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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 27, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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JUNO LIGHTING, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 3640 36-2852993
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
1300 SOUTH WOLF ROAD
DES PLAINES, ILLINOIS 60018
(847) 827-9880
(Address, including Zip Code, and Telephone Number, including Area Code,
of Registrant's Principal Executive Offices)
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GLENN R. BORDFELD
PRESIDENT AND CHIEF OPERATING OFFICER
JUNO LIGHTING, INC.
1300 SOUTH WOLF ROAD
DES PLAINES, ILLINOIS 60018
(847) 827-9880
(Name, Address, including Zip Code, and Telephone Number, including Area Code,
of Agent for Service)
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COPIES TO:
GREGORY C. SMITH, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
525 UNIVERSITY AVE, SUITE 220
PALO ALTO, CALIFORNIA 94301
(650) 470-4500 TELEPHONE
(650) 470-4570 FACSIMILE
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APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register securities for an offering pursuant to
Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED
MAXIMUM PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE(1)
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11 7/8% Series B Senior Subordinated
Notes
Due 2009............................... $125,000,000 100% $125,000,000 $34,750
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Guarantees of the 11 7/8% Series B Senior
Subordinated Notes Due 2009(2)......... -- -- -- --
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f) under the Securities Act.
(2) No separate consideration will be received for the Guarantees, and,
therefore, no additional registration fee is required.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
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CO-REGISTRANTS
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STATE OR OTHER I.R.S.
JURISDICTION OF PRIMARY STANDARD EMPLOYER
EXACT NAME OF CO-REGISTRANT INCORPORATION OR INDUSTRIAL CLASSIFICATION IDENTIFICATION
AS SPECIFIED IN ITS CHARTER ORGANIZATION CODE NUMBER NUMBER
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Juno Manufacturing, Inc. ............................. Illinois 3640 36-4180708
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Indy Lighting, Inc. .................................. Indiana 3640 35-1174751
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Advanced Fiberoptic Technologies, Inc. ............... Florida 3640 59-3392179
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION -- DATED AUGUST 27, 1999
PROSPECTUS
OFFER TO EXCHANGE ALL
11 7/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2009 FOR
11 7/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2009
OF
[JUNO LIGHTING INC. LOGO]
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.
NEW YORK CITY TIME, ON , 1999, UNLESS EXTENDED.
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TERMS OF THE EXCHANGE OFFER:
- We are offering a total of $125,000,000 new notes, which are registered
with the Securities and Exchange Commission, to all holders of our old
notes.
- We will exchange for new notes all outstanding old notes that are validly
tendered and not validly withdrawn.
- You may withdraw tenders of old notes at any time before the exchange
offer expires.
- We will not receive any cash proceeds from the exchange offer.
- The exchange of notes will not be a taxable exchange for U.S. federal
income tax purposes.
- The economic terms of the new notes are identical to those of the old
notes.
- The old notes are, and the new notes will be, guaranteed on a senior
subordinated basis by each of our material existing and future domestic
subsidiaries.
- There is no existing market for the new notes, and we do not intend to
apply for their listing on any securities exchange or for quotation
through the Nasdaq Stock Market.
INVESTING IN THE NEW NOTES INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 5.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE NOT REQUESTED TO SEND US A
PROXY.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE NOTES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS , 1999
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This prospectus incorporates by reference important business and financial
information about us which is not included in or delivered with this prospectus.
See "Available Information" and "Incorporation by Reference." You can obtain any
of the documents incorporated by reference in this prospectus through us or from
the Securities and Exchange Commission through its web site at
http://www.sec.gov. Documents incorporated by reference are available from us
without charge, excluding all exhibits unless we have specifically incorporated
by reference an exhibit in this prospectus. You can obtain documents
incorporated by reference in this prospectus by writing to us at Juno Lighting,
Inc., 1300 South Wolf Road, Des Plaines, Illinois 60018, Attention: Chief
Financial Officer, or calling us at (847) 827-9880.
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TABLE OF CONTENTS
PAGE
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Summary.............................. 1
Risk Factors......................... 5
Use of Proceeds...................... 11
Capitalization....................... 12
Selected Consolidated Financial
Data............................... 13
The Exchange Offer................... 15
Management's Discussion and Analysis
of Results of Operations and
Financial Condition................ 22
Business............................. 27
Management........................... 34
Certain Relationships and Related
Party Transactions................. 36
Description of Capital Stock......... 38
PAGE
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Security Ownership of Certain
Beneficial Owners and Management... 40
Executive Compensation............... 43
Description of Senior Credit
Facilities......................... 45
Description of Notes................. 47
United States Federal Tax
Consequences....................... 85
Plan of Distribution................. 89
Legal Matters........................ 89
Independent Public Accountants....... 90
Available Information................ 90
Incorporation by Reference........... 90
Pro Forma Consolidated Financial
Data............................... P-1
Index to Financial Statements........ F-1
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Juno, Indy, Air-Loc, Real Nail, Trac-Master and Wireforms are registered
trademarks of Juno.
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This prospectus is based on information provided by us and other sources
that we believe are reliable. However, we cannot assure you that the information
provided by these other sources is accurate or complete. For example, in
preparing estimates of market share and industry data, we utilized third party
sources when possible, but cannot verify some of the estimates through
independent sources. Certain of the data cited herein regarding markets and
Juno's positions and the positions of other manufacturers within these markets,
such as (1) the size of the U.S. recessed and track lighting market segments,
(2) Juno's industry-leading position in both the styling and development of
recessed and track lighting products and (3) Juno's reputation as an industry
leader in customer service, are not the product of independent research or
market share studies. Juno believes these statements are accurate as of the date
of this prospectus, based upon its knowledge of the industry and its
communications with its customers. However, these statements may prove to be
inaccurate.
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FORWARD-LOOKING STATEMENTS MAY BE INACCURATE
This prospectus (including information we have incorporated into this
prospectus by reference) contains forward-looking statements that are subject to
risks and uncertainties. You should not place undue reliance on those
statements. Forward-looking statements include information concerning our
possible or assumed future results of operations, including descriptions of our
business strategies. These statements often include words such as "believe,"
"expect," "anticipate," "intend," "plan," "estimate," "seek," "will" or "may" or
similar expressions. These statements are based on certain assumptions that we
have made in light of our experience in the industry as well as our perceptions
of historical trends, current conditions, expected future developments and other
factors we believe are appropriate in these circumstances. As you read and
consider this prospectus, you should understand that these statements are not
guarantees of performance or results. They involve risks, uncertainties and
assumptions. Many factors could affect our actual financial results or results
of operations and could cause actual results to differ materially from those in
the forward-looking statements. These factors include:
- general economic or business conditions affecting the lighting fixture
industry being less favorable than expected;
- our failure to develop or successfully introduce new products;
- increased competition in the lighting fixture market;
- substantial increases in our future required capital expenditures;
- the level of remodeling and construction activities;
- disruptions in production or distribution;
- raw material prices;
- our ability to obtain and retain patent and trademark protection for our
designs and inventions and defend ourselves against infringement claims
by other entities; and
- various other factors beyond our control.
All future written and oral forward-looking statements by us or persons
acting on our behalf are expressly qualified in their entirety by the cautionary
statements contained or referred to above. We do not have any obligation or
intention to release publicly any revisions to any forward-looking statements to
reflect events or circumstances in the future or to reflect the occurrence of
unanticipated events. YOU SHOULD READ CAREFULLY THE FACTORS DESCRIBED IN THE
"RISK FACTORS" SECTION OF THIS PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISKS
THAT COULD CAUSE ACTUAL RESULTS TO DIFFER FROM THESE FORWARD-LOOKING STATEMENTS.
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SUMMARY
In this prospectus, unless otherwise noted, the words "Juno," "we," "our,"
"ours" and "us" refer only to Juno Lighting, Inc. and its consolidated
subsidiaries. The following summary contains the basic information about this
exchange offer. It does not contain all of the information that is important to
you in deciding whether to exchange your old notes and invest in the new notes.
We encourage you to read the prospectus in its entirety.
OUR COMPANY
We are a leading designer, assembler and marketer of recessed and track
lighting fixtures. Our broad product line is used in commercial and residential
remodeling and new construction. Our principal products use a variety of light
sources and are designed for reliable and flexible function, efficient
operation, attractive appearance and simple installation and servicing.
We were recapitalized on June 30, 1999 in a transaction sponsored by
Fremont Investors I, LLC, a Delaware limited liability company formed by Fremont
Partners, L.P., and certain affiliated entities. The investment by Fremont
Investors represented as of June 30, 1999 on an as-converted basis an indirect
ownership interest of approximately 60.5% of our fully diluted common stock.
THE EXCHANGE OFFER
On June 30, 1999, we completed the private offering of our 11 7/8% Series A
Senior Subordinated Notes due 2009. We entered into a registration rights
agreement with the initial purchasers in the private offering in which we agreed
to deliver to you this prospectus and to complete the exchange offer. If the
exchange offer is not completed on or before November 27, 1999, the interest
rate on the 11 7/8% Series A Senior Subordinated Notes due 2009 will increase by
0.5% per annum during each subsequent 90-day period up to a maximum overall
increase of 2.0% per annum until we complete the exchange offer. You should read
the discussion under the headings "-- Summary Description of the New Notes" and
"Description of the Notes" for more information about the new notes.
We believe that the notes issued in the exchange offer may be resold by you
without compliance with the registration and prospectus delivery provisions of
the Securities Act, unless you are an affiliate of Juno or an underwriter or a
broker-dealer. You should read the discussion under the heading "The Exchange
Offer" for further information regarding the exchange offer and resale of the
notes.
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
Registration rights
agreement..................... This agreement entitles holders of old notes to
exchange such notes for new, registered notes
with identical economic terms. The exchange
offer will satisfy those rights. After the
exchange offer is complete, you will no longer
be entitled to any exchange or registration
rights with respect to your notes.
The exchange offer............ We are offering to exchange up to $125.0
million of the new notes for up to $125.0
million of the old notes. Old notes may be
exchanged only in $1,000 increments.
Tenders; expiration date;
withdrawal.................... The exchange offer will expire at 5:00 p.m.,
New York City time, on , 1999, unless
we extend it. If you decide to exchange your
old notes for new notes, you must acknowledge
that you are not engaging in, and do not intend
to engage in, a distribution of the new notes.
You may withdraw your tender of old notes at
any time before , 1999. If we decide
for any reason not to accept your notes for
exchange, we will return
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them to you promptly and without expense after
the exchange offer expires or terminates.
Conditions to the exchange
offer......................... We are not required to accept any old notes in
exchange for new notes. We may terminate or
amend the exchange offer if we determine that
the exchange offer violates applicable law or
any applicable interpretation of the
Commission.
Federal tax considerations.... The exchange of old notes for new notes under
the exchange offer will not result in any gain
or loss to you for federal income tax purposes.
Use of proceeds............... We will receive no proceeds from the exchange
offer.
Exchange agent................ Firstar Bank, N.A. is the exchange agent for
the exchange offer. The address and telephone
number of the exchange agent are set forth
under the heading "The Exchange
Offer -- Exchange Agent."
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the new notes and the old notes are identical in all material
respects but two:
- the transfer restrictions and registration rights relating to the old
notes do not apply to the new notes; and
- if we do not complete the exchange offer by November 27, 1999, the
interest rate on the old notes will increase by 0.5% per annum during
each subsequent 90-day period up to a maximum overall increase of 2.0%
per annum until we complete it.
Issuer..................... Juno Lighting, Inc., a Delaware corporation.
Securities................. $125.0 million in principal amount of 11 7/8%
Series B Senior Subordinated Notes due 2009.
Maturity................... July 1, 2009.
Interest................... Annual rate: 11 7/8%.
Payment frequency: every six months on January 1
and July 1. First payment: January 1, 2000.
Ranking.................... The notes are senior subordinated debt.
Accordingly, they will rank:
- behind all our existing and future senior debt;
- equally with all our existing and future
subordinated, unsecured debt that does not
expressly provide that it is subordinated to the
notes;
- ahead of any of our future debt that expressly
provides that it is subordinated to the notes;
and
- behind the liabilities of our existing and future
foreign subsidiaries.
Assuming the recapitalization was completed on May
31, 1999, the notes would have been subordinated to
approximately $97.3 million of our senior debt. In
addition, the notes would have been effectively
subordinated to all of the liabilities of our
foreign subsidiary.
Guarantees................. The notes will be unconditionally guaranteed on a
senior subordinated basis by each of our material
existing and future domestic subsidiaries.
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Optional Redemption........ On or after July 1, 2004, we may redeem some or all
of the notes at any time at the redemption prices
described in the section "Description of
Notes -- Optional Redemption."
Prior to July 1, 2002, we may redeem up to 35% of
the notes with the proceeds of public offerings of
our equity at the price listed in the section
"Description of Notes -- Optional Redemption."
Mandatory Offer to
Repurchase................. If we sell certain assets or experience specific
kinds of changes in control, we must offer to
repurchase the notes at the prices listed in the
section "Description of Notes -- Repurchase at the
Option of Holders."
Basic Covenants of
Indenture.................. We will issue the notes under an indenture which
will, among other things, restrict our ability to:
- borrow money;
- pay dividends on stock or repurchase stock;
- make investments;
- use assets as security in other transactions; and
- sell certain assets or merge with or into other
companies.
See "Description of Notes -- Certain Covenants."
YOU SHOULD REFER TO THE SECTION ENTITLED "RISK FACTORS" FOR AN EXPLANATION
OF CERTAIN RISKS OF INVESTING IN THE NOTES.
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Our executive offices are located at 1300 South Wolf Road, Des Plaines,
Illinois 60018 and our telephone number is (847) 827-9880.
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SUMMARY CONSOLIDATED FINANCIAL DATA
The summary historical financial data set forth below for the fiscal years
ended November 30, 1996, 1997 and 1998 and the six-month periods ended May 31,
1998 and 1999 are derived from and should be read in conjunction with the
audited financial statements and the unaudited quarterly financial statements of
Juno and the related notes thereto appearing elsewhere in this prospectus. The
historical consolidated financial data of Juno for the six-month periods ended
and as of May 31, 1998 and 1999, in the opinion of our management, contain all
adjustments (consisting only of normally recurring adjustments) necessary for a
fair presentation of such data. The summary pro forma financial data for Juno
set forth below has been derived from the pro forma financial data included
elsewhere in this prospectus and gives effect to the recapitalization. The pro
forma statement of operations data and other financial data give effect to the
recapitalization as if it had occurred on December 1, 1997, and the pro forma
balance sheet data gives effect to the recapitalization as if it had occurred on
May 31, 1999. The pro forma financial data does not purport to represent what
Juno's financial position and results of operations would have been if the
recapitalization had actually been completed as of the dates indicated and is
not intended to project Juno's financial position or results of operations for
any future period.
SIX MONTHS ENDED PRO FORMA
YEAR ENDED NOVEMBER 30, MAY 31, TWELVE MONTHS
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1996 1997 1998 1998 1999 MAY 31, 1999
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(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Net sales.............................. $131,479 $139,855 $160,941 $75,232 $82,781 $168,490
Gross profit........................... 63,160 67,974 81,059 37,271 40,749 84,537
Operating income....................... 26,394 27,373 36,976 15,930 18,077 38,798
Net income............................. $ 19,897 $ 20,303 $ 26,625 $11,587 $13,315 $ 9,188
OTHER FINANCIAL DATA:
EBITDA(1).............................. $ 29,468 $ 30,857 $ 40,654 $17,772 $20,153 $ 43,035
Depreciation and amortization.......... 3,074 3,484 3,678 1,842 2,076 3,912
Capital expenditures................... 13,316 13,226 5,293 2,536 3,133 5,890
Gross margin........................... 48.0% 48.6% 50.4% 49.5% 49.2% 50.2%
EBITDA margin.......................... 22.4% 22.1% 25.3% 23.6% 24.3% 25.5%
PRO FORMA FINANCIAL DATA:
Ratio of EBITDA to cash interest
expense.............................. 1.9x
Ratio of debt to EBITDA................ 5.1x
Pro forma ratio of earnings to fixed
charges(2)........................... 1.5x 1.5x 1.6x
Pro forma ratio of earnings to combined
fixed charges and preferred stock
dividend(3).......................... 1.0x 0.9x 1.0x
MAY 31, 1999
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ACTUAL PRO FORMA
BALANCE SHEET DATA: -------- ---------
Cash and marketable securities.............................. $102,717 $ 1,000
Working capital............................................. 152,546 49,134
Total assets................................................ 217,599 125,629
Total debt.................................................. 3,325 221,363
Stockholders' equity (deficit).............................. 200,417 (109,591)
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(1) EBITDA is defined as operating income before depreciation, amortization and,
on a pro forma basis, a management fee payable to Fremont Partners L.L.C.
EBITDA is presented because it is a widely accepted financial indicator used
by certain investors and analysts to analyze and compare companies on the
basis of operating performance. EBITDA is not intended to represent cash
flows for the period, is not presented as an alternative to operating income
as an indicator of operating performance, should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles in the United
States ("GAAP") and is not indicative of operating income or cash flow from
operations as determined under GAAP.
(2) In calculating the pro forma ratio of earnings to fixed charges, earnings
consist of income before taxes plus fixed charges. Fixed charges consist of
interest expense (which includes amortization of deferred financing costs
and debt issuance costs) and one-third of rental expense, deemed
representative of that portion of rental expense, estimated to be
attributable to interest.
(3) In calculating the pro forma ratio of earnings to combined fixed charges and
preferred stock dividend, earnings consist of income before taxes plus fixed
charges. Fixed charges consist of interest expense (which includes
amortization of deferred financing costs and debt issuance costs) and
one-third of rental expense, deemed representative of that portion of rental
expense, estimated to be attributable to interest, and non-cash dividends
payable on our Series A convertible preferred stock issued to Fremont
Investors or its assigns in the recapitalization.
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RISK FACTORS
You should read and consider carefully each of the following factors, as
well as the other information contained in or incorporated by reference into
this prospectus, before making a decision to tender your old notes in the
Exchange Offer. The risk factors set forth below (other than the first risk
factor described below) are generally applicable to the old notes as well as the
new notes.
RISKS RELATED TO THE NOTES
If You Do Not Exchange Your Notes Pursuant to this Exchange, You Might Not Be
Able to Ever Sell Your Notes.
It may be difficult for you to sell notes that are not exchanged in the
exchange offer. Those notes may not be offered or sold unless they are
registered or there are exemptions from the registration requirements under the
Securities Act and applicable state securities laws.
If you do not tender your old notes or if we do not accept some of your old
notes, those notes will continue to be subject to the transfer and exchange
restrictions in:
- the indenture,
- the legend on the old notes, and
- the offering memorandum relating to the old notes.
The restrictions on transfer of your old notes arise because we issued the
old notes pursuant to an exemption from the registration requirements of the
Securities Act and applicable state securities laws. In general, you may only
offer or sell the old notes if they are registered under the Securities Act and
applicable state securities laws, or offered and sold pursuant to an exemption
from such requirements. We do not intend to register the old notes under the
Securities Act. To the extent old notes are tendered and accepted in the
exchange offer, the trading market, if any, for the old notes would be adversely
affected.
We Are Substantially Leveraged and Have Limited Liquidity, Which Could Limit Our
Flexibility to Obtain Additional Capital or Grow Our Business.
We have recently incurred approximately $222.3 million of indebtedness,
consisting of $97.3 million of borrowings under senior credit facilities and
$125 million of senior subordinated notes in connection with the
recapitalization. These funds were used to fund a portion of the consideration
paid in the recapitalization and transaction expenses associated with the
recapitalization. The terms of the indebtedness include significant operating
and financial restrictions, such as limits on our ability to incur indebtedness,
create liens, sell assets, engage in mergers or consolidations, make investments
and pay dividends. In addition, under the senior credit facilities, we are
required to comply with certain financial covenants. See "Description of Senior
Credit Facilities."
As of May 31, 1999, after giving pro forma effect to the recapitalization,
we had approximately $235.2 million of total liabilities. This substantial
leverage may have important consequences for us, including the following:
- Our ability to obtain additional financing for working capital, capital
expenditures or other purposes may be impaired or any such financing may
not be available on terms favorable to us;
- During certain periods, a substantial portion of our cash flow available
from operations will be dedicated to the payment of principal and
interest expense, thereby reducing the funds that would otherwise be
available to us for operations and future business opportunities;
- Certain of our borrowings will be at variable rates of interest, which
could result in higher interest expense;
- A substantial decrease in operating income and cash flows or an increase
in expenses may make it difficult for us to meet our debt service
requirements or force us to modify our operations; and
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- Our substantial leverage may make us more vulnerable to economic
downturns and competitive pressure.
In addition, substantial leverage will have a negative effect on our net
income. Pro forma net income for the fiscal year ended November 30, 1998 and the
six months ended May 31, 1999 would have been $7.9 million and $3.7 million,
respectively, as compared to $26.6 million and $13.3 million, respectively, for
the same periods on a historical basis, and pro forma interest expense for
fiscal 1998 and the six months ended May 31, 1999 would have increased to $23.6
million and $11.7 million, respectively.
Our principal sources of liquidity are cash flow from our operations and
our revolving credit facility. Our ability to make scheduled payments of the
principal of, or to pay interest on, or to refinance our indebtedness and to
make scheduled payments under our other obligations depends on our future
performance, which is subject to economic, financial, competitive and other
factors beyond our control. Our business may not continue to generate sufficient
cash flow from operations in the future to service our debt and make necessary
capital expenditures after satisfying certain liabilities arising in the
ordinary course of business. If we are unable to do so, we may be required to
refinance all or a portion of our debt, sell assets or obtain additional
financing, and we cannot be assured of being able to complete such actions.
Our Business Activities and Our Ability to Raise Additional Funds Are Limited by
Covenants Under the Indenture and Senior Credit Facilities.
The indenture and the senior credit facilities contain numerous restrictive
covenants, including, but not limited to, covenants that restrict our ability to
incur indebtedness, pay dividends, create liens, sell assets and engage in
certain mergers and acquisitions. In addition, the terms of the senior credit
facilities also require us to maintain certain financial ratios. Our ability to
comply with the covenants and other terms of the indenture and the senior credit
facilities and to satisfy our other respective debt obligations (including,
without limitation, borrowings and other obligations under the senior credit
facilities) and our ability to make cash payments with respect to the notes will
depend on our future operating performance. In the event that we fail to comply
with the various covenants contained in the indenture or the senior credit
facilities, as applicable, we would be in default thereunder and the maturity of
substantially all of our long-term indebtedness could be accelerated.
A default under the indenture would also constitute an event of default
under the senior credit facilities. In addition, the lenders under the senior
credit facilities could elect to declare all amounts borrowed thereunder,
together with accrued interest, to be due and payable. If we were unable to
repay such borrowings, such lenders could proceed against our assets, which
secure our borrowings under the senior credit facilities. If the indebtedness
under the senior credit facilities were to be accelerated, our assets might not
be sufficient to repay such indebtedness and the notes in full. The terms of the
senior credit facilities prohibit the repayment, purchase, redemption,
defeasance or other payment of the notes at any time prior to their stated
maturity. See "Description of Senior Credit Facilities" and "Description of
Notes."
The Notes and Guarantees Are Unsecured Senior Subordinated Obligations.
The indebtedness evidenced by the notes are an unsecured obligation of Juno
and the indebtedness evidenced by the guarantees entered into by subsidiaries of
Juno are unsecured obligations of such subsidiaries. The payment of principal of
and premium, if any, and interest on the notes is subordinated in right of
payment to all senior indebtedness of Juno, including the payment of the senior
credit facilities, and the guarantees entered into by subsidiaries of Juno are
subordinated in right of payment to all senior indebtedness of our subsidiary
guarantors, including the subsidiary guarantors' respective guarantees of the
senior credit facilities. As of May 31, 1999, senior indebtedness of Juno was
approximately $97.3 million, after giving pro forma effect to the
recapitalization.
Because of the subordination provisions of the indenture, in the event of
insolvency, liquidation, reorganization, dissolution or other winding-up of Juno
or any of our subsidiary guarantors, holders of
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12
senior indebtedness of Juno or any of our subsidiary guarantors, as the case may
be, will have to be paid in full before we may make payments in respect of the
notes or before any of our subsidiary guarantors make payment in respect of
their subsidiary guarantees. In addition, we may not make any payment in respect
of the notes during the continuance of a payment default under any Designated
Senior Debt (as defined in the indenture). As a result, if certain non-payment
defaults exist with respect to Designated Senior Debt, the holders of such
Designated Senior Debt will be able to prevent payments on the notes for certain
periods of time. See "Description of Notes -- Subordination."
We May Not Be Able to Purchase the Notes upon a Change of Control, Which May
Prevent Us from Entering into Certain Business Combinations.
If we undergo a change of control, we may need to refinance large amounts
of our debt, including the debt under the notes and under the senior credit
facilities. If a change of control occurs, we must offer to buy back the notes
for a price equal to 101% of their principal amount, plus any interest which has
accrued and remains unpaid as of the repurchase date. We would fund any
repurchase obligation with our available cash, cash generated from other sources
such as borrowings, sales of equity, or funds provided by a new controlling
person. However, we cannot assure you that there will be sufficient funds
available for any required repurchases of the notes if a change of control
occurs. In addition, the senior credit facilities prohibit us from repurchasing
the notes after a change of control until we first repay our indebtedness under
the senior credit facilities in full. If we fail to repurchase the notes in that
circumstance, we will go into default under both the notes and the senior credit
facilities. Any future debt which we incur may also contain restrictions on
repayment which come into effect upon a change of control. If a change of
control occurs, we cannot assure you that we will have sufficient funds to
satisfy all of our debt obligations. These buyback requirements may also delay
or make it harder for others to obtain control of Juno. In addition, certain
important corporate events, such as leveraged recapitalizations, that would
increase the level of our indebtedness, would not constitute a change of control
under the indenture. See "Description of Notes -- Repurchase at the Option of
Holders -- Change of Control" and "-- Certain Definitions."
Fraudulent Transfer Risks: Under Certain Circumstances, a Court Could Cancel Our
Obligations Under the Notes or the Subsidiaries' Guarantees.
If we become the debtor in a bankruptcy case or encounter other financial
difficulty, a court could, under the fraudulent transfer provisions of federal
bankruptcy law and corresponding state laws, avoid (i.e., cancel) our
obligations under the notes. A court could do so if it found that, when we
issued the notes, we (1) received less than fair consideration or reasonably
equivalent value and (2) either (a) were or were rendered insolvent, (b) were
engaged in a business or transaction for which our remaining unencumbered assets
constituted unreasonably small capital, or (c) intended to incur or believed (or
should have believed) that we would incur debts beyond our ability to pay.
A court would likely find that we received less than fair consideration or
reasonably equivalent value to the extent that we pay the notes' proceeds to our
stockholders in connection with the recapitalization.
Our material existing and future domestic subsidiaries will guarantee the
notes. Under the laws described above, a court could cancel a subsidiary
guarantee if it found that when the guarantor entered into its guarantee (or, in
some jurisdictions, when payments became due thereunder), clauses (1) and (2)
above applied to the guarantor. A court would likely conclude that a guarantor
did not receive fair consideration or reasonably equivalent value unless it
received direct or indirect benefits from the notes' issuance.
If the court avoids the notes or a guarantee, you would have no rights
against us or the guarantor, respectively, with respect thereto. Moreover, the
court could order you to return any payments received from us or from the
guarantor.
The measure of insolvency for the above purposes will depend on the law of
the jurisdiction being applied. Generally, an entity would be considered
insolvent if the sum of its debts is greater than the fair value of its property
or if the present fair salable value of its assets is less than the amount that
will be
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required to pay its probable liability on its existing debts as they become
absolute and matured. For these purposes, "debts" includes contingent and
unliquidated debts.
There Is No Established Trading Market for the New Notes and No Guarantee That a
Market Will Develop or That You Will Be Able to Sell Your New Notes.
The new notes will constitute a new issue of securities, and there has not
been an established trading market for the new notes. A market may not develop,
and you may not be able to resell your new notes. Future trading prices of the
new notes will depend on many factors, including, among other things, prevailing
interest rates, our operating results and the market for similar securities. The
initial purchasers have advised us that they currently intend to make a market
in the new notes. However, the initial purchasers are not obligated to do so,
and any market-making may be discontinued at any time without notice.
The liquidity of, and trading market for, the new notes may also be
materially and adversely affected by declines in the market for high yield
securities generally. Such a decline may materially and adversely affect such
liquidity and trading independent of our financial performance and prospects.
RISKS RELATED TO THE RECAPITALIZATION
We Are Controlled by Fremont Investors
Fremont Investors own a new series of convertible preferred stock initially
representing as of June 30, 1999, on an as-converted basis, approximately 60.5%
of the fully diluted common stock of Juno. Fremont Investors have significant
voting power to control the direction and policies of Juno, the election of all
directors and the outcome of any matter requiring stockholder approval,
including adopting amendments to our certificate of incorporation and approving
the merger or a sale of all or substantially all of our assets. The directors
elected by Fremont Investors have the authority to make decisions affecting the
appointment of new management and the capital structure of Juno, including the
issuance of additional capital stock, the implementation of stock repurchase
programs and the declaration of dividends, if any.
We Are a Defendant in a Lawsuit Challenging the Recapitalization That Could
Adversely Affect Our Business.
One of our stockholders has brought a purported class action lawsuit
against us, our directors and Fremont Investors and Fremont Partners in Delaware
state court alleging the terms of our agreement with Fremont Investors and
Fremont Partners in the recapitalization are not in the best interests of the
stockholders. The plaintiff has sought relief in the form of an injunction
prohibiting the recapitalization or, if the recapitalization is completed prior
to the resolution of this litigation, a rescission of the recapitalization and
unspecified monetary damages. The plaintiff is seeking class certification and
because the lawsuit is in its early stages, we are unable to predict its
outcome. If this lawsuit, or any other proceeding described under
"Business -- Legal Proceedings," is decided or settled adversely to us, requires
us to make cash payments or requires significant management attention, our
business could suffer.
RISKS RELATED TO JUNO AND OUR INDUSTRY
Our Business Could Suffer If We Are Unable to Develop and Introduce New
Products.
We seek to expand our product lines in market segments in which we compete
and to introduce new products in market segments in which we do not currently
compete. The marketing efforts and strategies for product extensions and new
products may be substantially different from those associated with our
historical operations. Although we continue to make significant investments in
product development, we may not be successful in adding new products to our
current product lines or in developing new products. If we are not successful in
adding new products to our current product lines or in developing new products,
our operating results could be adversely affected. See "Business -- Products."
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The Market in Which We Operate Is Highly Competitive, and We May Not Be Able to
Compete Effectively, Especially Against Established Competitors with
Significantly Greater Financial Resources.
The lighting industry in which we operate is highly competitive. We compete
primarily on the basis of product quality, design, customer service,
distribution strength, brand awareness and price. Competitors range from large
global diversified companies to foreign manufacturers. A number of competitors,
including our two largest competitors, are divisions or subsidiaries of larger
companies which have substantially greater resources than us. Competition could
prevent the institution of price increases or could require price reductions or
increased spending on product development and marketing and sales which could
adversely effect our results of operations. See "Business -- Competition."
We Rely on Third Party Manufacturers to Supply Our Key Components.
A majority of the components utilized in our products are supplied by third
party manufacturers. While we have generally been able to obtain adequate
supplies of components from existing sources, in the future our suppliers may
not be able to meet our demand for components in a timely and cost-effective
manner. Although we believe alternative suppliers exist, our business, operating
results, financial condition or customer relationships could be adversely
affected by either an increase in prices for, or an interruption or reduction in
supply of, key components.
Our Business Could Suffer in the Event of a Work Stoppage by Our Unionized Labor
Force.
At May 31, 1999, all of our production employees, who constitute
approximately 56% of our employees, were covered by one of two collective
bargaining agreements. The collective bargaining agreements pertaining to our
Des Plaines, Illinois and Fishers, Indiana locations expire in September 1999
and September 2001, respectively. We believe that we have satisfactory relations
with our unions and, therefore, anticipate reaching new agreements on
satisfactory terms as existing agreements expire. However, new agreements may
not be reached without a work stoppage or strike or reached on terms
satisfactory to us. A prolonged work stoppage or strike could have a material
adverse effect on our results of operations. See "Business -- Employees."
We Depend on Key Personnel.
We are dependent to a significant extent upon the efforts and abilities of
our senior management personnel. The loss of services of one or more of our
senior management personnel could harm our business. We have entered into change
of control benefit agreements with certain of our executive officers, the terms
of which are set forth under "Certain Relationships and Related Party
Transactions -- Change of Control Benefits Arrangements." In addition, we do not
carry key-man life insurance on any of our executive officers.
Our Failure to Make or Integrate Acquisitions Effectively Could Impair Our
Business.
As part of our business strategy, we intend to pursue strategic
acquisitions. We cannot assure you that we will succeed in consummating any such
acquisitions. If any such acquisitions are consummated, we cannot assure you
that such acquisitions will be successfully integrated or operated profitably.
Acquisitions can present significant challenges to management due to the
increased time and resources required to properly integrate management,
employees, accounting controls, personnel and administrative functions. We
cannot assure you that we will not encounter such difficulties or that we will
be able to realize the benefits that we hope to achieve from future strategic
acquisitions.
We May Be Adversely Impacted by the Year 2000 Issue.
We have been assessing our "Year 2000" readiness and exposure to Year 2000
issues. Partly in connection with such assessment, we initiated a program to
upgrade our systems hardware and software.
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Our assessment has been focused on information technology systems and has also
included a review of non-information technology systems, principally embedded
building and facility systems. We entered into an agreement to acquire new
enterprise system software and certain related consulting services. The vendor
has advised us that the system is Year 2000 compliant. We implemented and tested
a portion of the new system in the fourth calendar quarter of 1998 and expect
the new system to be fully implemented and operational in our U.S. facilities
and in our Canadian facility in the third calendar quarter of 1999. We have also
solicited confirmation from our principal suppliers that they are Year 2000
compliant.
We believe that the principal cost of addressing our Year 2000 issues are
costs associated with implementing our new enterprise system. Through May 31,
1999 we incurred costs of approximately $4,300,000 with respect to such system
and estimate that we will incur approximately an additional $625,000 in costs
with respect to such system. However, the ultimate costs that we may incur with
respect to such system or Year 2000 matters may be significantly greater.
The failure of one or more of our systems to be Year 2000 compliant or of
our vendors or customers to be Year 2000 compliant could (1) prevent us from
engaging in our normal business operations for a time period, (2) cause us to
resort to alternate or manual processes and incur material additional expenses
to correct or replace deficient systems and (3) have a material effect on our
results of operations, liquidity and financial condition, although the ultimate
impact of such events is uncertain. Based on our assessment of our principal
information technology systems, including the advice of our enterprise system
vendor, we believe that our material systems will be Year 2000 compliant.
However, the impact of the failure of such systems to be compliant is uncertain
and we are unable to determine our most reasonably likely worst case scenario.
We have not undertaken and do not anticipate undertaking further analysis of the
uncertainty or development of a plan to address this uncertainty or the
potential that we or our vendors or customers fail to be Year 2000 compliant.
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USE OF PROCEEDS
We will not receive any proceeds from the exchange offer. The net proceeds
to us from the sale of the old notes were approximately $120.4 million, after
deducting underwriting discounts and commissions and other expenses of the
offering of old notes payable by us. We used all of the net proceeds to finance
the recapitalization.
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CAPITALIZATION
The following table sets forth as of May 31, 1999 (1) the unaudited
consolidated cash and cash equivalents and capitalization of Juno and (2) the
consolidated cash and the cash equivalents and capitalization of Juno on a pro
forma basis giving effect to the recapitalization.
MAY 31, 1999
---------------------
ACTUAL PRO FORMA
-------- ---------
(IN THOUSANDS)
Cash and cash equivalents................................... $102,717 $ 1,000
======== ========
Long-term debt, including current maturities:
Senior credit facilities:
Revolving credit facility(1).............................. $ -- $ 7,260
Term loan A............................................... -- 40,000
Term loan B............................................... -- 50,000
Industrial development revenue bond......................... 3,325 --
-------- --------
Total senior debt................................. 3,325 97,260
Notes offered hereby........................................ -- 124,103
-------- --------
Total subordinated debt........................... -- 124,103
-------- --------
Total long-term debt............................ 3,325 221,363
Stockholders' equity (deficit)
Series A convertible preferred stock...................... -- 106,000
Common stock.............................................. 186 24
Paid-in capital........................................... 5,864 756
Accumulated other comprehensive income.................... (402) (537)
Retained earnings (deficit)............................... 194,769 (215,834)
-------- --------
Total stockholders' equity (deficit).............. 200,417 (109,591)
-------- --------
Total capitalization............................ $203,742 $111,772
======== ========
- -------------------------
(1) The revolving credit facility is a six-year facility with maximum borrowing
availability (including letters of credit) of $35.0 million for working
capital and general corporate purposes. See "Description of Senior Credit
Facilities."
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SELECTED CONSOLIDATED FINANCIAL DATA
The following tables present selected consolidated financial data of Juno
for each of the fiscal years in the five-year period ended November 30, 1998 and
the six-month periods ended May 31, 1998 and 1999. The historical financial data
for the fiscal years ended November 30, 1996, 1997 and 1998 and the balance
sheets as of November 30, 1997 and 1998 are derived from, and should be read in
conjunction with, the audited financial statements and the unaudited quarterly
financial statements of Juno and the notes related thereto appearing elsewhere
in this prospectus. The historical financial data for the fiscal years ended
November 30, 1994 and 1995 and the balance sheets as of November 30, 1994, 1995
and 1996 are derived from audited financial statements of Juno not included in
this prospectus. The consolidated financial data of Juno for each of the
six-month periods ended May 31, 1998 and 1999 and the balance sheets as of May
31, 1998 and 1999 are derived from, and should be read in conjunction with,
Juno's unaudited consolidated financial statements and the related notes thereto
appearing elsewhere in this prospectus which, in the opinion of our management,
contain all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of this data. The results for the six-month
period ended May 31, 1999 are not necessarily indicative of the results for the
full year or for any future period.
SIX MONTHS
ENDED
YEAR ENDED NOVEMBER 30, MAY 31,
-------------------------------------------------------------- -----------------------
1994 1995 1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA:
Net sales...................... $ 126,777 $ 126,364 $ 131,479 $ 139,855 $ 160,941 $ 75,232 $ 82,781
Cost of sales.................. 61,228 65,085 68,319 71,881 79,882 37,961 42,032
---------- ---------- ---------- ---------- ---------- ---------- ----------
Gross profit................. 65,549 61,279 63,160 67,974 81,059 37,271 40,749
Selling, general and
administrative............... 31,895 33,634 36,766 40,601 44,083 21,341 22,672
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating income............. 33,654 27,645 26,394 27,373 36,976 15,930 18,077
Other income................... 2,712 3,269 3,718 4,020 4,281 2,071 2,395
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before taxes on
income..................... 36,366 30,914 30,112 31,393 41,257 18,001 20,472
Taxes on income................ 13,459 10,940 10,215 11,090 14,632 6,414 7,157
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income................... $ 22,907 $ 19,974 $ 19,897 $ 20,303 $ 26,625 $ 11,587 $ 13,315
========== ========== ========== ========== ========== ========== ==========
PER SHARE DATA:
Net income
Basic........................ $ 1.24 $ 1.08 $ 1.08 $ 1.10 $ 1.43 $ .62 $ .72
Diluted...................... 1.23 1.08 1.08 1.10 1.43 .62 .71
Shares used in per share
calculation
Basic........................ 18,423,120 18,483,220 18,451,366 18,522,270 18,576,015 18,562,199 18,599,184
Diluted...................... 18,549,662 18,563,341 18,494,548 18,540,835 18,614,863 18,594,120 18,654,308
OTHER FINANCIAL DATA:
EBITDA(1)...................... $ 36,865 $ 30,430 $ 29,468 $ 30,857 $ 40,654 $ 17,772 $ 20,153
Depreciation and
amortization................. 3,211 2,785 3,074 3,484 3,678 1,842 2,076
Capital expenditures........... 4,416 3,708 13,316 13,226 5,293 2,536 3,133
Gross margin................... 51.7% 48.5% 48.0% 48.6% 50.4% 49.5% 49.2%
EBITDA margin.................. 29.1% 24.1% 22.4% 22.1% 25.3% 23.6% 24.3%
Cash flows provided by (used
in)
Operating activities......... 22,902 20,166 22,162 17,200 22,567 7,351 10,567
Investing activities......... (15,439) (11,641) (19,011) (7,611) (12,637) (8,528) 10,567
Financing activities......... (4,698) (6,611) (6,197) (6,256) (6,238) (3,150) (3,400)
Ratio of earnings to fixed
charges(2)................... 63.8x 50.3x 49.9x 61.6x 91.2x 88.4x 92.5x
Pro forma ratio of earnings to
fixed charges(3)............. 1.5x 1.5x
Pro forma ratio of earnings to
combined fixed charges and
preferred dividend(4)........ 1.0x 0.9x
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SIX MONTHS
ENDED
YEAR ENDED NOVEMBER 30, MAY 31,
-------------------------------------------------------------- -----------------------
1994 1995 1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
BALANCE SHEET DATA:
Cash and marketable
securities................... $ 68,307 $ 79,181 $ 81,815 $ 83,945 $ 100,383 $ 90,754 $ 102,717
Working capital................ 89,451 102,294 104,465 110,876 133,409 122,909 152,546
Total assets................... 145,756 160,089 178,181 187,389 208,839 196,795 217,599
Total debt..................... 6,857 6,434 5,976 3,500 3,385 3,443 3,325
Stockholders' equity........... 126,748 141,368 155,661 170,630 191,448 179,399 200,417
- -------------------------
(1) EBITDA is defined as operating income before depreciation and amortization.
EBITDA is presented because it is a widely accepted financial indicator used
by certain investors and analysts to analyze and compare companies on the
basis of operating performance. EBITDA is not intended to represent cash
flows for the period, is not presented as an alternative to operating income
as an indicator of operating performance, should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with GAAP and is not indicative of operating income or cash flow
from operations as determined under GAAP.
(2) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income taxes plus fixed charges. Fixed charges consist of
interest expense (which includes amortization of deferred financing costs
and debt issuance costs) and one-third of rental expense, deemed
representative of that portion of rental expense estimated to be
attributable to interest.
(3) In calculating the pro forma ratio of earnings to fixed charges, earnings
consist of income before taxes plus fixed charges. Fixed charges consist of
interest expense, (which includes amortization of deferred financing costs
and debt issuance costs) and one-third of rental expense, deemed
representative of that portion of rental expense, estimated to be
attributable to interest.
(4) In calculating the pro forma ratio of earnings to combined fixed charges and
preferred stock dividend, earnings consist of income before taxes plus fixed
charges. Fixed charges consist of interest expense (which includes
amortization of deferred financing costs and debt issuance costs) and
one-third of rental expense, deemed representative of that portion of rental
expense, estimated to be attributable to interest, and non-cash dividends
payable on our series A convertible preferred stock issued to Fremont
Investors or its assigns in the recapitalization.
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THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Subject to the terms and conditions set forth in this prospectus and in the
accompanying letter of transmittal, we will accept for exchange old notes that
are properly tendered on or before the Expiration Date and not withdrawn as
permitted below. As used in this prospectus, the term "Expiration Date" means
5:00 p.m., New York City time, on , 1999, or such later date and time
to which we, in our sole discretion, extend the exchange offer.
The form and terms of the new notes being issued in the exchange offer are
the same as the form and terms of the old notes except that:
- the notes being issued in the exchange offer will have been registered
under the Securities Act and thus will not bear restrictive legends
restricting their transfer pursuant to the Securities Act, and
- the notes being issued in the exchange offer will not contain the
registration rights contained in the old notes.
As of the date of this prospectus, there is $125.0 million in total
principal amount of notes outstanding. This prospectus and the letter of
transmittal are first being sent on or about September , 1999, to all holders
of old notes known to us. Our obligation to accept old notes for exchange
pursuant to the exchange offer is subject to the conditions set forth below
under "-- Conditions to the Exchange Offer."
Notes tendered in the exchange offer must be in denominations of principal
amount of $1,000 and any integral multiple thereof.
We expressly reserve the right, at any time or from time to time, to extend
the period of time during which the Exchange Offer is open, and thereby delay
acceptance for exchange of any old notes, by giving oral or written notice of
such extension to the holders of old notes as described below. During any such
extension, all old notes previously tendered will remain subject to the exchange
offer and may be accepted for exchange by us. We will return at no expense to
the holder, any old notes not accepted for exchange as promptly as practicable
after the expiration or termination of the exchange offer.
If any of the events specified in "-- Conditions to the Exchange Offer"
should occur, we may amend or terminate the exchange offer, and not accept for
exchange any old notes not previously accepted for exchange. We will give oral
or written notice of any extension, amendment, non-acceptance or termination to
holders of old notes as promptly as practicable. In the case of an extension, we
will issue a press release or other public announcement no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date.
Following consummation of the exchange offer, we may commence one or more
additional exchange offers to those holders of old notes who did not exchange
their old notes for new notes on terms which may differ from those contained in
the registration rights agreement. We may use this prospectus, as amended or
supplemented from time to time, in connection with additional exchange offers.
Such additional exchange offers will take place from time to time until all
outstanding old notes have been exchanged for new notes.
PROCEDURES FOR TENDERING OLD NOTES
The tendering by a holder of old notes, and our mutual acceptance of the
old notes, will constitute a binding agreement between us and the holder on the
terms and subject to the conditions set forth in this prospectus and in the
accompanying letter of transmittal. Except as set forth below, to tender in the
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exchange offer, a holder must transmit to Firstar Bank of Minnesota, N.A., the
exchange agent, at the address set forth under "-- Exchange Agent" on or before
the Expiration Date either:
- a properly completed and duly executed letter of transmittal, including
all other documents required by such letter of transmittal, or
- if the old notes are tendered pursuant to the book-entry procedures set
forth below, an agent's message instead of a letter of transmittal.
In addition, on or prior to the Expiration Date, either:
- the exchange agent must receive the certificates for the old notes along
with the letter of transmittal; or
- the exchange agent must receive a timely confirmation of a book-entry
transfer of such old notes into the exchange agent's account at The
Depository Trust Company ("DTC") according to the procedure for
book-entry transfer described below, along with a letter of transmittal
or an agent's message instead of a letter of transmittal; or
- the holder must comply with the guaranteed delivery procedures described
below.
The term "agent's message" means a message, transmitted by DTC 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 the tendering holder
that such holder has received and agrees to be bound by the letter of
transmittal and that we may enforce the letter of transmittal against the
holder.
THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL OR AGENT'S
MESSAGES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE
HOLDERS. IF DELIVERY IS BY MAIL, WE RECOMMEND REGISTERED MAIL, PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO
GUARANTEE TIMELY DELIVERY. DO NOT SEND LETTERS OF TRANSMITTAL, AGENT'S MESSAGES
OR OLD NOTES TO US.
Signature requirements
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the notes surrendered for exchange are
tendered:
- by a registered holder of old notes who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the letter of transmittal, or
- for the account of an eligible institution.
An "eligible institution" is a member of a registered national securities
exchange or a member of the National Association of Securities Dealers, Inc. or
a commercial bank or trust company having an office or correspondent in the
United States.
If signatures on a letter of transmittal or a notice of withdrawal are
required to be guaranteed, the guarantor must be by an eligible institution. If
old notes are registered in the name of a person other than a signer of the
letter of transmittal, the old notes surrendered for exchange must be endorsed
by, or be accompanied by a written instrument or instruments of transfer or
exchange, in satisfactory form as determined by us in our sole discretion, duly
executed by the registered holder with the holder's signature guaranteed by an
eligible institution.
If a person or persons other than the registered holder or holders of old
notes signs the letter of transmittal, such old notes must be endorsed or
accompanied by appropriate powers of attorney, in either case signed exactly as
the name or names of the registered holder or holders that appear on the old
notes.
If trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity sign the letter of transmittal or any old notes or powers of attorney,
those persons should so indicate when signing, and must submit proper evidence
satisfactory to us of their authority to sign unless we waive this requirement.
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Our interpretations are binding on you
We will determine all questions as to the validity, form, eligibility,
including time of receipt, and acceptance of old notes tendered for exchange in
our sole discretion. Our determination will be final and binding. We reserve the
absolute right to:
- reject any and all tenders of any old note not properly tendered,
- refuse acceptance of any old note if, in our judgment or the judgment of
our counsel, acceptance of the old note might be unlawful, and
- waive any defects or irregularities or conditions of the exchange offer
as to any old note either before or after the Expiration Date. This
includes the right to waive the ineligibility of any holder who seeks to
tender old notes in the exchange offer.
Our interpretation of the terms and conditions of the exchange offer as to
any particular old notes either before or after the Expiration Date, including
the letter of transmittal and the instructions to it, will be final and binding
on all parties. Holders must cure any defects or irregularities in connection
with tenders of old notes for exchange within such reasonable period of time as
we will determine, unless we waive such defects or irregularities. Neither we,
the exchange agent, nor any other person shall have duty to notify anyone of any
defect or irregularity regarding any tender of old notes for exchange, nor shall
any of us incur any liability for failing to notify any person.
Representations you make by tendering
By tendering your old notes, you represent to us that, among other things,
- you are not our "affiliate," as defined in Rule 144 under the Securities
Act,
- you are acquiring the new notes you receive in the exchange offer in the
ordinary course of your business,
- neither you nor anyone receiving new notes from me has any arrangement or
understanding with any person to participate in a distribution, in
violation of the Securities Act, of the new notes issued in the exchange
offer,
- if you are not a broker-dealer, that you are not engaged in, and do not
intend to engage in, a distribution of new notes, and
- if you are a broker-dealer that receives new notes for your own account
in exchange for old notes that you acquired as a result of market-making
or other trading activities (other than old notes you acquired directly
from us or any of our affiliates), you will receive the new notes for
your own account in exchange for such old notes, and you will deliver a
prospectus meeting the requirements of the Securities Act in connection
with any resale of the new notes you receive in the exchange offer.
The letter of transmittal states that by so representing and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" under the Securities Act. See "Plan of Distribution."
If you are using the exchange offer to participate in a distribution of the
new notes, by tendering your old notes you will represent and agree that, if the
resales are of new notes obtained by you in exchange for old notes acquired by
you in the exchange offer directly from us or our affiliates, you may not rely
on the position of the Commission stated in its letters to Morgan Stanley & Co.,
Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available
May 13, 1998), as interpreted in the Commission's letter to Shearman & Sterling
(available July 2, 1993) and similar no-action letters, and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction and that such a secondary
resale transaction must be covered by an effective
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registration statement containing the selling security holder information
required by Item 507 or 508, as applicable, of Regulation S-K under the
Securities Act.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the exchange offer,
we will accept, promptly after the Expiration Date, all old notes properly
tendered and will issue the new notes promptly after acceptance of the old
notes. See "-- Conditions to the Exchange Offer." For purposes of the exchange
offer, we will be deemed to have accepted properly tendered old notes for
exchange when, as and if we have given oral or written notice to the exchange
agent, with written confirmation of any oral notice to be given promptly
thereafter.
For each old note accepted for exchange, the old note holder will receive a
new note having a principal amount of maturity equal to that of the surrendered
note. Interest on the new notes will accrue from June 30, 1999, the original
issue date of the old notes. If the exchange offer is not consummated by
November 27, 1999, the interest rate on the old notes, from and including such
date until but excluding the date of consummation of the exchange offer, will
increase by 0.5% per annum during each subsequent 90-day period up to a maximum
overall increase of 2.0% per annum. We will pay such interest, if any, on old
notes in exchange for which new notes were issued to the persons who, at the
close of business on June 15 or December 15 immediately preceding the interest
payment date, are registered holders of such old notes if such record date
occurs prior to such exchange, or are registered holders of the new notes if
such record date occurs on or after the date of such exchange, even if notes are
cancelled after the record date and on or before the interest payment date.
In all cases, we will issue new notes in the exchange offer for old notes
that are accepted for exchange only after the exchange agent timely receives
either:
- certificates for such old notes or a timely book-entry confirmation of
such old notes into the exchange agent's account at DTC, and
- a properly completed and duly executed letter of transmittal or, in the
case of a book-entry confirmation, an agent's message, and all other
required documents.
If tendered old notes are not accepted for any reason set forth in the
terms and conditions of the exchange offer or if a holder submits old notes for
a greater principal amount than the holder desired to exchange, we will return
such unaccepted or non-exchanged old notes without expense to the tendering
holder as promptly as practicable after the expiration or termination of the
exchange offer. In the case of old notes tendered by book-entry transfer into
the exchange agent's account at DTC, such unaccepted or non-exchanged old notes
will be credited to an account maintained with DTC as promptly as practicable
after the expiration or termination of the exchange offer.
BOOK-ENTRY TRANSFER
The exchange agent will request to establish an account for the old notes
at DTC for the exchange offer within two business days after the date of this
prospectus. Any financial institution that is a participant in DTC's systems may
make book-entry delivery of old notes by causing DTC to transfer such old notes
into the exchange agent's account at DTC in accordance with DTC's procedures for
transfer. However, although delivery of old notes may be effected through
book-entry transfer at DTC, the letter of transmittal or facsimile thereof, with
any required signature guarantees, or an agent's message in lieu of such letter
of transmittal, and any other required documents, must, in any case, be
transmitted to and received by the exchange agent at one of the addresses set
forth below under "-- Exchange Agent" on or prior to the Expiration Date or the
guaranteed delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the old notes desires to tender such old notes
and the old notes are not immediately available, or time will not permit such
holder's old notes or other required documents to
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reach the exchange agent before the Expiration Date, or the procedure for
book-entry transfer cannot be completed on a timely basis, a tender may be
effected if:
- the tender is made through an eligible institution;
- before the Expiration Date, the exchange agent receives from such
eligible institution a properly completed and duly executed letter of
transmittal, or a facsimile thereof, and notice of guaranteed delivery,
substantially in the form provided by us, by telegram, telex, facsimile
transmission, mail or hand delivery, setting forth the name and address
of the holder of old notes and the amount of old notes tendered, stating
that the tender is being made thereby and guaranteeing that within three
New York Stock Exchange trading days after the date of execution of the
notice of guaranteed delivery, the certificates for all physically
tendered old notes, in proper form for transfer, or a book-entry
confirmation, as the case may be, and any other documents required by the
letter of transmittal will be deposited by the eligible institution with
the exchange agent; and
- the exchange agent receives the certificates for all physically tendered
old notes, in proper form for transfer, or a book-entry confirmation, as
the case may be, and all other documents required by the letter of
transmittal, within three NYSE trading days after the date of execution
of the notice of guaranteed delivery.
WITHDRAWAL RIGHTS
You may withdraw tenders of old notes at any time before the Expiration
Date.
For a withdrawal to be effective, you must send a written notice of
withdrawal to the exchange agent at one of the addresses set forth below under
"-- Exchange Agent." Any such notice of withdrawal must:
- specify the name of the person having tendered the old notes to be
withdrawn,
- identify the old notes to be withdrawn, including the principal amount of
such old notes and
- if you have transmitted certificates for old notes, specify the name in
which such old notes are registered, if different from that of the
withdrawing holder.
If certificates for old notes have been delivered or otherwise identified
to the exchange agent, then, before the release of such certificates, the
withdrawing holder must also submit the serial numbers of the particular
certificates to be withdrawn and a signed notice of withdrawal with signatures
guaranteed by an eligible institution unless such holder is an eligible
institution.
If old notes have been tendered pursuant to the procedure for book-entry
transfer described above, any notice of withdrawal must specify the name and
number of the account at DTC to be credited with the withdrawn old notes and
otherwise comply with the procedures of such facility.
We will determine all questions as to the validity, form and eligibility,
including time of receipt, of such notices. Our determination will be final and
binding on all parties.
Any old notes so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the exchange offer. Any old notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder without cost to such holder. In the case of old notes
tendered by book-entry transfer into the exchange agent's account at DTC
pursuant to the book-entry transfer procedures described above, any withdrawn or
unaccepted old notes will be credited to the tendering holder's account
maintained with DTC for the old notes. Any return or credit will occur as soon
as practicable after withdrawal, rejection of tender or termination of the
exchange offer. Properly withdrawn old notes may be retendered by following one
of the procedures described under "-- Procedures for Tendering Old Notes" above
at any time on or before the Expiration Date.
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CONDITIONS TO THE EXCHANGE OFFER
We are not required to accept for exchange, or to issue new notes in
exchange for, any old notes. We may terminate or amend the exchange offer if, at
any time before the acceptance of such old notes for exchange or the exchange of
the new notes for such old notes, we determine in our sole and absolute
discretion, that the exchange offer violates applicable law or any applicable
interpretation of the staff of the Commission.
EXCHANGE AGENT
Firstar Bank, N.A., has been appointed as the exchange agent for the
exchange offer. All completed letters of transmittal and agent's messages should
be directed to the exchange agent at one of the addresses set forth below.
Questions and requests for assistance, requests for additional copies of this
prospectus or of the letter of transmittal and requests for notices of
guaranteed delivery should be directed to the exchange agent addressed as
follows:
Delivery to: Firstar Bank, N.A., Exchange Agent
By Hand/Overnight Delivery: By Registered or Certified Mail:
Firstar Bank, N.A. Firstar Bank, N.A.
101 E. Fifth Street 101 E. Fifth Street
St. Paul, Minnesota 55101 St. Paul, Minnesota 55101
Attention: Frank Leslie Attention: Frank Leslie
(eligible guarantor institutions only)
By Facsimile: 651-229-6415
Confirm by Telephone: 651-229-2600
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE IS NOT VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
We will not pay any brokers, dealers or others soliciting acceptances of
the exchange offer.
We will pay the estimated cash expenses to be incurred in connection with
the exchange offer, which are estimated to total $200,000.
TRANSFER TAXES
Holders who tender their old notes for exchange will not be obligated to
pay any transfer taxes in connection with the exchange. However, holders who
instruct us to register new notes in the name of, or request that old notes not
tendered or not accepted in the exchange offer be returned to, a person other
than the registered tendering holder will be responsible for the paying of any
applicable transfer tax.
HOLDERS, OTHER THAN AFFILIATES, MAY OFFER OR SELL THE NEW NOTES
Based on interpretations by the Commission staff, as set forth in no-action
letters issued to third parties, we believe that new notes issued in the
exchange offer for old notes may be offered for resale, resold or otherwise
transferred by the holders of such new notes, other than any such holder that is
an "affiliate" of Juno within the meaning of Rule 405 under the Securities Act.
Such new notes may be offered for resale, resold or otherwise transferred
without compliance with the registration and prospectus delivery requirements of
the Securities Act, if:
- such new notes issued in the exchange offer are acquired in the ordinary
course of such holder's business, and
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- such holders have no arrangement or understanding with any person to
participate in the distribution of such new notes issued in the exchange
offer.
Each holder, other than a broker-dealer, must acknowledge that it is not
engaged in, and does not intend to engage in, a distribution of new notes and
has no arrangement or understanding to participate in a distribution of new
notes.
However, we do not intend to request the Commission to consider, and the
Commission has not considered, the exchange offer in the context of a no-action
letter. We cannot guarantee that the Commission staff would make a similar
determination with respect to the exchange offer as in other circumstances.
If any holder is an "affiliate" of ours, as defined in Rule 405 under the
Securities Act of 1933, is engaged in or intends to engage in or has any
arrangement or understanding with respect to the distribution of the new notes
to be acquired pursuant to the exchange offer such holder:
- could not rely on the applicable interpretations of the Commission staff,
and
- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction.
Each broker-dealer that receives new notes for its own account in exchange
for old notes, where such old notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such new
notes. See "Plan of Distribution."
In addition, to comply with state securities laws, the new notes may not be
offered or sold in any state unless they have been registered or qualified for
sale in such state or an exemption from registration or qualification is
available and is complied with. The offer and sale of the new notes to
"qualified institutional buyers," as that term is defined under Rule 144A of the
Securities Act, is generally exempt from registration or qualification under the
state securities laws. We currently do not intend to register or qualify the
sale of the new notes in any state where an exemption from registration or
qualification is required and not available.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
OVERVIEW
We are a leading designer, assembler and marketer of recessed and track
lighting fixtures. Our broad product line is used in commercial and residential
remodeling and new construction. Our principal products use a variety of light
sources and are designed for reliable and flexible function, efficient
operation, attractive appearance and simple installation and servicing. The
following discussion should be read in conjunction with our consolidated
financial statements and notes thereto included elsewhere in this prospectus.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of certain items
to net sales for Juno for the periods indicated:
SIX MONTHS
ENDED
YEAR ENDED NOVEMBER 30, MAY 31,
------------------------ -------------
1996 1997 1998 1998 1999
------ ------ ------ ----- -----
Net sales.............................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales.......................................... 52.0 51.4 49.6 50.5 50.8
----- ----- ----- ----- -----
Gross profit......................................... 48.0 48.6 50.4 49.5 49.2
----- ----- ----- ----- -----
Selling, general and administrative expenses........... 28.0 29.0 27.4 28.4 27.4
----- ----- ----- ----- -----
Operating income..................................... 20.1% 19.6% 23.0% 21.2% 21.8%
===== ===== ===== ===== =====
FIRST SIX MONTHS OF FISCAL 1999 COMPARED TO FIRST SIX MONTHS OF FISCAL 1998
During the six-month period ended May 31, 1999, net sales increased 10.0%
to $82,781,000 compared to $75,232,000 for the like period in 1998. In the
opinion of management, sales increases were due primarily to market share gains
and increases in demand from improved economic conditions.
Cost of sales as a percentage of net sales increased slightly to 50.8%
compared to 50.5% for the like period in 1998. This increase is due primarily to
changes in sales mix for Juno's Canadian and Indy Lighting subsidiaries.
Selling, general and administrative expenses as a percentage of sales
decreased to 27.4% as compared to 28.4% in 1998 due to economies of scale
associated with the increase in sales.
FISCAL 1998 COMPARED TO FISCAL 1997
For the fiscal year ended November 30, 1998, net sales increased
approximately $21,086,000 or 15.1% to $160,941,000 from $139,855,000 for the
like period in 1997. This increase is due primarily to an overall increase in
demand from improving economic conditions and is represented by growth across
substantially all product lines and markets. Sales through our Canadian
subsidiary increased 8.4% to $9,290,000 for the year ended November 30, 1998
compared to $8,571,000 for the like period in 1997.
Gross profit expressed as a percentage of sales increased to 50.4% in
fiscal 1998 compared to 48.6% in fiscal 1997 due to increased productivity,
stable raw material costs and benefits from the redesign and retooling of high
volume parts.
Selling, general and administrative expenses as a percentage of sales
decreased to 27.4% in fiscal 1998 compared to 29.0% in fiscal 1997 due primarily
to economies of scale associated with the sales increase. In addition, we
incurred one-time charges in fiscal 1997 of approximately $700,000 to repair a
defective component in certain exit and emergency lighting fixtures. The
fixtures from this product line required the
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replacement of an electric component that was supplied by a vendor. We also
incurred a one-time charge of approximately $300,000 for our move to our new
factory and corporate office facilities in 1997.
The effective income tax rate for fiscal 1998 increased slightly to 35.5%
compared to 35.3% for fiscal 1997. Since our investment portfolio consists
largely of municipal bonds, the interest earned is substantially tax exempt.
Therefore, in periods when operating earnings increase compared to prior years,
the relationship of tax-exempt income to total income decreases thus producing a
higher effective income tax rate.
FISCAL 1997 COMPARED TO FISCAL 1996
For the fiscal year ended November 30, 1997, net sales increased
approximately $8,376,000 or 6.4% to $139,855,000 in fiscal 1997 compared to
$131,479,000 in fiscal 1996. This increase is due primarily to sales of new
products introduced in 1996. Sales through our Canadian subsidiary increased
11.2% to $8,571,000 for the year ended November 30, 1997 compared to $7,711,000
for the like period in 1996.
Gross profit expressed as a percentage of sales increased slightly to 48.6%
in fiscal 1997 compared to 48.0% in fiscal 1996 due primarily to reductions in
raw material costs and improvements in manufacturing productivity.
Selling, general and administrative expenses as a percentage of sales
increased to 29.0% in fiscal 1997 compared to 28.0% in fiscal 1996 due, in part,
to costs associated with the move to our new factory and corporate office
facilities in the fourth quarter of 1997. In addition, we incurred one-time
charges in fiscal 1997 of approximately $700,000 to repair a defective component
in certain exit and emergency lighting fixtures.
The effective income tax rate for fiscal 1997 increased to 35.3% compared
to 33.9% for fiscal 1996. Since our investment portfolio consists largely of
municipal bonds, the interest earned is substantially tax exempt. Therefore, in
periods when operating earnings increase compared to prior years, the
relationship of tax-exempt income to total income decreases thus producing a
higher effective income tax rate.
INFLATION
While Juno believes that it generally has been successful in controlling
the prices it pays for materials and passing on increased costs by increasing
its prices, we may not have future success in limiting material price increases
or reflecting any material price increases in the prices we charge our customers
or offsetting such price increases through improved efficiencies.
FINANCIAL CONDITION
During the six-month period ended May 31, 1999, we generated positive net
cash flow from operating activities of $10,567,000. This was comprised
principally of net income, depreciation and amortization and a decrease in
prepaid expenses (aggregating $16,688,000), net of increases in accounts
receivable of $3,819,000, inventory of $1,203,000 and other assets of $950,000.
We used the net cash provided from operating activities to finance capital
expenditures of $3,133,000 and pay dividends of $3,720,000.
FISCAL 1998. We generated positive cash flow from operating activities of
$22,567,000 comprised principally of net income, depreciation and amortization
and an increase in accounts payable (collectively aggregating $31,165,000), net
of an increase in accounts receivable ($2,601,000) and an increase in inventory
($5,408,000). Accounts receivable increased 9.1% in support of the higher sales
level compared to 1997. In order to maintain our commitment to prompt delivery
of product to our customers and to restore inventory to appropriate levels
following the move of our principal corporate office and assembly facility,
inventory increased by 23.8% compared to 1997 levels. Miscellaneous other assets
decreased to $607,000 from $4,456,000 due to the sale of the building that
formerly served as our principal corporate office and production facility.
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We used the net cash provided from operating activities to increase our
investment portfolio by $11,949,000, finance capital expenditures of $5,293,000,
and pay dividends of $6,686,000, which reflected a quarterly dividend rate of
$.09 per share.
On October 27, 1998 we announced the declaration of a cash dividend of $.10
per share payable January 15, 1999 to stockholders of record December 15, 1998.
This represents an 11% increase from the previous quarterly rate of $.09 per
share.
We generated additional positive cash flow of $4,605,000 from the sale of
the building that formerly served as our principal corporate office and
production facility. This building was previously classified in miscellaneous
other assets.
FISCAL 1997. We generated positive cash flow from operating activities of
$17,200,000 comprised principally of net income, depreciation and amortization,
and a decrease in inventory in preparation of the move of our principal
corporate office and production facility (collectively aggregating $24,355,000),
net of a decrease in accrued liabilities ($3,773,000) and an increase in
accounts receivable ($1,359,000). Miscellaneous other assets increased to
$4,456,000 from $67,000 due to the reclassification of our remaining unsold
building to other assets in recognition of its status as a non-productive asset.
We used the net cash provided from operating activities to finance capital
expenditures of $13,226,000, primarily for our new corporate office and
production facility, make principal payments on long-term debt of $1,048,000 and
pay dividends of $5,925,000, which reflected a quarterly dividend rate of $.08
per share.
On October 22, 1997 we announced the declaration of a cash dividend of $.09
per share payable January 15, 1998 to stockholders of record December 15, 1997.
This represents a 13% increase from the previous quarterly rate of $.08 per
share.
We completed our new corporate office and production facility in Des
Plaines, Illinois. Final occupancy took place on October 12, 1997. The cost of
the project, including furniture and equipment, amounted to $22,470,000 and was
financed out of existing corporate funds.
We generated additional positive cash flow of $4,322,000 from the sale of
two of our three buildings, all of which were vacant due to the move to the new
corporate office and production facility. We used these proceeds to retire an
Industrial Development Revenue Bond of approximately $950,000.
FISCAL 1996. We generated positive cash flow from operating activities of
$22,162,000 comprised principally of net income, depreciation and amortization,
and an increase in accrued liabilities (collectively aggregating $27,365,000),
net of increases in inventory ($3,692,000) and accounts receivable ($1,965,000).
In order to maintain our commitment to prompt delivery of product to our
customers and to support our planned move to our new facility in 1997, inventory
increased by 18.9% compared to 1995 levels. Accounts receivable increased 11.7%
which approximates the increase in the sales volume for the fourth quarter of
1996 compared to 1995. Net property and equipment increased 32.2% and accrued
liabilities increased 70.9% due primarily to the construction of the new
facility.
We used the net cash provided from operating activities to finance capital
expenditures of $13,316,000, increase our investment portfolio by $5,695,000,
and pay dividends of $5,903,000, which reflected a quarterly dividend rate of
$.08 per share.
LIQUIDITY AND CAPITAL RESOURCES
We historically have funded our operations principally from cash generated
from operations, available cash and income from marketable securities. We will
incur substantial indebtedness in connection with the recapitalization. Our
liquidity needs are expected to arise primarily from operating activities and
servicing indebtedness incurred in connection with the recapitalization.
Principal and interest payments under the senior credit facilities and the
notes represent significant liquidity requirements for us. As of May 31, 1999,
after giving pro forma effect to the recapitalization, we
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had cash of approximately $1,000,000 and approximately $27,740,000 available for
borrowing under our revolving credit facility and total indebtedness of
approximately $221,363,000.
Our principal source of cash to fund our liquidity needs will be net cash
from operating activities and borrowings under the senior credit facilities. We
believe these sources will be adequate to meet our anticipated future
requirements for working capital, capital expenditures, and scheduled payments
of principal and interest on our existing indebtedness for at least the next 12
months. We estimate capital expenditures for the fiscal year ending November 30,
1999 will be approximately $4,500,000. However, we may not generate sufficient
cash flow from operations or have future working capital borrowings available in
an amount sufficient to enable us to services our indebtedness, including the
notes, or to make necessary capital expenditures. See "Risk Factors -- We Will
Be Substantially Leveraged and Will Have Decreased Liquidity After the
Recapitalization, Which Could Limit Our Flexibility to Obtain Additional Capital
or Grow Our Business" and "-- Our Business Activities and Our Ability to Raise
Additional Funds Are Limited by Covenants Under the Indenture and Senior Credit
Facilities."
YEAR 2000 READINESS
We have been assessing our "Year 2000" readiness and exposure to Year 2000
issues. Partly in connection with such assessment, we initiated a program to
upgrade our systems hardware and software. Our assessment has been focused on
information technology systems and has also included a review of non-information
technology systems, principally embedded building and facility systems. We
entered into an agreement to acquire new enterprise system software and certain
related consulting services. The vendor has advised us that the system is Year
2000 compliant. We implemented and tested a portion of the new system in the
fourth calendar quarter of 1998 and expect the new system to be fully
implemented and operational in our U.S. facilities and in our Canadian facility
in the third calendar quarter of 1999. We have also solicited confirmation from
our principal suppliers that they are Year 2000 compliant.
We believe that the principal cost of addressing our Year 2000 issues are
costs associated with implementing our new enterprise system. Through May 31,
1999 we incurred costs of approximately $4,300,000 with respect to such system
and estimate that we will incur approximately an additional $625,000 in costs
with respect to such system. However, the ultimate costs that we may incur with
respect to such system or Year 2000 matters may be significantly greater.
The failure of one or more of our systems to be Year 2000 compliant or of
our vendors or customers to be Year 2000 compliant could (1) prevent us from
engaging in our normal business operations for a time period, (2) cause us to
resort to alternate or manual processes and incur material additional expenses
to correct or replace deficient systems and (3) have a material effect on our
results of operations, liquidity and financial condition, although the ultimate
impact of such events is uncertain. Based on our assessment of our principal
information technology systems, including the advice of our enterprise system
vendor, we believe that our material systems will be Year 2000 compliant.
However, the impact of the failure of such systems to be compliant is uncertain
and we are unable to determine our most reasonably likely worst case scenario.
We have not undertaken and do not anticipate undertaking further analysis of the
uncertainty or development of a plan to address this uncertainty or the
potential that we or our vendors or customers fail to be Year 2000 compliant.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains, and losses)
in a full set of general-purpose financial statements. This statement requires
that all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. SFAS No. 130
requires that an enterprise (a) classify items of other comprehensive income by
their nature in a financial statement and (b) display the accumulated balance of
other comprehensive income separately from retained earnings and additional
paid-in capital in the equity
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section of a statement of financial position. The Statement is effective for
fiscal years beginning after December 15, 1997. Reclassification of financial
statements for earlier periods provided for comparative purposes is required.
The adoption of SFAS No. 130 in the first quarter of 1999 has not had a material
impact on our financial statements.
In June 1997, the FASB issued Statement No. 131, "Disclosure about Segments
of an Enterprise and Related Information." This statement, effective for
financial statements for periods beginning after December 15, 1997, requires
that a public business enterprise report financial and descriptive information
about its reportable operating segments. Generally, financial information is
required to be reported on the basis that it is used internally for evaluating
segment performance and deciding how to allocate resources to segments. We are
evaluating the effects of this pronouncement.
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BUSINESS
GENERAL
We are a leading designer, assembler and marketer of recessed and track
lighting fixtures. Our broad product line is used in commercial and residential
remodeling and new construction. Our principal products use a variety of light
sources and are designed for reliable and flexible function, efficient
operation, attractive appearance and simple installation and servicing. Our
business model is differentiated based upon our proven design philosophy, strong
distributor relationships, exceptional customer service and flexible and
efficient assembly process. We outsource manufacturing of virtually all
components to minimize fixed costs and capital requirements and to provide
flexibility in responding to market needs. Our business is geographically
diverse, and while the Company generally does not sell to end-use customers and
accordingly cannot precisely determine the allocation of sales by use, Juno
estimates that sales related to remodeling represented approximately two-thirds
of 1998 sales. As a result, we believe our revenues and cash flow have exhibited
minimal cyclicality. Our net sales and EBITDA for the twelve-month period ended
May 31, 1999 were $168.5 million and $43.0 million, respectively. Since becoming
a public company in 1983, we have generated compound annual sales growth of over
14% and consistently generated EBITDA margins in excess of 20%.
We produce a wide variety of fixtures and related equipment for the
recessed and track lighting market segments. Our recessed lighting fixtures are
designed to be installed directly into ceilings, while our track lighting
fixtures are mounted on electrical tracks affixed to ceilings or walls.
End-users of our products generally prefer them due to their superior design,
reliability and ease of installation. We design and assemble substantially all
of our products in-house. However, we outsource virtually all component
manufacturing to a number of independent vendors principally located near our
production facilities. Inventories are maintained at our two production and
distribution facilities located near Chicago and Indianapolis and at our
distribution facilities near Atlanta, Dallas, Los Angeles, Philadelphia and
Toronto.
Our primary means of distribution is through over 1,200 distributors of
lighting products located throughout the United States and Canada. We have
established ourselves as a preferred lighting supplier by providing high quality
and well-designed products, superior customer service, timely delivery,
technical advice and product training. Our distributors maintain their own
inventory of our products, and, in turn, sell to electrical contractors and
builders and, in some cases, at the retail level. Sales to distributors are made
through our knowledgeable sales staff and through manufacturers' agents who also
sell other, non-competing electrical products. We also have a national accounts
sales force that focuses on department store, specialty retail, supermarket and
commercial accounts. We work closely with these national accounts to provide
custom solutions to their lighting needs and, in turn, to have Juno's products
specified for their major renovations or store expansions.
Economic Industry Reports, Inc., based upon data provided by the U.S.
Department of Commerce, estimates that manufacturers' U.S. sales of
non-automotive lighting fixtures were approximately $8.2 billion in 1997 and
expects this figure to increase by an average of 5.4% annually from 1998 to
reach $11.2 billion in 2003. Juno estimates that the U.S. track and recessed
segments of the lighting industry in which we participate accounted for
approximately $750 million in sales in 1997 and that Juno and two other
manufacturers account for the majority of sales in this core market. Juno
estimates that we have approximately a 20% share of this core market.
COMPETITIVE STRENGTHS
We have the following significant competitive strengths:
- Industry Leadership in Recessed and Track Lighting. We believe we have a
leading position in both the domestic recessed and track lighting market
segments, representing approximately a 20% aggregate market share in
these segments. We believe we are the only major independent lighting
company in the United States with a leading position in both of these
segments. We have
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achieved our leading position by providing innovative and high quality
products, superior customer service and rapid product delivery.
- Strong Distributor Relationships. We have developed strong relationships
with our distributor customers by serving their recessed and track
lighting needs for over 20 years. We have relationships with a broad base
of over 1,200 distributors across the United States and Canada. In
addition, we have strong relationships with a variety of national
department store, specialty retail, supermarket and commercial accounts.
We believe we are the preferred lighting supplier for our key accounts,
and many carry our products exclusively. We fill most orders within 48
hours of receipt which contributes to our reputation as an industry
leader in customer service. We are able to respond quickly to customer
needs by maintaining inventories at our production and distribution
facilities located near Chicago and Indianapolis as well as in our
distribution centers near Atlanta, Dallas, Los Angeles, Philadelphia and
Toronto.
- Innovative Product Design. We believe we are the industry leader in both
the styling and development of recessed and track lighting products. We
generate continuous new product flow through the development of original
products, introduction of product line extensions and improvements of
existing products. This product flow generates sales of new products,
increases demand for related products and heightens market awareness of
our existing products. Our proven design philosophy is focused on the
needs of the market and of our customers, and on products that can be
manufactured efficiently and at low cost. Many of our new and existing
products are protected by patents. Examples of our innovative products
include: Air-Loc Ready, Real Nail Bar Hangers, Sloped Ceiling Downlights,
Trac 12, White Baffles and Wireforms.
- Efficient and Flexible Assembly Model. We design and assemble
substantially all of our products in-house. The fabrication and
production of component parts is outsourced to independent manufacturers
principally located near our production facilities. We believe this
business model is the most efficient method of production, requiring
minimal capital investment by us in plant and equipment, while providing
us with highly flexible and low cost manufacturing capabilities. In
addition, our extensive use of common componentry across product lines
lowers production costs, increases product quality and reduces inventory
investment. In October 1997, we moved our executive offices and Illinois
production and distribution facility to a newly constructed building
located in Des Plaines, Illinois with approximately 540,000 square feet
of space. We believe that this building will allow us to substantially
increase sales volume without material additional investment in this
facility.
- Experienced and Committed Management Team. The members of our management
team, in aggregate, have over 100 years of experience in the lighting
industry and extensive experience with our operations and customers.
Management's successful execution of our differentiated business model
has enabled us to achieve EBITDA margins in excess of 20% through several
economic cycles and has positioned us to capitalize on attractive growth
opportunities. The incentive plan for senior management is linked to
future financial performance and includes options or other equity-based
incentives for up to approximately 14% of our fully diluted common stock
on an as-converted basis.
BUSINESS AND GROWTH STRATEGIES
Our primary business and growth strategies are as follows:
- Continue to Gain Market Share. We have historically been successful in
increasing our share of the recessed and track lighting markets. We
intend to further increase our share through continued emphasis on
delivery of innovative and high-quality products to our customers through
our differentiated business model. In addition, we intend to leverage our
strong distributor relationships to further penetrate existing
end-markets.
- Introduce New Products. We are continually developing and introducing new
products that utilize our production and distribution strengths and
represent profitable growth opportunities. We also
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review existing product lines for potential product improvements and line
extensions. Our development efforts are geared toward designing high
quality products that are innovative, efficient to produce and easy to
install. New products we recently developed or introduced include LED
Edgelit Exit Lights, Multi-Spots, Real Nail 2 Bar Hangers, Slants,
Three-Port Fiberoptic Illuminator and Trac-Sign.
- Add Product Lines. We estimate that the recessed and track lighting
market segments represent less than 10% of total U.S. lighting fixture
industry sales. We seek to add product lines in market segments in which
we do not currently compete, which may include outdoor lighting,
industrial lighting and fluorescent lighting. Many of the products we may
add are sold through the same distribution channels as our current
product lines. Strong relationships with our distributors should allow us
to secure shelf space for new products and expand our product offerings.
We recently introduced a line of exit and emergency lighting products
and, through our acquisition of Advanced Fiberoptic Technologies entered
the fiberoptic lighting products segment.
- Pursue Strategic Acquisitions. We compete in what we believe to be a
large, highly fragmented domestic lighting market that provides numerous
potential acquisition opportunities. We have successfully made
acquisitions that expanded our product offerings and end-markets and
strengthened our distributor relationships, including the acquisitions of
Indy Lighting and Danalite. Our management team has substantial
experience in acquiring and integrating companies in the lighting
industry, and we believe their experience will enable us to successfully
pursue selective strategic acquisitions. Future acquisitions will focus
on broadening our product offering and expanding our distributor and
customer relationships.
PRODUCTS
We produce a wide variety of lighting fixtures and related equipment of
both contemporary and traditional design, most of which are available in a
variety of styles, sizes and finishes. Some styles differ from others only in
size, light source capacity or other minor modifications. Fixtures that we
produce are designed to be installed in recesses in ceilings, mounted on
electrified tracks affixed to ceilings or walls and used in merchandise display
cases.
Each recessed fixture is composed of a housing and a separate trim.
Housings may be fitted with a variety of trims which offer a wide choice of
diffusers, lenses and louvers to satisfy different optical and aesthetic
requirements. Recessed fixtures are generally used for down-lighting, but by
special configuration they also may be used for wall-washing and spot lighting.
We have designed recessed lighting fixtures, sold under the Sloped Ceiling
Downlights name, that provide lighting perpendicular to a floor from a sloped
ceiling. We also produce a series of recessed fixtures, sold under the Air-Loc
Ready name, that are designed to restrict the passage of air into and out of a
residence through the fixture to minimize energy loss.
Our principal track lighting system, sold under the Trac-Master name, is
made up of an electrified extruded aluminum channel, called the track, and a
wide variety of individual fixtures that may be connected to any point on the
track. The individual fixtures are available in different geometric styles,
light source sizes and finishes. Our Trac-Master line of track fixtures allows
each track light to be controlled by either of two switches and includes a
series of miniature low voltage halogen track lights that provides higher lumens
per watt than standard incandescent light sources. We also have a line of track
fixtures, sold under the name of Vector by Juno, to complement our Trac-Master
line of products. This line is a lower priced but high quality line of products
that do not contain some of the features of Trac-Master.
We produce and market a line of miniature track lighting products under the
name Trac 12. This is a low voltage track lighting system featuring small
individual fixtures and a miniature lamp holder used in linear lighting
applications. We also assemble and distribute Trac-Sign, where our patent is
pending, a line of flexible, internally illuminated sign products that work in
conjunction with our existing track system. The product consists of an aluminum
enclosure with a fluorescent light source and permits the end-user to easily and
economically display and light advertising material in the form of standard-size
transparencies.
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As a result of our acquisition of Danalite several years ago, we began
manufacturing and selling a line of fixtures used in show case lighting
applications. Danalite's linear configuration uses low voltage and fluorescent
light sources in show cases as well as other merchandise display cases and other
commercial and residential accent lighting applications. The products are made
utilizing aluminum extruded channels in various lengths and finishes. These
products primarily utilize miniature 12-volt halogen light sources with hinged
sockets to simplify the process of changing the light source.
Advanced Fiberoptic Technologies, Inc., our wholly-owned subsidiary,
designs and assembles a system of fiberoptic lighting products. This system
consists of an illuminator, which uses either halogen or high intensity
discharge light sources, fiberoptic cable and fixtures. The electrically powered
illuminator generates the light and transfers it to the optical fiber. The
principal advantage of fiberoptic lighting is that the light at the application
level is free of heat and ultraviolet light, which can damage displayed items.
We produce a line of energy efficient Exit and Emergency lighting products
that are electronically controlled and surge protected. This product line uses
LED (light emitting diode) technology for its light source.
Indy Lighting, Inc., our wholly owned subsidiary, produces a wide variety
of commercial lighting fixture products for use primarily in department and
specialty retail stores. These products use incandescent, fluorescent, high
intensity discharge and compact fluorescent light sources to provide specialty
and general purpose lighting.
We believe our innovations in simplifying installation and improving the
function of our lighting products have served to increase demand for our
products.
Juno, Indy, Air-Loc, Real Nail, Trac-Master and Wireforms are registered
trademarks of Juno.
INTELLECTUAL PROPERTY
As of May 31, 1999, we owned 45 United States patents and had 6 patent
applications on file with the United States Patent Office. We also have 21
corresponding foreign patents, and 10 registered trademarks in the United
States. We cannot assure you that any patents will be issued with respect to
pending or future applications. As we develop products for new markets and uses,
we normally seek available patent protection. Juno believes that its patents are
important, but does not consider itself materially dependent upon any single
patent or group of related patents.
PRODUCTION
We design and assemble substantially all of our products in-house. However,
we outsource virtually all component manufacturing to a number of independent
vendors located principally near our production facilities. Tools, dies and
molds are manufactured by outside sources to our designs and specifications.
Tooling is consigned to independent job shops, mostly located near our
production facilities, which fabricate and finish the basic components of our
products. We inspect the components and assemble, test, package, store and ship
the finished products. We perform most assembly operations at our production
facilities located near Chicago and Indianapolis.
We outsource manufacturing of virtually all components to minimize fixed
costs and capital requirements and to produce flexibility in responding to
market needs. We believe our utilization of subcontractors with specialized
skills is the most efficient method of manufacturing our products. We further
believe alternate tool making specialists and fabricators are generally
available. We use multiple subcontractors for most of our components to
facilitate availability. In addition, we purchase many of the raw materials used
in the manufacturing of our components to control the quality of the raw
materials used by the subcontractors and to receive more competitive prices for
the raw materials.
We spent approximately $4,095,000, $4,719,000 and $4,309,000 on research,
development and testing of new products and on development of related tooling in
fiscal 1998, 1997 and 1996, respectively.
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SALES AND DISTRIBUTION
We have relationships with a broad base of over 1,200 distributors across
the United States and Canada. Each of our distributors maintains its own
inventory of Juno products and in turn, sells to electrical contractors and
builders and, in some cases, also sells at the retail level. Sales to
distributors are made through our own knowledgeable sales staff and also through
manufacturers' agents who sell other non-competing electrical products. We also
seek to have our products specified by architects, engineers and contractors for
large commercial and institutional projects with actual sales made through our
distributors. We also sell to certain wholesale lighting outlets and national
accounts. Indy sells its products primarily to the department store, specialty
retail, supermarket and commercial construction industries. Indy's products are
generally shipped from the factory directly to the job site.
Inventories are maintained at our production and distribution facilities
near Chicago and Indianapolis as well as in our distribution centers near
Atlanta, Dallas, Los Angeles, Philadelphia and Toronto. Inventories of Indy's
products are maintained at Indy's facility. Most orders are shipped from stock
inventory within 48 hours of receipt.
BACKLOG AND MATERIAL CUSTOMERS
We have no material long-term contracts. Orders are generally filled within
48 hours of receipt and therefore we have no backlog.
COMPETITION
Although we are not aware of published information regarding the market for
our products, we believe that our sales place us among the five highest-selling
manufacturers of track and recessed lighting products in the United States. We
estimate that there are more than fifty manufacturers of competing track and
recessed lighting products. We also compete with manufacturers of a variety of
fluorescent, high intensity discharge, exit and emergency and decorative
lighting products. A number of competitors, including our two largest
competitors, are divisions or subsidiaries of larger companies that have
substantially greater resources than us.
There is wide price variance in competitive products, and we believe that
our line can be described as moderately priced in order to be attractive to the
high-volume commercial and residential markets. However, lighting fixtures are
often purchased in small quantities and, as a result, product features may be
more important to a purchaser in small quantities than cost. We believe that our
growth has been attributable principally to our innovative and high-quality
products, the quality of our sales force and our superior customer service and
rapid product delivery. See "Risk Factors -- The Market in Which We Operate Is
Highly Competitive, and We May Not Be Able to Compete Effectively, Especially
Against Established Competitors with Significantly Greater Financial Resources."
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PROPERTIES
Our executive offices are located at 1300 South Wolf Road, Des Plaines,
Illinois 60018. Our assembly and distribution activities are conducted at the
facilities described in the following table.
APPROXIMATE
LOCATION SQUARE FOOTAGE FUNCTION OWNED/LEASED
-------- -------------- -------- ------------
Des Plaines, Illinois (Chicago)....... 540,000 Executive Offices, Owned
Production and
Distribution
Fishers, Indiana (Indianapolis)....... 130,000 Production and Owned
Distribution
Cerritos, California (Los Angeles).... 71,000 Distribution Leased
Bridgeport, New Jersey 49,000 Distribution Owned
(Philadelphia)......................
Brampton, Ontario (Toronto)........... 47,000 Distribution Owned
Norcross, Georgia (Atlanta)........... 44,700 Distribution Owned
Carrollton, Texas (Dallas)............ 39,000 Distribution Leased
Palmetto, Florida (Tampa)............. 10,000 Production and Leased
Distribution
RECENT EVENTS
We were recapitalized in June 1999 and deposited approximately $406.1
million in cash with our exchange agent for payment as merger consideration to
our stockholders. As of today, holders of approximately 533,800 shares of our
common stock have asserted dissenters' rights and have not been paid any merger
consideration. When we use the term recapitalization, we mean the
recapitalization which was effected by the exchange of approximately 87% of the
outstanding shares of our common stock for cash and the merger of Jupiter
Acquisition Corp. with and into us and the related financings.
LEGAL PROCEEDINGS
Juno, its directors, Fremont Investors and Fremont Partners have been named
as defendants in a lawsuit purported to be a class action commenced on or about
April 1, 1999 in the Court of Chancery in and for New Castle County, Delaware.
Such action is captioned Linda Parnes v. George M. Ball, Thomas Tomsovic, Allan
Coleman, Robert S. Fremont, Julius Lewis, Fremont Investors I, LLC, Fremont
Partners, L.P. and Juno Lighting, Inc. (Case No. 17084NC). The complaint in such
lawsuit alleges, among other things, that the Juno Board of Directors breached
its fiduciary duties to Juno stockholders by failing to appoint additional
independent directors and by entering into the merger agreement, and that
Fremont Investors and Fremont Partners aided and abetted such breach of
fiduciary duties. More specifically, the plaintiff alleges, among other things,
that the Juno Board of Directors failed to engage in any market check and agreed
to sell control of Juno to Fremont Investors for a price that was less than
Juno's true worth. As relief, the complaint seeks, among other things, an
injunction against consummation of the merger or, to the extent the merger is
concluded, a rescission of the merger, damages in an unspecified amount, a court
order compelling Juno to appoint two additional independent directors, and an
award to plaintiff of her costs and expenses, including attorneys' and expert's
fees, incurred in connection with such lawsuit.
We believe that the allegations contained in the complaint are without
merit and intend to vigorously contest the action, on behalf of ourself and our
directors, if the plaintiff elects to proceed with her action.
On September 8, 1997, we were served with a complaint for patent
infringement alleged by Mr. Ole K. Nilssen (Case No. 97 C 4624 in the United
States District Court for the Northern District of Illinois). In this complaint,
Mr. Nilssen alleges that we have infringed seven of Mr. Nilssen's patents and
seeks a permanent injunction against our sale of products utilizing the
inventions claimed by such patents
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and unspecified monetary damages, including a request for treble damages. These
patents relate variously to low-voltage, high frequency power supplies for
lighting systems and to track lighting systems incorporating such low-voltage
high frequency power supplies. We have filed an answer and counterclaim denying
the allegations of the complaint and asserting a number of affirmative defenses
and prayers for declaratory relief. On February 17, 1999, the complaint was
amended to add Management Investment & Technology, Ltd. and Digital Lighting,
Inc. as plaintiffs and to claim lost profits of these entities as damages. These
parties are allegedly exclusive licensees under patents held by Mr. Nilssen.
EMPLOYEES
As of May 31, 1999, we employed approximately 1,062 persons. As of May 31,
1999, all of our production employees, who constitute 56% of our employees, were
represented by one of two unions. The expiration dates for the two collective
bargaining agreements pertaining to our Des Plaines, Illinois, and Fishers,
Indiana locations are September 1999 and September 2001, respectively. See "Risk
Factors -- Our Business Could Suffer in the Event of a Work Stoppage by Our
Unionized Labor Force."
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to persons
who are our directors and executive officers with their ages as of July 31,
1999:
NAME AGE PRINCIPAL POSITION(S)
- ---- --- ---------------------
Robert Jaunich II...... 59 Chairman of the Board and Director
Mark N. Williamson..... 36 Director
Glenn R. Bordfeld...... 52 Director, President and Chief Operating Officer
Joel W. Chemers........ 62 Vice President, Human Resources and Legal Affairs
Thomas W. Tomsovic..... 57 Vice President, Operations
George J. Bilek........ 44 Vice President, Finance and Treasurer
Charles F. Huber....... 57 Vice President, Engineering and Special Projects
Scott L. Roos.......... 41 Vice President, Product Management & Development
Richard Stam........... 38 Vice President, Sales
Jacques P. LeFevre..... 44 Vice President; President of Indy Lighting, Inc.
R. Reed Powers......... 48 Vice President; President of Advanced Fiberoptic
Technologies, Inc.
Robert Jaunich II has served as a director since June 30, 1999. He has
served as President and Chief Executive Officer of Fremont Investors I, LLC
since May 1998, as a Managing Director of Fremont Partners, L.P. and a member of
FP Advisors, L.L.C. since 1996, and as a Managing Director and a member of the
Board of Directors and Executive Committee of the Fremont Group since 1991.
Prior to joining the Fremont Group in 1991, he was Executive Vice President and
a member of the Chief Executive Office of Swiss-based Jacobs Suchard AG.
Previously, he was President of Osborne Computer Corporation, President of Sara
Lee Corporation, and Executive Vice President of Memorex Corporation. Among the
various board positions he holds, Mr. Jaunich is Chairman of the Boards of
Directors of Kinetic Concepts, Inc. and Tapco Holdings, Inc., a director of Kerr
Group, Inc., a director of CNF Transportation, Inc. and Chairman of the Managing
General Partner of Crown Pacific Partners, L.P. His previous board associations
include Coldwell Banker Corporation, Petro Stopping Centers, L.P., Sara Lee
Corporation, Douwe Egberts, The Wine Group, Brach Van houten Holding, Inc. and
Nabob Foods.
Mark N. Williamson has served as a director since June 30, 1999. He has
served as Vice President and Treasurer of Fremont Investors I, LLC since May
1998 and as a Managing Director of Fremont Partners and a member of FP Advisors,
L.L.C. since 1996. Prior to joining Fremont Partners in May 1996, Mr. Williamson
served as a Managing Director at the Harvard Private Capital Group, Inc. from
August 1991. Prior to that time, he was an Associate at ESL Partners, Inc., a
private investment partnership pursuing value-oriented investments in private
and public equity and debt securities. His previous board associations include
Tarquin, PLC and Risk Capital Holdings, Inc.
Glenn R. Bordfeld has served as a director since July 1999. He has been
President, Chief Operating Officer since January 19, 1999. He was the Company's
Vice President, Sales from July 1991 to January 1999. Previously, he was
employed by the Company as its National Sales Manager from November 1988 to July
1991; its Assistant Sales Manager from November 1985 to November 1988 and its
Advertising Manager from November 1982 to November 1985.
Joel W. Chemers has been Vice President, Corporate Planning since January
19, 1999. He was Director, Corporate Planning from October 1997 to January 1999.
From March, 1996 to October 1997 he was Executive Vice President and Chief
Operating Officer of Tisma Machinery, a designer and builder of automatic
cartoning machinery. From 1993 through March 1996 he was Managing Director,
Midwest Region for Starshak & Associates, a consulting firm to underperforming
companies.
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Thomas W. Tomsovic has been employed by the Company since its founding in
1976. He was elected Vice President, Manufacturing in July 1983 and Vice
President, Operations in June 1986.
George J. Bilek has been Vice President, Finance and Treasurer since April
1990. He was employed by the Company as its Comptroller from September 1985 to
April 1990.
Charles F. Huber has been Vice President, Corporate Development since
December 1992. From January 1989 to December 1992 he was employed by the Company
as the Director of Corporate Development. From October 1984 to January 1989 he
was employed by Reliance Electric, Inc., a manufacturer and distributor of
electrical products, as its Vice President and General Manager.
Scott L. Roos rejoined Juno in October 1998 as Vice President, Product
Management and Development. From August 1994 through October 1998 he was Vice
President, Product Development and Marketing for Alkco, a division of the JJI
Lighting Group (a manufacturer of lighting products). From 1990 through August
1994 he was the Company's Director of New Product Development.
Richard Stam has been Vice President, Sales since August 1999. From 1997 to
1999, he was our national sales manager for North America. From 1994 to 1997, he
was the National Sales Manager for Juno Lighting, Ltd., our Canadian subsidiary.
Jacques P. LeFevre has served as a Vice President since August 1999. He has
been President of Indy Lighting, Inc. (acquired by Juno in 1988) since October
1994. He was Vice President and General Manager from October 1983 to October
1994. Previously he was a Certified Public Accountant with Arthur Young &
Company for six years.
R. Reed Powers has served as a Vice President since August 1999. He has
also been President of Advanced Fiberoptic Technologies, a subsidiary of Juno,
since June 1997. He was President of Sunlight Lighting Inc. from 1983 to 1997.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
INDEMNIFICATION AND INSURANCE
Juno's certificate of incorporation and bylaws contain provisions identical
to those existing prior to the recapitalization with respect to elimination of
personal liability and indemnification. These provisions will not be amended,
repealed or otherwise modified for a period of six years in any manner that
would adversely affect the rights of present and former officers and directors
of Juno and its subsidiaries at the time of the recapitalization.
In addition, Juno has agreed to maintain for six years directors' and
officers' liability insurance policies on terms and conditions which are at
least as favorable as those in effect at the effective time of the
recapitalization, covering events occurring prior to the recapitalization. In no
event will Juno be required to spend in any year in excess of 300% of the
aggregate premiums paid by Juno in 1998 on an annualized basis for such purpose.
If Juno would be required to spend in excess of 300% of the aggregate premiums
paid by Juno in 1998 on an annualized basis for such purpose for any year, Juno
must buy as much insurance as can be obtained for a cost not exceeding such
amount.
CHANGE OF CONTROL BENEFITS ARRANGEMENTS
The Board approved and Juno has entered into change of control benefits
agreements with the following executive officers of Juno: Thomas W. Tomsovic,
Charles F. Huber, George J. Bilek, and Glenn R. Bordfeld, and with three other
officers of Juno. These agreements provide for severance and other benefits in
the event of a change of control of Juno and in the event of certain
terminations of employment under employment contracts becoming effective upon
the change of control and ending upon six months notice from Juno, but no
earlier than December 31, 2000. Some benefits would be provided immediately upon
the change of control. Severance benefits for termination of employment after
the change of control would be payable only if an executive's employment is
terminated by Juno without "cause" or by the executive for "good reason." For
this purpose, "good reason" includes material adverse changes in duties,
reduction in salary, or a required move of more than 40 miles. "Cause" for these
purposes means commission of certain felonies, substance abuse, and serious
misconduct or neglect in the course of duties.
The recapitalization and the merger constituted a change of control
pursuant to these agreements. Upon the consummation of the recapitalization, the
principal benefits that were provided include (1) an employment contract with
(a) a 5% minimum annual base salary increase payable beginning at the end of
fiscal year 1999, (b) no adverse change in duties, (c) no required move of more
than 40 miles, and (d) participation in benefit and welfare plans; (2) a
transaction bonus of $150,000; (3) a performance bonus based on projected
operating income for the year of the change of control, prorated for the portion
of the year elapsed prior to the change of control and multiplied by 115%; and
(4) the acceleration of vesting of all unvested stock options.
The principal benefits that would be provided as severance benefits upon
termination by the executive for good reason or by Juno other than for cause or
disability include: (1) a lump sum payment equal to the greater of (x) six
months' base salary or (y) the base salary which would have been payable through
December 31, 2000; (2) a payment equal to forfeited retirement benefits, if any;
and (3) continuation of medical, dental, life insurance and other fringe
benefits for the greater of (x) six months or (y) until December 31, 2000. In
addition, the agreements provide reimbursement of legal fees for actions to
enforce the agreements brought in good faith, regardless of whether the
executive prevails in such action. The benefits are capped at the maximum amount
payable without triggering excise tax under the golden parachute provisions of
the Internal Revenue Code.
Payments that would be made to the persons who are parties to the change of
control benefits agreements in the event of their termination during the
employment period after the recapitalization (other than for cause or by reason
of the executive's death or disability) amount to a maximum of approximately
$2,167,000 for all officers with change of control benefits agreements. This
amount is based on numerous
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assumptions, including that all of the parties to the change of control benefit
agreements were terminated on July 31, 1999. However, no such persons have been
so terminated.
The foregoing is only a summary and is qualified in its entirety by
reference to the terms of each change of control benefits agreement.
MANAGEMENT SERVICES AGREEMENT
Juno and Fremont Partners L.L.C. entered into a management services
agreement at the effective time of the merger pursuant to which Fremont Partners
L.L.C. will render certain management services in connection with Juno's
business operations, including strategic planning, finance, tax and accounting
services. Juno will pay Fremont Partners L.L.C. an annual management fee of
$325,000 to render such services.
MANAGEMENT PARTICIPATION IN THE RECAPITALIZATION
In Fremont's prior acquisitions, entities affiliated with Fremont Partners
have offered equity ownership opportunities to the key management of the
companies they have acquired. In connection with the recapitalization, Fremont
Investors offered management and certain employees of Juno an opportunity to
purchase from Juno a portion of the Series A convertible preferred stock and
several such persons have purchased 8,030 shares in the aggregate.
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DESCRIPTION OF CAPITAL STOCK
The following description of Juno's capital stock does not purport to be
complete and is subject in all respects to applicable Delaware law and to the
provisions of the amended and restated certificate of incorporation.
AUTHORIZED CAPITAL STOCK
Under the amended and restated certificate of incorporation, the total
number of shares of all classes of capital stock that Juno has authority to
issue is 50,000,000, par value $.001 per share, of which 45,000,000 are shares
of Juno common stock and 5,000,000 are shares of Juno preferred stock.
COMMON STOCK
Holders of Juno common stock are entitled to one vote per share on all
matters submitted to a vote of the stockholders, including the election of
directors, and are entitled to receive ratably such dividends, if any, as may be
declared from time to time by the Board of Directors out of funds legally
available. In the event of a liquidation, dissolution or winding up of Juno,
holders of Juno common stock are entitled to share ratably in all assets
remaining after payment of Juno's liabilities and payment of the liquidation
preference of the Series A convertible preferred stock. Holders of Juno common
stock have no right to convert their shares of Juno common stock into other
securities, and there are no redemptive provisions with respect to such shares.
All of the outstanding shares of Juno are fully paid and non-assessable.
The rights, preferences and privileges of holders of Juno common stock are
subject to, and may be adversely affected by, the rights of holders of the
Series A convertible preferred stock and the shares of any other series of Juno
preferred stock which Juno may designate and issue in the future.
PREFERRED STOCK
Under the amended and restated certificate of incorporation, the Board of
Directors is authorized at any time and from time to time to provide for the
issuance of all or any shares of the Juno preferred stock in one or more classes
or series, and to fix for each such class or series such voting powers, full or
limited, or no voting powers, and such distinctive designations, preferences and
relative, participating, optional or other special rights and such
qualifications, limitations or restrictions thereof as are permitted by Delaware
law, including, but not limited to, the authority to provide that any such class
or series be: (a) subject to redemption at such time or times and at such price
or prices; (b) entitled to receive dividends (which may be cumulative or
non-cumulative) at such rates, on such conditions, and at such times, and
payable in preference to, or in such relation to, the dividends payable on any
other class or classes or any other series; (c) entitled to such rights upon the
dissolution of, or upon any distribution of the assets of, Juno; or (d)
convertible into, or exchangeable for, shares of any class or classes of stock,
or other securities or property, of Juno at such price or prices or at such
rates of exchange and with such adjustments; all as the Board determines by
resolution.
Under the amended and restated certificate of incorporation, Juno has
designated 1,060,000 shares of Juno preferred stock as the Series A convertible
preferred stock, which shares were issued to Fremont Investors, members of
Juno's management and certain employees of Juno in connection with the
recapitalization.
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SERIES A CONVERTIBLE PREFERRED STOCK
Holders of the Series A convertible preferred stock are entitled to receive
cumulative quarterly dividends, whether or not declared by the Board of
Directors, in an amount equal to the greater of:
- dividends which would have been payable to the holders of Series A
convertible preferred stock in such quarter had they converted their
Series A convertible preferred stock into Juno common stock prior to the
record date of dividends declared on the common stock in such quarter;
and
- the stated amount then in effect multiplied by 2%.
For the first five years following issuance, the dividends on the Series A
convertible preferred stock will be payable by an increase in the stated amount
of such stock. After five years from the issuance date, and continuing until
redemption or conversion, Juno will be required to pay the dividends on the
Series A convertible preferred stock in cash, calculated as described above,
subject to certain covenants and restrictions contained in the indenture and the
senior credit facilities.
PREEMPTIVE RIGHTS
No holder of any shares of any class of stock of Juno, other than the
Series A convertible preferred stock, has any preemptive or preferential right
to acquire or subscribe for any unissued shares of any class of stock or any
authorized securities which are convertible into or carry any right, option or
warrant to subscribe for or acquire shares of any class of stock.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
COMMON STOCK
PRINCIPAL HOLDERS
The following table sets forth, as of July 31, 1999, the number and
percentage of outstanding shares of common stock beneficially owned by each
person known to us to be the beneficial owner of more than five percent of the
outstanding shares of our common stock.
PERCENTAGE OF SHARES OUTSTANDING(1)
----------------------------------------
ASSUMING NO ASSUMING
CONVERSION OF CONVERSION OF ALL
OUTSTANDING SHARES OUTSTANDING SHARES
SHARES OF SERIES A OF SERIES A
BENEFICIALLY CONVERTIBLE CONVERTIBLE
NAME AND ADDRESS OWNED PREFERRED STOCK PREFERRED STOCK(2)
---------------- ------------ ------------------ ------------------
Fremont Investors I, LLC(3)...................... 4,007,695(3) 62.5% 62.2%
50 Fremont Street, Suite 3700
San Francisco, California 94105
Gabriel Capital Corporation(4)................... 730,125 30.4 11.3
450 Park Avenue
New York, New York 10022
Seneca Capital, L.P.(5).......................... 238,760 9.9 3.7
830 Third Avenue, 14th Floor
New York, New York 10022
- -------------------------
(1) Assumes that all dissenting shareholders in the merger withdraw their
demands for appraisal rights and that 2,400,000 shares of common stock are
outstanding.
(2) Assumes the conversion of all 1,060,000 shares of series A convertible
preferred stock outstanding as of June 30, 1999 into 4,038,095 shares of
common stock.
(3) Based on a Schedule 13D filed July 13, 1999 by Fremont Investors I, LLC,
Fremont Partners, L.P., FP Advisors, L.L.C., Fremont Group, L.L.C. and
Fremont Investors, Inc. According to the Schedule 13D, as of June 30, 1999,
Fremont Investors owned 1,052,020 shares of Series A convertible preferred
stock, which was convertible as of June 30, 1999 into 4,007,695 shares of
common stock, and Fremont Partners as the managing member of Fremont
Investors, FP Advisors as the general partner of Fremont Partners, Fremont
Group as the managing member of FP Advisors and Fremont Investors, Inc. as
manager of Fremont Group may be deemed to beneficially own the Series A
convertible preferred stock, and the shares of common stock into which such
Series A convertible preferred stock is convertible, owned directly by
Fremont Investors, and all of the foregoing entities may be deemed to have
shared voting power and shared dispositive power with respect to such
shares.
(4) Based on a Schedule 13D filed July 29, 1999 by Gabriel Capital Corporation
("Gabriel") and J. Ezra Merkin. According to the Schedule 13D, Gabriel has
the power to vote or direct the vote and to dispose or direct the
disposition of 435,155 shares, Mr. Merkin has the power to vote or direct
the vote and to dispose or direct the disposition of 294,970 held by Gabriel
and may be deemed to have the power to vote or direct the vote and to
dispose or direct the disposition of 435,155 shares held by Ariel Fund
Limited.
(5) Based on a Schedule 13G filed August 3, 1999 by Seneca Capital, L.P. ("SC
LP"), Seneca Capital Advisors, LLC ("SC LLC"), Seneca Capital International,
Ltd. ("SCI Ltd."), Seneca Capital Investments, LLC ("SCI LLC") and Douglas
A. Hirsch (collectively, "Seneca") and other information provided by
representatives of Seneca. According to the Schedule 13G and representatives
of Seneca, Mr. Hirsch beneficially owns 238,760 shares and shares the power
to vote or direct the vote and to dispose or direct the disposition of
238,760 shares, SC LP and SC LLC each beneficially
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owns and shares the power to vote or direct the vote and to dispose or direct
the disposition of 84,756 shares, SCI Ltd. beneficially owns and shares the
power to vote or direct the vote and to dispose or direct the disposition of
143,849 shares, and SCI LLC beneficially owns 154,004 shares, of which it has
the sole power to vote or direct the vote and to dispose or direct the
disposition of 10,155 shares and shares the power to vote or direct the vote and
to dispose or direct the disposition of 143,849 shares.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of July 31, 1999, the number and
percentage of outstanding shares of our common stock beneficially owned by each
director, certain executive officers and all executive officers and directors as
a group. The persons named hold sole voting and investment power with respect to
the shares of Juno common stock listed below, except as otherwise indicated.
Unless otherwise indicated, the business address of each named person is 1300
South Wolf Road, Des Plaines, Illinois 60018.
PERCENTAGE OF SHARES OUTSTANDING(1)
----------------------------------------
ASSUMING NO ASSUMING
CONVERSION OF CONVERSION OF ALL
SHARES OUTSTANDING SHARES OUTSTANDING SHARES
BENEFICIALLY OF SERIES A OF SERIES A
NAME OWNED PREFERRED STOCK PREFERRED STOCK(2)
---- ------------ ------------------ ------------------
Robert Jaunich II(3)............................. 4,007,695(4) 62.5% 62.2%
Mark Williamson(3)............................... 4,007,695(4) 62.5 62.2
Robert S. Fremont(5)............................. 36,385 1.5 *
Glenn R. Bordfeld(6)(7).......................... 11,232 * *
Thomas W. Tomsovic(8)(9)......................... 21,904 * *
George J. Bilek(8)(10)........................... 24,416 * 1.0
Charles F. Huber(8)(11).......................... 22,185 * *
All directors and executive officers as a 4,144,733 63.2 63.2
group (9 persons)(12).....................
- -------------------------
* Less than 1%.
(1) Assumes that all dissenting shareholders in the merger withdraw their
demands for appraisal rights and that 2,400,000 shares of common stock are
outstanding.
(2) Assumes the conversion of all 1,060,000 shares of series A convertible
preferred stock outstanding.
(3) Mr. Jaunich is President and Chief Executive Officer of Fremont Investors
I, LLC, and Mr. Williamson is Vice President and Treasurer of Fremont
Investors I, LLC. Messrs. Jaunich and Williamson each are Managing
Directors of Fremont Partners, the managing member of Fremont Investors.
They each may be deemed to have beneficial ownership of the shares of
common stock owned by Fremont Investors, but each disclaims any such
beneficial ownership. The business address of Mr. Jaunich and Mr.
Williamson is 50 Fremont Street, Suite 3700, San Francisco, California
94105.
(4) Assumes the conversion of 1,052,020 shares of preferred stock beneficially
owned by Fremont Investors as of June 30, 1999 into 4,007,695 shares of
common stock. See "-- Principal Holders."
(5) Mr. Fremont, our Chairman and Chief Executive Officer during the fiscal
year ended November 30, 1998, resigned such positions upon the merger on
June 30, 1999. The address of Mr. Fremont is 610 Brierhill Road, Deerfield,
Illinois 60015.
(6) Executive Officer and Director
(7) Includes 8,000 shares which Mr. Bordfeld has the right to acquire within 60
days of July 31, 1999 and assumes the conversion as of June 30, 1999 into
2,857 shares of common stock of 750 shares of preferred stock held by Mr.
Bordfeld.
(8) Executive Officer
(9) Includes 20,000 shares which Mr. Tomsovic has the right to acquire within
60 days of July 31, 1999 and assumes the conversion into 1,904 shares of
common stock of 500 shares of series A convertible preferred stock held by
Mr. Tomsovic.
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(10) Includes 20,000 shares which Mr. Bilek has the right to acquire within 60
days of July 31, 1999 and assumes the conversion into 3,809 shares of
common stock of 1,000 shares of series A convertible preferred stock held
by Mr. Bilek.
(11) Includes 20,000 shares which Mr. Huber has the right to acquire within 60
days of July 31, 1999 and assumes the conversion into 1,904 shares of
common stock of 500 shares of series A convertible preferred stock held by
Mr. Huber.
(12) Includes 116,600 shares which nine executive officers have the right to
acquire within 60 days of July 31, 1999 and assumes the conversion into
18,476 shares of common stock of 4,850 shares of series A convertible
preferred stock held by such executive officers. Excludes shares owned by
Mr. Fremont.
SERIES A PREFERRED STOCK
Set forth below is information regarding the beneficial ownership of our
series A preferred stock, without giving effect to the conversion of such
preferred stock into common stock.
PRINCIPAL HOLDER
The following table sets forth, as of July 31, 1999, the number and
percentage of outstanding shares of series A convertible preferred stock
beneficially owned by each person known to us to be the beneficial owner of more
than five percent of the outstanding shares of our series A convertible
preferred stock.
SHARES PERCENTAGE
BENEFICIALLY OF SHARES
NAME AND ADDRESS OWNED OUTSTANDING
---------------- ------------ -----------
Fremont Investors I, LLC.................................... 1,052,020 99.2%
50 Fremont Street, Suite 3700
San Francisco, California 94105
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of July 31, 1999, the number and
percentage of outstanding shares of our series A preferred stock beneficially
owned by each director, certain executive officers and all executive officers
and directors as a group. The persons named hold sole voting and investment
power with respect to the shares of our common stock listed below, except as
otherwise indicated. Unless otherwise indicated, the business address of each
named person is 1300 South Wolf Road, Des Plaines, Illinois 60018.
SHARES PERCENTAGE
BENEFICIALLY OF SHARES
NAME AND ADDRESS OWNED OUTSTANDING
---------------- ------------ -----------
Robert Jaunich II(1)........................................ 1,052,020 99.2%
Mark N. Williamson(1)....................................... 1,052,020 99.2
Robert S. Fremont(2)........................................ 0 *
Glenn R. Bordfeld........................................... 750 *
Thomas W. Tomsovic.......................................... 500 *
George J. Bilek............................................. 1,000 *
Charles F. Huber............................................ 500 *
All directors and executive officers as a group (9
persons)............................................... 1,056,270 99.7
- -------------------------
* Less than 1%.
(1) Mr. Jaunich is the President and Chief Executive Officer of Fremont
Investors and a Managing Director of Fremont Partners, the managing member
of Fremont Investors. Mr. Williamson is Vice President and Treasurer of
Fremont Investors and a Managing Director of Fremont Partners. They each may
be deemed to have beneficial ownership of the shares of preferred stock
owned by Fremont Investors, but each disclaims any such beneficial
ownership. The business address of Mr. Jaunich and Mr. Williamson is 50
Fremont Street, Suite 3700, San Francisco, California 94105.
(2) Mr. Fremont, our Chairman and Chief Executive Officer during the fiscal year
ended November 30, 1998, resigned such positions upon the merger on June 30,
1999. The address of Mr. Fremont is 610 Brierhill Road, Deerfield, Illinois
60015.
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EXECUTIVE COMPENSATION
The following Summary Compensation Table includes individual compensation
information regarding all compensation awarded to, earned by, or paid during the
fiscal years ended November 30, 1998, 1997 and 1996 to Juno's former Chief
Executive Officer, Mr. Fremont and the four other most highly compensated
executive officers in the fiscal year ended November 30, 1998 in all capacities
in which they served during the years in which they have been executive
officers. Mr. Fremont resigned as a director and officer upon the merger on June
30, 1999.
As reflected in the following table, Mr. Fremont participated and the four
other most highly paid executive officers of Juno currently participate in
Juno's 401(k) Plan. In addition, the named executives participate in, and
(except for Mr. Fremont) have received grants under, Juno's Stock Option Plans,
effective July 18, 1983 (the "1983 Stock Option Plan") and December 2, 1993 (the
"1993 Stock Option Plan"). No option grants were made to any of such named
executive officers in the fiscal year ended November 30, 1998.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
----------------------------------------
OTHER ANNUAL ALL OTHER
NAME & PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) COMPENSATION(2)
------------------------- ---- ------ ----- --------------- ---------------
Robert S. Fremont................... 1998 $504,400 $ -- -- $12,000
Chairman of the Board and 1997 504,400 -- -- 9,750
Chief Executive Officer 1996 504,000 -- -- 9,750
Glenn R. Bordfeld................... 1998 $186,539(3) $23,491 -- $12,000
President and Chief Operating
Officer 1997 176,154 -- -- 9,750
1996 166,346 -- -- 9,750
Thomas W. Tomsovic.................. 1998 $230,000 $23,491 -- $12,000
Vice President, Operations 1997 220,000 -- -- 9,750
1996 210,000 -- -- 9,750
George J. Bilek..................... 1998 $186,539 $23,491 -- $12,000
Vice President, Finance and
Treasurer 1997 176,154 -- -- 9,750
1996 165,481 -- -- 9,750
Charles F. Huber.................... 1998 $190,721 $23,491 -- $12,000
Vice President, Corporate
Development.................... 1997 180,077 -- -- 9,750
1996 169,471 -- -- 9,750
- -------------------------
(1) With respect to each named executive officer for each fiscal year, excludes
perquisites which did not exceed the lesser of $50,000 or 10% of the named
executive officer's salary and bonus for the fiscal year.
(2) Includes Juno's matching and discretionary contributions under the 401(k)
Plan. Amounts are included without regard to vesting of any Company
discretionary contributions.
(3) Mr. Bordfeld became Juno's President and Chief Operating Officer on January
19, 1999. Mr. Bordfeld previously served as Vice President -- Sales.
Juno and the named executive officers have entered into Change of Control
Benefits Agreements. See "Certain Relationships and Related Party
Transactions -- Change in Control Benefits Arrangements."
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STOCK OPTION PLAN EXERCISES AND YEAR-END VALUE TABLE
The following table discloses, for each of the executive officers listed,
information regarding stock options exercised during, or held at the end of, the
fiscal year ended November 30, 1998 pursuant to Juno's 1983 and 1993 Stock
Option Plans.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
TOTAL NUMBER OF TOTAL VALUE OF UNEXERCISED
NUMBER UNEXERCISED OPTIONS HELD IN-THE-MONEY OPTIONS
OF SHARES AT FISCAL YEAR END(1) HELD AT FISCAL YEAR(1)(2)
ACQUIRED VALUE ------------------------------- -------------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE(3) EXERCISABLE UNEXERCISABLE(3)
---- ----------- -------- ----------- ---------------- ----------- ----------------
Robert S. Fremont...... -- $ 0 0 0 $ 0 $ 0
Glenn R. Bordfeld...... 12,000 45,250 4,000 4,000 25,375 35,750
Thomas W. Tomsovic..... -- 0 16,000 4,000 91,125 35,750
George J. Bilek........ -- 0 16,000 4,000 91,125 35,750
Charles F. Huber....... -- 0 16,000 4,000 91,125 35,750
- -------------------------
(1) All options outstanding at the end of the fiscal year ended November 30,
1998, are incentive stock options and were granted at 100% of the fair
market value of Juno's common stock on the date of the grant. For all such
options, up to 20% of the shares covered by each option may be purchased
commencing on the first anniversary of the date of the grant and the amount
increases by 20% on each anniversary thereafter. Such options will expire at
various dates between December 9, 2003 and October 19, 2008. For incentive
stock options granted after December 31, 1986, the aggregate fair market
value of common stock with respect to which Incentive Stock Options become
exercisable for the first time by any individual grantee during any calendar
year may not exceed $100,000.
(2) Total value of options is based on the difference between the fair market
value of Juno common stock of $23.375, as of November 30, 1998, and the
exercise price per share of the options.
(3) Upon consummation of the merger on June 30, 1999 all outstanding stock
options vested and became fully exercisable.
COMPENSATION OF DIRECTORS
Except to the extent Messrs. Jaunich and Williamson may be deemed to be
compensated through the management services agreement between Fremont Partners
L.L.C. and us, directors who are not our employees are not compensated.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Other than the Compensation Committee members and Mr. Fremont, who attended
meetings of the Compensation Committee at the request of the Compensation
Committee and made recommendations regarding the compensation level of executive
officers other than himself, no current or former officer or employee of Juno or
its subsidiaries participated in the deliberations of the Board concerning
executive compensation during the fiscal year ended November 30, 1998.
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DESCRIPTION OF SENIOR CREDIT FACILITIES
General. In connection with the recapitalization, Juno entered into the
senior credit facilities with NationsBank, N.A., Credit Suisse First Boston and
certain other lenders. The senior credit facilities provide for aggregate
borrowings by Juno of approximately $125.0 million.
The senior credit facilities include (1) a $40.0 million tranche A term
loan (the "Term Loan A"), (2) a $50.0 million tranche B term loan (the "Term
Loan B") and (3) a $35.0 million revolving credit facility. Up to $5.0 million
of the revolving credit facility may be utilized to issue letters of credit.
Amounts borrowed under the revolving credit facility may be repaid and
reborrowed from time to time prior to the sixth anniversary of the closing date.
Interest. Amounts outstanding under the senior credit facilities bear
interest, at Juno's option, at a rate per annum equal to either: (1) the
Eurodollar Rate (the London interbank offered rate for eurodollar deposits as
adjusted for statutory reserve requirements) or (2) the Base Rate, in each case,
plus the Applicable Percentage. The "Base Rate" is defined as the higher of (1)
NationsBank's Prime Rate and (2) the Federal Funds Effective Rate plus 0.50%.
The Applicable Percentage for the revolving credit facility and the Term Loan A
is initially 1.0% for Base Rate loans and 2.5% for Eurodollar loans. The
Applicable Percentage for the Term Loan B is initially 1.5% for Base Rate loans
and 3.0% for Eurodollar loans. The Applicable Percentage for the revolving
credit facility, the Term Loan A and the Term Loan B adjusts according to a
performance pricing grid based on Juno's ratio of total funded debt to
consolidated EBITDA, ranging from (1) for Eurodollar loans, 2.5% to 1.625% for
the revolving credit facility and the Term Loan A and 3.0% to 2.75% for the Term
Loan B and (2) for Base Rate loans, 1.0% to 0.125% for the revolving credit
facility and the Term Loan A and 1.5% to 1.25% for the Term Loan B. Swingline
loans under the revolving credit facility bear interest at the Base Rate plus
0.50% without regard to Juno's ratio of total funded debt to consolidated
EBITDA.
Maturity. Borrowings under the revolving credit facility are due and
payable on November 30, 2005. The Term Loan A is payable in quarterly
installments ranging from $750,000 to $2,500,000, commencing February 29, 2000.
The final maturity of the Term Loan A is November 30, 2005. Borrowings under the
Term Loan B are due and payable in quarterly installments of (1) $125,000, from
February 29, 2000 through November 30, 2005 and (2) $11,750,000, from February
28, 2006 through November 30, 2006. The final maturity of the Term Loan B is
November 30, 2006.
Mandatory Prepayment. Juno is required to prepay the Term Loan A and the
Term Loan B with: (1) 100% of the net cash proceeds of all asset sales by Juno
and its subsidiaries (including sales of stock of subsidiaries of Juno), net of
selling expenses and taxes, subject to limited exceptions, (2) 100% of the net
cash proceeds of issuances of equity and debt obligations of Juno and its
subsidiaries, subject to limited exceptions and (3) 75% of excess cash flow if
the total funded debt to consolidated EBITDA ratio is equal to or greater than
3.75:1.00, or 50% of excess cash flow if the total funded debt to consolidated
EBITDA ratio is less than 3.75:1.00. To the extent that the amount of any
mandatory prepayment exceeds the outstanding loans under the Term Loan A and the
Term Loan B, loans under the revolving credit facility will be repaid and the
commitments under the revolving credit facility will be reduced.
Voluntary Prepayment. Juno may, at its option, prepay the Term Loan A, the
Term Loan B and the loans under the revolving credit facility, in minimum
principal amounts of $1,000,000, without premium or penalty, subject to
reimbursement of the lenders' breakage or redeployment costs in the case of
prepayment of Eurodollar Rate borrowings.
Guarantees. All obligations of Juno under the senior credit facilities are
unconditionally guaranteed by each existing and each subsequently acquired or
organized domestic subsidiary of Juno.
Security. The senior credit facilities are secured by a first priority
perfected security interest in all existing and after-acquired tangible and
intangible assets of Juno and its domestic subsidiaries, including, without
limitation, intellectual property, real property, all of the capital stock owned
by Juno and each of its domestic subsidiaries (subject to a limit of 65% of the
capital stock of foreign subsidiaries) and any intercompany debt obligations
(subject to limited exceptions).
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Covenants. The senior credit facilities require Juno to satisfy certain
financial tests, including, without limitation, causing the ratio of total
funded debt to consolidated EBITDA not to exceed certain specified levels; and
causing Juno's interest coverage ratio and fixed charge coverage ratio to exceed
certain specified levels. The senior credit facilities also contain certain
covenants which, among other things, limit the incurrence of additional
indebtedness, liens and negative pledges, mergers, consolidations and sales of
assets, investments, loans, advances and acquisitions, capital expenditures,
dividends, stock redemptions and redemption or prepayment of other indebtedness
and transactions with affiliates. The senior credit facilities also prohibit
prepayments of the notes and amendments to the terms of the notes.
Events of Default. The senior credit facilities contain customary events of
default, including, without limitation, payment defaults, breaches of
representations and warranties, covenant defaults, cross-default to material
indebtedness and agreements, bankruptcy and similar events, material judgments,
ERISA defaults, failure of any guaranty or security document supporting the
senior credit facilities to be in full force and effect and the occurrence of a
change in control of Juno.
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DESCRIPTION OF NOTES
You can find the definitions of certain terms used in this description
under the subheading "Certain Definitions." In this description, the word
"Company" refers only to Juno Lighting, Inc., and not to any of its
subsidiaries.
The Company issued the old Notes, and will issue the new Notes, under an
Indenture (the "Indenture") among itself, the Guarantors and Firstar Bank of
Minnesota, N.A., as trustee (the "Trustee"). The terms of the new Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The
Company and the initial purchasers have also entered into the registration
rights agreement with respect to the old Notes (the "Registration Rights
Agreement").
The following description is a summary of the material provisions of the
Indenture. It does not restate the Indenture in its entirety. We urge you to
read the Indenture because it, and not this description, define your rights as
holders of the Notes. Certain defined terms used in this description but not
defined below under "-- Certain Definitions" have the meanings assigned to them
in the Indenture. The Indenture is filed as an exhibit to the registration
statement which includes this prospectus. The new Notes are identical in all
material respects to the terms of the old Notes, except for certain transfer
restrictions and registration rights relating to the old Notes and except that
if the exchange offer is not consummated by November 27, 1999, the interest rate
on the old Notes will increase by 0.5% per annum during each subsequent 90-day
period up to a maximum overall increase of 2.0% per annum until the exchange
offer is completed.
BRIEF DESCRIPTION OF THE NOTES AND THE GUARANTEES
The Notes
The Notes:
- are general unsecured obligations of the Company;
- are subordinated in right of payment to all existing and future
Senior Debt of the Company;
- are pari passu in right of payment with any future senior
subordinated Indebtedness of the Company; and
- are unconditionally guaranteed by the Guarantors.
The Guarantees
The Notes are guaranteed by all of the material Domestic Subsidiaries of
the Company.
Each Guarantee of the Notes:
- is a general unsecured obligation of the Guarantor;
- is subordinated in right of payment to all existing and future
Senior Debt of the Guarantor; and
- is pari passu in right of payment with any future senior
subordinated Indebtedness of the Guarantor.
Not all of our subsidiaries will guarantee the Notes. In the event of a
bankruptcy, liquidation or reorganization of any of these non-guarantor
subsidiaries, these non-guarantor subsidiaries will pay the holders of their
debts and their trade and all other creditors before they will be able to
distribute any of their assets to us. Our sole non-guarantor subsidiary
generated 6.0% of our consolidated revenues in the twelve-month period ended May
31, 1999 and held 2.5% of our consolidated assets as of May 31, 1999. The
guarantor subsidiaries generated 21.5% of our consolidated revenues in the
twelve-month period ended May 31, 1999 and held 27.6% of our consolidated assets
as of May 31, 1999.
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As of the date of the Indenture, all of our subsidiaries will be
"Restricted Subsidiaries." However, under the circumstances described below
under the subheading "-- Certain Covenants -- Designation of Restricted and
Unrestricted Subsidiaries," we will be permitted to designate certain of our
subsidiaries as "Unrestricted Subsidiaries." Our Unrestricted Subsidiaries will
not be subject to many of the restrictive covenants in the Indenture. Our
Unrestricted Subsidiaries will not guarantee the Notes.
PRINCIPAL, MATURITY AND INTEREST
The Indenture provides for the issuance by the Company of Notes with a
maximum aggregate principal amount of $125 million. The Company may issue up to
$75 million of additional notes (the "Additional Notes") from time to time after
this offering. Any offering of Additional Notes is subject to the covenants
contained in the Indenture described below. The Notes and any Additional Notes
subsequently issued under the Indenture would be treated as a single class for
all purposes under the Indenture, including, without limitation, waivers,
amendments, redemptions and offers to repurchase. No offering of Additional
Notes is being made by this prospectus. In addition, we do not know whether we
will issue Additional Notes or the aggregate principal amount of such Additional
Notes. The Company will issue Notes only in registered form without coupons and
only in denominations of $1,000 and integral multiples of $1,000. The New Notes
will mature on July 1, 2009.
Interest on the Notes will accrue at the rate of 11 7/8% per annum and will
be payable semi-annually in arrears on January 1 and July 1, commencing on
January 1, 2000. The Company will make each interest payment to the Holders of
record on the immediately preceding December 15 and June 15.
Interest on the Notes will accrue from the date of original issuance or, if
interest has already been paid, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
METHODS OF RECEIVING PAYMENTS ON THE NOTES
If a Holder has given wire transfer instructions to the Company, the
Company will pay all principal, interest and premium, if any, on that Holder's
Notes in accordance with those instructions. All other payments on Notes will be
made at the office or agency of the Paying Agent and Registrar within the City
and State of New York unless the Company elects to make interest payments by
check mailed to the Holders at their addresses set forth in the register of
Holders.
PAYING AGENT AND REGISTRAR FOR THE NOTES
The Trustee will initially act as Paying Agent and Registrar. The Company
may change the Paying Agent or Registrar without prior notice to the Holders,
and the Company or any of its Subsidiaries may act as Paying Agent or Registrar.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents, and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. 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.
SUBSIDIARY GUARANTEES
The Guarantors will jointly and severally guarantee on an unconditional,
senior subordinated basis the Company's obligations under the Notes (each a
"Subsidiary Guarantee"). Each Subsidiary Guarantee will be subordinated to the
prior payment in full of all Senior Debt of that Guarantor. The obligations of
each
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Guarantor under its Subsidiary Guarantee will be limited as necessary to prevent
that Subsidiary Guarantee from constituting a fraudulent conveyance under
applicable law. See "Risk Factors -- Fraudulent Transfer Risks: Under Certain
Circumstances, a Court Could Cancel Our Obligations Under the Notes or the
Subsidiaries' Guarantees."
A Guarantor may not sell or otherwise dispose of all or substantially all
of its assets to, or consolidate with or merge with or into (whether or not such
Guarantor is the surviving Person), another Person, other than the Company or
another Guarantor, unless:
(1) immediately after giving effect to that transaction, no Default or
Event of Default exists; and
(2) either:
(a) the Person acquiring the property in any such sale or disposition or
the Person formed by or surviving any such consolidation or merger
assumes all the obligations of that Guarantor under the Indenture,
its Subsidiary Guarantee and the Registration Rights Agreement
pursuant to a supplemental indenture satisfactory to the Trustee; or
(b) the Net Proceeds of such sale or other disposition are applied in
accordance with the "Asset Sale" provisions of the Indenture.
The Subsidiary Guarantee of a Guarantor will be released:
(1) in connection with any sale or other disposition of all or
substantially all of the assets of that Guarantor (including by way of
merger or consolidation) to a Person that is not (either before or
after giving effect to such transaction) a Subsidiary of the Company,
if the Guarantor applies the Net Proceeds of that sale or other
disposition in accordance with the "Asset Sale" provisions of the
Indenture;
(2) in connection with any sale of all of the Capital Stock of a Guarantor
to a Person that is not (either before or after giving effect to such
transaction) a Subsidiary of the Company, if the Company applies the
Net Proceeds of that sale in accordance with the "Asset Sale"
provisions of the Indenture; or
(3) if the Company properly designates any Restricted Subsidiary that is a
Guarantor as an Unrestricted Subsidiary.
See "-- Repurchase at the Option of Holders -- Asset Sales."
SUBORDINATION
The payment of principal, interest and premium, if any, on the Notes will
be subordinated in right of payment, as set forth in the Indenture, to the prior
payment in full of all Senior Debt of the Company, including Senior Debt
incurred after the date of the Indenture.
The holders of Senior Debt of the Company or the Guarantors, as applicable,
will be entitled to receive payment in full of all Obligations due in respect of
Senior Debt (including interest after the commencement of any bankruptcy
proceeding at the rate specified in the applicable Senior Debt) before the
Holders of Notes will be entitled to receive any payment with respect to the
Notes and until all Obligations with respect to such applicable Senior Debt are
paid in full, any distribution to which the Holders of Notes would be entitled
shall be made to the Holders of Senior Debt (except that Holders of Notes may
receive and retain Permitted Junior Securities and payments made from the trust
described under "-- Legal Defeasance and Covenant Defeasance"), in the event of
any distribution to creditors of the Company of the Company or the Guarantors,
as applicable:
(1) in a liquidation or dissolution of the Company or the Guarantors, as
applicable;
(2) in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company or the Guarantors, as applicable or
its property;
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(3) in an assignment for the benefit of creditors; or
(4) in any marshalling of the Company's assets and liabilities.
The Company also may not make any payment in respect of the Notes (except
in Permitted Junior Securities or from the trust described under "-- Legal
Defeasance and Covenant Defeasance") if:
(1) a payment default on Designated Senior Debt occurs and is continuing
beyond any applicable grace period; or
(2) any other default occurs and is continuing on any series of Designated
Senior Debt that permits holders of that series of Designated Senior
Debt to accelerate its maturity and the Trustee receives a notice of
such default (a "Payment Blockage Notice") from the Company or the
holders of any Designated Senior Debt.
Payments on the Notes may and shall be resumed:
(1) in the case of a payment default, upon the date on which such default
is cured or waived; and
(2) in case of any other default, the earlier of the date on which such
default is cured or waived or 179 days after the date on which the
applicable Payment Blockage Notice is received, unless the maturity of
any Designated Senior Debt has been accelerated and such acceleration
has not been rescinded or waived.
No new Payment Blockage Notice may be delivered unless and until:
(1) 360 days have elapsed since the delivery of the immediately prior
Payment Blockage Notice; and
(2) all scheduled payments of principal, interest and premium, if any, on
the Notes that have come due have been paid in full in cash.
No default (other than a payment default) that existed or was continuing on
the date of delivery of any Payment Blockage Notice to the Trustee shall be, or
be made, the basis for a subsequent Payment Blockage Notice.
If the Trustee or any Holder of the Notes receives a payment in respect of
the Notes (except in Permitted Junior Securities or from the trust described
under "-- Legal Defeasance and Covenant Defeasance") when:
(1) the payment is prohibited by these subordination provisions; and
(2) the Trustee or the Holder has actual knowledge that the payment is
prohibited;
the Trustee or the Holder, as the case may be, shall hold the payment in trust
for the benefit of the holders of Senior Debt. Upon the proper written request
of the holders of Senior Debt, the Trustee or the Holder, as the case may be,
shall deliver the amounts in trust to the holders of Senior Debt or their proper
representative.
The Company must promptly notify holders of Senior Debt if payment of the
Notes is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event
of a bankruptcy, liquidation or reorganization of the Company or a Guarantor,
Holders of Notes may recover less ratably than creditors of the Company who are
holders of Senior Debt. See "Risk Factors -- The Notes and Guarantees Are
Unsecured Senior Subordinated Obligations."
OPTIONAL REDEMPTION
At any time prior to July 1, 2002, the Company may on any one or more
occasions redeem up to 35% of the aggregate principal amount of Notes issued
under the Indenture at a redemption price of 111.875%
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of the principal amount thereof, plus accrued and unpaid interest, if any, to
the redemption date, with the net cash proceeds of one or more Public Equity
Offerings; provided that:
(1) at least 65% of the aggregate principal amount of Notes (including any
Additional Notes) issued under the Indenture remains outstanding
immediately after the occurrence of such redemption (excluding Notes
held by the Company and its Subsidiaries); and
(2) the redemption must occur within 90 days of the date of the closing of
such Public Equity Offering.
Except pursuant to the preceding paragraph, the Notes will not be
redeemable at the Company's option prior to July 1, 2004.
After July 1, 2004, the Company may redeem all or a part of the Notes upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest, if any, thereon, to the applicable redemption date, if redeemed
during the twelve-month period beginning on July 1 of the years indicated below:
YEAR PERCENTAGE
---- ----------
2004........................................................ 105.9375%
2005........................................................ 103.9583%
2006........................................................ 101.9792%
2007 and thereafter......................................... 100.0000%
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
If a Change of Control occurs, each Holder of Notes will have the right to
require the Company to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of that Holder's Notes pursuant to a Change of
Control Offer on the terms set forth in the Indenture. In the Change of Control
Offer, the Company will offer a Change of Control Payment in cash equal to 101%
of the aggregate principal amount of Notes repurchased plus accrued and unpaid
interest, if any, thereon, to the date of repurchase. Within 30 days following
any Change of Control, the Company will mail a notice to each Holder describing
the transaction or transactions that constitute the Change of Control, which
offers to repurchase Notes on the Change of Control Payment Date specified in
such notice, which date shall be no earlier than 30 days and no later than 60
days from the date such notice is mailed, pursuant to the procedures required by
the Indenture and described in such notice. The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control. To the extent that the provisions of any securities laws or
regulations conflict with the Change of Control provisions of the Indenture, the
Company and its Restricted Subsidiaries will comply with the applicable
securities laws and regulations and will not be deemed to have breached their
respective obligations under the Change of Control provisions of the Indenture
by virtue of such conflict.
On the Change of Control Payment Date, the Company will, to the extent
lawful:
(1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of Control
Payment in respect of all Notes or portions thereof so tendered; and
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(3) deliver or cause to be delivered to the Trustee the Notes so accepted
together with an Officers' Certificate stating the aggregate principal
amount of Notes or portions thereof being repurchased by the Company.
The Paying Agent will promptly mail to each Holder of Notes so tendered the
Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unrepurchased portion of the Notes
surrendered, if any; provided that each such Note will be in a principal amount
of $1,000 or an integral multiple thereof.
Prior to complying with any of the provisions of the "Change of Control"
covenant, but in any event within 90 days following a Change of Control, the
Company will either repay all outstanding Senior Debt or obtain the requisite
consents, if any, under all agreements governing outstanding Senior Debt to
permit the repurchase of Notes required by the Change of Control covenant. The
Company will publicly announce the results of the Change of Control Offer on or
as soon as practicable after the Change of Control Payment Date.
The provisions described above that require the Company to make a Change of
Control Offer following a Change of Control will be applicable regardless of
whether any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the Holders of the Notes to require that the
Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
repurchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
The definition of Change of Control includes a phrase relating to the
direct or indirect sale, lease, transfer, conveyance or other disposition of
"all or substantially all" of the properties or assets of the Company and its
Restricted Subsidiaries taken as a whole. Although there is a limited body of
case law interpreting the phrase "substantially all," there is no precise
established definition of the phrase under applicable law. Accordingly, the
ability of a Holder of Notes to require the Company to repurchase such Notes as
a result of a sale, lease, transfer, conveyance or other disposition of less
than all of the assets of the Company and its Restricted Subsidiaries taken as a
whole to another Person or group may be uncertain.
Asset Sales
The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(1) the Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair
market value of the assets or Equity Interests issued or sold or
otherwise disposed of;
(2) such fair market value is determined by the Company's Board of
Directors and evidenced by a resolution of the Board of Directors set
forth in an Officers' Certificate delivered to the Trustee; and
(3) at least 75% of the consideration therefor received by the Company or
such Restricted Subsidiary is in the form of cash or Cash Equivalents.
For purposes of this provision, each of the following shall be deemed
to be cash:
(a) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet) of the Company or any
Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any
Subsidiary Guarantee) that are assumed by the transferee of any such
assets pursuant to a customary
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novation agreement that releases the Company or such Restricted
Subsidiary from further liability; and
(b) any securities, notes or other obligations received by the Company
or any such Restricted Subsidiary from such transferee that are
contemporaneously (subject to ordinary settlement periods) converted
by the Company or such Restricted Subsidiary into cash (to the
extent of the cash received in that conversion).
(1) to repay Senior Debt and, if the Senior Debt repaid is revolving credit
Indebtedness, to correspondingly reduce commitments with respect
thereto;
(2) to acquire all or substantially all of the assets of, or a majority of
the Voting Stock of, another Permitted Business;
(3) to make capital expenditures; and/or
(4) to acquire other long-term assets that are used or useful in a
Permitted Business.
Pending the final application of any such Net Proceeds, the Company may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million,
the Company will make an Asset Sale Offer to all Holders of Notes and all
holders of other Indebtedness that is pari passu with the Notes (including any
Additional Notes) containing provisions similar to those set forth in the
Indenture with respect to offers to repurchase or redeem with the proceeds of
sales of assets to repurchase the maximum principal amount of Notes (including
any Additional Notes) and such other pari passu Indebtedness that may be
repurchased out of the Excess Proceeds. The offer price in any Asset Sale Offer
will be equal to 100% of principal amount plus accrued and unpaid interest, if
any, to the date of repurchase, and will be payable in cash. If any Excess
Proceeds remain after consummation of an Asset Sale Offer, the Company may use
such Excess Proceeds for any purpose not otherwise prohibited by the Indenture.
If the aggregate principal amount of Notes (including any Additional Notes) and
such other pari passu Indebtedness tendered into such Asset Sale Offer exceeds
the amount of Excess Proceeds, the Trustee shall select the Notes (including any
Additional Notes) and such other pari passu Indebtedness to be repurchased on a
pro rata basis based on the principal amount of Notes and such other pari passu
Indebtedness tendered. Upon completion of each Asset Sale Offer, the amount of
Excess Proceeds shall be reset at zero.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with each
repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with the Asset Sales
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 under the Asset Sale provisions of the Indenture by virtue of such
conflict.
The agreements governing the Company's and the Guarantor's outstanding
Senior Debt currently prohibit the Company from purchasing any Notes, and also
provide that certain change of control or asset sale events with respect to the
Company would constitute a default under these agreements. Any future credit
agreements or other agreements relating to Senior Debt to which the Company
becomes a party may contain similar restrictions and provisions. In the event a
Change of Control or Asset Sale occurs at a time when the Company is prohibited
from purchasing Notes, the Company could seek the consent of its senior lenders
to the repurchase of Notes or could attempt to refinance the borrowings that
contain such prohibition. If the Company does not obtain such a consent or repay
such borrowings, the Company will remain prohibited from purchasing Notes. In
such case, the Company's failure to repurchase tendered Notes would constitute
an Event of Default under the Indenture which would, in turn, constitute a
default under such Senior Debt. In such circumstances, the subordination
provisions in the Indenture would likely restrict payments to the Holders of
Notes.
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SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, the Trustee
will select Notes for redemption as follows:
(1) if the Notes are listed, in compliance with the requirements of the
principal national securities exchange on which the Notes are listed;
or
(2) if the Notes are not so listed, on a pro rata basis, by lot or by such
method as the Trustee shall deem fair and appropriate.
No Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. Notices of redemption may not be conditional.
If any Note is to be redeemed in part only, the notice of redemption that
relates to that Note shall state the portion of the principal amount thereof to
be redeemed. A new Note in principal amount equal to the unredeemed portion of
the original Note will be issued in the name of the Holder thereof upon
cancellation of the original Note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date, interest ceases to
accrue on Notes or portions of them called for redemption.
CERTAIN COVENANTS
Restricted Payments
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or distribution
on account of the Company's or any of its Restricted Subsidiaries'
Equity Interests (including, without limitation, any payment in
connection with any merger or consolidation involving the Company or
any of its Restricted Subsidiaries) or to the direct or indirect
holders of the Company's or any of its Restricted Subsidiaries' Equity
Interests in their capacity as such (other than dividends or
distributions payable in Equity Interests (other than Disqualified
Stock) of the Company or payable to the Company or a Restricted
Subsidiary of the Company);
(2) purchase, redeem or otherwise acquire or retire for value (including,
without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company or any
direct or indirect parent of the Company (other than any such Equity
Interests owned by the Company or any Restricted Subsidiary of the
Company);
(3) make any payment on or with respect to, or repurchase, redeem, defease
or otherwise acquire or retire for value any Indebtedness that is
subordinated in right of payment to the Notes or the Subsidiary
Guarantees, except a payment of interest or principal at the Stated
Maturity thereof; or
(4) make any Restricted Investment (all such payments and other actions set
forth in clauses (1) through (4) above being collectively referred to
as "Restricted Payments"),
unless, at the time of and immediately after giving effect to such
Restricted Payment:
(1) no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof; and
(2) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant
to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of the covenant described below under the caption
"-- Incurrence of Indebtedness and Issuance of Preferred Stock"; and
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(3) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Indenture (excluding Restricted
Payments permitted by clauses (2), (3) and (4) of the next succeeding
paragraph), is less than the sum, without duplication, of:
(a) 50% of the Consolidated Net Income of the Company for the period
(taken as one accounting period) from the beginning of the first
fiscal quarter commencing after the date of the Indenture to the end
of the Company's most recently ended fiscal quarter for which
internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such
period is a deficit, less 100% of such deficit), plus
(b) 100% of the aggregate net cash proceeds received by the Company
after the date of the Indenture as a contribution to its common
equity capital or from the issue or sale of Equity Interests of the
Company (other than Disqualified Stock) or after the date of the
Indenture from the issue or sale of convertible or exchangeable
Disqualified Stock or convertible or exchangeable debt securities of
the Company that have been converted into or exchanged for such
Equity Interests (other than Equity Interests (or Disqualified Stock
or debt securities) sold to a Subsidiary of the Company), plus
(c) 50% of any cash dividends or other cash distributions received by
the Company or a Restricted Subsidiary after the Issue Date from an
Unrestricted Subsidiary, plus
(d) to the extent that any Restricted Investment that was made after the
date of the Indenture is sold for cash or Cash Equivalents or
otherwise liquidated or repaid for cash or Cash Equivalents, the
lesser of (i) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and
(ii) the initial amount of such Restricted Investment, plus
(e) $10.0 million.
So long as no Default has occurred and is continuing or would be caused
thereby, the preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would
have complied with the provisions of the Indenture;
(2) the redemption, repurchase, retirement, defeasance or other acquisition
of any subordinated Indebtedness of the Company or any Guarantor or of
any Equity Interests of the Company in exchange for, or out of the net
cash proceeds of the substantially concurrent sale (other than to a
Subsidiary of the Company) of, Equity Interests of the Company (other
than Disqualified Stock); provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from
clause (3)(b) of the preceding paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness of the Company or any Guarantor with the net
cash proceeds from an incurrence of Permitted Refinancing Indebtedness;
(4) the payment of any dividend by a Restricted Subsidiary of the Company
to the holders of its common Equity Interests on a pro rata basis;
(5) the repurchase, redemption, cancellation or other acquisition or
retirement for value of any Equity Interests of the Company or any
Restricted Subsidiary of the Company held by any member of the
Company's (or any of its Restricted Subsidiaries') management,
employees or directors pursuant to (i) any management, employee or
director equity subscription agreement or stock option agreement or
(ii) upon the death, disability or termination of employment of such
members of management, employees or directors; provided that the
aggregate price paid for all
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such purchased, redeemed, acquired or retired Equity Interests shall
not exceed $1,000,000 in any twelve-month period; and
(6) other Restricted Payments in an aggregate amount not to exceed $5.0
million since the date of the Indenture.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued to or by the Company or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any assets or securities that are required to be valued by this
covenant shall be determined by the Board of Directors whose resolution with
respect thereto shall be delivered to the Trustee. The Board of Directors'
determination must be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if the
fair market value exceeds $5.0 million. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this "Restricted Payments"
covenant were computed, together with a copy of any fairness opinion or
appraisal required by the Indenture.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt), and the Company will not issue any Disqualified Stock and will not permit
any of its Restricted Subsidiaries to issue any shares of preferred stock;
provided, however, that the Company may incur Indebtedness (including Acquired
Debt) or issue Disqualified Stock, and the Guarantors may incur Indebtedness
(including Acquired Debt) or issue preferred stock, if the Fixed Charge Coverage
Ratio for the Company's most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date on
which such additional Indebtedness is incurred or such Disqualified Stock or
preferred stock is issued or incurred would have been at least 2.0 to 1,
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred or the
preferred stock or Disqualified Stock had been issued, as the case may be, at
the beginning of such four-quarter period.
The first paragraph of this covenant will not prohibit the incurrence of
any of the following items of Indebtedness (collectively, "Permitted Debt"):
(1) the incurrence by the Company and any Guarantor of additional term
Indebtedness under Credit Facilities in an aggregate principal amount
at any one time outstanding under this clause (1) not to exceed $90.0
million less the aggregate amount of all repayments, optional or
mandatory, of the principal of any term Indebtedness under Credit
Facilities (other than repayments that are concurrently reborrowed)
that have actually been made since the date of the Indenture;
(2) the incurrence by the Company and any Guarantor of additional
revolving credit Indebtedness and letters of credit under Credit
Facilities in an aggregate principal amount at any one time
outstanding under this clause (2)(with letters of credit being deemed
to have a principal amount equal to the maximum potential liability of
the Company and its Restricted Subsidiaries thereunder) not to exceed
the greater of (a) $35.0 million less the aggregate amount of all Net
Proceeds of Asset Sales applied by the Company or any of its
Restricted Subsidiaries to repay any revolving credit Indebtedness
under Credit Facilities and effect a corresponding commitment
reduction thereunder pursuant to the covenant described above under
the caption "-- Repurchase at the Option of Holders -- Asset Sales" or
(b) the Borrowing Base;
(3) the incurrence by the Company or its Restricted Subsidiaries of the
Existing Indebtedness;
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(4) the incurrence by the Company and the Guarantors of Indebtedness
represented by the Notes (other than the Additional Notes) and the
related Subsidiary Guarantees to be issued on the date of the
Indenture and the Exchange Notes and the related Subsidiary Guarantees
to be issued pursuant to the Registration Rights Agreement;
(5) the incurrence by the Company or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage
financings or repurchase money obligations, in each case, incurred for
the purpose of financing all or any part of the repurchase price or
cost of construction or improvement of property, plant or equipment
used in the business of the Company or such Restricted Subsidiary, in
an aggregate principal amount, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any Indebtedness
incurred pursuant to this clause (5), not to exceed $10.0 million at
any time outstanding;
(6) the incurrence by the Company or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net
proceeds of which are used to refund, refinance or replace
Indebtedness (other than intercompany Indebtedness) that was permitted
by the Indenture to be incurred under the first paragraph of this
covenant or clauses (3), (4), (5), (6), (11) or (12) of this
paragraph;
(7) the incurrence by the Company or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among the Company and any of its
Wholly Owned Restricted Subsidiaries or between or among any Wholly
Owned Restricted Subsidiaries; provided, however, that:
(a) if the Company or any Guarantor is the obligor on such Indebtedness,
such Indebtedness must be expressly subordinated to the prior
payment in full in cash of all Obligations with respect to the
Notes, in the case of the Company, or the Subsidiary Guarantee, in
the case of a Guarantor; and
(b) (i) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than
the Company or a Restricted Subsidiary thereof and (ii) any sale or
other transfer of any such Indebtedness to a Person that is not
either the Company or a Wholly Owned Restricted Subsidiary thereof;
shall be deemed, in each case, to constitute an incurrence of such
Indebtedness by the Company or such Restricted Subsidiary, as the
case may be, that was not permitted by this clause (7);
(8) the incurrence by the Company or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or
hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Indenture to be
outstanding;
(9) the guarantee by the Company or any of the Guarantors of Indebtedness
of the Company or a Restricted Subsidiary of the Company that was
permitted to be incurred by another provision of this covenant;
(10) the accrual of interest, the accretion or amortization of original
issue discount, the payment of interest on any Indebtedness in the
form of additional Indebtedness with the same terms, and the payment
of dividends on Disqualified Stock in the form of additional shares of
the same class of Disqualified Stock will not be deemed to be an
incurrence of Indebtedness or an issuance of Disqualified Stock for
purposes of this covenant; provided, in each such case, that the
amount thereof is included in Fixed Charges of the Company as accrued;
(11) the incurrence by the Company or any of its Restricted Subsidiaries of
additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (11), not to exceed
$30.0 million; and
(12) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness
ceases to be Non-Recourse Debt of an Unrestricted
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Subsidiary, such event shall be deemed to constitute an incurrence of
Indebtedness by a Restricted Subsidiary of the Company that was not
permitted by this clause (12).
For purposes of determining compliance with this "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant, in the event that an
item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (1) through (12) above, or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company will be permitted to classify such item of Indebtedness on the date of
its incurrence, or later reclassify all or a portion of such item of
Indebtedness, in any manner that complies with this covenant. Indebtedness under
Credit Facilities outstanding on the date on which Notes are first issued and
authenticated under the Indenture shall be deemed to have been incurred on such
date in reliance on the exception provided by clauses (1) and (2) of the
definition of Permitted Debt.
No Senior Subordinated Debt
The Company will not incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is subordinate or junior in right of
payment to Indebtedness of the Company and senior in any respect in right of
payment to the Notes. No Guarantor will incur, create, issue, assume, guarantee
or otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to any Indebtedness of such Guarantor and senior in any respect
in right of payment to such Guarantor's Subsidiary Guarantee.
Liens
The Company will not, and will not permit any of its Subsidiaries to,
create, incur, assume or otherwise cause or suffer to exist or become effective
any Lien of any kind (other than Permitted Liens) upon any of their property or
assets, now owned or hereafter acquired, unless all payments due under the
Indenture and the New Notes are secured on an equal and ratable basis with the
obligations so secured until such time as such obligations are no longer secured
by a Lien.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock to
the Company or any of its Restricted Subsidiaries, or with respect to
any other interest or participation in, or measured by, its profits,
or pay any indebtedness owed to the Company or any of its Restricted
Subsidiaries;
(2) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
(3) transfer any of its properties or assets to the Company or any of its
Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) Existing Indebtedness as in effect on the date of the Indenture and
any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof,
provided that such amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacement or refinancings are
not materially more restrictive, taken as a whole, with respect to
such dividend and other payment restrictions than those contained in
such Existing Indebtedness, as in effect on the date of the Indenture;
(2) the Indenture, the Notes and the Subsidiary Guarantees;
(3) applicable law;
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(4) any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in contemplation of
such acquisition), which encumbrance or restriction is not applicable
to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired,
provided that, in the case of Indebtedness, such Indebtedness was
permitted by the terms of the Indenture to be incurred;
(5) customary non-assignment provisions in leases, licenses and similar
agreements entered into in the ordinary course of business and
consistent with past practices;
(6) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so
acquired of the nature described in clause (3) of the preceding
paragraph;
(7) any agreement for the sale or other disposition of a Restricted
Subsidiary that restricts distributions by that Restricted Subsidiary
pending its sale or other disposition;
(8) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are not materially more restrictive, taken as a whole,
than those contained in the agreements governing the Indebtedness
being refinanced;
(9) Liens securing Indebtedness that limit the right of the Company or any
of its Restricted Subsidiaries to dispose of the assets subject to
such Lien;
(10) provisions with respect to the disposition or distribution of assets
or property in joint venture agreements, assets sale agreements, stock
sale agreements and other similar agreements entered into in the
ordinary course of business; and
(11) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of
business.
Merger, Consolidation or Sale of Assets
The Company may not, directly or indirectly: (1) consolidate or merge with
or into another Person (whether or not the Company is the surviving
corporation); or (2) sell, assign, transfer, convey or otherwise dispose of all
or substantially all of the properties or assets of the Company and its
Restricted Subsidiaries taken as a whole, in one or more related transactions,
to another Person; unless:
(1) either: (a) the Company is the surviving corporation; or (b) the Person
formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, conveyance or
other disposition shall have been made is a corporation organized or
existing under the laws of the United States, any state thereof or the
District of Columbia;
(2) the Person formed by or surviving any such consolidation or merger (if
other than the Company) or the Person to which such sale, assignment,
transfer, conveyance or other disposition shall have been made assumes
all the obligations of the Company under the Notes, the Indenture and
the Registration Rights Agreement pursuant to a supplemental indenture
reasonably satisfactory to the Trustee;
(3) immediately after such transaction no Default or Event of Default
exists; and
(4) the Company or the Person formed by or surviving any such consolidation
or merger (if other than the Company), or to which such sale,
assignment, transfer, conveyance or other disposition shall have been
made:
(a) will have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of the Company
immediately preceding the transaction; and
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(b) will, on the date of such transaction after giving pro forma effect
thereto and any related financing transactions as if the same had
occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of the covenant described above under the caption
"-- Incurrence of Indebtedness and Issuance of Preferred Stock."
In addition, the Company may not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related
transactions, to any other Person. This "Merger, Consolidation or Sale of
Assets" covenant will not apply to a sale, assignment, transfer, conveyance or
other disposition of assets between or among the Company and any of its Wholly
Owned Restricted Subsidiaries.
Upon the occurrence of any transaction described above in which the Company
is not the continuing corporation, the successor corporation formed by such a
consolidation or into which the Company is merged or to which such transfer is
made will succeed to, and be substituted for, and may exercise every right and
power of, the Company under the Indenture and the Notes with the same effect as
if such successor corporation had been named as the Company therein.
Transactions with Affiliates
The Company will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would
have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person; and
(2) the Company delivers to the Trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess
of $1.0 million, a resolution of the Board of Directors set forth in
an Officers' Certificate certifying that such Affiliate Transaction
or series of Affiliate Transactions complies with this covenant and
that such Affiliate Transaction has been approved by a majority of
the disinterested members of the Board of Directors; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess
of $5.0 million, an opinion as to the fairness to the Holders of
such Affiliate Transaction from a financial point of view issued by
an accounting, appraisal or investment banking firm of national
standing.
The following items shall not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) any employment agreement entered into by the Company or any of its
Restricted Subsidiaries in the ordinary course of business and
consistent with the past practice of the Company or such Restricted
Subsidiary;
(2) transactions between or among the Company and/or its Restricted
Subsidiaries;
(3) payment of reasonable directors fees to Persons who are not otherwise
Affiliates of the Company;
(4) sales of Equity Interests (other than Disqualified Stock) to Affiliates
of the Company;
(5) so long as no Default or Event of Default has occurred and is
continuing, the payment of customary management fees and expenses
pursuant to the management agreement between Fremont Partners L.L.C.
and the Company, as amended from time to time, and transaction fees and
related expenses to the Principal or its Affiliates consistent with
past practices, including,
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without limitation, in connection with acquisitions, divestitures,
investments or financings by the Company or any of its Restricted
Subsidiaries; provided that the amount of management fees payable under
such management agreement will not exceed $325,000 during any
twelve-month period, which amount may be reasonably increased to
reflect a material increase in the size of the Company as a result of
an acquisition;
(6) Restricted Payments that are permitted by the provisions of the
Indenture described above under the caption "-- Restricted Payments;"
and
(7) maintenance in the ordinary course of business of benefit programs or
loan arrangements for employees, officers or directors of the Company
or any Restricted Subsidiary, including vacation plans, health and life
insurance plans, deferred compensation plans and retirement or savings
plans and similar plans.
Additional Subsidiary Guarantees
If the Company or any of its Subsidiaries acquires or creates another
Domestic Subsidiary after the date of the Indenture, then that newly acquired or
created Domestic Subsidiary must become a Guarantor and execute a supplemental
indenture and deliver an Opinion of Counsel to the Trustee within 10 Business
Days of the date on which it was acquired or created; provided that a Domestic
Subsidiary with assets with a fair market value of less than $1,000 shall not be
required to become a Subsidiary Guarantor and execute such a supplemental
indenture until such time as it shall have assets with a fair market value of at
least $1,000. This requirement shall not apply to any Subsidiaries that have
properly been designated as Unrestricted Subsidiaries in accordance with the
Indenture for so long as they continue to constitute Unrestricted Subsidiaries.
If any Subsidiary that is not a Guarantor at any time Guarantees Indebtedness of
the Company or a Guarantor, the Company will cause such Subsidiary to
simultaneously execute and deliver a supplemental Indenture providing for the
Guarantee of the payment of the Notes by such Subsidiary.
Designation of Restricted and Unrestricted Subsidiaries
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default. If a
Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate
fair market value of all outstanding Investments owned by the Company and its
Restricted Subsidiaries in the Subsidiary so designated will be deemed to be an
Investment made as of the time of such designation and will either reduce the
amount available for Restricted Payments under the first paragraph of the
covenant described above under the caption "-- Restricted Payments" or reduce
the amount available for future Investments under one or more clauses of the
definition of Permitted Investments, as the Company shall determine. That
designation will only be permitted if such Investment would be permitted at that
time and if such Restricted Subsidiary otherwise meets the definition of an
Unrestricted Subsidiary. The Board of Directors may redesignate any Unrestricted
Subsidiary to be a Restricted Subsidiary if the redesignation would not cause a
Default.
Limitation on Issuances and Sales of Equity Interests in Wholly Owned
Subsidiaries
The Company will not, and will not permit any of its Restricted
Subsidiaries to, transfer, convey, sell, lease or otherwise dispose of any
Equity Interests in any Wholly Owned Restricted Subsidiary of the Company to any
Person (other than the Company or a Wholly Owned Restricted Subsidiary of the
Company), unless:
(1) such transfer, conveyance, sale, lease or other disposition is of all
the Equity Interests in such Wholly Owned Restricted Subsidiary; and
(2) the cash Net Proceeds from such transfer, conveyance, sale, lease or
other disposition are applied in accordance with the covenant described
above under the caption "-- Repurchase at the Option of
Holders -- Asset Sales."
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In addition, the Company will not permit any Wholly Owned Restricted
Subsidiary of the Company to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to the Company or a Wholly Owned Restricted
Subsidiary of the Company.
Business Activities
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses, except to such extent as
would not be material to the Company and its Restricted Subsidiaries taken as a
whole.
Payments for Consent
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration to or for the benefit of any Holder of Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the Notes unless such consideration is offered to be paid
and is paid to all Holders of the Notes that consent, waive or agree to amend in
the time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
Reports
Whether or not required by the Commission, so long as any Notes are
outstanding, the Company will furnish to the Holders of Notes, within the time
periods specified in the Commission's rules and regulations:
(1) all quarterly and annual financial information that would be required
to be contained in a filing with the Commission on Forms 10-Q and 10-K
if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and, with respect to the annual information
only, a report on the annual financial statements by the Company's
certified independent accountants; and
(2) all current reports that would be required to be filed with the
Commission on Form 8-K if the Company were required to file such
reports.
If the Company has designated any of its Subsidiaries as Unrestricted
Subsidiaries, then the quarterly and annual financial information required by
the preceding paragraph shall include a reasonably detailed presentation, either
on the face of the financial statements or in the footnotes thereto, and in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, of the financial condition and results of operations of the Company
and its Restricted Subsidiaries separate from the financial condition and
results of operations of the Unrestricted Subsidiaries of the Company.
In addition, following the consummation of the exchange offer contemplated
by the Registration Rights Agreement, whether or not required by the Commission,
the Company will file a copy of all of the information and reports referred to
in clauses (1) and (2) above with the Commission for public availability within
the time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In addition, the
Company and the Subsidiary Guarantors have agreed that, for so long as any Notes
remain outstanding, they will furnish to the Holders and to securities analysts
and prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on the Notes
whether or not prohibited by the subordination provisions of the
Indenture;
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(2) default in payment when due of the principal of, or premium, if any, on
the Notes whether or not prohibited by the subordination provisions of
the Indenture;
(3) failure by the Company or any of its Restricted Subsidiaries to comply
with the provisions described under the captions "-- Repurchase at the
Option of Holders -- Change of Control," or "-- Repurchase at the
Option of Holders -- Asset Sales," or "-- Certain Covenants -- Merger,
Consolidation or Sale of Assets;"
(4) failure by the Company or any of its Restricted Subsidiaries for 60
days after notice to comply with any of the other agreements in the
Indenture;
(5) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or
any of its Restricted Subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the date of the Indenture, if
that default:
(a) is caused by a failure to pay principal of, or interest or premium,
if any, on such Indebtedness prior to the expiration of the grace
period provided in such Indebtedness on the date of such default (a
"Payment Default"); or
(b) results in the acceleration of such Indebtedness prior to its
express maturity,
and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under
which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $7.5 million or more;
(6) failure by the Company or any of its Restricted Subsidiaries to pay
final judgments aggregating in excess of $7.5 million, which judgments
are not paid, discharged or stayed for a period of 60 days;
(7) except as permitted by the Indenture, any Subsidiary Guarantee shall be
held in any judicial proceeding to be unenforceable or invalid or shall
cease for any reason to be in full force and effect or any Guarantor,
or any Person acting on behalf of any Guarantor, shall deny or
disaffirm its obligations under its Subsidiary Guarantee; and
(8) certain events of bankruptcy or insolvency with respect to the Company
or any of its Significant Restricted Subsidiaries.
In the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company or any Significant
Restricted Subsidiary, all outstanding Notes will become due and payable
immediately without further action or notice. If any other Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Notes may declare all the Notes to be
due and payable immediately.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
In the case of any Event of Default occurring by reason of any willful
action or inaction taken or not taken by or on behalf of the Company with the
intention of avoiding payment of the premium that the
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Company would have had to pay if the Company then had elected to redeem the
Notes pursuant to the optional redemption provisions of the Indenture, an
equivalent premium shall also become and be immediately due and payable to the
extent permitted by law upon the acceleration of the Notes. If an Event of
Default occurs prior July 1, 2004, by reason of any willful action (or inaction)
taken (or not taken) by or on behalf of the Company with the intention of
avoiding the prohibition on redemption of the Notes prior to July 1, 2004, then
the premium specified in the Indenture shall also become immediately due and
payable to the extent permitted by law upon the acceleration of the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture. Upon becoming aware of any Default or
Event of Default, the Company is required to deliver to the Trustee a statement
specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No past, present or future director, officer, employee, incorporator,
affiliate, or stockholder of the Company or any Guarantor, as such, shall have
any liability for any obligations of the Company or the Guarantors 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 of
Notes by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes. The waiver may
not be effective to waive liabilities under the federal securities laws.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes and all obligations
of the Guarantors discharged with respect to their Subsidiary Guarantees ("Legal
Defeasance") except for:
(1) the rights of Holders of outstanding Notes to receive payments in
respect of the principal of, or interest, premium, if any, outstanding
on such Notes when such payments are due from the trust referred to
below;
(2) the Company's obligations with respect to the Notes concerning issuing
temporary Notes, registration of Notes, mutilated, destroyed, lost or
stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the Trustee, and
the Company's and the Guarantor's obligations in connection therewith;
and
(4) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have
the obligations of the Company and any Guarantor released with respect to
certain covenants that are described in the Indenture ("Covenant Defeasance")
and thereafter any omission to comply with those covenants shall not constitute
a Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the Notes
and the Subsidiary Guarantees will be released.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) the Company must irrevocably deposit or cause to be deposited with the
Trustee, in trust, for the benefit of the Holders of the Notes, cash in
U.S. dollars, non-callable Government Securities, or a combination
thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay
the principal of, or interest or premium, if any, on the outstanding
Notes on the stated maturity or on the applicable redemption date, as
the case may be, and the Company must specify whether the Notes are
being defeased to maturity or to a particular redemption date;
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(2) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee an Opinion of Counsel reasonably acceptable to the Trustee
confirming that (a) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (b) since the
date of the Indenture, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(3) in the case of Covenant Defeasance, the Company shall have delivered to
the Trustee an Opinion of Counsel reasonably acceptable to the Trustee
confirming that the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of
such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would
have been the case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be continuing
either: (a) on the date of such deposit (other than a Default or Event
of Default resulting from the borrowing of funds to be applied to such
deposit); or (b) or insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on
the 91st day after the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the Indenture) to which the Company
or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries is bound;
(6) the Company must have delivered to the Trustee an Opinion of Counsel to
the effect that, assuming no intervening bankruptcy of the Company or
any Guarantor between the date of deposit and the 91st day following
the deposit and assuming that no Holder is an "insider" of the Company
under applicable bankruptcy law, after the 91st day following the
deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally;
(7) the Company must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders of Notes over the other creditors of the Company
or with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and
(8) the Company must deliver to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent relating
to the Legal Defeasance or the Covenant Defeasance have been complied
with.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next three succeeding paragraphs, the Indenture
or the Notes may be amended or supplemented with the consent of the Holders of
at least a majority in principal amount of the Notes (including any Additional
Notes) then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes),
and any existing default or noncompliance with any provision of the Indenture,
the Notes and the Subsidiary Guarantees may be waived with the consent of the
Holders of a majority in principal amount of the then-outstanding Notes
(including any Additional Notes) (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange offer
for, Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder):
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(1) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any Note or
alter the provisions with respect to the redemption of the Notes at the
option of the Company (other than provisions relating to the covenants
described above under the caption "-- Repurchase at the Option of
Holders");
(3) reduce the rate of or change the time for payment of interest on any
Note;
(4) waive a Default or Event of Default in the payment of principal of, or
interest or premium, if any, on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the Notes and a waiver of the payment
default that resulted from such acceleration);
(5) make any Note payable in money other than that stated in the Notes;
(6) make any change in the provisions of the Indenture relating to waivers
of past Defaults or Events of Default or the rights of Holders of Notes
to receive payments of principal of, or interest or premium, if any, on
the Notes;
(7) waive a redemption payment with respect to any Note (other than a
payment required by one of the covenants described above under the
caption "-- Repurchase at the Option of Holders");
(8) release any Guarantor from any of its obligations under its Subsidiary
Guarantee or the Indenture, except in accordance with the terms of the
Indenture; or
(9) make any change in the preceding amendment and waiver provisions.
In addition, any amendment to, or waiver of, the provisions of the
Indenture relating to subordination that adversely affects the rights of the
Holders of the Notes will require the consent of the Holders of at least 75% in
aggregate principal amount of Notes then outstanding.
Notwithstanding the preceding, without the consent of any Holder of Notes,
the Company, the Guarantors and the Trustee may amend or supplement the
Indenture, the Notes or the Subsidiary Guarantees:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(3) to provide for the assumption of the Company's or any Guarantor's
obligations to Holders of Notes in the case of a merger or
consolidation or sale of all or substantially all of the Company's
assets;
(4) to provide for the issuance of Additional Notes in accordance with the
limitations set forth in the Indenture on the Issue Date;
(5) to make any change that would provide any additional rights or benefits
to the Holders of Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder; or
(6) to comply with requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture
Act.
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SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect as
to all Notes issued thereunder, when:
(1) either:
(a) all Notes that have been authenticated (except lost, stolen or
destroyed Notes that have been replaced or paid and Notes for whose
payment money has theretofore been deposited in trust and thereafter
repaid to the Company) have been delivered to the Trustee for
cancellation; or
(b) all Notes that have not been delivered to the Trustee for
cancellation have become due and payable by reason of the making of
a notice of redemption or otherwise or will become due and payable
within one year and the Company or any Guarantor has irrevocably
deposited or caused to be deposited with the Trustee as trust funds
in trust solely for the benefit of the Holders, cash in U.S.
dollars, non-callable Government Securities, or a combination
thereof, in such amounts as will be sufficient without consideration
of any reinvestment of interest, to pay and discharge the entire
indebtedness on the Notes not delivered to the Trustee for
cancellation for principal, premium, if any, and accrued interest to
the date of maturity or redemption;
(2) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit or shall occur as a result of such deposit and
such deposit will not result in a breach or violation of, or constitute
a default under, any other instrument to which the Company or any
Guarantor is a party or by which the Company or any Guarantor is bound;
(3) the Company or any Guarantor has paid or caused to be paid all sums
payable by it under the Indenture; and
(4) the Company has delivered irrevocable instructions to the Trustee under
the Indenture to apply the deposited money toward the payment of the
Notes at maturity or the redemption date, as the case may be.
In addition, the Company must deliver an Officers' Certificate and an Opinion of
Counsel to the Trustee stating that all conditions precedent to satisfaction and
discharge have been satisfied.
CONCERNING THE TRUSTEE
If the Trustee becomes a creditor of the Company or any Guarantor, the
Indenture and the provisions of the Trust Indenture Act limit its right to
obtain payment of claims in certain cases, or to realize on certain property
received in respect of any such claim as security or otherwise. The Trustee will
be permitted to engage in other transactions; however, if it acquires any
conflicting interest it must eliminate such conflict within 90 days, apply to
the Commission for permission to continue or resign.
The Holders of a majority in aggregate principal amount of the
then-outstanding Notes (including Additional Notes) will have the right to
direct the time, method and place of conducting any proceeding for exercising
any remedy available to the Trustee, subject to certain exceptions. The
Indenture provides that in case an Event of Default shall occur and be
continuing, the Trustee will be required, in the exercise of its power, to use
the degree of care of a prudent man in the conduct of his own affairs. Subject
to such provisions, the Trustee will be under no obligation to exercise any of
its rights or powers under the Indenture at the request of any Holder of Notes,
unless such Holder shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to Juno Lighting, Inc.,
1300 South Wolf Road, Des Plaines, Illinois 60018, Attn: George Bilek.
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BOOK-ENTRY, DELIVERY AND FORM
The Notes initially will be or are represented by one or more Notes in
registered, global form without interest coupons (collectively, the "Global
Notes"). The Global Notes will be or have been deposited upon issuance with the
Trustee as custodian for The Depository Trust Company ("DTC"), in New York, New
York, and registered in the name of DTC or its nominee, in each case for credit
to an account of a direct or indirect participant in DTC as described below.
Except as set forth below, the Global Notes may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for Notes
in certificated form except in the limited circumstances described below. See
"-- Exchange of Global Notes for Certificated Notes." Except in the limited
circumstances described below, owners of beneficial interests in the Global
Notes will not be entitled to receive physical delivery of Notes in certificated
form.
Initially, the Trustee will act as Paying Agent and Registrar. The Notes
may be presented for registration of transfer and exchange at the offices of the
Registrar.
DEPOSITORY PROCEDURES
The following description of the operations and procedures of DTC are
provided solely as a matter of convenience. These operations and procedures are
solely within the control of the respective settlement systems and are subject
to changes by them. The Company takes no responsibility for these operations and
procedures and urges investors to contact the system or their participants
directly to discuss these matters.
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic
book-entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interests in, and transfers of ownership interests
in, each security held by or on behalf of DTC are recorded on the records of the
Participants and Indirect Participants.
DTC has also advised the Company that, pursuant to procedures established
by it:
(1) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the Initial Purchasers with portions of the
principal amount of the Global Notes; and
(2) ownership of these interests in the Global Notes will be shown on, and
the transfer of ownership thereof will be effected only through,
records maintained by DTC (with respect to the Participants) or by the
Participants and the Indirect Participants (with respect to other
owners of beneficial interest in the Global Notes).
All ownership interests in a Global Note may be subject to the procedures
and requirements of DTC. The laws of some states require that certain Persons
take physical delivery in definitive form of securities that they own.
Consequently, the ability to transfer beneficial interests in a Global Note to
such Persons will be limited to that extent. Because DTC can act only on behalf
of Participants, which in turn act on behalf of Indirect Participants and
certain banks, the ability of a Person having beneficial interests in a Global
Note to pledge such interests to Persons that do not participate in the DTC
system, or otherwise take actions in respect of such interests, may be affected
by the lack of a physical certificate evidencing such interests.
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EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
"HOLDERS" THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of, and interest, premium and
Liquidated Damages, if any, on a Global Note registered in the name of DTC or
its nominee will be payable to DTC in its capacity as the registered Holder
under the Indenture. Under the terms of the Indenture, the Company and the
Trustee will treat the Persons in whose names the Notes, including the Global
Notes, are registered as the owners thereof for the purpose of receiving
payments and for all other purposes. Consequently, neither the Company, the
Trustee nor any agent of the Company or the Trustee has or will have any
responsibility or liability for:
(1) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of
beneficial ownership interest in the Global Notes or for maintaining,
supervising or reviewing any of DTC's records or any Participant's or
Indirect Participant's records relating to the beneficial ownership
interests in the Global Notes; or
(2) any other matter relating to the actions and practices of DTC or any of
its Participants or Indirect Participants.
DTC has advised the Company that its current practice, upon receipt of any
payment in respect of securities such as the Notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date unless DTC has reason to believe it will not receive
payment on such payment date. Each relevant Participant is credited with an
amount proportionate to its beneficial ownership of an interest in the principal
amount of the relevant security as shown on the records of DTC. Payments by the
Participants and the Indirect Participants to the beneficial owners of Notes
will be governed by standing instructions and customary practices and will be
the responsibility of the Participants or the Indirect Participants and will not
be the responsibility of DTC, the Trustee or the Company. Neither the Company
nor the Trustee will be liable for any delay by DTC or any of its Participants
in identifying the beneficial owners of the Notes, and the Company and the
Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds, transfers between
Indirect Participants who hold an interest through a Participant will be
effected in accordance with the procedures of such Participant but generally
will settle in immediately available funds.
DTC has advised the Company that it will take any action permitted to be
taken by a Holder of Notes only at the direction of one or more Participants to
whose account DTC has credited the interests in the Global Notes and only in
respect of such portion of the aggregate principal amount of the Notes as to
which such Participant or Participants has or have given such direction.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Notes among participants in DTC, they are under no
obligation to perform or to continue to perform such procedures, and may
discontinue such procedures at any time. Neither the Company nor the Trustee nor
any of their respective agents will have any responsibility for the performance
by DTC or their respective participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
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EXCHANGE OF GLOBAL NOTES FOR CERTIFICATED NOTES
A Global Note is exchangeable for definitive Notes in registered
certificated form ("Certificated Notes") if:
(1) DTC (a) notifies the Company that it is unwilling or unable to continue
as depositary for the Global Notes and the Company fails to appoint a
successor depositary or (b) has ceased to be a clearing agency
registered under the Exchange Act;
(2) the Company, at its option, notifies the Trustee in writing that it
elects to cause the issuance of the Certificated Notes; or
(3) there shall have occurred and be continuing a Default or Event of
Default with respect to the Notes.
In addition, beneficial interests in a Global Note may be exchanged for
Certificated Notes upon prior written notice given to the Trustee by or on
behalf of DTC in accordance with the Indenture. In all cases, Certificated Notes
delivered in exchange for any Global Note or beneficial interests in Global
Notes will be registered in the names, and issued in any approved denominations,
requested by or on behalf of the depositary (in accordance with its customary
procedures) and will bear the applicable restrictive legend referred to in
"Notice to Investors," unless that legend is not required by applicable law.
Neither the Company nor the Trustee will be liable for any delay by the
holder of the Global Note or DTC in identifying the beneficial owners of Notes,
and the Company and the Trustee may conclusively rely on and will be protected
in relying on instructions from Holders of the Global Note or DTC for all
purposes.
EXCHANGE OF CERTIFICATED NOTES FOR GLOBAL NOTES
Certificated Notes may not be exchanged for beneficial interests in any
Global Note unless the transferor first delivers to the Trustee a written
certificate (in the form provided in the Indenture) to the effect that such
transfer will comply with the appropriate transfer restrictions applicable to
such Notes.
SAME DAY SETTLEMENT AND PAYMENT
The Company will make payments in respect of the Notes represented by the
Global Notes (including principal, premium, if any, and interest, if any) by
wire transfer of immediately available funds to the accounts specified by the
Global Note Holder. The Company will make all payments of principal, interest
and premium, if any, with respect to Certificated Notes by wire transfer of
immediately available funds to the accounts specified by the Holders thereof or,
if no such account is specified, by mailing a check to each such Holder's
registered address. The Notes represented by the Global Notes are expected to be
eligible to trade in the PORTAL market and to trade in DTC's Same-Day Funds
Settlement System, and any permitted secondary market trading activity in such
Notes will, therefore, be required by DTC to be settled in immediately available
funds. The Company expects that secondary trading in any Certificated Notes will
also be settled in immediately available funds.
REGISTRATION RIGHTS; ADDITIONAL INTEREST
The following description is a summary of the material provisions of the
Registration Rights Agreement. It does not restate that agreement in its
entirety and is qualified by reference to all the provisions of the Registration
Rights Agreement, a copy of which is filed as an exhibit to the Registration
Statement of which this prospectus is a part.
The Company, the Guarantors and the Initial Purchasers entered into the
Registration Rights Agreement on the closing of the offering of the old Notes.
Pursuant to the Registration Rights Agreement, the Company and the Guarantors
agreed to file with the Commission the registration statement of which this
prospectus is a part (the "Exchange Offer Registration Statement"). Upon the
effectiveness of the Exchange Offer Registration Statement, the Company and the
Guarantors will offer to the Holders of
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Transfer Restricted Securities pursuant to the Exchange Offer who are able to
make certain representations the opportunity to exchange their Transfer
Restricted Securities for new Notes.
If:
(1) the Company and the Guarantors are not
(a) required to file the Exchange Offer Registration Statement; or
(b) permitted to consummate the Exchange Offer because the Exchange
Offer is not permitted by applicable law or Commission policy; or
(2) any Holder of Transfer Restricted Securities notifies the Company prior
to the 20th day following consummation of the Exchange Offer that:
(a) it is prohibited by law or Commission policy from participating in
the Exchange Offer; or
(b) that it may not resell the new Notes acquired by it in the Exchange
Offer to the public without delivering a prospectus and the
prospectus contained in the Exchange Offer Registration Statement is
not appropriate or available for such resales; or
(c) that it is a broker-dealer and owns old Notes acquired directly from
the Company or an affiliate of the Company,
the Company and the Guarantors will file with the Commission a Shelf
Registration Statement to cover resales of the old Notes by the Holders thereof
who satisfy certain conditions relating to the provision of information in
connection with the Shelf Registration Statement.
The Company and the Guarantors will use their reasonable best efforts to
cause the applicable registration statement to be declared effective as promptly
as possible by the Commission.
For purposes of the preceding, "Transfer Restricted Securities" means each
old Note until the earlier of:
(1) the date on which such old Note has been exchanged by a Person other
than a broker-dealer for a new Note in the Exchange Offer;
(2) following the exchange by a broker-dealer in the Exchange Offer of an
old Note for a new Note, the date on which such new Note is sold to a
purchaser who receives from such broker-dealer on or prior to the date
of such sale a copy of the prospectus contained in the Exchange Offer
Registration Statement;
(3) the date on which such old Note has been effectively registered under
the Securities Act and disposed of in accordance with the Shelf
Registration Statement; or
(4) the date on which such old Note is distributed to the public pursuant
to Rule 144 under the Securities Act.
The Registration Rights Agreement provides:
(1) the Company and the Guarantors will file an Exchange Offer Registration
Statement with the Commission on or prior to 60 days after the closing
of this offering;
(2) the Company and the Guarantors will use their reasonable best efforts
to have the Exchange Offer Registration Statement declared effective by
the Commission on or prior to 150 days after the closing of this
offering;
(3) unless the Exchange Offer would not be permitted by applicable law or
Commission policy, the Company and the Guarantors will
(a) commence the Exchange Offer; and
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(b) use their reasonable best efforts to issue on or prior to 30
business days, or longer, if required by the federal securities
laws, after the date on which the Exchange Offer Registration
Statement was declared effective by the Commission, new Notes in
exchange for all old Notes tendered prior thereto in the Exchange
Offer; and
(4) if obligated to file the Shelf Registration Statement, the Company and
the Guarantors will use their reasonable best efforts to file the Shelf
Registration Statement with the Commission on or prior to 60 days after
such filing obligation arises and to cause the Shelf Registration to be
declared effective by the Commission on or prior to 150 days after such
obligation arises.
If:
(1) the Company and the Guarantors fail to file any of the registration
statements required by the Registration Rights Agreement on or before
the date specified for such filing; or
(2) any of such registration statements is not declared effective by the
Commission on or prior to the date specified for such effectiveness
(the "Effectiveness Target Date"); or
(3) the Company and the Guarantors fail to consummate the Exchange Offer
within 30 business days of the Effectiveness Target Date with respect
to the Exchange Offer Registration Statement; or
(4) the Shelf Registration Statement or the Exchange Offer Registration
Statement is declared effective but thereafter ceases to be effective
or usable in connection with resales of Transfer Restricted Securities
during the periods specified in the Registration Rights Agreement (each
such event referred to in clauses (1) through (4) above, a
"Registration Default"),
then the Company will pay as liquidated damages for such Registration Default,
additional interest to each Holder of Notes ("Additional Interest"), which shall
accrue at a rate of 0.5% per annum during the first 90-day period immediately
following the occurrence of the first Registration Default.
The rate of accrual of Additional Interest will increase by an additional
0.5% per annum with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum rate of Additional
Interest of 2.0% per annum.
All accrued Additional Interest will be paid by the Company and the
Guarantors on each Interest Payment Date to the Global Note Holder by wire
transfer of immediately available funds or by federal funds check and to Holders
of Certificated Notes by wire transfer to the accounts specified by them or by
mailing checks to their registered addresses if no such accounts have been
specified. All references herein and in the Indenture to "interest" payable on
the old Notes shall be deemed to include any Additional Interest that may become
due and payable on the old Notes.
Following the cure of all Registration Defaults, the accrual of Additional
Interest will cease.
Holders of old Notes are required to make certain representations to the
Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and are required to deliver certain
information to be used in connection with the Shelf Registration Statement and
to provide comments on the Shelf Registration Statement within the time periods
set forth in the Registration Rights Agreement in order to have their old Notes
included in the Shelf Registration Statement and benefit from the provisions
regarding Liquidated Damages set forth above. By acquiring Transfer Restricted
Securities, a Holder will be deemed to have agreed to indemnify the Company and
the Guarantors against certain losses arising out of information furnished by
such Holder in writing for inclusion in any Shelf Registration Statement.
Holders of old Notes are also be required to suspend their use of the prospectus
included in the Shelf Registration Statement under certain circumstances upon
receipt of written notice to that effect from the Company.
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CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other Person
is merged with or into or became a Subsidiary of such specified Person,
whether or not such Indebtedness is incurred in connection with, or in
contemplation of, such other Person merging with or into, or becoming a
Subsidiary of, such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a Person shall be deemed to be control. For purposes of this
definition, the terms "controlling," "controlled by" and "under common control
with" shall have correlative meanings.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights, (including, without limitation, by way of a sale and leaseback)
other than sales of inventory in the ordinary course of business
consistent with past practices; provided that the sale, conveyance or
other disposition of all or substantially all of the assets of the
Company and its Restricted Subsidiaries taken as a whole will be
governed by the provisions of the Indenture described above under the
caption "-- Repurchase at the Option of Holders -- Change of Control"
and/or the provisions described above under the caption "-- Certain
Covenants -- Merger, Consolidation or Sale of Assets" and not by the
provisions of the Asset Sale covenant; and
(2) the issuance of Equity Interests in any of the Company's Restricted
Subsidiaries or the sale of Equity Interests in any of its
Subsidiaries.
Notwithstanding the preceding, the following items shall not be deemed to
be Asset Sales:
(1) any single transaction or series of related transactions that involves
assets having a fair market value of less than $1.5 million;
(2) a transfer of assets between or among the Company and its Wholly Owned
Subsidiaries,
(3) an issuance of Equity Interests by a Wholly Owned Subsidiary to the
Company or to another Wholly Owned Subsidiary;
(4) the conveyance, transfer, assignment or other disposition of inventory
and other property in the ordinary course of business;
(5) the sale or other disposition of cash or Cash Equivalents; and
(6) a Restricted Payment or Permitted Investment that is permitted by the
covenant described above under the caption "-- Certain
Covenants -- Restricted Payments."
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire by conversion or
exercise of other securities, whether such right is currently exercisable or is
exercisable only upon the occurrence of a
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subsequent condition. The terms "Beneficially Owns" and "Beneficially Owned"
shall have a corresponding meaning.
"Board of Directors" means:
(1) with respect to a corporation, the board of directors of the
corporation;
(2) with respect to a partnership, the Board of Directors of the general
partner of the partnership; and
(3) with respect to any other Person, the board or committee of such Person
serving a similar function.
"Borrowing Base" means an amount equal to the sum of (i) 85% of the value
of accounts receivable (before giving effect to any related reserves) shown on
the Company's most recent consolidated balance sheet that are not more than 90
days past due in accordance with GAAP and (ii) 50% of the value of the inventory
shown on the Company's consolidated balance sheet in accordance with GAAP.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at that time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company, partnership
or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the right
to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is
pledged in support thereof) having maturities of not more than one year
from the date of acquisition;
(3) certificates of deposit and eurodollar time deposits with maturities of
six months or less from the date of acquisition, bankers' acceptances
with maturities not exceeding six months and overnight bank deposits,
in each case, with any domestic commercial bank having capital and
surplus in excess of $500.0 million and a Thomson Bank Watch Rating of
"B" or better;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3)
above entered into with any financial institution meeting the
qualifications specified in clause (3) above;
(5) commercial paper having at least a P1 rating obtainable from Moody's
Investors Service, Inc. or an A1 rating obtained from Standard & Poor's
Rating Services and in each case maturing within 270 days after the
date of acquisition; and
(6) money market funds at least 95% of the assets of which constitute Cash
Equivalents of the kinds described in clauses (1) through (5) of this
definition.
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"Change of Control" means the occurrence of any of the following:
(1) the direct or indirect sale, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of
related transactions, of all or substantially all of the assets of the
Company and its Restricted Subsidiaries taken as a whole to any
"person" (as that term is used in Section 13(d)(3) of the Exchange Act)
other than the Principal or an Affiliate of the Principal;
(2) the adoption of a plan relating to the liquidation or dissolution of
the Company;
(3) the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person" (as
defined above), other than the Principal and its Affiliates, becomes
the Beneficial Owner, directly or indirectly, of more than 50% of the
Voting Stock of the Company, measured by voting power rather than
number of shares; or
(4) the first day on which a majority of the members of the Board of
Directors of the Company are not Continuing Directors.
"Consolidated Cash Flow" means, with respect to any specified Person for
any period, the Consolidated Net Income of such Person for such period plus:
(1) an amount equal to any extraordinary loss plus any net loss realized by
such Person or any of its Subsidiaries in connection with an Asset
Sale, to the extent such losses were deducted in computing such
Consolidated Net Income; plus
(2) provision for taxes based on income or profits of such Person and its
Subsidiaries for such period, to the extent that such provision for
taxes was deducted in computing such Consolidated Net Income; plus
(3) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or
not capitalized (including, without limitation, amortization of debt
issuance costs and original issue discount, non-cash interest payments,
the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred
in respect of letter of credit or bankers' acceptance financings, and
net of the effect of all payments made or received pursuant to Hedging
Obligations), to the extent that any such expense was deducted in
computing such Consolidated Net Income; plus
(4) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses
that were paid in a prior period) and other non-cash expenses
(excluding any such non-cash expense to the extent that it represents
an accrual of or reserve for cash expenses in any future period or
amortization of a prepaid cash expense that was paid in a prior period)
of such Person and its Restricted Subsidiaries for such period to the
extent that such depreciation, amortization and other non-cash expenses
were deducted in computing such Consolidated Net Income;
provided that such Consolidated Net Income shall be reduced by non-cash
items increasing such Consolidated Net Income for such period, other
than the accrual of revenue in the ordinary course of business, in each
case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the preceding, the provision for taxes based on the income
or profits of, and the depreciation and amortization and other non-cash expenses
of, a Subsidiary of the Company shall be added to Consolidated Net Income to
compute Consolidated Cash Flow of the Company only to the extent that a
corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Subsidiary without prior governmental approval
(that has not been obtained), and without direct or indirect restriction
pursuant to the terms of its charter and all agreements, instruments,
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judgments, decrees, orders, statutes, rules and governmental regulations
applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any specified Person for
any period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that:
(1) the Net Income (but not loss) of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of accounting
shall be included only to the extent of the amount of dividends or
distributions paid in cash to the specified Person or a Wholly Owned
Subsidiary thereof;
(2) the Net Income of any Restricted Subsidiary shall be excluded to the
extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not
at the date of determination permitted without any prior governmental
approval (that has not been obtained) or, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders;
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall
be excluded;
(4) the cumulative effect of a change in accounting principles shall be
excluded; and
(5) the Net Income (but not loss) of any Unrestricted Subsidiary shall be
excluded, whether or not distributed to the specified Person or one of
its Subsidiaries.
"Consolidated Net Worth" means, with respect to any specified Person as of
any date, the sum of:
(1) the consolidated equity of the common stockholders of such Person and
its consolidated Subsidiaries as of such date; plus
(2) the respective amounts reported on such Person's balance sheet as of
such date with respect to any series of preferred stock (other than
Disqualified Stock) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out of
net earnings in respect of the year of such declaration and payment,
but only to the extent of any cash received by such Person upon
issuance of such preferred stock;
less (x) all write-ups (other than write-ups resulting from foreign
currency translations and write-ups of tangible assets of a
going-concern business made within 12 months after the acquisition of
such business) subsequent to the date of the Indenture in the book value
of any asset owned by such Person or Restricted Subsidiary of such
Person, (y) all investments as of such date in unconsolidated
Subsidiaries and in Persons that are not Subsidiaries (except, in each
case, Permitted Investments), and (z) all unamortized debt discount and
expense and unamortized deferred charges as of such date, all of the
foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who:
(1) was a member of such Board of Directors on the date of the Indenture;
or
(2) was nominated for election or elected to such Board of Directors with
the approval of a majority of the Continuing Directors who were members
of such Board at the time of such nomination or election.
"Credit Agreement" means that certain Credit Agreement, to be entered into
by and among the Company and NationsBank, N.A., and Credit Suisse First Boston,
providing for two senior secured term loan facilities in an aggregate principal
amount of $90.0 million and up to $35.0 million of revolving credit borrowings,
including any related notes, guarantees, collateral documents, instruments and
agreements
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executed in connection therewith, and in each case as amended, modified,
renewed, refunded, replaced or refinanced from time to time.
"Credit Facilities" means, one or more debt facilities (including, without
limitation, the Credit Agreement) or commercial paper facilities, in each case
with banks or other institutional lenders providing for revolving credit loans,
term loans, capital leases, receivables financing (including through the sale of
receivables to such lenders or to special purpose entities formed to borrow from
such lenders against such receivables) or letters of credit, in each case, as
amended, restated, modified, renewed, refunded, replaced or refinanced in whole
or in part from time to time.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Designated Senior Debt" means:
(1) any Indebtedness outstanding under the Credit Agreement; and
(2) any other Senior Debt permitted under the Indenture the principal
amount of which is $15.0 million or more and that has been designated
by the Company as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature. Notwithstanding the preceding sentence, any
Capital Stock that would constitute Disqualified Stock solely because the
holders thereof have the right to require the Company to repurchase such Capital
Stock upon the occurrence of a change of control or an asset sale shall not
constitute Disqualified Stock if the terms of such Capital Stock provide that
the Company may not repurchase or redeem any such Capital Stock pursuant to such
provisions unless such repurchase or redemption complies with the covenant
described above under the caption "-- Certain Covenants -- Restricted Payments."
"Domestic Subsidiary" means any Restricted Subsidiary that was formed under
the laws of the United States or any state thereof or the District of Columbia
or that guarantees or otherwise provides direct credit support for any
Indebtedness of the Company.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock or an increase in the stated value of preferred
stock (but excluding any debt security that is convertible into, or exchangeable
for, Capital Stock).
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Credit Agreement) in existence
on the date of the Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any specified Person for any period,
the sum, without duplication, of:
(1) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued, including,
without limitation, amortization of debt issuance costs and original
issue discount, non-cash interest payments, the interest component of
any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of
credit or bankers' acceptance financings, and net of the effect of all
payments made or received pursuant to Hedging Obligations; plus
(2) the consolidated interest of such Person and its Restricted
Subsidiaries that was capitalized during such period; plus
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(3) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or
secured by a Lien on assets of such Person or one of its Restricted
Subsidiaries, whether or not such Guarantee or Lien is called upon;
plus
(4) the product of (a) all dividends, whether paid or accrued and whether
or not in cash, on any series of preferred stock of such Person or any
of its Restricted Subsidiaries, other than dividends on Equity
Interests payable solely in Equity Interests of the Company (other than
Disqualified Stock) or to the Company or a Restricted Subsidiary of the
Company, times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person, expressed as a
decimal, in each case, on a consolidated basis and in accordance with
GAAP.
"Fixed Charge Coverage Ratio" means with respect to any specified Person
for any period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. In the event that the specified
Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees,
repays, repurchases or redeems any Indebtedness (other than ordinary working
capital borrowings) or issues, repurchases or redeems preferred stock subsequent
to the commencement of the period for which the Fixed Charge Coverage Ratio is
being calculated and on or prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, Guarantee, repayment, repurchase or redemption
of Indebtedness, or such issuance, repurchase or redemption of preferred stock,
and the use of the proceeds therefrom as if the same had occurred at the
beginning of the applicable four-quarter reference period.
In addition, for purposes of calculating the Fixed Charge Coverage Ratio:
(1) acquisitions that have been made by the specified Person or any of its
Restricted Subsidiaries, including through mergers or consolidations
and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period
and on or prior to the Calculation Date shall be given pro forma effect
as if they had occurred on the first day of the four-quarter reference
period and Consolidated Cash Flow for such reference period shall be
calculated on a pro forma basis in accordance with Regulation S-X under
the Securities Act, but without giving effect to clause (3) of the
proviso set forth in the definition of Consolidated Net Income;
(2) the Consolidated Cash Flow attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded; and
(3) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, but only
to the extent that the obligations giving rise to such Fixed Charges
will not be obligations of the specified Person or any of its
Restricted Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
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"Guarantors" means each of:
(1) the Company's Domestic Subsidiaries; and
(2) any other subsidiary that executes a Subsidiary Guarantee in accordance
with the provisions of the Indenture;
and their respective successors and assigns.
"Hedging Obligations" means, with respect to any specified Person, the
obligations of such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements;
(2) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates; and
(3) currency hedging arrangements designed to protect such Person against
fluctuations in currency values.
"Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent, in respect of:
(1) borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement agreements in respect thereof);
(3) banker's acceptances;
(4) representing Capital Lease Obligations;
(5) the balance deferred and unpaid of the purchase price of any property,
except any such balance that constitutes an accrued expense or trade
payable; or
(6) representing any Hedging Obligations,
if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included, the Guarantee
by the specified Person of any indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued with
original issue discount; and
(2) the principal amount thereof, together with any interest thereon that
is more than 30 days past due, in the case of any other Indebtedness.
"Investments" means, with respect to any Person, all direct or indirect
investments by such Person in other Persons (including Affiliates) in the forms
of direct or indirect loans (including Guarantees or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Subsidiary of the
Company such that, after giving effect to any such sale or disposition, such
Person is no longer a Restricted Subsidiary of the Company, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Equity
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Interests of such Restricted Subsidiary not sold or disposed of in an amount
determined as provided in the final paragraph of the covenant described above
under the caption "-- Certain Covenants -- Restricted Payments." The acquisition
by the Company or any Subsidiary of the Company of a Person that holds an
Investment in a third Person shall be deemed to be an Investment by the Company
or such Subsidiary in such third Person in an amount equal to the fair market
value of the Investment held by the acquired Person in such third Person in an
amount determined as provided in the final paragraph of the covenant described
above under the caption "-- Certain Covenants -- Restricted Payments."
"Issue Date" means the date of the first issuance of the Notes under the
Indenture.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"Net Income" means, with respect to any specified Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however:
(1) any gain or loss, together with any related provision for taxes on such
gain or loss, realized in connection with: (a) any Asset Sale; or (b)
the disposition of any securities by such Person or any of its
Restricted Subsidiaries or the extinguishment of any Indebtedness of
such Person or any of its Restricted Subsidiaries; and
(2) any extraordinary gain or loss, together with any related provision for
taxes on such extraordinary gain or loss.
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale, including, without limitation, legal, accounting
and investment banking fees, and sales commissions, and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof, in each
case, after taking into account any available tax credits or deductions and any
tax sharing arrangements, and amounts required to be applied to the repayment of
Indebtedness, other than Senior Debt secured by a Lien on the asset or assets
that were the subject of such Asset Sale and any reserve for adjustment in
respect of the sale price of such asset or assets established in accordance with
GAAP.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither the Company nor any of its Restricted Subsidiaries
(a) provides credit support of any kind (including any undertaking,
agreement or instrument that would constitute Indebtedness), (b) is
directly or indirectly liable as a guarantor or otherwise, or (c)
constitutes the lender;
(2) no default with respect to which (including any rights that the holders
thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice, lapse of time or both any holder
of any other Indebtedness (other than the Notes) of the Company or any
of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity; and
(3) as to which the lenders have been notified in writing that they will
not have any recourse to the stock or assets of the Company or any of
its Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
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"Permitted Business" means any business conducted or proposed to be
conducted (as described in the offering memorandum) by the Company and its
Restricted Subsidiaries on the date of the Indenture and other businesses
reasonably related or ancillary thereto.
"Permitted Investments" means:
(1) any Investment in the Company or in a Wholly Owned Restricted
Subsidiary of the Company;
(2) any Investment in Cash Equivalents;
(3) any Investment by the Company or any Restricted Subsidiary of the
Company in a Person, if as a result of such Investment:
(a) such Person becomes a Wholly Owned Restricted Subsidiary of the
Company; or
(b) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Wholly Owned Restricted Subsidiary
of the Company;
(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption
"-- Repurchase at the Option of Holders -- Asset Sales";
(5) any acquisition of assets solely in exchange for the issuance of Equity
Interests (other than Disqualified Stock) of the Company;
(6) Hedging Obligations; and
(7) other Investments in any Person having an aggregate fair market value
(measured on the date each such Investment was made and without giving
effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (7) that are at the time
outstanding not to exceed $10.0 million.
"Permitted Junior Securities" means:
(1) Equity Interests in the Company or any Guarantor; or
(2) debt securities that are subordinated to all Senior Debt and any debt
securities issued in exchange for Senior Debt to substantially the same
extent as, or to a greater extent than, the New Notes and the
Subsidiary Guarantees are subordinated to Senior Debt under the
Indenture.
"Permitted Liens" means:
(1) Liens of the Company and any Guarantor securing Senior Debt that was
permitted by the terms of the Indenture to be incurred;
(2) Liens in favor of the Company or the Guarantors;
(3) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any Subsidiary
of the Company; provided that such Liens were in existence prior to
the contemplation of such merger or consolidation and do not extend to
any assets other than those of the Person merged into or consolidated
with the Company or the Subsidiary;
(4) Liens on property existing at the time of acquisition thereof by the
Company or any Subsidiary of the Company, provided that such Liens
were in existence prior to the contemplation of such acquisition;
(5) 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;
(6) Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by clause (5) of the second paragraph of the covenant
entitled "-- Certain Covenants -- Incurrence of
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Indebtedness and Issuance of Preferred Stock" covering only the assets
acquired with such Indebtedness;
(7) Liens existing on the date of the Indenture;
(8) Liens for taxes, fees, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith
by appropriate proceedings promptly instituted and diligently
concluded, provided that any reserve or other appropriate provision as
shall be required in conformity with GAAP shall have been made
therefor;
(9) Liens incurred in the ordinary course of business of the Company or
any Subsidiary of the Company with respect to obligations that do not
exceed $10.0 million at any one time outstanding; and
(10) Liens on assets of Unrestricted Subsidiaries that secure Non-Recourse
Debt of Unrestricted Subsidiaries.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount
(or accreted value, if applicable) of the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus all accrued
interest thereon and the amount of all expenses and premiums incurred
in connection therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date later
than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness has a final maturity date no
earlier than the final maturity date of, and is subordinated in right
of payment to, the Notes on terms at least as favorable to the Holders
of Notes as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; and
(4) such Indebtedness is incurred either by the Company or by the
Restricted Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company or government or other entity.
"Principal" means Fremont Investors I, LLC.
"Public Equity Offerings" means an underwritten public offering of Capital
Stock (other than Disqualified Stock) of the Company registered under the
Securities Act.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Senior Debt" means:
(1) all Indebtedness of the Company or any Guarantor outstanding under
Credit Facilities and all Hedging Obligations with respect thereto;
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(2) any other Indebtedness of the Company or any Guarantor permitted to be
incurred under the terms of the Indenture, unless the instrument under
which such Indebtedness is incurred expressly provides that it is on a
parity with or subordinated in right of payment to the Notes or any
Subsidiary Guarantee; and
(3) all Obligations with respect to the items listed in the preceding
clauses (1) and (2).
Notwithstanding anything to the contrary in the preceding, Senior Debt will
not include:
(1) any liability for federal, state, local or other taxes owed or owing by
the Company;
(2) any Indebtedness of the Company to any of its Subsidiaries or other
Affiliates;
(3) any trade payables; or
(4) the portion of any Indebtedness that is incurred in violation of the
Indenture.
"Significant Restricted Subsidiary" means any Restricted Subsidiary that
would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of
Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation
is in effect on the date hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any specified Person:
(1) any corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock 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 one or
more of the other Subsidiaries of that Person (or a combination
thereof); and
(2) any partnership (a) the sole general partner or the managing general
partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof).
"Unrestricted Subsidiary" means any Subsidiary of the Company that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution, but only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or understanding
with the Company or any Restricted Subsidiary of the Company unless the
terms of any such agreement, contract, arrangement or understanding are
no less favorable to the Company or such Restricted Subsidiary than
those that might be obtained at the time from Persons who are not
Affiliates of the Company;
(3) is a Person with respect to which neither the Company nor any of its
Restricted Subsidiaries has any direct or indirect obligation (a) to
subscribe for additional Equity Interests or (b) to maintain or
preserve such Person's financial condition or to cause such Person to
achieve any specified levels of operating results; and
(4) has not guaranteed or otherwise directly or indirectly provided credit
support for any Indebtedness of the Company or any of the Restricted
Subsidiaries.
Any designation of a Subsidiary of the Company as an Unrestricted
Subsidiary shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the Board Resolution giving effect to such
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designation and an Officers' Certificate certifying that such designation
complied with the preceding conditions and was permitted by the covenant
described above under the caption "-- Certain Covenants -- Restricted Payments."
If, at any time, any Unrestricted Subsidiary would fail to meet the preceding
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the Indenture and 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 the covenant described under the caption
"-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred
Stock," the Company shall be in default of such covenant. The Board of Directors
of the Company may at any time designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that such designation shall be deemed to be an
incurrence of Indebtedness by a Restricted Subsidiary of the Company of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall only be permitted if (1) such Indebtedness is permitted under the covenant
described under the caption "-- Certain Covenants -- Incurrence of Indebtedness
and Issuance of Preferred Stock," calculated on a pro forma basis as if such
designation had occurred at the beginning of the four-quarter reference period;
and (2) no Default or Event of Default would be in existence following such
designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(1) 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
(2) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any specified Person means a
Restricted 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
Restricted Subsidiaries of such Person.
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UNITED STATES FEDERAL TAX CONSEQUENCES
The following is a summary of anticipated material United States Federal
income tax consequences associated with the exchange of old notes for new notes
pursuant to the exchange offer and the ownership and disposition of the new
notes. This summary is based upon existing United States federal income tax law
and official interpretations thereof, which are subject to change, possibly
retroactively. This summary does not discuss all aspects of United States
Federal income taxation which may be important to particular holders in light of
their individual investment circumstances, such as investors subject to special
tax rules (e.g., financial institutions, insurance companies, broker-dealers,
and tax-exempt organizations) or to persons that will hold the notes as a part
of a straddle, hedge, or synthetic security transaction for United States
Federal income tax purposes or that have a functional currency other than the
United States dollar, all of whom may be subject to tax rules that differ
significantly from those summarized below. In addition, this summary does not
discuss any foreign, state, or local tax considerations and assumes that holders
of the new notes will hold them as "capital assets" (generally, property held
for investment) under the Internal Revenue Code of 1986, as amended. Prospective
investors should consult their tax advisors regarding the United States Federal,
state, local, and foreign income and estate and other tax considerations of the
exchange of old notes for new notes and the ownership and disposition of the new
notes.
For purposes of this summary, a "U.S. Holder" is a beneficial owner of new
notes who or that is (i) an individual who is a citizen or resident of the
United States, (ii) a corporation, partnership, or other entity created or
organized under the laws of the United States or any state or political
subdivision thereof, (iii) an estate the income of which is includable in gross
income for United States Federal income tax purposes regardless of its source,
or (iv) a trust, the administration of which is subject to the primary
supervision of a United States court and which has one or more United States
persons who have the authority to control all substantial decisions of the
trust. The term "Non-U.S. Holder" means a beneficial owner of new notes that is
not a U.S. Holder.
TAX CONSEQUENCES TO U.S. HOLDERS
Exchange of Notes
A U.S. Holder will not recognize any gain or loss on the exchange of old
notes for new notes, and such U.S. Holder's tax basis and holding period in the
new notes will be the same as its basis and holding period in the old notes. The
issue price of the new notes will be the same as the issue price of the old
notes.
Market Discount
If a holder purchases new notes for an amount that is less than the issue
price of the new notes, the new notes will be considered to have market
discount. Any gain recognized by a holder on the disposition of the new notes
that have market discount or, to the extent provided in regulations, on the
disposition of exchanged basis property received in exchange for new notes that
have market discount, will be treated as ordinary income to the extent of the
market discount that accrued on the new notes while they were held by such
holder. Alternatively, the holder may elect to include market discount in income
currently over the life of the new notes. Such an election will apply to any
bonds with market discount acquired by the holder on or after the first day of
the first taxable year to which such election applies and is revocable only with
the consent of the Internal Revenue Service. Market discount will accrue on a
straight-line basis unless the holder elects to accrue the market discount on a
constant-yield method. Such an election will apply to those new notes to which
it is made and is irrevocable. Unless the holder elects to include market
discount in income on a current basis, as described above, a holder could be
required to defer the deduction of a portion of the interest paid on any
indebtedness incurred or maintained to purchase or carry the new notes.
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Disposition of the New Notes
Upon the sale, exchange or retirement of the new notes, a U.S. Holder will
recognize gain or loss equal to the difference between the amount realized upon
the sale, exchange or retirement (less a portion allocable to any accrued and
unpaid interest, which will be subject to tax as ordinary income and market
discount as described above)and the U.S. Holder's adjusted tax basis in the new
notes. A U.S. Holder's adjusted tax basis in the new notes generally will be the
U.S. Holder's cost therefor, less any principal payments received by such
holder.
Gain or loss recognized by a U.S. Holder on the sale, exchange or
retirement of the new notes will be capital gain or loss. The gain or loss will
be long-term capital gain or loss if the new notes have been held by the U.S.
Holder for more than twelve months. Long-term capital gain of individuals is
subject to a maximum United States federal tax rate of 20%. The deductibility of
capital losses by U.S. Holders is subject to limitation.
TAX CONSEQUENCES TO NON-U.S. HOLDERS
Taxation of Interest
In general, payments of interest received by a Non-U.S. Holder will
generally not be subject to United States federal withholding tax on interest
paid on the new notes provided that (i)(a) the Non-U.S. Holder does not actually
or constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote, (b) the Non-U.S. Holder is not
a "controlled foreign corporation" that is related to the Company actually or
constructively through stock ownership, and (c) the beneficial owner of the new
notes, under penalties of perjury, provides the Company or its agent with the
beneficial owner's name and address and certifies that it is not a U.S. Holder
in compliance with applicable requirements, see "Owner Statement Requirement"
below, (ii) the interest received on the new note is effectively connected with
the conduct by the Non-U.S. Holder of a trade or business within the United
States and the Non-U.S. Holder complies with certain reporting requirements, or
(iii) the Non-U.S. Holder is entitled to the benefits of an income tax treaty
under which the interest is exempt from United States federal withholding tax
and the Non-U.S. Holder complies with certain reporting requirements. Payments
of interest not exempt from United States federal withholding tax as described
above will be subject to withholding tax at a rate of 30% (subject to reduction
under an applicable treaty).
If interest and other payments received by a Non-U.S. Holder with respect
to the new notes (including proceeds from the disposition of the new notes) are
effectively connected with the conduct by such holder of a trade or business
within the United States (or the Non-U.S. Holder is otherwise subject to United
States federal income taxation on a net basis with respect to such holder's
ownership of the new notes), such Non-U.S. Holder will be subject to United
States federal income tax on such interest at graduated rates in essentially the
same manner as a U.S. Holder. In addition, if the Non-U.S. Holder is a
corporation, it may be required to pay United States branch profits tax equal to
30% of its effectively connected earnings and profits as adjusted for the
taxable year, unless the holder qualifies for an exemption from such tax or a
lower tax rate under an applicable treaty.
Disposition of the New Notes
Any capital gain a Non-U.S. Holder recognizes on the sale, exchange,
retirement or other taxable disposition of the new notes will not be subject to
United States Federal income and withholding tax, unless (1) the gain is
effectively connected with a Non-U.S. Holder's conduct of a trade or business
within the United States, or (2) the Non-U.S. Holder is an individual who is
present in the United States for 183 days or more during the taxable year of the
disposition, and certain other requirements are satisfied.
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Any such gain that is effectively connected with the conduct by a Non-U.S.
Holder of a United States trade or business will be subject to United States
federal income tax at graduated rates on a net income basis in the same manner
as if the holder were a U.S. Holder. If such Non-U.S. Holder is a corporation,
the gain may also be subject to the 30% United States branch profits tax
described above.
Federal Estate Taxes
A new note held by an individual who at the time of death is not a citizen
or resident of the United States will not be subject to United States Federal
estate tax as a result of such individual's death, provided that the individual
does not actually or constructively own 10% or more of the total combined voting
power of all classes of stock of the Company entitled to vote and that the
interest accrued on such new notes was not effectively connected with the
conduct by the Non-U.S. Holder of a United States trade or business.
Owner Statement Requirement
In order for a Non-U.S. Holder to establish eligibility for exemption from
United States federal withholding tax on interest income, either the beneficial
owner of the new notes or a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course of
its trade or business (a "Financial Institution") and that holds the new notes
on behalf of such owner must file a statement with the Company or its agent to
the effect that the beneficial owner is not a United States person. Under
current regulations, this requirement will be satisfied if the Company or its
agent receives (1) a statement (an "Owner Statement") from the beneficial owner
of new notes in which such owner certifies, under penalties of perjury, that
such owner is not a United States person and provides such owner's name and
address, or (2) a statement from the Financial Institution holding the new notes
on behalf of the beneficial owner in which the Financial Institution certifies,
under penalties of perjury, that it has received the Owner Statement together
with a copy of the Owner Statement. The beneficial owner must inform the Company
or its agent (or, in the case of a statement described in clause (2) of the
immediately preceding sentence, the Financial Institution) within 30 days of any
change in information on the Owner Statement.
BACKUP WITHHOLDING AND INFORMATION REPORTING
A noncorporate U.S. Holder may be subject to information reporting and
backup withholding at a rate of 31% with respect to payments of principal and
interest made on the new notes, or on proceeds of the disposition of the new
notes, unless such U.S. Holder provides a correct taxpayer identification number
or proof of an applicable exemption, and otherwise complies with applicable
requirements of the information and backup withholding rules.
Current United States Federal income tax law provides that in the case of
payments of interest to Non-U.S. Holders, the 31% backup withholding tax will
not apply to payments made by the Company or a paying agent on the new notes if
an Owner's Statement is received or an exemption has otherwise been established,
provided in each case that the Company or paying agent, as the case may be, does
not have actual knowledge that the payee is a United States person.
Under current United States Treasury Regulations, payments of the proceeds
of the sale of new notes to or through a foreign office of a "broker" will not
be subject to backup withholding but will be subject to information reporting if
the broker is a United States person, a controlled foreign corporation for
United States Federal income tax purposes, or a foreign person 50% or more of
whose gross income is from a United States trade or business for a specified
three-year period, unless the broker has in its records documentary evidence
that the holder is not a United States person and certain other conditions are
met or the holder otherwise establishes an exemption. Payment of the proceeds of
a sale to or through the United States office of a broker is subject to backup
withholding and information reporting unless the holder certifies its non-United
States status under penalties of perjury or otherwise establishes an exemption.
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Recently, the Treasury Department has promulgated final regulations
regarding the withholding and information reporting rules discussed above. In
general, the final regulations do not significantly alter the substantive
withholding and information reporting requirements but unify current
certification procedures and forms and clarify reliance standards. The final
regulations are generally effective for payments made after December 31, 2000,
subject to certain transition rules.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account pursuant to
the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of such new notes. This prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of new notes received in exchange for old notes where
such old notes were acquired as a result of market-making activities or other
trading activities. We have agreed that for a period of 180 days after the
Expiration Date, 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 new notes by
broker-dealers. New notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time:
- in one or more transactions in the over-the-counter market,
- in negotiated transactions,
- through the writing of options on the new notes, or
- a combination of such methods of resale.
Such notes may be sold:
- 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 or the purchasers of any such new notes.
Any broker-dealer that resells new notes that were received by it for its
own account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such new notes may be deemed to be an
"underwriter" within the meaning of the Securities Act. Any profit on any such
resale of new notes and any commissions or concessions received by any of them
may be deemed to be underwriting compensation under the Securities Act. The
letter of transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, we will promptly send
additional copies of the prospectus and any amendment or supplement to the
prospectus to any broker-dealer requesting these copies in the letter of
transmittal. We have agreed to pay all expenses incident to the exchange offer
other than commissions or concessions of any brokers or dealers and will
indemnify the holders of the notes, including any broker-dealers, against
various liabilities, including liabilities under the Securities Act.
Following consummation of the exchange offer, we may, in our sole
discretion, commence one or more additional exchange offers to holders of old
notes who did not exchange their old notes for new notes in the exchange offer
on terms which may differ from those contained in the registration rights
agreement. We may use this prospectus, as it may be amended of supplemented from
time to time, in connection with any such additional exchange offers. Such
additional exchange offers will take place from time to time until all
outstanding old notes have been exchanged for new notes.
LEGAL MATTERS
The validity of the new notes offered hereby and certain other legal
matters will be passed upon on behalf of the Company by Skadden, Arps, Slate,
Meagher & Flom LLP, Palo Alto, California.
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INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements of Juno at November 30, 1998 and 1997
and for each of the three years in the period ended November 30, 1998, included
in this prospectus, have been audited by PricewaterhouseCoopers LLP, independent
accountants, as stated in their report appearing herein.
AVAILABLE INFORMATION
Juno is subject to the information requirements of the Exchange Act (File
No. 0-11631), and in accordance therewith files periodic reports, proxy
statements and other information with the Commission relating to its business,
financial statements and other matters. The reports, proxy statements and other
information filed by Juno may be inspected and copied at prescribed rates at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and should be available for inspection and
copying at the regional offices of the Commission located at 7 World Trade
Center, Suite 1375, New York, New York 10048 and at Citicorp Center, 500 West
Madison Street, Chicago, Illinois 60661. Copies of such material can be obtained
at prescribed rates by writing to the Commission's Public Reference Section, 450
Fifth Street, N.W., Washington, D.C. 20549 (telephone number: 1-800-SEC-0330).
The Commission also maintains a Web site that contains reports, proxy statements
and other information regarding registrants that file electronically with the
Commission. The address of such site is http://www.sec.gov. Such material
relating to Juno can also be inspected at the reading room of the library of the
National Association of Securities Dealers, Inc., 1735 K Street, N.W., 2nd
Floor, Washington, D.C. 20006.
INCORPORATION BY REFERENCE
We have elected to "incorporate by reference" certain information into this
prospectus. By incorporating by reference we can disclose important information
to you by referring you to another document filed separately with the
Commission. The information incorporated by reference is deemed to be part of
this prospectus, except for any information superseded by information in this
prospectus. This prospectus incorporates by reference the documents set forth
below that we have previously filed with the Commission. These documents contain
important information about Juno and its finances.
JUNO SEC FILINGS (FILE NO. 0-11631) FILED ON
----------------------------------- --------
Annual Reports on Form 10-K and Form 10-K/A February 25, 1999 and March 29, 1999
Quarterly Report on Form 10-Q April 12, 1999
Quarterly Report on Form 10-Q June 24, 1999
Current Report on Form 8-K March 29, 1999
Current Report on Form 8-K June 28, 1999
Current Report on Form 8-K June 29, 1999
Current Report on Form 8-K July 1, 1999
Current Report on Form 8-K July 15, 1999
We are also incorporating by reference additional documents that we file
with the Commission between the date of this prospectus and the date of the
completion of the exchange offer.
Documents incorporated by reference are available from us without charge,
excluding all exhibits unless we have specifically incorporated by reference an
exhibit in this prospectus. You may obtain documents incorporated by reference
in this prospectus by writing to us at Juno Lighting, Inc., 1300 South Wolf
Road, Des Plaines, Illinois 60018, Attention: Chief Financial Officer, or
calling us at (847) 827-9880.
-------------------------
This exchange offer is not being made to, nor will we accept surrenders for
exchange from holders of outstanding old notes in any jurisdiction in which this
exchange offer or the acceptance thereof would not be in compliance with the
securities or blue sky laws of such jurisdiction.
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PRO FORMA CONSOLIDATED FINANCIAL DATA
The following pro forma consolidated financial statements of Juno include
the pro forma consolidated balance sheet as of May 31, 1999 and the pro forma
consolidated statements of income for the twelve- and six-month periods ended
May 31, 1999 and the year ended November 30, 1998.
The pro forma consolidated balance sheet is based on the unaudited
consolidated balance sheet of Juno as of May 31, 1999, and is adjusted to give
effect to the recapitalization as if it had occurred on such date.
The pro forma consolidated statements of income are based on the audited
consolidated statement of income of Juno for the year ended November 30, 1998
and the unaudited consolidated statements of income of Juno for each of the four
quarters in the twelve-month period ended May 31, 1999 are adjusted to give
effect to the recapitalization as though it had occurred as of December 1, 1997.
The pro forma consolidated financial statements and the accompanying notes
should be read in conjunction with Juno's historical consolidated financial
statements and related notes thereto included elsewhere in this offering
memorandum.
The pro forma consolidated financial statements do not purport to represent
what Juno's financial condition or results of operations would actually have
been had the recapitalization occurred on the assumed date, nor do they project
Juno's financial condition or results of operations for any future period or
date.
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PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MAY 31, 1999
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents...................... $ 28,232 $ (27,232)(a) $ 1,000
Marketable securities.......................... 74,485 (74,485)(b) --
Accounts receivable, net....................... 28,515 -- 28,515
Inventories.................................... 29,318 -- 29,318
Prepaid expenses............................... 4,319 -- 4,319
-------- --------- ---------
Total current assets................... 164,869 (101,717) 63,152
Property and equipment, net...................... 47,313 -- 47,313
Deferred financing costs......................... -- 9,747(c) 9,747
Other assets, net................................ 5,417 -- 5,417
-------- --------- ---------
Total assets........................... $217,599 $ (91,970) $ 125,629
======== ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable............................... $ 6,548 $ -- $ 6,548
Accrued liabilities............................ 5,655 65(d) 5,720
Current maturities of existing long-term
debt........................................ 120 (120)(e) --
Current maturities of term loans............... -- 1,750(f) 1,750
-------- --------- ---------
Total current liabilities.............. 12,323 1,695 14,018
Deferred income taxes............................ 1,654 (65)(d) 1,589
Existing long-term debt, less current
maturities..................................... 3,205 (3,205)(e) --
Revolving credit facility........................ -- 7,260(f) 7,260
Term loans, less current maturities.............. -- 88,250(f) 88,250
Senior subordinated notes........................ -- 124,103(f) 124,103
-------- --------- ---------
Total liabilities...................... 17,182 218,038 235,220
Stockholders' equity (deficit)
Series A convertible preferred stock........... -- 106,000(g) 106,000
Common stock................................... 186 (162)(h) 24
Paid-in capital................................ 5,864 (5,108)(h) 756
Accumulated other comprehensive income......... (402) (135)(i) (537)
Retained earnings (deficit).................... 194,769 (400,160)(h) (215,834)
(10,443)(i)
-------- --------- ---------
Total stockholders' equity (deficit)... 200,417 (310,008) (109,591)
-------- --------- ---------
Total liabilities and stockholders'
equity (deficit)..................... $217,599 $ (91,970) $ 125,629
======== ========= =========
The accompanying notes are an integral part of these financial statements.
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NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(a) The net adjustment to cash and cash equivalents is anticipated to be as
follows (in thousands):
INCREASES:
Marketable securities..................................... $ 74,485
Senior credit facilities
Revolving credit facility.............................. 7,260
Term loans............................................. 90,000
Senior subordinated notes................................. 124,103
Preferred equity.......................................... 106,000
---------
$ 401,848
---------
DECREASES:
Purchase of equity........................................ $(405,430)
Repayment of existing debt................................ (3,325)
Transaction expenses...................................... (20,325)
---------
(429,080)
---------
Net adjustment to cash and cash equivalents............... $ (27,232)
=========
(b) Reflects the sale of Juno's marketable securities to finance a portion of
the recapitalization, including recognition of the after-tax gain which was
previously recorded as a separate component of stockholders' equity.
(c) Represents deferred financing costs related to the recapitalization.
(d) Reflects income taxes currently payable resulting from Juno's sale of
marketable securities described in note (b) above, which were previously
recorded as deferred income tax liabilities.
(e) Reflects the repayment of Juno's pre-existing debt obligations.
(f) Reflects new borrowings associated with the recapitalization.
(g) Reflects the issuance of 1,060,000 shares of a new series of convertible
preferred stock at a price of $100.00 per share. The conversion price per
share, $26.25, exceeds the price per share of $25.00 offered to
stockholders in the merger. If the market price were to exceed the
conversion price upon issuance, that is, if the conversion feature were "in
the money," the intrinsic value of this conversion feature would be
allocated to paid-in capital.
(h) Reflects the redemption of 16,217,227 common shares at $25.00 per share.
(i) Reflects the net adjustment to retained earnings for the following
non-recurring items directly attributable to the recapitalization: (i)
estimated transaction costs of $10,578,000 and (ii) an after-tax gain of
$135,000 generated by the sale of Juno's marketable securities to finance a
portion of the recapitalization.
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PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED MAY 31, 1999
HISTORICAL ADJUSTMENTS(A) PRO FORMA
---------- -------------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net sales....................................... $168,490 $ -- $168,490
Cost of sales................................... 83,953 -- 83,953
-------- --------
Gross profit.................................... 84,537 -- 84,537
Selling, general and administrative expenses.... 45,414 325(b) 45,739
-------- --------- --------
Operating income................................ 39,123 (325) 38,798
Other income (expenses)
Interest expense.............................. (148) (23,398)(c) (23,546)
Interest and dividend income.................. 4,692 (4,692)(d) --
Miscellaneous................................. 61 -- 61
-------- --------- --------
Total other income (expense)............... 4,605 (28,090) (23,485)
-------- --------- --------
Income before taxes on income................... 43,728 (28,415) 15,313
Taxes on income................................. 15,375 (9,250)(e) 6,125
-------- --------- --------
Net income...................................... $ 28,353 $ (19,165) $ 9,188
======== ========= ========
Less: preferred stock dividends................. -- 9,091(f) 9,091
-------- --------- --------
Income available to common stockholders......... $ 28,353 $ (28,256) $ 97
======== ========= ========
Per share data:
Net income
Basic...................................... $ 1.52 $ .04
Diluted(g)................................. 1.52 .04
Shares used in per share calculation:
Basic...................................... 18,593 2,400
Diluted(g)................................. 18,644 2,467
Other data:
Depreciation and amortization(h).............. $ 3,912 $ 3,912
The accompanying notes are an integral part of these financial statements.
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PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED MAY 31, 1999
HISTORICAL ADJUSTMENTS(A) PRO FORMA
---------- -------------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net sales..................................... $82,781 $ -- $ 82,781
Cost of sales................................. 42,032 -- 42,032
------- -------- --------
Gross profit.................................. 40,749 -- 40,749
Selling, general and administrative
expenses.................................... 22,672 163(b) 22,835
------- -------- --------
Operating income.............................. 18,077 (163) 17,914
Other income (expenses)
Interest expense............................ (62) (11,678)(c) (11,740)
Interest and dividend income................ 2,417 (2,417)(d) --
Miscellaneous............................... 40 -- 40
------- -------- --------
Total other income (expense)............. 2,395 (14,095) (11,700)
------- -------- --------
Income before taxes on income................. 20,472 (14,258) 6,214
Taxes on income............................... 7,157 (4,671)(e) 2,486
------- -------- --------
Net income.................................... $13,315 $ (9,587) $ 3,728
======= ======== ========
Less: preferred stock dividends............... -- 4,634(f) 4,634
------- -------- --------
Income (loss) attributable to common
stockholders................................ $13,315 $(14,221) $ (906)
======= ======== ========
Per share data:
Net income..................................
Basic.................................... $ .72 $ (.38)
Diluted(g)............................... .71 (.38)
Shares used in per share calculation:
Basic.................................... 18,599 2,400
Diluted(g)............................... 18,654 2,400
Other data:
Depreciation and amortization(h)............ $ 2,076 $ 2,076
The accompanying notes are an integral part of these financial statements.
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PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED NOVEMBER 30, 1998
HISTORICAL ADJUSTMENTS(A) PRO FORMA
---------- -------------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net sales..................................... $160,941 $ -- $160,941
Cost of sales................................. 79,882 -- 79,882
-------- -------- --------
Gross profit.................................. 81,059 -- 81,059
Selling, general and administrative
expenses.................................... 44,083 325(b) 44,408
-------- -------- --------
Operating income.............................. 36,976 (325) 36,651
Other income (expenses)
Interest expense............................ (166) (23,463)(c) (23,629)
Interest and dividend income................ 4,371 (4,371)(d) --
Miscellaneous............................... 76 -- 76
-------- -------- --------
Total other income (expense)............. 4,281 (27,834) (23,553)
-------- -------- --------
Income before taxes on income................. 41,257 (28,159) 13,098
Taxes on income............................... 14,632 (9,393)(e) 5,239
-------- -------- --------
Net income.................................... $ 26,625 $(18,766) $ 7,859
======== ======== ========
Less: preferred stock dividends............... -- 8,739(f) 8,739
-------- -------- --------
Income (loss) attributable to common
stockholders................................ $ 26,625 $(27,505) $ (880)
======== ======== ========
Per share data:
Net income
Basic.................................... $ 1.43 $ (.37)
Diluted(g)............................... 1.43 (.37)
Shares used in per share calculation:
Basic.................................... 18,576 2,400
Diluted(g)............................... 18,615 2,400
Other Data:
Depreciation and amortization(h)............ $ 3,678 $ 3,678
The accompanying notes are an integral part of these financial statements.
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NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
(a) The pro forma adjustments do not include the following non-recurring items
directly attributable to the transactions contemplated by the merger
agreement: (i) an after-tax charge of $630,000 for management bonuses; and
(ii) an after-tax realized gain of $135,000 generated by the sale of Juno's
marketable securities to finance a portion of the recapitalization.
(b) Reflects the fee Juno will pay Fremont Partners L.L.C. pursuant to a
management agreement.
(c) The net adjustment to interest expense consists of the following (dollars
in thousands):
TWELVE
MONTHS SIX MONTHS
ENDED ENDED YEAR ENDED
MAY 31, MAY 31, NOVEMBER 30,
1999 1999 1998
------------ ------------ ------------
Elimination of interest expense related to the
existing indebtedness repaid in connection with
the recapitalization........................... $ 148 $ 62 $ 166
Interest on the new indebtedness at an assumed
weighted average interest rate of 10.1% per
annum.......................................... (22,289) (11,111) (22,372)
Amortization expense for deferred financing costs
related to the above........................... (1,257) (629) (1,257)
-------- -------- --------
Total interest increment............... $(23,398) $(11,678) $(23,463)
======== ======== ========
A 0.5% increase or decrease in the assumed weighted average interest rate
on the contemplated financing would change pro forma interest expense by
$1,111 for the twelve months ended May 31, 1999 and the year ended November
30, 1998, and by $556 for the six months ended May 31, 1999.
(d) Reflects the elimination of interest income generated by the marketable
securities sold in connection with the recapitalization.
(e) Reflects the adjustment necessary to state the pro forma taxes on income at
an assumed effective tax rate of 40%. The increase in the effective tax
rate relates to the elimination of interest income described in note (d)
above.
(f) Reflects the cumulative dividend on Series A convertible preferred stock at
a rate of 2% per quarter. If the conversion feature were "in the money"
upon issuance of the preferred stock, the intrinsic value of this right
would be recorded to paid-in capital and the resulting discount recognized
as a dividend to the preferred shareholders over the period benefitted.
(g) If the convertible preferred stock were converted, pro forma diluted net
income per share would have been $1.41, $.57, and $1.21 for the twelve
months ended May 31, 1999, the six months ended May 31, 1999 and the year
ended November 30, 1998, respectively. Such conversion is anti-dilutive,
and therefore excluded from pro forma diluted net income per share.
(h) Excludes amortization of deferred financing costs.
P-7
103
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Report of Independent Accountants........................... F-2
Consolidated Statements of Income for the three years ended
November 30, 1998, 1997 and 1996.......................... F-3
Consolidated Balance Sheets at November 30, 1998 and 1997... F-4
Consolidated Statements of Stockholders' Equity for the
three years ended November 30, 1996, 1997 and 1998........ F-6
Consolidated Statements of Cash Flow for the three years
ended November 30, 1998, 1997 and 1996.................... F-7
Notes to Consolidated Financial Statements.................. F-8
Condensed Consolidated Statements of Income for the three
months ended May 31, 1999 and May 31, 1998................ F-20
Condensed Consolidated Statements of Income for the six
months ended May 31, 1999 and May 31, 1998................ F-21
Condensed Consolidated Balance Sheets at May 31, 1999 and
November 30, 1998......................................... F-22
Condensed Consolidated Statement of Retained Earnings for
the six months ended
May 31, 1999.............................................. F-23
Condensed Consolidated Statements of Cash Flows for the six
months ended May 31, 1999 and May 31, 1998................ F-24
Notes to Condensed Consolidated Financial Statements........ F-25
F-1
104
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Juno Lighting, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, of stockholders' equity and of cash
flows present fairly, in all material respects, the financial position of Juno
Lighting, Inc. and its subsidiaries at November 30, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended November 30, 1998, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Chicago, Illinois
January 14, 1999
F-2
105
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED NOVEMBER 30,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
(IN THOUSANDS EXCEPT SHARE AND
PER SHARE AMOUNTS)
Net sales............................................ $ 160,941 $ 139,855 $ 131,479
Cost of sales........................................ 79,882 71,881 68,319
----------- ----------- -----------
Gross profit......................................... 81,059 67,974 63,160
Selling, general and administrative.................. 44,083 40,601 36,766
----------- ----------- -----------
Operating income..................................... 36,976 27,373 26,394
----------- ----------- -----------
Other income (expense):
Interest expense................................... (166) (244) (317)
Interest and dividend income....................... 4,371 3,946 3,957
Miscellaneous...................................... 76 318 78
----------- ----------- -----------
Total other income.............................. 4,281 4,020 3,718
----------- ----------- -----------
Income before taxes on income........................ 41,257 31,393 30,112
Taxes on income...................................... 14,632 11,090 10,215
----------- ----------- -----------
Net income........................................... $ 26,625 $ 20,303 $ 19,897
=========== =========== ===========
Net income per common share (basic and diluted)...... $ 1.43 $ 1.10 $ 1.08
=========== =========== ===========
Weighted average number of shares outstanding --
basic.............................................. 18,576,015 18,522,270 18,451,366
Weighted average number of shares outstanding --
diluted............................................ 18,614,863 18,540,835 18,494,548
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
F-3
106
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
NOVEMBER 30,
--------------------
1998 1997
-------- --------
(IN THOUSANDS)
ASSETS
Current:
Cash...................................................... $ 10,498 $ 6,806
Marketable securities..................................... 77,836 65,766
Accounts receivable, less allowance for doubtful accounts
of $1,205 and $907..................................... 24,577 22,533
Inventories............................................... 28,115 22,707
Prepaid expenses and miscellaneous........................ 5,041 4,696
-------- --------
Total current assets................................... 146,067 122,508
-------- --------
Property and equipment:
Land...................................................... 7,279 7,322
Building and improvements................................. 31,580 31,372
Tools and dies............................................ 7,884 7,117
Machinery and equipment................................... 7,135 6,299
Computer equipment........................................ 5,043 2,060
Office furniture and equipment............................ 2,606 2,166
-------- --------
61,527 56,336
Less accumulated depreciation............................. (15,351) (11,887)
-------- --------
Net property and equipment............................. 46,176 44,449
-------- --------
Other assets:
Marketable securities..................................... 12,049 11,373
Goodwill and other intangibles, net of accumulated
amortization of $1,536 and $1,367...................... 3,940 4,603
Miscellaneous............................................. 607 4,456
-------- --------
Total other assets..................................... 16,596 20,432
-------- --------
Total assets................................................ $208,839 $187,389
======== ========
The accompanying notes are an integral part of these financial statements.
F-4
107
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
NOVEMBER 30,
--------------------------
1998 1997
----------- -----------
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE AMOUNTS)
LIABILITIES
Current:
Accounts payable.......................................... $ 4,441 $ 3,579
Accrued liabilities....................................... 8,097 7,938
Current maturities of long-term debt...................... 120 115
-------- --------
Total current liabilities.............................. 12,658 11,632
-------- --------
Long-term debt, less current maturities..................... 3,265 3,385
-------- --------
Deferred income taxes payable............................... 1,468 1,742
-------- --------
Commitments and contingencies
Stockholders' equity
Common stock, $.01 par value; 50,000,000 shares
authorized, 18,595,327 and 18,563,412 shares issued.... 186 186
Paid-in capital........................................... 5,484 4,934
Accumulated other comprehensive income.................... 604 328
Retained earnings........................................... 185,174 165,238
-------- --------
191,448 170,686
-------- --------
Less: treasury stock, at cost; 0 and 3,642 shares........... -- (56)
-------- --------
Total stockholders' equity............................. 191,448 170,630
-------- --------
Total liabilities and stockholders' equity.................. $208,839 $187,389
======== ========
The accompanying notes are an integral part of these financial statements.
F-5
108
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED NOVEMBER 30, 1996, 1997 AND 1998
-------------------------------------------------------------------
COMMON STOCK ACCUMULATED
------------------ OTHER
AMOUNT PAID-IN COMPREHENSIVE RETAINED TREASURY
$.01 PAR CAPITAL INCOME EARNINGS STOCK TOTAL
-------- ------- ------------- -------- -------- --------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Balance, December 1, 1995....................... $185 $4,415 $ 460 $137,342 $(1,034) $141,368
Comprehensive income:
Net income for 1996........................... -- -- -- 19,897 -- 19,897
Gain on foreign currency translation.......... -- -- 4 -- -- 4
Change in unrealized holding gains............ -- -- 9 -- -- 9
--------
Comprehensive income............................ 19,910
--------
Treasury stock purchased...................... -- -- -- -- (637) (637)
Treasury stock reissued....................... -- -- -- (453) 875 422
Exercise of stock options..................... 1 379 -- -- -- 380
Tax benefit of stock options exercised........ -- 121 -- -- -- 121
Cash dividend ($.32 per share)................ -- -- -- (5,903) -- (5,903)
---- ------ ----- -------- ------- --------
Balance, November 30, 1996...................... 186 4,915 473 150,883 (796) 155,661
==== ====== ===== ======== ======= ========
Comprehensive income:
Net income for 1997........................... -- -- -- 20,303 -- 20,303
(Loss) on foreign currency translation........ -- -- (198) -- -- (198)
Change in unrealized holding gains............ -- -- 53 -- -- 53
--------
Comprehensive income............................ 20,158
--------
Treasury stock reissued....................... -- -- -- (23) 740 717
Tax benefit of stock options exercised........ -- 19 -- -- -- 19
Cash dividend ($.32 per share)................ -- -- -- (5,925) -- (5,925)
---- ------ ----- -------- ------- --------
Balance, November 30, 1997...................... 186 4,934 328 165,238 (56) 170,630
==== ====== ===== ======== ======= ========
Comprehensive income:
Net income for 1998........................... -- -- -- 26,625 -- 26,625
(Loss) on foreign currency translation........ -- -- (260) -- -- (260)
Change in unrealized holding gains............ -- -- 536 -- -- 536
--------
Comprehensive income............................ 26,901
--------
Treasury stock reissued....................... -- -- -- (3) 56 53
Exercise of stock options..................... -- 510 -- -- -- 510
Tax benefit of stock options exercised........ -- 40 -- -- -- 40
Cash dividend ($.36 per share)................ -- -- -- (6,686) -- (6,686)
---- ------ ----- -------- ------- --------
Balance, November 30, 1998...................... $186 $5,484 $ 604 $185,174 $ -- $191,448
==== ====== ===== ======== ======= ========
The accompanying notes are an integral part of these financial statements.
F-6
109
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
YEAR ENDED NOVEMBER 30,
---------------------------
1998 1997 1996
------- ------- -------
(IN THOUSANDS)
Net income.................................................. $26,625 $20,303 $19,897
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 3,678 3,484 3,074
Gain on sale of assets.................................... (178) (397) --
Increase (decrease) in allowance for doubtful accounts.... 298 353 (300)
Deferred income taxes..................................... (274) (369) (18)
Changes in assets and liabilities:
(Increase) in accounts receivable...................... (2,601) (1,359) (1,965)
(Increase) decrease in inventory....................... (5,408) 568 (3,692)
(Increase) decrease in prepaid expenses................ (607) (386) 714
(Increase) decrease in other assets.................... (27) (671) 55
Increase (decrease) in accounts payable................ 862 (553) 3
Increase (decrease) in accrued liabilities............. 199 (3,773) 4,394
------- ------- -------
Net cash provided by operating activities................... 22,567 17,200 22,162
------- ------- -------
Cash flows provided by (used in) investing activities:
Purchases of marketable securities........................ (47,089) (22,514) (43,226)
Proceeds from sales of marketable securities.............. 35,140 23,807 37,531
Proceeds from sale of assets.............................. 4,605 4,322 --
Capital expenditures...................................... (5,293) (13,226) (13,316)
------- ------- -------
Net cash (used in) investing activities..................... (12,637) (7,611) (19,011)
------- ------- -------
Cash flows provided by (used in) financing activities:
Principal payments on long-term debt...................... (115) (1,048) (458)
Dividends paid............................................ (6,686) (5,925) (5,903)
Purchase of treasury stock................................ -- -- (637)
Proceeds from sale of common stock through Employee Stock
Purchase Plan.......................................... 191 202 --
Proceeds from exercise of stock options................... 372 515 801
------- ------- -------
Net cash (used in) financing activities..................... (6,238) (6,256) (6,197)
------- ------- -------
Net increase (decrease) in cash............................. 3,692 3,333 (3,046)
Cash at beginning of year................................... 6,806 3,473 6,519
------- ------- -------
Cash at end of year......................................... $10,498 $ 6,806 $ 3,473
======= ======= =======
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest............................................... $ 163 $ 256 $ 320
Income taxes........................................... $16,234 $11,781 $10,577
======= ======= =======
The accompanying notes are an integral part of these financial statements.
F-7
110
JUNO LIGHTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF THE BUSINESS
Juno Lighting, Inc. (the "Company") is a specialist in the design,
manufacture and marketing of lighting fixtures for commercial and residential
use primarily in the United States.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All material intercompany accounts and
transactions have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
MARKETABLE SECURITIES
Consistent with the provisions of Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," the Company has classified its current and non-current securities
as available-for-sale and reports them at their estimated market values, which
have been determined based upon published market quotes. Unrealized gains and
losses relating to available-for-sale securities are considered to be temporary
and therefore are excluded from earnings and recorded as a separate component of
stockholders' equity until realized. Realized gains and losses on sales of
marketable securities are computed using the specific identification method.
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out) or
market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed over
estimated useful lives using the straight-line method for financial reporting
purposes and accelerated methods for income tax reporting. Depreciation expense
in 1998 and 1997 amounted to approximately $3,508,000 and $3,287,000,
respectively.
Useful lives for property and equipment are as follows:
Buildings and improvements................................. 20 - 40 years
Tools and dies............................................. 3 years
Machinery and equipment.................................... 7 years
Computer equipment......................................... 5 years
Office furniture and equipment............................. 5 years
GOODWILL
Goodwill is amortized using the straight-line method over a forty year
period.
F-8
111
JUNO LIGHTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INCOME TAXES
The Company uses the asset and liability approach under which deferred
taxes are provided for temporary differences between the financial reporting and
income tax bases of assets and liabilities based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect
taxable income.
RESEARCH AND DEVELOPMENT
The Company spent approximately $4,095,000, $4,719,000 and $4,309,000 on
research, development and testing of new products and development of related
tooling in fiscal 1998, 1997 and 1996, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's marketable securities are recorded at market value. The
carrying amount of the Company's other financial instruments approximates their
estimated fair value based upon market prices for the same or similar type of
financial instruments.
FOREIGN CURRENCY TRANSLATION
The financial statements of the Company's Canadian subsidiary have been
translated using local currency as the functional currency.
EARNINGS PER SHARE
Basic earnings per share are computed based upon weighted average number of
shares of common stock. Diluted earnings per share are computed based on the
weighted average number of shares of common stock and common stock equivalents
(stock options) outstanding. Share and per share information have been adjusted
for all stock splits.
STOCK-BASED COMPENSATION
As permitted by Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), the Company has elected
to continue to account for its stock-based awards in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25") and has provided the pro forma disclosures as required by SFAS 123
for the years ended November 30, 1998, 1997 and 1996.
MARKETABLE SECURITIES
Marketable securities consist principally of tax exempt municipal bonds.
The amortized cost of available-for-sale securities approximated the estimated
market value of such securities at November 30, 1998; gross unrealized holding
gains and losses were not significant. The estimated market value of
available-for-sale securities at November 30, 1998, by contractual maturity, are
shown below. Actual
F-9
112
JUNO LIGHTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
maturities may differ from contractual maturities as issuers have the right to
call or prepay certain of these securities.
MATURITY MARKET VALUE
- -------- --------------
(IN THOUSANDS)
Within one year........................................... $12,190
After one through ten years............................... 52,546
Over ten years............................................ 25,149
-------
$89,885
=======
Gross realized gains and losses on sales were not material.
INVENTORIES
Inventories consist of the following:
NOVEMBER 30,
------------------
1998 1997
------- -------
(IN THOUSANDS)
Finished goods.............................................. $13,164 $ 7,762
Raw materials............................................... 14,951 14,945
------- -------
Total....................................................... $28,115 $22,707
======= =======
Work in process inventories are not significant in amount and are included
in finished goods.
ACCRUED LIABILITIES
Accrued liabilities consist of the following:
NOVEMBER 30,
----------------
1998 1997
------ ------
(IN THOUSANDS)
Compensation and benefits................................... $4,684 $3,697
Current income taxes........................................ -- 323
Promotional programs........................................ 1,634 1,282
Real estate taxes........................................... 884 826
Commissions................................................. 443 378
Construction costs.......................................... -- 923
Other....................................................... 452 509
------ ------
Total....................................................... $8,097 $7,938
====== ======
F-10
113
JUNO LIGHTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
LONG-TERM DEBT
Long-term debt consists of the following:
NOVEMBER 30,
----------------
1998 1997
------ ------
(IN THOUSANDS)
Industrial Development Revenue Bond,
payable in escalating installments through December 2016,
plus interest at a variable rate, generally
approximating 67% of prime............................. $3,385 $3,500
Less current maturities..................................... 120 115
------ ------
Total long-term debt........................................ $3,265 $3,385
====== ======
The aforementioned bonds are collateralized by certain land, buildings, and
machinery and equipment. The aggregate amounts of existing long-term debt
maturing in each of the next five years are as follows:
1999 -- $120,000; 2000 -- $125,000; 2001 -- $135,000; 2002 -- $140,000;
2003 -- $145,000
TAXES ON INCOME
Provisions for federal and state income taxes in the consolidated
statements of income are comprised of the following:
NOVEMBER 30,
-----------------------------
1998 1997 1996
------- ------- -------
(IN THOUSANDS)
Current:
Federal................................................... $12,621 $ 9,494 $ 8,789
State..................................................... 2,632 2,120 1,563
------- ------- -------
15,253 11,614 10,352
------- ------- -------
Deferred:
Federal................................................... (528) (443) (117)
State..................................................... (93) (81) (20)
------- ------- -------
(621) (524) (137)
------- ------- -------
Total taxes on income....................................... $14,632 $11,090 $10,215
======= ======= =======
F-11
114
JUNO LIGHTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred tax assets (liabilities) are comprised of the following:
NOVEMBER 30,
------------------
1998 1997
------- -------
(IN THOUSANDS)
Reserves for doubtful accounts.............................. $ 451 $ 327
Inventory costs capitalized for tax purposes................ 547 452
Compensation and benefits................................... 993 857
Accrued warranty reserve.................................... 33 27
Accrued advertising......................................... 99 112
------- -------
Deferred tax assets....................................... 2,123 1,775
------- -------
Depreciation................................................ (1,020) (1,264)
Prepaid health and welfare costs............................ (328) (329)
Basis difference of acquired assets......................... (87) (95)
Capitalized interest........................................ (15) (34)
Real estate taxes........................................... (347) (348)
Unrealized holding gains.................................... (640) (378)
------- -------
Deferred tax liabilities.................................. (2,437) (2,448)
------- -------
Net deferred tax liability.................................. $ (314) $ (673)
======= =======
The following summary reconciles taxes at the federal statutory tax rate to
the Company's effective tax rate:
NOVEMBER 30,
--------------------
1998 1997 1996
---- ---- ----
Income taxes at statutory rate.............................. 35.0% 35.0% 35.0%
Dividend exclusion and municipal interest................... (3.5) (4.2) (4.3)
State and local taxes, net of federal income tax benefit.... 4.1 4.4 3.6
Other....................................................... (.1) .1 (.4)
---- ---- ----
Effective tax rate.......................................... 35.5% 35.3% 33.9%
==== ==== ====
STOCK BASED COMPENSATION PLANS
The Company maintains two stock-based compensation plans: a stock option
plan and a stock purchase plan. The Company's stock option plan provides for the
granting of stock options or stock appreciation rights ("SAR") to certain key
employees, including officers. The stock option plan is designed so that options
granted thereunder at 100% of the fair value of the common stock at date of
grant may, under certain circumstances, be treated as "incentive stock options"
as defined in Section 422 of the Internal Revenue Code of 1986, as amended.
Under the stock option plan, up to 600,000 shares of the Company's common stock
may be issued upon the exercise of stock options, and SARs may be granted with
respect to up to 600,000 shares of the Company's common stock. The per-share
option price for options granted under the stock option plan may not be less
than 100% of the fair market value of the Company's common stock on the date of
grant.
The Company's stock purchase plan allows employees to purchase shares of
the Company's common stock through payroll deductions over a twelve month
period. The purchase price is equal to 85% of the fair market value of the
common stock on either the first or last day of the accumulation period,
F-12
115
JUNO LIGHTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
whichever is lower. Purchases under the stock purchase plan are limited to the
lesser of $5,000 or 10% of an employees base salary. In connection with the
Company's stock purchase plan, 400,000 shares of common stock have been reserved
for future issuances. Under this stock purchase plan, 14,257 shares of common
stock were issued at $13.39 per share in 1998.
A summary of activity under the Company's stock option plan is as follows:
WEIGHTED
SHARES AVERAGE
AVAILABLE OPTIONS EXERCISE
FOR GRANT OUTSTANDING PRICE
--------- ----------- --------
Balance at November 30, 1995.............................. 271,000 445,000 $14.53
Options granted......................................... -- 1,000 $18.25
Options exercised....................................... -- (109,000) $ 7.32
Options canceled........................................ -- (12,000) $16.75
------- -------- ------
Balance at November 30, 1996.............................. 282,000 325,000 $16.87
Options granted......................................... -- 21,000 $16.16
Options exercised....................................... -- (32,000) $16.00
Options canceled........................................ -- (62,000) $16.76
------- -------- ------
Balance at November 30, 1997.............................. 323,000 252,000 $16.95
Options granted......................................... -- 11,000 $22.06
Options exercised....................................... -- (21,000) $17.47
Options canceled........................................ -- (6,000) $15.58
------- -------- ------
Balance at November 30, 1998.............................. 318,000 236,000 $17.17
======= ======== ======
A summary of outstanding and exercisable stock options as of November 30,
1998, is as follows:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------- --------------------
WEIGHTED
AVERAGED WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
NUMBER OF CONTRACTUAL LIFE EXERCISE NUMBER OF EXERCISE
RANGE OF EXERCISE PRICES SHARES (IN YEARS) PRICE SHARES PRICE
- ------------------------ --------- ---------------- -------- --------- --------
$14.44............................... 95,800 7.0 $14.44 54,800 $14.44
$15.38............................... 13,000 8.1 $15.38 2,600 $15.38
$16.69 - $18.50...................... 46,000 6.3 $18.46 33,400 $18.48
$19.63 - $22.19...................... 81,200 5.7 $19.95 54,400 $19.63
------- --- ------ ------- ------
236,000 6.5 $17.17 145,200 $17.33
======= === ====== ======= ======
As permitted under SFAS 123, the Company has elected to continue to follow
APB Opinion No. 25 in accounting for stock-based awards.
Pro forma information regarding net income and earnings per share is
required by SFAS 123 for stock-based awards granted after November 30, 1995, as
if the Company had accounted for its stock-based awards under the fair value
method of SFAS 123. The fair value of the Company's stock-based awards was
estimated as of the date of grant using the Black-Scholes option pricing model.
The weighted average estimated grant date fair value, as defined by SFAS
123, for options granted to employees during fiscal 1998, 1997 and 1996 was
$8.52, $7.54 and $6.74 per share, respectively, under the
F-13
116
JUNO LIGHTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Company's Stock Option Plan and $4.88, $4.77 and $5.08, respectively, under the
Company's Stock Purchase Plan. The fair value of the Company's stock-based
awards was estimated assuming the following weighted average assumptions:
1998 1997 1996
---- ---- ----
Expected life (in years).................................... 8 8 8
Expected volatility......................................... 35.9% 35.9% 38.2%
Dividend yield.............................................. 2.0% 2.0% 2.0%
Risk free interest rate..................................... 4.7% 6.0% 6.3%
Had the Company recorded compensation based on the estimated grant date
fair value, as defined by SFAS 123, for awards granted under its stock-based
compensation plans, the Company's net income and net income per share would have
been reduced to the pro forma amounts below for the years ended November 30,
1998, 1997 and 1996:
1998 1997 1996
------- ------- -------
(IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)
Net income as reported.................................... $26,625 $20,303 $19,897
Pro forma net income...................................... 26,551 20,223 19,866
Earnings per share as reported (basic & diluted).......... $ 1.43 $ 1.10 $ 1.08
Pro forma earnings per share (basic & diluted)............ 1.43 1.09 1.07
The pro forma effect on net income and earnings per common share for 1998,
1997 and 1996 is not representative of the pro forma effect on net income in
future years because it does not take into consideration pro forma compensation
expense related to grants made prior to fiscal 1996.
PROFIT SHARING PLAN
The Company has a profit sharing plan pursuant to Section 401(k) of the
Internal Revenue Code, whereby participants may contribute a percentage of
compensation, but not in excess of the maximum allowed under the Code. The plan
provides for a matching contribution by the Company which amounted to
approximately $195,000, $181,000 and $163,000 in 1998, 1997, and 1996,
respectively. In addition, the Company may make additional contributions at the
discretion of the Board of Directors. The Board authorized additional
contributions of $807,000, $598,000, and $569,000 in 1998, 1997 and 1996,
respectively.
COMMON SHARES
Pursuant to a dividend distribution declared by the Board of Directors in
1989, each common share outstanding has one non-voting common share purchase
right. The rights, which are exercisable only under certain conditions, entitle
the holder to purchase common shares at prices specified in the Rights
Agreement. These rights expire on August 3, 1999.
F-14
117
JUNO LIGHTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMITMENTS AND CONTINGENCIES
Total minimum rentals under noncancelable operating leases for distribution
warehouse space and equipment at November 30, 1998 are as follows:
NOVEMBER 30,
--------------
(IN THOUSANDS)
1999........................................................ $1,104
2000........................................................ 843
2001........................................................ 428
2002........................................................ 310
2003........................................................ 129
------
Total....................................................... $2,814
======
Total rent expense charged to operations amounted to approximately
$874,000, $823,000, and $897,000 for the years ended November 30, 1998, 1997 and
1996, respectively. In the ordinary course of business, there are various claims
and lawsuits brought by or against the Company. In the opinion of management,
the ultimate outcome of these matters will not materially affect the Company's
operations or financial position.
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
A summary of selected quarterly information for 1998 and 1997 is as
follows:
1998 QUARTER ENDED
------------------------------------------------
FEB. 28 MAY 31 AUG. 31 NOV. 30 TOTAL*
------- ------- ------- ------- --------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Net sales.................................. $34,386 $40,846 $44,419 $41,290 $160,941
Gross profit............................... 16,770 20,501 22,850 20,938 81,059
Net income................................. 4,766 6,822 8,050 6,988 26,625
Net income per common share (basic and
diluted)................................. $ .26 $ .37 $ .43 $ .37 $ 1.43
- ---------------
* Due to rounding differences, the totals for the fiscal year ended November 30,
1998 may not equal the sum of the respective items for the four quarters then
ended.
1997 QUARTER ENDED
------------------------------------------------
FEB. 28 MAY 31 AUG. 31 NOV. 30 TOTAL
------- ------- ------- ------- --------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Net sales.................................. $30,804 $35,832 $37,238 $35,981 $139,855
Gross profit............................... 14,351 17,024 18,767 17,832 67,974
Net income................................. 3,890 5,298 5,812 5,303 20,303
Net income per common share (basic and
diluted)................................. $ .21 $ .29 $ .31 $ .29 $ 1.10
GUARANTORS' FINANCIAL INFORMATION
The Company is planning to issue and register $125 million of Series B
Senior Subordinated Notes at 11 7/8% (the "Senior Subordinated Notes") under the
Securities Act of 1933, as amended (the "Act"). Pursuant to the registration and
issuance of the Senior Subordinated Notes under the Act, the Company's
F-15
118
JUNO LIGHTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GUARANTORS' FINANCIAL INFORMATION (CONTINUED)
domestic subsidiaries, Juno Manufacturing, Inc., Indy Lighting, Inc. and
Advanced Fiberoptic Technologies, Inc., will provide full and unconditional
senior subordinated guarantees for the Senior Subordinated Notes on a joint and
several basis.
Following is consolidating condensed financial information pertaining to
the Company ("Parent") and its subsidiary guarantors and subsidiary
non-guarantors.
FOR THE YEAR ENDED NOVEMBER 30, 1998
-------------------------------------------------------------------------
(IN THOUSANDS)
GUARANTOR NON-GUARANTOR TOTAL
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
Net sales........................... $124,945 $102,924 $9,493 $(76,421) $160,941
Cost of sales....................... 77,837 63,029 7,563 (68,547) 79,882
-------- -------- ------ -------- --------
Gross profit........................ 47,108 39,895 1,930 (7,874) 81,059
Selling, general and
administrative.................... 27,400 14,855 1,686 142 44,083
-------- -------- ------ -------- --------
Operating income.................... 19,708 25,040 244 (8,016) 36,976
Other income (expense).............. 3,806 615 (144) 4 4,281
-------- -------- ------ -------- --------
Income before taxes on income....... 23,514 25,655 100 (8,012) 41,257
Taxes on income..................... 4,990 9,591 60 (9) 14,632
-------- -------- ------ -------- --------
Net income.......................... $ 18,524 $ 16,064 $ 40 $ (8,003) $ 26,625
======== ======== ====== ======== ========
FOR THE YEAR ENDED NOVEMBER 30, 1997
-------------------------------------------------------------------------
(IN THOUSANDS)
GUARANTOR NON-GUARANTOR TOTAL
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
Net sales........................... $109,684 $30,099 $8,643 $(8,571) $139,855
Cost of sales....................... 55,547 18,421 6,672 (8,759) 71,881
-------- ------- ------ ------- --------
Gross profit........................ 54,137 11,678 1,971 188 67,974
Selling, general and
administrative.................... 30,773 7,816 1,821 191 40,601
-------- ------- ------ ------- --------
Operating income.................... 23,364 3,862 150 (3) 27,373
Other income (expense).............. 3,227 953 (156) (4) 4,020
-------- ------- ------ ------- --------
Income (loss) before taxes on
income............................ 26,591 4,815 (6) (7) 31,393
Taxes on income..................... 9,247 1,839 9 (5) 11,090
-------- ------- ------ ------- --------
Net income (loss)................... $ 17,344 $ 2,976 $ (15) $ (2) $ 20,303
======== ======= ====== ======= ========
F-16
119
GUARANTORS' FINANCIAL INFORMATION (CONTINUED)
FOR THE YEAR ENDED NOVEMBER 30, 1996
-------------------------------------------------------------------------
(IN THOUSANDS)
GUARANTOR NON-GUARANTOR TOTAL
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
Net sales........................... $101,869 $31,139 $7,774 $(9,303) $131,479
Cost of sales....................... 52,531 19,041 6,131 (9,384) 68,319
-------- ------- ------ ------- --------
Gross profit........................ 49,338 12,098 1,643 81 63,160
Selling, general and
administrative.................... 27,498 7,352 1,727 189 36,766
-------- ------- ------ ------- --------
Operating income (loss)............. 21,840 4,746 (84) (108) 26,394
Other income (expense).............. 3,735 144 (161) -- 3,718
-------- ------- ------ ------- --------
Income (loss) before taxes on
income............................ 25,575 4,890 (245) (108) 30,112
Taxes on income..................... 8,241 2,086 (97) (15) 10,215
-------- ------- ------ ------- --------
Net income (loss)................... $ 17,334 $ 2,804 $ (148) $ (93) $ 19,897
======== ======= ====== ======= ========
NOVEMBER 30, 1998
-------------------------------------------------------------------------
(IN THOUSANDS)
GUARANTOR NON-GUARANTOR TOTAL
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
Cash................................ $ 9,066 $ 1,054 $ 349 $ 29 $ 10,498
Marketable securities............... 77,836 -- -- -- 77,836
Accounts receivable, net............ 71,605 94,485 1,412 (142,925) 24,577
Inventories......................... 19,528 15,472 1,354 (8,239) 28,115
Other current assets................ 4,222 769 50 -- 5,041
-------- -------- ------ --------- --------
Total current assets........... 182,257 111,780 3,165 (151,135) 146,067
Property and equipment.............. 10,107 49,330 2,521 (431) 61,527
Less accumulated depreciation....... (1,900) (13,422) (350) 321 (15,351)
-------- -------- ------ --------- --------
Net property and equipment..... 8,207 35,908 2,171 (110) 46,176
Other assets........................ 76,798 59 -- (60,261) 16,596
-------- -------- ------ --------- --------
Total assets........................ $267,262 $147,747 $5,336 $(211,506) $208,839
======== ======== ====== ========= ========
Current liabilities................. $ 95,706 $ 57,945 $1,903 $(142,896) $ 12,658
Other liabilities................... 4,646 -- 2,204 (2,117) 4,733
-------- -------- ------ --------- --------
Total liabilities................... 100,352 57,945 4,107 (145,013) 17,391
Total stockholders' equity.......... 166,910 89,802 1,229 (66,493) 191,448
-------- -------- ------ --------- --------
Total liabilities and stockholders'
equity............................ $267,262 $147,747 $5,336 $(211,506) $208,839
======== ======== ====== ========= ========
F-17
120
GUARANTORS' FINANCIAL INFORMATION (CONTINUED)
NOVEMBER 30, 1997
-------------------------------------------------------------------------
(IN THOUSANDS)
GUARANTOR NON-GUARANTOR TOTAL
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
Cash................................ $ 4,880 $ 1,646 $ 157 $ 123 $ 6,806
Marketable securities............... 65,766 -- -- -- 65,766
Accounts receivable, net............ 20,475 15,567 1,354 (14,863) 22,533
Inventories......................... 17,419 4,247 1,285 (244) 22,707
Other current assets................ 4,407 126 41 122 4,696
-------- ------- ------ -------- --------
Total current assets........... 112,947 21,586 2,837 (14,862) 122,508
Property and equipment.............. 50,269 3,786 2,712 (431) 56,336
Less accumulated depreciation....... (9,318) (2,579) (308) 318 (11,887)
-------- ------- ------ -------- --------
Net property and equipment..... 40,951 1,207 2,404 (113) 44,449
Other assets........................ 26,775 4,390 -- (10,733) 20,432
-------- ------- ------ -------- --------
Total assets........................ $180,673 $27,183 $5,241 $(25,708) $187,389
======== ======= ====== ======== ========
Current liabilities................. $ 21,708 $ 2,965 $1,572 $(14,613) $ 11,632
Other liabilities................... 5,031 -- 2,229 (2,133) 5,127
-------- ------- ------ -------- --------
Total liabilities................... 26,739 2,965 3,801 (16,746) 16,759
Total stockholders' equity.......... 153,934 24,218 1,440 (8,962) 170,630
-------- ------- ------ -------- --------
Total liabilities and stockholders'
equity............................ $180,673 $27,183 $5,241 $(25,708) $187,389
======== ======= ====== ======== ========
FOR THE YEAR ENDED NOVEMBER 30, 1998
----------------------------------------------------------------------------
(IN THOUSANDS)
GUARANTOR NON-GUARANTOR TOTAL
PARENT SUBSIDIARIES(1) SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- --------------- ------------- ------------ ------------
Net cash provided by operating
activities..................... $ 20,301 $ 2,068 $207 $ (9) $ 22,567
-------- ------- ---- ----- --------
Cash flows provided by (used in)
investing activities
Capital expenditures........... (2,533) (2,760) -- -- (5,293)
Proceeds from sale of assets... 4,605 -- -- -- 4,605
Capital contributions.......... -- 100 10 (110) --
Purchases of marketable
securities.................. (47,089) -- -- -- (47,089)
Sales of marketable
securities.................. 35,140 -- -- -- 35,140
-------- ------- ---- ----- --------
Net cash provided by (used in)
investing activities........... (9,877) (2,660) 10 (110) (12,637)
-------- ------- ---- ----- --------
Cash provided by (used in)
financing activities
Dividends paid................. (6,686) -- -- -- (6,686)
Other financing activities..... 448 -- (24) 24 448
-------- ------- ---- ----- --------
Net cash used in financing
activities..................... (6,238) -- (24) 24 (6,238)
-------- ------- ---- ----- --------
Net increase (decrease) in
cash........................... 4,186 (592) 193 (95) 3,692
Cash at beginning of period...... 4,880 1,646 157 123 6,806
-------- ------- ---- ----- --------
Cash at end of period............ $ 9,066 $ 1,054 $350 $ 28 $ 10,498
======== ======= ==== ===== ========
- -------------------------
(1) In June 1998, the Company capitalized its guarantor subsidiary, Juno
Manufacturing, Inc., with a non-cash transfer of $49,415 of net assets
principally consisting of property and equipment and inventory.
F-18
121
GUARANTORS' FINANCIAL INFORMATION (CONTINUED)
FOR THE YEAR ENDED NOVEMBER 30, 1997
-------------------------------------------------------------------------
(IN THOUSANDS)
GUARANTOR NON-GUARANTOR TOTAL
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
Net cash provided by operating
activities........................ $ 15,962 $1,062 $124 $ 52 $ 17,200
-------- ------ ---- ---- --------
Cash flows provided by (used in)
investing activities
Capital expenditures.............. (13,112) (114) -- -- (13,226)
Proceeds from sale of assets...... 4,322 -- -- -- 4,322
Purchases of marketable
securities..................... (22,514) -- -- -- (22,514)
Sales of marketable securities.... 23,807 -- -- -- 23,807
-------- ------ ---- ---- --------
Net cash used in investing
activities........................ (7,497) (114) -- -- (7,611)
-------- ------ ---- ---- --------
Cash flows provided by (used in)
financing activities
Dividends paid.................... (5,925) -- -- -- (5,925)
Other financing activities........ (331) -- (22) 22 (331)
-------- ------ ---- ---- --------
Net cash used in financing
activities........................ (6,256) -- (22) 22 (6,256)
-------- ------ ---- ---- --------
Net increase in cash................ 2,209 948 102 74 3,333
Cash at beginning of period......... 2,671 698 55 49 3,473
-------- ------ ---- ---- --------
Cash at end of period............... $ 4,880 $1,646 $157 $123 $ 6,806
======== ====== ==== ==== ========
FOR THE YEAR ENDED NOVEMBER 30, 1996
-------------------------------------------------------------------------
(IN THOUSANDS)
GUARANTOR NON-GUARANTOR TOTAL
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
Net cash provided by operating
activities........................ $ 21,494 $ 555 $ 88 $25 $ 22,162
-------- ----- ---- --- --------
Cash flows provided by (used in)
investing activities
Capital expenditures.............. (12,860) (380) (76) -- (13,316)
Proceeds from sale of assets...... -- -- -- --
Purchases of marketable
securities..................... (43,226) -- -- -- (43,226)
Sales of marketable securities.... 37,531 -- -- -- 37,531
-------- ----- ---- --- --------
Net cash used in investing
activities........................ (18,555) (380) (76) -- (19,011)
-------- ----- ---- --- --------
Cash flows provided by (used in)
financing activities
Dividends paid.................... (5,903) -- -- -- (5,903)
Other financing activities........ (294) -- (22) 22 (294)
-------- ----- ---- --- --------
Net cash used in financing
activities........................ (6,197) -- (22) 22 (6,197)
-------- ----- ---- --- --------
Net increase (decrease) in cash..... (3,258) 175 (10) 47 (3,046)
Cash at beginning of period......... 5,929 523 65 2 6,519
-------- ----- ---- --- --------
Cash at end of period............... $ 2,671 $ 698 $ 55 $49 $ 3,473
======== ===== ==== === ========
F-19
122
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED
--------------------------
MAY 31, MAY 31,
1999 1998
----------- -----------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS EXCEPT PER
SHARE AMOUNTS)
Net sales................................................... $45,504 $40,846
Cost of sales............................................... 23,477 20,345
------- -------
Gross profit.............................................. 22,027 20,501
Selling, general and administrative......................... 11,876 10,873
------- -------
Operating income.......................................... 10,151 9,628
Other income................................................ 1,136 1,141
------- -------
Income before taxes on income............................. 11,287 10,769
Taxes on income............................................. 3,981 3,947
------- -------
Net income.................................................. $ 7,306 $ 6,822
======= =======
Net income per common share -- basic........................ $ .39 $ .37
======= =======
Net income per common share -- diluted...................... $ .39 $ .37
======= =======
The accompanying notes are an integral part of these financial statements.
F-20
123
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
SIX MONTHS ENDED
--------------------------
MAY 31, MAY 31,
1999 1998
----------- -----------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS EXCEPT PER
SHARE AMOUNTS)
Net sales................................................... $82,781 $75,232
Cost of sales............................................... 42,032 37,961
------- -------
Gross profit.............................................. 40,749 37,271
Selling, general and administrative......................... 22,672 21,341
------- -------
Operating income.......................................... 18,077 15,930
Other income................................................ 2,395 2,071
------- -------
Income before taxes on income............................. 20,472 18,001
Taxes on income............................................. 7,157 6,414
------- -------
Net income.................................................. $13,315 $11,587
======= =======
Net income per common share -- basic........................ $ .72 $ .62
======= =======
Net income per common share -- diluted...................... $ .71 $ .62
======= =======
The accompanying notes are an integral part of these financial statements.
F-21
124
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MAY 31, NOVEMBER 30,
1999 1998
-------- ------------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE
AMOUNTS)
ASSETS
Current assets:
Cash and cash equivalents................................. $ 28,232 $ 10,498
Marketable securities..................................... 74,485 77,836
Accounts receivable, less allowance for possible losses of
$1,240 and $1,205...................................... 28,515 24,577
Inventories at lower of cost or market.................... 29,318 28,115
Prepaid expenses and miscellaneous........................ 4,319 5,041
-------- --------
Total current assets.............................. 164,869 146,067
-------- --------
Property, plant and equipment,
less accumulated depreciation of $17,346 and $15,351...... 47,313 46,176
-------- --------
Other assets:
Marketable securities.................................. 0 12,049
Goodwill and other intangibles, net of accumulated
amortization of $1,698 and $1,536..................... 4,348 3,940
Miscellaneous.......................................... 1,069 607
-------- --------
Total other assets................................ 5,417 16,596
-------- --------
$217,599 $208,839
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 6,548 $ 4,441
Accrued liabilities....................................... 5,775 8,217
-------- --------
Total current liabilities......................... 12,323 12,658
-------- --------
Long-term debt and deferred income taxes.................... 4,859 4,733
-------- --------
Stockholders' equity:
Common stock, $.01 par value, shares authorized
50,000,000; outstanding 18,617,227 and 18,595,327...... 186 186
Paid-in capital........................................... 5,864 5,484
Accumulated other comprehensive income.................... (402) 604
Retained earnings......................................... 194,769 185,174
-------- --------
Total stockholders' equity........................ 200,417 191,448
-------- --------
$217,599 $208,839
======== ========
The accompanying notes are an integral part of these financial statements.
F-22
125
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF RETAINED EARNINGS
SIX MONTHS ENDED
MAY 31, 1999
----------------
(UNAUDITED)
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE AMOUNT)
Retained earnings, beginning of period............. $185,174
Cash dividend ($.20 per share)..................... (3,720)
Net income, six months ended May 31, 1999.......... 13,315
--------
Retained earnings, end of period................... $194,769
========
The accompanying notes are an integral part of these financial statements.
F-23
126
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED
--------------------------
MAY 31, MAY 31,
1999 1998
----------- -----------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
Cash flows provided by (used in) operating activities:
Net income................................................ $ 13,315 $ 11,587
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation & amortization............................ 2,076 1,842
Gain on sale of assets................................. -- (175)
Changes in assets and liabilities:
(Increase) in accounts receivable.................... (3,819) (4,070)
(Increase) in inventory.............................. (1,203) (3,007)
Decrease in prepaid expense.......................... 1,297 520
(Increase) in other assets........................... (950) (41)
Increase (decrease) in accounts payable and accrued
expenses............................................ (335) 662
Deferred income taxes................................ 186 33
-------- --------
Net cash provided by operating activities:.................. 10,567 7,351
-------- --------
Cash flows provided by (used in) investing activities:
Proceeds on sale of building.............................. -- 4,601
Capital expenditures...................................... (3,133) (2,536)
Purchases of marketable securities........................ (63,966) (26,093)
Sales of marketable securities............................ 77,666 15,500
-------- --------
Net cash provided by (used in) investing activities......... 10,567 (8,528)
-------- --------
Cash flows provided by (used in) financing activities:
Proceeds from exercise of stock options................... 380 249
Dividend paid............................................. (3,720) (3,341)
Principal payments on long-term debt...................... (60) (58)
-------- --------
Net cash (used in) financing activities................ (3,400) (3,150)
-------- --------
Net increase (decrease) in cash............................. 17,734 (4,327)
Cash at beginning of period................................. 10,498 6,806
-------- --------
Cash at end of period....................................... $ 28,232 $ 2,479
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest............................................... $ 62 $ 78
Income taxes........................................... 7,114 5,810
The accompanying notes are an integral part of these financial statements.
F-24
127
JUNO LIGHTING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL INFORMATION
The financial information presented in these consolidated financial
statements is unaudited but, in the opinion of management, reflects all normal
adjustments necessary for the fair presentation of the Company's financial
position, results of its operations and cash flows. The information in the
condensed consolidated balance sheet as of November 30, 1998 was derived from
the Company's audited consolidated financial statements.
INVENTORIES
Inventories are summarized as follows:
MAY 31, NOVEMBER 30,
1999 1998
------- ------------
(IN THOUSANDS)
Finished goods.............................................. $13,204 $13,164
Raw materials............................................... 16,114 14,951
------- -------
$29,318 $28,115
======= =======
NET INCOME PER COMMON SHARE
Basic earnings per share is calculated by dividing net income by the
weighted average number of common shares outstanding. Diluted earnings per share
is calculated by dividing net income by the weighted average number of common
shares outstanding including assumed exercise of dilutive stock options during
the periods. Such weighted average number of shares outstanding is as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------- ------------------------
MAY 31, MAY 31, MAY 31, MAY 31,
1999 1998 1999 1998
---------- ---------- ---------- ----------
Basic....................................... 18,602,077 18,564,020 18,599,184 18,562,199
Diluted..................................... 18,653,666 18,608,016 18,654,308 18,594,120
COMPREHENSIVE INCOME
As of December 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130). The
adoption of this Statement had no impact on the Company's net income or
stockholders' equity. SFAS 130 establishes new rules for the reporting and
display of comprehensive income and its components. SFAS 130 requires foreign
currency translation adjustments and unrealized gains or losses on the Company's
available-for-sale securities to be included in other comprehensive income.
Prior to the adoption of SFAS 130, the Company reported such adjustments and
unrealized gains or losses separately in stockholders' equity. Amounts in prior
year financial statements have been reclassified to conform to SFAS 130.
F-25
128
JUNO LIGHTING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The components of comprehensive income, net of related tax, are as follows
(in thousands):
THREE MONTHS ENDED SIX MONTHS ENDED
MAY 31, MAY 31,
------------------ ------------------
1999 1998 1999 1998
------- ------- ------- -------
Net income.......................................... $7,306 $6,822 $13,315 $11,587
Net change in unrealized gain (loss) on
available-for-sale securities..................... (913) 153 (1,125) 358
Foreign currency translation adjustment............. 64 (87) 118 (84)
------ ------ ------- -------
Comprehensive income.............................. $6,457 $6,888 $12,308 $11,861
====== ====== ======= =======
The components of accumulated other comprehensive income, net of related
tax, are as follows (in thousands):
MAY 31, NOVEMBER 30,
1999 1998
------- ------------
Unrealized gain on available-for-sale securities............ $ 135 $1,259
Foreign currency translation adjustment..................... (537) (655)
----- ------
Accumulated other comprehensive income.................... $(402) $ 604
===== ======
GUARANTORS' FINANCIAL INFORMATION
The Company is planning to issue and register $125 million of Series B
Senior Subordinated Notes at 11 7/8% (the "Senior Subordinated Notes") under the
Securities Act of 1933, as amended (the "Act"). Pursuant to the registration and
issuance of the Senior Subordinated Notes under the Act, the Company's domestic
subsidiaries, Juno Manufacturing, Inc., Indy Lighting, Inc. and Advanced
Fiberoptic Technologies, Inc., will provide full and unconditional senior
subordinated guarantees for the Senior Subordinated Notes on a joint and several
basis.
Following is consolidating condensed financial information pertaining to
the Company ("Parent") and its subsidiary guarantors and subsidiary
non-guarantors.
F-26
129
GUARANTORS' FINANCIAL INFORMATION (CONTINUED)
FOR THE SIX MONTHS ENDED MAY 31, 1999
------------------------------------------------------------------------
(IN THOUSANDS)
GUARANTOR NON-GUARANTOR TOTAL
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------- ------------ ------------
Net sales............................ $65,433 $68,037 $4,772 $(55,461) $82,781
Cost of sales........................ 51,298 41,971 4,197 (55,434) 42,032
------- ------- ------ -------- -------
Gross profit......................... 14,135 26,066 575 (27) 40,749
Selling, general and
administrative..................... 11,394 10,314 909 55 22,672
------- ------- ------ -------- -------
Operating income (loss).............. 2,741 15,752 (334) (82) 18,077
Other income (expense)............... 2,179 282 (66) -- 2,395
------- ------- ------ -------- -------
Income (loss) before taxes on
income............................. 4,920 16,034 (400) (82) 20,472
Taxes on income...................... 1,631 5,700 (172) (2) 7,157
------- ------- ------ -------- -------
Net income........................... $ 3,289 $10,334 $ (228) $ (80) $13,315
======= ======= ====== ======== =======
FOR THE SIX MONTHS ENDED MAY 31, 1998
------------------------------------------------------------------------
(IN THOUSANDS)
GUARANTOR NON-GUARANTOR TOTAL
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------- ------------ ------------
Net sales............................ $59,941 $15,883 $4,073 $(4,665) $75,232
Cost of sales........................ 30,133 9,333 3,183 (4,688) 37,961
------- ------- ------ ------- -------
Gross profit......................... 29,808 6,550 890 23 37,271
Selling, general and
administrative..................... 15,860 4,620 778 83 21,341
------- ------- ------ ------- -------
Operating income..................... 13,948 1,930 112 (60) 15,930
Other income (expense)............... 1,738 400 (74) 7 2,071
------- ------- ------ ------- -------
Income before taxes on income........ 15,686 2,330 38 (53) 18,001
Taxes on income...................... 5,379 1,018 22 (5) 6,414
------- ------- ------ ------- -------
Net income........................... $10,307 $ 1,312 $ 16 $ (48) $11,587
======= ======= ====== ======= =======
F-27
130
GUARANTORS' FINANCIAL INFORMATION (CONTINUED)
MAY 31, 1999
-------------------------------------------------------------------------
GUARANTOR NON-GUARANTOR TOTAL
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
Cash................................ $ 28,044 $ (287) $ 96 $ 379 $ 28,232
Marketable securities............... 74,485 -- -- -- 74,485
Accounts receivable, net............ 124,801 154,237 1,899 (252,422) 28,515
Inventories......................... 18,461 17,710 1,463 (8,316) 29,318
Other current assets................ 3,473 779 67 -- 4,319
-------- -------- ------ --------- --------
Total current assets........... 249,264 172,439 3,525 (260,359) 164,869
Property and equipment.............. 10,195 52,451 2,435 (422) 64,659
Less accumulated depreciation....... (2,064) (15,210) (395) 323 (17,346)
-------- -------- ------ --------- --------
Net property and equipment..... 8,131 37,241 2,040 (99) 47,313
Other assets........................ 64,664 1,007 -- (60,254) 5,417
-------- -------- ------ --------- --------
Total assets........................ $322,059 $210,687 $5,565 $(320,712) $217,599
======== ======== ====== ========= ========
Current liabilities................. $151,549 $110,553 $2,255 $(252,034) $ 12,323
Other liabilities................... 4,775 -- 2,191 (2,107) 4,859
-------- -------- ------ --------- --------
Total liabilities................... 156,324 110,553 4,446 (254,141) 17,182
Total stockholders' equity.......... 165,735 100,134 1,119 (66,571) 200,417
-------- -------- ------ --------- --------
Total liabilities and stockholders'
equity............................ $322,059 $210,687 $5,565 $(320,712) $217,599
======== ======== ====== ========= ========
NOVEMBER 30, 1998
-------------------------------------------------------------------------
(IN THOUSANDS)
GUARANTOR NON-GUARANTOR TOTAL
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
Cash................................ $ 9,066 $ 1,054 $ 349 $ 29 $ 10,498
Marketable securities............... 77,836 -- -- -- 77,836
Accounts receivable, net............ 71,605 94,485 1,412 (142,925) 24,577
Inventories......................... 19,528 15,472 1,354 (8,239) 28,115
Other current assets................ 4,222 769 50 -- 5,041
-------- -------- ------ --------- --------
Total current assets........... 182,257 111,780 3,165 (151,135) 146,067
Property and equipment.............. 10,107 49,330 2,521 (431) 61,527
Less accumulated depreciation....... (1,900) (13,422) (350) 321 (15,351)
-------- -------- ------ --------- --------
Net property and equipment..... 8,207 35,908 2,171 (110) 46,176
Other assets........................ 76,798 59 -- (60,261) 16,596
-------- -------- ------ --------- --------
Total assets........................ $267,262 $147,747 $5,336 $(211,506) $208,839
======== ======== ====== ========= ========
Current liabilities................. $ 95,706 $ 57,945 $1,903 $(142,896) $ 12,658
Other liabilities................... 4,646 -- 2,204 (2,117) 4,733
-------- -------- ------ --------- --------
Total liabilities................... 100,352 57,945 4,107 (145,013) 17,391
Total stockholders' equity.......... 166,910 89,802 1,229 (66,493) 191,448
-------- -------- ------ --------- --------
Total liabilities and stockholders'
equity............................ $267,262 $147,747 $5,336 $(211,506) $208,839
======== ======== ====== ========= ========
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131
GUARANTORS' FINANCIAL INFORMATION (CONTINUED)
FOR THE SIX MONTHS ENDED MAY 31, 1999
-------------------------------------------------------------------------
(IN THOUSANDS)
GUARANTOR NON-GUARANTOR TOTAL
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
Net cash provided by (used in)
operating activities.............. $ 8,789 $1,558 $(117) $337 $10,567
-------- ------ ----- ---- -------
Cash flows provided by (used in)
investing activities
Capital expenditures.............. (112) (2,898) (123) -- (3,133)
Purchases of marketable
securities..................... (63,966) -- -- -- (63,966)
Sales of marketable securities.... 77,666 -- -- -- 77,666
-------- ------ ----- ---- -------
Net cash provided by (used in)
investing activities.............. 13,588 (2,898) (123) -- 10,567
-------- ------ ----- ---- -------
Cash flows provided by (used in)
financing activities
Dividends paid.................... (3,720) -- -- -- (3,720)
Other financing activities........ 320 -- (13) 13 320
-------- ------ ----- ---- -------
Net cash provided used in financing
activities........................ (3,400) -- (13) 13 (3,400)
-------- ------ ----- ---- -------
Net increase (decrease) in cash..... 18,977 (1,340) (253) 350 17,734
Cash at beginning of period......... 9,066 1,054 349 29 10,498
-------- ------ ----- ---- -------
Cash at end of period............... $ 28,043 $ (286) $ 96 $379 $28,232
======== ====== ===== ==== =======
FOR THE SIX MONTHS ENDED MAY 31, 1998
-------------------------------------------------------------------------
(IN THOUSANDS)
GUARANTOR NON-GUARANTOR TOTAL
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
Net cash provided by (used in)
operating activities.............. $ 8,377 $ (827) $(64) $(135) $ 7,351
-------- ------- ---- ----- --------
Cash flows provided by (used in)
investing activities
Capital expenditures.............. (2,350) (186) -- -- (2,536)
Proceeds from sale of assets...... 4,601 -- -- -- 4,601
Purchases of marketable
securities..................... (26,093) -- -- -- (26,093)
Sales of marketable securities.... 15,500 -- -- -- 15,500
-------- ------- ---- ----- --------
Net cash used in investing
activities........................ (8,342) (186) -- -- (8,528)
-------- ------- ---- ----- --------
Cash flows provided by (used in)
financing activities
Dividends paid.................... (3,341) -- -- -- (3,341)
Other financing activities........ 191 -- (12) 12 191
-------- ------- ---- ----- --------
Net cash provided by (used in)
financing activities.............. (3,150) -- (12) 12 (3,150)
-------- ------- ---- ----- --------
Net decrease in cash................ (3,115) (1,013) (76) (123) (4,327)
Cash at beginning of period......... 4,880 1,646 157 123 6,806
-------- ------- ---- ----- --------
Cash at end of period............... $ 1,765 $ 633 $ 81 $ -- $ 2,479
======== ======= ==== ===== ========
F-29
132
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$125,000,000
(JUNO LIGHTING LOGO)
EXCHANGE OFFER
117/8% SENIOR SUBORDINATED NOTES DUE 2009
------------------------------
PROSPECTUS
------------------------------
September , 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNTIL SEPTEMBER , 1999, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES. WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
133
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As authorized by the Delaware General Corporation Law ("DGCL"), the
Certificate of Incorporation of Juno provides that no director of Juno shall be
personally liable to Juno or its stockholders for monetary damages for any
breach of fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to Juno or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violating of law, (iii) under Section 174 of the DGCL (relating to any willful
or negligent declaration of an unlawful dividend, stock purchase or redemption)
or (iv) for any transaction from which the director derived any improper
personal benefits. The effect of this provision is to eliminate the rights of
Juno and its stockholders (through stockholders' derivative suits on behalf of
Juno) to recover monetary damages against a director for breach of his fiduciary
duty as a director (including breaches resulting from grossly negligent
behavior), except in the situations described above. This provision does not
limit the liability of directors under federal securities laws and have no
effect on non-monetary remedies that may be available to Juno or its
stockholders.
The By-Laws of Juno provides for indemnification by Juno of its directors
and officers to the fullest extent permitted by the DGCL. The By-Laws also
provide that Juno may advance litigation expenses to a director, officer,
employee or agent upon receipt of an undertaking by or on behalf of such
director, officer, employee or agent to repay such amount if it is ultimately
determined that the director, officer, employee or agent is not entitled to be
indemnified by Juno.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
EXHIBIT NO. EXHIBIT DESCRIPTION
- ----------- -------------------
1.1 Purchase Agreement dated June 24, 1999 by and among Juno
Lighting, Inc., Juno Manufacturing, Inc., Indy Lighting,
Inc., Advanced Fiberoptic Technologies, Inc., Banc of
America Securities LLC and Credit Suisse First Boston
Corporation.
3.1 Amended and Restated Certificate of Incorporation of Juno.
3.2 By-Laws of Juno Lighting, Inc., as amended. Filed as Exhibit
3.1 to the Company's Annual Report on Form 10-K (File No.
0-11631) for the fiscal year ended November 30, 1990 and
incorporated herein by reference.
3.2(a) Amendment to By-Laws of Juno Lighting, Inc. Filed as Exhibit
3.1 to the Company's quarterly report on Form 10-Q (File No.
0-11631) for the quarter ended May 31, 1991 and incorporated
herein by reference.
4.1 Indenture, dated as of June 30, 1999, by and among Juno
Lighting, Inc., Juno Manufacturing, Inc., Indy Lighting,
Inc., Advanced Fiberoptic Technologies, Inc. and Firstar
Bank of Minnesota, N.A., as Trustee for the 11 7/8% Senior
Subordinated Notes due 2009.
4.2 Registration Rights Agreement, dated as of June 30, 1999, by
and among Juno Lighting, Inc., Juno Manufacturing, Inc.,
Indy Lighting, Inc., Advanced Fiberoptic Technologies, Inc.,
Banc of America Securities LLC and Credit Suisse First
Boston Corporation.
5.1* Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to
the legality of the new notes.
10.1 Juno Lighting, Inc. 1993 Stock Option Plan, as amended.
Filed as Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q (File No. 0-11631) for the quarter ended May 31,
1994 and incorporated herein by reference.
10.2 Loan Agreement dated as of December 1, 1991 by and between
Juno Lighting, Inc. and the Indiana Development Finance
Authority. Filed as Exhibit 10.1 to the Company's Annual
Report on Form 10-K (File No. 0-11631) for the fiscal year
ended November 30, 1992 and incorporated herein by
reference.
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134
EXHIBIT NO. EXHIBIT DESCRIPTION
- ----------- -------------------
10.2(a) Trust Indenture dated as of December 1, 1991 by and between
the Indiana Development Finance Authority and First
Wisconsin Trust Company, as Trustee, with respect to
Industrial Development Revenue Bonds, Series 1991 (Juno
Lighting, Inc. Project). Filed as Exhibit 10.1(a) to the
Company's Annual Report on Form 10-K (File No. 0-11631) for
the fiscal year ended November 30, 1992 and incorporated
herein by reference.
10.3 Agreement among Juno Lighting, Inc., the City of Des Plaines
and American National Bank and Trust Company of Chicago.
Filed as Exhibit 10.1 to the Company's Registration
Statement on Form S-1, made effective September 1, 1983
(Registration No. 2-85267) and incorporated herein by
reference.
10.4 Juno Lighting, Inc. 1983 Stock Option Plan, as amended.
Filed as Exhibit 10.1 to the Company's Annual Report on Form
10-K (File No. 0-11631) for the fiscal year ended November
30, 1983 and incorporated herein by reference.
10.4(a) First Amendment to the Juno Lighting, Inc. 1983 Stock Option
Plan dated April 9, 1986. Filed as Exhibit 10.2(a) to the
Company's Annual Report on Form 10-K (File No. 0-11631) for
the fiscal year ended November 30, 1986 and incorporated
herein by reference.
10.4(b) Third Amendment to the Juno Lighting, Inc. 1983 Stock Option
Plan dated May 6, 1987. Filed as Exhibit 10.2(b) to the
Company's Annual Report on Form 10-K (File No. 0-11631) for
the fiscal year ended November 30, 1987 and incorporated
herein by reference.
10.4(c) Fourth Amendment to the Juno Lighting, Inc. 1983 Stock
Option Plan dated September 24, 1987. Filed as Exhibit
10.2(c) to the Company's Annual Report on Form 10-K (File
No. 0-11631) for the fiscal year ended November 30, 1987 and
incorporated herein by reference.
10.4(d) Fifth Amendment to the Juno Lighting, Inc. 1983 Stock Option
Plan dated December 3, 1988. Filed as Exhibit 10.2(d) to the
Company's Annual Report on Form 10-K (File No. 0-11631) for
the fiscal year ended November 30, 1988 and incorporated
herein by reference.
10.5 Agreement dated as of July 1, 1984 among Juno Lighting,
Inc., the City of Des Plaines, Illinois and American
National Bank and Trust Company of Chicago. Filed as Exhibit
10.1(b) to the Company's Registration Statement on Form S-1,
made effective December 13, 1984 (Registration No. 2-94147)
and incorporated herein by reference.
10.6 Juno Lighting, Inc. 401(k) Plan, Amended and Restated
effective December 1, 1987, executed June 1, 1994. Filed as
an exhibit to the Company's Annual Report on Form 10-K (File
No. 0-11631) for the fiscal year ended November 30, 1988 and
incorporated herein by reference.
10.6(a) Juno Lighting, Inc. 401(k) Trust, effective December 1,
1985, executed June 1, 1994. Filed as an exhibit to the
Company's Annual Report on Form 10-K (File No. 0-11631) for
the fiscal year ended November 30, 1986 and incorporated
herein by reference.
10.6(b) Amendment to Juno Lighting, Inc. 401(k) Plan, effective
September 1, 1994, executed September 12, 1994. Filed as an
exhibit to the Company's Annual Report on Form 10-K (File
No. 0-11631) for the fiscal year ended November 30, 1994 and
incorporated herein by reference.
10.7 Juno Lighting, Inc. Rights Agreement dated as of August 3,
1989 between Juno Lighting, Inc. and the First National Bank
of Chicago, as Rights Agent. Filed as Exhibit 1 to the
Company's Current Report on Form 8-K (File No. 0-11631)
filed with the Securities and Exchange Commission on August
9, 1989 and incorporated herein by reference.
10.7(a) First Amendment to Juno Lighting, Inc. Rights Agreement
dated as of June 17, 1991 between Juno Lighting, Inc. and
The First National Bank of Chicago, as Rights Agent. Filed
as Exhibit 10.5(a) to the Company's Annual Report on Form
10-K (File No. 0-11631) for the fiscal year ended November
30, 1991 and incorporated herein by reference.
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135
EXHIBIT NO. EXHIBIT DESCRIPTION
- ----------- -------------------
10.7(b) Second Amendment to Juno Lighting, Inc. Rights Agreement
dated as of June 17, 1991 between Juno Lighting, Inc. and
The First Chicago Trust Company of New York, as successor
Rights Agent to The First National Bank of Chicago. Filed as
Exhibit 1 to the Company's Current Report on Form 8-K (SEC
File No. 0-11631) filed with the Securities and Exchange
Commission on July 17, 1991 and incorporated herein by
reference.
10.7(c) Third Amendment to Juno Lighting, Inc. Rights Agreement
dated as of March 26, 1999 between Juno Lighting, Inc. and
The First Chicago Trust Company, as successor Rights Agent.
Filed as Exhibit 10.7(c) to the Company's Current Report on
Form 8-K (File No. 0-11631) filed with the Securities and
Exchange Commission on March 29, 1999 and incorporated
herein by reference.
10.8 Form of Change of Control Benefits Agreement. Filed as
Exhibit 10.8 to the Company's Annual Report on Form 10-K/A
(File No. 0-11631) for the fiscal year ended November 30,
1998, and incorporated herein by reference.
10.9 Management Services Agreement, dated as of June 30, 1999, by
and between Juno Lighting, Inc. and Fremont Partners, L.L.C.
10.10 Credit Agreement, dated as of June 29, 1999, by and among
Juno Lighting, Inc. and NationsBank, N.A., Credit Suisse
First Boston Corporation and certain other lenders party
thereto.
11.1 Computations of Net Income Per Common Share. Filed as
Exhibit 11.1 to the Company's Annual Report on Form 10-K
(File No. 011631) for the fiscal year ended November 30,
1998, and incorporated herein by reference.
12.1 Statement regarding computation of ratio of earnings to
fixed charges.
21.1 Subsidiaries of the Registrant filed as Exhibit 21.1 to the
Company's Annual Report on Form 10-K (File No. 011631) for
the fiscal year ended November 30, 1998, and incorporated
herein by reference.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1)
24.1 Powers of Attorney (included on signature page to this
Registration Statement).
25.1 Form T-1 Statement of Eligibility of Firstar Bank, N.A., as
trustee
99.1 Form of Letter of Transmittal
99.2 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees
99.3 Form of Letter to Clients
99.4 Form of Notice of Guaranteed Delivery
99.5 Form of Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9
99.6 Financial Statement Schedule
- -------------------------
*To be filed by amendment.
II-3
136
(b) FINANCIAL STATEMENT SCHEDULES
All schedules have been included as Exhibit 99.6 or have been omitted as
not applicable or not required under the rules of Regulation S-X.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% "Calculation of
Registration Fee" table in the effective registration statement;
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof;
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering;
(4) that, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(5) (a) that prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes that
such reoffering prospectus will contain the information called for by the
applicable registration form with respect to reofferings by persons who may
be deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(b) that every prospectus: (A) that is filed pursuant to paragraph
(5)(a) immediately preceding, or (B) that purports to meet the
requirements of Section 10(a)(3) of the Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as a
part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining
any liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to
the
II-4
137
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(6) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
(a) to respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of
this Form S-4, within one business day of receipt of such request, and
to send the incorporated documents by first-class mail or other equally
prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through
the date of responding to the request.
(b) to supply by means of a post-effective amendment all
information concerning a transaction, and the company being acquired
involved therein, that was not the subject of and included in the
registration statement when it became effective.
II-5
138
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Des
Plaines, State of Illinois, on the 26th day of August, 1999.
JUNO LIGHTING, INC.
By: /s/ GLENN R. BORDFELD
------------------------------------
Glenn R. Bordfeld,
President and Chief Operating
Officer
POWER OF ATTORNEY AND SIGNATURES
Each person whose individual signature appears below hereby authorizes and
appoints Mark N. Williamson and Glenn R. Bordfeld, and each of them, with full
power of substitution and resubstitution and full power to act without the
other, as his true and lawful attorney-in-fact and agent to act in his name,
place and stead and to execute in the name and on behalf of each person,
individually and in each capacity stated below, and to file, any and all
amendments to this Registration Statement, including any and all post-effective
amendments and amendments thereto and any registration statement relating to the
same offering as this Registration Statement that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing, ratifying and confirming all that said
attorneys-in-fact and agents or any of them or their and his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated below on the 26th day of August, 1999.
/s/ ROBERT JAUNICH II Chairman of the Board of Directors
- ---------------------------------------------
Robert Jaunich II
/s/ MARK N. WILLIAMSON Director
- ---------------------------------------------
Mark N. Williamson
/s/ GLENN R. BORDFELD Director, President and Chief Operating Officer
- ---------------------------------------------
Glenn R. Bordfeld
II-6