is not yet effected.
All signatures on a notice of withdrawal must be guaranteed by a
recognized participant in the Securities Transfer Agents Medallion Program, the
New York Stock Exchange Medallion Signature Program or the Stock Exchange
Medallion Program; provided, however, that signatures on the notice of
withdrawal need not be guaranteed if the outstanding notes being withdrawn are
held for the account of any of the institutions listed above under the heading
"--Guaranteed Delivery Procedures."
A withdrawal of an instruction or a withdrawal of a tender must be
executed by a DTC participant or a holder of outstanding notes, as the case may
be, in the same manner as the person's name appears on its transmission through
ATOP or letter of transmittal, as the case may be, to which such withdrawal
relates. If a notice of withdrawal is signed by a trustee, partner, executor,
administrator, guardian, attorney-in-fact, agent, officer of a corporation or
other person acting in a fiduciary or representative capacity, such person must
so indicate when signing and must submit with the revocation appropriate
evidence of authority to execute the notice of withdrawal. A DTC participant or
a holder may withdraw an instruction or a tender, as the case may be, only if
such withdrawal complies with the provisions of this prospectus.
A withdrawal of a tender of outstanding notes by a DTC participant or a
holder, as the case may be, may be rescinded only by a new transmission of an
acceptance through ATOP or execution and delivery of a new letter of
transmittal, as the case may be, in accordance with the procedures described
herein.
27
EXCHANGE AGENT
The BNY Midwest Trust Company has been appointed as exchange agent for the
exchange offer. Questions, requests for assistance and requests for additional
copies of this prospectus or of the letter of transmittal should be directed to
the exchange agent addressed as follows:
BY REGISTERED OR CERTIFIED MAIL, BY HAND OR BY OVERNIGHT COURIER:
THE BANK OF NEW YORK
REORGANIZATION UNIT/CORPORATE TRUST DEPARTMENT
15 BROAD STREET -- 16TH FLOOR
NEW YORK, NEW YORK 10007
ATTENTION: MR. KIN LAU
TELEPHONE: (212) 235-2358
FAX: (212) 235-2261
The exchange agent also acts as trustee under the Indenture.
TRANSFER TAXES
Holders of outstanding notes who tender their outstanding notes for
exchange notes will not be obligated to pay any transfer taxes in connection
therewith, except that holders who instruct us to register exchange notes in
the name of, or request that outstanding notes not tendered or not accepted in
the exchange offer be returned to, a person other than the registered tendering
holder will be responsible for the payment of any applicable transfer tax
thereon.
28
USE OF PROCEEDS
The exchange offer is intended to satisfy certain of our obligations under
the registration rights agreement. We will not receive any proceeds from the
issuance of the exchange notes or the closing of the exchange offer.
In consideration for issuing the exchange notes as contemplated in this
prospectus, we will receive, in exchange, an equal number of outstanding notes
in like principal amount. The form and terms of the exchange notes are
identical in all material respects to the form and terms of the outstanding
notes, except as otherwise described in "The Exchange Offer--Terms of the
Exchange Offer." The outstanding notes surrendered in exchange for the exchange
notes will be retired and canceled and cannot be reissued.
29
DESCRIPTION OF OUR OTHER DEBT
SENIOR SECURED CREDIT FACILITIES
General
In connection with the TAC-Trim acquisition, we and our Canadian
Subsidiaries entered into new senior secured credit facilities (the "new senior
credit facilities") with JPMorgan Chase Bank ("JPMorgan Chase Bank"), as
administrative agent and collateral agent, JPMorgan Bank Canada, as Canadian
administrative agent and collateral agent ("Chase Canada"), Credit Suisse First
Boston ("CSFB"), as syndication agent, Deutsche Banc Alex. Brown Inc. ("DBAB"),
Merrill Lynch Capital Corporation ("Merrill," together with JPMorgan Chase
Bank, Chase Canada, CSFB and DBAB, the "agents"), as co-documentation agents
and the other lenders party thereto.
The new senior credit facilities consist of a senior secured revolving
credit facility and two senior secured term loan facilities. The revolving
credit facility is comprised of revolving loans in a total principal amount not
to exceed $175.0 million at any one time outstanding, of which approximately
$75.0 million is available to our Canadian Subsidiaries. The tranche A facility
is comprised of term loans in a total principal amount of $100.0 million. The
tranche B facility is comprised of term loans in a total principal amount of
$300.0 million.
The revolving credit facility, the tranche A facility and the tranche B
facility each will mature on December 31, 2005.
Security and Guarantees
Products' borrowings under the new senior credit facilities is secured by
all the assets of C&A and Products and certain subsidiaries of each, including
but not limited to:
o a first priority pledge of all of the capital stock (held by C&A,
Products or any domestic subsidiary of Products) of Products and each
existing and subsequently acquired or organized subsidiary of Products,
with limited exceptions for foreign subsidiaries; and
o a perfected first-priority security interest in substantially all
tangible and intangible assets of C&A, Products and each existing or
subsequently acquired or organized domestic subsidiary (other than the
receivables and insurance subsidiaries) of Products, with limited
exceptions.
Products' obligations under the new senior credit facilities is
unconditionally and irrevocably guaranteed jointly and severally by C&A and
each of our existing and subsequently acquired or organized domestic
subsidiaries, other than our receivables subsidiary (referred to below under
the heading "Receivables Purchase Facility").
Interest Rates and Fees
Borrowings bear interest, at our option, at either (a) adjusted LIBOR plus
a 3.75% margin in the case of the revolving credit and tranche A facilities and
4.00% margin in the case of the tranche B facilities, in all cases subject to a
minimum LIBOR of 3.00% or (b) the highest of (i) JPMorgan Chase Bank's prime
rate, (ii) the federal funds effective rate plus 1/2 of 1.00% and (iii) the
base CD rate plus 1.0%.
The new senior credit facilities provide for the payment to the lenders of
a commitment fee on any unused commitments under the revolving credit facility
equal to 1% per annum payable quarterly in arrears. After an initial period of
about six months, this commitment fee (with respect to the revolving credit
facility) and the interest rates with respect to the revolving credit facility
and the tranche A facility will be subject to adjustment subject to our
attaining certain performance targets.
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Scheduled Amortization
The schedule of amortization under the new senior credit facilities is set
forth in the table below.
TRANCHE A TERM TRANCHE B TERM
DATE LOAN AMORTIZATION LOAN AMORTIZATION
- ---------------------------- ------------------- ------------------
March 31, 2002 ............. $ 3,750,000 $ 750,000
June 30, 2002 .............. $ 3,750,000 $ 750,000
September 30, 2002 ......... $ 3,750,000 $ 750,000
December 31, 2002 .......... $ 3,750,000 $ 750,000
March 31, 2003 ............. $ 5,000,000 $ 750,000
June 30, 2003 .............. $ 5,000,000 $ 750,000
September 30, 2003 ......... $ 5,000,000 $ 750,000
December 31, 2003 .......... $ 5,000,000 $ 750,000
March 31, 2004 ............. $ 6,250,000 $ 750,000
June 30, 2004 .............. $ 6,250,000 $ 750,000
September 30, 2004 ......... $ 6,250,000 $ 750,000
December 31, 2004 .......... $ 6,250,000 $ 750,000
March 31, 2005 ............. $ 10,000,000 $ 72,750,000
June 30, 2005 .............. $ 10,000,000 $ 72,750,000
September 30, 2005 ......... $ 10,000,000 $ 72,750,000
December 31, 2005 .......... $ 10,000,000 $ 72,750,000
Total: .................... $100,000,000 $300,000,000
Mandatory Prepayments
The new senior credit facilities require us to prepay outstanding term
loans with 75% (subject to step-downs based upon our attaining certain
performance targets) of excess cash flow, 100% of the net proceeds of asset
dispositions (subject to certain exceptions) and 100% of proceeds of the net
proceeds of debt issuances, other than certain permitted debt.
Voluntary Prepayments
The new senior credit facilities provide for voluntary prepayments of term
loans and voluntary reductions of the unutilized portion of the commitments
under the revolving credit facility, without penalty (except as set forth
below), subject to certain conditions and restrictions.
Prepayment Premium
The new senior credit facilities require us to pay a prepayment premium on
mandatory and certain voluntary prepayments of the tranche B facility made
within the first three years after the closing date. The prepayment premium is
3% of the amount prepaid during the first year after the closing date, 2% of
the amount prepaid during the second year after the closing date, and 1% of the
amount prepaid during the third year after the closing date.
Covenants
Our new senior credit facilities require that we meet certain financial
tests, including, without limitation, the following tests: a maximum leverage
ratio, a minimum interest coverage ratio and certain prescribed limitations on
capital expenditures at levels to be agreed upon between us and the agents. Our
new senior credit facilities contain customary covenants and restrictions,
including, among others, limitations or prohibitions on declaring dividends and
other distributions, redeeming and repurchasing our capital stock, prepaying,
redeeming and repurchasing our other indebtedness, loans and investments,
additional indebtedness, liens, sale-leaseback transactions, preferred stock,
capital expenditures, recapitalizations, mergers, acquisitions and asset sales
and transactions with affiliates.
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Events of Default
Our new senior credit facilities specify certain customary events of
default, including, among others:
o nonpayment of principal or interest by us,
o our breach of the affirmative or negative covenants,
o our material breach of the representations and warranties,
o cross-default and cross-acceleration to our other indebtedness
(including to the receivables facility),
o our bankruptcy or insolvency,
o material judgments entered against us,
o certain ERISA violations by us,
o actual or asserted invalidity of security documents or guarantees
associated with the new senior credit facilities, and
o a change in control.
RECEIVABLES PURCHASE FACILITY
In connection with the TAC-Trim acquisition, we entered into an agreement
to sell, on an ongoing basis, the trade accounts receivable of certain business
operations to a bankruptcy-remote, special purpose subsidiary, wholly owned by
us. The receivables subsidiary will, subject to certain conditions, from time
to time, sell an undivided fractional ownership interest in a pool of domestic
and certain Canadian receivables, up to $250 million, to various multi-seller
commercial paper conduits supported by a committed liquidity facility. Upon
sale to the conduit, the receivables subsidiary will hold a subordinated
retained interest in the receivables. Under the terms of the agreement, new
receivables are added to the pool as collections reduce previously sold
receivables. We expect to service, administer and collect the receivables on
behalf of the receivables subsidiary and the conduit. The proceeds of sale will
be less than the face amount of accounts receivable sold by an amount that
approximates the purchaser's financing costs. The term of the receivables
facility will initially be 364 days, and may be extended for additional 364-day
periods with the agreement of all parties.
EXISTING 11 1/2% SENIOR SUBORDINATED NOTES DUE 2006
Products has outstanding $400 million in 11 1/2% Senior Subordinated notes
due 2006 (the "11 1/2% Notes"). In connection with the TAC-Trim acquisition, we
amended the indenture governing these 11 1/2% Notes to make each subsidiary
guarantor of the outstanding notes and the exchange notes a guarantor of the
11 1/2% Notes on a senior subordinated basis. The indenture governing the
11 1/2% Notes contains restrictive covenants (including, among others,
limitations on indebtedness, restricted payments, liens, asset dispositions,
change of control and transactions with affiliates) which are customary for such
securities.
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DESCRIPTION OF PRODUCTS PREFERRED STOCK
As part of the consideration payable to Textron in the TAC-Trim
acquisition, Products issued to Textron 182,700 shares of its Series A1
Redeemable Preferred Stock, 123,700 shares of its Series B1 Redeemable
Preferred Stock and 20,000 shares of its Series C1 Redeemable Preferred Stock.
In addition, if our debt instruments so require, we may issue additional shares
of a new series of redeemable preferred stock to satisfy any obligation to make
an earn-out payment based upon our performance for the five year period ended
December 31, 2006. Its terms will be identical to the series B preferred stock,
other than that Products will be required to mandatorily redeem such preferred
stock at its liquidation preference, with accrued and unpaid dividends, at such
time as, and to the extent that, Products is permitted to do so under material
debt instruments. In connection with an exchange offer referred to below under
" -- Registration Rights," Products may exchange its Series A1 Redeemable
Preferred Stock, Series B1 Redeemable Preferred Stock and Series C1 Redeemable
Preferred Stock for its Series A2 Redeemable Preferred Stock, Series B2
Redeemable Preferred Stock and Series C2 Redeemable Preferred Stock,
respectively, in each case having identical rights and preferences to the
predecessor series. We refer to Series A1 and Series A2 Redeemable Preferred
Stock together as "Series A Preferred Stock," Series B1 and Series B2 Preferred
Stock together as "Series B Preferred Stock" and Series C1 and Series C2
Preferred Stock together as "Series C Preferred Stock," and we refer to all of
the foregoing series of preferred stock collectively as "Preferred Stock." As
discussed below under " -- Redemption; Exchange of Series C Preferred Stock," "
- -- Registration Rights" and " -- Liquidity Provisions Relating to the Textron
Shares," Products may issue additional shares of Preferred Stock from time to
time in accordance with the provisions of the certificate of designation.
Dividends. Holders of Preferred Stock are entitled to receive dividends
accruing on the liquidation preference thereof at a rate of 11% per annum, in
respect of dividend periods ending on or prior to July 1, 2003, and 15% per
annum, in respect of dividend periods ending after July 1, 2003, in the case of
the Series A Preferred Stock, 12% per annum, in respect of dividend periods
ending on or prior to July 1, 2003, and 16% per annum, in respect of dividend
periods ending after July 1, 2003, in the case of the Series B Preferred Stock,
12% per annum, in respect of dividend periods ending on or prior to July 1,
2003, and 16% per annum, in respect of dividend periods ending after July 1,
2003 and in the case of the Series C Preferred Stock, in each case payable
quarterly in arrears, commencing on April 1, 2002 and accumulating from the
date of issuance. Products may, at its option, elect to accrue up to an amount
equivalent to 7% per annum of the liquidation value on the Series A Preferred
Stock, an amount equivalent to 8% per annum of the liquidation value on the
Series B Preferred Stock and an amount equivalent to 8% per annum of the
liquidation value on the Series C Preferred Stock in lieu of cash payment of
such dividends and, in each case, any accrued dividends will be added to the
liquidation preference of the applicable series of Preferred Stock. Under
certain circumstances, Products may, at its option, at all times through and
including January 1, 2004 accrue up to the full amount of all dividends on the
Preferred Stock in lieu of cash payment of such dividends and, in each case,
any accrued dividends will be added to the liquidation preference of the
applicable series of Preferred Stock.
Liquidation Preference. Upon any voluntary or involuntary liquidation,
dissolution or winding-up of Products, holders of the Preferred Stock will be
entitled to be paid out of the assets of Products available for distribution to
stockholders in the amount of $1,000 per share plus the aggregate amount of
accrued dividends prior to any distribution to any holders of equity securities
which rank junior to the Preferred Stock. In addition, upon any voluntary or
involuntary liquidation, dissolution or winding-up of Products, the holders of
Series C Preferred Stock will be entitled to a participation in distributions
to Products' common equity tied to any appreciation in the value of Products'
common equity subsequent the issuance date, not to exceed an aggregate of $2
million for all Series C Preferred Stock outstanding.
Ranking. Upon issuance, the Preferred Stock will rank senior to all
classes of Products' capital stock with respect to dividend and liquidation
rights. Subject to certain conditions, the Preferred Stock will rank on a
parity with any class of Products' capital stock established after the issuance
date of the Preferred Stock, the terms of which expressly provide that such
class or series ranks on a parity with the Preferred Stock, and junior to any
class of Products' capital stock established after the issuance date of the
Preferred Stock, the terms of which expressly provide that such class or series
ranks senior to the Preferred Stock.
33
Optional and Mandatory Redemption; Exchange of Series C Preferred
Stock Products is required to redeem all of the Series A and Series B Preferred
Stock outstanding on January 1, 2013 at a redemption price equal to 100% of the
liquidation preference thereof, plus accrued and unpaid dividends to the date
of redemption. Products is also required to redeem all of the Series C
Preferred Stock outstanding on February 1, 2022 at a redemption price equal to
100% of the liquidation preference thereof, plus accrued and unpaid dividends
to the date of redemption, plus common equity participation.
The Series A and Series B Preferred Stock are redeemable, at Products'
option, in whole or in part, at any time on or after January 1 of the years set
forth below, at the redemption prices set forth below, plus, without
duplication, accumulated and unpaid dividends to the date of redemption.
REDEMPTION PRICE
------------------------------------
SERIES A SERIES B
YEAR PREFERRED STOCK PREFERRED STOCK
- ----------------------------- ----------------- ----------------
2007 ........................ 107.500% 108.000%
2008 ........................ 105.000% 105.333%
2009 ........................ 102.500% 102.667%
2010 and thereafter ......... 100.000% 100.000%
The Series C Preferred Stock is not optionally redeemable.
At Products' option or at the option of the holders of a majority of
outstanding shares of Series C Preferred Stock, the Series C Preferred Stock is
exchangeable for Series B Preferred Stock at any time following the second
anniversary of its issuance date and prior to the third anniversary of its
issuance date. The rate of exchange will equal the liquidation preference of
the Series C Preferred Stock, plus accrued and unpaid dividends thereon, plus
common equity participation with respect thereto, divided by the liquidation
preference of the Series B Preferred Stock, plus accrued and unpaid dividends
thereon.
Change of Control Offer If Products experiences a change of control (as
defined in the certificate of designation), Products must give holders of the
Preferred Stock the opportunity to sell to Products their Preferred Stock at
100% of the liquidation preference thereof, plus accrued and unpaid dividends
to the date of redemption, plus, in the case of the Series C Preferred Stock,
common equity participation. No such redemption may be effected until Products
has performed all of its obligations arising upon a change of control under any
of its debt instruments, including the notes. Products will not consummate a
transaction resulting in a change of control unless at the time of or prior to
the change of control, Products shall have entered into an arrangement which
permits the timely redemption of the Preferred Stock.
Asset Sale Proceeds If Products disposes of any assets it may either
reinvest the net cash proceeds therefrom in its business or repay outstanding
indebtedness. Any proceeds not so applied will be applied by Products towards
dividends in arrears on the Preferred Stock or an offer to purchase Preferred
Stock at a redemption price equal to 100% of the liquidation preference
thereof, plus accrued and unpaid dividends, plus, in the case of the Series C
Preferred Stock, common equity participation.
Certain Restrictive Provisions The provisions of the certificate of
designation will limit Products' and its restricted subsidiaries' ability to
incur more debt; pay dividends and make distributions; repurchase stock; make
investments; merge or consolidate; transfer assets; enter into transactions
with affiliates; issue stock of subsidiaries; and amend or modify the
certificate of designation. These covenants are subject to a number of
important exceptions.
Liquidity Provisions Relating to the Textron Shares The provisions
describe in this paragraph apply solely to the holders of Series A Preferred
Stock that constitute Textron Shares. In the event that either (I) both (A)
Products and its restricted subsidiaries on a consolidated basis meet or exceed
certain financial criteria based on interest coverage, adjusted to exclude the
effect of certain acquisitions, at any time and (B) no Par Offer has been
properly made on or before the next succeeding dividend payment date and all
Textron Shares purchased pursuant thereto or (II) both (A) Products' Existing
Notes are repaid at or within 180 days their final stated maturity and (B) no
Par Offer has been properly made on or before such final repayment, the
dividend rate applicable solely to Textron Shares will increase by
34
1.00% per annum for the next full dividend period and by an additional 0.50%
per annum for each dividend period thereafter; provided that (1) the dividend
rate applicable to Textron Shares in effect at any time shall not exceed 20%
per annum and (2) the dividend rate will return to the dividend rate otherwise
applicable once a Par Offer has been properly made and all Textron Shares
purchased pursuant thereto. During any period when an increased dividend rate
in respect of Textron Shares shall be in effect, Products and its restricted
subsidiaries will be subject to additional restrictions on their ability to
incur additional indebtedness.
Products will not redeem more than $25 million aggregate principal amount
of its Existing Notes prior to their final stated maturity unless prior to or
concurrently therewith, a Par Offer shall have been made.
A "Par Offer" is an offer to purchase for cash any Textron Shares at a
purchase price per share equal to the liquidation preference thereof plus
accrued and unpaid dividends to the date of purchase.
"Textron Shares" means all shares of Series A Preferred Stock held
beneficially and of record solely by Textron and/or its subsidiaries to the
extent solely and continuously beneficially owned since the issuance date.
Upon transfer to any person other than Textron or its subsidiaries,
Textron Shares shall cease to be entitled to any of the benefits described
above. If Textron shares are transferred with cash dividends in arrears arising
from the provisions described above, such cash dividends in arrears shall cease
to exist upon transfer, and in lieu thereof, Products will issue to the
transferee additional shares of Series A Preferred Stock having an aggregate
liquidation preference plus accrued and unpaid dividends equal to the amount of
cash dividends in arrears that shall have ceased to exist.
Voting Rights Holders of the Preferred Stock shall be entitled to vote on
matters required or permitted to be voted upon by Products' common
stockholders, but the amount of such vote shall be limited to 2% of the
outstanding voting rights of all such voting stock in the aggregate. Preferred
stockholders will also be entitled to vote upon certain matters relating to the
Preferred Stock and as otherwise required under the laws of the State of
Delaware and as set forth below. If certain events occur, the holders of the
majority of the then outstanding affected series of Preferred Stock will be
entitled to elect two members of Products' Board of Directors, but in no event
shall such holders be entitled to elect more than two members. Such events
include if, after January 1, 2003, there are any cash dividends in arrears
which have been unpaid for any two consecutive quarterly dividend periods;
Products fails to redeem Preferred Stock as required by the certificate of
designation; Products fails to purchase Textron Shares tendered in a Par Offer;
certain breaches of the Certificate of Designation occur; or certain
bankruptcy, insolvency or debt accelerations occur.
Exchange of Preferred Stock for Subordinated Notes Each series of
Preferred Stock is exchangeable on any dividend payment date, solely at
Products' option, for Products' subordinated exchange notes; if there are no
cash dividends in arrears at the time of the exchange. If for so long as
Textron and its subsidiaries are the holders of at least a majority of the
aggregate liquidation preference of any of the Preferred Stock, we must obtain
the written consent of Textron prior to initiating the exchange. The exchange
rate shall be $1.00 principal amount of exchange notes for each $1.00 of the
aggregate liquidation preference of Preferred Stock.
Registration and Other Rights Pursuant to a preferred stock registration
and other rights agreement, Products has agreed to provide marketing assistance
to Textron in connection with underwritten resales of Preferred Stock. Such
marketing assistance may occur up to a maximum of three times; provided that
Products will not be required to provide such assistance more than once in any
270-day period.
In connection with Products' resale assistance, Textron may require
Products to provide purchasers of Preferred Stock with customary exchange offer
style registration rights to have their Preferred Stock registered under the
Securities Act. Under certain circumstances, Products may also be required to
register such purchasers' Preferred Stock for resale pursuant to a shelf
registration statement. In addition, under certain circumstances, Textron may
require Products to register its Preferred Stock for resale pursuant to a shelf
registration statement.
35
If Products fails to comply with certain provisions in the preferred stock
registration and other rights agreement relating to marketing assistance,
filing exchange offer registration statements or shelf registration statements,
or achieving effectiveness of such exchange offer registration statements or
shelf registration statements, Products may be required to pay liquidated
damages to the affected holders in the event of such noncompliance, up to a
maximum of 2.00% per annum of the aggregate liquidation preference. Any such
liquidated damages may be paid by Products, at its option, in cash or in kind
by issuing additional shares of Preferred Stock of the affected series having
an aggregate liquidation preference, accrued and unpaid dividends and, in the
case of the Series C Preferred Stock, common equity participation equal to the
amount of liquidated damages payable. Liquidated damages will cease to accrue
and be payable upon Products compliance with the applicable provisions of the
preferred stock registration and other rights agreement or (except in the case
of a failure relating to marketing assistance) upon the affected shares of
Preferred Stock becoming transferable without restriction under the Securities
Act.
36
DESCRIPTION OF THE EXCHANGE NOTES
The Company will issue the exchange notes offered hereby (together with
the outstanding notes, the "Notes") under the indenture for the outstanding
notes dated December 20, 2001 (the "Indenture") among itself, the Guarantors
(as defined below) and BNY Midwest Trust Company, as trustee (the "Trustee").
Any outstanding notes that remain outstanding after the completion of the
exchange offer, together with the exchange notes issued in exchange for the
outstanding notes, will be treated as a single class of debt securities under
the Indenture. The terms of the Notes include those expressly set forth in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act. We have filed a copy of the Indenture as an exhibit to the
registration statement.
This Description of the Notes is intended to be a useful overview of the
material provisions of the Notes and the Indenture. Since this description is
only a summary, you should refer to the Indenture for a complete description of
the obligations of the Company and the Guarantors and your rights with respect
to the Notes. Copies of the Indenture can be obtained from the Company at its
address set forth elsewhere in this prospectus.
You will find the definitions of capitalized terms used in this
description under the heading "-- Certain Definitions." For purposes of this
description, references to "the Company" refer only to Collins & Aikman
Products Co. and not to its subsidiaries or C&A.
GENERAL
The Notes:
o are general unsecured, senior obligations of the Company;
o mature on December 31, 2011;
o rank equally in right of payment to all existing and any future senior
indebtedness of the Company and senior in right of payment to all
existing and future Subordinated Indebtedness of the Company; and
o are unconditionally guaranteed on a senior basis by C&A (the "Parent
Guarantor") and by each wholly owned Domestic Subsidiary that is a
guarantor under our Bank Credit Facilities as of the Issue Date, being
all of the Company's wholly owned Domestic Subsidiaries other than its
receivables, insurance and charitable subsidiaries (together with all
Subsidiaries issuing a Guarantee with respect to the Notes after the
Issue Date, the "Subsidiary Guarantors" and, together with the Parent
Guarantor, the "Guarantors").
The Indenture allows the Company to issue additional Notes, subject to any
such issuance complying with the covenant described below under the heading
"Certain Covenants -- Limitation on Indebtedness."
Interest on the Notes will:
o accrue at the rate of 10 3/4% per annum;
o accrue from the most recent interest payment date on the outstanding
notes;
o be payable in cash semi-annually in arrears on June 30 and December 31
of each year, commencing on December 31, 2002;
o be payable to the holders of record on the June 15 and December 15
immediately preceding the related interest payment dates; and
o be computed on the basis of a 360-day year comprised of twelve 30-day
months.
PAYMENTS, TRANSFER AND EXCHANGE
The Trustee will initially be a paying agent and the registrar. Principal
of and premium, if any, and interest on the Notes will be payable, and the
Notes may be presented for registration of transfer and
37
exchange, at the office of the agency of the Company maintained for that
purpose in the Borough of Manhattan, the City of New York, provided that, at
the option of the Company, payment of interest on the Notes may be made by
check mailed to the address of the Person entitled thereto as it appears in the
register; and provided, further, that all payments of principal of, and
premium, if any and interest on Notes, the holders of which have given wire
transfer instructions to the Company or its agent at least 10 Business Days
prior to the applicable payment date, will be required to be made by wire
transfer of immediately available funds to the accounts specified by such
holders in such instructions.
The Notes will be issued in fully registered form, without coupons. No
service charge will be made for any registration of transfer or exchange of
Notes, but the Company may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection therewith. The Company is
not required to transfer or exchange any Note selected for redemption. Also,
the Company is not required to transfer or exchange any Note for a period of 15
days before a selection of Notes to be redeemed.
The registered holder of a Note will be treated as the owner of it for all
purposes.
OPTIONAL REDEMPTION
Except as set forth in the next paragraph, the Notes will not be
redeemable prior to December 31, 2006.
The Notes will be redeemable from time to time prior to December 31, 2004
only in the event that the Company receives net cash proceeds from one or more
Equity Offerings, in which case the Company may, at its option, use all or a
portion of any such net cash proceeds to redeem up to an aggregate principal
amount of Notes equal to 35% of the original aggregate principal amount of the
Notes, provided, however, that Notes in an aggregate principal amount equal to
at least 65% of the original aggregate principal amount of the Notes remains
outstanding after each such redemption. Any such redemption must occur within
120 days of any such Equity Offering and upon not less than 30 nor more than 60
days' notice mailed to each holder of Notes to be redeemed at such holder's
address appearing in the register, in amounts of $1,000, or an integral
multiple of $1,000, at a redemption price of 110.75% of the principal amount of
the Notes, plus accrued and unpaid interest, if any, to but excluding the date
of redemption.
The Notes will be subject to redemption, at the option of the Company, in
whole or in part, at any time on or after December 31, 2006 and prior to
maturity, upon not less than 30 nor more than 60 days' notice mailed to each
holder of Notes to be redeemed at such holder's address appearing in the
register, in amounts of $1,000 or an integral multiple of $1,000 at the
following redemption prices (expressed as percentages of the principal amount)
plus accrued and unpaid interest, if any, to but excluding the date of
redemption, if redeemed during the 12-month period commencing on or after
December 31 of the years set forth below:
YEAR REDEMPTION PRICE
- ----------------------------------------- -----------------
2006 .................................. 105.375%
2007 .................................. 103.583%
2008 .................................. 101.792%
2009 and thereafter ................... 100.000%
If the optional redemption date is on or after an interest record date and
on or before the related interest payment date, the accrued and unpaid
interest, if any, will be paid to the Person in whose name the Note is
registered at the close of business on such record date, and no additional
interest will be payable to holders whose Notes will be subject to redemption
by the Company.
In the case of any partial redemption, the Trustee will select the Notes
to be redeemed in compliance with the requirements of the principal securities
exchange, if any, on which the Notes are listed or, if the Notes are not
listed, then on a pro rata basis, by lot or by such other method as the Trustee
in its sole discretion will deem to be fair and appropriate, although no Note
of $1,000 in original principal amount or less will be redeemed in part. If any
Note is to be redeemed in part only, the notice of redemption
38
relating to that Note will state the portion of the principal amount thereof to
be redeemed. A new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the holder thereof upon cancellation of
the original Note.
GUARANTEES
PARENT GUARANTEE
The Parent Guarantor, as primary obligor and not as surety, will
irrevocably and unconditionally guarantee (the "Parent Guarantee") on an
unsecured senior basis the performance and punctual payment when due, whether
at stated maturity, by acceleration or otherwise, of all monetary obligations
of the Company under the Indenture and the Notes, whether for principal of, or
premium, if any, or interest on, the Notes, expenses, indemnification or
otherwise (all such obligations being herein called the "Guaranteed
Obligations"). The Parent Guarantor will agree to pay, in addition to the
amount stated above, on an unsecured senior basis, any and all expenses
(including reasonable counsel fees and expenses) incurred by the Trustee or
holders of Notes in enforcing any rights under the Parent Guarantee.
The Parent Guarantee will be limited in amount to an amount not to exceed
the maximum amount that can be guaranteed by the Parent Guarantor without
rendering the Parent Guarantee, as it relates to the Parent Guarantor, voidable
under applicable law relating to fraudulent conveyance or fraudulent transfer.
The Parent Guarantor presently has no material assets other than the common
stock of the Company.
The Parent Guarantee will be a continuing guarantee and will (1) remain in
full force and effect until payment in full of all the Guaranteed Obligations,
(2) be binding upon the Parent Guarantor and (3) inure to the benefit of and be
enforceable by the Trustee and the holders of the Notes. Upon the failure of
the Company to pay any Guaranteed Obligation when and as due, whether at
maturity, by acceleration, by redemption or otherwise, the Parent Guarantor
will, upon receipt of written demand by the Trustee, pay or cause to be paid,
in cash, to the holders of the Notes or the Trustee all unpaid monetary
Guaranteed Obligations.
SUBSIDIARY GUARANTEES
The Subsidiary Guarantors, as primary obligors and not as sureties, will,
jointly and severally, irrevocably and unconditionally guarantee (the
"Subsidiary Guarantees") on an unsecured senior basis the performance and
punctual payment when due, whether at stated maturity, by acceleration or
otherwise, of all Guaranteed Obligations. Each Subsidiary Guarantor will agree
to pay, in addition to the amount stated above, on an unsecured senior basis,
any and all expenses (including reasonable counsel fees and expenses) incurred
by the Trustee or holders of Notes in enforcing any rights under the Subsidiary
Guarantee with respect to such Subsidiary Guarantor.
Each Subsidiary Guarantee made by each Subsidiary Guarantor will be
limited in amount to an amount not to exceed the maximum amount that can be
guaranteed by such Subsidiary Guarantor without rendering such Guarantee, as it
relates to such Subsidiary Guarantor, voidable under applicable law relating to
fraudulent conveyance or fraudulent transfer.
Each Subsidiary Guarantee will be a continuing guarantee and will (1)
remain in full force and effect until payment in full of all the Guaranteed
Obligations, (2) be binding upon the Subsidiary Guarantors and (3) inure to the
benefit of and be enforceable by the Trustee and the holders of the Notes. Upon
the failure of the Company to pay any Guaranteed Obligation when and as due,
whether at maturity, by acceleration, by redemption or otherwise, each
Subsidiary Guarantor will, upon receipt of written demand by the Trustee, pay
or cause to be paid, in cash, to the holders of the Notes or the Trustee all
unpaid monetary Guaranteed Obligations.
In the event a Subsidiary Guarantor is sold or disposed of (whether by
merger, consolidation, the sale of its Capital Stock or the sale of all or
substantially all of its assets (other than by lease) and whether or not the
Subsidiary Guarantor is the surviving corporation in such transaction) to a
Person which is not the Company or a Restricted Subsidiary, such Subsidiary
Guarantor will be released from its obligations under its Subsidiary Guarantees
if:
39
(1) the sale or other disposition is in compliance with the Indenture,
including the covenant "-- Limitation on Asset Dispositions"; and
(2) all the obligations of such Subsidiary Guarantor under any other
Guarantees relating to any other Indebtedness of the Company or the
Restricted Subsidiaries terminate upon consummation of such transaction.
In addition, a Subsidiary Guarantor will be released from its obligations under
the Indenture, Subsidiary Guarantee and Registration Rights Agreement if the
Company designates such Subsidiary as an Unrestricted Subsidiary and such
designation complies with the other applicable provisions of the Indenture.
RANKING
The Indebtedness evidenced by the Notes, the Parent Guarantees and the
Subsidiary Guarantees will be unsecured senior obligations of the Company, the
Parent Guarantor and the Subsidiary Guarantors, respectively, ranking senior in
right of payment to all existing and future Subordinated Indebtedness,
including the Existing Notes and the related Guarantees, and ranking pari passu
with the Company's, the Parent Guarantor's and each Subsidiary Guarantor's
existing and future unsecured and unsubordinated Indebtedness.
At December 31, 2001, the aggregate amount of outstanding Indebtedness of
the Company and its Subsidiaries was $1,301.9 million, of which $400.0 million
would have been subordinated in right of payment to the Notes and related
Guarantees, and $400.0 million would have been secured Indebtedness of the
Company, the Parent Guarantor or the Subsidiary Guarantors effectively ranking
senior to the Notes and related Guarantees to the extent of the assets securing
such Indebtedness.
The Notes and the Guarantees will be structurally subordinate to the
liabilities, including trade payables, of the Company's Subsidiaries that are
not Subsidiary Guarantors.
CERTAIN COVENANTS
LIMITATION ON INDEBTEDNESS
The Company will not, and will not permit any Restricted Subsidiary to,
Incur any Indebtedness; provided, however, that the Company and the Subsidiary
Guarantors may Incur Indebtedness if, after giving pro forma effect to the
Incurrence of such Indebtedness and the receipt and application of the proceeds
thereof, the Consolidated Coverage Ratio would be greater than or equal to 2.25
to 1.00.
Notwithstanding the foregoing, the following Indebtedness may be Incurred
(collectively, "Permitted Indebtedness"):
(1) (a) Indebtedness of the Company or any Restricted Subsidiary under
the revolving facility component of the Bank Credit Facilities or one or
more other revolving credit facilities (including related Guarantees (as
defined below), notes, letters of credit and security documents) in an
aggregate principal amount which, when taken together with all other
Indebtedness Incurred pursuant to this clause (a) and then outstanding,
does not exceed $300.0 million,
(b) Indebtedness of the Company or any Restricted Subsidiary under the
term loan components of the Bank Credit Facilities (including related
Guarantees, notes, letters of credit and security documents) and under one
or more agreements or instruments effecting a Refinancing thereof in an
aggregate principal amount which, when taken together with all Indebtedness
Incurred pursuant to this clause (b) and then outstanding, does not exceed
an amount equal to (x) $400.0 million less (y) the aggregate amount of all
repayments of such Indebtedness resulting in the permanent reduction of the
commitments of the lenders of such Indebtedness with respect thereto prior
to the date of determination, and
40
(c) Indebtedness of the Company or any Restricted Subsidiary under one
or more receivables financing facilities pursuant to which the Company or
any Restricted Subsidiary pledges or otherwise borrows against its
Receivables in an aggregate principal amount which, when taken together
with all other Indebtedness Incurred pursuant to this clause (c) and then
outstanding, does not exceed 80% of the consolidated book value of the
Receivables of the Company and the Restricted Subsidiaries (to the extent
such Receivables are not then being financed pursuant to a Permitted
Receivables Financing Facility or as a basis for Indebtedness Incurred
pursuant to clause (10) of this paragraph);
(2) the original issuance by the Company of the Indebtedness represented
by the Notes and by the Subsidiary Guarantors of the Subsidiary Guarantees;
(3) (a) any Indebtedness (other than Indebtedness described in another
clause of this paragraph) of the Company or any Restricted Subsidiary
outstanding on the Issue Date, including, without limitation, the Existing
Notes outstanding on the Issue Date and Indebtedness assumed connection
with the TAC-Trim acquisition; (b) Indebtedness in respect of any Italian
JV Letters of Credit, any Brazilian Credit Facility and any Overdraft
Facilities; and (c) Indebtedness of the Subsidiary Guarantors consisting of
senior subordinated guarantees of the Company's obligations under the
Existing Notes;
(4) Indebtedness owed by the Company to any Restricted Subsidiary or
Indebtedness owed by any Restricted Subsidiary to the Company or any other
Restricted Subsidiary; provided, however, that
(a) any such Indebtedness owing by the Company to a Restricted
Subsidiary must be unsecured Indebtedness;
(b) upon either (1) the transfer or other disposition by a Restricted
Subsidiary or the Company of any Indebtedness so permitted to a Person
other than the Company or another Restricted Subsidiary or (2) the
issuance (other than directors' qualifying shares), sale, transfer or
other disposition of shares of Capital Stock (including by consolidation
or merger) of a Restricted Subsidiary to whom such Indebtedness is owing
or any other event which results in payments in respect of any such
Indebtedness being payable to a Person other than the Company or a
Restricted Subsidiary, the provisions of this clause (4) will no longer
be applicable to such Indebtedness and such Indebtedness will be deemed
to have been Incurred by the Company or the applicable Restricted
Subsidiary obligor at the time of such transfer or other disposition;
(5) Indebtedness of the Company or any Restricted Subsidiary consisting
of Permitted Interest Rate, Currency or Commodity Price Agreements;
(6) Indebtedness which is exchanged for or the proceeds of which are to
be used to Refinance outstanding Indebtedness Incurred pursuant to the
first paragraph of this covenant or clauses (2), (3), (6), (7), (8) or (9)
of this paragraph in an aggregate principal amount (or, if issued with
original issue discount, an aggregate issue price) not to exceed the
principal amount (or, if issued with original issue discount, the aggregate
accreted value) then outstanding of the Indebtedness so Refinanced plus the
amount of any premium required to be paid in connection with such
Refinancing pursuant to the terms of the Indebtedness so Refinanced or the
amount of any premium reasonably determined by the Company as necessary to
accomplish such Refinancing by means of a tender offer or negotiated
repurchase, plus the expenses of C&A, the Company or any Restricted
Subsidiary, as the case may be, Incurred in connection with such
Refinancing; provided, however, that
(a) Indebtedness the proceeds of which are used to Refinance
Indebtedness which is subordinate in right of payment to the Notes shall
only be permitted if the Refinancing Indebtedness Incurred is
subordinated to the Notes to the same extent as the Indebtedness being
refinanced;
(b) the Refinancing Indebtedness by its terms, or by the terms of any
agreement or instrument pursuant to which such Indebtedness is Incurred,
(i) provides that the Weighted
41
Average Life to Maturity of such Refinancing Indebtedness at the time
such Refinancing Indebtedness is Incurred is equal to or greater than
the Weighted Average Life to Maturity of the Indebtedness being
Refinanced and (ii) does not permit redemption or other retirement
(including pursuant to an offer to purchase) of such debt at the option
of the holder thereof prior to the earlier of 91 days after the Stated
Maturity of the Notes and the final stated maturity of the Indebtedness
being Refinanced, other than a redemption or other retirement at the
option of the holder of such Indebtedness (including pursuant to an
offer to purchase) which is conditioned upon provisions substantially
similar to those described under "-- Change of Control" and "--
Limitation on Asset Dispositions;"
(c) in the case of any Refinancing of Indebtedness Incurred by the
Company or a Guarantor, the Refinancing Indebtedness may be Incurred
only by the Company or a Guarantor; and
(d) Indebtedness Incurred pursuant to this clause (6) may not be
Incurred more than 60 days prior to the application of the proceeds to
repay the Indebtedness to be Refinanced;
(7) Indebtedness consisting of:
(a) Guarantees by the Company or any Restricted Subsidiary of
Indebtedness Incurred by a Restricted Subsidiary without violation of
the Indenture, and
(b) Guarantees by any Restricted Subsidiary (in addition to Guarantees
permitted by clause (a) above) of Indebtedness Incurred by the Company
(so long as such Restricted Subsidiary could have Incurred such
Indebtedness directly without violation of the Indenture) without
violation of the Indenture, so long as such Restricted Subsidiary (if it
is not then a Subsidiary Guarantor) provides an equal (or superior) and
ratable Guarantee for the benefit of the holders of the Notes; provided
that if such Indebtedness constitutes Subordinated Indebtedness, such
Guarantee by a Guarantor shall be subordinated to such Guarantor's
Guarantee of the Notes to the same extent as the Subordinated
Indebtedness being Incurred;
(8) Indebtedness of the Company or any Restricted Subsidiary represented
by Capitalized Lease Obligations, mortgage financings or other purchase
money obligations or obligations under other financing transactions
relating to capital expenditures, in each case Incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property used in a Related Business ("Capital Spending") and
Incurred no later than 270 days after the date of such acquisition or the
date of completion of such construction or improvement, provided, that the
principal amount of any Indebtedness Incurred pursuant to this clause (8)
(other than Indebtedness Incurred to Refinance other Indebtedness) at any
time during a single fiscal year shall not exceed 40% of the total Capital
Spending of the Company and the Restricted Subsidiaries made during the
period of the most recently completed four consecutive fiscal quarters
prior to the date of such Incurrence;
(9) Indebtedness of any Restricted Subsidiary Incurred prior to the time
(a) such Person became a Restricted Subsidiary,
(b) such Person merged into or was consolidated with a Restricted
Subsidiary, or
(c) another Restricted Subsidiary merged into or was consolidated with
such Person (in a transaction in which such Person became a Restricted
Subsidiary);
provided, that such Indebtedness was not Incurred in anticipation of such
transaction and was outstanding prior to such transaction; provided, further,
that to the extent the principal amount of such Indebtedness in any single
transaction or series of related transactions to be Incurred under this clause
(9) exceeds $10.0 million at the time such Person became a Restricted
Subsidiary in any such manner, the Company would have been able to Incur $1.00
of additional Indebtedness pursuant to the first paragraph of this covenant
after giving effect to the Incurrence of such Indebtedness pursuant to this
clause (9);
(10) Indebtedness of Foreign Subsidiaries Incurred for working capital
purposes if, at the time of Incurrence of such Indebtedness, and after
giving effect thereto, the aggregate principal amount
42
of all Indebtedness of the Foreign Subsidiaries Incurred pursuant to
this clause (10) and then outstanding does not exceed the amount (the
"Borrowing Base") equal to the sum of (x) 80% the consolidated book
value of the accounts receivable of the Foreign Subsidiaries and (y) 60%
the consolidated book value of the inventories of the Foreign
Subsidiaries;
(11) Indebtedness of any Restricted Subsidiary in an aggregate principal
amount which, together with any other Indebtedness Incurred pursuant to
this clause (11) and then outstanding, does not exceed the sum of $25.0
million plus, if at the time such Indebtedness is Incurred, the Company
would have been able to Incur $1.00 of additional Indebtedness pursuant to
the first paragraph of this covenant after giving effect to the Incurrence
of such Indebtedness pursuant to this clause (11), 3% of the Company's
Consolidated Assets as of the date of such Incurrence;
(12) Indebtedness Incurred in respect of (a) workers' compensation
claims, self-insurance obligations, bankers' acceptances, performance,
surety and similar bonds and completion guarantees provided by the Company
or a Restricted Subsidiary in the ordinary course of business, (b) in
respect of performance bonds or similar obligations of the Company or any
of the Restricted Subsidiaries for or in connection with pledges, deposits
or payments made or given in the ordinary course of business and not for
money borrowed in connection with or to secure statutory, regulatory or
similar obligations, including obligations under health, safety or
environmental obligations, and (c) arising from guarantees to suppliers,
lessors, licensees, contractors, franchises or customers of obligations
incurred in the ordinary course of business and not for money borrowed;
(13) Indebtedness arising from agreements of the Company or a Restricted
Subsidiary providing for indemnification, adjustment of purchase price or
similar obligations, in each case, Incurred or assumed in connection with
the disposition of any business, assets or Capital Stock of a Restricted
Subsidiary, provided, that the maximum aggregate liability in respect of
all such Indebtedness shall at no time exceed the gross proceeds actually
received by the Company and the Restricted Subsidiaries in connection with
such disposition;
(14) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument (except in the case of
daylight overdrafts) drawn against insufficient funds in the ordinary
course of business, provided, however, that such Indebtedness is
extinguished within five Business Days of Incurrence;
(15) the issuance and sale of Preferred Stock (a) by a Foreign
Subsidiary, (b) by a Restricted Subsidiary which is a joint venture with a
third party which is not an Affiliate of the Company or a Restricted
Subsidiary, and (c) by a Restricted Subsidiary pursuant to obligations with
respect to the issuance or sale of Preferred Stock which exist at the time
such Person becomes a Restricted Subsidiary and which were not created in
connection with or in contemplation of such Person becoming a Restricted
Subsidiary; and
(16) Indebtedness of the Company or any Restricted Subsidiary, in
addition to any Indebtedness Incurred pursuant to clauses (1) through (15)
above, which, together with any other Indebtedness Incurred pursuant to
this clause (16) and then outstanding, has an aggregate principal amount
not in excess of $50.0 million.
For purposes of determining compliance with, and the outstanding principal
amount of any particular Indebtedness incurred pursuant to and in compliance
with, this covenant:
(1) in the event that Indebtedness meets the criteria of more than one of
the types of Indebtedness described in the first and second paragraphs of
this covenant, the Company, in its sole discretion, will classify or
reclassify such item of Indebtedness in any manner that complies with this
covenant and such item of Indebtedness will be treated as having been
Incurred pursuant to only one of the clauses of the second paragraph of
this covenant or pursuant to the first paragraph of this covenant; and
(2) an item of Indebtedness may be divided and classified among more than
one of the types of Indebtedness described hereunder.
43
Accrual of interest, accrual of dividends, the accretion of accreted
value, the payment of interest in the form of additional Indebtedness and the
payment of dividends in the form of additional shares of Preferred Stock will
not be deemed to be an Incurrence of Indebtedness for purposes of this
covenant. The "amount" or "principal amount" of Indebtedness at any time of
determination as used herein represented by (a) any contingent Indebtedness,
will be, without duplication, the maximum principal amount thereof, (b) any
Indebtedness issued at a price that is less than the principal amount at
maturity thereof, will be the amount of the liability in respect thereof
determined in accordance with GAAP; provided that the accretion of any such
Indebtedness shall not be deemed an Incurrence thereof, (c) any Redeemable
Stock, will be the maximum fixed redemption or repurchase price in respect
thereof, and (d) any Preferred Stock, will be the maximum voluntary or
involuntary liquidation preference, in each case as of such time of
determination.
If at any time an Unrestricted Subsidiary becomes a Restricted Subsidiary,
any Indebtedness of such Subsidiary shall be deemed to be Incurred by a
Restricted Subsidiary of the Company as of such date (and, if such Indebtedness
is not permitted to be Incurred as of such date under this "Limitation on
Indebtedness" covenant, the Company shall be in Default of this covenant).
For purposes of determining compliance with any U.S. dollar-denominated
restriction on the Incurrence of Indebtedness, the U.S. dollar-equivalent
principal amount of Indebtedness denominated in a foreign currency shall be
calculated based on the relevant currency exchange rate in effect on the date
such Indebtedness was Incurred, in the case of term Indebtedness, or first
committed, in the case of revolving credit Indebtedness; provided, that if such
Indebtedness is Incurred to Refinance other Indebtedness denominated in a
foreign currency, and such Refinancing would cause the applicable U.S.
dollar-denominated restriction to be exceeded if calculated at the relevant
currency exchange rate in effect on the date of such Refinancing, such U.S.
dollar-denominated restriction shall be deemed not to have been exceeded so
long as the principal amount of such Refinancing Indebtedness does not exceed
the principal amount of such Indebtedness being Refinanced. Notwithstanding any
other provision of this covenant, the maximum amount of Indebtedness that the
Company may Incur pursuant to this covenant shall not be deemed to be exceeded
solely as a result of fluctuations in the exchange rate of currencies. The
principal amount of any Indebtedness Incurred to Refinance other Indebtedness,
if Incurred in a different currency from the Indebtedness being Refinanced,
shall be calculated based on the currency exchange rate applicable to the
currencies in which such Refinancing Indebtedness is denominated that is in
effect on the date of such Refinancing.
LIMITATION ON LIENS
The Company may not, and may not permit any Restricted Subsidiary to,
directly or indirectly, Incur or suffer to exist any Lien (other than Permitted
Liens) on or with respect to any property or assets (including Capital Stock)
now owned or hereafter acquired to secure any Indebtedness without making, or
causing such Subsidiary to make, effective provision for securing the Notes or,
in respect of Liens on any Subsidiary Guarantor's property or assets, any
Subsidiary Guarantee of such Subsidiary Guarantor, (x) equally and ratably with
such Indebtedness as to such property or assets for so long as such
Indebtedness will be so secured or (y) in the event such Indebtedness is
Subordinated Indebtedness, prior to such Indebtedness as to such property or
assets for so long as such Indebtedness will be so secured.
LIMITATION ON RESTRICTED PAYMENTS AND RESTRICTED INVESTMENTS
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly:
(1) declare or pay any dividend or make any distribution on or in respect
of the Capital Stock of the Company (including any payment in connection
with any merger or consolidation involving the Company) other than
dividends, distributions or payments payable solely in Capital Stock of the
Company or C&A (other than Redeemable Stock of the Company),
(2) purchase, redeem or otherwise retire or acquire for value any Capital
Stock of the Company or C&A (other than Capital Stock of the Company held
by a Restricted Subsidiary or in exchange for Capital Stock of the Company
or C&A (other than Redeemable Stock of the Company)),
44
(3) purchase, repurchase, redeem, defease or otherwise acquire or retire
for value, prior to scheduled maturity, scheduled repayment or scheduled
sinking fund payment any Subordinated Indebtedness of the Company or any
Subsidiary Guarantor (other than the purchase, repurchase or other
acquisition of Subordinated Indebtedness in anticipation of satisfying a
sinking fund obligation, principal installment or final maturity, in each
case due within one year of the date of acquisition), or
(4) make any Investment in any Person (other than Permitted Investments)
(each of clauses (1) through (4) being a "Restricted Payment") if:
(a) a Default or an Event of Default shall have occurred and is
continuing or would result from such Restricted Payment, or
(b) after giving pro forma effect to such Restricted Payment as if
such Restricted Payment had been made at the beginning of the applicable
four fiscal quarter period, the Company could not Incur at least $1.00
of additional Indebtedness pursuant to the first paragraph of the
covenant described under "-- Limitation on Indebtedness" above, or
(c) upon giving effect to such Restricted Payment, the aggregate of
all Restricted Payments declared or made subsequent to the Issue Date
exceeds the sum of:
(i) 50% of cumulative Consolidated Net Income (or, in the case
Consolidated Net Income shall be negative, less 100% of such deficit)
of the Company from January 1, 2002 through the last day of the last
fiscal quarter ending immediately preceding the date of such
Restricted Payment for which quarterly or annual financial statements
are available (taken as a single accounting period); plus
(ii) 100% of the aggregate net proceeds received by the Company
after the Issue Date, including the fair market value of property
other than cash (determined in good faith by the Board of Directors),
from contributions of capital or the issuance and sale (other than to
a Subsidiary of the Company) of Capital Stock (other than Redeemable
Stock) of the Company, provided, that any such net proceeds received,
directly or indirectly, by the Company from an employee stock
ownership plan financed by loans from the Company or a Subsidiary of
the Company shall be included only to the extent such loans have been
repaid with cash on or prior to the date of determination; plus
(iii) the amount by which Indebtedness of the Company or any
Restricted Subsidiary is reduced on the Company's balance sheet upon
the conversion or exchange (other than by a Restricted Subsidiary)
subsequent to the Issue Date of any Indebtedness of the Company or
any Restricted Subsidiary convertible or exchangeable for Capital
Stock (other than Redeemable Stock) of the Company or Capital Stock
of C&A (less the amount of any cash or other property (other than
such Capital Stock) distributed by the Company or any Restricted
Subsidiary upon such conversion or exchange); plus
(iv) to the extent not included in Consolidated Net Income, the net
reduction (received by the Company or any Restricted Subsidiary in
cash) in Investments (other than Permitted Investments) made by the
Company and the Restricted Subsidiaries since the Issue Date
(including if such reduction occurs by reason of the return of equity
capital, the repayment of the principal of loans or advances or other
transferred assets or the redesignation of Unrestricted Subsidiaries
as Restricted Subsidiaries), not to exceed, in the case of any
Investments in any Person, the amount of Investments (other than
Permitted Investments) made by the Company and the Restricted
Subsidiaries in such Person since the Issue Date.
So long as no Default or Event of Default shall have occurred and is
continuing or would result therefrom (except as to clauses (i) through (v),
(vii) and (ix) below), the foregoing will not prohibit:
(i) dividends paid within 60 days after the date of declaration thereof
if at such date of declaration such dividend would have complied with this
covenant;
45
(ii) the purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Indebtedness made by
the exchange for, or out of the proceeds of the substantially concurrent
sale of, Indebtedness Incurred pursuant to the first paragraph of, or
Subordinated Indebtedness meeting the criteria of subclauses (a) and (b) of
clause (6) of the second paragraph of "-- Limitation on Indebtedness" above
or in exchange for or out of the net proceeds of the substantially
concurrent issuance or sale (other than to a Subsidiary of the Company or
to an employee stock ownership plan financed by loans from the Company or a
Subsidiary of the Company) of shares of Capital Stock (other than
Redeemable Stock of the Company) of the Company or Capital Stock of C&A, to
the extent the net cash proceeds of any issuance or sale are received by
the Company as a capital contribution, provided, that the amount of such
purchase or redemption and the amount of net proceeds from such exchange or
sale shall be excluded from the calculation of the amount available for
Restricted Payments pursuant to the preceding paragraph;
(iii) the purchase, redemption, acquisition or retirement of any shares
of Capital Stock of the Company or C&A solely in exchange for or out of the
net proceeds of the substantially concurrent sale (other than to a
Subsidiary of the Company or to an employee stock ownership plan financed
by loans from the Company or a Subsidiary of the Company) of shares of
Capital Stock (other than Redeemable Stock of the Company) of the Company
or Capital Stock of C&A to the extent the net cash proceeds thereof are
received by the Company as a capital contribution, provided, that the
amount of such purchase, redemption, acquisition or retirement and the
amount of net proceeds from such exchange or sale shall be excluded from
the calculation of the amount available for Restricted Payments pursuant to
the preceding paragraph;
(iv) the purchase, redemption, acquisition or retirement of any
Subordinated Indebtedness from Net Available Proceeds to the extent
permitted under "-- Limitation on Asset Dispositions," provided, that such
purchase or redemption shall be excluded from the calculation of the amount
available for Restricted Payments pursuant to the preceding paragraph;
(v) the purchase, redemption, acquisition or retirement of any
Subordinated Indebtedness following a Change of Control after the Company
shall have complied with the provisions under "-- Change of Control" below,
including payment of the applicable Purchase Price;
(vi) payments (including through dividends or distributions to C&A to
enable it to make payments) (A) of amounts necessary and when necessary to
purchase, redeem, acquire, cancel or otherwise retire for value Capital
Stock of C&A, in each case held by full time officers, directors or
employees of C&A, the Company or any of the Company's Subsidiaries, upon,
in connection with or following death, disability, retirement, severance or
termination of employment or service or pursuant to any agreement or plan
under which such Capital Stock was issued or which was otherwise approved
by the Board of Directors of C&A or pursuant to an obligation on the part
of C&A or the Company with respect to the Company's Capital Stock of the
type contemplated by this subclause (A), (B) to redeem or repurchase stock
purchase or similar rights in respect of Capital Stock of C&A or the
Company or (C) to make cash payments to holders of Capital Stock of C&A or
the Company in lieu of the issuance of fractional shares of such Capital
Stock; provided, however, that the aggregate amount of payments pursuant to
subclauses (A), (B) and (C) of this clause (vi) after the Issue Date does
not exceed $5.0 million in any fiscal year plus any unutilized portion of
such amount in any prior fiscal year;
(vii) dividends or other Restricted Payments (including tax sharing
payments) to C&A to the extent used by C&A to pay its operating and
administrative expenses incurred in the ordinary course of its business,
including directors' fees, legal and audit expenses, listing fees,
judgments, awards or settlements payable by C&A arising from a Related
Business or C&A's status as a public company, SEC compliance expenses and
corporate franchise and other taxes;
(viii) so long as immediately before and immediately after giving effect
thereto, the Company would have been permitted to Incur at least $1.00 of
additional Indebtedness pursuant to the first paragraph under the
"Limitation on Indebtedness" covenant, payments of cash dividends on the
Textron Preferred Stock, or payments of cash dividends to C&A in an amount
sufficient to enable
46
C&A to pay dividends on the Textron Preferred Stock, equal to the minimum
cash dividends required pursuant to the terms of the certificate of
designations of the Textron Preferred Stock in effect on the Issue Date,
provided, that such dividends are applied directly to the payment of
dividends on the Textron Preferred Stock;
(ix) the payment of dividends or distributions to C&A in amounts and at
the times necessary to permit C&A to pay amounts, if any, owing by C&A in
connection with the TAC-Trim acquisition, the Bank Credit Facilities, the
Permitted Receivables Financing Facility, the offering of the Notes and
fees and expenses related to any of the foregoing; and
(x) any Investment made by the exchange for, or out of the proceeds of, a
capital contribution in respect of or the substantially concurrent sale of,
Capital Stock (other than Redeemable Stock) of the Company or Capital Stock
of C&A to the extent the net cash proceeds thereof are received by the
Company or are paid or contributed to the Company by C&A as a capital
contribution, provided, that the amount of such capital contribution or
proceeds used to make such Investment shall be excluded from the
calculation of the amount available for Restricted Payments pursuant to the
preceding paragraph; and
(xi) Restricted Payments (other than Investments and other Restricted
Payments otherwise permitted hereunder) in an aggregate amount not to
exceed $25.0 million.
Any payment made pursuant to clause (i), (v), (vi) (to the extent not
deducted in calculating Consolidated Net Income), (vii) (to the extent not
deducted in calculating Consolidated Net Income), (viii) or (xi) of the
preceding paragraph will, without duplication, be a Restricted Payment for
purposes of calculating aggregate Restricted Payments pursuant to the second
preceding paragraph and any payment made pursuant to clause (ii), (iii), (iv),
(ix) or (x) will be excluded for purposes of calculating aggregate Restricted
Payments pursuant to the second preceding paragraph.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of such Restricted Payment of the asset(s) or
securities proposed to be paid, transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to such Restricted Payment.
The fair market value of any cash Restricted Payment shall be its face amount
and any non-cash Restricted Payment shall be determined conclusively by the
Board of Directors acting in good faith.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES
The Company may not, and may not permit any Restricted Subsidiary to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(1) pay dividends (in cash or otherwise) or make any other distributions
in respect of its Capital Stock owned by the Company or any other
Restricted Subsidiary or pay any Indebtedness or other obligation owed to
the Company or any other Restricted Subsidiary;
(2) make loans or advances to the Company or any other Restricted
Subsidiary; or
(3) transfer any of its property or assets to the Company or any other
Restricted Subsidiary.
Notwithstanding the foregoing, the Company may, and may permit any
Restricted Subsidiary to, create or otherwise cause or suffer to exist or
become effective any such encumbrance or restriction:
(a) pursuant to any agreement in effect on the Issue Date;
(b) pursuant to the Bank Credit Facilities, the Permitted Receivables
Financing Facility, Permitted Interest Rate, Currency or Commodity Price
Agreements, the Indenture, the Existing Notes Indenture and the
Brazilian Credit Facility (provided, that any such encumbrances or
restrictions contained in the Brazilian Credit Facility are not
applicable to any Person, or properties or assets of any Person, other
than the Company's Brazilian Subsidiaries);
(c) pursuant to an agreement relating to any Indebtedness or Liens
Incurred by a Person (other than a Subsidiary of the Company that is a
Subsidiary of the Company on the Issue Date
47
or any Subsidiary carrying on any of the businesses of any such
Subsidiary) prior to the date on which such Person became a Subsidiary
of the Company and outstanding on such date and not Incurred in
anticipation of becoming a Subsidiary and not Incurred to provide all or
any portion of the funds utilized to consummate such acquisition, which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person so acquired;
(d) pursuant to an agreement effecting a Refinancing of Indebtedness
Incurred pursuant to an agreement referred to in clause (a), (b) or (c)
above or this clause (d), provided, however, that the provisions
contained in such Refinancing agreement relating to such encumbrance or
restriction are not, in the aggregate, more restrictive in any material
respect than the provisions contained in the agreement being Refinanced,
as determined in good faith by and in the reasonable judgment of the
Board of Directors and evidenced by a resolution of the Board of
Directors filed with the Trustee;
(e) in the case of clause (3) of the preceding paragraph, restrictions
contained in any mortgage, security or lease agreement (including a
capital or operating lease) securing Indebtedness of a Subsidiary
otherwise permitted under the Indenture, but only to the extent such
restrictions restrict the transfer of the property subject to such
mortgage, security agreement or lease agreement;
(f) in the case of clause (3) of the preceding paragraph, customary
nonassignment provisions entered into in the ordinary course of business
consistent with past practice in leases and other contracts to the
extent such provisions restrict the transfer or subletting of any such
lease or the assignment of rights under such contract;
(g) purchase money obligations for property acquired in the ordinary
course of business that impose encumbrances or restrictions of the
nature described in clause (3) of the preceding paragraph on the
property so acquired;
(h) any restriction with respect to a Subsidiary of the Company
imposed pursuant to an agreement which has been entered into for the
sale or disposition of all or substantially all the Capital Stock or
assets of such Subsidiary, provided, that consummation of such
transaction would not result in a Default or an Event of Default and
such restriction terminates if such transaction is closed or abandoned;
(i) any encumbrance or restriction with respect to a Foreign
Subsidiary pursuant to an agreement relating to Indebtedness which is
permitted under the covenant described under "-- Limitation on
Indebtedness" or Liens Incurred by such Foreign Subsidiary; and
(j) any encumbrance or restriction which by its terms permits the
payment of dividends and the making of other distributions, the making
of loans and advances and the transfer of property or assets to or by
the Company and to Restricted Subsidiaries to the extent needed to pay
principal, premium, if any and interest on the Notes as and when
required by the terms of the Indenture.
LIMITATION ON ASSET DISPOSITIONS
The Company may not, and may not permit any Restricted Subsidiary to, make
any Asset Disposition in one or more related transactions unless:
(1) the Company or the Restricted Subsidiary, as the case may be,
receives consideration for such disposition at least equal to the fair
market value for the assets sold or disposed of as determined by the Board
of Directors (including as to the value of all non-cash consideration) in
good faith and evidenced by a resolution of the Board of Directors filed
with the Trustee;
(2) either (a) at least 75% of the consideration for such disposition
consists of cash or Cash Equivalents or the assumption of Indebtedness of
the Company or any Restricted Subsidiary (other than Subordinated
Indebtedness) relating to such assets and release of the Company and the
48
Restricted Subsidiaries from all liability on the Indebtedness assumed or
(b) the aggregate non-cash consideration for all Asset Dispositions not
meeting the criteria set forth in the preceding clause (a) does not exceed
a fair market value in excess of $25.0 million; and
(3) all Net Available Proceeds, less any amounts invested within 365 days
of such disposition in assets of the Company or a Restricted Subsidiary
used or usable in a Related Business, are applied within 365 days of such
disposition:
(a) first, to the permanent repayment or reduction of Indebtedness
(other than Subordinated Indebtedness) of the Company or a Restricted
Subsidiary;
(b) second, to the extent any such amounts remain after application in
accordance with clause (1) above, to make an Offer to Purchase
outstanding Notes at 100% of their principal amount plus accrued and
unpaid interest, if any, to but excluding the date of purchase and, to
the extent the Company elects or is otherwise required by the terms
thereof, to make an offer to purchase any other Indebtedness of the
Company or a Subsidiary Guarantor that is pari passu with the Notes or
the Subsidiary Guarantees at a price no greater than 100% of the
principal amount thereof plus accrued and unpaid interest, if any, to
but excluding the date of purchase, and
(c) third, to the extent any such amounts remain after application in
accordance with clauses (a) and (b) above, to any other use as
determined by the Company which is not otherwise prohibited by the
Indenture.
The Company shall not be required to make an Offer to Purchase Notes
pursuant to this covenant if the Net Available Proceeds less invested amounts
pursuant to clause (3) of the preceding paragraph available therefor (after
application of the proceeds as provided in clause (a) of the preceding
paragraph) are less than $25.0 million for any particular Asset Disposition
(which lesser amounts shall be carried forward for purposes of determining
whether an Offer to Purchase is required with respect to the Net Available
Proceeds from any subsequent Asset Disposition). The Company may apply as a
credit in satisfaction of all or any part of the Company's obligation to make
an Offer to Purchase Notes pursuant to clause (b) of the preceding paragraph
the aggregate principal amount of the Notes purchased by the Company in
open-market transactions (i.e., excluding Notes optionally redeemed, or
required to be purchased by the Company, pursuant to the terms of the
Indenture) within the previous 24 consecutive months.
If the aggregate principal amount of the Notes surrendered by holders
thereof and other pari passu Indebtedness surrendered by holders or lenders,
collectively, pursuant to clause (b) of the second preceding paragraph exceeds
the amount of Net Available Proceeds, the Trustee shall select the portion of
the Notes and such other Indebtedness to be purchased on a pro rata basis on
the basis of the aggregate principal amount of the Notes tendered or
surrendered Notes and such other Indebtedness; provided, that Notes shall be
purchased only in increments of $1,000.
If the date of the closing of the Offer to Purchase is on or after an
interest record date and on or before the related interest payment date, any
accrued and unpaid interest will be paid to the Person in whose name a Note is
registered at the close of business on such record date, and no additional
interest will be payable to holders of the Notes whose tendered Notes are
purchased pursuant to the Offer of Purchase.
The Company will comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Notes pursuant to the
Indenture. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under the Indenture by virtue of any such
conflict.
TRANSACTIONS WITH AFFILIATES
The Company may not, and may not permit any Restricted Subsidiary to,
enter into any transaction (or series of related transactions) with an
Affiliate of the Company (other the Company or a Restricted Subsidiary),
including any Investment, either directly or indirectly, unless:
49
(1) such transaction is on terms no less favorable to the Company or such
Restricted Subsidiary than those that could be obtained in a comparable
arm's-length transaction with an entity that is not an Affiliate;
(2) for any transaction that involves in excess of $5.0 million, a
majority of the disinterested members of the Board of Directors of the
Company or C&A shall determine that the transaction satisfies the above
criteria in clause (1) above and shall evidence such a determination by a
Board Resolution; and
(3) for any transaction that involves in excess of $25.0 million, the
Company shall also obtain an opinion from a nationally recognized
independent investment banking firm or other expert with experience in
evaluating or appraising the terms and conditions of the type of
transaction (or series of related transactions) for which the opinion is
required stating in substance that such transaction (or series of related
transactions) is on terms not materially less favorable to the Company or
such Restricted Subsidiary than those that could be obtained in a
comparable arm's-length transaction with an entity that is not an Affiliate
of the Company (or on terms that are otherwise fair to the Company or such
Restricted Subsidiary from a financial point of view), which shall be
deemed to satisfy the requirements in clauses (1) and (2) of this
paragraph.
The foregoing provisions will not apply to:
(a) any Permitted Investment or any Restricted Payment permitted to be
paid pursuant to "-- Limitation on Restricted Payments and Restricted
Investments" above;
(b) any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of, employment,
compensation or indemnification arrangements, stock options and stock
ownership plans in the ordinary course of business to or with officers,
directors or employees of C&A or the Company and its Restricted
Subsidiaries, or approved by the Board of Directors;
(c) loans or advances to employees, indemnification agreements with and
the payment of fees and indemnities to directors, officers and full-time
employees of C&A or the Company and its Restricted Subsidiaries and
employment, noncompetition or confidentiality agreements entered into with
any such person in the ordinary course of business;
(d) the issuance of Capital Stock (other than Redeemable Stock) of the
Company or the receipt of capital contributions by the Company;
(e) transactions pursuant to agreements as in existence on the Issue Date;
(f) payments contemplated by the Advisory Agreement and payments in
connection with the TAC-Trim acquisition, including the reimbursement of
out-of-pocket expenses incurred in connection with the TAC-Trim
acquisition;
(g) transactions with any of C&A, the Becker Entities, the Joan Entities,
the Textron Entities or a Permitted Holder (as defined under "-- Change of
Control") in the ordinary course of business so long as the Company
determines in good faith (which determination shall be conclusive) that any
such agreement is on terms no less favorable to the Company or the
applicable Restricted Subsidiary than those that could be obtained in a
comparable arm's-length transaction with an entity that is not an
Affiliate;
(h) any management, service, purchase, supply or similar agreement relating
to the operations of a Related Business entered into in the ordinary course
of the Company's business between the Company or any Restricted Subsidiary
and any Unrestricted Subsidiary, in each case primarily engaged in a Related
Business, so long as the Company determines in good faith (which
determination shall be conclusive) that any such agreement is on terms no
less favorable to the Company or such Restricted Subsidiary than those that
could be obtained in a comparable arm's-length transaction with an entity
that is not an Affiliate; and
(i) transactions of the type described in clause (ii) of the definition of
Receivables Financing.
50
CHANGE OF CONTROL
Within 30 days of the occurrence of a Change of Control, unless the
Company has mailed a redemption notice with respect to all of the outstanding
Notes, the Company will be required to make an Offer to Purchase all
outstanding Notes at a purchase price equal to 101% of their principal amount
plus accrued and unpaid interest to the date of purchase.
A "Change in Control" shall be deemed to have occurred if
(1) (a) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than one or more Permitted Holders, is or becomes
the beneficial owner (within the meaning of Rule 13d-3 under the Exchange
Act), directly or indirectly, of more than 35% of the total voting power of
the Voting Stock of C&A or the Company, and
(b) the Permitted Holders beneficially own (as so defined), directly or
indirectly, in the aggregate a lesser percentage of the total voting power
of the Voting Stock of C&A or the Company, as the case may be, than such
other person and do not have the right or ability by voting power, contract
or otherwise to elect or designate for election a majority of the Board of
Directors of C&A or the Company, as the case may be (for the purposes of
this clause (1), such other person shall be deemed to beneficially own any
Voting Stock of a corporation (the "specified corporation") held by another
corporation (the "parent corporation"), if such other person beneficially
owns, directly or indirectly, more than 35% of the voting power of the
Voting Stock of such parent corporation and the Permitted Holders
beneficially own, directly or indirectly, in the aggregate a lesser
percentage of the voting power of the Voting Stock of such parent
corporation and do not have the right or ability by voting power, contract
or otherwise to elect or designate for election a majority of the board of
directors of such parent corporation); or
(2) during any period of two consecutive years (or, in the case this
event occurs within the first two years after the Issue Date, such shorter
period as shall have begun on such date), individuals who at the beginning
of such period constituted the Board of Directors of C&A or the Company
(together with any new directors whose election by such Board of Directors
or whose nomination for election by the shareholders of C&A or the Company
was approved by a vote of 662/3% of the directors of C&A or the Company
then still in office who were either directors at the beginning of such
period or whose election or nomination for election was previously so
approved or, in the case of the Company's Board of Directors only, were
approved by C&A if C&A shall beneficially own a majority of the Company's
Voting Stock) cease for any reason to constitute a majority of the Board of
Directors of C&A or the Company then in office;
provided, that a Change of Control shall not be deemed to have occurred solely
as a consequence of a merger or consolidation between C&A and the Company, in
which case all references in the preceding clauses (1) and (2) to "C&A or the
Company" shall henceforth be deemed to refer only to the surviving entity of
such merger or consolidation.
The term "Permitted Holder" shall mean Heartland and any of its Affiliates
and, with respect to the Company only, C&A. For purposes of clause (1) of the
definition of "Change of Control", no "person" other than Heartland and its
Affiliates shall be deemed to be a beneficial owner of Voting Stock of the
Company by reason of being a party to any of the Stockholders Agreements and
for the purposes of clause (1) (b) of the definition of "Change of Control",
the term "Permitted Holders" shall be deemed to include any other holder or
holders of shares of the Company or a parent corporation having ordinary voting
power if Heartland or any of its Affiliates shall hold the irrevocable general
proxy of each such holder in respect of the shares held by such holder.
The Bank Credit Facilities will prohibit the Company from purchasing any
Notes prior to repayment in full of the Bank Credit Facilities and will also
provide that certain change of control events with respect to the Company would
constitute a default thereunder. In the event that at the time of such Change
of Control the terms of the Bank Credit Facilities restrict or prohibit the
repurchase of Notes pursuant to this covenant, then prior to the mailing of the
Offer to Purchase but in any event within 30 days following any Change of
Control, the Company would need to (i) repay in full all Indebtedness under the
Bank
51
Credit Facilities or offer to repay in full all such Indebtedness and repay the
Indebtedness of each lender who has accepted such offer or (ii) obtain the
requisite consent under the Bank Credit Facilities to permit the repurchase of
the Notes as provided for in this covenant.
Future Indebtedness of the Company and the Restricted Subsidiaries may
contain prohibitions of certain events that would constitute a Change of
Control or require such Indebtedness to be repurchased upon a Change of
Control. Moreover, the exercise by the holders of Notes of their right to
require the Company to repurchase the Notes could cause a default under such
Indebtedness, even if the Change of Control itself does not, due to the
financial effect of such repurchase. Finally, the Company's ability to pay cash
to the holders of Notes upon a repurchase may be limited by the Company's then
existing financial resources. There can be no assurance that sufficient funds
will be available when necessary to make any required repurchases.
The Company will not be required to make an Offer to Purchase upon the
occurrence of a Change of Control if a third party makes the Offer to Purchase
in the manner, at the times and otherwise in compliance with the requirements
set forth in the Indenture applicable to an Offer to Purchase made by the
Company and purchases all Notes validly tendered and not withdrawn under such
Offer to Purchase.
The Company will comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of the Indenture, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations described in the Indenture by virtue of the
conflict.
PROVISION OF FINANCIAL INFORMATION
Whether or not C&A or the Company is required to be subject to Section
13(a) or 15(d) of the Exchange Act, or any successor provision thereto, C&A or
the Company shall file with the SEC the annual reports, quarterly reports and
other documents which C&A or the Company would have been required to file with
the SEC pursuant to such Section 13(a) or 15(d) or any successor provision
thereto if C&A or the Company were so required, such documents to be filed with
the SEC on or prior to the respective dates (the "Required Filing Dates") by
which C&A or the Company would have been required so to file such documents if
C&A or the Company were so required. C&A or the Company shall also in any event
(i) within 15 days of each Required Filing Date (a) transmit by mail to all
holders of Notes, as their names and addresses appear in the Security Register,
without cost to such holders of Notes, and (b) file with the Trustee, copies of
the annual reports, quarterly reports and other documents which C&A or the
Company files with the SEC pursuant to such Section 13(a) or 15(d) or any
successor provision thereto or would have been required to file with the SEC
pursuant to such Section 13(a) or 15(d) or any successor provisions thereto if
C&A or the Company were required to be subject to such Sections and (ii) if
filing such documents by C&A or the Company with the SEC is not permitted under
the Exchange Act, promptly upon written request of a holder of Notes supply
copies of such documents to any prospective holder of Notes. In addition,
unless the Notes have been previously registered under the Securities Act, if
C&A or the Company are not subject to Section 13(a) or 15(d) of the Exchange
Act, C&A and the Company shall furnish to holders and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
FUTURE SUBSIDIARY GUARANTORS
After the Issue Date, the Company will cause each Restricted Subsidiary,
other than a Foreign Subsidiary or a Subsidiary which is a Subsidiary
Guarantor, that becomes a guarantor under the Bank Credit Facilities to execute
and deliver to the Trustee a Subsidiary Guarantee pursuant to which such
Subsidiary Guarantor will unconditionally Guarantee, on a joint and several
basis, the full and prompt payment of the principal of, premium, if any, and
interest on the Notes on a senior basis.
52
LIMITATION ON INVESTMENTS BY C&A
C&A shall not make any direct Investments (other than Investments in Cash
Equivalents or of a de minimis nature (but not more than $1,000)) in any Person
other than the Company; provided, however, that this restriction shall cease to
have effect upon (i) the occurrence of a Change of Control of C&A or (ii) any
merger or consolidation between C&A and the Company.
UNRESTRICTED SUBSIDIARIES
The Company may designate any Subsidiary of the Company to be an
"Unrestricted Subsidiary" as provided below in which event such Subsidiary and
each other Person that is then or thereafter becomes a Subsidiary of such
Subsidiary will be deemed to be an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary of the Company
(including any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds
any Lien on any property of, any other Subsidiary of the Company which is not a
Subsidiary of the Subsidiary to be so designated or otherwise an Unrestricted
Subsidiary, provided, that either
(1) the Subsidiary to be so designated has total assets of $1,000 or less
or
(2) if such Subsidiary has assets greater than $1,000, the Investment
resulting from such designation would be permitted either as a Permitted
Investment or in compliance with the covenant entitled "-- Certain Covenants
-- Limitation on Restricted Payments and Restricted Investments."
In addition, without further designation, as of the Issue Date, the Company's
Receivables Subsidiary, Carcorp, Inc., will be an Unrestricted Subsidiary.
The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided, however, that immediately after giving effect
to such designation (x) the Company could Incur $1.00 of additional
Indebtedness under the first paragraph of the covenant described under "--
Certain Covenants -- Limitation on Indebtedness" and (y) no Default or Event of
Default shall have occurred and be continuing or would occur as a consequence
thereof. Any such designation by the Board of Directors shall be evidenced to
the Trustee by promptly filing with the Trustee a copy of the board resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation complied with the foregoing provisions.
MERGERS, CONSOLIDATIONS AND CERTAIN SALES OF ASSETS
The Company may not (1) consolidate with or merge into any other Person or
permit any other Person to consolidate with or merge into the Company or (2)
directly or indirectly, transfer, sell, lease or otherwise dispose of the
Company's assets substantially as an entirety to any Person (a "Fundamental
Transaction"), unless:
(a) in a Fundamental Transaction in which the Company does not survive or
in which the Company sells, leases or otherwise disposes of its assets
substantially as an entirety, the successor entity to the Company is
organized under the laws of the United States of America or any State
thereof or the District of Columbia and shall expressly assume, by a
supplemental indenture executed and delivered to the Trustee in form
satisfactory to the Trustee, all of the Company's obligations under the
Indenture;
(b) immediately before and after giving effect to such Fundamental
Transaction and treating any Indebtedness which becomes an obligation of
the Company or a Subsidiary as a result of such Fundamental Transaction as
having been Incurred by the Company or such Subsidiary at the time of the
Fundamental Transaction, no Default or Event of Default shall have occurred
and be continuing;
(c) immediately after giving effect to such Fundamental Transaction
(other than a Fundamental Transaction solely involving (i) the Company and
a Restricted Subsidiary of the Company or (ii) the Company and C&A) and
treating any Indebtedness which becomes an obligation of the
53
Company or a Subsidiary as a result of such transaction as having been
incurred by the Company or such Subsidiary at the time of such transaction,
the Company (including any successor entity to the Company) could Incur at
least $1.00 of additional Indebtedness pursuant to the provisions of the
first paragraph of the covenant under "-- Certain Covenants -- Limitation
on Indebtedness" above;
(d) each Subsidiary Guarantor (unless it is the other party to the
transactions above, in which case clause (a) shall apply) shall have by
supplemental indenture confirmed that its Subsidiary Guarantee shall apply
to such Person's obligations in respect of the Indenture and the Notes and
its obligations under the Registration Rights Agreement shall continue to
be in effect; and
(e) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indentures (if any)
comply with the Indenture.
Subject to the fourth paragraph of the covenant under "-- Certain
Covenants -- Guarantees -- Subsidiary Guarantees," a Guarantor may not (i)
consolidate with or merge into any other Person or (ii) directly or indirectly,
transfer, sell, lease or otherwise dispose of such Guarantor's assets
substantially as an entirety to any Person, unless:
(a) in a transaction in which the Guarantor does not survive or in which
the Guarantor sells or otherwise disposes of its assets substantially as an
entirety, the successor entity to the Guarantor is organized under the laws
of the United States of America or any State thereof or the District of
Columbia and shall expressly assume, by a supplemental indenture executed
and delivered to the Trustee in form satisfactory to the Trustee, all of
the Guarantor's obligations under the Indenture;
(b) immediately before and after giving effect to such transaction and
treating any Indebtedness which becomes an obligation of the Guarantor at
the time of the transaction as having been Incurred by the Guarantor at the
time of the transaction, no Default or Event of Default shall have occurred
and be continuing; and
(c) the Guarantor shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with the Indenture.
In the event of any transaction described in and complying with the
conditions listed in the immediately preceding paragraphs in which the Company
or a Guarantor is not the continuing corporation, the successor Person formed
or remaining will succeed to, and be substituted for, and may exercise every
right and power of, the Company or such Guarantor, as the case may be, and the
Company or such Guarantor, as the case may be, will be released and discharged
from all obligations and covenants under the Indenture.
CERTAIN DEFINITIONS
In addition to the definitions set forth elsewhere in this prospectus, the
following is a summary of certain of the defined terms used in the Indenture.
Reference is made to the Indenture for the full definition of all such terms,
as well as any other terms used herein for which no definition is provided.
"Advisory Agreement" means the Services Agreement dated as of February 23,
2001, as amended through the Issue Date, among C&A, the Company and Heartland
(or any other Affiliate thereof), as the same may be amended or modified from
time to time; but without giving effect to any amendment or modification after
the Issue Date that would increase the net fees payable thereunder to Heartland
Industrial Partners, L.P. and its Affiliates that have not been made subject to
compliance with the "Transactions With Affiliates" covenant.
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such specified Person. For the purposes of this definition, "control" when used
with respect to any Person means the power to direct the management and
policies of such specified Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the
54
foregoing; provided, that none of Textron Automotive Holdings (Italy) S.r.l. or
its Subsidiaries shall be deemed to be an Affiliate of the Company or any
Restricted Subsidiary unless such Person shall become a direct or indirect
Subsidiary of the Company.
"Asset Disposition" means any transfer, conveyance, sale, lease or other
disposition (including a consolidation or merger or other sale of a Restricted
Subsidiary with, into or to another Person in a transaction in which such
Restricted Subsidiary ceases to be a Restricted Subsidiary, but excluding
Receivables Sales and a disposition by a Restricted Subsidiary to the Company
or another Restricted Subsidiary or by the Company to a Restricted Subsidiary)
of:
(a) shares of Capital Stock (other than directors' qualifying shares) or
other ownership interests of a Restricted Subsidiary,
(b) substantially all of the assets of the Company or any of its
Restricted Subsidiaries representing a division or line of business, or
(c) other assets or rights of the Company or any of its Restricted
Subsidiaries outside of the ordinary course of business,
provided in each case that the aggregate consideration for such transfer,
conveyance, sale, lease or other disposition or any related series of such
transactions is equal to $25.0 million or more; provided, however, that (a) for
purposes of the covenant described under "-- Certain Covenants -- Limitation on
Asset Dispositions," the term "Asset Disposition" shall exclude any disposition
permitted by the covenant described under the heading "Certain Covenants --
Limitation on Restricted Payments" and (b) the term "Asset Disposition" shall
exclude transactions permitted under "-- Certain Covenants -- Mergers,
Consolidations and Certain Sales of Assets" above.
Notwithstanding the preceding, the following items shall not be deemed to
be Asset Dispositions:
(1) the sale of Cash Equivalents in the ordinary course of business;
(2) a disposition of inventory in the ordinary course of business;
(3) the surrender or waiver of contract rights or the settlement, release
or surrender of contract, tort or other claims of any kind;
(4) the grant in the ordinary course of business of licenses of patents,
trademarks and similar intellectual property;
(5) the sale or disposition of any Restricted Investment or Permitted
Investment of the type described in clauses (10), (11) or (12) of the
definition thereof;
(6) a disposition of obsolete or worn out equipment or equipment that is
no longer useful in the conduct of the business of the Company and its
Restricted Subsidiaries and that is disposed of in each case in the
ordinary course of business; and
(7) Receivables Sales in connection with a Receivables Financing.
"Bank Credit Facilities" means those certain senior credit facilities, by
and among the Company, the Company's Canadian Subsidiaries, JPMorgan Chase
Bank, as administrative agent and collateral agent, J.P. Morgan Bank Canada, as
Canadian administrative agent and collateral agent, Credit Suisse First Boston,
as syndication agent, Deutsche Banc Alex. Brown Inc. and Merrill Lynch Capital
Corporation, as co-documentation agents and the other lenders party thereto,
including any related notes, guarantees, collateral documents, letters of
credit, instruments and agreements executed in connection therewith (and any
appendices, exhibits or schedules to any of the foregoing), and in each case as
amended, modified, supplemented, restated, renewed, refunded, replaced,
restructured, repaid or refinanced from time to time (whether with the original
agents and lenders or other agents and lenders or otherwise, and whether
provided under the original credit facilities or other credit facilities or
otherwise).
"Becker Entities" means Charles E. Becker (or any of his immediate family
members, related family trusts, heirs and descendants), Becker Group LLC and
any other Affiliate of Charles E. Becker.
55
"Brazilian Credit Facility" means one or more credit facilities entered
into by Plascar Industria e Comerico Ltda and its Subsidiaries, together with
any credit support provided by the Company or any other Restricted Subsidiary,
providing for availability in an aggregate amount not to exceed $30.0 million
at any time outstanding.
"Business Day" means a day other than a Saturday, Sunday or other day on
which commercial banking institutions are authorized or required by law to
close in New York.
"Capital Lease Obligation" of any Person means the obligation to pay rent
or other payment amounts under a lease of (or other Indebtedness arrangements
conveying the right to use) real or personal property of such Person which is
required to be classified and accounted for as a capital lease or a liability
on the face of a balance sheet of such Person in accordance with GAAP. The
stated maturity of such obligation shall be the date of the last payment of
rent or any other amount due under such lease prior to the first date upon
which such lease may be terminated by the lessee without payment of a penalty.
The principal amount of such obligation shall be the capitalized amount thereof
that would appear on the face of a balance sheet of such Person in accordance
with GAAP.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) the equity, including Preferred Stock and
partnership interests, whether general or limited, of such Person.
"Cash Equivalents" means, at any time:
(1) any evidence of Indebtedness issued or directly and fully guaranteed
or insured by the United States of America, the United Kingdom, Canada,
France, Germany, Italy or Japan, or, in the case of an Asset Sale in Brazil
or an Investment of cash flow from the operations of the Company and its
Subsidiaries in Brazil, Brazil, or any agency or instrumentality thereof
(provided, that the full faith and credit of such country is pledged in
support thereof),
(2) certificates of deposit, money market deposit accounts and
acceptances with a maturity of 180 days or less from the date of
acquisition of any financial institution that is a member of the Federal
Reserve System or organized under the laws of the United Kingdom, Canada,
France, Germany, Italy or Japan or, in the case of an Asset Sale in Brazil
or an Investment of cash flow from the operations of the Company and its
Subsidiaries in Brazil, Brazil, having combined capital and surplus and
undivided profits of not less than $250.0 million,
(3) commercial paper with a maturity of 180 days or less from the date of
acquisition issued by a corporation organized under the laws of any state
of the United States of America or the District of Columbia or any foreign
country recognized by the United States of America whose debt rating, at
the time as of which such investment is made, is at least "A-1" by Standard
& Poor's Corporation or at least "P-1" by Moody's Investors Service, Inc.
or rated at least an equivalent rating category of another nationally
recognized securities rating agency,
(4) repurchase agreements and reverse repurchase agreements having a term
of not more than 30 days for underlying securities of the types described
in clause (1) above entered into with a financial institution meeting the
qualifications described in clause (2) above,
(5) any security, maturing not more than 180 days after the date of
acquisition, backed by standby or direct pay letters of credit issued by a
bank meeting the qualifications described in clause (2) above and
(6) any security, maturing not more than 180 days after the date of
acquisition, issued or fully guaranteed by any state, commonwealth, or
territory of the United States of America, or by any political subdivision
thereof, and rated at least "A" by Standard & Poor's Corporation or at
least "A" by Moody's Investors Service, Inc. or rated at least an
equivalent rating category of another nationally recognized securities
rating agency.
"Common Stock" of any Person means Capital Stock of such Person that does
not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
56
"Consolidated Assets" of any Person as of any date of determination means
the total assets of such Person as reflected on the most recently prepared
balance sheet of such Person, determined on a consolidated basis in accordance
with GAAP.
"Consolidated Cash Flow Available for Fixed Charges" for any period means
the Consolidated Net Income for such period increased by the sum of:
(1) Consolidated Interest Expense for such period, plus
(2) Consolidated Income Tax Expense for such period, plus
(3) the consolidated depreciation and amortization expense included in the
income statement of the Company and its Subsidiaries for such period plus
(4) all other expenses reducing Consolidated Net Income for such period
that do not represent cash disbursements for such period (excluding any
expense to the extent it represents an accrual of or reserve for cash
disbursements for any subsequent period prior to the Stated Maturity of the
Notes) less, to the extent included in the calculation of Consolidated Net
Income, items of income increasing Consolidated Net Income for such period
that do not represent cash receipts for such period (excluding any expense
to the extent it represents an accrual for cash receipts reasonably
expected to be received prior to the Stated Maturity of the Notes) in each
case for such period;
provided, however, that the provision for taxes based on the income or profits
of, the consolidated depreciation and amortization expense and such items of
expense or income attributable to, a Restricted Subsidiary shall be added to or
subtracted from Consolidated Net Income to compute Consolidated Cash Flow
Available for Fixed Charges only to the extent (and in the same proportion)
that the net income of such Restricted Subsidiary was included in calculating
Consolidated Net Income; provided, further, however, that the contribution to
Consolidated Cash Flow Available for Fixed Charges of a Restricted Subsidiary
which is restricted in its ability to pay dividends to the Company for any
period shall not exceed the amount that would have been permitted to be
distributed to the Company by such Restricted Subsidiary as a dividend or other
distribution during such period.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (1) Consolidated Cash Flow Available for Fixed Charges for the period
of the most recently completed four consecutive fiscal quarters for which
quarterly or annual financial statements are available to (2) Consolidated
Interest Expense for such period; provided, however, that:
(a) if the Company or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains outstanding
(other than Indebtedness to finance seasonal fluctuations in working
capital needs Incurred under a revolving credit (or similar arrangement) to
the extent of the commitment thereunder in effect on the last day of such
period unless any portion of such Indebtedness is projected in the
reasonable judgment of senior management of the Company to remain
outstanding for a period in excess of 12 months from the date of Incurrence
of such Indebtedness) or if the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness,
or both, Consolidated Cash Flow Available for Fixed Charges and
Consolidated Interest Expense for such period shall be calculated after
giving effect on a pro forma basis to (i) such Indebtedness as if such
Indebtedness had been Incurred on the first day of such period and (ii) the
discharge of any other Indebtedness repaid, repurchased, defeased or
otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period,
(b) if since the beginning of such period any Indebtedness of the Company
or any Restricted Subsidiary has been repaid, repurchased, defeased or
otherwise discharged (other than Indebtedness under a revolving credit or
similar arrangement unless such revolving credit Indebtedness has been
permanently repaid and has not been replaced), Consolidated Interest
Expense for such period shall be calculated after giving effect on a pro
forma basis as if such Indebtedness had been repaid, repurchased, defeased
or otherwise discharged on the first day of such period,
57
(c) if since the beginning of such period the Company or any Restricted
Subsidiary shall have made any Asset Disposition (including, for these
purposes, a disposition of the type described in clause (5) of the
definition of "Asset Disposition") or if the transaction giving rise to the
need to calculate the Consolidated Coverage Ratio is an Asset Disposition,
the Consolidated Cash Flow Available for Fixed Charges for such period
shall be reduced by an amount equal to the Consolidated Cash Flow Available
for Fixed Charges (if positive) attributable to the assets which are the
subject of such Asset Disposition (including, for these purposes, a
disposition of the type described in clause (5) of the definition of "Asset
Disposition") for such period or increased by an amount equal to the
Consolidated Cash Flow Available for Fixed Charges (if negative)
attributable thereto for such period, and Consolidated Interest Expense for
such period shall be reduced by an amount equal to the Consolidated
Interest Expense attributable to any Indebtedness of the Company or any
Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged
with respect to the Company and its continuing Restricted Subsidiaries in
connection with such Asset Disposition (including, for these purposes, a
disposition of the type described in clause (5) of the definition of "Asset
Disposition") for such period (or, if the Capital Stock of any Restricted
Subsidiary is sold, the Consolidated Interest Expense for such period
directly attributable to the Indebtedness of such Restricted Subsidiary to
the extent the Company and its continuing Restricted Subsidiaries are no
longer liable for such Indebtedness after such sale),
(d) if since the beginning of such period the Company or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment in any
Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary)
or an acquisition of assets, including any Investment in a Restricted
Subsidiary or any acquisition of assets occurring in connection with a
transaction causing a calculation to be made hereunder, which constitutes
all or substantially all of a line of business, Consolidated Cash Flow
Available for Fixed Charges and Consolidated Interest Expense for such
period shall be calculated after giving pro forma effect thereto (including
the Incurrence of any Indebtedness) as if such Investment or acquisition
occurred on the first day of such period and
(e) if since the beginning of such period any Person (that subsequently
became a Restricted Subsidiary or was merged with or into the Company or
any Restricted Subsidiary since the beginning of such period) shall have
made any Asset Disposition (including, for these purposes, a disposition of
the type described in clause (5) of the definition of "Asset Disposition"),
Investment or acquisition of assets that would have required an adjustment
pursuant to clause (c) or (d) above if made by the Company or a Restricted
Subsidiary during such period, Consolidated Cash Flow Available for Fixed
Charges and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto as if such Asset
Disposition (including, for these purposes, a disposition of the type
described in clause (5) of the definition of "Asset Disposition"),
Investment or acquisition occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be given to an
acquisition or disposition of assets, the amount of income or earnings relating
thereto and the amount of Consolidated Interest Expense associated with any
Indebtedness Incurred or repaid in connection therewith, the pro forma
calculations will be determined in good faith by a responsible financial or
accounting officer of the Company and such calculations may include such pro
forma adjustments for non-recurring items that the Company considers reasonable
in order to reflect the ongoing impact of any such transaction on the Company's
results of operations. If the Indebtedness to be Incurred bears a floating rate
of interest, the interest expense on such Indebtedness shall be calculated as
if the rate in effect on the date of determination had been the applicable rate
for the entire period (taking into account any Interest Rate, Currency or
Commodity Price Agreement applicable to such Indebtedness if such Interest
Rate, Currency or Commodity Price Agreement has a remaining term in excess of
12 months).
"Consolidated Income Tax Expense" for any period means the consolidated
provision for income taxes of the Company and the Restricted Subsidiaries for
such period calculated on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means for any period the consolidated
interest expense included in a consolidated income statement (without deduction
of interest income) of the Company and the Restricted Subsidiaries for such
period calculated on a consolidated basis in accordance with GAAP, including
without limitation or duplication (or, to the extent not so included, with the
addition of):
58
(1) the amortization of debt discounts;
(2) to the extent included in the calculation of net income under GAAP,
any payments or fees with respect to letters of credit, bankers'
acceptances or similar facilities;
(3) to the extent included in the calculation of net income under GAAP,
net costs with respect to interest rate swap or similar agreements or, to
the extent related to non-U.S. dollar denominated Indebtedness, foreign
currency hedge, exchange or similar agreements;
(4) Preferred Dividends in respect of all Preferred Stock of Restricted
Subsidiaries and Redeemable Stock of the Company held by Persons other than
the Company or a Wholly Owned Subsidiary whether or not declared or paid;
(5) interest on Indebtedness guaranteed by the Company and the Restricted
Subsidiaries and actually paid by the Company or the Restricted
Subsidiaries;
(6) capitalized interest;
(7) the portion of any rental obligation attributable to Capital Lease
Obligations allocable to interest expense and
(8) the loss on Receivables Sales, and excluding, to the extent included
in such consolidated interest expense, interest expense of any Person
acquired by the Company or a Subsidiary of the Company in a
pooling-of-interests transaction for any period prior to the date of such
transaction.
Notwithstanding the foregoing, the Consolidated Interest Expense with respect
to any Restricted Subsidiary, not all the net income of which was included in
calculating Consolidated Net Income by reason of the fact that such Restricted
Subsidiary was not a Wholly Owned Subsidiary, will be included only to the
extent (and in the same proportion) that the net income of such Restricted
Subsidiary was included in calculating Consolidated Net Income.
"Consolidated Net Income" for any period means the consolidated net income
(or loss) of the Company and its Subsidiaries before payment of dividends in
respect of any Capital Stock of the Company for such period determined on a
consolidated basis in accordance with GAAP; provided, that there will be
excluded therefrom:
(1) the net income (or loss) of any Person acquired by the Company or a
Subsidiary of the Company in a pooling-of-interests transaction for any
period prior to the date of such transaction,
(2) the net income (or loss) of any Person that is not a Restricted
Subsidiary except to the extent of the amount of dividends or other
distributions actually paid to the Company or a Restricted Subsidiary by
such Person during such period (subject, in the case of a dividend or
distribution to a Restricted Subsidiary, to the limitations contained in
clause (3) below),
(3) any net income of any Restricted Subsidiary to the extent such
Restricted Subsidiary is subject to restrictions, directly or indirectly,
on the payment of dividends or the making of distributions by such
Restricted Subsidiary, directly or indirectly, to the Company, except that
the Company's equity in a net loss of any such Restricted Subsidiary for
such period shall be included in determining such Consolidated Net Income,
(4) gains or losses on Asset Dispositions by the Company or its
Subsidiaries,
(5) all extraordinary gains and extraordinary losses,
(6) the cumulative effect of changes in accounting principles,
(7) non-cash gains or losses resulting from fluctuations in currency
exchange rates, and
(8) the tax effect of any of the items described in clauses (1) through (7)
above.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
59
"Domestic Subsidiary" means a Restricted Subsidiary other than a Foreign
Subsidiary.
"Earn-Out Amount" has the meaning provided in the Purchase Agreement.
"Equity Offering" means a primary sale of Common Stock of the Company or,
to the extent the net cash proceeds thereof are paid to the Company as a
capital contribution, Common Stock or Preferred Stock (other than Redeemable
Stock) of C&A, for cash to a Person or Persons other than a Subsidiary of the
Company.
"Existing Notes" means the Company's 11 1/2% Senior Subordinated Notes due
2006, issued under the Existing Notes Indenture.
"Existing Notes Indenture" means the Indenture, dated as of June 1, 1996
among the Company, C&A and First Union National Bank of North Carolina as
Trustee, as supplemented by the First, Second and Third Supplemental Indentures
thereto, as further amended, supplemented and modified from time to time.
"Foreign Subsidiary" means a Restricted Subsidiary that is organized under
the laws of any country other than the United States and substantially all the
assets of which are located outside the United States.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and
any obligation, contingent or otherwise, of such Person (1) to purchase or pay
(or advance or supply funds for the purchase or payment of) such Indebtedness
of such other Person (whether arising by virtue of partnership arrangements, or
by agreement to keep-well, to purchase assets, goods, securities or services,
to take-or-pay, or to maintain financial statement conditions or otherwise) or
(2) entered into for purposes of assuring in any other manner the obligee of
such Indebtedness of the payment thereof or to protect such obligee against
loss in respect thereof (in whole or in part); provided, however, that the term
"Guarantee" will not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Heartland" means Heartland Industrial Partners, L.P., a Delaware limited
partnership, and its successors.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or otherwise become liable in respect of such Indebtedness or other
obligation (including by acquisition of Subsidiaries if such Indebtedness
directly or indirectly becomes an obligation of such Person) or the recording,
as required pursuant to GAAP or otherwise, of any such Indebtedness or other
obligation on the balance sheet of such Person (and "Incurrence," "Incurred,"
and "Incurring" shall have meanings correlative to the foregoing); provided,
however, that a change in GAAP that results in an obligation of such Person
that exists at such time becoming Indebtedness will not be deemed an Incurrence
of such Indebtedness.
"Indebtedness" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and
whether or not contingent:
(1) the principal of and premium, if any, in respect of any indebtedness
of such Person for money borrowed,
(2) the principal of and premium, if any, with respect to obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments, including obligations Incurred in connection with the
acquisition of property, assets or businesses,
(3) the principal component of all obligations of such Person in respect
of letters of credit, bankers' acceptances or other similar instruments
(including reimbursement obligations with respect thereto) (other than
obligations with respect to letters of credit securing obligations (other
than obligations described in (1), (2), and (5)) entered into in the
ordinary course of business of such
60
Person to the extent that such letters of credit are not drawn upon or, if
and to the extent drawn upon, such drawing is reimbursed no later than the
third business day following receipt by such Person of a demand for
reimbursement following payment on the letter of credit),
(4) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (including securities repurchase
agreements but excluding trade accounts payable or accrued liabilities
arising in the ordinary course of business which are not overdue or which
are being contested in good faith), which purchase price is due more than
six months after the date of placing such property in service or taking
delivery and title thereto or the completion of such services; provided,
that the Company's obligations under the Purchase Agreement with respect to
the satisfaction of the Earn-Out Amount shall not be deemed Indebtedness;
provided, further, that any Indebtedness Incurred to pay or otherwise
discharge such obligations shall constitute Indebtedness,
(5) every Capital Lease Obligation of such Person,
(6) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Redeemable Stock or, with
respect to any Subsidiary, any Preferred Stock (but excluding, in each
case, any accrued dividends) but only to the extent such obligations arise
on or prior to the Stated Maturity of the notes; provided, that any
obligations to acquire Capital Stock of Textron Automotive Holdings (Italy)
S.r.l. or its successors pursuant to the arrangements contemplated by the
Purchase Agreement shall not be deemed to be Indebtedness; but that any
Indebtedness Incurred to pay or otherwise discharge such obligations shall
constitute Indebtedness,
(7) all Indebtedness of other Persons secured by a Lien on any asset of
such Person, whether or not such Indebtedness is assumed by such Person;
provided, however, that the amount of such Indebtedness shall be the lesser
of (a) the fair market value of such asset at such date of determination and
(b) the amount of such Indebtedness of such other Persons,
(8) every obligation under Interest Rate, Currency or Commodity Price
Agreements of such Person, and
(9) every obligation of the type referred to in clauses (1) through (8) of
another Person the payment of which, in any case, such Person has Guaranteed
or is responsible or liable, directly or indirectly, as obligor, Guarantor or
otherwise.
"Interest Rate, Currency or Commodity Price Agreement" of any Person means
any forward contract, futures contract, swap, option or other financial
agreement or arrangement (including caps, floors, collars and similar
agreements) relating to, or the value of which is dependent upon, interest
rates, currency exchange rates or commodity prices or indices (excluding
contracts for the purchase or sale of goods in the ordinary course of
business).
"Investment" by any Person means any direct or indirect loan, advance or
other extension of credit (including by way of Guarantee) or capital
contribution (by means of transfers of cash or other property to others or
payments for property or services for the account or use of others, or
otherwise) to, or purchase or acquisition of Capital Stock, bonds, notes,
debentures or other securities or evidence of Indebtedness issued by, any other
Person, including any payment on a Guarantee of any such obligation of such
other Person, but does not include trade accounts receivable in the ordinary
course of business.
For purposes of the provisions described under "-- Unrestricted
Subsidiary" and "-- Certain Covenants -- Limitation on Restricted Payments" and
the definition of "Permitted Investments," (1) with respect to a Restricted
Subsidiary that is designated as an Unrestricted Subsidiary, "Investment" will
include the portion (proportionate to the Company's equity interest in such
Subsidiary) of the fair market value of the net assets of such Subsidiary at
the time that such Subsidiary is designated an Unrestricted Subsidiary and with
respect to a Person that is designated as an Unrestricted Subsidiary
simultaneously with its becoming a Subsidiary of the Company, "Investment" will
mean the Investment made by the Company and the Restricted Subsidiaries to
acquire such Subsidiary; provided, however, that in either case upon a
redesignation of such Subsidiary as a Restricted Subsidiary, or upon the
acquisition of the Capital Stock of a Person such that such Person becomes a
Restricted Subsidiary, the Company shall be
61
deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary or such other Person in an amount (if positive) equal to (a) the
Company's "Investment" in such Subsidiary at the time of such redesignation or
in such Person immediately prior to such acquisition less (b) the portion
(proportionate to the Company's interest in such Subsidiary after such
redesignation or acquisition) of the fair market value of the net assets of
such Subsidiary at the time that such Subsidiary is so redesignated a
Restricted Subsidiary or of such Person immediately following such acquisition;
and (2) any property transferred to or from an Unrestricted Subsidiary will be
valued at its fair market value at the time of such transfer, in each case as
determined in good faith by the Board of Directors.
"Issue Date" means the date on which the Notes are originally issued.
"Italian JV Letters of Credit" means one or more letters of credit issued
to provide credit support for Textron Automotive Holdings (Italy) S.r.l. and
its Subsidiaries; provided, that the aggregate reimbursement obligation of the
Company and the Restricted Subsidiaries in respect thereof does not exceed
$10.0 million at any time.
"Joan Entities" means Elkin McCallum, Joan Fabrics Corporation, Western
Avenue Dyers L.P., Tyng Textiles LLC and any other Affiliate of Elkin McCallum
(or any of his immediate family members, related family trusts, heirs and
descendants).
"Lien" means, with respect to any property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever on or with respect to such property or assets (including, without
limitation, any conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing).
"Net Available Proceeds" from any Asset Disposition by any Person means
cash or Cash Equivalents received (including by way of sale or discounting of a
note, installment receivable or other receivable, but excluding any other
consideration received in the form of assumption by the acquiror of
Indebtedness or other obligations relating to such properties or assets)
therefrom by such Person, net of:
(1) all legal, accounting, financial advisory, title and recording tax
expenses, commissions and other fees and expenses Incurred and all federal,
state, provincial, foreign and local taxes required to be accrued as a
liability as a consequence of such Asset Disposition,
(2) all payments made by such Person or its Subsidiaries on any
Indebtedness which is secured by such assets in accordance with the terms
of any Lien upon or with respect to such assets or which must by the terms
of such Lien, or in order to obtain a necessary consent to such Asset
Disposition or by applicable law, be repaid out of the proceeds from such
Asset Disposition,
(3) all distributions and other payments made to minority interest
holders in Subsidiaries of such Person or joint ventures as a result of
such Asset Disposition,
(4) appropriate amounts to be provided by such Person or any Subsidiary
thereof, as the case may be, as a reserve in accordance with GAAP against
any liabilities associated with such assets and retained by such Person or
any Subsidiary thereof, as the case may be, after such Asset Disposition,
in each case as determined by the Board of Directors as evidenced by a
resolution of the Board filed with the Trustee; provided, however, that any
reduction in such reserve within 12 months following the consummation of
such Asset Disposition will be treated for all purposes of the Indenture
and the Notes as a new Asset Disposition at the time of such reduction with
Net Available Proceeds equal to the amount of such reduction and
(5) any amount needed to effect a reduction of the amount outstanding
under a Permitted Receivables Financing Facility as a result of such Asset
Disposition.
"Obligor" shall mean, with respect to any Receivable, the party obligated
to make payments with respect to such Receivable, including any guarantor
thereof.
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"Offer to Purchase" means a written offer (the "Offer") sent by the
Company by first class mail, postage prepaid, to each holder of Notes at its
address appearing in the Security Register on the date of the Offer offering to
purchase up to the principal amount of Notes specified in such Offer at the
purchase price specified in such Offer (as determined pursuant to the
Indenture). Unless otherwise required by applicable law, the Offer shall
specify an expiration date (the "Expiration Date") of the Offer to Purchase
which shall be, subject to any contrary requirements of applicable law, not
less than 30 days or more than 60 days after the date of such Offer and a
settlement date (the "Purchase Date") for purchase of Notes within five
Business Days after the Expiration Date. The Company shall notify the Trustee
at least 15 Business Days (or such shorter period as is acceptable to the
Trustee) prior to the mailing of the Offer of the Company's obligation to make
an Offer to Purchase, and the Offer shall be mailed by the Company or, at the
Company's request, by the Trustee in the name and at the expense of the
Company. The Offer shall contain information concerning the business of the
Company and its Subsidiaries which the Company in good faith believes will
enable such holders of Notes to make an informed decision with respect to the
Offer to Purchase, which at a minimum will include:
(1) the most recent annual and quarterly financial statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained in the documents required to be filed with the
Trustee pursuant to the Indenture (which requirements may be satisfied by
delivery of such documents together with the Offer),
(2) a description of material developments, if any, in the Company's
business subsequent to the date of the latest of such financial statements
referred to in clause (i) (including a description of the events requiring
the Company to make the Offer to Purchase),
(3) if applicable, appropriate pro forma financial information concerning
the Offer to Purchase and the events requiring the Company to make the
Offer to Purchase and
(4) any other information required by applicable law to be included
therein.
The Offer shall contain all instructions and materials necessary to enable
holders of the Notes to tender their Notes pursuant to the Offer to Purchase.
The Offer shall also state:
(a) the Section of the Indenture pursuant to which the Offer to Purchase is
being made;
(b) the Expiration Date and the Purchase Date;
(c) the aggregate principal amount of such outstanding Notes offered to be
purchased by the Company pursuant to the Offer to Purchase (including, if
less than 100%, the manner by which such has been determined pursuant to the
Section of the Indenture requiring the Offer to Purchase) (the "Purchase
Amount");
(d) the purchase price to be paid by the Company for each $1,000 aggregate
principal amount of Notes accepted for payment (as specified pursuant to the
Indenture) (the "Purchase Price");
(e) that the holder of Notes may tender all or any portion of Notes
registered in the name of such holder and that any portion of a Note tendered
must be tendered in an integral multiple of $1,000 principal amount;
(f) the place where Notes are to be surrendered for tender pursuant to the
Offer to Purchase;
(g) that interest on any Note not tendered or tendered but not purchased by
the Company pursuant to the Offer to Purchase will continue to accrue;
(h) that on the Purchase Date the Purchase Price will become due and
payable upon each Note being accepted for payment pursuant to the Offer to
Purchase and that interest thereon will cease to accrue on and after the
Purchase Date;
(i) that each holder of Notes electing to tender its Notes pursuant to the
Offer to Purchase will be required to surrender its Notes at the place or
places specified in the Offer prior to the close of business on the
Expiration Date (such Notes being, if the Company or the Trustee so requires,
duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the holder
thereof or his attorney duly authorized in writing);
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(j) that holders of Notes will be entitled to withdraw all or any portion
of Notes tendered if the Company (or the Paying Agent) receives, not later
than the close of business on the Expiration Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the holder, the
principal amount of the Notes the holder tendered, the certificate numbers
of the Notes the holder tendered and a statement that such holder of Notes
is withdrawing all or a portion of his tender;
(k) that (i) if Notes in an aggregate principal amount less than or equal
to the Purchase Amount are duly tendered and not withdrawn pursuant to the
Offer to Purchase, the Company will purchase all such Notes and (ii) if
Notes in an aggregate principal amount in excess of the Purchase Amount are
tendered and not withdrawn pursuant to the Offer to Purchase, the Company
will purchase Notes having an aggregate principal amount equal to the
Purchase Amount on a pro rata basis (with such adjustments as may be deemed
appropriate so that only Notes in denominations of $1,000 or integral
multiples thereof shall be purchased); and
(l) that in the case of any holder of Notes whose Notes are purchased
only in part, the Company will execute, and the Trustee shall authenticate
and deliver to the holder without service charge, a new Note, of any
authorized denomination as requested by such holder, in an aggregate
principal amount equal to and in exchange for the unpurchased portion of
the Notes so tendered.
Any Offer to Purchase will be governed by and effected in accordance with the
Offer for such Offer to Purchase.
"Overdraft Facilities" means local lines of credit of the Company's
Foreign Subsidiaries, together with any credit support provided by the Company
or any Restricted Subsidiary, providing for availability in an aggregate amount
not to exceed $25.0 million at any time outstanding.
"Permitted Acquired Investment" means any Investment by any Person (the
"Subject Person") in another Person made prior to the time
(1) the Subject Person became a Restricted Subsidiary,
(2) the Subject Person merged into or consolidated with a Restricted
Subsidiary, or
(3) another Restricted Subsidiary merged into or was consolidated with the
Subject Person (in a transaction in which the Subject Person became a
Restricted Subsidiary)
provided, that such Investment was not made in anticipation of any such
transaction and was outstanding prior to such transaction; provided, further,
that the book value of such Investments (excluding all Permitted Investments
(other than those referred to in clause (13) of the definition thereof)) do not
exceed 5% of the Consolidated Assets of the Subject Person immediately prior to
the Subject Person becoming a Restricted Subsidiary.
"Permitted Interest Rate, Currency or Commodity Price Agreement" of any
Person means any Interest Rate, Currency or Commodity Price Agreement entered
into with one or more financial institutions that is designed to protect such
Person (1) against fluctuations in interest rates or currency exchange rates
with respect to Indebtedness of the Company and its Restricted Subsidiaries and
which will have a notional amount no greater than the principal payments due
with respect to the Indebtedness being hedged thereby, or (2) in the case of
currency or commodity protection agreements, against currency exchange rate or
commodity price fluctuations in the ordinary course of the Company's and the
Restricted Subsidiaries' respective businesses relating to then existing
financial obligations or then existing or sold production and, in the case of
both (1) and (2), not for purposes of speculation.
"Permitted Investments" means:
(1) Investments in Cash Equivalents,
(2) Investments in existence on the Issue Date,
(3) Investments in any Restricted Subsidiary by the Company or any
Restricted Subsidiary, including any Investment made to acquire such
Restricted Subsidiary,
64
(4) Investments in the Company by any Restricted Subsidiary,
(5) sales of goods or services on trade credit terms consistent with the
Company's and its Subsidiaries' past practices or otherwise consistent with
trade credit terms in common use in the industry and recorded as accounts
receivable on the balance sheet of the Person making such sale,
(6) loans or advances to employees for purposes of purchasing Common
Stock of C&A in an aggregate amount outstanding at any one time not to
exceed $5.0 million and other loans and advances to employees of the
Company in the ordinary course of business and on terms consistent with the
Company's practices in effect prior to the Issue Date, including travel,
moving and other like advances,
(7) loans or advances to vendors or contractors of the Company in the
ordinary course of a Related Business,
(8) lease, utility and other similar deposits in the ordinary course of
business,
(9) stock, obligations or securities received in the ordinary course of
business in settlement of debts owing to the Company or a Subsidiary
thereof as a result of foreclosure, perfection, enforcement of any Lien or
in a bankruptcy proceeding,
(10) Investments in Unrestricted Subsidiaries, partnerships or joint
ventures involving the Company or its Restricted Subsidiaries, primarily
engaged in a Related Business, if the amount of such Investment (after
taking into account the amount of all other Investments made pursuant to
this clause (10), less any return of capital realized or any repayment of
principal received on such Permitted Investments, or any release or other
cancellation of any Guarantee constituting such Permitted Investment, which
has not at such time been reinvested in Permitted Investments made pursuant
to this clause (10)), does not exceed 1.5% of the Company's Consolidated
Assets,
(11) Investments in Persons to the extent any such Investment represents
the non-cash consideration otherwise permitted to be received by the
Company or its Restricted Subsidiaries in connection with an Asset
Disposition,
(12) any Investment included in clauses (3)(b), (5), (9) and (16) of the
definition of "Permitted Indebtedness",
(13) Permitted Acquired Investments, and
(14) Investments constituting "Permitted Investments" as defined in the
Bank Credit Facilities on the Issue Date.
"Permitted Liens" means:
(1) Liens existing on the Issue Date;
(2) Liens existing on property or assets at the time of acquisition by the
Company or a Restricted Subsidiary which secure Indebtedness that is not
incurred in contemplation of such property or assets being so acquired,
provided, that such Liens do not extend to other property or assets of the
Company or any Restricted Subsidiary;
(3) Liens securing Indebtedness of the type described in clauses (8), (9),
and (15) of the "Limitation on Indebtedness" covenant;
(4) Liens securing the Bank Credit Facilities, provided, that such Liens
shall not secure more than an aggregate of $700.0 million of Indebtedness
thereunder (plus, without duplication, such amount of Indebtedness which may
otherwise be subject to a Lien pursuant to clause (10) below), Liens securing
the Brazilian Credit Facility, the Overdraft Facilities, Liens securing
Indebtedness Incurred by Foreign Subsidiaries and Permitted Interest Rate,
Currency or Commodity Price Agreements;
(5) Liens replacing any of the items set forth in clauses (1) through (4)
above, provided, that (A) the principal amount of the Indebtedness secured by
such Liens shall not be increased (except
65
premiums or other payments paid in connection with a concurrent Refinancing
of such Indebtedness and the expenses Incurred in connection therewith),
(B) the principal amount of the Indebtedness secured by such Liens,
determined as of the date of Incurrence, has a Weighted Average Life to
Maturity at least equal to the remaining Weighted Average Life to Maturity
of the Indebtedness being Refinanced or repaid, (C) the maturity of the
Indebtedness secured by such Liens is not earlier than that of the
Indebtedness to be Refinanced, (D) such Liens have the same or a lower
ranking and priority as the Liens being replaced, and (E) such Liens shall
be limited to the property or assets encumbered by the Lien so replaced;
(6) Liens encumbering cash proceeds (or securities purchased therewith)
from Indebtedness permitted to be Incurred pursuant to the "Limitation on
Indebtedness" covenant which are set aside at the time of such Incurrence
in order to secure an escrow arrangement pursuant to which such cash
proceeds (or securities purchased therewith) are contemplated to ultimately
be released to the Company or a Restricted Subsidiary or returned to the
lenders of such Indebtedness, provided, that such Liens are automatically
released concurrently with the release of such cash proceeds (or securities
purchased therewith) from such escrow arrangement;
(7) Liens (including extensions, renewals and replacements thereof) upon
property or assets created for the purpose of securing Indebtedness
Incurred to finance or Refinance the cost (including the cost of
construction) of such property or assets, provided, that (A) the principal
amount of the Indebtedness secured by such Lien does not exceed 100% of the
cost of such property or assets, (B) such Lien does not extend to or cover
any property or assets other than the property or assets being financed or
Refinanced by such Indebtedness and any improvements thereon, and (C) the
Incurrence of such Indebtedness is permitted by the "Limitation on
Indebtedness" covenant;
(8) Liens in favor of the Company or a Restricted Subsidiary;
(9) Liens securing Indebtedness of Foreign Subsidiaries permitted to be
Incurred under the "Limitation on Indebtedness" covenant;
(10) Liens (other than Liens securing Subordinated Indebtedness) which,
when the Indebtedness relating to those Liens is added to all other then
outstanding Indebtedness of the Company and its Restricted Subsidiaries
secured by Liens and not listed in clauses (1) through (9) above or (11)
through (25) below, does not exceed 5% of the Consolidated Assets of the
Company;
(11) Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(12) Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by
appropriate proceedings;
(13) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent for
a period of more than 60 days or being contested in good faith;
(14) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security or similar obligations, including any Lien
securing letters of credit issued in the ordinary course of business
consistent with past practice in connection therewith, or to secure the
performance of tenders, statutory obligations, surety and appeal bonds,
bids, leases, government contracts, performance and return-of-money bonds
and other similar obligations (exclusive of obligations for the payment of
borrowed money);
(15) judgment Liens not accompanied by an Event of Default of the type
described in clause (8) under "Events of Default" arising from such
judgment;
(16) easements, rights-of-way, zoning restrictions, minor defects or
irregularities in title and other similar charges or encumbrances in
respect of real property not interfering in any material respect with the
ordinary conduct of business of the Company or any of its Restricted
Subsidiaries;
66
(17) any interest or title of a lessor under any lease, whether or not
characterized as capital or operating; provided, that such Liens do not
extend to any property or assets which is not leased property subject to
such lease;
(18) Liens upon specific items of inventory or other goods and proceeds
of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate
the purchase, shipment or storage of such inventory or other goods;
(19) Liens securing reimbursement obligations with respect to letters of
credit which encumber documents and other property relating to such letters
of credit and products and proceeds thereof;
(20) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the Company
or any of the Restricted Subsidiaries, including rights of offset and
set-off;
(21) leases or subleases granted to others not interfering in any
material respect with the business of the Company or the Restricted
Subsidiaries;
(22) Liens upon Receivables pursuant to one or more receivables financing
facilities to the extent that the Indebtedness thereunder could be Incurred
pursuant to clause 1(c) of second paragraph of the "Limitation on
Indebtedness" covenant;
(23) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of custom duties in connection with
importation of goods;
(24) Liens encumbering initial deposits and margin deposits, and other
Liens incurred in the ordinary course of business and that are within the
general parameters customary in the industry; and
(25) Liens arising from filing Uniform Commercial Code financing statements
regarding leases.
"Permitted Receivables Financing Facility" means the receivables financing
facility established pursuant to the Amended and Restated Receivables Sales
Agreement to be entered into, as amended from time to time, among the Company,
as master servicer, the Sellers parties thereto and Carcorp, Inc. (or any
successor thereto or replacement thereof) and one or more receivables financing
facilities pursuant to which the Company or any of its Subsidiaries sells,
transfers, assigns or pledges its Receivables to a special purpose entity or a
trust and in connection therewith such entity or trust Incurs Indebtedness
secured by such Receivables or otherwise finances Receivables with customary
limited repurchase obligations for breaches of certain representations,
warranties or covenants or limited recourse based upon the collectibility of
the Receivables sold.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company, government or any agency or political subdivision hereof or
any other entity.
"Preferred Dividends" for any Person means for any period the quotient
determined by dividing the amount of dividends and distributions paid or
accrued (whether or not declared) on Preferred Stock of such Person during such
period calculated in accordance with GAAP, by 1 minus the actual combined
Federal, state, local and foreign income tax rate of the Company on a
consolidated basis (expressed as a decimal) for such period.
"Preferred Stock" of any Person means Capital Stock of such Person of any
class or classes (however designated) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of Capital
Stock of any other class of such Person.
"Purchase Agreement" means the Purchase Agreement dated August 7, 2001
among Textron, Inc., C&A and the Company, as amended and restated to the Issue
Date.
"Receivables" means receivables, chattel paper, instruments, documents or
intangibles evidencing or relating to the right to payment of money.
"Receivables" shall include the indebtedness and payment obligations of any
Person to the Company or a Subsidiary arising from a sale of merchandise or
services
67
by the Company or such Subsidiary in the ordinary course of its business,
including any right to payment for goods sold or for services rendered, and
including the right to payment of any interest, finance charges, returned check
or late charges and other obligations of such Person with respect thereto.
Receivables shall also include (a) all of the Company's or such Subsidiary's
interest in the merchandise (including returned merchandise), if any, relating
to the sale which gave rise to such Receivable, (b) all other security
interests or Liens and property subject thereto from time to time purporting to
secure payment of such Receivable, whether pursuant to the contract related to
such Receivable or otherwise, together with all financing statements signed by
an Obligor describing any collateral securing such Receivable, and (c) all
guarantees, insurance, letters of credit and other agreements or arrangements
of whatever character from time to time supporting or securing payment of such
Receivable whether pursuant to the contract related to such Receivable or
otherwise.
"Receivables Financing" means (1) the sale or other disposition of
Receivables arising in the ordinary course of business or (2) the sale or other
disposition of Receivables that arise in the ordinary course of business to a
Receivables Subsidiary followed by, or in connection with, a financing
transaction in connection with such sale or disposition of such Receivables.
"Receivables Sale" of any Person means any sale, transfer, assignment or
pledge of Receivables by such Person (pursuant to a Permitted Receivables
Financing Facility, a purchase facility or otherwise), other than (1) in
connection with a disposition of the business operations of such Person
relating thereto or (2) a disposition of defaulted Receivables for purpose of
collection and not as a financing arrangement.
"Receivables Subsidiary" means an Unrestricted Subsidiary of the Company
or any other corporation, trust or entity that is exclusively engaged in
Receivables Financing, and activities reasonably related thereto.
"Redeemable Stock" of any Person means any Capital Stock of such Person
that by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or otherwise (including upon the occurrence of
an event) (i) matures or (ii) is required to be redeemed (pursuant to any
sinking fund obligation or otherwise) or (iii) is convertible into or
exchangeable for Indebtedness or Redeemable Stock or is redeemable at the
option of the holder thereof, in whole or in part, in each case in whole or in
part, at any time prior to 91 days after the final Stated Maturity of the
Notes. Notwithstanding the preceding sentence, (1) any Capital Stock that would
constitute Redeemable Stock solely because the holders of the Capital Stock
have the right to require the Company to repurchase such Capital Stock upon the
occurrence of a change of control or asset sale shall not constitute Redeemable
Stock if the terms of such Capital Stock provide that the Company may not
repurchase or redeem any such Capital Stock if prohibited by the terms hereof
and (2) Capital Stock in respect of which the Company may have an obligation of
the type referred to in clause (vi) of the second paragraph of the "Limitation
on Restricted Payments and Restricted Investments" covenant and Textron
Preferred Stock shall not constitute Redeemable Stock.
"Refinancing" means, with respect to any Indebtedness, a renewal,
extension, refinancing, replacement, amendment, restatement or refunding of
such Indebtedness, and shall include any successive Refinancing of any of the
foregoing.
"Related Business" means the businesses of the Company and the Restricted
Subsidiaries on the Issue Date and any business related, ancillary or
complementary to any of the businesses of the Company and the Restricted
Subsidiaries on the Issue Date, as determined conclusively and in good faith by
the Company's Board of Directors.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means an arrangement by any Person with
any lender or investor or to which such lender or investor is a party providing
for the leasing by such Person of any property or asset of such Person which
has been or is being sold or transferred by such Person not more than 270 days
68
after the acquisition thereof or the completion of construction or commencement
of operation thereof to such lender or investor or to any Person to whom funds
have been or are to be advanced by such lender or investor on the security of
such property or asset. The stated maturity of such arrangement will be the
date of the last payment of rent or any other amount due under such arrangement
prior to the first date on which such arrangement may be terminated by the
lessee without payment of a penalty.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the Commission.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision.
"Stockholders Agreements" means the Stockholders Agreement, dated July 3,
2001, by and among Heartland Industrial Partners, L.P. and the other Heartland
entities named therein, the Becker Stockholders named therein, Joan
Stockholders named therein and C&A, as amended, and the Stockholders Agreement,
dated February 23, 2001, by and among C&A, Heartland Industrial Partners I,
L.P. and the other Investor Stockholders listed on Schedule I thereto,
Blackstone Capital Company II, L.L.C., Blackstone Family Investment Partnership
I, L.P., Blackstone Advisory Directors Partnership L.P., Blackstone Capital
Partners L.P., and Wasserstein/C&A Holdings L.L.C., as amended.
"Subordinated Indebtedness" means Indebtedness as to which the payment of
principal (and premium, if any) and interest and other payment obligations is
subordinate by its terms to the prior payment in full of the Notes or the
Guarantees of the Company or a Guarantor, as applicable.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interest (including partnership interest)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such Person or by one or more
Subsidiaries of such Person, or by such Person and one or more Subsidiaries of
such Person.
"Subsidiary Guarantee" means, individually, any Guarantee of payment of
the Notes by a Subsidiary Guarantor pursuant to the terms of the Indenture,
and, collectively, all the Guarantees of the Notes. Each such Subsidiary
Guarantee will be in the form prescribed by the Indenture.
"TAC-Trim acquisition" means the acquisition by the Company of the Bison
Subsidiaries (as defined in the Purchase Agreement) pursuant to the Purchase
Agreement and the related transactions.
"Textron Entities" means Textron Inc. and its controlled Affiliates.
"Textron Preferred Stock" shall mean collectively, (1) the Company's
Series A1 Redeemable Preferred Stock, Series A2 Redeemable Preferred Stock,
Series B1 Redeemable Preferred Stock, Series B2 Redeemable Preferred Stock,
Series C1 Redeemable Preferred Stock and Series C2 Redeemable Preferred Stock,
(2) any substantially similar redeemable Preferred Stock of C&A issued in lieu
of or in exchange for Preferred Stock of the type described in the preceding
clause (1) pursuant to the terms of the Purchase Agreement or the Textron
Preferred Stock as in effect on the Issue Date and (3) any Series D Redeemable
Preferred Stock issued in satisfaction of the Earn-Out Amount.
"Unrestricted Subsidiary" means any Subsidiary designated as such by the
Board of Directors as set forth under "-- Unrestricted Subsidiaries" and any
Subsidiary of Unrestricted Subsidiary.
"U.S. Government Obligation" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons
performing similar functions) of such Person, whether at all times or only so
long as no senior class of securities has such voting power by reason of any
contingency; provided, that the Textron Preferred Stock shall not be deemed to
be Voting Stock for any purpose.
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"Weighted Average Life to Maturity" means, when applied to any
Indebtedness or Redeemable Stock, as the case may be at any date, the number of
years obtained by dividing (i) the sum of the products obtained by multiplying
(a) the amount of each then remaining installment, sinking fund, serial
maturity or other required payments of principal, including payment at final
maturity, in respect thereof, by (b) the number of years (calculated to the
nearest one-twelfth) that will elapse between such date and the making of such
payment, by (ii) the then outstanding principal amount or liquidation
preference, as applicable, of such Indebtedness or Redeemable Stock, as the
case may be.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of C&A or the
Company, as such, shall have any liability for any obligations of the Company
under the Notes, the Indenture or the Subsidiary Guarantees or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Notes.
Such waiver may not be effective to waive liabilities under the federal
securities laws and it is the view of the Commission that such a waiver is
against public policy.
CONCERNING THE TRUSTEE
BNY Midwest Trust Company is the Trustee under the Indenture and has been
appointed by the Company as registrar and paying agent with regard to the
Notes.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture:
(1) failure to pay principal of (or premium, if any, on) any such Note when
due;
(2) failure to pay any interest or additional interest (as required by the
Registration Rights Agreement) on any such Note when due, continued for 30
days;
(3) default in the payment of principal and interest on Notes required to
be purchased pursuant to an Offer to Purchase as described under "-- Certain
Covenants -- Change of Control" when due and payable;
(4) failure to perform or comply with the provisions described under
"Mergers, Consolidations and Certain Sales of Assets" by the Company or any
Guarantor;
(5) failure to perform or comply with any other covenant or agreement of
the Company under the Indenture or the Notes continued for 60 days after
written notice to the Company by the Trustee or the holders of at least 25%
in aggregate principal amount of the outstanding Notes;
(6) default under the terms of any instrument or instruments evidencing
or securing Indebtedness for money borrowed by the Company or any
Significant Subsidiary having an outstanding principal amount of $20
million individually or in the aggregate which default results in the
acceleration of the payment of such Indebtedness or constitutes the failure
to pay such Indebtedness when due at final maturity after the lapse of any
applicable grace period;
(7) the Parent Guarantee of the Notes or any Subsidiary Guarantee of the
Notes shall for any reason cease to be, or shall be asserted in writing by
the Parent Guarantor, the Company or the Subsidiary Guarantor not to be, in
full force and effect and enforceable in accordance with its terms;
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(8) the rendering of a final judgment or judgments (not subject to
appeal) against the Company or any Significant Subsidiary in an amount in
excess of $20 million (calculated net of any insurance available to pay
such judgment) which remains undischarged or unstayed for a period of 60
days after the date on which the right to appeal has expired; and
(9) certain events of bankruptcy, insolvency or reorganization affecting
the Company, any Significant Subsidiary or any group of Restricted
Subsidiaries that, taken together (as of the latest audited consolidated
financial statement for the Company and the Restricted Subsidiaries) would
constitute a Significant Subsidiary of the Company.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the holders of Notes, unless
such holders of the Notes shall have offered to the Trustee reasonable
indemnity. Subject to such provisions for the indemnification of Trustee, the
holders of a majority in aggregate principal amount of the outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee.
If an Event of Default (other than an Event of Default described in clause
(9) above with respect to the Company) shall occur and be continuing, either
the Trustee or the holders of at least 25% in aggregate principal amount of the
outstanding Notes may accelerate the maturity of all Notes; provided, however,
that after such acceleration, but before a judgment or decree based on
acceleration, the holders of a majority in aggregate principal amount of
outstanding Notes may, under certain circumstances, rescind and annul such
acceleration if all Events of Default, other than the non-payment of
accelerated principal, have been cured or waived as provided in the Indenture.
In the event of a declaration of acceleration of the Notes because an Event of
Default described in clause (6) under "Events of Default" has occurred and is
continuing, the declaration of acceleration of the Notes shall be automatically
annulled if the event of default or payment default triggering such Event of
Default pursuant to clause (6) shall be remedied or cured by the Company or a
Restricted Subsidiary or waived by the holders of the relevant Indebtedness
within 60 days after the declaration of acceleration with respect thereto and
if (a) the annulment of the acceleration of the Notes would not conflict with
any judgment or decree of a court of competent jurisdiction and (b) all
existing Events of Default, except nonpayment of principal, premium or interest
on the Notes that became due solely because of the acceleration of the Notes,
have been cured or waived. If an Event of Default specified in clause (9) above
occurs with respect to the Company, the outstanding Notes will ipso facto
become immediately due and payable without any declaration or other act on the
part of the Trustee or any holder of Notes. For information as to waiver of
defaults, see "-- Modification and Waiver."
No holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and unless also the holders of at least 25% in aggregate principal
amount of the outstanding Notes shall have made written request, and offered
reasonable indemnity, to the Trustee to institute such proceeding as trustee,
and such Trustee shall not have received from the holders of a majority in
aggregate principal amount of the outstanding Notes a direction inconsistent
with such request and shall have failed to institute such proceeding within 60
days. However, such limitations do not apply to a suit instituted by a holder
of a Note for enforcement of payment of the principal of and premium, if any,
or interest on such Note on or after the respective due dates and grace period
expressed in such Note and the Indenture.
The Company will be required to furnish to the Trustee annually a
statement as to the performance by the Company of certain of its obligations
under the Indenture and as to any default in such performance.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the holders of a majority in aggregate
principal amount of outstanding Notes; provided, however, that no such
modification or amendment may, without the consent of the holder of each Note
affected thereby,
71
(1) change the Stated Maturity of the principal of, or any installment of
interest on, such Note,
(2) reduce the principal amount of, or the premium or interest on, such
Note,
(3) change the place or currency of payment of principal of, or premium or
interest on, such Note,
(4) modify or change any provision of the Indenture or the related
definitions affecting the ranking of such Note or any Guarantee thereof in
any manner adverse in any material respect to the holder of such Note,
(5) reduce the premium payable upon the redemption or repurchase of any
Note,
(6) reduce the time before which such Note may be redeemed,
(7) impair the right to institute suit for the enforcement of any payment
on or with respect to such Note,
(8) reduce the above-stated percentage of outstanding Notes necessary to
modify or amend the Indenture,
(9) reduce the percentage of outstanding Notes necessary for waiver of
compliance with certain provisions of the Indenture or for waiver of
certain defaults,
(10) modify any provisions of the Indenture relating to the modification
and amendment of the Indenture or the waiver of past defaults or covenants,
except as otherwise specified, or
(11) following the mailing of any Offer to Purchase, modify any Offer to
Purchase required under "-- Certain Covenants -- Limitation on Asset
Dispositions" and "-- Certain Covenants -- Change of Control" in a manner
materially adverse to the holder of such Note.
Without the consent of any holder, the Company and the Trustee may amend
the Indenture to:
(a) cure any ambiguity, omission, defect or inconsistency;
(b) provide for the assumption by a successor corporation or other Person
of the obligations of the Company or any Guarantor under the Indenture;
(c) add Guarantees with respect to the Notes or release a Subsidiary
Guarantor; provided, however, that any such release is in accordance with
the provisions of the Indenture;
(d) secure the Notes;
(e) add to the covenants of the Company for the benefit of the holders of
Notes or surrender any right or power conferred upon the Company;
(f) comply with any requirement of the SEC in connection with the
qualification of the Indenture under the Trust Indenture Act;
(g) provide for the acceptance of appointment under the Indenture of a
successor Trustee and to add or change provisions of the Indenture as shall
be necessary to provide for or facilitate the administration of the trusts
by more than one Trustee; or
(h) make any other change that does not adversely affect the rights of any
holder of Notes.
The holders of a majority in aggregate principal amount of the Notes, on
behalf of all holders of the Notes, may waive compliance by the Company with
certain restrictive provisions of the Indenture. Subject to certain rights of
the Trustee, as provided in the Indenture, the holders of a majority in
aggregate principal amount of outstanding Notes, on behalf of all holders of
Notes, may waive any past default under the Indenture, except a default in the
payment of principal, premium or interest or a default arising from failure to
purchase any Note tendered pursuant to an Offer to Purchase.
DEFEASANCE AND DISCHARGE
The Company at any time may terminate all its obligations under the Notes
and the related obligations under the Indenture ("legal defeasance"), except
for certain obligations, including those
72
respecting the defeasance trust and obligations to register the transfer or
exchange of the Notes, to replace mutilated, destroyed, lost or stolen Notes
and to maintain a registrar and paying agent in respect of the Notes. If the
Company exercises its legal defeasance option, the Guarantees with respect to
Notes in effect at such time will terminate.
The Company at any time may terminate its obligations with respect to the
Notes under the covenants described under "Certain Covenants", the operation of
the "Events of Default" above other than Events of Default contained in clauses
(1), (2) and (9) (with respect to the Company only) and the limitations
contained in clause (c) of the first paragraph under "Mergers, Consolidations,
and Certain Sales of Assets" above ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (3), (4), (5), (6), (8) or (9) (with
respect only to Significant Subsidiaries), under "Events of Default" above.
In order to exercise either defeasance option, the Company must
irrevocably deposit in trust (the "defeasance trust") with the Trustee money
or, U.S. Government Obligations for the payment of principal, premium (if any)
and interest on the Notes to redemption or maturity, as the case may be, and
must comply with certain other conditions, including delivery to the Trustee of
an Opinion of Counsel to the effect that holders of the Notes will not
recognize income, gain or loss for Federal income tax purposes as a result of
such deposit and defeasance and will be subject to Federal income tax on the
same amount and in the same manner and at the same times as would have been the
case if such deposit and defeasance had not occurred (and, in the case of legal
defeasance only, such Opinion of Counsel must be based on a ruling of the
Internal Revenue Service or other change in applicable Federal income tax law).
The Company may satisfy and discharge all obligations under the Indenture
by delivering to the Trustee for cancellation all outstanding Notes or
depositing with the Trustee, after the outstanding Notes have become due and
payable or are called for redemption in accordance with the Indenture, cash
sufficient to pay at Stated Maturity or the Redemption Date all of the
outstanding Notes and paying all other sums payable under the Indenture with
respect to the Notes.
73
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes the material U.S. federal income tax
consequences resulting from acquisition, beneficial ownership and disposition
of a registered note acquired in exchange for an outstanding note. Except where
otherwise noted, it deals only with purchasers of notes who purchased their
notes in the original offering at the offering price and who hold the notes as
capital assets. This summary does not deal with special classes of holders such
as dealers in securities, partnerships or other pass-through entities,
financial institutions, life insurance companies, certain expatriates, persons
holding the notes as part of a straddle or hedging or conversion transaction or
persons whose functional currency is not the U.S. dollar. Moreover, this
summary is based upon the provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), and regulations, rulings and judicial decisions
thereunder as now in effect, and such authorities may be repealed, revoked or
modified (possibly on a retroactive basis) so as to result in federal income
tax consequences different from those discussed below.
As used herein, a "U.S. holder" is a beneficial owner of the notes that
for U.S. Federal income tax purposes is:
o a citizen or resident of the U.S.,
o a corporation (or an entity treated as a corporation) which is organized
under the laws of the U.S. or any political subdivision thereof,
o an estate, the income of which is subject to U.S. federal income tax
without regard to its source, or
o a trust if a court within the U.S. is able to exercise primary
supervision over the administration of the trust and one or more U.S.
persons have the authority to control all substantial decisions of the
trust, or if the trust has made a valid election to be treated as a
United States person.
A Non-U.S. holder is a beneficial owner that is for U.S. federal income
tax purposes either a nonresident alien or a corporation, estate or trust that
is not a U.S. holder.
If a partnership holds the notes, the tax treatment of a partner will
generally depend upon the status of the partner and the activities of the
partnership. If you are a partner of a partnership holding the notes, you
should consult your tax advisors.
EXCHANGE OF NOTES
Your exchange of an outstanding note for a registered note pursuant to the
exchange offer should not be a taxable event for U.S. federal income tax
purposes. Accordingly, you should have the same acquisition date, adjusted
basis, holding period, original issue discount, issue price, adjusted issue
price, stated redemption price at maturity, yield and accrual periods for a
registered note acquired pursuant to the exchange offer as you had for the
outstanding note immediately before the exchange. The tax consequences of
ownership and disposition of a registered note should be the same as the tax
consequences of the ownership and disposition of the outstanding note
surrendered in exchange for it.
Accordingly, in the following discussion, the U.S. federal income tax
consequences with respect to a registered note assume that the registered note
is treated, for U.S. federal income tax purposes, as the same note as the
outstanding note for which it was issued and that the registered note has the
same acquisition date, adjusted basis, holding period, original issue discount,
issue price, adjusted issue price, stated redemption price at maturity, yield
and accrual periods as the outstanding note had in your hands immediately
before the exchange, and that any amounts that accrue or are paid or payable on
an outstanding note are treated as accruing or as paid or payable on the
registered note.
U.S. HOLDERS
The following is a summary of the material U.S. federal tax consequences
that will apply to you if you are a U.S. holder of the notes. Material
consequences to Non-U.S. holders of the notes are described under "Non-U.S.
Holders" below.
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Payments of Interest
Except as set forth below, payments of stated interest and additional
interest, if any, on a note will generally be taxable to a U.S. holder as
ordinary income at the time it is paid or accrued, depending on the U.S.
holder's method of accounting for tax purposes.
Sale, Exchange and Retirement of Notes
Upon a sale, exchange (other than an exchange of notes for registered
notes) or retirement of a note, a U.S. holder generally will recognize gain or
loss equal to the difference between the amount received upon the sale,
exchange or retirement (less any amount attributable to accrued interest which
will be taxable as ordinary income, if not previously taken into income) and
the holder's tax basis in the note at that time.
Gain or loss, gain or loss realized on the sale, exchange or retirement of
a note will be capital gain or loss and will be long-term capital gain or loss
if at the time of sale, exchange or retirement the note has been held for more
than one year. Under current law, long-term capital gains of certain
non-corporate holders are generally taxed at lower rates than items of ordinary
income. The use of capital losses is subject to limitations.
NON-U.S. HOLDERS
The following is a summary of the material U.S. federal tax consequences
that will apply to you if you are a Non-U.S. holder of the notes. This summary
does not present a detailed description of the U.S. federal tax consequences to
you in light of your particular circumstances. In addition, it does not deal
with Non-U.S. holders subject to special treatment under U.S. federal tax laws
(including if you are a controlled foreign corporation, a passive foreign
investment company, a foreign personal holding company, a corporation that
accumulates earnings to avoid U.S. federal income tax, or, in certain
circumstances, a United States expatriate).
Under present U.S. federal income tax law and subject to the discussion of
information reporting and backup withholding below, payments of interest on the
notes to or on behalf of any Non-U.S. holder who is not engaged in a trade or
business within the U.S. with which interest on the notes is effectively
connected will not be subject to U.S. federal income or withholding tax,
provided that
o such beneficial owner does not actually or constructively own ten
percent or more of the total combined voting power of all classes of our
voting stock within the meaning of the Code and applicable U.S. Treasury
regulations,
o such beneficial owner is not a controlled foreign corporation for U.S.
federal income tax purposes (generally, a foreign corporation controlled
by U.S. shareholders) that is related to us through stock ownership, and
o certain certification requirements are met.
A Non-U.S. holder will not be exempt from U.S. withholding tax, however,
if the withholding agent or intermediary knows or has reason to know the
Non-U.S. holder should not be exempt. If a Non-U.S. holder does not qualify for
the foregoing exemption, interest payments to the Non-U.S. holder generally
will be subject to a 30% withholding tax (unless reduced or eliminated by an
applicable treaty and certain certification requirements are met).
Any capital gain realized upon a sale, exchange or retirement of a note by
or on behalf of a Non-U.S. holder ordinarily will not be subject to a U.S.
federal withholding or income tax unless (i) such gain is effectively connected
with a U.S. trade or business of the holder or (ii) in the case of an
individual, such beneficial owner is present in the U.S. for 183 days or more
during the taxable year of the sale, exchange or retirement and certain other
requirements are met. As noted above, an exchange of a note for an exchange
note pursuant to the registered offer will not constitute a taxable exchange.
If interest and other payments received by a Non-U.S. holder with respect
to the notes (including proceeds from the disposition of the notes) are
effectively connected with the conduct by the Non-U.S.
75
holder of a trade or business within the U.S. (or the Non-U.S. holder is
otherwise subject to U.S. federal income taxation on a net basis with respect
to such holder's ownership of the notes), such Non-U.S. holder will generally
not be subject to withholding tax (provided certain certification requirements
are met), but instead will generally be subject to the rules described above
for a U.S. holder (subject to any modification provided under an applicable
income tax treaty). Such Non-U.S. holder may also be subject to the "branch
profits tax" if such Non-U.S. holder is a corporation.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirement will apply to payments of
principal, premium, if any, and interest on a note and the proceeds of the sale
of a note with respect to U.S. holders. Backup withholding at a rate of 30%
(subject to periodic reductions through 2006) will apply to such payments if a
U.S. holder fails to provide a taxpayer identification number to certify that
such U.S. holder is not subject to backup withholding, or otherwise to comply
with the applicable requirements of the backup withholding rules. Certain U.S.
holders (including, among others, corporations) are not subject to the backup
withholding and reporting requirements.
We must report annually to the IRS and to each Non-U.S. holder on Form
1042-S the amount of interest paid on a note, regardless of whether withholding
was required, and any tax withheld with respect to the interest. Under the
provisions of an income tax treaty and other applicable agreements, copies of
these information returns may be made available to the tax authorities of the
country in which the Non-U.S. holder resides.
Backup withholding generally will not apply to payments made by us or our
paying agent to a Non-U.S. holder of a note who provides the requisite
certification (on an IRS form W-8BEN or other applicable form) or otherwise
establishes that it qualifies for an exemption from backup withholding.
Payments of the proceeds of a disposition of the notes by or through a U.S.
office of a broker generally will be subject to backup withholding and
information reporting unless the Non-U.S. holder certifies that it is a
Non-U.S. holder under penalties of perjury or otherwise establishes that it
qualifies for an exemption. Payments of principal or premium or the proceeds of
a disposition of the notes by or through a foreign office of a U.S. broker or
foreign broker with certain relationships to the United States generally will
be subject to information reporting, but not backup withholding, unless such
broker has documentary evidence in its records that the holder is a Non-U.S.
holder and certain other conditions are met, or the exemption is otherwise
established.
Backup withholding is not an additional tax; any amounts withheld under
the backup withholding rules will be allowed as a refund or a credit against
such holder's U.S. federal income tax liability provided the required
information is furnished to the IRS.
THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF U.S. FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO A PARTICULAR HOLDER IN LIGHT OF ITS PARTICULAR
CIRCUMSTANCES AND TAX SITUATION. EACH POTENTIAL INVESTOR SHOULD CONSULT SUCH
HOLDER'S TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO SUCH HOLDER OF THE
OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING THE APPLICATION AND EFFECT OF
STATE, LOCAL, FOREIGN, AND OTHER TAX LAWS OR SUBSEQUENT VERSIONS THEREOF.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of exchange notes received in
exchange for outstanding notes where such outstanding notes were acquired by
such brokerdealer as a result of market-making activities or other trading
activities. We have agreed that for a period of 180 days after effectiveness of
the exchange offer registration statement, we will make this prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the exchange notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer and/or the purchasers of any such exchange notes. Any
broker-dealer that resells exchange notes that were received by it for its own
account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such exchange notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit of any
such resale of exchange notes and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The letter of transmittal states that, by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
By acceptance of the exchange offer, each broker-dealer that receives exchange
notes pursuant to the exchange offer hereby agrees to notify us prior to using
this prospectus in connection with the sale or transfer of exchange notes, and
acknowledges and agrees that, upon receipt of notice from us of the happening
of any event which makes any statement in this prospectus untrue in any
material respect or which requires the making of any changes in this prospectus
in order to make the statements herein not misleading (which notice we agree to
deliver promptly to such broker-dealer), such broker-dealer will suspend use of
this prospectus until we have amended or supplemented the prospectus to correct
such misstatement or omission and have furnished copies of the amended or
supplemented prospectus to such broker-dealer.
For a period of 30 days after effectiveness of the exchange offer
registration statement, we will promptly upon request send additional copies of
this prospectus and any amendment or supplement thereto to any broker-dealer
that requests such documents in the letter of transmittal. We have agreed to
pay all expenses incident to the exchange offer (including the expenses of any
one special counsel for the Holders of the Notes) other than taxes you may
incur in connection with the exchange offer and commissions or concessions of
any brokers or dealers and will indemnify the Holders of the Notes
participating in the exchange offer (including any brokerdealers) against
certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters will be passed upon for us by Cahill Gordon &
Reindel, New York, New York.
EXPERTS
The consolidated financial statements of C&A Corporation and its
subsidiaries for the year ended December 31, 2001, incorporated in this
prospectus by reference to the Annual Report on Form 10-K for the year ended
December 31, 2001, as amended, have been so incorporated in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The consolidated financial statements of C&A Corporation and its
subsidiaries for the years ended December 31, 2000 and December 25, 1999,
included in the Annual Report on Form 10-K for the year
77
ended December 31, 2001, as amended, and incorporated by reference into this
prospectus, to the extent and for the periods indicated in their report, have
been audited by Arthur Andersen LLP, independent public accountants, and are
included herein in reliance upon the authority of said firm as experts in
giving said report. Arthur Andersen LLP has not consented to the incorporation
by reference of their report in this prospectus, and we have dispensed with the
requirement to file their consent in reliance upon Rule 437a of the Securities
Act of 1933. Because Arthur Andersen LLP has not consented to the incorporation
by reference of their report in this prospectus, you will not be able to
recover against Arthur Andersen LLP under Section 11 of the Securities Act of
1933 for any untrue statements of a material fact contained in the financial
statements audited by Arthur Andersen LLP or any omissions to state a material
fact required to be stated therein.
The combined financial statements of TAC-Trim, included in the Current
Reports on Form 8-K filed on January 4, 2002 (as amended on January 14, 2002 and
May 21, 2002) and incorporated by reference into this prospectus, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given on the authority of such firm as experts in auditing and accounting, to
the extent and for the periods indicated in their report with respect to such
financial statements.
The combined financial statements of Becker, included in the Current
Report on Form 8-K filed on April 17, 2001 and incorporated by reference into
this prospectus, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon and incorporated herein by reference. Such
combined financial statements are incorporated herein by reference in reliance
upon such report given on the authority of such firm as experts in auditing and
accounting, to the extent and for the periods indicated in their report with
respect to such financial statements.
The combined financial statements of Joan, included in the Current Report
on Form 8-K filed on October 10, 2001 incorporated by reference into this
prospectus, have been audited by KPMG LLP, independent auditors, given on the
authority of said firm as experts in auditing and accounting, to the extent and
for the periods indicated in their report with respect to such financial
statements.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
C&A files annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document that C&A
files at the SEC's public reference room at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for more
information on the public reference rooms. C&A's SEC filings are also available
to you at the SEC's web site at http:// www.sec.gov.
We have agreed that, whether or not we are required to do so by the rules
and regulations of the SEC, for so long as any of the notes remain outstanding,
we will furnish to the holders of the notes and file with the SEC (unless the
SEC will not accept the filing) copies of the financial and other information
that would be contained in the annual report and quarterly reports that we
would be required to file with the SEC if we were subject to the periodic
reporting requirements of the Exchange Act. We will also make such reports
available to prospective purchasers of the notes and the exchange notes, as
applicable, and to securities analysts and broker-dealers upon their request.
In addition, we have agreed that, for so long as the notes remain outstanding
and are "restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, we will furnish to holders of the notes and prospective
purchasers of the notes designated by such holders, upon the request of such
holders or such prospective purchasers, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act, unless we are
then subject to and in compliance with Section 13 or 15(d) of the Exchange Act.
We will also make all documentation regarding the exchange offer available,
without charge, at the office of the Luxembourg Paying Agent.
Each purchaser of the notes from the initial purchasers will be furnished
with a copy of this prospectus and any related amendments or supplements. Each
person receiving this prospectus acknowledges that (a) he has been afforded an
opportunity to request from us, and to review and has
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received, all additional information considered by him to be necessary to
verify the accuracy and completeness of the information herein, (b) he has not
relied on the initial purchasers or any person affiliated or associated with
the initial purchasers in connection with his investigation of the accuracy of
such information or his investment decision and (c) he understands that except
as provided pursuant to (a) above, no person has been authorized to give any
information or to make any representation concerning the notes offered hereby
other than those contained herein and, if given or made, such other information
or representation should not be relied upon as having been authorized by us or
the initial purchasers.
INCORPORATION OF DOCUMENTS BY REFERENCE
Rather than include certain information in this prospectus that C&A has
already included in reports filed with the SEC, we are incorporating this
information by reference, which means that we can disclose important
information to you by referring to those publicly filed documents containing
the information. This information incorporated by reference is considered to be
part of this prospectus, and the information that C&A files with the SEC after
the date of this prospectus and prior to the termination of the offerings of
the notes offered hereby will automatically update and supersede the
information in this prospectus. We incorporate by reference the following
documents filed by C&A with the SEC:
o Proxy Statement on Schedule 14A for C&A's annual meeting of stockholders
held on May 15, 2002 (other than the sections entitled "Executive
Compensation-Report of the Compensation Committee," "Performance Graph,"
"Report of the Audit Committee of the Board of Directors," and "Audit
Fees.")
o Annual Report on Form 10-K for the fiscal year ended December 31, 2001,
as amended by an Annual Report on Form 10-K/A filed on June 7, 2002;
o Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
2002, as amended by a Quarterly Report on Form 10-Q/A filed on June 7,
2002;
o Current Report on Form 8-K filed July 3, 2001 and the report on Form
8-K/A filed September 17, 2001;
o Current Report on Form 8-K filed October 4, 2001 and the report on Form
8/KA filed October 10, 2001;
o Current Report on Form 8-K filed January 4, 2002 and the report on Form
8-K/A filed January 14, 2002;
o Current Report on Form 8-K filed April 17, 2002;
o Current Report on Form 8-K filed May 21, 2002; and
o Current Report on Form 8-K filed May 29, 2002
All documents we file subsequent to the date of this prospectus pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to the
termination of the offering of the securities covered hereby shall be deemed to
be incorporated by reference into the prospectus.
We will provide to each person, including any beneficial owner, to whom
this prospectus is delivered, a copy of any or all of the information that has
been incorporated in this prospectus but is not being delivered with this
prospectus. We will provide this information upon written or oral request, at
no cost to the requester, directed to Collins & Aikman Corporation, 250
Stephenson Highway, Troy, Michigan 48083, telephone (248) 824-2500, attention:
Chief Financial Officer.
79
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated statements of
operations have been derived from: (a) C&A's audited and unaudited historical
financial statements filed in its 2001 Form 10-K as amended and March 31, 2002
Form 10-Q as amended and in the audited and unaudited financial statements of
C&A, Becker, Joan and TAC-Trim included in C&A's Current Reports on Form 8-K
filed September 17, 2001, October 10, 2001 and January 14, 2002, respectively,
adjusted, as applicable, to give pro forma effect to the acquisitions of Becker,
Joan and TAC-Trim (the "Acquisitions"), related financings (the "Financings"),
the February 2001 Heartland equity investment, the $86.9 million sale and
leaseback transaction entered into by TAC-Trim ("Textron Leasing Transaction"),
C&A's June 2002 offering of 16,000,000 shares of its common stock and the
assumed use of proceeds, and (b) unaudited interim historical data for Collins &
Aikman, Becker, Joan and TAC-Trim, adjusted, to give pro forma effect to the
Acquisitions, Financings and C&A's June 2002 offering of 16,000,000 shares of
its common stock and the assumed use of proceeds. All information is presented
after giving effect to C&A's one-for-2.5 reverse stock split effected on May 28,
2002. Shares associated with proceeds which will be used for general corporate
purposes are not considered in computing loss per share.
The TAC-Trim cash purchase price was financed through a combination of the
sale of 12.8 million shares of C&A's common stock and debt financing including
fees and expenses associated with the foregoing. Debt financing for the
TAC-Trim acquisition, as well as the refinancing of Products' existing credit
facilities, was obtained through $400 million of term loans under Products' new
$575 million senior credit facilities, the sale of accounts receivable under a
new accounts receivable financing arrangement and the issuance of $500 million
of 10 3/4% Senior Notes due 2011.
The unaudited pro forma condensed consolidated statements of operations
for the year ended December 31, 2001 give pro forma effect to the Acquisitions,
the Financings, the Textron Leasing Transaction and C&A's June 2002 offering of
16,000,000 shares of its common stock and the assumed use of proceeds, as if
they had occurred on January 1, 2001. In addition, the pro forma condensed
consolidated statement of operations for the year ended December 31, 2001 gives
effect to the February 2001 Heartland equity investment and the unaudited pro
forma condensed consolidated statement of operations for the three months ended
March 31, 2002 gives effect solely to C&A's June 2002 offering of 16,000,000
shares of its common stock and the assumed use of proceeds. The unaudited pro
forma condensed consolidated balance sheet as of March 31, 2002 gives pro forma
effect to C&A's June 2002 offering of 16,000,000 shares of its common stock as
if it occurred on March 31, 2002.
The unaudited pro forma condensed consolidated statements of operations
are presented for informational purposes only and do not purport to represent
what our results of operations would actually have been had the referenced
transactions occurred at such time or to project our results of operations for
any future period or date.
The pro forma adjustments are based upon available information and various
assumptions that we believe are reasonable. The pro forma adjustments and
certain assumptions are described in the accompanying notes. Pro form
adjustments have been used to eliminate historical goodwill amortization over
the periods presented. Appraisals for Becker and Joan were performed during
2001 and the related allocation of purchase price was completed. The allocation
of the purchase price for the TAC-Trim acquisition is preliminary and will be
revised upon the completion of the fixed asset and intangible asset appraisals,
which are in progress. Accordingly, as the appraisals are completed it is
likely that adjustments to depreciation expense as well as specifically
identifiable intangible assets and the related amortization will be recorded in
future periods. C&A, based on current knowledge and consultation with the
outside valuation specialists, estimates the value of identifiable,
definite-lived intangible assets at $40 million. Such intangible assets include
proprietary technologies such as Intellimold, Invisitech and other
manufacturing and software processes, customer relationships and trade names.
Based on the nature of these intangibles and their estimated useful lives, the
weighted average amortization period is seven years. C&A estimates that there
are no indefinite lived intangible assets resulting from the TAC-Trim
acquisition.
80
The unaudited pro forma condensed consolidated statements of operations
should be read in conjunction with the historical financial statements of C&A,
Becker, Joan and TAC-Trim and the related notes to such financial statements
found in C&A's 2001 Form 10-K/A and March 31, 2002 Form 10-Q/A and C&A's
Current Reports on Form 8-K filed September 17, 2001, October 10, 2001 and
January 14, 2002, respectively, and incorporated by reference herein.
The purchase of Becker, Joan and TAC-Trim was at a significant premium
over historical net assets and the primary reasons for this premium are
described below:
The Becker acquisition was important to C&A because it elevated C&A from a
sub-scale plastics player to a sizable, broad-range plastics supplier. Becker's
large-tonnage press capabilities complement C&A's small-to-medium tonnage
capabilities, rounding out the products C&A can offer its customers. Greater
operating scale justifies greater investment in research and development, which
leads to better customer relationships and future technology leadership.
Synergies between Becker and C&A led C&A to pay well in excess of the fair
value of Becker's identifiable assets: together the two businesses may
negotiate lower prices on resin due to larger volume; several plants can be
closed into larger plants with open capacity, saving overhead costs; Becker
brings tooling operations which allow us to in-source tooling requirements and
capture some profit; and Charles Becker, a skilled and successful veteran of
the auto industry, provides synergies by applying his expertise to C&A's
plastics, tooling and European operations as C&A's Vice Chairman.
The Joan acquisition was important to C&A because it (1) increased C&A's
market share in automotive fabrics and (2) gave C&A more control over product
quality and supply-chain management through vertical integration. Greater
operating scale justifies greater investment in research and development, which
leads to better customer relationships and future technology leadership.
Synergies between Joan and C&A led C&A to pay well in excess of the fair value
of Joan's identifiable assets: together the two businesses may negotiate lower
prices on yarn and dye due to larger volume; Joan's Lowell and Hickory plants
were not transferred because C&A had open capacity in its fabrics plants,
saving all overhead costs at the former Joan facilities; Joan brings a package
dying operation, Western Avenue Dyers, which allows C&A to in-source its
package yarn dying requirements and capture some profit; and the ability to
package dye a portion of its requirements provides leverage on the suppliers
who provide the balance of C&A's package-dyed yarn.
The TAC-Trim acquisition was important to C&A because it further elevated
C&A from a sizeable plastics player to a leading supplier in scale and in
manufacturing and product technology. Greater operating scale justifies greater
investment in research and development, which leads to better customer
relationships and future technology leadership. Synergies between TAC-Trim and
C&A led C&A to pay well in excess of the fair value of TAC-Trim's identifiable
assets: together the two businesses may negotiate lower prices on resin and MRO
due to larger volume; TAC-Trim's leading manufacturing disciplines can be
rolled out to C&A's other plants to increase profitability and decrease capital
expenditures and working capital; before C&A's acquisition of TAC-Trim, the
business bought parts for its cockpit products from outside manufacturers, but
C&A can in-source many of these parts and capture profit; consolidation of
overlapping headquarters functions generate savings on headcount and occupancy
costs.
81
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
PRO FORMA ADJUSTMENTS
----------------------------------------------------
PRO
1/1/01- 1/1/01- 1/1/01- OFFERING FORMA
6/30/01 9/20/01 12/20/01 TAC-TRIM ADJUST- AS AD-
C&A BECKER JOAN TAC-TRIM ITALY(1) OTHER SUBTOTAL MENTS JUSTED
------------ --------- --------- ----------- ---------- -------------- ------------ ------------- -----------
Net sales ............ $ 1,823.3 $ 97.3 $ 94.6 $ 1,590.0 $ (124.2) $ -- $ 3,481.0 $ -- $ 3,481.0
Cost of goods sold ... 1,604.5 91.2 75.9 1,430.3 (145.0) (30.1)(2) 3,026.8 -- 3,026.8
--------- ------ ------- ---------- -------- --------- --------- --------- ---------
Gross profit ......... 218.8 6.1 18.7 159.7 20.8 30.1 454.2 -- 454.2
Selling, general and
administrative
expenses ............ 164.4 11.1 3.2 83.0 (8.1) (1.9)(3) 251.7 -- 251.7
Restructuring charges 18.8 1.2 -- 10.2 -- -- 30.2 -- 30.2
--------- ------ ------- ---------- -------- --------- --------- --------- ---------
Operating income ..... 35.6 (6.2) 15.5 66.5 28.9 32.0 172.3 172.3
Interest expense, net 84.3 3.2 2.6 8.2 (1.0) 52.1 (4) 149.4 -- 149.4
Loss on sale of
receivables ......... 10.8 -- -- -- -- (4.3)(5) 6.5 -- 6.5
Products preferred
stock requirements .. 2.4 -- -- -- -- 46.2 (6) 48.6 (19.3)(6) 29.3
Other (income)
expense, net ........ 6.4 (0.2) (0.1) 38.8 3.4 (32.4)(7) 15.9 -- 15.9
Income (loss) from
continuing
operations before
income taxes ........ (68.3) (9.2) 13.0 19.5 26.5 (29.6) (48.1) 19.3 (28.8)
Income tax expense
(benefit) ........... (18.6) (1.8) 5.7 8.4 9.5 9.1 (8) 12.3 -- 12.3
--------- ------ ------- ---------- -------- --------- --------- --------- ----------
Income (loss) from
continuing
operations .......... $ (49.7) $ (7.4) $ 7.3 $ 11.1 $ 17.0 $ (38.7) $ (60.4) $ 19.3 $ (41.1)
========== ======= ======= ========== ======== ========= ========== ========= ==========
Reflects the one-for-2.5 reverse stock split effected on May 28, 2002
Income (loss) from continuing operations per common share:
Basic and diluted .................................................................................................. $ (0.53)
Average common shares outstanding:
Basic and diluted ................................................................................................... 77.6
===========
See notes to Unaudited Pro Forma Condensed Consolidated Statements of
Operations
82
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
The Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the year ended December 31, 2001 reflects results of operations for Becker,
Joan and TAC-Trim independently through the acquisition dates of July 3, 2001,
September 21, 2001 and December 20, 2001, respectively. Subsequent to the
acquisition dates, results of operations for Becker, Joan and TAC-Trim have
been included in the results of operations of C&A.
The unaudited pro forma condensed consolidated statement of operations
includes adjustments necessary to reflect the estimated effect of the
Acquisitions, Financings, the February 2001 Heartland equity investment and the
Textron Leasing Transaction as if they had occurred on January 1, 2001.
1. The statement of operations for TAC-Trim reflects a 90% consolidated
interest in Textron Automotive Italia S.r.l. ("TAC-Trim Italy"). The TAC-Trim
acquisition provides for the acquisition of only 50% of TAC-Trim Italy's parent
company and gives both parties significant participatory rights. This
adjustment provides for the removal of TAC-Trim Italy. See footnote 7 for the
adjustment to account for C&A's corresponding 50% equity investment in TAC-Trim
Italy's parent company.
2. Represents pro forma adjustments to decrease cost of goods sold for the
respective entries as follows (in millions):
YEAR ENDED DECEMBER 31, 2001
------------------------------------------------
BECKER JOAN TAC-TRIM TOTAL
---------- --------- ---------- ----------
Depreciation .................................... (a) (e) $ (0.2) $ -- $ (7.7) $ (7.9)
Joan purchase savings ........................... (b) -- (0.4) -- (0.4)
Cost associated with leases not assumed ......... (c) -- (0.3) -- (0.3)
Material purchase savings ....................... (d) -- -- -- (3.6)
Textron Leasing Transaction ..................... (e) -- -- 9.6 9.6
Purchase accounting adjustment to customer
supply contracts ............................... (f) -- -- (27.5) (27.5)
-------
$ (30.1)
=======
- ----------
(a) Represents (i) decreased depreciation expense, primarily resulting
from the reduction in value of leasehold improvements for leases on
facilities to be closed in connection with the Becker acquisition,
and (ii) decreased depreciation expense from the reduction of assets
resulting from the Textron Leasing Transaction.
(b) In connection with the Joan acquisition, C&A entered into a contract
with a company owned by the selling shareholder to purchase flat
woven goods. The adjustment reflects the difference between
historical and contractually agreed prices applied to actual
purchases made from the previously related party supplier during the
periods indicated.
(c) Adjustment reflects costs associated with leases not assumed on Joan
facilities contractually excluded from the Joan acquisition. All
other costs associated with the retained business continue to be
reflected in the Unaudited Pro Forma Condensed Consolidated
Statement of Operations.
(d) Collectively, C&A, Becker and TAC-Trim have both common suppliers
and common commodity purchases. The adjustment reflects purchase
savings mathematically derived from the lowest historically
contracted pricing applied to actual purchase volumes during the pro
forma periods presented.
(e) The adjustments reflect the impact of the Textron Leasing
Transaction completed in connection with the transactions. Assuming
the Textron Leasing Transaction had occurred on January 1, 2001, we
would have replaced depreciation expense with lease expense. The
estimated depreciation expense associated with the assets included
in the Textron Leasing Transaction was $7.7 million for the year
ended December 31, 2001. The estimated lease expense from the
Textron Leasing Transaction would have been $9.6 million for the
same period.
(f) The adjustment reflects the impact of purchase accounting
adjustments to customer supply contracts.
83
3. Represents pro forma adjustments to increase/(decrease) selling,
general and administrative expense as follows (in millions):
YEAR ENDED DECEMBER 31, 2001
------------------------------------------------
BECKER JOAN TAC-TRIM TOTAL
---------- --------- ---------- ----------
Elimination of related party management fees
and other .......................................... (a) $ (1.4) $ -- $ -- $ (1.4)
Elimination of certain management positions ......... (b) (0.4) (0.3) (2.7) (3.4)
Amortization ........................................ (c) 1.8 -- 5.7 7.5
TAC-Trim employee benefit plan adjustments .......... (d) -- -- 2.2 2.2
Net increase in parent company management
fee ................................................ (e) -- -- -- 0.3
------
5.2
Less: Historical goodwill amortization ............. (7.1)
------
$ (1.9)
======
- ----------
(a) Represents adjustment to eliminate related party management fees and
other fees historically paid by Becker to its related parties. The
management and oversight function will be replaced by support
provided by C&A and Heartland (see 3(e) for the net increase in
quarterly advisory fees).
(b) Reflects the elimination of compensation and benefits costs of
certain executive management positions that are redundant with
existing positions. The selling companies are primarily responsible
for severance costs associated with these individuals. C&A
anticipates incurring $0.6 million in severance costs relating to
these individuals. Such costs are not reflected in the unaudited pro
forma condensed consolidated financial statement.
(c) Reflects amortization of intangible assets for TAC-Trim which are
assumed to have a value of $40 million and a 7 year average life.
The allocation of the purchase price for the TAC-Trim acquisition is
preliminary and will be revised upon the completion of the fixed
asset and intangible asset appraisals, which are in progress. If the
TAC-Trim intangible assets were $10 million greater or less than the
$40 million assigned value, the pro forma EPS (without regard to tax
effect, if any) would have been $0.02 lower or higher, respectively.
Appraisals for Becker and Joan were performed during 2001 and the
related allocation of purchase price was completed. As a result of
these appraisals, $18 million was allocated to definite lived
intangible assets, representing non-compete agreements, which will
be amortized over their five year lives.
(d) In connection with the TAC-Trim acquisition, certain purchase
accounting adjustments for TAC-Trim pensions and other
post-retirement benefit plans will be necessary. These adjustments
reflect the net effect on historically recorded benefit expenses as
if the transactions had occurred on January 1, 2001 and primarily
result from a decrease in the funded status of the pension plan and
conventional purchase accounting adjustments, offset by savings
derived from a change to a cash balance plan (as provided by the
amended TAC-Trim acquisition agreement).
(e) Represents the net additional quarterly advisory fee contractually
arranged with Heartland.
4. Represents the increase in interest expense to reflect the impact of
(i) the elimination of interest expense reflected in the historical financial
statement, which is replaced by (ii) interest expense resulting from the
acquisition pro forma debt structure, and (iii) the amortization of financing
costs over the terms of the corresponding debt. A summary follows (in
millions):
YEAR ENDED
DECEMBER 31, 2001
------------------
Interest on Revolving Credit Facility (a) ..................... $ --
Interest on Tranche A Facility (a) ............................ 7.8
Interest on Tranche B Facility (a) ............................ 24.0
Interest on Products 11 1/2% Senior Subordinated Notes ........ 46.0
Interest on Products 10 3/4% Senior Notes ..................... 53.8
Other (b) ..................................................... 7.7
-------
Subtotal ................................................... 139.3
Amortization of debt issue costs (c) .......................... 10.7
-------
Interest expense under new debt structure .................. 150.0
Less: historical interest expense ............................. (97.9)
-------
Net increase ............................................... $ 52.1
=======
- ----------
(a) The interest on the revolving credit facility and the tranche A term
loan facility is variable based on LIBOR plus 3.75%, with a minimum
LIBOR rate of 3.00%. The assumed interest rate of 7.75% was in
effect during the period. The interest on the tranche B term loan
facility is variable based on LIBOR plus 4.00%, with a minimum LIBOR
rate of 3.00%. The interest rate of 8.00% was in effect during the
period. Based on $100 million of borrowings under the tranche A term
facility and $300 million of borrowings under the tranche B term
facility, a 0.125% increase or decrease in the assumed weighted
average interest rate for the term loans would change pro forma
interest expense by $0.4 million for the year ended December 31,
2001.
(b) Other includes interest on foreign debt, commitment fees and letters
of credit fees.
(c) Debt issuance costs are amortized over the term of the corresponding
agreements ranging from 4 to 10 years. Offering adjustment
represents write-off of unamortized debt issuance costs allocable to
the debt being repaid.
84
5. Represents the elimination of historical loss on sale of receivables
and replacement with the pro forma loss on sale of receivables. The resulting
pro forma loss on sale of receivables assumes the sale of $183.3 million of
receivables and an effective rate of 3.52% (commercial paper rate at December
31, 2001, plus 1.50%).
6. Represents the preferred stock requirements on Products Preferred Stock
issued as part of the TAC-Trim acquisition (in millions):
YEAR ENDED
DECEMBER 31, 2001 OFFERING
------------------- -----------
Products Preferred Stock requirements calculated using the effective
interest method (annual dividend rate carrying value of $82.2 million)
(Series A) ............................................................. $ 26.5 $ (19.3)
Products Preferred Stock requirements calculated using the effective
interest method (annual dividend rates of 12%, escalating to 16%) on the
carrying value of $64.7 million (Series B and C)........................ 22.1 --
Less: historical preferred stock requirements recorded .................. (2.4) --
------- -------
$ 46.2 $ (19.3)
======= =======
The $19.3 million offering adjustment gives effect to the $100 million
repurchase of $133.3 million liquidation preference of Products Series A
Preferred Stock with a carrying value of $60 million. The $40 million excess
over the carrying value has not been reflected in the pro forma statement of
operations, however this will be an increase to accumulated deficit and
deducted from net income in arriving at net income available to common
stockholders in the period in which the transaction occurs (which is expected
to be in the second or third quarter of 2002).
The amounts below reflect the repurchase of $133.3 million liquidation
value of Series A Product Preferred Stock. The remaining $106.2 million
difference between the carrying amount and liquidation value will be accreted
through the statement of operations through December 31, 2012 using the
effective interest method.
JANUARY 1, 2001
CARRYING LIQUIDATION
AMOUNT VALUE DIFFERENCE
---------------- ------------ -----------
Series A ......... $ 22.2 $ 49.4 $ 27.2
Series B ......... 55.7 123.7 68.0
Series C ......... 9.0 20.0 11.0
------- ------- -------
$ 86.9 $ 193.1 $ 106.2
======= ======= =======
The terms of our debt instruments place significant restrictions on our
ability to pay cash dividends. The computation assumes dividends are paid
quarterly. The terms of the instruments allow dividends to be accumulated. If
dividends were not paid the preferred stock requirements would increase $1.0
million.
7. This adjustment gives effect to equity accounting for our 50%
investment in TAC-Trim Italy's parent company in the net losses in TAC-Trim
Italy ($10.2 million). See footnote 1 for further discussion on the equity
investment in TAC-Trim Italy's parent company. This adjustment also reverses
the $42.6 million loss on the Textron Leasing Transaction reflected in their
historical financial statements.
8. Represents the estimated tax effect of the foregoing adjustments at
C&A's marginal tax rates. Such adjustment recognizes Products Preferred Stock
requirements as permanent differences. In addition, the adjustment reflects the
net additional tax for Becker and Joan as if the acquired companies were taxed
as C-corporations for all periods presented at C&A's marginal tax rates.
85
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2002
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
C&A OFFERING PRO FORMA
----------- --------------- ------------
Net sales .............................................. $ 914.8 $ -- $ 914.8
Cost of goods sold ..................................... 783.7 -- 783.7
------- ------- -------
Gross profit ........................................... 131.1 -- 131.1
Selling, general and administrative expenses ........... 67.6 -- 67.6
Restructuring charges .................................. 9.1 -- 9.1
------- ------- -------
Operating income ....................................... 54.4 -- 54.4
Interest expense, net .................................. 37.3 -- 37.3
Loss on sale of receivables ............................ 1.1 -- 1.1
Products Preferred Stock requirements .................. 11.2 (4.1)(1) 7.1
Other expense, net ..................................... 6.3 -- 6.3
------- ------- -------
Income (loss) from continuing operations before
income taxes .......................................... (1.5) 4.1 2.6
Income tax expense (benefit) ........................... 5.9 -- 5.9
------- ------- -------
Income (loss) from continuing operations ............... $ (7.4) $ 4.1 $ (3.3)
======== ======= ========
Reflects the one for 2.5 reverse stock split effected on
May 28, 2002
Income (loss) from continuing operations per
common share:
Basic and diluted ................................................................ $ (0.04)
Average common shares outstanding:
Basic and diluted ................................................................ 77.8
=========
- ----------
(1) Represents the adjustment of Products preferred stock requirements as a
result of the $100.0 million repurchase of $133.3 million liquidation
preference of Products Preferred Stock, Series A.
See notes to Unaudited Pro Forma Condensed Consolidated Statements of
Operations
86
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 2002
(IN MILLIONS)
C&A ADJUSTMENTS PRO FORMA
------------ --------------- ------------
Current Assets:
Cash and cash equivalents .................................. $ 92.1 $ 50.5(1) $ 142.6
Accounts receivable, net ................................... 487.4 -- 487.4
Inventories ................................................ 143.8 -- 143.8
Other ...................................................... 148.4 -- 148.4
--------- ---------- ---------
Total current assets ..................................... 871.7 50.5 922.2
Property, plant and equipment, net .......................... 608.7 -- 608.7
Deferred tax assets ......................................... 132.9 -- 132.9
Other assets ................................................ 176.1 -- 176.1
Goodwill .................................................... 1,249.8 15.0 (2) 1,264,8
Intangible assets ........................................... 53.9 53.9
--------- ---------- ---------
TOTAL ASSETS ................................................ $ 3,093.1 $ 65.5 $ 3,158.6
========= ========== =========
Current Liabilities:
Short-term borrowings ...................................... $ 33.0 $ -- $ 33.0
Current maturities of long-term debt ....................... 22.2 -- 22.2
Accounts payable ........................................... 531.7 -- 531.7
Accrued expenses ........................................... 290.2 15.0 (2) 305.2
--------- ---------- ---------
Total current liabilities ................................ 877.1 15.0 892.1
Long-term debt .............................................. 1,276.4 -- 1,276.4
Other, including post-retirement benefit obligation ......... 417.6 -- 417.6
Products Preferred Stock, mandatorily redeemable
in 2012 .................................................... 160.5 (60.0)(3) 100.5
Common stock ($.01 par value, 67.2 shares issued and
outstanding as adjusted 83.2 shares issued and
outstanding) ............................................... 0.7 0.1 (4) 0.8
Other paid-in capital ....................................... 1,124.1 150.4 (4) 1,274.5
Accumulated deficit ......................................... (690.2) (40.0)(3) (730.2)
Accumulated other comprehensive loss ........................ (73.1) (73.1)
TOTAL COMMON STOCKHOLDERS' EQUITY ........................... 361.5 110.5 472.0
--------- ---------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................. $ 3,093.1 $ 65.5 $ 3,158.6
========= ========== =========
- ----------
(1) Represents net cash proceeds of $150.5 million from the offering less
$100.0 million used for the repurchase of Products Preferred Stock.
(2) Reflects a $15.0 million additional payment to be made to settle the
purchase price of TAC-Trim.
(3) The $100.0 million cash payment represents the repurchase of Products
Series A preferred stock at a price of approximately 75% of its
liquidation preference of $133.3 million and a carrying value of $60.0
million. The difference between the $60.0 million carrying value and the
$100.0 million cash payment is an increase to accumulated deficit, in the
period of such repurchase, and income available for common stockholders
will be reduced by $40.0 million.
(4) Represents $150.5 million of net offering proceeds.
87
================================================================================
$500,000,000
COLLINS & AIKMAN PRODUCTS CO.
EXCHANGE OFFER FOR $500,000,000 AGGREGATE PRINCIPAL
AMOUNT OF 10 3/4% SENIOR NOTES DUE 2011
---------------------
PROSPECTUS
---------------------
JUNE 17, 2002
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus. You must
not rely on unauthorized information. This prospectus is not an offer to sell
or buy any securities in any jurisdiction where it is unlawful. The information
in this prospectus is current as of June 17, 2002.
- --------------------------------------------------------------------------------
================================================================================