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SCHEDULE 14C
(RULE 14C-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Check the appropriate box:
[ ] Preliminary Information Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14c-5(d)(2))
[X] Definitive Information Statement
BREED TECHNOLOGIES, INC.
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(Name of Registrant As Specified in Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
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[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
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previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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BREED TECHNOLOGIES, INC.
5300 OLD TAMPA HIGHWAY
LAKELAND, FLORIDA 33811
DECEMBER 26, 1997
INFORMATION STATEMENT
This Information Statement ("Information Statement") is being mailed to
the stockholders of BREED Technologies, Inc. (the "Company") in connection with
the previous approval by the board of directors (the "Board of Directors") of
the Company of the corporate actions described below and their subsequent
adoption by a majority of the stockholders of the Company. Accordingly, all
necessary corporate approvals in connection with the matters referred to herein
have been obtained, and this Information Statement is furnished solely for the
purpose of informing stockholders, in the manner required under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), of these corporate
actions before they take effect. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY.
CORPORATE ACTIONS TAKEN
The Company, as authorized by the necessary approvals of its Board of
Directors and a majority of Company's stockholders, has approved (i) the
adoption of an amendment (the "Amendment") to the Company's Certificate of
Incorporation to increase the authorized common stock, par value $0.01 per share
("Common Stock"), of the Company from 50,000,000 shares to 75,000,000 shares,
and (ii) the execution of a Stockholders Agreement, dated October 14, 1997
("Stockholders Agreement"), among the Company and certain of its stockholders,
consisting of Allen K. Breed, Johnnie Cordell Breed, and their related holdings
("Majority Stockholders"), entered into in connection with a Stock Purchase
Agreement, dated October 14, 1997 ("Stock Purchase Agreement"), by and between
the Company and Siemens Aktiengeseuschaft ("Siemens").
The Stockholders Agreement was entered into as a condition of the Stock
Purchase Agreement pursuant to which Series A Preference Shares of the Company
were sold to Siemens. The proceeds from the sale of the Series A Preference
Shares, together with certain other financing arrangements, were used to
purchase AlliedSignal's automotive safety restraint systems business ("SRS
Business"), to refinance the Company's then-existing credit facility, and to
provide funds for working capital and general corporate purposes. The other
financing arrangements included borrowings from NationsBank, N.A. and the
private placement issuance of debt securities primarily to institutional and
foreign investors.
The Amendment was adopted to provide the Board of Directors with the
continued flexibility in the management of the Company's capitalization,
financing arrangements, and potential future acquisitions. A copy of the
Amendment is attached hereto as Appendix A and is incorporated herein by
reference. The Amendment was not adopted in connection with, or necessary in
order to consummate, the purchase of the SRS Business or to obtain the financing
in connection therewith.
The written consent of the Majority Stockholders approving both the
Stockholders Agreement and the Amendment were executed on December 26, 1997 and
will take effect 20 days after the mailing of this Information Statement or such
later date as may be specified by the Board of Directors. A complete summary of
the actions taken are set forth herein.
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DISSENTERS' RIGHTS
The corporate actions described in this Information Statement will not
afford the Company's stockholders with the opportunity to dissent from the
actions described herein and to receive an agreed or judicially appraised value
for their shares.
THE AMENDMENT
The Company has adopted the Amendment to increase the number of
authorized shares of Common Stock from 50,000,000 shares to 75,000,000 shares.
The increase in authorized shares of Common Stock will provide the Company with
flexibility in its management of the Company's capitalization, employee benefit
plans, and future financing activities or corporation acquisitions. The
additional shares of Common Stock may be used by the Company (i) to increase the
number of shares available to be issued for issuance to holders of options and
warrants granted after the date hereof, (ii) to establish additional employee
compensation plans or to increase the shares available under current plans,
(iii) for issuance in connection with future financing activities of the
Company, including public and private offerings of the Common Stock or upon
conversion of other equity or debt securities, (iv) for issuance in connection
with future corporate acquisitions, or (v) other corporate purposes. As of
November 30, 1997, the Company had 31,708,778 shares of Common Stock outstanding
and had outstanding warrants and options to purchase 6,288,872 shares of Common
Stock, (including those shares issuable upon conversion of the Convertible
Debentures (defined below) and upon exercise of the NationsBank Warrants
(defined below)).
The Company has taken all actions required under Delaware law to
approve the Amendment. However, since stockholder approval of the Amendment was
obtained by written consent rather than at a meeting of the stockholders of the
Company, under the applicable rules of the Exchange Act the Amendment may not
become effective until the expiration of 20 calendar days from the date hereof.
Upon the expiration of the 20 day period, the Company will file the Amendment
with the Delaware Secretary of State.
The Company believes that the Amendment will not have any effect on its
business and operations, and expects to continue such business and operations as
they are currently being conducted.
Other than the distribution of Common Stock pursuant to warrants and
options outstanding on the date hereof, or upon the exercise of options issued
or to be issued in the future under directors and employee stock option plans,
the Company has no specific plans to issue Common Stock. Furthermore, there are
no other agreements, understandings, or arrangements for the issuance of the
additional Common Stock which would be authorized by the Amendment. The Common
Stock, including, the newly authorized shares, may be issued upon the Board of
Director's approval, without any further vote or action on the part of the
Company's stockholders. The Company's Certificate of Incorporation does not
provide for any preemptive rights upon the issuance of any Common Stock.
STOCKHOLDERS AGREEMENT
As part of the arrangements entered into by the Company to finance the
acquisition of the SRS Business, the Company approved the execution of the
Stockholders Agreement. The execution of the Stockholders Agreement, which is an
exhibit to the Stock Purchase Agreement, was required as a condition of the
Stock Purchase Agreement. Stockholder approval is not required under Delaware
law for the Company to enter into the Stockholders Agreement. Since, however,
such agreement provides benefits to Siemens with respect to the Common Stock
which are not available to stockholders generally, the New York Stock Exchange
("NYSE") required the Company to obtain the approval of the Stockholders
Agreement by its stockholders. Set forth below is a brief description of the
Stockholders Agreement, and the potential impact that it may have on
stockholders.
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BACKGROUND
On August 27, 1997, the Company entered into an Asset Purchase
Agreement with AlliedSignal to acquire the SRS Business (the "Asset Purchase
Agreement"). In connection with the acquisition, the Company negotiated and
entered into certain financing arrangements to secure the necessary funds to,
among other things, pay the purchase price for the SRS Business, to refinance
its then-existing credit facility, and to provide funds for working capital and
general corporate purposes. These financing arrangements included a credit
facility for approximately $900 million from NationsBank, N.A. ("NationsBank"),
proceeds of approximately $250 million from a private placement issuance of
convertible debt securities primarily to institutional and foreign investors
("Convertible Debentures"), and proceeds of approximately $115 million from the
issuance and sale of the Series A Preference Shares to Siemens (together, the
"Acquisition Financing"). Since the private placement of the Convertible
Debentures could not be consummated prior to the close of the SRS Business
acquisition, the Company issued Series B Convertible Preferred Stock (the "PSCC
Securities") to Prudential Securities Credit Corp. ("PSCC") for approximately
$200 million. The PSCC Securities were redeemed with the proceeds from the sale
of the Convertible Debentures. A more detailed description of the Acquisition
Financing transactions are set forth below. See "Recent Developments".
In addition to the Siemens purchase of the Series A Preference Shares
(the "Siemens Investment"), Siemens and the Company have entered into a
Memorandum of Understanding regarding the formation of a joint venture between
the two companies (the "Joint Venture") providing for worldwide research,
development, engineering, assembly, and marketing of automotive occupant safety
restraint systems.
The proceeds of the Acquisition Financing were used to (i) finance the
$710 million purchase price of the SRS Business, (ii) redeem the PSCC
Securities, (iii) refinance the Company's prior credit facility, and (iv) make
available approximately $100 million line of credit for working capital and
general corporate purposes. As of the date of this Information Statement, the
Company has borrowed approximately $800 million under its NationsBank credit
facility, leaving the Company with approximately $100 million of funds available
pursuant to the revolving line of credit thereunder.
CERTAIN TERMS OF STOCKHOLDERS AGREEMENT
As a condition to the Stock Purchase Agreement pursuant to which the
Series A Preference Shares were sold to Siemens, the Company and the Majority
Stockholders were required, among other things, to enter into the Stockholders
Agreement. At any time that the holders of the Series A Preference Shares do not
have in effect the right to elect a member of the Board of Directors, the
Stockholders Agreement obligates the Majority Stockholders to vote their shares
and take other necessary and appropriate corporate action to elect a designee of
Siemens to the Board of Directors of the Company and to ensure that the Siemens
director is a member of the Audit Committee of the Board of Directors. The
Stockholders Agreement also (i) grants Siemens rights of first offer for up to
five years with respect to certain future issuances of Common Stock or
securities convertible into Common Stock by the Company (subject to certain
exceptions), (ii) allows Siemens to participate in any sale of Common Stock by
the Majority Stockholders, (iii) grants the Company and the Majority
Stockholders rights of first offer for up to three years with respect to any
sales by Siemens or its affiliates (subject to certain exceptions), (iv)
prohibits Siemens for three years from acquiring certain securities of the
Company (subject to certain exceptions), (v) grants Siemens rights of first
offer for up to three years with respect to transfers of certain securities by
the Majority Stockholders (subject to certain exceptions), and (vi) grants the
Siemens director special consent rights with respect to certain business
activities of the Company, including the conduct by the Company of any business
in the field of electronic components for automotive safety restraint systems,
other than through the Joint Venture or as currently conducted by designated
subsidiaries of the Company. The Stockholders Agreement terminates upon the
earlier to occur of the date on which Siemens and certain of its affiliates
first collectively beneficially own less than the
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number of shares of Common Stock issued or issuable pursuant to the conversion
of the shares of Series A Preference Shares acquired by the Siemens pursuant to
the Stock Purchase Agreement or the delivery of a "First Make-Whole Notice" (as
defined in the Make-Whole Agreement described below). See "Recent Developments".
EFFECT OF THE STOCKHOLDERS AGREEMENT
The Company has taken all actions required under Delaware law to
approve the Stockholders Agreement. However, since stockholder approval was
obtained by written consent rather than at a meeting of the stockholders of the
Company, under the rules of the Exchange Act such approval will not be effective
until 20 calendar days from the date hereof.
The Stockholders Agreement, in effect, provides pre-emptive rights to
Siemens with respect to future issuances of Common Stock or securities
convertible into Common Stock, and a right of first refusal with respect to any
sales and certain transfers of the Common Stock by the Majority Stockholders.
Although such rights are not available to the Company's stockholders generally,
the Company does not believe that the Stockholders Agreement will have any
adverse effects on its stockholders or the business and operations of the
Company. Since the Company's stockholders do not have pre-emptive or any other
rights to participate in future offerings of its securities, the grant of
pre-emptive rights to Siemens does not impact any non-Siemens stockholders'
rights to acquire the Company's Common Stock. Similarly, the grant of rights of
first refusal to the Common Stock of the Majority Stockholders also should have
no impact on non-Siemens stockholders. On the other hand, the Company believes
that it has obtained significant benefits for both the Company and its
stockholders as a result of the SRS Business acquisition, the Acquisition
Financing, including the Siemens Investment, and the Joint Venture.
RECENT DEVELOPMENTS
SRS ACQUISITION
General. Pursuant to the Asset Purchase Agreement, on October 30, 1997,
the Company purchased the SRS Business consisting of substantially all assets
and certain assumed liabilities of AlliedSignal related to the design,
development, manufacture, marketing, and selling of automotive occupant
restraint products and systems (including, but not limited to, seat belt and
airbag assemblies and components). The aggregate consideration paid by the
Company was $710 million in cash. This purchase price is subject to post-closing
adjustment based on the net book value of the acquired business, any retained
cash balances, if any, and any amounts paid with respect to certain intracompany
obligations.
Post-Closing Covenants. The parties to the Asset Purchase Agreement
agreed to certain customer post-closing covenants, including without limitation
covenants related to taxes, employee matters, and the assumption of certain
liabilities.
Indemnification. AlliedSignal and certain affiliated sellers jointly
and severally agreed to indemnify (on a net after-tax basis) the Company and its
directors, officers, employees, agents, consultants, representatives,
affiliates, successors, and permitted assigns from and against in respect of any
and all claims, liabilities, obligations, lawsuits, damages (excluding loss of
profits and other consequential damages), costs and out-of-pocket expenses
arising out of or relating to: (i) breaches of any covenant or agreement made by
AlliedSignal in the Asset Purchase Agreement or certain ancillary agreements;
(ii) breaches of certain representations and warranties; (iii) certain
designated liabilities not being assumed by the Company; and (iv) the conduct of
certain businesses retained by AlliedSignal and the ownership, use and
possession of certain assets retained by AlliedSignal. AlliedSignal also has
provided special limited indemnifications to the Company for certain claims
related to environmental, intellectual property and recalls and service action
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matters. The indemnifications provided to the Company pursuant to the Asset
Purchase Agreement are subject to specified deductibles and caps (which
generally limit the aggregate liability of AlliedSignal to one-half the initial
purchase price).
The Company agreed to indemnify (on a net after-tax basis) AlliedSignal
and its directors, officers, employees, agents, consultants, representatives,
affiliates, successors, and permitted assigns from and against and in respect of
any and all losses arising out of the following: (i) breaches of any covenant or
agreement made by the Company in the Asset Purchase Agreement or certain
ancillary agreements; (ii) breaches of certain representations and warranties;
(iii) certain designated liabilities assumed by the Company; (iv) conduct of the
SRS Business and the ownership, use and possession of the acquired assets; and
(v) any liability to any person for any finder's, broker's or other similar fee
or commission related to the transaction.
Ancillary Agreements. The Company and AlliedSignal also executed
certain ancillary agreements in connection with the SRS Acquisition, including
(i) a transition services agreement, providing for the transition of certain
overhead services provided to the SRS Business by AlliedSignal, and (ii)
manufacturing and supply agreements permitting the Company to manufacture
certain components on behalf of AlliedSignal and requiring AlliedSignal to
supply the Company's requirements for certain components.
SIEMENS INVESTMENT
General. On October 14, 1997, the Company and Siemens entered into the
Stock Purchase Agreement pursuant to which, on October 30, 1997, the Company
issued and sold 4,883,227 Series A Preference Shares to Siemens for an aggregate
purchase price of $115 million. On October 14, 1997, in connection with the
Siemens Investment, Siemens and the Company entered into a Memorandum of
Understanding providing for the formation of the Joint Venture (the "Memorandum
of Understanding").
The Joint Venture. The Memorandum of Understanding contains the
material terms to be included in the definitive agreement on the Joint Venture.
The Memorandum of Understanding will terminate if the definitive agreement for
the formation of the Joint Venture is not executed by December 15, 1997. The
following is a description of the material terms of the Memorandum of
Understanding. The scope of the Joint Venture will be in the worldwide research,
development, engineering, assembly and marketing of motor vehicle occupant
safety restraint systems ("JV Systems"). A JV System must contain, at a minimum,
an electronic sensor together with either an airbag module, seat belts, or both.
The parties will work exclusively through the Siemens Joint Venture with respect
to JV Systems. Each party also will appoint the Joint Venture on a non-exclusive
basis as its distributor in order to market and sell components of JV Systems.
Upon receipt of governmental approvals and establishment of the Joint Venture
entity, which the Company expects to be completed in June 1998, new quotations
for sales of both JV Systems and components thereof will be made only by the
Joint Venture, unless a customer insists otherwise or market demands dictate
otherwise. Each of the parties also will agree that it will not sell motor
vehicle occupant safety restrain components, either directly or indirectly, to
third parties which compete with the Joint Venture in the sale of JV Systems.
The Joint Venture will be owned 50.2% by Siemens and 49.8% by the
Company. Siemens will contribute to the Joint Venture its shares in PARS GmbH,
Siemens' advanced crash text facility and occupant safety system development
center. The Company will form a new company to which it will contribute assets
which are comparable to those existing at PARS GmbH. The Company will then
contribute its ownership interests in the new company to the Joint Venture. The
Joint Venture will be governed by a partners' committee consisting of three
representatives from each of the Company and Siemens. The Joint Venture will
operate pursuant to an operating budget approved by the partners' committee and
subject to annual review. No expenditures in excess of budgeted amounts may be
made without consent of the partners' committee. The parties will provide
funding to the Joint Venture to the extent revenues and external funding sources
(such as loans raised from banks or other third parties) are inadequate to cover
budgeted operating expenses and
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capital expenditures. Neither party can be compelled to provide funding for
operating expenses and capital expenditures above budgeted amounts.
Any technology generated by the Joint Venture (either by itself or with
one of the parties) will belong joint to Siemens and the Company. Each party
will be responsible for warranties and liabilities, including recall actions,
arising from its components marketed by the Joint Venture to customers.
The term of the Joint Venture is not fixed. However, it is subject to
the right of either party to terminate the Joint Venture with six months prior
written notice, or sooner upon mutual agreement, after the sixth anniversary
date of the formation of the Joint Venture.
Stock Purchase Agreement and the Preference Shares. Pursuant to the
Stock Purchase Agreement, on October 30, 1997, Siemens acquired 4,883,227 Series
A Preference Shares. In addition, pursuant to the Stock Purchase Agreement, the
Company made customary representations and warranties concerning its business,
agreed to certain post-closing covenants, including an agreement to provide
Siemens with substantially equivalent rights to those granted in the future to
any stockholder acquiring an equal or smaller percentage of voting interest in
the Company as Siemens, agreed to indemnify Siemens for breaches of
representations and warranties for a period of up to 18 months, agreed to
indemnify Siemens for breach of covenants and granted Siemens certain
anti-dilution rights. The indemnification obligations of the Company are subject
to a $1.5 million deductible and a cap of $30 million.
The Company agreed with Siemens not to issue, prior to the
effectiveness of the Amendment, any additional shares of Common Stock if the
effect of such issuance were to result in the Majority Stockholders owning less
than a majority of the then outstanding Common Stock (without regard to the
conversion of any Series A Preference Shares).
Each Series A Preference Share represents one one-thousandth (1/1000th)
of a share of 1997 Series A Convertible Non-Voting Preferred Stock of the
Company and, subject to adjustment, is convertible into one share of Common
Stock. Except for voting rights required by law, and except for the right to
elect as a class one director of the Company during the period that begins on
the date when any Series A Preference Shares are converted into Common Stock and
ends on the date of the termination of the Stockholders Agreement (as defined
below), the holders of shares of Series A Preference Shares do not have voting
rights. If the definitive agreements for the Joint Venture are not executed by
December 15, 1997, the holders of Series A Preference Shares would be entitled
to receive an annual dividend in the form of Series A Preference Shares, payable
in quarterly installments on March 15, June 15, September 15, and December 15 of
each year, at the annual rate of five Series A Preference Shares for each 100
Series A Preference Shares owned of record by such holder. Such dividend would
commence on December 15, 1997. However, pursuant to the Stockholders Agreement,
the annual dividend will be waived (i) if such definitive agreements are
executed on or before December 15, 1997, and (ii) following the termination of
the Make-Whole Agreements (as defined below). All other rights of the holders of
Series A Preference Shares are equal to the rights of the holders of Common
Stock and are shared ratably on an as-converted basis.
Stockholders Agreement. In connection with the Siemens Investment, the
Company entered into a Stockholders Agreement with Siemens and the Majority
Stockholders which sets forth the obligations and duties described above. See
"Stockholders Agreement - Certain Terms of Stockholders Agreement".
The Make-Whole Agreement. In connection with the Siemens Investment,
the Company entered into a Make-Whole Agreement (the "Make-Whole Agreement")
with Siemens. Under the Make-Whole Agreement, within 30 days after a "Triggering
Event," Siemens will have the right to require the Company, at the Company's
election to either (i) repurchase the Series A Preference Shares purchased
pursuant to the Stock Purchase Agreement (and any shares issuable with respect
to such shares) for a purchase price equal to
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$115 million plus $15,753 per day for each day between December 15, 1997 and the
termination of the right (the "Make-Whole Price"), or (ii) if the net proceeds
from the bona fide sale of such shares by Siemens to a third party financial
institution does not equal the Make-Whole Price, to issue to Siemens such number
of shares (subject to certain limits) the net proceeds from the sale of which
would equal the amount of the deficit. Under the Make-Whole Agreement, a
"Triggering Event" means any of the following: (a) the Company and Siemens shall
have abandoned negotiations with respect to the Siemens Joint Venture; (b) the
definitive documentation with respect to the Siemens Joint Venture shall not
have been executed and delivered by December 15, 1997; (c) the parties shall
have been unable, after diligent and good faith efforts, to obtain the requisite
governmental clearances, approvals, or terminations of waiting periods which are
required or applicable (including under antitrust or competition laws) with
respect to the formation of the Siemens Joint Venture or conversion of the
shares purchased pursuant to the Stock Purchase Agreement into Common Stock
without the imposition of materially adverse conditions; or (d) the formation of
the Siemens Joint Venture shall not have been completed, in accordance with the
definitive agreements entered into by the Company and Siemens, by June 30, 1998.
The Make-Whole Agreement terminates if (1) prior to Siemens' delivery of a
notice that it has entered into an agreement to sell its shares to a third party
financial institution as described above, Siemens sells or otherwise transfers
any of the securities subject to the Make-Whole Agreement to any person other
than a direct or indirect subsidiary of Siemens or (2) Siemens has not delivered
such a notice by the later to occur of (x) July 31, 1998, or (y) 45 days after a
Triggering Event.
Registration Rights Agreement. In connection with the Siemens
Investment, the Company entered into a Registration Rights Agreement (the
"Registration Rights Agreement") with Siemens. Pursuant to the Registration
Rights Agreement with Siemens, Siemens shall have the right, after June 1, 1998
and before the tenth anniversary of the date of the Registration Rights
Agreement with Siemens, to require the Company to file up to three registration
statements under the Securities Act to register any shares of Common Stock or
Series A Preference Shares owned by Siemens for sale to the public, subject to
certain limitations. The Company is required to pay all expenses (other than
discounts and commissions) in connection with such demand registrations. In
addition, if the Company elects to register securities under the Securities Act
for its account or for the account of other stockholders, Siemens shall have the
right to register its shares under any such registration statement, subject to
certain limitations.
THE NATIONSBANK BORROWINGS
NationsBank Credit Facility. On October 30, 1997, the Company and
NationsBank executed the NationsBank Credit Facility pursuant to which
approximately $900 million of credit was extended to the Company. As of the date
hereof, the Company has borrowed approximately $800 million thereunder. The
following is a summary of the material terms and conditions of the Credit
Agreement, dated as of October 30, 1997 by and among the Company and certain
subsidiaries as borrower and NationsBank as agent and lender, and the lenders
party thereto from time to time (NationsBank and the lenders are hereafter
referred to as the "Lenders") (the "NationsBank Credit Facility"). The
NationsBank Credit Facility consists of a 366-day revolving credit facility of
up to $300 million, including a $25 million sublimit for the issuance of standby
letters of credit and $75 million sublimit for multi-currency borrowings, and a
366-day term loan facility of up to $600 million. The NationsBank Credit
Facility may be used to finance the SRS Acquisition, to refinance existing
indebtedness and fees and expenses relating to such indebtedness, and for
general working capital needs and other corporate purposes.
Borrowings under the NationsBank Credit Facility bear interest at a per
annum rate equal to, at the election of the Company, either (i) the higher of
the Federal Funds Rate plus 0.5% or the NationsBank prime rate plus, in either
case, an additional margin ranging from 2.0% to 5.0% based on the length of time
the revolving portion of the NationsBank Credit Facility is in existence, or
(ii) a rate based on the prevailing interbank offered rate plus an additional
margin ranging from 3.0% to 6.0% based on the length of time the NationsBank
Credit Facility is in existence. The letter of credit fee ranges from 3.0% to
6.0% and, when
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there is more than one Lender, an additional 0.125% for the issuing bank. The
Company is also required to pay a quarterly unused facility fee. In addition,
the Company paid NationsBank a commitment fee, upon the execution of the
NationsBank Credit Facility, equal to 3% of the aggregate available borrowings
under the NationsBank Credit Facility ($27 million). The NationsBank Credit
Facility provides for a 1.5% take-out fee ($13.5 million).
The NationsBank Credit Facility is secured by (i) a security interest
in all of the personal property and assets (including inventory, accounts
receivable, intellectual property, mortgages on all real property owned by the
Company and the assets acquired pursuant to the SRS Business acquisition) of the
Company and certain subsidiaries, (ii) a stock pledge by the Company and certain
subsidiaries of their stock in certain domestic subsidiaries and at least 65% of
the voting stock and 100% of the non-voting stock of foreign subsidiaries, (iii)
a pledge of the Common Stock owned by A. Breed, L.P., a Texas limited
partnership, and J. Breed, L.P., a Texas limited partnership, (iv) an assignment
of certain leases for facilities of the Company and certain subsidiaries, (v) a
pledge and subordination of intercompany notes, (vi) an assignment of certain
partnership interest, and (vii) an assignment of a trademark licensing
agreement. The NationsBank Credit Facility is guaranteed by certain of the
Company's subsidiaries.
The NationsBank Credit Facility contains customary representations and
warranties and events of default and requires compliance with certain covenants
by the Company and its subsidiaries, including, among other things: (i)
maintenance of certain financial ratios and compliance with certain financial
tests and limitations; (ii) limitations on the payment of dividends, incurrence
of additional indebtedness and granting of certain liens; and (iii) restrictions
on mergers, acquisitions, and investments.
In connection with the NationsBank Credit Facility, the Company also
entered into a warrant agreement with NationsBank providing for the issuance by
the Company of a warrant to purchase Common Stock.
Warrant Agreement. Pursuant to a Warrant Agreement between NationsBank
and the Company dated October 30, 1997 (the "Warrant Agreement"), in connection
with the NationsBank Credit Facility, the Company issued to NationsBank a
warrant (the "Warrant") exercisable for Common Stock of the Company (the
"Warrant Shares"). As of the date of the Warrant Agreement, the Warrant was
exercisable for 250,000 Warrant Shares at an exercise price of $23.125 per
share. The number of shares for which the Warrant is exercisable may be
increased to a maximum of 3,000,000 shares if the Company fails to fulfill
certain obligations prior to July 26, 1998, as described more fully below. The
exercise price for such additional shares shall be the market price of the
Common Stock on the day such Warrant Shares become exercisable. The Warrant
Agreement and the Warrant expire on October 30, 2000. NationsBank may elect that
the Warrant Shares be included in certain registration statements filed by the
Company under the Securities Act for the sale of Common Stock of the Company
and, until October 30, 2002, may demand that the Company register the Warrant
Shares on Form S-3.
The number of shares of Common Stock subject to the Warrant will be
increased as follows: (a) in the event the Company shall not have paid in full
its borrowings and other obligations under the NationsBank Credit Facility on or
prior to January 27, 1998, the number of Warrant Shares shall be automatically
increased to 1,000,000 effective as of January 27, 1998 unless the Company (i)
shall have furnished NationsBank a five-year operating plan acceptable to
NationsBank, and (ii) shall be in receipt of not less than $300 million of
permanent equity capital over September 24, 1997 levels on terms reasonably
acceptable to NationsBank (a condition which it will have satisfied following
this Offering); (b) in the event the Company shall not have paid in full its
borrowings and other obligations on or prior to April 27, 1998 (or if a binding
commitment to refinance and/or repay the obligations does then exist), the
number of Warrant Shares shall be automatically increased to 2,000,000 effective
as of April 27, 1998; (c) in the event the Company shall not have paid in full
its borrowings and other obligations on or prior to July 26, 1998 (or if a
binding commitment to refinance
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and/or repay the obligations does not then exist), the number of Warrant Shares
will be automatically increased to 3,000,000 effective as of July 26, 1998; and
(d) if the Company shall not have paid in full its borrowings and other
obligations on or prior to July 31, 1998, the number of Warrant Shares shall be
automatically increased to equal the greater of (x) 7.7% of all shares of Common
Stock outstanding or deemed outstanding on a fully diluted basis on July 31,
1998, and (y) 3,000,000.
SHAREHOLDER APPROVAL PREVIOUSLY OBTAINED
Under Delaware law, the Company's Certificate of Incorporation may be
amended and the Stockholders Agreement approved either by the affirmative vote
of a majority of the shares present at a meeting where a quorum is present or
through an action by written consent of a majority of the outstanding shares of
Common Stock in lieu of a stockholders' meeting.
As of the date hereof, the Company has issued and outstanding
31,712,778 shares of Common Stock, each of which is entitled to one vote on any
matter brought to a vote of the Company's stockholders. The Majority
Stockholders own 17,875,600 shares, or 56.36%, of all the issued and outstanding
shares of the Company's Common Stock as of the date of this Information
Statement. By written consent dated December 26, 1997, the Majority Stockholders
have approved the adoption and implementation of the Amendment and have approved
and ratified the Stockholders Agreement, both by written consent in lieu of a
stockholders' meeting, such consent to take effect 20 days following the mailing
of this Information Statement or on such later date as may be specified by the
Board of Directors. Such action by written consent is sufficient to satisfy the
applicable requirements of Delaware law that any amendment of the Certificate of
Incorporation be approved by the stockholders and the requirements of the NYSE
with respect to stockholder approval of the Stockholders Agreement. Accordingly,
the Company's stockholders will not be asked to take any further action on the
Amendment or the Stockholders Agreement at any future meeting.
OTHER MATTERS
The Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1997 has been previously mailed to each stockholder of the Company.
By Order of the Board of Directors
Lakeland, Florida LIZANNE GUPTILL
December 26, 1997 Secretary
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APPENDIX A
AMENDMENT TO
SECOND RESTATED CERTIFICATE OF INCORPORATION
RESOLVED, that Article 4 of the Second Restated Certificate of
Incorporation is hereby amended by deleting Article 4 in its entirety and
replacing it with the following:
"ARTICLE 4
AUTHORIZED CAPITAL
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 80,000,000 shares,
consisting of (i) 75,000,000 shares of Common Stock, $.01 par value per
share ("Common Stock"), and (ii) 5,000,000 shares of Preferred Stock,
$.001 par value per share ("Preferred Stock").
The following is a statement of the designations and the
powers, privileges and rights, and the qualifications, limitations or
restrictions thereof, in respect of each class of capital of the
Corporation.
4.1 COMMON STOCK.
a. General. The voting, dividend and liquidation rights of
the holders of the Common Stock are subject to and qualified by the
rights of the holders of the Preferred Stock of any series as may be
designated by the Board of Directors upon any issuance of the Preferred
Stock of any series.
b. Voting. The holders of the Common Stock are entitled to
one vote for each share held at all meetings of stockholders (and
written actions in lieu of meetings). There shall be no cumulative
voting.
The number of authorized shares of Common Stock may be
increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of
the stock of the Corporation entitled to vote, irrespective of the
provisions of Section 242(b)(2) of the General Corporation Law of
Delaware.
c. Dividends. Dividends may be declared and paid on the
Common Stock from funds lawfully available therefor as and when
determined by the Board of Directors and subject to any preferential
dividend rights of any then outstanding Preferred Stock.
d. Liquidation. Upon the dissolution or liquidation of the
Corporation, whether voluntary or involuntary, holders of Common Stock
will be entitled to receive all assets of the Corporation available for
distribution to its stockholders, subject to any preferential rights of
any then outstanding Preferred Stock.
4.2 PREFERRED STOCK.
Preferred Stock may be issued from time to time in one or more
series, each of such series to have such terms as stated or expressed
herein and in the resolution or resolutions
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providing for the issue of such series adopted by the Board of
Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the
Corporation may be reissued except as otherwise provided by law.
Different series of Preferred Stock shall not be construed to
constitute different classes of shares for the purposes of voting by
classes unless expressly provided.
Authority is hereby expressly granted to the Board of
Directors from time to time to issue the Preferred Stock in one or more
series, and in connection with the creation of any such series, by
resolution or resolutions providing for the issue of the shares
thereof, to determine and fix such voting powers, full or limited, or
no voting powers, and such designations, preferences and relative
participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, including without limitation
thereof, dividend rights, conversion rights, redemption privileges and
liquidation preferences, as shall be stated and expressed in such
resolutions, all to the full extent now or hereafter permitted by the
General Corporation Law of Delaware. Without limiting the generality of
the foregoing, the resolutions providing for issuance of any series of
Preferred Stock may provide that such series shall be superior or rank
equally or be junior to the Preferred Stock of any other series to the
extent permitted by law. Except as otherwise provided in this
Certificate of Incorporation, no vote of the holders of the Preferred
Stock or Common Stock shall be a prerequisite to the designation or
issuance of any shares of any series of the Preferred Stock authorized
by and complying with the conditions of this Certificate of
Incorporation, the right to have such vote being expressly waived by
all present and future holders of the capital stock of the
Corporation."
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