As filed with the Securities and Exchange Commission on July 26, 2010
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Cooper-Standard Holdings Inc.
(Exact name of registrant as specified in its charter)
Delaware | 3714 | 20-1945088 | ||
(State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification No.) |
39550 Orchard Hill Place Drive Novi, MI 48375 (248) 596-5900 |
Timothy W. Hefferon, Esq. Vice President, General Counsel and Secretary Cooper-Standard Holdings Inc. 39550 Orchard Hill Place Drive Novi, MI 48375 (248) 596-5900 |
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(Address, including zip code, and telephone number, including area code, of registrants principal executive offices) |
(Name, address, including zip code, and telephone number, including area code, of agent for service) |
Copy to:
Daniel J. Bursky, Esq.
Fried, Frank, Harris, Shriver & Jacobson LLP
One New York Plaza
New York, New York 10004
(212) 859-8000
Approximate date of commencement of proposed sale to public: From time to time after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. x
If this Form is filed to register additional 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(c) 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. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filer x | Smaller reporting company ¨ | |||
(Do not check if a smaller reporting company) |
CALCULATION OF REGISTRATION FEE
Title of each class of securities to be registered |
Amount to be
registered(1) |
Proposed
maximum offering price per security |
Proposed maximum
aggregate offering price |
Amount of
registration fee |
||||
Common stock, par value $0.001 per share |
11,181,673 | $29.80(2) | $333,213,855 | $23,758 | ||||
7% cumulative participating convertible preferred stock, par value $0.001 per share |
1,010,345 | $100.00(3) | $101,034,500 | $7,204 | ||||
Common stock, par value $0.001 per share |
4,335,176 | (4) | | | ||||
Warrants to purchase common stock, par value $0.001 per share |
1,693,827 | (5) | | | ||||
Common stock, par value $0.001 per share |
1,693,827 | $27.33(6) | $46,292,292 | $3,301 | ||||
Total |
$34,263 | |||||||
(1) | Represents shares of common stock, shares of 7% cumulative participating convertible preferred stock, including shares of common stock issuable upon conversion, and warrants to purchase common stock, including shares of common stock underlying the warrants, being registered for resale that were privately placed to investors in connection with the registrants emergence from bankruptcy on May 27, 2010. In accordance with Rule 416 under the Securities Act, the shares of common stock offered hereby also include such indeterminate number of shares of common stock that may be issued with respect to stock splits, stock dividends or similar transactions. |
(2) | Estimated solely for the purpose of determining the registration fee pursuant to Rule 457(c) under the Securities Act, based on the average of the high and low sales price of our common stock as of July 21, 2010 as reported on the Over-the-Counter Bulletin Board. |
(3) | Estimated solely for purposes of calculating the registration fee pursuant to Rule 457 under the Securities Act. |
(4) | Pursuant to Rule 457(i) under the Securities Act, no additional registration fee is required with respect to the shares of common stock issuable upon conversion of the preferred stock. |
(5) | Pursuant to Rule 457(i), no additional registration fee is required with respect to the warrants as a fee is being paid for the registration of the shares of common stock underlying the warrants. |
(6) | Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(g) under the Securities Act, based on an exercise price of $27.33 per share. |
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 the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. The selling security holders 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 JULY 26, 2010
Prospectus
Cooper-Standard Holdings Inc.
17,210,676 Shares of Common Stock
1,010,345 Shares of 7% Cumulative Participating Convertible Preferred Stock
Warrants to Purchase 1,693,827 Shares of Common Stock
We emerged from Chapter 11 reorganization on May 27, 2010. As part of our plan of reorganization, we issued the securities listed below in a private placement to certain creditors in order to raise a portion of the funds necessary for our emergence from bankruptcy. Pursuant to our plan of reorganization, certain creditors that received these securities and their transferees, who are identified as selling security holders throughout this prospectus, are entitled to have these securities registered for resale.
This prospectus relates to the following securities that may be sold from time to time by the selling security holders identified in this prospectus:
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11,181,673 shares of our common stock, par value $0.001 per share, which consists of 8,623,491 shares issued to certain creditors pursuant to a rights offering and 2,558,182 shares issued to certain creditors pursuant to a commitment agreement that provided for the backstop of the rights offering; |
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1,010,345 shares of our 7% cumulative participating convertible preferred stock, par value $0.001 per share, issued to certain creditors pursuant to the commitment agreement that provided for the backstop of the rights offering (including 10,345 shares of 7% preferred stock issued as a dividend payment on our outstanding shares of 7% preferred stock); |
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4,335,176 shares of our common stock issuable to holders of our 7% preferred stock upon conversion of their 7% preferred stock; |
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warrants to purchase 1,693,827 shares of our common stock issued to certain creditors pursuant to the commitment agreement that provided for the backstop of the rights offering; and |
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1,693,827 shares of our common stock issuable to holders of our warrants upon exercise of their warrants. |
All of the securities covered by this prospectus are being sold by the selling security holders. We will not receive any proceeds from the sales of any of these securities other than proceeds from the exercise of warrants to purchase shares of our common stock, which will be used for general corporate purposes. It is anticipated that the selling security holders will sell these securities from time to time in one or more transactions, in negotiated transactions or otherwise, at prevailing market prices or at prices otherwise negotiated.
Our common stock and warrants are currently traded on the Over-the-Counter Bulletin Board, commonly known as the OTC Bulletin Board, under the symbols COSH and COSHW, respectively. On July 21, 2010, the last sale price of our common stock was $29.90 per share and the last sale price of our warrants was $13.00 per warrant. There is currently no established market for our preferred stock.
Investing in our securities involves substantial risks. You should carefully consider the matters discussed under the section entitled Risk Factors beginning on page 15 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is , 2010
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RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS |
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MARKET FOR OUR COMMON STOCK AND WARRANTS AND RELATED STOCKHOLDER MATTERS |
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION |
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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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You should rely only on the information contained in this prospectus and any applicable prospectus supplement or amendment. We have not authorized any person to provide you with different information. This prospectus is not an offer to sell, nor is it an offer to buy, these securities in any state where the offer or sale is not permitted. The information in this prospectus is complete and accurate as of the date on the front cover of this prospectus, but our business, financial condition or results of operations may have changed since that date.
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This summary highlights information about us that is contained elsewhere in this prospectus. This summary may not contain all of the information that may be important to you. You should read the entire prospectus carefully before making an investment decision, including the section entitled Risk Factors and our consolidated financial statements and related notes. Unless the context requires otherwise, references in this prospectus to Cooper-Standard, the Company, we, us, our or similar terms refer to Cooper-Standard Holdings Inc. and all of its consolidated subsidiaries.
Our Business
We are a leading manufacturer of body sealing, anti-vibration, or AVS, and fluid handling components, systems, subsystems and modules. Our products are primarily for use in passenger vehicles and light trucks that are manufactured by global automotive original equipment manufacturers, or OEMs, and replacement markets. We believe that we are the largest global producer of body sealing systems, the second largest global producer of the types of fluid handling products that we manufacture and one of the largest North American producers in the AVS business.
We design and manufacture our products in each major automotive region of the world in close proximity to our customers through a disciplined and consistent approach to engineering and production. We operate in 66 manufacturing locations and nine design, engineering and administrative locations around the world, including Australia, Belgium, Brazil, Canada, China, Czech Republic, France, Germany, India, Italy, Japan, Korea, Mexico, the Netherlands, Poland, Spain, the United Kingdom and the United States. For the year ended December 31, 2009, we generated approximately 47% of our sales in North America, 40% in Europe, 6% in South America and 7% in Asia/Pacific.
For the year ended December 31, 2009, approximately 80% of our sales were direct to OEMs, including Ford Motor Company, or Ford, GM, defined herein as General Motors Corporation combined with General Motors Company, and Chrysler, defined herein as Chrysler LLC combined with Chrysler Group LLC, or, collectively, the Detroit 3, Fiat, Volkswagen/Audi Group, Renault/Nissan, PSA Peugeot Citroën, Daimler, BMW, Toyota, Volvo, Jaguar/Land Rover and Honda. The remaining 20% of our sales for the year ended December 31, 2009 were primarily to Tier I and Tier II automotive suppliers and non-automotive customers. In 2009, our products were found in 17 of the 20 top-selling vehicle models in North America and in 19 of the 20 top-selling vehicle models in Europe.
The following chart illustrates our balance and diversity by providing a breakdown of our $1.9 billion in sales for the year ended December 31, 2009 by geography and customer.
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We conduct substantially all of our activities through our subsidiaries and sell our product lines through two reportable segmentsNorth America and International. The International segment covers Europe, South America and Asia. For the year ended December 31, 2009 and the three months ended March 31, 2010, we had sales of $1.9 billion and $596.3 million and a net loss of $(356.1) million and net income of $3.4 million, respectively. On a pro forma basis, for the year ended December 31, 2009 and the three months ended March 31, 2010, we had sales of $1.9 billion and $596.3 million and a net loss of $(332.4) million and net income of $18.9 million, respectively. See Business for a more detailed description of our business.
Products
We supply a diverse range of products on a global basis to a broad group of customers across a wide range of vehicles. Our principal product lines are body and chassis products and fluid handling products. For the years ended December 31, 2008 and 2009, and the three months ended March 31, 2010, body and chassis products accounted for 66%, 65% and 65%, respectively, of our sales, and fluid handling products accounted for 34%, 35% and 35%, respectively, of our sales. The top ten vehicle platforms we supply accounted for approximately 28% of our sales in 2008, 32% of our sales in 2009 and 34% of our sales in the three months ended March 31, 2010. Our principal product lines are described below.
Product Lines |
Solutions |
Products & Modules |
Market Position* |
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Body & Chassis: |
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Body Sealing |
Protect vehicle interiors from weather, dust and noise intrusion | Extruded rubber and thermoplastic sealing, weather strip assemblies and encapsulated glass products | #1 globally | |||
Anti-Vibration |
Control and isolate noise and vibration in the vehicle to improve ride and handling | Engine and body mounts, dampers, isolators, springs, stamped or cast metal products and rubber products | #3 North America | |||
Fluid Handling |
Control, sense, measure and deliver fluids and vapors throughout the vehicle | Pumps, tubes and hoses, connectors and valves (individually and in systems and subsystems) | #2 globally |
* | Market positions are managements estimates, which are based on reports prepared by industry consultants commissioned by us in 2008. See Market and Industry Data. |
Our Industry
The automotive industry is one of the worlds largest and most competitive. Consumer demand for new vehicles largely determines sales and production volumes of global OEMs, and component suppliers rely on high levels of vehicle sales and production to be successful.
The automotive supplier industry is generally characterized by high barriers to entry, significant start-up costs and long-standing customer relationships. The key criteria by which OEMs judge automotive suppliers include price, quality, service, performance, design and engineering capabilities, innovation, timely delivery and, more recently, financial stability. Over the last decade, those suppliers that have been able to achieve manufacturing scale, reduce structural costs, diversify their customer bases and establish a global manufacturing footprint have been successful.
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The table below outlines vehicle production forecasts for years 2010 through 2014:
2010 | 2011 | 2012 | 2013 | 2014 | ||||||
(vehicle units in millions) | ||||||||||
Europe |
17.0 | 17.2 | 18.3 | 19.9 | 21.2 | |||||
North America |
11.6 | 12.6 | 13.5 | 14.6 | 15.2 | |||||
Asia |
32.8 | 34.6 | 37.4 | 39.9 | 41.4 |
Source: | CSM Worldwide June 2010 Forecast |
Among the leading drivers of new vehicle demand is the availability of consumer credit to finance purchases. Beginning in late 2008, turmoil in the global credit markets and the recession in the United States and global economies led to a severe contraction in the availability of consumer credit. As a result, global vehicle sales volumes plummeted, led by severe declines in the mature North American and European markets. During 2009, North American light vehicle industry production declined by approximately 32% from 2008 levels to 8.6 million units, while European light vehicle industry production declined by approximately 20% from 2008 levels to 16.3 million units. The decline was less pronounced in Asia, where volumes were down only 1% from 2008 levels to 26.6 million units. This resilience was largely attributable to the continued expansion of the Chinese and Indian markets, both of which are expected to continue to increase as a share of the global automotive market in the coming years.
The severe decline in vehicle sales and production in 2009 led to major restructuring activity in the industry, particularly in North America. GM and Chrysler reorganized through chapter 11 bankruptcy proceedings and the Detroit 3 undertook other strategic actions, including the divestiture or discontinuance of non-core businesses and brands and the acceleration or broadening of operational and financial restructuring activities. A number of significant automotive suppliers, including us, restructured through chapter 11 bankruptcy proceedings or through other means.
Several significant trends and developments are now contributing to improvement in the automotive supplier industry. These include improved retail vehicle sales and production in North America in the fourth quarter of 2009 and first quarter of 2010, a more positive credit environment, the continued growth of new markets in Asia, particularly China, and increased emphasis on green and other innovative technologies.
Our Competitive Strengths
Innovative and high quality products
We believe we have distinguished ourselves in the automotive industry through our engineering and technological capabilities, as evidenced by our development of innovative solutions, including our ESP Thermoplastic Glassruns (body sealing), ride stabilizing hydromounts (AVS) and proprietary plastics-to-aluminum overmolding process (fluid handling). In addition, we believe we have a reputation for outstanding quality within the automotive industry, a factor that has been important to maintaining and expanding our successful relationships with our customers. We have earned numerous awards, including, among others, the DaimlerChrysler Global Supplier Award, GM Supplier of the Year, Fords Silver World Excellence Award and Toyotas Cost Excellence Performance Award.
Operational excellence
We have a proven track record and disciplined approach to operational excellence, which has generated significant cost savings of approximately 4% of sales annually since 2004. We believe we have the ability to generate similar savings in the future due to the flexible nature of our manufacturing capabilities, our highly efficient operations and our ability to leverage economies of scale from the high volumes of products we produce
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for the worlds top-selling vehicle platforms. We have created a culture of continuous improvement and lean manufacturing in all aspects of our operations. Over the life cycle of each platform, we focus on streamlining manufacturing, increasing automation and reducing material and other costs in an effort to generate additional operational savings. We budget and track operational savings at the facility level, which management regularly reports and reviews.
Strong customer relations and program management
We believe that our customer relationships, program management capabilities, global presence, comprehensive product line, excellence in manufacturing, product innovation and quality assurance combine to provide us with significant competitive advantages. We have proven our ability to expand globally with customers, increase scale in a consolidating industry and be first-to-market with design and engineering innovations.
We have a high level of dedication to customer service, and for each major product launch we dedicate a team of sales representatives, engineers, quality specialists and senior management, who work together to ensure that the product launch is completed on time and consistent with rigorous quality standards. These characteristics have allowed us to remain a leading supplier to Ford and GM while steadily growing our business with European and Asian OEMs. Our capabilities are evidenced by our success in being awarded significant content on our customers top-selling platforms, including the Ford F-Series and GMs GMT900 platform, which includes the Yukon, Tahoe, Sierra and Silverado vehicle models.
Global manufacturing footprint
We have established a global manufacturing footprint that allows us to serve our customers worldwide. Our global manufacturing operations are supported by 66 manufacturing locations and nine design, engineering and administrative locations around the world, including Australia, Belgium, Brazil, Canada, China, Czech Republic, France, Germany, India, Italy, Japan, Korea, Mexico, the Netherlands, Poland, Spain, the United Kingdom and the United States. Since 2004, we have increased our sales outside North America from 30% to 53%, largely reflecting our strategic focus on gaining exposure to high growth Asian markets and from key acquisitions in Europe. As part of our strategy, we operate several successful international joint ventures, which has allowed us to enter into new geographic markets, to acquire new customers and to develop new technologies. Our joint venture partners provide knowledge and insight into local markets and access to local suppliers of raw materials and components. We believe our global manufacturing footprint and proximity to customers provides us with a competitive advantage by allowing us to efficiently transport parts to local customers at a significantly lower cost as many of the parts are difficult to transport across long distances.
Incumbent position across diverse customer base
In 2009, our products were found in 17 of the 20 top-selling vehicle models in North America and in 19 of the 20 top-selling vehicle models in Europe. As the incumbent supplier to platforms, we have typically participated in the design of their successor platforms, and therefore, we believe we have been afforded a competitive advantage to win the upgrade and the ultimate replacement business. In addition, we believe that our presence on our largest customers highest-volume and most important platforms is a competitive advantage that allows us to further increase our market share, cross-sell our other product lines, fully leverage our lean initiatives, spread our fixed costs over higher volumes and increase our return on capital.
Experienced management team
Our senior management team has extensive experience in the automotive industry and collectively has over 130 years of experience in the industry. Our management team is focused on guiding us through the challenges facing the
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automotive industry and the changing economic environment through ongoing and continued cost reduction and restructuring initiatives and is intent on continuing to implement our business strategies. For more information on our executive officers, see ManagementDirectors and Executive Officers.
Conservative capital structure
Upon the date of our emergence from bankruptcy, May 27, 2010, or the emergence date, we significantly improved our leverage as compared to historical levels. As part of our plan of reorganization, we extinguished $1,126.7 million of prepetition debt, issued $450 million of 8 1 / 2 % senior notes due 2018, or our senior notes, and entered into a $125 million senior secured asset-based revolving credit facility, or our senior ABL facility. At the emergence date, we had $479.3 million of outstanding indebtedness, consisting of our senior notes and $29.3 million in other debt of certain of our foreign subsidiaries. Our senior ABL facility is subject to borrowing base limitations, and we had approximately $34.3 million of letters of credit outstanding but not drawn under our senior ABL facility on the emergence date. For the year ended December 31, 2009 and the three months ended March 31, 2010, we had a net loss of $(356.1) million and net income of $3.4 million, respectively. On a pro forma basis, for the year ended December 31, 2009 and the three months ended March 31, 2010, we had a net loss of $(332.4) million and net income of $18.9 million, respectively. We believe our emergence date capital structure is a conservative and stable structure.
Our Business Strategy
Continue optimization of our business and cost structure
We seek to optimize our business and cost structure so that we are appropriately configured in the rapidly changing environment in the automotive industry, with an emphasis on reducing our overall cost structure and making our manufacturing operations more efficient. Our primary areas of focus are:
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Identifying and implementing lean manufacturing initiatives . Our lean manufacturing initiatives focus on optimizing manufacturing by eliminating waste, controlling cost and enhancing productivity. Lean manufacturing initiatives have been implemented at each of our manufacturing and design facilities and continue to be an important element in our disciplined approach to operational excellence. |
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Relocating operations to lower-cost countries . We are supplementing our Western European operations with Central and Eastern European facilities where there are lower operating costs and to more closely match our customers footprints for more efficient transport of parts. In addition, we have expanded our operations in China, India and Mexico. |
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Consolidating facilities to reduce our cost structure . Our optimization efforts are designed to streamline our global operations and include taking advantage of opportunities to reduce our overall cost structure by consolidating and closing facilities. For example, in the second half of 2009, we closed two manufacturing facilities, one located in Ohio and another located in Germany, and in March 2010, we announced the closure of our manufacturing facility in Spain. We will continue to take a disciplined approach to evaluating opportunities that would improve our efficiency, profitability and cost structure. |
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Maintaining flexibility in all areas of our operations . Our operational capital needs are generally lower than many in our industry and a major portion of our manufacturing machinery is movable from job-to-job, providing us flexibility in adapting to market changes and serving customers worldwide. |
Further developing technologies
We will draw on our technical expertise to provide customers with innovative solutions. Our engineers combine product design with a broad understanding of material options for enhanced vehicle performance. We believe our reputation for successful innovation in product design and material usage is the reason our customers consult us early in the development and design process of their next generation vehicles.
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Recent innovations that highlight our ability to combine materials and product design expertise can be found in the following products:
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Safe Seal . Safe Seal is a body sealing product featuring sensors built into the seal capable of reversing power windows, doors and partitions to prevent injury. |
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Our new generation Hydro Body Mount . Our new generation Hydro Body Mount features patented Inertia-track design, combining plastic, metal and rubber to provide superior damping in the driver compartment for improved ride. |
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Direct Injection Fuel Rail . Direct Injection Fuel Rails draw upon our innovative welding processes and understanding of metal dynamics to create high pressure capability for highly advanced direct injection engines, improving fuel economy and performance. |
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Stratlink . Utilizing our internal material engineering capabilities, we have developed a rubber compound that performs equally with externally sourced compounds, which will significantly reduce cost. |
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PlastiCool . PlastiCool is a low cost, low weight, high temperature alternative to metal and rubber hose currently used in transmission cooling that offers a more robust joint design, improving quality and potentially reducing warranty costs. Additionally, because the material is smaller than current alternatives, it allows for greater design flexibility. |
Continued emphasis on fuel efficient, global and high volume vehicles
We believe that by focusing on fuel efficient, global and high volume vehicles, we will be able to solidify and expand our global leadership position.
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Fuel efficient . With the recent shift in customer preferences toward light weight, fuel efficient vehicles, we intend to target small car, hybrid and alternative powertrains and increase the content we provide to these platforms. We believe that furthering our position in the small car and hybrid market and alternative powertrains will allow us to increase market share, create greater economies of scale and provide more opportunities to partner with customers. |
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Global . Our global presence makes us one of the select few manufacturers of products in our product line areas who can take advantage of the many business opportunities that are becoming available worldwide as a result of the OEMs expanding emphasis on global platforms. Examples of successful global platforms we supply are the redesigned Ford Fiesta and GMs Buick LaCrosse. |
China, India and South America will continue to be regions of emphasis as their light vehicle market is projected to grow substantially as their economies continue to develop. In China, we are developing a substantial manufacturing and marketing presence to serve local OEMs, and we intend to follow our customers as they target other high growth developing markets.
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High volume . While smaller cars and crossover vehicles have grown in popularity, certain large car and truck platforms continue to be in demand and remain important to our business. For example, the Ford F-150 and GMs GMT 900 platform (the Silverado, Sierra, Tahoe and Yukon nameplates) continue to be popular models for which we supply a broad range of our product offerings, including body sealing systems, anti-vibration systems and fuel, brake, emissions and thermal management components. |
Through our extensive product portfolio, innovative solutions and broad global capabilities, we expect to continue winning new business across all major regions and automakers.
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Developing systems solutions and other value-added products
We believe that significant opportunities exist to grow by providing complete subsystems, modules and assemblies. As a leader in design, engineering and technical capabilities, we are able to focus on improving products, developing new technologies and implementing more efficient processes in each of our product lines. Our body sealing products are visible to vehicle passengers and can enhance the vehicles aesthetic appeal, in addition to creating a barrier to wind, precipitation, dust and noise. Our AVS products are an important contributor to vehicle quality, significantly improving ride and handling. Our fluid handling modules and subsystems are designed to increase functionality and decrease costs to the OEM, which can be the deciding factor in winning new business.
Selectively pursuing complementary acquisitions and alliances
We intend to continue to selectively pursue complementary acquisitions and joint ventures to enhance our customer base, geographic penetration, scale and technology. Consolidation is an industry trend and is encouraged by the OEMs desire for fewer supplier relationships. We believe we have a strong platform for growth through acquisitions based on our past integration successes, experienced management team, global presence and operational excellence. In addition, we believe joint ventures allow us to penetrate new markets with less relative risk and capital investment. We currently operate through several successful joint ventures, including those with Nishikawa Rubber Company, Zhejiang Saiyang Seal Products Co., Ltd., Guyoung Technology Co. Ltd., Hubei Jingda Precision Steel Tube Industry Co., Ltd., Shanghai Automotive Industry Corporation and Toyoda Gosei Co., Ltd.
Developing business in non-automotive markets
While the automotive industry will continue to be our core business, we supply other industries with products using our expertise and material compounding capabilities. For example, we supply parts to customers in the technical rubber business and develop and produce synthetic rubber products for a variety of industry applications, including aircraft flooring, commercial flooring, insulating sheets for power stations, non-slip step coverings, rubber for appliances and construction applications. In our technical rubber business we fabricate products from a wide variety of elastomer compounds and can custom fit many applications.
Risk Factors
Investing in our equity securities involves substantial risk, and our ability to successfully operate our business is subject to numerous risks. Any of the factors set forth under Risk Factors may limit our ability to successfully execute our business strategy. You should carefully consider all of the information set forth in this prospectus and, in particular, the specific factors set forth under Risk Factors in deciding whether to invest in our equity securities. Among these important risks are the following:
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Because of our new post-bankruptcy capital structure and implementation of fresh-start accounting, our financial condition or results of operations will not be comparable to the financial condition or results of operations reflected in our historical financial statements. |
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We may not be able to generate sufficient cash to service all of our indebtedness and meet the dividend obligations of our preferred stock, and we may be forced to take other actions to satisfy our obligations under our indebtedness and preferred stock, which may not be successful. Because our ability to make scheduled payments on our debt and meet the dividend obligations of our preferred stock depends on our financial condition and operating performance, we are subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. |
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The financial condition of our customers, particularly the Detroit 3, may adversely affect our results of operations and financial condition. Chrysler, Ford and GM have engaged in unprecedented restructuring, which included Chrysler and GM reorganizing under bankruptcy laws, and while portions of Chrysler and GM have successfully emerged from bankruptcy proceedings, it is still uncertain what portion of their respective sales will return and whether they can be viable at a lower level of sales. |
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A prolonged or further material contraction in automotive sales and production volumes could materially adversely affect our liquidity, the viability of our supply base and the financial conditions of our customers. Our customers have been severely affected by the turmoil in the global credit markets and the economic recession. Our supply base has also been adversely affected by the current industry environment. Our financial condition, operating results and cash flows could be further affected by a material contraction in the automotive industry, which would impact our ability to meet our obligations. |
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Disruptions in the financial markets are adversely impacting the availability and cost of credit to us, which could continue to negatively affect our business. In addition, if our customers and suppliers are not able to obtain required capital, their businesses would be negatively impacted, which could negatively impact our business, whether through loss of sales or an inability to meet our commitments. |
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We could be materially adversely affected if we are unable to continue to compete successfully in the highly competitive automotive parts industry. We face numerous competitors in each of the product lines we produce and increased competition from suppliers producing in lower-cost countries. |
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We are subject to other risks associated with our non-U.S. operations, including: exchange controls and currency restrictions; currency fluctuations and devaluations; changes in local economic conditions; changes in laws and regulations, including the imposition of embargos; exposure to possible expropriation or other government actions; and unsettled political conditions and possible terrorist attacks. These and other factors may have a material adverse effect on out international operations or on our business, results of operations and financial condition. |
Our Reorganization
On August 3, 2009, we along with our U.S. subsidiaries, or the debtors, filed voluntary petitions for chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of Delaware. On August 4, 2009, our Canadian subsidiary, Cooper-Standard Automotive Canada Limited, or CSA Canada, sought relief under the Companies Creditors Arrangement Act in the Ontario Superior Court of Justice in Toronto, Ontario, Canada. The debtors and CSA Canada emerged from their respective insolvency proceedings on May 27, 2010, with approximately $480 million of funded debt, representing a reduction of over $650 million from prepetition levels.
As part of our emergence from chapter 11, we raised $450 million through the issuance of our senior notes and entered into our $125 million senior ABL facility with certain agent and lending banks. In addition, we raised $355 million through the issuance of (i) $100 million of our 7% cumulative participating convertible preferred stock, or our 7% preferred stock, to certain creditors pursuant to a commitment agreement that provided for the backstop of our rights offering, or the Backstop Parties, and (ii) $255 million of our common stock to the Backstop Parties and holders of our prepetition 8 3 / 8 % senior subordinated notes due 2014, or our prepetition senior subordinated notes, pursuant to our rights offering. The Backstop Parties also received warrants to purchase 7% of our common stock (assuming the conversion of our 7% preferred stock) for their commitment to backstop the rights offering.
In connection with our emergence from chapter 11, amounts outstanding under our $175 million debtor-in- possession financing facility and $639.6 million of claims under our prepetition credit facility were paid in full in cash. Holders of our prepetition 7% senior notes due 2012, or our prepetition senior notes, were also paid in full
8
in cash, except that the Backstop Parties received a distribution of our common stock in lieu of the cash payment for certain of their prepetition senior note claims. Holders of our prepetition senior subordinated notes were issued 8% of our outstanding common stock and warrants to purchase, in the aggregate, 3% of our outstanding common stock (in each case, assuming the conversion of our 7% preferred stock). In addition, our obligations under both our prepetition senior notes and our prepetition senior subordinated notes were cancelled. See Description of Certain Indebtedness for a more detailed description of our senior notes and senior ABL facility, Description of Capital Stock for a more detailed description of our equity securities and Our Reorganization for a more detailed description of our reorganization.
Accounting Impact of Emergence from Chapter 11
As discussed in detail in the section titled Unaudited Pro Forma Condensed Consolidated Financial Information, our emergence from bankruptcy, the implementation of our plan of reorganization and our application of fresh-start accounting principles will affect our future results of operations and make it difficult to compare our historical, pre-emergence results of operations with those that we report in the future. As noted in the unaudited pro forma condensed consolidated financial statements, initial fresh-start accounting valuations are preliminary and have been made solely for purposes of developing the unaudited pro forma condensed consolidated financial information. However, updates to such preliminary valuations will be completed in the periods subsequent to those reported in this prospectus and will be calculated as of our actual emergence date of May 27, 2010 and, to the extent such updates reflect a valuation different than those used in the unaudited pro forma condensed consolidated financial information, there may be adjustments in the carrying values of certain assets and liabilities and related deferred taxes. To the extent actual valuations differ from those used in calculating the unaudited pro forma condensed consolidated financial information, these differences will be reflected on our balance sheet under fresh-start accounting and may also affect the amount of revenues and expenses, which would be recognized in the statement of operations post-emergence from bankruptcy.
Corporate History
Cooper-Standard Holdings Inc. was formed and capitalized in 2004 as a Delaware corporation and began operating on December 23, 2004, when it acquired the automotive segment of Cooper Tire & Rubber Company, or the 2004 acquisition. Cooper-Standard Holdings Inc. operates the business primarily through its principal operating subsidiary, Cooper-Standard Automotive Inc. Our principal executive office is located at 39550 Orchard Hill Place Drive, Novi, MI 48375. Our telephone number is (248) 596-5900. Our website address is www.cooperstandard.com. The information available on or through our website is not part of this prospectus.
Market and Industry Data
Market data and other statistical information, including market share, ranking and similar information, used throughout this prospectus is based on data available from third party market research firms, other third party sources and our good faith estimates based on internal surveys and market intelligence. For a more detailed description of the market and industry data used in this prospectus, including a discussion of the risks and uncertainties inherent in such data, see Risk Factors, Forward-Looking Statements and Market and Industry Data.
Trademarks and Tradenames
We own or have rights to trademarks or trade names that we use in conjunction with the operation of our business. In addition, Stratlink , Safe Seal , PosiBond , and PosiLock , our name, logo and website name and address are our service marks or trademarks. Each trademark, trade name or service mark of any other company appearing in this prospectus belongs to its holder.
9
The Offering
Common Stock:
Offered by the selling security holders |
Up to 17,210,676 shares of our common stock consisting of: |
|
11,181,673 shares of our outstanding common stock; |
|
4,335,176 shares of our common stock issuable to holders of our 7% preferred stock upon conversion of their preferred stock; and |
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1,693,827 shares of our common stock issuable to holders of our warrants upon exercise of their warrants. |
Outstanding prior to and after to the offering(1) |
18,378,112. |
Outstanding prior to and after the offering, diluted(2) |
26,101,583. |
7% Preferred Stock:
Offered by the selling security holders |
Up to 1,010,345 shares of our 7% preferred stock. |
Outstanding prior to and after the offering(3) |
1,052,446. |
Warrants:
Offered by the selling security holders |
Warrants to purchase up to 1,693,827 shares of our common stock. We use the term warrant to refer to the right to purchase one share of our common stock. |
Outstanding prior to and after the offering(4) |
2,419,753. |
OTC Bulletin Board Symbol:
Common stock |
COSH. |
Warrants |
COSHW. |
7% Preferred Stock |
There is currently no established market for our 7% preferred stock. |
(1) | Reflects the total number of outstanding shares of our common stock as of July 21, 2010 without giving effect to shares of our common stock that may be issued upon the conversion of outstanding shares of our 7% preferred stock or upon the exercise of outstanding warrants or options to purchase shares of our common stock. |
(2) | Reflects the total number of outstanding shares of our common stock as of July 21, 2010, plus 4,515,823 shares issuable upon the conversion of our 7% preferred stock, 2,419,753 shares issuable upon the exercise of our warrants and 787,895 shares of our common stock that may be issued to certain of our officers and key employees and directors upon the exercise of options. |
(3) | Based upon the total number of outstanding shares of our 7% preferred stock as of July 21, 2010, including 42,101 shares of restricted 7% preferred stock issued to certain of our officers and key employees. |
(4) | Based upon the total number of outstanding warrants as of July 21, 2010. |
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Summary Historical and Pro Forma Financial Data
The following tables set forth our summary consolidated historical financial data and unaudited pro forma condensed consolidated financial information for the periods ended and as of the dates set forth below. The summary consolidated historical financial data as of December 31, 2008 and 2009 and for the years ended December 31, 2007, 2008 and 2009 have been derived from our audited consolidated financial statements and the notes thereto, which are included elsewhere in this prospectus. Ernst & Young LLPs report on the consolidated financial statements for the year ended December 31, 2009, which appears elsewhere herein, includes an explanatory paragraph which describes an uncertainty about Cooper-Standard Holding, Inc.s ability to continue as a going concern. The data should be read in conjunction with the consolidated financial statements, related notes, and other financial information included herein. The financial information as of December 31, 2007 was derived from our 2007 audited consolidated financial statements, which are not included in this prospectus. The summary historical financial data as of March 31, 2010 and for the three months ended March 31, 2009 and 2010 have been derived from our unaudited consolidated financial statements and the notes thereto, which are included elsewhere in this prospectus.
We have prepared the unaudited summary consolidated financial data as of and for the three months ended March 31, 2009 and 2010 on a basis consistent with our audited consolidated financial statements for the year ended December 31, 2009, and this information includes all adjustments (consisting of only normal recurring adjustments unless otherwise disclosed therein) that management considers necessary for a fair presentation of our financial position and results of operations for the periods indicated. Historical results are not necessarily indicative of future performance. Operating results for the three months ended March 31, 2010 are not necessarily indicative of results that may be expected for the full fiscal year.
The summary unaudited pro forma condensed consolidated financial data set forth below has been derived by applying the pro forma adjustments described under Unaudited Pro Forma Condensed Consolidated Financial Information to our historical consolidated balance sheet as of March 31, 2010 and to our historical consolidated statement of operations for the year ended December 31, 2009 and the three months ended March 31, 2010, respectively. The summary unaudited pro forma condensed consolidated statement of operations data has been prepared to give effect to the Pro Forma Adjustments, as further described under Unaudited Pro Forma Condensed Consolidated Financial Information, as if they had occurred on January 1, 2009. The summary unaudited pro forma condensed consolidated balance sheet data has been prepared to give effect to the transactions as if they had occurred on March 31, 2010.
The summary unaudited pro forma condensed consolidated financial data presented for the year ended December 31, 2009 are based on the historical consolidated financial statements and the summary unaudited pro forma condensed consolidated financial data presented for the three months ended March 31, 2010 was derived from the unaudited consolidated financial statements and each has been prepared to give effect to the following:
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the effectiveness of the debtors Second Amended Joint Chapter 11 Plan, or our plan of reorganization, including the issuance of our senior notes and the rights offering, collectively referred to as Reorganization Adjustments in Unaudited Pro Forma Condensed Consolidated Financial Information; and |
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the estimated adjustments required under fresh-start accounting for the entities that emerged from the bankruptcy cases, classified as Fresh-Start Adjustments in Unaudited Pro Forma Condensed Consolidated Financial Information. |
The following summary historical and unaudited pro forma condensed consolidated financial data is qualified by reference to, and should be read in conjunction with, our historical consolidated financial statements and the notes to those statements included elsewhere in this prospectus and the information under Unaudited Pro Forma Condensed Consolidated Financial Information, Capitalization and Managements Discussion and Analysis of Financial Condition and Results of Operations.
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The summary unaudited pro forma condensed consolidated financial information set forth below is presented for illustrative purposes only and is not necessarily indicative of the results of operations or financial position that would have actually been reported had the transactions and other matters reflected in the Pro Forma Adjustments occurred on January 1, 2009 or as of March 31, 2010, respectively, nor is it indicative of our future results of operations or financial position. In addition, our historical financial statements will not be comparable to our financial statements following our emergence from bankruptcy due to the effects of the consummation of our plan of reorganization as well as adjustments for fresh-start accounting. In addition, the amount of new stockholders equity in the unaudited pro forma condensed consolidated balance sheet is not an estimate of the market value of our common stock or 7% preferred stock as of the emergence date or at any other time. We make no representations as to the market value, if any, of our common stock and 7% preferred stock.
Historical | Pro Forma | |||||||||||||||||||||||||||
Year Ended December 31, |
Three Months
Ended March 31, |
Year
Ended
December 31, 2009 |
Three
Months Ended March 31, 2010 |
|||||||||||||||||||||||||
2007 | 2008 | 2009 | 2009 | 2010 | ||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||
Statement of operations: |
||||||||||||||||||||||||||||
Sales |
$ | 2,511.2 | $ | 2,594.6 | $ | 1,945.3 | $ | 401.8 | $ | 596.3 | $ | 1,945.3 | $ | 596.3 | ||||||||||||||
Cost of products sold |
2,114.1 | 2,260.1 | 1,679.0 | 363.9 | 491.8 | 1,691.9 | 493.5 | |||||||||||||||||||||
Gross profit |
397.1 | 334.5 | 266.3 | 37.9 | 104.5 | 253.4 | 102.8 | |||||||||||||||||||||
Selling, administration & engineering expenses |
222.1 | 231.7 | 199.5 | 45.2 | 53.0 | 199.7 | 55.2 | |||||||||||||||||||||
Amortization of intangibles |
31.9 | 31.0 | 15.0 | 7.2 | 0.2 | 15.1 | 3.8 | |||||||||||||||||||||
Impairment charges |
146.4 | 33.4 | 363.5 | | | 363.5 | | |||||||||||||||||||||
Restructuring |
26.4 | 38.3 | 32.4 | 22.6 | 0.3 | 32.4 | 0.3 | |||||||||||||||||||||
Operating profit (loss) |
(29.7 | ) | 0.1 | (344.1 | ) | (37.1 | ) | 51.0 | (357.3 | ) | 43.5 | |||||||||||||||||
Interest expense, net of interest income |
(89.5 | ) | (92.9 | ) | (64.3 | ) | (21.1 | ) | (11.8 | ) | (45.4 | ) | (11.5 | ) | ||||||||||||||
Equity earnings (losses) |
2.2 | 0.9 | 4.0 | (0.2 | ) | 2.0 | 3.2 | 1.8 | ||||||||||||||||||||
Reorganization items, net |
| | (17.4 | ) | | (23.3 | ) | | | |||||||||||||||||||
Other income (expense) |
(0.5 | ) | (1.4 | ) | 9.9 | (0.7 | ) | (6.9 | ) | 12.3 | (6.9 | ) | ||||||||||||||||
Income (loss) before income taxes |
(117.5 | ) | (93.3 | ) | (411.9 | ) | (59.1 | ) | 11.0 | (387.2 | ) | 26.9 | ||||||||||||||||
Provision for income tax expense (benefit) |
32.9 | 29.3 | (55.7 | ) | (3.8 | ) | 7.3 | (54.7 | ) | 7.7 | ||||||||||||||||||
Consolidated net income (loss) |
(150.4 | ) | (122.6 | ) | (356.2 | ) | (55.3 | ) | 3.7 | (332.5 | ) | 19.2 | ||||||||||||||||
Add: Net loss (income) attributable to noncontrolling interests(1) |
(0.6 | ) | 1.1 | 0.1 | 0.3 | (0.3 | ) | 0.1 | (0.3 | ) | ||||||||||||||||||
Net income (loss) attributable to Cooper-Standard Holdings Inc. |
$ | (151.0 | ) | $ | (121.5 | ) | $ | (356.1 | ) | $ | (55.0 | ) | $ | 3.4 | $ | (332.4 | ) | $ | 18.9 | |||||||||
Balance sheet data (at end of period): |
||||||||||||||||||||||||||||
Cash and cash equivalents |
$ | 40.9 | $ | 111.5 | $ | 380.3 | $ | 88.3 | $ | 265.3 | $ | 126.6 | ||||||||||||||||
Net working capital(2) |
249.8 | 154.5 | 240.8 | 159.3 | 311.0 | 301.5 | ||||||||||||||||||||||
Total assets |
2,162.3 | 1,818.3 | 1,737.4 | 1,733.0 | 1,686.4 | 1,689.7 | ||||||||||||||||||||||
Total non-current liabilities |
1,351.6 | 1,346.9 | 263.9 | 1,328.9 | 252.5 | 775.3 | ||||||||||||||||||||||
Total debt(3) |
1,140.2 | 1,144.1 | 204.3 | 1,155.7 | 152.4 | 477.8 | ||||||||||||||||||||||
Liabilities subject to compromise |
| | 1,261.9 | | 1,256.7 | | ||||||||||||||||||||||
Preferred stock |
| | | | | 128.0 | ||||||||||||||||||||||
Predecessor equity(deficit) |
276.8 | 19.7 | (306.5 | ) | (52.0 | ) | (304.3 | ) | | |||||||||||||||||||
Successor equity |
| | | | | 424.3 | ||||||||||||||||||||||
Statement of cash flows data: |
||||||||||||||||||||||||||||
Net cash provided (used) by: |
||||||||||||||||||||||||||||
Operating activities |
$ | 185.4 | $ | 136.5 | $ | 130.0 | $ | (32.3 | ) | $ | (56.7 | ) | ||||||||||||||||
Investment activities |
(260.0 | ) | (73.9 | ) | (45.5 | ) | (8.3 | ) | (8.3 | ) | ||||||||||||||||||
Financing activities |
55.0 | 14.1 | 166.1 | 18.7 | (51.6 | ) | ||||||||||||||||||||||
Capital expenditures |
107.3 | 92.1 | 46.1 | 8.3 | 12.0 | |||||||||||||||||||||||
Other financial data (unaudited): |
||||||||||||||||||||||||||||
EBITDA(4) |
$ | 107.5 | $ | 140.8 | $ | (233.6 | ) | $ | (7.6 | ) | $ | 43.7 | ||||||||||||||||
Adjusted EBITDA(4) |
285.7 | 210.2 | 176.5 | (4.5 | ) | 74.2 | ||||||||||||||||||||||
Ratio of earnings to combined fixed charges and preferred stock dividends |
| | | | 1.6x | | 2.5x |
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(1) | Certain prior period amounts have been reclassified from other income to net loss (income) attributable to noncontrolling interests due to recent accounting pronouncements. |
(2) | Net working capital is defined as current assets (excluding cash and cash equivalents) less current liabilities (excluding debt payable within one year). |
(3) | Includes $175.0 million and $124.6 million of borrowings under our debtor-in-possession credit agreement, dated December 18, 2009, or our DIP credit agreement, $0.8 million and $0.6 million in capital leases and $28.5 million and $27.2 million of other third party debt as of December 31, 2009 and March 31, 2010, respectively. |
(4) | In evaluating our business, management considers EBITDA and Adjusted EBITDA as key indicators of our operating performance. In addition, our management uses EBITDA and Adjusted EBITDA: |
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as measures utilized in the calculation of the financial covenants and ratios contained in our financing arrangements; |
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in developing our internal budgets and forecasts; |
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as a significant factor in evaluating our management for compensation purposes, see ManagementCompensation Discussion and Analysis; |
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in evaluating potential acquisitions; |
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in comparing our current operating results with corresponding historical periods and with the operational performance of other companies in our industry; and |
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in presentations to the members of our board of directors to enable our board of directors to have the same measurement basis of operating performance as is used by management in their assessments of performance and in forecasting and budgeting for our company. |
In addition, we believe EBITDA and Adjusted EBITDA and similar measures are widely used by investors, securities analysts and other interested parties in evaluating our performance. We define Adjusted EBITDA as net income (loss) plus provision for income tax expense (benefit), interest expense, net of interest income, depreciation and amortization, or EBITDA, as adjusted for items that management does not consider to be reflective of our core operating performance. These adjustments include restructuring costs, impairment charges, non-cash fair value adjustments, acquisition related costs, professional fees and expenses associated with our reorganization, non-cash stock based compensation and non-cash gains and losses from certain foreign currency transactions and translation.
We calculate EBITDA and Adjusted EBITDA by adjusting net income (loss) to eliminate the impact of a number of items we do not consider indicative of our ongoing operating performance. You are encouraged to evaluate each adjustment and the reasons we consider it appropriate for supplemental analysis. However, EBITDA and Adjusted EBITDA are not financial measurements recognized under U.S. GAAP, and when analyzing our operating performance, investors should use EBITDA and Adjusted EBITDA in addition to, and not as an alternative for, net income (loss), operating income, or any other performance measure derived in accordance with U.S. GAAP, or as an alternative to cash flow from operating activities as a measure of our liquidity. EBITDA and Adjusted EBITDA have limitations as analytical tools, and they should not be considered in isolation or as substitutes for analysis of our results of operations as reported under U.S. GAAP. These limitations include:
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they do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; |
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they do not reflect changes in, or cash requirements for, our working capital needs; |
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they do not reflect interest expense or cash requirements necessary to service interest or principal payments under our senior notes and senior ABL facility; |
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they do not reflect certain tax payments that may represent a reduction in cash available to us; |
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although depreciation and amortization are non-cash charges, the assets being depreciated or amortized may have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect cash requirements for such replacements; and |
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other companies, including companies in our industry, may calculate these measures differently and, as the number of differences in the way companies calculate these measures increases, the degree of their usefulness as a comparative measure correspondingly decreases. |
In addition, in evaluating Adjusted EBITDA, it should be noted that in the future we may incur expenses similar to the adjustments in the below presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
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The following table provides a reconciliation of EBITDA and Adjusted EBITDA to net income (loss), which is the most directly comparable financial measure presented in accordance with U.S. GAAP:
Historical | |||||||||||||||||||
Year Ended December 31, |
Three Months Ended
March 31, |
||||||||||||||||||
2007 | 2008 | 2009 | 2009 | 2010 | |||||||||||||||
(in millions) | |||||||||||||||||||
Net income (loss) attributable to Cooper-Standard Holdings Inc. |
$ | (151.0 | ) | $ | (121.5 | ) | $ | (356.1 | ) | $ | (55.0 | ) | $ | 3.4 | |||||
Plus: |
|||||||||||||||||||
Provision for income tax expense (benefit) |
32.9 | 29.3 | (55.7 | ) | (3.8 | ) | 7.3 | ||||||||||||
Interest expense, net of interest income |
89.6 | 92.9 | 64.3 | 21.1 | 11.8 | ||||||||||||||
Depreciation and amortization |
136.0 | 140.1 | 113.9 | 30.1 | 21.2 | ||||||||||||||
EBITDA |
$ | 107.5 | $ | 140.8 | $ | (233.6 | ) | (7.6 | ) | 43.7 | |||||||||
Restructuring |
26.4 | 30.6 | 32.4 | 2.6 | 0.3 | ||||||||||||||
Foreign exchange losses (gains) |
(0.1 | ) | 0.1 | (4.2 | ) | (0.5 | ) | 6.3 | |||||||||||
Net gain on bond repurchase(a) |
| (1.7 | ) | (9.1 | ) | | | ||||||||||||
Inventory write-up(b) |
2.5 | | | | | ||||||||||||||
Impairment(c) |
146.4 | 36.0 | 363.5 | | | ||||||||||||||
Reorganization costs(d) |
| | 25.1 | | 23.3 | ||||||||||||||
Transition and integration costs(e) |
1.5 | 0.5 | | | | ||||||||||||||
Stock compensation expense |
1.5 | (f) | 1.2 | (f) | 1.4 | (f) | | | |||||||||||
Other |
| 2.7 | 1.0 | 1.0 | 0.6 | ||||||||||||||
Adjusted EBITDA |
$ | 285.7 | $ | 210.2 | $ | 176.5 | $ | (4.5 | ) | $ | 74.2 | ||||||||
(a) | Net gain on purchases of our prepetition senior subordinated notes. |
(b) | Write-ups of inventory to fair value. |
(c) | For the year ended December 31, 2007, impairment included charges related to goodwill of $142.9 million and certain intangibles of $3.5 million. For the year ended December 31, 2008, impairment included charges related to goodwill of $23.1 million, certain intangibles of $3.9 million, fixed assets of $6.4 million and our investment in Guyoung Technology Co. Ltd., or Guyoung, of $2.7 million. For the year ended December 31, 2009, impairment included charges related to goodwill of $157.2 million, certain intangibles of $202.4 million and fixed assets of $3.9 million. |
(d) | Reorganization and bankruptcy-related expenses, including professional fees incurred before filing for bankruptcy in 2009. |
(e) | Transition and integration costs related to the acquisition of nine Metzeler Automotive Profile Systems sealing systems operations in Germany, Italy, Poland, Belarus and Belgium and a joint venture interest in China, or, collectively, MAPS, and the El Jarudo fuel rail manufacturing business of Automotive Components Holdings, LLC, or El Jarudo, in 2007 and a MAPS related acquisition of a joint venture interest in India, or MAP India, in 2008. |
(f) | Compensation expense related to stock options and stock units issued to management. |
14
Before investing in the securities offered hereby, you should carefully consider the following risks and all of the other information contained in this prospectus. The risks described below are not the only risks we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may adversely affect us and your investment. If any of the risks or uncertainties occur, our business, financial condition or results of operations could be materially adversely affected.
Risks Related to Our Business
We are highly dependent on the automotive industry. A prolonged or further material contraction in automotive sales and production volumes could materially adversely affect our liquidity, the viability of our supply base and the financial conditions of our customers, all of which could have a material adverse affect on our business, results of operations and financial condition.
The great majority of our customers are OEMs and their suppliers. In 2009, the automotive industry was severely affected by the turmoil in the global credit markets and the economic recession. These conditions had a dramatic impact on consumer vehicle demand in 2009. During 2009, North American light vehicle industry production declined by approximately 32% from 2008 levels to 8.6 million units. European light vehicle industry production declined by approximately 20% from 2008 levels to 16.3 million units.
Automotive sales and production are highly cyclical and depend, among other things, on general economic conditions and consumer spending and preferences (which can be affected by a number of issues, including fuel costs, employment levels and the availability of consumer financing). As the volume of automotive production fluctuates, the demand for our products also fluctuates. Declines in automotive sales and production in the second half of 2008 and into 2009 lead to our focused efforts, which are ongoing, to restructure our business and take other actions in order to reduce costs. There is no assurance that our actions to date will be sustainable over the long term or will be sufficient if there is further decline. In addition, if lower levels of sales and production are forecasted, non-cash impairment charges could result as the value of certain long-lived assets is reduced. As a result, our financial condition and results of operations could be materially adversely affected by further declines in vehicle production. Production levels in Europe and North America, most notably, affect us given our concentration of sales in those regions, which accounted for 40% and 47%, respectively, of our 2009 sales.
Our supply base has also been adversely affected by the current industry environment. Lower global automotive production, turmoil in the credit markets and extreme volatility over the past several years in raw material, energy and commodity costs have resulted in financial distress within our supply base and an increase in the risk of supply disruption. In addition, several automotive suppliers have filed for bankruptcy protection or have ceased operations. While we have developed and implemented strategies to mitigate these factors, these strategies have offset only a portion of the adverse impact. The continuation or worsening of these industry conditions could adversely affect our financial condition, operating results and cash flows, thereby making it more difficult for us to make payments under our indebtedness and our 7% preferred stock.
In addition, if our suppliers were to reduce normal trade credit terms, our liquidity could be adversely impacted. Likewise, our liquidity could be adversely impacted if our customers were to extend their normal payment terms, whether or not permitted under our contracts. If either of these situations occurs, we may need to rely on other sources of funding to bridge the additional gap between the time we pay our suppliers and the time we receive corresponding payments from our customers.
As a result of the above factors, further material contraction in automotive sales and production could have a material adverse effect on our results of operations and liquidity. In addition, our suppliers would also be subject to many of the same consequences, which could adversely impact their results of operations and liquidity. If a suppliers viability was to become impaired, it could impact the suppliers ability to perform as we expect and consequently our ability to meet our own commitments.
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The financial conditions of our customers, particularly the Detroit 3, may adversely affect our results of operations and financial condition.
Significantly lower global production levels, tightened liquidity and increased costs of capital have combined to cause severe financial distress among many of our customers and have forced those companies to implement various forms of restructuring actions. In some cases, these actions have involved significant capacity reductions, the discontinuation of entire vehicle brands or even reorganization under bankruptcy laws. Discontinuation of a brand can result in not only a loss of sales associated with any systems or components we supplied but also customer disputes regarding capital we expended to support production of such systems or components for the discontinued brand, and such disputes could potentially be resolved adversely to us.
In North America, Chrysler, Ford and GM have been engaged in unprecedented restructuring, which included, in the case of Chrysler and GM, reorganization under bankruptcy laws and subsequent asset sales. While portions of Chrysler and GM have successfully emerged from bankruptcy proceedings in the United States, it is still uncertain what portion of their respective sales will return and whether they can be viable at a lower level of sales.
We may not be able to generate sufficient cash to service all of our indebtedness and meet the dividend obligations of our 7% preferred stock, and we may be forced to take other actions to satisfy our obligations under our indebtedness and 7% preferred stock, which may not be successful.
Our ability to make scheduled payments on our debt and meet the dividend obligations of our 7% preferred stock or to refinance these obligations depends on our financial condition and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. We cannot assure you that we will maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness, and dividend obligations on our 7% preferred stock. For a description of our obligations to pay dividends on our 7% preferred stock, see Description of Capital StockPreferred Stock.
If our cash flows and capital resources are insufficient to fund our debt service obligations and our dividend obligations on our 7% preferred stock, we may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or refinance our indebtedness or our 7% preferred stock. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations or our dividend obligations on our 7% preferred stock. If our operating results and available cash are insufficient to meet our debt service obligations or our dividend obligations on our 7% preferred stock, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service, dividend and other obligations. We may not be able to consummate those dispositions or to obtain the proceeds that we could realize from them, and these proceeds may not be adequate to meet any debt service and dividend obligations then due. Additionally, terms of our indebtedness may limit the use of the proceeds from any disposition; as a result, we may not be allowed to use proceeds from such dispositions to satisfy all current debt service and dividend obligations.
Disruptions in the financial markets are adversely impacting the availability and cost of credit, which could continue to negatively affect our business.
Disruptions in the financial markets, including the bankruptcy, insolvency or restructuring of certain financial institutions, and the general lack of liquidity continue to adversely impact the availability and cost of incremental credit for many companies, including us, and may adversely affect the availability of credit already arranged. These disruptions are also adversely affecting the U.S. and world economy, further negatively impacting consumer spending patterns in the automotive industry. In addition, as our customers and suppliers respond to rapidly changing consumer preferences, they may require access to additional capital. If required capital is not obtained or its cost is prohibitively high, their businesses would be negatively impacted, which could result in further restructuring or even reorganization under bankruptcy laws. Any such negative impact, in turn, could negatively affect our business, either through loss of sales to any of our customers so affected or through inability to meet our commitments (or inability to meet them without excess expense) because of our suppliers inability to perform.
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We could be adversely affected by any shortage of supplies.
In the event of a rapid increase in production demands, either we or our customers or other suppliers may experience supply shortages of raw materials or components. This could be caused by a number of factors, including a lack of production line capacity or manpower or working capital constraints. In order to manage and reduce the cost of purchased goods and services, we and others within our industry have been rationalizing and consolidating our supply base. In addition, due to the turbulence in the automotive industry, several suppliers have initiated bankruptcy proceedings or ceased operations. As a result, there is greater dependence on fewer sources of supply for certain components and materials, which could increase the possibility of a supply shortage of any particular component. If any of our customers experience a material supply shortage, either directly or as a result of a supply shortage at another supplier, that customer may halt or limit the purchase of our products. Similarly, if we or one of our own suppliers experience a supply shortage, we may become unable to produce the affected products if we cannot procure the components from another source. Such production interruptions could impede a ramp-up in vehicle production and could have a material adverse effect on our business, results of operations and financial condition.
Escalating pricing pressures from our customers may adversely affect our business.
Pricing pressure in the automotive supply industry has been substantial and is likely to continue. Virtually all vehicle manufacturers seek price reductions in both the initial bidding process and during the term of the contract. Price reductions have impacted our sales and profit margins and are expected to do so in the future. If we are not able to offset continued price reductions through improved operating efficiencies and reduced expenditures, those price reductions may have a material adverse effect on our results of operations.
We may be at risk of not being able to meet significant increases in demand.
If demand increases significantly from what has been a historical low for production over the last two years, we may have difficulty meeting such demand, particularly if such increases in demand occur rapidly. This difficulty may include not having sufficient manpower or relying on suppliers who may not be able to respond quickly to a changed environment when demand significantly increases. Our inability to meet significant increases in demand could require us to delay delivery dates and could result in customers cancelling their orders, requesting discounts or ceasing to do business with us. In addition, as demand and volumes increase, we will need to purchase more inventory, which will increase our working capital needs. If our working capital needs exceed our cash flows from operations, we will be required to use our cash balances and available borrowings, as well as potential sources of additional capital, which may not be available on satisfactory terms and in adequate amounts, if at all, to satisfy those needs.
Increasing costs for, or reduced availability of, manufactured components and raw materials may adversely affect our profitability.
The principal raw materials we purchase include fabricated metal-based components, synthetic rubber, carbon black and natural rubber. Raw materials comprise the largest component of our costs, representing approximately 45% of our total costs in 2009. A significant increase in the price of these items could materially increase our operating costs and materially and adversely affect our profit margins because it is generally difficult to pass through these increased costs to our customers. Raw material costs remain volatile and could have an adverse impact on our profitability in the foreseeable future.
Because we purchase various types of raw materials and manufactured components, we may be materially and adversely affected by the failure of our suppliers of those materials to perform as expected. This non-performance may consist of delivery delays or failures caused by production issues or delivery of non-conforming products. The risk of non-performance may also result from the insolvency or bankruptcy of one or more of our suppliers. Our suppliers ability to supply products to us is also subject to a number of risks to such suppliers, including availability
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of raw materials, such as steel and natural rubber, destruction of their facilities or work stoppages. In addition, our failure to promptly pay, or order sufficient quantities of inventory from, our suppliers may increase the cost of products we purchase or may lead to suppliers refusing to sell products to us at all. Our efforts to protect against and to minimize these risks may not always be effective.
We consider the production capacities and financial condition of suppliers in our selection process and expect that they will meet our delivery requirements. However, there can be no assurance that strong demand, capacity limitations, shortages of raw materials or other problems will not result in any shortages or delays in the supply of components to us.
We could be materially adversely affected if we are unable to continue to compete successfully in the highly competitive automotive parts industry.
The automotive parts industry is highly competitive. We face numerous competitors in each of the product lines we serve. In general, there are three or more significant competitors and numerous smaller competitors for most of the products we offer. We also face increased competition for certain of our products from suppliers producing in lower-cost countries such as Korea and China, especially for certain lower-technology noise, vibration and harshness control products that have physical characteristics that make long-distance shipping more feasible and economical. We may not be able to continue to compete favorably, and increased competition in our markets may have a material adverse effect on our business.
We are subject to other risks associated with our non-U.S. operations.
We have significant manufacturing operations outside the United States, including joint ventures and other alliances. Our operations are located in 18 countries, and we export to several other countries. In 2009, approximately 73% of our sales were attributable to products manufactured outside the United States. Risks are inherent in international operations, including:
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exchange controls and currency restrictions; |
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currency fluctuations and devaluations; |
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changes in local economic conditions; |
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changes in laws and regulations, including the imposition of embargos; |
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exposure to possible expropriation or other government actions; and |
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unsettled political conditions and possible terrorist attacks. |
These and other factors may have a material adverse effect on our international operations or on our business, results of operations and financial condition. For example, we are faced with potential difficulties in staffing and managing local operations, and we have to design local solutions to manage credit risks of local customers and distributors. Also, the cost and complexity of streamlining operations in certain European countries is greater than would be the case in the United States, due primarily to labor laws in those countries that can make reducing employment levels more time-consuming and expensive than in the United States. Our flexibility in our foreign operations can also be somewhat limited by agreements we have entered into with our foreign joint venture partners.
Our overall success as a global business depends, in part, upon our ability to succeed in differing economic, social and political conditions. We may not continue to succeed in developing and implementing policies and strategies that are effective in each location where we do business, and failure to do so could harm our business, results of operations and financial condition.
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Our sales outside the United States expose us to currency risks. During times of a strengthening U.S. dollar, at a constant level of business, our reported international sales and earnings will be reduced because the local currency will translate into fewer U.S. dollars. In addition to currency translation risks, we incur a currency transaction risk whenever one of our operating subsidiaries enters into either a purchase or a sales transaction using a different currency from the currency in which it receives revenues. Given the volatility of exchange rates, we may not be able to manage our currency transaction and translation risks effectively, or volatility in currency exchange rates may have a material adverse effect on our financial condition or results of operations.
Our lean manufacturing and other cost savings plans may not be effective.
Our operations strategy includes cutting costs by reducing production errors, inventory levels, operator motion, overproduction and waiting while fostering the increased flow of material, information and communication. The cost savings that we anticipate from these initiatives may not be achieved on schedule or at the level anticipated by management. If we are unable to realize these anticipated savings, our operating results and financial condition may be materially adversely affected. Moreover, the implementation of cost saving plans and facilities integration may disrupt our operations and performance.
Our business could be materially adversely affected if we lost any of our largest customers.
In 2009, sales to our three largest customers, Ford, GM and Fiat, on a worldwide basis represented approximately 58% of our sales. Although business with each customer is typically split among numerous contracts, if we lost a major customer or that customer significantly reduced its purchases of our products, there could be a material adverse affect on our business, results of operations and financial condition.
We may incur material losses and costs as a result of product liability and warranty and recall claims that may be brought against us.
We may be exposed to product liability and warranty claims in the event that our products actually or allegedly fail to perform as expected or the use of our products results, or is alleged to result, in bodily injury and/or property damage. Accordingly, we could experience material warranty or product liability losses in the future and incur significant costs to defend against these claims. In addition, if any of our products are, or are alleged to be, defective, we may be required to participate in a recall of that product if the defect or the alleged defect relates to automotive safety. Our costs associated with providing product warranties could be material. Product liability, warranty and recall costs may have a material adverse effect on our business, results of operations and financial condition.
Work stoppages or similar difficulties could disrupt our operations.
As of March 31, 2010, approximately 34% of our employees were represented by unions, approximately 13% of which were located in the United States. It is possible that our workforce will become more unionized in the future. A work stoppage at one or more of our plants may have a material adverse effect on our business. Unionization activities could also increase our costs, which could have a material adverse effect on our profitability. We may be subject to work stoppages and may be affected by other labor disputes. Additionally, a work stoppage at one or more of our customers or our customers suppliers could materially adversely affect our operations if an alternative source of supply were not readily available. Work stoppages by employees of our customers also could result in reduced demand for our products and could have a material adverse effect on our business.
Our success depends in part on our development of improved products, and our efforts may fail to meet the needs of customers on a timely or cost-effective basis.
Our continued success depends on our ability to maintain advanced technological capabilities, machinery and knowledge necessary to adapt to changing market demands as well as to develop and commercialize innovative products. We may be unable to develop new products as successfully as in the past or to keep pace with technological developments by our competitors and the industry generally. In addition, we may develop specific
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technologies and capabilities in anticipation of customers demands for new innovations and technologies. If such demand does not materialize, we may be unable to recover the costs incurred in such programs. If we are unable to recover these costs or if any such programs do not progress as expected, our business, financial condition and results of operations could be materially adversely affected.
Our ability to operate our company effectively could be impaired if we fail to attract and retain key personnel.
Our ability to operate our business and implement our strategies depends, in part, on the efforts of our key employees. The severe down-turn in the automotive industry may add additional pressure on our ability to retain key employees. In addition, our future success will depend on, among other factors, our ability to attract and retain other qualified personnel. The loss of the services of any of our key employees or the failure to attract or retain other qualified personnel could have a material adverse effect on our business, financial condition and results of operations.
Our intellectual property portfolio is subject to legal challenges and considerable uncertainty.
We have developed and actively pursue the development of proprietary technology in the automotive industry and rely on intellectual property laws and a number of patents in many jurisdictions to protect such technology. There can be no assurances that the protections we have available for our proprietary technology in the United States and other countries will be available to us in many places we sell our products. Therefore, we may be unable to prevent third parties from using our intellectual property without authorization. If we had to litigate to protect these rights, any proceedings could be costly, and we may not prevail. We also face increasing exposure to the claims of others for infringement of intellectual property rights. We may have material intellectual property claims asserted against us in the future and could incur significant costs or losses related to such claims. In addition, any infringement or misappropriation of our technology that we cannot control could have a material negative impact on our business and results of operations.
Our pension plans are currently underfunded and we may have to make cash payments to the plans, reducing the cash available for our business.
We sponsor various pension plans worldwide that are underfunded and will require cash payments. Additionally, if the performance of the assets in our pension plans does not meet our expectations, or if other actuarial assumptions are modified, our required contributions may be higher than we expect. If our cash flow from operations is insufficient to fund our worldwide pension liability, we may be forced to reduce or delay capital expenditures, seek additional capital or seek to restructure or refinance our indebtedness or sell assets.
As of December 31, 2009, our $270.8 million projected benefit obligation, or PBO, for U.S. pension benefit obligations exceeded the fair value of the relevant plans assets, which totaled $186.6 million, by $84.2 million. Additionally, the international employees plans PBO exceeded plan assets by approximately $77.6 million as of December 31, 2009. The PBO for other postretirement benefits, or OPEB, was $69.4 million as of December 31, 2009. Our estimated funding requirement for pensions and OPEB during 2010 is approximately $18.4 million. Net periodic pension costs for U.S. and international plans, including pension benefits and OPEB, were $18.9 million and $14.4 million for the years ended December 31, 2008 and 2009, respectively. For more information, see notes 11 and 12 to our audited consolidated financial statements.
We are subject to a broad range of environmental, health and safety laws and regulations, which could adversely affect our business and results of operations.
We are subject to a broad range of federal, state and local environmental and occupational safety and health laws and regulations in the United States and other countries, including those governing: emissions to air; discharges to water; noise and odor emissions; the generation, handling, storage, transportation, treatment and disposal of waste
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materials; the cleanup of contaminated properties; and human health and safety. We may incur substantial costs associated with hazardous substance contamination or exposure, including cleanup costs, fines and civil or criminal sanctions, third party property or natural resource damage, personal injury claims or costs to upgrade or replace existing equipment as a result of violations of or liabilities under environmental laws or the failure to maintain or comply with environmental permits required at our locations. In addition, many of our current and former facilities are located on properties with long histories of industrial or commercial operations and some of these properties have been subject to certain environmental investigations and remediation activities. We maintain environmental reserves for certain of these sites, which we believe are adequate. Because some environmental laws (such as the Comprehensive Environmental Response, Compensation and Liability Act and analogous state laws) can impose liability retroactively and regardless of fault on potentially responsible parties for the entire cost of cleanup at currently or formerly owned and operated facilities, as well as sites at which such parties disposed or arranged for disposal of hazardous waste, we could become liable for investigating or remediating contamination at our current or former properties or other properties (including offsite waste disposal locations). We may not always be in complete compliance with all applicable requirements of environmental law or regulation, and we may receive notices of violation or become subject to enforcement actions or incur material costs or liabilities in connection with such requirements. In addition, new environmental requirements or changes to interpretations of existing requirements, or in their enforcement, could have a material adverse effect on our business, results of operations and financial condition. For example, while we are not large emitters of greenhouse gases, laws, regulations and certain regional initiatives under consideration by the U.S. Congress, the U.S. Environmental Protection Agency and various states, and in effect in certain foreign jurisdictions, could result in increased operating costs to control and monitor such emissions. We have made and will continue to make expenditures to comply with environmental requirements. While our costs to defend and settle claims arising under environmental laws in the past have not been material, such costs may be material in the future.
If our acquisition strategy is not successful, we may not achieve our growth and profit objectives.
We may selectively pursue complementary acquisitions in the future as part of our growth strategy. While we will evaluate business opportunities on a regular basis, we may not be successful in identifying any attractive acquisitions. We may not have, or be able to raise on acceptable terms, sufficient financial resources to make acquisitions. Our ability to make investments may also be limited by the terms of our existing or future financing arrangements. In addition, any acquisitions we make will be subject to all of the risks inherent in an acquisition strategy, including integrating financial and operational reporting systems, establishing satisfactory budgetary and other financial controls, funding increased capital needs and overhead expenses, obtaining management personnel required for expanded operations and funding cash flow shortages that may occur if anticipated sales are not realized or are delayed, whether by general economic or market conditions or unforeseen internal difficulties.
Our financial condition or results of operations following our emergence from bankruptcy will not be comparable to the financial condition or results of operations reflected in our historical financial statements.
Following our emergence from bankruptcy, we began operating our existing business under a new capital structure and implemented fresh-start accounting. As required by fresh-start accounting, assets and liabilities were recorded at fair value, based on values determined in connection with the implementation of our plan of reorganization. Accordingly, our financial condition and results of operations from and after our emergence from bankruptcy will not be comparable to the financial condition or results of operations reflected in our historical financial statements included elsewhere in this prospectus.
Our historical financial statements state that uncertainties related to our emergence from bankruptcy raise substantial doubt about our ability to continue as a going concern.
The financial statements included in this prospectus state that uncertainties related to our emergence from bankruptcy raise substantial doubt about our ability to continue as a going concern. Although we believe that as
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of our emergence from bankruptcy the basis for the uncertainties relating to our ability to continue as a going concern no longer exist, we cannot assure you that a similar disclosure will not be included in our future financial statements.
Regardless of the foregoing, our historical financial statements have been prepared in accordance with U.S. GAAP applicable to a going concern, which assumes that we will be able to meet our obligations and continue our operations over a reasonable length of time. Realization values may be substantially different from carrying values as shown, and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should we be unable to continue as a going concern.
Our emergence from bankruptcy will reduce or eliminate our U.S. net operating losses and other tax attributes and limit our ability to offset future U.S. taxable income with tax losses and credits incurred prior to our emergence from bankruptcy.
The discharge of a debt obligation by a taxpayer in a bankruptcy proceeding for an amount less than its adjusted issue price (as defined for tax purposes) generally creates cancellation of indebtedness income, or COD income, that is excludable from a taxpayers taxable income. However certain tax attributes otherwise available and of value to a debtor will be reduced to the extent of the excludable COD income. Additionally, Internal Revenue Code Sections 382 and 383 provide an annual limitation with respect to the ability of a corporation to utilize its tax attributes, as well as certain built-in-losses, against future U.S. taxable income in the event of a change in ownership. As a result of our emergence from bankruptcy we have had significant excludable COD income that will reduce or eliminate our U.S. net operating losses and other tax attributes and we have had an ownership change and a resulting limitation under Internal Revenue Code Sections 382 and 383.
We cannot be certain that our emergence from bankruptcy will not adversely affect our operations going forward.
Although we emerged from bankruptcy on May 27, 2010, we cannot assure you that having been subject to bankruptcy protection will not adversely affect our operations going forward, including our ability to negotiate favorable terms from suppliers, hedging counterparties and others and to attract and retain customers. The failure to obtain such favorable terms and retain customers could materially adversely affect our financial performance.
Risks Related to Our Equity Securities
Our common stock and warrants are currently quoted on the OTC Bulletin Board, which may limit the liquidity and price of our common stock and warrants more than if these securities were quoted or listed on a national securities exchange. In addition, an active trading market for our 7% preferred stock does not exist and may not develop.
Our common stock and warrants are currently quoted on the OTC Bulletin Board, an inter-dealer automated quotation system. To date, there has been a limited trading market for our common stock and warrants on the OTC Bulletin Board. Daily trading volume in shares of our common stock has averaged approximately 40,219 shares since our common stock has been quoted on the OTC Bulletin Board and daily trading volume in our warrants has averaged approximately 2,725 warrants since our warrants have been quoted on the OTC Bulletin Board. Although our common stock and warrants are quoted on the OTC Bulletin Board, only a limited trading market has developed for the purchase and sale of these securities and a more liquid market may not develop. We cannot predict how liquid the market for our common stock and warrants might become. In addition, there are risks associated with trading securities quoted on the OTC Bulletin Board compared to securities traded on a national securities exchange, including limited availability of order information and market data, liquidity risks and communications risks. In addition, an active trading market for our 7% preferred stock does not exist and may not develop. Our 7% preferred stock is not quoted on the OTC Bulletin Board and is not listed on any securities exchange. Since our 7% preferred stock has no stated maturity date, investors seeking liquidity will be limited to selling their shares of 7% preferred stock in the secondary market or converting their shares of 7% preferred stock into shares of our common stock and subsequently seeking to sell those shares of common stock.
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We cannot assure you that an active trading market for our 7% preferred stock will develop or, even if one develops, we cannot assure you that it will last. As a result of the limited trading market for our common stock and warrants and the absence of any market for our 7% preferred stock, the trading price of our common stock, warrants and 7% preferred stock could be materially adversely affected and holders ability to transfer these securities will be limited. For the foregoing reasons, the purchase of our securities must be considered a long-term investment acceptable only for prospective investors who are willing and can afford to accept and bear the substantial risk of the investment for an indefinite period of time. In addition, an investor in our securities may not be able to liquidate his or her investment, and our securities may not be acceptable as collateral for a loan.
The price of our common stock has been and may continue to be volatile, and such volatility could adversely affect our business and cause our stockholders to suffer significant losses.
There is a limited trading market for our common stock, and its price may be volatile in the indefinite future. Since trading of our common stock began being quoted on the OTC Bulletin Board on May 25, 2010, the high and low sale prices of our common stock through July 21, 2010 were $35.75 and $27.45, respectively. The price at which our common stock will trade may be volatile due to various factors, many of which are beyond our control, including the following:
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changes in our industry or the auto industry generally; |
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increased competition and competitive pricing pressures; |
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our ability to execute our business plan; |
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regulatory or political developments; |
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litigation and government investigations; |
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changes or proposed changes in governmental regulations affecting our business; |
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our ability to obtain working capital or project financing; |
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additions or departures of key personnel; |
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market conditions in the broader stock market in general; |
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limited public float in the hands of a small number of persons, whose sales or lack of sales could result in positive or negative pricing pressure on the market price for our common stock; |
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actual or anticipated fluctuations in our financial condition or annual or quarterly results of operations; |
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changes in investors and financial analysts perception of the business risks and conditions of our business; |
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changes in, or our failure to meet, earnings estimates and other performance expectations of investors or financial analysts; |
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unfavorable commentary or downgrades of our common stock by equity research analysts, or the announcement of any changes to our credit rating; |
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changes in the market valuations of companies in our industry viewed as similar to us; |
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depth of trading activity in our common stock; |
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future sales of our common stock; |
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the granting or exercise of employee stock options or other equity awards; |
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general market and economic conditions; and |
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realization of any of the risks described elsewhere in this prospectus under Risk Factors. |
In addition, the equity markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These broad market fluctuations may result in a material decline in the market price of our common stock and holders may not be able to sell their shares at prices they deem acceptable.
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We have no present intention to pay dividends on our common stock and, even if we change that policy, we may be unable to pay dividends on our common stock.
We have not paid any dividends to date on our common stock and we do not currently anticipate paying any dividends on our common stock in the foreseeable future. We currently intend to retain future earnings, if any, to finance operations and invest in our business. Any declaration and payment of future dividends to holders of our common stock will be at the discretion of our board of directors and will depend on many factors, including our financial condition, earnings, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends and other considerations that our board of directors deems relevant. In addition, the covenants of the credit agreement governing our senior ABL facility and the indenture governing our senior notes limit our ability to pay dividends on our common stock and limit the ability of our subsidiaries to pay dividends to us. Furthermore, we are permitted under our senior ABL facility and the indenture governing our notes senior to incur additional indebtedness, which in turn may severely restrict or prohibit the payment of dividends. Our future dividend policy will also depend on the limitations of financing instruments and arrangements to which we may become a party.
If we change that policy and commence paying dividends, we will not be obligated to continue paying those dividends and our stockholders will not be guaranteed, or have contractual or other rights, to receive dividends. If we commence paying dividends in the future, our board of directors may decide, in its discretion, at any time, to decrease the amount of dividends, otherwise modify or repeal the dividend policy or discontinue entirely the payment of dividends. Furthermore, Cooper-Standard Holdings Inc. is a holding company with no significant operations or material assets other than the equity interests it holds in its subsidiaries through which Cooper-Standard Holdings Inc. conducts all of its business operations. As a result, its ability to pay dividends is dependent on the generation of cash flow by its subsidiaries and their ability to make such cash available, by dividend or otherwise. Under the Delaware General Corporate Law, as amended, or the DGCL, our board of directors may not authorize the payment of a dividend unless it is either paid out of our surplus, as calculated in accordance with the DGCL, or if we do not have a surplus, it is paid out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year.
Sales of large amounts of our common stock or the perception that sales could occur may depress our stock price.
In connection with our emergence from bankruptcy, we issued 11,181,673 shares of common stock, 1,000,000 shares of 7% preferred stock and 1,693,827 warrants to purchase shares of our common stock, which constitute restricted securities under Rule 144 of the Securities Act and the resale of which is covered by this registration statement. As of July 21, 2010, we had 18,378,112 shares of common stock outstanding, without giving effect to the shares issuable upon the conversion of our 7% preferred stock or issuable upon the exercise of our warrants. At the time of our emergence from bankruptcy, we granted the selling security holders rights pursuant to our plan of reorganization to cause us to file one or more shelf registration statements under the Securities Act covering resales of these securities held by them, including the shares of common stock underlying the 7% preferred stock and the warrants. This registration statement is being filed pursuant to the rights provided in our plan of reorganization. In addition, we granted the security holders that backstopped our rights offering certain registration rights, including demand registration, shelf registration and piggyback registration rights, with respect to the common stock, 7% preferred stock and warrants held by them. All of these securities may also be sold under Rule 144 under the Securities Act, depending on their holding period and subject to significant restrictions in the case of securities held by persons deemed to be our affiliates.
Sales of large blocks of shares of our common stock, whether as resales, upon the conversion of our 7% preferred stock or upon the exercise of our warrants, in the public market could lower our stock price and impair our ability to raise funds in future stock offerings.
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We may in the future seek to raise funds through equity offerings, which could have a dilutive effect on our common stock.
In the future we may determine to raise capital through offerings of our common stock, securities convertible into our common stock or rights to acquire these securities or our common stock. In any case, the result would ultimately be dilutive to our common stock by increasing the number of shares outstanding. We cannot predict the effect this dilution may have on the price of our common stock.
In the event of our bankruptcy, liquidation or winding-up, our 7% preferred stock will rank senior to our common stock but junior to all of our liabilities and our subsidiaries liabilities.
In the event of our bankruptcy, liquidation or winding-up, our assets will be available to pay obligations on our 7% preferred stock only after all of our liabilities have been paid, but prior to any payments are made with respect to our common stock. In addition, our 7% preferred stock effectively ranks junior to all existing and future liabilities of our subsidiaries. The rights of holders of our 7% preferred stock to participate in the assets of our subsidiaries upon any liquidation or reorganization of any subsidiary will rank junior to the prior claims of that subsidiarys creditors. In the event of our bankruptcy, liquidation or winding-up, there may not be sufficient assets remaining after paying our liabilities and our subsidiaries liabilities to pay amounts due on any or all of our 7% preferred stock then outstanding.
Additionally, unlike indebtedness where principal and interest customarily are payable on specified due dates, (1) dividends on our 7% preferred stock are payable only if and when declared by our board of directors or a duly authorized committee of the board, and (2) as a Delaware corporation, we are restricted to making dividend and redemption payments on our 7% preferred stock only out of legally available assets. Further, our 7% preferred stock places no restrictions on our business or operations or on our ability to incur indebtedness or engage in any transactions, except that the consent of the holders representing at least two-thirds of our outstanding 7% preferred stock is required to amend our certificate of incorporation (including the certificate of designations of the 7% preferred stock) in a manner that adversely affects the preferences, rights or powers of our 7% preferred stock or to issue additional shares of 7% preferred stock, other than shares issued as dividends paid in-kind or any other equity security that ranks senior to or on a parity with our 7% preferred stock. In addition, the affirmative vote of each holder of our 7% preferred stock is required for the additional issuance of shares of 7% preferred stock if such additional shares are not offered to the holders of our 7% preferred stock on the same terms on a pro rata basis.
The market price of our 7% preferred stock and warrants will be directly affected by the market price of our common stock, which may be volatile.
To the extent that a secondary market for our 7% preferred stock or warrants develops, we believe that the market price of our 7% preferred stock and warrants will be significantly affected by the market price of our common stock. We cannot predict how the shares of our common stock will trade in the future. This may result in greater volatility in the market price of our 7% preferred stock and warrants than would be expected for non-convertible or -exercisable securities.
There may be future sales or other dilution of our common stock, including from the conversion of our 7% preferred stock, the exercise of our warrants and options and the vesting of our restricted stock, which may materially adversely affect the market price of our common stock, our 7% preferred stock or our warrants and negatively impact a holders investments.
We are not restricted from issuing additional common stock, including any securities that are convertible into or exercisable for, or that represent the right to receive, common stock or any substantially similar securities. In addition, quarterly dividends payable on our 7% preferred stock may be paid in-kind, at the Companys option, in additional shares of 7% preferred stock. Furthermore, we may issue additional preferred stock that ranks senior
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to, or on a parity with, our 7% preferred stock with the applicable consent of holders of two-thirds of our 7% preferred stock. The market price of our common stock, our 7% preferred stock or our warrants could decline as a result of sales of a large number of shares of common stock, 7% preferred stock, warrants or similar securities in the market in the future or the perception that such sales could occur. For example, if we issue preferred stock in the future that has a preference over our common stock with respect to the payment of dividends or upon our liquidation, dissolution or winding-up, or if we issue preferred stock with voting rights that dilute the voting power of our common stock, the rights of holders of our common stock or the market price of our common stock could be adversely affected.
Each share of our 7% preferred stock is convertible into, and each warrant is exercisable for, at the option of the holder, shares of our common stock. The conversion or exercise of some or all of our 7% preferred stock or warrants, as applicable, will dilute the ownership interest of our existing stockholders. Any sales in the public market of our common stock issuable upon such conversion or exercise could adversely affect prevailing market prices of the outstanding shares of our common stock or 7% preferred stock or warrants. In addition, the existence of our 7% preferred stock and warrants may encourage short selling or arbitrage trading activity by market participants because the conversion of our 7% preferred stock or exercise of our warrants could depress the price of our common stock. As noted above, a decline in the market price of our common stock may negatively impact the market price for our 7% preferred stock and warrants.
Furthermore, initial grants of restricted common stock, restricted 7% preferred stock and options were made to our officers and key employees under our Management Incentive Plan.
Together with these grants, there are currently outstanding 1,052,446 shares of our 7% preferred stock that are currently convertible into 4,515,823 shares of our common stock and warrants to purchase 2,419,753 shares of our common stock. Upon the vesting of restricted shares, the conversion of our 7% preferred stock or the exercise of warrants and options, these securities would have a dilutive effect on our outstanding shares of common stock.
Until the conversion of our 7% preferred stock or the exercise of our warrants, holders of these securities do not have identical rights as holders of our common stock, but they will be subject to all changes made with respect to our common stock.
Before converting shares of our 7% preferred stock, holders of our 7% preferred stock are not entitled to any rights with respect to our common stock (other than voting rights and rights to receive dividends or other distributions on our common stock), but they are subject to all changes affecting our common stock. In addition, holders of warrants are not entitled to any rights with respect to our common stock (including, without limitation, voting rights and rights to receive any dividends or other distributions on our common stock), but they also will be subject to all changes affecting our common stock. See Description of Capital StockPreferred StockVoting and Description of Capital StockWarrants. Even though holders of our 7% preferred stock vote on an as-converted basis with holders of our common stock, they will only be entitled to exercise all of the rights of a holder of our common stock upon conversion of their 7% preferred stock and only as to matters for which the record date occurs on or after the applicable conversion date and to the extent permitted by law, although they will be subject to any changes in the powers, preferences or special rights of our common stock that may occur as a result of any stockholder action taken before the applicable conversion date. Similarly, holders of our warrants will have rights with respect to our common stock only if they receive our common stock upon exercise of the warrants and only as of the date when such holder becomes a record owner of the shares of our common stock upon such exercise. For example, with respect to warrants, if an amendment is proposed to our certificate of incorporation or bylaws requiring stockholder approval and the record date for determining the stockholders of record entitled to vote on the amendment occurs prior to the date a warrant holder is deemed to be the owner of the shares of our common stock due upon exercise of the warrants, the exercising warrant holder will not be entitled to vote on the amendment, although such holder will nevertheless be subject to any changes in the powers, preferences or special rights of our common stock.
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Our 7% preferred stock is perpetual in nature.
Shares of our 7% preferred stock represent a perpetual interest in us and, unlike indebtedness, will not give rise to a claim for payment of a principal amount at a particular date. Other than in connection with a change of control or a cash transaction (as defined in the certificate of designations for our 7% preferred stock), holders of our 7% preferred stock will not have the right to call for the redemption of our 7% preferred stock. See Description of Capital StockPreferred StockRedemption rights upon certain transactions. Therefore, holders should be aware that they may be required to bear the financial risks of an investment in our 7% preferred stock for an indefinite period of time, unless such holders convert, at their option, their shares of 7% preferred stock into common stock.
The conversion rate of our 7% preferred stock and the exercise price of our warrants may not be adjusted for all dilutive events.
The number of shares of our common stock that holders are entitled to receive upon conversion of a share of 7% preferred stock and the exercise price of our warrants are subject to adjustment for certain events, including, but not limited to, the issuance of stock dividends on our common stock, the issuance of certain rights with respect to our common stock, subdivisions and combinations of our common stock, certain issuer tender or exchange offers and certain reorganization events. Such conversion rate or exercise price will not be adjusted, however, for other events, such as a third-party tender or exchange offer, that may adversely affect the market price of our 7% preferred stock or warrants. In addition, if any of these other events adversely affects the market price of our common stock, it may also adversely affect the market price of our 7% preferred stock and warrants. In addition, we are not restricted from offering common stock in the future or engaging in other transactions that may dilute our common stock and we may issue additional shares of 7% preferred stock and pay dividends on our 7% preferred stock in-kind with additional shares of 7% preferred stock, which may dilute our common stock.
A change in control with respect to us may not trigger certain rights for the purpose of our 7% preferred stock.
The certificate of designations of our 7% preferred stock contains no covenants or other provisions to afford protection to holders in the event of a change of control with respect to us, except upon the occurrence of transactions that constitute a change of control or a cash transaction as those terms are defined in the certificate of designations of our 7% preferred stock. However, the terms change of control and cash transaction are limited and may not include every change of control event that might cause the market price of our common stock or our 7% preferred stock to decline. As a result, the rights of holders of our 7% preferred stock upon the occurrence of a change of control or a cash transaction may not preserve the value of our 7% preferred stock in the event of certain change of control transactions with respect to us. Any change of control transaction with respect to us may also negatively affect the liquidity, value or volatility of our common stock and thereby negatively impact the value of our 7% preferred stock. Additionally, the provisions of our 7% preferred stock related to change of control transactions may have the effect of discouraging third parties from pursuing certain transactions with us, which may otherwise be in the best interest of our stockholders.
We may not have the funds necessary to redeem our 7% preferred stock following a change in control or a cash transaction.
Holders of our 7% preferred stock have the right to require us to redeem the shares of our 7% preferred stock held by them for cash upon the occurrence of a change in control or a cash transaction as those terms are defined in the certificate of designations of our 7% preferred stock. We may not have sufficient funds to redeem our 7% preferred stock at such time and may not have the ability to arrange necessary financing on acceptable terms or at all. In addition, our ability to purchase our 7% preferred stock may be limited by law or the terms of other agreements outstanding at such time. Moreover, a failure to repurchase our 7% preferred stock may also constitute an event of default under our existing or future debt agreements, and could result in the acceleration of the maturity of any existing or future outstanding indebtedness under such agreements, which would further restrict our ability to make such payments.
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The adjustment to the exercise price for warrants exercised in connection with an anti-dilutive adjustment event may not adequately compensate you for any lost value of your warrants as a result of such transaction.
If a specified corporate event or transaction constituting a dilutive event occurs, under certain circumstances we will decrease the exercise price for warrants exercised in connection with such dilutive adjustment event. The decrease in the exercise price will be determined based on the date on which the dilutive event occurs or becomes effective and the price paid per share of our common stock in such dilutive event. The adjustment to the exercise price for warrants exercised in connection with a dilutive event may not adequately compensate you for any lost value of your warrants as a result of such dilutive event.
Under certain circumstances, holders may have to pay U.S. federal income tax as a result of a deemed distribution with respect to our 7% preferred stock, common stock or warrantseven if holders do not receive a corresponding distribution of cashsuch as, for example, if we adjust, or fail to adjust, the conversion rate of our 7% preferred stock or the exercise price of the warrants in certain circumstances.
Holders of our 7% preferred stock, common stock and warrants may be treated as having received a constructive distribution in certain circumstances, for example if we make certain adjustments to (or certain failures to make adjustments to) the conversion rate or other terms of our 7% preferred stock or the exercise price of the warrants and such adjustment (or failure to make an adjustment) has the effect of increasing the proportionate interest of certain holders in our earnings and profits or assets. Such a distribution could be treated as a taxable dividend or capital gain for U.S. federal income tax purposes even though holders do not receive any cash with respect to such constructive distribution. In addition, non-U.S. holders (as defined in Certain U.S. Federal Income Tax Considerations) may be subject to U.S. federal withholding tax on any such constructive distribution on our 7% preferred stock, common stock and warrants. You are advised to consult your independent tax advisor and to read the section titled Certain U.S. Federal Income Tax Considerations regarding the possibility and tax treatment of any deemed distributions for U.S. federal income tax purposes.
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In addition to historical information, certain statements contained in this prospectus are forward-looking statements within the meaning of federal securities laws, and we intend that such forward-looking statements be subject to the safe-harbor created thereby. These forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenue or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, business trends, the impact of fresh-start accounting, the impact of our bankruptcy on our future performance and other information that is not historical information. When used in this prospectus, the words estimates, expects, anticipates, projects, plans, intends, believes, forecasts, or future or conditional verbs, such as will, should, could, or may, and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, managements examination of historical operating trends and data, are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them. However, no assurances can be made that these expectations, beliefs and projections will be achieved. Forward-looking statements are not guarantees of future performance and are subject to significant risks and uncertainties that may cause actual results or achievements to be materially different from the future results or achievements expressed or implied by the forward-looking statements.
There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in this prospectus. Important factors that could cause our actual results to differ materially from the forward-looking statements we make in this prospectus are described in Risk Factors. Such risks and uncertainties and other important factors include, but are not limited to:
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our dependence on the automotive industry and the possibility of further material contractions in automotive sales and production; |
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our ability to generate sufficient cash to service our indebtedness and meet dividend obligations on our 7% preferred stock; |
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disruptions in the financial markets and the availability of and cost of credit; |
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viability of our supply base; |
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escalating pricing pressures; |
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our ability to meet a significant increase in demand; |
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availability and cost of raw materials; |
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our ability to compete in the highly competitive automotive parts industry; |
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our significant non-U.S. operations; |
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our dependence on certain major customers; |
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labor conditions; |
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our ability to meet our customers needs for new and improved products in a timely manner; |
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our ability to attract and retain key personnel; |
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our legal rights to our intellectual property portfolio; |
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our underfunded pension plans; |
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environmental and other regulation; |
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the possibility that our acquisition strategy will not be successful; |
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the lack of comparability of our financial condition and results of operations following our emergence from bankruptcy to those reflected in our historical financial statements; |
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whether our future financial statements will contain disclosure about our ability to continue as a going concern; and |
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uncertainty as to the effect of our emergence from bankruptcy on our operations going forward. |
There may be other factors that may cause our actual results to differ materially from the forward-looking statements. All forward-looking statements attributable to us or persons acting on our behalf apply only as of the date of this prospectus and other reports we file with the Securities and Exchange Commission, or the SEC, and are expressly qualified in their entirety by the cautionary statements included herein and therein. We undertake no obligation to update or revise forward-looking statements to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events.
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RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table presents our historical ratio of earnings to fixed charges for the three months ended March 31, 2010 and 2009 and each of the five years ended December 31, 2009 and our pro forma ratio of earnings to combined fixed charges and preferred stock dividends for the year ended December 31, 2009 and the three months ended March 31, 2010.
For purposes of this table, earnings consist of pre-tax income (loss) from continuing operations before adjustments for minority interest in consolidated subsidiary, plus fixed charges. Fixed charges consist of interest on all debt, amortization of debt expenses incurred on issuance and an estimate of the interest within rental expense.
Historical | Pro Forma | |||||||||||||||||
Year Ended December 31, |
Three Months
Ended March 31, |
Year Ended
December 31, 2009 |
Three Months
Ended March 31, 2010 |
|||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | 2009 | 2010 | ||||||||||||
Ratio of earnings to combined fixed charges and preferred stock dividends(1) |
1.1x | | | | | | 1.6x | | 2.5x |
(1) | Earnings were insufficient to cover fixed charges by $15.0 million, $119.7 million, $94.2 million and $415.9 million for the years ended December 31, 2006, 2007, 2008 and 2009, respectively, and $58.9 million for the three months ended March 31, 2009. On a pro forma basis, earnings were insufficient to cover fixed charges by $397.4 million for the year ended December 31, 2009. |
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The following table sets forth our capitalization as of March 31, 2010 on an actual and pro forma basis to give effect to our plan of reorganization and related transactions. This table should be read with our consolidated financial statements and the related notes thereto and Managements Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this prospectus.
As of March 31, 2010 | |||||||
Actual |
Pro
Forma |
||||||
(unaudited) | |||||||
(in millions) | |||||||
Debt, including current maturities: |
|||||||
Current maturities of long term debt(1) |
143.1 | 18.5 | |||||
Senior notes |
| 450.0 | |||||
Debt subject to compromise(2) |
1,126.7 | | |||||
Other long term debt(3) |
9.3 | 9.3 | |||||
Total debt, including current maturities |
1,279.1 | 477.8 | |||||
Noncontrolling interest |
3.0 | 8.1 | |||||
Preferred stock |
| 128.0 | |||||
Predecessor equity (deficit) |
(307.3 | ) | | ||||
Successor equity (deficit) |
| 416.2 | |||||
Total capitalization |
$ | 974.8 | $ | 1,030.1 | |||
(1) | Current maturities of pre-emergence long-term debt include a 1% amortization payment on our DIP credit agreement and the full amounts outstanding under our DIP credit agreement. |
(2) | Debt subject to compromise reflects prepetition debt that was discharged pursuant to our plan of reorganization and excludes $135.2 million of other liabilities subject to compromise. |
(3) | Includes foreign subsidiary debt and capitalized lease obligations. |
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We have not paid any dividends to date on our common stock and we do not currently anticipate paying any dividends on our common stock in the foreseeable future. We currently intend to retain future earnings, if any, to finance operations and invest in our business. Any declaration and payment of future dividends to holders of our common stock will be at the discretion of our board of directors and will depend on many factors, including our financial condition, earnings, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends and other considerations that our board of directors deems relevant. In addition, the covenants of the credit agreement governing our senior ABL facility and the indenture governing our senior notes limit our ability to pay dividends on our common stock and limit the ability of our subsidiaries to pay dividends to us. Our future dividend policy will also depend on the limitations of financing instruments and arrangements to which we may become a party. See Description of Capital StockPreferred Stock and Description of
We will not receive any of the proceeds from the sale of the securities by the selling security holders. We may receive proceeds upon the exercise of warrants if any warrant holder pays the exercise price in cash rather than exercising on a cashless basis. Based on the initial exercise price of $27.33 per share for each warrant, if all of the warrants offered for resale under this prospectus are exercised for cash, we would receive proceeds of $46,292,292 from the issuance of shares of our common stock upon exercise of the warrants. If we receive any proceeds from the issuance of shares of our common stock upon exercise of warrants,
MARKET FOR OUR COMMON STOCK AND WARRANTS
AND RELATED STOCKHOLDER MATTERS
Our common stock has been quoted on the OTC Bulletin Board since May 25, 2010 under the symbol COSH and our warrants have been quoted on the OTC Bulletin Board since June 4, 2010 under the symbol COSHW. No prior established public trading market existed for our common stock or warrants prior to these dates.
There currently is a limited trading market for our common stock and warrants. The following chart lists the high and low sale prices for shares of our common stock and warrants for the calendar quarter indicated through July 21, 2010. These prices are between dealers and do not include retail markups, markdowns or other fees and commissions and may not represent actual transactions.
Common Stock | Warrants | |||||||||||
Quarter Ended |
High | Low | High | Low | ||||||||
June 30, 2010 |
$ | 35.75 | $ | 31.50 | $ | 17.00 | $ | 14.00 | ||||
September 30, 2010 (through July 21, 2010) |
$ | 31.00 | $ | 27.45 | $ | 14.50 | $ | 13.00 |
The closing price of our common stock on the OTC Bulletin Board on July 21, 2010 was $29.90 per share and the closing price of our warrants on the OTC Bulletin Board on July 21, 2010 was $13.00 per warrant.
As of July 21, 2010, we had approximately 104 holders of record of our common stock, based on information provided by our transfer agent.
As of the date hereof, an aggregate of 7,544,691 shares of our common stock may be purchased upon the exercise of outstanding options, issued upon the exercise of our outstanding warrants and issued upon the conversion of our outstanding shares of 7% preferred stock.
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Our unaudited pro forma condensed consolidated balance sheet is presented as of March 31, 2010 and our unaudited pro forma condensed consolidated statement of operations is presented for the year ended December 31, 2009 and for the three months ended March 31, 2010 and apply our accounting policies to the periods presented. As used herein, Predecessor refers to Cooper-Standard Holdings Inc. and all of our consolidated subsidiaries prior to the emergence date and Successor refers to Cooper-Standard Holdings Inc. and all of our consolidated subsidiaries on and after the emergence date. We prepared the December 31, 2009 unaudited pro forma condensed consolidated financial information by applying adjustments to our historical audited consolidated financial statements included elsewhere in this prospectus. We prepared our March 31, 2010 unaudited pro forma condensed consolidated financial information by applying adjustments to our historical unaudited consolidated financial statements included elsewhere in this prospectus. The unaudited pro forma condensed financial information gives effect to our plan of reorganization and fresh-start accounting as if the emergence date had occurred on January 1, 2009 for the unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2009 and the three months ended March 31, 2010 and on March 31, 2010 for the unaudited pro forma condensed consolidated balance sheet. The unaudited pro forma condensed consolidated financial information should be read in conjunction with Use of Proceeds, Capitalization, Selected Historical Consolidated Financial Data, Managements Discussion and Analysis of Financial Condition and Results of Operations, our audited consolidated financial statements and related notes as of and for the year ended December 31, 2009 and our unaudited consolidated financial statements and related notes as of and for the three months ended March 31, 2010, which are included elsewhere in this prospectus.
The unaudited pro forma condensed consolidated financial information is presented for informational purposes only. The unaudited pro forma condensed consolidated financial information is not necessarily indicative of what our financial position or results of operations would have been if the effectiveness of our plan of reorganization had actually occurred on January 1, 2009 or March 31, 2010, as applicable, and is not necessarily indicative of our future financial position or results of operations. In addition, our historical financial statements will not be comparable to our financial statements following our emergence from bankruptcy due to the effects of the consummation of our plan of reorganization as well as adjustments for fresh-start accounting. In addition, the amount of new stockholders equity in the unaudited pro forma condensed consolidated balance sheet is not an estimate of the market value of our common stock or 7% preferred stock as of the emergence date or at any other time. We make no representations as to the market value, if any, of our common stock or 7% preferred stock.
The following unaudited pro forma condensed consolidated financial information adjusts historical information for the effects of:
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our plan of reorganization, which includes the Reorganization Adjustments; and |
|
the estimated adjustments required under fresh-start accounting for the entities that emerged from the bankruptcy cases (classified as Fresh-Start Adjustments in the unaudited pro forma condensed consolidated financial information). |
Reorganization Adjustments
The unaudited pro forma condensed consolidated financial information gives effect to the following Reorganization Adjustments, our plan of reorganization and the implementation of the transactions contemplated by our plan of reorganization. These adjustments give effect to the terms of our plan of reorganization and certain underlying assumptions, which include, but are not limited to, the below.
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The issuance of our senior notes, which resulted in cash proceeds of $450.0 million. |
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The issuance of 17.5 million shares of our common stock, including 8.6 million shares offered to holders of our prepetition senior subordinated notes in connection with the rights offering, 2.6 million shares to the Backstop Parties pursuant to the commitment agreement, dated March 19, 2010, or the equity commitment agreement, and 6.3 million shares to certain holders of our prepetition senior notes and prepetition senior |
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subordinated notes. We also issued shares of our 7% preferred stock convertible into 4.3 million shares of our common stock pursuant to the equity commitment agreement. We received cash proceeds of $355 million in connection with the rights offering and equity commitment agreement and also received the full and complete satisfaction, settlement and release of allowed prepetition senior note claims and allowed prepetition senior subordinated note claims for such shares. In addition, we also issued warrants to purchase 2.4 million shares of our common stock. |
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The repayment of $124.6 million of liabilities under our DIP credit agreement. On the emergence date, each holder of an allowed DIP claim received, in full and complete satisfaction, settlement and release of and in exchange for such allowed claim against the debtors, an amount in cash equal to the allowed amount of such claim. |
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The repayment of the $634.7 million outstanding under the credit agreement entered into in connection with the 2004 acquisition, or, including subsequent amendments thereto, our prepetition credit agreement. |
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The repayment of the $104.1 million outstanding of our prepetition senior notes in cash. |
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A decrease in interest expense, including the amortization of debt issuance costs, resulting from a lower level of debt. |
Fresh-Start Adjustments
The unaudited pro forma condensed consolidated financial information also gives effect to the following Fresh-Start Adjustments relating to the preliminary application of fresh-start accounting pursuant to U.S. GAAP. Under fresh-start accounting, reorganization value represents the fair value of the entity before considering debt and approximates the amount a willing buyer would pay for the assets of the entity immediately after the reorganization. The Pro Forma Adjustments are based on an assumed reorganization value of $1,025 million for (i) differences in assumed working capital as of the emergence date and actual working capital as reported at the balance sheet date and (ii) the inclusion of a deferred tax liability at nominal value.
Reorganization values and the fair values of assets and liabilities, including leases, on the pro forma balance sheet are preliminary values as of March 31, 2010, have been made solely for purposes of developing the unaudited pro forma condensed consolidated financial information and are subject to further revisions and adjustments. Updates to such preliminary valuations will be completed in the periods subsequent to those reported in this prospectus and will be calculated as of our actual emergence date of May 27, 2010 and, to the extent such updates reflect a valuation different than those used in the unaudited pro forma condensed consolidated financial information, there may be adjustments in the carrying values of certain assets and liabilities and related deferred taxes. To the extent actual valuations differ from those used in preparing the unaudited pro forma condensed consolidated financial information, these differences will be reflected on our balance sheet upon emergence under fresh-start accounting and may also affect the revenues and expenses, which would be recognized in the statement of operations post-emergence from bankruptcy. As such, the following unaudited pro forma condensed consolidated financial information is not intended to represent our actual post-emergence financial condition and statement of operations, and any differences could be material.
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the three months ended March 31, 2010
(dollars in millions except per share data)
Historical |
Reorganization
and Fresh-Start Pro Forma Adjustments |
Pro Forma | ||||||||||
Sales |
$ | 596.3 | $ | | $ | 596.3 | ||||||
Cost of products sold |
491.8 | 1.7 | (a) | 493.5 | ||||||||
Gross profit |
104.5 | (1.7 | ) | 102.8 | ||||||||
Selling, administration & engineering expenses |
53.0 | 2.2 | (b) | 55.2 | ||||||||
Amortization of intangibles |
0.2 | 3.6 | (c) | 3.8 | ||||||||
Restructuring |
0.3 | | 0.3 | |||||||||
Operating profit |
51.0 | (7.5 | ) | 43.5 | ||||||||
Interest expense, net of interest income |
(11.8 | ) | 0.3 | (d) | (11.5 | ) | ||||||
Equity earnings |
2.0 | (0.2 | )(e) | 1.8 | ||||||||
Reorganization items, net |
(23.3 | ) | 23.3 | (f) | | |||||||
Other expense |
(6.9 | ) | | (6.9 | ) | |||||||
Income before income taxes |
11.0 | 15.9 | 26.9 | |||||||||
Provision for income tax benefit |
7.3 | 0.4 | (g) | 7.7 | ||||||||
Net income |
3.7 | 15.5 | 19.2 | |||||||||
Less: Net income attributed to noncontrolling interest |
(0.3 | ) | | (0.3 | ) | |||||||
Net income attributable to Cooper-Standard Holdings Inc. |
$ | 3.4 | $ | 15.5 | $ | 18.9 | ||||||
Basic net income per share attributable to common stockholders of Cooper-Standard Holdings Inc. |
$ | 0.77 | (h) | |||||||||
Diluted net income per share attributable to common stockholders of Cooper-Standard Holdings Inc. |
$ | 0.77 | (h) | |||||||||
See accompanying notes to the unaudited pro forma condensed consolidated financial statements.
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of March 31, 2010
(dollars in millions)
Historical |
Reorganization
Adjustments |
Fresh-Start
Adjustments |
Pro Forma | ||||||||||||
Assets |
|||||||||||||||
Current assets: |
|||||||||||||||
Cash and cash equivalents |
$ | 265.3 | $ | (138.7 | )(k) | $ | | $ | 126.6 | ||||||
Accounts receivable, net |
413.1 | | | 413.1 | |||||||||||
Inventories, net |
115.6 | | 8.1 | (u) | 123.7 | ||||||||||
Prepaid expenses |
29.3 | | | 29.3 | |||||||||||
Other |
91.3 | (12.3 | )(l) | | 79.0 | ||||||||||
Total current assets |
914.6 | (151.0 | ) | 8.1 | 771.7 | ||||||||||
Property, plant, & equipment, net |
559.7 | | 30.9 | (v) | 590.6 | ||||||||||
Intangibles, net |
98.4 | | 94.5 | (w) | 192.9 | ||||||||||
Other assets |
113.7 | 14.1 | (m) | 6.7 | (x) | 134.5 | |||||||||
$ | 1,686.4 | $ | (136.9 | ) | $ | 140.2 | $ | 1,689.7 | |||||||
Liabilities and Equity (Deficit) |
|||||||||||||||
Current liabilities: |
|||||||||||||||
Debt payable within one year |
$ | 18.5 | $ | | $ | | $ | 18.5 | |||||||
Debtor-in-possession financing |
124.6 | (124.6 | )(n) | | | ||||||||||
Accounts payable |
168.2 | 7.6 | (o) | | 175.8 | ||||||||||
Payroll liabilities |
82.6 | | (1.7 | )(y) | 80.9 | ||||||||||
Accrued liabilities |
87.6 | 4.3 | (p) | (5.0 | )(y) | 86.9 | |||||||||
Total current liabilities |
481.5 | (112.7 | ) | (6.7 | ) | 362.1 | |||||||||
Long-term debt |
9.3 | 450.0 | | 459.3 | |||||||||||
Pension benefits |
142.4 | | 27.3 | (y) | 169.7 | ||||||||||
Postretirement benefits other than pensions |
75.0 | | 6.8 | (y) | 81.8 | ||||||||||
Deferred tax liabilities |
6.4 | | 19.5 | (z) | 25.9 | ||||||||||
Other long-term liabilities |
19.4 | 15.2 | (q) | 4.0 | (aa) | 38.6 | |||||||||
Liabilities subject to compromise |
1,256.7 | (1,256.7 | )(r) | | | ||||||||||
Total liabilities |
1,990.7 | (904.2 | ) | 50.9 | 1,137.4 | ||||||||||
Preferred stock, new |
| 128.0 | (t) | | 128.0 | ||||||||||
Stockholders equity (deficit) |
|||||||||||||||
Total Predecessor deficit |
(307.3 | ) | 223.1 | (s) | 84.2 | (s) | | ||||||||
Total Successor equity |
| 416.2 | (t) | | 416.2 | ||||||||||
Noncontrolling interests |
3.0 | | 5.1 | (bb) | 8.1 | ||||||||||
Total equity (deficit) |
(304.3 | ) | 639.3 | 89.3 | 424.3 | ||||||||||
Total liabilities and equity (deficit) |
$ | 1,686.4 | $ | (136.9 | ) | $ | 140.2 | $ | 1,689.7 | ||||||
See accompanying notes to the unaudited pro forma condensed consolidated financial statements.
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended December 31, 2009
(dollars in millions except per share data)
Historical |
Reorganization
and Fresh-Start Pro Forma Adjustments |
Pro Forma | ||||||||||
Sales |
$ | 1,945.3 | $ | | $ | 1,945.3 | ||||||
Cost of products sold |
1,679.0 | 12.9 | (a) | 1,691.9 | ||||||||
Gross profit |
266.3 | (12.9 | ) | 253.4 | ||||||||
Selling, administration & engineering expenses |
199.5 | 0.2 | (b) | 199.7 | ||||||||
Amortization of intangibles |
15.0 | 0.1 | (c) | 15.1 | ||||||||
Impairment charges |
363.5 | | (i) | 363.5 | ||||||||
Restructuring |
32.4 | | 32.4 | |||||||||
Operating loss |
(344.1 | ) | (13.2 | ) | (357.3 | ) | ||||||
Interest expense, net of interest income |
(64.3 | ) | 18.9 | (d) | (45.4 | ) | ||||||
Equity earnings |
4.0 | (0.8 | )(e) | 3.2 | ||||||||
Reorganization items, net |
(17.4 | ) | 17.4 | (f) | | |||||||
Other income |
9.9 | 2.4 | (j) | 12.3 | ||||||||
Loss before income taxes |
(411.9 | ) | 24.7 | (387.2 | ) | |||||||
Provision for income tax benefit |
(55.7 | ) | 1.0 | (g) | (54.7 | ) | ||||||
Net loss |
(356.2 | ) | 23.7 | (332.5 | ) | |||||||
Less: Net loss attributed to noncontrolling interest |
0.1 | | 0.1 | |||||||||
Net loss attributable to Cooper-Standard Holdings Inc. |
$ | (356.1 | ) | $ | 23.7 | $ | (332.4 | ) | ||||
Basic net loss per share attributable to common stockholders of Cooper-Standard Holdings Inc. |
$ | (19.41 | )(h) | |||||||||
Diluted net loss per share attributable to common stockholders of Cooper-Standard Holdings Inc. |
$ | (19.41 | )(h) | |||||||||
See accompanying notes to the unaudited pro forma condensed consolidated financial statements.
38
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions except per share data)
1. Basis of Presentation
The unaudited pro forma condensed consolidated balance sheet is presented as of March 31, 2010 and the unaudited pro forma condensed consolidated statements of operations of the Successor are presented for the year ended December 31, 2009 and the three months ended March 31, 2010 and apply the Predecessors accounting policies to the periods presented. We prepared the following unaudited pro forma condensed consolidated financial information by applying adjustments to our historical consolidated financial statements. These adjustments give effect to our plan of reorganization and fresh-start accounting guidance pursuant to U.S. GAAP, reflecting the Successors post-emergence balance sheet as if the emergence date had occurred on January 1, 2009 for the periods presented for the unaudited pro forma condensed consolidated statements of operations and on March 31, 2010 for the unaudited pro forma condensed consolidated balance sheet.
2. Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
Reorganization and pro forma adjustments
(a) Reflects the following adjustments to increase cost of products sold:
Year Ended
December 31, 2009 |
Three
Months Ended March 31, 2010 |
|||||||
Adjust inventory to fair value |
$ | 7.6 | $ | | ||||
Adjust depreciation expense based on preliminary application of fresh-start accounting |
7.4 | 1.9 | ||||||
Eliminate net hedging losses pursuant to settlement of hedges upon emergence date |
(1.6 | ) | | |||||
Amortization of fair value of unfavorable leases |
(0.5 | ) | (0.2 | ) | ||||
$ | 12.9 | $ | 1.7 | |||||
(b) Reflects adjustments to selling, administration and engineering expenses for the following items:
Year Ended
December 31, 2009 |
Three
Months Ended March 31, 2010 |
|||||||
Eliminate bankruptcy related professional fees incurred in 2009 before bankruptcy filing |
$ | (7.7 | ) | $ | | |||
Eliminate stock compensation expense related to Predecessor equity |
(1.4 | ) | (0.2 | ) | ||||
Record stock compensation expense related to Successor equity |
9.9 | 2.5 | ||||||
Amortization of fair value of unfavorable leases |
(0.6 | ) | (0.1 | ) | ||||
$ | 0.2 | $ | 2.2 | |||||
39
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(dollars in millions except per share data)
(c) Reflects adjustments to increase the amortization of intangibles based on a preliminary application of fresh-start accounting, which results in total pro forma amortization of intangibles for the periods presented as follows:
Year Ended
December 31, 2009 |
Three
Months Ended March 31, 2010 |
|||||
Customer contracts and relationships |
$ | 13.5 | $ | 3.4 | ||
Technology |
1.5 | 0.4 | ||||
Other |
0.1 | | ||||
$ | 15.1 | $ | 3.8 | |||
(d) Adjustments reflect the elimination of interest expense and amortization of debt issuance costs on prepetition and debtor-in-possession indebtedness and the addition of the interest expense and amortization of debt issuance costs on our senior notes and our senior ABL facility:
Year Ended
December 31, 2009 |
Three
Months Ended March 31, 2010 |
|||||||
Eliminate historical interest expense and amortization of debt issuance costs |
$ | (64.3 | ) | $ | (11.8 | ) | ||
Add new interest on the following debt: |
||||||||
Interest on our senior notes and our senior ABL facility (including letter of credit charges) |
40.5 | 10.1 | ||||||
Amortization of debt issuance costs |
3.0 | 0.7 | ||||||
Interest on other debt |
1.9 | 0.7 | ||||||
Net reduction in interest expense |
$ | (18.9 | ) | $ | (0.3 | ) | ||
A 0.125% increase or decrease in the effective interest rate used above would increase or decrease the pro forma interest expense by $0.6 million and $0.2 million for the year ended December 31, 2009 and the three months ended March 31, 2010, respectively.
(e) Reflects amortization for the fair value adjustment on the equity investment related to joint ventures.
(f) Reflects the elimination of reorganization items incurred after filing for bankruptcy in 2009.
(g) Reflects the change in estimated total income tax provision through Reorganization and Pro Forma Adjustments using expected country specific effective income tax rates. No income tax provision adjustment was made on the portion of the pre-tax adjustments attributable to operations with anticipated valuation allowances.
40
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(dollars in millions except per share data)
(h) The information used to compute, and the calculation of, basic and diluted earnings per share, after giving effect to our new equity capital structure, is set forth below:
Year Ended
December 31, 2009 |
Three
Months Ended March 31, 2010 |
|||||||
Income (loss) attributable to common stockholders of Cooper-Standard Holdings, Inc. |
$ | (332.4 | ) | $ | 18.9 | |||
Less dividends declared or accumulated on 7% preferred stock |
(7.0 | ) | (1.8 | ) | ||||
Less undistributed earnings allocated to participating securities |
| (3.4 | ) | |||||
Income (loss) available to common stockholders of Cooper-Standard
|
$ | (339.4 | ) | $ | 13.7 | |||
Average shares outstanding-basic |
17,489,693 | 17,723,719 | ||||||
Effect of dilutive securities: |
||||||||
Potential shares of common stock attributable to RSUs |
| 80,503 | ||||||
Average shares outstanding-diluted |
17,489,693 | 17,804,222 | ||||||
In 2009, basic and diluted average shares outstanding were the same because the effect of potential shares of common stock was antidilutive. In addition, in 2009, no undistributed loss was allocated to participating securities based on the contractual obligations of the securities.
(i) Although fresh-start accounting will result in an adjustment to the historical cost basis of our assets, no adjustments have been made to the goodwill impairment charge of $157.2 million, the impairment charge of $202.4 million related to certain intangible assets and the impairment charge of $3.9 million related to certain fixed assets.
(j) Reflects the elimination of losses on interest rate swaps recorded in 2009 to reflect the settlement of these instruments upon our emergence from bankruptcy.
41
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(dollars in millions except per share data)
3. Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
Reorganization adjustments
(k) Reflects a decrease in cash and cash equivalents to give effect to transactions pursuant to our plan of reorganization, including the proceeds from the issuance of our senior notes, common stock and 7% preferred stock and payments for the discharge of debt and other liabilities subject to compromise.
Sources of funds: |
||||
Proceeds from issuance of our senior notes |
$ | 450.0 | ||
Proceeds from issuance of our 7% preferred stock |
100.0 | |||
Proceeds from issuance of our common stock |
255.0 | |||
Release of cash collateral for letters of credit and other cash deposits |
14.0 | |||
Total sources of funds |
$ | 819.0 | ||
Uses of funds: |
||||
Payments to DIP credit agreement lenders |
(124.6 | ) | ||
Payments to prepetition credit agreement lenders |
(634.7 | ) | ||
Payments to holders of our prepetition senior notes |
(104.1 | ) | ||
Payments for settlement of prepetition claims |
(20.8 | ) | ||
Debt issuance costs |
(18.8 | ) | ||
Professional fees |
(20.0 | ) | ||
Management Employee Incentive Plan |
(3.0 | ) | ||
Backstop fees |
(12.4 | ) | ||
Cooper Tire settlement |
(17.6 | ) | ||
Premium paid on our prepetition senior notes |
(1.7 | ) | ||
Total uses of funds |
(957.7 | ) | ||
Net change in funds |
$ | (138.7 | ) | |
(l) Adjustments reflect a decrease in other current assets to give effect to transactions pursuant to our plan of reorganization:
Premium paid on our prepetition senior notes |
1.7 | |||
Release of cash collateral for letters of credit and other cash deposits |
(14.0 | ) | ||
$ | (12.3 | ) | ||
(m) Adjustments reflect an increase in other assets to give effect to transactions pursuant to our plan of reorganization:
Debt issuance costs related to our senior ABL facility and the issuance of our senior notes |
18.8 | |||
Debt issuance costs related to our DIP credit agreement |
(4.7 | ) | ||
$ | 14.1 | |||
(n) Reflects repayment of borrowings under our DIP credit agreement on the date of our emergence from bankruptcy.
42
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(dollars in millions except per share data)
(o) Adjustments reflect the liabilities reinstated from the prepetition priority claims, administrative claims and miscellaneous secured claims.
(p) Adjustment reflects $1.7 million of liabilities reinstated as a result of the Cooper Tire settlement, and $2.6 million of current liabilities reinstated from liabilities subject to compromise for pension and deferred compensation.
(q) Adjustment reflects $16.0 million of long-term liabilities reinstated from liabilities subject to compromise for pension and deferred compensation, offset by $0.8 million of liabilities written off as the result of our plan of reorganization.
(r) Adjustment reflects the discharge of liabilities subject to compromise as follows:
Borrowings under our prepetition credit agreement(1) |
$ | 607.8 | |
Prepetition senior notes(1) |
206.2 | ||
Prepetition senior subordinated notes(1) |
324.6 | ||
General unsecured claims |
8.4 | ||
Other payables |
69.7 | ||
Derivatives and swaps |
20.8 | ||
Pension, deferred compensation and severance liabilities |
18.7 | ||
Other accrued liabilities |
0.5 | ||
$ | 1,256.7 | ||
(1) | Includes accrued and unpaid interest prior to our bankruptcy filing and unamortized debt issuance costs. |
(s) Reflects elimination of pre-emergence equity accounts and accumulated deficit under our plan of reorganization and accumulated other comprehensive loss under fresh-start accounting.
(t) Reflects the par value and additional paid in capital from our issuance of the following equity securities in connection with our emergence from bankruptcy:
1.0 million shares of 7% preferred stock |
$ | 128.0 | |
17.5 million shares of our common stock |
$ | 396.8 | |
2.4 million warrants |
19.4 | ||
$ | 416.2 | ||
The pro forma equity value of $416.2 million was calculated assuming no excess cash, based on the cash balances at March 31, 2010.
(u) Reflects an adjustment to inventories to reflect preliminary fair value adjustments. Inventories were recorded at fair value, which is estimated for finished goods and work-in-process based upon the expected selling price less costs to complete, selling and disposal costs and a normal profit to the buyer. Raw material inventory was recorded at carrying value as such value approximates the replacement cost.
(v) Reflects an adjustment to property, plant and equipment to fair value based on preliminary results of valuation procedures. The actual adjustment under fresh-start accounting as updated by our final valuation procedures as of the emergence date could differ materially from this estimate.
43
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(dollars in millions except per share data)
(w) The resulting intangible assets of $192.9 million represents the excess of our total anticipated enterprise value over the fair value of our estimated net assets:
Total anticipated enterprise value |
$ | 1,025.0 | ||
Less amounts allocable to fair values under fresh-start accounting: |
||||
Cash and cash equivalents |
126.6 | |||
Accounts receivable, net |
413.1 | |||
Inventories, net |
123.7 | |||
Prepaid expenses |
29.3 | |||
Other |
79.0 | |||
Property, plant and equipment, net |
590.6 | |||
Other assets |
134.5 | |||
Accounts payable |
(175.8 | ) | ||
Payroll liabilities |
(80.9 | ) | ||
Accrued liabilities |
(86.9 | ) | ||
Pension benefits |
(169.7 | ) | ||
Postretirement benefits other than pensions |
(81.8 | ) | ||
Deferred tax liabilities |
(25.9 | ) | ||
Other long-term liabilities |
(38.6 | ) | ||
Minority interest liability fair value adjustment |
(5.1 | ) | ||
New intangible assets(1) |
$ | 192.9 | ||
(1) | New intangible assets is comprised of $155.3 million in intangible assets and $37.6 million in goodwill. |
(x) Adjustment reflects the fair value adjustment on equity investments of $10.7 million offset by a pension asset write-off of $4.0 million.
(y) Reflects fair value adjustments of $(1.2) million and $34.1 million related to the current and long-term portions of pension and other post-retirement benefit plans, $(0.5) million related to the current portion of workers compensation and $(5.0) million related to customer owned tooling.
(z) Reflects an estimated net deferred tax liability as a result of fresh-start accounting.
(aa) Reflects the following adjustments to increase other long-term liabilities:
Elimination of long-term deferred tooling |
$ | (3.8 | ) | |
Record fair value of unfavorable leases |
6.7 | |||
Record fair value of workers compensation |
1.1 | |||
$ | 4.0 | |||
(bb) Reflects fair value adjustments on minority interest liability.
44
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth our selected consolidated financial data, consisting of statement of operations, balance sheet, statement of cash flows and other financial data, for each of the periods indicated. The following selected consolidated financial data has been derived from our audited consolidated financial statements as of December 31, 2008 and 2009 and for the years ended December 31, 2007, 2008 and 2009, which are included elsewhere in this prospectus, and from our audited consolidated financial statements as of December 31, 2005, 2006 and 2007 and for the years ended December 31, 2005 and 2006, which are not included in this prospectus, all of which have been audited by Ernst & Young LLP, independent registered public accountants. Ernst & Young LLPs report on the consolidated financial statements for the year ended December 31, 2009, which appears elsewhere herein, includes an explanatory paragraph which describes an uncertainty about our ability to continue as a going concern. The data should be read in conjunction with the consolidated financial statements, related notes and other financial information included herein. The following selected consolidated financial data as of March 31, 2009 and for the three months ended March 31, 2009 and 2010 has been derived from our unaudited consolidated financial statements included elsewhere in this prospectus.
We have prepared the unaudited selected consolidated financial data as of and for the three months ended March 31, 2009 and 2010 on a basis consistent with our audited consolidated financial statements for the year ended December 31, 2009, and this information includes all adjustments (consisting of only normal recurring adjustments unless otherwise disclosed therein) that management considers necessary for a fair presentation of our financial position and results of operations for the periods indicated. Historical results are not necessarily indicative of future performance. Operating results for the three months ended March 31, 2010 are not necessarily indicative of results that may be expected for the full fiscal year.
The following selected consolidated financial data is qualified by reference to, and should be read in conjunction with, our consolidated financial statements and the notes to those statements included elsewhere in this prospectus and the information under Capitalization and Managements Discussion and Analysis of Financial Condition and Results of Operations.
45
Year Ended December 31, |
Three Months Ended
March 31, |
|||||||||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | 2009 | 2010 | ||||||||||||||||||||||
Statement of operations: |
||||||||||||||||||||||||||||
Sales |
$ | 1,827.4 | $ | 2,164.3 | $ | 2,511.2 | $ | 2,594.6 | $ | 1,945.3 | $ | 401.8 | $ | 596.3 | ||||||||||||||
Cost of products sold |
1,550.2 | 1,832.1 | 2,114.1 | 2,260.1 | 1,679.0 | 363.9 | 491.8 | |||||||||||||||||||||
Gross profit |
277.2 | 332.2 | 397.1 | 334.5 | 266.3 | 37.9 | 104.5 | |||||||||||||||||||||
Selling, administration & engineering expenses |
169.7 | 199.8 | 222.1 | 231.7 | 199.5 | 45.2 | 53.0 | |||||||||||||||||||||
Amortization of intangibles |
28.2 | 31.0 | 31.9 | 31.0 | 15.0 | 7.2 | 0.2 | |||||||||||||||||||||
Impairment charges |
| 13.2 | 146.4 | 33.4 | 363.5 | | | |||||||||||||||||||||
Restructuring |
3.0 | 23.9 | 26.4 | 38.3 | 32.4 | 22.6 | 0.3 | |||||||||||||||||||||
Operating profit (loss) |
76.3 | 64.3 | (29.7 | ) | 0.1 | (344.1 | ) | (37.1 | ) | 51.0 | ||||||||||||||||||
Interest expense, net of interest income |
(66.6 | ) | (87.2 | ) | (89.5 | ) | (92.9 | ) | (64.3 | ) | (21.1 | ) | (11.8 | ) | ||||||||||||||
Equity earnings (losses) |
2.8 | 0.2 | 2.2 | 0.9 | 4.0 | (0.2 | ) | 2.0 | ||||||||||||||||||||
Reorganization items, net |
| | | | (17.4 | ) | | (23.3 | ) | |||||||||||||||||||
Other income (expense) |
(0.1 | ) | 7.9 | (0.5 | ) | (1.4 | ) | 9.9 | (0.7 | ) | (6.9 | ) | ||||||||||||||||
Income (loss) before income taxes |
12.4 | (14.8 | ) | (117.5 | ) | (93.3 | ) | (411.9 | ) | (59.1 | ) | 11.0 | ||||||||||||||||
Provision for income taxes (benefit) |
2.4 | (7.3 | ) | 32.9 | 29.3 | (55.7 | ) | (3.8 | ) | 7.3 | ||||||||||||||||||
Consolidated net income (loss) |
10.0 | (7.5 | ) | (150.4 | ) | (122.6 | ) | (356.2 | ) | (55.3 | ) | 3.7 | ||||||||||||||||
Add: Net loss (income) attributable to noncontrolling interests(1) |
(1.2 | ) | (0.9 | ) | (0.6 | ) | 1.1 | 0.1 | 0.3 | (0.3 | ) | |||||||||||||||||
Net income (loss) attributable to Cooper-Standard Holdings Inc. |
$ | 8.8 | $ | (8.4 | ) | $ | (151.0 | ) | $ | (121.5 | ) | $ | (356.1 | ) | $ | (55.0 | ) | $ | 3.4 | |||||||||
Balance sheet data (at end of period): |
||||||||||||||||||||||||||||
Cash and cash equivalents |
$ | 62.2 | $ | 56.3 | $ | 40.9 | $ | 111.5 | $ | 380.3 | $ | 88.3 | $ | 265.3 | ||||||||||||||
Net working capital(2) |
162.9 | 212.1 | 249.8 | 154.5 | 240.8 | 159.3 | 311.0 | |||||||||||||||||||||
Total assets |
1,734.2 | 1,911.4 | 2,162.3 | 1,818.3 | 1,737.4 | 1,733.0 | 1,686.4 | |||||||||||||||||||||
Total non-current liabilities |
1,112.8 | 1,256.1 | 1,351.6 | 1,346.9 | 263.9 | 1,328.9 | 252.5 | |||||||||||||||||||||
Total debt(3) |
902.5 | 1,055.5 | 1,140.2 | 1,144.1 | 204.3 | 1,155.7 | 152.4 | |||||||||||||||||||||
Liabilities subject to compromise |
| | | | 1,261.9 | | 1,256.7 | |||||||||||||||||||||
Equity (deficit) |
$ | 317.3 | $ | 324.0 | $ | 276.8 | $ | 19.7 | $ | (306.5 | ) | $ | (52.0 | ) | $ | (304.3 | ) | |||||||||||
Statement of cash flows data: |
||||||||||||||||||||||||||||
Net cash provided (used) by: |
||||||||||||||||||||||||||||
Operating activities |
$ | 113.0 | $ | 135.9 | $ | 185.4 | $ | 136.5 | $ | 130.0 | $ | (32.3 | ) | $ | (56.7 | ) | ||||||||||||
Investment activities |
(133.0 | ) | (281.8 | ) | (260.0 | ) | (73.9 | ) | (45.5 | ) | (8.3 | ) | (8.3 | ) | ||||||||||||||
Financing activities |
(7.2 | ) | 147.6 | 55.0 | 14.1 | 166.1 | 18.7 | (51.6 | ) | |||||||||||||||||||
Capital expenditures |
$ | 54.5 | $ | 82.9 | $ | 107.3 | $ | 92.1 | $ | 46.1 | $ | 8.3 | $ | 12.0 | ||||||||||||||
Other financial data (unaudited): |
||||||||||||||||||||||||||||
Ratio of earnings to combined fixed charges and preferred stock dividends |
1.1 | x | | | | | | 1.6 | x |
(1) | Due to the implementation of ASC Topic 810, Consolidation, certain prior period amounts have been reclassified to conform to the current period financial statement presentation. |
(2) | Net working capital is defined as current assets (excluding cash and cash equivalents) less current liabilities (excluding debt payable within one year). |
(3) | Includes $175.0 million and $124.6 million of borrowings under our DIP credit agreement, $0.8 million and $0.6 million in capital leases and $28.5 million and $27.3 million of other third-party debt as of December 31, 2009 and March 31, 2010, respectively. |
46
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This managements discussion and analysis of financial condition and results of operations is intended to assist in understanding and assessing the trends and significant changes in our results of operations and financial condition. Our historical results may not indicate, and should not be relied upon as an indication of, our future performance. Our forward-looking statements reflect our current views about future events, are based on assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements. See Forward-Looking Statements for a discussion of risks associated with reliance on forward-looking statements. Factors that may cause differences between actual results and those contemplated by forward-looking statements include, but are not limited to, those discussed below and elsewhere in this prospectus, particularly in Risk Factors. Managements discussion and analysis of financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and our consolidated financial statements and the notes thereto included elsewhere in this prospectus.
Basis of Presentation
The financial information of the Company included in this prospectus represents our consolidated financial position as of December 31, 2008 and 2009, and for the three-month period ended March 31, 2010, and our consolidated results of operations and cash flows for the years ended December 31, 2007, 2008 and 2009, and for the three month period ended March 31, 2010, and reflects the application of purchase accounting.
Company Overview
We design, manufacture and sell body sealing, fluid handling components, systems, subsystems and modules and Anti-Vibration Systems, or AVS, for use in passenger vehicles and light trucks manufactured by global automotive original equipment manufacturers, or OEMs. In 2009, approximately 80% of our sales consisted of original equipment sold directly to OEMs for installation on new vehicles. The remaining 20% of our sales were primarily to Tier I and Tier II suppliers and non-automotive customers. Accordingly, sales of our products are directly affected by the annual vehicle production of OEMs and, in particular, the production levels of the vehicles for which we provide specific parts. Most of our products are custom designed and engineered for a specific vehicle platform. Our sales and product development personnel frequently work directly with the OEMs engineering departments in the design and development of our various products.
Although each OEM may emphasize different requirements as the primary criteria for judging its suppliers, we believe success as an automotive supplier generally requires outstanding performance with respect to price, quality, service, performance, design and engineering capabilities, innovation and timely delivery. Importantly, we believe our continued commitment to investment in our design and engineering capability, including enhanced computerized software design capabilities, is important to our future success, and many of our present initiatives are designed to enhance these capabilities. In addition, in order to remain competitive we must also consistently achieve and sustain cost savings. In an effort to continuously reduce our cost structure, we seek to identify and implement lean initiatives, which focus on optimizing manufacturing by eliminating waste, controlling cost and enhancing productivity, and we evaluate opportunities to consolidate facilities and to relocate certain operations to lower cost countries. We believe we will continue to be successful in our efforts to improve our design and engineering capability and manufacturing processes while achieving cost savings, including through our lean initiatives.
Our OEM sales are principally generated from purchase orders issued by OEMs and as a result we have no order backlog. Once selected by an OEM to supply products for a particular platform, we typically supply those products for the life of the platform, which is normally six to eight years, although there is no guarantee that this will occur. In addition, when we are the incumbent supplier to a given platform, we believe we have a competitive advantage in winning the redesign or replacement platform.
47
We provide parts to virtually every major global OEM for use on a multitude of different platforms. However, we generate a significant portion of our sales from Ford Motor Company, or Ford, GM, defined herein as General Motors Corporation combined with General Motors Company, and Chrysler, defined herein as Chrysler LLC combined with Chrysler Group LLC, or, collectively, the Detroit 3. For the year ended December 31, 2009, our sales of product on platforms produced by Ford, GM and Chrysler comprised approximately 34.8%, 15.5% and 5.5% of our sales, respectively, or 55.8% in the aggregate of our sales. Consequently, any significant reduction of our sales to, or the loss of any one of, the Detroit 3 or any significant reduction in the market shares of the Detroit 3 could have a material adverse effect on our financial results.
In the year ended December 31, 2009, approximately 47% of sales were generated in North America while approximately 53% of our sales were generated outside of North America. Because of our significant international operations, we are subject to the risks associated with doing business in other countries. Historically, our operations in Canada and Western Europe have not presented materially different risks or problems from those we have encountered in the United States, although the cost and complexity of streamlining operations in certain European countries is greater than would be the case in the United States. This is due primarily to labor laws in those countries that can make reducing employment levels more time-consuming and expensive than in the United States. We believe the risks of conducting business in less developed markets, including Brazil, China, Czech Republic, India, Korea, Mexico and Poland are sometimes greater than in the U.S., Canadian and Western European markets. This is due to the potential for currency volatility, high interest, inflation rates and the general political and economic instability that are associated with these markets.
Our Reorganization
On August 3, 2009, we along with our U.S. subsidiaries, or the debtors, filed voluntary petitions for chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of Delaware, or the Bankruptcy Court. On August 4, 2009, our Canadian subsidiary, Cooper-Standard Automotive Canada Limited, or CSA Canada, sought relief under the Companies Creditors Arrangement Act in the Ontario Superior Court of Justice in Toronto, Ontario, Canada, or the Canadian Court. The debtors and CSA Canada emerged from their respective insolvency proceedings on May 27, 2010, with approximately $480 million of funded debt, representing a reduction of over $650 million from prepetition levels.
As part of our emergence from chapter 11, we raised $450 million through the issuance of our senior notes and entered into our $125 million senior ABL facility with certain agent and lending banks. In addition, we raised $355 million through the issuance of (i) $100 million of our 7% cumulative participating convertible preferred stock, or our 7% preferred stock, to certain creditors pursuant to a commitment agreement that provided for the backstop of our rights offering, or the Backstop Parties, and (ii) $255 million of our common stock to the Backstop Parties and holders of our prepetition 8 3 / 8 % senior subordinated notes due 2014, or our prepetition senior subordinated notes, pursuant to our rights offering. The Backstop Parties also received warrants to purchase 7% of our common stock (assuming the conversion of our 7% preferred stock) for their commitment to backstop the rights offering.
In connection with our emergence from chapter 11, amounts outstanding under our $175 million debtor-in-possession financing facility and $639.6 million of claims under our prepetition credit facility were paid in full in cash. Holders of our prepetition 7% senior notes due 2012, or our prepetition senior notes, were also paid in full in cash, except that the Backstop Parties received a distribution of our common stock in lieu of the cash payment for certain of their prepetition senior note claims. Holders of our prepetition senior subordinated notes were issued 8% of our outstanding common stock and warrants to purchase, in the aggregate, 3% of our outstanding common stock (in each case, assuming the conversion of our 7% preferred stock). In addition, our obligations under both our prepetition senior notes and our prepetition senior subordinated notes were cancelled. See Liquidity and Capital ResourcesAfter Emergence from Bankruptcy Proceedings and Description of Certain Indebtedness for a more detailed description of our senior notes and senior ABL facility, Description of Capital Stock for a more detailed description of our equity securities and Our Reorganization for a more detailed description of our reorganization.
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In connection with our emergence from bankruptcy, we implemented fresh-start accounting. As required by fresh-start accounting, assets and liabilities were recorded at fair value, based on values determined in connection with the implementation of our plan of reorganization. Accordingly, our financial condition and results of operations from and after our emergence from bankruptcy will not be comparable to the financial condition or results of operations reflected in our historical financial statements included elsewhere in this prospectus.
Business Environment and Outlook
Our business is directly affected by the automotive build rates in North America and Europe. New vehicle demand is driven by macro-economic and other factors, such as interest rates, manufacturer and dealer sales incentives, fuel prices, consumer confidence, employment levels, income growth trends, government incentives such as cash for clunkers and tax incentives. The severe global financial crisis that started in the second half of 2008 reduced vehicle demand overall with the low point occurring in 2009 with 8.6 million units in North America and 16.3 million units in Europe. CSM Worldwides June 2010 expected annualized light vehicle production volumes for 2010 are 11.6 million units in North America, while Europes volumes are expected to be 17.0 million units.
According to CSM Worldwide, actual North American light vehicle production volumes for the three months ended March 31, 2010 were 2.9 million compared to 1.7 million for the three months ended March 31, 2009, an increase of approximately 69.5%, and European light vehicle production volumes for the three months ended March 31, 2010 were 4.6 million compared to 3.4 million for the three months ended March 31, 2009, an increase of approximately 33%. According to CSM Worldwide, North America and Europe light vehicle production volumes in the second quarter of 2010 is estimated at 3.0 million and 4.4 million units, respectively, which is a 1.2 million unit increase for North America and a 0.2 million unit increase for Europe.
Competition in the automotive supplier industry is intense and has increased in recent years as OEMs have demonstrated a preference for stronger relationships with fewer suppliers. There are typically three or more significant competitors and numerous smaller competitors for most of the products we produce. However, the financial crisis and difficult industry environment is expected to result in significant consolidation among suppliers. The full impact of these consolidations has yet to be determined as the process is on-going.
OEMs have shifted some research and development, design and testing responsibility to suppliers, while at the same time shortening new product cycle times. To remain competitive, suppliers must have state-of-the-art engineering and design capabilities and must be able to continuously improve their engineering, design and manufacturing processes to effectively service the customer. Suppliers are increasingly expected to collaborate on, or assume the product design and development of, key automotive components, and to provide value added solutions under more stringent time frames.
Pricing pressure has continued as competition for market share has reduced the overall profitability of the industry and resulted in continued pressure on suppliers for price concessions. Consolidations and market share shifts among vehicle manufacturers continues to put additional pressures on the supply chain. These pricing and market pressures, along with the current financial crisis, will continue to drive our focus on reducing our overall cost structure through lean initiatives, capital redeployment, restructuring and other cost management processes.
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Results of Operations for the Three Month Period Ended March 31, 2010
Results of Operations
(in thousands)
Three Months Ended March 31, | ||||||||
2009 | 2010 | |||||||
Sales |
$ | 401,768 | $ | 596,324 | ||||
Cost of products sold |
363,936 | 491,820 | ||||||
Gross profit |
37,832 | 104,504 | ||||||
Selling, administration, & engineering expenses |
45,164 | 53,067 | ||||||
Amortization of intangibles |
7,218 | 189 | ||||||
Restructuring |
22,563 | 252 | ||||||
Operating profit (loss) |
(37,113 | ) | 50,996 | |||||
Interest expense, net of interest income |
(21,097 | ) | (11,811 | ) | ||||
Equity earnings (loss) |
(230 | ) | 1,960 | |||||
Reorganization items, net |
| (23,333 | ) | |||||
Other expense, net |
(662 | ) | (6,856 | ) | ||||
Income (loss) before income taxes |
(59,102 | ) | 10,956 | |||||
Provision (benefit) for income tax expense |
(3,825 | ) | 7,288 | |||||
Consolidated net income (loss) |
(55,277 | ) | 3,668 | |||||
Add: Net (income) loss attributed to noncontrolling interests |
311 | (259 | ) | |||||
Net income (loss) attributable to Cooper-Standard Holdings Inc. |
$ | (54,966 | ) | $ | 3,409 | |||
Three months ended March 31, 2010 compared to three months ended March 31, 2009
Sales. Our sales increased to $596.3 million in the first quarter of 2010 from $401.8 million in the first quarter of 2009, an increase of $194.6 million, or 48.4%. The improvement is a result of significant increase in volumes in all regions. In addition, foreign currency exchange had a net favorable impact on sales of $41.3 million.
Gross profit. Gross profit increased $66.7 million from $37.8 million in the first quarter of 2009 to $104.5 million in the first quarter of 2010. As a percentage of sales, gross profit increased to 17.5% of sales in the first quarter of 2010 as compared to 9.4% of sales in the first quarter of 2009. The improved gross profit and gross profit margin is a result of the significant increase in volumes in all regions and our lean savings, partially offset by the return of certain employee benefits and slightly higher raw material costs.
Restructuring. Restructuring charges decreased $22.3 million to $0.3 million in the first quarter of 2010 compared to $22.6 million in the first quarter of 2009. This decrease is due primarily to the reorganization involving the discontinuation of our global product line operating divisions that was initiated in the third quarter of 2008 and continued through the first quarter of 2009.
Interest expense, net. The decrease in interest expense of $9.3 million in the first quarter of 2010 resulted primarily from the cessation of recording interest expense on the debt that was in default, partially offset by interest expense recorded on our DIP credit agreement.
Other expense. Other expense increased $6.2 million in the first quarter of 2010 compared to the first quarter of 2009 due primarily to an increase in foreign currency losses of $4.9 million and $1.4 million of interest rate swap gains in 2009.
Provision for income tax expense (benefit). For the three months ended March 31, 2010, we recorded income tax provision of $7.3 million on earnings before income taxes of $11.0 million. This compares to an income tax benefit of $3.8 million on losses before income taxes of $59.1 million for the same period of 2009. Income tax
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expense for the three month period ended March 31, 2010 differs from statutory rates due to income taxes on foreign earnings, the inability to record a tax benefit for pre-tax losses in
the United States and certain foreign jurisdictions to the extent not offset by other categories of income, tax credits, income tax incentives, withholding taxes and other permanent items. Further, our current and future provision for income taxes
will be significantly impacted by the recognition of valuation allowances in certain countries, particularly the United States. We intend to maintain these allowances until it is more likely than not that the deferred tax assets will be realized.
Results of Operations for the Year Ended December 31, 2009
For the Year Ended December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
(in thousands) | ||||||||||||
Sales |
$ | 2,511,153 | $ | 2,594,577 | $ | 1,945,259 | ||||||
Cost of products sold |
2,114,039 | 2,260,063 | 1,678,953 | |||||||||
Gross profit |
397,114 | 334,514 | 266,306 | |||||||||
Selling, administration & engineering expenses |
222,134 | 231,709 | 199,552 | |||||||||
Amortization of intangibles |
31,850 | 30,996 | 14,976 | |||||||||
Impairment charges |
146,366 | 33,369 | 363,496 | |||||||||
Restructuring |
26,386 | 38,300 | 32,411 | |||||||||
Operating profit (loss) |
(29,622 | ) | 140 | (344,129 | ) | |||||||
Interest expense, net of interest income |
(89,577 | ) | (92,894 | ) | (64,333 | ) | ||||||
Equity earnings |
2,207 | 897 | 4,036 | |||||||||
Reorganization items, net |
| | (17,367 | ) | ||||||||
Other income (expense), net |
(468 | ) | (1,368 | ) | 9,919 | |||||||
Loss before income taxes |
(117,460 | ) | (93,225 | ) | (411,874 | ) | ||||||
Provision (benefit) for income tax expense |
32,946 | 29,295 | (55,686 | ) | ||||||||
Consolidated net loss |
(150,406 | ) | (122,520 | ) | (356,188 | ) | ||||||
Add: Net (income) loss attributed to noncontrolling interests |
(587 | ) | 1,069 | 126 | ||||||||
Net loss attributable to Cooper-Standard Holdings Inc. |
$ | (150,993 | ) | $ | (121,451 | ) | $ | (356,062 | ) | |||
Year ended December 31, 2009 compared to year ended December 31, 2008
Sales. Our sales decreased from $2,594.6 million in 2008 to $1,945.3 million in 2009, a decrease of $649.3 million, or 25.0%. The decrease resulted primarily from lower unit sales volume in both our North America (primarily the United States and Canada) and International (primarily Europe) segments. In addition, foreign currency exchange had a net unfavorable impact on sales of $110.8 million due to the relative strength of the dollar against other currencies (most notably the euro). Customer price concessions also contributed to our decrease in sales.
Gross profit. Gross profit decreased $68.2 million from $334.5 million in 2008 to $266.3 million in 2009. As a percentage of sales, gross profit increased to 13.7% of sales in 2009 as compared to 12.9% of sales in 2008. The decrease in gross profit resulted primarily from reduced North America and Europe volume and unfavorable product mix. The increase in gross profit margin is primarily the result of the favorable impact of management actions and various cost saving initiatives, partially offset by the lower volume.
Selling, administration and engineering . Selling, administration and engineering expenses decreased $32.2 million to $199.6 million for the year ended December 31, 2009 compared to $231.7 million for the year ended December 31, 2008. This decrease is due primarily to the favorable impact of various cost saving initiatives and management actions.
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Operating profit (loss). Operating loss in 2009 was $344.1 million compared to an operating profit of $0.1 million in 2008. This decrease is primarily due to the impairment charges of $363.5 million in 2009 compared to $33.4 million in 2008, reduced volumes and unfavorable foreign exchange, partially offset by the favorable impact of management actions and various cost saving initiatives.
Impairment charges. In 2009, we recorded a goodwill impairment charge of $157.2 million and impairment charges of $202.4 million related to certain intangible assets and $3.8 million related to certain fixed assets within our North America and International segments. During the second quarter of 2009, several events occurred that indicated potential impairment of our goodwill, other intangible assets and certain fixed assets. Such events included: (a) the chapter 11 bankruptcy of both Chrysler and GM and unplanned plant shut-downs by both Chrysler and GM; (b) continued product volume risk and negative product mix changes; (c) the commencement of negotiations with our pre-reorganization affiliate shareholders, senior secured lenders and bondholders to recapitalize our long term debt and equity; (d) our recognition as the second quarter progressed that there was an increasing likelihood that we would breach our financial covenants under the credit agreement entered into in connection with the 2004 acquisition, or, including subsequent amendments thereto, the prepetition credit agreement; (e) our decision to defer the June 15, 2009 interest payment on our 7% senior notes due 2012, or our prepetition senior notes, and 8 3 / 8 % senior subordinated notes due 2014, or our prepetition senior subordinated notes, pending the outcome of our quarterly financial results; (f) an analysis of whether we would meet our financial covenants for the past quarter; and (g) negotiations with our various constituencies. As a result of the combination of the above factors, we significantly reduced our second quarter projections.
In 2008, we recorded a goodwill impairment charge of $23.1 million in our International segment. This charge resulted from the weakening global economy, the global decline in vehicle production volumes and changes in product mix. Also, in 2008 we recorded intangible impairment charges of $3.9 million related to certain technology in our North America segment. Based on a discounted cash flow analysis it was determined that the historical cost of these intangible assets exceeded their fair value and impairment charges were recorded. Also, in 2008 we recorded fixed asset impairment charges of $6.4 million in our North America and International segments.
Interest expense, net. The decrease in interest expense of $28.6 million in 2009 resulted primarily from the cessation of recording interest expense on our debt obligations that are in default, decreased interest rates and decreased term loan balances.
Other income (expense). Other income was $9.9 million in 2009 as a result of foreign currency gains of $4.5 million and gains on debt repurchases of $9.1 million, partially offset by the loss on the sale of receivables of $1.2 million and losses on interest rate swaps of $2.4 million. Other expense of $1.4 million in 2008 was primarily a result of foreign currency losses of $0.9 million and a loss on the sale of receivables of $2.2 million, partially offset by gains on debt repurchases of $1.7 million.
Provision for income tax expense (benefit). Income taxes in 2008 included an expense of $29.3 million for an effective tax rate of 31.4% as compared to an income tax benefit of $55.7 million for an effective tax benefit rate of 13.5% in 2009. The effective tax benefit rate in 2009 differs from the statutory tax rate primarily as a result of the nondeductible nature of the goodwill impairment charge, the valuation allowances recorded on tax losses and credits generated in the United States and certain foreign jurisdictions, the benefit related to the settlement of a bi-lateral advanced pricing agreement, the distribution of income between the United States and foreign sources and other non-recurring discrete items.
Year ended December 31, 2008 compared to year ended December 31, 2007
Sales. Our sales increased from $2,511.2 million in 2007 to $2,594.6 million in 2008, an increase of $83.4 million, or 3.3%. The increase resulted primarily from the full twelve months impact of the acquisitions of nine Metzeler Automotive Profile Systems sealing systems operations in Germany, Italy, Poland, Belarus and Belgium and a joint venture interest in China, or collectively, MAPS, and a related acquisition of a joint venture
52
interest in India, or MAP India, and the El Jarudo fuel rail manufacturing business of Automotive Components Holdings, LLC, or El Jarudo, and favorable foreign exchange rates of $70.6 million, partially offset by lower volume. In our North America segment, our sales decreased by $282.0 million primarily due to lower unit sales volume, partially offset by $6.0 million of favorable foreign currency translation. In our International segment, sales increased by $365.4 million primarily due to a combination of factors including the acquisition of MAPS and MAP India, a $64.6 million favorable impact from foreign currency translation and higher unit sales volumes, partially offset by customer price concessions.
Gross profit. Gross profit decreased $62.6 million from $397.1 million in 2007 to $334.5 million in 2008. As a percentage of sales, gross profit decreased to 12.9% of sales in 2008 as compared to 15.8% of sales in 2007. This decrease resulted primarily from reduced North America volume and unfavorable product mix.
Operating profit (loss). Operating profit in 2008 was $0.1 million compared to an operating loss reported in 2007 of $29.6 million. This increase is primarily due to the impairment charges of $146.4 million in 2007 compared to $33.4 million in 2008, partially offset by reduced volumes, increased material costs and unfavorable foreign exchange.
Impairment charges. In 2008, we recorded a goodwill impairment charge of $23.1 million in our International segment. This charge resulted from the weakening global economy, the global decline in vehicle production volumes and changes in product mix. Also, in 2008 we recorded intangible impairment charges of $3.9 million related to certain technology in our North America segment. Based on a discounted cash flow analysis it was determined that the historical cost of these intangible assets exceeded their fair value and impairment charges were recorded. Also, in 2008 we recorded fixed asset impairment charges of $6.4 million in our North America and International segments.
In 2007 we recorded a goodwill impairment charge of $142.9 million and a $3.5 million charge related to the impairment of certain intangible assets within our North America segment. These charges resulted from projected declines in anticipated production volumes and a change in the production mix for certain key platforms in North America since our 2004 acquisition as well as the impact of increases in material costs and customer price concessions in North America.
Interest expense, net. Interest expense increased by $3.3 million in 2008 primarily due to increased indebtedness resulting from the acquisition of MAPS and increased short-term borrowings.
Other expense. Other expense of $1.4 million in 2008 was primarily a result of foreign currency losses of $0.9 million and a loss on the sale of receivables of $2.2 million, partially offset by gains on debt repurchases of $1.7 million. Other expense of $0.5 million in 2007 was primarily a result of foreign currency losses.
Provision for income tax expense (benefit). Income taxes in 2007 included an expense of $32.9 million for an effective tax rate of 28.0% as compared to income tax expense of $29.3 million for an effective tax rate of 31.4% in 2008. The effective tax rate in 2008 differs from the statutory tax rate primarily as a result of the nondeductible nature of the goodwill impairment charge, the valuation allowances recorded on tax losses and credits generated in the United States and certain foreign jurisdictions, the write-off of deferred tax assets in the United Kingdom, the distribution of income between the United States and foreign sources and other non-recurring discrete items. The effective tax rate in 2007 differs from the statutory tax rate primarily as a result of the nondeductible nature of the goodwill impairment charge, the valuation allowances recorded on tax losses and credits generated in the United States, the tax rate changes enacted during 2007 in the Czech Republic, Canada, Germany, Spain and the United Kingdom resulting in additional expense related to the impact of deferred taxes recorded in those jurisdictions, the distribution of income between the United States and foreign sources and other non-recurring discrete items.
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Segment Results of Operations for the Three Month Period Ended March 31, 2010
Through March 31, 2009, we reported our operating results in three business segments: Body & Chassis Systems, Fluid Systems and Asia Pacific. The Body & Chassis segment consisted mainly of body sealing products and components that protect vehicle interiors from weather, dust, and noise intrusion as well as systems and components that control and isolate noise vibration in a vehicle to improve ride and handling. The Fluid Systems segment consisted primarily of subsystems and components that direct, control, measure, and transport fluids and vapors throughout a vehicle. The Asia Pacific segment consisted of both Body & Chassis Systems and Fluid Systems operations in that region with the exception of our interest in a joint venture in China which was acquired as part of the MAPS acquisition, and the MAP India joint venture. These joint ventures were included in the Body & Chassis Systems segment, which was in line with the internal management structure at the time.
On March 26, 2009, we announced the implementation of a plan involving the discontinuation of its global Body & Chassis Systems and Fluid Systems segments and the establishment of a new operating structure organized on the basis of geographic regions. Under the plan, our operating structure as well as our reporting segments changed. As a result, we revised our segment disclosures beginning with the second quarter of 2009 from three reportable segments to the following two reportable segments, North America and International (comprising all of our operations outside of North America). Prior periods have been recast to conform to the current period presentation.
The following table presents sales and segment profit (loss) for each of the reportable segments for the quarters ended March 31, 2009 and 2010:
Three Months Ended March 31, | ||||||||
2009 | 2010 | |||||||
(in thousands) | ||||||||
Sales |
||||||||
North America |
$ | 188,976 | $ | 297,144 | ||||
International |
212,792 | 299,180 | ||||||
$ | 401,768 | $ | 596,324 | |||||
Segment profit (loss) |
||||||||
North America |
$ | (29,140 | ) | $ | 11,327 | |||
International |
(29,962 | ) | (371 | ) | ||||
$ | (59,102 | ) | $ | 10,956 | ||||
Three months ended March 31, 2010 compared to three months ended March 31, 2009
North America. Sales increased $108.2 million, or 57.2%, primarily due to a significant increase in sales volume and favorable foreign exchange of $12.6 million. Segment profit increased by $40.5 million, primarily due to a significant increase in volume and the favorable impact of our lean savings, partially offset by the return of certain employee benefits and slightly higher raw material costs.
International. Sales increased $86.4 million, or 40.6%, primarily due to a significant increase in volume and favorable foreign exchange of $28.7 million. Segment loss improved by $29.6 million, primarily due to a significant increase in volumes in all regions and the favorable impact of our lean savings, partially offset by the return of certain employee benefits and slightly higher raw material costs.
Segment Results of Operations for the Year Ended December 31, 2009
During 2007, we began reporting our operating results in the following three business segments: Body & Chassis Systems, Fluid Systems and Asia Pacific. The Body & Chassis Systems segment consisted mainly of body sealing products and components that protect vehicle interiors from weather, dust and noise intrusion as well as systems and
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components that control and isolate noise vibration in a vehicle to improve ride and handling. The Fluid Systems segment consisted primarily of subsystems and components that direct, control, measure and transport fluids and vapors throughout a vehicle. The Asia Pacific segment consisted of both Body & Chassis Systems and Fluid Systems operations in that region with the exception of our interest in a joint venture in China, which was acquired as part of the MAPS acquisition, and the MAP India joint venture. These joint ventures were included in the Body & Chassis Systems segment, which was in line with the internal management structure at the time. We continued to report our operating results in three business segments for all of 2008 and the first quarter of 2009.
On March 26, 2009, we announced the implementation of a plan involving the discontinuation of our Body & Chassis Systems and Fluid Systems segments and the establishment of a new operating structure organized on the basis of geographic regions. Under the plan, our operating structure as well as our reporting segments changed. As a result, we revised our segment disclosure beginning with the second quarter of 2009 from three reportable segments to the following two reportable segments, North America and International (comprising all of our operations outside of North America). Prior periods presented in this prospectus have been recast to conform to the current period presentation.
The following table presents sales and segment loss for each of our reportable segments for the years ended December 31, 2007, 2008 and 2009:
For the Year Ended December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
(in thousands) | ||||||||||||
Sales |
||||||||||||
North America |
$ | 1,526,458 | $ | 1,244,423 | $ | 910,306 | ||||||
International |
984,695 | 1,350,154 | 1,034,953 | |||||||||
$ | 2,511,153 | $ | 2,594,577 | $ | 1,945,259 | |||||||
Segment loss |
||||||||||||
North America |
$ | (86,723 | ) | $ | (36,662 | ) | $ | (246,015 | ) | |||
International |
(30,737 | ) | (56,563 | ) | (165,859 | ) | ||||||
$ | (117,460 | ) | $ | (93,225 | ) | $ | (411,874 | ) | ||||
Year ended December 31, 2009 compared to year ended December 31, 2008
North America . Sales decreased $334.1 million, or 26.8%, primarily due to lower sales volume of $302.4 million and unfavorable foreign exchange of $23.4 million. Segment loss increased by $209.4 million primarily due to the increased impairment charges of goodwill, intangibles and fixed assets of $234.9 million, lower sales volume and unfavorable foreign exchange, partially offset by the favorable impact of management actions and various cost saving initiatives.
International. Sales decreased $315.2 million, or 23.3%, primarily due to lower sales volume of $225.6 million and unfavorable foreign exchange $87.4 million. Segment loss increased by $109.3 million primarily due to the increased impairment charges of goodwill, intangibles and fixed assets of $95.2 million, lower sales volume and unfavorable foreign exchange, partially offset by the favorable impact of management actions and various cost saving initiatives.
Year ended December 31, 2008 compared to year ended December 31, 2007
North America. Sales decreased $282.0 million, or 18.5%, primarily due to lower sales volume, partially offset by favorable foreign exchange of $6.0 million. Segment loss decreased by $50.1 million as the result of a decrease of $138.5 million in impairment charges, offset by lower sales volumes and higher raw material costs in 2008.
55
International. Sales increased $365.5 million, or 37.1%, primarily due to the MAPS and MAP India acquisitions, favorable foreign exchange of $64.6 million, partially offset by lower sales volume. Segment loss increased by $25.8 million as the result of lower sales volume, unfavorable foreign exchange, impairment charges of $25.5 million and higher raw material costs, partially offset by the acquisitions.
Off-Balance Sheet Arrangements
As a part of our working capital management, we sell certain foreign receivables through third party financial institutions without recourse. The amount sold varies each month based on the amount of our underlying receivables and cash flow needs.
As of December 31, 2009 and March 31, 2010, we had $39.7 million and $37.6 million, respectively of receivables outstanding under receivables transfer agreements entered into by various foreign locations. We incurred losses on the sale of the receivables of $0.9 million in 2009 and $0.2 million for the three months ended March 31, 2010, which are recorded in other income (expense) in our consolidated statements of operations. We are continuing to service receivables for one of the locations. These were permitted transactions under our DIP credit agreement. We are also pursuing similar arrangements in various locations.
In addition, during the second quarter of 2009, we elected to participate in the Auto Supplier Support Program sponsored by the U.S. Treasury Department. The Auto Supplier Support Program is designed to provide eligible suppliers with access to government-backed protection on those Chrysler and GM U.S. dollar receivables that are accepted into the program. In applying for the program, we selected the program option that provides government-backed protection on collection of the receivables and expedited payment terms, for which a charge of 3% of the accepted receivables is applicable. We have been designated by both Chrysler and GM as an eligible supplier. During the year ended December 31, 2009, we received payments of $8.9 million and incurred charges of $0.3 million which was recorded in other income (expense) in our consolidated statements of operations.
As of December 31, 2009 and March 31, 2010, we had no other material off-balance sheet arrangements.
At December 31, 2008, we had $43.5 million of receivables outstanding under
receivable transfer agreements entered into by various foreign locations. We incurred losses on the sale of the receivables for the year ended December 31, 2008 of $2.2 million, which was recorded in other income (expense) in our consolidated
Liquidity and Capital ResourcesPrior to Emergence from Bankruptcy Proceedings
Short and long-term liquidity considerations and risks
As a result of the chapter 11 cases and the Canadian proceedings and the circumstances that led to them, we face uncertainty regarding the adequacy of our liquidity and capital resources and have limited access to financing. During the pendency of the chapter 11 cases and the Canadian proceedings, our primary sources of liquidity were cash flows from operations and borrowings made under our DIP credit agreement. In addition to the cash requirements necessary to fund ongoing operations, we incurred significant professional fees and other costs in connection with the chapter 11 cases and the Canadian proceedings.
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Cash flows
The following table summarizes our operating, investing and financing activities for the years ended December 31, 2007, 2008 and 2009 and the three months ended March 31, 2009 and 2010.
For the Year Ended
December 31, |
For the Three
Months
Ended March 31, |
|||||||||||||||||||
2007 | 2008 | 2009 | 2009 | 2010 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Net cash provided (used) by: |
||||||||||||||||||||
Operating activities |
$ | 185.4 | $ | 136.5 | $ | 130.0 | $ | (32.3 | ) | $ | (56.7 | ) | ||||||||
Investing activities |
(260.0 | ) | (73.9 | ) | (45.5 | ) | (8.3 | ) | (8.3 | ) | ||||||||||
Financing activities |
$ | 55.0 | $ | 14.1 | $ | 166.1 | $ | 18.7 | $ | (51.6 | ) |
Operating activities
Cash flow used in operations was $56.7 million for the three months ended March 31, 2010, which included $113.4 million of changes in operating assets and liabilities. This amount includes $99.0 million of working capital requirements, which is a result of the significant increase in volumes. Cash flow used in operations was $32.3 million for the three months ended March 31, 2009, which included $8.4 million of changes in operating assets and liabilities.
Cash flow provided by operations was $130.0 million in 2009, which included $25.9 million of changes in operating assets and liabilities. Cash flow provided by operations was $136.5 million in 2008, which included $59.3 million of changes in operating assets and liabilities. Cash flow provided by operations was $185.4 million in 2007.
Investing activities
Cash used in investing activities was $8.3 million for the three months ended March 31, 2010 and $8.3 million for the same period in 2009. Capital spending was $8.3 million for the three months ended March 31, 2009 and $12.0 million for the same period in 2010. The capital spending in 2010 was partially offset by $3.8 million of proceeds from the sale of fixed assets.
Cash used in investing activities was $45.5 million in 2009, which primarily consisted of $46.1 million of capital spending. This compared to $73.9 million in 2008, which primarily consisted of $92.1 million of capital spending, partially offset by gross proceeds of $8.6 million from a sale-leaseback transaction and $4.8 million of proceeds from the sale of fixed assets. Cash used in investing activities was $260.0 million in 2007.
We anticipate that we will spend approximately $80 million to $90 million on capital expenditures in 2010.
Financing activities
Net cash used in financing activities totaled $51.6 million for the three months ended March 31, 2010, which consisted primarily of payments on debtor-in-possession financing of $50.9 million and payments on long-term debt of $1.2 million, partially offset by increases of short-term debt. Net cash provided by financing activities totaled $18.7 million for the three months ended March 31, 2009, which consisted primarily of a net increase of short-term debt of $24.3 million, partially offset by normal debt payments of $5.6 million.
Net cash provided by financing activities totaled $166.1 million in 2009, which consisted primarily of debtor-in-possession financing net of debt issuance costs of $154.4 million, a net increase of short-term debt, partially offset by normal debt payments and repurchases of $10.0 million aggregate principal amount of our outstanding prepetition senior notes and our prepetition senior subordinated notes for $0.7 million. Net cash
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provided by financing activities totaled $14.1 million in 2008, which consisted primarily of a net increase of short-term debt, partially offset by normal debt payments and repurchases of $7.2 million aggregate principal amount of our outstanding prepetition senior notes and prepetition senior subordinated notes for $5.3 million . Net cash provided by financing activities was $55.0 million in 2007.
Financing
Prepetition debt obligations. As of August 3, 2009, the date of the filing of the chapter 11 cases by the debtors, we had approximately $1.2 billion of outstanding indebtedness on a consolidated basis, of which $86.4 million consisted of draws on a senior secured revolving credit facility, $527.0 million consisted of five senior secured term loan facilities, $513.4 million consisted of our prepetition senior notes and our prepetition senior subordinated notes and $50.8 million consisted of debt on account of other credit facilities, capital leases for affiliates, swaps, and other miscellaneous obligations. As a result of the filing of the chapter 11 cases, the loan commitments of the lenders under the prepetition credit agreement were terminated (including the availability under the revolving credit facility, including with respect to standby letters of credit) and all principal and accrued and unpaid interest outstanding under the prepetition credit agreement, our prepetition senior notes and our prepetition senior subordinated notes accelerated and became due and payable, subject to an automatic stay of any action to collect, assert or recover a claim against us as a result of the commencement of the chapter 11 proceedings and applicable bankruptcy law. Effective August 3, 2009, we ceased recording interest expense on outstanding prepetition debt instruments classified as liabilities subject to compromise. An additional $17.4 million of interest expense would have been recorded from January 1, 2010 to March 31, 2010 if we had continued to accrue interest on these instruments.
Prepetition senior credit agreement . In connection with Cooper-Standard Holdings Inc.s acquisition of the automotive segment of Cooper Tire & Rubber Company in 2004, or the 2004 acquisition, the Company, CSA U.S. and CSA Canada entered into a credit agreement with various lending institutions, Deutsche Bank Trust Company Americas, as administrative agent, Lehman Commercial Paper Inc., as syndication agent, and Goldman Sachs Credit Partners, L.P., UBS Securities LLC and The Bank of Nova Scotia, as co-documentation agents, or, with subsequent amendments thereto, the prepetition credit agreement, which provided for revolving credit facilities and term loan facilities. Our revolving credit facilities provided for loans in a total principal amount of up to $125.0 million with a maturity of December 2010. The term loan facilities included a Term Loan A facility of the Canadian dollar equivalent of $51.3 million with a maturity of December 2010, a Term Loan B facility of $115.0 million with a maturity of December 2011 and a Term Loan C facility of $185.0 million with a maturity of December 2011. These term loans were used to fund the 2004 acquisition. To finance, in part, the acquisition of fifteen fluid handling systems operations in North America, Europe and China from ITT Industries, Inc. and the MAPS acquisition, we also established and borrowed under two new term loan tranches, with an aggregate of $190 million borrowed in U.S. dollars and 64.725 million borrowed in euros. As of August 3, 2009, the date of the commencement of the chapter 11 proceedings, approximately $613.4 million of principal and accrued and unpaid interest was outstanding under the prepetition credit agreement, of which $86.4 million consisted of draws on the revolving credit facilities and $527.0 million consisted of five term loan facilities.
As a result of the filing of the chapter 11 cases, the loan commitments of the lenders under the prepetition credit agreement were terminated and all principal and accrued and unpaid interest outstanding under the prepetition credit agreement accelerated and became due and payable, subject to an automatic stay under applicable bankruptcy law.
Upon our emergence from bankruptcy, the prepetition credit agreement was cancelled and terminated, including all agreements relating thereto, except to the extent to allow the debtors, reorganized debtors or the administrative agent, as applicable, to make distributions pursuant to our plan of reorganization on account of claims related to such prepetition credit agreement and to perform certain other administrative duties thereunder.
Prepetition senior notes and prepetition senior subordinated notes. In connection with the 2004 acquisition, CSA U.S. issued $200 million aggregate principal amount of our prepetition senior notes, and $350 million aggregate
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principal amount of our prepetition senior subordinated notes. As a result of the filing of the chapter 11 cases, all principal and accrued and unpaid interest outstanding under our prepetition senior notes and our prepetition senior subordinated notes accelerated and became due and payable, subject to an automatic stay under applicable bankruptcy law.
Upon our emergence from bankruptcy, our prepetition senior notes and our prepetition senior subordinated notes were cancelled and the indentures governing such obligations were terminated, except to the extent to allow the debtors, reorganized debtors or the relevant trustee, as applicable, to make distributions pursuant to our plan of reorganization on account of claims related to such notes and perform certain other administrative duties or exercise certain protective rights thereunder.
DIP financing . In connection with the commencement of the chapter 11 cases and the Canadian proceedings, we and certain of our subsidiaries entered into a Debtor-In-Possession Credit Agreement, dated August 5, 2009, or our initial DIP credit agreement, with various lenders party thereto. On December 2, 2009, Metzeler Automotive Profile Systems GmbH, a German limited liability company, became an additional borrower under our initial DIP credit agreement. Under our initial DIP credit agreement, we borrowed an aggregate of $175 million principal amount of superpriority senior secured term loans in order to finance our operating, working capital and other general corporate needs (including the payment of fees and expenses in accordance with the orders of the Bankruptcy Court and the Canadian Court authorizing such borrowings).
In order to refinance our initial DIP credit agreement on terms more favorable to us, we and certain of our subsidiaries entered into our DIP credit agreement on December 18, 2009 with various lenders party thereto, which provided for superpriority senior secured term loans in an aggregate principal amount of up to $175 million, subject to certain conditions, and an uncommitted $25 million incremental facility.
Following the entry of a final order by the Bankruptcy Court approving our DIP credit agreement, on December 29, 2009, we borrowed $175 million under our DIP credit agreement. All of the proceeds of the borrowings under our DIP credit agreement, together with our cash on hand, were used to repay all borrowings and amounts outstanding under our initial DIP credit agreement, and to pay related fees and expenses. We prepaid $25 million of the borrowings under our DIP credit agreement on each of January 29, 2010, March 26, 2010 and April 20, 2010, and repaid the remaining balance upon our emergence from bankruptcy, at which time our DIP credit agreement was cancelled and terminated, including all agreements related thereto.
Liquidity and Capital ResourcesAfter Emergence from Bankruptcy Proceedings
As part of our plan of reorganization, we issued $450 million of our senior notes and entered into our $125 million senior ABL facility. Proceeds from our senior notes offering, together with proceeds of the rights offering and cash on hand, was used to pay claims under the prepetition credit agreement, our DIP credit agreement and the portion of the prepetition senior notes payable in cash, in full, together with related fees and expenses. Upon our emergence from bankruptcy, we had $479.3 million of outstanding indebtedness, consisting of $450 million of our senior notes and $29.3 million in other debt of certain of our foreign subsidiaries. We intend to fund our ongoing capital and working capital requirements through a combination of cash flows from operations and borrowings under our senior ABL facility. We anticipate that funds generated by operations and funds available under our senior ABL facility will be sufficient to meet working capital requirements for the next 12 months. For a description of our senior notes and our senior ABL facility, see Description of Certain Indebtedness.
Based on our current and anticipated levels of operations and the condition in our markets and industry, we believe that our cash on hand, cash flow from operations and availability under our senior ABL facility will enable us to meet our working capital, capital expenditures, debt service and other funding requirements for the foreseeable future. However, our ability to fund our working capital needs, debt payments and other obligations, and to comply with the financial covenants, including borrowing base limitations, under our senior ABL facility, depends on our future operating performance and cash flow and many factors outside of our control, including
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the costs of raw materials, the state of the overall automotive industry and financial and economic conditions and other factors, including those described under Risk Factors herein. Any future acquisitions, joint ventures or other similar transactions will likely require additional capital and there can be no assurance that any such capital will be available to us on acceptable terms, if at all.
Senior ABL facility
On the date of our emergence from bankruptcy, the Company, CSA U.S., or the U.S. Borrower, CSA Canada, or the Canadian Borrower and, together with the U.S. Borrower, the Borrowers, and certain subsidiaries of the U.S. Borrower entered into a senior secured asset-based revolving credit facility, or our senior ABL facility, with certain lenders, Bank of America, N.A., as agent, or the Agent, for such lenders, Deutsche Bank Trust Company Americas, as syndication agent, and Banc of America Securities LLC, Deutsche Bank Securities Inc., UBS Securities LLC and Barclays Capital, as joint lead arrangers and bookrunners. A summary of our senior ABL facility is set forth below. Also see Description of Certain IndebtednessSenior ABL Facility for more information on our senior ABL facility. This description and the description in Description of Certain IndebtednessSenior ABL facility are qualified in their entirety by reference to the credit agreement governing our senior ABL facility, which is included as an exhibit to the registration statement of which this prospectus is a part.
General . Our senior ABL facility provides for an aggregate revolving loan availability of up to $125 million, subject to borrowing base availability, including a $45 million letter of credit sub-facility and a $20 million swing line sub-facility. Our senior ABL facility also provides for an uncommitted $25 million incremental loan facility, for a potential total senior ABL facility of $150 million (if requested by the Borrowers and the lenders agree to fund such increase). No consent of any lender (other than those participating in the increase) is required to effect any such increase.
Maturity . Any borrowings under our senior ABL facility will mature, and the commitments of the lenders under our senior ABL facility will terminate, on May 27, 2014.
Borrowing base . Loan (and letter of credit) availability under our senior ABL facility is subject to a borrowing base, which at any time is limited to the lesser of: (A) the maximum facility amount (subject to certain adjustments) and (B) (i) up to 85% of eligible accounts receivable; plus (ii) up to the lesser of 70% of eligible inventory or 85% of the appraised net orderly liquidation value of eligible inventory; minus reserves established by the Agent. The accounts receivable portion of the borrowing base is subject to certain formulaic limitations (including concentration limits). The inventory portion of the borrowing base is limited to eligible inventory, as determined by an independent appraisal. The borrowing base is also subject to certain reserves, which are established by the Agent (which may include changes to the advance rates indicated above). Loan availability under our senior ABL facility is apportioned, as follows: $100 million to the U.S. Borrower and $25 million to the Canadian Borrower.
Guarantees; security . The obligations of the U.S. Borrower under our senior ABL facility and cash management arrangements and interest rate, foreign currency or commodity swaps entered into by us, in each case with the lenders and their affiliates, or, collectively, additional ABL secured obligations, are guaranteed on a senior secured basis by us and all of our U.S. subsidiaries (other than CS Automotive LLC), and the obligations of the Canadian Borrower under our senior ABL facility and additional ABL secured obligations of the Canadian Borrower and its Canadian subsidiaries are guaranteed on a senior secured basis by us, all of the Canadian subsidiaries of the Canadian Borrower and all of our U.S. subsidiaries. The U.S. Borrower guarantees the additional ABL secured obligations of its subsidiaries and the Canadian Borrower guarantees the additional ABL secured obligations of its Canadian subsidiaries. The obligations under our senior ABL facility and related guarantees are secured by a first priority lien on all of each Borrowers and each guarantors existing and future personal property consisting of accounts receivable, payment intangibles, inventory, documents, instruments, chattel paper and investment property, certain money, deposit accounts and securities accounts and certain related assets and proceeds of the foregoing.
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Interest . Borrowings under our senior ABL facility bear interest at a rate equal to, at the Borrowers option:
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in the case of borrowings by the U.S. Borrower, LIBOR or the base rate plus , in each case, an applicable margin; or |
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in the case of borrowings by the Canadian Borrower, BA rate, Canadian prime rate or Canadian base rate plus, in each case, an applicable margin. |
The initial applicable margin is 3.5% with respect to the LIBOR or BA-based borrowings and 2.5% with respect to base rate, Canadian prime rate and Canadian base rate borrowings. The applicable margin is subject, in each case, to quarterly performance pricing adjustments commencing six months after the closing date.
Covenants; events of default . Our senior ABL facility includes affirmative and negative covenants that will impose substantial restrictions on our financial and business operations, including its ability to incur and secure debt, make investments, sell assets, pay dividends or make acquisitions. Our senior ABL facility also includes a requirement to maintain a monthly fixed charge coverage ratio of no less than 1.1 to 1.0 when availability under our senior ABL facility is less than specified levels. Our senior ABL facility also contains various events of default that are customary for comparable facilities.
Our current revenue forecast for 2010 is determined from specific platform volume projections consistent with a North American and European light vehicle production estimate of 11.6 million units and 16.9 million units, respectively. Adverse changes to the vehicle production levels could have a negative impact on our future sales, liquidity, results of operations and ability to comply with our debt covenants under our senior ABL facility or any future financing arrangements we enter into. We took significant actions during the second half of 2008 and first quarter of 2009 to reduce our cost base and improve profitability. While we believe the vehicle production and other assumptions within our forecast are reasonable, we have also considered the possibility of even weaker demand. In addition to the potential impact of changes on our sales, our current operating performance and future compliance with the covenants under our senior ABL facility or any future financing arrangements we enter into are dependent upon a number of other external and internal factors, such as changes in raw material costs, changes in foreign currency rates, our ability to execute our cost savings initiatives, our ability to implement and achieve the savings expected by the changes in our operating structure and other factors beyond our control.
Senior notes due 2018
On May 11, 2010, CSA Escrow Corporation, or the escrow issuer, an indirect wholly-owned non-debtor subsidiary of CSA U.S. closed an offering of $450 million aggregate principal amount of our senior notes. Our senior notes were issued in a private placement exempt from registration under the Securities Act of 1933, as amended. A summary of our senior notes is set forth below. Also see Description of Certain IndebtednessSenior Notes due 2018 for more information on our senior notes.
General. Our senior notes were issued pursuant to an indenture dated May 11, 2010 by and between the escrow issuer and the trustee thereunder. Upon satisfaction of the escrow release conditions described above, the escrow issuer was merged with and into CSA U.S., with CSA U.S. as the surviving entity, and upon the consummation of the merger, CSA U.S. assumed all of the obligations of the escrow issuer under our senior notes and the indenture and the guarantees by the guarantors became effective, or the assumption. For purposes of this description, references to the issuer prior to the assumption refer to the escrow issuer and after the assumption refer to CSA U.S.
Guarantees. Our senior notes are guaranteed, jointly and severally, on a senior unsecured basis, by us and all of CSA U.S. wholly-owned domestic restricted subsidiaries, together with the escrow issuer, the obligors. If CSA U.S. or any of its domestic restricted subsidiaries acquires or creates another wholly-owned domestic restricted subsidiary that guarantees certain debt of CSA U.S. or a guarantor, such newly acquired or created subsidiary will also guarantee our senior notes.
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Ranking. Our senior notes and guarantees constitute senior debt of the obligors. They (1) rank equally in right of payment with all of the obligors existing and future senior debt, (2) rank senior in right of payment to all of the obligors existing and future subordinated debt, (3) are effectively subordinated in right of payment to all of the obligors existing and future secured indebtedness and secured obligations to the extent of the value of the collateral securing such indebtedness and obligations and (4) are structurally subordinated to all existing and future indebtedness and other liabilities of the issuers non-guarantor subsidiaries (other than indebtedness and liabilities owed to the issuer or one of its guarantor subsidiaries).
Optional redemption. The issuer has the right to redeem our senior notes at the redemption prices set forth below:
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on and after May 1, 2014, all or a portion of our senior notes may be redeemed at a redemption price of 104.250% of the principal amount thereof if redeemed during the twelve-month period beginning on May 1, 2014, 102.125% of the principal amount thereof if redeemed during the twelve-month period beginning on May 1, 2015, and 100% of the principal amount thereof if redeemed on or after May 1, 2016, plus any accrued an unpaid interest to the redemption date; |
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prior to May 1, 2013, up to 35% of our senior notes issued under the indenture may be redeemed with the proceeds from certain equity offerings at a redemption price of 108.50% of the principal amount thereof, plus any accrued and unpaid interest to the redemption date; and |
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prior to May 1, 2014, all or a portion of our senior notes may be redeemed at a price equal to 100% of the principal amount thereof plus a make-whole premium. |
Change of control. If a change of control occurs, unless CSA U.S. has exercised its right to redeem all of our outstanding senior notes through an optional redemption, each noteholder shall have the right to require that CSA U.S. repurchase such noteholders senior notes at a purchase price in cash equal to 101% of the principal amount on the date of purchase plus accrued and unpaid interest, if any, to the date of purchase, subject to the right of the noteholders of record on the relevant record date to receive interest due on the relevant interest payment date.
Covenants. The indenture limits, among other things, the ability of CSA U.S and its restricted subsidiaries to pay dividends or distributions, repurchase equity, prepay subordinated debt or make certain investments, incur additional debt or issue certain disqualified stock and preferred stock, incur liens, merge or consolidate with another company or sell all or substantially all of its assets, enter into transactions with affiliates and allow to exist certain restrictions on the ability of the subsidiary guarantors to pay dividends or make other payments to CSA U.S., in each case, subject to exclusions and other customary exceptions. In addition, certain of these covenants will not be applicable during any period of time when our senior notes have an investment grade rating. The indenture also contains customary events of default.
EBITDA and Adjusted EBITDA
The credit agreement governing our senior ABL facility requires us to comply with a minimum fixed charge coverage ratio of no less than 1.1 to 1.0 when availability under our senior ABL facility is less than specified levels. The fixed charge coverage ratio measures the ratio of our Adjusted EBITDA to certain fixed charges, including interest expense, over a twelve month period immediately preceding a month in which availability under our senior ABL facility is less than certain specified levels. In addition, the indenture governing our senior notes uses Adjusted EBITDA in the calculation of financial ratios contained in certain covenants. Additionally, in evaluating our business, management considers EBITDA and Adjusted EBITDA as key indicators of our operating performance. Our management also uses EBITDA and Adjusted EBITDA:
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as measures utilized in the calculation of the financial covenants and ratios contained in our financing arrangements; |
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in developing our internal budgets and forecasts; |
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as a significant factor in evaluating our management for compensation purposes, see Management Compensation Discussion and Analysis; |
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in evaluating potential acquisitions; |
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in comparing our current operating results with corresponding historical periods and with the operational performance of other companies in our industry; and |
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in presentations to the members of our board of directors to enable our board to have the same measurement basis of operating performance as is used by management in their assessments of performance and in forecasting and budgeting for our company. |
In addition, we believe EBITDA and Adjusted EBITDA and similar measures are widely used by investors, securities analysts and other interested parties in evaluating our performance. We define Adjusted EBITDA as net income (loss) plus provision for income tax expense (benefit), interest expense, net of interest income, depreciation and amortization or EBITDA, as adjusted for items that management does not consider to be reflective of our core operating performance. These adjustments include restructuring costs, impairment charges, non-cash fair value adjustments, acquisition related costs, professional fees and expenses associated with our reorganization, non-cash stock based compensation and non-cash gains and losses from certain foreign currency transactions and translation.
We calculate EBITDA and Adjusted EBITDA by adjusting net income (loss) to eliminate the impact of a number of items we do not consider indicative of our ongoing operating performance. You are encouraged to evaluate each adjustment and the reasons we consider it appropriate for supplemental analysis. However, EBITDA and Adjusted EBITDA are not financial measurements recognized under U.S. generally accepted accounting principles, or U.S. GAAP, and when analyzing our operating performance, investors should use EBITDA and Adjusted EBITDA in addition to, and not as an alternative for, net income (loss), operating income, or any other performance measure derived in accordance with U.S. GAAP, or as an alternative to cash flow from operating activities as a measure of our liquidity. EBITDA and Adjusted EBITDA have limitations as analytical tools, and they should not be considered in isolation or as substitutes for analysis of our results of operations as reported under U.S. GAAP. These limitations include:
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they do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; |
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they do not reflect changes in, or cash requirements for, our working capital needs; |
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they do not reflect interest expense or cash requirements necessary to service interest or principal payments under our senior notes and senior ABL facility; |
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they do not reflect certain tax payments that may represent a reduction in cash available to us; |
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although depreciation and amortization are non-cash charges, the assets being depreciated or amortized may have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect cash requirements for such replacements; and |
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other companies, including companies in our industry, may calculate these measures differently and, as the number of differences in the way companies calculate these measures increases, the degree of their usefulness as a comparative measure correspondingly decreases. |
In addition, in evaluating Adjusted EBITDA, it should be noted that in the future we may incur expenses similar to the adjustments in the below presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
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The following table provides a reconciliation of EBITDA and Adjusted EBITDA to net income (loss), which is the most directly comparable financial measure presented in accordance with U.S. GAAP:
Historical | |||||||||||||||||||
Year Ended December 31, |
Three Months
Ended March 31, |
||||||||||||||||||
2007 | 2008 | 2009 | 2009 | 2010 | |||||||||||||||
(in millions) | |||||||||||||||||||
Net income (loss) attributable to Cooper-Standard Holdings Inc. |
$ | (151.0 | ) | $ | (121.5 | ) | $ | (356.1 | ) | $ | (55.0 | ) | $ | 3.4 | |||||
Plus: |
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Provision for income tax expense (benefit) |
32.9 | 29.3 | (55.7 | ) | (3.8 | ) | 7.3 | ||||||||||||
Interest expense, net of interest income |
89.6 | 92.9 | 64.3 | 21.1 | 11.8 | ||||||||||||||
Depreciation and amortization |
136.0 | 140.1 | 113.9 | 30.1 | 21.2 | ||||||||||||||
EBITDA |
$ | 107.5 | $ | 140.8 | $ | (233.6 | ) | $ | (7.6 | ) | $ | 43.7 | |||||||
Restructuring |
26.4 | 30.6 | 32.4 | 2.6 | 0.3 | ||||||||||||||
Foreign exchange losses (gains) |
(0.1 | ) | 0.1 | (4.2 | ) | (0.5 | ) | 6.3 | |||||||||||
Net gain on bond repurchase(a) |
| (1.7 | ) | (9.1 | ) | | | ||||||||||||
Inventory write-up(b) |
2.5 | | | | | ||||||||||||||
Impairment(c) |
146.4 | 36.0 | 363.5 | | | ||||||||||||||
Reorganization costs(d) |
| | 25.1 | | 23.3 | ||||||||||||||
Transition and integration costs(e) |
1.5 | 0.5 | | | | ||||||||||||||
Stock compensation expense |
1.5 | (f) | 1.2 | (f) | 1.4 | (f) | | | |||||||||||
Other |
| 2.7 | 1.0 | 1.0 | 0.6 | ||||||||||||||
Adjusted EBITDA |
$ | 285.7 | $ | 210.2 | $ | 176.5 | (4.5 | ) | 74.2 | ||||||||||
(a) | Net gain on purchases of our prepetition senior subordinated notes. |
(b) | Write-ups of inventory to fair value. |
(c) | For the year ended December 31, 2007, impairment included charges related to goodwill of $142.9 million and certain intangibles of $3.5 million. For the year ended December 31, 2008, impairment included charges related to goodwill of $23.1 million, certain intangibles of $3.9 million, fixed assets of $6.4 million and our investment in Guyoung of $2.7 million. For the year ended December 31, 2009, impairment included charges related to goodwill of $157.2 million, certain intangibles of $202.4 million and fixed assets of $3.9 million. |
(d) | Reorganization and bankruptcy-related expenses, including professional fees incurred before our bankruptcy filing in 2009. |
(e) | Transition and integration costs related to the acquisition of MAPS and El Jarudo in 2007 and MAP India in 2008. |
(f) | Compensation expense related to stock options and stock units issued to management. |
Working Capital
Historically, we have not generally experienced difficulties in collecting our accounts receivable, but the dynamics associated with the recent economic downturn have impacted both the amount of our receivables and the stressed ability for our customers to pay within normal terms. Certain government sponsored programs may ease these constraints, but pressure on accounts receivable will continue until vehicle sales and production volumes stabilize. As of March 31, 2010, we had net cash of $265.3 million.
Contractual Obligations
Our contractual cash obligations consist of legal commitments requiring us to make fixed or determinable cash payments, regardless of the contractual requirements of the vendor to provide future goods or services. Except as
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disclosed, the below tables do not include information on our recurring purchase of materials for use in production, as our raw materials purchase contracts typically do not meet this definition because they do not require fixed or minimum quantities.
The filing of the chapter 11 cases constituted an event of default under certain of our debt obligations, including our prepetition senior notes, our prepetition senior subordinated notes and the prepetition credit agreement, amounts under which became automatically and immediately due and payable, subject to an automatic stay of any action to collect, assert or recover a claim against us and the application of applicable bankruptcy law.
In addition to our contractual obligations and commitments set forth in the table above, we have employment arrangements with certain key executives that provide for continuity of management. These arrangements include payments of multiples of annual salary, certain incentives and continuation of benefits upon the occurrence of specified events in a manner that is believed to be consistent with comparable companies.
We also have minimum funding requirements with respect to our pension obligations. We expect to make cash contributions of approximately $14.8 million to our domestic and foreign pension plan asset portfolios in 2010. Our minimum funding requirements after 2010 will depend on several factors, including the investment performance of our retirement plans and prevailing interest rates. Our funding obligations may also be affected by changes in applicable legal requirements. We also have payments due with respect to our postretirement benefit obligations. We do not prefund our postretirement benefit obligations. Rather, payments are made as costs are incurred by covered retirees. We expect other postretirement benefit net payments to be approximately $3.6 million in 2010.
We may be required to make significant cash outlays due to our unrecognized tax benefits. However, due to the uncertainty of the timing of future cash flows associated with our unrecognized tax benefits, we are unable to make reasonably reliable estimates of the period of cash settlement, if any, with the respective taxing authorities. Accordingly, unrecognized tax benefits of $3.2 million as of December 31, 2009 have been excluded from the contractual obligations table below. For further information related to unrecognized tax benefits, see note 13 to our audited annual financial statements.
In addition, excluded from the contractual obligation table are open purchase orders at December 31, 2009 for raw materials and supplies used in the normal course of business, supply contracts with customers, distribution agreements, joint venture agreements and other contracts without express funding requirements.
The following table summarizes our contractual obligations for the next five years and thereafter as of December 31, 2009, but excludes obligations owed under our prepetition senior notes, our prepetition senior subordinated notes and the prepetition credit agreement in the amount of $1.26 billion as of December 31, 2009, which are classified as liabilities subject to compromise on our balance sheet.
Payment Due by Period | |||||||||||||||
Total |
Less than
1 Year |
1-3 Years | 3-5 Years |
More than
5 Years |
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(in millions) | |||||||||||||||
Debt obligations: |
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DIP credit agreement |
$ | 175.0 | $ | 175.0 | $ | | $ | | $ | | |||||
Interest on debt obligations(1) |
7.3 | 7.3 | | | | ||||||||||
Capital lease obligations |
0.8 | 0.7 | 0.1 | | | ||||||||||
Operating lease obligations |
71.5 | 14.5 | 21.8 | 15.2 | 20.0 | ||||||||||
Other obligations(2) |
47.8 | 39.7 | 6.2 | 1.0 | 0.9 | ||||||||||
Total |
$ | 302.4 | $ | 237.2 | $ | 28.1 | $ | 16.2 | $ | 20.9 | |||||
(1) | Interest on debt obligations in the above table excludes accrued and unpaid interest owed under our prepetition senior notes, our prepetition senior subordinated notes and the prepetition credit agreement. |
(2) | Noncancellable purchase order commitments for capital expenditures and other borrowings. |
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The following table summarizes, on a pro forma basis as of March 31, 2010, our minimum payments for long-term debt, including current maturities, and short-term debt for the next five years and thereafter and includes certain of our executory contracts that were assumed in our chapter 11 proceedings.
Payment Due by Period | |||||||||||||||
Total |
Less than
1 Year |
1-3 Years | 3-5 Years |
More than
5 Years |
|||||||||||
(in millions) | |||||||||||||||
Debt obligations(1): |
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Senior ABL facility |
$ | | $ | | $ | | $ | | $ | | |||||
Senior notes |
450.0 | | | | 450.0 | ||||||||||
Interest on debt obligations(2) |
306.0 | 38.2 | 76.5 | 76.5 | 114.8 | ||||||||||
Capital lease obligations |
0.6 | 0.5 | 0.1 | | | ||||||||||
Operating lease obligations |
71.5 | 14.5 | 21.8 | 15.2 | 20.0 | ||||||||||
Other obligations(3) |
47.8 | 39.7 | 6.2 | 1.0 | 0.9 | ||||||||||
Total |
$ | 875.9 | $ | 92.9 | $ | 104.6 | $ | 92.7 | $ | 585.7 |
(1) | This table gives effect to the elimination of all of the debt subject to compromise reflected on our balance sheet as of March 31, 2010 as a result of our emergence from bankruptcy. |
(2) | Interest on debt obligations only includes the interest on our senior notes. The actual amounts of interest expense will ultimately depend on the amount of borrowings and letters of credit outstanding under our senior ABL facility and the interest rates in effect thereunder during each period. |
(3) | Noncancellable purchase order commitments for capital expenditures and other borrowings. |
Raw Materials and Manufactured Components
The principal raw materials for our business include fabricated metal-based components, oil based components, synthetic rubber, carbon black and natural rubber. We manage the procurement of our raw materials to assure supply and to obtain the most favorable pricing. For natural rubber, procurement is managed by buying in advance of production requirements and by buying in the spot market. For other principal materials, procurement arrangements include short-term supply agreements that may contain formula-based pricing based on commodity indices. These arrangements provide quantities needed to satisfy normal manufacturing demands. We believe we have adequate sources for the supply of raw materials and components for our products with suppliers located around the world. We often use offshore suppliers for machined components, metal stampings, castings and other labor-intensive, economically freighted products.
Extreme fluctuations in material pricing have occurred in recent years adding challenges in forecasting. The inability to recover higher than anticipated prices from our customers may impact profitability.
Seasonal Trends
Sales to automotive customers are lowest during the months prior to model changeovers and during assembly plant shutdowns. These typically result in lower sales volumes during July, August and December. However, economic conditions can change normal seasonality trends causing lower demand throughout the year. The impact of model changeovers and plant shutdowns is considerably less in years of lower demand overall.
Restructuring
We continually evaluate alternatives in an effort to align our business with the changing needs of our customers and lower our operating cost. This may include the realignment of our existing manufacturing capacity, facility closures or similar actions. See the notes to our unaudited interim financial statements as of March 31, 2010 for discussion of restructuring activities during the three months ended March 31, 2010.
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We implemented several restructuring initiatives in prior years in connection with the closure of facilities in North America, Europe and Asia. We initiated all of these initiatives prior to December 31, 2007 and continued to execute the closures through the end of 2009. The majority of the costs associated with the closures were incurred shortly after the original implementation. However, we continue to incur costs related principally to the liquidation of the respective facilities. The following table summarizes the 2008 and 2009 activity related to these initiatives:
Employee
Separation Costs |
Other
Exit Costs |
Asset
Impairments |
Total | |||||||||||||
(in thousands) | ||||||||||||||||
Balance at January 1, 2008 |
$ | 8,723 | $ | 4,752 | $ | | $ | 13,475 | ||||||||
Expense incurred |
2,209 | 4,780 | 4,687 | 11,676 | ||||||||||||
Cash payments |
(8,822 | ) | (8,792 | ) | 165 | (17,449 | ) | |||||||||
Utilization of reserve |
| | (4,852 | ) | (4,852 | ) | ||||||||||
Balance at December 31, 2008 |
$ | 2,110 | $ | 740 | $ | | $ | 2,850 | ||||||||
Expense incurred |
(517 | ) | 3,298 | 1,089 | 3,870 | |||||||||||
Cash payments |
(1,593 | ) | (3,800 | ) | | (5,393 | ) | |||||||||
Utilization of reserve |
| | (1,089 | ) | (1,089 | ) | ||||||||||
Balance at December 31, 2009 |
$ | | $ | 238 | $ | | $ | 238 | ||||||||
2008 initiatives
In July 2008, we implemented a restructuring action and announced the closure of two manufacturing facilities, one located in Australia and the other in Germany. Both closures are a result of changes in market demands and volume reductions and were substantially completed in 2009. The estimated total cost of this initiative is approximately $21.1 million. The following table summarizes the activity for this initiative during the years ended December 31, 2008 and December 31, 2009:
Employee
Separation Costs |
Other
Exit Costs |
Asset
Impairments |
Total | |||||||||||||
(in thousands) | ||||||||||||||||
Balance at January 1, 2008 |
$ | | $ | | $ | | $ | | ||||||||
Expense incurred |
14,455 | 149 | 3,282 | 17,886 | ||||||||||||
Cash payments |
(995 | ) | (149 | ) | | (1,144 | ) | |||||||||
Utilization of reserve |
| | (3,282 | ) | (3,282 | ) | ||||||||||
Balance at December 31, 2008 |
$ | 13,460 | $ | | $ | | $ | 13,460 | ||||||||
Expense incurred |
562 | 2,557 | 118 | 3,237 | ||||||||||||
Cash payments |
(12,579 | ) | (2,322 | ) | | (14,901 | ) | |||||||||
Utilization of reserve |
| | (118 | ) | (118 | ) | ||||||||||
Balance at December 31, 2009 |
$ | 1,443 | $ | 235 | $ | | $ | 1,678 | ||||||||
As a result of this initiative, a pension plan curtailment gain of $0.8 million was recognized as a reduction to restructuring expense during the fourth quarter of 2009.
In 2008, we initiated the closing of a European facility and the idling of a Canadian facility. During the year ended December 31, 2009, we recorded other exit costs of $0.5 million and asset impairments of $0.1 million in connection with this initiative.
Reorganization-Product Line Operating Group Discontinuation Initiative. During 2008, we commenced the initial phase of a reorganization ultimately involving the discontinuation of our global product line operating divisions, formerly called the Body & Chassis Systems division (which included the body sealing and AVS
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product lines) and the Fluid Systems division, and the establishment of a new operating structure organized on the basis of geographic regions. The estimated cost of this initial phase is approximately $7.8 million. The following table summarizes the activity for this initiative during the years ended December 31, 2008 and December 31, 2009:
Employee
Separation Costs |
Other
Exit Costs |
Asset
Impairments |
Total | |||||||||||
(in thousands) | ||||||||||||||
Balance at January 1, 2008 |
$ | | $ | | $ | | $ | | ||||||
Expense incurred |
7,670 | | | 7,670 | ||||||||||
Cash payments |
(3,741 | ) | | | (3,741 | ) | ||||||||
Utilization of reserve |
| | | | ||||||||||
Balance at December 31, 2008 |
$ | 3,929 | $ | | $ | | $ | 3,929 | ||||||
Expense incurred |
134 | | | 134 | ||||||||||
Cash payments |
(3,405 | ) | | | (3,405 | ) | ||||||||
Balance at December 31, 2009 |
$ | 658 | $ | | $ | | $ | 658 | ||||||
2009 initiatives
In the first quarter of 2009, we initiated the final phase of the reorganization of our operating structure, formally discontinuing our product line operating divisions and putting into place the new operating divisions based on geographic regions. The estimated total cost of this initiative is $18.7 million. The following table summarizes the activity for this initiative during the year ended December 31, 2009:
Employee
Separation Costs |
Other
Exit Costs |
Asset
Impairments |
Total | ||||||||||||
(in thousands) | |||||||||||||||
Balance at January 1, 2009 |
$ | | $ | | $ | | $ | | |||||||
Expense incurred |
18,570 | 86 | | 18,656 | |||||||||||
Cash payments |
(11,457 | ) | (86 | ) | | (11,543 | ) | ||||||||
Balance at December 31, 2009 |
$ | 7,113 | $ | | $ | | $ | 7,113 | |||||||
As a result of this initiative, a curtailment gain related to other postretirement benefits of $3.4 million was recognized as a reduction to restructuring expense during the fourth quarter of 2009.
We also initiated several other initiatives during 2009. These initiatives relate to the reorganization or closure of operating facilities in South America, Europe and Asia Pacific. The estimated total cost associated with these actions amount to $19.3 million. The following table summarizes the activity for these initiatives during the year ended December 31, 2009:
Employee
Separation Costs |
Other
Exit Costs |
Asset
Impairments |
Total | ||||||||||||
(in thousands) | |||||||||||||||
Balance at January 1, 2009 |
$ | | $ | | $ | | $ | | |||||||
Expense incurred |
9,864 | 368 | | 10,232 | |||||||||||
Cash payments |
(5,649 | ) | (312 | ) | | (5,961 | ) | ||||||||
Utilization of reserve |
| | | | |||||||||||
Balance at December 31, 2009 |
$ | 4,215 | $ | 56 | $ | | $ | 4,271 | |||||||
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We expect the reorganization of our operating structure and the other 2009 initiatives to be substantially completed by the end of 2010.
Critical Accounting Policies and Estimates
Our accounting policies are more fully described in note 2 to our audited annual financial statements. Application of these accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates and judgments on historical experience and on other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that of our significant accounting policies, the following may involve a higher degree of judgment or estimation than other accounting policies.
Reorganization
As a result of filing for chapter 11 bankruptcy, we adopted ASC 852 on August 3, 2009. ASC 852, is applicable to companies in chapter 11 of the Bankruptcy Code and generally does not change the manner in which financial statements are prepared. However, among other disclosures, it does require that the financial statements for periods subsequent to the filing of the chapter 11 petition distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Revenues, expenses, realized gains and losses and provisions for losses that can be directly associated with the reorganization and restructuring of the business must be reported separately as reorganization items in the statements of operations. The balance sheet must distinguish prepetition liabilities subject to compromise from both those prepetition liabilities that are not subject to compromise and from post-petition liabilities. Liabilities that may be affected by a plan of reorganization must be reported at the amounts expected to be allowed, even if they may be settled for lesser amounts. In addition, reorganization items must be disclosed separately in the statement of cash flows. We have segregated those items as outlined above for all reporting periods subsequent to such date.
Pre-production costs related to long-term supply arrangements
Costs for molds, dies and other tools owned by us to produce products under long-term supply arrangements are recorded at cost in property, plant and equipment and amortized over the lesser of three years or the term of the related supply agreement. The amount capitalized was $10.9 million and $9.3 million at December 31, 2008 and 2009, respectively. Costs incurred during the engineering and design phase of customer-owned tooling projects are expensed as incurred unless a contractual arrangement for reimbursement by the customer exists. Reimbursable tooling costs included in other assets was $3.8 million and $2.6 million at December 31, 2008 and 2009, respectively. Development costs for tools owned by the customer that meet the requirements of ASC Topic 340, Other Assets and Deferred Costs, are recorded in accounts receivable in the accompanying combined balance sheets if considered a receivable in the next twelve months. At December 31, 2008 and 2009, $77.8 million and $65.4 million, respectively, were included in accounts receivable for customer-owned tooling of which $32.8 million and $40.5 million, respectively, was not yet invoiced to the customer.
Goodwill
Goodwill is not amortized but is tested annually for impairment. We evaluate each reporting units fair value versus its carrying value annually or more frequently if events or changes in circumstances indicate that the carrying value may exceed the fair value of the reporting unit. Estimated fair values are based on the cash flows projected in the reporting units strategic plans and long-range planning forecasts discounted at a risk-adjusted rate of return. We assess the reasonableness of these estimated fair values using market based multiples of comparable companies. If the carrying value exceeds the fair value, an impairment loss is measured and recognized. Goodwill fair value measurements are classified within Level 3 of the fair value hierarchy, which are generally determined using unobservable inputs.
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During the second quarter of 2009, several events occurred that indicated potential impairment of our goodwill. Such events included: (a) the chapter 11 bankruptcy of both Chrysler and GM and unplanned plant shut-downs by both GM and Chrysler; (b) continued product volume risk and negative product mix changes; (c) the commencement of negotiations with our pre-reorganization affiliate shareholders, senior secured lenders, and bondholders to recapitalize our long term debt and equity; (d) our recognition as the second quarter progressed that there was an increasing likelihood that we would breach our financial covenants under the prepetition credit agreement; and (e) our decision to defer the June 15, 2009 interest payment on our prepetition senior notes and our prepetition senior subordinated notes pending the outcome of our quarterly financial results, an analysis of whether we would meet our financial covenants for the past quarter and negotiations with our various constituencies. As a result of the combination of the above factors, we significantly reduced our second quarter projections.
Other significant assumptions used in the discounted cash flow model include discount rate, terminal value growth rate, future capital expenditures and changes in future working capital requirements. These assumptions were not modified significantly as part of the interim goodwill impairment assessment. The significant decrease in the financial projections resulted in an enterprise value significantly lower than the amount computed in connection with the prior year annual impairment assessment. This significant decrease in enterprise value results in the carrying value of assets at all of our reporting units being greater than the related reporting units fair value. As a result, we recorded goodwill impairment charges of $93.6 million in our North America reporting unit, $39.6 million in our Europe reporting unit, $22.6 million in our South America reporting unit and $1.4 million in our Asia Pacific reporting unit during the second quarter of 2009. Changes in the factors noted above could impact the valuation of our remaining goodwill and other intangibles.
While we believe our estimates of fair value are reasonable based upon current information and assumptions about future results, changes in our businesses, the markets for our products, the economic environment and numerous other factors could significantly alter our fair value estimates and result in future impairment of recorded goodwill in the North American reporting unit. An adjustment to the financial projections or other assumptions used to value the North American reporting unit would have had a direct impact on the amount of goodwill impairment recognized during the second quarter and the amount of goodwill remaining on the December 31, 2009 balance sheet.
Long-lived assets
We monitor our long-lived assets for impairment indicators on an ongoing basis in accordance with ASC Topic 360, Property, Plant, and Equipment. If impairment indicators exist, we perform the required analysis by comparing the undiscounted cash flows expected to be generated from the long-lived assets to the related net book values. If the net book value exceeds the undiscounted cash flows, an impairment loss is measured and recognized. An impairment loss is measured as the difference between the net book value and the fair value of the long-lived assets. Fair value is estimated based upon either discounted cash flow analyses or estimated salvage values. Cash flows are estimated using internal budgets based on recent sales data, independent automotive production volume estimates and customer commitments, as well as assumptions related to discount rates. Change in economic or operating conditions impacting these estimates and assumptions could result in the impairment of long-lived assets.
As a result of our testing performed in accordance with ASC 360 we recorded asset and definite lived intangible asset impairment charges of $3.8 million and $202.4 million, respectively. Of the $3.8 million of asset impairment charges, $1.1 million was recorded in our North America segment and $2.7 million was recorded in our International segment. Of the $202.4 million of definite lived intangible asset impairment charges, $148.1 million was recorded in our North America segment and $54.3 million was recorded in our International segment.
Restructuring-related reserves
Specific accruals have been recorded in connection with restructuring our businesses, as well as the integration of acquired businesses. These accruals include estimates principally related to employee separation costs, the
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closure and/or consolidation of facilities, contractual obligations and the valuation of certain assets. Actual amounts recognized could differ from the original estimates. Restructuring-related reserves are reviewed on a quarterly basis and changes to plans are appropriately recognized when identified. Changes to plans associated with the restructuring of existing businesses are generally recognized as employee separation and plant phaseout costs in the period the change occurs. For additional discussion, please refer to note 6 to our audited annual financial statements.
Revenue recognition and sales commitments
We generally enter into agreements with our customers to produce products at the beginning of a vehicles life. Although such agreements do not generally provide for minimum quantities, once we enter into such agreements, fulfillment of our customers purchasing requirements can be our obligation for an extended period or the entire production life of the vehicle. These agreements generally may be terminated by our customer at any time. Historically, terminations of these agreements have been minimal. In certain limited instances, we may be committed under existing agreements to supply products to our customers at selling prices which are not sufficient to cover the direct cost to produce such products. In such situations, we recognize losses as they are incurred.
We receive blanket purchase orders from many of our customers on an annual basis. Generally, such purchase orders and related documents set forth the annual terms, including pricing, related to a particular vehicle model. Such purchase orders generally do not specify quantities. We recognize revenue based on the pricing terms included in our annual purchase orders as our products are shipped to our customers. As part of certain agreements, we are asked to provide our customers with annual cost reductions. We accrue for such amounts as a reduction of revenue as our products are shipped to our customers. In addition, we generally have ongoing adjustments to our pricing arrangements with our customers based on the related content and cost of our products. Such pricing accruals are adjusted as they are settled with our customers.
Amounts billed to customers related to shipping and handling are included in sales in our consolidated statements of operations. Shipping and handling costs are included in cost of sales in our consolidated statements of operations.
Income taxes
In determining the provision for income taxes for financial statement purposes, we make estimates and judgments which affect our evaluation of the carrying value of our deferred tax assets as well as our calculation of certain tax liabilities. In accordance with ASC Topic 740, Accounting for Income Taxes, we evaluate the carrying value of our deferred tax assets on a quarterly basis. In completing this evaluation, we consider all available positive and negative evidence. Such evidence includes historical operating results, the existence of cumulative losses in the most recent fiscal years, expectations for future pretax operating income, the time period over which our temporary differences will reverse and the implementation of feasible and prudent tax planning strategies. Deferred tax assets are reduced by a valuation allowance if, based on the weight of this evidence, it is more likely than not that all or a portion of the recorded deferred tax assets will not be realized in future periods.
During 2009, due to our recent operating performance in the United States and current industry conditions, we continued to assess, based upon all available evidence, that it was more likely than not that we would not realize our U.S. deferred tax assets. During 2009, our U.S. valuation allowance increased by $33.1 million, primarily related to operating losses incurred in the United States during 2009, offset by reductions in tax attributes resulting from the settlement of the U.S. and Canadian Advanced Pricing Agreement.
At December 31, 2009, deferred tax assets for net operating loss and tax credit carry-forwards of $193.8 million were reduced by a valuation allowance of $146.7 million. These deferred tax assets relate principally to net operating loss carry-forwards in the U.S and our subsidiaries in Australia, Brazil, China, France, Germany, Italy and Spain. They also relate to Special Economic Zone Credits in Poland, U.S foreign tax credits, research and development tax credits, state net operating losses and state tax credits. Some of these can be utilized
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indefinitely, while others expire from 2010 through 2029. We intend to maintain these allowances until it is more likely than not that the deferred tax assets will be realized. Effective January 1, 2009, with the adoption of ASC Topic 805 the benefit of the reversal of the valuation allowances on pre-acquisition contingencies will be included as a component of income tax expense. Adjustments in post-acquisition valuation allowances will be offset to future tax provision.
In addition, the calculation of our tax benefits and liabilities includes uncertainties in the application of complex tax regulations in a multitude of jurisdictions across our global operations. We recognize tax benefits and liabilities based on our estimate of whether, and the extent to which, additional taxes will be due. We adjust these liabilities based on changing facts and circumstances; however, due to the complexity of some of these uncertainties and the impact of any tax audits, the ultimate resolutions may be materially different from our estimated liabilities. For further information related to income taxes, see note 13 to our audited annual financial statements.
Pensions and postretirement benefits other than pensions
Included in our results of operations are significant pension and postretirement benefit costs, which are measured using actuarial valuations. Inherent in these valuations are key assumptions, including assumptions about discount rates and expected returns on plan assets. These assumptions are updated at the beginning of each fiscal year. We are required to consider current market conditions, including changes in interest rates, in making these assumptions. Changes in pension and postretirement benefit costs may occur in the future due to changes in these assumptions. Our net pension and postretirement benefit costs were approximately $14.9 million and $(0.5) million, respectively, during 2009.
To develop the discount rate for each plan, the expected cash flows underlying the plans benefit obligations were discounted using the December 31, 2009 Citigroup Pension Discount Curve to determine a single equivalent rate. To develop our expected return on plan assets, we considered historical long-term asset return experience, the expected investment portfolio mix of plan assets and an estimate of long-term investment returns. To develop our expected portfolio mix of plan assets, we considered the duration of the plan liabilities and gave more weight to equity positions, including both public and private equity investments, than to fixed-income securities. Holding all other assumptions constant, a 1% increase or decrease in the discount rate would have decreased or increased the fiscal 2010 net pension expense by approximately $3.1 million and $2.7 million, respectively. Likewise, a 1% increase or decrease in the expected return on plan assets would have decreased or increased the fiscal 2010 net pension cost by approximately $2.3 million. Decreasing or increasing the discount rate by 1% would have increased or decreased the projected benefit obligations by approximately $54.4 million and $44.6 million, respectively. Aggregate pension net periodic benefit cost is forecasted to be approximately $12.5 million in 2010.
The rate of increase in medical costs assumed for the next five years was held constant with prior years to reflect both actual experience and projected expectations. The health care cost trend rate assumption has a significant effect on the amounts reported. Only certain employees hired are eligible to participate in our subsidized postretirement plan. A 1% change in the assumed health care cost trend rate would have increased or decreased the fiscal 2010 service and interest cost components by $0.3 million and $0.2 million, respectively, and the projected benefit obligations would have increased or decreased by $2.6 million and $2.2 million, respectively. Aggregate other postretirement net periodic benefit cost is forecasted to be approximately $2.3 million in 2010.
The general funding policy is to contribute amounts deductible for U.S. federal income tax purposes or amounts required by local statute.
Derivative financial instruments
We utilize derivative financial instruments to reduce foreign currency exchange, interest rate and commodity price risks. We have established policies and procedures for risk assessment including the assessment of
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counterparty credit risk and the approval, reporting and monitoring of derivative financial instrument activities. On the date the derivative is established, we designate the derivative as either a fair value hedge, a cash flow hedge or a net investment hedge in accordance with our established policy. We do not enter into financial instruments for trading or speculative purposes.
By using derivative instruments to hedge exposures to changes in commodity prices and interest rates, we are exposed to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. When the fair value of a derivative contract is negative, we owe the counterparty and we do not possess credit risk. To mitigate credit risk, it is our policy to execute such instruments with creditworthy banks and not enter into derivatives for speculative purposes.
Use of estimates
The preparation of our consolidated financial statements in conformity with the accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of our consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. During 2009, there were no material changes in the methods or policies used to establish estimates and assumptions. Generally, matters subject to estimation and judgment include amounts related to accounts receivable realization, inventory obsolescence, asset impairments, useful lives of intangible and fixed assets, unsettled pricing discussions with customers and suppliers, restructuring accruals, deferred tax asset valuation allowances and income taxes, pension and other post retirement benefit plan assumptions, accruals related to litigation, warranty and environmental remediation costs and self-insurance accruals. Actual results may differ from estimates provided.
Fair value measurements
We measure certain assets and liabilities at fair value on a non-recurring basis using unobservable inputs (Level 3 input based on the U.S. GAAP fair value hierarchy). For further information on these fair value measurements, see Goodwill, Long-lived assets, Restructuring-related reserves, and Derivative financial instruments above.
Recent Accounting Pronouncements
See note 1 to our unaudited interim financial statements as of March 31, 2010 and note 2 to our audited annual financial statements.
Quantitative and Qualitative Disclosures About Market Risk
We are exposed to fluctuations in interest rates, currency exchange rates and commodity prices. Prior to filing for bankruptcy we had entered into derivative financial instruments to monitor our exposure to these risks, but as a result of the bankruptcy filing all but one of these instruments were dedesignated. We actively monitor our exposure to risk from changes in foreign currency exchange rates and interest rates through the use of derivative financial instruments in accordance with managements guidelines. We do not enter into derivative instruments for trading purposes. See Critical Accounting Policies and EstimatesDerivative financial instruments and note 21 to our audited annual financial statements.
Excluding prepetition debt, as of March 31, 2010, we had $131.5 million of variable rate debt. A 1% increase in the average interest rate would increase future interest expense by approximately $1.3 million per year.
At March 31, 2010 we had one interest rate swap contract outstanding with $7.9 million of notional amount pertaining to EURO denominated debt fixed at 4.14%.
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OUR REORGANIZATION
On August 3, 2009, the debtors filed voluntary petitions for relief under chapter 11 of title 11 of the United States Code, or the Bankruptcy Code, in the United States Bankruptcy Court for the District of Delaware, or the Bankruptcy Court. On August 4, 2009, CSA Canada commenced proceedings seeking relief from its creditors under Canadas Companies Creditors Arrangement Act in the Ontario Superior Court of Justice (Commercial List) in Toronto, Canada, or the Canadian Court. Our subsidiaries and operations outside the United States and Canada were not included in the chapter 11 cases or the Canadian proceedings (other than CSA Canada) and continued to operate in the ordinary course of business.
On March 26, 2010, we filed our plan of reorganization and the corresponding first amended disclosure statement for our plan of reorganization with the Bankruptcy Court. On May 12, 2010, the Bankruptcy Court entered an order confirming our plan of reorganization. The Canadian Court sanctioned CSA Canadas plan of compromise or arrangement on April 16, 2010.
On May 27, 2010, or the effective date, we consummated the reorganization contemplated by our plan of reorganization and emerged from chapter 11.
Following the effective date, our capital structure consisted of the following:
|
Senior ABL facility . A senior secured asset-based revolving credit facility in the aggregate principal amount of $125 million, which contains an uncommitted $25 million accordion facility that will be available at our request if the lenders at the time consent. |
|
8½% senior notes due 2018 . $450 million of senior unsecured notes that bear interest at 8½% per annum and mature on May 1, 2018. |
|
Common stock, 7% preferred stock and warrants . Equity securities comprised of (i) 17,489,693 shares of our common stock, (ii) 1,000,000 shares of our 7% preferred stock, which are initially convertible into 4,290,788 shares of our common stock, and (iii) 2,419,753 warrants to purchase up to an aggregate of 2,419,753 shares of our common stock. |
In addition, on the effective date, we issued to certain officers and key employees (i) 757,896 shares of our common stock as restricted stock, plus an additional 104,075 shares of our common stock as restricted stock that may be reduced subject to realized dilution on the warrants, (ii) 41,666 shares of 7% preferred stock as restricted 7% preferred stock and (iii) 702,509 options to purchase shares of common stock, plus an additional 78,057 options to purchase shares of our common stock that may be reduced subject to realized dilution on the warrants. On the day after the effective date, we issued to certain of our directors and Oak Hill Advisors L.P. and its affiliates, 26,448 shares of our common stock as restricted stock and 58,386 options to purchase shares of our common stock. We also reserved up to 780,566 shares of our common stock for future issuance to our management.
On the effective date, our prepetition equity, debt and certain other obligations were cancelled, terminated and repaid, as applicable, as follows:
|
Our prepetition common stock was cancelled, and no distributions were made to former shareholders. |
|
All outstanding obligations under our prepetition senior notes and prepetition senior subordinated notes were cancelled and the indentures governing these obligations were terminated. |
|
Our prepetition credit agreement and our DIP credit agreement were paid in full. |
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Some market data and other statistical information used throughout this prospectus is based on data available from CSM Worldwide and J.D. Power-LMC, each independent market research firms. Other data is based on our good faith estimates, which are derived from our review of internal surveys, as well as third party sources. Although we believe all of these third party sources are reliable, we have not independently verified the information and cannot guarantee its accuracy and completeness. To the extent that we have been unable to obtain information from third party sources, we have expressed our belief on the basis of our own internal analyses and estimates of our and our competitors products and capabilities. Certain market share, ranking and similar information set forth in this prospectus is based on managements estimates, which are primarily based on reports prepared by industry consultants commissioned by us. Market share information is subject to change, however, and cannot always be verified with complete certainty due to limits on the availability and reliability of raw data, the voluntary nature of the data-gathering process and other limitations and uncertainties inherent in any statistical survey of market share. While we are not aware of any misstatements regarding any market share, ranking and similar information presented herein, the global automotive industry involves risks and uncertainties and industry data is subject to change based on various factors. See Forward-Looking Statements and Risk Factors. In addition, customer preferences can and do change and the definition of the relevant market is a matter of judgment and analysis. As a result, you should be aware that market share, ranking and other similar information set forth in this prospectus, and estimates and beliefs based on such data, may not be reliable.
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The automotive industry is one of the worlds largest and most competitive. Consumer demand for new vehicles largely determines sales and production volumes of global OEMs, and component suppliers rely on high levels of vehicle sales and production to be successful.
The automotive supplier industry is generally characterized by high barriers to entry, significant start-up costs and long-standing customer relationships. The key criteria by which OEMs judge automotive suppliers include price, quality, service, performance, design and engineering capabilities, innovation, timely delivery and, more recently, financial stability. Over the last decade, those suppliers that have been able to achieve manufacturing scale, reduce structural costs, diversify their customer bases and establish a global manufacturing footprint have been successful.
The table below outlines vehicle production forecasts for years 2010 through 2014:
2010 | 2011 | 2012 | 2013 | 2014 | ||||||
(vehicle units in millions) | ||||||||||
Europe |
17.0 | 17.2 | 18.3 | 19.9 | 21.2 | |||||
North America |
11.6 | 12.6 | 13.5 | 14.6 | 15.2 | |||||
Asia |
32.8 | 34.6 | 37.4 | 39.9 | 41.4 |
Source: CSM Worldwide June 2010 Forecast
Among the leading drivers of new vehicle demand is the availability of consumer credit to finance purchases. Beginning in late 2008, turmoil in the global credit markets and the recession in the United States and global economies led to a severe contraction in the availability of consumer credit. As a result, global vehicle sales volumes plummeted, led by severe declines in the mature North American and European markets. During 2009, North American light vehicle industry production declined by approximately 32% from 2008 levels to 8.6 million units, while European light vehicle industry production declined by approximately 20% from 2008 levels to 16.3 million units. The decline was less pronounced in Asia, where volumes were down only 1% from 2008 levels to 26.6 million units. This resilience was largely attributable to the continued expansion of the Chinese and Indian markets, both of which are expected to continue to increase as a share of the global automotive market in the coming years.
The severe decline in vehicle sales and production in 2009 led to major restructuring activity in the industry, particularly in North America. GM and Chrysler reorganized through chapter 11 bankruptcy proceedings and the Detroit 3 undertook other strategic actions, including the divestiture or discontinuance of non-core businesses and brands and the acceleration or broadening of operational and financial restructuring activities. A number of significant automotive suppliers, including us, restructured through chapter 11 bankruptcy proceedings or through other means.
Several significant trends and developments are now contributing to improvement in the automotive supplier industry. These include improved retail vehicle sales and production in North America in the fourth quarter of 2009 and first quarter of 2010, a more positive credit environment, the continued growth of new markets in Asia, particularly China, and increased emphasis on green and other innovative technologies.
Positive North American Sales Trends
U.S. light vehicle sales declined significantly in 2008 and through the first two fiscal quarters of 2009. In 2000, 17.4 million light vehicles were sold in the U.S. In 2004, that number remained at a similar level at 16.9 million units, and in 2007, declined only slightly to 16.1 million units. However, as a result of the unprecedented global economic crisis, these levels declined precipitously with a 5.7 million unit decline, the largest drop off in any two year period in U.S. automotive history, bringing sales to post-World War II levels with 10.4 million units sold in
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2009. Based on monthly seasonally adjusted annual rate, or SAAR, it appears that sales bottomed in September 2009. Since then, monthly SAAR has continued to climb, reversing the trend from the second half of 2008. OEMs have reported positive sales numbers in each of the first two months of 2010, which further supports a turnaround.
In addition to a rebounding economy and greater availability of credit boosting light vehicle sales, the industry is also expected to be buoyed by pent-up demand as consumer confidence regains momentum, the return of leasing options and a pipeline of new products with a focus on fuel efficiency, safety and the latest electronics. Furthermore, in 2009, for the first time since 1945, more vehicles were scrapped than vehicles were sold and over 4.0 million vehicles have been shed from the total U.S. fleet, creating additional demand for replacement vehicles.
Global Light Vehicle Production Projected to Increase
In the face of declining sales figures, automotive OEMs slashed production and idled plants in 2009, resulting in an over 43.0% drop in production as compared to 2007 in North America and an approximate 25.0% drop in Europe. With sales projections rebounding, OEMs need to replenish inventory, and this in turn bodes well for the supplier base. Over the next four years, light vehicle production is expected to increase at a 14.3% compound annual growth rate in North America, 9.4% in the Asia/Pacific region, and 5.1% in Europe. While the production levels reached in 2013 are expected to be lower than pre-crisis levels in North America and Europe, OEMs and suppliers that restructured their cost base to achieve profitability in lower-volume environments are poised to reap significant rewards. Additionally, the global nature of the light vehicle rebound means that OEMs and suppliers with global operations are well positioned to maximize the coming opportunity.
Consumer Preferences Shifting to Small Cars
In 1985, light trucks accounted for only 28% of total U.S. sales volume. However, due to rising gas prices and increased awareness of environmental issues, consumer sentiment has shifted in recent years in favor of cars, specifically smaller B and C segment vehicles. While demand for Ford F-150 and GMT 900 trucks remains strong, as of January 2010 light trucks accounted for only 48% of total sales volume, an inversion of the pre-crisis forecasts.
Electrification/Efficiency
Consumer appeal, stemming from the high prices of conventional fuel and greater awareness of environmental issues, and government regulation are increasing the demand for hybrid electric, or HEVs, and electric vehicles, or EVs. These vehicles offer improved gas mileage and reduced carbon emissions, and may ultimately provide a vehicle alternative that eliminates the need for conventional gasoline engines. Industry experts project that by 2020, almost half of U.S. vehicles will require some form of battery technology to meet new Corporate Average Fuel Economy regulatory standards. The U.S. Government recently announced new national standards to cut emissions and increase gas mileage, mandating that U.S. passenger vehicles and light trucks must average 35.5 miles per gallon by 2016. In addition, governments continue to implement economic incentives related to fuel efficiency. For example, in February 2009, the U.S. government enacted the American Recovery and Reinvestment Act which, among other things, provides for a tax credit of between $2,500 and $7,500 for the purchase of plug-in electric vehicles depending on the battery capacity, and the Department of Energy announced a $300 million grant program to provide funding for cost-shared projects that expand the use of alternate fueled vehicles and advanced technology vehicles, including the installation of after-market equipment necessary to support them.
Similar industry dynamics are creating a demand for new battery technology applications in the heavy-duty transportation market, particularly in buses, trucks and other industrial vehicles. The higher fuel consumption rate of these large vehicles makes the potential fuel cost savings derived from the use of batteries even greater.
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Several government authorities and corporations are evaluating battery technologies for their large fleets of heavy-duty vehicles. For example, the City of London has announced plans to convert its fleet of buses to HEVs, with a goal that by 2012 all new buses entering the fleet will be HEVs.
Industry Sub Sector Overview
Body & chassis systems
Body sealing. Body sealing products protect the interior of a vehicle from weather and road noise or secure glass within the auto framework. Sealing products are generally manufactured with EPDM and thermoplastic elastomers and are found primarily on and around the door, windows, hood and trunk of the automobile. The size of the global body sealing system market is greater than $6 billion. The market is highly competitive and has become more consolidated as suppliers have grown in scale and expanded globally. Trends benefiting sealing suppliers include continued migration toward use of plastic components in weather-sealing applications, as well as increasing penetration of modular sealing systems. Key competitors in this market include Hutchinson (a subsidiary of Total SA), Henniges, SaarGummi and Toyoda Gosei Co. Ltd. Management believes that we are the largest supplier globally of automotive body sealing products.
Anti-Vibration. Anti-Vibration Systems, including engine and body mounts, dampers, isolators and springs, are designed to control and isolate noise and vibration and improve ride and handling. The global AVS market is approximately $8 billion and continues to expand due to consumer demand for quieter and smoother-riding vehicles. Within the AVS market, firms compete on design, engineering, product quality and price. Despite increasing globalization of manufacturing, barriers to entry remain significant as OEMs require significant engineering and technical expertise for AVS products. Key competitors in this market are Contitech, Paulstra (a subsidiary of Total SA) and Trelleborg.
Fluid systems. Automotive fluid products include systems, subsystems and components that direct, control and transport fluids and vapors throughout an automobile. Because of the numerous areas and broad applications within the vehicle that require fluid systems, this market remains fragmented. The aggregate global fluids markets in which we compete are estimated by management to represent annual sales of approximately $7 billion. The primary trend in the overall fluid systems market is the movement toward systems integration as OEMs increasingly desire suppliers that have the engineering and technical capabilities to design and manufacture complete modules and systems. Other factors contributing to growth in demand for fluid handling products include increasing emissions standards, diesel engine adaptation and automotive HVAC penetration. Key competitors in this market include Hutchinson, TI Automotive and Martinrea. Management believes that we are the second largest supplier globally of automotive fluid handling products.
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Our Business
We are a leading manufacturer of body sealing, AVS and fluid handling components, systems, subsystems and modules. Our products are primarily for use in passenger vehicles and light trucks that are manufactured by global automotive original equipment manufacturers and replacement markets.
We design and manufacture our products in each major automotive region of the world in close proximity to our customers through a disciplined and consistent approach to engineering and production. We operate in 66 manufacturing locations and nine design, engineering and administrative locations around the world, including Australia, Belgium, Brazil, Canada, China, Czech Republic, France, Germany, India, Italy, Japan, Korea, Mexico, the Netherlands, Poland, Spain, the United Kingdom and the United States. For the year ended December 31, 2009, we generated approximately 47% of our sales in North America, 40% in Europe, 6% in South America and 7% in Asia/Pacific.
For the year ended December 31, 2009, approximately 80% of our sales were direct to OEMs, including Ford, GM and Chrysler, Fiat, Volkswagen/Audi Group, Renault/Nissan, PSA Peugeot Citroën, Daimler, BMW, Toyota, Volvo, Jaguar/Land Rover and Honda. The remaining 20% of our sales for the year ended December 31, 2009 were primarily to Tier I and Tier II automotive suppliers and non-automotive customers. As of December 31, 2009, our products were found in 17 of the 20 top-selling vehicle models in North America and in 19 of the 20 top-selling vehicle models in Europe.
The following chart illustrates our balance and diversity by providing a breakdown of our $1.9 billion in sales for the year ended December 31, 2009 by geography and customer.
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We conduct substantially all of our activities through our subsidiaries and sell our product lines through two reportable segmentsNorth America and International. The International segment covers Europe, South America and Asia. For the year ended December 31, 2009 and the three months ended March 31, 2010, we had sales of $1.9 billion and $596.3 million and a net loss of $(356.1) million and net income of $3.4 million, respectively. On a pro forma basis, for the year ended December 31, 2009 and the three months ended March 31, 2010, we had sales of $1.9 billion and $596.3 million and a net loss of $(332.4) million and net income of $18.9 million, respectively.
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Our Competitive Strengths
Innovative and high quality products
We believe we have distinguished ourselves in the automotive industry through our engineering and technological capabilities, as evidenced by our development of innovative solutions, including our ESP Thermoplastic Glassruns (body sealing), ride stabilizing hydromounts (AVS) and proprietary plastics-to-aluminum overmolding process (fluid handling). In addition, we believe we have a reputation for outstanding quality within the automotive industry, a factor that has been important to maintaining and expanding our successful relationships with our customers. We have earned numerous awards, including, among others, the DaimlerChrysler Global Supplier Award, GM Supplier of the Year, Fords Silver World Excellence Award and Toyotas Cost Excellence Performance Award.
Operational excellence
We have a proven track record and disciplined approach to operational excellence, which has generated significant cost savings of approximately 4% of sales annually since 2004. We believe we have the ability to generate similar savings in the future due to the flexible nature of our manufacturing capabilities, our highly efficient operations and our ability to leverage economies of scale from the high volumes of products we produce for the worlds top-selling vehicle platforms. We have created a culture of continuous improvement and lean manufacturing in all aspects of our operations. Over the life cycle of each platform, we focus on streamlining manufacturing, increasing automation and reducing material and other costs in an effort to generate additional operational savings. We budget and track operational savings at the facility level, which management regularly reports and reviews.
Strong customer relations and program management
We believe that our customer relationships, program management capabilities, global presence, comprehensive product line, excellence in manufacturing, product innovation and quality assurance combine to provide us with significant competitive advantages. We have proven our ability to expand globally with customers, increase scale in a consolidating industry and be first-to-market with design and engineering innovations.
We have a high level of dedication to customer service, and for each major product launch we dedicate a team of sales representatives, engineers, quality specialists and senior management, who work together to ensure that the product launch is completed on time and consistent with rigorous quality standards. These characteristics have allowed us to remain a leading supplier to Ford and GM while steadily growing our business with European and Asian OEMs. Our capabilities are evidenced by our success in being awarded significant content on our customers top-selling platforms, including the Ford F-Series and GMs GMT900 platform, which includes the Yukon, Tahoe, Sierra and Silverado vehicle models.
Global manufacturing footprint
We have established a global manufacturing footprint that allows us to serve our customers worldwide. Our global manufacturing operations are supported by 66 manufacturing locations and nine design, engineering and administrative locations around the world, including Australia, Belgium, Brazil, Canada, China, Czech Republic, France, Germany, India, Italy, Japan, Korea, Mexico, the Netherlands, Poland, Spain, the United Kingdom and the United States. Since 2004, we have increased our sales outside North America from 30% to 53%, largely reflecting our strategic focus on gaining exposure to high growth Asian markets and from key acquisitions in Europe. As part of our strategy, we operate several successful international joint ventures, which has allowed us to enter into new geographic markets, to acquire new customers and to develop new technologies. Our joint venture partners provide knowledge and insight into local markets and access to local suppliers of raw materials and components. We believe our global manufacturing footprint and proximity to customers provides us with a competitive advantage by allowing us to efficiently transport parts to local customers at a significantly lower cost as many of the parts are difficult to transport across long distances.
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Incumbent position across diverse customer base
In 2009, our products were found in 17 of the 20 top-selling vehicle models in North America and in 19 of the 20 top-selling vehicle models in Europe. As the incumbent supplier to platforms, we have typically participated in the design of their successor platforms, and therefore, we believe we have been afforded a competitive advantage to win the upgrade and the ultimate replacement business. In addition, we believe that our presence on our largest customers highest-volume and most important platforms is a competitive advantage that allows us to further increase our market share, cross-sell our other product lines, fully leverage our lean initiatives, spread our fixed costs over higher volumes and increase our return on capital.
Experienced management team
Our senior management team has extensive experience in the automotive industry and collectively has over 130 years of experience in the industry. Our management team is focused on guiding us through the challenges facing the automotive industry and the changing economic environment through ongoing and continued cost reduction and restructuring initiatives and is intent on continuing to implement our business strategies. For more information on our executive officers, see ManagementDirectors and Executive Officers.
Conservative capital structure
Upon the emergence date, we significantly improved our leverage as compared to historical levels. As part of our plan of reorganization, we extinguished $1,126.7 million of prepetition debt, issued $450 million of our senior notes, and entered into our $125 million senior ABL facility. At the emergence date, we had $479.3 million of outstanding indebtedness, consisting of our senior notes and $29.3 million in other debt of certain of our foreign subsidiaries. Our senior ABL facility is subject to borrowing base limitations, and we had approximately $34.3 million of letters of credit outstanding but not drawn under our senior ABL facility on the emergence date. For the year ended December 31, 2009 and the three months ended March 31, 2010, we had a net loss of $(356.1) million and net income of $3.4 million, respectively. On a pro forma basis, for the year ended December 31, 2009 and the three months ended March 31, 2010, we had a net loss of $(332.4) million and net income of $18.9 million, respectively. We believe our emergence date capital structure is a conservative and stable structure.
Our Business Strategy
Continue optimization of our business and cost structure
We seek to optimize our business and cost structure so that we are appropriately configured in the rapidly changing environment in the automotive industry, with an emphasis on reducing our overall cost structure and making our manufacturing operations more efficient. Our primary areas of focus are:
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Identifying and implementing lean manufacturing initiatives . Our lean manufacturing initiatives focus on optimizing manufacturing by eliminating waste, controlling cost and enhancing productivity. Lean manufacturing initiatives have been implemented at each of our manufacturing and design facilities and continue to be an important element in our disciplined approach to operational excellence. |
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Relocating operations to lower-cost countries . We are supplementing our Western European operations with Central and Eastern European facilities where there are lower operating costs and to more closely match our customers footprints for more efficient transport of parts. In addition, we have expanded our operations in China, India and Mexico. |
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Consolidating facilities to reduce our cost structure . Our optimization efforts are designed to streamline our global operations and include taking advantage of opportunities to reduce our overall cost structure by consolidating and closing facilities. For example, in the second half of 2009, we closed two manufacturing facilities, one located in Ohio and another located in Germany, and in March 2010, we announced the closure of our manufacturing facility in Spain. We will continue to take a disciplined approach to evaluating opportunities that would improve our efficiency, profitability and cost structure. |
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Maintaining flexibility in all areas of our operations . Our operational capital needs are generally lower than many in our industry and a major portion of our manufacturing machinery is movable from job-to-job, providing us flexibility in adapting to market changes and serving customers worldwide. |
Further developing technologies
We will draw on our technical expertise to provide customers with innovative solutions. Our engineers combine product design with a broad understanding of material options for enhanced vehicle performance. We believe our reputation for successful innovation in product design and material usage is the reason our customers consult us early in the development and design process of their next generation vehicles.
Recent innovations that highlight our ability to combine materials and product design expertise can be found in the following products:
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Safe Seal . Safe Seal is a body sealing product featuring sensors built into the seal capable of reversing power windows, doors and partitions to prevent injury. |
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Our new generation Hydro Body Mount . Our new generation Hydro Body Mount features patented Inertia-track design, combining plastic, metal and rubber to provide superior damping in the driver compartment for improved ride. |
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Direct Injection Fuel Rail . Direct Injection Fuel Rails draw upon our innovative welding processes and understanding of metal dynamics to create high pressure capability for highly advanced direct injection engines, improving fuel economy and performance. |
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Stratlink . Utilizing our internal material engineering capabilities, we have developed a rubber compound that performs equally with externally sourced compounds, which will significantly reduce cost. |
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PlastiCool . PlastiCool is a low cost, low weight, high temperature alternative to metal and rubber hose currently used in transmission cooling that offers a more robust joint design, improving quality and potentially reducing warranty costs. Additionally, because the material is smaller than current alternatives, it allows for greater design flexibility. |
Continued emphasis on fuel efficient, global and high volume vehicles
We believe that by focusing on fuel efficient, global and high volume vehicles, we will be able to solidify and expand our global leadership position.
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Fuel efficient . With the recent shift in customer preferences toward light weight, fuel efficient vehicles, we intend to target small car, hybrid and alternative powertrains and increase the content we provide to these platforms. We believe that furthering our position in the small car and hybrid market and alternative powertrains will allow us to increase market share, create greater economies of scale and provide more opportunities to partner with customers. |
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Global . Our global presence makes us one of the select few manufacturers of products in our product line areas who can take advantage of the many business opportunities that are becoming available worldwide as a result of the OEMs expanding emphasis on global platforms. Examples of successful global platforms we supply are the redesigned Ford Fiesta and GMs Buick LaCrosse. |
China, India and South America will continue to be regions of emphasis as their light vehicle market is projected to grow substantially as their economies continue to develop. In China, we are developing a substantial manufacturing and marketing presence to serve local OEMs, and we intend to follow our customers as they target other high growth developing markets.
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High volume . While smaller cars and crossover vehicles have grown in popularity, certain large car and truck platforms continue to be in demand and remain important to our business. For example, the Ford F-150 and GMs GMT 900 platform (the Silverado, Sierra, Tahoe and Yukon nameplates) continue to be popular models for which we supply a broad range of our product offerings, including body sealing systems, anti-vibration systems and fuel, brake, emissions and thermal management components. |
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Through our extensive product portfolio, innovative solutions and broad global capabilities, we expect to continue winning new business across all major regions and automakers.
Developing systems solutions and other value-added products
We believe that significant opportunities exist to grow by providing complete subsystems, modules and assemblies. As a leader in design, engineering and technical capabilities, we are able to focus on improving products, developing new technologies and implementing more efficient processes in each of our product lines. Our body sealing products are visible to vehicle passengers and can enhance the vehicles aesthetic appeal, in addition to creating a barrier to wind, precipitation, dust and noise. Our AVS products are an important contributor to vehicle quality, significantly improving ride and handling. Our fluid handling modules and subsystems are designed to increase functionality and decrease costs to the OEM, which can be the deciding factor in winning new business.
Selectively pursuing complementary acquisitions and alliances
We intend to continue to selectively pursue complementary acquisitions and joint ventures to enhance our customer base, geographic penetration, scale and technology. Consolidation is an industry trend and is encouraged by the OEMs desire for fewer supplier relationships. We believe we have a strong platform for growth through acquisitions based on our past integration successes, experienced management team, global presence and operational excellence. In addition, we believe joint ventures allow us to penetrate new markets with less relative risk and capital investment. We currently operate through several successful joint ventures, including those with Nishikawa Rubber Company, Zhejiang Saiyang Seal Products Co., Ltd., Guyoung Technology Co. Ltd., Hubei Jingda Precision Steel Tube Industry Co., Ltd., or Jingda, Shanghai Automotive Industry Corporation, or SAIC, and Toyoda Gosei Co., Ltd., or Toyoda Gosei.
Developing business in non-automotive markets
While the automotive industry will continue to be our core business, we supply other industries with products using our expertise and material compounding capabilities. For example, we supply parts to customers in the technical rubber business and develop and produce synthetic rubber products for a variety of industry applications, including aircraft flooring, commercial flooring, insulating sheets for power stations, non-slip step coverings, rubber for appliances and construction applications. In our technical rubber business we fabricate products from a wide variety of elastomer compounds and can custom fit many applications.
Corporate History and Business Developments
Cooper-Standard Holdings Inc. was formed and capitalized in 2004 as a Delaware corporation and began operating on December 23, 2004, when it acquired the automotive segment of Cooper Tire & Rubber Company, or the 2004 acquisition. Cooper-Standard Holdings Inc. operates the business primarily through its principal operating subsidiary, Cooper-Standard Automotive Inc.
In February 2006, we acquired fifteen fluid handling systems operations in North America, Europe and China, or, collectively, FHS, from ITT Industries, Inc. In August 2007, we acquired MAPS from Automotive Sealing Systems S.A. We completed a related acquisition of MAP India in December 2007. In addition to the FHS and MAPS acquisitions, we acquired a hose manufacturing operation in Mexico from the Gates Corporation and a fuel rail operation in Mexico from Automotive Component Holdings, LLC, in 2005 and 2007, respectively. For additional information on our acquisitions, see note 5 to our audited annual financial statements.
From the time of the 2004 acquisition until March 2009, we operated our businesses through global operating divisions organized on a product-line basis. In March 2009, in response to a severe decline in worldwide automotive production that began in the second half of 2008, we announced the implementation of a
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comprehensive plan involving the discontinuation of our global product line operating divisions, formerly called the Body & Chassis Systems division and the Fluid Systems division, and the establishment of an operating structure organized on the basis of geographic regions. We now operate from two divisions, North America and International (covering Europe, South America and Asia). The new operating structure has allowed us to maintain our full portfolio of global products and provide unified customer contact points, while better managing our operating costs and resources. This plan resulted in a reduction in our worldwide salaried workforce by approximately 20%.
As part of the plan, our reporting segments changed to reflect the new operating structure. Segment information concerning sales to external customers, intersegment sales, segment profit, depreciation and amortization expense, capital expenditures and segment total assets for the last three fiscal years and the three month period ended March 31, 2010, respectively, is set forth in note 20 to our audited annual financial statements and note 13 to our unaudited consolidated financial statements, respectively, and Managements Discussion and Analysis of Financial Condition and Results of OperationsSegment Results of Operations for the Year Ended December 31, 2009 and Managements Discussion and Analysis of Financial Condition and Results of OperationsSegment Results of Operations for the Three Month Period Ended March 31, 2010.
In addition to the measures associated with the reorganization of our operating units, we have implemented a number of restructuring initiatives in recent years, including the closure of facilities in North America, Europe and Asia. For information on these restructuring initiatives, see note 6 to our audited annual financial statements and Managements Discussion and Analysis of Financial Condition and Results of OperationsRestructuring.
Products
We supply a diverse range of products on a global basis to a broad group of customers across a wide range of vehicles. Our principal product lines are body and chassis products and fluid handling products. For the years ended December 31, 2008 and 2009, and the three months ended March 31, 2010, body and chassis products accounted for 66%, 65% and 65%, respectively, of our sales, and fluid handling products accounted for 34%, 35% and 35%, respectively, of our sales. The top ten vehicle platforms we supply accounted for approximately 28% of our sales in 2008, 32% of our sales in 2009 and 34% of our sales for the three months ended March 31, 2010. Our principal product lines are described below.
Product Lines |
Solutions |
Products & Modules |
Market Position* | |||
Body & Chassis: |
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Body Sealing |
Protect vehicle interiors from weather, dust and noise intrusion | Extruded rubber and thermoplastic sealing, weather strip assemblies and encapsulated glass products | #1 globally | |||
Anti-Vibration |
Control and isolate noise and vibration in the vehicle to improve ride and handling | Engine and body mounts, dampers, isolators, springs, stamped or cast metal products and rubber products | #3 North America | |||
Fluid Handling |
Control, sense, measure and deliver fluids and vapors throughout the vehicle | Pumps, tubes and hoses, connectors and valves (individually and in systems and subsystems) | #2 globally |
* | Market positions are managements estimates, which are based on reports prepared by industry consultants commissioned by us in 2008. See Market and Industry Data. |
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Body & chassis products
We are a leading global supplier of automotive body sealing and AVS products. Body sealing products protect vehicle interiors from weather, dust and noise intrusion. AVS products isolate and reduce noise and vibration to improve ride and handling. Body sealing and AVS products lead to a better driving experience for all occupants. For the years ended December 31, 2008 and 2009 and the three months ended March 31, 2010, we generated approximately 66%, 65% and 65%, respectively, of total corporate revenue from the sale of body and chassis products (before corporate eliminations).
Body sealing
Based on third party analysis, we are the leading global supplier of body sealing products to the automotive industry. We are known throughout the industry to be a leader in providing innovative design and manufacturing solutions for complex automotive designs.
Our body sealing products are comprised of ethylene propylene diene M-class rubber, or EPDM-synthetic rubber, and thermoplastic elastomers, or TPE. The typical production process involves mixing of rubber compounds, extrusion (supported with metal and woven wire carriers or unsupported), cutting, notching, forming, injection molding and assembly.
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Below is a description of our primary sealing products:
Product Category |
Description |
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Dynamic seals |
Designed and used for areas of the vehicle in which a gap exists between the vehicle body and movable closures. The seals function to isolate cockpit occupants and engine components from exterior climate conditions such as wind noise and water, providing the occupants with an improved vehicle experience.
Door seals : Sectional seal design that fits the door structure and body cabin to seal rain dust, and noise from the occupants of vehicles.
Body seals : Secondary seal used to provide further noise and aesthetic coverage of welt flanges on the vehicle body.
Hood seals : Located on body flanges in the engine compartment protecting against water and dust penetration while also reducing engine and road noise in the vehicle cabin during high speed travel.
Trunk lid and lift gate seals : Located on body flanges in the truck or lift gate compartment offering protection against water and dust penetration.
Lower door seals/rocker seals : Offers protection in the rocker area against water and dust penetration. Reduces loud road noise entering the cabin during high speed driving.
Sunroof seals : Creates a narrow sealing space and minimize resistance for the sunroof. |
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Static seals |
Designed for stationary areas of the vehicle body. The seals function to isolate cockpit occupants and engine components from exterior climate conditions such as wind noise and water for improved vehicle experience.
Belt line seal : Provides protection against water, dust and noise for driver and passenger door moveable glass. |
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Glass run assembly : Enables the movable door glass and door to form one surface, improving glass movement and sealing the vehicle cabin from the exterior environment.
Quarter window trim/glass encapsulation : Integral pillar moldings and decorative plastic or metal corner trims seal fixed quarter side glass windows.
Appliqués : Also referred to as greenhouse moldings, these seals act as an aesthetic covering for A, B and C pillars. |
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Convertible seals |
Sealing materials that combine compressibility with superior design for use on a convertible vehicle soft top weather sealing application. |
Chassis
Based on third party analysis, we are one of the leading suppliers of AVS products in North America. We are known in North America for utilizing our advanced development and testing of AVS products and subsystems to provide innovative solutions.
Our AVS products include components manufactured with various types of rubbernatural rubber, butyl or EPDM in combination with stamped steel, aluminum or cast iron sub-components. Additionally, we supply brackets that are manufactured from stamped steel, aluminum or cast iron as individual final products. The typical production process for a rubber and metal product involves mixing of rubber compounds, metal preparation (cleaning and primer application), injection molding of the rubber and metals, final assembly and testing as required based on specific products.
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Below is a description of our primary chassis products:
Fluid handling products
We are one of the leading global integrators of fluid subsystems and components that control, sense and deliver fluids and vapors in motor vehicles. We believe we are the second largest global provider of fluid handling system products manufactured in our industry. We offer an extensive product portfolio and are positioned to serve our diverse customer base around the world. Utilizing our core competencies in thermal management, emissions management and fuel delivery systems, we create the highest value for our global customers by engineering unique solutions that anticipate and exceed their needs through Design For Six Sigma, seamless launches, lean enterprise principles and key strategic alliances. For the years ended December 31, 2008 and 2009 and the three months ended March 31, 2010, we generated approximately 34%, 35% and 35% of total corporate revenue from the sale of fluid handling products (before corporate eliminations).
We support the green technology trend as our customers expand towards hybrids and alternative powertrains required to meet future fuel efficiency demands. We provide thermal management solutions that enhance hybrid and electric vehicle powertrain cooling systems and offer bio-fuel compatible materials for alternative fuel vehicles. Our products support improved fuel economy initiatives with light weight, high performance plastic and aluminum materials that reduce weight and offer an improved value equation. We specialize in complete fuel system integration encompassing products from the fuel rail to the fuel tank lines. We support reduced emissions through the control of flow and temperature of exhaust gas.
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Our fluid handling products are principally found in four major vehicle systems: thermal management; fuel and brake; emissions management; and power management. Below is a description of our primary fluid handling products:
Product Category |
Description |
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Thermal Management |
Direct, control and transport oil, coolant, water and other fluids throughout the vehicle | |||
Engine oil cooling subsystems with over molded connections | Transmission oil cooling subsystems | |||
Engine oil cooler tube and hose assemblies | Transmission oil cooler tube and hose assemblies | |||
Engine oil cooling quick connects | Engine oil level indicator tube assemblies | |||
Electro/mechanical water valves and pumps | Integrated thermostats and plastic housings | |||
Coolant subsystems | Bypass valves | |||
Radiator and heater hoses | Auxiliary oil coolers | |||
Fuel & Brake |
Direct, control and transport fuel, brake fluid and vapors throughout the vehicle | |||
Fuel supply and return lines | Flexible brake lines | |||
Fuel/Vapor quick connects | Vacuum brake hoses | |||
Fuel/Vapor lines | ||||
Emissions Management |
Direct, control and transmit emission vapors and fluids throughout the vehicle | |||
Fully integrated exhaust gas recirculation modules | Exhaust gas recirculation valves | |||
EGR coolers and bypass coolers | DPF lines | |||
Exhaust gas recirculation tube assemblies | Secondary air tubes | |||
Power Management |
Direct, control and transmit power management fluids throughout the vehicle | |||
High pressure roof lines | Power steering pressure and return lines | |||
Hydraulic clutch lines | Air bag tubes |
Supplies and Raw Materials
Raw material prices have fluctuated greatly in recent years. We have implemented strategies with both our suppliers and our customers to help manage spikes in raw material prices. These actions include material substitutions, use of hedging and leveraging our global buy. Global optimization also includes using benchmarks and selective sourcing from low cost regions. We have also made process improvements to ensure the most efficient use of materials through scrap reduction, as well as standardization of material specification to maximize leverage over a higher volume purchase.
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The primary raw materials for our business include fabricated metal-based components, synthetic rubber, carbon black and natural rubber.
Patents and Trademarks
We believe one of our competitive advantages is our application of technological innovation to customer challenges. We hold over 500 patents in key product technologies, such as Daylight Opening Modules, Engineered Stretched Plastics, Low Fuel Permeation Nylon Tubing and Quick Connect Fluid Couplings, as well as core process methods, such as molding, joining and coating. Our patents are grouped into two major categories, products, which relate to specific product invention claims for products which can be produced, and processes, which relate to specific manufacturing processes that are used for producing products. The vast majority of our patents fall within the products category. We consider these patents to be of value and seek to protect our rights throughout the world against infringement. While in the aggregate these patents are important to our business, we do not believe that the loss or termination of any one of them would materially affect us. We continue to seek patent protection for our new products. Additionally, we develop significant technologies that we treat as trade secrets and choose not to disclose to the public through the patent process, but they nonetheless provide significant competitive advantage and contribute to our global leadership position in various markets.
We also have technology sharing and licensing agreements with various third parties, including with Nishikawa Rubber Company, one of our joint venture partners in body sealing products. We have mutual agreements with Nishikawa Rubber Company for sales, marketing and engineering services on certain body sealing products we sell and have maintained a relationship for more than 20 years. Under those agreements, each party pays for services provided by the other and royalties on certain products for which the other party provides design or development services.
We own or have licensed several trademarks that are registered in many countries, enabling us to protect and market our products worldwide. Key trademarks include StanPro ® (aftermarket trim seals), Safe Seal (obstacle detection sensors) and Stratlink (proprietary TPV polymer).
Seasonality
Historically, sales to automotive customers are lowest during the months prior to model changeovers and during assembly plant shutdowns. However, economic conditions and consumer demand may change the traditional seasonality of the industry as lower production may prevail without the impact of seasonality. Historically, model changeover periods have typically resulted in lower sales volumes during July, August and December. During these periods of lower sales volumes, profit performance is lower but working capital improves due to continuing collection of accounts receivable.
Competition
We believe that the principal competitive factors in our industry are price, quality, service, performance, design and engineering capabilities, innovation and timely delivery. We believe that our capabilities in these core competencies are integral to our position as a market leader in each of our product lines. Our body and chassis products compete with Toyoda Gosei, Trelleborg, Tokai, Vibracoustic, Paulstra, Hutchinson, Henniges, Meteor, SaarGummi and Standard Profil, among others. Our fluid handling products compete with TI Automotive, Martinrea, Hutchinson, Conti-Tech and Pierburg Gustav Wahler, along with numerous smaller companies in this competitive market.
Customers
We are a leading supplier to the Detroit 3 in each of our product categories and are increasing our presence with European and Asian OEMs. During the year ended December 31, 2009, approximately 34.8%, 15.5%, 8.1%, 7.4% and 5.5% of our sales were of product on platforms produced by Ford, GM, Fiat, Volkswagen/Audi and
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Chrysler, respectively. Our other major customers include OEMs such as Renault/Nissan, PSA Peugeot Citroën, BMW, Daimler and various Indian and Chinese OEMs. We also sell products to Visteon/ACH, Toyota, Porsche and, through NISCO, Honda. Our business with any given customer is typically split among several contracts for different parts on a number of platforms.
Backlog
Our OEM sales are generally based upon purchase orders issued by the OEMs and as such we do not have a backlog of orders at any point in time. Once selected to supply products for a particular platform, we typically supply those products for the platform life, which is normally six to eight years, although there is no guarantee that this will occur. In addition, when we are the incumbent supplier to a given platform, we believe we have an advantage in winning the redesign or replacement platform.
Research and Development
We operate nine design, engineering and administration facilities throughout the world and employ approximately 500 research and development personnel, some of whom reside at our customers facilities. We utilize Design for Six Sigma and other methodologies that emphasize manufacturability and quality. We are aggressively pursuing innovations that assist in resource conservation with particular attention to developing materials that are lighter weight and can be recycled. Our development teams are also working closely with our customers to design and deliver thermal management solutions for cooling electric motors and batteries for new hybrids. We also devote considerable research and development resources into AVS, resulting in high value, state-of-the-art solutions for our customers. These activities are applied not only in our AVS product lines, but also in body sealing (noise transmission isolation and abatement via vehicle windows and doors), fuel delivery systems (isolation of fuel injectors on fuel rails) and thermal management (noise and vibration free coolant pumps and valves). We spend significantly each year to maintain and enhance our technical centers, enabling us to quickly and effectively respond to customer demands. We spent $77.2 million, $81.9 million and $62.9 million in 2007, 2008 and 2009, respectively, on research and development.
Joint Ventures and Strategic Alliances
Joint ventures represent an important part of our business, both operationally and strategically. We have used joint ventures to enter into new geographic markets such as China, Korea and India to acquire new customers and to develop new technologies. In entering new geographic markets, teaming with a local partner can reduce capital investment by leveraging pre-existing infrastructure. In addition, local partners in these markets can provide knowledge and insight into local practices and access to local suppliers of raw materials and components. In North America, joint ventures have proven valuable in establishing new relationships with North American manufacturers. For example, we have business with Honda through our NISCO joint venture. In 2005, we acquired a 20% equity interest in and expanded our technical alliance with Guyoung, a Korean supplier of metal stampings, which built a manufacturing facility in Alabama that services Hyundai. In 2006, we finalized two joint venture agreements with Jingda, one of the largest tube manufacturers in China, to expand our presence in that country. As part of the acquisition of the MAPS business in 2007, we acquired a 47.5% equity interest in Shanghai SAIC-Metzeler Sealing Systems Co. Ltd., a joint venture with SAIC, which also owns a 47.5% equity interest, and Shanghai Qinpu Zhaotun Collective Asset Management Company, which owns the remaining 5% equity interest. This joint venture business is the leading manufacturer of automotive sealing products in China. Also, in 2007, we acquired a 74% equity interest in MAP India, a joint venture with Toyoda Gosei Co., Ltd., which owns the remaining 26% equity interest. MAP India is a leading manufacturer of automotive sealing products in India.
Geographic Information
In 2009, we generated approximately 47% of sales in North America, 40% in Europe, 6% in South America and 7% in Asia/Pacific. Approximately 27%, 14%, 11% and 9% of our sales were generated from our United States, German, Mexican and Canadian operations, respectively.
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In 2008, we generated approximately 48% of sales in North America, 42% in Europe, 5% in South America and 5% in Asia/Pacific. Approximately 26%, 17%, 12% and 10% of our sales were generated from our United States, German, Canadian and Mexican operations, respectively.
In 2007, we generated approximately 61% of sales in North America, 31% in Europe, 5% in South America and 3% in Asia/Pacific. Approximately 34%, 15%, 13%
Employees
We maintain good relations with both our union and non-union employees and, in the past ten years, have not experienced any major work stoppages. We renegotiated some of our domestic and international union agreements in 2009 and have several contracts set to expire in the next twelve months. As of March 31, 2010, approximately 34% of our employees were represented by unions and approximately 13% of our employees were union represented employees located in the United States.
As of March 31, 2010, we had approximately 18,400 full-time and temporary employees.
Environmental
We are subject to a broad range of federal, state and local environmental and occupational safety and health laws and regulations in the United States and other countries, including those governing: emissions to air; discharges to water; noise and odor emissions; the generation, handling, storage, transportation, treatment and disposal of waste materials; the cleanup of contaminated properties; and human health and safety. We may incur substantial costs associated with hazardous substance contamination or exposure, including cleanup costs, fines and civil or criminal sanctions, third party property or natural resource damage, personal injury claims or costs to upgrade or replace existing equipment as a result of violations of or liabilities under environmental laws or the failure to maintain or comply with environmental permits required at our locations. In addition, many of our current and former facilities are located on properties with long histories of industrial or commercial operations and some of these properties have been subject to certain environmental investigations and remediation activities. We maintain environmental reserves for certain of these sites, which we believe are adequate. Because some environmental laws (such as the Comprehensive Environmental Response, Compensation and Liability Act and analogous state laws) can impose liability retroactively and regardless of fault on potentially responsible parties for the entire cost of cleanup at currently or formerly owned and operated facilities, as well as sites at which such parties disposed or arranged for disposal of hazardous waste, we could become liable for investigating or remediating contamination at our current or former properties or other properties (including offsite waste disposal locations). We may not always be in complete compliance with all applicable requirements of environmental law or regulation, and we may receive notices of violation or become subject to enforcement actions or incur material costs or liabilities in connection with such requirements. In addition, new environmental requirements or changes to interpretations of existing requirements, or in their enforcement, could have a material adverse effect on our businesses, results of operations, and financial condition. For example, while we are not large emitters of greenhouse gases, laws, regulations and certain regional initiatives under consideration by the U.S. Congress, the U.S. Environmental Protection Agency, and various states, and in effect in certain foreign jurisdictions, could result in increased operating costs to control and monitor such emissions. We have made and will continue to make expenditures to comply with environmental requirements. While our costs to defend and settle claims arising under environmental laws in the past have not been material, such costs
Properties
As of March 31, 2010, our operations were conducted through 75 facilities in 18 countries, of which 66 are manufacturing facilities and nine are used for multiple purposes, including design, engineering and administration. Our corporate headquarters is located in Novi, Michigan. Our manufacturing facilities are located
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in North America, Europe, Asia, South America and Australia. We believe that substantially all of our properties are in good condition and that we have sufficient capacity to meet our current and projected manufacturing and design needs. Our principal owned and leased properties, and the number of facilities in each location with more than one facility are set forth below.
Location |
Principal Products |
Owned/Leased |
||
North America |
||||
United States |
||||
Auburn, Indiana |
Anti-Vibration Systems | Owned | ||
Auburn Hills, Michigan(a) |
Design, engineering and administration | Leased | ||
Bowling Green, Ohio(2) |
Body Sealing and Fluid Handling | Owned | ||
Bremen, Indiana(b) |
Body Sealing | Owned | ||
East Tawas, Michigan |
Fluid Handling | Owned | ||
Fairview, Michigan |
Fluid Handling | Owned | ||
Farmington Hills, Michigan(a) |
Design, engineering and administration | Leased | ||
Gaylord, Michigan |
Body Sealing | Owned | ||
Goldsboro, North Carolina(2) |
Body Sealing | Owned | ||
Leonard, Michigan |
Fluid Handling | Owned | ||
Mt. Sterling, Kentucky |
Fluid Handling | Owned | ||
New Lexington, Ohio |
Fluid Handling | Owned | ||
Novi, Michigan(a) |
Design, engineering and administration | Leased | ||
Oscoda, Michigan |
Fluid Handling | Owned | ||
Spartanburg, South Carolina |
Body Sealing | Owned | ||
Surgoinsville, Tennessee |
Fluid Handling | Leased | ||
Topeka, Indiana(b) |
Body Sealing | Owned | ||
Canada |
||||
Georgetown, Ontario |
Body Sealing | Owned | ||
Glencoe, Ontario |
Fluid Handling | Owned | ||
Mitchell, Ontario |
Anti-Vibration Systems | Owned | ||
Stratford, Ontario(3) |
Body Sealing | Owned | ||
Mexico |
||||
Aguacalientes |
Body Sealing | Leased | ||
Atlacomulco |
Fluid Handling | Owned | ||
Guaymas |
Fluid Handling | Leased | ||
Juarez |
Fluid Handling | Owned | ||
Saltillo |
Fluid Handling | Leased | ||
Torreon(2)(c) |
Fluid Handling | Owned | ||
South America |
||||
Brazil |
||||
Camaçari |
Fluid Handling | Leased | ||
Sao Paulo(a) |
Sales & Administration | Leased | ||
Varginha |
Body Sealing and Fluid Handling | Owned | ||
Europe |
||||
Belgium |
||||
Gent |
Body Sealing | Leased | ||
Czech Republic |
||||
Zdar |
Fluid Handling | Owned |
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Location |
Principal Products |
Owned/Leased |
||
France |
||||
Argenteuil(a) |
Design, engineering and administration | Leased | ||
Baclair |
Body Sealing | Leased | ||
Creutzwald |
Fluid Handling | Owned | ||
Lillebonne |
Body Sealing | Owned | ||
Vitré |
Body Sealing | Owned | ||
Germany |
||||
Grünberg |
Fluid Handling | Leased | ||
Hockenheim |
Fluid Handling | Owned | ||
Lindau |
Body Sealing | Owned | ||
Mannheim |
Body Sealing | Owned | ||
Schelklingen |
Fluid Handling | Owned | ||
Italy |
||||
Battipaglia |
Body Sealing | Owned | ||
Ciriè |
Body Sealing | Owned | ||
Netherlands |
||||
Amsterdam(a) |
Administration | Leased | ||
Poland |
||||
Bielsko-Biala |
Body Sealing | Owned | ||
Dzierzoniow(2) |
Body Sealing | Owned | ||
Myslenice |
Body Sealing | Leased | ||
Piotrkow |
Body Sealing | Owned | ||
Spain |
||||
Getafe(d) |
Fluid Handling | Owned | ||
United Kingdom |
||||
Coventry(a) |
Design, engineering and administration | Leased | ||
Asia Pacific |
||||
Australia |
||||
Adelaide |
Fluid Handling | Owned | ||
China |
||||
Changchun(b) |
Fluid Handling | Leased | ||
Chongqing |
Fluid Handling | Owned | ||
Huai-an(b) |
Body Sealing | Leased | ||
Jingzhou(b) |
Fluid Handling | Owned | ||
Kunshan |
Anti-Vibration, Body Sealing and Fluid Handling | Owned | ||
Panyu(b) |
Body Sealing | Leased | ||
Shanghai(b) |
Body Sealing | Owned | ||
Wuhu |
Body Sealing | Owned | ||
India |
||||
Chennai |
Fluid Handling | Leased | ||
Dharuhera(b) |
Body Sealing | Leased | ||
Ghaziabad(b) |
Body Sealing | Leased | ||
Gurgaon(b) |
Body Sealing | Leased | ||
Pune |
Fluid Handling | Leased | ||
Japan |
||||
Hiroshima(a) |
Design, engineering and administration | Leased | ||
Nagoya(a) |
Design, engineering and administration | Leased | ||
Korea |
||||
Cheong-Ju |
Body Sealing | Owned | ||
Seo-Cheon Gun |
Body Sealing & Fluid Handling | Owned |
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(a) | Denotes non-manufacturing locations, including design, engineering or administrative locations. |
(b) | Denotes joint venture facility. |
(c) | One of the facilities at this location is scheduled to be closed in 2010. |
(d) | Denotes location to be closed in 2010. |
Legal Proceedings
We are periodically involved in claims, litigation and various legal matters that arise in the ordinary course of business. In addition, we conduct and monitor environmental investigations and remedial actions at certain locations. Each of these matters is subject to various uncertainties, and some of these matters may be resolved unfavorably for us. A reserve estimate is established for each matter and updated as additional information becomes available. We do not believe that the ultimate resolution of any of these matters will have a material adverse effect on our business, financial condition or results of operations.
On August 3, 2009, we filed a voluntary petition for relief in the Bankruptcy Court to reorganize under chapter 11 of the Bankruptcy Code. We continued to operate our businesses and owned and managed our properties as a debtor-in-possession under the jurisdiction of the Bankruptcy Court in accordance with the applicable provisions of the Bankruptcy Code until we emerged from protection under chapter 11 of the Bankruptcy Code on May 27, 2010. See Our Reorganization.
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Directors and Executive Officers
Information regarding our directors and executive officers as of the date of this prospectus is set forth below.
Name |
Age |
Position |
||
James S. McElya |
62 | Chairman, Director and Chief Executive Officer | ||
Edward A. Hasler |
60 | President | ||
Allen J. Campbell |
52 | Vice President and Chief Financial Officer | ||
Keith D. Stephenson |
49 | President, International | ||
Michael C. Verwilst |
56 | Vice President, Mergers & Acquisitions | ||
Timothy W. Hefferon |
57 | Vice President, General Counsel and Secretary | ||
Kimberly Dickens |
48 | Vice President, Human Resources | ||
Helen T. Yantz |
49 | Vice President and Corporate Controller | ||
Glenn R. August |
49 | Director | ||
Orlando A. Bustos |
46 | Director | ||
Larry Jutte |
53 | Director | ||
David J. Mastrocola |
49 | Director | ||
Stephen A. Van Oss |
56 | Director | ||
Kenneth L. Way |
70 | Director |
James S. McElya is the Chairman of our board of directors and our Chief Executive Officer, a position he has held since March 2009 and previously held from September 2006 to July 2008. He served as executive Chairman from July 2008 to March 2009. Mr. McElya served as President and Chief Executive Officer from the date of the 2004 acquisition to September 2006. He has been a member of our board of directors since the 2004 acquisition. He was President, Cooper-Standard Automotive and a corporate Vice President of Cooper Tire & Rubber Company from June 2000 until the 2004 acquisition. Mr. McElya has over 33 years of automotive experience. He was previously President of Siebe Automotive Worldwide, a division of Invensys, PLC and spent 22 years with Handy & Harman in various executive management positions, including President, Handy & Harman Automotive, and Corporate Vice President of the parent company. Mr. McElya is the current Chairman of the board of directors of the Motor & Equipment Manufacturers Association and is a past Chairman and current member of the board of directors of the Original Equipment Supplier Association. He is a member of the board of directors of the National Alliance for Accessible Golf.
Edward A. Hasler is our President. Mr. Hasler served as President and Chief Executive Officer from July 2008 to March 2009 and as Vice Chairman and President, North America from March 2009 until May 2010. He served as President and Chief Operating Officer from September 2006 to July 2008. Mr. Hasler was President, Global Sealing Systems from the date of the 2004 acquisition to September 2006. He was the President of the Global Sealing Systems Division and a corporate Vice President of Cooper Tire & Rubber Company from 2003 until the 2004 acquisition. Mr. Hasler was employed from 2000 to 2001 in Germany as Managing Director, Europe for GDX Corporation. Prior to joining GDX, Mr. Hasler had been with Cooper Tire for nearly 15 years. At Cooper Tire, Mr. Hasler held several senior posts including Vice President, Operations; and Vice President, Controller. He has both an MBA and a BS in Business Administration.
Allen J. Campbell is our Vice President and Chief Financial Officer, a position he has held since the 2004 acquisition. He was Vice President, Asian Operations of the Cooper-Standard Automotive division of Cooper Tire & Rubber Company from 2003 until the 2004 acquisition and served as Vice President, Finance of the division from 1999 to 2003. Prior to joining Cooper Tire, Mr. Campbell was with The Dow Chemical Company for 18 years and held executive finance positions for both U.S. and Canadian operations. Mr. Campbell is a certified public accountant and received his MBA in Finance from Xavier University.
Keith D. Stephenson is our President, International, a position he has held since March 2009. He served as President, Global Body & Chassis Systems from June 2007 to March 2009. Mr. Stephenson was Chief
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Development Officer at Boler Company from January 2004 until October 2006. From 1985 to January 2004, he held various senior positions at Hendrickson, a division of Boler Company, including President of International Operations, Senior Vice President of Global Business Operations and President of the Truck Systems Group.
Michael C. Verwilst is our Vice President, Mergers & Acquisitions, a position he has held since March 2009. Previously, Mr. Verwilst served as President, Global Fluid Systems from June 2007 to March 2009. Mr. Verwilst joined the Company in 2003 as the Vice President, Strategic Planning and Business Development. Prior to joining the Company, Mr. Verwilst was a principal with Corporate Improvement Partners from 2001 to 2003. Mr. Verwilst held many executive positions with Federal-Mogul Corporation from 1978 to 2001, including Senior Vice President of Powertrain Systems and Vice President & General Manager of Powertrain SystemsAmericas.
Timothy W. Hefferon is our Vice President, General Counsel and Secretary, a position he has held since the 2004 acquisition. Prior to joining the Company, Mr. Hefferon was with ThyssenKrupp USA Inc. from 1999 to 2004, where he served as Deputy General Counsel and with Federal-Mogul Corporation from 1994 to 1999, where he served as Associate General Counsel. He was a partner from 1985 to 1994 of Hill Lewis, a Detroit-based law firm, where he served on the executive committee. Mr. Hefferon received his law degree from the University of Michigan Law School.
Kimberly Dickens is our Vice President, Human Resources, a position she has held since March of 2008. Prior to joining the Company, Ms. Dickens served as Vice President, Human Resources at Federal Signal Corporation from 2004 to 2008. Previously, Ms. Dickens held numerous plant and divisional human resource positions at Borg Warner Corporation beginning in 1988, ultimately serving as Vice President, Human Resources from 2002 to 2004. Ms. Dickens has a BS in Industrial Health and Safety from Oakland University and an MBA from Lewis University.
Helen T. Yantz is our Vice President and Corporate Controller, a position she has held since January 2005. Previously, Ms. Yantz held the position of Director of Accounting and Assistant Vice President from 2001 to 2005. Prior to joining the Company, Ms. Yantz was Manager of Financial Reporting at Trinity Health Systems from 2000 to 2001. Previously, Ms. Yantz held various positions in finance at CMS Generations Co., a subsidiary of CMS Energy, from 1990 to 2000, ultimately serving as the Director of Accounting. Ms. Yantz is a certified public accountant and has a BS from Arizona State University.
Glenn R. August has been a director since May 2010. Mr. August is President and Senior Partner of Oak Hill Advisors, L.P., an investment management firm he co-founded in 1996. Mr. August was a Managing Partner of the predecessor to Oak Hill Advisors, which he co-founded in 1987. Mr. August previously worked in the mergers and acquisitions department at Morgan Stanley in New York and London. He earned an M.B.A. degree from Harvard Business School, where he was a Baker Scholar, and a B.S. degree from Cornell University. Mr. August currently serves on the board of directors of iStar Financial Inc., the Horace Mann School, The Mount Sinai Childrens Center Foundation and the 92nd Street Y.
Orlando A. Bustos has been a director since May 2010. Mr. Bustos is the Founder and has been the Senior Managing Director of OHorizons LLC since its inception in 2006. He also Chairs and is President of The OHorizons Foundation, which he co-founded in 2009. From 2005 through 2006, Mr. Bustos was the President, International at Saturn Electronics and Engineering. From 2002 through 2005, Mr. Bustos was the Executive Director, GM Global Powertrain Purchasing at General Motors. While at GM Global Powertrain he also served as Business Sector Leader for the Electronics and Controls, Hybrid systems, and Driveline Sectors. From 2003 through 2005 Mr. Bustos served as a director of GMI Diesel Engineering Ltd. in Japan. From 2002 through 2005 he served as a director of Isuzu Motors Polska Sp. z.o.o. in Poland. From 2002 through 2005 he also served as a director of DMAX Ltd. Prior to these positions, Mr. Bustos held a multitude of key leadership positions across regions, functions and business units at General Motors. Mr. Bustos holds an MBA Sloan Fellowship from the Massachusetts Institute of Technology and a B.S. in electrical engineering from Georgia Institute of Technology.
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Larry Jutte has been a director since May 2010. Mr. Jutte previously served as Senior Vice President at Honda of America Manufacturing from 2001 until 2009 and was a member of the board of directors. Prior to that, Mr. Jutte has held various management and engineering positions at Honda since 1985, including vice president and plant manager. Mr. Jutte also serves on the board of directors for The Ohio State University Center for International Business Education and Research as well for the Koenig Equipment Co. In addition to serving on these boards, Mr. Jutte is Managing Member of Auld Technologies LLC since February 2009, and serves as President and COO of Ernie Green Industries Inc since March 2010.
David J. Mastrocola has been a director since May 2010. Mr. Mastrocola also serves as chairman of the governance committee of our board of directors. Mr. Mastrocola was a partner and managing director of Goldman, Sachs & Co., where he worked from 1987 until his retirement in 2008. During that period, Mr. Mastrocola held a number of senior management positions in the Investment Banking Division, including heading or co-heading the corporate finance, mergers/strategic advisory and industrials/natural resources departments. Mr. Mastrocola also served as a member of Goldman, Sachs & Co.s firmwide capital and commitments committees. From 1983 to 1985, Mr. Mastrocola was a senior auditor at Arthur Andersen & Co. He earned a B.S. in Accounting from Boston College and an MBA from Harvard University. Mr. Mastrocola currently serves as a trustee for Save the Children Federation, Inc.
Stephen A. Van Oss has been a director since August 2008. Mr. Van Oss also serves as chairman of the audit committee of our board of directors. Mr. Van Oss is Senior Vice President and Chief Operating Officer for WESCO Distribution Inc., a position he has held since September 2009. From July 2004 to September 2009, Mr. Van Oss served as the Senior Vice President and Chief Financial and Administrative officer for WESCO. From 2000 to 2004, Mr. Van Oss served as Vice President and Chief Financial Officer of WESCO. He served as WESCOs Director, Information Technology from 1997 to 2000 and as its Director, Acquisition Management in 1997. From 1995 to 1996, Mr. Van Oss served as Chief Operating Officer and Chief Financial Officer of Paper Back Recycling of America, Inc. He also held various management positions with Reliance Electric Corporation. Mr. Van Oss is a director of WESCO Distribution, Inc. and is a trustee of Robert Morris University.
Kenneth L. Way has been a director since the 2004 acquisition in December 2004. Mr. Way also serves as chairman of the compensation committee of our board of directors. Mr. Way served as the Chairman of the board of directors from 1988 through 2002 and CEO from 1988 to 2000 of Lear Corporation. Mr. Way had been affiliated with Lear Corporation and its predecessor companies for 37 years in various engineering, manufacturing and general management capacities. Mr. Way is also a director of CMS Energy Corporation.
Board of Directors
On the emergence date, in accordance with our plan of reorganization and our certificate of incorporation, the number of our directors was fixed at seven. In accordance with our plan of reorganization, our initial board, effective as of the emergence date, consists of (i) James S. McElya, our Chairman and Chief Executive Officer, (ii) Glenn R. August, who was nominated by Oak Hill Advisors L.P., on behalf of certain funds and separate accounts that it manages, pursuant to its nomination agreement, (iii) Orlando A. Bustos, who was nominated by Silver Point Capital L.P., on behalf of its affiliates and related funds, pursuant to its nomination agreement, (iv) Larry Jutte, an independent director who was nominated by Capital Research and Management Company, as investment advisor to certain funds it manages, TCW Shared Opportunity Fund IV, L.P., TCW Shared Opportunity Fund IVB, L.P., TCW Shared Opportunity Fund V, L.P., TD High Yield Income Fund and Lord, and Abbett & Co. LLC, as investment manager on behalf of multiple clients, pursuant to their nomination agreement in consultation with Mr. McElya, Korn/Ferry International and the creditors committee appointed in our bankruptcy proceedings, (v) David J. Mastrocola, an independent director who was nominated by Barclays Capital Inc. pursuant to its nomination agreement in consultation with Mr. McElya, Korn/Ferry International and the creditors committee, (vi) Stephen A. Van Oss, an independent director who was selected by us from our preemergence board of directors and (vii) Kenneth L. Way, an independent director who was selected by us from our pre-emergence board of directors. See Certain Relationships and Related Party TransactionsNomination Agreements for a further description of the nomination agreements.
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Committees of the Board of Directors
Our board of directors currently has an audit committee, a compensation committee and a governance committee.
Audit Committee
Our audit committee currently consists of Messrs. Mastrocola, Van Oss and Way. Mr. Van Oss serves as chairman of the committee. The audit committee currently is responsible for: (i) reviewing and discussing with management and our independent auditors our annual audited financial statements and quarterly financial statements and any audit issues and managements response; (ii) reviewing and discussing with management and our independent auditors our financial reporting and accounting standards and principles and significant changes in such standards and principles or their application; (iii) reviewing and discussing with management and our independent auditors our internal system of financial controls and disclosure controls and our risk assessment and management policies and activities; (iv) reviewing and evaluating the independence, qualifications, and performance of our independent auditors; (v) reviewing our legal compliance and ethics programs and investigating matters relating to managements integrity, including adherence to standards of business conduct established in our policies; and (vi) taking such actions as may be required or permitted under applicable law to be taken by an audit committee on behalf of us and our board of directors.
Compensation Committee
Our compensation committee currently consists of Messrs. August, Bustos and Way. Mr. Way serves as chairman of the committee. The compensation committee currently is responsible for: (i) the review and approval of corporate goals, objectives and other criteria relevant to the compensation of the Chief Executive Officer and other executive officers; (ii) the evaluation of the performance of the Chief Executive Officer and other executive officers and the determination and approval of their compensation; (iii) the review and approval of executive compensation programs; (iv) the review of director compensation and director and officer indemnification and insurance matters; (v) the review and approval of contracts and transactions with executive officers; (vi) the review and approval of equity-based compensation plans and awards made pursuant to such plans; (vii) the approval, review and oversight of our employee benefit plans, including the delegation of responsibility for such programs to the executive officers of the Company; and (viii) taking such actions as may be required or permitted under applicable law to be taken by a compensation committee on behalf of us and our board of directors.
Pursuant to certain of the nomination agreements, if a director of the board of directors who was nominated by Silver Point Capital, L.P. or Barclays Capital Inc. or any of their affiliates is designated as a member of the initial compensation (or equivalent) committee, we are required to take all necessary steps to cause the member of the board of directors nominated by Oak Hill Advisors L.P. to be designated as a member of such committee. If a director of the board of directors who was nominated by Oak Hill Advisors L.P. or any of its affiliates is designated as a member of the initial compensation (or equivalent) committee, we have to take all necessary steps to cause either (i) the member of the board of directors nominated by Barclays Capital Inc. or any of its affiliates or (ii) a nominee designated by Silver Point Capital, L.P. or any of its affiliates, to be designated as a member of such committee. Any material decisions or actions of the board of directors compensation (or equivalent) committee shall require the approval of the entire board of directors. Mr. Bustos was nominated to our board of directors by Silver Point Capital, L.P. Mr. August was nominated to our board of directors by Oak Hill Advisors L.P.
Governance Committee
Our governance committee currently consists of Messrs. Jutte, Mastrocola and Van Oss. Mr. Mastrocola serves as chairman of the committee. The governance committee currently is responsible for nominating candidates for our board of directors and assisting our board of directors in discharging its responsibilities relating to its organization, membership and performance and other issues relating to our corporate governance.
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Compensation Committee Interlocks and Insider Participation
Our compensation committee currently consists of Glenn R. August, Orlando A. Bustos and Kenneth L. Way. Mr. August is President and Senior Partner for Oak Hill Advisors, L.P. Funds and accounts managed by Oak Hill Advisors, L.P. are among the Backstop Parties. Mr. Bustos was nominated by Silver Point Capital L.P., on behalf of its affiliates and related funds. Funds and accounts managed by Silver Point Capital L.P. are among the Backstop Parties. See Certain Relationships and Related Party Transactions for a description of the equity commitment agreement, the equity registration rights agreement and the nomination agreements that we entered into with the Backstop Parties. Otherwise, no interlocking relationship exists between our board of directors or compensation committee and the board of directors or compensation committee of any other company.
Director Independence
Because our securities are not listed on any national securities exchange, we are not required to have a majority of, or any, independent directors. However, we have determined that we currently have four directors that we consider to be independent: Messrs. Jutte (governance committee member), Mastrocola (audit committee and governance committee member), Van Oss (audit committee and governance committee member) and Way (audit committee and compensation committee member).
Removal of Directors
Our certificate of incorporation provides that any or all of the members of our board of directors may be removed from office at any time, with or without cause, by the affirmative vote of holders of a majority of the voting power of all then outstanding shares of our capital stock entitled to vote generally in the election of directors, voting together as a single class.
Limitation of Personal Liability
Our certificate of incorporation provides that no current or former member of our board of directors will be personally liable to us or any of our stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted by the DGCL. If the DGCL is amended to authorize further limitation or elimination of the liability of directors, then the liability of a director to us or our stockholders will be limited or eliminated to the fullest extent permitted by the DGCL, as so amended.
Indemnification of Directors and Officers
Our certificate of incorporation contains mandatory indemnification provisions for our current and former directors and officers as described generally below.
We will be obligated to indemnify and hold harmless, to the fullest extent permitted by applicable law, as the same exists or may hereafter be amended, each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, hereinafter referred to as a proceeding, by reason of the fact that he or she is or was a director or officer of the Company or, while a director or officer of the Company, is or was serving at our request as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, hereinafter referred to as a Covered Person, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent, or in any other capacity while serving as a director, officer, employee or agent, against all expense, liability and loss (including, without limitation, attorneys fees, judgments, fines, ERISA excise taxes and penalties and amounts paid in settlement) reasonably incurred or suffered by such Covered Person in connection with such proceeding, and such right to indemnification will continue as to a
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person who has ceased to be a director, officer, employee or agent and will inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except for proceedings to enforce rights to indemnification, we will indemnify a Covered Person in connection with a proceeding (or part thereof) initiated by the Covered Person only if the proceeding (or part thereof) is authorized by the board. The Covered Person will have the right to be paid by us the expenses incurred in defending or otherwise participating in any such proceeding in advance of its final disposition.
In addition, we will be required pursuant to our bylaws to be the indemnitor of first resort (i.e., our obligations to any Covered Person will be primary and any obligation of third party indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by any Covered Person are secondary).
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 SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
Other Matters Concerning Directors and Executive Officers
SEC regulations require us to describe certain legal proceedings, including bankruptcy and insolvency filings involving our directors or executive officers or companies of which a director or executive officer was an executive officer at the time of filing. Each of the executive officers listed above served as an executive officer of the Company at the time we filed for protection under chapter 11 of the Bankruptcy Code in August of 2009. Further, Messrs. Van Oss and Way served as directors of the Company at the time we filed for protection under chapter 11 of the Bankruptcy Code in August of 2009.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics Policy that applies to all directors, officers and employees of the Company and our subsidiaries, including our chief executive officer, our chief financial officer and our controller. The Code of Business Conduct and Ethics Policy is available on our website at www.cooperstandard.com. We will also post on our website any amendment to, or waiver from, a provision of our policies that applies to our chief executive officer, chief financial officer or controller, and that relates to any of the following elements of these policies: honest and ethical conduct; disclosure in reports or documents filed by us with the SEC and in other public communications; compliance with applicable laws, rules and regulations; prompt internal reporting of code violations; and accountability for adherence to the policies.
Compensation Discussion and Analysis
Executive summary
This Compensation Discussion and Analysis describes the key principles and material elements of our compensation policies for the Named Executive Officers of the Company identified below in Executive compensation. Much of what is discussed below, however, applies generally to our executives and is not limited to the Named Executive Officers.
The compensation committee, with the assistance of independent executive compensation consultants, regularly reviews the various elements of our executive compensation program. In reviewing elements of compensation, we have normally placed considerable emphasis on performance-based compensation to ensure executives are compensated for annual and long-term results. Performance-based components of compensation have historically included annual bonuses tied to annual adjusted EBITDA results, long-term incentive plan awards pertaining to three year performance periods, a stock incentive plan and a management stock purchase plan.
In the latter part of 2008 and continuing into 2009, we implemented a number of cost-reduction measures in response to the conditions in the automotive industry and general economy that negatively impacted our financial results and ultimately led to the filing of the chapter 11 cases. These cost-reduction measures included temporary
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reductions in base pay, mandatory vacation without pay, bonus opportunities and benefits applicable to our salaried employees, including the Named Executive Officers, which are described under Processes relating to executive compensationExecutive compensation review and determinations for 2009.
As conditions in the automotive industry and our financial performance improved in the latter months of 2009, the compensation committee discontinued certain of the temporary cost-reduction measures that affected executive compensation. The compensation committee did not authorize new stock options or other awards under our stock incentive plan. Under our plan of reorganization, our common stock was cancelled upon emergence from bankruptcy. Compensatory actions related to emergence from bankruptcy are discussed under Compensation matters following emergence from bankruptcy.
Compensation philosophy and objectives
The objective of our compensation program has been to link executive compensation to our performance in a manner that accomplishes the following:
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enables us to attract and retain a highly qualified executive leadership team; |
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aligns the interests of executives with those of stockholders; and |
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motivates our leadership team to implement our long-term growth strategy while delivering consistently strong financial results. |
The program was designed to reward sustained enterprise value growth through incentives based on the achievement of performance objectives over varying time periods. As detailed below, our incentive programs emphasize specific Company or group-wide objectives over subjective, individual goals. Discretionary features of these programs allow for the recognition of achievements which the objective performance criteria do not fully measure but which further our key strategies. Base salary has been designed, in general, to be near the median of the range applicable to companies deemed comparable to us and performance-based compensation has been designed to provide opportunities above median levels in the industries in we compete for executives.
Processes relating to executive compensation
It is the responsibility of the compensation committee to assist in discharging our board of directors responsibilities relating to the compensation of our directors and executive officers and the oversight of compensation plans, policies and benefit programs. Our human resources executives and professionals support the compensation committee in its work. In evaluating and determining the salary and incentive compensation of our senior leadership team, the compensation committee receives information from our Global Vice President, Human Resources and recommendations from the CEO. The compensation committee as a whole, following discussions with the CEO, meets privately and determines the salary and incentive compensation of the CEO. Executives whose compensation is under consideration are not present during the compensation committees review meetings. The considerations, criteria and procedures applicable to these determinations are discussed under Executive Compensation Components.
Executive compensation review and determinations for 2009. In evaluating and determining the compensation of our executives for 2009, the compensation committee departed from its normal practices due to the severe conditions in the automotive industry and general economy that ultimately led to the filing of the chapter 11 cases in August 2009. In the fourth quarter of 2008 and the first quarter of 2009, we, with the approval of the compensation committee, implemented special cost-reduction measures affecting executive compensation, including the compensation of the Named Executive Officers. These included a temporary 10% reduction in base salary that remained in effect from January 2009 through September 2009; the suspension of our annual bonus plan program applicable to our executive officers for the first half of 2009; mandatory one week unpaid vacation; the suspension of fixed matching contributions under the qualified defined contribution plan applicable to the Named Executive Officers that remained in effect from January 2009 through December 2009 and the freezing of benefit accruals under the qualified defined benefit retirement plans applicable to the Named Executive Officers.
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These actions did not reflect a permanent change in our compensation philosophy or practices, but were taken as temporary measures in response to extraordinary conditions. Early in 2009, the compensation committee had retained Hewitt Associates to assist in conducting a comprehensive review of our executive compensation program including an assessment of the competitiveness of the program as compared to the external marketplace and the recommendation of appropriate changes in the program. During the course of the year, the compensation committee determined that, in light of the extraordinary circumstances and the temporary cost-reduction measures implemented during the year, the program review as initially contemplated should be deferred. The base salaries and cash incentive award target levels applicable to our senior executives that had been established for 2008 were kept in place for 2009 subject to the temporary cost-reduction measures described above and more fully described under Executive Compensation Components. The executive compensation review that resulted in the determination of executive compensation for 2008, and which had the above-mentioned carry-over effect into 2009, is described below under 2008 Executive Compensation Review.
2008 executive compensation review. In evaluating the compensation of our executives for 2008, the compensation committee engaged Towers Perrin to assess the market competitiveness of our executive compensation program at the time with particular focus on total direct compensation, comprised of base salary, annual incentive award opportunities, long-term incentive award opportunities, executive perquisites other than core health and welfare benefits, and executive severance and change-in-control benefits. Towers Perrin compared our programs in these areas with those of two comparator groups: a group of eleven automotive suppliers selected on the basis of annual sales (ranging from $907 million to $12.4 billion, with a median of $5.0 billion) and a group of 50 companies from various industrial segments also selected on the basis of annual sales (ranging from $290 million to $10.7 billion, with a median of $2.7 billion), as follows:
Automotive supplier revenue-based comparator group
American Axle & Mfg |
Eaton Corp |
Navistar International |
||
ArvinMeritor |
Fleetwood Enterprises |
PPG Industries Inc |
||
CLARCOR Inc. |
Hayes-Lemmerz |
Timken Co |
||
Cooper Tire & Rubber |
Ingersoll-Rand Co Ltd |
Broad industrial comparator group
Air Products and Chemicals Inc |
GATX Corp |
OMNOVA Solutions Inc |
||
American Axle & Mfg. |
Harley-Davidson Inc. |
Owens-Illinois Inc. |
||
Arctic Cat Inc. |
Harman International Industries |
Parker-Hannifin Corp |
||
ArvinMeritor Inc |
Harsco Corp |
Plum Creek Timber Co Inc |
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Ball Corp |
Hayes Lemmerz |
Rockwell Automation Inc. |
||
Black & Decker Corp |
HNI Corp |
Smurfit-Stone Container |
||
Brady Corp |
IDEX Corporation |
Sonoco Products Co |
||
Cameron International Corp |
ITT Corp |
Steelcase Inc. |
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Chesapeake Corp |
Kaman Corp |
Sybron |
||
CLARCOR Inc |
Lafarge North America |
Terex Corp |
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Constar International Inc |
Louisiana-Pacific Corp |
Thomas & Betts Corp |
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Cooper Tire & Rubber Co |
MeadWestvaco Corp |
Timken Co (The) |
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Donaldson Co Inc. |
Milacron Inc. |
Toro Co (The) |
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Dresser-Rand Group Inc |
Mine Safety Appliances Co |
Trinity Industries Inc |
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Fleetwood Enterprises Inc. |
Monaco Coach Corp |
USG Corp |
||
Flowserve Corp |
MSC Industrial Direct Co |
Valmont Industries Inc |
||
Fortune Brands Inc. |
Navistar International Corp |
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The compensation committee reviewed the report of Towers Perrin with the CEO and other members of executive management. The compensation committee considered the Towers Perrin report in determining the total compensation of senior management for 2008, but did not target any percentile level among the comparator groups used in the report in determining the appropriate level of each element of compensation for the executive leadership team. The compensation committee also took into account distinctions between our equity-based incentive compensation programs and those offered by many of the companies in the comparator groups arising out of the fact that our common stock was not publicly traded as was the case with many of the comparator group companies. Taking into account the above, the survey data generally reaffirmed that compensation of the executive leadership team as then approved by the compensation committee was in accordance with the our overall compensation strategy at the time.
Executive compensation components
The elements of compensation available to our executives are:
Base salary. Our senior executives are paid a base salary that is determined prior to or at the beginning of each fiscal year or upon changes in roles or positions within the Company. The compensation committee determines the salary of the CEO and, upon the recommendation of the CEO, the salaries of other members of the executive leadership team. The salaries of other executives are determined by the executives to whom they report, upon consultation with the CEO. Our policy is to pay base salaries that are competitive in the markets in which it competes for executives and that take into account the responsibilities and contributions of each executive. The base salary provides executives with a regular stream of income.
As described above under Executive compensation review and determinations for 2009, due to the severe industry and economic conditions at the time, the compensation committee did not make use of new surveys or other competitive benchmarking practices in determining the base salaries of our senior executives for 2009. At the recommendation of senior management, and consistent with actions taken with respect to other of our salaried employees, the compensation committee implemented a temporary 10% reduction in the base salaries of senior executives, including the Named Executive Officers, from the base salary levels in effect for 2008. These temporary reductions were in effect from January 1 through September 30, 2009, at which time the 2008 base salary levels were reinstated due to improved industry conditions and financial results. Mr. Stephensons salary was increased as of December 28, 2009 after further review by the compensation committee at that time, in connection with a market review of his position.
Annual bonus. Prior to or early in each fiscal year, the compensation committee normally determines target annual bonus amounts payable to our senior executives, including the Named Executive Officers, upon the achievement of performance targets established by the compensation committee for the year. The targets are generally set in terms of the adjusted EBITDA of us as a whole or, in some cases, of a particular operating division. Adjusted EBITDA is calculated, in general, as consolidated net income plus the sum of i) consolidated interest expense; ii) consolidated income tax expense; iii) any non-cash charges, losses or expenses; iv) most non-recurring fees, cash charges and other cash expenses; v) non-specified restructuring charges limited to 7.5% of adjusted EBITDA; vi) non-recurring fees, expenses or charges related to professional or financial advisory, financing, underwriting and other similar services related to equity offerings, investments, acquisitions, divestitures or recapitalizations; vii) extraordinary charges or losses; viii) losses related to discontinued operations; ix) losses in respect of business or asset dispositions outside the ordinary course; and x) non-recurring restructuring charges related to the integration of businesses acquired in certain acquisition transactions, subject to certain restrictions. Additional adjustments are sometimes made for extraordinary events upon approval of the compensation committee. Adjusted EBITDA is deemed by us to be an appropriate objective measurement of the financial performance of the Company or a division for that year.
In addition to establishing an adjusted EBITDA performance target, the achievement of which entitles senior executives to bonus payments at the target levels, the compensation committee establishes a threshold performance target, the achievement of which entitles executives to an annual bonus equal to 50% of the target
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bonus amounts. No bonuses are payable if we fails to meet the threshold performance target. In addition, the compensation committee sets a superior performance target, the achievement of which entitles executives to an annual bonus equal to 200% of the target bonus amounts. The superior performance adjusted EBITDA level represents a goal deemed unlikely of achievement at the beginning of the year based on the assumptions underlying the business plan, except upon performance substantially exceeding expectations. Annual bonus payments are determined on a linear basis for adjusted EBITDA attainment above the threshold level but not precisely at the target or superior performance level. In the first quarter following the end of the fiscal year to which the bonus applies, the compensation committee determines whether, and to what extent, the applicable performance targets were achieved based on our financial results for the fiscal year. The compensation committee may take into account special circumstances and adjust applicable performance targets and bonuses. The annual incentive bonus is designed to focus the executive leadership team on the achievement of strong financial performance over a one-year period.
As described above under Processes relating to executive compensationExecutive compensation review and determinations for 2009, due to the severe industry and economic conditions at the time, the compensation committee, at the recommendation of senior management, suspended the annual bonus program applicable to senior executives for the first half of 2009. For the second half of 2009, the compensation committee approved executive bonus opportunities with target amounts set at 50% of the amounts originally established for 2009 prior to the suspension of the program. The compensation committee established the half-year bonus target amount for each member of the executive leadership team based on a percentage of base salary. With respect to the Named Executive Officers, the percentage was 50% for Messrs. McElya and Hasler, and 32.5% for Messrs. Campbell, Stephenson and Verwilst. The compensation committee set adjusted EBITDA performance targets (applicable to the executives as a whole) for the second half of 2009 in accordance with our 2009 business plan applicable to that period, as follows: second-half adjusted EBITDA of $95,220,000 (threshold performance) for a pay-out of 50% of the executives half-year target bonuses; second-half adjusted EBITDA of $105,800,000 (target performance) for a pay-out of 100% of the executives half-year target bonuses; and second-half adjusted EBITDA exceeding $122,000,000 (superior performance) for a maximum pay-out of 200% of the respective executives half-year target bonus.
For the second half of 2009, superior performance was achieved such that each executive received a maximum pay-out of 200% of his half-year target bonus.
Long term incentive compensation. We have a Long Term Incentive Plan, or LTIP, which provides for the granting by the compensation committee of performance-based awards to executive officers covering performance periods of one year or longer. Awards are normally granted in the first quarter of each year; however, interim grants may be made in the case of new hires or promotions. At the time awards are granted, the compensation committee establishes performance targets and a payment scale which determines payout amounts at different levels of performance. After the end of the performance period, the compensation committee determines whether, and to what extent, performance targets have been achieved and the amount of any awards that have been earned. Award amounts are subject to discretionary adjustment by the compensation committee (they may be adjusted downward up to 80% or upward up to 150%). If a participant engages in inimical conduct, meaning an action or omission contrary to our best interest, before payment of an award is made, the payment is subject to forfeit. LTIP awards are designed to focus the executive leadership team on strong, sustained cash generation and have therefore been based on the achievement of operating cash flow objectives for us as a whole, generally over three-year performance periods.
At the time LTIP awards are granted, the compensation committee establishes a target award amount for each executive which represents the amount the executive will receive at the conclusion of the applicable performance period if performance targets are exactly met during the period. Target award amounts are based on the level of responsibility of the executive and other performance-based factors.
LTIP awards have historically been based on the achievement of operating cash generation goals. Based on our business plan, the compensation committee establishes specific operating cash flow targets for us as a whole on an annual basis. The target performance level represents what the compensation committee deems to be good
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operating cash flow performance for the year which is reasonably capable of achievement at a high level of performance on the part of the executive leadership team and our employees, based on the assumptions and business conditions on which our business plan is based. LTIP awards for the three-year performance period ending December 31, 2009 were based on the achievement of operating cash flow targets for the years ending December 2007, 2008 and 2009. The target operating cash flow for 2007 was established at $108,200,000, for 2008 at $179,000,000, and for 2009 at $122,500,000.
At the end of each LTIP performance period, the compensation committee determines the extent to which our mean average operating cash flow performance during the performance period met the mean average of the annual operating cash flow targets established by the compensation committee during the period. Subject to the right of the compensation committee to make adjustments under the plan, LTIP award payouts are determined in accordance with the following:
Achievement Level (Average) |
Payout % of
Target Opportunity |
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Less than 90% of mean target |
0 | % | |
At 90% of mean target |
50 | % | |
Each 1% over 90% |
+5 | % | |
At target |
100 | % | |
Each 1% above target |
+10 | % |
For the three-year performance period ending December 31, 2009, performance was 9.34% above target.
Stock incentive plan. Although the compensation committee of our board of directors was authorized to grant options at any time under the 2004 Cooper-Standard Holdings Inc. Stock Incentive Plan, options have historically not been granted on an annual or other regular or prescribed basis. The tranche of time-based options that vested as of December 23, 2009 was the last tranche of options outstanding under the Stock Incentive Plan subject to time or performance-based vesting. Due to the severe industry and economic conditions that prevailed during the first half of 2009 and the ultimate filing of the chapter 11 cases, the compensation committee determined that it was not appropriate to grant new options during 2009. The options outstanding under the 2004 Cooper-Standard Holdings Inc. Stock Incentive Plan were cancelled upon emergence from bankruptcy.
Management stock purchase plan. We maintain a nonqualified Deferred Compensation Plan which allows eligible executives and directors to defer base pay, bonus payments and long-term incentive pay and have it allocated on a pre-tax basis to various investment alternatives and ultimately distributed to the executive at a designated time in the future. The plan includes a feature referred to as the Management Stock Purchase Plan which provides participants the opportunity to purchase Company stock units with income deferred under the Deferred Compensation Plan at a price based on the fair value of our common stock as determined by the compensation committee. Purchased stock units are matched by us at year-end on a one-for-one basis, subject to an annual aggregate cap for all executives of $1,500,000 worth of matching units or 15,000 matching units, whichever is less. The compensation committee can increase the cap in any year. If the matching units are over-subscribed in a given year, participants receive a pro rata number of matching units based on the amount of stock units the participant purchased that year through deferrals. Matching units vest ratably over a three-year period, and may vest earlier upon a participants death, disability, retirement or termination by us without cause or by the participant for good reason. Matching units also become 100% vested upon the occurrence of a change in control for participants who are employed with us immediately prior to such change in control. Stock units are distributed to participants in the form of actual shares of our common stock, subject to restrictions on transfer, at a time in the future designated by the participant (though at our sole discretion, we may pay purchased units out in cash). A variety of other deemed fixed income and equity investment options are also available under the plan (which mirror the investment options available under the our qualified 401(k) plans), though deferrals allocated to such options are not matched.
The timing and form of future payments are specified in the elections submitted by participants with respect to deferrals made for any plan year. Executives may elect to receive payment beginning either at separation from
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service or at an otherwise specified date (generally at least three years after the year in which the deferrals are made). The form of payment for a given years deferral account can be any of the following: (i) single lump sum; (ii) annual installments for five years; (iii) annual installments for ten years; or (iv) a specified percentage of the account paid as a lump sum, and the remainder paid in either five annual installments or ten annual installments.
The Management Stock Purchase Plan is available to a broader group of executives than those who currently hold options under the Stock Incentive Plan. Due to the filing of the chapter 11 cases, the stock units outstanding under the Management Stock Purchase Plan were cancelled, and we do not currently consider the plan as an important component of its incentive-based compensation program.
Retirement plan benefits. The Named Executive Officers participate in our qualified defined benefit retirement plan, our qualified defined contribution investment savings plan and our nonqualified supplementary benefit plan. Benefits under these plans provide executives with an income source during their retirement years, and reward executives for long service to us. We believe that our retirement plans are generally competitive in the industries in which we compete for executives and assist us in attracting and retaining a high caliber executive leadership team.
This section summarizes the terms of the retirement benefits in effect as of December 31, 2009. In response to the continued economic downturn affecting our industry, we decided in December 2008 to implement a number of cost-reduction measures that became effective in 2009. These measures included a freeze in future accruals under our qualified defined benefit retirement plan effective February 1, 2009 and a suspension of fixed matching contributions under our qualified defined contribution investment savings plan. Our nonqualified supplementary benefit plan continues to accrue benefits but does not make up for benefit accruals that are lost due to the changes in the qualified plans described above. After undertaking the emergency measures described above, we also conducted an overall qualified retirement program design review during the 2009 calendar year and implemented a new qualified retirement program which became effective January 1, 2010, a brief summary of which is provided later in this section under the heading Defined contribution retirement plans.
Defined benefit retirement plans. The Cooper-Standard Automotive Inc. Salaried Retirement Plan, or CSA Retirement Plan, is a defined benefit plan that covers all our non-union employees in the United States, including the Named Executive Officers. As indicated above, a freeze in future accruals under the CSA Retirement Plan became effective on February 1, 2009. However, because the terms of the CSA Retirement Plan are still relevant in the determination of ongoing pension accruals under the Supplementary Benefit Plan (as further described below), a summary of such terms has been retained in this prospectus.
The CSA Retirement Plan is funded by our contributions only. There are two types of benefits under the plan, a cash balance benefit and a final average pay benefit. There are two separate grandfathered final average pay formulas in the plan, but only one of those formulas applies for purposes of the Named Executive Officers whose benefits are governed by final average pay provisions, so that formula is described herein. The final average pay benefit was closed effective January 1, 2002 with respect to any participant who was not at least 40 years of age and had at least 15 years of earned service as of that date.
The cash balance portion of the CSA Retirement Plan states benefits in the form of a hypothetical account established for each participant. Prior to the February 1, 2009 CSA Retirement Plan freeze, cash balance accounts increased by two components: a pay credit equal to a stated percentage of his or her compensation (as defined more specifically below under Determination of benefits under plans) each year, and an earnings credit equal to the interest rate paid on 30-year Treasury bonds times the hypothetical account balance. Effective with the February 1, 2009 freeze, future pay credits are no longer provided under the CSA Retirement Plan, but future interest credits are still provided.
The final average pay benefit portion of the CSA Retirement Plan provides benefits stated as an annuity equal to 1.5% times average compensation (the highest five of the last ten years, as further described below in Determination of benefits under plans) times years of service. Effective with the February 1, 2009 freeze, additional accruals related to service earned and pay received after the freeze are no longer provided under the
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CSA Retirement Plan. This final average pay benefit is payable on an unreduced basis at age 62 or upon attainment of age 55 with 30 years of service.
We maintain the Cooper-Standard Automotive Inc. Nonqualified Supplementary Benefit Plan, or the Supplementary Benefit Plan, for the benefit of certain employees (those who are members of a select group of highly-compensated executive employees, including the Named Executive Officers). The Supplementary Benefit Plan provides for an additional pension benefit that is designed to compensate for any reduced benefits under the CSA Retirement Plan due to limits imposed by the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code. The Supplementary Benefit Plan is also designed to provide Mr. McElya a final average pay benefit as if he were eligible for the benefits described under Final average pay design below. For cash balance participants, the Supplementary Benefit Plan also provides for an enhanced pay credit as further described under the heading Determination of benefits under plans below. The Supplementary Benefit Plan continues to accrue benefits but does not make up for benefit accruals that are lost due to the February 1, 2009 freeze of the CSA Retirement Plan.
Defined contribution retirement plans. The Cooper-Standard Automotive Inc. Investment Savings Plan, or the CSA Savings Plan, is a tax-qualified 401(k) retirement savings plan pursuant to which all U.S. non-union employees, including the Named Executive Officers, may contribute the lesser of up to 50% of Compensation (which includes the same compensation as that described below under Cash balance design, except that retention bonuses are excluded) or the limit prescribed by the Internal Revenue Code (though we impose lower deferral percentage limits on highly-compensated employees). We provide a fixed match of 40% of employee contributions up to 5% of Compensation, with a maximum matching contribution of 2% of Compensation. We may make additional discretionary contributions depending upon our performance. Our contributions are 100% vested after the employee has 3 years of service. Employee contributions are always 100% vested.
As described earlier in this section, in response to the continued economic downturn, we decided to suspend the fixed Company matching contributions from January 1, 2009 through December 31, 2009. A discretionary matching contribution providing a match of 10% of employee contributions up to 5% of Compensation for 2009 (with a maximum discretionary matching contribution of 0.5% of Compensation) was provided after the end of the year. Further, we redesigned our overall qualified retirement program effective January 1, 2010 to create a safe harbor defined-contribution-only offering which improves cost predictability and reduces cost volatility while providing a market competitive program to its employees. The new program provides the same 40% fixed matching on employee contributions of up to 5% of Compensation that was in effect prior to the January 1, 2009 fixed match suspension, and the plan also continues to provide for potential discretionary contributions depending on our performance. An additional non-elective employer contribution of 3% to 5% of Compensation (depending on age plus service with the Company) was also added to the plan to provide a solid foundation for retirement savings and which helps serve to replace future qualified defined benefit plan accruals which are no longer offered under the CSA Retirement Plan.
The Supplementary Benefit Plan also provides for an additional nonqualified employer contribution which (1) makes up for any Company contributions to the CSA Savings Plan that were not permitted to be made due to limitations under the Internal Revenue Code and (2) provides a nonqualified employer contribution which, when combined with the qualified savings plan employer contribution generally, and with respect to 2009, the hypothetical contributions that would have been made had the fixed Company matching contributions not been suspended, provides for a total employer contribution of 6% of Compensation (without regard to qualified plan limits prescribed by the Internal Revenue Code). The Supplementary Benefit Plan continues to accrue benefits but does not make up for fixed matching contribution that were lost due to the fixed match suspension that was in effect under the CSA Savings Plan from January 1, 2009 through December 31, 2009.
Determination of benefits under plans. Benefits under the CSA Retirement Plan and the nonqualified defined benefit portion of the Supplementary Benefit Plan are governed by either a cash balance design or a final average pay design. Although a freeze in future accruals under the CSA Retirement Plan became effective on February 1, 2009, the terms of the CSA Retirement Plan are still relevant in the determination of ongoing pension accruals under the Supplementary Benefit Plan, as further elaborated upon below.
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Cash balance design. Annual pay credits are added to a participants cash balance account at the end of each year, based on the participants compensation for the year and the sum of the participants age and service as of the beginning of that year. Compensation used as the basis for pay credits, or Compensation, includes all compensation reported as wages for federal income tax purposes excluding employer contributions to a plan of deferred compensation, income attributable to stock options (including income attributable to any disqualifying dispositions thereof), director fees, sales awards, relocation bonuses, signing bonuses, lump-sum severance payments, suggestion system awards, tuition reimbursement, payment upon the exercise of stock appreciation rights or in lieu of the exercise of stock options, imputed income (such as, but not limited to, group term life insurance that is reported as taxable income), benefits accruing or payable under nonqualified retirement plans, expatriate income, and other amounts that are either excludable or deductible from income in whole or in part for federal income tax purposes, or that represent payments pursuant to a program of benefits or deferred compensation, whether or not qualified under the Internal Revenue Code. Annual pay credits are provided as follows:
Sum of Age and Years of Service |
CSA Retirement Plan
Applicable Percentage(1) |
Supplementary Benefit Plan
Applicable Percentage(2) |
||||
Up to 35 |
3.0 | % | 6.0 | % | ||
3650 |
4.0 | % | 8.0 | % | ||
5165 |
5.5 | % | 11.0 | % | ||
6680 |
7.5 | % | 15.0 | % | ||
over 80 |
10.0 | % | 20.0 | % |
(1) | Although future pay credits are not provided under the CSA Retirement Plan after the February 1, 2009 freeze date, prior to February 1, 2009, the CSA Retirement Plan provided a pay credit equal to the executives Compensation, subject to qualified plan limitations under the Internal Revenue Code, multiplied by the percentage listed under the CSA Retirement Plan Applicable Percentage heading above. |
(2) | Prior to the February 1, 2009 freeze of the CSA Retirement Plan, the Supplementary Benefit Plan provided a pay credit equal to the difference between (1) the executives Compensation, without regard to qualified plan limitations, multiplied by the percentage listed under the Supplementary Benefit Plan Applicable Percentage heading above, and (2) the pay credit which provided under the CSA Retirement Plan determined in the manner described in footnote 1 above. |
After the February 1, 2009 freeze of the CSA Retirement Plan, the Supplementary Benefit Plan provides a pay credit equal to the difference between (1) the executives Compensation, without regard to qualified plan limitations, multiplied by the percentage listed under the Supplementary Benefit Plan Applicable Percentage heading above, and (2) the hypothetical pay credit which would have been provided under the CSA Retirement Plan had that plan not been frozen, determined in the manner described in footnote 1 above.
Annual interest credits are also added to a participants cash balance account each year. This credit is calculated by multiplying the cash balance account as of the end of the prior year by an interest rate that is equal to the annual yield statistic for 30-year U.S. Treasury securities for the month of October of the prior year.
Benefits fully vest upon 3 years of service, with no benefits vested for less than 3 years of service. Service is measured based on an elapsed time basis from date of hire.
Normal retirement age is age 65 with 5 years of service. The normal retirement benefit is defined as a monthly life annuity amount that is actuarially equivalent to the cash balance account projected to normal retirement age with interest credits. For participants whose prior final average pay accrued benefits were frozen and converted to an opening account balance at January 1, 2002 when the cash balance design was implemented, an additional amount is added to the normal retirement benefit based on the difference between (i) the frozen age 65 accrued benefit at January 1, 2002 and (ii) a hypothetical age 65 life annuity amount that is actuarially equivalent to the January 1, 2002 opening cash balance account projected to normal retirement age with interest credits only.
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Benefits are payable at termination either in the form of a lump sum or an annuity (the default form and time under the nonqualified plan is a lump sum at separation from service). The lump sum is equal to the cash balance account value at the time of distribution (plus an additional amount, if applicable, associated with the procedure described above for those who had an opening account balance established as of January 1, 2002). The immediate annuity payable is the actuarial equivalent of the normal retirement annuity benefit as described above, except in the event of early retirement, as described below.
Eligibility for early retirement is satisfied with attainment of either (i) age 62 with 10 years of service, or (ii) age 55 with 15 years of service. To the extent these age and service conditions are satisfied, the annuity form of benefit available is based on reducing the normal retirement benefit by 0.6% per month up to 36 months, and 0.4% for each additional month up to 84 months, by which age at retirement precedes age 65.
The normal form of annuity is a single life annuity for non-married participants and a reduced joint life annuity with a 50% survivor benefit for married participants. Other optional forms are available on a reduced basis as well.
Final average pay design. The following highlights the basic operation of the final average pay design features of the CSA Retirement Plan and the Supplementary Benefit Plan.
The annual retirement benefit, payable as a life annuity at age 65, is equal to 1.5% multiplied by final average pay multiplied by years of service, where final average pay is determined by taking the average of the highest five calendar years of compensation within the last ten calendar years, excluding the year in which termination occurs. Compensation is determined on the same basis as that applicable to the Cash Balance Design, except lump sum severance and signing bonuses are not excluded. Prior to the February 1, 2009 freeze of the CSA Retirement Plan, benefits associated with pay in excess of qualified plan limitations were provided by the Supplementary Benefit Plan, and benefits associated with pay up to qualified plan limits were provided by the CSA Retirement Plan. After the February 1, 2009 freeze of the CSA Retirement Plan, the Supplementary Benefit Plan still provides only for benefits associated with pay in excess of qualified plan limitations, but no further benefit accruals are provided under the qualified CSA Retirement Plan.
Benefits fully vest upon 3 years of service, with no benefits vested for less than 3 years of service. Service is measured based on an elapsed time basis from date of hire.
Benefits are payable as an annuity at retirement. The normal form of annuity is a single life annuity for non-married participants or a reduced joint life annuity with a 50% survivor benefit for married participants. Other optional forms are available on a reduced basis as well.
Eligibility for early retirement is satisfied with attainment of either (i) age 62 with 10 years of service, or (ii) age 55 with 15 years of service. The annuity form of benefit available is based on reducing the normal retirement benefit by 0.4% per month by which age at retirement precedes age 62. In addition, there is no reduction in any event if a participant has attained age 55 with 30 years of service.
Termination and change in control benefits. Our Named Executive Officers receive certain benefits under their employment agreements with us upon certain termination of employment events, including following a change in control of the Company. These benefits, described in detail under Terms Applicable to Payments Upon Termination of Employment below, are intended to ensure that the executive leadership team is able to objectively evaluate potential change in control transactions by addressing the potential personal impact of such transactions on our executives.
Health benefits. We provides executives with health and welfare benefits under our Health & Well-Being Benefit Plan that is made available generally to its salaried employees. The Health & Well-Being Benefit Plan is a flexible plan which permits participants to choose among various co-pay options and available benefits, including medical, prescription drug, dental, long-term disability and life insurance and other benefits, depending on the needs of the participant and his or her dependents. These benefits help us remain competitive in attracting and retaining a high caliber management team.
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Perquisites. We provide each of our senior executives with a vehicle for business and personal use through our vehicle lease program or through a vehicle allowance. We also reimburse senior executives the cost of tax preparation and financial planning services up to a maximum of $3,000 per year. The compensation committee regards the level of such perquisites to be modest and of benefit to us in attracting and retaining a high caliber management team.
Compensation matters following emergence from bankruptcy. In accordance with our plan of reorganization, the employment agreements and compensatory arrangements have generally been continued. As such, benefit levels and bonus opportunities would remain similar to past practice as described herein. No change in control will be deemed to have occurred under any such arrangements as a result of the transactions consummated pursuant to our plan of reorganization and our emergence from bankruptcy. In addition, the Named Executive Officers received a cash bonus and an equity grant consisting of restricted stock and stock options upon emergence from bankruptcy. Our plan of reorganization provided that the target amount of the cash bonus assumed an emergence date on or after June 1, 2010 through August 2, 2010 and amounts would be increased by 20% in the event of emergence from bankruptcy prior to such date. Target awards were $570,000 for Mr. McElya, $412,500 for Mr. Hasler, $242,000 for Mr. Campbell, $211,750 for Mr. Stephenson and $192,500 for Mr. Verwlist. As emergence occurred prior to June 1, 2010, the named executive officers received the following amounts: $684,000 for Mr. McElya, $495,000 for Mr. Hasler, $290,400 for Mr. Campbell, $254,100 for Mr. Stephenson and $231,000 for Mr. Verwlist.
On the emergence date, we adopted the 2010 Cooper-Standard Holdings Inc. Management Incentive Plan, or the Management Incentive Plan, that was filed with the Bankruptcy Court on May 5, 2010, as part of the supplement to our plan of reorganization. Initial grants were made to key employees on the date of emergence, or the Initial Grant Awards. The total number of shares authorized to be issued under the Management Incentive Plan as the Initial Grant Awards were as follows: (1) 4% of our common stock (or 757,896 shares of common stock, plus, subject to realized dilution on the warrants, an additional 104,075 shares of common stock) to be granted as restricted stock; (2) 4% of the 7% preferred stock (convertible into 178,783 shares of common stock) to be granted as restricted 7% preferred stock; and (3) 3% of the equity (or 702,509 shares of common stock, plus, subject to realized dilution on the warrants, an additional 78,057 shares of common stock) to be granted as stock options. The total number of shares which may be issued under the Management Incentive Plan as Future Grant Awards, to be issued incrementally to officers, employees and directors, is 3% of the equity (or 702,509 shares of common stock, plus, subject to realized dilution on the warrants, 78,057 shares of common stock).
On the date of emergence, the Initial Grant Awards were made to key employees of the Company. All the named executive officers received time-based stock options, time-based restricted stock, and time-based restricted 7% preferred stock, which vest in equal installments on each anniversary of emergence for four years, while the participant remains employed (other than the CEO who did not receive any stock options and whose time-based restricted stock and time-based restricted 7% preferred stock will vest in equal installments over three years). All the named executive officers also received equity awards in respect of warrants, which vest (or restrictions thereon lapse) and become exercisable on the later of the date on which (i) the time-based stock option or restricted stock vests (or restrictions thereon lapse) and becomes exercisable in accordance with its terms or (ii) any or all of the warrants are exercised, in each case in an amount determined based on the number of shares issued upon the exercise of such warrants, which shall be determined for each exercise of a warrant by multiplying the award by the Warrant Factor (as defined below); provided that upon termination of the participants employment prior to full exercise or expiration of the warrants, the award shall vest and become exercisable to the extent that the time-based stock option or time-based restricted stock vested (or restrictions thereon have lapsed) and became exercisable as of the date of such termination in accordance with its terms and in an amount determined by multiplying the award by the Deemed Warrant Factor. Warrant Factor means, at the time of each exercise of warrants, (i) the number of shares actually issued by the Company upon such exercise divided by (ii) the total amount of outstanding warrants. Deemed Warrant Factor means, as of the date of the participants termination of employment, (i) the number of shares that would have been issued by the Company if the warrants outstanding and unexercised as of such date were deemed exercised on a net exercise basis, based on the market value of such shares as of such date, divided by (ii) the total amount of outstanding warrants.
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The unvested outstanding awards are generally canceled by the Company without consideration upon termination of employment, provided that upon termination without Cause, by the participant for Good Reason, or due to the participants death or Disability (generally as such terms are defined in an executives employment agreement if they have one, or else as defined in the Management Incentive Plan), the participant shall be deemed vested as of the date of such termination in any of the equity awards that would have otherwise vested in the calendar year in which such termination occurs.
The initial grant allocations to the named executive officers were as follows:
Restricted
Common Stock |
Restricted
Common Stock in Respect of Warrants |
Restricted 7%
Preferred Stock |
Stock Options |
Stock
Options in Respect of Warrants |
||||||
James S. McElya |
375,940 | 54,075 | 21,534 | 0 | 0 | |||||
Edward Hasler |
61,680 | 9,000 | 3,533 | 110,000 | 13,857 | |||||
Allen J. Campbell |
54,581 | 7,566 | 3,142 | 93,000 | 11,941 | |||||
Keith D. Stephenson |
54,581 | 7,566 | 3,142 | 93,000 | 11,941 | |||||
Michael C. Verwilst |
34,516 | 4,761 | 1,977 | 58,000 | 7,448 |
The stock options were granted with an exercise price equal to the plan of reorganization value of our common stock of $25.52 per share.
Effect of accounting and tax treatment on compensation decisions. In the review and establishment of our compensation programs, we consider the anticipated accounting and tax implications to us and our executives. Section 162(m) of the Internal Revenue Code limits the deductibility of compensation paid to executives in excess of $1,000,000 in a year, other than performance-based compensation meeting certain requirements. The compensation committee considers our anticipated tax treatment for the compensation paid to executives; however, there may be instances where the compensation committee may conclude that it is appropriate to exceed the limitation on deductibility under Section 162(m) to ensure that executive officers are compensated in a manner that is consistent with our overall compensation philosophy and objectives and which the compensation committee believes to be in our best interests.
Executive compensation
Set forth below is information regarding compensation for services to the Company in all capacities of the following executive officers, or the Named Executive Officers, during the year ended December 31, 2009: (i) our Chief Executive Officer; (ii) our Chief Financial Officer; and (iii) the three most highly compensated executive officers other than the Chief Executive Officer and Chief Financial Officer who were serving as executive officers at December 31, 2009.
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Summary compensation table
Name and Principal
|
Year
(b) |
Salary
(c) |
Bonus(5)
(d) |
Stock
Awards(6) (e) |
Option
Awards(7) (f) |
Non-Equity
Incentive Plan Compensation(8) (g) |
Change in
Pension Value and Nonqualified Deferred Compensation Earnings(9) (h) |
All
Other
Compensation (i) |
Total
(j) |
||||||||||||||||||||
James S. McElya,(1) |
2009 | $ | 809,327 | (4) | $ | 0 | $ | 0 | $ | 0 | $ | 1,626,815 | $ | 1,233,312 | $ | 112,303 | (10) | $ | 3,781,757 | (27) | |||||||||
Chairman and Chief Executive Officer |
2008 | $ | 950,000 | $ | 0 | $ | 0 | $ | 0 | $ | 534,098 | $ | 586,959 | $ | 183,673 | (11) | $ | 2,254,730 | (28) | ||||||||||
2007 | $ | 850,000 | $ | 37,500 | $ | 284,093 | $ | 0 | $ | 1,456,393 | $ | 588,022 | $ | 127,282 | (12) | $ | 3,343,290 | (29) | |||||||||||
Edward Hasler,(2) |
2009 | $ | 647,596 | (4) | $ | 0 | $ | 0 | $ | 0 | $ | 1,426,815 | $ | 1,344,965 | $ | 74,494 | (13) | $ | 3,493,870 | (27) | |||||||||
Vice Chairman and President, North America |
2008 | $ | 660,578 | $ | 0 | $ | 0 | $ | 0 | $ | 504,788 | $ | 466,978 | $ | 95,216 | (14) | $ | 1,727,560 | (28) | ||||||||||
2007 | $ | 500,000 | $ | 37,500 | $ | 416,274 | $ | 243,146 | $ | 837,652 | $ | 240,575 | $ | 63,944 | (15) | $ | 2,339,091 | (29) | |||||||||||
Allen J. Campbell, |
2009 | $ | 383,308 | (4) | $ | 0 | $ | 0 | $ | 0 | $ | 672,751 | $ | 117,096 | $ | 50,644 | (16) | $ | 1,223,799 | (27) | |||||||||
Vice President and Chief Financial Officer |
2008 | $ | 440,000 | $ | 0 | $ | 0 | $ | 0 | $ | 309,386 | $ | 66,629 | $ | 71,176 | (17) | $ | 887,191 | (28) | ||||||||||
2007 | $ | 400,000 | $ | 37,500 | $ | 224,267 | $ | 100,578 | $ | 561,597 | $ | 72,013 | $ | 68,825 | (18) | $ | 1,464,780 | (29) | |||||||||||
Keith D. Stephenson |
2009 | $ | 335,394 | (4) | $ | 0 | $ | 0 | $ | 0 | $ | 637,001 | $ | 26,133 | $ | 188,352 | (19) | $ | 1,186,880 | (27) | |||||||||
President, International |
2008 | $ | 385,000 | $ | 0 | $ | 0 | $ | 529,562 | $ | 0 | $ | 35,392 | $ | 37,663 | (20) | $ | 987,617 | (28) | ||||||||||
Michael C. Verwilst,(3) |
2009 | $ | 321,327 | (4) | $ | 0 | $ | 0 | $ | 0 | $ | 637,001 | $ | 70,615 | $ | 35,891 | (21) | $ | 1,064,834 | (27) | |||||||||
Vice President, Mergers & Acquisitions |
2008 | $ | 385,000 | $ | 0 | $ | 0 | $ | 0 | $ | 162,834 | $ | 65,262 | $ | 57,261 | (22) | $ | 670,357 | (28) | ||||||||||
2007 | $ | 325,673 | $ | 37,500 | $ | 175,028 | $ | 95,044 | $ | 400,118 | $ | 61,394 | $ | 43,491 | (23) | $ | 1,138,248 | (29) | |||||||||||
Larry J. Beard, |
2009 | $ | 88,413 | (4) | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 67,758 | $ | 2,379,730 | (24) | $ | 2,535,901 | (27) | |||||||||
Vice President Strategic Planning and Business Development |
2008 | $ | 370,443 | $ | 0 | $ | 0 | $ | 0 | $ | 309,386 | $ | 122,610 | $ | 73,428 | (25) | $ | 875,867 | (28) | ||||||||||
2007 | $ | 365,000 | $ | 37,500 | $ | 210,293 | $ | 0 | $ | 533,433 | $ | 125,665 | $ | 51,185 | (26) | $ | 1,323,076 | (29) |
(1) | Mr. McElya served as executive Chairman from July 1, 2008 through March 25, 2009. As of March 26, 2009, he resumed serving as Chief Executive Officer as well. |
(2) | Mr. Hasler served as President and Chief Executive Officer from July 1, 2008 through March 25, 2009. As of March 26, 2009, he serves as the Vice Chairman and President, North America. In connection with his appointment in mid-2008, his annual base salary was increased to $750,000. |
(3) | Mr. Verwilst served as President, Global Fluid Systems from June 2007 through March 26, 2009. As of March 26, 2009 he resumed serving as Vice President, Mergers and Acquisitions. |
(4) | In response to the downturn in the economy and in the automotive supply industry, we implemented a 10% base pay reduction for all U.S. salaried employees, including the Named Executive Officers. In addition, we retained the equivalent of one weeks worth of base salary from all U.S. salaried employees in exchange for compensatory time off. The impact of these salary reduction measures are reflected in the base salary figures shown in column (c) for the Named Executive Officers. The annual base salaries that would have been in effect absent these reductions are as follows: Mr. McElya, $950,000; Mr. Hasler, $750,000; Mr. Campbell, $440,000; Mr. Stephenson, $385,000 (increased to $425,000 as of December 28, 2009); and Mr. Verwilst, $385,000. Mr. Beards employment ended on March 31, 2009, and his base earnings from January 1, 2009-March 31, 2009 (net of the reductions described above) are also shown in column (c). |
(5) | The amount shown in column (d) represents for each Named Executive Officer a special, discretionary bonus awarded by our board of directors in the years indicated. Incentive cash compensation earned during the fiscal year based on pre-established criteria approved by the compensation committee under our annual incentive bonus program and Long Term Incentive Plan is reported in column (g). |
(6) | The amount shown in column (e) represents the grant date fair value associated with Company matching units under the Management Stock Purchase Plan as determined pursuant to ASC Topic 718. As discussed herein, the value of the matching units is presumed to be $0 at December 31, 2009. Description of the Management Stock Purchase Plan is found under Executive Compensation Components. |
(7) | The amount shown in column (f) represents the grant date fair value of stock option awards granted pursuant to ASC Topic 718. As discussed herein, the value of the stock options was presumed to be $0 at December 31, 2009. |
(8) | The amount shown in column (g) represents: for 2009, the sum of: (i) bonus payments for 2009 under our annual incentive bonus program of, for Mr. McElya, $950,000; for Mr. Hasler, $750,000; for Mr. Campbell, $286,000; for Mr. Stephenson, $250,250; and for Mr. Verwilst, $250,250; and (ii) payments under our Long Term Incentive Plan for the performance period ending December 31, 2009 of, for Mr. McElya, $676,815; for Mr. Hasler, $676,815; for Mr. Campbell, $386,751; for Mr. Stephenson, $386,751; and for Mr. Verwilst, $386,751; and for 2008, the sum of: (i) zero bonus payments for 2008 under our annual incentive bonus program for all Named Executive Officers, and (ii) payments under our Long Term Incentive Plan for the performance period ending December 31, 2008 of, for Mr. McElya, $534,098; for Mr. Hasler, $504,788; for Mr. Campbell, $309,386; for Mr. Verwilst, $162,834; and for Mr. Beard, $309,386 (Mr. Stephenson had not yet been employed long enough to receive a payment under our Long Term Incentive Plan for the performance period ending December 31, 2008); and for 2007, the sum of: (i) bonus payments for 2007 under our annual incentive bonus program of, for Mr. McElya, $1,052,300; for Mr. Hasler, $495,200; for Mr. Campbell, $321,880; for Mr. Stephenson, $175,934; for Mr. Verwilst, $263,137; and for Mr. Beard, $293,716; and (ii) payments under our Long Term Incentive Plan for the performance period ending December 31, 2007 of, for Mr. McElya, $404,093; for Mr. Hasler, $342,452; for Mr. Campbell, $239,717; for Mr. Verwilst, $136,981; and for Mr. Beard, $239,717 (Mr. Stephenson had not yet been employed long enough to receive a payment under our Long Term Incentive Plan for the performance period ending December 31, 2007). |
(9) | The amount shown in column (h) represents for each Named Executive Officer the sum of the aggregate annualized change in the actuarial present value of accumulated benefits under all defined benefit and actuarial pension plans (qualified and non-qualified, including supplemental plans) from the plan measurement date used for financial statement reporting purposes with respect to the prior completed fiscal year to the plan measurement date used for financial statement reporting purposes with respect to the covered fiscal year. |
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(10) | The amount shown in column (i) represents our contributions under the qualified 401(k) CSA Investment Savings Plan and nonqualified defined contribution portion of the Supplementary Benefit Plan (totaling $80,090); the cost of Company-paid personal travel; the cost of Company-paid tax preparation and financial planning services; the cost of a Company-provided vehicle; and life insurance premiums paid by the Company. |
(11) | The amount shown in column (i) represents our contributions under the qualified 401(k) CSA Investment Savings Plan and nonqualified defined contribution portion of the Supplementary Benefit Plan (totaling $144,245); the cost of Company-paid personal travel; the cost of Company-paid tax preparation and financial planning services; the cost of a Company-provided vehicle; and life insurance premiums paid by the Company. |
(12) | The amount shown in column (i) represents our contributions under the qualified 401(k) CSA Investment Savings Plan and nonqualified defined contribution portion of the Supplementary Benefit Plan (totaling $105,250); the cost of Company-paid personal travel; the cost of Company-paid tax preparation and financial planning services; the cost of a Company-provided vehicle; and life insurance premiums paid by the Company. |
(13) | The amount shown in column (i) represents our contributions under the qualified 401(k) CSA Investment Savings Plan and nonqualified defined contribution portion of the Supplementary Benefit Plan (totaling $67,705); the cost of a Company-provided vehicle; and life insurance premiums paid by the Company. |
(14) | The amount shown in column (i) represents our contributions under the qualified 401(k) CSA Investment Savings Plan and nonqualified defined contribution portion of the Supplementary Benefit Plan (totaling $89,584); the cost of a Company-provided vehicle; and life insurance premiums paid by the Company. |
(15) | The amount shown in column (i) represents our contributions under the qualified 401(k) CSA Investment Savings Plan and nonqualified defined contribution portion of the Supplementary Benefit Plan (totaling $60,726); and life insurance premiums paid by the Company. |
(16) | The amount shown in column (i) represents our contributions under the qualified 401(k) CSA Investment Savings Plan and nonqualified defined contribution portion of the Supplementary Benefit Plan (totaling $38,692); the cost of Company-paid tax preparation and financial planning services; the cost of a Company-provided vehicle; and life insurance premiums paid by the Company. |
(17) | The amount shown in column (i) represents our contributions under the qualified 401(k) CSA Investment Savings Plan and nonqualified defined contribution portion of the Supplementary Benefit Plan (totaling $60,040); the cost of Company-paid tax preparation and financial planning services; the cost of a Company-provided vehicle; and life insurance premiums paid by the Company. |
(18) | The amount shown in column (i) represents our contributions under the qualified 401(k) CSA Investment Savings Plan and nonqualified defined contribution portion of the Supplementary Benefit Plan (totaling $43,153); the cost of a Company-provided apartment; the cost of Company-paid tax preparation and financial planning services; the cost of a Company-provided vehicle; and life insurance premiums paid by the Company. |
(19) | The amount shown in column (i) represents our contributions under the qualified 401(k) CSA Savings Plan and nonqualified defined contribution portion of the Supplementary Benefit Plan (totaling $17,001); the cost of a Company-provided vehicle; a goods and services differential of $28,810; the value of Company-paid costs associated with Mr. Stephensons expatriate assignment (totaling $140,610); and life insurance premiums paid by the Company. |
(20) | The amount shown in column (i) represents our contributions under the qualified 401(k) CSA Savings Plan and nonqualified defined contribution portion of the Supplementary Benefit Plan (totaling $33,608); the cost of a Company-provided vehicle; and life insurance premiums paid by the Company. |
(21) | The amount shown in column (i) represents our contributions under the qualified 401(k) CSA Investment Savings Plan and nonqualified defined contribution portion of the Supplementary Benefit Plan (totaling $25,927); the cost of Company-paid tax preparation and financial planning services; the cost of a Company-provided vehicle; and life insurance premiums paid by the Company. |
(22) | The amount shown in column (i) represents our contributions under the qualified 401(k) CSA Investment Savings Plan and nonqualified defined contribution portion of the Supplementary Benefit Plan (totaling $47,059); the cost of Company-paid tax preparation and financial planning services; the cost of a Company-provided vehicle; and life insurance premiums paid by the Company. |
(23) | The amount shown in column (i) represents our contributions under the qualified 401(k) CSA Savings Plan and nonqualified defined contribution portion of the Supplementary Benefit Plan (totaling $35,079); the cost of Company-paid tax preparation and financial planning services; the cost of a Company-provided vehicle; and life insurance premiums paid by the Company. |
(24) | Mr. Beards employment ended on March 31, 2009 due to a Resignation for Good Reason under his employment agreement. The amount shown in column (i) represents the cost of a Company-provided vehicle; life insurance premiums paid by the Company; and the amount of the compensation payable to Mr. Beard upon the termination of his employment (totaling $2,375,717, which represents a separation payment obligation of $1,237,500, a pension enhancement obligation of $234,413, $307,891 representing the payout of Mr. Beards non-qualified cash balance account under the Supplementary Benefit Plan less the amount the account earned in 2009 and reported under column (h), $131,204 representing the payout of Mr. Beards nonqualified defined contribution portion of the Supplementary Benefit Plan, $259,998 representing the portion of Mr. Beards Executive Deferred Compensation Plan account that was not allocated to CSA stock units, $175,594 worth of CSA stock representing 3,511.88 CSA stock units held under the Executive Deferred Compensation Plan at a share price of $50 at the time of distribution, $6,490 in vacation payout, and an estimated value of $22,627 related to temporary health and welfare benefits to be received for 24 months after termination). |
(25) | The amount shown in column (i) represents our contributions under the qualified 401(k) CSA Investment Savings Plan and nonqualified defined contribution portion of the Supplementary Benefit Plan (totaling $54,233); a special one-time Company contribution under the Executive Deferred Compensation Plan; the cost of a Company-provided vehicle; and life insurance premiums paid by the Company. |
(26) | The amount shown in column (i) represents our contributions under the qualified 401(k) CSA Investment Savings Plan and nonqualified defined contribution portion of the Supplementary Benefit Plan (totaling $39,568); the cost of Company-paid tax preparation and financial planning services; the cost of a Company-provided vehicle; and life insurance premiums paid by the Company. |
(27) | The percentages of total compensation in 2009 that were attributable to base salary and total bonus (the amounts identified in columns (d) and (g)) were as follows: Mr. McElya, base salary 21.4%, bonus 43.0%; for Mr. Hasler, base salary 18.5%, bonus 40.8%; for Mr. Campbell, base salary 31.2%, bonus 54.8%; for Mr. Stephenson, base salary 28.1%, bonus 53.4%; for Mr. Verwilst, base salary 30.0%, bonus 59.5%; for Mr. Beard, base salary 3.5%, bonus 0.0%. |
(28) | The percentages of total compensation in 2008 that were attributable to base salary and total bonus (the amounts identified in columns (d) and (g)) were as follows: Mr. McElya, base salary 42.1%, bonus 23.7%; for Mr. Hasler, base salary 38.2%, bonus 29.2%; for Mr. Campbell, base salary 49.6%, bonus 34.9%; for Mr. Stephenson, base salary 39.0%, bonus 0.0%; for Mr. Verwilst, base salary 57.4%, bonus 24.3%; for Mr. Beard, base salary 42.3%, bonus 35.3%. |
(29) | The percentages of total compensation in 2007 that were attributable to base salary and total bonus (the amounts identified in columns (d) and (g)) were as follows: Mr. McElya, base salary 25.4%, bonus 44.7%; for Mr. Hasler, base salary 21.4%, bonus 37.4%; for Mr. Campbell, base salary 27.3%, bonus 40.9%; for Mr. Verwilst, base salary 28.6%, bonus 38.4%; for Mr. Beard, base salary 27.6%, bonus 43.2%. |
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Non-equity incentive plan compensationannual incentive bonus
Due to the severe industry and economic conditions that developed in 2008 and continued into 2009, the compensation committee, at the recommendation of senior management, suspended the annual bonus program applicable to senior executives for the first half of 2009. For the second half of 2009, the compensation committee approved executive bonus opportunities with target amounts set at 50% of the amounts originally established for 2009 prior to the suspension of the program. For the second half of 2009, the compensation committee established an incentive bonus target amount for each member of the executive leadership team based on a percentage of base salary. With respect to the Named Executive Officers, the percentage was 50% for Messrs. McElya and Hasler, and 32.5% for Messrs. Campbell, Stephenson and Verwilst. These incentive bonus target amounts are based on the levels of responsibility of the executives and other performance-based factors. Incentive bonus amounts actually paid for 2009 performance are set forth in footnote (8) under column (g) of the above Summary Compensation Table.
2009 grants of plan-based awards
The following table sets forth information regarding plan-based awards made to the Named Executive Officers during 2009 that provide for possible future payouts.
Name (a) |
Award Type |
Grant Date
(b) |
Estimated Future Payouts
Under Non-Equity Incentive Plan Awards |
All Other
Stock Awards: Number of Shares of Stock or Units (#) (i) |
All Other
Option Awards: Number of Securities Underlying Options (j) |
Exercise
or Base Price of Option Awards ($/sh) (k) |
Grant Date
Fair Value of Stock and Option Awards ($/sh) (l) |
|||||||||||||
Threshold
(c) |
Target
(d) |
Maximum
(e) |
||||||||||||||||||
James S. McElya |
LTIP(1) | 1/1/2009 | $ | 175,000 | $ | 350,000 | Not applicable(2) | | | | | |||||||||
1/2 Year Bonus(3) | 7/1/2009 | $ | 237,500 | $ | 475,000 | $ 950,000 | ||||||||||||||
Edward A. Hasler |
LTIP(1) | 1/1/2009 | $ | 175,000 | $ | 350,000 | Not applicable(2) | | | | | |||||||||
1/2 Year Bonus(3) | 7/1/2009 | $ | 187,500 | $ | 375,000 | $ 750,000 | ||||||||||||||
Allen J. Campbell |
LTIP(1) | 1/1/2009 | $ | 100,000 | $ | 200,000 | Not applicable(2) | | | | | |||||||||
1/2 Year Bonus(3) | 7/1/2009 | $ | 71,500 | $ | 143,000 | $ 286,000 | ||||||||||||||
Keith D. Stephenson |
LTIP(1) | 1/1/2009 | $ | 100,000 | $ | 200,000 | Not applicable(2) | | | | | |||||||||
1/2 Year Bonus(3) | 7/1/2009 | $ | 62,563 | $ | 125,125 | $ 250,250 | ||||||||||||||
Michael C. Verwilst |
LTIP(1) | 1/1/2009 | $ | 100,000 | $ | 200,000 | Not applicable(2) | | | | | |||||||||
1/2 Year Bonus(3) | 7/1/2009 | $ | 62,563 | $ | 125,125 | $ 250,250 | ||||||||||||||
Larry Beard(4) |
LTIP(1) | 1/1/2009 | $ | 100,000 | $ | 200,000 | Not applicable(2) | | | | | |||||||||
1/2 Year Bonus(3) | | | | | | | | |
(1) | The non-equity incentive plan awards represent 2009 awards granted by the compensation committee to the Named Executive Officers under our Long Term Incentive Plan based on the achievement of operating cash flow objectives in the performance period beginning January 1, 2009 and ending December 31, 2011, or 2009 LTIP Awards. 2009 LTIP Awards are payable in the first quarter of 2012, depending on the level of achievement of established targets and the approval of the compensation committee. The determination of award amounts under the Long Term Incentive Plan is described under Long-term incentive compensation under the Executive Compensation Components section. The amounts set forth in footnote (5) under column (g) of the Summary Compensation Table do not pertain to the 2009 LTIP Awards; they reflect payments under a 2007 LTIP award granted by the compensation committee under the Long Term Incentive Plan based on the performance period beginning January 1, 2007 and ending December 31, 2009. |
(2) | The 2009 LTIP does not provide for a maximum payout; the amount of the payout increases by 10% for each 1% increase in the actual level of achievement above the target level. |
(3) | As described above under Executive compensation review and determinations for 2009, due to the severe industry and economic conditions at the time, the compensation committee, at the recommendation of senior management, suspended the annual bonus program applicable to senior executives for the first half of 2009. For the second half of 2009, the compensation committee approved executive bonus opportunities with target amounts set at 50% of the amounts originally established for 2009 prior to the suspension of the program. The compensation committee set adjusted EBITDA performance targets (applicable to the Company as a whole) for the second half of 2009 in accordance with our 2009 business plan applicable to that period for use as the basis for bonus attainment. The amounts set forth in footnote (7) under column (g) of the Summary Compensation Table pertain to payouts of the 2009 1/2 Year Bonus awards based on actual achievement based on performance to adjusted EBITDA targets. |
(4) | Mr. Beards employment with the us terminated as of March 31, 2009. He is not eligible for future payouts under non-equity incentive plan awards payable with respect to periods ending after that date, and as such, forfeited any right to payment under the 2009 LTIP. |
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Outstanding equity awards at 2009 fiscal year-end
The following table sets forth information concerning outstanding stock option awards and stock units under the Management Stock Purchase Plan held by the Named Executive Officers at December 31, 2009, including the number of shares underlying both exercisable and unexercisable portions of each stock option as well as the exercise price and expiration date of each outstanding option.
Option Awards(1) | Stock Awards | ||||||||||||||
Name (a) |
Number of
Securities Underlying Unexercised Options (#) Exercisable(2) (b) |
Equity Incentive Plan
Awards: Number of Securities Underlying Unexercised Unearned Options (#)(3) (d) |
Option
Exercise Price (e) |
Option
Expiration Date(4) (f) |
Number of
Shares or Units of Stock That Have Not Vested (#) (g) |
Market Value
of Shares or Units of Stock That Have Not Vested(10) (h) |
|||||||||
James S. McElya |
34,428 | 10,295 | $ | 100 | 12/23/2014 | 789 | (5) | $ | 0 | ||||||
Edward A. Hasler |
18,936 | 5,662 | $ | 100 | 12/23/2014 | 1,156 | (6) | $ | 0 | ||||||
3,807 | 1,595 | $ | 100 | 3/15/2017 | |||||||||||
Allen J. Campbell |
17,215 | 5,147 | $ | 100 | 12/23/2014 | 623 | (7) | $ | 0 | ||||||
1,576 | 660 | $ | 100 | 3/15/2017 | |||||||||||
Keith D. Stephenson |
8,333 | 4,167 | $ | 100 | 3/20/2018 | 471 | (8) | $ | 0 | ||||||
Michael C. Verwilst |
13,771 | 4,118 | $ | 100 | 12/23/2014 | ||||||||||
1,487 | 624 | $ | 100 | 3/15/2017 | 486 | (9) | $ | 0 | |||||||
Larry Beard |
| | | | | |
(1) | All of the amounts presented in this portion of the table relate to options to purchase shares of the Companys common stock granted to the Named Executive Officers under our Stock Incentive Plan. Options listed above with an Option Expiration Date of December 23, 2014 were granted on December 23, 2004, those with an Option Expiration Date of March 15, 2017 were granted on March 15, 2007, and those with an Option Expiration Date of March 20, 2018 were granted on March 20, 2008. |
(2) | Represents time-based options and performance-based options which have vested and were exercisable as of December 31, 2009 with respect to the following number of shares of the Companys common stock: for Mr. McElya, 22,362 shares time-based and 12,066 shares performance-based; for Mr. Hasler, 15,000 shares time-based and 7,743 shares performance-based; for Mr. Campbell, 12,299 shares time-based and 6,492 shares performance-based; for Mr. Stephenson, 8,333 shares time-based and 0 shares performance-based; and for Mr. Verwilst, 10,000 shares time-based and 5,258 shares performance-based. |
(3) | Represents outstanding time-based options and performance-based options which have not been earned or vested and were unexercisable as of December 31, 2009 with respect to the following number of shares of the Companys common stock: for Mr. McElya, 0 shares time-based and 10,295 shares performance-based; for Mr. Hasler, 0 shares time-based and 7,257 shares performance-based; for Mr. Campbell, 0 shares time-based and 5,807 shares performance-based; for Mr. Stephenson, 0 shares time-based and 4,167 shares performance-based; and for Mr. Verwilst, 0 shares time-based and 4,742 shares performance-based. |
(4) | Options expire on the earliest to occur of: (i) the tenth anniversary of the date of grant; (ii) the first anniversary of the date of the optionees termination of employment due to death, disability, retirement at normal retirement age or the sale by the Company (not constituting a change of control) of the business in which the optionee was employed; (iii) 90 days following the date of the optionees termination of employment without cause (or for reasons other than those described in (ii)); or (iv) on the date of the optionees termination of Employment for cause. Mr. Beard terminated his employment with us for Good Reason on March 31, 2009, pursuant to his employment agreement; thus his options expired on June 29, 2009. |
(5) | Represents 789 stock units, which is the portion of the units granted on December 31, 2007 through our match under the Management Stock Purchase Plan that had not yet become vested as of December 31, 2009. These matching units vest ratably over a three year period. Description of Management Stock Purchase Plan is found in Executive Compensation Components. |
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(6) | Represents 1,156 stock units, which is the portion of the units granted on December 31, 2007 through our match under the Management Stock Purchase Plan that had not yet become vested as of December 31, 2009. These matching units vest ratably over a three year period. Description of Management Stock Purchase Plan is found in Executive Compensation Components. |
(7) | Represents 623 stock units, which is the portion of the units granted on December 31, 2007 through our match under the Management Stock Purchase Plan that had not yet become vested as of December 31, 2009. These matching units vest ratably over a three year period. Description of Management Stock Purchase Plan is found in Executive Compensation Components. |
(8) | Represents 471 stock units, which is the portion of the units granted on December 31, 2007 through our match under the Management Stock Purchase Plan that had not yet become vested as of December 31, 2009. These matching units vest ratably over a three year period. Description of Management Stock Purchase Plan is found in Executive Compensation Components. |
(9) | Represents 486 stock units, which is the portion of the units granted on December 31, 2007 through our match under the Management Stock Purchase Plan that had not yet become vested as of December 31, 2009. These matching units vest ratably over a three year period. Description of Management Stock Purchase Plan is found in Executive Compensation Components. |
(10) | The values in column (h) equal the total number of matching stock units listed in column (g) for each Named Executive Officer multiplied by the value of the Companys common stock as of December 31, 2009, which was assumed to be $0 because the common stock of the Company was cancelled upon emergence from chapter 11 under our plan of reorganization. |
2009 option exercises and stock vested
The following table sets forth certain information regarding stock-based awards that vested during 2009 for our Named Executive Officers. No stock options were exercised by our Named Executive Officers in 2009.
Option Awards | Stock Awards | |||||||||
Name (a) |
Number of
Shares Acquired on Exercise (#) (b) |
Value Realized on
Exercise ($) (c) |
Number of
Shares Acquired on Vesting (#) (d) |
Value Realized on
Vesting ($)(7) (e) |
||||||
James S. McElya |
| | 789 | (1) | $ | | ||||
Edward A. Hasler |
| | 1,156 | (2) | $ | | ||||
Allen J. Campbell |
| | 623 | (3) | $ | | ||||
Keith D. Stephenson |
| | 471 | (4) | $ | | ||||
Michael C. Verwilst |
| | 486 | (5) | $ | | ||||
Larry Beard |
| | 1,168 | (6) | $ | 58,400 |
(1) | Represents 789 stock units which is the portion of the units granted on December 31, 2007 through our match under the Management Stock Purchase Plan that became vested on December 31, 2009. These matching units vest ratably over a three year period. Description of Management Stock Purchase Plan is found in Executive Compensation Components. |
(2) | Represents 1,156 stock units which is the portion of the units granted on December 31, 2007 through our match under the Management Stock Purchase Plan that became vested on December 31, 2009. These matching units vest ratably over a three year period. Description of Management Stock Purchase Plan is found in Executive Compensation Components. |
(3) | Represents 623 stock units which is the portion of the units granted on December 31, 2007 through our match under the Management Stock Purchase Plan that became vested on December 31, 2009. These matching units vest ratably over a three year period. Description of Management Stock Purchase Plan is found in Executive Compensation Components. |
(4) | Represents 471 stock units which is the portion of the units granted on December 31, 2007 through our match under the Management Stock Purchase Plan that became vested on December 31, 2009. These matching units vest ratably over a three year period. Description of Management Stock Purchase Plan is found in Executive Compensation Components. |
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(5) | Represents 486 stock units which is the portion of the units granted on December 31, 2007 through our match under the Management Stock Purchase Plan that became vested on December 31, 2009. These matching units vest ratably over a three year period. Description of Management Stock Purchase Plan is found in Executive Compensation Components. |
(6) | Represents 1,168 stock units which is the portion of the units granted on December 31, 2007 through our match under the Management Stock Purchase Plan that became vested on March 31, 2009 as a result of Mr. Beards Resignation for Good Reason. These matching units generally vest ratably over a three year period. Description of Management Stock Purchase Plan is found in Executive Compensation Components. |
(7) | Except for Mr. Beards figure, the values in column (e) equal the total number of matching stock units listed in column (d) for each Named Executive Officer multiplied by the value of the Companys common stock as of December 31, 2009, which was assumed to be $0 because the common stock of the Company was cancelled upon emergence from chapter 11 under the Plan of Reorganization. For Mr. Beard, the value reported under column (e) equals the number of matching stock units that became immediately vested as a result of his Resignation for Good Reason (listed in column (d)), multiplied by the value of the Companys common stock at the time his employment ended, which was $50 per share. |
2009 pension benefits
The following table sets forth the actuarial present value of each Named Executive Officers accumulated benefit under the CSA Retirement Plan and the non-qualified defined benefit portion of the Supplementary Benefit Plan as described in Retirement Plan Benefits under the Executive Compensation Components section, assuming benefits are paid at normal retirement age or the earliest retirement age at which participants receive unreduced benefits, based on current levels of compensation. The table also shows the number of years of credited service under each plan, computed as of the same pension plan measurement date used in our audited financial statements for the year ended December 31, 2009.
Name (a) |
Plan Name (b) |
Number of Years
Credited Service (#) (c) |
Present Value of
Accumulated Benefit(1) ($) (d) |
Payments During
Last Fiscal Year ($) (e) |
|||||||
James S. McElya |
CSA Retirement Plan(2) | 9.00 | $ | 109,173 | $ | 0 | |||||
Supplementary Benefit Plan(3) | 13.92 | (4) | $ | 3,641,551 | $ | 0 | |||||
Edward A. Hasler |
CSA Retirement Plan(6) | 22.08 | $ | 784,537 | $ | 0 | |||||
Supplementary Benefit Plan(6) | 23.00 | $ | 2,328,367 | $ | 0 | ||||||
Allen J. Campbell |
CSA Retirement Plan(2) | 10.33 | $ | 131,353 | $ | 0 | |||||
Supplementary Benefit Plan(5) | 11.25 | $ | 336,910 | $ | 0 | ||||||
Keith D. Stephenson |
CSA Retirement Plan(2) | 1.58 | $ | 17,316 | $ | 0 | |||||
Supplementary Benefit Plan(5) | 2.50 | $ | 51,701 | $ | 0 | ||||||
Michael C. Verwilst |
CSA Retirement Plan(2) | 5.83 | $ | 66,248 | $ | 0 | |||||
Supplementary Benefit Plan(5) | 6.75 | $ | 237,301 | $ | 0 | ||||||
Larry J. Beard |
CSA Retirement Plan(2) | 9.00 | $ | 0 | $ | 108,134 | |||||
Supplementary Benefit Plan(5) | 9.17 | $ | 0 | $ | 366,796 |
(1) | Present values determined using a December 31, 2009 measurement date and reflect benefits accrued based on service and pay earned through such date. Figures are determined based on post-commencement valuation mortality (2009 Static PPA table) and commencement of benefits at age 65, except for Mr. McElya and Mr. Hasler, who were assumed to retire at age 63 and 62 respectively because they are eligible for unreduced benefits at that age as discussed in footnotes (3) and (6) below. The assumed discount rate as of the measurement date is 5.60%. |
(2) | Messrs. McElya, Campbell, Beard, Verwilst and Stephenson are covered under the cash balance design for purposes of the qualified CSA Retirement Plan which was frozen January 31, 2009. The amount shown for Messr. Beard is the lump sum he received in 2009. |
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(3) | Mr. McElya receives two types of defined benefits under the Supplementary Benefit Plan. He receives a non-qualified cash balance benefit determined under usual terms. In addition, he receives a benefit determined under the final average pay design, offset by the annuity-equivalent of his qualified and nonqualified cash balance benefits. Because the final average pay design includes an unreduced feature upon attainment of age 62 and 10 years of service, which the executive would be eligible for, he was assumed to retire at age 63. |
(4) | Mr. McElya is granted four years of additional service in the Supplementary Benefit Plan to compensate for lost (non-vested) benefits accrued with his previous employer prior to joining us in January 2000. |
(5) | Messrs. Campbell, Stephenson, Verwilst, and Beard are covered under the cash balance design for purposes of the non-qualified Supplementary Benefit Plan. The amount shown for Messr. Beard is the lump sum he received in 2009. |
(6) | Mr. Hasler is covered under the final average pay design for both the qualified CSA Retirement Plan and the non-qualified Supplementary Benefit Plan. Because the final average pay design includes an unreduced feature upon attainment of age 62 and 10 years of service, which the executive would be eligible for, he was assumed to retire at age 62. |
2009 nonqualified deferred compensation
The following table sets forth annual executive and company contributions under non-qualified deferred compensation provisions of the Executive Deferred Compensation Plan and the non-qualified defined contribution portion of the Supplementary Benefit Plan, as well as each Named Executive Officers withdrawals, earnings and fiscal-year end balances in those plans.
Name (a) |
Executive
Contribution in Last FY(1) (b) |
Registrant
Contributions in Last FY(2) (c) |
Aggregate
Earnings in Last FY (d) |
Aggregate
Withdrawals/ Distributions (e) |
Aggregate
Balance at Last FYE (f) |
||||||||||||
James S. McElya |
$ | 0 | $ | 78,865 | $ | (37,326 | ) | $ | (1,034,304 | ) | $ | 755,734 | |||||
Edward A. Hasler |
$ | 0 | $ | 66,480 | $ | (284,630 | ) | $ | 0 | $ | 353,325 | ||||||
Allen J. Campbell |
$ | 0 | $ | 37,467 | $ | (151,337 | ) | $ | 0 | $ | 208,128 | ||||||
Keith D. Stephenson |
$ | 0 | $ | 15,776 | $ | (138,787 | ) | $ | 0 | $ | 47,959 | ||||||
Michael C. Verwilst |
$ | 0 | $ | 24,702 | $ | (106,929 | ) | $ | 0 | $ | 192,379 | ||||||
Larry J. Beard |
$ | 0 | $ | 0 | $ | (13,549 | ) | $ | (566,797 | ) | $ | 0 |
(1) | Amounts represent deferrals under the Executive Deferred Compensation Plan. |
(2) | Amounts are included in column (i) of the Summary Compensation Table and represent nonqualified matching contributions under the Supplementary Benefit Plan. Our match under the Executive Deferred Compensation Plan is made in stock units under the Management Stock Purchase Plan feature, which is more fully described in the Executive Compensation Components section. The NEOs did not make deferrals under the Management Stock Purchase Plan for the 2009 plan year and therefore did not receive matching stock units for 2009. |
Potential payments upon termination or change in control
The Named Executive Officers have entered into employment agreements with us which provide for certain benefits upon termination of employment, including termination following a change in control as defined in the Cooper-Standard Automotive Inc. Change of Control Severance Pay Plan, or the Change in Control Plan. The table below shows estimates of the value of compensation that would be payable to each Named Executive Officer upon termination of employment under certain circumstances. As indicated in the table, compensation upon termination of employment varies depending on the circumstances of the termination and whether or not it occurred following a change in control. Amounts presented in the table are calculated as if the employment of the executive terminated effective December 31, 2009. Payments due to any one of the Named Executive Officers upon actual termination of employment can only be determined at the time of termination. There can be no assurance that an actual termination or change in control would produce the same or similar results as those described below if it were to occur on any other date and if the actual circumstances at the time of termination.
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Amounts accrued under the normal terms of our pension and deferred compensation plans are not included in this table. Information concerning pension benefits and deferred compensation disclosures is presented under 2009 pension benefits, and 2009 nonqualified deferred compensation. Similarly, information concerning vested equity awards is not included in the table, and is presented under Outstanding equity awards at 2009 fiscal year end.
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(1) | Cash severance is generally paid in a lump sum at termination. Cash severance amounts estimated above are based on providing executives with prorated outstanding incentive awards and a multiple of the sum of (i) their annual base rate of salary at date of termination plus (ii) their target annual bonus for the year prior to termination, with such multiple equal to three (3) for Mr. McElya and two (2) for Messrs. Hasler, Campbell, Stephenson, and Verwilst. If the termination occurs following a change of control, each Named Executive officers cash severance is increased by one additional years base salary. Further description of the terms applicable to cash severance payments is included under Terms applicable to payments upon termination of employment. |
(2) | The pension enhancement provides for payment of the present value of the additional accrued benefit that would otherwise be due from the our qualified and non-qualified pension plans had the executive continued in active service for a specified number of years beyond termination, with such number of years equal to three (3) for Mr. McElya and two (2) for Messrs. Campbell, Hasler, Stephenson, and Verwilst. Pension-eligible earnings to be used for these calculations depend on the circumstances of the termination, described under Terms applicable to payments upon termination of employment. |
(3) | Health and life insurance benefits are continued for the Named Executive Officers and their covered dependents after termination of employment under certain circumstances. In such cases, the commitment is generally to provide for coverage for these benefits in a manner such that (i) benefits provided are substantially similar to those at termination and (ii) recipients of such benefits will not pay higher share of cost for such benefits than had been required prior to termination of employment based on elections in place at that time. Further description of the terms applicable to health and life insurance benefits is included under Terms applicable to payments upon termination of employment. |
(4) | Under Mr. McElyas employment agreement, payment of the cost of outplacement services is provided in an amount up to 15% of his annual base salary at the time of termination, and for purposes of the computations above, actual reimbursement was assumed not to exceed $50,000. In addition, outplacement services were assumed not to be utilized in the death and disability scenarios for Mr. McElya. Upon termination without cause (or resignation for good reason) after a change of control, all Named Executive officers are entitled to payment of the cost of outplacement services in an amount equal to the lesser of 15% of annual base salary at the time of termination, or $50,000. |
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(5) | Represents effect of accelerated vesting related to time-based and performance-based stock options. In the event of a change in control, outstanding and unvested time-based stock options become fully vested and exercisable, and 20% to 100% of outstanding and unvested performance-based options for the tranche applicable to the year in which the change in control occurs (and the tranche(s) applicable to future years) shall vest to the extent that cumulative consolidated EBITDA performance from the 2004 calendar year through the most recent fiscal year-end meets or exceeds 85% of cumulative performance targets for the same period (where vesting occurs on a straight-line basis between 20% and 100% depending on achievement of the performance targets between 85% and 100%). |
(6) | Upon a change of control of the Company each executive may be subject to certain excise taxes pursuant to Section 280G of the Internal Revenue Code. Pursuant to the executives employment agreement and/or the Severance Plan, we have agreed to reimburse the executive for all excise taxes that are imposed on the executive pursuant to Section 280G and any income and excise taxes that are payable by the executive as a result of this reimbursement. These amounts assume that no amounts will be discounted as attributable to reasonable compensation and no value will be attributed to the non-competition covenants included in the agreement. Amounts will be discounted to the extent we can demonstrate by clear and convincing evidence that the non-competition covenants included in the agreement substantially constrains the executives ability to perform services and there is a reasonable likelihood that the non-competition covenants will be enforced against the individual. |
(7) | Mr. Beards employment ended on March 31, 2009, due to resignation for Good Reason, pursuant to his employment agreement. The amounts set forth in the table represent actual payouts that occurred in 2009, which amounts are reflected in the Summary Compensation Table on page 133. The $58,400 listed under Accelerated Vesting of Equity Awards represents the number of matching stock units under the Management Stock Purchase Plan that became immediately vested as a result of his Resignation for Good Reason (1,168), multiplied by the value of the Companys common stock at the time his employment ended, which was $50/share; the Summary Compensation Table also includes the value of employee stock units and matching stock units that were already vested prior to Mr. Beards termination of employment. |
Terms applicable to payments upon termination of employment
We have in effect employment agreements with each of the Named Executive Officers which provide severance pay and benefits in the event of the executives termination of employment for specified reasons prior to a change of control of the Company, and a Change of Control Severance Pay Plan that provides severance pay and benefits if the executive is terminated following a change of control.
Mr. McElyas employment agreement . On March 26, 2009, Mr. McElyas existing employment agreement with us was amended and restated, primarily to document that Mr. McElya was again serving as our Chief Executive Officer in addition to serving as Chairman. The material provisions of Mr. McElyas previous employment agreement, entered into in December 2007, remained unchanged. Mr. McElyas employment agreement provides him with special retirement termination benefits in the event that he terminates employment as Chief Executive Officer with at least 90 days prior written notice and agrees to continue providing services to the us as non-executive Chairman of our board of directors for a period to be mutually agreed (a qualified retirement). The special retirement benefits correspond to the amounts and benefits that would otherwise be payable to Mr. McElya in connection with an involuntary termination of his employment without cause, or in connection with a voluntary termination of his employment for good reason, as such terms are defined in the employment agreement. Mr. McElyas employment agreement also provides that, following a qualified retirement as described above, Mr. McElyas stock options with Cooper-Standard Holdings Inc., or Holdings, will continue to vest as if he remained employed for so long as Mr. McElya continues to serve as non-executive Chairman, and his vested options upon termination as Chairman will remain exercisable until two years following the date of his termination as Chairman (or until the normal option term expiration date, if sooner).
In December 2007, Mr. McElya also entered into a put option agreement with Holdings and certain stockholders of Holdings related to the 20,000 shares of Holdings common stock that Mr. McElya purchased on December 23, 2004, or the Purchased Shares. Under the terms of the put option agreement, in the event of Mr. McElyas qualified retirement as described above, or termination of employment due to death or disability, in each case, prior to the occurrence of a qualified initial public offering of Holdings common stock, Mr. McElya will have the right to require Holdings to purchase his Purchased Shares for fair market value. Mr. McElyas put right under the put option agreement is generally exercisable within 180 days following the date of his termination as non-executive Chairman or termination due to death or disability.
The current term of Mr. McElyas employment agreement ends December 31, 2010, but the term will be automatically extended for one year periods thereafter unless we provide a notice of termination by September 30
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of a given year. The agreement provides Mr. McElya with an annual base salary (currently $950,000), which is to be reviewed by our board of directors each year. Our board of directors may increase, but not decrease, the base salary. The agreement also provides Mr. McElya with an annual bonus opportunity based on a percentage of his base salary (currently 100%) as well as participation in our benefit plans and long-term incentive plans and programs. Effective January 2009, Mr. McElya and the other members of our senior leadership team, consented to a 10% reduction in base salary for a six month period, subject to extension, and waived eligibility under the annual bonus plan for a bonus with respect to the first half of 2009. In addition, Mr. McElya consented to the freezing of certain retirement and savings plan benefits.
If Mr. McElya terminates employment for Good Reason, or we terminates Mr. McElyas employment without Cause, as those terms are defined in the agreement and described below, and in each case prior to a change of control of the Company, then we will pay or provide to Mr. McElya: (i) his accrued but unpaid salary, annual and long-term incentive compensation amounts; (ii) a pro rata payment of any target annual and long-term incentive compensation amounts for which the performance periods have not ended; (iii) the greater of a lump sum payment equal to three times his current annual base salary plus his annual target bonus amount (for the year preceding the year of his termination) or a sum equal to the biweekly payments that Mr. McElya would have received if he were paid at the rate of his average compensation for the remainder of the term; (iv) a lump sum payment equal to the value of three additional years of service credit under our qualified and non-qualified defined benefit pension plans, assuming his compensation under such plans for the three year period was the highest compensation paid to him during any of the five calendar years preceding the year in which his termination of employment occurs (not impacted by our freezing of accruals under the qualified defined benefit retirement plan); (v) three years of continued coverage under the life, accident and health plans sponsored by us and in which Mr. McElya was covered immediately prior to his termination; (vi) medical and life insurance coverage for Mr. McElya and his spouse for their lifetimes, and for his dependent children until they cease to qualify as dependents; and (vii) outplacement services for up to two calendar years following the year of termination, not to exceed a cost equal to 15% of his annual base pay. The lump sum amounts described in clauses (iii) and (iv) of the preceding sentence are payable six months following the date of Mr. McElyas termination of employment. If, during the first 36 months of life, medical and accident benefit continuation, we are unable to provide what are otherwise intended to be non-taxable benefits to Mr. McElya and his covered family members on a tax-free basis, then we will make an additional payment to Mr. McElya to reimburse him for the taxes due on such benefits.
Termination for Cause under Mr. McElyas employment agreement means termination for any of the following reasons: (i) any act or omission constituting a material breach by him of any of his significant obligations under the agreement or his continued failure or refusal to adequately perform the duties reasonably required of him which is materially injurious to us and his failure to correct such breach, failure or refusal within thirty (30) days of notice to him thereof by our board of directors; (ii) the conviction for a felony or the conviction for or finding by civil verdict of the commission by him of a dishonest act or common law fraud against us; or (iii) any other willful act or omission which is materially injurious to the financial condition or business reputation of, or is otherwise materially injurious to, us and his failure to correct such act or omission after notification by our board of directors of any such act or omission.
Termination by Mr. McElya for Good Reason under his employment agreement means termination following the occurrence of any of the following, without Mr. McElyas express, prior written consent: (i) a material breach by us of our obligations under the agreement relating to Mr. McElyas duties, compensation and benefits, including but not limited to, the assignment to him of any duties materially inconsistent with his status as Chief Executive Officer, or his removal from such position, or a substantial adverse alteration in the nature of his responsibilities except, in each case, in connection with a promotion, and the failure by us to remedy such breach within thirty (30) days after receipt of written notice of such breach from Mr. McElya; (ii) the relocation of Mr. McElyas work location 150 miles or more from its current location, except for relocation to our headquarters and required travel on the Companys business to an extent reasonably required to perform his duties; (iii) except as required by law, the failure by us to provide Mr. McElya with benefit plans that provide
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health, life, disability, retirement and fringe benefits that are substantially comparable in the aggregate to the level of such benefits provided him by Cooper Tire immediately prior to the 2004 acquisition other than in connection with a reduction in such level of benefits that applies to our other senior executives; (iv) the failure by us to obtain a satisfactory agreement from any successor to assume and agree to perform our obligations under the employment agreement and provide Mr. McElya with the same or a comparable position, duties, benefits, and base salary and incentive compensation as provided in the employment agreement; or (v) the failure of our board of directors to elect Mr. McElya to his existing position or an equivalent position.
If Mr. McElya terminates employment as a result of death or disability, then we will pay or provide to Mr. McElya or Mr. McElyas beneficiaries, estate or family, as applicable, the amounts and considerations Mr. McElya would have been entitled to as if Mr. McElyas employment had been terminated by Mr. McElya for Good Reason or by us without Cause immediately prior to the expiration of the current term of employment.
If Mr. McElya is terminated by us for Cause, Mr. McElya will be entitled to base pay and vested benefits under any plan in accordance with that plan and a pro rata portion of any incentive compensation for the year in which the termination occurs up to the date of termination.
If Mr. McElya voluntarily elects to retire and agrees to act as our non-executive Chairman of our board of directors for a mutually agreed upon term, then Mr. McElya will be entitled to the amounts and considerations Mr. McElya would have been entitled to if Mr. McElyas employment had been terminated by Mr. McElya for Good Reason or by us without Cause immediately prior to the expiration of the current term of employment.
If we elect not to extend Mr. McElyas employment agreement upon expiration of the current term, then Mr. McElya will be treated as if he terminated employment for good reason or we terminated without cause and entitled to the severance pay and other benefits described above, except that such pay and benefits will not be paid until his actual termination of employment which shall be deemed effective December 31 of the year in which we provided notice of its election.
The agreement also provides that if any payment or the amount of benefits due under the agreement or otherwise would be considered an excess parachute payment that subjects Mr. McElya to excise tax under Internal Revenue Code Section 4999, then we will make an additional gross-up payment to Mr. McElya to reimburse him for such taxes (and any taxes due on the gross-up payment).
In exchange for the benefits provided under the agreement, Mr. McElya agrees not to compete with us for a two-year period after his termination of employment, not to solicit or interfere with any of our employees or customer, and not to disclose confidential and proprietary information. Mr. McElya is also required to execute a release of all claims against us as a condition to receiving the severance payment and benefits, if applicable.
Employment agreements of other named executive officers. We have in effect employment agreements with the other Named Executive Officers, which are substantially similar to Mr. McElyas employment agreement except as described below. The other Named Executive Officers employment agreements have an initial term ending December 31, 2009 (July 1, 2011 for Mr. Hasler) and continue for one year periods thereafter, unless we or Named Executive Officer provides a notice of termination at least 60 days prior to the end of any term. Under the agreements, each Named Executive Officer is paid an annual base salary, currently as follows: $750,000 for Mr. Hasler; $440,000 for Mr. Campbell; $425,000 for Mr. Stephenson; and $385,000 for Mr. Verwilst. Mr. Beards employment with us terminated on March 31, 2009. The agreements provide that the compensation committee may increase the base salary from time to time, based upon the recommendation of the Chief Executive Officer. The agreements also provide that the Named Executive Officers are entitled to participate in such annual and long-term incentive compensation programs and benefit plans and programs as are generally provided to senior executives. In January of 2009, the Named Executive Officers consented to a 10% reduction in their base salaries for a six month period, subject to extension, and waived their eligibility under the annual bonus plan to bonuses with respect to the first half of 2009. In addition, the Named Executive Officers consented to the freezing of certain retirement and savings plan benefits.
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If a Named Executive Officer terminates employment for Good Reason or we terminate the employment of the Named Executive Officer without Cause, as those terms are defined in the agreement and described below, and in each case prior to a change of control of the Company, then we will pay or provide to the Named Executive Officer: (i) his accrued but unpaid salary, annual and long-term incentive compensation amounts; (ii) a pro rata payment of any annual incentive compensation amounts for which the performance period has not ended; (iii) a lump sum payment equal to two times the executives current annual base salary plus his annual target bonus amount (for the year preceding the year of his termination); (iv) a lump sum payment equal to the value of two additional years of service credit under our qualified and nonqualified defined benefit pension plans, assuming the executives compensation under such plans for such period was the same as the compensation paid to him during the year preceding his termination of employment (though additional years of service credit are not provided in relation to the qualified plan for this purpose beyond January 31, 2009 when we froze the qualified plan); and (v) two years of continued coverage under the life and health plans sponsored by us at the same cost to the executive as is being charged to active employees.
Termination for Cause under the employment agreements of these executives means termination for any of the following reasons: (i) the executives willful failure to perform duties or directives which is not cured following written notice; (ii) the executives commission of a felony or crime involving moral turpitude; (iii) the executives willful malfeasance or misconduct which is demonstrably injurious to us; or (iv) material breach by the executive of the non-competition, non-solicitation or confidentiality provisions of the agreement.
Termination by any of these executives for Good Reason shall mean termination following any of the following: (i) a substantial diminution in the executives position or duties, adverse change in reporting lines, or assignment of duties materially inconsistent with the executives position; (ii) any reduction in the executives base salary or annual bonus opportunity; (iii) any reduction in the executives long-term cash incentive compensation opportunities, other than reductions generally affecting other senior executives participating in the applicable long-term incentive compensation programs or arrangements; (iv) our failure to pay the executive any compensation or benefits when due; (v) relocation of the executives principal place of work in excess of 50 miles from the executives current principal place of work; or (vi) any material breach by us of the terms of the Agreement; in each case if we fail to cure such event within 10 calendar days after receipt from the executive of written notice of the event which constitutes Good Reason.
If the Named Executive Officers employment terminates due to disability or death, then we shall make a pro rata payment of the target amounts payable under any annual and long-term incentive compensation awards then in effect. In the event of any other termination of employment, no amounts are payable under the agreement.
If we elect not to extend the Named Executive Officers employment agreement for any year after expiration of the initial term, then the Named Executive Officer will be treated as if he were terminated by us without Cause and entitled to the severance pay and other benefits described above, except that such pay and benefits will not be paid until his actual termination of employment and if his actual termination occurs between ages 64 and 65, his severance multiplier (if higher than one) is reduced to one, and if after age 65, the executive will not be entitled to any severance payment or other benefits under the agreement.
In exchange for the benefits provided under the agreement, the Named Executive Officers agree not to compete with us or solicit or interfere with any of our employees or customer for a two-year period after his termination of employment, and not to disclose confidential and proprietary information. Each Named Executive Officer is also required to execute a release of all claims against us as a condition to receiving the severance payment and benefits, if applicable.
Change of control severance plan. If the Named Executive Officers are terminated following a change of control of the Company, then in lieu of the severance payments and benefits described above, the executives are entitled to the severance pay and benefits provided under our Change of Control Severance Pay Plan. Under the plan, if within two years following a Change of Control of the Company as defined in the plan and described below, a
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Named Executive Officer is terminated by us (or the successor in the change of control transaction) without Cause as defined in the plan and described below, or terminates his employment for certain reasons, then we (or the successor) will pay or provide to the Named Executive Officer: (i) an amount equal to one year of his annual base salary; (ii) a pro rata payment of any annual and long-term incentive compensation amounts for which the performance periods have not ended; (iii) a lump sum payment equal to three (for Mr. McElya) and two (for all other Named Executive Officers) times his current annual base salary plus his annual target bonus amount (for the year preceding the year of the change of control); (iv) a lump sum payment equal to the value of three (for Mr. McElya) and two (for all other Named Executive Officers) additional years of service credit under our qualified and nonqualified defined benefit pension plans, assuming the executives compensation under such plans for respective period was the highest compensation paid to the executive during any of the five years preceding the year in which his termination of employment occurs (though additional years of service credit are not provided in relation to the qualified plan for this purpose beyond January 31, 2009 when we froze the qualified plan); (v) three years (for Mr. McElya) and two years (for all other Named Executive Officers) of continued coverage under the life and health plans sponsored by us and in which the executive was covered immediately prior to his termination; (vi) medical and life insurance coverage for the Named Executive Officer and his spouse for their lifetimes, and for his dependent children until they cease to qualify as dependents, at the same cost as was being charged to the Named Executive Officer immediately prior to the change of control; and (vii) outplacement services for up to two calendar years following the year of termination, not to exceed a cost equal to the lesser of 15% of the Executives annual base pay or $50,000. If, during the first 36 months (for Mr. McElya) or 24 months (for all other Named Executive Officers) of life and medical benefit continuation, we are unable to provide what are otherwise intended to be non-taxable benefits to the Named Executive Officer and his covered family members on a tax-free basis, then we will make an additional payment to the Named Executive Officer to reimburse him for the taxes due on such benefits. In addition, under the Supplementary Benefit Plan (as described in the Executive Compensation Components section), participants receive a lump sum payout of the present value of their accrued benefits under this plan within 60 days after a termination of employment as described in this paragraph.
A Change of Control under the plan means the occurrence of any of the following events: (i) the sale or disposition, in one or a series of related transactions, of all or substantially all of the assets of the Company to any person or group (as such terms are defined in Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934, or the Exchange Act) other than certain permitted entities affiliated with us or our pre-reorganization affiliate shareholders or (ii) any person or group, other than such permitted entities, becomes the beneficial owner (as defined in Rules 13d-3 and l3d-5 under the Exchange Act), directly or indirectly, of greater than or equal to 50% of the total voting power of the voting stock of the Company, including by way of merger, consolidation or otherwise, except where one or more of our pre-reorganization affiliate shareholders and/or their respective affiliates, immediately following such merger, consolidation or other transaction, continue to have the ability to designate or elect a majority of the board of directors of the Company (or the board of directors of the resulting entity or its parent company). A transaction or series of transactions that would otherwise not constitute a Change of Control is treated as a Change of Control for purposes of the Named Executive Officers entitlements under the plan if clause (i), above, is satisfied in respect of the business or division in which such executive is principally engaged.
Termination for Cause under the plan has the same meaning as termination for Cause under Mr. McElyas employment agreement, described above. The circumstances that constitute reasons under the plan for which a Named Executive Officer may terminate his employment and be entitled to severance benefits as if he was terminated without Cause are as follows: (i) for Messrs. McElya, Hasler, Campbell, Stephenson, and Verwilst, a significant adverse change in the nature or scope of the authorities, powers, functions, responsibilities or duties attached to the position held by the executive immediately prior to the Change in Control, (ii) a reduction in the executives base salary or opportunities for incentive compensation under applicable our plans and programs, (iii) the termination or denial of the executives rights to employee benefits or a reduction in the scope or aggregate value thereof, (iv) any material breach of its obligations under the plan by us or any successor or (v) a requirement by the us that the executive move his principal work location more than 50 miles; in each case other
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than (v) unless remedied by us within ten calendar days following notice from the executive of such circumstances. Under the plan, Mr. McElya may voluntarily terminate his employment for any reason or without reason during the thirty-day period immediately following the date that is six months after a Change of Control has occurred (other than a Change of Control related to an initial public offering) and receive the severance benefits applicable to termination without Cause.
The plan also provides that if any payment or the amount of benefits due under the plan or otherwise would be considered an excess parachute payment that subjects the Named Executive Officer to excise tax under Internal Revenue Code Section 4999, then we will make an additional gross-up payment to the Named Executive Officer to reimburse him for such taxes (and any taxes due on the gross-up payment).
Finally, the plan provides that if the payment of any money or other benefit due under the plan could cause the application of an accelerated or additional tax to a Named Executive Officer under Internal Revenue Code Section 409A, such payment or benefit will be deferred or otherwise restructured to avoid such acceleration or additional tax.
If a Named Executive Officers employment is terminated for any other reason, then no amounts are payable under the plan.
In exchange for the benefits provided under the plan, each Named Executive Officer agrees not to compete with us and not to solicit or interfere with any of our employees or customers for a two-year period (for all Named Executive Officers) after his termination of employment, and agrees not to disclose confidential and proprietary information. Each Named Executive Officer is also required to execute a release of all claims against us as a condition to receiving the severance payment and benefits.
Director compensation
The following table sets forth information regarding the compensation received by each of our non-employee directors during the year ended December 31, 2009.
Name (a) |
Fees
Earned or Paid in Cash (b) |
Stock
Awards (c)(6) |
Option
Awards (d) |
All Other
Compensation (g) |
Total
(h) |
||||||||
Gerald J. Cardinale |
$ | | (1) | | | | $ | | |||||
Gary L. Convis |
$ | 66,125 | (2) | | | | $ | 66,125 | |||||
Jack Daly |
$ | | (1) | | | | | ||||||
S. A. Johnson |
$ | 127,625 | (3) | | | | $ | 127,625 | |||||
Leo F. Mullin |
$ | | (1) | | | | | ||||||
James A. Stern |
$ | | (1) | | | | | ||||||
Steven A. Van Oss |
$ | 76,125 | (4) | | | | $ | 76,125 | |||||
Kenneth L. Way |
$ | 77,625 | (5) | | | | $ | 77,625 |
(1) | As officers or nominees of our pre-reorganization affiliate shareholders, Messrs. Cardinale, Daly, Mullin and Stern were not entitled to compensation for serving as a director or member of any committee of our board of directors. |
(2) | Represents $60,125 ($65,000 minus 10% pay reduction for the first three quarters) for Mr. Convis annual outside director fee and $6,000 for attendance at meetings of our board of directors in 2009. |
(3) | Represents $60,125 ($65,000 minus 10% pay reduction for the first three quarters) for Mr. Johnsons annual outside director fee, $60,000 as a transitional fee paid to Mr. Johnson, who served prior to 2009 as the Companys Lead Director, and $7,500 for attendance at meetings of our board of directors in 2009. |
(4) | Represents $60,125 ($65,000 minus 10% pay reduction for the first three quarters) for Mr. Van Oss annual outside director fee, $10,000 for his service as Chairman of the audit committee, and $6,000 for attendance at meetings of our board of directors in 2009. |
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(5) | Represents $60,125 ($65,000 minus 10% pay reduction for the first three quarters) for Mr. Ways annual outside director fee, $10,000 for his service as Chairman of the compensation committee, and $ 7,500 for attendance at meetings of our board of directors in 2009. |
(6) | The amount shown in column (c) represents the grant date fair value associated with Company matching stock units allocated under the Management Stock Purchase Plan as determined pursuant to ASC Topic 718. Because the Company was cancelled upon emergence from chapter 11 under our plan of reorganization, the value of the Company common stock as of December 31, 2009 is deemed to be zero. |
Summary of director compensation for 2009
None of our directors who were officers or nominees of our pre-reorganization affiliate shareholders received any compensation for serving as a director or as a member or chair of a committee of our board of directors during 2009. Members of our board of directors who were not employees of the Company or officers, nominees or employees of our pre-reorganization affiliate shareholders were compensated with an outside director fee in the amount of $65,000 per year (which was reduced by 10% for the first three quarters of 2009) and, if they served as chair of a committee of our board of directors, an additional fee of $10,000 per year. Our directors who were not employees of the Company or officers, nominees or employees of our pre-reorganization affiliate shareholders also received $1,500 per meeting of the our board of directors that such members attended, and were eligible to receive grants of non-qualified and incentive stock options and other stock-based awards under our Stock Incentive Plan.
Director compensation following emergence from bankruptcy
On the day after emergence from bankruptcy, stock options and restricted stock awards were granted to the following non-employee directors in accordance with form of award agreements adopted by our board of directors: Orlando Bustos, Larry Jutte, David Mastrocola, Stephen A. Van Oss, and Kenneth L. Way. Each director was granted 4,408 shares of restricted common stock and 9,731 options to purchase common stock (with an exercise price per share equal to the plan of reorganization value of $25.52).
The time-based stock options and time-based restricted stock generally vest in installments equal to 50% on the first anniversary of the date of grant, and 25% on each of the second and third anniversaries of the date of grant, while the directors remain in service with the Company. The equity awards vest 100% in the event of a Change of Control. Upon termination of service due to the directors death, Disability or as the result of an involuntary removal by action of the stockholders, the awards vest on a pro-rata basis based on the following fraction, the numerator of which is the days served as a director from the later of the date of grant or the most recent anniversary of the date of grant through the termination date and the denominator of which is 365, multiplied by: 1) 50%, if such termination occurs prior to the first anniversary of the date of grant, or 2) 25%, if such termination occurs between the first and third anniversaries of the date of grant, provided that, where applicable, upon a termination due to a Termination Event of the Stockholder (as such terms are defined in the director nomination agreement pursuant to which such director was nominated), the equity would vest with respect to 50% of the award if such termination occurs prior to the first anniversary and with respect to 25% of the award granted thereunder if such termination occurs between the first and third anniversaries.
Effective as of May 28, 2010, our board of directors also approved the following compensation to be paid to the non-employee directors: an annual cash retainer of $75,000 per year, to be paid quarterly, a committee chair fee of $10,000 per year, paid quarterly, for service as chair of a standing committee of our board of directors, reimbursement of travel, accommodation and other expenses for meeting fees and expenses (with no per-meeting fees for attendance), and the equity awards described above. In addition, our bylaws provide for broad indemnification of directors.
Additionally, pursuant to its nomination agreement, Oak Hill Advisors, L.P. or its affiliates will be receiving the compensation described above (including the equity grants pursuant to substantially similar terms and substantially similar award agreements) in lieu of Glenn R. August.
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PRINCIPAL STOCKHOLDERS
The following table indicates information to our knowledge, as of July 20, 2010, regarding the beneficial ownership of our common stock by:
|
each of our directors; |
|
each of our named executive officers; |
|
each stockholder known by us to beneficially hold five percent or more of our common stock; and |
|
all of our executive officers and directors as a group. |
Beneficial ownership is determined under the rules of the SEC and generally includes voting or investment power with respect to securities. Unless indicated below, to our knowledge, the persons and entities named in the table have sole voting and investment power with respect to all shares beneficially owned, subject to community property laws where applicable. Shares of common stock subject to options, warrants or shares of 7% preferred stock that are currently exercisable or convertible, or exercisable or convertible within 60 days of July 20, 2010, are deemed to be outstanding and to be beneficially owned by the person holding such options, warrants or shares of our 7% preferred stock for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
All percentages and share amounts are approximate based on current information available to us. The information available to us may be incomplete.
Unless otherwise noted, the address for each person listed on the table is c/o Cooper-Standard Holdings Inc., 39550 Orchard Hill Place Drive, Novi, Michigan 48375.
Name and Address of Beneficial Owner |
Amount and
Nature of Beneficial Ownership |
Percent of All
Common Stock |
|||
Significant Owners: |
|||||
Silver Point Capital L.P.(1) |
4,170,589 | 20.9 | % | ||
Oak Hill Advisors, L.P.(2) |
4,146,251 | 20.8 | % | ||
Barclays Bank PLC(3) |
2,893,863 | 14.7 | % | ||
Capital Research and Management Company(4) |
2,238,114 | 11.7 | % | ||
Lord, Abbett & Co. LLC(5) |
1,768,836 | 9.5 | % | ||
TCW Asset Management Company(6) |
1,010,878 | 5.4 | % | ||
Directors and named executive officers: |
|||||
James S. McElya(7) |
523,370 | 2.8 | % | ||
Edward A. Hasler(8) |
85,988 | * | |||
Allen J. Campbell(9) |
76,040 | * | |||
Keith D. Stephenson(10) |
76,040 | * | |||
Michael C. Verwilst(11) |
47,850 | * | |||
Glenn R. August(2) |
| | |||
Orlando A. Bustos(12) |
22,139 | * | |||
Larry Jutte(13) |
4,408 | * | |||
David J. Mastrocola(13) |
4,408 | * | |||
Stephen A. Van Oss(13) |
4,408 | * | |||
Kenneth L. Way(13) |
4,408 | * | |||
Directors and executive officers as a group (14 persons) |
973,376 | 5.3 | % |
* | Less than 1% of issued and outstanding shares of common stock. |
(1) |
Includes: (i) 732,187 shares of common stock held by Silver Point Capital Fund, L.P. (SPCF); (ii) 318,634 shares of common stock issuable upon conversion of preferred stock held by SPCF; (iii) 159,016 shares of common stock issuable |
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upon exercise of warrants held by SPCF; (iv) 1,841,911 shares of common stock held by Silver Point Capital Offshore Master Fund, L.P. (SPCOMF); (v) 743,474 shares of common stock issuable upon conversion of preferred stock held by SPCOMF; and (vi) 375,368 shares of common stock issuable upon exercise of warrants held by SPCOMF. Silver Point Capital, L.P. shares voting and investment power with SPCF and SPCOMF. The address for Silver Point Capital L.P. is Two Greenwich Plaza, 1st Floor, Greenwich, CT 06830. |
(2) | Includes: (i) 3,228 shares of common stock held by Stichting MN Services US High Yield Fonds (Stichting I); (ii) 17,853 shares of common stock held by Stichting Pensioenfonds Van de Metalektro (PME) (Stichting II); (iii) 14,625 shares of common stock held by Stichting Pensioenfonds Metaal en Techniek (Stichting III); (iv) 39,046 shares of common stock held by Future Fund Board of Guardians (Future Fund); (v) 66,773 shares of common stock issuable upon conversion of preferred stock held by Future Fund; (vi) 26,441 shares of common stock issuable upon exercise of warrants held by Future Fund; (vii) 31,291 shares of common stock held by Lerner Enterprises, LLC (Lerner); (viii) 16,640 shares of common stock issuable upon conversion of preferred stock held by Lerner; (ix) 7,840 shares of common stock issuable upon exercise of warrants held by Lerner; (x) 504,910 shares of common stock held by Oak Hill Credit Alpha Master Fund, L.P. (OH-I); (xi) 28,914 shares of common stock issuable upon exercise of warrants held by OH-I; (xii) 447,530 shares of common stock held by Oak Hill Credit Opportunities Financing, Ltd. (OH-II); (xiii) 240,855 shares of common stock issuable upon conversion of preferred stock held by OH-II; (xiv) 107,504 shares of common stock issuable upon exercise of warrants held by OH-II; (xv) 168,908 shares of common stock held by OHA Strategic Credit Fund, L.P. (OH-III); (xvi) 8,192 shares of common stock issuable upon exercise of warrants held by OH-III; (xvii) 48,795 shares of common stock held by OHA Strategic Credit Master Fund II, L.P. (OH-IV); (xviii) 81,315 shares of common stock issuable upon conversion of preferred stock held by OH-IV; (xix) 32,200 shares of common stock issuable upon exercise of warrants held OH-IV; (xx) 174,989 shares of common stock held by OHA Strategic Credit Master Fund, L.P. (OH-V); (xxi) 288,551 shares of common stock issuable upon conversion of preferred stock held by OH-V; (xxii) 114,266 shares of common stock issuable upon exercise of warrants held OH-V; (xxiii) 742,050 shares of common stock held by OHA Strategic Credit Master Fund (Parallel II), L.P. (OH-VI); (xxiv) 35,866 shares of common stock issuable upon exercise of warrants held OH-VI; (xxv) 67,259 shares of common stock held by OHA Strategic Credit Fund (Parallel I), L.P. (OH-VII); (xxvi) 3,253 shares of common stock issuable upon exercise of warrants held OH-VII; (xxvii) 20,825 shares of common stock held by OHSF Financing, Ltd. (OH-VIII); (xxviii) 1,131 shares of common stock issuable upon exercise of warrants held OH-VIII; (xxix) 278,498 shares of common stock held by OHSF II Financing, Ltd. (OH-IX); (xxx) 375,208 shares of common stock issuable upon conversion of preferred stock held by OH-IX; and (xxxi) 151,495 shares of common stock issuable upon exercise of warrants held OH-IX;. Oak Hill Advisors, L.P. (OHA) is the investment advisor to Stichting I, Stichting II, Stichting III, Future Fund, Lerner, OH-I, OH-II, OH-III, OH-IV, OH-V, OH-VI, OH-VII, OH-VIII, and OH-IX, and certain of its affiliates and principals, either directly or indirectly, exercise voting and dispositive power over the securities owned by them. OHA and its affiliates and principals disclaim beneficial ownership of such securities, except to the extent of their direct pecuniary interest therein. Mr. August is President and Senior Partner for Oak Hill Advisors, L.P. and may be deemed to have beneficial ownership of the foregoing securities. Mr. August disclaims beneficial ownership of the foregoing securities except to the extent of his pecuniary interest in such securities. The address for Oak Hill Advisors, L.P. is 1114 Avenue of the Americas, 27th Floor, New York, NY 10036. |
(3) | Includes: (i) 743,198 shares of common stock held by Barclays Bank PLC; (ii) 867,023 shares of common stock issuable upon conversion of preferred stock held by Barclays Bank PLC; (iii) 439,672 shares of common stock issuable upon exercise of warrants held by Barclays Bank PLC; and (iv) 843,971 shares of common stock held by Barclays Capital Inc. The beneficial ownership information of Barclays Bank PLC reflected in the table above does not take into account transactions in our securities entered into by Barclays Bank PLC and Barclays Capital Inc. that have not settled as of July 20, 2010. Taking all of these transactions into account, the beneficial ownership information of Barclays Bank PLC reflected in the table above would be reduced by 751,291 shares of common stock and would result in Barclays Bank PLC beneficially owning 10.9% of our common stock. Barclays Capital Inc. is an indirectly, wholly-owned subsidiary of Barclays Bank PLC. The address for Barclays Bank PLC is 745 Seventh Avenue, New York, NY 10019. |
(4) | Includes: (i) 123,234 shares of common stock held by American Funds Insurance Series, Asset Allocation Fund (AFIS AAF); (ii) 85,545 shares of common stock issuable upon conversion of preferred stock held by AFIS AAF; (iii) 38,220 shares of common stock issuable upon exercise of warrants held by AFIS AAF; (iv) 4,134 shares of common stock held by American Funds Insurance Series, Global Bond Fund (AFIS GBF); (v) 289 shares of common stock issuable upon exercise of warrants held by AFIS GBF; (vi) 62,139 shares of common stock held by American Funds Insurance Series, High Income Bond Fund (AFIS HIBF); (vii) 21,385 shares of common stock issuable upon conversion of preferred stock held by AFIS HIBF; (viii) 11,422 shares of common stock issuable upon exercise of warrants held by AFIS HIBF; (ix) 40,522 shares of common stock held by Capital World Bond Fund, Inc. (CapWorld); (x) 2,837 shares of common stock issuable upon exercise of warrants held by CapWorld; (xi) 85,450 shares of common stock held by The Bond Fund of America, Inc. (BFA); (xii) 5,096 shares of common stock issuable upon exercise of warrants held by BFA; and (xiii) 586,012 shares of common stock held by The Income Fund of America, Inc. (IFA). Capital Research and Management Company, as investment adviser, has sole voting and investment power over the securities owned by AFIS AAF, AFIS GBF, AFIS HIBF, CapWorld, BFA and IFA. The address for Capital Research and Management Company is 630 Fifth Avenue, New York, NY 10111. |
129
(5) | Includes: (i) 56,469 shares of common stock held by Advanced Series TrustAST Lord Abbett Bond Debenture Portfolio (AST); (ii) 7,140 shares of common stock issuable upon conversion of preferred stock held by AST; (iii) 6,262 shares of common stock issuable upon exercise of warrants held by AST; (iv) 752,939 shares of common stock held by Lord Abbett Bond-Debenture Fund, Inc. (LA-I); (v) 95,135 shares of common stock issuable upon conversion of preferred stock held by LA-I; (vi) 83,503 shares of common stock issuable upon exercise of warrants held by LA-I; (vii) 112,940 shares of common stock held by Lord Abbett Investment TrustLord Abbett High Yield Fund (LA-II); (viii) 14,275 shares of common stock issuable upon conversion of preferred stock held by LA-II; (ix) 12,524 shares of common stock issuable upon exercise of warrants held by LA-II; (x) 131,763 shares of common stock held by Lord Abbett Research Fund, Inc.Lord Abbett Capital Structure Fund (LA-III); (xi) 16,648 shares of common stock issuable upon conversion of preferred stock held by LA-III; (xii) 14,613 shares of common stock issuable upon exercise of warrants held by LA-III; (xiii) 22,587 shares of common stock held by Lord Abbett Series Fund, Inc.Bond Debenture Portfolio (LA-IV); (xiv) 2,853 shares of common stock issuable upon conversion of preferred stock held by LA-IV; (xv) 2,504 shares of common stock issuable upon exercise of warrants held by LA-IV; (xvi) 3,764 shares of common stock held by Lord Abbett Series Fund, Inc.Capital Structure Portfolio (LA-V); (xvii) 481 shares of common stock issuable upon conversion of preferred stock held by LA-V; (xviii) 417 shares of common stock issuable upon exercise of warrants held by LA-V; (xix) 188,233 shares of common stock held by MET Investors Series TrustLord Abbett Bond Debenture Portfolio (LA-VI); (xx) 23,784 shares of common stock issuable upon conversion of preferred stock held by LA-VI; (xxi) 20,875 shares of common stock issuable upon exercise of warrants held by LA-VI; (xxii) 50,823 shares of common stock held by MHAM US Income Open (MHAM); (xxiii) 6,423 shares of common stock issuable upon conversion of preferred stock held by MHAM; (xxiv) 5,636 shares of common stock issuable upon exercise of warrants held by MHAM; (xxv) 107,294 shares of common stock held by Mizuho US High Yield Open (Mizuho); (xxvi) 13,559 shares of common stock issuable upon conversion of preferred stock held by Mizuho; (xxvii) 11,899 shares of common stock issuable upon exercise of warrants held by Mizuho; (xxviii) 2,824 shares of common stock held by Pollux Holdings LP (Pollux); (xxix) 356 shares of common stock issuable upon conversion of preferred stock held by Pollux; and (xxx) 312 shares of common stock issuable upon exercise of warrants held by Pollux. Lord, Abbett & Co. LLC, as investment advisor, has sole voting and investment power over the securities owned by AST, LA-I, LA-II, LA-III, LA-IV, LA-V, LA-VI, MHAM, Mizuho and Pollux. The address for Lord, Abbett & Co. LLC is 90 Hudson Street, Jersey City, NJ 07302. |
(6) | Includes: (i) 133,855 shares of common stock held by TCW Shared Opportunity Fund, IV, L.P. (TCW-IV); (ii) 38,116 shares of common stock issuable upon conversion of preferred stock held by TCW-IV; (iii) 16,745 shares of common stock issuable upon exercise of warrants held by TCW-IV; (iv) 48,199 shares of common stock held by TCW Shared Opportunity Fund, IVB, L.P. (TCW-IVB); (v) 7,771 shares of common stock issuable upon conversion of preferred stock held by TCW-IVB; (vi) 12,035 shares of common stock issuable upon exercise of warrants held by TCW-IVB;( vii) 534,867 shares of common stock held by TCW Shared Opportunity Fund, V, L.P. (TCW-V); (viii) 134,752 shares of common stock issuable upon conversion of preferred stock held by TCW-V; and (ix) 84,539 shares of common stock issuable upon exercise of warrants held by TCW-V. The investment adviser to TCW-IV, TCW-IVB and TCW-V is TCW Asset Management Company, an SEC-registered investment adviser, and, as such, has dispositive and voting power with respect to the shares held by the funds it advises. The address for TCW Asset Management Company is 11100 Santa Monica Boulevard, Suite 2000, Los Angeles, CA 90025. |
(7) | Includes 430,015 shares of restricted common stock and 21,757 shares of restricted preferred stock that are convertible into 93,355 shares of common stock, which were granted in connection with our emergence from bankruptcy. |
(8) | Includes 70,680 shares of restricted common stock and 3,570 shares of restricted preferred stock that are convertible into 15,318 shares of common stock, which were granted in connection with our emergence from bankruptcy. |
(9) | Includes 62,417 shares of restricted common stock and 3,175 shares of restricted preferred stock that are convertible into 13,623 shares of common stock, which were granted in connection with our emergence from bankruptcy. |
(10) | Includes 62,417 shares of restricted common stock and 3,175 shares of restricted preferred stock c that are convertible into 13,623 shares of common stock, which were granted in connection with our emergence from bankruptcy. |
(11) | Includes 39,277 shares of restricted common stock and 1,998 shares of restricted preferred stock that are convertible into 8,573 shares of common stock. |
(12) | Includes 17,731 shares of common stock purchased in the open market and 4,408 shares of restricted common stock, which were granted in connection with our emergence from bankruptcy. |
(13) | Represents of 4,408 shares of restricted common stock granted to each of these directors in connection with our emergence from bankruptcy. |
130
Pursuant to our plan of reorganization, we have filed with the SEC a registration statement on Form S-1 under the Securities Act, of which this prospectus forms a part, to register resales of securities that we issued in connection with our emergence from bankruptcy. The securities that we have registered for resale were issued to certain holders of our prepetition senior notes and prepetition senior subordinated notes to raise a portion of the funds we needed to emerge from bankruptcy on May 27, 2010. Up to 17,166,288 shares of our common stock, 1,010,345 shares of our 7% preferred stock and 1,693,827 of our warrants are being offered by this prospectus, all of which are being registered for sale for the accounts of the selling security holders. The selling security holders acquired the shares of our common stock and 7% preferred stock and warrants on May 27, 2010 pursuant to our rights offering and the commitment agreement backstopping our rights offering, in each case, in accordance with our plan of reorganization in transactions exempt from the registration requirements of the Securities Act.
The securities are being registered to permit public sales of the securities, and the selling security holders may offer the securities for resale from time to time pursuant to this prospectus. However, the selling security holders are under no obligation to sell any of the securities offered pursuant to this prospectus. The selling security holders may also sell, transfer or otherwise dispose of all or a portion of their securities in transactions exempt from the registration requirements of the Securities Act or pursuant to another effective registration statement covering those securities. We may from time to time include additional selling security holders in amendments to this prospectus.
All information with respect to security ownership has been furnished by or on behalf of the selling security holders and is as of July 20, 2010. We believe, based on information supplied by the selling security holders and subject to community property laws where applicable, that except as may otherwise be indicated in the footnotes to the table below, each selling security holder has sole voting and dispositive power with respect to the securities reported as beneficially owned by it. Because the selling security holders may sell all, part or none of the securities held by them, no estimates can be given as to the number of securities that will be held by each selling security holder upon termination of any offering made hereby. In addition, the selling security holders may have sold, transferred or otherwise disposed of, or may sell, transfer or otherwise dispose of, at any time and from time to time, the securities held by them in transactions exempt from the registration requirements of the Securities Act after the date on which it provided the information set forth on the table below. For purposes of the table below, however, we have assumed that after termination of this offering, none of the securities offered by this prospectus will be held by the selling security holders.
The following table sets forth the names of the selling security holders, the number of shares of common stock, shares of 7% preferred stock and warrants beneficially owned by them as of July 20, 2010, the number of shares of common stock, shares of our 7% preferred stock and warrants being offered by them, the number of shares of common stock, shares of our 7% preferred stock and warrants each selling security holder will beneficially own if the security holder sells all of the securities being registered and each selling security holders percentage ownership of our total outstanding common stock if all the securities in the offering are sold. As used in this prospectus, selling security holders includes the successors-in-interest, donees, transferees or others who may later hold the selling security holders interests.
Except as provided in the footnotes to the following table, none of the selling security holders has had any position with, held any office of or had any other material relationship with us or our affiliates during the past three years.
The percentage of our outstanding common stock beneficially owned by the selling security holders after the offering is determined under the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of our common stock that may be issued upon the conversion of our outstanding 7% preferred stock or upon the exercise of our outstanding warrants and options, in each case within 60 days of July 20, 2010, are deemed to be outstanding and to be beneficially owned by the person holding such securities for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
131
Name of Selling Security Holder |
Number of
Shares of Common Stock Owned Prior to Offering(1) |
Number
of Shares of 7% Preferred Stock Owned Prior to Offering |
Number
of Warrants Owned Prior to Offering |
Maximum
Number of Shares of Common Stock to be Sold Pursuant to this Prospectus(2) |
Maximum
Number of Shares of 7% Preferred Stock to be Sold Pursuant to this Prospectus |
Maximum
Number of Warrants to be Sold Pursuant to this Prospectus |
Shares of Common
Stock Owned After Offering(3) |
Shares of 7%
Preferred Stock Owned After Offering(3) |
Warrants
Owned After Offering(3) |
||||||||||||||||
Number(4) |
Percent
of Class |
Number |
Percent
of Class |
Number |
Percent
of Class |
||||||||||||||||||||
1798 Credit Opportunity Fund Ltd.(5) |
55,040 | | | 55,040 | | | | | | | | | |||||||||||||
1798 Relative Value Master Fund Ltd.(5) |
275,273 | 42,940 | | 399,841 | 42,940 | | | | | | | | |||||||||||||
1798 US Special Situations Master Fund(5) |
19,186 | 7,578 | | 51,696 | 7,578 | | | | | | | | |||||||||||||
Admiral Flagship Master Fund, Ltd. |
29,280 | | | 29,280 | | | | | | | | | |||||||||||||
Advanced Series Trust - AST Lord Abbett Bond Debenture Portfolio(6) |
56,469 | 1,664 | 6,262 | 58,058 | 1,664 | 2,788 | 11,813 | * | | | 3,474 | * | |||||||||||||
Advent Global Opportunity Master Fund(7) |
24,548 | | | 24,548 | | | | | | | | | |||||||||||||
Alden Global Distressed Opportunities Fund LP(8) |
317,689 | | | 317,689 | | | | | | | | | |||||||||||||
American Funds Insurance Series, Asset Allocation Fund(9) |
123,234 | 19,937 | 38,220 | 221,049 | 19,937 | 33,877 | 25,950 | * | | | 4,343 | * | |||||||||||||
American Funds Insurance Series, Global Bond Fund(9) |
4,134 | | 289 | 3,440 | | | 983 | * | | | 289 | * | |||||||||||||
American Funds Insurance Series, High Income Bond Fund(9) |
62,139 | 4,984 | 11,422 | 77,449 | 4,984 | 8,469 | 17,497 | * | | | 2,953 | * | |||||||||||||
American High Income Trust(9) |
1,139,235 | 99,687 | 190,869 | 1,102,501 | 99,687 | 169,382 | 655,339 | 3.6 | % | | | 21,487 | * | ||||||||||||
APG Fixed Income Credits Pool(10) |
174,199 | | 11,583 | 146,400 | | | 39,382 | * | | | 11,583 | * | |||||||||||||
Armory Master Fund, Ltd.(11) |
134,172 | | 9,266 | 117,120 | | | 26,318 | * | | | 9,266 | * | |||||||||||||
AST Capital Trust Co. Collective Investment TrustDCM High Yield Bond Fund(12) |
878 | | | 878 | | | | | | | | | |||||||||||||
Aviary Associates LP(13) |
49,619 | | 3,474 | 41,280 | | | 11,813 | * | | | 3,474 | * | |||||||||||||
Backspin Limited Partnership(14) |
17,976 | | 1,195 | 15,108 | | | 4,063 | * | | | 1,195 | * | |||||||||||||
Barclays Bank PLC(15) |
743,198 | 202,066 | 439,672 | 1,994,757 | 202,066 | 423,456 | 55,135 | * | | | 16,216 | * | |||||||||||||
Barclays Capital Inc.(15) |
843,971 | | | 449,070 | | | 394,901 | 2.1 | % | | | | | ||||||||||||
Brandy Trust Multi Strategy NGA LLC(16) |
32,749 | | 2,294 | 27,245 | | | 7,798 | * | | | 2,294 | * | |||||||||||||
Brownstone Investment Group LLC(17) |
54,494 | | 3,808 | 45,354 | | | 13,248 | * | | | 3,808 | * | |||||||||||||
BTIG LLC(18) |
9,049 | | 903 | 6,881 | | | 3,071 | * | | | 903 | * |
132
Name of Selling Security Holder |
Number of
Shares of Common Stock Owned Prior to Offering(1) |
Number
of Shares of 7% Preferred Stock Owned Prior to Offering |
Number
of Warrants Owned Prior to Offering |
Maximum
Number of Shares of Common Stock to be Sold Pursuant to this Prospectus(2) |
Maximum
Number of Shares of 7% Preferred Stock to be Sold Pursuant to this Prospectus |
Maximum
Number of Warrants to be Sold Pursuant to this Prospectus |
Shares of Common
Stock Owned After Offering(3) |
Shares of 7%
Preferred Stock Owned After Offering(3) |
Warrants
Owned After Offering(3) |
|||||||||||||||||
Number(4) |
Percent
of Class |
Number |
Percent
of Class |
Number |
Percent
of Class |
|||||||||||||||||||||
California Public Employees Retirement System (CalPERS)(19) |
73,200 | | | 73,200 | | | | | | | | | ||||||||||||||
Capital World Bond Fund, Inc.(9) |
40,522 | | 2,837 | 33,712 | | | 9,647 | * | | | 2,837 | * | ||||||||||||||
CC Arbitrage, Ltd.(20) |
89,469 | | 5,948 | 75,191 | | | 20,226 | * | | | 5,948 | * | ||||||||||||||
Contrarian Distressed Equity, L.P.(21) |
60,338 | | 4,225 | 50,197 | | | 14,366 | * | | | 4,225 | * | ||||||||||||||
Contrarian Long Short, L.P.(21) |
71,982 | | 5,040 | 59,884 | | | 17,138 | * | | | 5,040 | * | ||||||||||||||
David Fishel IRA |
29,280 | | 2,316 | 29,280 | | | 2,316 | * | | | 2,316 | * | ||||||||||||||
David Utter c/o PrinceRidge Group, LLC |
882 | | | 688 | | | 194 | * | | | | | ||||||||||||||
DuPont Pension Trust(12) |
35,721 | | | 35,721 | | | | | | | | | ||||||||||||||
Event Driven, A Series of Underlying Funds Trust(22) |
34,839 | | | 29,280 | | | 5,559 | * | | | | | ||||||||||||||
Future Fund Board of Guardians(23) |
39,046 | 15,562 | 26,441 | 132,260 | 15,562 | 26,441 | | | | | | | ||||||||||||||
Golden Tree Master Fund Ltd.(24) |
273,349 | | 3,498 | 41,555 | | | 235,292 | 1.3 | % | | | 3,498 | * | |||||||||||||
Golden Tree Master Fund II Ltd.(24) |
41,711 | | 498 | 5,916 | | | 36,292 | * | | | 498 | * | ||||||||||||||
GPC 83, LLC(25) |
4,528 | | 301 | 3,806 | | | 1,023 | * | | | 301 | * | ||||||||||||||
Gracie Credit Opportunities Master Fund, LP(25) |
169,670 | | 11,281 | 142,593 | | | 38,358 | * | | | 11,281 | * | ||||||||||||||
HFR RVA Global Opportunity Master Trust(7) |
30,492 | | | 30,492 | | | | | | | | | ||||||||||||||
Lerner Enterprises, LLC(23) |
31,291 | 3,878 | 7,840 | 48,769 | 3,878 | 6,589 | 7,002 | * | | | 1,251 | * | ||||||||||||||
Lord Abbett Bond-Debenture Fund, Inc.(6) |
752,939 | 22,172 | 83,503 | 774,045 | 22,172 | 37,170 | 157,532 | * | | | 46,333 | 1.9 | % | |||||||||||||
Lord Abbett Investment TrustLord Abbett High Yield Fund(6) |
112,940 | 3,327 | 12,524 | 116,111 | 3,327 | 5,575 | 23,628 | * | | | 6,949 | * | ||||||||||||||
Lord Abbett Research Fund, Inc.Lord Abbett Capital Structure Fund(6) |
131,763 | 3,880 | 14,613 | 135,457 | 3,880 | 6,505 | 27,567 | * | | | 8,108 | * | ||||||||||||||
Lord Abbett Series Fund, Inc.Bond Debenture Portfolio(6) |
22,587 | 665 | 2,504 | 23,220 | 665 | 1,115 | 4,724 | * | | | 1,389 | * | ||||||||||||||
Lord Abbett Series Fund, Inc.Capital Structure Portfolio(6) |
3,764 | 112 | 417 | 3,876 | 112 | 186 | 786 | * | | | 231 | * |
133
Name of Selling Security Holder |
Number of
Shares of Common Stock Owned Prior to Offering(1) |
Number
of Shares of 7% Preferred Stock Owned Prior to Offering |
Number
of Warrants Owned Prior to Offering |
Maximum
Number of Shares of Common Stock to be Sold Pursuant to this Prospectus(2) |
Maximum
Number of Shares of 7% Preferred Stock to be Sold Pursuant to this Prospectus |
Maximum
Number of Warrants to be Sold Pursuant to this Prospectus |
Shares of Common
Stock Owned After Offering(3) |
Shares of 7%
Preferred Stock Owned After Offering(3) |
Warrants
Owned After Offering(3) |
|||||||||||||||||
Number(4) |
Percent
of Class |
Number |
Percent
of Class |
Number |
Percent
of Class |
|||||||||||||||||||||
MET Investors Series TrustLord Abbett Bond Debenture Portfolio(6) |
188,233 | 5,543 | 20,875 | 193,510 | 5,543 | 9,292 | 37,091 | * | | | 9,292 | * | ||||||||||||||
MHAM US Income Open(6) |
50,823 | 1,497 | 5,636 | 52,249 | 1,497 | 2,509 | 10,633 | * | | | 3,127 | * | ||||||||||||||
Michael Finley |
8,269 | | 579 | 6,880 | | | 1,968 | * | | | 579 | * | ||||||||||||||
Mizuho US High Yield Open(6) |
107,294 | 3,160 | 11,899 | 110,304 | 3,160 | 5,297 | 22,448 | * | | | 6,602 | * | ||||||||||||||
Moore Macro Fund LP(26) |
660,487 | | | 660,487 | | | | | | | | | ||||||||||||||
MW Special Situations LP(16) |
9,924 | | 695 | 8,256 | | | 2,363 | * | | | 695 | * | ||||||||||||||
New Finance Alden SPV(8) |
41,280 | | | 41,280 | | | | | | | | | ||||||||||||||
New Generation Limited Partnership(16) |
119,916 | | 8,398 | 99,761 | | | 28,553 | * | | | 8,398 | * | ||||||||||||||
New Generation Turnaround Fund (Bermuda) LP(16) |
234,539 | | 16,425 | 195,119 | | | 55,845 | * | | | 16,425 | * | ||||||||||||||
NGA Ann Arbor Partners LP(16) |
1,488 | | 104 | 1,238 | | | 354 | * | | | 104 | * | ||||||||||||||
Oak Hill Credit Alpha Master Fund, L.P.(23). |
504,910 | | 28,914 | 365,446 | | | 168,378 | * | | | 28,914 | 1.2 | % | |||||||||||||
Oak Hill Credit Opportunities Financing, Ltd.(23) |
447,530 | 56,133 | 107,504 | 630,336 | 56,133 | 95,379 | 165,553 | * | | | 12,125 | * | ||||||||||||||
OHA Strategic Credit Fund, L.P.(23) |
168,908 | | 8,192 | 103,534 | | | 73,567 | * | | | 8,192 | * | ||||||||||||||
OHA Strategic Credit Master Fund II, L.P.(23) |
48,795 | 18,951 | 32,200 | 161,065 | 18,951 | 32,200 | 1,245 | * | | | | | ||||||||||||||
OHA Strategic Credit Master Fund, L.P.(23) |
174,989 | 67,249 | 114,266 | 571,557 | 67,249 | 114,266 | 6,249 | * | | | | | ||||||||||||||
OHA Strategic Credit Master Fund (Parallel II), L.P.(23) |
742,050 | | 35,866 | 453,315 | | | 324,601 | 1.8 | % | | | 35,866 | 1.5 | % | ||||||||||||
OHA Strategic Credit Fund (Parallel I), L.P.(23) |
67,259 | | 3,253 | 41,109 | | | 29,403 | * | | | 3,253 | * | ||||||||||||||
OHSF Financing, Ltd.(23) |
20,825 | | 1,131 | 14,288 | | | 7,668 | * | | | 1,131 | * | ||||||||||||||
OHSF II Financing, Ltd.(23) |
278,498 | 87,445 | 151,495 | 780,013 | 87,445 | 148,583 | 25,188 | * | | | 2,912 | * | ||||||||||||||
Ore Hill Sub Fund Ltd(27) |
148,897 | | 2,688 | 142,448 | | | 9,137 | * | | | 2,688 | * | ||||||||||||||
Pollux Holdings LP(6) |
2,824 | 83 | 312 | 2,902 | 83 | 139 | 580 | * | | | 173 | * | ||||||||||||||
Robert Brian Crews |
453 | | 67 | 200 | | | 320 | * | | | 67 | * |
134
Name of Selling Security Holder |
Number of
Shares of Common Stock Owned Prior to Offering(1) |
Number
of Shares of 7% Preferred Stock Owned Prior to Offering |
Number
of Warrants Owned Prior to Offering |
Maximum
Number of Shares of Common Stock to be Sold Pursuant to this Prospectus(2) |
Maximum
Number of Shares of 7% Preferred Stock to be Sold Pursuant to this Prospectus |
Maximum
Number of Warrants to be Sold Pursuant to this Prospectus |
Shares of Common
Stock Owned After Offering(3) |
Shares of 7%
Preferred Stock Owned After Offering(3) |
Warrants
Owned After Offering(3) |
|||||||||||||||||
Number(4) |
Percent
of Class |
Number |
Percent
of Class |
Number |
Percent
of Class |
|||||||||||||||||||||
Schroder Credit Renaissance Fund, Ltd(28) |
43,920 | | | 43,920 | | | | | | | | | ||||||||||||||
Seaport Group LLC Profit Sharing Plan(29) |
148,097 | | 9581 | 121,101 | | | 36,577 | * | | | 9,581 | * | ||||||||||||||
SG Aurora Master Fund L.P.(30) |
42,408 | | 2,969 | 35,281 | | | 10,096 | * | | | 2,969 | * | ||||||||||||||
Silver Point Capital Fund, L.P.(31) |
732,187 | 74,260 | 159,016 | 794,877 | 74,260 | 127,037 | 414,960 | 2.3 | % | | | 31,979 | 1.3 | % | ||||||||||||
Silver Point Capital Offshore Master Fund, L.P.(31) |
1,841,911 | 173,272 | 375,368 | 1,977,784 | 173,272 | 296,419 | 904,020 | 4.9 | % | | | 78,949 | 3.3 | % | ||||||||||||
Simran Pre-Event Driven Activist Opportunity Master Fund LTD(22) |
14,640 | | 4,158 | 14,640 | | | 4,158 | * | | | 4,158 | * | ||||||||||||||
SN3 SIP, Ltd.(24) |
44,097 | | 637 | 7,568 | | | 37,166 | * | | | 637 | * | ||||||||||||||
SOF Investments, L.P.(32) |
733,241 | | 25,483 | 322,081 | | | 436,643 | 2.4 | % | | | 25,483 | 1.1 | % | ||||||||||||
TCW Shared Opportunity Fund IV, L.P.(33) |
133,855 | 8,883 | 16,745 | 182,414 | 8,883 | 14,892 | 6,301 | * | | | 1,853 | * | ||||||||||||||
TCW Shared Opportunity Fund IVB, L.P.(33) |
48,199 | 1,811 | 12,035 | 37,405 | 1,811 | 3,035 | 30,600 | * | | | 9000 | * | ||||||||||||||
TCW Shared Opportunity Fund V, L.P.(33) |
534,867 | 31,405 | 84,539 | 645,736 | 31,405 | 52,650 | 76,533 | * | | | 31,889 | 1.3 | % | |||||||||||||
TD High Yield Income Fund(34) |
602,794 | 42,097 | 105,326 | 770,600 | 42,097 | 70,576 | 118,149 | * | | | 34,750 | 1.4 | % | |||||||||||||
The Bond Fund of America, Inc.(9) |
85,450 | | 5,096 | 60,544 | | | 30,002 | * | | | 5,096 | * | ||||||||||||||
The Income Fund of America, Inc.(9) |
586,012 | | | | | | 586,012 | 3.2 | % | | | | | |||||||||||||
UBS AG, London Branch(35) |
544,150 | 10,104 | 30,709 | 470,447 | 10,104 | | 73,703 | * | | | 30,709 | 1.3 | % | |||||||||||||
VSO Master Fund, Ltd.(36) |
60,659 | | 3,475 | 15,723 | | | 48,411 | * | | | 3,475 | * | ||||||||||||||
William M. Stern |
348 | | 23 | 293 | | | 78 | * | | | 23 | * | ||||||||||||||
Wilshire Institutional Master Fund SPCWilshire Castle Creek Covert Arb Segregated Portfolio(20) |
1,984 | | 132 | 1,668 | | | 448 | * | | | 132 | * |
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* | Less than 1% of class |
(1) | Does not include shares of common stock issuable upon the conversion of 7% preferred stock and exercise of warrants owned by the beneficial owner. |
(2) | Includes shares of common stock issuable upon the conversion of 7% preferred stock and exercise of warrants offered by the selling security holders. |
(3) | Represents the amount of securities that will be held by the selling security holders after completion of this offering based on the assumptions that (a) all securities registered for sale by the registration statement of which this prospectus forms a part will be sold and (b) that no other securities are acquired or sold by the selling security holders prior to completion of this offering. However, the selling security holders may sell all, some or none of the securities offered pursuant to this prospectus and may sell other securities that they may own pursuant to another registration statement under the Securities Act or sell some or all of their securities pursuant to an exemption from the registration provisions of the Securities Act. |
(4) | Includes shares of common stock issuable upon the conversion of 7% preferred stock and exercise of warrants beneficially owned by selling security holders after completion of the offering. |
(5) | Gary Lehrman and Aziz Nahas share voting and investment power over the securities owned by the selling security holder. |
(6) | Lord, Abbett & Co. LLC, as investment advisor, has sole voting and investment power over the securities owned by the selling security holder. Funds and accounts managed by Lord, Abbett & Co. LLC are among the Backstop Parties. See Certain Relationships and Related Party Transactions for a description of the equity commitment agreement, the equity registration rights agreement and the nomination agreements that we entered into with the Backstop Parties. |
(7) | Advent Capital Management, LLC is the investment manager of the selling security holder. Tracy V. Maitland is the natural person who has voting control over the securities being offered. |
(8) | Information for the selling security holder is based solely on information available to us from our transfer agent. |
(9) | Capital Research and Management Company, as investment adviser, has sole voting and investment power over the securities owned by the selling security holder. Funds and accounts managed by Capital Research and Management Company are among the Backstop Parties. See Certain Relationships and Related Party Transactions for a description of the equity commitment agreement, the equity registration rights agreement and the nomination agreements that we entered into with the Backstop Parties. |
(10) | APG Asset Management US Inc. is the agent for the selling security and has sole voting and investment power over the securities owned by the selling security holder. |
(11) | Armory Advisors LLC is the Investment Manager of the selling security holder. Jay Burnham, the Manager of Armory Advisors LLC, has sole voting and investment power over the securities owned by the selling security holder. |
(12) | State Street Corp., as Trustee, and DuPont Capital Management Corp. share voting power over the securities owned by DuPont Pension Trust. Wilmington Trust, as Trustee, and DuPont Capital Management Corp. share voting power over the securities owned by AST Capital Trust Co. Collective Investment TrustDCM High Yield Bond Fund. DuPont Capital Management Corp. has sole investment power over the securities owned by the selling security holder. |
(13) | Steven C. Taub and Ira S. Taub, the managing members of IST, LLC, the general partner of the selling security holder, share voting and investment power over the securities owned by the selling security holder. |
(14) | Blake Thomas, the General Partner of the selling security holder, has sole voting and investment power over the securities owned by the selling security holder. |
(15) | Barclays Capital Inc. is an indirectly, wholly-owned subsidiary of Barclays Bank PLC. Barclays Capital Inc. acted as joint lead arranger and bookrunner for our senior ABL facility, and Barclays Bank PLC acts as a lender under our senior ABL facility. Barclays Capital Inc. acted as a joint book-running manager and an initial purchaser of our senior notes. Funds and accounts managed by Barclays Bank PLC are among the Backstop Parties. See Certain Relationships and Related Party Transactions for a description of the equity commitment agreement, the equity registration rights agreement and the nomination agreements that we entered into with the Backstop Parties and the fees paid to Barclays Capital Inc. and Barclays Bank PLC related to our senior ABL facility and senior notes. |
(16) | New Generation Advisors LLC is the General Partner of the selling security holders. George Putnam III is the Manager and Attorney-In-Fact of Brandy Trust Multi Strategy NGA LLC and MW Special Situations LP and the President of New Generation Advisors LLC. Thomas Hill is Vice President of New Generation Advisors LLC. Carl Owens is Vice President of New Generation Advisors LLC. Messrs. Putnam III, Hill and Owens share voting and investment power over the securities owned by the selling security holders. |
(17) | Douglas B. Lowey, the Managing Member of the selling security holder, has sole voting and investment power over the securities owned by the selling security holder. |
(18) | Scott Kovalik, Steven Starker and Anton LeRoy share voting and investment power over the securities owned by the selling security holder. |
(19) | Jim Kourkoulakos is the Portfolio Manager for the selling security holder. Mr. Kourkoulakos has sole voting and investment power over the securities owned by the selling security holder. |
(20) | Castle Creek Arbitrage LLC is the investment manager acting with sole discretionary authority for the selling security holder. Allan Weine is the sole Managing Member of Castle Creek Arbitrage LLC. Castle Creek Arbitrage LLC and Mr. Weine both disclaim beneficial ownership of the securities owned by the selling security holder. |
(21) | Contrarian Capital Management, L.L.C. has sole voting and investment power over the securities owned by the selling security holder. |
(22) | Candi Hughes, Lance Baker, Shawn Graves and Mesh Tandon share voting and investment power over the securities owned by Event Driven, A Series of Underlying Funds Trust. Shawn Graves and Mesh Tandon share voting and investment power over the securities owned by Simran Pre-Event Driven Activist Opportunity Master Fund LTD. |
(23) |
Oak Hill Advisors, L.P. (OHA) is the investment advisor to the selling security holder and certain of its affiliates and principals, either directly or indirectly, exercise voting and dispositive power over the shares being registered. OHA and its affiliates and principals disclaim beneficial ownership of the shares being registered, except to the extent of their direct pecuniary interest therein. Funds and accounts managed by OHA are among the Backstop Parties. See Certain Relationships |
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and Related Party Transactions for a description of the equity commitment agreement, the equity registration rights agreement and the nomination agreements that we entered into with the Backstop Parties. |
(24) | Morris Tucker, manager of High Yield Operations, has sole voting and investment power over the securities owned by the selling security holders. |
(25) | P&S Credit Management is the Investment Manager of the selling security holder. Daniel Nir is the Managing Member of the General Partner of the Investment Manager. Mr. Nir has sole voting and investment power over the securities owned by the selling security holders. |
(26) | Information for the selling security holder is based solely on information available to us from our transfer agent. |
(27) | Ore Hill Partners LLC, as Investment Advisor, has sole voting and investment power over the securities owned by the selling security holder. |
(28) | Steven G. Edersheim and Julian C. Schroeder share voting and investment power over the securities owned by the selling security holder. |
(29) | Steve Smith has sole voting and investment power over the securities owned by the selling security holder. |
(30) | Christopher Testa and Sheldon Goldman share voting and investment power over the securities owned by the selling security holder. |
(31) | Silver Point Capital, L.P. shares voting and investment power with the selling security holder. Funds and accounts managed by Silver Point Capital, L.P. are among the Backstop Parties. See Certain Relationships and Related Party Transactions for a description of the equity commitment agreement, the equity registration rights agreement and the nomination agreements that we entered into with the Backstop Parties. |
(32) | MSD Capital, L.P. is the general partner of SOF Investments, L.P. and may be deemed to have or share voting and dispositive power over, and/or beneficially own, the common shares held by SOF Investments, L.P. MSD Capital Management LLC is the general partner of MSD Capital, L.P. and may be deemed to have or share voting and/or dispositive power over, and beneficially own, the common shares held by MSD Capital, L.P. Each of Glenn R. Fuhrman, John C. Phelan and Marc R. Lisker is a manager of MSD Capital Management LLC and may be deemed to have or share voting and/or dispositive power over, and beneficially own, the common shares owned by MSD Capital Management LLC. Each of Mr. Fuhrman, Mr. Phelan and Mr. Lisker disclaim beneficial ownership of such common shares, except to the extent of the pecuniary interest of such person in such shares. |
(33) | The investment adviser to the selling security holder is TCW Asset Management Company, an SEC-registered investment adviser, and, as such, has dispositive and voting power with respect to the shares held by the funds it advises. |
(34) | TD Asset Management, Inc., as Trustee and Manager of the selling security holder, has sole voting and investment power over the securities owned by the selling security holder. Funds and accounts managed by TD Asset Management, Inc. are among the Backstop Parties. See Certain Relationships and Related Party Transactions for a description of the equity commitment agreement, the equity registration rights agreement and the nomination agreements that we entered into with the Backstop Parties. |
(35) | UBS Securities LLC an affiliate of UBS AG, London Branch, acted as a joint book-running manager and an initial purchaser of our senior notes. UBS Securities LLC acted as a co-documentation agent under our prepetition credit agreement. UBS Securities LLC acted as co-syndication agent and co-arranger under our initial DIP credit agreement. UBS Securities LLC acted as joint lead arranger and bookrunner under our senior ABL facility. |
(36) | Alex Lagetko, the Managing Member of VSO Capital Management LLC, has sole voting and investment power over the securities owned by the selling security holder. |
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Equity Commitment Agreement
In connection with our plan of reorganization, we entered into an equity commitment agreement on March 19, 2010 with certain funds and/or accounts managed by Silver Point Capital, L.P., Barclays Bank PLC, Oak Hill Advisors, L.P., Lord, Abbett & Co. LLC, Capital Research and Management Company, TCW Asset Management Company and TD Asset Management Inc., all of which were holders of our prepetition senior notes and prepetition senior subordinated notes. We collectively refer to these entities as the Backstop Parties. Under the commitment agreement, the Backstop Parties committed to purchase 11.75% of our common stock and $100 million of our 7% preferred stock (convertible into 19.7% of our common stock), upon our emergence from bankruptcy (in each case, assuming conversion of the 7% preferred stock). The Backstop Parties also agreed to fully backstop any unsubscribed portion of the equity rights offering we conducted as part of our plan of reorganization. In aggregate, the commitment agreement provided us with commitment to purchase $355 million of our common stock and 7% preferred stock in connection with our emergence from bankruptcy. The commitment agreement also provided for the Backstop Parties to receive warrants to purchase 7% of our common stock upon emergence (assuming conversion of the 7% preferred stock). On account of their commitment to backstop the rights offering and certain other agreements to support our plan of reorganization, we paid the Backstop Parties an aggregate commitment premium equal to $12.4 million, plus reimbursement for certain transaction expenses.
Equity Registration Rights Agreement
In connection with the equity commitment agreement, on the date of our emergence from bankruptcy, we entered into a registration rights agreement, or the equity registration rights agreement, with the Backstop Parties and certain other holders of registrable securities. Registrable securities will consist of any shares of our common stock and 7% preferred stock, any warrants issued pursuant to our plan of reorganization and any shares of common stock issuable upon conversion of 7% preferred stock or upon exercise of warrants that are beneficially owned by the Backstop Parties and such other holders. Registrable securities will cease to be registrable securities under certain circumstances and upon the happening of certain events, such as upon their sale under a registration statement or pursuant to Rule 144.
The equity registration rights agreement gives the Backstop Parties and such other holders certain registration rights, including demand registration, shelf registration and piggyback registration rights. Any Backstop Party or such other holder that owned at least 5% of the outstanding common stock (on a fully diluted basis) as of the date of our emergence from bankruptcy and continues to own 5% of the outstanding common stock (on a fully diluted basis), each of which is referred to herein as a demand holder, has certain rights to demand the registration of its registrable securities on a registration statement, which may be a shelf registration, filed with the SEC on an underwritten or non-underwritten basis. Prior to our initial underwritten public offering, demand holders holding at least 35% of the outstanding registrable securities or any Backstop Party that owns at least 7.5% of the outstanding common stock (on a fully diluted basis) may make an initial demand registration, so long as the total offering price of the shares to be sold in the offering exceeds $75 million in the aggregate. After our initial underwritten public offering, any demand holder may make a demand registration so long as the total offering price of the shares to be sold in the offering exceeds, in the case of a registration on Form S-1, $50 million in the aggregate or, in the case of a registration on Form S-3, $20 million in the aggregate. We will not be required to effect more than two demand registrations in any 12-month period. In addition, we will not be required to effect a demand registration if within the 12-month period preceding the date of a request for a demand registration we have effected one demand registration and another registration statement has been declared effective within the 12-month period preceding such demand request and at least $20 million of the then outstanding registrable securities were entitled to be included in such registration. We will also not be required to effect a demand registration during certain suspension periods as set forth in the equity registration rights agreement. We are not required to conduct more than 12 underwritten demand registrations in total or more than eight demand registrations for the Backstop Parties on a Form S-1. In addition to the above demand rights, demand holders
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may request us to file a shelf registration for the continuous offering of the registrable securities, and whenever we propose to file a registration statement and registrable securities may be included in such registration, the holders of registrable securities may exercise piggyback registration rights.
The equity registration rights agreement also provides, subject to certain exceptions, that any holder party to the agreement that holds 5% or more of the outstanding shares of the common stock (on a fully diluted basis) will be restricted from effecting any public sale or distribution of any of our equity securities, or any securities convertible into exchangeable or exercisable for our equity securities, held by such holder for the seven days prior to and the 180-day period following the pricing date of our underwritten initial public offering and the seven days prior to and the 90-day period following the date of pricing any other underwritten offering by us.
Nomination Agreements
On the date of our emergence from bankruptcy, we entered into separate director nomination agreements with (i) Barclays Capital Inc., or Barclays, (ii) Silver Point Capital L.P., on behalf of its affiliates and related funds, or Silver Point, (iii) Oak Hill Advisors L.P., on behalf of certain funds and separate accounts that it manages, or Oak Hill, and (iv) Capital Research and Management Company, as investment advisor to certain funds it manages, TCW Shared Opportunity Fund IV, L.P., TCW Shared Opportunity Fund IVB, L.P., TCW Shared Opportunity Fund V, L.P., TD High Yield Income Fund, and Lord, Abbett & Co. LLC, as investment manager on behalf of multiple clients, such entities together referred to herein as the Designating Parties and together with Barclays, Silver Point and Oak Hill, as the Backstop Stockholders, and each such agreement is referred to herein as the nomination agreement and together, the nomination agreements. Each of the nomination agreements will continue to be in effect until the earlier of (i) termination of such agreement at the election of the applicable nominating parties, (ii) immediately prior to our annual meeting of stockholders held during the calendar year 2013 and (iii) the applicable nominating parties together with their respective affiliates (as defined in the nomination agreements) no longer beneficially own (as defined in the nomination agreements) in the aggregate 7.5% or greater of the issued and outstanding common stock (assuming the conversion of all outstanding shares of 7% preferred stock).
Pursuant to the Designating Parties and Barclays nomination agreements, each of the Designating Parties, acting together, and Barclays had the right to nominate one independent member of our board of directors, and such nominee would be selected in reasonable consultation with (but without the need for the approval of) our Chief Executive Officer and Korn/Ferry International, or such other executive search firm mutually acceptable to such Backstop Stockholder and us, so long as a committee of independent directors (as defined in such nomination agreements) determines that the respective Backstop Stockholders nominee will be nominated for election to our board of directors.
Pursuant to Silver Point and Oak Hills nomination agreements, Silver Point had the right to nominate one member of our board of directors (subject to the consent of Barclays if such member nominated by Silver Point was not independent) and Oak Hill had the right to nominate one member of our board of directors. In addition, each of Silver Point and Oak Hill had the right to appoint one observer to our board of directors in addition to the member of our board of directors nominated by each of them.
Pursuant to these rights, Oak Hill nominated Glenn R. August to our board of directors, Silver Point nominated Orlando A. Bustos to our board of directors, the Designating Parties nominated Larry Jutte to our board of directors as an independent director, and Barclays nominated David J. Mastrocola to our board of directors as an independent director. Each of these nominees was appointed to our board of directors as of the effective date of our emergence from bankruptcy on May 27, 2010.
Each of the members of our board of directors will serve in accordance with applicable federal and state laws, our certificate of incorporation, the Certificate of Designations for the 7% Cumulative Participating Convertible
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Preferred Stock and our bylaws. Nominees to our board of directors pursuant to each of the nomination agreements are entitled to compensation paid to other non-employee members of our board of directors. With respect to the nomination agreement with Oak Hill, if the nominee is an employee of Oak Hill or its affiliate, at the option of Oak Hill and subject to the approval of our board of directors, the nomination agreement provides that such compensation (or its economic equivalent) will instead be paid to Oak Hill or its affiliates. In accordance with the terms of Oak Hills nomination agreement, Oak Hill elected to receive such compensation, which was approved by our board of directors, and Oak Hill or its affiliates will be receiving the compensation described above (including the equity grants pursuant to substantially similar terms) in lieu of Glenn R. August.
Senior ABL Facility
Barclays Capital Inc., an affiliate of Barclays Bank PLC, acted as joint lead arranger and bookrunner for our senior ABL facility, and Barclays Bank PLC acts as a lender under our senior ABL facility. Pursuant to these arrangements, we paid Barclays Capital Inc. and Barclays Bank PLC aggregate fees of approximately $0.6 million.
Senior Notes
Barclays Capital Inc. acted as a joint book-running manager and an initial purchaser in the $450 million offering of our 8½% senior notes due 2018 for which it received a placement fee of approximately $1.7 million.
Other Relationships
A sibling of David J. Mastrocola, one of our directors, is a partner at Ernst & Young LLP, our auditor. Ernst & Young LLP received approximately $4.1 million for audit, audit-related and tax fees for services performed for us during the year ended December 31, 2009.
We paid OHorizons LLC approximately $0.4 million in professional fees during the three months ended March 31, 2010 for services rendered to Silver Point Capital, L.P. in connection with its role as one of the Backstop Parties. Orlando A. Bustos, one of our directors, is the founder and the senior managing director of OHorizons LLC and was appointed to our board of directors pursuant to a nomination agreement we entered into with Silver Point Capital, L.P. in connection with our emergence from bankruptcy. See Nomination Agreements.
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Common Stock
We are authorized to issue up to 190,000,000 shares of common stock, par value $0.001 per share. As of July 21, 2010, an aggregate of 18,378,112 shares of our common stock were issued and outstanding.
All shares of common stock vote as one class, except as otherwise provided by law. Each share of common stock carries one vote on the record date for the determination of the stockholders entitled to vote.
Each share of common stock is entitled to any dividends to be declared on a record date on or after the issue date of the common stock, except, however, that for so long as any shares of 7% preferred stock (as defined below) are outstanding, dividends may not be declared or paid on common stock (unless paid in common stock) unless the full cumulative preferred dividends have been paid and, in the case of a cash dividend, the Company shall have redeemed all shares of 7% preferred stock tendered in an offer to purchase such shares.
Holders of our common stock are not entitled to preemptive rights, and no redemption or sinking fund provisions are applicable to our common stock. All outstanding shares of our common stock are, and any shares of common stock to be issued upon the conversion of our 7% preferred stock or exercise of our warrants will be, fully paid and non-assessable.
In the event of our liquidation, dissolution or winding up, holders of common shares are entitled to share ratably in proportion to their shareholding in our assets, if any, remaining after the payment of all of our debts and liabilities, subject to any liquidation preference on any outstanding preference shares.
Warrants
An aggregate of 2,419,753 warrants have been issued and 2,419,753 shares of common stock are issuable upon exercise of the warrants. The warrants are exercisable into shares of common stock at an exercise price of $27.33 per share (subject to adjustment in accordance with anti-dilution protections) or on a cashless basis whereby for each warrant exercised its holder will receive a number of shares of common stock equal to (i) the closing sale price (as defined in the Warrant Agreement that we entered into with Computershare Inc. and Computershare Trust Company, N.A. on May 28, 2010) minus the exercise price (in each case as of the exercise date), divided by (ii) such closing sale price. The warrants may be exercised at any time during the period beginning upon our emergence from bankruptcy and ending at the close of business on the 90-month anniversary of our emergence from bankruptcy, or November 2017. However, warrants purchased pursuant to this registration statement are exercisable only if a registration statement and a prospectus relating to our common stock issuable upon exercise of such warrants is effective and current.
The warrants are subject to certain anti-dilution protection, including in the case of, among others, stock splits, stock dividends and distributions, tender or exchange offers, rights plans and certain issuances of common stock or derivatives. Warrant holders do not have the rights or privileges of holders of our common stock, including voting rights, until they exercise their warrants and receive shares of our common stock. After the issuance of shares of our common stock upon exercise of the warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.
No fractional shares will be issued upon exercise of warrants. If a holder exercises warrants and would be entitled to receive a fractional interest of a share, we will pay cash valued at the closing sale price of the exercise date.
This description is qualified in its entirety by reference to the complete text of the warrant agreement between us and Computershare Inc. and Computershare Trust Company, N.A., which is included as an exhibit to the registration statement of which this prospectus is a part.
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Preferred Stock
We are authorized to issue up to 10,000,000 shares of preferred stock, par value $0.001 per share. We have designated 2,000,000 shares of our authorized preferred stock as 7% cumulative participating convertible preferred stock, par value $0.001 per share, of which 1,052,446 are issued and outstanding as of July 21, 2010.
The following is a summary of the material terms of our 7% preferred stock, contained in the certificate of designations for the 7% preferred stock. This description is qualified in its entirety by reference to the complete text of the certificate of designations for our 7% preferred stock, which is included as an exhibit to the registration statement of which this prospectus is a part.
General
Pursuant to our plan of reorganization and the commitment agreement, the Backstop Parties purchased 1,000,000 shares of our 7% preferred stock, with a stated value of $100.00 per share.
Ranking
The 7% preferred stock ranks senior to our common stock and all other classes or series of our capital stock, except for any other class or series, the terms of which expressly provide that it ranks on a parity with the 7% preferred stock. In the event of our liquidation, winding-up or dissolution, holders of 7% preferred stock are entitled to priority in payments from us in an amount equal to the greater of (x) the stated value of the 7% preferred stock plus accrued and unpaid cumulative preferred dividends and (y) the conversion value of the 7% preferred stock.
Dividends
Holders of 7% preferred stock are entitled to receive, when, as and if declared by our board of directors, out of funds legally available for the payment of dividends, cumulative preferred dividends on a quarterly basis at the rate of 7% per year. Dividends may be paid in cash or in-kind with additional shares of 7% preferred stock at the option of the Company.
In addition, shares of 7% preferred stock are entitled to receive dividends to the same extent and on the same basis as dividends with respect to our common stock determined, when, as and if declared by our board of directors, out of funds legally available for the payment of dividends, in accordance with the number of shares of common stock issuable upon conversion of the 7% preferred stock at the time such dividend is declared. For so long as any shares of 7% preferred stock are outstanding, dividends may not be declared or paid on the common stock (unless paid in common stock) and we may not acquire any common stock unless the full cumulative preferred dividends have been paid and, in the case of a cash dividend on or cash acquisition of the common stock, unless we have redeemed all shares of 7% preferred stock tendered in an offer to purchase such shares.
Conversion at option of holders
Shares of 7% preferred stock are convertible at any time into shares of common stock at the option of the holders. As of the date of this prospectus, the outstanding shares of 7% preferred stock are convertible into 4,469,568 shares of our common stock. The initial and current conversion price of the 7% preferred stock is $23.30574 per share of common stock, subject to certain adjustments, including, among others, stock splits and reclassifications, stock dividends and distributions, tender or exchange offers, reorganization events, rights plans and certain issuances of common stock or derivatives. The number of shares of common stock delivered upon conversion is equal to the number obtained by dividing (i) the sum of the stated value and all accrued and unpaid cumulative dividends by (ii) the conversion price.
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Conversion at option of the Company
We may convert the 7% preferred stock at our option, for the number of shares of common stock as provided in the preceding paragraph, at any time after the third anniversary of our emergence from bankruptcy if (i) the closing sale price of the common stock exceeded 155% of the conversion price of the 7% preferred stock for each of 30 consecutive trading days within the 45-day period prior to the notification by us to the holders of the 7% preferred stock of our exercise of the conversion right, (ii) our common stock has been listed on the New York Stock Exchange, or the NYSE, or the NASDAQ Global Select Market or the NASDAQ Global Market, or, collectively, NASDAQ, and has been registered pursuant to section 12 of the Exchange Act, and (iii) a registration statement covering resales of the common stock issuable upon conversion of the 7% preferred stock has been declared effective prior to the date of notice and will remain available for resales for at least 60 days after the conversion date, subject to certain exceptions.
Conversion upon IPO
We may cause the conversion of all shares of 7% preferred stock into shares of common stock immediately prior to the consummation of an underwritten initial public offering of the common stock if (i) the holders of two-thirds of the then outstanding shares of 7% preferred stock approve the conversion and (ii) the common stock has been listed on the NYSE or NASDAQ and has been registered pursuant to section 12 of the Exchange Act.
Redemption rights upon certain transactions
On or within 30 days after receipt of a notice from us of certain events that constitute a change of control or involve a cash transaction (as defined below), the holders of 7% preferred stock may require us to redeem all or a portion of their 7% preferred stock at the greater of the stated value of the 7% preferred stock plus accrued and unpaid cumulative preferred dividends or the value of the shares of the common stock into which such shares of 7% preferred stock are then convertible. If a cash transaction occurs prior to the fifth anniversary of our emergence from bankruptcy, holders of 7% preferred stock will be entitled to receive cash equal to the greater of (i), in the case of a cash transaction that occurs prior to the first anniversary of our emergence from bankruptcy, the stated value of the 7% preferred stock plus accrued and unpaid cumulative preferred dividends both multiplied by 1.175, after the first anniversary and prior to the fifth anniversary of our emergence from bankruptcy, the stated value of the 7% preferred stock plus accrued and unpaid cumulative preferred dividends both multiplied by 1.125 and, thereafter, the stated value of the 7% preferred stock plus accrued and unpaid cumulative preferred dividends and (ii) the conversion value of the 7% preferred stock as of such date. Cash transaction means a merger, consolidation, share exchange or other similar transaction or a sale, lease or other transfer in one transaction or a series of related transactions of all or substantially all of our consolidated assets in which all of the common stock is converted into the right to receive cash.
Redemption at option of the Company
From and after the sixth anniversary of our emergence from bankruptcy, we may, at our option, redeem shares of 7% preferred stock at any time, in whole or in part, for cash at the greater of (x) the stated value of the 7% preferred stock plus accrued and unpaid cumulative dividends (which value will be multiplied by 1.125 if the redemption occurs prior to the seventh anniversary of our emergence from bankruptcy) and (y) 75% of the conversion value of the 7% preferred stock as of the second trading day prior to the redemption date. If 75% of the conversion value of the 7% preferred stock is greater than the amount in (x) above, we may redeem the shares of 7% preferred stock in part for cash equal to the redemption value of the 7% preferred stock and in part for shares of common stock valued as of the second trading day prior to the redemption date equal to the difference between the redemption value of the 7% preferred stock and 75% of the conversion value of the 7% preferred stock. In order for us to elect to exercise this redemption right, a registration statement covering resales of the common stock issuable upon redemption of the 7% preferred stock must have been declared effective prior to the date of notice and must remain available for resales for at least 60 days after the redemption date, subject to certain exceptions. In addition, in order for us to exercise this redemption right, all cumulative preferred dividends and all participating dividends must have been paid for all past dividend periods.
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Voting
Each share of 7% preferred stock carries one vote for each share of common stock into which such share of 7% preferred stock may be converted on the record date for the determination of the stockholders entitled to vote and will be entitled to vote on any matter upon which shares of the common stock are entitled to vote, voting together with the common stock and not as a separate class. In addition, the holders of two-thirds of the outstanding 7% preferred stock are required to approve certain actions, including:
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changes to our certificate of incorporation or the certificate of designations of the 7% preferred stock that are adverse to the rights of the 7% preferred stock; |
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changes of the 7% preferred stock (whether by merger, consolidation, reclassification or otherwise) into cash, securities or other property (except in accordance with the certificate of designations) or, in the case of a merger or consolidation involving us in which we are not the surviving entity, the 7% preferred stock may be exchanged for an equivalent number of shares of preferred stock of the surviving or resulting entity with substantially the same terms as the 7% preferred stock; |
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any issuance of shares of 7% preferred stock (other than the shares of 7% preferred stock issued at the effective date and additional shares issued as in-kind dividends); provided, however, that any issuance of shares of 7% preferred stock that are not offered to the existing holders of 7% preferred stock on a pro rata basis relative to their holdings on the same terms as offered to other participants in the issuance shall require the approval of each holder of 7% preferred stock; |
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the creation, authorization, issuance or increase in the amount of any equity security that ranks equally with or senior to the 7% preferred stock with respect to dividend rights, rights of redemption or rights of liquidation, dissolution or winding-up including us; and |
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the conversion of the shares of 7% preferred stock into shares of common stock immediately prior to the consummation of our initial underwritten public
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Transfer Agent
Our transfer agent is Computershare Trust Company, N.A.
Anti-Takeover Effects of Certain Provisions of Our Certificate of Incorporation and Bylaws and Delaware Law
Certain provisions that are included in our certificate of incorporation and bylaws, which are summarized in the following paragraphs, and applicable provisions of the DGCL, may make it more difficult for or prevent an unsolicited third party from acquiring control of us or changing our board of directors and management. These provisions may have the effect of deterring hostile takeovers or delaying changes in our control or in our management. These provisions are intended to enhance the likelihood of continued stability in the composition of our board of directors and in the policies furnished by them and to discourage certain types of transactions that may involve an actual or threatened change in our control. The provisions also are intended to discourage certain tactics that may be used in proxy fights. These provisions, however, could have the effect of discouraging others from making tender offers for our shares and, as a consequence, they also may inhibit fluctuations in the market price of our shares that could result from actual or rumored takeover attempts.
Size of board and vacancies
Our certificate of incorporation provides that the number of directors on our board of directors is fixed by our board of directors. Newly created directorships resulting from any increase in our authorized number of directors and vacancies in our board of directors resulting from death, resignation or removal from office will be filled solely by a majority vote of the directors then in office, even if less than a quorum, or by a sole remaining director.
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No cumulative voting
The DGCL provides that stockholders are not entitled to the right to cumulate votes in the election of directors unless our certificate of incorporation provides otherwise. Our certificate of incorporation does not expressly provide for cumulative voting.
Removal of directors
Our certificate of incorporation provides that any director may be removed at any time, with or without cause by the affirmative vote of the holders of a majority of the voting power of all then outstanding shares of stock entitled to vote generally in the election of directors, voting together as a single class.
Bylaw amendments
Our bylaws provide that the bylaws may only be amended by a majority of our board of directors or upon the affirmative vote of the holders of at least a majority of the voting power of all outstanding shares of stock entitled to vote generally in the election of directors, voting together as a single class.
Calling of special meetings of stockholders
Our certificate of incorporation provides that special meetings of our stockholders: (i) may be called by the chairman of the board, the chief executive officer, or any member of the board of directors pursuant to a resolution adopted by a majority of our board of directors; and (ii) must be called by the secretary at the written request of the holders of record of at least 20% of the voting power of the outstanding stock entitled to vote on the matter or matters to be brought before the proposed special meeting.
Stockholder action by written consent
The DGCL permits stockholder action by written consent unless otherwise provided by a corporations certificate of incorporation. Our certificate of incorporation provides that our stockholders may not act by written consent, unless the action by written consent of the stockholders is approved in advance by a board resolution or except as expressly provided by the terms of any series of preferred stock.
Advance notice requirements for stockholder proposals
Our bylaws establish advance notice procedures with respect to stockholder proposals. Stockholders will only be able to consider proposals specified in the notice of meeting or brought before the meeting by or at the direction of our board of directors or by a stockholder who was a stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and who has given to our secretary timely written notice, in proper form, of the stockholders intention to bring that business before the meeting. In order to bring business before an annual meeting, a stockholders notice must be received by the secretary of the company at the principal executive offices of the company not less than 90 calendar days or more than 120 calendar days before the first anniversary of the previous years annual meeting of stockholders, subject to certain exceptions contained in our bylaws. If the date of the applicable annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by a stockholder to be timely must be so received not earlier than 120 calendar days and not later than 90 calendar days before the date of such annual meeting or the tenth day following the date on which notice of the date of the annual meeting was mailed or public announcement of the date of such meeting is made by the company.
For the purposes of determining whether a stockholders notice is received in a timely manner for the annual meeting of stockholders in 2011, a stockholders notice must be received not later than February 15, 2011 and not before January 15, 2011. The adjournment or postponement of an annual meeting or the announcement does not commence a new time period for the giving of a stockholders notice as described above.
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Advance notice requirements for director nominations
Our bylaws establish advance notice procedures with respect to stockholder nomination of candidates for election as directors. Stockholders will only be able to consider nominations specified in the notice of meeting or brought before the meeting by or at the direction of our board of directors or by a stockholder who was a stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and who has given to our secretary timely written notice, in proper form, of the stockholders intention to bring that business before the meeting. In order to nominate directors to our board of directors at an annual meeting, a stockholders notice must be received by the secretary of the company at the principal executive offices of the company not less than 90 calendar days or more than 120 calendar days before the first anniversary of the previous years annual meeting of stockholders, subject to certain exceptions contained in our bylaws. If the date of the applicable annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by a stockholder to be timely must be so received not earlier than 120 calendar days and not later than 90 calendar days before the date of such annual meeting or the tenth day following the date on which notice of the date of the annual meeting was mailed or public announcement of the date of such meeting is made by the company.
In order to nominate directors at a special meeting of stockholders called for the purpose of electing directors, a stockholders notice must be received by the secretary of the company at the principal executive offices of the company not earlier than 120 calendar days and not later than 90 calendar days before the date of the special meeting or the tenth day following the date on which notice of the date of the special meeting was mailed or public announcement of the date is made by the company. In the case of a special meeting of stockholders called due to a special meeting request for the purpose of electing directors, proper notice must be received not later than 15 days prior to the meeting.
For the purposes of determining whether a stockholders notice is received in a timely manner for the annual meeting of stockholders in 2011, a stockholders notice must be received not later than February 15, 2011 and not before January 15, 2011. The adjournment or postponement of an annual meeting or the announcement does not commence a new time period for the giving of a stockholders notice as described above.
Amendments to certificate of incorporation and bylaws
The DGCL provides generally that the affirmative vote of a majority of the outstanding shares entitled to vote is required to amend a corporations certificate of incorporation, unless the certificate of incorporation requires a greater percentage. Our certificate of incorporation provides that the following provisions may be amended by our stockholders only by a vote of at least two-thirds of the voting power of all then outstanding shares of our stock entitled to vote generally in the election of directors, voting together as a single class:
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the number, election and terms of the directors; |
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the ability of our board of directors to fill vacancies on the board; |
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the removal of directors; |
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the rights of the holders of preferred stock to elect directors; |
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the power of our board of directors to adopt, amend, alter or repeal the bylaws; |
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the limitation on stockholder action by written consent; |
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the limitation and notice requirements for special meetings; and |
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the amendment provision requiring that the above provisions be amended only with a two-thirds supermajority vote. |
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Undesignated preferred stock
The authorization of our undesignated preferred stock makes it possible for our board of directors to issue our preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of us.
Section 203 of the Delaware General Corporation Law
We are not governed by Section 203 of the Delaware General Corporation Law. Section 203 of the Delaware General Corporation Law regulates corporate acquisitions and provides that specified persons who, together with affiliates and associates, own, or within three years did own, 15% or more of the outstanding voting stock of a corporation may not engage in business combinations with the corporation for a period of three years after the date on which the person became an interested stockholder unless:
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prior to such time, the corporations board of directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; |
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upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the corporations outstanding voting stock at the time the transaction commenced, other than statutorily excluded shares; or |
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at or after the time a person became an interested stockholder, the business combination is approved by the corporations board of directors and authorized at an annual or special meeting of stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder. |
The term business combination is defined to include mergers, asset sales and other transactions in which the interested stockholder receives or could receive a financial benefit on other than a pro rata basis with other stockholders.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
Senior ABL Facility
On the date of our emergence from bankruptcy, the Company, CSA U.S., or the U.S. Borrower, CSA Canada, or the Canadian Borrower and, together with the U.S. Borrower, the Borrowers, and certain subsidiaries of the U.S. Borrower entered into our senior ABL facility with certain lenders, Bank of America, N.A., as agent, or the Agent, for such lenders, Deutsche Bank Trust Company Americas, as syndication agent, and Banc of America Securities LLC, Deutsche Bank Securities Inc., UBS Securities LLC and Barclays Capital, as joint lead arrangers and bookrunners. This description is qualified in its entirety by reference to the complete text of the credit agreement governing our senior ABL facility, which is included as an exhibit to the registration statement of which this prospectus is a part.
General
Our senior ABL facility provides for an aggregate revolving loan availability of up to $125 million, subject to borrowing base availability, including a $45 million letter of credit sub-facility and a $20 million swing line sub-facility. Our senior ABL facility also provides for an uncommitted $25 million incremental loan facility, for a potential total senior ABL facility of $150 million (if requested by the Borrowers and the lenders agree to fund such increase). No consent of any lender (other than those participating in the increase) is required to effect any such increase.
Maturity
Any borrowings under our senior ABL facility will mature, and the commitments of the lenders under our senior ABL facility will terminate, on May 27, 2014.
Use of proceeds
There were no borrowings made under our senior ABL facility on the date of our emergence from bankruptcy. After our emergence from bankruptcy, proceeds from our senior ABL facility may be used by the Borrowers to pay certain unsecured claims, administrative expenses and administrative claims as contemplated by our plan of reorganization, to issue commercial and standby letters of credit, to finance ongoing working capital needs and for general corporate purposes.
Borrowing base
Loan (and letter of credit) availability under our senior ABL facility is subject to a borrowing base, which at any time is limited to the lesser of: (A) the maximum facility amount (subject to certain adjustments) and (B) (i) up to 85% of eligible accounts receivable; plus (ii) up to the lesser of 70% of eligible inventory or 85% of the appraised net orderly liquidation value of eligible inventory; minus reserves established by the Agent. The accounts receivable portion of the borrowing base is subject to certain formulaic limitations (including concentration limits). The inventory portion of the borrowing base is limited to eligible inventory, as determined by an independent appraisal. The borrowing base is also subject to certain reserves, which are established by the Agent (which may include changes to the advance rates indicated above). Loan availability under our senior ABL facility is apportioned, as follows: $100 million to the U.S. Borrower and $25 million to the Canadian Borrower.
Guarantees; security
The obligations of the U.S. Borrower under our senior ABL facility and cash management arrangements and interest rate, foreign currency or commodity swaps entered into by us, in each case with the lenders and their affiliates, or collectively, additional ABL secured obligations, are guaranteed on a senior secured basis by us and all of our U.S. subsidiaries (other than CS Automotive LLC), and the obligations of the Canadian Borrower under our senior ABL facility and additional ABL secured obligations of the Canadian Borrower and its Canadian subsidiaries are guaranteed on a senior secured basis by us, all of the Canadian subsidiaries of the Canadian Borrower and all of our U.S. subsidiaries. The U.S. Borrower guarantees the additional ABL secured
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obligations of its subsidiaries and the Canadian Borrower guarantees the additional ABL secured obligations of its Canadian subsidiaries. The obligations under our senior ABL facility and related guarantees are secured by a first priority lien on all of each Borrowers and each guarantors existing and future personal property consisting of accounts receivable, payment intangibles, inventory, documents, instruments, chattel paper and investment property, certain money, deposit accounts and securities accounts and certain related assets and proceeds of the foregoing.
Interest
Borrowings under our senior ABL facility bear interest at a rate equal to, at the Borrowers option:
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in the case of borrowings by the U.S. Borrower, LIBOR or the base rate plus , in each case, an applicable margin; or |
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in the case of borrowings by the Canadian Borrower, BA rate, Canadian prime rate or Canadian base rate plus, in each case, an applicable margin. |
The initial applicable margin is 3.5% with respect to the LIBOR or BA-based borrowings and 2.5% with respect to base rate, Canadian prime rate and Canadian base rate borrowings. The applicable margin is subject, in each case, to quarterly performance pricing adjustments commencing six months after the closing date.
Fees
In addition to paying interest on outstanding principal under our senior ABL facility, the Borrowers are required to pay a fee in respect of committed but unutilized commitments equal to 0.50% per annum when usage of our senior ABL facility (as apportioned between the U.S. and Canadian facilities) is greater than 50% and 0.75% per annum when usage of our senior ABL facility is equal to or less than 50%. The Borrowers are also required to pay a fee on outstanding letters of credit under our senior ABL facility at a rate equal to the applicable margin in respect of LIBOR and BA-based borrowings plus a fronting fee at a rate of 0.125% per annum to the issuer of such letters of credit, together with customary issuance and other letter of credit fees. Our senior ABL facility also requires the payment of customary agency and administrative fees.
Voluntary prepayments
The Borrowers are able to voluntarily reduce the unutilized portion of the commitment amount and repay outstanding loans, in each case, in whole or in part, at any time without premium or penalty (other than customary breakage and related reemployment costs with respect to repayments of LIBOR-based borrowings).
Covenants; events of default
Our senior ABL facility includes affirmative and negative covenants that will impose substantial restrictions on our financial and business operations, including its ability to incur and secure debt, make investments, sell assets, pay dividends or make acquisitions. Our senior ABL facility also includes a requirement to maintain a monthly fixed charge coverage ratio of no less than 1.1 to 1.0 when availability under our senior ABL facility is less than specified levels. Our senior ABL facility also contains various events of default that are customary for comparable facilities.
Senior Notes due 2018
General
On May 11, 2010, we issued $450 million aggregate principal amount of 8 1 / 2 % senior notes due 2018 in a private placement exempt from registration under the Securities Act through CSA Escrow Corporation, or the escrow issuer, an indirect wholly-owned non-debtor subsidiary of Cooper-Standard Automotive Inc., or CSA, our direct wholly-owned subsidiary. Upon our emergence from bankruptcy on May 27, 2010, CSA Escrow Corporation merged with and into CSA, with CSA as the surviving entity, and CSA assumed all of the obligations under the senior notes and the indenture governing the senior notes and the guarantees by the guarantors became effective. This description is qualified in its entirety by reference to the full text of the indenture governing our senior notes, which is included as an exhibit to the registration statement of which this prospectus is a part.
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Guarantees
Our senior notes are guaranteed, jointly and severally, on a senior unsecured basis, by the Company and all of CSAs wholly-owned domestic restricted subsidiaries, or the guarantors, and, together with the escrow issuer, the obligors. If CSA or any of its domestic restricted subsidiaries acquires or creates another wholly-owned domestic restricted subsidiary that guarantees certain debt of CSA or a guarantor, such newly acquired or created subsidiary will also guarantee our senior notes.
Ranking
Our senior notes and the guarantees constitute senior debt of the obligors and (1) rank equally in right of payment with all of the obligors existing and future senior debt, (2) rank senior in right of payment to all of the obligors existing and future subordinated debt, (3) are effectively subordinated in right of payment to all of the obligors existing and future secured indebtedness and secured obligations to the extent of the value of the collateral securing such indebtedness and obligations and (4) are structurally subordinated to all existing and future indebtedness and other liabilities of CSAs non-guarantor subsidiaries (other than indebtedness and liabilities owed to CSA or one of its guarantor subsidiaries).
Optional redemption
CSA has the right to redeem our senior notes at the redemption prices set forth below:
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on and after May 1, 2014, all or a portion of our senior notes may be redeemed at a redemption price of 104.250% of the principal amount thereof if redeemed during the twelve-month period beginning on May 1, 2014, 102.125% of the principal amount thereof if redeemed during the twelve-month period beginning on May 1, 2015, and 100% of the principal amount thereof if redeemed on or after May 1, 2016, plus any accrued an unpaid interest to the redemption date; |
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prior to May 1, 2013, up to 35% of our senior notes issued under the indenture may be redeemed with the proceeds from certain equity offerings at a redemption price of 108.50% of the principal amount thereof, plus any accrued and unpaid interest to the redemption date; and |
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prior to May 1, 2014, all or a portion of our senior notes may be redeemed at a price equal to 100% of the principal amount thereof plus a make-whole premium. |
Change of control
If a change of control occurs, unless CSA has exercised its right to redeem all of our outstanding senior notes through an optional redemption (as described above), each noteholder shall have the right to require that CSA repurchase such noteholders senior notes at a purchase price in cash equal to 101% of the principal amount on the date of purchase plus accrued and unpaid interest, if any, to the date of purchase, subject to the right of the noteholders of record on the relevant record date to receive interest due on the relevant interest payment date.
Covenants
The indenture limits, among other things, the ability of CSA and its restricted subsidiaries to pay dividends or distributions, repurchase equity, prepay subordinated debt or make certain investments, incur additional debt or issue certain disqualified stock and preferred stock, incur liens, merge or consolidate with another company or sell all or substantially all of its assets, enter into transactions with affiliates and allow to exist certain restrictions on the ability of the subsidiary guarantors to pay dividends or make other payments to CSA, in each case, subject to exclusions and other customary exceptions. In addition, certain of these covenants will not be applicable during any period of time when our senior notes have an investment grade rating. The indenture also contains customary events of default.
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Adjusted EBITDA
The credit agreement governing our senior ABL facility requires us to comply with a minimum fixed charge coverage ratio of no less than 1.1 to 1.0 when availability under our senior ABL facility is less than specified levels. The fixed charge coverage ratio measures the ratio of our Adjusted EBITDA to certain fixed charges, including interest expense, over a twelve month period immediately preceding a month in which availability under our senior ABL facility is less than certain specified levels. In addition, the indenture governing our senior notes uses Adjusted EBITDA in the calculation of financial ratios contained in certain covenants. We define Adjusted EBITDA, provide a reconciliation of Adjusted EBITDA to net income (loss) (the most directly comparable financial measure presented in accordance with U.S. GAAP) and discuss our uses of, and the limitations associated with the use of, Adjusted EBITDA in footnote 4 to Prospectus SummarySummary Historical and Pro Forma Financial Data and in Managements Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital ResourcesAfter Emergence from Bankruptcy ProceedingsEBITDA and Adjusted EBITDA.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain material U.S. federal income tax consequences of holding and disposing of our 7% preferred stock, common stock and warrants, converting our 7% preferred stock into common stock and exercising our warrants for common stock. This summary applies only to holders that are beneficial owners of our 7% preferred stock, common stock or warrants and that hold the 7% preferred stock, common stock or warrants as capital assets (generally, property held for investment). This summary is based on the U.S. Internal Revenue Code of 1986, as amended (the Code), its legislative history, existing final, temporary and proposed Treasury regulations, administrative pronouncements by the U.S. Internal Revenue Service (the IRS), and judicial decisions, all as in effect or in existence as of the date of this prospectus and all of which at any time may be repealed, revoked or modified or subject to differing interpretations so as to result in U.S. federal income tax consequences different from those discussed below, possibly with retroactive effect. The Company has not obtained, and does not intend to obtain, any ruling from the IRS concerning any of the U.S. federal income tax consequences discussed in this summary. Accordingly, there can be no assurance that the IRS will not assert a different position concerning any of the U.S. federal income tax consequences discussed below or that any such position would not be sustained by a court.
This summary does not purport to address all U.S. federal income tax consequences that may be relevant to a particular holder and you are urged to consult your own tax advisor regarding your specific tax situation. In particular, this summary does not address the tax consequences that may be relevant to holders in special tax situations including, for example:
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banks and financial institutions; |
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insurance companies; |
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brokers, dealers and traders in securities, currencies or commodities; |
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entities that are tax-exempt for U.S. federal income tax purposes and retirement plans, individual retirement accounts and tax-deferred accounts; |
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persons liable for alternative minimum tax; |
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certain U.S. expatriates; |
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regulated investment companies or real estate investment trusts; |
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persons that actually or constructively own 10% or more (measured by voting power or value) of our stock; |
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persons who acquired our 7% preferred stock, common stock or warrants pursuant to the exercise of any employee share option or otherwise as compensation, or pursuant to a tax free or tax deferred transaction; |
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persons whose functional currency is not the U.S. dollar; |
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partnerships, including entities and arrangements classified as partnerships for U.S. federal income tax purposes, and persons holding our 7% preferred stock, common stock or warrants through partnerships; or |
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persons holding our 7% preferred stock, common stock or warrants as part of a conversion, constructive sale, wash sale or other integrated transaction or a hedge, straddle or synthetic security. |
This discussion does not address any tax consequences other than U.S. federal income tax consequences.
In this discussion, a U.S. Holder is a beneficial owner of our 7% preferred stock, common stock or warrants that is, for U.S. federal income tax purposes: (a) an individual who is a citizen or resident of the United States; (b) a corporation (or other entity taxable as a corporation) organized under the laws of the United States, any State thereof or the District of Columbia; (c) an estate whose income is subject to U.S. federal income taxation regardless of its source; or (d) a trust if (1) a court within the United States is able to exercise primary supervision over its administration and one or more United States persons (as defined in the Code) have the authority to control all substantial decisions of the trust, or (2) the trust has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person.
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In this discussion, a Non-U.S. Holder is a beneficial owner of 7% preferred stock, common stock or warrants that is not a U.S. Holder and not a partnership (or an entity or arrangement classified as a partnership for U.S. federal income tax purposes).
The tax treatment of a partner in a partnership (including an entity or arrangement classified as a partnership for U.S. federal income tax purposes) that holds our 7% preferred stock, common stock or warrants generally will depend on the partners status, the activities of the partnership and certain determinations made at the partner level. A prospective investor in our 7% preferred stock, common stock or warrants that is a partnership, and partners in such a partnerships, should consult their own tax advisors.
Based on the terms of the 7% preferred stock, the Company expects, and therefore this discussion assumes, that our 7% preferred stock should be treated as common stock for purposes of Section 305 of the Code. If our 7% preferred stock were not so treated the consequences may differ from those stated herein.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL INCOME TAX RULES TO THEIR PARTICULAR CIRCUMSTANCES AS WELL AS THE U.S. STATE AND LOCAL, AND FOREIGN AND OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF PREFERRED STOCK, COMMON STOCK AND WARRANTS, CONVERSION OF PREFERRED STOCK INTO COMMON STOCK AND EXERCISE OF WARRANTS FOR COMMON STOCK.
Taxation of U.S. Holders of Warrants
Sale or other taxable disposition of warrants
Upon the sale, exchange or other taxable disposition of a warrant, in general, a U.S. Holder will recognize taxable gain or loss measured by the difference, if any, between (i) the amount realized on the sale, exchange or other taxable disposition, and (ii) the U.S. Holders adjusted tax basis in the warrant disposed of. A U.S. Holders adjusted tax basis in the warrant generally will equal the U.S. Holders cost to acquire the warrant, as adjusted in the manner described below, under Adjustments under the warrants. A U.S. Holders gain or loss generally will be capital gain or loss and generally will be long term capital gain or loss if, at the time of the sale or other disposition, the U.S. Holders holding period for the warrant is more than one year. Subject to limited exceptions, capital losses cannot be used to offset ordinary income. Long term capital gain recognized by a non-corporate U.S. Holder currently is subject to a preferential rate of U.S. federal income taxation.
Exercise of warrants
Because the warrants permit settlement though a cashless net share settlement, the U.S. federal income tax consequences of the exercise of a warrant are not entirely clear. It is expected that a U.S. Holder exercising a warrant would not recognize gain or loss for U.S. federal income tax purposes either (i) because the warrant should be treated as an option to acquire common stock or (ii) because exercise of the warrant for common stock is treated as a tax free recapitalization. In either case, a U.S. Holders initial tax basis in the common stock received (including any tax basis attributable to a fractional share of common stock), would equal such U.S. holders adjusted tax basis in the warrant exercised, increased by the amount of cash paid (if any) to exercise the warrant. If the warrant is treated as an option to acquire common stock, a U.S. Holders holding period for the common stock received on exercise generally would commence on the day following the exercise. If exercise of the warrant is treated as a tax free recapitalization, a U.S. Holders holding period generally would include the U.S. Holders holding period for the warrant exercised.
Despite the foregoing, the IRS could take the position that the exercise of a warrant constitutes a taxable exchange resulting in gain or loss, which would be capital gain or loss. The amount of capital gain or loss recognized on such an exchange and its character as short term or long term would depend on the position taken by the IRS regarding the nature of that exchange. If the U.S. Holder is treated as exchanging the warrants for
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shares of our common stock, the amount of capital gain or loss would be the difference between the fair market value of our common stock (and cash received in lieu of a fractional share of common stock), reduced by the amount of cash paid (if any) to exercise the warrants, and the U.S. Holders adjusted tax basis in the warrants exchanged. In that case, the U.S. Holder would have long term capital gain or loss if it has held the warrants for more than one year and the U.S. Holders initial tax basis in the common stock received would equal its fair market value.
Alternativelyspecifically if the exercising U.S. Holder elects a cashless net share settlementthe IRS could take the position that the U.S. Holder is treated as selling a portion of the warrants or underlying common stock for cash that is used to pay the exercise price for the warrants, in which case the amount of capital gain or loss would be the difference between that exercise price and the U.S. Holders adjusted tax basis attributable to the warrants or common stock deemed sold. If the U.S. Holder is treated as selling warrants, such U.S. Holder would have long term capital gain or loss if the U.S. Holder held the warrants for more than one year at the time of exercise. If the U.S. Holder is treated as selling underlying common stock, such U.S. Holder would have short term capital gain or loss. The U.S. Holders initial tax basis in the common stock received would equal such U.S. Holders adjusted tax basis in the warrants deemed exercised, increased by the U.S. Holders deemed amount realized from the warrants or common stock deemed sold.
A U.S. Holder that receives cash in lieu of receipt of a fractional share of common stock should generally be treated as recognizing capital gain or loss in an amount equal to the difference, if any, between the amount of cash received and the adjusted tax basis allocable to the fractional share.
Subject to limited exceptions, capital losses cannot be used to offset ordinary income. Long term capital gain recognized by a non-corporate U.S. Holder currently is subject to a preferential rate of U.S. federal income taxation.
U.S. holders should consult their tax advisors regarding the tax consequences of the exercise of the warrants.
Lapse of warrants
A U.S. Holder that allows a warrant to lapse would generally recognize a loss for U.S. federal income tax purposes equal to the adjusted tax basis of the warrant. In general, such a loss would be a capital loss, and would be a short term or long term capital gain or loss depending on the U.S. Holders holding period for the warrant.
Adjustments under the warrants
Certain events, such as adjustment of the exercise price of the warrants, could result in a deemed taxable distribution to a U.S. Holder of warrants if the adjustment has the effect of increasing the proportionate interest of the U.S. Holder in our earnings and profits or assets, without regard to whether the U.S. Holder receives any cash or other property. However, adjustments to the exercise price made pursuant to a bona fide reasonable adjustment formula that has the effect of preventing the dilution of the interests of U.S. Holders of the warrants generally will not result in a taxable deemed distribution. In the event of a deemed taxable distribution, a U.S. Holders basis in its warrants will be increased by the amount of the taxable distribution. If a taxable deemed distribution occurs, such deemed distribution would be taxable as a dividend, return of capital or capital gain in accordance with the rules discussed below, and U.S. Holders may recognize income as a result even though they receive no cash or property.
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Taxation of U.S. Holders of 7% Preferred Stock and Common Stock
Dividends and Other Distributions on 7% Preferred Stock or Common Stock. Distributions on our 7% preferred stock and common stock will constitute dividends and will be included in a U.S. Holders gross income (as ordinary income) when paid to the extent of our current or accumulated earnings and profits as determined under U.S. federal income tax principles. Distributions on our 7% preferred stock and common stock received by a U.S. Holder that exceed our current and accumulated earnings and profits will be treated first as a non-taxable return of capital reducing (but, not below zero) the U.S. Holders adjusted tax basis in the 7% preferred stock or common stock and, to the extent such distributions exceed the U.S. Holders adjusted tax basis in the 7% preferred stock or common stock, as capital gain. Subject to certain exceptions, dividends received by non-corporate U.S. Holders currently are taxed at a maximum rate of 15% (effective for tax years through 2010), provided that certain holding period requirements are met. Dividends paid to corporate U.S. Holders will generally qualify for the dividends-received deduction, provided that certain holding period requirements are met. Notwithstanding the foregoing, a distribution of additional shares of our 7% preferred stock to U.S. Holders of the 7% preferred stock in connection with payment of the quarterly preferred dividend (as described in Description of Capital StockPreferred StockDividends) generally would not be expected to constitute a taxable event for U.S. federal income tax purposes. A U.S. Holder that receives additional shares of our 7% preferred stock in connection with such a payment of the quarterly preferred dividend would reallocate its tax basis in the shares of 7% preferred stock prior to the distribution between such shares and the additional shares of 7% preferred stock received in accordance with their relative fair market values and the U.S. Holders holding period for the additional shares of 7% preferred stock received would include the holding period for the shares of 7% preferred stock on which such additional shares were distributed.
Certain events, such as adjustment of the conversion price of our 7% preferred stock could, in some circumstances, be deemed to result in the payment of a taxable distribution to the U.S. Holders of our 7% preferred stock if such event has the effect of increasing the proportionate interest of U.S. Holders of our 7% preferred stock in our earnings and profits or assets. A failure to fully adjust the conversion price of the 7% preferred stock to reflect a stock dividend or other event increasing the proportionate interest of U.S. Holders of the common stock in our earnings and profits or assets could, in some circumstances, be deemed to result in the payment of a taxable distribution to U.S. Holders of our common stock. In addition, a change in the exercise price of the warrants or another similar transaction could, in some circumstances, be deemed to result in the payment of a taxable distribution to U.S. Holders of the 7% preferred stock or common stock. However, adjustments to the conversion price made pursuant to a bona fide reasonable adjustment formula that has the effect of preventing the dilution of the interests of U.S. Holders of the 7% preferred stock or the common stock generally will not result in a taxable deemed distribution. If a taxable deemed distribution occurs, such deemed distribution would be taxable as a dividend, return of capital or capital gain in accordance with the rules discussed above, and U.S. Holders may recognize income as a result even though they receive no cash or property.
Conversion of 7% Preferred Stock into Common Stock. The conversion by a U.S. Holder of 7% preferred stock into common stock should not constitute a taxable event for U.S. federal income tax purposes (except to the extent of any cash received in lieu of a fractional share of common stock) and a U.S. Holders holding period and tax basis in the 7% preferred stock converted (other than tax basis attributable to a fractional share of common stock for which cash is received) should carry over to the common stock received upon conversion. A U.S. Holder that receives cash in lieu of receipt of a fractional share of common stock should generally be treated as recognizing capital gain or loss in an amount equal to the difference, if any, between the amount of cash received and the adjusted tax basis allocable to the fractional share.
Sale or Other Taxable Disposition of 7% Preferred Stock or Common Stock. Upon the sale or other taxable disposition of the 7% preferred stock or common stock, in general, a U.S. Holder will recognize taxable gain or loss measured by the difference, if any, between (i) the amount realized on the sale, exchange or other taxable disposition, and (ii) the U.S. Holders adjusted tax basis in the 7% preferred stock or the common stock disposed
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of. A U.S. Holders adjusted tax basis in the 7% preferred stock or common stock generally would be computed by reference to the U.S. Holders cost to acquire such 7% preferred stock or common stock, subject to certain adjustments, as discussed above. A U.S. Holders gain or loss generally will be capital gain or loss and generally will be long term capital gain or loss if, at the time of the sale or other disposition, the U.S. Holders holding period for the 7% preferred stock or the common stock is more than one year. Subject to limited exceptions, capital losses cannot be used to offset ordinary income. Long term capital gain recognized by a non-corporate U.S. holder currently is subject to a preferential rate of U.S. federal income taxation.
Taxation of Non-U.S. Holders of Warrants, 7% Preferred Stock and Common Stock
Dividends on 7% preferred stock or common stock and adjustments under the warrants
We will have to withhold U.S. federal income tax at a rate of 30%, or a lower rate under an applicable income tax treaty, from the gross amount of the dividends paid on our 7% preferred stock or common stock, as well as any deemed dividends resulting from adjustments to the exercise price of the warrants or adjustments to the conversion rate of the 7% preferred stock (each as described above), to a Non-U.S. holder that are not effectively connected with the Non-U.S. Holders conduct of a trade or business in the United States. Distributions, including taxable deemed distributions, will constitute dividends to the extent of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions that exceed our current and accumulated earnings and profits will be treated first as a non-taxable return of capital reducing (but, not below zero) the Non-U.S. Holders tax basis in the 7% preferred stock, common stock or warrants (as applicable) and, to the extent such distributions exceed the Non-U.S. Holders adjusted tax basis in the 7% preferred stock, common stock, or warrants (as applicable), as capital gain. In the case of any deemed dividends, the applicable withholding tax may apply to distributions on the Non-U.S. Holders common stock or 7% preferred stock, common stock deliverable upon conversion of 7% preferred stock or upon exercise of warrants, or on other proceeds we subsequently pay to such Non-U.S. Holder. Notwithstanding the foregoing, a distribution of additional shares of our 7% preferred stock to Non-U.S. Holders of the 7% preferred stock in connection with payment of the quarterly preferred dividend (as described in Description of Capital StockPreferred StockDividends) generally would not be expected to constitute a taxable event for U.S. federal income tax purposes.
In order to claim the benefit of an applicable income tax treaty, a Non-U.S. holder will be required to provide a properly executed IRS Form W-8BEN (or other applicable form) in accordance with the applicable certification and disclosure requirements. Special rules apply to partnerships and other pass-through entities and these certification and disclosure requirements also may apply to beneficial owners of partnerships and other pass-through entities that hold our 7% preferred stock or common stock. A Non-U.S. Holder that satisfies the requirements for a reduced rate of U.S. federal withholding tax under an income tax treaty may obtain a refund or credit of any excess amounts withheld by filing an appropriate claim for a refund with the IRS. Non-U.S. Holders should consult their own tax advisors regarding their entitlement to benefits under a relevant income tax treaty and the manner of claiming the benefits.
Dividends that are effectively connected with a Non-U.S. Holders conduct of a trade or business in the United States (and, if required by an applicable income tax treaty are attributable to a permanent establishment in the United States) are taxed on a net income basis at the regular graduated U.S. federal income tax rates in the same manner as if the Non-U.S. Holder were a resident of the United States. In such cases, we will not have to withhold U.S. federal income tax if the Non-U.S. holder provides a properly executed IRS Form W-8ECI (or other applicable form) in accordance with the applicable certification and disclosure requirements. In addition, a branch profits tax may be imposed at a 30% rate, or a lower rate under an applicable income tax treaty, on a foreign corporation that has earnings and profits (attributable to dividends or otherwise) that are effectively connected with the conduct of a trade or business in the United States.
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Conversion of 7% preferred stock into common stock
The conversion by a Non-U.S. Holder of our 7% preferred stock into common stock should not constitute a taxable event for U.S. federal income tax purposes (except to the extent of any cash received in lieu of a fractional share of common stock, which will be treated in the manner described below) and a Non-U.S. Holders holding period and tax basis in the 7% preferred stock converted (other than tax basis attributable to a fractional share of common stock for which cash is received) should carry over to the common stock received upon conversion.
Sale or other disposition of 7% preferred stock, common stock or warrants and exercise of warrants
A Non-U.S. Holder generally will not be subject to U.S. federal income tax or any withholding thereof with respect to gain realized on a sale or other disposition of our 7% preferred stock, common stock or warrants, or with respect to an exercise of warrants unless one of the following applies:
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the gain is effectively connected with the Non-U.S. Holders conduct of a trade or business in the United States (and if required by an applicable income tax treaty, is attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States); in these cases, the Non-U.S. Holder will generally be taxed on its net gain derived from the disposition or exercise at the regular graduated rates in the same manner as if the Non-U.S. Holder were a resident of the United States and, if the Non-U.S. Holder is a foreign corporation, the branch profits tax described above may also apply; |
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the Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of the disposition or exercise and meets certain other requirements; in this case, except as otherwise provided by an applicable income tax treaty, the gain, which may be offset by U.S. source capital losses, generally will be subject to a flat 30% U.S. federal income tax (even though the Non-U.S. Holder is not considered a resident alien under the Code); or |
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our 7% preferred stock, common stock or warrants constitute a United States real property interest by reason of our status as a United States real property holding corporation, or a USRPHC, for U.S. federal income tax purposes at any time during the shorter of (i) the 5-year period ending on the date you dispose of the 7% preferred stock, common stock or warrants, or exercise the warrants or (ii) the period you held the 7% preferred stock, common stock or warrants. |
Generally, a corporation is a USRPHC if the fair market value of its U.S. real property interests equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. We believe that we are not currently, and we do not anticipate becoming in the future, a USRPHC.
Information Reporting and Backup Withholding
Information returns may be filed with the IRS in connection with payments of dividends on our 7% preferred stock and common stock and the proceeds of a sale or other disposition of our 7% preferred stock, common stock or warrants, or an exercise of warrants. A non-exempt U.S. Holder may be subject to U.S. backup withholding on these payments if it fails to provide its taxpayer identification number to the withholding agent and comply with certification procedures or otherwise establish an exemption from backup withholding.
A Non-U.S. Holder may be subject to U.S. information reporting and backup withholding on these payments unless the Non-U.S. Holder complies with certification procedures to establish that it is not a United States person. In addition, the amount of any dividends (including deemed dividends) on our 7% preferred stock, common stock or warrants paid to a Non-U.S. Holder, and the amount of any U.S. federal tax withheld thereform, must be annually reported to the IRS and the holder. This information may be made available by the IRS under the provisions of an applicable income tax treaty or agreement with the tax authorities of the country in which the Non-U.S. Holder resides.
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Payment of the proceeds of the sale or other disposition of the 7% preferred stock, common stock or warrants to or through a non-U.S. office of a U.S. broker or of a non-U.S. broker with certain specified U.S. connections generally will be subject to information reporting requirements, but not backup withholding, unless the Non-U.S. Holder certifies under penalties of perjury that it is not a United States person or an exemption otherwise applies. Payments of the proceeds of a sale or other disposition of the 7% preferred stock, common stock or warrants to or through a U.S. office of a broker generally will be subject to information reporting and backup withholding, unless the Non-U.S. Holder certifies under penalties of perjury that it is not a United States person or otherwise establishes an exemption.
The amount of any backup withholding from a payment will be allowed as a credit against the holders U.S. federal income tax liability and may entitle the holder to a refund, provided that the required information is timely furnished to the IRS.
Additional Withholding Requirements
Under recently enacted legislation, the relevant withholding agent may be required to withhold 30% of any dividends and the proceeds of a sale of our 7% preferred stock, common stock or warrants paid after December 31, 2012 to (i) a foreign financial institution (as defined pursuant to that legislation) unless such foreign financial institution agrees to verify, report and disclose its U.S. accountholders and meets certain other specified requirements or (ii) a non-financial foreign entity that is the beneficial owner of the payment unless such entity certifies that it does not have any substantial United States owners or provides the name, address and taxpayer identification number of each substantial United States owner and such entity meets certain other specified requirements. If payment of this withholding tax is made, Non-U.S. Holders that are otherwise eligible for an exemption from, or reduction of, U.S. withholding taxes with respect to such dividends or proceeds will be required to seek a credit or refund from the IRS to obtain the benefit of such exemption or reduction. Non-U.S. Holders should contact their own tax advisors regarding the particular consequences to them of this legislation.
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On behalf of the selling security holders, we are registering for resale 11,181,673 shares of our common stock, 1,010,345 shares of our 7% preferred stock, 4,335,176 shares of our common stock issuable upon conversion of our 7% preferred stock, 1,693,827 warrants to purchase shares of our common stock, and 1,693,827 shares of our common stock issuable upon exercise of our warrants. As used in this prospectus, selling security holders includes the successors-in-interest, donees, transferees or others who may later hold the selling security holders interests. This prospectus may also be used by transferees of the selling security holders, including broker-dealers or other transferees who borrow or purchase the securities to settle or close out short sales of shares of securities. Selling security holders will act independently of us in making decisions with respect to the timing, manner and size of each sale or non-sale related transfer. We will not receive any proceeds from sales by the selling security holders.
We expect that the selling security holders will sell their shares primarily through sales on the OTC Bulletin Board or any other stock exchange, market or trading facility on which our shares are traded or in private transactions. Sales of the securities may be made at fixed or negotiated prices and may be effected by means of one or more of the following transactions, which may involve cross or block transactions:
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ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
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block trades in which the broker-dealer will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction; |
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purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
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an exchange distribution in accordance with the rules of the applicable exchange; |
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privately negotiated transactions; |
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settlement of short sales; |
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transactions in which broker-dealers may agree with one or more selling security holders to sell a specified number of such shares at a stipulated price per share; |
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through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; or |
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a combination of any of the above or any other method permitted pursuant to applicable law. |
The selling security holders will have the sole discretion not to accept any purchase offer or make any sale of their securities if they deem the purchase price to be unsatisfactory at a particular time. To the extent required, this prospectus may be amended and supplemented from time to time to describe a specific plan of distribution.
Broker-dealers engaged by selling security holders may arrange for other broker-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling security holders or, if any broker-dealer acts as agent for the purchase of securities, from the purchaser, in amounts to be negotiated. Selling security holders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved.
In connection with sales of securities, or interests therein, selling security holders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging the positions they assume. Selling security holders may also engage in short sales, puts and calls or other transactions in our securities or derivatives of our securities and may sell and deliver shares in connection with these transactions.
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Selling security holders and broker-dealers or agents involved in an arrangement to sell any of the offered securities may, under certain circumstances, be deemed to be underwriters with respect to securities they sell within the meaning of the Securities Act. Any profit on such sales and any discount, commission, concession or other compensation received by any such underwriter, broker-dealer or agent, may be deemed an underwriting discount and commission under the Exchange Act. No selling security holder has informed us that they have an agreement or understanding, directly or indirectly, with any person to distribute the securities. If a selling security holder should notify us that they have a material arrangement with a broker-dealer for the resale of their securities, we would be required to amend the registration statement of which this prospectus forms a part, and file a prospectus supplement to describe the agreement between the selling security holder and broker-dealer or agent, provide required information regarding the plan of distribution, and otherwise revise the disclosure in this prospectus as needed. We would also file the agreement between the selling security holder and the broker-dealer as an exhibit to the post-effective amendment to the registration statement.
We have agreed to pay all fees and expenses incurred by us incident to the registration of our securities, including SEC filing fees. Each selling security holder will be responsible for all costs and expenses in connection with the sale of their securities, including brokerage commissions or dealer discounts. Selling security holders will be indemnified by us against certain losses, claims, damages and liabilities, including certain liabilities under the Securities Act.
There can be no assurance that the selling security holders will sell any or all of the securities registered pursuant to the registration statement of which this prospectus forms a part.
To comply with the securities laws of certain jurisdictions, if applicable, the securities will be offered or sold in such jurisdictions only through registered or licensed brokers or dealers.
Selling security holders and other persons participating in the sale or distribution of the securities offered hereby, will be subject to applicable provisions of the Exchange Act and rules and regulations promulgated thereunder, including, without limitation, Regulation M. With certain exceptions, Regulation M restricts certain activities of, and limits the timing of purchases and sales of any of the securities by, selling security holders, affiliated purchasers and any broker-dealer or other person who participates in a distribution of the securities. Under Regulation M, these persons are precluded from bidding for or purchasing, or attempting to induce any person to bid for or purchase, any security subject to the distribution until the distribution is complete. Regulation M also prohibits any bids or purchases made in order to stabilize the price of a security in connection with the distribution of that security. All of these limitations may affect the marketability of the securities offered by this prospectus.
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The validity of the securities offered in this prospectus is being passed upon for us by Fried, Frank, Harris, Shriver & Jacobson LLP, New York,
The consolidated financial statements of Cooper-Standard Holdings Inc. as of December 31, 2009 and 2008, and for each of the three years in the period ended December 31, 2009, appearing in this Prospectus and Registration Statement have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon (which contains an explanatory paragraph describing conditions that raise substantial doubt about our ability to continue as a going concern as described in Note 3 to the consolidated financial statements) appearing elsewhere herein, and are included in reliance upon
WHERE YOU CAN FIND MORE INFORMATION
We file periodic and annual reports and other information with the SEC. We are not required to send annual reports to security holders pursuant to the SECs proxy rules. You may read and copy any document that we file with the SEC at the SECs Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain further information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our SEC filings also are available to the public over the Internet at the SECs website at http://www.sec.gov.
Our principal executive offices are located at 39550 Orchard Hill Place Drive, Novi, Michigan 48375, and our telephone number at that address is (248) 596-5900. You may find additional information about us and our subsidiaries on our website at www.cooperstandard.com. The information contained on, or that can be accessed through, our website is not incorporated by reference in, and is not part of, this prospectus, and should not be relied upon in connection with any investment decision.
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I NDEX TO FINANCIAL STATEMENTS
Page | ||
Audited Annual Financial Statements |
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Report of Ernst & Young LLP, independent registered public accounting firm |
F-2 | |
Consolidated statements of operations for the years ended December 31, 2007, 2008 and 2009 |
F-3 | |
Consolidated balance sheets as of December 31, 2008 and 2009 |
F-4 | |
F-5 | ||
Consolidated statements of cash flows for the years ended December 31, 2007, 2008 and 2009 |
F-6 | |
F-7 | ||
F-59 | ||
Interim Financial Statements (as of March 31, 2010) |
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F-60 | ||
F-61 | ||
F-62 | ||
F-63 |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Management
Cooper-Standard Holdings Inc.
We have audited the accompanying consolidated balance sheets of Cooper-Standard Holdings Inc. and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of operations, changes in equity (deficit) and cash flows for each of the three years in the period ended December 31, 2009. Our audits also included the financial statement schedule for the three years in the period ended December 31, 2009. These financial statements and schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of misstatement. We were not engaged to perform an audit of the Companys internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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 our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Cooper-Standard Holdings Inc. and subsidiaries at December 31, 2009 and 2008 and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule for the three years in the period ended December 31, 2009, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 3 to the consolidated financial statements, on August 3, 2009, Cooper Standard Holdings, Inc. and its wholly owned United States subsidiaries filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code. On August 4, 2009, the Companys Canadian subsidiary, Cooper Standard Automotive Canada Limited commenced proceedings seeking relief from its creditors under Canadas Companies Creditors Arrangement Act in the Ontario Superior Court of Justice in Toronto, Canada. As discussed in Note 3 to the consolidated financial statements, uncertainties inherent in the bankruptcy process raise substantial doubt about the Companys ability to continue as a going concern. Managements intentions with respect to these matters are also described in Note 3. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
As discussed in Note 2 to the consolidated financial statements, in 2009, the Company changed its method of accounting for and presentation of consolidated net income (loss) attributable to Cooper-Standard Holdings, Inc. and non-controlling interests.
As discussed in Notes 11 and 12 to the consolidated financial statements in 2008 and in 2007, the Company changed its method of accounting for pension and other postretirement benefit plans, respectively.
/s/ Ernst & Young LLP
Detroit, Michigan
March 31, 2010
F-2
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollar amounts in thousands)
Year
Ended
December 31, 2007 |
Year
Ended
December 31, 2008 |
Year
Ended
December 31, 2009 |
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Sales |
$ | 2,511,153 | $ | 2,594,577 | $ | 1,945,259 | ||||||
Cost of products sold |
2,114,039 | 2,260,063 | 1,678,953 | |||||||||
Gross profit |
397,114 | 334,514 | 266,306 | |||||||||
Selling, administration, & engineering expenses |
222,134 | 231,709 | 199,552 | |||||||||
Amortization of intangibles |
31,850 | 30,996 | 14,976 | |||||||||
Impairment charges |
146,366 | 33,369 | 363,496 | |||||||||
Restructuring |
26,386 | 38,300 | 32,411 | |||||||||
Operating profit (loss) |
(29,622 | ) | 140 | (344,129 | ) | |||||||
Interest expense, net of interest income |
(89,577 | ) | (92,894 | ) | (64,333 | ) | ||||||
Equity earnings |
2,207 | 897 | 4,036 | |||||||||
Reorganization items, net |
| | (17,367 | ) | ||||||||
Other income (expense), net |
(468 | ) | (1,368 | ) | 9,919 | |||||||
Loss before income taxes |
(117,460 | ) | (93,225 | ) | (411,874 | ) | ||||||
Provision (benefit) for income tax expense |
32,946 | 29,295 | (55,686 | ) | ||||||||
Consolidated net loss |
(150,406 | ) | (122,520 | ) | (356,188 | ) | ||||||
Add: Net (income) loss attributed to noncontrolling interests |
(587 | ) | 1,069 | 126 | ||||||||
Net loss attributable to Cooper-Standard Holdings Inc. |
$ | (150,993 | ) | $ | (121,451 | ) | $ | (356,062 | ) | |||
The accompanying notes are an integral part of these consolidated financial statements.
F-3
(DEBTOR-IN-POSSESSION)
CONSOLIDATED BALANCE SHEETS
December 31, 2008 and 2009
(Dollar amounts in thousands)
December 31,
2008 |
December 31,
2009 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ | 111,521 | $ | 380,254 | ||||
Accounts receivable, net |
333,693 | 355,543 | ||||||
Inventories, net |
116,952 | 111,575 | ||||||
Prepaid expenses |
19,162 | 22,153 | ||||||
Other |
42,226 | 76,454 | ||||||
Total current assets |
623,554 | 945,979 | ||||||
Property, plant, and equipment, net |
623,987 | 586,179 | ||||||
Goodwill |
244,961 | 87,728 | ||||||
Intangibles, net |
227,453 | 10,549 | ||||||
Other assets |
98,296 | 106,972 | ||||||
$ | 1,818,251 | $ | 1,737,407 | |||||
LIABILITIES AND EQUITY (DEFICIT) |
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Current liabilities: |
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Debt payable within one year |
$ | 94,136 | $ | 18,204 | ||||
Debtor-in-possession financing |
| 175,000 | ||||||
Accounts payable |
192,948 | 166,346 | ||||||
Payroll liabilities |
69,601 | 71,523 | ||||||
Accrued liabilities |
94,980 | 87,073 | ||||||
Total current liabilities |
451,665 | 518,146 | ||||||
Long-term debt |
1,049,959 | 11,059 | ||||||
Pension benefits |
161,625 | 148,936 | ||||||
Postretirement benefits other than pensions |
76,822 | 76,261 | ||||||
Deferred tax liabilities |
28,265 | 7,875 | ||||||
Other long-term liabilities |
30,253 | 19,727 | ||||||
Liabilities subject to compromise |
| 1,261,903 | ||||||
Total liabilities |
1,798,589 | 2,043,907 | ||||||
Equity (deficit): |
||||||||
Common stock, $0.01 par value, 4,000,000 shares authorized at December 31, 2008 and December 31, 2009, 3,479,100 shares issued and outstanding at December 31, 2008, 3,482,612 shares issued and outstanding at December 31, 2009 |
35 | 35 | ||||||
Additional paid-in capital |
354,894 | 356,316 | ||||||
Accumulated deficit |
(280,216 | ) | (636,278 | ) | ||||
Accumulated other comprehensive loss |
(59,536 | ) | (31,037 | ) | ||||
Total Cooper-Standard Holdings Inc. equity (deficit) |
15,177 | (310,964 | ) | |||||
Noncontrolling interests |
4,485 | 4,464 | ||||||
Total equity (deficit) |
19,662 | (306,500 | ) | |||||
Total liabilities and equity (deficit) |
$ | 1,818,251 | $ | 1,737,407 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
F-4
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
(Dollar amounts in thousands)
Common
Shares |
Common
Stock |
Additional
Paid-In Capital |
Retained
Earnings (Deficit) |
Accumulated
Other Comprehensive Income (Loss) |
Cooper-
Standard Holdings Inc. Equity (Deficit) |
Non-Controlling
Interest |
Total
Equity (Deficit) |
|||||||||||||||||||||||
Balance at December 31, 2006 |
3,238,100 | $ | 32 | $ | 323,778 | $ | (4,151 | ) | $ | 1,050 | $ | 320,709 | $ | 3,254 | $ | 323,963 | ||||||||||||||
Investment noncontrolling interest |
2,453 | 2,453 | ||||||||||||||||||||||||||||
Adoption of Fin 48 |
(195 | ) | (195 | ) | (195 | ) | ||||||||||||||||||||||||
Issuance of common stock |
250,000 | 3 | 29,997 | 30,000 | 30,000 | |||||||||||||||||||||||||
Repurchase of common stock |
(4,500 | ) | (450 | ) | (450 | ) | (450 | ) | ||||||||||||||||||||||
Stock-based compensation |
1,549 | 1,549 | 1,549 | |||||||||||||||||||||||||||
Impact of change in measurement date on benefit plans net of ($1,020) tax effect |
25,846 | 25,846 | 25,846 | |||||||||||||||||||||||||||
Comprehensive income (loss): |
||||||||||||||||||||||||||||||
Net income (loss) for 2007 |
(150,993 | ) | (150,993 | ) | 587 | (150,406 | ) | |||||||||||||||||||||||
Other comprehensive income (loss): |
||||||||||||||||||||||||||||||
Benefit plan liability, net of ($1,934) tax effect |
6,794 | 6,794 | 6,794 | |||||||||||||||||||||||||||
Currency translation adjustment |
43,246 | 43,246 | 1,949 | 45,195 | ||||||||||||||||||||||||||
Fair value change of derivatives, net of $19 tax effect |
(7,948 | ) | (7,948 | ) | (7,948 | ) | ||||||||||||||||||||||||
Comprehensive income (loss): |
(108,901 | ) | 2,536 | (106,365 | ) | |||||||||||||||||||||||||
Balance at December 31, 2007 |
3,483,600 | 35 | 354,874 | (155,339 | ) | 68,988 | 268,558 | 8,243 | 276,801 | |||||||||||||||||||||
Impact of Change in measurement date on benefit plans |
(3,426 | ) | (3,426 | ) | (3,426 | ) | ||||||||||||||||||||||||
Transaction with affiliate |
(1,741 | ) | (1,741 | ) | ||||||||||||||||||||||||||
Dividends paid to noncontrolling interest |
(662 | ) | (662 | ) | ||||||||||||||||||||||||||
Repurchase of common stock |
(4,500 | ) | (540 | ) | (540 | ) | (540 | ) | ||||||||||||||||||||||
Stock-based compensation |
560 | 560 | 560 | |||||||||||||||||||||||||||
Comprehensive income (loss): |
||||||||||||||||||||||||||||||
Net loss for 2008 |
(121,451 | ) | (121,451 | ) | (1,069 | ) | (122,520 | ) | ||||||||||||||||||||||
Other comprehensive loss: |
||||||||||||||||||||||||||||||
Benefit plan liability, net of ($1,097) tax effect |
(53,614 | ) | (53,614 | ) | (53,614 | ) | ||||||||||||||||||||||||
Currency translation adjustment |
(58,929 | ) | (58,929 | ) | (286 | ) | (59,215 | ) | ||||||||||||||||||||||
Fair value change of derivatives, net of ($44) tax effect |
(15,981 | ) | (15,981 | ) | (15,981 | ) | ||||||||||||||||||||||||
Comprehensive loss |
(249,975 | ) | (1,355 | ) | (251,330 | ) | ||||||||||||||||||||||||
Balance at December 31, 2008 |
3,479,100 | 35 | 354,894 | (280,216 | ) | (59,536 | ) | 15,177 | 4,485 | 19,662 | ||||||||||||||||||||
Issuance of common stock |
3,512 | 88 | 88 | 88 | ||||||||||||||||||||||||||
Stock-based compensation |
1,334 | 1,334 | 1,334 | |||||||||||||||||||||||||||
Comprehensive income (loss): |
||||||||||||||||||||||||||||||
Net loss for 2009 |
(356,062 | ) | (356,062 | ) | (126 | ) | (356,188 | ) | ||||||||||||||||||||||
Other comprehensive income (loss): |
||||||||||||||||||||||||||||||
Benefit plan liability, net of $1,120 tax effect |
(3,499 | ) | (3,499 | ) | (3,499 | ) | ||||||||||||||||||||||||
Currency translation adjustment |
25,898 | 25,898 | 105 | 26,003 | ||||||||||||||||||||||||||
Fair value change of derivatives, net of ($3,843) tax effect |
6,100 | 6,100 | 6,100 | |||||||||||||||||||||||||||
Comprehensive loss |
(327,563 | ) | (21 | ) | (327,584 | ) | ||||||||||||||||||||||||
Balance at December 31, 2009 |
3,482,612 | $ | 35 | $ | 356,316 | $ | (636,278 | ) | $ | (31,037 | ) | $ | (310,964 | ) | $ | 4,464 | $ | (306,500 | ) | |||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-5
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
Year Ended
December 31, 2007 |
Year Ended
December 31, 2008 |
Year Ended
December 31, 2009 |
||||||||||
Operating Activities: |
||||||||||||
Consolidated net loss |
$ | (150,406 | ) | $ | (122,520 | ) | $ | (356,188 | ) | |||
Adjustments to reconcile consolidated net loss to net cash provided by (used in) operating activities: |
||||||||||||
Depreciation |
104,199 | 109,109 | 98,801 | |||||||||
Amortization of intangibles |
31,850 | 30,996 | 14,976 | |||||||||
Impairment charges |
146,366 | 33,369 | 363,496 | |||||||||
Reorganization items |
| | 17,367 | |||||||||
Non-cash restructuring charges |
626 | 9,029 | 1,268 | |||||||||
Gain on bond repurchase |
| (1,696 | ) | (9,096 | ) | |||||||
Amortization of debt issuance cost |
4,883 | 4,866 | 10,286 | |||||||||
Deferred income taxes |
(1,296 | ) | 14,045 | (36,797 | ) | |||||||
Changes in operating assets and liabilities, net of effects of businesses acquired: |
||||||||||||
Accounts receivable |
(10,976 | ) | 163,279 | 14,886 | ||||||||
Inventories |
14,836 | 28,062 | 9,914 | |||||||||
Prepaid expenses |
3,440 | (2,880 | ) | (974 | ) | |||||||
Accounts payable |
39,945 | (86,316 | ) | 50,081 | ||||||||
Accrued liabilities |
(16,567 | ) | (28,148 | ) | 27,117 | |||||||
Other |
18,473 | (14,702 | ) | (75,155 | ) | |||||||
Net cash provided by operating activities |
185,373 | 136,493 | 129,982 | |||||||||
Investing activities: |
||||||||||||
Property, plant, and equipment |
(107,255 | ) | (92,125 | ) | (46,113 | ) | ||||||
Acquisition of business, net of cash acquired |
(158,671 | ) | 4,937 | | ||||||||
Gross proceeds from sale-leaseback transaction |
4,806 | 8,556 | | |||||||||
Proceeds from sale of fixed assets |
1,096 | 4,775 | 642 | |||||||||
Other |
7 | | | |||||||||
Net cash used in investing activities |
(260,017 | ) | (73,857 | ) | (45,471 | ) | ||||||
Financing activities: |
||||||||||||
Proceeds from issuance of debtor-in-possession financing |
| | 175,000 | |||||||||
Payments on debtor-in-possession financing |
| | (313 | ) | ||||||||
Proceeds from issuance of long-term debt |
59,968 | | | |||||||||
Increase in short term debt, net |
6,189 | 37,004 | 24,104 | |||||||||
Principal payments on long-term debt |
(37,557 | ) | (16,528 | ) | (11,646 | ) | ||||||
Proceeds from issuance of stock |
30,000 | | 88 | |||||||||
Debt issuance cost |
(3,104 | ) | (561 | ) | (20,592 | ) | ||||||
Repurchase of common stock |
(450 | ) | (540 | ) | | |||||||
Repurchase of bonds |
| (5,306 | ) | (737 | ) | |||||||
Other |
| | 171 | |||||||||
Net cash provided by financing activities |
55,046 | 14,069 | 166,075 | |||||||||
Effects of exchange rate changes on cash |
4,153 | (6,061 | ) | 18,147 | ||||||||
Changes in cash and cash equivalents |
(15,445 | ) | 70,644 | 268,733 | ||||||||
Cash and cash equivalents at beginning of period |
56,322 | 40,877 | 111,521 | |||||||||
Cash and cash equivalents at end of period |
$ | 40,877 | $ | 111,521 | $ | 380,254 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands except per share amounts)
Note 1. Description of Business
Description of business
Cooper-Standard Holdings Inc. (the Company), through its wholly-owned subsidiary Cooper-Standard Automotive Inc., or CSA U.S, is a leading global manufacturer of fluid handling, body sealing, and Anti-Vibration Systems, or AVS, components, systems, subsystems, and modules, primarily for use in passenger vehicles and light trucks for global original equipment manufacturers, or OEMs, and replacement markets. The Company conducts substantially all of its activities through its subsidiaries.
The Company is one of the largest global producers of body sealing systems, one of the two largest North American producers in the AVS business, and the second largest global producer of the types of fluid handling products that we manufacture. We design and manufacture our products in each major automotive region of the world in close proximity to our customers through a disciplined and consistent approach to engineering and production. The Company operates in 66 manufacturing locations and nine design, engineering, and administrative locations in 18 countries around the world.
Note 2. Significant Accounting Policies
Principles of combination and consolidation The consolidated financial statements include the accounts of the Company and the wholly owned and less than wholly owned subsidiaries controlled by the Company. All material intercompany accounts and transactions have been eliminated. Acquired businesses are included in the consolidated financial statements from the dates of acquisition.
Effective January 1, 2009 the Company adopted Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 810, Consolidation. ASC Topic 810-10-65 establishes accounting and reporting standards for noncontrolling interests in subsidiaries. This statement requires the reporting of all noncontrolling interests as a separate component of equity, the reporting of consolidated net income (loss) as the amount attributable to both the parent and the noncontrolling interests and the separate disclosure of net income (loss) attributable to the parent and to the noncontrolling interests. In addition, this statement provides accounting and reporting guidance related to changes in noncontrolling ownership interests. Upon adoption, certain prior period amounts have been reclassified to conform to the current period financial statement presentation. These reclassifications have no effect on our previously reported results of operations. Refer to Note 17, Other Income (Expense) for additional information on the adoption of ASC Topic 810-10-65.
The equity method of accounting is followed for investments in which the Company does not have control, but does have the ability to exercise significant influence over operating and financial policies. Generally this occurs when ownership is between 20 to 50 percent. The cost method is followed in those situations where the Companys ownership is less than 20 percent and the Company does not have the ability to exercise significant influence.
The Companys investment in Nishikawa Standard Company, or NISCO, a 50 percent owned joint venture in the United States, is accounted for under the equity method. This investment totaled $11,905 and $13,400 at December 31, 2008 and 2009, respectively, and is included in other assets in the accompanying consolidated balance sheets.
The Companys investment in Guyoung Technology Co. Ltd, or Guyoung, a 20 percent owned joint venture in Korea, is accounted for under the equity method. This investment totaled $1,179 and $1,370 at December 31, 2008 and 2009, respectively, and is included in other assets in the accompanying consolidated balance sheets.
F-7
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
The fair value of Guyoungs stock has declined since the Companys 2006 acquisition and during 2008, the Company determined that the decline in fair value was other than temporary and an impairment of $2,669 was recorded in equity earnings in our consolidated statement of operations.
The Companys investment in Shanghai SAIC-Metzler Sealing Systems Co. Ltd., a 47.5 percent owned joint venture in China, is accounted for under the equity method. This investment totaled $20,166 and $20,994 at December 31, 2008 and 2009, respectively, and is included in other assets in the accompanying consolidated balance sheets.
Foreign currency The financial statements of foreign subsidiaries are translated to U.S. dollars at the end-of-period exchange rates for assets and liabilities and a weighted average exchange rate for each period for revenues and expenses. Translation adjustments for those subsidiaries whose local currency is their functional currency are recorded as a component of accumulated other comprehensive income (loss) in stockholders equity. Transaction related gains and losses arising from fluctuations in currency exchange rates on transactions denominated in currencies other that the functional currency are recognized in earnings as incurred, except for those intercompany balances which are designated as long-term.
Cash and cash equivalents The Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents.
Accounts receivable The Company records trade accounts receivable when revenue is recorded in accordance with its revenue recognition policy and relieves accounts receivable when payments are received from customers. Generally the Company does not require collateral for its accounts receivable.
Allowance for doubtful accounts The allowance for doubtful accounts is established through charges to the provision for bad debts. The Company evaluates the adequacy of the allowance for doubtful accounts on a periodic basis. The evaluation includes historical trends in collections and write-offs, managements judgment of the probability of collecting accounts, and managements evaluation of business risk. This evaluation is inherently subjective, as it requires estimates that are susceptible to revision as more information becomes available. The allowance for doubtful accounts was $4,040 and $5,871 at December 31, 2008 and 2009, respectively.
Advertising expense Expenses incurred for advertising are generally expensed when incurred. Advertising expense was $842 for 2007, $1,080 for 2008, and $345 for 2009.
Inventories Inventories are valued at lower of cost or market. Cost is determined using the first-in, first-out method. Finished goods and work-in-process inventories include material, labor and manufacturing overhead costs. The Company records inventory reserves for inventory in excess of production and/or forecasted requirements and for obsolete inventory in production. As of December 31, 2008 and 2009, inventories are reflected net of reserves of $14,242 and $17,158, respectively.
Derivative financial instruments Derivative financial instruments are utilized by the Company to reduce foreign currency exchange, interest rate, and commodity price risks. The Company has established policies and procedures for risk assessment and the approval, reporting, and monitoring of derivative financial instrument activities. On the date the derivative is established, the Company designates the derivative as either a fair value hedge, a cash flow hedge, or a net investment hedge in accordance with its established policy. The Company does not enter into financial instruments for trading or speculative purposes.
F-8
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
Income taxes Income tax expense in the consolidated and combined statements of operations is accounted for in accordance with ASC Topic 740, Accounting for Income Taxes , which requires the recognition of deferred income taxes using the liability method.
Deferred tax assets or liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using enacted tax laws and rates. A valuation allowance is provided on deferred tax assets if we determine that it is more likely than not that the asset will not be realized.
Long-lived assets Property, plant, and equipment are recorded at cost and depreciated using primarily the straight-line method over their estimated useful lives. Leasehold improvements are amortized over the expected life of the asset or term of the lease, whichever is shorter. Intangibles with finite lives, which include technology, customer contracts, and customer relationships, are amortized over their estimated useful lives. The Company evaluates the recoverability of long-lived assets when events and circumstances indicate that the assets may be impaired and the undiscounted net cash flows estimated to be generated by those assets are less than their carrying value. If the net carrying value exceeds the fair value, an impairment loss exists and is calculated based on a discounted cash flow analysis or estimated salvage value. Discounted cash flows are estimated using internal budgets and assumptions regarding discount rates and other factors.
Pre-Production Costs Related to Long Term Supply Arrangements Costs for molds, dies, and other tools owned by us to produce products under long-term supply arrangements are recorded at cost in property, plant, and equipment and amortized over the lesser of three years or the term of the related supply agreement. The amounts capitalized were $10,896 and $9,324 at December 31, 2008 and 2009, respectively. Costs incurred during the engineering and design phase of customer-owned tooling projects are expensed as incurred unless a contractual arrangement for reimbursement by the customer exists. Reimbursable tooling costs included in other assets were $3,822 and $2,561 at December 31, 2008 and 2009, respectively. Development costs for tools owned by the customer are recorded in accounts receivable in the accompanying combined balance sheets if considered a receivable in the next twelve months. At December 31, 2008 and 2009, $77,769 and $65,351, respectively, was included in accounts receivable for customer-owned tooling of which $32,768 and $40,510, respectively, was not yet invoiced to the customer.
Goodwill Goodwill is not amortized but is tested annually for impairment by reporting unit which is determined in accordance with ASC Topic 350 Intangibles-Goodwill and Other . The Company utilizes an income approach to estimate the fair value of each of its reporting units. The income approach is based on projected debt-free cash flow which is discounted to the present value using discount factors that consider the timing and risk of cash flows. The Company believes that this approach is appropriate because it provides a fair value estimate based upon the reporting units expected long-term operating cash flow performance. Fair value is estimated using recent automotive industry and specific platform production volume projections, which are based on both third party and internally-developed forecasts, as well as commercial, wage and benefit, inflation and discount rate assumptions. Other significant assumptions include the weighted average cost of capital, terminal value growth rate, terminal value margin rates, future capital expenditures and changes in future working capital requirements. While there are inherent uncertainties related to the assumptions used and to managements application of these assumptions to this analysis, the Company believes that the income approach provides a reasonable estimate of the fair value of its reporting units. The Company conducts its annual goodwill impairment analysis as of October 1 st of each fiscal year.
Revenue Recognition and Sales Commitments We generally enter into agreements with our customers to produce products at the beginning of a vehicles life. Although such agreements do not generally provide for minimum quantities, once we enter into such agreements, fulfillment of our customers purchasing requirements
F-9
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
can be our obligation for an extended period or the entire production life of the vehicle. These agreements generally may be terminated by our customer at any time. Historically, terminations of these agreements have been minimal. In certain limited instances, we may be committed under existing agreements to supply products to our customers at selling prices which are not sufficient to cover the direct cost to produce such products. In such situations, we recognize losses as they are incurred.
We receive blanket purchase orders from many of our customers on an annual basis. Generally, such purchase orders and related documents set forth the annual terms, including pricing, related to a particular vehicle model. Such purchase orders generally do not specify quantities. We recognize revenue based on the pricing terms included in our annual purchase orders as our products are shipped to our customers. As part of certain agreements, we are asked to provide our customers with annual cost reductions. We accrue for such amounts as a reduction of revenue as our products are shipped to our customers. In addition, we generally have ongoing adjustments to our pricing arrangements with our customers based on the related content and cost of our products. Such pricing accruals are adjusted as they are settled with our customers.
Amounts billed to customers related to shipping and handling are included in sales in our consolidated statements of operations. Shipping and handling costs are included in cost of sales in our consolidated statements of operations.
Research and development Costs are charged to selling, administration and engineering expense as incurred and totaled, $77,183 for 2007, $81,942 for 2008, and $62,880 for 2009.
Stock-based compensation Effective January 1, 2006, the Company adopted ASC Topic 718, Compensation-Stock Compensation , using the prospective method. The prospective method requires compensation cost to be recognized for all share-based payments granted after the effective date of ASC 718. All awards granted prior to the effective date of ASC 718 are accounted for in accordance with Accounting Principles Board Opinion, or APB, No. 25, Accounting for Stock Issued to Employees .
Use of estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect reported amounts of (1) revenues and expenses during the reporting period and (2) assets and liabilities, as well as disclosure of contingent assets and liabilities, at the date of the financial statements. Actual results could differ from those estimates.
Reclassifications Certain prior period amounts have been reclassified to conform to the current year presentation. For further segment reclassifications, see Note 20. Business Segments.
Going Concern
The Company is operating pursuant to chapter 11 of the Bankruptcy Code and continuation as a going concern is contingent upon, among other things, the Companys ability to complete and execute a plan of reorganization. The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern and contemplate the realization of assets and the satisfaction of liabilities upon execution of the plan of reorganization. For additional details regarding the Companys reorganization under chapter 11 of the bankruptcy code and the current status of its plan of reorganization see Note 3. Reorganization under Chapter 11 of the Bankruptcy Code.
F-10
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
Recent accounting pronouncements
In June 2009, the FASB approved the FASB Accounting Standards Codification, or the Codification or ASC, as the single source of authoritative nongovernmental U.S. GAAP. The Codification does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all authoritative literature related to a particular topic in one place. All existing accounting standard documents will be superseded and all other accounting literature not included in the Codification will be considered nonauthoritative. The Codification is effective for interim and annual periods ending after September 15, 2009. The adoption of the Codification changed the Companys references to U.S. GAAP accounting standards, but did not impact the Companys results of operating financial position or liquidity.
In May 2009, the FASB issued ASC Topic 855, subsequent events, which provides guidance to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or available to be issued. ASC Topic 855 also requires entities to disclose the date through which subsequent events were evaluated as well as the rationale for why that date was selected. ASC Topic 855 is effective for interim and annual periods ending after June 15, 2009. The Company adopted this statement effective June 30, 2009. See Note 26. Subsequent Events for additional information.
In April 2009, the FASB issued FSP ASC Topic 320-10-65, which extends the Disclosures about Fair Value of Financial Instruments, to interim reporting periods. The provisions of this standard are effective for interim and annual reporting periods ending after June 15, 2009. The effects of adoption were not significant. See Note 21. Fair Value of Financial Instruments, for additional disclosures related to the fair value of the Companys Prepetition Credit Facility and Notes.
In August 2009, the FASB issued ASU No. 2009-05 which amends Fair Value Measurements and DisclosuresOverall (ASC Topic 820-10) to provide guidance on the fair value measurement of liabilities. This update requires clarification for circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the following techniques: 1) a valuation technique that uses either the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities or similar liabilities when traded as an asset; or 2) another valuation technique that is consistent with the principles in ASC Topic 820 such as the income and market approach to valuation. The amendments in this update also clarify that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability. This update further clarifies that if the fair value of a liability is determined by reference to a quoted price in an active market for an identical liability, that price would be considered a Level 1 measurement in the fair value hierarchy. Similarly, if the identical liability has a quoted price when traded as an asset in an active market, it is also a Level 1 fair value measurement if no adjustments to the quoted price of the asset are required. This update is effective for the fourth quarter 2009.
In December 2008, the FASB issued Employers Disclosures about Postretirement Benefit Plan Assets (ASC Topic 715-20-65). This guidance will expand disclosure by requiring the following new disclosures: 1) how investment allocation decisions are made by management; 2) major categories of plan assets; and 3) significant concentrations of risk. Additionally, ASC 715-20-65 will require an employer to disclose information about the valuation of plan assets similar to that required in ASC Topic 820 Fair Value Measurements and Disclosures. This guidance is effective for fiscal year ending December 31, 2009. The principal impact was expanded disclosure regarding the Companys benefit plan assets.
In March 2008, the FASB issued Disclosures About Derivative Instruments and Hedging Activities-an Amendment of FASB Statement No. 133 (ASC Topic 815). ASC Topic 815 requires entities that utilize
F-11
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
derivative instruments to provide qualitative disclosures about their objectives and strategies for using such instruments, as well as any details of credit risk related contingent features contained within derivatives. ASC Topic 815 also requires entities to disclose additional information about the amounts and locations of derivatives located within the financial statements, how the accounting provisions have been applied and the impact that hedges have on an entitys financial position, financial performance, and cash flows. The Company adopted this statement as of January 1, 2009.
In September 2006, the FASB issued Fair Value Measurements (ASC Topic 820). ASC Topic 820 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurement. This statement applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. The Company adopted ASC Topic 820 as of January 1, 2008 except for non-financial assets and liabilities recognized or disclosed at fair value on a non-recurring basis, for which the effective date was fiscal years beginning after November 15, 2008. See Note 21, Fair Value of Financial Instruments, for additional discussion of ASC Topic 820.
Note 3. Reorganization Under Chapter 11 of the Bankruptcy Code
Filing of Bankruptcy Cases
During 2009, the Companys revenues were adversely affected, particularly in the first half of the year, by the sharp decline in worldwide automotive production that followed the disruption in the global financial markets that began in 2008. Faced with a highly-leveraged balance sheet with debt exceeding $1.2 billion and unfavorable market conditions, including the severe downturn in the automotive industry and the accompanying decrease in production volumes, diminishing availability of credit and the overall deterioration in the U.S. economy, the Company dedicated a substantial portion of its cash flows from operations to the payment of principal and interest on the Companys indebtedness. Due to the adverse business impact of these factors, the Companys ability to maintain sufficient liquidity, satisfy its financial covenant requirements under the Prepetition Credit Agreement (as defined below) and make interest and principal payments on its outstanding indebtedness became uncertain. Recognizing the need for a comprehensive solution for these financial issues, prior to seeking bankruptcy protection, the Company engaged in discussions regarding possible alternatives to filing for bankruptcy, including refinancing a portion of its indebtedness with its key creditors. However, the Company was unable to complete those negotiations prior to seeking bankruptcy protection.
On August 3, 2009, the Company and each of its direct and indirect wholly-owned U.S. subsidiaries (collectively with the Company, the Debtors) filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code (the Bankruptcy Code) in the United States Bankruptcy Court for the District of Delaware (the Bankruptcy Court). The Debtors chapter 11 cases (the Chapter 11 Cases) are being jointly administered under Case No. 09-12743(PJW). The Debtors continue to operate their businesses and manage their properties as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the
applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. On August 14, 2009, the Official Committee of Unsecured Creditors (the Creditors Committee) was appointed in the Chapter 11 Cases.
On August 4, 2009, the Companys Canadian subsidiary, Cooper-Standard Automotive Canada Limited, a corporation incorporated under the laws of Ontario ( CSA Canada), commenced proceedings seeking relief from its creditors under Canadas Companies Creditors Arrangement Act (the Canadian Proceedings) in the Ontario Superior Court of Justice in Toronto, Canada (Commercial List) (the Canadian Court), court file no. 09-8307-00CL. The Canadian court has granted the Canadian debtors a stay of any Canadian proceedings to
F-12
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
allow the Debtors to pursue confirmation of a plan of reorganization in the U.S. proceedings. The stay is currently in effect through May 31, 2010. The Company (and its legal counsel) believe the Canadian court will continue to issue this stay through completion of the chapter 11 proceedings. The Companys subsidiaries and operations outside the United States and Canada are not included in the Chapter 11 Cases or the Canadian Proceedings (other than CSA Canada) and continue to operate in the ordinary course of business.
As a result of the Chapter 11 Cases, realization of assets and liquidation of liabilities are subject to uncertainty. While operating as debtors-in-possession under the protection of chapter 11 of the Bankruptcy Code, and subject to Bankruptcy Court approval or otherwise as permitted in the normal course of business, the Debtors may sell or otherwise dispose of assets and liquidate or settle liabilities for amounts other than those reflected in the consolidated financial statements, and may pursue various strategic alternatives as deemed appropriate by our board of directors to serve the best interests of the Company and its stakeholders.
In general, under the priority scheme established by the Bankruptcy Code, post-petition liabilities and secured claims must be satisfied before prepetition unsecured creditors and interest holders can receive any distribution or retain any property under a chapter 11 plan of reorganization. The ultimate recovery, if any, to the holders of the Companys 7% Senior Notes due 2012 (the Senior Notes) and 8 3 /8% Senior Subordinated Notes due 2014 (the Senior Subordinated Notes and, together with the Senior Notes, the Notes, and the holders of the Notes, the Noteholders) and other interest holders will not be determined until confirmation of a chapter 11 plan or plans of reorganization. No assurance can be given as to what values, if any, will be ascribed in the Chapter 11 Cases to each of these constituencies or what types or amounts of distributions, if any, they will receive. If certain requirements of the Bankruptcy Code are met, a chapter 11 plan of reorganization can be confirmed notwithstanding its rejection by such holders and notwithstanding the fact that such holders do not receive or retain any property on account of their interests under the chapter 11 plan. Accordingly, the Company urges that the appropriate caution be exercised with respect to existing and future investments in the Companys securities as the value and prospects are highly speculative. At this time there is no assurance we will be able to restructure as a going concern or successfully obtain confirmation of and implement a plan of reorganization.
Filing of the Original Chapter 11 Plan of Reorganization and Original Disclosure Statement
Prior to commencing the Chapter 11 Cases and since the filing of the Debtors petition for relief under the Bankruptcy Code, the Debtors have sought a consensual restructuring of their balance sheets so as to be able to emerge from chapter 11 with an appropriate capital structure that would enable the Debtors to remain competitive. After exploring a number of restructuring alternatives, which included discussions with the Creditors Committee, the lenders under the Prepetition Credit Agreement (as defined below) and certain Noteholders (the First Backstop Parties) came forward with proposal to backstop an equity rights offering, the proceeds of which would be used to pay the claims under the Prepetition Credit Facility in full. After further negotiations with the First Backstop Parties and the Creditors Committee regarding the proposal, on February 1, 2010, the Debtors filed their Joint Chapter 11 Plan of Reorganization (the Original Plan), an accompanying Disclosure Statement (the Original Disclosure Statement) and a Commitment Agreement, dated February 1, 2010 (the Original Equity Commitment Agreement, which the Company entered into with the First Backstop Parties). The Original Plan provided for a backstopped $245,000 equity rights offering which, when combined with proposed exit financing, would allow the Debtors to pay the claims under the Prepetition Credit Agreement in full, in cash, while distributing equity in the Company upon emergence from chapter 11 to the Noteholders, as well as rights to purchase additional equity.
F-13
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
Filing of Amended Chapter 11 Plan of Reorganization and Disclosure Statement
Shortly after filing the Original Plan, certain Noteholders (the Second Backstop Parties and, with the First Backstop Parties, the New Backstop Parties) approached the Debtors with an alternative proposal to backstop a rights offering that contained certain advantages when compared to the recovery provided for in the Original Plan. While the Debtors made significant progress negotiating a commitment agreement with the Second Backstop Parties, the Debtors had significant concerns about going forward with such alternative proposal for various reasons including, without limitation, uncertainty about receiving sufficient votes to confirm any plan of reorganization based on such alternative.
After extensive, arms-length negotiations between the Debtors, the Creditors Committee, the First Backstop Parties and the Second Backstop Parties, all parties agreed upon the terms of a revised restructuring proposal incorporated in a new Commitment Agreement, dated March 19, 2010 (the Equity Commitment Agreement), which terminated the Original Equity Commitment Agreement upon execution, and the Debtors filed with the Bankruptcy Court on March 20, 2010 a First Amended Joint Chapter 11 Plan of Reorganization (as amended by the Second Amended Joint Chapter 11 Plan of Reorganization, dated March 26, 2010, the Plan of Reorganization) and an accompanying new Disclosure Statement (as amended by the First Amended Disclosure Statement, dated March 26, 2010, the Disclosure Statement). The Disclosure Statement and the Equity Commitment Agreement were approved by the Bankruptcy Court on March 26, 2010. The Equity Commitment Agreement and the Plan of Reorganization provide for a backstopped equity rights offering and the purchase of new common stock and new preferred stock of the Company by the New Backstop Parties (as described below), with aggregate proceeds to the Company of $355,000 that would unimpair the claims under the Prepetition Credit Agreement and the Senior Notes and improve the recovery to the Senior Subordinated Noteholders. The Equity Commitment Agreement is subject to certain customary conditions, including, among other things, confirmation of the Plan of Reorganization. Under the Plan of Reorganization, holders of Senior Notes will receive payment in full, in cash, provided that certain of the New Backstop Parties have each agreed to forgo their right as holders of Senior Notes to receive payment in full, in cash, and in lieu thereof, have agreed to accept their pro rata share of 20.95% of the new common stock of the Company. In addition, holders of Senior Subordinated Notes will receive a distribution of 8% of the new common stock of the Company and warrants to acquire an additional 3% of the new common stock of the Company that may be exercised at a strike price of $27.33 per share, and eligible noteholders of Senior Subordinated Notes will receive rights to purchase 39.6% of the new common stock of the Company pursuant to the rights offering at a subscription price of $21.54 per share. In addition, the New Backstop Parties have agreed to purchase 11.75% of the new common stock of the Company at a price per share of $27.07 and 1,000,000 shares of new preferred stock of the Company at a price per share of $100.00 and will receive warrants to acquire an additional 7% of the new common stock of the Company that may be exercised at a strike price of $27.33 per share.
In order for the Debtors to successfully emerge from chapter 11, the Bankruptcy Court must first confirm a chapter 11 plan with respect to the Debtors that satisfies the requirements of the Bankruptcy Code. To be confirmed, a chapter 11 plan would, among other things, need to resolve the Debtors prepetition obligations, set forth the revised capital structure of the newly reorganized entity and provide for corporate governance subsequent to exit from bankruptcy.
In order for the Amended Plan to be confirmed by the Bankruptcy Court pursuant to section 1129(b) of the Bankruptcy Code, at least one class of impaired claims must accept the Plan of Reorganization, determined without including votes to accept the Amended Plan cast by insiders, as that term is defined in section 101(31) of the Bankruptcy Code. A class of claims has accepted a plan if such plan has been accepted by creditors that hold at least two-thirds in amount and more than one-half in number of the allowed claims of such class held by creditors that have accepted or rejected such plan. The New Backstop Parties (which hold a substantial majority
F-14
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
in dollar amount of the outstanding principal amount of Senior Subordinated Notes) support the Amended Plan and have agreed to vote in favor of the Amended Plan. In addition, confirmation of the Amended Plan is subject to the satisfaction of numerous conditions, including, among other things, consummation of the rights offering and entry into a new debt agreement and a new secured working capital facility.
Under the Bankruptcy Code, the exclusive period in which the Debtors may file a chapter 11 plan or plans of reorganization is 120-days from the date of the filing of the petition. The exclusive period in which the Debtors may solicit acceptances for any chapter 11 plan or plans of reorganization is 180-days from the date of the filing of the petition. The Bankruptcy Code also provides that the Bankruptcy Court may extend the 120-day plan exclusivity period up to 18 months after the petition date and the 180-day solicitation exclusivity period up to 20 months after the petition date. The Debtors exclusive period to file a chapter 11 plan or plans of reorganization has been extended to June 29, 2010. The Debtors exclusive period to solicit any plan or plans has been extended to August 30, 2010. If the Debtors exclusivity periods expire, other parties in interest will be allowed to file their own plans and solicit acceptances in connection therewith.
Debtor-in-Possession Financing
In connection with the commencement of the Chapter 11 Cases and the Canadian Proceedings, the Company entered into a Debtor-in-Possession Credit Agreement, dated August 5, 2009 (the Initial DIP Credit Agreement), among the Company, CSA U.S., and Cooper-Standard Automotive Canada Limited ( CSA Canada), various lenders party thereto, Deutsche Bank Trust Company Americas, as the administrative agent, Banc of America Securities LLC, General Electric Corporation and UBS Securities LLC, as co-syndication agents, Deutsche Bank Trust Company Americas, as documentation agent, Deutsche Bank Securities Inc. and General Electric Capital Corporation, as joint lead arrangers and book runners, and Banc of America Securities LLC and UBS Securities LLC, as co-arrangers. On December 2, 2009, Metzeler Automotive Profile Systems GmbH, a German limited liability company (the German Borrower and together with CSA U.S. and CSA Canada, the DIP Borrowers) became an additional borrower under the Initial DIP Credit Agreement. Under the Initial DIP Credit Agreement, the DIP Borrowers borrowed an aggregate of $175,000 principal amount of superpriority senior secured term loans in order to finance their operating, working capital and other general corporate needs (including the payment of fees and expenses in accordance with the orders of the Bankruptcy Court and the Canadian Court authorizing such borrowings).
In order to refinance the Initial DIP Credit Agreement on terms more favorable to the Company, on December 18, 2009 the Company entered into a new Debtor-in-Possession Credit Agreement (the DIP Credit Agreement), among Cooper-Standard Holdings Inc., the DIP Borrowers, various lenders party thereto, Deutsche Bank Trust Company Americas, as the administrative agent (in such capacity, the DIP Agent), collateral agent and documentation agent, and Deutsche Bank Securities Inc., as syndication agent, sole lead arranger and book runner.
On December 29, 2009, the Bankruptcy Court entered a final order approving the DIP Credit Agreement (and related loan documentation) and the borrowings thereunder. Funding under the DIP Credit Agreement occurred on December 30, 2009, whereby (i) $75,000 was borrowed by CSA U.S., (ii) $50,000 was borrowed by CSA Canada and (iii) $50,000 was borrowed by the German Borrower. Concurrently with such funding, liens on assets of the Company and certain of its subsidiaries were granted and guarantees by certain subsidiaries of the Company of the obligations under the DIP Credit Agreement were made. All of the proceeds of the borrowings under the DIP Credit Agreement, together with cash on hand of the DIP Borrowers, were used to repay all borrowings and amounts outstanding under the Initial DIP Credit Agreement, and to pay related fees and expenses.
F-15
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
For additional information on the DIP Credit Agreement, see Note 10. Debt below.
Other Chapter 11 Cases Updates
On October 2, 2009, the Debtors filed their schedules of assets and liabilities (the Schedules) and statements of financial affairs with the Bankruptcy Court. On October 27, 2009, the Bankruptcy Court entered an order establishing December 4, 2009 as the deadline (the General Bar Date) for all entities, other than governmental agencies, to file proofs of claim against the Debtors stating the amounts to which the claimants contend that they are entitled, subject to the rights of the Debtors to contest both the validity and amount of the claims. The Bankruptcy Court also set February 1, 2010 as the deadline for governmental entities to file their proofs of claim (the Governmental Bar Date and, together with the General Bar Date, the Bar Dates). The Debtors will continue to evaluate all claims asserted in the Chapter 11 Cases and may file periodic motions seeking to modify, reject, liquidate or allow such claims.
Liquidity and Going Concern
The accompanying consolidated financial statements have been prepared assuming we will continue as a going concern. This assumes a continuing of operations and the realization of assets and liabilities in the ordinary course of business. The consolidated financial statements do not include any adjustments that might result if we were forced to discontinue operations. We have had a history of net losses. Our net losses are principally attributable to insufficient revenue to cover our relatively high percentage of fixed costs, including the interest costs on our debt and our depreciation expense. We also have an accumulated stockholders deficit of $306,500 at December 31, 2009.
As a result of filing for chapter 11 bankruptcy, the Company adopted ASC 852, Reorganization on August 3, 2009. ASC 852, is applicable to companies in chapter 11 of the Bankruptcy Code, generally does not change the manner in which financial statements are prepared. However, among other disclosures, it does require that the financial statements for periods subsequent to the filing of the chapter 11 petition distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Revenues, expenses, realized gains and losses, and provisions for losses that can be directly associated with the reorganization and restructuring of the business must be reported separately as reorganization items in the statements of operations. The balance sheet must distinguish prepetition liabilities subject to compromise from both those prepetition liabilities that are not subject to compromise and from post-petition liabilities. Liabilities that may be affected by a plan of reorganization must be reported at the amounts expected to be allowed, even if they may be settled for lesser amounts. In addition, reorganization items must be disclosed separately in the statement of cash flows. The Company has segregated those items as outlined above for all reporting periods subsequent to such date.
As a result of the Chapter 11 Cases, realization of assets and liquidation of liabilities are subject to uncertainty. While operating as debtors-in-possession under the protection of chapter 11 of the Bankruptcy Code, and subject to Bankruptcy Court approval or otherwise as permitted in the normal course of business, the Debtors may sell or otherwise dispose of assets and liquidate or settle liabilities for amounts other than those reflected in the consolidated financial statements, and may pursue various strategic alternatives as deemed appropriate by the Companys board of directors to serve the best interests of the Company and its stakeholders.
Liabilities Subject to Compromise
The majority of the Debtors prepetition debt is in default and is classified as Liabilities Subject to Compromise in the accompanying consolidated balance sheet at December 31, 2009.
F-16
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
In addition to the Debtors prepetition debt which is in default, liabilities subject to compromise reflects the Debtors other liabilities incurred prior to the commencement of the bankruptcy proceedings. These amounts represent the Companys estimate of known or potential prepetition claims to be resolved in connection with the bankruptcy proceedings. Such claims remain subject to future adjustments. Future adjustments may result from: (i) negotiations; (ii) actions of the Bankruptcy Court; (iii) further developments with respect to disputed claims; (iv) rejection of executory contracts and leases; (v) the determination of value of any collateral securing claims; (vi) proofs of claims; or (vii) other events. Payment terms for these claims will be established in connection with a plan of reorganization. The Debtors liabilities subject to compromise consist of the following:
December 31,
2009 |
|||
Prepetition debt (including accrued interest of $27,095) |
$ | 1,138,565 | |
Accounts payable |
12,148 | ||
Pension and deferred compensation |
20,680 | ||
Derivatives |
18,090 | ||
Other |
72,420 | ||
Debtor liabilities subject to compromise |
$ | 1,261,903 | |
Effective August 3, 2009, the Company ceased recording interest expense on outstanding prepetition debt instruments classified as liabilities subject to compromise. An additional $28,274 of interest expense would have been recorded from August 3, 2009 to December 31, 2009 if the Company had continued to accrue interest on these instruments.
Reorganization Items
ASC Topic 852-10 requires reorganization items such as revenues, expenses such as professional fees directly related to the process of reorganizing the Debtors under chapter 11, realized gains and losses, provisions for losses, and interest income resulting from the reorganization and restructuring of the business to be separately disclosed. The Debtors reorganization items consist of the following:
(Income)/
Expense |
||||
For the year
ended December 31, 2009 |
||||
Professional fees directly related to reorganization |
$ | 17,737 | ||
Miscellaneous-other |
(370 | ) | ||
Total reorganization items |
$ | 17,367 | ||
Note 4. Debtor-in-Possession Financial Statements
The financial statements contained within this note represent the combined financial statements for the Debtors and Canadian Debtor only. The Companys non-Debtor subsidiaries are treated as non-consolidated affiliates in these financial statements and as such their net income is included as Equity loss from non-Debtor affiliates, net of tax in the statement of operations and their assets are included as Investments in non-Debtor affiliates in the balance sheet. The Debtors and Canadian Debtor financial statements contained herein have been prepared in accordance with the guidance in ASC Topic 852-10.
F-17
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
DEBTOR-IN-POSSESSION CONDENSED COMBINED
STATEMENTS OF OPERATIONS
Year Ended
December 31, 2009 |
||||
Sales |
$ | 871,047 | ||
Cost of products sold |
748,339 | |||
Gross profit |
122,708 | |||
Selling, administration, & engineering expenses |
90,827 | |||
Amortization of intangibles |
11,093 | |||
Impairment charges |
242,822 | |||
Restructuring |
6,660 | |||
Operating loss |
(228,694 | ) | ||
Interest expense, net of interest income |
(53,101 | ) | ||
Equity earnings |
1,650 | |||
Reorganization items, net |
(17,367 | ) | ||
Other income |
24,192 | |||
Loss before income taxes |
(273,320 | ) | ||
Benefit for income tax expense |
(26,551 | ) | ||
Equity loss from non-Debtor affiliates, net of tax |
(109,293 | ) | ||
Consolidated net loss |
(356,062 | ) | ||
Add: Net loss attributable to noncontrolling interests |
| |||
Net loss attributable to Debtors |
$ | (356,062 | ) | |
F-18
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
DEBTOR-IN-POSSESSION CONDENSED COMBINED
BALANCE SHEET
F-19
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
DEBTOR-IN-POSSESSION CONDENSED COMBINED
STATEMENTS OF CASH FLOW
Year Ended
December 31, 2009 |
||||
Operating Activities: |
||||
Net cash used in operating activities |
$ | (22,677 | ) | |
Investing activities: |
||||
Property, plant, and equipment |
(15,033 | ) | ||
Other |
236 | |||
Net cash used in investing activities |
(14,797 | ) | ||
Financing activities: |
||||
Proceeds from issuance of debtor-in-possession financing, net of debt issuance costs |
104,720 | |||
Payments on debtor-in-possession financing |
(313 | ) | ||
Increase (decrease) in short term debt |
21,398 | |||
Principal payments on long-term debt |
(9,029 | ) | ||
Transactions with non-Debtor subsidiaries |
(22,443 | ) | ||
Repurchase of bonds |
(737 | ) | ||
Other |
123 | |||
Net cash provided by financing activities |
93,719 | |||
Effects of exchange rate changes on cash |
16,248 | |||
Changes in cash and cash equivalents |
72,493 | |||
Cash and cash equivalents at beginning of period |
114,437 | |||
Cash and cash equivalents at end of period |
$ | 186,930 | ||
Note 5. Acquisitions
In March of 2007, the Company completed the acquisition of the El Jarudo fuel rail manufacturing business of Automotive Components Holdings, LLC, or El Jarudo or the El Jarudo business. The business is located in Juarez, Mexico and is a producer of automotive fuel rails. This acquisition does not meet the thresholds for a significant acquisition and therefore no pro forma financial information is presented.
On August 31, 2007, the Company completed the acquisition of nine Metzeler Automotive Profile Systems sealing systems operations in Germany, Italy, Poland, Belarus, Belgium, and a joint venture interest in China, or MAPS or the MAPS businesses, from Automotive Sealing Systems S.A. The MAPS businesses were acquired for $143,063 subject to an adjustment based on the difference between targeted working capital and working capital at the closing date, which was settled in June 2008. After adjusting for working capital and direct acquisition costs, the total acquisition value under purchase accounting was $144,378.
In December of 2007, the Company completed the acquisition of the 74% joint venture interest of Automotive Sealing Systems, S.A. (ASSSA) in Metzeler Automotive Profiles India Private Limited, or MAP India. The remaining 26 percent in the joint venture is owned by Toyoda Gosei Co., Ltd. This acquisition does not meet the thresholds for a significant acquisition and therefore no pro forma financial information is presented.
F-20
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
Note 6. Restructuring
The Company implemented several restructuring initiatives in prior years in connection with the closure of facilities in North America, Europe and Asia. The Company initiated all of these initiatives prior to December 31, 2007 and continued to execute the closures through the end of 2009. The majority of the costs associated with the closures were incurred shortly after the original implementation. However, the Company continues to incur costs related to principally to the liquidation of the respective facilities. The following table summarizes the 2008 and 2009 activity related to these initiatives:
Employee
Separation Costs |
Other Exit
Costs |
Asset
Impairments |
Total | |||||||||||||
Balance at January 1, 2008 |
$ | 8,723 | $ | 4,752 | $ | | $ | 13,475 | ||||||||
Expense incurred |
2,209 | 4,780 | 4,687 | 11,676 | ||||||||||||
Cash payments |
(8,822 | ) | (8,792 | ) | 165 | (17,449 | ) | |||||||||
Utilization of reserve |
| | (4,852 | ) | (4,852 | ) | ||||||||||
Balance at December 31, 2008 |
$ | 2,110 | $ | 740 | $ | | $ | 2,850 | ||||||||
Expense incurred |
(517 | ) | 3,298 | 1,089 | 3,870 | |||||||||||
Cash payments |
(1,593 | ) | (3,800 | ) | | (5,393 | ) | |||||||||
Utilization of reserve |
| | (1,089 | ) | (1,089 | ) | ||||||||||
Balance at December 31, 2009 |
$ | | $ | 238 | $ | | $ | 238 | ||||||||
2008 Initiatives
In July 2008, the Company implemented a restructuring action and announced the closure of two manufacturing facilities, one located in Australia and the other located in Germany. Both closures are a result of changes in market demands and volume reductions and are substantially completed as of December 31, 2009. However, the Company will continue to incur costs until the facilities are sold. The estimated total cost of this initiative is approximately $21,100. The following table summarizes the activity for this initiative during the year ended December 31, 2008 and December 31, 2009:
Employee
Separation Costs |
Other Exit
Costs |
Asset
Impairments |
Total | |||||||||||||
Balance at January 1, 2008 |
$ | | $ | | $ | | $ | | ||||||||
Expense incurred |
14,455 | 149 | 3,282 | 17,886 | ||||||||||||
Cash payments |
(995 | ) | (149 | ) | | (1,144 | ) | |||||||||
Utilization of reserve |
| | (3,282 | ) | (3,282 | ) | ||||||||||
Balance at December 31, 2008 |
$ | 13,460 | $ | | $ | | $ | 13,460 | ||||||||
Expense incurred |
562 | 2,557 | 118 | 3,237 | ||||||||||||
Cash payments |
(12,579 | ) | (2,322 | ) | | (14,901 | ) | |||||||||
Utilization of reserve |
| | (118 | ) | (118 | ) | ||||||||||
Balance at December 31, 2009 |
$ | 1,443 | $ | 235 | $ | | $ | 1,678 | ||||||||
As a result of this initiative, a pension plan curtailment gain of $800 was recognized as a reduction to restructuring expense during the fourth quarter of 2009.
F-21
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
In 2008, the Company initiated the closing of a European facility and the idling of a Canadian facility. During the year ended December 31, 2009, the Company recorded other exit costs of $483 and asset impairments of $61 in connection with this initiative.
Reorganization-Product Line Operating Group Discontinuation Initiative
During 2008, the Company commenced the initial phase of a reorganization ultimately involving the discontinuation of its global product line operating divisions, formerly called the Body & Chassis Systems division (which included the body sealing and AVS product lines) and the Fluid Systems division, and the establishment of a new operating structure organized on the basis of geographic regions. The estimated cost of this initial phase is approximately $7,800. The following table summarizes the activity for this initiative during the year ended December 31, 2008 and December 31, 2009:
Employee
Separation Costs |
Other Exit
Costs |
Asset
Impairments |
Total | |||||||||||
Balance at January 1, 2008 |
$ | | $ | | $ | | $ | | ||||||
Expense incurred |
7,670 | | | 7,670 | ||||||||||
Cash payments |
(3,741 | ) | | | (3,741 | ) | ||||||||
Utilization of reserve |
| | | | ||||||||||
Balance at December 31, 2008 |
$ | 3,929 | $ | | $ | | $ | 3,929 | ||||||
Expense incurred |
134 | | | 134 | ||||||||||
Cash payments |
(3,405 | ) | | | (3,405 | ) | ||||||||
Balance at December 31, 2009 |
$ | 658 | $ | | $ | | $ | 658 | ||||||
2009 Initiatives
In the first quarter of 2009, the Company initiated the final phase of the reorganization of its operating structure, formally discontinuing its product line operating divisions and putting into place the new operating divisions based on geographic regions. The estimated total cost of this initiative is $18,700. The following table summarizes the activity for this initiative during the year ended December 31, 2009:
Employee
Separation Costs |
Other Exit
Costs |
Asset
Impairments |
Total | ||||||||||||
Balance at January 1, 2009 |
$ | | $ | | $ | | $ | | |||||||
Expense incurred |
18,570 | 86 | | 18,656 | |||||||||||
Cash payments |
(11,457 | ) | (86 | ) | | (11,543 | ) | ||||||||
Balance at December 31, 2009 |
$ | 7,113 | $ | | $ | | $ | 7,113 | |||||||
As a result of this initiative a curtailment gain related to other postretirement benefits of $3,404 was recognized as a reduction to restructuring expense during the fourth quarter of 2009.
F-22
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
The Company also initiated several other initiatives during 2009. These initiatives relate to the reorganization or closure of operating facilities in South America, Europe and Asia Pacific. The estimated total cost associated with these actions amount to $19,250. The following table summarizes the activity for these initiatives during the year ended December 31, 2009:
Employee
Separation Costs |
Other Exit
Costs |
Asset
Impairments |
Total | ||||||||||||
Balance at January 1, 2009 |
$ | | $ | | $ | | $ | | |||||||
Expense incurred |
9,864 | 368 | | 10,232 | |||||||||||
Cash payments |
(5,649 | ) | (312 | ) | | (5,961 | ) | ||||||||
Utilization of reserve |
| | | | |||||||||||
Balance at December 31, 2009 |
$ | 4,215 | $ | 56 | $ | | $ | 4,271 | |||||||
The Company expects the reorganization of its operating structure and the other 2009 initiatives to be substantially
Note 7. Inventories
Inventories are comprised of the following:
December 31,
2008 |
December 31,
2009 |
|||||
Finished goods |
$ | 35,069 | $ | 27,826 | ||
Work in process |
26,520 | 25,616 | ||||
Raw materials and supplies |
55,363 | 58,133 | ||||
Inventories, net |
$ | 116,952 | $ | 111,575 | ||
Note 8. Property, Plant, and Equipment
Property, plant, and equipment is comprised of the following:
December 31, |
Estimated Useful
Lives |
|||||||||
2008 | 2009 | |||||||||
Land and improvements |
$ | 78,548 | $ | 81,609 | ||||||
Buildings and improvements |
229,384 | 240,413 | 15 to 40 years | |||||||
Machinery and equipment |
640,350 | 696,259 | 5 to 14 years | |||||||
Construction in Progress |
48,123 | 41,499 | ||||||||
996,405 | 1,059,780 | |||||||||
Accumulated depreciation |
(372,418 | ) | (473,601 | ) | ||||||
Property, plant and equipment, net |
$ | 623,987 | $ | 586,179 | ||||||
During 2008 it was determined that fixed assets at two of the Companys locations were impaired. As a result of this impairment, Property, Plant and Equipment was reduced by $6,408 during 2008.
During 2009 it was determined that fixed assets at several of the Companys locations were impaired. As a result of this impairment, Property, Plant and Equipment was reduced by $3,825 during 2009.
F-23
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
Depreciation expense totaled $104,199 for 2007, $109,109 for 2008, and $98,801 for 2009, respectively.
Note 9. Goodwill and Intangibles
Goodwill
The changes in the carrying amount of goodwill by reportable operating segment for the years ended December 31, 2008 and 2009 are summarized as follows:
North
America |
International | Total | ||||||||||
Balance at January 1, 2008 |
$ | 181,687 | $ | 108,901 | $ | 290,588 | ||||||
Adjustments to the Acquisition of El Jarudo |
(379 | ) | | (379 | ) | |||||||
Purchase price adjustments pre-acquisition |
| (22,107 | ) | (22,107 | ) | |||||||
Impairment charge |
| (23,141 | ) | (23,141 | ) | |||||||
Balance at December 31, 2008 |
$ | 181,308 | $ | 63,653 | $ | 244,961 | ||||||
Impairment charge |
(93,580 | ) | (63,653 | ) | (157,233 | ) | ||||||
Balance at December 31, 2009 |
$ | 87,728 | $ | | $ | 87,728 | ||||||
Goodwill is not amortized but is tested annually for impairment, or when events or circumstances indicate that impairment may exist, by reporting units, which are determined in accordance with ASC Topic 350. During the second quarter of 2009, several events occurred that indicated potential impairment of the Companys goodwill. Such events included: (a) the chapter 11 bankruptcy of both Chrysler LLC and General Motors and unplanned plant shut-downs; (b) continued product volume risk and negative product mix changes; (c) the Companys commencement of negotiations with its Sponsors, senior secured lenders, and bondholders to recapitalize its long term debt and equity; (d) the Companys recognition as the second quarter progressed that there was an increasing likelihood that it would breach its financial covenants under its Prepetition Credit Agreement; (e) the Companys decision to defer its June 15, 2009 interest payment on its Notes pending the outcome of its quarterly financial results; (f) an analysis of whether the Company would meet its financial covenants for the past quarter; and (g) negotiations with its various constituencies. As a result of the combination of the above factors in the second quarter, the Company significantly reduced its projections for the remainder of the year. This significant decrease in projections resulted in the carrying value of assets at all of the Companys reporting units being greater than the related reporting units fair value. As a result, the Company recorded goodwill impairment charges of $93,580 in its North America reporting unit, $39,604 in its Europe reporting unit, $22,628 in its South America reporting unit and $1,421 in its Asia Pacific reporting unit during the second quarter of 2009. As of December 31, 2009, accumulated goodwill impairment for the North America and International segments is $243,988 and $86,794, respectively.
Changes in the factors noted above, including a change in the estimated transaction value of the bankruptcy could impact the valuation of the Companys remaining goodwill and other intangibles.
The pre-acquisition purchase price adjustments for the period ended December 31, 2008 represent adjustments related to various tax matters and were recorded in accordance with EITF Issue No. 93-7 Uncertainties Related to Income Taxes in a Purchase Business Combination and restructuring accrual reversals related to the FHS acquisition.
During the fourth quarter of 2008, the Company recorded an impairment charge of $23,141 in its International segment. These charges were a result of a weakening global economy, a global decline in vehicle production volumes and changes in product mix.
F-24
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
Other Intangible Assets
During the second quarter of 2009, the Company assessed the realization of its intangible assets in connection with revisions to the Companys projections as a result of the negotiations associated with the bankruptcy. The Companys undiscounted cash flows (as adjusted to reflect the current outlook) were not sufficient to support the realization of certain intangible assets. As a result the Company performed discounted cash flow analysis for each intangible asset and determined that the fair value of certain intangible assets exceeded the assets respective fair value. During the second quarter of 2009, the Company recorded intangible impairment charges of $148,143 in its North America segment and $54,295 of intangible impairment charges in its International segment. The following table shows the impairment by intangible asset type:
Customer contracts |
$ | 68,177 | |
Customer relationships |
131,364 | ||
Developed technology |
1,558 | ||
Trademarks and tradenames |
1,339 | ||
Total intangible impairment |
$ | 202,438 | |
During the fourth quarter of 2008 the Company recorded intangible impairment charges of $3,820 in its North America segment. Based on a discounted cash flow analysis it was determined that these intangible assets exceeded their fair value and impairment charges were recorded.
The following table presents intangible assets, which are amortized on a straight line basis, and accumulated amortization balances of the Company as of December 31, 2008 and 2009, respectively:
Gross
Carrying Amount |
Accumulated
Amortization |
Net
Carrying Amount |
Amortization
Period |
|||||||||
Customer contracts |
$ | 156,039 | $ | (78,100 | ) | $ | 77,939 | 7 to 9 years | ||||
Customer relationships |
169,105 | (33,669 | ) | 135,436 | 15 to 20 years | |||||||
Developed technology |
6,421 | (2,204 | ) | 4,217 | 5 to 12 years | |||||||
Trademarks and tradenames |
1,700 | (306 | ) | 1,394 | 12 to 20 years | |||||||
Other |
11,358 | (2,891 | ) | 8,467 | ||||||||
Balance at December 31, 2008 |
$ | 344,623 | $ | (117,170 | ) | $ | 227,453 | |||||
Developed technology |
$ | 3,335 | $ | (1,479 | ) | $ | 1,856 | 5 to 12 years | ||||
Other |
8,986 | (293 | ) | 8,693 | ||||||||
Balance at December 31, 2009 |
$ | 12,321 | $ | (1,772 | ) | $ | 10,549 | |||||
Amortization expense totaled $31,850 for 2007, $30,996 for 2008, and $14,976 for 2009. Estimated amortization expense will total approximately $740 over each of the next five years.
F-25
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
Note 10. Debt
Outstanding debt consisted of the following at December 31, 2008 and 2009:
December 31,
2008 |
December 31,
2009 |
|||||||
Senior Notes |
$ | 200,000 | $ | | (a) | |||
Senior Subordinated Notes |
323,350 | | (a) | |||||
Term Loan A |
25,036 | | (a) | |||||
Term Loan B |
66,365 | | (a) | |||||
Term Loan C |
165,805 | | (a) | |||||
Term Loan D |
184,300 | | (a) | |||||
Term Loan E |
88,458 | | (a) | |||||
Revolving Credit Facility |
60,933 | |||||||
DIP Financing |
| 175,000 | ||||||
Capital leases and other borrowings |
29,848 | 29,263 | ||||||
Total debt |
1,144,095 | 204,263 | ||||||
Less: Current portion of long term debt |
(94,136 | ) | (18,204 | ) | ||||
DIP financing |
| (175,000 | ) | |||||
Total long-term debt |
$ | 1,049,959 | $ | 11,059 | ||||
(a) | Debt in default is classified as liabilities subject to compromise. |
General
During the first quarter of 2008, the Company purchased and retired $7,150 of its $330,500 outstanding Senior Subordinated Notes on the open market. The purchase was accounted for as an extinguishment of debt and, accordingly, $1,696 was recognized as a gain on debt extinguishment, after writing off the related unamortized debt issuance costs. The gain is included in other income (expense) in the consolidated statement of operations.
During the second quarter of 2009, the Company purchased and retired $10,000 of its $323,350 outstanding Senior Subordinated Notes on the open market. The purchase was accounted for as an extinguishment of debt and, accordingly, $9,096 was recognized as a gain on debt extinguishment, after writing off the related unamortized debt issuance costs. The gain is included in other income (expense) in the consolidated statement of operations.
The Company had $28,067 of standby letters of credit outstanding under the Revolving Credit Facility as of December 31, 2009.
Default under the Notes and Forbearance Agreements
On June 15, 2009, the Company did not make required interest payments in an aggregate amount of approximately $20,121 due and payable under the Senior Notes and the Senior Subordinated Notes issued by CSA U.S. The Company announced that it would utilize the applicable 30-day grace period on these scheduled interest payments to allow the Company to continue discussions with its lenders and other parties in an effort to increase liquidity and improve the Companys capital structure. The failure to make the scheduled interest payments did not constitute an event of default at such time under the indentures governing the Notes. However, the failure to make the scheduled interest payments after the expiration of the 30-day grace period did constitute
F-26
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
an event of default under the indentures. On July 15, 2009, the Company entered into (i) Senior Notes Forbearance Agreements (the Senior Notes Forbearance Agreements) with holders of more than 75% the aggregate principal amount of the outstanding Senior Notes and (ii) a Senior Subordinated Notes Forbearance Agreement (the Senior Subordinated Notes Forbearance Agreement and together with the Senior Notes Forbearance Agreements, the Forbearance Agreements) with holders of a majority of the aggregate principal amount of the outstanding Senior Subordinated Notes. The Forbearance Agreements provided that the noteholders party to the Forbearance Agreements would not exercise, and would not direct the applicable trustee to exercise, any remedies under the indenture agreements for a defined period of time not to exceed August 14, 2009 with respect to certain defaults resulting from the failure to make the interest payments under the Notes.
Default under the Prepetition Credit Agreement and Limited Waiver
As the event of default under the indentures governing the Notes resulted in a cross-default under the Companys Prepetition Credit Agreement, the Company obtained a limited waiver from a majority of the lenders party thereto on July 15, 2009. Under the limited waiver, as amended and restated, certain defaults resulting from the failure to make the interest payments on the Notes as described above were waived for a defined period of time not to exceed August 14, 2009.
Bankruptcy Cases
The filing of the Chapter 11 Cases by the Debtors on August 3, 2009 constituted a default or otherwise triggered repayment obligations under substantially all prepetition debt obligations of the Debtors, and as a result, the loan commitments of the lenders under the Prepetition Credit Agreement were terminated (including the availability under the revolving credit facility, including with respect to standby letters of credit) and all principal and accrued and unpaid interest outstanding under the Prepetition Credit Agreement, the Senior Notes and the Senior Subordinated Notes accelerated and became due and payable (subject to the automatic stay under chapter 11). Under chapter 11, the filing of a bankruptcy petition automatically stays most actions against a debtor, including actions with respect to prepetition claims and litigation. Absent an order of the Bankruptcy Court, substantially all prepetition liabilities are subject to compromise under a chapter 11 plan of reorganization. As of the date of the filing of the Chapter 11 Cases, approximately $608,000 of principal and accrued and unpaid interest was outstanding under the Prepetition Credit Agreement, approximately $208,800 of principal and accrued and unpaid interest was outstanding under the Senior Notes and approximately $329,900 of principal and accrued and unpaid interest was outstanding under the Senior Subordinated Notes.
DIP Credit Agreement
On August 5, 2009, the Bankruptcy Court entered an interim order approving debtor-in-possession financing on an interim basis. Pursuant to this interim order, the Company entered into a Debtor-in-Possession Credit Agreement, dated as of August 5, 2009 (the Initial DIP Credit Agreement), among the Company, CSA U.S., and CSA Canada, various lenders party thereto, Deutsche Bank Trust Company Americas, as administrative agent and collateral agent, Banc of America Securities LLC, General Electric Corporation and UBS Securities LLC, as co-syndication agents, Deutsche Bank Trust Company Americas, as documentation agent, Deutsche Bank Securities Inc. and General Electric Capital Corporation, as joint lead arrangers and book runners, and Banc of America Securities LLC and UBS Securities LLC, as co-arrangers. The Company received final approval of the Initial DIP Credit Agreement from the Bankruptcy Court on September 1, 2009. The Company received approval of the Initial DIP Credit Agreement from the Canadian Court on August 6, 2009. The Initial DIP Credit Agreement was amended on August 31, 2009 and September 11, 2009. Both amendments primarily updated some post-closing non-U.S. collateral delivery requirements. In addition, on December 2, 2009, Metzeler
F-27
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
Automotive Profile Systems GmbH, a German limited liability company (the German Borrower and together with CSA U.S. and CSA Canada, the DIP Borrowers), became an additional borrower under the Initial DIP Credit Agreement. Under the Initial DIP Credit Agreement, the DIP Borrowers borrowed an aggregate of $175,000 principal amount of superpriority senior secured term loans in order to finance their operating, working capital and other general corporate needs (including the payment of fees and expenses in accordance with the orders of the Bankruptcy Court and the Canadian Court authorizing such borrowings). The Initial DIP Credit Agreement also provided for an ability to incur up to an aggregate of $25,000 in uncommitted incremental debt.
In order to refinance the Initial DIP Credit Agreement on terms more favorable to the Company, on December 18, 2009 the Company entered into a Debtor-in-Possession Credit Agreement (the DIP Credit Agreement), among the Company, the DIP Borrowers, various lenders party thereto, Deutsche Bank Trust Company Americas, as the administrative agent (in such capacity, the DIP Agent), collateral agent and documentation agent, and Deutsche Bank Securities Inc., as syndication agent, sole lead arranger and book runner. Under the DIP Credit Agreement, the lenders party thereto committed to provide superpriority senior secured term loans to the DIP Borrowers in an aggregate principal amount of up to $175,000 (the DIP Facility), subject to certain conditions. The DIP Credit Agreement also provides for an additional uncommitted $25,000 incremental facility, for a total DIP Facility of up to $200,000 (if the incremental facility is requested and committed to by the requisite lenders).
On December 29, 2009, the Bankruptcy Court entered a final order approving the DIP Credit Agreement (and related loan documentation) and the borrowings thereunder. Funding under the DIP Credit Agreement occurred on December 30, 2009, whereby (i) $75,000 was borrowed by CSA U.S., (ii) $50,000 was borrowed by CSA Canada and (iii) $50,000 was borrowed by the German Borrower. All of the proceeds of the borrowings under the DIP Facility, together with cash on hand of the DIP Borrowers, were used to repay all borrowings and amounts outstanding under the Initial DIP Credit Agreement, and to pay related fees and expenses.
The obligations of the DIP Borrowers under the DIP Credit Agreement are guaranteed by the Company and certain of its U.S. and foreign subsidiaries, subject to limitations on guarantees by foreign entities of the obligations of the DIP Borrowers. The obligations under the DIP Credit Agreement and related guarantees are secured by liens on the assets of the Company, the DIP Borrowers and certain of the Companys U.S. and foreign subsidiaries, subject to limitations on liens granted by foreign entities supporting certain of the obligations of the DIP Borrowers and guarantors. Liens under the DIP Credit Agreement have first priority priming status with
respect to substantially all of the assets of the Company, the DIP Borrowers and their subsidiaries in the United States and Canada and are entitled to superpriority administrative expense claim status in the Chapter 11 Cases.
Loans under the DIP Credit Agreement bear interest at a rate per annum equal to (i) LIBOR (with a LIBOR floor of 2%) plus 6% or (ii) a base rate based on the higher of the federal funds overnight rate plus 0.5% and the prime lending rate (with a floor of 3%) plus 5%. Overdue principal and interest bear interest at a default rate of 2% over the applicable rate as determined under the terms of the DIP Credit Agreement. In addition, the DIP Credit Agreement obligates the DIP Borrowers to pay an agency fee and an extension fee to the DIP Agent.
Loans under the DIP Credit Agreement will amortize at a rate of 1% per annum, payable in quarterly installments. The outstanding principal amount of the loans under the DIP Credit Agreement, plus accrued and unpaid interest thereon, will be due and payable in full at maturity, which is the earliest of: (i) August 4, 2010, (ii) the first date on which both a plan of reorganization for each of the Company and its U.S. subsidiaries, which is confirmed by the Bankruptcy Court, and a plan of compromise or arrangement of CSA Canada, which is confirmed by the Canadian Court, in each case providing for the repayment of the obligations under the DIP Credit Agreement, become effective, and (iii) the acceleration of the DIP Facility or termination of the
F-28
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
commitments thereunder, including, without limitation, as a result of the occurrence of an event of default. With the consent of the requisite lenders and payment of an extension fee equal to 1% of the outstanding loans and commitments, the DIP Borrowers may at their option extend the maturity date by 90 days if no default exists or would result therefrom. Loans under the DIP Credit Agreement may be prepaid by the DIP Borrowers at any time in whole or in part without premium or penalty (except for customary breakage costs).
The DIP Credit Agreement includes affirmative and negative covenants that will impose substantial restrictions on the financial and business operations of the Company and its subsidiaries, including their ability to incur and secure debt, make investments, sell assets, pay dividends or make acquisitions. The DIP Credit Agreement also contains certain financial covenants including (i) the achievement of a minimum amount of consolidated EBITDA, (ii) the maintenance of a minimum amount of liquidity and (iii) limitations on the amount of capital expenditures. The DIP Credit Agreement also contains various events of default that are customary for debtor-in-possession financings of this type.
Amendments to the Prepetition Credit Agreement
The Company, CSA U.S., CSA Canada and Cooper-Standard Automotive International Holdings B.V., a corporation organized under the laws of the Netherlands (the Dutch Borrower and together with CSA U.S, and CSA Canada, the Prepetition Borrowers), entered into the Fifth Amendment and Consent to Credit Agreement, dated July 14, 2009 (the Fifth Amendment to the Prepetition Credit Agreement), with the lenders party thereto and the Prepetition Agent (as defined below), providing for the amendment of the Companys existing Credit Agreement, dated as of December 23, 2004 (as amended from time to time, the Prepetition Credit Agreement), to permit, (i) the incurrence of the loans and guarantees and the granting of liens on the assets of the Company and its subsidiaries, pursuant to the Initial DIP Credit Agreement and (ii) the Prepetition Credit Agreement administrative agents entering into intercreditor agreements and/or amendments to the security and pledge agreements that secure the obligations under the Prepetition Credit Agreement to provide that any liens incurred pursuant to the Initial DIP Credit Agreement will have priority over the liens under the Prepetition Credit Agreement. The Prepetition Credit Agreement was amended on December 16, 2009 in connection with the refinancing of the Initial DIP Credit Agreement in the same manner as provided by the Fifth Amendment to the Prepetition Credit Agreement except in respect of the DIP Credit Agreement. In addition, the Prepetition Credit Agreement was amended on August 18, 2009 to amend and define certain rights and allocations among the lenders party thereto.
Other borrowings at December 31, 2008 and 2009 reflect borrowings under capital leases and local bank lines, including $11,809 and $15,075 of short-term notes payable, respectively, classified in debt payable within one year on the consolidated balance sheet.
The maturities of debt at December 31, 2009 are as follows:
2010 |
$ | 196,140 | |
2011 |
3,270 | ||
2012 |
2,979 | ||
2013 |
637 | ||
2014 |
358 | ||
Thereafter |
879 | ||
$ | 204,263 | ||
Interest paid on third party debt was $91,764, $95,419 and $57,851 for 2007, 2008, and 2009, respectively.
F-29
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
Note 11. Pensions
The Company maintains defined benefit pension plans covering substantially all employees located in the United States. Benefits generally are based on compensation, length of service and age for salaried employees and on length of service for hourly employees. The Companys policy is to fund pension plans such that sufficient assets will be available to meet future benefit requirements. The Company also sponsors defined benefit pension plans for employees in some of its international locations.
The Company also sponsors defined contribution pension plans for certain salaried and hourly U.S. employees of the Company. Participation is voluntary. The Company matches contributions of participants, up to various limits based on its profitability, in substantially all plans. Matching contributions under these plans totaled $3,872 in 2007, $2,549 in 2008 and $602 in 2009.
The following tables disclose information related to the Companys defined benefit pension plans.
2008 | 2009 | |||||||||||||||
U.S. |
Non-
U.S. |
U.S. |
Non-
U.S. |
|||||||||||||
Change in projected benefit obligation: |
||||||||||||||||
Projected benefit obligations at beginning of period |
$ | 255,959 | $ | 142,742 | $ | 251,791 | $ | 113,484 | ||||||||
Measurement change service and interest cost |
6,393 | 1,046 | | | ||||||||||||
Service costemployer |
10,131 | 3,439 | 2,826 | 2,292 | ||||||||||||
Participant contributions |
| 35 | | | ||||||||||||
Interest cost |
15,516 | 7,634 | 15,146 | 7,146 | ||||||||||||
Actuarial (gain) loss |
3,965 | (18,968 | ) | 18,509 | 9,071 | |||||||||||
Amendments |
66 | | (227 | ) | | |||||||||||
Benefits paid |
(19,767 | ) | (9,384 | ) | (17,294 | ) | (11,721 | ) | ||||||||
Foreign currency exchange rate effect |
| (14,144 | ) | | 7,763 | |||||||||||
Curtailment/Settlements |
(20,472 | ) | (305 | ) | | 361 | ||||||||||
Acquisitions of MAPS & El Jarudo |
| 410 | | | ||||||||||||
Other |
| 979 | | (5 | ) | |||||||||||
Projected benefit obligations at end of period |
$ | 251,791 | $ | 113,484 | $ | 270,751 | $ | 128,391 | ||||||||
Change in plans assets: |
||||||||||||||||
Fair value of plans assets at beginning of period |
$ | 225,006 | $ | 62,318 | $ | 162,645 | $ | 41,122 | ||||||||
Actual return on plans assets |
(59,701 | ) | (10,552 | ) | 31,414 | 6,203 | ||||||||||
Employer contributions |
17,107 | 9,340 | 9,801 | 8,826 | ||||||||||||
Participant contributions |
| 35 | | | ||||||||||||
Benefits paid |
(19,767 | ) | (9,384 | ) | (17,294 | ) | (11,721 | ) | ||||||||
Foreign currency exchange rate effect |
| (11,208 | ) | | 6,320 | |||||||||||
Other |
| 573 | | (4 | ) | |||||||||||
Fair value of plans assets at end of period |
$ | 162,645 | $ | 41,122 | $ | 186,566 | $ | 50,746 | ||||||||
Funded status of the plans |
$ | (89,146 | ) | $ | (72,362 | ) | $ | (84,185 | ) | $ | (77,645 | ) | ||||
Amounts recognized in the balance sheets: |
||||||||||||||||
Accrued liabilities (current) |
$ | (210 | ) | $ | (4,897 | ) | $ | (12,847 | ) | $ | (4,418 | ) | ||||
Pension benefits (long term) |
(88,936 | ) | (72,689 | ) | (71,338 | ) | (77,598 | ) | ||||||||
Other assets |
| 5,224 | | 4,371 | ||||||||||||
Net amount recognized at December 31 |
$ | (89,146 | ) | $ | (72,362 | ) | $ | (84,185 | ) | $ | (77,645 | ) | ||||
F-30
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
Included in cumulative other comprehensive loss at December 31, 2009 are the following amounts that have not yet been recognized in net periodic benefit cost: unrecognized prior service costs of $ 1,742 ($1,720 net of taxes), unrecognized actuarial losses of $68,570 ($67,539 net of tax) and net transition obligation of $239 ($169 net of tax).
The amounts included in cumulative other comprehensive loss and expected to be recognized in net periodic benefit cost during the fiscal year-ended December 31, 2010 are $186, $3,495 and $16, respectively.
The accumulated benefit obligation for all domestic and international defined benefit pension plans was $249,478 and $108,251 at December 31, 2008 and $268,911 and $123,131 at December 31, 2009, respectively. As of December 31, 2008, the fair value of plan assets for two of the Companys defined benefit plans exceeded the projected benefit obligation of $27,588 by $5,224. As of December 31, 2009, the fair value of plan assets for two of the Companys defined benefit plans exceeded the projected benefit obligation of $45,920 by $4,371.
During 2008, the Company froze the defined benefits for the US Salaried Plan which resulted in a curtailment gain that reduced the projected benefit obligation for 2008.
Weighted average assumptions used to determine benefit obligations at December 31:
2008 | 2009 | |||||||||||
U.S. |
Non-
U.S. |
U.S. |
Non-
U.S. |
|||||||||
Discount rate |
6.18 | % | 6.35 | % | 5.79 | % | 5.66 | % | ||||
Rate of compensation increase |
3.25 | % | 3.22 | % | 3.25 | % | 3.46 | % |
The following table provides the components of net pension expense for the plans:
2007 | 2008 | 2009 | ||||||||||||||||||||||
U.S. |
Non-
U.S. |
U.S. |
Non-
U.S. |
U.S. |
Non-
U.S. |
|||||||||||||||||||
Service cost |
$ | 12,030 | $ | 5,500 | $ | 10,131 | $ | 3,439 | $ | 2,826 | 2,292 | |||||||||||||
Interest cost |
14,390 | 5,778 | 15,516 | 7,634 | 15,146 | 7,146 | ||||||||||||||||||
Expected return on plan assets |
(16,940 | ) | (3,712 | ) | (18,151 | ) | (4,144 | ) | (13,118 | ) | (2,988 | ) | ||||||||||||
Amortization of prior service cost, recognized actuarial loss and transition obligation |
240 | 503 | 191 | 453 | 3,840 | 201 | ||||||||||||||||||
Curtailment gain/settlement |
| (5,231 | ) | | | (159 | ) | (261 | ) | |||||||||||||||
Other |
| | 140 | (56 | ) | | | |||||||||||||||||
Net periodic benefit cost |
$ | 9,720 | $ | 2,838 | $ | 7,827 | $ | 7,326 | $ | 8,535 | $ | 6,390 | ||||||||||||
A curtailment gain of ($779) for the year ended December 31, 2009 included in the table above for one of the Companys international locations was recorded as a reduction to restructuring expense.
F-31
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
Weighted-average assumptions used to determine net periodic benefit costs for the years ended December 31 were:
2007 | 2008 | 2009 | ||||||||||||||||
U.S. |
Non-
U.S. |
U.S. |
Non-
U.S. |
U.S. |
Non-
U.S. |
|||||||||||||
Discount rate |
5.75 | % | 4.90 | % | 6.25 | % | 5.53 | % | 6.18 | % | 6.02 | % | ||||||
Expected return on plan assets |
8.50 | % | 8.00 | % | 8.00 | % | 6.92 | % | 8.00 | % | 7.11 | % | ||||||
Rate of compensation increase |
3.25 | % | 3.44 | % | 3.25 | % | 3.14 | % | 3.25 | % | 3.34 | % |
To develop the expected return on assets assumption, the Company considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio.
The weighted average asset allocations for the Companys pension plans at December 31, 2008 and 2009 by asset category are approximately as follows:
2008 | 2009 | |||||||||||
U.S. |
Non-
U.S. |
U.S. |
Non-
U.S. |
|||||||||
Equity securities |
37 | % | 45 | % | 41 | % | 53 | % | ||||
Debt securities |
28 | % | 54 | % | 23 | % | 47 | % | ||||
Real Estate |
5 | % | 0 | % | 3 | % | 0 | % | ||||
Balanced funds(1) |
29 | % | 0 | % | 31 | % | 0 | % | ||||
Cash and cash equivalents |
1 | % | 1 | % | 2 | % | 0 | % | ||||
100 | % | 100 | % | 100 | % | 100 | % | |||||
(1) | Invested primarily in equity, fixed income and cash instruments. |
Equity security investments are structured to achieve an equal balance between growth and value stocks. The Company determines the annual rate of return on pension assets by first analyzing the composition of its asset portfolio. Historical rates of return are applied to the portfolio. This computed rate of return is reviewed by the Companys investment advisors and actuaries. Industry comparables and other outside guidance is also considered in the annual selection of the expected rates of return on pension assets.
Plan Assets
Investments in equity securities and debt securities are valued at fair value using a market approach and observable inputs, such as quoted market prices in active markets (Level 1 input based on the GAAP fair value hierarchy). Investments in Balanced Funds are valued at fair value using a market approach and inputs that are directly or indirectly observable (Level 2 input based on the GAAP fair value hierarchy). Investments in Real Estate funds are valued at fair value based on appraisals for each investment fund. The appraisals are considered an unobservable input (Level 3 input based on the GAAP fair value hierarchy). The Companys plan assets include investments in real estate funds of $6,003 as of December 31, 2009. For the year ended December 31, 2009, changes in the fair value of these plan assets were due to unrealized losses of $2,745. For further information on the GAAP fair value hierarchy, see Note 21. Fair Value of Financial Instruments.
F-32
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
The Company estimates its benefit payments for its domestic and foreign pension plans during the next ten years to be as follows:
U.S. |
Non-
U.S. |
Total | |||||||
2010 |
$ | 20,799 | $ | 7,614 | $ | 28,413 | |||
2011 |
14,930 | 7,424 | 22,354 | ||||||
2012 |
15,465 | 7,313 | 22,778 | ||||||
2013 |
15,828 | 8,400 | 24,228 | ||||||
2014 |
16,151 | 8,285 | 24,436 | ||||||
2015-2019 |
88,588 | 45,048 | 133,636 |
The Company estimates it will make cash contributions of approximately $14,800 to its pension plans in 2010.
Note 12. Postretirement Benefits Other Than Pensions
The Company provides certain retiree health care and life insurance benefits covering substantially all U.S. salaried and certain hourly employees and employees in Canada. Employees are generally eligible for benefits upon retirement and completion of a specified number of years of creditable service. Independent actuaries determine postretirement benefit costs for each applicable subsidiary of the Company. The Companys policy is to fund the cost of these postretirement benefits as these benefits become payable.
The following tables disclose information related to the Companys postretirement benefit plans.
2008 | 2009 | |||||||||||||||
U.S. |
Non-
U.S. |
U.S. |
Non-
U.S. |
|||||||||||||
Change in benefit obligation: |
||||||||||||||||
Benefit obligations at beginning of year |
$ | 66,787 | $ | 14,084 | $ | 58,905 | $ | 9,569 | ||||||||
Measurement change service and interest cost |
1,293 | 354 | | | ||||||||||||
Service cost |
1,471 | 654 | 1,307 | 446 | ||||||||||||
Interest cost |
3,751 | 760 | 3,493 | 796 | ||||||||||||
Actuarial loss (gain) |
(5,516 | ) | (3,463 | ) | (2,228 | ) | 749 | |||||||||
Benefits paid |
(2,610 | ) | (475 | ) | (2,073 | ) | (486 | ) | ||||||||
Curtailment gain |
| | (2,433 | ) | (748 | ) | ||||||||||
Plan change |
(6,271 | ) | | (94 | ) | | ||||||||||
Other |
| | 159 | 338 | ||||||||||||
Foreign currency exchange rate effect |
| (2,345 | ) | | 1,664 | |||||||||||
Benefit obligation at end of year |
$ | 58,905 | $ | 9,569 | $ | 57,036 | $ | 12,328 | ||||||||
Funded status of the plans |
$ | (58,905 | ) | $ | (9,569 | ) | $ | (57,036 | ) | $ | (12,328 | ) | ||||
Net amount recognized at December 31 |
$ | (58,905 | ) | $ | (9,569 | ) | $ | (57,036 | ) | $ | (12,328 | ) | ||||
Included in cumulative other comprehensive loss at December 31, 2009 are the following amounts that have not yet been recognized in net periodic benefit cost: unrecognized prior service credits of $ 11,071 ($11,319 net of tax) and unrecognized actuarial gains of $26,316 ($25,889 net of tax). The amounts included in cumulative other comprehensive loss and expected to be recognized in net periodic benefit cost during the fiscal year-ended December 31, 2010 are ($1,822) and ($1,527), respectively.
F-33
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
During 2008 plan changes were made to four of the plans. These changes resulted in a decrease of $6,271 in projected benefit obligation at December 31, 2008.
The following table provides the components of net periodic expense for the plans:
2007 | 2008 | 2009 | ||||||||||
Service cost |
$ | 2,509 | $ | 2,125 | $ | 1,753 | ||||||
Interest cost |
4,901 | 4,511 | 4,289 | |||||||||
Amortization of prior service credit and recognized actuarial gain |
(908 | ) | (2,895 | ) | (3,290 | ) | ||||||
Curtailment gain |
| | (3,404 | ) | ||||||||
Other |
| | 160 | |||||||||
Net periodic benefit cost |
$ | 6,502 | $ | 3,741 | $ | (492 | ) | |||||
The curtailment gain for the year ended December 31, 2009 in the table above was recorded as a reduction to restructuring expense.
The weighted average assumed discount rate used to determine domestic benefit obligations was 6.10% and 5.80% at December 31, 2008 and 2009, respectively. The weighted-average assumed discount rate used to determine domestic net periodic expense was 5.75%, 6.25%, and 6.10% for 2007, 2008, and 2009, respectively.
The weighted average assumed discount rate used to determine international benefit obligations was 7.50% and 6.80% at December 31, 2008 and 2009, respectively. The weighted-average assumed discount rate used to determine domestic net periodic expense was 5.25%, 5.50%, and 7.50% for 2007, 2008, and 2009, respectively.
At December 31, 2009, the weighted average assumed annual rate of increase in the cost of health care benefits (health care cost trend rate) was 8.82% for 2010 for the U.S. and 9.0% for Non-U.S. with both grading down over time to 5.0% in 2018. A one-percentage point change in the assumed health care cost trend rate would have had the following effects:
Increase | Decrease | ||||||
Effect on service and interest cost components |
$ | 301 | $ | (241 | ) | ||
Effect on projected benefit obligations |
2,609 | (2,152 | ) |
The Company estimates its benefit payments for its postretirement benefit plans during the next ten years to be as follows:
U.S. |
Non-
U.S. |
Total | |||||||
2010 |
$ | 3,072 | $ | 546 | $ | 3,618 | |||
2011 |
3,257 | 551 | 3,808 | ||||||
2012 |
3,391 | 561 | 3,952 | ||||||
2013 |
3,520 | 584 | 4,104 | ||||||
2014 |
3,643 | 589 | 4,232 | ||||||
2015 - 2019 |
20,537 | 3,194 | 23,731 |
Other post retirement benefits recorded in our consolidated balance sheets include $11,725 and $10,429 as of December 31, 2008 and 2009, respectively, for termination indemnity plans for two of our European locations.
F-34
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
Note 13. Income Taxes
Components of the Companys income (loss) before income taxes and adjustment for non-controlling interests are as follows:
Year
Ended December 31, 2007 |
Year
Ended December 31, 2008 |
Year
Ended December 31, 2009 |
||||||||||
Domestic |
$ | (182,579 | ) | $ | (124,515 | ) | $ | (285,177 | ) | |||
Foreign |
65,119 | 31,290 | (126,697 | ) | ||||||||
$ | (117,460 | ) | $ | (93,225 | ) | $ | (411,874 | ) | ||||
The Companys provision (benefit) for income taxes consists of the following:
Year Ended
December 31, 2007 |
Year Ended
December 31, 2008 |
Year Ended
December 31, 2009 |
|||||||||
Current |
|||||||||||
Federal |
$ | 5,047 | $ | 2,293 | $ | (7,267 | ) | ||||
State |
212 | 701 | 417 | ||||||||
Foreign |
28,983 | 12,256 | (12,039 | ) | |||||||
Deferred |
|||||||||||
Federal |
| | | ||||||||
State |
(954 | ) | | | |||||||
Foreign |
(342 | ) | 14,045 | (36,797 | ) | ||||||
$ | 32,946 | $ | 29,295 | $ | (55,686 | ) | |||||
The following schedule reconciles the United States statutory federal rate to the income tax provision:
Year Ended
December 31, 2007 |
Year Ended
December 31, 2008 |
Year Ended
December 31, 2009 |
||||||||||
Tax at U.S. statutory rate |
$ | (41,111 | ) | $ | (32,629 | ) | $ | (144,156 | ) | |||
State and local taxes |
(4,732 | ) | (1,359 | ) | (5,999 | ) | ||||||
Tax credits |
(9,675 | ) | (6,995 | ) | (11,433 | ) | ||||||
Goodwill Impairment |
50,024 | 8,099 | 50,712 | |||||||||
Worthless security deduction |
(23,947 | ) | | | ||||||||
Liquidation of foreign subsidiary |
| 17,703 | | |||||||||
US-Canada APA Settlement |
| | 7,132 | |||||||||
Effect of tax rate changes |
4,891 | (1,304 | ) | (260 | ) | |||||||
Foreign withholding taxes |
5,176 | 2,529 | 861 | |||||||||
Effect of foreign tax rates |
(4,130 | ) | (6,828 | ) | (1,141 | ) | ||||||
Valuation allowance |
51,788 | 45,154 | 39,898 | |||||||||
Other, net |
4,662 | 4,925 | 8,700 | |||||||||
Income tax provision (benefit) |
$ | 32,946 | $ | 29,295 | $ | (55,686 | ) | |||||
Effective income tax rate |
(28.0 | )% | (31.4 | )% | 13.5 | % | ||||||
F-35
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
Payment for income taxes net of refunds in 2007, 2008, and 2009 was $20,622, $25,797 and ($1,006) respectively. These amounts do not include any payments or refunds of income taxes related to the US-Canada Advanced Pricing Agreement settlement.
Deferred tax assets and liabilities reflect the estimated tax effect of accumulated temporary differences between the basis of assets and liabilities for tax and financial reporting purposes, as well as net operating losses, tax credit and other carryforwards. Significant components of the Companys deferred tax assets and liabilities at December 31 are as follows:
2008 | 2009 | |||||||
Deferred tax assets: |
||||||||
Postretirement and other benefits |
$ | 73,339 | $ | 68,398 | ||||
Capitalized expenditures |
12,765 | 10,892 | ||||||
Net operating loss and tax credit carryforwards |
179,923 | 193,817 | ||||||
All other items |
38,741 | 36,518 | ||||||
Total deferred tax assets |
304,768 | 309,625 | ||||||
Deferred tax liabilities: |
||||||||
Property, plant and equipment |
(39,071 | ) | (38,990 | ) | ||||
Intangibles |
(77,098 | ) | | |||||
All other items |
(2,497 | ) | (12,129 | ) | ||||
Total deferred tax liabilities |
(118,666 | ) | (51,119 | ) | ||||
Valuation allowances |
(175,215 | ) | (210,650 | ) | ||||
Net deferred tax assets (liabilities) |
$ | 10,887 | $ | 47,856 | ||||
The net deferred taxes in the consolidated balance sheet are as follows:
2008 | 2009 | |||||||
Current Assets |
$ | 9,078 | $ | 7,239 | ||||
Non-Current Assets |
32,508 | 58,555 | ||||||
Current Liabilities |
(2,434 | ) | (10,063 | ) | ||||
Non-Current Liabilities |
(28,265 | ) | (7,875 | ) | ||||
$ | 10,887 | $ | 47,856 | |||||
At December 31, 2009, the U.S. has operating loss carryforwards of $83,400 with expiration dates beginning in 2027. The Companys foreign subsidiaries, primarily in France, Brazil, Germany, UK and Australia, have operating loss carryforwards aggregating $124,500 with indefinite expiration periods while Spain has an operating loss carryforward of $14,700 with expiration dates beginning in 2010. Other foreign subsidiaries in China, India, Mexico, Italy, the Netherlands, Belgium, Czech Republic and Korea have operating losses aggregating $64,900, with expiration dates beginning in 2013. The Companys Polish subsidiaries have special economic zone credits totaling $26,200. The Companys Czech Republic subsidiary has an income tax incentive totaling $5,800. The U.S. foreign tax credit and research tax credit carryforwards are $36,400 and $16,700 respectively, with expiration dates beginning in 2015 and 2023. The Company and its domestic subsidiaries have anticipated tax benefits of state net operating losses and credit carryforwards of $22,000 with expiration dates beginning in 2010.
F-36
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
During 2009, due to our recent operating performance in the United States and current industry conditions, we continued to assess, based upon all available evidence, that it was more likely than not that we would not realize our U.S. deferred tax assets. During 2009, our U.S. valuation allowance increased by $33,100, primarily related to operating losses incurred in the United States during 2009, offset by reductions in tax attributes resulting from the settlement of the U.S. and Canadian Advanced Pricing Agreement. Going forward, the need to maintain valuation allowances against deferred tax assets in the U.S. and other affected countries will cause variability in the Companys effective tax rate. The Company will maintain a full valuation allowance against our deferred tax assets in the U.S. and applicable foreign countries until sufficient positive evidence exists to eliminate them. Effective January 1, 2009, with the adoption of ASC Topic 805 the benefit of the reversal of the valuation allowances on pre-acquisition contingencies will be included as a component of income tax expense.
Deferred income taxes have not been provided on approximately $300,000 of undistributed earnings of foreign subsidiaries as such amounts are considered permanently reinvested. It is not practical to estimate any additional income taxes and applicable withholding taxes that would be payable on remittance of such undistributed earnings.
Under the terms of the Stock Purchase Agreement with Cooper Tire, the Company is indemnified against substantially all contingent income tax liabilities related to periods prior to the 2004 Acquisition. During March 2008 the Company became aware of a potentially favorable settlement of the pending bi-lateral Advance Pricing Arrangement (APA) negotiations between the United States (US) and Canada relating to the periods 20002007. Agreement between the two governments will impact transfer pricing matters between the Company and its wholly owned Canadian subsidiary. In March 2009, the US and Canadian governments signed Mutual Agreement Letters agreeing to the terms of the bi-lateral APA. On June 23, 2009, the final Canadian bi-lateral Advance Pricing Agreement with the Company was completed and signed. The settlement of the bi-lateral APA results in income tax refunds to Cooper-Standard Automotive Canada for the years 20002007 of up to $88,000 Canadian dollars. Under the terms of the Stock Purchase Agreement with Cooper Tire and Rubber Company (CTR) dated September 16, 2004, CTR has a claim against the Company for the amount of tax refunds received by Cooper-Standard Automotive Canada relating to the years 20002004. Refunds received from the Canadian government will be based on the preparation of amended tax returns for the years 20002007. The settlement of the APA should also result in a corresponding increase to the US taxable income of CSA for the years 20052007, but is not expected to result in any significant cash payment as the increased U.S. tax liability will be largely offset by existing tax credit carryforwards. On July 27, 2009, Cooper Standard Automotive Canada received approximately CAD $80,000 which represented the federal portion of the expected refunds plus interest as a result of settlement of the Canadian APA.
The Company, CSA U.S. and CSA Canada (collectively, the Defendants) were named as defendants in an adversary proceeding (Case No. 09-52014 (PJW)) initiated by Cooper Tire & Rubber Company and Cooper Tire Rubber & Company UK Limited (together, CTR) in the Bankruptcy Court on August 19, 2009 (the CTR Adversary Proceeding). CTRs complaint had sought a declaratory judgment that CTR was entitled to a portion of the CAD$80,000 tax refund received by CSA Canada from the Canadian government on July 27, 2009 and a portion of all future refunds received by CSA Canada, in each case relating to the period prior to the Companys 2004 Acquisition. CTR also sought imposition of a resulting trust or, in the alternative, a constructive trust in favor of CTR and turnover of the portion of the Canadian income tax refunds attributable to the years 2000 through 2004. On September 29, 2009, the Canadian Court issued an order lifting the stay in the Canadian Proceedings to allow CTR to commence proceedings against CSA Canada in the Chapter 11 Cases and ordering all income tax refunds received by CSA Canada after September 29, 2009 be segregated immediately upon receipt and not disbursed, encumbered or otherwise dealt with in any way until further order of the Canadian Court. On October 5, 2009, CTR filed an amended complaint in the adversary proceeding against the Company,
F-37
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
CSA U.S. and CSA Canada. It is the Companys belief that CTRs right to tax refunds for pre-acquisition periods is that of a general unsecured creditor and is subject to the general rules and processes of the Chapter 11 Cases. In connection with the CTR Adversary Proceedings, the Defendants, CTR and the Creditors Committee entered into an Agreement Concerning Terms and Conditions of a Compromise and Settlement, dated March 17, 2010 (the CTR Settlement Agreement). Under the terms of the CTR Settlement Agreement, which is subject to Bankruptcy Court approval CTR agreed to dismiss its complaint in the Bankruptcy Court with prejudice and claim no further entitlement to the tax refunds. The Defendants agreed to, among other things, (i) pay CTR approximately $17,600 in cash and (ii) to obtain a release of CTRs obligations in connection with a guarantee of one of the Companys leases or, alternatively, provide a letter of credit in favor of CTR, in the initial amount of $7,000 (but declining by $1,000 per year for seven years) to reimburse CTR for any amounts that it is required to pay the Companys landlord on account of such guarantee. The Defendants and CTR have also granted general mutual releases to each other with respect to claims and liabilities under the purchase agreement governing the 2004 Acquisition and other claims and liabilities, subject to certain exceptions relating to certain continuing indemnification obligations. As noted above, the effectiveness of the CTR Settlement Agreement is subject to Bankruptcy Court approval, and the Bankruptcy Court has scheduled a hearing on April 15, 2010 to consider the settlement.
At December 31, 2009, the Company has $3,218 ($3,654 including interest and penalties) of total unrecognized tax benefits. Of this total, $1,236 represents the amount of unrecognized tax benefits that, if recognized, would affect the effective income tax rate. The total unrecognized tax benefits differ from the amount which would effect the effective tax rate due to the impact of valuation allowances and the impact of Cooper Tire indemnifying substantially all income tax liabilities resulting from periods prior to the 2004 Acquisition.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
Year Ended
December 31, 2007 |
Year Ended
December 31, 2008 |
Year Ended
December 31, 2009 |
||||||||||
Balance as of January 1 |
$ | 4,021 | $ | 3,930 | $ | 4,728 | ||||||
Tax Positions related to the current period |
||||||||||||
Gross Additions |
568 | 411 | 255 | |||||||||
Gross Reductions |
| | | |||||||||
Tax Positions related to prior years |
||||||||||||
Gross Additions |
167 | 1,127 | | |||||||||
Gross Reductions |
| (244 | ) | (1,086 | ) | |||||||
Settlements |
(362 | ) | (32 | ) | (59 | ) | ||||||
Lapses on Statutes of Limitations |
(464 | ) | (464 | ) | (620 | ) | ||||||
Balance as of December 31 |
$ | 3,930 | $ | 4,728 | $ | 3,218 | ||||||
The Company, or one of its subsidiaries, files income tax returns in the United States and other foreign jurisdictions. Under the terms of the Stock Purchase Agreement with Cooper Tire, the Company is indemnified against substantially all income tax liabilities related to periods prior to the 2004 Acquisition. Subsequently, in the United States, all Internal Revenue Service examinations prior to the 2004 Acquisition are the responsibility of Cooper Tire; therefore the Company is not subject to U.S. federal, state, or local tax examinations for years ending December 23, 2004 and prior. The Internal Revenue Service (IRS) completed an examination of the Companys U.S. income tax returns for 2005 and 2006 during 2009. The only material adjustments were those related to the US and Canada Advanced Pricing Agreement. It is anticipated that an examination of the Companys U.S. income tax returns for 2007 and 2008 will begin during Q1 of 2010. The Companys foreign
F-38
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
subsidiaries are legally required to comply with the statute of limitations in each jurisdiction; however the Company is indemnified against substantially all income tax liabilities that may result from periods prior to the 2004 Acquisition. The Companys major foreign jurisdictions are Brazil, Canada, France, Germany, Italy, Mexico and Poland. The Company is no longer subject to income tax examinations in major foreign jurisdictions for years prior to 2002.
The Company does not anticipate any significant changes to its total unrecognized tax benefits within the next 12 months.
The Company classifies all tax related interest and penalties as income tax expense. At December 31, 2009, the
Note 14. Lease Commitments
The Company rents certain manufacturing facilities and equipment under long-term leases expiring at various dates. Rental expense for operating leases was $22,303, $23,331, and $21,570 for 2007, 2008, and 2009.
Future minimum payments for all non-cancelable operating leases are as follows:
2010 |
$ | 14,546 | |
2011 |
12,097 | ||
2012 |
9,715 | ||
2013 |
8,527 | ||
2014 |
6,713 | ||
Thereafter |
19,981 |
Note 15. Accumulated Other Comprehensive Income (Loss)
Cumulative other comprehensive income (loss) in the accompanying balance sheets consists of:
2007 | 2008 | 2009 | ||||||||||
Cumulative currency translation adjustment |
$ | 57,505 | $ | (1,424 | ) | $ | 24,474 | |||||
Benefit plan liability |
23,977 | (28,540 | ) | (33,159 | ) | |||||||
Tax effect |
916 | (181 | ) | 939 | ||||||||
Net |
24,893 | (28,721 | ) | (32,220 | ) | |||||||
Fair value change of derivatives |
(16,748 | ) | (32,685 | ) | (22,742 | ) | ||||||
Tax effect |
3,338 | 3,294 | (549 | ) | ||||||||
Net |
(13,410 | ) | (29,391 | ) | (23,291 | ) | ||||||
$ | 68,988 | $ | (59,536 | ) | $ | (31,037 | ) | |||||
The adoption of ASC Topic 810 resulted in the reclassification of amounts previously attributable to minority interest (now referred to as noncontrolling interest) to a separate component of stockholders equity on the accompanying consolidated balance sheets. Additionally, net income attributable to noncontrolling interests is shown separately from net income in the consolidated statement of operations. This reclassification has no effect on our previously reported results of operations.
F-39
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
Note 16. Contingent Liabilities
Employment Contracts
The Company has employment arrangements with certain key executives that provide for continuity of management. These arrangements include payments of multiples of annual salary, certain incentives, and continuation of benefits upon the occurrence of specified events in a manner that is believed to be consistent with comparable companies.
Unconditional Purchase Orders
Noncancellable purchase order commitments for capital expenditures made in the ordinary course of business were $12,593 and $19,252 at December 31, 2008 and 2009, respectively.
Legal and Other Claims
The Company is periodically involved in claims, litigation, and various legal matters that arise in the ordinary course of business. In addition, the
Company conducts and monitors environmental investigations and remedial actions at certain locations. Each of these matters is subject to various uncertainties, and some of these matters may be resolved unfavorably with respect to the Company. A
reserve estimate is established for each matter and updated as additional information becomes available. Based on the information currently known to us, we do not believe that the ultimate resolution of any of these matters will have a material
Note 17. Other Income (Expense), net
The components of Other Income (Expense) for the years 2007, 2008, and 2009 are as follows:
Year Ended
December 31, 2007 |
Year Ended
December 31, 2008 |
Year Ended
December 31, 2009 |
||||||||||
Foreign currency gains (losses) |
$ | (454 | ) | $ | (845 | ) | $ | 4,455 | ||||
Gain on debt repurchase |
| 1,696 | 9,096 | |||||||||
Loss on disposal of fixed assets |
(14 | ) | | | ||||||||
Interest rate swaps |
| | (2,414 | ) | ||||||||
Loss on sale of receivables |
| (2,219 | ) | (1,218 | ) | |||||||
Other income (expense) |
$ | (468 | ) | $ | (1,368 | ) | $ | 9,919 | ||||
Prior year amounts related to noncontrolling interest (minority interest) historically reflected as a component of other income (expense) have been reclassified to conform to current year presentation as required by ASC Topic 810. The adoption of ASC Topic 810 resulted in the reclassification of amounts being reported as minority interest, totaling $587 and ($1,069), for the years ended December 31, 2007 and 2008, respectively, being shown separately from net income (loss) in the accompanying consolidated statement of operations.
Note 18. Related Party Transactions
Sales to NISCO, a 50% owned joint venture, totaled $30,941, $26,658, and $21,705, in 2007, 2008, and 2009, respectively. In 2008, the Company received from NISCO a dividend of $5,000 all of which was related to earnings.
Purchases of materials from Guyoung Technology Co. Ltd, a 20% owned joint venture, totaled $5,041, $1,313 and $4,204 in 2007, 2008 and 2009, respectively.
F-40
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
In connection with the MAPS acquisition, the Company received $15,000 of capital contributions from each of its two Sponsors and their respective affiliates in 2007. The Company also paid $625 of transaction advisory fees to each of its two Sponsors in 2007.
Note 19. Capital Stock and Stock Options
In 2004, the Company was formed and was capitalized in conjunction with the 2004 Acquisition via the sale of 3,180,000 shares of common stock for $318,000 to affiliates of The Cypress Group L.L.C. and GS Capital Partners 2000, L.P., whom we refer to as our Sponsors. Pursuant to subscription agreements entered into as of August 27, 2007, the Company issued a total of 250,000 additional shares of common stock to its Sponsors for $30,000 which was invested by the Sponsors in connection with the financing of the Companys August 2007 acquisition of certain Metzeler Automotive Profile Systems sealing operations. Following the 2004 Acquisition and through December 31, 2007, five members of the board of directors and certain members of senior management purchased $4,910 of common stock. The Company repurchased $300 of common stock during 2005 from one such member of senior management whose employment with the Company terminated in 2005 and another $450 of common stock during 2007 from another such member of senior management whose employment with the Company terminated in 2006 and another $540 of common stock during 2008 from another such member of senior management whose employment with the Company terminated in 2007.
Effective as of the closing of the 2004 Acquisition, the Company established the 2004 Cooper-Standard Holdings Inc. Stock Incentive Plan, which permits the granting of nonqualified and incentive stock options, stock appreciation rights, restricted stock, and other stock-based awards to employees and directors. As of December 31, 2008 and 2009, the Company had 423,615 shares of common stock reserved for issuance under the plan, including outstanding options granted to certain employees and directors to purchase 192,615 and 168,017 shares of common stock, respectively, at a price of $100 per share, which was determined by the Company to be fair market value. In addition, there are also outstanding options granted to certain employees and directors to purchase 27,000 shares of common stock at a price of $120 per share. These options have a ten-year life. Of the options outstanding as of December 31, 2008 and 2009, options covering 165,239 and 140,641 shares of common stock, respectively, were granted upon the closing of the 2004 Acquisition or in the first year thereafter. During 2009, options covering 24,598 of these shares were forfeited. These options were issued prior to the effective date of ASC Topic 718 and therefore are accounted for in accordance with APB No. 25 and no stock compensation is required to be recognized. Of the 140,641 options outstanding at December 31, 2009, 108,326 are vested with a weighted average remaining contractual term of 5 years. A summary of option transactions for the years ended 2007, and 2008 for options that were granted after the effective date of ASC Topic 718 is shown below:
2007 | 2008 | 2009 | |||||||||||||||||
Options |
Wtd. Avg. Ex.
Price |
Options |
Wtd. Avg. Ex.
Price |
Options |
Wtd. Avg. Ex.
Price |
||||||||||||||
Outstanding at Beginning of Year |
4,025 | $ | 100.00 | 29,487 | $ | 100.00 | 54,376 | $ | 109.93 | ||||||||||
Granted |
25,462 | $ | 100.00 | 27,000 | $ | 120.00 | | $ | | ||||||||||
Cancelled |
| $ | | (655 | ) | $ | 100.00 | | $ | | |||||||||
Forfeited |
| $ | | (1,456 | ) | $ | 100.00 | | $ | | |||||||||
Outstanding at End of Year |
29,487 | $ | 100.00 | 54,376 | $ | 109.93 | 54,376 | $ | 109.93 | ||||||||||
Exercisable at End of Year |
4,264 | $ | 100.00 | 24,566 | $ | 108.01 | 38,960 | $ | 110.10 | ||||||||||
Weighted Average Fair Value of Options Granted |
$ | 46.02 | $ | 42.39 | $ | | |||||||||||||
Weighted Average Remaining Contractual Life (years): |
|||||||||||||||||||
Outstanding at End of Year |
9.2 | 8.7 | 7.7 | ||||||||||||||||
Exercisable at End of Year |
9.2 | 8.6 | 7.8 |
F-41
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
Stock compensation expense totaling $561, $635 and $699 has been recognized in 2007, 2008, and 2009, respectively for these options.
One-half of the options granted to employees in the initial one-year period following the 2004 Acquisition vest on a time basis, 20% per year over five years; the remaining one-half vest on a performance basis at a rate of between 0% and 20% per year, depending on the extent to which established performance targets are attained, with 85% attainment of performance targets being the threshold for any vesting. Performance-based options granted during this period are subject to certain acceleration provisions and, regardless of the achievement of performance targets in any year, may vest in full in the event of a transaction in which the Companys Sponsors realize an internal rate of return of at least 20% on their investment in the Company, or may vest in full 8 years following the date of grant if the compensation committee determines that certain accounting treatment would be required in the absence of such vesting. The same principles apply in the case of options granted after this initial period but before 2008, except that only the last three years of the five-year period applicable to options granted in the initial period are taken into account, and vesting occurs in increments of 33% rather than 20%. With respect to options granted in 2008, two-thirds of the options vest on a time basis at a rate of 50% per year over two years and the remaining one-third were eligible for vesting based on the performance of the Company in 2008. Options granted to employees covering 131,403 and 140,685 shares were vested as of December 31, 2008 and 2009, respectively. All of the options granted to directors vest on a time basis, 20% per year over five years in the case of options granted before 2008, and 50% per year over two years in the case of options granted in 2008. Options granted to directors covering an aggregate of 3,700 and 6,600 shares were vested as of December 31, 2008 and 2009, respectively.
The Company uses expected volatility of similar entities to develop the expected volatility. The expected option life was calculated using the simplified method. The risk free rate is based on U.S. Treasury zero-coupon issues with a term equal to the expected option life, on the date the stock options were granted. Fair value for the shares that are accounted for under ASC Topic 718 was estimated at the date of the grant using the Black-Scholes option pricing model using the following weighted average assumptions:
2007 | 2008 | |||
Expected volatility |
40.00% | 34.00% | ||
Dividend yield |
0.00% | 0.00% | ||
Expected option life |
6.0 years | 5.5 years | ||
Risk-free rate |
4.50% | 2.40% - 2.65% |
No options were granted during 2009.
The Company also maintains a nonqualified Deferred Compensation Plan which allows eligible executives and directors to defer base pay, bonus payments and long-term incentive pay and have it allocated on a pre-tax basis to various investment alternatives and ultimately distributed to the executive at a designated time in the future. In December 2006, a new plan feature referred to as the Management Stock Purchase Plan was established which provides participants the opportunity to purchase Company stock units with income deferred under the deferred compensation plan at a price based on the fair value of Company common stock determined on a semi-annual basis by the compensation committee of the Companys board of directors. Purchased stock units are matched by the Company at year-end on a one-for-one basis, subject to plan provisions which allow for an annual cap on the aggregate number of matching stock units, which the compensation committee may apply in its discretion. On December 31, 2009, approximately 37,417 Company stock units at $50 per unit were outstanding under this plan, subject to certain adjustments based on net actual incentive payments. Approximately 18,658 of these stock units are matching stock units that generally vest ratably over a three year period. As of
F-42
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
December 31, 2009, approximately 11,646 units were vested. In accordance with ASC Topic 718, for units granted to retirement eligible employees, compensation expense must be recognized immediately, since employees meeting eligibility for retirement would be immediately vested in this plan upon leaving employment. Compensation expense related to Company stock units equaled $988, $629, and $662, in 2007, 2008, and 2009, respectively.
Note 20. Business Segments
During 2007, the Company began managing its operations through three business segments: Body & Chassis Systems, Fluid Systems, and Asia Pacific. The Body & Chassis segment consisted mainly of body sealing products and components that protect vehicle interiors from weather, dust, and noise intrusion as well as systems and components that control and isolate noise vibration in a vehicle to improve ride and handling. The Fluid segment consisted primarily of subsystems and components that direct, control, measure, and transport fluids and vapors throughout a vehicle. The Asia Pacific segment consisted of both Body & Chassis and Fluid operations in that region with the exception of the Companys interest in a joint venture in China which was acquired as part of the MAPS acquisition, and the MAP India joint venture. These joint ventures were included in the Body & Chassis segment which was in line with the internal management structure. The Company continued to report its operating results in three business segments for all of 2008 and the first quarter of 2009.
On March 26, 2009, the Company announced the implementation of a plan involving the discontinuation of its global Body & Chassis and Fluid Systems operating divisions and the establishment of a new operating structure organized on the basis of geographic regions. Under the plan, the Companys operating structure as well as reporting segments, has changed, and the Company revised its segment disclosures beginning with the second quarter of 2009 from the three previously used reportable segments to two reportable segments, North America and International (comprising all of the Companys operations outside of North America). Prior periods have been revised to conform to the current period presentation. The Company recognized a charge of $7,800 and $18,656 in 2008 and 2009, related to this realignment. See Note 6. Restructuring for discussions on the restructuring. Due to this segment revision, the Company has also revised the previously reported amounts in Note 9, Goodwill and Intangibles, to conform to the new segment presentation.
ASC Topic 280, Segment Reporting , establishes the standards for reporting information about operating segments in financial statements. In applying the criteria set forth in ASC 280, the Company has determined that it operates in two segments.
The accounting policies of the Companys business segments are consistent with those described in Note 2. The Company evaluates segment performance based on segment profit before tax. The results of each segment include certain allocations for general, administrative, interest, and other shared costs. However, certain shared costs are not allocated to the segments and are included below in Eliminations and other. Intersegment sales are conducted at market prices. Segment assets are calculated based on a moving average over several quarters and exclude corporate assets, goodwill, intangible assets, deferred taxes, and certain other assets.
F-43
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
The following table details information on the Companys business segments:
For the Year Ended December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
Sales to external customers |
||||||||||||
North America |
$ | 1,526,458 | $ | 1,244,423 | $ | 910,306 | ||||||
International |
984,695 | 1,350,154 | 1,034,953 | |||||||||
Consolidated |
$ | 2,511,153 | $ | 2,594,577 | $ | 1,945,259 | ||||||
Intersegment sales |
||||||||||||
North America |
$ | 5,528 | $ | 3,687 | $ | 4,377 | ||||||
International |
12,363 | 11,585 | 5,467 | |||||||||
Eliminations and other |
(17,891 | ) | (15,272 | ) | (9,844 | ) | ||||||
Consolidated |
$ | | $ | | $ | | ||||||
Segment profit |
||||||||||||
North America |
$ | (86,723 | ) | $ | (36,662 | ) | $ | (246,015 | ) | |||
International |
(30,737 | ) | (56,563 | ) | (165,859 | ) | ||||||
Income before income taxes |
$ | (117,460 | ) | $ | (93,225 | ) | $ | (411,874 | ) | |||
Depreciation and amortization expense |
||||||||||||
North America |
$ | 85,617 | $ | 77,135 | $ | 60,192 | ||||||
International |
46,788 | 59,199 | 49,240 | |||||||||
Eliminations and other |
3,644 | 3,771 | 4,345 | |||||||||
Consolidated |
$ | 136,049 | $ | 140,105 | $ | 113,777 | ||||||
Capital expenditures |
||||||||||||
North America |
$ | 45,738 | $ | 27,565 | $ | 14,194 | ||||||
International |
58,263 | 54,783 | 30,076 | |||||||||
Eliminations and other |
3,254 | 9,777 | 1,843 | |||||||||
Consolidated |
$ | 107,255 | $ | 92,125 | $ | 46,113 | ||||||
Segment assets |
||||||||||||
North America |
$ | 938,946 | $ | 694,442 | ||||||||
International |
791,531 | 877,971 | ||||||||||
Eliminations and other |
87,774 | 164,994 | ||||||||||
Consolidated |
$ | 1,818,251 | $ | 1,737,407 | ||||||||
Net interest expense (income) included in segment profit for North America totaled $40,430, $45,831 and $31,013 for the years ended December 31, 2007, 2008 and 2009, respectively. International totaled $49,147, $47,063 and $33,320 for the years ended December 31, 2007, 2008 and 2009, respectively.
Restructuring costs included in segment profit for North America totaled $9,360, $13,356 and $8,624 for the years ended December 31, 2007, 2008 and 2009, respectively. International restructuring costs totaled $17,026, $24,944 and $23,787 for the years ended December 31, 2007, 2008 and 2009, respectively.
F-44
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
Geographic information for revenues, based on country of origin, and long-lived assets is as follows:
2007 | 2008 | 2009 | |||||||
Revenues |
|||||||||
United States |
$ | 857,051 | $ | 668,500 | $ | 516,411 | |||
Canada |
380,793 | 304,652 | 175,670 | ||||||
Mexico |
288,614 | 271,271 | 218,225 | ||||||
Germany |
324,305 | 440,393 | 277,859 | ||||||
Other |
660,390 | 909,761 | 757,094 | ||||||
Consolidated |
$ | 2,511,153 | $ | 2,594,577 | $ | 1,945,259 | |||
Tangible long-lived assets |
|||||||||
United States |
$ | 167,287 | $ | 138,098 | |||||
Canada |
50,773 | 48,450 | |||||||
Mexico |
55,295 | 54,363 | |||||||
Germany |
108,608 | 102,796 | |||||||
Other |
242,024 | 242,472 | |||||||
Consolidated |
$ | 623,987 | $ | 586,179 | |||||
Sales to customers of the Company which contributed ten percent or more of its total consolidated Sales and the related percentage of consolidated Company sales for 2007, 2008, and 2009 are as follows:
Customer |
2007
Percentage of Combined Sales |
2008
Percentage of Combined Sales |
2009
Percentage of Combined Sales |
||||||
Ford |
27 | % | 25 | % | 31 | % | |||
General Motors |
20 | % | 16 | % | 14 | % |
Note 21. Fair Value of Financial Instruments
Fair values of the Senior Notes and the Senior Subordinated Notes approximated $146,900 and $256,106 at December 31, 2008 and December 31, 2009 based on quoted market prices, compared to the recorded values totaling $523,350 and $505,300, respectively. Fair values of the Term Loans approximated $247,600 and $512,828 at December 31, 2008 and December 31, 2009, based on quoted market prices, compared to the recorded values totaling $530,000 and $520,637, respectively. The fair value of the DIP financing approximated $177,188 at December 31, 2009, based on quoted market prices, compared to the recorded value totaling $175,000 at December 31, 2009.
The Company uses derivative financial instruments, including forwards and swap contracts to manage its exposures to fluctuations in foreign exchange, interest rates and commodity prices. For a fair value hedge both the effective and ineffective, if significant, portions are recorded in earnings and reflected in the consolidated statement of operations. For a cash flow hedge, the effective portion of the change in the fair value of the derivative is recorded in accumulated other comprehensive income (loss) in the consolidated balance sheet. The ineffective portion, if significant, is recorded in other income or expense. When the underlying hedged transaction is realized or the hedged transaction is no longer probable, the gain or loss included in accumulated other comprehensive income (loss) is recorded in earnings and reflected in the consolidated statement of operations on the same line as the gain or loss on the hedged item attributable to the hedged risk.
F-45
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
The Company formally documents its hedge relationships, including the identification of the hedging instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the cash flow hedges. The Company also formally assesses whether a cash flow hedge is highly effective in offsetting changes in the cash flows of the hedged item. Derivatives are recorded at fair value in other current assets and other current liabilities.
Derivative Instruments and Hedging Activities
The failure to make the scheduled interest payments on the Senior Notes and Senior Subordinated Notes and the expiration of the applicable 30-day period on July 16, 2009 constituted a cross-default under the Companys ISDA Agreements in the names of Cooper-Standard Automotive, Inc., Cooper-Standard Automotive Canada, Limited and Cooper-Standard Automotive International Holdings B.V., with its various senior lenders as counterparties. As a result, the counterparties to certain outstanding derivative contracts under these ISDA Agreements elected to exercise their option of early termination under such contracts. Certain interest rate, foreign exchange and commodity swap derivatives that were designated under ASC 815 as cash flow hedges were terminated for the purposes of ASC 815 as a result of the failure to make the interest payment and in anticipation of the termination events. The value of these terminated derivatives, totaling $18,090, is classified as liabilities subject to compromise. The amounts in accumulated other comprehensive income at termination were frozen and will be recognized at the time the Company emerges from bankruptcy to the statement of operations over the remaining life of the underlying exposures.
Cash Flow Hedges
Forward foreign exchange contracts The Company enters into forward contracts to hedge currency risk of the U.S. Dollar against the Euro. The forward contracts are used to mitigate the potential volatility to earnings and cash flow arising from changes in currency exchange rates that impact the Companys foreign currency transactions. The gain or loss on the forward contracts is reported as a component of other comprehensive income (loss) (OCI) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. For the year ended December 31, 2009, $(30) was reclassified from AOCI into cost of products sold.
For the forward contracts terminated as cash flow hedges for the year ended December 31, 2009, $4,838 was reclassified from AOCI into cost of products sold.
Interest rate swaps The Company has an interest rate swap contract to manage cash flow fluctuations of variable rate debt due to changes in market interest rates. This contract which fixes the interest payment of a certain variable rate debt instrument is accounted for as a cash flow hedge. As of December 31, 2009, the USD notional amount of this contract was $9,508. At December 31, 2009, the fair value before taxes of the Companys interest rate swap contract was $(406) and is recorded in accrued liabilities and other long-term liabilities in the Companys consolidated balance sheet with the offset reflected in accumulated other comprehensive income (loss) (AOCI), net of deferred taxes. For the year ended December 31, 2009, $146 was reclassified from AOCI into interest expense. The amount to be reclassified in the next twelve months is expected to be approximately $(204).
For interest rate swaps terminated as cash flow hedges, $(22,912) is recognized in OCI as of December 31, 2009. For the year ended December 31, 2009, $6,807 was reclassified from AOCI into interest expense and for the year ended December 31, 2009, $2,414 was reclassified from AOCI to other expense (income).
F-46
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
Commodity price hedges The Company has exposure to the prices of commodities in the procurement of certain raw materials. The primary purpose of the Companys commodity price hedging activities is to manage the volatility associated with these forecasted purchases. The Company primarily utilized forward contracts with maturities of less than 24 months, which were accounted for as cash flow hedges. These instruments were intended to offset the effect of changes in commodity prices on forecasted inventory purchases. As of December 31, 2009, these forward contracts have been terminated as cash flow hedges. For the year ended December 31, 2009, $3,774 was reclassified from AOCI to cost of products sold.
Fair Value Measurements
ASC clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based upon assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1: |
Observable inputs such as quoted prices in active markets; | |
Level 2: |
Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and | |
Level 3: |
Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
Estimates of the fair value of foreign currency and commodity derivative instruments are determined using exchange traded prices and rates. The Company also considers the risk of non-performance in the estimation of fair value, and includes an adjustment for non-performance risk in the measure of fair value of derivative instruments. In certain instances where market data is not available, the Company uses management judgment to develop assumptions that are used to determine fair value.
Fair value measurements and the fair value hierarchy level for the Companys liabilities measured or disclosed at fair value on a recurring basis as of December 31, 2009, are shown below:
Contract |
Asset
(Liability) |
Level 1 | Level 2 | Level 3 | ||||||||||
Interest rate swap |
$ | (406 | ) | $ | | $ | | $ | (406 | ) | ||||
Total |
$ | (406 | ) | $ | | $ | | $ | (406 | ) | ||||
F-47
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
A reconciliation of changes in assets and liabilities related to derivative instruments measured at fair value using the market and income approach adjusted for our and our counterpartys credit risks for the year ended December 31, 2009, is shown below:
Net Derivative
Liabilities |
||||
Beginning Balance as of January 1, 2009 |
$ | 22,370 | ||
Total (gains) or losses (realized or unrealized) included in earnings (or changes in net liabilities) |
18,306 | |||
Included in other comprehensive income |
(7,310 | ) | ||
Purchases, issuances, and settlements |
(14,870 | ) | ||
Terminated hedges |
(18,090 | ) | ||
Ending Balance as of December 31, 2009 |
$ | 406 | ||
The amount of total (gains) or losses for the period included in earnings (or changes in net liabilities) attributable to the change in unrealized (gains) or losses relating to assets still held at the reporting date |
$ | | ||
(Gains) and losses (realized and unrealized) included in earnings (or changes in net liabilities) for the period (above) are reported in cost of products sold and other income (expense): |
||||
Total (gains) or losses included in earnings (or changes in net liabilities) for the period (above) |
$ | 18,306 | ||
Change in unrealized (gains) or losses relating to assets still held at the reporting date |
|
Items measured at fair value on a non-recurring basis
In addition to items that are measured at fair value on a recurring basis, the Company measures certain assets
and liabilities at fair value on a non-recurring basis, which are not included in the table above. As these non-recurring fair value measurements are generally determined using unobservable inputs, these fair value measurements are classified within
Level 3 of the fair value hierarchy. For further information on assets and liabilities measured at fair value on a non-recurring basis, see Note 2. Summary of Significant Accounting Policies, Note 6. Restructuring, Note 8.
Note 22. Selected Quarterly Information (Unaudited)
First
Quarter |
Second
Quarter |
Third
Quarter |
Fourth
Quarter |
|||||||||||||
2008 |
||||||||||||||||
Sales |
$ | 756,021 | $ | 765,639 | $ | 599,656 | $ | 473,261 | ||||||||
Gross profit |
119,119 | 117,989 | 62,484 | 34,922 | ||||||||||||
Consolidated net income (loss) |
15,705 | 11,403 | (32,808 | ) | (116,820 | ) | ||||||||||
Net income (loss) attributable to Cooper-Standard Holdings Inc. |
15,672 | 11,587 | (32,595 | ) | (116,115 | ) | ||||||||||
First
Quarter |
Second
Quarter |
Third
Quarter |
Fourth
Quarter |
|||||||||||||
2009 |
||||||||||||||||
Sales |
$ | 401,768 | $ | 448,046 | $ | 517,842 | $ | 577,603 | ||||||||
Gross profit |
37,832 | 55,287 | 82,067 | 91,120 | ||||||||||||
Consolidated net income (loss) |
(55,277 | ) | (349,344 | ) | 10,666 | 37,767 | ||||||||||
Net income (loss) attributable to Cooper-Standard Holdings Inc. |
(54,966 | ) | (349,340 | ) | 10,847 | 37,397 |
F-48
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
Note 23. Sale Leaseback Transaction
During the year ended December 31, 2007, the Company sold a manufacturing facility to an independent third party. Gross proceeds from this sale were $4,806. Concurrent with this sale, the Company entered into an agreement to lease the facility back from the purchaser over a lease term of 10 years. This lease is accounted for as an operating lease. A gain of $723 was deferred and is being amortized over the lease term.
During the year ended December 31, 2008, the Company sold a manufacturing facility to an independent third party and simultaneously agreed to lease the facility from that party for a period of 15 years. Gross proceeds from this sale were $8,556. The transaction is structured as an operating lease.
Note 24. Guarantor and Non-Guarantor Subsidiaries
In connection with the December 2004 acquisition by the Company of the automotive segment of Cooper Tire & Rubber Company, Cooper-Standard Automotive Inc. (for purpose of this Note 24, the Issuer), a wholly-owned subsidiary, issued the Senior Notes and Senior Subordinated Notes with a total principal amount of $550,000. Cooper-Standard Holdings Inc. (the Parent) and all wholly-owned domestic subsidiaries of the Issuer (the Guarantors) unconditionally guarantee the notes. The following consolidated financial data provides information regarding the financial position, results of operations and cash flows of the Guarantors. Separate financial statements of the Guarantors are not presented because management has determined that those would not be material to the holders of the notes. The Guarantors account for their investments in the non-guarantor subsidiaries on the equity method. The principal elimination entries are to eliminate the investments in subsidiaries and intercompany balances and transactions.
F-49
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 2007
Parent | Issuer | Guarantors | Non-Guarantors | Eliminations |
Consolidated
Totals |
|||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||
Sales |
$ | | $ | 456.8 | $ | 713.9 | $ | 1,464.3 | $ | (123.8 | ) | $ | 2,511.2 | |||||||||||
Cost of products sold |
| 411.9 | 571.8 | 1,254.2 | (123.8 | ) | 2,114.1 | |||||||||||||||||
Selling, administration, & engineering expenses |
| 103.0 | 51.8 | 67.3 | | 222.1 | ||||||||||||||||||
Amortization of intangibles |
| 21.5 | 2.8 | 7.6 | | 31.9 | ||||||||||||||||||
Impairment charges |
| 143.0 | 3.4 | | | 146.4 | ||||||||||||||||||
Restructuring |
| 6.3 | 1.1 | 19.0 | | 26.4 | ||||||||||||||||||
Operating profit (loss) |
| (228.9 | ) | 83.0 | 116.2 | | (29.7 | ) | ||||||||||||||||
Interest expense, net of interest income |
| (76.2 | ) | | (13.3 | ) | | (89.5 | ) | |||||||||||||||
Equity earnings |
| (0.3 | ) | 2.3 | 0.2 | | 2.2 | |||||||||||||||||
Other income (expense) |
| 41.5 | 0.2 | (42.2 | ) | | (0.5 | ) | ||||||||||||||||
Income (loss) before income taxes |
| (263.9 | ) | 85.5 | 60.9 | | (117.5 | ) | ||||||||||||||||
Provision for income tax expense (benefit) |
| 20.3 | (15.3 | ) | 27.9 | | 32.9 | |||||||||||||||||
Income (loss) before equity in income (loss) of subsidiaries |
| (284.2 | ) | 100.8 | 33.0 | | (150.4 | ) | ||||||||||||||||
Equity in net income (loss) of subsidiaries |
(150.4 | ) | 133.8 | | | 16.6 | | |||||||||||||||||
Consolidated net income (loss) |
(150.4 | ) | (150.4 | ) | 100.8 | 33.0 | 16.6 | (150.4 | ) | |||||||||||||||
Less: Net (income) loss attributable to noncontrolling interest |
| | | (0.6 | ) | | (0.6 | ) | ||||||||||||||||
Net Income (loss) attributable to Cooper-Standard Holdings Inc. |
$ | (150.4 | ) | $ | (150.4 | ) | $ | 100.8 | $ | 32.4 | $ | 16.6 | $ | (151.0 | ) | |||||||||
F-50
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 2008
Parent | Issuer | Guarantors | Non-Guarantors | Eliminations |
Consolidated
Totals |
|||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||
Sales |
$ | | $ | 381.0 | $ | 553.7 | $ | 1,759.1 | $ | (99.2 | ) | $ | 2,594.6 | |||||||||||
Cost of products sold |
| 347.7 | 465.4 | 1,546.2 | (99.2 | ) | 2,260.1 | |||||||||||||||||
Selling, administration, & engineering expenses |
| 87.8 | 40.7 | 103.2 | | 231.7 | ||||||||||||||||||
Amortization of intangibles |
| 20.5 | 2.3 | 8.2 | | 31.0 | ||||||||||||||||||
Impairment charges |
| 24.7 | 2.3 | 6.4 | | 33.4 | ||||||||||||||||||
Restructuring |
| 5.4 | 4.2 | 28.7 | | 38.3 | ||||||||||||||||||
Operating profit (loss) |
| (105.1 | ) | 38.8 | 66.4 | | 0.1 | |||||||||||||||||
Interest expense, net of interest income |
| (77.8 | ) | | (15.1 | ) | | (92.9 | ) | |||||||||||||||
Equity earnings |
| (4.4 | ) | 3.4 | 1.9 | | 0.9 | |||||||||||||||||
Other income (expense) |
| 27.2 | (0.9 | ) | (27.7 | ) | | (1.4 | ) | |||||||||||||||
Income (loss) before income taxes |
| (160.1 | ) | 41.3 | 25.5 | | (93.3 | ) | ||||||||||||||||
Provision for income tax expense (benefit) |
| 4.1 | (1.1 | ) | 26.3 | | 29.3 | |||||||||||||||||
Income (loss) before equity in income (loss) of subsidiaries |
| (164.2 | ) | 42.4 | (0.8 | ) | | (122.6 | ) | |||||||||||||||
Equity in net income (loss) of subsidiaries |
(122.6 | ) | 41.6 | | | 81.0 | | |||||||||||||||||
Consolidated net income (loss) |
(122.6 | ) | (122.6 | ) | 42.4 | (0.8 | ) | 81.0 | (122.6 | ) | ||||||||||||||
Less: Net (income) loss attributable to noncontrolling interest |
| | | 1.1 | | 1.1 | ||||||||||||||||||
Net Income (loss) attributable to Cooper-Standard Holdings Inc. |
$ | (122.6 | ) | $ | (122.6 | ) | $ | 42.4 | $ | 0.3 | $ | 81.0 | $ | (121.5 | ) | |||||||||
F-51
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 2009
Parent | Issuer | Guarantors | Non-Guarantors | Eliminations |
Consolidated
Totals |
|||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||
Sales |
$ | | $ | 333.9 | $ | 404.6 | $ | 1,286.1 | $ | (79.3 | ) | $ | 1,945.3 | |||||||||||
Cost of products sold |
| 288.1 | 326.9 | 1,143.3 | (79.3 | ) | 1,679.0 | |||||||||||||||||
Selling, administration, & engineering expenses |
| 77.4 | 30.4 | 91.7 | | 199.5 | ||||||||||||||||||
Amortization of intangibles |
| 10.2 | 0.9 | 3.9 | | 15.0 | ||||||||||||||||||
Impairment charges |
| 240.7 | 31.6 | 91.2 | | 363.5 | ||||||||||||||||||
Restructuring |
| 4.3 | 1.0 | 27.1 | | 32.4 | ||||||||||||||||||
Operating profit (loss) |
| (286.8 | ) | 13.8 | (71.1 | ) | | (344.1 | ) | |||||||||||||||
Interest expense, net of interest income |
| (51.8 | ) | | (12.5 | ) | | (64.3 | ) | |||||||||||||||
Equity earnings |
| 0.1 | 1.5 | 2.4 | | 4.0 | ||||||||||||||||||
Reorganization items, net |
| (17.4 | ) | | | | (17.4 | ) | ||||||||||||||||
Other income (expense), net |
| 23.4 | (1.4 | ) | (12.1 | ) | | 9.9 | ||||||||||||||||
Income (loss) before income taxes |
| (332.5 | ) | 13.9 | (93.3 | ) | | (411.9 | ) | |||||||||||||||
Provision for income tax expense (benefit) |
| 65.0 | (2.7 | ) | (118.0 | ) | | (55.7 | ) | |||||||||||||||
Income (loss) before equity in income (loss) of subsidiaries |
| (397.5 | ) | 16.6 | 24.7 | | (356.2 | ) | ||||||||||||||||
Equity in net income (loss) of subsidiaries |
(356.2 | ) | 41.3 | | | 314.9 | | |||||||||||||||||
Consolidated net income (loss) |
(356.2 | ) | (356.2 | ) | 16.6 | 24.7 | 314.9 | (356.2 | ) | |||||||||||||||
Less: Net (income) loss attributable to noncontrolling interest |
| | | 0.1 | | 0.1 | ||||||||||||||||||
Net Income (loss) attributable to Cooper-Standard Holdings Inc. |
$ | (356.2 | ) | $ | (356.2 | ) | $ | 16.6 | $ | 24.8 | $ | 314.9 | $ | (356.1 | ) | |||||||||
F-52
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
CONSOLIDATING BALANCE SHEET
December 31, 2008
Parent | Issuer | Guarantors | Non-Guarantors | Eliminations |
Consolidated
Totals |
|||||||||||||||
(dollars in millions) | ||||||||||||||||||||
ASSETS |
||||||||||||||||||||
Current assets: |
||||||||||||||||||||
Cash and cash equivalents |
$ | | $ | 40.0 | $ | | $ | 71.5 | $ | | $ | 111.5 | ||||||||
Accounts receivable, net |
| 49.2 | 63.0 | 221.5 | | 333.7 | ||||||||||||||
Inventories |
| 17.1 | 21.2 | 78.7 | | 117.0 | ||||||||||||||
Prepaid Expenses |
| (1.1 | ) | 0.6 | 19.7 | | 19.2 | |||||||||||||
Other |
| 27.8 | 2.7 | 11.7 | | 42.2 | ||||||||||||||
Total current assets |
| 133.0 | 87.5 | 403.1 | | 623.6 | ||||||||||||||
Investments in affiliates and intercompany accounts, net |
15.2 | 315.4 | 599.5 | 161.4 | (1,058.1 | ) | 33.4 | |||||||||||||
Property, plant, and equipment, net |
| 70.3 | 118.5 | 435.2 | | 624.0 | ||||||||||||||
Goodwill |
| 194.1 | 17.3 | 33.6 | | 245.0 | ||||||||||||||
Other assets |
| 149.4 | 17.1 | 125.8 | | 292.3 | ||||||||||||||
$ | 15.2 | $ | 862.2 | $ | 839.9 | $ | 1,159.1 | $ | (1,058.1 | ) | $ | 1,818.3 | ||||||||
LIABILITIES & EQUITY (DEFICIT) |
||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||
Debt payable within one year |
$ | | $ | 43.5 | $ | | $ | 50.6 | $ | | $ | 94.1 | ||||||||
Accounts payable |
| 36.4 | 25.0 | 131.6 | | 193.0 | ||||||||||||||
Accrued liabilities |
| 65.6 | 6.7 | 92.3 | | 164.6 | ||||||||||||||
Total current liabilities |
| 145.5 | 31.7 | 274.5 | | 451.7 | ||||||||||||||
Long-term debt |
| 957.5 | | 92.5 | | 1,050.0 | ||||||||||||||
Other long-term liabilities |
| 165.0 | 6.7 | 125.2 | | 296.9 | ||||||||||||||
| 1,268.0 | 38.4 | 492.2 | | 1,798.6 | |||||||||||||||
Total Cooper-Standard Holdings Inc. equity (deficit) |
15.2 | (405.8 | ) | 801.5 | 662.4 | (1,058.1 | ) | 15.2 | ||||||||||||
Noncontrolling interest |
| | | 4.5 | | 4.5 | ||||||||||||||
Total equity (deficit) |
15.2 | (405.8 | ) | 801.5 | 666.9 | (1,058.1 | ) | 19.7 | ||||||||||||
Total liabilities and equity (deficit) |
$ | 15.2 | $ | 862.2 | $ | 839.9 | $ | 1,159.1 | $ | (1,058.1 | ) | $ | 1,818.3 | |||||||
F-53
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
CONSOLIDATING BALANCE SHEET
December 31, 2009
Parent | Issuer | Guarantors | Non-Guarantors | Eliminations |
Consolidated
Totals |
||||||||||||||||||
(dollars in millions) | |||||||||||||||||||||||
ASSETS |
|||||||||||||||||||||||
Current assets: |
|||||||||||||||||||||||
Cash and cash equivalents |
$ | | $ | 91.5 | $ | 0.7 | $ | 288.1 | $ | | $ | 380.3 | |||||||||||
Accounts receivable, net |
| 54.3 | 61.0 | 240.2 | | 355.5 | |||||||||||||||||
Inventories |
| 16.4 | 22.9 | 72.3 | | 111.6 | |||||||||||||||||
Prepaid Expenses |
| 3.4 | 0.4 | 18.4 | | 22.2 | |||||||||||||||||
Other |
| 42.8 | 0.5 | 33.1 | | 76.4 | |||||||||||||||||
Total current assets |
| 208.4 | 85.5 | 652.1 | | 946.0 | |||||||||||||||||
Investments in affiliates and intercompany accounts, net |
(311.0 | ) | 580.2 | 660.4 | (197.6 | ) | (696.0 | ) | 36.0 | ||||||||||||||
Property, plant, and equipment, net |
| 65.5 | 94.1 | 426.6 | | 586.2 | |||||||||||||||||
Goodwill |
| 87.7 | | | | 87.7 | |||||||||||||||||
Other assets |
| 11.2 | 3.7 | 66.6 | | 81.5 | |||||||||||||||||
$ | (311.0 | ) | $ | 953.0 | $ | 843.7 | $ | 947.7 | $ | (696.0 | ) | $ | 1,737.4 | ||||||||||
LIABILITIES & EQUITY (DEFICIT) |
|||||||||||||||||||||||
Current liabilities: |
|||||||||||||||||||||||
Debt payable within one year |
$ | $ | 75.0 | $ | $ | 118.2 | $ | $ | 193.2 | ||||||||||||||
Accounts payable |
| 37.4 | 14.2 | 114.7 | | 166.3 | |||||||||||||||||
Accrued liabilities |
| 41.4 | 5.9 | 111.3 | | 158.6 | |||||||||||||||||
Total current liabilities |
| 153.8 | 20.1 | 344.2 | | 518.1 | |||||||||||||||||
Liabilities subject to compromise |
69.1 | 1,077.9 | 2.8 | 112.1 | | 1,261.9 | |||||||||||||||||
Long-term debt |
| | | 11.1 | | 11.1 | |||||||||||||||||
Other long-term liabilities |
| 141.3 | 6.4 | 105.1 | | 252.8 | |||||||||||||||||
69.1 | 1,373.0 | 29.3 | 572.5 | | 2,043.9 | ||||||||||||||||||
Total Cooper-Standard Holdings Inc. equity (deficit) |
(380.1 | ) | (420.0 | ) | 814.4 | 370.7 | (696.0 | ) | (311.0 | ) | |||||||||||||
Noncontrolling interest |
| | | 4.5 | | 4.5 | |||||||||||||||||
Total equity (deficit) |
(380.1 | ) | (420.0 | ) | 814.4 | 375.2 | (696.0 | ) | (306.5 | ) | |||||||||||||
Total liabilities and equity (deficit) |
$ | (311.0 | ) | $ | 953.0 | $ | 843.7 | $ | 947.7 | $ | (696.0 | ) | $ | 1,737.4 | |||||||||
F-54
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2007
Parent | Issuer | Guarantors | Non-Guarantors | Eliminations |
Consolidated
Totals |
|||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||
OPERATING ACTIVITIES |
||||||||||||||||||||||
Net cash provided by (used in) operating activities |
$ | | $ | (56.4 | ) | $ | 28.2 | $ | 213.6 | $ | | $ | 185.4 | |||||||||
INVESTING ACTIVITIES |
||||||||||||||||||||||
Property, plant, and equipment |
| (12.6 | ) | (18.6 | ) | (76.1 | ) | | (107.3 | ) | ||||||||||||
Acquisition of businesses, net of cash acquired |
| | (10.0 | ) | (148.7 | ) | | (158.7 | ) | |||||||||||||
Gross proceeds from sale-leaseback transaction |
| | | 4.8 | | 4.8 | ||||||||||||||||
Other |
| 0.1 | | 1.1 | | 1.2 | ||||||||||||||||
Net cash used in investing activities |
| (12.5 | ) | (28.6 | ) | (218.9 | ) | | (260.0 | ) | ||||||||||||
FINANCING ACTIVITIES |
||||||||||||||||||||||
Proceeds from issuance of long-term debt |
| 60.0 | | | | 60.0 | ||||||||||||||||
Increase/(decrease) in short term debt |
| 1.4 | | 4.8 | | 6.2 | ||||||||||||||||
Principal payments on long-term debt |
| (2.7 | ) | | (34.9 | ) | | (37.6 | ) | |||||||||||||
Debt issuance costs |
| (2.9 | ) | | (0.2 | ) | | (3.1 | ) | |||||||||||||
Equity Contributions |
| 30.0 | | | | 30.0 | ||||||||||||||||
Other |
| (0.5 | ) | | | | (0.5 | ) | ||||||||||||||
Net cash provided by (used in) financing activities |
| 85.3 | | (30.3 | ) | | 55.0 | |||||||||||||||
Effects of exchange rate changes on cash |
| 4.3 | | (0.1 | ) | | 4.2 | |||||||||||||||
Changes in cash and cash equivalents |
| 20.7 | (0.4 | ) | (35.7 | ) | | (15.4 | ) | |||||||||||||
Cash and cash equivalents at beginning of period |
| 21.9 | 0.4 | 34.0 | | 56.3 | ||||||||||||||||
Cash and cash equivalents at end of period |
$ | | $ | 42.6 | $ | | $ | (1.7 | ) | $ | | 40.9 | ||||||||||
Depreciation and amortization |
$ | | $ | 40.8 | 30.8 | $ | 64.4 | $ | | $ | 136.0 |
F-55
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2008
Parent | Issuer | Guarantors | Non-Guarantors | Eliminations |
Consolidated
Totals |
||||||||||||||||||
(dollars in millions) | |||||||||||||||||||||||
OPERATING ACTIVITIES |
|||||||||||||||||||||||
Net cash provided by (used in) operating activities |
$ | 0.5 | $ | (24.0 | ) | $ | 12.2 | $ | 147.8 | $ | | $ | 136.5 | ||||||||||
INVESTING ACTIVITIES |
|||||||||||||||||||||||
Property, plant, and equipment |
| (9.1 | ) | (12.5 | ) | (70.6 | ) | | (92.2 | ) | |||||||||||||
Gross proceeds from sale-leaseback transaction |
| | | 8.6 | | 8.6 | |||||||||||||||||
Other |
| 4.1 | 0.3 | 5.3 | | 9.7 | |||||||||||||||||
Net cash used in investing activities |
| (5.0 | ) | (12.2 | ) | (56.7 | ) | | (73.9 | ) | |||||||||||||
FINANCING ACTIVITIES |
|||||||||||||||||||||||
Increase/(decrease) in short term debt |
| 35.8 | | 1.2 | | 37.0 | |||||||||||||||||
Principal payments on long-term debt |
| (2.9 | ) | | (13.6 | ) | | (16.5 | ) | ||||||||||||||
Repurchase of bonds |
| (5.3 | ) | | | | (5.3 | ) | |||||||||||||||
Other |
(0.5 | ) | (0.5 | ) | | (0.1 | ) | | (1.1 | ) | |||||||||||||
Net cash provided by (used in) financing activities |
(0.5 | ) | 27.1 | | (12.5 | ) | | 14.1 | |||||||||||||||
Effects of exchange rate changes on cash |
| (0.7 | ) | | (5.4 | ) | | (6.1 | ) | ||||||||||||||
Changes in cash and cash equivalents |
| (2.6 | ) | | 73.2 | | 70.6 | ||||||||||||||||
Cash and cash equivalents at beginning of period |
| 42.6 | | (1.7 | ) | | 40.9 | ||||||||||||||||
Cash and cash equivalents at end of period |
$ | | $ | 40.0 | $ | | $ | 71.5 | $ | | $ | 111.5 | |||||||||||
Depreciation and amortization |
$ | | $ | 37.7 | $ | 24.8 | $ | 77.6 | $ | | $ | 140.1 |
F-56
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2009
Parent | Issuer | Guarantors | Non-Guarantors | Eliminations |
Consolidated
Totals |
|||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||
OPERATING ACTIVITIES |
||||||||||||||||||||||
Net cash provided by (used in) operating activities |
$ | | $ | (32.3 | ) | $ | 9.1 | $ | 153.1 | $ | | $ | 129.9 | |||||||||
INVESTING ACTIVITIES |
||||||||||||||||||||||
Property, plant, and equipment |
| (4.3 | ) | (7.0 | ) | (34.8 | ) | | (46.1 | ) | ||||||||||||
Fixed asset proceeds |
| | 0.2 | 0.4 | | 0.6 | ||||||||||||||||
Net cash used in investing activities |
| (4.3 | ) | (6.8 | ) | (34.4 | ) | | (45.5 | ) | ||||||||||||
FINANCING ACTIVITIES |
||||||||||||||||||||||
Increase/(decrease) in short term debt |
| 81.7 | | 96.5 | | 178.2 | ||||||||||||||||
Principal payments on long-term debt |
| (2.3 | ) | | (9.3 | ) | | (11.6 | ) | |||||||||||||
Repurchase of bonds |
| (0.7 | ) | | | | (0.7 | ) | ||||||||||||||
Other |
| 10.5 | (1.7 | ) | (8.6 | ) | | 0.2 | ||||||||||||||
Net cash provided by (used in) financing activities |
| 89.2 | (1.7 | ) | 78.6 | | 166.1 | |||||||||||||||
Effects of exchange rate changes on cash |
| (1.1 | ) | 0.1 | 19.3 | | 18.3 | |||||||||||||||
Changes in cash and cash equivalents |
| 51.5 | 0.7 | 216.6 | | 268.8 | ||||||||||||||||
Cash and cash equivalents at beginning of period |
| 40.0 | | 71.5 | | 111.5 | ||||||||||||||||
Cash and cash equivalents at end of period |
$ | | $ | 91.5 | $ | 0.7 | $ | 288.1 | $ | | $ | 380.3 | ||||||||||
Depreciation and amortization |
$ | | $ | 26.8 | $ | 22.3 | $ | 64.7 | $ | | $ | 113.8 |
Note 25. Accounts Receivable Factoring
As a part of its working capital management, the Company sells certain receivables through third party financial institutions without recourse. The amount sold varies each month based on the amount of underlying receivables and cash flow needs of the Company.
At December 31, 2008 and 2009, the Company had $43,544 and $ 39,703, respectively of receivables outstanding under receivable transfer agreements entered into by various locations. The Company incurred a loss on the sale of receivables for the year ended December 31, 2008 and 2009 of $2,219 and $950, respectively; this amount is recorded in other income (expense) in the consolidated statements of operations. The Company continues to service the receivables for one of the locations. These are permitted transactions under the Companys credit agreement. The Company is also pursuing similar arrangements in various locations.
F-57
COOPER-STANDARD HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollar amounts in thousands except per share amounts)
In addition, during the second quarter of 2009, the Company elected to participate in the Auto Supplier Support Program sponsored by the U.S. Treasury Department. The Auto Supplier Support Program is designed to provide eligible suppliers with access to government-backed protection on those Chrysler LLC (Chrysler) and General Motors Corporation (GM) U.S. dollar receivables that are accepted into the program. In applying for the program, the Company selected the program option that provides government-backed protection on collection of the receivables and expedited payment terms, for which a charge of 3% of the accepted receivables is applicable. The Company has been designated by both Chrysler and GM as an eligible supplier. During the year ended December 31, 2009, the Company received payments of $8,936 and incurred charges of $268 which is recorded in other income (expense) in the consolidated statements of operations.
In addition, the Company has been advised that Export Development Canada (EDC) has made available to the Companys Canadian subsidiary insurance coverage on certain GM and Chrysler receivables. EDCs program is designed to guarantee a substantial portion of a Canadian suppliers eligible receivables under the program. The Canadian subsidiary will be charged 6% per annum of the amount made available to it under the program.
Note 26. Subsequent Events
In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through March 31, 2010, the date the financial statements were issued.
On March 17, 2010 Cooper-Standard Holdings Inc., CSA U.S., and CSA Canada and CTR entered into the CTR Settlement Agreement. See Note 13. Income Taxes for a discussion of the settlement agreement reached between the Company, Cooper-Standard Automotive Inc. and the Canadian Debtor and CTR on March 17, 2010 in respect of tax refunds received by Cooper-Standard Automotive Canada relating to the years 2000 through 2004.
On February 1, 2010, the Debtors filed the Original Plan and the Original Disclosure Statement with the Bankruptcy Court. On March 26, 2010, the Debtors filed the Plan of Reorganization and the Disclosure Statement with the Bankruptcy Court. See Note 3. Reorganization under Chapter 11 of the Bankruptcy Code for a discussion of the current status of the Chapter 11 Cases and Canadian Proceedings.
During the first quarter of 2010, the Company decided to prepay a portion of the borrowing under the DIP agreement. On January 29, 2010, MAPS Germany, the Additional Borrower under the DIP Agreement, prepaid $25,000 of its portion of the borrowing and on March 26, 2010, the Canadian Borrower, prepaid $25,000.
See Item 1. BusinessBankruptcy Cases for a discussion of the current status of the Chapter 11 Cases and Canadian Proceedings.
F-58
Valuation and Qualifying Accounts
(dollars in millions)
Description |
Balance at
beginning of period |
Acquisition(a) |
Charged to
Expenses |
Charged
(credited) to other accounts(b) |
Deductions |
Balance at
end of period |
|||||||||||
Allowance for doubtful accounts deducted from accounts receivable |
|||||||||||||||||
Year ended December 31, 2007 |
$ | 10.1 | 0.9 | 0.1 | 0.8 | (1.7 | ) | $ | 10.2 | ||||||||
Year ended December 31, 2008 |
$ | 10.2 | | (1.4 | ) | (2.1 | ) | (2.7 | ) | $ | 4.0 | ||||||
Year ended December 31, 2009 |
$ | 4.0 | | 0.9 | 2.5 | (1.6 | ) | $ | 5.8 | ||||||||
Inventory reserve account deducted from inventories |
|||||||||||||||||
Year ended December 31, 2007 |
$ | 10.5 | 2.1 | 7.6 | 0.9 | (7.1 | ) | $ | 14.0 | ||||||||
Year ended December 31, 2008 |
$ | 14.0 | | 5.9 | (1.6 | ) | (4.1 | ) | $ | 14.2 | |||||||
Year ended December 31, 2009 |
$ | 14.2 | | 10.9 | 1.1 | (9.0 | ) | $ | 17.2 |
(a) | 2007 relates to MAPS acquisition. |
(b) | Primarily foreign currency translation. |
Balance
at
beginning of period |
Additions | Deductions(a) |
Balance at
end of period |
|||||||||||
Description |
Charged to
Income |
Charged to
Equity |
||||||||||||
Tax valuation allowance |
||||||||||||||
Year ended December 31, 2007 |
$ | 80.8 | 56.4 | (3.3 | ) | (5.1 | ) | $ | 128.8 | |||||
Year ended December 31, 2008 |
$ | 128.8 | 45.2 | 21.4 | (20.2 | ) | $ | 175.2 | ||||||
Year ended December 31, 2009 |
$ | 175.2 | 39.9 | (4.5 | ) | | $ | 210.6 |
(a) | Net reduction in tax valuation allowance is a result of the reversal of valuation allowances set up through purchase accounting and reversed through goodwill as a result of utilization of tax loss carry forwards and other cumulative book/tax difference. |
F-59
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollar amounts in thousands)
Three Months Ended | ||||||||
March 31,
2009 |
March 31,
2010 |
|||||||
Sales |
$ | 401,768 | $ | 596,324 | ||||
Cost of products sold |
363,936 | 491,820 | ||||||
Gross profit |
37,832 | 104,504 | ||||||
Selling, administration, & engineering expenses |
45,164 | 53,067 | ||||||
Amortization of intangibles |
7,218 | 189 | ||||||
Restructuring |
22,563 | 252 | ||||||
Operating profit (loss) |
(37,113 | ) | 50,996 | |||||
Interest expense, net of interest income |
(21,097 | ) | (11,811 | ) | ||||
Equity earnings (loss) |
(230 | ) | 1,960 | |||||
Reorganization items, net |
| (23,333 | ) | |||||
Other expense, net |
(662 | ) | (6,856 | ) | ||||
Income (loss) before income taxes |
(59,102 | ) | 10,956 | |||||
Provision (benefit) for income tax expense |
(3,825 | ) | 7,288 | |||||
Consolidated net income (loss) |
(55,277 | ) | 3,668 | |||||
Add: Net (income) loss attributed to noncontrolling interests |
311 | (259 | ) | |||||
Net income (loss) attributable to Cooper-Standard Holdings Inc. |
$ | (54,966 | ) | $ | 3,409 | |||
The accompanying notes are an integral part of these financial statements.
F-60
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
December 31,
2009 |
March 31,
2010 |
|||||||
(Unaudited) | ||||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 380,254 | $ | 265,293 | ||||
Accounts receivable, net |
355,543 | 413,139 | ||||||
Inventories, net |
111,575 | 115,576 | ||||||
Prepaid expenses |
22,153 | 29,331 | ||||||
Other |
76,454 | 91,288 | ||||||
Total current assets |
945,979 | 914,627 | ||||||
Property, plant, and equipment, net |
586,179 | 559,706 | ||||||
Goodwill |
87,728 | 87,728 | ||||||
Intangibles, net |
10,549 | 10,707 | ||||||
Other assets |
106,972 | 113,646 | ||||||
$ | 1,737,407 | $ | 1,686,414 | |||||
Liabilities and Equity (Deficit) |
||||||||
Current liabilities: |
||||||||
Debt payable within one year |
$ | 18,204 | $ | 18,565 | ||||
Debtor-in-possession financing |
175,000 | 124,562 | ||||||
Accounts payable |
166,346 | 168,206 | ||||||
Payroll liabilities |
71,523 | 82,580 | ||||||
Accrued liabilities |
87,073 | 87,568 | ||||||
Total current liabilities |
518,146 | 481,481 | ||||||
Long-term debt |
11,059 | 9,302 | ||||||
Pension benefits |
148,936 | 142,413 | ||||||
Postretirement benefits other than pensions |
76,261 | 74,989 | ||||||
Deferred tax liabilities |
7,875 | 6,382 | ||||||
Other long-term liabilities |
19,727 | 19,455 | ||||||
Liabilities subject to compromise |
1,261,903 | 1,256,726 | ||||||
Total liabilities |
2,043,907 | 1,990,748 | ||||||
Equity (deficit): |
||||||||
Common stock, $0.01 par value, 4,000,000 shares authorized at December 31, 2009 and March 31, 2010, 3,482,612 shares issued and outstanding at December 31, 2009, 3,482,612 shares issued and outstanding at March 31, 2010 |
35 | 35 | ||||||
Additional paid-in capital |
356,316 | 356,462 | ||||||
Accumulated deficit |
(636,278 | ) | (632,869 | ) | ||||
Accumulated other comprehensive loss |
(31,037 | ) | (30,947 | ) | ||||
Total Cooper-Standard Holdings Inc. deficit |
(310,964 | ) | (307,319 | ) | ||||
Noncontrolling interests |
4,464 | 2,985 | ||||||
Total deficit |
(306,500 | ) | (304,334 | ) | ||||
Total liabilities and deficit |
$ | 1,737,407 | $ | 1,686,414 | ||||
The accompanying notes are an integral part of these financial statements.
F-61
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollar amounts in thousands)
Three Months Ended
March 31, |
||||||||
2009 | 2010 | |||||||
Operating Activities: |
||||||||
Consolidated net income (loss) |
$ | (55,277 | ) | $ | 3,668 | |||
Adjustments to reconcile consolidated net income (loss) to net cash provided by (used in) operating activities: |
||||||||
Depreciation |
22,861 | 20,998 | ||||||
Amortization |
7,218 | 189 | ||||||
Non-cash restructuring |
33 | (18 | ) | |||||
Reorganization items |
| 23,333 | ||||||
Amortization of debt issuance cost |
1,251 | 8,429 | ||||||
Changes in operating assets and liabilities |
(8,355 | ) | (113,343 | ) | ||||
Net cash used in operating activities |
(32,269 | ) | (56,744 | ) | ||||
Investing activities: |
||||||||
Property, plant, and equipment |
(8,340 | ) | (12,021 | ) | ||||
Proceeds from the sale of assets and other |
26 | 3,754 | ||||||
Net cash used in investing activities |
(8,314 | ) | (8,267 | ) | ||||
Financing activities: |
||||||||
Payments on debtor-in-possession financing |
| (50,894 | ) | |||||
Increase in short term debt |
24,280 | 403 | ||||||
Principal payments on long-term debt |
(5,608 | ) | (1,150 | ) | ||||
Other |
| 65 | ||||||
Net cash provided by (used in) financing activities |
18,672 | (51,576 | ) | |||||
Effects of exchange rate changes on cash |
(1,271 | ) | 1,626 | |||||
Changes in cash and cash equivalents |
(23,182 | ) | (114,961 | ) | ||||
Cash and cash equivalents at beginning of period |
111,521 | 380,254 | ||||||
Cash and cash equivalents at end of period |
$ | 88,339 | $ | 265,293 | ||||
The accompanying notes are an integral part of these financial statements.
F-62
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollar amounts in thousands except per share amounts)
1. Overview
Description of business
Cooper-Standard Holdings Inc. (the Company), through its wholly-owned subsidiary Cooper-Standard Automotive Inc. (CSA U.S.), is a leading manufacturer of body sealing, anti-vibration (AVS) and fluid handling components, systems, subsystems, and modules, primarily for use in passenger vehicles and light trucks that are manufactured by global automotive original equipment manufacturers (OEMs) and replacement markets. The Company conducts substantially all of its activities through its subsidiaries.
Change in operating structure and reporting segments
On March 26, 2009, the Company announced the implementation of a comprehensive plan involving the discontinuation of its global product line operating divisions, formerly called the Body & Chassis Systems division (which included the body sealing and AVS product lines) and the Fluid Systems division, and the establishment of a new operating structure organized on the basis of geographic regions. The Company now operates from two divisions, North America and International (covering Europe, South America and Asia). The Companys reporting segments have changed, as of April 1, 2009, to reflect the new operating structure of the Company. Certain prior period amounts have been restated to conform to the current period financial statement presentation.
Basis of presentation
The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial information and should be read in conjunction with the consolidated financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2009, as filed with the SEC. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. These financial statements include all adjustments (consisting of normal, recurring adjustments) considered necessary for a fair presentation of the financial position and results of operations of the Company. The operating results for the interim period ended March 31, 2010 are not necessarily indicative of results for the full year.
Recent accounting pronouncements
In January 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2010-06, guidance amending fair value disclosures for interim and annual reporting periods beginning after December 15, 2009. This guidance requires disclosures about transfers of financial instruments into and out of Level 1 and 2 designations and disclosures about purchases, sales, issuances and settlements of financial instruments with a Level 3 designation. The Company adopted this statement effective January 1, 2010. The adoption of ASU No. 2010-06 did not have a material impact on the Companys consolidated financial statements.
The FASB amended ASC 810, Consolidations, with ASU 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. This update significantly changes the model for determining whether an entity is the primary beneficiary and should thus consolidate a variable interest entity. In addition, this update requires additional disclosures and an ongoing assessment of whether a variable interest
F-63
COOPER-STANDARD HOLDINGS INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
(Dollar amounts in thousands except per share amounts)
entity should be consolidated. The provisions of this update are effective for annual reporting periods beginning after November 15, 2009. The effects of adoption were not significant.
2. Reorganization Under Chapter 11 of the Bankruptcy Code
Business Downturn
During the first half of 2009, the Company experienced a substantial decrease in revenues caused by the severe decline in worldwide automotive production that followed the global financial crisis that began in 2008. GM (defined as General Motors Corporation combined with General Motors Company) and Chrysler (defined as Chrysler LLC combined with Chrysler Group LLC) each filed for chapter 11 protection during the second quarter of 2009. The impact of the crisis on the OEMs had a direct and immediate impact on suppliers. As a result of rapidly declining sales, the Company was overleveraged. Outstanding indebtedness was approximately $1.2 billion as of August 3, 2009.
The Company undertook a concentrated effort to reduce its operating costs and leverage. In addition to the reorganization of its operating structure announced in March 2009, the Company undertook a series of other cost reduction measures, including temporary salary and benefit reductions. The Company also engaged Lazard Freres & Co. LLC to advise it on restructuring its debt. The Company engaged in negotiations with its sponsoring stockholders, its lenders under it senior credit facilities and certain holders of its 7% Senior Notes due 2012 (the Senior Notes) and 8 3 / 8 % Senior Subordinated Notes due 2014 (the Senior Subordinated Notes and, together with the Senior Notes, the Notes, and the holders of the Notes, the Noteholders) in an effort to obtain liquidity and avoid commencing bankruptcy proceedings. On June 15, 2009, the Company announced that it would utilize a 30-day grace period in connection with interest payments scheduled for June 15, 2009 on the Senior Notes and the Senior Subordinated Notes to allow the Company to continue these negotiations in order to increase liquidity and improve its capital structure. The 30-day grace period expired on July 15, 2009.
Filing of Bankruptcy Cases
On August 3, 2009, the Company and each of its direct and indirect wholly-owned U.S. subsidiaries (collectively with the Company, the Debtors) filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code (the Bankruptcy Code) in the United States Bankruptcy Court for the District of Delaware (the Bankruptcy Court). The Debtors chapter 11 cases (the Chapter 11 Cases) have been consolidated for procedural purposes only under Case No. 09-12743(PJW). The Debtors Second Amended Joint Chapter 11 Plan (the Plan of Reorganization) was confirmed by the Bankruptcy Court on May 12, 2010. The Debtors continue to operate their businesses and manage their properties as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court and will do so until the Plan of Reorganization becomes effective, which the Debtors expect to happen in late May 2010, subject to the occurrence of certain conditions. On August 14, 2009, the Official Committee of Unsecured Creditors (the Creditors Committee) was appointed in the Chapter 11 Cases.
On August 4, 2009, the Companys Canadian subsidiary, Cooper-Standard Automotive Canada Limited, a corporation incorporated under the laws of Ontario ( CSA Canada), commenced proceedings seeking relief from its creditors under Canadas Companies Creditors Arrangement Act (the Canadian Proceedings) in the Ontario Superior Court of Justice in Toronto, Canada (Commercial List) (the Canadian Court), court file no. 09-8307-00CL. CSA Canadas plan of compromise or arrangement was sanctioned on April 16, 2010. The effectiveness of the plan of compromise or arrangement is subject to certain conditions, including the
F-64
COOPER-STANDARD HOLDINGS INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
(Dollar amounts in thousands except per share amounts)
consummation of the Plan of Reorganization. The Companys subsidiaries and operations outside of the United States and Canada are not included in the Chapter 11 Cases or the Canadian Proceedings and continue to operate in the ordinary course of business.
As a result of the Chapter 11 Cases, realization of assets and liquidation of liabilities are subject to uncertainty. While operating as debtors-in-possession under the protection of chapter 11 of the Bankruptcy Code, and subject to Bankruptcy Court approval or otherwise as permitted in the normal course of business, the Debtors may sell or otherwise dispose of assets and liquidate or settle liabilities for amounts other than those reflected in the consolidated financial statements, and may pursue various strategic alternatives as deemed appropriate by our Board of Directors to serve the best interests of the Company and its stakeholders.
In general, under the priority scheme established by the Bankruptcy Code, post-petition liabilities and secured claims must be satisfied before prepetition unsecured creditors and interest holders can receive any distribution or retain any property under a chapter 11 plan of reorganization. The recovery to the Noteholders is set forth in the Plan of Reorganization, which has been confirmed but has not yet been implemented. Implementation of the Plan of Reorganization remains subject to certain conditions. Accordingly, the Company urges that the appropriate caution be exercised with respect to existing and future investments in the Companys securities as the value and prospects remain highly speculative. At this time there is no assurance the Company will be able to implement a plan of reorganization.
Filing of the Original Chapter 11 Plan of Reorganization and Original Disclosure Statement
Prior to commencing the Chapter 11 Cases and since the filing of the Debtors petition for relief under the Bankruptcy Code, the Debtors sought a consensual restructuring of their balance sheets so as to be able to emerge from chapter 11 with an appropriate capital structure that would enable the Debtors to remain competitive. After exploring a number of restructuring alternatives, which included discussions with the Creditors Committee and the lenders under the Prepetition Credit Agreement (as defined below) certain Noteholders (the First Backstop Parties) came forward with a proposal to backstop an equity rights offering, the proceeds of which would be used to pay the claims under the Prepetition Credit Agreement in full. After further negotiations with the First Backstop Parties and the Creditors Committee regarding the proposal, on February 1, 2010, the Debtors filed their Joint Chapter 11 Plan of Reorganization (the Original Plan), an accompanying Disclosure Statement (the Original Disclosure Statement) and a Commitment Agreement, dated February 1, 2010 (the Original Equity Commitment Agreement, which the Company entered into with the First Backstop Parties). The Original Plan provided for a backstopped $245,000 equity rights offering which, when combined with proposed exit financing, would allow the Debtors to pay the claims under the Prepetition Credit Agreement in full, in cash, while distributing equity in the Company upon emergence from chapter 11 to the Noteholders, as well as rights to purchase additional equity.
Filing of Amended Chapter 11 Plan of Reorganization and Disclosure Statement
Shortly after filing the Original Plan, certain Noteholders (the Second Backstop Parties and, with the First Backstop Parties, the New Backstop Parties) approached the Debtors with an alternative proposal to backstop a rights offering that contained certain advantages when compared to the recovery provided for in the Original Plan. While the Debtors made significant progress negotiating a commitment agreement with the Second
F-65
COOPER-STANDARD HOLDINGS INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
(Dollar amounts in thousands except per share amounts)
Backstop Parties, the Debtors had significant concerns about going forward with this alternative proposal for various reasons including, without limitation, uncertainty about receiving sufficient votes to confirm any plan of reorganization based on such alternative.
After extensive, arms-length negotiations between the Debtors, the Creditors Committee, the First Backstop Parties and the Second Backstop Parties, all parties agreed upon the terms of a revised restructuring proposal incorporated in a new Commitment Agreement, dated March 19, 2010 (the New Equity Commitment Agreement), which terminated the Original Equity Commitment Agreement upon execution, and the Debtors filed with the Bankruptcy Court on March 20, 2010 a First Amended Joint Chapter 11 Plan of Reorganization and an accompanying new Disclosure Statement. On March 26, 2010, the Debtors filed the Plan of Reorganization and the First Amended Disclosure Statement for the Plan of Reorganization (the Disclosure Statement). Also, on March 26, 2010, the Bankruptcy Court approved the Disclosure Statement, authorized the solicitation of votes to approve the Plan of Reorganization and approved the New Equity Commitment Agreement. The Plan of Reorganization sets forth the contemplated structure of the reorganized Debtors and outlines the manner in which the prepetition creditors and equity holders various claims against and interest in the Debtors will be treated, subject to the occurrence of the Companys emergence from chapter 11.
The New Equity Commitment Agreement and the Plan of Reorganization provide for a backstopped equity rights offering and the purchase of new common stock and new preferred stock of the Company by the New Backstop Parties (as described below), with aggregate proceeds to the Company of $355,000, that will be used to satisfy the claims under the Prepetition Credit Agreement and the Senior Notes and improve the recovery to the Senior Subordinated Noteholders (when compared to the recovery they would have received under the Original Plan). Consummation of transactions contemplated by the New Equity Commitment Agreement is subject to certain customary conditions. Under the Plan of Reorganization, Senior Noteholders will receive payment in full, in cash, provided that certain of the New Backstop Parties have each agreed to forgo their right as Senior Noteholders to receive payment in full, in cash, and in lieu thereof, have agreed to accept their pro rata share of 20.95% of the new common stock of the Company (assuming the conversion of the new preferred stock of the Company). In addition, holders of Senior Subordinated Notes will receive a distribution of 8% of the new common stock of the Company (assuming the conversion of the new preferred stock of the Company) and warrants to acquire an additional 3% of the new common stock of the Company (assuming the conversion of the new preferred stock of the Company) that may be exercised at a strike price of $27.33 per share, and eligible noteholders of Senior Subordinated Notes will receive rights to purchase 39.6% of the new common stock of the Company (assuming conversion of the new preferred stock of the Company) pursuant to the rights offering at a subscription price of $21.54 per share. In addition, the New Backstop Parties have agreed to purchase 11.75% of the new common stock of the Company (assuming the conversion of the new preferred stock of the Company) at a price per share of $27.07 and 1,000,000 shares of new preferred stock of the Company (which constitutes all of the new preferred stock of the Company to be issued under the Plan of Reorganization at a price per share of $100.00 and will receive warrants to acquire an additional 7% of the new common stock of the Company (assuming the conversion of the new preferred stock of the Company and the warrants to acquire new common stock of the Company) that may be exercised at a strike price of $27.33 per share.
The Plan of Reorganization was confirmed by the Bankruptcy Court on May 12, 2010. On the date of the Debtors emergence from chapter 11, the terms of the Plan of Reorganization will be binding upon the Debtors and all other parties affected by the Plan of Reorganization. Parties will have 14 days following the entry of the confirmation order to file a notice of appeal with respect to such confirmation order. Even if a notice of appeal is timely filed, the Debtors expect to proceed to consummate the Plan of Reorganization in accordance with its
F-66
COOPER-STANDARD HOLDINGS INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
(Dollar amounts in thousands except per share amounts)
terms, unless the party seeking the appeal also obtains a stay of implementation of the Plan of Reorganization pending appeal of the confirmation order, in which even the Debtors will not be able to implement the terms of the Plan of Reorganization unless and until the stay is lifted. An appeal of the confirmation order may be initiated even if there is no stay pending appeal of the confirmation order and, in such circumstances, the appeal may be dismissed as moot if the Debtors have implemented the Plan of Reorganization to the point of substantial consummation.
Debtor-in-Possession Financing
In connection with the commencement of the Chapter 11 Cases and the Canadian Proceedings, the Company entered into debtor-in-possession financing arrangements. For additional information on these financing arrangements, see Note 7. Debt below.
Other Chapter 11 Cases Updates
On October 2, 2009, the Debtors filed their schedules of assets and liabilities and statements of financial affairs with the Bankruptcy Court. On October 27, 2009, the Bankruptcy Court entered an order establishing December 4, 2009 as the deadline for all entities, other than governmental agencies, to file proofs of claim against the Debtors stating the amounts to which the claimants contend that they are entitled, subject to the rights of the Debtors to contest both the validity and amount of the claims. The Bankruptcy Court also set February 1, 2010 as the deadline for governmental entities to file their proofs of claim. The Debtors have filed objections to certain of such claims, will continue to evaluate all claims asserted in the Chapter 11 Cases and may file periodic motions seeking to modify, reject, liquidate or allow such claims.
Fresh-Start Accounting
As required by accounting principles generally accepted in the United States (GAAP), should a plan of reorganization become effective, the Company will adopt fresh-start accounting in accordance with the guidance of Financial Accounting Standard Board Accounting Standards Codification Topic 852, Reorganizations. The accompanying consolidated financial statements do not include the effect of any changes in the Companys capital structure or changes in the fair value of assets and liabilities as a result of fresh-start accounting.
Liquidity and Going Concern
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. This assumes a continuing of operations and the realization of assets and liabilities in the ordinary course of business. The consolidated financial statements do not include any adjustments that might result if the Company were forced to discontinue operations. The Company has had a history of net losses. The Companys net losses were principally attributable to insufficient revenue to cover its relatively high percentage of fixed costs, including the interest costs on its debt and its depreciation expense. The Company also has an accumulated stockholders deficit of $304,334 at March 31, 2010.
As a result of filing for chapter 11 bankruptcy, the Company adopted ASC 852, Reorganization on August 3, 2009. ASC 852, is applicable to companies in chapter 11 of the Bankruptcy Code, generally does not change the manner in which financial statements are prepared. However, among other disclosures, it does require that the
F-67
COOPER-STANDARD HOLDINGS INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
(Dollar amounts in thousands except per share amounts)
financial statements for periods subsequent to the filing of the chapter 11 petition distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Revenues, expenses, realized gains and losses, and provisions for losses that can be directly associated with the reorganization and restructuring of the business must be reported separately as reorganization items in the statements of operations. The balance sheet must distinguish prepetition liabilities subject to compromise from both those prepetition liabilities that are not subject to compromise and from postpetition liabilities. Liabilities that may be affected by a plan of reorganization must be reported at the amounts expected to be allowed, even if they may be settled for lesser amounts. In addition, reorganization items must be disclosed separately in the statement of cash flows. The Company has segregated those items as outlined above for all reporting periods subsequent to such date. As a result of the Chapter 11 Cases, realization of assets and liquidation of liabilities are subject to uncertainty. While operating as debtors-in-possession under the protection of chapter 11 of the Bankruptcy Code, and subject to Bankruptcy Court approval or otherwise as permitted in the normal course of business, the Debtors may sell or otherwise dispose of assets and liquidate or settle liabilities for amounts other than those reflected in the consolidated financial statements, and may pursue various strategic alternatives as deemed appropriate by the Companys Board of Directors to serve the best interests of the Company and its stakeholders.
Liabilities Subject to Compromise
The majority of the Debtors prepetition debt is in default and is classified as Liabilities Subject to Compromise in the accompanying condensed consolidated balance sheet at March 31, 2010.
In addition to the Debtors prepetition debt which is in default, liabilities subject to compromise reflects the Debtors other liabilities incurred prior to the commencement of the bankruptcy proceedings. These amounts represent the Companys estimate of known or potential prepetition claims to be resolved in connection with the bankruptcy proceedings. Such claims remain subject to future adjustments. Future adjustments may result from: (i) negotiations; (ii) actions of the Bankruptcy Court; (iii) further developments with respect to disputed claims; (iv) rejection of executory contracts and leases; (v) the determination of value of any collateral securing claims; (vi) proofs of claims; or (vii) other events. Payment terms for these claims as set forth in the Plan of Reorganization. The Debtors liabilities subject to compromise consist of the following:
December 31,
2009 |
March 31,
2010 |
||||||
Prepetition debt |
$ | 1,138,565 | $ | 1,138,573 | * | ||
Accounts payable |
12,148 | 8,965 | |||||
Pension and deferred compensation |
20,680 | 18,680 | |||||
Derivatives |
18,090 | 18,092 | |||||
Other |
72,420 | 72,416 | |||||
Debtor liabilities subject to compromise |
$ | 1,261,903 | $ | 1,256,726 | |||
* | Includes accrued interest of $27,103 for the period through August 3, 2009. |
Effective August 3, 2009, the Company ceased recording interest expense on outstanding prepetition debt instruments classified as liabilities subject to compromise. An additional $45,707 of interest expense would have been recorded from August 3, 2009 to March 31, 2010 ($17,433 for the period from January 1, 2010 to March 31, 2010) if the Company had continued to accrue interest on these instruments.
F-68
COOPER-STANDARD HOLDINGS INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
(Dollar amounts in thousands except per share amounts)
Reorganization Items
ASC Topic 852-10 requires reorganization items such as revenues, expenses such as professional fees directly related to the process of reorganizing the Debtors under chapter 11, realized gains and losses, provisions for losses, and interest income resulting from the reorganization and restructuring of the business to be separately disclosed. The Debtors reorganization items consist of the following:
(Income)/Expense | |||
Three Months Ended
March 31, 2010 |
|||
Professional fees directly related to reorganization |
$ | 23,294 | |
Miscellaneous |
39 | ||
Total reorganization items |
$ | 23,333 | |
3. Debtor-in-Possession Financial Statements
The financial statements contained within this note represent the condensed combined financial statements for the Debtors and Canadian Debtor only. The
Companys non-Debtor subsidiaries are treated as non-consolidated affiliates in these financial statements and as such their net income is included as Equity income (loss) from non-Debtor affiliates, net of tax in the statement of
operations and their assets are included as Investments in non-Debtor affiliates in the balance sheet. The Debtors and Canadian Debtors financial statements contained herein have been prepared in accordance with the guidance
DEBTOR-IN-POSSESSION CONDENSED COMBINED
STATEMENTS OF OPERATIONS
Three Months Ended
March 31, 2010 |
||||
Sales |
$ | 280,966 | ||
Cost of products sold |
229,849 | |||
Gross profit |
51,117 | |||
Selling, administration, & engineering expenses |
26,167 | |||
Amortization of intangibles |
150 | |||
Restructuring |
159 | |||
Operating income |
24,641 | |||
Interest expense, net of interest income |
(8,539 | ) | ||
Equity earnings |
1,547 | |||
Reorganization items, net |
(22,905 | ) | ||
Other income |
6,030 | |||
Income before income taxes |
774 | |||
Provision for income tax expense |
5,942 | |||
Equity income from non-Debtor affiliates, net of tax |
8,577 | |||
Consolidated net income |
3,409 | |||
Add: Net loss attributable to noncontrolling interests |
| |||
Net income attributable to Debtors |
$ | 3,409 | ||
F-69
COOPER-STANDARD HOLDINGS INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
(Dollar amounts in thousands except per share amounts)
DEBTOR-IN-POSSESSION CONDENSED COMBINED
BALANCE SHEET
December 31,
2009 |
March 31,
2010 |
|||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 186,930 | $ | 140,674 | ||||
Accounts receivable, net |
145,398 | 174,537 | ||||||
Inventories, net |
48,017 | 47,923 | ||||||
Prepaid expenses |
4,232 | 8,045 | ||||||
Receivable from non-Debtor affiliates, net |
27,484 | 24,507 | ||||||
Other |
66,363 | 77,458 | ||||||
Total current assets |
478,424 | 473,144 | ||||||
Property, plant, and equipment, net |
216,634 | 210,107 | ||||||
Goodwill |
87,728 | 87,728 | ||||||
Investment in non-Debtor affiliates |
279,215 | 292,000 | ||||||
Intangibles, net |
1,679 | 1,697 | ||||||
Notes receivable from non-Debtor affiliates, net |
260,139 | 257,229 | ||||||
Other assets |
32,511 | 32,936 | ||||||
$ | 1,356,330 | $ | 1,354,841 | |||||
Liabilities and Deficit |
||||||||
Current liabilities: |
||||||||
Debt payable within one year |
$ | 47 | $ | 47 | ||||
Debtor-in-possession financing |
125,000 | 99,688 | ||||||
Accounts payable |
60,846 | 80,226 | ||||||
Payroll liabilities |
26,284 | 28,606 | ||||||
Accrued liabilities |
31,632 | 37,957 | ||||||
Total current liabilities |
243,809 | 246,524 | ||||||
Pension benefits |
71,668 | 68,758 | ||||||
Postretirement benefits other than pensions |
65,831 | 66,267 | ||||||
Deferred tax liabilities |
10,662 | 10,703 | ||||||
Other long-term liabilities |
13,421 | 13,182 | ||||||
Liabilities subject to compromise |
1,261,903 | 1,256,726 | ||||||
Total liabilities |
1,667,294 | 1,662,160 | ||||||
Total deficit |
(310,964 | ) | (307,319 | ) | ||||
Total liabilities and deficit |
$ | 1,356,330 | $ | 1,354,841 | ||||
F-70
COOPER-STANDARD HOLDINGS INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
(Dollar amounts in thousands except per share amounts)
DEBTOR-IN-POSSESSION CONDENSED COMBINED
STATEMENTS OF CASH FLOW
Three Months Ended
March 31, 2010 |
||||
Operating Activities: |
||||
Net cash used in operating activities |
$ | (15,201 | ) | |
Investing activities: |
||||
Property, plant, and equipment |
(6,292 | ) | ||
Proceeds from the sale of assets and other |
3,728 | |||
Net cash used in investing activities |
(2,564 | ) | ||
Financing activities: |
||||
Payments on debtor-in-possession financing |
(27,056 | ) | ||
Transactions with non-Debtor subsidiaries |
2,911 | |||
Other |
65 | |||
Net cash used in financing activities |
(24,080 | ) | ||
Effects of exchange rate changes on cash |
(4,411 | ) | ||
Changes in cash and cash equivalents |
(46,256 | ) | ||
Cash and cash equivalents at beginning of period |
186,930 | |||
Cash and cash equivalents at end of period |
$ | 140,674 | ||
4. Goodwill and Intangibles
The changes in the carrying amount of goodwill, by reportable operating segment for the three months ended March 31, 2010 are summarized as follows:
North America | International | Total | |||||||
Balance at January 1, 2010 |
$ | 87,728 | $ | | $ | 87,728 | |||
Adjustments |
| | | ||||||
Balance at March 31, 2010 |
$ | 87,728 | $ | | $ | 87,728 | |||
Goodwill is not amortized but is tested annually for impairment, or when events or circumstances indicate that impairment may exist, by reporting units, which are determined in accordance with ASC Topic 350, Goodwill and Other Intangible Assets . A change in the estimated transaction value of the bankruptcy could impact the valuation of the Companys remaining goodwill and other intangibles.
F-71
COOPER-STANDARD HOLDINGS INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
(Dollar amounts in thousands except per share amounts)
The following table presents intangible assets and accumulated amortization balances of the Company as of December 31, 2009 and March 31, 2010, respectively:
Gross
Carrying Amount |
Accumulated
Amortization |
Net
Carrying Amount |
Amortization
Period |
|||||||||
Developed technology |
$ | 3,335 | $ | (1,479 | ) | $ | 1,856 | 5 to 12 years | ||||
Other |
8,986 | (293 | ) | 8,693 | ||||||||
Balance at December 31, 2009 |
$ | 12,321 | $ | (1,772 | ) | $ | 10,549 | |||||
Developed technology |
$ | 3,276 | $ | (1,579 | ) | $ | 1,697 | 5 to 12 years | ||||
Other |
9,352 | (342 | ) | 9,010 | ||||||||
Balance at March 31, 2010 |
$ | 12,628 | $ | (1,921 | ) | $ | 10,707 | |||||
Amortization expense totaled $7,218 and $189 for the three months ended March 31, 2009 and 2010, respectively. Estimated amortization expense will total approximately $750 for the year ending December 31, 2010.
5. Restructuring
The Company implemented several restructuring initiatives in prior years in connection with the closure of facilities in North America, Europe and Asia. The Company initiated all of these initiatives prior to December 31, 2007 and continued to execute the closures through March 31, 2010. The majority of the costs associated with the closures were incurred shortly after the original implementation. However, the Company continues to incur costs related principally to the liquidation of the respective facilities. The following table summarizes the activity related to these initiatives for the three months ended March 31, 2010:
Employee
Separation Costs |
Other
Exit Costs |
Asset
Impairments |
Total | ||||||||||||
Balance at January 1, 2010 |
$ | | $ | 238 | $ | | $ | 238 | |||||||
Expense incurred |
| 299 | 3 | 302 | |||||||||||
Cash payments |
| (357 | ) | | (357 | ) | |||||||||
Utilization of reserve |
| | (3 | ) | (3 | ) | |||||||||
Balance at March 31, 2010 |
$ | | $ | 180 | $ | | $ | 180 | |||||||
F-72
COOPER-STANDARD HOLDINGS INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
(Dollar amounts in thousands except per share amounts)
2008 Initiatives
In July 2008, the Company implemented a restructuring action and announced the closure of two manufacturing facilities, one located in Australia and the other located in Germany. Both closures were a result of changes in market demands and volume reductions and are substantially completed as of March 31, 2010. However, the Company will continue to incur costs until the facilities are sold. The estimated total cost of these initiatives is approximately $21,050. The following table summarizes the activity related to these initiatives for the three months ended March 31, 2010.
Employee
Separation Costs |
Other
Exit Costs |
Asset
Impairments |
Total | ||||||||||||
Balance at January 1, 2010 |
$ | 1,443 | $ | 235 | $ | | $ | 1,678 | |||||||
Expense incurred |
(92 | ) | 17 | | (75 | ) | |||||||||
Cash payments |
(746 | ) | (33 | ) | | (779 | ) | ||||||||
Balance at March 31, 2010 |
$ | 605 | $ | 219 | $ | | $ | 824 | |||||||
Reorganization-Product Line Operating Group Discontinuation Initiative
During 2008, the Company commenced the initial phase of a reorganization ultimately involving the discontinuation of its global product line operating divisions, formerly called the Body & Chassis Systems division (which included the body sealing and AVS product lines) and the Fluid Systems division, and the establishment of a new operating structure organized on the basis of geographic regions. The estimated cost of this initial phase is approximately $7,800. The following table summarizes the activity for this initiative for the three months ended March 31, 2010:
Employee
Separation Costs |
Other
Exit Costs |
Asset
Impairments |
Total | |||||||||||
Balance at January 1, 2010 |
$ | 658 | $ | | $ | | $ | 658 | ||||||
Expense incurred |
4 | | | 4 | ||||||||||
Cash payments |
(563 | ) | | | (563 | ) | ||||||||
Balance at March 31, 2010 |
$ | 99 | $ | | $ | | $ | 99 | ||||||
2009 Initiatives
In the first quarter of 2009, the Company initiated the final phase of the reorganization of its operating structure, formally discontinuing its product line operating divisions and putting into place the new operating divisions based on geographic regions. The estimated total cost of this initiative is $18,400. The following table summarizes the activity for this initiative for the three months ended March 31, 2010:
Employee
Separation Costs |
Other
Exit Costs |
Asset
Impairments |
Total | |||||||||||
Balance at January 1, 2010 |
$ | 7,113 | $ | | $ | | $ | 7,113 | ||||||
Expense incurred |
(240 | ) | | | (240 | ) | ||||||||
Cash payments |
(1,888 | ) | | | (1,888 | ) | ||||||||
Balance at March 31, 2010 |
$ | 4,985 | $ | | $ | | $ | 4,985 | ||||||
F-73
COOPER-STANDARD HOLDINGS INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
(Dollar amounts in thousands except per share amounts)
The Company also commenced several other initiatives during 2009. These initiatives related to the reorganization or closure of operating facilities in South America, Europe and Asia Pacific. The estimated total cost associated with these actions amount to $19,250. The following table summarizes the activity for these initiatives for the three months ended March 31, 2010:
Employee
Separation Costs |
Other
Exit Costs |
Asset
Impairments |
Total | |||||||||||||
Balance at January 1, 2010 |
$ | 4,215 | $ | 56 | $ | | $ | 4,271 | ||||||||
Expense incurred |
28 | 254 | (21 | ) | 261 | |||||||||||
Cash payments |
(1,723 | ) | (284 | ) | | (2,007 | ) | |||||||||
Utilization of reserve |
| | 21 | 21 | ||||||||||||
Balance at March 31, 2010 |
$ | 2,520 | $ | 26 | $ | | $ | 2,546 | ||||||||
6. Inventories
Inventories are comprised of the following:
December 31,
2009 |
March 31,
2010 |
|||||
Finished goods |
$ | 27,826 | $ | 28,568 | ||
Work in process |
25,616 | 29,748 | ||||
Raw materials and supplies |
58,133 | 57,260 | ||||
$ | 111,575 | $ | 115,576 | |||
7. Debt
Outstanding debt consisted of the following at December 31, 2009 and March 31, 2010:
December 31,
2009 |
March 31,
2010 |
|||||||
DIP Financing |
$ | 175,000 | $ | 124,562 | ||||
Capital leases and other borrowings |
29,263 | 27,867 | ||||||
Total debt |
204,263 | 152,429 | ||||||
Less: Current portion of long term debt |
(18,204 | ) | (18,565 | ) | ||||
DIP financing |
(175,000 | ) | (124,562 | ) | ||||
Total long-term debt |
$ | 11,059 | $ | 9,302 | ||||
General
On January 29, 2010, the German Borrower under the DIP Credit Agreement prepaid $25,000 of its portion of the borrowing. The German Borrower prepaid an additional $25,000 in April 2010. On March 26, 2010, the Canadian Borrower prepaid $25,000. The remaining amounts outstanding under the DIP Credit Agreement will be repaid in full pursuant to the Plan of Reorganization.
F-74
COOPER-STANDARD HOLDINGS INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
(Dollar amounts in thousands except per share amounts)
The Company had $28,979 of standby letters of credit outstanding under the Revolving Credit Facility as of March 31, 2010.
Default under the Notes and Forbearance Agreements
On June 15, 2009, the Company did not make required interest payments in an aggregate amount of approximately $20,121 due and payable under the Senior Notes and the Senior Subordinated Notes issued by CSA U.S. The Company announced that it would utilize the applicable 30-day grace period on these scheduled interest payments to allow the Company to continue discussions with its lenders and other parties in an effort to increase liquidity and improve the Companys capital structure. The failure to make the scheduled interest payments did not constitute an event of default at such time under the indentures governing the Notes. However, the failure to make the scheduled interest payments after the expiration of the 30-day grace period did constitute an event of default under the indentures. On July 15, 2009, the Company entered into (i) a Senior Notes Forbearance Agreements (the Senior Notes Forbearance Agreements) with holders of more than 75% of the aggregate principal amount of the outstanding Senior Notes and (ii) a Senior Subordinated Notes Forbearance Agreement (the Senior Subordinated Notes Forbearance Agreement and together with the Senior Notes Forbearance Agreements, the Forbearance Agreements) with holders of a majority of the aggregate principal amount of the outstanding Senior Subordinated Notes. The Forbearance Agreements provided that the noteholders party to the Forbearance Agreements would not exercise, and would not direct the applicable trustee to exercise, any remedies under the indenture agreements for a defined period of time not to exceed August 14, 2009 with respect to certain defaults resulting from the failure to make the interest payments under the Notes.
Default under the Prepetition Credit Agreement and Limited Waiver
As the event of default under the indentures governing the Notes resulted in a cross-default under the Companys Prepetition Credit Agreement, the Company obtained a limited waiver from a majority of the lenders party thereto on July 15, 2009. Under the limited waiver, as amended and restated, certain defaults resulting from the failure to make the interest payments on the Notes as described above were waived for a defined period of time not to exceed August 14, 2009.
Bankruptcy Cases
The filing of the Chapter 11 Cases by the Debtors on August 3, 2009 constituted a default or otherwise triggered repayment obligations under substantially all prepetition debt obligations of the Debtors, and as a result, the loan commitments of the lenders under the Prepetition Credit Agreement were terminated (including the availability under the revolving credit facility, including with respect to standby letters of credit) and all principal and accrued and unpaid interest outstanding under the Prepetition Credit Agreement, the Senior Notes and the Senior Subordinated Notes accelerated and became due and payable (subject to the automatic stay under Chapter 11). Under Chapter 11, the filing of a bankruptcy petition automatically stays most actions against a debtor, including actions with respect to prepetition claims and litigation. Absent an order of the Bankruptcy Court, substantially all prepetition liabilities are subject to compromise under a chapter 11 plan of reorganization. As of the date of the filing of the Chapter 11 Cases, approximately $608,000 of principal and accrued and unpaid interest was outstanding under the Prepetition Credit Agreement, approximately $208,800 of principal and accrued and unpaid interest was outstanding under the Senior Notes and approximately $329,900 of principal and accrued and unpaid interest was outstanding under the Senior Subordinated Notes.
F-75
COOPER-STANDARD HOLDINGS INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
(Dollar amounts in thousands except per share amounts)
DIP Credit Agreement
On August 5, 2009, the Bankruptcy Court entered an interim order approving debtor-in-possession financing on an interim basis. Pursuant to this interim order, the Company entered into a Debtor-In-Possession Credit Agreement, dated as of August 5, 2009 (the Initial DIP Credit Agreement), among the Company, CSA U.S., and CSA Canada, various lenders party thereto, Deutsche Bank Trust Company Americas, as administrative agent and collateral agent, Banc of America Securities LLC, General Electric Capital Corporation and UBS Securities LLC, as co-syndication agents, Deutsche Bank Trust Company Americas, as documentation agent, Deutsche Bank Securities Inc. and General Electric Capital Corporation, as joint lead arrangers and book runners, and Banc of America Securities LLC and UBS Securities LLC, as co-arrangers. The Company received final approval of the Initial DIP Credit Agreement from the Bankruptcy Court on September 1, 2009. The Company received approval of the Initial DIP Credit Agreement from the Canadian Court on August 6, 2009. The Initial DIP Credit Agreement was amended on August 31, 2009 and September 11, 2009. Both amendments primarily updated some post-closing non-U.S. collateral delivery requirements. In addition, on December 2, 2009, Metzeler Automotive Profile Systems GmbH, a German limited liability company (the German Borrower and together with CSA U.S. and CSA Canada, the DIP Borrowers), became an additional borrower under the Initial DIP Credit Agreement. Under the Initial DIP Credit Agreement, the DIP Borrowers borrowed an aggregate of $175,000 principal amount of superpriority senior secured term loans in order to finance their operating, working capital and other general corporate needs (including the payment of fees and expenses in accordance with the orders of the Bankruptcy Court and the Canadian Court authorizing such borrowings). The Initial DIP Credit Agreement also provided for an ability to incur up to an aggregate of $25,000 in uncommitted incremental debt.
In order to refinance the Initial DIP Credit Agreement on terms more favorable to the Company, on December 18, 2009 the Company entered into a Debtor-In-Possession Credit Agreement (the DIP Credit Agreement), among the Company, the DIP Borrowers, various lenders party thereto, Deutsche Bank Trust Company Americas, as the administrative agent (in such capacity, the DIP Agent), collateral agent and documentation agent, and Deutsche Bank Securities Inc., as syndication agent, sole lead arranger and book runner. Under the DIP Credit Agreement, the lenders party thereto committed to provide superpriority senior secured term loans to the DIP Borrowers in an aggregate principal amount of up to $175,000 (the DIP Facility), subject to certain conditions. The DIP Credit Agreement also provides for an additional uncommitted $25,000 incremental facility, for a total DIP Facility of up to $200,000 (if the incremental facility is requested and committed to by the requisite lenders).
On December 29, 2009, the Bankruptcy Court entered a final order approving the DIP Credit Agreement (and related loan documentation) and the borrowings thereunder. Funding under the DIP Credit Agreement occurred on December 30, 2009, whereby (i) $75,000 was borrowed by CSA U.S., (ii) $50,000 was borrowed by CSA Canada and (iii) $50,000 was borrowed by the German Borrower. All of the proceeds of the borrowings under the DIP Facility, together with cash on hand of the DIP Borrowers, were used to repay all borrowings and amounts outstanding under the Initial DIP Credit Agreement, and to pay related fees and expenses.
The obligations of the DIP Borrowers under the DIP Credit Agreement are guaranteed by the Company and certain of its U.S. and foreign subsidiaries, subject to limitations on guarantees by foreign entities of the obligations of the DIP Borrowers. The obligations under the DIP Credit Agreement and related guarantees are secured by liens on the assets of the Company, the DIP Borrowers and certain of the Companys U.S. and foreign subsidiaries, subject to limitations on liens granted by foreign entities supporting certain of the obligations of the DIP Borrowers and guarantors. Liens under the DIP Credit Agreement have first priority priming status with
F-76
COOPER-STANDARD HOLDINGS INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
(Dollar amounts in thousands except per share amounts)
respect to substantially all of the assets of the Company, the DIP Borrowers and their subsidiaries in the United States and Canada and are entitled to superpriority administrative expense claim status in the Chapter 11 Cases.
Loans under the DIP Credit Agreement bear interest at a rate per annum equal to (i) LIBOR (with a LIBOR floor of 2%) plus 6% or (ii) a base rate based on the higher of the federal funds overnight rate plus 0.5% and the prime lending rate (with a floor of 3%) plus 5%. Overdue principal and interest bear interest at a default rate of 2% over the applicable rate as determined under the terms of the DIP Credit Agreement. In addition, the DIP Credit Agreement obligates the DIP Borrowers to pay an agency fee and an extension fee to the DIP Agent.
Loans under the DIP Credit Agreement will amortize at a rate of 1% per annum, payable in quarterly installments. The outstanding principal amount of the loans under the DIP Credit Agreement, plus accrued and unpaid interest thereon, will be due and payable in full at maturity, which is the earliest of: (i) August 4, 2010, (ii) the first date on which both a plan of reorganization for each of the Company and its U.S. subsidiaries, which is confirmed by the Bankruptcy Court, and a plan of compromise or arrangement of CSA Canada, which is confirmed by the Canadian Court, in each case providing for the repayment of the obligations under the DIP Credit Agreement, become effective, and (iii) the acceleration of the DIP Facility or termination of the commitments thereunder, including, without limitation, as a result of the occurrence of an event of default. With the consent of the requisite lenders and payment of an extension fee equal to 1% of the outstanding loans and commitments, the DIP Borrowers may at their option extend the maturity date by 90 days if no default exists or would result therefrom. Loans under the DIP Credit Agreement may be prepaid by the DIP Borrowers at any time in whole or in part without premium or penalty (except for customary breakage costs).
The DIP Credit Agreement includes affirmative and negative covenants that will impose substantial restrictions on the financial and business operations of the Company and its subsidiaries, including their ability to incur and secure debt, make investments, sell assets, pay dividends or make acquisitions. The DIP Credit Agreement also contains certain financial covenants including (i) the achievement of a minimum amount of consolidated EBITDA, (ii) the maintenance of a minimum amount of liquidity and (iii) limitations on the amount of capital expenditures. The DIP Credit Agreement also contains various events of default that are customary for debtor-in-possession financings of this type.
Amendments to the Prepetition Credit Agreement
The Company, CSA U.S., CSA Canada and Cooper-Standard Automotive International Holdings B.V., a corporation organized under the laws of the Netherlands (the Dutch Borrower and together with CSA U.S, and CSA Canada, the Prepetition Borrowers), entered into the Fifth Amendment and Consent to Credit Agreement, dated July 14, 2009 (the Fifth Amendment to the Prepetition Credit Agreement), with the lenders party thereto and the Prepetition Agent (as defined below), providing for the amendment of the Companys existing Credit Agreement, dated as of December 23, 2004 (as amended from time to time, the Prepetition Credit Agreement), to permit, (i) the incurrence of the loans and guarantees and the granting of liens on the assets of the Company and its subsidiaries, pursuant to the Initial DIP Credit Agreement and (ii) the Prepetition Credit Agreement administrative agents entering into intercreditor agreements and/or amendments to the security and pledge agreements that secure the obligations under the Prepetition Credit Agreement to provide that any liens incurred pursuant to the Initial DIP Credit Agreement will have priority over the liens under the Prepetition Credit Agreement. The Prepetition Credit Agreement was amended on December 16, 2009 in connection with the refinancing of the Initial DIP Credit Agreement in the same manner as provided by the Fifth Amendment to the
F-77
COOPER-STANDARD HOLDINGS INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
(Dollar amounts in thousands except per share amounts)
Prepetition Credit Agreement except in respect of the DIP Credit Agreement. In addition, the Prepetition Credit Agreement was amended on August 18, 2009 to amend and define certain rights and allocations among the lenders party thereto.
8. Pension and Postretirement Benefits other than Pensions
The following tables disclose the amount of net periodic benefit costs for the three months ended March 31, 2009 and 2010 for the Companys defined benefit plans and other postretirement benefit plans:
Pension Benefits | ||||||||||||||||
Three Months Ended March 31, | ||||||||||||||||
2009 | 2010 | |||||||||||||||
U.S. | Non-U.S. | U.S. | Non-U.S. | |||||||||||||
Service cost |
$ | 713 | $ | 620 | $ | 601 | $ | 543 | ||||||||
Interest cost |
3,773 | 1,658 | 3,767 | 1,744 | ||||||||||||
Expected return on plan assets |
(3,280 | ) | (683 | ) | (3,630 | ) | (874 | ) | ||||||||
Amortization of prior service cost and recognized actuarial loss |
938 | 47 | 880 | 43 | ||||||||||||
Curtailment cost |
68 | | | | ||||||||||||
Net periodic benefit cost |
$ | 2,212 | $ | 1,642 | $ | 1,618 | $ | 1,456 | ||||||||
Other Postretirement Benefits | ||||||||
Three Months Ended March 31, | ||||||||
2009 | 2010 | |||||||
Service cost |
$ | 429 | $ | 382 | ||||
Interest cost |
1,055 | 1,019 | ||||||
Amortization of prior service credit and recognized actuarial gain |
(821 | ) | (837 | ) | ||||
Other |
40 | 21 | ||||||
Net periodic benefit cost |
$ | 703 | $ | 585 | ||||
9. Income Taxes
Under ASC Topic 270, Interim Reporting, the Company is required to determine its effective tax rate each quarter based upon its estimated annual effective tax rate. The Company is also required to record the tax impact of certain unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, in the interim period in which they occur. In addition, jurisdictions with a projected loss for the year where no tax benefit can be recognized are excluded from the estimated annual effective tax rate.
The effective tax rate for the three months ended March 31, 2009, was 7% as compared to 67% for the three months ended March 31, 2010. The income tax rate for the three months ended March 31, 2010 varies from statutory rates due to income taxes on foreign earnings, the inability to record a tax benefit for pre-tax losses in the U.S. and certain foreign jurisdictions to the extent not offset by other categories of income, tax credits, income tax incentives, withholding taxes, and other permanent items. Further, the Companys current and future
F-78
COOPER-STANDARD HOLDINGS INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
(Dollar amounts in thousands except per share amounts)
provision for income taxes will be significantly impacted by the recognition of valuation allowances in certain countries, particularly the United States. The Company intends to maintain these allowances until it is more likely than not that the deferred tax assets will be realized. Accordingly, income taxes are impacted by the U.S. valuation allowance and the mix of earnings among jurisdictions.
Under the terms of the Stock Purchase Agreement with Cooper Tire, the Company is indemnified against substantially all contingent income tax liabilities related to periods prior to the 2004 Acquisition. During March 2008, the Company became aware of a potentially favorable settlement of the pending bi-lateral Advance Pricing Arrangement (APA) negotiations between the United States and Canada relating to the year 2000 through 2007. Agreement between the two governments will impact transfer pricing matters between the Company and its wholly owned Canadian subsidiary. In March 2009, the U.S. and Canadian governments signed Mutual Agreement Letters agreeing to the terms of the bi-lateral APA. On June 23, 2009, the final Canadian bi-lateral APA with the Company was completed and signed. The settlement of the bi-lateral APA results in income tax refunds to CSA Canada for the years 2000 through 2007 of up to CAD $88,000. Under the terms of the Stock Purchase Agreement with Cooper Tire and Rubber Company (CTR) dated September 16, 2004, CTR had a claim against the Company for the amount of tax refunds received by CSA Canada relating to the years 2000 through 2004. Refunds received from the Canadian government have been based on the preparation of amended tax returns for the years 2000 through 2007. The settlement of the APA also resulted in a corresponding increase to the U.S. taxable income of CSA U.S. for the years 2005 through 2007, but it is not expected to result in any significant cash payment as the increased U.S. tax liability will be largely offset by existing tax credit carryforwards. On July 27, 2009, CSA Canada received approximately CAD $80,000, which represented the federal portion of the expected refunds plus interest as a result of settlement of the Canadian APA.
The Company, CSA U.S. and CSA Canada (collectively, the Defendants) were named as defendants in an adversary proceeding (Case No. 09-52014 (PJW)) initiated by Cooper Tire & Rubber Company and Cooper Tire Rubber & Company UK Limited (together, CTR) in the Bankruptcy Court on August 19, 2009 (the CTR Adversary Proceeding). CTRs complaint had sought a declaratory judgment that CTR was entitled to a portion of the CAD $80,000 tax refund received by CSA Canada from the Canadian government on July 27, 2009 and a portion of all future refunds received by CSA Canada, in each case relating to the period prior to the Companys 2004 Acquisition. CTR also sought imposition of a resulting trust or, in the alternative, a constructive trust in favor of CTR and turnover of the portion of the Canadian income tax refunds attributable to the years 2000 through 2004. On September 29, 2009, the Canadian Court issued an order lifting the stay in the Canadian Proceedings to allow CTR to commence proceedings against CSA Canada in the Chapter 11 Cases and ordering all income tax refunds received by CSA Canada after September 29, 2009 be segregated immediately upon receipt and not disbursed, encumbered or otherwise dealt with in any way until further order of the Canadian Court. On October 5, 2009, CTR filed an amended complaint in the adversary proceeding against the Company, CSA U.S. and CSA Canada. In connection with the CTR Adversary Proceedings, the Defendants, CTR and the Creditors Committee entered into an Agreement Concerning Terms and Conditions of a Compromise and Settlement, dated March 17, 2010 (the CTR Settlement Agreement). Under the terms of the CTR Settlement Agreement, CTR agreed to, among other things, dismiss its complaint in the Bankruptcy Court with prejudice and claim no further entitlement to the tax refunds. The Defendants agreed to, among other things, (i) pay CTR approximately $17,600 in cash and (ii) to obtain a release of CTRs obligations in connection with a guarantee of one of the Companys leases or, alternatively, provide a letter of credit in favor of CTR, in the initial amount of $7,000 (but declining by $1,000 per year for seven years) to reimburse CTR for any amounts that it is required to pay the Companys landlord on account of such guarantee. The Defendants and CTR have also granted general mutual releases to each other with respect to claims and liabilities under the purchase agreement governing the
F-79
COOPER-STANDARD HOLDINGS INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
(Dollar amounts in thousands except per share amounts)
2004 Acquisition and other claims and liabilities, subject to certain exceptions relating to certain continuing indemnification obligations. On April 15, 2010, the Bankruptcy Court issued an order approving the CTR Settlement Agreement. We estimate that the remaining tax refund and related interest to be received by CSA Canada is approximately $40,000. No assurance can be given, however, when this estimated tax refund and related interest will be received from the Canadian government.
10. Comprehensive Income (Loss) and Equity (Deficit)
On an annual basis, disclosure of comprehensive income is incorporated into the statement of stockholders equity, which is not presented on a quarterly basis. The components of comprehensive income, net of related tax, are as follows:
Three Months Ended
March 31, 2009 |
Three Months Ended
March 31, 2010 |
||||||||||||||||||||||
Total |
Cooper-Standard
Holdings |
Noncontrolling
Interest |
Total |
Cooper-Standard
Holdings |
Noncontrolling
Interest |
||||||||||||||||||
Net income (loss) |
$ | (55,277 | ) | $ | (54,966 | ) | $ | (311 | ) | $ | 3,668 | $ | 3,409 | $ | 259 | ||||||||
Currency translation adjustment |
(22,396 | ) | (22,314 | ) | (82 | ) | 323 | 217 | 106 | ||||||||||||||
Pension and other postretirement benefits, net of tax |
(119 | ) | (119 | ) | | 11 | 11 | | |||||||||||||||
Fair value change of derivatives, net of tax |
5,722 | 5,722 | | (138 | ) | (138 | ) | | |||||||||||||||
Comprehensive income (loss): |
$ | (72,070 | ) | $ | (71,677 | ) | $ | (393 | ) | $ | 3,864 | $ | 3,499 | $ | 365 | ||||||||
The following table summarizes the Companys equity activity for the three months ended March 31, 2010:
Cooper-Standard
Holdings |
Noncontrolling
Interest |
Total Equity
(Deficit) |
||||||||||
Equity (deficit) at January 1, 2010 |
$ | (310,964 | ) | $ | 4,464 | $ | (306,500 | ) | ||||
Net income |
3,409 | 259 | 3,668 | |||||||||
Other comprehensive gain |
90 | 106 | 196 | |||||||||
Sale of non-controlling interest |
| (1,844 | ) | (1,844 | ) | |||||||
Stock-based compensation |
146 | | 146 | |||||||||
Equity (deficit) at March 31, 2010 |
$ | (307,319 | ) | $ | 2,985 | $ | (304,334 | ) | ||||
11. Other Income (Expense)
The components of other income (expense) are as follows:
Three Months Ended March 31, | ||||||||
2009 | 2010 | |||||||
Foreign currency gains (losses) |
$ | (1,801 | ) | $ | (6,653 | ) | ||
Interest rate swaps |
1,396 | | ||||||
Loss on sale of receivables |
(257 | ) | (203 | ) | ||||
Other Expense |
$ | (662 | ) | $ | (6,856 | ) | ||
F-80
COOPER-STANDARD HOLDINGS INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
(Dollar amounts in thousands except per share amounts)
12. Related Party Transactions
Sales to NISCO, a 50% owned joint venture, totaled $4,031 and $7,299 in the three months ended March 31, 2009 and 2010, respectively.
Purchases of materials from Guyoung Technology Co. Ltd, a Korean corporation of which the Company owns approximately 20% of the common stock, totaled $226 and $2,216 in the three months ended March 31, 2009 and 2010, respectively.
13. Business Segments
Through March 31, 2009, the Company reported its operating results in three business segments: Body & Chassis Systems, Fluid Systems, and Asia Pacific. The Body & Chassis segment consisted mainly of body sealing products and components that protect vehicle interiors from weather, dust, and noise intrusion as well as systems and components that control and isolate noise vibration in a vehicle to improve ride and handling. The Fluid Systems segment consisted primarily of subsystems and components that direct, control, measure, and transport fluids and vapors throughout a vehicle. The Asia Pacific segment consisted of both Body & Chassis and Fluid Systems operations in that region with the exception of the Companys interest in a joint venture in China which was acquired as part of the MAPS acquisition, and the MAP India joint venture. These joint ventures were included in the Body & Chassis segment which was in line with the internal management structure.
On March 26, 2009, the Company announced the implementation of a plan involving the discontinuation of its global Body & Chassis and Fluid Systems operating divisions and the establishment of a new operating structure organized on the basis of geographic regions. Under the plan, the Companys operating structure as well as reporting segments, has changed, and the Company revised its segment disclosures beginning with the second quarter of 2009 from the three reportable segments to two reportable segments, North America and International (comprising all of the Companys operations outside of North America). Prior periods have been revised to conform to the current period presentation. Due to this segment revision, the Company has also revised the previously reported amounts in Note 4Goodwill and Intangibles to conform to the new segment presentation.
F-81
COOPER-STANDARD HOLDINGS INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
(Dollar amounts in thousands except per share amounts)
The Company evaluates segment performance based on segment profit before tax. The following table details information on the Companys business segments:
Three Months Ended March 31, | ||||||||
2009 | 2010 | |||||||
Sales to external customers |
||||||||
North America |
$ | 188,976 | $ | 297,144 | ||||
International |
212,792 | 299,180 | ||||||
Consolidated |
$ | 401,768 | $ | 596,324 | ||||
Intersegment sales |
||||||||
North America |
$ | 738 | $ | 1,176 | ||||
International |
2,108 | 1,797 | ||||||
Eliminations and other |
(2,846 | ) | (2,973 | ) | ||||
Consolidated |
$ | | $ | | ||||
Segment profit (loss) |
||||||||
North America |
$ | (29,140 | ) | $ | 11,327 | |||
International |
(29,962 | ) | (371 | ) | ||||
Income (loss) before income taxes |
$ | (59,102 | ) | $ | 10,956 | |||
December 31,
2009 |
March 31,
2010 |
|||||
Segment assets |
||||||
North America |
$ | 694,442 | $ | 699,036 | ||
International |
877,971 | 835,168 | ||||
Eliminations and other |
164,994 | 152,210 | ||||
Consolidated |
$ | 1,737,407 | $ | 1,686,414 | ||
Restructuring costs included in segment profit for North America totaled $10,200 and $175 for the three months ended March 31, 2009 and 2010, respectively. International restructuring costs totaled $12,363 and $77 for the three months ended March 31, 2009 and 2010, respectively.
14. Guarantor and Non-Guarantor Subsidiaries
In connection with the December 2004 acquisition by the Company of the automotive segment of Cooper Tire & Rubber Company, Cooper-Standard Automotive Inc. (the Issuer), a wholly-owned subsidiary, issued the Senior Notes and Senior Subordinated Notes with a total principal amount of $550,000. Cooper-Standard Holdings Inc. and all wholly-owned domestic subsidiaries of Cooper-Standard Automotive Inc. (the Guarantors) unconditionally guarantee the notes. The following condensed consolidated financial data provides information regarding the financial position, results of operations, and cash flows of the Guarantors. Separate financial statements of the Guarantors are not presented because management has determined that those would not be material to the holders of the notes. The Guarantors account for their investments in the non-guarantor subsidiaries on the equity method. The principal elimination entries are to eliminate the investments in subsidiaries and intercompany balances and transactions.
F-82
COOPER-STANDARD HOLDINGS INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
(Dollar amounts in thousands except per share amounts)
CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2009
Parent | Issuer | Guarantors |
Non-
Guarantors |
Eliminations |
Consolidated
Totals |
|||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||
Sales |
$ | | $ | 72.3 | $ | 87.5 | $ | 259.0 | $ | (17.0 | ) | $ | 401.8 | |||||||||||
Cost of products sold |
| 63.0 | 74.5 | 243.4 | (17.0 | ) | 363.9 | |||||||||||||||||
Selling, administration, & engineering expenses |
| 18.4 | 5.4 | 21.4 | | 45.2 | ||||||||||||||||||
Amortization of intangibles |
| 5.0 | 0.4 | 1.8 | | 7.2 | ||||||||||||||||||
Restructuring |
| 8.5 | 0.9 | 13.2 | | 22.6 | ||||||||||||||||||
Operating profit (loss) |
| (22.6 | ) | 6.3 | (20.8 | ) | | (37.1 | ) | |||||||||||||||
Interest expense, net of interest income |
| (18.4 | ) | | (2.7 | ) | | (21.1 | ) | |||||||||||||||
Equity earnings (loss) |
| | (0.7 | ) | 0.5 | | (0.2 | ) | ||||||||||||||||
Other income (expense) |
| 4.5 | (0.5 | ) | (4.7 | ) | | (0.7 | ) | |||||||||||||||
Income (loss) before income taxes |
| (36.5 | ) | 5.1 | (27.7 | ) | | (59.1 | ) | |||||||||||||||
Provision for income tax expense (benefit) |
| (0.9 | ) | 0.1 | (3.0 | ) | | (3.8 | ) | |||||||||||||||
Income (loss) before equity in income (loss) of subsidiaries |
| (35.6 | ) | 5.0 | (24.7 | ) | | (55.3 | ) | |||||||||||||||
Equity in net income of subsidiaries |
(55.3 | ) | (19.7 | ) | | | 75.0 | | ||||||||||||||||
Consolidated net income (loss) |
(55.3 | ) | (55.3 | ) | 5.0 | (24.7 | ) | 75.0 | (55.3 | ) | ||||||||||||||
Less: Net (income) loss attributable to noncontrolling interest |
| | | 0.3 | | 0.3 | ||||||||||||||||||
Net Income (loss) attributable to Cooper-Standard Holdings Inc. |
$ | (55.3 | ) | $ | (55.3 | ) | $ | 5.0 | $ | (24.4 | ) | $ | 75.0 | $ | (55.0 | ) | ||||||||
F-83
COOPER-STANDARD HOLDINGS INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
(Dollar amounts in thousands except per share amounts)
CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2010
Parent | Issuer | Guarantors |
Non-
Guarantors |
Eliminations |
Consolidated
Totals |
||||||||||||||||||
(dollars in millions) | |||||||||||||||||||||||
Sales |
$ | | $ | 104.2 | $ | 130.5 | $ | 387.6 | $ | (26.0 | ) | $ | 596.3 | ||||||||||
Cost of products sold |
| 89.9 | 102.9 | 325.0 | (26.0 | ) | 491.8 | ||||||||||||||||
Selling, administration, & engineering expenses |
| 24.8 | 4.8 | 23.4 | | 53.0 | |||||||||||||||||
Amortization of intangibles |
| 0.1 | | 0.1 | | 0.2 | |||||||||||||||||
Restructuring |
| 0.1 | 0.1 | 0.1 | | 0.3 | |||||||||||||||||
Operating profit (loss) |
| (10.7 | ) | 22.7 | 39.0 | | 51.0 | ||||||||||||||||
Interest expense, net of interest income |
| (6.5 | ) | | (5.3 | ) | | (11.8 | ) | ||||||||||||||
Equity earnings |
| | 1.6 | 0.4 | | 2.0 | |||||||||||||||||
Reorganization items, net |
| (22.9 | ) | | (0.4 | ) | | (23.3 | ) | ||||||||||||||
Other income (expense), net |
| 0.1 | 0.1 | (7.1 | ) | | (6.9 | ) | |||||||||||||||
Income (loss) before income taxes |
| (40.0 | ) | 24.4 | 26.6 | | 11.0 | ||||||||||||||||
Provision for income tax expense (benefit) |
| 6.6 | (4.0 | ) | 4.7 | | 7.3 | ||||||||||||||||
Income (loss) before equity in income (loss) of subsidiaries |
| (46.6 | ) | 28.4 | 21.9 | | 3.7 | ||||||||||||||||
Equity in net income (loss) of subsidiaries |
3.7 | 50.3 | | | (54.0 | ) | | ||||||||||||||||
Consolidated net income (loss) |
3.7 | 3.7 | 28.4 | 21.9 | (54.0 | ) | 3.7 | ||||||||||||||||
Less: Net (income) loss attributable to noncontrolling interest |
| | | (0.3 | ) | | (0.3 | ) | |||||||||||||||
Net Income (loss) attributable to Cooper-Standard Holdings Inc. |
$ | 3.7 | $ | 3.7 | $ | 28.4 | $ | 21.6 | $ | (54.0 | ) | $ | 3.4 | ||||||||||
F-84
COOPER-STANDARD HOLDINGS INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
(Dollar amounts in thousands except per share amounts)
CONSOLIDATING BALANCE SHEET
December 31, 2009
Parent | Issuer | Guarantors |
Non-
Guarantors |
Eliminations |
Consolidated
Totals |
||||||||||||||||||
(dollars in millions) | |||||||||||||||||||||||
ASSETS |
|||||||||||||||||||||||
Current assets: |
|||||||||||||||||||||||
Cash and cash equivalents |
$ | | $ | 91.5 | $ | 0.7 | $ | 288.1 | $ | | $ | 380.3 | |||||||||||
Accounts receivable, net |
| 54.3 | 61.0 | 240.2 | | 355.5 | |||||||||||||||||
Inventories |
| 16.4 | 22.9 | 72.3 | | 111.6 | |||||||||||||||||
Prepaid Expenses |
| 3.4 | 0.4 | 18.4 | | 22.2 | |||||||||||||||||
Other |
| 42.8 | 0.5 | 33.1 | | 76.4 | |||||||||||||||||
Total current assets |
| 208.4 | 85.5 | 652.1 | | 946.0 | |||||||||||||||||
Investments in affiliates and intercompany accounts, net |
(311.0 | ) | 580.2 | 660.4 | (197.6 | ) | (696.0 | ) | 36.0 | ||||||||||||||
Property, plant, and equipment, net |
| 65.5 | 94.1 | 426.6 | | 586.2 | |||||||||||||||||
Goodwill |
| 87.7 | | | | 87.7 | |||||||||||||||||
Other assets |
| 11.2 | 3.7 | 66.6 | | 81.5 | |||||||||||||||||
$ | (311.0 | ) | $ | 953.0 | $ | 843.7 | $ | 947.7 | $ | (696.0 | ) | $ | 1,737.4 | ||||||||||
LIABILITIES & EQUITY (DEFICIT) |
|||||||||||||||||||||||
Current liabilities: |
|||||||||||||||||||||||
Debt payable within one year |
$ | | $ | 75.0 | $ | | $ | 118.2 | $ | | $ | 193.2 | |||||||||||
Accounts payable |
| 37.4 | 14.2 | 114.7 | | 166.3 | |||||||||||||||||
Accrued liabilities |
| 41.4 | 5.9 | 111.3 | | 158.6 | |||||||||||||||||
Total current liabilities |
| 153.8 | 20.1 | 344.2 | | 518.1 | |||||||||||||||||
Liabilities subject to compromise |
69.1 | 1,077.9 | 2.8 | 112.1 | | 1,261.9 | |||||||||||||||||
Long-term debt |
| | | 11.1 | | 11.1 | |||||||||||||||||
Other long-term liabilities |
| 141.3 | 6.4 | 105.1 | | 252.8 | |||||||||||||||||
69.1 | 1,373.0 | 29.3 | 572.5 | | 2,043.9 | ||||||||||||||||||
Total Cooper-Standard Holdings Inc. stockholders equity (deficit) |
(380.1 | ) | (420.0 | ) | 814.4 | 370.7 | (696.0 | ) | (311.0 | ) | |||||||||||||
Noncontrolling interest |
| | | 4.5 | | 4.5 | |||||||||||||||||
Total equity (deficit) |
(380.1 | ) | (420.0 | ) | 814.4 | 375.2 | (696.0 | ) | (306.5 | ) | |||||||||||||
Total liabilities and equity (deficit) |
$ | (311.0 | ) | $ | 953.0 | $ | 843.7 | $ | 947.7 | $ | (696.0 | ) | $ | 1,737.4 | |||||||||
F-85
COOPER-STANDARD HOLDINGS INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
(Dollar amounts in thousands except per share amounts)
CONSOLIDATING BALANCE SHEET
March 31, 2010
Parent | Issuer | Guarantors |
Non-
Guarantors |
Eliminations |
Consolidated
Totals |
||||||||||||||||||
(dollars in millions) | |||||||||||||||||||||||
ASSETS |
|||||||||||||||||||||||
Current assets: |
|||||||||||||||||||||||
Cash and cash equivalents |
$ | | $ | 86.5 | $ | 0.8 | $ | 178.0 | $ | | $ | 265.3 | |||||||||||
Accounts receivable, net |
| 62.7 | 71.6 | 278.8 | | 413.1 | |||||||||||||||||
Inventories |
| 16.7 | 22.6 | 76.3 | | 115.6 | |||||||||||||||||
Prepaid Expenses |
| 6.5 | 0.9 | 21.9 | | 29.3 | |||||||||||||||||
Other |
| 33.1 | 0.1 | 58.1 | | 91.3 | |||||||||||||||||
Total current assets |
| 205.5 | 96.0 | 613.1 | | 914.6 | |||||||||||||||||
Investments in affiliates and intercompany accounts, net |
(307.3 | ) | 546.2 | 686.0 | (189.3 | ) | (699.7 | ) | 35.9 | ||||||||||||||
Property, plant, and equipment, net |
| 63.8 | 89.3 | 406.6 | | 559.7 | |||||||||||||||||
Goodwill |
| 87.7 | | | | 87.7 | |||||||||||||||||
Other assets |
| 10.1 | 5.0 | 73.4 | | 88.5 | |||||||||||||||||
$ | (307.3 | ) | $ | 913.3 | $ | 876.3 | $ | 903.8 | $ | (699.7 | ) | $ | 1,686.4 | ||||||||||
LIABILITIES & EQUITY (DEFICIT) |
|||||||||||||||||||||||
Current liabilities: |
|||||||||||||||||||||||
Debt payable within one year |
$ | | $ | 74.8 | $ | | $ | 68.3 | $ | | $ | 143.1 | |||||||||||
Accounts payable |
| 50.4 | 20.1 | 97.7 | | 168.2 | |||||||||||||||||
Accrued liabilities |
| 42.9 | 5.2 | 122.1 | | 170.2 | |||||||||||||||||
Total current liabilities |
| 168.1 | 25.3 | 288.1 | | 481.5 | |||||||||||||||||
Liabilities subject to compromise |
69.1 | 1,073.4 | 2.1 | 112.1 | | 1,256.7 | |||||||||||||||||
Long-term debt |
| (0.1 | ) | | 9.4 | | 9.3 | ||||||||||||||||
Other long-term liabilities |
| 138.2 | 6.2 | 98.8 | | 243.2 | |||||||||||||||||
69.1 | 1,379.6 | 33.6 | 508.4 | | 1,990.7 | ||||||||||||||||||
Total Cooper-Standard Holdings Inc. stockholders equity (deficit) |
(376.4 | ) | (466.3 | ) | 842.7 | 392.4 | (699.7 | ) | (307.3 | ) | |||||||||||||
Noncontrolling interest |
| | | 3.0 | | 3.0 | |||||||||||||||||
Total equity (deficit) |
(376.4 | ) | (466.3 | ) | 842.7 | 395.4 | (699.7 | ) | (304.3 | ) | |||||||||||||
Total liabilities and equity (deficit) |
$ | (307.3 | ) | $ | 913.3 | $ | 876.3 | $ | 903.8 | $ | (699.7 | ) | $ | 1,686.4 | |||||||||
F-86
COOPER-STANDARD HOLDINGS INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
(Dollar amounts in thousands except per share amounts)
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 2009
Parent | Issuer | Guarantors |
Non-
Guarantors |
Eliminations |
Consolidated
Totals |
|||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||
OPERATING ACTIVITIES |
||||||||||||||||||||||
Net cash provided by (used in) operating activities |
$ | | $ | (12.1 | ) | $ | 1.3 | $ | (21.5 | ) | $ | | $ | (32.3 | ) | |||||||
INVESTING ACTIVITIES |
||||||||||||||||||||||
Property, plant, and equipment |
| (1.3 | ) | (1.3 | ) | (5.7 | ) | | (8.3 | ) | ||||||||||||
Net cash used in investing activities |
| (1.3 | ) | (1.3 | ) | (5.7 | ) | | (8.3 | ) | ||||||||||||
FINANCING ACTIVITIES |
||||||||||||||||||||||
Increase/(decrease) in short term debt |
| 18.0 | | 6.3 | | 24.3 | ||||||||||||||||
Principal payments on long-term debt |
| (0.7 | ) | | (4.9 | ) | | (5.6 | ) | |||||||||||||
Net cash provided by (used in) financing activities |
| 17.3 | | 1.4 | | 18.7 | ||||||||||||||||
Effects of exchange rate changes on cash |
| (1.3 | ) | | | | (1.3 | ) | ||||||||||||||
Changes in cash and cash equivalents |
| 2.6 | | (25.8 | ) | | (23.2 | ) | ||||||||||||||
Cash and cash equivalents at beginning of period |
| 40.0 | | 71.5 | | 111.5 | ||||||||||||||||
Cash and cash equivalents at end of period |
$ | | $ | 42.6 | $ | | $ | 45.7 | $ | | $ | 88.3 | ||||||||||
Depreciation and amortization |
$ | | $ | 9.1 | $ | 5.5 | $ | 15.5 | $ | | $ | 30.1 |
F-87
COOPER-STANDARD HOLDINGS INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
(Dollar amounts in thousands except per share amounts)
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 2010
Parent | Issuer | Guarantors |
Non-
Guarantors |
Eliminations |
Consolidated
Totals |
|||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||
OPERATING ACTIVITIES |
||||||||||||||||||||||
Net cash used in operating activities |
$ | | $ | (4.8 | ) | $ | (0.6 | ) | $ | (51.3 | ) | $ | | $ | (56.7 | ) | ||||||
INVESTING ACTIVITIES |
||||||||||||||||||||||
Property, plant, and equipment |
| (1.8 | ) | (2.8 | ) | (7.4 | ) | | (12.0 | ) | ||||||||||||
Fixed asset proceeds |
| | 3.5 | 0.2 | | 3.7 | ||||||||||||||||
Net cash provided by (used in) investing activities |
| (1.8 | ) | 0.7 | (7.2 | ) | | (8.3 | ) | |||||||||||||
FINANCING ACTIVITIES |
||||||||||||||||||||||
Increase/(decrease) in short term debt |
| | | (50.5 | ) | | (50.5 | ) | ||||||||||||||
Principal payments on long-term debt |
| (0.2 | ) | | (0.9 | ) | | (1.1 | ) | |||||||||||||
Other |
| 2.1 | | (2.1 | ) | | | |||||||||||||||
Net cash provided by (used in) financing activities |
| 1.9 | | (53.5 | ) | | (51.6 | ) | ||||||||||||||
Effects of exchange rate changes on cash |
| (0.3 | ) | | 1.9 | | 1.6 | |||||||||||||||
Changes in cash and cash equivalents |
| (5.0 | ) | 0.1 | (110.1 | ) | | (115.0 | ) | |||||||||||||
Cash and cash equivalents at beginning of period |
| 91.5 | 0.7 | 288.1 | | 380.3 | ||||||||||||||||
Cash and cash equivalents at end of period |
$ | | $ | 86.5 | $ | 0.8 | $ | 178.0 | $ | | $ | 265.3 | ||||||||||
Depreciation and amortization |
$ | | $ | 3.9 | $ | 3.9 | $ | 13.4 | $ | | $ | 21.2 |
15. Financial Instruments
Fair values of the Senior Notes and the Senior Subordinated Notes approximated $256,106 and $430,685 at December 31, 2009 and March 31, 2010, respectively, based on quoted market prices, compared to the recorded values totaling $505,300.
Fair values of the Term Loans approximated $512,828 and $520,637 at December 31, 2009 and March 31, 2010, respectively, based on quoted market prices, compared to the recorded values totaling $520,637.
Fair values of the DIP financing approximated $177,188 and $125,497 at December 31, 2009 and March 31, 2010, based on quoted market prices, compared to the recorded value totaling $175,000 and $124,562 at December 31, 2009 and March 31, 2010, respectively.
The Company uses derivative financial instruments, including forwards and swap contracts to manage its exposures to fluctuations in foreign exchange, interest rates and commodity prices. For a fair value hedge both the effective and ineffective, if significant, portions are recorded in earnings and reflected in the consolidated statement of operations. For a cash flow hedge, the effective portion of the change in the fair value of the derivative is recorded in accumulated other comprehensive income (loss) in the consolidated balance sheet. The ineffective portion, if significant, is recorded in other income or expense. When the underlying hedged
F-88
COOPER-STANDARD HOLDINGS INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
(Dollar amounts in thousands except per share amounts)
transaction is realized or the hedged transaction is no longer probable, the gain or loss included in accumulated other comprehensive income (loss) is recorded in earnings and reflected in the consolidated statement of operations on the same line as the gain or loss on the hedged item attributable to the hedged risk.
The Company formally documents its hedge relationships, including the identification of the hedging instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the cash flow hedges. The Company also formally assesses whether a cash flow hedge is highly effective in offsetting changes in the cash flows of the hedged item. Derivatives are recorded at fair value in other current assets and other current liabilities.
Derivative Instruments and Hedging Activities
The failure to make the scheduled interest payments on the Senior Notes and Senior Subordinated Notes and the expiration of the applicable 30-day period on July 16, 2009 constituted a cross-default under the Companys ISDA
Agreements in the names of Cooper-Standard Automotive, Inc., Cooper-Standard Automotive Canada, Limited and Cooper-Standard Automotive International Holdings B.V., with its various senior lenders as counterparties. As a result, the counterparties to certain outstanding derivative contracts under these ISDA Agreements elected to exercise their option of early termination under such contracts. Certain interest rate, foreign exchange and commodity swap derivatives that were designated under ASC 815 as cash flow hedges were terminated for the purposes of ASC 815 as a result of the failure to make the interest payment and in anticipation of the termination events. The value of these terminated derivatives, totaling $18,092, is classified as liabilities subject to compromise.
Cash Flow Hedges
Forward foreign exchange contracts The Company enters into forward contracts to hedge currency risk of the U.S. Dollar against the Mexican Peso, Canadian Dollar and the Euro against the Czech Koruna. The forward contracts are used to mitigate the potential volatility to earnings and cash flow arising from changes in currency exchange rates that impact the Companys foreign currency transactions. The gain or loss on the forward contracts is reported as a component of other comprehensive income (loss) (OCI) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. For the three months ended March 31, 2010, $36 was reclassified from accumulated other comprehensive income (loss) (AOCI) into cost of products sold. A summary of the outstanding contracts and the respective notional amounts is below:
Notional Amount |
Notional Amount
(local currency) |
|||||
Mexican peso |
USD | 4,400 | 54,671 | |||
Canadian dollar |
USD | 7,300 | 7,663 | |||
Czech Koruna |
EUR | 3,283 | 84,780 |
F-89
COOPER-STANDARD HOLDINGS INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
(Dollar amounts in thousands except per share amounts)
At March 31, 2010, the fair value before taxes of the Companys forward exchange contracts and the accounts in the condensed consolidated balance sheet in which the fair value amounts are included are shown below:
March 31, 2010 | ||||
Asset/(liability) | ||||
Other current assets |
$ | 72 | ||
Accrued liabilities |
(228 | ) | ||
$ | (156 | ) | ||
Interest rate swaps The Company has an interest rate swap contract to manage cash flow fluctuations of variable rate debt due to changes in market interest rates. This contract which fixes the interest payment of a certain variable rate debt instrument is accounted for as a cash flow hedge. As of March 31, 2010, the USD notional amount of this contract was $7,866. At March 31, 2010, the fair value before taxes of the Companys interest rate swap contract was $426 and is recorded in accrued liabilities and other long-term liabilities in the Companys consolidated balance sheet with the offset reflected in AOCI, net of deferred taxes. For the three months ended March 31, 2010, $61 was reclassified from AOCI into interest expense. The amount to be reclassified in the next twelve months is expected to be approximately $242.
For interest rate swaps terminated as cash flow hedges, $(22,932) is recognized in AOCI as of March 31, 2010.
Fair Value Measurements
ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based upon assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1: | Observable inputs such as quoted prices in active markets; | |
Level 2: | Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and | |
Level 3: | Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
Estimates of the fair value of foreign currency and commodity derivative instruments are determined using exchange traded prices and rates. The Company also considers the risk of non-performance in the estimation of fair value, and includes an adjustment for non-performance risk in the measure of fair value of derivative instruments. In certain instances where market data is not available, the Company uses management judgment to develop assumptions that are used to determine fair value. Fair value measurements and the fair value hierarchy level for the Companys liabilities measured or disclosed at fair value on a recurring basis as of March 31, 2010, are shown below:
Contract |
Asset
(Liability) |
Level 1 | Level 2 | Level 3 | ||||||||||
Interest rate swap |
$ | (426 | ) | $ | | $ | | $ | (426 | ) | ||||
Forward foreign exchange contract |
$ | (156 | ) | $ | | $ | | $ | (156 | ) | ||||
Total |
$ | (582 | ) | $ | | $ | | $ | (582 | ) | ||||
F-90
COOPER-STANDARD HOLDINGS INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
(Dollar amounts in thousands except per share amounts)
A reconciliation of changes in assets and liabilities related to derivative instruments measured at fair value using the market and income approach adjusted for our and our counterpartys credit risks for the three months ended March 31, 2010, is shown below:
Net Derivative
Liabilities |
||||
Beginning Balance as of January 1, 2010 |
$ | 406 | ||
Total (gains) or losses (realized or unrealized) included in earnings (or changes in net liabilities) |
97 | |||
Included in other comprehensive income |
176 | |||
Purchases, issuances, and settlements |
(97 | ) | ||
Ending Balance as of March 31, 2010 |
$ | 582 | ||
The amount of total (gains) or losses for the period included in earnings (or changes in net liabilities) attributable to the change in unrealized (gains) or losses relating to assets still held at the reporting date |
$ | | ||
(Gains) and losses (realized and unrealized) included in earnings (or changes in net liabilities) for the period (above) are reported in cost of products sold and other income (expense):
Total (gains) or losses included in earnings (or changes in net liabilities) for the period (above) |
$ | 97 | |
Change in unrealized (gains) or losses relating to assets still held at the reporting date |
|
Items measured at fair value on a non-recurring basis
In addition to items that are measured at fair value on a recurring basis, the Company measures certain assets and liabilities at fair value on a non-recurring basis, which are not included in the table above. As these non-recurring fair value measurements are generally determined using unobservable inputs, these fair value measurements are classified within Level 3 of the fair value hierarchy. For further information on assets and liabilities measured at fair value on a non-recurring basis, see Note 5. Restructuring.
16. Accounts Receivable Factoring
As a part of its working capital management, the Company sells certain receivables through third party financial institutions without recourse. The amount sold varies each month based on the amount of underlying receivables and cash flow needs of the Company.
At March 31, 2009 and 2010, the Company had $46,969 and $37,579, respectively of receivables outstanding under receivable transfer agreements entered into by various locations. The Company incurred a loss on the sale of receivables for the three months ended March 31, 2009 and 2010 of $257 and $203, respectively; this amount is recorded in other income (expense) in the consolidated statements of operations. The Company continues to service the receivables for one of the locations. These are permitted transactions under the Companys credit agreement. The Company is also pursuing similar arrangements in various locations.
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COOPER-STANDARD HOLDINGS INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
(Dollar amounts in thousands except per share amounts)
17. Subsequent Events
In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.
On April 15, 2010, the Bankruptcy Court issued an order approving the CTR Settlement Agreement. For additional information on the CTR Settlement Agreement, see Note 9. Income Taxes.
The German Borrower prepaid $25.0 million under the DIP Agreement in April 2010.
On April 28, 2010, the Company, CSA U.S., Metzeler Automotive Profile Systems GmbH, CSA Canada, the lenders party thereto, Deutsche Bank Trust Company Americas, as administrative agent, and the other parties thereto, entered into that certain First Amendment to Debtor-In-Possession Credit Agreement and Limited Waiver (the First Amendment). The First Amendment permits, among other things, the issuance of the New Notes and the guarantees thereof by the Company and certain of its wholly owned domestic subsidiaries.
As part of the Companys planned exit financing, on May 11, 2010, CSA Escrow Corporation, an indirect wholly-owned non-debtor subsidiary of the Company (the Escrow Issuer), issued $450 million of 8 1 / 2 % Senior Notes due 2018 (the New Notes). Proceeds from the New Notes offering were placed into escrow pending the satisfaction of certain conditions, including, among others, (1) the issuance by the Bankruptcy Court of a final order that has not been stayed pending appeal confirming a plan of reorganization and the satisfaction or waiver of all conditions precedent to effectiveness of the Plan of Reorganization, including the expiration of the 14-day period within which a notice of appeal must be filed in respect of such final order, (2) receipt of proceeds from the issuance of common and preferred equity, pursuant to a rights offering or otherwise, of not less than $355.0 million, (3) entry into and the effectiveness of a senior secured asset-backed revolving credit facility that provides for commitments in an aggregate principal amount of not less than $100.0 million and (4) the assumption by CSA U.S. of all of the obligations of the Escrow Issuer under the New Notes and the indenture governing the New Notes and the guarantee by the Company and certain wholly owned domestic subsidiaries of the Company of the New Notes. Upon satisfaction of these conditions, the proceeds from the New Notes offering will be released from escrow to CSA U.S. and will be used, together with the proceeds from the issuance of the common and preferred equity and borrowings, if any, under the new senior secured asset-backed revolving credit facility and cash on hand, to pay claims, fees and expenses as set forth and pursuant to the Plan of Reorganization. However, in the event that either (i) the proceeds from the New Notes offering are not released to CSA U.S. on or before a date not to exceed 90 days from the issuance of the New Notes or (ii) prior to such date, CSA U.S. has determined, in its reasonable discretion, that the escrow conditions cannot be satisfied by such date, the funds deposited into escrow will be used to redeem the New Notes at a price equal to the sum of 100% of the gross proceeds of the New Notes plus 1.0% of the aggregate principal amount of the New Notes, together with accrued and unpaid interest on the New Notes from the date of issuance up to but not including the date of such redemption.
On April 21, 2010, the Debtors entered into a commitment letter with the arrangers and agents for a new senior secured asset based revolving credit facility. On May 5, 2010, the Bankruptcy Court authorized the Debtors entry into such commitment letter as well as other documents in connection with such facility.
The Plan of Reorganization was confirmed by the Bankruptcy Court on May 12, 2010. In addition, CSA Canadas plan of compromise or arrangement was sanctioned by the Canadian Court on April 16, 2010. The Company expects the Plan of Reorganization and the plan of compromise or arrangement to become effective in late May 2010, but such effectiveness remains subject to certain conditions.
F-92
Cooper-Standard Holdings Inc.
17,210,676 Shares of Common Stock
1,010,345 Shares of 7% Cumulative Participating Convertible Preferred Stock
Warrants to Purchase 1,693,827 Shares of Common Stock
Prospectus
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. | Other Expenses of Issuance and Distribution |
The following table sets forth the costs and expenses, if any, payable by us relating to the sale of securities being registered. The selling security holders are responsible for any expenses incurred by them for brokerage, accounting, tax, or legal or other services incurred by the selling security holders in disposing of the securities. All amounts are estimates except the SEC registration fee.
SEC registration fee |
$ | 34,263 | |
Legal fees and expenses |
|||
Accounting fees and expenses |
|||
Transfer agent and registrar fees |
|||
Miscellaneous expenses |
|||
Total |
$ | ||
Item 14. | Indemnification of Directors and Officers |
Section 145 of the Delaware General Corporation Law, or the DGCL, permits a Delaware corporation to indemnify its officers, directors and other corporate agents to the extent and under the circumstances set forth therein. Our certificate of incorporation and bylaws provide that we will indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding whether civil, criminal, administrative or investigative, by reason of the fact that he is or was our director or officer, or is or was serving at our request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, in accordance with provisions corresponding to Section 145 of the Delaware General Corporation Law. These indemnification provisions may be sufficiently broad to permit indemnification of the registrants executive officers and directors for liabilities, including reimbursement of expenses incurred, arising under the Securities Act.
Pursuant to Section 102(b)(7) of the Delaware General Corporation Law, our certificate of incorporation eliminates the personal liability of a director to us or our stockholders for monetary damages for a breach of fiduciary duty as a director, except for liabilities arising:
|
from any breach of the directors duty of loyalty to us or our stockholders; |
|
from acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; |
|
under Section 174 of the Delaware General Corporation Law; and |
|
from any transaction from which the director derived an improper personal benefit. |
The above discussion of Section 145 of the Delaware General Corporation Law and of our certificate of incorporation and bylaws is not intended to be exhaustive and is respectively qualified in its entirety by Section 145 of the Delaware General Corporation Law, our certificate of incorporation and our bylaws.
As permitted by Section 145 of the Delaware General Corporation Law, we carry primary and excess insurance policies insuring our directors and officers against certain liabilities they may incur in their capacity as directors and officers. Under the policies, the insurer, on our behalf, may also pay amounts for which we granted indemnification to our directors and officers.
Our certificate of incorporation provides that our directors shall not be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from
II-1
liability or limitation thereof is not permitted by the Delaware General Corporation Law. If the DGCL is amended to authorize corporate action further eliminating or limiting the liability of directors, then the liability of our directors will be eliminated or limited to the fullest extent permitted by the DGCL, as so amended. Our bylaws provide for the same indemnification for our directors and officers.
Our bylaws provide that expenses (including attorneys fees) incurred by a Covered Person in defending, testifying or otherwise participating in any proceeding for which such officer or director may be entitled to indemnification hereunder shall be paid by us in advance of the final disposition of such proceeding upon receipt of an undertaking by or on behalf of such Covered Person to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by us as authorized by the bylaws.
The indemnification provided by our bylaws is not deemed to be exclusive of any other right to which a person seeking indemnification or advancement of expenses may be entitled under applicable law, our certificate of incorporation, our bylaws, an agreement, a vote of stockholders or disinterested directors or otherwise, as to action taken in another capacity while holding his or her office or position, and will continue as to a person who has ceased to be a Covered Person and will inure to the benefit of his or her heirs, executors and administrators.
Our bylaws provide that we may maintain insurance, at our expense, to protect ourselves and/or any director, officer, employee or agent of ours or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not we would have the power to indemnify such person against such expense, liability or loss under the DGCL.
Item 15. | Recent Sales of Unregistered Securities |
Equity Securities
In connection with our emergence from bankruptcy, on May 27, 2010, the effective date of our plan of reorganization, all then existing shares of our common stock were cancelled and we issued new equity securities comprised of 18,351,664 shares of new common stock, 1,041,666 shares of 7% preferred stock, 2,419,753 warrants to purchase common stock and 780,566 options to purchase common stock. On May 28, 2010, we issued 26,448 shares of common stock and 58,386 options to purchase common stock. These issuances are described below.
Of the 18,351,664 shares of common stock issued on May 27, 2010,
|
we issued 6,308,020 shares of common stock to the holders of our prepetition senior notes and prepetition senior subordinated notes in exchange for claims relating to our prepetition senior subordinated notes and a portion of our prepetition senior notes in reliance on the exemption from registration under the Securities Act afforded by Section 1145 of the Bankruptcy Code; |
|
we issued 8,623,491 shares of common stock to holders of our prepetition senior subordinated notes pursuant to the rights offering conducted pursuant to our plan of reorganization for an aggregate purchase price of $185.7 million in reliance on the exemption from registration under the Securities Act afforded by Section 4(2) of the Securities Act; |
|
we issued 2,558,182 shares of common stock to certain holders of our prepetition senior notes and prepetition senior subordinated notes that agreed to backstop our rights offering pursuant to a commitment agreement we entered into on April 19, 2010, or the Backstop Parties, for an aggregate purchase price of $55.1 million in reliance on the exemption from registration under the Securities Act afforded by Section 4(2) of the Securities Act; and |
|
we granted as restricted stock 757,896 shares, plus an additional 104,075 shares that may be reduced subject to realized dilution on the warrants, to officers and key employees in reliance on the exemptions from registration under the Securities Act afforded by Section 4(2) of the Securities Act and Rule 701 promulgated thereunder. |
II-2
Of the 1,041,666 shares of 7% preferred stock issued on May 27, 2010,
|
we issued 1,000,000 shares to the Backstop Parties for an aggregate purchase price of $100.0 million in reliance on the exemption from registration under the Securities Act afforded by Section 4(2) of the Securities Act; and |
|
we granted as restricted stock 41,666 shares to officers and key employees in reliance on the exemptions from registration under the Securities Act afforded by Section 4(2) of the Securities Act and Rule 701 promulgated thereunder. |
Of the 2,419,753 warrants issued on May 27, 2010,
|
we issued 725,926 warrants to purchase our common stock to holders of our prepetition senior subordinated notes in exchange for claims relating to our prepetition senior subordinated notes in reliance on the exemption from registration under the Securities Act afforded by Section 1145 of the Bankruptcy Code; and |
|
we issued 1,693,827 warrants to the Backstop Parties in consideration for their agreement to backstop the rights offering conducted pursuant to our plan of reorganization in reliance on the exemption from registration under the Securities Act afforded by Section 4(2) of the Securities Act. |
On May 27, 2010, we granted 702,509 options to purchase shares of common stock, plus an additional 78,057 options to purchase shares of common stock that may be reduced subject to realized dilution on the warrants, to officers and key employees in reliance on the exemptions from registration under the Securities Act afforded by Section 4(2) of the Securities Act and Rule 701 promulgated thereunder.
On May 28, 2010, we granted 26,448 shares of common stock and 58,386 options to purchase shares of common stock to non-employee directors and an affiliate of a non-employee director in reliance on the exemptions from registration under the Securities Act afforded by Section 4(2) of the Securities Act and Rule 701 promulgated thereunder.
On July 19, 2010, we paid a dividend to holders of our outstanding 7% preferred stock in the form of 10,780 additional shares of 7% preferred stock in reliance on the exemptions from registration under the Securities Act afforded by Section 4(2) of the Securities Act and Rule 701 promulgated thereunder.
Debt Securities
In connection with our emergence from bankruptcy on May 27, 2010, on May 11, 2010, CSA Escrow Corporation, an indirect wholly-owned subsidiary of ours, issued $450 million aggregate principal amount of 8½% senior notes due 2018 at a price of 100% of their face value resulting in $450 million of gross proceeds, the net proceeds of which were used to repay outstanding indebtedness under our debtor-in-possession credit facility and our prepetition credit facility, a portion of our prepetition senior notes and certain other bankruptcy claims and to make other payments in connection with our emergence. CSA Escrow Corporation merged with and into Cooper-Standard Holdings Inc. on May 27, 2010 in connection with our emergence from bankruptcy. The initial purchasers for the senior notes issued on May 11, 1010 were Deutsche Bank Securities Inc., Banc of America Securities LLC, Barclays Capital Inc. and UBS Securities LLC. The senior notes were offered and sold to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to non-U.S. investors outside the United States in compliance with Regulation S of the Securities Act.
Item 16. | Exhibits and Financial Statement Schedules |
The exhibits to this registration statement are listed on the Exhibit Index beginning on page II-8 hereof, which is incorporated by reference in this Item 16.
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Item 17. | 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:
(a) To include any prospectus required by section 10(a)(3) of the Securities Act;
(b) 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 Securities and Exchange Commission, or the SEC, pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the Calculation of Registration Fee table in the effective registration statement.
(c) 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, 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 the purpose of determining liability under the Securities Act to any purchaser if the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(5) That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(a) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(b) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(c) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(d) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
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(6) Insofar as indemnification for liabilities arising under the Securities Act of 1933 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 SEC such indemnification is against public policy as expressed in the 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 Act and will be governed by the final adjudication of such issue.
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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 Novi, State of Michigan, on July 26, 2010.
COOPER-STANDARD HOLDINGS INC. |
||
By: |
/s/ James S. McElya |
|
Name: |
James S. McElya | |
Title: |
Chairman, Director and Chief Executive Officer |
II-6
POWER OF ATTORNEY
KNOW ALL PEOPLE BY THESE PRESENTED, that each person whose signature appears below hereby constitutes and appoints James S. McElya, Allen J. Campbell and Timothy W. Hefferon, and each of them, the true and lawful attorneys-in-fact and agents of the undersigned, with full power of substitution and resubstitution, for and in the name, place and stead of the undersigned, to sign in any and all capacities (including, without limitation, the capacities listed below), the registration statement, any and all amendments (including post-effective amendments) to the registration statement and any and all successor registration statements of Cooper-Standard Holdings Inc., including any filings pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and anything necessary to be done to enable Cooper-Standard Holdings Inc. to comply with the provisions of the Securities Act and all the requirements of the Securities and Exchange Commission, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his or her substitute, or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities indicated on July 26, 2010.
Signatures |
Title |
|
/s/ James S. McElya James S. McElya |
Chairman, Director and Chief Executive Officer (Principal Executive Officer) |
|
/s/ Allen J. Campbell Allen J. Campbell |
Vice President and
(Principal Financial Officer) |
|
/s/ Helen T. Yantz Helen T. Yantz |
Vice President and
(Principal Accounting Officer) |
|
/s/ Glenn R. August Glenn R. August |
Director |
|
/s/ Orlando A. Bustos Orlando A. Bustos |
Director |
|
/s/ Larry Jutte Larry Jutte |
Director |
|
/s/ David J. Mastrocola David J. Mastrocola |
Director |
|
/s/ Stephen A. Van Oss Stephen A. Van Oss |
Director |
|
/s/ Kenneth L. Way Kenneth L. Way |
Director |
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Index to Exhibits
II-8
Exhibit No. |
Description of Exhibit |
|
10.7* | Executive Put Option Agreement, dated December 19, 2007, by and among Cooper-Standard Holdings Inc., Cypress Merchant Banking Partners II L.P., Cypress Merchant Banking II C.V., 55 th Street Partners II L.P., Cypress Side-by-Side LLC, GS Capital Partners 2000, L.P., GS Capital Partners 2000 Offshore, L.P., GS Capital Partners 2000 GmbH & Co. Beteiligungs KG, GS Capital Partners 2000, L.P. and James S. McElya (incorporated by reference to Exhibit 10.26 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2007). | |
10.8* | Employment Agreement, dated as of July 1, 2008, by and among Cooper-Standard Automotive Inc. and Edward A. Hasler (incorporated by reference to Exhibit 10.21 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2008). | |
10.9* | Employment Agreement, dated as of January 1, 2009, by and among Cooper-Standard Automotive Inc. and Allen J. Campbell (incorporated by reference to Exhibit 10.23 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2008). | |
10.10* | Employment Agreement, dated as of January 1, 2009, by and among Cooper-Standard Automotive Inc. and Keith D. Stephenson (incorporated by reference to Exhibit 10.25 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2008). | |
10.11* | Cooper-Standard Automotive Inc. Change of Control Severance Pay Plan, as Amended and Restated Effective July 1, 2008 (incorporated by reference to Exhibit 10.30 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2008). | |
10.12* | 2004 Cooper-Standard Holdings Inc. Stock Incentive Plan, as Amended and Restated Effective November 1, 2007 (incorporated by reference to Exhibit 10.31 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2007). | |
10.13* | Form of Nonqualified Stock Option Agreement (incorporated by reference to Exhibit 10.32 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2008). | |
10.14* | Cooper-Standard Automotive Inc. Deferred Compensation Plan, Effective January 1, 2005 with Amendments through December 31, 2008 (incorporated by reference to Exhibit 10.33 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2008). | |
10.15* | Cooper-Standard Automotive Inc. Pre-2005 Executive Deferred Compensation Plan, as Amended and Restated Effective January 1, 2005 (incorporated by reference to Exhibit 10.34 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2006). | |
10.16* | Cooper-Standard Automotive Inc. Nonqualified Supplementary Benefit Plan, Amended and Restated as of January 1, 2009 (incorporated by reference to Exhibit 10.35 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2008). | |
10.17* | Cooper-Standard Automotive Inc. Long-Term Incentive Plan (incorporated by reference to Exhibit 10.36 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2006). | |
10.18* | Limited Liability Company Agreement of Nishikawa Standard Company LLC, dated as of January 1, 2008 (incorporated by reference to Exhibit 10.39 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2008). | |
10.19* | Commitment Agreement, dated as of March 19, 2010, between Cooper-Standard Holdings Inc and certain backstop parties (incorporated by reference to Exhibit 10.49 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2009). | |
10.20* | Employment agreement, dated as of January 1, 2009, by and between Cooper-Standard Automotive Inc. and Michael C. Verwilst (incorporated by reference to Exhibit 10.50 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2009). |
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Exhibit No. |
Description of Exhibit |
|
10.21* | Agreement and General Release, dated as of March 31, 2009, by and among Cooper-Standard Holdings Inc., Cooper-Standard Automotive Inc. and Larry J. Beard (incorporated by reference to Exhibit 10.51 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2009). | |
10.22* | Director Nomination Agreement, made as of May 27, 2010, among the Company and Barclays Capital, Inc. (incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K dated June 3, 2010). | |
10.23* | Director Nomination Agreement, made as of May 27, 2010, among the Company and Silver Point Capital, L.P., on behalf of its affiliates and related funds (incorporated by reference to Exhibit 10.3 to the Companys Current Report on Form 8-K dated June 3, 2010). | |
10.24* | Director Nomination Agreement, made as of May 27, 2010, among the Company and Oak Hill Advisors L.P., on behalf of certain funds and separate accounts that it manages (incorporated by reference to Exhibit 10.4 to the Companys Current Report on Form 8-K dated June 3, 2010). | |
10.25* | Director Nomination Agreement, made as of May 27, 2010, among the Company and Capital Research and Management Company, as investment advisor to certain funds it manages, TCW Shared Opportunity Fund IV, L.P., TCW Shared Opportunity Fund IVB, L.P., TCW Shared Opportunity Fund V, L.P., TD High Yield Income Fund, and Lord, Abbett & Co. LLC, as investment manager on behalf of multiple clients (incorporated by reference to Exhibit 10.5 to the Companys Current Report on Form 8-K dated June 3, 2010). | |
10.26* | 2010 Cooper-Standard Holdings Inc. Management Incentive Plan (incorporated by reference to Exhibit 10.6 to the Companys Current Report on Form 8-K dated June 3, 2010). | |
10.27* | Form of 2010 Cooper-Standard Holdings Inc. Management Incentive Plan Nonqualified Stock Option Agreement for key employees (incorporated by reference to Exhibit 10.7 to the Companys Current Report on Form 8-K dated June 3, 2010). | |
10.28* | Form of 2010 Cooper-Standard Holdings Inc. Management Incentive Plan Restricted Stock Award Agreement for key employees (incorporated by reference to Exhibit 10.8 to the Companys Current Report on Form 8-K dated June 3, 2010). | |
10.29* | Form of 2010 Cooper-Standard Holdings Inc. Management Incentive Plan Nonqualified Stock Option Agreement for directors (incorporated by reference to Exhibit 10.9 to the Companys Current Report on Form 8-K dated June 3, 2010). | |
10.30* | Form of 2010 Cooper-Standard Holdings Inc. Management Incentive Plan Restricted Stock Award Agreement for directors (incorporated by reference to Exhibit 10.10 to the Companys Current Report on Form 8-K dated June 3, 2010). | |
10.31* | Settlement Agreement, dated as of March 17, 2010 (incorporated by reference to Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2010). | |
12.1 | Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends | |
21.1* | List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2009). | |
23.1 | Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm | |
23.2** | Consent of Fried, Frank, Harris, Shriver & Jacobson LLP (included in Exhibit 5.1) | |
24.1 | Powers of Attorney (included on signature page) |
* | Previously filed. |
** | To be filed by amendment. |
| Management contracts and compensation plans or arrangements. |
II-10
EXHIBIT 3.1
THIRD AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
COOPER-STANDARD HOLDINGS INC.
Cooper-Standard Holdings Inc., a corporation organized and existing under the laws of the State of Delaware (the Corporation ), DOES HEREBY CERTIFY AS FOLLOWS:
1. The name of the Corporation is Cooper-Standard Holdings Inc. The Corporation was originally incorporated under the name CSA Acquisition Corp., and the original certificate of incorporation was filed with the Secretary of State of the State of Delaware on September 10, 2004.
2. The Corporation filed an amended plan of reorganization under chapter 11 of title 11 of the United States Code on March 26, 2010 (the Plan ).
3. This Third Amended and Restated Certificate of Incorporation ( Certificate ) has been deemed approved without the need for Board of Directors ( Board ) or stockholder approval pursuant to Section 303 of the General Corporation Law of the State of Delaware (the DGCL ) because it is adopted pursuant to the Plan, as confirmed on May 12, 2010 by the United States Bankruptcy Court for the District of Delaware.
4. Pursuant to the provisions of Sections 242(a), 245 and 303 of the DGCL, the undersigned Corporation does hereby certify that the text of the Certificate is hereby amended and restated to read as follows:
ARTICLE I
NAME
The name of the corporation is Cooper-Standard Holdings Inc. (the Corporation ).
ARTICLE II
PURPOSE
The purpose for which the Corporation is organized is to engage in, carry on and conduct any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the DGCL ).
ARTICLE III
REGISTERED AGENT
The street address of the registered office of the Corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801, and the name of the Corporations registered agent at such address is The Corporation Trust Company.
ARTICLE IV
CAPITALIZATION
Section 4.1 Authorized Capital Stock .
The total number of shares of all classes of capital stock that the Corporation is authorized to issue is 200,000,000 shares, consisting of 190,000,000 shares of common stock, par value $0.001 per share (the Common Stock ), and 10,000,000 shares of preferred stock, par value $0.001 per share (the Preferred Stock ). Notwithstanding any other provisions contained herein to the contrary, the Corporation shall not issue nonvoting equity securities. The prohibition on issuance of nonvoting equity securities is included in this Certificate in compliance with Section 1123(a)(6) of the Bankruptcy Code (11 U.S.C. §1123(a)(6)).
Section 4.2 Preferred Stock .
(a) The Preferred Stock may be issued from time to time in one or more series. The Board of Directors (the Board ) is hereby expressly authorized to provide for the issuance of shares of Preferred Stock in one or more series and to establish from time to time the number of shares to be included in each such series and to fix the voting powers, if any, designations, powers, preferences and relative, participating, optional and other special rights, if any, of each such series and the qualifications, limitations and restrictions thereof, as shall be stated in the resolution(s) adopted by the Board providing for the issuance of such series and included in a certificate of designations (a Preferred Stock Designation ) filed pursuant to the DGCL.
(b) The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding and such additional shares as are necessary to satisfy the payment of dividends in kind on any Preferred Stock) by the affirmative vote of the holders of a majority of the outstanding shares of Common Stock, without a vote of the holders of the Preferred Stock, or any series thereof, unless a vote of any such holders of Preferred Stock is required pursuant to another provision of this Third Amended and Restated Certificate of Incorporation (this Certificate ) (including any Preferred Stock Designation.)
Section 4.3 Common Stock .
(a) The holders of shares of Common Stock shall be entitled to one vote for each such share on each matter properly submitted to the stockholders on which the holders of Common Stock are entitled to vote. Except as otherwise required by law or this Certificate (including any Preferred Stock Designation), at any annual or special meeting of the stockholders the Common Stock shall have the exclusive right to vote for the election of directors and on all other matters properly submitted to a vote of the stockholders. Notwithstanding the foregoing and subject to Section 4.2(b) , except as otherwise required by law or this Certificate (including a Preferred Stock Designation), holders of Common Stock shall not be entitled to vote on any amendment to this Certificate (including any amendment to any Preferred Stock Designation) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of
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such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Certificate (including any Preferred Stock Designation.)
(b) Subject to the rights of the holders of Preferred Stock, the holders of shares of Common Stock shall be entitled to receive such dividends and other distributions (payable in cash, property or capital stock of the Corporation) when, as and if declared thereon by the Board from time to time out of any assets or funds of the Corporation legally available therefor and shall share equally on a per share basis in such dividends and distributions.
(c) In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation, and subject to the rights of the holders of Preferred Stock in respect thereof, the holders of shares of Common Stock shall be entitled to receive all the remaining assets of the Corporation available for distribution to its stockholders, ratably in proportion to the number of shares of Common Stock held by them.
ARTICLE V
BOARD OF DIRECTORS
Section 5.1 Board Powers .
The business and affairs of the Corporation shall be managed by, or under the direction of, the Board. In addition to the powers and authority expressly conferred upon the Board by statute, this Certificate or the By-Laws of the Corporation (the By-Laws ), the Board is hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, in all cases, to the provisions of the DGCL, this Certificate and any By-Laws adopted by the Corporation; provided , however , that no amendments to this Certificate or the By-Laws hereafter adopted by the Corporation shall invalidate any prior act of the Board that would have been valid if such amendments to this Certificate or the By-Laws had not been adopted.
Section 5.2 Number, Election and Term .
(a) The number of directors of the Corporation shall initially be seven and shall be fixed from time to time exclusively by the Board pursuant to a resolution adopted by a majority of the Whole Board. For purposes of this Certificate, Whole Board shall mean the total number of directors the Corporation would have if there were no vacancies.
(b) Directors shall be elected each year at the annual meeting of stockholders of the Corporation and shall hold office until the next annual meeting of stockholders of the Corporation and until their successors have been elected and qualified, subject to such directors earlier death, resignation, retirement, disqualification or removal.
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(c) Unless and except to the extent that the By-Laws shall so require, the election of directors need not be by written ballot.
Section 5.3 Newly Created Directorships and Vacancies .
Newly created directorships resulting from an increase in the number of directors and any vacancies on the Board resulting from death, resignation, retirement, disqualification, removal or other cause may be filled solely by a majority vote of the directors then in office, even if less than a quorum, or by a sole remaining director (and not by stockholders), and any director so chosen shall hold office until the next annual meeting of stockholders of the Corporation and until his or her successor has been elected and qualified, subject to such directors earlier death, resignation, retirement, disqualification or removal.
Section 5.4 Removal .
Any or all of the directors may be removed from office at any time, with or without cause by the affirmative vote of holders of a majority of the voting power of all then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class.
Section 5.5 Preferred Stock Directors .
Notwithstanding any other provision of this Article V , and except as otherwise required by law, whenever the holders of one or more series of Preferred Stock shall have the right, voting separately by class or series, to elect one or more directors, the term of office, the filling of vacancies, the removal from office and other features of such directorships shall be governed by the terms of such series of Preferred Stock as set forth in this Certificate (including any Preferred Stock Designation) and such directors shall not be included in any of the classes created pursuant to this Article V unless expressly provided by such terms.
ARTICLE VI
BY-LAWS
In furtherance and not in limitation of the powers conferred upon it by law, the Board shall have the power to adopt, amend, alter or repeal the By-Laws. The affirmative vote of a majority of the Whole Board shall be required to adopt, amend, alter or repeal the By-Laws. The By-Laws also may be adopted, amended, altered or repealed by the stockholders to the extent permissible under the DGCL; provided , however , that in addition to any vote of the holders of any class or series of capital stock of the Corporation required by law or by this Certificate (including any Preferred Stock Designation), the affirmative vote of the holders of at least a majority of the voting power of all then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required for the stockholders to adopt, amend, alter or repeal the By-Laws.
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ARTICLE VII
MEETINGS OF STOCKHOLDERS
Section 7.1 No Action by Written Consent .
Except as otherwise expressly provided by the terms of any series of Preferred Stock permitting the holders of such series of Preferred Stock to act by written consent, any action required or permitted to be taken by stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation, unless the taking of such action by means of written consent of the stockholders of the Corporation is approved in advance by a resolution adopted by a majority of the Whole Board.
Section 7.2 Meetings .
Except as otherwise required by law or the terms of any one or more series of Preferred Stock, special meetings of stockholders of the Corporation (i) may be called by the Chairman of the Board, the Chief Executive Officer or any member of the Board pursuant to a resolution adopted by a majority of the Whole Board and (ii) shall be called by the Secretary at the written request (a Special Meeting Request ) of holders of record of at least 20% of the voting power of the outstanding stock of the Corporation entitled to vote on the matter or matters to be brought before the proposed special meeting. Such request shall state the purpose or purposes of the proposed meeting. Within 15 days of the Corporations receipt of a Special Meeting Request that complies with this Section 7.2 , the Corporation shall send a notice of the meeting to stockholders as set forth in the By-Laws. Special meetings of stockholders shall be held at such place and time and on such date as shall be determined by the Corporation and stated in the Corporations notice of meeting, provided that a special meeting of stockholders called pursuant to a Special Meeting Request shall be held no later than 30 days after the date the Corporation receives the Special Meeting Request, unless the stockholders submitting such Special Meeting Request request a date no later than 60 days after the date the Corporation receives the Special Meeting Request. Any special meeting of stockholders called pursuant to a Special Meeting Request and as to which notice has been given may be postponed, and any such special meeting as to which notice has been given may be cancelled, by the Secretary upon public announcement given before the date previously scheduled for such meeting or any adjournment thereof, in each case only if the stockholders submitting such Special Meeting Request request such postponement or cancellation in writing.
Section 7.3 Advance Notice .
Subject to Section 7.2, advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the By-Laws.
ARTICLE VIII
SECTION 203 OF THE DGCL
The Corporation hereby elects not to be governed by Section 203 of the DGCL.
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ARTICLE IX
LIMITED LIABILITY; INDEMNIFICATION
Section 9.1 Limitation of Personal Liability .
No person who is or was a director of the Corporation shall be personally liable to the Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted by the DGCL as the same exists or hereafter may be amended. If the DGCL is hereafter amended to authorize corporate action further limiting or eliminating the liability of directors, then the liability of a director to the Corporation or its stockholders shall be limited or eliminated to the fullest extent permitted by the DGCL, as so amended. Any repeal or amendment of this Section 9.1 by the stockholders of the Corporation or by changes in law, or the adoption of any other provision of this Certificate inconsistent with this Section 9.1 will, unless otherwise required by law, be prospective only (except to the extent such amendment or change in law permits the Corporation to further limit or eliminate the liability of directors) and shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or amendment or adoption of such inconsistent provision with respect to acts or omissions occurring prior to such repeal or amendment or adoption of such inconsistent provision.
Section 9.2 Indemnification .
(a) Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a proceeding ), by reason of the fact that he or she is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter a Covered Person ), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent, or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized or permitted by applicable law, as the same exists or may hereafter be amended, against all expense, liability and loss (including, without limitation, attorneys fees, judgments, fines, ERISA excise taxes and penalties and amounts paid in settlement) reasonably incurred or suffered by such Covered Person in connection with such proceeding, and such right to indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of this or her heirs, executors and administrators; and such right to indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided , however , that, except for proceedings to enforce rights to indemnification, the Corporation shall indemnify a Covered Person in connection with a proceeding (or part thereof) initiated by such Covered Person only if such proceeding (or part thereof) is authorized by the Board (whether before, during or after the pendency of such proceeding). The right to
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indemnification conferred by this Section 9.2 shall be a contract right that shall fully vest at the time the Covered Person first assumes his or her position as a director or officer of the Corporation and shall include the right to be paid by the Corporation the expenses incurred in defending or otherwise participating in any such proceeding in advance of its final disposition.
(b) The rights provided to Covered Persons pursuant to this Section 9.2 shall not be exclusive of any other right that any Covered Person may have or hereafter acquire under applicable law, this Certificate, the By-Laws, an agreement, a vote of stockholders or disinterested directors, or otherwise.
(c) Any repeal or amendment of this Section 9.2 by the stockholders of the Corporation or by changes in law, or the adoption of any other provision of this Certificate inconsistent with this Section 9.2 , will, unless otherwise required by law, be prospective only (except to the extent such amendment or change in law permits the Corporation to provide broader indemnification rights on a retroactive basis than permitted prior thereto), and will not in any way diminish or adversely affect any right or protection existing at the time of such repeal or amendment or adoption of such inconsistent provision in respect of any act or omission occurring prior to such repeal or amendment or adoption of such inconsistent provision.
(d) This Section 9.2 shall not limit the right of the Corporation, to the extent and in the manner authorized or permitted by law, to indemnify and to advance expenses to persons other than Covered Persons.
ARTICLE X
COMPETITIVE OPPORTUNITY
If any stockholder, any Affiliate of any stockholder or any of such stockholders or its Affiliates partners, members, stockholders, directors, officers or Affiliates (collectively, Representatives ), acquires knowledge of a potential transaction or matter which may be an investment or business opportunity or prospective economic or competitive advantage in which the Corporation could have an interest or expectancy (a Competitive Opportunity ) or otherwise is then exploiting any Competitive Opportunity, the Corporation will have no interest in, and no expectation that, such Competitive Opportunity be offered to it. Any such interest or expectation is hereby renounced so that such stockholder and its Representatives (including any Representative serving as an officer or director of the Corporation) shall (a) have no duty to communicate or present such Competitive Opportunity to the Corporation and (b) have the right to either hold any such Competitive Opportunity for such stockholders (and its agents, partners or Affiliates) own account and benefit or to recommend, assign or otherwise transfer such Competitive Opportunity to persons other than the Corporation or any Affiliate of the Corporation. For purposes of this Certificate, Affiliate shall mean, with respect to any person, any other person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such first person. This Article X shall not apply and shall not have any force or effect in the event that the Competitive Opportunity is presented to, acquired, or otherwise obtained by, a Representative as a result of such Representatives capacity as a director of the Corporation.
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ARTICLE XI
DIRECTOR NOMINATION AGREEMENTS
For so long as those certain Director Nomination Agreements dated as of May 27, 2010, among the Corporation and the other parties thereto, as amended from time to time (the Director Nomination Agreements ) shall remain in effect, the provisions of the Director Nomination Agreements shall be incorporated by reference into the relevant provisions hereof, and such provisions shall be interpreted and applied in a manner consistent with the terms of the Director Nomination Agreements.
ARTICLE XII
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate (including any Preferred Stock Designation), in the manner now or hereafter prescribed by this Certificate and the DGCL; and, except as set forth in Article IX , all rights, preferences and privileges herein conferred upon stockholders, directors or any other persons by and pursuant to this Certificate in its present form or as hereafter amended are granted subject to the right reserved in this Article XII ; provided , however , that, notwithstanding any other provision of this Certificate, and in addition to any other vote that may be required by law or any Preferred Stock Designation, the affirmative vote of the holders of at least 66 2 / 3 % of the voting power of all then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend, alter or repeal, or adopt any provision of this Certificate inconsistent with the purpose and intent of, Article V , Article VI , Article VII or this Article XII .
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IN WITNESS WHEREOF, Cooper-Standard Holdings Inc. has caused this Certificate to be duly executed in its name and on its behalf by its Secretary this 27th day of May, 2010.
Cooper-Standard Holdings Inc. | ||
By: |
/s/ Timothy W. Hefferon |
|
Name: | Timothy W. Hefferon | |
Title: | Secretary |
EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS
OF
COOPER-STANDARD HOLDINGS INC.,
a Delaware corporation
(the Corporation )
(Adopted as of May 27, 2010)
AMENDED AND RESTATED
BY-LAWS
OF
COOPER-STANDARD HOLDINGS INC.
ARTICLE I
OFFICES
Section 1.1 Registered Office . The registered office of the Corporation within the State of Delaware shall be located at either (a) the principal place of business of the Corporation in the State of Delaware or (b) the office of the corporation or individual acting as the Corporations registered agent in Delaware.
Section 1.2 Additional Offices . The Corporation may, in addition to its registered office in the State of Delaware, have such other offices and places of business, both within and outside the State of Delaware, as the Board of Directors of the Corporation (the Board ) may from time to time determine or as the business and affairs of the Corporation may require.
ARTICLE II
STOCKHOLDERS MEETINGS
Section 2.1 Annual Meetings . The annual meeting of stockholders shall be held at such place and time and on such date as shall be determined by the Board and stated in the notice of the meeting, provided that the Board may in its sole discretion determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication pursuant to Section 9.5(a) . At each annual meeting, the stockholders shall elect the directors of the Corporation and may transact any other business as may properly be brought before the meeting.
Section 2.2 Special Meetings . Except as otherwise required by applicable law, special meetings of stockholders, for any purpose or purposes, may be called only as provided in the Corporations Second Amended and Restated Certificate of Incorporation, as the same may be amended or restated from time to time (the Certificate of Incorporation ). The Board may in its sole discretion determine that a special meeting shall not be held at any place, but may instead be held solely by means of remote communication pursuant to Section 9.5(a) .
Section 2.3 Notices . Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, if any, date and hour of the meeting, the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting. Unless otherwise provided by applicable law or the Certificate of Incorporation, such notice shall be given by the Corporation not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting as of the record date for determining the stockholders entitled to notice of the meeting in the manner permitted by Section 9.3 . If said notice is for a stockholders meeting other than an annual meeting, it shall in addition state the purpose or purposes for which the meeting is called, and the business transacted at such meeting
shall be limited to the matters so stated in the Corporations notice of meeting (or any supplement thereto), and, if applicable, the Special Meeting Request or as otherwise permitted pursuant to Section 2.7 or Section 3.2 . Other than a special meeting of stockholders called pursuant to a Special Meeting Request in accordance with the Certificate of Incorporation, any meeting of stockholders as to which notice has been given may be postponed, and any special meeting of stockholders as to which notice has been given may be cancelled, by a resolution adopted by a majority of the Whole Board upon public announcement given before the date previously scheduled for such meeting or any adjournment thereof.
Section 2.4 Quorum . Except as otherwise provided by applicable law, the Certificate of Incorporation or these By-Laws, the presence, in person or by proxy, at a stockholders meeting of the holders of shares of outstanding capital stock of the Corporation representing a majority of the voting power of all outstanding shares of capital stock of the Corporation entitled to vote at such meeting shall constitute a quorum for the transaction of business at such meeting, except that when specified business is to be voted on by a class or series of stock voting as a class, the holders of shares representing a majority of the voting power of the outstanding shares of such class or series shall constitute a quorum of such class or series for the transaction of such business. If a quorum shall not be present or represented by proxy at any meeting of the stockholders, the chairman of the meeting may adjourn the meeting from time to time in the manner provided in Section 2.6 until a quorum shall attend. The stockholders present at a duly convened meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Shares of its own stock belonging to the Corporation or to another corporation (if a majority of the voting power of the shares entitled to vote in the election of directors belonging to such other corporation is held, directly or indirectly, by the Corporation) shall neither be entitled to vote nor, for quorum purposes, be counted in (a) the number shares present, in person or by proxy, at a stockholders meeting or (b) the number of shares of outstanding capital stock of the Corporation entitled to vote at a stockholders meeting; provided, however, that the foregoing shall not limit the right of the Corporation or any such other corporation to vote shares held by it in a fiduciary capacity.
Section 2.5 Voting of Shares .
(a) Voting Lists . The Secretary shall prepare, or shall cause the officer or agent who has charge of the stock ledger of the Corporation to prepare, at least 10 days before every meeting of stockholders, a complete list of the stockholders of record entitled to vote at the meeting (provided, however, if the record date for determining the stockholders entitled to vote is less than 10 days before the meeting date, the list shall reflect the stockholders entitled to vote as of the tenth day before the meeting date), arranged in alphabetical order for each class of stock and showing the address and the number of shares registered in the name of each stockholder. Nothing contained in this Section 2.5(a) shall require the Corporation to include the telephone number or other electronic contact information for electronic transmission to any stockholder on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least 10 days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the Corporation. If the Corporation determines to make the list available on an electronic network, the Corporation may take
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reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the meeting is to be held at a place, then the list of stockholders entitled to vote at the meeting shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be examined by any stockholder who is present. If a meeting of stockholders is to be held solely by means of remote communication as permitted by Section 9.5(a) , then such list shall be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of meeting. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the list required by this Section 2.5(a) or to vote in person or by proxy at any meeting of stockholders.
(b) Manner of Voting . At any stockholders meeting, every stockholder entitled to vote may vote in person or by proxy. If authorized by the Board, the voting by stockholders or proxyholders at any meeting conducted by remote communication may be effected by a ballot submitted by electronic transmission, provided that any such electronic transmission must either set forth or be submitted with information from which the Corporation can determine that the electronic transmission was authorized by the stockholder or proxyholder. The Board, in its discretion, or the chairman of the meeting of stockholders, in such persons discretion, may require that any votes cast at such meeting shall be cast by written ballot.
(c) Proxies . Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. Proxies need not be filed with the Secretary of the Corporation until the meeting is called to order, but shall be filed with the Secretary before being voted. Without limiting the manner in which a stockholder may authorize another person or persons to act for such stockholder as proxy, either of the following shall constitute a valid means by which a stockholder may grant such authority.
(i) A stockholder may execute a writing authorizing another person or persons to act for such stockholder as proxy. Execution may be accomplished by the stockholder or such stockholders authorized officer, director, employee or agent signing such writing or causing such persons signature to be affixed to such writing by any reasonable means, including, but not limited to, by facsimile signature.
(ii) A stockholder may authorize another person or persons to act for such stockholder as proxy by transmitting or authorizing the transmission of an electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission, provided that any such electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the stockholder.
Any copy, electronic transmission or other reliable reproduction of the writing or transmission authorizing another person or persons to act as proxy for a stockholder may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used; provided that such copy, electronic transmission or other reproduction shall be a complete reproduction of the entire original writing or transmission.
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(d) Required Vote . Subject to the rights of the holders of one or more series of preferred stock of the Corporation ( Preferred Stock ), voting separately by class or series, to elect directors pursuant to the terms of one or more series of Preferred Stock, the election of directors shall be determined by a plurality of the votes cast by the stockholders present in person or represented by proxy at the meeting and entitled to vote thereon. All other matters shall be determined by the vote of a majority of the votes cast by the stockholders present in person or represented by proxy at the meeting and entitled to vote thereon, unless the matter is one upon which, by applicable law, the Certificate of Incorporation, these By-Laws or applicable stock exchange rules, a different vote is required, in which case such provision shall govern and control the decision of such matter.
(e) Inspectors of Election . The Board may, and shall if required by law, in advance of any meeting of stockholders, appoint one or more persons as inspectors of election, who may be employees of the Corporation or otherwise serve the Corporation in other capacities, to act at such meeting of stockholders or any adjournment thereof and to make a written report thereof. The Board may appoint one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspectors of election or alternates are appointed by the Board, the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before discharging his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall ascertain and report the number of outstanding shares and the voting power of each; determine the number of shares present in person or represented by proxy at the meeting and the validity of proxies and ballots; count all votes and ballots and report the results; determine the disposition of any challenges and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors; and certify their determination of the number of shares represented at the meeting and their count of all votes and ballots. No person who is a candidate for an office at an election may serve as an inspector at such election. Each report of an inspector shall be in writing and signed by the inspector or by a majority of them if there is more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors.
Section 2.6 Adjournments . Any annual or special meeting of stockholders may be adjourned by the chairman of the meeting, from time to time, whether or not there is a quorum, to reconvene at the same or some other place, provided that a special meeting of stockholders called pursuant to a Special Meeting Request may not be adjourned without the written consent of the stockholders that submitted such Special Meeting Request. Notice need not be given of any such adjourned meeting if the date, time and place or the means of remote communication by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting, as applicable, are announced at the meeting at which the adjournment is taken. At the adjourned meeting the stockholders, or the holders of any class or series of stock entitled to vote separately as a class, as the case may be, may transact any business that might have been transacted at the original meeting. If the adjournment is for more than 30 days, notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If after the adjournment a new record date for stockholders entitled to vote is fixed for
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the adjourned meeting, the Board shall fix a new record date for notice of such adjourned meeting in accordance with Section 2.3 , and shall give notice of the adjourned meeting to each stockholder of record entitled to vote at such adjourned meeting as of the record date fixed for notice of such adjourned meeting.
Section 2.7 Advance Notice for Business .
(a) Annual Meetings of Stockholders . No business may be transacted at an annual meeting of stockholders, other than business that is either (I) specified in the Corporations notice of meeting (or any supplement thereto) given by or at the direction of the Board, (II) otherwise properly brought before the annual meeting by or at the direction of the Board or (III) otherwise properly brought before the annual meeting by any stockholder of the Corporation (x) who is a stockholder on the date of the giving of the notice provided for in this Section 2.7(a) and who is entitled to vote at such annual meeting and (y) who complies with the notice procedures set forth in this Section 2.7(a) . Except for proposals properly made in accordance with Rule 14a-8 (or any successor thereof) under the Securities Exchange Act of 1934, as amended (the Exchange Act ), and included in the notice of meeting given by or at the direction of the Board, the foregoing clause (III) shall be the exclusive means for a stockholder to propose business to be brought before an annual meeting of stockholders. Stockholders seeking to nominate persons for election to the Board must comply with Section 3.2 , and this Section 2.7 shall not be applicable to nominations.
(i) In addition to any other applicable requirements, for business (other than nominations) to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation and such business must otherwise be a proper matter for stockholder action. Subject to Section 2.7(a)(iv) , a stockholders notice to the Secretary with respect to such business, to be timely, must comply with the provisions of this Section 2.7(a)(i) . A stockholders notice must be received by the Secretary at the principal executive offices of the Corporation not later than the close of business on the 90th day nor earlier than the opening of business on the 120th day before the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that if the annual meeting is called for a date that is more than 30 days earlier or more than 60 days later than such anniversary date, notice by the stockholder to be timely must be so received not earlier than the opening of business on the 120th day before the meeting and not later than the later of (x) the close of business on the 90th day before the meeting or (y) the close of business on the 10th day following the day on which public announcement of the date of the annual meeting is first made by the Corporation. Notwithstanding the previous sentence, for purposes of determining whether a stockholders notice shall have been received in a timely manner for the annual meeting of stockholders in 2011, to be timely, a stockholders notice must have been received not later than the close of business on February 15, 2011, nor earlier than the opening of business on January 15, 2011. The public announcement of an adjournment or postponement of an annual meeting shall not commence a new time period for the giving of a stockholders notice as described in this Section 2.7(a) .
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(ii) To be in proper written form, a stockholders notice to the Secretary with respect to any business (other than director nominations which are the subject of Section 3.2 ) must set forth:
(A) as to each such matter such stockholder proposes to bring before the annual meeting (1) a brief description of the business desired to be brought before the annual meeting and any material interest in such business of such stockholder and any Stockholder Associated Person (as defined below), individually or in the aggregate, (2) the text of the proposal or business (including the text of any resolutions proposed for consideration and if such business includes a proposal to amend these By-Laws, the text of the proposed amendment) and (3) the reasons for conducting such business at the annual meeting;
(B) the name and address of the stockholder proposing such business, as they appear on the Corporations books;
(C) the class or series and number of shares of capital stock of the Corporation that are owned of record or are directly or indirectly owned beneficially by such stockholder and by any Stockholder Associated Person;
(D) any proxy (other than a revocable proxy given in response to a solicitation made pursuant to Section 14(a) (or any successor thereof) of the Exchange Act by way of a solicitation statement filed on Schedule 14A), contract, arrangement, understanding or relationship pursuant to which such stockholder or any Stockholder Associated Person has a right to vote any shares of the Corporation;
(E) any Derivative Position held by such Stockholder and by any Stockholder Associated Person;
(F) a description of all agreements, arrangements or understandings (written or oral) between or among such stockholder, any Stockholder Associated Person or any other person or persons (including their names) in connection with the proposal of such business by such stockholder;
(G) any other information relating to such stockholder and any Stockholder Associated Person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitation of proxies for election of directors (even if an election contest is not involved), or would be otherwise required, in each case pursuant to Section 14 (or any successor thereof) of the Exchange Act and the rules and regulations promulgated thereunder;
(H) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting; and
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(I) a statement of whether such stockholder or any Stockholder Associated Person intends, or is part of a group that intends, to solicit proxies in connection with the proposal.
(iii) The foregoing notice requirements of this Section 2.7(a) shall be deemed satisfied by a stockholder as to any proposal made pursuant to Rule 14a-8 (or any successor thereof) of the Exchange Act if the stockholder has notified the Corporation of such stockholders intention to present such proposal at an annual meeting in compliance with Rule 14a-8 (or any successor thereof) of the Exchange Act. No business shall be conducted at the annual meeting of stockholders except business brought before the annual meeting in accordance with the procedures set forth in this Section 2.7(a) , provided, however, that once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this Section 2.7(a) shall be deemed to preclude discussion by any stockholder of any such business conducted in accordance with the rules for such meeting as set forth in Section 2.8 . If the Board or the chairman of the annual meeting determines that any stockholder proposal was not made in accordance with the provisions of this Section 2.7(a) or that the information provided in a stockholders notice does not satisfy the information requirements of this Section 2.7(a) , such proposal shall not be presented for action at the annual meeting. Notwithstanding the foregoing provisions of this Section 2.7(a) , if the stockholder (or a qualified representative of the stockholder) does not appear at the annual meeting of stockholders of the Corporation to present the proposed business, such proposed business shall not be transacted, notwithstanding that proxies in respect of such matter may have been received by the Corporation.
(iv) In addition to the provisions of this Section 2.7(a) , a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth herein. Nothing in this Section 2.7(a) shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporations proxy statement pursuant to Rule 14a-8 (or any successor thereof) under the Exchange Act.
(b) Special Meetings of Stockholders . Any business may be transacted at a special meeting of stockholders, provided that with respect to each special meeting of stockholders, only such business shall be conducted as is permitted by Section 2.3 . Nominations of persons for election to the Board may be made at a special meeting of stockholders pursuant to Section 3.2 . Notwithstanding any provision contained herein, in the case of a special meeting of stockholders called pursuant to a Special Meeting Request, to be timely, a stockholders notice to the Secretary must be received by the Secretary at the principal executive offices of the Corporation not later than 15 days prior to such meeting.
Section 2.8 Conduct of Meetings . The chairman of each annual and special meeting of stockholders shall be the Chairman of the Board or, in the absence (or inability or refusal to act) of the Chairman of the Board, the Chief Executive Officer (if he or she shall be a director) or such other person as shall be appointed by the Board. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the chairman of the meeting. The Board may adopt or, in the
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absence thereof, the chairman of the meeting may prescribe, such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with these By-Laws or such rules and regulations, the chairman of any meeting of stockholders shall have the right and authority to convene, adjourn and close the meeting, and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board or prescribed by the chairman of the meeting, may include, without limitation, the following: (a) the establishment of an agenda or order of business for the meeting; (b) rules and procedures for maintaining order at the meeting and the safety of those present; (c) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine; (d) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (e) limitations on the time allotted (to individuals and in the aggregate) to questions or comments by participants. Unless and to the extent determined by the Board or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure. The secretary of each annual and special meeting of stockholders shall be the Secretary or, in the absence (or inability or refusal to act) of the Secretary, the chairman of the meeting may appoint any person to act as secretary of the meeting.
Section 2.9 No Action by Consent of Stockholders in Lieu of Meeting . Except as otherwise expressly provided by the terms of any series of Preferred Stock permitting the holders of such series of Preferred Stock to act by written consent, any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of the stockholders of the Corporation, unless a majority of the Whole Board approves in advance the taking of such action by means of written consent of stockholders, in which case such action may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum voting power that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation to its registered office in the State of Delaware, the Corporations principal place of business, or the Secretary of the Corporation. Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within 60 days of the date the earliest dated consent is delivered to the Corporation, a written consent or consents signed by a sufficient number of holders to take such action are delivered to the Corporation by delivery to the Corporations registered office in the State of Delaware, the Corporations principal place of business, or the Secretary. Delivery made to the Corporations registered office shall be by hand or by certified or registered mail, return receipt requested. An electronic transmission consenting to the action to be taken and transmitted by a stockholder, proxyholder or a person or persons authorized to act for a stockholder or proxyholder shall be deemed to be written, signed and dated for purposes hereof if such electronic transmission sets forth or is delivered with information from which the Corporation can determine that such transmission was transmitted by a stockholder or proxyholder (or by a person authorized to act for a stockholder or proxyholder) and the date on which such stockholder, proxyholder or authorized person transmitted such transmission. The date on which such electronic transmission is transmitted shall be deemed to be the date on which such consent was signed. No consent given by electronic transmission shall be deemed to have been delivered until such
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consent is reproduced in paper form and delivered to the Corporation by delivery either to the Corporations registered office in the State of Delaware, the Corporations principal place of business, or the Secretary of the Corporation. Delivery made to the Corporations registered office shall be made by hand or by certified or registered mail, return receipt requested. Notwithstanding the limitations on delivery in the previous sentence, consents given by electronic transmission may be otherwise delivered to the Corporations principal place of business or to the Secretary if, to the extent, and in the manner provided by resolution of a majority of the Whole Board. Any copy, electronic transmission or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used; provided that such copy, electronic transmission or other reproduction shall be a complete reproduction of the entire original writing. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for notice of such meeting had been the date that written consents signed by a sufficient number of holders were delivered to the Corporation as provided in this Section 2.9 .
ARTICLE III
DIRECTORS
Section 3.1 Powers . The business and affairs of the Corporation shall be managed by or under the direction of the Board, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-Laws required to be exercised or done by the stockholders. Directors need not be stockholders or residents of the State of Delaware.
Section 3.2 Advance Notice for Nomination of Directors .
(a) Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors by the stockholders of the Corporation, except as may be otherwise provided by the terms of one or more series of Preferred Stock with respect to the rights of holders of one or more series of Preferred Stock to elect directors. Nominations of persons for election to the Board at any annual meeting of stockholders, or at any special meeting of stockholders called for the purpose of electing directors as set forth in the Corporations notice of such special meeting, may be made (i) by or at the direction of the Board or (ii) by any stockholder of the Corporation (x) who is a stockholder of record on the date of the giving of the notice provided for in this Section 3.2 and who is entitled to vote in the election of directors at such meeting and (y) who complies with the notice procedures set forth in this Section 3.2 .
(b) In addition to any other applicable requirements, for a nomination to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a stockholders notice to the Secretary must comply with the provisions of this Section 3.2(b). A stockholders notice must be received by the Secretary at the principal executive offices of the Corporation: (i) in the case of an annual meeting, not later than the close of business on the 90th day nor earlier than the opening of business on the 120th day before the anniversary date of the immediately preceding annual
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meeting of stockholders; provided, however, that if the annual meeting is called for a date that is more than 30 days earlier or more than 60 days after such anniversary date, notice by the stockholder to be timely must be so received not earlier than the opening of business on the 120th day before the meeting and not later than the later of (x) the close of business on the 90th day before the meeting or (y) the close of business on the 10th day following the day on which public announcement of the date of the annual meeting is first made by the Corporation; (ii) except as specified in clause (iii), in the case of a special meeting of stockholders called for the purpose of electing directors, not earlier than the opening of business on the 120th day before the meeting and not later than the later of (x) the close of business on the 90th day before the meeting or (y) the close of business on the 10th day following the day on which public announcement of the date of the special meeting is first made by the Corporation; and (iii) in the case of a special meeting of stockholders called pursuant to a Special Meeting Request for the purpose of electing directors, not later than 15 days prior to such meeting. Notwithstanding the previous sentence, for purposes of determining whether a stockholders notice shall have been received in a timely manner for the annual meeting of stockholders in 2011, to be timely, a stockholders notice must have been received not later than the close of business on February 15, 2011, nor earlier than the opening of business on January 15, 2011. The public announcement of an adjournment or postponement of an annual meeting or special meeting shall not commence a new time period for the giving of a stockholders notice as described in this Section 3.2.
(c) Notwithstanding anything in paragraph (b) to the contrary, if the number of directors to be elected to the Board at an annual meeting is greater than the number of nominees of the Corporation and there is no public announcement by the Corporation specifying a decrease in the size of the Board at the time the notice of such meeting is given to stockholders, a stockholders notice required by this Section 3.2 shall be considered timely, but only with respect to the directorships for which the Corporation has failed to provide nominees, if it shall be received by the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the date on which such notice was given by the Corporation.
(d) To be in proper written form, a stockholders notice to the Secretary must set forth:
(i) as to each person whom the stockholder proposes to nominate for election as a director:
(A) the name, age, business address and residence address of the person,
(B) the principal occupation or employment of the person,
(C) the class or series and number of shares of capital stock of the Corporation that are owned of record or are directly or indirectly owned beneficially by the person,
(D) any Derivative Instrument directly or indirectly owned beneficially by such nominee, and
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(E) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 (or any successor thereof) of the Exchange Act and the rules and regulations promulgated thereunder; and
(ii) as to the stockholder giving the notice:
(A) the name and address of such stockholder as they appear on the Corporations books,
(B) the class or series and number of shares of capital stock of the Corporation that are owned of record or directly or indirectly owned beneficially by such Stockholder and any Stockholder Associated Person,
(C) any proxy (other than a revocable proxy given in response to a solicitation made pursuant to Section 14(a) (or any successor thereof) of the Exchange Act by way of a solicitation statement filed on Schedule 14A), contract, arrangement, understanding or relationship pursuant to which such stockholder or any Stockholder Associated Person has a right to vote any shares of the Corporation,
(D) any Derivative Position held by such Stockholder and by an Stockholder Associated Person,
(E) a description of all agreements, arrangements or understandings (written or oral) between or among such stockholder, any Stockholder Associated Person, any proposed nominee or any other person or persons (including their names) pursuant to which the nomination or nominations are to be made by such stockholder,
(F) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice,
(G) any other information relating to such stockholder and any Stockholder Associated Person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 (or any successor thereof) of the Exchange Act and the rules and regulations promulgated thereunder,
(H) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among such stockholder or any Stockholder Associated Person, or others acting in concert therewith, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, including, without limitation all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the
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stockholder making the nomination and any Stockholder Associated Person, or any person acting in concert therewith, was the registrant for purposes of such rule and the nominee was a director or executive officer of such registrant, and
(I) a statement of whether such stockholder or any Stockholder Associated Person intends, or is part of a group that intends, to solicit proxies for the election of the proposed nominee. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected.
(e) If the Board or the chairman of the meeting of stockholders determines that any nomination was not made in accordance with the provisions of this Section 3.2 , then such nomination shall not be considered at the meeting in question. Notwithstanding the foregoing provisions of this Section 3.2 , if the stockholder (or a qualified representative of the stockholder) does not appear at the meeting of stockholders of the Corporation to present the nomination, such nomination shall be disregarded, notwithstanding that proxies in respect of such nomination may have been received by the Corporation.
(f) In addition to the provisions of this Section 3.2 , a stockholder shall also comply with all of the applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth herein. Nothing in this Section 3.2 shall be deemed to affect any rights of the holders of Preferred Stock to elect directors pursuant to the Certificate of Incorporation or the right of the Board to fill newly created directorships and vacancies on the Board pursuant to the Certificate of Incorporation.
Section 3.3 Compensation . Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, the Board shall have the authority to fix the compensation of directors. The directors may be reimbursed their expenses, if any, of attendance at each meeting of the Board and may be paid either a fixed sum for attendance at each meeting of the Board or other compensation as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of committees of the Board may be allowed like compensation and reimbursement of expenses for service on the committee.
ARTICLE IV
BOARD MEETINGS
Section 4.1 Annual Meetings . The Board shall meet as soon as practicable after the close of each annual stockholders meeting at the place of the annual stockholders meeting unless the Board shall fix another time and place and give notice thereof in the manner required herein for special meetings of the Board. No notice to the directors shall be necessary to legally convene this meeting, except as provided in this Section 4.1 .
Section 4.2 Regular Meetings . Regularly scheduled, periodic meetings of the Board may be held without notice at such times, dates and places as shall from time to time be determined by the Board.
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Section 4.3 Special Meetings . Special meetings of the Board (a) may be called by the Chairman of the Board or the Chief Executive Officer and (b) shall be called by the Chairman of the Board, the Chief Executive Officer or Secretary on the written request of at least a majority of directors then in office, or the sole director, as the case may be, and shall be held at such time, date and place as may be determined by the person calling the meeting or, if called upon the request of directors or the sole director, as specified in such written request. Notice of each special meeting of the Board shall be given, as provided in Section 9.3 , to each director (i) at least 24 hours before the meeting if such notice is oral notice given personally or by telephone or written notice given by hand delivery or by means of a form of electronic transmission and delivery; (ii) at least two days before the meeting if such notice is sent by a nationally recognized overnight delivery service; and (iii) at least five days before the meeting if such notice is sent through the United States mail. If the Secretary shall fail or refuse to give such notice, then the notice may be given by the officer who called the meeting or the directors who requested the meeting. Any and all business that may be transacted at a regular meeting of the Board may be transacted at a special meeting. Except as may be otherwise expressly provided by applicable law, the Certificate of Incorporation, or these By-Laws, neither the business to be transacted at, nor the purpose of, any special meeting need be specified in the notice or waiver of notice of such meeting. A special meeting may be held at any time without notice if all the directors are present or if those not present waive notice of the meeting in accordance with Section 9.4 .
Section 4.4 Quorum; Required Vote . A majority of the Whole Board shall constitute a quorum for the transaction of business at any meeting of the Board, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board, except as may be otherwise specifically provided by applicable law, the Certificate of Incorporation or these By-Laws. If a quorum shall not be present at any meeting, a majority of the directors present may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.
Section 4.5 Consent In Lieu of Meeting . Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board or any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions (or paper reproductions thereof) are filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
Section 4.6 Organization . The chairman of each meeting of the Board shall be the Chairman of the Board or, in the absence (or inability or refusal to act) of the Chairman of the Board, a chairman elected from the directors present. The Secretary shall act as secretary of all meetings of the Board. In the absence (or inability or refusal to act) of the Secretary, the chairman of the meeting may appoint any person to act as secretary of the meeting.
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ARTICLE V
COMMITTEES OF DIRECTORS
Section 5.1 Establishment . The Board may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. Each committee shall keep regular minutes of its meetings and report the same to the Board when required. The Board shall have the power at any time to fill vacancies in, to change the membership of, or to dissolve any such committee.
Section 5.2 Available Powers . Any committee established pursuant to Section 5.1 hereof, to the extent permitted by applicable law and by resolution of the Board, shall have and may exercise all of the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that may require it.
Section 5.3 Alternate Members . The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of such committee.
Section 5.4 Procedures . Unless the Board otherwise provides, the time, date, place, if any, and notice of meetings of a committee shall be determined by such committee. Notice of each committee meeting shall be given, as provided in Section 9.3 , to each committee member (i) at least 24 hours before the meeting if such notice is oral notice given personally or by telephone or written notice given by hand delivery or by means of a form of electronic transmission and delivery; (ii) at least two days before the meeting if such notice is sent by a nationally recognized overnight delivery service; and (iii) at least five days before the meeting if such notice is sent through the United States mail. At meetings of a committee, a majority of the number of members of the committee (but not including any alternate member, unless such alternate member has replaced any absent or disqualified member at the time of, or in connection with, such meeting) shall constitute a quorum for the transaction of business. The act of a majority of the members present at any meeting at which a quorum is present shall be the act of the committee, except as otherwise specifically provided by applicable law, the Certificate of Incorporation, these By-Laws or the Board. If a quorum is not present at a meeting of a committee, the members present may adjourn the meeting from time to time, without notice other than an announcement at the meeting, until a quorum is present. Unless the Board otherwise provides and except as provided in these By-Laws, each committee designated by the Board may make, alter, amend and repeal rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board is authorized to conduct its business pursuant to Article III and Article IV of these By-Laws.
ARTICLE VI
OFFICERS
Section 6.1 Officers . The officers of the Corporation elected by the Board shall be a Chairman of the Board, a Chief Executive Officer, and such other officers as the Board from time to time may determine. Officers elected by the Board shall each have such powers and duties as generally pertain to their respective offices, subject to the specific provisions of this
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Article VI . Such officers shall also have such powers and duties as from time to time may be conferred by the Board. The Chairman of the Board or the Chief Executive Officer may also appoint such other officers (including, without limitation, a Treasurer, Secretary, Controller and one or more Vice Presidents) as may be necessary or desirable for the conduct of the business of the Corporation. Such other officers shall have such powers and duties and shall hold their offices for such terms as may be provided in these By-Laws or as may be prescribed by the Board or, if such officer has been appointed by the Chairman of the Board or the Chief Executive Officer, as may be prescribed by the appointing officer.
(a) Chairman of the Board . The Chairman of the Board shall preside when present at all meetings of the stockholders and the Board. The Chairman of the Board shall advise and counsel the Chief Executive Officer and other officers and shall exercise such powers and perform such duties as shall be assigned to or required of the Chairman of the Board from time to time by the Board or these By-Laws.
(b) Chief Executive Officer . The Chief Executive Officer shall be the chief executive officer of the Corporation, shall have general supervision of the affairs of the Corporation and general control of all of its business subject to the ultimate authority of the Board, and shall be responsible for the execution of the policies of the Board.
(c) Secretary .
(i) The Secretary shall attend all meetings of the stockholders, the Board and committees of the Board (at the request of the Board or such committee) and shall record the proceedings of such meetings in books to be kept for that purpose. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board and shall perform such other duties as may be prescribed by the Board, the Chairman of the Board or the Chief Executive Officer. The Secretary shall have custody of the corporate seal of the Corporation and the Secretary shall have authority to affix the same to any instrument requiring it, and when so affixed, it may be attested by his or her signature. The Board may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing thereof by his or her signature.
(ii) The Secretary shall keep, or cause to be kept, at the principal executive office of the Corporation or at the office of the Corporations transfer agent or registrar, if one has been appointed, a stock ledger, or duplicate stock ledger, showing the names of the stockholders and their addresses, the number and classes of shares held by each and, with respect to certificated shares, the number and date of certificates issued for the same and the number and date of certificates cancelled.
(d) Treasurer . The Treasurer shall perform all duties commonly incident to that office (including, without limitation, the care and custody of the funds and securities of the Corporation which from time to time may come into the Treasurers hands and the deposit of the funds of the Corporation in such banks or trust companies as the Board or the Chief Executive Officer may authorize).
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Section 6.2 Term of Office; Removal; Vacancies . The Chairman of the Board shall be elected annually by the Board at its first meeting held after each annual meeting of stockholders, and he or she shall hold office until the next annual meeting of the Board and until their successors are duly elected and qualified or until their earlier death, resignation, retirement, disqualification, or removal from office. Any officer, whether elected by the Board or appointed by the Chairman of the Board or the Chief Executive Officer, may be removed, with or without cause, at any time by the Board. Any officer appointed by the Chairman of the Board or the Chief Executive Officer may also be removed, with or without cause, by the Chairman of the Board or the Chief Executive Officer, as the case may be, unless the Board otherwise provides. Any vacancy occurring in any elected office of the Corporation may be filled by the Board. Any vacancy occurring in any office appointed by the Chairman of the Board or the Chief Executive Officer may be filled by the Chairman of the Board or the Chief Executive Officer as the case may be, unless the Board then determines that such office shall thereupon be elected by the Board, in which case the Board shall elect such officer.
Section 6.3 Other Officers . The Board may delegate the power to appoint such other officers and agents, and may also remove such officers and agents or delegate the power to remove same, as it shall from time to time deem necessary or desirable.
Section 6.4 Multiple Officeholders; Stockholder and Director Officers . Any number of offices may be held by the same person unless the Certificate of Incorporation or these By-Laws otherwise provide. Officers need not be stockholders or residents of the State of Delaware.
ARTICLE VII
SHARES
Section 7.1 Certificated and Uncertificated Shares . The shares of the Corporation shall be represented by certificates, provided that the Board may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed in accordance with Section 7.3 representing the number of shares registered in certificate form. The Corporation shall not have power to issue a certificate representing shares in bearer form.
Section 7.2 Multiple Classes of Stock . If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the Corporation shall (a) cause the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences or rights to be set forth in full or summarized on the face or back of any certificate that the Corporation issues to represent shares of such class or series of stock or (b) in the case of uncertificated shares, within a reasonable time after the issuance or transfer of such shares, send to the registered owner thereof a written notice containing the information required to be set forth on certificates as specified in clause (a) above; provided, however, that, except as otherwise provided by applicable law, in lieu of the foregoing requirements, there may be set forth on the
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face or back of such certificate or, in the case of uncertificated shares, on such written notice a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences or rights.
Section 7.3 Signatures . Each certificate representing capital stock of the Corporation shall be signed by or in the name of the Corporation by (a) the Secretary and (b) any other authorized officer of the Corporation. Any or all the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar on the date of issue.
Section 7.4 Consideration and Payment for Shares .
(a) Subject to applicable law and the Certificate of Incorporation, shares of stock may be issued for such consideration, having in the case of shares with par value a value not less than the par value thereof, and to such persons, as determined from time to time by the Board. The consideration may consist of any tangible or intangible property or benefit to the Corporation including cash, promissory notes, services performed, contracts for services to be performed or other securities.
(b) Subject to applicable law and the Certificate of Incorporation, shares may not be issued until the full amount of the consideration has been paid, unless upon the face or back of each certificate issued to represent any partly paid shares of capital stock or upon the books and records of the Corporation in the case of partly paid uncertificated shares, there shall have been set forth the total amount of the consideration to be paid therefor and the amount paid thereon up to and including the time said certificate representing certificated shares or said uncertificated shares are issued.
Section 7.5 Lost, Destroyed or Wrongfully Taken Certificates .
(a) If an owner of a certificate representing shares claims that such certificate has been lost, destroyed or wrongfully taken, the Corporation shall issue a new certificate representing such shares or such shares in uncertificated form if the owner: (i) requests such a new certificate before the Corporation has notice that the certificate representing such shares has been acquired by a protected purchaser; (ii) if requested by the Corporation, delivers to the Corporation a bond sufficient to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, wrongful taking or destruction of such certificate or the issuance of such new certificate or uncertificated shares; and (iii) satisfies other reasonable requirements imposed by the Corporation.
(b) If a certificate representing shares has been lost, destroyed or wrongfully taken, and the owner fails to notify the Corporation of that fact within a reasonable time after the owner has notice of such loss, apparent destruction or wrongful taking and the Corporation registers a transfer of such shares before receiving notification, the owner shall be precluded from asserting against the Corporation any claim for registering such transfer or a claim to a new certificate representing such shares or such shares in uncertificated form.
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Section 7.6 Transfer of Stock .
(a) If a certificate representing shares of the Corporation is presented to the Corporation with a stock power or other indorsement requesting the registration of transfer of such shares or an instruction is presented to the Corporation requesting the registration of transfer of uncertificated shares, the Corporation shall register the transfer as requested if:
(i) in the case of certificated shares, the certificate representing such shares has been surrendered;
(ii) (A) with respect to certificated shares, the indorsement is made by the person specified by the certificate as entitled to such shares; (B) with respect to uncertificated shares, an instruction is made by the registered owner of such uncertificated shares; or (C) with respect to certificated shares or uncertificated shares, the indorsement or instruction is made by any other appropriate person or by an agent who has actual authority to act on behalf of the appropriate person;
(iii) the Corporation has received a guarantee of signature of the person signing such indorsement or instruction or such other reasonable assurance that the indorsement or instruction is genuine and authorized as the Corporation may request;
(iv) the transfer does not violate any restriction on transfer imposed by the Corporation that is enforceable in accordance with Section 7.8(a) ; and
(v) such other conditions for such transfer as shall be provided for under applicable law have been satisfied.
(b) Whenever any transfer of shares shall be made for collateral security and not absolutely, the Corporation shall only record such fact in the entry of transfer if, when the certificate for such shares is presented to the Corporation for transfer or, if such shares are uncertificated, when the instruction for registration of transfer thereof is presented to the Corporation, both the transferor and transferee request the Corporation to do so.
Section 7.7 Registered Stockholders . Before due presentment for registration of transfer of a certificate representing shares of the Corporation or of an instruction requesting registration of transfer of uncertificated shares, the Corporation may treat the registered owner as the person exclusively entitled to inspect for any proper purpose the stock ledger and the other books and records of the Corporation, vote such shares, receive dividends or notifications with respect to such shares and otherwise exercise all the rights and powers of the owner of such shares, except that a person who is the beneficial owner of such shares (if held in a voting trust or by a nominee on behalf of such person) may, upon providing documentary evidence of beneficial ownership of such shares and satisfying such other conditions as are provided under applicable law, may also so inspect the books and records of the Corporation.
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Section 7.8 Effect of the Corporations Restriction on Transfer .
(a) A written restriction on the transfer or registration of transfer of shares of the Corporation or on the amount of shares of the Corporation that may be owned by any person or group of persons, if permitted by the DGCL and noted conspicuously on the certificate representing such shares or, in the case of uncertificated shares, contained in a notice sent by the Corporation to the registered owner of such shares within a reasonable time after the issuance or transfer of such shares, may be enforced against the holder of such shares or any successor or transferee of the holder including an executor, administrator, trustee, guardian or other fiduciary entrusted with like responsibility for the person or estate of the holder.
(b) A restriction imposed by the Corporation on the transfer or the registration of shares of the Corporation or on the amount of shares of the Corporation that may be owned by any person or group of persons, even if otherwise lawful, is ineffective against a person without actual knowledge of such restriction unless: (i) the shares are certificated and such restriction is noted conspicuously on the certificate; or (ii) the shares are uncertificated and such restriction was contained in a notice sent by the Corporation to the registered owner of such shares within a reasonable time after the issuance or transfer of such shares.
Section 7.9 Regulations . The Board shall have power and authority to make such additional rules and regulations, subject to any applicable requirement of law, as the Board may deem necessary and appropriate with respect to the issue, transfer or registration of transfer of shares of stock or certificates representing shares. The Board may appoint one or more transfer agents or registrars and may require for the validity thereof that certificates representing shares bear the signature of any transfer agent or registrar so appointed.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Right to Indemnification . Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a proceeding ), by reason of the fact that he or she is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter a Covered Person ), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent, or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized or permitted by applicable law, as the same exists or may hereafter be amended, against all expense, liability and loss (including, without limitation, attorneys fees, judgments, fines, ERISA excise taxes and penalties and amounts paid in settlement) reasonably incurred or suffered by such Covered Person in connection with such proceeding; provided, however, that, except as provided in Section 8.3 with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify a Covered Person in connection with a proceeding (or part thereof) initiated by such Covered Person only if such proceeding (or part thereof) is authorized by the Board (whether before, during or after the pendency of such proceeding).
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Section 8.2 Right to Advancement of Expenses . In addition to the right to indemnification conferred in Section 8.1 , a Covered Person shall also have the right to be paid by the Corporation the expenses (including, without limitation, attorneys fees) incurred in defending, testifying, or otherwise participating in any such proceeding in advance of its final disposition (hereinafter an advancement of expenses ); provided, however, that, if the Delaware General Corporation Law ( DGCL ) requires, an advancement of expenses incurred by a Covered Person in his or her capacity as a director or officer of the Corporation (and not in any other capacity in which service was or is rendered by such Covered Person, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking (hereinafter an undertaking ), by or on behalf of such Covered Person, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a final adjudication ) that such Covered Person is not entitled to be indemnified for such expenses under this Article VIII or otherwise.
Section 8.3 Right of Indemnitee to Bring Suit . If a claim under Section 8.1 or Section 8.2 is not paid in full by the Corporation within 60 days after a written claim therefor has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be 20 days, the Covered Person may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Covered Person shall also be entitled to be paid the expense of prosecuting or defending such suit. In (a) any suit brought by the Covered Person to enforce a right to indemnification hereunder (but not in a suit brought by a Covered Person to enforce a right to an advancement of expenses) it shall be a defense that, and (b) in any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that, the Covered Person has not met any applicable standard for indemnification set forth in the DGCL. Neither the failure of the Corporation (including its directors who are not parties to such action, a committee of such directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the Covered Person is proper in the circumstances because the Covered Person has met the applicable standard of conduct set forth in the DGCL, nor an actual determination by the Corporation (including a determination by its directors who are not parties to such action, a committee of such directors, independent legal counsel, or its stockholders) that the Covered Person has not met such applicable standard of conduct, shall create a presumption that the Covered Person has not met the applicable standard of conduct or, in the case of such a suit brought by the Covered Person, shall be a defense to such suit. In any suit brought by the Covered Person to enforce a right to indemnification or to an advancement of expenses hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the Covered Person is not entitled to be indemnified, or to such advancement of expenses, under this Article VIII or otherwise shall be on the Corporation.
Section 8.4 Non-Exclusivity of Rights . The rights provided to Covered Persons pursuant to this Article VIII shall not be exclusive of any other right that any Covered Person may have or hereafter acquire under applicable law, the Certificate of Incorporation, these By-Laws, an agreement, a vote of stockholders or disinterested directors, or otherwise.
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Section 8.5 Insurance . The Corporation may maintain insurance, at its expense, to protect itself and/or any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL.
Section 8.6 Indemnification of Other Persons . This Article VIII shall not limit the right of the Corporation to the extent and in the manner authorized or permitted by law to indemnify and to advance expenses to persons other than Covered Persons. Without limiting the foregoing, the Corporation may, to the extent authorized from time to time by the Board, grant rights to indemnification and to the advancement of expenses to any employee or agent of the Corporation and to any other person who is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, to the fullest extent of the provisions of this Article VIII with respect to the indemnification and advancement of expenses of Covered Persons under this Article VIII .
Section 8.7 Third Party Indemnitors . The Corporation hereby acknowledges that certain Covered Persons have certain rights to indemnification, advancement of expenses and/or insurance provided by third parties, including stockholders of the Corporation (collectively, the Third Party Indemnitors). The Corporation hereby agrees:
(a) that it is the indemnitor of first resort (i.e., its obligations to any such Covered Person are primary and any obligation of the Third Party Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by any such Covered Person are secondary);
(b) that it shall be required to advance the full amount of expenses incurred by any such Covered Person and shall be liable for the full amount of all Expenses, judgments, penalties, fines and amounts paid in settlement to the extent legally permitted and as required by the terms of the Certificate of Incorporation or these By-Laws (or any agreement between the Corporation and any such Covered Person), without regard to any rights any such Covered Person may have against the Third Party Indemnitors; and
(c) that it irrevocably waives, relinquishes and releases the Third Party Indemnitors from any and all claims against the Third Party Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof.
The Corporation further agrees that no advancement or payment by the Third Party Indemnitors on behalf of any such Covered Person with respect to any claim for which any such Covered Person has sought indemnification from the Corporation shall affect the foregoing and the Third Party Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of Indemnitee against the Corporation. The Corporation agrees that the Third Party Indemnitors are express third party beneficiaries of
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the terms of this Section 8.7 . Notwithstanding any other provision to the contrary in these By-Laws, the provisions of this Section 8.7 shall remain in full force and effect and shall not be repealed or amended for so long as the Company is party to those certain Director Nomination Agreements dated as of May 27, 2010, among the Company and the other parties thereto, as amended from time to time (the Director Nomination Agreements ).
Section 8.8 Amendments . Any repeal or amendment of this Article VIII by the Board or the stockholders of the Corporation or by changes in applicable law, or the adoption of any other provision of these By-Laws inconsistent with this Article VIII , shall, to the extent permitted by applicable law, be prospective only (except to the extent such amendment or change in applicable law permits the Corporation to provide broader indemnification rights to Covered Persons on a retroactive basis than permitted prior thereto), and will not in any way diminish or adversely affect any right or protection existing hereunder in respect of any act or omission occurring prior to such repeal or amendment or adoption of such inconsistent provision.
Section 8.9 Certain Definitions . For purposes of this Article VIII , (a) references to other enterprise shall include any employee benefit plan; (b) references to fines shall include any excise taxes assessed on a person with respect to an employee benefit plan; (c) references to serving at the request of the Corporation shall include any service that imposes duties on, or involves services by, a person with respect to any employee benefit plan, its participants, or beneficiaries; and (d) a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner not opposed to the best interest of the Corporation for purposes of Section 145 of the DGCL.
Section 8.10 Contract Rights . The rights provided to Covered Persons pursuant to this Article VIII (a) shall be contract rights based upon good and valuable consideration, pursuant to which a Covered Person may bring suit as if the provisions of this Article VIII were set forth in a separate written contract between the Covered Person and the Corporation, (b) shall fully vest at the time the Covered Person first assumes his or her position as a director or officer of the Corporation, (c) are intended to be retroactive and shall be available with respect to any act or omission occurring prior to the adoption of this Article VIII , (d) shall continue as to a Covered Person who has ceased to be a director or officer of the Corporation, and (e) shall inure to the benefit of the Covered Persons heirs, executors and administrators.
Section 8.11 Severability . If any provision or provisions of this Article VIII shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Article VIII shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Article VIII (including, without limitation, each such portion of this Article VIII containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.
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ARTICLE IX
MISCELLANEOUS
Section 9.1 Place of Meetings . If the place of any meeting of stockholders, the Board or committee of the Board for which notice is required under these By-Laws is not designated in the notice of such meeting, such meeting shall be held at the principal business office of the Corporation; provided, however, if the Board has, in its sole discretion, determined that a meeting shall not be held at any place, but instead shall be held by means of remote communication pursuant to Section 9.5 hereof, then such meeting shall not be held at any place.
Section 9.2 Fixing Record Dates .
(a) In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall not be more than 60 nor less than 10 days before the date of such meeting. If the Board so fixes a record date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of and to vote at a meeting of stockholders shall be at the close of business on the business day preceding the day on which notice is given, or, if notice is waived, at the close of business on the business day preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance with the foregoing provisions of this Section 9.2(a) at the adjourned meeting.
(b) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.
(c) In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which date shall not be more than 10 days after the date upon which the resolution fixing the record date is adopted by the Board. If no record date has been fixed by the Board, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board is otherwise required, shall be the
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first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or the Secretary of the Corporation. Delivery made to the Corporations registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board and prior action by the Board is otherwise required, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board adopts the resolution taking such prior action.
Section 9.3 Means of Giving Notice .
(a) Notice to Directors . Whenever under applicable law, the Certificate of Incorporation or these By-Laws notice is required to be given to any director, such notice shall be given either (i) in writing and sent by hand delivery, through the United States mail, or by a nationally recognized overnight delivery service for next day delivery, (ii) by means of electronic transmission, or (iii) by oral notice given personally or by telephone. A notice to a director will be deemed given as follows: (A) if given by hand delivery, orally, or by telephone, when actually received by the director, (B) if sent through the United States mail, when deposited in the United States mail, with postage and fees thereon prepaid, addressed to the director at the directors address appearing on the records of the Corporation, (C) if sent for next day delivery by a nationally recognized overnight delivery service, when deposited with such service, with fees thereon prepaid, addressed to the director at the directors address appearing on the records of the Corporation, (D) if sent by facsimile telecommunication, when sent to the facsimile number for such director appearing on the records of the Corporation, (E) if sent by email, when sent to the email address for such director appearing on the records of the Corporation, or (F) if sent by any other form of electronic transmission, when sent to the address, location or number (as applicable) for such director appearing on the records of the Corporation.
(b) Notice to Stockholders . Whenever under applicable law, the Certificate of Incorporation or these By-Laws notice is required to be given to any stockholder, such notice may be given (1) in writing and sent either by hand delivery, through the United States mail, or by a nationally recognized overnight delivery service for next day delivery, or (2) by means of electronic transmission consented to by the stockholder, to the extent permitted by, and subject to the conditions set forth in Section 232 of the DGCL. A notice to a stockholder shall be deemed given as follows:
(i) if given by hand delivery, when actually received by the stockholder,
(ii) if sent through the United States mail, when deposited in the United States mail, with postage and fees thereon prepaid, addressed to the stockholder at the stockholders address appearing on the stock ledger of the Corporation,
(iii) if sent for next day delivery by a nationally recognized overnight delivery service, when deposited with such service, with fees thereon prepaid, addressed to the stockholder at the stockholders address appearing on the stock ledger of the Corporation, and
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(iv) if given by a form of electronic transmission consented to by the stockholder to whom the notice is given and otherwise meeting the requirements set forth above,
(A) if by email, when directed to an email address at which the stockholder has consented to receive notice,
(B) if by a posting on an electronic network together with separate notice to the stockholder of such specified posting, upon the later of (1) such posting and (2) the giving of such separate notice, and
(C) if by any other form of electronic transmission, when directed to the stockholder.
A stockholder may revoke such stockholders consent to receiving notice by means of electronic communication by giving written notice of such revocation to the Corporation. Any such consent shall be deemed revoked if (1) the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with such consent and (2) such inability becomes known to the Secretary or to the Corporations transfer agent, or other person responsible for the giving of notice; provided, however, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.
(c) Notice to Stockholders Sharing Same Address . Without limiting the manner by which notice otherwise may be given effectively by the Corporation to stockholders, any notice to stockholders given by the Corporation under any provision of the DGCL, the Certificate of Incorporation or these By-Laws shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given. A stockholder may revoke such stockholders consent by delivering written notice of such revocation to the Corporation. Any stockholder who fails to object in writing to the Corporation within 60 days of having been given written notice by the Corporation of its intention to send such a single written notice shall be deemed to have consented to receiving such single written notice.
(d) Exceptions to Notice Requirements . Whenever notice is required to be given, under the DGCL, the Certificate of Incorporation or these By-Laws, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting that shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. If the action taken by the Corporation is such as to require the filing of a certificate with the Secretary of State of Delaware, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful.
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Whenever notice is required to be given by the Corporation, under any provision of the DGCL, the Certificate of Incorporation or these By-Laws, to any stockholder to whom (1) notice of two consecutive annual meetings of stockholders and all notices of stockholder meetings or of the taking of action by written consent of stockholders without a meeting to such stockholder during the period between such two consecutive annual meetings, or (2) all, and at least two payments (if sent by first-class mail) of dividends or interest on securities during a 12-month period, have been mailed addressed to such stockholder at such stockholders address as shown on the records of the Corporation and have been returned undeliverable, the giving of such notice to such stockholder shall not be required. Any action or meeting that shall be taken or held without notice to such stockholder shall have the same force and effect as if such notice had been duly given. If any such stockholder shall deliver to the Corporation a written notice setting forth such stockholders then-current address, the requirement that notice be given to such stockholder shall be reinstated. If the action taken by the Corporation is such as to require the filing of a certificate with the Secretary of State of Delaware, the certificate need not state that notice was not given to persons to whom notice was not required to be given pursuant to Section 230(b) of the DGCL. The exception in subsection (1) of the first sentence of this paragraph to the requirement that notice be given shall not be applicable to any notice returned as undeliverable if the notice was given by electronic transmission.
Section 9.4 Waiver of Notice . Whenever any notice is required to be given under applicable law, the Certificate of Incorporation, or these By-Laws, a written waiver of such notice, signed before or after the date of such meeting by the person or persons entitled to said notice, or a waiver by electronic transmission by the person entitled to said notice, shall be deemed equivalent to such required notice. All such waivers shall be kept with the books of the Corporation. Attendance at a meeting shall constitute a waiver of notice of such meeting, except where a person attends for the express purpose of objecting to the transaction of any business on the ground that the meeting was not lawfully called or convened.
Section 9.5 Meeting Attendance via Remote Communication Equipment .
(a) Stockholder Meetings . If authorized by the Board in its sole discretion, and subject to such guidelines and procedures as the Board may adopt, stockholders and proxyholders not physically present at a meeting of stockholders may, by means of remote communication:
(i) participate in a meeting of stockholders; and
(ii) be deemed present in person and vote at a meeting of stockholders, whether such meeting is to be held at a designated place or solely by means of remote communication, provided that (A) the Corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxyholder, (B) the Corporation shall implement reasonable measures to provide such stockholders and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings, and (C) if any stockholder or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such votes or other action shall be maintained by the Corporation.
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(b) Board Meetings . Unless otherwise restricted by applicable law, the Certificate of Incorporation or these By-Laws, members of the Board or any committee thereof may participate in a meeting of the Board or any committee thereof by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other. Such participation in a meeting shall constitute presence in person at the meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting was not lawfully called or convened.
Section 9.6 Dividends . The Board may from time to time declare, and the Corporation may pay, dividends (payable in cash, property or shares of the Corporations capital stock) on the Corporations outstanding shares of capital stock, subject to applicable law and the Certificate of Incorporation.
Section 9.7 Reserves . The Board may set apart out of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve.
Section 9.8 Contracts and Negotiable Instruments . Except as otherwise provided by applicable law, the Certificate of Incorporation or these By-Laws, any contract, bond, deed, lease, mortgage or other instrument may be executed and delivered in the name and on behalf of the Corporation by such officer or officers or other employee or employees of the Corporation as the Board may from time to time authorize. Such authority may be general or confined to specific instances as the Board may determine. The Chairman of the Board, the Chief Executive Officer, the President or any Vice President may execute and deliver any contract, bond, deed, lease, mortgage or other instrument in the name and on behalf of the Corporation. Subject to any restrictions imposed by the Board, the Chairman of the Board or the Chief Executive Officer may delegate powers to execute and deliver any contract, bond, deed, lease, mortgage or other instrument in the name and on behalf of the Corporation to other officers or employees of the Corporation under such persons supervision and authority, it being understood, however, that any such delegation of power shall not relieve such officer of responsibility with respect to the exercise of such delegated power.
Section 9.9 Fiscal Year . The fiscal year of the Corporation shall be fixed by the Board.
Section 9.10 Seal . The Board may adopt a corporate seal, which shall be in such form as the Board determines. The seal may be used by causing it or a facsimile thereof to be impressed, affixed or otherwise reproduced.
Section 9.11 Books and Records . The books and records of the Corporation may be kept within or outside the State of Delaware at such place or places as may from time to time be designated by the Board.
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Section 9.12 Resignation . Any director, committee member or officer may resign by giving notice thereof in writing or by electronic transmission to the Chairman of the Board, the Chief Executive Officer or the Secretary. The resignation shall take effect at the time specified therein, or at the time of receipt of such notice if no time is specified or the specified time is earlier than the time of such receipt. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
Section 9.13 Surety Bonds . Such officers, employees and agents of the Corporation (if any) as the Chairman of the Board, the Chief Executive Officer or the Board may direct, from time to time, shall be bonded for the faithful performance of their duties and for the restoration to the Corporation, in case of their death, resignation, retirement, disqualification or removal from office, of all books, papers, vouchers, money and other property of whatever kind in their possession or under their control belonging to the Corporation, in such amounts and by such surety companies as the Chairman of the Board, the Chief Executive Officer or the Board may determine. The premiums on such bonds shall be paid by the Corporation and the bonds so furnished shall be in the custody of the Secretary.
Section 9.14 Securities of Other Corporations . Powers of attorney, proxies, waivers of notice of meeting, consents in writing and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the Chairman of the Board or the Chief Executive Officer. Any such officer, may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities, or to consent in writing, in the name of the Corporation as such holder, to any action by such corporation, and at any such meeting or with respect to any such consent shall possess and may exercise any and all rights and power incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed. The Board may from time to time confer like powers upon any other person or persons.
Section 9.15 Amendments . In furtherance and not in limitation of the powers conferred upon it by law, the Board shall have the power to adopt, amend, alter or repeal the By-Laws. The affirmative vote of a majority of the Whole Board shall be required to adopt, amend, alter or repeal the By-Laws. The By-Laws also may be adopted, amended, altered or repealed by the stockholders to the extent permissible under the DGCL; provided, however, that in addition to any vote of the holders of any class or series of capital stock of the Corporation required by applicable law or the Certificate of Incorporation, the affirmative vote of the holders of at least a majority of the voting power of all outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required for the stockholders to adopt, amend, alter or repeal the By-Laws.
Section 9.16 Director Nomination Agreements . For so long as the Director Nomination Agreements shall remain in effect, the provisions of the Director Nomination Agreements shall be incorporated by reference into the relevant provisions hereof, and such provisions shall be interpreted and applied in a manner consistent with the terms of the Director Nomination Agreements.
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Section 9.17 Certain Definitions. For purposes of these By-Laws:
(a) Derivative Instrument shall mean any option, warrant, convertible security, stock appreciation right, swap or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, whether or not such instrument or right is subject to settlement in the underlying class or series of shares of the Corporation or otherwise.
(b) Derivative Position shall mean (i) any Derivative Instrument directly or indirectly owned beneficially by a stockholder or by any Stockholder Associated Person and any other direct or indirect opportunity of a stockholder or any Stockholder Associated Person to profit or share in any profit derived from any increase or decrease in the value of shares of the Corporation, (ii) any short interest in any security of the Corporation held by a stockholder or any Stockholder Associated Person (for purposes of Section 2.7 and Section 3.2 a person shall be deemed to have a short interest in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security), (iii) any rights beneficially owned, directly or indirectly, by a stockholder or Stockholder Associated Person to dividends on the shares of the Corporation that are separated or separable from the underlying shares of the Corporation, (iv) any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which a stockholder or any Stockholder Associated Person is a general partner or, directly or indirectly, beneficially owns an interest in a general partner or (v) any performance-related fees (other than an asset-based fee) that a stockholder or any Stockholder Associated Person is entitled to based on any increase or decrease in the value of shares of the Corporation or Derivative Instruments, if any, including without limitation any such interests held by members of a stockholders or any Stockholder Associated Persons immediate family sharing the same household.
(c) electronic transmission means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process, including but not limited to transmission by facsimile transmission, email, telex, telegram and cablegram.
(d) public announcement shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) (or any successor provisions thereof) of the Exchange Act.
(e) Stockholder Associated Person shall mean for any stockholder that is a beneficial owner of shares of stock of the Corporation (i) any person controlling, directly or indirectly, or acting as a group (within the meaning of Rule 13-d under the Securities Exchange Act of 1934, as amended) with respect to the shares of stock of the Corporation with, such stockholder and (ii) any beneficial owner of shares of stock of the Corporation owned of record or beneficially by such stockholder.
(f) Whole Board shall mean the total number of directors the Corporation would have if there were no vacancies.
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EXHIBIT 3.3
COOPER-STANDARD HOLDINGS INC.
CERTIFICATE OF DESIGNATIONS
7% CUMULATIVE PARTICIPATING CONVERTIBLE
PREFERRED STOCK
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
COOPER-STANDARD HOLDINGS INC., a Delaware corporation (the Corporation ), does hereby certify that pursuant to the authority conferred upon the Corporations board of directors (together with any duly authorized committee thereof, the Board of Directors ) by the provisions of the Corporations Certificate of Incorporation, which authorize the issuance of up to 10,000,000 shares of preferred stock, par value $0.001 per share, the following resolutions were duly adopted by the Board of Directors on May 25, 2010:
RESOLVED, that the issue of a class of preferred stock, par value $0.001 per share, of the Corporation is hereby authorized and the designation, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof are hereby fixed as follows:
7% CUMULATIVE PARTICIPATING CONVERTIBLE
PREFERRED STOCK
1. Number and Designation . 2,000,000 shares of preferred stock of the Corporation shall be designated as 7% Cumulative Participating Convertible Preferred Stock (the 7% Preferred Stock ).
2. Rank . The 7% Preferred Stock shall, with respect to preferred dividend rights, rights of redemption and rights upon liquidation, dissolution or winding-up of the Corporation, rank:
(a) senior to the Common Stock and to all other classes or series of capital stock of the Corporation, except for any such other class or series, the terms of which expressly provide that it ranks on a parity with the 7% Preferred Stock as to preferred dividend rights, rights of redemption and rights on liquidation, dissolution or winding-up of the Corporation (together with any securities, options, warrants or other rights convertible into, exchangeable for or exercisable to acquire any such capital stock, the Junior Securities ); and
(b) on a parity with each class or series of capital stock of the Corporation, the terms of which expressly provide that it ranks on a parity with the 7% Preferred Stock as to preferred dividend rights, rights of redemption and rights on liquidation, dissolution or winding-up of the Corporation (together with any securities, options, warrants or other rights convertible into, exchangeable for or exercisable to acquire any such capital stock, the Parity Securities ).
3. Preferred Dividends .
(a) Cumulative Preferred Dividends . Holders of 7% Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available for the payment of dividends, cumulative preferred cash dividends (or, to the extent permitted by Section 3(b) hereof, dividends in kind) on each share of 7% Preferred Stock at the rate of 7% per annum on the sum of (x) the Stated Value (as defined below) and (y) all accrued and unpaid dividends payable pursuant to this Section 3 for all past Dividend Periods (whether or not earned or
declared). Such dividends shall be payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing on June 30, 2010 (or if any such date is not a business day, the next succeeding business day) (each such date being a Dividend Payment Date ). A dividend period (a Dividend Period ) is the period from and including a Dividend Payment Date (other than the initial Dividend Period, which shall commence on and include the date of original issue of the 7% Preferred Stock) to but excluding the next immediately succeeding Dividend Payment Date. The amount of dividends payable for each full Dividend Period shall be computed by dividing the annual dividend rate by four. The amount of dividends payable for the initial Dividend Period or any other period shorter or longer than a full Dividend Period shall be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends shall be payable to the holders of record of shares of 7% Preferred Stock as they appear on the Corporations stock register at the close of business on the applicable record date, which shall be the 15 th day of the month in which the Dividend Payment Date occurs or such other date, not less than 10 days nor more than 60 days before the applicable Dividend Payment Date, as may be fixed by the Board of Directors. Accrued and unpaid dividends for any past Dividend Periods may be declared and paid at any time (whether in cash or in kind), without reference to any Dividend Payment Date, to holders of record on the applicable record date, which shall be no more than 45 days preceding the payment date thereof, as may be fixed by the Board of Directors. The Corporation shall provide 10 days prior written notice to the holders of 7% Preferred Stock of any applicable record date.
Dividends on the 7% Preferred Stock shall be cumulative and accrue from the date of issue (and, in the case of any Additional Shares (as defined below), from the date such Additional Shares are issued), whether or not funds of the Corporation are legally available for the payment of such dividends and whether or not such dividends are earned or declared by the Board of Directors. Accrued and unpaid dividends for any past Dividend Periods (whether or not earned or declared) shall accrue cumulative dividends at the rate set forth in this Section 3(a).
(b) Payment In Kind . The Corporation may, at its option, when, as and if declared by the Board of Directors, out of funds legally available for the payment of dividends, and, to the extent legally permitted at such time and to the extent such dividends are not declared and paid in cash on the relevant Dividend Payment Date, shall pay the preferred
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dividends payable pursuant to Section 3(a) hereof in additional shares of 7% Preferred Stock ( Additional Shares ) instead of cash, for each Dividend Period; provided that in connection with any such payment in Additional Shares, all accrued and unpaid dividends on shares of 7% Preferred Stock for all past Dividend Periods shall have been declared and paid in full (whether in cash or in kind). To the extent any dividends otherwise required to be paid in Additional Shares pursuant to the preceding sentence are prohibited as a result of any legal prohibition, the Corporation and the Board of Directors shall use their reasonable best efforts to remove any such legal prohibition and shall pay any such dividend in Additional Shares at such time and to the extent any such legal prohibition is removed. To the extent dividends are paid in Additional Shares, (i) such shares shall be duly and validly issued and fully paid and non-assessable, free and clear of all liens and other claims and not subject to any preemptive rights, and (ii) each holder of 7% Preferred Stock shall receive a number of Additional Shares equal to the product of (x) the number of shares of 7% Preferred Stock held by such holder and (y) a fraction, the numerator of which shall be equal to the cash amount per share of 7% Preferred Stock that would have been paid if the dividend had been paid in cash instead of Additional Shares and the denominator of which shall be equal to the Stated Value. No fractional shares shall be issued upon the payment of dividends pursuant to this Section 3(b), and the number of shares to be issued upon payment of such dividends will be rounded up to the nearest whole share; provided that, in lieu of rounding up to the nearest whole share, the Corporation may, at its option, pay a cash adjustment in respect of such fractional interest equal to such fractional interest multiplied by the Stated Value.
(c) Restrictions on Dividends, etc. So long as any shares of 7% Preferred Stock are outstanding, the Corporation shall not, and shall cause its subsidiaries not to, directly or indirectly, declare, pay or set apart for payment any dividends or other distributions on any Junior Securities (other than dividends or other distributions payable in shares of Junior Securities, including Common Stock, and cash paid in lieu of fractional shares of Common Stock), or repurchase, redeem or otherwise acquire or set apart funds to repurchase, redeem or otherwise acquire any Junior Securities for any consideration (through a sinking fund or otherwise), unless in each case the full cumulative preferred dividends have been paid in cash or Additional Shares on all outstanding shares of 7% Preferred Stock for all past Dividend Periods and, in case of a dividend on, or repurchase, redemption or other acquisition of, any Junior Securities
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payable in cash, the Corporation shall have redeemed all shares of 7% Preferred Stock tendered in an offer pursuant to Section 9(c) hereof; provided , however , that the foregoing restriction will not apply to repurchases, redemptions or other acquisitions of Junior Securities:
(i) in connection with any employment contract or benefit plan or arrangement with or for the benefit of employees, officers or directors of the Corporation or any of its subsidiaries approved by the Board of Directors; or
(ii) in exchange for any other class or series of Junior Securities (including the purchase of fractional interests in Junior Securities pursuant to the conversion or exchange provisions of the Junior Securities).
If full cumulative preferred dividends on all outstanding shares of 7% Preferred Stock have not been paid, then all preferred dividends declared and paid on the 7% Preferred Stock and any Parity Securities shall be declared and paid in the same form and ratably in proportion to the respective amounts of accrued and unpaid dividends on the 7% Preferred Stock and such Parity Securities.
Other than the preferred dividends payable pursuant to this Section 3 and the participating dividends payable pursuant to Section 4 hereof, the holders of shares of 7% Preferred Stock shall not be entitled to receive any dividends on the shares of 7% Preferred Stock.
4. Participating Dividends .
(a) Participating Dividends . In addition to the preferred dividends payable pursuant to Section 3 hereof, holders of 7% Preferred Stock shall be entitled to receive, for each share of 7% Preferred Stock, when, as and if declared by the Board of Directors, out of funds legally available for the payment of dividends, dividends and distributions (other than dividends payable in Common Stock) to the same extent and on the same basis as and contemporaneously with dividends and distributions (other than dividends payable in Common Stock) as declared by the Board of Directors with respect to shares of Common Stock in an amount equal to the product of (i) the number of shares of Common Stock issuable upon conversion of a share of 7% Preferred Stock pursuant to Section 6 hereof on the record date for the dividend or distribution on the Common Stock and (ii) the dividend or distribution payable on a share of the Common
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Stock. Dividends payable pursuant to this Section 4(a) shall be payable to the holders of record of shares of 7% Preferred Stock as they appear on the Corporations stock register at the close of business on the same record date as is applicable to the Common Stock, which shall be not less than 10 days nor more than 60 days before the applicable dividend payment date, as may be fixed by the Board of Directors. The Corporation shall provide 10 days prior written notice to the holders of 7% Preferred Stock of any applicable record date.
(b) Restrictions on Dividends . So long as any shares of 7% Preferred Stock are outstanding, the Corporation shall not, directly or indirectly, declare, pay or set apart for payment any dividends or other distributions on shares of Common Stock (other than dividends payable in Common Stock), unless the holders of 7% Preferred Stock shall simultaneously receive (i) all accrued and unpaid dividends payable pursuant to Section 3 hereof for all past Dividend Periods as required pursuant to Section 3(c) hereof and, in case of a dividend on, or repurchase, redemption or other acquisition of, Common Stock payable in cash, the Corporation shall have redeemed all shares of 7% Preferred Stock tendered in an offer pursuant to Section 9(c) hereof and Article 2 the dividends payable pursuant to this Section 4 with respect to such dividend or distribution on the Common Stock.
5. Liquidation Preference . In the event of any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, before any payment or distribution of the Corporations property or assets (whether capital or surplus) shall be made to or set apart for the holders of Junior Securities, the holders of 7% Preferred Stock shall be entitled to receive an amount per share of 7% Preferred Stock equal to the greater of (i) the sum of $100 (which amount shall be appropriately adjusted in the event of any stock split, stock combination or other similar recapitalization of the 7% Preferred Stock) (the Stated Value ) and all accrued and unpaid dividends payable pursuant to Section 3 hereof (whether or not earned or declared) to the date of final distribution to the holders of 7% Preferred Stock and (ii) the amount such share of 7% Preferred Stock would be entitled to receive pursuant to the liquidation, dissolution or winding up of the Corporation if such share had been converted into shares of Common Stock in accordance with Section 6 hereof. If, upon any liquidation, dissolution or winding-up of the Corporation, the Corporations assets, or proceeds thereof, distributable among the holders of 7% Preferred Stock and any Parity Securities are insufficient to pay in full the aggregate amount of the liquidation preference payable in respect of all outstanding shares of 7% Preferred Stock and Parity Securities, such assets or the proceeds thereof shall be
5
distributed among the holders of the 7% Preferred Stock and Parity Securities ratably in proportion to the respective amounts of the liquidation preference that would be payable on such shares of 7% Preferred Stock and Parity Securities if all such amounts were paid in full. For the avoidance of doubt, in the event of the voluntary or involuntary commencement of a case or other proceeding against the Corporation seeking its liquidation, reorganization, debt arrangement, dissolution, winding up or composition, or the readjustment of its debts, or the appointment of a trustee, receiver, custodian, liquidator, assignee or the like for the Corporation of all or substantially all of its assets, or any similar action with respect to the Corporation, whether judicial or non-judicial or under any law relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debt, the amount of all accrued and unpaid dividends payable pursuant to Section 3 hereof (whether or not earned or declared) shall be included in the allowed amount of the liquidation preference to which holders of 7% Preferred Stock shall be entitled.
Subject to the rights of the holders of any Parity Securities, after payment shall have been made in full to the holders of 7% Preferred Stock pursuant to this Section 5, the holders of Junior Securities shall be entitled to receive all remaining assets of the Corporation, subject to the respective terms applying thereto.
For purposes of this Section 5, a voluntary or involuntary liquidation, dissolution or winding-up of the Corporation shall not include a voluntary sale, lease or exchange of all or substantially all of the Corporations property or assets or a consolidation or merger of the Corporation with any other Person.
6. Conversion at the Option of the Holders .
(a) Holders Right to Convert . Subject to the provisions of this Section 6, each holder of shares of 7% Preferred Stock has the right, at any time and from time to time, at such holders option, to convert all or part of the holders shares of 7% Preferred Stock into fully paid and non-assessable shares of Common Stock. The number of shares of Common Stock deliverable upon conversion of a share of 7% Preferred Stock shall be equal to the result obtained by dividing (i) the sum of the Stated Value and all accrued and unpaid dividends payable pursuant to Section 3 hereof (whether or not earned or declared) to the effective date of the conversion by (ii) $23.30574, adjusted as provided in Section 7 hereof (each such price, a Conversion Price ).
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(b) Conversion Notice; Conversion Procedures .
(i) In order to exercise the conversion right, the holder of shares of 7% Preferred Stock shall deliver to the Conversion Agent certificates for the shares to be converted with a written notice of election to convert completed and signed, specifying the number of shares of 7% Preferred Stock to be converted (each such notice, a conversion notice). Unless the shares of Common Stock issuable upon conversion are to be issued in the same name as the name in which the shares of 7% Preferred Stock are registered, each share surrendered for conversion shall be accompanied by instruments of transfer, in form reasonably satisfactory to the Conversion Agent, duly executed by the holder or the holders duly authorized attorney. The holders right to convert shares called for redemption pursuant to Section 9(b) hereof or for conversion pursuant to Section 8 hereof shall terminate at 5:00 p.m., New York City time, on the business day immediately preceding the redemption or conversion date, unless the Corporation shall default in paying the amount payable upon such redemption or issuing the shares of Common Stock upon such conversion.
(ii) As promptly as practicable after the delivery of the certificates and the conversion notice as provided above, the Corporation shall issue and deliver to the holder or, at the holders written direction, to the holders transferee a certificate or certificates for the whole number of shares of Common Stock issuable upon conversion. If a holders interest is a beneficial interest in a global share certificate representing 7% Preferred Stock, a book-entry transfer shall be made by the Conversion Agent upon compliance with the relevant procedures for converting a beneficial interest in a global security.
(iii) Each conversion shall be deemed to have been effected immediately prior to the close of business on the date on which the certificates for the shares of 7% Preferred Stock and conversion notice were received by the Conversion Agent. The Person in whose name or names any certificate or certificates for shares of Common Stock are issuable upon such conversion shall be deemed to have become the holder of record of the shares of Common Stock represented thereby at such time on such date.
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(c) General Provisions Applicable to Conversions .
(i) The Corporation shall pay any and all issuance, delivery and transfer taxes in respect of the issuance or delivery of shares of Common Stock on conversion of 7% Preferred Stock. The Corporation shall not, however, be required to pay any tax in respect of any transfer involved in the issuance or delivery of shares of Common Stock in a name other than that of the holder of the 7% Preferred Stock so converted, and no such issuance or delivery shall be made unless and until the Person requesting such issuance or delivery has paid to the Corporation the amount of any such tax or has established to the Corporations satisfaction that such tax has been paid.
(ii) In connection with the conversion of shares of 7% Preferred Stock, no fractional shares of Common Stock shall be issued. In lieu thereof the Corporation shall, at its option, either round up the number of shares to be issued to the nearest whole number or pay a cash adjustment in respect of such fractional interest in an amount equal to such fractional interest multiplied by the Closing Sale Price of the Common Stock on the day on which such shares of 7% Preferred Stock are deemed to have been converted. If more than one share of 7% Preferred Stock shall be surrendered for conversion by the same holder at the same time, the number of full shares of Common Stock issuable on conversion of those shares shall be computed on the basis of the total number of shares of 7% Preferred Stock so surrendered.
(iii) As of the effective time of the conversion, the shares of 7% Preferred Stock that are converted shall be cancelled and no longer be outstanding and restored to the status of authorized but unissued preferred stock and not designated as part of the 7% Preferred Stock, and all rights of a holder of such shares shall terminate, except for the right of the holder to receive the Common Stock and any declared and unpaid dividends payable pursuant to Section 4 hereof on such shares with a record date on or prior to the effective time of the conversion.
(iv) If fewer than all shares of 7% Preferred Stock represented by any share certificate shall be converted, the Corporation shall issue a new certificate representing the unconverted shares of 7% Preferred Stock to the holder thereof, without cost to any such holder.
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(v) The Corporation shall:
(A) at all times reserve and keep available, free from preemptive rights, for issuance upon the conversion of shares of 7% Preferred Stock such number of its authorized but unissued shares of Common Stock as shall from time to time be sufficient to permit the conversion of all outstanding shares of 7% Preferred Stock;
(B) prior to the delivery of any shares of Common Stock upon conversion of 7% Preferred Stock, comply with all applicable laws and requirements of any securities exchange on which the shares of Common Stock are listed that require action to be taken by the Corporation; and
(C) ensure that all shares of Common Stock delivered upon conversion of 7% Preferred Stock will, upon delivery, (x) be duly and validly issued and fully paid and non-assessable, free of all liens and other claims and not subject to any preemptive rights and (y) if the Common Stock is listed on any securities exchange, be listed on such securities exchange.
7. Anti-Dilution Adjustments . The Conversion Price shall be subject to the adjustments set forth in this Section 7.
(a) Stock Dividends . If the Corporation shall declare and pay a dividend or other distribution on the Common Stock payable in shares of Common Stock, then the Conversion Price in effect immediately prior to the close of business on the record date for such dividend or distribution shall be adjusted by dividing such Conversion Price by the following fraction:
OS 1 |
OS 0 |
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where,
OS 1 = the sum of the number of shares of Common Stock outstanding immediately prior to the close of business on the record date for such dividend or distribution plus the total number of shares of Common Stock issued pursuant to such dividend or distribution
OS 0 = the number of shares of Common Stock outstanding immediately prior to the close of business on the record date for such dividend or distribution
(b) Subdivisions and Combinations of the Common Stock . If the Corporation shall subdivide or split the outstanding shares of Common Stock into a greater number of shares or combine or reclassify the outstanding shares of Common Stock into a smaller number of shares, then the Conversion Price in effect immediately prior to the open of business on the effective date of such subdivision, split, combination or reclassification shall be adjusted by dividing such Conversion Price by the following fraction:
OS 1 |
OS 0 |
where,
OS 1 = the number of shares of Common Stock outstanding immediately after such subdivision, split, combination or reclassification
OS 0 = the number of shares of Common Stock outstanding immediately prior to such subdivision, split, combination or reclassification
(c) Issuer Tender, Exchange Offers . If the Corporation or any of its subsidiaries successfully completes a tender or exchange offer for the Common Stock where the cash and fair value of any other consideration included in the payment per share of the Common Stock
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exceeds the Closing Sale Price of the Common Stock on the Trading Day immediately following the expiration date of the tender or exchange offer, then the Conversion Price in effect at the close of business on the expiration date of the tender or exchange offer shall be adjusted by dividing such Conversion Price by the following fraction:
AC + (SP 1 x OS 1 ) |
SP 1 x OS 0 |
where,
AC = the aggregate cash and fair value of any other consideration payable for shares purchased in the tender or exchange offer
SP 1 = the Closing Sale Price of Common Stock on the Trading Day immediately following the expiration date of the tender or exchange offer
OS 1 = the number of shares of Common Stock outstanding immediately after the expiration of the tender or exchange offer (after giving effect to the purchase or exchange of all shares purchased or exchanged in the tender or exchange offer)
OS 0 = the number of shares of Common Stock outstanding immediately prior to the expiration of the tender or exchange offer (prior to giving effect to the purchase or exchange of all shares purchased or exchanged in the tender or exchange offer)
In the event that the Corporation, or one of its subsidiaries, is obligated to purchase shares of Common Stock pursuant to any such tender offer or exchange offer, but the Corporation, or such subsidiary, is permanently prevented by applicable law from effecting any such purchases, or all such purchases are rescinded, then the Conversion Price shall be readjusted to be such Conversion Price that would then be in effect if such tender offer or exchange offer had not been made.
Except as set forth in the preceding sentence, if the application of this Section 7(c) to any tender offer or exchange offer would result in an increase in the Conversion Price, no adjustment shall be made for such tender offer or exchange offer under this Section 7(c). If an adjustment to the Conversion Price
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is required under this Section 7(c), delivery of any additional shares of Common Stock that may be deliverable upon conversion as a result of an adjustment required under this Section 7(c) shall be delayed to the extent necessary in order to complete the calculations provided for in this Section 7(c).
(d) Rights Plans . To the extent that the Corporation has a rights plan in effect with respect to the Common Stock, upon conversion of any shares of the 7% Preferred Stock, holders will receive, in addition to the shares of Common Stock, the rights under the rights plan, unless, prior to the time of conversion, the rights have separated from the shares of Common Stock, in which case the Conversion Price in effect at the time of separation shall be adjusted as if the Corporation had made a distribution to all holders of Common Stock by dividing such Conversion Price by the following fraction, subject to readjustment in the event of the expiration, termination, or redemption of such rights:
SP 0 |
SP 0 FMV |
where,
SP 0 = the Current Market Price per share of Common Stock on the Trading Day immediately preceding the ex-date
FMV = the fair value of the portion of the distribution applicable to one share of Common Stock on the Trading Day immediately preceding the ex-date
(e) Reorganization Events . In the event of:
(i) any merger or consolidation involving the Corporation;
(ii) any sale, lease or other transfer of all or substantially all of the Corporations property and assets to a third party;
(iii) any recapitalization, reclassification or other change of the Common Stock (other than changes resulting from a subdivision or combination);
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(iv) any statutory share exchange;
in each case in which the Common Stock will be converted into or exchanged for securities, cash or other property, then at the effective time of such event, each share of 7% Preferred Stock outstanding immediately prior to such event will become convertible into the kind and amount of securities, cash and other property that a holder of such share of 7% Preferred Stock would have been entitled to receive if such holder had converted its 7% Preferred Stock into Common Stock immediately prior to such event. For purposes of this Section 7(e), the kind and amount of securities, cash or other property that a holder of Common Stock would have been entitled to receive upon such event if there is the right to elect the type of consideration receivable shall be deemed to be (x) the weighted average of the kind and amount of securities, cash or other property received by the holders of Common Stock that affirmatively make such an election or (y) if no holders of Common Stock affirmatively make such an election, the weighted average of the kind and amount of securities, cash or other property actually received by such holders.
The Corporation (or any successor) shall, within five days of the occurrence of any such event, provide written notice to the holders of the 7% Preferred Stock of the occurrence of such event and the kind and amount of securities, cash or other property into which the 7% Preferred Stock is convertible. Failure to deliver such notice, or any defect therein, shall not affect the operation of this Section 7(e).
(f) Certain Issuance or Sale of Common Stock or Derivatives . If the Corporation shall issue or sell shares of Common Stock (or any securities, options, warrants or other rights convertible, exchangeable or exercisable to acquire such stock) without consideration or at a consideration per share of Common Stock (calculated based on the aggregate proceeds to the Corporation upon issuance and any additional consideration payable to the Corporation upon any such conversion, exchange or exercise), that is less than the Conversion Price in effect at the close of business on the day immediately preceding such issuance, then such Conversion Price shall be adjusted by multiplying such Conversion Price by the following fraction:
(AC / CP) + OS 0 |
OS 1 |
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where,
AC = the aggregate proceeds to the Corporation upon issuance and any additional consideration payable to the Corporation upon any conversion, exchange or exercise based on the maximum number of shares of Common Stock issuable by the Corporation in connection therewith
CP = the Conversion Price in effect at the close of business on the day immediately preceding such issuance
OS 0 = the number of shares of Common Stock outstanding immediately prior to such issuance
OS 1 = the sum of the number of shares of Common Stock outstanding immediately prior to such issuance and the total number of shares of Common Stock issued or subject to issuance upon conversion, exchange or exercise of all securities, options, warrants or rights issued
In the event that any portion of the aggregate consideration received by the Corporation in connection with the issuance or sale is not received in cash but in securities or other property, the above adjustment shall be made considering the fair value of such security or other property.
The adjustment of the Conversion Price pursuant to this Section 7(f) shall not apply to any issuance of shares of Common Stock (or any securities, options, warrants or other rights convertible, exchangeable or exercisable to acquire such stock):
(i) to all holders of Common Stock;
(ii) in connection with (A) any stock dividends for which an adjustment to the Conversion Price is made pursuant to Section 7(a) hereof, Article 1 stock subdivisions, splits, combinations or reclassifications for which an adjustment to the Conversion Price is made pursuant to Section 7(b) hereof, or Article 3 mergers or consolidations for which an adjustment to the Conversion Price is made pursuant to Section 7(e) hereof;
(iii) in connection with any employment contract or benefit plan or arrangement with or for the benefit of employees, officers or directors of the Corporation or any of its subsidiaries approved by the Board of Directors;
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(iv) upon conversion of any shares of 7% Preferred Stock or exercise of any of the warrants issued by the Corporation on the Effective Date representing the right to purchase an aggregate of 2,419,753 shares of Common Stock (subject to adjustments pursuant to the terms of the warrants) at an initial exercise price of $27.33 per share (subject to adjustments pursuant to the terms of the warrants); and
(v) in connection with the issuance of rights to purchase an aggregate of less than 1% of the outstanding Common Stock (calculated on a fully diluted basis) as compensation to third party lenders or purchases of bonds in connection with bona fide arms length debt financing by the Corporation with the approval of the Board of Directors.
(g) Decreases in Conversion Price . The Corporation may make such decreases in the Conversion Price, in addition to any other decreases required by this Section 7, if the Corporation deems it advisable in order to avoid or diminish any income tax to holders of the Common Stock resulting from any dividend or distribution of shares of Common Stock (or issuance of rights or warrants to acquire shares of Common Stock) or from any event treated as such for income tax purposes.
The Corporation may, from time to time, decrease the Conversion Price by any amount for a period of at least 20 business days if the Board of Directors shall have determined that such decrease would be in the interests of the Corporation.
Whenever the Conversion Price is decreased pursuant to this Section 7(g), the Corporation shall mail to holders of record of the 7% Preferred Stock a notice of the decrease at least 10 days prior to the date the decrease takes effect, and such notice shall state the decreased Conversion Price and the period during which it will be in effect.
(h) Certain Determinations . For purposes of the computation of any adjustments required under this Section 7, the following shall apply:
(i) Adjustments shall be made successively whenever any event giving rise to such an adjustment shall occur.
15
(ii) Fair value shall be determined by the Board of Directors in good faith; provided that if the holders of 25% or more of the outstanding shares of 7% Preferred Stock shall object to any such determination, such fair value shall be determined by an independent appraiser selected by such holders and reasonably satisfactory to the Corporation. The fees and expenses of such independent appraiser shall be paid by the Corporation. The holders of 7% Preferred Stock shall be notified promptly of any consideration other than cash to be received or paid by the Corporation and furnished with a description of the consideration and the fair value thereof, as determined in accordance with the foregoing provisions.
(iii) All adjustments to the Conversion Price shall be calculated to the nearest cent.
(iv) No adjustment in the Conversion Price will be made unless such adjustment would require an increase or decrease of at least one percent therein; provided , that any adjustments which by reason of this clause are not required to be made shall be carried forward and taken into account in any subsequent adjustment; provided further that at any time a conversion at the Corporations option becomes effective, adjustments to the Conversion Price will be made with respect to any such adjustment carried forward and which has not been taken into account before such date.
(i) Certificates as to Adjustment . Upon the occurrence of each adjustment to the Conversion Price, the Corporation shall promptly compute the Conversion Price in accordance with this Section 7 and furnish to each holder of 7% Preferred Stock an officers certificate setting forth the Conversion Price and setting forth in reasonable detail the facts upon which such adjustment is based. In the case of any action or event that causes an adjustment of the Conversion Price pursuant to this Section 7 and requires the fixing of a record date, the Corporation shall, at least five days prior to such record date, give notice to each holder of 7% Preferred Stock specifying the record date. Failure to deliver such notice, or any defect therein, shall not affect the legality or validity of any such action or event.
(j) Other Adjustments . If, at any time as a result of the provisions of this Section 7, holders of 7% Preferred Stock shall become entitled to receive upon conversion any shares of capital stock other than
16
Common Stock, the number of such other shares so receivable upon conversion of this 7% Preferred Stock shall thereafter be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions contained herein.
8. Conversion at the Option of the Corporation . The Corporation may, at its option, cause the conversion of the shares of 7% Preferred Stock in accordance with this Section 8.
(a) Conversion in connection with IPO . The Corporation may cause the conversion of all of the shares of 7% Preferred Stock into shares of Common Stock as provided in Section 6 hereof immediately prior to the consummation of an initial underwritten public offering of shares of Common Stock by the Corporation pursuant to a registration statement under the Securities Act; provided that the Corporations right to cause such conversion shall be subject to the condition that the Corporation has obtained the affirmative vote of the holders of two-thirds of the outstanding shares of 7% Preferred Stock (whether by written consent or at a meeting of the holders of 7% Preferred Stock duly called for such purpose) approving such conversion and the condition set forth in Section 8(b)(ii).
(b) Conversion Right After the Third Anniversary . Except as otherwise provided in Section 8(a) hereof, the Corporation may not exercise its right to cause the conversion of any shares of 7% Preferred Stock pursuant to this Section 8 prior to the third anniversary of the Effective Date. From and after the third anniversary of the Effective Date, the Corporation may cause the conversion of some or all of the shares of 7% Preferred Stock into shares of Common Stock as provided in Section 6 hereof; provided that (i) the Closing Sale Price of the Common Stock for each of 30 consecutive Trading Days within 45 days prior to the date the Corporation gives notice to the holders of 7% Preferred Stock that it exercises its conversion right exceeded 155% of the applicable Conversion Price, (ii) the shares of Common Stock have been listed on the New York Stock Exchange, the NASDAQ Global Select Market or the NASDAQ Global Market and registered pursuant to Section 12 of the Exchange Act and (iii) the condition in Section 9(b)(ii) has been satisfied.
(c) Notices by the Corporation; Conversion Procedures .
(i) In order to exercise its conversion rights pursuant to Section 8(a) or 8(b) hereof, the Corporation shall provide notice of
17
conversion by first class mail to each holder of record of the shares of 7% Preferred Stock to be converted or issue a press release for publication and make this information available on its website. This notice must be mailed, or the Corporation must issue the press release, not more than 90 days or less than 20 days prior to the date the conversion shall become effective. In addition to any information required by applicable law or regulation, this notice or press release shall state, as appropriate, (A) the date on which the conversion shall become effective as determined by the Board of Directors, Article 2 the aggregate number of shares of 7% Preferred Stock to be converted and, if less than all of the shares of 7% Preferred Stock are to be converted, the percentage of shares of 7% Preferred Stock to be converted and Article 3 the Conversion Price and the number of shares of Common Stock to be issued upon conversion of each share of 7% Preferred Stock.
(ii) If the Corporation elects to cause the conversion of less than all of the 7% Preferred Stock, the Conversion Agent will select the 7% Preferred Stock to be converted by lot, on a pro rata basis or by another method the Conversion Agent considers fair and appropriate, including any method required by the applicable depositary (so long as such method is not prohibited by the rules of any securities exchange or quotation association on which the shares of 7% Preferred Stock are then traded or quoted).
(iii) On the date the conversion shall become effective as specified in the Corporations conversion notice, certificates representing shares of Common Stock shall be issued and delivered to the holders of 7% Preferred Stock or their designee upon presentation and surrender of the share certificate evidencing the 7% Preferred Stock to the Conversion Agent, and, if required, upon furnishing of appropriate endorsements and transfer documents. If a holders interest is a beneficial interest in a global share certificate representing 7% Preferred Stock, a book-entry transfer shall be made by the Conversion Agent upon compliance with the relevant procedures for converting a beneficial interest in a global security.
(iv) The general conversion provisions set forth in Section 6(c) hereof shall apply to a conversion pursuant to this Section 8.
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9. Redemption of 7% Preferred Stock.
(a) Holders Right on a Change of Control . At any time on or within 30 days after receipt of a notice from the Corporation that a Change of Control or a Cash Transaction has occurred, each holder of 7% Preferred Stock may require the Corporation to redeem, in cash from legally available funds, all or a portion of such holders shares of 7% Preferred Stock at a cash price per share equal to the greater of (i) the sum of the Stated Value and all accrued and unpaid dividends payable pursuant to Section 3 hereof (whether or not earned or declared) to the redemption date and (ii) the Conversion Value as of the 2 nd Trading Day prior to the redemption date; provided that, in case of a Cash Transaction prior to the fifth anniversary of the Effective Date, each holder of shares of 7% Preferred Stock exercising its rights pursuant to this Section 9(a) shall receive, instead of the cash price per share specified above, a cash price per share equal to the applicable amounts specified in Section 10 hereof.
(b) Redemption at the Corporations Option .
(i) Except as otherwise provided in Section 9(c) hereof, the 7% Preferred Stock shall not be redeemable at the Corporations option prior to the sixth anniversary of the Effective Date. From and after the sixth anniversary of the Effective Date, the Corporation may, at its option, redeem shares of 7% Preferred Stock, at any time in whole or from time to time in part, at a cash price per share, payable out of funds legally available for such payment, equal to the greater of (1) the sum of the Stated Value and all accrued and unpaid dividends payable pursuant to Section 3 hereof (whether or not earned or declared) to the date of redemption, which sum will, in the case of a redemption prior to the seventh anniversary of the Effective Date, be multiplied by 1.125, and (2) 75% of the Conversion Value as of the 2 nd Trading Day prior to the redemption date; provided that if the amount in clause (2) is greater than the amount in clause (1), the Corporation shall have the right, at its option, to redeem such shares by paying an amount in cash equal to the amount in clause (1) and issuing such number of shares of Common Stock valued at the Closing Sale Price of the Common Stock on the 2 nd Trading Day prior to the redemption date equal to the excess of the amount in clause (2) over the amount in clause (1). No fractional shares of Common Stock shall be issued and, in lieu thereof, the Corporation may, at its option, either round up the number of shares of Common Stock to be issued to the nearest whole share or pay a cash
19
adjustment in respect of such fractional interest in an amount equal to such fractional interest multiplied by the Closing Sale Price of the Common Stock on the 2 nd Trading Day prior to the redemption date. If more than one share of 7% Preferred Stock shall be redeemed from the same holder at the same time, the number of full shares of Common Stock issuable pursuant to the foregoing proviso shall be computed on the basis of the total number of shares of 7% Preferred Stock so redeemed.
(ii) The Corporations right to redeem shares of 7% Preferred Stock pursuant to this Section 9(b) shall be subject to the condition that a resale registration statement covering the shares of Common Stock issuable upon conversion of the 7% Preferred Stock has been filed by the Corporation and declared effective by the Commission prior to the time the Corporation provides a redemption notice pursuant to Section 9(d)(ii) hereof and such resale registration statement will continue to be effective and available for resales for at least 60 days after the relevant redemption date; provided that such resale registration statement shall not be required if (A) each holder of 7% Preferred Stock is not an affiliate of the Corporation, (A) the shares of Common Stock deliverable upon conversion will not be subject to any transfer or resale restrictions under applicable United States securities laws, (A) the Corporation has agreed to deliver upon conversion shares of Common Stock without any legend through the facilities of The Depositary Trust Company, New York, or any successor depositary and (D) upon conversion, the holders of 7% Preferred Stock would be permitted to freely resell their shares of Common Stock in the relevant market.
(iii) The Corporation may not redeem any shares of 7% Preferred Stock pursuant to this Section 9(b) and may not set aside any cash amount for such redemption, unless full cumulative preferred dividends payable pursuant to Section 3 hereof and full participating dividends payable pursuant to Section 4 hereof have been paid on all outstanding shares of 7% Preferred Stock for all past Dividend Periods.
(c) Redemption of Additional Shares . In connection with the payment of a dividend on, or repurchase, redemption or other acquisition of, Junior Securities payable in cash, the Corporation shall offer to redeem from each holder of shares of 7% Preferred Stock a number of shares equal to the product of such holders percentage of the outstanding shares
20
of 7% Preferred Stock and the excess, if any, of the aggregate number of Additional Shares issued pursuant to Section 3(b) hereof less the aggregate number of shares of 7% Preferred Stock previously offered to be redeemed pursuant to this Section 9(c) (whether such offer was accepted or not, as long as the Corporation redeems all shares of 7% Preferred Stock that have been tendered in the offer), at a cash price per share, payable out of funds legally available for such payment, equal to the sum of the Stated Value and all accrued and unpaid dividends payable on such shares pursuant to Section 3 hereof (whether or not earned or declared) to the redemption date. In connection with any such offer, each holder of shares of 7% Preferred Stock shall have the right but not the obligation to accept such offer, in whole or in part, at any time prior to the applicable redemption date by providing the Corporation with an acceptance notice and written instructions for the payment by wire transfer of the amount specified in this Section 9(c).
(d) Redemption Notices; Redemption Procedures .
(i) In order to exercise the redemption right pursuant to Section 9(a) hereof, the holder of the shares of 7% Preferred Stock shall deliver to the Corporation a written notice stating the holders intention to exercise its redemption right, the number of such holders shares of 7% Preferred Stock to be redeemed and written instructions for the payment by wire transfer of the amount specified in Section 9(a) hereof. The redemption date shall be the date 15 days after the receipt of such notice by the Corporation; provided that if such redemption date is not a business day, the redemption date shall be the next succeeding business day.
(ii) In order to exercise the redemption right pursuant to Section 9(b) hereof or make the redemption offer pursuant to Section 9(c) hereof, the Corporation shall give notice of any such redemption or offer to the holders of shares of 7% Preferred Stock as they appear on the Corporations stock register at the close of business two days before the redemption notice is being mailed by the Corporation by first class mail, postage prepaid, not less than 30 days nor more than 60 days before the applicable redemption date; provided that neither the failure to give such notice nor any defect therein shall affect the validity of the redemption notice except as to the holder to whom the Corporation has failed to give said notice or whose notice was defective. Such redemption notice shall state (A) the redemption date, (2) the number of shares of 7% Preferred Stock
21
to be redeemed or offered to be redeemed and, if fewer than all the shares of 7% Preferred Stock are to be redeemed, the number of shares to be redeemed or offered to be redeemed from such holder, (3) the redemption price, (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price and (5) that dividends on the shares of 7% Preferred Stock to be redeemed will cease to accrue on the date of redemption. In case of a redemption pursuant to Section 9(b) hereof, no later than five days prior to the redemption date specified in the Corporations redemption notice, each holder of 7% Preferred Stock shall provide the Corporation with written instructions for the payment by wire transfer of the amounts specified in Section 9(b)(i) hereof, as applicable. If fewer than all outstanding shares of 7% Preferred Stock are to be redeemed pursuant to Section 9(b) hereof, the total number of shares of 7% Preferred Stock to be redeemed shall be determined by the Board of Directors and such total number of shares shall be redeemed pro rata among the holders in proportion to the respective number of shares held by each holder.
(iii) Upon surrender of the certificates for any shares of 7% Preferred Stock to be redeemed pursuant to this Section 9 to the Conversion Agent, such shares of 7% Preferred Stock shall be redeemed by the Corporation on the redemption date as specified in Sections 9(d)(i) and (ii) hereof, at the applicable redemption price. If fewer than all shares of 7% Preferred Stock represented by any such certificate are redeemed, the Corporation shall issue a new certificate representing the unredeemed shares of 7% Preferred Stock to the holder thereof, without cost to any such holder. If a holders interest is a beneficial interest in a global share certificate representing 7% Preferred Stock, a book-entry transfer shall be made by the Conversion Agent upon compliance with the relevant procedures for redeeming a beneficial interest in a global security.
(e) Effect of Redemption . Shares of 7% Preferred Stock that have been repurchased, redeemed or otherwise acquired by the Corporation in any manner shall (upon compliance with any applicable provisions of the laws of the State of Delaware and the provisions hereof) be cancelled, cease to be outstanding and be restored to the status of authorized but unissued preferred stock and not designated as part of the 7% Preferred Stock, and all rights of a holder with respect to shares of 7% Preferred Stock so redeemed, purchased or otherwise acquired shall immediately terminate and dividends on the shares of 7% Preferred Stock shall cease to accrue at the redemption date, except for the right of the
22
holder to receive the relevant redemption price and any declared and unpaid dividends payable pursuant to Section 4 on such shares with a record date on or prior to the redemption date, unless the Corporation defaults in providing money for the payment of the redemption price of the shares of 7% Preferred Stock to be redeemed.
10. Corporations Right in a Cash Transaction. In the event of a Cash Transaction, the Corporation may, at its option, cause all of the shares of 7% Preferred Stock to be converted in the Cash Transaction into a cash amount equal to the greater of (x) the product of the Multiplier and the sum of the Stated Value and all accrued and unpaid dividends payable pursuant to Section 3 hereof (whether or not earned or declared) to the date of the consummation of the Cash Transaction and (y) the Conversion Value as of such date. Multiplier means 1.175 if the Cash Transaction occurs prior to the first anniversary of the Effective Date, 1.125 if the Cash Transaction occurs on or after the first anniversary and prior to the fifth anniversary of the Effective Date and 1.0 thereafter.
Within five days after the occurrence of a Change of Control or a Cash Transaction or the execution of a definitive agreement relating to such a transaction, the Corporation shall provide to the holders of 7% Preferred Stock written notice of such event.
11. Voting Rights.
(a) General . Holders of shares of 7% Preferred Stock are not entitled to any voting rights except as provided in this Section 11 or as otherwise provided by law.
(b) Common Stock Voting Rights . Except as otherwise provided by law, the holders of shares of 7% Preferred Stock will be entitled to vote, together with the holders of shares of Common Stock and not separately as a class, on all matters upon which holders of shares of Common Stock have the right to vote. The holders of shares of 7% Preferred Stock will be entitled to one vote for each share of Common Stock issuable upon conversion of a share of 7% Preferred Stock on the record date for the determination of the stockholders entitled to vote. Fractional votes by the holders of shares of 7% Preferred Stock will not be permitted, and the number of votes that each holder is entitled to vote will be determined based on the total number of shares of 7% Preferred Stock held by such holder on the applicable record date.
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(c) Class Voting Rights . So long as any shares of 7% Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote of the holders of two-thirds of the outstanding shares of 7% Preferred Stock (whether by written consent or at a meeting of the holders of 7% Preferred Stock duly called for such purpose):
(i) amend, alter or repeal (by merger, consolidation, reclassification or otherwise) any provision of its Certificate of Incorporation (including this Certificate) so as to adversely affect the preferences, rights or powers of the 7% Preferred Stock;
(ii) change the 7% Preferred Stock (whether by merger, consolidation, reclassification or otherwise) into cash, securities or other property except in accordance with the terms hereof or, in the case of a merger or consolidation of the Corporation in which it is not the surviving or resulting entity, the 7% Preferred Stock may be exchanged for an equivalent number of shares of preferred stock of the surviving or resulting entity with terms substantially the same as the 7% Preferred Stock;
(iii) issue any shares of 7% Preferred Stock other than shares to be issued to the Backstop Purchasers and management at the Effective Date as provided in the Commitment Agreement dated as of March 19, 2010 and any Additional Shares in payment of dividends in kind; provided however that any such issuance of additional shares shall require the affirmative vote of each holder of 7% Preferred Stock, unless such additional shares are offered to the holders of 7% Preferred Stock on the same terms on a pro rata basis; or
(iv) create, authorize or issue any other equity security the terms of which provide that it ranks on a parity or senior to the 7% Preferred Stock with respect to dividend rights, rights of redemption or rights upon liquidation, dissolution or winding-up of the Corporation, or increase the authorized amount of any such other class or series.
In connection with any solicitation or consent of votes of any holder of shares of 7% Preferred Stock pursuant to this Section 11(c) or Section 8(a) hereof, the solicitation or consent shall be made to all holders in the same manner and on the same terms and conditions (including substantially the same opportunity to invest in any securities issued as a result of any such
24
approval pursuant to Section 11(c) hereof). In exercising the voting rights set forth in this Section 11(c) or Section 8(a) hereof, each share of 7% Preferred Stock shall have one vote per share.
12. Reports . (a) So long as any shares of 7% Preferred Stock are outstanding, if the Corporation is not subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Corporation must provide the holders of 7% Preferred Stock within the time periods specified in the Commissions rules and regulations applicable to non-accelerated filers (as in effect on the Effective Date) with:
(i) 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 Corporation were required to file such forms, including a Managements Discussion and Analysis of Financial Condition and Results of Operations and, with respect to annual information only, a report thereon by the Corporations certified independent accountants, and
(ii) all current reports that would be required to be filed with the Commission on Form 8-K if the Corporation were required to file such reports.
In addition, whether or not required by the Commission, the Corporation will, if the Commission will accept the filing, file a copy of all of the information and reports referred to in clauses (i) and (ii) above with the Commission for public availability within the time periods specified in the Commissions rules and regulations. In addition, the Corporation will make the information and reports available to securities analysts and prospective investors upon request. The Corporation will be deemed to have furnished the holders of 7% Preferred Stock the reports referred to in clauses (i) and (ii) above if the Corporation has either filed such reports with the Commission (and such reports are publicly available) or posted such reports on the Corporation website and issued a press release in respect thereof.
(b) For so long as any of the shares of the 7% Preferred Stock constitute restricted securities under Rule 144, the Corporation will furnish to the holders and prospective investors, upon their request, and make available the information reasonably necessary to comply with Rule 144 and Rule 144A with respect to re-sales of the shares under the Securities Act, all to the extent required from time to time to enable the shares to be sold without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 and Rule 144A.
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13. Transferability . The shares of 7% Preferred Stock shall be freely transferable, subject to transfer restrictions under applicable securities laws.
14. Remedies . Nothing herein shall limit the right of a holder of 7% Preferred Stock to pursue actual damages for any failure by the Corporation to comply with the terms of this Certificate and a holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.
15. Certain Definitions .
(a) As used in this Certificate, the following terms shall have the meanings defined in this Section 15.
By-laws means the by-laws of the Corporation, as they may be amended from time to time.
Certificate means this Certificate of Designations.
Cash Transaction means a merger, consolidation, share exchange or other similar transaction or a sale, lease or other transfer in one transaction or a series of related transactions of all or substantially all of the consolidated assets of the Corporation and its subsidiaries in which all of the Common Stock is converted into the right to receive cash.
Change of Control shall be deemed to have occurred if any of the following events shall have occurred after the original issuance of the 7% Preferred Stock:
(i) any person or group (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) (other than Barclays Bank PLC, Silver Point Capital LP, Oak Hill Advisors, L.P., Capital Research and Management Company and each of their respective affiliates) acquires the beneficial ownership (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the total voting power of the Corporations outstanding voting stock; or
(ii) the consummation of (x) any merger, consolidation, share exchange or other similar transaction involving the
26
Corporation or any of its subsidiaries, (y) any sale, lease or other transfer in one transaction or a series of related transactions of all or substantially all of the consolidated assets of the Corporation and its subsidiaries, taken as a whole, to any Person other than one of the Corporations subsidiaries or, (z) any recapitalization, reclassification or change of the Common Stock (other than changes resulting from a subdivision or combination), in each case, other than a transaction in which the persons that beneficially owned, directly or indirectly, the voting stock of the Corporation immediately prior to such transaction beneficially own, directly or indirectly, shares of common stock representing a majority of the total voting power of all outstanding classes of common stock of the surviving or resulting entity, transferee or ultimate parent of such party; or
(iii) the first day on which a majority of the members of the Board of Directors are not Continuing Directors ; Continuing Director means, as of any date, any member of the Board of Directors who (x) was a member of the Board of Directors on the Effective Date or (y) was nominated for election, elected or appointed to the Board of Directors with the approval of a majority of the Continuing Directors who were members of the Board of Directors at the time of such nomination, election or appointment.
Closing Sale Price of the Common Stock on any day means
(i) if the shares of Common Stock are listed on the New York Stock Exchange, the closing sale price per share of Common Stock (or if no closing sale price is reported, the last reported sale price) on such date on the New York Stock Exchange;
(ii) if the shares of Common Stock are not listed on the New York Stock Exchange, the closing sale price per share of Common Stock (or if no closing sale price is reported, the last reported sale price) on such date in composite trading for the principal United States national or regional securities exchange on which the shares of Common Stock are then listed;
(iii) if the shares of Common Stock are not listed on a United States national or regional securities exchange, the last quoted bid price per share of Common Stock in the over-the-counter market on the relevant date as reported by Pink OTC Markets Inc. or a similar organization; or
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(iv) if the shares of Common Stock are not quoted as described in clause (iii) above, the market price per share of Common Stock on the relevant date as determined in good faith by the Board of Directors, subject to Section 7(h)(ii) hereof.
Commission means the United States Securities and Exchange Commission.
Common Stock means the Corporations common stock, par value $0.001 per share.
Conversion Agent shall mean Computershare Trust Company, N.A. and its respective successors and assigns.
Conversion Value as of any date means an amount equal to the product of the number of shares of Common Stock issuable upon conversion of a share of 7% Preferred Stock pursuant to Section 6 hereof and the Closing Sale Price of the Common Stock on such date, or in the case of a Cash Transaction, the cash amount paid for each share of Common Stock in such transaction.
Current Market Price as of any determination date means the average daily Closing Sale Prices of the Common Stock for the 10 consecutive Trading Days ending on the earlier of such determination date and, if applicable, the day before the ex-date with respect to the issuance, distribution, subdivision or combination requiring such computation immediately prior to the date in question. ex-date (1) when used with respect to any issuance or distribution, means the first date on which the Common Stock trades, regular way, on the relevant exchange or in the relevant market from which the Closing Sale Price was obtained without the right to receive such issuance or distribution, and (2) when used with respect to any subdivision, split, combination or reclassification of shares of Common Stock, means the first date on which the Common Stock trades, regular way, on such exchange or in such market after the time at which such subdivision, split, combination or reclassification becomes effective. If another issuance, distribution, subdivision, split, combination or reclassification to which Section 7 applies occurs during the period applicable for calculating the Current Market Price pursuant to this definition, the Current Market Price shall be calculated for such period in a manner determined by the Board of Directors to reflect the impact of such issuance, distribution, subdivision or combination on the Closing Sale Price of the Common Stock during such period.
Effective Date means the effective date of the Chapter 11 plan of reorganization relating to the Corporation and its U.S. subsidiaries.
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Exchange Act shall mean the United States Securities Exchange Act of 1934, as amended.
Person means an individual, a corporation, a partnership, a limited liability company, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.
Securities Act means the United States Securities Act of 1933, as amended.
Trading Day is any day during which trading in securities generally occurs on the New York Stock Exchange or, if the Common Stock is not listed on the New York Stock Exchange, on the principal United States national or regional securities exchange on which the Common Stock is then listed or, if the Common Stock is not listed on a United States national or regional securities exchange, on the principal other market on which the Common Stock is then traded.
(b) Each of the following terms is defined in the Section set forth opposite such term:
Term |
Section |
|
7% Preferred Stock |
1 | |
Additional Shares |
3(b) | |
Board of Directors |
Preamble | |
Conversion Price |
6(a) | |
Corporation |
Preamble | |
Dividend Payment Date |
3(a) | |
Dividend Period |
3(a) | |
Junior Securities |
2(a) | |
Multiplier |
10 | |
Parity Securities |
2(b) | |
Stated Value |
5 |
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IN WITNESS WHEREOF, Cooper-Standard Holdings Inc. has caused this Certificate of Designations to be signed and attested by the undersigned this 27th day of May, 2010.
COOPER-STANDARD HOLDINGS INC. | ||
By: |
/s/ Allen J. Campbell |
|
Name: | Allen J. Campbell | |
Title: | V.P. and Chief Financial Officer |
ATTEST: | ||
By: |
/s/ Timothy W. Hefferon |
|
Name: | Timothy W. Hefferon | |
Title: | Secretary |
Exhibit 4.1
EXECUTION COPY
CSA ESCROW CORPORATION
Issuer
8 1 / 2 % Senior Notes due 2018
INDENTURE
Dated as of May 11, 2010
U.S. BANK NATIONAL ASSOCIATION
Trustee
CROSS-REFERENCE TABLE
Trust Indenture Act Section |
Indenture Section | |||
310(a)(1) |
7.10 | |||
(a)(2) |
7.10 | |||
(a)(3) |
N.A. | |||
(a)(4) |
N.A. | |||
(b) |
7.08; 7.10 | |||
(c) |
N.A. | |||
311(a) |
7.11 | |||
(b) |
7.11 | |||
(c) |
N.A. | |||
312(a) |
2.05 | |||
(b) |
13.03 | |||
(c) |
13.03 | |||
313(a) |
7.06 | |||
(b)(1) |
N.A. | |||
(b)(2) |
7.06 | |||
(c) |
7.06 | |||
(d) |
7.06 | |||
314(a) |
4.02; 4.11 | |||
(b) |
N.A. | |||
(c)(1) |
13.04 | |||
(c)(2) |
13.04 | |||
(c)(3) |
N.A. | |||
(d) |
N.A. | |||
(e) |
13.05 | |||
(f) |
4.12 | |||
315(a) |
7.01 | |||
(b) |
7.05; 13.02 | |||
(c) |
7.01 | |||
(d) |
7.01 | |||
(e) |
6.11 | |||
316(a)(last sentence) |
13.06 | |||
(a)(1)(A) |
6.05 | |||
(a)(1)(B) |
6.04 | |||
(a)(2) |
N.A. | |||
(b) |
6.07 | |||
317(a)(1) |
6.08 | |||
(a)(2) |
6.09 | |||
(b) |
2.04 | |||
318(a) |
13.01 |
N.A. means Not Applicable.
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be part of the Indenture.
TABLE OF CONTENTS | ||||
Page | ||||
ARTICLE 1 | ||||
Definitions and Incorporation by Reference | ||||
SECTION 1.01. | Definitions | 1 | ||
SECTION 1.02. | Other Definitions | 38 | ||
SECTION 1.03. | Incorporation by Reference of Trust Indenture Act | 39 | ||
SECTION 1.04. | Rules of Construction | 40 | ||
SECTION 1.05. | Acts of Holders | 41 | ||
ARTICLE 2 | ||||
The Securities | ||||
SECTION 2.01. | Form and Dating | 42 | ||
SECTION 2.02. | Execution and Authentication | 44 | ||
SECTION 2.03. | Registrar and Paying Agent | 45 | ||
SECTION 2.04. | Paying Agent To Hold Money in Trust | 45 | ||
SECTION 2.05. | Securityholder Lists | 45 | ||
SECTION 2.06. | Transfer and Exchange | 45 | ||
SECTION 2.07. | Replacement Securities | 60 | ||
SECTION 2.08. | Outstanding Securities | 60 | ||
SECTION 2.09. | Temporary Securities | 60 | ||
SECTION 2.10. | Cancellation | 60 | ||
SECTION 2.11. | Defaulted Interest | 61 | ||
SECTION 2.12. | CUSIP Numbers, ISINs, etc. | 61 | ||
SECTION 2.13. | Issuance of Additional Securities | 61 | ||
ARTICLE 3 | ||||
Redemption | ||||
SECTION 3.01. | Notices to Trustee | 62 | ||
SECTION 3.02. | Selection of Securities To Be Redeemed | 62 | ||
SECTION 3.03. | Notice of Redemption | 62 | ||
SECTION 3.04. | Effect of Notice of Redemption | 63 | ||
SECTION 3.05. | Deposit of Redemption Price | 63 | ||
SECTION 3.06. | Securities Redeemed in Part | 63 | ||
SECTION 3.07. | Special Mandatory Redemption | 64 |
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Page | ||||
ARTICLE 4 | ||||
Covenants | ||||
SECTION 4.01. | Payment of Securities | 64 | ||
SECTION 4.02. | SEC Reports | 64 | ||
SECTION 4.03. | Limitation on Indebtedness | 66 | ||
SECTION 4.04. | Limitation on Restricted Payments | 70 | ||
SECTION 4.05. | Limitation on Restrictions on Distributions from Restricted Subsidiaries | 76 | ||
SECTION 4.06. | Limitation on Sales of Assets and Subsidiary Stock | 79 | ||
SECTION 4.07. | Limitation on Affiliate Transactions | 83 | ||
SECTION 4.08. | Activities of Escrow Issuer Prior to the Release Date and Assumption | 84 | ||
SECTION 4.09. | Change of Control | 85 | ||
SECTION 4.10. | Future Guarantors | 86 | ||
SECTION 4.11. | Compliance Certificate | 86 | ||
SECTION 4.12. | Further Instruments and Acts | 87 | ||
SECTION 4.13. | Limitation on Liens | 87 | ||
SECTION 4.14. | Escrow of Proceeds | 87 | ||
SECTION 4.15. | Covenant Suspension | 88 | ||
ARTICLE 5 | ||||
Successor Company | ||||
SECTION 5.01. | When Company May Merge or Transfer Assets. | 89 | ||
ARTICLE 6 | ||||
Defaults and Remedies | ||||
SECTION 6.01. | Events of Default | 91 | ||
SECTION 6.02. | Acceleration | 93 | ||
SECTION 6.03. | Other Remedies | 93 | ||
SECTION 6.04. | Waiver of Past Defaults | 93 | ||
SECTION 6.05. | Control by Majority | 94 | ||
SECTION 6.06. | Limitation on Suits | 94 | ||
SECTION 6.07. | Rights of Holders To Receive Payment | 95 | ||
SECTION 6.08. | Collection Suit by Trustee | 95 | ||
SECTION 6.09. | Trustee May File Proofs of Claim | 95 | ||
SECTION 6.10. | Priorities for Funds Collected by Trustee | 95 | ||
SECTION 6.11. | Undertaking for Costs | 96 | ||
SECTION 6.12. | Waiver of Stay or Extension Laws | 96 |
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Page | ||||
ARTICLE 7 | ||||
Trustee | ||||
SECTION 7.01. | Duties of Trustee | 96 | ||
SECTION 7.02. | Rights of Trustee | 97 | ||
SECTION 7.03. | Individual Rights of Trustee | 98 | ||
SECTION 7.04. | Trustees Disclaimer | 98 | ||
SECTION 7.05. | Notice of Defaults | 98 | ||
SECTION 7.06. | Reports by Trustee to Holders | 99 | ||
SECTION 7.07. | Compensation and Indemnity | 99 | ||
SECTION 7.08. | Replacement of Trustee | 100 | ||
SECTION 7.09. | Successor Trustee by Merger | 100 | ||
SECTION 7.10. | Eligibility; Disqualification | 101 | ||
SECTION 7.11. | Preferential Collection of Claims Against Company | 101 | ||
SECTION 7.12. | Escrow Authorization | 101 | ||
ARTICLE 8 | ||||
Discharge of Indenture; Defeasance | ||||
SECTION 8.01. | Discharge of Liability on Securities; Defeasance | 102 | ||
SECTION 8.02. | Conditions to Defeasance | 103 | ||
SECTION 8.03. | Application of Trust Money | 104 | ||
SECTION 8.04. | Repayment to Company | 104 | ||
SECTION 8.05. | Indemnity for Government Obligations | 104 | ||
SECTION 8.06. | Reinstatement | 104 | ||
ARTICLE 9 | ||||
Amendments | ||||
SECTION 9.01. | Without Consent of Holders | 105 | ||
SECTION 9.02. | With Consent of Holders | 106 | ||
SECTION 9.03. | Compliance with Trust Indenture Act | 107 | ||
SECTION 9.04. | Revocation and Effect of Consents and Waivers | 107 | ||
SECTION 9.05. | Notation on or Exchange of Securities | 108 | ||
SECTION 9.06. | Trustee To Sign Amendments | 108 |
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Page | ||||
ARTICLE 10 | ||||
[Reserved] | ||||
ARTICLE 11 | ||||
Guarantees | ||||
SECTION 11.01. | Guarantees | 108 | ||
SECTION 11.02. | Limitation on Liability | 110 | ||
SECTION 11.03. | Successors and Assigns | 110 | ||
SECTION 11.04. | No Waiver | 110 | ||
SECTION 11.05. | Modification | 110 | ||
SECTION 11.06. | Release of Subsidiary Guarantor | 111 | ||
SECTION 11.07. | Contribution | 111 | ||
ARTICLE 12 | ||||
[Reserved] | ||||
ARTICLE 13 | ||||
Miscellaneous | ||||
SECTION 13.01. | Trust Indenture Act Controls | 112 | ||
SECTION 13.02. | Notices | 112 | ||
SECTION 13.03. | Communication by Holders with Other Holders | 112 | ||
SECTION 13.04. | Certificate and Opinion as to Conditions Precedent | 113 | ||
SECTION 13.05. | Statements Required in Certificate or Opinion | 113 | ||
SECTION 13.06. | When Securities Disregarded | 113 | ||
SECTION 13.07. | Rules by Trustee, Paying Agent and Registrar | 113 | ||
SECTION 13.08. | Legal Holidays | 114 | ||
SECTION 13.09. | Governing Law | 114 | ||
SECTION 13.10. | No Recourse Against Others | 114 | ||
SECTION 13.11. | Successors | 114 | ||
SECTION 13.12. | Multiple Originals | 114 | ||
SECTION 13.13. | Table of Contents; Headings | 114 | ||
SECTION 13.14. | Indenture Controls | 114 | ||
SECTION 13.15. | Severability | 114 | ||
SECTION 13.16. | Qualification of Indenture | 114 | ||
SECTION 13.17. | No Adverse Interpretation of Other Agreements | 115 | ||
Exhibit A | Form of Security | |||
Exhibit B | Form of Certificate of Transfer | |||
Exhibit C | Form of Certificate of Exchange | |||
Exhibit D | Form of Supplemental Indenture Related to the Guarantors | |||
Exhibit E | Form of Supplemental Indenture Related to the Assumption |
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INDENTURE, dated as of May 11, 2010, between CSA ESCROW CORPORATION, a Delaware corporation (the Escrow Issuer) and U.S. BANK NATIONAL ASSOCIATION, a national banking association, as trustee (the Trustee). For purposes of this Indenture prior to the Assumption (as defined herein), references to the Company in this Indenture refer only to the Escrow Issuer, and for purposes of this Indenture following the Assumption, references to the Company in this Indenture refer only to COOPER-STANDARD AUTOMOTIVE INC., an Ohio corporation.
The Escrow Issuer has duly authorized the execution and delivery of this Indenture to provide for the issuance of $450,000,000 aggregate principal amount of 8 1 / 2 % Senior Notes due 2018 issued on the date hereof (the Initial Securities).
Each party hereto agrees as follows for the benefit of the other parties hereto and for the equal and ratable benefit of the Holders of the Companys Initial Securities and the Exchange Securities (collectively, the Securities).
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions .
144A Global Security means a Global Security substantially in the form of Exhibit A attached hereto bearing the Global Security Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Securities sold in reliance on Rule 144A.
Additional Assets means (1) any property, plant or equipment used in a Related Business including improvements, through capital expenditures or otherwise, relating thereto (whether previously owned or acquired at the time such improvements are being made); (2) the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary; or (3) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary; provided , however , that any such Restricted Subsidiary described in clause (2) or (3) above is primarily engaged in a Related Business.
Additional Securities means Securities issued under this Indenture after the Issue Date and in compliance with Sections 2.13 and 4.03, it being understood that any Securities issued in exchange for or replacement of any Initial Security issued on the Issue Date shall not be an Additional Security, including any Exchange Securities issued pursuant to a Registration Rights Agreement.
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 the purposes of this definition, control when used with respect to any Person means
the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms controlling and controlled have meanings correlative to the foregoing.
Applicable Premium means with respect to any Security on any redemption date, the greater of (1) 1.00% of the principal amount of such Security and (2) the excess of (A) the present value at such redemption date of (i) the redemption price of such Security on May 1, 2014 (such redemption price being set forth in the table appearing in the second paragraph of section 5 of the Securities, exclusive of any accrued interest) plus (ii) all required interest payments due on such Security through May 1, 2014 (but excluding interest paid prior to the redemption date and accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points, over (B) the principal amount of such Security on such redemption date.
Applicable Procedures means, with respect to any transfer or exchange of or for beneficial interests in any Global Security, the rules and procedures of the Depositary, Euroclear and/or Clearstream that apply to such transfer or exchange.
Asset Sale means any sale, lease, transfer or other disposition (or series of related sales, leases, transfers or dispositions) by the Company or any Restricted Subsidiary, including any disposition by means of a merger, consolidation or similar transaction (each referred to for the purposes of this definition as a disposition), of:
(1) any shares of Capital Stock of a Restricted Subsidiary (other than directors qualifying shares or shares required by applicable law to be held by a Person other than the Company or a Restricted Subsidiary and Preferred Stock issued in compliance with the covenant described under Section 4.03);
(2) all or substantially all the assets of any division or line of business of the Company or any Restricted Subsidiary; or
(3) any other assets of the Company or any Restricted Subsidiary outside of the ordinary course of business of the Company or such Restricted Subsidiary
other than, in the case of clauses (1), (2) and (3) above, (A) a disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Restricted Subsidiary, (B) for purposes of Section 4.06 only, (i) a disposition that constitutes a Restricted Payment (or would constitute a Restricted Payment but for the exclusions from the definition thereof) and that is not prohibited by Section 4.04 and (ii) a disposition of all or substantially all the assets of the Company in accordance with Section 5.01, (C) any disposition that constitutes a Change of Control, (D) a disposition of assets with a Fair Market Value of less than $4.0 million, (E) a disposition of cash or Temporary Cash Investments, (F) sales or other dispositions of obsolete, uneconomical, negligible, worn-out or surplus assets in the ordinary course of business (including equipment and intellectual property), (G) sales, transfers and other dispositions of Receivables and Related Assets (as defined in the definition of Permitted Securitization) pursuant to Permitted Securitizations, (H) the creation of a Lien (but not the sale or other disposition of the
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property subject to such Lien) and (I) any sale, conveyance or other disposition of property or assets of the Company or any Restricted Subsidiary (whether in a single transaction or a series of related transactions) in connection with the Emergence Transactions.
Assumption means the consummation of the transactions whereby (a) Cooper-Standard will assume all of the obligations of the Escrow Issuer under this Indenture, (b) each of Parent and the Subsidiary Guarantors will guarantee the Securities and (c) to the extent Cooper-Standard assumes the obligations of the Escrow Issuer other than by merger, the Escrow Issuer is released from the obligations under this Indenture. The Assumption is to be effected by the execution and delivery of a supplemental indenture in the form of Exhibit E attached hereto (which shall be accompanied by the delivery of the Officers Certificate and Opinion of Counsel required by Section 9.06 hereof).
Attributable Debt in respect of a Sale/Leaseback Transaction means, as at the time of determination, the present value of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended) (discounted at the interest rate equal to the rate of interest implicit in such transaction, determined in accordance with GAAP; provided that, if such interest rate cannot be determined in accordance with GAAP, the present value shall be discounted at the interest rate borne by the Securities, compounded annually); provided , however , that if such Sale/Leaseback Transaction results in a Capital Lease Obligation, the amount of Indebtedness represented thereby will be determined in accordance with the definition of Capital Lease Obligation.
Average Life means, as of the date of determination, with respect to any Indebtedness, the quotient obtained by dividing (1) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of or redemption or similar payment with respect to such Indebtedness multiplied by the amount of such payment by (2) the sum of all such payments.
Bankruptcy Code means the United States Bankruptcy Code, 11 U.S.C. Section 101 et seq ., as amended from time to time.
Board of Directors with respect to a Person means the Board of Directors of such Person (or, if such Person is (i) a limited liability company, the manager of such company and (ii) a partnership, the board of directors or other governing body of the general partner of such Person) or any committee thereof duly authorized to act on behalf of such Board of Directors.
Business Day means each day which is not a Saturday, a Sunday or a day on which commercial banking institutions are not required to be open in the State of New York or the city in which the headquarters of the Company are located.
Capital Lease Obligation means an obligation that is required to be classified and accounted for as a capital lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP.
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Capital Stock of any Person means any and all shares, interests (including partnership interests), rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) the equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity.
Cases means the consolidated proceedings of Parent and its U.S. Subsidiaries, as debtors and debtors in possession under Chapter 11 of the Bankruptcy Code.
Change of Control means the occurrence of any of the following events:
(1) any person or group (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more of the Permitted Holders, is or becomes in a single transaction or in a series of related transactions the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes of this clause (1) such person shall be deemed to have beneficial ownership of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of a majority of the total voting power of the Voting Stock of the Company or of Parent;
(2) the adoption of a plan relating to the liquidation or dissolution of the Company; or
(3) the merger or consolidation of Parent or the Company with or into another Person or the merger of another Person with or into Parent or the Company, or the sale of all or substantially all the assets of Parent or the Company and their respective subsidiaries to another Person or group other than (A) a transaction in which the survivor or transferee is a Person that is controlled by one or more of the Permitted Holders or (B) a transaction following which (i) in the case of a merger or consolidation transaction, holders of securities that represented 100% of the Voting Stock of Parent or the Company immediately prior to such transaction (or other securities into which such securities are converted as part of such merger or consolidation transaction) own directly or indirectly at least a majority of the voting power of the Voting Stock of the surviving Person in such merger or consolidation transaction immediately after such transaction and in substantially the same proportion as before such transaction and (ii) in the case of a sale of assets transaction, each transferee becomes an obligor in respect of the Securities and a Subsidiary of the transferor of such assets.
Chapter 11 means Chapter 11 of the Bankruptcy Code.
Clearstream means Clearstream Banking, Société Anonyme.
Code means the Internal Revenue Code of 1986, as amended.
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Commodities Agreement means, in respect of a Person, any commodity futures contract, forward contract, option or similar agreement or arrangement (including derivative agreements or arrangements) as to which such Person is a party or beneficiary.
Company means the Person named as the Company in the first paragraph of this Indenture, until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter, Company shall mean such successor Person.
Consolidated Coverage Ratio as of any date of determination means the ratio of
(1) the aggregate amount of EBITDA for the most recent four consecutive fiscal quarters ended for which internal financial statements are available prior to the date of such determination to
(2) Consolidated Interest Expense for such four fiscal quarters;
provided , however , that
(A) if the Company or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period;
(B) if the Company or any Restricted Subsidiary has repaid, repurchased, defeased or otherwise discharged any Indebtedness since the beginning of such period or if any Indebtedness is to be repaid, repurchased, defeased or otherwise discharged (in each case other than Indebtedness Incurred under any revolving credit facility unless such Indebtedness has been permanently repaid and has not been replaced) on the date of the transaction giving rise to the need to calculate the Consolidated Coverage Ratio, EBITDA and Consolidated Interest Expense for such period shall be calculated on a pro forma basis as if such discharge had occurred on the first day of such period and as if the Company or such Restricted Subsidiary had not earned the interest income actually earned during such period in respect of cash or Temporary Cash Investments used to repay, repurchase, defease or otherwise discharge such Indebtedness;
(C) if since the beginning of such period the Company or any Restricted Subsidiary shall have made any Asset Sale, EBITDA for such period shall be reduced by an amount equal to EBITDA (if positive) directly attributable to the assets which are the subject of such Asset Sale for such period, or increased by an amount equal to EBITDA (if negative), directly attributable thereto for such period and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Asset Sale for
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such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale);
(D) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary) or an acquisition of assets, including any Investment or acquisition of assets occurring in connection with a transaction requiring a calculation to be made hereunder, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition had occurred on the first day of such period; and
(E) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary) shall have made any Asset Sale, any Investment or acquisition of assets that would have required an adjustment pursuant to clause (C) or (D) above if made by the Company or a Restricted Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Asset Sale, Investment or acquisition had occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets, the amount of income or earnings relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting officer of the Company and shall comply with Regulation S-X under the Securities Act (Regulation S-X) except that pro forma calculations may also include reasonably identifiable and factually supportable operating expense reductions for which the steps necessary for realization have been taken or are reasonably expected to be completed within 12 months of the transaction and are set forth in an Officers Certificate. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months). Interest on a Capital Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by a responsible financial or accounting officer of the Company to be the rate of interest implicit in such Capital Lease Obligation in accordance with GAAP. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurodollar interbank offered rate, or other rate, shall be deemed to have been based upon the rate actually chosen, or if none, then based upon such optional rate chosen as the Company may designate.
If any Indebtedness has been incurred under a revolving credit facility or revolving advances with respect to any Permitted Securitization and is being given pro forma effect, the interest on such Indebtedness shall be calculated based on the average daily balance of such Indebtedness for the four fiscal quarters subject to the pro forma calculation.
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Consolidated Foreign and Senior Secured Debt means, at any time, as determined at such time, without duplication, (a) the sum (without duplication) of (1) the aggregate principal amount of Secured Indebtedness of the Company or any of its Restricted Subsidiaries, (2) the aggregate principal amount of any Permitted Securitizations and (3) Indebtedness (other than intercompany Indebtedness) of Foreign Subsidiaries Incurred after the Release Date less (b) Indebtedness Incurred pursuant to Section 4.03(b)(1).
Consolidated Foreign and Senior Secured Leverage Ratio means as of any date, the ratio of Consolidated Foreign and Senior Secured Debt on such date to EBITDA for the most recent four consecutive fiscal quarters ended for which internal financial statements are available (the Four Quarter Period) prior to the date of the transaction giving rise to the need to calculate the Consolidated Foreign and Senior Secured Leverage Ratio. In addition to and not in limitation of the foregoing, for the purposes of this definition, Consolidated Foreign and Senior Secured Debt shall be calculated after giving pro forma effect to any Incurrence of Indebtedness on the applicable transaction date and the use of proceeds therefrom, and:
(1) if the Company or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such Four Quarter Period that remains outstanding or if the transaction giving rise to the need to calculate the Consolidated Foreign and Senior Secured Leverage Ratio is an Incurrence of Indebtedness, or both, EBITDA for such Four Quarter Period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such Four Quarter Period;
(2) if the Company or any Restricted Subsidiary has repaid, repurchased, defeased or otherwise discharged any Indebtedness since the beginning of such Four Quarter Period (including by the sale of Capital Stock of any Restricted Subsidiary whereby the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale) or if any Indebtedness is to be repaid, repurchased, defeased or otherwise discharged (in each case other than Indebtedness Incurred under any revolving credit facility unless such Indebtedness has been permanently repaid and has not been replaced) on the date of the transaction giving rise to the need to calculate the Consolidated Foreign and Senior Secured Leverage Ratio, EBITDA for such period shall be calculated on a pro forma basis as if such discharge had occurred on the first day of such Four Quarter Period and as if the Company or such Restricted Subsidiary had not earned the interest income actually earned during such period in respect of cash or Temporary Cash Investments used to repay, repurchase, defease or otherwise discharge such Indebtedness;
(3) if since the beginning of such Four Quarter Period the Company or any Restricted Subsidiary shall have made any Asset Sale, EBITDA for such Four Quarter Period shall be reduced by an amount equal to EBITDA (if positive) directly attributable to the assets which are the subject of such Asset Sale for such Four Quarter Period, or increased by an amount equal to EBITDA (if negative), directly attributable thereto for such Four Quarter Period;
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(4) if since the beginning of such Four Quarter Period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary) or an acquisition of assets, including any Investment or acquisition of assets occurring in connection with a transaction requiring a calculation of the Consolidated Foreign and Senior Secured Leverage Ratio to be made hereunder, EBITDA for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition had occurred on the first day of such Four Quarter Period; and
(5) if since the beginning of such Four Quarter Period any Person that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such Four Quarter Period shall have made any Asset Sale, any Investment or acquisition of assets that would have required an adjustment pursuant to clause (3) or (4) above if made by the Company or a Restricted Subsidiary during such Four Quarter Period, EBITDA for such Four Quarter Period shall be calculated after giving pro forma effect thereto as if such Asset Sale, Investment or acquisition had occurred on the first day of such Four Quarter Period.
For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets, the amount of income, earnings or EBITDA relating thereto, the pro forma calculations shall be determined in good faith by a responsible financial or accounting officer of the Company and shall comply with Regulation S-X except that pro forma calculations may also include reasonably identifiable and factually supportable operating expense reductions for which the steps necessary for realization have been taken or are reasonably expected to be completed within 12 months of the transaction and are set forth in an Officers Certificate.
Consolidated Interest Expense means, for any period, the total interest expense of the Company and its consolidated Restricted Subsidiaries included in the Companys consolidated income statement in accordance with GAAP, plus, to the extent not included in such total interest expense, and to the extent Incurred by the Company or its Restricted Subsidiaries, without duplication:
(1) interest expense attributable to Capital Lease Obligations;
(2) amortization of debt discount and debt issuance cost;
(3) capitalized interest;
(4) non-cash interest expense;
(5) to the extent included in the calculation of net income under GAAP, commissions, discounts and other fees and charges owed with respect to letters of credit and bankers acceptance financing;
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(6) to the extent included in the calculation of net income under GAAP, net payments pursuant to Hedging Obligations;
(7) dividends accrued in respect of all Disqualified Stock of the Company and all Preferred Stock of any Restricted Subsidiary that is not a Subsidiary Guarantor, in each case held by Persons other than the Company or a Restricted Subsidiary (other than dividends payable solely in Capital Stock (other than Disqualified Stock) of the Company); provided , however , that such dividends will be multiplied by a fraction, the numerator of which is one and the denominator of which is one minus the effective combined tax rate of the issuer of such Preferred Stock (expressed as a decimal) for such period (as estimated by the chief financial officer of the Company in good faith);
(8) interest incurred in connection with Investments in discontinued operations;
(9) interest actually paid by the Company or any Restricted Subsidiary under any Guarantee of any Indebtedness of any Person other than the Company or any Restricted Subsidiary;
(10) the cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company or any Subsidiary Guarantor) in connection with Indebtedness Incurred by such plan or trust; and
(11) commissions, discounts, yield and other fees and charges Incurred in connection with Permitted Securitizations during such period which are payable to any Person other than the Company or a Subsidiary Guarantor and that are comparable to or in the nature of interest under any Permitted Securitization, including losses on the sale of assets relating to any receivables securitization transaction accounted for as a true sale (other than any one-time financing fees paid upon entering into any Permitted Securitization),
and less (1) to the extent included in such total interest expense, (A) the amortization during such period of capitalized financing costs associated with the Emergence Transactions and (B) the amortization during such period of other capitalized financing costs, as determined in good faith by the chief financial officer of the Company, and (2) interest income for such period.
Consolidated Net Income means, for any period, the net income (or loss) attributable to the Company and its Subsidiaries on a consolidated basis in accordance with GAAP (i.e., after non-controlling interest) before any reduction for Preferred Stock dividends; provided , however , that there shall not be included in such Consolidated Net Income:
(1) any net income (or loss) of any Person (other than the Company) if such Person is not a Restricted Subsidiary, except that:
(A) subject to the exclusion contained in clause (5) below, (i) the Companys equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person (or to the extent promptly converted into cash) during such period to the Company or a Restricted Subsidiary as a dividend or other distribution and (ii) any dividend, distribution or other payments in respect of Capital Stock paid in cash by such Person to the Company or a Restricted Subsidiary thereof in excess of the amount included in clause (i) (subject, in the case of a dividend or other distribution paid to a Restricted Subsidiary, to the limitations contained in clause (3) below); and
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(B) the Companys equity in a net loss of any such Person for such period shall be included in determining such Consolidated Net Income to the extent such loss has been funded with cash from the Company or any Restricted Subsidiary;
(2) solely for the purpose of calculating the amount available for Restricted Payments under Section 4.04(a)(3), any net income of any Restricted Subsidiary if such Restricted Subsidiary is not a Subsidiary Guarantor and is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions in respect of its Capital Stock by such Restricted Subsidiary, directly or indirectly, to the Company (but, in the case of any Foreign Subsidiary, only to the extent cash equal to such net income (or a portion thereof) for such period is not readily procurable by the Company from such Foreign Subsidiary (with the amount of cash readily procurable from such Foreign Subsidiary being determined in good faith by the chief financial officer of the Company) pursuant to intercompany loans, repurchases of Capital Stock or otherwise (without duplication from clause (1))); provided that, subject to the exclusion contained in clause (4) below, the Companys equity in the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Restricted Subsidiary during such period to the Company or another Subsidiary Guarantor as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to another Restricted Subsidiary, to the limitation contained in this clause (2));
(3) the Companys equity in a net loss of any such Restricted Subsidiary for such period except to the extent such loss has been funded with cash from the Company or any Subsidiary Guarantor;
(4) any gain (or loss) realized upon the sale or other disposition of any assets of the Company, its consolidated Subsidiaries or any other Person (including pursuant to any sale-and-leaseback arrangement) which is not sold or otherwise disposed of in the ordinary course of business and any gain (or loss) realized upon the sale or other disposition of any Capital Stock of any Person;
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(5) any net after-tax extraordinary, unusual or nonrecurring gains or losses (less all fees and expenses relating thereto) or income or expense or charge, including, without limitation, any severance expense, restructuring charges, and fees, expenses or charges related to any offering of Capital Stock of such Person, any Investment, acquisition or Indebtedness permitted to be incurred hereunder (in each case, whether or not successful);
(6) the cumulative effect of a change in accounting principles and any charges or credits relating to the adoption of fresh-start accounting principles;
(7) any non-cash impairment charges resulting from the application of Statements of Financial Accounting Standards No. 142 and No. 144 and the amortization of intangibles pursuant to Statement of Financial Accounting Standards No. 141;
(8) any long-term incentive plan accruals and any non-cash compensation expense realized from grants of stock appreciation or similar rights, stock options or other rights to officers, directors and employees of such Person or any of its Restricted Subsidiaries; and
(9) any one-time non-cash charges (such as capitalized manufacturing profit in inventory) resulting from purchase accounting in connection with any acquisition that is consummated prior to or after the Issue Date;
in each case, for such period. Notwithstanding the foregoing, for the purpose of Section 4.04 only, there shall be excluded from Consolidated Net Income any repurchases, repayments or redemptions of Investments, proceeds realized on the sale of Investments or return of capital to the Company or a Restricted Subsidiary to the extent such repurchases, repayments, redemptions, proceeds or returns increase the amount of Restricted Payments permitted pursuant to Section 4.04(a)(3)(D).
Contribution Indebtedness means Indebtedness of the Company or any Subsidiary Guarantor in an aggregate principal amount equal to the aggregate amount of cash contributions (other than Excluded Contributions) made to the capital of the Company or such Subsidiary Guarantor after the Release Date; provided that:
(1) such cash contributions have not been used to make a Restricted Payment, and
(2) such Contribution Indebtedness (a) is Incurred within 180 days after the making of such cash contributions and (b) is so designated as Contribution Indebtedness pursuant to an Officers Certificate on the Incurrence date thereof.
Cooper-Standard means Cooper-Standard Automotive Inc.
Corporate Trust Office means the offices of the Trustee at 535 Griswold Street, Suite 550, Detroit, MI 48226 or any other offices of the Trustee.
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Credit Agreement means the debt facilities to be entered into on or about the Release Date by and among Parent, the Company, certain of its Subsidiaries, the lenders referred to therein and the other financial institutions and parties from time to time party thereto, together with those documents and instruments delivered in connection therewith (including, without limitation, any revolving loans, swingline loans and letters of credit thereunder, any incremental facility advanced thereunder or in connection therewith, and any notes, guarantees and collateral security documents, filings and other instruments delivered in connection therewith), as amended, extended, renewed, restated, supplemented or otherwise modified (in whole or in part, and without limitation as to obligor, party, amount, terms, conditions, covenants and other provisions) from time to time, and any agreement (and related documents and instruments) governing Indebtedness incurred to Refinance, in whole or in part, the borrowings, letters of credit and commitments then outstanding or permitted to be outstanding under such Credit Agreement (including term loans) or a successor Credit Agreement, whether by the same or any other lender or group of lenders.
Credit Facilities means, with respect to the Company or any of its Restricted Subsidiaries, one or more debt facilities, including the Credit Agreement, or commercial paper facilities with banks or other institutional lenders, investors or other financial institutions, indentures providing for revolving credit loans, term loans, notes, receivables financing, including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against receivables (or convey receivables to such lenders or other entities, on a recourse or non-recourse basis), letters of credit (including synthetic facilities), bank guarantees or other long-term or short-term indebtedness, including any guarantees, collateral security documents, instruments and agreements executed in connection therewith, and any amendments, supplements, modifications, extensions, renewals, restatements or refundings thereof and any indentures or credit facilities or commercial paper facilities or other financings with banks or other institutional lenders, investors or other financial institutions that replace, refund or refinance any part of the loans, notes, other credit facilities or commitments thereunder in whole or in part , including any such replacement, refunding or refinancing facility or indenture that increases the amount borrowable thereunder or alters the maturity thereof or the obligor in respect thereof.
Cumulative Preferred Stock means the preferred stock issued by Parent in connection with the Emergence Transactions.
Currency Agreement means any foreign exchange contract, currency swap agreement or other similar agreement with respect to currency values.
Custodian means the Trustee, as custodian with respect to the Securities in global form, or any successor entity thereto.
Default means any event which is, or after notice or passage of time or both would be, an Event of Default.
Definitive Security means a certificated Security registered in the name of the Holder thereof and issued in accordance with Section 2.06(c) hereof, substantially in the form of Exhibit A , except that such Security shall not bear the Global Security Legend and shall not have the Schedule of Increases or Decreases in Global Security attached thereto.
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Depositary means The Depository Trust Company, its nominees and their respective successors.
Designated Non-cash Consideration means the fair market value of non-cash consideration received by the Company or a Restricted Subsidiary in connection with an Asset Sale that is so designated as Designated Non-cash Consideration pursuant to an Officers Certificate, setting forth the basis of such valuation, executed by the principal financial officer of the Company, less the amount of cash or Temporary Cash Investments or Additional Assets received in connection with a subsequent sale or collection on such Designated Non-cash Consideration.
Designated Preferred Stock means preferred stock of the Company or any direct or indirect parent corporation thereof (in each case other than Disqualified Stock) that is issued for cash (other than to the Company or any of its Subsidiaries or an employee stock ownership plan or a trust established by the Company or any of its Subsidiaries for the benefit of their employees) and is so designated as Designated Preferred Stock pursuant to an Officers Certificate executed by the principal financial officer of the Company or the applicable parent corporation thereof, as the case may be, on the issuance date thereof.
Disqualified Stock means, with respect to any Person, any Capital Stock which 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) or upon the happening of any event:
(1) matures or is mandatorily redeemable (other than redeemable only for Capital Stock of such Person which is not itself Disqualified Stock) pursuant to a sinking fund obligation or otherwise;
(2) is convertible or exchangeable at the option of the holder for Indebtedness or Disqualified Stock; or
(3) is redeemable or must be purchased upon the occurrence of certain events or otherwise at the option of the holder, in whole or in part,
in each case on or prior to the first anniversary of the Stated Maturity of the Securities; provided that, only the portion of Capital Stock which so matures or is mandatorily redeemable, is so convertible or exchangeable or is so redeemable at the option of the holder thereof prior to such date will be deemed to be Disqualified Stock; provided further , however , that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to purchase or redeem such Capital Stock upon the occurrence of an asset sale or change of control (each defined in a substantially similar manner to the corresponding definitions in this Indenture) occurring prior to the first anniversary of the Stated Maturity of the Securities shall not constitute Disqualified Stock if any such requirement only becomes operative after compliance with such terms applicable to the Securities, including the purchase of any Securities tendered pursuant thereto.
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The amount of any Disqualified Stock that does not have a fixed redemption, repayment or repurchase price will be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were redeemed, repaid or repurchased on any date on which the amount of such Disqualified Stock is to be determined pursuant to this Indenture; provided , however , that if such Disqualified Stock could not be required to be redeemed, repaid or repurchased at the time of such determination, the redemption, repayment or repurchase price will be the book value of such Disqualified Stock as reflected in the most recent financial statements of such Person.
Domestic Subsidiary means any Restricted Subsidiary of the Company that was formed under the laws of the United States or any state of the United States or the District of Columbia.
EBITDA for any period means the sum of Consolidated Net Income, plus the following to the extent deducted in calculating such Consolidated Net Income and otherwise without duplication:
(1) all tax expense of the Company and its consolidated Restricted Subsidiaries for taxes based on income, profits or capital, including without limitation state, franchise and similar taxes (including state franchise taxes), of such Person and its Restricted Subsidiaries or, if applicable, the Tax Amount, for such period;
(2) Consolidated Interest Expense;
(3) depreciation and amortization expense of the Company and its consolidated Restricted Subsidiaries (excluding amortization expense attributable to a prepaid item that was paid in cash in a prior period);
(4) all other non-cash charges of the Company and its consolidated Restricted Subsidiaries (excluding any such non-cash charge to the extent that it represents an accrual of or reserve for cash expenditures in any future period), less all non-cash items of income of the Company and its consolidated Restricted Subsidiaries (other than accruals of revenue by the Company and its consolidated Restricted Subsidiaries in the ordinary course of business);
(5) any non-recurring fees, cash charges and other cash expenses made or incurred by the Company and its consolidated Restricted Subsidiaries in connection with the Emergence Transactions;
(6) any net after-tax income or loss (less all fees and expenses or charges relating thereto) attributable to the early extinguishment of Indebtedness and Hedging Obligations; and
(7) any net after-tax effect of income (loss) from disposed, abandoned, transferred, closed or discontinued operations and any net after-tax gain or loss on the disposal of abandoned, transferred, closed or discontinued operations;
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in each case for such period. Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization and non-cash charges of, a Restricted Subsidiary of the Company that is not a Subsidiary Guarantor shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion) that the net income of such Restricted Subsidiary was included in calculating Consolidated Net Income and only if (x) a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Restricted Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to such Restricted Subsidiary or its shareholders or (y) in the case of any Foreign Subsidiary, a corresponding amount of cash is readily procurable by the Company from such Foreign Subsidiary (as determined in good faith by the chief financial officer of the Company) pursuant to intercompany loans, repurchases of Capital Stock or otherwise, provided that to the extent cash of such Foreign Subsidiary provided the basis for including the net income of such Foreign Subsidiary in Consolidated Net Income pursuant to clause (3) of the definition of Consolidated Net Income, such cash shall not be taken into account for the purposes of determining readily procurable cash under this clause (y).
Emergence Transactions means all transactions relating to the Reorganization Plan and the Companys emergence from Chapter 11, including, but not limited to, closing of the Exit Financing.
Equity Offering means any public or private sale after the Issue Date of common stock or Preferred Stock of the Company or Parent, as applicable (other than Disqualified Stock), other than public offerings with respect to Parents, the Companys or such direct or indirect parent companys common stock registered on Form S-8 and any such public or private sale that constitutes an Excluded Contribution.
Escrow Agent means U.S. Bank National Association, as escrow agent under the Escrow Agreement, or any successor escrow agent as set forth in the Escrow Agreement.
Escrow Agreement means the Escrow Agreement to be dated as of the Issue Date, among the Company, the Trustee and the Escrow Agent, as amended, supplemented, modified, extended, renewed, restated or replaced in whole or in part from time to time.
Escrow End Date means the 60th day following the Issue Date; provided that the Company may on one occasion elect to extend the Escrow End Date for an additional 30 days so long as, not later than five Business Days prior to the scheduled Escrow End Date, (i) it provides prior written notice to the Escrow Agent and the Trustee and has issued a press release stating that it has extended the Escrow End Date and (ii) it has deposited cash into escrow with the Escrow Agent, to be held pursuant to the terms of the Escrow Agreement, in an amount sufficient to fund the redemption price due on the latest possible date for the revised Special Mandatory Redemption in respect of all outstanding Securities and has certified that such amounts will be satisfactory for such purpose.
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Escrow Investment means (1) Treasury Securities, (2) investments in time deposit accounts, certificates of deposit and money market deposits maturing no later than the Escrow End Date in each case, entitled to U.S. federal deposit insurance for the full amount thereof or issued by a bank or trust company (including the Escrow Agent or an affiliate of the Escrow Agent) which is organized under the laws of the United States of America or any State thereof having capital, surplus and undivided profits aggregating in excess of $500.0 million and (3) repurchase obligations maturing no later than the Escrow End Date entered into with a nationally recognized broker-dealer, with respect to which the purchased securities are Obligations issued or guaranteed by the United States government or any agency thereof, which repurchase Obligations shall be entered into pursuant to written agreements.
Escrow Issuer means CSA Escrow Corporation.
Escrow Proceeds has the meaning ascribed to such term under Section 4.14.
Euroclear means Euroclear S.A./N.V., as operator of the Euroclear system.
Exchange Act means the U.S. Securities Exchange Act of 1934, as amended.
Exchange Offer has the meaning set forth in any Registration Rights Agreement.
Exchange Securities means the debt securities of the Company issued pursuant to this Indenture in exchange for, and in an aggregate principal amount equal to, the Securities or Additional Securities issued hereunder, in compliance with the terms of the Registration Rights Agreement, or any similar agreement or otherwise.
Excluded Contributions means the Net Cash Proceeds received by the Company after the Release Date from:
(a) contributions to its common equity capital, and
(b) the sale (other than to a Subsidiary of the Company or to any Company or Subsidiary management equity plan or stock option plan or any other management or employee benefit plan or agreement) of Capital Stock (other than Disqualified Stock) of the Company;
in each case designated as Excluded Contributions pursuant to an Officers Certificate executed by an Officer of the Company, the cash proceeds of which are excluded from the calculation set forth in Section 4.04(a)(3).
Excluded Subsidiary means:
(1) any Foreign Subsidiary; and
(2) any Restricted Subsidiary of the Company; provided that the total assets of all Restricted Subsidiaries that are Excluded Subsidiaries solely as a result of this clause (2), as reflected on their respective most recent balance sheets prepared in accordance with GAAP, do not in the aggregate at any time exceed $1.0 million.
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Exit Financing means that certain financing to finance the Reorganization Plan expected to be composed of the Credit Agreement and the Securities.
Fair Market Value means the value that would be paid by a willing buyer to an unaffiliated willing seller in a transaction not involving distress or necessity of either party, determined in good faith by the Company and (i) in the event of transactions involving a Fair Market Value of more than $5.0 million, set forth in an Officers Certificate, and (ii) in the event of transactions involving a Fair Market Value of more than $10.0 million, as determined by the Board of Directors of the Company (unless otherwise provided in this Indenture).
Foreign Subsidiary means any Restricted Subsidiary that is not organized under the laws of the United States of America or any State thereof or the District of Columbia and any direct or indirect Subsidiary of such Restricted Subsidiary.
GAAP means generally accepted accounting principles in the United States of America as in effect as of the Issue Date.
Global Security Legend means the legend set forth in Section 2.06(g)(2) hereof, which is required to be placed on all Global Securities issued under this Indenture.
Global Securities means, individually and collectively, each of the Restricted Global Securities and the Unrestricted Global Securities, substantially in the form of Exhibit A hereto issued in accordance with Section 2.01, 2.06(b), 2.06(d) or 2.06(f) hereof.
Gross Proceeds means an amount equal to the aggregate U.S. Dollar amount received by the Company pursuant to the sale of the Securities, before giving effect to any discount to the Initial Purchasers.
Guarantee means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any Person and any obligation, direct or indirect, contingent or otherwise, of such Person:
(1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise); or
(2) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part);
provided , however , that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term Guarantee used as a verb has a corresponding meaning.
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Guarantors means:
(1) Parent;
(2) each direct or indirect Wholly Owned Domestic Subsidiary of the Company (other than Excluded Subsidiaries) on the date of this Indenture which has issued a guarantee with respect to other Indebtedness of the Company or a Guarantor; and
(3) any other Wholly Owned Restricted Subsidiary of the Company that guarantees such Securities or any related Exchange Securities pursuant to the terms of this Indenture.
Guaranty means the Parent Guaranty and the Subsidiary Guarantees.
Guaranty Agreement means a supplemental indenture entered into after the Issue Date, in a form satisfactory to the Trustee, pursuant to which a Subsidiary Guarantor guarantees the Companys Obligations with respect to the Securities on the terms provided for in this Indenture.
Hedging Obligations means, with respect to any specified Person, the obligations of such Person under:
(1) interest rate swap agreements, interest rate cap agreements, interest rate collar agreements and other agreements or arrangements designed for the purpose of fixing, hedging, mitigating or swapping interest rate risk either generally or under specific contingencies;
(2) foreign exchange contracts, currency swap agreements and other agreements or arrangements designed for the purpose of fixing, hedging, mitigating or swapping foreign currency exchange rate risk either generally or under specific contingencies; and
(3) commodity swap agreements, commodity cap agreements or commodity collar agreements designed for the purpose of fixing, hedging, mitigating or swapping commodity risk either generally or under specific contingencies.
Holder or Securityholder means the Person in whose name a Security is registered on the Registrars books.
Incur means issue, assume, Guarantee, incur, acquire or otherwise become liable (contingently or otherwise) for; provided , however , that any Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Person at the time it becomes a Restricted Subsidiary. The term Incurrence when used as a noun shall have a correlative meaning. Solely for purposes of determining compliance with Section 4.03:
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(1) amortization of debt discount or the accretion of principal with respect to a non-interest bearing or other discount security;
(2) the payment of regularly scheduled interest in the form of additional Indebtedness of the same instrument or the payment of regularly scheduled dividends on Capital Stock in the form of additional Capital Stock of the same class and with the same terms; and
(3) the obligation to pay a premium in respect of Indebtedness arising in connection with the issuance of a notice of redemption or making of a mandatory offer to purchase such Indebtedness;
will not be deemed to be the Incurrence of Indebtedness.
Indebtedness means, with respect to any Person on any date of determination (without duplication):
(1) the principal in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable, including, in each case, any premium on such indebtedness to the extent such premium has become due and payable;
(2) all Capital Lease Obligations of such Person and all Attributable Debt in respect of Sale/Leaseback Transactions entered into by such Person;
(3) the balance of deferred and unpaid purchase price of property or services of such Person and all obligations of such Person under any title retention agreement (but, in each case, excluding any accounts payable or other liability to trade creditors arising in the ordinary course of business); provided that any Indebtedness Incurred to pay or otherwise discharge such obligations shall constitute Indebtedness;
(4) the principal component of all obligations of such Person in respect of any letter of credit, bankers acceptance or similar credit transaction (including reimbursement obligations with respect thereto) (other than obligations with respect to letters of credit securing obligations (other than obligations described in clauses (1) through (3) above) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the tenth Business Day following payment on the letter of credit);
(5) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock of such Person or, with respect to any Preferred Stock of any Subsidiary of such Person, the principal amount of such Preferred Stock to be determined in accordance with this Indenture (but excluding, in each case, any accrued dividends); provided that the Cumulative Preferred Stock shall be deemed not to constitute Indebtedness;
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(6) to the extent not otherwise included in this definition, Hedging Obligations of such Person;
(7) all obligations of the type referred to in clauses (1) through (6) of other Persons and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any Guarantee;
(8) all obligations of the type referred to in clauses (1) through (7) of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the Fair Market Value of such property or assets at such date of determination and the amount of the obligation so secured; and
(9) to the extent not otherwise included, with respect to the Company and its Restricted Subsidiaries, the amount of any Permitted Securitization;
if and to the extent any of the foregoing Indebtedness in clauses (1) through (5) would appear as a liability upon a balance sheet (excluding the footnotes thereto) of such Person prepared in accordance with GAAP.
Notwithstanding the foregoing, in connection with the purchase by the Company or any Restricted Subsidiary of any business, the term Indebtedness will exclude post-closing payment adjustments to which the seller may become entitled to the extent such payment is determined by a final closing balance sheet or such payment depends on the performance of such business after the closing or similar obligations; provided , however , that, at the time of closing, the amount of any such payment is not determinable and, to the extent such payment thereafter becomes fixed and determined, the amount is paid within 30 days thereafter. Indebtedness shall not include any liability for foreign, federal, state or local taxes.
The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all obligations as described above; provided , however , that in the case of Indebtedness sold at a discount, the amount of such Indebtedness at any time will be the accreted value thereof at such time.
Notwithstanding the foregoing, for purposes of the definition of Obligations as used herein (and only such definition), the term Indebtedness shall include (i) all obligations of such Person in respect of any letter of credit, bankers acceptance or similar credit transaction (including reimbursement obligations and fees with respect thereto), (ii) all Hedging Obligations of such Person and (iii) all obligations of such Person pursuant to any Commodities Agreement.
Indenture means this Indenture as amended or supplemented from time to time.
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Independent Qualified Party means an investment banking firm, accounting firm or appraisal firm of national standing; provided , however , that such firm is not an Affiliate of the Company.
Indirect Participant means a Person who holds a beneficial interest in a Global Security through a Participant.
Initial Purchasers means Deutsche Bank Securities Inc., Banc of America Securities LLC, Barclays Capital Inc. and UBS Securities LLC.
Initial Securities has the meaning stated in the preamble to this Indenture
Interest Rate Agreement means any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate collar agreement, interest rate hedge agreement, interest rate swap agreement, interest rate cap agreement or other financial agreement or arrangement with respect to exposure to interest rates.
Investment means any direct or indirect advance, loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of the lender) or other extensions of credit (including by way of Guarantee or similar arrangement) or capital contribution (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments by a Person in another Person. The acquisition by the Company or any Restricted Subsidiary of a Person that holds an Investment in a third Person will be deemed to be an Investment by the Company or such Restricted Subsidiary in such third Person at such time. Except as otherwise provided for herein, the amount of an Investment shall be its Fair Market Value at the time the Investment is made and without giving effect to subsequent changes in value.
For purposes of the definition of Unrestricted Subsidiary, the definition of Restricted Payment and Section 4.04:
(1) Investment shall include the portion (proportionate to the Companys equity interest in such Subsidiary) of the Fair Market Value of the net assets of any Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided , however , that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent Investment in an Unrestricted Subsidiary equal to an amount (if positive) equal to (A) the Companys Investment in such Subsidiary at the time of such redesignation less (B) the portion (proportionate to the Companys equity interest in such Subsidiary) of the Fair Market Value of the net assets of such Subsidiary at the time of such redesignation; and
(2) any property transferred to or from an Unrestricted Subsidiary shall be valued at its Fair Market Value at the time of such transfer.
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Investment Grade Rating means a rating equal to or higher than Baa3 (or the equivalent) by Moodys and BBB- (or the equivalent) by Standard and Poors, or an equivalent rating by any other Rating Agency.
Issue Date means the first date on which the Initial Securities are originally issued.
Lien means, with respect to any property or assets, any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, security interest, lien, charge, easement (other than any easement not materially impairing usefulness or marketability), encumbrance, preference, priority or other security agreement of any kind or nature whatsoever on or with respect to such property or assets (including, without limitation, any conditional sale or other title retention agreement having substantially the same economic effect as any of the foregoing); provided that in no event shall an operating lease, in and of itself, be deemed to constitute a Lien.
Moodys means Moodys Investors Service, Inc. and any successor to its rating agency business.
Net Available Cash from an Asset Sale means cash payments received therefrom (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise and proceeds from the sale or other disposition of any securities received as consideration, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to such properties or assets or received in any other non-cash form), in each case net of:
(1) all legal, title and recording tax expenses, commissions and other fees and expenses incurred, and all federal, state, provincial, foreign and local taxes required to be accrued as a liability under GAAP, as a consequence of such Asset Sale;
(2) all payments made on any Indebtedness which is secured by any assets subject to such Asset Sale, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Sale, or by applicable law, be repaid out of the proceeds from such Asset Sale;
(3) all distributions and other payments required to be made to minority interest holders in Restricted Subsidiaries as a result of such Asset Sale;
(4) the deduction of appropriate amounts provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the property or other assets disposed in such Asset Sale and retained by the Company or any Restricted Subsidiary after such Asset Sale; and
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(5) any portion of the purchase price from an Asset Sale placed in escrow, whether as a reserve for adjustment of the purchase price, for satisfaction of indemnities in respect of such Asset Sale or otherwise in connection with that Asset Sale; provided , however , that upon the termination of that escrow, Net Available Cash will be increased by any portion of funds in the escrow that are released to the Company or any Restricted Subsidiary.
Net Cash Proceeds, with respect to any issuance or sale of Capital Stock or Indebtedness, means the cash proceeds of such issuance or sale net of attorneys fees, accountants fees, underwriters or placement agents fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof.
Non-U.S. Person means a Person who is not a U.S. Person.
Obligations means with respect to any Indebtedness, all obligations for principal, premium, interest, penalties, fees, indemnifications, reimbursements, and other amounts payable pursuant to the documentation governing such Indebtedness (including interest and fees accruing on or after the filing of any petition with respect to any bankruptcy, insolvency or reorganization of any obligor at the rate provided for in the documentation with respect thereto, whether or not a claim for post-filing interest and fees is allowed under applicable law).
Offering Memorandum means the offering memorandum dated April 29, 2010 relating to the initial issuance of Securities under this Indenture.
Officer means the Chairman of the Board, the president, the chief financial officer, any vice president, the general counsel, the treasurer or the secretary of the Company.
Officers Certificate means a certificate signed by an Officer.
Opinion of Counsel means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee.
Parent means Cooper-Standard Holdings Inc. All references to Parent shall include, unless the context requires otherwise, any entity that directly or indirectly owns all of the Companys Voting Stock.
Parent Guaranty means the Guarantee by Parent of the Companys Obligations with respect to the Securities and this Indenture, including any Guarantee entered into after the Issue Date.
Participant means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to DTC, shall include Euroclear and Clearstream).
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Permitted Holders means Barclays Bank PLC and its subsidiaries and any funds or accounts managed by Capital Research and Management Company, Lord, Abbett & Co., Oak Hill Advisors, L.P., Silver Point Capital, L.P., TCW Asset Management Company and TD Asset Management Inc.
Permitted Investment means an Investment by the Company or any Restricted Subsidiary in:
(1) the Company, a Restricted Subsidiary or a Person that will, upon the making of such Investment, become a Restricted Subsidiary;
(2) another Person if, as a result of such Investment, such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary; provided , however , that such Persons primary business is a Related Business;
(3) cash and Temporary Cash Investments;
(4) receivables owing to, and recorded as accounts receivable on the balance sheet of, the Company or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided , however , that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances;
(5) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business;
(6) loans or advances to employees, directors and officers of the Company or any of its Restricted Subsidiaries, in each case made in the ordinary course of business or to fund such Persons purchase of Capital Stock of the Company or any direct or indirect parent company thereof;
(7) Investments received in satisfaction of judgments or settlements of debt or compromises of obligations incurred in the ordinary course of business;
(8) the licensing or contribution of intellectual property pursuant to joint marketing arrangements with other Persons;
(9) any Person to the extent such Investment represents the non-cash portion of the consideration received for (a) an Asset Sale as permitted pursuant to Section 4.06 or (b) a disposition of assets not constituting an Asset Sale;
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(10) any Person where such Investment was acquired by the Company or any of its Restricted Subsidiaries (a) in exchange for any other Investment or accounts receivable held by the Company or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other Investment or accounts receivable or (b) as a result of a foreclosure by the Company or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default;
(11) any Person to the extent such Investments consist of prepaid expenses, negotiable instruments held for collection and lease, utility and workers compensation, performance and other similar deposits made in the ordinary course of business by the Company or any Restricted Subsidiary;
(12) any Person to the extent such Investments consist of Hedging Obligations otherwise permitted under Section 4.03;
(13) any Person to the extent such Investment exists on the Release Date, and any extension, modification or renewal of any such Investments existing on the Release Date, but only to the extent not involving additional advances, contributions or other Investments of cash or other assets or other increases thereof (other than as a result of the accrual or accretion of interest or original issue discount or the issuance of pay-in-kind securities, in each case, pursuant to the terms of such Investment as in effect on the Release Date);
(14) Investments the payment for which consists of Capital Stock of the Company (other than Disqualified Stock) or any direct or indirect parent company of the Company, as applicable; provided , however , that such Capital Stock will not increase the amount available for Restricted Payments under Section 4.04(a)(3);
(15) an SPE Subsidiary or an Investment by an SPE Subsidiary in any other Person as required by or in connection with a Permitted Securitization;
(16) Investments (including debt obligations and Capital Stock) received in connection with the bankruptcy or reorganization of suppliers and customers or in settlement of delinquent obligations of, or other disputes with, customers and suppliers arising in the ordinary course of business; and
(17) additional Investments by the Company or any of its Restricted Subsidiaries (including, but not limited to, joint ventures) having an aggregate Fair Market Value, taken together with all other Investments made pursuant to this clause (17), not to exceed the greater of $75.0 million (with the Fair Market Value of each Investment being measured at the time made and without giving effect to subsequent changes in value) and 4.0% of Total Assets.
Permitted Liens means:
(1) Liens existing on the Release Date;
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(2) Liens existing on property or assets at the time of acquisition by the Company or a Restricted Subsidiary which secure Indebtedness that is not incurred in contemplation of such property or assets being so acquired; provided that such Liens do not extend to other property or assets of the Company or any Restricted Subsidiary;
(3) Liens securing Indebtedness of the type described in (x) Section 4.03(b)(11); provided that such Lien is attached within 180 days of the Incurrence of such Indebtedness, and (y) Section 4.03(b)(12); provided that such Liens attach solely to assets of Foreign Subsidiaries;
(4) Liens securing Indebtedness of the type described in Section 4.03(b)(1);
(5) Liens replacing any of the items set forth in clauses (1) through (3) above; provided that (A) the principal amount of the Indebtedness secured by such Liens shall not be increased (except premiums or other payments paid in connection with a concurrent Refinancing of such Indebtedness and the expenses Incurred in connection therewith), (B) such Liens have the same or a lower ranking and priority as the Liens being replaced; and (C) such Liens shall be limited to the property or assets encumbered by the Lien so replaced;
(6) Liens encumbering cash proceeds (or securities purchased therewith) from Indebtedness permitted to be Incurred under Section 4.03 which are set aside at the time of such Incurrence in order to secure an escrow arrangement pursuant to which such cash proceeds (or securities purchased therewith) are contemplated to ultimately be released to the Company or a Restricted Subsidiary or returned to the lenders of such Indebtedness; provided that such Liens are automatically released concurrently with the release of such cash proceeds (or securities purchased therewith) from such escrow arrangement;
(7) Liens in favor of the Company or a Restricted Subsidiary;
(8) 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;
(9) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent for a period of more than 30 days or that are payable or subject to penalties for non-payment or that are being contested in good faith by appropriate proceedings;
(10) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law incurred in the ordinary course of business for sums not yet delinquent for a period of more than 60 days or being contested in good faith;
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(11) Liens incurred or deposits made in the ordinary course of business in connection with workers compensation, unemployment and other insurance and other types of social security or similar obligations, including any Lien securing letters of credit issued in the ordinary course of business consistent with past practice in connection therewith, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money);
(12) judgment Liens not accompanied by an Event of Default under Section 6.01(8) arising from such judgment;
(13) easements, rights-of-way, zoning restrictions, minor defects or irregularities in title and other similar charges or encumbrances in respect of real property not interfering in any material respect with the ordinary conduct of business of the Company or any of its Restricted Subsidiaries;
(14) any interest or title of a lessor under any lease, whether or not characterized as capital or operating; provided that such Liens do not extend to any property or asset which is not leased property subject to such lease;
(15) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Persons obligations in respect of bankers acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;
(16) Liens securing reimbursement obligations with respect to letters of credit which encumber documents and other property relating to such letters of credit and products and proceeds thereof;
(17) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual, or warranty requirements of the Company or any of the Restricted Subsidiaries, including rights of offset and set-off;
(18) leases or subleases granted to others not interfering in any material respect with the business of the Company or the Restricted Subsidiaries;
(19) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with importation of goods;
(20) Liens encumbering initial deposits and margin deposits, and other Liens incurred in the ordinary course of business and that are within the general parameters customary in the industry;
(21) Liens arising from filing Uniform Commercial Code financing statements regarding leases;
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(22) Liens on Receivables and Related Assets transferred to an SPE Subsidiary or on assets of an SPE Subsidiary, in either case incurred in connection with a Permitted Securitization;
(23) Liens securing Hedging Obligations so long as the related Indebtedness is, and is permitted under this Indenture to be, secured by a Lien on the same property securing such Hedging Obligation;
(24) Liens to secure any Refinancing Indebtedness permitted to be Incurred as Secured Indebtedness under this Indenture pursuant to Section 4.03(b)(5); provided that (a) the new Lien shall be limited to all or part of the same property and assets that secured the original Lien, and (b) the Indebtedness secured by the new Lien is not increased to any amount greater than the sum of (i) the outstanding principal amount or, if greater, committed amount of the Indebtedness renewed, refunded, refinanced, replaced, defeased or discharged with such Refinancing Indebtedness, and (ii) an amount necessary to pay any fees and expenses, including premiums, related to such renewal, refunding, refinancing, replacement, defeasance or discharge;
(25) any encumbrance or restriction (including put and call arrangements) with respect to Capital Stock of any joint venture or similar arrangement pursuant to any joint venture or similar agreement permitted under the indenture;
(26) Liens deemed to exist in connection with Investments in repurchase agreements permitted under Section 4.03; provided that such Liens do not extend to any assets other than those that are the subject of such repurchase agreement;
(27) Liens solely on any cash earnest money deposits made by the Company or any of its Restricted Subsidiaries in connection with any letter of intent or purchase agreement not prohibited by this Indenture;
(28) Liens in respect of cash-pooling arrangement outside of the United States covering assets of Subsidiaries that are non-Guarantors;
(29) any extension, renewal or replacement, in whole or in part, of any Lien described in clauses (1), (2), (3) and (31) of this definition of Permitted Liens; provided that any such extension, renewal or replacement is no more restrictive in any material respect than any Lien so extended, renewed or replaced and does not extend to any additional property or assets;
(30) Liens other than any of the foregoing incurred by the Company or any Restricted Subsidiary of the Company with respect to Indebtedness or other obligations that do not, in the aggregate, exceed $25.0 million at any one time outstanding; and
(31) Liens securing Indebtedness Incurred pursuant to the second proviso of Section 4.03(a).
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Permitted Securitization means any transaction or series of transactions that may be entered into by the Company or any Subsidiary pursuant to which it may sell, convey, contribute to capital or otherwise transfer (which sale, conveyance, contribution to capital or transfer may include or be supported by the grant of a security interest) Receivables or interests therein and all collateral securing such Receivables, all contracts and contract rights, purchase orders, security interests, financing statements or other documentation in respect of such Receivables, any guarantees, indemnities, warranties or other obligations in respect of such Receivables, any other assets that are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transactions involving receivables similar to such Receivables and any collections or proceeds of any of the foregoing (collectively, the Related Assets) (i) to a trust, partnership, corporation or other Person (other than the Company or any Subsidiary other than an SPE Subsidiary), which transfer is funded in whole or in part, directly or indirectly, by the incurrence or issuance by the transferee or any successor transferee of Indebtedness, fractional undivided interests or other securities that are to receive payments from, or that represent interests in, the cash flow derived from such Receivables and Related Assets or interests in such Receivables and Related Assets, or (ii) directly to one or more investors or other purchasers (other than the Company or any Subsidiary), it being understood that a Permitted Securitization may involve (A) one or more sequential transfers or pledges of the same Receivables and Related Assets, or interests therein (such as a sale, conveyance or other transfer to an SPE Subsidiary followed by a pledge of the transferred Receivables and Related Assets to secure Indebtedness incurred by the SPE Subsidiary), and all such transfers, pledges and Indebtedness Incurrences shall be part of and constitute a single Permitted Securitization, and (B) periodic transfers or pledges of Receivables and/or revolving transactions in which new Receivables and Related Assets, or interests therein, are transferred or pledged upon collection of previously transferred or pledged Receivables and Related Assets, or interests therein, provided that any such transactions shall provide for recourse to such Subsidiary (other than any SPE Subsidiary) or the Company (as applicable) only in respect of the cash flows in respect of such Receivables and Related Assets and to the extent of other customary securitization undertakings in the jurisdiction relevant to such transactions.
The amount or principal amount of any Permitted Securitization shall be deemed at any time to be (1) the aggregate principal or stated amount of the Indebtedness, fractional undivided interests (which stated amount may be described as a net investment or similar term reflecting the amount invested in such undivided interest) or other securities incurred or issued pursuant to such Permitted Securitization, in each case outstanding at such time, or (2) in the case of any Permitted Securitization in respect of which no such Indebtedness, fractional undivided interests or securities are incurred or issued, the cash purchase price paid by the buyer in connection with its purchase of Receivables less the amount of collections received in respect of such Receivables and paid to such buyer, excluding any amounts applied to purchase fees or discount or in the nature of interest.
Person means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.
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Preferred Stock, as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person.
principal of a Security means the principal of the Security plus the premium, if any, payable on the Security which is due or overdue or is to become due at the relevant time.
Private Placement Legend means the legend set forth in Section 2.06(g)(1) hereof to be placed on all Securities issued under this Indenture, except where otherwise permitted by the provisions of this Indenture.
Qualified Equity Offering means any underwritten public offering of Capital Stock (other than Disqualified Stock) of the Company, Parent or any other direct or indirect parent of the Company (other than Capital Stock sold to the Company or a Subsidiary of the Company); provided that if such public offering is of Capital Stock of Parent or any other direct or indirect parent of the Company, the net cash proceeds therefrom have been contributed to the common equity of the Company.
QIB means a qualified institutional buyer as defined in Rule 144A.
Rating Agency means Standard & Poors and Moodys or if Standard & Poors or Moodys or both shall not make a rating on the Securities publicly available, a nationally recognized statistical rating agency or agencies, as the case may be, selected by the Company (as certified by a resolution of the Board of Directors of the Company) which shall be substituted for Standard & Poors or Moodys or both, as the case may be.
Receivables means accounts receivable (including all rights to payment created by or arising from the sales of goods, leases of goods or the rendition of services, no matter how evidenced (including in the form of chattel paper) and whether or not earned by performance).
Refinance means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay, prepay, purchase, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such Indebtedness. Refinanced and Refinancing shall have correlative meanings.
Refinancing Indebtedness means:
(A) any Indebtedness that Refinances any Indebtedness of the Company or any Restricted Subsidiary existing on the Release Date or Incurred in compliance with this Indenture, including Indebtedness that Refinances Refinancing Indebtedness; provided , however , that:
(1) such Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being Refinanced;
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(2) such Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being Refinanced;
(3) such Refinancing Indebtedness has an aggregate principal amount that is equal to or less than 103% of the aggregate principal amount (or if Incurred with original issue discount, the aggregate accreted value) then outstanding (plus fees and expenses, including any premium and defeasance costs) under the Indebtedness being Refinanced; and
(4) if the Indebtedness being Refinanced is a Subordinated Obligation, such Refinancing Indebtedness is subordinated in right of payment, as the case may be to the Securities at least to the same extent as the Indebtedness being Refinanced;
(B) any Disqualified Stock 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 or refund, other Disqualified Stock of the Company or any of its Restricted Subsidiaries (other than Disqualified Stock held by the Company or any of its Restricted Subsidiaries); provided that:
(1) such Refinancing Indebtedness has a final redemption date later than the final redemption date of, and has a Average Life equal to or greater than the Average Life of, the Disqualified Stock being extended, refinanced, renewed, replaced or refunded;
(2) such Refinancing Indebtedness has a final redemption date later than the final maturity date of, and is contractually subordinated in right of payment to, the Securities on terms at least as favorable to the Securityholders as those contained in the documentation governing the Disqualified Stock being extended, refinanced, renewed, replaced or refunded;
(3) the liquidation or face value of such Refinancing Indebtedness does not exceed the liquidation or face value of the Disqualified Stock so extended, refinanced, renewed, replaced or refunded (plus all accrued dividends thereon and the amount of any reasonably determined premium necessary to accomplish such refinancing and such reasonable fees and expenses incurred in connection therewith);
(4) such Refinancing Indebtedness is not redeemable at the option of the holder thereof or mandatorily redeemable prior to the final maturity of the Disqualified Stock being extended, refinanced, renewed, replaced or refunded; and
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(5) such Disqualified Stock is issued either (a) by the Company or any Subsidiary Guarantor or (b) by the Restricted Subsidiary that is the issuer of the Disqualified Stock being extended, refinanced, renewed, replaced or refunded;
provided further , however , that Refinancing Indebtedness shall not include (A) Indebtedness of a Subsidiary that is not a Subsidiary Guarantor that Refinances Indebtedness of a Subsidiary Guarantor or (B) Indebtedness of the Company or a Restricted Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary.
Registration Rights Agreement means the Registration Rights Agreement related to the Initial Securities, dated as of the Issue Date, among the Company and the Initial Purchasers, as such agreement may be amended, modified or supplemented from time to time and, with respect to any Additional Securities, one or more registration rights agreements between the Company and the other parties thereto, as such agreement(s) may be amended, modified or supplemented from time to time, relating to rights given by the Company to the purchasers of Additional Securities to register such Additional Securities under the Securities Act.
Regulation S means Regulation S promulgated under the Securities Act.
Regulation S Global Security means a Regulation S Temporary Global Security or Regulation S Permanent Global Security, as applicable.
Regulation S Permanent Global Security means a permanent Global Security in the form of Exhibit A hereto bearing the Global Security Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Regulation S Temporary Global Security upon expiration of the Restricted Period.
Regulation S Temporary Global Security means a temporary Global Security in the form of Exhibit A hereto bearing the Global Security Legend, the Private Placement Legend and the Regulation S Temporary Global Security Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Securities initially sold in reliance on Rule 903.
Regulation S Temporary Global Security Legend means the legend set forth in Section 2.06(g)(3) hereof.
Related Business means any business in which the Company or any of the Restricted Subsidiaries was engaged on the Issue Date and any business related, ancillary or complementary to such business.
Reorganization Plan means a plan of reorganization in any of the Cases.
Restricted Definitive Security means a Definitive Security bearing the Private Placement Legend.
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Restricted Global Security means a Global Security bearing the Private Placement Legend.
Restricted Payment with respect to any Person means:
(1) the declaration or payment of any dividends or any other distributions of any sort in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving such Person) or similar payment to the direct or indirect holders of its Capital Stock (other than (A) dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock) or options, warrants or other rights to purchase Capital Stock (other than Disqualified Stock), (B) dividends or distributions payable solely to the Company or a Restricted Subsidiary and (C) pro rata dividends or other distributions made by a Subsidiary that is not a Wholly Owned Restricted Subsidiary to minority stockholders (or owners of an equivalent interest in the case of a Subsidiary that is an entity other than a corporation));
(2) the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of any Capital Stock of the Company or Parent held by any Person (other than by a Restricted Subsidiary) or of any Capital Stock of a Restricted Subsidiary held by any Affiliate of the Company (other than by the Company or a Restricted Subsidiary), including in connection with any merger or consolidation and including the exercise of any option to exchange any Capital Stock (other than into Capital Stock of the Company that is not Disqualified Stock);
(3) the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value or giving of any irrevocable notice of redemption with respect thereto, in each case, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment of any Subordinated Obligations of the Company or any Subsidiary Guarantor (other than (A) from the Company or a Restricted Subsidiary, (B) the purchase, repurchase, redemption, defeasance or other acquisition or retirement of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of such purchase, repurchase, redemption, defeasance or other acquisition or retirement, or (C) the giving of an irrevocable notice of redemption with respect to the transactions described in Section 4.04(b)(1) or (2)); or
(4) the making of any Investment (other than a Permitted Investment) in any Person.
Restricted Period means the 40-day distribution compliance period as defined in Regulation S.
Restricted Subsidiary means any Subsidiary of the Company that is not an Unrestricted Subsidiary.
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Rights Offering means the receipt (prior to or substantially simultaneously with the release of the Escrow Proceeds) of proceeds by the Company from the issuance of common and preferred equity, pursuant to a rights offering or otherwise, of not less than $355.0 million.
Rule 144 means Rule 144 promulgated under the Securities Act.
Rule 144A means Rule 144A promulgated under the Securities Act.
Rule 903 means Rule 903 promulgated under the Securities Act.
Rule 904 means Rule 904 promulgated under the Securities Act.
Sale/Leaseback Transaction means an arrangement relating to property owned by the Company or a Restricted Subsidiary on the Issue Date or thereafter acquired by the Company or a Restricted Subsidiary whereby the Company or a Restricted Subsidiary transfers such property to a third Person and the Company or a Restricted Subsidiary leases it from such Person.
SEC means the U.S. Securities and Exchange Commission.
Secured Indebtedness means any Indebtedness of the Company secured by a Lien.
Securities has the meaning stated in the preamble to this Indenture.
Securities Act means the U.S. Securities Act of 1933, as amended.
Significant Subsidiary means any Restricted Subsidiary that would be a Significant Subsidiary of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC.
SPE Subsidiary means any Subsidiary formed solely for the purpose of, and that engages only in, one or more Permitted Securitizations.
Standard & Poors means Standard & Poors, a division of The McGraw-Hill Companies, Inc., and any successor to its rating agency business.
Stated Maturity means (x) with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred) and (y) with respect to any Capital Lease Obligation, the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty.
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Subordinated Obligation means, with respect to a Person, any Indebtedness of such Person (whether outstanding on the Release Date or thereafter Incurred) which is subordinate or junior in right of payment to the Securities, the Parent Guaranty or a Subsidiary Guaranty of such Person, as the case may be, pursuant to a written agreement to that effect.
Subsidiary means, with respect to any Person, any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Voting Stock is at the time owned or controlled, directly or indirectly, by (1) such Person, (2) such Person and one or more Subsidiaries of such Person or (3) one or more Subsidiaries of such Person.
Subsidiary Guarantor means with respect to the Securities, a Guarantor that is a Restricted Subsidiary of the Company.
Subsidiary Guaranty means a Guarantee by a Subsidiary Guarantor of the Companys Obligations with respect to the Securities and this Indenture, Exchange Securities, and, to the extent permitted under Section 4.03, the Additional Securities, if any.
Tax Amount means (i) for any period, the aggregate amount of Tax Distributions required to be made during such period by Parent or the Company, as applicable, to their direct or indirect owners for the purpose of enabling such owners to pay their tax liability on their respective shares of cumulative taxable income attributable to Parent or the Company, as applicable, assuming the highest marginal federal, state and local tax rate for individuals in effect for the year and assuming residency in New York City, New York, and (ii) for any period, the amount of tax required to be paid by the direct or indirect owners of Parent or the Company, as applicable, directly to taxing authorities in respect of taxable income attributable to Parent or the Company and amounts paid in respect of franchise, capital and other non-income taxes required to be paid by such direct or indirect owners.
Tax Distribution means, in the event Parent or the Company becomes a pass-through or disregarded entity for U.S. federal income tax purposes, a distribution in respect of taxes to the members of Parent or the Company, as applicable.
Temporary Cash Investments means any of the following:
(1) any investment in direct obligations of the United States of America or any agency thereof or obligations guaranteed or insured by the United States of America or any agency thereof;
(2) investments in demand and time deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any State thereof or any foreign country recognized by the United States of America, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of $500,000,000 (or the foreign currency equivalent thereof) and has outstanding debt which is rated A (or such similar equivalent rating) or higher by at
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least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) or any money-market fund sponsored by a registered broker dealer or mutual fund distributor;
(3) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (1) above entered into with a bank meeting the qualifications described in clause (2) above;
(4) investments in commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of P-1 (or higher) according to Moodys or A-1 (or higher) according to Standard & Poors;
(5) investments in securities with maturities of six months or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least A by Standard & Poors or A by Moodys; and
(6) investments in money market funds that invest substantially all their assets in securities of the types described in clauses (1) through (5) above.
Total Assets means the total consolidated assets determined in accordance with GAAP, of, in the case of the Company, the Company and its Restricted Subsidiaries, and, in the case of Foreign Subsidiaries, the total consolidated assets of such Foreign Subsidiaries, in each case as shown on the most recent available internal balance sheet of such Person.
Treasury Rate means, as of any redemption date, the yield to maturity as of such redemption date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to the redemption date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the redemption date to May 1, 2014; provided , however , that if the period from the redemption date to May 1, 2014, is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used.
Treasury Securities means U.S. Government Obligations.
Trust Indenture Act means the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on the Issue Date; provided that in the event that the Trust Indenture Act of 1939 is amended after the Issue Date, Trust Indenture Act means, to the extent required by any such amendment, the Trust Indenture Act of 1939, as amended.
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Trust Officer means any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such Persons knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture.
Trustee means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor.
Uniform Commercial Code means the New York Uniform Commercial Code as in effect from time to time.
Unrestricted Definitive Security means one or more Definitive Securities that do not bear and are not required to bear the Private Placement Legend.
Unrestricted Global Security means a permanent Global Security, substantially in the form of Exhibit A attached hereto that bears the Global Security Legend and that has the Schedule of Increases or Decreases in Global Security attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing Securities that do not bear the Private Placement Legend.
Unrestricted Subsidiary means:
(1) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors of the Company in the manner provided below; and
(2) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors of the Company may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided , however , that either (A) the Subsidiary to be so designated has total assets of $1,000 or less or (B) if such Subsidiary has assets greater than $1,000, such designation would be permitted under Section 4.04.
The Board of Directors of the Company may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided , however , that immediately after giving effect to such designation (A) either (a) the Consolidated Coverage Ratio would not be less than immediately prior to such designation or (b) the Company could Incur $1.00 of additional Indebtedness under the first proviso of Section 4.03(a) and (B) no Default shall have occurred and be continuing. Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors of the Company giving effect to such designation and an Officers Certificate certifying that such designation complied with the foregoing provisions.
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Unsecured Indebtedness means Indebtedness that is not Secured Indebtedness.
U.S. Dollar Equivalent means with respect to any monetary amount in a currency other than U.S. dollars, at any time for determination thereof, the amount of U.S. dollars obtained by converting such foreign currency involved in such computation into U.S. dollars at the spot rate for the purchase of U.S. dollars with the applicable foreign currency as published in The Wall Street Journal in the Exchange Rates column under the heading Currency Trading on the date two Business Days prior to such determination.
U.S. Government Obligations means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable at the issuers option.
U.S. Person means a U.S. person as defined in Rule 902(k) under the Securities Act.
Voting Stock of a Person means all classes of Capital Stock of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof.
Wholly Owned Domestic Subsidiary of any specified Person means a Domestic Subsidiary of such Person all of the outstanding Capital Stock or other ownership interest of which shall at the time be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of such Person.
Wholly Owned Restricted Subsidiary means a Restricted Subsidiary all the Capital Stock of which (other than directors qualifying shares) is owned by the Company or one or more other Wholly Owned Restricted Subsidiaries.
Wholly Owned Subsidiary of any specified Person means a Subsidiary of such Person all of the outstanding Capital Stock or other ownership interest of which shall at the time be owned by such Person or by one or more Subsidiaries of such Person.
SECTION 1.02. Other Definitions .
Term |
Defined in
Indenture Section |
|
Acceleration Notice |
6.02 | |
Affiliate Transaction |
4.07(a) | |
Authenticating Agent Bankruptcy Custodian |
2.02
6.01 |
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Term |
Defined in
Indenture Section |
|
Bankruptcy Law |
6.01 | |
Change of Control Offer |
4.09(b) | |
covenant defeasance option |
8.01(b) | |
Covenant Suspension Event |
4.15 | |
cross-acceleration provision |
6.01(5) | |
DTC |
3.02 | |
Excess Proceeds |
4.06(a)(3)(B) | |
Exchange Offer Registration Statement |
4.02 | |
Escrow Proceeds |
4.14 | |
Event of Default |
6.01 | |
Guaranteed Obligations |
11.01 | |
Initial Lien |
4.13 | |
judgment default provision |
6.01(8) | |
legal defeasance option |
8.01(b) | |
Notice of Default |
6.01 | |
Offer |
4.06(b) | |
Offer Amount |
4.06(c)(2) | |
Offer Period |
4.06(c)(2) | |
Paying Agent |
2.03 | |
Purchase Date |
4.06(c)(1) | |
Refunding Capital Stock |
4.04(b)(i) | |
Registrar |
2.03 | |
Release Date |
4.14 | |
Reversion Date |
4.15 | |
Shelf Registration Statement |
4.02 | |
Special Mandatory Redemption |
3.07 | |
Special Mandatory Redemption Price |
3.07 | |
Successor Company |
5.01(a)(1) | |
Suspended Covenants |
4.15 | |
Suspension Period |
4.15 | |
Trigger Date |
3.07 |
SECTION 1.03. Incorporation by Reference of Trust Indenture Act . This Indenture is subject to the mandatory provisions of the Trust Indenture Act which are incorporated by reference in and made a part of this Indenture. The following Trust Indenture Act terms have the following meanings:
Commission means the SEC;
indenture securities means the Securities, the Parent Guaranty and the Subsidiary Guarantees;
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indenture security holder means a Securityholder;
indenture to be qualified means this Indenture;
indenture trustee or institutional trustee means the Trustee; and
obligor on the indenture securities means the Company, Parent, each Subsidiary Guarantor and any other obligor on the indenture securities.
All other Trust Indenture Act terms used in this Indenture that are defined by the Trust Indenture Act, defined by Trust Indenture Act reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction . Unless otherwise expressly provided or the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;
(3) or is not exclusive;
(4) including means including without limitation;
(5) words in the singular include the plural and words in the plural include the singular;
(6) Unsecured Indebtedness shall not be deemed to be subordinate or junior in right of payment to Secured Indebtedness merely by virtue of its nature as Unsecured Indebtedness;
(7) Secured Indebtedness shall not be deemed to be subordinate or junior in right of payment to any other Secured Indebtedness merely because it has a junior priority with respect to the same collateral;
(8) the principal amount of any Preferred Stock shall be (A) the maximum liquidation value of such Preferred Stock or (B) the maximum mandatory redemption or mandatory repurchase price with respect to such Preferred Stock, whichever is greater; and
(9) all references to the date the Securities were originally issued shall refer to the Issue Date.
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SECTION 1.05. Acts of Holders .
(a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments or record or both are delivered to the Trustee and, where it is hereby expressly required, to the Company. Proof of execution of any such instrument or of a writing appointing any such agent, or the holding by any Person of a Security, shall be sufficient for any purpose of this Indenture and (subject to Section 7.01) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of any notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by or on behalf of any legal entity other than an individual, such certificate or affidavit shall also constitute proof of the authority of the Person executing the same. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner that the Trustee deems sufficient.
(c) The ownership of Securities shall be proved by the Security register.
(d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, in respect of any action taken, suffered or omitted by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security.
(e) The Company may, in the circumstances permitted by the Trust Indenture Act, set a record date for purposes of determining the identity of Holders entitled to give any request, demand, authorization, direction, notice, consent, waiver or take any other act, or to vote or consent to any action by vote or consent authorized or permitted to be given or taken by Holders. Unless otherwise specified, if not set by the Company prior to the first solicitation of a Holder made by any Person in respect of any such action, or in the case of any such vote, prior to such vote, any such record date shall be the later of 30 days prior to the first solicitation of such consent or the date of the most recent list of Holders furnished to the Trustee prior to such solicitation.
(f) Without limiting the foregoing, a Holder entitled to take any action hereunder with regard to any particular Security may do so with regard to all or any part of the principal amount of such Security or by one or more duly appointed agents, each of which may do so pursuant to such appointment with regard to all or any part of such principal amount. Any
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notice given or action taken by a Holder or its agents with regard to different parts of such principal amount pursuant to this paragraph shall have the same effect as if given or taken by separate Holders of each such different part.
(g) Without limiting the generality of the foregoing, a Holder, including DTC that is the Holder of a Global Security, may make, give or take, by a proxy or proxies duly appointed in writing, any request, demand, authorization, direction, notice, consent, waiver or other action provided in this Indenture to be made, given or taken by Holders, and DTC that is the Holder of a Global Security may provide its proxy or proxies to the beneficial owners of interests in any such Global Security through such depositarys standing instructions and customary practices.
(h) The Company may fix a record date for the purpose of determining the Persons who are beneficial owners of interests in any Global Security held by DTC entitled under the procedures of such depositary to make, give or take, by a proxy or proxies duly appointed in writing, any request, demand, authorization, direction, notice, consent, waiver or other action provided in this Indenture to be made, given or taken by Holders. If such a record date is fixed, the Holders on such record date or their duly appointed proxy or proxies, and only such Persons, shall be entitled to make, give or take such request, demand, authorization, direction, notice, consent, waiver or other action, whether or not such Holders remain Holders after such record date. No such request, demand, authorization, direction, notice, consent, waiver or other action shall be valid or effective if made, given or taken more than 90 days after such record date.
ARTICLE 2
The Securities
SECTION 2.01. Form and Dating .
(a) General . The Securities and the Trustees certificate of authentication relating thereto shall be substantially in the form of Exhibit A hereto. The Securities may have notations, legends or endorsements required by law, stock exchange rule or depository rule or usage. The Company shall approve the form of the Securities and any notation, legend or endorsement on them. Each Security shall be dated the date of its issuance and shall show the date of its authentication.
The terms and provisions contained in the Securities, a form of which is annexed hereto as Exhibit A , shall constitute, and are hereby expressly made, a part of this Indenture and, to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. Upon the consummation of the Assumption, the terms and provisions of the Guarantees will constitute, and shall expressly be made, a part of this Indenture and the Company, Parent, the Subsidiary Guarantors and the Trustee, by their execution and delivery of the supplemental indenture substantially in the form of Exhibit E hereto, shall expressly agree to such terms and provisions and to be bound thereby. Any reference to a Guarantor herein shall be deemed to be a reference thereto solely from and after the date of its execution and delivery of a supplemental indenture hereto in the form of Exhibit D or Exhibit E hereto.
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(b) Global Securities . Securities issued in global form shall be substantially in the form of Exhibit A (the Global Security ) attached hereto (including the Global Security Legend thereon). Securities issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Security Legend thereon). Each Global Security shall provide that it shall represent up to the aggregate principal amount of Securities from time to time endorsed thereon and that the aggregate principal amount of outstanding Securities represented thereby may from time to time be reduced or increased, as applicable, to reflect exchanges and redemptions. Any endorsement of a Global Security to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Securities represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof.
(c) Temporary Global Securities . Securities offered and sold in reliance on Regulation S shall be issued initially in the form of the Regulation S Temporary Global Security, which shall be deposited on behalf of the purchasers of the Securities represented thereby with the Trustee, as custodian for the Depositary, and registered in the name of the Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf of Euroclear or Clearstream, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Restricted Period shall be terminated upon the receipt by the Trustee of:
(1) a written certificate from the Depositary, together with copies of certificates from Euroclear and Clearstream certifying that they have received certification of non-United States beneficial ownership of 100% of the aggregate principal amount of the Regulation S Temporary Global Security (except to the extent of any beneficial owners thereof who acquired an interest therein during the Restricted Period pursuant to another exemption from registration under the Securities Act and who shall take delivery of a beneficial ownership interest in a 144A Global Security bearing a Private Placement Legend, all as contemplated by Section 2.06(b) hereof); and
(2) an Officers Certificate from the Company.
Following the termination of the Restricted Period, beneficial interests in the Regulation S Temporary Global Security shall be exchanged for beneficial interests in the Regulation S Permanent Global Security pursuant to the Applicable Procedures. Simultaneously with the authentication of the Regulation S Permanent Global Security, the Trustee shall cancel the Regulation S Temporary Global Security. The aggregate principal amount of the Regulation S Temporary Global Security and the Regulation S Permanent Global Security may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee, as the case may be, in connection with transfers of interest as hereinafter provided.
(d) Terms . The aggregate principal amount of Securities that may be authenticated and delivered under this Indenture is unlimited.
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The Securities shall be subject to repurchase by the Company pursuant to a Change of Control Offer as provided in Section 4.09 hereof or an Offer as provided in Section 4.06 hereof. The Securities shall not be redeemable, other than as provided in Article 3.
Euroclear and Clearstream Procedures Applicable . The provisions of the Operating Procedures of the Euroclear System and Terms and Conditions Governing Use of Euroclear and the General Terms and Conditions of Clearstream Banking and Customer Handbook of Clearstream shall be applicable to transfers of beneficial interests in the Regulation S Temporary Global Security and the Regulation S Permanent Global Securities that are held by Participants through Euroclear or Clearstream.
SECTION 2.02. Execution and Authentication .
At least one Officer shall execute the Securities for the Company by manual or facsimile signature.
If an Officer whose signature is on a Security or a Guarantee was an Officer at the time of such execution but no longer holds that office or position at the time the Trustee authenticates the Security, the Security shall nevertheless be valid.
A Security shall not be valid until an authorized signatory of the Trustee manually or by facsimile signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture.
The Trustee shall authenticate (i) Initial Securities for original issue on the Issue Date in the aggregate principal amount not to exceed $450,000,000, and (ii) subject to Section 4.03, Additional Securities, in each case upon a written order of the Company in the form of an Officers Certificate. Each such written order shall specify the amount of Securities to be authenticated and the date on which the Securities are to be authenticated, whether the Securities are to be Securities or Additional Securities and whether the Securities are to be issued as Definitive Securities or Global Securities or such other information as the Trustee may reasonably request. Any Additional Securities shall be part of the same issue as the Initial Securities being issued on the Issue Date and will vote on all matters as one class with the Initial Securities being issued on the Issue Date, including, without limitation, waivers, amendments, redemptions, Change of Control Offers and Offers. For the purposes of this Indenture, except for Section 4.03, references to the Securities include Additional Securities, if any.
The Trustee may appoint an authenticating agent (the Authenticating Agent) reasonably acceptable to the Company to authenticate Securities. Unless otherwise provided in the appointment, an Authenticating Agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such Authenticating Agent. An Authenticating Agent has the same rights as an agent to deal with the Company or with any Affiliate of the Company.
The Securities shall be issuable in fully registered form only, without coupons, in denominations of at least $2,000 and any integral multiple of $1,000 in excess thereof.
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SECTION 2.03. Registrar and Paying Agent . The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange (the Registrar) and an office or agency where Securities may be presented for payment (the Paying Agent). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term Paying Agent includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-registrar not a party to this Indenture, which shall incorporate the terms of the Trust Indenture Act. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07. The Company or any Wholly Owned Subsidiary incorporated or organized within The United States of America may act as Paying Agent, Registrar, co-registrar or transfer agent.
The Company initially appoints the Trustee as Registrar and Paying Agent in connection with the Securities.
SECTION 2.04. Paying Agent To Hold Money in Trust . Prior to each due date of the principal (and premium, if any) and interest on any Security, the Company shall deposit with the Paying Agent a sum sufficient to pay such principal, any premium and interest when so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Securities and shall notify the Trustee of any default by the Company in making any such payment. If the Company or a Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon complying with this Section 2.04, the Paying Agent shall have no further liability for the money delivered to the Trustee.
SECTION 2.05. Securityholder Lists . The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders.
SECTION 2.06. Transfer and Exchange .
(a) Transfer and Exchange of Global Securities . Except as otherwise set forth in this Section 2.06, a Global Security may be transferred, in whole and not in part, only to another nominee of the Depositary or to a successor Depositary or a nominee of such successor Depositary. A beneficial interest in a Global Security may not be exchanged for a Definitive Security unless (i) the Depositary (x) notifies the Company that it is unwilling or unable to continue
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as Depositary for such Global Security or (y) has ceased to be a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days or (ii) there shall have occurred and be continuing a Default with respect to the Securities. Upon the occurrence of any of the preceding events in clause (i) or (ii) above, Definitive Securities delivered in exchange for any Global Security or beneficial interests therein 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). Global Securities also may be exchanged or replaced, in whole or in part, as provided in Section 2.07 and Section 2.09 hereof. Every Security authenticated and delivered in exchange for, or in lieu of, a Global Security or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or Section 2.09 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Security, except for Definitive Securities issued subsequent to any of the preceding events in clause (i) or (ii) above and pursuant to Section 2.06(c) hereof. A Global Security may not be exchanged for another Security other than as provided in this Section 2.06(a); provided , however , beneficial interests in a Global Security may be transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Securities . The transfer and exchange of beneficial interests in the Global Securities shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Securities shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Securities also shall require compliance with either subparagraph (1) or (2) below, as applicable, as well as one or more of the other following subparagraphs, as applicable:
(1) Transfer of Beneficial Interests in the Same Global Security . Beneficial interests in any Restricted Global Security may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Security in accordance with the transfer restrictions set forth in the Private Placement Legend; provided , however , that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Regulation S Temporary Global Security may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Security may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Security. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(1).
(2) All Other Transfers and Exchanges of Beneficial Interests in Global Securities . In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(1) hereof, the transferor of such beneficial interest must deliver to the Registrar either (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Security in an amount equal to the beneficial
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interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Security in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Security shall be registered to effect the transfer or exchange referred to in (1) above; provided that in no event shall Definitive Securities be issued upon the transfer or exchange of beneficial interests in the Regulation S Temporary Global Security prior to (A) the expiration of the Restricted Period and (B) the receipt by the Registrar of any certificates required pursuant to Rule 903. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Securities contained in this Indenture and the Securities or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Security(s) pursuant to Section 2.06(h) hereof.
(3) Transfer of Beneficial Interests to Another Restricted Global Security . A beneficial interest in any Restricted Global Security may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Security if the transfer complies with the requirements of Section 2.06(b)(2) hereof and the Registrar receives the following:
(A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Security, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; or
(B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Global Security, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof.
(4) Transfer and Exchange of Beneficial Interests in a Restricted Global Security for Beneficial Interests in an Unrestricted Global Security . A beneficial interest in any Restricted Global Security may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Security or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Security if the exchange or transfer complies with the requirements of Section 2.06(b)(2) hereof and:
(A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an
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exchange, or the transferee, in the case of a transfer, certifies in the applicable letter of transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Securities or (3) a Person who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a broker-dealer pursuant to an Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted Global Security proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Security, a certificate from such Holder substantially in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a Restricted Global Security proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Security, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each case set forth in this Section 2.06(b)(4), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.
If any such transfer is effected pursuant to Section 2.06(b)(2) or (4) at a time when an Unrestricted Global Security has not yet been issued, the Company shall issue and, upon receipt of an authentication order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Securities in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to Section 2.06(b)(2) or (4).
Beneficial interests in an Unrestricted Global Security cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Security.
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(c) Transfer or Exchange of Beneficial Interests for Definitive Securities .
(1) Beneficial Interests in Restricted Global Securities to Restricted Definitive Securities . If any holder of a beneficial interest in a Restricted Global Security proposes to exchange such beneficial interest for a Restricted Definitive Security or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Security, then, upon the occurrence of any of the events in paragraph (i) or (ii) of Section 2.06(a) hereof and receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted Global Security proposes to exchange such beneficial interest for a Restricted Definitive Security, a certificate from such holder substantially in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (1) thereof;
(C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to the Company, Parent or a Subsidiary thereof, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (3)(b) thereof; or
(F) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (3)(c) thereof;
the Trustee shall cause the aggregate principal amount of the applicable Global Security to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and mail to the Person designated in the instructions a Definitive Security in the applicable principal amount. Any Definitive Security issued in exchange for a beneficial interest in a Restricted Global Security pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the
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Participant or Indirect Participant. The Trustee shall mail such Definitive Securities to the Persons in whose names such Securities are so registered. Any Definitive Security issued in exchange for a beneficial interest in a Restricted Global Security pursuant to this Section 2.06(c)(1) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein.
(2) Beneficial Interests in Regulation S Temporary Global Security to Definitive Securities . Notwithstanding Section 2.06(c)(1)(A) and (C) hereof, a beneficial interest in the Regulation S Temporary Global Security may not be exchanged for a Definitive Security or transferred to a Person who takes delivery thereof in the form of a Definitive Security prior to (A) the expiration of the Restricted Period and (B) the receipt by the Registrar of any certificates required pursuant to Rule 903(b)(3)(ii)(B) of the Securities Act, except in the case of a transfer pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904.
(3) Beneficial Interests in Restricted Global Securities to Unrestricted Definitive Securities . A holder of a beneficial interest in a Restricted Global Security may exchange such beneficial interest for an Unrestricted Definitive Security or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Security only upon the occurrence of any of the events in subsection (i) or (ii) of Section 2.06(a) hereof and if:
(A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable letter of transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Securities or (3) a Person who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a broker-dealer pursuant to an Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted Global Security proposes to exchange such beneficial interest for an Unrestricted Definitive Security, a certificate from such holder substantially in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or
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(2) if the holder of such beneficial interest in a Restricted Global Security proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Security, a certificate from such holder substantially in the form of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each case set forth in this Section 2.06(c)(3), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.
(4) Beneficial Interests in Unrestricted Global Securities to Unrestricted Definitive Securities . If any holder of a beneficial interest in an Unrestricted Global Security proposes to exchange such beneficial interest for a Definitive Security or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Security, then, upon the occurrence of any of the events in subsection (i) or (ii) of Section 2.06(a) hereof and satisfaction of the conditions set forth in Section 2.06(b)(2) hereof, the Trustee shall cause the aggregate principal amount of the applicable Global Security to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and mail to the Person designated in the instructions a Definitive Security in the applicable principal amount. Any Definitive Security issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(4) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from or through the Depositary and the Participant or Indirect Participant. The Trustee shall mail such Definitive Securities to the Persons in whose names such Securities are so registered. Any Definitive Security issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(4) shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Securities for Beneficial Interests .
(1) Restricted Definitive Securities to Beneficial Interests in Restricted Global Securities . If any Holder of a Restricted Definitive Security proposes to exchange such Security for a beneficial interest in a Restricted Global Security or to transfer such Restricted Definitive Security to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Security, then, upon receipt by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Security proposes to exchange such Security for a beneficial interest in a Restricted Global Security, a certificate from such Holder substantially in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof;
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(B) if such Restricted Definitive Security is being transferred to a QIB in accordance with Rule 144A, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (1) thereof;
(C) if such Restricted Definitive Security is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (2) thereof;
(D) if such Restricted Definitive Security is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Security is being transferred to the Company, Parent or a Subsidiary thereof, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (3)(b) thereof; or
(F) if such Restricted Definitive Security is being transferred pursuant to an effective registration statement under the Securities Act, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (3)(c) thereof;
the Trustee shall cancel the Restricted Definitive Security, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the applicable Restricted Global Security, in the case of clause (B) above, the applicable 144A Global Security, in the case of clause (C) above, the applicable Regulation S Global Security.
(2) Restricted Definitive Securities to Beneficial Interests in Unrestricted Global Securities . A Holder of a Restricted Definitive Security may exchange such Security for a beneficial interest in an Unrestricted Global Security or transfer such Restricted Definitive Security to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Security only:
(A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable letter of transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Securities or (3) a Person who is an affiliate (as defined in Rule 144) of the Company;
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(B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a broker-dealer pursuant to an Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Securities proposes to exchange such Securities for a beneficial interest in the Unrestricted Global Security, a certificate from such Holder substantially in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Securities proposes to transfer such Securities to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Security, a certificate from such Holder substantially in the form of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each case set forth in this Section 2.06(d)(2), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(2), the Trustee shall cancel the Definitive Securities and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Security.
(3) Unrestricted Definitive Securities to Beneficial Interests in Unrestricted Global Securities . A Holder of an Unrestricted Definitive Security may exchange such Security for a beneficial interest in an Unrestricted Global Security or transfer such Definitive Securities to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Security at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Security and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Securities.
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If any such exchange or transfer from a Definitive Security to a beneficial interest is effected pursuant to subparagraph (2)(B), (2)(D) or (3) above at a time when an Unrestricted Global Security has not yet been issued, the Company shall issue and, upon receipt of an authentication order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Securities in an aggregate principal amount equal to the principal amount of Definitive Securities so transferred.
(e) Transfer and Exchange of Definitive Securities for Definitive Securities . Upon request by a Holder of Definitive Securities and such Holders compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Securities. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Securities duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e):
(1) Restricted Definitive Securities to Restricted Definitive Securities . Any Restricted Definitive Security may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Security if the Registrar receives the following:
(A) if the transfer will be made to a QIB in accordance with Rule 144A, then the transferor must deliver a certificate substantially in the form of Exhibit B hereto, including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule 904 then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; or
(C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications required by item (3) thereof, if applicable.
(2) Restricted Definitive Securities to Unrestricted Definitive Securities . Any Restricted Definitive Security may be exchanged by the Holder thereof for an Unrestricted Definitive Security or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Security if:
(A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable letter of transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Securities or (3) a Person who is an affiliate (as defined in Rule 144) of the Company;
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(B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a broker-dealer pursuant to an Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Securities proposes to exchange such Securities for an Unrestricted Definitive Security, a certificate from such Holder substantially in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Securities proposes to transfer such Securities to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Security, a certificate from such Holder substantially in the form of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each case set forth in this Section 2.06(e)(2), if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.
(3) Unrestricted Definitive Securities to Unrestricted Definitive Securities . A Holder of Unrestricted Definitive Securities may transfer such Securities to a Person who takes delivery thereof in the form of an Unrestricted Definitive Security. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Securities pursuant to the instructions from the Holder thereof.
(f) Exchange Offer . Upon the occurrence of an Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate (i) one or more Unrestricted Global Securities in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Securities tendered for acceptance by Persons that certify in the applicable letters of transmittal that (x) they are not broker-dealers, (y) they are not participating in a distribution of any Exchange Securities and (z) they are not affiliates (as defined in Rule 144) of the Company, and accepted for exchange in the Exchange Offer and (ii) Unrestricted Definitive Securities in an aggregate principal amount equal to the principal amount of the Restricted Definitive Securities tendered for acceptance by Persons that certify in the applicable letters of transmittal that (x) they are not broker-dealers, (y) they are not participating
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in a distribution of the Exchange Securities and (z) they are not affiliates (as defined in Rule 144) of the Company, and accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Securities, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Securities to be reduced accordingly, and the Company shall execute and the Trustee shall authenticate and mail to the Persons designated by the Holders of Definitive Securities so accepted Unrestricted Definitive Securities in the applicable principal amount. Any Securities that remain outstanding after the consummation of an Exchange Offer, and Exchange Securities issued in connection with an Exchange Offer, shall be treated as a single class of securities under this Indenture.
(g) Legends . The following legends shall appear on the face of all Global Securities and Definitive Securities issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture:
(1) Private Placement Legend .
(A) Except as permitted by subparagraph (B) below, each Global Security and each Definitive Security (and all Securities issued in exchange therefor or substitution therefor) shall bear the legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT) AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A QIB) OR (B) IT IS NOT A U.S. PERSON, IS NOT ACQUIRING THIS SECURITY FOR THE ACCOUNT OR FOR THE BENEFIT OF A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFF-SHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT,
(2) AGREES THAT IT WILL NOT, WITHIN, THE TIME PERIOD REFERRED TO UNDER RULE 144(d)(1) UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY, THE PARENT GUARANTOR OR ANY SUBSIDIARY THEREOF, (B) TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QIB OR AN ACCREDITED INVESTOR PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB OR AN ACCREDITED INVESTOR, RESPECTIVELY, IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT OR AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY
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RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE AND PROVIDED THAT PRIOR TO SUCH TRANSFER, THE TRUSTEE IS FURNISHED WITH AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY OR AN INTEREST HEREIN IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE (2)(E) ABOVE) A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY OR ANY INTEREST HEREIN WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. AS USED HEREIN THE TERMS OFFSHORE TRANSACTION, UNITED STATES AND U.S. PERSON HAVE THE MEANING GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT.
(B) Notwithstanding the foregoing, any Global Security or Definitive Security issued pursuant to subparagraph (b)(4), (c)(3), (c)(4), (d)(2), (d)(3), (e)(2), (e)(3) or (f) of this Section 2.06 (and all Securities issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend.
(2) Global Security Legend . Each Global Security shall bear a legend in substantially the following form:
THIS GLOBAL SECURITY IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS SECURITY) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06(h) OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.10 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM,
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THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (DTC) TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
(3) Regulation S Temporary Global Security Legend . The Regulation S Temporary Global Security shall bear a legend in substantially the following form:
BY ITS ACQUISITION HEREOF, THE HOLDER HEREOF REPRESENTS THAT IT IS NOT A U.S. PERSON, NOR IS IT PURCHASING FOR THE ACCOUNT OF A U.S. PERSON, AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT.
(h) Cancellation and/or Adjustment of Global Securities . At such time as all beneficial interests in a particular Global Security have been exchanged for Definitive Securities or a particular Global Security has been redeemed, repurchased or canceled in whole and not in part, each such Global Security shall be returned to or retained and canceled by the Trustee in accordance with Section 2.10 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Security is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Security or for Definitive Securities, the principal amount of Securities represented by such Global Security shall be reduced accordingly and an endorsement shall be made on such Global Security by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Security, such other Global Security shall be increased accordingly and an endorsement shall be made on such Global Security by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase.
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(i) General Provisions Relating to Transfers and Exchanges .
(1) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Securities and Definitive Securities upon receipt of an authentication order in accordance with Section 2.02 hereof or at the Registrars request.
(2) No service charge shall be made to a holder of a beneficial interest in a Global Security or to a Holder of a Definitive Security for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Section 2.07, Section 2.09, Section 3.06, Section 4.06, Section 4.09 and Section 9.05 hereof).
(3) Neither the Registrar nor the Company shall be required to register the transfer of or exchange any Security selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part.
(4) All Global Securities and Definitive Securities issued upon any registration of transfer or exchange of Global Securities or Definitive Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Securities or Definitive Securities surrendered upon such registration of transfer or exchange.
(5) The Company shall not be required (A) to issue, to register the transfer of or to exchange any Securities during a period beginning at the opening of business 15 days before the day of any selection of Securities for redemption under Section 3.02 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part or (C) to register the transfer of or to exchange a Security between a record date and the next succeeding interest payment date.
(6) Prior to due presentment for the registration of a transfer of any Security, the Trustee, any agent and the Company may deem and treat the Person in whose name any Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of (and premium, if any) and interest (including Additional Interest, if any) on such Securities and for all other purposes, and none of the Trustee, any agent or the Company shall be affected by notice to the contrary.
(7) The Trustee shall authenticate Global Securities and Definitive Securities.
(8) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted electronically or by facsimile.
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SECTION 2.07. Replacement Securities . If a mutilated Security is surrendered to the Registrar or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the requirements of Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar and any co-registrar from any loss which any of them may suffer if a Security is replaced. The Company and the Trustee may charge the Holder for their expenses in replacing a Security (including, without limitation, attorneys fees and disbursements in replacing such Security).
Every replacement Security is an additional Obligation of the Company.
In the event of any such mutilated, lost, destroyed or wrongfully taken Security has become due and payable, the Company in its discretion may pay such Security instead of issuing a new Security in replacement thereof.
SECTION 2.08. Outstanding Securities . Securities outstanding at any time are all Securities authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation and those described in this Section as not outstanding. A Security does not cease to be outstanding because the Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to them that the replaced Security is held by a protected purchaser (as defined in Section 8-303 of the Uniform Commercial Code).
If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date money sufficient to pay all principal (and premium, if any) and interest payable on that date with respect to the Securities (or portions thereof) to be redeemed or maturing, as the case may be, and the Paying Agent is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture, then on and after that date such Securities (or portions thereof) cease to be outstanding and interest on them ceases to accrue.
SECTION 2.09. Temporary Securities . Until Definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of Definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate Definitive Securities and deliver them in exchange for temporary Securities.
SECTION 2.10. Cancellation . The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel and destroy (subject to the record retention requirements of the Exchange Act) all Securities surrendered for registration of transfer, exchange,
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payment or cancellation and deliver a certificate of such destruction to the Company unless the Company directs the Trustee to deliver canceled Securities to the Company. The Company may not issue new Securities to replace Securities it has redeemed, paid or delivered to the Trustee for cancellation.
SECTION 2.11. Defaulted Interest . If the Company defaults in a payment of interest on the Securities, the Company shall pay defaulted interest (plus interest at the rate borne by the Securities on such defaulted interest to the extent lawful) in any lawful manner. The Company may pay the defaulted interest to the persons who are Securityholders on a subsequent special record date. The Company shall fix or cause to be fixed any such special record date and payment date to the reasonable satisfaction of the Trustee and shall promptly mail to each Securityholder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid.
SECTION 2.12. CUSIP Numbers, ISINs, etc . The Company in issuing the Securities may use CUSIP numbers, ISINs and Common Code numbers (in each case if then generally in use) and, if so, the Trustee shall use CUSIP numbers, ISINs and Common Code numbers in notices of redemption as a convenience to Holders; provided , however , that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company shall advise the Trustee in writing of any change in any CUSIP numbers, ISINs or Common Code numbers applicable to the Securities.
SECTION 2.13. Issuance of Additional Securities . After the Issue Date, the Company shall be entitled, subject to its compliance with Section 4.03, to issue Additional Securities under this Indenture, which Additional Securities shall have identical terms as the Securities issued on the Issue Date, other than with respect to the date of issuance and issue price. All the Securities issued under this Indenture shall be treated as a single class for all purposes of this Indenture including waivers, amendments, redemptions and offers to purchase.
With respect to any Additional Securities, the Company shall set forth in a resolution of the Board of Directors and an Officers Certificate, a copy of each which shall be delivered to the Trustee, the following information:
(1) the aggregate principal amount of such Additional Securities to be authenticated and delivered pursuant to this Indenture and the provision of Section 4.03 that the Company is relying on to issue such Additional Securities;
(2) the issue price, the issue date and the CUSIP number of such Additional Securities; provided , however , that no Additional Securities may be issued at a price that would cause such Additional Securities to have original issue discount within the meaning of Section 1273 of the Code; and
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(3) whether such Additional Securities shall be Securities or shall be issued in the form of Exchange Securities.
ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee . If the Company elects to redeem Securities pursuant to section 5 of the Securities, it shall notify the Trustee in writing of the redemption date, the principal amount of Securities to be redeemed and the paragraph of the Securities pursuant to which the redemption will occur; provided that no Securities of $2,000 or less shall be purchased or redeemed in part.
The Company shall give each notice to the Trustee provided for in this Section at least 30 days but not more than 60 days before the redemption date unless the Trustee consents to a shorter period. Such notice shall be accompanied by an Officers Certificate and an Opinion of Counsel from the Company to the effect that such redemption will comply with the conditions herein.
SECTION 3.02. Selection of Securities To Be Redeemed . If fewer than all the Securities are to be redeemed, the Trustee will select Securities in compliance with the requirements of the principal national securities exchange, if any, on which such Securities are listed, or, if such Securities are not so listed, on a pro rata basis or by lot or such similar method in accordance with the procedures of The Depository Trust Company (DTC). The Trustee shall make the selection from outstanding Securities not previously called for redemption. The Trustee may select for redemption portions of the principal of Securities that have denominations larger than $2,000. Securities and portions of them the Trustee selects shall be in principal amounts of $2,000 or a whole multiple of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Company promptly of the Securities or portions of Securities to be redeemed.
SECTION 3.03. Notice of Redemption . At least 30 days but not more than 60 days before a date for redemption of Securities, the Company shall send electronically or by first-class mail or otherwise in accordance with the procedures of DTC a notice of redemption to each Holder of Securities to be redeemed at such Holders registered address, except that a notice of redemption may be sent or mailed more than 60 days prior to a redemption date if the notice of redemption is issued in connection with a defeasance of the Securities or a satisfaction and discharge of this Indenture. Notwithstanding anything to the contrary contained in this Indenture, notice of a redemption upon an Equity Offering may be made in advance of an Equity Offering, subject to one or more conditions precedent, including but not limited to the consummation of such Equity Offering.
The notice shall identify the Securities to be redeemed and shall state:
(1) the redemption date;
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(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be redeemed, the identification and principal amounts of the particular Securities to be redeemed;
(6) that, unless the Company defaults in making such redemption payment or the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture, interest on Securities (or portion thereof) called for redemption ceases to accrue on and after the redemption date;
(7) the CUSIP number, ISIN or Common Code number, if any, printed on the Securities being redeemed; and
(8) that no representation is made as to the correctness or accuracy of the CUSIP number, ISIN, or Common Code number, if any, listed in such notice or printed on the Securities.
At the Companys request, the Trustee shall give the notice of redemption in the Companys name and at the Companys expense. In such event, the Company shall provide the Trustee with the information required by this Section.
SECTION 3.04. Effect of Notice of Redemption . Once notice of redemption is sent or mailed, Securities called for redemption become due and payable on the redemption date and at the redemption price stated in the notice. Upon surrender to the Paying Agent, such Securities shall be paid at the redemption price stated in the notice, plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the related interest payment date), and such Securities shall be canceled by the Trustee. Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder. On and after the redemption date, interest will cease to accrue on the Securities or portions of them called for redemption.
SECTION 3.05. Deposit of Redemption Price . Prior to the redemption date, the Company shall deposit with the Paying Agent (or, if the Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued interest on all Securities to be redeemed on that date other than Securities or portions of Securities called for redemption which have been delivered by the Company to the Trustee for cancellation.
SECTION 3.06. Securities Redeemed in Part . Upon surrender of a Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate for the Holder (at the Companys expense) a new Security equal in principal amount to the unredeemed portion of the Security surrendered.
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SECTION 3.07. Special Mandatory Redemption . The Securities will be subject to a mandatory redemption (a Special Mandatory Redemption) in the event that either (i) the Release Date has not occurred on or prior to the Escrow End Date or (ii) prior to the Escrow End Date, the Company has determined, in its reasonable discretion, that the escrow conditions cannot be satisfied by such date (any such date, a Trigger Date). The Company shall cause the notice of Special Mandatory Redemption to be mailed no later than the next Business Day following the Trigger Date and will redeem the Securities five Business Days following the date of the notice of redemption. The redemption price for any Special Mandatory Redemption will be the sum of 100% of the Gross Proceeds plus 1.0% of the aggregate principal amount of the Securities issued on the Issue Date, together with accrued and unpaid interest on the Securities from the Issue Date up to but not including the date of the Special Mandatory Redemption (the Special Mandatory Redemption Price).
If the Escrow Agent receives a notice of the Special Mandatory Redemption pursuant to the terms of the Securities, the Escrow Agent will liquidate all Escrow Proceeds then held by it not later than the last Business Day prior to the date of the Special Mandatory Redemption. Concurrently with the release of the amounts necessary to fund the Special Mandatory Redemption to the Paying Agent, the Escrow Agent will release any excess of Escrow Proceeds over the Special Mandatory Redemption Price to the Company, and the Company will be permitted to use such excess Escrow Proceeds at its discretion.
ARTICLE 4
Covenants
SECTION 4.01. Payment of Securities . The Company shall promptly pay the principal (and premium, if any) of and interest on the Securities on the dates and in the manner provided in the Securities and in this Indenture. Principal (and premium, if any) and interest shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds in accordance with this Indenture money sufficient to pay all principal (and premium, if any) and interest then due and the Trustee or the Paying Agent, as the case may be, is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal at the rate specified therefor in the Securities, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful.
SECTION 4.02. SEC Reports . From and after the Release Date, whether or not the Company is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company will file with the SEC (subject to the next sentence) and provide the Trustee and Securityholders with such annual reports and other reports as are specified in Sections 13 and 15(d) of the Exchange Act and applicable to a U.S. corporation subject to such Sections, such reports to be so filed and provided within the times specified for the filings of such reports
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for non-accelerated filers under such Sections and containing in all material respects, all the information, audit reports and exhibits required for such reports. If at any time, the Company is not subject to the periodic reporting requirements of the Exchange Act for any reason, the Company will nevertheless continue filing the reports specified in the preceding sentence with the SEC within the time periods required unless the SEC will not accept such a filing. The Company agrees that it will not take any action for the purpose of causing the SEC not to accept any such filings. If notwithstanding the foregoing, the SEC will not accept such filings for any reason, the Company will post the reports specified in the preceding sentence on its website within the time periods that would apply for non-accelerated filers if the Company were required to file those reports with the SEC. Notwithstanding the foregoing, the Company may satisfy such requirements prior to the effectiveness of a registration statement (the Exchange Offer Registration Statement) filed with the SEC with respect to a registered offer to exchange the Securities for new securities of the Company having terms substantially identical in all material respects to the Securities exchanged therefor (except that the Exchange Securities will not contain terms with respect to transfer restrictions) or a shelf registration statement (a Shelf Registration Statement) filed with the SEC covering resales of Securities or Exchange Securities, as the case may be, by filing with the SEC the Exchange Offer Registration Statement or Shelf Registration Statement, to the extent that any such registration statement contains substantially the same information as would be required to be filed by the Company if it were subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, and by providing the Trustee and Securityholders with such registration statement (and any amendments thereto) promptly following the filing thereof.
In addition, in the event that:
(a) the rules and regulations of the SEC permit a parent entity to report at such parent entitys level on a consolidated basis, and
(b) such parent entity is not engaged in any business in any material respect other than incidental to its ownership of the Capital Stock of the Company,
such consolidated reporting by such parent entity in a manner consistent with that described in this Section 4.02 for the Company will satisfy this Section 4.02.
At any time that any of the Companys Subsidiaries are Unrestricted Subsidiaries, then the quarterly and annual financial information required by the preceding paragraph will include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, and in Managements 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, the Company shall furnish to the Securityholders and to prospective investors, upon the requests of such Securityholders, any information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so long as the Securities are not freely transferable under the Securities Act.
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Notwithstanding the foregoing, the Company is deemed to have furnished such reports referred to above to the Trustee and the Securityholders if the Company has filed such reports with the SEC via the EDGAR filing system and such reports are publicly available.
Notwithstanding anything herein to the contrary, the Company will not be deemed to have failed to comply with any of its obligations hereunder for purposes of Section 6.01(4) until 120 days after the date any report hereunder is due.
SECTION 4.03. Limitation on Indebtedness
From and after the Release Date:
(a) The Company shall not, and shall not permit any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness; provided , however , that the Company and its Subsidiary Guarantors shall be entitled to Incur Indebtedness if, on the date of such Incurrence and after giving effect thereto on a pro forma basis, the Consolidated Coverage Ratio exceeds 2.0 to 1; provided , further , however , that the Company and its Restricted Subsidiaries will be entitled to Incur Indebtedness if, on the date of such Incurrence and after giving effect thereto on a pro forma basis, the Consolidated Coverage Ratio exceeds 2.0 to 1 and the Consolidated Foreign and Senior Secured Leverage Ratio is less than 1.75 to 1.
(b) Notwithstanding the foregoing paragraph (a), the Company and the Restricted Subsidiaries shall be entitled to Incur any or all of the following Indebtedness:
(1) Indebtedness Incurred by the Company and any Restricted Subsidiaries pursuant to Credit Facilities; provided , however , that immediately after giving effect to any such Incurrence, the aggregate principal amount of all Indebtedness Incurred under this clause (b)(1) and then outstanding does not exceed the greater of (x) $150.0 million less the sum of (i) all principal payments with respect to such Indebtedness pursuant to Section 4.06(a)(3)(A) and (ii) the aggregate principal amount of Indebtedness under Permitted Securitizations and (y) the sum of (i) 85% of (A) the consolidated book value of the accounts receivable of the Company and the Restricted Subsidiaries less (B) the aggregate principal amount of Indebtedness under Permitted Securitizations with respect to any SPE Subsidiary that is a consolidated entity in accordance with GAAP and (ii) 70% of the consolidated book value of the inventories of the Company and the Restricted Subsidiaries;
(2) Indebtedness owed to and held by the Company or a Restricted Subsidiary; provided , however , that (A) any subsequent issuance or transfer of any Capital Stock which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of such Indebtedness (other than to the Company or a Restricted Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness by the obligor thereon, (B) if the Company is the obligor on such Indebtedness and a Subsidiary Guarantor is not the obligee thereon, such Indebtedness is expressly subordinated to the prior payment in full in cash of all obligations with respect to the Securities, and (C) if a Subsidiary Guarantor is the obligor on such Indebtedness and a Subsidiary
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Guarantor is not the obligee thereon, such Indebtedness is expressly subordinated to the prior payment in full in cash of all obligations of such Subsidiary Guarantor with respect to its Subsidiary Guaranty;
(3) the Securities, the Exchange Securities (other than any Additional Securities) and any Subsidiary Guaranty (other than with respect to any Additional Securities);
(4) Indebtedness outstanding on the Release Date after giving effect to the consummation of the Reorganization Plan (other than Indebtedness described in clause (1), (2) or (3) of this Section 4.03(b)) which shall have the obligors, collateral, maturity and amortization features summarized in the Offering Memorandum under Description of Certain Indebtedness and Preferred Stock or referred to in the Offering Memorandum in the Pro Forma column of the table under Capitalization;
(5) Indebtedness of a Restricted Subsidiary Incurred and outstanding on or prior to the date on which such Subsidiary was acquired by the Company (other than Indebtedness Incurred in connection with, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Subsidiary became a Subsidiary or was acquired by the Company); provided , however , that on the date of such acquisition and after giving pro forma effect thereto, either (a) the Consolidated Coverage Ratio would not be less than immediately prior to such transactions or (b) the Company would have been entitled to Incur at least $1.00 of additional Indebtedness pursuant to Section 4.03(a);
(6) Refinancing Indebtedness in respect of Indebtedness Incurred pursuant to Section 4.03(a) or pursuant to clause (3), (4), (5) or (11) of this Section 4.03(b) or this clause (b)(6); provided , however , that to the extent such Refinancing Indebtedness directly or indirectly Refinances Indebtedness of a Subsidiary Incurred pursuant to clause (5) of this Section 4.03(b), such Refinancing Indebtedness shall be Incurred only by such Subsidiary;
(7) Hedging Obligations that are Incurred in the ordinary course of business (and not for speculative purposes) (1) that consist of Interest Rate Agreements, (2) for the purpose of fixing or hedging currency exchange rate risk with respect to any currency exchanges or (3) for the purpose of fixing or hedging commodity price risk with respect to any commodity purchases;
(8) the Incurrence of Indebtedness in respect of workers compensation claims, payment obligations in connection with health or other types of social security benefits, unemployment or other insurance or self-insurance obligations, reclamation, statutory obligations and other similar obligations, in the ordinary course of business;
(9) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business; provided , however , that such Indebtedness is extinguished within five Business Days of its Incurrence;
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(10) Indebtedness consisting of (a) the Guarantee of the Company or a Subsidiary Guarantor and any Guarantee by the Company or a Subsidiary Guarantor of Indebtedness Incurred in accordance with the provisions of this Indenture, (b) a Guarantee by any Foreign Subsidiary of Indebtedness of another Foreign Subsidiary of the Company Incurred in accordance with the provisions of this Indenture and (c) any Guarantee by a Restricted Subsidiary of Indebtedness of the Company Incurred in accordance with the provisions of this Indenture; provided that such Guarantee complies with Section 4.10;
(11) Indebtedness (including Capital Lease Obligations) Incurred by the Company or any of its Restricted Subsidiaries to finance the purchase, lease or cost of design, construction, installation, repair or improvement of property (real or personal), plant or equipment or other fixed or capital assets or in a Related Business (whether through the direct purchase of assets or the Capital Stock of any Person owning such assets (but no other material assets)) and Refinancing Indebtedness in respect thereof in an aggregate principal amount which, when added together with the amount of all other Indebtedness then outstanding and Incurred pursuant to this clause (11), does not exceed $50.0 million;
(12) Indebtedness Incurred by Foreign Subsidiaries in an aggregate principal amount (or accreted value, as applicable), at any time outstanding, not to exceed the greater of (x) $25.0 million and (y) 3.0% of the Total Assets of Foreign Subsidiaries;
(13) Permitted Securitizations;
(14) Indebtedness consisting of the financing of insurance premiums in the ordinary course of business not to exceed $5.0 million;
(15) Indebtedness in respect of (A) performance, surety, appeal or similar bonds, completion guarantees or similar instruments, letters of credit, bankers acceptances, bank guarantees, warehouse receipt or similar facilities, and reinvestment obligations related thereto, each provided in the ordinary course of business and (B) agreements providing for indemnification, adjustment of purchase price or similar obligations, or from guarantees or letters of credit, surety bonds or performance bonds securing any obligations pursuant to such agreement, Incurred in connection with the disposition of any business, assets or subsidiary;
(16) Contribution Indebtedness;
(17) preferred stock of a Restricted Subsidiary of the Company issued to the Company or another Restricted Subsidiary of the Company; provided that (a) any subsequent issuance or transfer of Capital Stock that results in any such preferred stock being held by a Person other than the Company or a Restricted Subsidiary thereof and (b) any sale or other transfer of any such preferred stock to a Person that is not either the Company or a Restricted Subsidiary thereof, in each case, will be deemed to constitute an issuance of such preferred stock that was not permitted by the provision described in this clause (17);
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(18) Guarantees (a) incurred in the ordinary course of business in respect of obligations of (or to) suppliers, customers, franchisees, lessors and licensees and (b) of Indebtedness of joint ventures constituting Investments permitted under this Indenture;
(19) Indebtedness issued by the Company or any of its Restricted Subsidiaries to any current, future or former director, officer, consultant or employee of the Company, the direct or indirect parent of the Company or any Restricted Subsidiary of the Company (or any of their Affiliates), or their estates or the beneficiaries of such estates to finance the purchase, redemption, acquisition or retirement for value of Capital Stock permitted by clause (2) of the definition of Restricted Payments;
(20) Indebtedness representing deferred compensation to employees of the Company (or any direct or indirect parent thereof) and of Restricted Subsidiaries incurred in the ordinary course of business; and
(21) Indebtedness of the Company or of any of its Subsidiary Guarantors in an aggregate principal amount which, when taken together with all other Indebtedness of the Company and its Subsidiary Guarantors outstanding on the date of such Incurrence (other than Indebtedness permitted by clauses (1) through (20) above or paragraph (a)), does not exceed $50.0 million.
(c) Notwithstanding the foregoing, neither the Company nor any Subsidiary Guarantor shall Incur any Indebtedness pursuant to Section 4.03(b) if the proceeds thereof are used, directly or indirectly, to Refinance any Subordinated Obligations of the Company or any Subsidiary Guarantor unless such Indebtedness shall be subordinated to the Securities or the applicable Subsidiary Guaranty to at least the same extent as such Subordinated Obligations.
(d) For purposes of determining compliance with this Section 4.03:
(1) any Indebtedness outstanding under the Credit Agreement on the Release Date after the application of the net proceeds from the sale of the Securities will be treated as Incurred on the Release Date under clause (1) of paragraph (b) of this Section 4.03,
(2) in the event that an item of Indebtedness (or any portion thereof) meets the criteria of more than one of the types of Indebtedness described in paragraphs (a) and (b) of this Section 4.03, the Company, in its sole discretion, will classify such item of Indebtedness (or any portion thereof) at the time of Incurrence and will only be required to include the amount and type of such Indebtedness in one of the above paragraphs; and
(3) the Company will be entitled at the time of Incurrence to divide and classify an item of Indebtedness in more than one of the types of Indebtedness described above, and with respect to any Indebtedness Incurred pursuant to any specific clause under Section 4.03(b), the Company may after such Indebtedness is Incurred reclassify all or a portion of such Indebtedness under a different clause of Section 4.03(b) or under Section 4.03(a) but only to the extent such Indebtedness could have been so Incurred under Section 4.03(a).
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(e) For purposes of determining compliance with any U.S. dollar-denominated restriction on the Incurrence of Indebtedness where the Indebtedness Incurred is denominated in a different currency, the amount of such Indebtedness will be the U.S. Dollar Equivalent, determined on the date of the Incurrence of such Indebtedness; provided , however , that if any such Indebtedness denominated in a different currency is subject to a Currency Agreement with respect to U.S. dollars, covering all principal, premium, if any, and interest payable on such Indebtedness, the amount of such Indebtedness expressed in U.S. dollars shall be as provided in such Currency Agreement. If Refinancing Indebtedness is Incurred to refinance Indebtedness that is denominated in a non-U.S. currency, and such refinancing would cause the applicable U.S. dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such U.S. dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such refinancing Indebtedness does not exceed the principal amount of such Indebtedness being refinanced, except to the extent that such U.S. Dollar Equivalent was determined based on a Currency Agreement, in which case the Refinancing Indebtedness shall be determined in accordance with the preceding sentence. Notwithstanding any other provision of this Section 4.03, the maximum amount of Indebtedness that the Company and the Subsidiary Guarantors may Incur pursuant to this Section 4.03 shall not be deemed to be exceeded solely as a result of fluctuations in the exchange rate of currencies.
Accrual of interest, the accretion of accreted value and the payment of interest or dividends in the form of additional Indebtedness, Disqualified Stock or Preferred Stock, as applicable, will not be deemed to be an incurrence of Indebtedness, Disqualified Stock or Preferred Stock for purposes of this covenant.
SECTION 4.04. Limitation on Restricted Payments
After the Release Date:
(a) The Company shall not, and shall not permit any Restricted Subsidiary, directly or indirectly, to make a Restricted Payment if at the time the Company or such Restricted Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result therefrom);
(2) the Company is not entitled to Incur an additional $1.00 of Indebtedness pursuant to the first proviso of Section 4.03(a); or
(3) the aggregate amount of such Restricted Payment and all other Restricted Payments since the Release Date permitted by the provisions described in this Section 4.04(a) and clauses (3), (8), (14) and (16) of Section 4.04(b) would exceed the sum of (without duplication):
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(A) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from April 1, 2010 to the end of the most recent fiscal quarter ended for which internal financial statements are available prior to the date of such Restricted Payment (or, in case such Consolidated Net Income shall be a deficit, minus 100% of such deficit); plus
(B) the sum of (x) 100% of the aggregate Net Cash Proceeds received by the Company from the issuance or sale of its Capital Stock subsequent to the Release Date (other than an issuance or sale to a Subsidiary of the Company and other than an issuance or sale to an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees), (y) 100% of the Fair Market Value of property constituting Additional Assets or Temporary Cash Investments received (including by way of merger) by the Company, a Restricted Subsidiary or any direct or indirect parent of the Company to the extent such property is actually contributed to the Company subsequent to the Release Date in exchange for, or as a capital contribution in respect of, Capital Stock of the Company (other than any such property received from a Subsidiary of the Company); provided , that if the Fair Market Value of any Additional Assets exceeds $25.0 million such Fair Market Value shall be confirmed by an Independent Qualified Party, and (z) 100% of any cash capital contribution received by the Company from its shareholders subsequent to the Release Date; provided that this clause (B) shall not include the proceeds from (V) Disqualified Stock, (W) Designated Preferred Stock, (X) Refunding Capital Stock, (Y) Excluded Contributions or (Z) net cash proceeds to the extent used to Incur Indebtedness, Disqualified Stock or Preferred Stock pursuant to Section 4.03(b)(16); plus
(C) the amount by which Indebtedness of the Company Incurred after the Release Date is reduced on the Companys consolidated balance sheet upon the conversion or exchange subsequent to the Release Date of any Indebtedness of the Company or any Restricted Subsidiary convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash, or the fair value of any other property, distributed by the Company upon such conversion or exchange); provided , however , that the foregoing amount shall not exceed the Net Cash Proceeds received by the Company or any Restricted Subsidiary from the sale of such Indebtedness (excluding Net Cash Proceeds from sales to a Subsidiary of the Company or to an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees); plus
(D) an amount equal to the sum of 100% of the cash and Fair Market Value of property other than cash received by the Company or any Restricted Subsidiary (i) from dispositions, sales, liquidations, retirements, repurchases, repayments or redemptions of all or any portion of Investments (other than Permitted Investments) made by the Company or any Restricted Subsidiary in any Person
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after the Release Date, (ii) the sale (other than to the Company or any Restricted Subsidiary) of the Capital Stock of an Unrestricted Subsidiary and (iii) to the extent such Person is an Unrestricted Subsidiary, the Fair Market Value of the Companys and its Restricted Subsidiaries Investment in such Unrestricted Subsidiary at the time such Unrestricted Subsidiary is designated a Restricted Subsidiary or is merged into or consolidated or amalgamated with or into, or transfers or conveys its assets to, the Company or a Restricted Subsidiary of the Company (other than to the extent such Investment constituted a Permitted Investment); plus
(E) in the event the Company or Restricted Subsidiary makes an Investment (other than a Permitted Investment) in a Person that, as a result of or in connection with such Investment, becomes a Restricted Subsidiary, an amount equal to the Fair Market Value of the existing Investment (other than a Permitted Investment) in such Person that was previously treated as a Restricted Payment.
(b) The provisions of Section 4.04(a) shall not prohibit:
(1) any Restricted Payment made out of the Net Cash Proceeds of the substantially concurrent sale of, or made by exchange for, Capital Stock of the Company or any direct or indirect parent of the Company to the extent contributed to the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary of the Company or an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees) (Refunding Capital Stock); provided , however , that the Net Cash Proceeds from such sale or such cash capital contribution (to the extent so used for such Restricted Payment) shall be excluded from the calculation of amounts under Section 4.04(a)(3)(B);
(2) any purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Obligations of the Company or a Restricted Subsidiary made by exchange for, or out of the proceeds of the substantially concurrent Incurrence of, Refinancing Indebtedness of such Person which is permitted to be Incurred pursuant to Section 4.03;
(3) dividends or distributions paid or the consummation of any irrevocable redemption within 60 days after the date of declaration thereof or the giving of an irrevocable redemption notice related thereto as the case may be, if at such date of declaration or notice such dividend, distribution or redemption would have complied with this Section 4.04;
(4)(x) the purchase, redemption or other acquisition of shares of Capital Stock of the Company or any of its Subsidiaries or any direct or indirect parent of the Company from current, future or former employees, directors or consultants of the Company or any of its Subsidiaries or any direct or indirect parent of the Company (or permitted transferees of such current, future or former employees, directors or consultants) and (y) dividends to Parent to be used by Parent to execute the transactions described in
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clause (x); provided , however , that the aggregate amount of such Restricted Payments (excluding amounts representing cancellation of Indebtedness) shall not exceed the sum of (A) $2.5 million in any fiscal year prior to a Qualified Equity Offering (and $5.0 million in any fiscal year following a Qualified Equity Offering); provided that any amount not so used in any fiscal year may be used in the next fiscal year and that the aggregate amount used pursuant to this clause (A) shall not exceed $5.0 million prior to a Qualified Equity Offering (and $10.0 million in any fiscal year following a Qualified Equity Offering), (B) the Net Cash Proceeds from the sale of Capital Stock to members of management, consultants, former consultants or directors of the Company and its Subsidiaries that occurs after the Release Date (to the extent the Net Cash Proceeds from the sale of such Capital Stock have not otherwise been applied to the payment of Restricted Payments by virtue of clause (3)(B) of paragraph (a) above) and (C) the cash proceeds of any key man life insurance policies that are used to make such repurchases; provided further , however , that the Net Cash Proceeds from such sale and pursuant to this clause (4) shall be excluded from the calculation of amounts under Section 4.04(a)(3)(B);
(5) the declaration and payments of dividends on Disqualified Stock and Preferred Stock of Restricted Subsidiaries that are not Subsidiary Guarantors issued pursuant to Section 4.03; provided , however , that, at the time of payment of such dividend, no Default shall have occurred and be continuing (or result therefrom);
(6) repurchases of Capital Stock deemed to occur (i) upon exercise of stock options or warrants if such Capital Stock represents all or a portion of the exercise price thereof of and (ii) in connection with the withholding of a portion of the Capital Stock granted or awarded to a director or an employee to pay for the taxes payable by such director or employee upon such grant or award;
(7) cash payments in lieu of the issuance of fractional shares in connection with the exercise of warrants, options or other securities convertible into or exchangeable for Capital Stock of the Company; provided , however , that any such cash payment shall not be for the purpose of evading the limitations of this Section 4.04;
(8)(x) in the event of a Change of Control (or similarly defined term in other Indebtedness), and if no Default shall have occurred and be continuing, the payment, purchase, redemption, defeasance or other acquisition or retirement of Subordinated Obligations of the Company or any Subsidiary Guarantor, in each case, at a purchase price not greater than 101% of the principal amount or liquidation preference of such Subordinated Obligations, plus any accrued and unpaid interest or dividends thereon; provided , however , that prior to such payment, purchase, redemption, defeasance or other acquisition or retirement, the Company (or a third party to the extent permitted by this Indenture) has made a Change of Control Offer with respect to the Securities as a result of such Change of Control (or similarly defined term in other Indebtedness) and has repurchased all such Securities validly tendered and not withdrawn in connection with such Change of Control Offer; provided further , however , that such payments, purchases, redemptions, defeasances or other acquisitions or retirements shall be included in the calculation of the amount of Restricted Payments;
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(9) within 90 days after completion of any offer to repurchase Securities pursuant to Section 4.06 (including the purchase of all Securities tendered), any repayment, repurchase, redemption, defeasance or other acquisition or retirement for value of any Subordinated Obligations of the Company or any Subsidiary Guarantor that are required to be repurchased or redeemed pursuant to the terms thereof as a result of such Asset Sale (or similarly defined term in such other Indebtedness), at a purchase price not greater than 100% of the outstanding principal amount or liquidation preference thereof ( plus accrued and unpaid interest and liquidated damages, if any);
(10) payments of intercompany Indebtedness, the Incurrence of which was permitted under Section 4.03(b)(2);
(11) dividends or distributions to Parent (x) to be used by Parent solely to pay its fees required to maintain its corporate existence and to pay for general corporate and overhead expenses (including salaries and other compensation of employees) Incurred by Parent in the ordinary course of its business; and (y) in amounts equal to amounts required by Parent to pay interest and/or principal on Indebtedness the proceeds of which have been contributed to the Company or any of its Subsidiary Guarantors and that has been guaranteed by, or is otherwise considered Indebtedness of, the Company Incurred in accordance with Section 4.03;
(12) dividends, distributions or advances to Parent to be used by Parent to pay federal, state and local taxes payable by Parent and directly attributable to (or arising as a result of) the operations of the Company and the Restricted Subsidiaries and to the extent of the amount actually received from its Unrestricted Subsidiaries in amounts required to pay taxes attributable to the income of such Unrestricted Subsidiaries; provided , however , that such dividends pursuant to this clause (12) are used by Parent for such purposes within 10 days of the receipt of such dividends;
(13) the payment of dividends or distributions on the Companys common equity of up to 6.0% per calendar year of the net proceeds received by the Company from any public Equity Offering or contributed to the equity capital of the Company by Parent from any Qualified Equity Offering;
(14) the distribution, as a dividend or otherwise, of shares of Capital Stock of, or Indebtedness owed to the Company or a Restricted Subsidiary by, any Unrestricted Subsidiaries (other than Unrestricted Subsidiaries, the primary assets of which are cash and/or Temporary Cash Investments);
(15) Restricted Payments that are made with Excluded Contributions;
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(16) so long as no Default has occurred and is continuing, other Restricted Payments in an aggregate amount, taken together with all other Restricted Payments made pursuant to this clause (16) since the Release Date not to exceed $25.0 million;
(17) any Restricted Payment made in connection with the Emergence Transactions;
(18) payments or distributions, in the nature of satisfaction of dissenters rights, pursuant to or in connection with a consolidation, merger or transfer of assets that complies with Section 5.01 and
(19) the declaration and payment of dividends or distributions (a) to holders of any class or series of Designated Preferred Stock of the Company (other than Disqualified Stock) issued after the Release Date and (b) to Parent or any other direct or indirect parent of the Company, the proceeds of which will be used to fund the payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) of Parent or any other direct or indirect parent of the Company issued after the Release Date; provided , however , that (x) for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of issuance of such Designated Preferred Stock, after giving effect to such issuance on a pro forma basis, the Company would have had a Consolidated Coverage Ratio of at least 2.00 to 1.00 and (y) the aggregate amount of dividends declared and paid pursuant to this clause (19) does not exceed the net cash proceeds actually received by the Company from any such sale of Designated Preferred Stock (other than Disqualified Stock) issued after the Release Date.
The amount of all Restricted Payments (other than those made in cash) will be the Fair Market Value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to this Section 4.04.
(c) Notwithstanding Section 4.04(b)(16), prior to May 11, 2012, the Company shall not, and shall not permit any of its Restricted Subsidiaries to, pay any cash dividend or make any cash distribution on, or in respect of, the Companys Capital Stock or purchase for cash or otherwise acquire for cash any Capital Stock of the Company or any direct or indirect parent of the Company for the purpose of paying any cash dividend or making any cash distribution to, or acquiring Capital Stock of any direct or indirect parent of the Company for cash from, the holders of any Capital Stock of any indirect parent of the Company, or guarantee any Indebtedness of any Affiliate of the Company for the purpose of paying such dividend, making such distribution or so acquiring such Capital Stock to or from the holders of any Capital Stock of any indirect parent of the Company, by means of the exception provided by Section 4.04(b)(16), if at the time and after giving effect to such payment, the Consolidated Foreign and Senior Secured Leverage Ratio of the Company would be greater than 2.50 to 1.00, except to the extent of purchases, redemptions or other acquisitions of Capital Stock of the type referred to in Section 4.04(b)(4).
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SECTION 4.05. Limitation on Restrictions on Distributions from Restricted Subsidiaries . After the Release Date, the Company shall not, and shall not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or consensual restriction on the ability of any Restricted Subsidiary (directly or indirectly) to (a) pay dividends or make any other distributions on its Capital Stock to the Company or a Restricted Subsidiary or pay any Indebtedness owed to the Company (it being understood that the priority of any Preferred Stock in receiving dividends or liquidating distributions prior to dividends or liquidating distributions being paid on common stock shall not be deemed a restriction on the ability to make distributions on Capital Stock), (b) make any loans or advances to the Company (it being understood that the subordination of loans or advances made to the Company or any Restricted Subsidiary to other Indebtedness Incurred by the Company or any Restricted Subsidiary shall not be deemed a restriction on the ability to make loans or advances) or (c) transfer any of its property or assets to the Company, except:
(1) with respect to clauses (a), (b) and (c):
(A) any encumbrance or restriction pursuant to an agreement in effect at or entered into on the Release Date;
(B) any encumbrance or restriction with respect to a Restricted Subsidiary or the property or assets acquired by the Company or any of its Restricted Subsidiaries existing on or prior to the date on which such Restricted Subsidiary was acquired by the Company (other than Indebtedness Incurred as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company) and outstanding on such date and any amendments, modification, restatements, renewals, extensions, increases, supplements, refunding, replacements or refinancing thereof; provided that the encumbrances and restrictions in any such amendments, modifications, restatements, renewals, extensions, increases, supplements, refunding, replacements or refinancing are entered into in the ordinary course of business or not materially more restrictive, taken as a whole, than those contained in the Credit Agreement, this Indenture, existing Indebtedness or such other agreements as in effect on the date of the acquisition;
(C) any encumbrance or restriction pursuant to an agreement effecting a Refinancing of Indebtedness Incurred pursuant to an agreement referred to in Section 4.05(1)(A) or (B) or this clause (C) or contained in any amendment, modification, restatement, renewal, extension, increase, supplement, refunding or replacement of an agreement referred to in Section 4.05(1)(A) or (B) or this clause (C); provided , however , that the encumbrances and restrictions with respect to such Restricted Subsidiary contained in any such refinancing agreement or amendment, modification, restatement, renewal, extension, increase, supplement, refunding or replacement are not materially more restrictive on the whole to the Securityholders than encumbrances and restrictions with respect to such Restricted Subsidiary contained in such predecessor agreements on the Release Date;
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(D) existing under, by reason of or with respect to Refinancing Indebtedness; provided that the encumbrances and restrictions contained in the agreements governing such Refinancing Indebtedness are not materially more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced;
(E) provisions restricting cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business;
(F) existing under, by reason of or with respect to customary provisions contained in leases or licenses of intellectual property and other agreements, in each case, entered into in the ordinary course of business;
(G) agreements entered into between a Foreign Subsidiary and another Foreign Subsidiary which second Foreign Subsidiary is not a Subsidiary of the first Foreign Subsidiary to the extent such agreements relate solely to such Foreign Subsidiaries and do not affect in any material respect the Companys or any Subsidiary Guarantors ability to make principal and interest payments on the Securities, as determined in good faith by the Company;
(H) any encumbrance or restriction with respect to a Restricted Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of some or all of the Capital Stock or any property and assets of such Restricted Subsidiary pending the closing of such sale or disposition;
(I) with respect to any Foreign Subsidiary, any encumbrance or restriction contained in the terms of any Indebtedness permitted to be Incurred under this Indenture, or any agreement pursuant to which such Indebtedness was issued;
(J) restrictions or conditions, governing any Indebtedness Incurred in connection with Permitted Securitizations that were permitted under Section 4.03(b)(13) if such restrictions or conditions apply only to the Receivables and the Related Assets that are the subject of the Permitted Securitization, and restrictions or conditions imposed on any SPE Subsidiary in connection with any Permitted Securitization;
(K) provisions limiting the disposition or distribution of assets or property or transfer of Capital Stock in joint venture agreements, asset sale agreements, sale-leaseback agreements, stock sale agreements, limited liability company organizational documents, and other similar agreements entered into in the ordinary course of business, consistent with past practice or with the approval of the Companys Board of Directors, which limitation is applicable only to the assets, property or Capital Stock that are the subject of such agreements;
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(L) restrictions on cash, Temporary Cash Investment or other deposits or net worth imposed by customers or lessors under contracts or leases entered into in the ordinary course of business;
(M) customary provisions in joint venture agreements, operating or similar agreements, asset sale agreements and stock sale agreements arising in connection with the entering into of such transactions;
(N) any restriction arising under applicable law, rule, regulation or administrative or court order;
(O) any encumbrance or restriction existing under or by reason of the Credit Facilities; and
(P) Indebtedness of a Restricted Subsidiary not prohibited to be Incurred under this Indenture; provided that (a) such encumbrances or restrictions are ordinary and customary in light of the type of Indebtedness being Incurred and the jurisdiction of the obligor and (b) such encumbrances or restrictions will not affect in any material respect the Companys or any Subsidiary Guarantors ability to make principal and interest payments on the Securities, as determined in good faith by the Company;
(2) with respect to clause (c) only:
(A) any encumbrance or restriction consisting of customary nonassignment provisions in leases governing leasehold interests to the extent such provisions restrict the transfer of the lease or the property leased thereunder;
(B) any encumbrance or restriction existing by virtue of any transfer of, agreement to transfer, option or right with respect to, or Lien on, any property or assets of the Company or any Restricted Subsidiary thereof not otherwise prohibited by the indenture;
(C) any encumbrance or restriction existing under, by reason of or with respect to (i) purchase money obligations for property acquired in the ordinary course of business or (ii) capital leases or operating leases that impose encumbrances or restrictions on the property so acquired or covered thereby;
(D) any encumbrance or restriction arising or agreed to in the ordinary course of business, not relating to any Indebtedness, and that do not, individually or in the aggregate, detract from the value of property or assets of the Company or any Restricted Subsidiary thereof in any manner material to the Company or any restricted Subsidiary thereof;
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(E) any encumbrance or restriction contained in security agreements or mortgages securing Indebtedness of a Restricted Subsidiary to the extent such encumbrance or restriction restricts the transfer of the property subject to such security agreements or mortgages;
(F) non-assignment provisions or subletting restrictions in contracts, leases and licenses entered into in the ordinary course of business;
(G) encumbrances on property that exist at the time the property was acquired by the Company or a Restricted Subsidiary, provided such encumbrances were not put in place in anticipation of such acquisition;
(H) customary provisions in asset sale agreements and stock sale agreements arising in connection with the entering into of such transactions; and
(3) any encumbrances or restrictions of the type referred to in clauses (a), (b) and (c) above imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in paragraphs (1) and (2) above; provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings (other than with respect to the Credit Facilities) are, in the good faith judgment of the Company, no more restrictive on the whole with respect to such dividend and other payment restrictions than those contained in the dividend or other payment restrictions prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing.
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock .
From and after the Release Date:
(a) The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, consummate any Asset Sale (in one or more related transactions), unless:
(1) the Company or such Restricted Subsidiary receives consideration at the time of such Asset Sale at least equal to the Fair Market Value (including as to the value of all non-cash consideration) of the shares and assets subject to such Asset Sale;
(2) at least 75% of the consideration therefor received by the Company or such Restricted Subsidiary, as the case may be, is in the form of cash, Temporary Cash Investments or Additional Assets; provided that the following shall be deemed to be cash or Temporary Cash Investments for purposes of this provision and for no other purpose:
(A) any liabilities (as shown on the Companys, or such Restricted Subsidiarys, most recent balance sheet or in the notes thereto) of the Company or any Restricted Subsidiary other than liabilities that are by their terms subordinated
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to the Securities, that are assumed by the transferee of any such assets and for which the Company and all Restricted Subsidiaries have been validly released by all creditors in writing; and
(B) any securities, notes or other similar obligations received by the Company or such Restricted Subsidiary from such transferee that are converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received) within 180 days following the closing of such Asset Sale; provided that the aggregate Fair Market Value of all such other assets received and not yet converted into cash shall not, at any one time when taken together with the aggregate amount of Designated Non-cash Consideration received pursuant to clause (C) below, exceed the greater of $50.0 million and 2.5% of Total Assets; and
(C) any Designated Non-cash Consideration received by the Company or such Restricted Subsidiary in such Asset Sale having an aggregate fair market value, taken together with all other Designated Non-cash Consideration received pursuant to this clause (C) that is at that time outstanding, not to exceed the greater of (i) $50.0 million and (ii) 2.5% of Total Assets at the time of the receipt of such Designated Non-cash Consideration, with the fair market value of each item of Designated Non-cash Consideration being measured at the time received and without giving effect to subsequent changes in value; and
(3) an amount equal to 100% of the Net Available Cash from such Asset Sale is applied by the Company (or such Restricted Subsidiary, as the case may be) :
(A) to the extent the Company elects (or is required by the terms of any Indebtedness), to prepay, repay, redeem or purchase Indebtedness under the Credit Agreement of the Company or Indebtedness (other than any Disqualified Stock) of a Restricted Subsidiary that is not a Guarantor (in each case other than Indebtedness owed to the Company or an Affiliate of the Company) within one year from the later of the date of such Asset Sale or the receipt of such Net Available Cash;
(B) to the extent the Company elects, to acquire Additional Assets within one year from the later of the date of such Asset Sale or the receipt of such Net Available Cash; provided that a binding commitment entered into not later than 365 days after the Asset Sale that generated the Net Available Cash shall be treated as a permitted application of the Net Available Cash from the date of such commitment so long as the Company or a Restricted Subsidiary enters into such commitment with the good faith expectation that such Net Available Cash will be applied to satisfy such commitment within 120 days of such commitment; provided , further , that if such commitment is later terminated or cancelled prior to the application of such Net Available Cash, then such Net Available Cash shall constitute Excess Proceeds; and
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(C) to the extent the Company elects, to make an offer to the applicable Securityholders (and to holders of pari passu Indebtedness of the Company) to purchase Securities (and such other pari passu Indebtedness of the Company) within one year from the later of the date of such Asset Sale or receipt of such Net Available Cash pursuant to and subject to the conditions contained in this Indenture;
provided , however , that in connection with any prepayment, repayment or purchase of Indebtedness pursuant to clause (A) or (C) above, the Company or such Restricted Subsidiary shall permanently retire such Indebtedness and shall cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased.
Any Net Available Cash from Asset Sales that are not applied or invested as provided in the first paragraph of this Section 4.06 within the time periods set forth above in this Section 4.06, shall be used for the purpose contemplated in Section 4.06(a)(3)(C). Notwithstanding the foregoing provisions of this Section 4.06, the Company and the Restricted Subsidiaries will not be required to apply any Net Available Cash in accordance with this Section 4.06 except to the extent that the aggregate Net Available Cash from all Asset Sales which is not otherwise applied in accordance with this Section 4.06 exceeds $20.0 million. Pending application of Net Available Cash pursuant to this Section 4.06, such Net Available Cash may be invested in Temporary Cash Investments or applied to temporarily reduce revolving credit indebtedness.
(b) In the event of an Asset Sale that requires the purchase of Securities (and other pari passu Indebtedness of the Company) pursuant to Section 4.06(a)(3)(C), the Company shall purchase Securities tendered pursuant to an offer by the Company for the Securities (and such other pari passu Indebtedness of the Company) (the Offer) at a purchase price of 100% of their principal amount (or, in the event such other pari passu Indebtedness of the Company was issued with significant original issue discount, 100% of the accreted value thereof) without premium, plus accrued but unpaid interest (or, in respect of such other pari passu Indebtedness of the Company, such lesser price, if any, as may be provided for by the terms of such pari passu Indebtedness of the Company) in accordance with the procedures (including prorating in the event of oversubscription) set forth in Section 4.06(c). If the aggregate purchase price of the securities tendered exceeds the Net Available Cash allotted to their purchase, the Company shall select the securities to be purchased on a pro rata basis but in round denominations, which in the case of the Securities will be denominations of $2,000 principal amount or multiples thereof. The Company shall not be required to make an Offer to purchase Securities (and other pari passu Indebtedness of the Company) pursuant to this Section 4.06 if the Net Available Cash available therefor is less than $20.0 million (which lesser amount shall be carried forward for purposes of determining whether such an Offer is required with respect to the Net Available Cash from any subsequent Asset Sale). Upon completion of such an Offer, Net Available Cash shall be deemed to be reduced by the aggregate amount of such Offer.
(c)(1) Promptly, and in any event within 10 days after the Company becomes obligated to make an Offer, the Company shall deliver to the Trustee and send, by first-class mail to each Holder, a written notice stating that the Holder may elect to have his Securities
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purchased by the Company either in whole or in part (subject to prorating as described in Section 4.06(b) in the event the Offer is oversubscribed) in integral multiples of $2,000 of principal amount, at the applicable purchase price. The notice shall specify a purchase date not less than 30 days nor more than 60 days after the date of such notice (the Purchase Date) and shall contain the most recently filed Annual Report on Form 10-K (including audited consolidated financial statements) of the Company, the most recent subsequently filed Quarterly Report on Form 10-Q and any Current Report on Form 8-K of the Company filed subsequent to such Quarterly Report, other than Current Reports describing Asset Sales otherwise described in the offering materials (or corresponding successor reports), in each case, to the extent not publicly available and all instructions and materials necessary to tender Securities pursuant to the Offer, together with the information contained in clause (3) below.
(2) Not later than the date upon which written notice of an Offer is delivered to the Trustee as provided below, the Company shall deliver to the Trustee an Officers Certificate as to (A) the amount of the Offer (the Offer Amount), including information as to any other pari passu Indebtedness included in the Offer, (B) the allocation of the Net Available Cash from the Asset Sale pursuant to which such Offer is being made and (C) the compliance of such allocation with the provisions of Sections 4.06(a) and (b). On such date, the Company shall also irrevocably deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust) in Temporary Cash Investments, maturing on the last day prior to the Purchase Date or on the Purchase Date if funds are immediately available by open of business, an amount equal to the Offer Amount to be held for payment in accordance with the provisions of this Section. If the Offer includes other pari passu Indebtedness, the deposit described in the preceding sentence may be made with any other paying agent pursuant to arrangements satisfactory to the Trustee. Upon the expiration of the period for which the Offer remains open (the Offer Period), the Company shall deliver to the Trustee for cancellation the Securities or portions thereof which have been properly tendered to and are to be accepted by the Company. The Trustee shall, on the Purchase Date, mail or deliver payment (or cause the delivery of payment) to each tendering Holder in the amount of the purchase price. In the event that the aggregate purchase price of the Securities delivered by the Company to the Trustee is less than the Offer Amount applicable to the Securities, the Trustee shall deliver the excess to the Company immediately after the expiration of the Offer Period for application in accordance with this Section 4.06.
(3) Holders electing to have a Security purchased shall be required to surrender the Security, with an appropriate form duly completed, to the Company at the address specified in the notice at least three Business Days prior to the Purchase Date. Holders shall be entitled to withdraw their election if the Trustee or the Company receives not later than one Business Day prior to the Purchase Date, a telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered for purchase by the Holder and a statement that such Holder is withdrawing his election to have such Security purchased. Holders whose Securities are purchased only in part shall be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered.
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(4) At the time the Company delivers Securities to the Trustee which are to be accepted for purchase, the Company shall also deliver an Officers Certificate stating that such Securities are to be accepted by the Company pursuant to and in accordance with the terms of this Section. A Security shall be deemed to have been accepted for purchase at the time the Trustee, directly or through an agent, mails or delivers payment therefor to the surrendering Holder.
(d) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations thereunder to the extent those laws or regulations are applicable in connection with any repurchase of Securities pursuant to this Section 4.06. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section 4.06, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.06 by virtue of its compliance with such securities laws or regulations.
SECTION 4.07. Limitation on Affiliate Transactions .
After the Release Date:
(a) The Company shall not, and shall not permit any Restricted Subsidiary to, enter into or permit to exist any transaction or series of related transactions (including the purchase, sale, lease or exchange of any property, employee compensation arrangements or the rendering of any service) with, or for the benefit of, any Affiliate of the Company (an Affiliate Transaction) involving aggregate consideration in excess of $1.0 million, either directly or indirectly, unless:
(1) the terms of the Affiliate Transaction are no less favorable to the Company or such Restricted Subsidiary, taken as a whole, than those that could be obtained at the time of the Affiliate Transaction in arms-length dealings with a Person who is not an Affiliate; and
(2) if such Affiliate Transaction involves an amount in excess of $15.0 million, the terms of the Affiliate Transaction are set forth in writing and a majority of the non-employee directors of the Company disinterested with respect to such Affiliate Transaction have determined in good faith that the criteria set forth in clause (1) are satisfied and have approved the relevant Affiliate Transaction as evidenced by a resolution of the Board of Directors of the Company; and
(3) if such Affiliate Transaction involves an amount in excess of $30.0 million, the Board of Directors of the Company shall also have received a written opinion from an Independent Qualified Party to the effect that such Affiliate Transaction is fair, from a financial standpoint, to the Company and its Restricted Subsidiaries or is not less favorable to the Company and its Restricted Subsidiaries than could reasonably be expected to be obtained at the time in an arms-length transaction with a Person who was not an Affiliate.
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(b) The provisions of Section 4.07(a) shall not prohibit:
(1) any Permitted Investment or Restricted Payment permitted to be made pursuant to Section 4.04;
(2) any payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, employee benefit plans, stock options and stock ownership plans in the ordinary course of business or consistent with past practice;
(3) loans or advances to employees in the ordinary course of business in accordance with the past practices of the Company or its Restricted Subsidiaries, but in any event not to exceed $5.0 million in the aggregate outstanding at any one time;
(4) the payment of reasonable fees to and indemnity provided on behalf of directors, officers, employees and consultants of the Company and its Restricted Subsidiaries who are not employees of the Company or its Restricted Subsidiaries in the ordinary course of business;
(5) any transaction with the Company, a Restricted Subsidiary or joint venture or similar entity which would constitute an Affiliate Transaction solely because the Company or a Restricted Subsidiary owns an equity interest in or otherwise controls such Restricted Subsidiary, joint venture or similar entity;
(6) the issuance or sale of any Capital Stock (other than Disqualified Stock) of the Company and the granting and performance of registration rights;
(7) pledges of Capital Stock of Unrestricted Subsidiaries for the benefit of lenders of Unrestricted Subsidiaries;
(8) any agreement as in effect on the Release Date and described in the Offering Memorandum or any renewals or extensions of any such agreement (so long as such renewals or extensions, taken as a whole, are not less favorable to the Company or the Restricted Subsidiaries) and the transactions evidenced thereby; and
(9) the Emergence Transactions, including the payment of fees and expenses in connection therewith.
SECTION 4.08. Activities of Escrow Issuer Prior to the Release Date and Assumption . Prior to the Release Date and the Assumption, the Company will be a limited purpose corporation whose primary activities are restricted to issuing the Securities, issuing capital stock to, and receiving capital contributions from, its direct or indirect parent, performing its obligations in respect of the Securities under this Indenture and the Escrow Agreement, and consummating the Assumption and redeeming the Securities in connection with any Special Mandatory Redemption, and conducting such other activities as are necessary or appropriate to carry out the activities described above. Prior to the Assumption, the Company will not issue any debt other than the Securities or own, hold or otherwise have any interest in any assets other than the Escrow Account and the Escrow Proceeds therein.
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SECTION 4.09. Change of Control .
(a) Upon the occurrence of a Change of Control after the Release Date, unless the Company has exercised its right to redeem all of the outstanding Securities pursuant to section 5 of the Securities, each Holder shall have the right to require that the Company purchase such Holders Securities at a purchase price in cash equal to 101% of the principal amount thereof on the date of purchase plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of the Holders of record on the relevant record date to receive interest due on the relevant interest payment date), in accordance with the terms contemplated in Section 4.09(b).
(b) Within 30 days following any Change of Control (or prior to the Change of Control if a definitive agreement is in place for the Change of Control), the Company will send a notice to each Holder electronically or by first-class mail at its registered address or otherwise in accordance with the procedures of DTC with a copy to the Trustee (the Change of Control Offer) stating:
(1) that a Change of Control has occurred and that such Holder has the right to require the Company to purchase such Holders Securities that will remain outstanding after giving effect to any redemption of the Securities that the Company has elected to make pursuant to section 5 of the Securities at a purchase price in cash equal to 101% of the principal amount thereof on the date of purchase, plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest on the relevant interest payment date);
(2) the circumstances and relevant facts regarding such Change of Control;
(3) the purchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is sent); and
(4) the instructions, as determined by the Company, consistent with this Section 4.09, that a Holder must follow in order to have its Securities purchased.
(c) Holders electing to have a Security purchased will be required to surrender the Security, with an appropriate form duly completed, to the Company at the address specified in the notice at least three Business Days prior to the purchase date. Holders will be entitled to withdraw their election if the Trustee or the Company receives not later than one Business Day prior to the purchase date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered for purchase by the Holder and a statement that such Holder is withdrawing his election to have such Security purchased.
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(d) On the purchase date, all Securities purchased by the Company under this Section shall be delivered by the Company to the Trustee for cancellation, and the Company shall pay the purchase price plus accrued and unpaid interest, if any, to the Holders entitled thereto.
(e) Notwithstanding the foregoing provisions of this Section 4.09, the Company shall not be required to make a Change of Control Offer following a Change of Control if (1) 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 this Indenture applicable to a Change of Control Offer made by the Company and purchases all the Securities validly tendered and not withdrawn under such Change of Control Offer or (2) a notice of redemption has been given for all of the Securities pursuant to section 5 of the Securities, unless and until there is a default in payment of the applicable redemption price. Notwithstanding anything to the contrary contained herein, a Change of Control Offer may be made in advance of a Change of Control, subject to one or more conditions precedent, including but not limited to the consummation of such Change of Control, if a definitive agreement is in place for the Change of Control at the time the Change of Control offer is made.
(f) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with any repurchase of Securities pursuant to this Section 4.09. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.09, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.09 by virtue of its compliance with such securities laws or regulations.
SECTION 4.10. Future Guarantors . From and after the Release Date, if the Company or any of its Restricted Subsidiaries acquires or creates another Wholly Owned Domestic Subsidiary (other than an Excluded Subsidiary) that is a Wholly Owned Restricted Subsidiary and such Subsidiary becomes a guarantor with respect to the Credit Agreement or other capital markets (including syndicated loan) Indebtedness of the Company or a Guarantor, then promptly after the date of such acquisition or creation, the Company will cause such Subsidiary to execute and deliver to the Trustee a supplemental indenture substantially in the form of Exhibit D attached hereto. In addition, in the event that any Restricted Subsidiary that is an Excluded Subsidiary ceases to be an Excluded Subsidiary, then such Restricted Subsidiary must become a Subsidiary Guarantor and execute and deliver to the Trustee a supplemental indenture substantially in the form of Exhibit D attached hereto within 60 days of the date of such event.
SECTION 4.11. Compliance Certificate . The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company an Officers Certificate stating that in the course of the performance by the signers of their duties as Officers of the Company they would normally have knowledge of any Default and whether or not the signers know of any Default that occurred during such period. If they do, the certificate shall describe the Default, its status and what action the Company is taking or proposes to take with respect thereto. The Company also shall comply with Trust Indenture Act § 314(a)(4).
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SECTION 4.12. Further Instruments and Acts . Upon request of the Trustee, the Company shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture.
SECTION 4.13. Limitation on Liens . After the Release Date, the Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or otherwise cause or suffer to exist or become effective any Lien (other than Permitted Liens) on any of its property or assets (including Capital Stock of any other Person), whether owned on the Release Date or thereafter acquired, securing any Indebtedness (the Initial Lien) unless contemporaneously therewith effective provision is made to secure the Securities or, in respect of Liens on any Restricted Subsidiarys property or assets, any Subsidiary Guaranty of the Securities of such Restricted Subsidiary, equally and ratably with (or on a senior basis to, in the case of Subordinated Obligations) such obligation for so long as such obligation is so secured by such Initial Lien. Any such Lien thereby created in favor of the Securities or any such Subsidiary Guaranty will be automatically and unconditionally released and discharged upon (i) the release and discharge of the Initial Lien to which it related or (ii) any sale, exchange or transfer (other than a transfer constituting a transfer of all or substantially all of the assets of the Company that is governed by Section 5.01) to any Person not an Affiliate of the Company of the property or assets secured by such Initial Lien, or of all of the Capital Stock held by the Company or any Restricted Subsidiary in, or all or substantially all the assets of, any Restricted Subsidiary creating such Initial Lien.
SECTION 4.14. Escrow of Proceeds . The proceeds from the offering of the Securities will be placed in escrow until the approval and the effectiveness of the Reorganization Plan in accordance with its terms. The terms of the escrow will be set forth in the Escrow Agreement, pursuant to which the Escrow Issuer will deposit with the Escrow Agent on the Issue Date the proceeds from the offering of the Securities and Cooper-Standard will deposit on the Issue Date sufficient cash or Temporary Cash Investments (solely with respect to instruments or investments satisfying clause (1), (2) or (3) of the definition in this Indenture, and in each case, maturing no later than the Escrow End Date) and other Escrow Investments, in an amount sufficient to redeem, for cash, the Securities at the Special Mandatory Redemption Price (collectively, the Escrow Proceeds). The Escrow Agent will grant the Trustee, for the benefit of the Securityholders, a first priority security interest in the escrow account and all deposits therein to secure the Special Mandatory Redemption.
Prior to the release of the Escrow Proceeds (either on the Release Date or in connection with the Special Mandatory Redemption), the Securities will be secured by a pledge of the Escrow Proceeds.
The Company shall only be entitled to direct the Escrow Agent to release to it the Escrow Proceeds upon satisfaction of the conditions set forth in form of Officers Certificate included as Exhibit A to the Escrow Agreement, which shall be certified in writing by the Company in an Officers Certificate delivered to the Escrow Agent contemporaneously with the release of the Escrow Proceeds on or prior to the Escrow End Date (such date, the Release Date).
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To the extent the Company or any Restricted Subsidiary has Incurred Indebtedness (treating Indebtedness not discharged pursuant to the Reorganization Plan and remaining outstanding on the Release Date as having been Incurred as of the Release Date), made any Restricted Payments, consummated any Asset Sale or otherwise taken any action or engaged in any activities during the period beginning on the Issue Date and ending on the Release Date, such actions and activities shall be treated and classified under this Indenture (including but not limited to impacting relevant baskets and determining whether a Default or Event of Default would have occurred as of the Release Date), as if this Indenture and the covenants set forth herein had applied to the Company and the Restricted Subsidiaries during such period. For purposes of the foregoing, (i) the Company shall be deemed to have been the direct or indirect owner of the Restricted Subsidiaries and the Company shall be deemed to have been the direct or indirect owner of all of the Domestic Subsidiaries of the Company for all relevant periods and (ii) all Subsidiaries of the Company shall be deemed to be Restricted Subsidiaries for the period from the Issue Date through the Release Date. The foregoing will not prevent the consummation of the Rights Offering prior to the Release Date.
SECTION 4.15. Covenant Suspension . If on any date following the Release Date, (i) the Securities have an Investment Grade Rating from both of the Rating Agencies and (ii) no Default has occurred and is continuing, then beginning on that date and continuing until the Reversion Date (the occurrence of the events described in the foregoing clauses (i) and (ii) being collectively referred to as a Covenant Suspension Event), the Company and the Restricted Subsidiaries will cease to be subject to Sections 4.03, 4.04, 4.05, 4.06, 4.07 and 5.01(a)(3) (the Suspended Covenants).
If on any date subsequent to a Covenant Suspension Event (the Reversion Date) one or both of the Rating Agencies (a) withdraw their Investment Grade Rating or downgrade the rating assigned to the Securities below an Investment Grade Rating and/or (b) the Company or any of its Affiliates enters into an agreement to effect a transaction and one or both of the Rating Agencies indicate that if consummated, such transaction (alone or together with any related recapitalization or refinancing transaction) would cause such Rating Agency to withdraw its Investment Grade Rating or downgrade the Securities below an Investment Grade Rating, in either case, then the Company and the Restricted Subsidiaries will thereafter again be subject to the Suspended Covenants under this Indenture with respect to future events and the Subsidiary Guarantees will be reinstated. The period of time between the Covenant Suspension Event and the Reversion Date is referred to as the Suspension Period. Notwithstanding that the Suspended Covenants may be reinstated, no default will be deemed to have occurred as a result of a failure to comply with the Suspended Covenants during the Suspension Period.
On each Reversion Date, all Indebtedness Incurred during the Suspension Period shall be classified to have been Incurred pursuant to Section 4.03(b)(4). Calculations made after the Reversion Date of the amount available to be made as Restricted Payments under Section 4.04 shall be made as though Section 4.04 had been in effect prior to, but not during, the Suspension Period. During any Suspension Period no Subsidiaries shall be declared Unrestricted Subsidiaries.
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ARTICLE 5
Successor Company
SECTION 5.01. When Company May Merge or Transfer Assets .
After the Release Date:
(a) The Company shall not consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of related transactions, directly or indirectly, all or substantially all its assets to, any Person, unless:
(1) the resulting, surviving or transferee Person (the Successor Company) shall be a Person organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and such Successor Company (if not the Company) shall expressly assume, by an indenture supplemental thereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Securities and this Indenture;
(2) immediately after giving pro forma effect to such transaction (and treating any Indebtedness which becomes an obligation of such Successor Company or any Subsidiary as a result of such transaction as having been Incurred by such Successor Company or such Subsidiary at the time of such transaction), no Default shall have occurred and be continuing;
(3) immediately after giving pro forma effect to such transaction, either (a) the Successor Company would be able to Incur an additional $1.00 of Indebtedness pursuant to the first proviso of Section 4.03(a) or pursuant to Section 4.03(b) the Consolidated Coverage Ratio for the Successor Company would not be less than immediately prior to such transaction;
(4) each Guarantor shall have by supplemental indenture confirmed that its Guarantee shall apply to each such Persons Obligation under this Indenture and the Securities; and
(5) the Company shall have delivered to the Trustee an Officers Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with this Indenture;
provided , however , that clauses (2) and (3) will not be applicable to (A) a Restricted Subsidiary consolidating with, merging into or transferring all or part of its properties and assets to the Company (so long as no Capital Stock of the Company or the Successor Company (if not the Company) is distributed to any Person) or (B) the Company merging with an Affiliate of the Company solely for the purpose and with the sole effect of reincorporating the Company in another jurisdiction.
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For purposes of this Section 5.01, the sale, lease, conveyance, assignment, transfer or other disposition of all or substantially all of the properties and assets of one or more Subsidiaries of the Company, which properties and assets, if held by the Company instead of such Subsidiaries, would constitute all or substantially all of the properties and assets of the Company on a consolidated basis, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company.
The Successor Company shall be the successor to the Company and shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture, and the predecessor Company, except in the case of a lease, shall be released from the obligation to pay the principal of and interest on the Securities.
Notwithstanding the foregoing, the Assumption and related transactions shall be permitted under this Indenture.
(b) The Company shall not permit any Subsidiary Guarantor to consolidate with or merge with or into, or convey, transfer or lease, in one transaction or series of transactions, all or substantially all of its assets to any Person unless:
(1) except in the case of a Subsidiary Guarantor (x) that has been disposed of in its entirety to another Person (other than to the Company or an Affiliate of the Company), whether through a merger, consolidation or sale of Capital Stock or assets or (y) that, as a result of the disposition of all or a portion of its Capital Stock, ceases to be a Subsidiary, the resulting, surviving or transferee Person (if not such Subsidiary) shall be a Person organized and existing under the laws of the jurisdiction under which such Subsidiary was organized or under the laws of the United States of America, or any State thereof or the District of Columbia, and such Person shall expressly assume, by a Guaranty Agreement, in a form satisfactory to the Trustee, all the obligations of such Subsidiary, if any, under its Subsidiary Guaranty and this Indenture;
(2) immediately after giving effect to such transaction or transactions on a pro forma basis (and treating any Indebtedness which becomes an obligation of the resulting, surviving or transferee Person as a result of such transaction as having been issued by such Person at the time of such transaction), no Event of Default shall have occurred and be continuing; and
(3) the Company delivers to the Trustee an Officers Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such Guaranty Agreement, if any, complies with this Indenture.
Notwithstanding the foregoing, any Subsidiary Guarantor may (i) merge into or transfer all or part of its properties and assets to another Subsidiary Guarantor or the Company, (ii) merge with an Affiliate of the Company solely for the purpose of reincorporating the Subsidiary Guarantor in the United States, any state thereof, the District of Columbia or any territory thereof or (iii) convert into a corporation, partnership, limited partnership, limited liability company or trust organized under the laws of the jurisdiction of organization of such Subsidiary Guarantor, in each case without regard to the requirements set forth in the preceding paragraph.
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(c) So long as the Parent Guaranty is in effect, Parent shall not merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, all or substantially all of its assets to any Person unless:
(1) the resulting, surviving or transferee Person (if not Parent) shall be a Person organized and existing under the laws of the jurisdiction under which Parent was organized or under the laws of the United States of America, or any State thereof or the District of Columbia, and such Person shall expressly assume all the obligations of Parent, if any, under the Parent Guaranty; and
(2) the Company delivers to the Trustee an Officers Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such Guaranty Agreement, if any, complies with this Indenture.
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default . An Event of Default occurs if:
(1) the Company defaults in any payment of interest on any Security when the same becomes due and payable and such default continues for a period of 30 days;
(2) the Company defaults in the payment of the principal of any Security when the same becomes due and payable at its Stated Maturity, upon optional redemption, upon Special Mandatory Redemption, upon other required purchase, upon declaration of acceleration or otherwise;
(3) the Company or Parent fails to comply with Section 5.01;
(4) the Company or any Significant Subsidiary fails to comply with its other agreements contained in this Indenture (other than a default referred to in clauses (1) and (2) above) and such failure continues for 60 days after the notice specified below;
(5) Indebtedness of the Company or any Significant Subsidiary (other than Indebtedness owing to the Company or any Restricted Subsidiary) is not paid within any applicable grace period after its final stated maturity or is accelerated, or in the case of a Permitted Securitization, terminated (except voluntary termination), by the holders thereof because of a default and the total amount of such Indebtedness unpaid or accelerated, or terminated in the case of a Permitted Securitization, exceeds $20.0 million (the cross-acceleration provision);
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(6) After the Release Date, Parent (so long as the Parent Guaranty is in effect), the Company or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in an involuntary case;
(C) consents to the appointment of a Bankruptcy Custodian of it or for any substantial part of its property; or
(D) makes a general assignment for the benefit of its creditors;
or takes any comparable action under any foreign laws relating to insolvency;
(7) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:
(A) is for relief against Parent (so long as the Parent Guaranty is in effect), the Company or any Significant Subsidiary in an involuntary case;
(B) appoints a Bankruptcy Custodian of Parent (so long as the Parent Guaranty is in effect), the Company or any Significant Subsidiary or for any substantial part of its property; or
(C) orders the winding up or liquidation of Parent (so long as the Parent Guaranty is in effect), the Company or any Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order or decree remains unstayed and in effect for 60 days;
(8) any judgment or decree for the payment of money in excess of $20.0 million (net of any amounts that are covered by insurance or bonded, treating any deductibles, self-insurance or retention as not so covered) is entered against the Company or any Significant Subsidiary, remains outstanding for a period of 60 consecutive days following such judgment and is not discharged, waived or stayed (the judgment default provision); or
(9) the Parent Guaranty or any Subsidiary Guaranty of any Significant Subsidiary with respect to the Securities ceases to be in full force and effect (other than in accordance with the terms of such Parent Guaranty or Subsidiary Guaranty) or Parent or a Subsidiary Guarantor denies or disaffirms its obligations under the Parent Guaranty or its Subsidiary Guaranty.
The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body.
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The term Bankruptcy Law means Title 11, United States Code, or any similar federal or state law for the relief of debtors. The term Bankruptcy Custodian means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law.
A Default under clause (4) will not constitute an Event of Default until the Trustee or the Holders of at least 25% in principal amount of the outstanding Securities notify the Company of the Default and the Company does not cure such Default within the time specified after receipt of such notice. Such notice must specify the Default, demand that it be remedied and state that such notice is a Notice of Default. The Company shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice in the form of an Officers Certificate of any Event of Default under clause (5) or (9) and any event which with the giving of notice or the lapse of time would become an Event of Default under clause (4) or (8), its status and what action the Company is taking or proposes to take with respect thereto.
SECTION 6.02. Acceleration . If an Event of Default (other than an Event of Default specified in Section 6.01(6) or (7) with respect to the Company) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in principal amount of the Securities by written notice to the Company and the Trustee, may declare the principal of and accrued but unpaid interest on all the Securities to be due and payable by notice in writing to the Company and (if applicable) the Trustee specifying the respective Event of Default and that it is a notice of acceleration (the Acceleration Notice). Upon proper delivery of such Acceleration Notice, such principal and interest shall be due and payable immediately. If an Event of Default specified in Section 6.01(6) or (7) with respect to the Company occurs and is continuing, the principal of and interest on all the Securities shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Securityholders. The Holders of a majority in principal amount of the Securities by notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of acceleration. No such rescission shall affect any subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies . If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults . The Holders of a majority in principal amount of the Securities by notice to the Trustee may waive an existing Default and its consequences except (a) a Default in the payment of the principal of or interest on a Security (b) a
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Default arising from the failure to redeem or purchase any Security when required pursuant to this Indenture or (c) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Securityholder affected. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right.
SECTION 6.05. Control by Majority . The Holders of a majority in principal amount of the Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 7.01, that the Trustee determines is unduly prejudicial to the rights of other Securityholders or would involve the Trustee in personal liability; provided , however , that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. Prior to taking any action hereunder, the Trustee shall be entitled to indemnification by Holders satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action.
If a Default occurs, is continuing and is known to the Trustee, the Trustee must mail to each Securityholder notice of the Default within 90 days after it occurs. Except in the case of a Default in the payment of principal of or interest on any Securities, the Trustee may withhold notice if and so long as a committee of its Trust Officers in good faith determines that withholding notice is not opposed to the interest of the Securityholders. In addition, the Company is required to deliver to the Trustee, within 120 days after the end of each fiscal year, a certificate indicating whether the signers thereof know of any Default that occurred during the previous year. The Company is required to deliver to the Trustee, within 30 days after the occurrence thereof, written notice of any event which would constitute certain Defaults, their status and what action the Company is taking or proposes to take in respect thereof.
SECTION 6.06. Limitation on Suits . Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no Holder may pursue any remedy with respect to this Indenture or the Securities unless:
(1) such Holder has previously given the Trustee written notice that an Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the outstanding Securities have requested the Trustee to pursue the remedy;
(3) such Holders have offered the Trustee reasonable security or indemnity against any loss, liability or expense;
(4) the Trustee has not complied with such request within 60 days after the receipt thereof and the offer of security or indemnity; and
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(5) the Holders of a majority in principal amount of the outstanding Securities have not given the Trustee a direction inconsistent with such request within such 60 day period.
A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over another Securityholder. In the event that the Definitive Securities are not issued to any beneficial owner promptly after the Registrar has received a request from the Holder of a Global Security to issue such Definitive Securities to such beneficial owner of its nominee, the Company expressly agrees and acknowledges, with respect to the right of any Holder to pursue a remedy pursuant to this Indenture, the right of such beneficial holder of Securities to pursue such remedy with respect to the portion of the Global Security that represents such beneficial holders Securities as if such Definitive Securities had been issued.
SECTION 6.07. Rights of Holders To Receive Payment . Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of and interest on the Securities held by such Holder, on or after the respective due dates expressed in the Securities, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee . If an Event of Default specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount then due and owing (together with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section 7.07.
SECTION 6.09. Trustee May File Proofs of Claim . The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Securityholders allowed in any judicial proceedings relative to the Company, its creditors or its property and to participate as a member, voting or otherwise, of any official committee of creditors appointed in such matter and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.07.
SECTION 6.10. Priorities for Funds Collected by Trustee . If the Trustee collects any money or property pursuant to this Article 6, it shall pay out the money or property in the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
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SECOND: to Securityholders for amounts due and unpaid on the Securities for principal (and premium, if any) and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal ( and premium, if any) and interest, respectively; and
THIRD: to the Company.
The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section. At least 15 days before such record date, the Trustee shall mail to each Securityholder and the Company a notice that states the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs . In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in aggregate principal amount of the Securities.
SECTION 6.12. Waiver of Stay or Extension Laws . The Company (to the extent it may lawfully do so) shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted.
ARTICLE 7
Trustee
SECTION 7.01. Duties of Trustee .
(a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Persons own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and
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(2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b) of this Section;
(2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section and to the provisions of the Trust Indenture Act.
SECTION 7.02. Rights of Trustee .
(a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company personally or by agent or attorney.
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(b) Before the Trustee acts or refrains from acting, it may require an Officers Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided , however , that the Trustees conduct does not constitute willful misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel.
(f) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Trust Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Securities and this Indenture.
(g) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by the Trustee in each of its capacities hereunder.
SECTION 7.03. Individual Rights of Trustee . The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustees Disclaimer . The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Companys use of the proceeds from the Securities, and it shall not be responsible for any statement of the Company in this Indenture or in any document issued in connection with the sale of the Securities or in the Securities other than the Trustees certificate of authentication.
SECTION 7.05. Notice of Defaults . If a Default occurs, is continuing and is known to the Trustee, the Trustee shall mail to each Securityholder notice of the Default within 90 days after it occurs. Except in the case of a Default in the payment of principal of or interest
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on any Security (including payments pursuant to the mandatory redemption provisions of such Security, if any), the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is not opposed to the interests of the Securityholders.
SECTION 7.06. Reports by Trustee to Holders . As promptly as practicable after each March 31, beginning with the March 31 following the date of this Indenture, and in any event prior to May 1 in each year, the Trustee shall mail to each Securityholder a brief report dated as of such date that complies with Trust Indenture Act § 313(a). The Trustee also shall comply with Trust Indenture Act § 313(b).
A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each stock exchange (if any) on which the Securities are listed. The Company agrees to notify promptly the Trustee whenever the Securities become listed on any stock exchange and of any delisting thereof.
SECTION 7.07. Compensation and Indemnity . The Company, Parent and the Subsidiary Guarantors, jointly and severally, agree that they shall pay to the Trustee from time to time reasonable compensation for its services. The Trustees compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company, Parent and the Subsidiary Guarantors, jointly and severally, agree that they shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustees agents, counsel, accountants and experts. The Company, Parent and the Subsidiary Guarantors, jointly and severally, shall indemnify the Trustee for, and hold the Trustee harmless against, any and all loss, damage, claims, liability or expense (including attorneys fees) incurred by it in connection with the acceptance or administration of this trust and the performance of its duties hereunder (including the costs and expenses of enforcing this Indenture against the Company, Parent or any of the Subsidiary Guarantors (including this Section 7.07) or defending itself against any claim whether asserted by any Holder, the Company, Parent or any Subsidiary Guarantor, or liability in connective with the acceptance, exercise or performance of any of its powers or duties hereunder). The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee may have separate counsel and the Company shall pay the fees and expenses of such counsel. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustees own willful misconduct, negligence or bad faith.
To secure the Companys, Parents and the Subsidiary Guarantors payment obligations in this Section, the Trustee shall have a Lien prior to the Securities on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest on particular Securities.
The Companys, Parents and the Subsidiary Guarantors payment obligations pursuant to this Section shall survive the discharge of this Indenture. When the Trustee incurs
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expenses after the occurrence of a Default specified in Section 6.01(7) or (8) with respect to the Company, the expenses are intended to constitute expenses of administration under the Bankruptcy Law.
SECTION 7.08. Replacement of Trustee . The Trustee may resign at any time by so notifying the Company. The Holders of a majority in principal amount of the Securities may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the Holders of a majority in principal amount of the Securities and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the Lien provided for in Section 7.07.
If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in principal amount of the Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this Section, the Companys obligations under Section 7.07 shall continue for the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger . If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee.
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In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification . The Trustee shall at all times satisfy the requirements of Trust Indenture Act § 310(a). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with Trust Indenture Act § 310(b); provided , however , that there shall be excluded from the operation of Trust Indenture Act § 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are outstanding if the requirements for such exclusion set forth in Trust Indenture Act § 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company . The Trustee shall comply with Trust Indenture Act § 311(a), excluding any creditor relationship listed in Trust Indenture Act § 311(b). A Trustee who has resigned or been removed shall be subject to Trust Indenture Act § 311(a) to the extent indicated.
SECTION 7.12. Escrow Authorization . Each Holder, by its acceptance of a Security, consents and agrees to the terms of the Escrow Agreement, including related documents thereto, as the same may be in effect or may be amended from time to time in writing by the parties thereto ( provided that no amendment that would materially adversely affect the rights of the Holders may be effected without the consent of each Holder of Securities affected thereby), and authorizes and directs the Trustee to enter into the Escrow Agreement and to perform its obligations and exercise its rights thereunder in accordance therewith. The Escrow Issuer shall do or cause to be done all such acts and things as may be necessary or proper, or as may be required by the provisions of the Escrow Agreement, to assure and confirm to the Trustee the security interest contemplated by the Escrow Agreement or any part thereof, as from time to time constituted, so as to render the same available for the security and benefit of this Indenture and of the Securities secured hereby, according to the intent and purpose herein expressed. Escrow Issuer shall take, or shall cause to be taken, any and all actions reasonably required to cause the Escrow Agreement to create and maintain, as security for the obligations of the Company under this Indenture and the Securities as provided in the Escrow Agreement, valid and enforceable first priority perfected liens in and on all the Escrow Proceeds, in favor of the Trustee for its benefit and the ratable benefit of the Holders, superior to and prior to the rights of third Persons and subject to no other Liens.
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ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities; Defeasance .
(a) When (1) the Company delivers to the Trustee all outstanding Securities (other than Securities replaced pursuant to Section 2.07) for cancellation or (2) all outstanding Securities have become due and payable, whether at maturity or on a redemption date as a result of the providing of a notice of redemption pursuant to Article 3 hereof and the Company irrevocably deposits with the Trustee funds sufficient to pay at maturity or upon redemption all outstanding Securities, including interest thereon to maturity or such redemption date (other than Securities replaced pursuant to Section 2.07), and if in either case the Company pays all other sums payable hereunder by the Company, then this Indenture shall, subject to Section 8.01(c), cease to be of further effect. The Trustee shall acknowledge satisfaction and discharge of this Indenture on demand of the Company accompanied by an Officers Certificate and an Opinion of Counsel and at the cost and expense of the Company.
(b) Subject to Sections 8.01(c) and 8.02, the Company at any time may terminate (1) all its obligations under the Securities and this Indenture (legal defeasance option) or (2) its obligations under Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.13 and 4.15 and the operation of Sections 6.01(4), 6.01(5), 6.01(6), 6.01(7), 6.01(8), and 6.01(9) (but, in the case of Sections 6.01(6) and (7), with respect only to Significant Subsidiaries and Parent) and the limitations contained in Section 5.01(a)(3) (covenant defeasance option). The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the Securities may not be accelerated because of an Event of Default with respect thereto. If the Company exercises its covenant defeasance option, payment of the Securities may not be accelerated because of an Event of Default specified in Sections 6.01(3), 6.01(4), 6.01(5), 6.01(6), 6.01(7), 6.01(8) and 6.01(9) (but, in the case of Sections 6.01(6) and (7), with respect only to Significant Subsidiaries and Parent) or because of the failure of the Company to comply with Section 5.01(a)(3). If the Company exercises its legal defeasance option or its covenant defeasance option, each Guarantor, if any, shall be released from all its obligations with respect to the related Guaranty.
Upon satisfaction of the conditions set forth herein and upon request of the Company, the Trustee shall acknowledge in writing the discharge of those obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Companys obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07 and 7.08 and in this Article 8 shall survive until the Securities have been paid in full. Thereafter, the Companys obligations in Sections 7.07, 8.04 and 8.05 shall survive.
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SECTION 8.02. Conditions to Defeasance . The Company may exercise its legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust with the Trustee money or U.S. Government Obligations or a combination thereof for the payment of principal of and interest on the Securities to maturity or redemption, as the case may be;
(2) the Company delivers to the Trustee a certificate from a nationally recognized firm of independent accountants, a nationally recognized investment bank or a nationally recognized appraisal or valuation firm expressing their opinion that the payments of principal (and premium, if any) and interest when due and without reinvestment on the deposited U.S. Government Obligations plus any deposited money without investment will provide cash at such times and in such amounts as will be sufficient to pay principal (and premium, if any) and interest when due on all the Securities to maturity or redemption, as the case may be;
(3) the Company shall have delivered to the Trustee an Officers Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Securities over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding any creditors of the Company or others;
(4) the deposit does not constitute a default or event of default under any other material agreement (including, without limitation, the Credit Agreement) binding on the Company;
(5) in the case of the legal defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel stating 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 this 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 Securityholders will not recognize income, gain or loss for federal income tax purposes as a result of such 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 defeasance had not occurred;
(6) in the case of the covenant defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Securityholders 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; and
(7) the Company delivers to the Trustee an Officers Certificate and an Opinion of Counsel (which Opinion of Counsel may be subject to customary assumptions and exclusions), each stating that all conditions precedent to the defeasance and discharge of the Securities as contemplated by this Article 8 have been complied with.
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Before or after a deposit, the Company may make arrangements satisfactory to the Trustee for the redemption of Securities at a future date in accordance with Article 3.
SECTION 8.03. Application of Trust Money . The Trustee shall hold in trust money or U.S. Government Obligations deposited with it pursuant to this Article 8. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal of and interest on the Securities.
SECTION 8.04. Repayment to Company . The Trustee and the Paying Agent shall promptly turn over to the Company upon request any excess money or securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal (and premium, if any) or interest that remains unclaimed for two years, and, thereafter, Securityholders entitled to the money must look to the Company for payment as general creditors.
SECTION 8.05. Indemnity for Government Obligations . The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations or the principal (and premium, if any) and interest received on such U.S. Government Obligations.
SECTION 8.06. Reinstatement . If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with this Article 8 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Companys, Parents and each Subsidiary Guarantors obligations under this Indenture, the Parent Guaranty each Subsidiary Guaranty and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article 8 until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with this Article 8; provided , however , that, (a) if the Company has made any payment of interest on or principal of any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent and (b) unless otherwise required by any legal proceeding or any other order or judgment of any court or any governmental authority, the Trustee or Paying Agent shall return all such money and U.S. Government Obligations to the Company promptly after receiving a written request therefor at any time if such reinstatement of the Companys obligations has occurred and continues to be in effect.
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ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Holders . The Company, the Guarantors and the Trustee may amend this Indenture or the Securities without notice to or consent of any Securityholder:
(1) to cure any ambiguity, omission, defect, mistake or inconsistency;
(2) to provide for the Assumption and assumption by a successor corporation of the obligations of Parent, the Company or any Subsidiary Guarantor under this Indenture;
(3) to provide for uncertificated Securities in addition to or in place of certificated Securities;
(4) to evidence and provide for the acceptance by a successor trustee; provided that the successor trustee is otherwise qualified and eligible to act as such under the terms of this Indenture;
(5) to add Guarantees with respect to the Securities, including any Subsidiary Guarantees, to release a Guarantor pursuant to the terms of this Indenture or to otherwise comply with the provisions described under Article 11, or to secure the Securities;
(6) to add to the covenants of the Company or a Subsidiary Guarantor for the benefit of the Holders or to surrender any right or power herein conferred upon the Company or a Subsidiary Guarantor;
(7) to comply with any requirements of the SEC in connection with qualifying, or maintaining the qualification of, this Indenture under the Trust Indenture Act;
(8) to make any change that does not adversely affect the rights of any Securityholder;
(9) to provide for the issuance of Additional Securities (and the grant of security for the benefit of Additional Securities) in accordance with the terms of this Indenture;
(10) to make any amendment to the provisions of this Indenture relating to the transfer and legending of Securities; provided , however , that (a) compliance with this Indenture as so amended would not result in the Securities being transferred in violation of the Securities Act or any other securities law and (b) such amendment does not materially and adversely affect the rights of the Securityholders to transfer the Securities under applicable securities laws;
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(11) to conform the text of this Indenture, the Guarantees or the Securities to any provision of the Description of Notes in the Offering Memorandum to the extent that such provision in the Description of Notes was intended to be a verbatim recitation of a provision of this Indenture, the Guarantees or the Securities;
(12) to provide for the issuance of Exchange Securities in accordance with the terms of this Indenture; or
(13) to comply with the rules of any applicable securities depositary.
After an amendment under this Section becomes effective, the Company is required to mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section.
SECTION 9.02. With Consent of Holders . The Company, Parent, the Subsidiary Guarantors and the Trustee may amend this Indenture or the Securities with the written consent of the Holders of at least a majority in aggregate principal amount of the Securities then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, such Securities) and any past default or compliance with any provisions may also be waived with the consent of the Holders of at least a majority in aggregate principal amount of the Securities then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, such Securities). However, without the consent of each Securityholder affected thereby, an amendment or waiver may not (with respect to any Security held by a non-consenting Holder):
(1) reduce the percentage of the aggregate principal amount of such Securities whose Holders must consent to an amendment;
(2) reduce the rate of or extend the time for payment of interest on any such Security;
(3) reduce the principal of or change the Stated Maturity of any such Security;
(4) reduce the amount payable upon the redemption of any such Security or change the time at which any such Security may be redeemed pursuant to Article 3 or to section 5 of the Securities;
(5) make any such Security payable in money other than that stated in such Security;
(6) impair the right of any Securityholder to receive payment of principal of and interest on such Securityholders Securities on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Securityholders Securities;
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(7) make any changes in the ranking or priority of any Security that would adversely affect the Securityholders;
(8) make any change in Section 6.04 or 6.07 or the second sentence of this Section; or
(9) release any Guarantor from any of its obligations under its Guarantee of the Securities other than in accordance with this Indenture.
Without the consent of the Securityholders of at least 75% in aggregate principal amount of the Securities then outstanding, no amendment or waiver may make any change to, or extend the time for performance under, the escrow release provisions described under Section 3.07 or Section 4.14 (including the definition of Escrow End Date).
It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof.
After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section.
SECTION 9.03. Compliance with Trust Indenture Act . Every amendment to this Indenture or the Securities shall comply with the Trust Indenture Act as then in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers . A consent to an amendment or a waiver by a Holder of a Security shall bind the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same debt as the consenting Holders Security, even if notation of the consent or waiver is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holders Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment or waiver becomes effective. After an amendment or waiver becomes effective, it shall bind every Securityholder. An amendment or waiver becomes effective upon the execution of such amendment or waiver by the Trustee.
The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Securityholders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Securityholders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date.
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SECTION 9.05. Notation on or Exchange of Securities . If an amendment changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security regarding the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment.
SECTION 9.06. Trustee To Sign Amendments . The Trustee shall sign any amendment authorized pursuant to this Article 9 if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive, and (subject to Section 7.01) shall be fully protected in relying upon, an Officers Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture and that such amendment is the legal, valid and binding obligation of the Company, Parent and the Subsidiary Guarantors, enforceable against them in accordance with its terms, subject to customary exceptions and complies with the provisions hereof (including Section 9.03).
ARTICLE 10
[Reserved]
ARTICLE 11
Guarantees
SECTION 11.01. Guarantees . Upon the consummation of the Assumption, the Guarantors hereby fully guarantee, jointly and severally, to each Holder and to the Trustee and its successors and assigns (a) the full and punctual payment of principal of and interest on the Securities when due, whether at maturity, by acceleration, by redemption or otherwise, and all other monetary obligations of the Company under this Indenture and the Securities and (b) the full and punctual performance within applicable grace periods of all other obligations of the Company under this Indenture and the Securities (all the foregoing being hereinafter collectively called the Guaranteed Obligations). Each of the Guarantors further agrees that the Guaranteed Obligations may be extended or renewed, in whole or in part, without notice or further assent from such Guarantor and that such Guarantor will remain bound under this Article 11 notwithstanding any extension or renewal of any Obligation.
Each Guarantor waives presentation to, demand of, payment from and protest to the Company of any of the Guaranteed Obligations and also waives notice of protest for nonpayment. Each Guarantor waives notice of any default under the Securities or the Guaranteed Obligations. The obligations of each Guarantor hereunder shall not be affected by (1) the failure of any Holder or the Trustee to assert any claim or demand or to enforce any right or remedy
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against the Company or any other Person (including any Guarantor) under this Indenture, the Securities or any other agreement or otherwise; (2) any extension or renewal of any thereof; (3) any rescission, waiver, amendment or modification of any of the terms or provisions of this Indenture, the Securities or any other agreement; (4) the release of any security held by any Holder or the Trustee for the Guaranteed Obligations or any of them; (5) the failure of any Holder or the Trustee to exercise any right or remedy against any other guarantor of the Guaranteed Obligations; or (6) except as set forth in Section 11.06, any change in the ownership of a Subsidiary Guarantor.
Each Guarantor further agrees that its Guaranty herein constitutes a guarantee of payment, performance and compliance when due (and not a guarantee of collection) and waives any right to require that any resort be had by any Holder or the Trustee to any security held for payment of the Guaranteed Obligations.
Except as expressly set forth in Sections 8.01(b), 11.02 and 11.06, the obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Guaranteed Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor herein shall not be discharged or impaired or otherwise affected by the failure of any Holder or the Trustee to assert any claim or demand or to enforce any remedy under this Indenture, the Securities or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of Parent or such Subsidiary Guarantor or would otherwise operate as a discharge of Parent or such Subsidiary Guarantor as a matter of law or equity.
Each Guarantor further agrees that its Guarantee herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Obligation is rescinded or must otherwise be restored by any Holder or the Trustee upon the bankruptcy or reorganization of the Company or otherwise.
In furtherance of the foregoing and not in limitation of any other right which any Holder or the Trustee has at law or in equity against any Guarantor by virtue hereof, upon the failure of the Company to pay the principal of or interest on any Obligation when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to perform or comply with any other Obligation, each Guarantor hereby promises to and shall, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal to the sum of (A) the unpaid amount of such Guaranteed Obligations, (B) accrued and unpaid interest on such Guaranteed Obligations (but only to the extent not prohibited by law) and (C) all other monetary Guaranteed Obligations of the Company to the Holders and the Trustee.
Each of the Guarantors agrees that it shall not be entitled to any right of subrogation in respect of any Obligations guaranteed hereby until payment in full of all Obligations.
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Each of the Guarantors further agrees that, as between it, on the one hand, and the Holders and the Trustee, on the other hand, (i) the maturity of the Guaranteed Obligations hereby may be accelerated as provided in Article 6 for the purposes of such Guarantors Guaranty herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Guaranteed Obligations guaranteed hereby, and (ii) in the event of any declaration of acceleration of such Guaranteed Obligations as provided in Article 6, such Guaranteed Obligations (whether or not due and payable) shall forthwith become due and payable by such Guarantor for the purposes of this Section.
Each Guarantor also agrees to pay any and all costs and expenses (including reasonable attorneys fees) incurred by the Trustee or any Holder in enforcing any rights under this Section.
SECTION 11.02. Limitation on Liability . Any term or provision of this Indenture to the contrary notwithstanding, the maximum aggregate amount of the Guaranteed Obligations guaranteed hereunder by any Guarantor shall not exceed the maximum amount that, after giving effect to all other contingent and fixed liabilities of such Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations under this Indenture, can be hereby guaranteed without rendering this Indenture, as it relates to such Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally.
SECTION 11.03. Successors and Assigns . This Article 11 shall be binding upon each Guarantor and its successors and assigns and shall inure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges conferred upon that party in this Indenture and in the Securities shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of this Indenture.
SECTION 11.04. No Waiver . Neither a failure nor a delay on the part of either the Trustee or the Holders in exercising any right, power or privilege under this Article 11 shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of the Trustee and the Holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Article 11 at law, in equity, by statute or otherwise.
SECTION 11.05. Modification . No modification, amendment or waiver of any provision of this Article 11, nor the consent to any departure by any Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Guarantor in any case shall entitle such Guarantor to any other or further notice or demand in the same, similar or other circumstances.
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SECTION 11.06. Release of Subsidiary Guarantor . A Subsidiary Guarantor will be released from its obligations under this Article 11 (other than any obligation that may have arisen under Section 11.07):
(1) upon the sale or other disposition (including by way of consolidation or merger) of a Subsidiary Guarantor, including the sale or disposition of Capital Stock of a Subsidiary Guarantor, following which such Subsidiary Guarantor is no longer a Subsidiary,
(2) upon the sale or disposition of all or substantially all the assets of such Subsidiary Guarantor,
(3) upon the designation of such Subsidiary Guarantor as an Unrestricted Subsidiary in accordance with the terms of this Indenture,
(4) at such time as such Subsidiary Guarantor does not have any Indebtedness outstanding that would have required such Subsidiary Guarantor to enter into a Guaranty Agreement pursuant to Section 4.10 and the Company provides an Officers Certificate to the Trustee certifying that no such Indebtedness is outstanding and that the Company elects to have such Subsidiary Guarantor released from this Article 11,
(5) upon a liquidation or dissolution of a Guarantor permitted under this Indenture;
(6) upon defeasance of the Securities pursuant to Article 8, or
(7) upon the full satisfaction of the Companys obligations under this Indenture;
provided , however , that in the case of clauses (1) and (2) above, (i) such sale or other disposition is made to a Person other than the Company or a Subsidiary of the Company, (ii) such sale or disposition is otherwise permitted by this Indenture and (iii) the Company provides an Officers Certificate to the Trustee to the effect that the Company will comply with its obligations under Section 4.06.
At the request of the Company, the Trustee shall execute and deliver an appropriate instrument evidencing such release.
SECTION 11.07. Contribution . Each Guarantor that makes a payment under a Guaranty shall be entitled upon payment in full of all Guaranteed Obligations under this Indenture to a contribution from each other Guarantor in an amount equal to such other Guarantors pro rata portion of such payment based on the respective net assets of all the Guarantors at the time of such payment determined in accordance with GAAP.
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ARTICLE 12
[Reserved]
ARTICLE 13
Miscellaneous
SECTION 13.01. Trust Indenture Act Controls . If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the Trust Indenture Act, the required provision shall control.
SECTION 13.02. Notices . Any notice or communication shall be in writing and delivered in person, via facsimile or mailed by first-class mail addressed as follows:
if to the Company or any Guarantor:
Cooper-Standard Automotive Inc.
39550 Orchard Hill Place Drive
Novi, MI 48375
if to the Trustee:
Corporate Trust Services
U.S. Bank National Association
535 Griswold Street, Suite 550
Detroit, MI 48226
The Company, any Guarantor or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Securityholder shall be mailed to the Securityholder at the Securityholders address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. Except for a notice to Trustee which is deemed given when received, if a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it.
SECTION 13.03. Communication by Holders with Other Holders . Securityholders may communicate pursuant to Trust Indenture Act § 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, any Guarantor, the Trustee, the Registrar and anyone else shall have the protection of Trust Indenture Act § 312(c).
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SECTION 13.04. Certificate and Opinion as to Conditions Precedent . Upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signer, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with.
SECTION 13.05. Statements Required in Certificate or Opinion . Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with.
SECTION 13.06. When Securities Disregarded . In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which the Trustee knows are so owned shall be so disregarded. Also, subject to the foregoing, only Securities outstanding at the time shall be considered in any such determination.
SECTION 13.07. Rules by Trustee, Paying Agent and Registrar . The Trustee may make reasonable rules for action by or a meeting of Securityholders. The Registrar and the Paying Agent may make reasonable rules for their functions.
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SECTION 13.08. Legal Holidays . If a payment date is not a Business Day, payment shall be made on the next succeeding Business Day, and no interest shall accrue for the intervening period. If a regular record date is a not a Business Day, the record date shall not be affected.
SECTION 13.09. Governing Law . This Indenture and the Securities shall be governed by, and construed in accordance with, the laws of the State of New York.
SECTION 13.10. No Recourse Against Others . A director, officer, employee, incorporator or stockholder, as such, of the Company or any Guarantor shall not have any liability for any obligations of the Company under the Securities or this Indenture or of such Guarantor under its Guaranty or this Indenture for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities.
SECTION 13.11. Successors . All agreements of the Company in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors.
SECTION 13.12. Multiple Originals . The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture.
SECTION 13.13. Table of Contents; Headings . The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof.
SECTION 13.14. Indenture Controls . If and to the extent that any provision of the Securities conflicts with a provision of this Indenture, such provision of this Indenture shall control.
SECTION 13.15. Severability . In case any provision in this Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and such provision shall be ineffective only to the extent of such invalidity, illegality or unenforceability.
SECTION 13.16. Qualification of Indenture . The Company and the Guarantors shall qualify this Indenture under the Trust Indenture Act in accordance with the terms and conditions of the Registration Rights Agreement and shall pay all reasonable costs and expenses (including attorneys fees and expenses for the Company, the Guarantors and the Trustee) incurred in connection therewith, including, but not limited to, costs and expenses of qualification of this Indenture and the Securities and printing this Indenture and the Securities. The Trustee shall be entitled to receive from the Company and the Guarantors any such Officers Certificates, Opinions of Counsel or other documentation as it may reasonably request in connection with any such qualification of this Indenture under the Trust Indenture Act.
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SECTION 13.17. No Adverse Interpretation of Other Agreements . This Indenture may not be used to interpret another indenture, loan, security or debt agreement of the Company or any Subsidiary thereof. No such indenture, loan, security or debt agreement may be used to interpret this Indenture.
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above.
[Signature pages follow]
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CSA ESCROW CORPORATION | ||
By: |
/s/ Allen J. Campbell |
|
Name: | Allen J. Campbell | |
Title: | President |
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U.S. BANK NATIONAL ASSOCIATION | ||
By: |
/s/ James Kowalski |
|
Name: | James Kowalski | |
Title: | Vice President |
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EXHIBIT A
[FORM OF FACE OF INITIAL SECURITY]
[Insert the Global Security Legend, if applicable pursuant to the provisions of the Indenture]
[Insert the Private Placement Legend, if applicable pursuant to the provisions of the Indenture]
[Insert the Regulation S Temporary Global Security Legend, if applicable pursuant to the provisions of the Indenture]
[Form of Initial Security]
No. | $ | |
CUSIP No. [ ] 1 ISIN No. [ ] 2 |
CSA ESCROW CORPORATION
8 1 / 2 % Senior Notes due 2018
CSA Escrow Corporation, a Delaware corporation, promises to pay to [ ], or registered assigns, the principal sum of [ ] DOLLARS [the amount listed on the Schedule of Increases or Decreases in Global Security attached hereto] 3 on May 1, 2018.
Interest Payment Dates: May 1 and November 1.
Record Dates: April 15 and October 15.
Additional provisions of this Security are set forth on the other side of this Security.
[Signature page follows]
1 |
Rule 144A: 12629Y AA9 |
Reg | S: U2287A AA2 |
2 |
Rule 144A: US12629YAA91 |
Reg | S: USU2287AAA26 |
3 |
Use the Schedule of Increases and Decreases language if Security is in Global Form. |
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Dated: May 11, 2010
CSA ESCROW CORPORATION |
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By: |
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|
Name: | ||
Title: |
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Dated: May 11, 2010
TRUSTEES CERTIFICATE OF AUTHENTICATION
U.S. BANK NATIONAL ASSOCIATION, | ||
as Trustee, certifies that this is one of the Securities referred to in the Indenture. |
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By |
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|
Authorized Signatory |
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[FORM OF REVERSE SIDE OF INITIAL SECURITY]
8 1 / 2 % Senior Note due 2018
1. | Interest |
Prior to the consummation of the Assumption (as defined in the Indenture), the references in this Security to the Company refers to CSA Escrow Corporation, a Delaware corporation. After the consummation of the Assumption, the references in this Security to the Company refer only to Cooper-Standard Automotive Inc., an Ohio corporation.
The Company promises to pay interest on the principal amount of this Security at the rate per annum shown above; provided , however , that if a default under Section 2(e) or Section 2(f) of the Registration Rights Agreement occurs, additional interest will accrue on this Security at a rate of 0.25% per annum (increasing by an additional 0.25% per annum after each consecutive 90-day period that occurs after the date on which such default occurs up to a maximum additional interest rate of 1.00% per annum) from and including the date on which any such default shall occur to but excluding the date on which all such defaults have been cured. The Company will pay interest semiannually on May 1 and November 1 of each year, commencing November 1, 2010. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from May 11, 2010. Interest will be computed on the basis of a 360-day year of twelve 30-day months.
2. | Method of Payment |
The Company will pay interest on the Securities (except defaulted interest) to the Persons who are registered holders of Securities at the close of business on the April 15 or October 15 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal (and premium, if any) and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Securities represented by a Global Security (including principal, premium and interest) will be made by wire transfer of immediately available funds to the accounts specified by the Depositary. The Company will make all payments in respect of a certificated Security (including principal, premium and interest) by mailing a check to the registered address of each Holder thereof; provided , however , that payments on a certificated Security may be made by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).
3. | Paying Agent and Registrar |
Initially, U.S. Bank National Association, a national banking association (the Trustee), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar.
4. | Indenture |
The Company issued the Securities under an Indenture dated as of May 11, 2010 (as amended, modified and supplemented, the Indenture), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on the date of the Indenture (the Act). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities include all such terms, and Securityholders are referred to the Indenture and the Act for a statement of those terms.
The Securities are senior unsecured obligations of the Company. The Company shall be entitled, subject to its compliance with Section 4.03 of the Indenture, to issue Additional Securities pursuant to Section 2.13 of the Indenture. The Initial Securities issued on the Issue Date, any Additional Securities and all Exchange Securities issued in exchange therefor will be treated as a single class for all purposes under the Indenture. The Indenture contains covenants that, among other things, limit the ability of the Company and its subsidiaries to incur additional indebtedness; pay dividends or distributions on, or redeem or repurchase capital stock; make investments; engage in transactions with affiliates; transfer or sell assets; guarantee indebtedness; restrict dividends or other payments of subsidiaries; and consolidate, merge or transfer all or substantially all of its assets and the assets of its subsidiaries. These covenants are subject to important exceptions and qualifications.
5. | Optional Redemption |
Except as set forth below, the Company shall not be entitled to redeem the Securities.
On and after May 1, 2014, the Company shall be entitled at its option to redeem all or a portion of the Securities upon not less than 30 nor more than 60 days notice, at the redemption prices (expressed in percentages of principal amount on the redemption date), plus accrued and unpaid interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period commencing on May 1 of the years set forth below:
Period |
Redemption Price | ||
2014 |
104.250 | % | |
2015 |
102.125 | % | |
2016 and thereafter |
100.000 | % |
Prior to May 1, 2014, the Company will be entitled at its option to redeem all or any portion of the Securities at a redemption price equal to 100% of the principal amount of such
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Securities plus the Applicable Premium as of, and any accrued and unpaid interest to, the redemption date (subject to the right of the Securityholders on the relevant record date to receive interest due on the relevant interest payment date). Notice of such redemption must be mailed by first-class mail to each Securityholders registered address, not less than 30 nor more than 60 days prior to the redemption date.
Prior to May 1, 2013, the Company will be entitled at its option on one or more occasions to redeem the Securities (which includes Additional Securities, if any) in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the Securities (which includes Additional Securities, if any) issued at a redemption price (expressed as a percentage of principal amount) of 108.500%, plus accrued and unpaid interest to the redemption date, with the net cash proceeds from one or more Equity Offerings ( provided that, if the Equity Offering is an offering by Parent, a portion of the net cash proceeds thereof equal to the amount required to redeem any such Securities is contributed to the equity capital of the Company or used to acquire Capital Stock of the Company (other than Disqualified Stock) from the Company); provided , however , that:
(1) at least 50% of such aggregate principal amount of Securities issued on the Issue Date remains outstanding immediately after the occurrence of each such redemption (other than Securities held, directly or indirectly, by the Company or its Affiliates); and
(2) each such redemption occurs within 90 days after the date of the related Equity Offering.
6. | Special Mandatory Redemption |
The Securities will be subject to a mandatory redemption (a Special Mandatory Redemption) in the event that either (i) the Release Date has not occurred on or prior to the Escrow End Date or (ii) prior to the Escrow End Date, the Company has determined, in its reasonable discretion, that the escrow conditions cannot be satisfied by such date (any such date, a Trigger Date). The Company will cause the notice of Special Mandatory Redemption to be mailed no later than the next Business Day following the Trigger Date and will redeem the Securities five Business Days following the date of the notice of redemption. The redemption price for any Special Mandatory Redemption will be the sum of 100% of the Gross Proceeds plus 1.0% of the aggregate principal amount of the Securities issued on the Issue Date, together with accrued and unpaid interest on the Securities from the Issue Date up to but not including the date of the Special Mandatory Redemption (the Special Mandatory Redemption Price).
If the Escrow Agent receives a notice of the Special Mandatory Redemption pursuant to the terms of the Securities, the Escrow Agent will liquidate all Escrow Proceeds then held by it not later than the last Business Day prior to the date of the Special Mandatory Redemption. Concurrently with the release of the amounts necessary to fund the Special Mandatory Redemption to the Paying Agent, the Escrow Agent will release any excess of Escrow Proceeds over the Special Mandatory Redemption Price to the Company, and the Company will be permitted to use such excess Escrow Proceeds at its discretion.
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7. Selection and Notice of Redemption
If the Company is redeeming less than all the Securities at any time, the Trustee will select Securities in compliance with the requirements of the principal national securities exchange, if any, on which such Securities are listed, or, if such Securities are not so listed, on a pro rata basis or by lot or such similar method in accordance with the procedures of DTC; provided that no Securities of $2,000 or less shall be purchased or redeemed in part.
The Company will cause notices of redemption to be sent electronically or mailed by first-class mail or provided otherwise in accordance with the procedures of DTC at least 30 but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at its registered address, except that redemption notices may be sent or mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Securities or a satisfaction and discharge of the Indenture. Notwithstanding anything to the contrary contained in the Indenture, notice of a redemption upon an Equity Offering may be made in advance of an Equity Offering, subject to one or more conditions precedent, including but not limited to the consummation of such Equity Offering.
If any Security is to be redeemed in part only, the notice of redemption that relates to that Security will state the portion of the principal amount thereof to be redeemed. The Company will issue a new Security in a principal amount equal to the unredeemed portion of the original Security in the name of the Holder upon cancellation of the original Security. Securities called for redemption become due on the date fixed for redemption. On and after the redemption date, interest will cease to accrue on Securities or portions of them called for redemption.
8. Put Provisions
Upon a Change of Control after the Release Date, any Holder of Securities will have the right to cause the Company to repurchase all or any part of the Securities of such Holder at a repurchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued and unpaid interest to the date of repurchase (subject to the right of holders of record on the relevant record date to receive interest due on the related interest payment date) as provided in, and subject to the terms of, the Indenture.
9. Guaranty
The payment by the Company of the principal of, and premium and interest on, the Securities is fully and unconditionally guaranteed on a joint and several senior basis by each of the Guarantors to the extent set forth in the Indenture.
10. Denominations; Transfer; Exchange
The Securities are in registered form in minimum denominations of $2,000 principal amount and whole multiples of $1,000 in excess thereof. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and
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fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or any Securities for a period of 15 days before a selection of Securities to be redeemed or between a record date and the next succeeding interest payment date.
11. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner of it for all purposes.
12. Unclaimed Money
If money for the payment of principal (and premium, if any) or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment.
13. Discharge and Defeasance
Subject to certain conditions, the Company at any time shall be entitled to terminate some or all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal (and premium, if any) and interest on the Securities to redemption or maturity, as the case may be.
14. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (1) the Indenture and the Securities may be amended with the written consent of the Holders of at least a majority in principal amount outstanding of the Securities and (2) any default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in principal amount outstanding of the Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company, Parent, the Subsidiary Guarantors and the Trustee shall be entitled to amend the Indenture or the Securities (i) to cure any ambiguity, omission, defect, mistake or inconsistency; (ii) to provide for the Assumption and assumption by a successor corporation of the obligations of Parent, the Company or any Subsidiary Guarantor under such Indenture; (iii) to provide for uncertificated Securities in addition to or in place of certificated Securities; (iv) to evidence and provide for the acceptance by a successor trustee; provided that the successor trustee is otherwise qualified and eligible to act as such under the terms of the Indenture; (v) to add Guarantees with respect to the Securities, including any Subsidiary Guaranties, to release a Guarantor pursuant to the terms of the Indenture or to otherwise comply with the provisions described under Article 11 of the Indenture or to secure the Securities; (vi) to add to the covenants of the Company or a Subsidiary Guarantor for the benefit of the Holders or to surrender any right or power conferred upon the Company or a Subsidiary Guarantor; (vii) to comply with any requirements of the SEC in connection with the qualifying, or maintaining the
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qualification of, the Indenture under the Trust Indenture Act; (viii) to make any change that does not adversely affect the rights of any Holder; (ix) to provide for the issuance of Additional Securities (and the grant of security for the benefit of Additional Securities) in accordance with the terms of the Indenture; (x) to make any amendment to the provisions of the Indenture relating to the transfer and legending of the Securities; provided , however , that (a) compliance with the Indenture as so amended would not result in the Securities being transferred in violation of the Securities Act or any other securities law and (b) such amendment does not materially and adversely affect the rights of the Holders to transfer the Securities under applicable securities laws; (xi) to conform the text of the Indenture, the Guarantees or the Securities to any provision of the Description of Notes in the Offering Memorandum to the extent that such provision in the Description of Notes was intended to be a verbatim recitation of a provision of the Indenture, the Guarantees or the Securities; (xii) to provide for the issuance of Exchange Securities in accordance with the terms of the Indenture; or (xiii) to comply with the rules of any applicable securities depositary.
Without the consent of the Holders of at least 75% in aggregate principal amount of the Securities then outstanding, no amendment or waiver may make any change to, or extend the time for performance under, the escrow release provisions described under Section 3.07 of the Indenture or Section 4.14 of the Indenture (including the definition of Escrow End Date).
15. Defaults and Remedies
Under the Indenture, Events of Default include (a) default for 30 days in payment of interest on the Securities; (b) default in payment of principal on the Securities at maturity, upon redemption pursuant to paragraph 5 herein, upon the Special Mandatory Redemption, upon acceleration or otherwise, or failure by the Company to redeem or purchase Securities when required; (c) failure to comply with Section 5.01 of the Indenture; (d) failure by the Company or any Significant Subsidiary to comply with other agreements in the Indenture (other than those referred to in clauses (a) and (b) above) and such failure continues for 60 days after notice; (e) certain accelerations (including failure to pay within any grace period after final maturity) of other Indebtedness of the Company if the amount accelerated (or so unpaid) exceeds $20.0 million; (f) certain events of bankruptcy or insolvency with respect to the Company, Parent and any Significant Subsidiaries; (g) certain judgments or decrees for the payment of money in excess of $20.0 million; and (h) certain defaults with respect to the Parent Guaranty or any Subsidiary Guaranty. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Securities may declare all the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default which will result in the Securities being due and payable immediately upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives indemnity or security satisfactory to it. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default (except a Default in payment of principal or interest) if it determines that withholding notice is in the interest of the Holders.
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16. Trustee Dealings with the Company
Subject to certain limitations imposed by the Trust Indenture Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee.
17. No Recourse Against Others
A director, officer, employee, incorporator or stockholder, as such, of the Company or any Guarantor or the Trustee shall not have any liability for any obligations of the Company or any Guarantor under the Securities, the Indenture, any Guaranty or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities.
18. Authentication
This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually or by facsimile signs the certificate of authentication on the other side of this Security.
19. Abbreviations
Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act).
20. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP and ISIN numbers to be printed on the Securities and has directed the Trustee to use CUSIP and ISIN numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.
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21. Holders Compliance with Registration Rights Agreement
Each Holder of a Security, by acceptance hereof, acknowledges and agrees to the provisions of the Registration Rights Agreement, including the obligations of the Holders with respect to a registration and the indemnification of the Company to the extent provided therein.
22. Governing Law
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
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ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignees name, address and zip code) |
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(Insert assignees soc. sec. or tax I.D. No.) |
and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him.
Date: |
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Your Signature: |
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Sign exactly as your name appears on the other side of this Security.
In connection with any transfer of any of the Securities evidenced by this certificate occurring prior to the expiration of the period referred to in Rule 144(d)(1) under the Securities Act after the later of the date of original issuance of such Securities and the last date, if any, on which such Securities were owned by the Company or any Affiliate of the Company, the undersigned confirms that such Securities are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
to the Company; or
(1) | pursuant to an effective registration statement under the Securities Act of 1933; or |
(2) | inside the United States to a qualified institutional buyer (as defined in Rule 144A under the Securities Act of 1933) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or |
(3) | outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act of 1933; or |
(4) | pursuant to the exemption from registration provided by Rule 144 under the Securities Act of 1933. |
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Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered holder thereof; provided , however , that if box (4) is checked, the Trustee shall be entitled to require, prior to registering any such transfer of the Securities, such legal opinions, certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, such as the exemption provided by Rule 144 under such Act.
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Signature | ||||||
Signature Guarantee:
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Signature must be guaranteed |
Signature |
Signatures must be guaranteed by an eligible guarantor institution meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (STAMP) or such other signature guarantee program as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
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TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a qualified institutional buyer within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigneds foregoing representations in order to claim the exemption from registration provided by Rule 144A.
Dated: |
|
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Notice: To be executed by an executive officer |
-11-
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The initial principal amount of this Global Security is $ . The following increases or decreases in this Global Security have been made:
Date of Exchange |
Amount of
decrease in principal amount of this Global Security |
Amount of
increase in principal amount of this Global Security |
Principal
amount of this Global Security following such decrease or increase |
Signature
of authorized officer of Trustee or Securities Custodian |
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OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company pursuant to Section 4.06 (Asset Sale) or 4.09 (Change of Control) of the Indenture, check the box: [ ]
If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.06 (Asset Sale) or 4.09 (Change of Control) of the Indenture, state the amount in principal amount: ($2,000 or an integral multiple of $1,000 thereof): $[ ]
Dated: | Your Signature: | |||
(Sign exactly as your name appears on the other side of this Security.) |
Signature Guarantee: |
(Signature must be guaranteed) |
Signatures must be guaranteed by an eligible guarantor institution meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (STAMP) or such other signature guarantee program as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
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EXHIBIT B
Form of Certificate of Transfer
[ ], [ ]
Corporate Trust Services
U.S. Bank National Association
535 Griswold Street, Suite 550
Detroit, MI 48226
Ladies and Gentlemen:
Reference is hereby made to the Indenture, dated as of May 11, 2010 (the Indenture ), between the Company and the Trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.
(the Transferor ) owns and proposes to transfer the Securit[y/ies] or interest in such Securit[y/ies] specified in Annex A hereto, in the principal amount of $ in such Securit[y/ies] or interests (the Transfer ), to (the Transferee ), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE 144A GLOBAL SECURITY OR A DEFINITIVE SECURITY PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the Securities Act ), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Security is being transferred to a Person that the Transferor reasonably believes is purchasing the beneficial interest or Definitive Security for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a qualified institutional buyer within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States.
2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE REGULATION S GLOBAL SECURITY OR A DEFINITIVE SECURITY PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the
United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Security will be subject to the restrictions on Transfer enumerated in the Indenture and the Securities Act.
3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE DEFINITIVE SECURITY PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Securities and Restricted Definitive Securities and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act;
or
(b) [ ] such Transfer is being effected to the Company, the Parent Guarantor or a subsidiary thereof;
or
(c) [ ] such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act.
4. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL SECURITY OR OF AN UNRESTRICTED DEFINITIVE SECURITY.
(a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Security will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Securities, on Restricted Definitive Securities and in the Indenture.
(b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Security will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Securities, on Restricted Definitive Securities and in the Indenture.
(c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Security will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Securities or Restricted Definitive Securities and in the Indenture.
This certificate and the statements contained herein are made for your benefit and the benefit of the Company.
[Insert Name of Transferor] | ||
By: |
|
|
Name: | ||
Title: |
Dated:
ANNEX A TO CERTIFICATE OF TRANSFER
1. | The Transferor owns and proposes to transfer the following: | |||||||||||
[CHECK ONE OF (a) OR (b)] | ||||||||||||
(a) | ¨ | a beneficial interest in the: | ||||||||||
(i) | ¨ | 144A Global Note (CUSIP ), or | ||||||||||
(ii) | ¨ | Regulation S Global Note (CUSIP ), or | ||||||||||
(b) | ¨ | a Restricted Definitive Note. | ||||||||||
2. | After the Transfer the Transferee will hold: | |||||||||||
[CHECK ONE] |
(a) | ¨ | a beneficial interest in the: |
(i) | ¨ | 144A Global Note (CUSIP ), or | ||||||||||
(ii) | ¨ | Regulation S Global Note (CUSIP ), or | ||||||||||
(iii) | ¨ | Unrestricted Global Note (CUSIP ); or | ||||||||||
(b) | ¨ | a Restricted Definitive Note; or | ||||||||||
(c) | ¨ | an Unrestricted Definitive Note, | ||||||||||
in accordance with the terms of the Indenture. |
EXHIBIT C
Form of Certificate of Exchange
[ ] [ ], [ ]
U.S. Bank National Association
U.S. Bank National Association
535 Griswold Street, Suite 550
Detroit, MI 48226
Re: | CSA Escrow Corporation | |||
8 1 / 2 % Senior Notes due 2018 (the Securities) . |
Ladies and Gentlemen:
Reference is hereby made to the Indenture dated as of May 11, 2010 (the Indenture ) between the Company and the Trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.
(the Owner ) owns and proposes to exchange the Securit[y/ies] or interest in such Securit[y/ies] specified herein, in the principal amount of $ in such Securit[y/ies] or interests (the Exchange ). In connection with the Exchange, the Owner hereby certifies that:
(1) EXCHANGE OF RESTRICTED DEFINITIVE SECURITIES OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL SECURITY FOR UNRESTRICTED DEFINITIVE SECURITIES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL SECURITY
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL SECURITY TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL SECURITY. In connection with the Exchange of the Owners beneficial interest in a Restricted Global Security for a beneficial interest in an Unrestricted Global Security in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owners own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Securities and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the Securities Act ), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Security is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.
(b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL SECURITY TO UNRESTRICTED DEFINITIVE SECURITY. In connection with the Exchange of the Owners beneficial interest in a Restricted Global Security for an Unrestricted Definitive Security, the Owner hereby certifies (i) the Definitive Security is being acquired for the Owners own account without transfer, (ii) such Exchange has been effected in
compliance with the transfer restrictions applicable to the Restricted Global Securities and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Security is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.
(c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE SECURITY TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL SECURITY. In connection with the Owners Exchange of a Restricted Definitive Security for a beneficial interest in an Unrestricted Global Security, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owners own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Securities and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.
(d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE SECURITY TO UNRESTRICTED DEFINITIVE SECURITY. In connection with the Owners Exchange of a Restricted Definitive Security for an Unrestricted Definitive Security, the Owner hereby certifies (i) the Unrestricted Definitive Security is being acquired for the Owners own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Securities and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Security is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.
(2) EXCHANGE OF RESTRICTED DEFINITIVE SECURITIES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL SECURITIES FOR RESTRICTED DEFINITIVE SECURITIES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL SECURITIES
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL SECURITY TO RESTRICTED DEFINITIVE SECURITY. In connection with the Exchange of the Owners beneficial interest in a Restricted Global Security for a Restricted Definitive Security with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Security is being acquired for the Owners own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Security issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Security and in the Indenture and the Securities Act.
(b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE SECURITY TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL SECURITY. In connection with the Exchange of the Owners Restricted Definitive Security for a beneficial interest in the [CHECK ONE] [ ] 144A Global Security [ ] Regulation S Global Security, with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owners own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Securities and pursuant to and in
accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Security and in the Indenture and the Securities Act.
This certificate and the statements contained herein are made for your benefit and the benefit of the Company and are dated .
[Insert Name of Transferor] |
||
By: |
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|
Name: | ||
Title: |
Dated:
EXHIBIT D
[FORM OF SUPPLEMENTAL INDENTURE RELATED TO SUBSIDIARY GUARANTORS]
SUPPLEMENTAL INDENTURE (this Supplemental Indenture ) dated as of [ ], among [GUARANTOR] (the New Guarantor ), CSA ESCROW CORPORATION, a Delaware corporation (to be merged with and into COOPER-STANDARD AUTOMOTIVE INC, an Ohio corporation, as the surviving entity) (the Company ), 4 and U.S. BANK NATIONAL ASSOCIATION, a national banking association, as trustee under the indenture referred to below (the Trustee ).
W I T N E S S E T H :
WHEREAS the Company has heretofore executed and delivered to the Trustee an indenture (as amended, supplemented or otherwise modified, the Indenture ) dated as of May 11, 2010, as supplemented, providing for the issuance of the Companys $450,000,000 aggregate principal amount of 8 1 / 2 % Senior Notes due 2018 ( the Securities );
WHEREAS Section 4.10 of the Indenture provides that under certain circumstances the Company is required to cause the New Guarantor to execute and deliver to the Trustee a supplemental indenture pursuant to which the New Guarantor shall unconditionally guarantee all the Companys Obligations under the Securities and the Indenture pursuant to a Guarantee on the terms and conditions set forth herein; and
WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, the Company and other existing Guarantors, if any, are authorized to execute and deliver this Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Guarantor, the Company and the Trustee mutually covenant and agree for the equal and ratable benefit of the holders of the Securities as follows:
1. Defined Terms . As used in this Supplemental Indenture, terms defined in the Indenture or in the preamble or recital hereto are used herein as therein defined, except that the term holders in this Supplemental Indenture shall refer to the term holders as defined in the Indenture and the Trustee acting on behalf of and for the benefit of such holders. The words herein , hereof and hereby and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular section hereof.
4 |
Delete this reference if supplemental indenture Exhibit E is signed prior to signing of this Supplemental Indenture. |
2. Agreement to Guarantee . The New Guarantor hereby agrees, jointly and severally with all existing guarantors (if any), to unconditionally guarantee the Companys Obligations under the Securities and the Indenture on the terms and subject to the conditions set forth in Article 11 of the Indenture and to be bound by all other applicable provisions of the Indenture and the Securities and to perform all of the obligations and agreements of a guarantor under the Indenture.
3. Notices . All notices or other communications to the New Guarantor shall be given as provided in Section 13.02 of the Indenture.
4. Ratification of Indenture; Supplemental Indentures Part of Indenture . Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every holder of Securities heretofore or hereafter authenticated and delivered shall be bound hereby.
5. Governing Law . THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
6. Trustee Makes No Representation . The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture.
7. Counterparts . The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.
8. Effect of Headings . The Section headings herein are for convenience only and shall not effect the construction thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written.
[NEW GUARANTOR] | ||
By: |
|
|
Name: | ||
Title: | ||
U.S. BANK NATIONAL ASSOCIATION as Trustee |
||
By: |
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|
Name: | ||
Title: |
EXHIBIT E
[FORM OF SUPPLEMENTAL INDENTURE RELATED TO ASSUMPTION]
SUPPLEMENTAL INDENTURE (this Supplemental Indenture ) dated as of [ ], 2010, among COOPER-STANDARD AUTOMOTIVE INC., an Ohio corporation (the New Company ), COOPER-STANDARD HOLDINGS INC., a Delaware corporation (the Parent Guarantor ), the subsidiaries of the New Company set forth on the signature page hereto (together with the Parent Guarantor, the Guarantors ) and U.S. BANK NATIONAL ASSOCIATION, a national banking association, as trustee under the indenture referred to below (the Trustee ).
W I T N E S S E T H :
WHEREAS CSA Escrow Corporation (the Company ) has heretofore executed and delivered to the Trustee an indenture (as amended, supplemented or otherwise modified, the Indenture ) dated as of May 11, 2010, providing for the issuance of the Companys (i) $450,000,000 aggregate principal amount of the 8 1 / 2 % Senior Notes due 2018 (the Securities );
WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, the New Company and the Guarantors are authorized to execute and deliver this Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Company, the Guarantors and the Trustee mutually covenant and agree for the equal and ratable benefit of the holders of the Securities as follows:
1. Defined Terms . As used in this Supplemental Indenture, terms defined in the Indenture or in the preamble or recital hereto are used herein as therein defined, except that the term holders in this Supplemental Indenture shall refer to the term holders as defined in the Indenture and the Trustee acting on behalf of and for the benefit of such holders. The words herein , hereof and hereby and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular section hereof.
2. Agreement to Assume Obligations . The New Company hereby agrees to unconditionally assume the Companys Obligations under the Securities and the Indenture on the terms and subject to the conditions set forth in the Indenture and to be bound by all applicable provisions of the Indenture and the Securities and to perform all of the obligations and agreements of the Company under the Indenture.
3. Agreement to Guarantee . The Guarantors hereby agree, jointly and severally, with all existing guarantors (if any), to unconditionally guarantee the New Companys Obligations under the Securities and the Indenture on the terms and subject to the conditions set forth in Article 11 of the Indenture and to be bound by all other applicable provisions of the Indenture and the Securities and to perform all of the obligations and agreements of a guarantor under the Indenture.
4. Notices . All notices or other communications to the New Company and the Guarantors shall be given as provided in Section 13.02 of the Indenture.
5. Ratification of Indenture; Supplemental Indentures Part of Indenture . Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every holder of Securities heretofore or hereafter authenticated and delivered shall be bound hereby.
6. Release of Obligations of Escrow Company . Upon execution of this Supplemental Indenture by the New Company and the Trustee, CSA Escrow Corporation is released and discharged from all obligations under the Indenture and the Securities.
7. Governing Law . THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
8. Trustee Makes No Representation . The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture.
9. Counterparts . The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.
10. Effect of Headings . The Section headings herein are for convenience only and shall not effect the construction thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written.
COOPER-STANDARD AUTOMOTIVE INC. | ||
By: |
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Name: | ||
Title: | ||
COOPER-STANDARD HOLDINGS INC. | ||
By: |
|
|
Name: | ||
Title: | ||
[GUARANTORS] | ||
By: |
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|
Name: | ||
Title: | ||
U.S. BANK NATIONAL ASSOCIATION as Trustee |
||
By: |
|
|
Name: | ||
Title: |
Acknowledged by:
CSA ESCROW CORPORATION
By: |
|
|
Name: | ||
Title: |
Exhibit 4.3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this Agreement ) is made and entered into as of May 11, 2010, by and among CSA Escrow Corporation, a Delaware corporation (the Escrow Corporation ), and Deutsche Bank Securities Inc. ( DBSI ), as representative of the several initial purchasers listed on Schedule 1 to the Purchase Agreement (as defined below) (collectively, the Initial Purchasers ), each of whom has agreed to purchase a portion of the $450,000,000 aggregate principal amount of the Companys 8 1 / 2 % Senior Notes due 2018 (the Initial Notes ) to be guaranteed by the Guarantors (the Guarantees ) pursuant to the Purchase Agreement. The Initial Notes and the Guarantees are herein collectively referred to as the Securities. On the Release Date, Cooper-Standard Automotive Inc., a Delaware corporation (the Company ), Cooper-Standard Holdings Inc. (the Parent Guarantor ) and the Subsidiary Guarantors (as defined in the Purchase Agreement) will execute a joinder agreement in the form of Exhibit A (the Joinder Agreement ) pursuant to which the Company, the Parent Guarantor and the Subsidiary Guarantors will become party to this Agreement.
This Agreement is made pursuant to the Purchase Agreement, dated April 29, 2010 (the Purchase Agreement ), among the Escrow Corporation, the Company, the Parent Guarantor and the Initial Purchasers (i) for the benefit of the Initial Purchasers and (ii) for the benefit of the holders from time to time of the Securities, including the Initial Purchasers. In order to induce the Initial Purchasers to purchase the Securities, the Company has agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Initial Purchasers set forth in Section 7(h) of the Purchase Agreement.
For purposes of this Agreement only (x) prior to the Release Date references to Company shall be deemed references to CSA Escrow Corporation and (y) on and after the Release Date references to the Company shall be deemed a reference to Cooper-Standard Automotive Inc.
In consideration of the foregoing, the parties hereto agree as follows:
1. Definitions . As used in this Agreement, the following terms shall have the following meanings:
Business Day shall mean any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed.
Company shall have the meaning set forth in the preamble and shall also include the Companys successors.
DBSI shall have the meaning set forth in the preamble.
Exchange Act shall mean the Securities Exchange Act of 1934, as amended from time to time.
Exchange Dates shall have the meaning set forth in Section 2(a)(ii) hereof.
Exchange Offer shall mean the exchange offer by the Company and the Guarantors of Exchange Securities for Registrable Securities pursuant to Section 2(a) hereof.
Exchange Offer Registration shall mean a registration under the Securities Act effected pursuant to Section 2(a) hereof.
Exchange Offer Registration Statement shall mean an exchange offer registration statement on Form S-4 (or, if applicable, on another appropriate form) and all amendments and supplements to such registration statement, in each case including the Prospectus contained therein or deemed a part thereof, all exhibits thereto and any document incorporated by reference therein.
Exchange Securities shall mean senior notes issued by the Company and guaranteed by the Guarantors under the Indenture containing terms identical to the Securities (except that the Exchange Securities will not be subject to restrictions on transfer or to any increase in annual interest rate for failure to comply with this Agreement) and to be offered to Holders of Securities in exchange for Securities pursuant to the Exchange Offer.
Free Writing Prospectus shall mean each free writing prospectus (as defined in Rule 405 under the Securities Act) prepared by or on behalf of the Company or used or referred to by the Company in connection with the sale of the Securities or the Exchange Securities.
Guarantee shall mean the guarantee of the Securities and Exchange Securities by any Guarantor under the Indenture.
Guarantors shall mean, on the Release Date upon execution and delivery of the Joinder Agreement, the Parent Guarantor and the Subsidiary Guarantors.
Holders shall mean the Initial Purchasers, for so long as they own any Registrable Securities, and each of their successors, assigns and direct and indirect transferees who become owners of Registrable Securities under the Indenture; provided that for purposes of Sections 4 and 6 of this Agreement, the term Holders shall include Participating Broker-Dealers.
Holders Inspector shall have the meaning set forth in Section 3(a)(xiv) hereof.
Indemnified Person shall have the meaning set forth in Section 6(c) hereof.
Indemnifying Person shall have the meaning set forth in Section 6(c) hereof.
Indenture shall mean the Indenture relating to the Securities dated as of May 11, 2010 between the Escrow Corporation and U.S. Bank National Association, as trustee (the Trustee), as the same may be supplemented or amended from time to time in accordance with the terms thereof.
Information shall have the meaning set forth in Section 3(a)(xiv) hereof.
Initial Purchasers shall have the meaning set forth in the preamble.
Inspectors shall have the meaning set forth in Section 3(a)(xiv) hereof.
Issue Date shall mean May 11, 2010.
Issuer Information shall have the meaning set forth in Section 6(a) hereof.
Market Maker shall have the meaning set forth in Section 5(a) hereof.
Market Makers Information shall have the meaning set forth in Section 5(d) hereof.
Market Making Registration Statement shall mean the registration statement referred to in Section 5(a)(i) hereof and all amendments and supplements to any such registration statement, including post-effective amendments, in each case including the Prospectus contained therein or deemed a part thereof, all exhibits thereto and any document incorporated by reference therein.
Majority Holders shall mean the Holders of a majority of the aggregate principal amount of the outstanding Registrable Securities; provided that whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, any Registrable Securities owned directly or indirectly by the Company or any of its affiliates shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage or amount; and provided , further , that if the Company shall issue any additional Securities under the Indenture prior to consummation of the Exchange Offer or, if applicable, the effectiveness of any Shelf Registration Statement, such additional Securities and the Registrable Securities to which this Agreement relates shall be treated together as one class for purposes of determining whether the consent or approval of Holders of a specified percentage of Registrable Securities has been obtained.
Parent Guarantor shall have the meaning set forth in the preamble and shall also include the Parent Guarantors successors.
Participating Broker-Dealers shall have the meaning set forth in Section 4(a) hereof.
Person shall mean an individual, partnership, limited liability company, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof.
Prospectus shall mean the prospectus included in, or, pursuant to the rules and regulations of the Securities Act, deemed a part of, a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including a prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by a Shelf Registration Statement, and by all other amendments and supplements to such prospectus, and in each case including any document incorporated by reference therein.
-2-
Purchase Agreement shall have the meaning set forth in the preamble.
Records shall have the meaning set forth in Section 3(a)(xiv) hereof.
Registration Actions shall have the meaning set forth in Section 3(d)(i) hereof.
Registrable Securities shall mean the Securities; provided that the Securities shall cease to be Registrable Securities on the earliest of (i) when the Exchange Securities are issued in exchange for the Securities pursuant to the Exchange Offer Registration Statement, (ii) when an Exchange Offer is completed (except with respect to Securities held by Persons that were not eligible to participate pursuant to the Exchange Offer), (iii) when a Registration Statement with respect to such Securities has become effective under the Securities Act and such Securities have been exchanged or disposed of pursuant to such Registration Statement, (iv) the date that is two years from the Issue Date or (v) when such Securities cease to be outstanding.
Registration Expenses shall mean any and all expenses incident to performance of or compliance by the Company and the Guarantors with this Agreement, including without limitation: (i) all SEC, stock exchange or Financial Industry Regulatory Authority, Inc. ( FINRA ) registration and filing fees, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws (including reasonable fees and disbursements of one counsel for any Underwriters and Holders (which counsel shall be elected by the Majority Holders and which counsel may also be counsel for the Initial Purchasers) in connection with blue sky qualification of any Exchange Securities or Registrable Securities), (iii) all expenses of the Company and the Guarantors in preparing or assisting in preparing, word processing, printing and distributing any Registration Statement, any Prospectus, any Free Writing Prospectus and any amendments or supplements thereto, any underwriting agreements, securities sales agreements or other similar agreements and any other documents relating to the performance of and compliance with this Agreement, (iv) all rating agency fees, (v) all fees and disbursements relating to the qualification of the Indenture under applicable securities laws, (vi) the fees and disbursements of the Trustee and its counsel as may be agreed by the Company and the Trustee, (vii) the fees and disbursements of counsel for the Company and the Guarantors and, in the case of a Shelf Registration Statement, the fees and disbursements of one counsel for the Holders (which counsel shall be selected by the Majority Holders and which counsel may also be counsel for the Initial Purchasers), (viii) the fees and disbursements of counsel for the Market Maker and (ix) the fees and disbursements of the independent public accountants of the Company and the Guarantors, including the expenses of any special audits or comfort letters required by or incident to the performance of and compliance with this Agreement, but excluding fees and expenses of counsel to the Underwriters (other than fees and expenses set forth in clause (ii) above) or the Holders and underwriting discounts and commissions, brokerage commissions and transfer taxes, if any, relating to the sale or disposition of Registrable Securities by a Holder.
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Registration Statement shall mean any registration statement of the Company and the Guarantors that covers any of the Exchange Securities or Registrable Securities pursuant to the provisions of this Agreement, including, without limitation, the Market Making Registration Statement, and all amendments and supplements to any such registration statement, including post-effective amendments, in each case including the Prospectus contained therein or deemed a part thereof, all exhibits thereto and any document incorporated by reference therein.
Release Date shall have the meaning set forth in the Purchase Agreement.
SEC shall mean the United States Securities and Exchange Commission.
Securities shall have the meaning set forth in the preamble.
Securities Act shall mean the Securities Act of 1933, as amended from time to time.
Shelf Additional Interest Date shall have the meaning set forth in Section 2(d) hereof.
Shelf Effectiveness Period shall have the meaning set forth in Section 2(b) hereof.
Shelf Registration shall mean a registration effected pursuant to Section 2(b) hereof.
Shelf Registration Statement shall mean a shelf registration statement of the Company and the Guarantors that covers all or a portion of the Registrable Securities (but no other securities unless approved by a majority of the Holders whose Registrable Securities are to be covered by such Shelf Registration Statement) on an appropriate form under Rule 415 under the Securities Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein or deemed a part thereof, all exhibits thereto and any document incorporated by reference therein.
Shelf Request shall have the meaning set forth in Section 2(b) hereof.
Staff shall mean the staff of the SEC.
Suspension Notice shall have the meaning set forth in Section 3(d)(i) hereof.
Suspension Period shall have the meaning set forth in Section 3(d)(i) hereof.
Target Registration Date shall have the meaning set forth in Section 2(d) hereof.
Trust Indenture Act shall mean the Trust Indenture Act of 1939, as amended from time to time.
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Trustee shall mean the trustee with respect to the Securities under the Indenture.
Underwriter shall have the meaning set forth in Section 3(e) hereof.
Underwriter Inspector shall have the meaning set forth in Section 3(a)(xiv) hereof.
Underwritten Offering shall mean an offering in which Registrable Securities are sold to an Underwriter for reoffering to the public.
2. Registration Under the Securities Act .
(a) To the extent not prohibited by any applicable law or applicable interpretations of the Staff, the Company and the Guarantors shall use their commercially reasonable efforts to (i) cause to be filed an Exchange Offer Registration Statement covering an offer to the Holders to exchange all the Registrable Securities for Exchange Securities and (ii) to cause such Registration Statement to become effective at the earliest possible time under the Securities Act. The Company and the Guarantors shall commence the Exchange Offer promptly after the Exchange Offer Registration Statement is declared effective by the SEC and use their commercially reasonable efforts to complete the Exchange Offer not later than 365 days after the Issue Date.
The Company and the Guarantors shall commence the Exchange Offer by mailing the related Prospectus, appropriate letters of transmittal and other accompanying documents to each Holder stating, in addition to such other disclosures as are required by applicable law, substantially the following:
(i) that the Exchange Offer is being made pursuant to this Agreement and that all Registrable Securities validly tendered and not properly withdrawn will be accepted for exchange.
(ii) the dates of acceptance for exchange (which shall be a period of at least 20 Business Days from the date such notice is mailed) (the Exchange Dates );
(iii) that any Registrable Security not tendered will remain outstanding and continue to accrue interest (but not any additional interest pursuant to Section 2(d)) but will not retain any rights under this Agreement, except as otherwise specified herein;
(iv) that any Holder electing to have a Registrable Security exchanged pursuant to the Exchange Offer will be required to (A) surrender such Registrable Security, together with the appropriate letters of transmittal, to the institution and at the address (located in the Borough of Manhattan, The City of New York) and in the manner specified in the notice, or (B) effect such exchange otherwise in compliance with the applicable procedures of the depositary for such Registrable Security, in each case prior to the close of business on the last Exchange Date; and
(v) that any Holder will be entitled to withdraw its election, not later than the close of business on the last Exchange Date, by (A) sending to the institution and at the address (located in the Borough of Manhattan, The City of New York) specified in the
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notice, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Registrable Securities delivered for exchange and a statement that such Holder is withdrawing its election to have such Securities exchanged or (B) effecting such withdrawal in compliance with the applicable procedures of the depositary for the Registrable Securities.
As a condition to participating in the Exchange Offer, a Holder will be required to represent to the Company and the Guarantors that (i) any Exchange Securities to be received by it will be acquired in the ordinary course of its business, (ii) at the time of the commencement of the Exchange Offer it has no arrangement or understanding with any Person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Securities in violation of the provisions of the Securities Act, (iii) it is not an affiliate (within the meaning of Rule 405 under the Securities Act) of the Company or any Guarantor, (iv) if such Holder is not a broker-dealer, that it is not engaged in, and does not intend to engage in, the distribution of Exchange Notes and (v) if such Holder is a broker-dealer that will receive Exchange Securities for its own account in exchange for Registrable Securities that were acquired as a result of market-making or other trading activities, then such Holder will provide such information as may be reasonably requested by the Company and deliver a Prospectus (or, to the extent permitted by law, make available a Prospectus to purchasers) in connection with any resale of such Exchange Securities.
As soon as practicable after the last Exchange Date, the Company and the Guarantors shall:
(i) accept for exchange Registrable Securities or portions thereof validly tendered and not properly withdrawn pursuant to the Exchange Offer; and
(ii) deliver, or cause to be delivered, to the Trustee for cancellation all Registrable Securities or portions thereof so accepted for exchange by the Company and
(iii) issue, and cause the Trustee to promptly authenticate and deliver to each Holder, Exchange Securities equal in principal amount to the principal amount of the Registrable Securities tendered by such Holder.
The Company and the Guarantors shall use their commercially reasonable efforts to complete the Exchange Offer as provided above and shall comply with the applicable requirements of the Securities Act, the Exchange Act and other applicable laws and regulations in connection with the Exchange Offer. The Exchange Offer shall not be subject to any conditions, other than that the Exchange Offer does not violate any applicable law or applicable interpretations of the Staff.
(b) In the event that (i) the Company and the Guarantors determine that the Exchange Offer Registration provided for in Section 2(a) above is not available or may not be completed as soon as practicable after the last Exchange Date because it would violate any applicable law or applicable interpretations of the Staff, (ii) the Exchange Offer is not for any other reason completed on or before 365th day after the Issue Date; provided , however , that if such day would otherwise fall on a day that is not a Business Day, then such Exchange Offer must be completed not later than the next successive Business Day, (iii) upon receipt of a Holders request, with respect
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to any Holder of Registrable Securities that (A) may not resell the Exchange Securities acquired by it in the Exchange Offer to the public without delivering a prospectus and that the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder or (B) is a broker-dealer and holds Securities acquired directly from the Company or one of its affiliates, (iv) upon receipt of a written request (a Shelf Request ) from any Initial Purchaser representing that it holds Registrable Securities that are or were ineligible to be exchanged in the Exchange Offer, , (v) upon receipt of written notice following the consummation of the Exchange Offer from any Holder that participated in the Exchange Offer notifying the Company that such Holder did not receive freely tradeable Exchange Securities in the Exchange Offer, other than by reason of such Holder being an affiliate of the Company, the Guarantors or any of their respective affiliates, and notifies the Company within 30 days after such Holder first becomes aware of such restrictions or (vi) upon receipt of written notice following the consummation of the Exchange Offer from any Holder notifying the Company that such Holder is or was ineligible to participate in the Exchange Offer by reason of such Holder being an affiliate of the Company, the Guarantors or any of their respective affiliates, and notifies the Company within 30 days after the consummation of the Exchange Offer of such ineligibility, then the Company and the Guarantors shall use their commercially reasonable efforts to cause to be filed as soon as practicable after such determination date or Shelf Request, as the case may be, a Shelf Registration Statement providing for the sale of all the Registrable Securities by the Holders thereof.
In the event that the Company and the Guarantors are required to file a Shelf Registration Statement pursuant to clause (iv) of the preceding sentence, the Company and the Guarantors shall use their commercially reasonable efforts to file and have become effective both an Exchange Offer Registration Statement pursuant to Section 2(a) with respect to all Registrable Securities and a Shelf Registration Statement (which may be a combined Registration Statement with the Exchange Offer Registration Statement) with respect to offers and sales of Registrable Securities held by the Initial Purchasers after completion of the Exchange Offer.
Subject to the fifth paragraph of Section 2(d) hereof, the Company and the Guarantors agree to use their commercially reasonable efforts to (A) cause the Shelf Registration Statement to be declared effective under the Securities Act and (B) keep the Shelf Registration Statement continuously effective until the earlier of (i) one year after the initial effectiveness or (ii) the date when all of the Registrable Securities are registered under such Shelf Registration Statement and are disposed of in accordance with such Shelf Registration Statement or cease to be outstanding (the Shelf Effectiveness Period ). The Company and the Guarantors further agree to supplement or amend the Shelf Registration Statement, the related Prospectus and any Free Writing Prospectus if required by the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement or by the Securities Act or by any other rules and regulations thereunder or if reasonably requested by a Holder of Registrable Securities with respect to information relating to such Holder, and to use their commercially reasonable efforts to cause any such amendment to become effective, if required, and such Shelf Registration Statement, Prospectus or Free Writing Prospectus, as the case may be, to become usable as soon as thereafter practicable. The Company and the Guarantors agree to furnish to the Holders of Registrable Securities copies of any such supplement or amendment reasonably promptly after its being used or filed with the SEC.
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(c) The Company and the Guarantors shall pay all Registration Expenses in connection with any registration pursuant to Section 2(a) or Section 2(b) hereof. Each Holder shall pay all underwriting discounts and commissions, brokerage commissions and transfer taxes, if any, relating to the sale or disposition of such Holders Registrable Securities pursuant to the Exchange Offer Registration Statement or Shelf Registration Statement and any fees and disbursements of counsel or experts retained by such Holder in connection with any registration pursuant hereto (other than any such fees and disbursements included within the definition of Registration Expenses and paid for by the Company and the Guarantors in accordance with the terms of this Agreement).
(d) An Exchange Offer Registration Statement pursuant to Section 2(a) hereof will not be deemed to have become effective unless it has been declared effective by the SEC. A Shelf Registration Statement pursuant to Section 2(b) hereof will not be deemed to have become effective unless it has been declared effective by the SEC or is automatically effective upon filing with the SEC as provided by Rule 462 under the Securities Act.
(e) In the event that either the Exchange Offer is not completed or the Shelf Registration Statement, if required pursuant to Section 2(b)(i), 2(b)(ii) or 2(b)(iii) hereof, does not become effective on or prior to 365th day after the Issue Date (the Target Registration Date ), the interest rate on the Registrable Securities will be increased by 0.25% per annum for the first 90 day period immediately following the Target Registration Date and by an additional 0.25% per annum with respect to each subsequent 90 day period, up to a maximum of 1.00% per annum, until the earliest of the Exchange Offer being completed, the Shelf Registration Statement, if required hereby, becoming effective and the date on which all Securities cease to be Registrable Securities; provided that the obligation of the Company and the Guarantors to pay such additional interest in any such case shall be the sole and exclusive monetary remedy of the Initial Purchasers and the Holders in the event that the Exchange Offer is not completed or the Shelf Registration Statement, if required pursuant to Section 2(b)(i), 2(b)(ii) or 2(b)(iii) hereof, does not become effective on or prior to the Target Registration Date.
(f) If a Shelf Registration Statement, if required hereby, has become effective and thereafter either ceases to be effective or the Prospectus contained therein ceases to be usable, in each case whether or not permitted by this Agreement, at any time during the Shelf Effectiveness Period, and such failure to remain effective or usable exists for more than 30 days (whether or not consecutive) in any 12-month period (such 30th day, the Shelf Trigger Date ), then the interest rate on the Registrable Securities will be increased by 0.25% per annum for the first 90 day period immediately following such date and by an additional 0.25% per annum with respect to each subsequent 90 day period, up to a maximum increase of 1.00% per annum, commencing on the day immediately following the Shelf Trigger Date and ending on such date that the Shelf Registration Statement has again become effective or the Prospectus again becomes usable, as the case may be.
(g) For the avoidance of doubt, an increase of the interest rate on the Registrable Securities may not accrue under each of Section 2(e) and Section 2(f) at any one time, and in the case that more than one basis for an increase in any interest rate pursuant to this Section 2(g) arises or exists under Section 2(e) and Section 2(f), such interest rate increase will not be aggregated and instead the interest rate will be increased as if only one such basis exists. Following the cessation of such basis for increased interest, the accrual of such additional interest will cease only when no other basis for any increase continues to exist.
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(h) Without limiting the remedies available to the Initial Purchasers and the Holders, the Company and the Guarantors acknowledge that any failure by the Company or the Guarantors to comply with their obligations under Section 2(a) and Section 2(b) hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Companys and the Guarantors obligations under Section 2(a) and Section 2(b) hereof.
The Company represents, warrants and covenants that it (including its agents and representatives) will not prepare, make, use, authorize, approve or refer to any Free Writing Prospectus other than any written communication relating to or that contains solely the terms of the Exchange Offer and/or other information that was included in the Registration Statement.
3. Registration Procedures .
(a) In connection with their obligations pursuant to Section 2(a) and Section 2(b) hereof, the Company and the Guarantors shall as soon as reasonably practicable:
(i) prepare and file with the SEC a Registration Statement on the appropriate form under the Securities Act, which form (x) shall be selected by the Company and the Guarantors, (y) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Securities by the Holders thereof and (z) shall comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the SEC to be filed therewith; and use their commercially reasonable efforts to cause such Registration Statement to become effective and remain effective for the applicable period in accordance with Section 2 hereof;
(ii) subject to Section 3(d) hereof, prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement effective for the applicable period in accordance with Section 2 hereof and cause each Prospectus to be supplemented by any required prospectus supplement and, as so supplemented, to be filed pursuant to Rule 424 under the Securities Act; and keep each Prospectus current during the period described in Section 4(3) of and Rule 174 under the Securities Act that is applicable to transactions by brokers or dealers with respect to the Registrable Securities or Exchange Securities;
(iii) to the extent any Free Writing Prospectus is used, file with the SEC any Free Writing Prospectus that is required to be filed by the Company or the Guarantors with the SEC in accordance with the Securities Act and to retain any Free Writing Prospectus not required to be filed;
(iv) in the case of a Shelf Registration, furnish to each Holder of Registrable Securities, to counsel for the Initial Purchasers, to counsel for such Holders and to each Underwriter of an Underwritten Offering of Registrable Securities, if any, without
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charge, as many copies of each Prospectus, preliminary prospectus or Free Writing Prospectus, and any amendment or supplement thereto, as such Holder, counsel or Underwriter may reasonably request in order to facilitate the sale or other disposition of the Registrable Securities thereunder; and the Company and the Guarantors consent to the use of such Prospectus, preliminary prospectus or such Free Writing Prospectus and any amendment or supplement thereto in accordance with applicable law by each of the Holders of Registrable Securities and any such Underwriters in connection with the offering and sale of the Registrable Securities covered by and in the manner described in such Prospectus, preliminary prospectus or such Free Writing Prospectus or any amendment or supplement thereto in accordance with applicable law;
(v) use their commercially reasonable efforts to register or qualify the Registrable Securities under all applicable state securities or blue sky laws of such jurisdictions as any Holder of Registrable Securities covered by a Registration Statement shall reasonably request in writing by the time the applicable Registration Statement becomes effective; cooperate with such Holders in connection with any filings required to be made with FINRA; and do any and all other acts and things that may be reasonably necessary or advisable to enable each Holder to complete the disposition in each such jurisdiction of the Registrable Securities owned by such Holder; provided that neither the Company nor any Guarantor shall be required to (1) qualify as a foreign corporation or other entity or as a dealer in securities in any such jurisdiction where it would not otherwise be required to so qualify, (2) file any general consent to service of process in any such jurisdiction or (3) subject itself to taxation in any such jurisdiction if it is not so subject;
(vi) notify counsel for the Initial Purchasers and, in the case of a Shelf Registration notify each Holder of Registrable Securities and counsel for such Holders promptly and, if requested by any such Holder or counsel, confirm such advice in writing (1) when a Registration Statement has become effective, when any post-effective amendment thereto has been filed and becomes effective, when any Free Writing Prospectus has been filed or any amendment or supplement to the Prospectus or any Free Writing Prospectus has been filed, (2) of any request by the SEC or any state securities authority for amendments and supplements to a Registration Statement, Prospectus or any Free Writing Prospectus or for additional information after the Registration Statement has become effective, (3) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, including the receipt by the Company of any notice of objection of the SEC to the use of a Shelf Registration Statement or any post-effective amendment thereto pursuant to Rule 401(g)(2) under the Securities Act, (4) if, between the applicable effective date of a Shelf Registration Statement and the closing of any sale of Registrable Securities covered thereby, the Company or any Guarantor receives any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose, (5) of the happening of any event during the period a Registration Statement is effective that makes any statement made in such Registration Statement or the related Prospectus or any Free Writing Prospectus untrue in any material respect or that requires the making of any changes in such Registration Statement or Prospectus or any Free Writing Prospectus in order to make the statements therein not misleading in any material respect and (6) of
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any determination by the Company or any Guarantor that a post-effective amendment to a Registration Statement or any amendment or supplement to the Prospectus or any Free Writing Prospectus would be appropriate;
(vii) use their commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement or, in the case of a Shelf Registration, the resolution of any objection of the SEC pursuant to Rule 401(g)(2), including by filing an amendment to such Shelf Registration Statement on the proper form, as soon as reasonably practicable and promptly provide notice to each Holder of the withdrawal of any such order or such resolution;
(viii) in the case of a Shelf Registration, furnish to each Holder of Registrable Securities upon request, without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto (without any documents incorporated therein by reference or exhibits thereto, unless requested);
(ix) in the case of a Shelf Registration, cooperate with the Holders of Registrable Securities to facilitate the timely preparation and delivery of certificates (unless such Registrable Securities are in book-entry form only) representing Registrable Securities to be sold and not bearing any restrictive legends and enable such Registrable Securities to be issued in such denominations and registered in such names (consistent with the provisions of the Indenture) as such Holders may reasonably request at least one Business Day prior to the closing of any sale of Registrable Securities;
(x) subject to Section 3(d), in the case of a Shelf Registration, upon the occurrence of any event contemplated by Section 3(a)(vi)(5) hereof, use their commercially reasonable efforts to prepare and file with the SEC a supplement or post-effective amendment to such Shelf Registration Statement or the related Prospectus or any Free Writing Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered (or, to the extent permitted by law, made available) to purchasers of the Registrable Securities, such Prospectus or Free Writing Prospectus, as the case may be, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and the Company and the Guarantors shall notify the Holders of Registrable Securities to suspend use of the Prospectus or any Free Writing Prospectus as promptly as practicable after the occurrence of such an event, and such Holders hereby agree to suspend use of the Prospectus or any Free Writing Prospectus, as the case may be, until the Company and the Guarantors have amended or supplemented the Prospectus or the Free Writing Prospectus, as the case may be, to correct such misstatement or omission;
(xi) within a reasonable time prior to the filing of any Registration Statement, any Prospectus, any Free Writing Prospectus, any amendment to a Registration Statement or amendment or supplement to a Prospectus or a Free Writing Prospectus or of any document that is to be incorporated by reference into a Registration Statement, a Prospectus or a Free Writing Prospectus after initial filing of a Registration Statement, provide one copy of such document to each Initial Purchaser and their counsel (and, in the case of a
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Shelf Registration Statement, to the Holders of Registrable Securities and their counsel); and the Company and the Guarantors shall not, at any time after initial filing of a Registration Statement, use or file any Prospectus, any Free Writing Prospectus, any amendment of or supplement to a Registration Statement or a Prospectus or a Free Writing Prospectus, or any document that is to be incorporated by reference into a Registration Statement, a Prospectus or a Free Writing Prospectus, of which the Initial Purchasers and their counsel (and, in the case of a Shelf Registration Statement, the Holders of Registrable Securities and their counsel) shall not have previously been advised and furnished a copy or to which the Initial Purchasers or their counsel (and, in the case of a Shelf Registration Statement, the Holders of Registrable Securities or their counsel) shall reasonably object;
(xii) obtain a CUSIP number for all Exchange Securities or Registrable Securities, as the case may be, not later than the initial effective date of a Registration Statement;
(xiii) cause the Indenture to be qualified under the Trust Indenture Act in connection with the registration of the Exchange Securities or Registrable Securities, as the case may be; cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the Trust Indenture Act; and execute, and use their commercially reasonable efforts to cause the Trustee to execute, all documents as may be required to effect such changes and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner;
(xiv) in the case of a Shelf Registration, make available for inspection by one representative designated by a majority of the Holders of Registrable Securities to be included in such Shelf Registration (such representative, the Holders Inspector ) and the Underwriters participating in any disposition pursuant to such Shelf Registration Statement (or one counsel to such Underwriters) (such Underwriters or counsel, the Underwriter Inspector and, together with the Holders Inspector, the Inspectors ), each upon a written request, at the offices where normally kept, during reasonable business hours, all pertinent financial and other records, pertinent corporate documents and instruments of the Company and its subsidiaries (collectively, the Records ), as shall be reasonably necessary to enable the Inspectors to exercise any applicable due diligence responsibilities, and cause the officers, directors and employees of the Company and any of its subsidiaries to supply all information ( Information ) reasonably requested by the Inspectors in connection with such due diligence responsibilities. The Inspectors shall agree in writing that they will keep the Records and Information confidential and that they will not disclose any of the Records or Information that the Company determines, in good faith, to be confidential and notifies the Inspectors in writing are confidential unless (i) the disclosure of such Records or Information is necessary to avoid or correct a material misstatement or omission in such Registration Statement or Prospectus, (ii) the release of such Records or Information is ordered pursuant to a subpoena or other order from a court claiming jurisdiction or any request or order from a regulatory body, (iii) disclosure of such Records or Information is necessary or advisable, in the judgment of counsel for the Inspectors, in connection with any action, claim, suit or proceeding, directly or indirectly, involving or potentially involving the Inspectors and arising out of, based upon, relating
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to or involving this Agreement, the applicable Indenture or the Purchase Agreement or any transactions contemplated hereby or thereby or arising hereunder or thereunder, (iv) the information in such Records or Information has been made generally available to the public other than by the Inspectors or any affiliate (as defined in Rule 405 under the Securities Act) thereof, (v) such information becomes available to any such person from a source other than the Company and such source is not known by such person to be bound by a confidentiality obligation to the Company or (vi) such information is necessary to establish a due diligence defense; provided , however , that (if permitted) prior notice shall be provided as soon as practicable to the Company of the potential disclosure of any information by any Inspector pursuant to clauses (i), (ii) or (iii) of this sentence to permit the Company to obtain a protective order (or waive the provisions of this paragraph (xiv)) and that such Inspector shall take such actions as are reasonably necessary to protect the confidentiality of such information (if practicable) to the extent such action is otherwise not inconsistent with, an impairment of or in derogation of the rights and interests of such Holder or Inspector;
(xv) in the case of a Shelf Registration, use their commercially reasonable efforts to cause all Registrable Securities to be listed on any securities exchange or any automated quotation system on which similar securities issued or guaranteed by the Company or any Guarantor are then listed and only if requested by the Majority Holders, to the extent such Registrable Securities satisfy applicable listing requirements;
(xvi) if reasonably requested by any Holder of Registrable Securities covered by a Shelf Registration Statement, promptly include in a Prospectus supplement or post-effective amendment such information with respect to such Holder as such Holder reasonably requests to be included therein and make all required filings of such Prospectus supplement or such post-effective amendment as soon as reasonably practicable after the Company has received notification of the matters to be so included in such filing;
(xvii) in the case of an Underwritten Offering, enter into such customary agreements (including an underwriting agreement as is customary in underwritten offerings of debt securities similar to the Securities) and take all such other actions in connection therewith (including those requested by the Holders of a majority in principal amount of the Registrable Securities covered by the Shelf Registration Statement) in order to expedite or facilitate the disposition of such Registrable Securities, including, but not limited to, (1) to the extent possible, make such representations and warranties to any Underwriters of such Registrable Securities with respect to the business of the Company and its subsidiaries and the Registration Statement, Prospectus, any Free Writing Prospectus and documents incorporated by reference or deemed incorporated by reference, if any, in each case, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings of debt securities similar to the Securities and confirm the same if and when requested, (2) obtain opinions of counsel to the Company and the Guarantors (which opinions, in form, scope and substance, shall be reasonably satisfactory to the Underwriters) addressed to each Underwriter, covering the matters customarily covered in opinions reasonably requested in underwritten offerings, (3) obtain comfort letters from the independent certified public accountants of the Company and the Guarantors (and, if necessary, any other certified public accountant of any subsidiary of the Company
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or any Guarantor, or of any business acquired by the Company or any Guarantor for which financial statements and financial data are or are required to be included in the Registration Statement) addressed to each selling Holder (to the extent permitted by applicable professional standards) and Underwriter of Registrable Securities, such letters to be in customary form and covering matters of the type customarily covered in comfort letters in connection with underwritten offerings of debt securities similar to the Securities, including but not limited to financial information contained in any preliminary prospectus, Prospectus or Free Writing Prospectus and (4) deliver such other documents and certificates as may be reasonably requested by the Holders of a majority in principal amount of the Registrable Securities being sold or the Underwriters, and which are customarily delivered in underwritten offerings of debt securities similar to the Securities, to evidence the continued validity of the representations and warranties of the Company and the Guarantors made pursuant to clause (1) above and to evidence compliance with any customary conditions contained in an underwriting agreement; and
(xviii) so long as any Registrable Securities remain outstanding, cause each Additional Guarantor upon the creation or acquisition by the Company of such Additional Guarantor, to execute a counterpart to this Agreement in the form attached hereto as Annex A and to deliver such counterpart to the Initial Purchasers no later than ten Business Days following the execution thereof.
(b) In the case of a Shelf Registration Statement, the Company may require each Holder of Registrable Securities to furnish to the Company such information regarding such Holder and the proposed disposition by such Holder of such Registrable Securities as the Company and the Guarantors may from time to time reasonably request in writing. To the extent such information is necessary to include in such Shelf Registration Statement and any Holder fails or refuses to provide such information within a reasonable period of time from the Companys request (such time to be provided in the Companys written request) such Holder shall not be entitled to include its Registrable Securities in such Shelf Registration Statement until such information is provided to the Company and reflected in such Shelf Registration Statement. Each Holder also agrees to notify the Company as promptly as reasonably practicable of any inaccuracy or change in information previously furnished by such Holder to the Company or of the occurrence of any event in either case as a result of which any Prospectus relating to the Shelf Registration Statement contains or would contain an untrue statement of a material fact regarding such Holder or such Holders intended method of disposition of Registrable Securities or omits to state any material fact regarding such Holder or such Holders intended method of disposition of such Registrable Securities required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and promptly to furnish to the Company any additional information required to correct and update any previously furnished information or required so that such Prospectus shall not contain, with respect to such Holder or the disposition of such Registrable Securities, an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing.
(c) In the case of a Shelf Registration Statement, each Holder of Registrable Securities covered in such Shelf Registration Statement agrees that, upon receipt of any notice from the Company and the Guarantors of the happening of any event of the kind described in Section
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3(a)(vi)(3) or 3(a)(vi)(5) hereof, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to the Shelf Registration Statement until such Holders receipt of the copies of the supplemented or amended Prospectus and any Free Writing Prospectus contemplated by Section 3(a)(x) hereof and, if so directed by the Company and the Guarantors, such Holder will deliver to the Company and the Guarantors all copies in its possession, other than permanent file copies then in such Holders possession, of the Prospectus and any Free Writing Prospectus covering such Registrable Securities that is current at the time of receipt of such notice.
(d) (i) Subject to the limitation set forth in the next succeeding paragraph, the Company shall be entitled to delay the initial filing of any Registration Statement, suspend its obligation to file any amendment to any Registration Statement, furnish any supplement or amendment to a Prospectus included in any Registration Statement, make any other filing with the SEC that would be incorporated by reference into any Registration Statement, cause any Registration Statement to remain effective or take any similar action (collectively, Registration Actions ) (A) if the board of directors of the Company determines in good faith that taking any such Registration Actions (1) would reasonably be expected to materially impede, delay or interfere with, or require premature disclosure of, any material financing, offering, acquisition, merger, corporate reorganization or segment reclassification or discontinuance of operations, which is required to be reflected in pro forma or restated financial statements that amends a historical financial statement of the Company, or other significant transaction or any negotiations, discussions or pending proposals with respect thereto, involving the Company or any of its subsidiaries or (2) would require disclosure of non-public material information the disclosure of which would reasonably be expected to materially and adversely affect the Company, subject to the provisions of Section 3(d)(ii) or (B) upon any event described in Section 3(a)(vi)(5) (the period resulting from any such delay, suspension or other action, a Suspension Period ). Upon the occurrence of any of the conditions described in the foregoing sentence, the Company shall give prompt notice (a Suspension Notice ) thereof to the Holders. Upon the termination of such condition, the Company shall give prompt notice thereof to the Holders and shall promptly proceed with all Registration Actions that were suspended pursuant to this paragraph.
(ii) If the Company and the Guarantors shall give any Suspension Notice, the Company and the Guarantors shall extend the period during which such Registration Statement shall be maintained effective pursuant to this Agreement by the number of days during the period from and including the date of the giving of such Suspension Notice to and including the date when the Holders of such Registrable Securities shall have received copies of the supplemented or amended Prospectus or any Free Writing Prospectus necessary to resume such dispositions. In no event shall the number of days included in all Suspension Periods exceed 60 days in the aggregate during any 365-day period. Notwithstanding anything in the foregoing to the contrary, the Company shall at all times use its commercially reasonable efforts to end any Suspension Period at the earliest possible time.
(iii) Each Holder agrees that upon receipt of any Suspension Notice from the Company pursuant to this Section 3(d), it will discontinue use of the Prospectus contained in such Registration Statement and any Free Writing Prospectus until receipt of copies of the supplemented or amended Prospectus or Free Writing Prospectus relating thereto or until advised in writing by the Company that the use of the Prospectus contained in such Registration Statement or Free Writing Prospectus may be resumed.
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(e) The Holders of Registrable Securities covered by a Shelf Registration Statement who desire to do so may sell such Registrable Securities in an Underwritten Offering. In any such Underwritten Offering, the investment bank or investment banks and manager or managers (each an Underwriter ) that will administer the offering will be selected by the Company, subject to the consent of the Holders of a majority in principal amount of the Registrable Securities included in such offering (which shall not be unreasonably withheld). No Holder may participate in any Underwritten Offering unless such Holder (i) agrees to sell such Holders Securities on the basis provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) timely completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents, under customary terms, as customarily required under the terms of such underwriting arrangements.
4. Participation of Broker-Dealers in Exchange Offer .
(a) The Staff has taken the position that any broker-dealer that receives Exchange Securities for its own account in the Exchange Offer in exchange for Securities that were acquired by such broker-dealer as a result of market-making or other trading activities (a Participating Broker-Dealer ) may be deemed to be an underwriter within the meaning of the Securities Act and must deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Securities.
The Company and the Guarantors understand that it is the Staffs position that if the Prospectus contained in the Exchange Offer Registration Statement includes a plan of distribution containing a statement to the above effect and the means by which Participating Broker-Dealers may resell the Exchange Securities, without naming the Participating Broker-Dealers or specifying the amount of Exchange Securities owned by them (except to the extent required by Staff positions), such Prospectus may be delivered by Participating Broker-Dealers (or, to the extent permitted by law, made available to purchasers) to satisfy their prospectus delivery obligation under the Securities Act in connection with resales of Exchange Securities for their own accounts, so long as the Prospectus otherwise meets the requirements of the Securities Act.
(b) In light of the above, and notwithstanding the other provisions of this Agreement, the Company and the Guarantors agree to amend or supplement the Prospectus contained in the Exchange Offer Registration Statement for a period of up to 180 days after the last Exchange Date (as such period may be extended pursuant to Section 3(d) of this Agreement), in order to expedite or facilitate the disposition of any Exchange Securities by Participating Broker-Dealers consistent with the positions of the Staff recited in Section 4(a) above. The Company and the Guarantors further agree that Participating Broker-Dealers shall be authorized to deliver such Prospectus (or, to the extent permitted by law, make available) during such period in connection with the resales contemplated by this Section 4.
(c) The Initial Purchasers shall have no liability to the Company, any Guarantor or any Holder with respect to any request that they may make pursuant to Section 4(b) above.
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5. Market Making .
(a) For so long as any of the Securities or Exchange Securities are outstanding and Barclays Capital Inc. (in such capacity, the Market Maker ) or any of its affiliates (as defined in the rules and regulations of the SEC) is an affiliate of the Company, the Guarantors or any of their affiliates and proposes to make a market in the Securities or Exchange Securities as part of its business in the ordinary course and is required to deliver a prospectus in connection with transactions in the Securities or the Exchange Securities, as the case may be, the following provisions shall apply for the sole benefit of the Market Maker:
(i) The Company and the Guarantors shall (A) on the date that the Exchange Offer Registration Statement or, if required hereby, the Shelf Registration Statement is filed with the SEC, file a registration statement (the Market Making Registration Statement ) (which may be the Exchange Offer Registration Statement or the Shelf Registration Statement if permitted by the rules and regulations of the SEC) and use their commercially reasonable efforts to cause such Market Making Registration Statement to become effective on or prior to the consummation of the Exchange Offer or the initial effective date of the Shelf Registration Statement, as applicable; (B) periodically amend such Market Making Registration Statement so that the information contained therein complies with the requirements of Section 10(a) under the Securities Act; (C) amend the Market Making Registration Statement or amend or supplement the related Prospectus when necessary to reflect any material changes in the information provided therein; and (D) amend the Market Making Registration Statement when required to do so in order to comply with Section 10(a)(3) of the Securities Act; provided, however, that (1) prior to filing the Market Making Registration Statement, any amendment thereto, any Free Writing Prospectus or any amendment or supplement to the related Prospectus or Free Writing Prospectus, the Company will furnish to the Market Maker copies of all such documents proposed to be filed, which documents will be subject to the review of the Market Maker and its counsel, and (2) the Company and the Guarantors will not file the Market Making Registration Statement, any amendment thereto, any Free Writing Prospectus or any amendment or supplement to the related Prospectus or Free Writing Prospectus to which the Market Maker and its counsel shall reasonably object unless the Company is advised by counsel that such Market Making Registration Statement or Free Writing Prospectus or any such amendment or supplement is required to be filed under applicable securities laws and the Company will provide the Market Maker and its counsel with copies of the Market Making Registration Statement and any Free Writing Prospectus and each amendment and supplement filed.
(ii) The Company shall notify the Market Maker and, if requested by the Market Maker, confirm such advice in writing, (A) when any Market Making Registration Statement, any post-effective amendment to the Market Making Registration Statement, any Free Writing Prospectus or any amendment or supplement to the related Prospectus or Free Writing Prospectus has been filed, and, with respect to any Market Making Registration Statement or any post-effective amendment, when the same has become effective; (B) of any request by the SEC for any post-effective amendment to the Market Making Registration Statement, any supplement or amendment to the related Prospectus or any Free Writing Prospectus or for additional information; (C) the issuance by the SEC of any
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stop order suspending the effectiveness of the Market Making Registration Statement or the initiation of any proceedings for that purpose, including the receipt by the Company of any notice of objection of the SEC to the use of the Market Making Registration Statement or any post-effective amendment thereto pursuant to Rule 401(g)(2) under the Securities Act; (D) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Securities or Exchange Securities for sale in any jurisdiction or the initiation or threatening of any proceedings for such purpose; and (E) of the happening of any event that makes any statement made in the Market Making Registration Statement, the related Prospectus or any Free Writing Prospectus or any amendment or supplement thereto untrue in any material respect or that requires the making of any changes in the Market Making Registration Statement, such Prospectus or such Free Writing Prospectus or amendment or supplement thereto, in order to make the statements therein not misleading in any material respect.
(iii) If any event contemplated by Section 5(a)(ii)(B) through (E) occurs during the period for which the Company and the Guarantors are required to maintain an effective Market Making Registration Statement, the Company and the Guarantors shall, subject to Section 5(a)(i), promptly prepare and file with the SEC a post-effective amendment to the Market Making Registration Statement or an amendment or supplement to the related Prospectus or Free Writing Prospectus or file any other required document so that the Prospectus or any Free Writing Prospectus will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(iv) In the event of the issuance of any stop order suspending the effectiveness of the Market Making Registration Statement, any notice of objection pursuant to Rule 401(g)(2) under the Securities Act or any order suspending the qualification of the Securities or Exchange Securities for sale in any jurisdiction, the Company and the Guarantors shall promptly use their commercially reasonable efforts to obtain the withdrawal of such order or the resolution of such objection, including by filing an amendment to the Market Making Registration Statement on the proper form as necessary.
(v) The Company shall furnish to the Market Maker, without charge, (i) at least one conformed copy of the Market Making Registration Statement and any post-effective amendment thereto; and (ii) as many copies of the related Prospectus, any Free Writing Prospectus and any amendment or supplement thereto as the Market Maker may reasonably request.
(vi) The Company and the Guarantors shall consent to the use in accordance with applicable law of the Prospectus contained in the Market Making Registration Statement, any Free Writing Prospectus or any amendment or supplement thereto by the Market Maker in connection with its market-making activities.
(vii) Notwithstanding the foregoing provisions of this Section 5, the Company and the Guarantors may for valid business reasons, including without limitation, the reasons set forth in Section 3(d), notify the Market Maker in writing that the Market Making Registration Statement is no longer effective or the Prospectus included therein or any
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Free Writing Prospectus is no longer usable for offers and sales of Securities or Exchange Securities; provided that the use of the Market Making Registration Statement or the Prospectus contained therein or any Free Writing Prospectus shall not be suspended for more than 90 days (whether or not consecutive) in the aggregate in any 12-month period. The Market Maker agrees that upon receipt of any notice from the Company pursuant to this Section 5(a)(vii), it will discontinue use of the Prospectus contained in the Market Making Registration Statement and any Free Writing Prospectus until receipt of copies of the supplemented or amended Prospectus or Free Writing Prospectus relating thereto or until advised in writing by the Company that the use of the Prospectus contained in the Market Making Registration Statement or the Free Writing Prospectus may be resumed.
(b) In connection with the Market Making Registration Statement, the Company shall make available for inspection by one representative of, the Market Maker (which may be) counsel to the Market Maker) (such representative, the Market Makers Inspector), upon a written request, at the offices where normally kept, during reasonable business hours, all Records of the Company and its subsidiaries, as shall be reasonably necessary to enable the Market Makers Inspectors to exercise any applicable due diligence responsibilities, and cause the officers, directors and employees of the Company and any of its subsidiaries to supply all Information reasonably requested by the Inspectors in connection with such due diligence responsibilities. The Market Makers Inspectors shall agree in writing that they will keep the Records and Information confidential and that they will not disclose any of the Records or Information that the Company determines, in good faith, to be confidential and notifies the Market Makers Inspectors in writing are confidential unless (i) the disclosure of such Records or Information is necessary to avoid or correct a material misstatement or omission in such Market Making Registration Statement or related Prospectus, (ii) the release of such Records or Information is ordered pursuant to a subpoena or other order from a court claiming jurisdiction or any request or order from a regulatory body, (iii) disclosure of such Records or Information is necessary or advisable, in the judgment of counsel for the Market Makers Inspectors, in connection with any action, claim, suit or proceeding, directly or indirectly, involving or potentially involving the Market Makers Inspectors and arising out of, based upon, relating to or involving this Agreement, the applicable Indenture or the Purchase Agreement or any transactions contemplated hereby or thereby or arising hereunder or thereunder, (iv) the information in such Records or Information has been made generally available to the public other than by the Market Makers Inspectors or any affiliate (as defined in Rule 405 under the Securities Act) thereof, (v) such Information becomes available to any such person from a source other than the Company and such source is not known by such person to be bound by a confidentiality obligation to the Company or (vi) such Information is necessary to establish a due diligence defense; provided , however , that (if permitted), prior notice shall be provided as soon as practicable to the Company of the potential disclosure of any information by any Market Makers Inspector pursuant to clauses (i), (ii) or (iii) of this sentence to permit the Company to obtain a protective order (or waive the provisions of this Section 5(b)) and that such Market Makers Inspector shall take such actions as are reasonably necessary to protect the confidentiality of such information (if practicable) to the extent such action is otherwise not inconsistent with, an impairment of or in derogation of the rights and interests of the Market Maker or Market Makers Inspector.
(c) Until the initial effective date of the Market Making Registration Statement, the Company and the Guarantors shall use commercially reasonable efforts to register or qualify the
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Securities or Exchange Securities for offer and sale under all applicable state securities or blue sky laws of such jurisdictions as the Market Maker reasonably requests in writing, cooperate with the Market Maker in connection with any filings required to be made with the National Association of Securities Dealers, Inc. and do any and all other acts or things that may be reasonably necessary or advisable to enable the offer and sale in such jurisdictions of the Securities or Exchange Securities covered by the Market Making Registration Statement; provided that the Company and the Guarantors shall not be required to (i) qualify as a foreign corporation or other entity or as a dealer in securities in any jurisdiction where it would not otherwise be required to so qualify, (ii) file any general consent to subject itself to service of process in any such jurisdictions or (iii) subject itself to taxation in any such jurisdiction if its not so subject.
(d) The Company and the Guarantors represent and agree that the Market Making Registration Statement, any post-effective amendments thereto, any Free Writing Prospectus, any amendments or supplements to the related Prospectus or any Free Writing Prospectus and any documents filed by them under the Exchange Act will, when they become effective or are filed with the SEC, as the case may be, conform in all material respects to the requirements of the Securities Act and the Exchange Act and the rules and regulations of the SEC thereunder and will not, as of each effective date of such Market Making Registration Statement or post-effective amendments and as of the filing date of any Free Writing Prospectus or amendments or supplements to such Prospectus or any Free Writing Prospectus or filings under the Exchange Act, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that no representation or warranty is made as to information contained in or omitted from the Market Making Registration Statement or the related Prospectus or any Free Writing Prospectus in reliance upon and in conformity with written information furnished to the Company by the Market Maker specifically for inclusion therein (the Market Makers Information ).
(e) At the time of initial effectiveness of the Market Making Registration Statement and concurrently with each time any Free Writing Prospectus is first used or the Market Making Registration Statement shall be amended by post-effective amendment, including by the filing of an annual report incorporated by reference into the Market Making Registration Statement, or the related Prospectus or any Free Writing Prospectus shall be amended or supplemented, the Company shall (if requested by the Market Maker) furnish the Market Maker and its counsel with a certificate of its Chairman of the Board of Directors, President, its Chief Financial Officer or any Vice President covering such customary matters as the Market Maker may reasonably request and that, to such officers knowledge no stop order suspending the effectiveness of the Market Making Registration Statement has been issued and no proceeding for that purpose is pending or threatened by the SEC.
(f) At the time of initial effectiveness of the Market Making Registration Statement and concurrently with each time any Free Writing Prospectus is first used or the Market Making Registration Statement shall be amended by post-effective amendment, including by the filing of an annual report incorporated by reference into the Market Making Registration Statement, or the related Prospectus or any Free Writing Prospectus shall be amended or supplemented, the Company shall (if requested by the Market Maker) furnish the Market Maker and its counsel with the written opinion of counsel for the Company reasonably satisfactory to the Market Maker (which
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may be the General Counsel of the Company in his sole discretion) covering such customary matters as the Market Maker may reasonably request and that, to such counsels knowledge, no stop order suspending the effectiveness of the Market Making Registration Statement has been issued, and no proceeding for that purpose is pending or threatened by the SEC; provided the Market Maker may not request more than two such opinions in any fiscal year.
(g) The Company and the Guarantors, on the one hand, and the Market Maker, on the other hand, hereby agree to indemnify each other, and, if applicable, contribute to the other, in accordance with Section 6 of this Agreement.
(h) The Company and the Guarantors will comply with the provisions of this Section 5 at their own expense and will reimburse the Market Maker for its expenses associated with this Section 5 (including reasonable fees of counsel for the Market Maker).
(i) The agreements contained in this Section 5 and the representations, warranties and agreements contained in this Agreement shall survive all offers and sales of the Securities and Exchange Securities and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party.
(j) For purposes of this Section 5, (i) any reference to the terms amend, amendment or supplement with respect to the Market Making Registration Statement or the Prospectus contained therein or any Free Writing Prospectus shall be deemed to refer to and include the filing under the Exchange Act of any document deemed to be incorporated therein by reference and (ii) any reference to the terms Securities or Exchange Securities shall be deemed to refer to and include any securities issued in exchange for or with respect to such Securities or Exchange Securities.
6. Indemnification and Contribution .
(a) The Company and each Guarantor, jointly and severally, agree to indemnify and hold harmless each Initial Purchaser, the Market Maker and each Holder, their respective affiliates, directors and officers and each Person, if any, who controls any Initial Purchaser or any Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages and liabilities (including, without limitation, reasonable legal fees and other expenses incurred in connection with any suit, action or proceeding or any claim asserted, as such fees and expenses are incurred), joint or several, that arise out of, or are based upon, (1) any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or any omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein not misleading, or (2) any untrue statement or alleged untrue statement of a material fact contained in any Prospectus, any Free Writing Prospectus or any issuer information ( Issuer Information ) filed or required to be filed pursuant to Rule 433(d) under the Securities Act, or any omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case except insofar as such losses, claims, damages or liabilities arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in
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reliance upon and in conformity with any information relating to any Initial Purchaser, information relating to any Holder or the Market Makers Information furnished to the Company in writing through DBSI, any selling Holder or the Market Maker, respectively, expressly for use therein.
(b) Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company, the Guarantors, the Initial Purchasers and the other selling Holders, the directors of the Company and the Guarantors, each officer of the Company and the Guarantors who signed the Registration Statement and each Person and their directors, officers and managing members, if any, who controls the Company, the Guarantors, any Initial Purchaser and any other selling Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the indemnity set forth in paragraph (a) above, but only with respect to any losses, claims, damages or liabilities (including, without limitation, reasonable legal fees and other expenses incurred in connection with any suit, action or proceeding or any claim asserted, as such fees and expenses are incurred) that arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any information relating to such Holder furnished to the Company in writing by such Holder expressly for use in any Registration Statement, any Prospectus and any Free Writing Prospectus. Notwithstanding the provisions of this Section 6(b), with respect to a Registration Statement that is not an Exchange Offer Registration Statement, including the related Prospectus and any Free Writing Prospectus related thereto, in no event shall a Holder be required to indemnify any amount in excess of the proceeds received by such Holder from the Securities or Exchange Securities sold by such Holder pursuant thereto.
(c) The Market Maker agrees to indemnify and hold harmless the Company and the Guarantors, the directors of the Company and the Guarantors and each officer of the Company and the Guarantors who signed the Market Making Registration Statement and each Person, if any, who controls the Company or the Guarantors within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the indemnity set forth in paragraph (a) above, but only with respect to any losses, claims, damages or liabilities (including, without limitation, reasonable legal fees and other expenses incurred in connection with any suit, action or proceeding or any claim asserted, as such fees and expenses are incurred) that arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any Market Makers Information furnished to the Company in writing by the Market Maker expressly for use in any Market Making Registration Statement, any Prospectus and any Free Writing Prospectus.
(d) If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any Person in respect of which indemnification may be sought pursuant to either paragraph (a), (b) or (c) above, such Person (the Indemnified Person ) shall promptly notify the Person against whom such indemnification may be sought (the Indemnifying Person ) in writing; provided that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have under this Section 6 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided , further , that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have to an Indemnified Person otherwise than under this Section 6. If any such proceeding shall be brought or asserted against an Indemnified
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Person and it shall have notified the Indemnifying Person thereof, the Indemnifying Person shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others entitled to indemnification pursuant to this Section 6 that the Indemnifying Person may designate in such proceeding and shall pay the reasonable fees and expenses of such proceeding and shall pay the reasonable fees and expenses of such counsel related to such proceeding, as incurred. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed to the contrary; (ii) the Indemnifying Person has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Person; (iii) the Indemnified Person shall have reasonably concluded that there may be legal defenses available to it that are different from or in addition to those available to the Indemnifying Person; or (iv) the named parties in any such proceeding (including any impleaded parties) include both the Indemnifying Person and the Indemnified Person and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood and agreed that the Indemnifying Person shall not, in connection with any proceeding or related proceeding in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons, and that all such reasonable fees and expenses shall be reimbursed as they are incurred. Any such separate firm (x) for any Initial Purchaser or the Market Maker, its affiliates, directors and officers and any control Persons of such Initial Purchaser or the Market Maker shall be designated in writing by DBSI, (y) for any Holder, its directors and officers and any control Persons of such Holder shall be designated in writing by the Majority Holders and (z) in all other cases shall be designated in writing by the Company. The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Person agrees to indemnify each Indemnified Person from and against any loss or liability by reason of such settlement or judgment. No Indemnifying Person shall, without the written consent of the Indemnified Person, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnification could have been sought hereunder by such Indemnified Person, unless such settlement (A) includes an unconditional release of such Indemnified Person, in form and substance reasonably satisfactory to such Indemnified Person, from all liability on claims that are the subject matter of such proceeding and (B) does not include any statement as to any admission of fault, culpability or a failure to act by or on behalf of any Indemnified Person.
(e) If the indemnification provided for in paragraphs (a), (b) or (c) above is unavailable to an Indemnified Person or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Person under such paragraph, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantors from the offering of the Securities and the Exchange Securities, on the one hand, and by the Holders from receiving Securities or Exchange Securities registered under the Securities Act or the Market Maker, on the other hand, or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) but also the relative fault of the Company and the Guarantors on the one
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hand and the Holders or the Market Maker on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the Company and the Guarantors on the one hand and the Holders or the Market Maker on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Guarantors or by the Holders or the Market Makers Information, as applicable, and the parties relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
(f) The Company, the Guarantors, the Holders and the Market Maker agree that it would not be just and equitable if contribution pursuant to this Section 6 were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above. The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages and liabilities referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any reasonable legal or other expenses incurred by such Indemnified Person in connection with any such action or claim. Notwithstanding the provisions of this Section 6, in no event shall a Holder or the Market Maker be required to contribute any amount in excess of the amount by which the total price at which the Securities or Exchange Securities sold by such Holder or the Securities sold by the Market Maker exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The Holders obligations to contribute pursuant to this Section 6 are several and not joint.
(g) The remedies provided for in this Section 6 are not exclusive and shall not limit any rights or remedies that may otherwise be available to any Indemnified Person at law or in equity.
(h) The indemnity and contribution provisions contained in this Section 6 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of the Initial Purchasers, the Market Maker or any Holder or any Person controlling any Initial Purchaser, the Market Maker or any Holder, or by or on behalf of the Company or the Guarantors or the officers or directors of or any Person controlling the Company or the Guarantors, (iii) acceptance of any of the Exchange Securities and (iv) any sale of Registrable Securities pursuant to a Shelf Registration Statement or the Market Making Registration Statement.
7. General .
(a) Inconsistent Agreements. The Company and the Guarantors represent, warrant and agree that (i) the rights granted to the Holders or the Market Maker hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of any other outstanding debt securities issued or guaranteed by the Company or any Guarantor under any other agreement and (ii) neither the Company nor any Guarantor has entered into, or on or after the
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date of this Agreement will enter into, any agreement that is inconsistent with the rights granted to the Holders of Registrable Securities or the Market Maker in this Agreement or otherwise conflicts with the provisions hereof. For clarification, nothing herein is intended to prohibit the Company and the Guarantors from (i) registering any Additional Notes (as defined in the Indenture) issued on the same registration statement as the Registrable Securities or (ii) complying with their obligations for the registration of any securities of the Parent Guarantor pursuant to the terms of the Plan of Reorganization or any agreement entered into as contemplated by the Plan of Reorganization.
(b) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company and the Guarantors have obtained the written consent of Holders of at least a majority in aggregate principal amount of the outstanding Registrable Securities affected by such amendment, modification, supplement, waiver or consent and with respect to the provisions of Section 5, the written consent of the Market Maker; provided that no amendment, modification, supplement, waiver or consent to any departure from the provisions of Section 6 hereof shall be effective as against any Holder of Registrable Securities or the Market Maker unless consented to in writing by such Holder or the Market Maker, as applicable; provided , further , that any such amendment, modification, supplement, waiver or consent to any departure from the provisions of this Agreement relating solely to Section 5 may be effected by a written consent duly executed solely by the Company and the Market Maker so long as any such amendment, modification, supplement, waiver or consent is not materially adverse to the Holders. Any amendments, modifications, supplements, waivers or consents pursuant to this Section 7(b) shall be by a writing executed by each of the parties hereto.
(c) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery: (i) if to a Holder, at the most current address given by such Holder to the Company by means of a notice given in accordance with the provisions of this Section 7(c), which address initially is, with respect to the Initial Purchasers, the address set forth in the Purchase Agreement; (ii) if to the Company and the Guarantors, initially at the Companys address set forth in the Purchase Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 7(c); (iii) if to the Market Maker, initially at 745 Seventh Avenue, New York, New York 10019, attention Debt Capital Markets - High Yield, and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 7(c); and (iv) to such other persons at their respective addresses as provided in the Purchase Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 7(c). All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next Business Day if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee, at the address specified in the Indenture.
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(d) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Purchase Agreement or the Indenture. If any transferee of any Holder shall acquire Registrable Securities in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all the terms of this Agreement, and by taking and holding such Registrable Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement and such Person shall be entitled to receive the benefits hereof. The Initial Purchasers (in their capacity as Initial Purchasers) shall have no liability or obligation to the Company or the Guarantors with respect to any failure by a Holder (other than such Initial Purchaser) to comply with, or any breach by any Holder (other than such Initial Purchaser) of, any of the obligations of such Holder under this Agreement.
(e) Third Party Beneficiaries. Each Holder shall be a third party beneficiary to the agreements made hereunder (excluding those agreements made in Section 5 hereto) between the Company and the Guarantors, on the one hand, and the Initial Purchasers and the Market Maker, on the other hand, and shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights or the rights of other Holders hereunder.
(f) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier, facsimile, email or other electronic transmission (i.e., pdf or tif) shall be effective as delivery of a manually executed counterpart of this Agreement.
(g) Headings. The headings in this Agreement are for convenience of reference only, are not a part of this Agreement and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. This Agreement, and any claims, controversy or dispute arising under or related to this Agreement, shall be governed by and construed in accordance with the laws of the State of New York without regard to conflict of law principles that would result in the application of any laws other than the laws of the State of New York.
(i) Entire Agreement; Severability. This Agreement contains the entire agreement between the parties relating to the subject matter hereof and supersedes all oral statements and prior writings with respect thereto. If any term, provision, covenant or restriction contained in this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable or against public policy, the remainder of the terms, provisions, covenants and restrictions contained herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated. The Company, the Guarantors and the Initial Purchasers shall endeavor in good faith negotiations to replace the invalid, void or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, void or unenforceable provisions.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
CSA ESCROW CORPORATION | ||
By: |
/s/ Allen J. Campbell |
|
Name: | Allen J. Campbell | |
Title: | President |
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Confirmed and accepted as of the date
first above written:
DEUTSCHE BANK SECURITIES INC.
For itself and on behalf of the
several Initial Purchasers
By: |
/s/ Stephanie Perry |
|
Name: | Stephanie Perry | |
Title: | Managing Director | |
By: |
/s/ Philip Saliba |
|
Name: | Philip Saliba | |
Title: | Director |
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EXHIBIT A
Joinder Agreement
WHEREAS, CSA Escrow Corporation and Deutsche Bank Securities Inc., as representative of the Initial Purchasers named on Schedule 1 of the Purchase Agreement (the Initial Purchasers ), heretofore executed and delivered a Registration Rights Agreement ( Registration Rights Agreement ), dated May 11, 2010, providing for the registration and exchange of the Securities (as defined therein); and
WHEREAS, Cooper-Standard Automotive Inc., a Delaware corporation (the Company ), and each of the Guarantors, which was originally not a party thereto, has agreed to join in the Registration Rights Agreement on the Release Date.
Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Registration Rights Agreement.
NOW, THEREFORE, the Company and each Guarantor hereby agrees for the benefit of the Initial Purchasers, as follows:
1. Joinder . Each of the undersigned signatory parties hereby acknowledges that it has received and reviewed a copy of the Registration Rights Agreement and all other documents it deems fit to enter into this Joinder Agreement (the Joinder Agreement ), and acknowledges and agrees to (i) join and become a party to the Registration Rights Agreement as indicated by its signature below; (ii) be bound by all covenants, agreements, representations, warranties, indemnities and acknowledgments attributable to the Guarantors and/or the Company, as applicable, to such signatory party in the Registration Rights Agreement as if made by, and with respect to, such signatory party; and (iii) perform all obligations and duties required and be entitled to all the benefits of the Guarantors or the Company, as applicable, and of such signatory party pursuant to the Registration Rights Agreement.
2. Representations and Warranties and Agreements of the Company and the Subsidiary Guarantors . Each of the undersigned hereby represents and warrants to and agrees with the Initial Purchasers that it has all the requisite corporate or limited liability company power and authority, as the case may be, to execute, deliver and perform its obligations under this Joinder Agreement and to consummate the transaction contemplated hereby and that when this Joinder Agreement is executed and delivered, it will constitute a valid and legally binding agreement enforceable against each of the undersigned in accordance with its terms.
3. Counterparts . This Joinder Agreement may be signed in one or more counterparts (which may be delivered in original form or via facsimile), each of which shall constitute an original when so executed and all of which together shall constitute one and the same agreement.
4. Amendments . No amendment or waiver of any provision of this Joinder Agreement, nor any consent or approval to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by all of the parties to the Registration Rights Agreement.
Ex. A-1
5. Headings . The section headings used herein are for convenience only and shall not affect the construction hereof.
6. Applicable Law . This Joinder Agreement, and any claims, controversy or dispute arising under or related to this Joinder Agreement, shall be governed by and construed in accordance with the laws of the State of New York without regard to conflict of law principles that would result in the application of any laws other than the laws of the State of New York.
Ex. A-2
IN WITNESS WHEREOF, the undersigned has executed this agreement as of the date first written above.
COOPER-STANDARD AUTOMOTIVE INC. | ||
By: |
|
|
Name: | ||
Title: | ||
COOPER-STANDARD HOLDINGS INC. | ||
By: |
|
|
Name: | ||
Title: | ||
[SUBSIDIARY GUARANTORS] | ||
By: |
|
|
Name: | ||
Title: |
Ex. A-3
Annex A
Counterpart to Registration Rights Agreement
The undersigned hereby absolutely, unconditionally and irrevocably agrees as a Guarantor (as defined in the Registration Rights Agreement, dated as of May 11, 2010 by and among CSA Escrow Corporation, a Delaware corporation, and Deutsche Bank Securities Inc., on behalf of itself and the other Initial Purchasers) to be bound by the terms and provisions of such Registration Rights Agreement.
IN WITNESS WHEREOF, the undersigned has executed this counterpart as of .
[NAME] | ||
By: |
|
|
Name: | ||
Title: |
Annex A-1
Exhibit 10.2
EXECUTION COPY
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of May 11, 2010 (the Agreement ), by and among CSA ESCROW CORPORATION, a Delaware corporation (the Escrow Company ), COOPER-STANDARD AUTOMOTIVE INC., an Ohio corporation (the Company ), U.S. BANK NATIONAL ASSOCIATION, a national banking association, as trustee (the Trustee ), and U.S. BANK NATIONAL ASSOCIATION, a national banking association, as escrow agent (the Escrow Agent ).
This Agreement is being entered into in connection with (i) the Purchase Agreement (the Purchase Agreement ), dated April 29, 2010, among the Escrow Company, the Company, Cooper-Standard Holdings Inc. and Deutsche Bank Securities Inc., Banc of America Securities LLC, Barclays Capital Inc. and UBS Securities LLC (collectively, the Initial Purchasers ), and (ii) the Indenture, dated as of the date hereof (as may be amended, supplemented or otherwise modified from time to time, the Indenture ), between the Escrow Company and the Trustee, governing the Escrow Companys $450,000,000 in aggregate principal amount of 8 1 / 2 % Senior Notes due 2018 (the Notes ).
For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged by each of the parties hereto, the parties hereto, intending to be legally bound, do hereby agree as follows:
Section 1. Definitions . Capitalized terms, used but not defined herein, shall have the respective meanings specified in the Indenture or the Purchase Agreement, as applicable.
Section 2. Appointment and Jurisdiction of Escrow Agent .
(a) The Escrow Company, the Company and the Trustee hereby appoint U.S. Bank National Association as escrow agent in accordance with the terms and conditions set forth herein, and the Escrow Agent hereby accepts such appointment.
(b) The Escrow Company, the Company, the Trustee and the Escrow Agent hereby agree that the securities intermediarys jurisdiction of the Escrow Agent is the State of New York for purposes of the New York UCC, including Section 8-110 thereof.
(c) The Escrow Company, the Company, the Trustee and the Escrow Agent hereby agree that the banks jurisdiction of the Escrow Agent is the State of New York for purposes of the New York UCC, including Section 9-304 thereof.
Section 3. The Escrow Property .
(a) On the date hereof (the Closing Date ), the Escrow Company shall cause to be deposited with the Escrow Agent:
(i) $446,250,000, representing (A) the gross proceeds from the offering of the Notes of $450,000,000, less (B) $3,750,000, which is one-third of the discount payable to the Initial Purchasers with respect to the offering of the Notes (the Proceeds ).
(b) On the Closing Date, the Company shall deposit with the Escrow Agent:
(i) $3,750,000, representing one-third of the discount payable to the Initial Purchasers with respect to the offering of the Notes on the Closing Date pursuant to the Purchase Agreement (the Paid Discount );
(ii) $7,500,000, representing two-thirds of the discount payable to the Initial Purchasers with respect to the offering of the Notes on either the Release Date or the Redemption Date pursuant to the Purchase Agreement (the Unpaid Discount ); and
(iii) $4,500,000, representing 1.0% of the gross proceeds from the offering of the Notes (the Specified Premium ), together with $6,268,750 representing the amount of interest that would accrue on the Notes from the Closing Date up to but not including the 60th day after the Closing Date (the Initial Escrow End Date ) (the foregoing interest amount being the Interest Deposit and together with the Proceeds, the Paid Discount, the Unpaid Discount, the Additional Interest Deposit (as defined below) and the Specified Premium, plus all interest, dividends and other distributions and payments thereon, collectively referred to herein as the Escrow Property ).
(c) If prior to the date of the Initial Escrow End Date, the Escrow Company elects to extend the Initial Escrow End Date to the 90th day following the Closing Date (such date, the Escrow Extension Date ), no later than five (5) Business Days prior to the Initial Escrow End Date, the Company shall deposit with the Escrow Agent$3,081,250 (the Additional Interest Deposit ), representing the amount equal to any additional accrued and unpaid interest on the Notes, respectively, from the Initial Escrow End Date up to, but not including, the Escrow Extension Date.
In no event shall the Company have any liability, obligation or responsibility for any of the amounts required to be deposited by the Escrow Company nor shall the Escrow Company have any liability, obligation or responsibility for any of the amounts required to be deposited by the Company. The Escrow Company and the Company agree that all amounts deposited pursuant to this Agreement shall be satisfactory for such purpose pursuant to the Indenture.
The Escrow Agent shall have no duty to solicit the Escrow Property. The Escrow Company and the Company, as applicable, certify that all amounts deposited pursuant to this Agreement shall be satisfactory for such purposes pursuant to the Indenture, and shall notify the Escrow Agent in writing at or prior to the time when any Escrow Property is sent to the Escrow Agent pursuant to this Agreement and certify at such time that all amounts deposited pursuant to this Agreement are satisfactory for such purposes pursuant to the Indenture. The Escrow Agent shall have no liability for Escrow Property, or interest thereon, sent to it that remain unclaimed and/or are returned if such written notification is not given.
(d)(i) Subject to and in accordance with the provisions hereof, the Escrow Agent agrees to hold the Escrow Property in either a securities account (as defined in Section 8-501 of the Uniform Commercial Code in effect in the State of New York on the date
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hereof (the
New York UCC
) or in a deposit account (as defined in Section 9-102(a)(29) of the New York UCC), as applicable. Escrow Property will be held in the
Wire Instructions:
ABA # | 091000022 | |
Bank Name | U.S. Bank National Association | |
Account # | 180121167365 | |
Reference | CSA Escrow Corp / Cooper-Standard Escrow | |
Trust # | 140982000 | |
Contact Person | James Kowalski |
The above referenced account will be established with the Escrow Agent or an affiliate in the name of the Escrow Agent, as escrow agent on behalf of the Escrow Company, (together with any successor account or accounts the Escrow Account ) and to administer the Escrow Account in accordance with the provisions of this Agreement, including, without limitation, holding in escrow, investing and reinvesting, and releasing or distributing the Escrow Property.
(ii) As security for the due and punctual payment when due and punctual performance of all amounts that may be payable from time to time under the Indenture and the Notes, now or hereafter arising, the Escrow Company and the Company hereby pledge, assign and grant to the Trustee, for the benefit of the holders of the Notes, a continuing security interest in, and a lien on, (i) the Escrow Account and the Escrow Property and (ii) all claims and rights of whatever nature which the Escrow Company may now have or hereafter acquire against any third party(ies) in respect of any of the Escrow Account or Escrow Property (including any claims or rights in respect of any Security Entitlements credited to an account of the Escrow Agent maintained at The Depository Trust Company or any other clearing corporation) or any other Securities Intermediary; (iii) all rights which the Escrow Company or the Company may now have or hereafter acquire against the Escrow Agent in respect of its holding and managing all or any part of the Escrow Account or Escrow Property; and (iv) all proceeds (as such term is defined in Section 9-102(a) of the UCC) of any of the foregoing. The Escrow Agent hereby acknowledges the Trustees security interest as set forth in this Section 2(d)(ii). The security interest of the Trustee shall at all times be valid, perfected and enforceable as a first priority security interest by the Trustee against Escrow Company, the Company and all third parties in accordance with the terms of this Agreement. The Escrow Company shall cause the Unpaid Discount to be paid from the Escrow Property to the Initial Purchasers pursuant to the Purchase Agreement at the same time the Escrow Property is released from escrow (regardless of whether released pursuant to Section 5(a) or 5(b)).
(iii) The Escrow Agent hereby agrees that each item of property (including, without limitation, all Temporary Cash Investments under clauses 1, 2 and 3
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of the definition thereof in the Indenture (the Limited Cash Equivalents ), in each case maturing no later than the Escrow End Date (as defined below), and with respect to clause (2) thereof with a bank or trust company having capital, surplus and undivided profits aggregating in excess of $500 million, and Escrow Investments (in each case, as defined in the Indenture) (collectively, the Escrow Agreement Permitted Investments )), and any investment property, financial asset, security, instrument or cash or cash balances (irrespective of the currency in which such cash or cash balances are denominated) credited to a securities account shall be treated as a financial asset within the meaning of Section 8-102(a)(9) of the New York UCC.
(iv) If at any time the Escrow Agent receives (i) any entitlement order (as such term is defined in Section 8-102(a)(8) of the New York UCC) with respect to any financial asset credited to the Escrow Account or (ii) any instruction (within the meaning of Section 9-104(b) of the New York UCC) concerning the disposition of funds held in the Escrow Account from the Trustee acting on the written directions of the majority of the holders of the Notes, the Escrow Agent shall comply with such entitlement order or instruction, as applicable, without further consent of the Escrow Company or any other person. The Trustee hereby agrees with the Escrow Company that it shall not give any entitlement orders or instructions, as applicable, unless the Notes become subject to a Special Mandatory Redemption pursuant to Section 3.07 of the Indenture or as otherwise permitted pursuant to Section 5 hereof.
(v) Upon the release of any Escrow Property pursuant to Section 5 hereof, the security interest of the Trustee for the benefit of the holders of the Notes shall automatically terminate without any further action and the Escrow Property shall be delivered to the recipient free and clear of any and all liens, claims or encumbrances of any person, including, without limitation, the Escrow Agent, the Trustee and the holders of the Notes.
(vi) The Escrow Company agrees to take all steps reasonably necessary to maintain the security interest created by this Agreement as a perfected first-priority security interest including causing UCC financing statements describing the Escrow Property and Escrow Account to be promptly filed in the State of Delaware. Without limiting the foregoing, the Escrow Company agrees to take all steps reasonably requested by the Trustee in connection with the perfection of the Trustees security interest in the Escrow Property and Escrow Account pursuant to this Agreement and, without limiting the generality of the foregoing, the Escrow Company hereby authorizes the Trustee and the Initial Purchasers on behalf of the Trustee to file one or more UCC financing statements that reasonably describe the collateral in such jurisdictions and filing offices and containing such description of collateral as the Trustee, or the Initial Purchasers on behalf of the Trustee, may determine is reasonably necessary in order to perfect the security interest granted herein.
(vii) The Escrow Company represents and warrants that as of the date hereof it is duly formed and validly existing as a corporation under the laws of the state of Delaware and is not organized under the laws of any other jurisdiction, and the Escrow Company hereby agrees that, prior to the termination of this Agreement, it will not change its name or jurisdiction of organization without giving the Trustee and the Initial Purchasers not less than 10 days prior written notice thereof.
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Section 4. Investment of the Escrow Property . During the term of this Agreement, the Escrow Agent shall invest and reinvest the Escrow Property in the Escrow Agreement Permitted Investments applicable to the Escrow Property, and in each case at the written direction of one of the authorized representatives of the Escrow Company identified on Schedule I hereto (each such representative, an Authorized Person ).
The Escrow Agent shall have no obligation to invest or reinvest the Escrow Property if deposited with the Escrow Agent after 11:00 a.m. local time in the City of New York on such day of deposit until the next Business Day. Instructions received after 11:00 a.m. local time in the City of New York will be treated as if received on the following Business Day. The Escrow Agent shall have no responsibility for any investment losses resulting from the investment, reinvestment or liquidation of the Escrow Property. Any interest or other income received on such investment and reinvestment of the Escrow Property shall become part of the Escrow Property and any losses incurred on such investment and reinvestment of the Escrow Property shall be debited against the Escrow Property. If a selection is not made and a written direction not given to the Escrow Agent by one of the authorized representatives of the Escrow Company, the Escrow Property shall remain uninvested with no liability for interest therein. It is agreed and understood that the entity serving as Escrow Agent may earn fees associated with the investments outlined above in accordance with the terms of such investments. Notwithstanding the foregoing, the Escrow Agent shall have the power to sell or liquidate the foregoing investments whenever the Escrow Agent shall be required to release all or any portion of the Escrow Property pursuant to Section 5 hereof. In no event shall the Escrow Agent be deemed an investment manager or adviser in respect of any selection of investments hereunder. It is understood and agreed that the Escrow Agent or its affiliates are permitted to receive additional compensation that could be deemed to be in the Escrow Agents economic self-interest for (1) serving as investment adviser, administrator, shareholder servicing agent, custodian or sub-custodian with respect to certain of the investments, (2) using affiliates to effect transactions in certain investments and (3) effecting transactions in investments.
Section 5. Distribution of Escrow Property . The Escrow Agent is directed to distribute the Escrow Property in the following manner:
(a) if at any time prior to the 60th day following the Closing Date, as may be extended for an additional 30 days on one occasion pursuant to the Indenture (the Escrow End Date ), the Escrow Agent receives an Officers Certificate from the Company substantially in the form of Exhibit A , dated as of the date the Escrow Property is released pursuant to the Release Notice (as defined below), executed by an Authorized Person of the Company and certifying to the Escrow Agent as to the matters set forth therein (an Officers Certificate ), and a written notice substantially in the form of Exhibit B , executed by an Authorized Person of the Escrow Company (a Release Notice ), the Escrow Agent shall on the same Business Day, provided that the Release Notice is received by 11:00 a.m. local time in the City of New York on that same Business Day, release the Escrow Property as directed and in the manner set forth in the Release Notice from the Escrow Company; or
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(b) if at any time prior to the Escrow End Date, the Escrow Agent receives a written notice from the Escrow Company (or an entitlement order or instructions, as applicable, from the Trustee pursuant to Section 3(e)(iv) hereof) setting forth the date on which a Special Mandatory Redemption will occur (a Redemption Notice ) in the form of Exhibit C hereto, and a Release Notice, substantially in the form of Exhibit B , executed by an Authorized Person of the Escrow Company, the Escrow Agent shall liquidate the Escrow Property no later than one (1) Business Day prior to the date specified for the Special Mandatory Redemption, and shall release the Escrow Property as directed and in the manner set forth in the Release Notice from the Escrow Company.
Section 6. Termination . This Agreement shall terminate upon the distribution of all Escrow Property from the account established hereunder. The provisions of Sections 7, 8, 9 and 10 shall survive the termination of this Agreement and the earlier resignation or removal of the Escrow Agent.
Section 7. Compensation of Escrow Agent . The Escrow Agent shall be entitled to payment from either the Escrow Company or the Company (without duplication) for customary fees and expenses for all services rendered by it hereunder as separately agreed to between the Company and the Escrow Agent (as such fees may be adjusted from time to time). Either the Escrow Company or the Company (without duplication) shall reimburse the Escrow Agent on demand for all loss, liability, damage, disbursements, advances or reasonable out-of-pocket expenses paid or incurred by it in the administration of its duties hereunder, including, but not limited to, all counsel, advisors and agents reasonable out-of-pocket fees and disbursements and all taxes or other governmental charges. At all times, the Escrow Agent will have a right of set off and first lien on the funds in the Escrow Property for payment of customary fees and reasonable out-of-pocket expenses and all such loss, liability, damage or expenses. Such compensation and expenses shall be paid from the Escrow Property to the extent not otherwise paid within thirty (30) days after an invoice has been rendered. Except as expressly provided in this Section 7, the Escrow Agent subordinates any lien or right of set off it may have with respect to the Escrow Property to the Trustees and the Secured Parties security interests granted hereunder other than in connection with fees pursuant to this Section 7 or the indemnification obligations in Section 9.
Section 8. Resignation of Escrow Agent . The Escrow Agent may resign and be discharged from its duties hereunder at any time by giving thirty (30) calendar days prior written notice of such resignation to the Escrow Company, the Company and the Trustee. Upon such notice, a successor escrow agent shall be appointed by the Escrow Company, the Company and the Trustee, who shall provide written notice of such to the resigning Escrow Agent. Such successor escrow agent shall become the escrow agent hereunder upon the resignation specified in such notice. If the Escrow Company, the Company and the Trustee are unable to agree upon a successor escrow agent within thirty (30) days after such notice, the Escrow Agent may, in its sole discretion, deliver the Escrow Property to the Trustee at the address provided herein or may apply to a court of competent jurisdiction for the appointment of a successor escrow agent or for other appropriate relief. The costs and reasonable out-of-pocket expenses (including its attorneys fees and expenses) incurred by the Escrow Agent in connection with such proceeding shall be paid by the Escrow Company and the Company. Upon receipt of the identity of the successor escrow agent, the Escrow Agent shall either deliver the Escrow Property then held
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hereunder to the successor Escrow Agent, less the Escrow Agents fees, costs and expenses or other obligations owed to the Escrow Agent to be paid from any interest earned in respect of the Escrow Property, or hold any interest earned in respect of the Escrow Property (or any portion thereof), pending distribution, until all such fees, costs and expenses or other obligations are paid. Upon its resignation and delivery of the Escrow Property as set forth in this Section 4, the Escrow Agent shall be discharged of and from any and all further obligations arising in connection with the Escrow Property or this Agreement.
Section 9. Indemnification of Escrow Agent . The Escrow Company and the Company shall jointly and severally indemnify, defend and hold harmless the Escrow Agent and its officers, directors, employees and agents, from and against and reimburse the Escrow Agent for any and all claims, obligations, liabilities, losses, damages, injuries (to person, property, or natural resources), penalties, stamp or other similar taxes, actions, suits, judgments and reasonable out-of-pocket costs and expenses (including reasonable attorneys fees and expenses) demanded, asserted or claimed against the Escrow Agent directly or indirectly relating to, or arising from, claims against the Escrow Agent by reason of its participation in the transactions contemplated hereby, including without limitation all reasonable out-of-pocket costs required to be associated with claims for damages to persons or property, and reasonable out-of-pocket attorneys and consultants fees and reasonable out-of-pocket expenses and court costs except to the extent caused by the Escrow Agents bad faith, gross negligence or willful misconduct. The provisions of this Section 9 shall survive the termination of this Agreement or the earlier resignation or removal of the Escrow Agent.
Section 10. The Escrow Agent . (a) The duties, responsibilities and obligations of Escrow Agent shall be limited to those expressly set forth herein and no duties, responsibilities or obligations shall be inferred or implied against the Escrow Agent. The Escrow Agent shall not be subject to, nor required to comply with, any other agreement to which the Escrow Company or the Trustee is a party, even though reference thereto may be made herein, or to comply with any direction or instruction (other than those contained herein or delivered in accordance with this Agreement) from the Escrow Company or the Trustee or an entity acting on its behalf. The Escrow Agent shall not be required to expend or risk any of its own funds or otherwise incur any liability, financial or otherwise, in the performance of any of its duties hereunder.
(b) If at any time the Escrow Agent is served with any judicial or administrative order, judgment, decree, writ or other form of judicial or administrative process which in any way affects the Escrow Property (including but not limited to orders of attachment or garnishment or other forms of levies or injunctions or stays relating to the transfer of the Escrow Property), the Escrow Agent is authorized to comply therewith in any manner it or legal counsel of its own choosing deems appropriate; and if the Escrow Agent complies with any such judicial or administrative order, judgment, decree, writ or other form of judicial or administrative process, Escrow Agent shall not be liable to any of the parties hereto or to any other person or entity even though such order, judgment, decree, writ or process may be subsequently modified or vacated or otherwise determined to have been without legal force or effect.
(c) The Escrow Agent shall not be liable for any action taken or omitted or for any loss or injury resulting from its actions or its performance or lack of performance of its
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duties hereunder in the absence of bad faith, gross negligence or willful misconduct on its part. In no event shall the Escrow Agent be liable (i) for acting in accordance with or conclusively relying upon any instruction, notice, demand, certificate or document from the Escrow Company or Trustee or any entity acting on behalf of the Escrow Company and the Trustee, (ii) for any indirect, consequential, punitive or special damages, regardless of the form of action and whether or not any such damages were foreseeable or contemplated, (iii) for the acts or omissions of its nominees, correspondents, designees, agents, subagents or subcustodians, (iv) for the investment or reinvestment of any cash held by it hereunder, in each case in good faith, in accordance with the terms hereof, including without limitation any liability for any delays (not resulting from its gross negligence or willful misconduct) in the investment or reinvestment of the Escrow Property, or any loss of interest or income incident to any such delays, or (v) for an amount in excess of the value of the Escrow Property, valued as of the date of deposit, but only to the extent of direct money damages.
(d) If any fees, reasonable out-of-pocket expenses or costs incurred by, or any obligations owed to, the Escrow Agent or its counsel hereunder are not paid within 10 Business Days after such expenses or costs are due, the Escrow Agent may reimburse itself therefor from the Escrow Property and may sell, liquidate, convey or otherwise dispose of any investment in respect of the Escrow Property for such purpose. The Escrow Agent may in its sole discretion withhold from any distribution of any interest earned in respect of the Escrow Property an amount it believes would, upon sale or liquidation, produce proceeds equal to any unpaid amounts to which the Escrow Agent is entitled to hereunder.
(e) The Escrow Agent may consult with legal counsel of its own choosing, at the expense of the Company, as to any matter relating to this Agreement, and the Escrow Agent shall not incur any liability in acting in good faith in accordance with any advice from such counsel.
(f) The Escrow Agent shall not incur any liability for not performing any act or fulfilling any duty, obligation or responsibility hereunder by reason of any occurrence beyond the control of the Escrow Agent (including but not limited to any act or provision of any present or future law or regulation or governmental authority, any act of God or war, civil unrest, local or national disturbance or disaster, any act of terrorism, or the unavailability of the Federal Reserve Bank wire or facsimile or other wire or communication facility).
(g) The Escrow Agent shall be entitled to conclusively rely upon any order, judgment, certification, demand, notice, instrument or other writing delivered to it hereunder without being required to determine the authenticity or the correctness of any fact stated therein or the propriety or validity or the service thereof. The Escrow Agent may act in conclusive reliance upon any instrument or signature believed by it to be genuine and may assume that any person purporting to give receipt or advice to make any statement or execute any document in connection with the provisions hereof has been duly authorized to do so.
(h) The Escrow Agent shall not be responsible in any respect for the form, execution, validity, value or genuineness of documents or securities deposited hereunder, or for any description therein, or for the identity, authority or rights of persons executing or delivering or purporting to execute or deliver any such document, security or endorsement. The Escrow
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Agent shall not be called upon to advise any party as to the wisdom in selling or retaining or taking or refraining from any action with respect to any securities or other property deposited hereunder.
(i) The Escrow Agent shall not be under any duty to give the Escrow Property held by it hereunder any greater degree of care than it gives its own similar property and shall not be required to invest any funds held hereunder except as directed in this Agreement. Uninvested funds held hereunder shall not earn or accrue interest.
(j) When the Escrow Agent acts on any information, instructions, communications, (including, but not limited to, communications with respect to the delivery of securities or the wire transfer of funds) sent by telex, facsimile, email or other form of electronic or data transmission, the Escrow Agent, absent bad faith, gross negligence or willful misconduct, shall not be responsible or liable in the event such communication is not an authorized or authentic communication of the Escrow Company or the Trustee or is not in the form the Escrow Company and the Trustee sent or intended to send (whether due to fraud, distortion or otherwise). The Escrow Company and the Trustee shall indemnify the Escrow Agent against any loss, liability, claim or reasonable out-of-pocket expense (including reasonable out-of-pocket legal fees and expenses) it may incur with its acting in accordance with any such communication.
(k) In the event of any ambiguity or uncertainty hereunder or in any notice, instruction or other communication received by the Escrow Agent hereunder, the Escrow Agent may, in its sole discretion, refrain from taking any action other than to retain possession of the Escrow Property, unless the Escrow Agent receives written instructions, signed by the Escrow Company or the Trustee, which eliminates such ambiguity or uncertainty.
(l) In the event of any dispute between or conflicting claims among the Escrow Company, the Company and the Trustee and any other person or entity with respect to any Escrow Property, the Escrow Agent shall be entitled, in its sole discretion, to refuse to comply with any and all claims, demands or instructions with respect to such Escrow Property so long as such dispute or conflict shall continue, and the Escrow Agent shall not be or become liable in any way to the Escrow Company, the Company or the Trustee for failure or refusal to comply with such conflicting claims, demands or instructions. The Escrow Agent shall be entitled to refuse to act until, in its sole discretion, either (i) such conflicting or adverse claims or demands shall have been determined by a final order, judgment or decree of a court of competent jurisdiction, which order, judgment or decree is not subject to appeal, or settled by agreement between the conflicting parties as evidenced in a writing satisfactory to the Escrow Agent or (ii) the Escrow Agent shall have received security or an indemnity satisfactory to it sufficient to hold it harmless from and against any and all losses which it may incur by reason of so acting. Any court order, judgment or decree shall be accompanied by a legal opinion by counsel for the presenting party, satisfactory to the Escrow Agent, to the effect that said order, judgment or decree represents a final adjudication of the rights of the parties by a court of competent jurisdiction, and that the time for appeal from such order, judgment or decree has expired without an appeal having been filed with such court. The Escrow Agent shall act on such court order and legal opinions without further question. The Escrow Agent may, in addition, elect, in its sole discretion, to commence an interpleader action or seek other judicial relief or orders as it may deem, in its sole discretion, necessary. The reasonable costs and reasonable out-of-pocket
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expenses (including attorneys fees and expenses) incurred in connection with such proceeding shall be paid by, and shall be deemed a joint and several obligation of, the Escrow Company and the Company.
(m) The Escrow Agent shall have no responsibility for the contents of any writing of the arbitrators or any third party contemplated herein as a means to resolve disputes and may conclusively rely without any liability upon the contents thereof.
(n) The Escrow Agent does not have any interest in the Escrow Property deposited hereunder but is serving as escrow holder only and having only possession thereof. The Escrow Company and the Company shall pay or reimburse the Escrow Agent upon request for any transfer taxes or other taxes relating to the Escrow Property incurred in connection herewith and shall indemnify and hold harmless the Escrow Agent from any amounts that it is obligated to pay in the way of such taxes. The Escrow Company shall be treated as the owner of the Escrow Property for U.S. federal income tax purposes. Any payments of income from this Escrow Account shall be subject to withholding regulations then in force with respect to United States taxes. The Escrow Company will provide the Escrow Agent with appropriate W-9 forms for tax identification number certifications. It is understood that the Escrow Agent shall only be responsible for income reporting with respect to income earned on the Escrow Property and will not be responsible for any other reporting. This paragraph shall survive notwithstanding any termination of this Agreement or the resignation or removal of the Escrow Agent.
(o) The Escrow Agent shall provide to the Escrow Company and the Company monthly statements identifying transactions, transfers or holdings of Escrow Property and each such statement shall be deemed to be correct and final upon receipt thereof by the Escrow Company, the Company and the Trustee unless the Escrow Agent is notified in writing, by the Escrow Company, the Company and the Trustee, to the contrary within thirty (30) Business Days of the date of such statement. The Escrow Company and Company acknowledge that regulations of the Comptroller of the Currency grant the parties the right to receive brokerage confirmations of the security transactions as they occur. The Escrow Company and Company specifically waive such notification to the extent permitted by law and will receive periodic cash transaction statements which will detail all investment transactions. Except as otherwise provided hereunder or agreed in writing among the parties hereto, Escrow Company shall retain the authority to institute, participate and join in any plan of reorganization, readjustment, merger or consolidation with respect to the issuer of any securities held hereunder, and, in general, to exercise each and every other power or right with respect to each such asset or investment as individuals generally have and enjoy with respect to their own assets and investment, including power to vote upon any securities.
Section 11. Miscellaneous . (a) This Agreement embodies the entire agreement and understanding among the parties relating to the subject matter hereof.
(b) This Agreement shall be governed by and construed in accordance with the laws of the State of New York without reference to the principles of conflict of laws (other than Section 5-1401 of the General Obligations Law).
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(c) Each of the parties hereto hereby irrevocably consents to the jurisdiction of the courts of the State of New York and of any Federal Court located in the Borough of Manhattan in such State in connection with any action, suit or other proceeding arising out of or relating to this Agreement or any action taken or omitted hereunder, and waives any claim of forum non conveniens and any objections as to laying of venue. Each party further waives personal service of any summons, complaint or other process and agrees that service thereof may be made by certified or registered mail directed to such person at such persons address for purposes of notices hereunder.
(d) All notices and other communications under this Agreement shall be in writing in English and shall be deemed given when delivered personally, on the next Business Day after delivery to a recognized overnight courier or mailed first class (postage prepaid) or when sent by facsimile to the parties (which facsimile copy shall be followed, in the case of notices or other communications sent to the Escrow Agent, by delivery of the original) at the following addresses (or to such other address as a party may have specified by notice given to the other parties pursuant to this provision):
If to the Escrow Company:
CSA Escrow Corporation
39550 Orchard Hill Place Drive
Novi, Michigan 48375
Facsimile: (248) 596-6535
Attention: Timothy Hefferon, Esq.
with a copy to (which copy shall not be deemed notice):
Fried, Frank, Harris, Shriver & Jacobson LLP
One New York Plaza
New York, NY 10004
Facsimile: (212) 859-4000
Attention: Daniel J. Bursky, Esq.
If to the Company:
Cooper-Standard Automotive Inc.
39550 Orchard Hill Place Drive
Novi, Michigan 48375
Facsimile: (248) 596-6535
Attention: Timothy Hefferon, Esq.
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with a copy to (which copy shall not be deemed notice):
Fried, Frank, Harris, Shriver & Jacobson LLP
One New York Plaza
New York, NY 10004
Facsimile: (212) 859-4000
Attention: Daniel J. Bursky, Esq.
If to the Initial Purchasers:
Deutsche Bank Securities Inc.
60 Wall Street
New York, New York 10005
Attention: Corporate Finance Department
with a copy to (which copy shall not be deemed notice):
Cahill Gordon & Reindel LLP
80 Pine Street
New York, New York 10005
Facsimile: (212) 269-5420
Attention: Douglas S. Horowitz
If to the Escrow Agent:
Corporate Trust Services
U.S. Bank National Association
535 Griswold Street, Suite 550
Detroit, MI 48226
Tel: (313) 234-4716
Fax: (313) 963-9428
Attn: James Kowalski
(e) The headings of the Sections of this Agreement have been inserted for convenience and shall not modify, define, limit or expand the express provisions of this Agreement.
(f) This Agreement and the rights and obligations hereunder of parties hereto may not be assigned except with the prior written consent of the other parties hereto. This Agreement shall be binding upon and inure to the benefit of each partys respective successors and permitted assigns. Except as expressly provided herein, no other person shall acquire or have any rights under or by virtue of this Agreement. This Agreement is intended to be for the sole benefit of the parties hereto, and (subject to the provisions of this Section 11(f)) their respective successors and assigns, and none of the provisions of this Agreement are intended to be, nor shall they be construed to be, for the benefit of any third person.
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(g) This Agreement may not be amended, supplemented or otherwise modified without the prior written consent of the parties hereto.
(h) The Escrow Agent makes no representation as to the validity, value, genuineness or the collectability of any security or other document or instrument held by or delivered to it.
(i) The parties hereto acknowledge that in accordance with Section 326 of the USA Patriot Act the Escrow Agent, like all financial institutions and in order to help fight the funding of terrorism and money laundering, is required to obtain, verify, and record information that identifies each person or legal entity that establishes a relationship or opens an account with U.S. Bank National Association. The parties to this Agreement agree that they will provide the Escrow Agent with such information as it may request in order for the Escrow Agent to satisfy the requirements of the USA Patriot Act.
(j) This Agreement may be executed in two or more counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument.
(k) The rights and remedies conferred upon the parties hereto shall be cumulative, and the exercise or waiver of any such right or remedy shall not preclude or inhibit the exercise of any additional rights or remedies. The waiver of any right or remedy hereunder shall not preclude the subsequent exercise of such right or remedy.
(l) The Escrow Company and the Company hereby represents and warrants (i) that this Agreement has been duly authorized, executed and delivered on its behalf and constitutes its legal, valid and binding obligation and (ii) that the execution, delivery and performance of this Agreement by the Escrow Company and the Company does not and will not violate any applicable law or regulation.
(m) The invalidity, illegality or unenforceability of any provision of this Agreement shall in no way affect the validity, legality or enforceability of any other provision; and if any provision is held to be unenforceable as a matter of law, the other provisions shall not be affected thereby and shall remain in full force and effect.
(n) No printed or other material in any language, including prospectuses, notices, reports, and promotional material which mentions U.S. Bank National Association or any of its respective affiliates by name or the rights, powers, or duties of the Escrow Agent under this Agreement shall be issued by any other parties hereto, or on such partys behalf, without the prior written consent of the Escrow Agent.
(o) For purposes of this Agreement, Business Day shall mean any day that is not a Saturday or Sunday or a day on which banks are required or permitted by law or executive order to be closed in the City of New York.
(p) For purposes of sending and receiving instructions or directions hereunder, all such instructions or directions shall be, and the Escrow Agent may conclusively rely upon such instructions or directions, delivered, and executed by an Authorized Person of the Escrow Company or the Company designated on Schedule I attached hereto and made a part hereof, which such designation shall include specimen signatures of such representatives, as such Schedule I may be updated from time to time.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
CSA ESCROW CORPORATION | ||
By: |
/s/ Allen J. Campbell |
|
Name: | Allen J. Campbell | |
Title: | President | |
COOPER-STANDARD AUTOMOTIVE INC. | ||
By: |
/s/ Allen J. Campbell |
|
Name: | Allen J. Campbell | |
Title: | Vice President & CFO |
U.S. BANK NATIONAL ASSOCIATION, as Trustee | ||
By: |
/s/ James Kowalski |
|
Name: | James Kowalski | |
Title: | Vice President |
U.S.BANK NATIONAL ASSOCIATION, as Escrow Agent | ||
By: |
/s/ James Kowalski |
|
Name: | James Kowalski | |
Title: | Vice President |
EXHIBIT A
Officers Certificate
of
COOPER-STANDARD AUTOMOTIVE INC.
[ ], 2010
This certificate is being delivered pursuant to Section 5 of the Escrow Agreement, dated as of May 11, 2010 (the Escrow Agreemen t ), by and among CSA Escrow Corporation, a Delaware corporation (the Escrow Company ), Cooper-Standard Automotive Inc., an Ohio corporation (the Company ), U.S. Bank National Association, a national banking association, as trustee (the Trustee ) and U.S. Bank National Association, a national banking association, as escrow agent (the Escrow Agent ). Capitalized terms used but not defined herein have the respective meanings specified in the Indenture, dated as of May 11, 2010 (the Indenture ), between the Escrow Company and the Trustee.
The Company hereby certifies to the Escrow Agent through the undersigned officer as follows:
1. The Bankruptcy Court has issued a final order, that has not been stayed pending appeal, confirming a Reorganization Plan and the satisfaction or waiver of all conditions precedent to the effectiveness of such Reorganization Plan has occurred, including the expiration of the 14-day period within which a notice of appeal must be filed in respect of such final order, except for the release of the Escrow Property (as defined in the Escrow Agreement) and other conditions to be satisfied substantially simultaneously with the release of Escrow Property.
2. Except as contemplated by the Reorganization Plan proposed by the Company as of April 29, 2010, the cash expenditures to be made on the Release Date in respect of Specified Claims pursuant to the Reorganization Plan will not exceed $35.0 million.
3. No Default or Event of Default has occurred and is continuing under the Indenture.
4. The Company has or will substantially simultaneously with the release of Escrow Property, receive proceeds from the issuance of common and preferred equity, pursuant to a rights offering or otherwise, of not less than $355.0 million.
5. Substantially simultaneously with the release of Escrow Property, the respective parties have executed and delivered documents relating to the Credit Agreement, and the conditions to effectiveness thereunder have been satisfied or waived by the parties thereto, and funds have been borrowed or received or available to be borrowed pursuant to (as necessary to consummate the Reorganization Plan) the Credit Agreement, which provides for commitments in an aggregate principal amount of not less than $100.0 million (availability subject to borrowing base and advance rate calculations).
Exhibit A-1
6. After giving effect to the consummation of the Reorganization Plan, a Change of Control has not occurred.
7. The Assumption has been consummated and the Company, as obligor in respect of the obligations under the Notes, has assumed all of the obligations of the Escrow Company under the Notes and the Indenture and the Guarantees of the Notes by the Guarantors are in full force and effect.
8. The Company and Escrow Company have caused (i) Fried, Frank, Harris, Shriver & Jacobson LLP, to deliver to the Initial Purchasers on the Release Date their opinion, dated the Release Date, substantially to the effect set forth in Exhibit C-1 to the Purchase Agreement; (i) Shumaker, Loop & Kendrick, LLP, to deliver to the Initial Purchasers on the Release Date their opinion, dated the Release Date, substantially to the effect set forth in Exhibit C-2 to the Purchase Agreement; and (iii) Timothy W. Hefferon, Vice President, General Counsel and Secretary of the Company, to deliver to the Initial Purchasers on the Release Date his opinion, dated the Release Date, in form and substance reasonably satisfactory to counsel for the Initial Purchasers.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
Exhibit A-2
IN WITNESS WHEREOF, the Company, through the undersigned officer, has signed this officers certificate as of the date first written above.
COOPER-STANDARD AUTOMOTIVE INC. | ||
By: |
|
|
Name: | ||
Title: |
Exhibit A-3
EXHIBIT B
Release Notice
[ ], 2010
Reference is hereby made to the Escrow Agreement, dated as of May 11 2010 (the Escrow Agreement ), by and among CSA Escrow Corporation, a Delaware corporation (the Escrow Company ), Cooper-Standard Automotive Inc., an Ohio corporation (the Company ), U.S. Bank National Association, a national banking association, as trustee (the Trustee ), and U.S. Bank National Association, a national banking association, as escrow agent (the Escrow Agent ). Capitalized terms used herein and not defined shall have the respective meanings ascribed to such terms in the Escrow Agreement.
Pursuant to the Escrow Agreement, the Escrow Company hereby authorizes the release by the Escrow Agent of the Escrow Property in the aggregate amount of:
[Choose one of the following as applicable]
[Choose if a release pursuant to Section 5(a)]
(a) $7,500,000 representing the Unpaid Discount payable to the Initial Purchasers pursuant to the wire instructions on Schedule attached hereto, which Unpaid Discount is two-thirds of the fee payable pursuant to the Purchase Agreement; and
(b) $[ ] representing the excess Escrow Property in the Escrow Account payable to the Company pursuant to the wire instructions on Schedule attached hereto.]
[Choose if a Special Mandatory Redemption is triggered and Escrow Property is to be distributed pursuant to Section 5(b)]
(a) $7,500,000 representing the Unpaid Discount payable to the Initial Purchasers pursuant to the wire instructions on Schedule attached hereto, which Unpaid Discount is two-thirds of the fee payable pursuant to the Purchase Agreement;
(b) $[ ] representing the gross proceeds of the Notes, the Specified Premium and the amount of Interest Deposit and any Additional Interest Deposits, if applicable, calculated based on the number of days from the Closing Date up to, but not including, the date of the Special Mandatory Redemption (the amounts collectively, the Special Mandatory Redemption Price ) to the Paying Agent (as defined in the Indenture) pursuant to the wire instructions on Schedule attached hereto; and
(c) $[ ] representing the excess Escrow Property in the Escrow Account payable to the Escrow Company pursuant to the wire instructions on Schedule attached hereto.]
Exhibit B-1
IN WITNESS WHEREOF, the undersigned have caused this Release Notice to be duly executed and delivered as of the first date written above.
CSA ESCROW CORPORATION | ||
By: |
|
|
Name: | ||
Title: |
Exhibit B-2
EXHIBIT C
Redemption Notice
NOTICE IS HEREBY GIVEN THAT, pursuant to Section 3.07 of the Indenture dated as of May 11, 2010 (the Indenture ), by and between CSA Escrow Corporation, a Delaware corporation (the Escrow Company ), and U.S. Bank National Association, a national banking association, as trustee (the Trustee ), all of the outstanding Notes are hereby called for redemption on [ ], 2010 (the Special Mandatory Redemption Date ) at a redemption price equal to the sum of 100% of the Gross Proceeds plus 1% of the principal amount of the Notes (as may be increased by the amounts set forth in the definition of Specified Premium ), together with accrued and unpaid interest on the Notes from the Issue Date up to but not including the Special Mandatory Redemption Date (the Special Mandatory Redemption Price ). Capitalized terms used herein without definition shall have the meanings ascribed to such terms in the Indenture.
If payment is requested to be made to any person other than the registered holder, a written instrument of transfer duly executed by the registered holder must accompany the Notes.
The Notes should be surrendered to the Paying Agent for payment of the Special Mandatory Redemption Price at the office of the Paying Agent as follows:
[By Mail] [By Hand] [By Courier]
The method chosen for the delivery of the Notes is at the option and risk of the holder. If delivery is by mail, use of registered or certified mail, properly insured is suggested. Notes held through The Depository Trust Company ( DTC ) or Euroclear/Clearstream should be surrendered for redemption in accordance with DTC or Euroclear/Clearstream as applicable.
CSA ESCROW CORPORATION | ||
By: |
|
|
Name: | ||
Title: |
Exhibit C-1
SCHEDULE I
Authorized Representatives of CSA Escrow Corporation
Name |
Title |
Specimen Signature |
||
Allen J. Campbell | President |
|
||
Timothy W. Hefferon | Vice President |
|
Authorized Representatives of Cooper-Standard Automotive Inc.
Name |
Title |
Specimen Signature |
||
James S. McElya | Chief Executive Officer and President |
|
||
Allen J. Campbell | Vice President and Chief Financial Officer |
|
||
Timothy W. Hefferon | Vice President, General Counsel and Secretary |
|
Sch. I-1
EXHIBIT 12.1
Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
(In millions, except ratio of earnings to fixed charges)
Historical | Pro Forma | |||||||||||||||||||||||||||||||||||
Year Ended December 31, | Three Months Ended March 31, |
Year Ended
December 31, 2009 |
Year Ended
March 31, 2010 |
|||||||||||||||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | 2009 | 2010 | ||||||||||||||||||||||||||||||
Income before income taxes |
$ | 12.4 | $ | (14.8 | ) | $ | (117.5 | ) | $ | (93.3 | ) | $ | (411.9 | ) | $ | (59.1 | ) | $ | 11.0 | $ | (387.2 | ) | $ | 26.9 | ||||||||||||
Less: |
||||||||||||||||||||||||||||||||||||
Income from equity method investment |
(2.8 | ) | (0.2 | ) | (2.2 | ) | (0.9 | ) | (4.0 | ) | 0.2 | (2.0 | ) | (3.2 | ) | (1.8 | ) | |||||||||||||||||||
Earnings (loss) from continuing operations before income taxes and income or loss from equity investments |
9.6 | (15.0 | ) | (119.7 | ) | (94.2 | ) | (415.9 | ) | (58.9 | ) | 9.0 | (390.4 | ) | 25.1 | |||||||||||||||||||||
Plus: |
||||||||||||||||||||||||||||||||||||
Fixed charges, excluding preferred stock dividend requirement |
71.6 | 92.9 | 104.8 | 108.2 | 73.6 | 23.9 | 14.1 | 54.7 | 13.8 | |||||||||||||||||||||||||||
Earnings available for fixed charges |
$ | 81.2 | $ | 77.9 | $ | (14.9 | ) | $ | 14.0 | $ | (342.3 | ) | $ | (35.0 | ) | $ | 23.1 | $ | (335.7 | ) | $ | 38.9 | ||||||||||||||
Fixed charges: |
||||||||||||||||||||||||||||||||||||
Interest expense |
$ | 66.6 | $ | 87.1 | $ | 97.4 | $ | 100.5 | $ | 66.5 | $ | 22.0 | $ | 12.2 | $ | 47.6 | $ | 11.9 | ||||||||||||||||||
Estimated interest factor for rentals |
5.0 | 5.8 | 7.4 | 7.7 | 7.1 | 1.9 | 1.9 | 7.1 | 1.9 | |||||||||||||||||||||||||||
Preferred stock dividend requirements |
| | | | | | | 7.0 | 1.8 | |||||||||||||||||||||||||||
Fixed charges |
$ | 71.6 | $ | 92.9 | $ | 104.8 | $ | 108.2 | $ | 73.6 | $ | 23.9 | $ | 14.1 | $ | 61.7 | $ | 15.6 | ||||||||||||||||||
Ratio of earnings to fixed charges |
1.1 | | | | | | 1.6 | | 2.5 | |||||||||||||||||||||||||||
Fixed charges in excess of earnings(1) |
$ | | $ | 15.0 | $ | 119.7 | $ | 94.2 | $ | 415.9 | $ | 58.9 | $ | | $ | 397.4 | $ | |
(1) | Earnings were insufficient to cover fixed charges by $15.0 million, $119.7 million, $94.2 million and $415.9 million for the years ended December 31, 2006, 2007, 2008 and 2009, respectively, and $58.9 million for the three months ended March 31, 2009. On a pro forma basis, earnings were insufficient to cover fixed charges by $397.4 million for the year ended December 31, 2009. |
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the reference to our firm under the caption Experts and to the use of our report dated March 31, 2010, in the Registration Statement (Form S-1 to be filed with the Securities and Exchange Commission on July 26, 2010) and related Prospectus of Cooper-Standard Holdings, Inc. dated July 26, 2010.
/s/ Ernst & Young
Detroit, MI
July 22, 2010