<PAGE>
AS FILED WITH SECURITIES AND EXCHANGE COMMISSION ON JANUARY 2, 1997
REGISTRATION NO. 333-14511
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO.1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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GENERAL HOUSING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 2451 16-1491687
(PRIMARY STANDARD (I.R.S. EMPLOYER
(STATE OR OTHER INDUSTRIAL IDENTIFICATION NO.)
JURISDICTION OF CLASSIFICATION CODE
INCORPORATION OR NUMBER)
ORGANIZATION)
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2255 INDUSTRIAL BOULEVARD
WAYCROSS, GEORGIA 31501
(912) 285-5068
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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SAMUEL P. SCOTT
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
GENERAL HOUSING, INC.
2255 INDUSTRIAL BOULEVARD
WAYCROSS, GEORGIA 31501
(912) 285-5068
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
JAMES A. LOCKE, ESQ. JOE DANNENMAIER, ESQ.
JOHN C. PARTIGAN, ESQ. THOMPSON & KNIGHT, P.C.
1700 PACIFIC AVENUE, SUITE 3300
NIXON, HARGRAVE, DEVANS & DOYLE LLP DALLAS, TEXAS 75201
CLINTON SQUARE (214) 969-1700
ROCHESTER, NEW YORK 14603
(716) 263-1000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
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. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
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<S> <C> <C> <C> <C>
Common Stock, $.001 par
value.................. 2,300,000 $14.00 $32,200,000 $9,758
</TABLE>
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(1) Includes up to 300,000 shares as to which the Underwriters have been
granted the option to purchase by the Company to cover over-allotments, if
any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JANUARY 2, 1997
2,000,000 SHARES
GENERAL HOUSING, INC.
COMMON STOCK
All of the shares of Common Stock offered hereby are being sold by the
Company. Prior to this offering, there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price will be
between $12.00 and $14.00 per share. For information relating to the factors
considered in determining the initial public offering price, see
"Underwriting." Application has been made for the inclusion of the Common Stock
in the Nasdaq National Market, under the symbol "GNHG."
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT COMPANY(1)
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<S> <C> <C> <C>
Per Share.................................... $ $ $
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Total(2)..................................... $ $ $
</TABLE>
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(1) Before deducting estimated expenses of $750,000 payable by the Company.
(2) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 300,000 shares of Common Stock, solely to cover over-
allotments, if any. See "Underwriting." If the Underwriters exercise this
option in full, the total price to public, underwriting discount and
proceeds to Company will be $ , $ and $ , respectively.
-----------
The shares of Common Stock are offered severally by the Underwriters named
herein subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that certificates
representing the shares will be ready for delivery at the offices of Rauscher
Pierce Refsnes, Inc., Dallas, Texas on or about , 1997.
RAUSCHER PIERCE REFSNES, INC. OPPENHEIMER & CO., INC.
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The date of this Prospectus is , 1997
<PAGE>
[ARTWORK TO COME]
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET IN THE OVER-THE-
COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including financial statements and notes thereto, included
elsewhere in this Prospectus. Except where the context otherwise requires, all
references to the "Company" or to "General" include General Housing, Inc., its
wholly owned subsidiary and the subsidiary's predecessor. Unless otherwise
indicated, the information contained in this Prospectus assumes no exercise of
the Underwriters' over-allotment option and has been adjusted to reflect
approximately a 0.82 for 1 reverse stock split to be effected immediately prior
to the closing of the Offering.
THE COMPANY
General produces manufactured homes in the southeastern United States, with
an emphasis on value-pricing and enhanced customer service. The Company sells
its homes through a network of independent dealers with more than 400 retail
sales centers principally located in the Company's primary markets of Georgia,
South Carolina, Florida, Alabama and North Carolina (the "Primary Markets") and
uses a variety of brand names in order to better penetrate its markets. The
Company's principal focus is on the production of multi-section homes, which,
for the first nine months of 1996, represented approximately 63% of the homes
sold by the Company. Since 1994, in the Company's Primary Markets, sales of
multi-section homes have exceeded sales of single-section homes. The Company
believes that wider and more flexible floor plan designs and site-built
appearance are features of multi-section homes that have contributed to this
trend. The Company manufactures its homes in five production facilities, four
of which are located in Waycross, Georgia, and one of which is located in
Lamar, South Carolina. The Company's single-section homes generally sell at
retail prices between $12,000 and $29,000 and its multi-section homes generally
sell at retail prices between $18,000 and $44,000.
Since its founding in 1987, the Company has experienced rapid growth. Net
sales have increased from $20.2 million in 1991 to $89.3 million in 1995, a
compound annual growth rate of 45%. During the first nine months of 1996, net
sales were $100.8 million compared to $63.2 million for the comparable period
in 1995, a 59% increase. In addition, the Company believes that its operating
margins are among the highest in the industry based on the publicly available
information of its competitors. The Company began production at its third and
fourth manufacturing facilities in January 1994 and August 1995, and began
production at its fifth manufacturing facility, located in South Carolina, in
December 1995.
BUSINESS STRATEGY
The key elements of the Company's business strategy are as follows:
Comprehensive Approach to Customer Service. The Company is committed to
providing comprehensive service to its independent dealers and to retail buyers
of its homes. To differentiate itself in the market, the Company created the
Gold Card service program. Under the Gold Card service program, the retail home
buyer is able to contact the Company directly with respect to all warranty
service claims. The Company believes that its Gold Card program: (1) ensures
prompt customer service, (2) develops loyalty among dealers by reducing their
need to provide time-consuming customer service and (3) enhances the Company's
reputation in the marketplace. The Company believes the Gold Card service
program has contributed to its success and that it continues to be the only
warranty service program in the industry administered directly by the
manufacturer. The Company provides all retail buyers of its homes with one-year
limited warranties and, with respect to most of its homes, pays for a third
party to provide limited warranties against structural defects for a period of
nine years beginning after the initial one-year warranty period.
Product Focus. The Company targets its homes to the value-priced segment of
the manufactured housing market. In 1995, the Company's average wholesale price
per home sold was $20,358. In designing its homes,
3
<PAGE>
the Company incorporates certain high-visibility and structural features that
are valued by home buyers and which are typically characteristic of higher-
priced manufactured homes, while avoiding other features that add to production
cost without significantly enhancing marketability. Standard high-visibility
and structural features typically include vaulted and textured ceilings,
plywood floors and higher-quality cabinets. Because of this design emphasis,
together with its manufacturing expertise and strict cost controls, the Company
believes that it is able to offer multi-section homes that compete directly
with the single-section homes offered by certain of its competitors.
Geographic Focus. General's objective is to become one of the leading
producers of value-priced manufactured homes across the southeastern United
States. Historically, the Company has focused on marketing its homes through
independent dealers in the Company's Primary Markets. The states comprising the
Company's Primary Markets represent five of the six largest markets for
manufactured housing and accounted for approximately 31% of industry shipments
during the first nine months of 1996 according to the Manufactured Housing
Institute, an industry trade association (the "MHI"). The Company plans to
continue to grow by increasing its presence in its Primary Markets and by
further expanding into contiguous markets in the southeastern United States.
Through its existing facilities, the Company believes that its level of
production can be increased to approximately 54 floors per day from its current
average production of approximately 40 floors per day.
Low-Cost Production. The Company strives to achieve low-cost production
through the use of (1) manufacturing-focused information systems, (2)
incentive-based compensation programs, (3) cost-efficient product designs and
(4) a centralized manufacturing strategy. The Company's information systems
provide management with daily reports that enable management to: identify
potential quality concerns; react to raw material price changes; recognize
changes in production efficiency; and tightly control costs. The Company relies
heavily on incentive-based compensation programs that are designed to motivate
employees to achieve production and sales volume goals and to maintain cost and
quality control standards. To help effect production efficiencies, the Company
uses innovative product designs and construction systems combined with
standardized base construction materials across product lines. The Company's
centralized manufacturing strategy allows the Company to reduce costs through
plant specialization and decreased overhead.
INDUSTRY
In 1995, the manufactured housing industry had estimated retail sales of
$12.3 billion in the United States, an increase of 21% over the previous year
according to the MHI. From 1991 through 1995, shipments of manufactured homes
increased from approximately 171,000 homes to 340,000 homes, a compound annual
growth rate of 18.7%. Growth has continued through the first nine months of
1996 as home shipments increased 9.2% over the comparable period in 1995.
Manufactured housing shipments have benefited from the continuing cost
advantage of manufactured homes relative to site-built homes, the improved
quality and appearance of manufactured homes, a stable economic environment and
increased availability of financing for manufactured home buyers.
During the first nine months of 1996, total manufactured home shipments
within the Company's Primary Markets increased by 11.8% over the comparable
period in 1995, exceeding the national rate of increase, and the Company's
total home shipments increased by 45.9% for the same period. Shipments of
multi-section manufactured homes in the Company's Primary Markets increased
from 47,566 in 1994 to 53,990 in 1995, an increase of 13.5%, and through the
first nine months of 1996, increased by 19.9% over the comparable period in
1995. The Company's shipments of multi-section homes increased 41% and 43%,
respectively, for the same periods.
ACQUISITION AND RESTRUCTURING
The Company is the successor to General Manufactured Housing, Inc. which
commenced operations in 1987 (the "Predecessor"). The Predecessor was acquired
on December 21, 1995, in a leveraged buyout
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transaction accounted for as a purchase, for an aggregate consideration of
approximately $50.6 million (the "Acquisition"). Strategic Investments &
Holdings, Inc., a private investment firm headquartered in Buffalo, New York
("Strategic Investments"), was instrumental in structuring the Acquisition.
Certain principals of Strategic Investments actively participate in the
management of the Company and an affiliate of Strategic Investments is a
principal stockholder of the Company. See "Certain Transactions--Management
Agreement" and "Principal Stockholders." The Acquisition was funded through the
issuance of the Company's capital stock and indebtedness. The proceeds of the
Offering will be used to reduce such indebtedness and to redeem the Company's
Series A Redeemable Preferred Stock (the "Redeemable Preferred Stock"). See
"Use of Proceeds," "Capitalization" and "Certain Transactions--The
Restructuring."
Simultaneous with the closing of the Offering, all classes of the Company's
issued and outstanding capital stock will be converted into a single class of
Common Stock and the deferred consideration payable to the former stockholders
of the Predecessor will be converted into promissory notes (together, with
certain other changes to the Company's capital structure, the "Restructuring").
In the fiscal quarter in which the Restructuring and the Offering are
consummated, the Company will record the following non-recurring charges: (1) a
non-cash charge of approximately $2.2 million resulting from the issuance of
Common Stock to holders of the Company's Series B Convertible Preferred Stock
(the "Series B Preferred Stock") in satisfaction of the liquidation preference
payable to such holders upon the conversion of the Series B Preferred Stock
into Common Stock, and (2) approximately $258,000 resulting from the redemption
of the Redeemable Preferred Stock, representing the difference between the
consideration received upon issuance (plus accretion) and the redemption price.
The non-cash charge of $2.2 million will reduce net income available to common
stockholders for such quarter, but will not reduce total stockholders' equity.
In addition, at the same time, the Company will record an extraordinary after-
tax charge to income of approximately $400,000 resulting from the prepayment of
a substantial portion of the Company's outstanding long-term debt. See "Certain
Transactions--The Acquisition" and "--The Restructuring."
THE OFFERING
<TABLE>
<C> <S>
Common Stock offered by the Company................... 2,000,000 shares
Common Stock to be outstanding after the Offering(1).. 5,769,231 shares
Use of proceeds....................................... To redeem all of the
shares of the Company's
Redeemable Preferred
Stock, and to reduce
indebtedness incurred
in connection with the
Acquisition. See "Use
of Proceeds."
Proposed Nasdaq National Market symbol................ GNHG
</TABLE>
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(1) Excludes 461,500 shares reserved for issuance under the Company's Stock
Option Plan, including 208,000 shares issuable upon the exercise of options
(all of which will be granted to officers and employees of the Company
immediately prior to the completion of the Offering) with an exercise price
equal to the initial public offering price. See "Management--Compensation
Pursuant to Plans" and "Principal Stockholders."
The Company's principal executive offices are located at 2255 Industrial
Boulevard, Waycross, Georgia 31501 and its telephone number is (912) 285-5068.
5
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SUMMARY FINANCIAL AND OPERATING INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<TABLE>
<CAPTION>
PREDECESSOR(1) COMPANY
-------------------------------------- --------------------------------------------
PRO FORMA(2)
-------------------------------
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30, YEAR ENDED NINE MONTHS
---------------------------- --------------------- DECEMBER 31, ENDED
1993 1994 1995(3) 1995 1996 1995(3) SEPTEMBER 30, 1996
-------- -------- ---------- -------- --------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............... $ 42,904 $ 66,574 $ 89,292 $ 63,154 $ 100,823 $89,292 $100,823
Gross profit............ 8,618 14,304 19,720 13,838 25,195 19,720 25,195
Income from
operations(4).......... 1,951 3,552 7,946 5,572 12,609 8,063 12,534
Interest expense........ 100 95 283 107 3,552 3,702 2,750
Net income.............. 1,093 2,106 7,251 5,181 5,207(6) -- --
Pro forma net income.... -- -- 4,784(5) 3,417(5) -- 2,326 5,658
Net income per common
share.................. -- -- --- -- $ 1.24 $ 0.40 $ 0.98
Weighted average number
of common shares
outstanding............ -- -- -- -- 3,604 5,769 5,769
OPERATING DATA:
Average wholesale price
per home:
Single-section homes.. $ 12,271 $ 13,617 $ 15,226 $ 15,019 $ 17,023
Multi-section homes... 19,291 22,007 22,995 22,664 24,691
Average per home...... 15,223 18,385 20,358 19,962 21,872
Homes sold:
Single-section homes.. 1,662 1,583 1,512 1,136 1,719
Multi-section homes... 1,206 2,084 2,942 2,078 2,969
-------- -------- -------- -------- ---------
Total homes......... 2,868 3,667 4,454 3,214 4,688
Manufacturing
facilities(7).......... 2 3 5 4 5
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA(8) AS ADJUSTED(9)
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<S> <C> <C> <C>
BALANCE SHEET DATA:
Total assets.............................. $56,496 $58,853 $58,409
Long-term debt............................ 30,479 32,479 17,249
Redeemable Preferred Stock................ 7,742 7,742 --
Stockholders' equity...................... 3,159 2,904 25,432
</TABLE>
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(1) On December 21, 1995, the Company acquired all of the capital stock of the
Predecessor in the Acquisition. The financial information assumes that the
Acquisition was consummated after the close of business on December 30,
1995.
(2) Pro forma to give effect to the Acquisition, the Restructuring and the
Offering as if such transactions had occurred on January 1, 1995. See
"Unaudited Pro Forma Financial Statements."
(3) Year ended December 30.
(4) Includes management compensation of approximately $2,049, $4,121, $1,855
and $1,391 for the years ended 1993, 1994 and 1995 and for the nine months
ended September 30, 1995, respectively, which would not have been paid
under the current executive salary and bonus plan.
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<PAGE>
(5) Reflects a pro forma provision for federal and state income taxes for the
Predecessor at a blended rate of 38% for 1995. During 1995, the Predecessor
elected to be treated as an S corporation for federal income tax purposes
and therefore recorded no provision for federal income taxes for the year
or for the nine months ended September 30, 1995.
(6) Before preferred stock dividends of $720 and accretion on preferred stock
of $22, which have been deducted from net income in determining net income
per common share.
(7) The Company's third, fourth and fifth facilities began operations in
January 1994, August 1995 and December 1995, respectively.
(8) Pro forma to give effect to the Restructuring. See "Unaudited Pro Forma
Financial Statements."
(9) Pro forma to give effect to the Restructuring and as adjusted to reflect
the sale by the Company of 2,000,000 shares of Common Stock in the Offering
and the application of the net proceeds as described under "Use of
Proceeds."
7
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RISK FACTORS
Prospective investors should consider carefully the following information,
in addition to the other information contained in this Prospectus, in
evaluating an investment in the shares of Common Stock offered hereby.
INDUSTRY CONDITIONS, CYCLICALITY AND SEASONALITY
The manufactured housing industry historically has been cyclical and is
influenced by many of the same national and regional economic and demographic
factors that affect the housing industry generally. Such factors include
consumer confidence, inflation, interest rates, availability of financing,
regional population and employment trends, availability and cost of
alternative housing, weather conditions and general economic conditions.
According to the MHI, during the period from 1983 to 1991, aggregate annual
domestic shipments of manufactured housing declined approximately 42% from
approximately 295,000 homes to 171,000 homes. The Company believes that the
principal causes of this decline included certain severe regional economic
downturns, deterioration of general economic conditions, reduced availability
of financing and high levels of repurchased and repossessed inventory of
manufactured homes. Although aggregate domestic manufactured housing shipments
increased 99% from 1991 to 1995, there can be no assurance that the
manufactured housing market will not experience future declines or that such
declines will not have a material adverse effect on the Company's business,
financial condition and results of operations.
In addition, the manufactured housing industry generally experiences lower
sales and reductions in backlog in the first and fourth quarters of the year
as a result of the effect of seasonal trends on manufacturing, distribution
and sales efforts. While the Company's quarterly results of operations have
not been materially impacted by seasonality during the last several years,
such seasonality, combined with increased production capacity in the industry
and at the Company, may have an adverse impact on the Company's future
operations during certain periods.
AVAILABILITY OF DEALER AND CONSUMER FINANCING
The Company's dealers and retail buyers of the Company's homes generally
secure financing for the purchase of the Company's homes from third-party
lenders. As is the practice in the industry, substantially all of the
Company's independent dealers finance their purchase of manufactured homes
through wholesale "floor plan" financing arrangements pursuant to which a
financial institution lends the dealer the purchase price of a home and
maintains a security interest in the home as collateral. Consumers typically
purchase manufactured homes through a combination of down payments ranging
from 5% to 10% and retail installment loans secured by a security interest in
the home. The availability, interest rates and other costs of financing for
dealers and retail home buyers can significantly affect the Company's sales
and are determined by the lending practices of financial institutions,
governmental policies and other conditions, all of which are beyond the
control of the Company. Interest rates for manufactured home loans are
generally higher than for loans for site-built homes and, at times, home loans
for manufactured housing have been more difficult to obtain than conventional
home mortgages. Although demand for the Company's homes has been positively
impacted by relatively low interest rates in recent periods, any future
increases in interest rates could have an adverse effect on the sales of the
Company's homes.
COMPETITION
The manufactured housing industry is highly competitive, and the barriers to
entry are lower than for industries requiring large capital investments or
substantial technological expertise. Competition exists at the manufacturing
and retail levels in terms of price, product quality and features, reputation
for service, warranty and repair, quality independent dealers and availability
of dealer and retail consumer financing. According to the MHI, at September
30, 1996, there were more than 98 companies producing manufactured homes at
more than 300 facilities in the United States, many of which are in direct
competition with the Company. Some of the Company's competitors have
substantially greater financial, manufacturing, distribution and marketing
resources than the Company. Fleetwood Enterprises, Inc. ("Fleetwood"),
Champion Enterprises, Inc. ("Champion") and Redman Industries, Inc. ("Redman")
produced approximately 20.3%, 7.7% and 6.9%, respectively, of all the homes
manufactured in the United States during 1995, and no other manufacturer
produced more than 6.5%.
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The recently announced acquisition of Redman by Champion could increase
competitive pressures on the Company. A number of the Company's competitors
also provide floor plan financing to retailers through captive financing
sources. A contraction in floor plan financing sources could provide an
advantage to those competitors with substantial capital resources or captive
financing capabilities. Manufactured homes compete with new and existing site-
built homes and, to a lesser degree, with apartments, townhouses, condominiums
and prefabricated, modular site-built homes. The Company believes that its
principal competitive strengths are its comprehensive approach to customer
service, product emphasis on multi-section homes, market concentration in the
southeastern United States and low cost production. Potential negative
competitive factors include the Company's relatively small size, geographic
concentration in the Southeastern United States and dependence upon third
parties for financing of retail sales of its homes. See "Business--
Competition."
DEPENDENCE ON SENIOR MANAGEMENT
The Company's success depends upon the continued contributions of its senior
executives, particularly its Chairman and Chief Executive Officer, Samuel P.
Scott. In 1995, Mr. Scott and his two sons were among the Company's five most
highly compensated executives. The Company maintains a $5.0 million key man
life insurance policy on the life of Mr. Scott. The loss of the services of
Mr. Scott or one or more of the Company's other senior executives could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Management."
FOCUS ON SOUTHEASTERN UNITED STATES
The Company sells its products in the southeastern United States, including
its Primary Markets of Georgia, South Carolina, Florida, Alabama and North
Carolina. While the Company believes that this region historically has been
strong for the manufactured housing industry, demographic factors and economic
conditions affecting this region may adversely affect the Company's business,
financial condition and results of operations.
CONTROL OF COMPANY
Upon completion of the Offering, approximately 65% of the outstanding Common
Stock of the Company will be beneficially owned by the Company's current
stockholders. As a result, such current stockholders, acting together, will
continue to be able to determine the outcome of elections of the Company's
directors and thereby control the management of the Company's business.
Pursuant to a management agreement, Strategic Investments provides management
and consulting services to the Company for which it receives compensation. See
"Principal Stockholders" and "Certain Transactions--Management Agreement."
PRICING AND AVAILABILITY OF RAW MATERIALS
The Company's future results of operations could be affected by the pricing
and availability of raw materials. Although the Company attempts to increase
the sales prices of its homes in response to higher materials costs, such
increases lag somewhat behind the escalation of materials costs. Four of the
most important raw materials used in the Company's operations, lumber, steel,
gypsum wallboard and insulation, have experienced price fluctuations in recent
periods. Although the Company has not experienced any shortage of such
building materials to date, there can be no assurance that sufficient supplies
of lumber, steel, gypsum wallboard and insulation, as well as other raw
materials, will continue to be available to the Company on terms it regards as
satisfactory. See "Business--Manufacturing."
GEOGRAPHIC EXPANSION OF OPERATIONS
In order to meet anticipated growth in demand, as conditions warrant, the
Company plans to expand its operations both within its Primary Markets and
into other contiguous areas in the southeastern United States, either through
the acquisition or construction of additional facilities. The Company's
ability to successfully implement its expansion plans will depend upon a
number of factors, including its capital resources, the availability of
suitable facility locations on acceptable terms, its ability to hire a
sufficient number of experienced plant management personnel, skilled workers
and other employees, and its ability to control opening and production costs.
The opening of additional facilities may have a negative effect on the
Company's earnings in one or more fiscal quarters.
In addition, if the Company were to proceed with one or more significant
acquisitions in which the consideration consists of cash, a substantial
portion of the Company's available cash could be used to
9
<PAGE>
consummate such transactions. If the Company were to consummate one or more
significant acquisitions in which the consideration consists of stock,
stockholders of the Company could suffer significant dilution of their
interest in the Company. Many of the businesses that might become attractive
acquisition candidates for the Company may have significant goodwill and
intangible assets, and acquisitions of these businesses, if accounted for as a
purchase, would typically result in substantial amortization charges to the
Company. The financial impact of acquisitions could have a material adverse
effect on the Company's business, financial condition and results of
operations and could cause substantial fluctuations in the Company's quarterly
and yearly operating results. See "Business--Acquisitions."
RELIANCE ON INDEPENDENT DEALERS
During the nine months ended September 30, 1996, the Company sold
manufactured homes through more than 400 independent retail sales centers. The
Company believes that the quality of its independent dealer network has been
important to the Company's performance. The Company does not have formal
marketing or other agreements with its dealers, and substantially all of the
Company's dealers also sell homes of other manufacturers. While the Company
believes its relations with its independent dealers are good, no assurance can
be given that the Company will be able to maintain these relations or that
these dealers will continue to sell the Company's homes. See "Business--
Distribution."
POTENTIAL ADVERSE EFFECTS OF GOVERNMENT REGULATION
The Company's operations are subject to a variety of federal, state and
local laws and regulations. Changes in, or a failure of the Company to comply
with, such laws and regulations could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Government Regulation."
CONTINGENT REPURCHASE OBLIGATIONS
As is customary in the manufactured housing industry, the Company has
entered into repurchase agreements with various financial institutions and
other credit sources pursuant to which the Company has agreed, under certain
circumstances, to repurchase unsold homes held in inventory by independent
dealers in the event of a default by a dealer in its obligation to such credit
sources. Under such agreements, the Company agrees to repurchase such homes in
an amount equal to the unpaid balance less any appropriate adjustments. The
Company estimates that its potential obligations under such repurchase
agreements approximated $45.3 million at September 30, 1996. During the past
three fiscal years, the Company has not incurred any significant costs
relating to such repurchase agreements; however, there can be no assurance
that the Company will not suffer losses in the future with respect to, and as
a consequence of, such repurchase agreements. See "Business--Dealer
Financing."
POTENTIAL PRODUCTS LIABILITY AND WARRANTY EXPENSE
Although the Company has never been subject to significant products
liability claims, the Company may be exposed to the risk of loss as a result
of defects in its products or components of its products. The Company
maintains a $20.0 million umbrella liability insurance policy, but there can
be no assurance that such insurance will be sufficient to cover potential
claims or that the present level of coverage will be available in the future
at reasonable cost. A partially insured or a completely uninsured successful
claim against the Company could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
The Company provides retail buyers of its homes with one-year limited
warranties and, with respect to most of its homes, pays a third party to
provide limited warranties against structural defects for a period of nine
years beginning after the initial one-year warranty period. There can be no
assurance that future warranty expenses will not have a material adverse
effect on the Company's business, financial condition and results of
operations. See "Business--Customer Service and Warranty."
ABSENCE OF PRIOR PUBLIC MARKET; OFFERING PRICE DETERMINED BY AGREEMENT;
VOLATILITY OF MARKET PRICE
Prior to the Offering, there has been no public market for the Common Stock
and there can be no assurance that an active public market for the Common
Stock will develop or be sustained after the Offering. The initial
10
<PAGE>
public offering price of the Common Stock has been determined solely by
negotiations between the Company and the Underwriters and may bear no
relationship to the market price of the Common Stock after the Offering. From
time to time after the Offering, there may be significant volatility in the
market price of the Common Stock. Quarterly operating results of the Company,
changes in earnings estimated by analysts, developments in the manufactured
housing industry, changes in general conditions in the economy or the
financial markets or other developments affecting the Company could cause the
market price of the Common Stock to fluctuate substantially. See
"Underwriting."
DILUTION
Purchasers of the Common Stock offered hereby will experience an immediate
and substantial dilution in pro forma net tangible book value per share of
their shares of Common Stock. After the completion of the Offering, the
Company will have a net tangible book value (deficit) per share. See
"Dilution."
TRANSACTIONS WITH AFFILIATES
The Company is the successor to General Manufactured Housing, Inc., which
was acquired on December 21, 1995 in a leveraged buyout transaction accounted
for as a purchase for an aggregate consideration of approximately $50.6
million. In connection with the Acquisition, the Company acquired the stock of
the Predecessor from Samuel P. Scott, the Company's Chief Executive Officer,
Gregory K. Scott and Drew E. Scott, officers of the Company, and other members
of the Scott family. Members of the Scott family and principal stockholders of
the Company purchased Common Stock, preferred stock or debt securities of the
Company, or a combination thereof, in connection with the Acquisition. The
consideration for the Acquisition and the purchase price of these securities
was determined by arm's length negotiations among the former stockholders of
the Predecessor and the Company's current principal stockholders. See "Certain
Transactions--The Acquisition" and "--Sales of Securities to Related Parties"
and "Principal Stockholders."
Certain principals of Strategic Investments actively participate in
management of the Company, and an affiliate of Strategic Investments is a
principal stockholder of the Company. Strategic Investments receives
compensation from the Company pursuant to a Management Agreement. See "Certain
Transactions--Management Agreement."
In connection with the Acquisition, the former stockholders of the
Predecessor agreed to indemnify the Company for certain losses and litigation
expenses, including any losses and litigation expenses which may be incurred
by the Company as a result of the pending audit of the Company's income tax
returns for 1992, 1993 and 1994. In addition, the former stockholders of the
Predecessor have reimbursed the Company for amounts paid to the State of
Georgia on behalf of members of senior management and other employees of the
Company with respect to income tax withholdings for prior periods. See
"Certain Transactions--Federal Tax Audit" and "--Georgia State Withholding
Tax."
Prior to the Acquisition, the Company had entered into a service contract
with, and recently exercised its option to purchase the net assets of, a
corporation wholly owned by a daughter of Samuel P. Scott. See "Certain
Transactions--Service Agreement."
ANTI-TAKEOVER PROVISIONS
In addition to the Common Stock, the Company's Restated Certificate of
Incorporation (the "Certificate of Incorporation") authorizes the issuance of
up to 2,000,000 shares of Preferred Stock. Upon completion of the Offering, no
shares of Preferred Stock will be outstanding. The Certificate of
Incorporation grants the Board of Directors broad power to establish the
rights and preferences of any series of Preferred Stock. As a result, if the
Board of Directors elects to issue any Preferred Stock, the rights and
preferences of any such Preferred Stock may be superior to those of the Common
Stock and could decrease the amount of earnings and assets available for
distribution to holders of Common Stock and adversely affect the rights and
preferences, including voting rights, of such holders. The Board of Directors
does not currently intend to seek stockholder approval prior to any issuance
of Preferred Stock, unless otherwise required by law. In addition, the Company
is and, subject to certain conditions, will continue to be subject to the
anti-takeover provisions of the Delaware General Corporation Law, which could
have the effect of delaying or preventing a change of control of the Company.
11
<PAGE>
Furthermore, upon a change of control, the Company's indebtedness under its
senior credit facility and Senior Subordinated Notes are required to be repaid
and the vesting of options outstanding under the Company's Stock Option Plan
would be accelerated. All of these factors could materially adversely affect
the market price of the Company's Common Stock. See "Description of Capital
Stock--Delaware Anti-takeover Law" and "--Certain Charter and By-law
Provisions."
DIVIDEND RESTRICTIONS
The Company's credit facilities prohibit the payment of dividends on the
Common Stock and the Company does not anticipate paying any dividends in the
foreseeable future.
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sales of a substantial number of shares of Common Stock in the public market
following the Offering could adversely affect the market price for the Common
Stock. Approximately 3,769,231 shares of Common Stock will be eligible for
sale beginning December 1997, based on current Commission rules and subject to
compliance with the manner-of-sale, volume and other limitations of Rule 144.
The Commission has proposed an amendment to Rule 144 that, if adopted, could
permit those shares to be sold earlier. Some investors have the right to
require the Company to register the public resale of their shares beginning
twelve months after the closing of the Offering. The Company's current
stockholders have entered into 180-day lock-up agreements with the
Underwriters. See "Description of Capital Stock--Registration Rights," "Shares
Eligible for Future Sale" and "Underwriting."
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
2,000,000 shares of Common Stock offered hereby, based on an assumed initial
public offering price of $13.00 per share and after deducting the underwriting
discount and estimated offering expenses, are estimated to be $23.4 million
($27.1 million if the Underwriters' over-allotment option is exercised in
full).
The Company will use approximately $15.4 million of the net proceeds to
reduce indebtedness that was incurred in 1995 to finance the Acquisition and
provide working capital. The Company intends to use such amount to repay in
full a $4.0 million term loan (the "Term Loan"), to reduce the Company's
revolving credit facility (the "Line of Credit") by $6.2 million, and to repay
in full $5.0 million of junior subordinated notes (the "Junior Subordinated
Notes"), plus pay all accrued interest and prepayment penalties thereon. The
Term Loan and Line of Credit each bear interest at 1.5% above a prime rate
designated by the lender or 3.75% above a LIBOR rate, at the election of the
Company, and mature on January 1, 2001 and April 1, 2000, respectively. The
maximum aggregate amount that can be outstanding under the Line of Credit is
currently $14.0 million, with the maximum amount declining on a quarterly
basis by varying amounts until April 1, 2000. The unused portion of the Line
of Credit may be borrowed for general corporate purposes. The Junior
Subordinated Notes bear interest at 13% and mature on June 30, 2003.
The Company will use $8.0 million of the net proceeds to redeem all of the
outstanding shares of its Redeemable Preferred Stock. The Redeemable Preferred
Stock has a mandatory redemption date of December 31, 2003 and pays quarterly
dividends at the rate of 12% per annum. Such shares were issued for an
aggregate consideration of $7.7 million in connection with the Acquisition.
See "Certain Transactions--The Acquisition."
In connection with the Acquisition, the Company acquired all of the issued
and outstanding shares of common stock of the Predecessor from Samuel P.
Scott, the Company's Chief Executive Officer, Gregory K. Scott, Drew E. Scott
and other members of the Scott family. The consideration for the transaction
of approximately $50.6 million was determined by arm's length negotiations
between the former stockholders of the Predecessor and the Company's current
principal stockholders. See "Certain Transaction--The Acquisition".
DIVIDEND POLICY
Since the Acquisition, the Company has neither declared nor paid cash
dividends on its Common Stock and does not anticipate paying any cash
dividends on its Common Stock in the foreseeable future. The Company currently
intends to retain all of its earnings, if any, for use in its business. In
addition, under the Company's existing credit facilities, the payment of cash
dividends on the Company's Common Stock is prohibited until such loans have
been paid in full.
12
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company on a
consolidated basis as of September 30, 1996, (i) on an historical basis, (ii)
on a pro forma basis to give effect to the Restructuring, and (iii) on an as
adjusted basis to reflect the sale by the Company of 2,000,000 shares of
Common Stock offered hereby and the application of the estimated net proceeds
therefrom as described under "Use of Proceeds." The table below should be read
in conjunction with the financial statements and notes thereto included
elsewhere in this Prospectus. See "Certain Transactions--The Restructuring"
and "Unaudited Pro Forma Financial Statements."
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------------
PRO FORMA
HISTORICAL PRO FORMA AS ADJUSTED
---------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt:
Notes payable to former stockholders of the
Predecessor(1)............................ $ -- $ 2,000 $ 2,000
Current portion of long-term debt.......... 45 45 45
------- ------- -------
Total short-term debt:................... $ 45 $ 2,045 $ 2,045
======= ======= =======
Long-term debt:
Line of Credit............................. $ 7,785 $ 7,785 $ 1,555
Term Note.................................. 4,000 4,000 --
Senior Subordinated Note................... 12,912 12,912 12,912
Junior Subordinated Notes.................. 5,000 5,000 --
Notes payable to former stockholders of the
Predecessor(1)............................ -- 2,000 2,000
Other...................................... 782 782 782
------- ------- -------
Total long-term debt..................... 30,479 32,479 17,249
------- ------- -------
Redeemable Preferred Stock, Series A, $.001
par value (8,000,000 shares authorized,
issued and outstanding, historical and pro
forma; no shares authorized, issued and
outstanding, as adjusted)................... 7,742 7,742 --
Stockholders' Equity:
Preferred Stock, $.001 par value,
(2,150,000 shares authorized, issued and
outstanding, historical; 2,000,000 shares
authorized, no shares issued and
outstanding, pro forma and as adjusted)... 2 -- --
Common Stock, $.001 par value, (4,375,000
shares authorized, 1,364,313 shares issued
and outstanding, historical; 3,769,211
shares issued and outstanding, pro forma;
20,000,000 shares authorized, 5,769,231
shares issued and outstanding, as
adjusted)(2).............................. 2 4 6
Warrants................................... 130 -- --
Additional paid-in capital................. 2,526 4,812 28,240
Retained earnings.......................... 4,465 2,315 1,413
Adjustment to Predecessor equity(3)........ (3,966) (4,227) (4,227)
------- ------- -------
Total stockholders' equity............... 3,159 2,904 25,432
------- ------- -------
Total capitalization................... $41,380 $43,125 $42,681
======= ======= =======
</TABLE>
- --------
(1) As part of the Restructuring, the incentive compensation payable to former
stockholders of the Predecessor will be converted into promissory notes.
See "Certain Transactions--The Restructuring."
(2) Excludes approximately 461,500 shares of Common Stock reserved for
issuance under the Company's Stock Option Plan, including 208,000 shares
issuable upon the exercise of options (all of which will be granted to
officers and employees of the Company immediately prior to the Completion
of the Offering) with an exercise price equal to the initial public
offering price. See "Management--Compensation Pursuant to Plans."
(3) The difference in fair value and Predecessor basis of the Common Stock
held by Predecessor stockholders has been accounted for as a reduction of
stockholders' equity and goodwill. See Note 1 of Notes to Consolidated
Financial Statements.
13
<PAGE>
DILUTION
The pro forma net tangible book value (deficit) of the Company as of
September 30, 1996, pro forma to give effect to the Restructuring, was $(38.6)
million, or $(10.26) per share of Common Stock. Net tangible book value
(deficit) per share represents the amount of total tangible assets less total
liabilities, divided by the number of shares of Common Stock outstanding.
After giving effect to the sale by the Company of 2,000,000 shares of Common
Stock at an assumed initial public offering price of $13.00 per share, and
after deducting the underwriting discount and estimated offering expenses
payable by the Company, the pro forma net tangible book value (deficit) of the
Company as of September 30, 1996 would have been $(15.7) million, or $(2.72)
per share. This represents an immediate increase in pro forma net tangible
book value of $7.54 per share to existing stockholders and an immediate
dilution of $15.72 per share to new investors. The following table illustrates
this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share........... $13.00
Pro forma net tangible book value (deficit) per share
before the Offering...................................... $(10.26)
Increase per share attributable to new investors.......... 7.54
-------
Pro forma net tangible book value (deficit) per share
after the Offering....................................... (2.72)
------
Dilution per share to new investors....................... $15.72
======
</TABLE>
The following table sets forth on a pro forma basis as of September 30,
1996, the number of shares of Common Stock previously purchased from the
Company, the total consideration paid to the Company and the average price per
share paid by existing stockholders and by the investors in the Offering at an
assumed initial public offering price of $13.00 per share and before deducting
the underwriting discount and estimated offering expenses payable by the
Company:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------- ------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders........... 3,769,231 65.3% $ 2,660,000 9.3% $ .71
New investors................... 2,000,000 34.7% 26,000,000 90.7% 13.00
--------- ----- ----------- ----- -----
Total......................... 5,769,231 100.0% $28,660,000 100.0%
========= ===== =========== =====
</TABLE>
The calculations set forth above do not give effect to 208,000 shares of
Common Stock issuable upon the exercise of options outstanding as of the date
of this Prospectus pursuant to the Company's Stock Option Plan.
14
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected historical and pro forma financial
data for the Company and the Predecessor for the periods indicated. The
selected historical financial data as of and for each of the years in the
five-year period ended December 30, 1995 are derived from the audited
financial statements of the Predecessor. The selected historical financial
data for the nine months ended September 30, 1996 are derived from the audited
financial statements of the Company. The selected historical financial data
for the nine months ended September 30, 1995 are derived from financial
statements that are unaudited but which, in the opinion of management, include
all adjustments (consisting only of normal recurring adjustments) necessary
for a fair presentation of financial condition and results of operations. The
pro forma financial information is unaudited and presents results of
operations of the Company as if the Acquisition, the Restructuring and the
Offering had occurred on January 1, 1995. The pro forma information is not
necessarily indicative of the results of operations for the Company had such
events occurred on that date or of the Company's results of operations for any
future periods. The selected financial data should be read in conjunction with
the financial statements and notes thereto included elsewhere in this
Prospectus. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Unaudited Pro Forma Financial Statements."
<TABLE>
<CAPTION>
PREDECESSOR(1)
---------------------------------------
YEARS ENDED DECEMBER 31,
---------------------------------------
1991 1992 1993 1994 1995(3)
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............................ $20,176 $30,903 $42,904 $66,574 $89,292
Cost of sales........................ 16,664 25,087 34,286 52,270 69,572
------- ------- ------- ------- -------
Gross profit......................... 3,512 5,816 8,618 14,304 19,720
Goodwill amortization................ -- -- -- -- --
Selling, general and administrative
expense(4).......................... 2,565 4,499 6,667 10,752 11,774
------- ------- ------- ------- -------
Income from operations............... 947 1,317 1,951 3,552 7,946
Interest expense..................... 86 132 100 95 283
Other (income) expense............... 96 97 89 55 (53)
------- ------- ------- ------- -------
Income before income taxes........... 765 1,088 1,762 3,402 7,716
Provision for income taxes........... 289 381 669 1,296 465
------- ------- ------- ------- -------
Net income........................... $ 476 $ 707 $ 1,093 $ 2,106 $ 7,251
======= ======= ======= ======= =======
Pro forma provision for income
taxes(5)............................ -- -- -- -- 2,932
------- ------- ------- ------- -------
Pro forma net income................. -- -- -- -- 4,784
======= ======= ======= ======= =======
Preferred stock dividends and
accretion........................... -- -- -- -- --
Net income per common share.......... -- -- -- -- --
Weighted average number of common
shares outstanding.................. -- -- -- -- --
<CAPTION>
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets......................... $ 3,980 $ 6,202 $ 7,632 $10,917
Long-term debt....................... 999 1,298 978 1,338
Redeemable Preferred Stock........... -- -- -- --
Stockholders' equity................. 1,410 2,216 3,203 5,309
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
PREDECESSOR(1) COMPANY
-------------- -----------------------------------------
ACTUAL PRO FORMA(2)
----------------------- --------------------------------
NINE MONTHS
ENDED SEPTEMBER 30, YEAR ENDED NINE MONTHS
----------------------- DECEMBER 31, ENDED SEPTEMBER 30,
1995 1996 1995(3) 1996
-------------- -------- ------------ -------------------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............... $63,154 $100,823 $89,292 $100,823
Cost of sales........... 49,316 75,628 69,572 75,628
------- -------- ------- --------
Gross profit............ 13,838 25,195 19,720 25,195
Goodwill amortization... -- 740 1,081 815
Selling, general and
administrative
expense(4)............. 8,266 11,846 10,576 11,846
------- -------- ------- --------
Income from operations.. 5,572 12,609 8,063 12,534
Interest expense........ 107 3,552 3,702 2,750
Other (income) expense.. (47) 22 (53) 22
------- -------- ------- --------
Income before income
taxes.................. 5,512 9,035 4,414 9,762
Provision for income
taxes.................. 331 3,828 -- --
------- -------- ------- --------
Net income.............. $ 5,181 $ 5,207 $ -- $ --
======= ======== ======= ========
Pro forma provision for
income taxes(5)........ 2,095 -- 2,088 4,104
------- -------- ------- --------
Pro forma net income.... $ 3,417 $ -- $ 2,326 $ 5,658
======= ======== ======= ========
Preferred stock dividend
and accretion.......... -- $ 742 -- --
Net income per common
share.................. $ 1.24 $ 0.40 $ 0.98
Weighted average number
of common shares
outstanding............ 3,604 5,769 5,769
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-----------------------------------
DECEMBER 31, 1995 ACTUAL PRO FORMA(6) AS ADJUSTED(7)
----------------- ------- ------------ --------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets(8)......... $99,660 $56,496 $58,853 $58,409
Long-term debt(8)....... 82,703 30,479 32,479 17,249
Redeemable Preferred
Stock.................. 7,720 7,742 7,742 --
Stockholders'
equity(9).............. (1,168) 3,159 2,904 25,432
</TABLE>
- --------
(1) On December 21, 1995, the Company acquired all of the capital stock of the
Predecessor in the Acquisition. The financial information assumes that the
Acquisition was consummated after the close of business on December 30,
1995.
(2) Pro forma to give effect to the Acquisition, the Restructuring and the
Offering as if such transactions had occurred on January 1, 1995. See
"Unaudited Pro Forma Financial Statements."
(3) Year ended December 30.
(4) Includes management compensation of approximately $(227), $779, $2,049,
$4,121, $1,855 and $1,391 for the years 1991, 1992, 1993, 1994 and 1995
and for the nine months ended September 30, 1995 respectively, which would
not have been paid under the current executive salary and bonus plan.
(5) Reflects a pro forma provision for federal and state income taxes for the
Predecessor at a blended rate of 38% for 1995. During 1995, the
Predecessor elected to be treated as an S corporation for federal income
tax purposes and therefore recorded no provision for federal income taxes
for the year or for the nine months ended September 30, 1995.
(6) Pro forma to give effect to the Restructuring. See "Unaudited Pro Forma
Financial Statements".
(7) Pro forma to give effect to the Restructuring and as adjusted to reflect
the sale by the Company of 2,000,000 shares of Common Stock in the
Offering and the application of the net proceeds as described under "Use
of Proceeds."
(8) Total assets include $45 million in Restricted Cash securing $45 million
of Installment Promissory Notes due to former stockholders of the
Predecessor included in long-term debt as of December 31, 1995. Such
amounts were repaid in September 1996.
(9) Stockholders' equity reflects reductions of equity of $3,828 and $3,966 at
December 31, 1995 and September 30, 1996, respectively, reflecting the
adjustments to Predecessor equity recorded in connection with the
Acquisition.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
On December 21, 1995, the Company acquired the business of its Predecessor.
See "Certain Transactions--The Acquisition." As a result of the Acquisition,
the nine month period ended September 30, 1996 is not comparable to the nine
month period ended September 30, 1995 due to the purchase accounting effects
of the Acquisition, the different capital structure of the Company following
the Acquisition, and the amendments to the Company's executive compensation
arrangements. The primary effect of the Acquisition and the related financing
on the Company's future operations is to reduce reported profitability to the
extent (1) interest expense is above historical norms resulting from higher
debt incurred as part of the Acquisition and (2) purchase accounting treatment
results in increased amortization charges. The discussion of results of
operations that follows is based upon, and should be read in conjunction with,
the financial statements, including the notes thereto, included elsewhere in
this Prospectus.
GENERAL
The Company has experienced significant growth in net sales and net income
since 1991. Over the last three fiscal years, its net sales and net income
have increased at a faster rate than that of the manufactured housing industry
as a whole. This growth resulted from increased demand for the Company's homes
and from the Company's internal expansion, including the addition to the
Company's operations of a total of three manufacturing facilities during 1994
and 1995. The Company intends to continue increasing its presence in its
Primary Markets, expanding into contiguous markets in the southeastern United
States and raising the level of production from its existing facilities as the
primary means of seeking further growth.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain operating
data of the Company:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------- -------------------
1993 1994 1995(1) 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Average wholesale price per
home:
Single-section homes.......... $12,271 $13,617 $15,226 $15,019 $17,023
Multi-section homes........... 19,291 22,007 22,995 22,664 24,691
Average per home............ 15,223 18,385 20,358 19,962 21,872
Homes sold:
Single-section homes.......... 1,662 1,583 1,512 1,136 1,719
Multi-section homes........... 1,206 2,084 2,942 2,078 2,969
------- ------- ------- ------- -------
Total homes................. 2,868 3,667 4,454 3,214 4,688
Manufacturing facilities(2) (end
of period)..................... 2 3 5 4 5
</TABLE>
- --------
(1) Year ended December 30.
(2) The Company's third, fourth and fifth facilities commenced operations in
January 1994, and August and December 1995, respectively.
17
<PAGE>
The following table sets forth for the periods indicated certain statement
of operations data expressed as a percentage of net sales:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- ------------------
1993 1994 1995(1) 1995 1996
------- ------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales..................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales................. 80.0 78.5 77.9 78.1 75.0
------- ------- ------- -------- --------
Gross profit.................. 20.0 21.5 22.1 21.9 25.0
Goodwill amortization......... 0.0 0.0 0.0 0.0 0.7
Selling, general and
administrative expense....... 15.5 16.2 13.2 13.1 11.8
------- ------- ------- -------- --------
Income from operations........ 4.5 5.3 8.9 8.8 12.5
Interest expense.............. 0.2 0.1 0.3 0.2 3.5
Net income.................... 2.5% 3.2% 5.4% 5.4% 5.2%
</TABLE>
- --------
(1) Year ended December 30.
(2) Reflects a pro forma provision for federal and state income taxes for the
Predecessor at a blended rate of 38% for 1995. During 1995, the
Predecessor elected to be treated as an S corporation for federal income
tax purposes and therefore recorded no provision for federal income taxes
for the year or for the nine months ended September 30, 1995.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1995
Net Sales. Net sales of manufactured homes increased by 59.5% to $100.8
million for the nine months ended September 30, 1996 compared to $63.2 million
for the nine months ended September 30, 1995. This increase reflects a 45.9%
increase in the number of homes sold and a 9.6% increase in the average
wholesale price per home. The increase in the average wholesale price per home
resulted from a continued shift by home buyers toward larger, and therefore
higher priced, homes and general price increases on such homes. The nine
months ended September 30, 1996 include $27.8 million of net sales from two
new manufacturing facilities which were not operating during the majority of
the nine months ended September 30, 1995. Sales of multi-section homes
accounted for approximately 63% of homes sold by the Company in the nine
months ended September 30, 1996 and 65% in the nine months ended September 30,
1995.
Cost of Sales. Cost of manufactured homes sold was $75.6 million (75% of net
sales) for the nine months ended September 30, 1996 as compared to $49.3
million (78.1% of net sales) for the nine months ended September 30, 1995. The
increase in cost of sales was due primarily to higher sales volume. The
decrease in the cost of sales as a percentage of net sales for the compared
periods was the result of general price increases on homes sold, lower prices
for certain commodity materials, increased manufacturing efficiencies
(including reduced overtime) and improved use of volume incentives in
purchasing raw materials.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by 42.2% to $11.8 million in the nine months
ended September 30, 1996 from $8.3 million in the nine months ended September
30, 1995, primarily as a result of increased sales, the addition of new
manufacturing facilities and expenses related to the Acquisition, together
with special dealer promotional expenses of $0.9 million. This increase was
partially offset by a reduction in executive compensation from $1.7 million in
the nine months ended September 30, 1995 to $1.1 million in the nine months
ended September 30, 1996, a 35.3% decrease, partly offset by management fees
paid to Strategic Investments pursuant to a Management Agreement entered into
by the Company in connection with the Acquisition.
Interest Expense. Interest expense, which includes the amortization of
deferred financing charges, increased to $3.6 million in the nine months ended
September 30, 1996 compared to approximately $100,000 in the nine months ended
September 30, 1995. Such increase resulted primarily from the financing
incurred in connection with the Acquisition.
18
<PAGE>
YEAR ENDED DECEMBER 30, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net Sales. Net sales increased by 34.1% to $89.3 million for fiscal 1995
compared to $66.6 million for fiscal 1994. The increase in net sales reflected
a 21.5% increase in the number of homes sold and a 10.7% increase in the
average wholesale price per home. Increased production from the Company's
existing facilities as well as from the opening of two new manufacturing
facilities in the latter part of 1995, enabled the Company to respond to
increased demand. Production at the new facilities accounted for approximately
$5.2 million of net sales in 1995. The average wholesale price per home
increased as a result of price increases instituted by the Company, which
included a pass through of higher lumber costs, and an increase in the size of
the average home. Sales of multi-section homes accounted for approximately 66%
of homes sold by the Company in 1995 as compared to approximately 57% in 1994.
Cost of Sales. Cost of manufactured homes sold was $69.6 million (77.9% of
net sales) for fiscal 1995 as compared to $52.3 million (78.5% of net sales)
for fiscal 1994. The increase in cost of sales was due primarily to higher
sales volume. The decrease in cost of sales as a percentage of net sales was
the result of improved use of volume incentives in purchasing raw materials,
maintenance of margins by adjusting wholesale prices to account for increases
in the cost of raw materials, particularly lumber, and by changes in sales mix
to a greater proportion of sales of multi-section homes, which typically have
higher margins.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by 9.3% to $11.8 million for fiscal 1995
from $10.8 million for fiscal 1994 primarily as a result of increased sales
and the addition of two new manufacturing facilities. The decrease in selling,
general and administrative expenses as a percentage of net sales from 16.2% in
fiscal 1994 to 13.2% in fiscal 1995 primarily resulted from a reduction in
executive compensation from $5.5 million in fiscal 1994 to $3.7 million in
fiscal 1995, a 32.7% decrease, and in part, from increased operating
efficiencies.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
Net Sales. Net sales increased by 55.2% to $66.6 million for fiscal 1994
compared to $42.9 million for fiscal 1993. The increase in net sales reflected
a 27.9% increase in the number of homes sold and a 20.8% increase in the
average wholesale price per home. During January 1994, the Company began
production at a third manufacturing facility. Production at this facility
accounted for approximately $17.4 million of net sales in 1994. The primary
reason for the increase in the average wholesale price per home in 1994 was
the pass through of increased costs resulting from the implementation of U.S.
Department of Housing and Urban Development ("HUD") Wind Zone regulations for
manufactured homes sold in certain coastal areas and an increase in the size
of the average home. Sales of multi-section homes accounted for 57% of homes
sold by the Company in 1994 as compared to 42% in 1993.
Cost of Sales. Cost of manufactured homes sold was $52.3 million (78.5% of
net sales) for fiscal 1994 as compared to $34.3 million (80.0% of net sales)
for fiscal 1993. The increase in cost of sales was due primarily to higher
sales volume. The decrease in cost of sales as a percentage of net sales for
the compared periods was the result of improved use of volume incentives in
purchasing raw materials, maintenance of margins by adjusting wholesale prices
to account for increases in the cost of raw materials, particularly lumber,
and by changes in sales mix to a greater proportion of sales of multi-section
homes, which typically have higher margins. The Company was able to pass
through increased costs associated with higher raw materials prices and
increased material content required by the new HUD Wind Zone regulations.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by 61.2% to $10.8 million for fiscal 1994
compared to $6.7 million for fiscal 1993 primarily as a result of increased
sales, the addition of a new manufacturing facility and increased levels of
executive compensation. Selling, general and administrative expenses as a
percentage of net sales increased to 16.2% in 1994 from 15.5% in 1993
primarily as a result of increased executive compensation, which rose to $5.5
million for 1994 compared to $3.1 million for 1993.
19
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital requirements and capital expenditures
historically have been funded from internally generated funds, and to a lesser
extent from borrowings. The Company's capital requirements have arisen
principally in connection with expansion of the Company's production capacity
and with increased working capital needs that normally accompany sales growth.
Accounts receivable are funded by approved dealer floor-plan financing and are
usually collected within 15 days. All homes are manufactured against orders,
and no homes are produced for inventory.
Cash flow provided by operating activities was approximately $340,000 and
$8.4 million for fiscal 1994 and 1995, respectively. Cash flow provided by
operating activities was $8.5 million for the nine month period ended
September 30, 1996, compared to $4.7 million for the nine month period ending
September 30, 1995. Increased cash flow from operations in 1995 was due in
part to the Company's status as an S corporation for federal income tax
purposes in that year, pursuant to which the Company had no federal income tax
liability. In the other compared periods, the Company operated as a C
corporation.
Capital expenditures were $1.4 million and $1.2 million for fiscal 1994 and
1995, respectively. Capital expenditures during those periods were used
primarily for expansion of manufacturing facilities and for normal property,
plant and equipment replacement. Expenditures in 1994 included $1.0 million
for the purchase of a corporate airplane and $200,000 to complete the
Company's Plant #3 in Waycross, Georgia. Expenditures in 1995 included
$400,000 to outfit and equip the Company's Plant #4 in Waycross, Georgia and
$800,000 to outfit and equip the Company's Plant #5 in Lamar, South Carolina.
In addition to the capital expenditures for Plant Nos. 3, 4 and 5, the Company
invested in the aggregate $1.8 million in inventory and accounts receivable
net of estimated trade payables during the first four months of operations of
these plants.
As a result of the Acquisition, the capital structure of the Company
significantly changed. The Company obtained a $26.0 million senior secured
credit facility consisting of a $16.0 million Line of Credit, a $4.0 million
Term Loan and a $6.0 million Working Capital Facility. The Company also issued
a $17.2 million Senior Subordinated Note for $14.9 million, which note bears
interest at 10.87% of the face amount through March 31, 2001 and 14.5%
thereafter through maturity on December 21, 2002. The discount on this note is
being amortized using the effective interest method over the life of the note.
In addition, the Company issued $5.0 million of Junior Subordinated Notes,
which bear interest at 13% and are payable in full on June 30, 2003. In
addition, the Company issued Redeemable Preferred Stock with a redemption
price of $8.0 million for approximately $7.7 million. Finally, the Company
issued additional preferred and common equity for proceeds of approximately
$2.7 million, all of which equity will be converted into or exchanged for
Common Stock as part of the Restructuring. In connection with the Acquisition,
the Predecessor paid on behalf of the Company approximately $3.0 million of
debt issuance and Acquisition costs.
As of September 30, 1996, borrowings and letters of credit outstanding under
the senior credit facility totaled $12.1 million, including $7.8 million under
the Line of Credit, $4.0 million under the Term Loan and approximately
$300,000 in outstanding letters of credit related to operations, leaving the
Company with $9.4 million available for use at that date. The Term Loan bears
interest at either a prime rate designated by the lender plus 1.5% or LIBOR
plus 3.75%, matures on January 1, 2001 and has no amortization until April 1,
2000. The Line of Credit bears interest at the same rate as the Term Loan, and
reduces over time, maturing on April 1, 2000. The Working Capital Facility,
which bears interest at either a prime rate designated by the lender plus
1.25% or LIBOR plus 3.5%, matures on January 1, 2001. As of September 30,
1996, the Company had $1,000 outstanding under the Working Capital Facility.
The senior credit facility is secured by substantially all of the assets of
the Company. During June 1996, the Company borrowed under the Line of Credit
to pay down $2.25 million of the Senior Subordinated Note.
The Company intends to use the net proceeds from the Offering to reduce
indebtedness and to redeem the Redeemable Preferred Stock. See "Use of
Proceeds." After completion of the Offering, the Company will have
approximately $9.0 million available under the senior credit facility, unless
the terms of the senior credit facility are renegotiated.
20
<PAGE>
In the fiscal quarter in which the Restructuring and the Offering are
consummated, the Company will record the following non-recurring charges: (1)
a non-cash charge of approximately $2.2 million resulting from the issuance of
Common Stock to the holders of Series B Preferred Stock in satisfaction of the
liquidation preference payable to such holders upon the conversion of the
Series B Preferred Stock into Common Stock, and (2) approximately $258,000
resulting from the redemption of the Redeemable Preferred Stock, representing
the difference between the consideration received upon issuance (plus
accretion) and the redemption price. The non-cash charge of $2.2 million will
reduce net income available to common stockholders for such quarter, but will
not reduce total stockholders' equity. In addition, at the same time, the
Company will record an extraordinary after-tax charge to income of
approximately $400,000 resulting from the prepayment of a substantial portion
of the Company's outstanding long-term debt. See "Certain Transactions--The
Acquisition" and "--The Restructuring."
In accordance with customary business practice in the manufactured housing
industry, the Company has entered into repurchase agreements with various
financial institutions and other credit sources pursuant to which the Company
has agreed, under certain circumstances, to repurchase homes sold to
independent dealers in the event of a default by a dealer in its obligation to
such credit sources. Under such agreements, the Company agrees to repurchase
homes not previously sold by the dealer at declining prices over the term of
the agreement (which generally ranges from 12 to 18 months). The Company
estimates that its potential obligations under such repurchase agreements
approximated $45.3 million at September 30, 1996. During fiscal 1993, 1994 and
1995, net expenses incurred by the Company under these repurchase agreements
totaled less than $25,000 in each year.
The Company believes that cash flow from operations, together with proceeds
from the Offering and existing credit facilities, will be adequate to support
its working capital needs and currently planned capital expenditure needs for
the foreseeable future.
BACKLOG
The Company's backlog at September 30, 1996 was approximately $6.9 million
as compared to $18.2 million at September 30, 1995. The Company believes that
the reduction in backlog is due principally to an increase in the Company's
production capacity as a result of the addition of two manufacturing
facilities in August and December 1995 and an overall increase in industry
production capacity. Due to the strong growth in demand for manufactured homes
in the Company's Primary Markets over the last several years, the seasonal
trend of generally lower sales and reductions in backlog in the first and
fourth quarters of the year has not materially impacted the Company's
quarterly results of operations. Such seasonality, however, combined with
increased production capacity in the industry and at the Company, may have an
adverse impact on the Company's future operations during certain periods.
21
<PAGE>
UNAUDITED QUARTERLY RESULTS
The following table sets forth certain unaudited quarterly financial
information for fiscal 1994 and 1995, and the nine months ended September 30,
1996. The unaudited quarterly information includes all adjustments, consisting
of normal recurring adjustments, which management considers necessary for a
fair presentation of the information shown. The operating results for any
quarter are not necessarily indicative of results of any future period.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994
Net sales............................. $13,781 $16,194 $17,608 $18,991 $ 66,574
Gross profit.......................... 2,964 3,516 3,900 3,924 14,304
Income from operations................ 700 900 989 963 3,552
Net income............................ 411 535 590 570 2,106
YEAR ENDED DECEMBER 30, 1995
Net sales............................. $20,176 $21,862 $21,116 $26,138 $ 89,292
Gross profit.......................... 4,275 4,995 4,568 5,882 19,720
Income from operations................ 1,663 2,108 1,801 2,374 7,946
Net income(1)......................... 1,014 1,290 1,113 1,367 4,784
NINE MONTHS ENDED SEPTEMBER 30, 1996
Net sales............................. $31,730 $33,168 $35,925 $100,823
Gross profit.......................... 8,127 8,419 8,649 25,195
Income from operations................ 3,640 4,753 4,216 12,609
Net income............................ 1,434 2,081 1,692 5,207
</TABLE>
- --------
(1) Reflects a pro forma provision for federal and state income taxes for the
Predecessor at a blended rate of 38% for 1995. During 1995, the
Predecessor elected to be treated as an S corporation for federal income
tax purposes and therefore recorded no provision for federal income taxes
for the year or for the nine months ended September 30, 1995.
22
<PAGE>
BUSINESS
GENERAL
General produces manufactured homes in the southeastern United States, with
an emphasis on value-pricing and enhanced customer service. The Company sells
its homes through a network of independent dealers with more than 400 retail
sales centers principally located in the Company's Primary Markets and uses a
variety of brand names in order to better penetrate its markets. The Company's
principal focus is on the production of multi-section homes, which, for the
first nine months of 1996, represented approximately 63% of the homes sold by
the Company. Since 1994, in the Company's Primary Markets, sales of multi-
section homes have exceeded sales of single-section homes. The Company
believes that wider and more flexible floor plan designs and site-built
appearance are features of multi-section homes that have contributed to this
trend. The Company manufactures its homes in five production facilities, four
of which are located in Waycross, Georgia, and one of which is located in
Lamar, South Carolina. The Company's single-section homes generally sell at
retail prices between $12,000 and $29,000 and its multi-section homes
generally sell at retail prices between $18,000 and $44,000.
Since its founding in 1987, the Company has experienced rapid growth. Net
sales have increased from $20.2 million in 1991 to $89.3 million in 1995, a
compound annual growth rate of 45%. During the first nine months of 1996, net
sales were $100.8 million compared to $63.2 million for the comparable period
in 1995, a 59% increase. In addition, the Company believes that its operating
margins are among the highest in the industry based on the publicly available
information of its competitors. The Company began production at its third and
fourth manufacturing facilities in January 1994 and August 1995, and began
production at its fifth manufacturing facility, located in South Carolina, in
December 1995.
The Company is the successor to General Manufactured Housing, Inc., which
commenced operations in 1987. The Predecessor was acquired on December 21,
1995 in a leveraged buyout transaction accounted for as a purchase, for an
aggregate consideration of approximately $50.6 million. As a result of the
Acquisition, an affiliate of Strategic Investments & Holdings, Inc. is a
principal stockholder of the Company, and certain principals of Strategic
Investments actively participate in the management of the Company. The
Acquisition was funded through the issuance of the Company's capital stock and
indebtedness. See "Certain Transactions--The Acquisition", "--Management
Agreement" and "--Sales of Securities to Related Parties" and "Principal
Stockholders."
BUSINESS STRATEGY
The key elements of the Company's business strategy are as follows:
Comprehensive Approach to Customer Service. The Company is committed to
providing comprehensive service to its independent dealers and to retail
buyers of its homes. To differentiate itself in the market, the Company
created the Gold Card service program. Under the Gold Card service program,
the retail home buyer is able to contact the Company directly with respect to
all warranty service claims. The Company believes that its Gold Card program:
(1) ensures prompt customer service, (2) develops loyalty among dealers by
reducing their need to provide time-consuming customer service and (3)
enhances the Company's reputation in the marketplace. The Company believes the
Gold Card service program has contributed to its success and that it continues
to be the only warranty service program in the industry administered directly
by the manufacturer. The Company provides all retail buyers of its homes with
one-year limited warranties and, with respect to most of its homes, pays a
third party to provide limited warranties against structural defects for a
period of nine years beginning after the initial one-year warranty period.
Product Focus. The Company targets its homes to the value-priced segment of
the manufactured housing market. In 1995, the Company's average wholesale
price per home sold was $20,358. In designing its homes, the Company
incorporates certain high-visibility and structural features that are valued
by home buyers and characteristic of higher-priced manufactured homes, while
avoiding other features that add to production cost
23
<PAGE>
without significantly enhancing marketability. Standard high-visibility and
structural features typically include vaulted and textured ceilings, plywood
floors and higher-quality cabinets. Because of this design emphasis, together
with its manufacturing expertise and strict cost controls, the Company
believes that it is able to offer multi-section homes that compete directly
with the single-section homes offered by certain of its competitors.
Geographic Focus. General's objective is to become one of the leading
producers of value-priced manufactured homes across the southeastern United
States. Historically, the Company has focused on marketing its homes through
independent dealers in the Company's Primary Markets. The states comprising
the Company's Primary Markets represent five of the six largest markets for
manufactured housing and accounted for approximately 31% of industry shipments
during the first nine months of 1996 according to MHI. The Company plans to
continue to grow by increasing its presence in its Primary Markets and by
further expanding into contiguous markets in the southeastern United States.
Through its existing facilities, the Company believes that its level of
production can be increased to approximately 54 floors per day from its
current average production of approximately 40 floors per day.
Low-Cost Production. The Company strives to achieve low-cost production
through the use of (1) manufacturing-focused information systems, (2)
incentive-based compensation programs, (3) cost-efficient product designs and
(4) a centralized manufacturing strategy. The Company's information systems
provide management with daily reports that enable management to: identify
potential quality concerns; react to raw material price changes; recognize
changes in production efficiency; and tightly control costs. The Company
relies heavily on incentive-based compensation programs that are designed to
motivate employees to achieve production and sales volume goals and to
maintain cost and quality control standards. To help effect production
efficiencies, the Company uses innovative product designs and construction
systems combined with standardized base construction materials across product
lines. The Company's centralized manufacturing strategy allows the Company to
reduce costs through plant specialization and decreased overhead.
INDUSTRY
A manufactured home is a complete single-family residence that is built in a
factory and transported to a site. Manufactured homes offer most of the
amenities of, and are generally built with the same materials as, site-built
homes. Manufactured homes are produced in sections, also referred to as
"floors", and finished homes may consist of one or more sections. According to
the MHI, in 1995, the United States manufactured housing industry had
estimated retail sales of $12.3 billion compared to $10.2 billion in 1994, an
increase of 21%. From 1991 through 1995, shipments of manufactured homes
increased from approximately 171,000 homes to 340,000 homes, a compound annual
growth rate of 18.7%. Growth has continued through the first nine months of
1996 as home shipments increased 9.2% over the comparable period in 1995.
During the first nine months of 1996, total manufactured home shipments
within the Company's Primary Markets increased by 11.8% over the comparable
period in 1995, exceeding the national rate of increase, and the Company's
total home shipments increased by 45.9% for the same period. Shipments of
multi-section manufactured homes in the Company's Primary Markets increased
from 47,566 in 1994 to 53,990 in 1995, an increase of 13.5%, and through the
first nine months of 1996, increased by 19.9% over the comparable period in
1995. The Company's shipments of multi-section homes increased 41% and 43%,
respectively, for the same periods.
Because of the lower cost of construction compared to site-built homes,
manufactured housing has historically served as one of the most affordable
alternatives for the home buyer. According to the U.S. Department of Commerce,
in 1995 the average cost per square foot was $23.95 for a single-section
manufactured home and $28.96 for a multi-section manufactured home, as
compared to an average cost of $60.55 per square foot for a site-built home,
each excluding land costs. Manufactured homes have traditionally been an
attractive means for home buyers to overcome the obstacles of large down
payments and high monthly mortgage payments. Since the introduction of the
first manufactured homes, there have been significant improvements in quality,
design and amenities, and attractive home sites have become increasingly
available.
24
<PAGE>
The following table sets forth information according to MHI regarding the
number of new manufactured homes shipped during each of the past five years
and for the nine months ended September 30, 1995 and 1996.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- --------------
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ------ ------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C>
New manufactured homes shipped:
Single-section homes........... 91 112 134 156 174 131 134
Multi-section homes............ 80 99 120 148 166 122 143
---- ---- ---- ---- ---- ------ ------
Total.......................... 171 211 254 304 340 253 277
==== ==== ==== ==== ==== ====== ======
New manufactured homes shipped as
a percentage of total new
single-family homes sold(1)..... 25.1% 25.7% 27.6% 31.2% 33.7% 32.5% 31.6%
</TABLE>
- --------
(1) Total new single-family homes sold includes both site-built and
manufactured homes.
As indicated in the table above, since 1991, the manufactured housing
industry has experienced a significant increase in demand. The Company
believes improved economic conditions, reduced inventories of repossessed
homes, greater availability of retail financing for the home buyer and
enhanced quality of manufactured homes have contributed to increased
shipments. Although the manufactured housing industry has experienced
consistent growth over the past four years, the industry is cyclical and is
affected by many of the same factors that influence the housing industry
generally, including inflation, interest rates, availability of financing,
regional economic and demographic conditions and consumer confidence levels,
as well as the affordability and availability of alternative housing, such as
apartments, condominiums and conventional, site-built homes. There can be no
assurance, therefore, as to whether recent increases in the demand for
manufactured housing will continue nationally or in the markets served by the
Company.
PRODUCTS
The Company produces a broad range of value-priced manufactured homes under
various brand names, including "Jaguar", "General" and "Admiral." The Company,
which presently offers over 75 models of homes, frequently adds new models and
updates its decors annually. Single-section homes range in size from 616
square feet to 1,216 square feet and multi-section homes range in size from
864 square feet to 2,128 square feet. Homes generally have two to four
bedrooms and all homes include some major appliances. The Company offers
additional optional features, including alternate color packages, wood burning
fireplaces, whirlpool baths, ceramic tile and other items. While the Company
does not offer central air-conditioning as a standard feature, its homes
include duct work so that it may be easily added.
DISTRIBUTION
During the nine months ended September 30, 1996, the Company sold
manufactured homes through more than 400 independent retail sales centers in
ten states in the southeastern United States and believes that the quality of
its dealer network has been important to its growth. The Company's Vice
President of Marketing administers a sales and marketing organization
consisting of two senior sales executives and 11 sales representatives. The
sales force works from the Company's executive offices in Waycross, rather
than travel extensively, which management believes is a more cost-effective
approach. Dealer relationships are maintained through Company-sponsored sales
events and participation in trade shows. Compensation to the sales force is
heavily incentive based, with sales representatives receiving a commission
based on a percentage of collected sales. The sales force has limited
discretion in pricing, as prices are established by senior management.
The Company believes the close working relationship between its sales
representatives and the dealers they service has been an important factor in
the Company's growth. The Company does not operate company-owned retail sales
centers. In order to promote dealer loyalty and to enable dealers to penetrate
retail markets, only one
25
<PAGE>
dealer within a given local market may distribute a particular brand of homes
manufactured by the Company. The Company will frequently sell a different
brand of its homes to another dealer in the same local market. This practice,
known as "double-channeling," is an operating strategy which enables the
Company to increase its market penetration. The Company does not have formal
marketing agreements with its dealers, and substantially all of the Company's
dealers also sell homes of other manufacturers. The Company believes its
relations with its independent dealers are good. During 1995, the Company's
largest dealer accounted for approximately 6.9% of net sales, and the
Company's ten largest dealers accounted for approximately 33.4% of net sales.
During the first nine months of 1996, Southern Lifestyle Homes accounted for
approximately 11% of net sales.
The number of independent retail sales centers selling the Company's homes
has steadily increased each year, as shown in the table below. During the nine
months ended September 30, 1996, the Company sold homes to more than 400
dealer locations, up from 318 in 1995, 263 in 1994 and 203 in 1993. The
greatest growth in 1996 came in South Carolina, as 58 retail sales centers in
that state added models produced at the new Lamar manufacturing facility.
Overall, during 1996, the Company sold homes manufactured at the Lamar
facility to approximately 70 independent retail sales centers.
INDEPENDENT RETAIL SALES CENTERS BY STATE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
----------------------- SEPTEMBER 30,
1993 1994 1995 1996
------- ------- ------- -----------------
<S> <C> <C> <C> <C>
Primary Markets:
Georgia............................. 60 88 86 98
South Carolina...................... 37 35 39 99
Florida............................. 28 44 45 48
Alabama............................. 27 30 54 57
North Carolina...................... 18 31 42 47
------- ------- ------- ---
170 228 266 349
Contiguous Markets:
Kentucky............................ 1 0 10 15
Louisiana........................... 3 8 6 4
Mississippi......................... 11 17 16 21
Tennessee........................... 18 10 16 16
Virginia............................ 0 0 4 1
------- ------- ------- ---
33 35 52 57
------- ------- ------- ---
Total............................. 203 263 318 406
======= ======= ======= ===
</TABLE>
CUSTOMER SERVICE AND WARRANTY
The Company provides its Gold Card service program to all retail buyers of
its homes. Using the Gold Card "800" number, a home buyer may directly contact
the Company to obtain service. The Company endeavors to respond promptly to
all service calls and to return any call received during normal business hours
within 30 minutes of receipt of the call. The Company's President frequently
contacts home buyers directly with respect to service-related issues. The
Company schedules any required service work with the home buyers and, if the
work relates to a manufacturing defect, engages independent contractors to
perform the work. The contractors obtain materials for the work from the
Company, which maintains an inventory of materials to enable the Company to
ensure prompt customer service. The Gold Card service program reduces the
independent dealer's involvement in the service process and provides the home
buyer with a direct link to the manufacturer. The Company believes
26
<PAGE>
that this program reduces the time and ultimate cost of resolving service
problems and builds collaborative relationships with independent dealers that
contribute to better long-term relationships and increased sales. The Company
strives to provide quick and personal handling of consumer complaints, and
maintains an average service backlog typically from 10 to 14 days, which the
Company believes compares favorably to others in the industry.
The Company maintains extensive manufacturing and service databases with
respect to the homes it sells. These databases include the building
identification number, the name of the dealer who sold the home and the
installer, a record of all service calls and attendant costs, the date and
place of manufacture, the floor plan and any optional features included in the
home, and identification of the principal building materials, fixtures and
appliances included in the home, together with the date of purchase and, for
certain components, names of the vendors that supplied such items. The
Company's service department uses this data to prepare weekly summaries of
service-related issues. The Company's databases enable management to improve
the manufacturing quality of its homes and monitor the service performance of
its contractors and dealers.
The Company provides all retail buyers of its homes with one-year limited
warranties and, with respect to most of its homes, pays a third party to
provide limited warranties against structural defects for a period of nine
years beginning after the initial one-year warranty period. Many of the
Company's competitors provide buyers with only the HUD-mandated one-year
limited warranty. The Company also furnishes to the consumer copies of any
direct warranties that are provided by the manufacturer of components and
appliances.
MANUFACTURING
The Company currently operates four manufacturing facilities located in
Waycross, Georgia and one manufacturing facility located in Lamar, South
Carolina. All of the Company's manufacturing facilities are designed to allow
for the production of either single-section or multi-section homes and for the
easy modification of product designs. This provides the Company with greater
flexibility to react to changes in customer demand. The Company leases each of
its facilities except for Plant #1 in Waycross, Georgia, which is owned by the
Company. The terms of the leases allow the Company to exercise purchase
options at its sole election. The following table sets forth certain
information with respect to the production of homes at the Company's current
manufacturing facilities, including production and estimated capacity
expressed in floors per day:
<TABLE>
<CAPTION>
COMMENCEMENT CURRENT ESTIMATED
PLANT LOCATION OF PRODUCTION PRODUCTION(1) CAPACITY(2)
- ----- --------------------- -------------- ------------- -----------
<S> <C> <C> <C> <C>
#1.............. Waycross, Georgia March, 1988 12 12
#2.............. Waycross, Georgia August, 1990 5 7
#3.............. Waycross, Georgia January, 1994 11 12
#4.............. Waycross, Georgia August, 1995 8 15
#5.............. Lamar, South Carolina December, 1995 4 8
--- ---
40 54
</TABLE>
- --------
(1) Average daily number of floors produced for the nine months ended
September 30, 1996. The Company's manufacturing facilities generally
operate on a one shift per day, five day per week basis.
(2) Estimates of management based upon current plant configuration and product
mix.
The Company currently manufactures only single-section homes at the Lamar
plant. The frames for those homes are currently manufactured in Waycross,
Georgia and shipped to the Lamar plant. The Company intends to expand its
Lamar operation in 1997 by adding a frame shop and, as market conditions
warrant, thereafter intends to begin construction of a new production facility
to be located in Lamar, which would allow the Company to increase production
of multi-section homes. The Company believes that the additional manufacturing
facilities would enable the Company to lower its manufacturing and freight
costs in the South Carolina market and to further penetrate the Kentucky,
Tennessee, Virginia and North Carolina markets.
27
<PAGE>
The following table sets forth the total homes and floors sold by the
Company for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------- -------------
1993 1994 1995 1995 1996
------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Homes sold:
Single-section homes................. 1,662 1,583 1,512 1,136 1,719
Multi-section homes.................. 1,206 2,084 2,942 2,078 2,969
------- ------- ------- ------ ------
Total homes........................ 2,868 3,667 4,454 3,214 4,688
Total floors sold...................... 4,074 5,751 7,396 5,292 7,657
</TABLE>
The principal materials used in the construction of the Company's homes
include lumber and lumber products, gypsum wallboard, steel, aluminum,
fiberglass, carpet, vinyl, fasteners, appliances, electrical items, windows
and doors. The Company believes that the materials used in the manufacture of
its homes are readily available at competitive prices from a wide variety of
suppliers. Accordingly, the Company does not believe that the loss of any
single supplier would have a material adverse effect on its business. The
Company's direct or variable costs of operations can be significantly affected
by the availability and pricing of raw materials.
The Company's backlog at September 30, 1996 was approximately $6.9 million
as compared to $18.2 million at September 30, 1995. The Company believes that
the reduction in backlog is due principally to an increase in the Company's
production capacity as a result of the addition of two manufacturing
facilities in August and December 1995 and an overall increase in industry
production capacity, which has brought supply more into balance with demand.
Due to the strong growth in demand for manufactured homes in the Company's
Primary Markets over the last several years, the seasonal trend of generally
lower sales and reductions in backlog in the first and fourth quarters of the
year has not materially impacted the Company's quarterly results of
operations. Such seasonality, however, combined with increased industry
production capacity, may have an adverse impact on the Company's future
operations during certain periods. Dealer orders are subject to cancellation
prior to the commencement of production without penalty, and accordingly, the
Company does not consider its backlog of orders to be firm orders.
The Company's management information systems provide management with daily
reports with respect to production (including per unit production hours,
overtime and material costs for each plant), sales, inventories, receivables,
collections, orders and backlog. These reports enable management to tightly
control costs and to manage the business to achieve established performance
goals.
Because the cost of transporting a manufactured home is significant,
substantially all of the Company's homes are sold to dealers within a 400-mile
radius of the manufacturing facility. The Company arranges for the
transportation of finished homes to dealers using independent trucking
companies. Customary sales terms are cash-on-shipment or guaranteed payment
from a floor plan financing source. Dealers or other independent installers
are responsible for placing the home on site, making utility hook-ups and
installing air-conditioning.
INCENTIVE COMPENSATION
The management of the Company relies heavily on the use of incentive-based
compensation arrangements to motivate the employees of the Company. Nearly
every functional area of the Company has some form of incentive program.
Hourly production workers in the plants are paid on a piece-rate type system,
based on production through-put. The incentive component is paid weekly,
thereby creating immediate feedback to the employees. Plant supervisors are
paid incentives based on production volume, efficiency, overtime, and quality.
Plant supervisors can achieve total weekly compensation of up to four times
weekly base-pay. The Company's quality control employees are paid incentives
based on the lack of production errors. The Company's sales executives and
representatives are paid salaries coupled with a commission program. Executive
management receives base salaries, augmented by participation in the Executive
Bonus Plan, which pays 7% of adjusted
28
<PAGE>
earnings before interest and taxes to five key officers. See "Management--
Compensation Pursuant to Plans." The Company believes that these incentives
enable management to create and maintain a production-oriented, profit-driven
work environment.
DEALER FINANCING
Substantially all of the Company's dealers finance their purchases through
"floor plan" arrangements under which a financial institution provides the
dealer with a loan for the purchase price of the home and maintains a security
interest in the home as collateral. In connection with a floor plan
arrangement, the financial institution that provides the dealer financing
customarily requires the Company to enter into a separate repurchase agreement
with the financial institution under which the Company is obligated, upon
default by the dealer, to repurchase unsold homes held in inventory by the
dealer at the Company's original invoice price plus certain administrative and
shipping expenses, reduced by any appropriate adjustments. At September 30,
1996, the Company's contingent repurchase liability under floor plan financing
arrangements was approximately $45.3 million. Homes that have been repurchased
by the Company under floor plan financing arrangements are usually sold to
other dealers, and losses to date under these arrangements have been
insignificant.
COMPETITION
The manufactured housing industry is highly competitive with competition
based upon various factors, including total price to the dealer, product
features, quality, warranty repair service and the terms of dealer and retail
consumer financing. Fleetwood, Champion and Redman produced approximately
20.3%, 7.7% and 6.9%, respectively, of all of the homes manufactured in the
United States during 1995, and no other manufacturer produced more than 6.5%.
The recently announced acquisition of Redman by Champion could increase
competitive pressures on the Company. A number of firms have been operating
longer and possess greater manufacturing, financial and other resources than
the Company, and there are numerous firms producing manufactured homes in the
states in which the Company operates, many of which are in direct competition
with the Company in the states where its homes are sold. Additionally,
management believes that a significant amount of new manufactured housing
production capacity has been developed in the past three years. A downturn in
the manufactured housing industry could result in excess industry capacity,
which in turn could result in increased competition adversely affecting the
Company's results of operations or financial condition. In addition, the
Company competes for quality independent dealers with other manufacturers,
some of which maintain their own retail sales centers. The Company's sales to
dealers could be adversely affected if competitors acquire independent dealers
and substituted other manufactured homes for homes manufactured by the
Company. Certain of the Company's competitors provide consumers with financing
from captive finance subsidiaries. While management believes that financing
has generally become more available in the manufactured housing industry in
recent years, a contraction in consumer credit could provide an advantage to
those competitors with internal financing capabilities. The Company believes
that its principal competitive strengths are its comprehensive approach to
customer service, product emphasis on multi-section homes, market
concentration in the southeastern United States and low cost production.
Potential negative competitive factors include the Company's relatively small
size, concentration in the Southeastern United States and dependence upon
third parties for financing of retail sales of its homes. Manufactured homes
also compete with site-built homes, as well as apartments, townhouses,
condominiums and existing site-built and manufactured homes.
The barriers to entry into the manufactured housing industry are relatively
low. Management believes, however, that the qualifications for obtaining
inventory, accounts receivable and finished goods financing, which are based
upon the financial strength of the manufacturer and each of its dealers, and
HUD manufacturing requirements, have in recent years become more difficult for
some competitors to meet.
GOVERNMENT REGULATION
The Company's manufactured homes are subject to a number of federal, state
and local laws and regulations. Construction of manufactured homes is governed
by the National Manufactured Housing Construction and Safety Standards Act of
1974 and the regulations issued by HUD thereunder, establishing comprehensive
national construction standards for manufactured homes which preempt
conflicting state and local regulations. These regulations cover all aspects
of manufactured home construction, including structural integrity,
29
<PAGE>
fire safety, wind loads, thermal protection and ventilation. The Company's
manufacturing facilities and the plans and specifications of its manufactured
homes have been approved by a HUD-designated inspection agency. The Company's
homes are regularly checked by an independent, HUD-approved inspector for
compliance during construction. Failure to comply with applicable HUD
regulations could expose the Company to a wide variety of sanctions, including
mandated closings of Company manufacturing facilities.
HUD regulations divide the country into three "Wind Zones" and impose more
stringent construction standards for homes to be sold in areas designated Wind
Zones II and III. The Company currently manufactures and sells homes only in
Wind Zones I and II. During 1995, approximately 24% of the Company's homes
were manufactured for Wind Zone II. The Company cannot predict if additional
regulations will be adopted or the effect such regulations would have on the
Company or the manufactured housing industry as a whole. Additionally, HUD
regulations divide the United States in three "Thermal Zones" and impose more
stringent energy conservation standards for homes to be sold therein. The
Company manufactures and sells homes in Thermal Zones I, II and III.
Manufacturing costs could increase as a result of changes in the Wind Zones,
Thermal Zones and other regulations, and there can be no assurance that the
Company will be able to increase the sales price of its homes to cover any
such increases in its manufacturing costs. The Company believes its
manufactured homes meet or exceed all present HUD requirements.
Manufactured, modular and site-built homes are often built with particle
board, paneling and other products that contain various formaldehyde resins.
HUD regulates the allowable concentration of formaldehyde in certain products
used in manufactured homes and requires warnings to purchasers concerning
formaldehyde-associated risks. Certain components of manufactured homes are
subject to regulation by the Consumer Product Safety Commission (the "CPSC"),
which is empowered to ban the use of component materials believed to be
hazardous to health and to require the manufacturer to repair defects in
components of its homes. The CPSC, the Environmental Protection Agency and
other governmental agencies currently are re-evaluating the allowable
standards for formaldehyde emissions. The Company uses materials in its
manufactured homes that meet the current HUD standards for formaldehyde
emissions and believes that it otherwise complies with HUD and other
applicable government regulations.
The location of manufactured homes is subject to local zoning and housing
regulations. A number of states require manufactured home producers and
retailers to post bonds to ensure the satisfaction of consumer warranty
claims. In addition, a number of states have adopted procedures governing the
installation of manufactured homes. Utility connections are subject to state
and local regulation and must be complied with by the dealer or other person
installing the home.
The Company's operations are also subject to federal, state and local laws
and regulations relating to the generation, storage, handling, emission,
transportation, disposal and discharge of materials into the environment.
Government authorities have the power to enforce compliance with these
regulations, and violations may result in the payment of fines or the entry of
injunctions, or both. Furthermore, the requirements of such environmental laws
and enforcement policies have generally become stricter in recent years. The
Company currently does not believe it will be required under existing
environmental laws and enforcement policies to expend amounts which will have
a material adverse effect on its operating results or financial condition. The
Company is unable to make any assurance, however, that the ultimate cost of
compliance with environmental laws and enforcement policies will not have a
material adverse effect on the operating results or financial condition of the
Company.
ACQUISITIONS
While the Company may in the future pursue an active acquisition policy, no
specific acquisitions are currently in negotiation, and the Company has no
immediate plans to commence such negotiations. If the Company were to proceed
with one or more significant acquisitions in which the consideration consists
of cash, a substantial portion of the Company's available cash could be used
to consummate the acquisitions. If the Company were to consummate one or more
significant acquisitions in which the consideration consists of stock,
stockholders of the Company could suffer a significant dilution of their
interests in the Company. The Company's
30
<PAGE>
ability to effect acquisitions may be dependent upon its ability to obtain
additional financing and, to the extent applicable, consents from the holders
of debt of the Company.
Many business acquisitions must be accounted for as purchases. Most of the
businesses that might become attractive acquisition candidates for the Company
are likely to have significant goodwill and intangible assets, and the
acquisitions of these businesses, if accounted for as a purchase, would
typically result in substantial amortization charges to the Company. In the
event the Company consummates additional acquisitions in the future that must
be accounted for as purchases, such acquisitions would likely increase the
Company's amortization expenses. In connection with any acquisitions the
Company could incur substantial expenses, including the fees of financial
advisors, attorneys and accountants, the expenses of integrating the business
of the acquired company with the Company's business and any expenses
associated with registering shares of the Company's capital stock, if such
shares are issued. The financial impact of such acquisitions could have a
material adverse effect on the Company's business, financial condition and
results of operations and could cause substantial fluctuations in the
Company's quarterly and yearly operating results.
EMPLOYEES
As of September 30, 1996, the Company employed approximately 1,000 persons.
The Company does not have any collective bargaining agreements and has not
experienced any work stoppages as a result of labor disputes. The Company
considers its employee relations to be good.
LEGAL PROCEEDINGS
The Internal Revenue Service is currently conducting an audit of the
Predecessor's income tax returns for 1992, 1993 and 1994. See "Certain
Transactions--Federal Tax Audit." During 1995, an individual filed an action
against the Company in Georgia state court seeking damages of $2.5 million for
personal injury and loss of consortium. The cause of action arises from an
incident in which the individual, while working for a subcontractor, fell and
injured himself on the Company's premises. The claim is being vigorously
contested by the Company. The Company is also involved in routine litigation
arising in the ordinary course of business. In the opinion of the Company, the
disposition of such matters will not have a material adverse effect on the
financial condition, liquidity or the results of operations of the Company.
31
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND SENIOR MANAGEMENT
The following table sets forth certain information, as of December 31, 1996,
with respect to the executive officers and directors of the Company, as well as
certain of its senior management.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Samuel P. Scott(1)...... 59 Chairman of the Board of Directors and Chief Executive Officer
Lannis Thomas........... 66 President
J. Wayne Roberts........ 51 Vice President, Chief Financial Officer and Treasurer
Gregory K. Scott........ 36 Vice President--Manufacturing
Thomas M. Vinson........ 54 Vice President--Marketing
Jack Himebook........... 63 Vice President--Purchasing
Drew E. Scott........... 28 Vice President--Consumer Affairs
Gary M. Brost(1)(2)(3).. 44 Director, Executive Vice President and Secretary
James C. DelZoppo(2).... 43 Director and Assistant Treasurer
Dennis C. Martin........ 46 Director
Donald R. Mossey........ 70 Director
James A. 40 Director
Parsons(1)(2)(3).......
</TABLE>
- --------
(1)Member of Executive Committee.
(2)Member of Audit Committee.
(3)Member of Compensation Committee.
Samuel P. Scott founded the Company in 1987 and has served as Chairman of the
Board of Directors and Chief Executive Officer of the Company since its
inception. From 1968 until founding the Company, Mr. Scott worked in the
manufactured home industry in various capacities.
Lannis Thomas has served as President of the Company since its inception. Mr.
Thomas has worked in the manufactured housing industry since 1983. Mr. Thomas
is a member of the board of directors of the Georgia Manufactured Housing
Association.
J. Wayne Roberts has served as Vice President, Treasurer and Chief Financial
Officer of the Company since December 1995. Mr. Roberts joined the Company in
early 1988 and was its Vice President of Finance from December 1989 until
December 1995. Mr. Roberts has spent all but ten years of his professional
career in the manufactured housing industry.
Gregory K. Scott has served as Vice President--Manufacturing of the Company
since 1988. Mr. Scott has spent his entire professional career in the
manufactured housing industry. Mr. Scott is the son of Samuel P. Scott.
Thomas M. Vinson has served as Vice President--Marketing of the Company since
September 1994. Mr. Vinson served as a Director of Sales of Fleetwood
Enterprises, Inc. from 1985 to 1992 and a Marketing Director of Clayton Homes,
Inc. from 1992 to 1994. Mr. Vinson has spent all but six years of his
professional career in the manufactured housing industry.
Jack Himebook has served as Vice President--Purchasing of the Company since
May 1995. Mr. Himebook joined the Company from Muncy Homes Corporation where he
was employed as a Purchasing Director from November 1993 to May 1995. From 1992
to 1993, he was employed with Regional Building Systems, Inc. as
32
<PAGE>
Director of Purchasing and from 1989 to 1992, he was employed by Active Homes
Inc. Mr. Himebook has been employed in the purchasing and production
operations area for his entire career.
Drew E. Scott has served as Vice President--Consumer Affairs of the Company
since December 1995. Mr. Scott joined the Company as Assistant to the
President of the Company in August 1992. From 1990 to 1992, Mr. Scott served
as Sales Representative for Jax Valves and Fittings in Jacksonville, Florida.
Mr. Scott is the son of Samuel P. Scott.
Gary M. Brost has been Executive Vice President, Secretary and a director of
the Company since the Acquisition. Since 1989, Mr. Brost has been President
and a principal of Strategic Investments, and is the President and a principal
of SIHI-GMH LLC ("SIHI"). Mr. Brost currently serves on the Boards of
Directors of several privately held companies.
James C. DelZoppo has been Assistant Treasurer and a director of the Company
since the Acquisition. Since 1989, Mr. DelZoppo has been a Vice President of
Strategic Investments and is Assistant Secretary and a principal of SIHI.
Dennis C. Martin has been a director of the Company since the Acquisition.
Since 1989, Mr. Martin has been a Vice President and a principal of Strategic
Investments and is Vice President, Secretary and a principal of SIHI.
Donald R. Mossey has been a director of the Company since October 1996. Mr.
Mossey was Chairman and Chief Executive Officer of Leland Engineering, Inc., a
manufacturer of undercarriages for recreational vehicles and of snowmobile
trailers, from 1972 to 1992. Between 1965 and 1972, Mr. Mossey was Chairman,
Chief Executive Officer and majority shareholder of Ventline Inc., a
manufacturer of range hoods and ventilators for mobile homes and recreational
vehicles. In 1972, Mr. Mossey sold his company to Phillips Industries, Inc., a
then public company and major supplier to the manufactured housing industry.
Mr. Mossey served as a Director of Phillips Industries Inc. from 1972 to 1987.
James A. Parsons has been a director of the Company since the Acquisition.
Mr. Parsons is a general partner of RFE Associates V, L.P., the General
Partner of RFE Investment Partners V, L.P., a private equity investment fund
located in New Canaan, Connecticut. Mr. Parsons currently serves on the Boards
of Directors of several privately held companies.
After completion of the Offering, the Company intends to recruit an
additional independent Director to serve on the Board.
The Board of Directors holds regular quarterly meetings and meets on other
occasions when required by special circumstances.
The By-Laws of the Company provide that, so long as any liabilities to the
Company's senior lender remain outstanding, a representative of the senior
lender may attend meetings of the Board of Directors of the Company as an
observer and shall have the right to receive a copy of all materials
distributed to the Board of Directors of the Company.
Members of the Board of Directors serve until the next annual meeting of
stockholders and until their respective successors have been elected and
qualified. Officers of the Company serve at the direction of the Board of
Directors and, unless elected for a lesser term, serve until the next annual
meeting of the Board of Directors.
The Company's Board of Directors currently has three committees, the
Executive Committee, the Audit Committee and the Compensation Committee. The
Executive Committee has the right to exercise certain of the powers and
authority of the Board of Directors in the management of the Company. The
Audit Committee, among other things, recommends the firm to be appointed as
independent accountants to audit the Company's financial statements, fixes the
compensation of such accountants, discusses the scope and results of the audit
with
33
<PAGE>
the independent accountants, reports to the Board of Directors with respect to
the same, and is responsible for ensuring that the business practices and
conduct of employees and other representatives of the Company and its
subsidiaries comply with the policies and procedures of the Company. The
Compensation Committee is charged with establishing a general compensation
policy for the Company and is responsible for the approval of directors' fees
and executive compensation and administers the Company's Stock Option Plan.
EXECUTIVE COMPENSATION
Summary Compensation. The following table sets forth the total compensation
paid or accrued by the Company on behalf of its Chief Executive Officer and
the five other most highly compensated executive officers of the Company
(hereinafter collectively referred to as the "Named Executive Officers") for
the fiscal year ended December 31, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
-------------------------------------------
NAME AND PRINCIPAL OTHER ANNUAL ALL OTHER
POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($) COMPENSATION ($)
------------------ ---- ---------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Samuel P. Scott......... 1995 $100,000 $1,771,385 $3,723(2) $4,800(3)
Chairman and
Chief Executive Officer
Lannis Thomas........... 1995 50,000 315,930 3,723(2)
President
J. Wayne Roberts........ 1995 50,000 315,930 3,723(2)
Vice President, Trea-
surer and Chief
Financial Officer
Gregory K. Scott........ 1995 50,000 305,930 3,723(2)
Vice President--Manu-
facturing
Drew E. Scott........... 1995 35,000 305,930 1,390(2)
Vice President--Con-
sumer Affairs
Thomas M. Vinson........ 1995 50,000 168,107 3,723(2)
Vice President--Market-
ing
</TABLE>
- --------
(1) Represents compensation paid pursuant to Predecessor's compensation
arrangements. These amounts do not include bonus awards of $215,113 and
$215,113 paid to Messrs. Thomas and Roberts, respectively, during 1995 for
services rendered during 1994.
(2) Consists of insurance premiums paid by the Company with respect to group
medical and life insurance coverage.
(3) Consists of insurance premiums paid by the Company with respect to a split
dollar life insurance policy presently in force insuring the life of Mr.
Scott.
The Company has entered into employment agreements with each of Samuel P.
Scott, Gregory K. Scott, and Drew E. Scott. Each of the agreements is for a
term expiring December 31, 2001, establishes the executive's base salary, and
contains a non-competition agreement for a period of two years following the
expiration of the agreement, voluntary resignation by the executive or
termination with cause. The employment agreements provide for base salaries in
the amounts of $325,000 for Samuel P. Scott and $100,000 for each of Gregory
K. Scott and Drew E. Scott. In addition, the base salaries for each of Messrs.
Thomas and Roberts were increased effective January 1, 1996 to $100,000.
34
<PAGE>
COMPENSATION PURSUANT TO PLANS
Executive Bonus Plan. The Company maintains an Executive Bonus Plan in which
Samuel P. Scott, Lannis Thomas, J. Wayne Roberts, Gregory K. Scott and Drew E.
Scott are entitled to participate, each with a participant percentage of 20%.
The plan provides for a bonus pool of 7% of EBIT of the Company, as defined in
the Executive Bonus Plan, in the event that EBIT exceeds the base amount of
$8.5 million for any fiscal year, to be divided among the plan participants
based upon their respective participant percentage. The plan became effective
January 1, 1996 and is administered by the Board of Directors or its
Compensation Committee, which may designate substitute participants in the
event of the termination of employment of any participant. The Board of
Directors may also elect to make discretionary bonus payments. The bonus pool
is payable to the participants, in cash, following the Company's receipt of
its audited financial statements. No portion of the bonus pool will be paid to
any participant for any fiscal year if such participant is not an employee of
the Company at the end of the year, although a prorated amount will be paid to
the participant or his personal representative in the event of the
participant's death, termination for disability or normal retirement during
the plan year. In September 1996, based on the Company's performance through
August 1996, the Company paid an aggregate of $500,000 to the participants
under the Plan as an advance against amounts due for that year, subject to an
undertaking by each participant to return the funds if he was not employed by
the Company as of December 31, 1996.
Executive Stock Option Plan. The Company's Executive Stock Option Plan (the
"Stock Option Plan") was adopted by the Company in October 1996. The Stock
Option Plan provides for the issuance of up to 461,500 shares of the Company's
Common Stock to key employees of the Company and its subsidiaries. Awards
under the Stock Option Plan may be in the form of incentive stock options or
non-qualified stock options.
The Stock Option Plan is administered by the Compensation Committee of the
Company's Board of Directors, the members of which are ineligible for any
grants under the Stock Option Plan. The Compensation Committee is authorized,
among other things, to recommend to the Board the selection of key employees
of the Company to whom, and the time or times at which, awards shall be
granted and the number of shares to be subject to each option awarded. No
awards may be made under the Stock Option Plan after the tenth anniversary of
the Stock Option Plan.
The Stock Option Plan permits the grant of incentive stock options within
the meaning of Section 422 of the Internal Revenue Code as well as options
that do not meet the requirements of that section. All options will expire not
more than 10 years after the date of grant. The exercise price for any option
under the Stock Option Plan shall be equal to the fair market value of the
Common Stock at the time such option is granted. Options are not transferrable
other than by will or by the laws of descent and distribution and may be
exercised only by the optionee, his guardian or his legal representative.
The Stock Option Plan may be amended by the Committee or the shareholders,
provided that the Committee may not, without shareholder approval, materially
increase the benefits accruing to participants under the Stock Option Plan,
increase the maximum number of shares as to which options may be granted under
the Stock Option Plan, change the minimum exercise price, change the class of
eligible persons, extend the period for which options may be granted or
exercised, or withdraw the authority to administer the Stock Option Plan from
the Committee.
DIRECTOR COMPENSATION
After this Offering, directors, except Mr. Scott, will receive annual fees
of $10,000 plus $1,000 per meeting attended, and all Directors will be
reimbursed for their out-of-pocket expenses relating to meetings of the Board
of Directors and Committees thereof.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
Mr. Samuel P. Scott was the Chief Executive Officer of, and Mr. Scott and
his spouse were the sole shareholders of, Scott Housing Systems, Inc., a
manufacturer of manufactured homes doing business throughout
35
<PAGE>
the southeast United States. Scott Housing Systems, Inc. filed for protection
from creditors under Chapter 7 of the Bankruptcy Code in April 1987. Certain
assets of Scott Housing Systems, Inc. were sold to the Company in 1987.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Certificate of Incorporation provides that none of its
directors shall be personally liable to the Company or any of its stockholders
for monetary damages for breach of fiduciary duty as a director, provided that
such limitation does not apply to liability of a director (1) for any breach
of the director's duty of loyalty to the Company or its stockholders, (2) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (3) under Section 174 of Title 8 of the Delaware
General Corporation Law (relating to liability of directors for unlawful
payments of dividends or unlawful stock purchases or redemptions) or (4) for
any transaction from which the director derived an improper personal benefit.
The Company's Certificate of Incorporation further provides that, if the
Delaware General Corporation Law is amended to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the Company shall be eliminated or limited to the
fullest extent permitted by the amended Delaware General Corporation Law.
This provision is intended to afford directors additional protection, and
limit their potential liability, from suits alleging a breach of the duty of
care by a director. The Company believes this provision will assist it in
maintaining and securing the services of directors who are not employees of
the Company. As a result of the inclusion of such a provision, stockholders
may be unable to recover monetary damages against directors for actions taken
by them that constitute negligence or gross negligence or that are in
violation of their fiduciary duties, although it may be possible to obtain
injunctive or other equitable relief with respect to such actions. If
equitable remedies are found not to be available to stockholders for any
particular case, stockholders may not have any effective remedy against the
challenged conduct.
The Company's By-laws also provide for indemnification of the Company's
directors, officers, employees and agents against liabilities arising from
their service in such capacities and from their service to other enterprises
(such as subsidiaries) at the request of the Company to the fullest extent
permitted by law, which generally requires that the individual has acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the Company's best interests, and, with respect to any criminal action or
proceeding, the individual had no reason to believe his conduct was unlawful.
In addition, the By-laws provide that such indemnification will be provided
only if the acts of the individual were not committed in bad faith or the
result of active and deliberate dishonesty and that the individual did not
personally gain in fact a financial profit or other advantage to which he was
not legally entitled. The Company has applied for and expects to maintain
directors and officers liability insurance.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee was established on March 20, 1996 and consists of
Messrs. Brost and Parsons. Mr. Brost is Executive Vice President and Secretary
of the Company. From March 20, 1996 until October 16, 1996, Mr. Samuel P.
Scott, the Company's Chairman and Chief Executive Officer, also served as a
member of the Compensation Committee. Prior to March 20, 1996, the Company did
not have a compensation committee and all directors, including Mr. Scott,
participated in deliberations concerning the compensation of executive
officers. After completion of the Offering, the Company intends to recruit an
additional independent Director to serve on the Compensation Committee.
Mr. Brost is the President and a principal of SIHI, the Managing Member of
Bulldog Holdings LLC ("Bulldog"). In connection with the Acquisition, the
Company sold 1,400,000 shares of its Series B Preferred Stock to Bulldog for
an aggregate consideration of $1.4 million. As part of the Restructuring, the
holders of the Company's 2,150,000 shares of Series B Preferred Stock will
convert such holdings into 1,771,033 shares of Common Stock, and pursuant to
the terms of the Certificate of Incorporation, will receive a liquidation
preference in the amount of approximately $2.2 million, which will be paid in
shares of Common Stock based on the assumed initial offering price. Prior to
the closing of the Offering, the shares of Common Stock to be issued to
Bulldog in connection with the conversion of the Company's Series B Preferred
Stock and payment of the liquidation preference will be distributed by Bulldog
to its members, including SIHI. On December 21, 1995, in
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<PAGE>
connection with the Acquisition, the Company entered into a Management
Agreement with Strategic Investments, of which Mr. Brost is President and a
principal, Mr. Martin is a Vice President and a principal, and Mr. DelZoppo is
a Vice President. See "Certain Transactions--Management Agreement."
Mr. Parsons is a General Partner of RFE Associates V, L.P., the General
Partner of RFE Investment Partners V, L.P. ("RFE"). RFE will receive
approximately $7.5 million of the proceeds of the Offering upon the payment of
the Junior Subordinated Notes and redemption of the Redeemable Preferred
Stock. See "Use of Proceeds." In connection with the Acquisition, without
taking into account the reverse stock split to be effected prior to closing of
the Offering, the Company sold to RFE (1) approximately $2.9 million in
aggregate principal amount of the Company's Junior Subordinated Notes, (2)
4,690,351 shares of the Company's Redeemable Preferred Stock for an aggregate
consideration of approximately $4.5 million, (3) 439,720 shares of the
Company's Series B Preferred Stock for an aggregate consideration of $439,720,
and (4) 714,546 shares of Common Stock for an aggregate consideration of
approximately $163,000. In connection with its investment, the Company also
granted certain put options to RFE, The Equitable Life Assurance Society of
the United States ("Equitable"), the State Treasurer of the State of Michigan
as Custodian of the Michigan Public School Employees Retirement System, State
Employees' Retirement System, Michigan State Police Retirement System and the
Michigan Judges Retirement System (collectively, "Michigan") and non-
affiliated investors, which put options will terminate immediately prior to
the closing of this Offering, and certain registration rights. See "Certain
Transactions--The Restructuring" and "Description of Capital Stock--
Registration Rights."
On December 21, 1995, in connection with the Acquisition, Mr. Samuel P.
Scott and his spouse purchased 92,749 shares of Common Stock from the Company
for an aggregate consideration of approximately $21,000. In addition, Gregory
K. Scott, Drew E. Scott and Kelly Scott Herold, Mr. Scott's children,
purchased a total of 213,501 shares of Common Stock from the Company for an
aggregate consideration of approximately $49,000. Mr. Scott is also involved
in certain other transactions relating to the Company described under "Certain
Transactions."
In connection with the sales described above, a stockholders' agreement (the
"Stockholders' Agreement"), dated as of December 21, 1995, was entered into
among the Company, RFE, Bulldog, Mr. Samuel P. Scott, Equitable, Michigan and
certain other stockholders. Under the terms of the Stockholders' Agreement,
Bulldog is entitled to designate up to four individuals to serve on the Board
of Directors of the Company, and RFE, Michigan and another non-affiliated
stockholder (the "RFE Group"), by plurality vote, are entitled to designate
two individuals to serve on the Board of Directors of the Company. The
Stockholders' Agreement provides that the seventh director is to be Samuel P.
Scott. Messrs. Brost, Martin and DelZoppo were elected as Bulldog's designees
on the Board of Directors, and Mr. Brost serves on the Compensation Committee
of the Board of Directors. Mr. Parsons was elected as one of the RFE Group's
designees on the Board of Directors and serves on the Compensation Committee
of the Board of Directors. Mr. Mossey is the RFE Group's other designee on the
Board of Directors. The Stockholders' Agreement will be terminated immediately
prior to the closing of the Offering.
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<PAGE>
CERTAIN TRANSACTIONS
THE ACQUISITION
On December 21, 1995, pursuant to a Stock Purchase Agreement dated as of
October 10, 1995 (the "Stock Purchase Agreement"), as amended, by and among
GMH Acquisition Corp., a Delaware corporation and wholly owned subsidiary of
the Company ("GAC"), and the former stockholders of the Predecessor, GAC
acquired all of the issued and outstanding shares of common stock of the
Predecessor for consideration of approximately $50.6 million in a leveraged
buyout transaction accounted for as a purchase. Approximately $36.7 million of
the purchase price was attributable to goodwill at the Acquisition date. The
consideration for the transaction was determined by arm's length negotiations
between the former stockholders of the Predecessor and the Company's current
principal stockholders. Pursuant to the Stock Purchase Agreement, the former
stockholders of the Company, including Samuel P. Scott, Gregory K. Scott and
Drew E. Scott, who are officers of the Company, and Kelly Scott Herold, Mr.
Scott's daughter, have agreed to indemnify the Company for losses and
litigation expenses incurred or required to be paid by the Company as a result
of a breach of certain representations, warranties, covenants or agreements
made by the former stockholders. The former stockholders' indemnity is subject
to a $300,000 deductible payment under certain circumstances, and a $3.3
million ceiling, which ceiling will be reduced to $2.3 million in April 1997
and $300,000 in April 1998; provided that indemnification for losses incurred
or required to be paid as a result of federal or state income taxes is not
limited by the ceiling. GAC was incorporated in Delaware in October 1994.
Immediately following the Acquisition, GAC was merged into the Predecessor, so
that as a result, the Predecessor became a wholly owned subsidiary of the
Company.
The consideration for the Acquisition included:
. Installment nonrecourse promissory notes of the Company in the
aggregate principal amount of $45.0 million, which were paid in full
on September 23, 1996.
. The Incentive Plan under which the former stockholders could receive
deferred consideration of up to an aggregate of $3.85 million based
on future earnings of the Company.
. Cash consideration of approximately $1.75 million.
The cash consideration for the Acquisition was funded through the issuance
of the Company's capital stock and indebtedness. In addition, the Company
incurred approximately $2.1 million in debt issuance costs and $2.1 million in
acquisition costs. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity."
THE RESTRUCTURING
The following transactions (collectively referred to as the "Restructuring")
have occurred or will automatically occur prior to the closing of the
Offering:
The holders of the Company's Series B Preferred Stock, including SIHI, RFE
and Michigan, will convert such holdings into shares of Common Stock, and
pursuant to the terms of the Certificate of Incorporation, will receive a
liquidation preference in the amount of approximately $2.2 million, which will
be paid in shares of Common Stock based on the assumed initial offering price
(the "Series B Conversion"). In addition, (1) the Company's Certificate of
Incorporation will be amended and restated to eliminate the Series B Preferred
Stock, the Class B and Class C Common Stock, redesignate the Class A Common
Stock as Common Stock and authorize the Company to issue 2,000,000 additional
shares of Preferred Stock, (2) Equitable and other non-affiliated individuals
who acquired warrants in connection with the Acquisition will exercise their
warrants to purchase an aggregate of 568,750 shares of the Company's Common
Stock for a nominal consideration and (3) certain put and call options held by
certain stockholders and the Company will be terminated.
Also prior to the closing of the Offering, the Incentive Plan will be
terminated, and the obligations to the former shareholders of the Predecessor
thereunder will be converted into promissory notes of the Company in the
aggregate principal amount of $4.0 million, bearing interest at the rate of 9%
per annum, and payable on April 1, 1997 and April 1, 1998 in equal amounts. In
addition, employment agreements between the Company and each of Samuel P.
Scott, Drew E. Scott and Gregory K. Scott will be amended principally to
extend the
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<PAGE>
term of the agreements until December 31, 2001 and provide that any stock
options to be awarded to Mr. Scott under the Stock Option Plan will vest at a
rate of 20% per annum. The employment agreement for Samuel P. Scott further
provides for Company-paid health insurance for Mr. Scott and his wife for the
remainder of their lives so long as Mr. Scott remains an executive officer of
the Company until December 31, 2001. In addition, Mr. Scott's current
employment agreement provides that he may continue to own a 20% equity
interest which be acquired in 1994 in Sweetwater Homes, Inc., a small producer
of manufactured homes, but may not directly or indirectly increase his equity
interest in Sweetwater, serve as an officer, director or employee of, or
consultant to Sweetwater or otherwise assist Sweetwater in any aspect of its
operations.
MANAGEMENT AGREEMENT
In connection with the Acquisition, the Company entered into a Management
Agreement with Strategic Investments under which it provides ongoing
management and consulting services to the Company. Messrs. Brost and Martin
are officers and shareholders of Strategic Investments and Mr. DelZoppo is an
officer of Strategic Investments. Services provided by Strategic Investments
include strategic planning, marketing, consulting, financial planning, capital
budgeting, executive compensation program analysis, monitoring of the
Company's business and assistance with merger and acquisition opportunities.
Pursuant to the Management Agreement, Strategic Investments is entitled to an
annual fee initially in an amount equal to $500,000 comprised of a base fee of
$250,000, subject to an adjustment based on the Consumer Price Index, and an
additional annual fee of $250,000. Strategic Investments is entitled to
receive the additional $250,000 fee so long as SIHI continues to own an equity
interest in the Company; provided, that if SIHI continues to own an equity
interest in the Company until the 30th month after the closing of the
Offering, Strategic Investments will continue to receive the full amount of
the additional $250,000 annual fee even if it disposes of all of its stock in
the Company after such date. In the event SIHI sells all of its stock in the
Company to an unaffiliated entity prior to the 30th month after the closing of
the Offering, the additional fee will be prorated for the fiscal year in which
such sale occurs based on the number of months during such year that SIHI held
such stock plus one additional year's fee. The term of the Management
Agreement ends December 31, 2001. Pursuant to the Management Agreement, the
Company paid to Strategic Investments, upon the closing of the Acquisition, a
closing fee of $500,000 plus reimbursement of expenses in the amount of
$29,811 incurred in connection with the Acquisition.
FEDERAL TAX AUDIT
The Internal Revenue Service (the "Service") is currently conducting an
audit of the Company's income tax returns for the years 1992, 1993 and 1994.
The Company believes that the principal focus of the Service's audit is the
reasonableness of compensation paid to Samuel P. Scott, the Company's Chief
Executive Officer, during those years. Although the Service has not completed
its income tax audit, if the Service successfully asserts that some portion of
the approximately $7.0 million of compensation that Mr. Scott received during
this period is excess compensation and should be recharacterized as dividends,
the Company would be subject to additional tax at a rate of 34% of such excess
amount for federal income tax purposes and 6% for state income tax purposes.
Each of the former stockholders of the Predecessor, including Mr. Scott,
Gregory K. Scott and Drew E. Scott, who are officers of the Company, and Kelly
Scott Herold, Mr. Scott's daughter, has acknowledged his or her obligation to
indemnify the Company for losses or obligations that the Service may assert,
or any litigation expenses incurred by the Company, as a result of the pending
tax audit. Each has confirmed to the Company his or her ability to personally
satisfy any such tax liability.
SERVICE AGREEMENT
In connection with the Acquisition, the Company entered into a service
agreement in December 1995 with M/H Retail, Inc. ("Retail"), a Georgia
corporation wholly owned by Kelly Scott Herold, a daughter of Samuel P. Scott,
a Director and Chief Executive Officer of the Company. Since the Company's
inception in 1987, Retail had provided warranty and repair services
exclusively to purchasers of the Company's homes and resold at retail certain
materials and components purchased from the Company. Pursuant to the service
agreement, Retail paid a management fee to the Company equal to Retail's net
operating profit. See note 7 of Notes to Consolidated
39
<PAGE>
Financial Statements. In October 1996, the Company exercised its option to
purchase Retail's assets, net of liabilities, at a cash purchase price of
approximately $36,000. During 1995 and 1996 (until closing of the sale) Kelly
Scott Herold received total payments from Retail of approximately $316,000 and
$75,000, respectively. The operations of Retail have now been integrated into
the operations of the Company.
GEORGIA STATE WITHHOLDING TAX
In late May 1996, the Company determined that it had failed to properly
withhold personal income tax for certain employees, including members of
senior management, of the Company who were non-Georgia residents. Upon its
discovery of this issue, the Company commenced withholding the proper amounts.
In addition, the Company and the individuals involved promptly brought the
matter to the attention of the Georgia Department of Revenue ("GDR") and
agreed to pay the sum of $694,037 representing the amount of tax the Company
should have withheld for the years in question, including interest to the date
of payment. The payment by the Company, made in July 1996, discharged the
personal income tax liability, including any interest, of all individual
employees of the Company whose income from employment with the Company was not
reported in years 1993, 1994 and 1995. The GDR waived all penalties with
regard to the Company's failure to withhold and the individuals' failure to
report or make estimated tax payments as well as any penalties for corporate
income tax. The former stockholders of the Predecessor reimbursed the Company
for the entire amount paid by the Company to the GDR.
SALES OF SECURITIES TO RELATED PARTIES
Mr. Parsons is a General Partner of RFE Associates V, L.P., the General
Partner of RFE. RFE will receive approximately $7.5 million of the proceeds of
the Offering upon the payment of the Junior Subordinated Notes and redemption
of the Redeemable Preferred Stock. See "Use of Proceeds." In connection with
the Acquisition, without taking into account the reverse stock split to be
effected prior to closing of the Offering, the Company sold to RFE (1)
approximately $2.9 million in aggregate principal amount of the Company's
Junior Subordinated Notes, (2) 4,690,351 shares of the Company's Redeemable
Preferred Stock for an aggregate consideration of approximately $4.5 million,
(3) 439,720 shares of the Company's Series B Preferred Stock for an aggregate
consideration of $439,720, and (4) 714,546 shares of Common Stock for an
aggregate consideration of approximately $163,000. In connection with such
investment, the Company also granted to RFE, Equitable, Michigan and non-
affiliated investors certain put options with respect to their shares, which
put options will terminate immediately prior to the closing of this Offering,
and certain registration rights. See "--The Restructuring" and "Description of
Capital Stock--Registration Rights."
Mr. Brost is an equity owner, President and Managing Member of SIHI, the
Managing Member of Bulldog. In connection with the Acquisition, the Company
sold 1,400,000 million shares of its Series B Preferred Stock to Bulldog for
an aggregate consideration of $1.4 million. Prior to the closing of the
Offering, the shares of Common Stock to be issued to Bulldog in connection
with the conversion of the Company's Series B Preferred Stock will be
distributed by Bulldog to its members, including SIHI.
On December 21, 1995, in connection with the Acquisition, Mr. Samuel P.
Scott and his spouse purchased 92,749 shares of Common Stock from the Company
for an aggregate consideration of approximately $21,000. In addition, Gregory
K. Scott, Drew E. Scott and Kelly Scott Herold, Mr. Scott's children,
purchased a total of 213,501 shares of Common Stock from the Company for an
aggregate consideration of approximately $49,000.
On December 21, 1995, in connection with the Acquisition, the Company issued
to Equitable the Senior Subordinated Note and warrants to purchase 350,000
shares of Common Stock for an aggregate consideration of approximately $15.0
million. In addition, the Company issued to Michigan, (1) approximately $1.9
million in aggregate principal amount of the Company's Junior Subordinated
Notes, (2) 3,076,922 shares of the Company's Redeemable Preferred Stock for an
aggregate consideration of approximately $3.0 million, (3) 288,462 shares of
the Company's Series B Preferred Stock for an aggregate consideration of
$288,462 and (4) 468,750 shares of Common Stock for an aggregate consideration
of approximately $107,000. Michigan will receive approximately
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<PAGE>
$4.9 million of the proceeds of the Offering upon the payment of the Junior
Subordinated Notes and redemption of the Redeemable Preferred Stock. See "Use
of Proceeds."
In connection with the sales described above, a Stockholders' Agreement (the
"Stockholders' Agreement"), dated as of December 21, 1995, was entered into
among the Company, RFE, Bulldog, Mr. Scott, Equitable, Michigan and certain
other stockholders. Under the terms of the Stockholders' Agreement, Bulldog is
entitled to designate up to four individuals to serve on the Board of
Directors of the Company, and the RFE Group, by plurality vote, is entitled to
designate two individuals to serve on the Board of Directors of the Company.
The Stockholders' Agreement provides that the seventh director is to be Samuel
P. Scott. Messrs. Brost, Martin and Del Zoppo were elected as Bulldog's
designees on the Board of Directors and Mr. Brost serves on the Compensation
Committee of the Board of Directors. Mr. Parsons was elected as one of the RFE
Group's designees on the Board of Directors and serves on the Compensation
Committee of the Board of Directors. Mr. Mossey is the RFE Group's other
designee on the Board of Directors. These voting arrangements will be
terminated immediately prior to the closing of the Offering.
In July 1996, in connection with his agreement to serve on the Company's
Board of Directors as a designee of the RFE Group, Mr. Mossey purchased from
RFE at the original purchase price thereof, securities of the Company
consisting of (1) $36,364 in principal amount of Junior Subordinated Notes for
an amount equal to the face amount thereof, (2) approximately 58,182 shares of
Redeemable Preferred Stock at a purchase price of $56,182, (3) 5,454 shares of
Series B Preferred Stock at a purchase price of $5,454 and (4) 8,864 shares of
Common Stock at a purchase price of approximately $2,000.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock giving effect to the completion of
the Restructuring and as adjusted to reflect the sale of the 2,000,000 shares
of Common Stock offered hereby assuming no exercise of the Underwriters over-
allotment option by: (1) each person who is known by the Company to own
beneficially more than 5% of any class of the Company's voting securities; (2)
each director of the Company; (3) each executive officer named in the Summary
Compensation Table; and (4) all directors and executive officers of the
Company as a group. The address of the officers of the Company is the
Company's principal offices. Except as otherwise noted, the persons named in
the table have sole voting and investment power with respect to all shares of
Common Stock shown as beneficially owned by them, subject to community
property laws where applicable.
<TABLE>
<CAPTION>
PERCENTAGE OWNED
AMOUNT AND -----------------
NATURE OF SHARES BEFORE AFTER
BENEFICIAL OWNER BENEFICIALLY OWNED OFFERING OFFERING
---------------- ------------------ -------- --------
<S> <C> <C> <C>
SIHI-GMH LLC(1)......................... 1,011,500 26.8% 17.5%
RFE Investment Partners V, L.P. ........ 979,103 26.0 17.0
36 Grove Street
New Canaan, CT 06840
State Treasurer of State of Michi-
gan(2)................................. 650,370 17.3 11.3
The Equitable Life Assurance Society of
the United States...................... 288,308 7.6 5.0
787 7th Avenue
New York, New York 10019
Samuel P. Scott(3)...................... 76,401 2.0 1.3
Lannis Thomas(4)........................ 23,065 * *
Gregory Keith Scott(5).................. 58,623 1.6 1.0
J. Wayne Roberts(6)..................... 23,065 * *
Thomas M. Vinson(7)..................... 17,298 * *
Drew Eric Scott(8)...................... 58,623 1.6 1.0
Gary M. Brost(1)........................ 1,011,500 26.8 17.5
James C. DelZoppo(1).................... 1,011,500 26.8 17.5
Dennis C. Martin(1)..................... 1,011,500 26.8 17.5
Donald R. Mossey........................ 12,298 * *
23805 County Road #6
Elkhart, Indiana 46514
James A. Parsons(9)..................... 979,103 26.0 17.0
36 Grove Street
New Canaan, CT 06840
Executive officers and directors as a
group(10).............................. 2,259,976 60.0 39.2
(11 persons)
</TABLE>
- --------
* Less than 1%.
(1) Consists of shares owned by SIHI, of which Mr. Brost is a principal and
President, Mr. DelZoppo is a principal and Assistant Secretary and Mr.
Martin is a principal and Vice President and Secretary.
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<PAGE>
Messrs. Brost, DelZoppo and Martin have shared voting power and shared
investment power with respect to these shares and disclaim beneficial
ownership thereof. The address of Messrs. Brost, DelZoppo and Martin is
c/o Strategic Investments & Holdings, Inc., 369 Franklin Street, Buffalo,
New York 14202
(2) The State Treasurer of the State of Michigan acts as Custodian of the
Michigan Public School Employees' Retirement System, State Employees'
Retirement System, Michigan State Police Retirement System and the
Michigan Judges Retirement System. The address of these investors is 430
West Allegan, Lansing, Michigan 48922.
(3) These shares are owned jointly with Mr. Scott's spouse, Sherry J. Scott.
Mr. Scott and his spouse share investment and voting power with respect
to all shares that he beneficially owns. Does not include 85,000 shares
issuable upon the exercise of options which are not deemed to be
presently exercisable.
(4) Does not include 15,000 shares issuable upon the exercise of options
which are not deemed to be presently exercisable.
(5) Does not include 15,000 shares issuable upon the exercise of options
which are not deemed to be presently exercisable.
(6) Does not include 15,000 shares issuable upon the exercise of options
which are not deemed to be presently exercisable.
(7) Does not include 15,000 shares issuable upon the exercise of options
which are not deemed to be presently exercisable.
(8) Does not include 15,000 shares issuable upon the exercise of options
which are not deemed to be presently exercisable.
(9) Consists of shares owned by RFE, of which RFE Associates V, L.P. is the
General Partner. Mr. Parsons is a General Partner of RFE Associates V,
L.P. Mr. Parsons has shared voting power and shared investment power with
respect to these shares. Mr. Parsons disclaims beneficial ownership of
such shares.
(10) See notes (1), (3), (4), (5), (6), (7), (8) and (9) above.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of the Company and certain
provisions of the Company's Certificate of Incorporation and By-laws is a
summary and is qualified in its entirety by the provisions of the Company's
Certificate of Incorporation and By-laws, each as amended, which have been
filed as exhibits to the Company's Registration Statement, of which this
Prospectus is a part. The following discussion assumes that the Restructuring
and the Offering have been completed.
The Company's authorized capital stock consists of 20,000,000 shares of
Common Stock, par value $0.001 per share, and 2,000,000 shares of Preferred
Stock, par value $0.001 per share. Upon consummation of the Offering,
5,769,231 shares of Common Stock will be outstanding and no shares of
Preferred Stock will be outstanding. Certain warrant holders have the right to
purchase 350,000 and 218,750 shares of the Company's Common Stock,
respectively, for a purchase price of $.01 per share, at any time until
December 21, 2002 and December 21, 2003, respectively. In addition, the holder
of the Company's Senior Subordinated Note has a put option which requires the
Company to repurchase its warrants at a price based on the fair market value
of the Common Stock. RFE obtained a similar put option with respect to its
shares of Common Stock. In connection with the Restructuring, the warrants
will be exercised and the put options will be terminated.
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Holders of
Common Stock are not entitled to cumulative voting rights with respect to the
election of directors and, as a consequence, minority stockholders will not be
able to elect directors on the basis of their votes alone. Subject to
preferences that may be applicable to any shares of Preferred Stock issued in
the future, all shares of Common Stock are entitled to such dividends as may
be declared from time to time by the Board of Directors out of funds legally
available for payment. See "Dividend Policy." In the event of a liquidation,
dissolution or winding up of the Company, holders of the Common Stock are
entitled to all assets remaining after payment of liabilities and the
liquidation preference of any then outstanding Preferred Stock. Holders of
Common Stock have no preemptive or conversion rights. There are no redemption
or sinking fund provisions applicable to the Common Stock. All shares of
Common Stock to be outstanding upon completion of this offering will be fully
paid and nonassessable.
At present, there is no established trading market for the Common Stock.
Application has been made to have the Common Stock approved for quotation on
the Nasdaq National Market under the symbol "GENH."
PREFERRED STOCK
The Board of Directors may, from time to time, without further action by the
Company's stockholders, authorize the issuance of shares of Preferred Stock in
series and may, at the time of issuance, determine the powers, rights,
preferences and limitations of any such series. Satisfaction of any dividend
preferences on outstanding shares of Preferred Stock would reduce the amount
of funds available for the payment of dividends on Common Stock. Holders of
Preferred Stock would be entitled to receive a preference payment in the event
of any liquidation, dissolution or winding up of the Company before any
payment is made to the holders of Common Stock. Under certain circumstances,
the issuance of such Preferred Stock may render more difficult or tend to
discourage a merger, tender offer or proxy contest, the assumption of control
by a holder of a large block of the Company's securities or the removal of
incumbent directors.
REGISTRATION RIGHTS
Pursuant to an Amended and Restated Registration Rights Agreement (the
"Registration Rights Agreement") among the Company and the holders ("Holders")
of approximately 3,769,231 shares of Common Stock (all such shares, the
"Registrable Shares"), such Holders or their permitted transferees are
entitled to certain registration rights with respect to the Registrable
Shares. If the Company at any time proposes to register any of its securities
under the Securities Act, the Holders will be entitled to notice thereof and,
subject to certain restrictions, to include their Registrable Shares in such
registration. Beginning twelve months after the closing of the Offering, the
RFE Group and Equitable may each make up to two demands of the Company to
register their shares on Form S-3 or similar short-form registration forms,
subject to certain conditions and limitations. A Holder's right to include
shares in an underwritten registration is subject to the right of the
underwriters to limit
44
<PAGE>
the number of shares included in the offering. Subject to certain limitations,
the Company is required to bear all registration, legal (for no more than one
independent legal counsel for all selling Holders) and other expenses in
connection with these registrations (other than underwriting discounts and
commissions) and must provide appropriate indemnification.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law. In general, the statute prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder unless prior
to the date the stockholder became an interested stockholder, the board
approved either the business combination or the transaction that resulted in
the stockholder becoming an interested stockholder or unless one of the two
following exceptions to the prohibition are satisfied: (i) upon consummation
of the transaction that resulted in such person becoming an interested
stockholder, the interested stockholder owned at least 85% of the Company's
voting stock outstanding at the time the transaction commenced (excluding, for
purposes of determining the number of shares outstanding, shares owned by
certain directors or certain employee stock plans) or (ii) on or after the
date the stockholder became an interested stockholder, the business
combination is approved by the board of directors and authorized by the
affirmative vote (and not by written consent) of at least two-thirds of the
outstanding voting stock excluding that stock owned by the interested
stockholder. A "business combination" includes a merger, asset sale or other
transaction resulting in a financial benefit to the interested stockholder. An
"interested stockholder" is a person who (other than the corporation and any
direct or indirect majority-owned subsidiary of the corporation), together
with affiliates and associates, owns (or as an affiliate or associate, within
the three years prior, did own) 15% or more of the corporation's outstanding
voting stock. It is possible that these provisions may have the effect of
delaying, deterring or preventing a change in control of the Company.
The Company's Certificate of Incorporation or By-laws, as applicable, among
other things (i) provide that the number of directors will be not fewer than
one, with the exact number of directors to be determined from time to time by
resolution adopted by a majority of the Board of Directors and (ii) provide
that the Board of Directors, without action by the stockholders, may issue and
fix the rights and preferences of shares of Preferred Stock. These provisions
may have the effect of delaying, deferring or preventing a change of control
of the Company without further action by the stockholders, may discourage bids
for the Common Stock at a premium over the market price of the Common Stock
and may adversely affect the market price of, and the voting and other rights
of the holders of, Common Stock.
The Company's senior credit facility and Senior Subordinated Note each
contain provisions that require prepayment of the amounts outstanding
thereunder upon a change in control of the Company. It is possible that these
provisions may have the effect of delaying, deterring or preventing a change
in control of the Company.
TRANSFER AGENT AND REGISTRAR
has been appointed as the transfer agent and registrar for the
Company's Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no public market for the Common Stock
of the Company, and any sale of substantial amounts of Common Stock in the
open market, or the availability of shares for sale, may adversely affect the
market price of the Common Stock and the ability of the Company to raise funds
through equity offerings in the future.
Upon completion of the Offering, after giving effect to the Restructuring,
the Company will have 5,769,231 outstanding shares of Common Stock, assuming
no exercise of the Underwriters' over-allotment option or
45
<PAGE>
outstanding stock options. Effective upon the consummation of the Offering,
after giving effect to the Restructuring, assuming no exercise of outstanding
options, the Company will have outstanding options exercisable for an
aggregate of approximately 208,000 shares of Common Stock (subject to anti-
dilution adjustment), none of which will be presently exercisable.
Of the Common Stock to be outstanding upon completion of the Offering, the
2,000,000 shares of Common Stock sold in the Offering will be freely tradeable
without restriction or further registration under the Securities Act, except
for any shares purchased by "affiliates" of the Company, as that term is
defined under the Securities Act and the Regulations promulgated thereunder
(an "Affiliate"). The remaining 3,769,231 shares of Common Stock held by
officers, directors, employees, consultants and other stockholders of the
Company were sold by the Company in reliance on exemptions from the
registration requirements of the Securities Act and are "restricted
securities" within the meaning of Rule 144 under the Securities Act. Any
shares of Common Stock issued upon the exercise of options or warrants held by
any of such persons also will constitute restricted securities.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an Affiliate, who has beneficially
owned "restricted securities" (defined generally in Rule 144 as unregistered
securities) for a period of at least two years from the later of the date such
restricted securities were acquired from the Company or the date they were
acquired from an Affiliate, is entitled to sell, within any three-month
period, a number of shares that does not exceed the greater of 1% of the then
outstanding shares of Common Stock (approximately 57,692 shares immediately
after the Offering) or the average weekly trading volume in the Common Stock
during the four calendar weeks preceding such sale. Sales under Rule 144 are
also subject to certain provisions relating to the volume and notice of sale
and the availability of current public information about the Company. Any
person (or persons whose shares are aggregated) who is not deemed to have been
an Affiliate of the Company at any time during the 90 days preceding a sale,
and who has beneficially owned restricted shares for at least three years,
would be entitled to sell such shares under Rule 144(k) without regard to the
volume or manner of sale limitations referred to above. However, since the
Company was just recently formed in 1995, none of the restricted shares will
be eligible for resale in the open market immediately after the Offering.
The Commission has recently proposed amendments to Rule 144 and Rule 144(k)
that would permit resales of restricted securities under Rule 144 after a one-
year, rather than a two-year holding period, subject to compliance with the
other provisions of Rule 144, and would permit resale of restricted securities
by non-Affiliates under Rule 144(k) after a two-year, rather than a three-year
holding period. Adoption of such amendments could result in resales of
restricted securities sooner than would be the case under Rule 144 and Rule
144(k) as currently in effect.
Assuming no additional shares are purchased by Affiliates, and subject to
the lock-up agreements, approximately 3,000,000 shares held by Affiliates of
the Company and approximately 770,000 shares held by existing stockholders of
the Company who are not Affiliates will be eligible for sale in the public
market at various times under Rule 144, subject to the foregoing volume
limitations and other restrictions.
The holders of 3,769,231 shares are entitled to certain registration rights
with respect to their shares. See "Description of Capital Stock--Registration
Rights."
For a description of certain 180-day lock-up agreements signed by the
Company's executive officers, directors and current stockholders of the
Company, see "Underwriting."
46
<PAGE>
UNDERWRITING
The Underwriters named below, represented by Rauscher Pierce Refsnes, Inc.
and Oppenheimer & Co., Inc. (the "Representatives") have severally agreed,
subject to the terms and conditions of the Underwriting Agreement, to purchase
from the Company the number of shares of Common Stock as set forth below
opposite their names below. The nature of the obligations of the Underwriters
is such that, if any of such shares are purchased, all must be purchased.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Rauscher Pierce Refsnes, Inc. .................................
Oppenheimer & Co., Inc. .......................................
---------
Total...................................................... 2,000,000
=========
</TABLE>
The Underwriters propose initially to offer the shares of Common Stock
offered hereby to the public at the price to public set forth on the cover
page of this Prospectus. The Underwriters may allow a concession to selected
dealers who are members of the National Association of Securities Dealers Inc.
("NASD") not in excess of $ per share, and the Underwriters may allow, and
such dealers may reallow, to members of the NASD a concession not in excess of
$ per share. After the Offering, the price to public, the concession and the
reallowance may be changed by the Representatives.
The Company has granted an option to the Underwriters, exercisable within 30
days after the date of this Prospectus, to purchase up to an additional
300,000 shares of Common Stock at the initial price to public, less
underwriting discount, set forth on the cover page of this Prospectus. The
Underwriters may exercise such option only for the purpose of covering any
over-allotments. To the extent the Underwriters exercise such option, each
Underwriter will be committed, subject to certain conditions, to purchase from
the Company that number of the additional shares of Common Stock which is
proportionate to such Underwriter's initial commitment.
At the request of the Company, the Underwriters have reserved for sale to
family members of the Company's executive officers, employees of, suppliers to
and persons having business relationships with the Company, at the public
offering price, up to 180,000 shares of the Common Stock offered hereby. The
number of shares available for sale to the general public will be reduced to
the extent such persons purchase such reserved shares. Any reserved shares not
so purchased will be offered by the Underwriters to the general public on the
same basis as the other shares offered hereby.
Prior to the Offering, there has been no public market for the Common Stock,
and there can be no assurance that a regular trading market will develop upon
the completion of the Offering. The initial public offering price was
determined by negotiations among the Company and the Representatives. The
primary factors considered by the Representatives in determining such public
offering price included the history of and the prospects for the industry in
which the Company competes, an assessment of the Company's management, its
past and present operations, its past and present earnings and the trend of
such earnings, the general condition of the securities markets at the time of
the Offering and the price-earnings multiples and market prices of publicly
traded securities of comparable companies.
47
<PAGE>
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act. The Company has
also agreed to pay to the Representatives a nonaccountable expense allowance
of $75,000.
The Company, its executive officers and directors and current stockholders
of the Company have agreed that for a period of 180 days after the date of
this Prospectus, they will not offer, sell, or otherwise dispose of any of the
shares of Common Stock beneficially owned or controlled by them (including
subsequently acquired shares), without the prior written consent of Rauscher
Pierce Refsnes Inc. on behalf of the Underwriters.
The Representatives have informed the Company that the Underwriters do not
intend to confirm sales to accounts over which they exercise discretionary
authority.
The Company has engaged Rauscher Pierce Refsnes, Inc. to provide certain
consulting and advisory services to the Company in the area of mergers,
acquisitions and dispositions. Any compensation paid pursuant to such
engagement would be contingent upon completion of a transaction. The Company
has no present commitments or agreements with respect to any such merger,
acquisition or disposition.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Nixon, Hargrave, Devans & Doyle llp, Rochester, New
York. Certain legal matters in connection with the Common Stock offered hereby
will be passed upon for the Underwriters by Thompson & Knight, P.C., Dallas,
Texas.
EXPERTS
The financial statements and schedule included in the Prospectus and
included elsewhere in the Registration Statement, to the extent and for the
periods indicated in their reports, have been audited by Arthur Andersen LLP,
independent public accountants, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in issuing said
reports.
On October 25, 1994, the Company's Board of Directors decided to retain
Arthur Andersen LLP as its independent certified public accountants and
dismissed the Company's former auditor. Prior to retaining Arthur Andersen
LLP, the Company had not consulted with Arthur Andersen LLP regarding
accounting principles. Prior to dismissal, there was no disagreement between
the Company and its former auditor on any matter of accounting principles or
practices, financial statement disclosure or auditing scope of procedure
which, if not resolved to the satisfaction of its former auditor, would have
caused its former auditor to make reference to the subject matter of the
disagreement in connection with his report and there occurred no "reportable
event" within the meaning of item 304(a)(1)(v) of SEC Regulation S-K.
ADDITIONAL INFORMATION
A Registration Statement on Form S-1 relating to the Common Stock offered
hereby has been filed by the Company with the Securities and Exchange
Commission, Washington, D.C. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. Statements contained in this Prospectus as to the contents
of any contract or other document referred to are not necessarily complete and
in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to such Registration Statement, exhibits and schedules. A
copy of the Registration Statement may be inspected by anyone without charge
and copied at prescribed rates at the public reference facilities maintained
by the Commission at its offices at Room 1024, 450 Fifth Street, N.W.,
Washington, DC 20549 and at the Commission's regional offices located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661,
and Seven World Trade Center, 13th Floor, New York, New York 10048. Such
material may also be accessed electronically by means of the Commission's Web
site on the Internet at http://www.sec.gov.
48
<PAGE>
GENERAL HOUSING, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS OF GENERAL HOUSING, INC.
Report of Independent Certified Public Accountants...................... F-2
Consolidated Balance Sheets, December 31, 1994 and 1995 and September
30, 1996............................................................... F-4
Consolidated Statements of Income for the years ended December 31, 1994
and December 30, 1995 and for the nine months ended September 30, 1995
(unaudited) and 1996................................................... F-6
Consolidated Statements of Changes in Stockholders' Equity for the years
ended December 31, 1994 and December 30, 1995 and for the nine months
ended September 30, 1996 .............................................. F-7
Consolidated Statements of Cash Flows for the years ended December 31,
1994 and December 30, 1995 and for the nine months ended September 30,
1995 (unaudited) and 1996.............................................. F-8
Notes to Consolidated Financial Statements.............................. F-9
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
Unaudited Pro Forma Financial Information............................... F-21
Unaudited Pro Forma Consolidated Balance Sheet, September 30, 1996...... F-22
Unaudited Pro Forma Consolidated Statement of Income for the year ended
December 30, 1995...................................................... F-24
Unaudited Pro Forma Consolidated Statement of Income for the nine months
ended September 30, 1996............................................... F-26
</TABLE>
F-1
<PAGE>
After the proposed stock split in connection with the initial public
offering of the Company, as discussed in Note 10 to the consolidated financial
statements, is effected, we expect to be in a position to render the following
audit report:
Jacksonville, Florida Arthur Andersen LLP
November 1, 1996 (except with
respect to Paragraph two of Note
10, as to which the date is
December 18, 1996)
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To General Housing, Inc.:
We have audited the accompanying consolidated balance sheets of General
Housing, Inc. (a Delaware corporation, formerly GMH Holdings, Inc.) (the
"Company"), as of December 31, 1995 and September 30, 1996, and the related
statements of income, changes in stockholders' equity, and cash flows for the
nine months ended September 30, 1996, and the balance sheet of General
Manufactured Housing, Inc. (the "Predecessor") as of December 31, 1994 and the
related statements of income, changes in stockholders' equity, and cash flows
for the years ended December 31, 1994 and December 30, 1995. These financial
statements are the responsibility of the Company's and the Predecessor's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of General Housing, Inc. as
of December 31, 1995, and September 30, 1996 and the results of its operations
and its cash flows for the nine months ended September 30, 1996, and the
financial position of General Manufactured Housing, Inc. as of December 31,
1994 and the results of its operations and its cash flows for the years ended
December 31, 1994 and December 30, 1995 in conformity with generally accepted
accounting principles.
F-2
<PAGE>
[INTENTIONALLY LEFT BLANK]
F-3
<PAGE>
GENERAL HOUSING, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
DECEMBER 31, 1994 AND 1995 AND SEPTEMBER 30, 1996
<CAPTION>
PREDECESSOR COMPANY
----------------- ------------------------------------
DECEMBER 31, 1994 DECEMBER 31, 1995 SEPTEMBER 30, 1996
----------------- ----------------- ------------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equiva-
lents................ $ 1,805,249 $ 505,227 $ 224,282
Accounts receivable... 3,385,118 4,631,290 5,866,348
Inventories........... 2,467,198 4,590,798 5,697,659
Deferred income tax-
es................... 0 540,000 795,000
Prepaid items......... 44,738 35,188 231,901
----------- ----------- -----------
Total current as-
sets............... 7,702,303 10,302,503 12,815,190
----------- ----------- -----------
PROPERTY, PLANT, AND
EQUIPMENT:
Land.................. 70,035 70,035 70,035
Buildings............. 1,932,633 2,215,829 2,280,588
Machinery, equipment,
and fixtures......... 1,934,762 1,918,884 2,117,803
----------- ----------- -----------
3,937,430 4,204,748 4,468,426
Less accumulated depre-
ciation................ (722,400) 0 (325,924)
----------- ----------- -----------
Property, plant and
equipment, net......... 3,215,030 4,204,748 4,142,502
----------- ----------- -----------
OTHER ASSETS:
Restricted cash and
cash equivalents
(Notes 1 and 4)...... 0 46,000,000 305,963
Goodwill, net of
accumulated
amortization of
$739,613 at September
30, 1996............. 0 36,653,445 37,162,585
Deferred financing
costs, net of
accumulated
amortization of
$372,282 at September
30, 1996............. 0 2,130,725 1,758,443
Other................. 0 368,339 311,459
----------- ----------- -----------
Total other assets.. 0 85,152,509 39,538,450
----------- ----------- -----------
Total assets........ $10,917,333 $99,659,760 $56,496,142
=========== =========== ===========
</TABLE>[/R]
The accompanying notes are an integral part of these consolidated balance
sheets.
F-4
<PAGE>
GENERAL HOUSING, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
DECEMBER 31, 1994 AND 1995 AND SEPTEMBER 30, 1996
<CAPTION>
PREDECESSOR COMPANY
----------------- ------------------------------------
DECEMBER 31, 1994 DECEMBER 31, 1995 SEPTEMBER 30, 1996
----------------- ----------------- ------------------
<S> <C> <C> <C>
LIABILITIES AND STOCK-
HOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable....... $ 2,009,593 $ 3,514,922 $ 3,364,006
Bank overdrafts........ 0 1,543,552 1,317,872
Accrued liabilities.... 2,038,310 3,877,281 9,848,465
Current portion of
long-term debt........ 181,977 41,427 45,097
----------- ----------- -----------
Total current lia-
bilities........... 4,229,880 8,977,182 14,575,440
Long-Term Debt, net of
current portion........ 1,338,052 37,702,746 30,479,263
Installment promissory
notes due to former
stockholders of the
predecessor............ 0 45,000,000 0
Deferred income taxes... 40,485 180,000 235,000
Other................... 0 1,247,332 305,963
----------- ----------- -----------
Total liabilities... 5,608,417 93,107,260 45,595,666
----------- ----------- -----------
Commitments and
Contingencies
(Notes 5,7,8,9,10 and
11)
Redeemable Preferred
Stock, Series A,
$8,000,000 redemption
amount; $.001 par
value; no shares
authorized at December
31, 1994; 8,000,000
shares authorized,
issued, and outstanding
at December 31, 1995
and September 30,
1996................... 0 7,720,000 7,741,600
----------- ----------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock, Series
B, $.001 par value; $1
per share liquidation
preference; no shares
authorized at December
31, 1994; 2,150,000
shares authorized,
issued and outstanding
at December 31, 1995
and September 30,
1996.................. 0 2,150 2,150
Common stock $.001 par
value; no shares
authorized at December
31, 1994; 4,375,000
shares authorized at
December 31, 1995 and
September 30, 1996 and
1,364,313 shares
issued and outstanding
at December 31, 1995
and September 30,
1996.................. 0 1,364 1,364
Warrants............... 0 130,000 130,000
Common stock of the
Predecessor, $100 par
value; 100,000 shares
authorized and 6,000
shares issued and
outstanding at
December 31, 1994; no
shares authorized at
December 31, 1995 and
September 30, 1996.... 600,000 0 0
Additional paid-in cap-
ital.................. 151,485 2,526,486 2,526,486
Retained earnings...... 4,674,431 0 4,465,126
Less 750 shares of
common stock held in
treasury, at cost..... (117,000) 0 0
----------- ----------- -----------
5,308,916 2,660,000 7,125,126
Adjustment to
Predecessor equity
(Note 1).............. 0 (3,827,500) (3,966,250)
----------- ----------- -----------
Total stockholders'
equity............. 5,308,916 (1,167,500) 3,158,876
----------- ----------- -----------
Total liabilities
and stockholders'
equity............. $10,917,333 $99,659,760 $56,496,142
=========== =========== ===========
</TABLE>[/R]
The accompanying notes are an integral part of these consolidated balance
sheets.
F-5
<PAGE>
GENERAL HOUSING, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994 AND DECEMBER 30, 1995
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
---------------------------------------- -------------
NINE NINE
YEAR ENDED YEAR ENDED MONTHS ENDED MONTHS ENDED
DECEMBER 31, DECEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1995 1996
------------ ------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net sales............... $66,574,049 $89,291,844 $63,153,690 $100,823,196
Cost of sales........... 52,269,610 69,572,072 49,315,927 75,627,725
----------- ----------- ----------- ------------
Gross profit............ 14,304,439 19,719,772 13,837,763 25,195,471
Selling, general and
administrative
expenses............... 10,752,845 11,774,090 8,265,423 11,847,081
Goodwill amortization... 0 0 0 739,613
----------- ----------- ----------- ------------
Income from operations.. 3,551,594 7,945,682 5,572,340 12,608,777
Interest expense........ 94,927 283,159 106,507 3,552,462
Other expense (income).. 55,102 (53,610) (46,413) 21,589
----------- ----------- ----------- ------------
Income before income
taxes.................. 3,401,565 7,716,133 5,512,246 9,034,726
Provision for income
taxes.................. 1,295,957 465,000 331,000 3,828,000
----------- ----------- ----------- ------------
Net income.............. $ 2,105,608 $ 7,251,133 $ 5,181,246 5,206,726
=========== =========== ===========
Preferred stock dividend
and accretion.......... 741,600
------------
Net income available to
common stockholders.... $ 4,465,126
============
Earnings per common
share.................. $ 1.24
============
Weighted average number
of common shares and
common share
equivalents
outstanding............ 3,603,846
============
Unaudited pro forma net
income
Pro forma provision for
income taxes........... $ 2,932,131 $ 2,095,000
----------- -----------
Pro forma net income.... $ 4,784,002 $ 3,417,246
=========== ===========
Unaudited supplemental
pro forma earnings per
share
Supplemental pro forma
earnings per common
share.................. $ 0.98
============
Supplemental pro forma
weighted average number
of common shares
outstanding............ 5,769,231
============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
GENERAL HOUSING, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994 AND DECEMBER 30, 1995
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
ADJUSTMENT
SERIES B STOCK HELD IN TO
PREFERRED STOCK COMMON STOCK ADDITIONAL TREASURY, AT COST PREDECESSOR
---------------- ------------------ PAID-IN RETAINED ------------------- EQUITY
SHARE AMOUNT SHARES AMOUNT WARRANTS CAPITAL EARNINGS SHARES AMOUNT (NOTE 1)
--------- ------ --------- -------- -------- ---------- ---------- ------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PREDECESSOR:
Balance, Decem-
ber 31, 1993... 0 $ 0 6,000 $600,000 $ 0 $ 151,485 $2,568,823 750 $ (117,000) $ 0
Net income...... 0 0 0 0 0 0 2,105,608 0 0 0
--------- ------ --------- -------- -------- ---------- ---------- ----- ----------- -----------
Balance, Decem-
ber 31, 1994... 0 0 6,000 600,000 0 151,485 4,674,431 750 (117,000) 0
S corporation
distributions
to
stockholders... 0 0 0 0 0 (4,084,826) 0 0 0
Net income...... 0 0 0 0 0 0 7,251,133 0 0 0
--------- ------ --------- -------- -------- ---------- ---------- ----- ----------- -----------
Balance, Decem-
ber 30, 1995... 0 $ 0 6,000 $600,000 $ 0 $ 151,485 $7,840,738 750 $ (117,000) $ 0
========= ====== ========= ======== ======== ========== ========== ===== =========== ===========
COMPANY:
Initial
investment in
General
Housing, Inc.
at December 31,
1995........... 2,150,000 $2,150 1,364,313 $ 1,364 $130,000 $2,526,486 $ 0 0 $ 0 $(3,827,500)
Adjustment to
predecessor
equity
(Note 5)....... 0 0 0 0 0 0 0 0 0 (138,750)
Preferred stock
dividends and
accretion...... 0 0 0 0 0 0 (741,600) 0 0 0
Net income...... 0 0 0 0 0 0 5,206,726 0 0 0
--------- ------ --------- -------- -------- ---------- ---------- ----- ----------- -----------
Balance, Septem-
ber 30, 1996... 2,150,000 $2,150 1,364,313 $ 1,364 $130,000 $2,526,486 $4,465,126 0 $ 0 $(3,966,250)
========= ====== ========= ======== ======== ========== ========== ===== =========== ===========
<CAPTION>
TOTAL
------------
<S> <C>
PREDECESSOR:
Balance, Decem-
ber 31, 1993... $ 3,203,308
Net income...... 2,105,608
------------
Balance, Decem-
ber 31, 1994... 5,308,916
S corporation
distributions
to
stockholders... (4,084,826)
Net income...... 7,251,133
------------
Balance, Decem-
ber 30, 1995... $ 8,475,223
============
COMPANY:
Initial
investment in
General
Housing, Inc.
at December 31,
1995........... $(1,167,500)
Adjustment to
predecessor
equity
(Note 5)....... (138,750)
Preferred stock
dividends and
accretion...... (741,600)
Net income...... 5,206,726
------------
Balance, Septem-
ber 30, 1996... $ 3,158,876
============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-7
<PAGE>
GENERAL HOUSING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND DECEMBER 30, 1995
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-------------------------------------------- ------------------
YEAR ENDED YEAR ENDED NINE NINE
DECEMBER 31, DECEMBER 30, MONTHS ENDED MONTHS ENDED
1994 1995 SEPTEMBER 30, 1995 SEPTEMBER 30, 1996
------------ ------------ ------------------ ------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operat-
ing activities:
Net income............. $2,105,608 $7,251,133 $5,181,246 $ 5,206,726
---------- ---------- ---------- -----------
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Loss from sale of prop-
erty, plant, and
equipment............. 8,703 0 0 0
Depreciation........... 291,154 483,180 344,177 325,924
Amortization........... 7,955 23,661 0 1,490,978
Deferred income taxes.. 23,565 (25,000) (10,000) (200,000)
Net increase in receiv-
ables................. (2,201,932) (1,246,172) (787,934) (1,235,058)
Net increase in inven-
tories................ (733,767) (2,123,600) (872,178) (1,106,861)
Net decrease (increase)
in prepaids........... 74,035 (15,450) (70,625) (196,713)
Net increase (decrease)
in payables........... 479,243 1,505,329 262,477 (150,916)
Net increase (decrease)
in bank overdrafts.... 0 1,543,552 0 (225,680)
Net increase in accrued
liabilities........... 287,575 980,971 672,336 4,583,681
Other.................. 0 (15,485) 0 0
---------- ---------- ---------- -----------
Total adjustments..... (1,763,469) 1,110,986 (461,747) 3,285,355
---------- ---------- ---------- -----------
Net cash provided by
operating activi-
ties................. 342,139 8,362,119 4,719,499 8,492,081
---------- ---------- ---------- -----------
Cash flows from invest-
ing activities:
Initial acquisition-re-
lated payments, net of
cash acquired......... 0 0 0 (1,008,747)
Deposit of cash in es-
crow.................. 0 0 0 (46,000,000)
Release of cash from
escrow................ 0 0 0 45,694,037
Additions to property,
plant, and equipment.. (1,353,381) (1,164,203) (921,929) (263,678)
Proceeds from sale of
property, plant, and
equipment............. 10,600 0 0 0
Other.................. 0 (392,000) (350,706) (694,037)
---------- ---------- ---------- -----------
Net cash used in in-
vesting activities... (1,342,781) (1,556,203) (1,272,635) (2,272,425)
---------- ---------- ---------- -----------
Cash flows from financ-
ing activities:
Proceeds from long-term
debt.................. 0 0 0 23,921,000
Repayment of
installment promissory
notes due to former
stockholders of the
Predecessor........... 0 0 0 (45,000,000)
Repayment of line of
credit................ 0 0 0 (39,416,345)
Proceeds from line of
credit................ 0 0 0 47,201,211
Repayment of long-term
debt.................. (210,626) (971,193) (122,719) (2,361,240)
Proceeds from long-term
debt.................. 600,000 0 0 0
Proceeds from sale of
equity and Redeemable
Preferred Stock....... 0 0 0 10,380,000
Payment of Acquisition-
related costs on be-
half of
acquirer.............. 0 (3,049,919) 0 0
S corporation distribu-
tions to stockhold-
ers................... 0 (4,084,826) (1,200,000) 0
Preferred stock divi-
dends................. 0 0 0 (720,000)
---------- ---------- ---------- -----------
Net cash provided by
(used in) financing
activities........... 389,374 (8,105,938) (1,322,719) (5,995,374)
---------- ---------- ---------- -----------
Net (decrease) increase
in cash and cash equiv-
alents................. (611,268) (1,300,022) 2,124,145 224,282
Cash and cash equiva-
lents, beginning of pe-
riod................... 2,416,517 1,805,249 1,805,249 0
---------- ---------- ---------- -----------
Cash and cash equiva-
lents, end of period... $1,805,249 $ 505,227 $3,929,394 $ 224,282
========== ========== ========== ===========
Supplemental cash flow
disclosures
Cash paid for
interest.............. $ 94,927 $ 135,040 $ 106,507 $ 2,404,208
========== ========== ========== ===========
Cash paid for income
taxes................. $1,177,900 $ 186,000 $ 160,000 $ 3,149,000
========== ========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-8
<PAGE>
GENERAL HOUSING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DATA WITH RESPECT TO SEPTEMBER 30, 1995 IS UNAUDITED)
1. ACQUISITION
On December 21, 1995, GMH Acquisition Corp. ("GAC"), a wholly owned
subsidiary of General Housing, Inc. (formerly GMH Holdings, Inc.) (the
"Company"), purchased all of the outstanding shares of common stock of General
Manufactured Housing, Inc. (the "Predecessor"). The Company and GAC were
incorporated in Delaware expressly for the purpose of acquiring all of the
outstanding common stock of the Predecessor. Subsequent to the purchase of the
Predecessor, GAC and the Predecessor were merged into one entity, General
Manufactured Housing, Inc. The accompanying consolidated financial statements
as of December 31, 1995 assume that the acquisition was consummated after the
close of business on December 30, 1995. No material transactions outside the
normal course of business, other than those directly related to the
acquisition, occurred from December 21, 1995 through December 30, 1995.
The purchase price was comprised of the following:
a. The Company issued installment promissory notes to the former
stockholders of the Predecessor in the amount of $45 million. To secure
payment on the notes, the Company obtained letters of credit and
deposited cash of approximately $45 million into irrevocable trust
accounts to collateralize such letters of credit (Note 4).
b. The Company deposited cash of $1 million into an escrow account as
assurance against certain contingencies indemnified against by the
former stockholders of the Predecessor. To the extent not needed to fund
any indemnifications, such cash will revert to the former stockholders
of the Predecessor.
c. The Company paid additional cash consideration of approximately
$750,000.
d. The Company established an incentive plan (the "Incentive Plan") under
which the former stockholders could receive up to an aggregate of $3.85
million based on the future earnings of the Company as defined in the
Incentive Plan.
e. The Company incurred approximately $2.1 million in acquisition costs.
The cash consideration was funded through the issuance of common stock,
preferred stock, warrants to purchase common stock, and debt. In addition, the
Company incurred approximately $2.1 million in debt issuance costs. Prior to
December 30, 1995, the Predecessor paid on behalf of the Company $3,049,919 of
debt issuance and acquisition costs. See Notes 3, 8, and 9 for descriptions of
the terms and amounts of debt, redeemable preferred stock and stock,
respectively, issued by the Company.
The acquisition has been accounted for as a purchase in accordance with
Accounting Principles Board Opinion ("APB") No. 16 and Issues No. 88-16 and
90-12 of the Emerging Issues Task Force ("EITF") of the Financial Accounting
Standards Board. Accordingly, the preliminary estimate of the purchase price
has been allocated to the assets and liabilities based on their respective
estimated fair values for the interest acquired by new owners at the date of
acquisition. The resulting excess of purchase price over fair value of net
assets acquired has been recorded as goodwill in the accompanying consolidated
balance sheets.
Purchase Accounting
The purchase method of accounting was used to record assets acquired and
liabilities assumed by the Company. Such accounting generally results in
increased amortization and depreciation reported in future periods.
Accordingly, the accompanying financial statements of the Predecessor and the
Company are not comparable in all material respects since those financial
statements report financial positions, results of operations and cash flows of
these two separate entities.
F-9
<PAGE>
GENERAL HOUSING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business Activity
The Company manufactures and distributes manufactured homes primarily
throughout the southeast and has manufacturing facilities in Waycross,
Georgia, and Lamar, South Carolina. The markets for the Company's products are
affected by changes in industry capacity and the economy in the Southeast.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
The Company manufactures homes pursuant to dealer orders, and sales and
related transit costs are recognized upon shipment of the home to the dealer.
Cash Management
The Company utilizes a zero balance bank account and checks issued for cash
disbursements are funded with draws on the line of credit. Outstanding checks
are recorded as bank overdrafts until they are presented to the bank for
payment.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with a
maturity of three months or less to be cash equivalents.
Concentration of Credit Risk and Major Customer
The Company's receivables are concentrated with manufactured home dealers in
the southeastern United States. The Company performs credit evaluations of its
customers and does not maintain an allowance for doubtful accounts as it
believes that all of its receivables are collectible.
Sales to a major customer, Southern Lifestyle Homes, were approximately 11%
of net sales for the nine months ended September 30, 1996.
Inventories
Inventories are valued at the lower of cost or market, cost being determined
on the first-in, first-out method. At December 31, 1995, inventories purchased
in connection with the acquisition of the Predecessor are stated at the
Predecessor's cost, which approximated fair value upon acquisition.
At December 31, 1994 and 1995 and September 30, 1996, inventories consisted
of the following:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
----------------- ------------------------------------
DECEMBER 31, 1994 DECEMBER 31, 1995 SEPTEMBER 30, 1996
----------------- ----------------- ------------------
<S> <C> <C> <C>
Raw materials........ $2,146,966 $3,584,864 $4,358,343
Work in progress..... 304,785 419,569 435,542
Finished goods....... 15,447 586,365 903,774
---------- ---------- ----------
Total.............. $2,467,198 $4,590,798 $5,697,659
========== ========== ==========
</TABLE>
F-10
<PAGE>
GENERAL HOUSING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Property, Plant and Equipment
All property purchased in connection with the acquisition of the Predecessor
has been recorded at the Predecessor's approximate net book value, which
approximated fair value upon acquisition. Depreciation is provided using the
straight-line method for financial reporting purposes based on the following
estimated useful lives:
<TABLE>
<S> <C>
Buildings..................................................... 31 to 36 years
Machinery, equipment, and fixtures............................ 3 to 10 years
</TABLE>
Expenditures for major renewals and betterments that extend the useful lives
of property and equipment are capitalized. Expenditures for maintenance and
repairs are charged to expense as incurred. The cost and accumulated
depreciation of assets sold or retired are removed from the respective
accounts. Any gain or loss from the sale or retirement of property, plant, and
equipment is reflected in other (income) expense in the accompanying
consolidated statements of income.
Goodwill
Excess of purchase price over the net assets acquired of the Predecessor
("goodwill") is being amortized over a period of forty years. In accordance
with APB No. 17, subsequent to the date of acquisition, the Company continually
evaluates whether later events and circumstances have occurred that indicate a
change in the estimated useful life or recoverability of goodwill. In
accordance with Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of", the Company continually evaluates whether current events
and circumstances warrant adjustments to the carrying amount of goodwill
identified with long-lived assets, based on the Company's estimates of
undiscounted operating income over the remaining life of goodwill. At this
time, the Company believes that no impairment has occurred.
Accrued Liabilities
At December 31, 1994 and 1995 and September 30, 1996, accrued liabilities
consisted of the following:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
----------------- ------------------------------------
DECEMBER 31, 1994 DECEMBER 31, 1995 SEPTEMBER 30, 1996
----------------- ----------------- ------------------
<S> <C> <C> <C>
Income taxes payable................................................ $ 94,491 $ 389,600 $1,066,260
Accrued payroll..................................................... 251,215 379,703 712,261
Accrued interest.................................................... 0 131,659 673,761
Accrued warranty costs.............................................. 195,040 1,100,000 1,739,353
Accrued dealer-installed options.................................... 318,705 455,911 796,712
Accrued management bonus............................................ 452,225 0 561,307
Incentive compensation payable to former stockholders of the
Predecessor........................................................ 0 0 1,387,011
Accrued volume incentive plan....................................... 286,537 304,353 445,261
Special dealer promotion............................................ 0 0 901,362
Other............................................................... 440,097 1,116,055 1,565,177
---------- ---------- ----------
$2,038,310 $3,877,281 $9,848,465
========== ========== ==========
</TABLE>
Product Warranties
Products are warranted by the Company against manufacturing defects for a
period of one year commencing at the time of retail sale. The estimated cost of
such warranties is accrued at the time of sale and is reflected in selling,
general and administrative expenses in the consolidated statements of income.
Warranty costs were
F-11
<PAGE>
GENERAL HOUSING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
$1,707,912 and $3,118,556 for the years ended December 31, 1994 and December
30, 1995, respectively. Warranty costs were $2,379,395 and $3,070,472 for the
nine months ended September 30, 1995 and 1996, respectively.
Volume Incentive Payable
Rebates are provided to dealers using a predetermined formula applied to the
volume of homes sold to the dealers during the year. Such rebates (reflected
as a reduction of gross sales) are recorded at the time sales to dealers are
recognized. Volume incentive rebates were $843,735 and $1,380,707 for the
years ended December 31, 1994 and December 30, 1995, respectively. Volume
incentive rebates were $995,689 and $1,449,359 for the nine months ended
September 30, 1995 and 1996, respectively.
Deferred Financing Costs
Deferred financing costs represent costs to obtain financing and are
amortized using both the effective interest method and the straight-line
method over the terms of the related indebtedness. The effect of debt
prepayments, if any, will be reflected in the amortization of deferred
financing costs in the period of prepayment.
Earnings Per Share
Earnings per share are based on the weighted average number of common shares
and equivalents outstanding. Common share equivalents consist of the
incremental common shares issuable upon conversion of the convertible
preferred stock and the exercise of warrants.
Fair Value of Financial Instruments
The carrying amounts reported in the accompanying consolidated balance
sheets for cash and cash equivalents, accounts receivable and accounts payable
approximate fair value due to the immediate or short-term maturity of these
financial instruments. In the opinion of management, total long- term debt
recorded in the accompanying consolidated balance sheets approximates fair
value based on the borrowing rates currently available to the Company for
loans with similar terms and average maturities.
Supplemental Cash Flow Disclosures
During the nine months ended September 30, 1996, the Company recorded
purchase price adjustments relating to the acquisition of the Predecessor.
These adjustments of approximately $1,387,000 (Note 5) and $306,000 (relating
to the remaining restricted cash balance which was not released as of
September 30, 1996) were reflected in the accompanying balance sheets as
increases to Goodwill and Accrued and Other Liabilities.
Interim Financial Data (Unaudited)
The interim financial data for the nine months ended September 30, 1995 is
unaudited; however, in the opinion of management, such interim data includes
all adjustments, consisting only of normal recurring adjustments, necessary
for the fair presentation of the Company's financial position and its results
for the interim periods in accordance with generally accepted accounting
principles.
Reclassifications
Certain 1994 and 1995 amounts have been reclassified to conform with the
interim 1996 presentation.
3. LONG-TERM DEBT
Senior Subordinated Note
In connection with the acquisition, the Company issued a $17,243,295 senior
subordinated note under a note and warrant purchase agreement consisting of a
senior subordinated note issued for cash consideration of $14,920,000 due
December 21, 2002. The note bears interest at an annual rate of 10.87% through
March 31, 2001 and 14.5% thereafter, payable quarterly through December 21,
2002. The discount on this note is being
F-12
<PAGE>
GENERAL HOUSING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
amortized using the effective interest method over the life of the note.
During the nine months ended September 30, 1996, the Company voluntarily
prepaid $2,250,000 of principal as allowed under the terms of the note.
Secured Credit Agreement
In connection with the acquisition, the Company entered into a $26 million
secured credit agreement consisting of approximately $16 million in a
revolving line of credit (the "line of credit") expiring April 1, 2000 and $4
million in a term loan due January 1, 2001. This agreement also provides for a
working capital facility when the line of credit has been exhausted, not to
exceed $6 million. Any amounts outstanding under the working capital facility
are due January 1, 2001. Availability under the line of credit declines on a
quarterly basis by varying amounts until April 1, 2000, at which time any
amounts outstanding under the revolving loan commitment become due and
payable. Interest is determined at the time of borrowing based on the
definition of loan type determined by the borrower. Based on this
determination, the revolving loans and term loan bear interest which is
payable monthly as follows:
a. If a reference rate loan (as defined in the secured credit agreement),
then at the sum of the reference rate in effect from time to time, plus
1.5% per annum
b. If a London InterBank Offered Rate ("LIBOR") loan, then at the sum of
LIBOR for the applicable interest period, plus 3.75% per annum
Working capital facility loans bear interest as follows:
a. If a reference rate loan (as defined in the secured credit agreement),
then at the sum of the reference rate in effect from time to time, plus
1.25% per annum
b. If a LIBOR loan, then at the sum of LIBOR for the applicable interest
period, plus 3.5% per annum
The line of credit, term loan, and working capital facility bear an interest
rate of 9.4% (weighted average), 9.5% and 9.5%, respectively, at September 30,
1996.
Junior Subordinated Notes
In connection with the acquisition, the Company issued $5 million in junior
subordinated notes payable to three stockholders due June 30, 2003. These
notes bear interest at an annual rate of 13%, payable quarterly through June
30, 2003.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
----------------- ------------------------------------
DECEMBER 31, 1994 DECEMBER 31, 1995 SEPTEMBER 30, 1996
----------------- ----------------- ------------------
<S> <C> <C> <C>
Senior Subordinated
Note, net of discount
of $2,323,295 and
$2,001,092 at December
31, 1995 and September
30, 1996,
respectively........... $ 0 $14,920,000 $12,912,203
Line of Credit.......... 0 12,965,642 7,784,866
Term Note............... 0 4,000,000 4,000,000
Working capital facili-
ty..................... 0 1,000 1,000
Junior Subordinated
Notes.................. 0 5,000,000 5,000,000
Other................... 579,264 857,531 826,291
Notes payable repaid in
1995................... 940,765 0 0
---------- ----------- -----------
1,520,029 37,744,173 30,524,360
Less current maturi-
ties................... (181,977) (41,427) (45,097)
---------- ----------- -----------
Total long-term debt.. $1,338,052 $37,702,746 $30,479,263
========== =========== ===========
</TABLE>
F-13
<PAGE>
GENERAL HOUSING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Maturities of long-term debt, including scheduled reductions of the line of
credit as of September 30, 1996 are as follows:
<TABLE>
<CAPTION>
<S> <C>
1997............................................................ $ 45,097
1998............................................................ 49,921
1999............................................................ 4,169,255
2000............................................................ 5,059,940
2001............................................................ 4,994,130
Thereafter...................................................... 18,207,109
-----------
32,525,452
Discount on Senior Subordinated Note............................ (2,001,092)
-----------
Long-term debt.................................................. $30,524,360
===========
</TABLE>
Borrowings under the various notes payable and the secured credit agreement
are collateralized by substantially all of the assets of the Company. These
agreements contain certain restrictive covenants, including financial
covenants which become more restrictive over time. The most restrictive
covenants include, among other restrictions, (a) current ratio, as defined,
(b) net worth, as defined, (c) net cash ratio, as defined, (d) total
liabilities ratio, as defined, (e) annual interest coverage ratio, as defined,
(f) limitations on the Company's ability to incur additional liens or debt or
enter into new lease agreements, (g) certain restrictions on dividend
distributions, and (h) limitations on changes of control of the Company.
4. INSTALLMENT PROMISSORY NOTES DUE TO FORMER STOCKHOLDERS OF THE PREDECESSOR
In connection with the purchase of the common stock from the former
stockholders of the Predecessor, the Company issued $45 million in installment
promissory notes (the "Installment Notes") to the former stockholders due
January 25, 1997, which were secured by letters of credit collateralized by
restricted cash. These notes bore interest at the same rate upon which
restricted cash earns interest, which is 5.57% at December 31, 1995. The
restricted cash of $45 million securing the letters of credit was placed in
irrevocable trust accounts. Under the terms of the notes, the former
stockholders had no recourse against the Company upon a default on the notes,
other than to demand repayment under the letters of credit.
During the nine months ended September 30, 1996, the Company released the
restricted cash for use to repay the Installment Notes to the former
stockholders.
5. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases certain machinery for use in its manufacturing process.
The following schedule lists the minimum future rental payments required by
the leases as of September 30, 1996:
<TABLE>
<CAPTION>
<S> <C>
1997................................................................ $184,800
1998................................................................ 42,600
1999................................................................ 7,600
--------
Total............................................................. $235,000
========
</TABLE>
The Company recorded rental expense of approximately $85,000 and $148,000
for the years ended December 31, 1994 and December 30, 1995, respectively, and
approximately $83,000 and $196,000 for the nine months ended September 30,
1995 and 1996, respectively.
F-14
<PAGE>
GENERAL HOUSING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Repurchase Agreements
As is customary in the manufactured housing industry, the Company is
contingently liable under the terms of repurchase agreements with various
financial institutions providing inventory financing for dealers of the
Company's products. Generally, the agreements provide for the repurchase of
the manufactured homes from the financing institutions in the event of
repossession upon a dealer's default. The contingent liability under these
agreements approximates the amount financed, reduced by the resale value of
any products which may be repurchased, and the risk of loss is spread over
numerous dealers and financial institutions. The aggregate amount outstanding
under these repurchase agreements was estimated to be approximately $45.3
million at September 30, 1996.
Incentive Plan and Executive Bonus Plan
Under the Incentive Plan, the former stockholders of the Predecessor can
earn up to $3.85 million over a five year period based upon the Company
achieving certain levels of earnings as defined in the Incentive Plan. As of
September 30, 1996, approximately $1,387,000 has been accrued in the
accompanying financial statements as due to former stockholders of the
Predecessor, with $1,248,750 assigned to goodwill, reflecting contingent
consideration, and $138,750 assigned to Adjustment to Predecessor Equity in
accordance with Issue No. 88-16 of the EITF. Pursuant to the terms of the
Incentive Plan, ninety percent of any unpaid amounts up to the maximum amount
payable under the Incentive Plan will be paid out immediately prior to an
initial public offering of the Company's common stock.
The Company has established an executive bonus plan (the "Executive Bonus
Plan") to provide incentives for its principal executives, whereby the
executives may earn cash compensation should earnings of the Company exceed
certain amounts, as defined in the agreement, in any fiscal year. As of
September 30, 1996, the Company has recorded approximately $1,061,000 of bonus
expense under the Executive Bonus Plan.
Other
The Internal Revenue Service is currently conducting an examination of the
Predecessor's income tax returns for 1992, 1993, and 1994. Although the
examination has not yet been completed, the former stockholders of the
Predecessor have indemnified the Company against any possible federal, state,
or local tax contingencies which might arise from preacquisition circumstances
or positions taken on tax returns.
During 1995, an individual filed an action against the Company in Ware
Superior Court, Georgia, seeking damages of $2,500,000 for personal injury and
loss of consortium. The cause of action arises from an incident where the
individual, while working for his employer, a subcontractor hired by a
contractor working for the Company, fell and injured himself on the Company's
premises. Although this matter is still in the discovery process, the Company
plans to contest it vigorously.
The Company is party to other various legal proceedings generally incidental
to its business. Management does not believe that the resolution or settlement
of the legal proceeding described above and any or all of such other
proceedings will have a material adverse effect on the financial condition or
liquidity of the Company.
6. INCOME TAXES
The Company accounts for income taxes under the provisions of SFAS No. 109,
"Accounting for Income Taxes". SFAS No. 109 requires the determination of
deferred income taxes using the liability method under which deferred tax
assets and liabilities are determined based on the difference between the
financial accounting and tax bases of assets and liabilities. Deferred tax
assets or liabilities at the end of each period are determined
F-15
<PAGE>
GENERAL HOUSING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
using the currently enacted regular tax rate expected to apply to the taxable
income in the periods in which the deferred tax asset or liability is expected
to be settled or realized.
Effective January 1, 1995, the Predecessor elected S corporation status for
income tax purposes, except with respect to the State of Georgia, where the
Predecessor was operating under C corporation status. The taxable income or
loss of an S corporation is included in the individual income tax returns of
the Company's stockholders. Accordingly, no income tax amounts were included
in the Predecessor's financial statements for 1995 other than amounts related
to the State of Georgia, where the Predecessor operated under C corporation
status. The Company is a C corporation.
The provision for income taxes for the respective periods is as follows:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
--------------------------------------- -------------
NINE MONTHS NINE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1995 1996
------------ ------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Federal income taxes:
Current.............................................................. $1,086,419 $ 0 $ 0 $3,393,000
Deferred............................................................. 23,565 0 0 (192,000)
---------- -------- -------- ----------
1,109,984 0 0 3,201,000
---------- -------- -------- ----------
State income taxes:
Current.............................................................. 185,973 490,000 341,000 635,000
Deferred............................................................. 0 (25,000) (10,000) (8,000)
---------- -------- -------- ----------
185,973 465,000 331,000 627,000
---------- -------- -------- ----------
Total Provision...................................................... $1,295,957 $465,000 $331,000 $3,828,000
========== ======== ======== ==========
</TABLE>
The provisions for income taxes differ from the amounts computed by applying
the federal statutory rates due to the following:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-------------------------------------------- -------------------
YEAR ENDED YEAR ENDED NINE MONTHS NINE MONTHS
DECEMBER 31, DECEMBER 30, ENDED ENDED
1994 1995 SEPTEMBER 30, 1995 SEPTEMBER 30, 1996
------------ ------------ ------------------ -------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Tax provision at the federal statutory rate................. $1,156,532 $ 0 $ 0 $3,087,000
State income taxes, net of federal benefit.................. 124,788 465,000 331,000 420,000
Goodwill amortization....................................... 0 0 0 281,000
Other....................................................... 14,637 0 0 40,000
---------- -------- -------- ----------
Total Provision........................................... $1,295,957 $465,000 $331,000 $3,828,000
========== ======== ======== ==========
</TABLE>
F-16
<PAGE>
GENERAL HOUSING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The tax effect of temporary differences which create deferred tax assets
(liabilities) at December 31, 1994 and 1995 and September 30, 1996 are as
follows:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
----------------- ------------------------------------
DECEMBER 31, 1994 DECEMBER 31, 1995 SEPTEMBER 30, 1996
----------------- ----------------- ------------------
<S> <C> <C> <C>
Deferred tax assets:
Warranty accrual.................................................. $ 74,022 $ 456,000 $ 660,000
Vacation accrual.................................................. 46,740 49,377 92,000
Other............................................................. -- 34,623 43,000
--------- --------- ---------
Total deferred assets........................................... 120,762 540,000 795,000
Deferred tax liabilities:
Depreciation...................................................... (101,310) (180,000) (235,000)
Other............................................................. (59,937) -- --
--------- --------- ---------
Total deferred liabilities...................................... (161,247) (180,000) (235,000)
--------- --------- ---------
Net deferred asset (liability).................................. $ (40,485) $ 360,000 560,000
========= ========= =========
</TABLE>
7. RELATED-PARTY TRANSACTIONS
M/H Retail, Inc. is a company controlled by a minority stockholder which
provides warranty services for the Company. The Company made payments to M/H
Retail, Inc. for warranty services of approximately $1,249,000 and $2,213,000
for fiscal 1994 and 1995, respectively, and $1,563,000 and $2,477,000 for the
nine months ended September 30, 1995 and 1996, respectively. The Company sells
materials used for warranty service to M/H Retail, Inc. from time to time.
Amounts due from M/H Retail, Inc. of approximately $108,000 and $368,000 as of
December 31, 1994 and 1995, respectively, were recorded as receivables in the
accompanying consolidated balance sheets. Amounts due from M/H Retail, Inc. of
approximately $523,000 were recorded as receivables in the accompanying
consolidated balance sheet at September 30, 1996.
In connection with the acquisition of the Predecessor, the Company entered
into a 15-year agreement with a company controlled by certain of its
stockholders to provide general management services to the Company. The
agreement is cancelable upon the occurrence of certain events, and payments
under the agreement are subordinate to the claims of certain stockholders and
debt holders of the Company. The base annual management fee is $250,000,
payable in quarterly installments in arrears, and up to $500,000 may be paid
under the agreement if certain perfomance goals are met. The total annual
management fee is subject to certain adjustments based on inflation and the
occurrence of certain future events. Also, in connection with the acquisition,
the Company paid a fee of approximately $500,000 upon closing which was
included in acquisition costs.
In connection with the acquisition, the Company issued $5 million of Junior
Subordinated Notes (Note 3), 8,000,000 shares of Redeemable Preferred Stock
(Note 8) and 750,000 shares of Series B preferred stock (Note 9) to common
stockholders.
8. REDEEMABLE SERIES A PREFERRED STOCK
Each share of Redeemable Preferred Stock is not convertible, is nonvoting
(except in certain circumstances, as defined), and has a par value of $.001
per share and a liquidation value of $1 per share; 8,000,000 shares are
authorized, issued, and outstanding. Holders of the Redeemable Preferred Stock
are entitled to receive quarterly dividends at an annual rate of twelve cents
per share. Such dividends are cumulative, and the holders of Redeemable
Preferred Stock shall be entitled to receive dividends and distributions prior
and in preference to
F-17
<PAGE>
GENERAL HOUSING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
any dividends or distributions on the Series B preferred stock, Class A common
stock, Class B common stock, or Class C common stock. The Redeemable Preferred
Stock was recorded on the accompanying consolidated balance sheet at its fair
value on the issue date. The difference between the fair value and the
liquidation value is being accreted to the mandatory redemption date of
December 31, 2003 using the effective interest method. Once redeemed, the
Redeemable Preferred Stock must be canceled and may not be reissued.
9. STOCKHOLDERS' EQUITY
The following are the major terms of the Company's stockholders' equity.
Series B Preferred Stock
Each share of Series B preferred stock is voting (as discussed below) and
has a par value of $.001 per share; 2,150,000 shares are authorized, issued,
and outstanding. The holders of Series B preferred stock shall not be entitled
to receive dividends on such shares. The holders of Series B preferred stock
and Class C common stock shall be entitled to receive prior and in preference
to any liquidating dividends and distributions to the holders of Class A and
Class B common stock the amount of $1 per share and will then participate
proportionately with the holders of the Class A and Class B common stock. The
holders of Series B preferred stock shall be entitled to the number of votes
as are equal to the number of shares of Class C common stock into which such
holders' shares of Series B preferred stock could be converted at the record
date. Each share of Series B preferred stock shall be convertible, at the
option of the holder, at any time after the date of issuance of such shares
into such number of shares of Class C common stock as is determined by
dividing the initial Series B conversion price by the Series B conversion
price in effect at the conversion date. At the option of the Company, Series B
preferred stock shall be converted into one or more shares of Class A common
stock (as determined by applicable conversion prices) upon a public offering
of the Company's stock, provided that the holders of the Series B preferred
stock are first paid their liquidation preference of $1 per share.
Class A Common Stock
Each share of Class A common stock is voting and has a par value of $.001
per share; 4,375,000 shares are authorized, and 1,364,313 shares are issued
and outstanding. Upon certain transfers of Class A common stock to holders of
Class B common stock, such shares of Class A common stock shall be converted
into the same number of shares of Class B common stock so being transferred.
Class B Common Stock
Each share of Class B common stock is nonvoting, except as defined in the
certificate of incorporation, and has a par value of $.001 per share; 787,500
shares are authorized, none of which are issued and outstanding. Upon certain
transfers of Class B common stock or upon the sale of any shares of common
stock of the Company pursuant to certain registered or qualified offerings,
each share of Class B common stock will be converted into a share of Class A
common stock.
Class C Common Stock
Each share of Class C common stock is voting and has a par value of $.001
per share; 2,150,000 shares are authorized, none of which are issued and
outstanding. The holders of Series B preferred stock and Class C common stock
shall be entitled to receive prior and in preference to any liquidating
dividends and distributions to the holders of Class A and Class B common stock
the amount of $1 per share and will then participate proportionately with the
holders of the Class A and Class B common stock. Class C common stock shall be
converted into one share of Class A common stock, at the option of the
Company, upon a public offering of the
F-18
<PAGE>
GENERAL HOUSING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Company's stock, provided that the holders of Class C common stock are first
paid their liquidation preference of $1 per share.
Stock Warrants
In connection with the financing of the acquisition, the Company issued
stock warrants to the Senior Subordinated Note holder and certain individuals.
Under the terms of the warrants, the warrant holders have the rights to
purchase 288,308 and 180,192 shares of the Company's common stock,
respectively, for a purchase price of $.01 per share at any time until
December 21, 2002 and December 21, 2003, respectively. Pursuant to an
investors' rights agreement (the "Rights Agreement"), the Senior Subordinated
Note holder has a put option which requires the Company to purchase the
warrants back at a price based on fair market value (as defined in the Rights
Agreement) of the common stock.
The warrants are recorded in the accompanying consolidated balance sheets at
the estimated fair value on the issue date.
Put and Call Options
Certain stockholders, pursuant to the Rights Agreement, have a put option to
require the Company to purchase all of their outstanding common shares at any
time and from time to time commencing December 30, 2003; 1,621,731 such shares
(1,003,929 common shares and 617,802 Series B preferred shares) are
outstanding at December 31, 1995. Upon exercise of the put option, the Company
shall pay a price per share equal to the fair market value (as defined in the
Rights Agreement) determined as of the date of the put notice. At any time
commencing December 30, 2004, the Company may elect to purchase all of the
aforementioned shares at a price equal to the fair market value determined as
of the date of the call notice.
10. SUBSEQUENT EVENTS
On October 16, 1996, the Company's Board of Directors (the "Board")
authorized a new class of common stock with 20,000,000 shares authorized into
which Class A common stock will be converted and a .823736264 for one reverse
stock split to be effected immediately prior to the Company's planned initial
public offering. All share and earnings per share data of the Company in the
accompanying financial statements have been retroactively adjusted to reflect
the stock split. In addition, the Board authorized changing the name of the
Company to General Housing, Inc. The Board also authorized the implementation
of an executive stock option plan providing for the issuance of up to 461,500
shares of the Company's common stock to key employees of which options for
208,000 shares will be granted at an exercise price equal to the initial
public offering price.
On December 18, 1996, the Company's Board of Directors authorized the
termination of the Incentive Plan (Note 5) and conversion of the Company's
obligations to the participants into promissory notes in the aggregate
principal amount of $4 million, bearing interest at 9% per annum and payable
in equal amounts on April 1, 1997 and 1998.
11. INITIAL PUBLIC OFFERING AND PRO FORMA SUPPLEMENTAL INFORMATION (UNAUDITED)
The Company is planning an initial public offering ("Offering") of 2,000,000
shares of the Company's common stock. The Company intends to use the net
proceeds of such Offering, which are expected to be approximately $23,400,000
based on an assummed offering price of $13 per share, for redemption of the
Redeemable Preferred Stock held by certain stockholders and repayment of
certain outstanding indebtedness (including the Junior Subordinated Notes
payable to certain stockholders). Immediately prior to closing of the
Offering, the Company plans to restructure its capital stock so that all
issued and outstanding shares of Class A common stock are exchanged for newly
created common stock, exercise its right to convert the Series B preferred
stock into the newly created common stock and satisfy the liquidation
preference requirements of $2,150,000 on the Series B preferred stock through
issuance of shares of the newly created common stock. In addition, the Rights
Agreement providing for put and call options on shares of the Company's stock
will be terminated.
F-19
<PAGE>
GENERAL HOUSING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In the fiscal quarter in which the restructuring is effected and the Offering
is consummated, the Company will record the following non-cash charges to net
income prior to determining earnings per share: (1) $2,150,000 resulting from
payment of the liquidation preference on the Series B preferred stock as noted
above, and (2) approximately $258,000 resulting from the redemption of the
Series A preferred stock, representing the difference between the consideration
received upon issuance (plus accretion) and the redemption price. In addition,
at the same time, the Company will record an extraordinary after-tax charge to
income of approximately $400,000 resulting from the prepayment of a substantial
portion of the Company's outstanding long-term debt.
PRO FORMA INFORMATION AND SUPPLEMENTAL PRO FORMA INFORMATION (UNAUDITED)
The unaudited pro forma net income for the year ended December 30, 1995 and
for the nine months ended September 30, 1995 is based on the pro forma
provision for income taxes which would have resulted assuming the Company was
taxed as a C corporation rather than as an S corporation.
The unaudited supplemental pro forma earnings per share is based on pro forma
income adjusted to give effect to the reduction in interest costs, net of the
tax effect, (approximately $665,000 in the period ended September 30, 1996) and
the elimination of the Redeemable Preferred Stock dividend and accretion
(approximately $742,000 in the period ended September 30, 1996) which would
have resulted assuming application of the net proceeds from the proposed
Offering to repay certain indebtedness of the Company and to redeem the
Redeemable Preferred Stock as if such repayment occurred as of January 1, 1996.
The number of shares used in the computation of unaudited supplemental pro
forma earnings per share is the weighted average number of common and common
equivalent shares outstanding increased by the estimated number of additional
shares issued in connection with the Offering, assuming the estimated net
proceeds of $23,400,000 are required to be used to repay such indebtedness and
to redeem Redeemable Preferred Stock.
F-20
<PAGE>
GENERAL HOUSING, INC.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma consolidated financial statements have
been prepared giving effect to the Acquisition, the Restructuring and the
Offering. The pro forma consolidated balance sheet as of September 30, 1996
assumes that the Restructuring and the Offering occurred on that date. The pro
forma consolidated statements of income for the year ended December 30, 1995
and the nine months ended September 30, 1996 give effect to the Acquisition,
the Restructuring and the Offering as if such events occurred on January 1,
1995.
The unaudited pro forma consolidated financial statements do not purport to
represent the results of operations or financial position had the above
transactions in fact occurred on such dates nor does such information give
effect to any transactions other than those transactions referred to above and
those transactions discussed in the notes to the unaudited pro forma
consolidated financial statements below. Moreover, the unaudited pro forma
consolidated financial statements are not intended to be indicative of future
results of operations or financial performance of the Company.
F-21
<PAGE>
GENERAL HOUSING, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA FOR THE
RESTRUCTURING FOR THE OFFERING RESTRUCTURING
HISTORICAL ADJUSTMENTS RESTRUCTURING ADJUSTMENTS AND OFFERING
---------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash
equivalents........... $ 224 6 (a) $ 230 $ 230
Accounts receivable.... 5,866 5,866 5,866
Inventories............ 5,698 5,698 5,698
Deferred income taxes.. 795 795 795
Prepaid items.......... 232 232 232
------- ------- -------
Total current assets... 12,815 12,821 12,821
------- ------- -------
Property, plant and
equipment, net......... 4,143 4,143 4,143
Restricted cash & cash
equivalents............ 306 306 306
Goodwill................ 37,163 2,351 (b) 39,514 39,514
Deferred financing
costs.................. 1,758 1,758 (444)(f) 1,314
Other assets............ 311 311 311
------- ------- -------
Total assets........... 56,496 58,853 58,409
======= ======= =======
Current liabilities:
Accounts payable....... 3,364 3,364 3,364
Bank overdrafts........ 1,318 1,318 1,318
Accrued liabilities.... 9,848 (1,388)(b) 8,460 8,460
Current portion of
long-term debt........ 45 2,000 (b) 2,045 2,045
------- ------- -------
Total current
liabilities........... 14,575 15,187 15,187
------- ------- -------
Long-term debt.......... 30,479 2,000 (b) 32,479 (15,230)(g) 17,249
Deferred income taxes... 235 235 235
Other Long-Term
Liabilities............ 306 306 306
------- ------- -------
Total liabilities...... 45,595 48,207 32,977
------- ------- -------
Redeemable preferred
stock.................. 7,742 7,742 (7,742)(g)(h) --
Stockholders' equity:
Preferred stock, series
B..................... 2 (2)(c) -- --
Common stock........... 2 2 (a)(c)(d)(e) 4 2 (g) 6
Warrants............... 130 (130)(a) -- --
Paid-in capital........ 2,526 2,286 (a)(d)(e) 4,812 23,428 (g) 28,240
Retained earnings...... 4,465 (2,150)(d) 2,315 (902)(f)(h)(i) 1,413
------- ------- -------
7,125 7,131 29,659
Adjustment to
Predecessor Equity.... (3,966) (261)(b) (4,227) (4,227)
------- ------- -------
3,159 2,904 25,432
------- ------- -------
56,496 58,853 58,409
======= ======= =======
</TABLE>
Note 1: The above pro forma balance sheet gives effect to the following pro
forma adjustments necessary to reflect the planned Restructuring (the
conversion of the Series B Preferred Stock into Common Stock, the
conversion of the Incentive Plan into promissory notes and the exercise
of outstanding warrants to purchase Common Stock, as described under
"Certain Transactions--The Restructuring") and the Offering, as if
these events had occurred on that date.
- --------
(a) Reflects the issuance of 568,750 shares of Common Stock upon the exercise
of outstanding warrants at an exercise price of $.01 per share. Results in
an increase in cash ($6), increase in common stock ($0.569), increase in
paid in capital ($135), and a decrease in warrants ($130).
F-22
<PAGE>
(b) Reflects the issuance of $4,000 in notes issued in connection with the
conversion of the Incentive Plan. Results in a net increase in goodwill of
$2,351 in addition to $1,388 previously accrued during the nine months
ended September 30, 1996 under the original terms of the Incentive Plan,
and a $261 adjustment to Predecessor equity. The notes bear interest at 9%
per annum and are payable in equal installments on April 1, 1997 and 1998.
(c) Reflects the conversion of 2,150,000 shares of Series B Preferred Stock
($2) to 2,150,000 shares of $.001 par value Common Stock ($2).
(d) Reflects the issuance of 165,385 shares of Common Stock at an assumed
offering price of $13 per share in payment of the $2,150 liquidation
preference on the Series B Preferred Stock conversion. Results in an
increase in common stock ($.165), increase in paid-in capital ($2,150),
and a decrease in retained earnings ($2,150).
(e) Reflects the effect of the reverse stock split on Common Stock ($.771) and
paid-in capital ($.771).
(f) Reflects the reduction in deferred financing costs (approximately $444)
due to the early repayment of debt with proceeds from the Offering.
(g) Reflects the issuance of 2,000,000 shares of Common Stock at an assumed
initial public offering price of $13 per share and the application of the
estimated net proceeds therefrom. Results in an increase in Common Stock
($2) and paid-in capital ($23,428).
(h) Reflects a charge to net income available to common stockholders ($258)
equal to the difference between the consideration received upon issuance
of the Redeemable Preferred Stock (plus accretion) and the redemption
price.
(i) Reflects estimated prepayment penalty of approximately $200 associated
with the early retirement of debt.
F-23
<PAGE>
GENERAL HOUSING, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 30, 1995
--------------------------------------------------------------------------------------------
PRO FORMA FOR THE
PRO FORMA FOR THE ACQUISITION,
ACQUISITION RESTUCTURING ACQUISITION AND OFFERING RESTRUCTURING AND
PREDECESSOR ADJUSTMENTS ADJUSTMENTS RESTRUCTURING ADJUSTMENTS OFFERING
----------- ----------- ------------ ----------------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales.............. $89,292 $ 89,292 $ 89,292
Cost of goods sold..... 69,572 69,572 69,572
------- --------- ------- --------- --------- ---------
Gross Profit............ 19,720 19,720 19,720
Goodwill amortization... -- 981 (a) 100 (f) 1,081 1,081
Selling, general, and
administrative
expenses............... 11,774 (1,198)(b) 10,576 10,576
------- --------- ------- --------- --------- ---------
Income from operations.. 7,946 217 (100) 8,063 8,063
Interest expense........ 283 4,704 (c) 360 (g) 5,347 (1,645)(i) 3,702
Other income............ (53) (53) (53)
------- --------- ------- --------- --------- ---------
Income before income
taxes.................. 7,716 (4,487) (460) 2,769 1,645 4,414
Provision for income
taxes.................. 465 1,135 (d) (137)(h) 1,463 625 (j) 2,088
------- --------- ------- --------- --------- ---------
Net income.............. 7,251 (5,622) (323) 1,306 1,020 2,326
Preferred stock
dividends.............. (988)(e) (988) 988 (k)
------- --------- ------- --------- --------- ---------
Net income available to
common stockholders.... $ 7,251 $ (6,610) $ (323) $ 318 $ 2,008 2,326
======= ========= ======= ========= ========= =========
Net Income per common
share.................. $ 0.08 $ 0.40
Weighted Average
Shares(l).............. 3,603,846 165,385 3,769,231 2,000,000 5,769,231
</TABLE>
Note 1: The above statement for the year ended December 30, 1995 gives effect
to the following pro forma adjustments necessary to reflect the
acquisition of General Manufactured Housing, Inc. (the "Predecessor")
by the Company; the planned Restructuring (the conversion of the Series
B Preferred Stock into Common Stock, the conversion of the Incentive
Plan into promissory notes and the exercise of outstanding warrants to
purchase Common Stock, as described under "Certain Transactions--The
Restructuring") and the Offering, as if these events had taken place as
of January 1, 1995. Pro forma adjustments do not reflect nonrecurring
adjustments associated with the Restructuring and the Offering,
including an extraordinary loss associated with the early retirement of
debt (approximately $446 net of tax effect), and charges to income
available to common stockholders for accretion to redemption amount on
Redeemable Preferred Stock ($264) and the issuance of Common Stock in
payment of the liquidation preference relating to the Series B
Conversion ($2,150).
- --------
(a) Reflects amortization expense of goodwill over a life of 40 years. The
acquisition was accounted for as a purchase business combination pursuant
to Accounting Principles Board Opinion No. 16. The excess of the purchase
price over the estimated fair value of assets acquired and liabilities
assumed was recorded as goodwill.
(b) Reflects the reduction of management compensation expense ($1,855) and the
recording of management fees ($500) and other general and administrative
expenses ($157). Management compensation eliminated represents the amount
of compensation paid to management in 1995 which would not have been paid
had the current executive bonus plan been in place. Management fees and
other general and administrative expenses represent increased expenses for
certain management, administrative and other recurring expenses resulting
from the Acquisition.
F-24
<PAGE>
(c) Reflects additional interest expense ($4,278) and amortization of deferred
financing costs ($426) resulting principally from debt incurred by the
Company to effect the Acquisition.
(d) The Predecessor operated as an S corporation for federal income tax
purposes during 1995. The adjustment reflects a provision for federal
income taxes at 34% to provide for taxes as if the Predecessor had been
taxed as a C corporation during 1995, less the tax benefits of the pro
forma adjustments described above.
(e) Reflects the dividend requirements on the Redeemable Preferred Stock
($960) and the accretion on the Redeemable Preferred Stock ($28).
8,000,000 shares of the Redeemable Preferred Stock were issued in
connection with the Acquisition for cash consideration of $7,720.
(f) Reflects increased amortization expense resulting from increased goodwill
($4,000) related to the conversion of the Incentive Plan into promissory
notes, which is being amortized over 40 years.
(g) Reflects increased interest expense associated with the $4,000 promissory
notes issued pursuant to the Incentive Plan conversion.
(h) Reflects the tax effect of the Restructuring adjustments.
(i) Reflects decreased interest expense related to debt to be retired with a
portion of the proceeds of the Offering.
(j) Reflects the income tax effect of the Offering adjustments at a rate of
38%.
(k) Reflects the elimination of the dividend requirement and the accretion on
the Redeemable Preferred Stock which will be redeemed with a portion of
the proceeds of the Offering.
(l) Weighted average shares for the Company reflect the reverse stock split to
be effected immediately prior to the closing of the Offering and the
issuance of Common Shares in connection with the Acquisition, the
Restructuring and the Offering. The components of the 5,769,231 pro forma
common shares include common stock of the Company (1,656,250), shares
issued for the conversion of warrants (568,750) and Series B preferred
stock (2,150,000), the effect of a .823736264 to 1 reverse stock split
(771,154), shares issued for $1 per share liquidation preference on
2,150,000 shares of Series B preferred stock (165,385), and the issuance
of common stock in connection with the offering (2,000,000).
F-25
<PAGE>
GENERAL HOUSING, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1996
----------------------------------------------------------------------------
PRO FORMA FOR
RESTRUCTURING PRO FORMA FOR THE OFFERING THE RESTRUCTURING
COMPANY ADJUSTMENTS RESTRUCTURING ADJUSTMENTS AND OFFERING
--------- ------------- ----------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales............. $ 100,823 $ 100,823 $ 100,823
Cost of goods sold.... 75,628 75,628 75,628
--------- ------- --------- --------- ---------
Gross profit............ 25,195 25,195 25,195
Goodwill amortization... 740 75 (a) 815 815
Selling, general, and
administrative
expenses............... 11,846 11,846 11,846
--------- ------- --------- --------- ---------
Income from operations.. 12,609 (75) 12,534 12,534
Interest expense........ 3,552 270 (b) 3,822 (1,072)(d) 2,750
Other expense........... 22 22 22
--------- ------- --------- --------- ---------
Income before income
taxes.................. 9,035 (345) 8,690 1,072 9,762
Provision for income
taxes.................. 3,828 (131)(c) 3,697 407 (e) 4,104
--------- ------- --------- --------- ---------
Net income.............. 5,207 (214) 4,993 665 5,658
Preferred stock
dividends.............. (742) (742) 742 (f) 0
--------- ------- --------- --------- ---------
Net income available to
common stockholders.... $ 4,465 $ (214) $ 4,251 $ 1,407 $ 5,658
========= ======= ========= ========= =========
Net Income per common
share.................. $ 1.24 $ 1.13 $ 0.98
Weighted Average
Shares(g).............. 3,603,846 165,385 3,769,231 2,000,000 5,769,231
</TABLE>
Note 1: The above statement for the nine months ended September 30, 1996 gives
effect to the following pro forma adjustments necessary to reflect the
planned Restructuring (the conversion of the Series B Preferred Stock
into Common Stock, the conversion of the Incentive Plan into promissory
notes and the exercise of outstanding warrants to purchase Common
Stock, as described under "Certain Transactions--The Restructuring")
and the Offering, as if these events had taken place as of January 1,
1995. Pro forma adjustments do not reflect nonrecurring adjustments
associated with the Restructuring and the Offering, including an
extraordinary loss associated with the early retirement of debt
(approximately $446 net of tax effect), and charges to income available
to common stockholders for accretion to redemption amount on Redeemable
Preferred Stock ($264) and the issuance of Common Stock in payment of
the liquidation preference relating to the Series B Conversion
($2,150).
- --------
(a) Reflects increased amortization expense resulting from increased goodwill
($4,000) related to the conversion of the Incentive Plan into promissory
notes, which is being amortized over 40 years.
(b) Reflects increased interest expense associated with the $4,000 promissory
notes issued under the Incentive Plan conversion.
(c) Reflects the tax effect of the Restructuring adjustments.
(d) Reflects decreased interest expense related to debt to be retired with a
portion of the proceeds of the Offering.
(e) Reflects the income tax effect of the Offering adjustments at a rate of
38%.
(f) Reflects the elimination of the dividend requirement and the accretion on
the Redeemable Preferred Stock which will be redeemed with a portion of
the proceeds of the Offering.
(g) Weighted average shares for the Company reflect the reverse stock split to
be effected immediately prior to the closing of the Offering and the
issuance of Common Shares in connection with the Acquisition, the
F-26
<PAGE>
Restructuring and the Offering. The components of the 5,769,231 pro forma
common shares include common stock of the Company (1,656,250), shares
issued for the conversion of warrants (568,750) and Series B preferred
stock (2,150,000), the effect of a .823736264 to 1 reverse stock split
(771,154), shares issued for a $1 per share liquidation preference on
2,150,000 shares of Series B preferred stock (165,385), and the issuance of
common stock in connection with the offering (2,000,000).
F-27
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 8
Use of Proceeds.......................................................... 12
Dividend Policy.......................................................... 12
Capitalization........................................................... 13
Dilution................................................................. 14
Selected Consolidated Financial Data..................................... 15
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 17
Business................................................................. 23
Management............................................................... 32
Certain Transactions..................................................... 38
Principal Stockholders................................................... 42
Description of Capital Stock............................................. 44
Shares Eligible for Future Sale.......................................... 45
Underwriting............................................................. 47
Legal Matters............................................................ 48
Experts.................................................................. 48
Additional Information................................................... 48
Index to Consolidated Financial Statements............................... F-1
</TABLE>
---------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2,000,000 SHARES
[GMH LOGO]
COMMON STOCK
---------------
PROSPECTUS
---------------
RAUSCHER PIERCE REFSNES, INC.
OPPENHEIMER & CO., INC.
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table is an itemized listing of expenses to be incurred by the
Company in connection with the issuance and distribution of the shares of
Common Stock being registered hereby, other than underwriting discounts and
commissions. All amounts shown are estimates, except the SEC Registration fee
and the NASD filing fee:
<TABLE>
<S> <C>
SEC Registration Fee........................................... $9,758.00
NASD Filing Fee................................................ 3,720.00
Printing and Engraving Costs................................... *
Legal Fees and Expenses........................................ *
Accounting Fees and Expenses................................... *
Transfer Agent and Registrar Fees.............................. *
Blue Sky Fees and Expenses..................................... *
NASDAQ Listing................................................. *
Miscellaneous.................................................. *
---------
Total........................................................ $ *
=========
</TABLE>
--------
* To be furnished by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("DGCL") provides that a
corporation may indemnify any director or officer against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement, actually
and reasonably incurred in defense of any threatened, pending or completed
action, suit or proceeding whether civil, criminal or investigative (other
than an action by or in the right of the corporation) arising by reason of the
fact that he/she is or was an officer or director, if he/she acted in good
faith and in a manner he/she reasonably believed to be in or not opposed to
the best interests of the corporation and, with respect to any criminal action
or proceeding, it is determined that he/she had no reasonable cause to believe
his/her conduct was unlawful. Section 145 also provides that a corporation may
indemnify any such officer or director against expenses incurred in an action
by or in the right of the corporation if he/she acted in good faith and in a
manner he/she reasonably believed to be in or not opposed to the best
interests of the Company, except in respect of any matter as to which such
person is adjudged to be liable to the Company, unless allowed by the court in
which such action is brought. This statute requires indemnification of such
officers and Directors against expenses to the extent they may be successful
in defending any such action. The statute also permits purchase of liability
insurance by the Company on behalf of its officers and Directors.
Article FIFTH of the Company's Certificate of Incorporation and Article IV
Section 2 of its Amended and Restated By-laws (collectively its "charter
documents") generally provide for the indemnification of and advancement of
litigation expenses to the Company's directors, officers, employees and agents
to the fullest extent permitted by the DGCL against all liabilities, losses
and expenses incurred in connection with any action, suit or proceeding in
which any of them become involved by reason of their service rendered to the
Company or, at its request, to another entity; provided that it is determined,
in connection with any civil action, that the indemnitee acted in good faith
and in a manner that he or she reasonably believed to be in or not opposed to
the Company's best interests, and in connection with any criminal proceeding,
that the indemnitee had no reasonable cause to believe his or her conduct was
unlawful. These provisions of the Company's charter documents are not
exclusive of any other indemnification rights to which an indemnitee may be
entitled, whether by contract or otherwise. The Company may also purchase
liability insurance on behalf of its Directors and officers, whether or not it
would have the obligation or power to indemnify any of them under the terms of
its charter documents or
II-1
<PAGE>
the DGCL. The Company has applied for and intends to maintain liability
insurance for the benefit of its directors and officers for serving in such
capacities.
Reference is made to the Underwriting Agreement filed as Exhibit 1.1 hereto
for provisions relating to the indemnification of the Underwriters and persons
who control the Underwriters within the meaning of Section 15 of the
Securities Act of 1933, and to indemnification of the Company by the
Underwriters.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On December 21, 1995, in connection with the acquisition of all of the
issued and outstanding stock of General Manufactured Housing, Inc., and
without adjustment for the reverse stock split to be completed prior to
closing of the Offering, the Registrant issued and sold to nine accredited
investors an aggregate of (i) $17,243,295 of Senior Subordinated Notes for a
purchase price of approximately $14,920,000; (ii) $5,000,000 of Junior
Subordinated Notes; (iii) 8,000,000 shares of Redeemable Preferred Stock at a
purchase price of $.97 per share; (iv) 2,150,000 shares of Series B
Convertible Preferred Stock at a purchase price of approximately $1.00 per
share; (v) 1,218,750 shares of Common Stock at a purchase price of
approximately $0.23 per share; and (vi) warrants to purchase 568,750 shares
Common Stock at an exercise price of $0.01 per share. As part of the same
transaction, the Company issued an aggregate of 437,500 shares of Common Stock
to members of management and other key employees of the Company at a purchase
price of approximately $0.23 per share. The aggregate consideration received
by the Registrant for the issuance of such notes and the sale of such shares
and warrants was $30,252,188, including the purchase price for the warrants.
The securities issued in the transaction described above were exempt from
registration under the Securities Act of 1933, as amended (the "Act"), in
reliance on Section 4(2) of the Act as a transaction by an issuer not
involving any public offering. In such transaction, the recipients of
securities had adequate access to information about the Registrant, and
appropriate legends regarding the restricted nature of such securities were
affixed to the certificates representing such securities.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
See the Exhibit Index immediately following the consolidated
financial statement schedules.
(b) Consolidated Financial Statement Schedules
<TABLE>
<CAPTION>
SCHEDULE
NUMBER DESCRIPTION
-------- -----------
<C> <S>
2 Valuation and qualifying accounts for the years ended December 31,
1994 and December 30, 1995 and the six months ended September 30,
1996.
</TABLE>
Schedules other than those listed above have been omitted since they are
either not required or are not applicable because the required information is
shown in the consolidated financial statements or related notes.
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit
II-2
<PAGE>
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus 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.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 1 TO REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
BUFFALO, NEW YORK, ON DECEMBER 30, 1996.
General Housing, Inc.
*
By __________________________________
Samuel P. Scott
Chairman of the Board of Directors
and
Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATE INDICATED:
SIGNATURE TITLE DATE
Chairman of the
* Board of Directors December 30,
- ------------------------------------- and Chief Executive 1996
SAMUEL P. SCOTT Officer (Principal
Executive Officer)
Vice President,
* Treasurer and Chief December 30,
- ------------------------------------- Financial Officer 1996
J. WAYNE ROBERTS (Principal
Financial and
Accounting Officer)
Director
* December 30,
- ------------------------------------- 1996
GARY M. BROST
Director
* December 30,
- ------------------------------------- 1996
JAMES C. DELZOPPO
Director
* December 30,
- ------------------------------------- 1996
DENNIS C. MARTIN
Director
- ------------------------------------- December 30,
DONALD R. MOSSEY 1996
Director
* December 30,
- ------------------------------------- 1996
JAMES A. PARSONS
/s/ Gary M. Brost
*By: ___________________________
GARY M. BROST
ATTORNEY-IN-FACT
II-4
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To General Housing, Inc.:
We have audited in accordance with generally accepted auditing standards,
the financial statements of General Housing, Inc., as of and for the nine
months ended September 30, 1996 and of General Manufactured Housing, Inc. for
the year ended December 30, 1995 and as of and for the year ended December 31,
1994, included in this registration statement and have issued our report
thereon dated November 1, 1996. Our audits were made for the purpose of
forming an opinion on the basic financial statements taken as a whole. The
schedule listed in Item 16(b) of Part II of the registration statement is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audits of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
Arthur Andersen LLP
Jacksonville, Florida
November 1, 1996
<PAGE>
SCHEDULE II
GENERAL HOUSING, INC.
VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED
DECEMBER 31, 1994 AND DECEMBER 30, 1995 AND THE NINE MONTHS ENDED SEPTEMBER 30,
1996
<TABLE>
<CAPTION>
BALANCE AT PROVISIONS BALANCE AT
VALUATION ALLOWANCE FOR BEGINNING CHARGED TO END OF
WARRANTY COSTS OF PERIOD EXPENSE DEDUCTIONS PERIOD
----------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
For the year ended December 31,
1994............................. $ 54,761 $1,707,912 $1,567,633 $ 195,040
For the year ended December 30,
1995............................. 195,040 3,118,556 2,213,596 1,100,000
For the nine months ended
September 30, 1996............... 1,100,000 3,070,472 2,431,119 1,739,353
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
1.1 Underwriting Agreement.*
2.1 Certificate of Ownership and Merger merging GMH Acquisition Corp. into
General Manufactured Housing, Inc. dated as of December 21, 1995.+
2.2 Articles of Merger merging GMH Acquisition Corp. into General
Manufactured Housing, Inc. dated as of December 21, 1995.+
2.3 Plan of Merger merging GMH Acquisition Corp. into General Manufactured
Housing, Inc.+
2.4 Certificate of Merger merging Lamar Housing, L.L.C. into General
Manufactured Housing, Inc., dated as of December 14, 1995.
3.1 Restated Certificate of Incorporation of the Company.*
3.2 Amended and Restated By-laws of the Company.*
4.1 Form of Common Stock Certificate.*
4.2 Article Fourth of the Amended and Restated Certificate of
Incorporation of the Company (see Exhibit 3.1).*
4.3 Article I of the Amended and Restated By-laws of the Company (see
Exhibit 3.2).*
4.4 Stockholders' Agreement dated as of December 21, 1995 among the
Company and the Stockholders and Warrant holders named therein.+
4.5 Warrant to Purchase Common Stock of the Company dated as of December
21, 1995 and issued to Eileen V. Austen to purchase 54,687 shares of
Class A Common Stock of the Company.+
4.6 Warrant to Purchase Common Stock of the Company dated as of December
21, 1995 and issued to Paul Cronson to purchase 54,687 shares of
Class A Common Stock of the Company.
4.7 Warrant to Purchase Common Stock of the Company dated as of December
21, 1995 and issued to Robert L. Goodwin to purchase 54,688 shares of
Class A Common Stock of the Company.
4.8 Warrant to Purchase Common Stock of the Company dated as of December
21, 1995 and issued to Robert C. Mayer, Jr. to purchase 54,688 shares
of Class A Common Stock of the Company.+
4.9 Investors' Rights Agreement dated as of December 21, 1995 among GMH
Holdings, Inc., Bulldog Holdings LLC, RFE Investment Partners V,
L.P., Sterling Commercial Capital, Inc., State Treasurer of the State
of Michigan, Custodian of the Michigan Public School Employees'
Retirement System, State Employees' Retirement System Michigan State
Police Retirement System and Michigan Judges Retirement System and
the Equitable Life Assurance Society of the United States.+
4.10 Common Stock Purchase Warrant dated as of December 21, 1995 issued by
GMH Holdings, Inc. to The Equitable Life Assurance Society of the
United States.+
4.11 Stock Purchase Agreement dated as of October 10, 1995 among Kelly
Scott Herold as Trustee, Gregory Keith Scott, Drew Eric Scott, Samuel
P. Scott and Sherry J. Scott as Joint Tenants, the Company and GMH
Acquisition Corp.+
4.12 First Amendment to the Stock Purchase Agreement dated as of December
21, 1995.+
4.13 Securities Purchase Agreement dated as of December 21, 1995 among the
Company, GMH Acquisition Corp., RFE Investment Partners V, L.P.,
State Treasurer of the State of Michigan, Custodian, and Sterling
Commercial Capital.+
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
4.14 Note and Warrant Purchase Agreement dated as of December 21, 1995
among GMH Acquisition Corp., the Company and The Equitable Life
Assurance Society of the United States.+
5 Opinion of Nixon, Hargrave, Devans & Doyle LLP.*
10.1 Contract of Lease and Rent dated as of December 30, 1993 between
General Manufactured Housing, Inc. and Waycross and Ware County
Development Authority.+
10.2 Sublease Agreement dated as of July 1, 1995 between Hi-Tech
Properties, Inc. and General Manufactured Housing, Inc.*
10.3 Lease Agreement dated as of October 10, 1995 between Waycross and Ware
County Development Authority and Hi-Tech Properties, Inc.+
10.4 Sublease Agreement dated as of October 10, 1995 between Hi-Tech
Properties, Inc. and General Manufactured Housing, Inc.+
10.5 Lease Agreement with Option to Purchase effective as of July 10, 1995
between R.A. Warr and Wayne Evans, each individually and doing
business as Lamar Warehouse Co., and General Manufactured Housing,
Inc., as successor by merger to Lamar Housing, L.L.C.
10.6 Aviation Ground Lease effective as of September 19, 1994 by and
between Ware County, Georgia, The City of Waycross, Georgia and
General Manufactured Housing, Inc. with respect to property at the
Waycross Ware County Airport.
10.7 Employment Agreement dated as of December 21, 1995 between General
Manufactured Housing, Inc. and Samuel P. Scott.+
10.8 Employment Agreement dated as of December 21, 1995 between GMH
Acquisition, Corp. and Gregory Keith Scott.
10.9 Employment Agreement dated as of December 21, 1995 between GMH
Acquisition Corp., and Drew Eric Scott.
10.10 Employment Agreement dated as of January 1, 1996 between General
Manufactured Housing, Inc. and Kelly S. Herold.
10.11 Escrow Agreement dated as of December 18, 1995 between and among GHM
Acquisition Corp., Kelly Scott Herold, as trustee, Gregory Keith
Scott, Drew Eric Scott and Samuel P. Scott, individually and as joint
tenant with Sherry J. Scott, and Key Trust Company.
10.12 Service Agreement dated as of December 21, 1995 between General
Manufactured Housing, Inc. and M/H Retail, Inc.
10.13 Junior Subordinated Promissory Note of General Manufactured Housing,
Inc. dated as of December 21, 1995 and issued to RFE Investment
Partners V, L.P. in the original principal amount of $2,931,469.00.
10.14 Junior Subordinated Promissory Note of General Manufactured Housing,
Inc. dated as of December 21, 1995 and issued to Sterling Commercial
Capital, Inc. in the original principal amount of $145,454.50.
10.15 Junior Subordinated Promissory Note of General Manufactured Housing,
Inc. dated as of December 21, 1995 and issued to State Treasurer of
the State of Michigan, Custodian of the Michigan Public School
Employees' Retirement System, State Employees' Retirement System,
Michigan State Police State Retirement System, and Michigan Judges
Retirement System in the original principal amount of $1,923,076.50.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.16 Secured Credit Agreement dated as of December 21, 1995 by and between
General Manufactured Housing, Inc. and First Source Financial LLP
("First Source").+
10.17 Term Loan Note dated Financial LLP ("First Source") as of December 21,
1995 from General Manufactured Housing, Inc. to First Source in the
original principal amount of $4,000,000.
10.18 Revolving Note dated as of December 21, 1995 from General Manufactured
Housing, Inc. to First Source in the original principal amount of
$16,000,000.
10.19 Working Capital Note dated as of December 21, 1995 from General
Manufactured Housing, Inc. to First Source in the original principal
amount of $6,000,000.
10.20 Subordination Agreement dated as of December 21, 1995 among General
Manufactured Housing, Inc., the Company, The Equitable Life Assurance
Society of the United States, RFE Investment Partners V., L.P.,
Sterling Commercial Capital, Inc., State Treasurer of the State of
Michigan, Custodian of the Michigan Public School Employees'
Retirement System, State Employees' Retirement System, Michigan State
Police Retirement System and Michigan Judges Retirement System,
Strategic Investments & Holdings, Inc. and First Source.
10.21 Security Agreement dated as of December 21, 1995 between General
Manufactured Housing, Inc. and First Source.
10.22 Agreement (Trademark) dated as of December 21, 1995 between General
Manufactured Housing, Inc. and First Source.
10.23 Aircraft Mortgage and Security Agreement dated as of December 21, 1995
between General Manufactured Housing, Inc. and First Source.+
10.24 Bank Agency Agreement dated as of December 21, 1995 among General
Manufactured Housing, Inc., First Source, First Source Financial,
Inc., Citicorp North America, Inc. and The First National Bank of
Chicago.
10.25 Pledge Agreement dated as of December 21, 1995 between the Company and
First Source.
10.26 Assignment of Leases dated as of December 21, 1995 from General
Manufactured Housing, Inc. to First Source.+
10.27 Deed to Secure Debt, Assignment of Leases, and Rents and Security
Agreement dated as of December 21, 1995 by General Manufactured
Housing, Inc. to and for the benefit of First Source.
10.28 Short Form Lease dated as of December 21, 1995 between Waycross and
Ware County Development Authority and General Manufactured Housing,
Inc.+
10.29 Leasehold Mortgage, Assignment of Leases and Rents and Security
Agreement dated as of December 21, 1995 from General Manufactured
Housing, Inc. to First Source.+
10.30 Post-Closing Agreement dated as of December 21, 1995 between General
Manufactured Housing, Inc. and First Source.
10.31 Management Agreement dated as of December 21, 1995 between General
Manufactured Housing, Inc. and Strategic Investments and Holdings,
Inc.+
10.32 Guaranty by Corporation dated as of December 30, 1993 given by General
Manufactured Housing, Inc. to the Patterson Bank.+
10.33 Indemnity Agreement dated as of December 30, 1993 between General
Manufactured Housing, Inc. and Waycross and Ware County Development
Authority.+
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.34 Manufacturer's Indemnification Agreement dated as of October 10, 1989
by and between General Manufactured Housing, Inc. and Security
Pacific Housing Services, Inc.
10.35 Indemnity Agreement dated as of July 1, 1995 between and among General
Manufactured Housing, Inc., Tim-Bar Corporation, and Hi-Tech
Properties, Inc.+
10.36 Installment Promissory Note of GMH Acquisition Corp. dated December
21, 1995 and issued to Drew Eric Scott in the original principal
amount of $10,457,143.+
10.37 Release of Deed of Trust to secure letter of credit dated as of
December 19, 1995.+
10.38 Agreement of Sale dated September 7, 1994 between Topflight Aviation
of Georgia, Inc. and General Manufactured Housing, Inc.*
10.39 Installment Promissory Note of GMH Acquisition Corp. dated December
21, 1995 and issued to Gregory Keith Scott in the original principal
amount of $410,457,143.+
10.40 Installment Promissory Note of GMH Acquisition Corp. dated December
21, 1995 and issued to Kelly Scott Herold as Trustee of the Kelly
Scott Herold Revocable Trust--1995 in the original principal amount
of $10,457,143.+
10.41 Installment Promissory Note of GMH Acquisition Corp. dated December
21, 1995 and issued to Samuel P. Scott and Sherry J. Scott, as joint
tenants, in the original principal amount of $13,628,571.+
10.42 Incentive Compensation Plan of the Company.+
10.43 Senior Subordinated Note of General Manufactured Housing, Inc. dated
December 21, 1995 and issued to The Equitable Life Assurance Society
of the United States in the original principal amount of
$17,243,295.+
10.44 Custody Agreement dated December 1995 between General Manufactured
Housing, Inc. and The First National Bank of Chicago.+
10.45 Executive Bonus Plan of the Company.+
10.46 Letter Agreement dated December 14, 1995 regarding costs of the
letters of credit issued by First National Bank of Chicago.+
10.47 Executive Stock Option Plan of the Company.*
10.48 Contract of Lease and Rent dated as of August 1, 1987 between Waycross
and Ware County Development Authority and Tim-Bar Corporation.*
10.49 Lease Agreement dated May 26, 1995 between Tim-Bar Corporation and Hi-
Tech Properties, Inc.*
10.50 Amendment to Lease Agreement dated July 1, 1995 between Tim-Bar
Corporation and Hi-Tech Properties, Inc.*
11.1 Statement regarding computations of earnings per share for the nine
months ended September 30, 1996.+
16 Letter regarding change in Certifying Accountant.+
22 Subsidiaries of the Company.+
23.1 Consent of Arthur Andersen LLP.+
23.2 Consent of Earl A. Lawson, CPA.
23.3 Consent of Nixon, Hargrave, Devans & Doyle LLP (contained in the
opinion filed as Exhibit 5).*
24 Power of Attorney (included on the signature page of the Registration
Statement).
27 Financial Data Schedule.+
</TABLE>
- --------
*To be filed by Amendment.
+Filed with this Amendment No. 1.
<PAGE>
EXHIBIT 2.1
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
GMH ACQUISITION CORP.
INTO
GENERAL MANUFACTURED HOUSING, INC.
PURSUANT TO SECTION 253 OF THE
GENERAL CORPORATION LAW OF DELAWARE
The undersigned, GMH Acquisition Corp., a corporation
organized and existing under the laws of the State of Delaware
(the "Corporation"), does hereby certify:
FIRST: That the Corporation was organized pursuant to
the General Corporation Law of the State of Delaware on the 5th
day of October, 1994.
SECOND: That the Corporation owns 100% of all the
issued and outstanding shares of General Manufactured Housing,
Inc., a corporation organized and existing under the laws of the
State of Georgia (the "Subsidiary").
THIRD: That the Board of Directors and shareholders of
the Corporation adopted the following resolutions by unanimous
written consents dated as of December 21, 1995 which provide for
the merger of the Corporation into the Subsidiary:
RESOLVED: That GMH Acquisition Corp., a corporation
organized and existing under the laws of the State of
Delaware (the "Corporation"), cause itself to be merged
into General Manufactured Housing, Inc., a corporation
organized and existing under the laws of the State of
Georgia (the "Subsidiary"); and further
RESOLVED: That the merger shall become effective when
the Articles of Merger (the "Articles of Merger") have
been filed in the office of the Secretary of State of
the State of Georgia and the Certificate of Ownership
and Merger (the "Certificate of Ownership and Merger")
has been filed in the office of the Secretary of State
of Delaware; and further
RESOLVED: That the Articles of Incorporation, By-Laws,
directors and officers of the Subsidiary shall be the
Articles of Incorporation, By-Laws, directors and
officers of the surviving corporation provided,
however, that the Articles of Incorporation of the
Subsidiary shall be amended and restated, upon filing
of the Articles of Merger, to read in their entirety as
set forth in Exhibit A attached hereto; and further
RESOLVED: That the Subsidiary has authorized one
hundred thousand (100,000) shares of common stock,
$100.00 par value, of which five thousand two hundred
and fifty (5,250) shares of common stock are issued and
outstanding, of which five thousand two hundred and
fifty (5,250) shares are owned by the Corporation. At
the time the merger becomes effective, all of the
issued and outstanding shares of the Corporation shall
be cancelled. The authorized capital stock of the
<PAGE>
Subsidiary outstanding at the time of the merger, all
of which is owned by the Corporation shall, at the time
the merger becomes effective, be reissued to the sole
shareholder of the Corporation; and further
RESOLVED: That the Plan of Merger, the Articles of
Merger and the Certificate of Ownership and Merger
presented to the Board of Directors on the date hereof
are hereby authorized and approved; and further
RESOLVED: That the appropriate officers of the
Corporation be and hereby are authorized to execute and
file the Articles of Merger and the Certificate of
Ownership and Merger on behalf of the Corporation with
such changes therein as the officers executing the same
may approve (their execution and delivery thereof to be
conclusive evidence of such approval), and to take all
such actions and execute and deliver all such
agreements, certificates, instruments and other
documents, and to affix thereto the Corporation's seal
as required, as may be necessary or appropriate to
perform and to carry out the purposes and intent of the
foregoing resolutions.
FOURTH: The surviving corporation may be served with process
in the State of Delaware in any proceeding for enforcement of
any obligation of Delaware, as well as for enforcement of any
obligation of the surviving corporation arising from the merger,
including any suit or other proceeding to enforce the right of any
stockholder as determined in appraisal proceedings pursuant to the
provisions of Section 262 of the General Corporation Law of the
State of Delaware, and it does hereby irrevocably appoint the
Secretary of State of the State of Delaware as its agent to accept
service of process in any such suit or other proceeding. The
address to which a copy of such process shall be mailed by the
Secretary of State of Delaware is Nixon, Hargrave, Devans & Doyle,
1600 Main Place Tower, Buffalo, NY 14202, until the surviving
corporation shall have hereafter designated in writing to the said
Secretary of State a different address for such purpose.
IN WITNESS WHEREOF, GMH Acquisition Corp. has caused
this Certificate of Ownership and Merger to be signed by its
President and attested by its Assistant Secretary this 21st day
of December, 1995.
GMH ACQUISITION CORP.
/s/ Gary M. Brost
____________________________
By: Gary M. Brost
Its: President
Attest:
/s/ James C. Delzoppo
_______________________
By: James C. Delzoppo
Its: Assistant Secretary
<PAGE>
EXHIBIT 2.2
ARTICLES OF MERGER
MERGING
GMH ACQUISITION CORP.
INTO
GENERAL MANUFACTURED HOUSING, INC.
PURSUANT TO SECTION 14-2-1101 OF THE
GEORGIA BUSINESS CORPORATION CODE
The undersigned, GMH Acquisition Corp., a corporation
organized and existing under the laws of the State of Delaware
(the "Corporation") and General Manufactured Housing, Inc. (the
"Subsidiary"), a corporation organized and existing under the
laws of the State of Georgia, do hereby certify:
FIRST: That the Corporation shall be merged with and
into the Subsidiary pursuant to the Plan of Merger attached
hereto as Exhibit A (the "Plan of Merger").
SECOND: That the Plan of Merger was duly adopted by
the shareholders of each of the Corporation and the Subsidiary.
THIRD: That the request for publication of a notice of
filing of the Certificate of Merger and payment therefor will be
made as required by subsection (b) of Section 14-2-1105.1 of the
Georgia Business Corporation Code.
IN WITNESS WHEREOF, GMH Acquisition Corp. and General
Manufactured Housing, Inc. have each caused these Articles of
Merger to be signed by its President and attested by its
Secretary this 21 day of December, 1995.
GMH ACQUISITION CORP.
/s/ Shawn Martin
By: Shawn M. Martin
Its: Vice President
Attest:
/s/ Carol S. McEwen
By: Carol McEwen
Its: Assistant Secretary
GENERAL MANUFACTURED HOUSING, INC.
/s/ Shawn Martin
By: Shawn M. Martin
Its: Vice President
Attest:
/s/ Carol S. McEwen
By: Carol McEwen
Its: Assistant Secretary
<PAGE>
EXHIBIT A
PLAN OF MERGER
<PAGE>
PLAN OF MERGER
OF
GMH ACQUISITION CORP.
INTO
GENERAL MANUFACTURED HOUSING, INC.
This Plan of Merger has been duly adopted and approved by
the Board of Directors of GMH Acquisition Corp., a corporation
organized and existing under the laws of the State of Delaware
(the "Corporation") and the Board of Directors and shareholders
of General Manufactured Housing, Inc., a corporation organized
and existing under the laws of the State of Georgia ("GMH"):
1. The Corporation proposes to merge and the name of the
surviving corporation into which the Corporation proposes to
merge is General Manufactured Housing, Inc.
2. The terms and conditions of the merger are as follows:
a. The merger shall become effective when the
Articles of Merger have been filed in the office of the
Secretary of State of the State of Georgia and the
Certificate of Ownership and Merger has been filed in
the office of the Secretary of State of Delaware.
b. The Articles of Incorporation, By-Laws,
directors and officers of GMH shall be the Articles of
Incorporation, By-Laws, directors and officers of the
surviving corporation provided, however, that the
Articles of Incorporation of GMH shall be amended and
restated, upon filing of the merger, to read in their
entirety as set forth in Exhibit A attached hereto.
3. GMH has authorized one hundred thousand (100,000)
shares of common stock, $100.00 par value, of which five thousand
two hundred and fifty (5,250) shares of common stock are issued
and outstanding, of which five thousand two hundred and fifty
(5,250) shares are owned by the Corporation. At the time the
merger becomes effective, all of the issued and outstanding
shares of the Corporation shall be cancelled. The authorized
capital stock of GMH outstanding at the time of the merger, all
of which is owned by the Corporation shall, at the time the
merger becomes effective, be reissued to the sole shareholder of
the Corporation.
<PAGE>
EXHIBIT A
AMENDED AND RESTATED ARTICLES OF INCORPORATION
<PAGE>
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
GENERAL MANUFACTURED HOUSING, INC.
I.
The name and style of the Corporation shall be GENERAL
MANUFACTURED HOUSING, INC.
II.
General Manufactured Housing, Inc. is organized
pursuant to the Georgia Business Corporation Code.
III.
General Manufactured Housing, Inc. is incorporated as a
Georgia For-Profit Corporation and is organized for the following
purposes: To construct, manufacture, assemble, buy, and sell all
types of manufactured buildings, structures and homes; to engage
in any activity incidental to or connected with the construction,
erection, etc. of the manufactured buildings, structures and
homes; and to engage in any other for profit business authorized
under the laws of the State of Georgia.
IV.
The Corporation has the authority to issue not more
than 100,000 shares of common stock at a par value of $100.00 per
share.
V.
The Board of Directors is hereby expressly authorized
to make, alter or repeal the by-laws of the corporation.
VI.
The Corporation reserves the right to amend, alter,
change or repeal any provisions contained in this Certificate of
Incorporation, in any manner now or hereafter prescribed by
statute in the State of Georgia, and all rights conferred upon
stockholders herein are granted subject to this reservation.
VII.
Except as prohibited by law, the Corporation may
indemnify any person who is or was a director, officer, employee
or agent of the Corporation or is or was serving at the request
of the Corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other
enterprise (including, without limitation, any employee benefit
plan) and may take such steps as may be deemed appropriate by the
Board of Directors, including purchasing and maintaining
insurance, entering into contracts (including, without
limitation, contracts of indemnification between the Corporation
and its directors and officers), creating a trust fund, granting
security interests or using other means (including, without
limitation, a letter of credit) to ensure the payment of such
amounts as may be necessary to effect such indemnification.
<PAGE>
VIII.
No director shall have any personal liability to the
Corporation or to its shareholders for monetary damages for
breach of duty of care or other duty as a director, by reason of
any act or omission occurring subsequent to the date when this
provision becomes effective, except that this provision shall not
eliminate or limit the liability of a director for (a) any
appropriation, in violation of his duties, or any business
opportunity of the Corporation; (b) acts or omissions which
involve intentional misconduct or a knowing violation of law;
(c) liabilities of a director imposed by Section 14-2-832 of the
Georgia Business Corporation Code; or (d) any transaction from
which the director derived an improper personal benefit.
IX.
Except for the Merger of GMH Acquisition Corp. into the
Corporation which is occurring simultaneously with the filing of
these Amended and Restated Articles of Incorporation, the
Corporation shall not, without first obtaining the affirmative
vote or written consent of its shareholders:
(i) authorize, approve or consummate any of the
following transactions or series of transactions: (A)
any acquisition of the Corporation by means of merger
of the Corporation with or into any other corporation
or other entity or person or other form of corporate
reorganization in which the Corporation shall not be
the continuing or surviving entity of such merger or
reorganization (other than a mere reincorporation
transaction) or a transaction in which the Corporation
is the surviving entity but the shares of the
Corporation's capital stock outstanding immediately
prior to the transaction are exchanged or converted by
virtue of the transaction into other property, whether
in the form of securities, cash or otherwise, or (B) a
sale of all or substantially all of the assets of the
Corporation, or (C) a liquidation, dissolution or
winding up of the Corporation;
(ii) make any loan, advance or capital contribution to,
or investment in, any of the officers, directors,
employees, providers, consultants, agents or other
representatives of the Corporation, other than travel
or salary advances in the ordinary course of business
in a manner consistent with past practice;
(iii) incur or assume or permit to exist any
indebtedness for borrowed money (including capitalized
leases) other than amounts owing under (A) that certain
Secured Credit Agreement dated as of December 21, 1995
by and between the Corporation and First Source
Financial LLP plus up to $2,600,000, (B) that certain
Note and Warrant Purchase Agreement dated as of
December 21, 1995 by and between the Corporation, GMH
Holdings, Inc. ("Holdings") and The Equitable Life
Assurance Society of the United States and (C) that
certain Securities Purchase Agreement dated as of
December 21, 1995 between and among the Corporation,
<PAGE>
Holdings, RFE Investment Partners V, L.P., Sterling
Commercial Capital, Inc. and the State Treasurer of the
State of Michigan, as Custodian, as each such documents
may be amended, restated, supplemented or otherwise
modified from time to time, or issue any debt
securities or assume, guarantee, endorse (other than in
the ordinary course of business consistent with past
practice) or otherwise as an accommodation become
responsible for, liabilities of any other person;
(iv) purchase, hold or own any capital stock, evidence
of indebtedness or other security of any subsidiary of
the Corporation or other corporation, partnership, or
other entity, unless such corporation, partnership or
other entity is a wholly-owned subsidiary of the
Corporation;
(v) engage in any new line of business outside the
purposes set forth in these Articles of Incorporation;
(vi) authorize or issue shares of any equity securities
of the Corporation, including any preferred stock,
options or warrants to purchase any such equity
security;
(vii) make any acquisition of, or loan, advance or
capital contribution to, or investment in any business
entity, which, individually or together with any
related series of such transactions, exceeds
$1,000,000;
(viii) make any capital expenditures in any one fiscal
year in excess of the sum of (A) $500,000 plus (B) the
difference between $500,000 and any unexpended amounts
from prior years; or
(ix) enter into any contract or transaction with an
affiliate of the Corporation that does not deal at
arm's length with the Corporation or which exceeds
$25,000 in amount.
GENERAL MANUFACTURED HOUSING, INC.
BY: /s/ Shawn M. Martin
Shawn M. Martin
Vice President
<PAGE>
EXHIBIT 2.3
PLAN OF MERGER
OF
GMH ACQUISITION CORP.
INTO
GENERAL MANUFACTURED HOUSING, INC.
This Plan of Merger has been duly adopted and approved by the Board of
Directors of GMH Acquisition Corp., a corporation organized and existing under
the laws of the State of Delaware (the "Corporation") and the Board of Directors
and shareholders of General Manufactured Housing, Inc., a corporation organized
and existing under the laws of the State of Georgia ("GMH"):
1. The Corporation proposes to merge and the name of the surviving
corporation into which the Corporation proposes to merge is General Manufactured
Housing, Inc.
2. The terms and conditions of the merger are as follows:
a. The merger shall become effective when the Articles of
Merger have been filed in the office of the Secretary of State of
the State of Georgia and the Certificate of Ownership and Merger
has been filed in the office of the Secretary of State of
Delaware.
b. The Articles of Incorporation, By-Laws, directors and
officers of GMH shall be the Articles of Incorporation, By-Laws,
directors and officers of the surviving corporation and the
Articles of Incorporation of GMH shall be amended and restated,
upon filing of the merger, to read in its entirety as set forth
in Exhibit A attached hereto.
3. GMH has authorized one hundred thousand (100,000) shares of
common stock, $.01 par value, of which five thousand two hundred and fifty
(5,250) shares of common stock are issued and outstanding, of which five
thousand two hundred (5,250) shares are owned by the Corporation. At the time
the merger becomes effective, all of the issued and outstanding shares of the
Corporation shall be cancelled. The authorized capital stock of GMH outstanding
at the time of the merger, all of which is owned by the Corporation shall, at
the time the merger becomes effective, be reissued to the sole shareholder of
the Corporation.
<PAGE>
- 2 -
EXHIBIT A
AMENDED AND RESTATED ARTICLES OF INCORPORATION
<PAGE>
- 3 -
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
GENERAL MANUFACTURED HOUSING, INC.
I.
The name and style of the Corporation shall be GENERAL MANUFACTURED
HOUSING, INC.
II.
General Manufactured Housing, Inc. is organized pursuant to the
Georgia Business Corporation Code.
III.
General Manufactured Housing, Inc. is incorporated as a Georgia For-
Profit Corporation and is organized for the following purposes: To construct,
manufacture, assemble, buy, and sell all types of manufactured buildings,
structures and homes; to engage in any activity incidental to or connected with
the construction, erection, etc. of the manufactured buildings, structures and
homes; and to engage in any other for profit business authorized under the laws
of the State of Georgia.
IV.
The Corporation has the authority to issue not more than 100,000
shares of common stock at a par value of $100.00 per share.
V.
The Board of Directors is hereby expressly authorized to make, alter
or repeal the by-laws of the corporation.
<PAGE>
- 4 -
VI.
The Corporation reserves the right to amend, alter, change or repeal
any provisions contained in this Certificate of Incorporation, in any manner now
or hereafter prescribed by statute in the State of Georgia, and all rights
conferred upon stockholders herein are granted subject to this reservation.
VII.
Except as prohibited by law, the Corporation may indemnify any person
who is or was a director, officer, employee or agent of the Corporation or is or
was serving at the request of the Corporation as a director, officer, employee,
or agent of another corporation, partnership, joint venture, trust, or other
enterprise (including, without limitation, any employee benefit plan) and may
take such steps as may be deemed appropriate by the Board of Directors,
including purchasing and maintaining insurance, entering into contracts
(including, without limitation, contracts of indemnification between the
Corporation and its directors and officers), creating a trust fund, granting
security interests or using other means (including, without limitation, a letter
of credit) to ensure the payment of such amounts as may be necessary to effect
such indemnification.
VIII.
No director shall have any personal liability to the Corporation or to
its shareholders for monetary damages for breach of duty of care or other duty
as a director, by reason of any act or omission occurring subsequent to the date
when this provision becomes effective, except that this provision shall not
eliminate or limit the liability of a director for (a) any appropriation, in
violation of his duties, or any business opportunity of the Corporation; (b)
acts or omissions which involve intentional misconduct or a knowing violation of
law; (c) liabilities of a director imposed by Section 14-2-832 of the Georgia
Business Corporation Code; or (d) any transaction from which the director
derived an improper personal benefit.
<PAGE>
- 5 -
IX.
Except for the Merger of GMH Acquisition Corp. into the Corporation
which is occurring simultaneously with the filing of these Amended and Restated
Articles of Incorporation, the Corporation shall not, without first obtaining
the affirmative vote or written consent of its shareholders:
(i) authorize, approve or consummate any of the following
transactions or series of transactions: (A) any acquisition of the
Corporation by means of merger of the Corporation with or into any
other corporation or other entity or person or other form of corporate
reorganization in which the Corporation shall not be the continuing or
surviving entity of such merger or reorganization (other than a mere
reincorporation transaction) or a transaction in which the Corporation
is the surviving entity but the shares of the Corporation's capital
stock outstanding immediately prior to the transaction are exchanged
or converted by virtue of the transaction into other property, whether
in the form of securities, cash or otherwise, or (B) a sale of all or
substantially all of the assets of the Corporation, or (C) a
liquidation, dissolution or winding up of the Corporation;
(ii) make any loan, advance or capital contribution to, or investment
in, any of the officers, directors, employees, providers, consultants,
agents or other representatives of the Corporation, other than travel
or salary advances in the ordinary course of business in a manner
consistent with past practice;
(iii) incur or assume or permit to exist any indebtedness for borrowed
money (including capitalized leases) other than amounts owing under
(A) that certain Secured Credit Agreement dated as of December 21,
1995 by and between the Corporation and First Source Financial LLP
plus up to $2,600,000, (B) that certain Note and Warrant Purchase
Agreement dated as of December 21, 1995 by and between the
Corporation, GMH Holdings, Inc. ("Holdings") and The Equitable Life
Assurance Society of the United States and (C) that certain Securities
Purchase Agreement dated as of December 21, 1995 between and among the
Corporation, Holdings, RFE Investment Partners V, L.P., Sterling
Commercial Capital, Inc. and the State Treasurer of the State of
Michigan, as Custodian, as each such documents may be amended,
restated, supplemented or otherwise modified from time to time, or
issue any debt securities or assume, guarantee, endorse (other than in
the ordinary course of business consistent with past practice) or
otherwise as an accommodation become responsible for, liabilities of
any other person;
<PAGE>
- 6 -
(iv) purchase, hold or own any capital stock, evidence of indebtedness
or other security of any subsidiary of the Corporation or other
corporation, partnership, or other entity, unless such corporation,
partnership or other entity is a wholly-owned subsidiary of the
Corporation;
(v) engage in any new line of business outside the purposes set forth
in these Articles of Incorporation;
(vi) authorize or issue shares of any equity securities of the
Corporation, including any preferred stock, options or warrants to
purchase any such equity security;
(vii) make any acquisition of, or loan, advance or capital
contribution to, or investment in any business entity, which,
individually or together with any related series of such transactions,
exceeds $1,000,000;
(viii) make any capital expenditures in any one fiscal year in excess
of the sum of (A) $500,000 plus (B) the difference between $500,000
and any unexpended amounts from prior years; or
(ix) enter into any contract or transaction with an affiliate of the
Corporation that does not deal at arm's length with the Corporation or
which exceeds $25,000 in amount.
GENERAL MANUFACTURED HOUSING, INC.
BY: /s/ GARY M. BROST
---------------------------------
Gary M. Brost
President
<PAGE>
EXHIBIT 4.4
____________________________________
GMH HOLDINGS, INC.
STOCKHOLDERS' AGREEMENT
_____________________________________
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
1. Definitions 3
2. Representations of the Stockholders; Indemnity 10
3. Restrictions on Transfers of Securities 11
(a) General Restrictions 11
(b) Restrictions on Stockholder Groups 13
4. Permitted Transfers of Securities 14
(a) A Stockholder Transfers 14
(b) B Stockholder Transfers 16
5. Transfers to the Corporation 18
6. Offer of Securities 19
7. Transfers with Respect to Employee Stockholders 21
8. Closing of Transfers 23
9. Come Along 25
(a) Come Along 25
(b) Warrants 27
10. Election of Directors and Other Voting Requirements 27
(a) Voting for Directors 27
(b) Nominations 27
(c) Vacancies 28
(d) Removal of Directors 28
(e) Written Consent 28
(f) Directors Expenses 29
(g) Special Election Matters 29
(h) Committees of the Board 30
(i) GMH Board 30
(j) Equitable's Rights 30
11. Special Voting Requirements 31
(a) Required Stockholder Approval While
Series A Preferred Share are Outstanding 31
(b) Required Stockholder Approval After
Series A Preferred Shares are Redeemed 34
12. Share and Warrant Certificates 36
(a) Restrictive Endorsement 36
(b) Replacement Certificates 37
13. No Default 37
14. Preemptive Rights 37
15. Registration Rights . . . . . . . . . . . . . . . . . 40
16. Miscellaneous 40
(a) Notices 40
(b) Termination; Amendment 41
(c) Waiver 41
(d) Counterparts 42
(e) Governing Law 42
(f) Benefit and Binding Effect 42
(g) Further Assurances 43
(h) Specific Performance 43
(i) Voting Percentages 44
Exhibit A Schedule of Stockholders
Exhibit B Registration Rights
<PAGE>
STOCKHOLDERS' AGREEMENT
THIS STOCKHOLDERS' AGREEMENT dated as of December 21, 1995, by and
among GMH Holdings, Inc., a Delaware corporation (the "Company"), and each
other party executing this Agreement or a counterpart hereof (hereinafter
referred to collectively as "Stockholders" and individually as a
"Stockholder").
W I T N E S S E T H:
WHEREAS, the Company is authorized to issue an aggregate of 4,375,000
shares of Class A Common Stock, par value $.001 per share (the "Class A
Common Shares"), of which 1,656,250 Class A Common Shares are currently
issued and outstanding, 787,500 shares of Class B Common Stock, par value
$.001 per share (the "Class B Common Shares"), none of which Class B Common
Shares are currently issued and outstanding, 2,150,000 shares of Class C
Common Stock, par value $.001 per share (the "Class C Common Shares" and
together with the Class A Common Shares and the Class B Common Shares, the
"Common Shares"), none of which Class C Common Shares are currently issued
and outstanding, 8,000,000 shares of Series A Redeemable Preferred Stock,
par value $.001 per share (the "Series A Preferred Shares"), all of which
Series A Preferred Shares are currently issued and outstanding, and
2,150,000 shares of Series B Convertible Preferred Stock, par value, $.001
per share (the "Series B Preferred Shares"), all of which Series B
Preferred Shares are currently issued and outstanding (the Class A Common
Shares, Class B Common Shares, Class C Common Shares, Series A Preferred
Shares and Series B Preferred Shares are collectively referred to as the
"Shares"); and
<PAGE>
WHEREAS, each Stockholder is the record and beneficial owner of the number
of Class A Common Shares, Class B Common Shares, Class C Common Shares, Series A
Preferred Shares and Series B Preferred Shares appearing opposite his or its
name on Exhibit A attached hereto, free and clear of all options, liens,
encumbrances or charges of any kind, except this Agreement; and
WHEREAS, the Company has issued to The Equitable Life Assurance Society of
the United States and to certain principals of Larkspur Capital Corporation
warrants dated the date hereof to purchase an aggregate of 568,750 Class A
Common Shares or Class B Common Shares at a price of $.01 per share (the
"Warrants"); and
WHEREAS, the parties deem it in the best interests of the Company to
provide for continuity in the control and operation of the Company and to
restrict the transfer of the Shares (including the Common Shares issuable upon
conversion of the Series B Preferred Shares or upon exercise of the Warrants),
as herein provided;
NOW, THEREFORE, in consideration of the agreements and mutual covenants
contained herein, the parties hereto agree as follows:
1. DEFINITIONS.
As used in this Agreement, terms defined in the preamble and recitals
hereto shall have the respective meanings specified therein, and the following
terms shall have the following meanings:
"A STOCKHOLDER" shall mean (i) any Stockholder that is designated one
of the Group A Stockholders in Exhibit A to this Agreement and (ii) any Person
who acquires Securities after the date hereof and is designated as an A
Stockholder in accordance with the provisions of this Agreement.
"ACT" shall mean the Securities Act of 1933, as amended.
"AFFILIATE", as applied to any Person, means any other person,
directly or indirectly controlling, controlled by, or under common control with
that Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise, and in all events, GMH shall be deemed to be an
Affiliate of the Company.
<PAGE>
"B STOCKHOLDER" shall mean (i) any Stockholder that is designated one
of the Group B Stockholders in Exhibit A to this Agreement and (ii) any Person
who acquires Securities after the date hereof and is designated as a B
Stockholder in accordance with the provisions of this Agreement.
"BULLDOG" shall mean Bulldog Holdings LLC, a New York limited
liability company.
"BUSINESS DAY" shall mean any day other than a Saturday or a Sunday or
a day on which commercial banking institutions in the City of New York are
authorized to close.
"CAUSE" shall mean, with respect to any Employee Stockholder, any of
the following: (a) any deliberate or intentional act or omission by the Employee
Stockholder with the intent of causing damage to the Company's or GMH's
relationships with its lenders, suppliers or customers; (b) any fraud,
misappropriation or embezzlement by the Employee Stockholder involving
properties, assets or funds of the Company or of GMH; (c) a conviction of the
Employee Stockholder, or plea of NOLO CONTENDERE by the Employee Stockholder, to
any crime or offense involving monies or other property of the Company or GMH or
any other felony or criminal act involving moral turpitude; (d) any usurpation
by the Employee Stockholder of a corporate opportunity of the Company or GMH or
the Employee Stockholder's willful and continual neglect of or willful and
continual failure to perform any of his material duties, responsibilities or
obligations as an employee of the Company or GMH, but only after notice of such
usurpation, neglect or failure is delivered to the Employee Stockholder and the
Employee Stockholder fails or refuses to remedy such usurpation, neglect or
failure to the reasonable satisfaction of the Board of Directors of the Company
or GMH, as applicable, within thirty (30) days after the receipt of such notice;
provided, that any act or omission taken by the Employee Stockholder in good
faith and in the reasonable belief that such action or omission was in the best
interests of the Company or GMH
<PAGE>
shall not constitute "Cause"; or (e) the violation by the Employee Stockholder
of Section 7 of his Employment Agreement or of any other non-competition
agreement or covenant binding upon the Employee Stockholder.
"CERTIFICATE OF INCORPORATION" shall mean the Company's Certificate of
Incorporation, as amended or restated from time to time.
"CO-SALE TRANSFER" shall mean any sale by any Stockholder of such
number of the Voting Shares held by such Stockholder in a bona fide, arms-length
transaction to any Person who is not then either a party to this Agreement or a
Related Transferee of such Stockholder, as the case may be, which results in
such Person owning in excess of 10% of the then issued and outstanding Voting
Shares.
"EMPLOYEE STOCKHOLDER" shall mean any of Samuel P. Scott, Kelly Scott
Herold, as Trustee, Drew Eric Scott, Gregory Keith Scott, Lannis Thomas, Wayne
Roberts, Thomas M. Vinson, Bruce Hallock, Michael O'Gorman, Benny Bryan or James
H. McClellan.
"EQUITABLE" shall mean The Equitable Life Assurance Society of the
United States, a New York insurance company.
"FUNDAMENTAL CHANGE" shall have the meaning set forth in Section 11(b)
hereof.
"GMH" shall mean, prior to the Merger, GMH Acquisition Corp., a
Delaware corporation, and after the Merger, General Manufactured Housing, Inc.,
a Georgia corporation.
"GROUP A OFFEREES" shall mean Bulldog, RFE, Michigan and Sterling.
"INVESTORS RIGHTS AGREEMENT" shall mean that certain Investors Rights
Agreement dated as of the date hereof between and among the RFE Group, Bulldog,
Equitable and the Company.
"MERGER" shall mean the merger of GMH Acquisition Corp. with and into
General Manufactured Housing, Inc., with General Manufactured Housing, Inc. as
the surviving corporation.
<PAGE>
"MICHIGAN" shall mean the State Treasurer of the State of Michigan,
Custodian of the Michigan Public School Employees' Retirement System, State
Employees Retirement System, Michigan State Police Retirement System and the
Michigan Judges' Retirement System.
"NON-SELLING STOCKHOLDER GROUP" shall mean the following Employee
Stockholders: Lannis Thomas, Wayne Roberts, James H. Vinson, Bruce Hallock,
Michael O'Gorman, Benny Bryan and Thomas M. McClellan.
"PERSON" shall mean a natural person, corporation, limited
partnership, general partnership, joint stock company, limited liability
company, limited liability partnership, joint venture, association, company,
trust, bank, trust company, and trust, business trust or other organization,
whether or not a legal entity, or a government or agency or any political
subdivision thereof.
"PUT DATE" shall mean the date which is the eighth (8th) anniversary
of the date hereof.
"PUT RIGHTS" shall mean the rights granted by the Company to the RFE
Group and Equitable pursuant to Section 1.1 of the Investors Rights Agreement.
"RELATED TRANSFEREES" shall mean, (i) with respect to each Stockholder
who is a natural person, such Stockholder's spouse, any lineal descendant
(whether by birth or adoption), and trusts for the benefit of his spouse or
lineal descendants (whether by birth or adoption), and, upon the death,
disability or incompetence of such Stockholder, his estate or personal
representative and (ii) with respect to any Stockholder who is not a natural
person, the Affiliates of such Stockholder, any partner of any Stockholder which
is a partnership and any successor trustee of any Stockholder which is a
trustee.
"RFE" shall mean RFE Investment Partners V, L.P., a Delaware limited
partnership.
"RFE GROUP" shall mean RFE, Michigan and Sterling.
<PAGE>
"SECURITIES" shall mean and include (i) all Class A Common Shares,
Class B Common Shares, Class C Common Shares, Series A Preferred Shares, Series
B Preferred Shares and Warrants owned, of record or beneficially, by any
Stockholder, (ii) all Class A Common Shares, Class B Common Shares, Class C
Common Shares, Series A Preferred Shares, Series B Preferred Shares and Warrants
hereafter acquired, directly or indirectly, by any Stockholder, including the
Common Shares issuable upon conversion of the Series B Preferred Shares or upon
exercise of any Warrant, and (iii) all other Securities of the Company acquired
by any Stockholder by way of dividend or upon an increase, reduction,
substitution or reclassification of stock of the Company or upon any
reorganization of the Company.
"SECURITIES ACTS" shall mean any applicable statute, rule, regulation
or administrative or regulatory requirement applicable to the transfer of
securities of the Company, including the Act, and the rules and regulations
promulgated thereunder, and all applicable state securities or "blue sky" laws.
"SELLING STOCKHOLDER GROUP" shall mean the following Employee
Stockholders: Samuel P. Scott, Kelly Scott Herold, as Trustee, Gregory Keith
Scott and Drew Eric Scott.
"STERLING" shall mean Sterling Commercial Capital, Inc., a New York
corporation.
"STOCKHOLDER GROUP" shall mean, with respect to any Stockholder, such
Stockholder, each of his or its Related Transferees and each of their respective
successor Related Transferees.
"TRANSFER" shall mean any sale, assignment, transfer, pledge,
hypothecation, mortgage, charge, lien, encumbrance, gift, bequest, transmission
or other disposition of Securities, provided that the encumbrances contemplated
by, and transfers of Securities pursuant to the terms and provisions of Section
4 hereof shall not be deemed to be "transfers".
<PAGE>
"VOTING SHARES" shall mean the Series B Preferred Shares, the Class A
Common Shares, the Class B Common Shares issuable upon exercise of the Warrant
issued to Equitable (notwithstanding that the Class B Common Shares are non-
voting) and the Class C Common Shares, including (a) any Class C Common Shares
issued upon conversion of the Series B Shares or (b) Class A Common Shares or
Class B Common Shares issued upon exercise of the Warrants.
"WARRANTS" shall have the meaning set forth in the recitals hereto.
2. REPRESENTATIONS OF THE STOCKHOLDERS; INDEMNITY.
(a) Each Stockholder other than Michigan and Equitable, severally
represents and warrants as follows:
(i) this Agreement constitutes the valid and legally binding
obligation of such Stockholder, enforceable against such Stockholder in
accordance with its terms, subject to (A) laws of general application relating
to bankruptcy, insolvency, and the relief of debtors, and (B) rules of law
governing specific performance, injunctive relief or other equitable remedies;
(ii) the execution, delivery and performance of this Agreement by
such Stockholder does not (A) violate or result in a breach of or constitute a
default under any of the organizational or constituent documents of any
Stockholder which is not a natural Person, or any contract, agreement,
indenture, mortgage, pledge, note, bond, license, permit or other instrument or
obligation to which such Stockholder is a party or by which it or any of its
assets are bound or affected or (B) require any permit, consent, approval or
authorization of, or designation, declaration or filing with, any governmental
authority or any other person or entity, except for those which have already
been obtained; and
(iii) such Stockholder, if not a natural person, has all
<PAGE>
requisite power and authority to enter into and perform its obligations under
this Agreement in accordance with its terms.
(b) Each Stockholder, other than Michigan and Equitable, agrees to
indemnify and hold harmless the other Stockholders and the Company and its
directors, employees, affiliates and agents from and against any and all
damages, losses, costs and expenses (including reasonable attorneys' fees) which
any of them may incur by reason of the failure of such Stockholder to fulfill
any of the terms or conditions of this Agreement, or by reason of any breach of
the representations and warranties made by such Stockholder in this Agreement.
3. RESTRICTIONS ON TRANSFERS OF SECURITIES.
(a) GENERAL RESTRICTIONS. During the term of this Agreement, none of
the Securities may be the subject of a transfer unless:
(i) such transfer shall be made in accordance with the provisions
of this Agreement and Exhibit B hereto, relating to the Stockholders'
rights to register their Common Shares or Warrants under the Securities
Acts;
(ii) the proposed transferee shall deliver to the Company a
written acknowledgment that the Securities to be transferred are subject to
this Agreement and that the proposed transferee and his or its successors
in interest agree to be and are bound hereby and thereby to the same extent
and in the same manner as the transferor of such Securities; provided, that
from and after the Put Date, the restrictions contained in this Agreement
shall cease to apply to any Shares which are covered by the Put Rights; and
(iii) such transfer shall be made in compliance with the Securities
Acts, and prior to any such transfer, the Stockholder proposing to
transfer Securities shall give the Company (A) notice describing the
manner and circumstances of the proposed transfer and (B) if reasonably
requested by the Company, a written opinion of legal
<PAGE>
counsel reasonably satisfactory to the Company and its counsel, in form
and substance reasonably satisfactory to the Company and its counsel, to
the effect that the proposed transfer of Securities will be in compliance
with the Securities Acts; provided, however, that for transactions made
pursuant to Rule 144 under the Act, an opinion of counsel shall only be
required if reasonably requested by the Company and which shall be to the
effect that the proposed transfer of Securities may be effected without
registration under the Act; and provided, further, that no such opinion of
counsel shall be necessary for a transfer by a Stockholder which is (1) a
partnership to its partners or retired partners in accordance with
partnership interests, (2) an individual to a Related Transferee or trust
for the benefit of such individual or Related Transferee or (3) a trustee
for the benefit of others to a successor trustee.
Upon the transfer of Securities in accordance with this Agreement, the
transferee of such Securities shall be deemed a "Stockholder" hereunder. Any
attempted transfer of Securities other than in accordance with this Agreement
and the Registration Rights Agreement shall be null and void, and the Company
shall not recognize any such attempted transfer nor reflect in its records any
change in ownership of Securities pursuant thereto, nor issue any certificate or
other evidence of ownership of Securities in connection therewith.
(b) RESTRICTIONS ON STOCKHOLDER GROUPS. Any Securities transferred
upon satisfaction of the conditions contained in this Agreement shall be held
subject to the terms of this Agreement and the holder thereof shall be deemed a
Stockholder for purposes of this Agreement, as follows:
(i) Any Securities transferred to, or any Securities held by, any
one of the A Stockholders shall be held by such A Stockholder subject to the
provisions hereof governing Securities held by A
<PAGE>
Stockholders.
(ii) Any Securities transferred to, or any Securities held by any
one of the B Stockholders shall be held by such B Stockholder subject to the
provisions hereof governing Securities held by B Stockholders.
(iii) Any Securities transferred to any Person that is not a
Stockholder prior to such transfer shall, unless otherwise provided herein, be
held by such Person subject to the provisions hereof governing Securities held
by the Stockholder that transferred Shares to such Person.
4. PERMITTED TRANSFERS OF SHARES. Notwithstanding the provisions of
Section 3(a) hereof, during the term of this Agreement, any Stockholder may
transfer any or all of his or its respective Securities, subject to the
restrictions contained in Section 3 hereof and upon compliance with the
following terms and conditions:
(a) A STOCKHOLDER TRANSFERS. Subject to the provisions of Section
11(a)(xiii), any A Stockholder may transfer any or all of his, her or its
Securities as follows:
(i) to any Related Transferee of the A Stockholder making such
transfer, provided that any Securities transferred to such Related Transferee
shall be held by such Related Transferee subject to the provisions hereof
governing A Stockholders;
(ii) to the Company in accordance with the procedures described in
Section 5 hereof;
(iii) Bulldog may transfer its Securities to the RFE Group in
accordance with the option granted to the RFE Group pursuant to Section 2 of the
Investors Rights Agreement;
(iv) Equitable may transfer its Securities to a Person (A) for
whom Alliance Corporate Finance Group Incorporated is the sole investment
advisor and (B) in connection with such Person becoming the
<PAGE>
holder of any of the Senior Subordinated Notes of GMH originally issued to
Equitable; or
(v) to any Person, including any Stockholder (other than the
Persons described in (i), (ii), (iii) and (iv) above), provided that (A) such
Securities are first offered for sale to the Group A Offerees (excluding any
member of the Group A Offerees who is the transferor), pro rata in accordance
with the procedures described in Section 6 hereof, (B) if the Group A Offerees
do not agree to purchase all of such Securities offered for sale, the remainder
of such Securities are next offered to all other A Stockholders, pro rata in
accordance with the procedures described in Section 6 hereof, (C) if the Group A
Offerees and such other A Stockholders do not agree to purchase all of such
Securities offered for sale, the remainder of such Securities are next offered
for sale to all B Stockholders, pro rata in accordance with the procedures
described in Section 6 hereof and (D) if any such transfer involves a Co-Sale
Transfer, it shall be made in accordance with the procedures described in
Section 9 hereof; and provided, further, that from and after the Put Date, the
provisions of this Section 4(a)(iv) shall cease to apply to any transfer of
Voting Shares held by any A Stockholder which are subject to the Put Rights.
(b) B STOCKHOLDER TRANSFERS. Subject to the provisions of Section
11(a)(xiii), any B Stockholder may transfer any or all of his, her or its
Securities as follows:
(i) INTENTIONALLY DELETED
(ii) to any other B Stockholder; provided, that, (A) such
Securities are first offered for sale to the members of the Selling
Stockholder Group, pro rata in accordance with the procedures described in
Section 6 hereof and (B) if the members of the Selling Stockholder Group do
not agree to purchase all of such Securities offered for sale, the
remainder of such Securities are next offered
<PAGE>
for sale to the members of the Non-Selling Stockholder Group, pro rata in
accordance with the procedures described in Section 6 hereof;
(iii) to the members of the Selling Stockholder Group in accordance
with the provisions of Section 7(a);
(iv) to any Related Transferee of the B Stockholder making
such transfer, provided that any Securities transferred to such Related
Transferee shall be held by such Related Transferee subject to the
provisions governing B Stockholders;
(v) to the Company in accordance with the procedures described in
Section 5 hereof; or
(vi) to any Person, including a Stockholder (other than the
Persons described in (i), (ii), (iii), (iv) and (v) above), provided that
(A) such Securities are first offered for sale to the Group A Offerees, pro
rata in accordance with the procedures described in Section 6 hereof
(except that if a member of the Non-Selling Stockholder Group is the
transferor, such Securities shall first be offered for sale to the members
of the Selling Stockholder Group, pro rata in accordance with the
procedures described in Section 6 hereof, and if the members of the Selling
Stockholder Group do not agree to purchase all of such Securities offered
for sale, the remainder of such Securities are then offered for sale to the
Group A Offerees), (B) if the Group A Offerees do not agree to purchase all
of such Securities offered for sale, the remainder of such Securities are
next offered for sale to all other B Stockholders, pro rata in accordance
with the procedures described in Section 6 hereof, (C) if the Group A
Offerees and such other B Stockholders do not agree to purchase all of such
Securities offered for sale, the remainder of such Securities are next
offered for sale to all A Stockholders (other than the Group A Offerees),
pro rata in accordance with the procedures described in Section 6 hereof
and (D) if such transfer involves a Co-Sale Transfer,
<PAGE>
it shall be made in accordance with the procedures described in
Section 9 hereof.
5. TRANSFERS TO THE CORPORATION. Any Stockholder may transfer any or
all of his or its Securities to the Company, on such terms and conditions as the
Stockholder and the Corporation may agree; PROVIDED, HOWEVER, that except for
(a) any redemption of the Series A Preferred Shares in accordance with the
Certificate of Incorporation or (b) any repurchase of Voting Shares pursuant to
the Put Rights, the Company shall not repurchase or redeem any Securities
without the written consent of the Stockholders required pursuant to the
provisions of Sections 11(a) or (b) hereof, as applicable. Any Securities
purchased or redeemed by the Company shall be retired and not be reissued. If
the Company is legally or contractually restricted from purchasing all of such
Securities, the Company shall, at such time, purchase the portion of the
Securities which it is legally or contractually permitted to purchase, and shall
purchase the balance of the Securities as soon thereafter as it is legally or
contractually able to do so.
6. OFFER OF SECURITIES. Whenever any Stockholder is required to offer
Securities for sale to other Stockholders pursuant to Section 4 hereof, the
following procedures shall apply:
(a) The Stockholder proposing to make such a transfer (the
"Transferor") shall deliver a written notice of the proposed transfer (the
"Transfer Notice") to the Company and to each of the other Stockholders entitled
to receive an offer to purchase under the provisions of this Agreement. The
Transfer Notice shall contain a description of the proposed transaction and the
terms thereof, including the number of Securities to be transferred, the name of
each Person to whom or in favor of whom the proposed transfer shall be made (the
"Transferee"), and a description of the consideration to be received by the
Transferor upon transfer of the Securities which must be cash.
(b) At the same time as the delivery of the Transfer Notice, the
Transferor shall deliver a written offer to sell to each of the other
Stockholders entitled to receive such an offer under other provisions of this
Agreement, a pro rata (in accordance with the percentage of Voting Shares then
held by the other Stockholders) portion of the Securities offered for sale by
the Transferor, as required under other provisions of this Agreement. Such offer
to sell shall contain the same terms and conditions and shall be for the same
consideration as described in the Transfer Notice.
(c) For a period of twenty-five (25) days after the offer described in
(b) above is sent to Stockholders, each such Stockholder may, by written notice
to the Transferor and to the Company, accept in whole or in part the offer to
sell Securities. Such acceptance shall specify the amount of Securities to be
purchased by such Stockholder and a proposed date for closing such purchase,
which date shall not exceed sixty (60) days from the date the offer described in
(b) above is sent to Stockholders. If any Stockholder does not accept the offer
to purchase all of the Securities offered by the Transferor, the Transferor
shall make one or more additional offers of the remainder of such Securities to
Stockholders who have agreed to purchase all of the Securities previously
offered to them by the Transferor. Such additional offer or offers shall be made
for a period of ten (10) days to each of such Stockholders in the same ratio
that the amount of Voting Shares which such Stockholder has agreed to purchase
bears to the total amount of Voting Shares which all Stockholders to whom such
additional offer or offers are made have agreed to purchase.
(d) In the event that the other Stockholders do not agree to purchase
all of the Securities offered for sale by the Transferor, the Transferor shall
have the right at his or its election:
(i) to proceed with the sale of such Securities as other
Stockholders have agreed to purchase;
<PAGE>
(ii) to cancel all of the offers to other Stockholders and
not sell; or
(iii) to cancel all of the offers to other Stockholders and
make a bona fide sale or other transfer of the Securities to the
Transferee named in the Transfer Notice, but only in strict accordance
with the terms and for the consideration stated in the Transfer Notice
and within ninety (90) days of the last offer to Stockholders
hereunder.
7. TRANSFERS WITH RESPECT TO EMPLOYEE STOCKHOLDERS.
(a) If any member of the Non-Selling Stockholder Group voluntarily
ceases to serve as an employee or officer of the Company or GMH without the
consent of the Company or GMH, as applicable, or his employment is terminated
for any reason other than death or disability, in each case, on or prior to the
third anniversary of the date of this Agreement, all Securities held by such
Stockholder and his Related Transferees, if any, shall, immediately upon such
termination of employment, be transferred to the members of the Selling
Stockholder Group (pro rata in accordance with the percentage of Voting Shares
then held by the members of the Selling Stockholder Group) for a purchase price
equal to the total number of Shares so transferred multiplied by the par value
of such Shares.
(b) If (i) the employment of any member of the Non-Selling Stockholder
Group with the Company or GMH terminates by reason of death or disability or
(ii) after the third anniversary of the date of this Agreement but prior to the
earlier of (A) the fifth anniversary of the date of this Agreement or (B) the
date upon which a Co-Sale Transfer occurs, any member of the Non-Selling
Stockholder Group voluntarily ceases to serve as an employee or officer of the
Company or GMH without the consent of the Company or GMH, as applicable, or his
employment with the Company or GMH is terminated for any reason other than death
or disability, then such Person shall immediately surrender to the Corporation
all
<PAGE>
Shares held by him and his Related Transferees, if any, in exchange for an equal
number of Class B Common Shares.
(c) If prior to the earlier of (i) the fifth anniversary of the date
of this Agreement or (ii) the date upon which a Co-Sale Transfer occurs, any
member of the Selling Stockholder Group voluntarily ceases to serve as an
executive officer of the Company or GMH or his employment with the Company or
GMH is terminated for Cause, then such Person shall immediately surrender to the
Corporation all Shares held by him and his Related Transferees, if any, (and
who, in the case of Samuel P. Scott, shall mean his Related Transferees, if any,
who have acquired Securities by transfer from him after the date hereof), in
exchange for an equal number of Class B Common Shares.
(d) Immediately upon the occurrence of any event set forth in
paragraphs (b) or (c) above which requires the exchange of Class A Common Shares
for certificates of Class B Common Shares, the rights of the holder of such
Class A Common Shares shall automatically cease, and such Person shall be deemed
to have become a holder of Class B Common Shares.
8. CLOSING OF TRANSFERS. The closing for all purchases and sales of
Securities provided for in this Agreement hereof shall be held at the offices of
the Company. If any Stockholder (or a Related Transferee) who has become
obligated to purchase or sell Securities hereunder is deceased on the closing
date for such purchase or sale and such deceased person's personal
representative shall not have been appointed and qualified by such date, then
the closing shall be postponed until the 10th day after the appointment and
qualification of such personal representative. If the closing date of such
purchase or sale falls on a Saturday, Sunday or legal holiday, then the closing
shall be held on the next succeeding business day. The purchase price for the
Securities shall be paid at the closing by certified check or by cashier's or
official bank check. At the closing, the seller(s) shall deliver to the
purchaser(s) the
<PAGE>
certificate or certificates representing the Securities to be sold, duly
endorsed in blank and bearing the necessary documentary stamps. Any Stockholder
(or his personal representative or any Related Transferee of such Stockholder)
which transfers Securities shall (a) do all things and execute and deliver all
such papers as may be necessary or reasonably requested by the Company in order
to consummate such transfer, (b) pay to the Company such amounts as may be
required for any applicable stock transfer taxes and (c) pay to the Company any
expenses incurred by the Company in connection with such transfer (including
reasonable attorneys fees). In the event that a Stockholder (or, his personal
representative or any Related Transferee of such Stockholder) having become
obligated to sell Securities hereunder shall fail to deliver such Securities in
accordance with the terms of this Agreement, the purchasers may, at their
option, in addition to all other remedies they may have, send to the sellers by
personal delivery or registered mail, return receipt requested, the purchase
price of such Securities as is hereinabove specified. Thereupon, the Company
shall (i) cancel on its books the certificate or certificates representing the
Securities to be sold, (ii) issue, in lieu thereof, a new certificate or
certificates in the name of the purchasers representing such Securities, (iii)
deliver such new certificate or certificates to the Purchasers and (iv) give
notice thereof to the sellers, and thereupon all of the sellers' rights in and
to such Securities shall terminate.
9. COME ALONG.
(a) COME ALONG. If any Stockholder proposes to transfer Voting Shares
in a Co-Sale Transfer (the "Selling Stockholder"), it shall give notice of such
proposed sale (the "Sale Notice") to the Company and the other Stockholders (the
"Other Stockholders"), which notice shall set forth at least the name and
address of the proposed transferee (the "Buyer") and the price and terms of such
proposed sale. Any of the Other Stockholders shall then be entitled to give,
within 20 days after the giving of such
<PAGE>
Sale Notice, a counter-notice to the Company, the Selling Stockholder, and to
the Buyer at the address specified in the Sale Notice, that it elects to have
the Buyer choose to purchase the number of Voting Shares owned by such Other
Stockholder (and the Voting Shares of his, her or its Related Transferees, if
any) equal to (i) the number of Voting Shares held by such Other Stockholder and
his, her or its Related Transferees, if any, multiplied by (ii) a fraction, the
numerator of which is the number of Voting Shares proposed to be acquired by the
Buyer from the Selling Stockholder and the denominator of which is the total
number of Voting Shares held by the Selling Stockholder (before giving effect to
the proposed sale to the Buyer), at the same price and upon the same terms and
conditions as contained in the Sale Notice. In the event any Other Stockholder
makes the aforesaid election, the Buyer shall purchase and such Other
Stockholder (and his, her or its Related Transferees, if any) shall sell such
number of Voting Shares owned (or deemed owned) by them at the same price and
upon the same terms and conditions as contained in the Sale Notice; provided,
that if the Buyer is not willing to purchase the total number of Voting Shares
held by the Selling Stockholder and the Other Stockholders who have elected to
participate in such sale, the Buyer shall purchase that number of Voting Shares
that it wishes to purchase (but not less than the number set forth in the Sale
Notice), and the Selling Stockholder and the Other Stockholders shall each sell
that number of Voting Shares to the Buyer equal to the product of (x) the
aggregate number of Voting Shares to be purchased by the Buyer and (y) a
fraction, the numerator of which is the number of Voting Shares then owned by
such Stockholder, and the denominator of which is the aggregate number of Voting
Shares owned by the Selling Stockholder and the Other Stockholders who have
elected to participate in such sale.
(b) WARRANTS. For purposes of Section 9(a), any Stockholder which
holds Warrants and which, if such Warrants had been exercised, would
<PAGE>
be permitted to sell the resulting Voting Shares under Section 9(a), shall have
the right to sell Warrants for the number of Voting Shares which, together with
the number of Voting Shares, if any, such Stockholder elects to sell, equals the
number of Voting Shares such Stockholder is permitted to sell under Section
9(a), without any requirement that such Warrants be exercised and converted to
Voting Shares before a sale under Section 9(a). The purchase price per Warrant
shall be the purchase price per Voting Share less the exercise price of the
Warrant.
10. ELECTION OF DIRECTORS AND OTHER VOTING REQUIREMENTS.
(a) VOTING FOR DIRECTORS. During the term of this Agreement, (i)
there shall be seven directors of the Company and (ii) at each meeting of the
Stockholders of the Company for the election of directors, the Stockholders
shall vote all Voting Shares held by them for the election of the seven persons
nominated pursuant to Section 10(b).
(b) NOMINATIONS. During the term of this Agreement, directors
shall be nominated by the Stockholders as follows: the nominees for directors
shall be (i) the four persons nominated by Bulldog, (ii) the two persons
receiving a plurality of votes cast by all members of the RFE Group, including
one nominee designated by RFE and (iii) Samuel P. Scott.
(c) VACANCIES. During the term of this Agreement, should a
vacancy in the Board of Directors be caused by death, resignation, removal or
any other reason, each of the Stockholders agrees to vote all Voting Shares
owned by such Stockholder for (i) the one person receiving a plurality of votes
cast by all B Stockholders at a meeting of B Stockholders held to nominate
directors, in the case of a vacancy caused by the death, resignation, removal or
other reason with respect to Samuel P. Scott or (ii) the nominee selected by
Bulldog or the RFE Group, as the case may be, as provided in Section 10(b)
hereof.
(d) REMOVAL OF DIRECTORS. If at any time any Stockholder proposes
to remove any director who was nominated by such Stockholder as
<PAGE>
provided in Section 10(b) hereof, each Stockholder agrees to vote all of the
Voting Shares owned by such Stockholder for such removal if removal has been
approved by the persons who would be entitled to fill a vacancy pursuant to
Section 10(c) hereof.
(e) WRITTEN CONSENT. Notwithstanding any reference herein to
votes cast at a meeting of the Stockholders, directors may be chosen for
nomination by the Stockholders acting by written consent without a meeting and
directors may be elected by the Stockholders acting by written consent without a
meeting to the extent permitted by law, by the certificate of incorporation and
the by-laws of the Company; PROVIDED, HOWEVER, that nothing in this Section
10(e) shall authorize the nomination, election or removal of directors other
than in accordance with the provisions of this Section 10.
(f) DIRECTORS EXPENSES. Each director of the Company (and any
observer pursuant to Section 10(j)) shall be reimbursed for his actual out of
pocket expenses incurred in attending each meeting of the Board of Directors or
any committee thereof. In addition, if any of the directors nominated by the RFE
Group pursuant to Section 10(b)(ii) is a person with outside operating
experience and not otherwise affiliated with any member of the RFE Group, the
Company will pay such director reasonable directors fees.
(g) SPECIAL ELECTION MATTERS. Notwithstanding anything contained
in this Section 10 to the contrary, if an Event of Default, as defined in the
Certificate of Incorporation has occurred and not been cured, the Stockholders
shall (to the limited extent, if at all, necessary to accomplish the following)
vote all Voting Shares held by them at the time to accomplish the nomination and
election of that number of nominees of the holders of the Series A Preferred
Shares as constitute the smallest number of directors which shall constitute a
majority of the Company's Board of Directors (including, but not limited to,
voting to remove members
<PAGE>
of the Board of Directors serving prior to such election).
(h) COMMITTEES OF THE BOARD. The Board of Directors of each of
the Company and GMH shall establish an Audit Committee and a Compensation
Committee in accordance with the By-laws of the Company and GMH and so long as
the RFE Group owns at least 10% of the issued and outstanding Voting Shares,
such committees shall include a representative of the RFE Group.
(i) GMH BOARD. Each of the Stockholders and the Company hereby
agrees to take such action as may be required so that the Board of Directors of
GMH is at all time identical to the Board of Directors of the Company.
(j) EQUITABLE'S RIGHTS. So long as Equitable continues to own at
least 70% of the initial purchase percentage of the Warrants issued to it,
Equitable will have (i) the ability to have a representative attend meetings of
the Board of Directors of each of the Company and GMH as an observer, (ii) the
right to receive all materials sent to such Boards of Directors by the Company
or GMH, as applicable, (iii) the right to inspect the Company's and GMH's books
and records and, upon reasonable notice, visit the Company and GMH and (iv)
consult with management of the Company and GMH. Holders of the Warrants issued
to Equitable shall receive monthly unaudited financial statements and annually,
a copy of management's budget for the succeeding year, each at the same time as
such financial statements and budget are delivered to the Company's and GMH's
lenders.
11. SPECIAL VOTING REQUIREMENTS.
(a) REQUIRED STOCKHOLDER APPROVAL WHILE SERIES A PREFERRED SHARES
ARE OUTSTANDING. At any time during the term of this Agreement that Series A
Preferred Shares are outstanding, the approval by the affirmative vote or
written consent of the Stockholders holding not less than (x) 66-2/3 of all of
the issued and outstanding Series A Preferred Shares with respect to paragraphs
(ii), (iv), (vi), (vii), (viii) or (ix) below and (y)
<PAGE>
50.1% of the issued and outstanding Series A Preferred Shares with respect to
paragraphs (i), (iii), (v), (x), (xi), (xii) and (xiii) below shall be required
to authorize any of the following:
(i) the payment or declaration of any dividend on the Common
Shares, Series B Preferred Shares or any other equity securities
(including options or warrants) of the Company (other than the Series
A Preferred Shares) or the redemption, purchase or other acquisition
for value (or the payment into or setting aside for a sinking fund for
such purpose) any of the Common Shares, Series B Preferred Shares or
any other equity securities of the Company, or the application of any
of the Company's assets to the redemption, retirement, purchase or
acquisition, directly or indirectly, through subsidiaries or
otherwise, of any of the Common Shares, Series B Preferred Shares or
other equity securities of the Company, except for (A) redemptions of
Series A Preferred Shares as provided in accordance with the
provisions of the Certificate of Incorporation, and (B) repurchases of
Common Shares pursuant to the Investors' Rights Agreement;
(ii) (A) any acquisition of the Company by means of a merger
of the Company with or into any other corporation or other entity or
person or other form of corporate reorganization in which the Company
shall not be the continuing or surviving entity of such merger or
reorganization (other than a mere reincorporation transaction) or a
transaction in which the Company is the surviving entity but the
shares of the Company's capital stock outstanding immediately prior to
the transaction are exchanged or converted by virtue of the
transaction into other property, whether in the form of securities,
cash or otherwise or (B) a sale of all or substantially all of the
assets of the Company, or in either case, any such action with respect
to any subsidiary of the Company;
(iii) the making of any loan, advance or capital contribution
to, or investment in, or permitting or causing any subsidiary of the
Company to make any loan, advance or capital contribution to, or
investment in any of the officers, directors, employees, providers,
consultants, agents or other representatives of the Company, other
than (A) travel or salary advances in the ordinary course of business
in a manner consistent with past practice, and (B) loans evidenced by
promissory notes in connection with the purchase of Common Shares
under employment or restrictive stock purchase agreements or the
Investors' Rights Agreement;
(iv) any incurrence or assumption or permitting to exist of
or permitting or causing any subsidiary of the Company to incur or
assume or permit to exist any indebtedness for borrowed money
(including capitalized leases) other than the indebtedness owing to
(A) First Source Financial LLP pursuant to the terms of the Secured
Credit Agreement dated as of the date hereof by and between First
Source Financial LLP and GMH, (B) Equitable pursuant to the terms of
the Note and Warrant Purchase Agreement dated as of the date hereof by
and between Equitable, the Company and GMH, and (C) the RFE Group
pursuant to the terms of the Securities Purchase Agreement dated as of
the date hereof between and among the RFE Group, the Company and GMH
in excess of $2,600,000 in the aggregate, or the issuance of any debt
securities or the assumption, guarantee, endorsement (other than in
the ordinary course of business consistent with past practice) or
<PAGE>
otherwise as an accommodation becoming responsible for, liabilities of
any other Person;
(v) any purchase, holding or owning, or permitting or
causing any subsidiary of the Company to purchase, hold or own any
capital stock, evidence of indebtedness or other security of any
subsidiary of the Company or other corporation, partnership or other
entity, unless such corporation, partnership or other entity is a
wholly owned subsidiary of the Company;
(vi) permitting or causing the Company, or any subsidiary of
the Company, to engage in any new line of business outside the
construction, manufacture, assembling, purchasing and selling all
types of manufactured buildings, structures and homes;
(vii) any authorization or issuance of any equity securities
of the Company, including any preferred stock, options or warrants to
purchase any such equity security;
(viii) any amendment or repeal of any provision of, the
addition of any provision to, or the waiver of any provision of the
Company's Certificate of Incorporation or By-Laws, or any alteration
or change in the rights, preferences, privileges or powers of, or the
restrictions provided for the benefit of, the Series A Preferred
Shares, or causing or permitting any subsidiary of the Company to do
the same;
(ix) the making of any acquisition of, or loan, advance or
capital contribution to, or investment in or permitting any subsidiary
of the Company to make any acquisition of, or loan, advance or capital
contribution to, or investment in any business entity, which,
individually or together with any related series of such transactions,
exceeds $1,000,000;
(x) the making of or permitting or causing any subsidiary of
the Company to make any capital expenditures in any one fiscal year in
excess of the sum of (A) $500,000 plus (B) the difference between
$500,000 and any unexpended amounts from prior years;
(xi) the entering into of any contract or transaction with an
Affiliate of the Company that does not deal at arm's length with the
Company or which exceeds $25,000 in amount, or causing or permitting
any subsidiary of the Company to do the same;
(xii) the reclassification of any shares of Common Stock or
any other shares of the Company into shares having any preference or
priority as to dividends or assets superior to or on a parity with any
such preference or priority of the Series A Preferred Stock; or
(xiii) the transfer of (A) any Shares of the Company held by
any of Samuel P. Scott, Gregory Keith Scott, Drew Eric Scott or
Bulldog, (B) any membership interests in Bulldog held by SIHI-GMH LLC
or (C) any membership interest in SIHI-GMH LLC held by either Gary M.
Brost or Dennis C. Martin, in each case in excess of 10% of the Shares
or membership interests originally held by them, in any transaction or
series of transactions, except for (I) transfers to Related
Transferees (or Persons who would be Related Transferees of SIHI-GMH
LLC, Gary M. Brost or Dennis C. Martin if they were parties to this
Agreement) and (II) transfers by Bulldog to the RFE Group pursuant to
the Investors Rights Agreement in any transaction or series of
<PAGE>
transactions.
(b) REQUIRED STOCKHOLDER APPROVAL AFTER SERIES A PREFERRED SHARES ARE
REDEEMED. At any time during the term of this Agreement that there are no Series
A Preferred Shares outstanding, the approval by the affirmative vote or written
consent of the Stockholders holding not less than 70% of all of the issued and
outstanding Voting Shares shall be required to authorize any of the following:
(i) the repurchase or redemption of any of the Shares;
(ii) any amendment of the Certificate of Incorporation or By-Laws
of the Company or any consent by the Company to any amendment of the
Certificate of Incorporation or By-Laws of GMH;
(iii) any authorization of or any issuance of any authorized but
unissued capital stock of the Company, except the issuance of Securities
upon the exercise of the Warrants or upon conversion of any Series B
Preferred Shares;
(iv) any sale of the Company's entire interest in GMH;
(v) the sale, lease or exchange of all or substantially all of
the Company's assets or any consent by the Company to any sale, lease or
exchange by GMH of all or substantially all of the assets of GMH;
(vi) any merger or consolidation of the Company or GMH with or into
any other corporation;
(vii) the dissolution of the Company or GMH;
(viii) the adoption of a plan of liquidation of the Company or GMH;
(ix) any action by the Company to commence any case, proceeding or
other action (A) under any existing or future law of any jurisdiction
relating to bankruptcy, insolvency, reorganization or relief of debtors,
seeking to have an order for relief entered with respect to it or GMH, or
seeking to adjudicate it or GMH a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding up, liquidation,
dissolution, composition or other relief with respect to it or GMH or its
or GMH's debts, or (B) seeking appointment of a receiver, trustee,
custodian or other similar official for it or GMH or for all or any
substantial part of its or GMH's assets, or making a general assignment for
the benefit of its or GMH's creditors;
(x) any recapitalization of the Company or GMH; or
(xi) except as provided in the Registration Rights Agreement, any
public offering of securities of the Company or any consent by the Company
to GMH authorizing any public offering of securities of GMH.
(c) Any of the actions described in Section 11(b)
<PAGE>
above are herein referred to as a "Fundamental Change".
(d) For purposes of Section 11(a), as to any matter set forth therein
which requires the approval or consent of the Stockholders holding not less than
66-2/3% of all of the issued and outstanding Series A Preferred Shares, such
matter shall be deemed approved or consented to unless the Company shall have
received written notice from the requisite percentage of holders of Series A
Preferred Shares that they do not approve or consent to such matter within ten
(10) Business Days after the holders of the Series A Preferred Shares have
received a written request from the Company asking for such approval or consent.
12. SHARE AND WARRANT CERTIFICATES.
(a) RESTRICTIVE ENDORSEMENT. Each certificate representing
Securities now or hereafter held by a Stockholder shall be stamped with legends
in substantially the following form:
"THE SHARES [WARRANTS] REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS'
AGREEMENT DATED AS OF DECEMBER __, 1995, COPIES OF
WHICH ARE AVAILABLE AT THE OFFICE OF THE COMPANY
AND MAY BE INSPECTED BY ANY PROSPECTIVE TRANSFEREE
OF THE SHARES [WARRANTS] REPRESENTED HEREBY ON
REQUEST. SUCH STOCKHOLDERS' AGREEMENT PROVIDES,
AMONG OTHER THINGS, FOR CERTAIN RESTRICTIONS ON
THE SALE, ASSIGNMENT, TRANSFER, PLEDGE,
HYPOTHECATION, MORTGAGE, CHARGE, LIEN,
ENCUMBRANCE, GIFT, BEQUEST, TRANSMISSION OR OTHER
DISPOSITION OF THE SHARES [WARRANTS] REPRESENTED
BY THIS CERTIFICATE."
THE SALE AND ISSUANCE OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAW
OF ANY STATE OR OTHER JURISDICTION. THESE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE
DISTRIBUTION THEREOF. THESE SECURITIES MAY NOT BE
OFFERED, SOLD, PLEDGED, OR TRANSFERRED UNLESS (I)
A REGISTRATION STATEMENT UNDER THE ACT IS IN
EFFECT AS TO THESE SECURITIES AND SUCH OFFER,
SALE, PLEDGE, OR TRANSFER IS IN COMPLIANCE WITH
APPLICABLE SECURITIES LAW OF ANY STATE OR OTHER
JURISDICTION OR (II) THERE IS AN OPINION OF
COUNSEL OR OTHER EVIDENCE, SATISFACTORY TO THE
CORPORATION, THAT AN EXEMPTION THEREFROM IS
AVAILABLE AND THAT SUCH OFFER, SALE, PLEDGE, OR
TRANSFER IS IN COMPLIANCE WITH APPLICABLE
<PAGE>
SECURITIES LAW OF ANY STATE OR OTHER JURISDICTION.
Each Stockholder agrees that he or it will deliver all certificates for
Securities owned by him or it to the Company for the purpose of affixing such
legend thereto.
(b) REPLACEMENT CERTIFICATES. Upon presentation of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
certificate representing Securities and indemnity agreement reasonably
satisfactory to the Company, and upon reimbursement to the Company of all its
reasonable expenses incident thereto, and upon surrender of such certificate or
instrument, if mutilated, to the Company, each Stockholder agrees to use his or
its best efforts to cause the Company deliver a new certificate of like tenor in
lieu of such lost, stolen, destroyed or mutilated certificate.
13. NO DEFAULT. Notwithstanding anything to the contrary contained in
this agreement, none of the Stockholders shall take any action hereunder which
would cause the Company or any of its subsidiaries or Affiliates to breach any
material agreement to which the Company, such subsidiary or Affiliate is a
party.
14. PREEMPTIVE RIGHTS.
(a) In the event that the Company should determine to (i)
authorize and issue any shares of its capital stock or other equity securities
(other than securities issued (A) pursuant to the conversion of the Series B
Shares, (B) pursuant to the exercise of the Warrants, (C) pursuant to the
acquisition of another corporation by the Company or issued in connection with
any merger, consolidation, combination, purchase of all or substantially all of
the assets or other reorganization which has been approved by the Board of
Directors of the Company and the Stockholders in accordance with the provisions
of this Agreement, (D) pursuant to any rights or agreements, including without
limitation convertible securities, provided that the rights established by this
Section 14 apply with respect
<PAGE>
to the initial sale or grant by the Company of such rights or agreements (other
than the rights or agreements described in clause (F) below), (E) in connection
with any stock split, stock dividend or recapitalization of the Company, (F) to
employees, consultants, officers or directors of the Company pursuant to any
stock option, stock purchase or stock bonus plan, agreement or arrangement for
the primary purpose of soliciting or retaining such employees, consultants,
officers or directors services and which are outstanding on the date hereof or
are hereafter approved by the Board of Directors and the Stockholders in
accordance with the terms of this Agreement, and (G) in a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act, covering the offer and sale of securities for the
account of the Company and/or selling shareholders to the public) or (ii) to
reissue any treasury shares previously acquired by the Company, then the Company
shall notify each Stockholder holding Voting Shares and each Warrant holder of
such proposed offering and the price thereof, and for a period of 30 days after
such notice, each such Stockholder and Warrant holder may purchase a pro rata
(in accordance with the percentage of Voting Shares then held by such
Stockholder and Warrant holder) amount of the shares being offered by delivery
of the purchase price therefor to the Company. If any Stockholder or Warrant
holder does not accept the offer to purchase all of his or its pro rata share of
the shares being offered, the Company shall make one or more additional offers
of the remainder of such shares to Stockholders or Warrant holders who have
agreed to purchase all of the shares previously offered. Such additional offer
or offers shall be made for a period of 10 days to each of such Stockholders and
Warrant holders in the same ratio that the amount of shares which such
Stockholder or Warrant holder has agreed to purchase bears to the total amount
of shares which all Stockholders and Warrant holders to which such additional
offer or offers are made have agreed to purchase. Any shares not so purchased
may be sold
<PAGE>
by the Company to a third party who agrees to be bound by the terms of this
Agreement and who shall become a Stockholder hereunder.
(b) For purposes of any calculation of the number of shares of
Voting Shares held or outstanding under this Section 14, the conversion of all
securities convertible into or exchangeable for Voting Shares and the exercise
of all outstanding rights, options and warrants to acquire Voting Shares shall
be assumed.
15. REGISTRATION RIGHTS. The Stockholders shall have the registration
rights set forth on Exhibit B hereto.
16. MISCELLANEOUS.
(a) NOTICES. Wherever this Agreement provides for notice to any
party (except as expressly provided to the contrary), it shall be given in
writing by messenger, electronic transmission, telegraph, telex or postage
prepaid, registered or recorded delivery, air mail letter sent to the address
set forth under each Stockholder's name at the foot of this Agreement, or to
such other address as the party affected may hereafter designate in writing to
the Company and all other Stockholders; together with a copy to the Company at
the address set forth at the foot of this Agreement. Any such notice shall be
effective when received by the party to whom addressed; provided that if given
or made by postage prepaid, registered or recorded delivery, airmail letter or
by telegraph or telex, it shall be deemed to have been received at the earlier
of (i) when actually received or (ii) five (5) business days after the same was
posted or sent (and in proving such it shall be sufficient to prove that the
envelope containing the same was properly addressed and posted as aforesaid or
sent), and provided that if given or made by telegraph or telex, it shall be
deemed to have been received at the time of dispatch.
(b) TERMINATION; AMENDMENT. This Agreement (i) may be terminated or
amended at any time by the written consent of the Company and the holders of
seventy percent (70%) of the Voting Shares and notice of
<PAGE>
such to the Company and all Stockholders, provided that no amendment that
adversely affects the interest of any Stockholder shall be effective against
such Stockholder absent such Stockholder's prior written consent, and (ii) shall
be terminated (A) upon the consummation of (1) a registered public offering of
the Common Shares or (2) a Fundamental Change of the type described in Section
11(b)(iv), (vi), (vii), (viii) or (ix) of this Agreement or (B) ten years from
the date hereof, unless, at anytime within two years prior to any date upon
which termination would occur under this clause (B), all of the parties extend
its duration for an additional period, not to exceed ten years.
(c) WAIVER. No failure or delay on the part of the Stockholders or any
of them in exercising any right, power or privilege hereunder, and no course of
dealing between the Stockholders or any of them shall operate as a waiver
thereof nor shall any single or partial exercise of any right, power or
privilege hereunder preclude the simultaneous or later exercise of any other
right, power or privilege. The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies which the Stockholders or
any of them would otherwise have. No notice to or demand in any case shall
entitle the recipient thereof to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of the
Stockholders or any of them to take any other or further action in any
circumstances without notice or demand.
(d) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
(e) GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware.
(f) BENEFIT AND BINDING EFFECT. Except as expressly contemplated
herein, this Agreement may not be assigned or transferred.
<PAGE>
This Agreement shall be binding upon and shall inure to the benefit of the
Company and each of the Stockholders and their respective executors,
administrators and personal representatives and heirs and their permitted
successors and assigns hereunder and shall be binding upon their successors and
assigns. In the event that any part of this Agreement shall be held to be
invalid or unenforceable, the remaining parts thereof shall nevertheless
continue to be valid and enforceable as though the invalid portions were not a
part hereof.
(g) FURTHER ASSURANCES. Each party hereto agrees to use its best
efforts to take, and to use its best efforts to cause the Company to take, any
action which may be reasonably requested by any other party hereto in order to
effectuate or implement the provisions of this Agreement; provided that no party
shall be required to take any requested action or cause the Company to take any
requested action not specifically required under this Agreement if such
requested action might adversely affect the interest of such party or the
Company.
(h) SPECIFIC PERFORMANCE. Due to the fact that the Securities cannot
be readily purchased or sold in the open market, and that legal remedies may be
inadequate to enforce this Agreement, the parties will be irreparably damaged in
the event that this Agreement is not specifically enforced. In the event of a
breach or threatened breach of the terms, covenants and/or conditions of this
Agreement by any of the parties hereto, the other parties shall, in addition to
all other remedies, be entitled to a temporary or permanent mandatory
injunction, or any appropriate decree of specific performance, without any bond
or security being required and without being required to show any actual damage
or that monetary damages would not provide an adequate remedy.
(i) VOTING PERCENTAGES. Whenever any provision in this Agreement
provides for a specified percentage of Voting Shares to authorize or approve any
action, such percentage shall be calculated as if all Warrants had been
exercised and all shares convertible into Voting Shares had been converted. In
addition, each member of the RFE Group hereby grants to Bulldog the right to
vote 29.1667% of the Series B Preferred Shares and/or Class C Common Shares held
by it as if it were the record and beneficial owner thereof; provided, however,
that the rights granted to Bulldog under this sub-paragraph (i) shall not affect
the calculation of the number of Voting Shares owned by any member of the RFE
Group for purposes of any other provision of this Agreement; and provided,
further, that if Bulldog distributes the Series B Preferred Shares or Class C
Common Shares owned by it, the voting rights granted in this sub-paragraph (i)
shall cease to apply.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as
of the day and year first above written.
GMH HOLDINGS INC.
By: /s/ GARY M. BROST
----------------------------------------------
Name: Gary M. Brost
Title: President
369 Franklin Street
Buffalo, New York 14202
A STOCKHOLDERS:
---------------
BULLDOG HOLDINGS LLC
By: /s/ GARY M. BROST
----------------------------------------------
Name: Gary M. Brost
Title: President
369 Franklin Street
Buffalo, New York 14202
RFE INVESTMENT PARTNERS, V, L.P.
By: RFE Associates V, L.P., general partner
By: /s/ JAMES PARSONS
----------------------------------------------
Name: James Parsons
Title: General Partner
36 Grove Street
New Canaan, Connecticut 06840
<PAGE>
STERLING COMMERCIAL CAPITAL, INC.
By:/s/ HARVEY ROSENBLATT
----------------------------------------------
Name: Harvey Rosenblatt
Title: Executive Vice-
President
175 Great Neck Road
Great Neck, New York 11021
STATE TREASURER OF THE STATE OF MICHIGAN,
CUSTODIAN OF THE MICHIGAN PUBLIC SCHOOL
EMPLOYEES' RETIREMENT SYSTEM, STATE EMPLOYEES
RETIREMENT SYSTEM, MICHIGAN STATE POLICE
RETIREMENT SYSTEM, AND MICHIGAN JUDGES'
RETIREMENT SYSTEM
By:/s/ PAUL E. RICE
----------------------------------------------
Paul E. Rice
Administrator
Alternate Investments Division
430 West Allegan
Lansing, Michigan 48922
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE
UNITED STATES
By:/s/ JAMES R. WILSON
----------------------------------------------
Name: James R. Wilson
Title: Investment Officer
787 7th Avenue
New York, New York 10019
/s/ ROBERT C. MAYER, JR.
--------------------------------------------------
Robert C. Mayer, Jr.
114 River Road
Scarborough, New York 10510
/s/ ROBERT L. GOODWIN
--------------------------------------------------
Robert L. Goodwin
27 Meadow Lane
Greenwich, Connecticut 06831
<PAGE>
/s/ PAUL C. CRONSON
--------------------------------------------------
Paul C. Cronson
111 E. 80th Street
New York, New York 10021
/s/ EILEEN V. AUSTEN
--------------------------------------------------
Eileen V. Austen
3630 Meadville Drive
Sherman Oaks, California 91403
B STOCKHOLDERS:
/s/ SAMUEL P. SCOTT
--------------------------------------------------
Samuel P. Scott, as Joint Tenant with Sherry
P. Scott
4300 South Fletcher Avenue
Fernandina Beach, FL 32034
KELLY SCOTT HEROLD
--------------------------------------------------
Kelly Scott Herold, as Trustee
1230 Greenridge Road
Jacksonville, FL 32207
GREGORY KEITH SCOTT
--------------------------------------------------
Gregory Keith Scott
3136-A South Fletcher Avenue
Fernandina Beach, FL 32034
DREW ERIC SCOTT
--------------------------------------------------
Drew Eric Scott
3000-B South Fletcher Avenue
Fernandina Beach, FL 32034
WAYNE ROBERTS
--------------------------------------------------
Wayne Roberts
2255 Industrial Blvd.
Waycross, GA 32503
<PAGE>
/s/ LANNIS THOMAS
--------------------------------------------------
Lannis Thomas
2255 Industrial Blvd.
Waycross, GA 32503
/s/ THOMAS M. VINSON III
--------------------------------------------------
Thomas M. Vinson III
2255 Industrial Blvd.
Waycross, GA 32503
/s/ BRUCE HALLOCK
--------------------------------------------------
Bruce Hallock
2255 Industrial Blvd.
Waycross, GA 32503
/s/ MICHAEL O'GORMAN
--------------------------------------------------
Michael O'Gorman
2255 Industrial Blvd.
Waycross, GA 32503
/s/ BENNY BRYAN
--------------------------------------------------
Benny Bryan
2255 Industrial Blvd.
Waycross, GA 32503
/s/ JAMES H. MCCLELLAN
--------------------------------------------------
James H. McClellan
2255 Industrial Blvd.
Waycross, GA 32503
/s/ SHERRY J. SCOTT
--------------------------------------------------
Sherry J. Scott, as Joint Tenant with
Samuel J. Scott
4300 South Fletcher Avenue
Fernandina Beach, FL 32034
<PAGE>
EXHIBIT A
SCHEDULE OF STOCKHOLDERS
<TABLE>
<CAPTION>
STOCKHOLDER NUMBER OF SHARES GROUP
SERIES A SERIES B CLASS A CLASS B CLASS C
PREFERRED PREFERRED COMMON COMMON COMMON WARRANTS
<S> <C> <C> <C> <C> <C> <C> <C>
Bulldog Holdings LLC 1,400,000 A
RFE Investments
Partners V, L.P. 4,690,351 439,720 714,546 A
State Treasurer of
the State of
Michigan, Custodian 3,076,922 288,462 468,750 A
Sterling Commercial
Capital, Inc. 232,727 21,818 35,454 A
The Equitable Life
Assurance Society of
the United States 350,000 A
Eileen V. Austen 54,687 A
Paul C. Cronson 54,687 A
Robert C. Goodwin 54,688 A
Robert C. Mayer 54,688 A
Samuel P. Scott and
Sherry J. Scott,
as joint tenants 92,749 B
Kelly Scott Herold,
as Trustee 71,167 B
Gregory Keith Scott 71,167 B
Drew Eric Scott 71,167 B
Lannis Thomas 28,000 B
Wayne Roberts 28,000 B
Thomas M. Vinson 21,000 B
Bruce Hallock 14,000 B
Michael O'Gorman 14,000 B
Benny Bryan 13,125 B
James H. McClellan 13,125 B
_________ _________ _________ ________ ______ _______
TOTAL 8,000,000 2,150,000 1,656,250 0 0 568,750
</TABLE>
<PAGE>
EXHIBIT B
REGISTRATION RIGHTS
1. DEFINITIONS. Capitalized terms used without definition in
this Exhibit B shall have the meanings set forth in the Stockholders'
Agreement to which this Exhibit B is attached. The following terms shall
have the following respective meanings:
COMMISSION: the Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act or the
Exchange Act, whichever is the relevant statute for the particular purpose.
Equitable Initiating Holders: any holder or holders of more
than 50% of the Warrants.
EXCHANGE ACT: the Securities Exchange Act of 1934, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time of
determination.
INITIATING HOLDERS: each of (a) The Equitable Initiating
Holders and (b) the RFE Initiating Holders, together with their successors
and permitted assigns.
IPO: the issuance by the Company in a Public Offering under
the Act of a number of shares of Common Stock such that, after giving
effect to such Public Offering, there shall be outstanding pursuant to one
or more such Public Offerings shares of Common Stock equal to at least 20%
of the capital stock of the Company on a fully-diluted basis.
OTHER SECURITIES: any stock (other than Common Stock) and
other securities of the Company or any other Person (corporate or
otherwise) which the holders of the Warrants at any time shall be entitled
to receive, or shall have received, upon the exercise of the Warrants, in
lieu of or in addition to Common Stock, or which at any time shall be
issuable or shall have been issued in exchange for or in replacement of
Common Stock or Other Securities pursuant to Section 3 of the Warrant
Agreement or otherwise.
PUBLIC OFFERING: any offering of Common Stock or Other
Securities, or any securities issued or issuable with respect to any Common
Stock or Other Securities by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise, in each case to the
public pursuant to an effective registration statement under the Act.
REGISTRABLE SECURITIES: (a) any shares of Common Stock
issued and outstanding as of the date hereof, (b) the Warrants, (c) any
shares of Common Stock or Other Securities issued or issuable upon exercise
of the Warrants or upon conversion of the Series B Preferred Shares and (d)
any securities issued or issuable with respect to any Common Stock or Other
Securities referred to in subdivision (c) by way of stock dividend or stock
split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise. As to any
particular Registrable Securities, once issued such securities shall cease
to be Registrable Securities when (x) a registration statement with respect
to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in
accordance with such registration statement, (y) they shall have been sold
as permitted under Rule 144 (or any successor provision) under the
Securities Act, or (z) they shall have ceased to be outstanding.
REGISTRATION EXPENSES: all expenses incident to the
Company's performance of or compliance with the provisions of this Exhibit
B, including, without limitation, all registration, filing and NASD fees,
all fees and expenses of complying with securities or blue sky laws, all
word processing, duplicating and printing expenses, messenger and delivery
expenses, the fees and disbursements of counsel for the Company and of its
independent public accountants, including the expenses of any special
audits or "cold comfort" letters required by or incident to such
performance and compliance, the reasonable fees and disbursements of a
single counsel and single firm of accountants retained by the holders of
the Registrable Securities being registered, premiums and other costs of
policies of insurance against liabilities arising out of the public
offering of the Registrable Securities being registered and any fees and
<PAGE>
disbursements of underwriters customarily paid by issuers or sellers of
securities, but excluding underwriting discounts, commissions, transfer
taxes and any other compensation paid to underwriters or other agents or
brokers to effect the sale, if any, PROVIDED
that, in any case where Registration Expenses are not to be borne by the
Company, such expenses shall not include salaries of Company personnel or
general overhead expenses of the Company, auditing fees, premiums or other
expenses relating to liability insurance required by underwriters of the
Company, or other expenses for the preparation of financial statements or
other data normally prepared by the Company in the ordinary course of its
business or which the Company would have incurred in any event.
REQUESTING HOLDER: the meaning in paragraph 7.
RFE INITIATING HOLDERS: RFE and Michigan.
WARRANT AGREEMENT: the Common Stock Purchase Warrant
expiring December 21, 2002 issued by the Company.
WARRANTS: the meaning specified in the opening paragraph of
the Warrant Agreement.
2. REGISTRATION ON REQUEST.
(a) REQUEST. At any time and from time to time after the
180th day following the consummation of an IPO, upon the written request of
one or more Initiating Holders, requesting that the Company effect the
registration under the Securities Act of all or part of such Initiating
Holders' Registrable Securities and specifying the intended method of
disposition thereof, the Company will promptly give written notice of such
requested registration to all holders of outstanding Registrable
Securities, and thereupon will use its best efforts to effect its
registration under the Securities Act of:
(i) the Registrable Securities which the Company has been so
requested to register by such Initiating Holder or Holders for
disposition in accordance with the intended method of disposition
stated in such request; and
(ii) all other Registrable Securities the Holders of which
have made written requests to the Company for registration thereof
within 20 Business Days after the giving of such written notice by the
Company (which request shall specify the intended method of
disposition thereof),
all to the extent required to permit the disposition (in accordance with
the intended methods thereof as aforesaid) of the Registrable Securities so
to be registered; PROVIDED that the Company shall not be required to effect
the registration pursuant to this Section 2 of any Warrants (but shall be
required to effect the registration of Registrable Securities described in
clauses (b) and (c) of the definition of Registrable Securities), and
PROVIDED, FURTHER, that any holder of Registrable Securities to be included
in any such registration, may, by written notice to the Company within 10
Business Days after its receipt of a copy of a notice from the managing
underwriter delivered pursuant to paragraph (g) below, withdraw such
request and, on receipt of such notice of the withdrawal of such request
from holders comprising at least a majority of the holders of Registrable
Securities to be included in such registration, the Company may elect not
to effect such registration. Subject to paragraph (g) below, the Company
may include in such registration other securities for sale for its own
<PAGE>
account or for the account of any other Person.
(b) NUMBER OF REGISTRATIONS. The Company shall not be
required to effect more than two registrations for the RFE Initiating
Holders and two registrations for the Equitable Initiating Holders pursuant
to this Section 2, PROVIDED that such registrations, taken together, shall
permit the disposition of at least 80% of the Registrable Securities which
the Company has been so requested to register, and PROVIDED, FURTHER, that
if two such registrations shall not permit the disposition of at least 80%
of such Registrable Securities, the Company shall be required to effect
additional registrations pursuant to this Section 2 until they have
permitted the disposition of at least 80% of such Registrable Securities.
(c) REGISTRATION STATEMENT FORM. Registrations under this
Section 2 shall be on such appropriate registration form of the Commission
(i) as shall be selected by the Company and as shall be acceptable to at
least a majority of the holders of Registrable Securities to be included in
such registration and (ii) as shall permit the disposition of the
Registrable Securities which the Company has been requested to register
under this Section 2 in accordance with the intended method or methods of
disposition specified in the request for their registration. The Company
may, if permitted by law, effect any registration requested under this
Section 2 by the filing of a registration statement on Form S-3 (or any
successor or similar short form registration statement) unless the holders
holding at least a majority (by number of shares) of the Registrable
Securities as to which such registration relates (and, if such registration
involves an underwritten Public Offering of such Registrable Securities,
the managing underwriter of such Public Offering) shall notify the Company
in writing that, in the judgment of such holders (and, if applicable, such
managing underwriter), the use of a more detailed form specified in such
notice is of material importance to the success of the Public Offering of
such Registrable Securities, in which case such registration shall be
effected on the form so specified. Upon the request of at least a majority
of the holders of Registrable Securities, registration under this Section 2
shall be by means of a shelf registration pursuant to Rule 415 under the
Securities Act (but only if the Company is then eligible to use Form S-2 or
S-3 (or any successor forms)).
(d) EXPENSES. The Company will pay all Registration
Expenses in connection with the first two registrations for each of the RFE
Initiating Holders and the Equitable Initiating Holders effected pursuant
to this Section 2, and, if such registrations, taken together, shall not
permit the disposition of at least 80% of the Registrable Securities which
the Company has been requested to register under this Section 2, the
Company will pay all Registration Expenses in connection with each
additional registration pursuant to this Section 2 until such
registrations, taken together, shall have permitted the disposition of at
least 80% of such Registrable Securities.
(e) SELECTION OF UNDERWRITERS. If, in the discretion of
the holders of a majority (by number of shares) of the Registrable
Securities, any offering pursuant to this Section 2 shall constitute an
underwritten offering, the underwriter or underwriters thereof shall be
selected, after consultation with such holders, by the Company and shall be
acceptable to the holders of at least a majority of the holders of
Registrable Securities to be included in such offering, who shall not
unreasonably withhold their acceptance of such underwriter or underwriters.
(f) EFFECTIVE REGISTRATION STATEMENT. A registration
requested pursuant to this Section 2 will not be deemed to have been
<PAGE>
effected and a demand shall not be deemed to have been made (i) unless it
has become effective, (ii) if the registration does not remain effective
for a period of at least 120 days (or, with respect to any registration
statement filed pursuant to Rule 415 under the Securities Act, for a period
of at least 2 years) or, if earlier, until all the Registrable Securities
requested to be registered in connection therewith were sold, (iii) if,
after it has become effective, such registration is interfered with by any
stop order, injunction or other order or requirement of the Commission or
other governmental agency or court, or (iv) if the conditions to closing
specified in the purchase agreement or underwriting agreement entered into
in connection with such registration are not satisfied other than by reason
of some act or omission by such Initiating Holders.
(g) PRIORITY IN REQUESTED REGISTRATIONS. If a requested
registration pursuant to this Section 2 involves an underwritten offering,
and the managing underwriter shall advise the Company in writing (with a
copy to each holder of Registrable Securities requesting registration)
that, in its opinion, the number of securities requested to be included in
such registration (including securities of the Company which are not
Registrable Securities) exceeds the number which can be sold in such
offering, the Company will include in any such registration to the extent
of the number which the Company is so advised can be sold in such offering
(i) first, Registrable Securities requested to be included in such
registration by the holder or holders of Registrable Securities who are
Initiating Holders, pro rata among such holders on the basis of the number
of Registrable Securities requested to be included by such holders, and
(ii) second, other securities of the Company proposed to be included in
such registration, in accordance with the priorities, if any, then existing
among the Company and the holders of such other securities.
3. INCIDENTAL REGISTRATION.
(a) RIGHT TO INCLUDE REGISTRABLE SECURITIES.
Notwithstanding any limitation contained in Section 2, if the Company at
any time proposes to register any of its securities under the Securities
Act (other than by a registration on Form S-4 or S-8 or any successor or
similar forms), whether or not for sale for its own account, in a manner
which would permit registration of Registrable Securities for sale to the
public under the Securities Act, each such time, it will give prompt
written notice to all holders of Registrable Securities of its intention to
do so and of such holders' rights under this Section 3. Upon the written
request of any such holder made within 20 days after receipt of any such
notice (which request shall specify the Registrable Securities intended to
be disposed of by such holder and the intended method of disposition
thereof), the Company will use its best efforts to effect the registration
under the Securities Act of all Registrable Securities which the Company
has been so requested to register by the holders thereof, to the extent
requisite to permit the disposition (in accordance with the intended
methods thereof as aforesaid) of the Registrable Securities so to be
registered, by inclusion of such Registrable Securities in the registration
statement which covers the securities which the Company proposes to
register, PROVIDED that (i) the Company shall not be required to effect the
registration pursuant to this Section 3 of any Warrants (but shall be
required to effect the registration of Registrable Securities described in
clauses (b) and (c) of the definition of Registrable Securities) and (ii)
if, at any time after giving written notice of its intention to register
any securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
<PAGE>
determination to each holder of Registrable Securities and, thereupon, (x)
in the case of a determination not to register, shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses
in connection therewith), without prejudice, however, to the rights of any
holder or holders of Registrable Securities entitled to request that such
registration be effected as a registration under Section 2, and (y) in the
case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities for the same period as the delay in
registering such other securities. No registration effected under this
Section 3 shall relieve the Company of its obligation to effect any
registration statement upon request under Section 2. The Company will pay
all Registration Expenses in connection with each registration of
Registrable Securities requested pursuant to this Section 3.
(b) PRIORITY IN INCIDENTAL REGISTRATIONS. If a
registration pursuant to this Section 3 involves an underwritten offering
and the managing underwriter advises the Company in writing that, in its
opinion, the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering, the
Company will include in such registration, to the extent of the number
which the Company is so advised can be sold in such offering, securities
determined as follows:
(i) if such registration as initially proposed by the
Company was solely a primary registration of its securities, (x)
first, the securities proposed by the Company to be sold for its own
account, (y) second, any Registrable Securities requested to be
included in such registration, pro rata among the holders thereof
requesting such registration on the basis of the number of shares of
Registrable Securities requested to be included by such holders and
(z) third, any other securities of the Company proposed to be included
in such registration, pro rata among the holders thereof requesting
such registration on the basis of the number of shares of such
securities requested to be included by such holders; and
(ii) if such registration as initially proposed by the
Company was in whole or in part requested by holders of securities of
the Company, other than holders of Registrable Securities, pursuant to
Section 2 hereof, such securities held by the holders initiating such
registration, any Registrable Securities requested to be included in
such registration, and any other securities of the Company proposed to
be included in such registration, pro rata among the holders thereof
requesting such registration on the basis of the number of shares of
such securities requested to be included by such holders.
4. REGISTRATION PROCEDURES. If and whenever (a) the
Company is required to use its best efforts to effect the registration of
any Registrable Securities under the Securities Act as provided in Sections
2 and 3 or (b) there is a Requesting Holder in connection with any other
proposed registration by the Company under the Securities Act, the Company
will as expeditiously as possible:
(i) prepare and file with the Commission the requisite
registration statement (including such audited financial statements as
may be required by the Securities Act or the rules and regulations
promulgated thereunder) to effect such registration and use its best
efforts to cause such registration statement to become effective,
PROVIDED that before filing such registration statement or any
amendments thereto, the Company will furnish to the counsel selected
<PAGE>
by the holders of Registrable Securities whose Registrable Securities
are to be included in such registration copies of all such documents
proposed to be filed, which documents will be subject to the review of
such counsel, and PROVIDED, FURTHER, that the Company may discontinue
any registration of its securities which are not Registrable
Securities at any time prior to the effective date of the registration
statement relating thereto;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to maintain the effectiveness
of such registration statement and to comply with the provisions of
the Securities Act with respect to the disposition of all securities
covered by such registration statement until the earlier of (A) such
time as all of such securities have been disposed of in accordance
with the intended methods of disposition by the seller or sellers
thereof set forth in such registration statement and (B) the
expiration of 120 days after such registration statement becomes
effective, except with respect to any such registration statement
filed pursuant to Rule 415 (or any successor Rule) under the
Securities Act, in which case such period shall be 2 years;
(iii) furnish to each seller of Registrable Securities covered
by such registration statement and each Requesting Holder such number
of conformed copies of such registration statement and of each such
amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424
under the Securities Act, in conformity with the requirements of the
Securities Act, and such other documents, as such seller may
reasonably request;
(iv) use its best efforts to register or qualify all
Registrable Securities and other securities covered by such
registration statement under such other securities or blue sky laws of
such jurisdictions as each seller thereof and each Requesting Holder
shall reasonably request, to keep such registration or qualification
in effect for so long as such registration statement remains in
effect, and take any other action which may be reasonably necessary or
advisable to enable such seller to consummate the disposition in such
jurisdictions of the securities owned by such seller, except that the
Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this subdivision (iv)
be obligated to be so qualified or to consent to general service of
process in any such jurisdiction;
(v) use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities;
(vi) furnish to each seller of Registrable Securities and
each Requesting Holder a signed counterpart, addressed to such seller
(and the underwriters, if any), of
(A) an opinion of counsel for the Company, dated the
effective date of such registration statement (and, if such
<PAGE>
registration includes an underwritten Public Offering, dated the
date of any closing under the underwriting agreement), reasonably
satisfactory in form and substance to such seller, and
(B) a "comfort" letter, dated the effective date of
such registration statement (and, if such registration includes
an underwritten Public Offering, dated the date of any closing
under the underwriting agreement), signed by the independent
public accountants who have certified the Company's financial
statements included in such registration statement,
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in
the case of the accountants' letter, with respect to events subsequent
to the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' letters delivered
to the underwriters in underwritten Public Offerings of securities
and, in the case of the accountants' letter, such other financial
matters, as such seller (or the underwriters, if any) may reasonably
request;
(vii) immediately notify each seller of such Registrable
Securities, and (if requested by any such seller) confirm such advice
in writing, (A) when the prospectus or any prospectus supplement or
post-effective amendment has been filed, and, with respect to the
registration statement or any post-effective amendment, when the same
has become effective, (B) of any request by the Commission for
amendments or supplements to the registration statement or the
prospectus or for additional information, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the
registration statement or the initiation of any proceedings for that
purpose and (D) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Registrable
Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose;
(viii) use its best efforts to obtain the withdrawal of any
order suspending the effectiveness of the registration statement at
the earliest possible time;
(ix) immediately notify each holder of Registrable Securities
covered by such registration statement and each Requesting Holder, at
any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any event as a
result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were
made, and at the request of any such holder promptly prepare and
furnish to such seller a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such
prospectus shall not include 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 under which they were made;
(x) otherwise comply with all applicable rules and
regulations of the Commission, and make available to its security
<PAGE>
holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than
eighteen months, beginning with the first full calendar month after
the effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the
Securities Act, and not file any amendment or supplement to such
registration statement or prospectus to which any such seller or any
Requesting Holder shall have reasonably objected on the grounds that
such amendment or supplement does not comply in all material respects
with the requirements of the Securities Act or of the rules or
regulations thereunder, having been furnished with a copy thereof at
least five business days prior to the filing thereof;
(xi) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration
statement not later than the effective date of such registration
statement;
(xii) cooperate with the sellers of such Registrable
Securities to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold, which
securities shall not bear any restrictive legends and shall be in a
form eligible for deposit with The Depository Trust Company; and
enable such Registrable Securities to be in such denominations and
registered in such names as such sellers may request at least two
Business Days prior to any sale of Registrable Securities;
(xiii) use its best efforts (A) to cause all such Registrable
Securities covered by such registration statement to be listed on a
national securities exchange (if such Registrable Securities are not
already so listed) and on each additional national securities exchange
on which similar securities issued by the Company are then listed, if
the listing of such Registrable Securities is then permitted under the
rules of such exchange, or (B) to secure designation of all such
Registrable Securities covered by such registration statement as a
NASDAQ "national market system security" within the meaning of Rule
llAa2-1 of the Commission or, failing that, secure NASDAQ
authorization for such Registrable Securities and, without limiting
the generality of the foregoing, to arrange for at least two market
makers to register as such with respect to such Registrable Securities
with the NASD;
(xiv) provide a CUSIP number for all Registrable Securities,
not later than the effective date of the applicable registration
statement; and
(xv) enter into such agreements and take such other actions
as the Requisite Holders shall reasonably request in order to expedite
or facilitate the disposition of such Registrable Securities.
The Company may require each holder of Registrable Securities as to which
any registration is being effected to furnish the Company such information
regarding such holder and the distribution of such securities as the
Company may from time to time reasonably request in writing.
5. UNDERWRITTEN OFFERINGS.
(a) REQUESTED UNDERWRITTEN OFFERINGS. If requested by the
underwriters for any underwritten offering by holders of Registrable
Securities pursuant to the registration requested under Section 2, the
<PAGE>
Company will enter into an underwriting agreement with such underwriters
for such offering, such agreement to be satisfactory in substance and form
to each such holder and the underwriters and to contain such
representations and warranties by the Company and such other terms as are
customarily contained in agreements of this type, including, without
limitation, indemnities to the effect and to the extent provided in Section
8. The holders of Registrable Securities to be distributed by such
underwriters shall be parties to such underwriting agreement and may, at
their option, require that any or all of the representations and warranties
by, and the other agreements on the part of, the Company to and for the
benefit of such underwriters shall also be made to and for the benefit of
such holders of Registrable Securities and that any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. No holder of Registrable Securities
shall be required (i) to make any representations or warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding such holder and such holder's intended
method of distribution and any other representation required by law or (ii)
to indemnify (or to contribute with respect to an indemnifiable claim) the
Company or any underwriters of the Registrable Securities, except as set
forth in Section 8.
(b) INCIDENTAL UNDERWRITTEN OFFERINGS. If the Company at
any time proposes to register any of its securities under the Securities
Act as contemplated by Section 3 and such securities are to be distributed
by or through one or more underwriters, the Company will, subject to the
provisions of Section 3(b), use its best efforts, if requested by any
holder of Registrable Securities, to arrange for such underwriters to
include the Registrable Securities to be offered and sold by such holder
among the securities to be distributed by such underwriters. The holders
of Registrable Securities to be distributed by such underwriters shall be
parties to the underwriting agreement between the Company and such
underwriters and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of,
the Company to and for the benefit of such underwriters shall also be made
to and for the benefit of such holders of Registrable Securities and that
any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to
the obligations of such holders of Registrable Securities. No holder of
Registrable Securities shall be required (i) to make any representations or
warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such holder and such
holder's intended method of distribution and any other representation
required by law or (ii) to indemnify (or to contribute with respect to an
indemnifiable claim) the Company or any underwriters of the Registrable
Securities, except as set forth in Section 8.
(c) HOLDBACK AGREEMENTS.
(i) Each holder of Registrable Securities agrees, if so
required by the managing underwriter, not to effect any public sale or
distribution of securities of the Company of the same class as the
securities included in such Registration Statement, during the seven
days prior to the date on which any underwritten registration pursuant
to Section 2 or 3 has become effective and the 90 days thereafter,
except as part of such underwritten registration or to the extent that
such holder is prohibited by applicable law from agreeing to withhold
Registrable Securities from sale or is acting in its capacity as a
fiduciary or an investment adviser. Without limiting the scope of the
<PAGE>
term "fiduciary," a holder shall be deemed to be acting as a fiduciary
or an investment adviser if its actions or the Registrable Securities
proposed to be sold are subject to ERISA, the Investment Company Act
of 1940 or the Investment Advisers Act of 1940 or if such Registrable
Securities are held in a separate account under applicable insurance
law or regulation.
(ii) The Company agrees (A) not to effect any public sale or
distribution of its equity securities or securities convertible into
or exchangeable or exercisable for any of such securities during the
seven days prior to the date on which any underwritten registration
pursuant to Section 2 or 3 has become effective and the 90 days
thereafter, except as part of such underwritten registration and
except pursuant to registrations on Form S-4 or S-8 or any successor
or similar forms thereto, and (B) to cause each holder of its equity
securities or of any securities convertible into or exchangeable or
exercisable for any of such securities, in each case purchased from
the Company at any time after the date of this Agreement (other than
in a Public Offering), to agree not to effect any such public sale or
distribution of such securities, during such period, except as part of
such underwritten registration.
6. PREPARATION; REASONABLE INVESTIGATION. In connection with
the preparation and filing of each registration statement under the
Securities Act, the Company will give the holders of Registrable Securities
to be registered under such registration statement, their underwriters, if
any, each Requesting Holder and one firm of counsel and accountants on
behalf of such Requesting Holders, the opportunity to participate in the
preparation of such registration statement, each prospectus included
therein or filed with the Commission, and each amendment thereof or
supplement thereto, and will give each of them such access to its books and
records and such opportunities to discuss the business of the Company with
its officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of such holders'
and such underwriters' respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company agrees
to include in any such registration statement all information which any
holder of Registrable Securities being registered, upon advice of counsel,
shall reasonably request.
7. RIGHTS OF REQUESTING HOLDERS. The Company will not file any
registration statement under the Securities Act, whether or not pursuant to
registration rights granted to other holders of its securities and whether
or not for sale for its own account (other than by a registration on Form
S-4, S-8 or any successor form thereto), unless it shall first have given
to each Person which holds any Registrable Securities issued by the Company
at least 30 days' prior written notice thereof. Any such holder who shall
so request within 30 days after such notice (a "Requesting Holder") shall
have the rights of a Requesting Holder provided in Sections 4, 6 and 8. In
addition, if any registration statement refers to any Requesting Holder by
name or otherwise as the holder of any securities of the Company, then such
holder shall have the right to require (A) the insertion therein of
language, in form and substance reasonably satisfactory to such holder, to
the effect, if true, that the holding by such holder of such securities
does not necessarily make such holder a "controlling person" of the Company
within the meaning of the Securities Act and is not to be construed as a
recommendation by such holder of the investment quality of the Company's
debt or equity securities covered thereby and that such holding does not
imply that such holder will assist in meeting any future financial
requirements of the Company, or (B) in the event that such reference to
<PAGE>
such holder by name or otherwise is not required by the Securities Act or
any rules and regulations promulgated thereunder, the deletion of the
reference to such holder.
8. INDEMNIFICATION.
(a) The Company will, and hereby does, indemnify, to the
extent permitted by applicable law, each holder of Registrable Securities
and its Affiliates and their respective officers and directors, if any, and
each Person, if any, who controls such holder within the meaning of Section
15 of the Securities Act, against all losses, claims, damages, liabilities
(or proceedings in respect thereof) and expenses (under the Securities Act
or common law or otherwise), joint or several, caused by any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus (and as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) or any
preliminary prospectus or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such losses,
claims, damages, liabilities (or proceedings in respect thereof) or
expenses are caused by any untrue statement or alleged untrue statement
contained in or by any omission or alleged omission from information
furnished in writing to the Company by such holder expressly for use
therein. If the offering pursuant to any registration statement provided
for under this Agreement is made through underwriters, no action or failure
to act on the part of such underwriters (whether or not any such
underwriter is an Affiliate of any holder of Registrable Securities) shall
affect the obligations of the Company to indemnify any holder of
Registrable Securities or any other Person pursuant to the preceding
sentence. If the offering pursuant to any registration statement provided
for under this Agreement is made through underwriters, the Company agrees
to enter into an underwriting agreement in customary form with such
underwriters, and the Company agrees to indemnify such underwriters, their
officers and directors, if any, and each Person, if any, who controls such
underwriters within the meaning of Section 15 of the Securities Act to the
same extent as hereinbefore provided with respect to the indemnification of
the holders of Registrable Securities; PROVIDED that the Company shall not
be required to indemnify any such underwriter, or any officer or director
of such underwriter or any Person who controls such underwriter within the
meaning of Section 15 of the Securities Act, to the extent that the loss,
claim, damage, liability (or proceedings in respect thereof) or expense for
which indemnification is claimed results from such underwriter's failure to
send or give a copy of the amended or supplemented final prospectus to the
Person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the
sale of Registrable Securities to such Person if such statement or omission
was corrected in such amended or supplemented final prospectus prior to
such written confirmation and the underwriter was given notice of the
availability of such amended or supplemented final prospectus.
(b) In connection with any registration statement in which
a holder of Registrable Securities is participating, each such holder will
indemnify, to the extent permitted by applicable law, the Company, its
officers and directors and each Person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act, against any losses,
claims, damages, liabilities (or proceedings in respect thereof) and
expenses (under the Securities Act, common law or otherwise), caused by any
untrue statement or alleged untrue statement of a material fact or any
omission or alleged omission of a material fact required to be stated in
the registration statement or prospectus or preliminary prospectus or any
<PAGE>
amendment thereof or supplement thereto or necessary to make the statements
therein not misleading, but only to the extent that such untrue statement
is contained in or such omission is from information so furnished in
writing by such holder expressly for use therein; PROVIDED that such
holder's obligations hereunder shall be limited to an amount equal to the
net proceeds to such holder of the Registrable Securities sold pursuant to
such registration statement.
(c) Any Person entitled to indemnification under the
provisions of this Section 8 shall (i) give prompt notice to the
indemnifying party of any claim with respect to which it seeks
indemnification (but the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its obligations
under the preceding subdivisions of this Section 8, except to the extent
that the indemnifying party is actually prejudiced by such failure) and
(ii) unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may exist in
respect of such claim, permit such indemnifying party to assume the defense
of such claim, with counsel reasonably satisfactory to the indemnified
party; and if such defense is so assumed, such indemnifying party shall not
enter into any settlement without the consent of the indemnified party if
such settlement attributes liability to the indemnified party, and such
indemnifying party shall not be subject to any liability for any settlement
made without its consent (which shall not be unreasonably withheld); and
any underwriting agreement entered into with respect to any registration
statement provided for under this Agreement shall so provide. In the event
an indemnifying party shall not be entitled, or elects not, to assume the
defense of a claim, such indemnifying party shall not be obligated to pay
the fees and expenses of more than one counsel or firm of counsel for all
parties indemnified by such indemnifying party in respect of such claim,
unless in the reasonable judgment of any such indemnified party a conflict
of interest may exist between such indemnified party and any other of such
indemnified parties in respect to such claim. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on
behalf of a participating holder of Registrable Securities, its officers,
directors or any Person, if any, who controls such holder as aforesaid, and
shall survive the transfer of such securities by such holder.
(d) If the indemnification provided for in this Section 8
shall for any reason be held by a court to be unavailable to an indemnified
party under Section 8(a) or (b) hereof in respect of any loss, claim,
damage or liability, or any action in respect thereof, then, in lieu of the
amount paid or payable under Section 8(a) or (b), the indemnified party and
the indemnifying party under Section 8(a) or (b) shall contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating the same),
(i) in such proportion as is appropriate to reflect the relative fault of
the Company and the prospective sellers of Registrable Securities covered
by the registration statement which resulted in such loss, claim, damage or
liability, or action or proceeding in respect thereof, with respect to the
statements or omissions which resulted in such loss, claim, damage or
liability, or action or proceeding in respect thereof, as well as any other
relevant equitable considerations or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as
shall be appropriate to reflect the relative benefits received by the
Company and such prospective sellers from the offering of the securities
covered by such registration statement, PROVIDED, that for purposes of
clauses (i) or (ii), the relative benefits received by the prospective
sellers shall be deemed not to exceed the amount of proceeds received by
such prospective sellers, and no holder of Registrable Securities shall be
<PAGE>
required to contribute any amount in excess of the amount such holder would
have been required to pay to an indemnified party if the indemnity under
subsection (b) of this Section 8 was available. 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. Such sellers' obligations
to contribute as provided in this Section 8(d) are several in proportion to
the relative value of their respective Registrable Securities covered by
such registration statement and not joint. In addition, no Person shall be
obligated to contribute hereunder any amounts in payment for any settlement
of any action or claim effected without such Person's consent, which
consent shall not be unreasonably withheld.
(e) Indemnification and contribution similar to that
specified in the preceding subdivisions of this Section 8 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification
of securities under any federal or state law or regulation of any
governmental authority other than the Securities Act.
(f) An indemnifying party shall make payments of all
amounts required to be made pursuant to the foregoing provisions of this
Section 8 to or for the account of the indemnified party from time to time
promptly upon receipt of bills or invoices relating thereto or when
otherwise due or payable, subject to an undertaking by the Indemnified
Party to repay all such amounts if a court of competent jurisdiction
determines that such Indemnified Party is not entitled to indemnity or the
benefits of contribution hereunder.
9. ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company
will not effect or permit to occur any combination or subdivision of shares
which would adversely affect the ability of the holders of Registrable
Securities to include such Registrable Securities in any registration of
its securities contemplated by this Exhibit B or the marketability of such
Registrable Securities under any such registration.
10. REGISTRATION RIGHTS TO OTHERS. The Company shall not,
without the prior written consent of the holders of a majority of
Registrable Securities, provide to any holder of any securities of the
Company rights with respect to the registration of such securities under
the Act which are more favorable to such holder than the terms and
conditions provided in this Exhibit B to holders of Registrable Securities.
The Company shall provide to the holders of Registrable Securities copies
of any agreements which purport to grant rights with respect to the
registration of any of the Company's securities to any holder or
prospective holder thereof promptly upon executing the same.
11. OTHER REGISTRATION OF COMMON STOCK. If any shares of the
Common Stock required to be reserved for purposes of issuance upon exercise
of the Warrants in connection with their sale in a registration pursuant to
Section 2 or 3 require registration with or approval of any governmental
authority under any federal or state law (other than the Securities Act)
before such shares may be issued upon such exercise, the Company will, at
its expense and as expeditiously as possible, use its best efforts to cause
such shares to be duly registered or approved, as the case may be.
12. NOMINEES FOR BENEFICIAL OWNERS. For purposes of this
Exhibit B, in the event that any Registrable Securities are held by a
nominee for the beneficial owner thereof, the beneficial owner thereof may,
at its election, be treated as the holder of such Registrable Securities
<PAGE>
for purposes of any request or other action by any holder or holders of
Registrable Securities pursuant to this Exhibit B or any determination of
any number or percentage of shares of Registrable Securities held by any
holder or holders of Registrable Securities contemplated by this Exhibit B.
If the beneficial owner of any Registrable Securities so elects, the
Company may require assurances reasonably satisfactory to it of such
owner's beneficial ownership of such Registrable Securities.
13. RULE 144 AND RULE 144A. The Company shall take all actions
reasonably necessary to enable holders of Registrable Securities to sell
such securities without registration under the Securities Act within the
limitation of the provisions of Rule 144 and Rule 144A under the Securities
Act, as such Rules may be amended from time to time, or any similar rules
or regulations hereafter adopted by the Commission, including, without
limitation, filing on a timely basis all reports required to be filed
pursuant to the Exchange Act.
14. TRANSFER; ASSIGNMENT. Upon a transfer of Registrable
Securities by the holder thereof, the rights granted hereunder to the
holders of Registrable Securities may be transferred to such transferee.
15. AMENDMENT. Notwithstanding the provisions of the
Stockholders Agreement to which this Exhibit B is attached, this Exhibit B
may not be amended or modified without the prior written consent of holders
of more than 50% of the Registrable Securities. Any approval, action or
waiver of any provision contained in this Exhibit B shall require the prior
approval or consent of holders of more than 50% of the Registrable
Securities, and upon receiving such approval or consent, such approval,
action or waiver shall be binding upon all holders of Registrable
Securities; provided, that if any amendment is adverse to any holder of
Registrable Securities, the same must be approved by such holder.
<PAGE>
EXHIBIT 4.5
WARRANT TO PURCHASE COMMON STOCK OF
GMH HOLDINGS, INC.
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Exercise of Warrant . . . . . . . . . . . . . . 1
Section 2. Reservation of Shares . . . . . . . . . . . . . 2
Section 3. Adjustment of Shares. . . . . . . . . . . . . . 3
Section 4. Liquidation, Dissolution, Etc.. . . . . . . . . 5
Section 5. Representations and Warranties of the Company . 6
Section 6. Loss, Theft, Destruction or Mutilation. . . . . 8
Section 7. Shareholder's Rights. . . . . . . . . . . . . . 8
Section 8. Notices. . . . . . . . . . . . . . . . . . . . . 8
Section 9. Applicable Law . . . . . . . . . . . . . . . . . 9
Section 10. Binding Effect . . . . . . . . . . . . . . . . . 9
SIGNATURES
EXHIBIT A
<PAGE>
WARRANT TO PURCHASE COMMON STOCK OF
GMH HOLDINGS, INC.
THIS WARRANT AND THE SHARES OF CLASS A COMMON STOCK
ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES
LAWS OF ANY STATE, AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF
(i) RECEIPT BY GMH HOLDINGS, INC. (THE "COMPANY") OF AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION UNDER
SUCH SECURITIES LAWS IS NOT REQUIRED, OR (ii) REGISTRATION UNDER
SUCH SECURITIES LAWS, OR (iii) COMPLIANCE WITH RULE 144 OF THE
SECURITIES ACT OF 1933 AS AMENDED.
THIS WARRANT AND THE SHARES OF CLASS A COMMON STOCK
ISSUABLE UPON THE EXERCISE HEREOF ARE SUBJECT TO THE TERMS OF A
STOCKHOLDERS' AGREEMENT DATED AS OF THE DATE HEREOF BY AND AMONG
THE COMPANY, ITS STOCKHOLDERS AND WARRANTHOLDERS, WHICH
AGREEMENT, INTERALIA, RESTRICTS THE TRANSFER OF THIS WARRANT AND
THE SHARES OF CLASS A COMMON STOCK ISSUABLE UPON THE EXERCISE
HEREOF.
This is to certify, that, FOR VALUE RECEIVED, EILEEN V.
AUSTEN, her successors and assigns ("Holder") is entitled to
purchase from the Company pursuant to this Warrant, 54,687 shares
of Class A Common Stock of the Company ("Shares") for a purchase
price of $.01 per Share, provided that any rights pursuant to
this Warrant must be exercised on or before December 21, 2003.
Section 1. Exercise of Warrant. This Warrant may be
exercised by the Holder hereof as to the whole or any part of
shares of Class A Common Stock covered hereby and may be
exercised upon thirty (30) days' prior written notice, sent by
certified mail, return receipt requested, to the Company in the
form of subscription attached hereto as Exhibit A duly executed
by the Holder. Upon payment of the purchase price by the Holder
either in cash or check payable to the order of the Company and
presentation and surrender of this Warrant, the Company shall
deliver a certificate or certificates representing all Shares
issued to the Holder pursuant to this Warrant in accordance with
the instructions of the Holder. The Shares have not been
registered under the Securities Act of 1933, as amended or under
the securities laws of any state, and may not be transferred in
the absence of (i) receipt of an opinion of counsel satisfactory
to the Company that registration under such securities laws is
not required, or (ii) registration under such securities laws or
(iii) compliance with Rule 144 of the Securities Act of 1933, as
amended.
If this Warrant shall be exercised in respect of a part
only of the Shares covered hereby, the Holder shall be entitled
to receive a similar Warrant of like tenor and date covering the
number of Shares in respect of which this Warrant shall not have
been exercised. As used herein, the term "Warrant" shall include
any replacement Warrant or Warrants issued pursuant to this
paragraph.
Section 2. Reservation of Shares. The Company hereby
covenants and agrees that at all times during the term of this
Warrant, there shall be reserved for issuance out of its
authorized and unissued Class A Common Stock, the number of
shares as shall be required to be issued upon exercise of this
Warrant. The Company shall, from time to time, increase the
number of authorized shares of Class A Common Stock so as to
maintain the number of such shares required to be issued upon the
exercise of this Warrant.
Section 3. Adjustment of Shares. The Shares issuable
upon the exercise of this Warrant shall be subject to the
following adjustments:
(i) If at any time after the issuance and before
termination of all of the rights granted by this Warrant (either
by the exercise in full of the Warrant rights or by reason of the
passage of time), there shall be a subdivision, combination,
stock dividend, stock split or other distribution (except by
sale), or reclassification, or other change of the outstanding
shares of Class A Common Stock of the Company into a different
kind, or class of shares, stock dividends, stock splits or other
<PAGE>
distributions, then at the same time the Shares issuable upon the
exercise of this Warrant shall, on the date upon which such
change shall become effective, be changed into the equivalent
thereof (including price and number thereof) under the terms of
such subdivision, combination, stock dividend, stock split or
other distribution (except by sale for value) or reclassification
or other change.
(ii) If at any time after the issuance and before
termination of all of the rights granted by this Warrant (either
by the exercise in full of the Warrant rights or by reason of the
passage of time), the Company shall consolidate with or merge
into another corporation, the Holder hereof shall thereafter be
entitled upon the exercise hereof to purchase, with respect to
each Share purchasable hereunder, such securities of the
surviving corporation as the Holder would be entitled to receive
had it exercised this Warrant immediately prior to the effective
date of such consolidation or merger, without any change in, or
payment in addition to, the purchase price hereunder, and the
successor corporation shall take such steps in connection with
such consolidation or merger as may be necessary to assure that
all of the provisions of this Warrant shall thereafter be
applicable in relation to any securities or property, thereafter
deliverable upon the exercise of this Warrant. The Company shall
not effect any such consolidation or merger unless prior to the
consummation thereof, the successor corporation (if other than
the Company) resulting therefrom shall assume by written
instrument executed and mailed to the Holder hereof at the
address shown on the books of the Company, the obligation to
deliver to the Holder such stock, securities or property as in
accordance with the foregoing provisions the Holder shall be
entitled to purchase. A sale of all or substantially all of the
assets of the Company for consideration consisting primarily of
stock or securities shall be deemed a consolidation or merger for
the foregoing purposes.
(iii) The Company shall promptly give written notice
to the Holder of the happening of any event requiring an
adjustment of the number of Shares issuable upon the exercise of
this Warrant.
(iv) If at any time after the issuance and before
termination of all of the rights granted by this Warrant (either
by the exercise in full of the Warrant rights or by reason of the
passage of time) Class A Common Stock of the Company is sold for
a price which is less than One Dollar ($1.00) per share (such
price being hereinafter called "Lesser Price"), the Holder may
purchase the Shares subject to this Warrant at the Lesser Price,
and the number of Shares it may purchase shall be increased so
that a total investment of $546.87 may be made at the option of
the Holder.
(v) Notwithstanding any anti-dilution provisions
contained herein, such provisions shall not apply in the event of
any proposed offering for sale of the Company's common stock to
the public as provided for under the Securities Act of 1933, as
amended, and applicable state securities laws, nor shall a mere
increase in the authorized shares or the issuance of shares under
an employee fringe benefit or stock option plan or options or
warrants granted to the Company's directors result in a change in
<PAGE>
the price or number of Shares which may be acquired hereunder.
Section 4. Liquidation, Dissolution, Etc. In the
event that the liquidation or dissolution of the Company or the
winding up of the Company shall at any time be proposed, the
Company shall give the Holder at least thirty (30) days' prior
written notice stating the date on which such event is to take
place and the date as of which the holders of Class A Common
Stock shall be entitled to exchange their Class A Common Stock
for securities or other property, deliverable upon such
liquidation, dissolution or winding up. During such thirty (30)
day period, the Holder may purchase the Shares issuable hereunder
and be entitled in respect of the Shares so purchased to all of
the rights of the holders of Class A Common Stock of the Company
in proportion to the Holder's ownership interest after such
purchase. If the Warrant is not exercised prior to the expira-
tion of that thirty (30) day period, it shall be void, and no
right shall exist hereunder.
Section 5. Representations and Warranties of the
Company. The Company hereby represents and warrants as follows:
(i) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Delaware and has all requisite corporate power and authority
to own and operate its properties and to carry on its business.
(ii) The Company's entire authorized capital consists
of (A) 8,000,000 shares of Series A Redeemable Preferred Stock,
$.001 par value, all of which shares will be issued and
outstanding immediately following the Closing on the date hereof,
(B) 2,150,000 shares of Series B Convertible Preferred Stock,
$.001 par value, all of which shares will be issued and
outstanding immediately following the Closing on the date hereof,
(C) 4,375,000 shares of Class A Common Stock, $.001 par value,
1,656,250 of which shares will be issued and outstanding
immediately following the Closing on the date hereof, (D) 787,500
shares of Class B Common Stock, $.001 par value, none of which
shares will be issued and outstanding immediately following the
Closing on the date hereof, and (E) 2,150,000 shares of Class C
Common Stock, $.001 par value, none of which shares shall be
issued and outstanding immediately following the Closing on the
date hereof.
(iii) The execution and delivery of this Warrant, and
the issuance and delivery of the shares of Class A Common Stock
of the Company upon the exercise hereof, have been duly
authorized by all such proper corporate proceedings as may be
necessary, and will not contravene or constitute a default under
or with respect to any provision of applicable law or regulation
or of the Company's Certificate of Incorporation or By-laws, each
as amended, or of any agreement or other instrument binding upon
or related to the Company, and constitutes the legal, valid and
binding obligation of the Company enforceable against the Company
in accordance with its terms.
(iv) All shares of Class A Common Stock of the
Company which may be delivered upon the exercise of this Warrant
will, upon delivery, be free from all taxes, liens and charges
with respect to the purchase thereof, and such shares of Class A
<PAGE>
Common Stock will, upon payment of the purchase price hereunder,
be duly authorized, validly issued, fully paid and
non-assessable.
(v) All representations and warranties shall survive
the execution hereof.
Section 6. Loss, Theft, Destruction or Mutilation.
Upon receipt by the Company of evidence satisfactory to it of the
ownership and the loss, theft, destruction or mutilation of this
Warrant, the Company will execute and deliver in lieu thereof a
new Warrant containing the same terms and conditions.
Section 7. Shareholder's Rights. Except as otherwise
set forth in the Stockholders' Agreement dated as of the date
hereof by and among the Company, its stockholders and its
warrantholders, until the valid exercise of this Warrant, the
Holder hereof shall not be entitled to any rights of a
stockholder of the Company with respect to any shares purchasable
hereunder; immediately upon the exercise of this Warrant and upon
payment of the purchase price as provided herein, the Holder
hereof shall be deemed a record holder of Class A Common Stock of
the Company with respect to the shares purchased hereunder.
Section 8. Notices. Any notice authorized by this
Agreement to be given or made shall be sufficiently given or made
if delivered in person or if sent by registered or certified
mail, return receipt requested, postage prepaid, as follows:
To the Holder:
c/o Larkspur Capital Corporation
445 Park Avenue
New York, New York 10022
To the Company:
GMH Holdings, Inc.
369 Franklin Street
Buffalo, New York 14202
Attn: Gary M. Brost
Section 9. Applicable Law. This Warrant shall be
governed and construed in accordance with the laws of the State
of Delaware.
Section 10. Binding Effect. This Warrant shall be
binding upon and inure to the benefit of the parties and their
respective successors, assigns, heirs and personal
representatives.
IN WITNESS WHEREOF, this Warrant has been duly executed
by the parties hereto as of the 21st day of December, 1995.
GMH HOLDINGS, INC.
By: /s/ Gary M. Brost
Gary M. Brost
President
<PAGE>
EXHIBIT A
GMH Holdings, Inc.
369 Franklin Street
Buffalo, New York 14202
Attention: President
Gentlemen:
This letter constitutes an offer to GMH Holdings, Inc.
for the following:
_____________________________________________________
("Holder") agrees to subscribe for ________ shares of the Class A
Common Stock of the Company ("Stock") for a purchase price of
$.01 per share. The total issue price for the Stock is to be
$_____________. The Holder shall pay the price in full upon
tender of a certificate or certificates representing the Stock.
Very truly yours,
By:____________________
Name:
Accepted:
GMH HOLDINGS, INC.
By:____________________
<PAGE>
EXHIBIT 4.8
WARRANT TO PURCHASE COMMON STOCK OF
GMH HOLDINGS, INC.
<PAGE>
TABLE OF CONTENTS
PAGE
Section 1. Exercise of Warrant............................ 1
Section 2. Reservation of Shares.......................... 2
Section 3. Adjustment of Shares........................... 3
Section 4. Liquidation, Dissolution, Etc.................. 5
Section 5. Representations and Warranties of the Company.. 6
Section 6. Loss, Theft, Destruction or Mutilation......... 8
Section 7. Shareholder's Rights........................... 8
Section 8. Notices........................................ 8
Section 9. Applicable Law................................. 9
Section 10. Binding Effect................................. 9
SIGNATURES
EXHIBIT A
<PAGE>
WARRANT TO PURCHASE COMMON STOCK OF
GMH HOLDINGS, INC.
THIS WARRANT AND THE SHARES OF CLASS A COMMON STOCK ISSUABLE UPON THE
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE TRANSFERRED
IN THE ABSENCE OF (i) RECEIPT BY GMH HOLDINGS, INC. (THE "COMPANY") OF AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION UNDER SUCH
SECURITIES LAWS IS NOT REQUIRED, OR (ii) REGISTRATION UNDER SUCH SECURITIES
LAWS, OR (iii) COMPLIANCE WITH RULE 144 OF THE SECURITIES ACT OF 1933 AS
AMENDED.
THIS WARRANT AND THE SHARES OF CLASS A COMMON STOCK ISSUABLE UPON THE
EXERCISE HEREOF ARE SUBJECT TO THE TERMS OF A STOCKHOLDERS' AGREEMENT DATED AS
OF THE DATE HEREOF BY AND AMONG THE COMPANY, ITS STOCKHOLDERS AND
WARRANTHOLDERS, WHICH AGREEMENT, INTERALIA, RESTRICTS THE TRANSFER OF THIS
WARRANT AND THE SHARES OF CLASS A COMMON STOCK ISSUABLE UPON THE EXERCISE
HEREOF.
This is to certify, that, FOR VALUE RECEIVED, ROBERT C. MAYER, JR.,
his successors and assigns ("Holder") is entitled to purchase from the Company
pursuant to this Warrant, 54,688 shares of Class A Common Stock of the Company
("Shares") for a purchase price of $.01 per Share, provided that any rights
pursuant to this Warrant must be exercised on or before December 21, 2003.
Section 1. EXERCISE OF WARRANT. This Warrant may be exercised by the
Holder hereof as to the whole or any part of shares of Class A Common Stock
covered hereby and may be exercised upon thirty (30) days' prior written notice,
sent by certified mail, return receipt requested, to the Company in the form of
subscription attached hereto as Exhibit A duly executed by the Holder. Upon
payment of the purchase price by the Holder either in cash or check payable to
the order of the Company and
<PAGE>
presentation and surrender of this Warrant, the Company shall deliver a
certificate or certificates representing all Shares issued to the Holder
pursuant to this Warrant in accordance with the instructions of the Holder. The
Shares have not been registered under the Securities Act of 1933, as amended or
under the securities laws of any state, and may not be transferred in the
absence of (i) receipt of an opinion of counsel satisfactory to the Company that
registration under such securities laws is not required, or (ii) registration
under such securities laws or (iii) compliance with Rule 144 of the Securities
Act of 1933, as amended.
If this Warrant shall be exercised in respect of a part only of the
Shares covered hereby, the Holder shall be entitled to receive a similar Warrant
of like tenor and date covering the number of Shares in respect of which this
Warrant shall not have been exercised. As used herein, the term "Warrant" shall
include any replacement Warrant or Warrants issued pursuant to this paragraph.
Section 2. RESERVATION OF SHARES. The Company hereby covenants and
agrees that at all times during the term of this Warrant, there shall be
reserved for issuance out of its authorized and unissued Class A Common Stock,
the number of shares as shall be required to be issued upon exercise of this
Warrant. The Company shall, from time to time, increase the number of authorized
shares of Class A Common Stock so as to maintain the number of such shares
required to be issued upon the exercise of this Warrant.
Section 3. ADJUSTMENT OF SHARES. The Shares issuable upon the exercise
of this Warrant shall be subject to the following adjustments:
(i) If at any time after the issuance and before termination of all of
the rights granted by this Warrant (either by the exercise in full of the
Warrant rights or by reason of the passage of time), there shall be a
subdivision, combination, stock dividend, stock split or other distribution
(except by sale), or reclassification, or other change of the outstanding shares
of Class A Common Stock of the Company into a different
<PAGE>
kind, or class of shares, stock dividends, stock splits or other distributions,
then at the same time the Shares issuable upon the exercise of this Warrant
shall, on the date upon which such change shall become effective, be changed
into the equivalent thereof (including price and number thereof) under the terms
of such subdivision, combination, stock dividend, stock split or other
distribution (except by sale for value) or reclassification or other change.
(ii) If at any time after the issuance and before termination of all
of the rights granted by this Warrant (either by the exercise in full of the
Warrant rights or by reason of the passage of time), the Company shall
consolidate with or merge into another corporation, the Holder hereof shall
thereafter be entitled upon the exercise hereof to purchase, with respect to
each Share purchasable hereunder, such securities of the surviving corporation
as the Holder would be entitled to receive had it exercised this Warrant
immediately prior to the effective date of such consolidation or merger, without
any change in, or payment in addition to, the purchase price hereunder, and the
successor corporation shall take such steps in connection with such
consolidation or merger as may be necessary to assure that all of the provisions
of this Warrant shall thereafter be applicable in relation to any securities or
property, thereafter deliverable upon the exercise of this Warrant. The Company
shall not effect any such consolidation or merger unless prior to the
consummation thereof, the successor corporation (if other than the Company)
resulting therefrom shall assume by written instrument executed and mailed to
the Holder hereof at the address shown on the books of the Company, the
obligation to deliver to the Holder such stock, securities or property as in
accordance with the foregoing provisions the Holder shall be entitled to
purchase. A sale of all or substantially all of the assets of the Company for
consideration consisting primarily of stock or securities shall be deemed a
consolidation or merger for the foregoing purposes.
<PAGE>
(iii) The Company shall promptly give written notice to the Holder of
the happening of any event requiring an adjustment of the number of Shares
issuable upon the exercise of this Warrant.
(iv) If at any time after the issuance and before termination of all
of the rights granted by this Warrant (either by the exercise in full of the
Warrant rights or by reason of the passage of time) Class A Common Stock of the
Company is sold for a price which is less than One Dollar ($1.00) per share
(such price being hereinafter called "Lesser Price"), the Holder may purchase
the Shares subject to this Warrant at the Lesser Price, and the number of Shares
it may purchase shall be increased so that a total investment of $546.88 may be
made at the option of the Holder.
(v) Notwithstanding any anti-dilution provisions contained herein,
such provisions shall not apply in the event of any proposed offering for sale
of the Company's common stock to the public as provided for under the Securities
Act of 1933, as amended, and applicable state securities laws, nor shall a mere
increase in the authorized shares or the issuance of shares under an employee
fringe benefit or stock option plan or options or warrants granted to the
Company's directors result in a change in the price or number of Shares which
may be acquired hereunder.
Section 4. LIQUIDATION, DISSOLUTION, ETC. In the event that the
liquidation or dissolution of the Company or the winding up of the Company shall
at any time be proposed, the Company shall give the Holder at least thirty (30)
days' prior written notice stating the date on which such event is to take place
and the date as of which the holders of Class A Common Stock shall be entitled
to exchange their Class A Common Stock for securities or other property,
deliverable upon such liquidation, dissolution or winding up. During such thirty
(30) day period, the Holder may purchase the Shares issuable hereunder and be
entitled in respect of the Shares so purchased to all of the rights of the
holders of Class A Common Stock of the Company in proportion to the Holder's
ownership
<PAGE>
interest after such purchase. If the Warrant is not exercised prior to the
expiration of that thirty (30) day period, it shall be void, and no right shall
exist hereunder.
Section 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants as follows:
(i) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to own and operate its properties and to carry on
its business.
(ii) The Company's entire authorized capital consists of (A) 8,000,000
shares of Series A Redeemable Preferred Stock, $.001 par value, all of which
shares will be issued and outstanding immediately following the Closing on the
date hereof, (B) 2,150,000 shares of Series B Convertible Preferred Stock, $.001
par value, all of which shares will be issued and outstanding immediately
following the Closing on the date hereof, (C) 4,375,000 shares of Class A Common
Stock, $.001 par value, 1,656,250 of which shares will be issued and outstanding
immediately following the Closing on the date hereof, (D) 787,500 shares of
Class B Common Stock, $.001 par value, none of which shares will be issued and
outstanding immediately following the Closing on the date hereof, and (E)
2,150,000 shares of Class C Common Stock, $.001 par value, none of which shares
shall be issued and outstanding immediately following the Closing on the date
hereof.
(iii) The execution and delivery of this Warrant, and the issuance and
delivery of the shares of Class A Common Stock of the Company upon the exercise
hereof, have been duly authorized by all such proper corporate proceedings as
may be necessary, and will not contravene or constitute a default under or with
respect to any provision of applicable law or regulation or of the Company's
Certificate of Incorporation or By-laws, each as amended, or of any agreement or
other instrument binding
<PAGE>
upon or related to the Company, and constitutes the
legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms.
(iv) All shares of Class A Common Stock of the Company which may be
delivered upon the exercise of this Warrant will, upon delivery, be free from
all taxes, liens and charges with respect to the purchase thereof, and such
shares of Class A Common Stock will, upon payment of the purchase price
hereunder, be duly authorized, validly issued, fully paid and non-assessable.
(v) All representations and warranties shall survive the
execution hereof.
Section 6. LOSS, THEFT, DESTRUCTION OR MUTILATION. Upon receipt by the
Company of evidence satisfactory to it of the ownership and the loss, theft,
destruction or mutilation of this Warrant, the Company will execute and deliver
in lieu thereof a new Warrant containing the same terms and conditions.
Section 7. SHAREHOLDER'S RIGHTS. Except as otherwise set forth in the
Stockholders' Agreement dated as of the date hereof by and among the Company,
its stockholders and its warrantholders, until the valid exercise of this
Warrant, the Holder hereof shall not be entitled to any rights of a stockholder
of the Company with respect to any shares purchasable hereunder; immediately
upon the exercise of this Warrant and upon payment of the purchase price as
provided herein, the Holder hereof shall be deemed a record holder of Class A
Common Stock of the Company with respect to the shares purchased hereunder.
Section 8. NOTICES. Any notice authorized by this Agreement to be
given or made shall be sufficiently given or made if delivered in person or if
sent by registered or certified mail, return receipt requested, postage prepaid,
as follows:
To the Holder:
<PAGE>
c/o Larkspur Capital Corporation
445 Park Avenue
New York, New York 10022
To the Company:
GMH Holdings, Inc.
369 Franklin Street
Buffalo, New York 14202
Attn: Gary M. Brost
Section 9. APPLICABLE LAW. This Warrant shall be governed and
construed in accordance with the laws of the State of Delaware.
Section 10. BINDING EFFECT. This Warrant shall be binding upon
and inure to the benefit of the parties and their respective successors,
assigns, heirs and personal representatives.
IN WITNESS WHEREOF, this Warrant has been duly executed by the
parties hereto as of the 21st day of December, 1995.
GMH HOLDINGS, INC.
By: /S/ GARY M. BROST
Gary M. Brost
President
<PAGE>
EXHIBIT A
GMH Holdings, Inc.
369 Franklin Street
Buffalo, New York 14202
Attention: President
Gentlemen:
This letter constitutes an offer to GMH Holdings, Inc. for the
following:
_____________________________________________________ ("Holder")
agrees to subscribe for ________ shares of the Class A Common Stock of the
Company ("Stock") for a purchase price of $.01 per share. The total issue
price for the Stock is to be $_____________. The Holder shall pay the
price in full upon tender of a certificate or certificates representing the
Stock.
Very truly yours,
By:____________________
Name:
Accepted:
GMH HOLDINGS, INC.
By:____________________
<PAGE>
EXHIBIT 4.9
======================================
GMH HOLDINGS, INC.
INVESTORS' RIGHTS AGREEMENT
December 21, 1995
======================================
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1
PUT/CALL
1.1 Put Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Repurchase Rights. . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2
BULLDOG OPTION
2.1 Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3
MISCELLANEOUS
3.1 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 Successors and Assigns; Assignment of Rights . . . . . . . . . 4
3.3 Entire Agreement; Amendment; Waiver. . . . . . . . . . . . . . 4
3.4 Notices, etc.. . . . . . . . . . . . . . . . . . . . . . . . . 4
3.5 Delays or Omissions. . . . . . . . . . . . . . . . . . . . . . 4
3.6 Rights; Separability . . . . . . . . . . . . . . . . . . . . . .5
3.7 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . .5
3.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . .5
3.9 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . .5
3.10 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
3.11 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . .5
<PAGE>
GMH HOLDINGS, INC.
INVESTORS' RIGHTS AGREEMENT
This Investors' Rights Agreement (this "Agreement") is
made and entered into as of the 21st day of December, 1995, by
and among GMH HOLDINGS, INC., a Delaware corporation (the
"Company"), the persons identified on Exhibit A attached hereto
(the "Purchasers"), BULLDOG HOLDINGS LLC, a New York limited
liability company ("Bulldog") and THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES (the "Equitable").
WHEREAS, the Purchasers are parties to the Securities
Purchase Agreement dated as of the date hereof between the
Company, General Manufactured Housing, Inc. and the Purchasers
(the "Series A Agreement"), certain of the Company's and such
Purchasers' obligations under which are conditioned upon the
execution and delivery by such Purchasers, Bulldog, Equitable and
the Company of this Agreement;
For purposes of Section 1.1, 1.2(c) and 3 of this
Agreement only, Equitable shall be deemed to be a Purchaser.
NOW, THEREFORE, in consideration of the mutual promises
and covenants set forth herein, the parties hereto agree as
follows:
SECTION 1
PUT/CALL
1.1 Put Rights. (a) At any time, and from time to
time, commencing December 30, 2003, a Purchaser may, by notice to
the Company and to the other Purchasers (a "Put Notice") elect to
require the Company (subject to the conditions set forth below),
to purchase (a "Put") all of the Common Stock and Series B Shares
owned by such Purchaser at a price equal to the Fair Market Value
(as defined below) determined as of the date of the Put Notice,
and the Company, subject to the conditions set forth below, shall
thereupon become obligated to purchase all of such Common Stock
and Series B Stock at the Fair Market Value. In the event that
the Fair Market Value is less than the price at which such
Purchaser is willing to Put such Common Stock and Series B Shares
then, within 30 days after the date of the determination of Fair
Market Value, the Purchaser may withdraw such Put Notice and the
obligations of the Purchaser and the Company pursuant to this
Section 1.1 with respect to such Put shall be terminated. During
the thirty (30) day period following the delivery of any Put
Notice, each Purchaser shall have the right to exercise a Put on
equal priority with the Purchaser who delivered the Put Notice
initiating such process with respect to all Common Stock and
Series B Shares owned by such Purchaser.
(b) The Company's obligations with respect to a
Put(s) shall be limited to the extent of its funds legally
available for the purchase of capital stock of the Company. In
the event that the Company is so limited in its ability to
fulfill any Put, the Company will use its reasonable efforts to
<PAGE>
arrange financing on commercially reasonable terms and conditions
in an amount sufficient to enable it to fulfill its obligations
in respect of all Common Stock and Series B Shares Put by
Purchasers during the 30 day period following delivery of the
initiating Put Notice. If, notwithstanding such efforts, after a
period of 90 days following the determination of Fair Market
Value as of the date of the initiating Put Notice, the Company is
unable to acquire for cash all of the Common Stock and Series B
Shares which have been Put, then the Company shall issue to each
Purchaser who has Put Common Stock and Series B Shares a
Promissory Note of the Company in the original principal amount
equal to the Fair Market Value of the Common Stock and Series B
Shares so Put which the Company is unable to acquire for cash
(prorating the cash to be paid and principal amount of Promissory
Notes to be delivered based upon the number of shares (calculated
on an as converted and/or as exercised basis) Put by each
Purchaser as compared to the total number of shares Put by all
Purchasers). Any such promissory note shall bear interest at the
rate per annum equal to the then prevailing rate for three year
U.S. Treasury obligations plus 500 basis points on the
outstanding principal amount thereof, shall be mandatorily
prepayable out of excess cash flow of the Company and its
subsidiaries on a consolidation basis, and shall mature on the
third anniversary of the Put Notice applicable thereto. Such
Promissory Note shall contain such subordination provisions as
the Company's senior lenders shall reasonably request. The
Promissory Note shall be secured by a pledge of the securities
with respect to which the Put has been exercised. The Promissory
Note shall be substantially in the form of Exhibit I attached to
this Agreement. The securities pledged to secure the Promissory
Note shall be endorsed in blank, together with assignments
separate from certificates, which are undated and have been
executed by the Company, and shall be delivered to the Purchaser,
together with a pledge agreement executed by the Company in
substantially the form of Exhibit II attached to this Agreement
and the Promissory Note, at the Closing of such Put.
(c) The closing of any Put transaction shall take
place on a date (such date to be as soon as practicable after the
Valuation has been delivered) and at the offices of the Company.
The Company, will pay for the Common Stock and Series B Shares to
be purchased pursuant to a Put by wire transfer to the Purchaser
to the extent provided above, and, if required pursuant to
subparagraph (b) above by delivery of a Promissory Note duly
executed by the Company. The Company, will be entitled to
receive customary representations and warranties from the
Purchaser regarding the sale of the Common Stock and Series B
Shares including a representation that the Purchaser has good and
marketable title to the Common Stock and Series B Shares to be
transferred free and clear of all liens, claims and other
encumbrances.
(d) As used herein, the following terms shall
have the following respective meanings:
Entity Fair Market Value shall mean the fair
market value of the Company and its Subsidiaries
considered as one entity (as established pursuant
to a Valuation), in the event of a sale of the
Company and its Subsidiaries pursuant to an active
<PAGE>
marketing process, less any indebtedness of the
Company and its Subsidiaries for borrowed money.
Fair Market Value of a share of Common Stock
shall mean the Entity Fair Market Value divided by
the total number of issued and outstanding shares
of Common Stock of the Company on a fully diluted
basis (including the conversion of all securities
convertible into Common Stock and the exercise of
all warrants which are exercisable into Common
Stock). Fair Market Value of a Series B Share
shall mean the Fair Market Value of a share of
Common Stock multiplied by the number of shares of
Common Stock into which such Series B Share is
then convertible.
"Valuation" shall mean with respect to Entity
Fair Market Value, the agreement of the Company
and the applicable Purchaser(s), or if the Company
and such Purchaser(s) are unable to agree within
30 days after delivery of the Put Notice, the
opinion of an investment banking firm of national
standing designated by mutual agreement of the
Company and the Purchaser. The costs of
conducting the Valuation shall be borne equally by
the applicable Purchaser and the Company.
1.2 Repurchase Rights. (a) At any time commencing
December 30, 2004, the Company may, by notice to the Purchasers
(a "Call Notice"), elect to purchase (a "Call") all of the
Purchasers' Common Stock and Series B Shares at a price equal to
the Fair Market Value thereof, determined as of the date of the
Call Notice. The Call Notice will set forth the time and place
for the closing of the transaction.
(b) At any time commencing December 30, 2004, the
Company may, by a Call Notice to Equitable, elect to Call of
Equitable's Common Stock and Warrants at a price equal to the
Fair Market Value thereof, determined as of the date of the Call
Notice. The Call Notice will set forth the time and place for
the closing of the transaction.
(c) The closing of the transactions contemplated
by this Section 1.2 shall take place on the date and at the place
designated by the Company in the Call Notice which date shall not
be more than 90 days after the delivery of such notice. The
Company will pay for the Common Stock and Series B Shares to be
purchased pursuant to a Call in cash by wire transfer payable to
the holder of such Common Stock and Series B Shares. The Company
will be entitled to receive customary representations and
warranties from each Purchaser regarding the sale of the Common
Stock and Series B Shares, including but not limited to the
representation that the Purchaser has good and marketable title
to the Common Stock and Series B Shares to be transferred free
and clear of all liens, claims and other encumbrances.
SECTION 2
BULLDOG OPTION
<PAGE>
2.1 Option. On each dividend payment date with
respect to the Series A Shares (and whether or not any dividend
in respect of the Series A Shares is earned or declared), in the
event that there is an aggregate amount of accrued and unpaid
dividends in respect of the Series A Shares in excess of
$500,000, then Bulldog shall grant to each Purchaser an option to
purchase such Purchaser's pro rata share (as defined below) of
that number of Series B Shares (adjusted for any combinations,
consolidations, stock splits, or stock distributions or dividends
with respect to such shares) (the "Option Shares") owned by
Bulldog as equals .21875 times the difference between (a) the
aggregate amount of accrued and unpaid dividends in respect of
all Series A Shares minus (b) the greater of (x) $500,000 and (y)
the lowest aggregate amount of accrued and unpaid dividends
outstanding in respect of all Series A Shares since the
immediately preceding dividend payment date (or, if Bulldog has
converted some or all of the Series B Shares such that it owns an
insufficient number of Series B Shares to satisfy such option,
then such option shall be for such number of shares of Common
Stock as such number of Option Shares would then convert into at
the then applicable Series B Conversion Price); provided that the
maximum number of Option Shares as to which the Purchasers may be
granted options hereunder shall be that number of Option Shares
as shall represent ten percent (10%) of the Company's Common
Stock on a fully-diluted basis. The option exercise price per
share with respect to any such option shall equal $2.2857 per
share (as adjusted for combinations, consolidations or stock
distributions or dividends with respect to such shares) and the
term of each such option shall be eight years from the date of
grant of such option. Each option may be exercised in whole or
in part provided that options shall be exercised in amounts no
less than the lesser of (i) $10,000 in aggregate exercise price
and (ii) the total dollar amount in exercise price of all
unexercised options held by such optionee. If prior to exercise
of any option granted pursuant to this Section, the Company pays
dividends in respect of the Series A Shares such that the
aggregate amount of accrued and unpaid dividends in respect of
all Series A Shares is less than $500,000, then one-half of the
unexercised options which are then held by such optionee (but
excluding any options which have previously been outstanding at
any time when the aggregate amount of accrued and unpaid
dividends on all Series A Shares is less than $500,000) shall
expire and be of no further force or effect. A Purchaser's pro
rata share shall be that percentage which expresses the ratio
between the number of shares of Common Stock owned by such
Purchaser and the aggregate number of shares of Common Stock
owned by all such Purchasers.
SECTION 3
MISCELLANEOUS
3.1 Governing Law. This Agreement shall be governed
in all respects by the laws of the State of Delaware, as applied
to agreements among Delaware residents entered into and to be
performed entirely within Delaware.
3.2 Successors and Assigns; Assignment of Rights. The
<PAGE>
rights and benefits of a Purchaser hereunder (including such
Purchaser's rights and benefits under Section 1.1 hereof) may be
assigned to a transferee or assignee in connection with transfer
or assignment of any Series A Shares owned by such Purchaser (A)
to any person or entity which is a majority-owned subsidiary of a
Purchaser or controls, is controlled by or under common control
with the Purchaser, (B) to any other person or entity provided
that (a) such transfer may otherwise be effected in accordance
with applicable securities laws, (b) such transferee or assignee
acquires at least 160,000 Series A Shares and (c) such assignee
or transferee executes a written instrument agreeing to be bound
by the terms and provisions of this Agreement, (C) to a
constituent partner of a Purchaser, a trust (including
liquidating trusts for the benefit of such a partner or partners)
or the estate of such a constituent partner, and (D) to a
successor trustee of a Purchaser in its capacity as trustee.
Any such transfer or assignment permitted hereby shall inure to
the benefit of, and be binding upon, the successors, assigns,
heirs, executors and administrators of the parties hereto.
3.3 Entire Agreement; Amendment; Waiver. This
Agreement, the Series A Agreement and the other agreements
contemplated thereby constitute the full and entire understanding
and agreement between the parties with regard to the subjects
hereof and thereof. Neither this Agreement nor any term hereof
may be amended, waived, discharged or terminated, except by a
written instrument signed by the Company and the holders of at
least sixty six and 2/3 percent (66-2/3%) of the Series A Shares
and any such amendment, waiver, discharge or termination shall be
binding upon all the parties hereto, but in no event shall the
obligation of any party hereto be materially increased, except
upon the written consent of such party.
3.4 Notices, etc. All notices and other
communications required or permitted hereunder shall be in
writing and shall be mailed by United States first-class mail,
postage prepaid, sent by -facsimile or delivered personally by
hand or nationally recognized courier addressed (a) if to a
Purchaser, as indicated on the list of Purchasers attached hereto
as Exhibit A, or at such other address as such Purchaser or
permitted assignee shall have furnished to the Company in
writing, (b) if to Bulldog to Strategic Investments & Holdings,
Inc., Cyclorama Building, 369 Franklin Street, Buffalo, New York
14202; Attention: Gary M. Brost or at such other address as shall
have furnished to the Company in writing, or (c) if to the
Company, at such address or facsimile number as the Company shall
have furnished to each Purchaser in writing. All such notices
and other written communications shall be effective on the date
of mailing, facsimile transfer or delivery.
3.5 Delays or Omissions. No delay or omission to
exercise any right, power or remedy accruing to any Purchaser (in
any capacity hereunder), upon any breach or default of the
Company under this Agreement shall impair any such right, power
or remedy of such Purchaser nor shall it be construed to be a
waiver of any such breach or default, or an acquiescence therein,
or of or in any similar breach or default be deemed a waiver of
any other breach or default theretofore or thereafter occurring.
Any waiver, permit, consent or approval of any kind or character
on the part of any Purchaser (in any capacity hereunder) of any
<PAGE>
breach or default under this Agreement or any waiver on the part
of any Purchaser of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies,
either under this Agreement or by law or otherwise afforded to
any Purchaser, shall be cumulative and not alternative.
3.6 Rights; Separability. Unless otherwise expressly
provided herein, a Purchaser's rights hereunder are several
rights, not rights jointly held with any of the other Purchaser.
In case any provision of the Agreement 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.
3.7 Titles and Subtitles. The titles of the
paragraphs and subparagraphs of this Agreement are for
convenience of reference only and are not to be considered in
construing or interpreting this Agreement.
3.8 Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be an original,
but all of which together shall constitute one instrument.
3.9 No Third Party Beneficiaries. The covenants and
agreements set forth herein are for the sole and exclusive
benefit of the parties hereto and their respective successors and
assigns and such covenants and agreements shall not be construed
as conferring, and are not intended to confer, any rights or
benefits upon any other persons.
3.10 Remedies. The parties to this Agreement
acknowledge and agree that a breach of any of the covenants of
the Company, the Purchasers or Bulldog set forth in this
Agreement may not be compensable by payment of money damages and,
therefore, that the covenants of the foregoing parties set forth
in this Agreement may be enforced in equity by a decree requiring
specific performance. Without limiting the foregoing, if any
disputes arise concerning Section 1 hereof, the parties to this
Agreement agree that an injunction may be issued pending
resolution of such controversy. Such remedies shall be
cumulative and non-exclusive and shall be in addition to any
other rights and remedies the parties may have under this
Agreement. Any transfer or acquisition of Restricted Securities
in violation of this Agreement shall be null and void ab initio.
3.11 Definitions. As used in this Agreement, the
following definitions shall apply:
"Common Stock" shall mean, collectively, the
Company's Class A Common Stock, par value $0.001 per share, the
Company's Class C Common Stock, par value $0.001 per share,
including shares of Class C Common Stock issued or issuable upon
conversion of Series B Shares, and the Company's Class B Common
Stock, par value $0.001 per share, including shares of Class A or
Class B Common Stock issued or issuable upon exercise of the
warrants issued to Equitable on the date hereof.
"Series A Shares" shall mean the Company's Series
A Redeemable Preferred Stock, par value $0.001 per share.
<PAGE>
"Series B Shares" shall mean the Company's Series
B Convertible Preferred Stock, par value $0.001 per share.
"Warrant" shall mean those certain warrants to
purchase Common Stock issued to Equitable on the date hereof
pursuant to that certain Note and Warrant Purchase Agreement
dated as of the date hereof among the Company, GMH Acquisition
Corp. and Equitable.
[Remainder of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this Investors' Rights Agreement effective as of the day and year
first above written.
THE COMPANY: GMH HOLDINGS, INC.
By: /s/ Gary M. Brost
Name: Gary M. Brost
Title: President
BULLDOG: BULLDOG HOLDINGS LLC
By: SIHI-GMH LLC
Its Managing Member
By: /s/ Gary M. Brost
Gary M. Brost
President
THE PURCHASERS: RFE INVESTMENT PARTNERS V, L.P.
By: RFE ASSOCIATES V, L.P.,
Its General Partner
By: /s/ [illegible]
A General Partner
STERLING COMMERCIAL CAPITAL, INC.
By: /s/ Harvey Rosenblatt
Harvey Rosenblatt,
Executive Vice President
State Treasurer of the State of
Michigan, Custodian of the Michigan
Public School Employees' Retirement
System, State Employees' Retirement
System, Michigan State Police
<PAGE>
Retirement System, and Michigan
Judges Retirement System
By: /s/ Paul E. Rice
Name: Paul E. Rice
Title: Administrator, Alternative
Investments Division
EQUITABLE: THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
By: /s/ [illegible]
Investment Officer
<PAGE>
Exhibit A
SCHEDULE OF PURCHASERS
Purchaser's Name and Address
RFE Investment Partners V, L.P.
36 Grove Street
New Canaan, CT 06840
State Treasurer of the
State of Michigan,
Custodian
430 West Allegan, 3rd Floor
Lansing, MI 48992
Sterling Commercial Capital, Inc.
175 Great Neck Road
Great Neck, NY 11021
<PAGE>
INVESTORS' RIGHTS AGREEMENT
EXHIBIT I
PROMISSORY NOTE
FOR VALUE RECEIVED, GMH Holdings, Inc., a Delaware
corporation (hereinafter called the "Company"), with offices at
__________________________________ hereby promises to pay to the
order of ______________________________________[name of person
exercising Put], a __________________________________________
("Payee"), at its office at
_____________________________________________________________
[address of Payee], or at such other office as it designates in
writing to the Company, the principal sum of
_____________________________ Dollars ($_____________), such
payment to be in such coin or currency of the United States of
<PAGE>
America as at the time of payment is legal tender for the payment
of public and private debts. The principal amount of this Note
shall be paid in three equal annual installments (or in three
installments as nearly equal as possible), one year, two years,
and three years from the initial issuance date of this Note.
This Note shall bear interest on the unpaid principal amount
hereof from time to time outstanding, payable every three months
from the initial issuance date of this Note, commencing on the
third month from the initial issuance date of this Note in like
money on the principal sum unpaid hereof, from the date hereof,
and upon payment of principal in full, at a rate per annum equal
to [Three year Treasury rate plus 500 basis points] per annum.
Payments of principal and/or interest shall be made at the office
of Payee. Notwithstanding the provisions of this Note, if the
rate of interest payable hereunder is limited by law, the rate
payable hereunder shall be the maximum rate permitted by law.
If, however, the Company pays any interest in excess of the
maximum rate of interest permitted by law, any interest so paid
which exceeds such maximum rate shall automatically be considered
a payment of principal and shall automatically be applied in
reduction of principal due on this Note to the extent of such
excess.
This Note may be prepaid in whole or in part by the
Company. In addition, in the event that at the end of any fiscal
year ending after the date hereof there shall exist "Excess Cash
Flow" (as defined below), then within ten (10) days after the
date upon which the Company's audited consolidated financial
statements with respect to such fiscal year become available, the
Company shall be required to pay to Payee, an amount equal to all
of such Excess Cash Flow. Notwithstanding anything to the
contrary contained in this Note, the Company shall (a) with
respect to any mandatory or permitted prepayment under this
paragraph, prepay this Note and other notes initially issued in
the same year as this Note by reason of the exercise of Put
rights given to holders of certain securities of the Company
pursuant to repurchase rights granted in an Investors' Rights
Agreement dated as of December __, 1995 (the "Investors' Rights
Agreement") between the Company and the Purchasers named therein
pro rata based on the relative aggregate principal amounts
thereof outstanding; and (b) prepay in full Notes issued in early
years by reason of the exercise of Put rights given to holders of
Company securities pursuant to the Investors' Rights Agreement
prior to prepayment of Notes issued in later years.
To secure payment of this Note and of any liability or
liabilities of the Company to the holder, due or to become due or
that may hereafter be contracted or existing, however acquired by
the holder, the Company hereby grants a security interest in and
shall deliver to the holder appropriate documentation, including
a Pledge Agreement of even date herewith, representing such
security interest, securities of the Company which the Company
has delivered to the Payee pursuant to the exercise by the Payee
of the Put option contained in the Investors' Rights Agreement.
Reference to any other agreement referred to in this
Note shall in no way impair the negotiability of this Note or the
absolute and unconditional obligation of the Company to pay both
principal and interest hereon as provided herein.
<PAGE>
In case of default in the payment of this Note or
breach of the obligations of the Company contained herein, the
holder shall have all rights given by the Uniform Commercial Code
in the property, assets and securities in which it has a security
interest. In addition, in the case of default in the payment of
this Note or a breach of the obligations of the Company contained
herein, the unpaid balance of the principal and interest due
hereunder shall be immediately due and payable without notice.
The waiver (which may only be by a written instrument) or the
remedying of any default in a reasonable manner shall not operate
as a waiver of the default remedied or any prior or subsequent
default. If any amount payable hereunder is not paid when due in
accordance with the terms hereof, the Company shall pay the
holder hereof all its reasonable costs and expenses of
collection, including but not limited to, its reasonable
attorneys' fees actually incurred.
Presentment for payment, demand, notice of dishonor,
protest and notice of protest are hereby waived.
This Note shall be governed and construed in accordance
with the laws of the State of New York applicable to contracts
made and to be performed wholly within such state.
For purposes of this Note, the following definitions
shall apply.
"Consolidated Net Income" for any period, shall mean
the consolidated net income (or deficit) of the Company and its
subsidiaries for such period, determined in accordance with GAAP,
excluding, however, any gains or losses from the sale or other
disposition of assets (other than sales of inventory in the
ordinary course of business) and any other non-cash extraordinary
or non-recurring gains or losses.
"Excess Cash Flow" for any period, shall mean an amount
equal to the sum of (i) Consolidated Net Income for such period,
plus (ii) an amount equal to the amount of depreciation expense,
depletion expense, non-cash amortization expense (including the
amortization of goodwill), accrued non-cash interest expense and
all other non-cash charges deducted in arriving at such net
income, minus (iii) an amount equal to the amount of capital
expenditures actually incurred by the Company during such period
(up to a maximum amount of $500,000 in any year).
<PAGE>
IN WITNESS WHEREOF, GMH Holdings, Inc. has caused this
Note to be duly executed and delivered in its corporate name by
its officers duly authorized on this _____ day of
_______________________, 199__.
GMH HOLDINGS, INC.
By:______________________________
Its:
ATTEST
_________________________________
Secretary
<PAGE>
INVESTORS' RIGHTS AGREEMENT
EXHIBIT II
PLEDGE AGREEMENT
THIS AGREEMENT is made as of _____________________,
199__, by and between ___________________________, and
__________________________ corporation ("Pledgor") and [ ]
("Pledgee").
The following is a recital of facts of facts underlying
this Agreement:
Pledgor has sold Common Stock, par value $.001 par
share ("Common Stock") to Pledgee pursuant to a Securities
Purchase Agreement dated as of December __, 1995, by and between
Pledgor, General Manufactured Housing, Inc. and the Purchasers
named therein (the "Purchase Agreement"). Pursuant to an
Investors' Rights Agreement dated as of December __, 1995 between
Pledgee, Pledgor, and certain other Purchasers named therein,
(the "Investors' Rights Agreement"), Pledgor granted to Pledgee
the right to put the Common Stock. Pledgee has exercised its put
rights pursuant to the Investors' Rights Agreement. In
connection with the put, the Pledgor is making payment by
delivering a promissory note in the principal amount of
_________________________________ Dollars ($ ) of even date
herewith (the "Note"). In order to secure payment of the Note
and all other sums due to Pledgee pursuant to the terms of the
Investors' Rights Agreement, Pledgor desires to pledge to Pledgee
its securities of the class and in the number being repurchased
as provided in Investors' Rights Agreement (the "Stock").
NOW, THEREFORE, the parties agree as follows:
1. Pledge. Pledgor pledges and herewith delivers to
Pledgee as security for payment of the Note and all other sums
due to Pledgee pursuant to the Investors' Rights Agreement, in
accordance with their respective terms, all the Stock and given
Pledgee a continuing lien upon the Stock as security therefor.
If Pledgor comes into default under the terms of the Note, and
fails to cure such default within any grace period specifically
provided in the Note, Pledgor authorizes Pledgee to sell all or
any portion of the Stock at public or private sale by completing
the endorsements and/or assignments in blank and to apply the
proceeds, after deducting all expenses of collection and sale
(including reasonable attorney fees) in payment of any and all
obligations of Pledgor evidenced by the Note. Pledgee shall have
all the rights and remedies provided under the Uniform Commercial
Code. Whenever any notice of sale is required to be given to
Pledgor, it shall be considered reasonable if such notice is
given at least (7) days prior to the date of such sale.
<PAGE>
Simultaneously with the execution hereof, Pledgor has delivered
the Stock to Pledgee, endorsed in blank, together with
assignments separate from certificates, which are undated and
have been executed by Pledgor.
2. Release of Collateral. When the Note and all sums
due to Pledgee pursuant to the Investors' Rights Agreement are
paid in full, Pledgee shall deliver the certificate(s)
representing the Stock and endorsements and/or assignments
separate from certificates to Pledgor.
3. Pledgee's Rights. So long as Pledgor is not in
default under the Note or terms of this Agreement, Pledgee shall
not have the right to receive any dividends payable with respect
to the Stock and Pledgee shall have no right to vote the Stock
except as provided in the Purchase Agreement. If, however, any
stock dividends or distributions of stock or other securities are
made on account of the Stock, then Pledgor shall promptly deliver
such stock or securities to Pledgee, endorsed in blank, together
with assignments separate from certificates, which are undated
and have been executed by Pledgor, whereupon such stock or
securities shall be subject to the terms of this Agreement and
shall be considered to be Stock as that term is used herein.
Upon the occurrence of any default under the Note Pledge may
exercise all voting rights incident to the Stock (which term
shall include any voting securities issued as a dividend and
distribution made thereon.)
4. Remedies Cumulative. Pledgee may pursue any and
all remedies in connection with the collateral pledged hereunder
notwithstanding the availability of other remedies, all such
remedies shall be cumulative and may be pursued simultaneously or
independently.
5. Notices. Any notices required or desired to be
given hereunder, shall be in writing and shall be considered
sufficiently given for all purposes if delivered by hand or sent
by registered or certified mail, to the parties hereto at the
address set forth below or such other address as they may direct
in writing by similar notice:
If to Pledgor:
[ ]
If to Pledgee:
[ ]
6. Miscellaenous. This Agreement is binding upon the
parties hereto and their successors and assigns. This Agreement
may only be amended by a writing signed by all of the parties
hereto and may be waived only by a writing signed by the party
charged with such waiver. This Agreement may be signed in more
than one counterpart, each of which shall be considered to be an
original, but all of which shall constitute one and the same
Agreement. This Agreement is government by and shall be
construed in accordance with the laws of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, the parties have executed and
delivered this Agreement as of the date first set forth above.
"PLEDGOR"
[ ]
By:________________________________
"PLEDGEE"
[ ]
___________________________________
<PAGE>
EXHIBIT 4.10
EXECUTION COPY
____________________________________________________________________________
____________________________________________________________________________
GMH HOLDINGS, INC.
COMMON STOCK PURCHASE WARRANT
Expiring December 21, 2002
This Warrant and any shares acquired upon the exercise of
this Warrant have not been registered under the Securities
Act of 1933 and may not be transferred in the absence of
such registration or an exemption therefrom under such Act.
This Warrant and such shares are also subject to certain
restrictions on transferability imposed by a certain
Stockholders' Agreement, a copy of which is on file at the
offices of the Company.
___________________________________________________________________________
___________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
1. Exercise of Warrant . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Manner of Exercise . . . . . . . . . . . . . . . . . . . . . . 1
1.2. When Exercise Deemed Effected. . . . . . . . . . . . . . . . . 2
1.3. Delivery of Stock Certificates, etc. . . . . . . . . . . . . . 2
1.4. Company to Reaffirm Obligations. . . . . . . . . . . . . . . . 2
1.5. Payment by Application of the Notes. . . . . . . . . . . . . . 3
2. Adjustments; Dividends. . . . . . . . . . . . . . . . . . . . . . . 3
2.1. Number of Shares; Warrant Price. . . . . . . . . . . . . . . . 3
2.2. Adjustment of Warrant Price; Payment of Regular
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2.1. Issuance of Additional Shares of Common
Stock. . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2.2. Dividends and Distributions. . . . . . . . . . . . . . 4
2.3. Treatment of Options and Convertible Securities. . . . . . . . 4
2.4. Treatment of Stock Dividends, Stock Splits, etc. . . . . . . . 7
2.5. Computation of Consideration . . . . . . . . . . . . . . . . . 7
2.6. Adjustments for Combinations, etc. . . . . . . . . . . . . . . 9
2.7. Dilution in Case of Other Securities . . . . . . . . . . . . . 9
2.8. Minimum Adjustment of Warrant Price. . . . . . . . . . . . . . 9
3. Consolidation, Merger, Sale of Assets,
Reorganization, etc . . . . . . . . . . . . . . . . . . . . . . . . 10
3.1. General Provisions . . . . . . . . . . . . . . . . . . . . . . 10
3.2. Assumption of Obligations. . . . . . . . . . . . . . . . . . . 11
4. Other Dilutive Events . . . . . . . . . . . . . . . . . . . . . . . 12
5. No Dilution or Impairment . . . . . . . . . . . . . . . . . . . . . 12
6. Accountants' Report as to Adjustments . . . . . . . . . . . . . . . 13
7. Notices of Corporate Action . . . . . . . . . . . . . . . . . . . . 13
8. Restrictions on Transfer. . . . . . . . . . . . . . . . . . . . . . 14
8.1. Restrictive Legends. . . . . . . . . . . . . . . . . . . . . . 14
8.2. Notice of Proposed Transfer; Opinions of Counsel . . . . . . . 15
8.3. Termination of Restrictions. . . . . . . . . . . . . . . . . . 16
9. Registration under Securities Act . . . . . . . . . . . . . . . . . 16
10. Financial Information . . . . . . . . . . . . . . . . . . . . . . . 16
10.1. Financial Statements . . . . . . . . . . . . . . . . . . . . 16
10.2. Availability of Information. . . . . . . . . . . . . . . . . 18
11. Reservation of Stock, etc . . . . . . . . . . . . . . . . . . . . . 18
12. Ownership, Transfer and Substitution of Warrants. . . . . . . . . . 18
12.1. Ownership of Warrants. . . . . . . . . . . . . . . . . . . . 18
12.2. Transfer and Exchange of Warrants. . . . . . . . . . . . . . 18
12.3. Replacement of Warrants. . . . . . . . . . . . . . . . . . . 19
13. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
14. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
15. No Rights or Liabilities as Stockholder . . . . . . . . . . . . . . 25
16. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
17. Expiration; Notice. . . . . . . . . . . . . . . . . . . . . . . . . 25
18. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
<PAGE>
Common Stock Purchase Warrant
Expiring December 21, 2002
New York, New York
December 21, 1995
PPN# 36189# 11 1
No. W-1
GMH HOLDINGS, INC., a Delaware corporation (the "Company"), for
value received, hereby certifies that THE EQUITABLE LIFE ASSURANCE SOCIETY OF
THE UNITED STATES or registered assigns, is entitled to purchase from the
Company 350,000 duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock, par value $.001 per share,
of the Company (the "Common Stock"), which may be either Class B
Common Stock or (at the election of the holder of this Warrant if
such holder is an Eligible Holder) Class A Common Stock or (in
the case of an Eligible Holder) any combination thereof, at the
purchase price per share of $.01, at any time or from time to
time prior to 3:00 P.M., New York City time, on December 21,
2002, all subject to the terms, conditions and adjustments set
forth below in this Warrant.
This Warrant is one of the Common Stock Purchase
Warrants (the "Warrants", such term to include all Warrants
issued in substitution therefor) originally issued in connection
with the issue and sale by General Manufactured Housing, Inc., a
wholly-owned subsidiary of the Company, of $17,243,295 aggregate
principal amount of its Senior Subordinated Notes due 2002
(together with all notes issued in substitution therefor, the
"Notes"), pursuant to the Note and Warrant Purchase Agreement
(the "Purchase Agreement"), dated as of December 21, 1995,
between the Company and the institutional investor named therein
(the "Purchaser"). The Warrants originally so issued evidence
rights to purchase an aggregate of 350,000 shares of Common
Stock, subject to adjustment as provided herein. Certain
capitalized terms used in this Warrant are defined in section 13.
1. Exercise of Warrant. 1.1. Manner of Exercise.
This Warrant may be exercised by the holder hereof, in whole or
in part, during normal business hours on any Business Day by
surrender of this Warrant, with the form of subscription at the
end hereof (or a reasonable facsimile thereof), setting forth
such holder's election to receive Class A Common Stock or Class B
Common Stock or a combination thereof, duly executed by such
holder, to the Company at its principal office (or, if such
exercise shall be in connection with an underwritten Public
Offering of shares of Common Stock (or Other Securities) subject
to this Warrant, at the location at which the Company shall have
agreed to deliver the shares of Common Stock (or Other
<PAGE>
Securities) subject to such offering), accompanied by payment, in
cash or by certified or official bank check payable to the order
of the Company or by application of Notes in the manner provided
in section 1.5 (or by a combination of such methods), in the
amount obtained by multiplying (a) the number of shares of Common
Stock (without giving effect to any adjustment therein)
designated in such form of subscription by (b) $.01, and such
holder shall thereupon be entitled to receive the number of duly
authorized, validly issued, fully paid and nonassessable shares
of Common Stock (or Other Securities) determined as provided in
sections 2 through 4.
1.2. When Exercise Deemed Effected. Each exercise of
this Warrant shall be deemed to have been effected immediately
prior to the close of business on the Business Day on which this
Warrant shall have been surrendered to the Company as provided in
section 1.1, and at such time the person or persons in whose name
or names any certificate or certificates for shares of Common
Stock (or Other Securities) shall be issuable upon such exercise
as provided in section 1.3 shall be deemed to have become the
holder or holders of record thereof.
1.3. Delivery of Stock Certificates, etc. As soon as
practicable after the exercise of this Warrant, in whole or in
part, and in any event within five Business Days thereafter
(unless such exercise shall be in connection with an underwritten
Public Offering of shares of Common Stock (or Other Securities)
subject to this Warrant, in which event concurrently with such
exercise), the Company at its expense (including the payment by
it of any applicable taxes other than transfer taxes) will cause
to be issued in the name of and delivered to the holder hereof
or, subject to section 8, as such holder (upon payment by such
holder of any applicable transfer taxes) may direct,
(a) a certificate or certificates for the number of
duly authorized, validly issued, fully paid and
nonassessable shares of Class A Common Stock or Class B
Common Stock (or Other Securities) to which such holder
shall be entitled upon such exercise plus, in lieu of any
fractional share to which such holder would otherwise be
entitled, cash in an amount equal to the same fraction of
the Market Price per share of such Common Stock (or Other
Securities) on the Business Day next preceding the date of
such exercise, and
(b) in case such exercise is in part only, a new
Warrant or Warrants of like tenor, calling in the aggregate
on the face or faces thereof for the number of shares of
Common Stock equal (without giving effect to any adjustment
therein) to the number of such shares called for on the face
of this Warrant minus the number of such shares designated
by the holder upon such exercise as provided in section 1.1.
1.4. Company to Reaffirm Obligations. The Company
will, at the time of or at any time after each exercise of this
Warrant, upon the request of the holder hereof or of any shares
of Common Stock (or Other Securities) issued upon such exercise,
acknowledge in writing its continuing obligation to afford to
such holder all rights (including, without limitation, any right
of registration of any shares of Common Stock (or Other
<PAGE>
Securities) issuable upon exercise of this Warrant pursuant to
section 9) to which such holder shall continue to be entitled
after such exercise in accordance with the terms of this Warrant,
provided that if any such holder shall fail to make any such
request, the failure shall not affect the continuing obligation
of the Company to afford such rights to such holder.
1.5. Payment by Application of the Notes. Upon any
exercise of this Warrant, the holder hereof may, at its option,
instruct the Company, by so specifying in the form of
subscription submitted therewith as provided in section 1.1, to
apply to the payment required by section 1.1 all or any part of
the principal amount then unpaid and of the interest on such
principal amount then accrued on any one or more Notes at the
time held by such holder, in which case the Company will accept
the aggregate amount of principal and accrued interest on such
principal specified in such form of subscription in satisfaction
of a like amount of such payment. In case less than the entire
unpaid principal amount of any Note shall be so specified, the
principal amount so specified shall be credited, as of the date
of such exercise, against the installments of principal then
remaining unpaid on such Note pro rata to all such remaining
installments. Within ten days after receipt of any such notice,
the Company will pay to the holder of the Notes submitting such
form of subscription, in the manner provided in such Notes and
the Purchase Agreement, all unpaid interest accrued to the date
of exercise of such Warrant on the principal amount so specified
in such form of subscription that is not applied to the payment
required by section 1.1 under this section 1.5. In the event
that the entire unpaid principal amount of any Note is applied
to the payment required by section 1.1 under this section 1.5,
such Note shall be promptly surrendered and cancelled in
accordance with the Purchase Agreement.
2. Adjustments; Dividends. 2.1. Number of Shares;
Warrant Price. The number of shares of Common Stock which the
holder of this Warrant shall be entitled to receive upon each
exercise hereof shall be determined by multiplying the number of
shares of Common Stock which would otherwise (but for the
provisions of this section 2) be issuable upon such exercise, as
designated by the holder hereof pursuant to section 1.1, by a
fraction of which (a) the numerator is $.01 and (b) the
denominator is the Warrant Price in effect on the date of such
exercise. The "Warrant Price" shall initially be $.01 per share,
shall be adjusted and readjusted from time to time as provided in
this section 2 and, as so adjusted or readjusted, shall remain in
effect until a further adjustment or readjustment thereof is
required by this section 2.
2.2. Adjustment of Warrant Price; Payment of Regular
Dividends. 2.2.1. Issuance of Additional Shares of Common
Stock. In case the Company, at any time or from time to time
after December 21, 1995 (the "Initial Date"), shall issue or sell
Additional Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to section 2.3 or 2.4)
without consideration or for a consideration per share less than
the Current Market Price in effect, in each case, on the date of
and immediately prior to such issue or sale, then, and in each
such case, subject to section 2.8, such Warrant Price shall be
reduced, concurrently with such issue or sale, to a price
<PAGE>
(calculated to the nearest .0001 of a cent) determined by
multiplying such Warrant Price by a fraction,
(a) the numerator of which shall be (i) the number of
shares of Common Stock outstanding immediately prior to such
issue or sale plus (ii) the number of shares of Common Stock
which the aggregate consideration received by the Company
for the total number of such Additional Shares of Common
Stock so issued or sold would purchase at the Current Market
Price, and
(b) the denominator of which shall be the number of
shares of Common Stock outstanding immediately after such
issue or sale,
provided that, for the purposes of this section 2.2.1 (x)
immediately after any Additional Shares of Common Stock are
deemed to have been issued pursuant to section 2.3 or 2.4, such
Additional Shares shall be deemed to be outstanding, and (y)
treasury shares shall not be deemed to be outstanding.
2.2.2. Dividends and Distributions. In case the
Company at any time or from time to time after the Initial Date
shall declare, order, pay or make a dividend or other
distribution (including, without limitation, any distribution of
other or additional stock or other securities or property or
Options by way of dividend or spin-off, reclassification,
recapitalization or similar corporate rearrangement) on any
Common Stock, other than a dividend payable in Additional Shares
of Common Stock or in Options for Common Stock, then, and in each
such case, the holder of this Warrant shall be entitled to
receive the amount in cash or other property to which such holder
would actually have been entitled as a shareholder upon the
payment thereof by the Company if such holder had exercised this
Warrant immediately prior to the close of business on the record
date fixed for the determination of holders of Common Stock
entitled to receive such dividend.
2.3. Treatment of Options and Convertible Securities.
In case the Company at any time or from time to time after the
Initial Date shall issue, sell, grant or assume, or shall fix a
record date for the determination of holders of any class of
securities entitled to receive, any Options or Convertible
Securities, then, and in each such case, the maximum number of
Additional Shares of Common Stock (as set forth in the instrument
relating thereto, without regard to any provisions contained
therein for a subsequent adjustment of such number) issuable upon
the exercise of such options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of
such Convertible Securities, shall be deemed to be issued for
purposes of section 2.1 as of the time of such issue, sale, grant
or assumption or, in case such a record date shall have been
fixed, as of the close of business on such record date (or, if
the Common Stock trades on an ex-dividend basis, on the date
prior to the commencement of ex-dividend trading), provided that
such Additional Shares of Common Stock shall not be deemed to
have been issued unless the consideration per share (determined
pursuant to section 2.5) of such shares would be less than the
Current Market Price in effect, in each case, on the date of and
immediately prior to such issue, sale, grant or assumption or
<PAGE>
immediately prior to the close of business on such record date
(or, if the Common Stock trades on an ex-dividend basis, on the
date prior to the commencement of ex-dividend trading), as the
case may be, and provided, further, that in any such case in
which Additional Shares of Common Stock are deemed to be issued,
(a) no further adjustment of the Warrant Price shall
be made upon the subsequent issue or sale of Additional
Shares of Common Stock or Convertible Securities upon the
exercise of such Options or the conversion or exchange of
such Convertible Securities;
(b) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for
any increase in the consideration payable to the Company, or
decrease in the number of Additional Shares of Common Stock
issuable, upon the exercise, conversion or exchange thereof
(by change of rate or otherwise), the Warrant Price computed
upon the original issue, sale, grant or assumption thereof
(or upon the occurrence of the record date, or date prior to
the commencement of ex-dividend trading, as the case may be,
with respect thereto), and any subsequent adjustments based
thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options, or the rights
of conversion or exchange under such Convertible Securities,
which are outstanding at such time;
(c) upon the expiration of any such Options or of the
rights of conversion or exchange under any such Convertible
Securities which shall not have been exercised (or upon
purchase by the Company and cancellation or retirement of
any such Options which shall not have been exercised or of
any such Convertible Securities the rights of conversion or
exchange under which shall not have been exercised), the
Warrant Price computed upon the original issue, sale, grant
or assumption thereof (or upon the occurrence of the record
date, or date prior to the commencement of ex-dividend
trading, as the case may be, with respect thereto), and any
subsequent adjustments based thereon, shall, upon such
expiration (or such cancellation or retirement, as the case
may be), be recomputed as if:
(x) in the case of options for Common Stock or of
Convertible Securities, the only Additional Shares of
Common Stock issued or sold were the Additional Shares
of Common Stock, if any, actually issued or sold upon
the exercise of such Options or the conversion or
exchange of such Convertible Securities and the
consideration received therefor was (i) an amount equal
to (A) the consideration actually received by the
Company for the issue, sale, grant or assumption of all
such Options, whether or not exercised, plus (B) the
consideration actually received by the Company upon
such exercise, minus (C) the consideration paid by the
Company for any purchase of such Options which were not
exercised, or (ii) an amount equal to (A) the
consideration actually received by the Company for the
issue, sale, grant or assumption of all such
Convertible Securities which were actually converted or
<PAGE>
exchanged, plus (B) the additional consideration, if
any, actually received by the Company upon such
conversion or exchange, minus (C) the consideration
paid by the Company for any purchase of such
Convertible Securities the rights of conversion or
exchange under which were not exercised, and
(y) in the case of Options for Convertible
Securities, only the Convertible Securities, if any,
actually issued or sold upon the exercise of such
Options were issued at the time of the issue, sale,
grant or assumption of such options, and the
consideration received by the Company for the
Additional Shares of Common Stock deemed to have then
been issued was an amount equal to (i) the
consideration actually received by the Company for the
issue, sale, grant or assumption of all such Options,
whether or not exercised, plus (ii) the consideration
deemed to have been received by the Company (pursuant
to section 2.5) upon the issue or sale of the
Convertible Securities with respect to which such
Options were actually exercised, minus (iii) the
consideration paid by the Company for any purchase of
such Options which were not exercised;
(d) no readjustment pursuant to subdivision (b) or (c)
above shall have the effect of increasing the Warrant Price
by an amount in excess of the amount of the adjustment
thereof originally made in respect of the issue, sale, grant
or assumption of such options or Convertible Securities; and
(e) in the case of any such Options which expire by
their terms not more than 30 days after the date of issue,
sale, grant or assumption thereof, no adjustment of the
Warrant Price shall be made until the expiration or exercise
of all such Options, whereupon such adjustment shall be made
in the manner provided in subdivision (c) above.
In case at any time after the Initial Date the Company
shall be required to increase the number of Additional Shares of
Common Stock subject to any Option or into which any Convertible
Securities (other than the Warrants) are convertible or
exchangeable pursuant to the operation of anti-dilution
provisions applicable thereto, such Additional Shares shall be
deemed to be issued for purposes of section 2.1 as of the time of
such increase.
2.4. Treatment of Stock Dividends, Stock Splits, etc.
In case the Company at any time or from time to time after the
Initial Date shall declare or pay any dividend or other
distribution on any class of stock of the Company payable in
Common Stock, or shall effect a subdivision of the outstanding
shares of Common Stock into a greater number of shares of Common
Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case,
Additional Shares of Common Stock shall be deemed to have been
issued (a) in the case of any such dividend, immediately after
the close of business on the record date for the determination of
holders of any class of securities entitled to receive such
dividend, or (b) in the case of any such subdivision, at the
<PAGE>
close of business on the day immediately prior to the day upon
which such corporate action becomes effective.
2.5. Computation of Consideration. For the purposes
of this section 2:
(a) The consideration for the issue or sale of any
Additional Shares of Common Stock or for the issue, sale,
grant or assumption of any Options or Convertible
Securities, irrespective of the accounting treatment of such
consideration, shall
(x) insofar as it consists of cash, be an amount
equal to the amount of cash received by the Company,
without deducting any expenses paid or incurred by the
Company or any commissions or compensation paid or
concessions or discounts allowed to underwriters,
dealers or others performing similar services and any
accrued interest or dividends in connection with such
issue or sale,
(y) insofar as it consists of consideration
(including securities) other than cash, be computed at
the fair value thereof at the time of such issue or
sale, as determined in good faith by the Board of
Directors of the Company, without deducting any
expenses paid or incurred by the Company for any
commissions or compensation paid or concessions or
discounts allowed to underwriters, dealers or others
performing similar services and any accrued interest or
dividends in connection with such issue or sale, and
(z) in case Additional Shares of Common Stock are
issued or sold or Convertible Securities are issued,
sold, granted or assumed together with other stock or
securities or other assets of the Company for a
consideration which covers both, be the proportion of
such consideration so received, computed as provided in
subdivisions (x) and (y) above, allocable to such
Additional Shares of Common Stock or Convertible
Securities, as the case may be, all as determined in
good faith by the Board of Directors of the Company.
(b) All Options issued, sold, granted or assumed
together with other stock or securities or other assets of
the Company for a consideration which covers both, all
Additional Shares of Common Stock, Options or Convertible
Securities issued in payment of any dividend or other
distribution on any class of stock of the Company and all
Additional Shares of Common Stock issued to effect a
subdivision of the outstanding shares of Common Stock into a
greater number of shares of Common Stock (by reclassi-
fication or otherwise than by payment of a dividend in
Common Stock) shall be deemed to have been issued without
consideration (unless, in the case of Options issued, sold,
granted or assumed together with other stock or securities
or other assets of the Company for a consideration which
covers both, the portion of the consideration allocated to
the Options is specifically stated under the terms of such
transaction).
<PAGE>
(c) Additional Shares of Common Stock deemed to have
been issued for consideration pursuant to section 2.3,
relating to Options and Convertible Securities, shall be
deemed to have been issued for a consideration per share
determined by dividing
(x) the total amount, if any, received and
receivable by the Company as consideration for the
issue, sale, grant or assumption of the Options or
Convertible Securities in question, plus the minimum
aggregate amount of additional consideration (as set
forth in the instruments relating thereto, without
regard to any provision contained therein for a
subsequent adjustment of such consideration) payable to
the Company upon the exercise in full of such Options
or the conversion or exchange of such Convertible
Securities or, in the case of Options for Convertible
Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange
of such Convertible Securities, in each case computing
such consideration as provided in the foregoing sub-
division (a), by
(y) the maximum number of shares of Common Stock
(as set forth in the instruments relating thereto,
without regard to any provision contained therein for a
subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange
of such Convertible Securities.
(d) Additional Shares of Common Stock issued or deemed
to have been issued pursuant to the operation of anti-
dilution provisions applicable to Convertible Securities
(other than the Warrants), Options or other securities of
the Company (either as a result of the adjustments provided
for by the Warrants or otherwise) shall be deemed to have
been issued without consideration.
2.6. Adjustments for Combinations, etc. In case the
outstanding shares of Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser
number of shares of Common Stock, the Warrant Price in effect
immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or
consolidation, be proportionately increased.
2.7. Dilution in Case of Other Securities. In case any
Other Securities shall be issued or sold or shall become subject
to issue or sale upon the conversion or exchange of any stock (or
Other Securities) of the Company (or any issuer of Other
Securities or any other Person referred to in section 3) or to
subscription, purchase or other acquisition pursuant to any
Options issued or granted by the Company (or any such other
issuer or Person) for a consideration such as to dilute, on a
basis consistent with the standards established in the other
provisions of this section 2, the purchase rights granted by this
Warrant, then, and in each such case, the computations,
adjustments and readjustments provided for in this section 2 with
respect to the Warrant Price shall be made as nearly as possible
<PAGE>
in the manner so provided and applied to determine the amount of
Other Securities from time to time receivable upon the exercise
of the Warrants, so as to protect the holders of the Warrants
against the effect of such dilution.
2.8. Minimum Adjustment of Warrant Price. If the
amount of any adjustment of the Warrant Price required pursuant
to this section 2 would be less than one percent of the Warrant
Price in effect at the time such adjustment is otherwise so
required to be made, such amount shall be carried forward and
adjustment with respect thereto made at the time of and together
with any subsequent adjustment which, together with such amount
and any other amount or amounts so carried forward, shall
aggregate at least one percent of such Warrant Price; provided
that, upon the exercise of this Warrant, all adjustments carried
forward and not theretofore made up to and including the date of
such exercise shall be made to the nearest one one-hundredth of a
cent.
3. Consolidation, Merger, Sale of Assets,
Reorganization, etc. 3.1. General Provisions. In case the
Company, after the Initial Date, (a) shall consolidate with or
merge into any other Person and shall not be the continuing or
surviving corporation of such consolidation or merger, or (b)
shall permit any other Person to consolidate with or merge into
the Company and the Company shall be the continuing or surviving
Person but, in connection with such consolidation or merger,
Common Stock or Other Securities shall be changed into or
exchanged for cash, stock or other securities of any other Person
or any other property, or (c) shall transfer all or substantially
all of its properties and assets to any other Person, or (d)
shall effect a capital reorganization or reclassification of
Common Stock or Other Securities (other than a capital
reorganization or reclassification resulting in the issue of
Additional Shares of Common Stock for which adjustment in the
Warrant Price is provided in section 2.2.1 or 2.2.2), then, and
in the case of each such transaction, the Company shall give
written notice thereof to each holder of any Warrant not less
than 30 days prior to the consummation thereof and proper
provision shall be made so that, upon the basis and the terms and
in the manner provided in this section 3, the holder of this
Warrant, upon the exercise hereof at any time after the
consummation of such transaction, shall be entitled to receive,
at the aggregate Warrant Price in effect at the time of such
consummation for all Common Stock (or other Securities) issuable
upon such exercise immediately prior to such consummation, in
lieu of the Common Stock (or Other Securities) issuable upon such
exercise prior to such consummation, either of the following, as
such holder shall elect by written notice to the Company on or
before the date immediately preceding the date of the consumma-
tion of such transaction (and, in the absence of such notice, the
provisions of subdivision (y) below shall be deemed to have been
elected by such holder):
(x) the highest amount of cash, securities or other
property to which such holder would actually have been
entitled as a shareholder upon such consummation if such
holder had exercised this Warrant immediately prior thereto,
subject to adjustments (subsequent to such consummation) as
nearly equivalent as possible to the adjustments provided
<PAGE>
for in section 2 and this section 3, provided that if a
purchase, tender or exchange offer shall have been made to
and accepted by the holders of Common Stock under
circumstances in which, upon completion of such purchase,
tender or exchange offer, the maker thereof, together with
members of any group (within the meaning of Section 13(d)(3)
of the Exchange Act) of which such maker is a part, and
together with any affiliate or associate of such maker
(within the meaning of Rule 12b-2 under the Exchange Act)
and any members of any such group of which any such
affiliate or associate is a part, own beneficially (within
the meaning of Rule 13d-3 under the Exchange Act) more than
50% of the outstanding shares of Common Stock, and if the
holder of this Warrant so designates in such notice given to
the Company, the holder of this Warrant shall be entitled to
receive the highest amount of cash, securities or other
property to which such holder would actually have been
entitled as a shareholder if the holder of this Warrant had
exercised this Warrant prior to the expiration of such
purchase, tender or exchange offer, accepted such offer and
all of the Common Stock held by such holder had been
purchased pursuant to such purchase, tender or exchange
offer, subject to adjustments (from and after the
consummation of such purchase, tender or exchange offer) as
nearly equivalent as possible to the adjustments provided
for in section 2 and this section 3; or
(y) the number of shares of Voting Common Stock (or
equivalent equity interests) of the Acquiring Person or, if
the Acquiring Person fails to meet, but its Parent meets,
the requirements set forth in the proviso below, of its
Parent, subject to adjustments (subsequent to such corporate
action) as nearly equivalent as possible to the adjustments
provided for in section 2 and this section 3, determined by
dividing (x) the product obtained by multiplying (A) the
number of shares of Common Stock (or Other Securities) to
which the holder of this Warrant would have been entitled
had such holder exercised this Warrant immediately prior to
the consummation of such transaction, times (B) the greater
of the Acquisition Price and the Warrant Price in effect on
the date immediately preceding the date of such
consummation, by (y) the Current Market Price per share of
the Voting Common Stock (or equivalent equity interests) of
the Acquiring Person or its Parent, as the case may be, on
the date immediately preceding the date of such
consummation.
3.2. Assumption of Obligations. Notwithstanding
anything contained in this Warrant or the Purchase Agreement to
the contrary, the Company will not effect any of the transactions
described in subdivisions (a) through (d) of section 3.1 unless,
prior to the consummation thereof, each Person (other than the
Company) which may be required to deliver any cash, stock or
other securities or other property upon the exercise of this
Warrant as provided herein shall assume, by written instrument
delivered to, and reasonably satisfactory to, the holder of this
Warrant, (a) the obligations of the Company under this Warrant
(and if the Company shall survive the consummation of such
transaction, such assumption shall be in addition to, and shall
not release the Company from, any continuing obligations of the
<PAGE>
Company under this Warrant) and (b) the obligation to deliver to
such holder such cash, stock or other securities or other
property as, in accordance with the foregoing provisions of this
section 3, such holder may be entitled to receive, and such
Person shall have similarly delivered to such holder an opinion
of counsel for such Person, which counsel shall be reasonably
satisfactory to such holder, stating that this Warrant shall
thereafter continue in full force and effect and the terms hereof
(including, without limitation, all of the provisions of section
2 and this section 3) shall be applicable to the cash, stock or
other securities or other property which such Person may be
required to deliver upon any exercise of this Warrant or the
exercise of any rights pursuant hereto. Nothing in this section
3 or in section 7 shall be deemed to authorize the Company to
enter into any transaction not otherwise permitted by the
Purchase Agreement.
4. Other Dilutive Events. In case any event shall
occur as to which the provisions of section 2 or section 3 are
not strictly applicable but the failure to make any adjustment
would not fairly protect the purchase rights represented by this
Warrant in accordance with the essential intent and principles of
such sections, then, in each such case, the Company shall appoint
a firm of independent public accountants of recognized national
standing (which may be the regular auditors of the Company),
which shall give their opinion upon the adjustment, if any, on a
basis consistent with the essential intent and principles
established in sections 2 and 3, necessary to preserve, without
dilution, the purchase rights represented by this Warrant. Upon
receipt of such opinion the Company will promptly mail a copy
thereof to the holder of this Warrant and shall make the
adjustments described therein.
5. No Dilution or Impairment. The Company will not,
by amendment of its certificate of incorporation or through any
consolidation, merger, reorganization, transfer of assets,
dissolution, issue or sale of securities (other than the shares
of Common Stock and Preferred Stock issued on the date of the
Closing under the Purchase Agreement and any securities issued
upon conversion or exchange thereof) or any other voluntary
action, avoid or seek to avoid the observance or performance of
any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in
order to protect the rights of the holder of this Warrant against
dilution or other impairment. Without limiting the generality of
the foregoing, the Company (a) will not permit the par value of
any shares of stock receivable upon the exercise of this Warrant
to exceed the amount payable therefor upon such exercise, (b)
will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid
and nonassessable shares of stock upon the exercise of all of the
Warrants from time to time outstanding, (c) will not take any
action which results in any adjustment of the Warrant Price if
the total number of shares of Common Stock (or Other Securities)
issuable after the action upon the exercise of all of the
Warrants would exceed the total number of shares of Common Stock
(or other Securities) then authorized by the Company's
certificate of incorporation and available for the purpose of
issue upon such exercise and, (d) will not issue any capital
<PAGE>
stock of any class which has the right to more than one vote per
share or which is preferred as to dividends or as to the dis-
tribution of assets upon voluntary or involuntary dissolution,
liquidation or winding-up, unless such stock is sold for a cash
consideration at least equal to the amount of its preference upon
voluntary or involuntary dissolution, liquidation or winding-up
and the rights of the holders thereof shall be limited to a fixed
percentage (not exceeding 15%) of such cash consideration in
respect of participation in dividends.
6. Accountants' Report as to Adjustments. In each
case of any adjustment or readjustment in the shares of Common
Stock (or Other Securities) issuable upon the exercise of the
Warrants, the Company at its expense will promptly compute such
adjustment or readjustment in accordance with the terms of the
Warrants and cause independent public accountants of recognized
national standing selected by the Company (which may be the
regular auditors of the Company) to verify such computation and
prepare a report setting forth such adjustment or readjustment
and showing in reasonable detail the method of calculation
thereof and the facts upon which such adjustment or readjustment
is based, including without limitation a statement of (a) the
consideration received or to be received by the Company for any
Additional Shares of Common Stock issued or sold or deemed to
have been issued, (b) the number of shares of Common Stock
outstanding or deemed to be outstanding, and (c) the Warrant
Price in effect immediately prior to such issue or sale and as
adjusted and readjusted (if required by section 2) on account
thereof. The Company will forthwith mail a copy of each such
report to each holder of a Warrant and will, upon the written
request at any time of any holder of a Warrant, furnish to such
holder a like report setting forth the Warrant Price at the time
in effect and showing in reasonable detail how it was calculated.
The Company will also keep copies of all such reports at its
principal office and will cause the same to be available for
inspection at such office during normal business hours by any
holder of a Warrant or any prospective purchaser of a Warrant
designated by the holder thereof.
7. Notices of Corporate Action. In the event of
(a) any taking by the Company of a record of the
holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive
any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of
stock of any class or any other securities or property, or
to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of
the Company or any consolidation or merger involving the
Company and any other Person or any transfer of all or
substantially all the assets of the Company to any other
Person, or
(c) any voluntary or involuntary dissolution,
liquidation or winding-up of the Company,
the Company will mail to each holder of a Warrant a notice
<PAGE>
specifying (x) the date or expected date on which any such record
is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend,
distribution or right, and (y) the date or expected date on which
any such reorganization, reclassification, recapitalization,
consolidation, merger, transfer, dissolution, liquidation or
winding-up is to take place and the time, if any such time is to
be fixed, as of which the holders of record of Common Stock (or
Other Securities) shall be entitled to exchange their shares of
Common Stock (or Other Securities) for the securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution,
liquidation or winding-up. Such notice shall be mailed at least
20 days prior to the date therein specified, in the case of any
date referred to in the foregoing subdivision (x), and at least
90 days prior to the date therein specified, in the case of the
date referred to in the foregoing subdivision (y).
8. Restrictions on Transfer. 8.1. Restrictive
Legends. Except as otherwise permitted by this section 8, each
Warrant originally issued pursuant to the Purchase Agreement and
each Warrant issued upon direct or indirect transfer or in
substitution for any Warrant pursuant to section 12 shall be
stamped or otherwise imprinted with a legend in substantially the
following form:
"This Warrant and any shares acquired upon the exercise of
this Warrant have not been registered under the Securities
Act of 1933 and may not be transferred in the absence of
such registration or an exemption therefrom under such Act.
This Warrant and such shares are also subject to certain
restrictions on transferability imposed by a certain
Stockholders' Agreement, a copy of which is on file at the
offices of the Company."
Except as otherwise permitted by this section 8, each certificate
for Common Stock (or Other Securities) issued upon the exercise
of any Warrant and each certificate issued upon the direct or
indirect transfer of any such Common Stock (or Other Securities)
shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 and may not be
transferred in the absence of such registration or an
exemption therefrom under such Act. Such shares are also
subject to certain restrictions on transferability imposed
by Common Stock Purchase Warrants expiring December 21, 2002
and by a certain Stockholders' Agreement, copies of which
are on file at the offices of the Company."
8.2. Notice of Proposed Transfer; Opinions of Counsel.
Prior to any transfer of any Restricted Securities which are not
registered under an effective registration statement under the
Securities Act (other than a transfer pursuant to Rule 144 or any
comparable rule under such Act), the holder thereof will give
written notice to the Company of such holder's intention to
effect such transfer and to comply in all other respects with
this section 8.2. Each such notice (a) shall describe the manner
and circumstances of the proposed transfer in sufficient detail
<PAGE>
to enable counsel to render the opinions referred to below, and
(b) shall designate counsel for the holder giving such notice
(who may be internal counsel for such holder). The holder giving
such notice will submit a copy thereof to the counsel designated
in such notice and the Company will promptly submit a copy
thereof to its counsel. The following provisions shall then
apply:
(x) If in the opinion of each such counsel the
proposed transfer may be effected without registration, such
holder shall thereupon be entitled to transfer such
Restricted Securities in accordance with the terms of the
notice delivered by such holder to the Company. Each
Warrant or certificate, if any, issued upon or in connection
with such transfer shall bear the appropriate restrictive
legend set forth in section 8.1 unless, in the opinion of
each such counsel, such legend is no longer required to
insure compliance with the Securities Act. If for any
reason counsel for the Company shall fail to deliver to the
Company an opinion upon such matters, or the Company shall
fail to notify such holder thereof, within 15 days after
counsel for such holder shall have delivered its opinion
upon such matters to such holder (with a copy to the
Company), then for all purposes of such Restricted
Securities the opinion for the Company shall be deemed to be
the same as the opinion of counsel for such holder.
(y) If the opinion of either or both such counsel is
not to the effect that the proposed transfer may legally be
effected without registration of such Restricted Securities
under the Securities Act (such opinion or opinions to state
the basis of the legal conclusions reached therein), the
Company will promptly so notify the holder thereof and
thereafter such holder shall not be entitled to transfer
such Restricted Securities (other than in a transfer
pursuant to Rule 144 or any comparable rule under the
Securities Act) until the conditions specified in
subdivision (x) above shall be satisfied or until
registration of such Restricted Securities under the
Securities Act has become effective.
Notwithstanding the foregoing provisions of this section 8.2, the
holder of any Restricted Securities shall be permitted to
transfer any such Restricted Securities pursuant to Rule 144A
under the Securities Act, provided that each transferee agrees in
writing to be bound by all the restrictions on transfer of such
Restricted Securities contained in this section 8.2. The Company
and the holder of Restricted Securities will pay the fees and
disbursements of their respective counsel in connection with all
opinions rendered by them pursuant to this section 8.2 and
pursuant to section 8.3.
8.3. Termination of Restrictions. The restrictions
imposed by this section 8 upon the transferability of Restricted
Securities shall cease and terminate as to any particular
Restricted Securities (a) when such securities shall have been
effectively registered under the Securities Act and disposed of
in accordance with the registration statement covering such
Restricted Securities, (b) when, in the opinions of both counsel
for the holder thereof and counsel for the Company, such restric-
<PAGE>
tions are no longer required in order to insure compliance with
the Securities Act, or (c) when such securities have been
beneficially owned, by a person who has not been an affiliate of
the Company for at least three months, for a period of at least
three years, all as determined under Rule 144 under the
Securities Act. Whenever such restrictions shall terminate as to
any Restricted Securities, as soon as practicable thereafter and
in any event within five days, the holder thereof shall be
entitled to receive from the Company, without expense (other than
transfer taxes, if any), new securities of like tenor not bearing
the applicable legend set forth in section 8.1 hereof.
9. Registration under Securities Act. The holders of
Registrable Securities shall have the rights with respect to the
registration of Registrable Securities set forth in Exhibit B
(Registration Rights) of the Stockholders' Agreement.
10. Financial Information. 10.1. Financial
Statements. Until the occurrence of an IPO, the Company will
deliver to each holder of Registrable Securities:
(a) within 45 days after the end of each of the first
three quarterly fiscal periods in each fiscal year of the
Company, consolidated balance sheets of the Company and its
Subsidiaries as at the end of such period and the related
consolidated statements of income, stockholders' equity and
cash flows of the Company and its Subsidiaries for such
period and (in the case of the second and third quarterly
periods) for the period from the beginning of the current
fiscal year to the end of such quarterly period, setting
forth in each case in comparative form the consolidated
figures for the corresponding periods of the previous fiscal
year, all in reasonable detail and certified by a principal
financial officer of the Company as presenting fairly, in
accordance with generally accepted accounting principles
(except for the absence of notes thereto) applied (except as
specifically set forth therein) on a basis consistent with
such prior fiscal periods, the information contained
therein, subject to changes resulting from normal year-end
audit adjustments;
(b) within 90 days after the end of each fiscal year
of the Company, consolidated balance sheets of the Company
and its Subsidiaries as at the end of such year and the
related consolidated statements of income, stockholders'
equity and cash flows of the Company and its Subsidiaries
for such fiscal year, setting forth in each case in compara-
tive form the consolidated figures for the previous fiscal
year, all in reasonable detail and accompanied by a report
thereon of Arthur Andersen LLP or other independent public
accountants of recognized national standing selected by the
Company and reasonably satisfactory to the Requisite
Holders, which report shall state that such consolidated
financial statements present fairly the financial position
of the Company and its Subsidiaries as at the dates
indicated and the results of their operations and their cash
flows for the periods indicated in conformity with generally
accepted accounting principles applied on a basis consistent
with prior years (except as otherwise specified in such
report) and that the audit by such accountants in connection
<PAGE>
with such consolidated financial statements has been made in
accordance with generally accepted auditing standards;
(c) in addition to the financial statements required
by subdivisions (a) and (b) of this section 10.1, within 30
days after the end of each month, consolidated balance
sheets of the Company and its Subsidiaries as at the end of
such month and the related consolidated statements of
income, stockholders' equity and cash flows of the Company
and its Subsidiaries for such month and (in the case of the
second through twelfth month of the fiscal year) for the
period from the beginning of the current fiscal year to the
end of such month, setting forth in each case in comparative
form the consolidated figures for the corresponding periods
of the previous fiscal year, all in reasonable detail and
certified by a principal financial officer of the Company as
presenting fairly, in accordance with generally accepted
accounting principles (except for the absence of notes
thereto) applied (except as specifically set forth therein)
on a basis consistent with such prior fiscal periods, the
information contained therein, subject to changes resulting
from normal year-end audit adjustments; and
(d) promptly upon their becoming available, copies of
all financial statements, reports, notices and proxy
statements sent or made available generally by the Company
to its security holders, of all regular and periodic reports
and all registration statements and prospectuses filed by
the Company or any Subsidiary with any securities exchange
or with the Commission, and of all press releases and other
statements made available generally by the Company or any
Subsidiary to the public concerning material developments in
the business of the Company or its Subsidiaries.
10.2. Availability of Information. The Company will
cooperate with each holder of any Restricted Securities in
supplying such information as may be necessary for such holder to
complete and file any information reporting forms presently or
hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale
of any Restricted Securities.
11. Reservation of Stock, etc. The Company will at
all times reserve and keep available, solely for issuance and
delivery upon exercise of the Warrants, the number of shares of
Common Stock (or Other Securities) from time to time issuable
upon exercise of all Warrants at the time outstanding. All
shares of Common Stock (or Other Securities) shall be duly
authorized and, when issued upon such exercise, shall be validly
issued and, in the case of shares, fully paid and nonassessable,
with no liability on the part of the holders thereof.
12. Ownership, Transfer and Substitution of Warrants.
12.1. Ownership of Warrants. The Company may treat the person
in whose name any Warrant is registered on the register kept at
the principal office of the Company as the owner and holder
thereof for all purposes, notwithstanding any notice to the
contrary, except that, if and when any Warrant is properly
assigned in blank, the Company may (but shall not be obligated
to) treat the bearer thereof as the owner of such Warrant for all
<PAGE>
purposes, notwithstanding any notice to the contrary. Subject to
section 8 a Warrant, if properly assigned, may be exercised by a
new holder without first having a new Warrant issued.
12.2. Transfer and Exchange of Warrants. Upon the
surrender of any Warrant, properly endorsed, for registration of
transfer or for exchange at the principal office of the Company,
the Company at its expense will (subject to compliance with
section 8, if applicable) execute and deliver to or upon the
order of the holder thereof a new Warrant or Warrants of like
tenor, in the name of such holder or as such holder (upon payment
by such holder of any applicable transfer taxes) may direct,
calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces
of the Warrant or Warrants so surrendered.
12.3. Replacement of Warrants. Upon receipt of
evidence reasonably satisfactory to the Company of the loss,
theft, destruction or mutilation of any Warrant and, in the case
of any such loss, theft or destruction of any Warrant held by a
Person other than the Purchaser or any institutional investor,
upon delivery of indemnity reasonably satisfactory to the Company
in form and amount or, in the case of any such mutilation, upon
surrender of such Warrant for cancellation at the principal
office of the Company, the Company at its expense will execute
and deliver, in lieu thereof, a new Warrant of like tenor.
13. Definitions. As used herein, unless the context
otherwise requires, the following terms have the following
respective meanings:
Acquiring Person: the continuing or surviving
corporation of a consolidation or merger with the Company (if
other than the Company), the transferee of substantially all of
the properties and assets of the Company, the corporation
consolidating with or merging into the Company in a consolidation
or merger in connection with which the Common Stock is changed
into or exchanged for stock or other securities of any other
Person or cash or any other property, or, in the case of a
capital reorganization or reclassification, the Company.
Acquisition Price: as applied to the Common Stock, with
respect to any transaction to which section 3 applies, (a) the
price per share equal to the greater of the following, determined
in each case as of the date immediately preceding the date of
consummation of such transaction: (x) the Market Price of the
Common Stock and (y) the highest amount of cash plus the Fair
Value of the highest amount of securities or other property which
the holder of this Warrant would have been entitled as a
shareholder to receive upon such consummation if such holder had
exercised this Warrant immediately prior thereto, or (b) if a
purchase, tender or exchange offer is made by the Acquiring
Person (or by any of its affiliates) to the holders of the Common
Stock and such offer is accepted by the holders of more than 50%
of the outstanding shares of Common Stock, the greater of (i) the
price determined in accordance with the foregoing subdivision (a)
and (ii) the price per share equal to the greater of the
following, determined in each case as of the date immediately
preceding the acceptance of such offer by the holders of more
than 50% of the outstanding shares of Common Stock: (A) the
<PAGE>
Market Price of the Common Stock and (B) the highest amount of
cash plus the Fair Value of the highest amount of securities or
other property which the holder of this Warrant would be entitled
as a shareholder to receive pursuant to such offer if such holder
had exercised this Warrant immediately prior to the expiration of
such offer and accepted the same.
Additional Shares of Common Stock: all shares
(including treasury shares) of Common Stock issued or sold (or,
pursuant to section 2.3 or 2.4, deemed to be issued) by the
Company after the Initial Date hereof, whether or not
subsequently reacquired or retired by the Company, other than (a)
shares of Common Stock issued upon the exercise of Warrants, (b)
shares of Common Stock issued upon the exercise of shares of the
Series B Preferred Stock issued on the Initial Date, (c) the
shares of Common Stock issued upon the conversion of the Series B
Convertible Preferred Stock, par value $.001 per share, of the
Company and (d) the shares of Common Stock and Preferred Stock
issued on the date of the Closing under the Purchase Agreement
and any securities issued upon conversion or exchange thereof.
Business Day: any day other than a Saturday or a Sunday
or a day on which commercial banking institutions in the City of
New York are authorized by law to be closed, provided that, in
determining the period within which certificates or Warrants are
to be issued and delivered pursuant to section 1.3 at a time when
shares of Common Stock (or Other Securities) are listed or
admitted to trading on any national securities exchange or in the
over-the-counter market and in determining the Market Price of
any securities listed or admitted to trading on any national
securities exchange or in the over-the-counter market, "Business
Day" shall mean any day when the principal exchange in which
securities are then listed or admitted to trading is open for
trading or, if such securities are traded in the over-the-counter
market in the United States, such system is open for trading, and
provided, further, that any reference to "days" (unless Business
Days are specified) shall mean calendar days.
Class A Common Stock: the Company's Class A Common
Stock, par value $.001 per share, as constituted on the date
hereof and any stock into which such Class A Common Stock shall
have been changed or any stock resulting from any reclassi-
fication of such Class A Common Stock.
Class B Common Stock: the Company's Class B Common
Stock, par value $.001 per share, as constituted on the date
hereof and any stock into which such Class B Common Stock shall
have been changed or any stock resulting from any reclassi-
fication of such Class B Common Stock.
Class C Common Stock: the Company's Class C Common
Stock, par value $.001 per share, as constituted on the date
hereof and any stock into which such Class C Common Stock shall
have been changed or any stock resulting from any reclassi-
fication of such Class C Common Stock.
Commission: the Securities and Exchange Commission or
any other Federal agency at the time administering the Securities
Act or the Exchange Act, whichever is the relevant statute for
the particular purpose.
<PAGE>
Common Stock: the Class A Common Stock, the Class B
Common Stock, the Class C Common Stock and all other stock of any
class or classes (however designated) of the Company (other than
the Warrants) the holders of which have the right, without
limitation as to amount, either to all or to a share of the
balance of current dividends and liquidating dividends after the
payment of dividends and distributions on any shares entitled to
preference.
Company: GMH Holdings, Inc., a Delaware corporation.
Convertible Securities: any evidences of indebtedness,
shares of stock (other than Common Stock) or other securities
directly or indirectly convertible into or exchangeable for
Additional Shares of Common Stock.
Current Market Price: on any date specified herein, (a)
with respect to Common Stock or to Voting Common Stock (or
equivalent equity interests) of an Acquiring Person or its
Parent, (x) the average daily Market Price during the period of
the most recent 20 consecutive Business Days ending on such date,
or (y) if shares of Common Stock or such Voting Common Stock (or
equivalent equity interests), as the case may be, are not then
listed or admitted to trading on any national securities exchange
and if the closing bid and asked prices thereof are not then
quoted or published in the over-the-counter market, the Market
Price on such date; and (b) with respect to any other securities,
the Market Price on such date.
Eligible Holder: a holder of this Warrant that is not
The Equitable Life Assurance Society of the United States or an
insurance company affiliate thereof.
Exchange Act: the Securities Exchange Act of 1934, or
any similar Federal statute, and the rules and regulations of the
commission thereunder, all as the same shall be in effect at the
time of determination.
Fair Value: with respect to any securities or other
property, the fair value thereof as of a date which is within 15
days after the date as of which the determination is to be made
(a) determined by an agreement between the Company and the
Requisite Holders or (b) if the Company and the Requisite Holders
fail to agree, determined jointly by a nationally recognized
independent investment banking or a nationally recognized
securities valuation firm retained by the Company and by a
nationally recognized independent investment banking or a
nationally recognized securities valuation firm retained by the
Requisite Holders, either of which firms may be an independent
investment banking or securities valuation firm regularly
retained by the Company or any such holder or (c) if the Company
or such holders shall fail so to retain an independent investment
banking or securities valuation firm within ten Business Days
after the retention of such firm by such holders or the Company,
as the case may be, determined solely by the firm so retained or
(d) if the firms so retained by the Company and by such holders
shall be unable to reach a joint determination within 15 Business
Days after the retention of the last firm so retained, determined
by another nationally recognized independent investment banking
<PAGE>
or nationally recognized securities valuation firm which is not a
regular investment banking or securities valuation firm of the
Company or any such holder chosen by the first two such firms.
Initial Date: the meaning specified in section 2.2.
Market Price: on any date specified herein, (a) with
respect to Common Stock, or with respect to Voting Common Stock
(or equivalent equity interests) of an Acquiring Person or its
Parent, the amount per share equal to (x) the last sale price of
shares of such security, regular way, on such date or, if no such
sale takes place on such date, the average of the closing bid and
asked prices thereof on such date, in each case as officially
reported on the principal national securities exchange on which
the same are then listed or admitted to trading, or (y) if no
shares of such security are then listed or admitted to trading on
any national securities exchange but such security is designated
as a national market system security by the NASD, the last
trading price of such security on such date, or if such security
is not so designated, the average of the reported closing bid and
asked prices thereof on such date as shown by the NASDAQ system
or, if no shares thereof are then quoted in such system, as
published by the National Quotation Bureau, Incorporated or any
successor organization, and in either case as reported by any
member firm of the New York Stock Exchange selected by the
Company, or (z) if no shares of such security are then listed or
admitted to trading on any national exchange or designated as a
national market system security and if no closing bid and asked
prices thereof are then so quoted or published in the over-the-
counter market, the higher of (x) the book value thereof as
determined by agreement between the Company and the Requisite
Holders, or if the Company and the Requisite Holders fail to
agree, by any firm of independent public accountants of
recognized standing selected by the Board of Directors of the
Company, as of the last day of any month ending within 60 days
preceding the date as of which the determination is to be made
and (y) the Fair Value thereof; and (b) with respect to any other
securities, the Fair Value thereof.
NASD: the National Association of Securities Dealers.
NASDAQ: the Automated Quotation System of the NASD.
Notes: the meaning specified in the opening paragraphs
of this Warrant.
Options: rights, options or warrants to subscribe for,
purchase or otherwise acquire either Additional Shares of Common
Stock or Convertible Securities.
Other Securities: any stock (other than Common Stock)
and other securities of the Company or any other Person
(corporate or otherwise) which the holders of the Warrants at any
time shall be entitled to receive, or shall have received, upon
the exercise of the Warrants, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been
issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to section 3 or otherwise.
Parent: as to any Acquiring Person, any corporation
<PAGE>
which (a) controls the Acquiring Person directly or indirectly
through one or more intermediaries, (b) is required to include
the Acquiring Person in its consolidated financial statements
under generally accepted accounting principles and (c) is not
itself included in the consolidated financial statements of any
other Person (other than its consolidated subsidiaries).
Person: an individual, a partnership, an association, a
joint venture, a corporation, a limited liability company, a
business, a trust, an unincorporated organization or a government
or any department, agency or subdivision thereof.
Public Offering: any offering of Common Stock or Other
Securities, or any securities issued or issuable with respect to
any Common Stock or Other Securities by way of stock dividend or
stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization
or otherwise, in each case to the public pursuant to an effective
registration statement under the Securities Act.
Purchase Agreement: the meaning specified in the
opening paragraphs of this Warrant.
Purchaser: the meaning specified in the opening
paragraphs of this Warrant.
Registrable Securities: (a) the Warrants, (b) any
shares of Common Stock or Other Securities issued or issuable
upon exercise of the Warrants and (c) any securities issued or
issuable with respect to any Common Stock or Other Securities
referred to in subdivision (b) by way of stock dividend or stock
split or in connection with a combination of shares, recapitali-
zation, merger, consolidation or other reorganization or
otherwise. As to any particular Registrable Securities, once
issued such securities shall cease to be Registrable Securities
when (x) a registration statement with respect to the sale of
such securities shall have become effective under the Securities
Act and such securities shall have been disposed of in accordance
with such registration statement, (y) they shall have been sold
as permitted under Rule 144 (or any successor provision) under
the Securities Act, or (z) they shall have ceased to be
outstanding.
Requisite Holders: the holders of more than 50% of (a)
the Warrants at the time outstanding determined on the basis of
the number of shares of Common Stock or Other Securities
deliverable upon exercise thereof and (b) as to any Warrants that
shall have been exercised, the number of shares of Common Stock
or Other Securities outstanding after giving effect to such
exercise; voting as a single class.
Restricted Securities: (a) any Warrants bearing the
applicable legend set forth in section 8.1, (b) any shares of
Common Stock (or Other Securities) which have been issued upon
the exercise of Warrants and which are required to be evidenced
by a certificate or certificates bearing the applicable legend
set forth in such section, and (c) unless the context otherwise
requires, any shares of Common Stock (or Other Securities) which
are at the time issuable upon the exercise of Warrants and which,
when so issued, will be required to be evidenced by a certificate
<PAGE>
or certificates bearing the applicable legend set forth in such
section.
Securities Act: the Securities Act of 1933, or any
similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the
time of determination.
Series B Preferred Stock: the Series B Convertible
Preferred Stock, par value $.001 per share, of the Company.
Stockholders' Agreement: the Stockholders' Agreement,
dated as of December 21, 1995, among the Company and the
Stockholders signatory thereof.
Subsidiary: any corporation, association or other
business entity a majority (by number of votes) of the Voting
Common Stock of which is at the time owned by the Company or by
one or more Subsidiaries or by the Company and one or more
Subsidiaries.
Transfer: unless the context otherwise requires, any
sale, assignment, transfer, pledge, hypothecation, mortgage,
charge, lien, encumbrance gift, bequest, transmission or other
disposition of any security, provided that the encumbrances
contemplated by, and transfers of securities pursuant to the
terms and provisions of, the Stockholders' Agreement shall not be
deemed to be "transfers".
Voting Common Stock: with respect to any corporation,
association or other business entity, stock of any class or
classes (or equivalent interest), if the holders of the stock of
such class or classes (or equivalent interests) are ordinarily,
in the absence of contingencies, entitled to vote for the
election of a majority of the directors (or persons performing
similar functions) of such corporation, association or business
entity, even if the right so to vote has been suspended by the
happening of such a contingency.
Warrant Price: the meaning specified in section 2.1.
Warrants: the meaning specified in the opening
paragraphs of this Warrant.
14. Remedies. The Company stipulates that the
remedies at law of the holder of this Warrant in the event of any
default or threatened default by the Company in the performance
of or compliance with any of the terms of this Warrant are not
and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a
decree for the specific performance of any agreement contained
herein or by an injunction against a violation of any of the
terms hereof or otherwise.
15. No Rights or Liabilities as Stockholder. Nothing
contained in this Warrant shall be construed as conferring upon
the holder hereof any rights as a stockholder of the Company or
as imposing any liabilities on such holder to purchase any
securities or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors or
<PAGE>
stockholders of the Company or otherwise.
16. Notices. All notices and other communications
under this Warrant shall be in writing and shall be mailed by
registered or certified mail, return receipt requested, addressed
(a) if to any holder of any Warrant or any holder of any Common
Stock (or Other Securities), at the registered address of such
holder as set forth in the register kept at the principal office
of the Company, or (b) if to the Company, to the attention of its
Chief Financial Officer at its principal office, provided that
the exercise of any Warrant shall be effected in the manner
provided in section 1.
17. Expiration; Notice. The right to exercise this
Warrant shall expire at 3:00 P.M., New York City time, December
21, 2002.
18. Miscellaneous. This Warrant and any term hereof
may be changed, waived, discharged or terminated only by an
instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is
sought. The agreements of the Company contained in this Warrant
other than those applicable solely to the Warrants and the
holders thereof shall inure to the benefit of and be enforceable
by any holder or holders at the time of any Common Stock (or
Other Securities) issued upon the exercise of Warrants, whether
so expressed or not. This Warrant shall be construed and
enforced in accordance with and governed by the laws of the State
of New York. The section headings in this Warrant are for
purposes of convenience only and shall not constitute a part
hereof.
GMH HOLDINGS, INC.
By:/s/ Gary M. Brost
Title: President
<PAGE>
FORM OF SUBSCRIPTION
(To be executed only upon exercise of Warrant)
To _________________
The undersigned registered holder of the within
Warrant hereby irrevocably exercises such Warrant for, and
purchases thereunder, __________ shares of Class A Common Stock
and __________ shares of Class B Common Stock of GMH HOLDINGS,
INC., a Delaware corporation, and herewith makes payment of
$_________ therefor [by application pursuant to section 1.5 of
such Warrant of $________ aggregate principal amount of Notes (as
defined in such Warrant) plus $ _______ accrued interest
thereon], and requests that the certificates for such shares be
issued in the name of, and delivered to ______________, whose
address is ______________.
Dated: ________________
(Signature must conform in all respects
to name of holder as specified on the
face of this Warrant)
[insert address]
<PAGE>
FORM OF ASSIGNMENT
(To be executed only upon transfer of Warrant)
For value received, the undersigned registered holder
of the within Warrant hereby sells, assigns and transfers unto
_____________________ the right represented by such Warrant to
purchase __________ shares of Common Stock of GMH HOLDINGS, INC.,
a Delaware corporation, to which such Warrant relates, and
appoints ______________ Attorney to make such transfer on the
books of __________ maintained for such purpose, with full power
of substitution in the premises.
Dated: ________________
(Signature must conform in all respects
to name of holder as specified on the
face of this Warrant)
[insert address]
Signed in the presence of:
<PAGE>
EXHIBIT 4.11
STOCK PURCHASE AGREEMENT
By and Between
KELLY SCOTT HEROLD, as Trustee, GREGORY KEITH SCOTT,
DREW ERIC SCOTT, SAMUEL P. SCOTT, and
SHERRY J. SCOTT, as Joint Tenants and
GENERAL MANUFACTURED HOUSING, INC.
and
GMH ACQUISITION CORP.
Dated as of October 10, 1995
<PAGE>
TABLE OF CONTENTS
Section Page
1. Definitions. . . . . . . . . . . . . . . . . . . . . 1
2. Purchase and Sale of Stock . . . . . . . . . . . . . 4
3. Purchase Price . . . . . . . . . . . . . . . . . . . 4
(a) Cash; Installment Notes . . . . . . . . . . . . 4
(b) Escrow Arrangements . . . . . . . . . . . . . . 4
(c) Interest. . . . . . . . . . . . . . . . . . . . 5
4. Closing . . . . . . . . . . . . . . . . . . . . . . 5
5. Deliveries by the Sellers . . . . . . . . . . . . . 5
6. Deliveries by the Buyer . . . . . . . . . . . . . . 5
7. Joint and Several Representations and Warranties
of the Sellers. . . . . . . . . . . . . . . . . . . 6
(a) Organization; Good Standing; Power; Etc. . . . 6
(b) Capitalization . . . . . . . . . . . . . . . . 6
(c) Effective Agreement. . . . . . . . . . . . . . 7
(d) Consents . . . . . . . . . . . . . . . . . . . 7
(e) Title to Property and Assets . . . . . . . . . 7
(f) Leases and Licensing Agreements. . . . . . . . 8
(g) Agreements, Etc. . . . . . . . . . . . . . . . 9
(h) ERISA. . . . . . . . . . . . . . . . . . . . . 10
(i) Stockholder Agreements . . . . . . . . . . . . 11
(j) Financial Statements . . . . . . . . . . . . . 11
(k) Litigation, Etc. . . . . . . . . . . . . . . . 11
(l) Licenses and Permits . . . . . . . . . . . . . 12
(m) Taxes. . . . . . . . . . . . . . . . . . . . . 12
(n) No Material Adverse Change . . . . . . . . . . 13
(o) Business Property Rights . . . . . . . . . . . 13
(p) Insurance. . . . . . . . . . . . . . . . . . . 13
(q) Inventories. . . . . . . . . . . . . . . . . . 14
(r) Offices. . . . . . . . . . . . . . . . . . . . 14
(s) Company Actions. . . . . . . . . . . . . . . . 14
(t) Related Party Transactions . . . . . . . . . . 15
(u) Undisclosed Liabilities. . . . . . . . . . . . 15
(v) Inaccuracies . . . . . . . . . . . . . . . . . 16
(w) Suppliers and Customers. . . . . . . . . . . . 16
(x) Potential Conflicts of Interest. . . . . . . . 16
(y) Accounts Receivable. . . . . . . . . . . . . . 17
(z) Environmental Compliance . . . . . . . . . . . 17
(aa) Brokers. . . . . . . . . . . . . . . . . . . . 21
(bb) GMH Authorization. . . . . . . . . . . . . . . 21
(cc) GMH Title. . . . . . . . . . . . . . . . . . . 21
<PAGE>
8. Individual Representations and Warranties of the
Sellers . . . . . . . . . . . . . . . . . . . . . . 21
(a) Authority. . . . . . . . . . . . . . . . . . . 21
(b) Effective Agreement. . . . . . . . . . . . . . 21
(c) Title to Stock . . . . . . . . . . . . . . . . 22
(d) Interests in Competitors . . . . . . . . . . . 22
9. Representations and Warranties of the Buyer . . . . 22
(a) Organization; Good Standing; Power . . . . . . 22
(b) Authorization. . . . . . . . . . . . . . . . . 22
(c) Effective Agreement. . . . . . . . . . . . . . 22
(d) Consents . . . . . . . . . . . . . . . . . . . 23
(e) Litigation . . . . . . . . . . . . . . . . . . 23
(f) Brokers. . . . . . . . . . . . . . . . . . . . 23
10. Covenants of the Sellers. . . . . . . . . . . . . . 23
(a) Cooperation. . . . . . . . . . . . . . . . . . 23
(b) Transactions in the Ordinary Course of
Business . . . . . . . . . . . . . . . . . . . 24
(c) Conduct of Business. . . . . . . . . . . . . . 24
(d) Maintenance of Books; Compliance . . . . . . . 24
(e) Access to Properties . . . . . . . . . . . . . 24
(f) Settlement of Obligations. . . . . . . . . . . 24
(g) Further Disclosure . . . . . . . . . . . . . . 24
11. Covenants of the Buyer. . . . . . . . . . . . . . . 25
(a) Cooperation. . . . . . . . . . . . . . . . . . 25
(b) Further Disclosure . . . . . . . . . . . . . . 25
(c) Best Efforts to Obtain Required Financing. . . 25
12. Conditions Precedent to the
Obligations of the Sellers. . . . . . . . . . . . . 25
13. Conditions Precedent to the
Obligations of the Buyer. . . . . . . . . . . . . . 27
14. Additional Covenants. . . . . . . . . . . . . . . . 29
(a) No Shop. . . . . . . . . . . . . . . . . . . . 29
(b) Environmental Covenants. . . . . . . . . . . . 29
15. Indemnification; Survival . . . . . . . . . . . . . 29
(a) Indemnification by the Buyer . . . . . . . . . 29
(b) Joint and Several Indemnification by the
Sellers. . . . . . . . . . . . . . . . . . . . 30
(c) Several Indemnification by the Sellers . . . . 31
(d) Deductibles and Ceilings . . . . . . . . . . . 32
(e) Notice . . . . . . . . . . . . . . . . . . . . 33
(f) Defense of Claims or Actions . . . . . . . . . 33
(g) Cooperation. . . . . . . . . . . . . . . . . . 34
(h) Escrow . . . . . . . . . . . . . . . . . . . . 34
(i) Set Off Rights . . . . . . . . . . . . . . . . 35
(j) Survival . . . . . . . . . . . . . . . . . . . 35
(k) Exclusive Remedy . . . . . . . . . . . . . . . 36
16. Covenants Against Competition . . . . . . . . . . . 36
(a) Non-Compete. . . . . . . . . . . . . . . . . . 36
(b) Confidential Information . . . . . . . . . . . 37
(c) Employees of the Buyer . . . . . . . . . . . . 37
(d) Rights and Remedies Upon Breach. . . . . . . . 37
(e) Severability of Covenants. . . . . . . . . . . 38
(f) Blue-Pencilling. . . . . . . . . . . . . . . . 38
(g) Enforceability in Jurisdictions. . . . . . . . 38
16-A Buyer's Post-Closing Covenants. . . . . . . . . . . 38
17. Termination . . . . . . . . . . . . . . . . . . . . 39
18. Amendments; Waivers, Etc. . . . . . . . . . . . . . 39
19. Expenses. . . . . . . . . . . . . . . . . . . . . . 40
20. Notices, Etc. . . . . . . . . . . . . . . . . . . . 40
21. Assignment. . . . . . . . . . . . . . . . . . . . . 41
22. Applicable Law. . . . . . . . . . . . . . . . . . . 41
23. Entire Agreement. . . . . . . . . . . . . . . . . . 41
<PAGE>
24. Counterparts. . . . . . . . . . . . . . . . . . . . 41
25. Headings. . . . . . . . . . . . . . . . . . . . . . 41
26. Binding Effect; Benefits. . . . . . . . . . . . . . 41
27. Publicity . . . . . . . . . . . . . . . . . . . . . 42
<PAGE>
LIST OF EXHIBITS
Exhibit A - Share Ownership
Exhibit B - Form of Employment Agreement by and between
Samuel P. Scott E. Scott and GMH Acquisition
Corp.
Exhibit C - Form of Employment Agreement by and between
Gregory Keith Scott and Drew Eric Scott and
GMH Acquisition Corp.
Exhibit D - Escrow Agreement
Exhibit E - Form of Installment Promissory Note
Exhibit F - Form of Incentive Compensation Plan
Exhibit G - Form of Stock Subscription Agreements
Exhibit H - Opinion of Holland & Knight
Exhibit I - Opinion of Nixon, Hargrave, Devans & Doyle LLP
<PAGE>
LIST OF SCHEDULES
Schedule 7(a) Organization; Good Standing; Power; Etc.
Schedule 7(b) Capitalization
Schedule 7(c) Effective Agreement
Schedule 7(d) Consents
Schedule 7(e) Title to Property and Assets
Schedule 7(f) Leases and Licensing Agreements
Schedule 7(g) Agreements, Etc.
Schedule 7(h) Pension Plans
Schedule 7(j) Financial Statements
Schedule 7(k) Litigation
Schedule 7(l) Licenses and Permits
Schedule 7(m) Taxes
Schedule 7(n) Material Adverse Changes
Schedule 7(o) Business Property Rights
Schedule 7(p) Insurance
Schedule 7(q) Inventories
Schedule 7(r) Offices
Schedule 7(s) Company Actions
Schedule 7(t) Related Party Transactions
Schedule 7(u) Undisclosed Liabilities
Schedule 7(w) Suppliers and Customers
Schedule 7(x) Potential Conflicts of Interest
Schedule 7(y) Accounts Receivable
Schedule 7(z) Environmental Compliance
Schedule 14(b) Environmental Covenants
<PAGE>
STOCK PURCHASE AGREEMENT
Stock Purchase Agreement dated as of October 10, 1995 by and among
KELLY SCOTT HEROLD, as Trustee, GREGORY KEITH SCOTT, DREW ERIC SCOTT, SAMUEL P.
SCOTT and SHERRY J. SCOTT, as Joint Tenants (individually a "Seller" and
collectively the "Sellers"), GENERAL MANUFACTURED HOUSING, INC., a Georgia
corporation ("GMH") and GMH ACQUISITION CORP., a Delaware corporation (the
"Buyer").
W I T N E S S E T H :
WHEREAS, the Sellers own all of the outstanding shares of capital
stock of GMH;
WHEREAS, GMH is a 99% member and Samuel P. Scott is a 1% member of
Lamar Housing LLC, a Georgia limited liability company ("Lamar" and, together
with GMH, collectively, the "Acquired Entities"; and
WHEREAS, the Sellers desire to sell all of the capital stock and
membership interests of the Acquired Entities to the Buyer, and the Buyer
desires to purchase the same, all upon the terms and conditions hereinafter set
forth (the "Transaction").
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties hereto do hereby agree as follows:
Section 1. Definitions. As used in this Agreement, terms defined
in the preamble and recitals of this Agreement shall have the meanings set forth
therein and the following terms shall have the meanings set forth below.
"Affiliate" shall mean, with respect to any person or entity, any
shareholder, subsidiary, officer, director or partner of such person or entity
and any other person which directly or indirectly controls, is controlled by or
is under common control with such person or entity, whether through the
ownership of securities, by contract or otherwise.
"Agreement" shall mean this Stock Purchase Agreement and all Schedules
and Exhibits hereto, as the same may from time to time be amended.
"Audit Date" shall mean December 31, 1994.
"Audited Financial Statements" shall mean the audited financial
statements of GMH as and for the fiscal years ending December 31, 1992, 1993 and
1994 (including the balance sheets, the related statements of income and cash
flow and the related footnotes thereto), examined by Arthur Andersen LLP for
1994 and by Earl A. Lawson for 1993 and 1992.
"Business Conditions" shall mean, collectively, the business,
properties, condition (financial or otherwise) or prospects (exclusive, in the
case of the Acquired Entities, of circumstances or events generally affecting
businesses competing in the manufactured housing industry) of the person or
entity in question.
"Business Property Rights" shall mean and include all of the Acquired
Entities' right, title and interest in and to the name "General Manufactured
Housing", all domestic and foreign patents, patent licenses and applications,
trademarks, trademark licenses and applications, trade names, trade name
licenses and applications, copyrights, copyright licenses and applications, know
how, trade secrets, formulae, computer software, processes, technology,
innovations, inventions, manufacturing drawings, engineering drawings, product
designs, product patterns, and other intangible property rights of the Acquired
Entities, together with all other intangible personal property owned by the
Acquired Entities.
"Closing" shall mean the closing of the transactions contemplated by
this Agreement in Buffalo, New York on the Closing Date or in such other place
as may be agreed to by the parties to this Agreement.
"Closing Date" shall mean a date on or after the conditions specified
in Sections 12 and 13 hereof have been satisfied or waived, but in no event
later than November 30, 1995 or such other date as may be agreed to by the
parties to this Agreement.
"Code" shall mean the Internal Revenue Code of 1986 and all
regulations promulgated thereunder, as the same have from time to time been
amended.
"Employment Agreements" shall mean the employment agreements between
the Buyer and each of Samuel P. Scott, Gregory K. Scott and Drew E. Scott,
substantially in the forms of Exhibits B and C hereto.
"Environmental Reports" shall mean the following reports prepared by
United Consulting Group, Ltd: Phase 1 Environmental Site Assessment for
<PAGE>
Plants 1, 2 and 3 dated August 25, 1995; Asbestos Survey, Radon Gas Testing and
Sanborn Map Review for Plants 1, 2, 3 and 4 dated September 18, 1995; Phase 2
Environmental Site Assessment Report for Plants 1, 2 and 3 dated September 21,
1995; Phase 1 Environmental Site Assessment Report for Plant 4 dated October 2,
1995 and Draft Phase 1 Environmental Site Assessment Report for Plant 5 dated
October 6, 1995.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974
(and any sections of the Code amended by it) and all regulations promulgated
thereunder, as the same have from time to time been amended.
"Escrow Agent" shall mean Manufacturers & Traders Trust Company, or
such other financial institution as is mutually acceptable to the parties
hereto.
"Escrow Agreement" shall mean the escrow agreement by and between the
Buyer, the Sellers and the Escrow Agent substantially in the form of Exhibit D
hereto.
"Escrowed Funds" shall mean the sum of $1,000,000 deposited with the
Escrow Agent pursuant to Section 3(b) hereof.
"Financial Statements" shall mean the Audited Financial Statements and
the Unaudited Financial Statements.
"GAAP" shall mean generally accepted accounting principles, as in
effect from time to time.
"Litigation Expense" shall mean any expenses incurred in connection
with investigating, defending or asserting any claim, action, suit or proceeding
incident to any matter indemnified against under this Agreement, including,
without limitation, court filing fees, court costs, arbitration fees or costs,
witness fees, and fees and disbursements of legal counsel (whether incurred in
any action or proceeding between the parties to this Agreement or between any
party to this Agreement and any third party), investigators, expert witnesses,
accountants and other professionals.
"Loss" shall mean any loss, obligation, claim, liability, settlement
payment, award, judgment, fine, penalty, interest charge, expense, damage or
deficiency or other charge, other than Litigation Expense.
"Net Worth" shall mean total assets minus total liabilities, as those
terms are defined by GAAP.
"Person" shall mean and include an individual, a corporation, a
partnership, a limited liability company, a limited liability partnership, a
joint venture, a trust, an unincorporated association, a government or political
subdivision or agency thereof or any other entity.
"Premises" shall mean the facilities owned or leased by the Acquired
Entities which are identified in the Environmental Reports.
"Sellers knowledge" or the equivalent language used herein shall mean
facts actually known or recollected by any of the Sellers, independently and
after review of reports prepared for the Sellers in connection with the
Transaction, including, without limitation, the Environmental Reports, and after
investigation limited to inquiry of Messrs. Wayne Roberts, Lannis Thomas, Neal
Conner, Esq. and Tim Vinson at or about the time of execution and delivery of
this Agreement and shall not include or be deemed to include facts that the
Sellers might have learned through more extensive investigation.
"Stock" shall mean the shares of capital stock and limited liability
company interests to be sold by the Sellers to the Buyer, as set forth in
Exhibit A hereto.
"Unaudited Financial Statements" shall mean the unaudited financial
statements of GMH as and for the nine month period ending September 30, 1995,
including the balance sheet, the related statements of income and cash flow and
the related footnotes thereto.
"Working Capital" shall mean total current assets minus total current
liabilities, as those terms are defined by GAAP.
Section 2. Purchase and Sale of Stock. In reliance on the
representations and warranties, upon the terms, and subject to the
<PAGE>
conditions of this Agreement, the Buyer agrees to purchase and accept delivery
from the Sellers and GMH, and the Sellers and GMH agree to sell, assign,
transfer and deliver to the Buyer, at the Closing provided for in Section 4
hereof, all of the Stock held by them, free and clear of all liens, claims,
charges, restrictions, equities or encumbrances of any kind.
Section 3. Purchase Price.
(a) Cash; Installment Notes. As consideration for the Stock, the
Buyer, at the Closing, will pay to the Sellers cash in the amount of $46,000,000
(which amount will be allocated among the Sellers as set forth in Exhibit A
hereto), less, if elected by the Sellers to be paid out of such amount, the
amount of any debt repayment required pursuant to the terms of this Agreement.
Such amount, less any amounts deposited with the Escrow Agent pursuant to
Section 3(b) hereof, shall be paid by wire transfer of immediately available
funds and by delivery of the installment promissory notes, substantially in the
form of Exhibit E attached hereto in such amounts as are mutually agreed by the
parties hereto.
(b) Escrow Arrangements. At the Closing, the Buyer shall cause to be
deposited with the Escrow Agent, in cash, in immediately available funds, the
Escrowed Funds. Any payment of the Escrowed Funds to the Sellers shall be made
in accordance with the provisions of Section 15(h) hereof.
(c) Interest. In the event the Closing occurs after October 31,
1995, the Buyer agrees to pay to the Sellers in cash, on the Closing Date,
interest at the rate of 8% per annum on $46,000,000 for each day from November
1, 1995 until the Closing occurs, such amount to be allocated among the Sellers
as set forth on Exhibit A hereto. In addition, in the event the Closing occurs
after October 31, 1995, the Sellers shall be permitted to withdraw, immediately
prior to the Closing, the amount of cash in GMH on October 31, 1995 less
$100,000 and less any amounts required to repay any debt of GMH in accordance
with the terms of this Agreement, if so elected by the Sellers pursuant to
Section 3(a) hereof.
Section 4. Closing. The Closing shall take place at the offices
of Nixon, Hargrave, Devans & Doyle LLP, Buffalo, New York (or at such other
place as the parties may mutually agree) at 10:00 in the forenoon, local time,
on October 31, 1995 or on such other date as the parties may mutually agree (the
"Closing Date"), but in no event later than November 30, 1995.
Section 5. Deliveries by the Sellers. At the Closing, the Sellers
and GMH will deliver to the Buyer:
(a) Stock certificates and other evidence of ownership for the Stock,
free and clear of all liens, claims, charges, restrictions, equities or
encumbrances of any kind, which certificates shall be duly endorsed to the Buyer
or accompanied by duly executed stock powers in form satisfactory to the Buyer,
and to which all required transfer tax stamps shall be affixed;
(b) A certificate of the Sellers certifying as to the accuracy of the
Sellers' representations and warranties at and as of the Closing and that the
Sellers have performed and complied with all of the terms, provisions and
conditions to be performed and complied with by the Sellers at or before the
Closing; and
(c) Such other certificates and documents as the Buyer or its counsel
may reasonably request.
Section 6. Deliveries by the Buyer. At the Closing, the Buyer
will deliver to the Sellers:
(a) Cash and installment promissory notes of the Buyer in the
aggregate principal amount of $46,000,000, allocated among the Sellers as set
forth on Exhibit A attached hereto, less, if elected to be paid by the Sellers
out of such amount, the amount of any debt of GMH required to be paid under the
terms of this Agreement. Each of such notes shall be in the form of Exhibit E
hereto, with the blanks appropriately completed;
(b) A certificate of the Buyer certifying as to the accuracy of the
Buyer's representations and warranties at and as of the Closing and that the
Buyer has performed and complied with all of the terms, provisions and
conditions to be performed and complied with by the Buyer at or before the
Closing; and
<PAGE>
(c) Such other certificates and documents as the Sellers or their
counsel may reasonably request.
Section 7. Joint and Several Representations and Warranties of the
Sellers. Each of the Sellers jointly and severally represents and warrants to
the Buyer as follows:
(a) Organization; Good Standing; Power; Etc. GMH is a duly organized,
validly existing corporation in good standing under the laws of the State of
Georgia. Lamar is a duly organized, validly existing limited liability company
in good standing under the laws of the State of Georgia. Each of the Acquired
Entities has all requisite power, authority and capacity to own, lease and
operate its properties, and to carry on its business as the same is now being
conducted. Each of the Acquired Entities is qualified as a foreign corporation
or limited liability company, as applicable and is in good standing in all such
other jurisdictions, set forth on Schedule 7(a) hereto, where the business
conducted or the assets owned by it requires such qualification, except where
the failure to so qualify would not have a material adverse effect on the
Business Conditions of such Acquired Entity. Except as otherwise set forth on
Schedule 7(a) hereto, none of the Acquired Entities have any equity interest,
direct or indirect, in any corporation, partnership, joint venture or other
entity. Set forth on Schedule 7(a) hereto is a true, complete and correct list
of all the assumed names or trade names under which any of the Acquired Entities
conducts business.
(b) Capitalization. Set forth on Schedule 7(b) hereto is a
description of the authorized, issued and outstanding equity interests of each
of the Acquired Entities and the names of the persons to whom it is issued.
There are no other classes or series of capital stock or other equity interest
of any of the Acquired Entities authorized, issued or outstanding. All of the
issued and outstanding shares of capital stock or other equity interest of each
of the Acquired Entities are validly issued, fully paid and non-assessable with
no liability attaching to the ownership thereof. Except as set forth on Schedule
7(b), there are no outstanding rights of subscription, warrants, call options,
contracts or other agreements of any kind, issued or granted by any of the
Sellers or any of the Acquired Entities, to purchase or otherwise acquire
securities of any of the Acquired Entities.
(c) Effective Agreement. Except as set forth on Schedule 7(c)
hereto, the execution, delivery and performance of this Agreement by each of the
Sellers and the consummation of the Transaction do not and will not: (i)
conflict with, violate or result in the breach of any of the terms or conditions
of, or constitute a default under, the organizational or constituent documents
of any of the Acquired Entities, or any contract, agreement, commitment,
indenture, mortgage, pledge, note, bond, license, permit or other instrument or
obligation to which any of the Acquired Entities is a party or by which any of
the Acquired Entities or their assets may be bound or affected, or any law,
regulation, ordinance or decree to which any of the Acquired Entities or their
assets are subject, except for (A) requirements for consents of governmental
authorities, persons or entities referred to in Section 7(d) hereof and (B) such
violations, breaches or defaults which would not have a material adverse effect
on the Business Conditions of any of the Acquired Entities or on the Sellers'
ability to consummate the Transaction and other transactions contemplated hereby
to which they are parties; or (ii) result in the creation or imposition of any
lien, security interest, charge, encumbrance, restriction or right, including
rights of termination or cancellation, in or with respect to, or otherwise
materially adversely affect, any of the properties, assets or businesses of any
of the Acquired Entities (other than liens, security interests, charges,
encumbrances, restrictions or rights arising in connection with the financing of
the Transaction).
(d) Consents. No permit, consent, approval, or authorization of, or
designation, declaration or filing with, any governmental authority or any other
person or entity on the part of any of the Sellers or any of the Acquired
Entities is required in connection with the execution or delivery by any of the
Sellers of this Agreement or the consummation of the Transaction other than
those specified in Schedule 7(d) hereto, except where the failure to obtain such
consent would not have a material adverse effect on the Business Conditions of
any of the Acquired Entities or on the Transaction.
(e) Title to Property and Assets. A list of, to Sellers' knowledge,
all the property and assets, real and personal, tangible and intangible, having
a book value in excess of $20,000.00, owned by each of
<PAGE>
the Acquired Entities is set forth in Schedule 7(e) hereto (including, but not
limited to, a list of all motor vehicles and vehicle I.D. numbers, and all bank
accounts maintained by each of the Acquired Entities). Except as set forth in
Schedule 7(e) hereto, to Sellers' knowledge, each of the Acquired Entities has
good and marketable title to all such properties and assets, subject to no
mortgage, pledge, lien, security interest, lease, charge, encumbrance or
conditional sale or other title retention agreement (collectively,
"Encumbrances"), except for such Encumbrances which do not materially adversely
affect the use, operation or transfer of such property or asset. Except as set
forth on Schedule 7(e) hereto, to Sellers' knowledge, all plants, warehouses,
structures and equipment of each of the Acquired Entities are in good operating
condition and repair, normal wear and tear excepted (meaning that, to Sellers'
knowledge, the aggregate repair costs to be incurred by the Acquired Entities
during the 12 months following the Closing will not materially exceed historical
repair costs on a per plant basis). To Sellers' knowledge, no property or asset
owned or leased by any of the Acquired Entities is in violation of any
applicable building or zoning law in respect thereof. The assets, properties,
rights and business of each of the Acquired Entities constitute all of the
material assets, properties and rights in which the Sellers (or any of their
Affiliates) have any interest, direct or indirect, and which are used in
connection with the business of the Acquired Entities. Except as set forth in
Schedule 7(e) hereto, there are no other material assets which are used
substantially on an exclusive basis in connection with the business of the
Acquired Entities which are not owned by the Acquired Entities.
(f) Leases and Licensing Agreements. Schedule 7(f) hereto contains a
list and brief description of, all leases of real property and all franchises,
licensing agreements and leases of (or other arrangements for the use of) any
item of personal property to which any of the Acquired Entities is a party,
either as lessor or lessee and which involves annual payments of at least
$25,000. Each of the Acquired Entities enjoys peaceful and undisturbed
possession under all leases under which it is now operating and no substantial
portion of which expires within a one year period. To Sellers' knowledge, all
such leases, franchises and licensing agreements are in good standing and are
valid and effective in accordance with their respective terms, and to Sellers'
knowledge, there are no existing defaults or events of default or events which
with notice or lapse of time or both would constitute defaults, the consequences
of which would permit the acceleration of payments due under or the termination
of any of such leases, franchises or licensing agreements. None of the Sellers
or, to Sellers' knowledge, any of the Acquired Entities have given or received
any notice, nor do the Sellers have any knowledge, of any claimed default with
respect to any lease, franchise or licensing agreement set forth in Schedule
7(f) hereto. Except for any consents referred to in Section 7(d) hereto, to
Sellers' knowledge, the continuation, validity and effectiveness of all such
leases, franchises and licensing agreements will in no way be adversely affected
by the Transaction.
(g) Agreements, Etc. Set forth in Schedule 7(g) hereto are complete
and accurate lists of the following:
(i) all indentures, mortgages, agreements, contracts,
arrangements, commitments, instruments, understandings or obligations,
oral or written, of each of the Acquired Entities, which are to be
performed by any party in whole or in part on or after the date of
Closing, including, without limitation, all product warranties,
individually obligating the Acquired Entities in amounts greater than
$25,000 (other than purchase orders for goods entered into by any of
the Acquired Entities in the ordinary course of business which
individually do not exceed $75,000);
(ii) all agreements, contracts, understandings, arrangements and
obligations, oral or written, of each of the Acquired Entities with
any supplier to which any of the Acquired Entities has paid more than
$250,000 in any of the last three fiscal years, or with any customer
which has paid to any of the Acquired Entities more than $500,000 in
any of the last three fiscal years;
(iii) all employee bonus, incentive, compensation, profit sharing,
retirement, pension, group insurance, death benefit or other fringe
benefit plans, deferred compensation and post-termination obligations
or trust agreements of each of the Acquired Entities in effect or
under which any amounts remain unpaid on the date of Closing or are to
become effective after the date of Closing;
<PAGE>
(iv) all collective bargaining agreements of each of the Acquired
Entities with any labor union or other representative of employees,
including local agreements, amendments, supplements, letters and
memoranda of understanding of all kinds and all employment and
consulting contracts not terminable at will without penalty to which
any of the Acquired Entities is a party;
(v) each instrument defining the terms on which funded
indebtedness of or guarantees by any of the Acquired Entities in
excess of $25,000 have been or may be issued;
(vi) any agreement limiting the freedom of any of the Sellers or
any of the Acquired Entities to compete in any line of business or
with any person, or limiting the freedom of any other person to
compete with any of the Sellers or any of the Acquired Entities;
(vii) all other agreements, contracts, arrangements, commitments,
instruments, understandings, or obligations, oral or written, to which
any of the Acquired Entities is a party and in which any Seller or any
Affiliate of any of the Acquired Entities has any interest, direct or
indirect, which involve payments of more than $25,000 to or from any
of the Acquired Entities;
(viii) the amounts and terms of all loans or advances individually
in excess of $25,000 by any of the Acquired Entities to the Sellers or
their Affiliates or the employees and Affiliates of any of the
Acquired Entities; and
(ix) a summary of the anticipated terms and conditions of any
item currently being negotiated by or on behalf of any of the Acquired
Entities which would upon completion be included within the scope of
paragraphs (i) through (viii) of this Section 7(g).
Except as set forth on Schedule 7(g) hereto, (A) there are no
agreements in effect which are required to be listed on Schedule 7(g) hereto
which permit any of the Acquired Entities to incur debt for borrowed money to
any bank, insurance company or other financial institution; (B) to Seller's
knowledge none of the rights or obligations of any of the Acquired Entities
under any indenture, mortgage, agreement, contract, arrangement, commitment,
instrument, understanding or obligation listed on Schedule 7(g) hereto will be
materially adversely affected by the Transaction; and (C) to Seller's knowledge,
there is no material default or claimed or purported or alleged default or state
of facts which with notice or lapse of time or both would constitute a material
default on the part of any party in the performance of any obligation to be
performed or paid by any party under any indenture, mortgage, agreement,
contract, arrangement, commitment, instrument, understanding or obligation
listed on Schedule 7(g) hereto.
(h) ERISA. Schedule 7(h) lists, to Sellers' knowledge, all the
employee benefit plans, programs and arrangements (the "Plans") maintained for
the benefit of any current or former employee, officer or director of any of the
Acquired Entities or any other corporation or trade or business which must be
aggregated with any of the Acquired Entities as required by any subsection of
Section 414 of the Code (an "ERISA Affiliate"), and the Buyer has been furnished
with a copy of each Plan and each material document prepared in connection with
each Plan. None of the Plans are or are required to be qualified under Section
401(a) of the Code.
(i) Stockholder Agreements. On the Closing Date, there will be no
agreements, written or oral between any of the Acquired Entities and any Seller
(or any Affiliates of such Seller) or any other person, or between or among any
of the Sellers, relating to the acquisition, disposition or voting of the
capital stock of any of the Acquired Entities.
(j) Financial Statements. Except as set forth on Schedule 7(j)
hereto, the Audited Financial Statements (i) to Sellers' knowledge, are true,
correct and complete in every material respect, (ii) have been prepared in
accordance with the books and records of GMH, (iii) present fairly the financial
position and results of operations of GMH, as of the dates and for the periods
indicated, and (iv) have been prepared in accordance with GAAP applied on a
consistent basis for GMH. Except as set forth on Schedule 7(j) hereto, to
Sellers' knowledge, the Unaudited Financial Statements (i) are true, correct and
complete in every material respect, (ii) have been prepared in accordance with
the books and records of GMH, (iii) present fairly the financial position and
results of operations of GMH, as of the date and for the period indicated and
(iv)
<PAGE>
have been prepared in accordance with GAAP applied on a consistent basis for
GMH. As of the Audit Date, the amounts due or accrued to any Seller from GMH
(other than for employment compensation and shareholder distributions) were as
set forth on Schedule 7(j) hereto, and GMH has not incurred or will not incur
any liability for any additional amounts of such accruals or amounts due
subsequent to the Audit Date.
(k) Litigation, Etc. Except as set forth on Schedule 7(k)
hereto, there is no suit, action or litigation, administrative hearing,
arbitration, labor controversy or negotiation, or other proceeding or
governmental inquiry or investigation affecting any of the Acquired
Entities or their respective properties (including product liability,
environmental or land use proceedings) pending or to Sellers' knowledge,
threatened against any of the Acquired Entities which, if resolved
adversely, would have a material adverse effect on the Business Conditions
of any of the Acquired Entities. There are no judgments, consent decrees
or injunctions against, or to Seller's knowledge, affecting or binding upon
any of the Acquired Entities or any officer or director thereof. To
Sellers' knowledge, each of the Acquired Entities is in compliance with all
laws, ordinances, requirements, orders and regulations applicable to its
business (including, without limitation, the National Manufactured Housing
Construction and Safety Standards Act of 1974, as amended, and regulations
promulgated thereunder by the United States Department of Housing and Urban
Development, as amended), the violation of which would have a material
adverse effect on its Business Conditions, and none of the Sellers or any
of the Acquired Entities have received notice of any claimed default with
respect to any of the foregoing that was not resolved in the ordinary
course of business.
(l) Licenses and Permits. Schedule 7(l) hereto contains a complete
and accurate list and brief description of, to Sellers' knowledge, all
governmental licenses and permits issued in the name or for the benefit of any
of the Acquired Entities. To Sellers' knowledge, none of the Acquired Entities
is required, nor will be required in connection with or as a result of the
Transaction, to possess or obtain any governmental license or permit except for
those described on Schedule 7(l) hereto. Except as set forth on Schedule 7(l)
hereto, to Sellers' knowledge, all such licenses and permits may be transferred
to the Buyer as contemplated by this Agreement.
(m) Taxes. Each of the Acquired Entities has duly filed all federal,
state, local, foreign and other tax returns which are required to be filed by
it, and all such returns are true and correct. Each of the Acquired Entities has
paid all taxes pursuant to such returns or pursuant to any assessments received
by it or which it is obligated to withhold from amounts owing to any employee,
creditor or third party. Except as set forth on Schedule 7(m), the tax returns
of any Acquired Entity have not been audited by the relevant taxing authorities
in any of the six consecutive years immediately preceding the Closing Date, no
returns of any of the Acquired Entities are currently being audited by any
local, state or federal authority, and none of the Acquired Entities have been
notified by any such authority of a forthcoming audit. All monies required to be
withheld by any of the Acquired Entities from employees for income taxes, Social
Security and unemployment insurance taxes have been collected or withheld, and
either paid to the respective governmental agencies or set aside in accounts for
such purpose, or accrued, reserved against, and entered upon the books of such
Acquired Entity, as applicable. Set forth on Schedule 7(m) hereto are all
elections made by each of the Acquired Entities or by any of the Sellers under
the Code or any state, local, foreign or other tax law affecting any tax return
for any of the Acquired Entities covering fiscal years ending in or after 1989.
All such elections were, to Sellers' knowledge, valid when made and are
currently valid, and no Acquired Entity nor any Seller will take any action
which would result in the termination of such election prior to the Closing
Date, without the prior written consent of the Buyer.
(n) No Material Adverse Change. Except as described in Section 7(a)
hereto, since the Audit Date, there has been no material adverse change in the
condition of any of the Acquired Entities, financial or otherwise, as shown on
the balance sheets referred to in Section 7(j) hereof as at the Audit Date. To
Sellers' knowledge, there is no fact, condition, proposal or circumstance which
exists or which any Seller has reason to believe may exist in the future
relating to the business of any of the Acquired Entities, which materially
adversely affects the same, or which more than likely will in the future
materially adversely affect the same, which has not been disclosed on Schedule
7(n) hereto. Anything herein to the contrary notwithstanding, the Sellers make
no representation or warranty as to the future prospects of the manufactured
housing industry
<PAGE>
in general, in whole or in part. Except as shown on Schedule 7(n), to Sellers'
knowledge, there are no controversies pending between any of the Acquired
Entities and any of their employees which have affected or more than likely will
in the future affect the Business Conditions of any of the Acquired Entities.
(o) Business Property Rights. Set forth on Schedule 7(o) hereto is,
to Sellers' knowledge, a complete and accurate, in every material respect, list
and brief description of all Business Property Rights owned or held by any of
the Acquired Entities or for which application has been made as of the date
hereof. Except as described on Schedule 7(o) hereto, to Sellers' knowledge, the
Acquired Entities have the sole and exclusive right to use all such Business
Property Rights. Except as set forth on Schedule 7(o) hereto, none of the
Sellers or, to Sellers' knowledge, any of the Acquired Entities have received
any notice of any claimed conflict with respect to the Business Property Rights
of others. Except as set forth on Schedule 7(o) hereto, to Sellers' knowledge,
all such Business Property Rights are fully assignable without the consent of
any third party and without infringing or violating the rights of any third
party.
(p) Insurance. Schedule 7(p) hereto contains a list of, to Sellers'
knowledge, all insurance policies of each of the Acquired Entities and a
description of the terms thereof. To Sellers' knowledge, all of the insurance
policies listed on Schedule 7(p) are valid and enforceable in accordance with
their terms and in full force and effect. To Sellers' knowledge, such policies
carry such limits of liability and coverage for such risks and liabilities as
are customary for companies engaged in the same or similar business activities.
None of the Sellers or any of the Acquired Entities have received any notice of
any cancellation, modification, change in premium or denial of renewal in
connection with any of the insurance policies listed on Schedule 7(p) hereto or
any renewal of any of them. Except as set forth on Schedule 7(p) hereto, to
Sellers' knowledge, no claims, other than workers' compensation claims, in
excess of $50,000 each or $100,000 in the aggregate have been made or are
pending on such insurance policies since January 1, 1992.
(q) Inventories. Schedule 7(q) hereto contains a list of the
locations at which the inventories of any of the Acquired Entities are located.
To Sellers' knowledge, the inventory of each of the Acquired Entities (including
that reflected on the balance sheet contained as part of the Unaudited Financial
Statements) is, or was prior to the Closing Date, in good condition and suitable
and usable in the ordinary course of business at the aggregate amounts carried
on such balance sheet (net of reserves for obsolete or otherwise unusable
inventory) and on the books and records of the Acquired Entities at September
30, 1995. To Sellers' knowledge, such inventory is in sufficient supply,
consistent with past practice and projected operations, to furnish the inventory
requirements of the business of each of the Acquired Entities in the ordinary
course of business and is not materially in excess of the normal purchasing
patterns of any of the Acquired Entities. To Sellers' knowledge, the value of
finished goods inventory returned to any of the Acquired Entities by all of
their customers and not resold has not exceeded 5% of the total value of their
finished goods inventories during the last 12 months.
(r) Offices. The Acquired Entities maintain principal executive
offices and other offices at the locations set forth on Schedule 7(r) hereto,
and the books and records of each of the Acquired Entities are kept at the
location set forth on such Schedule. During the four months immediately
preceding the Closing Date, none of the Acquired Entities have changed their
name, the location of their principal executive offices, their identity or their
structure, except as contemplated by this Agreement.
(s) Company Actions. Since the Audit Date, except as otherwise
contemplated by this Agreement or as set forth in Schedule 7(s) hereto, none of
the Acquired Entities have:
(i) issued any capital stock, bonds or other corporate
securities,
(ii) borrowed any amount or incurred or become subject to any
liabilities (absolute or contingent) except current liabilities
incurred, and liabilities under contracts entered into, in the
ordinary course of business,
(iii) discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent) other than current
liabilities shown on their balance sheet as at the Audit
<PAGE>
Date, or current liabilities incurred since the Audit Date in the
ordinary course of business,
(iv) declared or made any payment or distribution to stockholders
in respect to their capital stock or purchased or redeemed any shares
of their capital stock,
(v) split or otherwise subdivided or reclassified their shares,
(vi) mortgaged, pledged or subjected to lien, charge or any other
encumbrance any of their assets, tangible or intangible, except
possible mechanics' liens or liens of real or personal property taxes
not yet due and payable,
(vii) sold, assigned or transferred any of its tangible assets or
cancelled any debts or obligations (except in the ordinary course of
business),
(viii) sold, assigned or transferred any Business Property Rights,
(ix) suffered any extraordinary losses, or waived any rights of
substantial value (whether or not in the ordinary course of business),
(x) made any changes in officer compensation, except in the
ordinary course of business and consistent with past practice,
(xi) made any investment in, advanced any money to, or guaranteed
any obligation of any third person or entity, or
(xii) entered into any transaction other than in the ordinary
course of business.
(t) Related Party Transactions. Except as set forth on Schedule 7(t)
hereto, none of the Acquired Entities is currently, directly or indirectly,
purchasing, acquiring or leasing any property from, or selling, transferring or
leasing any property to, or entering into any other transaction or agreement
with, any of the Sellers or their Affiliates or any Affiliate of any of the
Acquired Entities.
(u) Undisclosed Liabilities. Except as set forth on Schedule 7(u)
hereto or otherwise disclosed in the various schedules delivered pursuant to
this Section 7, to Sellers' knowledge, there are no material liabilities of any
of the Acquired Entities of any kind whatsoever, whether or not accrued and
whether or not contingent, absolute, determined or determinable, and to Sellers'
knowledge, there is no existing condition which could reasonably result in such
liability, other than liabilities reflected or reserved against on the Audited
Financial Statements ending on the Audit Date or on the Unaudited Financial
Statements.
(v) Inaccuracies. To Sellers' knowledge, neither the financial
statements referred to in Section 7(j) hereof, nor this Agreement, nor any
schedule, certificate or statement furnished by or on behalf of any of the
Sellers or any of the Acquired Entities pursuant to this Agreement, contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained therein not misleading; and to
Sellers' knowledge, there is no fact in connection with this Agreement which
materially adversely affects the Business Conditions of any of the Acquired
Entities which has not been set forth herein or in a schedule, certificate or
statement furnished to the Buyer by or on behalf of any of the Sellers or any of
the Acquired Entities.
(w) Suppliers and Customers. Except as set forth on Schedule 7(w)
hereto, to Sellers' knowledge, no supplier or customer listed on Schedule 7(g)
hereto has cancelled or otherwise terminated, or made any written threat to any
of the Sellers or any of the Acquired Entities to cancel or otherwise terminate,
for any reason, including the contemplated consummation of the Transaction, its
relationship with any of the Acquired Entities, or has at any time on or after
January 1, 1995 decreased materially its services or supplies to any of the
Acquired Entities in the case of any such supplier, or its purchases of the
products of any of the Acquired Entities, or made any written claim that any
product sold by any of the Acquired Entities failed to meet any specification
with respect thereto or was otherwise defective, in the case of any such
customer, other than in the ordinary course of business. Except as set forth on
<PAGE>
Schedule 7(w), none of the Sellers has any knowledge that any such supplier or
customer intends to cancel or otherwise terminate its relationship with any of
the Acquired Entities or to decrease materially its services or supplies to any
of the Acquired Entities, or its purchases of the products of any of the
Acquired Entities, as the case may be.
(x) Potential Conflicts of Interest. Except as set forth in Schedule
7(x), none of the Sellers or any Affiliate of any of the Acquired Entities (i)
is an officer, director, employee or consultant of, or owns or otherwise
controls any person which is, or is engaged in business as, a competitor,
customer or supplier of any of the Acquired Entities in connection with their
respective businesses; (ii) owns, directly or indirectly, in whole or in part,
any tangible or intangible property which any of the Acquired Entities is using
in a material way in connection with its business or the use of which is
necessary for its business; or (iii) has any cause of action or other claim
whatsoever against, or owes any amount to any of the Acquired Entities, except
for claims in the ordinary course of business, such as for accrued vacation pay,
accrued benefits under employee benefit plans and similar matters and agreements
existing on the date hereof.
(y) Accounts Receivable. To Sellers' knowledge, all of the accounts
receivable (net of reserves for uncollectible accounts) reflected on the balance
sheets referred to in Section 7(j) hereof and in the books and records of each
of the Acquired Entities are valid and arose in the ordinary course of business.
Except as set forth on Schedule 7(y) hereto, none of the Sellers has any
knowledge of any such account receivable with a value in excess of $50,000 that
is being contested or disputed by the obligor thereon.
(z) Environmental Compliance. Except as set forth on Schedule 7(z)
hereto or on the Environmental Reports, to Sellers' knowledge:
(i) (A) The Premises are not being and have not been used for
the treatment, storage, generation, transportation,
processing, handling or production of any Hazardous
Substance, or for the storage of petroleum or petroleum
based products other than those referenced herein.
(B) The Premises are not being and have not been used for
the disposal of any Hazardous Substance, or as a
landfill, or other waste disposal site or for military,
manufacturing or industrial purposes.
(C) The Premises are not being and have not been used for
storage, treatment, generation, transportation,
processing, handling, production or disposal of any
Hazardous Waste as that term is defined under RCRA,
CERCLA, or comparable state Environmental Laws, and the
regulations thereunder (hereinafter, "Hazardous
Waste"), or as a Hazardous Waste landfill or other
Hazardous Waste disposal site.
(ii) Underground storage tanks are not and have not been located on
the Premises.
(iii) The soil, subsoil, bedrock, surface water and groundwater of the
Premises are free of any Hazardous Substances.
(iv) There has been no Release nor is there the threat of a Release
of any Hazardous Substance on, at or from the Premises which
through soil, subsoil, bedrock, surface water or groundwater
migration could come to be located on the Premises, and the
Seller has not received any form of notice or inquiry from any
federal, state or local governmental agency or authority, any
operator, licensee or occupant of the Premises or any other
person with regard to a Release or the threat of a Release of
any Hazardous Substance on, at or from the Premises.
(v) All necessary Environmental Permits have been obtained and are
in full force and effect.
(vi) No event has occurred with respect to the Premises which, with
the passage of time or the giving of notice, or both,
<PAGE>
would constitute a violation of any applicable Environmental Law
or non-compliance with any Environmental Permit, and at all
times, the Premises and all present and prior uses thereof have
complied with all Environmental Laws.
(vii) There are no agreements, consent orders, decrees, judgments,
license or permit conditions or other orders or directives of
any federal, state or local court, governmental agency or
authority relating to the past, present or future ownership,
use, operation, sale, transfer or conveyance of the Premises
which require any change in the present condition of the
Premises or any work, repairs, construction, containment, clean
up, investigations, studies, removal or other remedial action or
capital expenditures with respect to the Premises.
(viii) There are no actions, suits, claims or proceedings, pending,
contemplated, or threatened, which could cause the incurrence of
expenses or costs of any name or description or which seek money
damages, injunctive relief, remedial action or any other remedy
that arise out of, relate to or result from (A) a violation or
alleged violation of any applicable Environmental Law or non-
compliance or alleged non-compliance with any Environmental
Permit, (B) the presence of any Hazardous Substance or a release
or the threat of a Release of any Hazardous Substance on, at or
from the Premises or (C) human exposure to any Hazardous
Substance, noises, vibrations or nuisances of whatever kind to
the extent the same arise from the condition of the Premises or
the ownership, use, operation, sale, transfer or conveyance
thereof.
(ix) Each Acquired Entity is in compliance with all applicable
Environmental Laws.
(x) None of the Acquired Entities have (A) received any notice of,
or (B) been subject to, any administrative or judicial
proceeding pursuant to any applicable Environmental Law, either
now or at any time during the past three years.
(xi) There are no present facts or circumstances that could form the
basis for the assertion of any claim against any Acquired Entity
relating to environmental matters including, without limitation,
any claim arising from past or present environmental practices
asserted under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), the Resource
Conservation and Recovery Act ("RCRA") or any other federal,
state or local environmental statute.
For purposes of this Section 7(z), the following terms shall have the
meanings set forth below:
"Environment" means any water or water vapor, including groundwater
and surface water, any land, including land surface or subsurface, air, fish,
wildlife, biota and all other natural resources.
"Environmental Laws" mean all federal, state and local environmental,
land use, zoning, health, chemical use, safety and sanitation laws,
environmental permit requirements statutes, ordinances, rules, regulations and
codes relating to the protection of the Environment, including, but not limited
to those laws and requirements governing the use, storage, treatment,
generation, transportation, processing, handling, production or disposal of
Hazardous Substances, those laws with regard to record keeping, notification and
reporting requirements respecting hazardous materials, and the rules,
regulations, policies, guidelines, interpretations, decisions, orders and
directives of federal, state and local governmental agencies and authorities
with respect thereto.
"Environmental Permits" mean all permits, certificates, licenses,
approvals, authorizations, consents or registrations required by any applicable
Environmental Law, and/or required: (i) in connection with the ownership, use
and/or operation of the Premises; (ii) for the storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances; or (iii) for the sale, transfer or conveyance of the Premises.
"Hazardous Materials" means materials defined as "hazardous
substances," "hazardous wastes" or "solid wastes" in CERCLA, RCRA and in
<PAGE>
any similar federal, state or local environmental statute.
"Hazardous Substance" means, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products
(including, without limitation, waste petroleum and waste petroleum products),
methane, hazardous materials, hazardous wastes, pollutants, contaminants, and
hazardous or toxic substances or related materials, or chemicals posing an
unreasonable risk of harm to health or the environment, as regulated or defined
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended (42 U.S.C. Section 9601, et seq.), the Hazardous Materials
Transportation Act, as amended (49 U.S.C. Section 1801, et seq.), the Resource
Conservation and Recovery Act, as amended (42 U.S.C. Section 6901, et seq.), the
Toxic Substances Control Act, as amended (15 U.S.C. Section 2601, et seq.), or
any other applicable Environmental Law, and the regulations promulgated
thereunder.
"Release" means any past or present spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing or dumping of a Hazardous Substance into the Environment (including
the abandonment or discarding of barrels, containers, and other closed
receptacles containing any Hazardous Substance), including the meaning as given
to that term in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (42 U.S.C. Section 9601, et seq.), and the
regulations promulgated thereunder.
(aa) Brokers. There is no broker or finder or other Person who would
have any valid claim against any of the Sellers or any of the Acquired Entities
for a fee, commission or brokerage in connection with this Agreement or the
transactions contemplated hereby as a result of any agreement, understanding,
arrangement or action by any of the Sellers or any of the Acquired Entities.
(bb) GMH Authorization. GMH has all requisite corporate power,
authority and capacity to enter into this Agreement and to perform all of its
obligations hereunder. The Board of Directors and shareholders of GMH have duly
authorized the execution and delivery of this Agreement and the performance of
the transactions contemplated hereby. This Agreement constitutes the legal,
valid and binding obligation of GMH enforceable against it in accordance with
its terms.
(cc) GMH Title. GMH is the sole record and beneficial owner of the
membership interest in Lamar set forth opposite its name on Exhibit A, free and
clear of all liens, claims, charges, restrictions, equities and encumbrances of
any kind.
Section 8. Individual Representations and Warranties of the Sellers.
Each of the Sellers severally, but not jointly, represents and warrants to the
Buyer as follows:
(a) Authority. Such Seller has the power, authority and capacity to
enter into this Agreement and to perform all of his or her obligations
hereunder, including without limitation the obligation to transfer all of the
shares of the Stock held by such Seller. This Agreement constitutes the legal,
valid and binding obligation of such Seller enforceable against such Seller in
accordance with its terms.
(b) Effective Agreement. The execution, delivery and performance of
this Agreement by or on behalf of such Seller and the consummation of the
Transaction do not and will not conflict with, violate or result in the breach
of any terms or conditions of, or constitute a default under, any contract,
agreement, commitment, indenture, mortgage, pledge, note, license, permit or
other instrument or obligation or any law, regulation, ordinance or decree to
which such Seller is a party or by which such Seller or the Stock owned by such
Seller may be bound or affected, except for (i) requirements of consents which
will be obtained and (ii) such violations, breaches or defaults which would not
have a material adverse effect on the ability of such Seller to consummate the
transactions contemplated hereby.
(c) Title to Stock. Such Seller is the sole record and beneficial
owner of the Stock set forth opposite his or her name on Exhibit A hereto, free
and clear of all liens, claims, charges, restrictions, equities and encumbrances
of any kind.
(d) Interests in Competitors. Except for the Stock, such Seller has
no equity interest, direct or indirect, in any corporation,
<PAGE>
partnership, joint venture or other entity engaged in a business similar to or
competing with the business of any of the Acquired Entities, except as reflected
on Schedule 7(x) attached hereto.
Section 9. Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Sellers as follows:
(a) Organization; Good Standing; Power. The Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Buyer has the corporate power, authority and capacity to
own, lease and operate its properties and to carry on its intended business. The
Buyer has no subsidiaries or interest in any joint venture, partnership, limited
liability company, limited liability partnership or any other entity.
(b) Authorization. The Buyer has all requisite corporate power,
authority and capacity to enter into this Agreement and to perform all of its
obligations hereunder. The Board of Directors and shareholders of the Buyer have
duly authorized the execution and delivery of this Agreement and the performance
of the transactions contemplated hereby. This Agreement constitutes the legal,
valid and binding obligation of the Buyer enforceable against it in accordance
with its terms.
(c) Effective Agreement. The execution, delivery and performance of
this Agreement by the Buyer and the consummation of the Transaction do not and
will not (i) conflict with, violate or result in the breach of any of the terms
or conditions of, or constitute a default under, the Certificate of
Incorporation or the By-Laws of the Buyer, or any contract, agreement,
commitment, indenture, mortgage, pledge, note, bond, license, permit or other
instrument or obligation to which the Buyer is a party or by which the Buyer or
its assets may be bound or affected, or any law, regulation, ordinance or decree
to which the Buyer or its assets are subject; or (ii) result in the creation or
imposition of any lien, security interest, charge, encumbrance, restriction or
right, including rights of termination or cancellation, in or with respect to,
or otherwise materially adversely affect, any of the properties, assets or
businesses of the Buyer (other than liens, security interests, charges,
encumbrances, restrictions or rights arising in connection with the financing of
the Transaction).
(d) Consents. No permit, consent, approval or authorization of, or
designation, declaration or filing with, any governmental authority or any other
person or entity on the part of the Buyer is required in connection with the
execution or delivery by the Buyer of this Agreement or the consummation of the
Transaction other than consents from the shareholders of the Buyer, except where
the failure to obtain such consent would not have a material adverse effect on
the Business Conditions of the Buyer.
(e) Litigation. There is no suit, action or litigation,
administrative hearing, arbitration or other proceeding or governmental inquiry
or investigation affecting the Buyer, its Affiliates, or their properties
pending or, to Buyer's knowledge, threatened against the Buyer or its
Affiliates, which could materially and adversely affect the transactions
contemplated by this Agreement. The Buyer is in compliance with all laws,
ordinances, requirements, orders and regulations applicable to it, the violation
of which would have a material, adverse effect on its Business Conditions, and
the Buyer has not received notice of any claimed default with respect to any of
the foregoing, and none of the foregoing will be affected by the Transaction.
(f) Brokers. Except for R. Lewis Ray, there is no broker or finder
or any other Person who would have any valid claim against the Buyer for a fee,
commission or brokerage in connection with this Agreement or the transactions
contemplated hereby as a result of any agreement, understanding, arrangement or
action by the Buyer. Buyer covenants and agrees to satisfy and discharge any and
all obligations to Mr. Ray arising from or relating to the transactions
contemplated by this Agreement and to indemnify Sellers for, and hold them
harmless from, any and all claims and liabilities relating to such obligations.
Section 10. Covenants of the Sellers. Each of the Sellers covenants
and agrees that, prior to the Closing Date, except as otherwise consented to in
writing by the Buyer or as permitted by this Agreement:
(a) Cooperation. Each of the Sellers and each of the Acquired
Entities shall use its best efforts to obtain all consents and authorizations of
third parties and to make all filings with and give all notices to third parties
which may be necessary or reasonably required in
<PAGE>
order to effect the Transaction and shall take such additional actions as the
Buyer may reasonably request in writing to cooperate so that the transactions
contemplated by this Agreement may be expeditiously consummated.
(b) Transactions in the Ordinary Course of Business. Each of the
Sellers shall cause each of the Acquired Entities to enter into transactions
only in the ordinary course of business.
(c) Conduct of Business. Each of the Sellers shall, and shall cause
each of the Acquired Entities to, conduct his or its business and affairs in
such a manner as to assure reasonably that the representations and warranties of
the Sellers contained in this Agreement shall continue to be true, correct and
complete at and as of the Closing Date.
(d) Maintenance of Books; Compliance. Each of the Sellers shall
cause each of the Acquired Entities to maintain its respective books, accounts
and records in the usual manner consistent with prior years and to use all
reasonable efforts to duly comply in all material respects with all laws or
decrees applicable to it and the conduct of its respective business.
(e) Access to Properties. Each of the Acquired Entities shall give
to the Buyer and to its counsel, accountants, and other representatives, full
access during normal business hours, upon reasonable prior notice, to all of the
properties, books, tax returns, contracts, commitments and records of each of
the Acquired Entities and shall furnish to the Buyer copies of all such
documents, authenticated in a manner and to the extent reasonably requested by
the Buyer, and information with respect to its affairs, as the Buyer may from
time to time reasonably request.
(f) Settlement of Obligations. All obligations owed to any of the
Acquired Entities by any of the Sellers or their Affiliates or any Affiliate
(other than an Acquired Entity) of any of the Acquired Entities, except as
otherwise contemplated by this Agreement, shall be paid in full and satisfied.
All obligations of any of the Acquired Entities to any such other person shall
be paid. Each of the Acquired Entities and the Sellers shall be released from
all guarantees of the obligations of such other persons.
(g) Further Disclosure. From time to time prior to the Closing Date,
the Sellers shall promptly disclose in writing to the Buyer any matter hereafter
arising which, if existing or occurring at the date of this Agreement, would
have been required to be disclosed as an exception to the representations and
warranties of the Sellers. No such disclosure shall have the effect of curing
any misrepresentation or breach of any warranty without the written consent of
the Buyer, unless the Buyer consummates the Transaction following such
disclosure.
Section 11. Covenants of the Buyer. The Buyer covenants and agrees
that, prior to the Closing Date, except as otherwise consented to in writing by
the Sellers or as permitted by this Agreement:
(a) Cooperation. The Buyer shall use its best efforts to obtain all
consents and authorizations of third parties and to make all filings with and
give all notices to third parties which may be necessary or reasonably required
in order for it to effect the Transaction and shall take such additional actions
as the Sellers may reasonably request in writing to cooperate so that the
transactions contemplated by this Agreement may be expeditiously consummated;
provided, however, that neither the Buyer nor any shareholder of the Buyer shall
be obligated to make any financial concessions or to guarantee the obligations
of any other party in connection with the Buyer's efforts under this Section
11(a), except as expressly contemplated by this Agreement.
(b) Further Disclosure. From time to time prior to the Closing Date,
the Buyer shall promptly disclose in writing to the Sellers any matter hereafter
arising which, if existing or occurring at the date of this Agreement, would
have been required to be disclosed as an exception to the representations and
warranties of the Buyer. No such disclosure shall have the effect of curing any
misrepresentation or breach of any warranty without the written consent of the
Sellers, unless the Sellers consummate the Transaction following such
disclosure.
(c) Best Efforts to Obtain Required Financing. The Buyer shall use
its best efforts in good faith to obtain any and all financing required for it
to consummate the Transaction on terms reasonably acceptable to the Buyer.
<PAGE>
Section 12. Conditions Precedent to the Obligations of the Sellers.
All obligations of the Sellers under this Agreement are subject to the
fulfillment, at or prior to the Closing Date, of each of the following
conditions, which conditions may be waived only by the Sellers:
(a) The representations and warranties of the Buyer herein contained
shall be true and correct as of the date hereof and shall continue to be true
and correct as of the Closing Date with the same force and effect as though made
as of the Closing Date.
(b) The Buyer shall have performed or complied with all the
obligations, agreements and covenants of the Buyer herein contained to be
performed by it prior to or as of the Closing Date.
(c) The Sellers shall have received a certificate of the Buyer as to
compliance with paragraphs (a) and (b) of this Section 12.
(d) Messrs. Nixon, Hargrave, Devans & Doyle LLP, counsel to the
Buyer, shall have delivered to the Sellers an opinion, dated the Closing Date,
in substantially the form attached hereto as Exhibit I.
(e) No action, suit or proceeding by or before any court or any
governmental or regulatory authority shall have been commenced or threatened,
and no investigation by any governmental or regulatory authority shall have been
commenced or threatened, seeking to restrain, prevent or change the Transaction
or seeking judgments against the Sellers, any of the Acquired Entities or the
Buyer awarding substantial damages in respect of the Transaction.
(f) All deliveries required to be made under this Agreement to the
Sellers at or before the Closing Date shall have been received by the Sellers.
(g) The Buyer shall have entered into the Employment Agreements with
Samuel P. Scott, Gregory K. Scott and Drew E. Scott, in substantially the forms
attached hereto as Exhibits B and C, with such changes thereto as the parties
hereto agree.
(h) The Buyer shall have adopted the Incentive Compensation Plan in
substantially the form attached hereto as Exhibit F, with such changes to
Sections 4(a), 5(a), 5(d) and 5(e) thereof as shall be acceptable to the
Sellers.
(i) The Buyer shall have entered into the Stock Subscription
Agreement(s) with the Sellers and/or their designees (which shall include, but
not be limited to, Wayne Roberts, Lannis Thomas and Tim Vinson) relating to
their acquisition of an aggregate 10% equity interest in the Buyer for $100,000,
in substantially the form attached hereto as Exhibit G, and the Sellers shall
have been granted representation on the Board of Directors of the Buyer for so
long as amounts payable under the Incentive Compensation Plan remain
outstanding.
(j) The balance sheet of GMH as of October 31, 1995 shall reflect (i)
Working Capital of at least $3,250,000, (ii) accounts receivable from M/H
Retail, Inc. of not more than $250,000, and (iii) Net Worth of at least
$7,560,000.
(k) The Sellers shall have been released from all personal guarantees
securing the obligations of GMH.
Section 13. Conditions Precedent to the Obligations of the Buyer. All
obligations of the Buyer under this Agreement are subject to the fulfillment, at
or prior to the Closing Date, of each of the following conditions, which
conditions may be waived only by the Buyer:
(a) The representations and warranties of the Sellers herein
contained shall be true and correct as of the date hereof and shall continue to
be true and correct as of the Closing Date with the same force and effect as
though made as of the Closing Date.
(b) The Sellers and GMH shall have performed or complied with all the
obligations, agreements and covenants of the Sellers herein contained to be
performed by them prior to or as of the Closing Date.
(c) The Buyer shall have received a certificate from the Sellers and
GMH as to compliance with paragraphs (a) and (b) of this Section 13.
<PAGE>
(d) Messrs. Holland & Knight, counsel to the Sellers and GMH, shall
have delivered to the Buyer an opinion, dated the Closing Date, in substantially
the form attached hereto as Exhibit H.
(e) No action, suit or proceeding by or before any court or any
governmental or regulatory authority shall have been commenced or threatened,
and no investigation by any governmental or regulatory authority shall have been
commenced or threatened, seeking to restrain, prevent or change the Transaction
or seeking judgments against any of the Sellers, any of the Acquired Entities or
the Buyer awarding substantial damages in respect of the Transaction.
(f) All deliveries required to be made under this Agreement to the
Buyer on or before the Closing Date shall have been received by the Buyer.
(g) The Buyer shall have received evidence, satisfactory to it and
its counsel, that all of the consents disclosed in Schedule 7(d) hereto have
been duly obtained.
(h) Samuel P. Scott, Gregory K. Scott and Drew E. Scott shall have
entered into their respective Employment Agreements with the Buyer in
substantially the forms attached as Exhibits B and C, with such changes thereto
as the parties hereto shall agree.
(i) The Buyer shall have obtained senior and subordinated financing
for the Transaction on terms reasonably acceptable to the Buyer.
(j) The Buyer shall have received an audited balance sheet of each of
the Acquired Entities as at October 31, 1995, examined by Arthur Andersen LLP
which shall reflect no breach of Sellers' representations, warranties or
covenants contained in this Agreement, together with a schedule of cash
transactions from the date of such balance sheet to the Closing Date.
(k) All of the funded indebtedness of GMH shall have been repaid in
full (or provision for such payment shall be made at Closing), and the cash
balance of GMH on the Closing Date shall be at least $100,000 (after giving
effect to such debt repayment).
(l) The Sellers, the Escrow Agent and the Buyer shall have entered
into the Escrow Agreement.
(m) The Sellers shall have delivered to the Buyer true, correct and
complete copies of the by-laws, articles of incorporation, operating agreements,
other organizational and constituent documents and minute books of each of the
Acquired Entities and all agreements, leases, licenses, financial statements,
tax returns, Business Property Rights and insurance policies referred to in
Sections 7(f), 7(g), 7(i), 7(j), 7(m), 7(o) and 7(p) hereof.
(n) The Buyer shall have received a letter from Samuel P. Scott, in
form and content acceptable to the Buyer, relating to his resignation as an
officer and director of Sweetwater Homes, Inc. and agreeing not to participate
in any way in the business of Sweetwater Homes, Inc.
(o) The balance sheet of GMH as of October 31, 1995 shall reflect (i)
Working Capital of at least $3,250,000, (ii) accounts receivable from M/H
Retail, Inc. of not more than $250,000, and (iii) Net Worth of at least
$7,560,000.
(p) The Sellers shall have agreed to the terms of the Incentive
Compensation Plan substantially in the form of Exhibit F attached hereto, with
such changes to Sections 4(a), 5(a), 5(d) and 5(e) thereof as are acceptable to
the Buyer.
Section 14. Additional Covenants.
(a) No Shop. From and after the execution of this Agreement and
until the earlier of (i) termination of this Agreement in accordance with the
provisions of Section 17 hereof and (ii) November 30, 1995, each of the Sellers,
jointly and severally, agrees that such Seller shall not solicit from others,
offers relating to, or engage with others in any discussions or negotiations
relating to, participation in the acquisition of the Acquired Entities, whether
such acquisition is proposed to be in the form of an acquisition of stock or
otherwise.
(b) Environmental Covenants. The parties hereto agree that
<PAGE>
promptly upon execution of this Agreement, the Buyer will commence and
diligently pursue the environmental remediation with respect to the Premises
listed on Schedule 14(b) hereto. The Buyer shall bear all costs of the
environmental remediation listed on Schedule 14(b) hereto, together with any
confirmatory sampling and any further remedial action on or around the Premises
required or identified as a result of or in conjunction with such remediation
and/or sampling up to a maximum of $100,000. Any and all costs of the
environmental remediation listed on Schedule 14(b) hereto and any such
confirmatory sampling and further remedial action in excess of $100,000 shall be
borne by the Sellers and treated as a Loss, payable in accordance with the
provisions of Section 15.
Section 15. Indemnification; Survival.
(a) Indemnification by the Buyer. Subject to the provisions of
Section 15(d) hereof, the Buyer shall indemnify and save harmless each of the
Sellers, the Affiliates of the Sellers and their respective successors and
assigns from, against, for and in respect of:
(i) any Loss incurred or required to be paid because of the breach of
any representation, warranty, covenant or agreement of the Buyer
in this Agreement or in any document delivered by the Buyer
pursuant to this Agreement; and
(ii) any Litigation Expense incurred or required to be paid in
connection with any matter indemnified against in Section
15(a)(i) hereof, except for Litigation Expense incurred in any
claim, action, suit or proceeding brought by a party indemnified
under Section 15(a)(i) hereof seeking indemnification hereunder
in which there is not either a settlement or a final
determination that such indemnified party is entitled to
indemnification hereunder.
(b) Joint and Several Indemnification by the Sellers. Subject to the
provisions of Section 15(d) hereof, each of the Sellers jointly and severally
shall indemnify and save harmless the Buyer, the Affiliates of the Buyer and
their respective successors and assigns, from, against, for and in respect of:
(i) any Loss incurred or required to be paid because of the breach of
any representation, warranty, covenant or agreement of any Seller
in this Agreement, other than those contained in Sections 7(m),
7(bb), 7(cc), 8, 14(a), 14(b) and 16 hereof, or in any document
delivered by any of the Sellers or any of the Acquired Entities
pursuant to this Agreement;
(ii) any Loss incurred or required to be paid because of the breach of
any representation or warranty contained in Section 7(m) of this
Agreement and any obligation or payment by the Buyer in respect
of federal, state, local, foreign and other income taxes ("income
taxes") of any of the Acquired Entities, or of any affiliated
group, as defined in the Code, which included any of the Acquired
Entities (but only to the extent that the subject taxes are
attributable to the Acquired Entities), for all taxable periods
ended on or prior to the Closing Date, in excess of amounts (x)
previously paid with respect thereto by any of the Acquired
Entities (or, if applicable, by any such affiliated group), or
(y) reflected in the Financial Statements referred to in Section
7(j) hereof, or (z) attributable to income of any of the Acquired
Entities earned in the ordinary course of business after the
Audit Date through and including the Closing Date, determined on
a basis consistent with that used in determining tax liability on
the Financial Statements referred to in Section 7(j) hereof;
(iii) any Loss incurred or required to be paid arising out of the
complaints filed by the following individuals against GMH with
the Equal Employment Opportunity Commission: Anthony Harmon;
Nelda A. Rollins; Donna J. Beasley; Susan E. Reynolds; Dorothy P.
Woodie and Betty Fritz;
(iv) any Loss incurred or required to be paid because of the breach of
any representation, warranty, covenant or agreement of the
Sellers contained in Section 7(bb) or 7(cc) of this Agreement, or
in any document delivered by any Seller or any Acquired Entity
pursuant thereto;
<PAGE>
(v) any Loss incurred or required to be paid because of the breach of
any covenant or agreement contained in Section 14(a) hereof;
(vi) any Loss incurred or required to be paid because of the breach of
any covenant or agreement of the Sellers contained in Section
14(b) hereof; and
(vii) any Litigation Expense incurred or required to be paid in
connection with any matter indemnified against in Section
15(b)(i), (ii), (iv), (v) or (vi) hereof, except for Litigation
Expense incurred in any claim, action, suit or proceeding brought
by a party indemnified under Section 15(b)(i), (ii), (iv), (v) or
(vi) hereof seeking indemnification hereunder in which there is
not either a settlement or a final determination that such
indemnified party is entitled to indemnification hereunder.
(c) Several Indemnification by the Sellers. Each of the Sellers
severally, but not jointly, shall indemnify and save harmless the Buyer, the
Affiliates of the Buyer and their respective successors and assigns, from,
against, for and in respect of:
(i) any Loss incurred or required to be paid because of the breach of
any representation, warranty, covenant or agreement of such
Seller contained in Section 8 or 16 hereof; and
(ii) any Litigation Expense incurred or required to be paid in
connection with any matter indemnified against in Section
15(c)(i) hereof, except for Litigation Expense incurred in any
claim, action, suit or proceeding brought by a party indemnified
under Section 15(c)(i) hereof seeking indemnification hereunder
in which there is not either a settlement or a final
determination that such indemnified party is entitled to
indemnification hereunder.
(d) Deductibles and Ceilings.
(i) Deductibles.
(A) The Buyer shall be obligated to pay indemnity for any Loss
described in Section 15(a)(i) hereof or any Litigation Expense
described in Section 15(a)(ii) hereof relating thereto, only to
the extent such Losses and Litigation Expenses exceed $300,000 in
the aggregate.
(B) The Sellers shall be obligated to pay indemnity for (1) any
Loss described in Sections 15(b)(i) and 15(b)(iii) hereof, (2)
any Litigation Expense described in Section 15(b)(vii) hereof
relating thereto and (3) any Litigation Expense relating to any
Loss described in Section 15(b)(ii) hereof, only to the extent
such Losses and Litigation Expenses exceed $300,000 in the
aggregate.
(C) The Sellers shall be obligated to pay indemnity for any Loss
described in Section 15(b)(vi) hereof, and any Litigation Expense
described in Section 15(b)(vii) relating thereto, only to the
extent that such Losses and Litigation Expenses exceed $100,000
in the aggregate.
(ii) Ceilings.
(A) The Buyer shall not be obligated to pay indemnity for any
Loss described in Section 15(a)(i) hereof and any Litigation
Expense relating thereto in excess of $4,000,000 in the
aggregate.
(B) The Sellers shall not be obligated to pay indemnity for (1)
any Loss described in Section 15(b)(i), 15(b)(iii) 15(b)(iv) or
15(b)(vi) hereof, (2) any Litigation Expense described in Section
15(b)(vii) hereof relating thereto and (3) any Litigation Expense
relating to any Loss described in Section 15(b)(ii) hereof in
excess of $4,000,000 in the aggregate; provided, however, that
such $4,000,000 ceiling shall be reduced dollar-for-dollar for
any and all amounts in excess of $1,000,000 earned by and paid to
the Sellers
<PAGE>
under the Incentive Compensation Plan referred to in Section
15(i) hereof.
(e) Notice. The indemnified party shall use its best efforts to give
prompt written notice to the indemnifying party or parties of any claim or event
known to it which does or may give rise to a claim by the indemnified party
against the indemnifying party or parties based on this Agreement, stating the
nature and basis of said claims or events and the amounts thereof, to the extent
known.
(f) Defense of Claims or Actions. In the event any claim, action,
suit or proceeding is made or brought by third parties, with respect to which a
party may be entitled to indemnity hereunder, the indemnified parties shall give
written notice of such claim, action, suit or proceeding and a copy of the
claim, process and all legal pleadings with respect thereto to the indemnifying
parties within ten business days of being served with such claim, process or
legal pleading. Such notice shall not be a condition precedent to any liability
of the indemnifying parties under this Agreement unless the failure to give such
notice results in actual prejudice to the indemnifying party. The indemnifying
parties shall have the right to assume the defense of any such claim or action.
If the indemnifying parties wish to assume the defense of such claim or action,
such assumption shall be evidenced by written notice to the indemnified parties.
After such notice, the indemnifying parties shall engage independent legal
counsel of reputable standing selected by them and reasonably acceptable to the
indemnified parties, to assume the defense and may contest, pay, settle or
compromise any such claim or action on such terms and conditions as the
indemnifying parties may determine. If the indemnifying parties assume the
defense of any such claim, action, suit or proceeding, the indemnified parties
shall have the right to employ their own counsel, at their own expense, and if
the indemnified parties shall have reasonably concluded and specifically
notified the indemnifying parties either that there may be specific defenses
available to them which are different from or additional to those available to
the indemnifying parties or that such claim, action, suit or proceeding involves
or could have a material adverse effect upon them with respect to matters beyond
the scope of the indemnity provided hereunder, then the counsel representing
them, to the extent made necessary by such defenses, shall have the right to
direct such defenses of such claim, action, suit or proceeding in its behalf. In
the event that the indemnifying parties shall not agree in writing to assume the
defense of such claim or action, the indemnified parties may engage independent
counsel of reputable standing selected by them to assume the defense and may
contest, pay, settle or compromise any such claim or action on such terms and
conditions as the indemnified parties may determine; provided, however, that the
indemnified parties shall not settle or compromise any claim or action without
the prior consent of the indemnifying parties if such indemnifying parties
acknowledge in writing their liability for any Loss or Litigation Expense
incurred or required to be paid in respect of such claim or action. The fees and
expenses of such counsel shall constitute Litigation Expenses. The indemnified
parties and the indemnifying parties shall cooperate in good faith in connection
with such defense and all such parties shall have the right to employ their own
counsel, but, except as provided above, the fees and expenses of their counsel
shall be at their own expense. The indemnified parties or the indemnifying
parties, as the case may be, shall be kept fully informed of such claim, action,
suit or proceeding at all stages thereof whether or not they are represented by
their own counsel.
(g) Cooperation. The parties hereto agree to render to each other
such assistance as they may reasonably require of each other and to cooperate in
good faith with each other in order to ensure the proper and adequate defense of
any claim, action, suit or proceeding brought by any third party. Where
independent counsel has been selected by the indemnifying parties or by the
indemnified parties pursuant to Section 15(f) hereof, the indemnifying parties
or the indemnified parties, as the case may be, shall be entitled to rely upon
the reasonable advice of such counsel in the reasonable conduct of the defense,
and no indemnifying party shall be relieved of liability hereunder by reason of
such reliance or the defense conducted by such counsel.
(h) Escrow. To secure the Sellers' obligations to indemnify the
Buyer against (i) any Loss pursuant to Sections 15(b)(i), 15(b)(ii), 15(b)(iii),
15(b)(iv) and 15(b)(vi) and 15(c)(i) hereof and (ii) any Litigation Expense
pursuant to Section 15(b)(vii) and 15(c)(ii) hereof with respect thereto, the
Buyer shall deposit the Escrowed Funds with the Escrow Agent in accordance with
the provisions of Section 3(b) hereof. The Escrow Agent shall hold and dispose
of the Escrowed Funds and shall act as Escrow Agent in accordance with the terms
of the Escrow Agreement. Nothing
<PAGE>
contained in this Section 15(h) is intended to diminish the Buyer's rights to
indemnity pursuant to Sections 15(b) and 15(c) hereof, and in the event the
Buyer incurs or is required to pay a Loss or a Litigation Expense with respect
thereto which is in excess of the Escrowed Funds, the Buyer shall continue to
have all rights to indemnity pursuant to the terms of this Agreement, including,
without limitation, the right to set off against the Incentive Compensation Plan
pursuant to Section 15(i) hereof, subject to the limitations provided in Section
15(d) hereof.
(i) Set Off Rights. Each of the Sellers agrees that in the event
that either the Buyer incurs or is required to pay a Loss or Litigation Expense
for which it is entitled to indemnity pursuant to Section 15(b) or Section 15(c)
hereof, the full amount of any such Loss and Litigation Expense shall be set off
against amounts owed, but not theretofore paid, by the Buyer to the Sellers
pursuant to the Incentive Compensation Plan to the extent such Loss or
Litigation Expense is not otherwise paid by the Sellers, regardless of whether
such Loss or Litigation Expense is paid from the Escrowed Funds or otherwise. In
the event the Buyer exercises its set off rights hereunder against the Incentive
Compensation Plan, it will give the Sellers written notice thereof, including
the amount to be set off, and upon the giving of such notice, the amount due to
the Sellers shall automatically be reduced by the amount set forth in the notice
as if such amount had been prepaid by the Buyer and applied to the payments in
the order of maturity. Anything herein to the contrary notwithstanding, the
foregoing set-off rights of the Buyer shall apply only to amounts owed, but not
theretofore paid, by the Buyer to the Sellers pursuant to the Incentive
Compensation Plan, and any amounts theretofore earned and paid to the Sellers
pursuant to the Incentive Compensation Plan shall not thereafter be subject to
any claim by the Buyer except with respect to a Loss for which the Sellers shall
have an indemnification obligation to the Buyer pursuant to Section 15(b)(ii)
hereof.
(j) Survival. All representations, warranties, covenants and
agreements contained herein shall survive the execution, delivery and
consummation of this Agreement for a period of two years following the Closing
Date, except for (a) the covenants contained in Section 16 hereof, which shall
survive for a period of five years following the Closing Date; (b) the
representations, warranties and covenants contained in Sections 7(m) and
15(b)(ii) hereof, and the indemnification obligations relating thereto pursuant
to Section 15 hereof, which shall survive until the expiration of the applicable
statutes of limitations; (c) the covenants contained in Section 14(b) hereof,
which shall survive until the expiration of the applicable statute of
limitations; and (d) the representations and warranties contained in Sections
7(bb), 7(cc) and 8 hereof, and the indemnification obligations relating thereto
contained in Section 15 hereof, which shall survive until the expiration of the
applicable statute of limitations. In addition, if written notice of a violation
or breach of any specified representation, warranty, covenant or agreement is
given to the party charged with such violation or breach during the period
provided for in the preceding sentence, such representation, warranty, covenant
or agreement shall continue to survive until such matter has been resolved by
settlement, litigation (including all appeals related thereto) or otherwise.
(k) Exclusive Remedy. It is understood and agreed by the parties
hereto that, in the event the transactions contemplated herein are consummated,
the indemnification and set-off rights of the Buyer provided in this Section 15
shall be the sole and exclusive remedy of the Buyer, the Affiliates of the
Buyer, and their respective successors and assigns to redress or obtain
satisfaction or indemnity with respect to any breach by any one or more of the
Sellers of any one or more of the representations, warranties or covenants
contained in Sections 7, 8 and 10 hereof, except for claims arising out of any
willful fraud committed by any of the Sellers. Except as set forth in the
immediately preceding sentence, any and all other remedies or causes of action
which might otherwise relate thereto or accrue to the Buyer in connection
therewith are hereby knowingly and expressly waived and released by the Buyer.
It is acknowledged by the Buyer that the agreements contained in this Section 15
(k) are material inducements to the Sellers to engage in the transactions
contemplated by this Agreement and that the Sellers would not have entered into
this Agreement but for the foregoing understanding and agreement.
Section 16. Covenants Against Competition. Each of the Sellers
acknowledges that (i) the business of producing and distributing at wholesale
manufactured housing (the "Business") is conducted by the Acquired Entities in
eleven (11) contiguous southeastern states, i.e., Florida, Georgia, South
Carolina, North Carolina, Virginia, West Virginia,
<PAGE>
Alabama, Mississippi, Louisiana, Kentucky and Tennessee (collectively, the
"Current Market Area"), and the Business involves the identification and
development of new markets relating to the production and distribution at
wholesale of manufactured housing; (ii) the Acquired Entities have developed
trade secrets and confidential information concerning the Business; and (iii)
the agreements and covenants contained in this Section 16 are essential to
protect the Business of the Acquired Entities following the consummation of the
transactions contemplated hereby. Accordingly, each of the Sellers severally
covenants and agrees, with respect to himself, as follows:
(a) Non-Compete. For a period of five years following the Closing
(the "Restricted Period"), such Seller (or any other entity 5% or more of the
beneficial ownership of which is held by such Seller alone or together with any
of the other Sellers or related family members (a "Controlled Entity")) shall
not anywhere in the Current Market Area or any state contiguous thereto (i)
engage in the Business by owning or operating facilities in the United States
for its own account, or (ii) become a partner, owner, principal, employee,
consultant or agent of any person or entity engaged in the Business, except for
employment or consulting services performed for the Buyer under the agreements
referred to in Sections 12(g) and 13(h) hereof or any amendments or renewals
thereof; provided, however, that Sam Scott may continue to own no more than 20%
of the equity of Sweetwater Homes, Inc. in accordance with the terms of the
letter agreement described in Section 13(n) thereof.
(b) Confidential Information. During and after the Restricted
Period, such Seller and any Controlled Entity shall keep secret and retain in
strictest confidence, and shall not use, in competition with or in a manner
otherwise detrimental to the interests of the Buyer, for the benefit of himself
or others other than the Buyer any confidential information, including without
limitation any confidential "know-how," trade secrets, customer lists, details
of client or consultant contracts, pricing policies, operational methods,
marketing plans or strategies, product development techniques or plans, business
acquisition plans and new personnel acquisition plans related to the Business
("Confidential Information"). The term "Confidential Information" does not
include, and there shall be no obligation hereunder with respect to, (i)
information that becomes generally available to the public other than as a
result of a disclosure by such Seller or a Controlled Entity or any agent or
other representative thereof and (ii) general business methods applicable to the
Business including, but not limited to, pricing policies, operational methods
and marketing concepts. Neither such Seller nor any Controlled Entity shall have
any obligation hereunder to keep confidential any of the Confidential
Information to the extent disclosure of any thereof is required by law, or
determined in good faith by such Seller to be necessary or appropriate to comply
with any legal or regulatory order, regulation or requirement; provided,
however, that in the event disclosure is required by law such Seller or the
Controlled Entity concerned shall provide the Buyer with prompt notice of such
requirement so that the Buyer may seek an appropriate protective order.
(c) Employees of the Buyer. During the Restricted Period, such
Seller and any Controlled Entity shall not, directly or indirectly, (i) hire or
solicit any employee of the Buyer or encourage any such employee to leave such
employment, or (ii) solicit, induce or influence any customer, supplier, lender,
lessor or any other person or entity which has a business relationship with the
Buyer to discontinue or reduce the extent of such relationship with the Buyer.
(d) Rights and Remedies Upon Breach. In the event such Seller or any
Controlled Entity breaches, or threatens to commit a breach of, any of the
provisions of this Section 16 (the "Restrictive Covenants"), the Buyer shall
have the following rights and remedies, which shall be independent of any others
and severally enforceable, and shall be in addition to, and not in lieu of, any
other rights and remedies available to the Buyer at law or in equity:
(i) the right and remedy to enjoin the breaching party from violating
or threatening to violate the Restrictive Covenants and to have
the Restrictive Covenants specifically enforced by any court of
competent jurisdiction, it being agreed that any breach or
threatened breach of the Restrictive Covenants would cause
irreparable injury to the Buyer and that money damages would not
provide an adequate remedy to the Buyer; and
(ii) the right and remedy to require the breaching party to
<PAGE>
account for and pay over to the Buyer all compensation, profits,
monies, accruals, increments or other benefits derived or
received by such party as the result of any transactions
constituting a breach of the Restrictive Covenants.
(e) Severability of Covenants. Such Seller acknowledges and agrees
that the Restrictive Covenants are reasonable and valid in geographical and
temporal scope and in all other respects. If any court determines that any of
the Restrictive Covenants, or any part thereof, are invalid or unenforceable,
the remainder of the Restrictive Covenants shall not thereby be affected and
shall be given full effect, without regard to the invalid portions.
(f) Blue-Pencilling. If any court determines that any of the
Restrictive Covenants, or any part thereof, are unenforceable because of the
duration or geographic scope of such provision, such court shall have the power
to reduce the duration or scope of such provision, as the case may be, and, in
its reduced form, such provision shall then be enforceable.
(g) Enforceability in Jurisdictions. The parties hereto intend to
and hereby confer jurisdiction to enforce the Restrictive Covenants upon the
courts of any jurisdiction within the geographical scope of such Restrictive
Covenants. If the courts of any one or more of such jurisdictions hold the
Restrictive Covenants unenforceable by reason of the breadth of such scope or
otherwise, it is the intention of the parties hereto that such determination not
bar or in any way affect the Buyer's right to the relief provided above in the
courts of any other jurisdiction within the geographical scope of such
Restrictive Covenants, as to breaches of such Restrictive Covenants in such
other respective jurisdictions, such Restrictive Covenants as they relate to
each jurisdiction being, for this purpose, severable into diverse and
independent covenants.
Section 16-A. Buyer's Post-Closing Covenants. Buyer covenants and
agrees to use its best efforts in good faith following consummation of the
Transaction to defend vigorously any claims asserted against any of the Acquired
Entities that could result in a Loss for which Sellers might have
indemnification obligations under Sections 15(b)(ii) or (iii) hereof. In
connection with such defense, Buyer agrees to employ independent legal counsel
of reputable standing reasonably acceptable to the Sellers. Additionally, in
connection with any claims for which the Sellers might have indemnification
obligations pursuant to Section 15(b)(ii) hereof, the Buyer agrees, if requested
by the Sellers, to utilize the services of Arthur Andersen LLP to assist in the
defense of any additional tax assessment.
Section 17. Termination. Notwithstanding anything to the contrary
herein, this Agreement may be terminated and the transactions contemplated
hereby may be abandoned:
(a) by the mutual consent of the Sellers and the Buyer at any time
prior to the Closing Date;
(b) by action of the Board of Directors of the Buyer if there exists
a material breach of any representation, warranty, covenant or agreement made to
the Buyer under this Agreement (which breach cannot be cured or is not cured
upon 15 days written notice) or if any condition to the obligation of the Buyer
hereunder becomes impossible to fulfill in any material way, or if the Closing
has not occurred by the Closing Date, as such may have been extended by mutual
written consent of the parties;
(c) by Samuel P. Scott if there exists a material breach of any
representation, warranty, covenant or agreement made to the Sellers (which
breach cannot be cured or is not cured upon 15 days written notice) or if any
condition to the obligation of the Sellers hereunder becomes impossible to
fulfill in any material way, or if the Closing has not occurred by the Closing
Date, as such may have been extended by mutual written consent of the parties;
or
(d) by Samuel P. Scott or the Buyer if the Transaction has not been
consummated by November 30, 1995.
Upon the termination of this Agreement under this Section 17, no party
hereto shall have any further liability or obligation to any other party
hereunder, except for the obligation of each party to pay its own expenses as
set forth in Section 19 hereof.
Section 18. Amendments; Waivers, Etc. This Agreement may be
<PAGE>
amended, modified and supplemented by written agreement approved by the Sellers
and the Buyer at any time prior to the Closing Date with respect to any of the
terms contained herein. Prior to or on the Closing Date, the parties hereto may
in writing (i) extend the time for the performance of any of the obligations or
other acts of the parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
hereunder, and (iii) waive compliance with any of the agreements or conditions
contained herein.
Section 19. Expenses. Whether the Transaction is consummated or not,
each party hereto shall bear all of its own expenses, including, without
limitation, the fees and disbursements of its counsel; provided, however, that
if the Transaction is consummated, the Buyer shall (a) reimburse the Sellers for
the cost of the Environmental Reports and the audited balance sheet prepared by
Arthur Andersen LLP pursuant to Section 13(j) hereof and (b) reimburse the Buyer
for its expenses incurred in connection with the Transaction, including, without
limitation, the fees and disbursements of its counsel.
Section 20. Notices, Etc. All notices, consents, demands, requests,
approvals and other communications which are required or may be given hereunder
shall be in writing and shall be deemed to have been duly given (a) when
delivered personally, (b) if sent by telecopy, when receipt thereof is
acknowledged at the telecopy number below, (c) the second day following the day
on which the same has been delivered prepaid to a national air courier service
or (d) five business days following deposit in the mails registered or
certified, postage prepaid, in each case, addressed as follows:
If to the Sellers:
c/o Samuel P. Scott
General Manufactured Housing, Inc.
P.O. Box 1449
Waycross, Georgia 31502-1449
Telecopy: 912-285-1397
with a copy to:
Neal L. Conner, Esq.
Kopp and Conner, P.C.
1008 Plant Avenue
Waycross, Georgia 31502
Telecopy: 912-285-9813
and
L. Kinder Cannon III, Esq.
Holland & Knight
50 North Laura Street, Suite 3900
P.O. Box 52687
Jacksonville, Florida 32201-2687
Telecopy: 904-358-1872
If to the Buyer:
Gary M. Brost, President
GMH Acquisition Corp.
369 Franklin Street
Buffalo, New York 14202
Telecopy: 716-857-6490
with a copy to:
Charles P. Jacobs, Esq.
Nixon, Hargrave, Devans & Doyle LLP
1600 Main Place Tower
Buffalo, New York 14202
Telecopy: 716-853-8109
or to such other person or persons at such address or addresses as may be
designated by written notice hereunder.
Section 21. Assignment. Neither the Sellers nor the Buyer may assign
or convey this Agreement or any of their respective rights or obligations
hereunder to any other party; provided, however, that (a) the Buyer may assign
any or all of its rights hereunder to an institutional lender or lenders
providing financing for the Transaction and (b) prior to
<PAGE>
the Closing Date, any one or more of the Sellers may assign all of his or her
rights and obligations hereunder to the trustee of a trust all of the beneficial
interests of which are owned by such Seller(s) or his, her or their immediate
family members.
Section 22. Applicable Law. This Agreement shall be governed by and
construed and interpreted in accordance with the laws or the State of Georgia
without giving effect to conflict of laws principles thereof.
Section 23. Entire Agreement. This Agreement and all Exhibits and
Schedules hereto embody the entire agreement and understanding of the parties
hereto and supersede any prior agreement or understanding between the parties.
Section 24. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
Section 25. Headings. Headings of the Sections in this Agreement are
for reference purposes only and shall not be deemed to have any substantive
effect.
Section 26. Binding Effect; Benefits. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
heirs, administrators, executors, successors and assigns; provided, however,
that nothing in this Agreement, expressed or implied, is intended to confer on
any person other than the parties hereto or their respective successors and
assigns, any rights and remedies, obligations or liabilities under or by reason
of this Agreement.
Section 27. Publicity. The timing and content of any press release
or other announcements regarding the transactions described herein shall be
mutually acceptable.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first above written.
SELLERS:
/s/ Kelly Scott Herold
------------------------------------
KELLY SCOTT HEROLD, as Trustee
/s/ Gregory Keith Scott
------------------------------------
GREGORY KEITH SCOTT
/s/ Drew Eric Scott
------------------------------------
DREW ERIC SCOTT
/s/ Samuel P. Scott
------------------------------------
SAMUEL P. SCOTT, as Joint Tenant
/s/ Sherry J. Scott
------------------------------------
SHERRY J. SCOTT, as Joint Tenant
GENERAL MANUFACTURED HOUSING, INC.
By: /s/ Sam Scott
--------------------------------
Title: Sam Scott, Chairman
BUYER:
GMH ACQUISITION CORP.
By:/s/ Gary M. Brost
---------------------------------
Gary M. Brost, President
<PAGE>
EXHIBIT A
<PAGE>
EXHIBIT A
SHARE OWNERSHIP
General Manufacturing Housing, Inc.
Name of Shareholder Number of Shares Purchase Price
Kelly Scott Herold, Trustee 1,220
Gregory Keith Scott 1,220
Drew Eric Scott 1,220
Samuel P. Scott and
Sherry J. Scott,
Joint Tenants 1,590
Lamar Housing LLC % of Interests Purchase Price
Name of Member
General Manufactured
Housing, Inc. 99%
Samuel P. Scott 1%
<PAGE>
EXHIBIT B
<PAGE>
EXHIBIT B
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made and entered
into as of October ____, 1995, by and between GMH ACQUISITION CORP., a Delaware
corporation with an office at P.O. Box 1449, Waycross, Georgia 31502-1449 (the
"Company") and SAMUEL P. SCOTT, currently residing at 4300 South Fletcher
Avenue, Fernandina Beach, Florida 32034(the "Executive").
The parties hereto, intending to be legally bound hereby, and in
consideration of the mutual covenants herein contained, agree as follows:
1. Employment.
1.1 The Company employs the Executive, and the Executive accepts
such employment (the "Employment"), as Chief Executive Officer of the Company.
The Executive agrees to accept the employment and agrees to remain in the employ
of the Company during the Employment Term (as defined in Section 2 hereof) and
any extensions thereof and to perform such lawful duties as are from time to
time assigned to him by the Board of Directors of the Company (the "Board") and
which are normally associated with the position of Chief Executive Officer in
the manufactured housing industry and generally consistent with past practices
of the Company.
<PAGE>
1.2 During the Employment Term and any extensions thereof, the
Executive will devote his best efforts and full business time, skill and
attention to the performance of his duties on behalf of the Company.
2. Term of Employment. Subject to the provisions of Section 6
hereof, the term of the Executive's employment hereunder shall be from the date
hereof until December 31, 2000 (the "Employment Term").
3. Compensation.
3.1 The Company agrees to pay, and the Executive agrees to
accept, as base compensation for all services to be rendered by the Executive in
any capacity to the Company or its affiliates during the Employment Term, a
salary of $300,000 per annum, subject to such deductions and withholdings as may
be required by law or by further agreement with the Executive (the "Base
Salary"), payable in arrears in equal bi-weekly installments. The Base Salary
may be increased from time to time in the discretion of the Board. Any such
increases shall be added to the Base Salary then being paid to the Executive,
and the sum thereof shall then become the Base Salary for each successive year,
until further adjusted in accordance with the provisions of this Section 3.1.
3.2 In addition to the Base Salary, the Executive shall
participate in the Company's Executive Bonus Plan, a copy of which is attached
hereto as Exhibit 1, (the "Plan") subject to the terms and conditions of the
Plan. The Executive's "Participant Percentage" under the Plan will never be less
than 20% of the "Bonus Pool" (as such terms are defined in the Plan). The
Company will award not less than a $100,000 incentive award to the Executive for
the 1996 Plan Year regardless of the size of the Bonus Pool.
3.3 The Company shall reimburse the Executive for all reasonable
and necessary expenses incurred by the Executive in connection with the
Employment, including without limitation, travel and lodging expenses and
charges incurred on a Company credit card for business entertainment. Such
expenses shall be reimbursed to the Executive by the Company after the
Executive's submittal of an invoice to the Company with respect to the
reimbursable expenses incurred by him. All invoices for reimbursable expenses
shall include adequate supporting documentation of the expenses incurred by the
Executive, including receipts.
4. Additional Benefits. During the Employment Term, the Company
shall provide the following additional benefits to the Executive:
4.1 The Executive shall be entitled to paid vacation during each
calendar year in such amounts and at such times as the Executive in his sole
discretion, shall determine consistent with past practice and in accordance with
the Executive's obligations under this Agreement.
4.2 The Company shall provide the Executive with health, medical
and hospitalization insurance benefits equal to those provided by the Company to
other executive officers of the Company. In addition, the Executive shall be
permitted, if and to the extent eligible, to participate in any pension plan or
other "fringe benefits" of the Company, which may be available generally to
other executive officers of the Company.
4.3 So long as the Company shall own or lease on an exclusive
basis an airplane, the Executive or his family members shall be entitled to
personal use thereof, subject to the business requirements of the Company, at
the rate of ten (10) hours of flying time per month on a cumulative basis. The
Executive shall be deemed to have received additional compensation in the amount
of $175.00 for each such hour of actual personal use of such Company airplane.
4.4 To defray the expenses of operating his personal automobile
in connection with the performance of his duties hereunder, the Executive shall
be entitled to an automobile allowance in the amount of $500.00 per month.
4.5 The Company shall maintain during the term of this Agreement
and pay all premiums on that certain key-man, split-dollar life insurance
presently in force (or a substitute policy of comparable quality) insuring the
life of the Executive and carrying a death benefit of not less than $600,000.
The beneficiary(ies) of such life insurance shall be designated by the
Executive.
<PAGE>
4.6 The Company shall obtain, maintain throughout the term of
this Agreement and pay all premiums on a policy or policies of disability
insurance covering the Executive for the lesser of (a) the maximum amount
permitted by law and (b) $300,000 per annum, payable to not less than age 70,
reasonably obtainable under the circumstances. Such policy or policies of
disability insurance shall provide for commencement of benefits payable
thereunder immediately following any termination of the Executive's employment
pursuant to Section 6.5 hereof.
4.7 During the term of this Agreement, the Executive or his
designee(s) shall be entitled to the exclusive use and enjoyment of the six (6)
season tickets to the Jacksonville Jaguars NFL football games. Additionally,
upon termination of this Agreement, the Company shall sell and assign to
Executive all remaining tickets for the balance of the then current season and
all rights and/or licenses to purchase such season tickets in the future, all at
the face value thereof.
4.8 The Executive shall have the right, in his sole discretion,
to designate the recipients of any and all incentive travel and other benefits
awarded by suppliers of the Company for the year 1995.
5. Insurance. In addition to any insurance coverage provided for in
Section 4 hereof, the Company may, in its discretion, purchase or renew
insurance on the life of the Executive, with the Company or a lender of the
Company as beneficiary in an amount determined by the Company or such lender
from time to time. The Executive agrees to submit to medical examinations and
otherwise to cooperate with the Company and any such lender in connection with
obtaining such insurance.
6. Termination.
6.1 In the event the Executive's employment is terminated for
"Cause", the Executive shall have no further rights under this Agreement, except
the right to receive the Base Salary up to the date of termination by the
Company of the Executive's employment hereunder. The decision to terminate the
Executive under this Section 6.1 shall be made by the Board. The term "Cause"
shall mean any of the following: (a) any deliberate or intentional act or
omission by the Executive with the intent of causing damage to the Company's
relationships with its lenders, suppliers or customers; (b) any fraud,
misappropriation or embezzlement by the Executive involving properties, assets
or funds of the Company; (c) a conviction of the Executive, or plea of nolo
contendere by the Executive, to any crime or offense involving monies or other
property of the Company or any other felony or criminal act involving moral
turpitude; (d) any usurpation by the Executive of a corporate opportunity of the
Company or the Executive's willful and continual neglect of or willful and
continual failure to perform any of his material duties, responsibilities or
obligations as an employee of the Company, but only after notice of such
usurpation, neglect or failure is delivered to the Executive and the Executive
fails or refuses to remedy such usurpation, neglect or failure to the reasonable
satisfaction of the Board within thirty (30) days after the receipt of such
notice; provided, that any action or omission taken by the Executive in good
faith and in the reasonable belief that such action or omission was in the best
interests of the Company shall not constitute "Cause"; or (e) the violation by
the Executive of Section 7 of this Agreement or of any other non-competition
agreement or covenant binding upon the Executive.
6.2 In the event the Executive's employment is terminated
without "Cause", the Executive shall have no further rights under this Agreement
except the right to receive (a) the Base Salary for the balance of the term of
this Agreement, payable in arrears, in bi-weekly installments, (b) any amounts
due in accordance with the terms of the Plan, (c) all benefits under Section 4.1
hereof which have accrued as of the date of termination and (d) uninterrupted
continuation of all rights and benefits accorded the Executive under Sections
4.2, 4.5 and 4.6 hereof for the duration of this Agreement. Additionally, upon
termination by the Company of the Executive's employment without "Cause", the
Executive and the other participants in the Incentive Compensation Plan shall be
entitled to immediate payment of their respective shares of an amount equal to
the difference between $4,000,000 and the aggregate amount of payments
theretofore made to the Executive and the other participants pursuant to such
Plan or set off pursuant to Section 15(i) of the Stock Purchase Agreement dated
as of October __, 1995 by and among the Company, the Executive and certain other
parties thereto.
6.3 In the event of the Executive's death during the Employment
Term, the Employment Term shall terminate automatically as of
<PAGE>
the date of the Executive's death, and the Executive's executor, administrator
or other legal representative shall have no further rights hereunder, except the
right to receive (a) the Base Salary up to the date of the Executive's death and
(b) any amounts due under the Plan.
6.4 If for any reason (other than pursuant to Section 6.3 or
6.5), the Executive resigns from his employment hereunder, this Agreement shall
terminate automatically, and the Executive shall have no further rights
hereunder, except the right to receive the Base Salary up to the date of the
Executive's resignation.
6.5 If, by reason of any illness, disability or incapacity, the
Executive is unable to perform his duties under this Agreement for a period of
six (6) consecutive months (or shorter periods aggregating to nine (9) months in
any twelve (12) month period) ("Disability"), the Company may terminate the
Employment Term as of the last day of such six (6) or nine (9) month period, as
the case may be, or as of such other day thereafter, provided the Executive
remains unable to perform his duties hereunder. The Executive or his legal
representative, if one is appointed, shall be entitled to receive, within sixty
(60) days after the date of such termination, any amounts payable to the
Executive pursuant to this Agreement up to the date of termination of this
Agreement. Notwithstanding the foregoing, if the Executive suffers a Disability
and his employment hereunder is not terminated, the Executive shall be entitled
to receive any amounts owing to him hereunder, less any disability insurance
payments which Executive receives pursuant to disability insurance provided by
the Company hereunder.
6.6 Upon the termination of the Executive's employment pursuant
to this Section 6, the Executive shall have no further rights under this
Agreement except as expressly provided in this Section 6.
7. Non-Competition, Non-Interference and Non-Disclosure.
7.1 The Executive acknowledges that: (a) the business of
producing and distributing at wholesale, manufactured housing, currently
conducted and as conducted from time to time throughout the term of this
Agreement (collectively, the "Business") is conducted by and is proposed to be
conducted by the Company throughout the states of Florida, Georgia, South
Carolina, North Carolina, Virginia, West Virginia, Alabama, Mississippi,
Louisiana, Kentucky and Tennessee (the "Company's Market"); (b) the Business
involves the identification and development of new products and markets relating
to the production and distribution at wholesale of manufactured housing; (c) the
Company has developed trade secrets and confidential information concerning the
Business; and (d) the agreements and covenants contained in this Section 7 are
essential to protect the Business of the Company. In order to induce the Company
to enter into this Employment Agreement, the Executive covenants and agrees
that:
7.2 For a period commencing on the date of this Agreement and
ending (a) on the date that the Executive's employment is terminated without
Cause, or (b) in the case of the expiration of this Agreement or the Executive's
voluntary resignation or termination with Cause, on the date which is two years
following such expiration, resignation or termination of this Agreement, neither
the Executive nor any entity of which 5% or more of the beneficial ownership is
held by the Executive or a related family member ("Controlled Entity") will,
anywhere in the Company's Market, directly or indirectly own, manage, operate,
control, invest or acquire an interest in, or otherwise engage or participate
in, whether as a proprietor, partner, stockholder, director, officer, "Key
Employee" (defined herein to include any person who is employed in a management,
executive, supervisory, marketing or sales capacity for another person), joint
venturer, investor or other participant, any business which competes with the
Business ("Competitive Business") without regard to (i) whether the Competitive
Business has its office, manufacturing or other business facilities within or
without the Company's Market, (ii) whether any of the activities of the
Executive referred to above occur or are performed within or without the
Company's Market or (iii) whether the Executive resides, or reports to an
office, within or without the Company's Market.
7.3 During the period commencing on the date of this Agreement
and ending on the date which is two years following the expiration or
termination of this Agreement, whether by resignation, termination with or
without Cause, or otherwise (the "Restricted Period"), neither the Executive nor
any Controlled Entity will directly or indirectly solicit, induce or influence
any customer, supplier, lender, lessor or any other person which has a business
relationship with the Company, or which
<PAGE>
had on the date of this Agreement, a business relationship with the Company, to
discontinue or reduce the extent of such relationship with the Company.
7.4 During the Restricted Period, neither the Executive nor any
Controlled Entity will directly or indirectly recruit, solicit or otherwise
induce or influence any employee or sales agent of the Company or any of its
affiliates to discontinue such employment or agency relationship with the
Company. During the Restricted Period, neither the Executive nor any Controlled
Entity will employ or seek to employ, or cause or induce any Competitive
Business to employ or seek to employ for any Competitive Business, any person
who is then (or was at any time within six months prior to the date the
Executive or the Competitive Business employs or seeks to employ such person)
employed by the Company. Nothing herein shall prevent the Executive from
providing a letter of recommendation to an Employee with respect to a future
employment opportunity.
7.5 During the Restricted Period and thereafter, neither the
Executive nor any Controlled Entity will directly or indirectly disclose to
anyone, or use or otherwise exploit for the Executive's or any Controlled
Entity's own benefit or for the benefit of anyone other than the Company, any
confidential information, including, without limitation, any confidential "know-
how", trade secrets, customer lists, details of client or consultant contracts,
pricing policies, operational methods, marketing plans or strategies, product
development techniques or plans, computer software, business acquisition plans
and new personnel acquisition plans of the Company related to the Business or
any portion or phase of any scientific or technical information, design,
process, procedure, formula or improvement of the Company that is valuable and
not generally known to the competitors of the Company whether or not in written
or tangible form (hereinafter referred to as "Confidential Information"). The
term "Confidential Information" does not include, and there shall be no
obligation hereunder with respect to, (a) information that becomes generally
available to the public other than as a result of a disclosure by the Executive
or a Controlled Entity or any agent or other representative thereof and (b)
general business methods applicable to a sales business including, but not
limited to, pricing policies, operational methods and marketing concepts.
Neither the Executive nor any Controlled Entity shall have any obligation
hereunder to keep confidential any Confidential Information to the extent
disclosure of any thereof is required by law, or determined in good faith by the
Executive to be necessary or appropriate to comply with any legal or regulatory
order, regulation or requirement; provided, however, that in the event
disclosure is required by law, the Executive or the Controlled Entity concerned
shall provide the Company with prompt notice of such requirement so that the
Company may seek an appropriate protective order.
7.6 In the event the termination or expiration of this
Agreement, the covenants and agreements contained in this Section 7 shall
survive, shall continue thereafter, and shall not expire unless and except as
expressly set forth in such Sections.
7.7 The parties to this Agreement agree that (a) if either the
Executive or any Controlled Entity breaches any provision of this Section 7, the
damage to the Company will be substantial, although difficult to ascertain, and
money damages will not afford the Company an adequate remedy, and (b) if either
the Executive or any Controlled Entity is in breach of this Agreement, or
threatens a breach of this Agreement, the Company shall be entitled, in addition
to all other rights and remedies as may be available to the Company at law or in
equity, to (i) specific performance, (ii) injunctive and other equitable relief
to prevent or restrain a breach of this Agreement and (iii) require the
breaching party to account for and pay over to the Company all compensation,
profits, monies, accruals or other benefits derived or received by such party as
the result of any transactions constituting a breach hereof.
7.8 If any court determines that any provision of this Section 7
is unenforceable because of the duration or geographic scope of such provision,
such court shall have the power to reduce the scope or duration of such
provision, as the case may be, and, in its reduced form, such provision shall
then be enforceable.
7.9 Notwithstanding anything to the contrary contained herein, a
continuation of the Executive's present twenty percent (20%) equity interest in
Sweetwater Homes, Inc. ("Sweetwater"), a current competitor of the Company,
shall not be deemed a violation or breach of any of the provisions of this
Section 7, so long as the Executive does not, from and after the date of this
Agreement, directly or indirectly: (i)
<PAGE>
increase his equity interest in Sweetwater; (ii) serve as an officer, director
or employee of, or consultant to Sweetwater; or (iii) otherwise assist
Sweetwater in any aspect of its operations.
8. Additional Covenants of Company.
(a) If at any time during the term of this Agreement the Company
shall decide to sell the airplane hangar owned by it on the date hereof, the
Company shall first offer such property for sale to the Executive at such
purchase price and on such terms as the Company shall deem reasonable under the
circumstances. The Executive shall have fifteen (15) business days in which to
exercise his purchase option and an additional thirty (30) days in which to
consummate the purchase transaction should he elect to purchase such property.
If the Executive fails or refuses to exercise his purchase option within the
prescribed 15-day period, the Company may offer such property for sale to any
third party at a price and on terms no more favorable to the prospective
purchaser than those offered to the Executive.
(b) If at any time during the term of this Agreement the Company
shall decide not to exercise one or both of the purchase options that are
included in the leases in existence on the date hereof covering the Company's
Plants No. 4 and 5, respectively (the "Purchase Options"), prior to the
expiration of the Purchase Options, the Company shall permit the Executive to
purchase such properties for his personal use and benefit pursuant to the terms
and conditions of the Purchase Options as if the Company were exercising such
Purchase Options.
9. Headings. The section headings of this Agreement are for
convenience of reference only and are not to be considered in the interpretation
of the terms and conditions of this Agreement.
10. Notices. All notices and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when delivered personally, (b) if sent by
telecopy, when receipt thereof is acknowledged at the telecopy number below, (c)
the day following the day on which the same has been delivered prepaid for
overnight delivery to a national air courier service or (d) three business days
following deposit in the United States Mail, registered or certified, postage
prepaid, in each case, addressed as follows:
If to the Company: GMH Acquisition Corp.
P.O. Box 1449
Waycross, Georgia 31502-1449
Attn: Gary M. Brost
Telecopy: _____________
with copies to: Strategic Investments &
Holdings, Inc.
369 Franklin Street
Buffalo, New York 14202
Attn: Gary M. Brost
Telecopy: 716-857-6490
Nixon, Hargrave, Devans & Doyle LLP
1600 Main Place Tower
Buffalo, New York 14202
Attn: Charles P. Jacobs, Esq.
Telecopy: 716-853-8109
If to the
Executive: Samuel P. Scott
4300 South Fletcher Avenue
Fernandina Beach, Florida 32034
Telecopy: __________________
with a copy to: Holland & Knight
50 North Laura Street
Jacksonville, Florida 32202
Attn: L. Kinder Cannon, III, Esq.
Telecopy: 904-358-1872
Any party may change the persons and address to which notices or other
communications are to be sent by given written notice of such change to the
other party in the manner provided herein for giving notice.
11. Waiver of Breach. No waiver by either party of any
<PAGE>
condition or of the breach by the other of any term or covenant contained in
this Agreement, whether by conduct or otherwise, in any one or more instances
shall be deemed or construed as a further or continuing waiver of any such
condition or breach or a waiver of any other condition, or of the breach of any
other term or covenant set forth in this Agreement. The failure of either party
to exercise any right hereunder shall not bar the later exercise thereof.
12. Binding Nature; Assignment. This Agreement shall inure to
the benefit of and be binding on the parties and their respective
successors in interest, and shall not be assignable by either party without
the written consent of the other; provided that nothing in this Section
shall preclude the Executive from designating a beneficiary to receive any
benefit payable hereunder upon his death, or the executors, administrators
or other legal representatives of the Executive or his estate from
assigning any rights hereunder to which they become entitled to the person
or persons entitled thereto.
13. Governing Law. This Agreement is entered into and shall be
construed in accordance with the laws of the State of Georgia, without
giving effect to conflict of laws principles thereof requiring application
of the substantive laws of another jurisdiction.
14. Invalidity or Unenforceability. If any term or provision of
this Agreement is held to be invalid or unenforceable for any reason, such
invalidity or unenforceability shall not affect any other term or provision
hereof and this Agreement shall continue in full force and effect as if
such invalid or unenforceable term or provision (to the extent of the
invalidity or unenforceability) had not been contained herein.
15. Entire Agreement. This Agreement constitutes the full and
complete understanding and agreement of the Executive and the Company
respecting the subject matter hereof, and supersedes all prior
understandings and agreements concerning the subject matter hereof, oral or
written, express or implied. This Agreement may not be modified or amended
orally, but only by an agreement in writing, signed by the party against
whom enforcement of any modification or amendment is sought.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall be deemed one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written.
EXECUTIVE
/s/ Samuel P. Scott
______________________________
Samuel P. Scott
COMPANY
GMH ACQUISITION CORP.
By: /s/ Gary M. Brost
__________________________
Gary M. Brost
Title: Executive Vice President
<PAGE>
EXHIBIT C
<PAGE>
EXHIBIT C
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of October
___, 1995, by and between GMH ACQUISITION CORP., a Delaware corporation
with an office at P.O. Box 1449, Waycross, Georgia 31502-1449 (the
<PAGE>
"Company") and [GREGORY KEITH/DREW ERIC] SCOTT, currently residing at
_________________________________________________ (the "Executive").
The parties hereto, intending to be legally bound hereby, and in
consideration of the mutual covenants herein contained, agree as follows:
1. Employment.
1.1 The Company employs the Executive, and the Executive accepts
such employment (the "Employment"), as ______________________________ of the
Company. The Executive agrees to accept the employment and agrees to remain in
the employ of the Company during the Employment Term (as defined in Section 2
hereof) and any extensions thereof and to perform such lawful duties as are from
time to time assigned to him by the Chief Executive Officer or the Board of
Directors of the Company (the "Board") and which are normally associated with
the position of ______________________________ in the manufactured housing
industry.
1.2 During the Employment Term and any extensions thereof, the
Executive will devote his best efforts and full business time, skill and
attention to the performance of his duties on behalf of the Company.
2. Term of Employment. Subject to the provisions of Section 6
hereof, the term of the Executive's employment hereunder shall be from the date
hereof until December 31, 2000 (the "Employment Term").
3. Compensation.
3.1 The Company agrees to pay, and the Executive agrees to
accept, as base compensation for all services to be rendered by the Executive in
any capacity to the Company or its affiliates during the Employment Term, a
salary of $100,000 per annum, subject to such deductions and withholdings as may
be required by law or by further agreement with the Executive (the "Base
Salary"), payable in arrears in equal bi-weekly installments. The Base Salary
may be increased from time to time in the discretion of the Board. Any such
increases shall be added to the Base Salary then being paid to the Executive,
and the sum thereof shall then become the Base Salary for each successive year,
until further adjusted in accordance with the provisions of this Section 3.1.
3.2 In addition to the Base Salary, the Executive shall
participate in the Company's Executive Bonus Plan, a copy of which is attached
hereto as Exhibit 1, (the "Plan") subject to the terms and conditions of the
Plan. The Executive's "Participant Percentage" under the Plan will never be less
than 20% of the "Bonus Pool" (as such terms are defined in the Plan). The
Company will award not less than a $100,000 incentive award to the Executive for
the 1996 Plan Year regardless of the size of the Bonus Pool.
3.3 The Company shall reimburse the Executive for all reasonable
and necessary expenses incurred by the Executive in connection with the
Employment, including without limitation, travel and lodging expenses and
charges incurred on a Company credit card for business entertainment. Such
expenses shall be reimbursed to the Executive by the Company after the
Executive's submittal of an invoice to the Company with respect to the
reimbursable expenses incurred by him. All invoices for reimbursable expenses
shall include adequate supporting documentation of the expenses incurred by the
Executive, including receipts.
4. Additional Benefits. During the Employment Term, the Company
shall provide the following additional benefits to the Executive:
4.1 The Executive shall be entitled to ____ (__) weeks of paid
vacation during each calendar year.
4.2 The Company shall provide the Executive with health, medical
and hospitalization insurance benefits equal to those provided by the Company to
other executive officers of the Company. In addition, the Executive shall be
permitted, if and to the extent eligible, to participate in any pension plan or
other "fringe benefits" of the Company, which may be available generally to
other executive officers of the Company.
4.3 To defray the expenses of operating his personal automobile
in connection with the performance of his duties hereunder, the Executive shall
be entitled to an automobile allowance in the amount of $200.00 per month.
<PAGE>
5. Insurance. In addition to any insurance coverage provided for in
Section 4 hereof, the Company may, in its discretion, purchase or renew
insurance on the life of the Executive, with the Company or a lender of the
Company as beneficiary in an amount determined by the Company or such lender
from time to time. The Executive agrees to submit to medical examinations and
otherwise to cooperate with the Company and any such lender in connection with
obtaining such insurance.
6. Termination.
6.1 In the event the Executive's employment is terminated for
"Cause", the Executive shall have no further rights under this Agreement, except
the right to receive the Base Salary up to the date of termination by the
Company of the Executive's employment hereunder. The decision to terminate the
Executive under this Section 6.1 shall be made by the Chief Executive Officer of
the Company or by the Board. The term "Cause" shall mean any of the following:
(a) any deliberate or intentional act or omission by the Executive with the
intent of causing damage to the Company's relationships with its lenders,
suppliers or customers; (b) any fraud, misappropriation or embezzlement by the
Executive involving properties, assets or funds of the Company; (c) a conviction
of the Executive, or plea of nolo contendere by the Executive, to any crime or
offense involving monies or other property of the Company or any other felony or
criminal act involving moral turpitude; (d) any usurpation by the Executive of a
corporate opportunity of the Company or the Executive's willful and continual
neglect of or willful and continual failure to perform any of his material
duties, responsibilities or obligations as an employee of the Company, but only
after notice of such usurpation, neglect or failure is delivered to the
Executive and the Executive fails or refuses to remedy such usurpation, neglect
or failure to the reasonable satisfaction of the Board within thirty (30) days
after the receipt of such notice; provided, that any action or omission taken by
the Executive in good faith and in the reasonable belief that such action or
omission was in the best interests of the Company shall not constitute "Cause";
or (e) the violation by the Executive of Section 7 of this Agreement or of any
other non-competition agreement or covenant binding upon the Executive.
6.2 In the event the Executive's employment is terminated
without "Cause", the Executive shall have no further rights under this Agreement
except the right to receive (a) the Base Salary for the balance of the term of
this Agreement, payable in arrears, in bi-weekly installments, (b) any amounts
due in accordance with the terms of the Plan, (c) all benefits under Section 4.1
hereof which have accrued as of the date of termination and (d) uninterrupted
continuation of all rights and benefits accorded the Executive under Section 4.2
hereof for the duration of this Agreement.
6.3 In the event of the Executive's death during the Employment
Term, the Employment Term shall terminate automatically as of the date of the
Executive's death, and the Executive's executor, administrator or other legal
representative shall have no further rights hereunder, except the right to
receive (a) the Base Salary up to the date of the Executive's death and (b) any
amounts due under the Plan.
6.4 If for any reason (other than pursuant to Section 6.3 or
6.5), the Executive resigns from his employment hereunder, this Agreement shall
terminate automatically, and the Executive shall have no further rights
hereunder, except the right to receive the Base Salary up to the date of the
Executive's resignation.
6.5 If, by reason of any illness, disability or incapacity, the
Executive is unable to perform his duties under this Agreement for a period of
six (6) consecutive months (or shorter periods aggregating to nine (9) months in
any twelve (12) month period) ("Disability"), the Company may terminate the
Employment Term as of the last day of such six (6) or nine (9) month period, as
the case may be, or as of such other day thereafter, provided the Executive
remains unable to perform his duties hereunder. The Executive or his legal
representative, if one is appointed, shall be entitled to receive, within sixty
(60) days after the date of such termination, any amounts payable to the
Executive pursuant to this Agreement up to the date of termination of this
Agreement. Notwithstanding the foregoing, if the Executive suffers a Disability
and his employment hereunder is not terminated, the Executive shall be entitled
to receive any amounts owing to him hereunder, less any disability insurance
payments which Executive receives pursuant to disability insurance provided by
the Company hereunder.
<PAGE>
6.6 Upon the termination of the Executive's employment pursuant
to this Section 6, the Executive shall have no further rights under this
Agreement except as expressly provided in this Section 6.
7. Non-Competition, Non-Interference and Non-Disclosure.
7.1 The Executive acknowledges that: (a) the business of
producing and distributing at wholesale manufactured housing currently conducted
and as conducted from time to time throughout the term of this Agreement
(collectively, the "Business") is conducted by and is proposed to be conducted
by the Company throughout the states of Florida, Georgia, South Carolina, North
Carolina, Virginia, West Virginia, Alabama, Mississippi, Louisiana, Kentucky and
Tennessee (the "Company's Market"); (b) the Business involves the identification
and development of new products and markets relating to the production and
distribution at wholesale of manufactured housing; (c) the Company has developed
trade secrets and confidential information concerning the Business; and (d) the
agreements and covenants contained in this Section 7 are essential to protect
the Business of the Company. In order to induce the Company to enter into this
Employment Agreement, the Executive covenants and agrees that:
7.2 For a period commencing on the date of this Agreement and
ending (a) on the date that the Executive's employment is terminated without
Cause, or (b) in the case of the expiration of this Agreement or the Executive's
voluntary resignation or termination with Cause, on the date which is two years
following such expiration, resignation or termination of this Agreement, neither
the Executive nor any entity of which 5% or more of the beneficial ownership is
held by the Executive or a related family member ("Controlled Entity") will,
anywhere in the Company's Market, directly or indirectly own, manage, operate,
control, invest or acquire an interest in, or otherwise engage or participate
in, whether as a proprietor, partner, stockholder, director, officer, "Key
Employee" (defined herein to include any person who is employed in a management,
executive, supervisory, marketing or sales capacity for another person), joint
venturer, investor or other participant, any business which competes with the
Business ("Competitive Business") without regard to (i) whether the Competitive
Business has its office, manufacturing or other business facilities within or
without the Company's Market, (ii) whether any of the activities of the
Executive referred to above occur or are performed within or without the
Company's Market or (iii) whether the Executive resides, or reports to an
office, within or without the Company's Market.
7.3 During the period commencing on the date of this Agreement
and ending on the date which is two years following the expiration or
termination of this Agreement, whether by resignation, termination with or
without Cause, or otherwise (the "Restricted Period"), neither the Executive nor
any Controlled Entity will directly or indirectly solicit, induce or influence
any customer, supplier, lender, lessor or any other person which has a business
relationship with the Company, or which had on the date of this Agreement, a
business relationship with the Company, to discontinue or reduce the extent of
such relationship with the Company.
7.4 During the Restricted Period, neither the Executive nor any
Controlled Entity will directly or indirectly recruit, solicit or otherwise
induce or influence any employee or sales agent of the Company or any of its
affiliates to discontinue such employment or agency relationship with the
Company. During the Restricted Period, neither the Executive nor any Controlled
Entity will employ or seek to employ, or cause or induce any Competitive
Business to employ or seek to employ for any Competitive Business, any person
who is then (or was at any time within six months prior to the date the
Executive or the Competitive Business employs or seeks to employ such person)
employed by the Company. Nothing herein shall prevent the Executive from
providing a letter of recommendation to an Employee with respect to a future
employment opportunity.
7.5 During the Restricted Period and thereafter, neither the
Executive nor any Controlled Entity will directly or indirectly disclose to
anyone, or use or otherwise exploit for the Executive's or any Controlled
Entity's own benefit or for the benefit of anyone other than the Company, any
confidential information, including, without limitation, any confidential "know-
how", trade secrets, customer lists, details of client or consultant contracts,
pricing policies, operational methods, marketing plans or strategies, product
development techniques or plans, computer software, business acquisition plans
and new personnel acquisition plans of the Company related to the Business or
any portion or phase of any scientific or technical information, design,
process, procedure, formula or
<PAGE>
improvement of the Company that is valuable and not generally known to the
competitors of the Company whether or not in written or tangible form
(hereinafter referred to as "Confidential Information"). The term "Confidential
Information" does not include, and there shall be no obligation hereunder with
respect to, (a) information that becomes generally available to the public other
than as a result of a disclosure by the Executive or a Controlled Entity or any
agent or other representative thereof and (b) general business methods
applicable to a sales business including, but not limited to, pricing policies,
operational methods and marketing concepts. Neither the Executive nor any
Controlled Entity shall have any obligation hereunder to keep confidential any
Confidential Information to the extent disclosure of any thereof is required by
law, or determined in good faith by the Executive to be necessary or appropriate
to comply with any legal or regulatory order, regulation or requirement;
provided, however, that in the event disclosure is required by law, the
Executive or the Controlled Entity concerned shall provide the Company with
prompt notice of such requirement so that the Company may seek an appropriate
protective order.
7.6 In the event the termination or expiration of this
Agreement, the covenants and agreements contained in this Section 7 shall
survive, shall continue thereafter, and shall not expire unless and except as
expressly set forth in such Sections.
7.7 The parties to this Agreement agree that (a) if either the
Executive or any Controlled Entity breaches any provision of this Section 7, the
damage to the Company will be substantial, although difficult to ascertain, and
money damages will not afford the Company an adequate remedy, and (b) if either
the Executive or any Controlled Entity is in breach of this Agreement, or
threatens a breach of this Agreement, the Company shall be entitled, in addition
to all other rights and remedies as may be available to the Company at law or in
equity, to (i) specific performance, (ii) injunctive and other equitable relief
to prevent or restrain a breach of this Agreement and (iii) require the
breaching party to account for and pay over to the Company all compensation,
profits, monies, accruals or other benefits derived or received by such party as
the result of any transactions constituting a breach hereof.
7.8 If any court determines that any provision of this Section 7
is unenforceable because of the duration or geographic scope of such provision,
such court shall have the power to reduce the scope or duration of such
provision, as the case may be, and, in its reduced form, such provision shall
then be enforceable.
8. Headings. The section headings of this Agreement are for
convenience of reference only and are not to be considered in the interpretation
of the terms and conditions of this Agreement.
9. Notices. All notices and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when delivered personally, (b) if sent by
telecopy, when receipt thereof is acknowledged at the telecopy number below, (c)
the day following the day on which the same has been delivered prepaid for
overnight delivery to a national air courier service or (d) three business days
following deposit in the United States Mail, registered or certified, postage
prepaid, in each case, addressed as follows:
If to the Company: GMH Acquisition Corp.
P.O. Box 1449
Waycross, Georgia 31502-1449
Attn: Gary M. Brost
Telecopy: ________________
with copies to: Strategic Investments &
Holdings, Inc.
369 Franklin Street
Buffalo, New York 14202
Attn: Gary M. Brost
Telecopy: 716-857-6490
Nixon, Hargrave, Devans & Doyle LLP
1600 Main Place Tower
Buffalo, New York 14202
Attn: Charles P. Jacobs, Esq.
Telecopy: 716-853-8109
If to the
<PAGE>
Executive: Gregory Keith Scott
__________________________
__________________________
Telecopy: _______________
with a copy to: Holland & Knight
50 North Laura Street
Jacksonville, Florida 32202
Attn: L. Kinder Cannon, III, Esq.
Telecopy: 904-358-1872
Any party may change the persons and address to which notices or other
communications are to be sent by given written notice of such change to the
other party in the manner provided herein for giving notice.
10. Waiver of Breach. No waiver by either party of any condition or
of the breach by the other of any term or covenant contained in this Agreement,
whether by conduct or otherwise, in any one or more instances shall be deemed or
construed as a further or continuing waiver of any such condition or breach or a
waiver of any other condition, or of the breach of any other term or covenant
set forth in this Agreement. The failure of either party to exercise any right
hereunder shall not bar the later exercise thereof.
11. Binding Nature; Assignment. This Agreement shall inure to the
benefit of and be binding on the parties and their respective successors in
interest, and shall not be assignable by either party without the written
consent of the other; provided that nothing in this Section shall preclude the
Executive from designating a beneficiary to receive any benefit payable
hereunder upon his death, or the executors, administrators or other legal
representatives of the Executive or his estate from assigning any rights
hereunder to which they become entitled to the person or persons entitled
thereto.
12. Governing Law. This Agreement is entered into and shall be
construed in accordance with the laws of the State of Georgia, without giving
effect to conflict of laws principles thereof requiring application of the
substantive laws of another jurisdiction.
13. Invalidity or Unenforceability. If any term or provision of this
Agreement is held to be invalid or unenforceable for any reason, such invalidity
or unenforceability shall not affect any other term or provision hereof and this
Agreement shall continue in full force and effect as if such invalid or
unenforceable term or provision (to the extent of the invalidity or
unenforceability) had not been contained herein.
14. Entire Agreement. This Agreement constitutes the full and
complete understanding and agreement of the Executive and the Company respecting
the subject matter hereof, and supersedes all prior understandings and
agreements concerning the subject matter hereof, oral or written, express or
implied. This Agreement may not be modified or amended orally, but only by an
agreement in writing, signed by the party against whom enforcement of any
modification or amendment is sought.
15. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall be deemed one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written.
EXECUTIVE
/s/ Gregory Keith/Drew Eric Scott
______________________________________
Gregory Keith/Drew Eric Scott
COMPANY
GMH ACQUISITION CORP.
By: /s/ Gary M. Brost
___________________________________
Gary M. Brost
Title: Executive Vice President
<PAGE>
EXHIBIT D
<PAGE>
EXHIBIT D
[TO BE PROVIDED]
<PAGE>
EXHIBIT E
<PAGE>
GMH ACQUISITION CORP.
INSTALLMENT PROMISSORY NOTE
THIS NOTE IS NOT
NEGOTIABLE
$_______________ ___________, 1995
FOR VALUE RECEIVED, the undersigned GMH ACQUISITION CORP. ("GMH"), a
Delaware corporation, hereby promises to pay to the order of
___________________________, with an address of _____________________ (the
"Payee"), the principal amount of $__________, as follows:
(i) $__________ payable on November __, 1995;
(ii) $__________ payable on December __, 1995; and
(iii) $__________ payable on January, 1996.
Payments of principal shall be made by transfer of immediately available funds
to such account at such bank as Payee shall direct. No prepayment of all or any
part of this Note shall be permitted.
This Note is one of the Installment Promissory Notes issued by GMH in the
aggregate principal amount of $__________ (individually, a "Note" and
collectively, the "Notes") in connection with the purchase by GMH of all of the
issued and outstanding common stock of General Manufactured Housing, Inc.
pursuant to that certain Stock Purchase Agreement dated as of October __, 1995
(the "Stock Purchase Agreement") among GMH, the Sellers (as that term is defined
therein) and General Manufactured Housing, Inc. GMH, together with its
successors and assigns, are collectively referred to herein as the "Company."
1. Interest.
This Note shall bear interest on all outstanding principal at a fixed
rate per annum of _____ percent (___%) [___ percent (___%) reduced by all costs
of the letter of credit to be provided to the Sellers to secure the Notes].
Interest shall be payable on each of the three principal payment dates set forth
above. If this Note or any payment of principal or interest hereon shall not be
paid when due (whether at stated maturity, by acceleration or otherwise) the
overdue principal, and to the extent permitted by law, any overdue interest
shall bear interest at the rate of ___%, which interest shall accrue from the
date of such default in payment to the date payment of such overdue principal
and interest shall be made. Interest on overdue principal and interest shall be
payable on demand. All interest payments required on this Note shall be computed
on the basis of a 360-day year of twelve 30-day months. If any payment on this
Note becomes due and payable on a Saturday, Sunday or other day on which
commercial banks in Georgia or New York are authorized or required by law to
close, the maturity thereof shall be extended to the next succeeding business
day, and, with respect to payments of principal, interest thereon shall be
payable during such extension at the then applicable rate.
2. Securities Representation.
Payee represents that he will not transfer or dispose of all or any
part of this Note in violation of the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
<PAGE>
3. Transfer of Note.
The holder of this Note shall not sell, assign, pledge, transfer,
hypothecate or in any manner dispose of or part with all or any part of his
right, title and interest in and to this Note without the prior written consent
of the Company.
4. Notices.
All notices, consents, demands, requests, approvals and other
communications which are required or may be given hereunder shall be in writing
and shall be deemed to have been duly given (a) when delivered personally, (b)
if sent by telecopy, when receipt thereof is acknowledged at the telecopy number
below, (c) the second day following the day on which the same has been delivered
prepaid to a national air courier service or (d) three business days following
deposit in the mail, registered or certified postage prepaid in each case,
addressed as follows: (i) if to the holder of this Note to whom this Note is
originally issued, to his address set forth in the first paragraph hereof, or at
such other address as may have been furnished to the Company by such holder in
writing, or (ii) if to any other holder of this Note, to such address as may
have been furnished to the Company in writing by such holder, or, until such
other holder furnishes to the Company an address, then to, and at the address
of, the last holder of this Note who has so furnished an address to the Company,
or (iii) if to the Company, at P.O. Box 1449, Waycross, Georgia 31502-1449,
Telecopy: (___) ___-____. Any notice given pursuant to this Section shall be
effective, whether given by the Company or the holder of this Note, or by either
of their counsel.
5. Events of Default. In the event that:
(a) the Company fails to make any payment of principal on this Note
when due or defaults for more than 3 business days in making any payment of
interest required to be made on this Note; or
(b) the Company, (i) commences any case, proceeding or other action
(x) under any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking
to have an order for relief entered with respect to it, or seeking to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts, or (y) seeking appointment of a receiver, trustee, custodian
or other similar official for it or for all or any substantial part of its
assets, or shall make a general assignment for the benefit of its creditors, or
(ii) is the debtor named in any other case, proceeding or other action of a
nature referred to in clause (i) above which (x) results in the entry of an
order for relief or any such adjudication or appointment or (y) remains
undismissed, undischarged or unbonded for a period of 60 days, or (iii) takes
any action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i) or (ii) above, or (iv)
shall generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; then, and in any such event, and
at any time thereafter, if such default shall then be continuing, the Payee may,
by written notice to the Company, declare this Note due and payable, whereupon
this Note, together with all accrued and unpaid interest thereon, shall be due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived. In addition, in any such event, the
Payee shall be entitled to recover reasonable attorneys' fees and other costs of
collection incurred.
6. Amendments and Waivers.
Neither this Note nor any term hereof may be changed, waived,
discharged or terminated orally or in writing, except that any term of this Note
may be amended and the observance of any such term may be waived (either
generally or in a particular instance either retroactively or prospectively)
with (but only with) the written consent of the holder of this Note.
7. Benefit.
All of the covenants, stipulations, promises and agreements contained
in this Note by GMH shall be binding upon GMH and its successors and assigns and
shall inure to the benefit of and be enforceable by the
<PAGE>
holder of this Note and his successors and assigns.
8. Law Governing.
This Note shall be governed by and construed in accordance with the
laws of the State of Delaware without regard to conflicts of law principles
thereof.
9. Construction.
Wherever the context may require, any pronoun used herein shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs shall include the plural and vice versa.
10. Security.
As collateral security for the faithful and timely performance of all
of the Company's obligations on this Note, GMH has obtained a stand-by letter of
credit from ______________ ___________, a copy of which is attached hereto. The
Payee shall be entitled to the benefits of such letter of credit.
11. No Recourse.
The Payee by his acceptance of this Note hereby agrees for itself and
its successors and assigns in favor of any incorporator, officer, director,
stockholder, agent or employee of GMH that this Note and the obligations of GMH
to Payee hereunder shall be payable only out of the assets of GMH, and no
recourse shall be had for payment of any amount due hereunder against any such
incorporator, stockholder, officer, director, agent or employee of GMH by virtue
of any law or by enforcement of any assessment or otherwise, all such liability,
if any, being, by the acceptance hereof and as a part of the consideration for
the issue hereof, expressly released, other than as a result of such
incorporator's, stockholder's, officer's, director's, agent's or employee's
fraud or willful misconduct.
<PAGE>
IN WITNESS WHEREOF, GMH has executed this Note as of the day and year first
written above.
GMH ACQUISITION CORP.
By: ______________________________
Title: ___________
<PAGE>
EXHIBIT F
<PAGE>
GMH ACQUISITION CORP.
INCENTIVE COMPENSATION PLAN
1. PURPOSES OF THE PLAN
The purposes of this Incentive Compensation Plan (the "Plan") are to
enable GMH Acquisition Corp. (the "Company") to retain the services of key
employees and to provide them with increased motivation and incentive to
achieve and exceed the goals of the business consistent with both short
term and long term objectives.
2. DEFINITIONS
The following terms shall have the meanings set forth below:
(a) "Base Amount" means $11 million; provided, however, that for the
<PAGE>
Stub Period, the Base Amount shall equal the product of (a) $11 million and (b)
a fraction, the numerator of which is the number of days in the Stub Period, and
the denominator of which is 365.
(b) "Board of Directors" means the Board of Directors of the Company.
(c) "Bonus Pool" means, for each Plan Year, an amount equal to EBIT in
excess of the Base Amount for such fiscal year; provided, however, that such
amount shall not exceed $4 million in the aggregate, $2 million in any one Plan
Year; and provided, further, however, that for the Stub Period, the Bonus Pool
shall not exceed an amount equal to the product of (a) $2 million and (b) a
fraction, the numerator of which is the number of days in the Stub Period, and
the denominator of which is 365.
(d) "EBIT" means, for each applicable Plan Year, the net income of the
Company for such year, before (i) interest expense, (ii) taxes, (iii)
amortization, (iv) amounts paid under the Company's Executive Bonus Plan, (v)
the Management Fee, (vi) reimbursement of the Company's expenses under Section
19 of the Stock Purchase Agreement, (vii) costs incurred by the Company in
remediating the Company's properties pursuant to Section 14(b) of the Stock
Purchase Agreement and (viii) all compensation and benefits payable to
management personnel added after the Effective Date other than at the direction
of the Chief Executive Officer of the Company's operating subsidiary and other
than in the ordinary course of the Company's business, all as shown on the
audited financial statements of the Company; provided, that EBIT shall be
determined in accordance with generally accepted accounting principles,
consistent with those employed by the Company in 1994 and reflected on its
audited financial statements for such year.
(e) "Effective Date" means __________, 1995.
(f) "Management Agreement" means the Management Agreement dated as of
__________________, 1995 by and between Strategic Investments & Holdings, Inc.
and the Company.
(g) "Management Fee" means an amount equal to the management fee paid
pursuant to the terms of the Management Agreement.
(h) "Participant" means Samuel P. Scott, Gregory Keith Scott, Drew Eric
Scott and Kelly S. Herold.
(i) "Participant Percentage" means, for any Plan Year, the percentage of
the Bonus Pool allocated to a Participant.
(j) "Plan Year" means any of the fiscal years of the Company following the
consummation of the transactions contemplated by the Stock Purchase Agreement
and ending on or before December 31, 2000.
(k) "Stock Purchase Agreement" means that certain Stock Purchase Agreement
dated as of October __, 1995 by and among Samuel P. Scott et al. and the
Company.
(l) "Stub Period" shall mean the period from the Effective Date through
December 31, 1995.
3. TERM OF THE PLAN
The term of this Plan shall commence on the Effective Date and terminate on
the earlier of (i) December 31, 2000, (ii) the payment to Participants of $4
million under the terms of the Plan, or (iii) the initial public offering of the
common equity of the Company.
4. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Board of Directors. In the event
the employment of any Participant terminates, the Board of Directors shall
[reallocate the Participant Percentage of the terminating Participant among the
remaining Participants]. Any decision by the Board of Directors regarding the
administration or interpretation or construction of any provisions of the Plan
shall be final, binding and conclusive.
(b) No member of the Board of Directors shall be liable for any action
taken or omitted to be taken or for any determination made by him or her in good
faith with respect to the Plan, and the Company shall indemnify and hold
harmless each member of the Board of Directors against any cost or expense
(including counsel fees) or liability (including any sum paid in settlement of a
claim with the approval of the Board of Directors) arising
<PAGE>
out of any act or omission in connection with the administration or
interpretation of the Plan, unless arising out of such person's own fraud or bad
faith.
5. INCENTIVE AWARDS
(a) Based upon the recommendations of the Chief Executive Officer, the
Board of Directors shall determine the eligible Participants for the Plan Year
and the Participant Percentage for each Participant.
(b) If EBIT for any Plan Year does not exceed the Base Amount for such
year, the Company shall not allocate any amounts to the Bonus Pool.
(c) If EBIT for any Plan Year exceeds the Base Amount for such year, the
Company shall allocate 100% of the amount of EBIT in excess of the Base Amount
to the Bonus Pool to be allocated among the Participants; provided, however,
that the maximum amount to be allocated to the Bonus Pool in any Plan year shall
not exceed $2 million and the maximum amount to be allocated to the entire Bonus
Pool shall not exceed $4 million.
(d) The Bonus Pool, if any, for any Plan Year shall be calculated and paid
to the Participants, in cash, within thirty (30) days after the Company's
receipt of its audited financial statements for such year but no later than one
hundred fifty (150) days following the end of such year; [provided, however,
that except as provided in paragraph (e) hereof, no portion of the Bonus Pool
shall be paid to any Participant for any Plan Year if such Participant is not an
employee of the Company at the end of such year.]
[(e) In the event that a Participant is not an employee of the Company at
the end of a Plan year because of his death, termination for disability or
retirement during such year, the portion of the Bonus Pool, if any, payable to
such Participant for such Plan Year shall be prorated to the date of death, date
of termination for disability or date of retirement, and the portion of the
Bonus Pool attributable to the part of the Plan Year prior to such date of
death, termination or retirement shall be determined and paid to such
Participant or his legal representative in accordance with paragraph (d) above.
In the event that a Participant is not an employee of the Company at the end of
a Plan Year because such Participant has either voluntarily terminated his
employment or because of the termination of such Participant for any reason
other than death, disability or retirement during such year, no portion of the
Bonus Pool for such year shall be payable to such Participant but instead shall
be allocated among the remaining Participants proportionately based on their
existing Participant Percentages.]
(f) Any and all amounts payable under the Bonus Pool hereunder shall be
subject to applicable federal, state and local tax withholding requirements.
(g) In the event that the Company's common stock is sold in an initial
public offering prior to the end of the term of this Agreement, the Company will
pay, in cash, to the Participants, no later than ____________, an amount equal
to 90% of an amount equal to the difference between $4.0 million and the amounts
which have previously been paid to Participants or set off under the Stock
Purchase Agreement.
6. MISCELLANEOUS
(a) No right to receive any incentive compensation under the Plan shall be
transferable except by will or the laws of descent and distribution. Any
purported transfer contrary to this provision will be null and void and without
effect.
(b) Neither the adoption of the Plan nor its operation, nor any document
describing or referring to the Plan, or any part hereof, nor the designation of
any employee as a Participant in the Plan shall confer upon any Participant any
right to continue in the employ of the Company or shall in any way affect the
right and power of the Company to terminate the employment of any Participant at
any time with or without assigning a reason therefor, to the same extent as
might have been done if the Plan had not been adopted.
(c) By acceptance of any incentive compensation under the Plan, the
recipient shall be deemed to agree (a) to execute any and all documents
reasonably requested by the Company in connection with his or her participation
in the Plan, including an agreement to report any amounts received under the
Plan as compensation and (b) that any compensation paid
<PAGE>
hereunder will not be taken into account as "base remuneration", "wages",
"salary" or "compensation" in determining the amount of any contribution to or
payment or any other benefit under any pension, retirement, incentive, profit-
sharing or deferred compensation plan of the Company.
(d) The place of administration of the Plan shall be in the State of
Georgia, and the validity, construction, interpretation, administration and
effect of the Plan and of its rules and regulations, and rights relating to the
Plan, shall be determined solely in accordance with the laws of the State of
Georgia.
(e) The amounts due under the Plan are subject to setoff in accordance
with the terms of the Stock Purchase Agreement and the Escrow Agreement dated as
of ____________, 1995 by and between the Company and ___________________.
<PAGE>
EXHIBIT G
<PAGE>
GMH ACQUISITION CORP.
SUBSCRIPTION AGREEMENT
October __, 1995
GMH Acquisition Corp.
____________________
____________________
RE: Subscription for Shares of [Class A] Common Stock, Par Value
[$0.01] Per Share, of GMH Acquisition Corp. (the "Corporation")
Ladies and Gentlemen:
The Corporation and the undersigned hereby agree as follows:
1. The Corporation hereby agrees to issue and sell to the undersigned,
and the undersigned hereby agrees to subscribe for and purchase from the
Corporation, _____ shares of its [Class A] Common Stock, [par value $0.01] per
share (the "Shares") at an aggregate purchase price of $_______________.
2. Payment for the Shares shall be made by the undersigned within two
days of the Corporation's request therefor. Payment shall be made by means of
delivery by the undersigned of a check payable to the Corporation in the amount
of _______________ and 00/100 Dollars ($_______________). Delivery by the
Corporation of a certificate representing the Shares shall be made on the date
of payment or promptly thereafter.
3. The undersigned represents that the undersigned is acquiring the
Shares for his own account for investment and not with a view to the
distribution or resale thereof or with any present intention of distributing or
selling such Shares. The undersigned agrees that the Shares may not be
transferred except upon registration under the Securities Act of 1933, as
amended (the "Act"), and under any applicable state securities or "blue sky"
laws, or upon receipt by the Corporation of an opinion of counsel, in form and
substance satisfactory to it, to the effect that such transfer may be made
without registration under the Act and applicable state securities or "blue sky"
laws.
4. The undersigned agrees that the following legend may be set forth on
all certificate representing the Shares:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAW
OF ANY STATE. SUCH SHARES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH
REGISTRATION IS NOT REQUIRED BY SAID ACT OR STATE LAWS.
5. The undersigned acknowledges that the undersigned has been informed by
the Corporation that in the absence of an effective registration statement under
the Act and under any applicable state securities or "blue sky" laws (or an
exemption from the registration requirements thereof), the Shares may not be
sold or otherwise transferred or disposed of. The Corporation is not obligated
to register under the Act any sale, transfer or other disposition of the Shares,
and accordingly, the Shares may be held indefinitely unless such sale, transfer
or disposition is registered under the Act and under any applicable state
securities or "blue sky" laws or is exempt from the registration requirements
thereof. Any sales pursuant to Rule 144 under the Act may only be made in
limited amounts upon compliance with all of the terms and conditions of that
Rule. The undersigned has been informed that the Corporation will not supply the
undersigned with any information necessary to enable the undersigned to make
routine sales of the Shares under Rule 144. In the event that Rule 144 is not
applicable, the Shares may not be sold, transferred or otherwise disposed of
without registration unless there is compliance with an applicable exemption.
6. The undersigned represents and affirms that the undersigned (i) has
such knowledge and experience in financial and business affairs that he is
capable of evaluating the merits and risks involved in purchasing the Shares,
(ii) is able to bear the economic risks involved in purchasing the Shares, and
(iii) has had the opportunity to ask questions of, and receive answers from, the
Corporation and persons acting on its behalf concerning the terms and conditions
of the offering of the Shares and to obtain any additional information in
connection therewith.
7. The undersigned further acknowledges that the Shares will be held
subject to the terms and conditions of a Stockholders Agreement to be entered
into among the Corporation and its stockholders.
Very truly yours,
______________________________
Accepted and Agreed:
GMH ACQUISITION CORP.
By:/s/ Gary M. Brost
_________________________
Gary M. Brost, President
<PAGE>
EXHIBIT H
[TO BE PROVIDED]
<PAGE>
EXHIBIT I
[TO BE PROVIDED]
<PAGE>
SELLERS' SCHEDULES - 10/10/95
GENERAL MANUFACTURED HOUSING, INC.
Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
The following schedules form a part of that certain STOCK
PURCHASE AGREEMENT by and between Kelly Scott HEROLD, AS TRUSTEE, GREGORY KEITH
SCOTT, DREW ERIC SCOTT AND SAMUEL P. SCOTT AND SHERRY J. SCOTT, as Joint Tenants
(collectively, the "Sellers"), GENERAL MANUFACTURED HOUSING, INC. and GMH
ACQUISITION CORP. (the "Buyer") dated October 10, 1995 (the "Amendment").
Capitalized terms contained in the following schedules have the same meanings as
given them in the Agreement. All references to sections refer to sections of the
Agreement unless otherwise specified. Any restatement or paraphrase in the
following schedules (indicated by small, non-bolded print) of any of the
statements set forth in Section 7 or elsewhere in the Agreement are for
reference purposes only and, in the event of any discrepancy between any such
restatement or paraphrase and the text of the Agreement, as amended, the text of
the Agreement shall control.
Addenda attached hereto:
Addendum 1 to Schedule 7(e) - Tangible Personal and Real Property of
GMH
Addendum 2 to Schedule 7(e) - List of all motor vehicles
Addendum 3 to Schedule 7(e) - List of all bank accounts and
certificates
Addendum 4 to Schedule 7(e) - Condition of manufacturing plants
Addendum to Schedule 7(n) - Schedule of Workers' Compensation
Insurance claims
Addendum to Schedule 7 (p) - List of additional insurance policies
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(a) "Organization; Good Standing; Power; Etc."
I. Jurisdictions where business is conducted or assets are owned and in
which GMH is qualified as a foreign corporation to do business:
Florida
North Carolina
South Carolina
Lamar Housing, L.L.C., as a Georgia limited liability company, will
conduct business and own assets in South Carolina and consequently is
in the process of obtaining the necessary authority to transact
business in South Carolina.
II. Equity Interests in any corporation, partnership, joint venture or
other entity owned, directly or indirectly, by Acquired Entities:
99% ownership interest in the Capital Account of Lamar Housing,
L.L.C., is held by GMH.
III. List of all assumed names or trade names in use by Acquired Entities:
The Acquired Entities sometimes refer to themselves, their respective
divisions or their products by the following assumed names: "General
Housing," "Jaguar Homes," "Lamar Housing," "Augustine," "Cougar,"
"Little General," "Governor," or "Senator." These are not registered
trade or fictitious names or marks.
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(b) "Capitalization"
Description of the authorized, issued and outstanding equity interests and names
of persons to whom issued:
GENERAL MANUFACTURED HOUSING, INC.:
100,000 shares of common stock authorized, par value $100.00 per
share
Shareholders No. of Shares
Samuel P. Scott and Sherry J. 1,590
Scott JT TEN
Drew Eric Scott 1,220
Gregory Keith Scott 1,220
Kelly Scott Herold, 1,220
Trustee of the
Kelly Scott Herold
Revocable Trust--1995
dated October __, 1995
Treasury Shares:
General Manufactured Housing, Inc. 750
LAMAR HOUSING, L.L.C.
(non-stock entity)
Owner % of Capital Account
General Manufactured
Housing, Inc. 99%
Samuel P. Scott 1
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(c) "Effective Agreement"
Other than the exceptions listed after each entry below, the execution, delivery
and performance of this Agreement by each of the Sellers and the consummation of
the Transaction do not and will not:
(I) conflict with, violate or result in the breach of any of the terms or
conditions of, or constitute a default under
a) the organizational or constituent documents of any of the
Acquired Entities;
None
b) any contract, agreement, commitment, indenture, mortgage, pledge,
note, bond, license, permit or other instrument or obligation to
which any of the Acquired Entities is a party or by which any of
the Acquired Entities or their assets may be bound or affected;
LICENSES
Alabama Manufacturer License No. 4521 (expires 12/31/95) and copy
of renewal application (no date)
Florida DMV License as Manufacturer of Mobile Homes, #MH10075,
effective 10/1/94 for 94-95 license year, and Renewal Certificate
through 9/30/95 of Bankers Insurance Company Bond No. 33-35881
(originally dated 10/1/93)
Florida DMV License as Manufacturer of Recreational Vehicles,
#MR10150, effective 10/1/94 for 94-95 license year, and Renewal
Certificate through 9/30/95 of Bankers Insurance Company Bond No.
33-35880 (originally dated 10/1/93)
Georgia Manufactured Homes Manufacturer/Dealer License No. 20913
(expires 12/31/95)
Kentucky Certificate of Acceptability No. 95-MM-10-59 (license to
manufacture, import or sell mobile homes to Kentucky Dealers;
expires 12/31/95)
Louisiana Manufacturer License No. 95-M00086 (expires 12/31/95)
Mississippi Privilege License for Manufacturer No. 95-M0157
(expires 6/30/96)
North Carolina Manufacturer's License No. 001113 (expires
6/30/95), Continuation Certificate through 6/30/96 of Selective
Insurance Bond No. B73551, and copies of various related 1994
documents
License Bonds, Manufacturer's Representative, to South Carolina
Manufactured Housing Board, through Bankers Insurance Company
(6/30/95 - 6/30/96): #33-19363, Michael O'Gorman; #33-19364, Tom
Howard Moss; #33-35895, Braxton Guill; and #33-19365, Bruce C.
Hallock
South Carolina Manufacturer License No. 6255 (expires 6/30/96)
and License Bond #33-19361 to South Carolina Manufactured Housing
Board through Bankers Insurance Company (6/30/95 - 6/30/96)
Tennessee Factory-Manufactured Structures License No. 4500
(expires 12/31/95), Continuation Certificate through 12/31/95 of
USF&G Bond No. 02-0130-11677-93-6
Virginia Manufacturer License #M-1995-00108 (expires 4/6/96)
REPURCHASE AGREEMENTS
1) Bombardier Capital Inc. Floorplan Repurchase Agreement
dated 8/7/92
2) Ford Motor Credit Manufacturer Agreement and Addendum dated
11/19/90 (not signed by Ford Motor Credit)
3) Green Tree Financial Corporation Stock Floorplan Financing
Agreement dated 2/24/95 and Pre-Sold Floorplan Financing
Agreement dated 1/25/94
4) Deere Credit, Inc. (a/k/a Deere Credit Services, Inc., a/k/a
John Deere Credit) Manufacturer's Financing Agreement and
Addendum dated 7/19/94
5) ITT Commercial Finance Corp. Floorplan Repurchase Agreement
dated 3/4/88
6) NationsCredit Commercial Corporation Inventory Repurchase
Agreement dated 7/21/93 and corporate Guaranty by General up
<PAGE>
to $117,537 on specific invoices, dated 4/3/95
7) Whirlpool Financial Corporation Repurchase Agreement dated
4/17/90
8) Security Pacific Housing Services, Inc. Retail Credit Line
arrangements dated 10/9/89, including Manufacturer's
Invoicing Certification, Manufacturer's Indemnification
Agreement, and personal guaranty (which expired by its own
terms on or about 10/9/94)
9) SouthTrust Bank Repurchase Agreement dated 11/14/91
In addition, the Company has entered into repurchase agreements
with numerous local and regional financial institutions
(generally providing floorplan/inventory financing for a single
dealer) which in the aggregate represent not more than 20% of the
Company's total repurchase obligation (in dollars).
DEBT OBLIGATIONS
1) Corporate Guaranty of Deed to Secure Debt made by Waycross
and Ware County Development Authority to Patterson Bank
dated 12/30/93 encumbering Plants 2 and 3 to secure
Promissory Note in the original principal amount of
$613,727.63 in connection with sale and lease-back
transaction;
2) Promissory Note to NationsBank of Georgia, N.A., in the
original principal amount of $600,000 dated 8/24/94 (secured
by lien on aircraft, engines, propellers, accessories and
parts);
REAL PROPERTY LEASES:
1) Contract of Lease and Rent dated 12/30/93 with Waycross and
Ware County Development Authority for real property referred
to as Plants 2 and 3
2) Lease Agreement dated 5/26/95 between Tim-Bar Corporation
and Hi-Tech Properties, Inc. (the primary lease underlying
the sublease to GMH) for real property referred to as Plant
4
3) Lease Agreement with Option to Purchase dated 7/10/95
between R. Warr & W. Evans (dba Lamar Warehouse Co.) and
Lamar Housing, L.L.C. for real property referred to as Plant
5 in Lamar, South Carolina
4) Lease of vacant land adjacent to Plant 4, to be used for
storage of finished goods; lease terms are currently being
negotiated and the effect of the Transaction on the lease
has therefore not yet been determined
OTHER
"HUD Package" evidencing GMH's qualification as HUD-approved
manufacturer
Share Purchase Agreement dated September 1, 1992, by and between
Samuel P. Scott, Sherry J. Scott, Gregory Keith Scott, Kelly
Scott Herold individually and as Trustee of the Kelly Scott
Herold Revocable Trust dated June 3, 1994, and Drew Eric Scott,
as amended June 3, 1994
Operating Agreement of Lamar Housing, L.L.C.
c) any law, regulation, ordinance or decree to which any of the
Acquired Entities or their assets are subject;
None
(II) result in the creation or imposition of any lien, security interest,
charge, encumbrance, restriction or right, including rights of
termination or cancellation, in or with respect to, or otherwise
materially adversely affect, any of the properties, assets or
businesses of any of the Acquired Entities.
All documents included in Part I Item b of this Schedule 7(c) are
incorporated herein by reference.
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(d) "Consents"
Permits, consents, approvals, or authorizations of, or designations,
declarations or filings with, governmental authorities or other persons or
entities by Sellers or any Acquired Entity required in connection with the
execution or delivery by any of the Sellers or the consummation of the
Transaction:
The following licenses may not be transferable, but, to Sellers'
knowledge, new licenses should be obtainable by Buyer without undue
burden or expense. However, if such licenses are not maintained,
sales of the Company's products might be interrupted in the affected
jurisdictions. Lamar Housing, L.L.C. is in the process of applying
for similar licenses and bonding where required.
LICENSES:
Alabama Manufacturer License No. 4521 (expires 12/31/95) and copy of
renewal application (no date)
Florida DMV License as Manufacturer of Mobile Homes, #MH10075,
effective 10/1/94 for 94-95 license year, and Renewal Certificate
through 9/30/95 of Bankers Insurance Company Bond No. 33-35881
(originally dated 10/1/93)
Florida DMV License as Manufacturer of Recreational Vehicles,
#MR10150, effective 10/1/94 for 94-95 license year, and Renewal
Certificate through 9/30/95 of Bankers Insurance Company Bond No.
33-35880 (originally dated 10/1/93)
Georgia Manufactured Homes Manufacturer/Dealer License No. 20913
(expires 12/31/95)
Kentucky Certificate of Acceptability No. 95-MM-10-59 (license to
manufacture, import or sell mobile homes to Kentucky Dealers; expires
12/31/95)
Louisiana Manufacturer License No. 95-M00086 (expires 12/31/95)
Mississippi Privilege License for Manufacturer No. 95-M0157 (expires
6/30/96)
North Carolina Manufacturer's License No. 001113 (expires 6/30/96),
Continuation Certificate through 6/30/96 of Selective Insurance Bond
No. B73551, and copies of various related 1994 documents
License Bonds, Manufacturer's Representative, to South Carolina
Manufactured Housing Board, through Bankers Insurance Company (6/30/95
- 6/30/96): #33-19363, Michael O'Gorman; #33-19364, Tom Howard Moss;
#33-35895, Braxton Guill; and #33-19365, Bruce C. Hallock
South Carolina Manufacturer License No. 6255 (expires 6/30/96) and
License Bond #33-19361 to South Carolina Manufactured Housing Board
through Bankers Insurance Company (6/30/95 - 6/30/96)
Tennessee Factory-Manufactured Structures License No. 4500 (expires
12/31/95), Continuation Certificate through 12/31/95 of USF&G Bond No.
02-0130-11677-93-6
<PAGE>
Virginia Manufacturer License #M-1995-00108 (expires 4/6/96)
REPURCHASE AGREEMENTS:
Green Tree Financial Corporation Stock Floorplan Financing Agreement
dated 2/24/95 and Pre-Sold Floorplan Financing Agreement dated 1/25/94
Deere Credit, Inc. (a/k/a Deere Credit Services, Inc., a/k/a John
Deere Credit) Manufacturer's Financing Agreement and Addendum dated
7/19/94
NationsCredit Commercial Corporation Inventory Repurchase Agreement
dated 7/21/93 and corporate Guaranty by General up to $117,537 on
specific invoices, dated 4/3/95
Whirlpool Financial Corporation Repurchase Agreement dated 4/17/90
In addition, the Company has entered into purchase agreements with
numerous local and regional financial institutions (generally
providing floorplan/inventory financing for a single dealer) which in
the aggregate represent not more than 20% of the Company's total
repurchase obligation (in dollars) and which may or may not require
the consent of such financial institution in connection with this
transaction.
DEBT OBLIGATIONS:
1) Corporate Guaranty of Deed to Secure Debt made by Waycross and
Ware County Development Authority to Patterson Bank dated 12/30/93
encumbering Plants 2 and 3 to secure Promissory Note in the original
principal amount of $613,727.63 in connection with sale and lease-back
transaction
2) Promissory Note to NationsBank of Georgia, N.A., in the original
principal amount of $600,000 dated 8/24/94 (secured by lien on
aircraft, engines, propellers, accessories and parts)
REAL PROPERTY LEASES:
1) Contract of Lease and Rent dated 12/30/93 between GMH and the
Waycross and Ware County Development Authority for real property
referred to as Plants 2 and 3
2) Lease Agreement dated 5/26/95 between Tim-Bar Corporation and
Hi-Tech Properties, Inc. (the primary lease underlying the sublease to
GMH)
3) Lease Agreement with Option to Purchase dated 7/10/95 between R.
Warr & W. Evans (dba Lamar Warehouse Co.) and Lamar Housing, L.L.C.
for Plant 5 in Lamar, South Carolina
4) Ground Lease dated 9/19/94 between Ware County and the City of
Waycross as Lessors and GMH for airplane hangar
OTHER:
"HUD Package" evidencing GMH's qualification as HUD-approved
manufacturer
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufacutred Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(e) "Title to and Assets"
I. Description of all property and assets, real and personal, tangible
and intangible (having a book value in excess of $20,000) owned by
each of the Acquired Entities:
Beechcraft King Air 200 airplane
Attached hereto as "Addendum 1 to Schedule 7(e)" and incorporated
herein by reference is the depreciation schedule of General
Manufactured Housing, Inc., as of June 30, 1995, reflecting
tangible personal and real property of GMH.
Attached hereto as "Addendum 2 to Schedule 7(e)" and incorporated
herein by reference is a list of all motor vehicles, including
serial numbers, as of 10/10/95.
Attached hereto as "Addendum 3 to Schedule 7(e)" and incorporated
herein by reference is a list of all bank accounts and
certificates as of 10/10/95.
II. Exceptions to title of assets listed in item I of this Schedule 7(e):
1) Deed to Secure Debt to BankSouth, Waycross dated 5/25/88
encumbering Plant 1, securing two Promissory Notes for $400,000
and $186,793, respectively (personally guaranteed by Sam Scott)
2) Deed to Secure Debt (second mortgage) encumbering Plant 1
property, securing Note to The Patterson Bank dated 3/2/95 in the
maximum amount of $209,000, for payment of a declining Letter of
Credit in favor of Tim-Bar Corporation in the maximum amount of
$209,000 (declining at the rate of $9,000 per month) as Security
Deposit under Lease between Hi-Tech and Tim-Bar for Plant 4
3) Deed to Secure Debt and UCC-1 to Patterson Bank dated
12/30/93 from Waycross and Ware County Development Authority
encumbering Plants 2 and 3 and certain personal property located
therein to secure Promissory Note in the original principal
amount of $613,727.63 in connection with sale and lease-back
transaction
4) Security Agreement dated 8/24/94 and UCC-1 Financing Statement
filed 9/26/94 in favor of NationsBank of Georgia, N.A., encumbering
aircraft, engines, propellers, accessories and parts, to secure
Promissory Note in the original principal amount of $600,000
5) UCC-1 Financing Statements in favor of Fabwel, Inc., encumbering
leased equipment consisting of Guttermaker Extruder and Watertite
Gutter Machines
6) UCC-1 Financing Statements in favor of AMS of Indiana, Inc.
encumbering leased equipment consisting of heat duct machines
7) UCC-1 Financing Statements in favor of Toyota Motor Credit Corp.
encumbering leased equipment including 6 Toyota Forklifts
III. Condition and repair of property:
See "Addendum 4 to Schedule 7(e)" (letter from Neal Conner, Esq.,
relating to condition of manufacturing plants) attached hereto and
incorporated herein by reference.
IV. Other material assets used substantially on an exclusive basis in
connection with the business of the Acquired Entities which are not
owned by the Acquired Entities:
Residential property located at 824 Holly Ross Lane, Waycross,
GA, leased pursuant to Rental Agreement dated August 1, 1995, by
and between Ralph and Faye Tyson (Owners) and Lannis Thomas
(Tenant), for the purpose of providing temporary living quarters
for employees of the Acquired Entities while in Waycross on
business
See also descriptions of leased equipment on Schedule 7(f)
incorporated herein by reference.
<PAGE>
MANUFACTURED HOUSING, INC.
Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(f) "Leases and Licensing Agreements"
I. List and brief description of all leases of real property and all
franchises, licensing agreements and leases of (or other arrangements
for the use of) any item of personal property:
REAL PROPERTY LEASES:
1) Lease and Assignment of Lease dated 12/30/93 in connection with
sale and leaseback to/from Waycross and Ware County Development
Authority for real property referred to as Plants 2 and 3
2) Sublease Agreement dated 7/1/95 between HI-TECH PROPERTIES, INC.
as sublessor and GMH for real property referred to as Plant 4, and
Lease Agreement dated 5/26/95 between Tim-Bar Corporation and Hi-Tech
Properties, Inc. (the primary lease underlying the sublease to GMH)
3) Lease Agreement with Option to Purchase dated 7/10/95 between R.
Warr & W. Evans, each individually and dba Lamar Warehouse Co., and
Lamar Housing, L.L.C. for Plant 5 in Lamar, South Carolina
4) Lease (documentation currently in process) of vacant land
adjacent to Plant 4, to be used for storage of finished goods
5) Ground Lease dated 9/19/94 between Ware County and the City of
Waycross as Lessors and GMH for airplane hangar
6) Residential property located at 824 Holly Ross Lane, Waycross,
GA, leased pursuant to Rental Agreement dated August 1, 1995, by and
between Ralph and Faye Tyson (Owners) and Lannis Thomas (Tenant), for
the purpose of providing temporary living quarters for employees of
the Acquired Entities while in Waycross on business
PERSONAL PROPERTY LEASES:
1) Equipment Lease Agreements with Handling Systems Engineering,
Inc. (all assigned simultaneously with execution to Toyota Motor
Credit Corporation), all for Toyota Forklifts, as follows:
6/2/95 . . . . . . . . . . . S/N 76092
8/18/93. . . . . . . . . . . S/N 75336
. . . . . . . . . . . . . . S/N 75390
. . . . . . . . . . . . . . SIN 75417
. . . . . . . . . . . . . . S/N 75431
12/16/92 . . . . . . . . . . S/N 75016
12/8/93. . . . . . . . . . . S/N 75536
. . . . . . . . . . . . . . S/N 75538
Additional Toyota Forklifts are being leased from Handling Systems
Engineering, Inc. by Lamar Housing, L.L.C.; documentation is being
processed by the Handling Systems Engineering, Inc.
2) Four (4) each Guttermaker Extruders and Watertite Gutter Machines
leased pursuant to [verbal arrangement] with Fabwel, Inc. in
consideration of $1 annual rent and purchase of raw materials from
Fabwel, Inc.
3) Four (4) Heat Duct Machines leased pursuant to [verbal
arrangement] with AMS of Indiana, Inc., in consideration of $1 annual
rent and purchase of raw materials from AMS of Indiana, Inc.
4) "Warranty Track" software license/lease (unwritten) from GPR
Software Systems
5) License for CAD software system [documentation cannot be located]
II. Consents required pursuant to the terms of the above as a result of
the Transaction:
REAL PROPERTY LEASES:
1) Lease and Assignment of Lease dated 12/30/93 in connection with
sale and leaseback to/from Waycross and Ware County Development
Authority for real property referred to as Plants 2 and 3
2) Lease Agreement dated 5/26/95 between Tim-Bar Corporation and Hi-
Tech Properties, Inc. (the primary lease underlying the sublease
between GMH and Hi-Tech Properties, Inc. for Plant 4)
3) Lease Agreement with Option to Purchase dated 7/10/95 between R.
Warr & W. Evans (dba Lamar Warehouse Co.) and Lamar Housing, L.L.C.
for Plant 5 in Lamar, South Carolina
4) Ground Lease dated 9/19/94 between Ware County and the City of
Waycross as Lessors and GMH for airplane hangar
5) Rental Agreement dated August 1, 1995, by and between Ralph and
Faye Tyson (Owners) and Lannis Thomas (Tenant), for residential
property located at 824 Holly Ross Lane, Waycross, GA, for the purpose
of providing temporary living quarters for employees of the Acquired
Entities while in Waycross on business
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(g) "Agreements, Etc."
I. Indentures, mortgages, agreements, contracts, arrangements,
commitments, instruments, understandings or obligations of the
Acquired Entities to be performed in whole or in part on or after the
date of Closing, including product warranties, greater than $25,000
(excluding purchase orders for goods entered into by any of the
Acquired Entities in the ordinary course of business which
individually do not exceed $75,000):
SECURED DEBT OBLIGATIONS:
1) Deed to Secure Debt to BankSouth, Waycross dated 5/25/88
encumbering Plant 1, securing two Promissory Notes dated 5/25/88 for
$400,000 and $186,793, respectively (personally guaranteed by Sam
Scott)
2) Promissory Note in the original principal amount of $600,000
dated 8/24/94 in favor of NationsBank of Georgia, N.A., encumbering
aircraft, engines, propellers, accessories and parts, to secure
3) Deed to Secure Debt (second mortgage) dated 3/2/95, encumbering
Plant 1 real property, to The Patterson Bank, securing Note for
payment of Letter of Credit in favor of Tim-Bar Corporation in the
maximum amount of $209,000 as Security Deposit under Lease between Hi-
Tech and tim-Bar for Plant 4
LETTERS OF CREDIT:
1) Letter of Credit No. PB020 dated 5/22/95 issued by The Patterson
Bank in favor of Tim-Bar Corporation in the maximum amount of $209,000
(said balance declining at the rate of $9,000 per month) as Security
Deposit under Lease between Hi-Tech and Tim-Bar for Plant 4
2) Irrevocable Letter of Credit No. PB013 dated 5/18/93 issued by
The Patterson Bank in favor of Bankers Insurance Company for $50,000,
<PAGE>
securing South Carolina Manufacturer's Representative License Bonds
REPURCHASE AGREEMENTS:
1) Bombardier Capital Inc. Floorplan Repurchase Agreement dated
8/7/92
2) Ford Motor Credit Manufacturer Agreement and Addendum dated
11/19/90
3) Green Tree Financial Corporation Stock Floorplan Financing
Agreement dated 2/24/95 and Pre-Sold Floorplan Financing Agreement
dated 1/25/94
4) Deere Credit, Inc. (a/k/a Deere Credit Services, Inc., a/k/a John
Deere Credit) Manufacturer's Financing Agreement and Addendum dated
7/19/94
5) ITT Commercial Finance Corp. Floorplan Repurchase Agreement dated
3/4/88
6) NationsCredit Commercial Corporation Inventory Repurchase
Agreement dated 7/21/93 and corporate Guaranty by General up to
$117,537 on specific invoices, dated 4/3/95
7) Whirlpool Financial Corporation Repurchase Agreement dated
4/17/90
8) Security Pacific Housing Services, Inc. Retail Credit Line
arrangements dated 10/9/89, including Manufacturer's Invoicing
Certification, Manufacturer's Indemnification Agreement, and personal
guaranty (which expired by its own terms on or about 10/9/94)
9) SouthTrust Bank Repurchase Agreement dated 11/14/91
In addition, the Company has entered into repurchase agreements with
numerous local and regional financial institutions (generally
providing floorplan/inventory financing for a single dealer) which in
the aggregate represent not more than 20% of the Company's total
repurchase obligation (in dollars).
GUARANTEES AND INDEMNIFICATIONS:
1) Indemnity Agreement in favor of Lessor as to deficiencies caused
by default of Lessee and Indemnification holding Lessor harmless
against claims for losses, damage or injury on the leased premises,
pursuant to Articles IX and XII, respectively, of Contract of Lease
and Rent with Waycross and Ware County Development Authority as Lessor
2) Corporate Guaranty by General to NationsCredit up to $117,537 on
specific invoices, dated 4/3/95 in connection with Commercial
Corporation Inventory Repurchase Agreement dated 7/21/93
3) Manufacturer's Indemnification Agreement and personal guaranty
dated 10/9/89 (which expired by its own terms on or about 10/9/94) to
Security Pacific Housing Services, Inc. in connection with retail
credit line arrangements
4) Corporate Guaranty by GMH of Deed to Secure Debt made by Waycross
and Ware County Development Authority to Patterson Bank dated 12/30/93
encumbering Plants 2 and 3 to secure Promissory Note in the original
principal amount of $613,727.63 in connection with sale and lease-back
transaction;
5) General indemnifications in favor of Lessor in Articles IX and
XII of that certain Lease and Assignment of Lease between GMH as
Lessee and Waycross and Ware County Development Authority as Lessor
dated 12/30/93 in connection with sale and lease-back of real property
referred to as Plants 2 and 3
6) Environmental indemnity and hold harmless provision in favor of
<PAGE>
Lessor in Section 13 of that certain Lease Agreement dated 5/26/95, as
amended July 1, 1995, between Tim-Bar Corporation as Lessor and Hi-
Tech Properties, Inc. as Lessee (the primary lease underlying that
certain Sublease Agreement dated 7/1/95 between HI-TECH PROPERTIES,
INC. as sublessor and GMH as sublessee for real property referred to
as Plant 4)
7) Environmental indemnity and hold harmless provision in favor of
Lessor in Section 22 of that certain Lease Agreement with Option to
Purchase dated 7/10/95 between R. Warr & W. Evans, each individually
and dba Lamar Warehouse Co., and Lamar Housing, L.L.C. for Plant 5 in
Lamar, South Carolina
8) Personal guaranty by Sam Scott of GMH Deed to Secure Debt to
BankSouth, Waycross dated 5/25/88 encumbering Plant 1, securing two
Promissory Notes dated 5/25/88 for $400,000 and $186,793, respectively
9) Indemnity Agreement from GMH to Tim-Bar Corporation as Lessor
under that certain Lease Agreement dated 5/26/95 as amended July 1,
1995 pursuant to Section paragraph F. of Section Two of Amendment to
Lease Agreement dated July 1, 1995
WARRANTY OBLIGATIONS:
1) "Gold Card Service" customer service warranty program, which
includes (i) HUD mandated 1-year warranty and (ii) additional 9-year
warranty (insured)
2) Product warranty obligations pursuant to warranty information
contained in Setup Manual, Homeowners' Manual, and advertising
literature distributed with finished homes
3) GMH may have additional liability under warranty claims not yet
filed by homeowners resulting from defective composite siding
manufactured by Cladwood (See GMH vs. Cladwood on Schedule 7(k));
Negotiations with Cladwood to recover damages incurred by GMH are
currently in progress
4) Barfield vs. Southern Lifestyle Homes, Inc. and General
Manufactured Housing, Inc.: breach of contract claim filed June 1995
in South Carolina
5) Threatened warranty/product liability claim by Thelma Grant,
resident of South Carolina
6) Greg A. Hall vs. GMH and others: warranty claim suit filed in the
Court of Common Pleas for the Second Judicial Circuit, Aiken County,
South Carolina, Civil Action No. 95-CP-02-732; Complaint served on GMH
10/9/95
REAL PROPERTY LEASES:
1) Lease and Assignment of Lease dated 12/30/93 in connection with
sale and lease-back to/from Waycross and Ware County Development
Authority for real property referred to as Plants 2 and 3, including
also general indemnifications in favor of Lessor in Articles IX and
XII thereof
2) Sublease Agreement dated 7/1/95 between HI-TECH PROPERTIES, INC.
as sublessor and GMH for real property referred to as Plant 4; Lease
Agreement dated 5/26/95 between Tim-Bar Corporation and Hi-Tech
Properties, Inc. (the primary lease underlying the sublease to GMH)
including also an environmental indemnity and hold harmless provision
in favor of Lessor in Section 13 of such primary lease
3) Lease Agreement with Option to Purchase dated 7/10/95 between R.
Warr & W. Evans (dba Lamar Warehouse Co.) and Lamar Housing, L.L.C.
for Plant 5 in Lamar, South Carolina, including also an environmental
indemnity and hold harmless provision in favor of Lessor in Section 22
thereof
4) Lease (documentation currently in process) of vacant land
adjacent to Plant 4, to be used for storage of finished goods
<PAGE>
5) Ground Lease dated 9/19/94 between Ware County and the City of
Waycross as Lessors and GMH for airplane hangar
PERSONAL PROPERTY LEASES:
1) Equipment Lease Agreements with Handling Systems Engineering,
Inc. (all assigned simultaneously with execution by Handling Systems
Engineering, Inc. to Toyota Motor Credit Corporation), all for Toyota
Forklifts, as follows:
6/2/95 . . . . . . . . . . . S/N 76092
8/18/93. . . . . . . . . . . S/N 75336
. . . . . . . . . . . . . . S/N 75390
. . . . . . . . . . . . . . S/N 75417
. . . . . . . . . . . . . . S/N 75431
12/16/92 . . . . . . . . . . S/N 75016
12/8/93. . . . . . . . . . . S/N 75536
. . . . . . . . . . . . . . S/N 75538
Additional Toyota Forklifts are being leased from Handling Systems
Engineering, Inc. by Lamar Housing, L.L.C.; documentation is being
processed by the Handling Systems Engineering, Inc.
2) Four (4) each Guttermaker Extruders and Watertite Gutter Machines
leased pursuant to [verbal understanding/ arrangement] with Fabwel,
Inc. in consideration of $1 annual rent and purchase of raw materials
from Fabwel, Inc.
3) Four (4) Heat Duct Machines leased pursuant to arrangements with
AMS of Indiana, Inc., dated 1995, in consideration of $1 annual rent
and purchase of raw materials from AMS of Indiana, Inc.
4) "Warranty Track" software license/lease (unwritten) from GPR
Software Systems
II. Agreements, contracts, understandings, arrangements and obligations
with any supplier paid more than $250,000 by Acquired Entities in any
of the last three fiscal years
GE Appliances National Contract Sales agreement for appliances
[GE is the only supplier paid more than $500,000. Because of the
reduced threshold ($250,000), this item will require
supplementation.]
or with any customer which has paid more than $500,000 to Acquired
Entities in any of the last three fiscal years
CUSTOMERS OVER $500,000 THRESHOLD SINCE 1/1/95:
Oakwood Mobile Homes, Inc., Volume Incentive Program pursuant to
letter dated 2/9/95 from GMH to Mike Stidham, Executive Vice
President of Oakwood Mobile Homes, Inc. [However, see
Schedule 7(w) concerning Oakwood's suspension of purchases.]
Additional Dealers under Volume Incentive Program:
Calvary Mobile Homes, Greenville, NC
Edisto Housing Center, Inc., Orangeburg, SC
Southern Lifestyle Homes, Florence, SC
[Information as to customers over $500,000 threshold for calendar
years 1993 and 1994 to be provided supplementally.]
III. Employee bonus, incentive, compensation, profit sharing, retirement,
pension, group insurance, death benefit or other fringe benefit plans,
deferred compensation and post-termination obligations or trust
agreements in effect or under which amounts remain unpaid as of, or
are to become effective after, the Closing of the Transaction
1) Health Insurance Contract: BCBS Master Contract #23041-001,004
eff. 5/1/93
2) Group Term Life Master Policy: Transamerica Life #BTL199 eff.
<PAGE>
8/1/91
3) Group Travel Accident Insurance Policy: ITT Hartford #ETB-102015
(4/27/94 - 4/27/95)
4) GMH Premium Only Cafeteria Plan (A&R 1/1/95)
IV. Collective bargaining agreements with any labor union or other
representative of employees
None
and all employment and consulting contracts not terminable at will without
penalty;
None
V. Each instrument defining the terms on which debts of or guarantees by
Acquired Entities in excess of $25,000 have been or may be issued;
SECURED DEBT OBLIGATIONS:
1) Deed to Secure Debt to BankSouth, Waycross dated 5/25/88
encumbering Plant 1, securing two Promissory Notes for $400,000 and
$186,793, respectively (personally guaranteed by Sam Scott)
2) Corporate Guaranty of Deed to Secure Debt to Patterson Bank dated
12/30/93 from Waycross and Ware County Development Authority
encumbering Plants 2 and 3 to secure Promissory Note in the original
principal amount of $613,727.63, in connection with sale and lease-
back transaction
3) Security Agreement and UCC-1 Financing Statement dated 8/24/94 in
favor of NationsBank of Georgia, N.A., encumbering aircraft, engines,
propellers, accessories and parts, to secure Promissory Note in the
original principal amount of $600,000
4) Deed to Secure Debt (second mortgage) dated 3/2/95, encumbering
Plant 1 real property, to The Patterson Bank, securing Note for
payment of Letter of Credit in favor of Tim-Bar Corporation in the
maximum amount of $209,000 as Security Deposit under Lease between Hi-
Tech and tim-Bar for Plant 4
LETTERS OF CREDIT:
1) Declining Letter of Credit in favor of Tim-Bar Corporation in the
maximum amount of $209,000 (declining at the rate of $9,000 per month)
as Security Deposit under Lease between Hi-Tech and Tim-Bar for Plant
4
2) Irrevocable Letter of Credit in favor of Bankers Insurance
Company for $50,000, drawn on The Patterson Bank, dated 5/18/93
(expired 5/18/94), securing South Carolina Manufacturer's
Representative License Bonds
REPURCHASE AGREEMENTS (repurchase obligations survive termination of
Agreement in each case):
1) Bombardier Capital Inc. Floorplan Repurchase Agreement dated
8/7/92
2) Ford Motor Credit Manufacturer Agreement and Addendum dated
11/19/90 (not signed by Ford Motor Credit)
3) Green Tree Financial Corporation Stock Floorplan Financing
Agreement dated 2/24/95 and Pre-Sold Floorplan Financing Agreement
dated 1/25/94
4) Deere Credit, Inc. (a/k/a Deere Credit Services, Inc., a/k/a John
Deere Credit) Manufacturer's Financing Agreement and Addendum dated
7/19/94
<PAGE>
5) ITT Commercial Finance Corp. Floorplan Repurchase Agreement dated
3/4/88
6) NationsCredit Commercial Corporation Inventory Repurchase
Agreement dated 7/21/93 and corporate Guaranty by General up to
$117,537 on specific invoices, dated 4/3/95
7) Whirlpool Financial Corporation Repurchase Agreement dated
4/17/90
8) Security Pacific Housing Services, Inc. Retail Credit Line
arrangements dated 10/9/89, including Manufacturer's Invoicing
Certification, Manufacturer's Indemnification Agreement, and personal
guaranty (which expired by its own terms on or about 10/9/94)
9) SouthTrust Bank Repurchase Agreement dated 11/14/91
In addition, the Company has entered into repurchase agreements with
numerous local and regional financial institutions (generally
providing floorplan/inventory financing for a single dealer) which in
the aggregate represent not more than 20% of the Company's total
repurchase obligation (in dollars).
WARRANTY OBLIGATIONS:
1) "Gold Card Service" customer service warranty program, which
includes (i) HUD mandated 1-year warranty and (ii) additional 9-year
warranty (insured)
2) Product warranty obligations pursuant to warranty information
contained in Setup Manual, Homeowners' Manual, and advertising
literature distributed with finished homes
3) GMH may have additional liability under warranty claims not yet
filed by homeowners resulting from defective composite siding
manufactured by Cladwood (See GMH vs. Cladwood on Schedule 7(k));
Negotiations with Cladwood to recover damages incurred by GMH are
currently in progress
4) Barfield vs. Southern Lifestyle Homes, Inc. and General
Manufactured Housing, Inc.: breach of contract claim filed June 1995
in South Carolina
5) Threatened warranty/product liability claim by Thelma Grant,
resident of South Carolina
6) Greg A. Hall vs. GMH and others: warranty claim suit filed in
South Carolina; Complaint served on GMH 10/9/95
VI. Any agreement limiting the freedom of any of the Sellers or the
Acquired Entities to compete in any line of business or with any
person,
None
or limiting the freedom of any other person to compete with any of the
Sellers or any of the Acquired Entities
None
VII. Other agreements, contracts, arrangements, commitments, instruments,
understandings, or obligations, oral or written, to which any of the
Acquired Entities is a party and in which any Seller or any Affiliate
of any of the Acquired Entities has any interest, direct or indirect,
which involve payments of more than $25,000 to or from any of the
Acquired Entities
Sublease Agreement dated 7/1/95 between HI-TECH PROPERTIES, INC. as
sublessor and GMH as sublessee for real property referred to as Plant
4
VIII. Amounts and terms of all loans or advances by Acquired Entities to the
Sellers or their Affiliates or the employees and Affiliates of any of
the Acquired Entities;
<PAGE>
After 12/31/94, advances for the first three calendar quarters of 1995
were made to each Seller by GMH in the total amount of $300,000 each,
against 1995 income taxes. It is anticipated that additional advances
of $100,000 each will be made for each calendar quarter thereafter
until the closing date. These amounts are reflected on the books as
loans but will be recharacterized as distributions at year-end.
IX. Summary of the anticipated terms and conditions of any item currently
being negotiated by or on behalf of any of the Acquired Entities which
would upon completion be included within the scope of paragraphs (i)
through (viii) of Section 7(g) of the Agreement.
Lease (documentation currently in process) of vacant land adjacent to
Plant 4, to be used for storage of finished goods
Lamar Housing, L.L.C. (Plant 5) is currently in development (expected
to be operational prior to 10/31/95) and therefore may, in connection
with such Plant, become a party to or subject to additional
agreements, arrangements, instruments, or obligations which would upon
completion be included within the scope of paragraphs (i) through
(viii) of Section 7(g) of the Agreement.
X. (A) Agreements in effect which permit any of the Acquired Entities to
incur debt for borrowed money to any bank, insurance company or other
financial institution;
None
(B) rights or obligations of Acquired Entities under any indenture,
mortgage, agreement, contract, arrangement, commitment, instrument,
understanding or obligation listed on this Schedule 7(g) which will be
materially adversely affected by the Transaction;
None
(C) material defaults or claimed, purported or alleged defaults or
state of facts which with notice or lapse of time or both would
constitute material defaults on the part of any party in the
performance of any obligation to be performed or paid by any party
under any indenture, mortgage, agreement, contract, arrangement,
commitment, instrument, understanding or obligation listed on this
Schedule 7(g).
None
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(h) "Pension Plans"
List of all Plans (as defined in Section 7(h)) maintained for the benefit
of any current or former employee, officer or director of any of the
Acquired Entities or any ERISA Affiliate (as defined in Section 7(h)):
Health Insurance Contract: BCBS Master Contract #23041-001,004 eff.
5/1/93
Group Term Life Master Policy: Transamerica Life #BTL1199 eff. 8/1/91
Group Travel Accident Insurance Policy: ITT Hartford #ETB-102015
(4/27/94 - 4/27/95)
GMH Premium Only Cafeteria Plan (A&R 1/1/95)
AFLAC Cafeteria Plan (terminated 12/31/94)
The Acquired Entities do not and have not ever maintained any plan
qualified or intended to be qualified under 401(a) of the Code.
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(j) "Financial Statements"
I. Amounts due or accrued to any Seller from GMH as of the Audit Date and
additional amounts of such accruals or amounts subsequent to the Audit
Date:
After 12/31/94, advances for the first three calendar quarters of 1995
were made to each Seller by GMH in the total amount of $300,000 each,
against 1995 income taxes. It is anticipated that additional advances
of $100,000 each will be made for each calendar quarter thereafter
until the closing date. These amounts are reflected on the books as
loans but will be recharacterized as distributions at year-end.
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(k) "Litigation, Etc."
Suits, actions, litigation, administrative hearings, arbitrations, labor
controversies or negotiations, other proceedings or governmental inquiries
or investigations, judgments, consent decrees, injunctions, violations of
laws, ordinances, requirements, orders and regulations applicable to the
business of Acquired Entities, and notices received of claimed default with
respect to any of the foregoing:
"Outstanding State Cases" as of September 14, 1995, consisting of consumer
complaints made through state agencies, considered to be in the ordinary
course of business of the Acquired Entities, including:
SERIAL
STATE AGENCY NO. CUSTOMER DEALER
AL Manufactured Housing Comm. 3725 Schimmelfennig Robertsdale
AL Manufactured Housing Comm. 3376 McClinton Mobile
FL DMV 1659 Screws Yulee
FL DMV 5546 Wilson Dunnellon
FL DMV 1831 Cummins Davenport
FL DMV 6521 Howard Old Town
GA Safety Fire Commissioner 0795 Solomon Milledgeville
GA Safety Fire Commissioner 0613 Lapaz Richland
GA Safety Fire Commissioner 4060 Armour Alto-AtlantaMH
GA Safety Fire Commissioner 3833 Jones Alverton
GA Safety Fire Commissioner 6294 Lot Inspect OliverEnterprises
LA 3349 Singleton Denham Springs
MS State Fire Marshal 2712 Waldrop D'Iberville
NC Dept of Insurance 1421 Sports
NC Dept of Insurance 4087 Davidson
NC Dept of Insurance 5025 Jeffries
NC Dept of Insurance 1279 Richman York
SC Manufactured Housing Bd 5867 Miller West Columbia
SC Manufactured Housing Bd 0566 Morehouse Florence
The following EEOC Notices of Discrimination have been issued by the
Savannah Local Office of the Equal Employment Opportunity Commission:
1) Reynolds: Sex Discrimination Charge filed 9/24/93
2) Rollins: Sex Discrimination Charge filed 6/10/94
3) Woodie: Sex Discrimination Charge filed 9/16/94
4) Harmon: Race and Retaliation and Disability Discrimination
Charge filed 3/22/95; Dismissal and Notice of Right to Sue issued
8/4/95 by EEOC (Claimant has 90 days to bring charges in U.S.
District Court)
5) Fritz: Sex Discrimination Charge filed 6/20/95
Other Pending and Threatened Causes of Action:
1) Barfield vs. Southern Lifestyle Homes, Inc. and General
Manufactured Housing, Inc.: breach of contract claim filed June
1995 in South Carolina
2) GMH vs. Jerry Blaxton; relating to an alleged liability of
approximately $10,000 for towing services; Blaxton has defaulted
in this matter
3) GMH vs. Cladwood Division of Smurfitt Newsprint Corporation
("Cladwood"), Product liability claim to recover amounts paid out
by GMH to settle warranty claims by homeowners resulting from
defective composite siding manufactured by Cladwood
4) Threatened warranty claim/product liability action by customer
Thelma Grant (South Carolina); settlement negotiations currently
in progress
5) Barry Murray vs. GMH: Employee of Murray Plumbing Co., Inc., a
Georgia corporation and subcontractor of Solar Shield, Inc., a
South Carolina corporation and contractor engaged by GMH, has
filed a complaint in connection with a personal injury resulting
from a July 1994 accident which occurred at a GMH plant
6) Greg A. Hall vs. GMH and others: warranty claim suit filed in
South Carolina; Complaint served on GMH 10/9/95
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(I) "Licenses and Permits"
1. Complete and accurate list and brief description of all governmental
licenses and permits:
Alabama Manufacturer License No. 4521 (expires 12/31/95) and copy of
renewal application (no date)
Florida DMV License as Manufacturer of Mobile Homes, #MH10075,
effective 10/1/94 for 94-95 license year, and Renewal Certificate
through 9/30/95 of Bankers Insurance Company Bond No. 33-35881
(originally dated 10/1/93)
Florida DMV License as Manufacturer of Recreational Vehicles,
#MR10150, effective 10/1/94 for 94-95 license year, and Renewal
Certificate through 9/30/95 of Bankers Insurance Company Bond No.
33-35880 (originally dated 10/1/93)
Georgia Manufactured Homes Manufacturer/Dealer License No. 20913
(expires 12/31/95)
Kentucky Certificate of Acceptability No. 95-MM-10-59 (license to
manufacture, import or sell mobile homes to Kentucky Dealers; expires
12/31/95)
Louisiana Manufacturer License No. 95-M00086 (expires 12/31/95)
Mississippi Privilege License for Manufacturer No. 95-M0157 (expires
6/30/96)
North Carolina Manufacturer's License No. 001113 (expires 6/30/96),
Continuation Certificate through 6/30/96 of Selective Insurance Bond
No. B73551, and copies of various related 1994 documents
License Bonds, Manufacturer's Representative, to South Carolina
Manufactured Housing Board, through Bankers Insurance Company (6/30/95
- 6/30/96): #33-19363, Michael O'Gorman; #33-19364, Tom Howard Moss;
#33-35895, Braxton Guill; and #33-19365, Bruce C. Hallock
South Carolina Manufacturer License No. 6255 (expires 6/30/96) and
License Bond #33-19361 to South Carolina Manufactured Housing Board
through Bankers Insurance Company (6/30/95 - 6/30/96)
Tennessee Factory-Manufactured Structures License No. 4500 (expires
12/31/95), Continuation Certificate through 12/31/95 of USF&G Bond No.
02-0130-11677-93-6
Virginia Manufacturer License #M-1995-00108 (expires 4/6/96)
Lamar Housing, L.L.C. is in the process of applying for similar
licenses and bonding where required.
"HUD Package" evidencing GMH's qualificatioan as HUD-approved
manufacturer.
II. Governmental licenses or permits required or to be required in
connection with or as a result of the Transaction:
See response to Part III below.
III. Licenses and permits which may NOT be transferred to the Buyer as
contemplated by the Agreement:
The foregoing licenses may not be transferable, but, to Sellers'
knowledge, new licenses should be obtainable by Buyer without undue
burden or expense. However, if such licenses are not maintained,
sales of the Company's products might be interrupted in the affected
jurisdictions.
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(m) "Taxes"
I. Tax Returns which have been the subject of any audit during the past
six years, are the subject of an audit currently being conducted, or
concerning which the Acquired Entities have been notified of a forthcoming
audit:
I.R.S. audit completed for calendar years 1990 and 1991
I.R.S. audit of 1992 and 1993 currently in progress; see Note 3 to the
1994 Audited Financial Statements
Georgia audit of Sales and Use Tax completed for the period from July
1990 through June 1993
Notice received from Florida Department of Revenue indicates the
impending audit of Florida Corporation Income Tax for 1990 through
1993 and Florida Intangible Personal Property Tax for 1991 through
1994
II. Elections made by Acquired Entities or Sellers under the Code or other
tax law affecting any tax return of Acquired Entities for years ending in
or after 1989:
I.R.C. "S" Corporation election made by GMH effective for tax years
ending after 12/31/94
ADDITIONAL COMMENTS CONCERNING RETURNS NOT FILED:
The Company has not filed Form 5500 with respect to AFLAC Cafeteria
Plan termianted in 1994
Lamar Housing, L.L.C. was formed in 1995 and consequently its initial
income tax return will not be due until 1996.
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(n) "No Material Adverse Change"
I. Material adverse changes in the condition of any of the Acquired
Entities, financial or otherwise:
Oakwood Mobile Homes gave notice on or about August 25, 1995, that
they will suspend purchases from GMH. The Buyer was promptly notified
of this development (i.e., prior to signing or executing this
Agreement). In its notification, Oakwood characterized this situation
as temporary; however, no assurances can be given that such suspension
may not be permanent. During the first six months of 1995, sales to
Oakwood accounted for approximately 10% of GMH's total revenues during
that period.
II. Other facts, conditions, proposals or circumstances relating to the
business and which materially adversely affects or will in the future
affect the same:
None
III. Employee Controversies:
The following EEOC Notices of Discrimination issued by the Savannah
Local Office of the Equal Employment Opportunity Commission:
1) Reynolds: Sex Discrimination Charge filed 9/24/93
2) Rollins: Sex Discrimination Charge filed 6/10/94
3) Woodie: Sex Discrimination Charge filed 9/16/94
4) Harmon: Race and Retaliation Discrimination Charge filed
3/22/95; Dismissal and Notice of Right to Sue issued 8/4/95 by
EEOC (Claimant has 90 days to bring charges in U.S. District
Court)
5) Fritz: Sex Discrimination Charge filed 6/20/95
Attached hereto as "Addendum to Schedule 7(n)" and incorporated
herein by reference is a schedule of Workers' Compensation
Insurance claims made or which might be made by employees of the
Acquired Entities.
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(o) "Business Property Rights"
I. Complete and accurate, in every material respect, list and brief
description of all Business Property Rights owned or held by any of the
Acquired Entities or for which application has been made:
Registration of Mark and design No. S13433 filed 3/11/94 in the State
of Georgia: "Jaguar Homes 1994 . . . the Year of the Cat!!!"
II. Exceptions to the Acquired Entities' sole and exclusive right to use
all Business Property Rights listed in I. above:
Since the inception of the NFL expansion franchise in Jacksonville,
Florida, known as the "Jacksonville Jaguars," use of the "Jaguar" name
has become widespread throughout the region. Sellers and Acquired
Entities make no representation as to the exclusivity or
registrability of the name by the Buyer in any jurisdiction or the
Company's ability to preserve any rights it may have in said name.
III. Business of Acquired Entities which conflicts with any Business
Property Rights of others, or concerning which the Sellers or Acquired
Entities have received any notice of any claimed conflict:
Prior to the formation of GMH, Samuel Scott acquired title to various
patents that relate to the business of mobile home manufacturing.
Such patents are not material to the business conducted by the
Acquired Entities and, if and to the extent that the Acquired Entities
now or in the future were deemed to infringe upon the proprietary
rights evidenced by such patents, Mr. Scott agrees to waive and
release any such infringement.
IV. Rights of third parties which would be infringed or violated by
assignment of any of the Business Property Rights listed in I. above:
None
V. Consents required to assign any of the Business Property Rights listed
in I. above:
[Preliminarily, there appears to be no indication in the Georgia Code
that an assignment and/or re-registration of the mark would be
required in a stock sale.]
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(p) "Insurance"
1. List of all insurance policies of each of the Acquired Entities and a
description of the terms thereof:
Commercial General Liability Insurance Policy; Bankers Insurance Co.
#GLA 10 S100104-00 (3/31/95 - 3/31/96); covering all plants plus M/H
Retail, Inc., and products liability
Commercial Property Insurance Policy; Pennsylvania Lumbermens
#10-G-012-03-95 (3/31/95 - 3/31/96) covering 2255 Industrial Drive
(Plant 1); Airport Hangar; 2875 Fulford Rd (Plant 4); all inventory
(raw materials and finished goods) and machinery and equipment at all
locations
Commercial Property Insurance Policy; Georgia Casualty & Surety
Company #CMP0003174 (6/17/95 - 6/17/96) covering 3233 Industrial Blvd.
(Plant 2)
Commercial Property Insurance Policy; Georgia Casualty & Surety
Company #CF 3260 (11/17/94 - 11/17/95) covering 2170 Industrial Blvd.,
Waycross, GA (Plant 3)
Aircraft Insurance Policy; Insurance Company of North America Policy
#S00293714 on 1979 King Air 200, N-561SS (9/17/94 - 9/17/95)
Workers' Comp/Employer's Liability Ins. Policy: Georgia Casualty &
Surety Company #WC 922721 (4/6/95 - 4/6/96)
Auto Insurance Policy: Georgia Casualty & Surety Company #BA 922723
(4/6/95-4/6/96) covering all trucks and cars
Additional policies are being procured for Lamar Housing, L.L.C.
Split-dollar life insurance on Sam Scott in the face amount of
$600,000; GMH pays premium and is entitled to reimbursement therefor
on policy payout; net benefits accrue to insured's beneficiaries
See also "Addendum to Schedule 7(p)" (list of additional insurance
policies) attached heereto and incorporated herein by reference.
II. Claims (other than Workers' Compensation claims) in excess of $50,000
each or $100,000 in the aggregate made or pending on the insurance
policies listed in I. above since January 1, 1992:
None
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(q) "Inventories"
I. List of the locations at which inventories of any of the Acquired Entities
are located:
Plant 1 2255 Industrial Boulevard, Waycross, GA
Plant 2 3233 Industrial Boulevard, Waycross, GA
Plant 3 2170 Industrial Boulevard, Waycross, GA
Plant 4 2875 Fulford Road, Waycross, GA
Vacant Lot Adjacent to Plant 4
Plant 5 206 South Railroad Avenue, Lamar, SC
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(r) "Offices"
Principal executive office and other office locations maintained by Acquired
Entities:
General Manufactured Housing, Inc.
2255 Industrial Boulevard
Waycross, GA
Lamar Housing, L.L.C.
206 South Railroad Aveue
Lamar, SC
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(s) "Company Actions"
I. Capital stock or other corporate securities issued since the Audit
Date:
None
II. Amounts borrowed and liabilities incurred (other than in the ordinary
course of business) since the Audit Date:
Deed to Secure Debt (second mortgage) dated 3/2/95, encumbering Plant
1 property to The Patterson Bank, securing Note in the maximum amount
of $209,000, for payment of a declining Letter of Credit in favor of
Tim-Bar Corporation (declines at the rate of $9,000 per month), as
Security Deposit under Lease between Hi-Tech and Tim-Bar for Plant 4
III. Liens, encumbrances, obligations, and liabilities discharged,
satisfied, or paid (other than current liabilities shown on the
balance sheet as of the Audit Date and current liabilities incurred in
the ordinary course of business) since the Audit Date other than in
compliance of the covenant to discharge all funded indebtedness:
None
IV. Payments or distributions to stockholders and purchases or redemptions
of shares of capital stock since the Audit Date:
After 12/31/94, advances for the first three calendar quarters of 1995
were made to each Seller by GMH in the total amount of $300,000 each,
against 1995 income taxes. It is anticipated that additional advances
of $100,000 each will be made for each calendar quarter thereafter
until the closing date. These amounts are reflected on the books as
loans but will be recharacterized as distributions at year-end.
V. Stock splits and reclassifications since the Audit Date:
None
VI. Assets mortgaged, pledged or subjected to lien, charge or other
encumbrance (other than mechanics' liens or tax liens not yet due and
payable) since the Audit Date:
Deed to Secure Debt (second mortgage) dated 3/2/95, encumbering
Industrial Blvd. property to The Patterson Bank, securing Note in the
maximum amount of $209,000, for payment of a declining Letter of
Credit in favor of Tim-Bar Corporation (declining at the rate of
$9,000 per month) as Security Deposit under Lease between Hi-Tech and
Tim-Bar for Plant 4
VII. Tangible assets sold, assigned or transferred and debts and
obligations cancelled (except in the ordinary course of business)
since the Audit Date:
In 1995, GMH's lease of a 1993 Jaguar automobile provided to Sam Scott
expired, whereupon Mr. Scott personally exercised the option (included
in such lease) to purchase such automobile.
GMH recently has transferred the following personal property to
Sellers: Personal Computer (located in Sam Scott's Waycross residence)
and fax machine (located in Sam Scott's Montana residence) to Sam
Scott; fax machine and printer (located in Kelly Herold's California
residence) to Kelly Herold.
VIII. Business Property Rights sold, assigned or transferred since the Audit
Date:
None
IX. Extraordinary losses suffered and rights of substantial value waived
since the Audit Date:
None
X. Changes in officer compensation (except in the ordinary course of
business and consistent with past practice) since the Audit Date:
None
XI. Investments made in, money advanced to, and obligations guaranteed for
any third person or entity since the Audit Date:
None
XII. Transactions entered into (other than in the ordinary course of
business) since the Audit Date:
Lamar Housing, L.L.C. (Plant 5) is currently in development (expected
to be operational prior to 10/31/95) and extraordinary development
expenses are being incurred in connection with such Plant
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(t) "Related Party Transactions"
Current transactions with the Sellers or their Affiliates or any Affiliate of
any Acquired Entity (including purchases, acquisitions, leases, transfers or any
other transaction or agreement):
SEE NOTE 5 TO THE 1994 AUDITED FINANCIAL STATEMENT:
After 12/31/94, advances for the first three calendar quarters of 1995 were made
to each Seller by GMH in the total amount of $300,000 each, against 1995 income
taxes. It is anticipated that additional advances of $100,000 each will be made
for each calendar quarter thereafter until the closing date. These amounts are
reflected on the books as loans but will be recharacterized as distributions at
year-end.
Sublease Agreement dated 7/1/95 between HI-TECH PROPERTIES, INC. as sublessor
and GMH for real property referred to as Plant 4.
Patterson Bank issued Declining Letter of Credit dated 3/2/95, in the maximum
amount of $209,000, in favor of Tim-Bar Corporation in the name of GMH and
secured by a GMH Deed to Secure Debt encumbering GMH real property, as the
Security Deposit under the primary Lease for Plant 4 between Hi-Tech Properties,
Inc. and Tim-Bar Corporation
In 1995, GMH's lease of a 1993 Jaguar automobile provided to Sam Scott expired,
whereupon Mr. Scott personally exercised the option (included in such lease) to
purchase such automobile.
The grounds of Sam Scott's personal residence are maintained by the lawn service
contractor engaged by GMH. Mr. Scott pays 50% of the total cost of lawn services
provided under such contract.
M/H Retail, Inc. engages in regular business transactions with GMH with respect
to warranty service and sales of surplus materials.
GMH recently has transferred the following personal property to Sellers:
Personal Computer (located in Sam Scott's Waycross residence) and fax machine
(located in Sam Scott's Montana residence) to Sam Scott; fax machine and printer
(located in Kelly Herold's California residence) to Kelly Herold.
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(u) "Undisclosed Liabilities"
Material liabilities not disclosed on financial statements:
None
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(w) "Suppliers and Customers"
I. Suppliers which have cancelled or termianted, or made a written threat to
cancel or terminate, or concerning which any Seller has knowledge as to their
intention to cancel or terminate, their relationship with any of the Acquired
Entities, or at any time after 1/1/95 have decreased materially their services
or supplies to any of the Acquired entities other than in the ordinary course of
business:
None
II. Customers which have cancelled or terminated, or made a written threat to
cancel or terminate, or concerning which any Seller has knowledge as to their
intention to cancel or terminate, their relationship with any of the Acquired
Entities, or at any time after 1/1/95 have decreased materially their usage of
the services or products of any of the Acquired Entities or made any written
claim that any item sold by Acquired Entities failed to meet any specification
or were otherwise defective, other than in the ordinary course of business:
Oakwood Mobile Homes gave notice on or about August 25, 1995, that
they will suspend purchases from GMH. The Buyer was promptly notified
of this development (i.e., prior to signing or executing this
Agreement). In its notification, Oakwood characterized this situation
as temporary; however, no assurances can be given that such suspension
may not be permanent. During the first six months of 1995, sales to
Oakwood accounted for approximately 10% of GMH's total revenues during
that period.
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(x) "Potential Conflicts of Interest"
I. Interest in competitor, customer or supplier
Samuel Scott owns an approximate 20% equity interest in Sweetwater
Homes, Inc., a competitor of GMH. At Closing, Mr. Scott will execute a
letter setting forth his undertakings and commitments to the Company
with respect to his equity interest in Sweetwater Homes, Inc.
II. Interest in any tangible or intangible asset used by the Acquired Entities
in connection with their business
M/H Retail, Inc. (See Schedule 7(t))
Hi-Tech Properties, Inc. (See Schedule 7(t))
III. Claims or causes of action by Seller or any Affiliate against any
Acquired Entity (other than in the ordinary course of business)
None
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(y) "Accounts Receivable"
Accounts Receivable in excess of $50,000 that are being contested or disputed by
the obligor thereon:
None
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(z) "Environmental Compliance"
No exceptions other than as disclosed in the Environmental Reports.
Copies of the addenda to Schedules 7(e), 7(n) and 7(p)
will be provided upon request.
<PAGE>
Schedule 14(b)
(a) All drums, empty or discarded, at each Plant shall be removed and
placed in a drum storage area at each Plant before removal to a
landfill authorized to receive such waste. The storage area shall be
contained by a three foot tall cinderblock wall with a sealed concrete
floor. Drums or containers currently in use shall be stored on metal
racks, off of the ground, in order to observe any leaks or spillage on
the ground. The contact adhesive at each Plant shall be stored off of
the floor to prevent any accidental spills reaching the ground.
(b) The aboveground storage tanks ("ASTs")at Plant Nos. 1 and 2 shall be
temporarily removed with the contaminated soil beneath the ASTs
excavated and placed in a landfill authorized to receive such waste.
The bottom of each AST area at each Plant shall be sealed with
concrete to the cinderblock walls. A manual valve that may be opened
or closed shall be installed at each AST area to allow for rainwater
drainage. A secondary containment, consisting of at least a six-inch
berm, shall be installed beneath the ASTs at each Plant.
(c) The surface tar areas at Plants No. 1 and No. 2 shall be removed and
placed in a landfill authorized to receive such waste.
(d) Soil and groundwater sampling will be conducted in accordance with the
Proposal for Phase II Environmental Site Assessment for Plant Nos. 1
and 2 dated September 25, 1995 prepared by United Consulting Group,
Ltd. Purchaser will remediate the soil and/or groundwater, if
necessary, in accordance with applicable Environmental Laws.
(e) Handauger borings will be conducted in accordance with the Proposal
for Phase II Environmental Site Assessment for Plant NO. 4 dated
October 4, 1995 prepared by United Consulting Group, Ltd. to establish
the condition of Plant No. 4 which existed prior to commencement of
the lease for Plant No. 4.
<PAGE>
Exhibit 4.12
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS AMENDMENT dated as of December 21, 1995 (the "Amendment") is
entered into among KELLY SCOTT HEROLD, as Trustee, GREGORY KEITH SCOTT,
DREW ERIC SCOTT, SAMUEL P. SCOTT, both Individually and as Joint Tenant
with SHERRY J. SCOTT, GENERAL MANUFACTURED HOUSING, INC., a Georgia
corporation ("GMH") and GMH ACQUISITION CORP., a Delaware corporation (the
"Buyer") and amends the Stock Purchase Agreement dated as of October 10,
1995 (the "Original Agreement") by and among Kelly Scott Herold, as
Trustee, Gregory Keith Scott, Drew Eric Scott, Samuel P. Scott and Sherry
J. Scott, as Joint Tenants, GMH and the Buyer (collectively, the "Original
Parties").
WITNESSETH:
WHEREAS, the Original Parties entered into the Original
Agreement; and
WHEREAS, since the execution of the Original Agreement, the
parties have had further discussions regarding certain aspects of the terms
of the Original Agreement; and
WHEREAS, the parties hereto wish to amend the Original Agreement
in order to accurately set forth their understandings and agreements
regarding the terms of the Transaction;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements made herein and in the Original Agreement, the parties hereto,
intending to be legally bound, hereby amend the Original Agreement as
follows:
1. All capitalized terms used in this Amendment and not defined
herein shall have the meanings given such terms in the Original Agreement.
2. The Table of Contents is hereby deemed conformed to reflect
the changes set forth below to the substantive provisions of the Original
Agreement.
3. The definition of "Sellers" set forth in the preamble to the
Original Agreement is hereby deleted and the following definition added, in
alphabetical order, to Section 1 of the Original Agreement:
"Sellers" shall mean, collectively, Kelly Scott Herold, as
Trustee, Gregory Keith Scott, Drew Eric Scott, Samuel P. Scott
both Individually and as Joint Tenant with Sherry J. Scott, and
each of the Sellers, individually, shall be a "Seller."
4. The following definitions set forth in Section 1 of the
Original Agreement are hereby amended and restated in their entirety to
read as follows:
"Closing Date" shall mean a date on or after the conditions
specified in Sections 12 and 13 hereof have been satisfied or
waived, but in no event later than December 31, 1995 or such
other date as may be agreed to by the parties to this Agreement.
5. The first sentence of subsection (a) of Section 3 of the
Original Agreement is hereby amended and restated in its entirety to read
as follows:
(a) Cash; Installment Notes. As consideration for the Stock,
the Buyer, at the Closing, will pay to the Sellers cash in the amount of
$46,000,000.
6. Subsections (c), (d) and (e) of Section 3 of the Original
Agreement are hereby amended and restated in their entirety to read as
follows:
(c) Interest. In addition to amounts payable under Section 3(a)
above, the Buyer agrees to pay to the Sellers in cash, on the Closing Date,
interest at the rate of $10,082 per day for each day from November 1, 1995
until and including the day immediately preceding the Closing Date, such
amount to be allocated among the Sellers as set forth on Exhibit A hereto.
(d) Purchase Price Adjustment.
<PAGE>
(i) In addition to amounts payable pursuant to Sections
3(a) and 3(c) above, the Buyer shall pay the Sellers an
additional amount, in the aggregate equal to the amount obtained
by dividing (A) the product of (1) the consolidated taxable
income of the Acquired Entities ("Taxable Income") for the period
commencing on November 1, 1995 and ending on the day immediately
preceding the Closing Date (the "Applicable Period") times (2)
the difference between the maximum personal federal income tax
rate in effect for such period and the federal capital gains rate
in effect for such period by (B) 1 minus the federal capital
gains rate in effect for such period. This additional amount
will be calculated by the Buyer within 30 days after the last
business day of the month in which the Closing occurs. Within 40
days after the last business day of the month in which the
Closing occurs, the Buyer shall send the Sellers a copy of such
calculation, together with such supporting detail as will enable
the Sellers to verify such calculation. Within 10 days after
their receipt of such calculation from the Buyer, the Sellers
will advise the Buyer in writing whether they agree or disagree
with the Buyer's calculations. If the Sellers agree with the
Buyer's calculation, the Buyer shall remit the amount due to the
Sellers by wire transfer within 10 days after its receipt of the
Sellers' notice to that effect. If the Sellers disagree with the
Buyer's calculation, the Buyer and the Sellers shall use their
best efforts to resolve such disagreement. If the Sellers and
the Buyer are unable to resolve such disagreement within 30 days
after the Buyer's receipt of the Sellers' notice of such
disagreement, the disagreement shall be submitted to Arthur
Andersen LLP for resolution, whose decision shall be binding upon
the Buyer and the Sellers. Within 10 days after Arthur Andersen
LLP's determination of the amount due to the Sellers, the Buyer
shall remit the amount so determined to be due to the Sellers by
wire transfer.
(ii) In the event the Closing occurs on a date other than
the first day of a month, Taxable Income, if any, for the month
in which the Closing occurs, shall be calculated on a prorata
basis by multiplying (A) the full month's Taxable Income with
respect to such month times (B) a fraction, the numerator of
which is the number of days in such month which have occurred
prior to the Closing Date, and the denominator of which is the
total number of days in such month.
(iii) Notwithstanding anything to the contrary contained
herein, in the event the Taxable Income for the Applicable Period
shall be negative, the Buyer shall not owe the Sellers any
additional amount under this Section 3(d), and the Sellers shall
not owe any amounts under this Section 3(d) to the Buyer.
(e) Cash Withdrawal. Prior to the Closing, the Sellers shall be
permitted to withdraw, for the Applicable Period an amount of cash in the
Acquired Entities equal to $3,628,000 (exclusive of normal salary accruals
for the Sellers who are employed by GMH at an annualized rate of $200,000
in the aggregate (the "Accruals")) minus the amount of any distributions
made to any of the Sellers during the Applicable Period in excess of the
Accruals. All calculations required under this Section 3(e) shall be based
upon the audited financial statements of the Acquired Entities as of
October 31, 1995 examined by Arthur Andersen LLP. In the event the amount
of cash the Sellers are entitled to withdraw under this Section 3(e)
exceeds the amount of cash in the Acquired Entities immediately prior to
the Closing, then the Buyer agrees to borrow such sums to enable it to pay
to the Sellers an amount equal to the difference, and in the event the
Sellers shall have withdrawn an amount in excess of the amount the Sellers
are permitted to withdraw under this Section 3(e), then the Sellers shall,
immediately upon demand therefor, pay such excess to the Buyer.
7. Section 4 of the Original Agreement is hereby amended and
restated in its entirety to read as follows:
Section 4. Closing. The Closing shall take place at the
offices of Nixon, Hargrave, Devans & Doyle LLP, New York, New York (or at
such other place as the parties may mutually agree) at 10:00 in the
forenoon, local time, on December 20, 1995 or on such other date as the
parties may mutually agree (the "Closing Date"), but in no event later than
December 31, 1995.
8. Section 7(m) of the Original Agreement is hereby amended and
<PAGE>
restated in its entirety to read as follows:
(m) Taxes. Each of the Acquired Entities has duly filed all
federal, state, local, foreign and other tax returns which are required to
be filed by it, and all such returns are true and correct. Each of the
Acquired Entities has paid all taxes pursuant to such returns or pursuant
to any assessments received by it or which it is obligated to withhold from
amounts owing to any employee, creditor or third party. Except as set
forth on Schedule 7(m), the tax returns of any Acquired Entity have not
been audited by the relevant taxing authorities in any of the six
consecutive years immediately preceding the Closing Date, no returns of any
of the Acquired Entities are currently being audited by any local, state,
federal or foreign tax authority, and none of the Acquired Entities have
been notified by any such authority of a forthcoming audit. All monies
required to be withheld by any of the Acquired Entities from employees or
others for income taxes, Social Security and unemployment insurance taxes
have been collected or withheld, and either paid to the respective
governmental agencies or set aside in accounts for such purpose, or
accrued, reserved against, and entered upon the books of such Acquired
Entity, as applicable. Set forth on Schedule 7(m) hereto are all elections
made by each of the Acquired Entities or by any of the Sellers under the
Code or any state, local, foreign or other tax law affecting any tax return
for any of the Acquired Entities covering fiscal years ending in or after
1989. GMH timely filed an election to be taxed under Subchapter S of the
Code, effective January 1, 1995, and timely filed comparable elections
under the relevant tax laws of all states in which it is required to file
income tax returns. All such elections, and all elections required to be
shown on Schedule 7(m) hereto, were, to Sellers' knowledge, valid when made
and are currently valid, and no Acquired Entity nor any Seller will take
any action which would result in the termination of such election prior to
the Closing Date, without the prior written consent of the Buyer.
9. Section 12(j) of the Original Agreement is hereby amended
and restated in its entirety to read as follows:
(j) The consolidated balance sheet of the Acquired Entities as
of October 31, 1995 shall reflect (i) Working Capital of at least
$3,250,000, (ii) accounts receivable from M/H Retail, Inc. of not more than
$250,000, and (iii) Net Worth of at least $7,560,000.
10. Subsections (j), (k) and (o) of Section 13 of the Original
Agreement are each hereby amended and restated in their entirety to read as
follows:
(j) The Buyer shall have received an audited balance sheet of
each of the Acquired Entities as at October 31, 1995, examined by Arthur
Andersen LLP which shall reflect no breach of Sellers' representations,
warranties or covenants contained in this Agreement, together with a
schedule of cash transactions of the Acquired Entities from the date of
such balance sheet to the Closing Date which is certified as being true and
correct in all material respects by either the Chief Executive or Chief
Financial Officer of GMH and is reasonably acceptable to the Buyer.
(k) The cash balance of the Acquired Entities on the Closing
Date, after giving effect to any cash withdrawals pursuant to Section 3(e)
hereof, shall be at least $100,000.
(o) The consolidated balance sheet of the Acquired Entities as
of October 31, 1995 shall reflect (i) Working Capital of at least
$3,250,000, (ii) accounts receivable from M/H Retail, Inc. of not more than
$250,000, and (iii) Net Worth of at least $7,560,000.
11. The following new subsection (q) shall be added at the end
of Section 13 of the Original Agreement:
(q) Lamar shall have merged with and into GMH, and all of the
assets and liabilities of Lamar shall have become assets and liabilities of
GMH.
12. Section 14 of the Original Agreement is hereby amended and
restated in its entirety to read as follows:
Section 14. Additional Covenants.
(a) No Shop. From and after the execution of this Agreement and
until the earlier of (i) termination of this Agreement in accordance with the
provisions of Section 17 hereof and (ii) December 31, 1995, each of the Sellers,
jointly and
<PAGE>
severally, agrees that such Seller shall not solicit from others, offers
relating to, or engage with others in any discussions or negotiations relating
to, participation in the acquisition of the Acquired Entities, whether such
acquisition is proposed to be in the form of an acquisition of stock or
otherwise.
(b) Environmental Covenants. The parties hereto agree that promptly
upon consummation of the Transaction, the Buyer will commence and diligently
pursue the environmental remediation with respect to the Premises listed on
Schedule 14(b) hereto. The Buyer shall bear all costs of the environmental
remediation listed on Schedule 14(b) hereto, together with any confirmatory
sampling and any further remedial action on or around the Premises required or
identified as a result of or in conjunction with such remediation and/or
sampling up to a maximum of $100,000. Any and all costs of the environmental
remediation listed on Schedule 14(b) hereto and any such confirmatory sampling
and further remedial action in excess of $100,000 shall be borne by the Sellers
and treated as a Loss, payable in accordance with the provisions of Section 15.
13. Subsection (b)(ii) of Section 15 of the Original Agreement is
hereby amended and restated in its entirety to read as follows:
(ii) any (A) Loss incurred or required to be paid because of (I)
the breach of any representation or warranty contained in
Section 7(m) of this Agreement or (II) any failure to file
any Form 5500 with respect to the AFLAC Cafeteria Plan with
either the Internal Revenue Service or Department of Labor
and (B) obligation or payment by the Buyer in respect of
federal, state, local, foreign and other income taxes
("income taxes") of any of the Acquired Entities, or of any
affiliated group, as defined in the Code, which included any
of the Acquired Entities (but only to the extent that the
subject taxes are attributable to the Acquired Entities),
for all taxable periods ended on or prior to the Closing
Date, in excess of amounts (x) previously paid with respect
thereto by any of the Acquired Entities (or, if applicable,
by any such affiliated group), or (y) reflected as an
accrual on the balance sheet of the Acquired Entities as of
October 31, 1995 examined by Arthur Andersen LLP, determined
on a basis consistent with that used in determining tax
liability on the Financial Statements referred to in Section
7(j) hereof;
14. Subsections (A) and (B) of Section 15(d)(ii) of the Original
Agreement are hereby amended to replace "$4,000,000" in each such subsection
with "$3,850,000".
15. Section 16-A of the Original Agreement is hereby amended by
adding the following sentence at the end thereof: "In the event GMH has not
filed any required Form 5500 with respect to the AFLAC Cafeteria Plan prior to
the Closing Date, the Buyer shall cooperate with the Sellers following the
Closing to effect such filing as promptly as is reasonably possible; provided,
that nothing contained herein shall be deemed to obligate the Buyer to pay any
Loss incurred by the Buyer in connection with such filing, all such Losses to be
paid by the Sellers in accordance with the provisions of Section 15 hereof."
16. Subsection (d) of Section 17 of the Original Agreement is hereby
amended to change the date set forth therein from November 30, 1995 to December
31, 1995.
17. Samuel P. Scott, individually and as a joint tenant with Sherry
J. Scott, is hereby made a party to the Original Agreement as fully as if he
were one of the Original Parties. The cover page of and the preamble to the
Original Agreement are each revised to change the reference to "SAMUEL P. SCOTT
and SHERRY J. SCOTT, as Joint Tenants" to "SAMUEL P. SCOTT,
<PAGE>
both Individually and as Joint Tenant with SHERRY J. SCOTT."
18. Schedules 7(a), (b), (c), (d), (e), (f), (g), (k), (l), (n), (p),
(s) and (t) are hereby amended and restated in their entirety as attached on
Exhibit A hereto.
19. On and after this Amendment becoming effective, all references to
"the Agreement" in the Original Agreement shall mean the Original Agreement, as
amended by this Amendment.
20. Except as expressly amended by this Amendment, the Original
Agreement and each and every representation, warranty, covenant, term and
condition therein, are hereby specifically ratified and confirmed.
21. This Amendment may be executed in several counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same document.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Amendment as of the date first above written.
SELLERS:
/s/ Kelly Scott Herold
------------------------------
KELLY SCOTT HEROLD, as Trustee
/s/ Gregory Keith Scott
------------------------------
GREGORY KEITH SCOTT
/s/ Drew Eric Scott
------------------------------
DREW ERIC SCOTT
/s/ Samuel P. Scott
------------------------------
SAMUEL P. SCOTT, Individually
and as Joint Tenant
/s/ Sherry J. Scott
------------------------------
SHERRY J. SCOTT, as Joint
Tenant
GENERAL MANUFACTURED HOUSING,
INC.
By: /s/ Samuel P. Scott
---------------------------
Title: Chairman of the Board
BUYER:
GMH ACQUISITION CORP.
By: /s/ Gary M. Brost
---------------------------
Gary M. Brost, President
<PAGE>
EXHIBIT A
SELLERS' REVISED SCHEDULES - 10/18/95
GENERAL MANUFACTURED HOUSING, INC.
First Amendment to Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
The following schedules form a part of that certain FIRST AMENDMENT TO
STOCK PURCHASE AGREEMENT by and between Kelly Scott HEROLD, AS TRUSTEE, GREGORY
KEITH SCOTT, DREW ERIC SCOTT AND SAMUEL P. SCOTT AND SHERRY J. SCOTT, as Joint
Tenants (collectively, the "Sellers"), GENERAL MANUFACTURED HOUSING, INC. and
GMH ACQUISITION CORP. (the "Buyer") dated December __, 1995 (the "Amendment").
Capitalized terms contained in the following schedules have the same meanings as
given them in the Stock Purchase Agreement dated October 10, 1995 (the
"Agreement"). All references to sections refer to sections of the Agreement
unless otherwise specified. Any restatement or paraphrase in the following
schedules (indicated by small, non-bolded print) of any of the statements set
forth in Section 7 or elsewhere in the Agreement are for reference purposes only
and, in the event of any discrepancy between any such restatement or paraphrase
and the text of the Agreement, as amended, the text of the Agreement, as
amended, shall control.
Addenda attached hereto:
Revised Addendum 2 to Schedule 7(e) - List of all motor vehicles
Addendum 1 to Schedule 7(k) - Summary of State Cases as of
November 27, 1995
Addendum 2 to Schedule 7(k) - Summary of Pending and Threatened
Litigation Actions
<PAGE>
First Amendment to Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
Manufactured General Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(a) "Organization; Good Standing; Power; Etc."
I. Jurisdictions where business is conducted or assets are
owned and in which GMH is qualified as a foreign corporation
to do business:
Florida
North Carolina
South Carolina (as of December 15, 1995)
Lamar Housing, L.L.C. (the "L.L.C."), obtained authority to
transact business in South Carolina on October 20, 1995, and
it remained so qualified through the date of its merger into
GMH on December 15, 1995.
II. Equity Interests in any corporation, partnership, joint
venture or other entity owned, directly or indirectly, by
Acquired Entities:
Prior to the merger of the L.L.C. into GMH, GMH held a 99%
ownership interest in the Capital Account of L.L.C.
III. List of all assumed names or trade names in use by Acquired
Entities:
The Acquired Entities sometimes refer to themselves, their
respective divisions or their products by the following
assumed names: "General Housing," "Jaguar Homes," "Lamar
Housing," "Augustine," "Cougar," "Little General,"
"Governor," or "Senator." These are not registered trade or
fictitious names or marks.
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
First Amendment to Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(b) "Capitalization"
Description of the authorized, issued and outstanding equity interests and names
of persons to whom issued:
GENERAL MANUFACTURED HOUSING, INC.:
100,000 shares of common stock authorized, par
value $100.00 per share
Shareholders No. of Shares
Samuel P. Scott and Sherry J. 1,590
Scott JT TEN
Drew Eric Scott 1,220
Gregory Keith Scott 1,220
Kelly Scott Herold, 1,220
Trustee of the
Kelly Scott Herold
Revocable Trust--1995
dated September 27, 1995
Treasury Shares:
General Manufactured Housing, Inc. 750
LAMAR HOUSING, L.L.C. (prior to merger into GMH on
December 15, 1995)
(non-stock entity)
Owner % of Capital Account
General Manufactured
Housing, Inc. 99%
Samuel P. Scott 1
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
First Amendment to Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(c) "Effective Agreement"
Other than the exceptions listed after each entry below, the execution, delivery
and performance of this Agreement by each of the Sellers and the consummation of
the Transaction do not and will not:
(I) conflict with, violate or result in the breach of any of the terms or
conditions of, or constitute a default under
a) the organizational or constituent documents of any of the Acquired
Entities;
None
b) any contract, agreement, commitment, indenture, mortgage, pledge,
note, bond, license, permit or other instrument or obligation to which
any of the Acquired Entities is a party or by which any of the
Acquired Entities or their assets may be bound or affected;
LICENSES (of General Manufactured Housing, Inc. except where noted)
Alabama Manufacturer License No. 4521 (expires 12/31/95) and copy of
renewal application (no date)
Florida DMV License as Manufacturer of Mobile Homes, #MH10075,
effective 10/1/95 for 95-96 license year, and Renewal Certificate
through 9/30/95 of Bankers Insurance Company Bond No. 33-35881
(originally dated 10/1/93)
Florida DMV License as Manufacturer of Recreational Vehicles,
#MR10150, effective 10/1/95 for 95-96 license year, and Renewal
Certificate through 9/30/95 of Bankers Insurance Company Bond No. 33-
35880 (originally dated 10/1/93)
Georgia Manufactured Homes Manufacturer/Dealer License No. 20913
(expires 12/31/95)
Kentucky Certificate of Acceptability No. 95-MM-10-59 (license to
manufacture, import or sell mobile homes to Kentucky Dealers; expires
12/31/95)
Louisiana Manufacturer License No. 95-M00086 (expires 12/31/95)
Mississippi Privilege License for Manufacturer No. 95-M0157 (expires
6/30/96)
North Carolina Manufacturer's License No. 001113 (expires 6/30/96),
Continuation Certificate through 6/30/96 of Selective Insurance Bond
No. B73551
License Bonds, Manufacturer's Representative, to South Carolina
Manufactured Housing Board, through Bankers Insurance Company
(6/30/95 -6/30/96): #33-19363, Michael O'Gorman; #33-19364, Tom Howard
Moss; #33-35895, Braxton Guill; and #33-19365, Bruce C. Hallock
South Carolina Manufacturer License No. 6255 (expires 6/30/96) and
License Bond #33-19361 to South Carolina Manufactured Housing Board
through Bankers Insurance Company (6/30/95 - 6/30/96)
South Carolina Manufacturer License No. 10410 (expires 6/30/96)
originally issued to Lamar Housing, L.L.C.; Bankers Insurance Company
Bond No. 33-34875 (9/8/95 through 6/30/96) naming Lamar Housing,
L.L.C. as principal
Tennessee Factory-Manufactured Structures License No. 4500 (expires
12/31/95), Continuation Certificate through 12/31/95 of USF&G Bond No.
02-0130-11677-93-6 and Cincinnati Insurance Co. Bond No. 33-35881
effective 12/31/95
Virginia Manufacturer License #M-1995-00108 (expires 4/6/96)
REPURCHASE AGREEMENTS
1) Bombardier Capital Inc. Floorplan Repurchase Agreement dated
8/7/92
2) Ford Motor Credit Manufacturer Agreement and Addendum dated
11/19/90 (not signed by Ford Motor Credit)
3) Green Tree Financial Corporation Stock Floorplan Financing
Agreement dated 2/24/95 and Pre-Sold
<PAGE>
Floorplan Financing Agreement dated 1/25/94
4) Deere Credit, Inc. (a/k/a Deere Credit Services, Inc., a/k/a John
Deere Credit) Manufacturer's Financing Agreement and Addendum
dated 7/19/94
5) ITT Commercial Finance Corp. Floorplan Repurchase Agreement dated
3/4/88
6) NationsCredit Commercial Corporation Inventory Repurchase
Agreement dated 7/21/93 and corporate Guaranty by General up to
$117,537 on specific invoices, dated 4/3/95
7) Whirlpool Financial Corporation Repurchase Agreement dated
4/17/90
8) Security Pacific Housing Services, Inc. Retail Credit Line
arrangements dated 10/9/89, including Manufacturer's Invoicing
Certification, Manufacturer's Indemnification Agreement, and
personal guaranty (which expired by its own terms on or about
10/9/94)
9) SouthTrust Bank Repurchase Agreement dated 11/14/91
In addition, the Company has entered into repurchase agreements with
numerous local and regional financial institutions (generally
providing floorplan/inventory financing for a single dealer) which in
the aggregate represent not more than 20% of the Company's total
repurchase obligation (in dollars).
DEBT OBLIGATIONS
1) Corporate Guaranty of Deed to Secure Debt made by Waycross and
Ware County Development Authority to Patterson Bank dated
12/30/93 encumbering Plants 2 and 3 to secure Promissory Note in
the original principal amount of $613,727.63 in connection with
sale and lease-back transaction;
2) Promissory Note to NationsBank of Georgia, N.A., in the original
principal amount of $600,000 dated 8/24/94 (secured by lien on
aircraft, engines, propellers, accessories and parts);
REAL PROPERTY LEASES:
1) Contract of Lease and Rent dated 12/30/93 with Waycross and Ware
County Development Authority for real property referred to as
Plants 2 and 3
2) Lease Agreement dated 5/26/95 between Tim-Bar Corporation and Hi-
Tech Properties, Inc. (the primary lease underlying the sublease
to GMH) for real property referred to as Plant 4
3) Lease Agreement with Option to Purchase dated 7/10/95 between R.
Warr & W. Evans (dba Lamar Warehouse Co.) and Lamar Housing,
L.L.C. for real property referred to as Plant 5 in Lamar, South
Carolina
4) Lease Agreement dated 10/10/95 between Waycross and Ware County
Development Authority and Hi-Tech Properties, Inc. for unimproved
real property adjacent to Plant 4 (which requires consent of the
Lessor to sublease to GMH, but which consent is expected to be
obtained prior to the closing date)
5) Sellers are aware of the existence of a Lease Agreement between
Waycross and Ware County Development Authority and Tim-Bar
Corporation, the primary lease underlying the 5/26/95 sublease
from Tim-Bar to Hi-Tech; a copy of such Lease Agreement has not
yet been made available and consequently the terms thereof have
not yet been reviewed as of the date of this Amendment; it may or
may not require the Consent of the Landlord in connection with
the Transaction.
OTHER
HUD certification as HUD-approved manufacturer
c) any law, regulation, ordinance or decree to which any of the Acquired
Entities or their assets are subject;
None
(II) result in the creation or imposition of any lien, security interest,
charge, encumbrance, restriction or right, including rights of termination
or cancellation, in or with respect to, or otherwise materially adversely
affect, any of the properties, assets or businesses of any of the Acquired
Entities.
All documents included in Part I Item b of this Schedule 7(c) are
incorporated herein by reference.
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
First Amendment to Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(d) "Consents"
Permits, consents, approvals, or authorizations of, or designations,
declarations or filings with, governmental authorities or other persons or
entities by Sellers or any Acquired Entity required in connection with the
execution or delivery by any of the Sellers or the consummation of the
Transaction:
The following licenses may not be transferable, but, to
Sellers' knowledge, new licenses should be obtainable by
Buyer without undue burden or expense. However, if such
licenses are not maintained, sales of the Company's products
might be interrupted in the affected jurisdictions.
LICENSES (of General Manufactured Housing, Inc. except where noted)
Alabama Manufacturer License No. 4521 (expires 12/31/95) and
copy of renewal application (no date)
Florida DMV License as Manufacturer of Mobile Homes,
#MH10075, effective 10/1/95 for 95-96 license year, and
Renewal Certificate through 9/30/95 of Bankers Insurance
Company Bond No. 33-35881 (originally dated 10/1/93)
Florida DMV License as Manufacturer of Recreational
Vehicles, #MR10150, effective 10/1/95 for 95-96 license
year, and Renewal Certificate through 9/30/95 of Bankers
Insurance Company Bond No. 33-35880 (originally dated
10/1/93)
Georgia Manufactured Homes Manufacturer/Dealer License No.
20913 (expires 12/31/95)
Kentucky Certificate of Acceptability No. 95-MM-10-59
(license to manufacture, import or sell mobile homes to
Kentucky Dealers; expires 12/31/95)
Louisiana Manufacturer License No. 95-M00086 (expires
12/31/95)
Mississippi Privilege License for Manufacturer No. 95-MO157
(expires 6/30/96)
<PAGE>
North Carolina Manufacturer's License No. 001113 (expires 6/30/96),
Continuation Certificate through 6/30/96 of Selective Insurance Bond No.
B73551
License Bonds, Manufacturer's Representative, to South Carolina
Manufactured Housing Board, through Bankers Insurance Company (6/30/95 -
6/30/96): #33-19363, Michael O'Gorman; #33-19364, Tom Howard Moss; #33-
35895, Braxton Guill; and #33-19365, Bruce C. Hallock
South Carolina Manufacturer License No. 6255 (expires 6/30/96) and License
Bond #33-19361 to South Carolina Manufactured Housing Board through Bankers
Insurance Company (6/30/95 - 6/30/96)
South Carolina Manufacturer License No. 10410 (expires 6/30/96) originally
issued to Lamar Housing, L.L.C.; Bankers Insurance Company Bond No. 33-
34875 (9/8/95 through 6/30/96) naming Lamar Housing, L.L.C. as principal
Tennessee Factory-Manufactured Structures License No. 4500 (expires
12/31/95), Continuation Certificate through 12/31/95 of USF&G Bond No. 02-
0130-11677-93-6 and Cincinnati Insurance Co. Bond No. 33-35881 effective
12/31/95
Virginia Manufacturer License #M-1995-00108 (expires 4/6/96)
REPURCHASE AGREEMENTS:
Green Tree Financial Corporation Stock Floorplan Financing Agreement dated
2/24/95 and Pre-Sold Floorplan Financing Agreement dated 1/25/94 Deere
Credit, Inc. (a/k/a Deere Credit Services, Inc., a/k/a John Deere Credit)
Maufacturer's Financing Agreement and Addendum dated 7/19/94
NationsCredit commercial Corporation Inventory Repurchase Agreement dated
7/21/93 and corporate Guaranty by General up to $117,537 on specific
invoices, dated 4/3/95
Whirlpool Financial Corporation Repurchase Agreement dated 4/17/90
In addition, the Company has entered into repurchase agreements with
numerous local and regional financial institutions (generally providing
floorplan/inventory financing for a single dealer) which in the aggregate
represent not more than 20% of the Company's total repurchase obligation
(in dollars) and which may or may not require the consent of such financial
institution in connection with this transaction.
DEBT OBLIGATIONS
1) Corporate Guaranty of Deed to Secure Debt made by Waycross and Ware
County Development Authority to Patterson Bank dated 12/30/93 encumbering
Plants 2 and 3 to secure Promissory Note in the original principal amount
of $613,727.63 in connection with sale and lease-back transaction;
2) Promissory Note to NationsBank of Georgia, N.A., in the original
principal amount of $600,000 dated 8/24/94 (secured by lien on aircraft,
engines, propellers, accessories and parts);
REAL PROPERTY LEASES:
1) Contract of Lease and Rent dated 12/30/93 with Waycross and Ware
County Development Authority for real property referred to as Plants 2 and
3
2) Lease Agreement dated 5/26/95 between Tim-Bar Corporation and Hi-Tech
Properties, Inc. (the primary lease underlying the sublease to GMH)
3) Lease Agreement with Option to Purchase dated 7/10/95 between R. Warr
& W. Evans (dba Lamar Warehouse Co.) and Lamar Housing, L.L.C. for real
property referred to as Plant 5 in Lamar, South Carolina
4) Ground Lease dated 9/19/94 between Ware County and the City of
Waycross as Lessors and GMH for airplane hangar
5) Lease Agreement dated 10/10/95 between Waycross and Ware County
Development Authority and Hi-Tech Properties, Inc. for unimproved real
property adjacent to Plant 4 (which requires consent of the Lessor to
sublease to GMH, but which consent is expected to be obtained prior to the
closing date)
6) Sellers are aware of the existence of a Lease Agreement between
Waycross and Ware County Development Authority and Tim-Bar Corporation, the
primary lease underlying the 5/26/95 sublease from Tim-Bar to Hi-Tech; a
copy of such Lease Agreement has not yet been made available and
consequently the terms thereof have not yet been reviewed as of the date of
this Amendment; it may or may not require the Consent of the Landlord in
connection with the Transaction.
OTHER
"HUD Package" evidencing GMH's qualification as HUD-approved manufacturer
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
First Amendment to Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufacutred Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(e) "Title to and Assets"
I. Description of all property and assets, real and personal,
tangible and intangible (having a book value in excess of
$20,000) owned by each of the Acquired Entities:
Beechcraft King Air 200 airplane
Attached to Schedule 7(e) to the Stock Purchase Agreement dated
10/10/95 as "Addendum 1 to Schedule 7(e)" is the depreciation schedule
of General Manufactured Housing, Inc., as of June 30, 1995, reflecting
tangible personal and real property of GMH.
Attached here to as "Revised Addendum 2 to Schedule 7(e)" is a list of
all motor vehicles, including serial numbers as of December 18, 1995
Attached to Schedule 7(e) to the Stock Purchase Agreement dated
10/10/95 as "Addendum 3 to Schedule 7(e)" is a IM of all bank accounts
and certificates as of 10/10/95.
II. Exceptions to title of assets listed in item I of this
Schedule 7(e):
1) Deed to Secure Debt to BankSouth, Waycross dated 5/25/88
encumbering Plant 1, securing two Promissory Notes for $400,000 and
$186,793, respectively (personally guaranteed by Sam Scott)
2) Deed to Secure Debt (second mortgage) encumbering Plant 1
property, securing Note to The Patterson Bank dated 3/2/95 in the
maximum amount of $209,000, for payment of a declining Letter of
Credit in favor of Tim-Bar Corporation in the maximum amount of
$209,000 (declining at the rate of $9,000 per month) as Security
Deposit under Lease between Hi-Tech and Tim-Bar for Plant 4
3) Deed to Secure Debt and UCC-1 to Patterson Bank dated 12/30/93
from Waycross and Ware County Development Authority encumbering Plants
2 and 3 and certain personal property located therein to secure
Promissory Note in the original principal amount of $613,727.63 in
connection with sale and lease-back transaction
4) Security Agreement dated 8/24/94 and UCC-1 Financing Statement
filed 9/26/94 in favor of NationsBank of Georgia, N.A., encumbering
aircraft, engines, propellers, accessories and parts, to secure
Promissory Note in the original principal amount of $600,000
5) UCC-1 Financing Statements in favor of Fabwel, Inc., encumbering
leased equipment consisting of Guffermaker Extruder and Watertite
Gutter Machines
6) UCC-1 Financing Statements in favor of AMS of Indiana, Inc.
encumbering leased equipment consisting of heat duct machines
7) UCC-1 Financing Statements in favor of Toyota Motor Credit Corp.
encumbering leased equipment including 6 Toyota Forklifts
III. Condition and repair of property:
See "Addendum 4 to Schedule 7(e)" (letter from Neal Conner, Esq.,
relating to condition of manufacturing plants) attached to the Stock
Purchase Agreement dated 10/10/95
IV. Other material assets used substantially on an exclusive basis in
connection with the business of the Acquired Entities which are not
owned by the Acquired Entities:
Residential property located at 824 Holly Ross Lane, Waycross,
GA, leased pursuant to Rental Agreement dated August 1, 1995, by
and between Ralph and Faye Tyson (Owners) and Lannis Thomas
(Tenant), for the purpose of providing temporary living quarters
for employees of the Acquired Entities while in Waycross on
business
See also descriptions of leased equipment on Schedule 7(f)
incorporated herein by reference.
<PAGE>
MANUFACTURED HOUSING, INC.
First Amendment to Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(f) "Leases and Licensing Agreements"
I. List and brief description of all leases of real property and all
franchises, licensing agreements and leases of (or other arrangements for
the use of) any item of personal property:
REAL PROPERTY LEASES:
1) Lease and Assignment of Lease dated 12/30/93 in connection with sale
and leaseback to/from Waycross and Ware County Development Authority for
real property referred to as Plants 2 and 3
2) Sublease Agreement dated 7/1/95 between HI-TECH PROPERTIES, INC. as
sublessor and GMH for real property referred to as Plant 4, and Lease
Agreement dated 5/26/95 between Tim-Bar Corporation and Hi-Tech Properties,
Inc. (the primary lease underlying the sublease to GMH)
3) Lease Agreement with Option to Purchase dated 7/10/95
<PAGE>
between R. Warr & W. Evans, each individually and dba Lamar Warehouse Co.,
and Lamar Housing, L.L.C. for Plant 5 in Lamar, South Carolina
4) Lease Agreement dated 10/10/95 between Waycross and Ware County
Development Authority and Hi-Tech Properties, Inc. for unimproved real
property adjacent to Plant 4
5) Sublease Agreement dated as of 10/10/95 between Hi-Tech Properties,
Inc. and General Manufactured Housing, Inc. for unimproved real property
adjacent to Plant 4
6) Ground Lease dated 9/19/94 between Ware County and the City of
Waycross as Lessors and GMH for airplane hangar
7) Residential property located at 824 Holly Ross Lane, Waycross, GA,
leased pursuant to Rental Agreement dated August 1, 1995, by and between
Ralph and Faye Tyson (Owners) and Lannis Thomas (Tenant), for the purpose
of providing temporary living quarters for employees of the Acquired
Entities while in Waycross on business
8) Sellers are aware of the existence of a Lease Agreement between
Waycross and Ware County Development Authority and Tim-Bar Corporation, the
primary lease underlying the 5/26/95 sublease from Tim-Bar to Hi-Tech; a
copy of such Lease Agreement has not yet been made available and
consequently the terms thereof have not yet been reviewed as of the date of
this Amendment
PERSONAL PROPERTY LEASES:
1) Equipment Lease Agreements with Handling Systems Engineering, Inc.
(all assigned simultaneously with execution to Toyota Motor Credit
Corporation), all for Toyota Forklifts, as follows:
6/2/95. . . . . . . . . . . S/N 76092
8/18/93 . . . . . . . . . . S/N 75336
. . . . . . . . . . . . . . S/N 75390
. . . . . . . . . . . . . . SIN 75417
. . . . . . . . . . . . . . S/N 75431
12/16/92. . . . . . . . . . S/N 75016
12/8/93 . . . . . . . . . . S/N 75536
. . . . . . . . . . . . . . S/N 75538
2) Equipment Lease Agreements with Southeast Industrial Equipment for
Toyota Forklifts used in the Lamar, S.C. Plant 5, as follows:
8/17/95 . . . . . . . . . . S/N 12225
8/22/95 . . . . . . . . . . S/N 71247
3) Four (4) each Guttermaker Extruders and Watertite Gutter Machines
leased pursuant to [verbal arrangement] with Fabwel, Inc. in consideration
of $1 annual rent and purchase of raw materials from Fabwel, Inc.
4) Four (4) Heat Duct Machines leased pursuant to [verbal arrangement]
with AMS of Indiana, Inc., in consideration of $1 annual rent and purchase
of raw materials from AMS of Indiana, Inc.
5) "Warranty Track" software license/lease (unwritten) from GPR Software
Systems
6) License for CAD software system
II. Consents required pursuant to the terms of the above as a result of the
Transaction:
REAL PROPERTY LEASES:
1) Lease and Assignment of Lease dated 12/30/93 in connection with sale
and leaseback to/from Waycross and Ware County Development Authority for
real property referred to as Plants 2 and
2) Lease Agreement dated 5/26/95 between Tim-Bar Corporation and Hi-Tech
Properties, Inc. (the primary lease underlying the sublease between GMH and
Hi-Tech Properties, Inc. for Plant 4)
3) Lease Agreement with Option to Purchase dated 7/10/95 between R. Warr
& W. Evans (dba Lamar Warehouse Co.) and Lamar Housing, L.L.C. for Plant 5
in Lamar, South Carolina
4) Ground Lease dated 9/19/94 between Ware County and the City of
Waycross as Lessors and GMH for airplane hangar
5) Rental Agreement dated August 1, 1995, by and between Ralph and Faye
Tyson (Owners) and Lannis Thomas (Tenant), for residential property located
at 824 Holly Ross Lane, Waycross, GA, for the purpose of providing
temporary living quarters for employees of the Acquired Entities while in
Waycross on business
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
First Amendment to Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(g) "Agreements, Etc."
I. Indentures, mortgages, agreements, contracts, arrangements,
commitments, instruments, understandings or obligations of
the Acquired Entities to be performed in whole or in part on
or after the date of Closing, including product warranties,
greater than $25,000 (excluding purchase orders for goods
entered into by any of the Acquired Entities in the ordinary
course of business which individually do not exceed
$75,000):
SECURED DEBT OBLIGATIONS:
1) Deed to Secure Debt to BankSouth, Waycross dated 5/25/88 encumbering
Plant 1, securing two Promissory Notes dated 5/25/88 for $400,000 and
$186,793, respectively (personally guaranteed by Sam Scott)
2) Promissory Note in the original principal amount of $600,000 dated
8/24/94 in favor of NationsBank of Georgia, N.A., encumbering aircraft,
engines, propellers, accessories and parts, to secure
3) Deed to Secure Debt (second mortgage) dated 3/2/95, encumbering Plant
1 real property, to The Patterson Bank, securing Note for payment of Letter
of Credit in favor of Tim-Bar Corporation in the maximum amount of $209,000
as Security Deposit under Lease between Hi-Tech and Tim-Bar for Plant 4
LETTERS OF CREDIT:
1) Letter of Credit No. PB020 dated 5/22/95 issued by The Patterson Bank
in favor of Tim-Bar Corporation in the maximum amount of $209,000 (said
balance declining at the rate of $9,000 per month) as Security Deposit
under Lease between Hi-Tech and Tim-Bar for Plant 4
2) Irrevocable Letter of Credit No. PB013 dated 5/18/93 issued by The
Patterson Bank in favor of Bankers Insurance Company for $50,000, securing
South Carolina Manufacturer's Representative License Bonds
REPURCHASE AGREEMENTS:
1) Bombardier Capital Inc. Floorplan Repurchase Agreement
<PAGE>
dated 8/7/92
2) Ford Motor Credit Manufacturer Agreement and Addendum dated 11/19/90
3) Green Tree Financial Corporation Stock Floorplan Financing Agreement
dated 2/24/95 and Pre-Sold Floorplan Financing Agreement dated 1/25/94
4) Deere Credit, Inc. (a/k/a Deere Credit Services, Inc., a/k/a John
Deere Credit) Manufacturer's Financing Agreement and Addendum dated 7/19/94
5) ITT Commercial Finance Corp. Floorplan Repurchase Agreement dated
3/4/88
6) NationsCredit Commercial Corporation Inventory Repurchase Agreement
dated 7/21/93 and corporate Guaranty by General up to $117,537 on specific
invoices, dated 4/3/95
7) Whirlpool Financial Corporation Repurchase Agreement dated 4/17/90
8) Security Pacific Housing Services, Inc. Retail Credit Line
arrangements dated 10/9/89, including Manufacturer's Invoicing
Certification, Manufacturer's Indemnification Agreement, and personal
guaranty (which expired by its own terms on or about 10/9/94)
9) SouthTrust Bank Repurchase Agreement dated 11/14/91
In addition, the Company has entered into repurchase agreements with
numerous local and regional financial institutions (generally providing
floorplan inventory financing for a single dealer) which in the aggregate
represent not more than 20% of the Company's total repurchase obligation
(in dollars).
GUARANTEES AND INDEMNIFICATIONS:
1) Indemnity Agreement in favor of Lessor as to deficiencies caused by
default of Lessee and Indemnification holding Lessor harmless against
claims for losses, damage or injury on the leased premises, pursuant to
Articles IX and XII, respectively, of Contract of Lease and Rent with
Waycross and Ware County Development Authority as Lessor
2) Corporate Guaranty by General to NationsCredit up to $117,537 on
specific invoices, dated 4/3/95 in connection with Commercial Corporation
Inventory Repurchase Agreement dated 7/21/93
3) Manufacturer's Indemnification Agreement and personal guaranty dated
10/9/89 (which expired by its own terms on or about 10/9/94) to Security
Pacific Housing Services, Inc. in connection with retail credit line
arrangements
4) Corporate Guaranty by GMH of Deed to Secure Debt made by Waycross and
Ware County Development Authority to Patterson Bank dated 12/30/93
encumbering Plants 2 and 3 to secure Promissory Note in the original
principal amount of $613,727.63 in connection with sale and lease-back
transaction;
5) General indemnifications in favor of Lessor in Articles IX and XII of
that certain Lease and Assignment of Lease between GMH as Lessee and
Waycross and Ware County Development Authority as Lessor dated 12/30/93 in
connection with sale and lease-back of real property referred to as Plants
2 and 3
6) Environmental indemnity and hold harmless provision in favor of Lessor
in Section 13 of that certain Lease Agreement dated 5/26/95, as amended
July 1, 1995, between Tim-Bar Corporation as Lessor and Hi-Tech Properties,
Inc. as Lessee (the primary lease underlying that certain Sublease
Agreement dated 7/1/95 between HI-TECH PROPERTIES, INC. as sublessor and
GMH as sublessee for real property
<PAGE>
referred to as Plant 4)
7) Environmental indemnity and hold harmless provision in favor of Lessor
in Section 22 of that certain Lease Agreement with Option to Purchase dated
7/10/95 between R. Warr & W. Evans, each individually and dba Lamar
Warehouse Co., and Lamar Housing, L.L.C. for Plant 5 in Lamar, South
Carolina
8) Personal guaranty by Sam Scott of GMH Deed to Secure Debt to
BankSouth, Waycross dated 5/25/88 encumbering Plant 1, securing two
Promissory Notes dated 5/25/88 for $400,000 and $186,793, respectively
9) Indemnity Agreement from GMH to Tim-Bar Corporation as Lessor under
that certain Lease Agreement dated 5/26/95 as amended July 1, 1995 pursuant
to Section paragraph F. of Section Two of Amendment to Lease Agreement
dated July 1, 1995
10) Indemnification by GMH of Hi-Tech Properties, Inc. under Section
Two.D. of the Sublease Agreement for the vacant land adjacent to Plant 4
11) Sellers are aware of the existence of a Lease Agreement between
Waycross and Ware County Development Authority and Tim-Bar Corporation, the
primary lease underlying the 5/26/95 sublease from Tim-Bar to Hi-Tech; a
copy of such Lease Agreement has not yet been made available and
consequently the terms thereof have not yet been reviewed as of the date of
this Amendment; it may or may not contain indemnification provisions in
favor of the Lessor
WARRANTY OBLIGATIONS:
1) "Gold Card Service" customer service warranty program, which includes
(i) HUD mandated 1-year warranty and (ii) additional 9-year warranty
(insured)
2) Product warranty obligations pursuant to warranty information
contained in Setup Manual, Homeowners' Manual, and advertising literature
distributed with finished homes
3) GMH may have additional liability under warranty claims not yet filed
by homeowners resulting from defective composite siding manufactured by
Cladwood (See GMH vs. Cladwood on Schedule 7(k)); Negotiations with
Cladwood to recover damages incurred by GMH are currently in progress
4) Barfield vs. Southern Lifestyle Homes, Inc. and General Manufactured
Housing, Inc.: breach of contract claim filed June 1995 in South Carolina
5) Threatened warranty/product liability claim by Thelma Grant, resident
of South Carolina
6) Greg A. Hall vs. GMH and others: warranty claim suit filed in the
Court of Common Pleas for the Second Judicial Circuit, Aiken County, South
Carolina, Civil Action No. 95-CP-02-732; Complaint served on GMH 10/9/95
REAL PROPERTY LEASES:
1) Lease and Assignment of Lease dated 12/30/93 in connection with sale
and leaseback to/from Waycross and Ware County Development Authority for
real property referred to as Plants 2 and 3, including also general
indemnifications in favor of Lessor in Articles IX and XII thereof
2) Sublease Agreement dated 7/1/95 between HI-TECH PROPERTIES, INC. as
sublessor and GMH for real property referred to as Plant 4; Lease Agreement
dated 5/26/95 between Tim-Bar Corporation and Hi-Tech Properties, Inc. (the
primary lease underlying the sublease to GMH) including also an
environmental indemnity and hold harmless provision in favor of Lessor in
Section 13 of such primary lease; Sellers are aware of the existence of a
Lease Agreement between Waycross and Ware County Development Authority and
<PAGE>
Tim-Bar Corporation, the primary lease underlying the 5/26/95 sublease from
Tim-Bar to Hi-Tech, however a copy of such Lease Agreement has not yet been
made available and consequently the terms thereof have not yet been
reviewed as of the date of this Amendment
3) Lease Agreement with Option to Purchase dated 7/10/95 between R. Warr
& W. Evans (dba Lamar Warehouse Co.) and Lamar Housing, L.L.C. for Plant 5
in Lamar, South Carolina, including also an environmental indemnity. and
hold harmless provision in favor of Lessor in Section 22 thereof
4) Sublease Agreement dated as of 10/10/95 between HiTech Properties,
Inc. and General Manufactured Housing, Inc. for unimproved real property
adjacent to Plant 4 and Lease Agreement dated 10/10/95 between Waycross and
Ware County Development Authority and Hi-Tech Properties, Inc. (the primary
lease underlying the sublease to GMH) used for storage of finished goods
5) Ground Lease dated 9/19/94 between Ware County and the City of
Waycross as Lessors and GMH for airplane hangar
PERSONAL PROPERTY LEASES:
1) Equipment Lease Agreements with Handling Systems Engineering, Inc.
(all assigned simultaneously with execution by Handling Systems
Engineering, Inc. to Toyota Motor Credit Corporation), all for Toyota
Forklifts, as follows:
6/2/95. . . . . . . . . . . S/N 76092
8/18/93 . . . . . . . . . . S/N 75336
. . . . . . . . . . . . . . S/N 75390
. . . . . . . . . . . . . . S/N 75417
. . . . . . . . . . . . . . S/N 75431
12/16/92. . . . . . . . . . S/N 75016
12/8/93 . . . . . . . . . . S/N 75536
. . . . . . . . . . . . . . S/N 75538
2) Equipment Lease Agreements with Southeast Industrial Equipment for
Toyota Forklifts used in the Lamar, S.C. Plant 5, as follows:
8/17/95 . . . . . . . . . . S/N 12225
8/22/95 . . . . . . . . . . S/N 71247
3) Four (4) each Guttermaker Extruders and Watertite Gutter Machines
leased pursuant to [verbal understanding/ arrangement] with Fabwel, Inc. in
consideration of $1 annual rent and purchase of raw materials from Fabwel,
Inc.
4) Four (4) Heat Duct Machines leased pursuant to arrangements with AMS
of Indiana, Inc., dated 1995, in consideration of $1 annual rent and
purchase of raw materials from AMS of Indiana, Inc.
5) "Warranty Track" software license/lease (unwritten) from GPR Software
Systems
II. Agreements, contracts, understandings, arrangements and obligations with
any supplier paid more than $250,000 by Acquired Entities in any of the
last three fiscal years
The following vendors exceeded the $250,000 threshold in 1993 and/or
1995 (year-to-date) AND are parties to agreements, contracts,
understandings, or arrangements with GMH as described below (records
for 1994 are not yet available):
1) EDISTO HOUSING offers a customer rebate program to purchases of
finished homes.
2) FABWEL, INC. leases equipment to GMH at a nominal rent, pursuant to an
oral agreement, in consideration for the purchase of raw materials
from Fabwel.
3) M/H RETAIL, INC. provides services to GMH pursuant to that certain
Agreement dated March 23, 1988, by and between M/H Retail, Inc., and
GMH, as amended by that
<PAGE>
certain Amendment dated as of _______________, 1994.
4) AMS of Indiana, Inc. leases equipment to GMH at a nominal rent,
pursuant to an oral agreement, in consideration for the purchase of
raw materials from AMS OF GEORGIA.
5) GENERAL ELECTRIC purchases are at agreed-upon prices pursuant to the
GE Appliances National Contract Sales Agreement
or with any customer which has paid more than $500,000 to Acquired Entities in
any of the last three fiscal years
Customers under Volume Incentive Program over $500,000 threshold for 1995
as of August 31, 1995:
Oakwood Mobile Homes, Inc., Volume Incentive Program pursuant to letter
dated 2/9/95 from GMH to Mike Stidham, Executive Vice President of Oakwood
Mobile Homes, Inc. [However, see Schedule 7(w) concerning Oakwood's
suspension of purchases.]
Calvary Mobile Homes, Greenville, NC Edisto Housing Center, Inc.,
Orangeburg, SC Southern Lifestyle Homes, Florence, SC
Customers under Volume Incentive Program over $500,000 threshold in 1994:
A&W Mobile Homes
Edisto Housing Center, Inc.
Ranch Park
Southern Lifestyle
Customers under Volume Incentive Program over $500,000 threshold in 1993:
A&W Mobile Homes
Ranch Park
Edisto Housing Center, Inc.
Southern Lifestyle
III. Employee bonus, incentive, compensation, profit sharing, retirement,
pension, group insurance, death benefit or other fringe benefit plans,
deferred compensation and post-termination obligations or trust agreements
in effect or under which amounts remain unpaid as of, or are to become
effective after, the Closing of the Transaction
1) Health Insurance Contract: BCBS Master Contract #23041-001,004 eff.
5/1/93
2) Group Term Life Master Policy: Transamerica Life #BTL199 eff. 8/1/91
3) Group Travel Accident Insurance Policy: ITT Hartford #ETB-102015
(4/27/94 - 4/27/95)
4) GMH Premium Only Cafeteria Plan (A&R 1/1/95)
IV. Collective bargaining agreements with any labor union or other
representative of employees
None
and all employment and consulting contracts not terminable at will without
penalty;
None
V. Each instrument defining the terms on which debts of or guarantees by
Acquired Entities in excess of $25,000 have been or may be issued;
SECURED DEBT OBLIGATIONS:
1) Deed to Secure Debt to BankSouth, Waycross dated
5/25/88 encumbering Plant 1, securing two Promissory Notes
for $400,000 and $186,793, respectively (personally
<PAGE>
guaranteed by Sam Scott)
2) Corporate Guaranty of Deed to Secure Debt to Patterson Bank dated
12/30/93 from Waycross and Ware County Development Authority encumbering
Plants 2 and 3 to secure Promissory Note in the original principal amount
of $613,727.63, in connection with sale and lease-back transaction
3) Security Agreement and UCC-1 Financing Statement dated 8/24/94 in
favor of NationsBank of Georgia, N.A., encumbering aircraft, engines,
propellers, accessories and parts, to secure Promissory Note in the
original principal amount of $600,000
4) Deed to Secure Debt (second mortgage) dated 3/2/95, encumbering Plant
1 real property, to The Patterson Bank, securing Note for payment of Letter
of Credit in favor of Tim-Bar Corporation in the maximum amount of $209,000
as Security Deposit under Lease between Hi-Tech and tim-Bar for Plant 4
LETTERS OF CREDIT:
1) Declining Letter of Credit in favor of Tim-Bar Corporation in the
maximum amount of $209,000 (declining at the rate of $9,000 per month) as
Security Deposit under Lease between Hi-Tech and Tim-Bar for Plant 4
2) Irrevocable Letter of Credit in favor of Bankers Insurance Company for
$50,000, drawn on The Patterson Bank, dated 5/18/93 (expired 5/18/94),
securing South Carolina Manufacturer's Representative License Bonds
REPURCHASE AGREEMENTS (repurchase obligations survive termination of Agreement
in each case):
1) Bombardier Capital Inc. Floorplan Repurchase Agreement dated 8/7/92
2) Ford Motor Credit Manufacturer Agreement and Addendum dated 11/19/90
(not signed by Ford Motor Credit)
3) Green Tree Financial Corporation Stock Floorplan Financing Agreement
dated 2/24/95 and Pre-Sold Floorplan Financing Agreement dated 1/25/94
4) Deere Credit, Inc. (a/k/a Deere Credit Services, Inc., a/k/a John
Deere Credit) Manufacturer's Financing Agreement and Addendum dated 7/19/94
5) ITT Commercial Finance Corp. Floorplan Repurchase Agreement dated
3/4/88
6) NationsCredit Commercial Corporation Inventory Repurchase Agreement
dated 7/21/93 and corporate Guaranty by General up to $117,537 on specific
invoices, dated 4/3/95
7) Whirlpool Financial Corporation Repurchase Agreement dated 4/17/90
8) Security Pacific Housing Services, Inc. Retail Credit Line
arrangements dated 10/9/89, including Manufacturer's Invoicing
Certification, Manufacturer's Indemnification Agreement, and personal
guaranty (which expired by its own terms on or about 10/9/94)
9) SouthTrust Bank Repurchase Agreement dated 11/14/91
In addition, the Company has entered into repurchase agreements with
numerous local and regional financial institutions (generally providing
floorplan inventory financing for a single dealer) which in the aggregate
represent not more than 20% of the Company's total repurchase obligation
(in dollars).
WARRANTY OBLIGATIONS:
<PAGE>
1) "Gold Card Service" customer service warranty program, which includes
(i) HUD mandated 1-year warranty and (ii) additional 9-year warranty
(insured)
2) Product warranty obligations pursuant to warranty information
contained in Setup Manual, Homeowners' Manual, and advertising literature
distributed with finished homes
3) GMH may have additional liability under warranty claims not yet filed
by homeowners resulting from defective composite siding manufactured by
Cladwood (See GMH vs. Cladwood on Schedule 7(k)); Negotiations with
Cladwood to recover damages incurred by GMH are currently in progress
4) Barfield vs. Southern Lifestyle Homes, Inc. and General Manufactured
Housing, Inc.: breach of contract claim filed June 1995 in South Carolina
5) Threatened warranty/product liability claim by Thelma Grant, resident
of South Carolina
6) Greg A. Hail vs. GMH and others: warranty claim suit filed in South
Carolina; Complaint served on GMH 10/9/95
7) John R. Edge and Patricia A. Edge vs. General Manufactured Housing,
Inc., et al.: warranty claim suit charging fraud and requesting damages "in
excess of $10,000" filed in Ware County Superior Court on November 30, 1995
VI. Any agreement limiting the freedom of any of the Sellers or the Acquired
Entities to compete in any line of business or with any person,
None
or limiting the freedom of any other person to compete with any of the
Sellers or any of the Acquired Entities
None
VII. Other agreements, contracts, arrangements, commitments, instruments,
understandings, or obligations, oral or written, to which any of the
Acquired Entities is a party and in which any Seller or any Affiliate of
any of the Acquired Entities has any interest, direct or indirect, which
involve payments of more than $25,000 to or from any of the Acquired
Entities
Sublease Agreement dated 7/1/95 between HI-TECH PROPERTIES, INC. as
sublessor and GMH as sublessee for real property referred to as Plant 4
Sublease Agreement dated 10/10/95 between Hi-Tech Properties, Inc. as
sublessor and GMH as sublessee for vacant property adjacent to Plant 4,
which provides for rental amounts based on certain assumptions concerning
ad valorem taxes and the actual rent amount cannot at this time be
precisely determined
VIII. Amounts and terms of all loans or advances by Acquired Entities to the
Sellers or their Affiliates or the employees and Affiliates of any of the
Acquired Entities;
After 12/31/94, advances for the first three calendar quarters of 1995
were made to each Seller by GMH in the total amount of $300,000 each,
against 1995 income taxes. It is anticipated that additional advances of
$100,000 each will be made for each calendar quarter thereafter until the
closing date. These amounts are reflected on the books as loans but will
be recharacterized as distributions at year-end.
IX. Summary of the anticipated terms and conditions of any item currently
being negotiated by or on behalf of any of the Acquired Entities which
would upon completion be included within the scope of paragraphs (i)
through (viii) of Section 7(g) of the Agreement.
None
X. (A) Agreements in effect which permit any of the Acquired Entities to
incur debt for borrowed money to any bank, insurance company or other
financial institution;
None
(B) rights or obligations of Acquired Entities under any indenture,
mortgage, agreement, contract, arrangement, commitment, instrument,
understanding or obligation listed on this Schedule 7(g) which will be
materially adversely affected by the Transaction;
None
(C) material defaults or claimed, purported or alleged defaults or state
of facts which with notice or lapse of time or both would constitute
material defaults on the part of any party in the performance of any
obligation to be performed or paid by any party under any indenture,
mortgage, agreement, contract, arrangement, commitment, instrument,
understanding or obligation listed on this Schedule 7(g).
None
<PAGE>
MANUFACTURED HOUSING, INC.
First Amendment to Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(k) "Litigation, Etc."
Suits, actions, litigation, administrative hearings, arbitrations, labor
controversies or negotiations, other proceedings or governmental inquiries or
investigations, judgments, consent decrees, injunctions, violations of laws,
ordinances, requirements, orders and regulations applicable to the business of
Acquired Entities, and notices received of claimed default with respect to any
of the foregoing:
Attached hereto as Addendum 1 to Schedule 7(k) is a summary of Pending State
Cases as of November 27, 1995.
The following EEOC Notices of Discrimination have been issued by the Savannah
Local Office of the Equal Employment Opportunity Commission:
1) Reynolds: Sex Discrimination Charge filed 9/24/93
2) Rollins: Sex Discrimination Charge filed 6/10/94
3) Woodie: Sex Discrimination Charge filed 9/16/94
4) Fritz: Sex Discrimination Charge filed 6/20/95
Other Pending and Threatened Causes of Action:
Attached hereto as Addendum 2 to Schedule 7(k) is a summary of certain
pending and threatened litigation actions. In addition, Sellers are aware
of the following additional causes of action:
1) GMH vs. Jerry Blaxton; relating to an alleged liability of
approximately $10,000 for towing services; Blaxton has defaulted in this
matter
2) GMH vs. Cladwood Division of Smurfitt Newsprint Corporation
("Cladwood"), Product liability claim to recover amounts paid out by GMH
to settle warranty claims by homeowners resulting from defective composite
siding manufactured by Cladwood
3) John R. Edge and Patricia A. Edge vs. General Manufactured Housing,
Inc., et al.: warranty claim suit charging fraud and requesting damages
"in excess of $10,000" filed in Ware County Superior Court on November 30,
1995
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
First Amendment to Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(I) "Licenses and Permits"
1. Complete and accurate list and brief description of all governmental
licenses and permits:
Alabama Manufacturer License No. 4521 (expires 12/31/95) and copy of
renewal application (no date)
Florida DMV License as Manufacturer of Mobile Homes, #MH10075, effective
10/1/95 for 95-96 license year, and Renewal Certificate through 9/30/95 of
Bankers Insurance Company Bond No. 33-35881 (originally dated 10/1/93)
Florida DMV License as Manufacturer of Recreational Vehicles, #MR10150,
effective 10/1/95 for 95-96 license year, and Renewal Certificate through
9/30/95 of Bankers Insurance Company Bond No. 33-35880 (originally dated
10/1/93)
Georgia Manufactured Homes Manufacturer/Dealer License No. 20913 (expires
12/31/95)
Kentucky Certificate of Acceptability No. 95-MM-10-59 (license to
manufacture, import or sell mobile homes to Kentucky Dealers; expires
12/31/95)
Louisiana Manufacturer License No. 95-M00086 (expires 12/31/95)
Mississippi Privilege License for Manufacturer No. 95-M0157 (expires
6/30/96)
North Carolina Manufacturer's License No. 001113 (expires 6/30/96),
Continuation Certificate through 6/30/96 of Selective Insurance Bond No.
B73551
License Bonds, Manufacturer's Representative, to South Carolina
Manufactured Housing Board, through Bankers Insurance Company (6/30/95 -
6/30/96): #33-19363, Michael O'Gorman; #33-19364, Tom Howard Moss; #33-
35895, Braxton Guill; and #33-19365, Bruce C. Hallock
South Carolina Manufacturer License No. 6255 (expires 6/30/96) and License
Bond #33-19361 to South Carolina Manufactured Housing Board through Bankers
Insurance Company (6/30/95 - 6/30/96)
South Carolina Manufacturer License No. 10410 (expires 6/30/96) originally
issued to Lamar Housing, L.L.C.; Bankers Insurance Company Bond No. 33-
34875 (9/8/95 through 6/30/96) naming Lamar Housing, L.L.C. as principal
Tennessee Factory-Manufactured Structures License No. 4500 (expires
12/31/95), Continuation Certificate through 12/31/95 of USF&G Bond No. 02-
0130-11677-93-6 and Cincinnati Insurance Co. Bond No. 33-35881 effective
12/31/95
Virginia Manufacturer License #M-1995-00108 (expires 4/6/96)
HUD certification as HUD-approved manufacturer.
II. Governmental licenses or permits required or to be required in connection
with or as a result of the Transaction:
See response to Part III below.
III. Licenses and permits which may NOT be transferred to the Buyer as
contemplated by the Agreement:
The foregoing licenses may not be transferable, but, to Sellers' knowledge,
new licenses should be obtainable by Buyer without undue burden or expense.
However, if such licenses are not maintained, sales of the Company's
products might be interrupted in the affected jurisdictions.
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
First Amendment to Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(n) "No Material Adverse Change"
I. Material adverse changes in the condition of any of the Acquired Entities,
financial or otherwise:
Oakwood Mobile Homes gave notice on or about August 25, 1995, that they
will suspend purchases from GMH. The Buyer was promptly notified of this
development (i.e., prior to signing or executing this Agreement). In its
notification, Oakwood characterized this situation as temporary; however,
no assurances can be given that such suspension may not be permanent.
During the first six months of 1995, sales to Oakwood accounted for
approximately 10% of GMH's total revenues during that period.
II. Other facts, conditions, proposals or circumstances relating to the
business and which materially adversely affects or will in the future
affect the same:
None
III. Employee Controversies:
The following EEOC Notices of Discrimination issued by the Savannah Local
Office of the Equal Employment Opportunity Commission:
1) Reynolds: Sex Discrimination Charge filed 9/24/93
2) Rollins: Sex Discrimination Charge filed 6/10/94
3) Woodie: Sex Discrimination Charge filed 9/16/94
4) Fritz: Sex Discrimination Charge filed 6/20/95
The Georgia State Board of Workers' Compensation awarded former-employee
Clifford Steverson the sum of $225.00 per week commencing July 16, 1993,
and continuing until further award, plus medical expenses and attorney
fees, in its opinion dated August 31, 1994, relating to an accident
occurring on 1/9/92.
Attached to the Stock Purchase Agreement dated 10/10/95 as "Addendum to
Schedule 7(n)" is a schedule of Workers' Compensation Insurance claims made
or which might be made by employees of the Acquired Entities.
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
First Amendment to Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(p) "Insurance"
1. List of all insurance policies of each of the Acquired Entities and a
description of the terms thereof:
Commercial General Liability Insurance Policy; Bankers Insurance Co. #GLA
10 S100104-00 (3/31/95 - 3/31/96); covering all plants plus M/H Retail,
Inc., and products liability
Commercial Property Insurance Policy; Pennsylvania Lumbermens #10-G-012-03-
95 (3/31/95 - 3/31/96) covering 2255 Industrial Drive (Plant 1); Airport
Hangar; 2875 Fulford Rd (Plant 4); all inventory (raw materials and
finished goods) and machinery and equipment at all locations
Commercial Property Insurance Policy; Georgia Casualty & Surety Company
#CMP0003174 (6/17/95 - 6/17/96) covering 3233 Industrial Blvd. (Plant 2)
Commercial Property Insurance Policy; Georgia Casualty & Surety Company #CF
3260 (11/17/94 - 11/17/95) covering 2170 Industrial Blvd., Waycross, GA
(Plant 3)
Aircraft Insurance Policy; Insurance Company of North America Policy
#S00293714 on 1979 King Air 200, N-561SS (9/17/94 - 9/17/95)
Workers' Comp/Employer's Liability Ins. Policy: Georgia Casualty & Surety
Company #WC 922721 (4/6/95 - 4/6/96)
Auto Insurance Policy: Georgia Casualty & Surety Company #BA 922723
(4/6/95-4/6/96) covering all trucks and cars
Time Insurance Company Policy Number 02220903 insuring the life of Sam
Scott in the face amount of $1,000,000 is owned by Mrs. Sherry Scott but
GMH pays premiums and is entitled to reimbursement therefor on policy
payout under a "split-dollar" arrangement; net benefits accrue to insured's
beneficiaries
Lamar Housing LLC; Commercial Property Coverage; Pennsylvania Lumbermens
Mutual Insurance Company #39-L-053-01-95; effective 8/17/95
Lamar Housing LLC; Workers Compensation and Employers Liability Policy;
Cincinnati Insurance Company #6C28-UB-716V318-1-95; effective 9/1/95-1/1/96
Lamar Housing LLC; General Liability Insurance; Bankers Insurance #GLA 39
S100128-00; expires 1/1/96
See also "Addendum to Schedule 7(p)" (List of additional insurance
policies) attached to the Stock Purchase Agreement dated 10/10/95
II. Claims (other than Workers' Compensation claims) in excess of $50,000 each
or $100,000 in the aggregate made or pending on the insurance policies
listed in I. above since January 1, 1992:
None
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
First Amendment to Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(s) "Company Actions"
I. Capital stock or other corporate securities issued since the Audit Date:
None
II. Amounts borrowed and liabilities incurred (other than in the ordinary
course of business) since the Audit Date:
Deed to Secure Debt (second mortgage) dated 3/2/95, encumbering Plant 1
property to The Patterson Bank, securing Note in the maximum amount of
$209,000, for payment of a declining Letter of Credit in favor of Tim-Bar
Corporation (declines at the rate of $9,000 per month), as Security Deposit
under Lease between Hi-Tech and Tim-Bar for Plant 4
III. Liens, encumbrances, obligations, and liabilities discharged, satisfied, or
paid (other than current liabilities shown on the balance sheet as of the
Audit Date and current liabilities incurred in the ordinary course of
business) since the Audit Date other than in compliance of the covenant to
discharge all funded indebtedness:
None
IV. Payments or distributions to stockholders and purchases or redemptions of
shares of capital stock since the Audit Date:
After 12/31/94, advances for the first three calendar quarters of 1995 were
made to each Seller by GMH in the total amount of $300,000 each, against
1995 income taxes. It is anticipated that additional advances of $100,000
each will be made for each calendar quarter thereafter until the closing
date. These amounts are reflected on the books as loans but will be
recharacterized as distributions at year-end.
V. Stock splits and reclassifications since the Audit Date:
None
VI. Assets mortgaged, pledged or subjected to lien, charge or other encumbrance
(other than mechanics' liens or tax liens not yet due and payable) since
the Audit Date:
Deed to Secure Debt (second mortgage) dated 3/2/95, encumbering Industrial
Blvd. property to The Patterson Bank, securing Note in the maximum amount
of $209,000, for payment of a declining Letter of Credit in favor of Tim-
Bar Corporation (declining at the rate of $9,000 per month) as Security
Deposit under Lease between Hi-Tech and Tim-Bar for Plant 4
VII. Tangible assets sold, assigned or transferred and debts and obligations
cancelled (except in the ordinary course of business) since the Audit Date:
In 1995, GMH's lease of a 1993 Jaguar automobile provided to Sam Scott
expired, whereupon Mr. Scott personally exercised the option (included in
such lease) to purchase such automobile.
GMH recently has transferred the following personal property to Sellers:
Persona {Computer (located in Sam Scott's Waycross residence) and fax
machine (located in Sam Scott's Montana residence) to Sam Scott; fax
machine and printer (located in Kelly Herold's California residence) to
Kelly Herold.
VIII. Business Property Rights sold, assigned or transferred since the Audit
Date:
None
IX. Extraordinary losses suffered and rights of substantial value waived since
the Audit Date:
None
X. Changes in officer compensation (except in the ordinary course of business
and consistent with past practice) since the Audit Date:
None
XI. Investments made in, money advanced to, and obligations
guaranteed for any third person or entity since the Audit
Date:
None
XII. Transactions entered into (other than in the ordinary course of business)
since the Audit Date:
Lamar Housing, L.L.C. was merged into General Manufactured Housing, Inc.
on December 15, 1995
Sublease Agreement dated as of 10/10/95 between Hi-Tech Properties, Inc.
and General Manufactured Housing, Inc. for unimproved real property
adjacent to Plant 4, used for storage of finished goods
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
First Amendment to Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Schedule 7(t) "Related Party Transactions"
Current transactions with the Sellers or their Affiliates or any Affiliate of
any Acquired Entity (including purchases, acquisitions, leases, transfers or any
other transaction or agreement):
SEE NOTE 5 TO THE 1994 AUDITED FINANCIAL STATEMENT:
After 12/31/94, advances for the first three calendar quarters of 1995 were made
to each Seller by GMH in the total amount of $300,000 each, against 1995 income
taxes. It is anticipated that additional advances of $100,000 each will be made
for each calendar quarter thereafter until the closing date. These amounts are
reflected on the books as loans but will be recharacterized as distributions at
year-end.
Sublease Agreement dated 7/1/95 between HI-TECH PROPERTIES, INC. as sublessor
and GMH for real property referred to as Plant 4.
Sublease Agreement dated as of 10/10/95 between HI-TECH PROPERTIES, INC. as
sublessor and GMH for vacant lot adjacent to Plant 4.
Patterson Bank issued Declining Letter of Credit dated 3/2/95, in the maximum
amount of $209,000, in favor of Tim-Bar Corporation in the name of GMH and
secured by a GMH Deed to Secure Debt encumbering GMH real property, as the
Security Deposit under the primary Lease for Plant 4 between Hi-Tech Properties,
Inc. and Tim-Bar Corporation
In 1995, GMH's lease of a 1993 Jaguar automobile provided to Sam Scott expired,
whereupon Mr. Scott personally exercised the option (included in such lease) to
purchase such automobile.
The grounds of Sam Scott's personal residence are maintained by the lawn service
contractor engaged by GMH. Mr. Scott pays 50% of the total cost of lawn services
provided under such contract.
M/H Retail, Inc. engages in regular business transactions with GMH with respect
to warranty service and sales of surplus materials.
GMH recently has transferred the following personal property to Sellers:
Personal Computer (located in Sam Scott's Waycross residence) and fax machine
(located in Sam Scott's Montana residence) to Sam Scott; fax machine and printer
(located in Kelly Herold's California residence) to Kelly Herold.
Sublease Agreement dated as of 10/10/95 between Hi-Tech Properties, Inc. and
General Manufactured Housing, Inc. for unimproved real property adjacent to
Plant 4, used for storage of finished goods
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
First Amendment to Stock Purchase Agreement
among Kelly Scott Herold, as Trustee, et al.,
General Manufactured Housing, Inc.
and GMH Acquisition Corp.
Revised Addendum 2 to Schedule 7(e) - List of all motor vehicles
1. 1974. . . Ford . . . (Trash Truck). . . . . . . S/N 83301
2. 1985. . . Ford . . . (Trash Truck). . . . . . . S/N 08760
3. 1988. . . Dodge. . . (Parts Truck). . . . . . . S/N 07299
4. 1984. . . Chevrolet. (Maintenance). . . . . . . S/N 85260
5. 1984. . . Ford . . . (Trash Truck). . . . . . . S/N 28368
6. 1980. . . Ford . . . (Frame Shop) . . . . . . . S/N G0484
7. 1991. . . Lincoln. . (Visiting Dealers) . . . . S/N 50884
8. 1995. . . Dodge. . . (Pickup Materials Truck) . S/N 03513
9. 1984. . . GMC. . . . (FOR SALE) . . . . . . . . S/N 46207
10. 1990. . . Dodge Van. (Medical). . . . . . . . . S/N 60418
11. 1983. . . Ford . . . (Trash Truck). . . . . . . S/N 47331
12. 1987. . . Ford . . . (Trash Truck). . . . . . . S/N 02742
<PAGE>
PENDING STATE CASES
November 27, 1995
Alabama
SN # 3137 Joyce Spivey Salem Crystal Valley
State Inspection at 10/18 - work order to
Richard Lott 11/2
Wants settlement $450 to Kool Seal room &
for siding that can not be matched
SN # 2050 Leslie Morse Five Points Steve Ward
Asking for State Inspection - Set-up -
Attorney involved
SN # 6402 Killingsworth Andalusia Southland
Cosmetic; set-up; not blocked correctly -
asking for State Inspection
Florida
SN # 3969 Terry Ponder Tampa Godwins
State ReInspection 10/20 - Don Miller
attended. HOLD until dealer completes
work - excessive moisture. Sagging
ceiling/soft spot
SN # 1526 Nancy Barnett Howey in Hills Ed's
Factory Showcase
State ReInspection 10/26 - Don Miller
attended
Wants new roof and settlement - Deflections
in roof - State needs letter that within
tolerance. Called HWC & Sunbelt
SN # 5057 Lisa Harris Lithia Quality-Plant
City
State Inspection 9/27 - not notified - work
order issued 10/4 - Al D
Gap at base cabinet & front door - Major
set-up problems
HOLD until dealer completes work
SN # 3687 Yarbrough Lake City K & E
Customer took down wall - Roof sagging
Waiting for State Inspection
SN # 3703 Famous Brown Live Oak K & E
State Inspection 11/8 - Correct & replace
data plate
Remainder set-up
SN # 4961 Baxter Live Oak Summerset
State Inspection 12/7 at 10 AM - Dwaine has
work order
Floors; walls - waiting on counter top
? attending
<PAGE>
Georgia
SN # 6343 Randall Gary Jefferson Carefree
Work order issued 9/25 - finished 10/2 -
return issued 10/13 JS
SN # 5486 John Braswell Bethelem Carefree
State Inspection 10/17 - Rodney Wallace -
work order 11/14
SN # 1082 Rhonda Roberson Douglas Hilliard
State Inspection 11/15 - Bob Merritt
attended - Floors - electrical
SN # 3763 Dahlberg Aeworth Atl. MH Brokers
State Inspection 12/7 at 10 AM - may be
set-up - bowed walls
Customer is problem - difficult
? attending
SN # 6211 Ramos Americus Housing Brokers
State Inspection 11/13 - Gary Guy - Furnace
problems - Coleman
SN # 4163 Hood Buford Great American
State Inspection 11/16 - Rodney Wallace
attended - floors; walls
SN # 1390 Wade Sylvania Jones & Veal
State Inspection 11/16 - Ceiling cracks -
sandy soil- SN # 7487 Hall Dublin Country Classic
State Inspection 11/28 at 11 AM - Major
set-up problems
Bettie attending Customer wants to rescind
sale
SN # 6452 Wilbanks Tiger Bob's Family
Housing Inspection 11/30 at 11 AM - set-up;
cosmetic
Rodney Wallace attending
North
Carolina
SN # 1421 George Sports Lillington Harry Reed
State ReInspection 11/2 at 8 AM - RC
attended. Info 11/3
SN # 4087 Edward Davidson Kelly Homes
10/16 Hazel thinks hearing best way to
close
HEARING 10/28 at 9AM in Raleigh - Drew
attending
SN # 6754 Stephen Nadeau Conway Oakwood -
Conway
State Inspection 10/13 - Pat Yates
attended. Work order 10/18
Minor; most against dealer. HOLD per
customer until 11/30 - Pat
SN # 3627 Mims/Ackerman Andrews Howard Homes
State Inspection 10/26 - Pat Yates attended
Mostly set-up - Cosmetic - Door leaks - Pat
has work order
SN # 3205 Herndon Cope Edisto Housing
State Inspection 11/6 - Pat Yates attended
Minor - mostly cosmetic - Pat has work
order
Kitchen tile/doors - Danube to replace
carpet - also set-up
Jerry Metts has work order
SN # 3510 James Hartsville Southern
Lifestyle
State Inspection 11/9 - Pay Yates attended
Tennessee
SN # 6276 Burke Full Branch Capitol Homes
Mostly set-up - Asking for State Inspection
SN # 5495 Davis Speedwell Oakwood
Ceiling cracks, carpet, trim, set-up -
Kevin Hall has work order
<PAGE>
NO. 15 - Status of litigation actions; pending and threatened.
1. Jamie R. Alexander and Michell Norman Alexander vs. General Manufactured
Housing, Inc., Meadows Industries, Inc., d/b/a Meadows Mobile Homes, and
Green Tree Financial Corporation United States District Court, Southern
District of Mississippi, Southern Division Civil Action No. 1:95cv112BrB
Plaintiffs filed suit January 25, 1994 seeking damages against General and other
defendants in the amount of $50,000. The complaint arises primarily from
warranty claims for the purchase of a 1992 General House. General is being
defended by the Law Firm of Byrd & Wiser in Biloxi, Mississippi. Management is
contesting this matter vigorously. This case is set for trial on April 16, 1996.
The Law Firm of Kopp and Conner, P.C. is not directly involved in the defense of
this cause of action.
2. Janet Lehman and Gabriel Lehman vs. Quest Mobile Homes, Inc., General
Manufactured Housing, Inc., Cathy Ward, Individually and M.M. Pickett,
Individually. Circuit Court of Forrest County, Mississippi Civil Action No.
6-94-4279
This cause of action is being defended by Byrd and Wiser in Biloxi, Mississippi.
This is also a warranty type claim and General intends to contest it vigorously.
This cause of action is still in the discovery period.
3. David and Karen S. Barfield vs. Southern Lifestyle Homes, Inc. and General
Manufactured Homes, Inc. Court of Common Pleas, Florence, South Carolina
Civil Action No. #95-CP-21-735
This cause of is also a warranty type claim and General intends to contest it
vigorously. This cause of action is being defended by Stanton, Jones & Smith in
Hartsville, South Carolina. This cause of action is in the discovery period.
4. Barry Murray and Sandra Murray vs. General Manufactured Housing, Inc. Ware
Superior Court Civil Action File No. 95V-794
This cause of action is a personal injury lawsuit and loss of consortium action.
This cause of action is being defended by Kenny Carswell of Jesup, Georgia. This
cause of action is in the discovery period.
5. Greg A. Hall vs. General Manufactured Housing, Inc., Southern Lifestyle
Homes, Inc., and Green Tree Financial Corporation Court of Common Plea,
Second Judicial Circuit of South Carolina Civil Action File No.
95-CP-02-732
This cause of action is a warranty type claim. This cause of action is being
defended by Fox & Verenes of Aiken, South Carolina. This cause of action is in
the discovery period.
THREATENED LITIGATION
6. Thelma Loney Grant - slip and fall accident; date of accident 1/4/95;
defect in mobile home caused bathroom to flood; claimant slipped and fell. Ms.
Grant is represented by an attorney, Edward S. Ervin, IV in Sumter, South
Carolina
7. Vicki A. Curtis; date of accident 7/16/95; personal injury/negligence
claim; debris from mobile home repairs left in yard; claimant fell over debris
and broke her leg; medicals to date totalling $1,402.15. Ms. Curtis is
represented by an attorney, William S. Eubanks in Black Mountain, North
Carolina.
8. George and Rose Roberson; mobile home destroyed by fire, the insurer
contends that the mobile home had electrical defects which caused the fire. This
case has been turned over to General's insurance carrier.
<PAGE>
EXHIBIT 4.13
GENERAL MANUFACTURED HOUSING, INC.
AND
GMH HOLDINGS, INC.
SECURITIES PURCHASE AGREEMENT
December 21, 1995
<PAGE>
TABLE OF CONTENTS
SECTION 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
AUTHORIZATION AND SALE OF THE SECURITIES . . . . . . . . . . . . . . . . . . 1
1.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Sale of the Securities. . . . . . . . . . . . . . . . . . . . 2
SECTION 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
CLOSING DATE; DELIVERY . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Delivery. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
REPRESENTATIONS AND WARRANTIES OF THE GMH COMPANIES. . . . . . . . . . . . . 3
3.1 Organization and Qualification. . . . . . . . . . . . . . . . 3
3.2 Certificate of Incorporation and Bylaws . . . . . . . . . . . 3
3.3 Corporate Power . . . . . . . . . . . . . . . . . . . . . . . 3
3.4 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . 4
3.5 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . 4
3.6 Authorization . . . . . . . . . . . . . . . . . . . . . . . . 5
3.7 Financial Statements. . . . . . . . . . . . . . . . . . . . . 6
3.8 Title to Properties and Assets. . . . . . . . . . . . . . . . 7
3.9 Related-Party Transactions. . . . . . . . . . . . . . . . . . 8
3.10 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
<PAGE>
3.11 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.12 Intellectual Property . . . . . . . . . . . . . . . . . . . . 8
3.13 Material Contracts. . . . . . . . . . . . . . . . . . . . . . 9
3.14 Compliance with Other Instruments . . . . . . . . . . . . . . 10
3.15 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.16 Registration Rights . . . . . . . . . . . . . . . . . . . . . 11
3.17 Governmental Consent. . . . . . . . . . . . . . . . . . . . . 11
3.18 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.19 Tax Returns, Payments, and Elections. . . . . . . . . . . . . 12
3.20 Environmental and Safety Laws . . . . . . . . . . . . . . . . 13
3.21 Brokers or Finders. . . . . . . . . . . . . . . . . . . . . . 14
3.22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.23 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.24 Federal Reserve Regulations . . . . . . . . . . . . . . . . . 15
3.25 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.26 Securities Act. . . . . . . . . . . . . . . . . . . . . . . . 16
3.27 Insurance.. . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.28 Issuance Taxes. . . . . . . . . . . . . . . . . . . . . . . . 16
3.29 Other Representations . . . . . . . . . . . . . . . . . . . . 16
3.30 Small Business Concern. . . . . . . . . . . . . . . . . . . . 16
3.31 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 16
3.32 Acquisition and Financing . . . . . . . . . . . . . . . . . . 17
SECTION 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS . . . . . . . . . . . . . . 17
4.1 Experience. . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.2 Investment. . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.3 Rule 144. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.4 No Public Market. . . . . . . . . . . . . . . . . . . . . . . 18
4.5 Access to Data. . . . . . . . . . . . . . . . . . . . . . . . 18
4.6 Authorization . . . . . . . . . . . . . . . . . . . . . . . . 18
4.7 Brokers or Finders. . . . . . . . . . . . . . . . . . . . . . 18
4.8 Accredited Investor . . . . . . . . . . . . . . . . . . . . . 18
SECTION 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
CONDITIONS TO CLOSING OF THE PURCHASERS. . . . . . . . . . . . . . . . . . . 19
5.1 Representations and Warranties. . . . . . . . . . . . . . . . 19
5.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.3 Compliance Certificate. . . . . . . . . . . . . . . . . . . . 19
5.4 Blue Sky Law. . . . . . . . . . . . . . . . . . . . . . . . . 19
5.5 Restated Certificates . . . . . . . . . . . . . . . . . . . . 19
<PAGE>
5.6 Small Business Concern Documents. . . . . . . . . . . . . . . 19
5.7 Proceedings and Documents . . . . . . . . . . . . . . . . . . 19
5.8 Board of Directors. . . . . . . . . . . . . . . . . . . . . . 20
5.9 Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . 20
5.10 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . 20
5.11 Stockholders Agreement. . . . . . . . . . . . . . . . . . . . 20
5.12 Investors' Rights Agreement.. . . . . . . . . . . . . . . . . 20
5.13 SIHI Fee Agreement. . . . . . . . . . . . . . . . . . . . . 20
5.14 Minimum Investment. . . . . . . . . . . . . . . . . . . . . . 20
5.15 Reliance Certificates . . . . . . . . . . . . . . . . . . . . 21
5.16 Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.17 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.18 Legal and Investigative Fees . . . . . . . . . . . . . . 21
5.19 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . 21
5.20 No Adverse Change . . . . . . . . . . . . . . . . . . . . . . 22
5.21 Related Party Transactions. . . . . . . . . . . . . . . . . . 22
5.22 Amendment to Purchase Agreement . . . . . . . . . . . . . . . 22
5.23 Subordination Agreement . . . . . . . . . . . . . . . . . . . 22
5.24 Satisfaction of Obligation. . . . . . . . . . . . . . . . . . 22
SECTION 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
CONDITIONS TO CLOSING OF THE COMPANY . . . . . . . . . . . . . . . . . . . . 22
6.1 Representations and Warranties. . . . . . . . . . . . . . . . 22
6.2 Blue Sky Law. . . . . . . . . . . . . . . . . . . . . . . . . 23
6.3 Minimum Investment. . . . . . . . . . . . . . . . . . . . . . 23
SECTION 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
COVENANTS OF THE GMH COMPANIES . . . . . . . . . . . . . . . . . . . . . . . 23
7.1 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 23
7.2 Payment of Principal and Interest . . . . . . . . . . . . . . 23
7.3 Prompt Payment of Taxes . . . . . . . . . . . . . . . . . . . 23
7.4 Maintenance of Properties and Leases. . . . . . . . . . . . . 24
7.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.6 Accounts and Records. . . . . . . . . . . . . . . . . . . . . 24
7.7 Compliance with Requirements of Governmental Authorities. . . 24
7.8 Maintenance of Corporate Existence, etc . . . . . . . . . . . 24
7.9 Full Time Employment. . . . . . . . . . . . . . . . . . . . . 25
7.10 Senior Debt . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.11 Restrictions on Dividends and Distributions . . . . . . . . . 25
<PAGE>
7.12 Certain Restrictions. . . . . . . . . . . . . . . . . . . . . 25
7.13 Transactions with Affiliates. . . . . . . . . . . . . . . . . 26
7.14 Limitation on Indebtedness. . . . . . . . . . . . . . . . . . 26
SECTION 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. . . . . . . . . 30
8.1 Survival of Representations and Warranties. . . . . . . . . . 30
8.2 Indemnification by the Company. . . . . . . . . . . . . . . . 30
8.3 Indemnification by the Purchasers . . . . . . . . . . . . . . 30
SECTION 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.1 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 31
9.2 Successors and Assigns; Third Party Beneficiaries . . . . . . 31
9.3 Entire Agreement; Amendment and Waiver. . . . . . . . . . . . 31
9.4 Notices, etc. . . . . . . . . . . . . . . . . . . . . . . . . 31
9.5 Delays or Omissions . . . . . . . . . . . . . . . . . . . . . 32
9.6 References. . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.7 Severability. . . . . . . . . . . . . . . . . . . . . . . . . 32
9.8 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . 32
9.9 Pronouns. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.10 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 32
9.11 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.12 Certain Definitions . . . . . . . . . . . . . . . . . . . . . 33
SCHEDULE A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
EXHIBIT A - Form of Restated Certificate
EXHIBIT B - Form of Junior Note
EXHIBIT C - Disclosure Schedule
EXHIBIT D - Form of Investors' Rights Agreement
EXHIBIT E - Form of Stockholders Agreement
EXHIBIT F - Form of Officer's Certificate
EXHIBIT G - Form of Opinion of Company's Counsel
EXHIBIT H - Sam Scott Reliance Certificate
EXHIBIT I - Gary Brost Reliance Certificate
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
AND
GMH HOLDINGS, INC.
SECURITIES PURCHASE AGREEMENT
This agreement (this "Agreement") is made effective as of December 21,
1995, among GMH HOLDINGS, INC., a Delaware corporation (the "Company"), GENERAL
MANUFACTURED HOUSING, INC., a Georgia corporation and a successor by merger to
GMH Acquisition Corp., a Delaware corporation ("GMH"), and each of the entities
set forth on the "Schedule of Purchasers" attached hereto as Schedule A (the
"Purchasers").
GMH Acquisition Corp., a Delaware corporation ("Acquisition Co."), has
entered into a Stock Purchase Agreement, dated as of October 10, 1995, as
amended (the "Stock Purchase Agreement"), with the Sellers (as defined therein),
providing for the purchase of all of the issued and outstanding capital stock of
General Manufactured Housing, Inc., a Georgia corporation ("Pre-Merger GMH").
Immediately prior to such purchase, Lamar Housing LLC, a Georgia limited
liability company ("Lamar" and, together with Pre-Merger GMH, the "Acquired
Entities") will be merged with and into Pre-Merger GMH. Concurrently with the
consummation of the transactions contemplated by this Agreement, (i) Acquisition
Co. will acquire such stock of Pre-Merger GMH and (ii) Acquisition Co. will be
merged (the "Merger") into Pre-Merger GMH with the effect that GMH shall become
a wholly-owned subsidiary of the Company as the surviving entity. The Company
together with GMH are sometimes collectively referred to as the "GMH Companies".
The transactions described above, together with the related
transactions to be consummated on the Closing Date, are collectively sometimes
referred to herein as the "Acquisition".
SECTION 1
AUTHORIZATION AND SALE OF THE SECURITIES
1.1 Authorization. The Company will have authorized before the
Closing (as defined below) the sale and issuance to the Purchasers of (a)
8,000,000 shares of Series A Redeemable Preferred Stock, par value $0.001 per
share (the "Series A Shares"), (b) 750,000 shares of Series B Convertible
Preferred Stock, par value $0.001 per share (the "Series B Shares")
(representing the right to convert into shares of Class C Common Stock
representing approximately 17% of the Common Stock of the Company on a fully
diluted basis), and (c) 1,218,750 shares (the "Class A Common Shares") of the
Company's Class A Common Stock, par value $0.001 per share ("Class A Common
Stock") (representing approximately 28% of the Common Stock of the Company on a
fully-diluted basis). GMH will have authorized before the Closing the sale and
issuance of GMH's Junior Subordinated Notes due June 30, 2003 in the total
aggregate principal amount of $5,000,000.00 (the "Junior Notes"). The Junior
Notes shall be dated the Closing Date (as defined below) and shall be in the
form attached as Exhibit B to this Agreement. The term Securities means
collectively the Series A Shares, the Series B Shares and the Class A Common
Shares. The Securities have the rights, preferences, privileges, and
restrictions as set forth in the Company's Restated Certificate of Incorporation
(the "Restated Certificate") attached hereto as Exhibit A.
1.2 Sale of the Securities and Junior Notes. Subject to the terms
and conditions hereof, (a) the Company shall sell and issue to each Purchaser,
and each Purchaser shall purchase from the Company, severally
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but not jointly, the Securities specified opposite such Purchaser's name on the
Schedule of Purchasers, at the purchase price set forth on such schedule and (b)
GMH shall sell and issue to each Purchaser, and each Purchaser shall purchase
from GMH, severally but not jointly, the Junior Notes in such amounts specified
opposite such Purchaser's name on the Schedule of Purchasers, at the purchase
price set forth on such schedule. The Company's and GMH's agreement with each of
the Purchasers is a separate agreement, and the sale of Securities and the
Junior Notes to each of the Purchasers is a separate sale.
SECTION 2
CLOSING DATE; DELIVERY
2.1 Closing. The closing of the purchase and sale of the Securities
and the Junior Notes hereunder (the "Closing") shall take place at the offices
of Nixon, Hargrave, Devans & Doyle LLP at 437 Madison Avenue, New York, New York
on December 20, 1995, or at such other place and time upon which the Company and
the Purchasers shall agree, as evidenced by the completion of the transactions
contemplated hereby. The date of Closing is referred to as the "Closing Date".
2.2 Delivery. At the Closing, (a) the Company shall deliver to each
Purchaser the appropriate certificate(s) representing the Securities purchased
by such Purchaser at the Closing and (b) GMH shall deliver to each Purchaser a
Junior Note representing the Junior Notes purchased by such Purchaser at the
Closing, which shall be delivered against payment of the purchase price therefor
in the amount specified in the Schedule of Purchasers, by wire transfer.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE GMH COMPANIES
The Company and GMH hereby jointly and severally represent and warrant
(which representations and warranties are deemed made immediately following the
consummation of the Acquisition and the Merger) to each Purchaser that, except
as set forth on the Disclosure Schedule attached hereto as Exhibit C,
specifically identifying the relevant subparagraph(s) hereof, which Disclosure
Schedule shall be deemed to be part of the representations and warranties as if
made hereunder:
3.1 Organization and Qualification. (a) The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has the requisite corporate power and authority to own,
lease and operate its assets, properties and business and to carry on its
business as it is now being conducted or contemplated to be conducted, including
such business as the Company will undertake as a result of the Acquisition.
(b) GMH is a corporation duly organized, validly existing and in
good standing under the laws of the State of Georgia, and has the requisite
corporate power and authority to own, lease and operate its assets, properties
and business and to carry on its business as it is now being conducted or
contemplated to be conducted, including such business as GMH will undertake as a
result of the Acquisition.
(c) The Company, GMH and each of their respective Subsidiaries
are duly qualified as a foreign corporation to transact business, and is in good
standing, in each jurisdiction where the character of its properties, owned or
leased, or the nature of its activities makes such qualification necessary,
except where the failure to be so qualified, individually or in the aggregate,
would not have a material adverse effect on the business, assets, properties,
operations, results of operations, condition (financial or otherwise) or
prospects of the Company, GMH and their Subsidiaries taken as a whole (a
"Material Adverse Effect").
3.2 Certificate of Incorporation and Bylaws. The Company has
delivered to the Purchasers true, correct, and complete copies of the Company's
certificate of incorporation, as amended through the date hereof, and the
Company's bylaws, as amended through the date hereof. GMH has delivered to the
Purchasers true, correct, and complete copies of GMH's certificate of
incorporation, as amended through the date hereof, and GMH's bylaws, as amended
through the date hereof.
3.3 Corporate Power. Each of the Company and GMH has all
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requisite corporate power and authority to execute and deliver this Agreement
and the Ancillary Agreements (as defined in Section 3.6 below) to which it is a
party, to sell and issue the Securities hereunder, in the case of the Company,
and to sell and issue the Junior Notes, in the case of GMH, to consummate the
transactions contemplated by the Stock Purchase Agreement (including the
financings and refinancings contemplated thereby), to consummate the Merger as
contemplated by the Merger Instruments, to make the borrowing evidenced by the
Junior Notes, and to carry out and perform its respective obligations under the
terms of this Agreement, the Stock Purchase Agreement, the Restated Certificate
and each of the Ancillary Agreements to which it is a party.
3.4 Subsidiaries. None of the GMH Companies has any direct or
indirect Subsidiaries other than, in the case of the Company, GMH. Neither of
the GMH Companies, directly or indirectly, owns or controls or has any capital
or other equity interest or participation (or any interest convertible into or
exchangeable or exercisable for, any capital or other equity interest or
participation), nor is either of the GMH Companies, directly or indirectly,
subject to any obligation or requirement to provide funds to or invest in, any
person, except as provided in Section 3.4 of the Disclosure Schedule.
3.5 Capitalization. (a) The authorized capital stock of the Company
will, upon the filing of the Restated Certificate, consist of 17,462,500 shares,
(i) 4,375,000 of which are designated Class A Common Stock, par value $0.001 per
share (the "Class A Common Stock"), (ii) 787,500 of which are designated Class B
Common Stock, par value $0.001 per share (the "Class B Common Stock"), (iii)
2,150,000 shares of which are designated Class C Common Stock, par value $0.001
per share (the "Class C Common Stock; and collectively with the Class A Common
Stock and the Class B Common Stock, the "Common Stock"), and (iv) 10,150,000 of
which are designated Preferred Stock, par value $0.001 per share (the "Preferred
Stock"), 8,000,000 shares of which are designated "Series A Redeemable Preferred
Stock" (the "Series A Shares"), and 2,150,000 shares of which are designated
"Series B Convertible Preferred Stock." All issued and outstanding shares of the
Company's capital stock (including those issued in connection with the
Acquisition) have been duly authorized and validly issued, are fully paid and
nonassessable, and were issued in compliance with all applicable federal and
state securities laws and are owned of record, and to the Company's knowledge
beneficially, by the shareholders in the amounts set forth in Section 3.5 of the
Disclosure Schedule. Section 3.5 of the Disclosure Schedule lists all of the
issued and outstanding capital stock of the Company after giving effect to the
transactions contemplated hereby, including the owners of record of all equity
securities of the Company and the number of shares of each class of stock owned
thereby. The relative rights, privileges, and preferences of the Series A
Shares, Series B Shares and Common Stock will be as stated in the Restated
Certificate. Except as set forth in Section 3.5 of the Disclosure Schedule or in
the Restated Certificate, there are no options, warrants, conversion privileges,
or preemptive or other rights or agreements presently outstanding to purchase or
otherwise acquire any authorized but unissued shares of the capital stock or
other securities of the Company. Except as set forth in Section 3.5 of the
Disclosure Schedule, the Company is not a party or subject to any agreement or
understanding, and, to the Company's knowledge, except as contemplated hereby
and by the Ancillary Agreements, there is no agreement or understanding that
affects or relates to the voting or giving of written consents with respect to
any security, or the voting by a director, of the Company. All outstanding
securities have been sold for cash, other than the warrants issued to the
principals of Larkspur Capital Corporation as described in Section 3.5 of the
Disclosure Schedule. To the Company's knowledge, except as set forth in the
Stockholders Agreement and the Investors' Rights Agreement, no shareholder has
granted options or other rights to purchase any shares of Common Stock or other
equity security of the Company from such shareholder. The Company holds no
shares of its capital stock in its treasury.
(b) As of the Closing Date, the authorized capital stock of GMH
will consist of 100,000 shares of common stock, par value $100.00 per share. On
the Closing Date after giving effect to the Acquisition and the transactions
contemplated by this Agreement, 5,250 shares of such common stock will be issued
and outstanding. As of the Closing Date, GMH will not have outstanding
securities convertible into or exchangeable for any shares of its capital stock,
nor will it have outstanding any rights to subscribe for or to purchase, or any
options for the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to, any shares of its capital stock or any securities
convertible into or exchangeable for any shares of its capital stock.
<PAGE>
(c) As of the Closing Date and after giving effect to the
Acquisition and the other transactions contemplated hereby, except as set forth
in Section 3.5(c) of the Disclosure Schedule, none of the GMH Companies will be
subject to any obligation (contingent or otherwise) to repurchase or otherwise
to acquire or retire any shares of its capital stock. None of the GMH Companies
is required to file, nor has it filed, pursuant to Section 12 or Section 15(d)
of the Exchange Act, a registration statement relating to any class of its
debtor equity securities.
3.6 Authorization. (a) All corporate action on the part of the
Company, its officers, directors, and its stockholders necessary for the
authorization, execution, delivery, and performance of this Agreement, the
Restated Certificate, the Investors' Rights Agreement, to be dated as of the
Closing Date, by and among the Company, the Senior Subordinated Lender, the
Purchasers, and Bulldog Holdings LLC ("Bulldog") and substantially in the form
of Exhibit D hereto (the "Investors' Rights Agreement), the Stockholders
Agreement, to be dated as of the Closing Date, among the Company, the Senior
Subordinated Lender, certain members of management of the Company who are
parties thereto, Bulldog, the Purchasers and certain other parties thereto,
substantially in the form of Exhibit E hereto (the "Stockholders Agreement") and
all other agreements executed by the GMH Companies in connection with the
transactions contemplated hereby (the Investors' Rights Agreement, the Restated
Certificate, the Stockholders Agreement and such other agreements contemplated
hereby to which either of the GMH Companies is a party being sometimes
hereinafter referred to individually as an "Ancillary Agreement" and
collectively as the "Ancillary Agreements") by the Company, the authorization,
sale, issuance and delivery of the Securities at the Closing, the authorization
of the transactions contemplated by the Merger, the authorization of the
financings contemplated by the Senior Loan Agreement and the Senior Subordinated
Loan Instruments, and the performance of all of the Company's obligations
hereunder and thereunder have been taken or will be taken prior to the Closing.
This Agreement and each of the Ancillary Agreements, when executed and delivered
by the Company, will constitute a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to (i)
laws of general application relating to bankruptcy, insolvency, and the relief
of debtors, and (ii) rules of law governing specific performance, injunctive
relief, or other equitable remedies.
(b) All corporate action on the part of GMH, its officers,
directors, and its stockholders necessary for the authorization, execution,
delivery, and performance of this Agreement, the Junior Notes, the Stock
Purchase Agreement, the Merger Instruments, the Senior Loan Agreement, the
Senior Subordinated Loan Instruments, and the Ancillary Agreements to which GMH
is a party, by GMH, the authorization, sale, issuance and delivery of the Junior
Notes at the Closing, the authorization of the borrowing evidenced by the Junior
Notes, the authorization of the transactions contemplated by the Stock Purchase
Agreement, the authorization of the transactions contemplated by the Merger, the
authorization of the financings contemplated by the Senior Loan Agreement and
the Senior Subordinated Loan Instruments, and the performance of all of GMH's
obligations hereunder and thereunder have been taken or will be taken prior to
the Closing. This Agreement and each of the Ancillary Agreements to which GMH is
a party, when executed and delivered by GMH, will constitute a valid and legally
binding obligation of GMH, enforceable against GMH in accordance with its terms,
subject to (i) laws of general application relating to bankruptcy, insolvency,
and the relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief, or other equitable remedies.
(c) The Series A Shares, Series B Shares, and the Class A Common
Shares, when issued in accordance with this Agreement, will be duly authorized,
validly issued, fully paid, and nonassessable, and will have the rights,
preferences, privileges, and restrictions as set forth in the Restated
Certificate. The Series A Shares, the Series B Shares and the Class A Common
Shares, when issued, will be free of any liens, claims, encumbrances or
restrictions on transfer, except as set forth in the Stockholders Agreement, the
Investors' Rights Agreement and the Restated Certificate.
3.7 Financial Statements. (a) The audited balance sheets of Pre-
Merger GMH as at December 31, 1994, and December 31, 1993, and the related
statements of income and retained earnings, and statements of cash flows for the
two years ended December 31, 1994, including the notes thereto, reported on by
Arthur Andersen LLP, independent certified public accountants ("Arthur
Andersen"), which have been delivered to the
<PAGE>
Purchaser, fairly present the financial position of Pre-Merger GMH as at such
dates and the results of operations and retained earnings and the changes in
cash flows of Pre-Merger GMH for the years then ended in accordance with
generally accepted accounting principles applied on a consistent basis and show
all material liabilities, absolute or contingent, of Pre-Merger GMH as at such
date. The foregoing financial statements as at December 31, 1994, and for the
twelve-month period then ended are hereinafter referred to collectively, as the
"Financials"; the balance sheet included in the Financials is hereinafter
referred to as the "Balance Sheet"; and December 31, 1994 is hereinafter
referred to as the "Balance Sheet Date".
(b) The audited balance sheet of Pre-Merger GMH as at October
31, 1995 and the related unaudited statement of income and retained earnings,
and unaudited statements of cash flow for the ten-month period then ended, in
each case, including the notes thereto, reported on by Arthur Andersen, which
have been delivered to the Purchasers, fairly present the financial position of
Pre-Merger GMH as at such dates and the results of operations and retained
earnings and changes in cash flows of Pre-Merger GMH as of such dates and for
the periods then ended in accordance with generally accepted accounting
principles applied on a consistent basis and show all material liabilities,
absolute or contingent, of Pre-Merger GMH as at such date. Since the Balance
Sheet Date, Pre-Merger GMH has conducted its business in the ordinary course
consistent with past practice and except as set forth in Section 3.7(b) to the
Disclosure Schedule, there has been no change, event, occurrence or development
of a state of circumstances or facts, which, individually or in the aggregate,
has had, or would reasonably be expected to have, a Material Adverse Effect and
neither of the GMH Companies has knowledge of any such change, event, occurrence
or development or a state of circumstances or facts which is threatened, nor has
there been any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of the GMH Companies
which, individually or in the aggregate, has had or would reasonably be expected
to have a Material Adverse Effect.
(c) The GMH Companies have delivered to the Purchasers complete
and correct copies of the pro forma consolidated balance sheet of the GMH
Companies as of the Closing Date (the "Pro Forma Balance Sheet"), giving pro
forma effect to the Acquisition, the Merger, the issuance of the Securities and
the Junior Notes hereunder, the borrowing under the Senior Loan Agreement and
the issuance of the Senior Subordinated Notes and Warrants as contemplated by
the Senior Subordinated Loan Instruments, as if such transactions were
consummated on the date of the Pro Forma Balance Sheet. The Pro Forma Balance
Sheet has been prepared in good faith on the basis stated therein (including
that the assumptions when made and as of the date hereof are reasonable
assumptions).
3.8 Title to Properties and Assets. Each of the GMH Companies has
good and marketable title to all of its owned real property (including
fixtures), good, valid and legal title to all its personal properties and
assets, and has good title to all its leasehold interests, in each case subject
to no mortgage, pledge, lien, lease, conditional sale agreement, security
interest, encumbrance, or charge, other than Permitted Liens as defined in the
Senior Loan Agreement.
3.9 Related-Party Transactions. Except as set forth in Section 3.9
to the Disclosure Schedule, no employee, officer or director of the GMH
Companies or member of his or her immediate family is indebted to either of the
GMH Companies, and, neither of the GMH Companies is indebted (or committed to
make loans or extend or guarantee credit) to any of them. Except as set forth in
Section 3.9 to the Disclosure Schedule, no employee, officer or director of
either of the GMH Companies or member of his or her immediate family has any
direct or indirect ownership interest in any firm or corporation with which
either of the GMH Companies is affiliated or with which either of the GMH
Companies has a business relationship, or any firm or corporation that competes
with either of GMH Companies, except stock ownership by employees, officers, or
directors of GMH Companies and members of their immediate families in publicly
traded companies that may compete with the GMH Companies. Except as set forth in
Section 3.9 to the Disclosure Schedule, no officer or director or any member of
their immediate families is, directly or indirectly, interested in any material
contract with either of the GMH Companies.
3.10 Permits. The GMH Companies have all franchises, permits
(including Environmental Permits), licenses, authorizations, approvals, and any
similar authority ("Permits") necessary for the conduct of their business as now
being conducted by them, the lack of which would,
<PAGE>
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect and reasonably believes they can obtain, without undue burden or
expense, any similar authority for the conduct of their business as planned by
the GMH Companies to be conducted. Without limiting the foregoing, the GMH
Companies have all Permits referred to in Schedule 7(d) of the Stock Purchase
Agreement all of which are in full force and effect. The GMH Companies are not
in violation in any material respect of, or default in any material respect
under, any of such Permits.
3.11 Liabilities. Except as set forth in Section 3.11 of the
Disclosure Schedule, the GMH Companies have no indebtedness for borrowed money
that either of the GMH Companies has directly or indirectly created, incurred,
assumed, or guaranteed, or with respect to which either of the GMH Companies has
otherwise become directly or indirectly liable. On the Closing Date, after
giving effect to the repayment of the obligations shown on Section 3.11 of the
Disclosure Schedule, as obligations that are intended to be satisfied on or
prior to the Closing Date, the GMH Companies will not be in default with respect
to any indebtedness for borrowed money or any instrument or agreement relating
thereto. Except as set forth in the immediately preceding sentence, neither of
the GMH Companies has any liabilities or obligations, absolute or contingent,
which are, individually or in the aggregate, material to the business of the
Company and GMH, except obligations under contracts made in the ordinary course
of business that would not be required to be reflected in financial statements
prepared in accordance with generally accepted accounting principles.
3.12 Intellectual Property. The GMH Companies do not own or possess,
and are not licensed with respect to, any "Intellectual Property" (as defined
below) other than as set forth in Section 3.12 of the Disclosure Schedule. To
the knowledge of the GMH Companies, the GMH Companies own or possess sufficient
legal rights to all Intellectual Property necessary for their business as
presently conducted and as proposed to be conducted without any conflict with,
or infringement of, the rights of others. Section 3.12 of the Disclosure
Schedule contains a complete list of all of the material Intellectual Property
rights of the GMH Companies or used in the business of GMH Companies, and except
as set forth therein, there are no outstanding options, licenses, or agreements
of any kind relating to the foregoing Intellectual Property, nor is either of
the GMH Companies bound by or a party to any options, licenses, or agreements of
any kind with respect to the Intellectual Property of any other person or
entity. To the knowledge of the GMH Companies, no shareholder, director, officer
or employee of either of the GMH Companies or any other person or entity other
than the GMH Companies has any interest in any of the Intellectual Property of
the GMH Companies which has not been waived, or in any inventions, profits,
royalties or other property arising therefrom. Neither of the GMH Companies has
received any communications alleging that the Company or GMH has violated or, by
conducting its business as proposed, would violate any Intellectual Property
rights of any other person or entity. To the knowledge of the GMH Companies,
none of the Company's or GMH's officers is obligated under any contract
(including licenses, covenants, or commitments of any nature) or other
agreement, or subject to any judgment, decree, or order of any court or
administrative agency, that would interfere with the use of such officers' best
efforts to promote the interests of the or that would conflict with the business
of the GMH Companies as proposed to be conducted. Except as set forth on
Schedule 3.12 of the Disclosure Schedule, all of the Intellectual Property of
the GMH Companies is owned by GMH Companies, free and clear of all liens and
encumbrances. Any and all patents, patent applications, copyrights, copyright
applications, trademarks and trademark applications relating to the Intellectual
Property of the GMH Companies is owned by the Company or GMH and held in the
Company's or GMH's name. As used in this Agreement the term "Intellectual
Property" means all intellectual property rights and other intangible property
rights including, without limitation, patents, patent applications, patent
rights, trademarks, trademark applications, trade names, fictitious or assumed
names, service marks, service mark applications, copyrights, copyright
applications, software, know-how, certificates of public convenience and
necessity, franchises, licenses, inventions, trade secrets, proprietary
processes, formulae and computer programs, software and displays.
3.13 Material Contracts. All Contracts (a) involving amounts of
$250,000 or more during a fiscal year in any one case, or (b) which,
individually or in the aggregate, would reasonably be expected to have a
material effect on the GMH Companies (or their business, assets,
properties, financial condition, operations or operating results), are to
the knowledge of the GMH Companies, legal, valid, binding, and in full
force and effect, and, are enforceable by the applicable GMH Company in
accordance with their respective terms, subject to (i) laws of general
<PAGE>
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief or other
equitable remedies. True and complete copies of such Contracts have been made
available to the Purchasers. Section 3.13 of the Disclosure Schedule lists all
such contracts, agreements and instruments. Neither of the GMH Companies has
received notice that the Company or GMH has, breached any of the material terms
or provisions of such Contracts, and each of the Company and GMH has paid in
full or accrued all amounts due thereunder. Except as specifically set forth in
Section 3.13 of the Disclosure Schedule, none of the Contracts listed in Section
3.13 of the Disclosure Schedule provides for additional or accelerated payments
or other consideration to be made on account of the transactions contemplated
hereby or by the Stock Purchase Agreement and no notice to, filing or
registration with, or permit, license, variance, waiver, exemption, franchise,
order, consent, authorization or approval of, any person is required in order
that the Contracts set forth in Section 3.13 of the Disclosure Schedule continue
in full force and effect (without breach in any material respect by the GMH
Companies thereof, or giving any contractual party a right to terminate or
modify, such Contract) following the consummation of the transactions
contemplated hereby or by the Stock Purchase Agreement. All filings,
registrations, permits, licenses, variances, waivers, exemptions, franchises,
orders, authorizations and approvals required in order that the Contracts set
forth in Section 3.13 of the Disclosure Schedule continue in full force and
effect (without breach in any material respect by the Company thereof or payment
of additional or accelerated consideration thereunder) following the
consummation of the transactions contemplated hereby have been made, effected or
obtained and are in full force and effect.
3.14 Compliance with Other Instruments. None of the GMH Companies is,
and after giving effect to the Acquisition and the financing thereof none of
them will be, in violation or breach of any term of its certificate of
incorporation or bylaws (each as amended through the date hereof), or in any
material respect of any term or provision of any mortgage, indebtedness,
indenture, contract, agreement, instrument, judgement, or decree, and is not in
violation of any order, statute, rule, or regulation (collectively, "Laws")
applicable to the GMH Companies, except violations which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
The execution, delivery, and performance of, and compliance with the Stock
Purchase Agreement, the Merger Instruments, this Agreement and the Ancillary
Agreements, the issuance of the Securities and the Junior Notes, the
consummation of the transaction contemplated by the Senior Loan Agreement and
the Senior Subordinated Loan Instruments, the borrowing of the monies
represented by the Junior Notes, the consummation of the transactions
contemplated by the Stock Purchase Agreement and the Merger, and the
consummation of the transactions contemplated hereby and thereby, do not and
will not (i) violate, or result in a breach of any provision of or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a creation of any Lien upon any of the
assets, properties or business of either of the GMH Companies under, any of the
terms, conditions or provisions of (x) the certificate of incorporation or the
by-laws of either of the GMH Companies or (y) any Contract to which either of
the GMH Companies or any of their assets, properties or business are subject; or
(ii) violate any judgment, ruling, order, writ, injunction, award, decree, or
law of any court or foreign, federal, state, county or local government or any
other governmental, regulatory or administrative agency or authority which is
applicable to either of the GMH Companies or any of their assets, properties or
businesses, except, with respect to clauses (y) and (ii) above, violations
which, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect; or (iii) result in the suspension, revocation,
impairment, forfeiture, or non-renewal of any franchise, permit, license,
authorization, or approval material to either of the GMH Companies. To the
knowledge of the GMH Companies, there is no such term or provision or Law, the
effects of compliance with which are not reflected in the Financial Statements,
which materially and adversely affects the business of either of the GMH
Companies or any of their properties or assets.
3.15 Litigation. Except as set forth in Section 3.15 of the
Disclosure Schedule, there are no actions, suits, proceedings, or governmental
investigations pending or, to the knowledge of the GMH Companies, threatened
against either of the GMH Companies, or any of their respective properties
before any court or governmental agency (nor, to the knowledge of the GMH
Companies, is there any reasonable basis therefor). Neither of the GMH Companies
is a party to, or to the knowledge of the GMH
<PAGE>
Companies, named in any order, writ, injunction, judgment, or decree of any
court, government agency, or instrumentality. Except as set forth in Section
3.15 of the Disclosure Schedule, there is no action, suit or proceeding by
either of the GMH Companies currently pending, nor is there any material action,
suit or proceeding that either of the GMH Companies currently intends to
initiate.
3.16 Registration Rights. Except as set forth in the Stockholders'
Agreement, the Company is not under any obligation to register (as defined in
the Stockholders' Agreement) any of its presently outstanding securities or any
of its securities which may hereafter be issued.
3.17 Governmental Consent. No consent, approval, or authorization of,
or designation, declaration, notification, or filing with any governmental
authority on the part of either of the GMH Companies is required in connection
with the valid execution, delivery and performance of this Agreement, the Stock
Purchase Agreement, the Merger Instruments, the Senior Loan Agreement, the
Senior Subordinated Loan Instruments, or any of the Ancillary Agreements, the
offer, sale, or issuance of the Securities and the Junior Notes, the borrowing
evidenced by the Junior Notes, or the consummation of any other transaction
contemplated hereby or thereby (other than those which have been obtained and
remain in full force and effect or those the failure of which to obtain would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect) , except the (i) filing of the Restated Certificate with the
Delaware Secretary of the State, and (ii) qualification (or the taking of such
action as may be necessary to secure an exemption from qualification, if
available) of the offer and sale of the Securities under applicable blue sky
laws, which filings and qualifications, if required, will be accomplished in a
timely manner; provided, however, that solely with respect to federal and state
"blue sky" securities laws, the representations and warranties provided in this
Section 3.17 with respect to the issuance and sale of the Securities shall be
subject to the accuracy of the representations of the Purchasers set forth in
Section 4 hereof.
3.18 Employees. To the knowledge of the GMH Companies, no officer of
either of the GMH Companies is or will be in violation of any judgment, decree,
or order, or any term of any employment contract, patent disclosure agreement,
or other contract or agreement relating to the relationship of any such officer
with the GMH Companies or any other party because of the nature of the business
conducted or to be conducted by the GMH Companies or the performance by the
officer of his responsibilities to the GMH Companies. Except as set forth in
Section 3.18 of the Disclosure Schedule, neither of the GMH Companies is a party
to or bound by any currently effective employment contract, deferred
compensation agreement, bonus plan, incentive plan, profit sharing plan,
retirement agreement, or other employee compensation agreement. To the knowledge
of the GMH Companies, no officer or key employee, or any group of key employees,
intends to terminate his or their employment with the GMH Companies, nor does
either of the GMH Companies have a present intention to terminate the employment
of any of the foregoing. Subject to the terms of the employment agreements with
each of Sam Scott, Greg Scott and Drew Scott and to general principles related
to wrongful termination of employees, the employment of each officer and
employee of the GMH Companies is terminable at the will of the GMH Companies. No
Contract exists between the employees of the GMH Companies (or a union
representing any of such employees) and the GMH Companies and, to the knowledge
of the GMH Companies, no union has attempted to organize or represent the labor
force of the GMH Companies in the 24 months immediately prior to the date
hereof. During such 24-month period there have been no lockouts, strikes,
slowdowns, work stoppages or threats thereof by or with respect to the labor
force of either of the GMH Companies. Except as set forth in Section 3.18 of the
Disclosure Schedule, no person (including, but not limited to, any foreign,
federal, state, county or local government or other governmental, regulatory or
administrative agency or authority) has any pending claim, suit, action,
proceeding or investigation against either of the GMH Companies arising out of
any statute, law, ordinance, code, rule or regulation relating to discrimination
in employment or employment practices or occupational safety and health
standards (including, without limitation, The Fair Labor Standards Act, as
amended, Title VII of the Civil Rights Act of 1964, as amended, the
Rehabilitation Act of 1973, as amended, the Age Discrimination in Employment Act
of 1967, as amended, or the Americans with Disabilities Act of 1990) which, in
each case, if upheld, would have a Material Adverse Effect.
3.19 Tax Returns, Payments, and Elections. Each of the GMH Companies
and the Acquired Entities has filed all tax returns and reports
<PAGE>
as required by law. These returns and reports are true and correct in all
material respects. Except as set forth in Section 3.19 of the Disclosure
Schedule, each of the GMH Companies and the Acquired Entities has paid all taxes
and other assessments due, except those contested by it in good faith. Neither
of the GMH Companies has elected pursuant to the Internal Revenue Code of 1986,
as amended ("Code"), to be treated as a collapsible corporation pursuant to
Section 341(f) of the Code, nor has either of them made any other elections
pursuant to the Code (other than elections that relate solely to methods of
accounting, depreciation, or amortization) that would have a material effect on
the business, properties, prospects, or financial condition of each of the GMH
Companies taken as a whole, other than the S election previously made by GMH
which will terminate upon consummation of the Acquisition. Each of the GMH
Companies and the Acquired Entities has withheld or collected from each payment
made to each of its employees, the amount of all taxes, Federal Insurance
Unemployment Tax Act taxes required to be withheld or collected therefrom, and
has paid the same to the proper tax receiving officers or authorized
depositories.
3.20 Environmental and Safety Laws. Each of the GMH Companies has
obtained or is diligently pursuing obtaining all applicable environmental
permits ("Environmental Permits") relating to pollution or protection of the
environment, including laws relating to emissions, discharges, releases, or
threatened releases of pollutants, contaminants, or hazardous or toxic materials
or wastes into the ambient air, surface water, ground water, or land, or
otherwise relating to the manufacturing, processing, distribution, use,
treatment, storage, generation, disposal, transport or handling of pollutants,
contaminants or hazardous or toxic materials or wastes, all of which are set
forth in Section 3.20 to the Disclosure Schedule, and, except as specifically
indicated on such Schedule, the transactions contemplated hereby will not alter
or impair in any material respect any such Environmental Permits. Except as set
forth in Section 3.20 to the Disclosure Schedule, each of the GMH Companies is
in material compliance with all terms and conditions of such Environmental
Permits and has complied in all material respects and is in compliance in all
material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligation, schedules and timetables
contained in such laws or contained in any regulation, code, plan, order,
decree, judgment, notice or demand letter issued, entered promulgated or
approved thereunder to the extent applicable. Except as disclosed in Section
3.20 to the Disclosure Schedule, there is no action, suit or proceeding at law
or in equity by any Person or any arbitration or any administrative or other
proceeding by or before (or, to the knowledge of the GMH Companies, any
investigation by) any governmental or other instrumentality or agency, pending,
or to knowledge of either of the GMH Companies, threatened against the GMH
Companies or the Acquired Entities relating to environmental compliance or
attempting to establish environmental liability. The GMH Companies have
previously delivered to the Purchasers true and correct copies of all of the
information set forth in Section 3.20 to the Disclosure Schedule.
Except as set forth in Section 3.20 of the Disclosure Schedule,
to the knowledge of the GMH Companies, there are no conditions, circumstances,
activities, practices, incidents, actions or plans relating to any real property
leased or owned by either of the GMH Companies, or the business of the GMH
Companies or the Acquired Entities or sites used by the GMH Companies or the
Acquired Entities for waste disposal or recycling which would be reasonably
likely to interfere with or prevent compliance or continued compliance with or
which are in non-compliance with any environmental laws or with any regulation,
code, order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder, or which would reasonably be
expected to give rise to any common law or other legal liability, including,
without limitation, liability under the Comprehensive Environmental Response,
Compensation and Liability Act, as amended ("CERCLA"), Resource Conservation and
Recovery Act, as amended ("RCRA"), or similar state, foreign or local laws, or
otherwise form the basis of any claim, action, demand, suit, proceeding,
hearing, notice of violation, study or investigation, based on or related to the
manufacture, processing, distribution, use, treatment, storage, disposal,
generation, transport or handling, or emission, discharge, release or threatened
release into the environment, of any pollutant, contaminant, chemical, or
industrial, toxic or hazardous material, substance or waste. Without in any way
limiting the foregoing, and except as set forth in Section 3.20 of the
Disclosure Schedule, no release, emission or discharge into the environment of
any hazardous substance (as that term is defined under CERCLA or any applicable
state law) has occurred or is currently occurring in connection with the conduct
of the business of the GMH Companies.
<PAGE>
3.21 Brokers or Finders. Except as set forth in Section 3.21 of the
Disclosure Schedule, neither of the GMH Companies has incurred, or will incur,
directly or indirectly, as a result of any action taken by either of the GMH
Companies, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
3.22 [Intentionally left blank]
3.23 ERISA. Except as listed in Section 3.23 of the Disclosure
Schedule, neither the GMH Companies nor any entity required to be aggregated
with the GMH Companies under Sections 414(b), (c), (m), (n) or (o) of the Code
sponsors, maintains, has any obligation to contribute to, has any liability
under, or is otherwise a party to, any Benefit Plan. For purposes of this
Agreement, "Benefit Plan" shall mean any plan, fund, program, policy,
arrangement or contract, whether formal or informal, which is in the nature of
(i) an employee pension benefit plan (as defined in Section 3(2) of ERISA) or
(ii) an employee welfare benefit plan (as defined in Section 3(1) of ERISA).
With respect to each Benefit Plan listed in Section 3.23 of the Disclosure
Schedule, to the extent applicable:
(a) Each such Benefit Plan has been maintained and operated in
all material respects in compliance with its terms and with all applicable
provisions of ERISA, the Code and all regulations, rulings and other authority
issued thereunder;
(b) All contributions required by law to have been made under
each such Benefit Plan (without regard to any waivers granted under Section 412
of the Code) to any fund or trust established thereunder or in connection
therewith have been made by the due date thereof;
(c) Each such Benefit Plan intended to qualify under Section
401(a) of the Code is the subject of a favorable unrevoked determination letter
issued by the Internal Revenue Service as to its qualified status under the
Code, which determination letter may still be relied upon as to such tax
qualified status, and no circumstances have occurred that would adversely affect
the tax qualified status of any such Benefit Plan;
(d) The actuarial present value of all accrued benefits under
each such Benefit Plan subject to Title IV of ERISA did not, as of the latest
valuation date of such Benefit Plan, exceed the then current value of the assets
of such Benefit Plan allocable to such accrued benefits, all as based upon the
actuarial assumptions and methods currently used for such Benefit Plan;
(e) None of such Benefit Plans that are "employee welfare
benefit plans" as defined in Section 3(1) of ERISA provides for continuing
benefits or coverage for any participant or beneficiary of a participant after
such participant's termination of employment, except as required by Sections 601
through 608 of ERISA;
(f) Neither of the GMH Companies nor any trade or business
(whether or not incorporated) under common control with the GMH Companies within
the meaning of Section 4001 of ERISA has, or at any time has had, any obligation
to contribute to any "multiemployer plan" as defined in Section 3(37) of ERISA;
and
(g) If any such Benefit Plan is not subject to ERISA and covers
any non-United States employee or former employee of the GMH Companies, then
according to the actuarial assumptions and valuations most recently used for the
purpose of funding each such plan (or, if the same has no such assumptions and
valuations or is unfunded, then according to the actuarial assumptions and
valuations in use by the Pension Benefit Guaranty Corporation), the total amount
or value of the funds available under each such plan to pay benefits accrued
thereunder or segregated in respect of such accrued benefits, together with any
reserve or accrual with respect thereto, exceeds the present value of all
benefits (actual or contingent) accrued as of such date of all participants and
past participants therein who are employees or former employees of the GMH
Companies.
3.24 Federal Reserve Regulations. Neither of the GMH Companies is
engaged in the business of extending credit for the purpose of purchasing or
carrying margin securities (within the meaning of Regulation G of the Board of
Governors of the Federal Reserve System), and no part of the proceeds of the
Securities or the Junior Notes will be used to purchase or carry any margin
security or to extend credit to others for the purpose
<PAGE>
of purchasing or carrying any margin security or in any other manner which would
involve a violation of any of the regulations of the Board of Governors of the
Federal Reserve Syste m.
3.25 Disclosure. No representation or warranty of the GMH Companies
contained in this Agreement, the Ancillary Agreements, in the Disclosure
Schedule, in the exhibits attached hereto or in any written statement or
certificate furnished to the Purchasers pursuant hereto or in connection with
the transactions contemplated hereby, when read together, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein not misleading in light
of the circumstances under which they were made.
3.26 Securities Act. Subject to the accuracy of the Purchasers'
representations in Section 4 the offer, sale, and issuance of the Securities and
the Junior Notes in conformity with the terms of this Agreement constitute
transactions exempt from the registration requirements of Section 5 of the
Securities Act.
3.27 Insurance. The GMH Companies have in full force and effect fire
and casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed, and such other policies of insurance, and in
such amounts as in the best judgment of the GMH Companies is acceptable for the
nature and extent of the business of the GMH Companies as currently being
conducted, and as currently proposed to be conducted.
3.28 Issuance Taxes. All taxes, if any, imposed by law in connection
with the issuance, sale and delivery of the Securities and the Junior Notes
shall have been fully paid by the GMH Companies, and all laws imposing such
taxes shall have been fully complied with, prior to the Closing Date.
3.29 Other Representations. Neither of the GMH Companies has any
knowledge that, the representations and warranties of the Sellers and GMH
contained in Section 7 of the Stock Purchase Agreement are not true and correct
in all material respects. The representations and warranties of the Company and
GMH made in the Senior Loan Agreement and the Senior Subordinated Loan
Instruments are true and correct.
3.30 Small Business Concern. The Company, together with its
"affiliates" (as that term is defined in Section 121.401 of Title 13 of the Code
of Federal Regulations), is a "small business concern" within the meaning of the
Small Business Investment Act of 1958 and the regulations thereunder, including
Section 121.802(a) of Title 13 of the Code of Federal Regulations. The
information set forth in the documents provided to the Purchaser pursuant to
Section 5.6 below is accurate and complete. Neither the Company nor any
Subsidiary thereof engages in, and it shall not hereafter engage in, any
activities, nor shall the Company or any such Subsidiary use directly or
indirectly the proceeds of the sale of the Securities or the Junior Notes, for
any purpose, for which a Small Business Investment Company is prohibited from
providing funds by the Small Business Investment Act of 1958 and the regulations
thereunder, including Title 13, Code of Federal Regulations, 107.901.
3.31 Use of Proceeds. The proceeds received by the Company and GMH
from the sale of the Securities and the Junior Notes shall be used by the
Company and GMH to consummate the transactions contemplated by the Stock
Purchase Agreement and to pay related expenses. At least fifty-one percent (51%)
of the assets and activities of the GMH Companies on a consolidated basis (after
giving effect to the consummation of the transactions contemplated by the Stock
Purchase Agreements) will be within the United States of America.
3.32 Acquisition and Financing. Simultaneously with the consummation
of the transactions contemplated by this Agreement, GMH is consummating (i) the
Acquisition pursuant to the terms and provisions of the Stock Purchase
Agreement, (ii) the Merger pursuant to Merger Instruments and (iii) the
financings contemplated Senior Loan Agreement and the Senior Subordinated Loan
Instruments. True and complete copies of the Stock Purchase Agreement, the
Merger Instruments, the Senior Loan Agreement, the Senior Subordinated Loan
Instruments, and the Bulldog Documents have been delivered to the Purchasers. In
connection therewith, the GMH Companies hereby represent and warrant to the
Purchasers that to the knowledge of the GMH Companies after due inquiry, there
is no fact which materially adversely affects the financial condition or results
of
<PAGE>
operations of the GMH Companies or the Acquired Entities which has not been set
forth in the Stock Purchase Agreement, this Agreement or any other documents,
certificates or statements delivered in connection therewith or herewith and
furnished to the Purchaser by or on behalf of the GMH Companies.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby severally (and not jointly) represents and
warrants to the GMH Companies with respect to the purchase of the
Securities and the Junior Notes as follows:
4.1 Experience. Such Purchaser has substantial experience in
evaluating and investing in private placement transactions of securities in
companies similar to the Company so that such Purchaser is capable of evaluating
the merits and risks of such Purchaser's investment in the Company and has the
capacity to protect such Purchaser's own interests.
4.2 Investment. Such Purchaser is acquiring the Securities for
investment for such Purchaser's own account, not as a nominee or agent, and not
with the view to, or for resale in connection with, any distribution thereof.
Such Purchaser understands that the Securities have not been, and will not be,
registered under the Securities Act or the securities laws of any state by
reason of exemptions from the registration provisions of the Securities Act and
such laws which depend upon, among other things, the bona fide nature of the
investment intent and the accuracy of such Purchaser's representations as
expressed herein.
4.3 Rule 144. Such Purchaser acknowledges that the Securities must
be held indefinitely unless subsequently registered under the Securities Act or
an exemption from such registration is available. Such Purchaser is aware of the
provisions of Rule 144 promulgated under the Securities Act which permit the
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, (i) the
existence of a public market for the shares, (ii) the availability of certain
current public information about the Company, (iii) the resale occurring not
less than two years after a party (who is not an "affiliate") has purchased and
fully paid for the shares to be sold, (iv) the sale being effected through a
"broker's transaction" or in transactions directly with a "market maker" (as
provided by Rule 144(f)) and (v) the number of shares being sold during any
three-month period not exceeding specified limitations.
4.4 No Public Market. Such Purchaser understands that no public
market now exists for any of the securities issued by the Company and that there
is no assurance that a public market will ever exist for the Securities.
4.5 Access to Data. Such Purchaser has had an opportunity to discuss
the Company's business, management, and financial affairs with the Company's
management and the opportunity to review the Company's facilities and business
plan. Such Purchaser has also had an opportunity to ask questions of officers of
the Company, which questions were answered to its satisfaction. The Purchasers
acknowledge that they have had an opportunity to conduct their own independent
due diligence investigation of the Company.
4.6 Authorization. This Agreement and the Ancillary Agreements, when
executed and delivered by such Purchaser, will constitute valid and legally
binding obligations of the Purchaser, enforceable in accordance with their
respective terms, subject to (i) laws of general application relating to
bankruptcy, insolvency, and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief, or other equitable remedies.
Such Purchaser, if not a natural person, has full corporate or partnership, as
the case may be, power and authority to enter into and to perform its
obligations under this Agreement and the Ancillary Agreements in accordance with
their respective terms. Such Purchaser represents that it has not been
organized, reorganized or recapitalized specifically for the purpose of
investing in the Company.
4.7 Brokers or Finders. Except as set forth in Section 4.7 of the
Disclosure Schedule, neither the Purchaser nor the Company has incurred, or will
incur, directly or indirectly, as a result of any action taken by such
Purchaser, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this
<PAGE>
Agreement or any transaction contemplated hereby.
4.8 Accredited Investor. Such Purchaser is an "Accredited Investor"
as that term is defined in Rule 501(a) of Regulation D promulgated under the
Securities Act. Each Purchaser has its principal office in the state set forth
in Schedule A hereto.
SECTION 5
CONDITIONS TO CLOSING OF THE PURCHASERS
The obligations of each Purchaser to purchase the Securities and
the Junior Notes at the Closing is, at the option of Purchasers purchasing
at least 66-2/3% of the Securities, subject to the fulfillment on or prior
to the Closing Date of the following conditions:
5.1 Representations and Warranties. The representations and
warranties made by the GMH Companies in Section 3 of this Agreement shall have
been true and correct when made, and shall be true and correct as of the Closing
Date in all material respects.
5.2 Covenants. All covenants, agreements, and conditions contained in
this Agreement to be performed by the GMH Companies on or prior to the Closing
shall have been performed or complied with in all material respects.
5.3 Compliance Certificate. Each of the GMH Companies shall have
delivered to the Purchasers a Compliance Certificate in substantially the form
attached hereto as Exhibit F, executed by an executive officer of the applicable
GMH Company, dated the Closing Date, and certifying to the fulfillment of the
conditions specified thereon.
5.4 Blue Sky Law. The GMH Companies shall have obtained, or shall
obtain within the time periods required by applicable law, all necessary blue
sky law permits and qualifications, or secured exemptions therefrom, required by
any state for the offer and sale of the Securities and the Junior Notes at the
Closing.
5.5 Restated Certificates. The Restated Certificate shall have been
filed with the Secretary of State of the State of Delaware. A Restated
Certificate of Incorporation of GMH, amending GMH's certificate of incorporation
to require the approval of the holders of the Series A Shares with respect to
those matters referred to in the "Protective Provisions" of the Restated
Certificate as they apply to GMH, shall have been filed with the Secretary of
State of the State of Georgia.
5.6 Small Business Concern Documents. The Company shall have executed
and delivered to the Purchasers, a Size Status Declaration on SBA Form 480 and
an Assurance of Compliance on SBA Form 652D, and shall have provided to the
Purchasers information necessary for the preparation of a Portfolio Financing
Report on SBA Form 1031.
5.7 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be reasonably satisfactory in
substance and form to counsel for the Purchasers, and they shall have received
all such counterpart originals or certified or other copies of such documents as
they may reasonably request.
5.8 Board of Directors. Section 4(d) of Article FOURTH of the
Restated Certificate shall provide that the authorized number of directors of
the Company shall initially be seven (7), two (2) of whom shall be elected by
the Purchasers. The Company's board of directors shall, upon the Closing,
consist of Samuel P. Scott, E. Mark Noonan, Gary M. Brost, Dennis C. Martin,
James C. Del Zoppo, and James A. Parsons. The Board shall have established an
Audit and a Compensation Committee, with at least one of the directors elected
by the Purchasers serving on each such Committee. Similar provisions shall be
adopted with respect to GMH.
5.9 Opinion of Counsel. Each Purchaser shall have received from
Nixon, Hargrave, Devans & Doyle LLP, counsel for the Company, an opinion, dated
the Closing Date, satisfactory in form and substance to the Purchasers and their
special counsel, and which shall be substantially in the form of Exhibit G,
attached hereto.
5.10 No Litigation. No action, suit or other proceeding shall be
pending or threatened before any court, tribunal, or governmental authority
<PAGE>
seeking or threatening to restrain or prohibit the consummation of the
transactions contemplated hereby, or seeking to obtain substantial damages in
respect thereof or which would otherwise materially and adversely affect the
Company, its business, assets, prospects or financial condition.
5.11 Stockholders Agreement. The Company, each Purchaser, Bulldog,
the Senior Subordinated Lender, the members of management of GMH who are parties
thereto and certain other parties thereto shall have entered into the
Stockholders Agreement, which shall be in form and substance satisfactory to the
Purchasers and their special counsel.
5.12 Investors' Rights Agreement. The Company, Bulldog, the Senior
Subordinated Lender, and each Purchaser shall have entered into the Investors'
Rights Agreement which shall be satisfactory in form and substance to the
Purchasers and their special counsel.
5.13 SIHI Fee Agreement. SIHI shall have entered into a Management
Agreement with the Company in form and substance satisfactory to the Purchasers
providing for deferral of the management fee under certain conditions as
specified therein.
5.14 Minimum Investment. The Purchasers shall purchase not less than
8,000,000 Series A Shares, 750,000 Series B Shares, 1,218,750 Class A Common
Shares and $5,000,000 principal amount of Junior Notes at the Closing, for an
aggregate purchase price equal to not less than $13,750,000.
5.15 Reliance Certificates. Sam Scott shall have executed and
delivered to the Purchasers a certificate in the form attached as Exhibit H
hereto, certifying that he has reviewed the representations and warranties
contained in Section 7 of the Purchase Agreement and that, to the best of his
knowledge, such representations and warranties are true, correct and complete.
Gary Brost shall have executed and delivered to the Purchasers a certificate in
the form of Exhibit I, certifying that he has reviewed the representations and
warranties contained in Section 3 of this Agreement and that, to the best of his
knowledge, such representations and warranties are true, correct and complete.
5.16 Acquisition. The Company shall have consummated the Acquisition
as contemplated by the Purchase Agreement and the merger of Acquisition Co. with
and into GMH shall have occurred.
5.17 Financing. The terms and conditions for the financing of the
Company, including the credit facilities being provided by First Source
Financial LLP ("First Source") pursuant to the Senior Loan Agreement, and
related documents, and the Senior Subordinated Notes being purchased by the
Senior Subordinated Lender pursuant to the Senior Subordinated Loan Instruments
shall be acceptable to Purchasers. Concurrently with the Closing, the Company
shall have borrowed or have available for borrowing (a) from First Source, as a
term loan, the principal amount of $20,000,000 pursuant to the Senior Loan
Agreement; and an additional $6,000,000 principal amount as a revolving credit
facility and (b) from the Senior Subordinated Lender, $15,000,000 pursuant to
the Senior Subordinated Loan Instruments (collectively, the "Senior Debt"). A
complete and correct copy of each of the Senior Loan Agreement, such security
agreements and the Senior Subordinated Loan Instruments shall have been
delivered to Purchasers, together with evidence satisfactory to Purchasers of
such borrowings under the Senior Loan Agreement and the Senior Subordinated Loan
Instruments, and no other agreements or instruments shall exist relating to the
terms of such borrowings.
5.18 Legal and Investigative Fees. At the Closing, the Company will
pay (a) the legal fees and out-of-pocket expenses of Finn Dixon & Herling,
special counsel to Purchasers, with respect to this Agreement and the
transactions contemplated hereby, and (b) Purchaser's reasonable out-of-pocket
expenses for due diligence with respect to this Agreement and the transactions
contemplated hereby.
5.19 Capitalization. The capitalization of the Company shall be
acceptable to Purchasers, including the Company providing the Purchasers with
evidence satisfactory to the Purchasers that (i) Bulldog and other investors
have invested at least $1,400,000 in cash equity in the Company and (ii) at
least $650,000 of such $1,400,000 has been invested directly by principals and
employees of Strategic Investments & Holdings, Inc. ("SIHI") and the children of
Ross Kenzie (but in no event shall more than $150,000 of such $650,000 be
invested by the children of Ross Kenzie). The capitalization of Bulldog
(including all documents relating thereto (the "Bulldog Documents"), true,
correct and complete copies of which shall have
<PAGE>
been delivered to the Purchasers) shall be acceptable to the Purchasers.
5.20 No Adverse Change. No event or condition of any character shall
have occurred that has a reasonable possibility of having a Material Adverse
Effect.
5.21 Related Party Transactions. Arrangements satisfactory to the
Purchasers shall have been executed between (i) the Company and M/H Retail Inc.
and (ii) the Company and Hi-Tech Properties, Inc., and (iii) the Company and any
other Affiliate of the Company which provides services to the Company, whereby
any material profit derived from such relationships shall be derived by the
Company and the duration and scope of such arrangements are satisfactory to the
Purchasers.
5.22 Amendment to Purchase Agreement. An amendment in form and
substance satisfactory to the Purchasers shall have been executed by the parties
to the Purchase Agreement.
5.23 Subordination Agreement. The Subordination Agreement between
First Source, Equitable, the Company, GMH and SIHI (the "Subordination
Agreement") shall have been executed and delivered by the parties thereto, and
shall be in form and substance satisfactory to the Purchasers.
5.24 Satisfaction of Obligation. All of the obligations of the GMH
Companies or the Acquired Entities shown on Section 3.11 of the Disclosure
Schedule as obligations that are required or intended to be satisfied on or
prior to the Closing Date shall have been satisfied in full and all liens
securing any of such obligations shall have been released.
SECTION 6
CONDITIONS TO CLOSING OF THE COMPANY
The Company's obligation to sell and issue any Securities and GMH's
obligation to issue and sell any Junior Notes, at the Closing is, at the option
of the Company, subject to the fulfillment on or prior to the Closing Date of
the following conditions:
6.1 Representations and Warranties. The representations and
warranties made by each Purchaser in Section 4 of this Agreement shall have been
true and correct when made, and shall be true and correct as of the Closing
Date.
6.2 Blue Sky Law. The GMH Companies shall have obtained all necessary
blue sky law permits and qualifications, or secured exemptions therefrom,
required by any state for the offer and sale of the Securities at the Closing.
6.3 Minimum Investment. The Purchasers shall purchase not less than
8,000,000 Series A Shares, 750,000 Series B Shares, 1,218,750 Class A Common
Shares and $5,000,000 principal amount of Junior Notes at the Closing, for an
aggregate purchase price equal to not less than $13,750,000.
SECTION 7
COVENANTS OF THE GMH COMPANIES
7.1 Use of Proceeds. The proceeds of the issuance of the Securities
and the Junior Notes to the Purchasers shall be used solely for the purposes of
consummating the Acquisition contemplated by the Stock Purchase Agreement and
the payment of related fees and expenses. In the event that the Company or GMH
diverts any of such financing proceeds for any other use without the Purchasers'
prior written consent, the Purchasers shall have the right to rescind the
purchase contemplated hereby and receive immediate repayment of the amounts paid
hereunder in respect of the Securities and the Junior Notes, plus accrued and
unpaid dividends and interest, as the case may be. Within 90 days after the date
hereof, each of the Company and GMH will deliver a certificate signed by an
appropriate officer, to the Purchasers confirming that the proceeds of the sale
of the Securities and the Junior Notes hereunder have not been used in violation
of the Small Business Investment Act of 1958, as amended, or the regulations
promulgated thereunder. In addition, the Company and GMH shall provide the
Purchasers with all such information (including officer's certificates) which
the Purchasers may reasonably request in order for
<PAGE>
Purchasers to conduct a post-closing review to assure that such proceeds were
used for the intended purpose as required by 107.305 of Title 13 of the Code of
Federal Regulations.
7.2 Payment of Principal and Interest. GMH shall duly and punctually
pay the principal and interest on the Junior Notes.
7.3 Prompt Payment of Taxes. (a) The GMH Companies shall pay when due
all FICA taxes and withheld federal, state and/or city income taxes for which
the GMH Companies are obligated, and notify the Purchasers promptly in the event
of its failure to make any such payments when due.
(b) The GMH Companies shall pay all other taxes, levies,
assessments, liens, claims of lien(s) which if unpaid would result in a lien,
and other governmental charges to which the GMH Companies or any of their
property is or shall be subject, before such charges become delinquent, except
that no such charge need be paid so long as its validity or amount is being
contested in good faith by appropriate proceedings and the GMH Companies shall
have established such reserve with respect thereto as shall be required by
generally accepted accounting principles, and the adequacy of such reserve shall
be supported by the opinion of an independent certified public accountants of
the GMH Companies. Notwithstanding the foregoing, any such tax, assessment,
charge or levy shall be paid forthwith (under protest) upon the commencement of
proceedings to foreclose any liens securing the same or upon institution of
distraint proceedings.
7.4 Maintenance of Properties and Leases. Each of GMH Companies will
keep, or cause to be kept, its properties and those of its Subsidiaries in good
repair, working order and condition, reasonable wear and tear excepted, and
shall from time to time make all needed repairs and replacements thereto; and
the GMH Companies will at all times comply with each provision of all leases to
which any of them is a party or under which any of them occupies property if the
breach of such provision would reasonably be expected to have a Material Adverse
Effect.
7.5 Insurance. The GMH Companies will (a) maintain such insurance as
may be required by law, or by the Senior Loan Agreement or otherwise reasonably
required by the Purchasers, all to such extent and against such hazards and
liabilities, as is customarily maintained by prudent companies similarly
situated, and (b) maintain a sufficient amount of insurance so that neither it
nor the Purchasers will be considered a co-insurer or co-insurers.
7.6 Accounts and Records. The GMH Companies will keep true records
and books of account in which full, true and correct entries will be made of all
dealing or transactions in relation to its business and affairs in accordance
with generally accepted accounting principles applied on a consistent basis. The
GMH Companies will employ certified public accountants selected by the Board of
Directors and have annual reviews made by such independent public accountants in
the course of which such accountants shall make such examinations, in accordance
with the standards established by the American Institute of Certified Public
Accountants.
7.7 Compliance with Requirements of Governmental Authorities. The GMH
Companies will not violate any law, ordinance or governmental rule or regulation
to which they are subject, nor fail to obtain any license, permit, franchise or
other governmental authorization necessary to the ownership of its properties or
to the conduct of its business, which violation or failure to obtain would
reasonably be expected to have a Material Adverse Effect.
7.8 Maintenance of Corporate Existence, etc. The GMH Companies shall
maintain in full force and effect their respective corporate existences, rights
and franchises and all licenses and other rights to use patents, processes,
licenses, trademarks, trade names or copyrights owned or possessed by them and
deemed by the GMH Companies to be necessary for the conduct of their business.
7.9 Full Time Employment. The GMH Companies shall enter into such
agreements as will require each of Sam Scott, Greg Scott and Drew Scott to
devote his entire working time to the business affairs of the GMH Companies for
a term of five years.
7.10 Senior Debt. The GMH Companies will not extend or permit the
extension of the time for payment in full of the Senior Debt or any replacement
thereof beyond December 1, 2003, unless the terms of such
<PAGE>
extension or replacement (a) permit payment in full at its maturity, without
deferral, of the Junior Notes, and (b) permit, pursuant to the Investors' Rights
Agreement, repurchase of the Class A Common Shares, pursuant to the terms of
that agreement without restriction; provided there exists at the time of
redemption or payment no event of default under the Senior Loan Agreement or any
replacement thereof. The Company and GMH will not enter into any amendment or
modification of the Senior Loan Agreement or the Senior Subordinated Loan
Instruments except as permitted by the terms of the Subordination Agreement.
7.11 Restrictions on Dividends and Distributions. Until the entire
principal amount of the Junior Notes shall have been paid in full, without the
consent of the holders of sixty six and 2/3 percent (66-2/3%) of the aggregate
principal amount of the Junior Notes then outstanding, neither the Company nor
GMH will declare or pay any dividend on, or make any sinking fund payment,
redemption or repurchase with respect to, any shares of any class of its capital
stock, except (i) dividends in respect of the Series A Shares (but only if there
does not exist any accrued and unpaid interest (whether or not earned) on the
Junior Notes); (ii) the Company's purchase obligations with respect to the
Purchasers set forth in the Investor's Rights Agreement; (iii) dividends from
GMH to the Company from time to time for the payment of its portion of the
aggregate federal and state income tax liabilities (including estimated tax
liabilities) of the affiliated group filing consolidated returns of which the
Company is the common parent and GMH is a member for any taxable year, provided
that such payments shall not exceed with respect to any year the federal and
state income tax liabilities of GMH for such year determined as if GMH was not a
member of such affiliated group filing consolidated returns but rather as if GMH
filed its returns on a separate company basis for such year and all prior years;
and (iv) dividends by GMH to the Company to fund dividends and other
distributions permitted by clauses (i) through (iii).
7.12 Certain Restrictions. Without the prior written consent of the
holders of sixty-six and 2/3 percent (66-2/3%) of the aggregate principal amount
of the Junior Notes then outstanding, neither the Company nor GMH (a) will sell,
lease or otherwise dispose of or transfer a material portion of its or any
Subsidiary's assets (excluding sales of inventory in the ordinary course of
business); (b) will sell or otherwise dispose of any equity interest in any
Subsidiary; (c) will become a party to (or permit any Subsidiary to become a
party to) any merger, consolidation, reorganization, acquisition of another
company or commitment to take any such action, provided that a wholly-owned
Subsidiary of the Company may be merged with or into another subsidiary of the
Company or with or into the Company.
7.13 Transactions with Affiliates. Except for transactions entered
into in connection with the Acquisition which have been disclosed to the
Purchasers, without the prior written consent of the holders of sixty-six and
2/3 percent (66-2/3%) of the aggregate principal amount of the Junior Notes, the
Company and GMH shall not enter into any transaction or agreement, including but
not limited to, a loan, lease, royalty, purchase or sale agreement, directly or
indirectly with or which will benefit any officer, director, or holder of any
class of the Company's stock or any family member or relative of such officer,
director, or shareholder or any corporation or other entity or person which
directly or indirectly controls, is controlled by or is under common control
with such officer, director, or stockholder or family member or relative of such
officer, director, or stockholder unless such transaction is done on terms which
are arm's length to the GMH Companies or does not involve amounts in excess of
$25,000.
7.14 Limitation on Indebtedness. Without the prior written consent of
the holders of sixty-six and 2/3 percent (66-2/3%) of the aggregate principal
amount of the Junior Notes, the GMH Companies shall not incur any indebtedness
for borrowed money, other than the Senior Indebtedness (as defined in the
Subordination Agreement) which is not junior in terms of payment to the Junior
Notes.
7.15 Additional Covenants. The Company hereby covenants and agrees,
so long as any Purchaser owns any Securities or Junior Notes, as follows:
7.15.1 Financial Information. The Company shall furnish the
following reports to each Purchaser:
(i) as soon as practicable after the end of each fiscal
quarter (except the fourth quarter), and in any event within 45
days thereafter, an unaudited income statement and
<PAGE>
statement of cash flows for such fiscal quarter and an unaudited
balance sheet as of the end of such fiscal quarter, in each case
prepared, to the extent consolidation is required under generally
accepted accounting principles applied on a consistent basis, on
a consolidated and a consolidating basis for the Company, GMH and
any subsidiaries hereafter existing; within 30 days after the end
of each month, an unaudited monthly income statement, statement
of cash flows and balance sheet, in each case prepared, to the
extent consolidation is required under generally accepted
accounting principles applied on a consistent basis, on a
consolidated and a consolidating basis for the Company, GMH and
any subsidiaries hereafter existing, subject to normal, non-
recurring year-end adjustments; and an annual budget (including
projected monthly consolidated and consolidating income
statements, balance sheets and statements of cash flow) at least
15 days prior to the beginning of each fiscal year. The monthly
financial statements shall include comparisons to the then
applicable annual budget and summaries of financial plans of the
Company, GMH and any Subsidiaries.
(ii) as soon as practicable after the end of each
fiscal year, and in any event within 90 days thereafter, an
income statement and statement of cash flows for such fiscal
year, a balance sheet of the Company, GMH and their
subsidiaries prepared on a consolidated basis as of the end
of such fiscal year, and a statement of changes in financial
condition for such fiscal year, all certified by independent
public accountants of recognized national standing selected
by the Company.
(iii) as soon as available, but in any event: (i) within 30
days after the beginning of each fiscal year of the GMH
Companies, a copy of the plan and forecast (including a projected
closing balance sheets, income statements and funds flow
statements) of the GMH Companies for such fiscal year; and (ii)
within 30 days after the end of the second fiscal quarter of the
GMH Companies in each fiscal year, an update of each plan and
forecast delivered with respect to the fiscal year in which such
fiscal quarter occurs, to the extent there are any material
changes in such plan resulting from actual and then anticipated
results and forecasts.
(iv) Promptly upon the filing or making thereof, copies of
each filing and report made by the GMH Companies with or to any
securities exchange or to the Securities and Exchange Commission
and of each written communication from the GMH Companies to its
shareholders generally.
(v) as and when provided to the Senior Subordinated
Lender, any reports furnished to the Senior Subordinated Lender.
All financial statements provided for above shall be
prepared in accordance with general accepted accounting
principles, applied on a consistent basis (except that such
unaudited financial statements may be prepared without footnotes
and will be subject to normal, non-recurring year-end audit
adjustments).
7.15.2 Additional Information and Rights.
(a) The GMH Companies will permit any Purchaser, so long
as such Purchaser owns at least 800,000 Series A Shares, or
75,000 Series B Shares, or 120,000 shares of Class C Common
Shares or any combination thereof, to visit and inspect any of
the properties of the GMH Companies, including its books of
account and other records (and make copies thereof and take
extracts therefrom), and to discuss its affairs, finances and
accounts with the officers and its independent public accountants
of GMH Companies, all at such reasonable times as such person may
reasonably request.
(b) Each Purchaser shall have the right to consult with
the officers of the GMH Companies as to the management of the GMH
Companies.
<PAGE>
(c) The provisions of Section 7.15.1 hereof and this
Section 7.15.2 shall not be in limitation of any rights which any
Purchaser may have with respect to the books and records of the
GMH Companies and any Subsidiary, or to inspect their properties
or discuss their affairs, finances and accounts, under the laws
of the jurisdictions in which they are incorporated.
(d) The GMH Companies shall allow an agent or
representative of each Purchaser which does not have a
representative serving as a member of the Company's Board of
Directors or their respective designees to attend in a non-voting
capacity any and all meetings of the Board of Directors of the
GMH Companies and shall receive copies of any written consents
distributed in lieu of any meeting, and shall receive any and all
information provided to the members of the Board of Directors in
connection with any of the foregoing.
7.15.3 Termination of Financial Information Rights. The
obligation of the GMH Companies to deliver information under Section
7.15.1(i) and (ii) hereof and the rights of those Purchasers entitled
to the benefits of Section 7.15.2 hereof shall terminate and shall be
of no further force or effect upon the closing of the Company's
initial public offering of Common Stock. Thereafter, the Company shall
deliver to each Purchaser, and its assignees or transferees, such
financial information as the Company from time to time provides to
holders of its registered Common Stock as well as any information
provided for in Section 7.15.2, to the extent applicable.
7.15.4 Key Person Life Insurance. The GMH Companies shall,
within 90 days after the date hereof, use their respective best
efforts to obtain from financially sound and reputable insurers term
life insurance on the life of Sam Scott, and in such amounts, as the
Board of Directors shall determine. Any such term life insurance
policy (i) shall name the GMH Companies as loss payees, and (ii) shall
not be cancelable by the GMH Companies without prior written approval
of holders of not less than fifty one percent (51%) of the then
outstanding Series A Shares.
7.15.5 Employee and Other Stock Arrangements. Except with
respect to issuances set forth in Section 3.5 of the Disclosure
Schedule, the GMH Companies shall not, without the approval of the
Board of Directors and the holders of not less than sixty six and 2/3
percent (66-2/3%) of the then outstanding Series A Shares, issue any
of its capital stock, or grant an option or rights to subscribe for,
purchase or acquire any of its capital stock, to any employee,
consultant, officer or director of the GMH Companies or a Subsidiary.
7.15.6 Stock Fully Paid; Reservation of Shares. The Company
covenants and agrees that all Class C Common Stock that may be issued
upon the conversion of the Series B Shares will, upon issuance in
accordance with the terms of the Restated Certificate, be fully paid
and nonassessable, and that the issuance thereof shall not give rise
to any preemptive rights on the part of any person, other than the
rights created under the Stockholders Agreement. The Company further
covenants and agrees that the Company will at all times have
authorized and reserved a sufficient number of shares of its Class C
Common Stock for issuance upon conversion of the Series B Shares and
will increase the authorized number of shares of Class C Common Stock,
if at any time the number of shares of Class C Common Stock authorized
and unissued shall be insufficient to permit the conversion of Series
B Shares.
7.15.7 Replacement of Certificates Representing Preferred
Shares. Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of any
certificates representing Series A Shares, Series B Shares, Class A
Common Stock, or Class C Common Stock, as the case may be, and, in the
case of any such loss, theft or destruction, upon delivery of a bond
of indemnity satisfactory to the Company if required by the Board of
Directors, or, in the case of any such mutilation, upon surrender and
cancellation of the certificates representing
<PAGE>
Series A Shares, Series B Shares, Class A Common Stock, or Class C
Common Stock, as the case may be, the Company will issue new
certificates representing Series A Shares, Series B Shares, Class A
Common Stock, or Class C Common Stock, as the case may be, in lieu of
such lost, stolen, destroyed or mutilated certificates representing
Series A Shares, Series B Shares, Class A Common Stock, as the case
may be.
SECTION 8
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
8.1 Survival of Representations and Warranties. The representations
and warranties of the GMH Companies shall survive the Closing for a period of
two years (provided that the representations and warranties of the GMH Companies
contained in Sections 3.2, 3.3, 3.5, 3.6 and 3.25 shall survive for the period
of the applicable statute of limitations) and the representations and warranties
of the Purchasers made herein shall survive the Closing for the period of the
applicable statute of limitations and shall in no way be affected by any
investigation of the subject matter thereof made by or on behalf of the
Purchasers and their respective representatives and agents. The covenants of the
parties herein shall survive the Closing. All statements contained herein or in
any certificate, schedule or other writing delivered in connection with the
transactions contemplated hereby shall be deemed representations and warranties
of the respective parties making them.
8.2 Indemnification by the Company. The GMH Companies hereby jointly
and severally agree to indemnify and hold each of the Purchasers harmless from
or against, for and in respect of any and all damages, losses, obligations,
liabilities, claims, actions or causes of action, encumbrances, costs, or
expenses suffered, sustained, incurred or required to be paid by any Purchaser
arising out of or in connection with or as a result of the breach by either GMH
Company of any representation, warranty, covenant or agreement made by it
contained in this Agreement, notice of which breach is given to the GMH
Companies prior to the expiration of the applicable survival period set forth in
Section 8.1 above. In addition, the GMH Companies hereby jointly and severally
agree to indemnify and hold each Purchaser harmless from or against, for and in
respect of all reasonable costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses, interest and penalties) incurred by any
Purchaser in connection with any action, suit, proceeding, demand, claim,
assessment or judgment incident to any of the matters indemnified against in
this Section 8.2.
8.3 Indemnification by the Purchasers. Each of the Purchasers (other
than the State of Michigan) hereby severally agrees to indemnify and hold the
GMH Companies harmless from or against, for and in respect of any and all
damages, losses, obligations, liabilities, claims, actions or causes of action,
encumbrances, costs, or expenses suffered, sustained, incurred or required to be
paid by the GMH Companies arising out of or in connection with or as a result of
the breach by such Purchaser of any representation, warranty, covenant or
agreement made by it contained in this Agreement. In addition, each of the
Purchasers (other than the State of Michigan) hereby severally agrees to
indemnify and hold the GMH Companies harmless from or against, for an in respect
of all reasonable costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses, interest and penalties) incurred by the GMH
Companies in connection with any action, suit, proceeding, demand, claim,
assessment or judgment incident to any of the matters indemnified against in
this Section 8.3.
SECTION 9
GENERAL PROVISIONS
9.1 Governing Law. This Agreement shall be governed by, and construed
according to the laws of the State of Delaware.
9.2 Successors and Assigns; Third Party Beneficiaries. Except as
otherwise expressly limited herein, the provisions hereof shall inure to the
benefit of, and be binding upon, the successors (including successor trustees,
in the case of a trustee), permitted assigns, heirs, executors, and
administrators of the parties hereto and the provisions of Section 8 shall inure
to the benefit of each party entitled to indemnification hereunder, including
each indemnified party.
<PAGE>
9.3 Entire Agreement; Amendment and Waiver. This Agreement and the
Ancillary Agreements constitute the full and entire understanding and agreement
between the parties with regard to the subject matters hereof and thereof. Any
term of this Agreement may be amended, and the observance of any term hereof may
be waived (either generally or in a particular instance) only with the written
consent of Purchasers representing sixty six and 2/3 percent (66-2/3%) of the
Class A Common Shares held by the Purchasers at the time of the occurrence of
such waiver or amendment and the written consent of the Company. Any amendment
or waiver effected in accordance with this Section 10.3 shall be binding upon
each of the parties hereto.
9.4 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be (i) mailed by registered or
certified mail, postage prepaid, (ii) delivered by reliable overnight courier
service, or (iii) otherwise delivered by hand or by messenger, addressed (A) if
to a Purchaser, to such Purchaser's address set forth on the Schedule of
Purchasers, or at such other address as such Purchaser shall have furnished to
the Company in writing, with a copy to Finn Dixon & Herling, One Landmark
Square, Stamford, Connecticut 06901, Attention: Michael J. Herling, Esq.,
telecopier no. (203) 348-5777, or (B) if to a GMH Company to P.O. Box 1449, 2255
Industrial Blvd.,Waycross, Georgia 31502-1449, telecopier no. (912)285-1397 or
at such other address as the Company shall have furnished to the Purchasers, and
to SIHI, Cyclorama Building, 369 Franklin Street, Buffalo, New York 14202,
Attention: Gary M. Brost, with a copy to Nixon, Hargrave, Devans & Doyle LLP,
1600 Main Place Tower, Buffalo, New York, 14202-3716, Attention: Charles P.
Jacobs, Esq., telecopier no. (716) 853-8109.
9.5 Delays or Omissions. No delay or omission to exercise any right,
power, or remedy accruing to any party upon any breach or default under this
Agreement, shall be deemed a waiver of any other breach or default theretofore
or thereafter occurring. Any waiver, permit, consent, or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must begin writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any of the parties, shall be
cumulative and not alternative.
9.6 References. Unless the context otherwise requires, any reference
to a "Section" refers to a section of this Agreement. Any reference to "this
Section" refers to the whole number section in which such reference is
contained.
9.7 Severability. If any provision of this Agreement is held to be
unenforceable under applicable law, then such provision shall be excluded from
this Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms. The court in its discretion may substitute for the excluded provision an
enforceable provision which in economic substance reasonably approximates the
excluded provision.
9.8 Fees and Expenses. The Company shall pay the reasonable fees and
disbursements of the law firm of Finn Dixon & Herling, counsel for the
Purchasers incurred in connection with the negotiation, execution and delivery
of this Agreement and the Ancillary Agreements. In addition, the Company shall
pay all expenses incurred by it in connection with the negotiation, execution
and delivery of this Agreement and the Ancillary Agreements and the enforcement
by the Purchasers of any of their respective rights and benefits arising
hereunder or under any Ancillary Agreement against the Company, including,
without limitation, reasonable fees and disbursements of one counsel for the
Purchasers.
9.9 Pronouns. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the identity of the person
or persons may require.
9.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and enforceable against
the parties actually executing such counterpart, and all of which, when taken
together, shall constitute one instrument.
9.11 Remedies. The parties to this Agreement acknowledge and agree
that a breach of any of the covenants of the Company or the Purchasers set forth
in this Agreement may not be compensable by payment of money damages and,
therefore, that the covenants of the foregoing parties
<PAGE>
set forth in this Agreement may be enforced in equity by a decree requiring
specific performance.
9.12 Certain Definitions. As used in this Agreement, the following
terms shall have the following meanings unless the context otherwise required:
(i) "Affiliate" shall mean a person that, directly or
indirectly, controls or is controlled by, or is under common control with, any
Person.
(ii) "Contracts" means and includes all written contracts,
agreements, instruments, indentures, notes, bonds, leases, mortgages, deeds of
trust, franchises, licenses, permits, commitments or arrangements or
understandings.
(iii) "Control" (including, with correlative meaning, the
terms "controlled by" and "under common control with") as used with respect to
any person, means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such person, whether
through ownership of voting securities or by Contract or otherwise.
(iv) "Merger Agreement' shall mean the Merger Agreement
dated as of the Closing Date among Acquisition Co. and GMH.
(v) "Merger Certificate" means, collectively, the (a)
Certificate of Ownership and Merger with respect to the Merger, dated as of the
effective date of the Merger and duly filed with the Secretary of State of
Delaware on such date and (b) Articles of Merger with respect to the Merger,
dated as of the effective date of the Merger and duly filed with the Secretary
of State of Georgia on such date.
(vi) "Merger Instruments" means, collectively, the Merger
Agreement, the Merger Certificate and all other documents and instruments
executed in connection with the Merger.
(vii) "Person" means any individual, corporation, general or
limited partnership, limited liability company, firm, joint venture,
association, enterprise, joint stock company, trust, unincorporated organization
or other entity
(viii) "Senior Lenders" means First Source Financial LLP, as
Lender under the Senior Loan Agreement and any other "Lender" that may after the
Closing Date become an assignee of First Source Financial LLP under the Senior
Loan Agreement.
(ix) "Senior Loan Agreement" means the Secured Credit
Agreement, dated as of December 21, 1995, between GMH and First Source Financial
LLP, as amended from time to time.
(x) "Senior Subordinated Lender" means The Equitable Life
Assurance Society of the United States, a New York insurance company.
(xi) "Senior Subordinated Loan" means the loan in the
original principal amount of $15,000,000 made by Senior Subordinated Lender to
GMH pursuant to the Senior Subordinated Loan Instruments.
(xii) "Senior Subordinated Loan Instruments" means the
Senior Subordinated Note Agreement, Senior Subordinated Note and all other
documents and instrument executed in connection with the Senior
Subordinated Loan.
(xiii) "Senior Subordinated Note" means that certain Senior
Note Due December 21, 2002 in the aggregate principal amount of $17,243,295
issued by Acquisition Co. to Senior Subordinated Lender pursuant to the Senior
Subordinated Note Agreement.
(xiv) "Senior Subordinated Note Agreement" means that certain
Note and Warrant Purchase Agreement dated as of the Closing Date between GMH,
the Company and Senior Subordinated Lender.
(xv) "Subsidiary" shall mean any Person as to which the
Company, directly or indirectly, owns or has the power to vote, or to exercise a
controlling influence with respect to, fifty percent (50%) or more of the
securities of any class of such person, the holders of which class are entitled
to vote for the election of directors (or persons performing similar functions)
of such person.
<PAGE>
Executed effective as of the date first set forth above.
THE GMH COMPANIES: GMH HOLDINGS, INC.
By: /s/ Gary M. Brost
--------------------------------------
Name: Gary M. Brost
Title: President
GENERAL MANUFACTURED HOUSING, INC.
By: /s/ Gary M. Brost
--------------------------------------
Name: Gary M. Brost
Title: President
THE PURCHASERS:
RFE INVESTMENT PARTNERS V, L.P.
By: RFE ASSOCIATES V, L.P.
Its General Partner
By: /s/ illegible
--------------------------------------
A General Partner
STERLING COMMERCIAL CAPITAL, INC.
By: /s/ Harvey Rosenblatt
--------------------------------------
Harvey Rosenblatt
Executive Vice President
State Treasurer of the State of Michigan,
Custodian of the Michigan Public School
Employees' Retirement System, State
Employees' Retirement System, Michigan State
Police Retirement System, and Michigan Judges
Retirement System
By: /s/ Paul E. Rice
--------------------------------------
Name: Paul E. Rice
Title: Administrator, Alternative Investments
Division
<PAGE>
SCHEDULE A
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
No. of No. of No. of
Series A Series B Class A Total Principal Total
Preferred Preferred Common Securities Amount of Junior Note
Shares Shares Shares Purchase Junior Notes Purchase
Purchaser's Name and Address Purchased Purchased Purchased Price Purchased Price
<S> <C> <C> <C> <C> <C> <C>
RFE Investment Partners V, L.P.
36 Grove Street
New Canaan, CT 06840 4,690,351 439,720 714,546 $5,130,071 $2,931,469.00 $2,931,469.00
State of Treasurer of the
State of Michigan, Custodian
430 West Allegan, 3rd Floor
Lansing, MI 48992 3,076,922 288,462 468,750 $3,365,384 $1,923,076.50 $1,923,076.50
Sterling Commercial Capital, Inc.
175 Great Neck Road
Great Neck, NY 11021 232,727 21,818 35,454 $ 254,545 $ 145,454.50 $ 145,454.50
--------- --------- --------- ---------- ------------- -------------
TOTAL 8,000,000 750,000 1,218,750 $8,750,000 $5,000,000.00 $5,000,000.00
</TABLE>
<PAGE>
RESTATED
CERTIFICATE OF INCORPORATION
OF
GMH HOLDINGS, INC.
Pursuant to the provisions of Sections 241 and 245 of the General
Corporation Law of the State of Delaware (the "G.C.L.") the undersigned, Gary M.
Brost and James C. DelZoppo, the President and Assistant Secretary,
respectively, of GMH HOLDINGS, INC., a corporation organized and existing in the
State of Delaware (the "Corporation"), do hereby certify as follows:
FIRST: The name of the Corporation is GMH HOLDINGS, INC.
SECOND: The Certificate of Incorporation of the Corporation was filed
with the Secretary of State on November 20, 1995.
THIRD: This Restated Certificate of Incorporation restates,
integrates and amends the Certificate of Incorporation of the Corporation. This
Restated Certificate of Incorporation amends the authorized capital stock of the
Corporation and the relative rights and preferences thereof. The Corporation has
not received any payment for any of its stock, and this Restated Certificate of
Incorporation has been duly adopted by the Directors of the Corporation in
accordance with the provisions of Sections 241 and 245 of the G.C.L.
FOURTH: The capital of the Corporation will not be reduced under
or by reason of the amendments to the Certificate of Incorporation effected
hereby.
FIFTH: The text of the Certificate of Incorporation is hereby
amended and restated to read as herein set forth in full:
FIRST: The corporate name of the corporation (hereinafter called
the "Corporation") is GMH HOLDINGS, INC.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is located at 32 Loockerman Square, Suite 400, County of Kent,
City of Dover, State of Delaware 19901, and the name of the registered agent of
this Corporation in the State of Delaware at such address is The Prentice-Hall
Corporation/System, Inc.
THIRD: The purposes for which the Corporation is organized shall include
the transaction of any or all lawful business for which corporations may be
organized under the provisions of the General Corporation Law of the State of
Delaware.
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FOURTH: A. The Corporation is authorized to issue four (4) classes of
capital stock, to be designated, respectively, Preferred Stock ("Preferred
Stock"), Class A Common Stock, Class B Common Stock and Class C Common Stock
(collectively, "Common Stock"). The total number of shares of capital stock
which the Corporation is authorized to issue is Seventeen Million, Four Hundred
Sixty-Two Thousand, Five Hundred (17,462,500). The total number of shares of
Preferred Stock which the Corporation shall have the authority to issue is Ten
Million, One Hundred Fifty Thousand (10,150,000). The total number of shares of
Class A Common Stock which the Corporation shall have the authority to issue is
Four Million, Three Hundred Seventy-five Thousand (4,375,000). The total number
of shares of Class B Common Stock which the Corporation shall have the authority
to issue is Seven Hundred Eighty-Seven Thousand, Five Hundred (787,500). The
total number of shares of Class C Common Stock which the Corporation shall have
authority to issue is Two Million, One Hundred Fifty Thousand (2,150,000). The
Preferred Stock shall have a par value of $.001 per share, the Class A Common
Stock shall have a par value of $.001 per share, the Class B Common Stock shall
have a par value of $.001 per share and the Class C Common Stock shall have a
par value of $.001 per share.
B. The Preferred Stock shall be divided into series. The first
series shall consist of 8,000,000 shares and is designated "Series A Redeemable
Preferred Stock" (the "Series A Preferred Stock"). The second series shall
consist of 2,150,000 shares and is designated "Series B Convertible Preferred
Stock" (the "Series B Preferred Stock"). The remaining shares of Preferred Stock
may be issued from time to time in one or more series. The Board of Directors of
the Corporation is authorized, subject to limitations prescribed by law and the
provisions of this Article FOURTH, to provide for the issuance of all or any of
the remaining shares of Preferred Stock in one or more series, and by filing a
certificate pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in each such
series, and to fix the designation, powers, preferences and rights of the shares
of each such series and the qualifications, limitations or restrictions thereof.
The Board of Directors is also expressly authorized to increase or decrease (but
not below the number of shares of such series then outstanding) the number of
shares of any series other than the Series A or Series B Preferred Stock
subsequent to the issue of shares of that series. In case the number of shares
of any such series shall be so decreased, the shares constituting such decrease
shall resume the status that they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
The authority of the Board of Directors with respect to each series shall
include, but not be limited to, determination as to the following:
(a) The number of shares constituting that series and the
distinctive designation of that series;
(b) The dividend rate on the shares of that series, if any,
whether dividends shall be cumulative, and if so, from which date or
dates, and the relative rights of priority, if any, of payment of
dividends on shares of that series;
(c) Whether that series shall have voting rights, in addition to
the voting rights provided by law, and, if so, the terms of such
voting rights;
(d) Whether that series shall have conversion privileges, and,
if so, the terms and conditions of such conversion, including
provision for adjustment of the conversion rate in such events as the
Board of Directors shall determine;
(e) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall be
redeemable, and the amount per share payable in case of redemption,
which amount may vary under different conditions and at different
redemption dates;
(f) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms
and amount of such sinking fund;
(g) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment
of shares of that series; and
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(h) Any other relative rights, preferences and limitations of
that series.
C. The following is a statement of the powers, designations,
preferences, privileges, rights, qualifications, limitations and restrictions in
respect to the Class A Common Stock, Class B Common Stock, Class C Common Stock,
the Series A Preferred Stock and the Series B Preferred Stock of the
Corporation:
1. Identical Rights of Class A, Class B and Class C Common Stock.
Except as otherwise provided in this Article FOURTH, all shares of Class A
Common Stock, Class B Common Stock and Class C Common Stock shall be identical
and shall entitle the holders thereof to the same rights and privileges.
2. Dividends; Other Distributions.
(a) The holders of shares of the Series A Preferred Stock shall
be entitled to receive dividends, out of any assets legally available
therefor, prior and in preference to any declaration or payment of any
dividend on the Series B Preferred Stock, Common Stock or other equity
securities of the Corporation, at the annual rate of twelve cents
($0.12) per share (as adjusted for any combinations, consolidations or
stock distributions or dividends with respect to such shares) payable,
only if and to the extent there exist cumulative earnings sufficient
to pay such dividend, quarterly in arrears on each March 31, June 30,
September 30 and December 31 of each year commencing March 31, 1996.
Such dividends shall accrue on each share from the date of filing this
Restated Certificate of Incorporation with the Secretary of State of
the State of Delaware (the "Original Issue Date") and shall accrue
from day to day, whether or not earned or declared. Such dividends
shall be cumulative so that if such dividends in respect of any
previous or current quarterly dividend period, at the annual rate
specified above, shall not have been paid or declared and a sum
sufficient for the payment thereof set apart, the deficiency shall
first be fully paid before any dividend or other distribution shall be
paid on or declared and set apart for the Series B Preferred Stock,
the Common Stock or any other equity securities of the Corporation.
(b) The holders of shares of Series B Preferred Stock shall not
be entitled to receive dividends on such shares.
(c) No dividends or distributions may be declared and paid upon
shares of Common Stock in any fiscal year of the Corporation so long
as any Series A Preferred Stock or Series B Preferred Stock remains
outstanding. When and as dividends are declared on the Common Stock,
whether payable in cash, in property or in securities of the
Corporation, the holders of the Common Stock shall be entitled to
share equally, share for share, in such dividends, except that if
dividends are declared which are payable in shares of Common Stock,
dividends shall be declared which are payable at the same rate on all
classes of stock, but such dividends shall be payable only in shares
of Class A Common Stock to holders of Class A Common Stock, shall be
payable only in shares of Class B Common Stock to holders of Class B
Common Stock and shall be payable only in shares of Class C Common
Stock to holders of Class C Common Stock.
(d) If the Corporation shall in any manner subdivide (by stock
split, stock dividend or otherwise) or combine (by reverse stock split
or otherwise) the outstanding shares of one class of Common Stock, the
outstanding shares of the other class of Common Stock shall be
proportionately subdivided or combined.
3. Liquidation Preference. In the event of any liquidation,
dissolution, or winding up of the Corporation, either voluntary or involuntary,
distributions to the shareholders of the Corporation shall be made in the
following manner:
(a) The holders of the Series A Preferred Stock shall be
entitled to receive, prior and in preference to any distribution of
any of the assets or surplus funds of the Corporation to the holders
of the Series B Preferred Stock or the Common Stock, by reason of
their ownership of such stock, (i) the amount of $1.00 per share (the
"Series A Original Cost") for each share of Series
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A Preferred Stock then held by them, adjusted for any combinations,
consolidations, stock splits, or stock distributions or dividends with
respect to such shares, plus (ii) an amount equal to the accrued but
unpaid dividends whether or not earned or declared, on such share of
Series A Preferred Stock (such sum being referred to herein as the
"Series A Liquidation Value"). The assets and funds thus distributed
among the holders of the Series A Preferred Stock shall be distributed
among the holders of the Series A Preferred Stock in proportion to the
full Series A Liquidation Value each such holder is otherwise entitled
to receive in accordance with the preceding sentence.
(b) If, upon the completion of the distributions contemplated by
Section C.3(a) of this Article FOURTH, assets and funds remain
available for distribution by the Corporation, the holders of the
Series B Preferred Stock and Class C Common Stock shall be entitled to
receive, prior and in preference to any distribution of any of the
assets or surplus funds of the Corporation to the holders of the Class
A and Class B Common Stock, by reason of their ownership of such
stock, (i) the amount of $1.00 per share (the "Series B and Class C
Liquidation Value") for each share of Series B Preferred Stock and
Class C Common Stock then held by them, adjusted for any combinations,
consolidations, stock splits, or stock distributions or dividends with
respect to such shares. The assets and funds thus distributed among
the holders of the Series B Preferred Stock and Class C Common Stock
shall be distributed among the holders of the Series B Preferred Stock
and Class C Common Stock in proportion to the full Series B and Class
C Liquidation Value each such holder is otherwise entitled to receive
in accordance with the preceding sentence.
(c) If, upon the completion of the distributions contemplated by
Sections C.3(a) and (b) of this Article FOURTH, assets and funds
remain available for distribution by the Corporation, the entire
remaining assets and funds of the Corporation legally available for
distribution, if any, shall be distributed among the holders of the
Series B Preferred Stock and the Common Stock in proportion to the
number of shares of the Series B Preferred Stock and of the Common
Stock then held by them such that each share of Series B Preferred
Stock and each share of Common Stock shall be entitled to a ratable
distribution of such assets and funds.
(d) For purposes of this Section C.3, unless otherwise approved
by the holders of at least 66-2/3% of the then outstanding Series A
Preferred Stock voting as a class, (i) any acquisition of the
Corporation by means of merger of the Corporation with or into any
other corporation or other entity or person or other form of corporate
reorganization in which the Corporation shall not be the continuing or
surviving entity of such merger or reorganization (other than a mere
reincorporation transaction) or a transaction in which the Corporation
is the surviving entity but the shares of the Corporation's capital
stock outstanding immediately prior to the transaction are exchanged
or converted by virtue of the transaction into other property, whether
in the form of securities, cash or otherwise, or (ii) a sale of all or
substantially all of the assets of the Corporation shall be treated as
a liquidation, dissolution or winding up of the Corporation and shall
entitle the holders of Series A Preferred Stock, the Series B
Preferred Stock and the Class C Common Stock to receive at closing, in
cash, securities or other property (valued as provided in Section
C.3(e)) in amounts as specified in Sections C.3(a) and (b) of this
Article FOURTH.
(e) Whenever the distribution provided for in this Section C.3
shall be payable in securities or property other than cash, the "fair
value" of the assets or property to be distributed in such event shall
be determined in good faith by the Board of Directors of the
Corporation.
4. Voting Rights.
(a) General Voting Rights. Except as otherwise provided herein
and in Section C.7 of this Article FOURTH, and except as otherwise
required by law, (i) the holder of each share of Class A Common Stock
and Class C Common Stock issued and outstanding
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shall have one vote per share, and (ii) the holder of each share of
Series B Preferred Stock shall be entitled to the number of votes as
is equal to the number of shares of Class C Common Stock into which
such holder's shares of Series B Preferred Stock could be converted at
the record date for determination of the shareholders entitled to vote
on such matters, or, if no such record date is established, at the
date such vote is taken or any written consent of stockholders is
solicited, and shall have voting rights and powers equal to the voting
rights and powers of the Class C Common Stock (except as otherwise
expressly required by law), such votes to be counted together with all
other shares of stock of the Corporation having general voting power
and not separately as a class. Except as expressly provided herein,
the Class B Common Stock and the Series A Preferred Stock shall be
non-voting. Holders of Common Stock, Series A Preferred Stock and
Series B Preferred Stock shall be entitled to notice of any
stockholders' meeting in accordance with the By-laws of the
Corporation. Fractional votes by the holders of Series B Preferred
Stock, as the case may be, shall not, however, be permitted, and any
fractional voting rights resulting from the above formula (after
aggregating all shares into which shares of Series B Preferred Stock
held by each holder could be converted) shall be rounded to the
nearest lower whole number.
(b) Special Voting Rights. No amendment to, or modification or
waiver of, any provision of this Certificate of Incorporation or the
By-Laws of the Corporation that (i) alters or changes the powers,
preferences or rights of the shares of Class B Common Stock or (ii)
modifies the provisions of Section C.5(b)(iii) of this Article FOURTH
as to shares of Class A Common Stock shall be effective without the
vote as a separate class of the holders of at least 66-2/3% of the
shares of the Class B Common Stock.
(c) Meeting Procedures. At every meeting of the holders of the
Class A and Class C Common Stock, such holders shall vote together as
a class. At every meeting of the holders of the Class A, Class B and
Class C Common Stock at which the holders of Class B Common Stock are
entitled to vote on any matter, such holders shall, except as
otherwise provided in subdivision (b), vote together as a single
class.
(d) Board Voting Matters. The Board of Directors shall consist
of seven (7) members. The holders of Series A Preferred Stock, as a
class, shall be entitled to elect two (2) members of the Board of
Directors. The holders of the Series B Preferred Stock and Class C
Common Stock, voting together as a class, shall be entitled to elect
four (4) members of the Board of Directors. The holders of the Class A
Common Stock as a class, shall be entitled to elect the remaining
member of the Board of Directors.
(e) Board Vacancy Procedures. In the case of any vacancy in the
office of a director occurring among the directors elected by the
holders of the Series A Preferred Stock, Series B Preferred Stock
and/or Class C Common Stock and Class A Common Stock, as the case may
be, pursuant to Section C.4(d) of this Article FOURTH, the Corporation
shall, promptly, but in any event within five (5) days after the
creation of such vacancy, call a special meeting of stockholders for
the purpose of filling any vacancy created in the Board, in accordance
with the By-Laws of the Corporation. The Corporation shall immediately
thereafter give the stockholders of the Corporation notice of such
special meeting. At such special meeting, the stockholders entitled to
elect the director(s) as to which the vacancy relates shall be
entitled to elect a director to fill each such vacancy for the
unexpired term of such Board seat, and such director or directors
shall serve until the next annual meeting of stockholders or until his
successor or successors shall have been duly elected and shall
qualify. Any director who shall have been elected by the holders of
the Series A Preferred Stock, Series B Preferred Stock and/or Class C
Common Stock or Class A Common Stock, as the case may be, or any
director so elected as provided in the preceding sentence hereof, may
be removed during the aforesaid term of office, whether with or
without cause, only by the affirmative vote of the holders of a
majority of the Series A Preferred Stock, Series B Preferred Stock
and/or Class C Common Stock or Class A Common Stock, as the case may
be, that elected such director.
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(f) So long as any shares of the Series A Preferred Stock remain
outstanding, in the event of (i) a failure of the Corporation to
redeem shares of Series A Preferred Stock as required pursuant to
Section C.6 of this Article FOURTH; (ii) a failure of the Corporation
to pay dividends on the Series A Preferred Stock as provided in
Section C.2 of this Article FOURTH and such failure continues such
that the Corporation shall have accrued and unpaid dividends in
respect of the Series A Preferred Stock in excess of $2,500,000; or
(iii) the Corporation or any subsidiary of the Corporation shall
default in the payment of any of the Corporation's (or such
subsidiary's) indebtedness for borrowed money (including capitalized
leases) in an amount in excess of $10,000, and such default shall
continue unwaived or uncured for a period of 180 days or more (the
"Events of Default"), then the holders of the Series A Preferred
Stock, as a class, shall (immediately upon the giving of written
notice to the Corporation by the holders of a majority of the then
outstanding shares of Series A Preferred Stock) be entitled to elect
the smallest number of directors that shall constitute a majority of
the authorized number of directors of the Corporation, and the holders
of the Class A Common Stock, Class C Common Stock and Series B
Preferred Stock, as a class, voting together as a single class, shall
be entitled to elect the remaining members of the Board of Directors
in accordance with the procedures set forth in Section C.4(g). Upon
the election by the holders of the Series A Preferred Stock, as a
class, of the directors they are entitled to elect as provided in the
immediately preceding sentence, the terms of office of all persons who
were theretofore directors of the Corporation shall forthwith
terminate, whether or not the holders of the Class A Common Stock,
Class C Common Stock and Series B Preferred Stock, voting together as
a single class, shall then have elected the remaining directors of the
Corporation. If, after the election of a new Board of Directors
pursuant to this Section C.4(f), the Events of Default are cured
(which for purposes of clause (ii) of this subparagraph (f) shall mean
that accrued and unpaid dividends on the Series A Preferred Stock in
excess of $500,000 shall have been paid to the holders thereof and for
purposes of clause (iii) of this subparagraph (f) shall mean that no
default in the payment of any of the Corporation's (or such
subsidiary's) indebtedness for borrowed money shall exist), then the
holders of the Series A Preferred Stock shall be divested of the
special voting rights specified in this section, and the voting
procedures set forth in Section C.4(d) of this Article FOURTH shall
immediately, without any further action, apply. However, the special
voting rights of this section shall again accrue to the holders of the
shares of the Series A Preferred Stock, as a class, in case of any
later occurrence of an Event of Default. Upon the termination of any
such special voting rights as hereinabove provided, the Board of
Directors shall promptly call a special meeting of the stockholders at
which all directors will be elected in accordance with the provisions
of Section C.4(d) of this Article FOURTH, and the terms of office of
all persons who are then directors of the Corporation shall terminate
immediately upon the election of their successors.
(g) Whenever under the provisions of Section C.4(f) hereof, the
right shall have accrued to the holders of the Series A Preferred
Stock, as a class, to elect a majority of the Corporation's directors,
the Board of Directors shall, within ten (10) days after delivery to
the Corporation at its principal office of a request to such effect by
the holders of a majority of the then outstanding shares of the Series
A Preferred Stock, call a special meeting of the stockholders for the
election of directors, to be held upon not less than ten (10) nor more
than twenty (20) days' notice to such holders. If such notice of
meeting is not given within the ten (10) days required above, the
holders of Series A Preferred Stock requesting such meeting may also
call such meeting and for such purposes shall have access to the stock
books and records of the Corporation. At any meeting so called or at
any other meeting held for the election of directors while the holders
of shares of Series A Preferred Stock shall have the voting power
provided in Section C.4(f), the holders of a majority of the shares of
Series A Preferred Stock present in person or by proxy or voting by
written consent, shall be sufficient to constitute a quorum for the
election of directors as herein provided. In the case of any vacancy
in the
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office of a director occurring among the directors elected by the
holders of Series A Preferred Stock pursuant to Section C.4(f), the
remaining directors so elected by that class may by affirmative vote
of a majority thereof (or the remaining director so elected if there
be but one) elect a successor or successors to hold office for the
unexpired term of the director or directors whose place or places
shall be vacant, provided that if there are no remaining directors so
elected by that class, the vacancies may be filled by the affirmative
vote of the holders of a majority of the shares of Series A Preferred
Stock given either at a special meeting of such stockholders duly
called for that purpose or pursuant to a written consent of
stockholders. Any directors who shall have been elected by the holders
of Series A Preferred Stock or by any directors so elected as provided
in the next preceding sentence hereof may be removed during the
aforesaid term of office, either with or without cause, by, and only
by, the affirmative vote of the holders of a majority of the shares of
the Series A Preferred Stock who elected such director or directors,
given either at a special meeting of such stockholders duly called for
that purpose or pursuant to a written consent of stockholders, and any
vacancy thereby created may be filled by the holders of Series A
Preferred Stock represented at such meeting or pursuant to such
written consent.
5. Conversion.
(a) The holders of the Series B Preferred Stock and Class C
Common Stock shall have conversion rights as follows:
(i) Right to Convert. (A) Each share of Series B Preferred Stock
shall be convertible, at the option of the holder thereof, at any time
after the date of issuance of such share at the office of the
Corporation or any transfer agent for the Series B Preferred Stock,
into such number of fully paid and nonassessable shares of Class C
Common Stock as is determined by dividing the initial Series B
Conversion Price by the Series B Conversion Price then in effect. The
"initial Series B Conversion Price" for the Series B Preferred Stock
shall be $1.00. The initial Series B Conversion Price shall be subject
to adjustment as hereinafter provided. No amount shall be payable by a
shareholder in respect of the conversion of any share of Series B
Preferred Stock.
(ii) Automatic Conversion.
(A) Each share of Series B Preferred Stock shall be
converted into one or more share(s) of Class A Common Stock at
the then-effective Series B Conversion Price for such share of
Series B Preferred Stock, at the option of the Corporation,
immediately upon the closing of a firm commitment underwritten
public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended (the "Securities
Act"), covering the offer and sale of shares of the Corporation's
Common Stock for the account of the Corporation and/or selling
stockholders to the public at a price per share of not less than
$5.00 per share (appropriately, adjusted for any
recapitalization, stock split, reverse stock split, stock
dividend or the like) and resulting in aggregate net proceeds to
the Corporation (after deducting underwriters' discounts and
expenses relating to the issuance, including fees of the
Corporation's counsel) of not less than $10,000,000 (a "Qualified
Offering") if and only if the holders of the Series B Preferred
Stock are first paid their liquidation preference provided for in
Section C.3(b) hereof.
(B) Each share of Class C Common Stock shall be converted
into one share of Class A Common Stock, at the option of the
Corporation, immediately upon the closing of a Qualified Offering
if and only if the holders of the Class C Common Stock are first
paid their liquidation preference provided for in Section C.3(b)
hereof.
(iii) Mechanics of Conversion. No fractional shares of Class
A Common Stock or Class C Common Stock shall be issued upon conversion
of Series B Preferred Stock. All shares of Class A Common Stock or
Class C Common Stock (including fractions thereof) issuable upon
conversion of more than one
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share of Series B Preferred Stock by a holder thereof shall be
aggregated for purposes of determining whether the conversion would
result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the
issuance of a fraction of a share of Class A Common Stock or Class C
Common Stock, the Corporation shall, in lieu of issuing any fractional
shares to which the holder would be otherwise entitled, pay cash equal
to the fair market value of such fractional share on the date of
conversion, which fair market value shall be determined in good faith
by the Board of Directors. Before any holder of Series B Preferred
Stock shall convert into full shares of Class A Common Stock or Class
C Common Stock and to receive certificates therefor, such holder shall
surrender the certificate or certificates therefor, duly endorsed, at
the office of the Corporation or of any transfer agent for the Series
B Preferred Stock, and shall give written notice to the Corporation at
such office that such holder elects to convert the same. The
Corporation shall, as soon as practicable thereafter, issue and
deliver at the office of the Corporation or at such transfer agent's
office to such holder of Series B Preferred Stock, (i) a certificate
or certificates for the number of shares of Class A Common Stock or
Class C Common Stock to which such holder shall be entitled as
aforesaid, and (ii) cash or a check payable to the holder of such
Series B Preferred Stock in the amount of any cash amounts payable as
the result of a conversion into fractional shares of Class A Common
Stock or Class C Common Stock. Such conversion shall be deemed to have
been made immediately prior to the close of business on the date of
such surrender of the Series B Preferred Stock to be converted, or, in
the case of a conversion at the option of the Corporation pursuant to
Section C.5(a)(ii), immediately prior to the closing of the Qualified
Offering, and the person or persons entitled to receive the Class A
Common Stock or Class C Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of
such Class A Common Stock or Class C Common Stock on the date of such
conversion. If the conversion is in connection with a Qualified
Offering the conversion shall be conditioned upon the closing with the
underwriter of the sale of securities pursuant to such offering, in
which event the person(s) entitled to receive the Class A Common Stock
issuable upon such conversion of the Series B Preferred Stock shall
not be deemed to have converted such Series B Preferred Stock, until
immediately upon the closing of such sale of securities.
(iv) Adjustments to Conversion Price for Certain Issues.
(A) Adjustments for Subdivisions, Combinations or
Consolidation of Class A or Class C Common Stock. In the event
the Corporation at any time or from time to time after the
Original Issue Date shall declare or pay, without consideration,
any dividend on the Class A Common Stock or Class C Common Stock
payable in Class A Common Stock or Class C Common Stock or in any
right to acquire Class A Common Stock or Class C Common Stock for
no consideration, or shall effect a subdivision of the
outstanding shares of Class A Common Stock or Class C Common
Stock into a greater number of shares of Class A Common Stock or
Class C Common Stock (by stock split, reclassification or
otherwise than by a payment of a dividend in Class A Common Stock
or Class C Common Stock or in any right to acquire Class A Common
Stock or Class C Common Stock), or in the event the outstanding
Class A Common Stock or Class C Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser
number of shares of Class A Common Stock or Class C Common Stock,
then the Series B Conversion Price in effect immediately prior to
such event shall, concurrently with the effectiveness of such
event, be proportionately decreased or increased as appropriate.
In the event that the Corporation shall declare or pay, without
consideration, any dividend on the Class A Common Stock or Class
C Common Stock payable in any right to acquire Class A Common
Stock or Class C Common Stock for no consideration, then the
Corporation shall be deemed to have made a dividend payable in
Class A Common Stock or Class C Common Stock in an amount of
shares equal to the maximum number of shares issuable upon
exercise of such rights to acquire Class A Common Stock or Class
C Common Stock.
<PAGE>
(B) Adjustments for Reclassification, Exchange and
Substitution. If the Class A Common Stock or Class C Common Stock
issuable upon conversion of the Series B Preferred Stock shall be
changed into the same or a different number of shares of any
other class or classes of stock, whether by capital
reorganization, reclassification or otherwise (other than a
subdivision or combination of shares provided for above), the
Series B Conversion Price then in effect for each share of the
Series B Preferred Stock, shall, concurrently with the
effectiveness of such reorganization, reclassification or other
event, be proportionately adjusted such that the Series B
Preferred Stock shall be convertible into, in lieu of the number
of shares of Class A Common Stock or Class C Common Stock which
the holders would otherwise have been entitled to receive, that
number of shares of such other class or classes of stock or other
securities equivalent to the number of shares of Class A Common
Stock or Class C Common Stock that would have been subject to
receipt by the holders upon conversion of the Series B Preferred
Stock immediately before that change.
(v) No Impairment. The Corporation shall not, by amendment of
its Certificate of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale
of securities or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms to be observed or
performed hereunder by the Corporation but shall at all times in good
faith assist in the carrying out of all the provisions of this Section
C.5 of this Article FOURTH and in the taking of all such action as may
be necessary or appropriate in order to protect the conversion rights
of the holders of the Series B Preferred Stock against impairment.
(vi) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Series B Conversion Price pursuant
to this Section C.5 of this Article FOURTH, the Corporation at its
expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to each holder of shares
of Series B Preferred Stock, a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Corporation shall, upon
the written request at any time of any holder of Series B Preferred
Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (x) such adjustments and readjustments, (y)
the Series B Conversion Price at the time in effect, and (z) the
number of shares of Class A Common Stock or Class C Common Stock and
the amount, if any, of other property which at the time would be
received upon the conversion of shares of Series B Preferred Stock.
(vii) Notices of Record Date. In the event that the Corporation
shall propose at any time:
(A) to declare any dividend or distribution upon its
Class A Common Stock or Class C Common Stock, whether or not a
regular cash dividend or a dividend payable in shares of Class A
Common Stock or Class C Common Stock, and whether or not out of
earnings or earned surplus;
(B) to offer for subscription pro rata to the holders of
any class or series of its stock any additional shares of stock
of any class or series or other rights;
(C) to effect any reclassification or recapitalization of
its Class A Common Stock or Class C Common Stock outstanding
involving a change in the Class A Common Stock or Class C Common
Stock; or
(D) to merge or consolidate with or into any other
corporation, or sell, lease or convey all or substantially all
its property or business, or to liquidate, dissolve or wind up or
to enter into any other transaction contemplated by Section C.3
(d) (i) or (ii) ;
then, in connection with each such event, the Corporation
<PAGE>
shall send to the holders of the Series A Preferred Stock and
Series B Preferred Stock:
(1) at least 20 days' prior written notice of the
date on which a record shall be taken for such dividend,
distribution or subscription rights (and specifying the date
on which the holders of Class A Common Stock or Class C
Common Stock shall be entitled thereto) or for determining
rights to vote in respect of the matters referred to in (C)
and (D) above; and
(2) in the case of the matters referred to in (C) and
(D) above, in the event a record date is taken with respect
to any such matter, at least 20 days' prior written notice
of such record date or, if no such record date is taken, at
least 20 days' prior written notice of the date when such
matters shall take place (and specifying the date on which
the holders of Class A Common Stock or Class C Common Stock
shall be entitled to exchange their shares of Class A Common
Stock or Class C Common Stock for securities or other
property deliverable upon the occurrence of such event).
Each such written notice shall be delivered personally or sent by
first class mail, postage prepaid, addressed to the holders of
the Series A Preferred Stock and/or Series B Preferred Stock, as
the case may be, at the address for each such holder as shown on
the books of the Corporation.
(viii) Issue Taxes. The Corporation shall pay any and all
issue and other taxes that may be payable in respect of any issue or
delivery of shares of Class A Common Stock on conversion of Series B
Preferred Stock pursuant hereto; provided, however, that the
Corporation shall not be obligated to pay any transfer taxes resulting
from any transfer requested by any holder in connection with any such
conversion.
(ix) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Class A Common Stock and Class C
Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series B Preferred Stock, such number of its shares
of Class A Common Stock and Class C Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding shares
of the Series B Preferred Stock; and if at any time the number of
authorized but unissued shares of Class A Common Stock or Class C
Common Stock shall not be sufficient to effect the conversion of all
of the then outstanding shares of the Series B Preferred Stock, the
Corporation shall take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued
shares of Class A Common Stock or Class C Common Stock to such number
of shares as shall be sufficient for such purpose, including, without
limitation, utilizing its best efforts to obtain the requisite
stockholder approval of any necessary amendment to the Certificate of
Incorporation.
(b) The holders of Class A and Class B Common Stock shall have
conversion rights as follows:
(i) Mandatory Conversion of Class B Common Stock Upon Certain
Transfers. Immediately upon the transfer of any shares of Class B
Common Stock to any Person other than an Insurance Company Affiliate
of the holder of such shares, such shares shall, automatically and
without any action on the part of the holder thereof, be converted
into the same number of shares of Class A Common Stock as the number
of shares of Class B Common Stock so being transferred. Upon the
surrender for registration of transfer of any certificates which prior
to the transfer thereof represented shares of Class B Common Stock,
(A) the Corporation shall issue one or more new certificates, in such
denominations as may be requested, for the same aggregate number of
shares of Class A Common Stock represented by the certificates so
surrendered, and registered as the holder thereof may request, and (B)
the rights of the holder of such shares of Class B Common Stock shall
cease with respect to the number of shares so transferred and the
person or persons in whose name or names the
<PAGE>
certificates for shares of Class A Common Stock are to be issued upon
such transfer shall be deemed to have become the holders of record of
the shares of Class A Common Stock represented thereby.
(ii) Mandatory Conversion of Class B Common Stock upon
Registration and Sale of Securities. Immediately upon the sale of
shares of Common Stock pursuant to an effective registration statement
filed under Section 5 of the Securities Act, each share of Class B
Common Stock sold pursuant to such registration statement shall,
automatically and without any action on the part of the holder
thereof, be converted into a share of Class A Common Stock. Upon the
surrender for registration of transfer of any certificate or
certificates which prior to the registered sale thereof represented
shares of Class B Common Stock, (A) the Corporation shall issue one or
more new certificates, in such denominations as may be requested, for
the same aggregate number of shares of Class A Common Stock
represented by the certificates so surrendered, and registered as the
purchaser of such shares of Class B Common Stock may request and (B)
the rights of the holder of such shares of Class B Common Stock shall
cease with respect to the number of shares so sold and the person or
persons in whose name or names the certificates for share of Class A
Common Stock are to be issued upon such sale shall be deemed to have
become the holder or holders of record of the shares of Class A Common
Stock represented thereby.
(iii) Mandatory Conversion of Class A Common Stock Upon
Certain Transfers. Immediately upon the transfer of any shares of
Class A Common Stock to any person who is a holder of Class B Common
Stock, such shares of Class A Common Stock shall, automatically and
without any action on the part of the holder thereof, be converted
into the same number of shares of Class B Common Stock as the number
of shares of Class A Common Stock so being transferred. Upon the
surrender for registration of transfer of any certificates which prior
to the transfer thereof represented shares of Class A Common Stock,
(A) the Corporation shall issue one or more new certificates, in such
denominations as may be requested, for the same aggregate number of
shares of Class A Common Stock represented by the certificates so
surrendered, and registered as the purchaser of such shares may
request and (B) the rights of the holder of such shares of Class A
Common Stock shall cease with respect to the number of shares so sold
and the person or persons in whose name or names the certificates for
shares of Class B Common Stock are to be issued upon such sale shall
be deemed to have become the holder or holders of record of the shares
of Class B Common Stock represented thereby.
(iv) Reservation of Shares, Validity, etc. The Corporation shall
at all times reserve and keep available out of its authorized but
unissued shares of Class A Common Stock, or its treasury shares,
solely for the purpose of issue upon the conversion of the Class B
Common Stock as provided in this Section C.5(b), such number of shares
of Class A Common Stock as are then issuable upon the conversion of
all outstanding shares of Class B Common Stock. The Corporation shall
at all times reserve and keep available out of its authorized but
unissued shares of Class B Common Stock, or its treasury shares,
solely for the purpose of issue upon the conversion of the Class A
Common Stock as provided in this Section C.5(b), such number of shares
Class B Common Stock as are then issuable upon the conversion of all
outstanding shares of Class A Common Stock. The Corporation covenants
that all shares of Class A Common Stock and Class B Common Stock which
are issuable upon conversion shall, when issued, be duly and validly
issued, fully paid and nonassessable and free of all liens and
charges. The Corporation shall take all such action as may be
necessary to assure that all such shares of Class A Common Stock or
Class B Common Stock may be so issued without violation of any law or
any regulation, rule or other requirement of any governmental
authority applicable to the Corporation or any requirement of any
securities exchange upon which shares of Class A Common Stock or Class
B Common Stock may be listed. The Corporation shall not take any
action which would affect the number of shares of Class A Common Stock
or Class B Common Stock outstanding or issuable for any purposes
unless immediately following such action the Corporation would have
authorized but unissued shares of Class A Common Stock and Class B
Common Stock, or treasury shares, not then reserved or
<PAGE>
required to be reserved for any purpose other than the purpose of
issue upon conversion of Class B Common Stock or Class A Common Stock,
as the case may be, sufficient to meet the reservation requirements of
the first two sentences of this subdivision (v).
(v) Registration and Listing. If any shares of Class A Common
Stock or Class B Common Stock required to be reserved for purposes of
conversion hereunder require, before such shares may be issued upon
conversion, registration with or approval of any governmental
authority under any federal or state law (other than any registration
under the Securities Act or any state securities law required by
reason of any transfer involved in such conversion), or listing on any
domestic securities exchange, the Corporation shall, at its expense
and as promptly as possible, use its best efforts to cause such shares
to be duly registered or approved or listed, as the case may be.
(vi) Charges. The issue of certificates for shares of Class A
Common Stock upon conversion of shares of Class B Common Stock and
certificates for shares of Class B Common Stock upon conversion of
shares of Class A Common Stock shall be made without charge to the
holders of such shares for any issue tax in respect thereof or other
costs incurred by the Corporation in connection with such conversion
and the related issue of shares of Class A Common Stock and or Class B
Common Stock, as the case may be; provided that the Corporation shall
not be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of any certificate in a
name other than that of the holder of the Class B Common Stock
converted or the holder of the Class A Common Stock converted, as the
case may be.
(vii) Definitions. As used in this Section C.5(b), the
following terms shall have the following meanings:
Affiliate of a Person means another Person that directly,
or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with such Person and shall
include any portfolio or investment fund of which such Person is the
sole investment advisor. The term "control" means possession, directly
or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of
voting securities, by contract or otherwise.
Insurance Company Affiliate of a Person means an Affiliate
of such Person that is an insurance company subject to regulation as
such under the insurance laws of the jurisdiction of its organization
or in which it conducts business.
Person means an individual, a partnership, an association,
a joint venture, a corporation, a business, a trust, an unincorporated
organization or a government or any department, agency or subdivision
thereof.
6. Redemption.
(a) The Corporation shall redeem, from any source of funds
legally available therefor, all of the outstanding Series A Preferred
Stock, on December 31, 2003 (the "Series A Redemption Date"). The
Corporation shall effect such redemption by paying in cash in exchange
for the shares of Series A Preferred Stock to be redeemed a sum equal
to the Series A Original Cost (as adjusted for any stock dividends,
combinations or splits with respect to such shares) plus all
accumulated but unpaid dividends on such shares (the "Series A
Redemption Price").
(b) At least 15 but no more than 30 days prior to the Series A
Redemption Date written notice shall be mailed, first class postage
prepaid, to each holder of record (at the close of business on the
business day next preceding the day on which notice is given) of the
Series A Preferred Stock to be redeemed, at the address last shown on
the records of the Corporation for such holder, notifying such holder
of the redemption to be effected, specifying the number of shares to
be redeemed from such holder, the Series A Redemption Date, the Series
A Redemption Price, the place at which payment may be obtained and
calling upon such holder to surrender to the Corporation, in the
<PAGE>
manner and at the place designated his certificate or certificates
representing the shares to be redeemed (the "Redemption Notice").
Except as provided in Section C.6(c), on or after the Series A
Redemption Date, each holder of Series A Preferred Stock to be
redeemed shall surrender to this Corporation the certificate or
certificates representing such shares, in the manner and at the place
designated in the Redemption Notice, and thereupon the Series A
Redemption Price of such shares shall be payable to the order of the
person whose name appears on such certificate or certificates as the
owner thereof and each surrendered certificate shall be cancelled. In
the event less than all the shares represented by any such certificate
are redeemed, a new certificate shall be issued representing the
unredeemed shares.
(c) From and after the Series A Redemption Date, unless there
shall have been a default in payment of the Series A Redemption Price,
all rights of the holders of shares of Series A Preferred Stock
designated for redemption in the Redemption Notice as holders of
Series A Preferred Stock (except the right to receive the Series A
Redemption Price without interest upon surrender of their certificate
or certificates) shall cease with respect to such shares, and such
shares shall not thereafter be transferred on the books of the
Corporation or be deemed to be outstanding for any purpose whatsoever.
If the funds of the Corporation legally available for redemption of
shares of Series A Preferred Stock on the Series A Redemption Date are
insufficient to redeem the total number of shares of Series A
Preferred Stock to be redeemed on such date, those funds which are
legally available will be used to redeem the maximum possible number
of such shares ratably among the holders of such shares to be redeemed
based upon their holdings of Series A Preferred Stock. The shares of
Series A Preferred Stock not redeemed shall remain outstanding and
entitled to all the rights and preferences provided herein. At any
time thereafter when additional funds of the Corporation are legally
available for the redemption of shares of Series A Preferred Stock
such funds will immediately be used to redeem the balance of the
shares which the Corporation has become obliged to redeem on the
Series A Redemption Date, but which it has not redeemed.
(d) On or prior to the Series A Redemption Date, the Corporation
shall deposit the Series A Redemption Price of all shares of Series A
Preferred Stock designated for redemption in the Redemption Notice and
not yet redeemed with a bank or trust corporation having aggregate
capital and surplus in excess of $100,000,000 as a trust fund for the
benefit of the respective holders of the shares designated for
redemption and not yet redeemed, with irrevocable instructions and
authority to the bank or trust corporation to pay the Series A
Redemption Price for such shares to their respective holders on or
after the Series A Redemption Date upon receipt of notification from
the Corporation that such holder has surrendered his share certificate
to the Corporation pursuant to Section C.6(b) above. As of the Series
A Redemption Date, the deposit shall constitute full payment of the
shares to their holders, and from and after the Series A Redemption
Date the shares so called for redemption shall be redeemed and shall
be deemed to be no longer outstanding, and the holders thereof shall
cease to be stockholders with respect to such shares and shall have no
rights with respect thereto except the rights to receive from the bank
or trust corporation payment of the Series A Redemption Price of the
shares, without interest, upon surrender of their certificates
therefor.
7. Protective Provisions. In addition to any other rights provided
by law, so long as any shares of Series A Preferred Stock shall be outstanding,
the Corporation shall not, without first obtaining the affirmative vote or
written consent of the holders of not less than (a) 66.67% of such outstanding
shares of Series A Preferred Stock with respect to clauses (ii), (iv), (vi),
(vii), (viii) and (ix) below and (b) 50.1%. of such outstanding shares of Series
A Preferred Stock with respect to clauses (i), (iii), (v), (x), (xi) and (xii)
below:
(i) pay or declare any dividend on the Corporation's Common
Stock, Series B Preferred Stock or any other equity securities
(including options or warrants) of the Corporation (other than
the Series A Preferred Stock) or redeem, purchase or otherwise
acquire for value (or pay into
<PAGE>
or set aside for a sinking fund for such purpose) any share or
shares of the Corporation's Common Stock, Series B Preferred
Stock or any other equity securities of the Corporation, or apply
any of the Corporation's assets to the redemption, retirement,
purchase or acquisition, directly or indirectly, through
subsidiaries or otherwise, of any of the Corporation's Common
Stock, Series B Preferred Stock, or other equity securities of
the Corporation, except for (x) redemptions of Series A Preferred
Stock as provided in Section C.6 hereof, and (y) repurchases of
Common Stock pursuant to that certain Investors' Rights Agreement
dated as of the Original Issue Date among the Corporation, and
the other parties thereto (the "Investors' Rights Agreement");
(ii) authorize, approve or consummate any transaction or
series of transactions contemplated by Section C.3(d) of this
Article FOURTH with respect to the Corporation or any subsidiary
of the Corporation;
(iii) make any loan, advance or capital contribution to, or
investment in, or permit or cause any subsidiary of the
Corporation to make any loan, advance or capital contribution to,
or investment in any of the officers, directors, employees,
providers, consultants, agents or other representatives of the
Corporation, other than (A) travel or salary advances in the
ordinary course of business in a manner consistent with past
practice, and (B) loans evidenced by promissory notes in
connection with the purchase of Common Stock under employment or
restrictive stock purchase agreements entered into by the
Corporation or the Investors' Rights Agreement;
(iv) incur or assume or permit to exist or permit or cause
any subsidiary of the Corporation to incur or assume or permit to
exist any indebtedness for borrowed money (including capitalized
leases) other than amounts owing under (A) that certain Secured
Credit Agreement dated as of December 21, 1995 by and between
General Manufactured Housing, Inc. ("Subsidiary") and First Source
Financial LLP, (B) that certain Note and Warrant Purchase
Agreement dated as of December 21, 1995 by and between the
Corporation, Subsidiary and The Equitable Life Assurance Society
of the United States and (C) that certain Securities Purchase
Agreement dated as of December 21, 1995 between and among the
Corporation, Subsidiary, RFE Investment Partners V L.P., Sterling
Commercial Capital, Inc. and the State Treasurer of the State of
Michigan, as Custodian in excess of $2,600,000 in the aggregate,
or issue any debt securities or assume, guarantee, endorse (other
than in the ordinary course of business consistent with past
practice) or otherwise as an accommodation become responsible for,
liabilities of any other person;
(v) purchase, hold or own, or permit or cause any
subsidiary of the Corporation to purchase, hold or own any capital
stock, evidence of indebtedness or other security of any
subsidiary of the Corporation or other corporation, partnership,
or other entity, unless such corporation, partnership or other
entity is a wholly-owned subsidiary of the Corporation.
(vi) permit or cause the Corporation or any subsidiary of
the Corporation to engage in any new line of business outside the
construction, manufacture, assembling, purchasing and selling all
types of manufactured buildings, structures and homes;
(vii) authorize or issue shares of any equity securities of
the Corporation, including any preferred stock, options or
warrants to purchase any such equity security;
(viii) amend or repeal any provision of, add any provision
to, or waive any provision (including any of these protective
provisions) of the Corporation's Certificate of Incorporation or
By-laws, or alter or change the rights, preferences, privileges or
powers of, or the restrictions provided for the benefit of, the
Series A
<PAGE>
Preferred Stock or cause or permit any subsidiary of the
Corporation to do the same;
(ix) make any acquisition of, or loan, advance or capital
contribution to, or investment or permit any subsidiary of the
Corporation to make any acquisition of, or loan, advance or
capital contribution to, or investment in any business entity,
which, individually or together with any related series of such
transactions, exceeds $1,000,000;
(x) make or permit or cause any subsidiary of the
Corporation to make any capital expenditures in any one fiscal
year in excess of the sum of (A) $500,000 plus (B) the difference
between $500,000 and any unexpended amounts from prior years;
(xi) enter into any contract or transaction with an
affiliate of the Corporation (or cause or permit any subsidiary of
the Corporation to do the same) that does not deal at arm's length
with the Corporation or which exceeds $25,000 in amount; or
(xii) reclassify any shares of Common Stock or any other
shares of the Corporation into shares having any preference or
priority as to dividends or assets superior to or on a parity with
any such preference or priority of the Series A Preferred Stock.
In the event that the Corporation shall propose at any time to take any
action specified in this Section C.7, then the Corporation shall send to the
holders of the Series A preferred Stock at least 5 days prior written notice of
the date on which the vote of the holders of the Series A Preferred Stock shall
be taken with respect to such matter.
8. Increasing Common Stock. The number of authorized shares of
Common Stock may be increased or decreased (but not below the number of shares
of Common Stock then outstanding) by an affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote thereon.
9. No Reissuance of Series A Preferred Stock or Series B
Preferred Stock. No shares of Series A Preferred Stock or Series B Preferred
Stock acquired by the Corporation by reason of redemption, purchase, conversion
or otherwise shall be reissued, and any such shares shall be cancelled, retired,
and eliminated from the shares which the Corporation shall be authorized to
issue; provided, however, that any such redeemed or purchased shares of
Preferred Stock shall be eliminated from the shares which the Corporation shall
be authorized to issue only upon the filing with the Secretary of State of the
State of Delaware of a certificate of amendment of this Restated Certificate of
Incorporation in compliance with the General Corporation Law of the State of
Delaware.
FIFTH: No 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; provided, however, that the foregoing clause shall
not apply to any liability of a director (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of Title 8 of the G.C.L. or (iv) for
any transaction from which the director derived an improper personal benefit. If
the G.C.L.is amended to authorize corporate action further eliminating or
limiting the personal liability of Directors, then the liability of a Director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the G.C.L. as so amended. The provisions of this Article FIFTH are
not intended to, and shall not, limit, supersede or modify any other defense
available to a Director under applicable law. Any repeal or modification of this
Article FIFTH by the stockholders of the Corporation shall not adversely affect
any right or protection of a director of the Corporation existing immediately
prior to the time of such repeal or modification.
SIXTH: In accordance with the provisions of Section 103(d) of the G.C.L.,
the Restated Certificate of Incorporation set forth above shall become effective
upon its filing date.
<PAGE>
IN WITNESS WHEREOF, the President of the Corporation has executed, and
the Secretary of the Corporation has attested to, this Restated Certificate
of Incorporation this 20th day of December, 1995.
GMH HOLDINGS, INC.
By: /s/ Gary M. Brost
----------------------------------
Name: Gary M. Brost
Title: President
ATTEST:
By:/s/ James C. DelZoppo
----------------------------
Name: James C. DelZoppo
Title: Assistant Secretary
<PAGE>
EXHIBIT A
<PAGE>
EXHIBIT B
THIS JUNIOR SUBORDINATED NOTE IS SUBORDINATED PURSUANT TO THE
TERMS OF THAT CERTAIN SUBORDINATION AGREEMENT DATED THE DATE
HEREOF AMONG THE PAYEE, THE OTHER PURCHASERS WHO ARE PARTIES
TO THE AGREEMENT (AS DEFINED BELOW), THE MAKER, THE SENIOR
LENDER, THE SENIOR SUBORDINATED LENDER AND STRATEGIC
INVESTMENTS & HOLDINGS, INC.(ALL AS DEFINED BELOW).
GENERAL MANUFACTURED HOUSING, INC.
JUNIOR SUBORDINATED NOTE DUE JUNE 30, 2003
$[ ]
December __, 1995
FOR VALUE RECEIVED, GENERAL MANUFACTURED HOUSING, INC. a Georgia
corporation with its principal office at 2255 Industrial Boulevard, Waycross,
Georgia 31503 (the "Maker"), hereby unconditionally promise(s) to pay to the
order of [ ] (the "Payee"), or registered assigns at the
office of the Payee located [ ] or at such other
office as the holder hereof may designate, in lawful money of the United
States, the principal sum of $[ ], together with interest thereon
as provided for below.
This Note is one of a duly authorized issue of Junior Subordinated Notes of
the Maker, limited in aggregate principal amount to Five Million Dollars
($5,000,000.00) (the "Notes"), copies of which are available for inspection at
the Maker's principal office. The Notes have been sold pursuant to a Securities
Purchase Agreement dated as of the date hereof, among the Maker and the Payees
of the Notes (the "Agreement"), a copy of which is available for inspection at
the Maker's principal office. This Note is subject and entitled to certain
terms, conditions, covenants and agreements contained in the Agreement.
Reference to the Agreement and the Subordination Agreement (as defined below)
shall in no way impair the negotiability hereof or the absolute and
unconditional obligation of the Maker to pay both principal of and interest on
this Note as provided herein.
1. EQUAL RANK. The Notes rank equally and ratably without priority over one
another. No payment, including any prepayment, shall be made hereunder unless
payment, including any prepayment, is made with respect to the other Notes in an
amount which bears the same ratio to the then unpaid balance on such other Notes
as the payment made hereon bears to the then unpaid balance under this Note.
2. INTEREST. Interest shall accrue on the outstanding principal balance
hereof at a rate per annum equal to thirteen percent (13%) per annum, payable
(in the event and only to the extent that Maker has accumulated earnings
sufficient to pay such accrued interest) quarterly, on the last day of
<PAGE>
December, March, June and September in each year and on the Maturity Date (as
defined below), commencing on March 31, 1996. Interest for the period commencing
with the date of this Note through March 31, 1996 shall be payable on March 31,
1996.
If all or a portion of the principal amount of or interest on this Note
shall not be paid when due (whether or not such interest has been earned as
provided above and whether at stated maturity, by acceleration or otherwise)
such overdue amount shall bear interest at a rate per annum which is 2% above
the rate that would otherwise be applicable thereto.
Anything contained in this Note to the contrary notwithstanding, the
Payee does not intend to charge and the Maker shall not be required to pay
interest or other charges in excess of the maximum rate (if any) permitted by
applicable law (if any). Any payments in excess of such maximum shall be
refunded to the Maker or credited against principal.
3. PAYMENT OF PRINCIPAL AND INTEREST. The Maker shall pay the entire unpaid
principal hereof and any accrued and unpaid interest thereon in one lump payment
due on June 30, 2003. The term "Maturity Date" shall mean June 30, 2003.
4. SUBORDIANTION. Anything in this Note to the contrary notwithstanding,
the indebtedness evidenced by this Note shall be subordinated to the prior
payment and satisfaction of all indebtedness of the Maker to (i) First Source
Financial LLP (the "Senior Lender") arising out of the Secured Credit Agreement
dated December 21, 1995 (the "Loan Agreement") between the Senior Lender and the
Maker including any such additional indebtedness permitted by the Subordination
Agreement, and (ii) The Equitable Life Assurance Society of the United States
(the "Senior Subordinated Lender") arising out of that certain Note and Warrant
Purchase Agreement dated as of December 21, 1995 (the "Note Agreement"), between
the Maker and the Senior Subordinated Lender (such indebtedness of the Maker to
which this Note is subordinated being hereinafter referred to as "Senior
Indebtedness"), which subordination shall be subject to the terms and conditions
of that certain Subordination Agreement dated as of the date hereof between the
Maker, the Senior Lender, the Senior Subordinated Lender, Strategic Investments
& Holdings, Inc. and the Payees of the Notes. Senior Indebtedness shall include
any replacement or refinancing thereof. This Note and the other Notes shall be
senior in right of payment to all other borrowed money indebtedness of the
Maker, except the Senior Indebtedness.
5. LIQUIDATION RIGHTS. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Maker, this Note shall be entitled
to a claim in liquidation after the payment in full of all Senior Indebtedness
of the Maker, but before participation by the holders of any debt subordinate
hereto or of any capital stock of the Maker. The amount of the claim in
liquidation shall equal the amount to which the Payee of this Note would be
entitled in the case of payment, whether or not this Note is eligible for
payment at the time of liquidation. If upon such liquidation, dissolution, or
winding up, the assets available for distribution among the holders of the Notes
shall be insufficient to permit the payment of the full amounts of their claims
in liquidation, then the entire assets of the Maker to be distributed to the
holders of the Notes shall be distributed pro-rata among the holders of the
Notes based upon the amounts of their respective claims in liquidation.
6. PREPAYMENT. Optional prepayment. The Maker may prepay the principal
hereof and all interest thereon in whole or in part at any time without penalty
or premium after ten (10) days' prior written notice to the holders of the
Notes; provided that any partial prepayment is in multiples of $10,000. At the
time of prepayment, all interest owing on the amount prepaid to the date of
payment must simultaneously be paid.
7. EXPENSES. The Maker shall pay the Payee, on demand, for all reasonable
costs and expenses, including, but not limited to, reasonable attorneys' fees,
incurred in the collection or enforcement of this Note.
8. DISCLOSURE OF SENIOR INDEBTEDNESS. The Maker shall notify the Payee of
this Note of the existence of any Senior Indebtedness, incurred from time to
time, or any written modification, extension, renewal or rollover thereof or any
default therein within five (5) days of the date it is incurred or occurs. Such
notice shall provide the Payee of this Note access to all documents executed in
connection therewith and all information with respect thereto.
9. DEFAULT; ACCELERATION. The occurrence of any of the following shall
constitute an "Event of Default":
<PAGE>
(a) The breach by the Maker of any of the terms or provisions contained
in this Note or any of the Notes, including without limitation the failure to
pay when due (whether at the date hereof or at a date fixed for prepayment
hereof or by acceleration hereof or otherwise) any principal, interest, charges
or other amounts hereunder or failure to perform hereunder or under any of the
Notes and such breach shall continue unremedied for five business days; or
(b) If the Maker
(i) shall commence any case or proceeding or other action relating
to it under any bankruptcy, insolvency or other similar law or seek
reorganization, arrangement, readjustment of its debts, dissolution,
liquidation, winding-up, composition or any other relief under any bankruptcy,
insolvency, reorganization, liquidation, dissolution, arrangement, composition,
readjustment of debt or any other similar act or law, of any jurisdiction,
domestic or foreign, now or hereafter existing; or
(ii) shall admit the material allegations of any petition or
pleading in connection with any such case or proceeding; or
(iii) makes an application for, or consents or acquiesces to, the
appointment of a receiver, conservator, trustee or similar officer for the Maker
or for all or a substantial part of the Maker's property; or
(iv) makes a general assignment for the benefit of creditors; or
(v) is unable or admits in writing its inability to pay its debts
as they mature; or
(c) Commencement of any case or proceeding or the taking of any other
action against the Maker in bankruptcy, insolvency, or similar law or seeking
reorganization, arrangement, readjustment of its debts, liquidation,
dissolution, winding-up, composition or for any other relief under any
bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement,
composition, readjustment of debt or any other similar act of law of any
jurisdiction, domestic or foreign, now or hereafter existing; or the appointment
of a receiver, conservator, trustee or similar officer for the Maker or for all
or a substantial part of the Maker's property; or the issuance of a warrant of
attachment, execution or similar process against any substantial part of the
property of the Maker; and the continuance of any of such events for sixty (60)
days undismissed, unbonded or undischarged; or
(d) An event of default shall occur under (i) the Senior Loan Agreement
(as defined in the Securities Purchase Agreement) or related documents, or (ii)
any of the Senior Subordinated Note Instruments (as defined in the Securities
Purchase Agreement) or related documents, or (iii) any other agreements relating
to Senior Indebtedness or (iv) any of the Notes; or
(e) The Maker shall fail to comply with any of its covenants contained
in the Agreement or the Investors Rights Agreement dated as of the date hereof
among the Maker, the Payees of the Notes and certain other parties, and such
failure continues unremedied for a period of thirty (30) days after the Maker
receives written notice from the Payee of such default; or
(f) Any representation or warranty of the Maker in the Agreement or in
any other document or instrument delivered pursuant to the Agreement shall prove
to have been false in any material respect upon the date when made; or
(g) Maker shall fail to pay at maturity, or within any applicable period
of grace, any obligation for borrowed money or credit received or in respect of
any indebtedness for borrowed money (other than the Senior Indebtedness) or fail
to observe or perform any material term, covenant or agreement contained in any
agreement by which it is bound, evidencing or securing borrowed money or credit
received or in respect of any indebtedness for borrowed money (other than the
Senior Indebtedness) for such period of time as would permit (assuming the
giving of appropriate notice if required) the holder or holders thereof or of
any obligations issued thereunder to accelerate the maturity thereof, or
(h) There shall remain in force, undischarged, unsatisfied and unstayed,
for more than thirty days, whether or not consecutive, any final judgment
against Maker that with other outstanding final judgments, undischarged, against
Maker exceeds in the aggregate $250,000; or
(i) The Maker shall be enjoined, restrained or in any way prevented by
the order of any court or any administrative or regulatory agency from
<PAGE>
conducting any material part of its business; or
(j) The Agreement or the Investors' Rights Agreement shall cease, for
any reason, to be in full force and effect other than in accordance with the
terms thereof.
Upon the occurrence, and at any time during the continuance, of an Event
of Default, the Payee, at the Payee's option and without the need for
presentment, demand, protest, or other notice of any kind, may declare all
unpaid principal hereof and interest hereunder to be immediately due and payable
and same shall become immediately due and payable upon such declaration;
provided that in the event of any Event of Default specified in clauses (b) and
(c) above, all such amounts shall become immediately due and payable
automatically and without any requirement of notice from the Payee.
10. CERTAIN WAIVERS. The Maker and any endorser or guarantor hereof
(collectively, the "Obligors") and each of them (i) waive(s) presentment,
diligence, protest, demand, notice of demand, notice of acceptance or reliance,
notice of non-payment, notice of dishonor, notice of protest and all other
notices to parties in connection with the delivery, acceptance, performance,
default or enforcement of this Note, any endorsement or guaranty of this Note,
or any collateral or other security; (ii) consent(s) to any and all delays,
extensions, renewals or other modifications of this Note, any related document
or the debt(s) or collateral evidenced hereby or thereby or any waivers of any
term hereof or thereof, any release, surrender, taking of additional,
substitution, exchange, failure to perfect, record, preserve, realize upon, or
lawfully dispose of, or any other impairment of, any collateral or other
security, or any other failure to act by the Payee or any other forbearance or
indulgence shown by the Payee, from time to time and in one or more instances
(without notice to or assent from any of the Obligors) and agree(s) that none of
the foregoing shall release, discharge or otherwise impair any of their
liabilities; (iii) agree(s) that the full or partial release or discharge of any
Obligor(s) shall not release, discharge or otherwise impair the liabilities of
any other Obligor(s); and (iv) otherwise waive(s) any other defenses based on
suretyship or impairment of collateral.
11. REGISTRATION AND TRANSFER OF THIS NOTE. The Maker shall keep at its
principal executive office a register (herein sometimes referred to as the "Note
Register"), in which, but at its expense (other than transfer taxes, if any),
the Maker shall provide for the registration and transfer of the Notes. The
Payee of this Note, at such Payee's option, may in person or by duly authorized
attorney surrender this Note for exchange at the principal office of the Maker,
to receive in exchange therefor a new Note or Notes, as may be requested by such
Payee, of the same series and in the same aggregate unpaid principal amount as
the aggregate unpaid principal amount of the Note or Notes so surrendered;
provided, however, that any transfer tax relating to such transaction shall be
paid by the Payee requesting the exchange. Each such new Note shall be dated as
of the date to which interest has been paid on the unpaid principal amount of
the Note or Notes so surrendered and shall be in such principal amount and
registered in such name or names as such Payee may designate in writing.
12. LOST DOCUMENTS. Upon receipt by the Maker of evidence satisfactory to
it of the loss, theft, destruction or mutilation of this Note or any Notes
exchanged for it, and (in case of loss, theft or destruction ) of indemnity
satisfactory to it, and upon reimbursement to the Maker of all reasonable
expenses incidental thereto, and upon surrender and cancellation of such Note,
if mutilated, the Maker will make and deliver in lieu of such Note a new Note of
the same series and of like tenor and unpaid principal amount and dated as of
the date to which interest has been paid on the unpaid principal amount of the
Note in lieu of which such new Note is made and delivered.
13. COMMERCIAL TRANSACTION; JURY WAIVER. THE MAKER ACKNOWLEDGES THAT THE
TRANSACTION OF WHICH THIS NOTE IS A PART IS A COMMERCIAL TRANSACTION. THE MAKER
HEREBY KNOWINGLY AND VOLUNTARILY WAIVES TRIAL BY JURY AND THE RIGHT THERETO IN
ANY ACTION OR PROCEEDING OF ANY KIND, ARISING UNDER OR OUT OF, OR OTHERWISE
RELATED TO OR OTHERWISE CONNECTED WITH, THIS NOTE AND/OR ANY RELATED DOCUMENT.
THE MAKER FURTHER ACKNOWLEDGES THAT IT HAS HAD AN OPPORTUNITY TO REVIEW THIS
NOTE AND THE OTHER FINANCING DOCUMENTS WITH ITS COUNSEL AND THAT IT ON ITS OWN
HAS MADE THE DETERMINATION TO EXECUTE THIS NOTE AND ALL OTHER FINANCING
DOCUMENTS TO WHICH IT IS A PARTY AFTER CONSIDERATION OF ALL OF THE TERMS OF THIS
NOTE AND SUCH OTHER DOCUMENTS (INCLUDING THE INTEREST RATE) AND OF ALL OTHER
FACTORS WHICH IT CONSIDERS RELEVANT.
14. BINDING NATURE. This Note shall bind the Maker and the Maker's
successors and permitted assigns and shall inure to the benefit of the Payee and
the Payee's heirs, representatives, successors and permitted assigns.
<PAGE>
This Note may only be transferred to a transferee of shares of capital stock of
GMH Holdings, Inc. which have been issued pursuant to the Agreement. The term
"Payee" as used herein shall include, in addition to the initial Payee, any
successors, endorsees, or other permitted assignees of such Payee and shall also
include any other holder of this Note.
15. GOVERNING LAW. This Note shall be governed by and construed and
interpreted in accordance with the laws the State of Delaware, without regard to
its rules pertaining to conflicts of laws thereunder.
16. MISCELLANEOUS. No delay or omission by the Payee in exercising any
right or remedy hereunder shall operate as a waiver of such right or remedy or
any other right or remedy; and a waiver on one occasion shall not be a bar to or
waiver of any right or remedy on any other occasion. All rights and remedies of
the Payee hereunder, any other applicable document and under applicable law
shall be cumulative and not in the alternative. No provision of this Note may be
waived or modified orally but only by a writing (a) signed by the party against
whom enforcement of such amendment, waiver or other modification is sought and
(b) consented to in writing by holders of Notes representing sixty six and 2/3
percent (66-2/3%) in principal amount of the Notes.
17. NOTICES. All notices, requests, consents and demands shall be made in
writing and shall be mailed first class postage prepaid, or delivered by hand or
by messenger to the Maker or to the Payee hereof at their respective addresses
set forth at the beginning of this Note or at such other respective addresses as
may be furnished in writing to each other.
IN WITNESS WHEREOF, the Maker has executed and delivered this Note as of
the day and year first written above.
Maker:
GENERAL MANUFACTURED HOUSING, INC.
By:_________________________________________
Name:
Title:
<PAGE>
EXHIBIT C
DISCLOSURE SCHEDULE
TO SECURITIES PURCHASE AGREEMENT
Section 3.4 Subsidiaries
a) GMH may provide funds to M/H Retail, Inc. to assist in its
performance of service and warranty work.
b) GMH is obligated to provide funds to the Company to enable it to
pay its taxes and to pay dividends on the Series A Redeemable
Preferred Stock.
Section 3.5(a) Capitalization
ISSUED AND OUTSTANDING STOCK OF THE COMPANY
<TABLE>
<CAPTION>
STOCKHOLDER NUMBER OF SHARES
SERIES A SERIES B CLASS A CLASS B CLASS C
PREFERRED PREFERRED COMMON COMMON COMMON WARRANTS
<S> <C> <C> <C> <C> <C> <C>
Bulldog Holdings LLC 1,400,000
RFE Investments
Partners V, L.P. 4,690,351 439,720 714,546
State Treasurer of
the State of
Michigan,
Custodian 3,076,922 288,462 468,750
Sterling Commercial
Capital, Inc. 232,727 21,818 35,454
The Equitable Life
Assurance Society of
the United States 350,000
Eileen V. Austen 54,687
Paul C. Cronson 54,687
Robert C. Goodwin 54,688
Robert C. Mayer 54,688
Samuel P. Scott and
Sherry J. Scott, as
joint tenants 92,749
Kelly Scott Herold,
as Trustee 71,167
Gregory Keith Scott 71,167
Drew Eric Scott 71,167
Lannis Thomas 28,000
Wayne Roberts 28,000
Thomas M. Vinson 21,000
Bruce Hallock 14,000
Michael O'Gorman 14,000
Benny Bryan 13,125
James H. McClellan 13,125
--------- --------- --------- ------- -------- -------
TOTAL 8,000,000 2,150,000 1,656,250 0 0 568,750
</TABLE>
<PAGE>
Reference is hereby made to the following documents, each dated
the date hereof, with respect to options, warrants, etc.:
1) Warrants to purchase common stock of the Company in the names of:
a) The Equitable Life Assurance Society of the United States -
350,000 shares of Class A or Class B Common
b) Eileen V. Austin - 54,687 shares of Class A Common
c) Paul C. Cronson - 54,687 shares of Class A Common
d) Robert C. Goodwin - 54,688 shares of Class A Common
e) Robert C. Mayer - 54,688 shares of Class A Common
2) Stockholders' Agreement
3) Investors Rights Agreement
4) Note and Warrant Purchase Agreement
Section 3.5(c)
The Company is subject to "put" obligations set forth in the Investors
Rights Agreement.
Section 3.7(b)
GMH and Oakwood Mobile Homes, a manufacturer and retailer
headquartered in North Carolina, had an agreement pursuant to which
GMH was to supply 24 foot, double-wide homes to Oakwood's captive
retail network. GMH expected to use Plant No. 4 located in Waycross,
Georgia exclusively for the construction of these homes. Oakwood gave
notice to GMH, on or about August 25, 1995, that it would not be
ordering any further homes from GMH for the foreseeable future due to
over manufacturing by Oakwood of its own products, and the desire for
their retail network to sell Oakwood's products before those
manufactured by GMH. All homes that had been ordered to that time were
completed by GMH and
<PAGE>
purchased by Oakwood. GMH has shifted double-wide production to Plant
No. 4 in order to reduce its considerable backlog of orders. In its
notification, Oakwood characterized this situation as temporary;
however, no assurances can be given that such suspension may not be
permanent. Sales to Oakwood accounted for approximately 10% of GMH's
total revenues during the first six months of 1995.
Section 3.9 Related - Party Transactions
Management Agreement dated the date hereof between GMH and Strategic
Investments & Holdings, Inc.
M/H Retail, Inc. is a corporation, all of the outstanding stock of
which is owned by the Kelly Scott Herold Revocable Trust -1995 which
is a shareholder of the Company. M/H Retail and GMH are parties to an
existing service agreement which will be replaced at closing with a
Service Agreement dated the date hereof pursuant to which M/H retail
will provide certain warranty and repair work on manufactured homes
produced and sold by GMH.
Hi-Tech Properties, Inc. is a corporation wholly owned by Drew Eric
Scott who is a shareholder of the Company. That corporation subleases
the Plant 4 property to GMH and separately subleases to GMH a vacant
lot adjacent to Plant 4.
Samuel Scott owns an approximate 20% equity interest in Sweetwater
Homes, Inc., a competitor of GMH. At closing, Mr. Scott will execute a
letter setting forth his undertakings and commitments to the Company
with respect to his equity interest in Sweetwater Homes, Inc,
including, but not limited to, a) his resignation as a director of
Sweetwater, b) the termination of any existing relationship that would
be considered participation in the management or business affairs of
Sweetwater, and c) the limitation of equity ownership in Sweetwater to
no more than 20%.
On the closing date, Samuel Scott will enter into an employment
agreement which will provide that, if GMH elects not to exercise its
option to purchase the properties underlying its leases of Plants 4
and 5, GMH shall permit Mr. Scott to exercise such options.
Section 3.11 Liabilities
Indebtedness to The Patterson Bank in the original principal amount of
$613,727.63.
Indebtedness to First Source Financial LLP under documents delivered
on the date hereof.
Indebtedness to The Equitable Life Assurance Society of the United
States under documents delivered on the date hereof.
Junior Subordinated Notes dated the date hereof to
1) RFE Investment Partners V, L.P.
2) The Treasurer of the State of Michigan as Custodian for the
Michigan Public School Employees Retirement System, the
Michigan State Employees' Retirement System, the Michigan
State Police Retirement System and the Michigan Judges
Retirement System
3) Sterling Commercial Capital, Inc.
Section 3.12 Intellectual Property
Service Mark and design No. S-13433 filed with and issued by State of
Georgia 3/11/94, expiring 3/11/04: "Jaguar Homes 1994...the Year of
the Cat!!!"
Prior to the formation of GMH, Samuel Scott acquired title to various
patents that relate to the business of mobile home manufacturing. Such
patents are not material to the business conducted by GMH and, if to
the extent that GMH now or in the future were deemed to infringe upon
the proprietary rights evidenced by such patents, Mr. Scott agrees to
waive and release any such infringement.
Section 3.13 Material Contracts
<PAGE>
The following vendors exceeded the $250,000 threshold in 1993 and/or
1995 (year-to-date) AND are parties to agreements, contracts, understandings, or
arrangements with GMH as described below (records for 1994 are not yet
available):
1) Edisto Housing offering a customer rebate program to purchases of
finished homes.
2) Fabwel, Inc. leases equipment to GMH at a nominal rent, pursuant
to an oral agreement, in consideration for the purpose of raw
materials from Fabwel.
3) M/H Retail, Inc. provides services to GMH pursuant to that certain
Agreement dated March 23, 1988, by and between M/H Retail, Inc.,
and GMH, as amended by that certain Amendment dated as of
_________, 1994.
4) AMS of Indiana, Inc. leases equipment to GMH at a nominal rent,
pursuant to an oral agreement, in consideration for the purchase
of raw materials from AMS of Georgia.
5) General Electric purchases are at agreed-upon prices pursuant to
the GE Appliances National Contract Sales Agreement.
Oakwood Mobile Homes, Inc. agreement and volume incentive program. See
Section 3.7(b) above.
Section 3.15 Litigation
"Outstanding State Cases" as of November 27, 1995, consisting of consumer
complaints made through state agencies, considered to be in the ordinary course
of business of the Borrower the outcomes of which, both individually and in the
aggregate should not have a material adverse effect:
STATE AGENCY SN CUSTOMER DEALER
AL 3137 Spivey Crystal Valley
AL 2050 Morse Steve Ward
AL 6402 Killingsworth Southland
FL 3969 Ponder Godwins
FL 1526 Barnett Ed's Factory Showcase
FL 5027 Harris Quality-Plant City
FL 3687 Yarbrough K&E
FL 3703 Famous Brown K&E
FL 4961 Baxter Summerset
GA 6343 Gary Carefree
GA 5486 Braswell Carefree
GA 1082 Roberson Hilliard
GA 3763 Dahlberg Atl. MH Brokers
GA 6211 Ramos Housing Brokers
GA 4163 Hood Great American
GA 1390 Wade Jones & Veal
GA 7487 Hall Country Classic
GA 6452 Wilbanks Bob's Family Housing
NC Dept of Insurance 1421 Sports
NC Dept of Insurance 4087 Davidson
NC 1421 George Sports Harry Reed
NC 4087 Davidson Kelly Homes
SC 6754 Nadeau Oakwood-Conway
SC 3627 Mims/Ackerman Howard Homes
SC 3205 Herndon Edisto Housing
SC 3510 James Southern Lifestyle
TN 6276 Burke Capitol Homes
TN 5495 Davis Oakwood
The following EEOC Notices of Discrimination have been issued by the Savannah
Local Office of the Equal Employment Opportunity Commission:
1) Susan Reynolds: Sex discrimination charge filed 9/24/93.
2) Nelda Rollins: Sex discrimination, sexual harassment charges filed 6/10/94.
3) Patrice Woodie: Sex, sexual harassment discrimination charges filed
<PAGE>
9/16/94.
4) Betty Fritz: Sex discrimination charge filed 6/20/95.
The foregoing cases are not expected to have a Material Adverse Effect.
Other pending and threatened causes of action:
1) Barfield vs. Southern Lifestyle Homes, Inc. and General Manufactured
Housing, Inc.:
Claim for breach of contract and warranty, fraud, unfair trade practices,
and negligence filed June 1995 in South Carolina.
2) GMH, Inc. vs. Jerry Blaxton: Relating to an alleged liability of
approximately 10,000 for towing services; Blaxton has defaulted in this
matter.
3) GMH, Inc. vs. Cladwood Division of Smurfitt Newsprint Corporation
("Cladwood"): Product liability claim to recover amounts paid out by GMH,
Inc. to settle warranty claims by homeowners resulting from defective
composite siding manufactured by Cladwood.
4) Thelma Grant: Threatened South Carolina warranty/product liability action
by customer; settlement negotiations currently in progress.
5) Barry Murray vs. GMH, Inc.: Employee of Murray Plumbing Co., Inc., a
Georgia corporation and subcontractor of Solar Shield, Inc., a South
Carolina corporation and contractor engaged by GMH, Inc., has filed a
complaint in connection with a personal injury resulting from a July 1994
accident which occurred at a GMH, Inc. plant.
6) Greg A. Hall vs. GMH, Inc. and others: Warranty claim suit filed in South
Carolina;
Complaint served on GMH, Inc. 10/9/95.
7) George Sports: Warranty Claim. This claim is being addressed. Last
inspection was 11/2/95. Awaiting letter from N. Carolina approving
inspection.
8) Jamie R. Alexander and Michelle Norman Alexander vs. GMH, Inc., et al;
warranty claims in the amount of $50,000. Trial set for 4/16/96.
9) Janet Lehman and Gabriel Lehman vs. GMH, Inc., et al; warranty claim.
10) Vicki A. Curtis: Threatened personal injury/ negligence claim.
11) George and Rose Roberson: Threatened litigation regarding electrical
defects in mobile home.
12) John and Patricia Edge: Complaint for damages based on warranty claims on
11/30/95;
13) Catherine Frazier: Warranty claims. Settlement has been negotiated but not
yet complete.
14) Actions which are considered to be in the ordinary course of business of the
Borrower for which Borrower has received no communication within the last
year:
a) Louise Weeks: Warranty claim.
b) Joycesteen Mack: Warranty claim.
c) David and Jo Ann Brannen: Warranty claim.
d) George and Rose Roberson: Electrical fire, mobile home destroyed.
e) Ronald and Leslie Truelove: Warranty claim.
The outcomes of the foregoing pending and threatened causes of action are not
expected to have a Material Adverse Effect.
Section 3.18 Employees
Employment Agreements dated as of the date hereof among GMH and each of
Samuel P. Scott, Gregory Keith Scott and Drew Eric Scott
<PAGE>
Executive Bonus Plan of GMH
Incentive Compensation Plan of GMH
Employee Benefit Plans:
A. Group Health
Health Care Master Contract between Blue Cross and Blue Shield of
Georgia and GMH, Number 23041-001,004, dated May 10, 1993,
continues until terminated.
B. Group Life
Group Term Life Insurance Master Policy
Transamerica Assurance Company
Master Policy #BTL1199
C. Group Travel
Group Travel Accident Program
Policy No. ETB-102015
4/27/95-4/27/96
D. Cafeteria Plan
General Manufactured Housing, Inc. Premium Only Cafeteria
Plan - Plan Amendment effective January 1, 1995.
The following EEOC Notices of Discrimination have been issued by the Savannah
Local Office of the Equal Opportunity Commission:
1) Susan Reynolds: Sex discrimination charge filed 9/24/93.
2) Nelda Rollins: Sex discrimination, sexual harassment charges filed
6/10/94.
3) Patrice Woodie: Sex, sexual harassment discrimination charges filed
9/16/94.
4) Betty Fritz: Sex discrimination charge filed 6/20/95.
The foregoing cases are not expected to have a Material Adverse Effect.
Section 3.19 Tax Returns, Payments and Elections
GMH had an agreement to act as administrator for a Cafeteria Plan. No
final Form 5500 has been filed for such plan. AFLAC is in the process of
preparing such form but is having difficulty gathering certain information.
Pursuant to the Stock Purchase Agreement dated as October 10, 1995, as amended,
the Sellers (as defined in the Stock Purchase Agreement) have agreed to
indemnify GMH for any penalties incurred for such failure to file.
Section 3.20 Environmental and Safety Laws
The information set forth in the following documents is hereby incorporated in
its entirety herein:
1. Phase I Environmental Site Assessment Report for Plants 1, 2 and 3
dated August 25, 1995;
2. Asbestos Survey, Radon Gas Testing and Sanborn Map Review for Plants
1, 2, 3 and 4 dated September 18, 1995;
3. Phase II Environmental Site Assessment Report for Plants 1, 2 and 3
dated September 21, 1995;
4. Proposal for Additional AST Investigation on Plant No. 1 and Plant No.
2, dated September 25, 1995;
5. Phase I Environmental Site Assessment Report for Plant 4 dated October
2, 1995;
6. Proposal for Phase II Environmental Site Assessment on Plant No. 4,
<PAGE>
dated October 4, 1995;
7. Phase I Environmental Site Assessment Report for Plant 5, dated
October 11, 1995;
8. Report regarding Asbestos Abatement Cost Estimates dated October 12,
1995; and
9. Report regarding the Well Surveys for Plants No. 1 and 2 dated October
20, 1995.
Section 3.21 Brokers and Finders
The following fees are obligations of GMH:
R. Lewis Ray -- $500,000
Larkspur Capital Corporation -- $1,565,000
Strategic Investments & Holdings, Inc. -- $500,000
Alliance Corporate Finance Group Incorporated -- $300,000
Section 3.23 ERISA
Executive Bonus Plan of GMH
Incentive Compensation Plan of GMH
Employee Benefit Plans:
A. Group Health
Health Care Master Contract between Blue Cross and Blue
Shield of Georgia and GMH, Number 23041-001,004, dated May
10, 1993, continues until terminated.
B. Group Life
Group Term Life Insurance Master Policy
Transamerica Assurance Company
Master Policy #BTL1199
C. Group Travel
Group Travel Accident Program
Policy No. ETB-102015
4/27/95-4/27/96
D. Cafeteria Plan
General Manufactured Housing, Inc. Premium Only Cafeteria
Plan - Plan Amendment effective January 1, 1995.
GMH had an agreement to act as administrator for a Cafeteria Plan. No final Form
5500 has been filed for such plan. AFLAC is in the process of preparing such
form but is having difficulty gathering certain information. Pursuant to the
Stock Purchase Agreement dated as October 10, 1995, as amended, the Sellers (as
defined in the Stock Purchase Agreement) have agreed to indemnify GMH for any
penalties incurred for such failure to file.
Section 4.7 Brokers or Finders.
See items listed under Section 3.21 above.
<PAGE>
EXHIBIT D
<PAGE>
==============================================
GMH HOLDINGS, INC.
INVESTORS' RIGHTS AGREEMENT
December 21, 1995
==============================================
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PUT/CALL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Put Rights. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Repurchase Rights . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
BULLDOG OPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 Option. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Successors and Assigns; Assignment of Rights. . . . . . . . . 5
3.3 Entire Agreement; Amendment; Waiver . . . . . . . . . . . . . 5
3.4 Notices, etc. . . . . . . . . . . . . . . . . . . . . . . . . 5
3.5 Delays or Omissions . . . . . . . . . . . . . . . . . . . . . 5
3.6 Rights; Separability. . . . . . . . . . . . . . . . . . . . . 6
3.7 Titles and Subtitles. . . . . . . . . . . . . . . . . . . . . 6
3.8 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 6
3.9 No Third Party Beneficiaries. . . . . . . . . . . . . . . . . 6
3.10 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.11 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
GMH HOLDINGS, INC.
INVESTORS' RIGHTS AGREEMENT
This Investors' Rights Agreement (this "Agreement") is made and entered
into as of the 21st day of December, 1995, by and among GMH HOLDINGS, INC., a
Delaware corporation (the "Company"), the persons identified on Exhibit A
attached hereto (the "Purchasers"), BULLDOG HOLDINGS LLC, a New York limited
liability company ("Bulldog") and THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE
UNITED STATES (the "Equitable").
WHEREAS, the Purchasers are parties to the Securities Purchase Agreement
dated as of the date hereof between the Company, General Manufactured Housing,
Inc. and the Purchasers (the "Series A Agreement"), certain of the Company's and
such Purchasers' obligations under which are conditioned upon the execution and
delivery by such Purchasers, Bulldog, Equitable and the Company of this
Agreement;
For purposes of Sections 1.1, 1.2(c) and 3 of this Agreement only,
Equitable shall be deemed to be a Purchaser.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties hereto agree as follows:
<PAGE>
SECTION 1
PUT/CALL
1.1 Put Rights. (a) At any time, and from time to time, commencing
December 30, 2003, a Purchaser may, by notice to the Company and to the other
Purchasers (a "Put Notice") elect to require the Company (subject to the
conditions set forth below), to purchase (a "Put") all of the Common Stock and
Series B Shares owned by such Purchaser at a price equal to the Fair Market
Value (as defined below) determined as of the date of the Put Notice, and the
Company, subject to the conditions set forth below, shall thereupon become
obligated to purchase all of such Common Stock and Series B Shares at the Fair
Market Value. In the event that the Fair Market Value is less than the price at
which such Purchaser is willing to Put such Common Stock and Series B Shares,
then, within 30 days after the date of the determination of Fair Market Value,
the Purchaser may withdraw such Put Notice and the obligations of the Purchaser
and the Company pursuant to this Section 1.1 with respect to such Put shall be
terminated. During the thirty (30) day period following the delivery of any Put
Notice, each Purchaser shall have the right to exercise a Put on equal priority
with the Purchaser who delivered the Put Notice initiating such process with
respect to all Common Stock and Series B Shares owned by such Purchaser.
(b) The Company's obligations with respect to a Put(s) shall be
limited to the extent of its funds legally available for the purchase of capital
stock of the Company. In the event that the Company is so limited in its ability
to fulfill any Put, the Company will use its reasonable efforts to arrange
financing on commercially reasonable terms and conditions in an amount
sufficient to enable it to fulfill its obligations in respect of all Common
Stock and Series B Shares Put by Purchasers during the 30 day period following
delivery of the initiating Put Notice. If, notwithstanding such efforts, after a
period of 90 days following the determination of Fair Market Value as of the
date of the initiating Put Notice, the Company is unable to acquire for cash all
of the Common Stock and Series B Shares which have been Put, then the Company
shall issue to each Purchaser who has Put Common Stock and Series B Shares a
Promissory Note of the Company in the original principal amount equal to the
Fair Market Value of the Common Stock and Series B Shares so Put which the
Company is unable to acquire for cash (prorating the cash to be paid and
principal amount of Promissory Notes to be delivered based upon the number of
shares (calculated on an as converted and/or as exercised basis) Put by each
Purchaser as compared to the total number of shares Put by all Purchasers). Any
such promissory note shall bear interest at the rate per annum equal to the then
prevailing rate for three year U.S. Treasury obligations plus 500 basis points
on the outstanding principal amount thereof, shall be mandatorily prepayable out
of excess cash flow of the Company and its subsidiaries on a consolidation
basis, and shall mature on the third anniversary of the Put Notice applicable
thereto. Such Promissory Note shall contain such subordination provisions as the
Company's senior lenders shall reasonably request. The Promissory Note shall be
secured by a pledge of the securities with respect to which the Put has been
exercised. The Promissory Note shall be substantially in the form of Exhibit I
attached to this Agreement. The securities pledged to secure the Promissory Note
shall be endorsed in blank, together with assignments separate from
certificates, which are undated and have been executed by the Company, and shall
be delivered to the Purchaser, together with a pledge agreement executed by the
Company in substantially the form of Exhibit II attached to this Agreement and
the Promissory Note, at the Closing of such Put.
(c) The closing of any Put transaction shall take place on a date
(such date to be as soon as practicable after the Valuation has been delivered)
and at the offices of the Company. The Company, will pay for the Common Stock
and Series B Shares to be purchased pursuant to a Put by wire transfer to the
Purchaser to the extent provided above, and, if required pursuant to
subparagraph (b) above by delivery of a Promissory Note duly executed by the
Company. The Company, will be entitled to receive customary representations and
warranties from the Purchaser regarding the sale of the Common Stock and Series
B Shares including a representation that the Purchaser has good and marketable
title to the Common Stock and Series B Shares to be transferred free and clear
of all liens, claims and other encumbrances.
(d) As used herein, the following terms shall have the following
respective meanings:
Entity Fair Market Value shall mean the fair market value of the
Company and its Subsidiaries considered as one entity (as established
pursuant to a Valuation), in the event of a sale of the Company and
its Subsidiaries pursuant to an active marketing process, less any
indebtedness of the Company and its Subsidiaries for borrowed money.
Fair Market Value of a share of Common Stock shall mean the
<PAGE>
Entity Fair Market Value divided by the total number of issued and
outstanding shares of Common Stock of the Company on a fully diluted
basis (including the conversion of all securities convertible into
Common Stock and the exercise of all warrants which are exercisable
into Common Stock). Fair Market Value of a Series B Share shall mean
the Fair Market Value of a share of Common Stock multiplied by the
number of shares of Common Stock into which such Series B Share is
then convertible.
"Valuation" shall mean with respect to Entity Fair Market Value,
the agreement of the Company and the applicable Purchaser(s), or if
the Company and such Purchaser(s) are unable to agree within 30 days
after delivery of the Put Notice, the opinion of an investment banking
firm of national standing designated by mutual agreement of the
Company and the Purchaser. The costs of conducting the Valuation shall
be borne equally by the applicable Purchaser and the Company.
1.2 Repurchase Rights. (a) At any time commencing December 30, 2004, the
Company may, by notice to the Purchasers (a "Call Notice"), elect to purchase (a
"Call") all of the Purchasers' Common Stock and Series B Shares at a price equal
to the Fair Market Value thereof, determined as of the date of the Call Notice.
The Call Notice will set forth the time and place for the closing of the
transaction.
(b) At any time commencing December 30, 2004, the Company may, by a
Call Notice to Equitable, elect to Call all of Equitable's Common Stock at a
price equal to the Fair Market Value thereof, determined as of the date of the
Call Notice. The Call Notice will set forth the time and place for the closing
of the transaction.
(c) The closing of the transactions contemplated by this Section 1.2
shall take place on the date and at the place designated by the Company in the
Call Notice which date shall not be more than 90 days after the delivery of such
notice. The Company will pay for the Common Stock and Series B Shares to be
purchased pursuant to a Call in cash by wire transfer payable to the holder of
such Common Stock and Series B Shares. The Company will be entitled to receive
customary representations and warranties from each Purchaser regarding the sale
of the Common Stock and Series B Shares, including but not limited to the
representation that the Purchaser has good and marketable title to the Common
Stock and Series B Shares to be transferred free and clear of all liens, claims
and other encumbrances.
SECTION 2
BULLDOG OPTION
2.1 Option. On each dividend payment date with respect to the Series A
Shares (and whether or not any dividend in respect of the Series A Shares is
earned or declared), in the event that there is an aggregate amount of accrued
and unpaid dividends in respect of the Series A Shares in excess of $500,000,
then Bulldog shall grant to each Purchaser an option to purchase such
Purchaser's pro rata share (as defined below) of that number of Series B Shares
(adjusted for any combinations, consolidations, stock splits, or stock
distributions or dividends with respect to such shares) (the "Option Shares")
owned by Bulldog as equals .21875 times the difference between (a) the aggregate
amount of accrued and unpaid dividends in respect of all Series A Shares minus
(b) the greater of (x) $500,000 and (y) the lowest aggregate amount of accrued
and unpaid dividends outstanding in respect of all Series A Shares since the
immediately preceding dividend payment date (or, if Bulldog has converted some
or all of the Series B Shares such that it owns an insufficient number of Series
B Shares to satisfy such option, then such option shall be for such number of
shares of Common Stock as such number of Option Shares would then convert into
at the then applicable Series B Conversion Price); provided that the maximum
number of Option Shares as to which the Purchasers may be granted options
hereunder shall be that number of Option Shares as shall represent ten percent
(10%) of the Company's Common Stock on a fully-diluted basis. The option
exercise price per share with respect to any such option shall equal $2.2857 per
share (as adjusted for combinations, consolidations or stock distributions or
dividends with respect to such shares) and the term of each such option shall be
eight years from the date of grant of such option. Each option may be exercised
in whole or in part provided that options shall be exercised in amounts no less
than the lesser of (i) $10,000 in aggregate exercise price and (ii) the total
dollar amount in exercise price of all unexercised options held by such
optionee. If prior to exercise of any option granted pursuant to this Section,
the Company pays dividends in respect of the Series A Shares such that the
<PAGE>
aggregate amount of accrued and unpaid dividends in respect of all Series A
Shares is less than $500,000, then one-half of the unexercised options which are
then held by such optionee (but excluding any options which have previously been
outstanding at any time when the aggregate amount of accrued and unpaid
dividends on all Series A Shares is less than $500,000) shall expire and be of
no further force or effect. A Purchaser's pro rata share shall be that
percentage which expresses the ratio between the number of shares of Common
Stock owned by such Purchaser and the aggregate number of shares of Common Stock
owned by all such Purchasers.
SECTION 3
MISCELLANEOUS
3.1 Governing Law. This Agreement shall be governed in all respects by
the laws of the State of Delaware, as applied to agreements among Delaware
residents entered into and to be performed entirely within Delaware.
3.2 Successors and Assigns; Assignment of Rights. The rights and
benefits of a Purchaser hereunder (including such Purchaser's rights and
benefits under Section 1.1 hereof) may be assigned to a transferee or assignee
in connection with transfer or assignment of any Series A Shares owned by such
Purchaser (A) to any person or entity which is a majority-owned subsidiary of a
Purchaser or controls, is controlled by or under common control with the
Purchaser, (B) to any other person or entity provided that (a) such transfer may
otherwise be effected in accordance with applicable securities laws, (b) such
transferee or assignee acquires at least 160,000 Series A Shares and (c) such
assignee or transferee executes a written instrument agreeing to be bound by the
terms and provisions of this Agreement, (C) to a constituent partner of a
Purchaser, a trust (including liquidating trusts for the benefit of such a
partner or partners) or the estate of such a constituent partner, and (D) to a
successor trustee of a Purchaser in its capacity as trustee. Any such transfer
or assignment permitted hereby shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
3.3 Entire Agreement; Amendment; Waiver. This Agreement, the Series A
Agreement and the other agreements contemplated thereby constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof. Neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated, except by a written instrument signed
by the Company and the holders of at least sixty six and 2/3 percent (66-2/3%)
of the Series A Shares and any such amendment, waiver, discharge or termination
shall be binding upon all the parties hereto, but in no event shall the
obligation of any party hereto be materially increased, except upon the written
consent of such party.
3.4 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage prepaid, sent by -facsimile or delivered personally by
hand or nationally recognized courier addressed (a) if to a Purchaser, as
indicated on the list of Purchasers attached hereto as Exhibit A, or at such
other address as such Purchaser or permitted assignee shall have furnished to
the Company in writing, (b) if to Bulldog to Strategic Investments & Holdings,
Inc., Cyclorama Building, 369 Franklin Street, Buffalo, New York 14202;
Attention: Gary M. Brost or at such other address as shall have furnished to the
Company in writing, or (c) if to the Company, at such address or facsimile
number as the Company shall have furnished to each Purchaser in writing. All
such notices and other written communications shall be effective on the date of
mailing, facsimile transfer or delivery.
3.5 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any Purchaser (in any capacity hereunder), upon any
breach or default of the Company under this Agreement shall impair any such
right, power or remedy of such Purchaser nor shall it be construed to be a
waiver of any such breach or default, or an acquiescence therein, or of or in
any similar breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval of
any kind or character on the part of any Purchaser (in any capacity hereunder)
of any breach or default under this Agreement or any waiver on the part of any
Purchaser of any provisions or conditions of this Agreement must be made in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any Purchaser, shall be cumulative and not alternative.
<PAGE>
3.6 Rights; Separability. Unless otherwise expressly provided herein, a
Purchaser's rights hereunder are several rights, not rights jointly held with
any of the other Purchaser. In case any provision of the Agreement 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.
3.7 Titles and Subtitles. The titles of the paragraphs and subparagraphs
of this Agreement are for convenience of reference only and are not to be
considered in construing or interpreting this Agreement.
3.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
3.9 No Third Party Beneficiaries. The covenants and agreements set forth
herein are for the sole and exclusive benefit of the parties hereto and their
respective successors and assigns and such covenants and agreements shall not be
construed as conferring, and are not intended to confer, any rights or benefits
upon any other persons.
3.10 Remedies. The parties to this Agreement acknowledge and agree that a
breach of any of the covenants of the Company, the Purchasers or Bulldog set
forth in this Agreement may not be compensable by payment of money damages and,
therefore, that the covenants of the foregoing parties set forth in this
Agreement may be enforced in equity by a decree requiring specific performance.
Without limiting the foregoing, if any disputes arise concerning Section 1
hereof, the parties to this Agreement agree that an injunction may be issued
pending resolution of such controversy. Such remedies shall be cumulative and
non-exclusive and shall be in addition to any other rights and remedies the
parties may have under this Agreement. Any transfer or acquisition of Restricted
Securities in violation of this Agreement shall be null and void ab initio.
3.11 Definitions. As used in this Agreement, the following definitions
shall apply:
"Common Stock" shall mean, collectively, the Company's Class A Common
Stock, par value $0.001 per share, the Company's Class C Common Stock, par value
$0.001 per share, including shares of Class C Common Stock issued or issuable
upon conversion of Series B Shares, and the Company's Class B Common Stock, par
value $0.001 per share, including shares of Class A or Class B Common Stock
issued or issuable upon exercise of the warrants issued to Equitable on the date
hereof.
"Series A Shares" shall mean the Company's Series A Redeemable
Preferred Stock, par value $0.001 per share.
"Series B Shares" shall mean the Company's Series B Convertible
Preferred Stock, par value $0.001 per share.
[Remainder of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights
Agreement effective as of the day and year first above written.
THE COMPANY: GMH HOLDINGS, INC.
By:____________________________________
Name:
Title:
BULLDOG: BULLDOG HOLDINGS LLC
By: SIHI-GMH LLC
Its Managing Member
By:____________________________________
THE PURCHASERS: RFE INVESTMENT PARTNERS V, L.P.
By: RFE ASSOCIATES V, L.P.,
Its General Partner
By:____________________________________
A General Partner
STERLING COMMERCIAL CAPITAL, INC.
By:____________________________________
Harvey Rosenblatt,
Executive Vice President
State Treasurer of the State of Michigan,
Custodian of the Michigan Public School
Employees' Retirement System, State
Employees' Retirement System, Michigan
State Police Retirement System, and
Michigan Judges Retirement System
By:____________________________________
Name: Paul E. Rice
Title: Administrator, Alternative
Investments Division
EQUITABLE: THE EQUITABLE LIFE ASSURANCE SOCIETY OF
THE UNITED STATES
By:____________________________________
Investment Officer
<PAGE>
Exhibit A
SCHEDULE OF PURCHASERS
Purchaser's Name and Address
RFE Investment Partners V, L.P.
36 Grove Street
New Canaan, CT 06840
State Treasurer of the
State of Michigan, Custodian
430 West Allegan, 3rd Floor
Lansing, MI 48992
Sterling Commercial Capital, Inc.
175 Great Neck Road
Great Neck, NY 11021
<PAGE>
INVESTORS' RIGHTS AGREEMENT
EXHIBIT I
PROMISSORY NOTE
FOR VALUE RECEIVED, GMH Holdings, Inc., a Delaware corporation
(hereinafter called the "Company"), with offices at ____________________________
hereby promises to pay to the order of ________________________________ [name of
person exercising Put], a ____________________________________________
("Payee"), at its office at _________________________________________ [address
of Payee], or at such other office as it designates in writing to the Company,
the principal sum of ______________________ Dollars ($___________), such payment
to be in such coin or currency of the United States of America as at the time of
payment is legal tender for the payment of public and private debts. The
principal amount of this Note shall be paid in three equal annual installments
(or in three installments as nearly equal as possible), one year, two years, and
three years from the initial issuance date of this Note. This Note shall bear
interest on the unpaid principal amount hereof from time to time outstanding,
payable every three months from the initial issuance date of this Note,
commencing on the third month from the initial issuance date of this Note in
like money on the principal sum unpaid hereof, from the date hereof, and upon
payment of principal in full, at a rate per annum equal to [Three year Treasury
rate plus 500 basis points] per annum. Payments of principal and/or interest
shall be made at the office of Payee. Notwithstanding the provisions of this
Note, if the rate of interest payable hereunder is limited by law, the rate
payable hereunder shall be the maximum rate permitted by law. If, however, the
Company pays any interest in excess of the maximum rate of interest permitted by
law, any interest so paid which exceeds such maximum rate shall automatically be
considered a payment of principal and shall automatically be applied in
reduction of principal due on this Note to the extent of such excess.
This Note may be prepaid in whole or in part by the Company. In
addition, in the event that at the end of any fiscal year ending after the date
hereof there shall exist "Excess Cash Flow" (as defined below), then within ten
(10) days after the date upon which the Company's audited consolidated financial
statements with respect to such fiscal year become available, the Company shall
be required to pay to Payee, an amount equal to all of such Excess Cash Flow.
Notwithstanding anything to the contrary contained in this Note, the Company
shall (a) with respect to any mandatory or permitted prepayment under this
paragraph, prepay this Note and other notes initially issued in the same year as
this Note by reason of the exercise of Put rights given to holders of certain
securities of the Company pursuant to repurchase rights granted in an Investors'
Rights Agreement dated as of December __, 1995 (the "Investors' Rights
Agreement") between the Company and the Purchasers named therein pro rata based
on the relative aggregate principal amounts thereof outstanding; and (b) prepay
in full Notes issued in early years by reason of the exercise of Put rights
given to holders of Company securities pursuant to the Investors' Rights
Agreement prior to prepayment of Notes issued in later years.
To secure payment of this Note and of any liability or liabilities of
the Company to the holder, due or to become due or that may hereafter be
contracted or existing, however acquired by the holder, the Company hereby
grants a security interest in and shall deliver to the holder appropriate
documentation, including a Pledge Agreement of even date herewith, representing
such security interest, securities of the Company which the Company has
delivered to the Payee pursuant to the exercise by the Payee of the Put option
contained in the Investors' Rights Agreement.
Reference to any other agreement referred to in this Note shall in no
way impair the negotiability of this Note or the absolute and unconditional
obligation of the Company to pay both principal and interest hereon as provided
herein.
In case of default in the payment of this Note or breach of the
obligations of the Company contained herein, the holder shall have all rights
given by the Uniform Commercial Code in the property, assets and securities in
which it has a security interest. In addition, in the case of default in the
payment of this Note or a breach of the obligations of the Company contained
herein, the unpaid balance of the principal and interest due hereunder shall be
immediately due and payable without notice. The waiver (which may only be by a
written instrument) or the remedying of any default in a reasonable manner shall
not operate as a waiver of the default remedied or any prior or subsequent
default. If any amount payable hereunder is not paid when due in accordance with
the terms hereof, the Company shall pay the holder hereof all its reasonable
costs and expenses of collection, including but not limited to, its reasonable
attorneys' fees actually incurred.
Presentment for payment, demand, notice of dishonor, protest and
notice of protest are hereby waived.
This Note shall be governed and construed in accordance with the laws
of the State of New York applicable to contracts made and to be performed wholly
within such state.
For purposes of this Note, the following definitions shall apply.
"Consolidated Net Income" for any period, shall mean the consolidated
net income (or deficit) of the Company and its subsidiaries for such period,
<PAGE>
determined in accordance with GAAP, excluding, however, any gains or losses from
the sale or other disposition of assets (other than sales of inventory in the
ordinary course of business) and any other non-cash extraordinary or non-
recurring gains or losses.
"Excess Cash Flow" for any period, shall mean an amount equal to the
sum of (i) Consolidated Net Income for such period, plus (ii) an amount equal to
the amount of depreciation expense, depletion expense, non-cash amortization
expense (including the amortization of goodwill), accrued non-cash interest
expense and all other non-cash charges deducted in arriving at such net income
IN WITNESS WHEREOF, GMH Holdings, Inc. has caused this Note to be
duly executed and delivered in its corporate name by its officers duly
authorized on this ____ day of _______________, 199__.
GMH HOLDINGS, INC.
By:__________________________________
Its:
ATTEST
_____________________________
Secretary
<PAGE>
INVESTORS' RIGHTS AGREEMENT
EXHIBIT II
PLEDGE AGREEMENT
THIS AGREEMENT is made as of ________________, 199__, by and between
____________________________, and _______________________ corporation
("Pledgor") and [ ] ("Pledgee").
The following is a recital of facts of facts underlying this
Agreement:
Pledgor has sold Common Stock, par value $.001 par share ("Common
Stock") to Pledgee pursuant to a Securities Purchase Agreement dated as of
December __, 1995, by and between Pledgor, General Manufactured Housing, Inc.
and the Purchasers named therein (the "Purchase Agreement"). Pursuant to an
Investors' Rights Agreement dated as of December __, 1995 between Pledgee,
Pledgor, and certain other Purchasers named therein, (the "Investors' Rights
Agreement"), Pledgor granted to Pledgee the right to put the Common Stock.
Pledgee has exercised its put rights pursuant to the Investors' Rights
Agreement. In connection with the put, the Pledgor is making payment by
delivering a promissory note in the principal amount of_________________________
Dollars ($ ) of even date herewith (the "Note"). In order to secure payment
of the Note and all other sums due to Pledgee pursuant to the terms of the
Investors' Rights Agreement, Pledgor desires to pledge to Pledgee its securities
of the class and in the number being repurchased as provided in Investors'
Rights Agreement (the "Stock").
NOW, THEREFORE, the parties agree as follows:
1. Pledge. Pledgor pledges and herewith delivers to Pledgee as
security for payment of the Note and all other sums due to Pledgee pursuant to
the Investors' Rights Agreement, in accordance with their respective terms, all
the Stock and given Pledgee a continuing lien upon the Stock as security
therefor. If Pledgor comes into default under the terms of the Note, and fails
to cure such default within any grace period specifically provided in the Note,
Pledgor authorizes Pledgee to sell all or any portion of the Stock at public or
private sale by completing the endorsements and/or assignments in blank and to
apply the proceeds, after deducting all expenses of collection and sale
(including reasonable attorney fees) in payment of any and all obligations of
Pledgor evidenced by the Note. Pledgee shall have all the rights and remedies
provided under the Uniform Commercial Code. Whenever any notice of sale is
required to be given to Pledgor, it shall be considered
<PAGE>
reasonable if such notice is given at least (7) days prior to the date of such
sale. Simultaneously with the execution hereof, Pledgor has delivered the Stock
to Pledgee, endorsed in blank, together with assignments separate from
certificates, which are undated and have been executed by Pledgor.
2. Release of Collateral. When the Note and all sums due to Pledgee
pursuant to the Investors' Rights Agreement are paid in full, Pledgee shall
deliver the certificate(s) representing the Stock and endorsements and/or
assignments separate from certificates to Pledgor.
3. Pledgee's Rights. So long as Pledgor is not in default under the
Note or terms of this Agreement, Pledgee shall not have the right to receive any
dividends payable with respect to the Stock and Pledgee shall have no right to
vote the Stock except as provided in the Purchase Agreement. If, however, any
stock dividends or distributions of stock or other securities are made on
account of the Stock, then Pledgor shall promptly deliver such stock or
securities to Pledgee, endorsed in blank, together with assignments separate
from certificates, which are undated and have been executed by Pledgor,
whereupon such stock or securities shall be subject to the terms of this
Agreement and shall be considered to be Stock as that term is used herein. Upon
the occurrence of any default under the Note Pledge may exercise all voting
rights incident to the Stock (which term shall include any voting securities
issued as a dividend and distribution made thereon.)
4. Remedies Cumulative. Pledgee may pursue any and all remedies in
connection with the collateral pledged hereunder notwithstanding the
availability of other remedies, all such remedies shall be cumulative and may be
pursued simultaneously or independently.
5. Notices. Any notices required or desired to be given hereunder,
shall be in writing and shall be considered sufficiently given for all purposes
if delivered by hand or sent by registered or certified mail, to the parties
hereto at the address set forth below or such other address as they may direct
in writing by similar notice:
If to Pledgor:
[ ]
If to Pledgee:
[ ]
6. Miscellaneous. This Agreement is binding upon the parties hereto
and their successors and assigns. This Agreement may only be amended by a
writing signed by all of the parties hereto and may be waived only by a writing
signed by the party charged with such waiver. This Agreement may be signed in
more than one counterpart, each of which shall be considered to be an original,
but all of which shall constitute one and the same Agreement. This Agreement is
government by and shall be construed in accordance with the laws of the State of
Delaware.
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first set forth above.
"PLEDGOR"
[ ]
By:___________________________________
"PLEDGEE"
[ ]
______________________________________
<PAGE>
EXHIBIT E
<PAGE>
____________________________________
GMH HOLDINGS, INC.
STOCKHOLDERS' AGREEMENT
_____________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Representations of the Stockholders; Indemnity. . . . . . . . . . . . . 8
3. Restrictions on Transfers of Securities . . . . . . . . . . . . . . . . 9
(a) General Restrictions . . . . . . . . . . . . . . . . . . . . . . . 9
(b) Restrictions on Stockholder Groups . . . . . . . . . . . . . . . .11
4. Permitted Transfers of Shares . . . . . . . . . . . . . . . . . . . . .12
(a) A Stockholder Transfers. . . . . . . . . . . . . . . . . . . . . .12
(b) B Stockholder Transfers. . . . . . . . . . . . . . . . . . . . . .13
5. Transfers to the Corporation. . . . . . . . . . . . . . . . . . . . . .15
6. Offer of Securities . . . . . . . . . . . . . . . . . . . . . . . . . .15
7. Transfers with Respect to Employee Stockholders . . . . . . . . . . . .17
8. Closing of Transfers. . . . . . . . . . . . . . . . . . . . . . . . . .19
9. Come Along. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
(a) Come Along . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
(b) Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
10. Election of Directors and Other Voting Requirements . . . . . . . . . .22
(a) Voting for Directors . . . . . . . . . . . . . . . . . . . . . . .22
(b) Nominations. . . . . . . . . . . . . . . . . . . . . . . . . . . .22
(c) Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
(d) Removal of Directors . . . . . . . . . . . . . . . . . . . . . . .23
(e) Written Consent. . . . . . . . . . . . . . . . . . . . . . . . . .23
(f) Directors Expenses . . . . . . . . . . . . . . . . . . . . . . . .23
(g) Special Election Matters . . . . . . . . . . . . . . . . . . . . .23
(h) Committees of the Board. . . . . . . . . . . . . . . . . . . . . .24
(i) GMH Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
(j) Equitable's Rights . . . . . . . . . . . . . . . . . . . . . . . .24
11. Special Voting Requirements . . . . . . . . . . . . . . . . . . . . . .25
(a) Required Stockholder Approval While Series A Preferred Shares are
Outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . .25
(b) Required Stockholder Approval After Series A Preferred Shares
are Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . .27
12. Share and Warrant Certificates. . . . . . . . . . . . . . . . . . . . .29
(a) Restrictive Endorsement. . . . . . . . . . . . . . . . . . . . . .29
(b) Replacement Certificates . . . . . . . . . . . . . . . . . . . . .30
13. No Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
14. Preemptive Rights . . . . . . . . . . . . . . . . . . . . . . . . . . .30
15. Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . .32
16. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
(a) Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
(b) Termination; Amendment . . . . . . . . . . . . . . . . . . . . . .33
(c) Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
(d) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . .34
(e) Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . .34
(f) Benefit and Binding Effect . . . . . . . . . . . . . . . . . . . .34
(g) Further Assurances . . . . . . . . . . . . . . . . . . . . . . . .35
(h) Specific Performance . . . . . . . . . . . . . . . . . . . . . . .35
(i) Voting Percentages . . . . . . . . . . . . . . . . . . . . . . . .35
</TABLE>
Exhibit A Schedule of Stockholders
Exhibit B Registration Rights
<PAGE>
STOCKHOLDERS' AGREEMENT
THIS STOCKHOLDERS' AGREEMENT dated as of December 21, 1995, by and among
GMH Holdings, Inc., a Delaware corporation (the "Company"), and each other party
executing this Agreement or a counterpart hereof (hereinafter referred to
collectively as "Stockholders" and individually as a "Stockholder").
W I T N E S S E T H:
WHEREAS, the Company is authorized to issue an aggregate of 4,375,000
shares of Class A Common Stock, par value $.001 per share (the "Class A Common
Shares"), of which 1,656,250 Class A Common Shares are currently issued and
outstanding, 787,500 shares of Class B Common Stock, par value $.001 per share
(the "Class B Common Shares"), none of which Class B Common Shares are currently
issued and outstanding, 2,150,000 shares of Class C Common Stock, par value
$.001 per share (the "Class C Common Shares" and together with the Class A
Common Shares and the Class B Common Shares, the "Common Shares"), none of which
Class C Common Shares are currently issued and outstanding, 8,000,000 shares of
Series A Redeemable Preferred Stock, par value $.001 per share (the "Series A
Preferred Shares"), all of which Series A Preferred Shares are currently issued
and outstanding, and 2,150,000 shares of Series B Convertible Preferred Stock,
par value, $.001 per share (the "Series B Preferred Shares"), all of which
Series B Preferred Shares are currently issued and outstanding (the Class A
Common Shares, Class B Common Shares, Class C Common Shares, Series A Preferred
Shares and Series B Preferred Shares are collectively referred to as the
"Shares"); and
WHEREAS, each Stockholder is the record and beneficial owner of the number
of Class A Common Shares, Class B Common Shares, Class C Common Shares, Series A
Preferred Shares and Series B Preferred Shares appearing opposite his or its
name on Exhibit A attached hereto, free and clear of all options, liens,
encumbrances or charges of any kind, except this Agreement; and
WHEREAS, the Company has issued to The Equitable Life Assurance Society of
the United States and to certain principals of Larkspur Capital Corporation
warrants dated the date hereof to purchase an aggregate of 568,750 Class A
Common Shares or Class B Common Shares at a price of $.01 per share (the
"Warrants"); and
WHEREAS, the parties deem it in the best interests of the Company to
provide for continuity in the control and operation of the Company and to
restrict the transfer of the Shares (including the Common Shares issuable upon
conversion of the Series B Preferred Shares or upon exercise of the Warrants),
as herein provided;
NOW, THEREFORE, in consideration of the agreements and mutual covenants
contained herein, the parties hereto agree as follows:
1. Definitions.
As used in this Agreement, terms defined in the preamble and recitals
hereto shall have the respective meanings specified therein, and the following
terms shall have the following meanings:
"A Stockholder" shall mean (i) any Stockholder that is designated one
of the Group A Stockholders in Exhibit A to this Agreement and (ii) any Person
who acquires Securities after the date hereof and is designated as an A
Stockholder in accordance with the provisions of this Agreement.
<PAGE>
"Act" shall mean the Securities Act of 1933, as amended.
"Affiliate", as applied to any Person, means any other person,
directly or indirectly controlling, controlled by, or under common control with
that Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise, and in all events, GMH shall be deemed to be an
Affiliate of the Company.
"B Stockholder" shall mean (i) any Stockholder that is designated one
of the Group B Stockholders in Exhibit A to this Agreement and (ii) any Person
who acquires Securities after the date hereof and is designated as a B
Stockholder in accordance with the provisions of this Agreement.
"Bulldog" shall mean Bulldog Holdings LLC, a New York limited
liability company.
"Business Day" shall mean any day other than a Saturday or a Sunday or
a day on which commercial banking institutions in the City of New York are
authorized to close.
"Cause" shall mean, with respect to any Employee Stockholder, any of
the following: (a) any deliberate or intentional act or omission by the Employee
Stockholder with the intent of causing damage to the Company's or GMH's
relationships with its lenders, suppliers or customers; (b) any fraud,
misappropriation or embezzlement by the Employee Stockholder involving
properties, assets or funds of the Company or of GMH; (c) a conviction of the
Employee Stockholder, or plea of nolo contendere by the Employee Stockholder, to
any crime or offense involving monies or other property of the Company or GMH or
any other felony or criminal act involving moral turpitude; (d) any usurpation
by the Employee Stockholder of a corporate opportunity of the Company or GMH or
the Employee Stockholder's willful and continual neglect of or willful and
continual failure to perform any of his material duties, responsibilities or
obligations as an employee of the Company or GMH, but only after notice of such
usurpation, neglect or failure is delivered to the Employee Stockholder and the
Employee Stockholder fails or refuses to remedy such usurpation, neglect or
failure to the reasonable satisfaction of the Board of Directors of the Company
or GMH, as applicable, within thirty (30) days after the receipt of such notice;
provided, that any act or omission taken by the Employee Stockholder in good
faith and in the reasonable belief that such action or omission was in the best
interests of the Company or GMH shall not constitute "Cause"; or (e) the
violation by the Employee Stockholder of Section 7 of his Employment Agreement
or of any other non-competition agreement or covenant binding upon the Employee
Stockholder.
"Certificate of Incorporation" shall mean the Company's Certificate of
Incorporation, as amended or restated from time to time.
"Co-Sale Transfer" shall mean any sale by any Stockholder of such
number of the Voting Shares held by such Stockholder in a bona fide, arms-length
transaction to any Person who is not then either a party to this Agreement or a
Related Transferee of such Stockholder, as the case may be, which results in
such Person owning in excess of 10% of the then issued and outstanding Voting
Shares.
"Employee Stockholder" shall mean any of Samuel P. Scott, Kelly Scott
Herold, as Trustee, Drew Eric Scott, Gregory Keith Scott, Lannis Thomas, Wayne
Roberts, Thomas M. Vinson, Bruce Hallock, Michael O'Gorman, Benny Bryan or James
H. McClellan.
"Equitable" shall mean The Equitable Life Assurance Society of the
United States, a New York insurance company.
"Fundamental Change" shall have the meaning set forth in Section 11(b)
hereof.
"GMH" shall mean, prior to the Merger, GMH Acquisition Corp., a
Delaware corporation, and after the Merger, General Manufactured Housing, Inc.,
a Georgia corporation.
"Group A Offerees" shall mean Bulldog, RFE, Michigan and Sterling.
<PAGE>
"Investors Rights Agreement" shall mean that certain Investors Rights
Agreement dated as of the date hereof between and among the RFE Group, Bulldog,
Equitable and the Company.
"Merger" shall mean the merger of GMH Acquisition Corp. with and into
General Manufactured Housing, Inc., with General Manufactured Housing, Inc. as
the surviving corporation.
"Michigan" shall mean the State Treasurer of the State of Michigan,
Custodian of the Michigan Public School Employees' Retirement System, State
Employees Retirement System, Michigan State Police Retirement System and the
Michigan Judges' Retirement System.
"Non-Selling Stockholder Group" shall mean the following Employee
Stockholders: Lannis Thomas, Wayne Roberts, James H. Vinson, Bruce Hallock,
Michael O'Gorman, Benny Bryan and Thomas M. McClellan.
"Person" shall mean a natural person, corporation, limited
partnership, general partnership, joint stock company, limited liability
company, limited liability partnership, joint venture, association, company,
trust, bank, trust company, and trust, business trust or other organization,
whether or not a legal entity, or a government or agency or any political
subdivision thereof.
"Put Date" shall mean the date which is the eighth (8th) anniversary
of the date hereof.
"Put Rights" shall mean the rights granted by the Company to the RFE
Group and Equitable pursuant to Section 1.1 of the Investors Rights Agreement.
"Related Transferees" shall mean, (i) with respect to each Stockholder
who is a natural person, such Stockholder's spouse, any lineal descendant
(whether by birth or adoption), and trusts for the benefit of his spouse or
lineal descendants (whether by birth or adoption), and, upon the death,
disability or incompetence of such Stockholder, his estate or personal
representative and (ii) with respect to any Stockholder who is not a natural
person, the Affiliates of such Stockholder, any partner of any Stockholder which
is a partnership and any successor trustee of any Stockholder which is a
trustee.
"RFE" shall mean RFE Investment Partners V, L.P., a Delaware limited
partnership.
"RFE Group" shall mean RFE, Michigan and Sterling.
"Securities" shall mean and include (i) all Class A Common Shares,
Class B Common Shares, Class C Common Shares, Series A Preferred Shares, Series
B Preferred Shares and Warrants owned, of record or beneficially, by any
Stockholder, (ii) all Class A Common Shares, Class B Common Shares, Class C
Common Shares, Series A Preferred Shares, Series B Preferred Shares and Warrants
hereafter acquired, directly or indirectly, by any Stockholder, including the
Common Shares issuable upon conversion of the Series B Preferred Shares or upon
exercise of any Warrant, and (iii) all other Securities of the Company acquired
by any Stockholder by way of dividend or upon an increase, reduction,
substitution or reclassification of stock of the Company or upon any
reorganization of the Company.
"Securities Acts" shall mean any applicable statute, rule, regulation
or administrative or regulatory requirement applicable to the transfer of
securities of the Company, including the Act, and the rules and regulations
promulgated thereunder, and all applicable state securities or "blue sky" laws.
"Selling Stockholder Group" shall mean the following Employee
Stockholders: Samuel P. Scott, Kelly Scott Herold, as Trustee, Gregory Keith
Scott and Drew Eric Scott.
"Sterling" shall mean Sterling Commercial Capital, Inc., a New York
corporation.
"Stockholder Group" shall mean, with respect to any Stockholder, such
Stockholder, each of his or its Related Transferees and each of their respective
successor Related Transferees.
"transfer" shall mean any sale, assignment, transfer, pledge,
hypothecation, mortgage, charge, lien, encumbrance, gift, bequest, transmission
or other disposition of Securities, provided that the
<PAGE>
encumbrances contemplated by, and transfers of Securities pursuant to the terms
and provisions of Section 4 hereof shall not be deemed to be "transfers".
"Voting Shares" shall mean the Series B Preferred Shares, the Class A
Common Shares, the Class B Common Shares issuable upon exercise of the Warrant
issued to Equitable (notwithstanding that the Class B Common Shares are non-
voting) and the Class C Common Shares, including (a) any Class C Common Shares
issued upon conversion of the Series B Shares or (b) Class A Common Shares or
Class B Common Shares issued upon exercise of the Warrants.
"Warrants" shall have the meaning set forth in the recitals hereto.
2. Representations of the Stockholders; Indemnity.
(a) Each Stockholder other than Michigan and Equitable, severally
represents and warrants as follows:
(i) this Agreement constitutes the valid and legally binding
obligation of such Stockholder, enforceable against such Stockholder in
accordance with its terms, subject to (A) laws of general application
relating to bankruptcy, insolvency, and the relief of debtors, and (B)
rules of law governing specific performance, injunctive relief or other
equitable remedies;
(ii) the execution, delivery and performance of this Agreement
by such Stockholder does not (A) violate or result in a breach of or
constitute a default under any of the organizational or constituent
documents of any Stockholder which is not a natural Person, or any
contract, agreement, indenture, mortgage, pledge, note, bond, license,
permit or other instrument or obligation to which such Stockholder is a
party or by which it or any of its assets are bound or affected or (B)
require any permit, consent, approval or authorization of, or designation,
declaration or filing with, any governmental authority or any other person
or entity, except for those which have already been obtained; and
(iii) such Stockholder, if not a natural person, has all
requisite power and authority to enter into and perform its obligations
under this Agreement in accordance with its terms.
(b) Each Stockholder, other than Michigan and Equitable, agrees to
indemnify and hold harmless the other Stockholders and the Company and its
directors, employees, affiliates and agents from and against any and all
damages, losses, costs and expenses (including reasonable attorneys' fees) which
any of them may incur by reason of the failure of such Stockholder to fulfill
any of the terms or conditions of this Agreement, or by reason of any breach of
the representations and warranties made by such Stockholder in this Agreement.
3. Restrictions on Transfers of Securities.
(a) General Restrictions. During the term of this Agreement, none of
the Securities may be the subject of a transfer unless:
(i) such transfer shall be made in accordance with the
provisions of this Agreement and Exhibit B hereto, relating to the
Stockholders' rights to register their Common Shares or Warrants under the
Securities Acts;
(ii) the proposed transferee shall deliver to the Company a
written acknowledgment that the Securities to be transferred are subject to
this Agreement and that the proposed transferee and his or its successors
in interest agree to be and are bound hereby and thereby to the same extent
and in the same manner as the transferor of such Securities; provided, that
from and after the Put Date, the restrictions contained in this Agreement
shall cease to apply to any Shares which are covered by the Put Rights; and
(iii) such transfer shall be made in compliance with the
Securities Acts, and prior to any such transfer, the Stockholder proposing
to transfer Securities shall give the Company (A) notice describing the
manner and circumstances of the proposed transfer and (B) if reasonably
requested by the Company, a written opinion of legal counsel reasonably
satisfactory to the Company and its counsel, in form and substance
reasonably satisfactory to the Company and its counsel, to the effect that
the proposed transfer of
<PAGE>
Securities will be in compliance with the Securities Acts; provided,
however, that for transactions made pursuant to Rule 144 under the Act, an
opinion of counsel shall only be required if reasonably requested by the
Company and which shall be to the effect that the proposed transfer of
Securities may be effected without registration under the Act; and
provided, further, that no such opinion of counsel shall be necessary for a
transfer by a Stockholder which is (1) a partnership to its partners or
retired partners in accordance with partnership interests, (2) an
individual to a Related Transferee or trust for the benefit of such
individual or Related Transferee or (3) a trustee for the benefit of others
to a successor trustee.
Upon the transfer of Securities in accordance with this Agreement, the
transferee of such Securities shall be deemed a "Stockholder" hereunder. Any
attempted transfer of Securities other than in accordance with this Agreement
and the Registration Rights Agreement shall be null and void, and the Company
shall not recognize any such attempted transfer nor reflect in its records any
change in ownership of Securities pursuant thereto, nor issue any certificate or
other evidence of ownership of Securities in connection therewith.
(b) Restrictions on Stockholder Groups. Any Securities transferred
upon satisfaction of the conditions contained in this Agreement shall be held
subject to the terms of this Agreement and the holder thereof shall be deemed a
Stockholder for purposes of this Agreement, as follows:
(i) Any Securities transferred to, or any Securities held by,
any one of the A Stockholders shall be held by such A Stockholder subject
to the provisions hereof governing Securities held by A Stockholders.
(ii) Any Securities transferred to, or any Securities held by
any one of the B Stockholders shall be held by such B Stockholder subject
to the provisions hereof governing Securities held by B Stockholders.
(iii) Any Securities transferred to any Person that is not a
Stockholder prior to such transfer shall, unless otherwise provided herein,
be held by such Person subject to the provisions hereof governing
Securities held by the Stockholder that transferred Shares to such Person.
4. Permitted Transfers of Shares. Notwithstanding the provisions of
Section 3(a) hereof, during the term of this Agreement, any Stockholder may
transfer any or all of his or its respective Securities, subject to the
restrictions contained in Section 3 hereof and upon compliance with the
following terms and conditions:
(a) A Stockholder Transfers. Subject to the provisions of Section
11(a)(xiii), any A Stockholder may transfer any or all of his, her or its
Securities as follows:
(i) to any Related Transferee of the A Stockholder making
such transfer, provided that any Securities transferred to such Related
Transferee shall be held by such Related Transferee subject to the
provisions hereof governing A Stockholders;
(ii) to the Company in accordance with the procedures
described in Section 5 hereof;
(iii) Bulldog may transfer its Securities to the RFE Group in
accordance with the option granted to the RFE Group pursuant to Section 2
of the Investors Rights Agreement;
(iv) Equitable may transfer its Securities to a Person (A)
for whom Alliance Corporate Finance Group Incorporated is the sole
investment advisor and (B) in connection with such Person becoming the
holder of any of the Senior Subordinated Notes of GMH originally issued to
Equitable; or
(v) to any Person, including any Stockholder (other than
the Persons described in (i), (ii), (iii) and (iv) above), provided that
(A) such Securities are first offered for sale to the Group A Offerees
(excluding any member of the Group A Offerees who is the transferor), pro
rata in accordance with the procedures described in Section 6 hereof, (B)
if the Group A Offerees do not agree to purchase all of such Securities
offered for sale, the remainder of such Securities are next offered to all
other A Stockholders, pro rata in
<PAGE>
accordance with the procedures described in Section 6 hereof, (C) if the
Group A Offerees and such other A Stockholders do not agree to purchase all
of such Securities offered for sale, the remainder of such Securities are
next offered for sale to all B Stockholders, pro rata in accordance with
the procedures described in Section 6 hereof and (D) if any such transfer
involves a Co-Sale Transfer, it shall be made in accordance with the
procedures described in Section 9 hereof; and provided, further, that from
and after the Put Date, the provisions of this Section 4(a)(iv) shall cease
to apply to any transfer of Voting Shares held by any A Stockholder which
are subject to the Put Rights.
(b) B Stockholder Transfers. Subject to the provisions of Section
11(a)(xiii), any B Stockholder may transfer any or all of his, her or its
Securities as follows:
(i) INTENTIONALLY DELETED
(ii) to any other B Stockholder; provided, that, (A) such
Securities are first offered for sale to the members of the Selling
Stockholder Group, pro rata in accordance with the procedures described in
Section 6 hereof and (B) if the members of the Selling Stockholder Group do
not agree to purchase all of such Securities offered for sale, the
remainder of such Securities are next offered for sale to the members of
the Non-Selling Stockholder Group, pro rata in accordance with the
procedures described in Section 6 hereof;
(iii) to the members of the Selling Stockholder Group in
accordance with the provisions of Section 7(a);
(iv) to any Related Transferee of the B Stockholder making such
transfer, provided that any Securities transferred to such Related
Transferee shall be held by such Related Transferee subject to the
provisions governing B Stockholders;
(v) to the Company in accordance with the procedures described
in Section 5 hereof; or
(vi) to any Person, including a Stockholder (other than the
Persons described in (i), (ii), (iii), (iv) and (v) above), provided that
(A) such Securities are first offered for sale to the Group A Offerees, pro
rata in accordance with the procedures described in Section 6 hereof
(except that if a member of the Non-Selling Stockholder Group is the
transferor, such Securities shall first be offered for sale to the members
of the Selling Stockholder Group, pro rata in accordance with the
procedures described in Section 6 hereof, and if the members of the Selling
Stockholder Group do not agree to purchase all of such Securities offered
for sale, the remainder of such Securities are then offered for sale to the
Group A Offerees), (B) if the Group A Offerees do not agree to purchase all
of such Securities offered for sale, the remainder of such Securities are
next offered for sale to all other B Stockholders, pro rata in accordance
with the procedures described in Section 6 hereof, (C) if the Group A
Offerees and such other B Stockholders do not agree to purchase all of such
Securities offered for sale, the remainder of such Securities are next
offered for sale to all A Stockholders (other than the Group A Offerees),
pro rata in accordance with the procedures described in Section 6 hereof
and (D) if such transfer involves a Co-Sale Transfer, it shall be made in
accordance with the procedures described in Section 9 hereof.
5. Transfers to the Corporation. Any Stockholder may transfer any
or all of his or its Securities to the Company, on such terms and conditions as
the Stockholder and the Corporation may agree; provided, however, that except
for (a) any redemption of the Series A Preferred Shares in accordance with the
Certificate of Incorporation or (b) any repurchase of Voting Shares pursuant to
the Put Rights, the Company shall not repurchase or redeem any Securities
without the written consent of the Stockholders required pursuant to the
provisions of Sections 11(a) or (b) hereof, as applicable. Any Securities
purchased or redeemed by the Company shall be retired and not be reissued. If
the Company is legally or contractually restricted from purchasing all of such
Securities, the Company shall, at such time, purchase the portion of the
Securities which it is legally or contractually permitted to purchase, and shall
purchase the balance of the Securities as soon thereafter as it is legally or
contractually able to do so.
6. Offer of Securities. Whenever any Stockholder is required
<PAGE>
to offer Securities for sale to other Stockholders pursuant to Section 4 hereof,
the following procedures shall apply:
(a) The Stockholder proposing to make such a transfer (the
"Transferor") shall deliver a written notice of the proposed transfer (the
"Transfer Notice") to the Company and to each of the other Stockholders entitled
to receive an offer to purchase under the provisions of this Agreement. The
Transfer Notice shall contain a description of the proposed transaction and the
terms thereof, including the number of Securities to be transferred, the name of
each Person to whom or in favor of whom the proposed transfer shall be made (the
"Transferee"), and a description of the consideration to be received by the
Transferor upon transfer of the Securities which must be cash.
(b) At the same time as the delivery of the Transfer Notice, the
Transferor shall deliver a written offer to sell to each of the other
Stockholders entitled to receive such an offer under other provisions of this
Agreement, a pro rata (in accordance with the percentage of Voting Shares then
held by the other Stockholders) portion of the Securities offered for sale by
the Transferor, as required under other provisions of this Agreement. Such offer
to sell shall contain the same terms and conditions and shall be for the same
consideration as described in the Transfer Notice.
(c) For a period of twenty-five (25) days after the offer described
in (b) above is sent to Stockholders, each such Stockholder may, by written
notice to the Transferor and to the Company, accept in whole or in part the
offer to sell Securities. Such acceptance shall specify the amount of Securities
to be purchased by such Stockholder and a proposed date for closing such
purchase, which date shall not exceed sixty (60) days from the date the offer
described in (b) above is sent to Stockholders. If any Stockholder does not
accept the offer to purchase all of the Securities offered by the Transferor,
the Transferor shall make one or more additional offers of the remainder of such
Securities to Stockholders who have agreed to purchase all of the Securities
previously offered to them by the Transferor. Such additional offer or offers
shall be made for a period of ten (10) days to each of such Stockholders in the
same ratio that the amount of Voting Shares which such Stockholder has agreed to
purchase bears to the total amount of Voting Shares which all Stockholders to
whom such additional offer or offers are made have agreed to purchase.
(d) In the event that the other Stockholders do not agree to purchase
all of the Securities offered for sale by the Transferor, the Transferor shall
have the right at his or its election:
(i) to proceed with the sale of such Securities as other
Stockholders have agreed to purchase;
(ii) to cancel all of the offers to other Stockholders and not
sell; or
(iii) to cancel all of the offers to other Stockholders and make
a bona fide sale or other transfer of the Securities to the Transferee
named in the Transfer Notice, but only in strict accordance with the terms
and for the consideration stated in the Transfer Notice and within ninety
(90) days of the last offer to Stockholders hereunder.
7. Transfers with Respect to Employee Stockholders.
(a) If any member of the Non-Selling Stockholder Group voluntarily
ceases to serve as an employee or officer of the Company or GMH without the
consent of the Company or GMH, as applicable, or his employment is terminated
for any reason other than death or disability, in each case, on or prior to the
third anniversary of the date of this Agreement, all Securities held by such
Stockholder and his Related Transferees, if any, shall, immediately upon such
termination of employment, be transferred to the members of the Selling
Stockholder Group (pro rata in accordance with the percentage of Voting Shares
then held by the members of the Selling Stockholder Group) for a purchase price
equal to the total number of Shares so transferred multiplied by the par value
of such Shares.
(b) If (i) the employment of any member of the Non-Selling
Stockholder Group with the Company or GMH terminates by reason of death or
disability or (ii) after the third anniversary of the date of this Agreement but
prior to the earlier of (A) the fifth anniversary of the date of this Agreement
or (B) the date upon which a Co-Sale Transfer occurs, any member of the Non-
Selling Stockholder Group voluntarily ceases to serve as
<PAGE>
an employee or officer of the Company or GMH without the consent of the Company
or GMH, as applicable, or his employment with the Company or GMH is terminated
for any reason other than death or disability, then such Person shall
immediately surrender to the Corporation all Shares held by him and his Related
Transferees, if any, in exchange for an equal number of Class B Common Shares.
(c) If prior to the earlier of (i) the fifth anniversary of the date
of this Agreement or (ii) the date upon which a Co-Sale Transfer occurs, any
member of the Selling Stockholder Group voluntarily ceases to serve as an
executive officer of the Company or GMH or his employment with the Company or
GMH is terminated for Cause, then such Person shall immediately surrender to the
Corporation all Shares held by him and his Related Transferees, if any, (and
who, in the case of Samuel P. Scott, shall mean his Related Transferees, if any,
who have acquired Securities by transfer from him after the date hereof), in
exchange for an equal number of Class B Common Shares.
(d) Immediately upon the occurrence of any event set forth in
paragraphs (b) or (c) above which requires the exchange of Class A Common Shares
for certificates of Class B Common Shares, the rights of the holder of such
Class A Common Shares shall automatically cease, and such Person shall be deemed
to have become a holder of Class B Common Shares.
8. Closing of Transfers. The closing for all purchases and sales of
Securities provided for in this Agreement hereof shall be held at the offices of
the Company. If any Stockholder (or a Related Transferee) who has become
obligated to purchase or sell Securities hereunder is deceased on the closing
date for such purchase or sale and such deceased person's personal
representative shall not have been appointed and qualified by such date, then
the closing shall be postponed until the 10th day after the appointment and
qualification of such personal representative. If the closing date of such
purchase or sale falls on a Saturday, Sunday or legal holiday, then the closing
shall be held on the next succeeding business day. The purchase price for the
Securities shall be paid at the closing by certified check or by cashier's or
official bank check. At the closing, the seller(s) shall deliver to the
purchaser(s) the certificate or certificates representing the Securities to be
sold, duly endorsed in blank and bearing the necessary documentary stamps. Any
Stockholder (or his personal representative or any Related Transferee of such
Stockholder) which transfers Securities shall (a) do all things and execute and
deliver all such papers as may be necessary or reasonably requested by the
Company in order to consummate such transfer, (b) pay to the Company such
amounts as may be required for any applicable stock transfer taxes and (c) pay
to the Company any expenses incurred by the Company in connection with such
transfer (including reasonable attorneys fees). In the event that a Stockholder
(or, his personal representative or any Related Transferee of such Stockholder)
having become obligated to sell Securities hereunder shall fail to deliver such
Securities in accordance with the terms of this Agreement, the purchasers may,
at their option, in addition to all other remedies they may have, send to the
sellers by personal delivery or registered mail, return receipt requested, the
purchase price of such Securities as is hereinabove specified. Thereupon, the
Company shall (i) cancel on its books the certificate or certificates
representing the Securities to be sold, (ii) issue, in lieu thereof, a new
certificate or certificates in the name of the purchasers representing such
Securities, (iii) deliver such new certificate or certificates to the Purchasers
and (iv) give notice thereof to the sellers, and thereupon all of the sellers'
rights in and to such Securities shall terminate.
9. Come Along.
(a) Come Along. If any Stockholder proposes to transfer Voting
Shares in a Co-Sale Transfer (the "Selling Stockholder"), it shall give notice
of such proposed sale (the "Sale Notice") to the Company and the other
Stockholders (the "Other Stockholders"), which notice shall set forth at least
the name and address of the proposed transferee (the "Buyer") and the price and
terms of such proposed sale. Any of the Other Stockholders shall then be
entitled to give, within 20 days after the giving of such Sale Notice, a
counter-notice to the Company, the Selling Stockholder, and to the Buyer at the
address specified in the Sale Notice, that it elects to have the Buyer choose to
purchase the number of Voting Shares owned by such Other Stockholder (and the
Voting Shares of his, her or its Related Transferees, if any) equal to (i) the
number of Voting Shares held by such Other Stockholder and his, her or its
Related Transferees, if any, multiplied by (ii) a fraction, the numerator of
which is the number of Voting Shares proposed to be acquired by the Buyer from
the Selling Stockholder and the denominator of which is the total number of
Voting
<PAGE>
Shares held by the Selling Stockholder (before giving effect to the proposed
sale to the Buyer), at the same price and upon the same terms and conditions as
contained in the Sale Notice. In the event any Other Stockholder makes the
aforesaid election, the Buyer shall purchase and such Other Stockholder (and
his, her or its Related Transferees, if any) shall sell such number of Voting
Shares owned (or deemed owned) by them at the same price and upon the same terms
and conditions as contained in the Sale Notice; provided, that if the Buyer is
not willing to purchase the total number of Voting Shares held by the Selling
Stockholder and the Other Stockholders who have elected to participate in such
sale, the Buyer shall purchase that number of Voting Shares that it wishes to
purchase (but not less than the number set forth in the Sale Notice), and the
Selling Stockholder and the Other Stockholders shall each sell that number of
Voting Shares to the Buyer equal to the product of (x) the aggregate number of
Voting Shares to be purchased by the Buyer and (y) a fraction, the numerator of
which is the number of Voting Shares then owned by such Stockholder, and the
denominator of which is the aggregate number of Voting Shares owned by the
Selling Stockholder and the Other Stockholders who have elected to participate
in such sale.
(b) Warrants. For purposes of Section 9(a), any Stockholder which
holds Warrants and which, if such Warrants had been exercised, would be
permitted to sell the resulting Voting Shares under Section 9(a), shall have the
right to sell Warrants for the number of Voting Shares which, together with the
number of Voting Shares, if any, such Stockholder elects to sell, equals the
number of Voting Shares such Stockholder is permitted to sell under Section
9(a), without any requirement that such Warrants be exercised and converted to
Voting Shares before a sale under Section 9(a). The purchase price per Warrant
shall be the purchase price per Voting Share less the exercise price of the
Warrant.
10. Election of Directors and other Voting Requirements.
(a) Voting for Directors. During the term of this Agreement,
(i) there shall be seven directors of the Company and (ii) at each meeting of
the Stockholders of the Company for the election of directors, the Stockholders
shall vote all Voting Shares held by them for the election of the seven persons
nominated pursuant to Section 10(b).
(b) Nominations. During the term of this Agreement, directors
shall be nominated by the Stockholders as follows: the nominees for directors
shall be (i) the four persons nominated by Bulldog, (ii) the two persons
receiving a plurality of votes cast by all members of the RFE Group, including
one nominee designated by RFE and (iii) Samuel P. Scott.
(c) Vacancies. During the term of this Agreement, should a
vacancy in the Board of Directors be caused by death, resignation, removal or
any other reason, each of the Stockholders agrees to vote all Voting Shares
owned by such Stockholder for (i) the one person receiving a plurality of votes
cast by all B Stockholders at a meeting of B Stockholders held to nominate
directors, in the case of a vacancy caused by the death, resignation, removal or
other reason with respect to Samuel P. Scott or (ii) the nominee selected by
Bulldog or the RFE Group, as the case may be, as provided in Section 10(b)
hereof.
(d) Removal of Directors. If at any time any Stockholder
proposes to remove any director who was nominated by such Stockholder as
provided in Section 10(b) hereof, each Stockholder agrees to vote all of the
Voting Shares owned by such Stockholder for such removal if removal has been
approved by the persons who would be entitled to fill a vacancy pursuant to
Section 10(c) hereof.
(e) Written Consent. Notwithstanding any reference herein to
votes cast at a meeting of the Stockholders, directors may be chosen for
nomination by the Stockholders acting by written consent without a meeting and
directors may be elected by the Stockholders acting by written consent without a
meeting to the extent permitted by law, by the certificate of incorporation and
the by-laws of the Company; provided, however, that nothing in this Section
10(e) shall authorize the nomination, election or removal of directors other
than in accordance with the provisions of this Section 10.
(f) Directors Expenses. Each director of the Company (and any
observer pursuant to Section 10(j)) shall be reimbursed for his actual out of
pocket expenses incurred in attending each meeting of the Board of Directors or
any committee thereof. In addition, if any of the directors nominated by the RFE
Group pursuant to Section 10(b)(ii) is a person with
<PAGE>
outside operating experience and not otherwise affiliated with any member of the
RFE Group, the Company will pay such director reasonable directors fees.
(g) Special Election Matters. Notwithstanding anything
contained in this Section 10 to the contrary, if an Event of Default, as defined
in the Certificate of Incorporation has occurred and not been cured, the
Stockholders shall (to the limited extent, if at all, necessary to accomplish
the following) vote all Voting Shares held by them at the time to accomplish the
nomination and election of that number of nominees of the holders of the Series
A Preferred Shares as constitute the smallest number of directors which shall
constitute a majority of the Company's Board of Directors (including, but not
limited to, voting to remove members of the Board of Directors serving prior to
such election).
(h) Committees of the Board. The Board of Directors of each of
the Company and GMH shall establish an Audit Committee and a Compensation
Committee in accordance with the By-laws of the Company and GMH and so long as
the RFE Group owns at least 10% of the issued and outstanding Voting Shares,
such committees shall include a representative of the RFE Group.
(i) GMH Board. Each of the Stockholders and the Company hereby
agrees to take such action as may be required so that the Board of Directors of
GMH is at all time identical to the Board of Directors of the Company.
(j) Equitable's Rights. So long as Equitable continues to own
at least 70% of the initial purchase percentage of the Warrants issued to it,
Equitable will have (i) the ability to have a representative attend meetings of
the Board of Directors of each of the Company and GMH as an observer, (ii) the
right to receive all materials sent to such Boards of Directors by the Company
or GMH, as applicable, (iii) the right to inspect the Company's and GMH's books
and records and, upon reasonable notice, visit the Company and GMH and (iv)
consult with management of the Company and GMH. Holders of the Warrants issued
to Equitable shall receive monthly unaudited financial statements and annually,
a copy of management's budget for the succeeding year, each at the same time as
such financial statements and budget are delivered to the Company's and GMH's
lenders.
11. Special Voting Requirements.
(a) Required Stockholder Approval While Series A Preferred
Shares are Outstanding. At any time during the term of this Agreement that
Series A Preferred Shares are outstanding, the approval by the affirmative vote
or written consent of the Stockholders holding not less than (x) 66-2/3 of all
of the issued and outstanding Series A Preferred Shares with respect to
paragraphs (ii), (iv), (vi), (vii), (viii) or (ix) below and (y) 50.1% of the
issued and outstanding Series A Preferred Shares with respect to paragraphs (i),
(iii), (v), (x), (xi), (xii) and (xiii) below shall be required to authorize any
of the following:
(i) the payment or declaration of any dividend on the Common
Shares, Series B Preferred Shares or any other equity securities (including
options or warrants) of the Company (other than the Series A Preferred
Shares) or the redemption, purchase or other acquisition for value (or the
payment into or setting aside for a sinking fund for such purpose) any of
the Common Shares, Series B Preferred Shares or any other equity securities
of the Company, or the application of any of the Company's assets to the
redemption, retirement, purchase or acquisition, directly or indirectly,
through subsidiaries or otherwise, of any of the Common Shares, Series B
Preferred Shares or other equity securities of the Company, except for (A)
redemptions of Series A Preferred Shares as provided in accordance with the
provisions of the Certificate of Incorporation, and (B) repurchases of
Common Shares pursuant to the Investors' Rights Agreement;
(ii) (A) any acquisition of the Company by means of a merger of
the Company with or into any other corporation or other entity or person or
other form of corporate reorganization in which the Company shall not be
the continuing or surviving entity of such merger or reorganization (other
than a mere reincorporation transaction) or a transaction in which the
Company is the surviving entity but the shares of the Company's capital
stock outstanding immediately prior to the transaction are exchanged or
converted by virtue of the transaction into other property, whether in the
form of securities, cash or otherwise or (B) a sale of all or substantially
all of the
<PAGE>
assets of the Company, or in either case, any such action with respect to
any subsidiary of the Company;
(iii) the making of any loan, advance or capital contribution
to, or investment in, or permitting or causing any subsidiary of the
Company to make any loan, advance or capital contribution to, or investment
in any of the officers, directors, employees, providers, consultants,
agents or other representatives of the Company, other than (A) travel or
salary advances in the ordinary course of business in a manner consistent
with past practice, and (B) loans evidenced by promissory notes in
connection with the purchase of Common Shares under employment or
restrictive stock purchase agreements or the Investors' Rights Agreement;
(iv) any incurrence or assumption or permitting to exist of or
permitting or causing any subsidiary of the Company to incur or assume or
permit to exist any indebtedness for borrowed money (including capitalized
leases) other than the indebtedness owing to (A) First Source Financial LLP
pursuant to the terms of the Secured Credit Agreement dated as of the date
hereof by and between First Source Financial LLP and GMH, (B) Equitable
pursuant to the terms of the Note and Warrant Purchase Agreement dated as
of the date hereof by and between Equitable, the Company and GMH, and (C)
the RFE Group pursuant to the terms of the Securities Purchase Agreement
dated as of the date hereof between and among the RFE Group, the Company
and GMH in excess of $2,600,000 in the aggregate, or the issuance of any
debt securities or the assumption, guarantee, endorsement (other than in
the ordinary course of business consistent with past practice) or otherwise
as an accommodation becoming responsible for, liabilities of any other
Person;
(v) any purchase, holding or owning, or permitting or causing
any subsidiary of the Company to purchase, hold or own any capital stock,
evidence of indebtedness or other security of any subsidiary of the Company
or other corporation, partnership or other entity, unless such corporation,
partnership or other entity is a wholly owned subsidiary of the Company;
(vi) permitting or causing the Company, or any subsidiary of
the Company, to engage in any new line of business outside the
construction, manufacture, assembling, purchasing and selling all types of
manufactured buildings, structures and homes;
(vii) any authorization or issuance of any equity securities of
the Company, including any preferred stock, options or warrants to purchase
any such equity security;
(viii) any amendment or repeal of any provision of, the addition
of any provision to, or the waiver of any provision of the Company's
Certificate of Incorporation or By-Laws, or any alteration or change in the
rights, preferences, privileges or powers of, or the restrictions provided
for the benefit of, the Series A Preferred Shares, or causing or permitting
any subsidiary of the Company to do the same;
(ix) the making of any acquisition of, or loan, advance or
capital contribution to, or investment in or permitting any subsidiary of
the Company to make any acquisition of, or loan, advance or capital
contribution to, or investment in any business entity, which, individually
or together with any related series of such transactions, exceeds
$1,000,000;
(x) the making of or permitting or causing any subsidiary of
the Company to make any capital expenditures in any one fiscal year in
excess of the sum of (A) $500,000 plus (B) the difference between $500,000
and any unexpended amounts from prior years;
(xi) the entering into of any contract or transaction with an
Affiliate of the Company that does not deal at arm's length with the
Company or which exceeds $25,000 in amount, or causing or permitting any
subsidiary of the Company to do the same;
(xii) the reclassification of any shares of Common Stock or any
other shares of the Company into shares having any preference or priority
as to dividends or assets superior to or on a parity with any such
preference or priority of the Series A Preferred Stock; or
<PAGE>
(xiii) the transfer of (A) any Shares of the Company held by any
of Samuel P. Scott, Gregory Keith Scott, Drew Eric Scott or Bulldog, (B)
any membership interests in Bulldog held by SIHI-GMH LLC or (C) any
membership interest in SIHI-GMH LLC held by either Gary M. Brost or Dennis
C. Martin, in each case in excess of 10% of the Shares or membership
interests originally held by them, in any transaction or series of
transactions, except for (I) transfers to Related Transferees (or Persons
who would be Related Transferees of SIHI-GMH LLC, Gary M. Brost or Dennis
C. Martin if they were parties to this Agreement) and (II) transfers by
Bulldog to the RFE Group pursuant to the Investors Rights Agreement in any
transaction or series of transactions.
(b) Required Stockholder Approval After Series A Preferred Shares are
Redeemed. At any time during the term of this Agreement that there are no Series
A Preferred Shares outstanding, the approval by the affirmative vote or written
consent of the Stockholders holding not less than 70% of all of the issued and
outstanding Voting Shares shall be required to authorize any of the following:
(i) the repurchase or redemption of any of the Shares;
(ii) any amendment of the Certificate of Incorporation or By-Laws of
the Company or any consent by the Company to any amendment of the Certificate of
Incorporation or By-Laws of GMH;
(iii) any authorization of or any issuance of any authorized but
unissued capital stock of the Company, except the issuance of Securities upon
the exercise of the Warrants or upon conversion of any Series B Preferred
Shares;
(iv) any sale of the Company's entire interest in GMH;
(v) the sale, lease or exchange of all or substantially all of the
Company's assets or any consent by the Company to any sale, lease or exchange by
GMH of all or substantially all of the assets of GMH;
(vi) any merger or consolidation of the Company or GMH with or into
any other corporation;
(vii) the dissolution of the Company or GMH;
(viii) the adoption of a plan of liquidation of the Company or GMH;
(ix) any action by the Company to commence any case, proceeding or
other action (A) under any existing or future law of any jurisdiction relating
to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have
an order for relief entered with respect to it or GMH, or seeking to adjudicate
it or GMH a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding up, liquidation, dissolution, composition or other relief
with respect to it or GMH or its or GMH's debts, or (B) seeking appointment of a
receiver, trustee, custodian or other similar official for it or GMH or for all
or any substantial part of its or GMH's assets, or making a general assignment
for the benefit of its or GMH's creditors;
(x) any recapitalization of the Company or GMH; or
(xi) except as provided in the Registration Rights Agreement, any
public offering of securities of the Company or any consent by the Company to
GMH authorizing any public offering of securities of GMH.
(c) Any of the actions described in Section 11(b) above are herein
referred to as a "Fundamental Change".
(d) For purposes of Section 11(a), as to any matter set forth therein
which requires the approval or consent of the Stockholders holding not less than
66-2/3% of all of the issued and outstanding Series A Preferred Shares, such
matter shall be deemed approved or consented to unless the Company shall have
received written notice from the requisite percentage of holders of Series A
Preferred Shares that they do not approve or consent to such matter within ten
(10) Business Days after the holders of the Series A Preferred Shares have
received a written request from the Company asking for such approval or consent.
12. Share and Warrant Certificates.
<PAGE>
(a) Restrictive Endorsement. Each certificate representing
Securities now or hereafter held by a Stockholder shall be stamped with legends
in substantially the following form:
"THE SHARES [WARRANTS] REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO A STOCKHOLDERS' AGREEMENT DATED AS OF
DECEMBER __, 1995, COPIES OF WHICH ARE AVAILABLE AT THE
OFFICE OF THE COMPANY AND MAY BE INSPECTED BY ANY
PROSPECTIVE TRANSFEREE OF THE SHARES [WARRANTS]
REPRESENTED HEREBY ON REQUEST. SUCH STOCKHOLDERS'
AGREEMENT PROVIDES, AMONG OTHER THINGS, FOR CERTAIN
RESTRICTIONS ON THE SALE, ASSIGNMENT, TRANSFER, PLEDGE,
HYPOTHECATION, MORTGAGE, CHARGE, LIEN, ENCUMBRANCE,
GIFT, BEQUEST, TRANSMISSION OR OTHER DISPOSITION OF THE
SHARES [WARRANTS] REPRESENTED BY THIS CERTIFICATE."
THE SALE AND ISSUANCE OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
UNDER THE SECURITIES LAW OF ANY STATE OR OTHER
JURISDICTION. THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION
WITH, THE DISTRIBUTION THEREOF. THESE SECURITIES MAY
NOT BE OFFERED, SOLD, PLEDGED, OR TRANSFERRED UNLESS
(I) A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT
AS TO THESE SECURITIES AND SUCH OFFER, SALE, PLEDGE, OR
TRANSFER IS IN COMPLIANCE WITH APPLICABLE SECURITIES
LAW OF ANY STATE OR OTHER JURISDICTION OR (II) THERE IS
AN OPINION OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY
TO THE CORPORATION, THAT AN EXEMPTION THEREFROM IS
AVAILABLE AND THAT SUCH OFFER, SALE, PLEDGE, OR
TRANSFER IS IN COMPLIANCE WITH APPLICABLE SECURITIES
LAW OF ANY STATE OR OTHER JURISDICTION.
Each Stockholder agrees that he or it will deliver all certificates for
Securities owned by him or it to the Company for the purpose of affixing such
legend thereto.
(b) Replacement Certificates. Upon presentation of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any certificate representing Securities and indemnity agreement
reasonably satisfactory to the Company, and upon reimbursement to the Company of
all its reasonable expenses incident thereto, and upon surrender of such
certificate or instrument, if mutilated, to the Company, each Stockholder agrees
to use his or its best efforts to cause the Company deliver a new certificate of
like tenor in lieu of such lost, stolen, destroyed or mutilated certificate.
13. No Default. Notwithstanding anything to the contrary contained
in this agreement, none of the Stockholders shall take any action hereunder
which would cause the Company or any of its subsidiaries or Affiliates to breach
any material agreement to which the Company, such subsidiary or Affiliate is a
party.
14. Preemptive Rights.
(a) In the event that the Company should determine to (i)
authorize and issue any shares of its capital stock or other equity securities
(other than securities issued (A) pursuant to the conversion of the Series B
Shares, (B) pursuant to the exercise of the Warrants, (C) pursuant to the
acquisition of another corporation by the Company or issued in connection with
any merger, consolidation, combination, purchase of all or substantially all of
the assets or other reorganization which has been approved by the Board of
Directors of the Company and the Stockholders in accordance with the provisions
of this Agreement, (D) pursuant to any rights or agreements, including without
limitation convertible securities, provided that the rights established by this
Section 14 apply with respect to the initial sale or grant by the Company of
such rights or agreements (other than the rights or agreements described in
clause (F) below), (E) in connection with any stock split, stock dividend or
recapitalization of the Company, (F) to employees, consultants, officers or
directors of the Company pursuant to any stock option, stock purchase or stock
bonus plan, agreement or arrangement for the primary purpose of soliciting or
retaining such employees, consultants, officers or directors services and which
are outstanding on the date hereof or are hereafter approved by the Board of
Directors and the Stockholders in accordance with the terms of this Agreement,
and (G) in a firm commitment underwritten public offering
<PAGE>
pursuant to an effective registration statement under the Securities Act,
covering the offer and sale of securities for the account of the Company and/or
selling shareholders to the public) or (ii) to reissue any treasury shares
previously acquired by the Company, then the Company shall notify each
Stockholder holding Voting Shares and each Warrant holder of such proposed
offering and the price thereof, and for a period of 30 days after such notice,
each such Stockholder and Warrant holder may purchase a pro rata (in accordance
with the percentage of Voting Shares then held by such Stockholder and Warrant
holder) amount of the shares being offered by delivery of the purchase price
therefor to the Company. If any Stockholder or Warrant holder does not accept
the offer to purchase all of his or its pro rata share of the shares being
offered, the Company shall make one or more additional offers of the remainder
of such shares to Stockholders or Warrant holders who have agreed to purchase
all of the shares previously offered. Such additional offer or offers shall be
made for a period of 10 days to each of such Stockholders and Warrant holders in
the same ratio that the amount of shares which such Stockholder or Warrant
holder has agreed to purchase bears to the total amount of shares which all
Stockholders and Warrant holders to which such additional offer or offers are
made have agreed to purchase. Any shares not so purchased may be sold by the
Company to a third party who agrees to be bound by the terms of this Agreement
and who shall become a Stockholder hereunder.
(b) For purposes of any calculation of the number of shares of
Voting Shares held or outstanding under this Section 14, the conversion of all
securities convertible into or exchangeable for Voting Shares and the exercise
of all outstanding rights, options and warrants to acquire Voting Shares shall
be assumed.
15. Registration Rights. The Stockholders shall have the registration
rights set forth on Exhibit B hereto.
16. Miscellaneous.
(a) Notices. Wherever this Agreement provides for notice to any
party (except as expressly provided to the contrary), it shall be given in
writing by messenger, electronic transmission, telegraph, telex or postage
prepaid, registered or recorded delivery, air mail letter sent to the address
set forth under each Stockholder's name at the foot of this Agreement, or to
such other address as the party affected may hereafter designate in writing to
the Company and all other Stockholders; together with a copy to the Company at
the address set forth at the foot of this Agreement. Any such notice shall be
effective when received by the party to whom addressed; provided that if given
or made by postage prepaid, registered or recorded delivery, airmail letter or
by telegraph or telex, it shall be deemed to have been received at the earlier
of (i) when actually received or (ii) five (5) business days after the same was
posted or sent (and in proving such it shall be sufficient to prove that the
envelope containing the same was properly addressed and posted as aforesaid or
sent), and provided that if given or made by telegraph or telex, it shall be
deemed to have been received at the time of dispatch.
(b) Termination; Amendment. This Agreement (i) may be terminated
or amended at any time by the written consent of the Company and the holders of
seventy percent (70%) of the Voting Shares and notice of such to the Company and
all Stockholders, provided that no amendment that adversely affects the interest
of any Stockholder shall be effective against such Stockholder absent such
Stockholder's prior written consent, and (ii) shall be terminated (A) upon the
consummation of (1) a registered public offering of the Common Shares or (2) a
Fundamental Change of the type described in Section 11(b)(iv), (vi), (vii),
(viii) or (ix) of this Agreement or (B) ten years from the date hereof, unless,
at anytime within two years prior to any date upon which termination would occur
under this clause (B), all of the parties extend its duration for an additional
period, not to exceed ten years.
(c) Waiver. No failure or delay on the part of the Stockholders
or any of them in exercising any right, power or privilege hereunder, and no
course of dealing between the Stockholders or any of them shall operate as a
waiver thereof nor shall any single or partial exercise of any right, power or
privilege hereunder preclude the simultaneous or later exercise of any other
right, power or privilege. The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies which the Stockholders or
any of them would otherwise have. No notice to or demand in any case shall
entitle the recipient thereof to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of the
Stockholders or any of them to take any other or further action in any
circumstances
<PAGE>
without notice or demand.
(d) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
(e) Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware.
(f) Benefit and Binding Effect. Except as expressly contemplated
herein, this Agreement may not be assigned or transferred. This Agreement shall
be binding upon and shall inure to the benefit of the Company and each of the
Stockholders and their respective executors, administrators and personal
representatives and heirs and their permitted successors and assigns hereunder
and shall be binding upon their successors and assigns. In the event that any
part of this Agreement shall be held to be invalid or unenforceable, the
remaining parts thereof shall nevertheless continue to be valid and enforceable
as though the invalid portions were not a part hereof.
(g) Further Assurances. Each party hereto agrees to use its best
efforts to take, and to use its best efforts to cause the Company to take, any
action which may be reasonably requested by any other party hereto in order to
effectuate or implement the provisions of this Agreement; provided that no party
shall be required to take any requested action or cause the Company to take any
requested action not specifically required under this Agreement if such
requested action might adversely affect the interest of such party or the
Company.
(h) Specific Performance. Due to the fact that the Securities
cannot be readily purchased or sold in the open market, and that legal remedies
may be inadequate to enforce this Agreement, the parties will be irreparably
damaged in the event that this Agreement is not specifically enforced. In the
event of a breach or threatened breach of the terms, covenants and/or conditions
of this Agreement by any of the parties hereto, the other parties shall, in
addition to all other remedies, be entitled to a temporary or permanent
mandatory injunction, or any appropriate decree of specific performance, without
any bond or security being required and without being required to show any
actual damage or that monetary damages would not provide an adequate remedy.
(i) Voting Percentages. Whenever any provision in this Agreement
provides for a specified percentage of Voting Shares to authorize or approve any
action, such percentage shall be calculated as if all Warrants had been
exercised and all shares convertible into Voting Shares had been converted. In
addition, each member of the RFE Group hereby grants to Bulldog the right to
vote 29.1667% of the Series B Preferred Shares and/or Class C Common Shares held
by it as if it were the record and beneficial owner thereof; provided, however,
that the rights granted to Bulldog under this sub-paragraph (i) shall not affect
the calculation of the number of Voting Shares owned by any member of the RFE
Group for purposes of any other provision of this Agreement; and provided,
further, that if Bulldog distributes the Series B Preferred Shares or Class C
Common Shares owned by it, the voting rights granted in this sub-paragraph (i)
shall cease to apply .
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed this Agreement
as of the day and year first above written.
GMH HOLDINGS INC.
By: /s/ Gary M. Brost
__________________________________
Name: Gary M. Brost
Title: President
369 Franklin Street
Buffalo, New York 14202
A STOCKHOLDERS:
BULLDOG HOLDINGS LLC
By: /s/ Gary M. Brost
_________________________________
Name: Gary M. Brost
Title: President
369 Franklin Street
Buffalo, New York 14202
RFE INVESTMENT PARTNERS, V, L.P.
By: RFE Associates V, L.P., general partner
By: _________________________________
Name:
Title: General Partner
36 Grove Street
New Canaan, Connecticut 06840
STERLING COMMERCIAL CAPITAL, INC.
By: _________________________________
Name: Harvey Rosenblatt
Title: Executive Vice-President
175 Great Neck Road
Great Neck, New York 11021
STATE TREASURER OF THE STATE OF MICHIGAN,
CUSTODIAN OF THE MICHIGAN PUBLIC SCHOOL
EMPLOYEES' RETIREMENT SYSTEM, STATE EMPLOYEES
RETIREMENT SYSTEM, MICHIGAN STATE POLICE
RETIREMENT SYSTEM, AND MICHIGAN JUDGES'
RETIREMENT SYSTEM
By: _________________________________
Paul E. Rice
Administrator
Alternate Investments Division
430 West Allegan
Lansing, Michigan 48922
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE
UNITED STATES
By: _________________________________
Name:
Title:
787 7th Avenue
New York, New York 10019
_____________________________________
Robert C. Mayer, Jr.
114 River Road
Scarborough, New York 10510
_____________________________________
Robert L. Goodwin
27 Meadow Lane
Greenwich, Connecticut 06831
_____________________________________
Paul C. Cronson
111 E. 80th Street
<PAGE>
New York, New York 10021
_____________________________________
Eileen V. Austen
3630 Meadville Drive
Sherman Oaks, California 91403
B STOCKHOLDERS:
_____________________________________
Samuel P. Scott
4300 South Fletcher Avenue
Fernandina Beach, FL 32034
_____________________________________
Kelly Scott Herold, as Trustee
1230 Greenridge Road
Jacksonville, FL 32207
_____________________________________
Gregory Keith Scott
3136-A South Fletcher Avenue
Fernandina Beach, FL 32034
_____________________________________
Drew Eric Scott
3000-B South Fletcher Avenue
Fernandina Beach, FL 32034
_____________________________________
Wayne Roberts
2255 Industrial Blvd.
Waycross, GA 32503
_____________________________________
Lannis Thomas
2255 Industrial Blvd.
Waycross, GA 32503
_____________________________________
Thomas M. Vinson
2255 Industrial Blvd.
Waycross, GA 32503
_____________________________________
Bruce Hallock
2255 Industrial Blvd.
Waycross, GA 32503
_____________________________________
Michael O'Gorman
2255 Industrial Blvd.
Waycross, GA 32503
_____________________________________
Benny Bryan
2255 Industrial Blvd.
Waycross, GA 32503
_____________________________________
James H. McClellan
2255 Industrial Blvd.
Waycross, GA 32503
<PAGE>
EXHIBIT A
SCHEDULE OF STOCKHOLDERS
<TABLE>
<CAPTION>
STOCKHOLDER NUMBER OF SHARES GROUP
SERIES A SERIES B CLASS A CLASS B CLASS C
PREFERRED PREFERRED COMMON COMMON COMMON WARRANTS
<S> <C> <C> <C> <C> <C> <C> <C>
Bulldog Holdings LLC 1,400,000 A
RFE Investments
Partners V, L.P. 4,690,351 439,720 714,546 A
State Treasurer of
the State of
Michigan,
Custodian 3,076,922 288,462 468,750 A
Sterling Commercial
Capital, Inc. 232,727 21,818 35,454 A
The Equitable Life
Assurance Society of
the United States 350,000 A
Eileen V. Austen 54,687 A
Paul C. Cranson 54,687 A
Robert C. Goodwin 54,688 A
Robert C. Mayer 54,688 A
Samuel P. Scott 92,749 B
Kelly Scott Herold,
as Trustee 71,167 B
Gregory Keith Scott 71,167 B
Drew Eric Scott 71,167 B
Lannis Thomas 28,000 B
Wayne Roberts 28,000 B
Thomas M. Vinso 21,000 B
Bruce Hallock 14,000 B
Michael O'Gorma 14,000 B
Benny Bryan 13,125 B
James H. McClelan 13,125 B
_________ _________ _________ _________ _________ _______
TOTAL 8,000,000 2,150,000 1,656,250 0 0 568,750
</TABLE>
<PAGE>
EXHIBIT B
REGISTRATION RIGHTS
<PAGE>
REGISTRATION RIGHTS
1. Definitions. Capitalized terms used without definition in
this Exhibit B shall have the meanings set forth in the Stockholders' Agreement
to which this Exhibit B is attached. The following terms shall have the
following respective meanings:
Commission: the Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act or the
Exchange Act, whichever is the relevant statute for the particular purpose.
Equitable Initiating Holders: any holder or holders of more
than 50% of the Warrants.
Exchange Act: the Securities Exchange Act of 1934, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time of determination.
Initiating Holders: each of (a) The Equitable Initiating
Holders and (b) the RFE Initiating Holders, together with their successors and
permitted assigns.
IPO: the issuance by the Company in a Public Offering under
the Act of a number of shares of Common Stock such that, after giving effect to
such Public Offering, there shall be outstanding pursuant to one or more such
Public Offerings shares of Common Stock equal to at least 20% of the capital
stock of the Company on a fully-diluted basis.
Other Securities: any stock (other than Common Stock) and
other securities of the Company or any other Person (corporate or otherwise)
which the holders of the Warrants at any time shall be entitled to receive, or
shall have received, upon the exercise of the Warrants, in lieu of or in
addition to Common Stock, or which at any time shall be issuable or shall have
been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 3 of the Warrant Agreement or otherwise.
Public Offering: any offering of Common Stock or Other
Securities, or any securities issued or issuable with respect to any Common
Stock or Other Securities by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization or otherwise, in each case to the public pursuant to an
effective registration statement under the Act.
Registrable Securities: (a) any shares of Common Stock
issued and outstanding as of the date hereof, (b) the Warrants, (c) any shares
of Common Stock or Other Securities issued or issuable upon exercise of the
Warrants or upon conversion of the Series B Preferred Shares and (d) any
securities issued or issuable with respect to any Common Stock or Other
Securities referred to in subdivision (c) by way of stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (x) a registration statement with respect
<PAGE>
to the sale of such securities shall have become effective under the Securities
Act and such securities shall have been disposed of in accordance with such
registration statement, (y) they shall have been sold as permitted under Rule
144 (or any successor provision) under the Securities Act, or (z) they shall
have ceased to be outstanding.
Registration Expenses: all expenses incident to the
Company's performance of or compliance with the provisions of this Exhibit B,
including, without limitation, all registration, filing and NASD fees, all fees
and expenses of complying with securities or blue sky laws, all word processing,
duplicating and printing expenses, messenger and delivery expenses, the fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of any special audits or "cold comfort"
letters required by or incident to such performance and compliance, the
reasonable fees and disbursements of a single counsel and single firm of
accountants retained by the holders of the Registrable Securities being
registered, premiums and other costs of policies of insurance against
liabilities arising out of the public offering of the Registrable Securities
being registered and any fees and disbursements of underwriters customarily paid
by issuers or sellers of securities, but excluding underwriting discounts,
commissions, transfer taxes and any other compensation paid to underwriters or
other agents or brokers to effect the sale, if any, provided that, in any case
where Registration Expenses are not to be borne by the Company, such expenses
shall not include salaries of Company personnel or general overhead expenses of
the Company, auditing fees, premiums or other expenses relating to liability
insurance required by underwriters of the Company, or other expenses for the
preparation of financial statements or other data normally prepared by the
Company in the ordinary course of its business or which the Company would have
incurred in any event.
Requesting Holder: the meaning in paragraph 7.
RFE Initiating Holders: RFE and Michigan.
Warrant Agreement: the Common Stock Purchase Warrant
expiring December 21, 2002 issued by the Company.
Warrants: the meaning specified in the opening paragraph of
the Warrant Agreement.
2. Registration on Request.
(a) Request. At any time and from time to time after the
180th day following the consummation of an IPO, upon the written request of one
or more Initiating Holders, requesting that the Company effect the registration
under the Securities Act of all or part of such Initiating Holders' Registrable
Securities and specifying the intended method of disposition thereof, the
Company will promptly give written notice of such requested registration to all
holders of outstanding Registrable Securities, and thereupon will use its best
efforts to effect its registration under the Securities Act of:
(i) the Registrable Securities which the Company has been
so requested to register by such Initiating Holder or Holders for
disposition in accordance with the intended method of disposition
stated in such request; and
(ii) all other Registrable Securities the Holders of which
have made written requests to the Company for registration thereof
within 20 Business Days after the giving of such written notice by the
Company (which request shall specify the intended method of
disposition thereof),
all to the extent required to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so to be
registered; provided that the Company shall not be required to effect the
registration pursuant to this Section 2 of any Warrants (but shall be required
to effect the registration of Registrable Securities described in clauses (b)
and (c) of the definition of Registrable Securities), and provided, further,
that any holder of Registrable Securities to be included in any such
registration, may, by written notice to the Company within 10 Business Days
after its receipt of a copy of a notice from the managing underwriter delivered
pursuant to paragraph (g) below, withdraw such request and, on receipt of such
notice of the withdrawal of such request
<PAGE>
from holders comprising at least a majority of the holders of Registrable
Securities to be included in such registration, the Company may elect not to
effect such registration. Subject to paragraph (g) below, the Company may
include in such registration other securities for sale for its own account or
for the account of any other Person.
(b) Number of Registrations. The Company shall not be
required to effect more than two registrations for the RFE Initiating Holders
and two registrations for the Equitable Initiating Holders pursuant to this
Section 2, provided that such registrations, taken together, shall permit the
disposition of at least 80% of the Registrable Securities which the Company has
been so requested to register, and provided, further, that if two such
registrations shall not permit the disposition of at least 80% of such
Registrable Securities, the Company shall be required to effect additional
registrations pursuant to this Section 2 until they have permitted the
disposition of at least 80% of such Registrable Securities.
(c) Registration Statement Form. Registrations under this
Section 2 shall be on such appropriate registration form of the Commission (i)
as shall be selected by the Company and as shall be acceptable to at least a
majority of the holders of Registrable Securities to be included in such
registration and (ii) as shall permit the disposition of the Registrable
Securities which the Company has been requested to register under this Section 2
in accordance with the intended method or methods of disposition specified in
the request for their registration. The Company may, if permitted by law, effect
any registration requested under this Section 2 by the filing of a registration
statement on Form S-3 (or any successor or similar short form registration
statement) unless the holders holding at least a majority (by number of shares)
of the Registrable Securities as to which such registration relates (and, if
such registration involves an underwritten Public Offering of such Registrable
Securities, the managing underwriter of such Public Offering) shall notify the
Company in writing that, in the judgment of such holders (and, if applicable,
such managing underwriter), the use of a more detailed form specified in such
notice is of material importance to the success of the Public Offering of such
Registrable Securities, in which case such registration shall be effected on the
form so specified. Upon the request of at least a majority of the holders of
Registrable Securities, registration under this Section 2 shall be by means of a
shelf registration pursuant to Rule 415 under the Securities Act (but only if
the Company is then eligible to use Form S-2 or S-3 (or any successor forms)).
(d) Expenses. The Company will pay all Registration
Expenses in connection with the first two registrations for each of the RFE
Initiating Holders and the Equitable Initiating Holders effected pursuant to
this Section 2, and, if such registrations, taken together, shall not permit the
disposition of at least 80% of the Registrable Securities which the Company has
been requested to register under this Section 2, the Company will pay all
Registration Expenses in connection with each additional registration pursuant
to this Section 2 until such registrations, taken together, shall have permitted
the disposition of at least 80% of such Registrable Securities.
(e) Selection of Underwriters. If, in the discretion of the
holders of a majority (by number of shares) of the Registrable Securities, any
offering pursuant to this Section 2 shall constitute an underwritten offering,
the underwriter or underwriters thereof shall be selected, after consultation
with such holders, by the Company and shall be acceptable to the holders of at
least a majority of the holders of Registrable Securities to be included in such
offering, who shall not unreasonably withhold their acceptance of such
underwriter or underwriters.
(f) Effective Registration Statement. A registration
requested pursuant to this Section 2 will not be deemed to have been effected
and a demand shall not be deemed to have been made (i) unless it has become
effective, (ii) if the registration does not remain effective for a period of at
least 120 days (or, with respect to any registration statement filed pursuant to
Rule 415 under the Securities Act, for a period of at least 2 years) or, if
earlier, until all the Registrable Securities requested to be registered in
connection therewith were sold, (iii) if, after it has become effective, such
registration is interfered with by any stop order, injunction or other order or
requirement of the Commission or other governmental agency or court, or (iv) if
the conditions to closing specified in the purchase agreement or underwriting
agreement entered into in connection with such registration are not satisfied
other than by reason of some act or omission by such Initiating Holders.
(g) Priority in Requested Registrations. If a requested
<PAGE>
registration pursuant to this Section 2 involves an underwritten offering, and
the managing underwriter shall advise the Company in writing (with a copy to
each holder of Registrable Securities requesting registration) that, in its
opinion, the number of securities requested to be included in such registration
(including securities of the Company which are not Registrable Securities)
exceeds the number which can be sold in such offering, the Company will include
in any such registration to the extent of the number which the Company is so
advised can be sold in such offering (i) first, Registrable Securities requested
to be included in such registration by the holder or holders of Registrable
Securities who are Initiating Holders, pro rata among such holders on the basis
of the number of Registrable Securities requested to be included by such
holders, and (ii) second, other securities of the Company proposed to be
included in such registration, in accordance with the priorities, if any, then
existing among the Company and the holders of such other securities.
3. Incidental Registration.
(a) Right to Include Registrable Securities.
Notwithstanding any limitation contained in Section 2, if the Company at any
time proposes to register any of its securities under the Securities Act (other
than by a registration on Form S-4 or S-8 or any successor or similar forms),
whether or not for sale for its own account, in a manner which would permit
registration of Registrable Securities for sale to the public under the
Securities Act, each such time, it will give prompt written notice to all
holders of Registrable Securities of its intention to do so and of such holders'
rights under this Section 3. Upon the written request of any such holder made
within 20 days after receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such holder and the
intended method of disposition thereof), the Company will use its best efforts
to effect the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the holders
thereof, to the extent requisite to permit the disposition (in accordance with
the intended methods thereof as aforesaid) of the Registrable Securities so to
be registered, by inclusion of such Registrable Securities in the registration
statement which covers the securities which the Company proposes to register,
provided that (i) the Company shall not be required to effect the registration
pursuant to this Section 3 of any Warrants (but shall be required to effect the
registration of Registrable Securities described in clauses (b) and (c) of the
definition of Registrable Securities) and (ii) if, at any time after giving
written notice of its intention to register any securities and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register or to
delay registration of such securities, the Company may, at its election, give
written notice of such determination to each holder of Registrable Securities
and, thereupon, (x) in the case of a determination not to register, shall be
relieved of its obligation to register any Registrable Securities in connection
with such registration (but not from its obligation to pay the Registration
Expenses in connection therewith), without prejudice, however, to the rights of
any holder or holders of Registrable Securities entitled to request that such
registration be effected as a registration under Section 2, and (y) in the case
of a determination to delay registering, shall be permitted to delay registering
any Registrable Securities for the same period as the delay in registering such
other securities. No registration effected under this Section 3 shall relieve
the Company of its obligation to effect any registration statement upon request
under Section 2. The Company will pay all Registration Expenses in connection
with each registration of Registrable Securities requested pursuant to this
Section 3.
(b) Priority in Incidental Registrations. If a registration
pursuant to this Section 3 involves an underwritten offering and the managing
underwriter advises the Company in writing that, in its opinion, the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering, the Company will include in such
registration, to the extent of the number which the Company is so advised can be
sold in such offering, securities determined as follows:
(i) if such registration as initially proposed by the
Company was solely a primary registration of its securities, (x)
first, the securities proposed by the Company to be sold for its own
account, (y) second, any Registrable Securities requested to be
included in such registration, pro rata among the holders thereof
requesting such registration on the basis of the number of shares of
Registrable Securities requested to be included by such holders and
(z) third, any other securities of the Company proposed to be included
<PAGE>
in such registration, pro rata among the holders thereof requesting
such registration on the basis of the number of shares of such
securities requested to be included by such holders; and
(ii) if such registration as initially proposed by the
Company was in whole or in part requested by holders of securities of
the Company, other than holders of Registrable Securities, pursuant to
Section 2 hereof, such securities held by the holders initiating such
registration, any Registrable Securities requested to be included in
such registration, and any other securities of the Company proposed to
be included in such registration, pro rata among the holders thereof
requesting such registration on the basis of the number of shares of
such securities requested to be included by such holders.
4. Registration Procedures. If and whenever (a) the
Company is required to use its best efforts to effect the registration of any
Registrable Securities under the Securities Act as provided in Sections 2 and 3
or (b) there is a Requesting Holder in connection with any other proposed
registration by the Company under the Securities Act, the Company will as
expeditiously as possible:
(i) prepare and file with the Commission the requisite
registration statement (including such audited financial statements as
may be required by the Securities Act or the rules and regulations
promulgated thereunder) to effect such registration and use its best
efforts to cause such registration statement to become effective,
provided that before filing such registration statement or any
amendments thereto, the Company will furnish to the counsel selected
by the holders of Registrable Securities whose Registrable Securities
are to be included in such registration copies of all such documents
proposed to be filed, which documents will be subject to the review of
such counsel, and provided, further, that the Company may discontinue
any registration of its securities which are not Registrable
Securities at any time prior to the effective date of the registration
statement relating thereto;
(ii) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used
in connection therewith as may be necessary to maintain the
effectiveness of such registration statement and to comply with the
provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement until the
earlier of (A) such time as all of such securities have been disposed
of in accordance with the intended methods of disposition by the
seller or sellers thereof set forth in such registration statement and
(B) the expiration of 120 days after such registration statement
becomes effective, except with respect to any such registration
statement filed pursuant to Rule 415 (or any successor Rule) under the
Securities Act, in which case such period shall be 2 years;
(iii) furnish to each seller of Registrable Securities
covered by such registration statement and each Requesting Holder such
number of conformed copies of such registration statement and of each
such amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424
under the Securities Act, in conformity with the requirements of the
Securities Act, and such other documents, as such seller may
reasonably request;
(iv) use its best efforts to register or qualify all
Registrable Securities and other securities covered by such
registration statement under such other securities or blue sky laws of
such jurisdictions as each seller thereof and each Requesting Holder
shall reasonably request, to keep such registration or qualification
in effect for so long as such registration statement remains in
effect, and take any other action which may be reasonably necessary or
<PAGE>
advisable to enable such seller to consummate the disposition in such
jurisdictions of the securities owned by such seller, except that the
Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this subdivision (iv)
be obligated to be so qualified or to consent to general service of
process in any such jurisdiction;
(v) use its best efforts to cause all Registrable
Securities covered by such registration statement to be registered
with or approved by such other governmental agencies or authorities as
may be necessary to enable the seller or sellers thereof to consummate
the disposition of such Registrable Securities;
(vi) furnish to each seller of Registrable Securities and
each Requesting Holder a signed counterpart, addressed to such seller
(and the underwriters, if any), of
(A) an opinion of counsel for the Company, dated the
effective date of such registration statement (and, if such
registration includes an underwritten Public Offering, dated the
date of any closing under the underwriting agreement), reasonably
satisfactory in form and substance to such seller, and
(B) a "comfort" letter, dated the effective date of
such registration statement (and, if such registration includes
an underwritten Public Offering, dated the date of any closing
under the underwriting agreement), signed by the independent
public accountants who have certified the Company's financial
statements included in such registration statement,
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in
the case of the accountants' letter, with respect to events subsequent
to the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' letters delivered
to the underwriters in underwritten Public Offerings of securities
and, in the case of the accountants' letter, such other financial
matters, as such seller (or the underwriters, if any) may reasonably
request;
(vii) immediately notify each seller of such Registrable
Securities, and (if requested by any such seller) confirm such advice
in writing, (A) when the prospectus or any prospectus supplement or
post-effective amendment has been filed, and, with respect to the
registration statement or any post-effective amendment, when the same
has become effective, (B) of any request by the Commission for
amendments or supplements to the registration statement or the
prospectus or for additional information, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the
registration statement or the initiation of any proceedings for that
purpose and (D) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Registrable
Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose;
(viii) use its best efforts to obtain the withdrawal of any
order suspending the effectiveness of the registration statement at
the earliest possible time;
(ix) immediately notify each holder of Registrable
Securities covered by such registration statement and each Requesting
Holder, at any time when a prospectus relating thereto is required to
be delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
<PAGE>
misleading in the light of the circumstances under which they were
made, and at the request of any such holder promptly prepare and
furnish to such seller a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such
prospectus shall not include 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 under which they were made;
(x) otherwise comply with all applicable rules and
regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than
eighteen months, beginning with the first full calendar month after
the effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the
Securities Act, and not file any amendment or supplement to such
registration statement or prospectus to which any such seller or any
Requesting Holder shall have reasonably objected on the grounds that
such amendment or supplement does not comply in all material respects
with the requirements of the Securities Act or of the rules or
regulations thereunder, having been furnished with a copy thereof at
least five business days prior to the filing thereof;
(xi) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration
statement not later than the effective date of such registration
statement;
(xii) cooperate with the sellers of such Registrable
Securities to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold, which
securities shall not bear any restrictive legends and shall be in a
form eligible for deposit with The Depository Trust Company; and
enable such Registrable Securities to be in such denominations and
registered in such names as such sellers may request at least two
Business Days prior to any sale of Registrable Securities;
(xiii) use its best efforts (A) to cause all such
Registrable Securities covered by such registration statement to be
listed on a national securities exchange (if such Registrable
Securities are not already so listed) and on each additional national
securities exchange on which similar securities issued by the Company
are then listed, if the listing of such Registrable Securities is then
permitted under the rules of such exchange, or (B) to secure
designation of all such Registrable Securities covered by such
registration statement as a NASDAQ "national market system security"
within the meaning of Rule 11Aa2-1 of the Commission or, failing that,
secure NASDAQ authorization for such Registrable Securities and,
without limiting the generality of the foregoing, to arrange for at
least two market makers to register as such with respect to such
Registrable Securities with the NASD;
(xiv) provide a CUSIP number for all Registrable Securities,
not later than the effective date of the applicable registration
statement; and
(xv) enter into such agreements and take such other actions
as the Requisite Holders shall reasonably request in order to expedite
or facilitate the disposition of such Registrable Securities.
The Company may require each holder of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such holder and the distribution of such securities as the Company may from time
to time reasonably request in writing.
5. Underwritten Offerings.
(a) Requested Underwritten Offerings. If requested by the
underwriters for any underwritten offering by holders of Registrable
<PAGE>
Securities pursuant to the registration requested under Section 2, the Company
will enter into an underwriting agreement with such underwriters for such
offering, such agreement to be satisfactory in substance and form to each such
holder and the underwriters and to contain such representations and warranties
by the Company and such other terms as are customarily contained in agreements
of this type, including, without limitation, indemnities to the effect and to
the extent provided in Section 8. The holders of Registrable Securities to be
distributed by such underwriters shall be parties to such underwriting agreement
and may, at their option, require that any or all of the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
such holders of Registrable Securities and that any or all of the conditions
precedent to the obligations of such underwriters under such underwriting
agreement be conditions precedent to the obligations of such holders of
Registrable Securities. No holder of Registrable Securities shall be required
(i) to make any representations or warranties to or agreements with the Company
or the underwriters other than representations, warranties or agreements
regarding such holder and such holder's intended method of distribution and any
other representation required by law or (ii) to indemnify (or to contribute with
respect to an indemnifiable claim) the Company or any underwriters of the
Registrable Securities, except as set forth in Section 8.
(b) Incidental Underwritten Offerings. If the Company at
any time proposes to register any of its securities under the Securities Act as
contemplated by Section 3 and such securities are to be distributed by or
through one or more underwriters, the Company will, subject to the provisions of
Section 3(b), use its best efforts, if requested by any holder of Registrable
Securities, to arrange for such underwriters to include the Registrable
Securities to be offered and sold by such holder among the securities to be
distributed by such underwriters. The holders of Registrable Securities to be
distributed by such underwriters shall be parties to the underwriting agreement
between the Company and such underwriters and may, at their option, require that
any or all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters shall also
be made to and for the benefit of such holders of Registrable Securities and
that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to the
obligations of such holders of Registrable Securities. No holder of Registrable
Securities shall be required (i) to make any representations or warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding such holder and such holder's intended method
of distribution and any other representation required by law or (ii) to
indemnify (or to contribute with respect to an indemnifiable claim) the Company
or any underwriters of the Registrable Securities, except as set forth in
Section 8.
(c) Holdback Agreements.
(i) Each holder of Registrable Securities agrees, if so
required by the managing underwriter, not to effect any public sale or
distribution of securities of the Company of the same class as the
securities included in such Registration Statement, during the seven
days prior to the date on which any underwritten registration pursuant
to Section 2 or 3 has become effective and the 90 days thereafter,
except as part of such underwritten registration or to the extent that
such holder is prohibited by applicable law from agreeing to withhold
Registrable Securities from sale or is acting in its capacity as a
fiduciary or an investment adviser. Without limiting the scope of the
term "fiduciary," a holder shall be deemed to be acting as a fiduciary
or an investment adviser if its actions or the Registrable Securities
proposed to be sold are subject to ERISA, the Investment Company Act
of 1940 or the Investment Advisers Act of 1940 or if such Registrable
Securities are held in a separate account under applicable insurance
law or regulation.
(ii) The Company agrees (A) not to effect any public sale or
distribution of its equity securities or securities convertible into
or exchangeable or exercisable for any of such securities during the
seven days prior to the date on which any underwritten registration
<PAGE>
pursuant to Section 2 or 3 has become effective and the 90 days
thereafter, except as part of such underwritten registration and
except pursuant to registrations on Form S-4 or S-8 or any successor
or similar forms thereto, and (B) to cause each holder of its equity
securities or of any securities convertible into or exchangeable or
exercisable for any of such securities, in each case purchased from
the Company at any time after the date of this Agreement (other than
in a Public Offering), to agree not to effect any such public sale or
distribution of such securities, during such period, except as part of
such underwritten registration.
6. Preparation; Reasonable Investigation. In connection with
the preparation and filing of each registration statement under the Securities
Act, the Company will give the holders of Registrable Securities to be
registered under such registration statement, their underwriters, if any, each
Requesting Holder and one firm of counsel and accountants on behalf of such
Requesting Holders, the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give each
of them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be necessary,
in the opinion of such holders' and such underwriters' respective counsel, to
conduct a reasonable investigation within the meaning of the Securities Act. The
Company agrees to include in any such registration statement all information
which any holder of Registrable Securities being registered, upon advice of
counsel, shall reasonably request.
7. Rights of Requesting Holders. The Company will not file any
registration statement under the Securities Act, whether or not pursuant to
registration rights granted to other holders of its securities and whether or
not for sale for its own account (other than by a registration on Form S-4, S-8
or any successor form thereto), unless it shall first have given to each Person
which holds any Registrable Securities issued by the Company at least 30 days'
prior written notice thereof. Any such holder who shall so request within 30
days after such notice (a "Requesting Holder") shall have the rights of a
Requesting Holder provided in Sections 4, 6 and 8. In addition, if any
registration statement refers to any Requesting Holder by name or otherwise as
the holder of any securities of the Company, then such holder shall have the
right to require (a) the insertion therein of language, in form and substance
reasonably satisfactory to such holder, to the effect, if true, that the holding
by such holder of such securities does not necessarily make such holder a
"controlling person" of the Company within the meaning of the Securities Act and
is not to be construed as a recommendation by such holder of the investment
quality of the Company's debt or equity securities covered thereby and that such
holding does not imply that such holder will assist in meeting any future
financial requirements of the Company, or (b) in the event that such reference
to such holder by name or otherwise is not required by the Securities Act or any
rules and regulations promulgated thereunder, the deletion of the reference to
such holder.
8. Indemnification.
(a) The Company will, and hereby does, indemnify, to the
extent permitted by applicable law, each holder of Registrable Securities and
its Affiliates and their respective officers and directors, if any, and each
Person, if any, who controls such holder within the meaning of Section 15 of the
Securities Act, against all losses, claims, damages, liabilities (or proceedings
in respect thereof) and expenses (under the Securities Act or common law or
otherwise), joint or several, caused by any untrue statement or alleged untrue
statement of a material fact contained in any registration statement or
prospectus (and as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) or any preliminary prospectus or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities (or proceedings in
respect thereof) or expenses are caused by any untrue statement or alleged
untrue statement contained in or by any omission or alleged omission from
information furnished in writing to the Company by such holder expressly for use
therein. If the offering pursuant to any registration statement provided for
under this Agreement is made through underwriters, no action or failure to act
on the part of such underwriters (whether or not any such underwriter is an
Affiliate of any holder of Registrable Securities) shall
<PAGE>
affect the obligations of the Company to indemnify any holder of Registrable
Securities or any other Person pursuant to the preceding sentence. If the
offering pursuant to any registration statement provided for under this
Agreement is made through underwriters, the Company agrees to enter into an
underwriting agreement in customary form with such underwriters, and the Company
agrees to indemnify such underwriters, their officers and directors, if any, and
each Person, if any, who controls such underwriters within the meaning of
Section 15 of the Securities Act to the same extent as hereinbefore provided
with respect to the indemnification of the holders of Registrable Securities;
provided that the Company shall not be required to indemnify any such
underwriter, or any officer or director of such underwriter or any Person who
controls such underwriter within the meaning of Section 15 of the Securities
Act, to the extent that the loss, claim, damage, liability (or proceedings in
respect thereof) or expense for which indemnification is claimed results from
such underwriter's failure to send or give a copy of the amended or supplemented
final prospectus to the Person asserting an untrue statement or alleged untrue
statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such amended or supplemented final
prospectus prior to such written confirmation and the underwriter was given
notice of the availability of such amended or supplemented final prospectus.
(b) In connection with any registration statement in which
a holder of Registrable Securities is participating, each such holder will
indemnify, to the extent permitted by applicable law, the Company, its officers
and directors and each Person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act, against any losses, claims,
damages, liabilities (or proceedings in respect thereof) and expenses (under the
Securities Act, common law or otherwise), caused by any untrue statement or
alleged untrue statement of a material fact or any omission or alleged omission
of a material fact required to be stated in the registration statement or
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or necessary to make the statements therein not misleading, but only to
the extent that such untrue statement is contained in or such omission is from
information so furnished in writing by such holder expressly for use therein;
provided that such holder's obligations hereunder shall be limited to an amount
equal to the net proceeds to such holder of the Registrable Securities sold
pursuant to such registration statement.
(c) Any Person entitled to indemnification under the
provisions of this Section 8 shall (i) give prompt notice to the indemnifying
party of any claim with respect to which it seeks indemnification (but the
failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under the preceding
subdivisions of this Section 8, except to the extent that the indemnifying party
is actually prejudiced by such failure) and (ii) unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, permit such
indemnifying party to assume the defense of such claim, with counsel reasonably
satisfactory to the indemnified party; and if such defense is so assumed, such
indemnifying party shall not enter into any settlement without the consent of
the indemnified party if such settlement attributes liability to the indemnified
party, and such indemnifying party shall not be subject to any liability for any
settlement made without its consent (which shall not be unreasonably withheld);
and any underwriting agreement entered into with respect to any registration
statement provided for under this Agreement shall so provide. In the event an
indemnifying party shall not be entitled, or elects not, to assume the defense
of a claim, such indemnifying party shall not be obligated to pay the fees and
expenses of more than one counsel or firm of counsel for all parties indemnified
by such indemnifying party in respect of such claim, unless in the reasonable
judgment of any such indemnified party a conflict of interest may exist between
such indemnified party and any other of such indemnified parties in respect to
such claim. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of a participating holder of Registrable
Securities, its officers, directors or any Person, if any, who controls such
holder as aforesaid, and shall survive the transfer of such securities by such
holder.
(d) If the indemnification provided for in this Section 8
shall for any reason be held by a court to be unavailable to an indemnified
party under Section 8(a) or (b) hereof in respect of any loss, claim, damage or
liability, or any action in respect thereof, then, in lieu of the amount paid or
payable under Section 8(a) or (b), the indemnified party and the indemnifying
party under Section 8(a) or (b) shall contribute to the aggregate losses,
claims, damages and liabilities (including legal or other
<PAGE>
expenses reasonably incurred in connection with investigating the same), (i) in
such proportion as is appropriate to reflect the relative fault of the Company
and the prospective sellers of Registrable Securities covered by the
registration statement which resulted in such loss, claim, damage or liability,
or action or proceeding in respect thereof, with respect to the statements or
omissions which resulted in such loss, claim, damage or liability, or action or
proceeding in respect thereof, as well as any other relevant equitable
considerations or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as shall be appropriate to
reflect the relative benefits received by the Company and such prospective
sellers from the offering of the securities covered by such registration
statement, provided, that for purposes of clauses (i) or (ii), the relative
benefits received by the prospective sellers shall be deemed not to exceed the
amount of proceeds received by such prospective sellers, and no holder of
Registrable Securities shall be required to contribute any amount in excess of
the amount such holder would have been required to pay to an indemnified party
if the indemnity under subsection (b) of this Section 8 was available. 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. Such sellers' obligations to
contribute as provided in this Section 8(d) are several in proportion to the
relative value of their respective Registrable Securities covered by such
registration statement and not joint. In addition, no Person shall be obligated
to contribute hereunder any amounts in payment for any settlement of any action
or claim effected without such Person's consent, which consent shall not be
unreasonably withheld.
(e) Indemnification and contribution similar to that
specified in the preceding subdivisions of this Section 8 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification
of securities under any federal or state law or regulation of any
governmental authority other than the Securities Act.
(f) An indemnifying party shall make payments of all
amounts required to be made pursuant to the foregoing provisions of this Section
8 to or for the account of the indemnified party from time to time promptly upon
receipt of bills or invoices relating thereto or when otherwise due or payable,
subject to an undertaking by the Indemnified Party to repay all such amounts if
a court of competent jurisdiction determines that such Indemnified Party is not
entitled to indemnity or the benefits of contribution hereunder.
9. Adjustments Affecting Registrable Securities. The Company
will not effect or permit to occur any combination or subdivision of shares
which would adversely affect the ability of the holders of Registrable
Securities to include such Registrable Securities in any registration of its
securities contemplated by this Exhibit B or the marketability of such
Registrable Securities under any such registration.
10. Registration Rights to Others. The Company shall not,
without the prior written consent of the holders of a majority of Registrable
Securities, provide to any holder of any securities of the Company rights with
respect to the registration of such securities under the Act which are more
favorable to such holder than the terms and conditions provided in this Exhibit
B to holders of Registrable Securities. The Company shall provide to the holders
of Registrable Securities copies of any agreements which purport to grant rights
with respect to the registration of any of the Company's securities to any
holder or prospective holder thereof promptly upon executing the same.
11. Other Registration of Common Stock. If any shares of the
Common Stock required to be reserved for purposes of issuance upon exercise of
the Warrants in connection with their sale in a registration pursuant to Section
2 or 3 require registration with or approval of any governmental authority under
any federal or state law (other than the Securities Act) before such shares may
be issued upon such exercise, the Company will, at its expense and as
expeditiously as possible, use its best efforts to cause such shares to be duly
registered or approved, as the case may be.
12. Nominees for Beneficial Owners. For purposes of this Exhibit
B, in the event that any Registrable Securities are held by a nominee for the
beneficial owner thereof, the beneficial owner thereof may, at its election, be
treated as the holder of such Registrable Securities for purposes of any request
or other action by any holder or holders of Registrable Securities pursuant to
this Exhibit B or any determination of any number or percentage of shares of
Registrable Securities held by any
<PAGE>
holder or holders of Registrable Securities contemplated by this Exhibit B. If
the beneficial owner of any Registrable Securities so elects, the Company may
require assurances reasonably satisfactory to it of such owner's beneficial
ownership of such Registrable Securities.
13. Rule 144 and Rule 144A. The Company shall take all actions
reasonably necessary to enable holders of Registrable Securities to sell such
securities without registration under the Securities Act within the limitation
of the provisions of Rule 144 and Rule 144A under the Securities Act, as such
Rules may be amended from time to time, or any similar rules or regulations
hereafter adopted by the Commission, including, without limitation, filing on a
timely basis all reports required to be filed pursuant to the Exchange Act.
14. Transfer; Assignment. Upon a transfer of Registrable
Securities by the holder thereof, the rights granted hereunder to the holders of
Registrable Securities may be transferred to such transferee.
15. Amendment. Notwithstanding the provisions of the
Stockholders Agreement to which this Exhibit B is attached, this Exhibit B may
not be amended or modified without the prior written consent of holders of more
than 50% of the Registrable Securities. Any approval, action or waiver of any
provision contained in this Exhibit B shall require the prior approval or
consent of holders of more than 50% of the Registrable Securities, and upon
receiving such approval or consent, such approval, action or waiver shall be
binding upon all holders of Registrable Securities; provided, that if any
amendment is adverse to any holder of Registrable Securities, the same must be
approved by such holder.
<PAGE>
EXHIBIT F
COMPLIANCE CERTIFICATE
The undersigned officer of GMH HOLDINGS, INC., a Delaware corporation
(the "Corporation"), hereby delivers this Certificate as required by Section 5.3
of that certain Securities Purchase Agreement among the Corporation, General
Manufactured Housing, Inc., a Georgia corporation, and the Purchasers listed on
Schedule A thereto (the "Purchase Agreement"). The undersigned hereby certifies
on behalf of the Corporation that all of the conditions precedent to the closing
of the transactions at the Closing (as defined in the Purchase Agreement), set
forth in Section 5 of the Purchase Agreement, have been satisfied by the
Corporation.
IN WITNESS WHEREOF, the undersigned has hereunto affixed his signature
to this Certificate of the President as of this ____ day of December, 1995.
________________________________
Gary M. Brost
<PAGE>
EXHIBIT G
<PAGE>
DRAFT
12/17/95
[Form of Opinion of NHD&D]
December __21, 1995
RFE Investment Partners V, L.P.
36 Grove Street
New Canaan, CT 06840
State Treasurer of the State of Michigan
c/o Alternate Investments Division
430 West Allegan
Lansing, MI 48922
Sterling Commercial Capital, Inc.
175 Great Neck Road
Great Neck, New York 11021
Re: Securities Purchase Agreement Between and Among GMH
Holdings, Inc., General Manufactured Housing, Inc. and the
Purchasers Named Therein
Ladies and Gentlemen:
We have acted as counsel to GMH Acquisition Corp., a Delaware
corporation ("Acquisition Co.") and its successor by merger, General
Manufactured Housing, Inc., a Georgia corporation (together with Acquisition
Co., "GMH"), GMH Holdings, Inc., a Delaware corporation (the "Company") and
Bulldog Holdings LLC, a New York limited liability company ("Bulldog"), in
connection with execution and delivery of that certain Securities Purchase
Agreement of even date herewith (the "Securities Purchase Agreement") between
GMH, Holdings and the Purchasers named therein. All capitalized terms used but
not elsewhere defined herein shall have the respective meanings ascribed to such
terms in the Securities Purchase Agreement.
The following documents (collectively, the "Applicable Documents")
each dated of even date herewith, have been executed and delivered in connection
with the purchase of the Securities and the Junior Notes:
1. the Securities Purchase Agreement;
2. the Junior Notes;
3. the Investors Rights Agreement; and
4. the Stockholders Agreement.
In rendering these opinions, we have examined the following (each of
which is dated as of the Closing Date unless another date is indicated):
(a) the Applicable Documents;
(b) the Certificate of Incorporation and By-Laws of each of
Acquisition Co. and the Company and all amendments thereto and restatements
thereof, each dated as set forth therein; and
(c) the Operating Agreement of Bulldog, together with all amendments
thereto, each dated as set forth therein (the "Operating Agreement").
In addition, we have examined such other records and documents as we
have deemed relevant or material in order to enable us to render the opinions
herein, including, without limitation, originals or copies, certified or
otherwise identified to our satisfaction, of all such records of Acquisition
Co., the Company and Bulldog, certificates of public officials, certificates of
officers or other representatives of Acquisition Co., the Company and Bulldog,
and such other documents, certificates and corporate or other records as we have
deemed necessary or appropriate as a basis for the opinions set forth herein,
including (i) certified copies of certain resolutions duly adopted by the
Stockholders and Board of Directors of each of Acquisition Co. and the Company,
(ii) the Articles of Organization of Bulldog filed with the Secretary of State
of the State of New York on December __November 27, 1995 and (iii) certified
copies of certain resolutions duly adopted by SIHI-GMH LLC, the Managing Member
of Bulldog.
We have obtained and relied on evidence or advice satisfactory to us
from the Secretary of State of the States of Delaware, Georgia and South
Carolina, as the case may be, with respect to: (a) the corporate good standing
of Acquisition Co. in Delaware; (b) the corporate good standing of the Company
in Delaware; (c) the authority to do business and good standing of the Company
in New York; (d) the good standing of Bulldog in New York and (e) the
effectiveness of the Merger in Delaware.
<PAGE>
In all such examinations, we have assumed the genuineness of all
signatures by each party (other than signatures of Acquisition Co., the Company
and Bulldog), the authenticity of all documents submitted to us as originals and
the conformity to original documents of all documents submitted to us as
conformed or photostatic copies. For the purposes of the opinions hereinafter
expressed, we have further assumed (a) the due formation, organization or
qualification to do business, valid existence and good standing of each entity
which is a party to any of the Applicable Documents (other than Acquisition Co.,
the Company and Bulldog) under the laws of each jurisdiction in which such
entity does business; (b) the legal capacity of all natural persons executing
the Applicable Documents; (c) due execution and delivery, pursuant to due
authorization, of each Applicable Document referred to in this opinion by each
party thereto (other than Acquisition Co., the Company and Bulldog) and (d) that
each Applicable Document constitutes the valid and binding obligation of each
party thereto (other than Acquisition Co., the Company and Bulldog), enforceable
against such party in accordance with its terms.
Based upon and subject to the foregoing, and to the qualifications and
limitations set forth below, we are of the opinion that:
1. Each of Acquisition Co. and the Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company is qualified to do business and in good standing as a
foreign corporation in the State of New York. Each of Acquisition Co. and the
Company possesses corporate powers which are adequate for the carrying on of its
respective business and the ownership of its respective property. The Company
has the requisite right, corporate power and authority to execute and deliver
the Applicable Documents to which it is a party, and to enter into and perform
its obligations thereunder.
2. Bulldog is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of New York. We note
that under the New York Limited Liability Company Act, within 120 days after the
effectiveness of the Articles of Organization, Bulldog is required to publish a
notice in two newspapers of general circulation in the county in which its
principal place of business is located, for six consecutive weeks. Bulldog
possesses the requisite powers which are adequate for the carrying on of its
business and the ownership of its property. Bulldog has the requisite right,
power and authority to execute and deliver the Applicable Documents to which it
is a party, and to enter into and perform its obligations thereunder.
3. The Applicable Documents to which the Company and Bulldog are a
party have been duly executed and delivered by such Person, and such Applicable
Documents, as executed and delivered, are the valid and binding obligations of
such Person, enforceable against such Person, in accordance with their
respective terms. The execution and delivery by the Company and Bulldog of the
Applicable Documents to which such Person is a party and the performance of
their respective obligations thereunder have been duly authorized and approved
by all necessary corporate or limited liability company action, as applicable.
Each of Acquisition Co. and the Company has taken all requisite corporate action
on its part to authorize the merger of Acquisition Co. with and into GMH (the
"Merger") pursuant to the Plan of Merger (the "Plan of Merger") and the
performance of Acquisition Co.'s performance thereunder. The Plan of Merger has
been duly and validly executed by Acquisition Co. and the Company and
constitutes the valid and binding obligation of Acquisition Co. and the Company,
enforceable against them in accordance with its terms.
4. The authorized capital stock of the Company consists of
1,656,250 shares of Class A Common Stock, $.001 par value, 787,500 shares of
Class B Common Stock, $.001 par value, 2,150,000 shares of Class C Common Stock,
$.001 par value, and 10,150,000 shares of Preferred Stock, $.001 par value, of
which 8,000,000 shares are designated Series A Redeemable Preferred Stock and
2,150,000 shares are designated Series B Convertible Preferred Stock.
Immediately prior to the Closing, no shares of Class A Common Stock, no shares
of Class B Common Stock, no shares of Class C Common Stock, no shares of Series
A Preferred Stock, and no shares of Series B Preferred Stock were issued and
outstanding. The Class C Common Stock issuable upon conversion of the Series B
Shares has been duly and validly reserved, and when issued in accordance with
the Company's Restated Certificate of Incorporation (the "Restated Certificate")
will be validly issued, fully paid and nonassessable. The Securities issued
under the Securities Purchase Agreement are validly issued, fully paid and
nonassessable and free of any liens, encumbrances and preemptive or similar
<PAGE>
rights, except as contained in the Stockholders Agreement. To our knowledge,
except for rights described in the Securities Purchase Agreement, the Exhibits
thereto, the Investors Rights Agreement, the Stockholders Agreement and the
Restated Certificate, there are no other options, warrants, conversion
privileges or other rights presently outstanding to purchase or otherwise
acquire any authorized but unissued shares of capital stock or other securities
of the Company or any other agreements to issue any such securities or rights.
The respective rights, privileges, preferences and limitations of the Class A
Common Stock, the Class B Common Stock the Class C Common Stock, the Series A
Shares and the Series B Shares are stated in the Company's Restated Certificate
of Incorporation. The certificates representing the Securities are in due and
proper form and have been validly executed.
(b) As of the Closing Date, immediately prior to the Merger, the
authorized capital stock of Acquisition Co. will consist of 200 shares of common
stock, without par value, of which one share is outstanding and owned of record
by the Company.
5. (a) The Company is not in violation of any term of its Restated
Certificate or Bylaws, or, to our knowledge, in any material respect of any term
or provision of any material contract, agreement, instrument, judgment or decree
to which such Person is a party or which is binding on it. The execution and
delivery by the Company of the Applicable Documents to which it is a party do
not: (A)(i) result in a breach or a violation of the provisions of the Restated
Certificate or By-Laws of the Company, (B)(ii) to our knowledge, result in a
breach or default under any material contract, agreement, instrument, judgment
or decree to which the Company is a party or by which it is bound, except for
such breaches or defaults which would not have a Material Adverse Effect, or
(C)(iii) to our knowledge, result in a violation of any applicable law, statute
or regulation of any governmental authority or regulatory body.
(b) Bulldog is not in violation of any term of its Articles of
Organization or Operating Agreement, or, to our knowledge, in any material
respect of any term or provision of any material contract, agreement,
instrument, judgment or decree to which it is a party or which is binding on it.
The execution and delivery by Bulldog of the Applicable Documents to which it is
a party do not: (A)(i) result in a breach or a violation of the provisions of
the Articles of Organization or Operating Agreement of Bulldog, (B)(ii) to our
knowledge, result in a breach or default under any material contract, agreement,
instrument, judgment or decree to which Bulldog is a party or by which it is
bound, except for such breaches or defaults which would not have a Material
Adverse Effect, or (C)(iii) to our knowledge, result in a violation of any
applicable law, statute or regulation of any governmental authority or
regulatory body.
(c) To our knowledge, the execution and delivery by GMH of the
Securities Purchase Agreement and the Junior Notes does not result in a breach
or default under any material contract, agreement, instrument, judgment or
decree to which GMH is a party or by which it is bound except for such breaches
or defaults which would not have a Material Adverse Effect.
6. No consent, approval or authorization of or designation,
declaration or filing with any governmental authority on the part of the Company
[or GMH ] is required in connection with the valid execution and delivery of the
Securities Purchase Agreement, the Stockholders Agreement, the Plan of Merger,
the Junior Notes or the Investors' Rights Agreement or any other Applicable
Document to which such Person is a party or the offer, sale or issuance of the
Junior Notes or the Securities (and the Class C Common Stock issuable upon
conversion of the Series B Shares) or the consummation of any other transaction
contemplated thereby (including the Merger), except (a) filing of the Restated
Certificate in the Office of the Delaware Secretary of State, (b) qualification
(or taking such action as may be necessary to secure an exemption from
qualification., if available) under applicable blue sky laws of the offer and
sale of the Junior Notes and the Shares (and the Class C Common Stock issuable
upon conversion of the Series B Shares) which may be effected after the Closing
and (c) filing of the Certificate of Ownership and Merger. The filing referred
to in clause (a) above has been accomplished and is effective, and to our
knowledge there are no proceedings or threat thereof which question the validity
of such filing.
7. To our knowledge there are no actions, suits, proceedings or
formal investigations pending or threatened against Acquisition Co., the Company
or GMH, before any federal, state or other governmental authority or regulatory
body other than as disclosed in the Applicable Documents.
<PAGE>
8. Subject to the accuracy of the Purchaser representations in
Section 4 of the Securities Purchase Agreement, we are of the opinion that the
offer, sale and issuance of the Junior Notes and the Securities in conformity
with the terms of the Securities Purchase Agreement constitute transactions
exempt from the registration requirements of Section 5 of the Securities Act of
1933, as amended.
[9. The Senior Loan Agreement ] and the Senior Subordinated Note
Agreement ] are valid and binding obligations of GMH, enforceable against GMH in
accordance with their respective terms.]
10. Each of the Investors' Rights Agreement and the Stockholders
Agreement has been duly executed and delivered by Bulldog and is a valid and
binding obligation of Bulldog, enforceable against Bulldog in accordance with
its terms.
11. The Certificate of Ownership and Merger attached to the Plan
of Merger as Exhibit A is in proper form for filing with the Secretary of State
of the State of Delaware. Upon the due and proper filing of the Certificate of
Ownership and Merger (including the payment of any appropriate filing fees) with
the Secretary of State of the State of Delaware, the merger of Acquisition Co.
into GMH will be effective under applicable law.
Our opinions are qualified as follows:
a. The enforceability of the Applicable Documents is subject to or
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
arrangement, moratorium or other similar laws relating to or affecting the
rights of creditors generally and general principles of equity (regardless of
whether such enforceability is considered in a proceeding at law or in equity).
b. The enforceability of the Applicable Documents is further
subject to the qualification that certain waivers, remedies and other similar
post default provisions of the Applicable Documents may be unenforceable under
or that enforceability of such provisions may be limited by applicable law. In
particular, we call your attention to the fact that we express no opinion with
respect to the enforceability of (i) the indemnification provisions contained in
the Applicable Documents to the extent that such provisions may be construed to
include indemnification for liabilities arising under federal or state
securities or blue sky laws, (ii) any Applicable Document against any person or
entity who or which is not a party thereto or with respect to any provisions
thereof requiring a party thereto to cause such person or party to take or
further refrain from taking specified actions or (iii) any provisions which
expressly purport to waive statutory rights, including without limitation, the
statutory right of redemption. Notwithstanding the foregoing, in our opinion,
the Applicable Documents contain adequate provisions to permit the practical
realization of the benefits intended to be conferred by the Applicable
Documents.
c. With respect to our opinions regarding the enforceability of
the Applicable Documents, we have assumed compliance by all persons other than
Acquisition Co., the Company and Bulldog with the terms, conditions and
restrictions set forth in the Applicable Documents.
d. We express no opinion regarding the status of title to any real
or personal property.
e. We express no opinion with respect to the Investment Advisors
Act of 1940 or the provisions of the Securities Exchange Act of 1934 regarding
registration of brokers and dealers.
f. No opinion is expressed herein as to the enforceability of
choice of law provisions or any waivers of jurisdiction or venue.
g. We express no opinion with respect to Paragraph 6 hereof as to
any authorization, consent, approval, license, exemption of or filing or
registration by [either GMH or] the Company which they may be required to obtain
as a result of the involvement of parties other than such Person, and the
transactions contemplated by the Applicable Documents because of any of such
other party's legal or regulatory status or because of any other facts
specifically pertaining to any of such other parties.
h. We express no opinion with respect to statutes and ordinances,
administrative decisions and rules and regulations, in each
<PAGE>
case of counties, towns, municipalities and special political subdivisions, and
judicial decisions to the extent they deal with any of the foregoing.
As to any facts material to our opinions, we have relied upon oral or
written statements and certifications of officers and other representatives of
Acquisition Co., GMH, the Company and Bulldog and others, upon certificates and
other documents from public officials and upon the accuracy of the
representations and warranties contained in the Applicable Documents. We have
not independently investigated or verified such facts and do not opine as to
their accuracy.
The phrases "to our knowledge" or "known to us," when used herein,
mean that our opinion is based solely on matters within the actual knowledge of
the attorneys in this Firm actively involved in the transactions contemplated by
the Applicable Documents which, in the case of factual information with respect
to Acquisition Co., GMH, the Company and Bulldog, is derived from inquiry of the
appropriate officers of Acquisition Co., GMH, the Company and Bulldog (without
independent investigation), reviewing certificates of such officers, reviewing
our files, and reviewing the documents described herein.
In rendering the opinions expressed in Paragraphs 1 and 2 above, we
have relied solely upon certificates of public officials as to the qualification
to do business and good standing of Acquisition Co., the Company and Bulldog.
We are licensed to practice law under the laws of the State of New
York. The opinions herein expressed are limited to the laws of the State of New
York, the General Corporation Law of the State of Delaware and to the extent not
otherwise excluded herein, the federal laws of the United States of America. To
the extent that any of the Applicable Documents are governed by laws of a state
other than the State of New York and the General Corporation Law of the State of
Delaware, we have assumed, without independent investigation and with your
permission, that the laws of such state are identical to the laws of the State
of New York.
The opinions expressed in this letter are based upon the law in effect
on the date hereof, and we assume no obligation to revise or supplement this
opinion should such law be changed by legislative action, judicial decision or
otherwise.
This opinion is being furnished to you at the direction, and with the
authorization of the Company pursuant to Section 5.9 of the Securities Purchase
Agreement, solely for your benefit and may be relied upon by you with respect to
the transactions recited herein and therein. This opinion may not be relied upon
by, quoted in any manner to or delivered to, any person or entity without, in
each instance, our prior written consent.
Very truly yours,
<PAGE>
[Letterhead of Powell, Goldstein, Frazer & Murphy]
December 21, 1995
RFE Investment Partners V, L.P.
36 Grove Street
New Canaan, CT 06840
The Treasurer of the State of Michigan, Custodian
430 West Allegan
3rd Floor
Lansing, MI 48992
Sterling Commercial Capital, Inc.
175 Great Neck Road
Great Neck, NY 11021
Re: General Manufactured Housing, Inc.
Ladies and Gentlemen:
We have served as Georgia local counsel to General Manufactured Housing,
Inc., a Georgia corporation and successor by merger to GMH Acquisition Corp., a
Delaware corporation ("GMH"), in connection with the issuance and sale by GMH of
$5,000,000 aggregate principal amount of the Junior Subordinated Notes of GMH
(the "Junior Notes") pursuant to the terms and conditions of that certain
Securities Purchase Agreement of even date herewith (the "Securities Purchase
Agreement") to RFE Associates V, L.P., The Treasurer of the State of Michigan as
Custodian for the Michigan Public School Employees Retirement System, the
Michigan State Police Retirement System and the Michigan Judges Retirement
System and Sterling Commercial Capital, Inc. (the "Transaction").
This opinion letter is limited by, and is in accordance with, the January
1, 1992 edition of the Interpretive Standards applicable to Legal Opinions to
Third Parties in Corporate Transactions adopted by the Legal Opinion Committee
of the Corporate and Banking Law Section of the State Bar of Georgia, which
Interpretive Standards are incorporated in this opinion letter by this reference
and are attached hereto as Exhibit A. Capitalized terms used in this opinion
letter and not otherwise defined herein shall have the meanings assigned to such
terms in the Interpretive Standards or the Securities Purchase Agreement, as the
case may be.
The Junior Notes, each dated of even date herewith, have been executed and
delivered in connection with the Transaction. The Junior Notes, the Securities
Purchase Agreement and the Plan of Merger hereinafter are referred to
collectively as the "Documents."
In rendering this opinion we have examined copies of the Documents
forwarded to us by your counsel dated December 21, 1995, certified copies the
articles of incorporation, by-laws and corporate resolutions of GMH and a
certificate of good standing for GMH from the State of Georgia. In giving the
opinions hereinafter expressed, we have relied only upon our examination of the
foregoing documents and certificates, and we have made no independent
verification of the factual matters set forth in such documents or certificates
and no other investigation or inquiry. With respect to the due execution and
delivery of the Documents by GMH, we have relied solely upon a facsimile copy of
an officer's certificate from an officer of GMH in the form of Exhibit B hereto.
For purposes of this opinion, we have assumed that:
(i) The execution and delivery of the Documents and other documents
reviewed by us, and the entry into and performance of the transactions
contemplated by the Documents, by all parties other than GMH have been duly
authorized by all necessary actions and constitute the valid and binding
obligations of all parties other than GMH.
(ii) The necessary merger documents were duly filed with the Secretary of
State of Delaware to effect the merger of Acquisition with and into GMH as of
the Closing Date under the laws of the State of Delaware.
(iii) All of the Documents are enforceable, to the extent not
controlled by the laws of the State of Georgia.
Based upon the foregoing, but subject to the assumptions, limitations and
qualifications set forth below, we are of the opinion that:
1. GMH is a Georgia corporation organized and validly existing under the
laws of the State of Georgia and is in good standing under such laws. GMH has
all requisite corporate power to own and use its properties and assets, and to
carry on its business as presently conducted.
2. GMH has all requisite corporate power to execute and deliver the
Documents, to issue and sell the Junior Notes and to perform its obligations
under the terms of the Documents.
3. As of the Closing Date, the authorized capital stock of GMH will
consist of 100,000 shares of common stock, par value $100.00 per share. On the
Closing Date after giving effect to the Acquisition and the transactions
contemplated by the Securities Purchase Agreement, 5,250 shares of such common
stock will be issued and outstanding. As of the Closing Date, GMH will not have
outstanding securities convertible into, or exchangeable for, any shares of its
capital stock.
4. GMH has duly authorized the execution and delivery of the Documents
including without limitation the issuance and sale of the Junior Notes, and GMH
has duly executed and delivered the Documents. The consummation of the merger of
Acquisition into GMH (the "Merger") has been authorized by all necessary
corporate action on the part of GMH.
5. The execution and delivery of the Documents, the issuance of Junior
Notes and the consummation of the merger of Acquisition with and into GMH, do
<PAGE>
not violate or conflict with, or give rise to a default under, any provision of
the Articles of Incorporation or Bylaws of GMH, or any applicable Georgia law,
rule or regulation.
6. No consent, approval or authorization or other action by or filing
with, any government authority of the State of Georgia is required for (i) the
execution and delivery by GMH of the Documents to which it is a party, (ii) the
issuance and sale of the Junior Notes, or (iii) the consummation of the
transactions contemplated by the Documents, except filing of Articles Merger
with the Secretary of State of Georgia.
7. The Documents are valid and binding obligations of GMH enforceable
against GMH in accordance with their respective terms.
8. The Articles of Merger attached hereto as Exhibit C are in proper form
for filing with the Secretary of State of Georgia. Upon the due and proper
filing of the Articles of Merger (including the payment of my appropriate filing
fees) with the Secretary of State of Georgia, the Merger will be effective under
the laws of the State of Georgia.
Our opinions expressed in this letter are subject to the following
qualifications:
(a) We express no opinion as to the enforceability of (A) provisions
which purport to appoint the Lender, in any capacity, as the attorney-in-
fact or proxy of the Borrower, and (B) provisions which purport to waive
rights which cannot be waived by law. In particular, we point out that in
an opinion issued July 11, 1994, the Supreme Court of Georgia held that
pre-litigation contractual waivers of trial by jury are not enforceable in
Georgia, Bank South, N.A. vs. Howard, 264 Ga. 339 (1994).
(b) We point out that O.C.G.A. 13-1-11 limits the enforceability of
attorneys fees provisions to an amount not in excess of 15 percent of the
principal and interest owing on the evidence of indebtedness [the statutory
definition of the term "reasonable attorneys fees" in a note or other
evidence of indebtedness in O.C.G.A. 13-1-11(a)(2) being an amount equal
to 15 percent of the first $500.00 of principal and interest owing and 10
percent of the principal and interest owing in excess of $500.00]. We
further point out that a lender's right to collect attorneys fees in the
event of a default under an evidence of indebtedness is limited by O.C.G.A.
13-1-11, in that, upon acceleration of payment of an indebtedness under
Georgia law, the obligated party has a period of ten days from the receipt
of notice of acceleration within which to pay all principal and interest
without the payment of attorneys fees. We express no opinion as to the
ability of the Lender to collect actual attorneys fees, regardless of their
reasonableness, incurred in enforcing rights under the Documents.
Our opinion is limited to the laws of the State of Georgia. We shall have
no continuing obligation to inform you of changes in law or fact subsequent to
the date hereof or facts of which we become aware after the date hereof.
This opinion is limited to the matters set forth herein. No opinions may be
inferred or implied beyond the matters expressly contained herein. This opinion
letter is provided to you for your exclusive use solely in connection with the
Transaction, and may not be relied upon by any other person or for any other
purposes without our prior written consent.
Very truly yours,
Powell, Goldstein, Frazer & Murphy
<PAGE>
EXHIBIT H
RELIANCE CERTIFICATE
The undersigned SAMUEL P. SCOTT, hereby delivers this Certificate as
required by Section 5.15 of that certain Securities Purchase Agreement among the
GMH Holdings, Inc., a Delaware corporation, General Manufactured Housing, Inc.,
a Georgia Corporation, and the Purchasers listed on Schedule A thereto (the
"Purchase Agreement"). The undersigned hereby certifies that he has reviewed
each of the representations and warranties of the Sellers contained in that
certain Stock Purchase Agreement dated as of October 10, 1995, as amended, among
GMH Acquisition Corp., a Delaware corporation, and the Sellers who are a party
thereto, and, to the best of the undersigned's knowledge, such representations
and warranties are true, correct and complete.
IN WITNESS WHEREOF, the undersigned has hereunto affixed his signature
to this Certificate as of this ____ day of December, 1995
/s/ Samuel P. Scott
_____________________________
Samuel P. Scott
<PAGE>
EXHIBIT I
RELIANCE CERTIFICATE
The undersigned, GARY M. BROST, hereby delivers this Certificate as
required by Section 5.15 of that certain Securities Purchase Agreement among the
GMH Holdings, Inc., a Delaware corporation, General Manufactured Housing, Inc.,
a Georgia Corporation, and the Purchasers listed on Schedule A thereto (the
"Purchase Agreement"). The undersigned hereby certifies that he has reviewed
each of the representations and warranties of the GMH Companies contained in the
Purchase Agreement and, to the best of the undersigned's knowledge, such
representations and warranties are true, correct and complete.
IN WITNESS WHEREOF, the undersigned has hereunto affixed his signature
to this Certificate as of this ____ day of December, 1995.
/s/ Gary M. Brost
_______________________________
Gary M. Brost
<PAGE>
Exhibit 4.14
EXECUTION COPY
GMH ACQUISITION CORP.
Senior Subordinated Notes due 2002
GMH HOLDINGS, INC.
Warrants to Purchase Common Stock
______________________________
NOTE AND WARRANT
PURCHASE AGREEMENT
______________________________
Dated as of December 21, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Authorization of Notes and Warrants . . . . . . . . . . . . . . . . 1
2. Sale and Purchase of Notes and Warrants . . . . . . . . . . . . . . 2
2.1. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . 2
2.2. Issue Price. . . . . . . . . . . . . . . . . . . . . . . . . 2
3. Closing; Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.1. Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2. Transaction Fee. . . . . . . . . . . . . . . . . . . . . . . 3
3.3. Legal Fees . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . 3
4.1. Representations and Warranties . . . . . . . . . . . . . . . 3
4.2. Performance; No Default. . . . . . . . . . . . . . . . . . . 3
4.3. Compliance Certificate . . . . . . . . . . . . . . . . . . . 3
4.4. Opinions of Counsel. . . . . . . . . . . . . . . . . . . . . 4
4.5. Consummation of Acquisition. . . . . . . . . . . . . . . . . 4
4.6. Consummation of Merger . . . . . . . . . . . . . . . . . . . 4
4.7. Amendment of Certificate of Incorporation. . . . . . . . . . 5
4.8. Certain Agreements . . . . . . . . . . . . . . . . . . . . . 5
4.9. Consents, Agreements . . . . . . . . . . . . . . . . . . . . 5
4.10. Common Stock, Preferred Stock and Junior
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Subordinated Loans . . . . . . . . . . . . . . . . . . . . . 5
4.11. Senior Loans . . . . . . . . . . . . . . . . . . . . . . . . 6
4.12. Satisfaction of Obligations. . . . . . . . . . . . . . . . . 6
4.13. Compliance with Securities Laws. . . . . . . . . . . . . . . 6
4.14. No Adverse U.S. Legislation, Action or
Decision, etc. . . . . . . . . . . . . . . . . . . . . . . . 6
4.15. No Actions Pending . . . . . . . . . . . . . . . . . . . . . 7
4.16. Purchase Permitted By Applicable Law, etc. . . . . . . . . . 7
4.17. Proceedings and Documents. . . . . . . . . . . . . . . . . . 7
4.18. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.19. Transaction Expenses . . . . . . . . . . . . . . . . . . . . 7
5. Representations and Warranties, etc.. . . . . . . . . . . . . . . . 7
5.1. Organization, Standing, etc. . . . . . . . . . . . . . . . . 7
5.2. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 9
5.3. Qualification. . . . . . . . . . . . . . . . . . . . . . . . 9
5.4. Business; Financial Statements . . . . . . . . . . . . . . . 9
5.5. Changes, etc.. . . . . . . . . . . . . . . . . . . . . . . . 10
5.6. Compliance with Other Instruments, etc.. . . . . . . . . . . 10
5.7. Governmental Consents, etc.. . . . . . . . . . . . . . . . . 10
5.8. Capital Stock and Related Matters. . . . . . . . . . . . . . 11
5.9. Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.10. Tax Returns and Payments . . . . . . . . . . . . . . . . . . 12
5.11. Title to Properties; Liens . . . . . . . . . . . . . . . . . 13
5.12. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.13. Environmental Compliance . . . . . . . . . . . . . . . . . . 14
5.14. Patents, Trademarks, Authorizations, etc.. . . . . . . . . . 15
5.15. Federal Reserve Regulations. . . . . . . . . . . . . . . . . 15
5.16. Status Under Certain Federal Statutes. . . . . . . . . . . . 16
5.17. Foreign Assets Control Regulations, etc. . . . . . . . . . . 16
5.18 Compliance with ERISA. . . . . . . . . . . . . . . . . . ... 16
5.19. Offer of Securities. . . . . . . . . . . . . . . . . . . . . 18
5.20. Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . 18
5.21. Solvency of the Company. . . . . . . . . . . . . . . . . . . 18
5.22. Certain Fees . . . . . . . . . . . . . . . . . . . . . . . . 19
5.23. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6. Purchase for Investment; Source of Funds. . . . . . . . . . . . . . 19
7. Furnishing of Information . . . . . . . . . . . . . . . . . . . . . 20
7.1. Accounting; Financial Statements and Other
Information. . . . . . . . . . . . . . . . . . . . . . . . . 20
7.2. Rule 144A. . . . . . . . . . . . . . . . . . . . . . . . . . 24
8. Inspection; Confidentiality . . . . . . . . . . . . . . . . . . . . 25
8.1. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.2. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . 25
9. Prepayment of Notes . . . . . . . . . . . . . . . . . . . . . . . . 26
9.1. Required Prepayment Without Premium. . . . . . . . . . . . . 26
9.2. Optional Prepayments Without Premium . . . . . . . . . . . . 26
9.3. Optional Prepayments With Premium. . . . . . . . . . . . . . 26
9.4. Contingent Prepayments Upon Change of Control. . . . . . . . 26
9.5 Master Premium Table . . . . . . . . . . . . . . . . . . . . 27
9.6. Notice of Optional Prepayments; Officers'
Certificate. . . . . . . . . . . . . . . . . . . . . . . . . 27
9.7. Allocation of Partial Prepayments. . . . . . . . . . . . . . 28
9.8. Maturity; Surrender, etc.. . . . . . . . . . . . . . . . . . 28
9.9. Acquisition of Notes . . . . . . . . . . . . . . . . . . . . 28
10. Business and Financial Covenants. . . . . . . . . . . . . . . . . . 28
10.1. Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.2. Liens, etc.. . . . . . . . . . . . . . . . . . . . . . . . . 29
10.3. Investments, Guaranties, etc.. . . . . . . . . . . . . . . . 31
10.4. Restricted Payments. . . . . . . . . . . . . . . . . . . . . 33
10.5. Consolidation, Merger, Sale of Assets, etc.. . . . . . . . . 33
10.6. Certain Financial Covenants. . . . . . . . . . . . . . . . . 35
10.7. Transactions with Affiliates . . . . . . . . . . . . . . . . 39
10.8. Corporate Existence, etc.; Business. . . . . . . . . . . . . 39
10.9. Subsidiary Stock and Indebtedness. . . . . . . . . . . . . . 40
10.10. Payment of Taxes and Claims. . . . . . . . . . . . . . . . . 41
10.11 Compliance with ERISA. . . . . . . . . . . . . . . . . . . . 41
10.12. Maintenance of Properties; Insurance . . . . . . . . . . . . 42
10.13. Other Loan Agreements. . . . . . . . . . . . . . . . . . . . 43
11. Events of Default; Acceleration . . . . . . . . . . . . . . . . . . 43
12. Remedies on Default, etc. . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
<PAGE>
<TABLE>
<S> <C>
13. [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . 47
14. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
15. Registration, Transfer and Substitution of Notes;
Action by Noteholders . . . . . . . . . . . . . . . . . . . . . . . 61
15.1. Note Register; Ownership of Notes. . . . . . . . . . . . . . 61
15.2. Transfer and Exchange of Notes . . . . . . . . . . . . . . . 62
15.3. Replacement of Notes . . . . . . . . . . . . . . . . . . . . 62
15.4. Notes held by Company, etc., Deemed Not
Outstanding. . . . . . . . . . . . . . . . . . . . . . . . . 62
16. Payments on Notes . . . . . . . . . . . . . . . . . . . . . . . . . 62
16.1. Place of Payment . . . . . . . . . . . . . . . . . . . . . . 62
16.2. Home Office Payment. . . . . . . . . . . . . . . . . . . . . 63
17. Expenses, etc.. . . . . . . . . . . . . . . . . . . . . . . . . . . 63
18. Survival of Representations and Warranties. . . . . . . . . . . . . 64
19. Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . . 64
20. Notices, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
21. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 65
22. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . 66
</TABLE>
SCHEDULE A -- Schedule of Purchaser Information
SCHEDULE B -- Schedule of Equity Purchasers
SCHEDULE C -- Schedule of Debt and Liens
SCHEDULE D -- Schedule of Investments
SCHEDULE E -- Disclosure Schedule
EXHIBIT A -- Form of Senior Subordinated Note due 2002
EXHIBIT B -- Form of Warrant
EXHIBIT C-1 -- Form of Opinion of Company Counsel
EXHIBIT C-2 -- Form of Opinion of company's Georgia Counsel
EXHIBIT C-3 -- Form of Opinion of Purchaser's Counsel
EXHIBIT D -- Form of Restated Certificate of Incorporation
of Holding
EXHIBIT E -- Form of Stockholder's Agreement
EXHIBIT F -- Form of Investors' Rights Agreement
EXHIBIT G -- Form of Subordination Agreement
<PAGE>
GMH Acquisition Corp.
P.O. Box 1449
Waycross, Georgia 31502
Senior Subordinated Notes due December 21, 2002
Warrants to Purchase Common Stock
December 21, 1995
The Equitable Life Assurance Society of the United States
787 Seventh Avenue
New York, New York 10019
Ladies and Gentlemen:
GMF Acquisition Corp., a Delaware corporation (the "Company"), has
entered into a Stock Purchase Agreement, dated as of October 10, 1995 (as
amended, the "Stock Purchase Agreement"), with the Sellers (as defined in
section 14), providing for the purchase of all of the issued and outstanding
capital stock of General Manufactured Housing, Inc., a Georgia corporation
("GMH"). The Company is a wholly-owned subsidiary of GMH Holdings, Inc., a
Delaware corporation ("Holding"). Concurrently with the consummation of the
transactions contemplated by this Agreement, (i) the Company will acquire such
stock of GMH and (ii) GMH Acquisition will be merged into GMH, with GMH as the
<PAGE>
surviving entity. For purposes of this Agreement, the term "Company" will refer
to GMH Acquisition Corp. prior to such merger and to GMH, as the surviving
entity with respect to such merger, thereafter.
The transaction described above, together with the related
transactions to be consummated on the Closing Date, are collectively sometimes
referred to herein as the "Acquisition." Certain other capitalized terms used in
this Agreement are defined in section 14; references to a "Schedule" or an
"Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit attached
to this Agreement.
The GMH Companies agree with you as follows:
1. Authorization of Notes and Warrants. In connection with the
Acquisition, (a) the Company will authorize the issue and sale of $17,243,295
aggregate principal amount of its Senior Subordinated Notes due December 21,
2002 (the "Notes," such term to include any such notes issued in substitution
therefor pursuant to section 15), to be substantially in the form of the Note
set out in Exhibit A, with such changes therefrom, if any, as may be approved by
you and the Company; and (b) Holding will authorize the issue and sale of
warrants (the "Warrants," such term to include any warrants issued in
substitution therefor pursuant to section 12.3 of the Warrant) to purchase
350,000 shares of, at the election of the holder, either the Class A Common
Stock or the Class B Common Stock of Holding at an initial exercise price of
$.01 per share, to be substantially in the form of the Warrant set out in
Exhibit B, with such changes therefrom, if any, as may be approved by you and
Holding.
2. Sale and Purchase of Notes and Warrants.
2.1. Purchase Price. Subject to the terms and conditions of this
Agreement, the Company will issue and sell to you and you will purchase from the
Company, at the Closing provided for in section 3, Notes in the aggregate
principal amount specified in section 1, and subject to the terms and conditions
of this Agreement, Holding will issue and sell to you and you will purchase from
Holding, at the Closing provided for in section 3, Warrants for the number of
shares of Common Stock specified in section 1; for a combined purchase price of
$15,000,000.
2.2. Issue Price. The Company, Holding and you agree for U.S. federal
income tax purposes (a) that (x) the present value as of the Closing Date of all
payments under the Notes, using a discount rate based on a yield which the
Company, Holding and you agree is the original yield of comparable debt
instruments not issued as part of an investment unit (which rate is not less
than the applicable federal rate on the date the Notes are issued), is $994.67
per $1,000 principal amount, and that (y) the aggregate "issue price" under
1273(b) of the Code of all of the Notes to be issued hereunder is $14,920,000;
and (b) that the aggregate purchase price under 1273(b) of the Code of all of
the Warrants to be issued hereunder is $80,000. The Company, Holding and you
agree to use the foregoing issue price, purchase price, value and the yield
which results in such issue price for U.S. f ederal income tax purposes with
respect to this transaction.
3. Closing; Fees.
3.1. Closing. The sale of the Notes and Warrants to be purchased by
you shall take place at the offices of Nixon, Hargrave, Devans & Doyle LLP, 437
Madison Avenue, New York, New York 10022, at 10:00 a.m., New York City time, at
a closing (the "Closing") on December 21, 1995 or on such other Business Day
thereafter on or prior to December 31, 1995 as may be agreed upon by the Company
and you. At the Closing (a) the Company will deliver to you the Notes to be
purchased by you in the form of a single Note (or such greater number of Notes
in denominations of at least $100,000 as you may request)
<PAGE>
dated the date of the closing and registered in your name (or in the name of
your nominee), and (b) Holding will deliver to you the Warrants to be purchased
by you in the form of a single warrant certificate (or such greater number of
warrant certificates as you may request) dated the date of the Closing and
registered in your name (or in the name of your nominee); against delivery by
you to the Company or its order of immediately available funds in the amount of
the purchase price therefor. If at the Closing the Company or Holding shall fail
to tender such Notes or such Warrants to you as provided above in this section
3, or any of the conditions specified in section 4 shall not have been
fulfilled, you shall, at your election, be relieved of all further obligations
under this Agreement, without thereby waiving any other rights you may have by
reason of such failure or such nonfulfillment.
3.2. Transaction Fee. On the date of the Closing, the Company will
pay to Alliance Corporate Finance Group Incorporated, in immediately available
funds, a transaction fee equal to $300,000.
3.3. Legal Fees. On the date of the Closing, the Company will pay the
fees and disbursements of your special counsel incurred in connection with the
transaction contemplated by this Agreement and set forth in a statement
delivered to the Company on or prior to the date of the Closing, and thereafter
the Company will pay, promptly upon receipt of a supplemental statement
therefor, additional fees and disbursements of your special counsel, if any,
incurred in connection with the closing of such transactions.
4. Conditions to Closing. Your obligation to purchase and pay for
the Notes and Warrants to be sold to you at the Closing is subject to the
fulfillment to your satisfaction, prior to or at the Closing, of the following
conditions:
4.1. Representations and Warranties. The representations and
warranties of the GMH Companies contained in this Agreement and those otherwise
made in writing by either of the GMH Companies in connection with the
Acquisition and the transactions contemplated by this Agreement shall be correct
when made and at the time of the Closing, except as affected by the consummation
of the Acquisition and any related transactions entered into in connection
therewith.
4.2. Performance; No Default. Each of the GMH Companies shall have
performed and complied with all agreements and conditions contained in this
Agreement required to be performed or complied with by it prior to or at the
Closing and at the time of the Closing no Event of Default or Potential Event of
Default shall have occurred and be continuing.
4.3. Compliance Certificate. The Company shall have delivered to you
an Officers' Certificate of the Company, dated the date of the Closing,
certifying that the conditions specified in sections 4.1 and 4.2 have been
fulfilled and that, after giving effect to the issuance of all of the Notes and
Warrants, each of the GMH Companies will be in compliance in all material
respects with the most stringent limitations on the incurrence or maintenance of
Debt contained in any instrument or agreement applicable to or binding on either
of them or certifying that a complete and correct copy of a waiver or waivers of
compliance with such limitations is attached to such officers' Certificate.
4.4. Opinions of Counsel. You shall have received (a) from Nixon,
Hargrave, Devans & Doyle LLP, counsel for the GMH Companies, (b) from Powell,
Goldstein, Frazer & Murphy, special Georgia counsel for the GMH Companies and
(c) from Becker, Glynn, Melamed & Muffly LLP, your special counsel in connection
with the transactions contemplated by this Agreement, favorable opinions
substantially in the forms set forth in Exhibits C-1, C-2 and C-3, respectively,
and covering such other matters incident to such transaction as you may
reasonably request, each addressed to you, dated the date of the Closing and
otherwise satisfactory in substance and form to you. You shall also have
received copies of the opinions delivered by counsel for the GMH Companies and
counsel for the Sellers in connection with the consummation of the Acquisition,
accompanied by letters, dated the Closing Date and addressed to you, from such
counsel stating that you are entitled to rely on such opinions as if they were
addressed to you.
4.5. Consummation of Acquisition. The transactions
<PAGE>
contemplated by the Stock Purchase Agreement shall have been duly consummated.
The Stock Purchase Agreement shall be in full force and effect and no term or
condition thereof shall have been amended, modified or waived except with your
prior written consent. The purchase price under the Stock Purchase Agreement
shall have been paid in full in a combination of cash and Installment Promissory
Notes, and the Company shall have no further obligation with respect to the
purchase price except as set forth in the Stock Purchase Agreement. You and your
special counsel shall have received complete and correct copies of the Stock
Purchase Agreement as executed, with all exhibits and schedules thereto, and of
each document required under the Stock Purchase Agreement to be delivered or
filed in connection with the consummation of the Acquisition. All taxes, fees
and other expenses incurred in connection with the transactions contemplated by
the Stock Purchase Agreement which are required to be paid or provided for as a
condition to the due consummation of such transactions shall have been duly paid
or provided for by the Sellers or the Company. All governmental authorizations,
consents, approvals, exemptions or other actions required in connection with the
Acquisition shall have been duly received.
4.6. Consummation of Merger. The Merger shall have been duly
consummated in accordance with the laws of the States of Delaware and Georgia
and the Plan of Merger and General Manufactured Housing, Inc., a Georgia
corporation, shall be the surviving entity. The Plan of Merger shall be
satisfactory to you in form and substance and shall have been duly filed with
the Secretary of State of the States of Delaware and Georgia. All governmental
authorizations, consents, approvals, exemptions or other actions required in
connection with such Merger shall have been duly obtained or taken.
4.7. Amendment of Certificate of Incorporation. The Certificate of
Incorporation of Holding shall have been amended and restated to include
substantially the provisions set forth in Exhibit D relating to the Class B
Common Stock and, except as so amended, the Certificate of Incorporation shall
not have been amended or modified without your prior written consent.
4.8. Certain Agreements.
(a) Stockholders' Agreement. Holding and the Persons listed on part I
of Schedule B shall have executed and delivered to you the Stockholders'
Agreement substantially in the form of Exhibit E.
(b) Investors' Rights Agreements. The Investors' Rights Agreement
shall have been executed and delivered by the parties thereto, substantially in
the form of Exhibit F.
(c) Subordination Agreement. The Subordination Agreement shall have
been executed and delivered by the parties thereto, substantially in the form of
Exhibit G.
4.9. Consents, Agreements. Each of the Company and Holding shall have
obtained all consents and waivers, under any term of any agreement or instrument
to which it is a party or by which it or any of its properties or assets is
bound, or any term of any applicable law, ordinance, rule or regulation of any
governmental authority (including without limitation the Department of Housing
and Urban Development) or any term of any applicable order, judgment or decree
of any court, arbitrator or governmental authority, necessary or appropriate in
connection with the Acquisition, and such consents and waivers shall be in full
force and effect on the Closing Date. A complete and correct copy of each of
such consents and waivers shall have been delivered to you.
4.10. Common Stock, Preferred Stock and Junior Subordinated Loans.
Holding shall have sold shares of Class A Common Stock to the purchasers of
Class A Common Stock listed in part 1 of Schedule B and shall have received
payment in full therefor in an amount in cash of not less than $1,318,750.
Holding shall have sold shares of the Series A Preferred Stock to the purchasers
of Series A Preferred Stock listed in part 2 of Schedule B and shall have
received payment in full therefor in an aggregate amount in cash of not less
than $7,720,000. Holding
<PAGE>
shall have sold shares of the Series B Preferred Stock to the purchasers of
Series B Preferred Stock listed in part 3 of Schedule B and shall have received
payment in full therefor in an aggregate amount in cash of not less than
$2,150,000. The Company shall have issued $5,000,000 aggregate principal amount
of the Junior Subordinated Notes and shall have received payment in full
therefor in an amount in cash equal to the face amount thereof. The RFE
Securities Purchase Agreement shall be satisfactory in form and substance to you
and shall be in full force and effect on the Closing Date and no term or
condition thereof shall have been amended or modified without your consent. A
complete and correct copy of the RFE Securities Purchase Agreement shall have
been delivered to you.
4.11. Senior Loans. Concurrently with the Closing, the Company shall
have borrowed from the Senior Lenders, as a term loan, the principal amount of
$20,000,000 pursuant to the Senior Loan Agreement; and the Company shall have
available to it under the Senior Loan Agreement an additional $6,000,000
principal amount as a revolving credit facility. The Senior Loan Agreement and
the related security agreements shall be satisfactory in form and substance to
you and shall be in full force and effect on the Closing Date and no term or
condition thereof shall have been amended or modified without your consent. A
complete and correct copy of each of the Senior Loan Agreement and such security
agreements shall have been delivered to you, together with evidence satisfactory
to you of such borrowings under the Senior Loan Agreement.
4.12. Satisfaction of Obligations. All of the obligations of the GMH
Companies shown on Schedule C as obligations that are required or intended to be
satisfied on or prior to the Closing Date shall have been satisfied in full and
all Liens securing any of such obligations shall have been released.
4.13. Compliance with Securities Laws. The offering and sale of the
Notes and Warrants to you, and the offering and sale of the Common Stock, the
Preferred Stock and the Junior Subordinated Notes to be issued by Holding at or
prior to the Closing, shall have complied with all applicable requirements of
federal and state securities laws and you shall have received evidence thereof
in form and substance satisfactory to you.
4.14. No Adverse U.S. Legislation, Action or Decision, etc. No
legislation shall have been enacted by either house of Congress or favorably
reported by any committee thereof, no other action shall have been taken by any
United States governmental authority, whether by order, regulation, rule, ruling
or otherwise, and no decision shall have been rendered by any court of competent
jurisdiction in the United States, which would materially and adversely affect
the Notes or the Warrants being purchased by you hereunder.
4.15. No Actions Pending. There shall be no suit, action,
investigation, inquiry or other proceeding by any governmental body or any other
Person or any other legal or administrative proceeding pending or, to the
Company's knowledge, threatened, which questions the validity or legality of the
Acquisition or the other transactions contemplated by this Agreement or which
seeks damages or injunctive or other equitable relief in connection therewith.
4.16. Purchase Permitted By Applicable Law, etc. On the date of the
Closing, your purchase of Notes and Warrants (a) shall be permitted by the laws
and regulations of each jurisdiction to which you are subject and (b) shall not
subject you to any tax, penalty or, in your reasonable judgment, other onerous
condition by reason of any change after the date of this Agreement in any
applicable law or governmental regulation. If requested by you, you shall have
received, at least five Business Days prior to the Closing, an Officers'
Certificate of the Company certifying as to such matters of fact as you may
reasonably specify to enable you to determine whether such purchase is so
permitted.
4.17. Proceedings and Documents. All corporate and other proceedings
in connection with the transactions
<PAGE>
contemplated by this Agreement and all documents and instruments incident to
such transactions shall be satisfactory to you and your special counsel, and you
and your special counsel shall have received all such counterpart originals or
certified or other copies of such documents as you or they may reasonably
request.
4.18. Fees. The fees required to be paid by sections 3.2 and 3.3
shall have been paid as therein provided.
4.19. Transaction Expenses. The transaction fees and expenses payable
in connection with the Acquisition and the other transactions contemplated by
this Agreement, including without limitation the fees referred to in sections
3.2, 3.3 and 5.22, shall not exceed $4,100,000 in the aggregate, and the Company
shall have delivered to you a letter to that effect.
5. Representations and Warranties, etc. The Company and Holding
hereby jointly and severally represent and warrant that:
5.1. Organization, Standing, etc.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to own, lease and operate its properties
(including the properties to be owned and operated by it after consummation of
the Acquisition), to carry on its business as now conducted and as proposed to
be conducted following the Acquisition, to enter into this Agreement and the
Operative Agreements to which it is a party, to issue and sell the Notes, and
the' Junior Subordinated Notes to be issued by it in connection with the
Acquisition, and to carry out the transactions contemplated by this Agreement
and the Operative Agreements to which it is a party.
(b) Holding is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to own, lease and operate its properties, to carry
on its business as now conducted and as proposed to be conducted following the
Acquisition, to enter into this Agreement and the Operative Agreements to which
it is a party, to issue and sell the Warrants, and the Common Stock and
Preferred Stock, and to carry out the transactions contemplated by this
Agreement and the Operative Agreements to which it is a party.
(c) The Company was organized on October 5, 1994 and has not engaged
in any business other than the issuance of its capital stock and the negotiation
and consummation of the transactions contemplated by this Agreement, the Stock
Purchase Agreement, the RFE Securities Purchase Agreement and the Senior Loan
Agreement, and has incurred no liabilities except for expenses and liabilities
incident to its organization and to the carrying out of the transactions
contemplated by this Agreement and the Operative Agreements.
(d) Holding was organized cn November 20, 1995 and has not engaged in
any business other than the issuance of its capital stock and the negotiation
and consummation of the transactions contemplated by this Agreement, the Stock
Purchase Agreement, the RFE Securities Purchase Agreement and the Senior Loan
Agreement, and has incurred no liabilities except for expenses and liabilities
incident to its organization and to the carrying out of the transactions
contemplated by this Agreement and the Operative Agreements.
(e) GMH is a corporation duly organized, validly existing and in good
standing under the laws of the State of Georgia and has all requisite corporate
power and authority to own, lease and operate its properties, to carry on its
business as now conducted and as proposed to be conducted following the
Acquisition, to enter into this Agreement and the Operative Agreements to which
it is a party and to carry out the transactions contemplated by this Agreement
and the Operative Agreements to which it is a party.
5.2. Subsidiaries. As of the date of this Agreement none of the GMH
Companies has, and on the Closing Date after
<PAGE>
giving effect to the Acquisition and the other transactions contemplated by this
Agreement, none of them will have, any Subsidiaries other than (in the case of
Holding) the Company.
5.3. Qualification. Each of the GMH Companies is, and after giving
effect to the Acquisition will be, duly qualified and in good standing as a
foreign corporation authorized to do business in each jurisdiction (other than
the jurisdiction of its incorporation) in which the nature of its activities or
the character of the properties it owns or leases makes such qualification
necessary and in which the failure so to qualify would have a materially adverse
effect on the GMH Companies.
5.4. Business; Financial Statements. The Company has delivered to you
complete and correct copies of (a) the audited financial statements of GMH as
and for the fiscal years ending December 31, 1992, 1993 and 1994 (including the
balance sheets and the related statements of income and cash flows), with the
report thereon of Arthur Andersen LLP, independent public accountants, for 1994,
and of Earl A. Lawson, independent public accountant, for 1993 and 1992; (b) the
audited balance sheet of GMH as and for the ten month period ending October 31,
1995, with the report thereon of Arthur Andersen LLP (the financial statements
described in the foregoing clause (a) and in this clause (b) being referred to
collectively as the "Audited Financial Statements"); (c) unaudited statements of
income and cash flows for the ten months ended October 31, 1995 (the "Unaudited
Financial Statements" and, together with the Audited Financial Statements, the
"Financial Statements"); and (d) the pro forma balance sheet of the Company as
of November 30, 1995 (the "Pro Forma Balance Sheet"), giving pro forma effect to
the Acquisition, the issuance of the Notes and Warrants hereunder, the borrowing
under the Senior Loan Agreement and the issuance of the Common Stock, the
Preferred Stock and the Junior Subordinated Notes as contemplated hereby, as if
such transactions were consummated on the date of the Pro Forma Balance Sheet.
The Financial Statements have been prepared in accordance with generally
accepted accounting principles, applied on a consistent basis throughout the
periods specified (except such changes as are therein specified and except, in
the case of the Unaudited Financial Statements, for the absence of footnotes and
for year-end audit adjustments), and present fairly the financial position of
GMH as of the respective dates specified and the results of its operations and
changes in financial position for the respective periods specified. The Pro
Forma Balance Sheet gives pro forma effect to the Acquisition and the other
transactions contemplated hereby and by the Senior Loan Agreement and the
issuance of the Common Stock, the Preferred Stock and the Junior Subordinated
Notes in connection with such transactions. The Pro Forma Balance Sheet has been
prepared on the basis stated therein (including the assumptions set forth
therein, which were reasonable assumptions when made and are reasonable
assumptions as of the date hereof).
5.5. Changes, etc. There has been no materially adverse change in the
assets, liabilities or financial condition of the Company since its
incorporation other than changes contemplated by this Agreement and the
Operative Agreements. Since December 31, 1994, (a) except as set forth in
Schedule E, there has been no change in the assets, liabilities or financial
condition of GMH, other than changes in the ordinary course of business which
have not been, either in any case or in the aggregate, materially adverse to
GMH, and (b) neither the business, operations or affairs nor any of the
properties or assets of GMH have been affected by any occurrence or development
(whether or not insured against) which has been, either in any case or in the
aggregate, materially adverse to GMH.
5.6. Compliance with Other Instruments, etc. None of the GMH
Companies is, and after giving effect to the Acquisition and the financing
thereof none of them will be, in violation of its Certificate of Incorporation
or by-laws. None of the GMH Companies is, and after giving effect to the
Acquisition and the financing thereof none of the GMH Companies will be, in
violation of any term of any agreement or instrument to which it is a party or
by which it or any of its properties or assets is bound, or any term of any
applicable law, ordinance, rule or regulation of any governmental authority or
any term of any applicable order,
<PAGE>
judgment or decree of any court, arbitrator or governmental authority, the
consequences of which violation would have a materially adverse effect on the
business, operations, affairs, condition (financial or otherwise), properties or
assets of any of the GMH Companies; the execution, delivery and performance of
this Agreement and the Notes and Warrants and the issuance of the Common Stock,
the Preferred Stock and the Junior Subordinated Notes to be issued as
contemplated hereby, and the execution, delivery and performance of the
Operative Agreements, will not result in any violation of or be in conflict with
or constitute a default under any such term or result in the creation of (or
impose any obligation on any of the GMH Companies to create) any Lien, other
than Liens described in section 10.2 hereof, upon any of the properties or
assets of the GMH Companies pursuant to any such term; and there is no such term
which materially adversely affects, or which in the future and after giving
effect to the Acquisition would materially adversely affect the business,
operations, affairs, condition (financial or otherwise), properties or assets of
the GMH Companies.
5.7. Governmental Consents, etc. No consent, approval or
authorization of, or declaration or filing with, any governmental authority on
the part of the GMH Companies is required for the.valid execution and delivery
of this Agreement, the Stock Purchase Agreement or any of the other Operative
Agreements (other than those which have been duly obtained or made and other
than the filing of Uniform Commercial Code financing statements as required by
the Senior Loan Agreement) or the consummation of the transactions contemplated
hereby or thereby or the valid offer, issue, sale and delivery of the Notes and
Warrants.
5.8. Capital Stock and Related Matters.
(a) As of the Closing Date, the authorized capital stock of Holding
will consist of 4,375,000 shares of Class A Common Stock, 787,500 shares of
Class B Common Stock, 2,150,000 shares of Class C Common Stock, 8,000,000 shares
of Series A Preferred Stock and 2,150,000 shares of Series B Preferred Stock. On
the Closing Date after giving effect to the transactions contemplated by this
Agreement and the Operative Agreements, 1,656,250 shares of the Class A Common
Stock, no shares of Class B Common Stock, no shares of the Class C Common Stock,
8,000,000 shares of Series A Preferred Stock and 2,150,000 shares of the Series
B Preferred Stock will be issued and outstanding. The shares of Class A Common
Stock and Class B Common Stock issuable upon exercise of the Warrants, and the
shares of Class A Common Stock issuable upon conversion of the Class B Common
Stock, have been duly authorized and validly reserved for issuance upon such
exercise or conversion and, when so issued, will be validly issued, fully paid
and non-assessable. As of the Closing Date, Holding will not have outstanding
securities convertible into or exchangeable for any shares of its capital stock,
nor will it have outstanding any rights to subscribe for or to purchase, or any
options for the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to, any shares of its capital stock or any securities
convertible into or exchangeable for any shares of its capital stock, other than
(i) as set forth in the Stockholders' Agreement and Investors' Rights Agreement,
(ii) as set forth in the Restated Certificate of Incorporation of Holding as of
the Closing Date, (iii) the Warrants and (iv) the warrants issued to principals
and employees of Larkspur Capital Corporation.
(b) As of the Closing Date, after giving effect to the transactions
contemplated by this Agreement and the Operative Agreements, the authorized
capital stock of the Company will consist of 100,000 shares of common stock, par
value $100 per share, of which 5,250 shares will be issued and outstanding. As
of the Closing Date, the Company will not have outstanding securities
convertible into or exchangeable for any shares of its capital stock, nor will
it have outstanding securities convertible into or exchangeable for any shares
of its capital stork, nor will it have outstanding any rights to subscribe for
or to purchase, or any options for the purchase of, or any agreements providing
for the issuance (contingent or otherwise) of, or any calls, commitments or
claims of any character relating
<PAGE>
to, any shares of its capital stock or any securities convertible into or
exchangeable for any shares of its capital stock.
(c) As of the Closing Date and after giving effect to the Acquisition
and the other transactions contemplated hereby, except as set forth in the
Investors' Rights Agreement, none of the GMH Companies will be subject to any
obligation (contingent or otherwise) to repurchase or otherwise to acquire or
retire any shares of its capital stock. Except as set forth in the Stockholders'
Agreement, none of the GMH Companies is required to file, nor has it filed,
pursuant to Section 12 or Section 15(d) of the Exchange Act, a registration
statement relating to any class of its debt or equity securities.
5.9. Debt. Schedule C-1 correctly describes all secured and unsecured
Debt of the GMH Companies, including Debt of GMH, outstanding, or for which any
of them has commitments (other than the Notes, the Junior Subordinated Notes and
the loans outstanding under the Senior Loan Agreement), and identifies the
collateral securing any 'of such Debt that is secured. Except as set forth on
Schedule C-2, on the Closing Date and after giving effect to the Acquisition the
GMH Companies will have no Debt outstanding. On the Closing Date after giving
effect to the repayment of the obligations that are shown on Schedule C-1 as
obligations that are required or intended to be satisfied on or prior to the
Closing Date, the GMH Companies will not be in default with respect to any Debt
or any instrument or agreement relating thereto.
5.10. Tax Returns and Payments. Neither the Company nor Holding has
incurred any liability for any taxes, assessments or other governmental charges
with respect to it or to any of its properties, assets, income or franchises,
whether or not now due and payable (other than state franchise taxes and similar
taxes payable solely as a result of the organization or qualification of Holding
and the Company). GMH has filed all tax returns required by law to be filed by
it and has paid all taxes, assessments and other governmental charges levied
upon it and any of its properties, assets, income or franchises which are due
and payable, other than those presently payable without penalty or interest and
those presently being contested in good faith by appropriate proceedings
diligently conducted for which such reserves or other appropriate provision, if
any, as shall be required by generally accepted accounting principles shall have
been made. The Federal income tax liabilities of GMH has been finally determined
by the Internal Revenue Service and satisfied, or the time for audit has
expired, for all fiscal periods through December 31, 1991. The charges, accruals
and reserves on the book s of GMH in respect of income taxes for all fiscal
periods are adequate in all material respects in the opinion of the Company, and
the Company knows of no unpaid assessment for additional Federal, state or
foreign income taxes for any period or any basis for any such assessment.
5.11. Title to Properties; Liens. On the Closing Date and after
giving effect to the Acquisition and the other transactions contemplated by this
Agreement, each of the GMH Companies will have good and sufficient title to all
of its properties and assets, including the properties and assets reflected in
the Pro Forma Balance Sheet referred to in section 5.4 (other than inventory
disposed of in the ordinary course of business after the respective dates
thereof), and none of such properties or assets is subject to any Liens except
such as are permitted by section 10.2. On the Closing Date and after giving
effect to the Acquisition and the other transactions contemplated by this
Agreement, each of the GMH Companies will enjoy peaceful and undisturbed
possession under all leases necessary for the operation of its properties and
assets, and all such leases will be valid and subsisting and will be in full
force and effect. Except to perfect and protect security interests of the
character permitted by section 10.2, no presently effective financing statement
under the Uniform
<PAGE>
Commercial Code which names Holding or the Company as debtor is on file in any
jurisdiction, and neither Holding nor the Company has signed any presently
effective financing statement or any presently effective security agreement
authorizing any secured party thereunder to file any such financing statement.
No presently effective financing statement under the Uniform Commercial Code
which names GMH as debtor is on file in any jurisdiction and GMH has not signed
any presently effective financing statement or any presently effective security
agreement authorizing any secured party thereunder to file any such financing
statement, except in each case for such financing statements or security
agreements which will concurrently with the Closing be terminated and as to
which Uniform Commercial Code termination statements have been or will
concurrently with the Closing be filed in such jurisdiction or be delivered to
the Senior Lenders for filing [; and except for financing statements relating to
the Ware County Obligation].
5.12. Litigation. There is no action, proceeding or investigation
pending or, to the knowledge of any of the GMH Companies, threatened (or any
basis therefor known to the Company) which questions the validity or legality of
this Agreement, the Notes or the Warrants, or any action taken or to be taken
pursuant to this Agreement, the Notes, the Warrants, the Stock Purchase
Agreement or any of the other Operative Agreements or which would result, either
in any case or in the aggregate, in any material adverse change in the business,
operations, affairs, condition (financial or otherwise), properties or assets of
any of the GMH Companies, or in any liability on the part of the GMH Companies,
which would be material to the GMH Companies, taken as a whole.
5.13. Environmental Compliance. Except as disclosed in Schedule E:
(a) the Premises are not being and have not been used for the
treatment, generation, transportation, processing, handling or production of any
Hazardous Substance, or for the storage of petroleum or petroleum based products
other than those referenced in the Environmental Reports;
(b) the Premises are not being and have not been used for the
disposal of any Hazardous Substance, or as a landfill, or other waste disposal
site;
(c) the Premises are not being and have not been used for storage,
treatment, generation, transportation, processing, handling, production or
disposal of any Hazardous Waste, or as a Hazardous Waste landfill or other
Hazardous Waste disposal site;
(d) underground storage tanks are not and have not been located on
the Premises;
(e) the soil, subsoil, bedrock, surface water and groundwater of the
Premises are free of any Hazardous Substances;
(f) there has been no Release nor is there the threat of a Release of
any Hazardous Substance on, at or from the Premises which through soil, subsoil,
bedrock, surface water or groundwater migration could come to be located on the
Premises, and none of the GMH Companies has received any form of notice or
inquiry from any federal, state or local governmental agency or authority, any
operator, licensee or occupant of the Premises or any other Person with regard
to a Release or the threat of a Release of any Hazardous Substance on, at or
from the Premises;
(g) all necessary Environmental Permits have been obtained and are in
full force and effect;
(h) no event has occurred with respect to the Premises which, with
the passage of time or the giving of notice, or both, would constitute a
violation of any applicable current Environmental Law or non-compliance with any
Environmental Permit, and at all times the Premises and all present and prior
uses thereof have substantially complied with all Environmental Laws;
(i) there are no agreements, consent orders, decrees, judgments,
license or permit conditions or other orders or directives of any federal, state
or local court, governmental agency or authority relating to the past, present
or future ownership, use, operation, sale, transfer or conveyance of the
Premises which require containment, clean up, investigations, studies, removal
or other remedial action or capital expenditures
<PAGE>
with respect to the Premises;
(j) there are no actions, suits, claims or proceedings, pending, or
threatened, which would cause the incurrence of expenses or costs of any kind or
description or which seek money damages, injunctive relief, remedial action or
any other remedy that arise out of, relate to or result from a violation or
alleged violation of any applicable Environmental Law or non-compliance or
alleged non-compliance with any Environmental Permit, the presence of any
Hazardous Substance or a release or the threat of a Release of any Hazardous
Substance on, at or from the Premises or human exposure to any Hazardous
Substance;
(k) GMH is in substantial compliance with all applicable
Environmental Laws;
(l) GMH has not received any notice of, or been subject to, any
administrative or judicial proceeding pursuant to any applicable Environmental
Law, either now or at any time during the past three years; and
(m) there are no present facts or circumstances that form the basis
for the assertion of any claim against GMH relating to environmental matters
including, without limitation, any claim arising from past or present
environmental practices asserted under CERCLA or RCRA or any other federal,
state or local environmental statute.
5.14. Patents, Trademarks, Authorizations, etc. After giving effect
to the Acquisition, each of the GMH Companies will own, possess or be licensed
or otherwise have the full right to use, all patents, trademarks, service marks,
trade names, copyrights, licenses, authorizations, technology, know-how and
processes, and all rights with respect to the foregoing, necessary for the
conduct of its business, without any known conflict with the rights of others.
5.15. Federal Reserve Regulations. The GMH Companies will not,
directly or indirectly, use any of the proceeds of the sale of the Notes
and.Warrants for the purpose, whether immediate, incidental or ultimate, of
buying a "margin stock" or of maintaining, reducing or retiring any indebtedness
originally incurred to purchase a stock that is currently a "margin stock," or
for any other purpose which might constitute this transaction a "purpose
credit," in each case within the meaning of Regulation G of the Board of
Governors of the Federal Reserve System (12 C.F.R. 207, as amended) or
Regulation U of such Board (12 C.F.R. 221, as amended), or otherwise take or
permit to be taken any action which would involve a violation of such Regulation
G or Regulation U or of Regulation T (12 C.F.R. 22.0, as amended) or Regulation
X (12 C.F.R. 224, as amended) or any other regulation of such Board. No Debt of
the GMH Companies, including Debt of GMH being reduced or retired out of the
proceeds of the sale of the Notes and Warrants, was incurred for the purpose of
purchasing or carrying any such "margin stock," and none of the GMH Companies
owns or has any present intention of acquiring any such "margin stock."
5.16. Status Under Certain Federal Statutes. None of the GMH
Companies is, and after giving effect to the Acquisition none of them will be,
(a) an "investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act bf 1940, as amended;
(b) a "holding company" or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," as such terms are defined in the Public Utility Holding Company Act of
1935, as amended; (c) a "public utility" as such term is defined in the Federal
Power Act, as amended; or (d) a "rail carrier or a person controlled by or
affiliated with a rail carrier", within the meaning of Title 49, U.S.C., or a
"carrier" to which 49 U.S.C. 11301(b)(1) is applicable.
5.17. Foreign Assets Control Regulations, etc. Neither the issue and
sale of the Notes and Warrants by the GMH Companies nor their use of the
proceeds thereof as contemplated by this Agreement will violate the Foreign
Assets Control
<PAGE>
Regulations, the Transaction Control Regulations, the Cuban Assets Control
Regulations, the Foreign Funds Control Regulations, the Iranian Assets Control
Regulations, the Iranian Transactions Regulations, the Iraqi Sanctions
Regulations, the Libyan Sanctions Regulations, or any similar foreign assets
control or export control regulations of the United States Treasury Department
(31 C.F.R., Subtitle B, Chapter V as amended) or the restrictions set forth in
Executive Orders No. 8389, 9193, 12543 (Libya), 12544 (Libya), 12801 (Libya),
12722 (Iraq), 12724 (Iraq), as amended, of the President of the United States of
America or of any rules or regulations issued thereunder.
5.18. Compliance with ERISA.
(a) None of the GMH Companies has breached the fiduciary rules of
ERISA or engaged in any prohibited transaction in connection with which it could
be subjected to (in the case of any such breach) a suit for damages or (in the
case of any such prohibited transaction) either a civil penalty assessed under
section 502(i) of ERISA or a tax imposed by section 4975 of the Code, which
suit, penalty or tax, in any case, would be materially adverse to any of the GMH
Companies.
(b) No Plan which is a defined benefit plan or any trust created
under any such Plan has been terminated since September 2, 1974. None of the GMH
Companies nor any Related Person has within the past six years contributed to a
single employer plan which has at least two contributing sponsors not under
common control or ceased operations at a facility in a manner which could result
in liability of any of the GMH Companies under section 4062(f) of ERISA. No
liability to the PBGC has been or is expected by any of the GMH Companies to be
incurred with respect to any Plan which is or would be materially adverse to any
of the GMH Companies. There has been no reportable event (within the meaning of
section 4043(b) of ERISA) or any other event or condition with respect to any
Plan which presents a risk of termination of any such Plan by the PBGC under
circumstances which in any case could result in liability which would be
materially adverse to any of the GMH Companies.
(c) Full payment has been made of all amounts which any of the GMH
Companies or any Related Person is required under the terms of each Plan to have
paid as contributions to such Plan as of the last day of the most recent fiscal
year of such Plan ended prior to the date hereof.
(d) The present value of all vested accrued benefits under all Plans
that are defined benefit plans, determined as of the end of each of the GMH
Companies' most recently ended fiscal year on the basis of reasonable actuarial
assumptions, does not exceed the current value of the assets of such Plans
allocable to such vested accrued benefits. The terms "present value", "current
value", and "accrued benefit" have the meanings specified in section 3 of ERISA.
(e) None of the GMH Companies is or has ever been obligated to
contribute to any Multiemployer Plan.
(f) The execution and delivery of this Agreement and the issue and
sale of the Notes hereunder will not involve any transaction which is subject to
the prohibitions of section 406 of ERISA or in connection with which a tax could
be imposed pursuant to section 4975 of the Code. The representation by the GMH
Companies in the preceding sentence is made in reliance upon and subject to the
accuracy of your representation in section 6.2 of this Agreement as to the
source of the funds used to pay the purchase price of the Notes purchased by
you. None of the GMH Companies is a party in interest with respect to any
employee benefit plan whose name has been disclosed to the Company pursuant to
section 6.2 and securities of the GMH Companies are not employer securities with
respect to any such plan. As used in this section 5.18(f), the terms "employee
benefit plans" and "party in interest" have the respective meanings specified in
section 3 of ERISA and the term "employer*securities" has the meaning specified
in section 407 (d) (1) of ERISA.
5.19. Offer of Securities. Neither the GMH Companies nor Larkspur
Capital Corporation (the only Persons authorized or
<PAGE>
employed by any of the GMH Companies to act as agent, broker, dealer or
otherwise in connection with the offering or sale of the Notes or Warrants or
any similar securities of the GMH Companies) has directly or indirectly offered
the securities to be purchased by you pursuant to this Agreement or any part
thereof or any similar securities for sale to, or solicited any offer to buy any
of the same from, or otherwise approached or negotiated in respect thereof with,
any Person other than, in the case of the Notes and the Warrants, you and
approximately 32 other institutional investors and, in the case of the Class A
Common Stock, the Preferred Stock and the Junior Subordinated Notes, to the
purchasers listed in Schedule B. Neither the GMH Companies nor anyone acting on
their behalf has taken or will take any action which would subject the issuance
and sale of the Notes or the Warrants to the registration and prospectus
delivery provisions of the Securities Act.
5.20. Use of Proceeds. The GMH Companies will apply the proceeds of
the sale of the Notes and the Warrants solely to the payment of the purchase
price under the Stock Purchase Agreement and for the payment of expenses
incurred in connection with the transactions contemplated hereby.
5.21. Solvency of the Company. As of the Closing Date and after
giving effect to the Acquisition and the other transactions contemplated hereby,
(a) the aggregate value of all of the assets of the GMH Companies, at a fair
valuation (determined in accordance with applicable law), will exceed the total
liabilities of such GMH Company (including contingent, subordinated, unmatured
and unliquidated liabilities); (b) each GMH Company will be able to pay its
debts as they mature; (c) neither of the GMH Companies will have unreasonably
small capital for the business in which it is proposed to be engaged; and (d)
each of the GMH Companies will be able to satisfy in full any final judgment
which either results from an action for money damages pending against it on the
Closing Date or was a judgment in such an action docketed against it on the
Closing Date. For purposes of this section 5.21, the "fair valuation" of any
asset will be that amount which may be realized within a reasonable time, either
through collection or sale of such asset at fair market value, defining the
latter as the amount which could be obtained for the property in question within
such period by a willing seller from a willing buyer, each having reasonable
knowledge of the relevant facts, neither being under any compulsion to act, with
equity to both. None of the GMH Companies has any intent to hinder, delay or
defraud any entity to which it is, or will become, on or after the Closing Date,
indebted or to incur debts that would be beyond its ability to pay as they
mature.
5.22. Certain Fees. Except for the fees referred to in section 3, the
closing fee payable to SIHI in the amount of $500,000, the investment banking
fee payable to Larkspur Capital Corporation in the amount of $1,565,000, and the
broker's fee payable to R. Lewis Ray in the amount of $500,000, no broker's or
finder's fee or commission has been paid or will be payable with respect to the
offer, issue and sale of the Notes or the Warrants or with respect to the
Acquisition, and each of the GMH Companies hereby indemnifies you against, and
will hold you harmless from, any claim, demand or liability asserted against you
for broker's or finder's fees alleged to have been incurred by any of the GMH
Companies or any other Person (other than you or your Affiliates) in connection
with any such offer, issue and sale or the Acquisition or any of the other
transactions contemplated by this Agreement, the Stock Purchase Agreement or any
of the other Operative Agreements.
5.23. Disclosure. Neither this Agreement nor the Private Placement
Memorandum nor any other document, certificate or instrument delivered to you by
any of the GMH Companies or Larkspur Capital Corporation in connection with the
transactions contemplated by this Agreement, when read together, contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein and therein, in light of the
circumstances under which they were made, not misleading. There is no fact known
to any of the GMH Companies (other than matters of a general economic or
political nature which do not affect the GMH Companies uniquely) which
<PAGE>
materially adversely affects the business, operations, affairs, condition
(financial or otherwise), properties or assets of the GMH Companies, which has
not been set forth in this Agreement or in the other documents, certificates and
instruments delivered to you by the GMH Companies or Larkspur Capital
Corporation in connection with the transactions contemplated hereby and thereby.
6. Purchase for Investment; Source of Funds.
6.1. You represent and warrant that you are purchasing the Notes and
Warrants for your own account not with a view to the distribution thereof or
with any present intention of distributing or selling any of the Notes or
Warrants, provided that the disposition of your or their property shall at all
times be within your or their control.
6.2. You represent that no part of the funds to be used by you to pay
the purchase price of the Notes and Warrants constitutes assets allocated to any
separate account maintained by you in which any employee benefit plan (or its
related trust) has any interest.
As used in this section 6.2, the terms "employee benefit plan" and "separate
account" shall have the respective meanings assigned to such terms in section 3
of ERISA.
7. Furnishing of Information.
7.1. Accounting; Financial Statements and Other Information. Holding
will maintain, and will cause each of its Subsidiaries to maintain, a system of
accounting established and administered in accordance with generally accepted
accounting principles, and will accrue, and will cause each of its Subsidiaries
to accrue, all such liabilities as shall be required by generally accepted
accounting principles. The Company will deliver (in duplicate) to you, so long
as you shall be entitled to purchase Notes and Warrants under this Agreement or
you or your nominee shall be the holder of any Notes or Warrants, and to each
other institutional holder of any Notes or Warrants:
(a) within 45 days after the end of each of the first three
quarterly fiscal periods in each fiscal year of Holding, consolidated
and consolidating balance sheets of Holding and its Subsidiaries as at
the end of such period and the related consolidated (and, as to
statements of income and cash flows, consolidating) statements of
income, stockholders' equity and cash flows of Holding and its
Subsidiaries for such period and (in the case of the second and third
quarterly periods) for the period from the beginning of the current
fiscal year to the end of such quarterly period, setting forth in each
case in comparative form the consolidated and (where applicable)
consolidating figures for the corresponding periods of the previous
fiscal year, all in reasonable detail and certified by a principal
financial officer of Holding as presenting fairly, in accordance with
generally accepted accounting principles (except for the absence of
notes thereto) applied (except as specifically set forth therein) on a
basis consistent with such prior fiscal periods, the information
contained therein, subject to changes resulting from normal year-end
audit adjustments;
(b) within 90 days after the end of each fiscal year of Holding,
consolidated and consolidating balance sheets of the Company and its
Subsidiaries as at the end of such year and the related consolidated
(and, as to statements of income and cash flows, consolidating)
statements of income, stockholders' equity and cash flows of Holding
and its Subsidiaries for such fiscal year, setting forth in each case
in comparative form the consolidated and (where applicable)
consolidating figures for the previous fiscal year, all in reasonable
detail and (i) in the case of such consolidated financial statements,
accompanied by a report thereon of Arthur Andersen LLP or other
independent public accountants of recognized national standing
selected by
<PAGE>
the Company (and reasonably satisfactory to you, so long as you shall
be entitled to purchase Notes and Warrants under this Agreement or you
or your nominee shall be the holder of any of the Notes or Warrants,
and to the holder or holders of at least 66 2/3% in principal amount
of the Notes then outstanding) (subject to section 15.4), which report
shall state that such consolidated financial statements present fairly
the financial position of Holding and its subsidiaries as at the dates
indicated and the results of their operations and their cash flows for
the periods indicated in conformity with generally accepted accounting
principles applied on a basis consistent with prior years (except as
otherwise specified in such report) and that the audit by such
accountants in connection with such consolidated financial statements
has been made in accordance with generally accepted standards and (ii)
in the case of such consolidating financial statements, certified by a
principal financial officer of Holding as presenting fairly, in
accordance with generally accepted accounting principles applied
(except as specifically set forth therein) on a basis consistent with
such prior fiscal periods, the information contained therein;
(c) together with each delivery of financial statements pursuant
to subdivisions (a) and (b) of this section 7.1, an Officers'
Certificate of Holding (i) stating that the signers have reviewed the
terms of this Agreement and of the Notes and have made, or caused to
be made under their supervision, a review in reasonable detail of the
transactions and condition of Holding and its Subsidiaries during the
accounting period covered by such financial statements and that such
review has not disclosed the existence during or at the end of such
accounting period, and that the signers do not have knowledge of the
existence as at the date of the Officers' Certificate, of any
condition or event which constitutes an Event of Default or Potential
Event of Default, or, if any such condition or event existed or
exists, specifying the nature and period of existence thereof and what
action Holding or the Company has taken or is taking or proposes to
take with respect thereto, (ii) specifying the amount available at the
end of such accounting period for Restricted Payments in compliance
with section 10.4 and showing in reasonable detail all calculations
required in arriving at such amount, and (iii) demonstrating -n
reasonable detail compliance during and at the end of such accounting
period with the restrictions contained in sections 10.1 through 10.6;
(d) together with each delivery of financial statements pursuant
to subdivision (b) of this section 7.1, a written statement by the
independent public accountants giving the report thereon (i) stating
that their audit examination has included a review of the terms of
this Agreement and of the Notes and that such review is sufficient to
enable them to make the statement referred to in clause (iii) of this
subdivision (d) (it being understood that no special audit procedures,
other than those required by generally accepted auditing standards,
shall be required), (ii) stating whether, in the course of their audit
examination, they obtained knowledge (and whether, as of the date of
such written statement, they have knowledge) of the existence of any
condition or event which constitutes an Event of Default or Potential
Event of Default, and, if so, specifying the nature and period of
existence thereof, and (iii) stating that they have examined the
Officers' Certificate delivered in connection therewith pursuant to
subdivision (c) of this section 7.1 and that the matters set forth in
such Officers' Certificate pursuant to clauses (ii) and (iii) of such
subdivision (c) have been properly stated in accordance with the terms
of this Agreement;
<PAGE>
(e) in addition to the financial statements required by
subdivisions (a) and (b) of this section 7.1, within 30 days after the
end of each month, consolidated balance sheets of Holding and its
Subsidiaries as at the end of such month and the related consolidated
statements of income, stockholders' equity and cash flows of Holding
and its Subsidiaries for such month and (in the case of the second
through twelfth month of the fiscal year) for the period from the
beginning of the current fiscal year to the end of such month, setting
forth in each case in comparative form the consolidated figures for
the corresponding periods of the previous fiscal year, all in
reasonable detail and certified by a principal financial officer of
Holding as presenting fairly, in accordance with generally accepted
accounting principles (except as specifically set forth therein) on a
basis consistent with such prior fiscal periods, the information
contained therein, subject to changes resulting from normal year-end
audit adjustments;
(f) at least fifteen days prior to the commencement of each
fiscal year commencing with the 1996 fiscal year, financial forecasts
and budgets for such fiscal year (including consolidated and
consolidating balance sheets, income statements and statements of cash
flows), setting forth the principal assumptions upon which such
forecasts and budgets are based;
(g) promptly upon receipt thereof, copies of all reports
submitted to any of the GMH Companies by independent public
accountants in connection with each annual, interim or special audit
of the books of the Company or any Subsidiary made by such
accountants, including, without limitation, the comment letter
submitted by such accountants to management in connection with their
annual audit;
(h) promptly upon their becoming available, copies of all
financial statements, reports, notices and proxy statements sent or
made available generally by any of the GMH Companies to its security
holders or by any Subsidiary to its security holders other than the
Company or another Subsidiary, of all regular and periodic reports and
all registration statements and prospectuses filed by any of the GMH
Companies or any Subsidiary with any securities exchange or with the
Securities and Exchange Commission or any governmental authority
succeeding to any of its functions, and of all press releases and
other statements made available generally by any of the GMH Companies
or any Subsidiary to the public concerning material developments in
the business of the GMH Companies or their Subsidiaries;
(i) immediately upon any principal officer of any of the GMH
Companies or any other officer of any of the GMH Companies involved in
their financial administration obtaining knowledge of any condition or
event which constitutes an Event of Default or Potential Event of
Default, or that the holder of any Note has given any notice or taken
any other action with respect to a claimed Event of Default or
Potential Event of Default under this Agreement or that any Person has
given any notice to the any GMH Company or any Subsidiary or taken any
other action with respect to a claimed default or event or condition
of the type referred to in section 11(f) or (g), an Officers'
Certificate describing the same and the period of existence thereof
and what action the GMH Companies have taken, are taking and propose
to take with respect thereto;
(j) immediately upon any principal officer of any of the GMH
Companies or any other officer of the GMH Companies involved in their
financial administration obtaining knowledge of the occurrence of any
(i) "reportable event," as such term is defined in
<PAGE>
section 4043 of ERISA, or (ii) "prohibited transaction," as such term
is defined in section 4975 of the Code, in connection with any Plan or
any trust created thereunder, a written notice specifying the nature
thereof, what action the GMH Companies have taken, are taking and
propose to take with respect thereto, and, when known, any action
taken or threatened by the Internal Revenue Service or the PBGC with
respect thereto, provided that, with respect to the occurrence of any
"reportable event" as to which the PBGC has waived the 30-day
reporting requirement, such written notice need be given only at the
time notice is given to the PBGC;
(k) within ninety days after the end of each fiscal year of
Holding, an Officers' Certificate of holding setting forth in
reasonable detail the amount of the Company's Repurchase Obligations
as of the end of such fiscal year and the amount of, and the
circumstances relating to, any payments that were required to be made
during such fiscal year in respect of the Repurchase obligations; and
(l) with reasonable promptness, such other financial reports
and information and data with respect to the GMH Companies or any of
their Subsidiaries as from time to time may be reasonably requested by
any holder of Notes.
7.2. Rule 144A.
(a) Holding and the Company represent and warrant that neither the
Notes nor the Warrants issued and sold to you hereunder, nor the shares of
Common Stock issuable upon exercise of the Warrants, are of the same class as
securities listed on a national securities exchange or quoted in a U.S.
automated inter-dealer quotation system.
(b) The Company agrees that, until such time as it may be subject
either to Section 13 or to Section 15(d) of the Exchange Act, it will furnish to
any holder of Notes or to a prospective purchaser, on or prior to the date such
Note is to be sold to such prospective purchaser, subject to a written
confidentiality undertaking by such prospective purchaser satisfactory in form
and substance to the Company, the following information (which shall be
reasonably current in relation to the date of-such sale under this paragraph): a
very brief statement of the nature of the business of the Company and the
products and services it offers; and the Company's most recent audited
consolidated balance sheets and profit and loss and retained earnings statement,
and, if available, similar financial statements for the two preceding fiscal
years.
(c) Holding agrees that, until such time as it may be subject either
to Section 13 or to Section 15(d) of the Exchange Act, it will furnish to any
holder of Warrants or to a prospective purchaser, on or prior to the date such
Warrant is to be sold to such prospective purchaser, subject to a written
confidentiality undertaking by such prospective purchaser satisfactory in form
and substance to Holding, the following information (which shall be reasonably
current in relation to the date of such sale under this paragraph): a very brief
statement of the nature of the business of Holding and the products and services
it offers; and Holding's most recent audited consolidated balance sheets and
profit and loss and retained earnings statement, and, if available, similar
financial statements for the two preceding fiscal years.
8. Inspection; Confidentiality.
8.1. Inspection. The GMH Companies will permit any authorized
representatives designated by you, so long as you shall be entitled to purchase
Notes and Warrants under this Agreement or you or your nominee shall be the
holder of any Notes, Warrants or Common Stock or by any other institutional
holder of any Notes, Warrants or Common Stock without expense to the GMH
Companies, to visit and inspect any of the properties of the GMH Companies or
any of their Subsidiaries, including its and
<PAGE>
their books of account, and to make copies and take extracts therefrom, and to
discuss its and their affairs, finances and accounts with its and their officers
and independent public accountants, all at such reasonable times and as often as
may be reasonably requested, but in no event more than four times per annum
unless there shall have occurred and be continuing an Event of Default or
Potential Event of Default.
8.2. Confidentiality. You agree that you will not disclose without
the prior consent of the Company (other than to your employees, officers,
directors, advisors, auditors or counsel or to another holder of the Notes or
Warrants) any information with respect to the GMH Companies or any Subsidiary
which is furnished pursuant to section 7 or this section 8, provided that you
may disclose any such information (a) as has become generally available to the
public (except by your or your affiliate's action in violation of this section),
(b) as may be required in any report, statement or testimony submitted to any
municipal, state or Federal regulatory body having or claiming to have
jurisdiction over you or to the National Association of Insurance Commissioners
or similar organizations or their successors, (c) as may be required in response
to any summons or subpoena or in connection with any litigation (and you will
use reasonable efforts, prior to any such disclosure, to give the Company
advance notice thereof and to assist the Company in obtaining a protective order
or otherwise to prevent such disclosure), (d) to the extent that you believe it
appropriate in order to comply with any law, order, regulation or ruling
applicable to you or (e) to the prospective transferee in connection with any
contemplated transfer of any of the Notes by you, subject to the provisions of
an appropriate confidentiality agreement.
9. Prepayment of Notes.
9.1. Required Prepayment Without Premium. On March 31, 2001, the
Company will prepay $2,243,295 principal amount of the Notes less any portion of
the Accreted Discount previously prepaid (or such lesser principal amount as
shall then be outstanding), at the principal amount of the Notes so prepaid,
without premium.
9.2. Optional Prepayments Without Premium. The Company may, at its
option, upon notice as provided in section 9.6, prepay at any time a portion of
the Notes (in integral multiples of $1,000) without premium, provided that the
amount of such prepayment, when added to the sum of all prepayments theretofore
made under this section 9.2, shall not exceed $2,250,000 in the aggregate.
9.3. Optional Prepayments With Premium. The Company may, in addition
to the optional prepayment at any time without premium permitted by section 9.2,
at its option, upon notice as provided in section 9.6, prepay at any time after
December 21, 1997, all, or from time to time after such date any part (in
integral multiples of $1,000) of, the Notes, at the principal amount so prepaid,
plus a premium applicable in accordance with the premium table set forth in
section 9.5, depending upon the 12-month period in which the date fixed for such
prepayment occurs.
9.4. Contingent Prepayments Upon Change of Control. In the event of
the occurrence of a Change of Control, the Company shall give prompt written
notice thereof to each holder of the Notes, by registered mail (and shall
confirm such notice by prompt telephonic advice to an investment officer of each
such holder), which notice shall contain a written, irrevocable offer by the
Company to prepay, on a date specified in such notice (which date shall be not
less than 30 days and not more than 60 days after the date of such notice), the
Notes held by such holder in full (and not in part). Upon the acceptance of such
offer by any holder mailed to the Company at least 10 days prior to the date of
prepayment specified in the Company's offer, such prepayment shall be made at
the principal amount of the Notes held by such holder, plus a premium applicable
in accordance with the premium table set forth in section 9.5, depending upon
the 12-month period in which the date fixed for such prepayment occurs. Any
offer by the Company to prepay the Notes pursuant to
<PAGE>
this section 9.4 shall be accompanied by an Officers' Certificate certifying
that the conditions of this section 9.4 have been fulfilled and specifying the
particulars of such fulfillment. If the holder of any Notes shall accept such
offer, the principal amount of such Notes shall become due and payable on the
date specified in such offer. In the event that there shall have been a partial
prepayment of the Notes under this section 9.4, the Company shall promptly give
notice to the holders of the Notes, accompanied by an Officers' Certificate
setting forth the principal amount of each of the Notes that was prepaid and
specifying how each such amount was determined.
9.5. Master Premium Table.
(a) For the purposes of sections 9.3, 9.4 and 11, whenever a premium
is required to be paid upon prepayment, or acceleration as provided in Section
11, of any Note, the applicable premium shall be determined in accordance with
the following table, depending upon the period in which the date fixed for such
prepayment or acceleration occurs:
12-Month Period
Commencing December 21, Premium
1995 Make-Whole Premium
1996 Make-Whole Premium
1997 9.67%
1998 7.25%
1999 4.83%
2000 2.42%
2001 0.00%
(b) For the purposes of any calculation of Make-Whole Premium under
section 9.4 or 11, it will be assumed, as of the date for which the premium is
to be calculated, that (i) the remaining principal amount of the Notes, for
purposes of the calculation of Called Principal and Remaining Scheduled
Payments, will be the Adjusted Principal Amount and (ii) the remaining cash
interest payable on the Notes, for purposes of the calculation of Remaining
Scheduled Payments, will be at the rate of 14.50%. For the purposes of any other
calculation of premium hereunder, it will be assumed that the remaining
principal amount of the Notes, on which the applicable premium percentage is to
be calculated, will be the Adjusted Principal Amount.
9.6. Notice of Optional Prepayments; Officers' Certificate. The
Company will give each holder of any Notes written notice of each optional
prepayment under section 9.2 or 9.3 not less than 30 days and not more than 60
days prior to the date fixed for such prepayment, in each case specifying such
date, the aggregate principal amount of the Notes to be prepaid, the principal
amount of each Note held by such holder to be prepaid, the portion thereof
representing Accreted Discount, the premium, if any, applicable to such
prepayment and the section of this Agreement under which such prepayment is to
be made. Such notice shall be accompanied by an Officers' Certificate certifying
that the conditions of such section have been fulfilled and specifying the
particulars of such fulfillment.
9.7. Allocation of Partial Prepayments. In the case of each partial
prepayment paid or to be prepaid (except a prepayment pursuant to section 9.4 of
the Notes held by some but not all holders), the principal amount of the Notes
to be prepaid shall be allocated (in integral multiples of $1,000) among all of
the Notes at the time outstanding in proportion, as nearly as practicable, to
the respective unpaid principal amounts thereof not theretofore called for
prepayment, with adjustments, to the extent. practicable, to compensate for any
prior prepayments not made exactly in such proportion.
9.8. Maturity; Surrender, etc. In the case of each prepayment, the
principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date, the Accreted Discount thereof as of such
date and the applicable premium, if any. From and after such date, unless the
Company shall fail to pay such principal amount when so due and payable,
together with the interest and premium,
<PAGE>
if any, as aforesaid, interest on such principal amount shall cease to accrue.
Any Note paid or prepaid in full shall be surrendered to the Company and
cancelled and shall not be reissued, and no Note shall be issued in lieu of any
prepaid principal amount of any Note. In the case of any prepayment of the Notes
in full, the amount to be prepaid shall be the Adjusted Principal Amount,
together with the Accreted Discount, interest accrued and unpaid to the date of
payment and any applicable premium.
9.9. Acquisition of Notes. The Company will not, and will not permit
any Subsidiary or Affiliate to, purchase, redeem or otherwise acquire any.Note
except upon the payment or prepayment thereof in accordance with the terms of
this Agreement and such Note.
10. Business and Financial Covenants. The Company and Holding
jointly and severally covenant that from the date of this Agreement through the
Closing and thereafter so long as any of the Notes are outstanding:
10.1. Debt. The GMH Companies will not, and will not permit any
Subsidiary to, directly or indirectly, create, incur, assume, guarantee, or
otherwise become or remain directly or indirectly liable with respect to, any
Debt, except that:
(a) the Company may become and remain liable with respect to the
Debt evidenced by the Notes;
(b) the Company may become and remain liable with respect to
Debt outstanding pursuant to the Senior Loan Agreement in a principal
amount not to exceed at any time of determination $26,000,000;
(c) the Company may become and remain liable with respect to the
Junior Subordinated Notes in a principal amount not to exceed
$5,000,000 (plus any increase in principal resulting from the addition
to principal of interest payments blocked pursuant to the
Subordination Agreement);
(d) the Company may become and, until not later than January 25,
1996, may remain liable with respect to the Installment Promissory
Notes, if any, issued to the Sellers pursuant to section 3(a) of the
Stock Purchase Agreement;
(e) the Company may remain liable with respect to the Debt
outstanding on the date hereof and referred to on Schedule C (other
than Debt shown on Schedule C as obligations that are required or
intended to be satisfied on or prior to the Closing Date); and
(f) the Company may become and remain liable with respect to
Debt in addition to that otherwise permitted by the foregoing
provisions of this section 10.1 in an aggregate principal amount
outstanding not to exceed at any time of determination $2,600,000.
For the purposes of this section 10.1, any Person becoming a Subsidiary after
the date of this Agreement shall be deemed to have incurred all of its then
outstanding Debt at the time it becomes a Subsidiary, and any Person extending,
renewing or refunding any Debt shall be deemed to have incurred such Debt at the
time of such extension, renewal or refunding.
10.2. Liens, etc. The GMH Companies will not, and will not permit
any Subsidiary to, directly or indirectly create, incur, assume or permit to
exist any Lien on or with respect to any property or asset (including any
document or instrument in respect of goods or accounts receivable) of any of the
GMH Companies or any Subsidiary, whether now owned or held or hereafter
acquired, or any income or profits therefrom, except:
(a) Liens for taxes, assessments or other governmental charges
the payment of which is not at the time required by section 10.10;
<PAGE>
(b) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics and materialmen incurred in the ordinary
course of business for sums not yet due or the payment of which is not
at the time required by section 10.10;
(c) Liens (other than any Lien imposed by ERISA or the Code in
connection with a Plan) incurred or deposits made in the ordinary
course of business (i) in connection with workers' compensation,
unemployment insurance and other types of social security, or (ii) to
secure (or to obtain letters of credit that secure) the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
performance bonds, purchase, construction or sales contracts and other
similar obligations, in each case not incurred or made in connection
with the borrowing of money, the obtaining of advances or credit or
the payment of the deferred purchase price of property;
(d) any attachment or judgment Lien, unless the judgment it
secures shall not, within 60 days after the entry thereof, have been
discharged or execution thereof stayed pending appeal, or shall not
have been discharged within 60 days after the expiration of any such
stay;
(e) leases or subleases granted to others, easements, rights-of-
way, restrictions and other similar' charges or encumbrances, in each
case incidental to, and not interfering with, the ordinary conduct of
the business of the Company or any Subsidiary;
(f) Liens existing on the date of this Agreement and described
in Schedule C-1;
(g) Liens incurred to secure the Debt of the Company outstanding
in compliance with sections 10.1(b) and (f);
(h) any Lien created to secure all or any part of the purchase
price, or to secure Debt incurred or assumed to pay all or any part of
the purchase price, of property acquired by the Company after the
Closing Date, provided that (i) any such Lien shall be confined solely
to the item or items of property so acquired and, if required by the
terms of the instrument originally creating such Lien, other property
which is an improvement to or is acquired for specific use in
connection with such acquired property or which is real property being
improved by such acquired property, (ii) the principal amount of the
Debt secured by any such Lien shall at no time exceed an amount equal
to 80% (but 100% in the case of property the acquisition of which is
financed through a Capital Lease Obligation) of the lesser of (A) the
cost to the Company of the property so acquired and (B) the fair
market value of such property (as determined in good faith by the
Board) at the time of such acquisition, (iii) any such Lien shall be
created within three months after, in the case of property, its
acquisition, or, in the case of improvements, their completion; and
(iv) the aggregate principal amount of all Debt secured by Liens
outstanding under this subdivision (h) shall at no time exceed
$75,000; and
(i) Liens incurred to secure the Ware County Obligation.
For the purposes of this section 10.2, any Person becoming a Subsidiary after
the date of this Agreement shall be deemed to have incurred all of its then
outstanding Liens at the time it becomes a Subsidiary, and any Person extending,
renewing or refunding any Debt secured by any Lien shall be deemed to have
incurred such Lien at the time of such extension, renewal or refunding.
<PAGE>
10.3. Investments, Guaranties, etc. The GMH Companies will not, and
will not permit any Subsidiary to, directly or indirectly (a) make or own any
Investment in any Person, or (b) create or become or be liable with respect to
any Guaranty, except:
(i) the GMH Companies and their Subsidiaries may make and own
Investments in
(t) marketable direct obligations issued or unconditionally
guaranteed by the United States of America or issued by any agency
thereof maturing within one year from the date of acquisition thereof,
(u) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such
state or any public instrumentality thereof maturing within one year
from the date of acquisition thereof and having as at any date of
determination the highest rating obtainable from either Standard &
Poor's Corporation or Moody's Investors Service, Inc.,
(v) commercial paper maturing no more than 270 days from the
date of creation thereof and having as at any date of determination
the highest rating obtainable from either Standard & Poor's
Corporation or Moody's Investors Service, Inc.,
(w) certificates of deposit maturing within one year from the
date of acquisition thereof issued by commercial banks incorporated
under the laws of the United States of America or any state thereof or
the District of Columbia, each having as at any date of determination
combined capital and surplus of not less than $500,000,000 ("Permitted
Banks"),
(x) bankers' acceptances eligible for rediscount under
requirements of The Board of Governors of the Federal Reserve System
and accepted by Permitted Banks,
(y) obligations of the type described in clauses (t) through (w)
above purchased from a securities dealer designated as a "primary
dealer" by the Federal Reserve Bank of New York or a Permitted Bank as
counterparty pursuant to a repurchase agreement obligating such
counterparty to repurchase such obligations not later than 14 days
after the purchase thereof and which provides that the obligations
which are the subject thereof are held for the benefit of ' the
Company, Holding or a Subsidiary by a custodian which is a Permitted
Bank and which is not the counterparty to the repurchase agreement in
question, and
(z) the securities of any investment company registered under
the Investment Company Act of 1940 which is a "money market fund"
within the meaning of regulations of the Securities and Exchange
Commission, or an interest in a pooled fund maintained by a Permitted
Bank having comparable investment restrictions;
(ii) the Company may continue to own the Investments it owns on the
date hereof in Persons which are listed in Schedule D;
(iii) the Company and its Wholly-Owned Subsidiaries may make and own
Investments in any Wholly-Owned Subsidiary or any Person which
simultaneously therewith becomes a Wholly-Owned Subsidiary, if (x) such
Subsidiary or such Person is a corporation organized under the laws of the
United States or any state thereof or the District of
<PAGE>
Columbia, (y) substantial@ly all of its assets are located and
substantially all of its business is conducted within the United States and
(z) it is engaged primarily in the business of manufactured housing ;
(iv) the GMH Companies may become and remain liable with respect to
reimbursement obligations with respect to letters of credit issued pursuant
to the Senior Loan Agreement; and
(v) the Company may become and remain liable with respect to the
Repurchase Obligations.
10.4. Restricted Payments.
(a) Neither Holding nor the Company will directly or indirectly
declare, order, pay, make or set apart any sum or property for any Restricted
Payment, except that:
(i) Holding and the Company may make Restricted Payments in
accordance with the Subordination Agreement; and
(ii) each of the Company and its Subsidiaries may make payments
to Holding equal to the Company's or such Subsidiary's share of
amounts sufficient in the aggregate to enable Holding to pay the
federal and state income tax liabilities of the affiliated group
filing consolidated returns, provided that neither the Company nor
such Subsidiary shall pay an amount exceeding the tax liabilities it
would incur on a separate basis.
(b) The Company will not declare any dividend (other than a dividend
payable solely in shares of its own stock) on any shares of any class of its
stock which is payable more than 60 days after the date of declaration thereof.
The Company will not permit any Subsidiary, directly or indirectly, to declare,
order, pay or make any Restricted Payment or to set apart any sum or property
for any such purpose.
10.5. Consolidation, Merger, Sale of Assets, etc. The GMH Companies
will not, and will not permit any Subsidiary to, directly or indirectly,
(a) consolidate with or merge into any other Person or permit any
other Person to consolidate with or merge into it, except that:
(i) any Subsidiary of the Company may consolidate with or merge
into the Company or a Wholly-Owned Subsidiary of the Company if the
Company or such Wholly-Owned Subsidiary, as the case may be, shall be
the surviving corporation and if, immediately after giving effect to
such transaction, no condition or event shall exist which constitutes
an Event of Default or Potential Event of Default;
(ii) any corporation (other than a Subsidiary) may consolidate
with or merge into any of the GMH Companies if such GMH Company shall
be the surviving corporation and if, immediately after giving effect
to such transaction, (x) substantially all of the assets of the
Company shall be located and substantially all of its business shall
be conducted within the United States and (y) no condition or event
shall exist which constitutes an Event of Default or Potential Event
of Default; and
(iii) any of the GMH Companies may consolidate with or merge
into any other corporation if (w) the surviving corporation is a
corporation organized and existing under the laws of the United States
of America or a state thereof, with substantially all of its assets
located and substantially all of its business conducted within the
United States, (x) in the case of a consolidation or merger involving
Holding or the
<PAGE>
Company, such corporation expressly assumes, by an agreement
satisfactory in substance and form to the holders of more than 50% of
the Notes outstanding (subject to section 15.4) (which agreement may
require the delivery in connection with such assumption of such
opinions of counsel as such ' holders may reasonably require), the
obligations of Holding or the Company, as the case may be, under this
Agreement and under the Notes, (y) immediately after giving effect to
such transaction, such corporation shall not be liable with respect to
any Debt or allow its property to be subject to any Lien which it
could not become liable with respect to or allow its property to
become subject to under this Agreement on the date of such
transaction, and (z) immediately after giving effect to such
transaction no condition or event shall exist which constitutes an
Event of Default or a Potential Event of Default; or
(b) sell, lease, abandon or otherwise dispose of all or substantially
all its assets, except that:
(i) any Subsidiary of the Company may sell, lease or otherwise
dispose of all or substantially all its assets to the Company or a
Wholly-Owned Subsidiary; and
(ii) any of the GMH Companies may sell, lease or otherwise
dispose of all or substantially all its assets to any corporation into
which such Company could be consolidated or merged in compliance with
subdivision (a)(iii) of this section 10.5, provided that (x) each of
the conditions set forth in such subdivision (a)(iii) shall have been
fulfilled, and (y) no such disposition shall relieve the Company or
Holding from its obligations under this Agreement or the Notes; or
(c) sell, lease, abandon or otherwise dispose of any of its assets
(except in the ordinary course of business or in a transaction permitted by
subdivision (b) of this section 10.5), except that the Company or its
Subsidiaries (i) may sell or trade in obsolete or unusable items of equipment
which promptly are replaced with new items of equipment of like function and
comparable value to the obsolete or unusable items of equipment when new and
(ii) may sell assets in addition to those otherwise permitted by this paragraph
(c) in an aggregate amount not to exceed $50,000 per year.
10.6. Certain Financial Covenants. The GMH Companies will
(a) Current Ratio. Maintain at all times a minimum Current Ratio of
not less than the ratio set forth below opposite the applicable period:
Applicable Period Ratio
Closing Date to March 31, 1998 1.00
April 1, 1998 to December 31, 1998 1.25
January 1, 1999 and thereafter 1.50
(b) Adjusted Net Worth. Maintain an Adjusted Net Worth on the last
day of each month during each period listed below of at least the amounts set
forth opposite such period:
Minimum Adjusted
Net Worth
Period (in $ millions)
1/1/96 to 3/31/96 10,200
4/1/96 to 6/30/96 10,900
7/1/96 to 9/30/96 11,500
10/1/96 to 12/31/96 12,300
1/1/97 to 3/31/97 13,000
4/1/97 to 6/30/97 13,700
7/1/97 to 9/30/97 14,500
10/1/97 to 11/30/97 15,200
12/31/97 15,600
<PAGE>
1/1/98 to 3/31/98 17,700
4/1/98 to 6/30/98 19,000
7/1/98 to 9/30/98 20,400
10/1/98 to 12/31/98 22,000
1/1/99 to 3/31/99 23,800
4/1/99 to 6/30/99 26,300
7/1/99 to 9/30/99 28,100
10/1/99 to 12/31/99 30,000
1/1/2000 to 3/31/2000 31,900
4/1/2000 to 6/30/2000 34,100
7/1/2000 to 9/30/2000 36,300
10/1/2000 and thereafter 38,500
(c) Net Cash Ratio. Not permit the ratio (as measured on the last
day of any month beginning with the month ending on January 31, 1996) of Net
Cash Generated to Total Fixed Charges for the twelve months ending on the last
day of such month during each period listed below (or in the case of months
ending on or before December 31, 1996, for the period from the Closing Date to
the last day of such month treated as a single accounting period) to be less
than the ratio listed below opposite such period:
Minimum
Period Ratio
1/1/96 to 1/31/96 0.50
2/1/96 to 3/31/96 0.80
4/1/96 to 6/30/96 0.80
7/1/96 to 9/30/96 0.80
10/1/96 to 12/31/96 0.80
1/1/97 to 3/31/97 0.80
4/1/97 to 6/30/97 0.80
7/1/97 to 9/30/97 0.80
10/1/97 to 12/31/97 0.85
1/1/98 to 3/31/98 0.90
4/1/98 to 6/30/98 0.90
7/1/98 to 9/30/98 0.90
10/1/98 to 12/31/98 0.90
1/1/99 to 3/31/99 0.90
4/1/99 to 6/30/99 1.05
7/1/99 to 9/30/99 1.05
10/1/99 to 12/31/99 1.05
1/1/2000 to 3/31/2000 1.15
4/1/2000 to 6/30/2000 1.20
7/1/2000 to 9/30/2000 1.40
10/1/2000 and thereafter 1.60
(d) Total Liabilities Ratio. Not permit the ratio of (a) Total
Liabilities to (b) Adjusted Net Worth to exceed on the last day of any month
during any period set forth below, the ratio set forth opposite such period
below:
Maximum
Period Ratio
1/1/96 to 3/31/96 5.00
4/1/96 to 6/30/96 5.00
7/1/96 to 9/30/96 4.50
10/1/96 to 12/31/96 4.00
1/1/97 to 3/31/97 3.75
4/1/97 to 6/30/97 3.50
7/1/97 to 9/30/97 3.25
10/1/97 to 12/31/97 2.75
1/1/98 to 3/31/98 2.50
4/1/98 to 6/30/98 2.25
7/1/98 to 9/30/98 2.00
10/1/98 to 12/31/98 2.00
1/1/99 to 3/31/99 1.75
4/1/99 to 6/30/99 1.75
7/1/99 to 9/30/99 1.75
10/1/99 to 12/31/99 1.75
1/1/2000 to 3/31/2000 1.50
4/1/2000 to 6/30/2000 1.50
7/1/2000 to 9/30/2000 1.50
10/1/2000 and thereafter 1.50
(e) Annual Interest Coverage Ratio. Not permit the Interest Coverage
Ratio Number 1 measured on January 31, 1996 and
<PAGE>
on the last day of any month thereafter for any twelve consecutive months ending
on such last day (or in the case of any month ending on or before December 31,
1996, for the period from the Closing Date to the last day of such month treated
as a single accounting period) to be less than the ratio listed below for the
period during which such month occurs:
Period Ratio
Closing Date to 3/31/96 1.40
4/1/96 to 6/30/96 1.70
7/1/96 to 9/30/96 1.80
10/1/96 to 12/31/96 1.90
1/1/97 to 3/31/97 2.00
4/1/97 to 6/30/97 2.10
7/1/97 to 9/30/97 2.15
10/1/97 to 12/31/97 2.15
1/1/98 to 3/31/98 2.75
4/1/98 to 6/30/98 3.00
7/1/98 to 9/30/98 3.25
10/1/98 to 12/31/98 3.75
1/1/99 to 3/31/99 4.00
4/1/99 to 6/30/99 4.00
7/1/99 to 9/30/99 4.50
10/1/99 to 12/31/99 4.50
1/1/2000 to 3/31/2000 5.00
4/1/2000 to 6/30/2000 5.00
7/1/2000 to 9/30/2000 5.00
10/1/2000 and thereafter 5.00
(f) Quarterly Interest Coverage Ratio. Not permit the Interest
Coverage Ratio Number 2 for any period comprised of three consecutive calendar
months (or in the case of the period ending on or before March 31, 1996, for the
period from the Closing Date to the last day of such month treated as a single
accounting period) and ending during any period specified below to be less than
the ratio listed below for such period:
Minimum
Period Ratio
1/1/96 to 3/31/96 1.50
4/1/96 to 6/30/96 1.75
7/1/96 to 9/30/96 1.75
10/1/96 to 12/31/96 2.10
1/1/97 to 3/31/97 2.10
4/1/97 to 6/30/97 2.10
7/1/97 to 9/30/97 2.20
10/1/97 to 12/31/97 2.20
1/1/98 to 3/31/98 3.00
4/1/98 to 6/30/98 3.25
7/1/98 to 9/30/98 3.25
10/1/98 to 12/31/98 3.25
1/1/99 to 3/31/99 4.00
4/1/99 to 6/30/99 4.00
7/1/99 to 9/30/99 4.00
10/1/99 to 12/31/99 4.00
1/1/2000 to 3/31/2000 4.00
4/1/2000 to 6/30/2000 4.00
7/1/2000 to 9/30/2000 4.00
10/1/2000 and thereafter 4.00
(g) Gross Capital Expenditures. Not directly or indirectly (by way
of the acquisition of the securities of a Person or otherwise), make Gross
Capital Expenditures, except that the Company may, so long as no Event of
Default or Potential Event of Default shall exist or would result therefrom,
make Gross Capital Expenditures in the ordinary course of business in an
aggregate amount not to exceed (a) $500,000 for any Fiscal Year of the Company
other than the Fiscal Year ending December 31, 1995 and (b) $83,000 for the
Fiscal Year ending December 31, 1995; provided, that in the event the Company
does not make Gross Capital Expenditures during any Fiscal Year, except for the
Fiscal Year ending December 31, 1995, up to the amounts specified above, then
the Gross Capital Expenditures permitted to be made in the succeeding Fiscal
Year shall be increased by a positive amount, up to a maximum of $100,000, equal
to (y) the applicable limit specified above minus (z) the
<PAGE>
actual amount of Gross Capital Expenditures expended during such prior Fiscal
Year.
10.7. Transactions with Affiliates. The GMH Companies will not, and
will not permit any Subsidiary to, directly or indirectly, engage in any
transaction material to any of the GMH Companies or any of their Subsidiaries
(including, without limitation, the purchase, sale or exchange of assets or the
rendering of any service) with any Affiliate of any of the GMH Companies, except
in the ordinary course of and pursuant to the reasonable requirements of such
GMH Company's or such Subsidiary's business and upon fair and reasonable terms
that are no less favorable to such GMH Company or such Subsidiary, as the case
may be, than those which would be obtained, in the good faith judgment of the
Company, in an arm's length transaction at the time from Persons which are not
such an Affiliate, provided that (a) the foregoing restrictions shall not apply
to any transaction between a GMH Company and a Wholly-Owned Subsidiary or
between one Wholly-Owned Subsidiary and another Wholly-Owned Subsidiary; (b) the
Company may pay an annual base management fee to SIHI for management services
rendered to the Company, up to a maximum annual amount of $250,000 plus,
commencing in the 1997 fiscal year, an additional amount pursuant to the
cost-of-living adjustment provisions of the Management Agreement between the
Company and SIHI not to exceed 3% per year, plus reasonable out-of-pocket
expenses of SIHI not to exceed $50,000 per year; and, to the extent permitted by
the Subordination Agreement, an incentive management fee in a maximum annual
amount of $250,000; (c) the Company may make payments in respect of the
Installment Promissory Notes so long as such Notes are permitted to be
outstanding under the terms of section 10.1; (d) the Company may reimburse
Bulldog and SIHI-GMH LLC for expenses reasonably incurred by them not to exceed
$5,000 per annum in the aggregate; and (e) the Company may carry out the terms
of the Operative Agreements.
10.8. Corporate Existence, etc.; Business. Each of the GMH Companies
will at all times preserve and keep in full force and effect its corporate
existence, and rights and franchises deemed material to its business, and those
of each of its Subsidiaries, except as otherwise specifically permitted by
section 10.5 and except that the corporate existence of any Subsidiary may be
terminated if, in the good faith judgment of the Board of the Company, such
termination is in the best interest of the GMH Companies and is not
disadvantageous to the holders of the Notes. The GMH Companies will not, and
will not permit any Subsidiary to, engage in any business other than the
business of manufactured housing.
10.9. Subsidiary Stock and Indebtedness. Except as permitted by
section 10.5, the GMH Companies will not:
(a) directly or indirectly sell, assign, pledge (except as permitted
by section 10.2) or otherwise dispose of any Debt of or any shares of stock of
(or warrants, rights or options to acquire stock of) any Subsidiary except to a
Wholly-Owned Subsidiary or as directors' qualifying shares if required by
applicable law;
(b) permit any Subsidiary directly or indirectly to sell, assign,
pledge (except as permitted by section 10.2) or otherwise dispose of any Debt of
any GMH Company or any other Subsidiary, or any shares of stock of (or warrants,
rights or options to acquire stock of) any other Subsidiary, except to Holding
or a Wholly-Owned Subsidiary or as directors' qualifying shares if required by
applicable law;
(c) permit any Subsidiary to have outstanding any shares of preferred
stock other than shares of preferred stock which are owned by Holding or a
Wholly-Owned Subsidiary; or
(d) permit any Subsidiary directly or indirectly to issue or sell
(including, without limitation, in connection with a merger or consolidation of
a Subsidiary otherwise permitted by section 10.5(a)) any shares of its stock (or
warrants, rights or options to acquire its stock) except to Holding or a Wholly-
Owned Subsidiary or as directors' qualifying shares if required by applicable
law;
<PAGE>
provided that, subject to compliance with section 10.5(c), all Debt and shares
of stock of any Subsidiary owned by Holding and its other Subsidiaries may be
simultaneously sold as an entirety for a cash consideration at least equal to
the fair value thereof (as determined in good faith by the Board of Holding) at
the time of such sale if such Subsidiary does not at the time own (i) any Debt
of any of the GMH Companies or (ii) any Debt or stock of any other Subsidiary
which is not also being simultaneously sold as an entirety in compliance with
this proviso or section 10.5(b)(ii) and if immediately after giving effect to
such transaction no condition or event shall exist which constitutes an Event of
Default or Potential Event of Default, and provided further that shares of stock
of Subsidiaries owned by any of the GMH Companies and their Subsidiaries may be
disposed of in connection with a sale or other disposition by such GMH Company
or Subsidiary of all or substantially all of its assets in compliance with
section 10.5(b)(ii).
10.10. Payment of Taxes and Claims. Each of the GMH Companies will,
and will cause each Subsidiary to, pay all taxes, assessments and other
governmental charges imposed upon it or any of its properties or assets or in
respect of any of its franchises, business, income or profits before any penalty
or interest accrues thereon, and all claims (including, without limitation,
claims for labor, services, materials and supplies) for sums which have become
due and payable and which by law have or would become a Lien upon any of its
properties or assets, provided that no such charge or claim need be paid if
being contested in good faith by appropriate proceedings promptly initiated and
diligently conducted and if such reserves or other appropriate provision, if
any, as shall be required by generally accepted accounting principles shall have
been made therefor.
10.11. Compliance with ERISA. The GMH Companies will not, and will
not permit any Subsidiary to,
(a) engage in any transaction in connection with which any of the GMH
Companies or any Subsidiary could be subject to either a civil penalty assessed
pursuant to section 502(i) of ERISA or a tax imposed by section 4975 of the
Code, terminate or withdraw from any Plan which is a defined benefit plan (other
than a Multiemployer Plan) in a manner, or take any other action with respect to
any such Plan which is a defined benefit plan (including, without limitation, a
substantial cessation of operations within the meaning of section 4062(f) of
ERISA), which could result in any liability of any of the GMH Companies or any
Subsidiary to the PBGC, to a trust established pursuant to section
4041(c)(3)(B)(ii) or (iii) or 4042(i) of ERISA, or to a trustee appointed under
section 4042(b) or (c) of ERISA, incur any liability to the PBGC on account of a
termination of a Plan under section 4064 of ERISA, fail to make full payment
when due of all amounts which, under the provisions of any Plan, any of the GMH
Companies or any Subsidiary is required to pay as contributions thereto, or
permit to exist any accumulated funding deficiency, whether or not waived, with
respect to any Plan (other than a Multiemployer Plan), if, in any such case,
such penalty or tax or such liability, or the failure to make such payment, or
the existence of such deficiency, as the case may be, could have a material
adverse effect on any of the GMH Companies or any of their Subsidiaries;
(b) permit the present value of all vested accrued benefits under all
Plans maintained at such time by the GMH Companies and their Subsidiaries (other
than Multiemployer Plans) guaranteed under Title IV of ERISA to exceed the
current value of the assets of such Plans allocable to such vested accrued
benefits by more than $1,000,000;
(c) permit the aggregate complete or partial withdrawal liability
under Title IV of ERISA with respect to Multiemployer Plans incurred by the GMH
Companies and their Subsidiaries to exceed $1,000,000; or
(d) permit the sum of (i) the amount by which the current value of
all vested accrued benefits referred to in subdivision (b) of this section 10.11
exceeds the current value of the assets referred to in such subdivision (b) and
(ii) the
<PAGE>
amount of the aggregate incurred withdrawal liability referred to in subdivision
(c) of this section 10.11 to exceed $1,000,000.
For the purposes of subdivisions (c) and (d) of this section 10.10, the amount
of the withdrawal liability of the GMH Companies and their Subsidiaries at any
date shall be the aggregate present value of the amount claimed to have been
incurred less any portion thereof as to which the Company reasonably believes,
after appropriate consideration of possible adjustments arising under sections
4219 and 4221 of ERISA, the GMH Companies and their Subsidiaries will have no
liability, and that the Company shall obtain prompt written advice from
independent actuarial consultants supporting such determination. The Company
agrees (i) once in each calendar year to request and obtain a current statement
of withdrawal liability from each Multiemployer Plan and (ii) to transmit a copy
of such statement to you, so long as you or your nominee shall be the holder of
any Notes or Warrants, and to each other institutional holder of any Notes or
Warrants, within 15 days after the Company receives the same. As used in this
section 10.11, the term "accumulated funding deficiency" has the meaning
specified in section 302 of ERISA and section 412 of the Code, and the terms
"present value," "current value" and "accrued benefit" have the meanings
specified in section 3 of ERISA.
10.12. Maintenance of Properties; Insurance. The GMH Companies will
maintain or cause to be maintained in good repair, working order and condition,
normal wear and tear excepted, all properties used or useful in the business of
the GMH Companies and their Subsidiaries and from time to time will make or
cause to be made all appropriate repairs, renewals and replacements thereof. The
GMH Companies will maintain or cause to be maintained, with financially sound
and reputable insurers, insurance with respect to their properties and business
and the properties and business of their Subsidiaries against loss or damage of
the kinds customarily insured against by corporations of established reputation
engaged in the same or similar business and similarly situated, of such types
and in such amounts as are customarily carried under similar circumstances by
such other corporations. Such insurance may be subject to co-insurance,
deductibility or similar clauses which, in effect, result in self-insurance of
certain losses, provided that such self-insurance is in accord with the approved
practices of corporations similarly situated and adequate insurance reserves are
maintained in connection with such self-insurance.
10.13. Other Loan Agreements.
(a) Holding and the Company will not enter into any amendment or
modification of the Senior Loan Agreement which increases the principal amount
of the loans thereunder by more than $2,600,000, increases the interest rate or
rates or the fees and charges applicable to such loans, shortens the final
maturity or the maturity of any prepayment of such loans, or amends or modifies
the covenants or events of default such that, after giving effect to such
amendment or modification, the covenants and events of default in the Senior
Loan Agreement, taken as a whole, would be materially more restrictive to
Holding and the Company, taken as a whole.
(b) Holding will not enter into any amendment or modification of the
RFE Securities Purchase Agreement, any of the Junior Securities, or the Restated
Certificate of Incorporation of Holding relating to any of the Preferred Stock
if such amendment or modification is adverse to the interests of the holders of
the Notes.
(c) The Company will promptly deliver to each holder of the Notes a
copy of each amendment to the Senior Loan Agreement or the RFE Securities
Purchase Agreement, each amendment of any of the Junior Securities and each
agreement or instrument evidencing any other Debt of the GMH Companies entered
into after the date of the Closing.
11. Events of Default; Acceleration. If any of the following
conditions or events ("Events of Default") shall occur and be continuing:
<PAGE>
(a) if the Company shall default in the payment of any principal of
or premium, if any, on any Note when the same becomes due and payable, whether
at maturity or at a date fixed for prepayment or by declaration or otherwise; or
(b) if the Company shall default in the payment of any interest on
any Note for more than 10 days after the same becomes due and payable; or
(c) if the Company shall default in the performance of or compliance
with any term contained in section 7.1(i) or 10.1 through 10.6, inclusive; or
(d) if the Company shall default in the performance of or compliance
with any term contained in this Agreement other than those referred to above in
this section 11 and such default shall not have been remedied within 30 days
after such failure shall first have become known to any officer of the Company
or written notice thereof shall have been received by the Company from any
holder of any Note; or
(e) if any representation or warranty made in writing by or on behalf
of Holding or the Company in this Agreement or in any instrument furnished in
compliance with this Agreement shall prove to have been false or incorrect in
any material respect on the date as of which made; or
(f) if any GMH Company or any Subsidiary shall default (as principal
or guarantor or other surety) in the payment of any principal of or premium or
interest on any Debt (other than the Notes and other than Senior Debt) which is
outstanding in a principal amount of at least $1,000,000, or if any event shall
occur or condition shall exist in respect of any such Debt or under any evidence
of any such Debt or of any mortgage, indenture or other agreement relating
thereto, the effect of which default, event or condition is to cause or to
permit the holders of such Debt to cause the acceleration of the payment of such
Debt, or to require or to permit the holders of such Debt to require any GMH
Company or Subsidiary to repurchase such Debt, before its stated maturity or
before its regularly scheduled dates of payment; or
(g) if any GMH Company or any Subsidiary shall default (as principal
or guarantor or other surety) in the payment of any principal of or premium or
interest on any Senior Debt which is outstanding in a principal amount of at
least $1,000,000, or if any event shall occur or condition shall exist in
respect of any such Senior Debt or under any evidence of any such Senior Debt or
of any mortgage, indenture or other agreement relating thereto, the effect of
which default, event or condition is to cause the acceleration of the payment of
such Senior Debt, or to require any GMH Company or Subsidiary to repurchase such
Senior Debt, before its stated maturity or before its regularly scheduled dates
of payment; or
(h) if any GMH Company or any Material Subsidiary shall (i) be
generally not paying its debts as they become due, (ii) file, or consent by
answer or otherwise to the filing against it of, a petition for relief or
reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy or insolvency law of any
jurisdiction, (iii) make an assignment for the benefit of its creditors, (iv)
consent to the appointment of a custodian, receiver, trustee or other officer
with similar powers with respect to it or with respect to any substantial part
of its property, (v) be adjudicated insolvent or (vi) take corporate action for
the purpose of any of the foregoing; or
(i) if a court or governmental authority of competent jurisdiction
shall enter an order appointing, without consent by any GMH Company or any
Material Subsidiary, a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial part of its
property, or if an order for relief shall be entered in any case or proceeding
for liquidation or reorganization or otherwise to take advantage of any
bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution,
winding-up or liquidation of any GMH Company or any Material Subsidiary, or if
any petition for any such relief shall be filed against any GMH
<PAGE>
Company or a Material Subsidiary and such petition shall not be dismissed within
30 days; or
(j) if a final judgment or judgments shall be rendered against the
GMH Companies and Subsidiaries for the payment of money in excess of $500,000 in
excess of insurance coverage in the aggregate and any one of such judgments
shall not be discharged or execution thereon stayed pending appeal, within 60
days after entry thereof, or, in the event of such a stay, such judgment shall
not be discharged within 60 days after such stay expires; then, (x) upon the
occurrence of any Event of Default described in subdivision (h) or (i) of this
section 11 with respect to the Company (other than such an Event of Default
described in clause (i) of subdivision (h) or described in clause (vi) of
subdivision (h) by virtue of the reference in such clause (vi) to such clause
(i)), the Adjusted Principal Amount and Accreted Discount of and accrued
interest on the Notes shall automatically become due and payable or (y) upon the
occurrence of any other Event of Default, (i) in the case of any Event of
Default described in subdivision (a) or (b) of this section 11, an Original
Holder or any holder or holders of 25% or more in principal amount of the Notes
at the time outstanding (subject to section 15.4) or (ii) in the case of any
Event of Default described in any other subdivision of this section 11, any
holder or holders of more than 50% in principal amount of the Notes at the time
outstanding (subject to section 15-4) may at any time (unless all defaults shall
theretofore have been remedied) at its or their option, by written notice or
notices to the Company, declare all the Notes to be due and payable, whereupon
the Adjusted Principal Amount of all the Notes shall forthwith mature and become
due and payable, together with interest accrued thereon and the Accreted
Discount thereof, and, to the extent permitted by applicable law, a premium
determined in accordance with the premium table set forth in section 9.5, all
without presentment, demand, protest or notice, which are hereby waived,
provided, that during the existence of an Event of Default described in
subdivision (a) or (b) of this section 11 then, irrespective of whether any
Original Holder or the holder or holders of 25% or more in principal amount of
Notes then outstanding shall have declared all the Notes to be due and payable
pursuant to this section 11, any holder of the Notes (other than the Company or
any of its Subsidiaries or Affiliates) may, at its option, by notice in writing
to the Company, declare the Notes then held by such holder to be due and
payable, whereupon the Adjusted Principal Amount of all the Notes then held by
such holder shall forthwith mature and become due and payable together with
interest accrued thereon and the Accreted Discount thereof, and, to the extent
permitted by law, a premium determined in accordance with the premium table set
forth in section 9.5, without presentment, demand, protest or notice, which are
hereby waived.
At any time after the principal of, and interest accrued on, any or
all of the Notes are declared due and payable, the holders of not less than 75%
in aggregate principal amount of the Notes then outstanding (subject to section
15.4), by written notice to the Company may rescind and annul any such
declaration and its consequences if (x) the Company has paid all overdue
interest on the Notes, the principal of and premium, if any, on any Notes which
have become due otherwise than by reason of such declaration, and interest on
such overdue principal and premium and (to the extent permitted by applicable
law) any overdue interest in respect of the Notes at the rate equal to 2.0% plus
the otherwise applicable rate, (y) all Events of Default, other than non-payment
of amounts which have become due solely by reason of such declaration, and all
conditions and events which constitute Events of Default or Potential Events of
Default have been cured or waived pursuant to section 19, and (z) no judgment or
decree has been entered for the payment of any monies due pursuant to the Notes
or this Agreement; but no such rescission and annulment shall extend to or
affect any subsequent Event of Default or Potential Event of Default or impair
any right consequent thereon.
12. Remedies on Default, etc. In case any one or more Events of
Default or Potential Events of Default shall occur and be continuing, the holder
of any Note at the time outstanding may proceed to protect and enforce the
rights of such holder by an
<PAGE>
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in such Note, or for
an injunction against a violation of any of the terms hereof or thereof, or in
aid of the exercise of any power granted hereby or thereby or by law or
otherwise. In case of a default in the payment of any principal of or premium,
if any, or interest on any Note, the Company will pay to the holder thereof such
further amount as shall be sufficient to cover the cost and expenses of
collection, including, without limitation, reasonable attorneys' fees, expenses
and disbursements. No course of dealing and no delay on the part of any holder
of any Note in exercising any right, power or remedy shall operate as a waiver
thereof or otherwise prejudice such holder's rights, powers or remedies. No
right, power or remedy conferred by this Agreement or by any Note upon any
holder thereof shall be exclusive of any other right, power or remedy referred
to herein or therein or now or hereafter available at law, in equity, by statute
or otherwise.
13. [Intentionally Omitted].
14. Definitions. As used herein the following terms have the
following respective meanings:
Accreted Discount: with respect to the Notes, as of any date of
determination, the portion of the $2,243,295 original issue discount applicable
thereto which, as of such date, has accreted in accordance with customary
financial practice; and, with respect to any particular Note or part thereof,
the portion of such accreted discount attributable to such Note or part thereof.
Acquisition: the meaning specified in the introductory paragraphs of
this Agreement.
Adjusted Net Worth: at any date, (a) $10,000,000, plus (b) Net Income
plus (c) depreciation and amortization expenses, to the extent that the same are
deducted in determining Net Income, for the period beginning on the Closing Date
to and including the date of calculation (treating such period as one accounting
period), less (d) unless subtracted in determining Net Income and without double
counting, all amounts paid by Holding or the Company to purchase, redeem or
otherwise acquire any Equity Interests.
Adjusted Operating Profit: for any period, Net Income for such period
plus (a) any amount which, in conformity with generally accepted accounting
principles, would be set forth opposite the caption "income tax expense"
(including deferred income taxes) (or any like caption) on an income statement
of Holding and its consolidated Subsidiaries for such period, less (b) any
amount which, in conformity with generally accepted accounting principles, would
be set forth opposite the caption "extraordinary pre-tax gain" (or any like
caption) on such an income statement, plus (c) Interest Expense for such period,
plus (d) any amount which, in conformity with generally accepted accounting
principles, would be set forth opposite the caption "depreciation and
amortization expenses" (or any like caption) (including, without limitation,
amortization of Intangible Assets) on such an income statement for such period,
to the extent the same are deducted from the net revenues of Holding, in
conformity with generally accepted accounting principles, in determining Net
Income for such period, plus (e) any amount permitted to be and actually paid in
respect of Management Fees pursuant to section 10.7.
Adjusted Principal Amount: with respect to the Notes, as of any date
of determination, $15,000,000 less the amount of any principal of the Notes
theretofore prepaid (other than the prepayment of principal made pursuant to
section 9.1); and, with respect to any particular Note, the portion of such
principal amount attributable to such Note.
Affiliate: any Person directly or indirectly controlling or
controlled by or under common control with any of the GMH Companies or any
Subsidiary, including (without limitation) any Person beneficially owning or
holding 5% or more of any class of voting securities of any of the GMH Companies
or any Subsidiary or any other corporation of which any of the GMH Companies or
<PAGE>
any Subsidiary owns or holds 5% or more of any class of voting securities,
provided that, for purposes of this' definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting securities
or by contract or otherwise, and provided further that neither you nor any other
Person which is an institution shall be deemed to be an Affiliate of any of the
GMH Companies or any of their Subsidiaries solely by reason of ownership of the
Notes or Warrants or other securities issued in exchange for the Notes or
Warrants or by reason of having the benefits of any agreements or covenants of
Holding and the Company contained in this Agreement.
Asset Sale: any sale, assignment, conveyance,, transfer or other
disposition of any assets of the GMH Companies permitted by section 10.5(c).
Asset Sale Proceeds: the aggregate cash proceeds payable to the
Company in connection with any Asset Sale, after deduction of all reasonable,
customary and documented costs and expenses of such Asset Sale.
Board: with respect to any GMH Company, the Board of Directors of
such GMH Company or a committee of three or more directors lawfully exercising
the relevant powers of such Board.
Bulldog: Bulldog Holdings LLC, a New York limited liability company.
Business Day: any day except a Saturday, a Sunday or other day on
which commercial banks in New York City or Georgia are required or authorized by
law to be closed.
Capital Lease: as applied to any Person, any lease of any property
(whether real, personal or mixed) by such Person as lessee which would, in
accordance with generally accepted accounting principles, be required to be
classified and accounted for as a capital lease on a balance sheet of such
Person.
Capital Lease Obligation: with respect to any Capital Lease, the
amount of the obligation of the lessee thereunder which would, in accordance
with generally accepted accounting principles, appear on a balance sheet of such
lessee in respect of such Capital Lease.
Cash Equivalents: Investments of the GMH Companies permitted by
section 10.3(i).
Cash Instruments: all cash, checks, drafts and other similar writings
for the payment of money, including without limitation all insurance and
condemnation proceeds, Asset Sale Proceeds and Equity Sale Proceeds.
CERCLA: the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (42 U.S.C. Section 9601, et seq.).
Change of Control: (a) the sale, lease, abandonment or other
disposition by any GMH Company of all or substantially all of its assets; (b) at
any time prior to the occurrence of an IPO, Bulldog and the RFE Group, together
ceasing to be the beneficial owner or owners, directly or indirectly, of at
least 70% (or 51% if as a result of acquisition of Voting Stock by third parties
and not as a result of sales by Bulldog or the RFE Group) of the Voting Stock of
Holding on a fully-diluted basis; or (c) at any time from and after the
occurrence of an,IPO, any Person or "group" (within the meaning of Section
13(d)(3) of the Exchange Act) (other than SIHI or the RFE Group, or any such
"group" which consists entirely of SIHI and the RFE Group) (i) being or becoming
the beneficial owner, directly or indirectly, of more than 30% of the Voting
Stock of Holding or (ii) causing its nominees, or possessing the right to name
its nominees, to hold half or more of the seats on the Board of Holding.
<PAGE>
Class A Common Stock: the Class A Common Stock, par value $.001 per
share, of Holding.
Class B Common Stock: the Class B Common Stock, par value $.001 per
share, of Holding.
Class C Common Stock: the Class C Common Stock, par value $.001 per
share, of Holding.
Code: the Internal Revenue Code of 1986, as amended from time to
time.
Common Stock: the Class A Common Stock, the Class B Common Stock and
the Class C Common Stock.
Company: prior to the Merger, GMH Acquisition Corp., a Delaware
corporation, and thereafter, General Manufactured Housing, Inc., a Georgia
corporation.
Current Assets: at any date, the amount which, in conformity with
generally accepted accounting principles, would be set forth opposite the
caption "total current assets" (or any like caption) on a balance sheet of
Holding and its consolidated Subsidiaries at such date, less, without
duplication, cash, Cash Instruments and Cash Equivalents.
Current Liabilities: at any date, the amount which, in conformity
with generally accepted accounting principles, would be set forth opposite the
caption "total current liabilities" (or any like caption) on a balance sheet of
Holding and its consolidated Subsidiaries at such date, less any portion thereof
attributable to the Notes, Debt of the GMH Companies outstanding under the
Senior Loan Agreement, Capital Leases, or bank overdrafts (but only to the
extent repaid in full on the Business Day following creation thereof).
Current Ratio: at any date, the ratio on such date of (a) Current Assets
(excluding Intangible Assets) to (b) Current Liabilities.
Debt: as applied to any Person (without duplication):
(a) any indebtedness for borrowed money which such Person has
directly or indirectly created, incurred or assumed; and
(b) any indebtedness, whether or not for borrowed money, secured
by any Lien in respect of property owned by such Person, whether or
not such Person has assumed or become liable for the payment of such
indebtedness; and
(c) any indebtedness, whether or not for borrowed money,
including any Capital Lease Obligation, with respect to which such
Person has become directly or indirectly liable and which represents
or has been incurred to finance the purchase price (or a portion
thereof) of any property or services or business acquired by such
Person, whether by purchase, consolidation, merger or otherwise
(excluding accounts payable incurred in the ordinary course of
business to finance the purchase of property and services from trade
suppliers, if such accounts payable are not more than 90 days past
due); and
(d) any indebtedness of such Person consisting of unpaid
reimbursement obligations in respect of drawings under letters of
credit issued for the account of such Person; and
(e) any indebtedness of any other Person of the character
referred to in subdivision (a), (b), (c) or (d) of this definition
with respect to which the Person whose Debt is being determined has
become liable by way of a Guaranty (other than in respect of the
Repurchase Obligations).
Environment: any water or water vapor, including
<PAGE>
groundwater and surface water, any land, including land surface or subsurface,
air, fish, wildlife, biota and all other natural resources.
Environmental Laws: all federal, state and local environmental,
health, chemical use, safety and sanitation laws, environmental permit
requirements statutes, ordinances, rules, regulations and codes relating to the
protection of the Environment, including, but not limited to those laws and
requirements governing the use, storage, treatment, generation, transportation,
processing, handling, production or disposal of Hazardous Substances, those laws
with regard to record keeping, notification and reporting requirements
respecting hazardous materials, and the rules, regulations, policies,
guidelines, interpretations, decisions, orders and directives of federal, state
and local governmental agencies and authorities with respect thereto.
Environmental Permits: all permits, certificates, licenses,
approvals, authorizations, consents or registrations required by any applicable
Environmental Law, or required for the storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances.
Environmental Reports: the following reports prepared by United
Consulting Group, Ltd.: Phase 1 Environmental Site Assessment Report for Plants
1, 2 and 3 dated August 25, 1995; Asbestos Survey, Radon Gas Testing and Sanborn
Map Review for Plants 1, 2, 3 and 4 dated September 18, 1995; Phase 2
Environmental Site Assessment Report for Plants 1, 2 and 3 dated September 21,
1995; Phase 1 Environmental Site Assessment Report for Plant 4 dated October 2,
1995; Phase 1 Environmental Site Assessment Report for Plant 5 dated October 11,
1995; Proposal for Additional AST Investigation on Plant 1 and Plant 2, dated
September 25, 1995; Proposal for Phase 2 Environmental Site Assessment on Plant
4, dated October 4, 1995; Report regarding Asbestos Abatement Cost Estimate,
dated October 12, 1995; and Report regarding Well Survey for Plants 1 and 2,
dated October 20, 1995.
Equity Interests: any of the capital stock, and any options, warrants
and other rights to acquire the capital stock, of Holding.
Equity Sale: any issuance, sale, conveyance, transfer or other
disposition of any Equity Interests.
Equity Sale Proceeds: the aggregate cash proceeds payable to Holding
in connection with any Equity Sale, after deduction of all reasonable, customary
and documented costs and expenses of such Equity Sale.
ERISA: the Employee Retirement Income Security Act of 1974, as
amended from time to time.
Exchange Act: the Securities Exchange Act of 1934, as amended from
time to time.
Event of Default: the meaning specified in section 11.
Fiscal Year: the fiscal year of the GMH Companies for financial
accounting purposes, which fiscal year ends on December 31. The 1995 Fiscal Year
of the GMH Companies shall commence on the Closing Date and end on December 31,
1995.
Fiscal Year 1995 Percentage: the percentage calculated by dividing
(a) the number of days from and including the Closing Date to and including
December 31, 1995 by (b) 365.
GMH: General Manufactured Housing, a Georgia corporation.
GMH Companies: Collectively, Holding, the Company and, as the context
may require, GMH.
Gross Capital Expenditures: for any period, the total of all
expenditures incurred by the GMH Companies in respect of the purchase or other
acquisition of fixed or capital assets
<PAGE>
during such period, without any deduction for trade-ins, salvage values, resales
or similar recoveries, including the amount which in accordance with generally
accepted accounting principles is or should be initially posted to the balance
sheet of Holding and its consolidated Subsidiaries with respect to Capital
Leases.
Guaranty: as applied to any Person, any direct or indirect liability,
contingent or otherwise, of such Person with respect to any indebtedness, lease,
dividend or other obligation of another, including, without limitation, any such
obligation directly or indirectly guaranteed, endorsed (otherwise than for
collection or deposit in the ordinary course of business) or discounted or sold
with recourse by such Person, or in respect of which such Person is otherwise
directly or indirectly liable, including, without limitation, any such
obligation in effect guaranteed by such Person through any agreement (contingent
or otherwise) to purchase, repurchase or otherwise acquire such obligation or
any security therefor, or to provide funds for the payment or discharge of such
obligation (whether in the form of loans, advances, stock purchases, capital
contributions or otherwise), or to maintain the solvency or any balance sheet or
other financial condition of the obligor of such obligation, or to make payment
for any products, materials or supplies or for any transportation or services
regardless of the non-delivery or nonfurnishing thereof, in any such case if the
purpose or intent of such agreement is to provide assurance that such obligation
will be paid or discharged, or that any agreements relating thereto will be
complied with, or that the holders of such obligation will be protected against
loss in respect thereof. The amount of any Guaranty shall be equal to the
outstanding principal amount of the obligation guaranteed.
Hazardous Materials: materials defined as "hazardous substances,"
"hazardous wastes" or "solid wastes" in CERCLA, RCRA or in any similar federal,
state or local environmental statute.
Hazardous Substance: without limitation, any flammable explosives,
radon, radioactive materials, asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls, petroleum and petroleum products (including, without
limitation, waste petroleum and waste petroleum products), methane, hazardous
materials, hazardous wastes, pollutants, contaminants, and hazardous or toxic
substances or related materials, or chemicals posing an unreasonable risk of
harm to health or the environment, as regulated or defined under CERCLA, RCRA,
the Hazardous Materials Transportation Act, as amended (49 U.S.C. Section 1801,
et seq.), the Toxic Substances Control Act, as amended (15 U.S.C. Section 2601,
et seq.), or any other applicable Environmental Law and the regulations
promulgated thereunder.
Hazardous Waste: the meanings specified therefor in RCRA, CERCLA, or
comparable state Environmental Laws and the regulations thereunder.
Holding: GMH Holdings, Inc., a Delaware corporation.
Installment Promissory Notes: the Installment Promissory Notes to be
delivered by Holding to the Sellers on the Closing Date, pursuant to the Stock
Purchase Agreement, in the form attached as Exhibit E to the Stock Purchase
Agreement as in effect on the Closing Date.
Intangible Assets: licenses, franchises, patents, patent
applications, trademarks, trademark applications, tradenames, copyrights,
copyright applications, computer software rights, goodwill and research and
development expenses or other intangibles shown on the balance sheet of Holding
and its consolidated Subsidiaries.
Interest Coverage Ratio Number 1: for any period, the ratio of (a)
Adjusted Operating Profit for such period less the aggregate amount incurred by
the GMH Companies during such period on account of Gross Capital Expenditures
for such period to (b) Interest Expense for such period.
Interest Coverage Ratio Number 2: for any period, the ratio of (a)
Adjusted Operating Profit for such period to (b) Interest Expense for such
period.
<PAGE>
Interest Expense: for any period, the amount which, in conformity
with generally accepted accounting principles, would be set forth opposite the
caption "interest expense" (or any like caption) on an income statement of
Holding and its consolidated Subsidiaries.
Investment: as applied to any Person, any direct or indirect purchase
or other acquisition by such Person of stock or other securities of any other
Person, or any direct or indirect loan, advance (other than advances to
employees for moving and travel expenses, drawing accounts and similar
expenditures in the ordinary course of business) or capital contribution by such
Person to any other Person, including all Debt and accounts receivable from such
other Person which are not current assets or did not arise from sales to such
other Person in the ordinary course of business, and excluding prepaid expenses
and lease, utility, workers compensation, performance and other similar
deposits, in each case incurred in the ordinary course of business. In computing
the amount involved in any Investment at the time outstanding, (a) undistributed
earnings of, and interest accrued in respect of Debt owing by, such other Person
accrued after the date of such Investment shall not be included, (b) there shall
not be deducted from the amounts invested in such other Person any amounts
received as earnings (in the form of dividends, interest or otherwise) on such
Investment or as loans from such other Person, and (c) unrealized increases or
decreases in value, or write-ups, write-downs or write-offs, of Investments in
such other Person shall be disregarded.
Investors' Rights Agreement: the Investors' Rights Agreement, dated
as of December 21, 1995, among Holding, The Equitable Life Assurance Society of
the United States, Bulldog and the RFE Group, substantially in the form of
Exhibit F.
IPO: the issuance by Holding in a registered public offering under
the Securities Act of a number of shares of Common Stock such that, after giving
effect to such offering, there shall be outstanding pursuant to one or more such
public offerings shares of Common Stock equal to at least 20% of the capital
stock of Holding on a fully-diluted basis.
Junior Securities: the Series A Preferred Stock, the Series B
Preferred Stock and the Junior Subordinated Notes.
Junior Subordinated Notes: the Junior Subordinated Notes to be issued
by the Company to the RFE Group on the Closing Date, in the principal amount of
$5,000,000, in the form attached as Exhibit B to the RFE Securities Purchase
Agreement.
Lien: as to any Person, any mortgage, lien, pledge, adverse claim,
charge, security interest or other encumbrance in or on, or any interest or
title of any vendor, lessor, lender or other secured party to or of such Person
under any conditional sale or other title retention agreement or Capital Lease
with respect to, any property or asset owned or held by such Person, or the
signing or filing of a financing statement which names such Person as debtor, or
the signing of any security agreement authorizing any other party as the secured
party thereunder to file any financing statement.
Make-Whole Premium: with respect to any Note, a premium equal to the
excess, if any, of the Discounted Value of the Called Principal of such Note
over the sum of (a) such Called Principal plus (b) interest accrued thereon as
of (including interest due on) the Settlement Date with respect to such Called
Principal. The Make-Whole Premium shall in no event be less than zero. As used
in this definition, the following terms have the following meanings:
Called Principal: with respect to any Note, the principal of
such Note that is to be prepaid, subject to a Make-Whole Premium,
pursuant to section 9.3 or is declared to be immediately due and
payable pursuant to section 11, as the context requires.
Discounted Value: with respect to the Called Principal of any
Note, the amount obtained by
<PAGE>
discounting all Remaining Scheduled Payments with respect to such
Called Principal from their respective scheduled due dates to the
Settlement Date with respect to such Called Principal, in accordance
with accepted financial practice and at a discount factor (applied on
a semiannual basis) equal to the Reinvestment Yield with respect to
such Called Principal.
Reinvestment Yield: with respect to the Called Principal of any
Note, the sum of (a) 2.5% plus (b) the yield to maturity determined by
reference to the Treasury Constant Maturity Series yields reported,
for the latest day for which such yields shall have been reported as
of the Business Day next preceding the Settlement Date with respect to
such Called Principal, in Federal Reserve Statistical Release H.15
(519) (or, if such Statistical Release is not published, any publicly
available source of similar market data acceptable to the holders of
more than 50% in principal amount of the Notes being prepaid or
accelerated) for actively traded U.S. Treasury securities having a
constant maturity equal to the Remaining Average Life of such Called
Principal as of such Settlement Date. Such implied yield shall be
determined, if necessary, (x) by converting U.S. Treasury bill
quotations to bond-equivalent yields in accordance with accepted
financial practice and (y) by linear interpolation between reported
yields.
Remaining Average Life: with respect to the Called Principal of
any Note, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing (a) such Called Principal into (b) the sum
of the products obtained by multiplying (i) each Remaining Scheduled
Payment of such Called Principal (but not of interest thereon) by (ii)
the number of years (calculated to the nearest one-twelfth year) which
will elapse between the Settlement Date with respect to such Called
Principal and the scheduled due date of such Remaining Scheduled
Payment.
Remaining Scheduled Payments: with respect to the Called
Principal of any Note, all payments of such Called Principal and
interest thereon that would be due on or after the Settlement Date
with respect to such Called Principal if no payment of such Called
Principal were made prior to its scheduled due date.
Settlement Date: with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid
pursuant to section 9.3 or is declared to be immediately due and
payable pursuant to section 11, as the context requires.
Management Fees: the fees and expenses payable by the Company to SIHI
pursuant to the Management Agreement, dated as of December 21, 1995.
Material Subsidiary: a Subsidiary which, at the date of
determination, has assets with a book value in excess of 5% of the aggregate
book value of all assets of Holding. and its Subsidiaries at the end of the then
most recently completed fiscal year of Holding, or which produced net income
during such fiscal year which is more than 5% of Net Income for such fiscal
year.
Merger: the merger of GMH Acquisition Corp., a Delaware corporation,
into General Manufactured Housing,, Inc., a Georgia corporation, with the latter
company as the surviving entity.
Multiemployer Plan: any Plan which is a "multi-employer plan" (as
such term is defined in section 4001(a)(3) of ERISA).
Net Cash Generated: for any period, an amount equal to (a) Adjusted
Operating Profit for such period, less (b) Gross Capital Expenditures incurred
during such period, plus (c) the
<PAGE>
amount of any reduction (minus the amount of any increase) in Working Capital in
such period.
Net Income: for any period, net income or loss of Holding and its
consolidated Subsidiaries as it would appear on an income statement of Holding
and its consolidated Subsidiaries for such period prepared in accordance with
generally accepted accounting principles, less, to the extent not subtracted
from gross income in computing net income, the amounts paid or payable by the
GMH Companies in respect of Restricted Payments permitted under section 10.4 and
Management Fees permitted by section 10.7.
Officers' Certificate: a certificate executed on behalf of Holding or
the Company, as the context may require, by its Chairman of the Board of
Directors (if an officer) or its President or one of its Vice Presidents and its
Treasurer or one of its Assistant Treasurers.
Operative Agreements: the Stock Purchase Agreement, the RFE
Securities Purchase Agreement, the Stockholders' Agreement, the Investors'
Rights Agreement, the Subordination Agreement and the Senior Loan Agreement.
Original Holder: The Equitable Life Assurance Society of the United
States or any affiliate thereof to which any of the Notes shall subsequent to
the Closing Date have been transferred.
PBGC: the Pension Benefit Guaranty Corporation or any governmental
authority succeeding to any of its functions.
Person: an individual, a partnership, an association, a joint
venture, a corporation, a limited liability company, a business, a trust, an
unincorporated organization or a government or any department, agency or
subdivision thereof.
Plan: an "employee pension benefit plan" (as defined in section 3 of
ERISA) which is or has been established or maintained, or to which contributions
are or have been made, by Holding or any of its Related Persons, or an employee
pension benefit plan as to which Holding or any of its Related Persons would be
treated as a contributing sponsor under section 4069 of ERISA if it were to be
terminated, or such a plan as to which Holding or any of its Related Persons
would be treated as a contributing sponsor under section 4212(c) of ERISA.
Plan of Merger: the Plan of Merger, dated as of December 21, 1995,
between GMH Acquisition Corp., a Delaware corporation, and General Manufactured
Housing, Inc., a Georgia corporation.
Potential Event of Default: any condition or event which, with notice
or lapse of time or both, would become an Event of Default.
Preferred Stock: the Series A Preferred Stock and the Series B
Preferred Stock.
Premises: the facilities owned or leased by GMH, which are identified
in the Environmental Reports.
Private Placement Memorandum: the Confidential Private Placement
Memorandum, dated July 18, 1995, as supplemented on December 14, 1995, prepared
by Larkspur Capital Corporation in connection with the offer and issuance of the
Notes and Warrants.
RCRA: the Resource Conservation and Recovery Act, as amended (42
U.S.C. Section 6901, et seq.).
Repurchase Obligations: the contingent obligations of the Company
under agreements with the lenders to the purchasers of the Company's inventory
(each a "dealer") relating to inventory purchased by such dealer pursuant to
which the Company agrees to repurchase any new and unused inventory remaining in
the possession of such dealer or repossessed by such dealer's lender after a
default under the financing agreements between such dealer and its lender,
subject to the terms and conditions of such repurchase agreements.
<PAGE>
RFE: RFE Investment Partners V, L.P., a Delaware limited partnership.
RFE Group: collectively, RFE, the State of Michigan and Sterling
Commercial Capital, Inc.
RFE Securities Purchase Agreement: the Securities Purchase Agreement,
dated as of December 21, 1995, among RFE, the Company, Holding and the
purchasers listed therein.
Release: any past or present spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing or
dumping of a Hazardous Substance into the Environment (including the abandonment
or discarding of barrels, containers, and other closed receptacles containing
any Hazardous Substance), including the meaning as given to that term in CERCLA
and the regulations promulgated thereunder.
Related Person: any trade or business, whether or not incorporated,
which, together with Holding, is treated as a single employer under section 414
of the Code.
Restricted Payment: with reference to Holding or the Company, as the
context requires, (a) any dividend or other distribution, direct or indirect, on
account of any shares of any.class of stock of Holding or the Company, as the
case may be, now or hereafter outstanding, except a dividend payable solely in.
shares of common stock; (b) any redemption, retirement, purchase or other
acquisition, direct or indirect, of any shares of any class of stock of Holding
or the Company, as the case may be, now or hereafter outstanding, or of any
warrants, rights or options to acquire any such shares, except to the extent
that the consideration therefor consists of shares of stock of Holding or the
Company; and (c) any payment, direct or indirect, of or on account of any
principal of or premium on any Junior Securities of Holding or any other
subordinated Debt of Holding or the Company now or hereafter outstanding or any
redemption, retirement, purchase or other acquisition, direct or indirect, of
any such Junior Securities or subordinated Debt.
Securities Act: the Securities Act of 1933, as amended from time to
time.
Sellers: Kelly Scott Herold, as Trustee, Gregory Keith Scott, Drew
Eric Scott, Samuel P. Scott, Individually, and as Joint Tenant with Sherry J.
Scott; as "Sellers" under the Stock Purchase Agreement.
Senior Debt: all principal of and premium, if any, and interest on
Debt of the Company outstanding from time to time under (a) the Senior Loan
Agreement and (b) other Debt of the Company outstanding in compliance with
section 10.1(f) unless, under the instrument evidencing the same or under which
the same is outstanding, it is expressly provided that such Debt is junior and
subordinate to other Debt of the Company or its Subsidiaries.
Senior Lenders: First Source Financial LLP, as Lender under the
Senior Loan Agreement and any other "Lender" that may after the Closing Date
become an assignee of First Source Financial LLP under the Senior Loan
Agreement.
Senior Loan Agreement: The Loan Agreement, dated as of December 21,
1995, between the Company and First Source Financial LLP, as amended from time
to time.
Series A Preferred Stock: the Series A Redeemable Preferred Stock,
par value $.001 per share, of Holding, to be issued on the Closing Date to the
RFE Group, having an aggregate liquidation preference of $8,000,000.
Series B Preferred Stock: the Series B Convertible Preferred Stock,
par value $.001 per share, of Holding, to be issued on the Closing Date to
Bulldog and the RFE Group, having an aggregate liquidation preference of
$2,150,000.
State of Michigan: the Treasurer of the State of Michigan, as
Custodian for the Michigan Public School Employees Retirement System, the
Michigan State Employees Retirement
<PAGE>
System, the Michigan State Police Retirement System and the Michigan Judges
Retirement System.
Stock Purchase Agreement: the Stock Purchase Agreement, dated as of
October 10, 1995, between the Company and the Sellers named therein, as amended
to the date hereof.
Stockholders' Agreement: the Stockholders' Agreement, dated as of
December 21, 1995, among Holding, The Equitable Life Assurance Society of the
United States and the Persons listed in Schedule B, substantially in the form
set forth in Exhibit E.
SIHI: Strategic Investments & Holdings, Inc., a Delaware corporation.
Subordination Agreement: the Subordination Agreement, dated as of
December 21, 1995, among Holding, The Equitable Life Assurance Society of the
United States, the RFE Group, SIHI and First Source Financial LLP, substantially
in the form of Exhibit G.
Subsidiary: with reference to any of the GMH Companies, as the
context may require, any corporation at least 50% (by number of votes) of the
Voting Stock of which is at the time owned by the such GMH Company or by one or
more Subsidiaries of such GMH Company or by such GMH Company and one or more
Subsidiaries.
Total Fixed Charges: for any period, the sum of (a) all scheduled or
accelerated payments of interest or principal on account of Debt of Holding or
its consolidated Subsidiaries, including any and all penalties, premiums,
prepayment fees or the like thereon (including without limitation any "Scheduled
Reduction" in the "Revolving Loan Commitment" (as such terms are defined in the
Senior Loan Agreement), whether or not such reduction gives rise to a payment of
any loans outstanding under the Senior Loan Agreement) with respect to such
period plus (b) taxes paid or payable with respect to such period directly by
the GMH Companies to any governmental authority, plus (c) to the extent not
subtracted in determining Net Income and without double counting, all amounts
paid by Holding and its consolidated Subsidiaries with respect to such period to
purchase, redeem or otherwise acquire any Equity Interests. For purposes of the
foregoing, "scheduled payments" shall not include repayment of Loans (i)
pursuant to clauses eighth and ninth of section 7.3 of the Senior Loan Agreement
or (ii) following any reductions or termination of the Commitments pursuant to
section 2.5 or 2.6 of the Senior Loan Agreement.
Total Liabilities: at any date, the sum of (a) the amount which, in
conformity with generally accepted accounting principles, would be set forth
opposite the caption "liabilities" (or any like caption) on a balance sheet of
Holding and its consolidated Subsidiaries at such date plus (b) the aggregate
amount of Guaranties of Holding and its consolidated Subsidiaries outstanding on
such date (other than those which would constitute liabilities under clause (a)
above).
Voting Stock: with reference to any corporation, stock of any class
or classes (or equivalent interests), if the holders of the stock of such class
or classes (or equivalent interests) are ordinarily, in the absence of
contingencies, entitled to vote for the election of the directors (or Persons
performing similar functions) of such corporation, even though the right so to
vote has been suspended by the happening of such a contingency.
Ware County Obligation: the Corporate Guaranty of Deed to Secure Debt
made by Waycross and Ware County Development Authority to Patterson Bank, dated
December 30, 1993, to secure Promissory Note in the original principal amount of
$613,727.63.
Warrants: the meaning specified in section 1.
Wholly-Owned: as applied to a Subsidiary of any GMH Company, a
Subsidiary all the outstanding shares (other than directors' qualifying shares,
if required by law) of every class of stock of which are at the time owned by
such GMH Company or by one or more Wholly-Owned Subsidiaries thereof or by such
GMH
<PAGE>
Company and one or more Wholly-Owned Subsidiaries thereof.
15. Registration, Transfer and Substitution of Notes; Action by
Noteholders.
15.1. Note Register; Ownership of Notes. The Company will keep at
its principal office a register in which the Company will provide for the
registration of Notes and the registration of transfers of Notes. The Company
may treat the Person in whose name any Note is registered on such register as
the owner thereof for the purpose of receiving payment of the principal of and
the premium, if any, and interest on such Note and for all other purposes,
whether or not such Note shall be overdue, and the Company shall not be affected
by any notice to the contrary. All references in this Agreement to a "holder" of
any Note shall mean the Person in whose name such Note is at the time
.registered on such register.
15.2. Transfer and Exchange of Notes. Upon surrender of any Note for
registration of transfer or for exchange to the Company at its principal office,
the Company at its expense will execute and deliver in exchange therefor a new
Note or Notes in denominations of at least $100,000 (except one Note may be
issued in a lesser principal amount if the unpaid principal amount of the
surrendered Note is not evenly divisible by, or is less than $100,000), as
requested by the holder or transferee, which aggregate the unpaid principal
amount of such surrendered Note, registered as such holder or transferee may
request, dated so that there will be no loss of interest on such surrendered
Note and otherwise of like tenor.
15.3. Replacement of Notes. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Note and, in the case of any such loss, theft or destruction of any Note, upon
delivery of an indemnity bond in such reasonable amount as the Company may
determine (or, in the case of any Note held by you or another institutional
holder or your or its nominee, of an indemnity agreement from you or such other
holder) or, in the case of any such mutilation, upon the surrender of such Note
for cancellation to the Company at its principal office, the Company at its
expense will execute and deliver, in lieu thereof, a new Note in the unpaid
principal amount of such lost, stolen, destroyed or mutilated Note, dated so
that there will be no loss of interest on such Note and otherwise of like tenor.
Any Note in lieu of which any such new Note has been so executed and .delivered
by the Company shall not be deemed to be an outstanding Note for any purpose of
this Agreement.
15.4. Notes held by Company, etc., Deemed Not Outstanding. For the
purposes of determining whether the holders of the Notes of the requisite
principal amount at the time outstanding have taken any action authorized by
this Agreement with respect to the giving of consents or approvals or with
respect to acceleration upon an Event of Default, any Notes directly or
indirectly owned by the Company or any of its Subsidiaries or Affiliates shall
be disregarded and deemed not to be outstanding.
16. Payments on Notes.
16.1. Place of Payment. Payments of principal, premium, if any, and
interest becoming due and payable on the Notes shall be made at the principal
office of The Chase Manhattan Bank, N.A. in the Borough of Manhattan, the City
and State of New York, unless the Company, by written notice to each holder of
any Notes, shall designate the principal office of another bank or trust company
in such Borough as such place of payment, in which case the principal office of
such other bank or trust company shall thereafter be such place of payment.
16.2. Home Office Payment. So long as you or your nominee shall be
the holder of any Note, and notwithstanding anything contained in section 16.1
or in such Note to the contrary, the Company will pay all sums becoming due on
such Note for principal, premium, if any, and interest by the method and at the
address specified for such purpose in Schedule A, or by such other method or at
such other address as you shall have from time
<PAGE>
to time specified to the Company in writing for such purpose, without the
presentation or surrender of such Note or the making of any notation thereon,
except that any Note paid or prepaid in full shall be surrendered to the Company
at its principal office or at the place of payment maintained by the Company
pursuant to section 16.1 for cancellation. Prior to any sale or other
disposition of any Note held by you or your nominee you will, at your election,
either endorse thereon the amount of principal paid thereon and the last date to
which interest has been paid thereon or surrender such Note to the Company in
exchange for a new Note or Notes pursuant to section 16.2. The Company will
afford the benefits of this section 16.2 to any institutional investor which is
the direct or indirect transferee of any Note purchased by you under this
Agreement and which has made the same agreement relating to such Note as you
have made in this section 16.2.
17. Expenses, etc. Whether or not the transactions contemplated by
this Agreement shall be consummated, the Company will pay all expenses in
connection with such transactions and in connection with any amendments or
waivers (whether or not the same become effective) under or in respect of this
Agreement, the Notes and the Warrants, including, without limitation: (a) the
cost and expenses of preparing and reproducing this Agreement, the Notes or the
Warrants, of furnishing all opinions by counsel for the GMH Companies (including
any opinions requested by your special counsel as to any legal matter arising
hereunder) and all certificates on behalf of the GMH Companies, and of the GMH
Companies' performance of and compliance with all agreements and conditions
contained herein on its part to be performed or complied with; (b) the cost of
delivering to your principal office, insured to your satisfaction, the Notes and
Warrants sold to you hereunder and any Notes or Warrants delivered to you upon
any substitution of Notes or Warrants pursuant to section 15 and of your
delivering any Notes or Warrants, insured to your satisfaction, upon any such
substitution; (c) the reasonable fees, expenses and disbursements of your
special counsel in connection with such transactions and any such amendments or
waivers; and (d) the reasonable out-of-pocket expenses incurred by you in
connection with such transactions and any such amendments or waivers. The
Company also will pay, and will save you and each holder of any Notes harmless
from, all claims in respect of the fees, if any, of brokers and finders and any
and all liabilities with respect to any taxes (including interest and penalties)
which may be payable in respect of the execution and delivery of this Agreement,
the issue of the Notes and Warrants and any amendment or waiver under or in
respect of this Agreement, the Notes and the Warrants. The obligation of the
Company under this section 17 shall survive any disposition or payment of the
Notes and the termination of this Agreement and the expiration of the Warrants.
18. Survival of Representations and Warranties. All representations
and warranties contained in this Agreement or made in writing by Holding or the
Company in connection with the transactions contemplated by this Agreement shall
survive the execution and delivery of this Agreement, any investigation at any
time made by you or on your behalf and the purchase of the Notes and Warrants by
you under this Agreement. All statements contained in any certificate or other
instrument delivered by or on behalf of Holding or the Company pursuant to this
Agreement shall be deemed representations and warranties of Holding and the
Company under this Agreement.
19. Amendments and Waivers. Any term of this Agreement or of the
Notes may be amended and the observance of any term of this Agreement or of the
Notes may be waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of the Company and
the holders of more than 50% in principal amount of the Notes at the time
outstanding (subject to section 15.4), provided that, without the prior written
consent of the holders of all the Notes at the time outstanding (subject to
section 15.4), no such amendment or waiver shall (a) change the maturity or the
principal amount of, or reduce the rate or change the time of payment of
interest on, or change the amount or the time of payment of any principal or
premium payable on any prepayment of, any Note, (b) reduce the aforesaid
percentages of the principal
<PAGE>
amount of the Notes the holders of which are required to consent to any such
amendment or waiver, (c) change the percentage of the principal amount of the
Notes the holders of which may declare the Notes to be due and payable as
provided in section 11, (d) modify the proviso to the first sentence of section
11, or (e) decrease the percentage of the principal amount of the Notes the
holders of which may rescind and-annul any such declaration as provided in
section 11. Any amendment or waiver effected in accordance with this section 19
shall be binding upon each holder of any Note at the time outstanding, each
future holder of any Note and the Company.
20. Notices, etc. Except as otherwise provided in this Agreement,
notices and other communications under this Agreement shall be in writing and
shall be delivered, or mailed by registered or certified mail, return receipt
requested, addressed, (a) if to you, at the address set forth in Schedule A or
at such other address as you shall have furnished to the Company in writing,
except as otherwise provided in section 16.2 with respect to payments on Notes
held by you or your nominee, or (b) if to any other holder of any Note, at such
address as such other holder shall have furnished to the Company in writing, or,
until any such other holder so furnishes to the Company an address, then to and
at the address of the last holder of such Note who has furnished an address to
the Company, or (c) if to Holding or the Company, at its address set forth at
the beginning of this Agreement, to the attention of the Chief Financial Officer
of the Company, or at such other address, or to the attention of such other
officer, as the Company shall have furnished to you and each such other holder
in writing. Any notice so addressed and delivered by hand or courier shall be
deemed to be given when received, and any notice so addressed and mailed by
registered or certified mail shall be deemed to be given three Business Days
after being so mailed.
21. Indemnification. The Company will indemnify and hold harmless
each of you and each person who controls you within the meaning of the
Securities Act or the Exchange Act and each of your subsidiaries and each of
your and their respective directors, officers, employees, agents and advisors
(any and all of whom are referred to as the "Indemnified Party") from and
against any and all losses, claims, damages and liabilities, whether joint or
several (including all legal fees or other expenses reasonably incurred by any
Indemnified Party in connection with the @reparation for or defense of any
pending or threatened third party claim, action or proceeding, whether or not
resulting in any liability), which such Indemnified Party actually and
reasonably incurs (whether or not such Indemnified Party is a party thereto)
under any applicable federal or state law or otherwise, caused by or arising out
of, or allegedly caused by or arising out of, the Acquisition or the Note
Agreement or any transaction contemplated hereby or thereby, other than, with
respect to any Indemnified Party, losses, claims, damages or liabilities that
are the result of any representation made by such Indemnified Party in section 6
or the result of the gross negligence or willful misconduct of such Indemnified
Party.
Promptly after receipt by an Indemnified Party of notice of any claim,
action or proceeding with respect to which an Indemnified Party is entitled to
indemnity hereunder, such Indemnified Party will notify the Company of such
claim or the commencement of such action or proceeding, provided that the
failure of an Indemnified Party to give notice as provided herein shall not
relieve the Company of its obligations under this section 21 with respect to
such Indemnified Party, except to the extent that the Company is actually
prejudiced by such failure. The Company will assume the defense of such claim,
action or proceeding and will employ counsel reasonably satisfactory to the
Indemnified Party and will pay the fees and expenses of such counsel.
Notwithstanding the preceding sentence, the Indemnified Party will be entitled,
at the expense of the Company, to employ counsel separate from counsel for the
Company and for any other party in such action if the Indemnified Party
reasonably determines that a conflict of interest or other reasonable basis
exists which makes representation by counsel chosen by the Company not
advisable, but the Company will not be obligated to pay the fees and expenses of
more than one counsel for all
Indemnified Parties.
22. Miscellaneous. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not, and, in particular, shall inure
to the benefit of and be enforceable by any holder or holders at the time of the
Notes or any part thereof. Except as stated in section 18, this Agreement
embodies the entire agreement and understanding between you, Holding and the
Company and supersedes all prior agreements and understandings relating to the
subject matter hereof. This Agreement and the Notes shall be construed and
enforced in accordance with and governed by the law of the State of New York.
The headings in this Agreement are for purposes of reference only and shall not
limit or otherwise affect the meaning hereof. This Agreement may be executed in
any number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
<PAGE>
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterparts of this letter and return one of the
same to the Company, whereupon this letter shall become a binding agreement
between you, Holding and the Company.
Very truly yours,
GMH ACQUISITION CORP.
By: /s/ Gary M. Brost
________________________________
Title: President
GMH HOLDINGS, INC.
By: /s/ Gary M. Brost
________________________________
Title: President
The foregoing Agreement is
hereby agreed to as of the
date thereof.
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
By: James K. [illegible]
Investment Officer
<PAGE>
SCHEDULES TO
NOTE AND WARRANT PURCHASE AGREEMENT
DATED AS OF DECEMBER 21, 1995
AMONG GMH ACQUISITION CORP., GMH HOLDINGS, INC.
AND THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
All capitalized terms contained in these schedules shall have the meanings
set forth in the Note and Warrant Purchase Agreement. Any item disclosed on any
schedule shall be deemed to have been disclosed on all schedules.
<PAGE>
SCHEDULE A
Purchaser Information
The Equitable Life Assurance Society
of the United States
787 Seventh Avenue
New York, New York 10019
<PAGE>
SCHEDULE B
Equity Purchasers
<TABLE>
<CAPTION>
STOCKHOLDER NUMBER OF SHARES
SERIES A SERIES B CLASS A
PREFERRED PREFERRED COMMON
<S> <C> <C> <C>
Bulldog Holdings LLC 1,400,000
RFE Investments Partners V, L.P. 4,690,351 439,720 714,546
State Treasurer of the State of
Michigan, Custodian of the
Michigan Public School
Employees' Retirement System,
State Employees' Retirement
System, Michigan State Police
Retirement System, and Michigan
Judges Retirement System 3,076,922 288,462 468,750
Sterling Commercial Capital, Inc. 232,727 21,818 35,454
The Equitable Life Assurance
Society of the United States
Eileen V. Austen
Paul C. Cronson
Robert C. Goodwin
Robert C. Mayer
Samuel P. Scott and Sherry J.
Scott, as Joint Tenants 92,749
Kelly Scott Herold, as Trustee
for the Kelly Scott Herold
Revocable Trust - 1995 71,167
Gregory Keith Scott 71,167
Drew Eric Scott 71,167
Lannis Thomas 28,000
Wayne Roberts 28,000
Thomas M. Vinson 21,000
Bruce Hallock 14,000
Michael O'Gorman 14,000
Benny Bryan 13,125
James H. McClellan 13,125
________ _________ __________
TOTAL 8,000,000 2,150,000 1,656,250
</TABLE>
<PAGE>
SCHEDULE C
Debt and Liens
C-1.
a. Debt to The Patterson Bank in the original principal amount of $613,727.63
in connection with sale and lease-back transaction.
i) Collateral:
Deed to secure debt to Patterson Bank described dated 12/30/93 from
Waycross and Ware County Development Authority encumbering Plants 2
and 3.
b. Installment Promissory Notes of GMH Acquisition Corp. to each of Samuel J.
Scott and Sherry J. Scott, as joint tenants, Drew Eric Scott, Gregory Keith
Scott, and Kelly Scott Herold, as Trustee, due January 25, 1996 in the
aggregate principal amount of $45,000,000.
C-2.
a. Debt to First Source LLP in a principal amount up to $26,000,000
b. Debt to the Equitable Life Assurance Society of the United States in an
amount up to $17,243,298.
c. Debt to RFE Investment Partners V, L.P., State of Michigan, as Custodian,
and Sterling Commercial Capital, Inc. in the amount of $5,000,000.
d. Promissory Note in the original principal amount of $600,000 dated 8/24/94
in favor of Nationsbank of Georgia, N.A., secured by Security Agreement
dated 8/24/94 encumbering aircraft, engines, propellers, accessories and
parts including UCC and FAA filings to be removed immediately following the
Closing.
e. Reimbursement obligations of GMH with respect to the following:
1) Letter of Credit No. PB020 dated 5/22/95 issued by The Patterson Bank
in favor of Tim-Bar Corporation in the maximum amount of $207,000 (said
balance declining at the rate of $9,000 per month) as Security Deposit
under Lease between Hi-Tech and Tim-Bar for Plant 4
2) Irrevocable Letter of Credit No. PB013 dated 5/18/93 issued by The
Patterson Bank in favor of Bankers Insurance Company for $50,000, securing
South Carolina Manufacturer's Representative License Bonds
<PAGE>
SCHEDULE D
Investment
The Company owns all of the outstanding stock of General Manufactured
Housing, Inc.
<PAGE>
SCHEDULE E
A. ENVIRONMENTAL COMPLIANCE
1. There are two (2) 500 gallon above ground storage tanks (AST) at Plant
Nos. 1,2 and 3. One AST contains diesel fuel and the other AST
contains gasoline. The ASTs at Plant Nos. 1 and 2 had petroleum
residue underneath them. All three AST locations have no sealed
concrete floor beneath them. Elevated concentration levels of
petroleum constituents were detected in the soil and ground water
below the ASTs at Plant Nos. 1 and 2.
2. Plant No. 3 has a welding and painting Facility for Constructing steel
platforms. Stained soil is present at the maintenance/welding shop.
The painting area and nearby soil is also stained with a black coating
paint. The stained soil at the maintenance/welding shop was removed.
The painting area does not pose a threat.
3. Stained soil was evident around an air compressor located at Plant No.
2 and was removed.
4. Mineral spirits are stored in 55-gallon drums at Plant No. 1. Stained
soil was observed beneath thus storage area, but analytical results
from samples collected in this area were below state guidance levels.
5. Surface tar areas are located at Plant Nos. 1 and 2.
6. Contact adhesive containing acetone, toluene, and N-hexane are present
and used at each Plant. Scrapwood, steel parts and sheetrock are
stored at each Plant. Paint and non-toxic glue are present and used at
each Plant. Plastic roof cement and Plaster of Paris are stored at
Plant No. 2. Steel drums containing hydraulic oil is stored at Plant
No. 3.
7. Plant Nos. 1, 2, and 3 are located in an industrial park. General
American Transportation Corp. (GATX) is located adjacent to Plant No.
2 and is a listed CERCLIS site. A registered leaking underground
storage tank is located within a .5 mile radius of the Plants. RCRA
hazardous waste generators are located in the industrial park.
8. Asbestos containing pipe fitting insulation is located throughout the
ceiling areas and the boiler room in Plant No. 2 Asbestos containing
linoleum floor materials is located in Plant Nos. 1 and 3.
9. Plant No. 4 was used previously as a cardboard plant. A 10,000 gallon
diesel UST had previously been stored and removed. Two 270-gallon
steel ASTs currently are used. One AST contains diesel fuel and the
other AST contains gasoline.
10. Contact adhesive, glue, thread cutting oil, roof adhesive, roof
element, paint, oil/water mixture, hydraulic oil, formaldehyde resin,
and caustic soda beads are stored and used at Plant No. 4.
11. An old compressor is stored at Plant No. 4 and stained concrete is
present in the area of the compressor.
12. GATX is a listed CERCLIS site and RCRA hazardous waste generator and
is located adjacent to Plant No. 4. Groundwater beneath the GATX site
is contaminated with naphthalene. A registered leaking underground
storage tank is located within .5 miles of Plant No. 4
13. Plant No. 5 was used previously as a warehouse and was listed on
federal and state databases as a small quantity generator of hazardous
wastes.
14. Four (4) ASTs are located 200 feet northeast of Plant No. 5 and
stained soil is present beneath these tanks. Three (3) registered
leaking underground storage tanks are located within a .5 mile radius
of Plant No. 5.
B. MATERIAL ADVERSE CHANGE
1. Borrower and Oakwood Mobile Homes, a manufacturer and retailer
headquartered in North Carolina, had an agreement pursuant to which
Borrower was to supply 24 foot, double-wide homes to Oakwood's captive
retail network. Borrower expected to use Plant No. 4 located in
Waycross, Georgia exclusively for the construction of these homes.
Oakwood gave notice to Borrower, on or about August 25, 1995, that it
would not be ordering any further homes from Borrower for the
foreseeable future due to over manufacturing by Oakwood of its own
products, and the desire for their retail network to sell Oakwood's
products before those manufactured by Borrower. All homes that had
been ordered to that time were completed by Borrower and purchased by
Oakwood. Borrower has shifted double-wide production to Plant No. 4 in
order to reduce its considerable backlog of orders. In its
notification, Oakwood characterized this situation as temporary;
however, no assurances can be given that such suspension may not be
permanent. Sales to Oakwood accounted for approximately 10% of
Borrower's total revenues during the first six months of 1995.
<PAGE>
EXHIBIT A
Form of Senior Note
<PAGE>
EXHIBIT A
GENERAL MANUFACTURED HOUSING, INC.
Senior Subordinated Note due December 21, 2002
PPN# 37029* AA 7
No. R New York, N.Y.
$ , 19__
GENERAL MANUFACTURED HOUSING, INC. a Georgia corporation (the
"Company"), for value received, hereby promises to pay to
_________________________, or registered assigns, the principal amount of
$______ on December 21, 2002, with interest (computed on the basis of a 360-day
year of twelve 30-day months) on the unpaid balance of such principal amount at
the rate of (a) for the period from the date hereof to and including March 31,
2001, 10.87% per annum, and (b) 14.50% per annum thereafter, payable quarterly
on each March 31, June 30, September 30 and December 31 after the date hereof,
commencing March 31, 1996, until such unpaid balance shall become due and
payable (whether at maturity or at a date fixed for prepayment or by declaration
or otherwise), and with interest on any overdue principal (including any overdue
prepayment of principal) and premium, if any, and (to the extent permitted by
applicable law) on any overdue interest, at the rate of 2.00% per annum plus the
otherwise applicable rate until paid, payable quarterly as aforesaid or, at the
option of the holder hereof, on demand. Payments of principal, premium, if any,
and interest on this Note shall be made in lawful money of the United States of
America at the principal office of The Chase Manhattan Bank, N.A., in the
Borough of Manhattan, the City and State of New York, or at such other office or
agency in such Borough as the Company shall have designated by written notice to
the holder of this Note as provided in the Note and Warrant Purchase Agreement
referred to below.
This Note is one of the Company's Senior Subordinated Notes due
December 21, 2002 (the "Notes"), originally issued in the aggregate principal
amount of $17,243,295 pursuant to the Note and Warrant Purchase Agreement, dated
as of December 21, 1995, as from time to time amended, between the Company and
the institutional investor referred to therein. The holder of this
<PAGE>
Note is entitled to the benefits of such Note and Warrant Purchase Agreement and
may enforce the agreements of the Company contained therein and exercise the
remedies provided for thereby or otherwise available in respect thereof.
The obligations evidenced hereby are subordinate in the manner and to
the extent set forth in that certain Subordination Agreement, dated as of
December 21, 1995 (the "Subordination Agreement"), among the Company, The
Equitable Life Assurance Society of the United States, RFE Investment Partners
V, L.P., Sterling Commercial Capital, Inc., the State Treasurer of the State of
Michigan, as Custodian, and First Source Financial LLP (the "Senior Lender"), to
the obligations (including interest) owed by the Company to the holders of all
the Notes issued pursuant to that certain Secured Credit Agreement, dated as of
December 21, 1995, between the Company and the Senior Lender, as such Secured
Credit Agreement has been and hereafter may be supplemented and amended from
time to time; and each holder hereof, by its acceptance hereof, agrees to be
bound by the provisions of the Subordination Agreement.
This Note is a registered Note and is transferable only upon surrender
of this Note for registration or transfer, duly endorsed, or accompanied by a
written instrument of transfer duly executed by the holder hereof or his
attorney duly authorized in writing. References in this Note to a "holder" shall
mean the person in whose name this Note is at the time registered on the
register kept by the Company as provided in such Note and Warrant Purchase
Agreement and the Company may treat such person as the owner of this Note for
the purpose of receiving payment and for all other purposes of receiving payment
and for all other purposes, and the Company shall not be affected by any notice
to the contrary.
The Notes are subject to required and optional prepayment, in whole or
in part, in certain cases with a premium and in other cases without a premium,
all as specified in such Note and Warrant Purchase Agreement.
In case an Event of Default, as defined in such Note and Warrant
Purchase Agreement, shall occur and be continuing, the unpaid balance of the
principal of this Note may become due and payable to the extent provided in such
Note and Warrant Purchase Agreement.
This Note is made and delivered in New York, New York, and shall be
governed by the laws of the State of New York.
GENERAL MANUFACTURED HOUSING INC.
By_______________________________
Title:
<PAGE>
SCHEDULE A
SCHEDULE OF PURCHASERS
Principal Amount of
Name and Address Notes; Number of
of Purchaser Warrants
THE EQUITABLE LIFE ASSURANCE SOCIETY Principal Amount of
THE UNITED STATES Note:
(1) All payments by wire transfer of $17,226,308
immediately available funds (other
than in respect of transaction
fees) to: Number of Warrants:
The Chase Manhattan Bank, N.A. 350,000
110 West 52nd Street
New York, New York 10019
ABA No. 021-000021
A/C The Equitable Life Assurance
Society of the United States
Account No. 037-2-409417
Each such wire transfer shall set
forth the name of the Company,
the private placement number,
the due date of the payment
being made and if such payment
is a final payment.
Payments by wire transfer of
immediately available funds
in respect of transaction
fees to:
Citibank, N.A.
399 Park Avenue
New York, New York 10021
ABA No. 021000089
A/C Alliance Corporate Finance Group
Incorporated
Account No. 3849-3365
(2) All notices of payment and written
confirmation of such wire transfers to
The Equitable Life Assurance Society
of the United States
c/o Alliance Capital Management L.P.
135 West 50th Street
6th Floor
New York, New York 10020
Attention: Cash Operations
(3) All other communications to be
sent to:
The Equitable Life Assurance Society
of the United States
c/o Alliance Corporate Finance Group
Incorporated
1345 Avenue of the Americas
39th Floor
New York, New York 10105
(4) Securities to be delivered to:
The Equitable Life Assurance Society
of the United States
787 Seventh Avenue
TW/41
New York, New York 10019
Attention: Celeste Greenidge
(5) TIN 13-5570651
<PAGE>
EXHBIIT B
Form of Warrant
<PAGE>
EXHIBIT B
GMH HOLDINGS, INC.
COMMON STOCK PURCHASE WARRANT
Expiring December 21, 2002
This Warrant and any shares acquired upon the exercise of this Warrant have not
been registered under the Securities Act of 1933 and may not be transferred in
the absence of such registration or an exemption therefrom under such Act. This
Warrant and such shares are also subject to certain restrictions on
transferability imposed by a certain Stockholders' Agreement, a copy of which is
on file at the offices of the Company.
<PAGE>
TABLE OF CONTENTS
1. Exercise of Warrant . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Manner of Exercise . . . . . . . . . . . . . . . . . . . . . . 1
1.2. When Exercise Deemed Effected. . . . . . . . . . . . . . . . . 2
1.3. Delivery of Stock Certificates, etc. . . . . . . . . . . . . . 2
1.4. Company to Reaffirm Obligations. . . . . . . . . . . . . . . . 3
1.5. Payment by Application of the Notes. . . . . . . . . . . . . . 3
2. Adjustments; Dividends. . . . . . . . . . . . . . . . . . . . . . . 3
2.1. Number of Shares; Warrant Price. . . . . . . . . . . . . . . . 3
2.2. Adjustment of Warrant Price; Payment of Regular
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2.1. Issuance of Additional Shares of Common
Stock. . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2.2. Dividends and Distributions. . . . . . . . . . . . . . 4
2.3. Treatment of Options and Convertible Securities. . . . . . . . 5
2.4. Treatment of Stock Dividends, Stock Splits, etc. . . . . . . . 7
2.5. Computation of Consideration . . . . . . . . . . . . . . . . . 7
2.6. Adjustments for Combinations, etc. . . . . . . . . . . . . . . 9
2.7. Dilution in Case of Other Securities . . . . . . . . . . . . . 9
2.8. Minimum Adjustment of Warrant Price. . . . . . . . . . . . . 10
3. Consolidation, Merger, Sale of Assets,
Reorganization, etc . . . . . . . . . . . . . . . . . . . . . . . . 10
3.1. General Provisions . . . . . . . . . . . . . . . . . . . . . . 10
3.2. Assumption of Obligations. . . . . . . . . . . . . . . . . . . 12
4. Other Dilutive Events . . . . . . . . . . . . . . . . . . . . . . . 12
5. No Dilution or Impairment . . . . . . . . . . . . . . . . . . . . . 12
6. Accountants' Report as to Adjustments . . . . . . . . . . . . . . . 13
7. Notices of Corporate Action . . . . . . . . . . . . . . . . . . . . 14
8. Restrictions on Transfer. . . . . . . . . . . . . . . . . . . . . . 15
8.1. Restrictive Legends. . . . . . . . . . . . . . . . . . . . . . 15
8.2. Notice of Proposed Transfer; Opinions of Counsel . . . . . . . 15
8.3. Termination of Restrictions. . . . . . . . . . . . . . . . . . 16
9. Registration under Securities Act . . . . . . . . . . . . . . . . . 17
10. Financial Information . . . . . . . . . . . . . . . . . . . . . . . 17
10.1. Financial Statements . . . . . . . . . . . . . . . . . . . . 17
10.2. Availability of Information. . . . . . . . . . . . . . . . . 18
11. Reservation of Stock, etc . . . . . . . . . . . . . . . . . . . . . 18
12. Ownership, Transfer and Substitution of Warrants. . . . . . . . . . 19
12.1. Ownership of Warrants. . . . . . . . . . . . . . . . . . . . 19
12.2. Transfer and Exchange of Warrants. . . . . . . . . . . . . . 19
12.3. Replacement of Warrants. . . . . . . . . . . . . . . . . . . 19
13. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
14. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
15. No Rights or Liabilities as Stockholder . . . . . . . . . . . . . . 26
16. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
17. Expiration; Notice. . . . . . . . . . . . . . . . . . . . . . . . . 26
18. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
<PAGE>
Common Stock Purchase Warrant
Expiring December 21, 2002
New York, New York
__________, 19__
PPN# 36189# 11 1
No. W-1
GMH HOLDINGS, INC., a Delaware corporation (the "Company"), for value
received, hereby certifies that _________________________________________ or
registered assigns, is entitled to purchase from the Company _______ duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock,
par value $.001 per share, of the Company (the "Common Stock"), which may be
either Class B Common Stock or (at the election of the holder of this Warrant if
such holder is an Eligible Holder) Class A Common Stock or (in the case of an
Eligible Holder) any combination thereof, at the purchase price per share of
$.01, at any time or from time to time prior to 3:00 P.M., New York City time,
on December 21, 2002, all subject to the terms, conditions and adjustments set
forth below in this Warrant.
This Warrant is one of the Common Stock Purchase Warrants (the
"Warrants", such term to include all Warrants issued in substitution therefor)
originally issued in connection with the issue and sale by General Manufactured
Housing, Inc., a wholly-owned subsidiary of the Company, of $17,243,295
aggregate principal amount of its Senior Subordinated Notes due 2002 (together
with all notes issued in substitution therefor, the "Notes"), pursuant to the
Note and Warrant Purchase Agreement (the "Purchase Agreement"), dated as of
December 21, 1995, between the Company and the institutional investor named
therein (the "Purchaser"). The Warrants originally so issued evidence rights to
purchase an aggregate of 350,000 shares of Common Stock, subject to adjustment
as provided herein. Certain capitalized terms used in this Warrant are defined
in section 13.
<PAGE>
1. Exercise of Warrant. 1.1. Manner of Exercise. This Warrant may be
exercised by the holder hereof, in whole or in part, during normal business
hours on any Business Day by surrender of this Warrant, with the form of
subscription at the end hereof (or a reasonable facsimile thereof), setting
forth such holder's election to receive Class A Common Stock or Class B Common
Stock or a combination thereof, duly executed by such holder, to the Company at
its principal office (or, if such exercise shall be in connection with an
underwritten Public Offering of shares of Common Stock (or Other Securities)
subject to this Warrant, at the location at which the Company shall have agreed
to deliver the shares of Common Stock (or Other Securities) subject to such
offering), accompanied by payment, in cash or by certified or official bank
check payable to the order of the Company or by application of Notes in the
manner provided in section 1.5 (or by a combination of such methods), in the
amount obtained by multiplying (a) the number of shares of Common Stock (without
giving effect to any adjustment therein) designated in such form of subscription
by (b) $.01, and such holder shall thereupon be entitled to receive the number
of duly authorized, validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) determined as provided in sections 2 through
4.
1.2. When Exercise Deemed Effected. Each exercise of this Warrant
shall be deemed to have been effected immediately prior to the close of business
on the Business Day on which this Warrant shall have been surrendered to the
Company as provided in section 1.1, and at such time the person or persons in
whose name or names any certificate or certificates for shares of Common Stock
(or Other Securities) shall be issuable upon such exercise as provided in
section 1.3 shall be deemed to have become the holder or holders of record
thereof.
1.3. Delivery of Stock Certificates, etc. As soon as practicable after
the exercise of this Warrant, in whole or in part, and in any event within five
Business Days thereafter (unless such exercise shall be in connection with an
underwritten Public Offering of shares of Common Stock (or Other Securities)
subject to this Warrant, in which event concurrently with such exercise), the
Company at its expense (including the payment by it of any applicable taxes
other than transfer taxes) will cause to be issued in the name of and delivered
to the holder hereof or, subject to section 8, as such holder (upon payment by
such holder of any applicable transfer taxes) may direct,
(a) a certificate or certificates for the number of duly authorized,
validly issued, fully paid and nonassessable shares of Class A Common Stock
or Class B Common Stock (or Other Securities) to which such holder shall be
entitled upon such exercise plus, in lieu of any fractional share to which
such holder would otherwise be entitled, cash in an amount equal to the
same fraction of the Market Price per share of such Common Stock (or Other
Securities) on the Business Day next preceding the date of such exercise,
and
(b) in case such exercise is in part only, a new Warrant or Warrants
of like tenor, calling in the aggregate on the face or faces thereof for
the number of shares of Common Stock equal (without giving effect to any
adjustment therein) to the number of such shares called for on the face of
this Warrant minus the number of such shares designated by the holder upon
such exercise as provided in section 1.1.
1.4. Company to Reaffirm Obligations. The Company will, at the time of
or at any time after each exercise of this Warrant, upon the request of the
holder hereof or of any shares of Common Stock (or Other Securities) issued upon
such exercise, acknowledge in writing its continuing obligation to afford to
such holder all rights (including, without limitation, any right of registration
of any shares of Common Stock (or Other Securities) issuable upon exercise of
this Warrant pursuant to section 9) to which such holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant,
provided that if any such holder shall fail to make any such request, the
failure shall not affect the continuing obligation
<PAGE>
of the Company to afford such rights to such holder.
1.5. Payment by Application of the Notes. Upon any exercise of this
Warrant, the holder hereof may, at its option, instruct the Company, by so
specifying in the form of subscription submitted therewith as provided in
section 1.1, to apply to the payment required by section 1.1 all or any part of
the principal amount then unpaid and of the interest on such principal amount
then accrued on any one or more Notes at the time held by such holder, in which
case the Company will accept the aggregate amount of principal and accrued
interest on such principal specified in such form of subscription in
satisfaction of a like amount of such payment. In case less than the entire
unpaid principal amount of any Note shall be so specified, the principal amount
so specified shall be credited, as of the date of such exercise, against the
installments of principal then remaining unpaid on such Note pro rata to all
such remaining installments. Within ten days after receipt of any such notice,
the Company will pay to the holder of the Notes submitting such form of
subscription, in the manner provided in such Notes and the Purchase Agreement,
all unpaid interest accrued to the date of exercise of such Warrant on the
principal amount so specified in such form of subscription that is not applied
to the payment required by section 1.1 under this section 1.5. In the event that
the entire unpaid principal amount of any Note is applied to the payment
required by section 1.1 under this section 1.5, such Note shall be promptly
surrendered and cancelled in accordance with the Purchase Agreement.
2. Adjustments; Dividends. 2.1. Number of Shares; Warrant Price. The
number of shares of Common Stock which the holder of this Warrant shall be
entitled to receive upon each exercise hereof shall be determined by multiplying
the number of shares of Common Stock which would otherwise (but for the
provisions of this section 2) be issuable upon such exercise, as designated by
the holder hereof pursuant to section 1.1, by a fraction of which (a) the
numerator is $.01 and (b) the denominator is the Warrant Price in effect on the
date of such exercise. The "Warrant Price" shall initially be $.01 per share,
shall be adjusted and readjusted from time to time as provided in this section 2
and, as so adjusted or readjusted, shall remain in effect until a further
adjustment or readjustment thereof is required by this section 2.
2.2. Adjustment of Warrant Price; Payment of Regular Dividends. 2.2.1.
Issuance of Additional Shares of Common Stock. In case the Company, at any time
or from time to time after December 21, 1995 (the "Initial Date"), shall issue
or sell Additional Shares of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to section 2.3 or 2.4) without consideration
or for a consideration per share less than the Current Market Price in effect,
in each case, on the date of and immediately prior to such issue or sale, then,
and in each such case, subject to section 2.8, such Warrant Price shall be
reduced, concurrently with such issue or sale, to a price (calculated to the
nearest .0001 of a cent) determined by multiplying such Warrant Price by a
fraction,
(a) the numerator of which shall be (i) the number of shares of
Common Stock outstanding immediately prior to such issue or sale plus (ii)
the number of shares of Common Stock which the aggregate consideration
received by the Company for the total number of such Additional Shares of
Common Stock so issued or sold would purchase at the Current Market Price,
and
(b) the denominator of which shall be the number of shares of Common
Stock outstanding immediately after such issue or sale,
provided that, for the purposes of this section 2.2.1 (x) immediately after any
Additional Shares of Common Stock are deemed to have been issued pursuant to
section 2.3 or 2.4, such Additional Shares shall be deemed to be outstanding,
and (y) treasury shares shall not be deemed to be outstanding.
2.2.2. Dividends and Distributions. In case the Company at any time
or from time to time after the Initial Date
<PAGE>
shall declare, order, pay or make a dividend or other distribution (including,
without limitation, any distribution of other or additional stock or other
securities or property or Options by way of dividend or spin-off,
reclassification, recapitalization or similar corporate rearrangement) on any
Common Stock, other than a dividend payable in Additional Shares of Common Stock
or in Options for Common Stock, then, and in each such case, the holder of this
Warrant shall be entitled to receive the amount in cash or other property to
which such holder would actually have been entitled as a shareholder upon the
payment thereof by the Company if such holder had exercised this Warrant
immediately prior to the close of business on the record date fixed for the
determination of holders of Common Stock entitled to receive such dividend.
2.3. Treatment of Options and Convertible Securities. In case the
Company at any time or from time to time after the Initial Date shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities entitled to receive, any Options or
Convertible Securities, then, and in each such case, the maximum number of
Additional Shares of Common Stock (as set forth in the instrument relating
thereto, without regard to any provisions contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such options or, in the
case of Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities, shall be deemed to be issued for purposes of
section 2.1 as of the time of such issue, sale, grant or assumption or, in case
such a record date shall have been fixed, as of the close of business on such
record date (or, if the Common Stock trades on an ex-dividend basis, on the date
prior to the commencement of ex-dividend trading), provided that such Additional
Shares of Common Stock shall not be deemed to have been issued unless the
consideration per share (determined pursuant to section 2.5) of such shares
would be less than the Current Market Price in effect, in each case, on the date
of and immediately prior to such issue, sale, grant or assumption or immediately
prior to the close of business on such record date (or, if the Common Stock
trades on an ex-dividend basis, on the date prior to the commencement of ex-
dividend trading), as the case may be, and provided, further, that in any such
case in which Additional Shares of Common Stock are deemed to be issued,
(a) no further adjustment of the Warrant Price shall be made upon the
subsequent issue or sale of Additional Shares of Common Stock or
Convertible Securities upon the exercise of such Options or the conversion
or exchange of such Convertible Securities;
(b) if such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any increase in the
consideration payable to the Company, or decrease in the number of
Additional Shares of Common Stock issuable, upon the exercise, conversion
or exchange thereof (by change of rate or otherwise), the Warrant Price
computed upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of the record date, or date prior to the commencement
of ex-dividend trading, as the case may be, with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options, or the rights of conversion or
exchange under such Convertible Securities, which are outstanding at such
time;
(c) upon the expiration of any such Options or of the rights of
conversion or exchange under any such Convertible Securities which shall
not have been exercised (or upon purchase by the Company and cancellation
or retirement of any such Options which shall not have been exercised or of
any such Convertible Securities the rights of conversion or exchange under
which shall not have been exercised), the Warrant Price computed upon the
original issue, sale, grant or assumption thereof (or upon the occurrence
of the record date, or date prior to the commencement of ex-dividend
trading, as the case may be, with respect thereto), and any subsequent
adjustments based thereon, shall, upon such expiration (or such
cancellation or retirement, as the case
<PAGE>
may be), be recomputed as if:
(x) in the case of options for Common Stock or of Convertible
Securities, the only Additional Shares of Common Stock issued or sold
were the Additional Shares of Common Stock, if any, actually issued or
sold upon the exercise of such Options or the conversion or exchange
of such Convertible Securities and the consideration received therefor
was (i) an amount equal to (A) the consideration actually received by
the Company for the issue, sale, grant or assumption of all such
Options, whether or not exercised, plus (B) the consideration actually
received by the Company upon such exercise, minus (C) the
consideration paid by the Company for any purchase of such Options
which were not exercised, or (ii) an amount equal to (A) the
consideration actually received by the Company for the issue, sale,
grant or assumption of all such Convertible Securities which were
actually converted or exchanged, plus (B) the additional
consideration, if any, actually received by the Company upon such
conversion or exchange, minus (C) the consideration paid by the
Company for any purchase of such Convertible Securities the rights of
conversion or exchange under which were not exercised, and
(y) in the case of Options for Convertible Securities, only the
Convertible Securities, if any, actually issued or sold upon the
exercise of such Options were issued at the time of the issue, sale,
grant or assumption of such options, and the consideration received by
the Company for the Additional Shares of Common Stock deemed to have
then been issued was an amount equal to (i) the consideration actually
received by the Company for the issue, sale, grant or assumption of
all such Options, whether or not exercised, plus (ii) the
consideration deemed to have been received by the Company (pursuant to
section 2.5) upon the issue or sale of the Convertible Securities with
respect to which such Options were actually exercised, minus (iii) the
consideration paid by the Company for any purchase of such Options
which were not exercised;
(d) no readjustment pursuant to subdivision (b) or (c) above shall
have the effect of increasing the Warrant Price by an amount in excess of
the amount of the adjustment thereof originally made in respect of the
issue, sale, grant or assumption of such options or Convertible Securities;
and
(e) in the case of any such Options which expire by their terms not
more than 30 days after the date of issue, sale, grant or assumption
thereof, no adjustment of the Warrant Price shall be made until the
expiration or exercise of all such Options, whereupon such adjustment shall
be made in the manner provided in subdivision (c) above.
In case at any time after the Initial Date the Company shall be
required to increase the number of Additional Shares of Common Stock subject to
any Option or into which any Convertible Securities (other than the Warrants)
are convertible or exchangeable pursuant to the operation of anti-dilution
provisions applicable thereto, such Additional Shares shall be deemed to be
issued for purposes of section 2.1 as of the time of such increase.
2.4. Treatment of Stock Dividends, Stock Splits, etc. In case the
Company at any time or from time to time after the Initial Date shall declare or
pay any dividend or other distribution on any class of stock of the Company
payable in Common Stock, or shall effect a subdivision of the outstanding shares
of Common Stock into a greater number of shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in Common Stock),
then, and in each such case, Additional Shares of Common Stock shall be deemed
to have been issued (a) in the case of any such dividend, immediately after the
close of business on the record date for the determination of holders of any
class of securities entitled to receive such
<PAGE>
dividend, or (b) in the case of any such subdivision, at the close of business
on the day immediately prior to the day upon which such corporate action becomes
effective.
2.5. Computation of Consideration. For the purposes of this section
2:
(a) The consideration for the issue or sale of any Additional Shares
of Common Stock or for the issue, sale, grant or assumption of any Options
or Convertible Securities, irrespective of the accounting treatment of such
consideration, shall
(x) insofar as it consists of cash, be an amount equal to the
amount of cash received by the Company, without deducting any expenses
paid or incurred by the Company or any commissions or compensation
paid or concessions or discounts allowed to underwriters, dealers or
others performing similar services and any accrued interest or
dividends in connection with such issue or sale,
(y) insofar as it consists of consideration (including
securities) other than cash, be computed at the fair value thereof at
the time of such issue or sale, as determined in good faith by the
Board of Directors of the Company, without deducting any expenses paid
or incurred by the Company for any commissions or compensation paid or
concessions or discounts allowed to underwriters, dealers or others
performing similar services and any accrued interest or dividends in
connection with such issue or sale, and
(z) in case Additional Shares of Common Stock are issued or sold
or Convertible Securities are issued, sold, granted or assumed
together with other stock or securities or other assets of the Company
for a consideration which covers both, be the proportion of such
consideration so received, computed as provided in subdivisions (x)
and (y) above, allocable to such Additional Shares of Common Stock or
Convertible Securities, as the case may be, all as determined in good
faith by the Board of Directors of the Company.
(b) All Options issued, sold, granted or assumed together with other
stock or securities or other assets of the Company for a consideration
which covers both, all Additional Shares of Common Stock, Options or
Convertible Securities issued in payment of any dividend or other
distribution on any class of stock of the Company and all Additional Shares
of Common Stock issued to effect a subdivision of the outstanding shares of
Common Stock into a greater number of shares of Common Stock (by reclassi-
fication or otherwise than by payment of a dividend in Common Stock) shall
be deemed to have been issued without consideration (unless, in the case of
Options issued, sold, granted or assumed together with other stock or
securities or other assets of the Company for a consideration which covers
both, the portion of the consideration allocated to the Options is
specifically stated under the terms of such transaction).
(c) Additional Shares of Common Stock deemed to have been issued for
consideration pursuant to section 2.3, relating to Options and Convertible
Securities, shall be deemed to have been issued for a consideration per
share determined by dividing
(x) the total amount, if any, received and receivable by the
Company as consideration for the issue, sale, grant or assumption of
the Options or Convertible Securities in question, plus the minimum
aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration)
payable to the Company upon the exercise in full of such Options or
the conversion or exchange of such Convertible
<PAGE>
Securities or, in the case of Options for Convertible Securities, the
exercise of such Options for Convertible Securities and the conversion
or exchange of such Convertible Securities, in each case computing
such consideration as provided in the foregoing sub-division (a), by
(y) the maximum number of shares of Common Stock (as set forth
in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of
such Convertible Securities.
(d) Additional Shares of Common Stock issued or deemed to have been
issued pursuant to the operation of anti-dilution provisions applicable to
Convertible Securities (other than the Warrants), Options or other
securities of the Company (either as a result of the adjustments provided
for by the Warrants or otherwise) shall be deemed to have been issued
without consideration.
2.6. Adjustments for Combinations, etc. In case the outstanding shares
of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Warrant Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
2.7. Dilution in Case of Other Securities. In case any Other
Securities shall be issued or sold or shall become subject to issue or sale upon
the conversion or exchange of any stock (or Other Securities) of the Company (or
any issuer of Other Securities or any other Person referred to in section 3) or
to subscription, purchase or other acquisition pursuant to any Options issued or
granted by the Company (or any such other issuer or Person) for a consideration
such as to dilute, on a basis consistent with the standards established in the
other provisions of this section 2, the purchase rights granted by this Warrant,
then, and in each such case, the computations, adjustments and readjustments
provided for in this section 2 with respect to the Warrant Price shall be made
as nearly as possible in the manner so provided and applied to determine the
amount of Other Securities from time to time receivable upon the exercise of the
Warrants, so as to protect the holders of the Warrants against the effect of
such dilution.
2.8. Minimum Adjustment of Warrant Price. If the amount of any
adjustment of the Warrant Price required pursuant to this section 2 would be
less than one percent of the Warrant Price in effect at the time such adjustment
is otherwise so required to be made, such amount shall be carried forward and
adjustment with respect thereto made at the time of and together with any
subsequent adjustment which, together with such amount and any other amount or
amounts so carried forward, shall aggregate at least one percent of such Warrant
Price; provided that, upon the exercise of this Warrant, all adjustments carried
forward and not theretofore made up to and including the date of such exercise
shall be made to the nearest one one-hundredth of a cent.
3. Consolidation, Merger, Sale of Assets, Reorganization, etc. 3.1.
General Provisions. In case the Company, after the Initial Date, (a) shall
consolidate with or merge into any other Person and shall not be the continuing
or surviving corporation of such consolidation or merger, or (b) shall permit
any other Person to consolidate with or merge into the Company and the Company
shall be the continuing or surviving Person but, in connection with such
consolidation or merger, Common Stock or Other Securities shall be changed into
or exchanged for cash, stock or other securities of any other Person or any
other property, or (c) shall transfer all or substantially all of its properties
and assets to any other Person, or (d) shall effect a capital reorganization or
reclassification of Common Stock or Other Securities (other than a capital
reorganization or reclassification resulting in the issue of Additional Shares
of Common Stock for which adjustment in the
<PAGE>
Warrant Price is provided in section 2.2.1 or 2.2.2), then, and in the case of
each such transaction, the Company shall give written notice thereof to each
holder of any Warrant not less than 30 days prior to the consummation thereof
and proper provision shall be made so that, upon the basis and the terms and in
the manner provided in this section 3, the holder of this Warrant, upon the
exercise hereof at any time after the consummation of such transaction, shall be
entitled to receive, at the aggregate Warrant Price in effect at the time of
such consummation for all Common Stock (or other Securities) issuable upon such
exercise immediately prior to such consummation, in lieu of the Common Stock (or
Other Securities) issuable upon such exercise prior to such consummation, either
of the following, as such holder shall elect by written notice to the Company on
or before the date immediately preceding the date of the consumma-tion of such
transaction (and, in the absence of such notice, the provisions of subdivision
(y) below shall be deemed to have been elected by such holder):
(x) the highest amount of cash, securities or other property to which
such holder would actually have been entitled as a shareholder upon such
consummation if such holder had exercised this Warrant immediately prior
thereto, subject to adjustments (subsequent to such consummation) as nearly
equivalent as possible to the adjustments provided for in section 2 and
this section 3, provided that if a purchase, tender or exchange offer shall
have been made to and accepted by the holders of Common Stock under
circumstances in which, upon completion of such purchase, tender or
exchange offer, the maker thereof, together with members of any group
(within the meaning of Section 13(d)(3) of the Exchange Act) of which such
maker is a part, and together with any affiliate or associate of such maker
(within the meaning of Rule 12b-2 under the Exchange Act) and any members
of any such group of which any such affiliate or associate is a part, own
beneficially (within the meaning of Rule 13d-3 under the Exchange Act) more
than 50% of the outstanding shares of Common Stock, and if the holder of
this Warrant so designates in such notice given to the Company, the holder
of this Warrant shall be entitled to receive the highest amount of cash,
securities or other property to which such holder would actually have been
entitled as a shareholder if the holder of this Warrant had exercised this
Warrant prior to the expiration of such purchase, tender or exchange offer,
accepted such offer and all of the Common Stock held by such holder had
been purchased pursuant to such purchase, tender or exchange offer, subject
to adjustments (from and after the consummation of such purchase, tender or
exchange offer) as nearly equivalent as possible to the adjustments
provided for in section 2 and this section 3; or
(y) the number of shares of Voting Common Stock (or equivalent equity
interests) of the Acquiring Person or, if the Acquiring Person fails to
meet, but its Parent meets, the requirements set forth in the proviso
below, of its Parent, subject to adjustments (subsequent to such corporate
action) as nearly equivalent as possible to the adjustments provided for in
section 2 and this section 3, determined by dividing (x) the product
obtained by multiplying (A) the number of shares of Common Stock (or Other
Securities) to which the holder of this Warrant would have been entitled
had such holder exercised this Warrant immediately prior to the
consummation of such transaction, times (B) the greater of the Acquisition
Price and the Warrant Price in effect on the date immediately preceding the
date of such consummation, by (y) the Current Market Price per share of the
Voting Common Stock (or equivalent equity interests) of the Acquiring
Person or its Parent, as the case may be, on the date immediately preceding
the date of such consummation.
3.2. Assumption of Obligations. Notwithstanding anything contained in
this Warrant or the Purchase Agreement to the contrary, the Company will not
effect any of the transactions described in subdivisions (a) through (d) of
section 3.1 unless, prior to the consummation thereof, each Person (other than
the Company) which may be required to deliver any cash, stock or
<PAGE>
other securities or other property upon the exercise of this Warrant as provided
herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the holder of this Warrant, (a) the obligations of the Company
under this Warrant (and if the Company shall survive the consummation of such
transaction, such assumption shall be in addition to, and shall not release the
Company from, any continuing obligations of the Company under this Warrant) and
(b) the obligation to deliver to such holder such cash, stock or other
securities or other property as, in accordance with the foregoing provisions of
this section 3, such holder may be entitled to receive, and such Person shall
have similarly delivered to such holder an opinion of counsel for such Person,
which counsel shall be reasonably satisfactory to such holder, stating that this
Warrant shall thereafter continue in full force and effect and the terms hereof
(including, without limitation, all of the provisions of section 2 and this
section 3) shall be applicable to the cash, stock or other securities or other
property which such Person may be required to deliver upon any exercise of this
Warrant or the exercise of any rights pursuant hereto. Nothing in this section 3
or in section 7 shall be deemed to authorize the Company to enter into any
transaction not otherwise permitted by the Purchase Agreement.
4. Other Dilutive Events. In case any event shall occur as to which
the provisions of section 2 or section 3 are not strictly applicable but the
failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles of such sections, then, in each such case, the Company shall appoint
a firm of independent public accountants of recognized national standing (which
may be the regular auditors of the Company), which shall give their opinion upon
the adjustment, if any, on a basis consistent with the essential intent and
principles established in sections 2 and 3, necessary to preserve, without
dilution, the purchase rights represented by this Warrant. Upon receipt of such
opinion the Company will promptly mail a copy thereof to the holder of this
Warrant and shall make the adjustments described therein.
5. No Dilution or Impairment. The Company will not, by amendment of
its certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities
(other than the shares of Common Stock and Preferred Stock issued on the date of
the Closing under the Purchase Agreement and any securities issued upon
conversion or exchange thereof) or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the holder of this Warrant against dilution or other
impairment. Without limiting the generality of the foregoing, the Company (a)
will not permit the par value of any shares of stock receivable upon the
exercise of this Warrant to exceed the amount payable therefor upon such
exercise, (b) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of stock upon the exercise of all of the Warrants from time
to time outstanding, (c) will not take any action which results in any
adjustment of the Warrant Price if the total number of shares of Common Stock
(or Other Securities) issuable after the action upon the exercise of all of the
Warrants would exceed the total number of shares of Common Stock (or other
Securities) then authorized by the Company's certificate of incorporation and
available for the purpose of issue upon such exercise and, (d) will not issue
any capital stock of any class which has the right to more than one vote per
share or which is preferred as to dividends or as to the dis-tribution of assets
upon voluntary or involuntary dissolution, liquidation or winding-up, unless
such stock is sold for a cash consideration at least equal to the amount of its
preference upon voluntary or involuntary dissolution, liquidation or winding-up
and the rights of the holders thereof shall be limited to a fixed percentage
(not exceeding 15%) of such cash consideration in respect of participation in
dividends.
6. Accountants' Report as to Adjustments. In each
<PAGE>
case of any adjustment or readjustment in the shares of Common Stock (or Other
Securities) issuable upon the exercise of the Warrants, the Company at its
expense will promptly compute such adjustment or readjustment in accordance with
the terms of the Warrants and cause independent public accountants of recognized
national standing selected by the Company (which may be the regular auditors of
the Company) to verify such computation and prepare a report setting forth such
adjustment or readjustment and showing in reasonable detail the method of
calculation thereof and the facts upon which such adjustment or readjustment is
based, including without limitation a statement of (a) the consideration
received or to be received by the Company for any Additional Shares of Common
Stock issued or sold or deemed to have been issued, (b) the number of shares of
Common Stock outstanding or deemed to be outstanding, and (c) the Warrant Price
in effect immediately prior to such issue or sale and as adjusted and readjusted
(if required by section 2) on account thereof. The Company will forthwith mail a
copy of each such report to each holder of a Warrant and will, upon the written
request at any time of any holder of a Warrant, furnish to such holder a like
report setting forth the Warrant Price at the time in effect and showing in
reasonable detail how it was calculated. The Company will also keep copies of
all such reports at its principal office and will cause the same to be available
for inspection at such office during normal business hours by any holder of a
Warrant or any prospective purchaser of a Warrant designated by the holder
thereof.
7. Notices of Corporate Action. In the event of
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any
consolidation or merger involving the Company and any other Person or any
transfer of all or substantially all the assets of the Company to any other
Person, or
(c) any voluntary or involuntary dissolution, liquidation or winding-
up of the Company,
the Company will mail to each holder of a Warrant a notice specifying (x) the
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (y) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other Securities) for the securities or other property deliverable
upon such reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation or winding-up. Such notice shall be
mailed at least 20 days prior to the date therein specified, in the case of any
date referred to in the foregoing subdivision (x), and at least 90 days prior to
the date therein specified, in the case of the date referred to in the foregoing
subdivision (y).
8. Restrictions on Transfer. 8.1. Restrictive Legends. Except as
otherwise permitted by this section 8, each Warrant originally issued pursuant
to the Purchase Agreement and each Warrant issued upon direct or indirect
transfer or in substitution for any Warrant pursuant to section 12 shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"This Warrant and any shares acquired upon the exercise of this Warrant
have not been registered under the Securities Act of 1933 and may not be
transferred in the absence of
<PAGE>
such registration or an exemption therefrom under such Act. This Warrant
and such shares are also subject to certain restrictions on transferability
imposed by a certain Stockholders' Agreement, a copy of which is on file at
the offices of the Company."
Except as otherwise permitted by this section 8, each certificate for Common
Stock (or Other Securities) issued upon the exercise of any Warrant and each
certificate issued upon the direct or indirect transfer of any such Common Stock
(or Other Securities) shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933 and may not be transferred in the absence of
such registration or an exemption therefrom under such Act. Such shares are
also subject to certain restrictions on transferability imposed by Common
Stock Purchase Warrants expiring December 21, 2002 and by a certain
Stockholders' Agreement, copies of which are on file at the offices of the
Company."
8.2. Notice of Proposed Transfer; Opinions of Counsel. Prior to any
transfer of any Restricted Securities which are not registered under an
effective registration statement under the Securities Act (other than a transfer
pursuant to Rule 144 or any comparable rule under such Act), the holder thereof
will give written notice to the Company of such holder's intention to effect
such transfer and to comply in all other respects with this section 8.2. Each
such notice (a) shall describe the manner and circumstances of the proposed
transfer in sufficient detail to enable counsel to render the opinions referred
to below, and (b) shall designate counsel for the holder giving such notice (who
may be internal counsel for such holder). The holder giving such notice will
submit a copy thereof to the counsel designated in such notice and the Company
will promptly submit a copy thereof to its counsel. The following provisions
shall then apply:
(x) If in the opinion of each such counsel the proposed transfer may
be effected without registration, such holder shall thereupon be entitled
to transfer such Restricted Securities in accordance with the terms of the
notice delivered by such holder to the Company. Each Warrant or
certificate, if any, issued upon or in connection with such transfer shall
bear the appropriate restrictive legend set forth in section 8.1 unless, in
the opinion of each such counsel, such legend is no longer required to
insure compliance with the Securities Act. If for any reason counsel for
the Company shall fail to deliver to the Company an opinion upon such
matters, or the Company shall fail to notify such holder thereof, within 15
days after counsel for such holder shall have delivered its opinion upon
such matters to such holder (with a copy to the Company), then for all
purposes of such Restricted Securities the opinion for the Company shall be
deemed to be the same as the opinion of counsel for such holder.
(y) If the opinion of either or both such counsel is not to the
effect that the proposed transfer may legally be effected without
registration of such Restricted Securities under the Securities Act (such
opinion or opinions to state the basis of the legal conclusions reached
therein), the Company will promptly so notify the holder thereof and
thereafter such holder shall not be entitled to transfer such Restricted
Securities (other than in a transfer pursuant to Rule 144 or any comparable
rule under the Securities Act) until the conditions specified in
subdivision (x) above shall be satisfied or until registration of such
Restricted Securities under the Securities Act has become effective.
Notwithstanding the foregoing provisions of this section 8.2, the holder of any
Restricted Securities shall be permitted to transfer any such Restricted
Securities pursuant to Rule 144A under the Securities Act, provided that each
transferee agrees in writing to be bound by all the restrictions on transfer of
such Restricted Securities contained in this section 8.2. The Company
<PAGE>
and the holder of Restricted Securities will pay the fees and disbursements of
their respective counsel in connection with all opinions rendered by them
pursuant to this section 8.2 and pursuant to section 8.3.
8.3. Termination of Restrictions. The restrictions imposed by this
section 8 upon the transferability of Restricted Securities shall cease and
terminate as to any particular Restricted Securities (a) when such securities
shall have been effectively registered under the Securities Act and disposed of
in accordance with the registration statement covering such Restricted
Securities, (b) when, in the opinions of both counsel for the holder thereof and
counsel for the Company, such restric-tions are no longer required in order to
insure compliance with the Securities Act, or (c) when such securities have been
beneficially owned, by a person who has not been an affiliate of the Company for
at least three months, for a period of at least three years, all as determined
under Rule 144 under the Securities Act. Whenever such restrictions shall
terminate as to any Restricted Securities, as soon as practicable thereafter and
in any event within five days, the holder thereof shall be entitled to receive
from the Company, without expense (other than transfer taxes, if any), new
securities of like tenor not bearing the applicable legend set forth in section
8.1 hereof.
9. Registration under Securities Act. The holders of Registrable
Securities shall have the rights with respect to the registration of Registrable
Securities set forth in Exhibit B (Registration Rights) of the Stockholders'
Agreement.
10. Financial Information. 10.1. Financial Statements. Until the
occurrence of an IPO, the Company will deliver to each holder of Registrable
Securities:
(a) within 45 days after the end of each of the first three quarterly
fiscal periods in each fiscal year of the Company, consolidated balance
sheets of the Company and its Subsidiaries as at the end of such period and
the related consolidated statements of income, stockholders' equity and
cash flows of the Company and its Subsidiaries for such period and (in the
case of the second and third quarterly periods) for the period from the
beginning of the current fiscal year to the end of such quarterly period,
setting forth in each case in comparative form the consolidated figures for
the corresponding periods of the previous fiscal year, all in reasonable
detail and certified by a principal financial officer of the Company as
presenting fairly, in accordance with generally accepted accounting
principles (except for the absence of notes thereto) applied (except as
specifically set forth therein) on a basis consistent with such prior
fiscal periods, the information contained therein, subject to changes
resulting from normal year-end audit adjustments;
(b) within 90 days after the end of each fiscal year of the Company,
consolidated balance sheets of the Company and its Subsidiaries as at the
end of such year and the related consolidated statements of income,
stockholders' equity and cash flows of the Company and its Subsidiaries for
such fiscal year, setting forth in each case in compara-tive form the
consolidated figures for the previous fiscal year, all in reasonable detail
and accompanied by a report thereon of Arthur Andersen LLP or other
independent public accountants of recognized national standing selected by
the Company and reasonably satisfactory to the Requisite Holders, which
report shall state that such consolidated financial statements present
fairly the financial position of the Company and its Subsidiaries as at the
dates indicated and the results of their operations and their cash flows
for the periods indicated in conformity with generally accepted accounting
principles applied on a basis consistent with prior years (except as
otherwise specified in such report) and that the audit by such accountants
in connection with such consolidated financial statements has been made in
accordance with generally accepted auditing standards;
(c) in addition to the financial statements required by subdivisions
(a) and (b) of this section 10.1, within 30
<PAGE>
days after the end of each month, consolidated balance sheets of the
Company and its Subsidiaries as at the end of such month and the related
consolidated statements of income, stockholders' equity and cash flows of
the Company and its Subsidiaries for such month and (in the case of the
second through twelfth month of the fiscal year) for the period from the
beginning of the current fiscal year to the end of such month, setting
forth in each case in comparative form the consolidated figures for the
corresponding periods of the previous fiscal year, all in reasonable detail
and certified by a principal financial officer of the Company as presenting
fairly, in accordance with generally accepted accounting principles (except
for the absence of notes thereto) applied (except as specifically set forth
therein) on a basis consistent with such prior fiscal periods, the
information contained therein, subject to changes resulting from normal
year-end audit adjustments; and
(d) promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available
generally by the Company to its security holders, of all regular and
periodic reports and all registration statements and prospectuses filed by
the Company or any Subsidiary with any securities exchange or with the
Commission, and of all press releases and other statements made available
generally by the Company or any Subsidiary to the public concerning
material developments in the business of the Company or its Subsidiaries.
10.2. Availability of Information. The Company will cooperate with
each holder of any Restricted Securities in supplying such information as may be
necessary for such holder to complete and file any information reporting forms
presently or hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale of any
Restricted Securities.
11. Reservation of Stock, etc. The Company will at all times reserve
and keep available, solely for issuance and delivery upon exercise of the
Warrants, the number of shares of Common Stock (or Other Securities) from time
to time issuable upon exercise of all Warrants at the time outstanding. All
shares of Common Stock (or Other Securities) shall be duly authorized and, when
issued upon such exercise, shall be validly issued and, in the case of shares,
fully paid and nonassessable, with no liability on the part of the holders
thereof.
12. Ownership, Transfer and Substitution of Warrants. 12.1. Ownership
of Warrants. The Company may treat the person in whose name any Warrant is
registered on the register kept at the principal office of the Company as the
owner and holder thereof for all purposes, notwithstanding any notice to the
contrary, except that, if and when any Warrant is properly assigned in blank,
the Company may (but shall not be obligated to) treat the bearer thereof as the
owner of such Warrant for all purposes, notwithstanding any notice to the
contrary. Subject to section 8 a Warrant, if properly assigned, may be exercised
by a new holder without first having a new Warrant issued.
12.2. Transfer and Exchange of Warrants. Upon the surrender of any
Warrant, properly endorsed, for registration of transfer or for exchange at the
principal office of the Company, the Company at its expense will (subject to
compliance with section 8, if applicable) execute and deliver to or upon the
order of the holder thereof a new Warrant or Warrants of like tenor, in the name
of such holder or as such holder (upon payment by such holder of any applicable
transfer taxes) may direct, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant or Warrants so surrendered.
12.3. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant
held by a Person other than the Purchaser or any institutional investor, upon
delivery of indemnity reasonably satisfactory to the Company in form and amount
or, in the case of any such mutilation, upon
<PAGE>
surrender of such Warrant for cancellation at the principal office of the
Company, the Company at its expense will execute and deliver, in lieu thereof, a
new Warrant of like tenor.
13. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
Acquiring Person: the continuing or surviving corporation of a
consolidation or merger with the Company (if other than the Company), the
transferee of substantially all of the properties and assets of the Company, the
corporation consolidating with or merging into the Company in a consolidation or
merger in connection with which the Common Stock is changed into or exchanged
for stock or other securities of any other Person or cash or any other property,
or, in the case of a capital reorganization or reclassification, the Company.
Acquisition Price: as applied to the Common Stock, with respect to any
transaction to which section 3 applies, (a) the price per share equal to the
greater of the following, determined in each case as of the date immediately
preceding the date of consummation of such transaction: (x) the Market Price of
the Common Stock and (y) the highest amount of cash plus the Fair Value of the
highest amount of securities or other property which the holder of this Warrant
would have been entitled as a shareholder to receive upon such consummation if
such holder had exercised this Warrant immediately prior thereto, or (b) if a
purchase, tender or exchange offer is made by the Acquiring Person (or by any of
its affiliates) to the holders of the Common Stock and such offer is accepted by
the holders of more than 50% of the outstanding shares of Common Stock, the
greater of (i) the price determined in accordance with the foregoing subdivision
(a) and (ii) the price per share equal to the greater of the following,
determined in each case as of the date immediately preceding the acceptance of
such offer by the holders of more than 50% of the outstanding shares of Common
Stock: (A) the Market Price of the Common Stock and (B) the highest amount of
cash plus the Fair Value of the highest amount of securities or other property
which the holder of this Warrant would be entitled as a shareholder to receive
pursuant to such offer if such holder had exercised this Warrant immediately
prior to the expiration of such offer and accepted the same.
Additional Shares of Common Stock: all shares (including treasury
shares) of Common Stock issued or sold (or, pursuant to section 2.3 or 2.4,
deemed to be issued) by the Company after the Initial Date hereof, whether or
not subsequently reacquired or retired by the Company, other than (a) shares of
Common Stock issued upon the exercise of Warrants, (b) shares of Common Stock
issued upon the exercise of shares of the Series B Preferred Stock issued on the
Initial Date, (c) the shares of Common Stock issued upon the conversion of the
Series B Convertible Preferred Stock, par value $.001 per share, of the Company
and (d) the shares of Common Stock and Preferred Stock issued on the date of the
Closing under the Purchase Agreement and any securities issued upon conversion
or exchange thereof.
Business Day: any day other than a Saturday or a Sunday or a day on
which commercial banking institutions in the City of New York are authorized by
law to be closed, provided that, in determining the period within which
certificates or Warrants are to be issued and delivered pursuant to section 1.3
at a time when shares of Common Stock (or Other Securities) are listed or
admitted to trading on any national securities exchange or in the over-the-
counter market and in determining the Market Price of any securities listed or
admitted to trading on any national securities exchange or in the over-the-
counter market, "Business Day" shall mean any day when the principal exchange in
which securities are then listed or admitted to trading is open for trading or,
if such securities are traded in the over-the-counter market in the United
States, such system is open for trading, and provided, further, that any
reference to "days" (unless Business Days are specified) shall mean calendar
days.
Class A Common Stock: the Company's Class A Common Stock, par value
$.001 per share, as constituted on the date hereof and any stock into which such
Class A Common Stock shall
<PAGE>
have been changed or any stock resulting from any reclassi-fication of such
Class A Common Stock.
Class B Common Stock: the Company's Class B Common Stock, par value
$.001 per share, as constituted on the date hereof and any stock into which such
Class B Common Stock shall have been changed or any stock resulting from any
reclassi-fication of such Class B Common Stock.
Class C Common Stock: the Company's Class C Common Stock, par value
$.001 per share, as constituted on the date hereof and any stock into which such
Class C Common Stock shall have been changed or any stock resulting from any
reclassi-fication of such Class C Common Stock.
Commission: the Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act or the Exchange Act,
whichever is the relevant statute for the particular purpose.
Common Stock: the Class A Common Stock, the Class B Common Stock, the
Class C Common Stock and all other stock of any class or classes (however
designated) of the Company (other than the Warrants) the holders of which have
the right, without limitation as to amount, either to all or to a share of the
balance of current dividends and liquidating dividends after the payment of
dividends and distributions on any shares entitled to preference.
Company: GMH Holdings, Inc., a Delaware corporation.
Convertible Securities: any evidences of indebtedness, shares of stock
(other than Common Stock) or other securities directly or indirectly convertible
into or exchangeable for Additional Shares of Common Stock.
Current Market Price: on any date specified herein, (a) with respect
to Common Stock or to Voting Common Stock (or equivalent equity interests) of an
Acquiring Person or its Parent, (x) the average daily Market Price during the
period of the most recent 20 consecutive Business Days ending on such date, or
(y) if shares of Common Stock or such Voting Common Stock (or equivalent equity
interests), as the case may be, are not then listed or admitted to trading on
any national securities exchange and if the closing bid and asked prices thereof
are not then quoted or published in the over-the-counter market, the Market
Price on such date; and (b) with respect to any other securities, the Market
Price on such date.
Eligible Holder: a holder of this Warrant that is not The Equitable
Life Assurance Society of the United States or an insurance company affiliate
thereof.
Exchange Act: the Securities Exchange Act of 1934, or any similar
Federal statute, and the rules and regulations of the commission thereunder, all
as the same shall be in effect at the time of determination.
Fair Value: with respect to any securities or other property, the fair
value thereof as of a date which is within 15 days after the date as of which
the determination is to be made (a) determined by an agreement between the
Company and the Requisite Holders or (b) if the Company and the Requisite
Holders fail to agree, determined jointly by a nationally recognized independent
investment banking or a nationally recognized securities valuation firm retained
by the Company and by a nationally recognized independent investment banking or
a nationally recognized securities valuation firm retained by the Requisite
Holders, either of which firms may be an independent investment banking or
securities valuation firm regularly retained by the Company or any such holder
or (c) if the Company or such holders shall fail so to retain an independent
investment banking or securities valuation firm within ten Business Days after
the retention of such firm by such holders or the Company, as the case may be,
determined solely by the firm so retained or (d) if the firms so retained by the
Company and by such holders shall be unable to reach a joint determination
within 15 Business Days after the retention of the last firm so retained,
determined
<PAGE>
by another nationally recognized independent investment banking or nationally
recognized securities valuation firm which is not a regular investment banking
or securities valuation firm of the Company or any such holder chosen by the
first two such firms.
Initial Date: the meaning specified in section 2.2.
Market Price: on any date specified herein, (a) with respect to Common
Stock, or with respect to Voting Common Stock (or equivalent equity interests)
of an Acquiring Person or its Parent, the amount per share equal to (x) the last
sale price of shares of such security, regular way, on such date or, if no such
sale takes place on such date, the average of the closing bid and asked prices
thereof on such date, in each case as officially reported on the principal
national securities exchange on which the same are then listed or admitted to
trading, or (y) if no shares of such security are then listed or admitted to
trading on any national securities exchange but such security is designated as a
national market system security by the NASD, the last trading price of such
security on such date, or if such security is not so designated, the average of
the reported closing bid and asked prices thereof on such date as shown by the
NASDAQ system or, if no shares thereof are then quoted in such system, as
published by the National Quotation Bureau, Incorporated or any successor
organization, and in either case as reported by any member firm of the New York
Stock Exchange selected by the Company, or (z) if no shares of such security are
then listed or admitted to trading on any national exchange or designated as a
national market system security and if no closing bid and asked prices thereof
are then so quoted or published in the over-the-counter market, the higher of
(x) the book value thereof as determined by agreement between the Company and
the Requisite Holders, or if the Company and the Requisite Holders fail to
agree, by any firm of independent public accountants of recognized standing
selected by the Board of Directors of the Company, as of the last day of any
month ending within 60 days preceding the date as of which the determination is
to be made and (y) the Fair Value thereof; and (b) with respect to any other
securities, the Fair Value thereof.
NASD: the National Association of Securities Dealers.
NASDAQ: the Automated Quotation System of the NASD.
Notes: the meaning specified in the opening paragraphs of this
Warrant.
Options: rights, options or warrants to subscribe for, purchase or
otherwise acquire either Additional Shares of Common Stock or Convertible
Securities.
Other Securities: any stock (other than Common Stock) and other
securities of the Company or any other Person (corporate or otherwise) which the
holders of the Warrants at any time shall be entitled to receive, or shall have
received, upon the exercise of the Warrants, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities pursuant to
section 3 or otherwise.
Parent: as to any Acquiring Person, any corporation which (a) controls
the Acquiring Person directly or indirectly through one or more intermediaries,
(b) is required to include the Acquiring Person in its consolidated financial
statements under generally accepted accounting principles and (c) is not itself
included in the consolidated financial statements of any other Person (other
than its consolidated subsidiaries).
Person: an individual, a partnership, an association, a joint venture,
a corporation, a limited liability company, a business, a trust, an
unincorporated organization or a government or any department, agency or
subdivision thereof.
Public Offering: any offering of Common Stock or Other Securities, or
any securities issued or issuable with respect to any Common Stock or Other
Securities by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization
<PAGE>
or otherwise, in each case to the public pursuant to an effective
registration statement under the Securities Act.
Purchase Agreement: the meaning specified in the opening
paragraphs of this Warrant.
Purchaser: the meaning specified in the opening paragraphs
of this Warrant.
Registrable Securities: (a) the Warrants, (b) any shares of
Common Stock or Other Securities issued or issuable upon exercise
of the Warrants and (c) any securities issued or issuable with
respect to any Common Stock or Other Securities referred to in
subdivision (b) by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise. As to
any particular Registrable Securities, once issued such
securities shall cease to be Registrable Securities when (x) a
registration statement with respect to the sale of such
securities shall have become effective under the Securities Act
and such securities shall have been disposed of in accordance
with such registration statement, (y) they shall have been sold
as permitted under Rule 144 (or any successor provision) under
the Securities Act, or (z) they shall have ceased to be
outstanding.
Requisite Holders: the holders of more than 50% of (a) the
Warrants at the time outstanding determined on the basis of the
number of shares of Common Stock or Other Securities deliverable
upon exercise thereof and (b) as to any Warrants that shall have
been exercised, the number of shares of Common Stock or Other
Securities outstanding after giving effect to such exercise;
voting as a single class.
Restricted Securities: (a) any Warrants bearing the
applicable legend set forth in section 8.1, (b) any shares of
Common Stock (or Other Securities) which have been issued upon
the exercise of Warrants and which are required to be evidenced
by a certificate or certificates bearing the applicable legend
set forth in such section, and (c) unless the context otherwise
requires, any shares of Common Stock (or Other Securities) which
are at the time issuable upon the exercise of Warrants and which,
when so issued, will be required to be evidenced by a certificate
or certificates bearing the applicable legend set forth in such
section.
Securities Act: the Securities Act of 1933, or any similar
Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time of
determination.
Series B Preferred Stock: the Series B Convertible Preferred
Stock, par value $.001 per share, of the Company.
Stockholders' Agreement: the Stockholders' Agreement, dated
as of December 21, 1995, among the Company and the Stockholders
signatory thereof.
Subsidiary: any corporation, association or other business
entity a majority (by number of votes) of the Voting Common Stock
of which is at the time owned by the Company or by one or more
Subsidiaries or by the Company and one or more Subsidiaries.
Transfer: unless the context otherwise requires, any sale,
assignment, transfer, pledge, hypothecation, mortgage, charge,
lien, encumbrance gift, bequest, transmission or other
disposition of any security, provided that the encumbrances
contemplated by, and transfers of securities pursuant to the
terms and provisions of, the Stockholders' Agreement shall not be
deemed to be "transfers".
Voting Common Stock: with respect to any corporation,
association or other business entity, stock of any class or
classes (or equivalent interest), if the holders of the stock of
such class or classes (or equivalent interests) are ordinarily,
in the absence of contingencies, entitled to vote for the
election of a majority of the directors (or persons performing
<PAGE>
similar functions) of such corporation, association or business
entity, even if the right so to vote has been suspended by the
happening of such a contingency.
Warrant Price: the meaning specified in section 2.1.
Warrants: the meaning specified in the opening paragraphs of
this Warrant.
14. Remedies. The Company stipulates that the remedies at
law of the holder of this Warrant in the event of any default or
threatened default by the Company in the performance of or
compliance with any of the terms of this Warrant are not and will
not be adequate and that, to the fullest extent permitted by law,
such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or
otherwise.
15. No Rights or Liabilities as Stockholder. Nothing
contained in this Warrant shall be construed as conferring upon
the holder hereof any rights as a stockholder of the Company or
as imposing any liabilities on such holder to purchase any
securities or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors or
stockholders of the Company or otherwise.
16. Notices. All notices and other communications under
this Warrant shall be in writing and shall be mailed by
registered or certified mail, return receipt requested, addressed
(a) if to any holder of any Warrant or any holder of any Common
Stock (or Other Securities), at the registered address of such
holder as set forth in the register kept at the principal office
of the Company, or (b) if to the Company, to the attention of its
Chief Financial Officer at its principal office, provided that
the exercise of any Warrant shall be effected in the manner
provided in section 1.
17. Expiration; Notice. The right to exercise this Warrant
shall expire at 3:00 P.M., New York City time, December 21, 2002.
18. Miscellaneous. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument
in writing signed by the party against which enforcement of such
change, waiver, discharge or termination is sought. The
agreements of the Company contained in this Warrant other than
those applicable solely to the Warrants and the holders thereof
shall inure to the benefit of and be enforceable by any holder or
holders at the time of any Common Stock (or Other Securities)
issued upon the exercise of Warrants, whether so expressed or
not. This Warrant shall be construed and enforced in accordance
with and governed by the laws of the State of New York. The
section headings in this Warrant are for purposes of convenience
only and shall not constitute a part hereof.
GMH HOLDINGS, INC.
By:___________________________
Title:
<PAGE>
FORM OF SUBSCRIPTION
(To be executed only upon exercise of Warrant)
To _________________
The undersigned registered holder of the within Warrant
hereby irrevocably exercises such Warrant for, and purchases
thereunder, __________ shares of Class A Common Stock and
__________ shares of Class B Common Stock of GMH HOLDINGS, INC.,
a Delaware corporation, and herewith makes payment of $_________
therefor [by application pursuant to section 1.5 of such Warrant
of $________ aggregate principal amount of Notes (as defined in
such Warrant) plus $ _______ accrued interest thereon], and
requests that the certificates for such shares be issued in the
name of, and delivered to ______________, whose address is
______________.
Dated: ________________
_____________________
(Signature must conform in all respects
to name of holder as specified on the
face of this Warrant)
[insert address]
<PAGE>
FORM OF ASSIGNMENT
(To be executed only upon transfer of Warrant)
For value received, the undersigned registered holder of the
within Warrant hereby sells, assigns and transfers unto
_____________________ the right represented by such Warrant to
purchase __________ shares of Common Stock of GMH HOLDINGS, INC.,
a Delaware corporation, to which such Warrant relates, and
appoints ______________ Attorney to make such transfer on the
books of __________ maintained for such purpose, with full power
of substitution in the premises.
Dated: ________________
______________________
(Signature must conform in all respects
to name of holder as specified on the
face of this Warrant)
[insert address]
Signed in the presence of:
__________________________
<PAGE>
EXHIBIT C-1
Form of Opinion of Company Counsel
<PAGE>
[Letterhead of Nixon, Hargrave, Devans & Doyle LLP]
December 21, 1995
The Equitable Life Assurance Society
of the United States
787 Seventh Avenue
New York, New York 10019
General Manufactured Housing, Inc.
Senior Subordinated Notes due 2002
GMH Holdings, Inc,
Warrants to Purchase Common Stock
Ladies and Gentlemen:
We have acted as counsel to GMH Acquisition Corp., a
Delaware corporation ("Acquisition Co.") and its successor by
merger, General Manufactured Housing, Inc., a Georgia corporation
(together with Acquisition Co., the "Company") and GMH Holdings,
Inc., a Delaware corporation ("Holdings"), and have acted in such
capacity in connection with:
(a) the issue and sale to you today by the Company of
$17,243,295 aggregate principal amount of its Senior Subordinated
Notes due 2002 (the "Notes") pursuant to the Note and Warrant
Purchase Agreement, dated as of the date hereof (the "Note
Agreement") among Acquisition Co., Holdings and you;
(b) the issue and sale to you today by Holdings of
warrants (the "Warrants") to purchase shares of the common stock,
par value $.001 per share (the "Common Stock"), of Holdings;
(c) the acquisition by Acquisition Co., pursuant to
the Stock Purchase Agreement, dated as of October 10, 1995, as
amended (the "Stock Purchase Agreement"), between Acquisition Co.
and the sellers named therein, of all of the issued and
outstanding shares of the capital stock of the Company; and the
merger of Acquisition Co. into the Company pursuant to the Plan
of Merger, dated December 21, l995 (the "Merger Agreement"),
between Acquisition Co. and the Company (the transactions
contemplated by the Stock Purchase Agreement and the merger of
Acquisition Co. into the Company, being sometimes collectively
referred to herein as the "Acquisition);
(d) the issuance and sale (i) by the Company and
Holdings to RFE Investment Partners V, L.P., the State of
Michigan and Sterling Commercial Capital, Inc., pursuant to the
Securities Purchase Agreement, dated as of December 21, 1995 (the
"RFE Securities Purchase Agreement"), of 8,000,000 shares of the
Series A Preferred Stock, 750,000 shares of the Series B
Preferred Stock, 1,218,750 shares of the Class A Common Stock and
$5,000,000 aggregate principal amount of the Junior Subordinated
Notes of the Company and (ii) by Holdings to Bulldog Holdings
LLC, pursuant to the Subscription Agreement, dated as of December
21, 1995 (the "Bulldog Subscription Agreement"), of 1,400,000
shares of the Series B Preferred Stock (the shares of Common
Stock and Preferred Stock and the Junior Subordinated Notes
issued pursuant to the RFE Securities Purchase Agreement and the
Bulldog Subscription Agreement being referred to herein
collectively as the "Junior Securities");
(e) the entering into by Holdings and its stockholders
of the Stockholders' Agreement, dated as of the date hereof
(including the Registration Rights provisions attached as Exhibit
B thereto, the "Stockholders' Agreement"), and by Holdings and
certain stockholders of the Investors' Rights Agreement, dated as
of the date hereof (the "Investors' Rights Agreement"), setting
forth certain agreements as to the transfer and registration of
the shares of Preferred Stock and Common Stock held by such
stockholders; and
(f) the restatement of the Certificate of
Incorporation of Holdings set forth in the Restated Certificate
of Incorporation, dated December 20, 1995 (the "Restated
Certificate").
The Company, Acquisition Co. and Holdings are sometimes
hereinafter referred to as the "GMH Companies." The Note
Agreement, the Stockholders' Agreement and the Investors' Rights
Agreement are sometimes hereinafter referred to collectively as
<PAGE>
the "Holdings Agreements"). Other capitalized terms used herein
without definition have the meanings specified therefor in the
Note Agreement.
In rendering these opinions, we have examined the following
(each of which is dated as of the Closing Date unless another
date is indicated):
(a) the Notes;
(b) the Warrants;
(c) the Holdings Agreements; and
(d) the Certificate of Incorporation and By-Laws of each of
Acquisition Co. and Holdings and all amendments thereto and
restatements thereof (including the Restated Certificate), each
dated as set forth therein.
In addition, we have examined such other records and
documents as we have deemed relevant or material in order to
enable us to render the opinions herein, including, without
limitation, originals or copies, certified or otherwise
identified to our satisfaction, of all such records of the GMH
Companies, certificates of public officials, certificates of
officers or other representatives of the GMH Companies, and such
other documents, certificates and corporate or other records as
we have deemed necessary or appropriate as a basis for the
opinions set forth herein, including certified copies of certain
resolutions duly adopted by the Stockholders and Board of
Directors of each of the GMH Companies.
We have obtained and relied on evidence or advice
satisfactory to us from the Secretary of State of the States of
Delaware and New York, as the case may be, with respect to: (a)
the corporate good standing of Acquisition Co. in Delaware; (b)
the corporate good standing of Holdings in Delaware; (c) the
authority to do business and good standing of Holdings in New
York; and (d) the effectiveness of the Merger in Delaware.
In all such examinations, we have assumed the genuineness of
all signatures by each party (other than signatures of the GMH
Companies), the authenticity of all documents submitted to us as
originals and the conformity to original documents of all
documents submitted to us as conformed or photostatic copies. For
the purposes of the opinions hereinafter expressed, we have
further assumed (a) the due formation, organization or
qualification to do business, valid existence and good standing
of each entity which is a party to any of the Holdings Agreements
(other than the GMH Companies) under the laws of each
jurisdiction in which such entity does business; (b) the legal
capacity of all natural persons executing the Holdings
Agreements; (c) due execution and delivery, pursuant to due
authorization, of each Holdings Agreement referred to in this
opinion by each party thereto (other than the GMH Companies) and
(d) that each Holdings Agreement constitutes the valid and
binding obligation of each party thereto (other than the GMH
Companies), enforceable against such party in accordance with its
terms.
Based upon and subject to the foregoing, and to the
qualifications and limitations set forth below, we are of the
following opinion:
1. Incorporation, Standing, etc. (a) Acquisition Co.
Acquisition Co. is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to
own and operate its properties, to carry on its business as now
conducted and as proposed to be conducted, to enter into the Note
Agreement and to carry out the terms of the Note Agreement.
(b) Holdings. Holdings is a corporation duly
incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate
power and authority to own and operate its properties, to carry
on its business as now conducted and as proposed to be conducted,
to enter into each of the Holdings Agreements, to issue and sell
<PAGE>
the Warrants and to carry out the terms of the Holdings
Agreements and the Warrants.
2. Qualification. Holdings is duly qualified and in good
standing as a foreign corporation authorized to do business in
the State of New York.
3. Compliance with Other Instruments, etc.
(a) Neither Acquisition Co. nor Holdings, after giving
effect to the Acquisition, is in violation of any term of its
certificate of incorporation or by-laws or of any term of any
agreement or instrument to which it is a party or by which it is
bound or any term of any applicable law, ordinance, rule or
regulation of any governmental authority or, to our knowledge,
any term of any applicable order, judgment or decree of any
court, arbitrator or governmental authority binding on it, the
consequences of which violation would have a material adverse
effect on the business, operations, affairs, condition (financial
or otherwise), properties or assets of either of them. Neither
the execution and delivery nor the performance of the Note
Agreement by Acquisition or the Note Agreement, the Stockholders'
Agreement, the Investors' Rights Agreement and the Warrants by
Holdings will result in any violation of or constitute a default
under any agreement to which such corporation is a party or
result in the creation of (or impose any obligation on either
Acquisition Co. or Holdings to create) any Lien upon any of the
properties or assets of either Acquisition Co. or Holdings
pursuant to any such agreement.
(b) The Company is not in default under any terms of
any material agreement or instrument to which it is a party or by
which it is bound. Neither the execution and delivery nor the
performance of the Notes by the Company will result in any
violation of or constitute a default under any term of any
agreement or instrument to which it is a party or by which it is
bound or any term of any applicable New York or federal law,
ordinance, rule or regulation of any New York or federal
governing authority binding upon it.
4. Governmental Consent. No consent, approval or
authorization of, or declaration or filing with, any governmental
authority on the part of any of the GMH Companies is required for
the valid execution and delivery of the Note Agreement, the
Stockholders' Agreement or the Investors' Rights Agreement or the
valid offer, issue, sale and delivery of the Notes or the
Warrants pursuant to the Note Agreement or the offer, issue, sale
and delivery of the Junior Securities, other than (a) the filing
of the Restated Certificate with the Secretary of State of the
State of the State of Delaware and (b) such consents, approvals,
authorizations, declarations or filings which have been duly
obtained and are in full force and effect.
5. Certain Regulatory Matters. (a) None of the GMH
Companies, after giving effect to the Acquisition, is an
"investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of
1940, as amended.
(b) None of the GMH Companies, after giving effect to
the Acquisition, is a "holding company", or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", as
such terms are defined in the Public Utility Holding Company Act
of 1935, as amended.
(c) None of the GMH Companies, after giving effect to
the Acquisition, is a "public utility" as such term is defined in
the Federal Power Act, as amended.
(d) The issue and sale of the Notes and Warrants do
not violate Regulation G, T, X or U of the Board of Governors of
the Federal Reserve System.
6. Agreements, Notes and Warrants. The Note Agreement, the
Stockholders' Agreement, the Investors' Rights Agreement and the
Warrants have been duly authorized by all necessary corporate
action on the part of Holdings. The Note Agreement has been duly
<PAGE>
executed and delivered by Acquisition Co. and, as a result of the
Acquisition, constitutes the legal, valid and binding obligation
of Acquisition Co., enforceable against Acquisition Co. in
accordance with its terms. The Holdings Agreements and the
Warrants have been duly executed and delivered by Holdings and
constitute legal, valid and binding obligations of Holdings,
enforceable against Holdings in accordance with their respective
terms. The Notes have been duly executed and delivered by the
Company and constitute legal, valid and binding obligations of
the Company, enforceable against the Company in accordance with
their terms.
7. Acquisition. The Acquisition, including the acquisition
of stock pursuant to the Stock Purchase Agreement and the merger
of Acquisition Co. into the Company, has been duly consummated.
The Merger Agreement is in proper form for filing and has been
duly filed in the offices of the Secretary of State of the State
of Delaware. All other consents, approvals and authorizations of
and all declarations and filings with all governmental
authorities required on the part of any GMH Company in order to
consummate the Acquisition have been duly obtained and made and
are in full force and effect.
8. Restated Certificate. The Restated Certificate is in
proper form for filing with the Secretary of State of the State
of Delaware, has been duly adopted by all necessary corporate
action on the part of Holdings, has been duly executed and
acknowledged by a duly authorized officer of Holdings and has
been duly filed with such Secretary of State. The terms of
Article FOURTH of such Certificate of Amendment are valid under
the laws of the State of Delaware, and the shares of Common Stock
issuable upon exercise of the Warrants have or upon such issuance
will have the terms set forth in such Article FOURTH.
9. Holdings Capital Stock. The authorized capital stock of
Holdings consists of 17,462,500 shares of common stock, par value
$.001 per share, divided into 4,375,000 shares of the Class A
Common Stock, of which 1,656,250 shares have been issued and are
outstanding; 787,500 shares of the Class B Common Stock, none of
which shares have been issued and are outstanding; 2,150,000
shares of the Class C Common Stock, none of which shares have
been issued and are outstanding; and 10,150,000 shares of
preferred stock, par value $.001 per share, divided into
8,000,000 shares of Series A Redeemable Preferred Stock, all of
which shares have been issued and are outstanding, and 2,150,000
shares of Series B Convertible Preferred Stock, all of which
shares have been issued and are outstanding; in each case after
giving effect to the Acquisition. The shares of Class A Common
Stock and Class B Common Stock issuable upon the exercise of the
Warrants have been duly authorized and validly reserved for
issuance upon such exercise and, when so issued in accordance
with the terms of the Warrants, will be validly issued, fully
paid and nonassessable, and except as set forth in the
Stockholders Agreement, there are no preemptive rights of
stockholders with respect to the issuance of such shares upon
such exercise. All of the outstanding shares of the Common Stock
have been duly authorized and are validly issued, fully paid and
nonassessable, and the certificates evidencing such shares have
been duly executed and delivered by Holdings and are in proper
form under the Delaware General Corporation Law. Other than (i)
the Series B Preferred Stock, (ii) the Class A Common Stock,
(iii) the Class B Common Stock, (iv) the Warrants and (ii) the
warrants to purchase an aggregate of 218,750 shares of Class A
Common Stock issued to principals and employees of Larkspur
Capital Corporation, Holdings does not have outstanding
securities convertible into or exchangeable for any shares of its
capital stock. Except as set forth in the Investors' Rights
Agreement and the Stockholders' Agreement, Holdings does not have
any rights to subscribe for or to purchase, or any options for
the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims
of any character relating to, any shares of its capital stock or
any securities convertible into or exchangeable for any shares of
its capital stock; and Holdings is not subject to any obligation
(contingent or otherwise) to repurchase or otherwise to acquire
or retire any shares of its capital stock, except as set forth in
the Investors' Rights Agreement.
<PAGE>
10. Securities Act and Trust Indenture Act. The offer,
issue, sale and delivery of the Notes, the Warrants and the
Junior Securities, in each case under the circumstances
contemplated by the Note Agreement, the RFE Securities Purchase
Agreement and the Bulldog Subscription Agreement, constitute
exempted transactions under the registration provisions of the
Securities Act, and neither the registration of the Notes, the
Warrants or the Junior Securities under the Securities Act nor
the qualification of an indenture in respect of the Notes or any
Junior Securities under the Trust Indenture Act of 1939, as
amended, is required in connection with such offer, issue, sale
and delivery.
11. Litigation. There is, to our knowledge, no action,
proceeding or investigation pending or threatened which questions
the validity of any of the Holdings Agreements, the Notes or the
Warrants or any action taken or to be taken pursuant to the
Holdings Agreements, the Notes or the Warrants, or which if
rendered adversely, would result, either in any case or in the
aggregate, in any adverse change in the business, operations,
affairs, condition (financial or otherwise), properties or assets
of the GMH Companies, taken as a whole or in any liability on the
part of any GMH Company which would be material to the GMH
Companies, taken as a whole.
Our opinions are qualified as follows:
a. The enforceability of the Holdings Agreements, the
Warrants and the Notes is subject to or limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, arrangement,
moratorium or other similar laws relating to or affecting the
rights of creditors generally and general principles of equity
(regardless of whether such enforceability is considered in a
proceeding at law or in equity).
b. With respect to our opinions regarding enforceability,
we call your attention to the fact that we express no opinion
with respect to the enforceability of (i) the indemnification
provisions contained in the Holdings Agreements to the extent
that such provisions may be construed to include indemnification
for liabilities arising under federal or state securities or blue
sky laws, (ii) any Holdings Agreements against any person or
entity who or which is not a party thereto or with respect to any
provisions thereof requiring a party thereto to cause such person
or party to take or further refrain from taking specified actions
or (iii) any provisions which expressly purport to waive
statutory rights, including without limitation, the statutory
right of redemption.
c. With respect to our opinions regarding the
enforceability of the Holdings Agreements, we have assumed
compliance by all persons other than Acquisition Co. and Holdings
with the terms, conditions and restrictions set forth in the
Holdings Agreements.
d. We express no opinion regarding the status of title to
any real or personal property.
e. We express no opinion with respect to the Investment
Advisors Act of 1940 or the provisions of the Securities Exchange
Act of 1934 regarding registration of brokers and dealers.
f. No opinion is expressed herein as to the enforceability
of choice of law provisions (except as to the Note Agreement, the
Notes and the Warrants), or any waivers of jurisdiction or venue.
g. We express no opinion with respect to Paragraph 4
hereof as to any authorization, consent, approval, license,
exemption of or filing or registration by any of the GMH
Companies which they may be required to obtain as a result of the
involvement of parties other than such Person, and the
transactions contemplated by the Holdings Agreements, the
Warrants or the Notes because of any of such other party's legal
or regulatory status or because of any other facts specifically
pertaining to any of such other parties.
h. We express no opinion with respect to statutes and
ordinances, administrative decisions and rules and regulations,
<PAGE>
in each case of counties, towns, municipalities and special
political subdivisions, and judicial decisions to the extent they
deal with any of the foregoing.
As to any facts material to our opinions, we have relied
upon oral or written statements and certifications of officers
and other representatives of the GMH Companies and others, upon
certificates and other documents from public officials and upon
the accuracy of the representations and warranties contained in
the Holdings Agreements. We have not independently investigated
or verified such facts and do not opine as to their accuracy.
The phrases "to our knowledge" or "known to us," when used
herein, mean that our opinion is based solely on matters within
the actual knowledge of the attorneys in this Firm actively
involved in the transactions contemplated by the Holdings
Agreements which, in the case of factual information with respect
to the GMH Companies, is derived from inquiry of the appropriate
officers of the GMH Companies (without independent
investigation), reviewing certificates of such officers,
reviewing our files, and reviewing the documents described
herein.
In rendering the opinions expressed in Paragraphs 1 and 2
above, we have relied solely upon certificates of public
officials as to the qualification to do business and good
standing of Acquisition Co. and Holdings.
We are licensed to practice law under the laws of the State
of New York. The opinions herein expressed are limited to the
laws of the State of New York, the General Corporation Law of the
State of Delaware and to the extent not otherwise excluded
herein, the federal laws of the United States of America. Insofar
as any of the opinions contained herein involve matters of
Georgia law, we have relied on the opinion of Powell, Goldstein,
Frazer & Murphy dated the date hereof, a copy of which is
attached hereto.
The opinions expressed in this letter are based upon the law
in effect on the date hereof, and we assume no obligation to
revise or supplement this opinion should such law be changed by
legislative action, judicial decision or otherwise.
This opinion is being furnished to you at the direction, and
with the authorization of the Acquisition Co. pursuant to Section
4.4(a) of the Note Agreement, solely for your benefit and may be
relied upon by you with respect to the transactions recited
herein and therein. This opinion may not be relied upon by,
quoted in any manner to or delivered to, any person or entity
without, in each instance, our prior written consent; provided,
however, that any of your assignees or participants permitted
under the Note Agreement shall be entitled to rely on such
opinions as if it were addressed to them.
Very truly yours,
/s/ Nixon, Hargrave, Devans & Doyle LLP
<PAGE>
[On Letterhead of Powell, Goldstein, Frazer & Murphy]
December 21, 1995
The Equitable Life Assurance Society
of the United States
787 Seventh Avenue
New York, New York 10019
Re: General Manufactured Housing, Inc.
Ladies and Gentlemen:
We have served as Georgia local counsel to General
Manufactured Housing, Inc., a Georgia corporation and successor
by merger to GMH Acquisition Corp., a Delaware corporation (the
"Company"), and have acted in such capacity in connection with:
(a) the issue and sale to you today by the Company of
$17,243,295.00 aggregate principal amount of its Senior
Subordinated Notes due 2002 (the "Notes") pursuant to the
Note and Warrant Purchase Agreement, dated as of December
21, 1995 (the "Note Agreement"), among GMH Acquisition
Corp., a Delaware corporation ("Acquisition"), GMH Holdings
and you;
(b) the acquisition by Acquisition, pursuant to the
Stock Purchase Agreement, dated as of October 10, 1995, as
amended (the "Stock Purchase Agreement"), between Holdings
and the sellers named therein, of all the issued and
outstanding shares of the capital stock of the Company; and
the merger of Acquisition into the Company pursuant to the
Plan of Merger, dated December 21, 1995 (the "Merger
Agreement") between Acquisition and the Company (the
transactions contemplated by the Stock Purchase Agreement
and the merger of Acquisition into the Company being
sometimes collectively referred to herein as the
"Transaction"); and
(c) The issuance and sale by the Company to RFE
Investment Partners V, L.P., the State of Michigan and
Sterling Commercial Capital, Inc., pursuant to the
Securities Purchase Agreement, dated as of December 21, 1995
(the "RFE Securities Purchase Agreement"), of $5,000,000
aggregate principal amount of the Junior Subordinated Notes
of the Company (the "Junior Securities").
The Notes, the Note Agreement, the Stock Purchase
Agreement and the Merger Agreement are referred to collectively
as the "Documents."
This opinion letter is limited by, and is in accordance
with, the January 1, 1992 edition of the Interpretive Standards
applicable to Legal Opinions to Third Parties in Corporate
Transactions adopted by the Legal Opinion Committee of the
Corporate and Banking Law Section of the State Bar of Georgia,
which Interpretive Standards are incorporated in this opinion
letter by this reference and are attached as Exhibit A.
Capitalized terms used in this opinion letter and not otherwise
defined herein shall have the meanings assigned to such terms in
the Interpretive Standards or the Note Agreement, as appropriate.
In rendering this opinion we have examined copies of
the Documents forwarded to us by your counsel dated December 21,
1995, certified copies of the articles of incorporation, bylaws
and corporate resolutions of the Company and a certificate of
good standing for the Company from the State of Georgia. In
giving the opinions hereinafter expressed, we have relied only
upon our examination of the foregoing documents and certificates,
and we have made no independent verification of the factual
matters set forth in such documents or certificates and no other
investigation or inquiry. With respect to the due execution and
delivery of the Documents by the Company, we have relied solely
upon a facsimile copy of an officer's certificate from an officer
of the Company in the form of Exhibit B hereto.
The opinions set forth herein are limited to the laws
of the State of Georgia.
For purposes of this opinion, we have assumed that:
(i) The execution and delivery of the Documents and
other documents reviewed by us, and the entry into and
performance of the transactions contemplated by the Documents, by
all parties other than the company have been duly authorized by
all necessary actions and constitute the
<PAGE>
valid and bonding obligations of all parties other than the
Company.
(ii) The necessary merger documents were duly filed
with the Secretary of State of Delaware to effect the merger of
Acquisition with and into the Company as of the Closing Date
under the laws of the state of Delaware.
(iii) All of the Documents are enforceable, to the
extent not controlled by the laws of the State of Georgia.
We are of the following opinion:
1. Incorporation, Standing, etc. The Company is a
corporation validly existing and in good standing under the laws of
the State of Georgia and has all requisite corporate power and
authority to own and use its properties, to carry on its business as
now conducted, to enter into the Note Agreement, to issue and sell the
Notes and to carry out the terms of the Note Agreement and the Notes.
2. Compliance with Charter. The Transaction does not
violate of any term of the Company's articles of incorporate or bylaws
or any term of any applicable law, ordinance, rule or regulation of
any governmental authority of the State of Georgia.
3. Governmental Consent. No consent, approval or
authorization of, or declaration or filing with, any governmental
authority of the State of Georgia on the part of the Company is
required for the valid execution and delivery of the Note Agreement,
or the valid offer, issue, sale and delivery of the Notes pursuant to
the Note Agreement or the offer, issue, sale and delivery of the
Junior Securities.
4. Agreement and Notes. The Note Agreement and the
Notes have been duly authorized by all necessary corporate action on
the part of this Company. The Notes have been duly executed and
delivered by the Company and constitute legal, valid and binding
obligations of the Company, enforceable against the Company in
accordance with their respective terms; the Note Agreement was duly
executed and delivered by Acquisition and, as a result of the
Transaction, constitutes legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with its terms;
except in each case (a) that such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws of general application relating to or effecting the
rights and remedies of creditors, (b) that acceleration of the Notes
may affect the collectibility of that portion of the stated principal
amount thereof which might be determined to constitute unearned
interest thereon, and (c) no opinion is expressed as to any provision
for the indemnification of persons for liability under any federal or
state securities laws.
5. The Transaction. The Merger Agreement is in proper
form for filing and has been duly filed in the office of the Secretary
of State of Georgia and the merger was effective as of the Closing
Date in accordance with such agreement and the laws of the State of
Georgia. All other consents, approvals and authorizations of the
declarations and filings with all governmental authorities or offices
of public registry of the state of Georgia required on the part of the
Company in order to consummate the Transaction have been duly obtained
and made and are in full force and effect.
6. The Company. After giving effect to the
Transaction, the authorized capital stock of the Company consists of
100,000 shares of the common stock, par value $100.00 per share, of
which 5,250 shares have been issued and are outstanding. All of the
outstanding shares of such common stock have been duly authorized and
are validly issued, fully paid and nonassessable. The form of stock
certificate attached hereto as Exhibit C is in proper form under the
laws of the State of Georgia.
Our opinions expressed in this letter are subject to
the following qualifications:
<PAGE>
(a) We express no opinion as to the enforceability of
(A) provisions which purport to appoint the Lender, in any
capacity, as the attorney-in-fact or proxy of the Borrower, and
(B) provisions which purport to waive rights which cannot be
waived by law. In particular, we point out that in an opinion
issued July 11, 1994, the Supreme Court of Georgia held that pre-
litigation contractual waivers of trial by jury are not
enforceable in Georgia, Bank South, N.A. vs. Howard, 264 Ga. 339
(1994).
(b) We point out that O.C.G.A. 13-1-11 limits the
enforceability of attorneys fees provisions to an amount not in
excess of 15 percent of the principal and interest owing on the
evidence of indebtedness [the statutory definition of the term
"reasonable attorneys fees" in a note or other evidence of
indebtedness in O.C.G.A. 13-1-11(a)(2) being an amount equal to
15 percent of the first $500.00 of principal and interest owing
and 10 percent of the principal and interest owing in excess of
$500.00]. We further point out that a lender's right to collect
attorneys fees in the event of a default under an evidence of
indebtedness is limited by O.C.G.A. 13-1-11, in that, upon
acceleration of payment of an indebtedness under Georgia law, the
obligated party has a period of ten days from the receipt of
notice of acceleration within which to pay all principal and
interest without the payment of attorneys fees. We express no
opinion as to the ability of the Lender to collect actual
attorneys fees, regardless of their reasonableness, incurred in
enforcing rights under the Documents.
This opinion is limited to the matters set forth
herein. No opinion may be inferred or implied beyond the matters
expressly contained herein. This opinion letter is provided to you for
your exclusive use solely in connection with the transactions listed
in paragraphs (a) through (c) above, and may not be relied upon by any
other person or for any other purpose without our prior written
consent; provided, however that any of your assignees or participants
permitted under the Documents shall be entitled to rely on this
opinion letter as if it were addressed to them and provided further
that Nixon, Hargrave, Devans & Doyle LLP may rely on this opinion
solely for the purpose of rendering an opinion to you with respect to
the transactions set forth herein, to the extent their opinion relates
to the laws of the State of Georgia.
Very truly yours,
/s/ Powell, Goldstin, Frazer & Murphy
Powell, Goldstein, Frazer & Murphy
<PAGE>
Exhibit A
INTERPRETIVE STANDARDS
APPLICABLE TO CERTAIN LEGAL OPINIONS
TO THIRD PARTIES IN CORPORATE TRANSACTIONS
Effective January 1, 1992
Purpose and Scope of Interpretive Standards
The purpose of these Interpretive Standards is to explain the meaning
of Opinion Letters (which incorporate these Interpretive Standards by
reference) addressed to non-client third parties in connection with
corporate acquisition or financing transactions. Included in these
Interpretive Standards are general qualifications to legal opinions, common
assumptions as to fact and law, standards governing an opinion that an
agreement is "enforceable" and interpretations of certain recurring legal
opinions and confirmations of fact. Incorporation in an Opinion Letter of
these Interpretive Standards is intended to shorten the content of the
letter while expanding the mutual understanding of its meaning. Any part of
these Interpretive Standards, however, may be overridden by a specific
statement in an Opinion Letter which supersedes a contrary Interpretive
Standard.
Definitions of Terms Used in Interpretive Standards
The following capitalized terms have the following meanings when used
in these Interpretive Standards:
Agreement means the primary legal document which evidences the
Transaction.
Assets means all of the tangible and intangible real and personal
property of Company.
Company means the entity which is the client of Opinion Giver and on
whose behalf the Opinion Letter is given.
Documents means the Agreement, together with any other document
identified in the Opinion Letter, which contains one or more obligations of
Company related to the Transaction.
GBCC means the Georgia Business Corporation Code in effect on the date
of the Opinion Letter.
Law(s), whether or not a capitalized term, means the constitution,
statutes, judicial and administrative decisions, and rules and regulations
of governmental agencies of the Opining Jurisdiction and, unless otherwise
specified, federal law.
Local Law means the statutes, administrative decisions, and rules and
regulations of any county, municipality or subdivision, whether created at
the federal, state or regional level.
Opining Jurisdiction means a jurisdiction, the law of which Opinion
Giver addresses.
Opinion means a legal opinion contained in an Opinion Letter.
Opinion Giver means the law firm or lawyer giving an Opinion.
Opinion Letter means the letter containing one or more Opinions or
confirmations of fact by Opinion Giver.
Opinion Recipient means the person or persons to whom the Opinion
Letter is addressed.
Other Agreements means documents (other than the Documents) to which
Company is a party or by which Company is bound.
Other Counsel means counsel (other than Opinion Giver) providing a
legal opinion or confirmation of fact on aspects of the Transaction
directed to Opinion Recipient or Opinion Giver or both.
Other Jurisdiction means any jurisdiction (other than the Opining
Jurisdiction) the law of which is stipulated to be the governing law.
Personal Property means all of the tangible and intangible personal
property of Company.
Primary Lawyer Group has the meaning discussed in Interpretive
Standard 7.
Public Authority Documents means certificates issued by a governmental
office or agency, such as the Secretary of State, or by a private
organization having access to and regularly reporting on government files
and records, as to a person's property or status.
Remedies Opinion means an Opinion dealing with the enforceability
against Company of one or more Documents.
<PAGE>
Transaction means the transaction with respect to which the Opinion
Letter is given.
Qualifications To Each Opinion
1. Law Addressed by Opinion.
If an Opinion Letter is expressly limited to the Law of one or more
specified jurisdictions or to one or more discrete laws within one or more
jurisdictions, an Opinion with respect to any other law, or the effect of
any other law, is disclaimed.
2. Scope of Opinion.
An Opinion covers only those matters both essential to the conclusion
stated by the Opinion and, based upon prevailing norms and expectations
found among experienced legal practitioners in the Opining Jurisdiction,
reasonable in the circumstances. Other matters are not included in an
Opinion by implication. The following matters, including their effects and
the effects of noncompliance, are not covered by implication or otherwise
in any Opinion, unless coverage is specifically addressed in the Opinion
Letter as provided by Interpretive Standard 11:
(1) Local Law
(2) Law relating to permissible rates, computation or
disclosure of interest, e.g., usury
(3) Antitrust and unfair competition law
(4) Securities law
(5) Fiduciary obligations
(6) Pension and employee benefit law, e.g., ERISA
(7) Regulations G, T, U and X of the Board of Governors
of the Federal Reserve System
(8) Fraudulent transfer law
(9) Environmental law
(10) Land use and subdivision law
(11) Except with respect to a No Consent Opinion
(interpretative Standard 28), Hart-Scott-Rodino,
Exon-Florio and other laws related to filing
requirements, other than charter-related filing
requirements, such as requirements for filing
articles of merger
(12) Except with respect to a No Violation Opinion
(interpretive Standard 27), law concerning creation,
attachment, perfection or priority of a security
interest in any Assets
(13) Bulk transfer law
(14) Tax law
(15) Patent, copyright, trademark and other intellectual
property law
(16) Racketeering law, e.g., RICO
(17) Criminal statutes of general application, e.g., mail
fraud and wire fraud
(18) Health and safety law, e.g., OSHA
(19) Labor law
(20) Law concerning national or local emergency
3. Unwarranted Reliance.
Opinion Giver may not rely for purposes of the Opinion Letter upon
information, whether or not in a Public Authority Document, or (except in
the case of arbitrary or hypothetical assumptions contained in an
overriding agreement referred to in Interpretive Standard 11 or as stated
in Interpretive Standard 22 with respect to choice of law) upon an
assumption otherwise appropriate, if Opinion Giver has knowledge that such
information or assumption is false, or recognizes factors that compel the
conclusion that reliance upon such information or assumption would be
unreasonable. "Knowledge" or "recognizes" for purposes of the foregoing
sentence and wherever used in these Interpretive Standards means the
current awareness of information by any lawyer in the Primary Lawyer Group.
4. Reliance on Other Sources of Information.
Subject to Interpretive Standard 3, Opinion Giver may rely, without
investigation, upon facts established by a Public
<PAGE>
Authority Document, facts provided by an agent of Company or others and, if
disclosed in the Opinion Letter, facts asserted by a party to the
Transaction in a representation or warranty embodied in the Documents,
provided:
(1) if not established by a Public Authority Document, the facts
do not constitute a statement, directly or in practical effect, of the
legal conclusion in question;
(2) the person providing facts is, in Opinion Giver's
professional judgment, an appropriate source; and
(3) if the facts are set forth in a certificate, Opinion Giver
has used reasonable professional judgment as to its form and content.
5. Scope of Opinion Giver's Inquiry.
Opinion Giver is presumed to have reviewed such documents and given
consideration to such matters of law and fact as Opinion Giver deemed
appropriate in order to give an Opinion or confirmation of fact, unless
Opinion Giver has expressly limited the scope of inquiry in the Opinion
Letter. A recital of specific documents reviewed or specific procedures
followed, without more, is not a limitation on the scope of Opinion Giver's
inquiry for purposes of the foregoing presumption.
6. Opinion or Confirmation Qualified by Knowledge of Opinion Giver.
Whenever an Opinion Letter qualifies an Opinion or confirmation of
fact by the words "to our knowledge," known to us" or words of similar
meaning, the quoted words mean the current awareness by lawyers in the
Primary Lawyer Group of information such lawyers recognize as relevant to
the Opinion or confirmation so qualified. The quoted words do not include
within what is "known" information not within such current awareness that
might be revealed if a canvass of lawyers outside the Primary Lawyer Group
were made, if the Opinion Giver's files were searched or if any other
investigation were made.
7. "Primary Lawyer Group."
"Primary Lawyer Group" means that lawyer in Opinion Giver's
organization who signs the Opinion Letter and, solely as to information
relevant to an Opinion or confirmation issue, any lawyer in Opinion Giver's
organization who is primarily responsible for providing the response
concerning the particular issue.
8. Who May Rely On Opinion.
Opinion Recipient and designated principals of Opinion Recipient, if
Opinion Recipient is identified in the Opinion Letter as an agent for
designated principals, are the only persons entitled to rely upon any
Opinion or confirmation of fact contained in the Opinion Letter, and then
only for purposes of the Transaction.
9. Other Counsel.
Opinion Giver's responsibility for the opinion of Other Counsel
depends upon what is stated in the Opinion Letter. A statement that Opinion
Giver has relied on an opinion of Other Counsel means only that Opinion
Giver believes that (i) based upon Other Counsel's professional reputation,
it is competent to render such opinion, and (ii) such opinion on its face
appears to address the matters upon which Opinion Giver places reliance. A
statement that Opinion Giver believes that Opinion Recipient is justified
in relying on an opinion of Other Counsel means only that Opinion Giver
believes that, based upon Other Counsel's professional reputation, it is
competent to render such opinion. A statement that Opinion Giver concurs in
an opinion of Other Counsel means that Opinion Giver has assumed the
responsibility for verifying the accuracy of the opinion of Other Counsel.
If no concurrence by Opinion Giver is expressed, no concurrence is implied.
If Opinion Giver merely identifies or remains silent with respect to the
opinion of Other Counsel, Opinion Giver
<PAGE>
assumes no responsibility for Other Counsel's opinion, and Opinion
Recipient may not assume that Opinion Giver has relied upon Other Counsel's
opinion.
10. Updating.
An Opinion Letter speaks as of the date of its delivery, and Opinion
Giver has no obligation to advise Opinion Recipient or anyone else of any
matter of fact or law thereafter occurring, whether or not brought to the
attention of Opinion Giver, even though that matter affects any analysis or
conclusion in the Opinion Letter.
11. Overriding Agreement.
Opinion Giver and Opinion Recipient may agree upon arbitrary or
hypothetical assumptions that may not be true and upon qualifications,
standards or interpretations inconsistent with these Interpretive
Standards. Any such agreement with respect to such assumptions,
qualifications, standards or interpretations, when described with
reasonable particularity in the Opinion Letter, will supersede any contrary
provision of these Interpretive Standards.
Assumptions
12. Assumptions As To Parties Other Than Company.
Opinion Recipient in the Transaction has acted in good faith and
without notice of any defense against enforcement or rights created by, or
adverse claim to any property transferred as part of, the Transaction. Each
party to the Transaction other than Company has complied with all laws
applicable to it that affect the Transaction.
13. Assumptions As To Natural Persons and Documents.
Each natural person acting on behalf of any party to the Transaction
has sufficient legal competency to carry out such person's role in the
Transaction. Each document submitted to Opinion Giver for review is
accurate and complete, each document purporting to be original is
authentic, each document purporting to be a copy conforms to an authentic
original, and each signature on a document is genuine.
14. Assumptions As To Transaction.
The Transaction complies with any test required by law of good faith
or fairness. Each party will act in accordance with the terms and
conditions of the Documents.
15. Assumption As To Accessibility of Laws.
Each Law for which Opining Giver is deemed to be responsible is
published, accessible and generally available to lawyers practicing in the
Opining Jurisdiction.
16. Assumptions As To Company.
No discretionary act of Company or on its behalf will be taken after
the date of the Transaction if such act might result in a violation of law
or breach or default under any agreement, decree, writ, judgment or court
order. Company will obtain all permits and governmental approvals and take
all other actions which are both (i) relevant to performance of the
Documents or consummation of the Transaction, and (ii) required in the
future under applicable law. Company holds requisite title and rights to
its Assets.
17. Assumptions As To Other Agreement.
Any Other Agreement will be enforced as written.
18. Assumption As To Understandings.
There is no understanding or agreement not embodied in a Document
among parties to the Transaction that would modify any term of a Document
or any right or obligation of a party.
<PAGE>
19. Assumption As To Absence of Mistake or Fraud.
With respect to the Transaction and the Documents, there has been no
mutual mistake of fact and there exists no fraud or duress.
20. Assumption As To Invalidity.
No issue of unconstitutionality or invalidity of a relevant Law exists
unless a reported case has so held.
Remedies Opinion Standards
21. Meaning of Remedies Opinion.
A. General Meaning. The Remedies Opinion, with respect to any
referenced Document, and subject to the limitations contained in these
Interpretive Standards and in the Opinion Letter, means that:
(i) a contract has been formed under the law of contracts
of the jurisdiction applicable under Interpretive Standard 22;
and
(ii) under laws normally applicable to contracts like the
Document, to parties like the Company and to transactions like
the Transaction, each obligation imposed on Company by the
Document, each agreement made by Company in the Document, and
each right, benefit and remedy conferred by Company in the
Document, will be given effect as stated in the Document.
B. Existence of Contract. The professional judgment reflected in
subparagraph A(i) above requires the Opinion Giver to conclude that:
(i) All legal requirements under contract law for the
formation of a contract of the type involved in the referenced
Document effective against Company (other than requirements that
would be covered by a Corporate Status Opinion, a Corporate
Powers Opinion and a Corporate Acts Opinion discussed at
Interpretive Standards 24, 25 and 26) are met, such as necessary
formalities (including compliance with any applicable statute of
frauds), consideration (where necessary), definiteness, and the
inclusion of essential terms.
(ii) The Document does not violate a law as to formation
of contracts that would prevent a court presented with the
Document from enforcing it.
(iii) Company does not presently have available any
contractual defense to the Document, such as the statute of
limitations.
22. Choice of Law in Remedies Opinion.
If a Document covered by the Remedies Opinion contains no governing
law provision, or contains a governing law provision which names the
Opining Jurisdiction, the Remedies Opinion means that if Company is brought
before a proper court of the Opining Jurisdiction to enforce rights under
the Document, and if such court applies the substantive law of the Opining
Jurisdiction, the result will be as stated in the Opinion and these
Interpretive Standards.
If the Document contains a governing law provision which names a
jurisdiction other than the Opining Jurisdiction, the Remedies Opinion does
not opine whether any court of any jurisdiction will give effect to the
governing law provision in the Agreement, but assumes that if Company is
brought before a proper court of the Opining Jurisdiction to enforce rights
under the Document, such court will apply the substantive law of the
Opining Jurisdiction, notwithstanding the governing law provision in the
Document, and based upon such assumption the result will be as stated in
the Opinion and these Interpretive Standards.
<PAGE>
The Remedies Opinion does not extend to the content or effect of any
law other than the law of the Opining Jurisdiction and federal law.
23. Exceptions To The Remedies Opinion.
Any Remedies Opinion contained in an Opinion Letter which incorporates
these Interpretive Standards by reference will be deemed not to address the
matters excluded in Interpretive Standard 2 and subject to the following
exceptions:
(i) The effect of bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the rights and
remedies of creditors. This includes the effect of the Federal
Bankruptcy Code in its entirety, including matters of contract
rejection, fraudulent conveyance and obligation, turn-over,
preference, equitable subordination, automatic stay, conversion
of a non-recourse obligation into a recourse obligation, and
substantive consolidation. This also includes state laws
regarding fraudulent transfers, obligations, and conveyances,
including O.C.G.A. 18-2-20, et seq., and state receivership
laws.
(ii) The effect of general principles of equity, whether
applied by a court of law or equity. This includes the following
concepts: (a) principles governing the availability of specific
performance, injunctive relief or other traditional equitable
remedies; (b) principles affording traditional equitable defenses
(e.g., waiver, laches and estoppel); (c) good faith and fair
dealing; (d) reasonableness; (e) materiality of the breach; (f)
impracticability or impossibility of performance; (g) the effect
of obstruction, failure to perform or otherwise to act in
accordance with an agreement by any person other than Company;
(h) the effect of Section 1-102(3) of the Uniform Commercial
Code; and (i) unconscionability.
(iii) The effect and possible unenforceability of
contractual provisions providing for choice of governing law.
(iv) The possible unenforceability of provisions
purporting to waive certain rights of guarantors .
(v) The possible unenforceability of provisions requiring
indemnification for, or providing exculpation, release or
exemption from liability for, action or inaction, to the extent
such action or inaction involves negligence or willful misconduct
or to the extent otherwise contrary to public policy.
(vi) The possible unenforceability of provisions purporting
to require arbitration of disputes.
(vii) The possible unenforceability of provisions
prohibiting competition, the solicitation or acceptance of
customers, of business relationships or of employees, the use or
disclosure of information, or other activities in restraint of
trade.
(viii) The possible unenforceability of provisions
imposing increased interest rates or late payment charges upon
delinquency in payment or default or providing for liquidated
damages, or for premiums on prepayment, acceleration, redemption,
cancellation, or termination, to the extent any such provisions
are deemed to be penalties or forfeitures.
(ix) The possible unenforceability of waivers or advance
consents that have the effect of waiving statutes of limitation,
marshalling of assets or similar requirements, or as to the
jurisdiction of courts, the venue of actions, the right to jury
trial or, in certain cases, notice.
(x) The possible unenforceability of provisions
<PAGE>
that waivers or consents by a party may not be given effect
unless in writing or in compliance with particular requirements
or that a person's course of dealing, course of performance, or
the like or failure or delay in taking actions may not constitute
a waiver of related rights or provisions or that one or more
waivers may not under certain circumstances constitute a waiver
of other matters of the same kind.
(xi) The effect of curse of dealing, course of
performance, or the like, that would modify the terms of an
agreement or the respective rights or obligations of the parties
under an agreement.
(xii) The possible unenforceability of provisions that
enumerated remedies are not exclusive or that a party has the
right to pursue multiple remedies without regard to other
remedies elected or that all remedies are cumulative.
(xiii) The effect of O.C.G.A. 13-1-11 on provisions
relating to attorneys fees.
(xiv) The possible unenforceability of provisions that
determinations by a party or a party's designee are conclusive.
(xv) The possible unenforceability of provisions
permitting modifications of an agreement only in writing.
(xvi) The possible unenforceability of provisions that
the provisions of an agreement are severable.
(xvii) The effect of laws requiring mitigation of damages.
(xviii) The possible unenforceability of provisions
permitting the exercise, under certain circumstances, of rights
without notice or without providing opportunity to cure failures
to perform.
(xix) The effect of agreements as to rights of set off
otherwise than in accordance with the applicable law.
Interpretations
24. Corporate Status Opinion.
An Opinion to the effect that Company was duly organized as a
corporation and is existing in good standing under the laws of the State of
Georgia (Corporate Status Opinion) is subject to the following
understandings:
(1) "duly organized" means that Company (i) properly complied
with the Georgia statutory requirements for incorporation, and (ii)
thereafter properly complied with the Georgia statutory requirements
for organization;
(2) "is existing" means that company is a corporation which has
not ceased to exist under the GBCC;
(3) the Opinion refers to the status of Company only for
purposes of and under the GBCC; and
(4) "good standing" has no official meaning under the GBCC, and
for purposes of any Opinion with respect to a corporation subject to
the GBCC means:
(i) Company has filed no notice of intent to dissolve under
Section 1403 of the GBCC;
(ii) the Secretary of State has signed no certificate of
dissolution with respect to Company;
(iii) the Superior Court of the county of Company's
registered office has entered no decree ordering
<PAGE>
Company dissolved; and
(iv) Company has satisfied its tax and annual registration
requirements under Section 1420 of the GBCC.
An Opinion limited to the conclusion that the Company "is a
corporation" means that third parties may not challenge Company's corporate
existence, the State of Georgia recognizes such existence, and the state
may challenge Company's incorporation only under the circumstances
described in Section 203(b) of the GBCC.
25. Corporate Powers Opinion.
An Opinion to the effect that Company has the corporate power to
execute and deliver a Document, to perform its obligations under a
Document, to own and use its Assets and to conduct its business (Corporate
Powers Opinion) is subject to the following understandings:
(1) the Opinion refers only to the GBCC and Company's articles
of incorporation as sources of corporate power;
(2) "power" refers only to whether the acts referenced in the
Opinion are ultra vires;
(3) the Opinion is built upon an assumption that the Corporate
Status Opinion could also be given;
(4) "own and use" refers to every right Company has in the
Assets;
(5) the Opinion refers to Assets owned and used and business
conducted on the date of the Opinion, and not those contemplated for
future ownership, use or conduct except to the extent the acquisition
of the Assets or conduct of the business is concurrent with, and
recognized by Opinion Giver as constituting part of, the consummation
of the Transaction; and
(6) the Opinion does not affirm that Company is engaged in no
unlawful business and in no business which Georgia law would not
permit to be conducted by a corporation incorporated under the GBCC.
26. Corporate Acts Opinion.
An Opinion to the effect that Company has duly authorized the
execution and delivery of, and performance by Company under, the Documents
and has duly executed and delivered the Documents (Corporate Acts Opinion)
is subject to the following understandings:
(1) the Opinion affirms compliance with all corporate action
necessary under the GBCC, Company's articles of incorporation and
bylaws and, if applicable, Company's duly adopted policies and
practices for delegation of authority in order to authorize the
execution and delivery of, and performance under, the Documents;
(2) the Opinion affirms that the execution and delivery of the
Documents was, and Company's performance of its obligations under the
Documents in accordance with the Documents as written will be, in
accordance with the authorization;
(3) the Opinion is built upon an assumption that the Corporate
Status Opinion and the Corporate Powers Opinion could also be given:
(4) the Opinion addresses no law other than the GBCC and
applicable law of agency.
27. No Violation Opinion.
An Opinion to the effect that Company's execution and delivery of the
Documents do not, and if Company were now to
<PAGE>
perform its obligations under the Documents such performance would not,
result in (i) a violation of Company's articles of incorporation, bylaws or
any law to which Company or its Assets are subject, or (ii) a breach of or
default under described agreements, or (iii) a creation or imposition of
contractual liens or security interests arising out of described
agreements, or (iv) a violation of any known judicial or administrative
decree, writ, judgment or order to which Company or its Assets are subject
(No Violation Opinion) is subject to the following understandings:
(1) a "violation" or "breach or default" means any act or
omission that, by itself or upon notice or the passage of time or
both, would constitute a violation, breach or default giving rise to a
remedy under the document or law in question;
(2) the Opinion addresses only the relevant facts and law as
they exist on the date of the Opinion Letter;
(3) "agreements" refers to agreements, indentures, documents and
other instruments in writing, identified in the Opinion Letter;
(4) references to any law or to "decree, writ, judgment or
order" or the like include only those (i) which either prohibit
performance by Company under the Documents or subject Company to a
fine, penalty or other similar sanction, and (ii) which a lawyer,
using customary professional diligence, would reasonably recognize as
applicable to Company and the Transaction;
(5) the Opinion addresses only whether the specific terms of the
relevant Document violate law or cause a breach of or default under
the specific terms of an obligation created by a described Other
Agreement, taking into account information provided in accordance with
Interpretive Standard 4 and other facts known to Opinion Giver;
(6) the Opinion does not address acts permitted or contemplated
but not required, or inferred but not set forth, by the relevant
Documents, except to the extent such acts are concurrent with, and
recognized by Opinion Giver as constituting part of, the consummation
of the Transaction;
(7) to the extent the interpretation of words in described
agreements requires resort to law, the law is that of the Opining
Jurisdiction; and
(8) the Opinion does not address liens or security interests
created by or in favor of Opinion Recipient, created under a Document
or arising by operation of law.
28. No Consent Opinion.
An Opinion to the effect that no consent, approval, authorization or
other action by, or filing with, any governmental authority is required for
Company's execution and delivery of the Documents and consummation of the
Transaction (No Consent Opinion) is subject to the understandings set forth
in Interpretive Standards 2 and 27(2) and (4). "Required" means that there
is no governmental consent, approval, authorization or filing, the absence
of which would either prohibit performance by Company of its obligations
under the Documents or subject Company to a fine, penalty or other similar
sanction.
29. Capitalization Opinion.
An Opinion to the effect that described shares have been duly
authorized and are, or upon issuance will be, validly issued, fully paid
and nonassessable (Capitalization Opinion) is subject to the following
understandings:
(1) the Opinion affirms compliance with all corporate action
necessary to create and issue the shares under the Georgia corporate
law in effect at the time of such creation and issuance ("Corporate
Code") and Company's articles of incorporation and bylaws;
<PAGE>
(2) "duly authorized" means Company had the corporate power to
create the shares, the shares so created have the rights and
attributes required by the Corporate Code, and the rights and
attributes of the shares so created were permitted by the Corporate
Code and are permitted by the GBCC and Company's articles of
incorporation and bylaws;
(3) "validly issued" means that at the time of issuance Company
had sufficient authorized and unissued shares to permit the shares to
be issued, Company took the steps necessary to accord shareholder
status to the persons to whom the shares were issued and Company has
taken no step to deprive the shares of the "validly issued" status;
(4) "fully paid and nonassessable" means that the consideration
received upon issuance of the shares (i) was legally sufficient, (ii)
satisfied the requirements of the Corporate Code, Company's articles
of incorporation and bylaws, and relevant corporate resolutions, (iii)
was approved (e.g., as to value of property or services) by the
directors or shareholders, as required, and (iv) was in fact received,
subject to paragraph (1) above; and
(5) the Opinion is based upon the assumption that the Corporate
Status Opinion could also be given.
30. Share Transfer Opinion.
The only laws addressed in any Opinion as to the rights of a seller in
shares of Company acquired by any purchaser are the GBCC and Article 8 of
the UCC, and no Opinion is given regarding liens (other than UCC security
interests) that may be perfected without filing or possession of the share
certificate. The Opinion is based upon the assumption that the
Capitalization Opinion could also be given.
31. Personal Property Transfer Opinion.
An Opinion as to Company's transfer of Personal Property expresses no
opinion as to Company's title. See Interpretive Standard 16.
32. Foreign Qualification Confirmation.
A confirmation to the effect that Company is qualified to transact
business as a foreign corporation in any one or more named jurisdictions is
not a legal opinion, but a statement which may be based solely upon one or
more certificates referenced in the Opinion Letter and limited in meaning
to the words of each certificate. No implication arises from such
confirmation that certificates have been acquired from all jurisdictions in
which Company is required to be qualified, or that certificates obtained
are from the appropriate public officials in the jurisdictions referenced.
33. Litigation Confirmation.
A confirmation regarding litigation pending or threatened in writing
against Company or any Assets derives from Opinion Giver's knowledge as
defined at Interpretive Standard 6 and certificate reliance discussed at
Interpretive Standard 4, but not from any reviews of public or court
records or files of Opinion Giver or others.
Incorporation by Reference Accord
34. These Interpretive Standards may be incorporated by reference in
the Opinion Letter by a statement similar to the following:
The Opinion Letter is limited by, and is in accordance with, the
January 1, 1992 edition of the Interpretive Standards applicable
to Legal Opinions to Third Parties in Corporate Transactions
adopted by the Legal Opinion Committee of the Corporate and
Banking Law Section of the State Bar of Georgia, which
Interpretive Standards are incorporated in this Opinion Letter by
this reference.
<PAGE>
OPINION LETTER CERTIFICATE
The undersigned, being the duly elected and appointed President of
General Manufactured Housing, Inc., a Georgia corporation (the "Company"),
hereby gives this certificate to induce Powell, Goldstein, Frazer & Murphy
to issue (i) an opinion letter in favor of First Source Financial LLP and
Katten Muchin & Zavis in connection with a credit facility to the Company
being made pursuant to the terms and conditions of a certain Secured Credit
Agreement of even date herewith between the Company and First Source
Financial LLP (the "Agreement") (the "First Source Opinion"); (ii) an
opinion letter in favor of RFE Associates V, L.P., the State of Michigan
and Sterling Commercial Capital, Inc. in connection with the issuance and
sale by the Company of $5,000,000 aggregate principal amount of its Junior
Subordinated Notes, and (iii) an opinion letter in favor of The Equitable
Life Assurance Society of the United States in connection with the issuance
and sale by the Company of $15,000,000 aggregate principal amount of its
Senior Subordinated Notes.
The undersigned hereby certifies as follows:
A. Attached hereto as Exhibit A are the Articles of Incorporation of
the Company which have been certified by the Secretary of State
of Georgia, as in full force and effect as of the date hereof. No
amendment to such Articles of Incorporation has been filed in the
office of the Secretary of State of Georgia since the effective
date of certification of such Articles of Incorporation by the
Secretary of State of Georgia;
B. Attached hereto as Exhibit B are true, complete and correct
copies of the By-laws of the Company, and all amendments thereto,
as in full force and effect as of the date hereof;
C. Attached hereto as Exhibit C are true, complete and correct
copies of resolutions of the Board of Directors of the Company
(collectively, the "Company Resolutions"). The Company
Resolutions have not been amended or revoked since the date of
adoption and are the only resolutions relating to the Agreement
and were adopted in compliance with all procedural requirements
of the Company's Articles of Incorporation and Bylaws and the
Georgia Business Corporation Code;
D. Attached hereto as Exhibit D is a copy of the stock certificate
issued to GMH Holdings, Inc., a Delaware corporation and the sole
shareholder of the Company, representing 5250 shares of common
stock of the Company;
E. The directors voting on the Company Resolutions and the officers
acting on behalf of Company in the transactions contemplated by
the Agreement were duly appointed and incumbent in the offices at
the time of all relevant corporate action and at all relevant
times thereafter;
F. As of the date hereof, the Company has not received any notice
from the Secretary of Georgia of a determination that any grounds
exist for administratively dissolving the Company, and the
Company has not received notice of a commencement of any action
to judicially dissolve the Company;
G. Neither the board of directors nor the shareholders of the
Company has taken any action with respect to dissolution of the
Company, and the Company has not filed any notice of intent to
dissolve with the State of Georgia; and
H. Purchaser does not report to, and is not regulated by, any
federal or state governmental regulatory agency.
IN WITNESS WHEREOF, the undersigned has executed this Certificate, as
of the 21st day of December, 1995.
GENERAL MANUFACTURED HOUSING, INC.
By: /s/ Gary M. Brost
________________________________
Title: President
I, James DelZoppo, Assistant Secretary of the Company, do hereby
certify that Gary M. Brost is the duly elected, qualified and acting
President of the Company, and that the signature of Gary M. Brost set forth
above is his true and genuine signature.
/s/ James C. DelZoppo
___________________________________
By: James C. DelZoppo
Title: Assistant Secretary
<PAGE>
EXHIBIT A
ARTICLES OF INCORPORATION
<PAGE>
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
GENERAL MANUFACTURED HOUSING, INC.
I.
The name and style of the Corporation shall be GENERAL
MANUFACTURED HOUSING, INC.
II.
General Manufactured Housing, Inc. is organized
pursuant to the Georgia Business Corporation Code.
III.
General Manufactured Housing, Inc. is incorporated as a Georgia
For-Profit Corporation and is organized for the following purposes: To
construct, manufacture, assemble, buy, and sell all types of manufactured
buildings, structures and homes; to engage in any activity incidental to or
connected with the construction, erection, etc. of the manufactured
buildings, structures and homes; and to engage in any other for profit
business authorized under the laws of the State of Georgia.
IV.
The Corporation has the authority to issue not more than 100,000
shares of common stock at a par value of $100.00 per share.
V.
The Board of Directors is hereby expressly authorized to make,
alter or repeal the by-laws of the corporation.
VI.
The Corporation reserves the right to amend, alter, change or
repeal any provisions contained in this Certificate of Incorporation, in
any manner now or hereafter prescribed by statute in the State of Georgia,
and all rights conferred upon stockholders herein are granted subject to
this reservation.
<PAGE>
VII.
Except as prohibited by law, the Corporation may indemnify any
person who is or was a director, officer, employee or agent of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee, or agent of another corporation, partnership,
joint venture, trust, or other enterprise (including, without limitation,
any employee benefit plan) and may take such steps as may be deemed
appropriate by the Board of Directors, including purchasing and maintaining
insurance, entering into contracts (including, without limitation,
contracts of indemnification between the Corporation and its directors and
officers), creating a trust fund, granting security interests or using
other means (including, without limitation, a letter of credit) to ensure
the payment of such amounts as may be necessary to effect such
indemnification.
VIII.
No director shall have any personal liability to the Corporation
or to its shareholders for monetary damages for breach of duty of care or
other duty as a director, by reason of any act or omission occurring
subsequent to the date when this provision becomes effective, except that
this provision shall not eliminate or limit the liability of a director for
(a) any appropriation, in violation of his duties, or any business
opportunity of the Corporation; (b) acts or omissions which involve
intentional misconduct or a knowing violation of law; (c) liabilities of a
director imposed by Section 14-2-832 of the Georgia Business Corporation
Code; or (d) any transaction from which the director derived an improper
personal benefit.
IX.
Except for the Merger of GMH Acquisition Corp. into the
Corporation which is occurring simultaneously with the filing of these
Amended and Restated Articles of Incorporation, the Corporation shall not,
without first obtaining the affirmative vote or written consent of its
shareholders:
(i) authorize, approve or consummate any of the following
transactions or series of transactions: (A) any acquisition
of the Corporation by means of merger of the Corporation
with or into any other corporation or other entity or person
or other form of corporate reorganization in which the
Corporation shall not be the continuing or surviving entity
of such merger or reorganization (other than a mere
reincorporation transaction) or a transaction in which the
Corporation is the surviving entity but the shares of the
Corporation's capital stock outstanding immediately prior to
the transaction are exchanged or converted by virtue of the
transaction into other property, whether in the form of
securities, cash or otherwise, or (B) a sale of all or
substantially all of the assets of the Corporation, or (C) a
liquidation, dissolution or winding up of the Corporation;
(ii) make any loan, advance or capital contribution to, or
investment in, any of the officers, directors, employees,
providers, consultants, agents or other representatives of
the Corporation, other than travel or salary advances in the
ordinary course of business in a manner consistent with past
practice;
(iii) incur or assume or permit to exist any indebtedness for
borrowed money (including capitalized leases) other than
amounts owing under (A) that certain Secured Credit
Agreement dated as of December 21, 1995 by and between the
Corporation and First Source Financial LLP plus up to
$2,600,000, (B) that certain Note and Warrant Purchase
Agreement dated as of December 21, 1995 by and between the
Corporation, GMH Holdings, Inc. ("Holdings") and The
Equitable Life Assurance
<PAGE>
Society of the United States and (C) that certain Securities
Purchase Agreement dated as of December 21, 1995 between and
among the Corporation, Holdings, RFE Investment Partners V,
L.P., Sterling Commercial Capital, Inc. and the State
Treasurer of the State of Michigan, as Custodian, as each
such documents may be amended, restated, supplemented or
otherwise modified from time to time, or issue any debt
securities or assume, guarantee, endorse (other than in the
ordinary course of business consistent with past practice)
or otherwise as an accommodation become responsible for,
liabilities of any other person;
(iv) purchase, hold or own any capital stock, evidence of
indebtedness or other security of any subsidiary of the
Corporation or other corporation, partnership, or other
entity, unless such corporation, partnership or other entity
is a wholly-owned subsidiary of the Corporation;
(v) engage in any new line of business outside the purposes set
forth in these Articles of Incorporation;
(vi) authorize or issue shares of any equity securities of the
Corporation, including any preferred stock, options or
warrants to purchase any such equity security;
(vii) make any acquisition of, or loan, advance or capital
contribution to, or investment in any business entity,
which, individually or together with any related series of
such transactions, exceeds $1,000,000;
(viii) make any capital expenditures in any one fiscal year in
excess of the sum of (A) $500,000 plus (B) the difference
between $500,000 and any unexpended amounts from prior
years; or
(ix) enter into any contract or transaction with an affiliate of
the Corporation that does not deal at arm's length with the
Corporation or which exceeds $25,000 in amount.
GENERAL MANUFACTURED HOUSING, INC.
BY: /s/ Shawn M. Martin
_____________________________________
Shawn M. Martin
Vice President
<PAGE>
EXHIBIT B
BY-LAWS
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
GENERAL MANUFACTURED HOUSING, INC.
(amended as of 12/21/95)
ARTICLE I
OFFICES
The Corporation shall at all times maintain a registered office
in the State of Georgia and a registered agent at that address but may have
other offices located within or outside the State of Georgia as the Board
of Directors may determine.
ARTICLE II
SHAREHOLDERS' MEETING
2.1 Annual Meetings. The annual meeting of the shareholders for
the election of directors and the transaction of other business as may come
before the meeting shall be held each year on such day and at such hour as
shall be fixed by the Board of Directors.
2.2 Special Meetings. A special meeting of the shareholders may
be called at any time by the President or any holder or holders of as much
as twenty-five percent of the votes entitled to be cast on any issue
proposed to be considered at the meeting. Special meetings shall be held at
such a time and place and on such date as shall be specified in the notice
of the meeting.
2.3 Place. Annual or special meetings of shareholders may be held
within or without the State of Georgia.
2.4 Notice. Notice of annual or special shareholders meetings
stating place, day and hour of the meeting shall be given in writing not
less than ten nor more than fifty days before the date of the meeting,
either mailed to the last known address or personally given to each
shareholder and First Source Financial LLP ("First Source") at 2850 West
Golf Road, 5th Floor, Rolling Meadows, Illinois 60008. Notice of a meeting
may be waived by an instrument in writing executed before or after the
meeting. The waiver need not specify the purpose of the meeting or the
business transacted, unless one of the purposes of the meeting concerns a
plan of merger or consolidation, in which event the waiver shall comply
with the further requirements of law concerning such waivers. Attendance at
such meeting in person or by proxy shall constitute a waiver of notice
thereof. Notice of any special meeting at which amendments to or
restatements of the articles of incorporation, merger or consolidation of
the Corporation, or the disposition of corporate assets requiring
shareholder approval are to be considered shall state such purpose, and
further comply with all requirements of law.
2.5 Quorum. At all meetings of shareholders, shares representing
a majority of the votes entitled to be cast shall constitute a quorum for
the transaction of business, and no resolution or business shall be
transacted without the favorable vote of the holders of a majority of the
shares represented at the meeting and entitled to vote. A lesser number may
adjourn from day to day, and shall announce the time and place to which the
meeting is adjourned.
2.6 Action in Lieu of Meeting. Any action to be taken at a
meeting of the shareholders of the Corporation, or any action that may be
taken at a meeting of the shareholders, may be taken without a meeting if a
consent in writing setting forth the action so taken shall be signed by the
holders of all the shares entitled to vote with respect to the subject
matter thereof, or by the holders of such lesser number of shares as may be
required in accordance with any lawful provision of the Articles of
Incorporation, and any further requirements of law pertaining to such
consents have been complied with.
ARTICLE III
DIRECTORS
3.1 Management. Subject to these Bylaws, or any lawful agreement
between the shareholders, the full and entire management of the affairs and
business of the Corporation shall be vested in the Board of Directors,
which shall have and may exercise all of the powers that may be exercised
or performed by the Corporation.
3.2 Number of Directors. The shareholders shall fix by resolution
the precise number of members of the Board of Directors, provided that the
Board of Directors shall consist of at least one (1) member. Directors
shall be elected at each annual meeting of the shareholders and shall serve
for a term of one year and until their successors are elected. A majority
of said directors shall constitute a quorum for the transaction of
<PAGE>
business. All resolutions adopted and all business transacted by the Board
of Directors shall require the affirmative vote of a majority of the
directors present at the meeting.
3.3 Vacancies. The directors may fill the place of any director
which may become vacant prior to the expiration of his term, such
appointment by the directors to continue until the expiration of the term
of the director whose place has become vacant, or may fill any directorship
created by reason of an increase in the number of directors, such
appointment by the directors to continue for a term of office until the
next election of directors by the shareholders and until the election of
the successor.
3.4 Meetings. The directors shall meet annually, without notice,
following the annual meeting of the shareholders provided, however, that
notice shall be provided to First Sorce at the address set forth above.
Special meetings of the directors may be called at any time by the
President or by any two directors, on two days' notice to each director and
First Source at the address set forth above, which notice shall specify the
time and place of the meeting. Notice of any such meeting may be waived by
an instrument in writing executed before or after the meeting. Directors
may attend and participate in meetings either in person or by means of
conference telephones or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and
participation in a meeting by means of such communication equipment shall
constitute presence in person at any meeting. Attendance in person at such
meeting shall constitute a waiver of notice thereof.
3.5 Action in Lieu of Meeting. Any action to be taken at a
meeting of the directors, or any action that may be taken at a meeting of
the directors, may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by all of the directors
and any further requirements of law pertaining to such consents have been
complied with.
3.6 Executive and Other Committees of Directors. The Board of
Directors may, by resolution passed by a majority of the whole Board,
designate an Executive Committee and one or more other committees, each
consisting of three or more directors of the Corporation and each having
such power and authority as the Board of Directors may by resolution
provide (except as limited by the laws of the State of Georgia). The Board
of Directors may authorize any such committee to exercise all or some of
the powers and authority of the Board of Directors in the management of the
property, business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it;
provided, however, that no such committee shall have the power or authority
in reference to:
(a) Amending the Certificate of Incorporation,
(b) Adopting an agreement of merger or consolidation,
(c) Recommending to the stockholders the sale, lease
or exchange of all or substantially all of the
Corporation's property and assets,
(d) Recommending to the stockholders a dissolution of
the Corporation or a revocation of a dissolution,
(e) Amending the By-laws of the Corporation,
(f) Declaring dividends, or
(g) Authorizing the issuance of stock.
Subject to any requirements of law, each committee shall take action in
accordance with such rules as are provided by resolution of the Board of
Directors or as the committee members shall unanimously agree upon.
3.7 Compensation Committee. The Board of Directors shall appoint
a Compensation Committee, consisting of any number of its members as it may
designate, consistent with the Articles of Incorporation, the bylaws and
the laws of the State of Georgia. Notwithstanding the foregoing, RFE
Investment Partners V, L. P. shall have the right to designate a member of
the Compensation Committee so long as it remains a holder of Preferred
Stock and Common Stock of the Corporation. The Compensation Committee shall
establish a general compensation
<PAGE>
policy for the Corporation and shall have responsibility for the approval
of increases in directors' fees and in salaries.
3.8 Audit Committee. The Board of Directors shall appoint an
Audit Committee consisting of any number of its members as it may
designate, consistent with the Articles of Incorporation, the Bylaws and
the laws of the State of Georgia. Notwithstanding the foregoing, RFE
Investment Partners V, L.P. shall have the right to designate a member of
the Audit Committee so long as it remains a holder of Preferred Stock and
Common Stock of the Corporation. The Audit Committee shall select and
engage on behalf of the Corporation, subject to the consent of the
shareholders, and fix the compensation of, a firm of certified public
accountants whose duty it shall be to audit the books and accounts of the
Corporation and its subsidiaries for the fiscal year in which they are
appointed, and who shall report to such Committee. The Audit Committee
shall confer with the auditors and shall determine, and from time to time
shall report to the Board of Directors upon, the scope of the auditing of
the books and accounts of the Corporation and its subsidiaries. The Audit
Committee shall also be responsible for determining that the business
practices and conduct of employees and other representatives of the
Corporation, and its subsidiaries comply with the policies and procedures
of the Corporation.
3.9 Observatory Seat. So long as any Liabilities (as defined in
the Secured Credit Agreement dated as of December 21, 1995 between the
Corporation and First Source) remain outstanding, a representative of First
Source may attend meetings of the Board as an observer and have the right
to receive a copy of all Board materials.
3.10 Removal. Any director may be removed from office, with or
without cause, upon the vote of the shareholders holding a majority of the
shares entitled to be cast with respect to the election of directors, at a
meeting with respect to which notice of such purpose is given.
ARTICLE IV
OFFICERS
4.1 General Provisions. The officers of the Corporation shall
consist of a President, a Secretary and a Treasurer who shall be elected by
the Board of Directors, and such other officers as may be elected by the
Board of Directors or appointed as provided in these Bylaws. Each officer
shall be elected or appointed for a term of office running until the
meeting of the Board of Directors following the next annual meeting of the
shareholders of the Corporation, or such other term as provided by
resolution of the Board of Directors or the appointment to office. Each
officer shall serve for the term of office for which he is elected or
appointed and until his successor has been elected or appointed and has
qualified or his earlier resignation, removal from office or death. Any two
or more offices may be held by the same person.
4.2 President. The President shall be the chief executive officer
of the Corporation and shall have general and active management of the
operation of the Corporation. He shall be responsible for the
administration of the Corporation, including general supervision of the
policies of the Corporation and general and active management of the
financial affairs of the Corporation, and shall execute bonds, mortgages or
other contracts in the name and on behalf of the Corporation.
4.3 Secretary. The Secretary shall keep minutes of all meetings
of the shareholders and directors and have charge of the minute books,
stock books and seal of the Corporation and shall perform such other duties
and have such other powers as may from time to time be delegated to him by
the President or the Board of Directors.
4.4 Treasurer. The Treasurer shall be charged with the management
of the financial affairs of the Corporation, shall have the power to
recommend action concerning the Corporation's affairs to the President, and
shall perform such other duties and have such other powers as may from time
to time be delegated to him by the President or the Board of Directors.
<PAGE>
4.5 Assistant Secretaries and Treasurers. Assistants to the
Secretary and Treasurer may be appointed by the President or elected by the
Board of Directors and shall perform such duties and have such powers as
shall be delegated to them by the President or the Board of Directors.
4.6 Vice Presidents. The Corporation may have one or more Vice
Presidents, elected by the Board of Directors, who shall perform such
duties and have such powers as may be delegated by the President or the
Board of Directors.
ARTICLE V
CAPITAL STOCK
5.1 Share Certificates. Share certificates shall be numbered in
the order in which they are issued. They shall be signed by the President
or a Vice President and the Secretary or an Assistant Secretary and the
seal of the Corporation shall be affixed thereto. Share certificates shall
be kept in a book and shall be issued in consecutive order therefrom. The
name of the person owning the shares, the number of shares, and the date of
issue shall be entered on the stub of each certificate. Share certificates
exchanged or returned shall be cancelled by the Secretary or an Assistant
Secretary and placed in their original place in the stock book.
5.2 Transfer of Shares. Transfer of shares shall be made on the
stock books of the Corporation by the holder in person or by power of
attorney, on surrender of the old certificate for such shares, duly
assigned.
5.3 Voting. The holders of the capital stock shall be entitled to
one vote for each share of stock standing in their name.
ARTICLE VI
SEAL
The seal of the Corporation shall be in such form as the Board of
Directors may from time to time determine. In the event it is inconvenient
to use such a seal at any time, the signature of the Corporation followed
by the word "Seal" enclosed in parentheses or scroll shall be deemed the
seal of the Corporation. The seal shall be in the custody of the Secretary
and affixed by him or by his assistants on the certificates of stock and
other appropriate papers.
ARTICLE VII
AMENDMENT
These Bylaws may be amended by majority vote of the Board of
Directors of the Corporation or by vote of the shareholders holding a
majority of the shares entitled to vote, provided that the shareholders may
provide by resolution that any Bylaw provision repealed, amended, adopted
or altered by them may not be repealed, amended, adopted or altered by the
Board of Directors.
ARTICLE VIII
INDEMNIFICATION
Each person who is or was a director of officer of the
Corporation, and each person who is or was a director or officer of the
Corporation who at the request of the Corporation is serving or has served
as an officer, director, partner, joint venturer or trustee of another
Corporation, partnership, joint venture, trust or other enterprise shall be
indemnified by the Corporation against those expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement which are allowed to
be paid or reimbursed by the Corporation under the laws of the State of
Georgia and which are actually and reasonably incurred in connection with
any action, suit or proceeding, pending or threatened, whether civil,
criminal, administrative or investigative, in which such person may be
involved by reason of his being or having been a director of officer of
this Corporation or of any such other enterprise. Such indemnification
shall be made only in accordance with the laws of
<PAGE>
the State of Georgia and subject to the conditions prescribed therein.
In any instance where the laws of the State of Georgia permit
indemnification to be provided to persons who are or have been an officer or
director of the Corporation or who are or have been an officer, director,
partner, joint venturer or trustee of any such other enterprise only on a
determination that certain specified standards of conduct have been met, upon
application for indemnification by any such person the Corporation shall
promptly cause such determination to be made (i) by the Board of Directors by
majority vote of a quorum consisting of directors not at the time parties to the
proceeding; (ii) if a quorum cannot be obtained, by majority vote of a committee
duly designated by the Board of Directors (in which designation directors who
are parties may participate), consisting of two or more directors not at the
time parties to the proceeding; (iii) by special legal counsel selected by the
Board of Directors or its committee in the manner prescribed in (i) or (ii), or
if a quorum of the Board of Directors cannot be obtained under (i), and a
committee cannot be designated under (ii), selected by majority vote of the full
Board of Directors (in which selection directors who are parties may
participate) or (iv) by the shareholders, but shares owned by or voted under the
control of directors who are at the time parties to the proceeding may not be
voted on the determination.
As a condition to any such right of indemnification, the Corporation
may require that it be permitted to participate in the defense of any such
action or proceeding through legal counsel designated by the Corporation and at
the expense of the Corporation.
The Corporation may purchase and maintain insurance on behalf of any
such persons whether or not the Corporation would have the power to indemnify
such officers and directors against any liability under the laws of the State of
Georgia. If any expenses or other amounts are paid by way of indemnification,
other than by court order, action by shareholders or by an insurance carrier,
the Corporation shall provide notice of such payment to the shareholders in
accordance with the provisions of the laws of the State of Georgia.
<PAGE>
EXHIBIT C
COMPANY RESOLUTIONS
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
_____________________________________________
ACTION TAKEN BY UNANIMOUS WRITTEN CONSENT
OF BOARD OF DIRECTORS
_____________________________________________
The undersigned, being all of the directors of General Manufactured
Housing, Inc. (the "Corporation") hereby consent, pursuant to Article III,
Section 3.5 of the By-laws of the Corporation and Section 14-2-821 of the
Georgia Business Corporation Code of the State of Georgia, to the adoption of
the following resolutions with the same force and effect as if said resolutions
had been duly adopted at a meeting of the Board of Directors of the Corporation,
and direct that this Consent be filed with the minutes of the Board of
Directors:
Election of Officers.
RESOLVED: That the following are hereby elected officers of the
Corporation until their successors are elected and have qualified:
Gary M. Brost President
Dennis C. Martin Vice President
Gary M. Brost Treasurer
Dennis C. Martin Secretary
James C. DelZoppo Assistant Secretary
Merger
RESOLVED: That the Corporation hereby approves the merger into itself
of GMH Acquisition Corp., a Delaware Corporation (the "Parent"),
owning 100% of all issued and outstanding shares of the Corporation;
and further
RESOLVED: That the merger shall become effective when the Articles of
Merger (the "Articles of Merger") have been filed in the office of the
Secretary of State of the State of Georgia and the Certificate of
Ownership and Merger (the "Certificate of Ownership and Merger") has
been filed in the office of the Secretary of State of Delaware; and
further
RESOLVED: That the Articles of Incorporation, By-Laws, directors and
officers of the Corporation shall be the Articles of Incorporation,
By-Laws, directors and officers of the surviving corporation provided,
however, that the Articles of Incorporation of the Corporation shall
be amended and restated, upon filing of the Articles of Merger, to
read in its entirety as set forth in Exhibit A attached hereto; and
further
RESOLVED: That the Corporation has authorized one hundred thousand
(100,000) shares of common stock, $100.00 par value, of which five
thousand two hundred and fifty (5,250) shares of common stock are
issued and outstanding, of which five thousand two hundred and fifty
(5,250) shares are owned by the Parent. At the time the merger becomes
effective, all of the issued and outstanding shares of the Parent
shall be cancelled. The authorized capital stock of the Corporation
outstanding at the time of the merger, all of which is owned by the
Parent shall, at the time the merger becomes effective, be reissued to
GMH Holdings, Inc., a Delaware corporation; and further
RESOLVED: That the Plan of Merger, the Articles of Merger and the
Certificate of Ownership and Merger presented to the Board of
Directors on the date hereof are hereby authorized and approved.
Secured Credit Agreement and Related Documents
RESOLVED: That the Secured Credit Agreement to be entered into by and
between First Source Financial LLP ("First Source") and the
Corporation (the "Secured Credit Agreement"), in substantially the
form presented to the Directors on the date hereof, is hereby
authorized and approved; and further
RESOLVED: That the Revolving Note in the maximum principal amount of
$16,000,000 made by the Corporation to First Source (the "Revolving
Note"), in substantially the form presented to the Directors on the
date hereof is hereby authorized and approved; and further
RESOLVED: That the Working Capital Note in the maximum principal
amount of $6,000,000 made by the Corporation to First Source (the
"Working Capital Note"), in substantially the form presented to the
Directors on the date hereof is hereby authorized and approved; and
<PAGE>
further
RESOLVED: That the Term Loan Note in the maximum principal amount of
$4,000,000 made by the Corporation to First Source (the "Term Loan
Note"), in substantially the form presented to the Directors on the
date hereof is hereby authorized and approved; and further
RESOLVED: That the Security Agreement to be entered into by the
Corporation in favor of First Source (the "Security Agreement") and
the Assignment of Trademarks contemplated thereby (the "Assignment of
Trademarks"), in substantially the form presented to the Directors on
the date hereof, are hereby authorized and approved.
Subordination Agreement
RESOLVED: That the Subordination Agreement to be entered into by and
among the Corporation, First Source, The Equitable Life Assurance
Society of the United States ("Equitable"), RFE Investment Partners V,
L.P. ("RFE"), Sterling Commercial Capital, Inc. ("Sterling"), the
State Treasurer of the State of Michigan, Custodian of the Michigan
Public School Employees' Retirement System, Michigan State Police
Retirement System and Michigan Judges' Retirement System (" State of
Michigan"), GMH Holdings, Inc. and Strategic Investments & Holdings,
Inc. (the "Subordination Agreement"), in substantially the form
presented to the Directors on the date hereof, is hereby authorized
and approved.
Senior Subordinated Note
RESOLVED: That the Senior Subordinated Note in the maximum principal
amount of $17,243,295 ("Senior Subordinated Note") made by the
Corporation to Equitable in the execution form presented to the
Directors on the date hereof, is hereby authorized and approved.
Securities Purchase Agreement
RESOLVED: That the Securities Purchase Agreement (the "Securities
Purchase Agreement") to be entered into by and among the Corporation,
GMH Holdings, Inc., RFE, Sterling and State of Michigan, in
substantially the form presented to the Directors on the date hereof,
is hereby authorized and approved.
Junior Subordinated Notes
RESOLVED: That the Junior Subordinated Notes in the aggregate maximum
principal amount of $5,000,000 ("Junior Subordinated Notes") made by
the Corporation to each of RFE, Sterling and State of Michigan, in
substantially the form presented to the Directors on the date hereof,
is hereby authorized and approved.
Solvency Affidavit
RESOLVED: That the Solvency Affidavit to be executed by the
Corporation for the benefit of First Source, in substantially the form
presented to the Directors on the date hereof, is hereby authorized
and approved.
Deed to Secure Debt
RESOLVED: That the Deed to Secure Debt with respect to the property
known as 2255 Industrial Boulevard, Waycross, Georgia (the "Deed to
Secure Debt") to be executed by the Corporation in favor of First
Source, in substantially the form presented to the Directors on the
date hereof, is hereby authorized and approved.
Assignments of Leases
<PAGE>
RESOLVED: That the Assignments of Leases with respect to the
properties known as Plant 2, Plant 3, Plant 4, Vacant Lot adjacent to
Plant 4 and Airplane Hangar (the "Assignments of Leases"), to be
executed by the Corporation in favor of First Source, in substantially
the form presented to the Directors on the date hereof, is hereby
authorized and approved.
Leasehold Mortgage
RESOLVED: That the Leasehold Mortgage, Assignment of Leases and Rents
and Security Agreement (the "Leasehold Mortgage"), to be executed by
the Corporation in favor of First Source, in substantially the form
presented to the Directors on the date hereof, is hereby authorized
and approved.
Execution of Documents
RESOLVED: That the President, any Vice President and any Executive
Vice Presidents, the Treasurer, the Secretary and the Assistant
Secretary of the Corporation, acting singly, be and hereby are
authorized to execute and deliver the First Amendment, the Articles of
Merger, Certificate of Ownership and Merger, the Secured Credit
Agreement, Revolving Note, Working Capital Note, Term Loan Note,
Subordination Agreement, Senior Subordinated Note, Securities Purchase
Agreement, Junior Subordinated Notes, Solvency Affidavit, Deed to
Secure Debt, Assignments of Leases, Security Agreement, Assignment of
Trademarks and Leasehold Mortgage on behalf of the Corporation with
such changes therein as the officer executing the same may approve
(his execution and delivery thereof to be conclusive evidence of such
approval), and each officer of the Corporation is hereby authorized to
take all such actions and execute and deliver all such other
agreements, certificates, instruments and other documents, and to
affix thereto the Corporation's seal as required, as may be necessary
or appropriate to perform and to carry out the purposes and intent of
the foregoing resolutions and the consummation of the transactions
contemplated thereby.
General Ratifications
RESOLVED: That the appropriate officers of the Corporation are
authorized to execute and deliver all such instruments, and amendments
to instruments, on behalf of the Corporation, and to take all such
action, as they deem necessary or appropriate to carry out the intent
of the agreements and documents referenced above and the above
resolutions and to consummate the Transactions. All acts authorized in
the above resolutions, but performed prior to the adoption of these
resolutions, are hereby ratified and affirmed.
RESOLVED: That any and all actions heretofore taken in furtherance of
the transactions authorized or contemplated by the foregoing
resolutions by each officer of the Corporation, be and hereby are,
ratified, approved and confirmed, including without limiting the
foregoing, the execution and delivery of any agreements, certificates,
financing statements, filings, affidavits, instruments and other
documents as may be or have been necessary or appropriate in order to
effectuate the purposes of the foregoing resolutions, and the
consummation of all transactions contemplated thereby and in
connection therewith.
<PAGE>
This consent may be executed in two or more counterparts,
each of which shall be deemed to be an original and all which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have signed this
Consent as of the 21st day of December, 1995.
/s/ Gary M. Brost
________________________________
Gary M. Brost
Director
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
ACTION TAKEN BY WRITTEN CONSENT
OF SOLE STOCKHOLDER
The undersigned, being the sole stockholder of General Manufactured
Housing, Inc., a Georgia corporation (the "Corporation"), does hereby consent,
pursuant to Article II, Section 2.6 of the By-Laws of the Corporation and
Section 12-2-704 of the Georgia Business Corporation Code, to the adoption of
the following resolutions with the same force and effect as if said resolutions
had been duly adopted at a meeting of the stockholders of the Corporation, and
direct that this Consent be filed with the minutes of the stockholders:
Merger
RESOLVED: That GMH Acquisition Corp., a corporation organized and existing
under the laws of the State of Delaware ("Parent") be merged into the
Corporation; and further
RESOLVED: That the merger shall become effective when the Articles of
Merger (the "Articles of Merger") have been filed in the office of the
Secretary of State of the State of Georgia and the Certificate of
Ownership and Merger (the "Certificate of Ownership and Merger") has been
filed in the office of the Secretary of State of Delaware; and further
RESOLVED: That the Articles of Incorporation, By-Laws, directors and
officers of the Corporation shall be the Articles of Incorporation, By-
Laws, directors and officers of the surviving corporation provided,
however, that the Articles of Incorporation of the Corporation shall be
amended and restated, upon filing of the Articles of Merger, to read in
their entirety as set forth in Exhibit A attached thereto; and further
RESOLVED: That the Corporation has authorized one hundred thousand
(100,000) shares of common stock, $100.00 par value, of which five
thousand two hundred and fifty (5,250) shares of common stock are issued
and outstanding, of which five thousand two hundred and fifty (5,250)
shares are owned by the Parent. At the time the merger becomes effective,
all of the issued and outstanding shares of the Parent shall be cancelled.
The authorized capital stock of the Corporation outstanding at the time of
the merger, all of which is owned by the Parent shall, at the time the
merger becomes effective, be reissued to GMH Holdings, Inc., a Delaware
corporation, which, prior to the merger, is the sole shareholder of
Parent; and further
RESOLVED: That the Plan of Merger, the Articles of Merger and the
Certificate of Ownership and Merger presented to the Board of Directors on
the date hereof are hereby authorized and approved; and further
RESOLVED: That the undersigned hereby acknowledges that the 5,250 shares
of common stock of the Corporation (the "Shares") being converted in the
merger are being converted for the undersigned's own account without the
participation of any other person, with the intent of holding the Shares
for investment and without the intent of participating, directly or
indirectly, in a distribution of the Shares or any portion thereof, nor is
the undersigned aware of the existence of any distribution of the
Corporation's securities.
RESOLVED: That the President, any Vice President or Executive Vice
President, the Treasurer, the Secretary and the Assistant Secretary of the
Corporation, acting singly, be and hereby are authorized to execute and
deliver the Articles of Merger and the Certificate of Ownership and Merger
on behalf of the Corporation with such changes therein as the officer
executing the same may approve (his execution and delivery thereof to be
conclusive evidence of such approval), and each officer of the Corporation
is hereby authorized to take all such actions and execute and deliver all
such other agreements, certificates, instruments and other documents, and
to affix thereto the Corporation's seal as required, as may be necessary
or appropriate to perform and to carry out the purposes and intent of the
foregoing resolutions and the consummation of the transactions
contemplated thereby.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this
Consent as of the 21st day of December, 1995.
GMH ACQUISITION CORP.,
as sole stockholder
By: /s Gary M. Brost
_______________________________
Gary M. Brost, President
<PAGE>
GMH ACQUISITION CORP.
GENERAL MANUFACTURED HOUSING, INC.
____________________________________________________
ACTION TAKEN BY WRITTEN CONSENT
IN LIEU OF JOINT MEETING
____________________________________________________
The undersigned, being the sole director of GMH Acquisition Corp., a
Delaware corporation ("Acquisition"), and of General Manufactured Housing ,
Inc., a Georgia corporation ("GMH"), (collectively, the "Corporations"), does
hereby consent, pursuant to Article II, Section 7 of the By-Laws of Acquisition
and Section 141(f) of the General Corporation Law of the State of Delaware and
Article III, Section 3.5 of the By-laws of GMH and Section 14-2-821 of the
Georgia Business Corporation Code to the adoption of the following resolutions
with the same force and effect as if said resolutions had been duly adopted at a
meeting of the Boards of Directors of each of the Corporations, and direct that
this Consent be filed with the minutes of the Board of Directors of each:
Election of Officers
RESOLVED: That the following are hereby elected officers of each of the
Corporations:
Shawn M. Martin Vice President
Carol McEwen Assistant Secretary
Execution of Merger Documents
RESOLVED: That any Vice President and any Assistant Secretary of the
Corporations, acting singly, be, and each of them hereby is, authorized to
execute and deliver the Articles of Merger in the form attached hereto as
Exhibit A (the "Articles of Merger") merging Acquisition into GMH with the
latter surviving, to be filed with the Secretary
<PAGE>
of State of the State of Georgia on behalf of the Corporations with such
changes therein as the officer executing the same may approve (his or her
execution and delivery thereof to be conclusive evidence of such
approval), and each officer of the Corporations is hereby authorized to
take all such actions and execute and deliver all such other documents,
and to affix thereto the Corporations' respective seals as required, as
may be necessary or appropriate to perform and to carry out the purposes
and intent of the foregoing resolutions and the consummation of the
transactions contemplated thereby.
Execution of Amended and Restated Articles of Incorporation
RESOLVED: That any Vice President and any Assistant Secretary of the
Corporations, acting singly, be, and each of them hereby is, authorized to
execute and deliver the Amended and Restated Articles of Incorporation of
GMH attached to the Articles of Merger, with such changes therein as the
officer executing the same may approve (his or her execution and delivery
thereof to be conclusive evidence of such approval), and each officer of
the Corporations is hereby authorized to take all such actions and execute
and deliver all such other documents, and to affix thereto the
Corporations' respective seals as required, as may be necessary or
appropriate to perform and to carry out the purposes and intent of the
foregoing resolutions and the consummation of the transactions
contemplated thereby.
Resignation of Officers.
RESOLVED: That, effective immediately following the execution and filing
of the Articles of Merger, with the attached Amended and Restated Articles
of Incorporation, with the Secretary of State of the State of Georgia, the
resignations of Shawn M. Martin and Carol McEwen as officers of the
Corporations are accepted by each of the Corporations.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Consent as of the
21st day of December, 1995.
/s/ Gary M. Brost
___________________________________
Gary M. Brost, Sole Director
of GMH Acquisition Corp. and
Sole Director of General
Manufactured Housing, Inc.
<PAGE>
EXHIBIT A
ARTICLES OF MERGER
<PAGE>
EXHIBIT D
STOCK CERTIFICATE
<PAGE>
[Form of Stock Certificate No. 27 for 5,250 shares of Common Stock of General
Manufactured Housing, Inc. issued to GMH Holdings, Inc. on December 21, 1995.]
<PAGE>
EXHIBIT C
<PAGE>
EXHIBIT C-2
Form of Opinion of Georgia Counsel
See attachment to Exhibit C-1.
<PAGE>
EXHIBIT C-3
Form of Opinion of Company Counsel
Not Included.
<PAGE>
EXHIBIT D
Form of Restated Certificate of Incorporation
<PAGE>
RESTATED
CERTIFICATE OF INCORPORATION
OF
GMH HOLDINGS, INC.
Pursuant to the provisions of Sections 241 and 245 of the General
Corporation Law of the State of Delaware (the "G.C.L.") the undersigned, Gary M.
Brost and James C. DelZoppo, the President and Assistant Secretary,
respectively, of GMH HOLDINGS, INC., a corporation organized and existing in the
State of Delaware (the "Corporation"), do hereby certify as follows:
FIRST: The name of the Corporation is GMH HOLDINGS, INC.
SECOND: The Certificate of Incorporation of the Corporation was filed
with the Secretary of State on November 20, 1995.
THIRD: This Restated Certificate of Incorporation restates, integrates
and amends the Certificate of Incorporation of the Corporation. This Restated
Certificate of Incorporation amends the authorized capital stock of the
Corporation and the relative rights and preferences thereof. The Corporation has
not received any payment for any of its stock, and this Restated Certificate of
Incorporation has been duly adopted by the Directors of the Corporation in
accordance with the provisions of Sections 241 and 245 of the G.C.L.
FOURTH: The capital of the Corporation will not be reduced under or by
reason of the amendments to the Certificate of Incorporation effected hereby.
FIFTH: The text of the Certificate of Incorporation is hereby amended
and restated to read as herein set forth in full:
FIRST: The corporate name of the corporation (hereinafter called the
"Corporation") is GMH HOLDINGS, INC.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is located at 32 Loockerman Square, Suite 400, County of Kent,
City of Dover, State of Delaware 19901, and the name of the registered agent of
this Corporation in the State of Delaware at such address is The Prentice-Hall
Corporation/System, Inc.
THIRD: The purposes for which the Corporation is organized shall
include the transaction of any or all lawful business for which corporations may
be organized under the provisions of the General Corporation Law of the State of
Delaware.
<PAGE>
FOURTH: A. The Corporation is authorized to issue four (4) classes
of capital stock, to be designated, respectively, Preferred Stock ("Preferred
Stock"), Class A Common Stock, Class B Common Stock and Class C Common Stock
(collectively, "Common Stock"). The total number of shares of capital stock
which the Corporation is authorized to issue is Seventeen Million, Four Hundred
Sixty-Two Thousand, Five Hundred (17,462,500). The total number of shares of
Preferred Stock which the Corporation shall have the authority to issue is Ten
Million, One Hundred Fifty Thousand (10,150,000). The total number of shares of
Class A Common Stock which the Corporation shall have the authority to issue is
Four Million, Three Hundred Seventy-five Thousand (4,375,000). The total number
of shares of Class B Common Stock which the Corporation shall have the authority
to issue is Seven Hundred Eighty-Seven Thousand, Five Hundred (787,500). The
total number of shares of Class C Common Stock which the Corporation shall have
authority to issue is Two Million, One Hundred Fifty Thousand (2,150,000). The
Preferred Stock shall have a par value of $.001 per share, the Class A Common
Stock shall have a par value of $.001 per share, the Class B Common Stock shall
have a par value of $.001 per share and the Class C Common Stock shall have a
par value of $.001 per share.
B. The Preferred Stock shall be divided into series. The first
series shall consist of 8,000,000 shares and is designated "Series A Redeemable
Preferred Stock" (the "Series A Preferred Stock"). The second series shall
consist of 2,150,000 shares and is designated "Series B Convertible Preferred
Stock" (the "Series B Preferred Stock"). The remaining shares of Preferred Stock
may be issued from time to time in one or more series. The Board of Directors of
the Corporation is authorized, subject to limitations prescribed by law and the
provisions of this Article FOURTH, to provide for the issuance of all or any of
the remaining shares of Preferred Stock in one or more series, and by filing a
certificate pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in each such
series, and to fix the designation, powers, preferences and rights of the shares
of each such series and the qualifications, limitations or restrictions thereof.
The Board of Directors is also expressly authorized to increase or decrease (but
not below the number of shares of such series then outstanding) the number of
shares of any series other than the Series A or Series B Preferred Stock
subsequent to the issue of shares of that series. In case the number of shares
of any such series shall be so decreased, the shares constituting such decrease
shall resume the status that they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
The authority of the Board of Directors with respect to each series
shall include, but not be limited to, determination as to the following:
(a) The number of shares constituting that series and the
distinctive designation of that series;
(b) The dividend rate on the shares of that series, if any,
whether dividends shall be cumulative, and if so, from which date or
dates, and the relative rights of priority, if any, of payment of
dividends on shares of that series;
(c) Whether that series shall have voting rights, in addition to
the voting rights provided by law, and, if so, the terms of such
voting rights;
(d) Whether that series shall have conversion privileges, and,
if so, the terms and conditions of such conversion, including
provision for adjustment of the conversion rate in such events as the
Board of Directors shall determine;
(e) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall be
redeemable, and the amount per share payable in case of redemption,
<PAGE>
which amount may vary under different conditions and at different
redemption dates;
(f) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms
and amount of such sinking fund;
(g) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment
of shares of that series; and
(h) Any other relative rights, preferences and limitations of
that series.
C. The following is a statement of the powers, designations,
preferences, privileges, rights, qualifications, limitations and restrictions in
respect to the Class A Common Stock, Class B Common Stock, Class C Common Stock,
the Series A Preferred Stock and the Series B Preferred Stock of the
Corporation:
1. Identical Rights of Class A, Class B and Class C Common Stock.
Except as otherwise provided in this Article FOURTH, all shares of Class A
Common Stock, Class B Common Stock and Class C Common Stock shall be identical
and shall entitle the holders thereof to the same rights and privileges.
2. Dividends; Other Distributions.
(a) The holders of shares of the Series A Preferred Stock shall
be entitled to receive dividends, out of any assets legally available
therefor, prior and in preference to any declaration or payment of any
dividend on the Series B Preferred Stock, Common Stock or other equity
securities of the Corporation, at the annual rate of twelve cents
($0.12) per share (as adjusted for any combinations, consolidations or
stock distributions or dividends with respect to such shares) payable,
only if and to the extent there exist cumulative earnings sufficient
to pay such dividend, quarterly in arrears on each March 31, June 30,
September 30 and December 31 of each year commencing March 31, 1996.
Such dividends shall accrue on each share from the date of filing this
Restated Certificate of Incorporation with the Secretary of State of
the State of Delaware (the "Original Issue Date") and shall accrue
from day to day, whether or not earned or declared. Such dividends
shall be cumulative so that if such dividends in respect of any
previous or current quarterly dividend period, at the annual rate
specified above, shall not have been paid or declared and a sum
sufficient for the payment thereof set apart, the deficiency shall
first be fully paid before any dividend or other distribution shall be
paid on or declared and set apart for the Series B Preferred Stock,
the Common Stock or any other equity securities of the Corporation.
(b) The holders of shares of Series B Preferred Stock shall not
be entitled to receive dividends on such shares.
(c) No dividends or distributions may be declared and paid upon
shares of Common Stock in any fiscal year of the Corporation so long
as any Series A Preferred Stock or Series B Preferred Stock remains
outstanding. When and as dividends are declared on the Common Stock,
whether payable in cash, in property or in securities of the
Corporation, the holders of the Common Stock shall be entitled to
share equally, share for share, in such dividends, except that if
dividends are declared which are payable in shares of Common Stock,
dividends shall be declared which are payable at the same rate on all
classes of stock, but such dividends shall be payable only in shares
of Class A Common Stock to
<PAGE>
holders of Class A Common Stock, shall be payable only
in shares of Class B Common Stock to holders of Class B
Common Stock and shall be payable only in shares of
Class C Common Stock to holders of Class C Common
Stock.
(d) If the Corporation shall in any manner subdivide (by stock
split, stock dividend or otherwise) or combine (by reverse stock split
or otherwise) the outstanding shares of one class of Common Stock, the
outstanding shares of the other class of Common Stock shall be
proportionately subdivided or combined.
3. Liquidation Preference. In the event of any liquidation,
dissolution, or winding up of the Corporation, either voluntary or involuntary,
distributions to the shareholders of the Corporation shall be made in the
following manner:
(a) The holders of the Series A Preferred Stock shall be
entitled to receive, prior and in preference to any distribution of
any of the assets or surplus funds of the Corporation to the holders
of the Series B Preferred Stock or the Common Stock, by reason of
their ownership of such stock, (i) the amount of $1.00 per share (the
"Series A Original Cost") for each share of Series A Preferred Stock
then held by them, adjusted for any combinations, consolidations,
stock splits, or stock distributions or dividends with respect to such
shares, plus (ii) an amount equal to the accrued but unpaid dividends
whether or not earned or declared, on such share of Series A Preferred
Stock (such sum being referred to herein as the "Series A Liquidation
Value"). The assets and funds thus distributed among the holders of
the Series A Preferred Stock shall be distributed among the holders of
the Series A Preferred Stock in proportion to the full Series A
Liquidation Value each such holder is otherwise entitled to receive in
accordance with the preceding sentence.
(b) If, upon the completion of the distributions contemplated by
Section C.3(a) of this Article FOURTH, assets and funds remain
available for distribution by the Corporation, the holders of the
Series B Preferred Stock and Class C Common Stock shall be entitled to
receive, prior and in preference to any distribution of any of the
assets or surplus funds of the Corporation to the holders of the Class
A and Class B Common Stock, by reason of their ownership of such
stock, (i) the amount of $1.00 per share (the "Series B and Class C
Liquidation Value") for each share of Series B Preferred Stock and
Class C Common Stock then held by them, adjusted for any combinations,
consolidations, stock splits, or stock distributions or dividends with
respect to such shares. The assets and funds thus distributed among
the holders of the Series B Preferred Stock and Class C Common Stock
shall be distributed among the holders of the Series B Preferred Stock
and Class C Common Stock in proportion to the full Series B and Class
C Liquidation Value each such holder is otherwise entitled to receive
in accordance with the preceding sentence.
(c) If, upon the completion of the distributions contemplated by
Sections C.3(a) and (b) of this Article FOURTH, assets and funds
remain available for distribution by the Corporation, the entire
remaining assets and funds of the Corporation legally available for
distribution, if any, shall be distributed among the holders of the
Series B Preferred Stock and the Common Stock in proportion to the
number of shares of the Series B Preferred Stock and of the Common
Stock then held by them such that each share of Series B Preferred
Stock and each share of Common Stock shall be entitled to a ratable
distribution of such assets and funds.
(d) For purposes of this Section C.3, unless
<PAGE>
otherwise approved by the holders of at least 66-2/3% of the then
outstanding Series A Preferred Stock voting as a class, (i) any
acquisition of the Corporation by means of merger of the Corporation
with or into any other corporation or other entity or person or other
form of corporate reorganization in which the Corporation shall not be
the continuing or surviving entity of such merger or reorganization
(other than a mere reincorporation transaction) or a transaction in
which the Corporation is the surviving entity but the shares of the
Corporation's capital stock outstanding immediately prior to the
transaction are exchanged or converted by virtue of the transaction
into other property, whether in the form of securities, cash or
otherwise, or (ii) a sale of all or substantially all of the assets of
the Corporation shall be treated as a liquidation, dissolution or
winding up of the Corporation and shall entitle the holders of Series
A Preferred Stock, the Series B Preferred Stock and the Class C Common
Stock to receive at closing, in cash, securities or other property
(valued as provided in Section C.3(e)) in amounts as specified in
Sections C.3(a) and (b) of this Article FOURTH.
(e) Whenever the distribution provided for in this Section C.3
shall be payable in securities or property other than cash, the "fair
value" of the assets or property to be distributed in such event shall
be determined in good faith by the Board of Directors of the
Corporation.
4. Voting Rights.
(a) General Voting Rights. Except as otherwise provided herein
and in Section C.7 of this Article FOURTH, and except as otherwise
required by law, (i) the holder of each share of Class A Common Stock
and Class C Common Stock issued and outstanding shall have one vote
per share, and (ii) the holder of each share of Series B Preferred
Stock shall be entitled to the number of votes as is equal to the
number of shares of Class C Common Stock into which such holder's
shares of Series B Preferred Stock could be converted at the record
date for determination of the shareholders entitled to vote on such
matters, or, if no such record date is established, at the date such
vote is taken or any written consent of stockholders is solicited, and
shall have voting rights and powers equal to the voting rights and
powers of the Class C Common Stock (except as otherwise expressly
required by law), such votes to be counted together with all other
shares of stock of the Corporation having general voting power and not
separately as a class. Except as expressly provided herein, the Class
B Common Stock and the Series A Preferred Stock shall be non-voting.
Holders of Common Stock, Series A Preferred Stock and Series B
Preferred Stock shall be entitled to notice of any stockholders,
meeting in accordance with the By-laws of the Corporation. Fractional
votes by the holders of Series B Preferred Stock, as the case may be,
shall not, however, be permitted, and any fractional voting rights
resulting from the above formula (after aggregating all shares into
which shares of Series B Preferred Stock held by each holder could be
converted) shall be rounded to the nearest lower whole number.
(b) Special Voting Rights. No amendment to, or modification or
waiver of, any provision of this Certificate of Incorporation or the
By-Laws of the Corporation that (i) alters or changes the powers,
preferences or rights of the shares of Class B Common Stock or (ii)
modifies the provisions of Section C.5(b)(iii) of this Article FOURTH
as to shares of Class A Common Stock shall be effective without the
vote as a separate class of the holders of at least 66-2/3% of the
shares of the Class B Common Stock.
(c) Meeting Procedures. At every meeting of the
<PAGE>
holders of the Class A and Class C Common Stock, such holders shall
vote together as a class. At every meeting of the holders of the Class
A, Class B and Class C Common Stock at which the holders of Class B
Common Stock are entitled to vote on any matter, such holders shall,
except as otherwise provided in subdivision (b), vote together as a
single class.
(d) Board Voting Matters. The Board of Directors shall consist
of seven (7) members. The holders of Series A Preferred Stock, as a
class, shall be entitled to elect two (2) members of the Board of
Directors. The holders of the Series B Preferred Stock and Class C
Common Stock, voting together as a class, shall be entitled to elect
four (4) members of the Board of Directors. The holders of the Class A
Common Stock as a class, shall be entitled to elect the remaining
member of the Board of Directors.
(e) Board Vacancy Procedures. In the case of any vacancy in the
office of a director occurring among the directors elected by the
holders of the Series A Preferred Stock, Series B Preferred Stock
and/or Class C Common Stock and Class A Common Stock, as the case may
be, pursuant to Section C.4(d) of this Article FOURTH, the Corporation
shall, promptly, but in any event within five (5) days after the
creation of such vacancy, call a special meeting of stockholders for
the purpose of filling any vacancy created in the Board, in accordance
with the By-Laws of the Corporation. The Corporation shall immediately
thereafter give the stockholders of the Corporation notice of such
special meeting. At such special meeting, the stockholders entitled to
elect the director(s) as to which the vacancy relates shall be
entitled to elect a director to fill each such vacancy for the
unexpired term of such Board seat, and such director or directors
shall serve until the next annual meeting of stockholders or until his
successor or successors shall have been duly elected and shall
qualify. Any director who shall have been elected by the holders of
the Series A Preferred Stock, Series B Preferred Stock and/or Class C
Common Stock or Class A Common Stock, as the case may be, or any
director so elected as provided in the preceding sentence hereof, may
be removed during the aforesaid term of office, whether with or
without cause, only by the affirmative vote of the holders of a
majority of the Series A Preferred Stock, Series B Preferred Stock
and/or Class C Common Stock or Class A Common Stock, as the case may
be, that elected such director.
(f) So long as any shares of the Series A Preferred Stock
remain outstanding, in the event of (i) a failure of the Corporation
to redeem shares of Series A Preferred Stock as required pursuant to
Section C.6 of this Article FOURTH; (ii) a failure of the Corporation
to pay dividends on the Series A Preferred Stock as provided in
Section C.2 of this Article FOURTH and such failure continues such
that the Corporation shall have accrued and unpaid dividends in
respect of the Series A Preferred Stock in excess of $2,500,000; or
(iii) the Corporation or any subsidiary of the Corporation shall
default in the payment of any of the Corporation's (or such
subsidiary's) indebtedness for borrowed money (including capitalized
leases) in an amount in excess of $10,000, and such default shall
continue unwaived or uncured for a period of 180 days or more (the
"Events of Default"), then the holders of the Series A Preferred
Stock, as a class, shall (immediately upon the giving of written
notice to the Corporation by the holders of a majority of the then
outstanding shares of Series A Preferred Stock) be entitled to elect
the smallest number of directors that shall constitute a majority of
the authorized number of directors of the Corporation, and the holders
of the Class A Common Stock, Class C Common Stock and Series B
Preferred Stock, as a class, voting together as a single class, shall
be entitled to elect the remaining
<PAGE>
members of the Board of Directors in accordance with the procedures
set forth in Section C.4(g). Upon the election by the holders of the
Series A Preferred Stock, as a class, of the directors they are
entitled to elect as provided in the immediately preceding sentence,
the terms of office of all persons who were theretofore directors of
the Corporation shall forthwith terminate, whether or not the holders
of the Class A Common Stock, Class C Common Stock and Series B
Preferred Stock, voting together as a single class, shall then have
elected the remaining directors of the Corporation. If, after the
election of a new Board of Directors pursuant to this Section C.4(f),
the Events of Default are cured (which for purposes of clause (ii) of
this subparagraph (f) shall mean that accrued and unpaid dividends on
the Series A Preferred Stock in excess of $500,000 shall have been
paid to the holders thereof and for purposes of clause (iii) of this
subparagraph (f) shall mean that no default in the payment of any of
the Corporation's (or such subsidiary's) indebtedness for borrowed
money shall exist), then the holders of the Series A Preferred Stock
shall be divested of the special voting rights specified in this
section, and the voting procedures set forth in Section C.4(d) of this
Article FOURTH shall immediately, without any further action, apply.
However, the special voting rights of this section shall again accrue
to the holders of the shares of the Series A Preferred Stock, as a
class, in case of any later occurrence of an Event of Default. Upon
the termination of any such special voting rights as hereinabove
provided, the Board of Directors shall promptly call a special meeting
of the stockholders at which all directors will be elected in
accordance with the provisions of Section C.4(d) of this Article
FOURTH, and the terms of office of all persons who are then directors
of the Corporation shall terminate immediately upon the election of
their successors.
(g) Whenever under the provisions of Section C.4(f) hereof, the
right shall have accrued to the holders of the Series A Preferred
Stock, as a class, to elect a majority of the Corporation's directors,
the Board of Directors shall, within ten (10) days after delivery to
the Corporation at its principal office of a request to such effect by
the holders of a majority of the then outstanding shares of the Series
A Preferred Stock, call a special meeting of the stockholders for the
election of directors, to be held upon not less than ten (10) nor more
than twenty (20) days' notice to such holders. If such notice of
meeting is not given within the ten (10) days required above, the
holders of Series A Preferred Stock requesting such meeting may also
call such meeting and for such purposes shall have access to the stock
books and records of the Corporation. At any meeting so called or at
any other meeting held for the election of directors while the holders
of shares of Series A Preferred Stock shall have the voting power
provided in Section C.4(f), the holders of a majority of the shares of
Series A Preferred Stock present in person or by proxy or voting by
written consent, shall be sufficient to constitute a quorum for the
election of directors as herein provided. In the case of any vacancy
in the office of a director occurring among the directors elected by
the holders of Series A Preferred Stock pursuant to Section C.4(f),
the remaining directors so elected by that class may by affirmative
vote of a majority thereof (or the remaining director so elected if
there be but one) elect a successor or successors to hold office for
the unexpired term of the director or directors whose place or places
shall be vacant, provided that if there are no remaining directors so
elected by that class, the vacancies may be filled by the affirmative
vote of the holders of a majority of the shares of Series A Preferred
Stock given either at a special meeting of such stockholders duly
called for that purpose or pursuant to a written consent of
<PAGE>
stockholders. Any directors who shall have been elected by the holders
of Series A Preferred Stock or by any directors so elected as provided
in the next preceding sentence hereof may be removed during the
aforesaid term of office, either with or without cause, by, and only
by, the affirmative vote of the holders of a majority of the shares of
the Series A Preferred Stock who elected such director or directors,
given either at a special meeting of such stockholders duly called for
that purpose or pursuant to a written consent of stockholders, and any
vacancy thereby created may be filled by the holders of Series A
Preferred Stock represented at such meeting or pursuant to such
written consent.
5. Conversion.
(a) The holders of the Series B Preferred Stock and Class C
Common Stock shall have conversion rights as follows:
(i) Right to Convert. (A) Each share of Series B Preferred Stock
shall be convertible, at the option of the holder thereof, at any time
after the date of issuance of such share at the office of the
Corporation or any transfer agent for the Series B Preferred Stock,
into such number of fully paid and nonassessable shares of Class C
Common Stock as is determined by dividing the initial Series B
Conversion Price by the Series B Conversion Price then in effect. The
"initial Series B Conversion Price" for the Series B Preferred Stock
shall be $1.00. The initial Series B Conversion Price shall be subject
to adjustment as hereinafter provided. No amount shall be payable by a
shareholder in respect of the conversion of any share of Series B
Preferred Stock.
(ii) Automatic Conversion.
(A) Each share of Series B Preferred Stock shall be
converted into one or more share(s) of Class A Common Stock at
the then-effective Series B Conversion Price for such share of
Series B Preferred Stock, at the option of the Corporation,
immediately upon the closing of a firm commitment underwritten
public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended (the "Securities
Act"), covering the offer and sale of shares of the Corporation's
Common Stock for the account of the Corporation and/or selling
stockholders to the public at a price per share of not less than
$5.00 per share (appropriately adjusted for any recapitalization,
stock split, reverse stock split, stock dividend or the like) and
resulting in aggregate net proceeds to the Corporation (after
deducting underwriters' discounts and expenses relating to the
issuance, including fees of the Corporation's counsel) of not
less than $10,000,000 (a "Qualified Offering") if and only if the
holders of the Series B Preferred Stock are first paid their
liquidation preference provided for in Section C.3(b) hereof.
(B) Each share of Class C Common Stock shall be converted
into one share of Class A Common Stock, at the option of the
Corporation, immediately upon the closing of a Qualified Offering
if and only if the holders of the Class C Common Stock are first
paid their liquidation preference provided for in Section C.3(b)
hereof.
(iii) Mechanics of Conversion. No fractional shares of Class A
Common Stock or Class C Common Stock shall be issued upon conversion
of Series B Preferred Stock. All shares of Class A Common Stock or
Class C Common Stock (including fractions thereof) issuable upon
conversion of more than one share of Series B
<PAGE>
Preferred Stock by a holder thereof shall be aggregated for purposes
of determining whether the conversion would result in the issuance of
any fractional share. If, after the aforementioned aggregation, the
conversion would result in the issuance of a fraction of a share of
Class A Common Stock or Class C Common Stock, the Corporation shall,
in lieu of issuing any fractional shares to which the holder would be
otherwise entitled, pay cash equal to the fair market value of such
fractional share on the date of conversion, which fair market value
shall be determined in good faith by the Board of Directors. Before
any holder of Series B Preferred Stock shall convert into full shares
of Class A Common Stock or Class C Common Stock and to receive
certificates therefor, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation
or of any transfer agent for the Series B Preferred Stock, and shall
give written notice to the Corporation at such office that such holder
elects to convert the same. The Corporation shall, as soon as
practicable thereafter, issue and deliver at the office of the
Corporation or at such transfer agent's office to such holder of
Series B Preferred Stock, (i) a certificate or certificates for the
number of shares of Class A Common Stock or Class C Common Stock to
which such holder shall be entitled as aforesaid, and (ii) cash or a
check payable to the holder of such Series B Preferred Stock in the
amount of any cash amounts payable as the result of a conversion into
fractional shares of Class A Common Stock or Class C Common Stock.
Such conversion shall be deemed to have been made immediately prior to
the close of business on the date of such surrender of the Series B
Preferred Stock to be converted, or, in the case of a conversion at
the option of the Corporation pursuant to Section C.5(a)(ii),
immediately prior to the closing of the Qualified Offering, and the
person or persons entitled to receive the Class A Common Stock or
Class C Common Stock issuable upon such conversion shall be treated
for all purposes as the record holder or holders of such Class A
Common Stock or Class C Common Stock on the date of such conversion.
If the conversion is in connection with a Qualified Offering the
conversion shall be conditioned upon the closing with the underwriter
of the sale of securities pursuant to such offering, in which event
the person(s) entitled to receive the Class A Common Stock issuable
upon such conversion of the Series B Preferred Stock shall not be
deemed to have converted such Series B Preferred Stock, until
immediately upon the closing of such sale of securities.
(iv) Adjustments to Conversion Price for Certain Issues.
(A) Adjustments for Subdivisions, Combinations or
Consolidation of Class A or Class C Common Stock. In the event
the Corporation at any time or from time to time after the
Original Issue Date shall declare or pay, without consideration,
any dividend on the Class A Common Stock or Class C Common Stock
payable in Class A Common Stock or Class C Common Stock or in any
right to acquire Class A Common Stock or Class C Common Stock for
no consideration, or shall effect a subdivision of the
outstanding shares of Class A Common Stock or Class C Common
Stock into a greater number of shares of Class A Common Stock or
Class C Common Stock (by stock split, reclassification or
otherwise than by a payment of a dividend in Class A Common Stock
or Class C Common Stock or in any right to acquire Class A Common
Stock or Class C Common Stock), or in the event the outstanding
Class A Common Stock or Class C Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser
number of shares of Class A Common
<PAGE>
Stock or Class C Common Stock, then the Series B Conversion Price
in effect immediately prior to such event shall, concurrently
with the effectiveness of such event, be proportionately
decreased or increased as appropriate. In the event that the
Corporation shall declare or pay, without consideration, any
dividend on the Class A Common Stock or Class C Common Stock
payable in any right to acquire Class A Common Stock or Class C
Common Stock for no consideration, then the Corporation shall be
deemed to have made a dividend payable in Class A Common Stock or
Class C Common Stock in an amount of shares equal to the maximum
number of shares issuable upon exercise of such rights to acquire
Class A Common Stock or Class C Common Stock.
(B) Adjustments for Reclassification, Exchange and
Substitution. If the Class A Common Stock or Class C Common Stock
issuable upon conversion of the Series B Preferred Stock shall be
changed into the same or a different number of shares of any
other class or classes of stock, whether by capital
reorganization, reclassification or otherwise (other than a
subdivision or combination of shares provided for above), the
Series B Conversion Price then in effect for each share of the
Series B Preferred Stock, shall, concurrently with the
effectiveness of such reorganization, reclassification or other
event, be proportionately adjusted such that the Series B
Preferred Stock shall be convertible into, in lieu of the number
of shares of Class A Common Stock or Class C Common Stock which
the holders would otherwise have been entitled to receive, that
number of shares of such other class or classes of stock or other
securities equivalent to the number of shares of Class A Common
Stock or Class C Common Stock that would have been subject to
receipt by the holders upon conversion of the Series B Preferred
Stock immediately before that change.
(v) No Impairment. The Corporation shall not, by amendment
of its Certificate of Incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the
Corporation but shall at all times in good faith assist in the
carrying out of all the provisions of this Section C.5 of this
Article FOURTH and in the taking of all such action as may be
necessary or appropriate in order to protect the conversion
rights of the holders of the Series B Preferred Stock against
impairment.
(vi) Certificate as to Adjustments. Upon the occurrence of
each adjustment or readjustment of the Series B Conversion Price
pursuant to this Section C.5 of this Article FOURTH, the
Corporation at its expense shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and furnish
to each holder of shares of Series B Preferred Stock, a
certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series B Preferred Stock,
furnish or cause to be furnished to such holder a like
certificate setting forth (x) such adjustments and readjustments,
(y) the Series B Conversion Price at the time in effect, and (z)
the number of shares of Class A Common Stock or Class C Common
Stock and the amount, if any, of
<PAGE>
other property which at the time would be received upon the
conversion of shares of Series B Preferred Stock.
(vii) Notices of Record Date. In the event that the
Corporation shall propose at any time:
(A) to declare any dividend or distribution upon its
Class A Common Stock or Class C Common Stock, whether or not
a regular cash dividend or a dividend payable in shares of
Class A Common Stock or Class C Common Stock, and whether or
not out of earnings or earned surplus;
(B) to offer for subscription pro rata to the holders
of any class or series of its stock any additional shares of
stock of any class or series or other rights;
(C) to effect any reclassification or recapitalization
of its Class A Common Stock or Class C Common Stock
outstanding involving a change in the Class A Common Stock
or Class C Common Stock; or
(D) to merge or consolidate with or into any other
corporation, or sell, lease or convey all or substantially
all its property or business, or to liquidate, dissolve or
wind up or to enter into any other transaction contemplated
by Section C.3(d)(i) or (ii);
then, in connection with each such event, the Corporation
shall send to the holders of the Series A Preferred Stock
and Series B Preferred Stock:
(1) at least 20 days' prior written notice of the date
on which a record shall be taken for such dividend,
distribution or subscription rights (and specifying the date
on which the holders of Class A Common Stock or Class C
Common Stock shall be entitled thereto) or for determining
rights to vote in respect of the matters referred to in (C)
and (D) above; and
(2) in the case of the matters referred to in (C) and
(D) above, in the event a record date is taken with respect
to any such matter, at least 20 days' prior written notice
of such record date or, if no such record date is taken, at
least 20 days' prior written notice of the date when such
matters shall take place (and specifying the date on which
the holders of Class A Common Stock or Class C Common Stock
shall be entitled to exchange their shares of Class A Common
Stock or Class C Common Stock for securities or other
property deliverable upon the occurrence of ouch event).
Each such written notice shall be delivered personally or
sent by first class mail, postage prepaid, addressed to the
holders of the Series A Preferred Stock and/or Series B
Preferred Stock, as the case may be, at the address for each
such holder as shown on the books of the Corporation.
(viii) Issue Taxes. The Corporation shall pay any and all
issue and other takes that may be payable in respect of any issue
or delivery of shares of Class A Common Stock on conversion of
Series B Preferred Stock pursuant hereto; provided, however, that
the Corporation shall not
<PAGE>
be obligated to pay any transfer taxes resulting from any
transfer requested by any holder in connection with any such
conversion.
(ix) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Class A Common Stock and
Class C Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series B Preferred Stock, such
number of its shares of Class A Common Stock and Class C Common
Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series B Preferred
Stock; and if at any time the number of authorized but unissued
shares of Class A Common Stock or Class C Common Stock shall not
be sufficient to effect the conversion of all of the then
outstanding shares of the Series B Preferred Stock, the
Corporation shall take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized
but unissued shares of Class A Common Stock or Class C Common
Stock to such number of shares as shall be sufficient for such
purpose, including, without limitation, utilizing its best
efforts to obtain the requisite stockholder approval of any
necessary amendment to the Certificate of Incorporation.
(b) The holders of Class A and Class B Common Stock shall have
conversion rights as follows:
(i) Mandatory Conversion of Class B Common Stock Upon
Certain Transfers. Immediately upon the transfer of any shares of
Class B Common Stock to any Person other than an Insurance
Company Affiliate of the holder of such shares, such shares
shall, automatically and without any action on the part of the
holder thereof, be converted into the same number of shares of
Class A Common Stock as the number of shares of Class B Common
Stock so being transferred. Upon the surrender for registration
of transfer of any certificates which prior to the transfer
thereof represented shares of Class B Common Stock, (A) the
Corporation shall issue one or more new certificates, in such
denominations as may be requested, for the same aggregate number
of shares of Class A Common Stock represented by the certificates
so surrendered, and registered as the holder thereof may request,
and (B) the rights of the holder of such shares of Class B Common
Stock shall cease with respect to the number of shares so
transferred and the person or persons in whose name or names the
certificates for shares of Class A Common Stock are to be issued
upon such transfer shall be deemed to have become the holders of
record of the shares of Class A Common Stock represented thereby.
(ii) Mandatory Conversion of Class B Common Stock upon
Registration and Sale of Securities. Immediately upon the sale of
shares of Common Stock pursuant to an effective registration
statement filed under Section 5 of the Securities Act, each share
of Class B Common Stock sold pursuant to such registration
statement shall, automatically and without any action on the part
of the holder thereof, be converted into a share of Class A
Common Stock. Upon the surrender for registration of transfer of
any certificate or certificates which prior to the registered
sale thereof represented shares of Class B Common Stock, (A) the
Corporation shall issue one or more new certificates, in such
denominations as may be requested, for the same aggregate number
of shares of Class A Common Stock represented by the
<PAGE>
certificates so surrendered, and registered as the purchaser of
such shares of Class B Common Stock may request and (B) the
rights of the holder of such shares of Class B Common Stock shall
cease with respect to the number of shares so sold and the person
or persons in whose name or names the certificates for share of
Class A Common Stock are to be issued upon such sale shall be
deemed to have become the holder or holders of record of the
shares of Class A Common Stock represented thereby.
(iii) Mandatory Conversion of Class A Common Stock Upon
Certain Transfers. Immediately upon the transfer of any shares of
Class A Common Stock to any person who is a holder of Class B
Common Stock, such shares of Class A Common Stock shall,
automatically and without any action on the part of the holder
thereof, be converted into the same number of shares of Class B
Common Stock as the number of shares of Class A Common Stock so
being transferred. Upon the surrender for registration of
transfer of any certificates which prior to the transfer thereof
represented shares of Class A Common Stock, (A) the Corporation
shall issue one or more new certificates, in such denominations
as may be requested, for the same aggregate number of shares of
Class A Common Stock represented by the certificates so
surrendered, and registered as the purchaser of such shares may
request and (B) the rights of the holder of such shares of Class
A Common Stock shall cease with respect to the number of shares
so sold and the person or persons in whose name or names the
certificates for shares of Class B Common Stock are to be issued
upon such sale shall be deemed to have become the holder or
holders of record of the shares of Class B Common Stock
represented thereby.
(iv) Reservation of Shares, Validity, etc. The Corporation
shall at all times reserve and keep available out of its
authorized but unissued shares of Class A Common Stock, or its
treasury shares, solely for the purpose of issue upon the
conversion of the Class B Common Stock as provided in this
Section C.5(b), such number of shares of Class A Common Stock as
are then issuable upon the conversion of all outstanding shares
of Class B Common Stock. The Corporation shall at all times
reserve and keep available out of its authorized but unissued
shares of Class B Common Stock, or its treasury shares, solely
for the purpose of issue upon the conversion of the Class A
Common Stock as provided in this Section C.5(b), such number of
shares Class B Common Stock as are then issuable upon the
conversion of all outstanding shares of Class A Common Stock. The
Corporation covenants that all shares of Class A Common Stock and
Class B Common Stock which are issuable upon conversion shall,
when issued, be duly and validly issued, fully paid and
nonassessable and free of all liens and charges. The Corporation
shall take all such action as may be necessary to assure that all
such shares of Class A Common Stock or Class B Common Stock may
be so issued without violation of any law or any regulation, rule
or other requirement of any governmental authority applicable to
the Corporation or any requirement of any securities exchange
upon which shares of Class A Common Stock or Class B Common Stock
may be listed. The Corporation shall not take any action which
would affect the number of shares of Class A Common Stock or
Class B Common Stock outstanding or issuable for any purposes
unless immediately following such action the Corporation would
have authorized but unissued shares of Class A Common Stock and
Class B Common Stock, or treasury shares, not then reserved or
required to
<PAGE>
be reserved for any purpose other than the purpose of issue upon
conversion of Class B Common Stock or Class A Common Stock, as
the case may be, sufficient to meet the reservation requirements
of the first two sentences of this subdivision (v).
(v) Registration and Listing. If any shares of Class A
Common Stock or Class B Common Stock required to be reserved for
purposes of conversion hereunder require, before such shares may
be issued upon conversion, registration with or approval of any
governmental authority under any federal or state law (other than
any registration under the Securities Act or any state securities
law required by reason of any transfer involved in such
conversion), or listing on any domestic securities exchange, the
Corporation shall, at its expense and as promptly as possible,
use its best efforts to cause such shares to be duly registered
or approved or listed, as the case may be.
(vi) Charges. The issue of certificates for shares of Class
A Common Stock upon conversion of shares of Class B Common Stock
and certificates for shares of Class B Common Stock upon
conversion of shares of Class A Common Stock shall be made
without charge to the holders of such shares for any issue tax in
respect thereof or other costs incurred by the Corporation in
connection with such conversion and the related issue of shares
of Class A Common Stock and or Class B Common Stock, as the case
may be; provided that the Corporation shall not be required to
pay any tax which may be payable in respect of any transfer
involved in the issue and delivery of any certificate in a name
other than that of the holder of the Class B Common Stock
converted or the holder of the Class A Common Stock converted, as
the case may be.
(vii) Definitions. As used in this Section C.5(b), the
following terms shall have the following meanings:
Affiliate of a Person means another Person that directly, or
indirectly through one or more intermediaries, controls or is
controlled by or is under common control with such Person and
shall include any portfolio or investment fund of which such
Person is the sole investment advisor. The term "control" means
possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract
or otherwise.
Insurance Company Affiliate of a Person means an Affiliate
of such Person that is an insurance company subject to regulation
as such under the insurance laws of the jurisdiction of its
organization or in which it conducts business.
Person means an individual, a partnership, an association, a
joint venture, a corporation, a business, a trust, an
unincorporated organization or a government or any department,
agency or subdivision thereof.
6. Redemption.
(a) The Corporation shall redeem, from any source of funds
legally available therefor, all of the outstanding Series A Preferred
Stock, on December 31, 2003 (the "Series A Redemption Date"). The
Corporation shall effect such redemption by paying in cash in exchange
for the shares of Series A Preferred Stock to be redeemed a sum equal
to the Series A Original Cost (as adjusted for any stock dividends,
combinations or
<PAGE>
splits with respect to such shares) plus all
accumulated but unpaid dividends on such shares (the "Series A
Redemption Price").
(b) At least 15 but no more than 30 days prior to the Series A
Redemption Date written notice shall be mailed, first class postage
prepaid, to each holder of record (at the close of business on the
business day next preceding the day on which notice is given) of the
Series A Preferred Stock to be redeemed, at the address last shown on
the records of the Corporation for such holder, notifying such holder
of the redemption to be effected, specifying the number of shares to
be redeemed from such holder, the Series A Redemption Date, the Series
A Redemption Price, the place at which payment may be obtained and
calling upon such holder to surrender to the Corporation, in the
manner and at the place designated his certificate or certificates
representing the shares to be redeemed (the "Redemption Notice").
Except as provided in Section C.6(c), on or after the Series A
Redemption Date, each holder of Series A Preferred Stock to be
redeemed shall surrender to this Corporation the certificate or
certificates representing such shares, in the manner and at the place
designated in the Redemption Notice, and thereupon the Series A
Redemption Price of such shares shall be payable to the order of the
person whose name appears on such certificate or certificates as the
owner thereof and each surrendered certificate shall be cancelled. In
the event less than all the shares represented by any such certificate
are redeemed, a new certificate shall be issued representing the
unredeemed shares.
(c) From and after the Series A Redemption Date, unless there
shall have been a default in payment of the Series A Redemption Price,
all rights of the holders of shares of Series A Preferred Stock
designated for redemption in the Redemption Notice as holders of
Series A Preferred Stock (except the right to receive the Series A
Redemption Price without interest upon surrender of their certificate
or certificates) shall cease with respect to such shares, and such
shares shall not thereafter be transferred on the books of the
Corporation or be deemed to be outstanding for any purpose whatsoever.
If the funds of the Corporation legally available for redemption of
shares of Series A Preferred Stock on the Series A Redemption Date are
insufficient to redeem the total number of shares of Series A
Preferred Stock to be redeemed on such date, those funds which are
legally available will be used to redeem the maximum possible number
of such shares ratably among the holders of such shares to be redeemed
based upon their holdings of Series A Preferred Stock. The shares of
Series A Preferred Stock not redeemed shall remain outstanding and
entitled to all the rights and preferences provided herein. At any
time thereafter when additional funds of the Corporation are legally
available for the redemption of shares of Series A Preferred Stock
such funds will immediately be used to redeem the balance of the
shares which the Corporation has become obliged to redeem on the
Series A Redemption Date, but which it has not redeemed.
(d) On or prior to the Series A Redemption Date, the Corporation
shall deposit the Series A Redemption Price of all shares of Series A
Preferred Stock designated for redemption in the Redemption Notice and
not yet redeemed with a bank or trust corporation having aggregate
capital and surplus in excess of $100,000,000 as a trust fund for the
benefit of the respective holders of the shares designated for
redemption and not yet redeemed, with irrevocable instructions and
authority to the bank or trust corporation to pay the Series A
Redemption Price for such shares to their respective holders on or
after the Series A Redemption Date upon receipt of notification
<PAGE>
from the Corporation that such holder has surrendered his share
certificate to the Corporation pursuant to Section C.6(b) above. As of
the Series A Redemption Date, the deposit shall constitute full
payment of the shares to their holders, and from and after the Series
A Redemption Date the shares so called for redemption shall be
redeemed and shall be deemed to be no longer outstanding, and the
holders thereof shall cease to be stockholders with respect to such
shares and shall have no rights with respect thereto except the rights
to receive from the bank or trust corporation payment of the Series A
Redemption Price of the shares, without interest, upon surrender of
their certificates therefor.
7. Protective Provisions. In addition to any other rights provided
by law, so long as any shares of Series A Preferred Stock shall be
outstanding, the Corporation shall not, without first obtaining the
affirmative vote or written consent of the holders of not less than (a)
66.67% of such outstanding shares of Series A Preferred Stock with respect
to clauses (ii), (iv), (vi), (vii), (viii) and (ix) below and (b) 50.1% of
such outstanding shares of Series A Preferred Stock with respect to clauses
(i), (iii), (v), (x), (xi) and (xii) below:
(i) pay or declare any dividend on the Corporation's Common
Stock, Series B Preferred Stock or any other equity securities
(including options or warrants) of the Corporation (other than the
Series A Preferred Stock) or redeem, purchase or otherwise acquire for
value (or pay into or set aside for a sinking fund for such purpose)
any share or shares of the Corporation's Common Stock, Series B
Preferred Stock or any other equity securities of the Corporation, or
apply any of the Corporation's assets to the redemption, retirement,
purchase or acquisition, directly or indirectly, through subsidiaries
or otherwise, of any of the Corporation's Common Stock, Series B
Preferred Stock, or other equity securities of the Corporation, except
for (x) redemptions of Series A Preferred Stock as provided in Section
C.6 hereof, and (y) repurchases of Common Stock pursuant to that
certain Investors' Rights Agreement dated as of the Original Issue
Date among the Corporation, and the other parties thereto (the
"Investors' Rights Agreement");
(ii) authorize, approve or consummate any transaction or series
of transactions contemplated by Section C.3(d) of this Article FOURTH
with respect to the Corporation or any subsidiary of the Corporation;
(iii) make any loan, advance or capital contribution to, or
investment in, or permit or cause any subsidiary of the Corporation to
make any loan, advance or capital contribution to, or investment in
any of the officers, directors, employees, providers, consultants,
agents or other representatives of the Corporation, other than (A)
travel or salary advances in the ordinary course of business in a
manner consistent with past practice, and (B) loans evidenced by
promissory notes in connection with the purchase of Common Stock under
employment or restrictive stock purchase agreements entered into by
the Corporation or the Investors' Rights Agreement;
(iv) incur or assume or permit to exist or permit or cause any
subsidiary of the Corporation to incur or assume or permit to exist
any indebtedness for borrowed money (including capitalized leases)
other than amounts owing under (A) that certain Secured Credit
Agreement dated as of December 21, 1995 by and between General
Manufactured Housing, Inc. ("Subsidiary") and First Source Financial
LLP, (B) that certain Note and Warrant Purchase Agreement dated as of
December 21, 1995 by and between the Corporation, Subsidiary and The
Equitable Life Assurance Society of the United States and (C) that
certain Securities Purchase Agreement dated as
<PAGE>
of December 21, 1995 between and among the Corporation, Subsidiary,
RFE Investment Partners V L.P., Sterling Commercial Capital, Inc. and
the State Treasurer of the State of Michigan, as custodian in excess
of $2,600,000 in the aggregate, or issue any debt securities or
assume, guarantee, endorse (other than in the ordinary course of
business consistent with past practice) or otherwise as an
accommodation become responsible for, liabilities of any other person;
(v) purchase, hold or own, or permit or cause any subsidiary of
the Corporation to purchase, hold or own any capital stock, evidence
of indebtedness or other security of any subsidiary of the Corporation
or other corporation, partnership, or other entity, unless such
corporation, partnership or other entity is a wholly-owned subsidiary
of the Corporation.
(vi) permit or cause the Corporation or any subsidiary of the
Corporation to engage in any new line of business outside the
construction, manufacture, assembling, purchasing and selling all
types of manufactured buildings, structures and homes;
(vii) authorize or issue shares of any equity securities of the
Corporation, including any preferred stock, options or warrants to
purchase any such equity security;
(viii) amend or repeal any provision of, add any provision to,
or waive any provision (including any of these protective provisions)
of the Corporation's Certificate of Incorporation or By-laws, or alter
or change the rights, preferences, privileges or powers of, or the
restrictions provided for the benefit of, the Series A Preferred Stock
or cause or permit any subsidiary of the Corporation to do the same;
(ix) make any acquisition of, or loan, advance or capital
contribution to, or investment or permit any subsidiary of the
Corporation to make any acquisition of, or loan, advance or capital
contribution to, or investment in any business entity, which,
individually or together with any related series of such transactions,
exceeds $1,000,000;
(x) make or permit or cause any subsidiary of the Corporation to
make any capital expenditures in any one fiscal year in excess of the
sum of (A) $500,000 plus (B) the difference between $500,000 and any
unexpended amounts from prior years;
(xi) enter into any contract or transaction with an affiliate of
the Corporation (or cause or permit any subsidiary of the Corporation
to do the same) that does not deal at arm's length with the
Corporation or which exceeds $25,000 in amount; or
(xii) reclassify any shares of Common Stock or any other shares
of the Corporation into shares having any preference or priority as to
dividends or assets superior to or on a parity with any such
preference or priority of the Series A Preferred Stock.
In the event that the Corporation shall propose at any time to take
any action specified in this Section C.7, then the Corporation shall send
to the holders of the Series A Preferred Stock at least 5 days prior
written notice of the date on which the vote of the holders of the Series A
Preferred Stock shall be taken with respect to such matter.
8. Increasing Common Stock. The number of authorized shares of
Common Stock may be increased or decreased (but not below the number of
shares of Common Stock then outstanding) by an affirmative vote of the
holders of a majority of the stock of the Corporation entitled to vote
thereon.
9. No Reissuance of Series A Preferred Stock or Series B Preferred
Stock. No shares of Series A Preferred Stock or Series B Preferred Stock
acquired by the Corporation by reason of redemption, purchase, conversion
or otherwise shall be reissued, and any such shares shall be cancelled,
retired, and eliminated from the shares which the Corporation shall be
authorized to issue; provided, however, that any such redeemed or purchased
shares of Preferred Stock shall be eliminated from the shares which the
Corporation shall be authorized to issue only upon the filing with the
Secretary of State of the State of Delaware of a certificate of amendment
of this Restated Certificate of Incorporation in compliance with the
General Corporation Law of the State of Delaware.
FIFTH: No 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; provided, however, that the foregoing
clause shall not apply to any liability of a director (i) for any breach of
the director's duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of Title
8 of the G.C.L. or (iv) for any transaction from which the director derived
an improper personal benefit. If the G.C.L. is amended to authorize
corporate action further eliminating or limiting the personal liability of
Directors, then the liability of a Director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the G.C.L. as so
amended. The provisions of this Article FIFTH are not intended to, and
shall not, limit, supersede or modify any other defense available to a
Director under applicable law. Any repeal or modification of this Article
FIFTH by the stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing immediately
prior to the time of such repeal or modification.
SIXTH: In accordance with the provisions of Section 103(d) of the
G.C.L., the Restated Certificate of Incorporation set forth above shall
become effective upon its filing date.
<PAGE>
IN WITNESS WHEREOF, the President of the Corporation has executed, and
the Secretary of the Corporation has attested to, this Restated Certificate of
Incorporation this 20th day of December, 1995.
GMH HOLDINGS, INC.
By: /s/ Gary M. Brost
----------------------------------------
Name: Gary M. Brost
Title: President
ATTEST:
By: /s/ James C. DelZoppo
-----------------------------
Name: James C. DelZoppo
Title: Assistant Secretary
<PAGE>
EXHIBIT E
Form of Stockholder's Agreement
<PAGE>
____________________________________
GMH HOLDINGS, INC.
STOCKHOLDERS' AGREEMENT
_____________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
1. Definitions. . . . . . . . . . . . . . . . . . . . . 2
2. Representations of the Stockholders; Indemnity . . . 9
3. Restrictions on Transfers of Securities. . . . . . . 11
(a) General Restrictions. . . . . . . . . . . . . . 11
(b) Restrictions on Stockholder Groups. . . . . . . 12
4. Permitted Transfers of Securities. . . . . . . . . . 13
(a) A Stockholder Transfers . . . . . . . . . . . . 13
(b) B Stockholder Transfers . . . . . . . . . . . . 15
5. Transfers to the Corporation . . . . . . . . . . . . 17
6. Offer of Securities. . . . . . . . . . . . . . . . . 18
7. Transfers with Respect to Employee Stockholders. . . 20
8. Closing of Transfers . . . . . . . . . . . . . . . . 22
9. Come Along . . . . . . . . . . . . . . . . . . . . . 23
(a) Come Along. . . . . . . . . . . . . . . . . . . 23
(b) Warrants. . . . . . . . . . . . . . . . . . . . 25
10. Election of Directors and Other Voting Requirements. 25
(a) Voting for Directors. . . . . . . . . . . . . . 25
(b) Nominations . . . . . . . . . . . . . . . . . . 27
(c) Vacancies . . . . . . . . . . . . . . . . . . . 26
(d) Removal of Directors. . . . . . . . . . . . . . 26
(e) Written Consent . . . . . . . . . . . . . . . . 26
(f) Directors Expenses. . . . . . . . . . . . . . . 27
(g) Special Election Matters. . . . . . . . . . . . 27
(h) Committees of the Board . . . . . . . . . . . . 28
(i) GMH Board . . . . . . . . . . . . . . . . . . . 28
(j) Equitable's Rights. . . . . . . . . . . . . . . 28
11. Special Voting Requirements. . . . . . . . . . . . . 29
(a) Required Stockholder Approval While
Series A Preferred Share are Outstanding. . . . 29
(b) Required Stockholder Approval After
Series A Preferred Shares are Redeemed. . . . . 32
12. Share and Warrant Certificates . . . . . . . . . . . 33
(a) Restrictive Endorsement . . . . . . . . . . . . 33
(b) Replacement Certificates. . . . . . . . . . . . 34
13. No Default . . . . . . . . . . . . . . . . . . . . . 35
14. Preemptive Rights. . . . . . . . . . . . . . . . . . 35
15. Registration Rights . . . . . . . . . . . . . . . . . 37
16. Miscellaneous. . . . . . . . . . . . . . . . . . . . 37
(a) Notices . . . . . . . . . . . . . . . . . . . . 37
(b) Termination; Amendment. . . . . . . . . . . . . 38
(c) Waiver. . . . . . . . . . . . . . . . . . . . . 39
(d) Counterparts. . . . . . . . . . . . . . . . . . 39
(e) Governing Law . . . . . . . . . . . . . . . . . 39
(f) Benefit and Binding Effect. . . . . . . . . . . 39
(g) Further Assurances. . . . . . . . . . . . . . . 40
(h) Specific Performance. . . . . . . . . . . . . . 40
(i) Voting Percentages. . . . . . . . . . . . . . . 41
Exhibit A Schedule of Stockholders
Exhibit B Registration Rights
</TABLE>
<PAGE>
STOCKHOLDERS' AGREEMENT
THIS STOCKHOLDERS' AGREEMENT dated as of December 21, 1995, by and
among GMH Holdings, Inc., a Delaware corporation (the "Company"), and each
other party executing this Agreement or a counterpart hereof (hereinafter
referred to collectively as "Stockholders" and individually as a
"Stockholder").
W I T N E S S E T H:
WHEREAS, the Company is authorized to issue an aggregate of 4,375,000
shares of Class A Common Stock, par value $.001 per share (the "Class A
Common Shares"), of which 1,656,250 Class A Common Shares are currently
issued and outstanding, 787,500 shares of Class B Common Stock, par value
$.001 per share (the "Class B Common Shares"), none of which Class B Common
Shares are currently issued and outstanding, 2,150,000 shares of Class C
Common Stock, par value $.001 per share (the "Class C Common Shares" and
together with the Class A Common Shares and the Class B Common Shares, the
"Common Shares"), none of which Class C Common Shares are currently issued
and outstanding, 8,000,000 shares of Series A Redeemable Preferred Stock,
par value $.001 per share (the "Series A Preferred Shares"), all of which
Series A Preferred Shares are currently issued and outstanding, and
2,150,000 shares of Series B Convertible Preferred Stock, par value, $.001
per share (the "Series B Preferred Shares"), all of which Series B
Preferred Shares are currently issued and outstanding (the Class A Common
Shares, Class B Common Shares, Class C Common Shares, Series A Preferred
Shares and Series B Preferred Shares are collectively referred to as the
"Shares"); and
WHEREAS, each Stockholder is the record and beneficial owner of the
number of Class A Common Shares, Class B Common Shares, Class C Common
Shares, Series A Preferred Shares and Series B Preferred Shares appearing
opposite his or its name on Exhibit A attached hereto, free and clear of
all options, liens, encumbrances or charges of any kind, except this
Agreement; and
WHEREAS, the Company has issued to The Equitable Life Assurance
Society of the United States and to certain principals of Larkspur Capital
Corporation warrants dated the date hereof to purchase an aggregate of
568,750 Class A Common Shares or Class B Common Shares at a price of $.01
per share (the "Warrants"); and
WHEREAS, the parties deem it in the best interests of the Company to
provide for continuity in the control and operation of the Company and to
restrict the transfer of the Shares (including the Common Shares issuable
upon conversion of the Series B Preferred Shares or upon exercise of the
Warrants), as herein provided;
NOW, THEREFORE, in consideration of the agreements and mutual
covenants contained herein, the parties hereto agree as follows:
1. Definitions.
As used in this Agreement, terms defined in the preamble and
recitals hereto shall have the respective meanings specified therein, and
the following terms shall have the following meanings:
"A Stockholder" shall mean (i) any Stockholder that is designated
one of the Group A Stockholders in Exhibit A to this Agreement and (ii) any
Person who acquires Securities after the date hereof and is designated as
an A Stockholder in accordance with the provisions of this Agreement.
<PAGE>
"Act" shall mean the Securities Act of 1933, as amended.
"Affiliate", as applied to any Person, means any other person,
directly or indirectly controlling, controlled by, or under common control
with that Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled
by" and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through
the ownership of voting securities or by contract or otherwise, and in all
events, GMH shall be deemed to be an Affiliate of the Company.
"B Stockholder" shall mean (i) any Stockholder that is designated
one of the Group B Stockholders in Exhibit A to this Agreement and (ii) any
Person who acquires Securities after the date hereof and is designated as a
B Stockholder in accordance with the provisions of this Agreement.
"Bulldog" shall mean Bulldog Holdings LLC, a New York limited
liability company.
"Business Day" shall mean any day other than a Saturday or a
Sunday or a day on which commercial banking institutions in the City of New
York are authorized to close.
"Cause" shall mean, with respect to any Employee Stockholder, any
of the following: (a) any deliberate or intentional act or omission by the
Employee Stockholder with the intent of causing damage to the Company's or
GMH's relationships with its lenders, suppliers or customers; (b) any
fraud, misappropriation or embezzlement by the Employee Stockholder
involving properties, assets or funds of the Company or of GMH; (c) a
conviction of the Employee Stockholder, or plea of nolo contendere by the
Employee Stockholder, to any crime or offense involving monies or other
property of the Company or GMH or any other felony or criminal act
involving moral turpitude; (d) any usurpation by the Employee Stockholder
of a corporate opportunity of the Company or GMH or the Employee
Stockholder's willful and continual neglect of or willful and continual
failure to perform any of his material duties, responsibilities or
obligations as an employee of the Company or GMH, but only after notice of
such usurpation, neglect or failure is delivered to the Employee
Stockholder and the Employee Stockholder fails or refuses to remedy such
usurpation, neglect or failure to the reasonable satisfaction of the Board
of Directors of the Company or GMH, as applicable, within thirty (30) days
after the receipt of such notice; provided, that any act or omission taken
by the Employee Stockholder in good faith and in the reasonable belief that
such action or omission was in the best interests of the Company or GMH
shall not constitute "Cause"; or (e) the violation by the Employee
Stockholder of Section 7 of his Employment Agreement or of any other non-
competition agreement or covenant binding upon the Employee Stockholder.
"Certificate of Incorporation" shall mean the Company's
Certificate of Incorporation, as amended or restated from time to time.
"Co-Sale Transfer" shall mean any sale by any Stockholder of such
number of the Voting Shares held by such Stockholder in a bona fide, arms-
length transaction to any Person who is not then either a party to this
Agreement or a Related Transferee of such Stockholder, as the case may be,
which results in such Person owning in excess of 10% of the then issued and
outstanding Voting Shares.
"Employee Stockholder" shall mean any of Samuel P. Scott, Kelly
Scott Herold, as Trustee, Drew Eric Scott, Gregory Keith Scott, Lannis
Thomas, Wayne Roberts, Thomas M. Vinson, Bruce Hallock, Michael O'Gorman,
Benny Bryan or James H. McClellan.
"Equitable" shall mean The Equitable Life Assurance Society of
the United States, a New York insurance company.
<PAGE>
"Fundamental Change" shall have the meaning set forth in Section
11(b) hereof.
"GMH" shall mean, prior to the Merger, GMH Acquisition Corp., a
Delaware corporation, and after the Merger, General Manufactured Housing,
Inc., a Georgia corporation.
"Group A Offerees" shall mean Bulldog, RFE, Michigan and
Sterling.
"Investors Rights Agreement" shall mean that certain Investors
Rights Agreement dated as of the date hereof between and among the RFE
Group, Bulldog, Equitable and the Company.
"Merger" shall mean the merger of GMH Acquisition Corp. with and
into General Manufactured Housing, Inc., with General Manufactured Housing,
Inc. as the surviving corporation.
"Michigan" shall mean the State Treasurer of the State of
Michigan, Custodian of the Michigan Public School Employees' Retirement
System, State Employees Retirement System, Michigan State Police Retirement
System and the Michigan Judges' Retirement System.
"Non-Selling Stockholder Group" shall mean the following Employee
Stockholders: Lannis Thomas, Wayne Roberts, James H. Vinson, Bruce Hallock,
Michael O'Gorman, Benny Bryan and Thomas M. McClellan.
"Person" shall mean a natural person, corporation, limited
partnership, general partnership, joint stock company, limited liability
company, limited liability partnership, joint venture, association,
company, trust, bank, trust company, and trust, business trust or other
organization, whether or not a legal entity, or a government or agency or
any political subdivision thereof.
"Put Date" shall mean the date which is the eighth (8th)
anniversary of the date hereof.
"Put Rights" shall mean the rights granted by the Company to the
RFE Group and Equitable pursuant to Section 1.1 of the Investors Rights
Agreement.
"Related Transferees" shall mean, (i) with respect to each
Stockholder who is a natural person, such Stockholder's spouse, any lineal
descendant (whether by birth or adoption), and trusts for the benefit of
his spouse or lineal descendants (whether by birth or adoption), and, upon
the death, disability or incompetence of such Stockholder, his estate or
personal representative and (ii) with respect to any Stockholder who is not
a natural person, the Affiliates of such Stockholder, any partner of any
Stockholder which is a partnership and any successor trustee of any
Stockholder which is a trustee.
"RFE" shall mean RFE Investment Partners V, L.P., a Delaware
limited partnership.
"RFE Group" shall mean RFE, Michigan and Sterling.
"Securities" shall mean and include (i) all Class A Common
Shares, Class B Common Shares, Class C Common Shares, Series A Preferred
Shares, Series B Preferred Shares and Warrants owned, of record or
beneficially, by any Stockholder, (ii) all Class A Common Shares, Class B
Common Shares, Class C Common Shares, Series A Preferred Shares, Series B
Preferred Shares and Warrants hereafter acquired, directly or indirectly,
by any Stockholder, including the Common Shares issuable upon conversion of
the Series B Preferred Shares or upon exercise of any Warrant, and (iii)
all other Securities of the Company acquired by any Stockholder by way of
dividend or upon an increase, reduction, substitution or reclassification
of stock of the Company or upon any reorganization of the Company.
"Securities Acts" shall mean any applicable statute, rule,
regulation or administrative or regulatory requirement applicable to the
transfer of securities of the Company,
<PAGE>
including the Act, and the rules and regulations promulgated thereunder,
and all applicable state securities or "blue sky" laws.
"Selling Stockholder Group" shall mean the following Employee
Stockholders: Samuel P. Scott, Kelly Scott Herold, as Trustee, Gregory
Keith Scott and Drew Eric Scott.
"Sterling" shall mean Sterling Commercial Capital, Inc., a New
York corporation.
"Stockholder Group" shall mean, with respect to any Stockholder,
such Stockholder, each of his or its Related Transferees and each of their
respective successor Related Transferees.
"transfer" shall mean any sale, assignment, transfer, pledge,
hypothecation, mortgage, charge, lien, encumbrance, gift, bequest,
transmission or other disposition of Securities, provided that the
encumbrances contemplated by, and transfers of Securities pursuant to the
terms and provisions of Section 4 hereof shall not be deemed to be
"transfers".
"Voting Shares" shall mean the Series B Preferred Shares, the
Class A Common Shares, the Class B Common Shares issuable upon exercise of
the Warrant issued to Equitable (notwithstanding that the Class B Common
Shares are non-voting) and the Class C Common Shares, including (a) any
Class C Common Shares issued upon conversion of the Series B Shares or (b)
Class A Common Shares or Class B Common Shares issued upon exercise of the
Warrants.
"Warrants" shall have the meaning set forth in the recitals
hereto.
2. Representations of the Stockholders; Indemnity.
(a) Each Stockholder other than Michigan and Equitable,
severally represents and warrants as follows:
(i) this Agreement constitutes the valid and legally
binding obligation of such Stockholder, enforceable against such
Stockholder in accordance with its terms, subject to (A) laws of
general application relating to bankruptcy, insolvency, and the relief
of debtors, and (B) rules of law governing specific performance,
injunctive relief or other equitable remedies;
(ii) the execution, delivery and performance of this
Agreement by such Stockholder does not (A) violate or result in a
breach of or constitute a default under any of the organizational or
constituent documents of any Stockholder which is not a natural
Person, or any contract, agreement, indenture, mortgage, pledge, note,
bond, license, permit or other instrument or obligation to which such
Stockholder is a party or by which it or any of its assets are bound
or affected or (B) require any permit, consent, approval or
authorization of, or designation, declaration or filing with, any
governmental authority or any other person or entity, except for those
which have already been obtained; and
(iii) such Stockholder, if not a natural person, has all
requisite power and authority to enter into and perform its
obligations under this Agreement in accordance with its terms.
(b) Each Stockholder, other than Michigan and Equitable, agrees
to indemnify and hold harmless the other Stockholders and the Company and
its directors, employees, affiliates and agents from and against any and
all damages, losses, costs and expenses (including reasonable attorneys'
fees) which any of them may incur by reason of the failure of such
Stockholder to fulfill any of the terms or conditions of this Agreement, or
by reason of any breach of the representations and warranties made by such
Stockholder in this Agreement.
3. Restrictions on Transfers of Securities.
<PAGE>
(a) General Restrictions. During the term of this Agreement,
none of the Securities may be the subject of a transfer unless:
(i) such transfer shall be made in accordance with the
provisions of this Agreement and Exhibit B hereto, relating to the
Stockholders' rights to register their Common Shares or Warrants under
the Securities Acts;
(ii) the proposed transferee shall deliver to the Company a
written acknowledgment that the Securities to be transferred are
subject to this Agreement and that the proposed transferee and his or
its successors in interest agree to be and are bound hereby and
thereby to the same extent and in the same manner as the transferor of
such Securities; provided, that from and after the Put Date, the
restrictions contained in this Agreement shall cease to apply to any
Shares which are covered by the Put Rights; and
(iii) such transfer shall be made in compliance with the
Securities Acts, and prior to any such transfer, the Stockholder
proposing to transfer Securities shall give the Company (A) notice
describing the manner and circumstances of the proposed transfer and
(B) if reasonably requested by the Company, a written opinion of legal
counsel reasonably satisfactory to the Company and its counsel, in
form and substance reasonably satisfactory to the Company and its
counsel, to the effect that the proposed transfer of Securities will
be in compliance with the Securities Acts; provided, however, that for
transactions made pursuant to Rule 144 under the Act, an opinion of
counsel shall only be required if reasonably requested by the Company
and which shall be to the effect that the proposed transfer of
Securities may be effected without registration under the Act; and
provided, further, that no such opinion of counsel shall be necessary
for a transfer by a Stockholder which is (1) a partnership to its
partners or retired partners in accordance with partnership interests,
(2) an individual to a Related Transferee or trust for the benefit of
such individual or Related Transferee or (3) a trustee for the benefit
of others to a successor trustee.
Upon the transfer of Securities in accordance with this Agreement, the
transferee of such Securities shall be deemed a "Stockholder" hereunder.
Any attempted transfer of Securities other than in accordance with this
Agreement and the Registration Rights Agreement shall be null and void, and
the Company shall not recognize any such attempted transfer nor reflect in
its records any change in ownership of Securities pursuant thereto, nor
issue any certificate or other evidence of ownership of Securities in
connection therewith.
(b) Restrictions on Stockholder Groups. Any Securities
transferred upon satisfaction of the conditions contained in this Agreement
shall be held subject to the terms of this Agreement and the holder thereof
shall be deemed a Stockholder for purposes of this Agreement, as follows:
(i) Any Securities transferred to, or any Securities held
by, any one of the A Stockholders shall be held by such A Stockholder
subject to the provisions hereof governing Securities held by A
Stockholders.
(ii) Any Securities transferred to, or any Securities held
by any one of the B Stockholders shall be held by such B Stockholder
subject to the provisions hereof governing Securities held by B
Stockholders.
(iii) Any Securities transferred to any Person that is not a
Stockholder prior to such transfer shall, unless otherwise provided
herein, be held by such Person subject to the provisions hereof
governing Securities held by the Stockholder that transferred Shares
to such Person.
4. Permitted Transfers of Shares. Notwithstanding the
provisions of Section 3(a) hereof, during the term of this Agreement, any
Stockholder may transfer any or all of his or its respective Securities,
subject to the restrictions contained in Section 3 hereof and upon
compliance with the following terms and conditions:
<PAGE>
(a) A Stockholder Transfers. Subject to the provisions of
Section 11(a)(xiii), any A Stockholder may transfer any or all of his, her
or its Securities as follows:
(i) to any Related Transferee of the A Stockholder making
such transfer, provided that any Securities transferred to such
Related Transferee shall be held by such Related Transferee subject to
the provisions hereof governing A Stockholders;
(ii) to the Company in accordance with the procedures
described in Section 5 hereof;
(iii) Bulldog may transfer its Securities to the RFE Group
in accordance with the option granted to the RFE Group pursuant to
Section 2 of the Investors Rights Agreement;
(iv) Equitable may transfer its Securities to a Person (A)
for whom Alliance Corporate Finance Group Incorporated is the sole
investment advisor and (B) in connection with such Person becoming the
holder of any of the Senior Subordinated Notes of GMH originally
issued to Equitable; or
(v) to any Person, including any Stockholder (other than
the Persons described in (i), (ii), (iii) and (iv) above), provided
that (A) such Securities are first offered for sale to the Group A
Offerees (excluding any member of the Group A Offerees who is the
transferor), pro rata in accordance with the procedures described in
Section 6 hereof, (B) if the Group A Offerees do not agree to purchase
all of such Securities offered for sale, the remainder of such
Securities are next offered to all other A Stockholders, pro rata in
accordance with the procedures described in Section 6 hereof, (C) if
the Group A Offerees and such other A Stockholders do not agree to
purchase all of such Securities offered for sale, the remainder of
such Securities are next offered for sale to all B Stockholders, pro
rata in accordance with the procedures described in Section 6 hereof
and (D) if any such transfer involves a Co-Sale Transfer, it shall be
made in accordance with the procedures described in Section 9 hereof;
and provided, further, that from and after the Put Date, the
provisions of this Section 4(a)(iv) shall cease to apply to any
transfer of Voting Shares held by any A Stockholder which are subject
to the Put Rights.
(b) B Stockholder Transfers. Subject to the provisions of
Section 11(a)(xiii), any B Stockholder may transfer any or all of his, her
or its Securities as follows:
(i) INTENTIONALLY DELETED
(ii) to any other B Stockholder; provided, that, (A) such
Securities are first offered for sale to the members of the Selling
Stockholder Group, pro rata in accordance with the procedures
described in Section 6 hereof and (B) if the members of the Selling
Stockholder Group do not agree to purchase all of such Securities
offered for sale, the remainder of such Securities are next offered
for sale to the members of the Non-Selling Stockholder Group, pro rata
in accordance with the procedures described in Section 6 hereof;
(iii) to the members of the Selling Stockholder Group in
accordance with the provisions of Section 7(a);
(iv) to any Related Transferee of the B Stockholder making
such transfer, provided that any Securities transferred to such
Related Transferee shall be held by such Related Transferee subject to
the provisions governing B Stockholders;
(v) to the Company in accordance with the procedures
described in Section 5 hereof; or
<PAGE>
(vi) to any Person, including a Stockholder (other than the
Persons described in (i), (ii), (iii), (iv) and (v) above), provided
that (A) such Securities are first offered for sale to the Group A
Offerees, pro rata in accordance with the procedures described in
Section 6 hereof (except that if a member of the Non-Selling
Stockholder Group is the transferor, such Securities shall first be
offered for sale to the members of the Selling Stockholder Group, pro
rata in accordance with the procedures described in Section 6 hereof,
and if the members of the Selling Stockholder Group do not agree to
purchase all of such Securities offered for sale, the remainder of
such Securities are then offered for sale to the Group A Offerees),
(B) if the Group A Offerees do not agree to purchase all of such
Securities offered for sale, the remainder of such Securities are next
offered for sale to all other B Stockholders, pro rata in accordance
with the procedures described in Section 6 hereof, (C) if the Group A
Offerees and such other B Stockholders do not agree to purchase all of
such Securities offered for sale, the remainder of such Securities are
next offered for sale to all A Stockholders (other than the Group A
Offerees), pro rata in accordance with the procedures described in
Section 6 hereof and (D) if such transfer involves a Co-Sale Transfer,
it shall be made in accordance with the procedures described in
Section 9 hereof.
5. Transfers to the Corporation. Any Stockholder may transfer
any or all of his or its Securities to the Company, on such terms and
conditions as the Stockholder and the Corporation may agree; provided,
however, that except for (a) any redemption of the Series A Preferred
Shares in accordance with the Certificate of Incorporation or (b) any
repurchase of Voting Shares pursuant to the Put Rights, the Company shall
not repurchase or redeem any Securities without the written consent of the
Stockholders required pursuant to the provisions of Sections 11(a) or (b)
hereof, as applicable. Any Securities purchased or redeemed by the Company
shall be retired and not be reissued. If the Company is legally or
contractually restricted from purchasing all of such Securities, the
Company shall, at such time, purchase the portion of the Securities which
it is legally or contractually permitted to purchase, and shall purchase
the balance of the Securities as soon thereafter as it is legally or
contractually able to do so.
6. Offer of Securities. Whenever any Stockholder is required to
offer Securities for sale to other Stockholders pursuant to Section 4
hereof, the following procedures shall apply:
(a) The Stockholder proposing to make such a transfer (the
"Transferor") shall deliver a written notice of the proposed transfer (the
"Transfer Notice") to the Company and to each of the other Stockholders
entitled to receive an offer to purchase under the provisions of this
Agreement. The Transfer Notice shall contain a description of the proposed
transaction and the terms thereof, including the number of Securities to be
transferred, the name of each Person to whom or in favor of whom the
proposed transfer shall be made (the "Transferee"), and a description of
the consideration to be received by the Transferor upon transfer of the
Securities which must be cash.
(b) At the same time as the delivery of the Transfer Notice, the
Transferor shall deliver a written offer to sell to each of the other
Stockholders entitled to receive such an offer under other provisions of
this Agreement, a pro rata (in accordance with the percentage of Voting
Shares then held by the other Stockholders) portion of the Securities
offered for sale by the Transferor, as required under other provisions of
this Agreement. Such offer to sell shall contain the same terms and
conditions and shall be for the same consideration as described in the
Transfer Notice.
(c) For a period of twenty-five (25) days after the offer
described in (b) above is sent to Stockholders, each such Stockholder may,
by written notice to the Transferor and to the Company, accept in whole or
in part the offer to sell Securities. Such acceptance shall specify the
amount of Securities to be purchased by such Stockholder and a proposed
date for closing
<PAGE>
such purchase, which date shall not exceed sixty (60) days from the date
the offer described in (b) above is sent to Stockholders. If any
Stockholder does not accept the offer to purchase all of the Securities
offered by the Transferor, the Transferor shall make one or more additional
offers of the remainder of such Securities to Stockholders who have agreed
to purchase all of the Securities previously offered to them by the
Transferor. Such additional offer or offers shall be made for a period of
ten (10) days to each of such Stockholders in the same ratio that the
amount of Voting Shares which such Stockholder has agreed to purchase bears
to the total amount of Voting Shares which all Stockholders to whom such
additional offer or offers are made have agreed to purchase.
(d) In the event that the other Stockholders do not agree to
purchase all of the Securities offered for sale by the Transferor, the
Transferor shall have the right at his or its election:
(i) to proceed with the sale of such Securities as other
Stockholders have agreed to purchase;
(ii) to cancel all of the offers to other Stockholders and
not sell; or
(iii) to cancel all of the offers to other Stockholders and
make a bona fide sale or other transfer of the Securities to the
Transferee named in the Transfer Notice, but only in strict accordance
with the terms and for the consideration stated in the Transfer Notice
and within ninety (90) days of the last offer to Stockholders
hereunder.
7. Transfers with Respect to Employee Stockholders.
(a) If any member of the Non-Selling Stockholder Group
voluntarily ceases to serve as an employee or officer of the Company or GMH
without the consent of the Company or GMH, as applicable, or his employment
is terminated for any reason other than death or disability, in each case,
on or prior to the third anniversary of the date of this Agreement, all
Securities held by such Stockholder and his Related Transferees, if any,
shall, immediately upon such termination of employment, be transferred to
the members of the Selling Stockholder Group (pro rata in accordance with
the percentage of Voting Shares then held by the members of the Selling
Stockholder Group) for a purchase price equal to the total number of Shares
so transferred multiplied by the par value of such Shares.
(b) If (i) the employment of any member of the Non-Selling
Stockholder Group with the Company or GMH terminates by reason of death or
disability or (ii) after the third anniversary of the date of this
Agreement but prior to the earlier of (A) the fifth anniversary of the date
of this Agreement or (B) the date upon which a Co-Sale Transfer occurs, any
member of the Non-Selling Stockholder Group voluntarily ceases to serve as
an employee or officer of the Company or GMH without the consent of the
Company or GMH, as applicable, or his employment with the Company or GMH is
terminated for any reason other than death or disability, then such Person
shall immediately surrender to the Corporation all Shares held by him and
his Related Transferees, if any, in exchange for an equal number of Class B
Common Shares.
(c) If prior to the earlier of (i) the fifth anniversary of the
date of this Agreement or (ii) the date upon which a Co-Sale Transfer
occurs, any member of the Selling Stockholder Group voluntarily ceases to
serve as an executive officer of the Company or GMH or his employment with
the Company or GMH is terminated for Cause, then such Person shall
immediately surrender to the Corporation all Shares held by him and his
Related Transferees, if any, (and who, in the case of Samuel P. Scott,
shall mean his Related Transferees, if any, who have acquired Securities by
transfer from him after the date hereof), in exchange for an equal number
of Class B Common Shares.
(d) Immediately upon the occurrence of any event set forth in
paragraphs (b) or (c) above which requires the exchange
<PAGE>
of Class A Common Shares for certificates of Class B Common Shares, the
rights of the holder of such Class A Common Shares shall automatically
cease, and such Person shall be deemed to have become a holder of Class B
Common Shares.
8. Closing of Transfers. The closing for all purchases and
sales of Securities provided for in this Agreement hereof shall be held at
the offices of the Company. If any Stockholder (or a Related Transferee)
who has become obligated to purchase or sell Securities hereunder is
deceased on the closing date for such purchase or sale and such deceased
person's personal representative shall not have been appointed and
qualified by such date, then the closing shall be postponed until the 10th
day after the appointment and qualification of such personal
representative. If the closing date of such purchase or sale falls on a
Saturday, Sunday or legal holiday, then the closing shall be held on the
next succeeding business day. The purchase price for the Securities shall
be paid at the closing by certified check or by cashier's or official bank
check. At the closing, the seller(s) shall deliver to the purchaser(s) the
certificate or certificates representing the Securities to be sold, duly
endorsed in blank and bearing the necessary documentary stamps. Any
Stockholder (or his personal representative or any Related Transferee of
such Stockholder) which transfers Securities shall (a) do all things and
execute and deliver all such papers as may be necessary or reasonably
requested by the Company in order to consummate such transfer, (b) pay to
the Company such amounts as may be required for any applicable stock
transfer taxes and (c) pay to the Company any expenses incurred by the
Company in connection with such transfer (including reasonable attorneys
fees). In the event that a Stockholder (or, his personal representative or
any Related Transferee of such Stockholder) having become obligated to sell
Securities hereunder shall fail to deliver such Securities in accordance
with the terms of this Agreement, the purchasers may, at their option, in
addition to all other remedies they may have, send to the sellers by
personal delivery or registered mail, return receipt requested, the
purchase price of such Securities as is hereinabove specified. Thereupon,
the Company shall (i) cancel on its books the certificate or certificates
representing the Securities to be sold, (ii) issue, in lieu thereof, a new
certificate or certificates in the name of the purchasers representing such
Securities, (iii) deliver such new certificate or certificates to the
Purchasers and (iv) give notice thereof to the sellers, and thereupon all
of the sellers' rights in and to such Securities shall terminate.
9. Come Along.
(a) Come Along. If any Stockholder proposes to transfer Voting
Shares in a Co-Sale Transfer (the "Selling Stockholder"), it shall give
notice of such proposed sale (the "Sale Notice") to the Company and the
other Stockholders (the "Other Stockholders"), which notice shall set forth
at least the name and address of the proposed transferee (the "Buyer") and
the price and terms of such proposed sale. Any of the Other Stockholders
shall then be entitled to give, within 20 days after the giving of such
Sale Notice, a counter-notice to the Company, the Selling Stockholder, and
to the Buyer at the address specified in the Sale Notice, that it elects to
have the Buyer choose to purchase the number of Voting Shares owned by such
Other Stockholder (and the Voting Shares of his, her or its Related
Transferees, if any) equal to (i) the number of Voting Shares held by such
Other Stockholder and his, her or its Related Transferees, if any,
multiplied by (ii) a fraction, the numerator of which is the number of
Voting Shares proposed to be acquired by the Buyer from the Selling
Stockholder and the denominator of which is the total number of Voting
Shares held by the Selling Stockholder (before giving effect to the
proposed sale to the Buyer), at the same price and upon the same terms and
conditions as contained in the Sale Notice. In the event any Other
Stockholder makes the aforesaid election, the Buyer shall purchase and such
Other Stockholder (and his, her or its Related Transferees, if any) shall
sell such number of Voting Shares owned (or deemed owned) by them at the
same price and upon the same terms and conditions as contained in the Sale
Notice; provided, that if the Buyer is not willing to purchase the total
number of Voting Shares held by the Selling Stockholder and the
<PAGE>
Other Stockholders who have elected to participate in such sale, the Buyer
shall purchase that number of Voting Shares that it wishes to purchase (but
not less than the number set forth in the Sale Notice), and the Selling
Stockholder and the Other Stockholders shall each sell that number of
Voting Shares to the Buyer equal to the product of (x) the aggregate number
of Voting Shares to be purchased by the Buyer and (y) a fraction, the
numerator of which is the number of Voting Shares then owned by such
Stockholder, and the denominator of which is the aggregate number of Voting
Shares owned by the Selling Stockholder and the Other Stockholders who have
elected to participate in such sale.
(b) Warrants. For purposes of Section 9(a), any Stockholder
which holds Warrants and which, if such Warrants had been exercised, would
be permitted to sell the resulting Voting Shares under Section 9(a), shall
have the right to sell Warrants for the number of Voting Shares which,
together with the number of Voting Shares, if any, such Stockholder elects
to sell, equals the number of Voting Shares such Stockholder is permitted
to sell under Section 9(a), without any requirement that such Warrants be
exercised and converted to Voting Shares before a sale under Section 9(a).
The purchase price per Warrant shall be the purchase price per Voting Share
less the exercise price of the Warrant.
10. Election of Directors and other Voting
Requirements.
(a) Voting for Directors. During the term of this
Agreement, (i) there shall be seven directors of the Company and (ii) at
each meeting of the Stockholders of the Company for the election of
directors, the Stockholders shall vote all Voting Shares held by them for
the election of the seven persons nominated pursuant to Section 10(b).
(b) Nominations. During the term of this Agreement,
directors shall be nominated by the Stockholders as follows: the nominees
for directors shall be (i) the four persons nominated by Bulldog, (ii) the
two persons receiving a plurality of votes cast by all members of the RFE
Group, including one nominee designated by RFE and (iii) Samuel P. Scott.
(c) Vacancies. During the term of this Agreement, should a
vacancy in the Board of Directors be caused by death, resignation, removal
or any other reason, each of the Stockholders agrees to vote all Voting
Shares owned by such Stockholder for (i) the one person receiving a
plurality of votes cast by all B Stockholders at a meeting of B
Stockholders held to nominate directors, in the case of a vacancy caused by
the death, resignation, removal or other reason with respect to Samuel P.
Scott or (ii) the nominee selected by Bulldog or the RFE Group, as the case
may be, as provided in Section 10(b) hereof.
(d) Removal of Directors. If at any time any Stockholder
proposes to remove any director who was nominated by such Stockholder as
provided in Section 10(b) hereof, each Stockholder agrees to vote all of
the Voting Shares owned by such Stockholder for such removal if removal has
been approved by the persons who would be entitled to fill a vacancy
pursuant to Section 10(c) hereof.
(e) Written Consent. Notwithstanding any reference herein
to votes cast at a meeting of the Stockholders, directors may be chosen for
nomination by the Stockholders acting by written consent without a meeting
and directors may be elected by the Stockholders acting by written consent
without a meeting to the extent permitted by law, by the certificate of
incorporation and the by-laws of the Company; provided, however, that
nothing in this Section 10(e) shall authorize the nomination, election or
removal of directors other than in accordance with the provisions of this
Section 10.
(f) Directors Expenses. Each director of the Company (and
any observer pursuant to Section 10(j)) shall be reimbursed for his actual
out of pocket expenses incurred in attending each meeting of the Board of
Directors or any committee thereof. In addition, if any of the directors
nominated by the RFE Group pursuant to Section 10(b)(ii) is a person with
outside
<PAGE>
operating experience and not otherwise affiliated with any member of the
RFE Group, the Company will pay such director reasonable directors fees.
(g) Special Election Matters. Notwithstanding anything
contained in this Section 10 to the contrary, if an Event of Default, as
defined in the Certificate of Incorporation has occurred and not been
cured, the Stockholders shall (to the limited extent, if at all, necessary
to accomplish the following) vote all Voting Shares held by them at the
time to accomplish the nomination and election of that number of nominees
of the holders of the Series A Preferred Shares as constitute the smallest
number of directors which shall constitute a majority of the Company's
Board of Directors (including, but not limited to, voting to remove members
of the Board of Directors serving prior to such election).
(h) Committees of the Board. The Board of Directors of each
of the Company and GMH shall establish an Audit Committee and a
Compensation Committee in accordance with the By-laws of the Company and
GMH and so long as the RFE Group owns at least 10% of the issued and
outstanding Voting Shares, such committees shall include a representative
of the RFE Group.
(i) GMH Board. Each of the Stockholders and the Company
hereby agrees to take such action as may be required so that the Board of
Directors of GMH is at all time identical to the Board of Directors of the
Company.
(j) Equitable's Rights. So long as Equitable continues to
own at least 70% of the initial purchase percentage of the Warrants issued
to it, Equitable will have (i) the ability to have a representative attend
meetings of the Board of Directors of each of the Company and GMH as an
observer, (ii) the right to receive all materials sent to such Boards of
Directors by the Company or GMH, as applicable, (iii) the right to inspect
the Company's and GMH's books and records and, upon reasonable notice,
visit the Company and GMH and (iv) consult with management of the Company
and GMH. Holders of the Warrants issued to Equitable shall receive monthly
unaudited financial statements and annually, a copy of management's budget
for the succeeding year, each at the same time as such financial statements
and budget are delivered to the Company's and GMH's lenders.
11. Special Voting Requirements.
(a) Required Stockholder Approval While Series A Preferred
Shares are Outstanding. At any time during the term of this Agreement that
Series A Preferred Shares are outstanding, the approval by the affirmative
vote or written consent of the Stockholders holding not less than (x) 66-
2/3 of all of the issued and outstanding Series A Preferred Shares with
respect to paragraphs (ii), (iv), (vi), (vii), (viii) or (ix) below and (y)
50.1% of the issued and outstanding Series A Preferred Shares with respect
to paragraphs (i), (iii), (v), (x), (xi), (xii) and (xiii) below shall be
required to authorize any of the following:
(i) the payment or declaration of any dividend on the
Common Shares, Series B Preferred Shares or any other equity
securities (including options or warrants) of the Company (other than
the Series A Preferred Shares) or the redemption, purchase or other
acquisition for value (or the payment into or setting aside for a
sinking fund for such purpose) any of the Common Shares, Series B
Preferred Shares or any other equity securities of the Company, or the
application of any of the Company's assets to the redemption,
retirement, purchase or acquisition, directly or indirectly, through
subsidiaries or otherwise, of any of the Common Shares, Series B
Preferred Shares or other equity securities of the Company, except for
(A) redemptions of Series A Preferred Shares as provided in accordance
with the provisions of the Certificate of Incorporation, and (B)
repurchases of Common Shares pursuant to the Investors' Rights
Agreement;
(ii) (A) any acquisition of the Company by means of a merger
of the Company with or into any other
<PAGE>
corporation or other entity or person or other form of corporate
reorganization in which the Company shall not be the continuing or
surviving entity of such merger or reorganization (other than a mere
reincorporation transaction) or a transaction in which the Company is
the surviving entity but the shares of the Company's capital stock
outstanding immediately prior to the transaction are exchanged or
converted by virtue of the transaction into other property, whether in
the form of securities, cash or otherwise or (B) a sale of all or
substantially all of the assets of the Company, or in either case, any
such action with respect to any subsidiary of the Company;
(iii) the making of any loan, advance or capital
contribution to, or investment in, or permitting or causing any
subsidiary of the Company to make any loan, advance or capital
contribution to, or investment in any of the officers, directors,
employees, providers, consultants, agents or other representatives of
the Company, other than (A) travel or salary advances in the ordinary
course of business in a manner consistent with past practice, and (B)
loans evidenced by promissory notes in connection with the purchase of
Common Shares under employment or restrictive stock purchase
agreements or the Investors' Rights Agreement;
(iv) any incurrence or assumption or permitting to exist of
or permitting or causing any subsidiary of the Company to incur or
assume or permit to exist any indebtedness for borrowed money
(including capitalized leases) other than the indebtedness owing to
(A) First Source Financial LLP pursuant to the terms of the Secured
Credit Agreement dated as of the date hereof by and between First
Source Financial LLP and GMH, (B) Equitable pursuant to the terms of
the Note and Warrant Purchase Agreement dated as of the date hereof by
and between Equitable, the Company and GMH, and (C) the RFE Group
pursuant to the terms of the Securities Purchase Agreement dated as of
the date hereof between and among the RFE Group, the Company and GMH
in excess of $2,600,000 in the aggregate, or the issuance of any debt
securities or the assumption, guarantee, endorsement (other than in
the ordinary course of business consistent with past practice) or
otherwise as an accommodation becoming responsible for, liabilities of
any other Person;
(v) any purchase, holding or owning, or permitting or
causing any subsidiary of the Company to purchase, hold or own any
capital stock, evidence of indebtedness or other security of any
subsidiary of the Company or other corporation, partnership or other
entity, unless such corporation, partnership or other entity is a
wholly owned subsidiary of the Company;
(vi) permitting or causing the Company, or any subsidiary
of the Company, to engage in any new line of business outside the
construction, manufacture, assembling, purchasing and selling all
types of manufactured buildings, structures and homes;
(vii) any authorization or issuance of any equity
securities of the Company, including any preferred stock, options or
warrants to purchase any such equity security;
(viii) any amendment or repeal of any provision of, the
addition of any provision to, or the waiver of any provision of the
Company's Certificate of Incorporation or By-Laws, or any alteration
or change in the rights, preferences, privileges or powers of, or the
restrictions provided for the benefit of, the Series A Preferred
Shares, or causing or permitting any subsidiary of the Company to do
the same;
(ix) the making of any acquisition of, or loan, advance or
capital contribution to, or investment in or permitting any subsidiary
of the Company to make any acquisition of, or loan, advance or capital
contribution to, or investment in any business entity, which,
individually or
<PAGE>
together with any related series of such transactions, exceeds
$1,000,000;
(x) the making of or permitting or causing any subsidiary
of the Company to make any capital expenditures in any one fiscal year
in excess of the sum of (A) $500,000 plus (B) the difference between
$500,000 and any unexpended amounts from prior years;
(xi) the entering into of any contract or transaction with
an Affiliate of the Company that does not deal at arm's length with
the Company or which exceeds $25,000 in amount, or causing or
permitting any subsidiary of the Company to do the same;
(xii) the reclassification of any shares of Common Stock or
any other shares of the Company into shares having any preference or
priority as to dividends or assets superior to or on a parity with any
such preference or priority of the Series A Preferred Stock; or
(xiii) the transfer of (A) any Shares of the Company held
by any of Samuel P. Scott, Gregory Keith Scott, Drew Eric Scott or
Bulldog, (B) any membership interests in Bulldog held by SIHI-GMH LLC
or (C) any membership interest in SIHI-GMH LLC held by either Gary M.
Brost or Dennis C. Martin, in each case in excess of 10% of the Shares
or membership interests originally held by them, in any transaction or
series of transactions, except for (I) transfers to Related
Transferees (or Persons who would be Related Transferees of SIHI-GMH
LLC, Gary M. Brost or Dennis C. Martin if they were parties to this
Agreement) and (II) transfers by Bulldog to the RFE Group pursuant to
the Investors Rights Agreement in any transaction or series of
transactions.
(b) Required Stockholder Approval After Series A Preferred
Shares are Redeemed. At any time during the term of this Agreement that
there are no Series A Preferred Shares outstanding, the approval by the
affirmative vote or written consent of the Stockholders holding not less
than 70% of all of the issued and outstanding Voting Shares shall be
required to authorize any of the following:
(i) the repurchase or redemption of any of the Shares;
(ii) any amendment of the Certificate of Incorporation or By-
Laws of the Company or any consent by the Company to any amendment of the
Certificate of Incorporation or By-Laws of GMH;
(iii) any authorization of or any issuance of any authorized but
unissued capital stock of the Company, except the issuance of Securities
upon the exercise of the Warrants or upon conversion of any Series B
Preferred Shares;
(iv) any sale of the Company's entire interest in GMH;
(v) the sale, lease or exchange of all or substantially all of
the Company's assets or any consent by the Company to any sale, lease or
exchange by GMH of all or substantially all of the assets of GMH;
(vi) any merger or consolidation of the Company or GMH with or
into any other corporation;
(vii) the dissolution of the Company or GMH;
(viii) the adoption of a plan of liquidation of the Company or
GMH;
(ix) any action by the Company to commence any case, proceeding
or other action (A) under any existing or future law of any jurisdiction
relating to bankruptcy, insolvency, reorganization or relief of debtors,
seeking to have an order for relief entered with respect to it or GMH, or
seeking to adjudicate it or GMH a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding up, liquidation,
dissolution, composition or other relief with respect to it or
<PAGE>
GMH or its or GMH's debts, or (B) seeking appointment of a receiver,
trustee, custodian or other similar official for it or GMH or for all or
any substantial part of its or GMH's assets, or making a general assignment
for the benefit of its or GMH's creditors;
(x) any recapitalization of the Company or GMH; or
(xi) except as provided in the Registration Rights Agreement, any
public offering of securities of the Company or any consent by the Company
to GMH authorizing any public offering of securities of GMH.
(c) Any of the actions described in Section 11(b) above are
herein referred to as a "Fundamental Change".
(d) For purposes of Section 11(a), as to any matter set forth
therein which requires the approval or consent of the Stockholders holding
not less than 66-2/3% of all of the issued and outstanding Series A
Preferred Shares, such matter shall be deemed approved or consented to
unless the Company shall have received written notice from the requisite
percentage of holders of Series A Preferred Shares that they do not approve
or consent to such matter within ten (10) Business Days after the holders
of the Series A Preferred Shares have received a written request from the
Company asking for such approval or consent.
12. Share and Warrant Certificates.
(a) Restrictive Endorsement. Each certificate representing
Securities now or hereafter held by a Stockholder shall be stamped with
legends in substantially the following form:
"THE SHARES [WARRANTS] REPRESENTED BY
THIS CERTIFICATE ARE SUBJECT TO A
STOCKHOLDERS' AGREEMENT DATED AS OF
DECEMBER __, 1995, COPIES OF WHICH ARE
AVAILABLE AT THE OFFICE OF THE COMPANY
AND MAY BE INSPECTED BY ANY PROSPECTIVE
TRANSFEREE OF THE SHARES [WARRANTS]
REPRESENTED HEREBY ON REQUEST. SUCH
STOCKHOLDERS' AGREEMENT PROVIDES, AMONG
OTHER THINGS, FOR CERTAIN RESTRICTIONS
ON THE SALE, ASSIGNMENT, TRANSFER,
PLEDGE, HYPOTHECATION, MORTGAGE, CHARGE,
LIEN, ENCUMBRANCE, GIFT, BEQUEST,
TRANSMISSION OR OTHER DISPOSITION OF THE
SHARES [WARRANTS] REPRESENTED BY THIS
CERTIFICATE."
THE SALE AND ISSUANCE OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR
UNDER THE SECURITIES LAW OF ANY STATE OR
OTHER JURISDICTION. THESE SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO, OR IN CONNECTION
WITH, THE DISTRIBUTION THEREOF. THESE
SECURITIES MAY NOT BE OFFERED, SOLD,
PLEDGED, OR TRANSFERRED UNLESS (I) A
REGISTRATION STATEMENT UNDER THE ACT IS
IN EFFECT AS TO THESE SECURITIES AND
SUCH OFFER, SALE, PLEDGE, OR TRANSFER IS
IN COMPLIANCE WITH APPLICABLE SECURITIES
LAW OF ANY STATE OR OTHER JURISDICTION
OR (II) THERE IS AN OPINION OF COUNSEL
OR OTHER EVIDENCE, SATISFACTORY TO THE
CORPORATION, THAT AN EXEMPTION THEREFROM
IS AVAILABLE AND THAT SUCH OFFER, SALE,
PLEDGE, OR TRANSFER IS IN COMPLIANCE
WITH APPLICABLE SECURITIES LAW OF ANY
STATE OR OTHER JURISDICTION.
Each Stockholder agrees that he or it will deliver all certificates
for Securities owned by him or it to the Company for
<PAGE>
the purpose of affixing such legend thereto.
(b) Replacement Certificates. Upon presentation of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any certificate representing Securities and indemnity
agreement reasonably satisfactory to the Company, and upon reimbursement to
the Company of all its reasonable expenses incident thereto, and upon
surrender of such certificate or instrument, if mutilated, to the Company,
each Stockholder agrees to use his or its best efforts to cause the Company
deliver a new certificate of like tenor in lieu of such lost, stolen,
destroyed or mutilated certificate.
13. No Default. Notwithstanding anything to the contrary
contained in this agreement, none of the Stockholders shall take any action
hereunder which would cause the Company or any of its subsidiaries or
Affiliates to breach any material agreement to which the Company, such
subsidiary or Affiliate is a party.
14. Preemptive Rights.
(a) In the event that the Company should determine to (i)
authorize and issue any shares of its capital stock or other equity
securities (other than securities issued (A) pursuant to the conversion of
the Series B Shares, (B) pursuant to the exercise of the Warrants, (C)
pursuant to the acquisition of another corporation by the Company or issued
in connection with any merger, consolidation, combination, purchase of all
or substantially all of the assets or other reorganization which has been
approved by the Board of Directors of the Company and the Stockholders in
accordance with the provisions of this Agreement, (D) pursuant to any
rights or agreements, including without limitation convertible securities,
provided that the rights established by this Section 14 apply with respect
to the initial sale or grant by the Company of such rights or agreements
(other than the rights or agreements described in clause (F) below), (E) in
connection with any stock split, stock dividend or recapitalization of the
Company, (F) to employees, consultants, officers or directors of the
Company pursuant to any stock option, stock purchase or stock bonus plan,
agreement or arrangement for the primary purpose of soliciting or retaining
such employees, consultants, officers or directors services and which are
outstanding on the date hereof or are hereafter approved by the Board of
Directors and the Stockholders in accordance with the terms of this
Agreement, and (G) in a firm commitment underwritten public offering
pursuant to an effective registration statement under the Securities Act,
covering the offer and sale of securities for the account of the Company
and/or selling shareholders to the public) or (ii) to reissue any treasury
shares previously acquired by the Company, then the Company shall notify
each Stockholder holding Voting Shares and each Warrant holder of such
proposed offering and the price thereof, and for a period of 30 days after
such notice, each such Stockholder and Warrant holder may purchase a pro
rata (in accordance with the percentage of Voting Shares then held by such
Stockholder and Warrant holder) amount of the shares being offered by
delivery of the purchase price therefor to the Company. If any Stockholder
or Warrant holder does not accept the offer to purchase all of his or its
pro rata share of the shares being offered, the Company shall make one or
more additional offers of the remainder of such shares to Stockholders or
Warrant holders who have agreed to purchase all of the shares previously
offered. Such additional offer or offers shall be made for a period of 10
days to each of such Stockholders and Warrant holders in the same ratio
that the amount of shares which such Stockholder or Warrant holder has
agreed to purchase bears to the total amount of shares which all
Stockholders and Warrant holders to which such additional offer or offers
are made have agreed to purchase. Any shares not so purchased may be sold
by the Company to a third party who agrees to be bound by the terms of this
Agreement and who shall become a Stockholder hereunder.
(b) For purposes of any calculation of the number of shares
of Voting Shares held or outstanding under this Section 14, the conversion
of all securities convertible into or exchangeable for Voting Shares and
the exercise of all outstanding rights, options and warrants to acquire
Voting Shares
<PAGE>
shall be assumed.
15. Registration Rights. The Stockholders shall have the
registration rights set forth on Exhibit B hereto.
16. Miscellaneous.
(a) Notices. Wherever this Agreement provides for notice to
any party (except as expressly provided to the contrary), it shall be given
in writing by messenger, electronic transmission, telegraph, telex or
postage prepaid, registered or recorded delivery, air mail letter sent to
the address set forth under each Stockholder's name at the foot of this
Agreement, or to such other address as the party affected may hereafter
designate in writing to the Company and all other Stockholders; together
with a copy to the Company at the address set forth at the foot of this
Agreement. Any such notice shall be effective when received by the party to
whom addressed; provided that if given or made by postage prepaid,
registered or recorded delivery, airmail letter or by telegraph or telex,
it shall be deemed to have been received at the earlier of (i) when
actually received or (ii) five (5) business days after the same was posted
or sent (and in proving such it shall be sufficient to prove that the
envelope containing the same was properly addressed and posted as aforesaid
or sent), and provided that if given or made by telegraph or telex, it
shall be deemed to have been received at the time of dispatch.
(b) Termination; Amendment. This Agreement (i) may be terminated
or amended at any time by the written consent of the Company and the
holders of seventy percent (70%) of the Voting Shares and notice of such to
the Company and all Stockholders, provided that no amendment that adversely
affects the interest of any Stockholder shall be effective against such
Stockholder absent such Stockholder's prior written consent, and (ii) shall
be terminated (A) upon the consummation of (1) a registered public offering
of the Common Shares or (2) a Fundamental Change of the type described in
Section 11(b)(iv), (vi), (vii), (viii) or (ix) of this Agreement or (B) ten
years from the date hereof, unless, at anytime within two years prior to
any date upon which termination would occur under this clause (B), all of
the parties extend its duration for an additional period, not to exceed ten
years.
(c) Waiver. No failure or delay on the part of the Stockholders
or any of them in exercising any right, power or privilege hereunder, and
no course of dealing between the Stockholders or any of them shall operate
as a waiver thereof nor shall any single or partial exercise of any right,
power or privilege hereunder preclude the simultaneous or later exercise of
any other right, power or privilege. The rights and remedies herein
expressly provided are cumulative and not exclusive of any rights or
remedies which the Stockholders or any of them would otherwise have. No
notice to or demand in any case shall entitle the recipient thereof to any
other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of the Stockholders or any of them to
take any other or further action in any circumstances without notice or
demand.
(d) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
(e) Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware.
(f) Benefit and Binding Effect. Except as expressly contemplated
herein, this Agreement may not be assigned or transferred. This Agreement
shall be binding upon and shall inure to the benefit of the Company and
each of the Stockholders and their respective executors, administrators and
personal representatives and heirs and their permitted successors and
assigns hereunder and shall be binding upon their successors and assigns.
In the event that any part of this Agreement shall be held to be invalid or
unenforceable, the remaining parts thereof shall nevertheless continue to
be valid and enforceable as though
<PAGE>
the invalid portions were not a part hereof.
(g) Further Assurances. Each party hereto agrees to use its best
efforts to take, and to use its best efforts to cause the Company to take, any
action which may be reasonably requested by any other party hereto in order to
effectuate or implement the provisions of this Agreement; provided that no party
shall be required to take any requested action or cause the Company to take any
requested action not specifically required under this Agreement if such
requested action might adversely affect the interest of such party or the
Company.
(h) Specific Performance. Due to the fact that the Securities cannot
be readily purchased or sold in the open market, and that legal remedies may be
inadequate to enforce this Agreement, the parties will be irreparably damaged in
the event that this Agreement is not specifically enforced. In the event of a
breach or threatened breach of the terms, covenants and/or conditions of this
Agreement by any of the parties hereto, the other parties shall, in addition to
all other remedies, be entitled to a temporary or permanent mandatory
injunction, or any appropriate decree of specific performance, without any bond
or security being required and without being required to show any actual damage
or that monetary damages would not provide an adequate remedy.
(i) Voting Percentages. Whenever any provision in this Agreement
provides for a specified percentage of Voting Shares to authorize or approve any
action, such percentage shall be calculated as if all Warrants had been
exercised and all shares convertible into Voting Shares had been converted. In
addition, each member of the RFE Group hereby grants to Bulldog the right to
vote 29.1667% of the Series B Preferred Shares and/or Class C Common Shares held
by it as if it were the record and beneficial owner thereof; provided, however,
that the rights granted to Bulldog under this sub-paragraph (i) shall not affect
the calculation of the number of Voting Shares owned by any member of the RFE
Group for purposes of any other provision of this Agreement; and provided,
further, that if Bulldog distributes the Series B Preferred Shares or Class C
Common Shares owned by it, the voting rights granted in this sub-paragraph (i)
shall cease to apply.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed
this Agreement as of the day and year first above written.
GMH HOLDINGS INC.
By: /s/ Gary M. Brost
___________________________
Name: Gary M. Brost
Title: President
369 Franklin Street
Buffalo, New York 14202
A STOCKHOLDERS:
BULLDOG HOLDINGS LLC
By: /s/ Gary M. Brost
____________________________
Name: Gary M. Brost
Title: President
369 Franklin Street
Buffalo, New York 14202
RFE INVESTMENT PARTNERS, V, L.P.
By: RFE Associates V, L.P., general
partner
<PAGE>
By: ____________________________
Name:
Title: General Partner
36 Grove Street
New Canaan, Connecticut 06840
STERLING COMMERCIAL CAPITAL, INC.
By: /s/ Harvey Rosenblatt
____________________________
Name: Harvey Rosenblatt
Title: Executive Vice-
President
175 Great Neck Road
Great Neck, New York 11021
STATE TREASURER OF THE STATE OF
MICHIGAN, CUSTODIAN OF THE MICHIGAN
PUBLIC SCHOOL EMPLOYEES' RETIREMENT
SYSTEM, STATE EMPLOYEES RETIREMENT
SYSTEM, MICHIGAN STATE POLICE
RETIREMENT SYSTEM, AND MICHIGAN
JUDGES' RETIREMENT SYSTEM
By: /s/ Paul E. Rice
____________________________
Paul E. Rice
Administrator
Alternate Investments Division
430 West Allegan
Lansing, Michigan 48922
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
By: ____________________________
Name:
Title:
787 7th Avenue
New York, New York 10019
/s/ Robert C. Mayer,Jr.
________________________________
Robert C. Mayer, Jr.
114 River Road
Scarborough, New York 10510
/s/ Robert L. Goodwin
________________________________
Robert L. Goodwin
27 Meadow Lane
Greenwich, Connecticut 06831
/s/ Paul C. Cronson
________________________________
Paul C. Cronson
111 E. 80th Street
New York, New York 10021
/s/ Eileen V. Austen
________________________________
Eileen V. Austen
<PAGE>
3630 Meadville Drive
Sherman Oaks, California 91403
B STOCKHOLDERS:
/s/ Samuel P. Scott
________________________________
Samuel P. Scott
4300 South Fletcher Avenue
Fernandina Beach, FL 32034
/s/ Kelly Scott Herold
________________________________
Kelly Scott Herold, as Trustee
1230 Greenridge Road
Jacksonville, FL 32207
/s/ Gregory Keith Scott
________________________________
Gregory Keith Scott
3136-A South Fletcher Avenue
Fernandina Beach, FL 32034
/s/ Drew Eric Scott
________________________________
Drew Eric Scott
3000-B South Fletcher Avenue
Fernandina Beach, FL 32034
/s/ Wayne Roberts
________________________________
Wayne Roberts
2255 Industrial Blvd.
Waycross, GA 32503
/s/ Lannis Thomas
________________________________
Lannis Thomas
2255 Industrial Blvd.
Waycross, GA 32503
/s/ Thomas M. Vinson
________________________________
Thomas M. Vinson
2255 Industrial Blvd.
Waycross, GA 32503
/s/ Bruce Hallock
________________________________
Bruce Hallock
2255 Industrial Blvd.
Waycross, GA 32503
/s/ Michael O'Gorman
________________________________
Michael O'Gorman
2255 Industrial Blvd.
Waycross, GA 32503
/s/ Benny Bryan
________________________________
Benny Bryan
2255 Industrial Blvd.
Waycross, GA 32503
/s/ James H. McClellan
________________________________
James H. McClellan
2255 Industrial Blvd.
Waycross, GA 32503
<PAGE>
EXHIBIT A
SCHEDULE OF STOCKHOLDERS
<TABLE>
<CAPTION>
STOCKHOLDER NUMBER OF SHARES GROUP
SERIES A SERIES B CLASS A CLASS B CLASS C
PREFERRED PREFERRED COMMON COMMON COMMON WARRANTS
<S> <C> <C> <C> <C> <C> <C> <C>
Bulldog Holdings LLC 1,400,000 A
RFE Investments
Partners V, L.P. 4,690,351 439,720 714,546 A
State Treasurer of
the State of
Michigan, Custodian 3,076,922 288,462 468,750 A
Sterling Commercial
Capital, Inc. 232,727 21,818 35,454 A
The Equitable Life
Assurance Society of
the United States 350,000 A
Eileen V. Austen 54,687 A
Paul C. Cronson 54,687 A
Robert C. Goodwin 54,688 A
Robert C. Mayer 54,688 A
Samuel P. Scott 92,749 B
Kelly Scott Herold,
as Trustee 71,167 B
Gregory Keith Scott 71,167 B
Drew Eric Scott 71,167 B
Lannis Thomas 28,000 B
Wayne Roberts 28,000 B
Thomas M. Vinson 21,000
Bruce Hallock 14,000 B
Michael O'Gorman 14,000 B
Benny Bryan 13,125 B
James H. McClellan 13,125 B
_________ _________ _________ ________ ______ ________
TOTAL 8,000,000 2,150,000 1,656,250 0 0 568,750
</TABLE>
<PAGE>
EXHIBIT B
REGISTRATION RIGHTS
<PAGE>
REGISTRATION RIGHTS
1. Definitions. Capitalized terms used without definition in this
Exhibit B shall have the meanings set forth in the Stockholders' Agreement to
which this Exhibit B is attached. The following terms shall have the following
respective meanings:
Commission: the Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act or the Exchange Act,
whichever is the relevant statute for the particular purpose.
Equitable Initiating Holders: any holder or holders of more than
50% of the Warrants.
Exchange Act: the Securities Exchange Act of 1934, or any similar
Federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time of determination.
Initiating Holders: each of (a) The Equitable Initiating Holders
and (b) the RFE Initiating Holders, together with their successors and permitted
assigns.
IPO: the issuance by the Company in a Public Offering under the
Act of a number of shares of Common Stock such that, after giving effect to such
Public Offering, there shall be outstanding pursuant to one or more such Public
Offerings shares of Common Stock equal to at least 20% of the capital stock of
the Company on a fully-diluted basis.
Other Securities: any stock (other than Common Stock) and other
securities of the Company or any other Person (corporate or otherwise) which the
holders of the Warrants at any time shall be entitled to receive, or shall have
received, upon the exercise of the Warrants, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities pursuant to
Section 3 of the Warrant Agreement or otherwise.
Public Offering: any offering of Common Stock or Other
Securities, or any securities issued or issuable with respect to any Common
Stock or Other Securities by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization or otherwise, in each case to the public pursuant to an
effective registration statement under the Act.
Registrable Securities: (a) any shares of Common Stock issued and
outstanding as of the date hereof, (b) the Warrants, (c) any shares of Common
Stock or Other Securities issued or issuable upon exercise of the Warrants or
upon conversion of the Series B Preferred Shares and (d) any securities issued
or issuable with respect to any Common Stock or Other Securities referred to in
subdivision (c) by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable
<PAGE>
Securities, once issued such securities shall cease to be Registrable Securities
when (x) a registration statement with respect to the sale of such securities
shall have become effective under the Securities Act and such securities shall
have been disposed of in accordance with such registration statement, (y) they
shall have been sold as permitted under Rule 144 (or any successor provision)
under the Securities Act, or (z) they shall have ceased to be outstanding.
Registration Expenses: all expenses incident to the Company's
performance of or compliance with the provisions of this Exhibit B, including,
without limitation, all registration, filing and NASD fees, all fees and
expenses of complying with securities or blue sky laws, all word processing,
duplicating and printing expenses, messenger and delivery expenses, the fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of any special audits or "cold comfort"
letters required by or incident to such performance and compliance, the
reasonable fees and disbursements of a single counsel and single firm of
accountants retained by the holders of the Registrable Securities being
registered, premiums and other costs of policies of insurance against
liabilities arising out of the public offering of the Registrable Securities
being registered and any fees and disbursements of underwriters customarily paid
by issuers or sellers of securities, but excluding underwriting discounts,
commissions, transfer taxes and any other compensation paid to underwriters or
other agents or brokers to effect the sale, if any, provided that, in any case
where Registration Expenses are not to be borne by the Company, such expenses
shall not include salaries of Company personnel or general overhead expenses of
the Company, auditing fees, premiums or other expenses relating to liability
insurance required by underwriters of the Company, or other expenses for the
preparation of financial statements or other data normally prepared by the
Company in the ordinary course of its business or which the Company would have
incurred in any event.
Requesting Holder: the meaning in paragraph 7.
RFE Initiating Holders: RFE and Michigan.
Warrant Agreement: the Common Stock Purchase Warrant expiring
December 21, 2002 issued by the Company.
Warrants: the meaning specified in the opening paragraph of the
Warrant Agreement.
2. Registration on Request.
(a) Request. At any time and from time to time after the 180th
day following the consummation of an IPO, upon the written request of one or
more Initiating Holders, requesting that the Company effect the registration
under the Securities Act of all or part of such Initiating Holders' Registrable
Securities and specifying the intended method of disposition thereof, the
Company will promptly give written notice of such requested registration to all
holders of outstanding Registrable Securities, and thereupon will use its best
efforts to effect its registration under the Securities Act of:
(i) the Registrable Securities which the Company has been so
requested to register by such Initiating Holder or Holders for disposition
in accordance with the intended method of disposition stated in such
request; and
(ii) all other Registrable Securities the Holders of which have
made written requests to the Company for registration thereof within 20
Business Days after the giving of such written notice by the Company (which
request shall specify the intended method of disposition thereof),
all to the extent required to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so to be
registered; provided that the Company shall not be required to effect the
registration pursuant to this Section 2 of any Warrants (but shall be required
to
<PAGE>
effect the registration of Registrable Securities described in clauses (b) and
(c) of the definition of Registrable Securities), and provided, further, that
any holder of Registrable Securities to be included in any such registration,
may, by written notice to the Company within 10 Business Days after its receipt
of a copy of a notice from the managing underwriter delivered pursuant to
paragraph (g) below, withdraw such request and, on receipt of such notice of the
withdrawal of such request from holders comprising at least a majority of the
holders of Registrable Securities to be included in such registration, the
Company may elect not to effect such registration. Subject to paragraph (g)
below, the Company may include in such registration other securities for sale
for its own account or for the account of any other Person.
(b) Number of Registrations. The Company shall not be required
to effect more than two registrations for the RFE Initiating Holders and two
registrations for the Equitable Initiating Holders pursuant to this Section 2,
provided that such registrations, taken together, shall permit the disposition
of at least 80% of the Registrable Securities which the Company has been so
requested to register, and provided, further, that if two such registrations
shall not permit the disposition of at least 80% of such Registrable Securities,
the Company shall be required to effect additional registrations pursuant to
this Section 2 until they have permitted the disposition of at least 80% of such
Registrable Securities.
(c) Registration Statement Form. Registrations under this
Section 2 shall be on such appropriate registration form of the Commission (i)
as shall be selected by the Company and as shall be acceptable to at least a
majority of the holders of Registrable Securities to be included in such
registration and (ii) as shall permit the disposition of the Registrable
Securities which the Company has been requested to register under this Section 2
in accordance with the intended method or methods of disposition specified in
the request for their registration. The Company may, if permitted by law, effect
any registration requested under this Section 2 by the filing of a registration
statement on Form S-3 (or any successor or similar short form registration
statement) unless the holders holding at least a majority (by number of shares)
of the Registrable Securities as to which such registration relates (and, if
such registration involves an underwritten Public Offering of such Registrable
Securities, the managing underwriter of such Public Offering) shall notify the
Company in writing that, in the judgment of such holders (and, if applicable,
such managing underwriter), the use of a more detailed form specified in such
notice is of material importance to the success of the Public Offering of such
Registrable Securities, in which case such registration shall be effected on the
form so specified. Upon the request of at least a majority of the holders of
Registrable Securities, registration under this Section 2 shall be by means of a
shelf registration pursuant to Rule 415 under the Securities Act (but only if
the Company is then eligible to use Form S-2 or S-3 (or any successor forms)).
(d) Expenses. The Company will pay all Registration Expenses in
connection with the first two registrations for each of the RFE Initiating
Holders and the Equitable Initiating Holders effected pursuant to this Section
2, and, if such registrations, taken together, shall not permit the disposition
of at least 80% of the Registrable Securities which the Company has been
requested to register under this Section 2, the Company will pay all
Registration Expenses in connection with each additional registration pursuant
to this Section 2 until such registrations, taken together, shall have permitted
the disposition of at least 80% of such Registrable Securities.
(e) Selection of Underwriters. If, in the discretion of the
holders of a majority (by number of shares) of the Registrable Securities, any
offering pursuant to this Section 2 shall constitute an underwritten offering,
the underwriter or underwriters thereof shall be selected, after consultation
with such holders, by the Company and shall be acceptable to the holders of at
least a majority of the holders of Registrable Securities to be included in such
offering, who shall not unreasonably withhold their acceptance of such
underwriter or
<PAGE>
underwriters.
(f) Effective Registration Statement. A registration requested
pursuant to this Section 2 will not be deemed to have been effected and a demand
shall not be deemed to have been made (i) unless it has become effective, (ii)
if the registration does not remain effective for a period of at least 120 days
(or, with respect to any registration statement filed pursuant to Rule 415 under
the Securities Act, for a period of at least 2 years) or, if earlier, until all
the Registrable Securities requested to be registered in connection therewith
were sold, (iii) if, after it has become effective, such registration is
interfered with by any stop order, injunction or other order or requirement of
the Commission or other governmental agency or court, or (iv) if the conditions
to closing specified in the purchase agreement or underwriting agreement entered
into in connection with such registration are not satisfied other than by reason
of some act or omission by such Initiating Holders.
(g) Priority in Requested Registrations. If a requested
registration pursuant to this Section 2 involves an underwritten offering, and
the managing underwriter shall advise the Company in writing (with a copy to
each holder of Registrable Securities requesting registration) that, in its
opinion, the number of securities requested to be included in such registration
(including securities of the Company which are not Registrable Securities)
exceeds the number which can be sold in such offering, the Company will include
in any such registration to the extent of the number which the Company is so
advised can be sold in such offering (i) first, Registrable Securities requested
to be included in such registration by the holder or holders of Registrable
Securities who are Initiating Holders, pro rata among such holders on the basis
of the number of Registrable Securities requested to be included by such
holders, and (ii) second, other securities of the Company proposed to be
included in such registration, in accordance with the priorities, if any, then
existing among the Company and the holders of such other securities.
3. Incidental Registration.
(a) Right to Include Registrable Securities. Notwithstanding any
limitation contained in Section 2, if the Company at any time proposes to
register any of its securities under the Securities Act (other than by a
registration on Form S-4 or S-8 or any successor or similar forms), whether or
not for sale for its own account, in a manner which would permit registration of
Registrable Securities for sale to the public under the Securities Act, each
such time, it will give prompt written notice to all holders of Registrable
Securities of its intention to do so and of such holders' rights under this
Section 3. Upon the written request of any such holder made within 20 days after
receipt of any such notice (which request shall specify the Registrable
Securities intended to be disposed of by such holder and the intended method of
disposition thereof), the Company will use its best efforts to effect the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by the holders thereof, to the extent
requisite to permit the disposition (in accordance with the intended methods
thereof as aforesaid) of the Registrable Securities so to be registered, by
inclusion of such Registrable Securities in the registration statement which
covers the securities which the Company proposes to register, provided that (i)
the Company shall not be required to effect the registration pursuant to this
Section 3 of any Warrants (but shall be required to effect the registration of
Registrable Securities described in clauses (b) and (c) of the definition of
Registrable Securities) and (ii) if, at any time after giving written notice of
its intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each holder of Registrable Securities and, thereupon, (x) in
the case of a determination not to register, shall be relieved of its obligation
to register any Registrable Securities in connection with such registration (but
<PAGE>
not from its obligation to pay the Registration Expenses in connection
therewith), without prejudice, however, to the rights of any holder or holders
of Registrable Securities entitled to request that such registration be effected
as a registration under Section 2, and (y) in the case of a determination to
delay registering, shall be permitted to delay registering any Registrable
Securities for the same period as the delay in registering such other
securities. No registration effected under this Section 3 shall relieve the
Company of its obligation to effect any registration statement upon request
under Section 2. The Company will pay all Registration Expenses in connection
with each registration of Registrable Securities requested pursuant to this
Section 3.
(b) Priority in Incidental Registrations. If a registration
pursuant to this Section 3 involves an underwritten offering and the managing
underwriter advises the Company in writing that, in its opinion, the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering, the Company will include in such
registration, to the extent of the number which the Company is so advised can be
sold in such offering, securities determined as follows:
(i) if such registration as initially proposed by the Company
was solely a primary registration of its securities, (x) first, the
securities proposed by the Company to be sold for its own account, (y)
second, any Registrable Securities requested to be included in such
registration, pro rata among the holders thereof requesting such
registration on the basis of the number of shares of Registrable Securities
requested to be included by such holders and (z) third, any other
securities of the Company proposed to be included in such registration, pro
rata among the holders thereof requesting such registration on the basis of
the number of shares of such securities requested to be included by such
holders; and
(ii) if such registration as initially proposed by the Company
was in whole or in part requested by holders of securities of the Company,
other than holders of Registrable Securities, pursuant to Section 2 hereof,
such securities held by the holders initiating such registration, any
Registrable Securities requested to be included in such registration, and
any other securities of the Company proposed to be included in such
registration, pro rata among the holders thereof requesting such
registration on the basis of the number of shares of such securities
requested to be included by such holders.
4. Registration Procedures. If and whenever (a) the Company is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Sections 2 and 3 or (b) there
is a Requesting Holder in connection with any other proposed registration by the
Company under the Securities Act, the Company will as expeditiously as possible:
(i) prepare and file with the Commission the requisite
registration statement (including such audited financial statements as may
be required by the Securities Act or the rules and regulations promulgated
thereunder) to effect such registration and use its best efforts to cause
such registration statement to become effective, provided that before
filing such registration statement or any amendments thereto, the Company
will furnish to the counsel selected by the holders of Registrable
Securities whose Registrable Securities are to be included in such
registration copies of all such documents proposed to be filed, which
documents will be subject to the review of such counsel, and provided,
further, that the Company may discontinue any registration of its
securities which are not Registrable Securities at any time prior to the
effective date of the registration statement relating thereto;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be
<PAGE>
necessary to maintain the effectiveness of such registration statement and
to comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement until
the earlier of (A) such time as all of such securities have been disposed
of in accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such registration statement and (B) the
expiration of 120 days after such registration statement becomes effective,
except with respect to any such registration statement filed pursuant to
Rule 415 (or any successor Rule) under the Securities Act, in which case
such period shall be 2 years;
(iii) furnish to each seller of Registrable Securities covered by
such registration statement and each Requesting Holder such number of
conformed copies of such registration statement and of each such amendment
and supplement thereto (in each case including all exhibits), such number
of copies of the prospectus contained in such registration statement
(including each preliminary prospectus and any summary prospectus) and any
other prospectus filed under Rule 424 under the Securities Act, in
conformity with the requirements of the Securities Act, and such other
documents, as such seller may reasonably request;
(iv) use its best efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement
under such other securities or blue sky laws of such jurisdictions as each
seller thereof and each Requesting Holder shall reasonably request, to keep
such registration or qualification in effect for so long as such
registration statement remains in effect, and take any other action which
may be reasonably necessary or advisable to enable such seller to
consummate the disposition in such jurisdictions of the securities owned by
such seller, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not but for the requirements of this
subdivision (iv) be obligated to be so qualified or to consent to general
service of process in any such jurisdiction;
(v) use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to
enable the seller or sellers thereof to consummate the disposition of such
Registrable Securities;
(vi) furnish to each seller of Registrable Securities and each
Requesting Holder a signed counterpart, addressed to such seller (and the
underwriters, if any), of
(A) an opinion of counsel for the Company, dated the
effective date of such registration statement (and, if such
registration includes an underwritten Public Offering, dated the date
of any closing under the underwriting agreement), reasonably
satisfactory in form and substance to such seller, and
(B) a "comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an
underwritten Public Offering, dated the date of any closing under the
underwriting agreement), signed by the independent public accountants
who have certified the Company's financial statements included in such
registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to the underwriters in
underwritten Public Offerings of securities and, in the case of the
accountants' letter, such other financial matters, as such seller (or the
underwriters, if any) may reasonably request;
<PAGE>
(vii) immediately notify each seller of such Registrable
Securities, and (if requested by any such seller) confirm such advice in
writing, (A) when the prospectus or any prospectus supplement or post-
effective amendment has been filed, and, with respect to the registration
statement or any post-effective amendment, when the same has become
effective, (B) of any request by the Commission for amendments or
supplements to the registration statement or the prospectus or for
additional information, (C) of the issuance by the Commission of any stop
order suspending the effectiveness of the registration statement or the
initiation of any proceedings for that purpose and (D) of the receipt by
the Company of any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any jurisdiction or
the initiation or threatening of any proceeding for such purpose;
(viii) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of the registration statement at the earliest
possible time;
(ix) immediately notify each holder of Registrable Securities
covered by such registration statement and each Requesting Holder, at any
time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under
which they were made, and at the request of any such holder promptly
prepare and furnish to such seller a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such securities, such
prospectus shall not include 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
under which they were made;
(x) otherwise comply with all applicable rules and regulations
of the Commission, and make available to its security holders, as soon as
reasonably practicable, an earnings statement covering the period of at
least twelve months, but not more than eighteen months, beginning with the
first full calendar month after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act, and not file any amendment or supplement to
such registration statement or prospectus to which any such seller or any
Requesting Holder shall have reasonably objected on the grounds that such
amendment or supplement does not comply in all material respects with the
require-ments of the Securities Act or of the rules or regulations
thereunder, having been furnished with a copy thereof at least five
business days prior to the filing thereof;
(xi) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration
statement not later than the effective date of such registration statement;
(xii) cooperate with the sellers of such Registrable Securities to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold, which securities shall not bear any
restrictive legends and shall be in a form eligible for deposit with The
Depository Trust Company; and enable such Registrable Securities to be in
such denominations and registered in such names as such sellers may request
at least two Business Days prior to any sale of Registrable Securities;
(xiii) use its best efforts (A) to cause all such
<PAGE>
Registrable Securities covered by such registration statement to be listed
on a national securities exchange (if such Registrable Securities are not
already so listed) and on each additional national securities exchange on
which similar securities issued by the Company are then listed, if the
listing of such Registrable Securities is then permitted under the rules of
such exchange, or (B) to secure designation of all such Registrable
Securities covered by such registration statement as a NASDAQ "national
market system security" within the meaning of Rule llAa2-1 of the
Commission or, failing that, secure NASDAQ authorization for such
Registrable Securities and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register as such
with respect to such Registrable Securities with the NASD;
(xiv) provide a CUSIP number for all Registrable Securities, not
later than the effective date of the applicable registration statement; and
(xv) enter into such agreements and take such other actions as
the Requisite Holders shall reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities.
The Company may require each holder of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such holder and the distribution of such securities as the Company may from time
to time reasonably request in writing.
5. Underwritten Offerings.
(a) Requested Underwritten Offerings. If requested by the
underwriters for any underwritten offering by holders of Registrable Securities
pursuant to the registration requested under Section 2, the Company will enter
into an underwriting agreement with such underwriters for such offering, such
agreement to be satisfactory in substance and form to each such holder and the
underwriters and to contain such representations and warranties by the Company
and such other terms as are customarily contained in agreements of this type,
including, without limitation, indemnities to the effect and to the extent
provided in Section 8. The holders of Registrable Securities to be distributed
by such underwriters shall be parties to such underwriting agreement and may, at
their option, require that any or all of the representations and warranties by,
and the other agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of such holders of
Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders of Registrable Securities. No
holder of Registrable Securities shall be required (i) to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
holder and such holder's intended method of distribution and any other
representation required by law or (ii) to indemnify (or to contribute with
respect to an indemnifiable claim) the Company or any underwriters of the
Registrable Securities, except as set forth in Section 8.
(b) Incidental Underwritten Offerings. If the Company at any
time proposes to register any of its securities under the Securities Act as
contemplated by Section 3 and such securities are to be distributed by or
through one or more underwriters, the Company will, subject to the provisions of
Section 3(b), use its best efforts, if requested by any holder of Registrable
Securities, to arrange for such underwriters to include the Registrable
Securities to be offered and sold by such holder among the securities to be
distributed by such underwriters. The holders of Registrable Securities to be
distributed by such underwriters shall be parties to the underwriting agreement
between the Company and such underwriters and may, at their option, require that
any or all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such
<PAGE>
underwriters shall also be made to and for the benefit of such holders of
Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders of Registrable Securities. No
holder of Registrable Securities shall be required (i) to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
holder and such holder's intended method of distribution and any other
representation required by law or (ii) to indemnify (or to contribute with
respect to an indemnifiable claim) the Company or any underwriters of the
Registrable Securities, except as set forth in Section 8.
(c) Holdback Agreements.
(i) Each holder of Registrable Securities agrees, if so required
by the managing underwriter, not to effect any public sale or distribution
of securities of the Company of the same class as the securities included
in such Registration Statement, during the seven days prior to the date on
which any underwritten registration pursuant to Section 2 or 3 has become
effective and the 90 days thereafter, except as part of such underwritten
registration or to the extent that such holder is prohibited by applicable
law from agreeing to withhold Registrable Securities from sale or is acting
in its capacity as a fiduciary or an investment adviser. Without limiting
the scope of the term "fiduciary," a holder shall be deemed to be acting as
a fiduciary or an investment adviser if its actions or the Registrable
Securities proposed to be sold are subject to ERISA, the Investment Company
Act of 1940 or the Investment Advisers Act of 1940 or if such Registrable
Securities are held in a separate account under applicable insurance law or
regulation.
(ii) The Company agrees (A) not to effect any public sale or
distribution of its equity securities or securities convertible into or
exchangeable or exercisable for any of such securities during the seven
days prior to the date on which any underwritten registration pursuant to
Section 2 or 3 has become effective and the 90 days thereafter, except as
part of such underwritten registration and except pursuant to registrations
on Form S-4 or S-8 or any successor or similar forms thereto, and (B) to
cause each holder of its equity securities or of any securities convertible
into or exchangeable or exercisable for any of such securities, in each
case purchased from the Company at any time after the date of this
Agreement (other than in a Public Offering), to agree not to effect any
such public sale or distribution of such securities, during such period,
except as part of such underwritten registration.
6. Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act,
the Company will give the holders of Registrable Securities to be registered
under such registration statement, their underwriters, if any, each Requesting
Holder and one firm of counsel and accountants on behalf of such Requesting
Holders, the opportunity to participate in the preparation of such registration
statement, each prospectus included therein or filed with the Commission, and
each amendment thereof or supplement thereto, and will give each of them such
access to its books and records and such opportunities to discuss the business
of the Company with its officers and the independent public accountants who have
certified its financial statements as shall be necessary, in the opinion of such
holders' and such underwriters' respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company agrees to
include in any such registration statement all information which any holder of
Registrable Securities being registered, upon advice of counsel, shall
reasonably request.
7. Rights of Requesting Holders. The Company will not file any
registration statement under the Securities Act, whether or not pursuant to
registration rights granted to other holders of its securities and whether or
not for sale for its own
<PAGE>
account (other than by a registration on Form S-4, S-8 or any successor form
thereto), unless it shall first have given to each Person which holds any
Registrable Securities issued by the Company at least 30 days' prior written
notice thereof. Any such holder who shall so request within 30 days after such
notice (a "Requesting Holder") shall have the rights of a Requesting Holder
provided in Sections 4, 6 and 8. In addition, if any registration statement
refers to any Requesting Holder by name or otherwise as the holder of any
securities of the Company, then such holder shall have the right to require (a)
the insertion therein of language, in form and substance reasonably satisfactory
to such holder, to the effect, if true, that the holding by such holder of such
securities does not necessarily make such holder a "controlling person" of the
Company within the meaning of the Securities Act and is not to be construed as a
recommendation by such holder of the investment quality of the Company's debt or
equity securities covered thereby and that such holding does not imply that such
holder will assist in meeting any future financial requirements of the Company,
or (b) in the event that such reference to such holder by name or otherwise is
not required by the Securities Act or any rules and regulations promulgated
thereunder, the deletion of the reference to such holder.
8. Indemnification.
(a) The Company will, and hereby does, indemnify, to the extent
permitted by applicable law, each holder of Registrable Securities and its
Affiliates and their respective officers and directors, if any, and each Person,
if any, who controls such holder within the meaning of Section 15 of the
Securities Act, against all losses, claims, damages, liabilities (or proceedings
in respect thereof) and expenses (under the Securities Act or common law or
otherwise), joint or several, caused by any untrue statement or alleged untrue
statement of a material fact contained in any registration statement or
prospectus (and as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) or any preliminary prospectus or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities (or proceedings in
respect thereof) or expenses are caused by any untrue statement or alleged
untrue statement contained in or by any omission or alleged omission from
information furnished in writing to the Company by such holder expressly for use
therein. If the offering pursuant to any registration statement provided for
under this Agreement is made through underwriters, no action or failure to act
on the part of such underwriters (whether or not any such underwriter is an
Affiliate of any holder of Registrable Securities) shall affect the obligations
of the Company to indemnify any holder of Registrable Securities or any other
Person pursuant to the preceding sentence. If the offering pursuant to any
registration statement provided for under this Agreement is made through
underwriters, the Company agrees to enter into an underwriting agreement in
customary form with such underwriters, and the Company agrees to indemnify such
underwriters, their officers and directors, if any, and each Person, if any, who
controls such underwriters within the meaning of Section 15 of the Securities
Act to the same extent as hereinbefore provided with respect to the
indemnification of the holders of Registrable Securities; provided that the
Company shall not be required to indemnify any such underwriter, or any officer
or director of such underwriter or any Person who controls such underwriter
within the meaning of Section 15 of the Securities Act, to the extent that the
loss, claim, damage, liability (or proceedings in respect thereof) or expense
for which indemnification is claimed results from such underwriter's failure to
send or give a copy of the amended or supplemented final prospectus to the
Person asserting an untrue statement or alleged untrue statement or omission or
alleged omission at or prior to the written confirmation of the sale of
Registrable Securities to such Person if such statement or omission was
corrected in such amended or supplemented final prospectus prior to such written
confirmation and the underwriter was given notice of the availability of such
amended or supplemented final prospectus.
<PAGE>
(b) In connection with any registration statement in which a
holder of Registrable Securities is participating, each such holder will
indemnify, to the extent permitted by applicable law, the Company, its officers
and directors and each Person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act, against any losses, claims,
damages, liabilities (or proceedings in respect thereof) and expenses (under the
Securities Act, common law or otherwise), caused by any untrue statement or
alleged untrue statement of a material fact or any omission or alleged omission
of a material fact required to be stated in the registration statement or
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or necessary to make the statements therein not misleading, but only to
the extent that such untrue statement is contained in or such omission is from
information so furnished in writing by such holder expressly for use therein;
provided that such holder's obligations hereunder shall be limited to an amount
equal to the net proceeds to such holder of the Registrable Securities sold
pursuant to such registration statement.
(c) Any Person entitled to indemnification under the provisions
of this Section 8 shall (i) give prompt notice to the indemnifying party of any
claim with respect to which it seeks indemnification (but the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of this
Section 8, except to the extent that the indemnifying party is actually
prejudiced by such failure) and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, permit such
indemnifying party to assume the defense of such claim, with counsel reasonably
satisfactory to the indemnified party; and if such defense is so assumed, such
indemnifying party shall not enter into any settlement without the consent of
the indemnified party if such settlement attributes liability to the indemnified
party, and such indemnifying party shall not be subject to any liability for any
settlement made without its consent (which shall not be unreasonably withheld);
and any underwriting agreement entered into with respect to any registration
statement provided for under this Agreement shall so provide. In the event an
indemnifying party shall not be entitled, or elects not, to assume the defense
of a claim, such indemnifying party shall not be obligated to pay the fees and
expenses of more than one counsel or firm of counsel for all parties indemnified
by such indemnifying party in respect of such claim, unless in the reasonable
judgment of any such indemnified party a conflict of interest may exist between
such indemnified party and any other of such indemnified parties in respect to
such claim. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of a participating holder of Registrable
Securities, its officers, directors or any Person, if any, who controls such
holder as aforesaid, and shall survive the transfer of such securities by such
holder.
(d) If the indemnification provided for in this Section 8 shall
for any reason be held by a court to be unavailable to an indemnified party
under Section 8(a) or (b) hereof in respect of any loss, claim, damage or
liability, or any action in respect thereof, then, in lieu of the amount paid or
payable under Section 8(a) or (b), the indemnified party and the indemnifying
party under Section 8(a) or (b) shall contribute to the aggregate losses,
claims, damages and liabilities (including legal or other expenses reasonably
incurred in connection with investigating the same), (i) in such proportion as
is appropriate to reflect the relative fault of the Company and the prospective
sellers of Registrable Securities covered by the registration statement which
resulted in such loss, claim, damage or liability, or action or proceeding in
respect thereof, with respect to the statements or omissions which resulted in
such loss, claim, damage or liability, or action or proceeding in respect
thereof, as well as any other relevant equitable considerations or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company and such prospective sellers from the offering of the
securities covered by such registration statement, provided, that
<PAGE>
for purposes of clauses (i) or (ii), the relative benefits received by the
prospective sellers shall be deemed not to exceed the amount of proceeds
received by such prospective sellers, and no holder of Registrable Securities
shall be required to contribute any amount in excess of the amount such holder
would have been required to pay to an indemnified party if the indemnity under
subsection (b) of this Section 8 was available. 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. Such sellers' obligations to contribute as
provided in this Section 8(d) are several in proportion to the relative value of
their respective Registrable Securities covered by such registration statement
and not joint. In addition, no Person shall be obligated to contribute hereunder
any amounts in payment for any settlement of any action or claim effected
without such Person's consent, which consent shall not be unreasonably withheld.
(e) Indemnification and contribution similar to that specified
in the preceding subdivisions of this Section 8 (with appropriate modifications)
shall be given by the Company and each seller of Registrable Securities with
respect to any required registration or other qualification of securities under
any federal or state law or regulation of any governmental authority other than
the Securities Act.
(f) An indemnifying party shall make payments of all amounts
required to be made pursuant to the foregoing provisions of this Section 8 to or
for the account of the indemnified party from time to time promptly upon receipt
of bills or invoices relating thereto or when otherwise due or payable, subject
to an undertaking by the Indemnified Party to repay all such amounts if a court
of competent jurisdiction determines that such Indemnified Party is not entitled
to indemnity or the benefits of contribution hereunder.
9. Adjustments Affecting Registrable Securities. The Company will
not effect or permit to occur any combination or subdivision of shares which
would adversely affect the ability of the holders of Registrable Securities to
include such Registrable Securities in any registration of its securities
contemplated by this Exhibit B or the marketability of such Registrable
Securities under any such registration.
10. Registration Rights to Others. The Company shall not, without the
prior written consent of the holders of a majority of Registrable Securities,
provide to any holder of any securities of the Company rights with respect to
the registration of such securities under the Act which are more favorable to
such holder than the terms and conditions provided in this Exhibit B to holders
of Registrable Securities. The Company shall provide to the holders of
Registrable Securities copies of any agreements which purport to grant rights
with respect to the registration of any of the Company's securities to any
holder or prospective holder thereof promptly upon executing the same.
11. Other Registration of Common Stock. If any shares of the Common
Stock required to be reserved for purposes of issuance upon exercise of the
Warrants in connection with their sale in a registration pursuant to Section 2
or 3 require registration with or approval of any governmental authority under
any federal or state law (other than the Securities Act) before such shares may
be issued upon such exercise, the Company will, at its expense and as
expeditiously as possible, use its best efforts to cause such shares to be duly
registered or approved, as the case may be.
12. Nominees for Beneficial Owners. For purposes of this Exhibit B,
in the event that any Registrable Securities are held by a nominee for the
beneficial owner thereof, the beneficial owner thereof may, at its election, be
treated as the holder of such Registrable Securities for purposes of any request
or other action by any holder or holders of Registrable Securities pursuant to
this Exhibit B or any determination of any number or percentage of shares of
Registrable Securities held by any holder or holders of Registrable Securities
contemplated by this Exhibit B. If the beneficial owner of any Registrable
<PAGE>
Securities so elects, the Company may require assurances reasonably satisfactory
to it of such owner's beneficial ownership of such Registrable Securities.
13. Rule 144 and Rule 144A. The Company shall take all actions
reasonably necessary to enable holders of Registrable Securities to sell such
securities without registration under the Securities Act within the limitation
of the provisions of Rule 144 and Rule 144A under the Securities Act, as such
Rules may be amended from time to time, or any similar rules or regulations
hereafter adopted by the Commission, including, without limitation, filing on a
timely basis all reports required to be filed pursuant to the Exchange Act.
14. Transfer; Assignment. Upon a transfer of Registrable Securities
by the holder thereof, the rights granted hereunder to the holders of
Registrable Securities may be transferred to such transferee.
15. Amendment. Notwithstanding the provisions of the Stockholders
Agreement to which this Exhibit B is attached, this Exhibit B may not be amended
or modified without the prior written consent of holders of more than 50% of the
Registrable Securities. Any approval, action or waiver of any provision
contained in this Exhibit B shall require the prior approval or consent of
holders of more than 50% of the Registrable Securities, and upon receiving such
approval or consent, such approval, action or waiver shall be binding upon all
holders of Registrable Securities; provided, that if any amendment is adverse to
any holder of Registrable Securities, the same must be approved by such holder.
<PAGE>
EXHIBIT F
Form of Investor's Rights Agreement
<PAGE>
GMH HOLDINGS, INC.
INVESTORS' RIGHTS AGREEMENT
December 21, 1995
<PAGE>
TABLE OF CONTENTS
SECTION 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PUT/CALL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Put Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Repurchase Rights. . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
BULLDOG OPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Successors and Assigns; Assignment of Rights . . . . . . . . . 5
3.3 Entire Agreement; Amendment; Waiver. . . . . . . . . . . . . . 6
3.4 Notices, etc.. . . . . . . . . . . . . . . . . . . . . . . . . 6
3.5 Delays or Omissions. . . . . . . . . . . . . . . . . . . . . . 6
3.6 Rights; Separability . . . . . . . . . . . . . . . . . . . . . 6
3.7 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . 7
3.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.9 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . 7
3.10 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.11 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 7
<PAGE>
GMH HOLDINGS, INC.
INVESTORS' RIGHTS AGREEMENT
This Investors' Rights Agreement (this "Agreement") is made and entered
into as of the 21st day of December, 1995, by and among GMH HOLDINGS, INC., a
Delaware corporation (the "Company"), the persons identified on Exhibit A
attached hereto (the "Purchasers"), BULLDOG HOLDINGS LLC, a New York limited
liability company ("Bulldog") and THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE
UNITED STATES (the "Equitable").
WHEREAS, the Purchasers are parties to the Securities Purchase Agreement
dated as of the date hereof between the Company, General Manufactured Housing,
Inc. and the Purchasers (the "Series A Agreement"), certain of the Company's and
such Purchasers' obligations under which are conditioned upon the execution and
delivery by such Purchasers, Bulldog, Equitable and the Company of this
Agreement;
For purposes of Sections 1.1, 1.2(c) and 3 of this Agreement only,
Equitable shall be deemed to be a Purchaser.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties hereto agree as follows:
SECTION 1
PUT/CALL
1.1 Put Rights. (a) At any time, and from time to time, commencing
December 30, 2003, a Purchaser may, by notice to the Company and to the other
Purchasers (a "Put Notice") elect to require the Company (subject to the
conditions set forth below), to purchase (a "Put") all of the Common Stock and
Series B Shares owned by such Purchaser at a price equal to the Fair Market
Value (as defined below) determined as of the date of the Put Notice, and the
Company, subject to the conditions set forth below, shall thereupon become
obligated to purchase all of such Common Stock and Series B Shares at the Fair
Market Value. In the event that the Fair Market Value is less than the price at
which such Purchaser is willing to Put such Common Stock and Series B Shares,
then, within 30 days after the date of the determination of Fair Market Value,
the Purchaser may withdraw such Put Notice and the obligations of the Purchaser
and the Company pursuant to this Section 1.1 with respect to such Put shall be
terminated. During the thirty (30) day period following the delivery of any Put
Notice, each Purchaser shall have the right to exercise a Put on equal priority
with the Purchaser who delivered the Put Notice initiating such process with
respect to all Common Stock and Series B Shares owned by such Purchaser.
(b) The Company's obligations with respect to a Put(s) shall be
limited to the extent of its funds legally available for the purchase of capital
stock of the Company. In the event that the Company is so limited in its ability
to fulfill any Put, the Company will use its reasonable efforts to arrange
financing on commercially reasonable terms and conditions in an amount
sufficient to enable it to fulfill its obligations in respect of all Common
Stock and Series B Shares Put by Purchasers during the 30 day period following
delivery of the initiating Put Notice. If, notwithstanding such efforts, after a
period of 90 days following the determination of Fair Market Value as of the
date of the initiating Put Notice, the Company is unable to acquire for cash all
of the Common Stock and Series B Shares which have been Put, then the Company
shall issue to each Purchaser who has
<PAGE>
Put Common Stock and Series B Shares a Promissory Note of the Company
in the original principal amount equal to the Fair Market Value of the
Common Stock and Series B Shares so Put which the Company is unable to
acquire for cash (prorating the cash to be paid and principal amount
of Promissory Notes to be delivered based upon the number of shares
(calculated on an as converted and/or as exercised basis) Put by each
Purchaser as compared to the total number of shares Put by all
Purchasers). Any such promissory note shall bear interest at the rate
per annum equal to the then prevailing rate for three year U.S.
Treasury obligations plus 500 basis points on the outstanding
principal amount thereof, shall be mandatorily prepayable out of
excess cash flow of the Company and its subsidiaries on a
consolidation basis, and shall mature on the third anniversary of the
Put Notice applicable thereto. Such Promissory Note shall contain such
subordination provisions as the Company's senior lenders shall
reasonably request. The Promissory Note shall be secured by a pledge
of the securities with respect to which the Put has been exercised.
The Promissory Note shall be substantially in the form of Exhibit I
attached to this Agreement. The securities pledged to secure the
Promissory Note shall be endorsed in blank, together with assignments
separate from certificates, which are undated and have been executed
by the Company, and shall be delivered to the Purchaser, together with
a pledge agreement executed by the Company in substantially the form
of Exhibit II attached to this Agreement and the Promissory Note, at
the Closing of such Put.
(c) The closing of any Put transaction shall take place on a
date (such date to be as soon as practicable after the Valuation has
been delivered) and at the offices of the Company. The Company, will
pay for the Common Stock and Series B Shares to be purchased pursuant
to a Put by wire transfer to the Purchaser to the extent provided
above, and, if required pursuant to subparagraph (b) above by delivery
of a Promissory Note duly executed by the Company. The Company, will
be entitled to receive customary representations and warranties from
the Purchaser regarding the sale of the Common Stock and Series B
Shares including a representation that the Purchaser has good and
marketable title to the Common Stock and Series B Shares to be
transferred free and clear of all liens, claims and other
encumbrances.
(d) As used herein, the following terms shall have the following
respective meanings:
Entity Fair Market Value shall mean the fair market value of
the Company and its Subsidiaries considered as one entity (as
established pursuant to a Valuation), in the event of a sale of
the Company and its Subsidiaries pursuant to an active marketing
process, less any indebtedness of the Company and its
Subsidiaries for borrowed money.
Fair Market Value of a share of Common Stock shall mean the
Entity Fair Market Value divided by the total number of issued
and outstanding shares of Common Stock of the Company on a fully
diluted basis (including the conversion of all securities
convertible into Common Stock and the exercise of all warrants
which are exercisable into Common Stock). Fair Market Value of a
Series B Share shall mean the Fair Market Value of a share of
Common Stock multiplied by the number of shares of Common Stock
into which such Series B Share is then convertible.
"Valuation" shall mean with respect to Entity Fair Market
Value, the agreement of the Company and the applicable
Purchaser(s), or if the Company and such Purchaser(s) are unable
to agree within 30 days after delivery of the Put Notice, the
opinion of an investment banking firm of national standing
designated by mutual agreement of the Company and the Purchaser.
The costs of conducting the Valuation shall be borne equally by
the applicable Purchaser and the Company.
1.2 Repurchase Rights. (a) At any time commencing December 30, 2004,
the Company may, by notice to the Purchasers
<PAGE>
(a "Call Notice"), elect to purchase (a "Call") all of the Purchasers'
Common Stock and Series B Shares at a price equal to the Fair Market Value
thereof, determined as of the date of the Call Notice. The Call Notice will
set forth the time and place for the closing of the transaction.
(b) At any time commencing December 30, 2004, the Company may,
by a Call Notice to Equitable, elect to Call all of Equitable's Common
Stock at a price equal to the Fair Market Value thereof, determined as of
the date of the Call Notice. The Call Notice will set forth the time and
place for the closing of the transaction.
(c) The closing of the transactions contemplated by this Section
1.2 shall take place on the date and at the place designated by the Company
in the Call Notice which date shall not be more than 90 days after the
delivery of such notice. The Company will pay for the Common Stock and
Series B Shares to be purchased pursuant to a Call in cash by wire transfer
payable to the holder of such Common Stock and Series B Shares. The Company
will be entitled to receive customary representations and warranties from
each Purchaser regarding the sale of the Common Stock and Series B Shares,
including but not limited to the representation that the Purchaser has good
and marketable title to the Common Stock and Series B Shares to be
transferred free and clear of all liens, claims and other encumbrances.
SECTION 2
BULLDOG OPTION
2.1 Option. On each dividend payment date with respect to the Series
A Shares (and whether or not any dividend in respect of the Series A Shares
is earned or declared), in the event that there is an aggregate amount of
accrued and unpaid dividends in respect of the Series A Shares in excess of
$500,000, then Bulldog shall grant to each Purchaser an option to purchase
such Purchaser's pro rata share (as defined below) of that number of Series
B Shares (adjusted for any combinations, consolidations, stock splits, or
stock distributions or dividends with respect to such shares) (the "Option
Shares") owned by Bulldog as equals .21875 times the difference between (a)
the aggregate amount of accrued and unpaid dividends in respect of all
Series A Shares minus (b) the greater of (x) $500,000 and (y) the lowest
aggregate amount of accrued and unpaid dividends outstanding in respect of
all Series A Shares since the immediately preceding dividend payment date
(or, if Bulldog has converted some or all of the Series B Shares such that
it owns an insufficient number of Series B Shares to satisfy such option,
then such option shall be for such number of shares of Common Stock as such
number of Option Shares would then convert into at the then applicable
Series B Conversion Price); provided that the maximum number of Option
Shares as to which the Purchasers may be granted options hereunder shall be
that number of Option Shares as shall represent ten percent (10%) of the
Company's Common Stock on a fully-diluted basis. The option exercise price
per share with respect to any such option shall equal $2.2857 per share (as
adjusted for combinations, consolidations or stock distributions or
dividends with respect to such shares) and the term of each such option
shall be eight years from the date of grant of such option. Each option may
be exercised in whole or in part provided that options shall be exercised
in amounts no less than the lesser of (i) $10,000 in aggregate exercise
price and (ii) the total dollar amount in exercise price of all unexercised
options held by such optionee. If prior to exercise of any option granted
pursuant to this Section, the Company pays dividends in respect of the
Series A Shares such that the aggregate amount of accrued and unpaid
dividends in respect of all Series A Shares is less than $500,000, then
one-half of the unexercised options which are then held by such optionee
(but excluding any options which have previously been outstanding at any
time when the aggregate amount of accrued and unpaid dividends on all
Series A Shares is less than $500,000) shall expire and be of no further
force or effect. A Purchaser's pro rata share shall be that percentage
which expresses the ratio between the number of shares of Common Stock
owned by such Purchaser and the aggregate number of shares of Common Stock
<PAGE>
owned by all such Purchasers.
SECTION 3
MISCELLANEOUS
3.1 Governing Law. This Agreement shall be governed in all respects
by the laws of the State of Delaware, as applied to agreements among
Delaware residents entered into and to be performed entirely within
Delaware.
3.2 Successors and Assigns; Assignment of Rights. The rights and
benefits of a Purchaser hereunder (including such Purchaser's rights and
benefits under Section 1.1 hereof) may be assigned to a transferee or
assignee in connection with transfer or assignment of any Series A Shares
owned by such Purchaser (A) to any person or entity which is a majority-
owned subsidiary of a Purchaser or controls, is controlled by or under
common control with the Purchaser, (B) to any other person or entity
provided that (a) such transfer may otherwise be effected in accordance
with applicable securities laws, (b) such transferee or assignee acquires
at least 160,000 Series A Shares and (c) such assignee or transferee
executes a written instrument agreeing to be bound by the terms and
provisions of this Agreement, (C) to a constituent partner of a Purchaser,
a trust (including liquidating trusts for the benefit of such a partner or
partners) or the estate of such a constituent partner, and (D) to a
successor trustee of a Purchaser in its capacity as trustee. Any such
transfer or assignment permitted hereby shall inure to the benefit of, and
be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto.
3.3 Entire Agreement; Amendment; Waiver. This Agreement, the Series A
Agreement and the other agreements contemplated thereby constitute the full
and entire understanding and agreement between the parties with regard to
the subjects hereof and thereof. Neither this Agreement nor any term hereof
may be amended, waived, discharged or terminated, except by a written
instrument signed by the Company and the holders of at least sixty six and
2/3 percent (66-2/3%) of the Series A Shares and any such amendment,
waiver, discharge or termination shall be binding upon all the parties
hereto, but in no event shall the obligation of any party hereto be
materially increased, except upon the written consent of such party.
3.4 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by United
States first-class mail, postage prepaid, sent by -facsimile or delivered
personally by hand or nationally recognized courier addressed (a) if to a
Purchaser, as indicated on the list of Purchasers attached hereto as
Exhibit A, or at such other address as such Purchaser or permitted assignee
shall have furnished to the Company in writing, (b) if to Bulldog to
Strategic Investments & Holdings, Inc., Cyclorama Building, 369 Franklin
Street, Buffalo, New York 14202; Attention: Gary M. Brost or at such other
address as shall have furnished to the Company in writing, or (c) if to the
Company, at such address or facsimile number as the Company shall have
furnished to each Purchaser in writing. All such notices and other written
communications shall be effective on the date of mailing, facsimile
transfer or delivery.
3.5 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any Purchaser (in any capacity hereunder), upon
any breach or default of the Company under this Agreement shall impair any
such right, power or remedy of such Purchaser nor shall it be construed to
be a waiver of any such breach or default, or an acquiescence therein, or
of or in any similar breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any Purchaser
(in any capacity hereunder) of any breach or default under this Agreement
or any waiver on the part of any Purchaser of any provisions or conditions
of this Agreement must be made in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either
under this Agreement or by law or otherwise afforded to
<PAGE>
any Purchaser, shall be cumulative and not alternative.
3.6 Rights; Separability. Unless otherwise expressly provided herein,
a Purchaser's rights hereunder are several rights, not rights jointly held
with any of the other Purchaser. In case any provision of the Agreement
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.
3.7 Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and
are not to be considered in construing or interpreting this Agreement.
3.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
3.9 No Third Party Beneficiaries. The covenants and agreements set
forth herein are for the sole and exclusive benefit of the parties hereto
and their respective successors and assigns and such covenants and
agreements shall not be construed as conferring, and are not intended to
confer, any rights or benefits upon any other persons.
3.10 Remedies. The parties to this Agreement acknowledge and agree
that a breach of any of the covenants of the Company, the Purchasers or
Bulldog set forth in this Agreement may not be compensable by payment of
money damages and, therefore, that the covenants of the foregoing parties
set forth in this Agreement may be enforced in equity by a decree requiring
specific performance. Without limiting the foregoing, if any disputes arise
concerning Section 1 hereof, the parties to this Agreement agree that an
injunction may be issued pending resolution of such controversy. Such
remedies shall be cumulative and non-exclusive and shall be in addition to
any other rights and remedies the parties may have under this Agreement.
Any transfer or acquisition of Restricted Securities in violation of this
Agreement shall be null and void ab initio.
3.11 Definitions. As used in this Agreement, the following definitions
shall apply:
"Common Stock" shall mean, collectively, the Company's Class A
Common Stock, par value $0.001 per share, the Company's Class C Common
Stock, par value $0.001 per share, including shares of Class C Common Stock
issued or issuable upon conversion of Series B Shares, and the Company's
Class B Common Stock, par value $0.001 per share, including shares of Class
A or Class B Common Stock issued or issuable upon exercise of the warrants
issued to Equitable on the date hereof.
"Series A Shares" shall mean the Company's Series A Redeemable
Preferred Stock, par value $0.001 per share.
"Series B Shares" shall mean the Company's Series B Convertible
Preferred Stock, par value $0.001 per share.
[Remainder of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Investors'
Rights Agreement effective as of the day and year first above written.
THE COMPANY: GMH HOLDINGS, INC.
By:________________________________
Name:
Title:
BULLDOG: BULLDOG HOLDINGS LLC
By: SIHI-GMH LLC
Its Managing Member
By:________________________________
THE PURCHASERS: RFE INVESTMENT PARTNERS V, L.P.
By: RFE ASSOCIATES V, L.P.,
Its General Partner
By:________________________________
A General Partner
STERLING COMMERCIAL CAPITAL, INC.
By: /s/ Harvey Rosenblatt
_______________________________
Harvey Rosenblatt,
Executive Vice President
State Treasurer of the State of
Michigan, Custodian of the Michigan
Public School Employees' Retirement
System, State Employees' Retirement
System, Michigan State Police
Retirement System, and Michigan
Judges Retirement System
By: /s/ Paul E. Rice
_____________________________
Name: Paul E. Rice
Title:Administrator, Alternative
Investments Division
EQUITABLE: THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
By: ______________________________
Investment Officer
<PAGE>
Exhibit A
SCHEDULE OF PURCHASERS
Purchaser's Name and Address
RFE Investment Partners V, L.P.
36 Grove Street
New Canaan, CT 06840
State Treasurer of the
State of Michigan, Custodian
430 West Allegan, 3rd Floor
Lansing, MI 48992
Sterling Commercial Capital, Inc.
175 Great Neck Road
Great Neck, NY 11021
<PAGE>
INVESTORS' RIGHTS AGREEMENT
EXHIBIT I
<PAGE>
PROMISSORY NOTE
FOR VALUE RECEIVED, GMH Holdings, Inc., a Delaware corporation
(hereinafter called the "Company"), with offices at
___________________________________ hereby promises to pay to the order of
________________________________ [name of person exercising Put], a
____________________________________________ ("Payee"), at its office at
_________________________________________ [address of Payee], or at such
other office as it designates in writing to the Company, the principal sum
of ______________________ Dollars ($___________), such payment to be in
such coin or currency of the United States of America as at the time of
payment is legal tender for the payment of public and private debts. The
principal amount of this Note shall be paid in three equal annual
installments (or in three installments as nearly equal as possible), one
year, two years, and three years from the initial issuance date of this
Note. This Note shall bear interest on the unpaid principal amount hereof
from time to time outstanding, payable every three months from the initial
issuance date of this Note, commencing on the third month from the initial
issuance date of this Note in like money on the principal sum unpaid
hereof, from the date hereof, and upon payment of principal in full, at a
rate per annum equal to [Three year Treasury rate plus 500 basis points]
per annum. Payments of principal and/or interest shall be made at the
office of Payee. Notwithstanding the provisions of this Note, if the rate
of interest payable hereunder is limited by law, the rate payable hereunder
shall be the maximum rate permitted by law. If, however, the Company pays
any interest in excess of the maximum rate of interest permitted by law,
any interest so paid which exceeds such maximum rate shall automatically be
considered a payment of principal and shall automatically be applied in
reduction of principal due on this Note to the extent of such excess.
This Note may be prepaid in whole or in part by the Company. In
addition, in the event that at the end of any fiscal year ending after the
date hereof there shall exist "Excess Cash Flow" (as defined below), then
within ten (10) days after the date upon which the Company's audited
consolidated financial statements with respect to such fiscal year become
available, the Company shall be required to pay to Payee, an amount equal
to all of such Excess Cash Flow. Notwithstanding anything to the contrary
contained in this Note, the Company shall (a) with respect to any mandatory
or permitted prepayment under this paragraph, prepay this Note and other
notes initially issued in the same year as this Note by reason of the
exercise of Put rights given to holders of certain securities of the
Company pursuant to repurchase rights granted in an Investors' Rights
Agreement dated as of December __, 1995 (the "Investors' Rights Agreement")
between the Company and the Purchasers named therein pro rata based on the
relative aggregate principal amounts thereof outstanding; and (b) prepay in
full Notes issued in early years by reason of the exercise of Put rights
given to holders of Company securities pursuant to the Investors' Rights
Agreement prior to prepayment of Notes issued in later years.
To secure payment of this Note and of any liability or liabilities of
the Company to the holder, due or to become due or that may hereafter be
contracted or existing, however acquired by the holder, the Company hereby
grants a security interest in and shall deliver to the holder appropriate
documentation, including a Pledge Agreement of even date herewith,
representing such security interest, securities of the Company which the
Company has delivered to the Payee pursuant to the exercise by the Payee of
the Put option contained in the Investors' Rights Agreement.
Reference to any other agreement referred to in this Note shall in no
way impair the negotiability of this Note or the absolute and unconditional
obligation of the Company to pay both principal and interest hereon as
provided herein.
In case of default in the payment of this Note or breach of the
obligations of the Company contained herein, the holder shall have all
rights given by the Uniform Commercial Code in the property, assets and
securities in which it has a security
<PAGE>
interest. In addition, in the case of default in the payment of this Note
or a breach of the obligations of the Company contained herein, the unpaid
balance of the principal and interest due hereunder shall be immediately
due and payable without notice. The waiver (which may only be by a written
instrument) or the remedying of any default in a reasonable manner shall
not operate as a waiver of the default remedied or any prior or subsequent
default. If any amount payable hereunder is not paid when due in accordance
with the terms hereof, the Company shall pay the holder hereof all its
reasonable costs and expenses of collection, including but not limited to,
its reasonable attorneys' fees actually incurred.
Presentment for payment, demand, notice of dishonor, protest and
notice of protest are hereby waived.
This Note shall be governed and construed in accordance with the laws
of the State of New York applicable to contracts made and to be performed
wholly within such state.
For purposes of this Note, the following definitions shall apply.
"Consolidated Net Income" for any period, shall mean the consolidated
net income (or deficit) of the Company and its subsidiaries for such
period, determined in accordance with GAAP, excluding, however, any gains
or losses from the sale or other disposition of assets (other than sales of
inventory in the ordinary course of business) and any other non-cash
extraordinary or non-recurring gains or losses.
"Excess Cash Flow" for any period, shall mean an amount equal to the
sum of (i) Consolidated Net Income for such period, plus (ii) an amount
equal to the amount of depreciation expense, depletion expense, non-cash
amortization expense (including the amortization of goodwill), accrued non-
cash interest expense and all other non-cash charges deducted in arriving
at such net income
IN WITNESS WHEREOF, GMH Holdings, Inc. has caused this Note to be duly
executed and delivered in its corporate name by its officers duly
authorized on this ____ day of _______________, 199__.
GMH HOLDINGS, INC.
By:___________________________
Its:
ATTEST
_____________________________
Secretary
<PAGE>
INVESTORS' RIGHTS AGREEMENT
EXHIBIT II
PLEDGE AGREEMENT
THIS AGREEMENT is made as of ________________, 199__, by and between
____________________________, and _______________________ corporation
("Pledgor") and [ ] ("Pledgee").
The following is a recital of facts of facts underlying this
Agreement:
Pledgor has sold Common Stock, par value $.001 par share ("Common
Stock") to Pledgee pursuant to a Securities Purchase Agreement dated as of
December __, 1995, by and between Pledgor, General Manufactured Housing,
Inc. and the Purchasers named therein (the "Purchase Agreement"). Pursuant
to an Investors' Rights Agreement dated as of December __, 1995 between
Pledgee, Pledgor, and certain other Purchasers named therein, (the
"Investors' Rights Agreement"), Pledgor granted to Pledgee the right to put
the Common Stock. Pledgee has exercised its put rights pursuant to the
Investors' Rights Agreement. In connection with the put, the Pledgor is
making payment by delivering a promissory note in the principal amount of
_________________________ Dollars ($ ) of even date herewith (the "Note").
In order to secure payment of the Note and all other sums due to Pledgee
pursuant to the terms of the Investors' Rights Agreement, Pledgor desires
to pledge to Pledgee its securities of the class and in the number being
repurchased as provided in Investors' Rights Agreement (the "Stock").
NOW, THEREFORE, the parties agree as follows:
1. Pledge. Pledgor pledges and herewith delivers to Pledgee as
security for payment of the Note and all other sums due to Pledgee pursuant
to the Investors' Rights Agreement, in accordance with their respective
terms, all the Stock and given Pledgee a continuing lien upon the Stock as
security therefor. If Pledgor comes into default under the terms of the
Note, and fails to cure such default within any grace period specifically
provided in the Note, Pledgor authorizes Pledgee to sell all or any portion
of the Stock at public or private sale by completing the endorsements
and/or assignments in blank and to apply the proceeds, after deducting all
expenses of collection and sale (including reasonable attorney fees) in
payment of any and all obligations of Pledgor evidenced by the Note.
Pledgee shall have all the rights and remedies provided under the Uniform
Commercial Code. Whenever any notice of sale is required to be given to
Pledgor, it shall be considered reasonable if such notice is given at least
(7) days prior to the date of such sale. Simultaneously with the execution
hereof, Pledgor has delivered the Stock to Pledgee, endorsed in blank,
together with assignments separate from certificates, which are undated and
have been executed by Pledgor.
2. Release of Collateral. When the Note and all sums due to Pledgee
pursuant to the Investors' Rights Agreement are paid in full, Pledgee shall
deliver the certificate(s) representing the Stock and endorsements and/or
assignments separate from certificates to Pledgor.
3. Pledgee's Rights. So long as Pledgor is not in default under the
Note or terms of this Agreement, Pledgee shall not have the right to
receive any dividends payable with respect to the Stock and Pledgee shall
have no right to vote the Stock except as provided in the Purchase
Agreement. If, however, any stock dividends or distributions of stock or
other securities are made on account of the Stock, then Pledgor shall
promptly deliver such stock or securities to Pledgee, endorsed in blank,
together with assignments separate from certificates, which are undated and
have been executed by Pledgor, whereupon such stock or securities shall be
subject to the terms of this Agreement and shall be considered to be Stock
as that term is used herein. Upon the occurrence of any default under the
Note Pledge may exercise all voting rights incident to the Stock (which
term shall include any voting securities issued as a dividend and
distribution made thereon.)
4. Remedies Cumulative. Pledgee may pursue any and all remedies in
connection with the collateral pledged hereunder notwithstanding the
availability of other remedies, all such remedies shall be cumulative and
may be pursued simultaneously or independently.
5. Notices. Any notices required or desired to be given hereunder,
shall be in writing and shall be considered sufficiently given for all
purposes if delivered by hand or sent by registered or certified mail, to
the parties hereto at the address set forth below or such other address as
they may direct in writing by similar notice:
If to Pledgor:
[ ]
<PAGE>
If to Pledgee:
[ ]
6. Miscellaneous. This Agreement is binding upon the parties hereto
and their successors and assigns. This Agreement may only be amended by a
writing signed by all of the parties hereto and may be waived only by a
writing signed by the party charged with such waiver. This Agreement may be
signed in more than one counterpart, each of which shall be considered to
be an original, but all of which shall constitute one and the same
Agreement. This Agreement is government by and shall be construed in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first set forth above.
"PLEDGOR"
[ ]
By:______________________________
"PLEDGEE"
[ ]
_________________________________
<PAGE>
EXHIBIT G
Form of Subordination Agreement
<PAGE>
SUBORDINATION AGREEMENT
This SUBORDINATION AGREEMENT (this "Agreement") is entered into as of
December 21, 1995 among GENERAL MANUFACTURED HOUSING, INC., a Georgia
corporation and successor by merger to GMH Acquisition Corp., a Delaware
corporation ("Borrower"), GMH HOLDINGS, INC., a Delaware corporation
("Parent"), THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES, a
New York insurance company ("Senior Subordinated Lender"), RFE INVESTMENT
PARTNERS V, L.P., a Delaware limited partnership ("RFE"), STERLING
COMMERCIAL CAPITAL, INC., a New York corporation ("Sterling"), STATE
TREASURER OF THE STATE OF MICHIGAN, Custodian of the Michigan Public School
Employees' Retirement System, State Employees' Retirement System, Michigan
State Police Retirement System and Michigan Judges Retirement System (the
"State of Michigan") (RFE, Sterling and the State of Michigan hereinafter
are referred to collectively as "Junior Subordinated Lenders"), STRATEGIC
INVESTMENTS & HOLDINGS, INC., a Delaware corporation ("Strategic"), and
FIRST SOURCE FINANCIAL LLP, an Illinois registered limited liability
partnership ("Senior Lender").
R E C I T A L S
A. Borrower and Senior Lender have entered into a Secured Credit
Agreement of even date herewith (as the same hereafter may be amended,
restated, supplemented or otherwise modified from time to time, the "Credit
Agreement"), subject to the terms and conditions of which Senior Lender
will make certain loans and other financial accommodations to Borrower.
B. Borrower is indebted to Senior Subordinated Lender in the
principal amount of $17,243,295, which indebtedness is evidenced by a
certain senior subordinated note of even date herewith issued by Borrower
payable to Senior Subordinated Lender, a copy of which is attached hereto
as Exhibit A (the "Senior Subordinated Note").
<PAGE>
C. Borrower is indebted to Junior Subordinated Lenders in the
aggregate principal amount of $5,000,000, which indebtedness is evidenced
by certain junior subordinated notes of even date herewith issued by
Borrower payable to Junior Subordinated Lenders, copies of which are
attached hereto as Exhibit B (the "Junior Subordinated Notes").
D. Parent owns 100% of the issued and outstanding capital stock of
Borrower.
E. Junior Subordinated Lenders collectively own 100% (8,000,000
shares) of the issued and outstanding Series A Preferred Stock of Parent
(the "Preferred Stock").
F. One of the conditions precedent to Senior Lender's obligations
under the Credit Agreement is that this Agreement shall have been executed
and delivered.
NOW THEREFORE, the parties hereto hereby agree as follows:
1. Recitals and Definitions.
1.1 Recitals. The Recitals set forth above are acknowledged by the
parties hereto to be true and correct and are incorporated herein by this
reference.
1.2 Definitions. All capitalized terms used but not elsewhere defined
herein shall have the respective meanings ascribed to such terms in the
Credit Agreement. As used herein, the following terms shall have the
following meanings:
Additional Principal Amount: with respect to each Principal
Payment Date, an amount equal to the quotient obtained by
dividing (a) the amount of any Permitted Increase by (b) the
number of Principal Payment Dates remaining after the effective
date of such Permitted Increase.
Applicable Period: with respect to the calculation of Total
Cash Sources or Non-Subordinated Fixed Charges as of (a) April
30, 1996, the three month period then ended, (b) July 31, 1996,
the six month period then ended and (c) any other Determination
Date, the nine month period then ended.
Articles: the Restated Certificate of Incorporation of
Parent as in effect on the date hereof.
Available Cash: as of any Determination Date, an amount
equal to the remainder of (a) the quotient obtained by dividing
(i) Total Cash Sources for the Applicable Period ending on such
Determination Date by (ii) 1.10 minus (b) Non-Subordinated Fixed
Charges for the Applicable Period ending on such Determination
Date minus (c) for any Determination Date which occurs on or
after July 31, 1996, all Subordinated Payments actually paid with
respect to the (i) first Fiscal Quarter of 1996, in the case of
the Determination Date which occurs on July 31, 1996 and (ii) in
the case of any other Determination Date, the last two Fiscal
Quarters ending during the Applicable Period ending on such
Determination Date (which Subordinated Payments correspond to the
calculation of Available Cash for the first two Determination
Dates of such Applicable Period).
Cash Overage: as of any Determination Date, an amount equal
to the remainder of (a) Total Cash Sources for the Applicable
Period ending on such Determination Date minus (b) Non-
Subordinated Fixed Charges for such Applicable Period minus (c)
the aggregate amount of all accrued and unpaid Senior
Subordinated Payments (including for the current period) minus
(d) 110% of the amount of the accreted discount on the Senior
Subordinated Notes with respect to such Applicable Period.
<PAGE>
Determination Date: the last day of each January, April,
July and October.
Incentive Management Fees: the management fees payable by
Borrower to Strategic pursuant to Section 2.3(b) of the
Management Agreement, in an aggregate amount not to exceed (a)
$69,500 with respect to the last ten days of December, 1995 and
the first Fiscal Quarter of 1596 and (b) $62,500 with respect to
any other Fiscal Quarter.
Junior Subordinated Default: a default in the payment of the
Junior Subordinated Indebtedness or any other occurrence
permitting Junior Subordinated Lenders to accelerate the payment
of all or any portion of the Junior Subordinated Indebtedness.
Junior Subordinated Default Notice: a written notice from
Junior Subordinated Lenders to Borrower of the occurrence of a
Junior Subordinated Default.
Junior Subordinated Indebtedness: all of the obligations of
Borrower to Junior Subordinated Lenders under the Junior
Subordinated Instruments and all other amounts now or hereafter
owed by Borrower to Junior Subordinated Lenders other than the
Preferred Obligations.
Junior Subordinated Instruments: the Junior Subordinated
Notes, the Junior Subordinated Note Purchase Agreement and all
other documents and instruments evidencing or pertaining to any
portion of the Junior Subordinated Indebtedness.
Junior Subordinated Note Purchase Agreement: the Securities
Purchase Agreement of even date herewith among Borrower, Parent
and the Junior Subordinated Lenders.
Junior Subordinated Payments: quarterly cash payments of
interest on the Junior Subordinated Indebtedness (other than any
Junior Subordinated Indebtedness representing accrued and unpaid
interest added to the principal amount of the Junior Subordinated
Indebtedness) required by the Junior Subordinated Notes at a rate
not to exceed 13.00% per annum.
Lien: any lien, mortgage, security interest, financing
statement, pledge, hypothecation, assignment or judgment lien of
any kind or nature whatsoever, whether arising by contract,
operation of law, or otherwise.
Management Agreement: that certain Management Agreement of
even date herewith between Borrower and Strategic.
Non-Subordinated Fixed Charges: for any Applicable Period,
the sum of (a) all scheduled payments of interest on account of
the Senior Indebtedness for such Applicable Period, plus (b) all
Senior Principal Payments for such Applicable Period, plus (c)
without double counting, all income taxes accrued (but not less
than zero) by Borrower and Parent with respect to such Applicable
Period.
Preferred Dividends: quarterly cash dividends from Borrower
to Parent in an amount sufficient to enable Parent to pay the
Parent Preferred Dividends.
Parent Preferred Dividends: quarterly cash dividends on the
Preferred Stock required by the Articles in an amount not to
exceed $240,000 per quarter. Parent Preferred Dividends shall not
include any accrued and unpaid interest on any unpaid Parent
Preferred Dividends from prior quarters.
<PAGE>
Permitted Increase: any and all increases in the Commitments
agreed to by Borrower and Senior Lender after the date hereof in
an aggregate amount not to exceed $2,600,000.
Preferred Dividend Instruments: the Articles and all other
documents and instruments evidencing or pertaining to the payment
of the Preferred Dividends or the Parent Preferred Dividends.
Preferred Obligations: all of the obligations of Borrower to
Parent and Parent to Junior Subordinated Lenders under the
Preferred Dividend Instruments and all other amounts now or
hereafter owed by Borrower to Parent and by Parent to Junior
Subordinated Lenders, in their capacity as owners of the
Preferred Stock.
Principal Payment Date: the last day of each Fiscal Quarter.
Proceeding: any insolvency, bankruptcy, receivership,
custodianship, liquidation, reorganization, assignment for the
benefit of creditors or other proceeding for the liquidation,
dissolution or other winding up of Borrower or its property.
Senior Indebtedness: the Liabilities, together with post-
petition interest thereon, whether or not allowed in any
Proceeding.
Senior Principal Payments: with respect to each Applicable
Period, the sum of the amounts set forth below opposite each
Principal Payment Date which occurs during such Applicable Period
plus the Additional Principal Amount, if any, applicable to each
such Principal Payment Date:
Principal Payment Date Amount
March 31, 1996 $ 350,000
June 30, 1996 $ 700,000
September 30, 1996 $1,050,000
December 31, 1996 $1,050,000
March 31, 1997 $1,075,000
June 30, 1997 $1,100,000
September 30, 1997 $1,125,000
December 31, 1997 $1,125,000
March 31, 1998 $1,687,500
June 30, 1998 $2,250,000
September 30, 1998 $2,812,500
December 31, 1998 $2,812,500
March 31, 1999 $3,250,000
June 30, 1999 $3,687,500
September 30, 1999 $4,125,000
December 31, 1999 $4,125,000
March 31, 2000 $4,250,000
June 30, 2000 $4,375,000
September 30, 2000 $4,500,000
December 31, 2000 $4,500,000
Senior Subordinated Default: a default in the payment of the
Senior Subordinated Indebtedness or any other occurrence
permitting Senior Subordinated Lender to accelerate the payment
of all or any portion of the Senior Subordinated Indebtedness.
Senior Subordinated Default Notice: a written notice from
Senior Subordinated Lender to Borrower of the occurrence of a
Senior Subordinated Default.
Senior Subordinated Indebtedness: all of the obligations of
Borrower to Senior Subordinated Lender under the Senior
Subordinated Instruments and all other amounts now or hereafter
owed by Borrower to Senior Subordinated Lender.
Senior Subordinated Instruments: the Senior Subordinated
Note, the Senior Subordinated Note
<PAGE>
Purchase Agreement and all other documents and instruments
evidencing or pertaining to any portion of the Senior
Subordinated Indebtedness.
Senior Subordinated Note Purchase Agreement: the Note and
Warrant Purchase Agreement of even date herewith among Borrower,
Parent and Senior Subordinated Lender.
Senior Subordinated Payments: quarterly cash payments of
interest on the Senior Subordinated Indebtedness (other than any
Senior Subordinated Indebtedness representing accrued and unpaid
interest added to the principal amount of the Senior Subordinated
Indebtedness) required by the Senior Subordinated Note at a rate
not to exceed 10.87% per annum through March 31, 2001 and 14.50%
per annum thereafter, or, if the Liabilities have been paid in
full and the Commitments have been terminated, any other
applicable rate set forth in the Senior Subordinated Instruments.
Subordinated Holders: Senior Subordinated Lender, Junior
Subordinated Lenders, Parent and Strategic.
Subordinated Instruments: the Senior Subordinated
Instruments, the Junior Subordinated Instruments, the Preferred
Dividend Instruments and the Management Agreement.
Subordinated Obligations: the Senior Subordinated
Indebtedness, the Junior Subordinated Indebtedness, the Preferred
Obligations and the Incentive Management Fees.
Subordinated Payments: the Senior Subordinated Payments, the
Junior Subordinated Payments, the Preferred Dividends and the
Incentive Management Fees.
Total Cash Sources: for any Applicable Period, (a) the
amount which, in conformity with GAAP, would be set forth
opposite the caption "net income" (or any like caption) (plus, to
the extent subtracted from gross income in determining such net
income, any dividends paid or payable by Borrower) on an income
statement of Borrower for such Applicable Period, plus (b) the
amount which, in conformity with GAAP, would be set forth
opposite the caption "interest expense" (or any like caption) on
such an income statement, plus (c) the amount (but not less than
zero) which, in conformity with GAAP, would be set forth opposite
the caption "income tax expense" (or any like caption) on such an
income statement, plus (d) the amount which, in conformity with
GAAP, would be set forth opposite the caption "depreciation and
amortization expenses" (or any like caption) on such an income
statement, plus (e) the amount accrued by Borrower related to
Incentive Management Fees during such Applicable Period in an
aggregate amount not to exceed (i) $62,500 for the Applicable
Period ending April 30, 1996, (ii) $125,000 for the Applicable
Period ending July 31, 1996 and (iii) $187,500 for any Applicable
Period thereafter, less (f) the amount which, in conformity with
GAAP, would be set forth opposite the caption "extraordinary pre-
tax gain" (or any like caption) on such an income statement, less
(g) capital expenditures (as determined in conformity with GAAP)
incurred during such Applicable Period.
2. Subordination of the Subordinated Obligations to Senior Indebtedness.
2.1 Subordination. The payment of any and all of the (a) Subordinated
Obligations is hereby expressly subordinated to the prior payment in full
of the Senior Indebtedness, (b) Junior Subordinated Indebtedness, Preferred
Dividends and Incentive Management Fees is hereby expressly subordinated to
the prior payment in full of the Senior Subordinated Indebtedness and
<PAGE>
(c) Preferred Dividends and Incentive Management Fees is hereby expressly
subordinated to the prior payment in full of the Junior Subordinated
Indebtedness.
2.2 Restrictions on Payments. Notwithstanding any provision of the
Subordinated Instruments to the contrary and in addition to any other
limitations set forth herein or therein, no payment of principal, interest,
dividends, fees or any other amount due with respect to the Subordinated
Obligations shall be made, and no Subordinated Holder shall exercise any
right of set-off (other than a set-off by Senior Subordinated Lender of the
exercise price of the warrant issued to it by Parent on the Closing Date
against the Senior Subordinated Indebtedness provided the amount of such
set-off does not exceed $3,500 in the aggregate) or recoupment with respect
to any Subordinated Obligations, until all of the Senior Indebtedness is
paid in full, except that, subject to the proviso at the end of this
Section 2.2, (i) on April 1, 1996, Borrower may make and the applicable
Subordinated Holder may receive and retain all Subordinated Payments
accrued through March 31, 1996 and (ii) on the first Business Day after the
end of each Fiscal Quarter commencing with the Fiscal Quarter ending June
30, 1996 Borrower may make and the applicable Subordinated Holder may
receive and retain accrued and unpaid Subordinated Payments in an aggregate
amount not to exceed Available Cash as of the most recent Determination
Date in the following order of priority:
(a) first, all accrued and unpaid Senior Subordinated Payments;
(b) second, all accrued and unpaid Junior Subordinated Payments;
and
(c) third, all accrued and unpaid Preferred Dividends and
Incentive Management Fees, pro rata to the aggregate amount thereof
then outstanding;
provided, that in the event that due to the payment restrictions of this
Section 2.2 any Junior Subordinated Payments, Preferred Dividends or
Incentive Management Fees have accrued with respect to any prior Fiscal
Quarter and remain unpaid, no Junior Subordinated Payments, Preferred
Dividends and Incentive Management Fees shall be paid except to the extent
of any Cash Overage.
2.3 Proceedings. In the event of any Proceeding, (i) all Senior
Indebtedness first shall be paid in full in cash before any payment of or
with respect to the Subordinated Obligations shall be made; (ii) any
payment which, but for the terms hereof, otherwise would be payable or
deliverable in respect of the Subordinated Obligations shall be paid or
delivered directly to Senior Lender (to be held and/or applied by Senior
Lender in accordance with the terms of the Credit Agreement) until all
Senior Indebtedness is paid in full, and each Subordinated Holder
irrevocably authorizes, empowers and directs all receivers, trustees,
liquidators, custodians, conservators and others having authority in the
premises to effect all such payments and deliveries, and each Subordinated
Holder also irrevocably authorizes, empowers and directs Senior Lender to
demand, sue for, collect and receive every such payment or distribution
upon the failure of such Subordinated Holder to do so within a reasonable
period of time after requested to do so by Senior Lender; (iii) each
Subordinated Holder agrees to execute and deliver to Senior Lender or its
representative all such further instruments reasonably requested by Senior
Lender confirming the authorization referred to in the foregoing clause
(ii) and (iv) each Subordinated Holder agrees to execute, verify, deliver
and file any proofs of claim in respect of the Subordinated Obligations
reasonably requested by Senior Lender in connection with any such
proceeding at least 15 days prior to the bar date for filing such proofs of
claim and, upon the failure of such Subordinated Holder to do so, such
Subordinated Holder hereby irrevocably authorizes, empowers and appoints
Senior Lender its agent and attorney-in-fact to (A) execute, verify,
deliver and file such proofs of claim and (B) vote such proofs of claim in
any such proceeding if such Subordinated Holder fails to do so within a
reasonable time prior to the deadline for voting such proofs of claim.
Notwithstanding the provisions of this
<PAGE>
Section 2.3, in the event of any Proceeding and if so ordered by a court of
competent jurisdiction, Subordinated Holders may receive securities
(including equity securities) of Borrower as reorganized, or securities of
Borrower or any other Person provided for by a plan of reorganization,
composition, arrangement, adjustment or readjustment of Borrower or of its
securities, the payment of which is subordinate, at least to the extent
provided in this Agreement with respect to the Subordinated Obligations, to
the payment of all Senior Indebtedness of Borrower at the time outstanding
and to the payment of all securities issued to Senior Lender in exchange
therefor.
2.4 Incorrect Payments. If any payment not permitted under subsection
2.2 is received by any Subordinated Holder on account of the Subordinated
Obligations before all Senior Indebtedness is paid in full, such payment
shall not be commingled with any asset of such Subordinated Holder, shall
be held in trust by such Subordinated Holder for the benefit of Senior
Lender and shall be paid over to Senior Lender, or its designated
representative, for application (in accordance with the Credit Agreement)
to the payment of the Senior Indebtedness then remaining unpaid, until all
of the Senior Indebtedness is paid in full.
2.5 Sale, Transfer. No Subordinated Holder shall sell, assign,
dispose of or otherwise transfer all or any portion of the Subordinated
Obligations unless, prior to the consummation of any such action, the
transferee thereof executes and delivers to Senior Lender an agreement
substantially identical to this Agreement, providing for the continued
subordination and forbearance of the Subordinated Obligations to the Senior
Indebtedness as provided herein and for the continued effectiveness of all
of the rights of Senior Lender arising under this Agreement.
Notwithstanding the failure to execute or deliver any such agreement, the
subordination effected hereby shall survive any sale, assignment,
disposition or other transfer of all or any portion of the Subordinated
Obligations, and the terms of this Agreement shall be binding upon the
successors and assigns of each Subordinated Holder, as provided in Section
10 below.
2.6 Legends. Until the Senior Indebtedness is paid in full, each of
the Subordinated Instruments at all times shall contain in a conspicuous
manner the following legend:
"The obligations evidenced hereby are subordinate in the manner
and to the extent set forth in that certain Subordination
Agreement (the "Subordination Agreement") dated as of December
20, 1995 among General Manufactured Housing, Inc. ("Borrower"),
GMH Holdings, Inc., The Equitable Life Assurance Society of the
United States, RFE Investment Partners V, L.P., Sterling
Commercial Capital, Inc., the State Treasurer of the State of
Michigan, as Custodian of the Michigan Public School Employees'
Retirement System, the Michigan State Employees' Retirement
System, the Michigan State Police Retirement System and the
Michigan Judges Retirement System, Strategic Investments &
Holdings, Inc. and First Source Financial LLP ("Senior Lender")
to the obligations (including interest) owed by Borrower to the
holders of all of the notes issued pursuant to that certain
Secured Credit Agreement dated as of December 20, 1995 between
Borrower and Senior Lender, as such Secured Credit Agreement has
been and hereafter may be supplemented and amended from time to
time; and each holder hereof, by its acceptance hereof, shall be
bound by the provisions of the Subordination Agreement.
2.7 Restriction on Action by each Subordinated Holder.
(a) Until the Senior Indebtedness is paid in full and notwithstanding
anything contained in the Subordinated Instruments, the Credit Agreement or
the other Related Documents to the contrary, no Subordinated Holder shall
agree to any amendment or modification of, or supplement to, the
Subordinated Instruments as in effect on the date hereof, the effect of
which is to (i) increase the amount of the Subordinated Obligations,
<PAGE>
(ii) increase the rate of interest or dividends on or fees payable in
respect of any of the Subordinated Obligations, (iii) shorten the maturity
date of any of the Subordinated Obligations, (iv) accelerate the terms
under which the Subordinated Obligations are payable or (v) make the
covenants or events of default contained therein, taken as a whole,
materially more restrictive to Borrower or Parent.
(b) Until the Senior Indebtedness is paid in full, no Subordinated
Holder shall exercise any of the remedies with respect to the Subordinated
Obligations set forth in any of the Subordinated Instruments or that
otherwise may be available to such Subordinated Holder, either at law or in
equity, except that:
(1) in the event Senior Lender accelerates the Senior
Indebtedness, Senior Subordinated Lender may accelerate the Senior
Subordinated Indebtedness and Junior Subordinated Lenders may
accelerate the Junior Subordinated Indebtedness, and, in the event
Senior Subordinated Lender is entitled under clause (3) below to
accelerate and does accelerate the Senior Subordinated Indebtedness,
Junior Subordinated Lenders may accelerate the Junior Subordinated
Indebtedness;
(2) in the event of any Proceeding not initiated by any
Subordinated Holder, such Subordinated Holder may participate in such
Proceeding;
(3) in the event the aggregate amount of all accrued and unpaid
Senior Subordinated Payments exceeds $937,500, or in the event that
Senior Subordinated Lender receives less than $237,500 in the
aggregate on account of the Senior Subordinated Payments with respect
to any two successive Fiscal Quarters, then, provided Senior
Subordinated Lender, at any time after either such event occurs, gives
Senior Lender not less than 30 days' prior notice of its intent to
exercise such remedies, Senior Subordinated Lender may exercise any of
the remedies set forth in the Senior Subordinated Instruments;
(4) in the event the aggregate amount of all accrued and unpaid
Junior Subordinated Payments exceeds $650,000, then, provided provided
Junior Subordinated Lenders, at any time after such event occurs, give
Senior Lender not less than 120 days' prior notice of their intent to
exercise such remedies, Junior Subordinated Lenders may exercise any
of the remedies set forth in the Junior Subordinated Instruments;
(5) in the event Junior Subordinated Lenders give the notice
referred to in clause (4) above, Senior Subordinated Lender may
exercise any of the remedies set forth in the Senior Subordinated
Instruments provided Senior Subordinated Lender, at any time after the
Junior Subordinated Lenders give the notice referred to in clause (4)
above, gives Senior Lender not less than 60 days' prior notice of its
intent to exercise such remedies;
(6) Junior Subordinated Lenders may exercise their rights to
elect a majority of the Board of Directors of Parent pursuant to
Article C, Section 4(f) of the Articles and Section 10(g) of the
Stockholders Agreement;
(7) in the event any Subordinated Payment permitted to be made
under the terms of this Agreement is not made by Borrower, the
applicable Subordinated Holder may take action to collect the amount
of such Subordinated Payment provided such Subordinated Holder gives
Senior Lender not less than 15 days' prior notice of its intent to
take such action; and
(8) each Subordinated Holder may take action to enforce its
rights under the Articles, the Investors Rights Agreement and the
Stockholders Agreement other than any such rights pertaining to the
acceleration or payment of the Subordinated Obligations.
2.8 Amendments of Credit Agreement and Related Documents. Until the
Senior Indebtedness is paid in full and notwithstanding
<PAGE>
anything contained in the Subordinated Instruments, the Credit Agreement or
the other Related Documents to the contrary, Senior Lender shall not agree
to any amendment or modification of, or supplement to, the Credit Agreement
or the Related Documents as in effect on the date hereof, the effect of
which is to (i) increase the Commitments (except for any Permitted
Increase), (ii) increase the rate of interest on or fees payable in respect
of any of the Senior Indebtedness, (iii) shorten the maturity date of any
of the Senior Indebtedness, (iv) accelerate the terms under which the
Senior Indebtedness (other than any Permitted Increase) is payable or (v)
make the covenants or events of default contained therein, taken as a
whole, materially more restrictive to Borrower or Parent.
3. Continued Effectiveness of this Agreement. The terms of this
Agreement, the subordination effected hereby, and the rights and the
obligations of each Subordinated Holder and Senior Lender arising
hereunder, shall not be affected, modified or impaired in any manner or to
any extent by: (a) any amendment or modification of or supplement to the
Credit Agreement, any of the other Related Documents or any of the
Subordinated Instruments; (b) the validity or enforceability of any of such
documents; or (c) any exercise or non-exercise of any right, power or
remedy under or in respect of the Senior Indebtedness or the Subordinated
Obligations or any of the instruments or documents referred to in clause
(a) above.
4. Representations and Warranties. Each party hereto hereby
represents and warrants that this Agreement, when executed and delivered,
will constitute the valid and legally binding obligation of such party
enforceable in accordance with its terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors' rights generally
and by equitable principles.
5. Cumulative Rights, No Waivers. Each and every right, remedy and
power granted to Senior Lender hereunder shall be cumulative and in
addition to any other right, remedy or power specifically granted herein,
in the Credit Agreement or the other Related Documents, in the Subordinated
Instruments or now or hereafter existing in equity, at law, by virtue of
statute or otherwise, and may be exercised by Senior Lender, from time to
time, concurrently or independently and as often and in such order as
Senior Lender may deem expedient. Any failure or delay on the part of
Senior Lender in exercising any such right, remedy or power, or abandonment
or discontinuance of steps to enforce the same, shall not operate as a
waiver thereof or affect Senior Lender's right thereafter to exercise the
same, and any single or partial exercise of any such right, remedy or power
shall not preclude any other or further exercise thereof or the exercise of
any other right, remedy or power, and no such failure, delay, abandonment
or single or partial exercise of Senior Lender's rights hereunder shall be
deemed to establish a custom or course of dealing or performance among the
parties hereto.
6. Modification. Any modification or waiver of any provision of this
Agreement, or any consent to any departure by any Subordinated Holder
therefrom, shall not be effective in any event unless the same is in
writing and signed by Senior Lender and the Subordinated Holder against
whom enforcement of such modification, waiver or consent is sought, and
then such modification, waiver or consent shall be effective only in the
specific instance and for the specific purpose given. Any notice to or
demand on any Subordinated Holder in any event not specifically required of
Senior Lender hereunder shall not entitle any Subordinated Holder to any
other or further notice or demand in the same, similar or other
circumstances unless specifically required hereunder.
7. Additional Documents and Actions. Each Subordinated Holder at any
time, and from time to time, after the execution and delivery of this
Agreement, upon the request of Senior Lender and at the expense of such
Subordinated Holder, promptly will execute and deliver such further
documents and do such further acts and things as Senior Lender reasonably
may request in order to effect fully the purposes of this Agreement.
<PAGE>
8. Notices. All notices under this Agreement shall be in writing and
shall be (a) delivered in person, (b) sent by telecopy or (c) mailed,
postage prepaid, either by registered or certified mail, return receipt
requested, or by overnight express courier, addressed as follows:
To Borrower or Parent: c/o General Manufactured Housing,
Inc.
2255 Industrial Boulevard
Waycross, GA 31501
Attention: Sam Scott
Telecopy No.: (912) 285-1397
and
Strategic Investments & Holdings,
Inc.
Cyclorama Building
369 Franklin Street
Buffalo, NY 14202
Attention: Gary M. Brost
Telecopy No.: (716) 857-6490
To Senior Subordinated
Lender: c/o Alliance Corporate Finance
Group
1345 Avenue of the Americas
New York, NY 10105
Attention: Susan C. Penny
Telecopy No.: (212) 969-1529
To Junior Subordinated
Lenders: c/o RFE Investment Partners V, L.P.
36 Grove Street
New Canaan, CT 06840
Attention: James A. Parsons
Telecopy No.: (203) 966-3109
and
Alternative Investments Division
Bureau of Investments
Michigan Department of Treasury
P.O. Box 15128 (U.S. Mail)
Lansing, MI 48901 (U.S. Mail)
430 W. Allegan (Overnight Courier)
Lansing, MI 48922 (Overnight
Courier)
Attention: Linda Rose
Thomas Hufnagel
Telecopy No.: (517) 335-3668
and
Finance and Development Division
Department of Attorney General
P.O. Box 30217 (U.S. Mail)
Lansing, MI 48909 (U.S. Mail)
120 Michigan Avenue, Fourth Floor
(Overnight Courier)
Lansing, MI 48933 (Overnight
Courier)
Attention: Timothy F. Konieczny
Telecopy No.: (517) 335-3088
To Strategic: Strategic Investments & Holdings,
Inc.
Cyclorama Building
369 Franklin Street
Buffalo, NY 14202
Attention: Gary M. Brost
Telecopy No.: (716) 857-6490
To Senior Lender: c/o First Source Financial, Inc.
2850 West Golf Road, 5th Floor
Rolling Meadows, IL 60008
Attention: Contract Administration
<PAGE>
Telecopy No.: (708) 734-7910
or to any other address or telecopy number, as to any of the parties
hereto, as such party shall designate in a notice to the other parties
hereto. All notices sent pursuant to the terms of this Section 8 shall be
deemed received (i) if personally delivered, then on the Business Day of
delivery, (ii) if sent by telecopy, on the day sent if a Business Day or if
such day is not a Business Day, then on the next Business Day, (iii) if
sent by registered or certified mail, on the earlier of the third Business
Day following the day sent or when actually received or (iv) if sent by
overnight, express courier, on the next Business Day immediately following
the day sent. Any notice by telecopy shall be followed by delivery of a
copy of such notice on the next Business Day by overnight, express courier
or by personal delivery.
9. Severability. In the event that any provision of this Agreement
is deemed to be invalid by reason of the operation of any law or by reason
of the interpretation placed thereon by any court or governmental
authority, this Agreement shall be construed as not containing such
provision and the invalidity of such provision shall not affect the
validity of any other provisions hereof, and any and all other provisions
hereof which otherwise are lawful and valid shall remain in full force and
effect.
10. Successors and Assigns. This Agreement shall inure to the benefit
of the successors and assigns of Senior Lender and shall be binding upon
the successors and assigns of Borrower and each Subordinated Holder.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which taken together shall be one and the same instrument.
12. Defines Rights of Creditors. The provisions of this Agreement are
solely for the purpose of defining the relative rights of each Subordinated
Holder and Senior Lender and shall not be deemed to create any rights or
priorities in favor of any other Person, including, without limitation,
Borrower.
13. Conflict. In the event of any conflict between any term, covenant
or condition of this Agreement and any term, covenant or condition of any
of the Subordinated Instruments, the provisions of this Agreement shall
control and govern. For purposes of this Section 13, to the extent that any
provisions of any of the Subordinated Instruments provide rights, remedies
and benefits to Senior Lender that exceed the rights, remedies and benefits
provided to Senior Lender under this Agreement, such provisions of the
applicable Subordinated Instruments shall be deemed to supplement (and not
to conflict with) the provisions hereof.
14. Statement of Indebtedness to Subordinated Holders. Pursuant to
the Credit Agreement, Borrower is obligated to furnish to Senior Lender a
monthly Compliance Certificate containing, among other things, computations
of Available Cash and the Subordinated Payments owing from Borrower to each
Subordinated Holder. Borrower will furnish a copy of such computations to
each Subordinated Holder as and when furnished to Senior Lender. Senior
Lender may rely without further investigation upon such computations unless
the affected Subordinated Holder notifies Senior Lender of its objections
to such computations within 30 days after receipt.
15. Headings. The paragraph headings used in this Agreement are for
convenience only and shall not affect the interpretation of any of the
provisions hereof.
16. Termination. All obligations of Senior Lender under this
Agreement shall terminate upon the indefeasible payment in full of the
Senior Indebtedness. All obligations of all other parties under this
agreement shall terminate upon the indefeasible payment in full of the
Senior Subordinated Indebtedness.
<PAGE>
17. Default Notices. Senior Subordinated Lender shall provide Senior
Lender with a copy of each Senior Subordinated Default Notice concurrently
with the sending thereof to Borrower, and promptly shall notify Senior
Lender in the event the Senior Subordinated Default which is the subject of
such Senior Subordinated Default Notice is cured or waived. Junior
Subordinated Lenders shall provide Senior Lender with a copy of each Junior
Subordinated Default Notice concurrently with the sending thereof to
Borrower, and promptly shall notify Senior Lender in the event the Junior
Subordinated Default which is the subject of such Junior Subordinated
Default Notice is cured or waived.
18. No Contest of Liens; No Security for Subordinated Obligations.
Each Subordinated Holder agrees that it will not at any time contest the
validity, perfection, priority or enforceability of the Liens in the
Collateral granted to Senior Lender pursuant to the Credit Agreement and
the other Related Documents or accept or take any collateral security for
the Subordinated Obligations. The provisions of this Agreement shall apply
regardless of any invalidity, unenforceability or lack of perfection of the
Liens in the Collateral granted to Senior Lender pursuant to the Credit
Agreement and the other Related Documents.
19. SUBMISSION TO JURISDICTION. SENIOR LENDER MAY ENFORCE ANY CLAIM
ARISING OUT OF THIS AGREEMENT, THE CREDIT AGREEMENT OR THE RELATED
DOCUMENTS IN ANY STATE OR FEDERAL COURT HAVING SUBJECT MATTER JURISDICTION
AND LOCATED IN CHICAGO, ILLINOIS. FOR THE PURPOSE OF ANY ACTION OR
PROCEEDING INSTITUTED WITH RESPECT TO ANY SUCH CLAIM, BORROWER AND EACH
SUBORDINATED HOLDER OTHER THAN THE STATE OF MICHIGAN HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF SUCH COURTS. BORROWER AND PARENT EACH HEREBY
IRREVOCABLY DESIGNATE PRENTICE-HALL, WITH OFFICES ON THE DATE HEREOF AT 33
NORTH LASALLE STREET, SUITE 1925, CHICAGO, ILLINOIS 60602, TO RECEIVE FOR
AND ON BEHALF OF SUCH PERSON SERVICE OF PROCESS IN ILLINOIS. EACH OTHER
SUBORDINATED HOLDER OTHER THAN THE STATE OF MICHIGAN AND SENIOR
SUBORDINATED LENDER HEREBY IRREVOCABLY DESIGNATES THE PERSON WHOSE NAME AND
ADDRESS ARE SET FORTH ON EXHIBIT C TO RECEIVE FOR AND ON BEHALF OF SUCH
SUBORDINATED HOLDER SERVICE OF PROCESS IN ILLINOIS. SENIOR SUBORDINATED
LENDER ACKNOWLEDGES AND AGREES THAT IT HAS A PRESENCE IN THE STATE OF
ILLINOIS AND IS SUBJECT TO SERVICE OF PROCESS IN ILLINOIS. BORROWER AND
EACH SUBORDINATED HOLDER OTHER THAN THE STATE OF MICHIGAN FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF SAID COURTS BY
MAILING A COPY THEREOF, BY REGISTERED MAIL, POSTAGE PREPAID, TO BORROWER OR
SUCH SUBORDINATED HOLDER AND AGREES THAT SUCH SERVICE, TO THE FULLEST
EXTENT PERMITTED BY LAW, (i) SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE
SERVICE OF PROCESS UPON IT IN ANY SUCH SUIT, ACTION OR PROCEEDING AND (ii)
SHALL BE TAKEN AND HELD TO BE VALID PERSONAL SERVICE UPON AND PERSONAL
DELIVERY TO IT. NOTHING HEREIN CONTAINED SHALL AFFECT THE RIGHT OF SENIOR
LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR PRECLUDE
SENIOR LENDER FROM BRINGING AN ACTION OR PROCEEDING IN RESPECT HEREOF IN
ANY OTHER COUNTRY, STATE OR PLACE HAVING JURISDICTION OVER SUCH ACTION.
BORROWER AND EACH SUBORDINATED HOLDER OTHER THAN THE STATE OF MICHIGAN
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY HAVE OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT LOCATED IN
CHICAGO, ILLINOIS AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
20. GOVERNING LAW. THIS AGREEMENT SHALL BE A CONTRACT MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO
CONFLICT OF LAWS PRINCIPLES.
[remainder of this page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
GENERAL MANUFACTURED HOUSING, INC.,
a Georgia corporation and successor
by merger to GMH Acquisition Corp.,
a Delaware corporal
By: /s/ Gary M. Brost
______________________________
Gary M. Brost
President
GMH HOLDINGS, INC., a Delaware
corporation
By: /s/ Gary M. Brost
______________________________
Gary M. Brost
President
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES, a New
York insurance company
By: /s/ James R. Wilson
________________________________
Name: James R. Wilson
Title: Investment Officer
RFE INVESTMENT PARTNERS V, L.P., a
Delaware limited partnership
By: RFE Associates V, L.P., a
Delaware limited partnership,
its sole general partner
By: /s/ James A. Parsons
___________________________
James A. Parsons
General Partner
STERLING COMMERCIAL CAPITAL, INC.,
a New York corporation
By: /s/ Harvey Rosenblatt
_______________________________
Harvey Rosenblatt
Executive Vice President
STATE TREASURER OF THE STATE OF
MICHIGAN, Custodian of the Michigan
Public School Employees' Retirement
System, State Employees' Retirement
System, Michigan State Police
Retirement System and Michigan
Judges Retirement System
By: /s/ Paul E. Rice
_______________________________
Paul E. Rice
Administrator, Alternative
Investments Division
STRATEGIC INVESTMENTS & HOLDINGS,
INC., a Delaware corporation
By: /s/ Gary M. Brost
_______________________________
Gary M. Brost
President
FIRST SOURCE FINANCIAL LLP, an
Illinois registered limited
liability partnership
By: First Source Financial, Inc.,
a Delaware corporation, its
Agent/Manager
By: /s/ illegible
____________________________
Name:
Title:
<PAGE>
EXHIBIT A
(See Attached)
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
Senior Subordinated Note due December 21, 2002
PPN# 37029* AA 7
No. R-1 New York, N.Y.
$17,243,295 December 21, 1995
GENERAL MANUFACTURED HOUSING, INC., a Georgia corporation (the
"Company"), for value received, hereby promises to pay to THE EQUITABLE
LIFE ASSURANCE SOCIETY OF THE UNITED STATES, or registered assigns, the
principal amount of $17,243,295 on December 21, 2002, with interest
(computed on the basis of a 360-day year of twelve 30-day months) on the
unpaid balance of such principal amount at the rate of (a) for the period
from the date hereof to and including March 31, 2001, 10.87% per annum, and
(b) 14.50% per annum thereafter, payable quarterly on each March 31, June
30, September 30 and December 31 after the date hereof, commencing March
31, 1996, until such unpaid balance shall become due and payable (whether
at maturity or at a date fixed for prepayment or by declaration or
otherwise), and with interest on any overdue principal (including any
overdue prepayment of principal) and premium, if any, and (to the extent
permitted by applicable law) on any overdue interest, at the rate of 2.00%
per annum plus the otherwise applicable rate until paid, payable quarterly
as aforesaid or, at the option of the holder hereof, on demand. Payments of
principal, premium, if any, and interest on this Note shall be made in
lawful money of the United States of America at the principal office of The
Chase Manhattan Bank, N.A., in the Borough of Manhattan, the City and State
of New York, or at such other office or agency in such Borough as the
Company shall have designated by written notice to the holder of this Note
as provided in the Note and Warrant Purchase Agreement referred to below.
This Note is one of the Company's Senior Subordinated Notes due
December 21, 2002 (the "Notes"), originally issued in the aggregate
principal amount of $17,243,295 pursuant to the Note and Warrant Purchase
Agreement, dated as of December 21, 1995, as from time to time amended,
between the Company and the institutional investor referred to therein. The
holder of this Note is entitled to the benefits of such Note and Warrant
Purchase Agreement and may enforce the agreements of the Company contained
therein and exercise the remedies provided for thereby or otherwise
available in respect thereof.
The obligations evidenced hereby are subordinate in the manner
and to the extent set forth in that certain Subordination Agreement, dated
as of December 21, 1995 (the "Subordination Agreement"), among the Company,
The Equitable Life Assurance Society of the United States., RFE Investment
Partners V, L.P., Sterling Commercial Capital, Inc., the State Treasurer of
the State of Michigan, as Custodian, and First Source Financial LLP (the
"Senior Lender"), to the obligations (including interest) owed by the
Company to the holders of all the Notes issued pursuant to that certain
Secured Credit Agreement, dated as of December 21, 1995, between the
Company and the Senior Lender, as such Secured Credit Agreement has been
and hereafter may be supplemented and amended from time to time; and each
holder hereof, by its acceptance hereof, agrees to be bound by the
<PAGE>
provisions of the Subordination Agreement.
This Note is a registered Note and is transferable only upon
surrender of this Note for registration or transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed by the holder
hereof or his attorney duly authorized in writing. References in this Note
to a "holder" shall mean the person in whose name this Note is at the time
registered on the register kept by the Company as provided in such Note and
Warrant Purchase Agreement and the Company may treat such person as the
owner of this Note for the purpose of receiving payment and for all other
purposes, and the Company shall not be affected by any notice to the
contrary.
The Notes are subject to required and optional prepayment, in
whole or in part, in certain cases with a premium and in other cases
without a premium, all as specified in such Note and Warrant Purchase
Agreement.
In case an Event of Default, as defined in such Note and Warrant
Purchase Agreement, shall occur and be continuing, the unpaid balance of
the principal of this Note may become due and payable to the extent
provided in such Note and Warrant Purchase Agreement.
<PAGE>
EXHIBIT B
(See Attached)
<PAGE>
THIS JUNIOR SUBORDINATED NOTE IS SUBORDINATED PURSUANT TO THE
TERMS OF THAT CERTAIN SUBORDINATION AGREEMENT DATED THE DATE
HEREOF AMONG THE PAYEE, THE OTHER PURCHASERS WHO ARE PARTIES
TO THE AGREEMENT (AS DEFINED BELOW), THE MAKER, THE SENIOR
LENDER, THE SENIOR SUBORDINATED LENDER AND STRATEGIC
INVESTMENTS & HOLDINGS, INC. (ALL AS DEFINED BELOW).
GENERAL MANUFACTURED HOUSING, INC.
JUNIOR SUBORDINATED NOTE DUE JUNE 30, 2003
$145,454.50
December 21, 1995
FOR VALUE RECEIVED, GENERAL MANUFACTURED HOUSING, INC. a Georgia
corporation with its principal office at 2255 Industrial Boulevard,
Waycross, Georgia 31503 (the "Maker"), hereby unconditionally promise(s) to
pay to the order of STERLING COMMERCIAL CAPITAL, INC. (the "Payee"), or
registered assigns at the office of the Payee located at 175 Great Neck
Road, Great Neck, New York 11021 or at such other office as the holder
hereof may designate, in lawful money of the United States, the principal
sum of One Hundred Forty Five Thousand Four Hundred Fifty Four and 50/100
Dollars ($145,454.50), together with interest thereon as provided for
below.
This Note is one of a duly authorized issue of Junior subordinated
Notes of the Maker, limited in aggregate principal amount to Five Million
Dollars ($5,000,000.00) (the "Notes"), copies of which are available for
inspection at the Maker's principal office. The Notes have been sold
pursuant to a Securities Purchase Agreement dated as of the date hereof,
among the Maker and the Payees of the Notes (the "Agreement"), a copy of
which is available for inspection at the Maker's principal office. This
Note is subject and entitled to certain terms, conditions, covenants and
agreements contained in the Agreement. Reference to the Agreement and the
Subordination Agreement (as defined below) shall in no way impair the
negotiability hereof or the absolute and unconditional obligation of the
Maker to pay
<PAGE>
both principal of and interest on this Note as provided herein.
1. Equal Rank. The Notes rank equally and ratably without priority over
one another. No payment, including any prepayment, shall be made hereunder
unless payment, including any prepayment, is made with respect to the other
Notes in an amount which bears the same ratio to the then unpaid balance on
such other Notes as the payment made hereon bears to the then unpaid
balance under this Note.
2. Interest. Interest shall accrue on the outstanding principal balance
hereof at a rate per annum equal to thirteen percent (13%) per annum,
payable (in the event and only to the extent that Maker has accumulated
earnings sufficient to pay such accrued interest) quarterly, on the first
day of December, March, June and September in each year and on the Maturity
Date (as defined below), commencing on March 31, 1996. Interest for the
period commencing with the date of this Note through March 31, 1996 shall
be payable on March 31, 1996.
If all or a portion of the principal amount of or interest on this
Note shall not be paid when due (whether or not such interest has been
earned as provided above and whether at stated maturity, by acceleration or
otherwise) such overdue amount shall bear interest at a rate per annum
which is 2% above the rate that would otherwise be applicable thereto.
Anything contained in this Note to the contrary notwithstanding, the
Payee does not intend to charge and the Maker shall not be required to pay
interest or other charges in excess of the maximum rate (if any) permitted
by applicable law (if any). Any payments in excess of such maximum shall be
refunded to the Maker or credited against principal.
3. Payment of Principal and Interest. The Maker shall pay the entire
unpaid principal hereof and any accrued and unpaid interest thereon in one
lump payment due on June 30, 2003. The term "Maturity Date" shall mean June
30, 2003.
4. Subordination. Anything in this Note to the contrary notwithstanding,
the indebtedness evidenced by this Note shall be subordinated to the prior
payment and satisfaction of all indebtedness of the Maker to (i) First
Source Financial LLP (the "Senior Lender") arising out of the Secured
Credit Agreement dated December 21, 1995 (the "Loan Agreement") between the
Senior Lender and the Maker, including any such additional indebtedness
permitted by the Subordination Agreement, and (ii) The Equitable Life
Assurance Society of the United States (the "Senior Subordinated Lender")
arising out of that certain Note and Warrant Purchase Agreement dated as of
December 21, 1995 (the "Note Agreement"), between the Maker and the Senior
Subordinated Lender (such indebtedness of the Maker to which this Note is
subordinated being hereinafter referred to as "Senior Indebtedness"), which
subordination shall be subject to the terms and conditions of that certain
Subordination Agreement dated as of the date hereof between the Maker, the
Senior Lender, the Senior Subordinated Lender, Strategic Investments &
Holdings, Inc. and the Payees of the Notes. Senior Indebtedness shall
include any replacement or refinancing thereof. This Note and the other
Notes shall be senior in right of payment to all other borrowed money
indebtedness of the Maker, except the Senior Indebtedness.
5. Liquidation Rights. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Maker, this Note shall be
entitled to a claim in liquidation after the payment in full of all Senior
Indebtedness of the Maker, but before participation by the holders of any
debt subordinate hereto or of any capital stock of the Maker. The amount of
the claim in liquidation shall equal the amount to which the Payee of this
Note would be entitled in the case of payment, whether or not this Note is
eligible for payment at the time of liquidation. If upon such liquidation,
dissolution, or winding up, the assets available for distribution among the
holders of the Notes shall be insufficient to permit the payment of the
full amounts of their claims in liquidation, then the entire assets of the
Maker to be distributed to the holders of the Notes shall be distributed
pro-rata among the holders of the Notes based upon
<PAGE>
the amounts of their respective claims in liquidation.
6. Prepayment. Optional prepayment. The Maker may prepay the principal
hereof and all interest thereon in whole or in part at any time without
penalty or premium after ten (10) days' prior written notice to the holders
of the Notes; provided that any partial prepayment is in multiples of
$10,000. At the time of prepayment, all interest owing on the amount
prepaid to the date of payment must simultaneously be paid.
7. Expenses. The Maker shall pay the Payee, on demand, for all reasonable
costs and expenses, including, but not limited to, reasonable attorneys'
fees, incurred in the collection or enforcement of this Note.
8. Disclosure of Senior Indebtedness. The Maker shall notify the Payee of
this Note of the existence of any Senior Indebtedness, incurred from time
to time, or any written modification, extension, renewal or rollover
thereof or any default therein within five (5) days of the date it is
incurred or occurs. Such notice shall provide the Payee of this Note access
to all documents executed in connection therewith and all information with
respect thereto.
9. Default; Acceleration. The occurrence of any of the following shall
constitute an "Event of Default":
(a) The breach by the Maker of any of the terms or provisions
contained in this Note or any of the Notes, including without limitation
the failure to pay when due (whether at the date hereof or at a date fixed
for prepayment hereof or by acceleration hereof or otherwise) any
principal, interest, charges or other amounts hereunder or failure to
perform hereunder or under any of the Notes and such breach shall continue
unremedied for five business days; or
(b) If the Maker
(i) shall commence any case or proceeding or other action
relating to it under any bankruptcy, insolvency or other similar law or
seek reorganization, arrangement, readjustment of its debts, dissolution,
liquidation, winding-up, composition or any other relief under any
bankruptcy, insolvency, reorganization, liquidation, dissolution,
arrangement, composition, readjustment of debt or any other similar act or
law, of any jurisdiction, domestic or foreign, now or hereafter existing;
or
(ii) shall admit the material allegations of any petition or
pleading in connection with any such case or proceeding; or
(iii) makes an application for, or consents or acquiesces to,
the appointment of a receiver, conservator, trustee or similar officer for
the Maker or for all or a substantial part of the Maker's property; or
(iv) makes a general assignment for the benefit of creditors; or
(v) is unable or admits in writing its inability to pay its
debts as they mature; or
(c) Commencement of any case or proceeding or the taking of any other
action against the maker in bankruptcy, insolvency, or similar law or
seeking reorganization, arrangement, readjustment of its debts,
liquidation, dissolution, winding-up, composition or for any other relief
under any bankruptcy, insolvency, reorganization, liquidation, dissolution,
arrangement, composition, readjustment of debt or any other similar act of
law or any jurisdiction, domestic or foreign, now or hereafter existing; or
the appointment of a receiver, conservator, trustee or similar officer for
the Maker or for all or a substantial part of the Maker's property; or the
issuance of a warrant of attachment, execution or similar process against
any substantial part of the property of the Maker; and the continuance of
any of such events for sixty (60) days undismissed, unbonded or
undischarged; or
<PAGE>
(d) An event of default shall occur under (i) the Senior Loan
Agreement (as defined in the Securities Purchase Agreement) or related
documents, or (ii) any of the Senior Subordinated Note Instruments (as
defined in the Securities Purchase Agreement) or related documents, or
(iii) any other agreements relating to Senior Indebtedness or (iv) any of
the Notes; or
(e) The Maker shall fail to comply with any of its covenants
contained in the Agreement or the Investors Rights Agreement dated as of
the date hereof among the Maker, the Payees of the Notes and certain other
parties, and such failure continues unremedied for a period of thirty (30)
days after the Maker receives written notice from the Payee of such
default; or
(f) Any representation or warranty of the Maker in the Agreement or
in any other document or instrument delivered pursuant to the Agreement
shall prove to have been false in any material respect upon the date when
made; or
(g) Maker shall fail to pay at maturity, or within any applicable
period of grace, any obligation for borrowed money or credit received or in
respect of any indebtedness for borrowed money (other than the Senior
Indebtedness) or fail to observe or perform any material term, covenant or
agreement contained in any agreement by which it is bound, evidencing or
securing borrowed money or credit received or in respect of any
indebtedness for borrowed money (other than the Senior Indebtedness) for
such period of time as would permit (assuming the giving of appropriate
notice if required) the holder or holders thereof or of any obligations
issued thereunder to accelerate the maturity thereof; or
(h) There shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty days, whether or not consecutive, any final
judgment against maker that with other outstanding final judgments,
undischarged, against Maker exceeds in the aggregate $250,000; or
(i) The Maker shall be enjoined, restrained or in any way prevented
by the order of any court or any administrative or regulatory agency from
conducting any material part of its business; or
(j) The Agreement or the Investors' Rights Agreement shall cease, for
any reason, to be in full force and effect other than in accordance with
the terms thereof.
Upon the occurrence, and at any time during the continuance, of an
Event of Default, the Payee, at the Payee's option and without the need for
presentment, demand, protest, or other notice of any kind, may declare all
unpaid principal hereof and interest hereunder to be immediately due and
payable and same shall become immediately due and payable upon such
declaration; provided that in the event of any Event of Default specified
in clauses (b) and (c) above, all such amounts shall become immediately due
and payable automatically and without any requirement of notice from the
Payee.
10. Certain Waivers. The Maker and any endorser or guarantor hereof
(collectively, the "Obligors") and each of them (i) waive(s) presentment,
diligence, protest, demand, notice of demand, notice of acceptance or
reliance, notice of non-payment, notice of dishonor, notice of protest and
all other notices to parties in connection with the delivery, acceptance,
performance, default or enforcement of this Note, any endorsement or
guaranty of this Note, or any collateral or other security; (ii) consent(s)
to any and all delays, extensions, renewals or other modifications of this
Note, any related document or the debt(s) or collateral evidenced hereby or
thereby or any waivers of any term hereof or thereof, any release,
surrender, taking of additional, substitution, exchange, failure to
perfect, record, preserve, realize upon, or lawfully dispose of, or any
other impairment of, any collateral or other security, or any other failure
to act by the Payee or any other forbearance or indulgence shown by the
Payee, from time to time and in one or more instances (without notice to or
assent from any of the Obligors) and agree(s) that none of the foregoing
shall release,
<PAGE>
discharge or otherwise impair any of their liabilities; (iii) agree(s) that
the full or partial release or discharge of any Obligor(s) shall not
release, discharge or otherwise impair the liabilities of any other
Obligor(s); and (iv) otherwise waive(s) any other defenses based on
suretyship or impairment of collateral.
11. Registration and Transfer of this Note. The Maker shall keep at its
principal executive office a register (herein sometimes referred to as the
"Note Register"), in which, but at its expense (other than transfer taxes,
if any), the Maker shall provide for the registration and transfer of the
Notes. The Payee of this Note, at such Payee's option, may in person or by
duly authorized attorney surrender this Note for exchange at the principal
office of the Maker, to receive in exchange therefor a new Note or Notes,
as may be requested by such Payee, of the same series and in the same
aggregate unpaid principal amount as the aggregate unpaid principal amount
of the Note or Notes so surrendered; provided, however, that any transfer
tax relating to such transaction shall be paid by the Payee requesting the
exchange. Each such new Note shall be dated as of the date to which
interest has been paid on the unpaid principal amount of the Note or Notes
so surrendered and shall be in such principal amount and registered in such
name or names as such Payee may designate in writing.
12. Lost Documents. Upon receipt by the Maker of evidence satisfactory to
it of the loss, theft, destruction or mutilation of this Note or any Notes
exchanged for it, and (in case of loss, theft or destruction) of indemnity
satisfactory to it, and upon reimbursement to the Maker of all reasonable
expenses incidental thereto, and upon surrender and cancellation of such
Note, if mutilated, the Maker will make and deliver in lieu of such Note a
new Note of the same series and of like tenor and unpaid principal amount
and dated as of the date to which interest has been paid on the unpaid
principal amount of the Note in lieu of which such new Note is made and
delivered.
13. Commercial Transaction; Jury Waiver. THE MAKER ACKNOWLEDGES THAT THE
TRANSACTION OF WHICH THIS NOTE IS A PART IS A COMMERCIAL TRANSACTION. THE
MAKER HEREBY KNOWINGLY AND VOLUNTARILY WAIVES TRIAL BY JURY AND THE RIGHT
THERETO IN ANY ACTION OR PROCEEDING OF ANY KIND, ARISING UNDER OR OUT OF,
OR OTHERWISE RELATED TO OR OTHERWISE CONNECTED WITH, THIS NOTE AND/OR ANY
RELATED DOCUMENT. THE MAKER FURTHER ACKNOWLEDGES THAT IT HAS HAD AN
OPPORTUNITY TO REVIEW THIS NOTE AND THE OTHER FINANCING DOCUMENTS WITH ITS
COUNSEL AND THAT IT ON ITS OWN HAS MADE THE DETERMINATION TO EXECUTE THIS
NOTE AND ALL OTHER FINANCING DOCUMENTS TO WHICH IT IS A PARTY AFTER
CONSIDERATION OF ALL OF THE TERMS OF THIS NOTE AND SUCH OTHER DOCUMENTS
(INCLUDING THE INTEREST RATE) AND OF ALL OTHER FACTORS WHICH IT CONSIDERS
RELEVANT.
14. Binding Nature. This Note shall bind the Maker and the Maker's
successors and permitted assigns and shall inure to the benefit of the
Payee and the Payee's heirs, representatives, successors and permitted
assigns. This Note may only be transferred to a transferee of shares of
capital stock of GMH Holdings, Inc. which have been issued pursuant to the
Agreement. The term "Payee" as used herein shall include, in addition to
the initial Payee, any successors, endorsees, or other permitted assigns of
such Payee and shall also include any other holder of this Note.
15. Governing Law. This Note shall be governed by and construed and
interpreted in accordance with the laws of the State of Delaware, without
regard to its rules pertaining to conflicts of laws thereunder.
16. Miscellaneous. No delay or omission by the Payee in exercising any
right or remedy hereunder shall operate as a waiver of such right or remedy
or any other right or remedy; and a waiver on one occasion shall not be a
bar to or waiver of any right or remedy on any other occasion. All rights
and remedies of the Payee hereunder, any other applicable document and
under applicable law shall be cumulative and not in the alternative. No
provision of this Note may be waived or modified orally but only by a
writing (a) signed by the party against whom enforcement of such amendment,
waiver or other modification is
<PAGE>
sought and (b) consented to in writing by holders of Notes representing
sixty six and 2/3 percent (66-2/3%) in principal amount of the Notes.
17. Notices. All notices, requests, consents and demands shall be made in
writing and shall be mailed first class postage prepaid, or delivered by
hand or by messenger to the Maker or to the Payee hereof at their
respective addresses set forth at the beginning of this Note or at such
other respective addresses as may be furnished in writing to each other.
IN WITNESS WHEREOF, the Maker has executed and delivered this Note as
of the day and year first written above.
Maker:
GENERAL MANUFACTURED HOUSING, INC.
By: /s/ Gary M. Brost
_________________________________
Name: Gary M. Brost
Title: President
<PAGE>
EXHIBIT 10.1
CONTRACT OF LEASE AND RENT
GEORGIA, WARE COUNTY
THIS CONTRACT of Lease and Rent, sometimes referred to
as "Agreement" and sometimes referred to as "Lease", made and
entered into as of the 30th day of December, 1993, by and
between WAYCROSS AND WARE COUNTY DEVELOPMENT AUTHORITY,
hereinafter sometimes called "Authority," a public Georgia
Corporation, as Lessor, and General Manufactured Housing, Inc., a
Georgia Corporation with offices in Ware County, Georgia, for the
purposes of this agreement hereinafter sometimes called "Company,"
and sometimes called Lessee,
W I T N E S S E T H :
WHEREAS, the Authority, an instrumentality of the State
of Georgia, and a public corporation, created under an Amendment
to the Constitution of the State of Georgia and an Act of the
Georgia General Assembly (Georgia Laws 1953, November-December
Session, Page 266, et seq.; Georgia Laws 1955, Page 2840, et seq.)
to develop and promote for the public good and welfare, jobs
and payrolls in industry, agriculture, commerce, natural
resources, vocational training and the making of long-range plans
for the coordination of such development, promotion and expansion
within the area of the City of Waycross and Ware County, Georgia,
having full lawful power and authority to enter into this Contract
of Lease and Rent, has proposed and does hereby propose that it
shall:
(a) Borrow the sum of $613,727.63 from The Patterson
Bank (Lending Institution), and grant to Lending Institution a
Deed to Secure Debt for real property located in the County of
Ware, State of Georgia, and described in Exhibit "A" hereto,
together with all easements, tenements, hereditaments,
appurtenances, rights, privileges and immunities thereto belonging
or appertaining (hereinafter sometimes called "the Lease
Premises"), to the Company for rentals and upon the terms and
conditions herein set forth; and
WHEREAS, the Company desires to accept the proposals of
the Authority and enter into this Agreement; and
WHEREAS, the Authority intends to give a note ("Note")
and Deed to Secure Debt ("Deed to Secure Debt") to Lending
Institution for the loan to improve the Leased Premises and
personal property fixtures; and
WHEREAS, on December 21, 1993 at 5:00 o'clock p.m. the
Authority, after public notice, duly published in the official
organ of Ware County, Georgia, held a public hearing to discuss
and consider the proposed project; and
WHEREAS, on December 21, 1993 the Commission, in a
regular public meeting, considered said project and adopted a
resolution approving the terms as set forth herein and as set
forth in the Installment Promissory Note and Deed to Secure Debt
between the Authority and the Lending Institution, executed
contemporaneously herewith.
<PAGE>
NOW THEREFORE, in consideration of the premises and the
mutual covenants and agreements herein set forth and the mutual
benefits to flow to each of the parties hereto, the Authority and
the Company do hereby covenant and agree as follows:
ARTICLE I
Grant of Lease and Term
1.01 Authority hereby leases to Lessee, and Lessee hereby
takes and hires from Authority, the leased premises described on
Exhibit "A" and the leased equipment described on the attached
Exhibit "B" attached hereto, for a term, beginning the date hereof
and ending December 30, 2008, unless terminated prior thereto or
renewed, all as hereinafter permitted and provided.
ARTICLE II
Indebtedness Against Leased Premises
2.01 It is contemplated that, contemporaneously with the
closing hereof, The Patterson Bank, hereinafter referred to as
"Lending Institution", shall lend to the Authority the sum of
$613,727.63 to be secured by a Deed to Secure Debt upon the leased
premises. The loan made contemporaneously herewith shall be
payable $6,600.00 monthly commencing January 15, 1994 and in the
same amount on the 1st day of each month thereafter until a total
of 180 such payments have been made. Reference is hereby made to
the Adjustable Rate Installment Promissory Note (Note) and it is
incorporated herein by reference. The monthly installment may
adjust as set forth in said Note.
ARTICLE III
Rent
3.01 The Lessee shall pay monthly rental, in advance, in the
sum of $6,600.00 on the 15 day of each month commencing
January 15, 1994 for 180 months. Then the monthly rental shall be
adjusted in the same amount, manner, and at the same time as the
adjustments to the monthly installment from the Authority to the
Lending Institution as set forth in 2.01, above. In other words
the monthly rental for each month during the term hereof shall be
equal to the monthly installment paid from the Authority to the
Lending Institution.
3.02 The Lessee shall pay as additional rent all water, sewer
and utility charges that are imposed upon the project, however,
Lessee shall have the right in its own or in the Authority's name,
or both, to contest the validity of the amount of such water,
sewer or utility charge by appropriate proceedings timely
instituted; provided further, however, that the Lessee give the
Authority written notice of its intention to contest such charges,
and provided that the Lessee agrees to hold the Authority harmless
from any costs and expenses the Authority may incur by reason of
such contest and provided that the Lessee shall pay promptly any
valid final judgment enforcing any such charge.
3.03 As additional rent, the Lessee, in addition to all other
payments provided for herein, shall pay to the Authority, in
<PAGE>
addition to the sum required in the previous lease and in lieu of
ad valorem taxes, sums as are provided for under Section 4.03.
ARTICLE IV
Taxes and Assessments
4.01 The Lessee covenants that it will pay all taxes or
assessments in connection with the leased premises, if any, which
my be levied or assessed upon the Authority or upon the Lessee or
upon the property under this Lease when the same shall become due,
provided, however, that the Lessee shall not be required to pay
nay such taxes or assessments so long as the Lessee in good
faith contests the same.
4.02 The Lessee has entered into this Lease in contemplation
that under the laws of the State of Georgia, the leased premises
and all parts thereof which are owned by the Authority on January
first of each year and this Lease are not subject to ad valorem
taxes for that year. Authority covenants that it will not part
with fee simple title to the leased premises or any part thereof
(except with the Lessee's written consent) during the primary
terms hereunder and that it will not take any action that may
reasonably be construed as tending to cause or induce a levy or
assessment of the ad valorem taxes on the Project or any part
thereof or on this Lease, and should any such levy or assessment
be threatened or occur, the Authority shall, at the Lessee's
request, cooperate fully with the Lessee in all reasonable and
lawful ways to prevent or contest any such levy or assessment.
4.03 Except as set forth below in Paragraph 4.05, during such
time as the leased real property is not subject to ad valorem
taxes, and in addition to the sums required in the other terms of
this lease, for each year that the Lease is in effect, Lessee
agrees to pay to Authority a portion of the amount of taxes that
would have been assessed against the property for that year if the
property were subject to ad valorem taxes. For the 1994 tax year
Lessee shall pay to Authority 1/15 of the 1994 tax amount. For
the 1995 tax year Lessee shall pay to Authority 2/15 of the 1995
tax amount. For each year thereafter the amount to be paid by
Lessee pursuant to this subparagraph 4.03 shall be determined by
adding 1/15 to the fraction used for the previous year to
determine payments pursuant to this paragraph, multiplied by the
taxes that would have been assessed against the property for that
year if it were subject to ad valorem taxes; provided, however,
that the sums to be paid pursuant to this subparagraph 4.03 in any
year shall never exceed 100% of the tax amount for that year.
4.04 Except as set forth below in Paragraph 4.05, during such
time as the leased equipment is not subject to ad valorem taxes,
in addition to the sums required to be paid under the other terms
of this Lease, for each year that the Lease is in effect, Lessee
agrees to pay to Authority, a portion of the amount of taxes that
would have been assessed against the property if it were subject
to ad valorem taxes. For the 1994 tax year Lessee shall pay to
Authority 1/10 of the 1994 tax amount. For the 1995 tax year
Lessee shall pay to Authority 2/10 of the 1995 tax amount. For
each tax year thereafter, the sums to be paid by Lessee pursuant
to the terms of this subparagraph 4.04 shall be determined by
adding 1/10 to the fraction used for the previous year to
<PAGE>
determine the payments pursuant to this paragraph, multiplied by
the taxes that would have been assessed against the property for
that year if it were subject to ad valorem taxes; provided,
however, that the sums to be paid pursuant to this subparagraph
4.04 in any year shall never exceed 100% of the tax amount for
that year.
4.05 A. For the years 1994, 1995 and 1996, Lessee shall
make payments in lieu of taxes as set forth in Paragraph 4.03 and
4.04 of this Article IV.
B. The parties are entering into this Lease and the
related transactions with the expectation that it will lead to job
growth and payroll growth above Lessee's 1993 employment and
payroll levels. Lessee's 1993 employment is 290 employees and its
1993 payroll is $6,600,000.00. Lessee represents that (1) it
expects to increase its 1993 employment by 75 employees, or from
290 to 365 and (2) further expects to increase its 1993 payroll by
$1,125,000.00 or from $6,600,000.00 to $7,725,000.00. For years
beginning in 1997 and throughout the remaining term of the lease,
the parties shall review the actual average payroll increase and
number of jobs increase and determine payments in lieu of taxes as
set forth below.
C. 1. To determine the payment in lieu of taxes for
1997 and subsequent years the parties shall use the following
procedure:
a. Determine the average number of employees
(as limited below) employed by Lessee during the years 1994, 1995
and 1996.
b. From that number subtract the number 290.
c. The resulting number shall be the
numerator of Fraction One and the denominator shall be the number
75.
2. a. In like manner determine the average
payroll of Lessee during the years 1994, 1995 and 1996 (as limited
below).
b. From that average subtract $6,600,000.00.
c. Such number shall be the numerator of
Fraction Two and the denominator shall be $1,125,000.00.
3. If both of said fractions are one (1) or
greater, then the payment in lieu of taxes for real property and
improvements for the year 1997 shall be 4/15 of the 1997 tax
amount as determined pursuant to Section 4.03 and not adjusted
pursuant to this paragraph. The payment in lieu of taxes for the
year 1997 for equipment and personal property shall be 4/10s of
the 1997 tax amount, as determined pursuant to Section 4.04 and
not adjusted pursuant to this paragraph.
4. If either fraction (i.e. lower fraction) is
less than "1" then the payment in lieu of taxes shall be adjusted
and determined in the following manner:
<PAGE>
Step 1. From the applicable tax amount for
1997 (pursuant to Section 4.03 and 4.04) subtract the amounts of
payments in lieu of taxes for 1997 pursuant to Sections 4.03 and
4.04, unadjusted pursuant to this Section 4.05.
Step 2. Multiply the result from Step 1 by
the lower fraction. That amount shall be the tax savings for
1997.
For 1997, Lessee shall pay in lieu of taxes the
applicable taxes for 1997 less and except the tax savings for
1997 as determined pursuant to this Step.
D. To determine the payment in lieu of taxes for 1998
and all subsequent years, the parties shall use the same procedure
except that in Step C.1.a. (above) they shall determine the
average number of employees employed by Lessee for the 3 previous
years (e.g. for 1998, they shall average 1995, 1996, and 1997
employees), and in Step C.2.a. (above) they shall determine the
average payroll of Lessee for the 3 previous years (e.g. for 1998,
they shall average 1995, 1996,and 1997 payroll); further in
Step 1, the Parties shall use the tax amount for that tax year
pursuant to Section 4.03 and 4.04 (e.g. 1998 the applicable
fractions shall be 5/15 for real property and 5/10 for personal
property.
E. Payments in lieu of taxes shall be due and payable
on the same date that State and County taxes are due.
F. For a person to be considered an employee pursuant
to the terms of this Article IV, he must work not less than 1000
hours during the calendar year.
G. In determining payroll increases for the purposes
of this Article IV, no increases in income to "highly compensated
employees" shall be considered. The term "highly compensated
persons" shall have the same meaning as that term has in the
Internal Revenue Code.
H. The Parties understand and agree that Lessee's
payroll and employment records are confidential. Lessee shall
permit Authority's designated accountant to see only such
employment and payroll records as are necessary to make the
calculations and determinations pursuant to this Article. The
Parties agree to maintain the confidentiality of all such records
provided that the Parties can use the totals determined for the
purposes of this Article but for no other purposes.
ARTICLE V
Use of Premises
5.01 The Lessee agrees that in the use and occupancy of said
leased premises it will at all times comply with all applicable
sanitary and safety laws, rules and regulations and will commit no
nuisance and will permit no nuisance upon the premises by others.
5.02 The Lessee agrees that during the term of this Lease,
including any renewal periods thereof, if any, it will make all
necessary repairs and will keep and maintain leased premises,
<PAGE>
including all building and improvements thereon and appurtenances
thereto belonging, in good repair at its own cost; and upon the
expiration or termination of this Lease or any renewal periods
thereof,it will surrender the Project and the improvements thereon
and appurtenances thereto belonging to the Authority in as good a
condition as prevailed at the time of the beginning of occupancy
by the Lessee, ordinary wear and tear and acts of God and
condemnation excepted.
ARTICLE VI
Insurance
6.01 Upon the execution of this Lease, and thereafter
throughout the term thereof, including the renewal period, if any,
the Lessee agrees to keep, or cause to be kept, the building and
other improvements of leased premises insured against loss or
damage by fire with Uniform Standard Extended Coverage Endorsement
covering perils of windstorm, hail, explosion, riots, civil
commotion, aircraft, vehicles and smoke (except as limited or
obtainable in the present Uniform Standard Extended Coverage
Endorsement), and such other casualties and events as may be
provided for under Uniform Coverage at all times in amounts
sufficient to prevent the Authority or the Lessee from becoming a
co-insurer, within the terms of applicable policies, and at least
to an amount equal to ninety percent (90%) of the full insurable
value thereof, and to pay all premiums thereon. All such
insurance policies shall be in companies which are authorized to
transact business and are in good standing in the State of
Georgia. The Authority retains the privilege of approving or
disapproving the policy or policies taken out by the Lessee under
this Article, however, Authority will not be unreasonable in the
exercise of this privilege. Each policy shall be so written or
endorsed to make losses, if any, payable to the Authority, the
lending institution, and the Lessee, as their respective interest
may appear; and each policy shall have standard mortgage clauses
attached thereto, payable to the lending institutions as their
interest may appear. The original of all insurance policies shall
be deposited with and retained by Lessor, or by Lending
Institution. The Lessee may insure such property under a blanket
insurance policy or policies which not only cover such property
but other properties also, in which event the coverage may conform
to the blanket policy or policies. Lessee may deposit with
Authority a certificate or certificates of insurance in lieu of
the original policy or policies but Authority shall have the right
to inspect said original policy or policies to determine the
extent of the coverage.
6.02 The Lessee agrees that it will carry public liability
insurance against liability for injuries or the death of persons
resulting from injuries occurring on or in any way relating to the
leased premises and for damages to property occurring on or in any
way related to the leased property in the minimum amount of
$100,000 for the death of or personal injury to any one person,
$300,000 for total personal injury and death claim resulting from
any one accident, and $50,000 for property damage.
6.03 Not less than fifteen (15) days prior to the expiration
date of the expiring policies, originals of the insurance policies
provided for in this Article, each bearing notations evidencing
<PAGE>
payment of premiums or other evidence of such payment satisfactory
to the Lending Institution shall be delivered by the Lessee to the
Authority or to the Lending Institution. In case the Lessee
neglects to insure or keep insured the improvements, buildings or
structures, as herein provided, or shall neglect to procure or pay
for any policies of insurance or renewals thereof to be procured
and paid for by the Lessee under this Lease, the Authority or the
lending institution, may, but shall not be obligated to procure or
renew such insurance, and the amount so paid therefor by the
Authority or Lending Institution shall be recovered from the
Lessee at the next rent payment day after said payment.
ARTICLE VII
Alterations
7.01 The Lessee shall have the privilege of remodeling the
buildings or making improvements to the real property covered by
the Project from time to time, as in its discretion, it may
determine to be desirable for its uses and purposes, and upon the
obtaining of the written approval of the Authority. The cost of
such improvements and remodeling shall be paid for by the Lessee
and shall be the property of the Authority, subject to the terms
of this Lease; provided, however, the Lessee shall have the right
to remove from the leased premises at any time before the
expiration or termination of the Lease, and while it is in good
standing with reference to the payments of rent and performance of
other obligations hereunder, any machinery, fixtures, equipment,
appliances or other personalty placed in or upon the leased
premises by the Lessee, which have been placed therein at the sole
expense of the Lessee using funds other than those furnished by
Authority, whether attached to the realty or not, which can be
removed without material damage to the existing buildings or
structures, or in the event such removal causes damage to the
existing building or structures, restoration and repair of such
damage shall be made at the sole expense of the Lessee. Approval
by Authority to alterations by Lessee as provided for in this
Article will not be unreasonably withheld, and said approval shall
be granted providing said alterations do not impair the operating
unity or materially alter the character or diminish the value of
the leased premises. Authority agrees to execute a landlord's
waiver of lien or similar document as Lessee may reasonably
request as to any machinery, removable fixtures, equipment,
appliances or other removable personalty as Lessee may acquire,
whether by purchase or lease, and install on the leased premises,
to facilitate Lessee's financing of the purchase or leasing
thereof.
ARTICLE VIII
Damage or Destruction
8.01 If the buildings situated upon the leased premises
and/or the personal property leased shall be damaged or either
partially or totally destroyed by fire, flood, windstorm or other
casualty at any time during the primary term of this Lease, there
shall be no abatement or reduction in the rent payable by the
Lessee to the Authority, and the Lessee shall repair, store and/or
replace such damage or damages, at its own cost to the condition
existing immediately prior to such damage or destruction as nearly
<PAGE>
as possible, but the total amount collected under any and all
policies of insurance covering such casualty shall be paid into a
special fund, and such total amount shall be paid to the Lessee at
the Lessee's election, either upon the completion of such repairs
of such damages and the restoration of the damaged or destroyed
buildings, structures and improvements and/or personal property,
or periodically as such repair and restoration progress. All
payments shall be made only upon a certification by the Treasurer
of the Authority and by the architect or engineer of the Authority
for such Project, which certification shall be given as the
restoration or repair work is in fact made by the Lessee. Such
restoration, repairs or replacement may be made in a manner so as
to make the facilities more useful. In the event the Lessee shall
fail to repair, restore, or replace and pay the cost of repairing,
restoring or replacing any damage or destruction of improvements
and/or personal property on the leased premises which may be
caused by any of the hazards above referred to, after the lapse of
reasonable time and after thirty days written notice given by the
Authority to the Lessee, and the failure of the Lessee to commence
repairs within said thirty-day period, the Authority may do so and
recover the reasonable cost thereof from the Lessee, less whatever
amount the Authority may collect under any policy or policies of
insurance covering such damage or losses.
8.02 Notwithstanding anything to the contrary that may be
hereinbefore provided in this section, in the event said building
or buildings cannot lawfully be repaired and restored or
reconstructed or in the event said building or buildings cannot
lawfully be replaced by a new building or buildings as
hereinbefore in this section required or permitted to be done, or
if for any other reason it shall not be economically feasible and
practicable to repair and restore or reconstruct said building or
buildings or to replace such building or buildings with such new
building or buildings so that same will be sufficient for the then
needs and use of the Lessee, then the Lessee shall not be required
and the Authority shall not be entitled to repair or restore or
reconstruct or replace said building or buildings as hereinbefore
in this section; provided, the Lessee shall have, and is hereby
granted, the option to purchase the leased premises. To exercise
such option, the Lessee shall within 30 days following the damage
or destruction give written notice to the Authority and shall
specify therein the date of closing of such purchase, which date
shall not be less than 15 days nor more than 45 days from the date
such notice is mailed. The purchase price, which shall be payable
by the Lessee in cash at closing, shall be a sum that, when added
to the amount the Authority may collect under any policy or
policies of insurance covering such damage or losses, will be
sufficient to repay and release or satisfy in full the then
remaining principal balance under said indebtedness secured by the
leased premises in the original principal amount of $613,727.63,
with all accrued interest thereon to the date of payment, plus (1)
any actual out-of-pocket expense in closing the sale by Authority,
plus (2) One Dollar. The Authority will execute and deliver to
Lessee, upon payment in cash of the purchase price, a Warranty
Deed to the property, and this Lease shall thereupon terminate.
ARTICLE IX
Indemnity Agreement.
<PAGE>
9.01 In addition to the other terms and conditions herein
Lessee agrees to furnish to Lessor, in a form reasonably
acceptable to Lessor, an Agreement to indemnify Lessor and hold
Lessor harmless with respect to any deficiency that may result
from any default by Lessee during the term of this Lease.
ARTICLE X.
Condemnation
10.01 If the whole or any part of the leased premises shall be
taken or condemned by a competent authority for any public use or
purpose, then and in that event any award or compensation or
damages recovered on account of any such taking or condemnation,
less any expense, including counsel fees incurred in litigating,
arbitrating, compromising or settling any claim arising out of
such condemnation, shall be disposed of in the following manner:
(a) If such taking or condemnation shall invoke
the taking or condemnation in whole or in part of the structural
portion of the main building situated on such premises to such
extent that said building is thereby rendered unsuitable for usage
thereof by the Lessee, the entire amount of the award or
compensation or damages recovered on account of such taking or
condemnation shall promptly, when received or collected, be
deposited in a special fund to be used as hereinafter in this
subsection (a) provided, and there shall be an account of such
taking or condemnation no abatement or reduction in the rent
payable by the Lessee to the Authority during the balance of the
primary term of this Lease. The Lessee at its own cost shall, if
the same can lawfully be done, repair and restore said building in
the event of any such partial taking or condemnation, or shall
reconstruct said building or construct a new building or buildings
suitable for the needs and use of the Lessee as it may elect, in
the event said building be wholly taken or condemned, or be taken
or condemned to such an extent as to render said building
unsuitable for economical usage; but the total amount of such
award, compensation or damages paid to the Authority as aforesaid
shall in that event be paid over to the Lessee, at the Lessee's
election either upon the completion of such repairs and
restoration or of such reconstruction or construction or
periodically as such repairs and restoration or such construction
or reconstruction progress (but limited to the extent of the cost
of same), and shall be applied by the Lessee to the payment of the
cost thereof or, if such cost has already been paid by the Lessee,
to reimburse it for such cost, provided, however, that the
aggregate sum or sums paid shall in no event exceed the actual
cost of such repairs and restoration of such reconstruction or
construction.
10.02 Any surplus of such award or compensation or damages
remaining after the completion of any payment for such repairs and
restoration of such reconstruction or construction shall be
retained by Authority.
10.03 In the event the Lessee shall fail to repair and restore
or to reconstruct or to replace and pay the cost of repairing and
restoring or of reconstructing or replacing said building as it is
obligated by this section to do, after the lapse of a reasonable
time and after due notice is given by the Authority to the Lessee,
<PAGE>
the Authority may repair and restore or reconstruct said building
and recover the reasonable costs thereof from the Lessee, less
whatever amount the Authority may collect from the funds
representing any such award or compensation or damages recovered
on account of any such taking or condemnation of the leased
premises and paid to the Authority.
10.04 Notwithstanding anything to the contrary that may be
hereinbefore provided in this section, in the event said building
cannot lawfully be repaired and restored or reconstructed or in
the event said building cannot lawfully be replaced by a new
building or buildings as hereinbefore in this section required or
permitted to be done, or if by reason of the reduction in size,
shape or dimension of the leased premises on which said building
is situated or for any other reason it shall not be economically
feasible and practicable to repair and restore or reconstruct said
building or to replace such building with such new building or
buildings so that same will be sufficient for the then needs and
use of the Lessee, then the Lessee shall not be required and the
Authority shall not be entitled to repair or restore or
reconstruct or replace said building as hereinbefore in this
section provided, if the Lessee shall exercise the following
option; and in which event the Lessee shall have, and is hereby
granted, the option to purchase the leased premises. To exercise
such option, the Lessee shall within 30 days following the taking
under exercise of the power of eminent domain (or conveyance in
lieu thereof) give written notice to the Authority and shall
specify therein the date of closing of such purchase, which date
shall not be less than 15 days nor more than 45 days from the date
such notice is mailed. The purchase price, which shall be payable
by the Lessee in cash at closing, shall be a sum that, when added
to the award, compensation or damages, will be sufficient to repay
and release or satisfy in full the then remaining principal
balance under said indebtedness secured by the leased premises (1)
in the face amount of $613,727.63 with all accrued interest
thereon to the date of payment, plus (2) any actual out-of-pocket
expense in closing the sale by Authority, plus (3) One Dollar.
The Authority will execute and deliver to Lessee, upon the payment
in cash of the purchase price, a Warranty Deed to the property,
and this Lease shall thereupon terminate.
ARTICLE XI
Default
11.01 It is made a condition under this Lease that if the
Lessee shall fail to pay any one or more rent installments, as
called for by this Lease, for a period of fifteen (15) days after
the same becomes due and payable, the Authority, at its option,
may, after thirty (30) days written notice and failure of the
Lessee to pay such rental installment within the said thirty (30)
days, cancel and terminate the Lease and recover possession of the
leased premises, such notice to be given as provided in
Article XXI herein.
11.02 It is further agreed that if the Lessee shall default
in the performance of any other of the terms, provisions,
covenants or conditions in its part to be performed, kept or
observed hereunder, then and in any such event the Authority at
its election may terminate this Lease at any time thereafter and
<PAGE>
recover possession of the leased premises and personal property by
giving thirty days written notice, as provided in Article XXI
herein; and at the expiration of such thirty day period, this
Lease and all of the right and interest herein granted to the
Lessee, including any option privileges, shall cease and terminate
unless within such thirty day period all such default or defaults
shall have been cured, except in the event that the curing of such
default takes more than thirty days and the Lessee is proceeding
to cure the default as soon as possible.
11.03 If the right of the Lessee to the use, occupancy and
possession of the leased premises shall be terminated in any way,
then the Authority shall use its best efforts to relet said
premises or any part thereof for the account and benefit of the
Lessee for such renewal terms to such persons, firms, or
corporation and for such periods or period as may be fixed and
determined by the Authority, and the Authority shall not
unreasonably refuse to accept or receive any suitable occupant or
tenant offered by the Lessee. The Authority shall not otherwise
be required to do any act whatsoever or exercise any diligence
whatsoever in or about the procurement of another occupant or
tenant to mitigate the damages to the Authority, and if a
sufficient sum shall not be received from any reletting to satisfy
the rental payments hereby agreed to be made by the Lessee, after
paying the expenses of reletting and collection, then the Lessee
hereby agrees to pay and satisfy any such deficiency if, as and
when the same exists; provided, however, any excess rentals from
any such reletting shall be credited to any rental due or to
become due by the Lessee.
ARTICLE XII
Indemnification of Authority
12.01 The Lessee covenants that at all times it will protect
and hold the Authority harmless against claims for losses, damage
or injury, including death of or injury to the person or damage to
the property of others resulting from a wrongful or negligent act
or default of the Lessee, its agents, servants or employees, in,
on or about the leased premises, including the driveways,
sidewalks and roadways thereof, or for any other violations by the
Lessee of the terms of this Lease; and it is understood and agreed
that the Authority shall not be liable for any damage or injury
to the persons or property of the Lessee or its agents, servants
or employees, or any other person who may be upon the leased
premises, due to any act or negligence of any person other than
the Authority, its agents, servants and employees, or caused by
fire, water, steam, gas, sewage, electric current, or by the
breaking, leaking or destruction of pipes, or by an explosion, and
that all personal property brought upon the leased premises by
the Lessee, its servants, agents or employees, shall be at the
sole risk of the Lessee or of said agents, servants or employees,
and the Authority shall not be liable for any damage thereto or
destruction thereof, except as in this paragraph provided.
ARTICLE XIII
Remedies of Authority
13.01 The Lessee agrees that the rights and remedies of the
<PAGE>
Authority under this Lease shall be cumulative and shall not
exclude any other rights and remedies of the Authority allowed by
law, and failure to insist upon the strict performance of any of
the covenants and agreements herein set forth or to declare a
forfeiture for any violation thereof shall not be considered or
taken as a waiver or relinquishment for the future of the
Authority's right to insist upon and to enforce by mandamus or
other appropriate legal remedy a strict compliance by the Lessee
with all of the covenants and conditions hereof, or of the
Authority's rights to declare a forfeiture for a violation of any
covenants or conditions, if such violation be continued or
repeated, or of the Authority's right to recover possession of the
leased premises by reason thereof.
ARTICLE XIV
Force Majeure
14.01 In case, by reason of FORCE MAJEURE, either party
hereto shall be rendered unable to wholly or in part carry out its
obligations under this Lease, other than the obligation of the
Lessee to make the rental payments required under the terms
hereof, then, except as otherwise provided in this Lease, if such
party shall give notice and full particulars of such Force Majeure
in writing to the other party within a reasonable time after the
occurrence of the event or cause relied on, the obligation of the
party giving such notice, so far as they are affected by such
Force Majeure, shall be suspended during the continuance of the
inability then claimed, but for no longer period, and such party
shall endeavor to remove or overcome such inability with all
reasonable dispatch. The term "FORCE MAJEURE", as employed
herein, shall mean acts of God, strikes, lockouts or other
industrial disturbances, acts of the public enemy, orders of any
kind of the Government of the United States or the State of
Georgia, or any civil or military authority, insurrection, riots,
epidemics, landslides, lightning, earthquakes, fires, hurricanes,
storms, floods, washouts, droughts, arrests, restraining of
government and people, civil disturbances, explosion, breakage or
accidents to machinery, transmission pipes or canals, partial or
entire failure of utilities or any other cause not reasonably
within the control of the party claiming such inability. It is
understood and agreed that the settlement of strikes, lockouts and
other industrial disturbances shall be entirely within the
discretion of the party having the difficulty and that the above
requirement that any Force Majeure shall be remedied with all
reasonable dispatch shall not require the settlement of strikes,
lockouts and other industrial disturbances by acceding to the
demands of the opposing party or parties when such course is
unfavorable in the judgment of the party having the difficulty.
ARTICLE XV
Bankruptcy, Dissolution and Merger
15.01 The Lessee agrees that in the event a receiver should be
appointed by a court of competent jurisdiction to take charge of
the business or assets of the Lessee, or in the event the Lessee
is adjudicated a bankrupt, whether voluntary or involuntary
proceedings, and such receivership or bankruptcy proceedings are
not dismissed within a period of sixty days, all rent for the
<PAGE>
entire remaining term of this Lease shall forthwith and
automatically become due and payable in cash from the Lessee to
the Authority, and the Lessee shall immediately pay to the
Authority, without demand, the aggregate amount so payable.
ARTICLE XVI
Future Rentals
16.01 Payments may be made by the Lessee to the Authority
representing future monthly rentals, which shall apply on the last
rental payment due under this Lease, but same shall not in any way
alter or suspend any other obligations of the Lessee under the
terms of this Lease, and the Lessee shall continue to perform and
be responsible for the performance of all other terms and
provisions, including but not by way of limitation, obligations to
maintain and insure the premises at their own expense.
ARTICLE XVII
Inspection
17.01 The Lessee agrees and covenants that the Authority, or
its agent, at all reasonable times and during all reasonable
hours shall have free access to the demised premises for the
purpose of examining or inspecting the condition of same, or of
exercising any rights or powers reserved to the Authority under
the terms and provisions of this Lease.
ARTICLE XVIII
Option to Purchase
18.01 Notwithstanding any of the other terms and conditions
herein, the Authority does hereby grant to Lessee the right and
option to purchase the leased premises during the term of this
Lease and any renewal hereof. The purchase price shall be One
Hundred Dollars and the unpaid principal balance with all accrued
interest to the date of payment due by the Authority upon the note
and Deed to Secure Debt to The Patterson Bank described in
Article II hereof, plus any actual out-of-pocket expenses in
closing the sale by the Authority to the Lessee. The Authority
will execute and deliver to Lessee, upon the payment in cash of
the purchase price, a Warranty Deed to said property, upon the
exercise of this option to purchase by Lessee.
In addition, the Authority shall, upon the exercise of
the option to purchase and payment of purchase price, assign to
Lessee all rights, claims, and demands possessed by the Authority
with respect to any damage, destruction, and/or condemnation of
said property, including without limitation, all insurance
policies.
ARTICLE XIX
Assignment
19.01 The Lessee may not assign or transfer this Lease or
sublet the whole or any part of the leased premises, without the
<PAGE>
written consent of the Authority, provided, however, that any such
assignment shall provide that the Lessee remain primarily liable
to the Authority for the payment of all rentals and for the full
performance of all the covenants and conditions of this Lease, and
that assignee Lessee shall be required to fulfill any and all
requirements of Georgia Law as to its authority to do business in
this state. The Authority may assign this Lease without the
permission of Lessee, either written or verbal.
ARTICLE XX
20.01 This Lease shall create the relationship of Landlord and
Tenant between the Authority, as Lessor, and the Lessee, as
Lessee, it being understood and agreed that no estate shall pass
out of the Authority, and that the Lessee has only a usufruct,
not subject to levy and sale except as in this Lease provided.
ARTICLE XXI
21.01 The Authority covenants and agrees that the Lessee, upon
payment of the rental herein and performing and observing the
covenants, conditions and agreements hereof upon the part of the
Lessee to be performed and observed, shall and may peaceably hold
and enjoy the leased premises during the terms hereof without any
interruption or disturbance from the Authority, subject, however,
to the terms of this Lease.
21.02 It is expressly understood and agreed that disbursements
from the special fund (resulting from insurance proceeds or
condemnation proceeds as provided for in Article VIII, Damage or
Destruction and Article IX, Condemnation) for repairs,
restoration, or replacement of improvements shall be made only
with the prior written approval of the lending institution.
ARTICLE XXII
Notices
22.01 All notices, demands and requests, which may or are
requested to be given from either party to the other, shall be in
writing and shall be deemed to have been properly given when
served personally on an executive officer of the party to whom
such notice is to be given, or when sent postage prepaid by
registered or certified mail (with or without requesting return
receipt) by depositing thereof in a duly constituted United States
Post Office or branch thereof in a sealed envelope as follows:
If intended for the Lessee: General Manufactured
Housing, Inc.
P.O. Box 1449
Waycross, GA 31502
or if intended for the Authority: Waycross and Ware County
Development Authority
P.O. Box 137
Waycross, GA 31502
22.02 Either party may change the address and name of the
<PAGE>
addressee to which subsequent notices are to be sent to it by
notice to the other as aforesaid, but any such notice of change,
as sent by mail, shall not be effective until the fifth (5th) day
after it is mailed.
22.03 This Agreement shall survive any and all closings
referred to herein or contemplated by the terms hereof.
IN WITNESS WHEREOF, the Authority, being hereunto
authorized by valid and subsisting resolutions duly adopted, has
caused this Lease to be executed and delivered in its name and
behalf and under its seal, by and through its Chairman and
Secretary, and the Lessee being hereunto authorized by valid and
subsisting resolutions duly adopted, has caused this Lease to be
executed it its name and behalf and under its seal, by an through
its Chairman and Secretary.
WAYCROSS AND WARE COUNTY
DEVELOPMENT AUTHORITY, LESSOR
BY: /s/ [illegible]
CHAIRMAN
ATTEST: /s/ [illegible]
SECRETARY
Signed, sealed and delivered
in the presence of:
/s/ [illegible]
WITNESS
/s/ [illegible]
NOTARY PUBLIC (SEAL)
My commission expires: July 26, 1997
stamped
GENERAL MANUFACTURED HOUSING,
INC.
BY: /s/ Lannis Thomas
PRESIDENT
ATTEST: /s/ [illegible]
SECRETARY
Signed, sealed and delivered
in the presence of:
/s/ [illegible]
WITNESS
/s/ [illegible]
NOTARY PUBLIC (SEAL)
My commission expires: July 26, 1997
stamped
<PAGE>
EXHIBIT A
PARCEL ONE: All that tract of land in Ware County, Georgia, being
a part of Land Lot No. 125 of the 8th Land District of Ware
County, Georgia, said tract described as follows: BEGINNING at a
point on the western margin of Industrial Boulevard, in the
Waycross-Ware County Industrial Park, at the southwestern corner
of the intersection of Industrial Boulevard and Fulford Road;
thence from said beginning point S 18 1/2 ll' W a distance of 1045
feet to a point; thence S 85 1/2 53' W at an interior angle of 112 1/2 18'
a distance of 432.3 feet to a point; thence N 18 1/2 11' E at an
interior angle of 67 1/2 42' a distance of 1096 feet to the southerly
margin of Fulford Road; thence S 87 1/2 36' E at an interior angle of
105 1/2 47' a distance of 415.6 feet to the point or place of
beginning; Said tract of land containing approximately 9.82 acres
of land and bounded on the north by Fulford Road; on the East by
Industrial Boulevard; on the South by Scapa Drive; and West by
other lands of Ware County, Georgia. Said tract is further
described by a survey and plat made by C. S. Eidson dated 7/24/62,
for Waycross and Ware County Development Authority, recorded in
the office of the Clerk of Ware Superior Court in Plat Book "A",
Page 938, to which plat reference is hereby made for all property
purposes.
SUBJECT TO: an Easement for utilities 30 feet wide, beginning at
the southwest corner of the intersection of Fulford Road and
Industrial Boulevard and extending south of uniform width along
the western margin of Industrial Boulevard to the northwest corner
of the intersection of Industrial Boulevard and Scapa Drive.
SUBJECT TO: an encroachment for an existing county road across
the southeastern corner of said tract at the intersection of Scapa
Drive and Industrial Boulevard; reference being made to the above
stated plat which sows said encroachment which is approximately 12
feet at its widest point on Scapa Drive, diminishing to 1 along
Industrial Boulevard at a distance of approximately 100 feet.
PARCEL TWO: All those plots, pieces parcels or tracts of land
situate, lying and being in the County of Ware, State of Georgia,
more particularly described as follows:
TRACT 1:
All that tract or parcel of land situate, lying and
being in the 125th and 152nd Land Lots of the Eighth Land District
of Ware County, Georgia, and more particularly described as
follows:
To arrive at the Point of Beginning, commence at the
northeast corner of the intersection of Albany Avenue Extension
with Industrial Boulevard and run thence North 17 1/2 53' East along
the east margin a distance of 424 feet to an iron pin at the
POINT OR PLACE OF BEGINNING, continue thence North 17 1/2 53' East a
distance of 400 feet to a concrete monument; run thence South
72 1/2 7" East a distance of 680 feet to a concrete monument; run
thence North 17 1/2 53'41" West a distance of 415 feet; run thence
North 26 1/2 37'41" West a distance of 399.4 feet; run thence South
72 1/2 07' East a distance of 598.65 feet; run thence South 01 1/2 10'
East a distance of 848.87 feet; run thence South 89 1/2 08' West a
distance of 604.97 feet to an axle; run thence South 11 1/2 59' West a
distance of 103.70 feet to a concrete monument; run thence North
72 1/2 07' West a distance of 713.5 feet to the POINT OR PLACE OF
<PAGE>
BEGINNING.
TRACT 2:
All of that tract or parcel of land being in Ware
County, Georgia, described as follows: To obtain the starting
point of the property hereby conveyed, begin where the center line
of U.S. Highway #82 would intersect with the eastern right of way
line of Industrial Boulevard, if extended; thence from this point
run North 10 1/2 11' East along the easterly margin of Industrial
Boulevard a distance of 1036.5 feet to a point on the easterly
margin of Industrial Boulevard marked by a concrete marker, which
point is the BEGINNING POINT of the property described and
conveyed; thence from this Beginning Point run north 18 1/2 11' East
along the easterly margin of Industrial Boulevard a distance of
700 feet to a point marked by a concrete marker; thence at an
inside angle of 90 1/2 run South 71 1/2 49' East a distance of 400 feet
to a point marked by a concrete marker; thence at an inside angle
of 132 1/2 19' run South 24 1/2 l8' East a distance of 399.4 feet to a
point marked by a concrete marker; thence at an inside angle of
135 1/2 31' run South 18 1/2 11' West a distance of 415 feet to a point
marked by a concrete marker; run thence North 71 1/2 49' West a
distance of 680 feet to the eastern margin of Industrial
Boulevard, the POINT OR PLACE OF BEGINNING.
<PAGE>
ASSIGNMENT OF CONTRACT OF LEASE AND RENT
GEORGIA, WARE COUNTY
FOR VALUE RECEIVED, and for the purpose of furnishing
additional security, the undersigned, WAYCROSS AND WARE COUNTY
DEVELOPMENT AUTHORITY, does hereby transfer, sell assign unto THE
PATTERSON BANK, a banking corporation with offices and place of
business in the City of Waycross, Georgia, that certain Contract
of Lease and Rent (hereinafter called Lease) made and entered into
on the 30th day of December, 1993 by and between Waycross and Ware
County Development Authority, a public corporation, and General
Manufactured Housing, Inc., a Georgia corporation with offices in
Ware County, Georgia. It is agreed and understood that Waycross
and Ware County Development Authority, unless and until there is a
default under the Security Deed from Waycross and Ware County
Development Authority to The Patterson Bank executed
contemporaneously herewith, that The Patterson Bank will collect
all rents provided for in said Lease, and will enforce all of the
terms and provisions of said Lease insofar as they relate to
performance by Lessee.
In the event of default under the Security Deed to The
Patterson Bank, said Bank is hereby, authorized to collect all
rents and to exercise any and all rights of the undersigned as
Lessor in and to said Lease and to enforce all provisions as
contained in said Lease.
In the event and upon payment of the indebtedness of
this undersigned to the Bank for which indebtedness this
assignment is made, the Bank, its successors and assigns, will
surrender this Lease and reassign same to Waycross and Ware County
Development Authority, its successors and assigns.
<PAGE>
IN WITNESS WHEREOF, Waycross and Ware County Development
Authority has hereunto subscribed its corporate name and affixed
its corporate seal by and through its Chairman with the
attestation by the Secretary, who are the authorized officers, on
this the 30th day of December, 1993.
WAYCROSS AND WARE COUNTY
DEVELOPMENT AUTHORITY
BY: /s/ [illegible] (SEAL)
CHAIRMAN
ATTEST: /s/ [illegible] (SEAL)
SECRETARY
Signed, sealed and delivered
in the presence of:
/s/ [illegible]
WITNESS
/s/ [illegible]
NOTARY PUBLIC (SEAL)
My commission expires: July 26, 1997
[stamped]
<PAGE>
EXHIBIT 10.3
LEASE AGREEMENT
This Lease is made and executed effective this 10th day of
October, 1995, by and between WAYCROSS AND WARE COUNTY DEVELOPMENT
AUTHORITY, a body politic organized and existing under the laws of the
State of Georgia, having its principal office in Ware County, Georgia,
referred to as Lessor, and HI-TECH PROPERTIES, INC., a corporation
organized and existing under the laws of the State of Georgia, having
its principal office in Ware County, Georgia, referred to as Lessee.
The parties agree as follows:
SECTION ONE DEMISE AND TERM
Lessor leases to Lessee the real property in the County of
Ware, State of Georgia, described in Exhibit A attached to and made a
part of this Lease Agreement (sometimes called the "demised
premises"), to have and to hold for a term of ten (10) years
commencing on the date of this Lease Agreement.
SECTION TWO RENT
Lessee shall pay Lessor rent for the demised premises as
follows:
A. For the period ending ten (10) years from the date
of this Lease Agreement, the sum of One Dollar ($1.00) per year.
B. Lessee shall pay Lessor a portion of the amount of ad
valorem taxes that would have been assessed against the property
identified in Exhibit A for each year if said property were subject to
ad valorem taxes. For the 1996 tax year, the Lessee shall pay to the
Lessor one-fifteenth (1/15th) of the 1996 amount. For the 1997 tax
year and for each year thereafter, the amount to be paid to the Lessee
pursuant to this subparagraph shall be determined by adding one-
fifteenth (1/15th) to the fraction used for the previous year,
multiplied by the taxes that
<PAGE>
would have been assessed against the property for that year if it were
subject to ad valorem taxes; provided, however, that the sums to be
paid pursuant to this subparagraph in any year shall never exceed one
hundred percent (100%) of the tax amount for that year.
SECTION THREE WARRANTIES OF TITLE
AND QUIET ENJOYMENT; SUBLEASE
Lessor covenants that Lessor is seized of the real property
in fee simple and has full right to make this Lease Agreement and that
Lessee shall have quiet and peaceable possession of the demised
premises during the term of this Lease Agreement. This Lease may not
be assigned by the Lessee or sublet by the Lessee without the prior
written consent of the Lessor.
SECTION FOUR
USE OF PREMISES
The demised premises shall be used in connection with
the industrial operation of the Lessee.
SECTION FIVE
CONSTRUCTION OFIMPROVEMENTS
On delivery of possession of the demised premises to Lessee,
the Lessee shall have the right to remove the fence presently located
on the demised premises. The Lessee shall also have the right to place
moveable buildings on the premises but no other right to construct or
improve the premises shall exist except without the written consent of
the Lessor. All buildings or other improvements placed upon the
premises by the Lessee shall be removed by the Lessee upon termination
of this Lease.
SECTION SIX
COMPLIANCE WITH LAWS; PROHIBITION AGAINST WASTE
During the term of this Lease Agreement, Lessee shall
comply with all applicable laws affecting the demised premises.
<PAGE>
SECTION SEVEN
UTILITIES
All water, gas, electricity, telephone, and other
public utility services used on or furnished to the demised
premises during the term of this Lease Agreement shall be paid
for by Lessee.
SECTION EIGHT
LIENS
Lessee shall keep the fee estate of the demised premises
free and clear from all mechanics' and material suppliers' and other
liens for work or labor done.
SECTION NINE
INDEMNIFICATION OF LESSOR
Lessor shall not be liable for any loss, injury, death, or
damage to persons or property which at any time may be suffered or
sustained by Lessee or by any person who may at any time be using or
occupying or visiting the demised premises. Lessee shall indemnify
Lessor against any and all claims, liability, loss, or damage on
account of any such loss, injury, death, or damage.
SECTION TEN
PROHIBITION OF INVOLUNTARY ASSIGNMENT
Neither this Lease Agreement nor the leasehold estate of
Lessee nor any interest of Lessee under this Lease Agreement in the
demised premises or any buildings or improvements on the demised
premises shall be subject to involuntary assignment, transfer, or
sale, or to assignment, transfer, or sale by operation of law in any
manner (except through a statutory merger or consolidation, or devise,
or intestate succession) and any attempted involuntary assignment,
transfer, or sale shall be void and of no effect.
SECTION ELEVEN
PARTIES BOUND
<PAGE>
This Lease Agreement shall be binding on and shall inure to
the benefit of and shall apply to the respective successors and
assigns of Lessor and Lessee. All reference in this Lease Agreement to
"Lessor" or "Lessee" shall be deemed to refer to and include
successors and assigns of Lessor or Lessee without specific mention of
such successors or assigns.
SECTION TWELVE
DEFAULT
A. Lessee is leasing from Tim-Bar Corporation property
located immediately east of and adjoining the demised premises. Said
premises are being leased for the purpose of manufacturing mobile
homes and providing jobs. If the Lease with Tim-Bar Corporation should
terminate during the term of this Lease, then, at Lessor's option,
this Lease shall also terminate.
B. If Lessee should cease manufacturing operations on the
adjoining property leased from Tim-Bar Corporation for a period of not
less than ninety (90) days, then Lessor shall have the right and
option to terminate this Lease upon giving Lessee thirty (30) days
advance notice thereof. If Lessee should recommence manufacturing
operations within said thirty (30) day period, then the Lease shall
not be terminated.
C. Lessor's rights in the event of Lessee's default. If
Lessee shall fail or neglect to observe, keep, or perform any of the
covenants, terms, or conditions contained in this Lease Agreement on
its part to be observed, kept, or performed, and the default shall
continue for a period of thirty (30) days after written notice from
Lessor setting forth the nature of Lessee's default, then and in any
such event, Lessor shall have the right at its option, on written
notice to Lessee, to terminate this Lease Agreement and all rights of
Lessee under this Lease
<PAGE>
Agreement shall then cease.
SECTION THIRTEEN
TERMINATION OF LEASE
A. The Lessor shall have the right to terminate this Lease
in the event that the Lessor decides to sell or develop the property
which is the subject of this Lease as identified in Exhibit A, and in
the event that the Lessee does not exercise its option to purchase as
set forth therein. This Lease shall terminate on the ninetieth (90th)
day after the Lessee has received notice by the Lessor of the Lessor's
intention to sell or develop said property unless the Lessee exercises
its option to purchase.
B. The Lessee shall have the right by notice to the Lessor
to terminate this Lease Agreement and surrender its leasehold interest
effective on the date given in the notice. On such effective date,
Lessee shall be relieved from all further liability under the Lease
and shall deliver possession of the demised premises to the Lessor.
SECTION FOURTEEN
NOTICES
A. All notices, demands, or other writings in this Lease
Agreement provided to be given or made or sent, or which may be given
or made or sent, by either party to the other, shall be deemed to have
been dully given or made or sent when made in writing and deposited in
the United States mail, registered and postage prepaid, and addressed
as follows:
TO LESSOR: 200 Lee Avenue Waycross, Georgia
31501
TO LESSEE: 2255 Industrial Boulevard Waycross,
Georgia 31501
B. The address to which any notice, demand, or other
writing may be given or made or sent to any party as above
<PAGE>
provided may be changed by written notice given by the party as
above provided.
SECTION FIFTEEN
RIGHT TO PURCHASE
If Lessor should decide to sell or develop the demised
premises identified in Exhibit A, Lessor shall give to the Lessee a
thirty (30) day option to purchase said property at a purchase price
of Five Thousand and 00/100 ($5,000.00) Dollars per acre. Said option
shall terminate upon the thirtieth (30th) day after notice to the
Lessee by the Lessor of the Lessor's intention to sell or develop the
demised premises.
SECTION SIXTEEN
WAIVER
A waiver by Lessor of any breach of any covenant or duty of
Lessee under this Lease is not a waiver of a breach of any other
covenant or duty of Lessee, or of any subsequent breach of the same
covenant or duty.
SECTION SEVENTEEN
TIME OF THE ESSENCE
Time is of the essence of this Lease Agreement and all
of its provisions.
SECTION EIGHTEEN
GOVERNING LAW
It is agreed that this Lease Agreement shall be
governed by, construed, and enforced in accordance with the laws
of the State of Georgia.
SECTION NINETEEN
PARAGRAPH HEADINGS
The titles to the paragraphs of this Lease Agreement
are solely for the convenience of the parties and shall not be
used to explain, modify, simplify, or aid in the interpretation
of the provisions of this Lease Agreement.
<PAGE>
SECTION TWENTY
ENTIRE AGREEMENT
This Agreement shall constitute the entire Agreement
between the parties. Any prior understanding or representation
of any kind preceding the date of this Agreement shall not be
binding upon either party except to the extent incorporated in
this Agreement.
SECTION TWENTY-ONE
MODIFICATION OF AGREEMENT
Any modification of this Agreement or additional
obligation assumed by either party in connection with this
Agreement shall be binding only if evidenced in writing signed by
each party or an authorized representative of each party.
<PAGE>
IN WITNESS WHEREOF, each party to this Lease Agreement
has caused it to be executed on the date indicated above.
WAYCROSS AND WARE COUNTY DEVELOPMENT
AUTHORITY (SEAL)
LESSOR
BY: /s/ [illegible] ------------
TITLE: Chairman
ATTEST:
BY: /s/ David Moon ------------
TITLE: Secretary Signed,
sealed and delivered
in the presence of:
/s/ [illegible] Tucker
-------------------------------
WITNESS
/s/ Phyllis [illegible]
-------------------------------
NOTARY PUBLIC (SEAL)
MY COMMISSION EXPIRES: 6/28/97
HI-TECH PROPERTIES, INC. LESSEE
(SEAL)
BY: /s/ [illegible]
TITLE: Chairman
<PAGE>
ATTEST:
BY: /s/ Shelby Griffin
TITLE: Secretary
Signed, sealed and
delivered
in the presence of:
/s/ Barbara Johnson
------------------------------
WITNESS
/s/ Phyllis [illegible]
------------------------------
NOTARY PUBLIC (SEAL)
MY COMMISSION EXPIRES: 6/28/97
<PAGE>
Exhibit A
All that tract or parcel of land being 8.10 acres in Land Lot 124 of
the 8th Land District of Ware County, Georgia, as shown on that plat
of Franklin Miles, Registered Land Surveyor, dated April 20, 1995,
a copy of which is attached hereto and made a part hereof by
reference, and to which plat reference is made hereby for a more
specific and detailed description as to metes and bounds, courses
and distances.
<PAGE>
[Attached to Exhibit A is a map of 8.10 acres located in land lot
124 in the 8th Land District of Ware County, Georgia.]
<PAGE>
EXHIBIT 10.4
SUBLEASE AGREEMENT
This sublease agreement is made and executed effective October 10,
1995, by and between HI-TECH PROPERTIES, INC., a corporation organized and
existing under the laws of the State of Georgia, with its principal office
in the County of Ware, State of Georgia,referred to as "Sublessor," and
GENERAL MANUFACTURES HOUSING, INC., a corporation organized and
existing under the laws of the State of Georgia, with its principal office
at 2255 Industrial Boulevard, City of Waycross, County of Ware, State of
Georgia, referred to as "Sublessee. "
RECITALS
The parties recite and declare:
A. Sublessor entered into a Lease Agreement with Waycross and Ware
County Development Authority (the "Lessor") dated October 10, 1995, a copy
of which is attached hereto as Exhibit "A" (the "Master Lease Agreement"),
for certain unimproved real estate (the "Premises") located in the County
of Ware, State of Georgia, being more particularly described in the Master
Lease Agreement.
B. Sublessor desires to sublease the Premises to Sublessee and
Sublessee desires to sublease the Premises from Sublessor subject to the
terms and provisions of this Sublease Agreement.
In consideration of the above recitals, the terms and covenants of
this Sublease Agreement, and other valuable consideration, the receipt of
which is acknowledged, the parties agree as follows:
SECTION ONE
GRANT
Sublessor hereby subleases the Premises to Sublessee and Sublessee
hereby leases the Premises subject to the terms and conditions of this
Sublease Agreement.
SECTION TWO
PROVISIONS CONSTITUTING SUBLEASE
A. This Sublease Agreement is subject to all of the terms and
conditions of the Master Lease Agreement, except as set forth in this
Sublease Agreement.
B. Sublessee hereby assumes all the obligations of the Sublessor
under the Master Lease Agreement and Sublessor hereby grants to the
Sublessee all of the rights and privileges under the Master Lease
Agreement.
C. Neither Sublessor nor Sublessee shall commit or permit to be
committed on the Premises any act or omission that shall violate any term
or condition of the Master Lease Agreement or breach the terms of the
Master Lease Agreement or cause the Master Lease Agreement to be
terminated.
D. Sublessee shall indemnify and hold Sublessor harmless against
any and all claims, liability, loss or damage on account of any loss,
injury, death or damage to persons or property which at any time may be
<PAGE>
suffered or sustained by Sublessor or by any person who may at any time be
using or occupying or visiting the Premises, including, but not limited
to, any claim, liability, loss or damage incurred by Sublessor resulting
from the violation by Sublessee of any state, federal or local
environmental law, rule, order or regulation, and also including any
claim, liability, loss or damage which arises out of Sublessor's
obligation to indemnify Lessor under the provisions of Section Nine of the
Master Lease Agreement.
SECTION THREE
TERM AND POSSESSION
A. The term of this Sublease Agreement shall commence on October
10, 1995, and shall terminate on the earlier of (1) October 9, 2005, or
(2) the date of termination of the Master Lease Agreement.
B. Sublessee shall be given possession of the Premises effective
October 10, 1995.
C. The termination of this Sublease Agreement shall not affect or
impair any right of the Sublessor arising prior to or as a result of such
termination, or relieve Sublessee of any obligations under this Sublease
Agreement arising out of acts which occurred prior to such termination,
including but not limited to the obligations of Sublessee under the
indemnification provisions of Section Two.D.
SECTION FOUR
RENT
Sublessee shall pay the following amounts to Lessor under the Master
Lease Agreement as rent for the Premises:
(a) the sum of One Dollar ($1.00) per year during the term of
this Sublease Agreement; and
(b) the amount calculated by reference to the ad valorem tax
amount as set forth in Section Two.B. of the Master Lease Agreement.
Such amount shall be payable without deduction, offset, prior notice or
demand, in lawful money of the United States.
SECTION FIVE
USE
The Premises shall be used by Sublessee in connection with the
manufacture of manufactured housing by Sublessee and all purposes
authorized under the Master Lease Agreement.
SECTION SIX
CONDITION OF THE PREMISES
Sublessee accepts the Premises in their condition as of the date of
this Sublease Agreement and shall deliver them to Sublessor in the same
condition, normal wear and tear excepted, at the expiration of this
Sublease Agreement.
SECTION SEVEN
REPRESENTATIONS OR WARRANTIES
Sublessee acknowledges that neither Sublessor nor Sublessor's agents
<PAGE>
have made any representations or warranties as to the suitability of the
Premises for the conduct of Sublessee's business.
SECTION EIGHT
INSURANCE
Sublessee shall acquire and keep in force comprehensive general
liability insurance, including contractual liability insurance, covering
this Sublease Agreement or any liability arising out of Sublessor's
interest as sublessor of the Premises or Sublessee's use, occupancy or
maintenance of the Premises and all areas appurtenant to the Premises, in
such amounts and limits as may be mutually agreed upon between the
parties. Sublessee shall name Sublessor as an additional insured under
such insurance policy and shall provide a certificate of insurance or an
authenticated duplicate of its policy to Sublessor on request.
SECTION NINE
EFFECT OF PARTIAL INVALIDITY
The invalidity of any part of this Sublease Agreement will not and
shall not be deemed to affect the validity of any other part. In the
event that any provision of this Sublease Agreement is held to be invalid,
the parties agree that the remaining provisions shall be deemed to be in
full force and effect as if they had been executed by both parties
subsequent to the expungement of the invalid provision.
SECTION TEN
PARAGRAPH HEADINGS
The titles to the paragraphs of this Sublease Agreement are solely
for the convenience of the parties and shall not be used to explain,
modify, simplify or aid in the interpretation of the provisions of this
Sublease Agreement.
SECTION ELEVEN
NOTICES
A. All notices, demands or other writings in this Sublease
Agreement provided to be given or made or sent, or which may be given or
made or sent by either party to the other, shall be deemed to have been
fully given or made or sent when made in writing and deposited in the
United States mail, registered and postage prepaid, and addressed as
follows:
TO SUBLESSOR: HI-TECH PROPERTIES, INC.
2255 INDUSTRIAL BOULEVARD
WAYCROSS, GEORGIA 31503
TO SUBLESSEE: GENERAL MANUFACTURED HOUSING, INC.
2255 INDUSTRIAL BOULEVARD
WAYCROSS, GEORGIA 31503
B. The address to which any notice, demand or other writing may be
given or made or sent to any party as above-provided may be changed by
written notice given by the party as above provided.
SECTION TWELVE
NONDISTURBANCE
This Sublease Agreement shall not be effective until the Lessor under
<PAGE>
the Master Lease Agreement has given its written consent to the terms and
conditions of this Sublease Agreement.
SECTION THIRTEEN
GOVERNING LAW
It is agreed that this Sublease Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of
Georgia.
SECTION FOURTEEN
ENTIRE AGREEMENT
This Sublease Agreement shall constitute the entire agreement between
the parties. Any prior understanding or representation of any kind
preceding the date of this Sublease Agreement shall not be binding upon
either party except to the extent incorporated in this Sublease Agreement.
SECTION FIFTEEN
MODIFICATION OF AGREEMENT; SUBLEASE
Any modification of this Sublease Agreement or additional obligation
assumed by either party in connection with this agreement shall be binding
only if evidenced in writing signed by each party or an authorized
representative of each party. This Sublease Agreement and the rights and
obligations of the Sublessee hereunder may not be assigned or sublet by
the Sublessee without the prior written consent of the Sublessor. No
assignment or sublet shall in any way relieve Sublessee of any obligation
under this Sublease Agreement, including, but not limited to, the
indemnification provisions of Section Two.D.
SECTION SIXTEEN
COUNTERPARTS
This Sublease Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute but one and the same instrument.
<PAGE>
In witness whereof, each party to this Sublease Agreement has caused
it to be executed at Waycross, Georgia, effective on the date indicated
above.
Signed, sealed and delivered HI-TECH PROPERTIES, INC.
in the presence of:
s/ L. Kinder Cannon III BY: s/ Drew E. Scott
WITNESS TITLE: Drew E. Scott, President
s/ Shelby Jean Griffin ATTEST: s/ Shelby Griffin
NOTARY PUBLIC
(SEAL)
MY COMMISSION EXPIRES: Nov.17,1997 BY: s/ Shelby Griffin
TITLE: Shelby Griffin, Sec/Treasurer
Stamped
<PAGE>
Signed, sealed and delivered GENERAL MANUFACTURED HOUSING, INC.
in the presence of:
s/ L. Kinder Cannon III BY: s/SamuelP. Scott
WITNESS TITLE: Samuel P. Scott, Chairman
s/ Shelby Jean Griffin ATTEST:
NOTARY PUBLIC
(SEAL)
MY COMMISSION EXPIRES: Nov. 17, 1997 BY: s/ J. Wayne Roberts
Stamped TITLE: J. Wayne Roberts,
Sec/Treasurer
<PAGE>
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as
of December 21, 1995, by and between GMH ACQUISITION CORP., a
Delaware corporation with an office at P.O. Box 1449, Waycross,
Georgia 31502-1449 (the "Company") and SAMUEL P. SCOTT, currently
residing at 4300 South Fletcher Avenue, Fernandina Beach, Florida
32034(the "Executive").
The parties hereto, intending to be legally bound hereby,
and in consideration of the mutual covenants herein contained,
agree as follows:
1. Employment.
1.1 The Company employs the Executive, and the
Executive accepts such employment (the "Employment"), as Chief
Executive Officer of the Company. The Executive agrees to accept
the employment and agrees to remain in the employ of the Company
during the Employment Term (as defined in Section 2 hereof) and
any extensions thereof and to perform such lawful duties as are
from time to time assigned to him by the Board of Directors of
the Company (the "Board") and which are normally associated with
the position of Chief Executive Officer in the manufactured
housing industry and generally consistent with past practices of
the Company.
1.2 During the Employment Term and any extensions
thereof, the Executive will devote his best efforts and full
business time, skill and attention to the performance of his
duties on behalf of the Company.
2. Term of Employment. Subject to the provisions of
Section 6 hereof, the term of the Executive's employment
hereunder shall be from the date hereof until December 31, 2000
(the "Employment Term").
3. Compensation.
3.1 The Company agrees to pay, and the Executive
agrees to accept, as base compensation for all services to be
rendered by the Executive in any capacity to the Company or its
affiliates during the Employment Term, a salary of $300,000 per
annum, subject to such deductions and withholdings as may be
required by law or by further agreement with the Executive (the
"Base Salary"), payable in arrears in equal bi-weekly
installments. The Base Salary may be increased from time to time
in the discretion of the Board. Any such increases shall be
added to the Base Salary then being paid to the Executive, and
the sum thereof shall then become the Base Salary for each
successive year, until further adjusted in accordance with the
provisions of this Section 3.1.
3.2 In addition to the Base Salary, the Executive
shall participate in the Company's Executive Bonus Plan, a copy
of which is attached hereto as Exhibit 1, (the "Plan") subject to
the terms and conditions of the Plan. The Executive's
"Participant Percentage" under the Plan will never be less than
20% of the "Bonus Pool" (as such terms are defined in the Plan).
<PAGE>
The Company will award not less than a $100,000 incentive award
to the Executive for the 1996 Plan Year regardless of the size of
the Bonus Pool.
3.3 The Company shall reimburse the Executive for all
reasonable and necessary expenses incurred by the Executive in
connection with the Employment, including without limitation,
travel and lodging expenses and charges incurred on a Company
credit card for business entertainment. Such expenses shall be
reimbursed to the Executive by the Company after the Executive's
submittal of an invoice to the Company with respect to the
reimbursable expenses incurred by him. All invoices for
reimbursable expenses shall include adequate supporting
documentation of the expenses incurred by the Executive,
including receipts.
4. Additional Benefits. During the Employment Term,
the Company shall provide the following additional benefits to
the Executive:
4.1 The Executive shall be entitled to paid vacation
during each calendar year in such amounts and at such times as
the Executive in his sole discretion, shall determine consistent
with past practice and in accordance with the Executive's
obligations under this Agreement.
4.2 The Company shall provide the Executive with
health, medical and hospitalization insurance benefits equal to
those provided by the Company to other executive officers of the
Company. In addition, the Executive shall be permitted, if and
to the extent eligible, to participate in any pension plan or
other "fringe benefits" of the Company, which may be available
generally to other executive officers of the Company.
4.3 So long as the Company shall own or lease on
an exclusive basis an airplane, the Executive or his family
members shall be entitled to personal use thereof, subject to the
business requirements of the Company, at the rate of ten (10)
hours of flying time per month on a cumulative basis. The
Executive shall be deemed to have received additional
compensation in the amount of $175.00 for each such hour of
actual personal use of such Company airplane.
4.4 To defray the expenses of operating his
personal automobile in connection with the performance of his
duties hereunder, the Executive shall be entitled to an
automobile allowance in the amount of $500.00 per month.
4.5 The Company shall maintain during the term of
this Agreement and pay all premiums on that certain key-man,
split-dollar life insurance presently in force (or a substitute
policy of comparable quality) insuring the life of the Executive
and carrying a death benefit of not less than $600,000. The
beneficiary(ies) of such life insurance shall be designated by
the Executive.
4.6 The Company shall obtain, maintain throughout
the term of this Agreement and pay all premiums on a policy or
policies of disability insurance covering the Executive for the
lesser of (a) the maximum amount permitted by law and (b)
<PAGE>
$300,000 per annum, payable to not less than age 70, reasonably
obtainable under the circumstances. Such policy or policies of
disability insurance shall provide for commencement of benefits
payable thereunder immediately following any termination of the
Executive's employment pursuant to Section 6.5 hereof.
4.7 During the term of this Agreement, the
Executive or his designee(s) shall be entitled to the exclusive
use and enjoyment of the six (6) season tickets to the
Jacksonville Jaguars NFL football games. Additionally, upon
termination of this Agreement, the Company shall sell and assign
to Executive all remaining tickets for the balance of the then
current season and all rights and/or licenses to purchase such
season tickets in the future, all at the face value thereof.
4.8 The Executive shall have the right, in his
sole discretion, to designate the recipients of any and all
incentive travel and other benefits awarded by suppliers of the
Company for the year 1995.
5. Insurance. In addition to any insurance coverage
provided for in Section 4 hereof, the Company may, in its
discretion, purchase or renew insurance on the life of the
Executive, with the Company or a lender of the Company as
beneficiary in an amount determined by the Company or such lender
from time to time. The Executive agrees to submit to medical
examinations and otherwise to cooperate with the Company and any
such lender in connection with obtaining such insurance.
6. Termination.
6.1 In the event the Executive's employment is
terminated for "Cause", the Executive shall have no further
rights under this Agreement, except the right to receive the Base
Salary up to the date of termination by the Company of the
Executive's employment hereunder. The decision to terminate the
Executive under this Section 6.1 shall be made by the Board. The
term "Cause" shall mean any of the following: (a) any deliberate
or intentional act or omission by the Executive with the intent
of causing damage to the Company's relationships with its
lenders, suppliers or customers; (b) any fraud, misappropriation
or embezzlement by the Executive involving properties, assets or
funds of the Company; (c) a conviction of the Executive, or plea
of nolo contendere by the Executive, to any crime or offense
involving monies or other property of the Company or any other
felony or criminal act involving moral turpitude; (d) any
usurpation by the Executive of a corporate opportunity of the
Company or the Executive's willful and continual neglect of or
willful and continual failure to perform any of his material
duties, responsibilities or obligations as an employee of the
Company, but only after notice of such usurpation, neglect or
failure is delivered to the Executive and the Executive fails or
refuses to remedy such usurpation, neglect or failure to the
reasonable satisfaction of the Board within thirty (30) days
after the receipt of such notice; provided, that any action or
omission taken by the Executive in good faith and in the
reasonable belief that such action or omission was in the best
interests of the Company shall not constitute "Cause"; or (e) the
violation by the Executive of Section 7 of this Agreement or of
any other non-competition agreement or covenant binding upon the
<PAGE>
Executive.
6.2 In the event the Executive's employment is
terminated without "Cause", the Executive shall have no further
rights under this Agreement except the right to receive (a) the
Base Salary for the balance of the term of this Agreement,
payable in arrears, in bi-weekly installments, (b) any amounts
due in accordance with the terms of the Plan, (c) all benefits
under Section 4.1 hereof which have accrued as of the date of
termination and (d) uninterrupted continuation of all rights and
benefits accorded the Executive under Sections 4.2, 4.5 and 4.6
hereof for the duration of this Agreement. Additionally, upon
termination by the Company of the Executive's employment without
"Cause", the Executive and the other participants in the
Incentive Compensation Plan shall be entitled to immediate
payment of their respective shares of an amount equal to the
difference between $4,000,000 and the aggregate amount of
payments theretofore made to the Executive and the other
participants pursuant to such Plan or set off pursuant to Section
15(i) of the Stock Purchase Agreement dated as of October 10,
1995 by and among the Company, the Executive and certain other
parties thereto, as amended from time to time.
6.3 In the event of the Executive's death during the
Employment Term, the Employment Term shall terminate
automatically as of the date of the Executive's death, and the
Executive's executor, administrator or other legal representative
shall have no further rights hereunder, except the right to
receive (a) the Base Salary up to the date of the Executive's
death and (b) any amounts due under the Plan.
6.4 If for any reason (other than pursuant to Section
6.3 or 6.5), the Executive resigns from his employment hereunder,
this Agreement shall terminate automatically, and the Executive
shall have no further rights hereunder, except the right to
receive the Base Salary up to the date of the Executive's
resignation.
6.5 If, by reason of any illness, disability or
incapacity, the Executive is unable to perform his duties under
this Agreement for a period of six (6) consecutive months (or
shorter periods aggregating to nine (9) months in any twelve (12)
month period) ("Disability"), the Company may terminate the
Employment Term as of the last day of such six (6) or nine (9)
month period, as the case may be, or as of such other day
thereafter, provided the Executive remains unable to perform his
duties hereunder. The Executive or his legal representative, if
one is appointed, shall be entitled to receive, within sixty (60)
days after the date of such termination, any amounts payable to
the Executive pursuant to this Agreement up to the date of
termination of this Agreement. Notwithstanding the foregoing, if
the Executive suffers a Disability and his employment hereunder
is not terminated, the Executive shall be entitled to receive any
amounts owing to him hereunder, less any disability insurance
payments which Executive receives pursuant to disability
insurance provided by the Company hereunder.
6.6 Upon the termination of the Executive's
employment pursuant to this Section 6, the Executive shall have
no further rights under this Agreement except as expressly
<PAGE>
provided in this Section 6.
7. Non-Competition, Non-Interference and Non-Disclosure.
7.1 The Executive acknowledges that: (a) the
business of producing and distributing at wholesale, manufactured
housing, currently conducted and as conducted from time to time
throughout the term of this Agreement (collectively, the
"Business") is conducted by and is proposed to be conducted by
the Company throughout the states of Florida, Georgia, South
Carolina, North Carolina, Virginia, West Virginia, Alabama,
Mississippi, Louisiana, Kentucky and Tennessee (the "Company's
Market"); (b) the Business involves the identification and
development of new products and markets relating to the
production and distribution at wholesale of manufactured housing;
(c) the Company has developed trade secrets and confidential
information concerning the Business; and (d) the agreements and
covenants contained in this Section 7 are essential to protect
the Business of the Company. In order to induce the Company to
enter into this Employment Agreement, the Executive covenants and
agrees that:
7.2 For a period commencing on the date of this
Agreement and ending (a) on the date that the Executive's
employment is terminated without Cause, or (b) in the case of the
expiration of this Agreement or the Executive's voluntary
resignation or termination with Cause, on the date which is two
years following such expiration, resignation or termination of
this Agreement, neither the Executive nor any entity of which 5%
or more of the beneficial ownership is held by the Executive or a
related family member ("Controlled Entity") will, anywhere in the
Company's Market, directly or indirectly own, manage, operate,
control, invest or acquire an interest in, or otherwise engage or
participate in, whether as a proprietor, partner, stockholder,
director, officer, "Key Employee" (defined herein to include any
person who is employed in a management, executive, supervisory,
marketing or sales capacity for another person), joint venturer,
investor or other participant, any business which competes with
the Business ("Competitive Business") without regard to
(i) whether the Competitive Business has its office,
manufacturing or other business facilities within or without the
Company's Market, (ii) whether any of the activities of the
Executive referred to above occur or are performed within or
without the Company's Market or (iii) whether the Executive
resides, or reports to an office, within or without the Company's
Market.
7.3 During the period commencing on the date of
this Agreement and ending on the date which is two years
following the expiration or termination of this Agreement,
whether by resignation, termination with or without Cause, or
otherwise (the "Restricted Period"), neither the Executive nor
any Controlled Entity will directly or indirectly solicit, induce
or influence any customer, supplier, lender, lessor or any other
person which has a business relationship with the Company, or
which had on the date of this Agreement, a business relationship
with the Company, to discontinue or reduce the extent of such
relationship with the Company.
7.4 During the Restricted Period, neither the
<PAGE>
Executive nor any Controlled Entity will directly or indirectly
recruit, solicit or otherwise induce or influence any employee or
sales agent of the Company or any of its affiliates to
discontinue such employment or agency relationship with the
Company. During the Restricted Period, neither the Executive nor
any Controlled Entity will employ or seek to employ, or cause or
induce any Competitive Business to employ or seek to employ for
any Competitive Business, any person who is then (or was at any
time within six months prior to the date the Executive or the
Competitive Business employs or seeks to employ such person)
employed by the Company. Nothing herein shall prevent the
Executive from providing a letter of recommendation to an
Employee with respect to a future employment opportunity.
7.5 During the Restricted Period and thereafter,
neither the Executive nor any Controlled Entity will directly or
indirectly disclose to anyone, or use or otherwise exploit for
the Executive's or any Controlled Entity's own benefit or for the
benefit of anyone other than the Company, any confidential
information, including, without limitation, any confidential
"know-how", trade secrets, customer lists, details of client or
consultant contracts, pricing policies, operational methods,
marketing plans or strategies, product development techniques or
plans, computer software, business acquisition plans and new
personnel acquisition plans of the Company related to the
Business or any portion or phase of any scientific or technical
information, design, process, procedure, formula or improvement
of the Company that is valuable and not generally known to the
competitors of the Company whether or not in written or tangible
form (hereinafter referred to as "Confidential Information").
The term "Confidential Information" does not include, and there
shall be no obligation hereunder with respect to, (a) information
that becomes generally available to the public other than as a
result of a disclosure by the Executive or a Controlled Entity or
any agent or other representative thereof and (b) general
business methods applicable to a sales business including, but
not limited to, pricing policies, operational methods and
marketing concepts. Neither the Executive nor any Controlled
Entity shall have any obligation hereunder to keep confidential
any Confidential Information to the extent disclosure of any
thereof is required by law, or determined in good faith by the
Executive to be necessary or appropriate to comply with any legal
or regulatory order, regulation or requirement; provided,
however, that in the event disclosure is required by law, the
Executive or the Controlled Entity concerned shall provide the
Company with prompt notice of such requirement so that the
Company may seek an appropriate protective order.
7.6 In the event the termination or expiration of
this Agreement, the covenants and agreements contained in this
Section 7 shall survive, shall continue thereafter, and shall not
expire unless and except as expressly set forth in such Sections.
7.7 The parties to this Agreement agree that
(a) if either the Executive or any Controlled Entity breaches any
provision of this Section 7, the damage to the Company will be
substantial, although difficult to ascertain, and money damages
will not afford the Company an adequate remedy, and (b) if either
the Executive or any Controlled Entity is in breach of this
Agreement, or threatens a breach of this Agreement, the Company
<PAGE>
shall be entitled, in addition to all other rights and remedies
as may be available to the Company at law or in equity, to
(i) specific performance, (ii) injunctive and other equitable
relief to prevent or restrain a breach of this Agreement and
(iii) require the breaching party to account for and pay over to
the Company all compensation, profits, monies, accruals or other
benefits derived or received by such party as the result of any
transactions constituting a breach hereof.
7.8 If any court determines that any provision of
this Section 7 is unenforceable because of the duration or
geographic scope of such provision, such court shall have the
power to reduce the scope or duration of such provision, as the
case may be, and, in its reduced form, such provision shall then
be enforceable.
7.9 Notwithstanding anything to the contrary
contained herein, a continuation of the Executive's present
twenty percent (20%) equity interest in Sweetwater Homes, Inc.
("Sweetwater"), a current competitor of the Company, shall not be
deemed a violation or breach of any of the provisions of this
Section 7, so long as the Executive does not, from and after the
date of this Agreement, directly or indirectly: (i) increase his
equity interest in Sweetwater; (ii) serve as an officer, director
or employee of, or consultant to Sweetwater; or (iii) otherwise
assist Sweetwater in any aspect of its operations.
8. Additional Covenants of Company.
(a) If at any time during the term of this
Agreement, the Company shall decide to sell the airplane hangar
owned by it on the date hereof, to the extent permitted to do so,
the Company shall first offer such property for sale to the
Executive and provide for the Executive's assumption of the
Company's obligations under the ground lease relating thereto at
such purchase price and on such terms as the Company shall deem
reasonable under the circumstances. The Executive shall have
fifteen (15) business days in which to exercise his purchase
option and an additional thirty (30) days in which to consummate
the purchase transaction should he elect to purchase such
property. If the Executive fails or refuses to exercise his
purchase option within the prescribed 15-day period, the Company
may offer such property for sale to any third party at a price
and on terms no more favorable to the prospective purchaser than
those offered to the Executive.
(b) If at any time during the term of this Agreement, the
Company shall decide not to exercise one or both of the purchase options
that are included in the leases in existence on the date hereof covering
the Company's Plants No. 4 (and the vacant land adjacent thereto) and 5,
respectively (the "Purchase Options"), prior to the expiration of the Purchase
Options, the Company shall permit the Executive to purchase such
properties, subject to the leasehold interest in favor of the
Company, pursuant to the terms and conditions of the Purchase
Options as if the Company were exercising such Purchase Options.
9. Headings. The section headings of this Agreement
are for convenience of reference only and are not to be
considered in the interpretation of the terms and conditions of
this Agreement.
<PAGE>
10. Notices. All notices and other communications
required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given (a) when
delivered personally, (b) if sent by telecopy, when receipt
thereof is acknowledged at the telecopy number below, (c) the day
following the day on which the same has been delivered prepaid
for overnight delivery to a national air courier service or (d)
three business days following deposit in the United States Mail,
registered or certified, postage prepaid, in each case,
addressed as follows:
If to the Company: GMH Acquisition Corp.
P.O. Box 1449
Waycross, Georgia 31502-1449
Attn: Gary M. Brost
Telecopy: 912-285-1397
with copies to: Strategic Investments &
Holdings, Inc.
369 Franklin Street
Buffalo, New York 14202
Attn: Gary M. Brost
Telecopy: 716-857-6490
Nixon, Hargrave, Devans & Doyle LLP
1600 Main Place Tower
Buffalo, New York 14202
Attn: Charles P. Jacobs, Esq.
Telecopy: 716-853-8109
If to the
Executive: Samuel P. Scott
4300 South Fletcher Avenue
Fernandina Beach, Florida 32034
with a copy to: Holland & Knight
50 North Laura Street
Jacksonville, Florida 32202
Attn: L. Kinder Cannon, III, Esq.
Telecopy: 904-358-1872
Any party may change the persons and address to which
notices or other communications are to be sent by given written
notice of such change to the other party in the manner provided
herein for giving notice.
11. Waiver of Breach. No waiver by either party of
any condition or of the breach by the other of any term or
covenant contained in this Agreement, whether by conduct or
otherwise, in any one or more instances shall be deemed or
construed as a further or continuing waiver of any such condition
or breach or a waiver of any other condition, or of the breach of
any other term or covenant set forth in this Agreement. The
failure of either party to exercise any right hereunder shall not
bar the later exercise thereof.
12. Binding Nature; Assignment. This Agreement shall
inure to the benefit of and be binding on the parties and their
respective successors in interest, and shall not be assignable by
<PAGE>
either party without the written consent of the other; provided
that nothing in this Section shall preclude the Executive from
designating a beneficiary to receive any benefit payable
hereunder upon his death, or the executors, administrators or
other legal representatives of the Executive or his estate from
assigning any rights hereunder to which they become entitled to
the person or persons entitled thereto. It is specifically
understood and acknowledged that this Agreement will be assumed
by General Manufactured Housing, Inc., a Georgia corporation
("GMH") by virtue of a merger of the Company with and into GMH
which is occurring contemporaneously with the execution hereof.
13. Governing Law. This Agreement is entered into and
shall be construed in accordance with the laws of the State of
Georgia, without giving effect to conflict of laws principles
thereof requiring application of the substantive laws of another
jurisdiction.
14. Invalidity or Unenforceability. If any term or
provision of this Agreement is held to be invalid or
unenforceable for any reason, such invalidity or unenforceability
shall not affect any other term or provision hereof and this
Agreement shall continue in full force and effect as if such
invalid or unenforceable term or provision (to the extent of the
invalidity or unenforceability) had not been contained herein.
15. Entire Agreement. This Agreement constitutes the
full and complete understanding and agreement of the Executive
and the Company respecting the subject matter hereof, and
supersedes all prior understandings and agreements concerning the
subject matter hereof, oral or written, express or implied. This
Agreement may not be modified or amended orally, but only by an
agreement in writing, signed by the party against whom
enforcement of any modification or amendment is sought.
16. Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an
original and all of which together shall be deemed one and the
same instrument.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written.
EXECUTIVE
/s/ Samuel P. Scott
Samuel P. Scott
COMPANY
GMH ACQUISITION CORP.
By: /s/ Gary M. Brost
Gary M. Brost
President
<PAGE>
EXHIBIT 1
GENERAL MANUFACTURED HOUSING, INC.
EXECUTIVE BONUS PLAN
1. PURPOSES OF THE PLAN
The purposes of this Executive Bonus Plan (the "Plan") are
to enable General Manufactured Housing, Inc. (the "Company") to
retain the services of key employees and to provide them with
increased motivation and incentive to achieve and exceed the
goals of the business consistent with both short term and long
term objectives.
2. DEFINITIONS
The following terms shall have the meanings set forth below:
(a) "Base Amount" means $8.5 million.
(b) "Board of Directors" means the Board of Directors of
the Company.
(c) "Bonus Pool" means, for each fiscal year of the
Company, so long as EBIT equals or exceeds the Base Amount for
such fiscal year, 7% of EBIT.
(d) "EBIT" means, for each fiscal year of the Company, the
net income of the Company for such year, before (i) interest
expense, (ii) taxes, (iii) amortization, (iv) amounts paid under
the Company's Incentive Compensation Plan, (v) reimbursement of
the Company's expenses under Section 19 of the Stock Purchase
Agreement, (vi) the Management Fee, (vii) costs incurred by the
Company in remediating the Company's properties pursuant to
Section 14(b) of the Stock Purchase Agreement and (viii) all
compensation and benefits payable to management personnel added
after the Effective Date other than at the direction of the Chief
Executive Officer of the Company and other than in the ordinary
course of the Company's business, all as shown on the audited
financial statements of the Company; provided, that EBIT shall be
determined in accordance with generally accepted accounting
principles consistent with those employed by the Company in 1994
and reflected in its audited financial statements for such year.
(e) "Effective Date" means January 1, 1996.
(f) "Management Agreement" means the Management Agreement
dated as of December 21, 1995 by and between Strategic
Investments & Holdings, Inc. and the Company.
(g) "Management Fee" means an amount equal to the
management fee paid pursuant to the terms of the Management
Agreement.
(h) "Participant" means each of the following management
<PAGE>
personnel of the Company: Samuel Scott, Gregory Scott, Drew
Scott, Lannis Thomas and Wayne Roberts.
(i) "Participant Percentage" means, for any Plan Year, the
percentage of the Bonus Pool allocated to a Participant, which
shall be 20% for each Participant.
(j) "Plan Year" means the fiscal year of the Company.
(k) "Stock Purchase Agreement" means that certain Stock
Purchase Agreement dated as of October 10, 1995, among Samuel P.
Scott et al. and GMH Acquisition Corp., as amended.
3. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Board of
Directors or a Compensation Committee thereof. In the event the
employment of any Participant terminates, the Board of Directors
or Compensation Committee shall have the right to designate a
substitute Participant or Participants (having an aggregate
Participant Percentage not in excess of that of the terminating
Participant) or otherwise determine the disposition of the
Participant Percentage of any such terminating Participant. Any
decision by the Board of Directors or Compensation Committee
regarding the administration, interpretation or construction of
any provisions of the Plan shall be final, binding and
conclusive.
(b) No member of the Board of Directors or Compensation
Committee shall be liable for any action taken or omitted to be
taken or for any determination made by him or her in good faith
with respect to the Plan, and the Company shall indemnify and
hold harmless each member of the Board of Directors or
Compensation Committee against any cost or expense (including
counsel fees) or liability (including any sum paid in settlement
of a claim with the approval of the Board of Directors) arising
out of any act or omission in connection with the administration
or interpretation of the Plan, unless arising out of such
person's own fraud or bad faith.
(c) The Plan shall become effective upon the Effective
Date.
4. INCENTIVE AWARDS
(a) If EBIT for any Plan Year does not at least equal the
Base Amount for such year, the Company shall not allocate any
amounts to the Bonus Pool. Notwithstanding the foregoing or
anything to the contrary contained herein, the Board of Directors
may elect to make discretionary bonus payments, not paid from any
Bonus Pool, in order to reward and retain such key employees as
it shall deem appropriate.
(b) If EBIT for any Plan Year equals or exceeds the Base
Amount for such year, the Company shall allocate 7% of EBIT to
the Bonus Pool to be allocated among the Participants.
(c) The Bonus Pool, if any, for any Plan Year shall be
calculated and paid to the Participants, in cash, within thirty
(30) days after the Company's receipt of its audited financial
<PAGE>
statements for such year but not later than one hundred fifty
(150) days following the end of such year; provided, however,
that except as provided in paragraph (d) hereof, no portion of
the Bonus Pool shall be paid to any Participant for any Plan Year
if such Participant is not an employee of the Company at the end
of such year.
(d) In the event that a Participant is not an employee of
the Company at the end of a Plan Year because of his death,
termination for disability or retirement during such year, the
portion of the Bonus Pool, if any, payable to such Participant
for such Plan Year shall be prorated to the date of death, date
of termination for disability or date of retirement, and the
portion of the Bonus Pool attributable to the part of the Plan
Year prior to such date of death, termination or retirement shall
be determined and paid to such Participant or his legal
representative in accordance with paragraph (c) above. In the
event that a Participant is not an employee of the Company at the
end of a Plan Year because such Participant has either
voluntarily terminated his employment or because of the
termination of such Participant for any reason other than death,
disability or retirement during such year, no portion of the
Bonus Pool for such year shall be payable to such Participant.
(e) Any and all amounts payable under the Bonus Pool
hereunder shall be subject to (i) applicable federal, state and
local tax withholding requirements and (ii) the Company's
obligations to comply with the covenants set forth in the
Company's agreements with its lenders, and payment of any and all
amounts payable under the Bonus Pool may be deferred in order to
maintain the Company's compliance with such covenants. Such
deferred amounts will be accrued until such time as they are
permitted to be paid under the Company's agreements with its
lenders and shall then be promptly paid with interest as set
forth in the immediately following sentence. Any such deferred
amounts will accrue interest at the Prime Rate, as such rate is
quoted from time to time in the Wall Street Journal.
5. MISCELLANEOUS
(a) No right to receive any incentive compensation under
the Plan shall be transferable except by will or the laws of
descent and distribution. Any purported transfer contrary to
this provision will be null and void and without effect.
(b) Neither the adoption of the Plan nor its operation, nor
any document describing or referring to the Plan, or any part
hereof, nor the designation of any employee as a Participant in
the Plan shall confer upon any Participant any right to continue
in the employ of the Company or shall in any way affect the right
and power of the Company to terminate the employment of any
Participant at any time with or without assigning a reason
therefor, to the same extent as might have been done if the Plan
had not been adopted.
(c) By acceptance of any incentive compensation under the
Plan, the recipient shall be deemed to agree (a) to execute any
and all documents requested by the Company in connection with his
or her participation in the Plan, including an agreement to
report any amounts received under the Plan as compensation and
<PAGE>
(b) that any compensation paid hereunder will not be taken into
account as "base remuneration", "wages", "salary" or
"compensation" in determining the amount of any contribution to
or payment or any other benefit under any pension, retirement,
incentive, profit-sharing or deferred compensation plan of the
Company.
(d) The place of administration of the Plan shall be in the
State of Georgia, and the validity, construction, interpretation,
administration and effect of the Plan and of its rules and
regulations, and rights relating to the Plan, shall be determined
solely in accordance with the laws of the State of Georgia.
<PAGE>
Exhibit 10.16
SECURED CREDIT AGREEMENT
dated as of December 21, 1995
among
FIRST SOURCE FINANCIAL LLP,
as Lender,
and
GENERAL MANUFACTURED HOUSING, INC.
as Borrower
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
BACKGROUND................................................................. 1
SECTION 1 CERTAIN DEFINITIONS.............................................. 1
1.1 Certain Definitions.............................................. 1
Account Debtor........................................................ 2
Account Receivable.................................................... 2
Accounts.............................................................. 2
Acquisition........................................................... 2
Acquisition Corp...................................................... 2
Acquisition Instruments............................................... 2
Adjusted Net Worth.................................................... 2
Adjusted Operating Profit............................................. 2
Affiliate............................................................. 3
Affiliate Group....................................................... 3
Agent Bank............................................................ 3
Aircraft Security Agreement........................................... 3
Asset Sale............................................................ 3
Asset Sale Proceeds................................................... 4
Bank Agency Agreement................................................. 4
Base Management Fees.................................................. 4
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Bond Guaranty......................................................... 4
Borrower.............................................................. 4
Borrower Equity Interests............................................. 4
Borrowing Certificate................................................. 4
Bulldog............................................................... 4
Business Day.......................................................... 4
Cap Amount............................................................ 4
Cash Equivalents...................................................... 5
Cash Instruments...................................................... 5
Chattel Paper......................................................... 5
Closing Date.......................................................... 5
Code.................................................................. 6
Collateral............................................................ 6
Collateral Documents.................................................. 6
Collected Balances.................................................... 6
Commitments........................................................... 6
Compliance Certificate................................................ 6
Contingent Obligation................................................. 6
Contractual Obligation................................................ 7
Controlled Group...................................................... 7
Current Assets........................................................ 7
Current Liabilities................................................... 7
Current Ratio......................................................... 7
Default Interest Period............................................... 7
Default Rate.......................................................... 7
Dollar(s)............................................................. 7
Employee Benefit Plan................................................. 7
Employment Agreements................................................. 8
Equity Sale........................................................... 8
Equity Sale Proceeds.................................................. 8
ERISA................................................................. 8
Event of Default...................................................... 8
Financing Statements.................................................. 8
Fiscal Quarter........................................................ 8
Fiscal Year........................................................... 8
Fiscal Year 1995 Percentage........................................... 8
Force Majeure......................................................... 9
Funding Date.......................................................... 9
GAAP.................................................................. 9
General Intangible.................................................... 9
GMH................................................................... 9
GMH Equity Interests.................................................. 9
Gross Capital Expenditures............................................ 9
Hazardous Material.................................................... 9
Incentive Management Fees............................................. 10
Indebtedness.......................................................... 10
Indebtedness to be Refinanced......................................... 10
Initial Equity Contribution........................................... 10
Intangible Assets..................................................... 10
Interest Coverage Ratio Number 1...................................... 11
Interest Coverage Ratio Number 2...................................... 11
Interest Expense...................................................... 11
Interest Period....................................................... 11
Investors' Rights Agreement........................................... 11
Issuer................................................................ 11
Junior Subordinated Lenders........................................... 11
Junior Subordinated Loan.............................................. 11
Junior Subordinated Loan Instruments.................................. 11
Junior Subordinated Notes............................................. 12
Junior Subordinated Note Agreement.................................... 12
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Lamar................................................................. 12
Lamar Merger.......................................................... 12
Lamar Merger Agreement................................................ 12
Lamar Merger Certificate.............................................. 12
Lamar Merger Instruments.............................................. 12
LC Exposure........................................................... 12
LC Guaranty........................................................... 12
LC Guaranty Request................................................... 12
LC Reimbursement Agreements and LC Reimbursement Agreement............ 12
LC Utilization........................................................ 12
Lease Obligations..................................................... 12
Leasehold Mortgage and Leasehold Mortgages............................ 13
Lender................................................................ 13
Lender Party.......................................................... 13
Letter of Credit...................................................... 13
Letter of Credit Commitment........................................... 13
Liabilities........................................................... 13
LIBOR Interest Payment Date........................................... 13
LIBOR Interest Rate Determination Date................................ 13
LIBOR Rate............................................................ 13
LIBOR Rate Loans...................................................... 13
LIBOR Reserve Percentage.............................................. 14
Lien.................................................................. 14
Lockbox............................................................... 14
Loan and Loans........................................................ 14
Manager............................................................... 14
Management Agreement.................................................. 14
Master Account........................................................ 14
Material Adverse Effect............................................... 14
Material Intellectual Property Right.................................. 14
Maximum Amount of the Working Capital Commitment...................... 14
Merger................................................................ 14
Merger Agreement...................................................... 15
Merger Certificate.................................................... 15
Merger Instruments.................................................... 15
Mortgage and Mortgages................................................ 15
Multiemployer Plan.................................................... 15
Net Cash Generated.................................................... 15
Net Income............................................................ 15
Note and Notes........................................................ 15
Notice of LIBOR Activity.............................................. 15
Operating Account..................................................... 15
PBGC.................................................................. 15
Parent................................................................ 15
Parent Equity Documents............................................... 16
Parent Equity Interests............................................... 16
Parent Preferred Dividends............................................ 16
Parent Preferred Stock................................................ 16
Pension Plan.......................................................... 16
Permitted LC.......................................................... 16
Permitted Liens....................................................... 16
Permitted Prior Liens................................................. 17
Person................................................................ 17
Pledge Agreement...................................................... 17
Preferred Dividends................................................... 18
Prepayment Fee........................................................ 18
Property.............................................................. 18
Reference Rate........................................................ 18
Reference Rate Loans.................................................. 18
Reimbursement Obligations............................................. 18
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Related Documents..................................................... 18
Related Transactions.................................................. 18
Reportable Event...................................................... 18
Repurchase Agreements................................................. 18
Repurchase Obligations................................................ 19
Requirement of Law.................................................... 19
Revolving Loan and Revolving Loans.................................... 19
Revolving Loan Commitment............................................. 19
Revolving Loan Commitment Reduction Amount............................ 19
Revolving Loan Commitment Reduction Date.............................. 19
Revolving Loan Termination Date....................................... 19
Revolving Note........................................................ 19
Scheduled Reduction in the Revolving Loan Commitment.................. 19
Scheduled Reduction in the Term Loan Commitment....................... 19
Scott................................................................. 19
Security Agreement.................................................... 19
Selling Shareholders.................................................. 19
Selling Shareholders Bank............................................. 20
Selling Shareholders Indebtedness..................................... 20
Selling Shareholders Instruments...................................... 20
Selling Shareholders Letters of Credit................................ 20
Selling Shareholders Notes............................................ 20
Senior Subordinated Lender............................................ 20
Senior Subordinated Loan.............................................. 20
Senior Subordinated Loan Instruments.................................. 20
Senior Subordinated Note.............................................. 20
Senior Subordinated Note Agreement.................................... 21
Stated Amount......................................................... 21
Stockholders Agreement................................................ 21
Stock Purchase Agreement.............................................. 21
Subordinated Lenders.................................................. 21
Subordinated Loans.................................................... 21
Subordinated Loan Instruments......................................... 21
Subordinated Notes.................................................... 21
Subordination Agreement............................................... 21
Subsidiary............................................................ 21
Term Loan............................................................. 21
Term Loan Commitment.................................................. 21
Term Loan Commitment Reduction Amount................................. 21
Term Loan Commitment Reduction Date................................... 22
Term Loan Termination Date............................................ 22
Term Loan Note........................................................ 22
Total Fixed Charges................................................... 22
Total Liabilities..................................................... 22
Total WC Exposure..................................................... 22
Unapplied Insurance or Condemnation Proceeds.......................... 22
Uniform Commercial Code............................................... 22
Unmatured Event of Default............................................ 23
Welfare Plan.......................................................... 23
Working Capital....................................................... 23
Working Capital Commitment............................................ 23
Working Capital Commitment Extension Request.......................... 23
Working Capital Loan and Working Capital Loans........................ 23
Working Capital Loan Termination Date................................. 23
Working Capital Note.................................................. 23
1.2 Accounting and Financial Determinations.......................... 23
1.3 Cross References; Headings....................................... 24
</TABLE>
SECTION 2 COMMITMENTS OF LENDER; LOAN REQUESTS; REDUCTION OR TERMINATION
OF THE COMMITMENTS; PREPAYMENTS; MAKING
<PAGE>
<TABLE>
<S> <C>
OF PAYMENTS; SETOFF............................................. 24
2.1 Commitments...................................................... 24
2.1.1. Revolving Loan Commitment.............................. 24
2.1.2. Working Capital Commitment............................. 24
2.1.3. Letter of Credit Commitment............................ 25
2.1.4. Term Loan Commitment................................... 25
2.2 Extension of Working Capital Loan Termination Date............... 25
2.3 Loan Requests.................................................... 26
2.4 Certain Waivers.................................................. 26
2.5 Reduction or Termination of the Revolving Loan
Commitment....................................................... 27
2.6 Reduction or Termination of the Working Capital
Commitment and Letter of Credit Commitment....................... 28
2.7 Reduction or Termination of the Term Loan
Commitment....................................................... 29
2.8 Mandatory Prepayments............................................ 30
2.9 Voluntary Prepayments............................................ 31
2.10 Prepayment Fee................................................... 32
2.11 Making of Payments............................................... 32
2.12 Due Date Extension............................................... 32
2.13 Setoff........................................................... 33
2.14 Certain Matters Relating to LC Guaranties........................ 33
2.14.1. Reimbursement Obligation................................. 33
2.14.2. Reimbursement Obligations Absolute....................... 34
2.14.3. Indemnification.......................................... 34
SECTION 3 NOTES; RECORDKEEPING............................................. 35
3.1 Revolving Note................................................... 35
3.2 Working Capital Note............................................. 35
3.3 Term Loan Note................................................... 36
3.4 Recordkeeping.................................................... 36
SECTION 4 INTEREST......................................................... 36
4.1 Interest Rates on Revolving Loans and Term Loan.................. 36
4.2 Interest Rates on Working Capital Loans.......................... 36
4.3 Default Interest................................................. 37
4.4 Conversion or Continuation....................................... 37
4.5 Special Provisions Governing LIBOR Rate Loans.................... 38
4.6 Interest Payment Dates........................................... 41
4.7 Setting of Rates................................................. 41
4.8 Computation of Interest.......................................... 41
SECTION 5 FEES............................................................. 42
5.1 Revolving Loan Non-Use Fee....................................... 42
5.2 Working Capital Loan Non-Use Fee................................. 42
5.3 Closing Fee...................................................... 42
5.4 Computation of Fees.............................................. 42
5.5 Letter of Credit Fees............................................ 42
SECTION 6 ACCOUNT AGREEMENTS; ACCOUNTS; LIST OF ACCOUNTS
AND ACCOUNT STATEMENTS........................................... 43
6.1 Account Agreements............................................... 43
6.2 Accounts......................................................... 44
6.3 List of Accounts and Account Statements.......................... 44
SECTION 7 PROCEEDS OF COLLATERAL; APPLICATION OF FUNDS;
DEEMED LOANS..................................................... 45
7.1 Proceeds of Collateral; Notices to Account Debtors;
Lockbox.......................................................... 45
7.2 Application of Funds Available for Operating
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Expenses......................................................... 45
7.3 Application of Funds Available for Loan Repayments............... 45
7.4 Application Upon an Event of Default............................. 46
7.5 Deemed Loans..................................................... 46
SECTION 8 INCREASED COSTS AND OTHER SPECIAL PROVISIONS..................... 47
8.1 Increased Costs.................................................. 47
8.2 Funding Losses................................................... 48
8.3 Conclusiveness of Statements; Survival of
Provisions....................................................... 48
8.4 Discretion of Lender as to Manner of Funding..................... 48
SECTION 9 COLLATERAL SECURITY.............................................. 48
9.1 Borrower......................................................... 48
9.1.1. Personal Property........................................ 48
9.1.2. Real Estate.............................................. 48
9.1.3. Pledge Agreement......................................... 49
9.2 Change of Location or Name....................................... 49
9.3 Deliveries; Further Assurances................................... 49
9.4 Subsequently Acquired Property................................... 50
9.5 Asset Sales and Equity Sales..................................... 51
SECTION 10 REPRESENTATIONS AND WARRANTIES.................................. 51
10.1 Due Organization, Authorization.................................. 51
10.2 Certain Agreements............................................... 52
10.3 Financial Information; Financial Condition....................... 52
10.4 Litigation and Contingent Obligations............................ 53
10.5 Liens............................................................ 53
10.6 Absence of Default............................................... 54
10.7 Employee Benefit Plans........................................... 54
10.8 Investment Company Act; Public Utility Holding
Company Act...................................................... 55
10.9 Regulations G, U and X........................................... 55
10.10 Proceeds........................................................ 55
10.11 Lamar Merger Instruments, Acquisition Instruments and
Merger Instruments............................................... 56
10.12 Insurance....................................................... 56
10.13 Material Disruptions............................................ 56
10.14 Patents, Trademarks............................................. 56
10.15 Ownership of Properties; Property Schedule...................... 57
10.16 Business Locations; Trade Names................................. 57
10.17 Accuracy of Information......................................... 57
10.18 Subsidiaries.................................................... 57
10.19 Hazardous Materials............................................. 57
10.20 Agent's Fees.................................................... 58
10.21 Taxes........................................................... 58
10.22 Securities Laws................................................. 58
10.23 Governmental Authorizations..................................... 58
10.24 Compliance with Laws............................................ 59
10.25 Employees and Labor............................................. 59
SECTION 11 COVENANTS....................................................... 59
11.1 Reports, Certificates and other Information...................... 59
11.1.1. Initial Balance Sheet.................................... 60
11.1.2. Audit Report............................................. 60
11.1.3. Quarterly Reports........................................ 60
11.1.4. Monthly Reports.......................................... 60
11.1.5. Business Plan............................................ 61
11.1.6. Compliance Certificates; Management Reports.............. 61
11.1.7. Auditors' Materials...................................... 61
</TABLE>
<PAGE>
<TABLE>
<S> <C>
11.1.8. Reports to SEC and to Shareholders....................... 61
11.1.9. Notice of Default, Litigation, Intellectual
Property and ERISA Matters............................... 61
11.1.10. Insurance Reports....................................... 62
11.1.11. Withdrawal Liability.................................... 62
11.1.12. List of Officers and Directors.......................... 63
11.1.13. Borrowing Base Report................................... 63
11.1.14. Tax Returns and Receipts................................ 63
11.1.15. Other Information....................................... 63
11.2 Corporate Existence; Foreign Qualification....................... 63
11.3 Books, Records and Inspections................................... 63
11.4 Insurance........................................................ 64
11.5 Taxes and Liabilities............................................ 64
11.6 Current Ratio.................................................... 64
11.7 Adjusted Net Worth............................................... 65
11.8 Employee Benefit Plans........................................... 65
11.9 Collateral Documents............................................. 66
11.10 Compliance with Laws............................................ 66
11.11 Maintenance of Permits.......................................... 66
11.12 Intentionally Deleted........................................... 66
11.13 Net Cash Ratio.................................................. 66
11.14 Total Liabilities Ratio......................................... 67
11.15 Annual Interest Coverage Ratio.................................. 68
11.16 Quarterly Interest Coverage Ratio............................... 68
11.17 Purchase, Redemption, Dividend, Interest and Payment
Restrictions.................................................... 69
11.18 Gross Capital Expenditures...................................... 70
11.19 Guaranties, Loans, Advances or Investments...................... 70
11.20 Working Capital Commitment...................................... 70
11.21 Mergers, Acquisitions, Consolidations, Sales.................... 70
11.22 Leases.......................................................... 70
11.23 Unconditional Purchase Obligations.............................. 71
11.24 Regulations G, U and X.......................................... 71
11.25 Subsidiaries.................................................... 71
11.26 No Amendment of Certain Documents............................... 71
11.27 Other Agreements................................................ 71
11.28 Business Activities............................................. 71
11.29 Transactions with Affiliates.................................... 71
11.30 Environmental Liabilities....................................... 72
11.31 Indebtedness.................................................... 72
11.32 Liens........................................................... 72
11.33 Fiscal Year..................................................... 72
SECTION 12 CONDITIONS...................................................... 72
12.1 Initial Revolving Loan........................................... 73
12.1.1. Lamar Merger, Acquisition and Merger..................... 73
12.1.2. No Default............................................... 73
12.1.3. Warranties and Representations........................... 73
12.1.4. Lender Approval of Certain Documents..................... 73
12.1.5. Litigation............................................... 73
12.1.6. Fees..................................................... 74
12.1.7. Establishment of Accounts................................ 74
12.1.8. Indebtedness to be Refinanced............................ 74
12.1.9. Documents................................................ 74
12.1.10. Subordinated Loan Instruments........................... 77
12.1.11. Parent Equity Interests................................. 77
12.1.12. Initial Equity Contribution............................. 78
12.2 Term Loan, Initial Revolving Loan and Working
Capital Loan..................................................... 78
12.2.1. Loans.................................................... 78
</TABLE>
<PAGE>
<TABLE>
<S> <C>
12.2.2. Notes.................................................... 78
12.2.3. Maximum Loan Balance at Closing.......................... 78
12.3 All Loans; LC Guaranties......................................... 78
12.3.1. No Default; Reaffirmation of Warranties and
Representations.......................................... 78
12.3.2. Litigation; Adverse Changes.............................. 78
12.3.3. Borrowing Certificate and Other
Confirmations............................................ 79
12.3.4. Minimum Loan Balance..................................... 79
SECTION 13 EVENTS OF DEFAULT AND THEIR EFFECT.............................. 79
13.1 Events of Default................................................ 79
13.1.1. Non-Payment of Loans or Reimbursement
Obligations.............................................. 79
13.1.2. Non-Payment of Fees or Other Amounts..................... 80
13.1.3. Non-Payment of Other Indebtedness........................ 80
13.1.4. Other Material Obligations............................... 80
13.1.5. Bankruptcy, Insolvency, etc.............................. 80
13.1.6. Non-compliance with Certain Provisions................... 81
13.1.7. Non-compliance With Other Provisions of this
Agreement or the Related Documents....................... 81
13.1.8. Indebtedness to be Refinanced............................ 81
13.1.9. Warranties and Representations........................... 81
13.1.10. Employee Benefit Plans.................................. 81
13.1.11. Related Documents....................................... 82
13.1.12. Collateral.............................................. 82
13.1.13. Change in Ownership..................................... 82
13.1.14. Change in Management.................................... 82
13.1.15. Subordinated Loan Instruments........................... 82
13.1.16. Litigation.............................................. 82
13.2 Effect of Event of Default....................................... 82
SECTION 14 GENERAL......................................................... 83
14.1 Waiver; Amendments............................................... 83
14.2 Confirmations.................................................... 83
14.3 Notices.......................................................... 83
14.4 Costs, Expenses and Taxes........................................ 84
14.5 Indemnification.................................................. 84
14.6 SUBMISSION TO JURISDICTION....................................... 87
14.7 Governing Law.................................................... 87
14.8 Entry Into Agreement............................................. 87
14.9 Legal Opinions................................................... 88
14.10 JURY TRIAL...................................................... 88
14.11 Successors and Assigns.......................................... 88
14.12 Sale of Notes; Participations................................... 88
14.13 Confidentiality................................................. 89
</TABLE>
<PAGE>
SCHEDULES
SCHEDULE I Revolving Loan Commitment Reduction Amounts (<section> 2.1.1)
SCHEDULE IA Term Loan Commitment Reduction Amounts (<section> 2.1.4)
SCHEDULE II Locations of Bank Accounts (<section> 6.2)
SCHEDULE III Litigation (<section> 10.4)
SCHEDULE IV Insurance (<section> 10.12)
SCHEDULE V Intellectual Property Rights (<section> 10.14)
SCHEDULE VI Certain Property of Borrower (<section> 10.15)
SCHEDULE VII Business Locations; Trade Names (<section> 10.16)
SCHEDULE VIII Hazardous Materials (<section> 10.19)
SCHEDULE IX Business Activities (<section> 11.28)
SCHEDULE X Indebtedness (including Indebtedness to be
Refinanced); Liens (<section><section> 10.5 and 11.31)
SCHEDULE XI Financial Information (<section> 10.3)
SCHEDULE XII Agent's Fees (<section> 10.20)
SCHEDULE XIII Parent Equity Interests (Definitions)
SCHEDULE XIV Material Adverse Change (<section> 10.3)
SCHEDULE XV Lamar Merger Instruments, Acquisition Instruments and Merger
Instruments (<section> 10.11)
SCHEDULE XVI Transactions with Affiliates (<section> 11.29)
SCHEDULE XVII Accrued Amounts (<section> 2.5)
EXHIBITS
EXHIBIT A LC Guaranty (<section> 2.1.3)
EXHIBIT B LC Reimbursement Agreement (<section> 2.1.3)
EXHIBIT C Working Capital Commitment Extension Request (<section> 2.2)
EXHIBIT D Notice of LIBOR Activity (<section> 2.3(a))
EXHIBIT E Revolving Note (<section> 3.1)
EXHIBIT F Working Capital Note (<section> 3.2)
EXHIBIT G Term Loan Note
EXHIBIT H Compliance Certificate (<section> 11.1.6)
EXHIBIT I Borrowing Certificate (<section> 12.3.3)
EXHIBIT J LC Guaranty Request (<section> 12.3.3)
<PAGE>
EXHIBIT 10.16
SECURED CREDIT AGREEMENT
THIS SECURED CREDIT AGREEMENT (this "Agreement"), dated as of December 21,
1995, is entered into between GENERAL MANUFACTURED HOUSING, INC., a Georgia
corporation and successor by merger to GMH Acquisition Corp., a Delaware
corporation ("Borrower"), and FIRST SOURCE FINANCIAL LLP, an Illinois registered
limited liability partnership (together with its successors and assigns,
"Lender").
BACKGROUND
1. GMH Acquisition Corp., a Delaware corporation ("Acquisition Corp."),
and Selling Shareholders are parties to that certain Stock Purchase Agreement
dated as of October 10, 1995, as amended by the First Amendment to Stock
Purchase Agreement dated as of December 21, 1995 (together, the "Stock Purchase
Agreement"), pursuant to which Acquisition Corp. agreed to acquire the GMH
Equity Interests, subject to the terms and conditions thereof.
2. Prior to the Closing Date, Lamar merged with and into GMH.
3. Immediately prior to the execution and delivery of this Agreement,
Acquisition Corp. (a) acquired the GMH Equity Interests and (b) merged with and
into GMH.
4. Borrower desires that Lender extend financing to enable Borrower
<PAGE>
to satisfy its obligations to the Selling Shareholders arising from the
consummation of the Acquisition and the Merger, to repay the Indebtedness to be
Refinanced, to provide funds for capital expenditures, to pay the transaction
costs incurred in connection with the Related Transactions and to supply the
working capital and other financing needs of Borrower, such financing to be
comprised of the working capital, reducing revolving loan, term loan and letter
of credit facilities established by this Agreement, all on the terms and
conditions set forth herein.
5. As security for the loans to be made by Lender to, or for the account
of, Borrower, Borrower will grant to Lender a first priority lien on, and a
security interest in, all of its assets and Parent will grant to Lender a first
priority lien on, and security interest in, the Borrower Equity Interests.
6. Accordingly, in consideration of the mutual agreements contained
herein, and subject to the terms and conditions hereof, the parties hereto agree
as follows:
SECTION 1 CERTAIN DEFINITIONS.
SECTION 1.1 CERTAIN DEFINITIONS. When used herein, the following terms
shall have the following meanings:
ACCOUNT DEBTOR shall mean any Person obligated on or under any Account
Receivable, Chattel Paper or General Intangible.
ACCOUNT RECEIVABLE shall mean any of Borrower's "accounts," as defined in
the Uniform Commercial Code.
ACCOUNTS - see SECTION 6.1.
ACQUISITION shall mean the acquisition by Acquisition Corp. of the GMH
Equity Interests pursuant to the terms and conditions of the Acquisition
Instruments.
ACQUISITION CORP. - see BACKGROUND.
ACQUISITION INSTRUMENTS shall mean, collectively, the Stock Purchase
Agreement and all other documents and instruments executed by Borrower, GMH
or any Selling Shareholder in connection with the Acquisition.
ADJUSTED NET WORTH shall mean, at any date, (a) $10,000,000, PLUS (b) Net
Income plus depreciation and amortization expenses, to the extent that the
same are deducted in determining Net Income, for the period beginning on
the Closing Date to and including the date of calculation (treating such
period as one accounting period), LESS (c) unless subtracted in determining
Net Income and without double counting, all amounts paid by Borrower to
purchase, redeem or otherwise acquire any Borrower Equity Interests.
Nothing contained herein shall be deemed to permit Borrower to take any
action otherwise prohibited by this Agreement.
ADJUSTED OPERATING PROFIT shall mean, for any period, Net Income for such
period before deduction of any amount which, in conformity with GAAP, would
be set forth opposite the caption "income tax expense" (including deferred
income taxes) (or any like caption) on an income statement of Borrower for
such period, LESS (a) any amount which, in conformity with GAAP, would be
set forth opposite the caption
<PAGE>
"extraordinary pre-tax gain" (or any like caption) on such an income
statement, PLUS (b) Interest Expense to the extent deducted in determining
Net Income for such period, PLUS (c) an amount which, in conformity with
GAAP, would be set forth opposite the caption "depreciation and
amortization expenses" (or any like caption) (including, without
limitation, amortization of Intangible Assets) on such an income statement
for such period, to the extent the same are deducted from the net revenues
of Borrower, in conformity with GAAP, in determining Net Income for such
period, PLUS (d) without double counting, any amount permitted to be and
actually paid pursuant to SECTION 11.29 hereof to the extent deducted in
determining Net Income for such period.
AFFILIATE of any Person shall mean any director (or Person holding the
equivalent position) or officer (or Person holding the equivalent position)
of such Person or of any Affiliate of such Person, and any other Person
which, directly or indirectly, controls or is controlled by or under common
control with such Person (excluding any trustee under, or any committee
with responsibility for administering, any Pension Plan). The Affiliate
Group shall be deemed to be Affiliates of Borrower. Lender shall not be
deemed to be an Affiliate of Borrower or any of its other Affiliates. A
Person shall be deemed to be
(a) "controlled by" any other Person if such other Person
possesses, directly or indirectly, power
(i) to vote 10% or more of the securities having at the time
of any determination hereunder voting power for the election of
directors of such Person (or Persons holding equivalent
positions); or
(ii) to direct or cause the direction of the management and
policies of such Person, whether by contract or otherwise; or
(b) "controlled by" or "under common control with" such other
Person if such other Person is a member of the immediate family of
such Person or is the executor, administrator, or other personal
representative of such Person.
AFFILIATE GROUP shall mean, collectively, Bulldog, SIHI-GMH LLC, a New York
limited liability company, Manager, Senior Subordinated Lender, Junior
Subordinated Lenders and Alliance Corporate Finance Group Incorporated.
AGENT BANK shall mean any bank serving in the capacity of agent for Lender
under the Bank Agency Agreement. The initial Agent Bank shall be The First
National Bank of Chicago.
AIRCRAFT SECURITY AGREEMENT - see SECTION 9.1.1.
ASSET SALE shall mean any sale, assignment, conveyance, transfer or other
disposition of any Property of Borrower other than (a) any sale or lease of
inventory in the ordinary course of business, (b) any sale or trade-in of
obsolete or unusable items of equipment which promptly are replaced with
new items of equipment of like function and comparable value to the
obsolete or unusable items of equipment when the same were new or not
obsolete or unusable or (c) any sale of obsolete or unusable items of
equipment so long as the aggregate
<PAGE>
amount of the proceeds of all such sales does not exceed (i) $25,000 in any
Fiscal Year other than the Fiscal Year ending December 31, 1995 and (ii)
the product of (x) $25,000 multiplied by (y) the Fiscal Year 1995
Percentage in the Fiscal Year ending December 31, 1995. ASSET SALE PROCEEDS
shall mean the aggregate cash proceeds payable to Borrower in connection
with any Asset Sale, after deduction of all reasonable, customary and
documented costs and expenses of such Asset Sale.
BANK AGENCY AGREEMENT - see SECTION 6.1.
BASE MANAGEMENT FEES shall mean (a) the management fees payable by Borrower
to Manager pursuant to Section 2.3(a) of the Management Agreement, in an
aggregate amount not to exceed (i) $250,000 (as adjusted pursuant to
Section 2.3(a) of the Management Agreement) in any Fiscal Year other than
the Fiscal Year ending December 31, 1995 and (ii) the product of (x)
$250,000 multiplied by (y) the Fiscal Year 1995 Percentage in the Fiscal
Year ending December 31, 1995 and (b) reasonable out-of-pocket expenses
payable by Borrower to Manager pursuant to Section 2.1 of the Management
Agreement.
BOND GUARANTY shall mean the Guaranty By Corporation dated as of December
30, 1993 executed by GMH to and for the benefit of The Patterson Bank to
guarantee the payment of all amounts owed by the Waycross and Ware County
Development Authority to The Patterson Bank pursuant to that certain
Adjustable Rate Installment Promissory Note dated December 30, 1993 in the
original principal amount of $613,727.63.
BORROWER - see Preamble.
BORROWER EQUITY INTERESTS shall mean all of the capital stock and options,
warrants and other rights to acquire capital stock of Borrower.
BORROWING CERTIFICATE - see SECTION 12.3.3.
BULLDOG shall mean Bulldog Holdings LLC, a New York limited liability
company.
BUSINESS DAY shall mean (a) for all purposes other than as covered by
clause (b) below, any day of the year (other than any Saturday or Sunday)
on which the Federal Reserve Bank is open for business in Chicago, Illinois
and (b) with respect to all notices, determinations, fundings and payments
in connection with the LIBOR Rate and/or LIBOR Rate Loans, any day that is
a Business Day pursuant to clause (a) and that is also a day for trading by
and between banks in the London interbank market.
CAP AMOUNT shall mean, at any time, the sum of the amounts specified as
such in each LC Guaranty at the time of its issuance (such amount, with
respect to any LC Guaranty, being herein called the "RELEVANT CAP"); it
being understood that:
(a) the Relevant Cap with respect to any LC Guaranty may be reduced
from time to time by the Stated Amount of a Permitted LC covered thereby if
Lender shall have received evidence satisfactory to Lender that all of the
following conditions have been satisfied: (i) such Permitted LC shall have
terminated or expired in accordance with its terms, (ii) such Permitted LC
shall have been surrendered to the
<PAGE>
Issuer thereof and cancelled, (iii) if such Permitted LC shall have been
drawn upon, the Issuer thereof shall have been fully reimbursed for such
draw, and (iv) such Issuer shall have consented in writing to a reduction,
equal to such Stated Amount in such Relevant Cap; and
(b) the Relevant Cap with respect to any LC Guaranty may be increased
from time to time by the Stated Amount of a Permitted LC to be covered
thereby if Lender shall have received evidence satisfactory to Lender that
such Permitted LC shall be issued in a manner permitted by this Agreement
concurrently with such increase;
provided, however, that in no event shall the Cap Amount exceed at any time
$1,000,000; and provided, further, that for purposes of determining the Cap
Amount, each LC Guaranty issued hereunder shall be included unless such LC
Guaranty shall have been returned to Lender and the applicable Issuer shall
have acknowledged in writing that Lender shall have no further obligations
thereunder.
CASH EQUIVALENTS shall mean any or all of the following: obligations of, or
guaranteed as to interest and principal by, the United States Government
maturing within 90 days after the date on which such obligations are
purchased; open market commercial paper of any corporation (other than
Borrower or any of its Affiliates) incorporated under the laws of the
United States of America or any State thereof or the District of Columbia
rated "Prime-1" or its equivalent by Moody's Investors Service Inc. or "A-
1" or its equivalent by Standard & Poor's Corporation; or certificates of
deposit maturing within 90 days after the issuance thereof issued by
commercial banks organized under the laws of the United States of America
or of any political subdivision thereof and either (a) having a combined
capital and surplus in excess of $500,000,000 or (b) being one of the four
domestic banks having the largest combined capital and surplus among banks
having their principal offices in Chicago, Illinois.
CASH INSTRUMENTS shall mean all cash, checks, drafts and other similar
writings for the payment of money, including, without limitation, all
insurance and condemnation proceeds, Asset Sale Proceeds and Equity Sale
Proceeds.
CHATTEL PAPER shall mean any of Borrower's "chattel paper," as defined in
the Uniform Commercial Code.
CLOSING DATE shall mean the date of this Agreement.
CODE shall mean the Internal Revenue Code of 1986, as amended.
COLLATERAL shall mean all property and/or rights on or in which a Lien is
granted to Lender (or to any agent, trustee or other party acting on behalf
of Lender), to secure the payment, performance or observance of all or any
of the Liabilities, including any such Lien granted pursuant to this
Agreement or any of the Collateral Documents or any other agreements,
instruments or documents provided for herein or therein or delivered or to
be delivered hereunder or thereunder or in connection herewith or
therewith.
COLLATERAL DOCUMENTS shall mean, collectively, the Security Agreement, the
Aircraft Security Agreement, the Leasehold Mortgages, the Mortgages, the
Bank Agency Agreement, the Pledge Agreement, the Financing Statements and
any and all other agreements, instruments or
<PAGE>
documents provided for in SECTION 9 or otherwise pursuant to which a Lien
is granted to Lender (or to any agent, trustee, or other party acting on
behalf of Lender), as security for all or any of the Liabilities, as such
documents may be amended, restated, modified or supplemented from time to
time.
COLLECTED BALANCES - see SECTION 7.2.
COMMITMENTS shall mean collectively, the Letter of Credit Commitment, the
Revolving Loan Commitment, the Term Loan Commitment and the Working Capital
Commitment.
COMPLIANCE CERTIFICATE - see SECTION 11.1.6.
CONTINGENT OBLIGATION as to any Person shall mean the undrawn face amount
of any letters of credit issued for the account of such Person and shall
also mean any obligation of such Person guaranteeing or in effect
guaranteeing any Indebtedness, leases, dividends, letters of credit or
other obligations ("PRIMARY OBLIGATIONS") of any other Person (the "PRIMARY
OBLIGOR") in any manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, whether or not contingent, (a)
to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (b) to advance or supply funds (i) for the
purchase or payment of any such primary obligation or (ii) to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the financial condition or solvency of the primary obligor, (c) to
purchase property, securities or services primarily for the purpose of
assuring the obligee under any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation or (d)
otherwise to assure or hold harmless the obligee under such primary
obligation against loss in respect thereof; PROVIDED, HOWEVER, that the
term Contingent Obligation shall not include endorsements of instruments
for deposit or collection in the ordinary course of business. The amount of
any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation or, where such
Contingent Obligation is specifically limited to a portion of any such
primary obligation, that portion to which it is limited or, if not stated
or determinable, the maximum reasonably anticipated liability in respect
thereof (assuming such Person is required to perform thereunder) as
determined by such Person in good faith.
CONTRACTUAL OBLIGATION of any Person shall mean any provision of any
security issued by such Person or of any agreement, document, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.
CONTROLLED GROUP shall mean Borrower and any corporation, trade or business
that is, together with Borrower, a member of a controlled group of
corporations or a controlled group of trades or businesses under common
control or treated as a single employer, or whose employees would be
treated as employed by Borrower, under Section 414 of the Code or Section
4001 of ERISA.
CURRENT ASSETS shall mean, at any date, the amount which, in conformity
with GAAP, would be set forth opposite the caption "total current assets"
(or any like caption) on a balance sheet of Borrower at such date, less,
without duplication, cash, Cash Instruments, and Cash Equivalents.
<PAGE>
CURRENT LIABILITIES shall mean, at any date, the amount which, in
conformity with GAAP, would be set forth opposite the caption "total
current liabilities" (or any like caption) on a balance sheet of Borrower
at such date, less any portion thereof attributable to the Notes, the
Subordinated Notes, leases which have been, or, in accordance with GAAP,
should be, recorded as capitalized leases, bank overdrafts (but only to the
extent repaid in full on the Business Day following creation thereof), or
any other Indebtedness incurred hereunder.
CURRENT RATIO shall mean, at any date, the ratio on such date of (a)
Current Assets (excluding Intangible Assets) to (b) Current Liabilities.
DEFAULT INTEREST PERIOD - see SECTION 4.3(B).
DEFAULT RATE - see SECTION 4.3(A).
DOLLAR(S) and the sign "$" shall mean lawful money of the United States of
America.
EMPLOYEE BENEFIT PLAN shall mean any "employee benefit plan," as defined
under Section 3(3) of ERISA or any other material plan, policy, program,
arrangement or agreement, whether or not written, with respect to current
employees, former employees, independent contractors or leased employees,
or the beneficiaries or dependents thereof, which is or has been maintained
by Borrower or a current or past member of its Controlled Group or as to
which Borrower or any member of its Controlled Group otherwise has or could
have any liability.
EMPLOYMENT AGREEMENTS shall mean those certain employment agreements dated
as of the Closing Date between Borrower and each of Scott, Gregory K. Scott
and Drew E. Scott, as modified from time to time to the extent permitted by
this Agreement.
EQUITY SALE shall mean any issuance, sale, give away, conveyance, transfer
or other disposition of any Borrower Equity Interests or any other change
in the capital structure of Borrower, or, to the extent the same would
result in an Event of Default under SECTION 13.1.13, any issuance, sale,
give away, conveyance, transfer or other disposition of any Parent Equity
Interests or any other change in the capital structure of Parent,
including, without limitation any initial public offering of the Parent
Equity Interests but specifically excluding, to the extent the same would
not result in an Event of Default under Section 13.1.13, any issuance,
sale, give away, conveyance, transfer or other disposition (a) due to the
exercise of any warrants, puts, calls or conversion of any preferred or
common stock from one class to another in accordance with the Stockholders
Agreement or the Restated Certificate of Incorporation of Parent as in
effect on the Closing Date or (b) the proceeds of which are not payable to
Borrower or Parent.
EQUITY SALE PROCEEDS shall mean the aggregate cash proceeds paid to
Borrower or Parent in connection with any Equity Sale, after deduction of
all reasonable, customary and documented costs and expenses of such Equity
Sale.
ERISA shall mean the Employee Retirement Income Security Act of 1974,
<PAGE>
as amended.
EVENT OF DEFAULT shall mean any of the events or conditions described in
SECTION 13.1.
FINANCING STATEMENTS - see SECTION 12.1.9(P).
FISCAL QUARTER shall mean any fiscal quarter of Borrower for financial
accounting purposes.
FISCAL YEAR shall mean the fiscal year of Borrower for financial accounting
purposes, which fiscal year ends on December 31. The 1995 Fiscal Year of
Borrower shall commence on the Closing Date and end on December 31, 1995.
FISCAL YEAR 1995 PERCENTAGE shall mean the percentage calculated by
dividing (a) the number of days from and including the Closing Date to and
including December 31, 1995 by (b) 365.
FORCE MAJEURE shall mean acts of God, acts of public enemies,
insurrections, riots, civil disturbances, strikes, boycotts, other direct
consequences of a labor dispute, other industrial disturbances, fires,
explosions, floods, epidemics, quarantine restrictions, shortages of
materials, equipment or transportation, freight embargoes, power or utility
failures, orders or acts, or failures to act, of civil or military
authority or other similar causes beyond the control of Borrower.
FUNDING DATE shall mean, with respect to any Loan, the date of the funding
of such Loan.
GAAP shall mean generally accepted accounting principles in the United
States of America as in effect from time to time.
GENERAL INTANGIBLE shall mean any of Borrower's "general intangibles," as
defined in the Uniform Commercial Code.
GMH shall mean General Manufactured Housing, Inc., a Georgia corporation
and predecessor to Borrower, as in existence prior to the consummation of
the Merger.
GMH EQUITY INTERESTS shall mean all of the capital stock and options,
warrants and other rights to acquire capital stock of GMH outstanding
immediately prior to the consummation of the Acquisition.
GROSS CAPITAL EXPENDITURES shall mean, for any period, the total of all
expenditures incurred by Borrower in respect of the purchase or other
acquisition of fixed or capital assets during such period, without any
deduction for trade-ins, salvage values, resales or similar recoveries,
including the amount which in accordance with GAAP is or should be
initially posted to the balance sheet of Borrower with respect to leases
entered into during such period which have been, or, in accordance with
GAAP, should be, recorded as capitalized leases.
HAZARDOUS MATERIAL shall mean: (a) any "hazardous substance" as now defined
pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C.A. <section> 9601(14), as amended by the
Superfund Amendments and Reauthorization Act ("SARA"), and including the
judicial interpretation thereof; (b) any "pollutant or contaminant" as
defined in 42 U.S.C.A. <section>
<PAGE>
9601(33); (c) any material now defined as "hazardous waste" pursuant to 40
C.F.R. Part 261; (d) any petroleum, including crude oil and any fraction
thereof; (e) natural gas, natural gas liquids, liquefied natural gas, or
synthetic gas usable for fuel; (f) any "hazardous chemical" as defined
pursuant to 29 C.F.R. Part 1910; (g) any asbestos, polychlorinated biphenyl
(PCB), or isomer of dioxin, or any material or thing containing or composed
of such substance or substances; and (h) any other substance, regardless of
physical form, that is subject to any Federal, state or local governmental
statute, rule or regulation relating to the protection of human health,
plant life, animal life, natural resources, property or the reasonable
enjoyment of life or property from the presence in the environment of any
solid, liquid, gas or odor, from whatever source.
INCENTIVE MANAGEMENT FEES shall mean the management fees payable by
Borrower to Manager pursuant to Section 2.3(b) of the Management Agreement,
in an aggregate amount not to exceed (a) $250,000 in any Fiscal Year other
than the Fiscal Year ending December 31, 1995 and (b) the product of (x)
$250,000 multiplied by (y) the Fiscal Year 1995 Percentage in the Fiscal
Year ending December 31, 1995.
INDEBTEDNESS of a Person shall mean (a) indebtedness of such Person for
borrowed money, (b) indebtedness of such Person for the deferred purchase
price of services or property, excluding trade payables incurred in the
ordinary course of business, (c) monetary obligations of such Person under
leases which have been, or, in accordance with GAAP, should be, recorded as
capitalized leases, (d) indebtedness of such Person arising under
acceptance facilities, (e) obligations of such Person with respect to
judgments, awards or decrees and (f) indebtedness of such Person consisting
of unpaid reimbursement obligations in respect of all drawings under
letters of credit issued for the account of such Person (including, without
limitation, with respect to each of the foregoing CLAUSES (A) through (F),
any such indebtedness or obligation which is nonrecourse to the credit of
such Person but is secured by assets of such Person). Indebtedness shall
not include the liability of any Person for judgments, awards or decrees
(i) to the extent that such Person is fully insured and with respect to
which the insurer has assumed responsibility in writing, (ii) to the extent
that such Person is fully indemnified (upon terms and by creditworthy
indemnitors which are reasonably satisfactory to Lender) or (iii) which
have been in force for less than the applicable period for filing an appeal
so long as execution is not levied thereunder (or in respect of which such
Person shall at the time in good faith be prosecuting an appeal or
proceeding for review and in respect of which a stay of execution or
appropriate appeal bond shall have been obtained pending such appeal or
review).
INDEBTEDNESS TO BE REFINANCED - see SECTION 12.1.8.
INITIAL EQUITY CONTRIBUTION shall mean the equity contribution made by
Parent to Acquisition Corp. on or before the Closing Date in an amount not
less than $10,250,000.
INTANGIBLE ASSETS shall mean, with reference to Borrower, licenses,
franchises, patents, patent applications, trademarks, trademark
applications, tradenames, copyrights, copyright applications, computer
software rights, goodwill and research and development expense or other
like intangibles shown on the balance sheet of Borrower.
INTEREST COVERAGE RATIO NUMBER 1 shall mean, for any period, the ratio
<PAGE>
of (a) (i) Adjusted Operating Profit for such period MINUS (ii) the
aggregate amount incurred by Borrower during such period on account of
Gross Capital Expenditures for such period to (b) Interest Expense for such
period.
INTEREST COVERAGE RATIO NUMBER 2 shall mean, for any period, the ratio of
(a) Adjusted Operating Profit for such period to (b) Interest Expense for
such period.
INTEREST EXPENSE shall mean, for any period, the amount which, in
conformity with GAAP, would be set forth opposite the caption "interest
expense" (or any like caption) on an income statement of Borrower for such
period.
INTEREST PERIOD shall mean with respect to any LIBOR Rate Loan, a period of
one, three or six months commencing on a Business Day selected by Borrower
pursuant to this Agreement. Each such Interest Period shall end on (but
exclude) the date which numerically corresponds to such Business Day one,
three or six months thereafter, PROVIDED, HOWEVER, that if there is no such
numerically corresponding day in such next, third or sixth succeeding
month, such Interest Period shall end on the first Business Day of the
month next succeeding such next, third or sixth succeeding month.
INVESTORS' RIGHTS AGREEMENT shall mean that certain Investors' Rights
Agreement dated as of the Closing Date among Parent, Bulldog, Junior
Subordinated Lenders and Senior Subordinated Lender.
ISSUER shall mean any financial institution which Borrower from time-to-
time, with the prior written consent of Lender, may select to issue
Permitted LCs.
JUNIOR SUBORDINATED LENDERS shall mean RFE Investment Partners V, L.P., a
Delaware limited partnership, Sterling Commercial Capital, Inc., a New York
corporation, and the Treasurer of the State of Michigan as Custodian for
the Michigan Public School Employees Retirement System, the Michigan State
Employees' Retirement System, the Michigan State Police Retirement System
and the Michigan Judges Retirement System.
JUNIOR SUBORDINATED LOAN shall mean the loan in the original principal
amount of $5,000,000 made by Junior Subordinated Lenders to Borrower
pursuant to the Junior Subordinated Loan Instruments.
JUNIOR SUBORDINATED LOAN INSTRUMENTS shall mean the Junior Subordinated
Note Agreement, Junior Subordinated Notes and all other documents and
instruments executed by Borrower or any Junior Subordinated Lender in
connection with the Junior Subordinated Loan.
JUNIOR SUBORDINATED NOTES shall mean those certain Junior Subordinated
Notes Due June 30, 2003 in the aggregate principal amount of $5,000,000
issued by Borrower to Junior Subordinated Lenders pursuant to the Junior
Subordinated Note Agreement.
JUNIOR SUBORDINATED NOTE AGREEMENT shall mean that certain Securities
Purchase Agreement dated as of the Closing Date among Borrower and Junior
Subordinated Lenders.
LAMAR shall mean Lamar Housing, L.L.C., a Georgia limited liability
company.
<PAGE>
LAMAR MERGER shall mean the merger of Lamar with and into GMH with GMH as
the surviving corporation, in accordance with the terms and conditions of
the Lamar Merger Instruments.
LAMAR MERGER AGREEMENT shall mean the Agreement and Plan of Merger dated as
of December 14, 1995 between Lamar and GMH.
LAMAR MERGER CERTIFICATE shall mean the Certificate of Merger with respect
to the Lamar Merger, dated as of December 14, 1995 and duly filed with the
Secretary of State of Georgia on December 15, 1995.
LAMAR MERGER INSTRUMENTS shall mean, collectively, the Lamar Merger
Agreement, the Lamar Merger Certificate and all other documents and
instruments executed by Lamar or GMH in connection with the Lamar Merger.
LC EXPOSURE shall mean, at any time, the sum of (a) the Cap Amount at such
time, PLUS (b) the then aggregate amount of outstanding Reimbursement
Obligations.
LC GUARANTY - see SECTION 2.1.3.
LC GUARANTY REQUEST - see SECTION 12.3.3.
LC REIMBURSEMENT AGREEMENTS AND LC REIMBURSEMENT AGREEMENT - see SECTION
2.1.3.
LC UTILIZATION - see SECTION 5.5.
LEASE OBLIGATIONS shall mean, at any date, the rental commitments of
Borrower under leases for real and/or personal property (including taxes,
insurance, maintenance and similar expenses which Borrower is obligated to
pay under the terms of said leases) on such date, whether or not such
obligations are reflected as liabilities or commitments on a balance sheet
of Borrower or in the notes thereto, excluding, however, obligations under
leases which have been, or, in accordance with GAAP, should be, recorded as
capitalized leases.
LEASEHOLD MORTGAGE and LEASEHOLD MORTGAGES - see SECTION 9.1.2.
LENDER - see PREAMBLE.
LENDER PARTY - see SECTION 14.5(A).
LETTER OF CREDIT shall mean an irrevocable standby letter of credit issued
by an Issuer for the account of Borrower, pursuant to an LC Reimbursement
Agreement.
LETTER OF CREDIT COMMITMENT - see SECTION 2.1.3.
LIABILITIES shall mean all of the following, in each case howsoever
created, arising or evidenced, whether direct or indirect, joint or
several, absolute or contingent, or now or hereafter existing or arising,
or due or to become due: (a) all liabilities, obligations and Indebtedness
to Lender of Borrower under or in connection with this Agreement, any Note,
any Letter of Credit, any LC Guaranty or any of the other Related Documents
(including, without limitation, all Reimbursement Obligations) and (b) all
other liabilities, obligations and Indebtedness of Borrower to Lender in
connection with the Related
<PAGE>
Transactions.
LIBOR INTEREST PAYMENT DATE shall mean, with respect to any LIBOR Rate Loan
(a) the first Business Day of each month and (b) the last day of each
Interest Period applicable thereto.
LIBOR INTEREST RATE DETERMINATION DATE - see SECTION 4.5(B).
LIBOR RATE shall mean, for any Interest Period, an interest rate per annum
obtained by dividing (a) the rate of interest published in THE WALL STREET
JOURNAL two (2) Business Days prior to the first day of such Interest
Period under the caption "Money Rates; London Interbank Offered Rates
(LIBOR)," with respect to a time period equal to such Interest Period, by
(b) a percentage equal to 100% MINUS the LIBOR Reserve Percentage, if any,
in effect on the applicable LIBOR Interest Rate Determination Date;
PROVIDED, HOWEVER, that if such publication is not available or such rate
is not set forth therein, the LIBOR Rate shall be determined on the basis
of any other source reasonably acceptable to Lender.
LIBOR RATE LOANS shall mean Loans which bear interest determined by
reference to the LIBOR Rate.
LIBOR RESERVE PERCENTAGE shall mean, for any day, the aggregate of the
rates (expressed as a decimal), of reserve requirements current on such day
(including, without limitation, basic, supplemental, marginal and emergency
reserves) under any regulation promulgated by the Board of Governors of the
Federal Reserve System (or any other governmental authority having
jurisdiction over Lender) as in effect from time to time dealing with
reserve requirements prescribed for eurocurrency funding, including any
reserve requirements with respect to "eurocurrency liabilities" under
Regulation D of the Board of Governors of the Federal Reserve System.
LIEN shall mean any mortgage, lien, security title, pledge, encumbrance,
charge, retained security title of a conditional vendor or lessor, or other
security interest of any kind, whether arising under a security agreement,
mortgage, deed of trust, deed to secure debt, chattel mortgage, assignment,
pledge, retention of security title, financing or similar statement or
notice or arising as a matter of law, judicial process or otherwise.
LOCKBOX - see SECTION 6.2(A).
LOAN and LOANS - see the last paragraph of SECTION 2.1.
MANAGER shall mean Strategic Investments & Holdings, Inc., a Delaware
corporation.
MANAGEMENT AGREEMENT shall mean that certain Management Agreement by and
between Manager and Borrower dated as of the Closing Date.
MASTER ACCOUNT - see SECTION 6.2(A).
MATERIAL ADVERSE EFFECT shall mean (a) a material adverse effect on the
financial condition, operations, assets, business or prospects of Borrower
or (b) a material impairment of the ability of Borrower to perform its
obligations in connection with this Agreement or any of the Related
Documents to which it is a party or of Lender to enforce or collect any of
the Liabilities.
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MATERIAL INTELLECTUAL PROPERTY RIGHT - see SECTION 10.14.
MAXIMUM AMOUNT OF THE WORKING CAPITAL COMMITMENT shall mean $6,000,000 (as
reduced pursuant to this Agreement, including pursuant to SECTION 2.6).
MERGER shall mean the merger of Acquisition Corp. with and into GMH with
GMH as the surviving corporation, in accordance with the terms and
conditions of the Merger Instruments.
MERGER AGREEMENT shall mean the Plan of Merger dated as of the Closing Date
between Acquisition Corp. and GMH.
MERGER CERTIFICATE shall mean, collectively, the (a) Certificate of
Ownership and Merger with respect to the Merger, dated as of the effective
date of the Merger and duly filed with the Secretary of State of Delaware
on such date and (b) Articles of Merger with respect to the Merger, dated
as of the effective date of the Merger and duly filed with the Secretary of
State of Georgia on such date.
MERGER INSTRUMENTS shall mean, collectively, the Merger Agreement, the
Merger Certificate and all other documents and instruments executed by
Acquisition Corp. or GMH in connection with the Merger.
MORTGAGE and MORTGAGES - see SECTION 9.1.2.
MULTIEMPLOYER PLAN shall mean any "multiemployer plan" within the meaning
of Section 3(37) or 4001(a)(3) of ERISA to which Borrower or a current or
past member of its Controlled Group is making or has made contributions to
or as to which Borrower or any member of its Controlled Group otherwise has
or could have any liability.
NET CASH GENERATED shall mean, for any period, an amount equal to (a)
Adjusted Operating Profit for such period, LESS (b) Gross Capital
Expenditures incurred during such period, PLUS (c) the amount of any
reduction (or minus the amount of any increase) in Working Capital in such
period.
NET INCOME shall mean, for any period, net income or loss of Borrower as it
would appear on an income statement of Borrower for such period prepared in
accordance with GAAP, LESS, to the extent not subtracted from gross income
in computing net income, the amounts paid or payable under SECTIONS
11.17(I) and 11.17(II), and, if paid or payable by Borrower to any
Affiliate of Borrower, 11.17(III).
NOTE and NOTES shall mean the Revolving Note, the Term Note and the Working
Capital Note, or any of them.
NOTICE OF LIBOR ACTIVITY - see SECTION 2.3(A).
OPERATING ACCOUNT - see SECTION 6.2(B).
PBGC shall mean the Pension Benefit Guaranty Corporation, and any entity
succeeding to any or all of its functions under ERISA.
PARENT shall mean GMH Holdings, Inc., a Delaware corporation.
PARENT EQUITY DOCUMENTS shall mean the Restated Certificate of
Incorporation of Parent as in effect on the Closing Date, the
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Stockholders Agreement, the Investors' Rights Agreement and all other
documents and instruments evidencing or pertaining to the Parent Equity
Interests.
PARENT EQUITY INTERESTS shall mean all of the capital stock and options,
warrants and other rights to acquire capital stock of Parent, as more
particularly set forth on SCHEDULE XIII.
PARENT PREFERRED DIVIDENDS shall mean the quarterly cash dividends on the
Parent Preferred Stock required by the Parent Equity Documents in an amount
not to exceed $240,000 in the aggregate per quarter.
PARENT PREFERRED STOCK shall mean all of the issued and outstanding shares
of Series A Redeemable Preferred Stock of Parent.
PENSION PLAN shall mean any Employee Benefit Plan (other than a
Multiemployer Plan), which is subject to title IV of ERISA or subject to
the minimum funding standards under Section 412 of the Code or Section 302
of ERISA.
PERMITTED LC shall mean a Letter of Credit issued with Lender's prior
written consent; PROVIDED, HOWEVER, that (a) each such Letter of Credit
shall expire pursuant to its terms on or before the Working Capital Loan
Termination Date and (b) at no time shall Total WC Exposure exceed the
Working Capital Commitment in effect at such time.
PERMITTED LIENS shall mean any of the following Liens:
(a) Liens in favor of Lender, granted pursuant to the Collateral
Documents;
(b) Liens in connection with the acquisition of fixed assets after
the date hereof and attaching only to the Property being
acquired, if the Indebtedness secured thereby does not exceed the
lesser of eighty percent (80%) of the fair market value of such
Property at the time of acquisition thereof and $75,000 in the
aggregate for Borrower at any one time outstanding;
(c) Liens for current taxes or other governmental charges or levies
which are not delinquent or are being contested in good faith and
by appropriate proceedings, and with respect to which adequate
reserves have been established, and are being maintained, in
accordance with GAAP;
(d) mechanic's, worker's, materialmen's and other like Liens arising
in the ordinary course of business in respect of obligations
which are not delinquent or which are being contested in good
faith and by appropriate proceedings, and with respect to which
adequate reserves have been established, and are being
maintained, in accordance with GAAP;
(e) Liens arising in the ordinary course of business for sums being
contested in good faith and by appropriate proceedings, and with
respect to which adequate reserves have been established, and are
being maintained, in accordance with GAAP, or for sums not due,
and in any case not involving any deposits or advances for
borrowed money or the deferred purchase price of Property or
services;
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(f) zoning ordinances, easements, licenses, reservations, covenants,
conditions or restrictions on the use of Property which, in
Lender's reasonable determination, are not violated by existing
uses or improvements, do not interfere with the use of the
related Property and do not adversely affect the merchantability
of the title to the related Property;
(g) Liens in respect of judgments or awards with respect to which no
Event of Default would exist pursuant to SECTION 13.1.16;
(h) Liens incurred in the ordinary course of business in connection
with worker's compensation, unemployment insurance or other forms
of governmental insurance or benefits; and
(i) Liens shown on PART 1 of SCHEDULE X.
PERMITTED PRIOR LIENS shall mean any of the following Liens:
(a) the Permitted Liens described in clauses (b), (f), (h) and (i) of
the definition of Permitted Liens, subject to the limitations, if
any, set forth therein; and
(b) the Permitted Liens described in clauses (c) and (d) of the
definition of Permitted Liens that are accorded priority by law
to the Liens in favor of Lender granted pursuant to the
Collateral Documents.
PERSON shall mean any natural person, corporation, firm, general or limited
partnership, limited liability company or partnership, trust, association,
government, governmental agency or other entity, whether acting in an
individual, fiduciary or other capacity.
PLEDGE AGREEMENT - see SECTION 9.1.3.
PREFERRED DIVIDENDS shall mean quarterly cash dividends from Borrower to
Parent in an amount sufficient to enable Parent to pay the Parent Preferred
Dividends (including accrued and unpaid Parent Preferred Dividends)
permitted to be paid pursuant to the Subordination Agreement.
PREPAYMENT FEE - see SECTION 2.10.
PROPERTY shall mean all types of real, personal or mixed property and all
types of tangible or intangible property.
REFERENCE RATE shall mean at any time the rate per annum then most recently
announced by The First National Bank of Chicago, a national banking
association, as its corporate base rate at Chicago, Illinois (or if such
rate is not being quoted, the rate which is the successor to such rate, and
if no successor is being quoted, the rate conceptually equivalent to such
rate which the domestic commercial bank having the highest combined capital
and surplus of any bank having its principal office in Chicago, Illinois is
quoting).
REFERENCE RATE LOANS shall mean Loans which bear interest determined by
reference to the Reference Rate.
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REIMBURSEMENT OBLIGATIONS - see SECTION 2.14.1.
RELATED DOCUMENTS shall mean the Notes, the Subordination Agreement, the
Collateral Documents and all other agreements, documents and instruments
executed and delivered by Borrower or Parent pursuant hereto.
RELATED TRANSACTIONS shall mean all transactions contemplated by this
Agreement and the Related Documents, including, without limitation, the
Lamar Merger, the Acquisition, the Merger, the Loans, the Subordinated
Loans, the repayment of the Indebtedness to be Refinanced with proceeds of
Loans to be made to Borrower, the granting by Borrower of Liens on the
Collateral to secure the Liabilities and the granting by Parent of the
Liens on the Borrower Equity Interests to secure the Liabilities.
REPORTABLE EVENT shall have the meaning given to such term under Section
4043 of ERISA other than a reportable event described in 29 C.F.R. Sections
2615.12, 2615.13, 2615.14, 2615.15, 2615.19 or 2615.20.
REPURCHASE AGREEMENTS shall mean those certain agreements with the
floorplan lenders to the purchasers of Borrower's inventory (individually,
a "dealer") relating to such inventory purchased by such dealer pursuant to
which Borrower agrees to repurchase any such inventory which is new and
unused inventory remaining in the possession of such dealer or repossessed
by such dealer's lender after a default under the financing agreements
between such dealer and its lender, subject to the terms and conditions of
such agreements.
REPURCHASE OBLIGATIONS shall mean the Contingent Obligations of Borrower
under the Repurchase Agreements.
REQUIREMENT OF LAW for any Person shall mean the corporate charter and By-
Laws or other organizational or governing documents of such Person, and any
law, treaty, rule, ordinance or regulation or determination of an
arbitrator or a court or other governmental authority, in each case
applicable to or binding upon such Person or any of its Property or to
which such Person or any of its Property is subject.
REVOLVING LOAN and REVOLVING LOANS - see SECTION 2.1.1, including any
Reimbursement Obligations which have been converted to Revolving Loans.
REVOLVING LOAN COMMITMENT - see SECTION 2.1.1.
REVOLVING LOAN COMMITMENT REDUCTION AMOUNT - see SECTION 2.5(A).
REVOLVING LOAN COMMITMENT REDUCTION DATE shall mean each date indicated as
such in SCHEDULE I or, if such date is not a Business Day, the next
succeeding Business Day.
REVOLVING LOAN TERMINATION DATE - see SECTION 2.1.1.
REVOLVING NOTE - see SECTION 3.1.
SCHEDULED REDUCTION IN THE REVOLVING LOAN COMMITMENT for any Revolving Loan
Commitment Reduction Date shall mean the amount set forth in SCHEDULE I
opposite such Revolving Loan Commitment Reduction Date.
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SCHEDULED REDUCTION IN THE TERM LOAN COMMITMENT for any Term Loan
Commitment Reduction Date shall mean the amount set forth in SCHEDULE IA
opposite such Term Loan Commitment Reduction Date.
SCOTT shall mean Samuel P. Scott, individually.
SECURITY AGREEMENT - see SECTION 9.1.1.
SELLING SHAREHOLDERS shall mean collectively, Kelly Scott Herold, as
Trustee of the Kelly Scott Herold Revocable Trust - 1995 dated September
27, 1995, Gregory Keith Scott, Drew Eric Scott and Scott, individually and
as joint tenant with Sherry J. Scott.
SELLING SHAREHOLDERS BANK shall mean The First National Bank of Chicago.
SELLING SHAREHOLDERS INDEBTEDNESS shall mean the Indebtedness owing by
Borrower to the Selling Shareholders evidenced by the Selling Shareholders
Notes, the outstanding principal amount of which shall not exceed
$45,000,000, and the repayment of which shall be secured by the Selling
Shareholders Letters of Credit.
SELLING SHAREHOLDERS INSTRUMENTS shall mean the Selling Shareholders Notes
and the Selling Shareholders Letters of Credit.
SELLING SHAREHOLDERS LETTERS OF CREDIT shall mean those certain Irrevocable
Stand-by Letters of Credit issued by the Selling Shareholders Bank in the
respective face amounts and to the respective holders of the Selling
Shareholders Notes to secure repayment of the Selling Shareholders
Indebtedness.
SELLING SHAREHOLDERS NOTES shall mean those certain non-recourse
Installment Promissory Notes each dated the Closing Date and each due and
payable in full on January 25, 1996, made by Borrower in favor of (a) Kelly
Scott Herold, as Trustee of the Kelly Scott Herold Revocable Trust - 1995
dated September 27, 1995, in the original principal amount of $10,457,143,
(b) Gregory Keith Scott in the original principal amount of $10,457,143,
(c) Drew Eric Scott in the original principal amount of $10,457,143, and
(d) Samuel P. Scott and Sherry J. Scott, as joint tenants, in the original
principal amount of $13,628,571.
SENIOR SUBORDINATED LENDER shall mean The Equitable Life Assurance Society
of the United States, a New York insurance company.
SENIOR SUBORDINATED LOAN shall mean the loan in the original principal
amount of $15,000,000 made by Senior Subordinated Lender to Acquisition
Corp. pursuant to the Senior Subordinated Loan Instruments.
SENIOR SUBORDINATED LOAN INSTRUMENTS shall mean the Senior Subordinated
Note Agreement, Senior Subordinated Note and all other documents and
instruments executed by Borrower or Senior Subordinated Lender in
connection with the Senior Subordinated Loan.
SENIOR SUBORDINATED NOTE shall mean that certain Senior Note Due December
21, 2002 in the aggregate principal amount of $17,243,295 issued by
Borrower to Senior Subordinated Lender pursuant to the Senior Subordinated
Note Agreement.
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SENIOR SUBORDINATED NOTE AGREEMENT shall mean that certain Note and Warrant
Purchase Agreement dated as of the Closing Date between Acquisition Corp.
and Senior Subordinated Lender.
STATED AMOUNT shall mean, with respect to any Permitted LC and as of any
date of determination, the maximum amount for which a draw or a demand for
payment may then be made thereunder, whether or not such maximum amount is
defined therein as the "Stated Amount" thereof.
STOCKHOLDERS AGREEMENT shall mean that certain Stockholders Agreement dated
as of the Closing Date among Parent and all holders of the Parent Equity
Interests.
STOCK PURCHASE AGREEMENT - see BACKGROUND.
SUBORDINATED LENDERS shall mean Senior Subordinated Lender and Junior
Subordinated Lenders.
SUBORDINATED LOANS shall mean the Senior Subordinated Loan and the Junior
Subordinated Loan.
SUBORDINATED LOAN INSTRUMENTS shall mean the Senior Subordinated Loan
Instruments and the Junior Subordinated Loan Instruments.
SUBORDINATED NOTES shall mean the Senior Subordinated Note and the Junior
Subordinated Notes.
SUBORDINATION AGREEMENT shall mean a subordination agreement among Lender,
Borrower, Parent, Manager and Subordinated Lenders, in form and substance
satisfactory to Lender, as amended, modified or supplemented from time to
time in accordance with the terms thereof.
SUBSIDIARY shall mean a corporation of which the indicated Person and/or
its other subsidiaries, individually or in the aggregate, own, directly or
indirectly, such number of outstanding shares as have at the time of any
determination hereunder more than 50% of the ordinary voting power for the
election of directors (or their equivalent under the laws of the
jurisdiction of organization of such corporation).
TERM LOAN - see SECTION 2.1.4.
TERM LOAN COMMITMENT - see SECTION 2.1.4.
TERM LOAN COMMITMENT REDUCTION AMOUNT - see SECTION 2.7(A).
TERM LOAN COMMITMENT REDUCTION DATE shall mean each date indicated as such
in SCHEDULE IA or, if such date is not a Business Day, the next succeeding
Business Day.
TERM LOAN TERMINATION DATE - see SECTION 2.1.4.
TERM LOAN NOTE - see SECTION 3.3.
TOTAL FIXED CHARGES shall mean, for any period, the sum of (a) all
scheduled or accelerated payments of interest or principal on account of
Indebtedness of Borrower, including any and all penalties, premiums,
prepayment fees or the like thereon (including without limitation any
Scheduled Reduction in the Revolving Loan Commitment or Scheduled Reduction
in the Term Loan Commitment, whether or not such
<PAGE>
reduction gives rise to a payment of any Loans) with respect to such period
PLUS (b) taxes paid or payable with respect to such period directly by
Borrower to any governmental authority and, without double counting, the
amounts paid or payable by Borrower to Parent to enable Parent to make such
payments on behalf of Borrower, PLUS (c) to the extent not subtracted in
determining Net Income and without double counting, all amounts paid by
Borrower with respect to such period to purchase, redeem or otherwise
acquire any Borrower Equity Interests PLUS (d) all scheduled payments of
Preferred Dividends with respect to such period. Nothing contained herein
shall be deemed to permit Borrower to take any action otherwise prohibited
by this Agreement. For purposes of the foregoing, "scheduled payments"
shall not include repayments of Loans (i) pursuant to clauses TENTH,
ELEVENTH and TWELFTH of SECTION 7.3 or (ii) following any reductions or
termination of the Commitments pursuant to SECTION 2.5, 2.6, or 2.7.
TOTAL LIABILITIES at any date shall mean the sum of (a) the amount which,
in conformity with GAAP, would be set forth opposite the caption
"liabilities" (or any like caption) on a balance sheet of Borrower at such
date PLUS (b) the aggregate amount of Contingent Obligations (excluding the
Repurchase Obligations) of Borrower outstanding on such date (other than
those which would constitute liabilities under CLAUSE (A) above).
TOTAL WC EXPOSURE shall mean, at any time, the sum of (a) the LC Exposure,
if any, at such time and (b) the then aggregate outstanding principal
amount of all Working Capital Loans.
UNAPPLIED INSURANCE OR CONDEMNATION PROCEEDS shall mean all casualty
insurance or condemnation proceeds with respect to Borrower's Property
which are not applied to the repair, restoration or rebuilding of the
damaged, destroyed or condemned Property pursuant to the Collateral
Documents.
UNIFORM COMMERCIAL CODE shall mean the Uniform Commercial Code as in effect
in the State of Illinois on the date of this Agreement. UNMATURED EVENT OF
DEFAULT shall mean any event or condition which if it continues uncured
will, with the lapse of time or notice or lapse of time and notice,
constitute an Event of Default.
WELFARE PLAN shall mean any Employee Benefit Plan which is an "employee
welfare benefit plan," as such term is defined in Section 3(1) of ERISA.
WORKING CAPITAL shall mean, at any date, the excess of Current Assets over
Current Liabilities as of such date.
WORKING CAPITAL COMMITMENT - see SECTION 2.1.2.
WORKING CAPITAL COMMITMENT EXTENSION REQUEST - see SECTION 2.2.
WORKING CAPITAL LOAN and WORKING CAPITAL LOANS - see SECTION 2.1.2,
including any Reimbursement Obligations which have been converted to
Working Capital Loans.
WORKING CAPITAL LOAN TERMINATION DATE - see SECTION 2.1.2.
WORKING CAPITAL NOTE - see SECTION 3.2.
SECTION 1.2 ACCOUNTING AND FINANCIAL DETERMINATIONS. Where the
<PAGE>
character or amount of any asset or liability or item of income or expense is
required to be determined, or any accounting computation is required to be made,
for the purpose of this Agreement or the Related Documents, such determination
or calculation shall be made, to the extent applicable and except as otherwise
specified in this Agreement or such Related Document, on a consolidated basis so
as to include all Subsidiaries of Borrower in each such calculation and in
accordance with GAAP; PROVIDED, HOWEVER, that if any change in generally
accepted accounting principles from those applied in the preparation of the
financial statements referred to in SECTION 10.3 hereof is occasioned by the
promulgation of rules, regulations, pronouncements and opinions by or required
by the Financial Accounting Standards Board or the American Institute of
Certified Public Accountants (or successors thereto or agencies with similar
functions), the initial announcement of which change is made after the Closing
Date, results in a change in the method of calculation of financial covenants,
standards or terms found in SECTIONS 1 or 11 hereof, the parties hereto agree to
enter into good faith negotiations in order to amend such provisions so as to
reflect such changes with the desired result that the criteria for evaluating
Borrower's financial condition shall be the same after such changes as if such
changes had not been made; and PROVIDED, FURTHER, that until such time as the
parties hereto agree upon such amendments, such financial covenants, standards
and terms shall be construed and calculated as though such change had not taken
place. When used herein, the term "financial statement" shall include the notes
and schedules thereto, if any.
SECTION 1.3 CROSS REFERENCES; HEADINGS. The words "hereof," "herein" and
"hereunder" and words of a similar import when used in this Agreement or in any
of the Related Documents shall refer to this Agreement or such Related Document
as a whole and not to any particular provision of this Agreement or such Related
Document. Section, Schedule and Exhibit references contained in this Agreement
are references to Sections, Schedules and Exhibits in or to this Agreement
unless otherwise specified. Any reference in any Section or definition to any
clause is, unless otherwise specified, to such clause of such Section or
definition. The various headings in this Agreement and the Related Documents are
inserted for convenience only and shall not affect the meaning or interpretation
of this Agreement or such Related Document or any provision hereof or thereof.
SECTION 2 COMMITMENTS OF LENDER; LOAN REQUESTS; REDUCTION OR
TERMINATION OF THE COMMITMENTS; PREPAYMENTS; MAKING OF
PAYMENTS; SETOFF
SECTION 2.1 COMMITMENTS. Subject to the terms and conditions of this
Agreement, Lender shall:
2.1.1. REVOLVING LOAN COMMITMENT. Make loans to Borrower (herein
collectively called the "Revolving Loans" and individually called a
"Revolving Loan") on a revolving basis from time to time before April 1,
2000 (herein called the "Revolving Loan Termination Date") in such amounts
as Borrower from time to time may request up to the amount set forth in
SCHEDULE I (as reduced pursuant to this Agreement, including pursuant to
SECTION 2.5) at such time.
The foregoing commitment of Lender is herein called the "Revolving
Loan Commitment."
2.1.2. WORKING CAPITAL COMMITMENT. Make loans to Borrower (herein
collectively called the "Working Capital Loans" and individually called a
"Working Capital Loan") on a revolving basis
<PAGE>
from time to time before January 1, 1999 or such later date as may be
established pursuant to SECTION 2.2 (herein called the "Working Capital
Loan Termination Date") in such amounts as Borrower from time to time may
request up to the then existing Maximum Amount of the Working Capital
Commitment, PROVIDED, HOWEVER, that (a) Lender shall not be required to
make any Working Capital Loan following the initial Working Capital Loan
unless there shall be outstanding, at the time of such proposed Working
Capital Loan, Revolving Loans in the full principal amount of the Revolving
Loan Commitment then in effect; (b) Lender shall not be required to make
any Working Capital Loan if, after giving effect to such Working Capital
Loan, the aggregate principal amount of the outstanding Working Capital
Loans would exceed the Maximum Amount of the Working Capital Commitment
then in effect; and (c) the initial Working Capital Loan shall not exceed
$2,500,000.
The foregoing commitment of Lender is herein called the "Working
Capital Commitment."
2.1.3. LETTER OF CREDIT COMMITMENT. Issue to an Issuer guaranties,
substantially in the form set forth in EXHIBIT A or otherwise in form and
substance satisfactory to Lender (each herein, together with any extension
or renewals thereof, or guaranties issued by Lender in substitution
therefor from time to time, called an "LC Guaranty") of reimbursement
obligations of Borrower arising under reimbursement agreements
substantially in the form set forth in EXHIBIT B or such other form as is
satisfactory to Lender (herein collectively called the "LC Reimbursement
Agreements" and individually called an "LC Reimbursement Agreement"), in
each case executed in connection with Permitted LCs; PROVIDED HOWEVER, that
Lender shall not be required to issue any LC Guaranty if, after giving
effect to such issuance, Total WC Exposure would exceed the Working Capital
Commitment then in effect, and PROVIDED, FURTHER, that in no event shall
the aggregate amount of reimbursement obligations of Borrower secured at
any time pursuant to LC Guaranties exceed $1,000,000. All LC Guaranties
shall expire on or before the Working Capital Loan Termination Date.
The foregoing commitment of Lender is herein called the "Letter of
Credit Commitment."
2.1.4. TERM LOAN COMMITMENT. Make a term loan to Borrower on the
Closing Date in the amount of $4,000,000 (herein called the "Term Loan")
due and payable on or before January 1, 2001 (herein called the "Term Loan
Termination Date") (as reduced pursuant to this Agreement, including
pursuant to SECTION 2.7).
The foregoing commitment of Lender is herein called the "Term Loan
Commitment."
The Revolving Loans, Term Loan and the Working Capital Loans are herein
collectively called "Loans" and individually called a "Loan."
SECTION 2.2 EXTENSION OF WORKING CAPITAL LOAN TERMINATION DATE.
Borrower, pursuant to a Working Capital Commitment Extension Request
substantially in the form set forth in EXHIBIT C (a "Working Capital Commitment
Extension Request"), delivered to Lender not more than 120, nor less than 30,
Business Days prior to the then scheduled Working Capital Loan Termination Date,
may request Lender to extend all or part (as specified in such Working Capital
Commitment Extension Request) of the Working Capital Commitment and the Letter
of Credit Commitment for up to two additional one year periods, each expiring on
the anniversary of the
<PAGE>
then scheduled Working Capital Loan Termination Date (or, if such date is not a
Business Day, on the next succeeding Business Day). If no Event of Default or
Unmatured Event of Default has occurred and is continuing on the then scheduled
Working Capital Loan Termination Date, the Working Capital Loan Termination Date
shall be extended for an additional one year period as so requested, but in no
event beyond January 1, 2001.
SECTION 2.3 LOAN REQUESTS.
(a) With respect to borrowings comprised of Reference Rate Loans not
exceeding an aggregate amount of $500,000 in a single day, Borrower shall
give notice to Lender of each such proposed borrowing by 10:00 A.M.,
Chicago time on the day of, or within five (5) Business Days prior to, the
proposed Funding Date of such borrowing. With respect to borrowings
comprised of Reference Rate Loans in an aggregate amount in excess of
$500,000 in a single day, Borrower shall give notice to Lender of each such
proposed borrowing by 10:00 A.M., Chicago time no later than three (3)
Business Days and no sooner than five (5) Business Days prior to, the
proposed Funding Date of such borrowing. Each of the aforementioned notices
may be oral and shall be confirmed in writing on or before the fifteenth
Business Day of the first calendar month following the Funding Date of each
such borrowing by delivery of a Borrowing Certificate to Lender. With
respect to borrowings comprised of LIBOR Rate Loans, Borrower shall deliver
to Lender written notice of each such proposed borrowing substantially in
the form set forth on EXHIBIT D (each a "Notice of LIBOR Activity") by
10:00 A.M., Chicago time at least three (3) Business Days prior to, but in
any event no more than five (5) Business Days prior to, the proposed
Funding Date. Each oral or written notice, as the case may be, given
pursuant to this SECTION 2.3(A) shall be irrevocable. Loans made on any
Funding Date (x) in the case of Reference Rate Loans, shall be in an
aggregate minimum amount of $45,000 and integral multiples of $5,000 in
excess thereof and (y) in the case of LIBOR Rate Loans, shall be in an
aggregate minimum amount of $1,000,000 and integral multiplies of $200,000
in excess thereof. Subject to receipt by Lender of the documents required
under SECTION 12 with respect to such borrowing and the satisfaction of all
other conditions precedent to such borrowing set forth in this Agreement,
on the requested Funding Date Lender shall pay over such funds by wire
transfer to the Master Account (except that, with respect to the initial
Loans, disbursement shall be according to instructions to be agreed upon by
Lender and Borrower on or prior to the Closing Date).
(b) Lender shall not incur any liability to Borrower in acting upon
any oral notice referred to above which Lender believes in good faith to
have been given by a duly authorized officer or other person authorized to
borrow on behalf of Borrower or for otherwise acting in good faith under
this SECTION 2.3 and, upon funding of any Loans by Lender in accordance
with this Agreement pursuant to any such oral notice, Borrower shall have
effected a Loan hereunder.
SECTION 2.4 CERTAIN WAIVERS. Borrower waives presentment, demand for
payment, notice of dishonor and protest, notice of the creation of any of the
Liabilities and all other notices whatsoever to Borrower with respect to the
Liabilities except notices required under SECTION 13.1.
SECTION 2.5 REDUCTION OR TERMINATION OF THE REVOLVING LOAN COMMITMENT.
(a) On each Revolving Loan Commitment Reduction Date, the
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Revolving Loan Commitment in effect on such date shall be reduced by an
amount equal to the sum of (i) the Revolving Loan Commitment Reduction
Amount plus (ii) for the last day of any Fiscal Year of Borrower on which
there is $1,000 or less in aggregate outstanding principal amount of all
Working Capital Loans, an amount equal to the positive difference between
(x) the Revolving Loan Commitment as adjusted pursuant to the foregoing
clause (i) and (y) (A) the daily average of the outstanding principal
amount of the Revolving Loans for a period of 30 days preceding such
Revolving Loan Commitment Reduction Date rounded up to the nearest integral
multiple of $50,000 PLUS (B) the amounts accrued by Borrower on its
financial statements delivered to Lender pursuant to SECTION 11.1.4 hereof
for those items listed on SCHEDULE XVII; PROVIDED, HOWEVER, that prior to
the termination of the Revolving Loan Commitment, the Revolving Loan
Commitment shall at no time be less than $1,000. For purposes of the
foregoing, "Revolving Loan Commitment Reduction Amount" shall mean the
amount indicated with respect to the relevant Revolving Loan Commitment
Reduction Date in SCHEDULE I under the caption "Scheduled Reduction in
Revolving Loan Commitment." Borrower shall not, in anticipation of any
Revolving Loan Commitment Reduction Date, take any actions primarily
intended to increase the amount specified in clause (y) above for such
date. These actions could include, for example and not by way of
limitation, prepayment or accelerated payment of Borrower's trade payables,
other obligations or discretionary expenditures or making short term
investments (whether with Revolving Loan proceeds or other available cash).
Additionally, effective as of the date the amounts described in clauses
(A), (B) and (C) below are required to be applied to the repayment of the
Loans, the Revolving Loan Commitment shall be automatically and permanently
reduced by the amount of all (A) Unapplied Insurance or Condemnation
Proceeds, (B) Asset Sale Proceeds and (C) Equity Sale Proceeds.
(b) In addition to the mandatory reductions of the Revolving Loan
Commitment under CLAUSE (A) above, Borrower may voluntarily from time to
time on at least five Business Days' prior written irrevocable notice to
Lender permanently reduce the amount of the Revolving Loan Commitment or
terminate the Revolving Loan Commitment prior to the Revolving Loan
Termination Date; PROVIDED, HOWEVER, that no such notice may be given
unless, prior to or contemporaneously with the effective date of such
reduction or termination, the Working Capital Commitment and Letter of
Credit Commitment shall have been terminated pursuant to SECTION 2.6 or
otherwise and PROVIDED, FURTHER, that prior to the termination of the
Revolving Loan Commitment, the Revolving Loan Commitment shall at no time
be less than $1,000. Each such voluntary reduction of the Revolving Loan
Commitment shall be in an aggregate amount of at least $100,000 and an
integral multiple of $50,000. Borrower may terminate the Revolving Loan
Commitment only upon payment in full of the Revolving Note and all amounts,
if any, due pursuant to SECTION 2.10.
(c) The amount of each reduction of the Revolving Loan Commitment
pursuant to clauses (a) and (b) above (other than reductions pursuant to
clause (a) (i) above) shall be subtracted (as an additional reduction of
the Revolving Loan Commitment) from the "Amount of Revolving Loan
Commitment" set forth in SCHEDULE I opposite each remaining period
beginning with the period which includes the date of such reduction; and,
upon Borrower's request, Lender shall deliver to Borrower a copy of
SCHEDULE I setting forth such revisions, which revised SCHEDULE I shall
become a part of this Agreement amending any and all previous versions of
SCHEDULE I, PROVIDED, HOWEVER, that the
<PAGE>
failure of Lender to provide such SCHEDULE I shall not give rise to or
result in any liability of Lender.
SECTION 2.6 REDUCTION OR TERMINATION OF THE WORKING CAPITAL COMMITMENT
AND LETTER OF CREDIT COMMITMENT.
(a) On the Working Capital Commitment Termination Date, the Working
Capital Commitment and the Letter of Credit Commitment in effect on such
date shall be reduced to zero. Additionally, effective as of the date the
amounts described in clauses (i), (ii) or (iii) below are required to be
applied to the repayment of the Loans, the Working Capital Commitment shall
be automatically and permanently reduced by the amount of all (i) Unapplied
Insurance or Condemnation Proceeds less the amount of any reduction in the
Revolving Loan Commitment pursuant to SECTION 2.5(A)(A), (ii) Asset Sale
Proceeds less the amount of any reduction in the Revolving Loan Commitment
pursuant to SECTION 2.5(A)(B), and (iii) Equity Sale Proceeds less the
amount of any reduction in the Revolving Loan Commitment pursuant to
SECTION 2.5(A)(C).
(b) In addition to the mandatory reduction of the Working Capital
Commitment under CLAUSE (A) above, Borrower may voluntarily from time to
time on at least five Business Days' prior written irrevocable notice to
Lender permanently reduce the amount of the Working Capital Commitment, any
such reduction to be in an aggregate amount of at least $100,000 and an
integral multiple of $50,000; PROVIDED, HOWEVER, that prior to the
termination of the Working Capital Commitment, the Working Capital
Commitment shall at no time be less than $1,000. Borrower may at any time
when no LC Guaranty or Permitted LC is outstanding, on like notice prior to
the Working Capital Loan Termination Date, terminate the Working Capital
Commitment and the Letter of Credit Commitment upon payment in full of the
Working Capital Note and full and final release and return of the LC
Guaranties by the respective Issuers to Lender. (c) The amount of each
reduction of the Maximum Amount of Working Capital Commitment pursuant to
clauses (a) and (b) above shall be subtracted (as an additional permanent
reduction of the Working Capital Commitment) from the Maximum Amount of the
Working Capital Commitment then in effect and the reduced Maximum Amount of
the Working Capital Commitment shall constitute the Maximum Amount of the
Working Capital Commitment.
SECTION 2.7 REDUCTION OR TERMINATION OF THE TERM LOAN COMMITMENT.
(a) On each Term Loan Commitment Reduction Date, the Term Loan
Commitment in effect on such date shall be reduced by an amount equal to
the Term Loan Commitment Reduction Amount. For purposes of the foregoing,
"Term Loan Commitment Reduction Amount" shall mean the amount indicated
with respect to the relevant Term Loan Commitment Reduction Date in
SCHEDULE IA under the caption "Scheduled Reduction in Term Loan
Commitment." Additionally, effective as of the date the amounts described
in clauses (A), (B) and (C) below are required to be applied to the
repayment of the Loans, the Term Loan Commitment shall be automatically and
permanently reduced by the amount of all (A) Unapplied Insurance or
Condemnation Proceeds less the amount of any reduction in the Revolving
Loan Commitment pursuant to SECTION 2.5(A)(A) and the Working Capital
Commitment pursuant to SECTION 2.6(A)(I), (B) Asset Sale Proceeds less the
amount of any reduction in the Revolving Loan Commitment pursuant to
SECTION 2.5(A)(B) and the Working Capital Commitment pursuant to SECTION
2.6(A)(II) and (C)
<PAGE>
Equity Sale Proceeds less the amount of any reduction in the Revolving Loan
Commitment pursuant to SECTION 2.5(A)(C) and the Working Capital Commitment
pursuant to SECTION 2.6(A)(III).
(b) In addition to the mandatory reductions of the Term Loan
Commitment under CLAUSE (A) above, Borrower may voluntarily from time to
time on at least five Business Days' prior written irrevocable notice to
Lender permanently reduce the amount of the Term Loan Commitment or
terminate the Term Loan Commitment prior to the Term Loan Termination Date;
PROVIDED, HOWEVER, that no such notice may be given unless, prior to or
contemporaneously with the effective date of such reduction or termination,
the Revolving Loan Commitment, Working Capital Commitment and Letter of
Credit Commitment shall have been terminated pursuant to SECTION 2.5 and
2.6 or otherwise. Each such voluntary reduction of the Term Loan Commitment
shall be in an aggregate amount of at least $100,000 and an integral
multiple of $50,000. Borrower may terminate the Term Loan Commitment only
upon payment in full of the Term Loan Note and all amounts, if any, due
pursuant to SECTION 2.10.
(c) The amount of each reduction of the Term Loan Commitment pursuant
to clauses (a) and (b) above (other than reductions pursuant to clause (a)
(i) above) shall be subtracted (as an additional reduction of the Term Loan
Commitment) from the "Amount of Term Loan Commitment" set forth in SCHEDULE
IA opposite each remaining period beginning with the period which includes
the date of such reduction; and, upon Borrower's request, Lender shall
deliver to Borrower a copy of SCHEDULE IA setting forth such revisions,
which revised SCHEDULE IA shall become a part of this Agreement amending
any and all previous versions of SCHEDULE IA; PROVIDED, HOWEVER, that the
failure of Lender to provide such SCHEDULE IA shall not give rise to or
result in any liability of Lender.
SECTION 2.8 MANDATORY PREPAYMENTS.
(a) Concurrently with each reduction (including any termination) of
the Revolving Loan Commitment (whether pursuant to SECTION 2.5 or
otherwise), Borrower shall make a mandatory prepayment of the amount, if
any, by which the unpaid principal amount of the Revolving Loans (after
giving effect to any repayments thereof pursuant to SECTION 7.3), exceeds
the then reduced amount of the Revolving Loan Commitment (and each such
payment shall be accompanied by accrued interest on such principal amount
and, with respect to reductions as a result of any prepayment described in
SECTION 2.10, the Prepayment Fee required under such Section).
(b) Concurrently with each reduction (including any termination) of
the Working Capital Commitment (whether pursuant to SECTION 2.6 or
otherwise), Borrower shall make a mandatory prepayment of the amount, if
any, by which (i) the unpaid principal amount of the Working Capital Loans
(after giving effect to any repayments thereof pursuant to SECTION 7.3)
exceeds (ii) the then reduced amount of the Working Capital Commitment (and
each such payment shall be accompanied by accrued interest on such
principal amount and, with respect to reduction as a result of any
prepayment described in SECTION 2.10, the Prepayment Fee required under
such Section).
(c) Concurrently with each reduction (including any termination) of
the Term Loan Commitment (whether pursuant to SECTION 2.7 or otherwise),
Borrower shall make a mandatory prepayment of the amount,
<PAGE>
if any, by which the unpaid principal amount of the Term Loan (after giving
effect to any repayments thereof pursuant to SECTION 7.3) exceeds the then
reduced amount of the Term Loan Commitment (and each such payment shall be
accompanied by accrued interest on such principal amount and, with respect
to reductions as a result of any prepayment described in SECTION 2.10, the
Prepayment Fee required under such Section).
(d) If at any time Total WC Exposure shall exceed the Working Capital
Commitment then in effect, Borrower shall make a mandatory prepayment of
the Working Capital Loans (and each such prepayment shall be accompanied by
accrued interest on such principal amount and/or cause a reduction in the
Cap Amount then in effect (by the delivery of cash collateral to the
applicable Issuer or otherwise) in the aggregate amount of such excess;
PROVIDED, HOWEVER, that any such reduction in the Cap Amount shall not be
deemed effective for the purposes hereof until the applicable Issuer shall
have delivered to Lender a written acknowledgment thereof.
(e) If at any time the making of a deemed Loan pursuant to the first
sentence of SECTION 7.5(B) results in Loans or Reimbursement Obligations
exceeding the related Commitment, then Borrower immediately shall make a
mandatory prepayment thereof (and each such payment shall be accompanied by
accrued interest on such principal amount).
(f) Upon receipt by Borrower of any Unapplied Insurance or
Condemnation Proceeds, Asset Sale Proceeds or by Borrower or Parent of any
Equity Sale Proceeds, Borrower shall make a mandatory prepayment of the
Loans in the amount thereof, each such prepayment to be applied in the
order set forth in SECTION 7.3 (and each such payment shall be accompanied
by accrued interest on such principal amount and any payment required under
SECTION 2.10).
SECTION 2.9 VOLUNTARY PREPAYMENTS. Borrower voluntarily from time to
time may prepay the Loans in whole or in part, PROVIDED that:
(a) any prepayment of the Term Loan may be made only if at the time
of such prepayment the aggregate outstanding principal amount of all
Revolving Loans and all Working Capital Loans is $1,000 or less and no
Reimbursement Obligations are outstanding;
(b) any prepayment of Revolving Loans may be made only if at the time
of such prepayment the aggregate outstanding principal amount of all
Working Capital Loans is $1,000 or less and no Reimbursement Obligations
are outstanding;
(c) except for prepayments pursuant to SECTION 7.3, Borrower shall
give Lender not less than three (3) Business Days' prior notice of any
prepayment, specifying the Loans to be prepaid, and the date and amount of
such prepayment;
(d) prior to the termination of the Working Capital Commitment,
Borrower shall be entitled to prepay only so much of the Working Capital
Loans as shall leave at all times outstanding a minimum principal amount of
$1,000 in Working Capital Loans;
(e) prior to the termination of the Revolving Loan Commitment,
Borrower shall be entitled to prepay only so much of the Revolving Loans as
shall leave at all times outstanding a minimum principal
<PAGE>
amount of $1,000 in Revolving Loans;
(f) except for prepayments pursuant to SECTION 7.3, each partial
prepayment of a Loan shall be in a principal amount of at least $100,000
and an integral multiple of $50,000; and
(g) each such prepayment shall be accompanied by accrued interest on
the principal amount prepaid.
SECTION 2.10 PREPAYMENT FEE. Each prepayment of all or any portion of the
outstanding principal balance of the Loans made from the proceeds of any
refinancing of the Liabilities, from Asset Sale Proceeds, from Unapplied
Insurance or Condemnation Proceeds, from Equity Sale Proceeds or from any other
source of funds other than revenue derived in the ordinary course of Borrower's
business operations shall be accompanied in each case by a prepayment fee
("Prepayment Fee") in an amount equal to:
(a) if such prepayment is made at any time during the period from and
including the Closing Date to and including the first anniversary of the
Closing Date, three percent (3.0%) of such prepayment;
(b) if such prepayment is made at any time during the period from and
after the first anniversary of the Closing Date to and including the second
anniversary of the Closing Date, two percent (2.0%) of such prepayment; and
(c) if such prepayment is made at any time during the period from and
after the second anniversary of the Closing Date to and including the third
anniversary of the Closing Date, one percent (1.0%) of such prepayment.
SECTION 2.11 MAKING OF PAYMENTS. All payments of principal of, or
interest on, the Notes and of all fees and other Liabilities shall be made by
Borrower to Lender in immediately available Dollars. All such payments shall be
made to Lender's Account No. 2358874 at LaSalle National Bank, ABA #071000505
(or such other account as Lender may from time to time specify), not later than
11:30 A.M., Chicago time, on the date due; and funds received after that hour
shall be deemed to have been received by Lender on the next following Business
Day. Anything in this Agreement to the contrary notwithstanding, under no
circumstances shall receipt by Agent Bank of funds of Borrower constitute
repayment of Loans or entitle Borrower to interest thereon.
SECTION 2.12 DUE DATE EXTENSION. If any payment of principal or interest
with respect to any of the Loans or Reimbursement Obligations falls due on a
Saturday, Sunday or other day which is not a Business Day, then such due date
shall be extended to the next following Business Day, and additional interest
shall accrue and be payable for the period of such extension.
SECTION 2.13 SETOFF. Lender, Agent Bank (as agent of Lender) and any
holder of a Note shall have all rights of set-off (up to the full amount of the
Liabilities at the time of any such set-off) provided by applicable law, and in
addition thereto, at any time (a) any payment or amount owing by Borrower under
or in connection with this Agreement or the Related Documents is then due to
Lender or any such holder of a Note or (b) any Event of Default exists, Lender
(or Agent Bank as Lender's agent) and any such holder of a Note may apply to the
payment of such payment or other amount any and all balances, credits, deposits,
accounts or moneys of Borrower then or thereafter with Lender (or Agent Bank as
Lender's agent)
<PAGE>
or such holder of a Note.
SECTION 2.14 CERTAIN MATTERS RELATING TO LC GUARANTIES.
2.14.1. REIMBURSEMENT OBLIGATION. Notwithstanding any provision herein
to the contrary, immediately upon any Issuer's presentation of any demand
for payment under an LC Guaranty, Borrower shall be obligated to reimburse
Lender for such demand, on the date on which Lender honors such demand, in
immediately available funds equal to the amount of such honored demand
(such obligations being referred to herein as "Reimbursement Obligations").
Lender shall use its best efforts to give notice to Borrower of the amount
of such honored demand, PROVIDED that the failure to give such notice shall
not relieve Borrower of its Reimbursement Obligation nor give rise to or
result in any liability of Lender. If all or any part of such demand is not
paid by Borrower when due, such unpaid amount shall bear interest for each
day during the period from the day of such demand until it shall be paid in
full at a rate equal to the Default Rate applicable to Working Capital
Loans which are Reference Rate Loans. Pursuant to a written notice within
five (5) Business Days prior to, or contemporaneously with, Borrower's
incurrence of a Reimbursement Obligation, Borrower may request that such
Reimbursement Obligation be converted into a Working Capital Loan. Such
Reimbursement Obligation shall be so converted if, and only if, each of the
following conditions shall have been satisfied within three (3) Business
Days after the date the Reimbursement Obligation is incurred: (i) no Event
of Default or Unmatured Event of Default shall have occurred and be
continuing, (ii) after giving effect to such conversion, Total WC Exposure
shall not exceed the Working Capital Commitment then in effect, (iii) all
other conditions precedent to the making of a Working Capital Loan shall be
satisfied, other than any requirement that the amount of such Loan shall be
in a minimum amount of $100,000 or an integral multiple of $50,000, and
(iv) an appropriate officer of Borrower shall have delivered a certificate
confirming satisfaction of each of the conditions specified in CLAUSES (I),
(II) and (III) above. Such conversion shall be effective on the date on
which all of the conditions specified in the preceding sentence are
satisfied, and thereafter each reference in this Agreement or any other
Related Document to a Loan or Loans shall be deemed to include reference to
such Reimbursement Obligations as so converted.
2.14.2. REIMBURSEMENT OBLIGATIONS ABSOLUTE. The obligation of Borrower
to reimburse Lender for demands made under the LC Guaranties shall be
unconditional and irrevocable and shall be enforced strictly in accordance
with the terms of this Agreement under all circumstances, including,
without limitation, the following:
(a) lack of validity or enforceability of the applicable LC Guaranty
or Permitted LC;
(b) the existence of any claim, set-off, defense or other right which
Borrower may have at any time against an Issuer or Lender or any other
Person, whether in connection with this Agreement, the transactions
contemplated herein or any unrelated transaction (including any underlying
transaction between Borrower and the beneficiary under a Permitted LC);
(c) any draft, demand, certificate or any other document presented
under an LC Guaranty or Permitted LC proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement
<PAGE>
therein being untrue or inaccurate in any respect;
(d) payment by Lender under the LC Guaranty against a demand which
does not comply with the terms of the LC Guaranty, PROVIDED that such
payment does not constitute gross negligence or willful misconduct of
Lender;
(e) any adverse change in the condition (financial or otherwise) of
Borrower;
(f) any breach of this Agreement by Borrower or Lender; or
(g) the fact that an Event of Default or an Unmatured Event of Default
shall have occurred and be continuing.
2.14.3. INDEMNIFICATION. In addition to amounts payable as elsewhere
provided herein and to the provisions of SECTION 14.5 hereof, Borrower
hereby agrees to indemnify, exonerate and hold Lender and each of its
officers, directors, employees and agents free and harmless from and
against any and all claims, demands, actions, causes of action, suits,
losses, costs (including reasonable attorneys' fees and disbursements),
charges, liabilities and damages, and expenses in connection therewith
(irrespective of whether such Person is a party to the action for which
indemnification hereunder is sought) which Lender or its officers,
directors, employees and agents incurs or is subject to as a consequence,
directly or indirectly, of (i) the issuance of any LC Guaranty, other than
as a result of the gross negligence or willful misconduct of such Person as
determined by a court of competent jurisdiction, or (ii) the failure of
Lender to honor a demand under an LC Guaranty as a result of any act or
omission, whether rightful or wrongful, of any present or future de jure or
de facto government or governmental authority (herein all such acts or
omissions being called "Governmental Acts"). All obligations under this
SECTION 2.14.3 shall survive any termination of this Agreement.
As among Borrower and Lender, Borrower assumes all risks of the acts
and omissions of, or misuse of an LC Guaranty by, the applicable Issuer or
any beneficiary of a Permitted LC. Without limiting the foregoing, Lender
shall not be responsible for: (i) the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document submitted by any
Person in connection with the application for and issuance of a LC Guaranty
or Permitted LC, even if such document is proven to be in any respect
invalid, insufficient, inaccurate, fraudulent or forged; (ii) the validity
or sufficiency of any instrument transferring or assigning or purporting to
transfer or assign a LC Guaranty or Permitted LC or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason; (iii) the failure of the beneficiary
of a Permitted LC to comply fully with conditions required in order to draw
thereupon, or the failure of an Issuer to comply fully with conditions
required in order to demand under a LC Guaranty; (iv) errors, omissions,
interruptions or delays in transmission or delivery of any messages, by
mail, cable, telegraph, facsimile, telex or otherwise, whether or not they
be in cipher; (v) errors in interpretation of technical terms; (vi) any
loss or delay in the transmission or otherwise of any document required in
order to make a drawing under a Permitted LC or a demand under a LC
Guaranty or of the proceeds of either thereof; (vii) the misapplication by
an Issuer of the proceeds of any demand under a LC Guaranty; and (viii) any
<PAGE>
consequences arising from causes beyond the control of Lender, including,
without limitation, any Governmental Acts. None of the above shall affect,
impair or prevent the vesting of any of Lender's rights or powers
hereunder.
Without limiting the foregoing, any action taken or omitted by Lender
under or in connection with a LC Guaranty shall not put Lender under any
resulting liability to Borrower.
SECTION 3 NOTES; RECORDKEEPING.
SECTION 3.1 REVOLVING NOTE. The Revolving Loans shall be evidenced by a
promissory note (herein, as from time to time supplemented, extended or
replaced, called the "Revolving Note") substantially in the form set forth in
EXHIBIT E, with appropriate insertions, dated the date hereof, payable to the
order of Lender in the maximum principal amount of the Revolving Loan
Commitment.
SECTION 3.2 WORKING CAPITAL NOTE. The Working Capital Loans shall be
evidenced by a promissory note (herein, as such note may be from time to time
supplemented, extended or replaced, called the "Working Capital Note")
substantially in the form set forth in EXHIBIT F, with appropriate insertions,
dated the date hereof, payable to the order of Lender in the maximum principal
amount of the Working Capital Commitment.
SECTION 3.3 TERM LOAN NOTE. The Term Loan shall be evidenced by a
promissory note (herein, as such note may be from time to time supplemented,
extended or replaced, called the "Term Loan Note") substantially in the form set
forth in EXHIBIT G, with appropriate insertions, dated the date hereof, payable
to the order of Lender in the maximum principal amount of the Term Loan
Commitment.
SECTION 3.4 RECORDKEEPING. Lender shall record in its records the date
and amount of each Loan made hereunder, each repayment thereof, and the other
information provided for herein. The aggregate unpaid principal amount so
recorded shall be rebuttable presumptive evidence of the principal amount owing
and unpaid on the applicable Note. The failure so to record any such information
or any error in so recording any such information shall not, however, limit or
otherwise affect the actual obligations of Borrower hereunder or under the Notes
to repay the principal amount of all Loans together with all interest accruing
thereon.
SECTION 4 INTEREST.
SECTION 4.1 INTEREST RATES ON REVOLVING LOANS AND TERM LOAN. Subject to
SECTION 4.3, Borrower hereby promises to pay interest on the outstanding
principal amount of each Revolving Loan and the Term Loan for the period
commencing on the date of such Loan until such Loan is paid in full, at a rate
per annum determined by reference to the Reference Rate or the LIBOR Rate. The
applicable basis for determining the rate of interest shall be selected by
Borrower, at the time a borrowing is requested pursuant to SECTION 2.3(A) or at
the time a Notice of LIBOR Activity is given pursuant to SECTION 4.4, as the
case may be. If a Revolving Loan or Term Loan is outstanding with respect to
which notice has not been given to Lender in accordance with the terms of this
Agreement specifying the basis for determining the rate of interest, then such
Revolving Loan or Term Loan shall be a Reference Rate Loan. Subject to SECTION
4.3, all Revolving Loans and the Term Loan shall bear interest as follows:
(a) if a Reference Rate Loan, then at the sum of the Reference
<PAGE>
Rate in effect from time to time, PLUS one and one-half percent (1.50%) per
annum; or
(b) if a LIBOR Rate Loan, then at the sum of the LIBOR Rate for the
applicable Interest Period, PLUS three and three-quarters percent (3.75%)
per annum.
SECTION 4.2 INTEREST RATES ON WORKING CAPITAL LOANS. Subject to SECTION
4.3, Borrower hereby promises to pay interest on the outstanding principal
amount of each Working Capital Loan for the period commencing on the date of
such Working Capital Loan until such Working Capital Loan is paid in full, at a
rate per annum determined by reference to the Reference Rate or the LIBOR Rate.
The applicable basis for determining the rate of interest shall be selected by
Borrower, at the time a borrowing is requested pursuant to SECTION 2.3(A) or at
the time a Notice of LIBOR Activity is given by Borrower pursuant to SECTION
4.4, as the case may be. If a Working Capital Loan is outstanding with respect
to which notice has not been given to Lender in accordance with the terms of
this Agreement specifying the basis for determining the rate of interest, then
such Working Capital Loan shall be a Reference Rate Loan. Subject to SECTION
4.3, all Working Capital Loans shall bear interest as follows:
(a) if a Reference Rate Loan, then at the sum of the Reference Rate in
effect from time to time, PLUS one and one-quarter percent (1.25%) per
annum; or
(b) if a LIBOR Rate Loan, then at the sum of the LIBOR Rate for the
applicable Interest Period, PLUS three and one-half percent (3.50%) per
annum.
SECTION 4.3 DEFAULT INTEREST.
(a) Notwithstanding the respective rates of interest specified in
SECTIONS 4.1 and 4.2, during any Default Interest Period the unpaid
principal amount of all Loans shall bear interest at the applicable rate
per annum set forth in SECTION 4.1 and 4.2, respectively, plus two percent
(2%) per annum (each rate described in this clause (a) being herein called
the "Default Rate").
(b) For purposes of this SECTION 4.3, the term "Default Interest
Period" shall mean a period of time (i) if an Event of Default under
SECTIONS 13.1.1 or 13.1.5 occurs, commencing on the date on which such
Event of Default occurs and ending on the date on which such Event of
Default is waived, or (ii) if an Event of Default (other than under SECTION
13.1.1 or 13.1.5) occurs, commencing on the date of written notice to
Borrower from Lender of such occurrence and ending on the date such Event
of Default is waived.
SECTION 4.4 CONVERSION OR CONTINUATION.
(a) Subject to the provisions of SECTION 4.5, Borrower shall have the
option (i) to convert at any time all or any part of its outstanding Loans
equal to $1,000,000 and integral multiples of $200,000 in excess of that
amount from a Reference Rate Loan to a LIBOR Rate Loan; (ii) to convert all
or any part of its outstanding Loans equal to $1,000,000 and integral
multiples of $200,000 in excess of that amount from a LIBOR Rate Loan to a
Reference Rate Loan on the expiration date of any Interest Period
applicable thereto; or (iii) upon the expiration of the Interest Period
with respect to any LIBOR Rate Loan, to continue all or any portion of such
Loan equal to
<PAGE>
$1,000,000 and integral multiples of $200,000 in excess of that amount as a
LIBOR Rate Loan, and the succeeding Interest Period(s) of such continued
Loan shall commence on the expiration date of the Interest Period
applicable thereto; PROVIDED, HOWEVER, that, notwithstanding the foregoing,
no outstanding Loan may be continued as, or be converted into, a LIBOR Rate
Loan when any Event of Default or Unmatured Event of Default has occurred
and is continuing.
(b) In the event Borrower shall elect to convert or continue a Loan
under SECTION 4.4(A), Borrower shall deliver to Lender a Notice of LIBOR
Activity by 10:00 A.M., Chicago time three (3) Business Days prior to, but
in any event not more than five (5) Business Days prior to, the proposed
conversion/continuation date. Upon conversion or continuation by Lender in
accordance with this Agreement pursuant to any Notice of LIBOR Activity,
Borrower shall have effected the conversion/continuation of Loans
hereunder.
(c) The officers and employees of Borrower authorized to request a
Loan on behalf of Borrower shall also be authorized to request a
conversion/continuation on behalf of Borrower. Lender shall not incur any
liability to Borrower in acting upon any oral notice referred to above
which Lender believes in good faith to have been given by a duly authorized
officer or other person authorized to act on behalf of Borrower or such
other obligor or for otherwise acting in good faith under this SECTION 4.4.
(d) Any Notice of LIBOR Activity for conversion to, or continuation
of, a Loan (including any such oral notice) shall be irrevocable and
Borrower shall be bound to convert or continue in accordance therewith.
SECTION 4.5 SPECIAL PROVISIONS GOVERNING LIBOR RATE LOANS.
Notwithstanding anything to the contrary contained in this Agreement, the
following provisions shall govern with respect to LIBOR Rate Loans as to the
matters covered:
(a) DETERMINATION OF INTEREST PERIOD. By giving notice as set forth in
SECTIONS 2.3 or 4.4(B), Borrower shall have the option, subject to the
other provisions of this SECTION 4.5, to specify whether the Interest
Period applicable to any requested LIBOR Rate Loan shall be a one-month,
three-month or six-month period. The determination of Interest Periods
shall be further subject to the following provisions:
(i) In the case of immediately successive Interest Periods, each
successive Interest Period shall commence on the day on which the
immediately preceding Interest Period expires.
(ii) If any Interest Period would otherwise expire on a day which
is not a Business Day, the Interest Period shall be extended to expire
on the next succeeding Business Day.
(iii) Borrower may not select an Interest Period for any Loan
which terminates later than January 1, 2001 or for any Working Capital
Loan which terminates later than the Working Capital Loan Termination
Date then in effect.
(iv) Borrower may not select an Interest Period with respect to
any portion of principal of a Loan which extends beyond a date on
which Borrower could reasonably be expected to be required to
<PAGE>
make a mandatory payment or prepayment of that portion of principal
(including, without limitation, as a result of any mandatory reduction
in the Revolving Loan Commitment or Working Capital Commitment,
respectively, pursuant to the terms of this Agreement).
(v) Any Interest Period which begins on a day for which there is
no numerically corresponding day in the calendar month during which
such Interest Period is to end shall (subject to clause (ii) above)
end on the first Business Day following the last day of such calendar
month.
(vi) There shall be no more than three (3) Interest Periods in
effect at any one time.
(b) DETERMINATION OF INTEREST RATE. As soon as practicable on the
first Business Day immediately preceding the first day of any Interest
Period applicable to any LIBOR Rate Loans (the "LIBOR Interest Rate
Determination Date"), Lender shall determine (which determination shall,
absent manifest error, be presumptively correct) the interest rate which
shall apply to such Loans for such Interest Period and shall promptly give
notice thereof (in writing or by telephone confirmed in writing) to
Borrower.
(c) SUBSTITUTED RATE OF BORROWING. In the event that on any LIBOR
Interest Rate Determination Date Lender shall have determined (which
determination shall be presumptively correct and binding upon all parties)
that, by reason of any changes arising after the date of this Agreement
affecting the London interbank market, adequate and fair means do not exist
for ascertaining the LIBOR Rate on a basis consistent with the essential
intent of the parties hereto, then, and in any such event, the right of
Borrower to select a LIBOR Rate Loan for such Loan or any subsequent Loan
shall be suspended until Lender shall notify Borrower and Lender that the
circumstances causing such suspension no longer exist, and such requested
Loan shall be a Reference Rate Loan.
(d) ILLEGALITY. Notwithstanding anything to the contrary contained in
this Agreement, in the event that on any date Lender shall have reasonably
determined (which determination shall be final and conclusive and binding
upon all parties) that the making or continuation of its LIBOR Rate Loans
has become unlawful by compliance by Lender in good faith with any
applicable law, treaty, governmental rule, regulation or order (whether or
not having the force of law and whether or not failure to comply therewith
would be unlawful), then Lender shall promptly give notice to Borrower of
such determination. Subject to the prior withdrawal of a Notice of LIBOR
Activity or prepayment of the LIBOR Rate Loans of Lender as contemplated by
the following SECTION 4.5(E), the obligation of Lender to make or maintain
its LIBOR Rate Loans during any such period shall be terminated at the
earlier of the termination of the Interest Period then in effect or when
required by law, and Borrower shall no later than the termination of the
Interest Period in effect at the time any such determination pursuant to
this SECTION 4.5(D) is made or, earlier, when required by law, repay the
LIBOR Rate Loans of Lender, together with all interest accrued thereon.
(e) OPTIONS OF BORROWER. In lieu of prepaying Lender as required by
SECTION 4.5(D) above, Borrower may exercise either of the following
options:
<PAGE>
(i) Upon written notice to Lender, Borrower may terminate the
obligations of Lender to make or maintain Loans as, and to convert
Loans into, LIBOR Rate Loans and in such event, Borrower shall, at the
end of the then current Interest Period (or at such earlier time as
prepayment is otherwise required), convert all of the LIBOR Rate Loans
into Reference Rate Loans in the manner contemplated by SECTION 4.4
but without satisfying the advance notice requirements therein; or
(ii) Borrower may, by giving notice (by telephone confirmed
immediately by telecopy) to Lender require Lender to make the LIBOR
Rate Loan then being requested as a Reference Rate Loan or to continue
to maintain its outstanding Reference Rate Loan then the subject of a
Notice of LIBOR Activity as a Reference Rate Loan or to convert its
LIBOR Rate Loans then outstanding that are so affected into Reference
Rate Loans at the end of the then current Interest Period (or at such
earlier time as prepayment is otherwise required) in the manner
contemplated by SECTION 4.4 but without satisfying the advance notice
requirements therein.
(f) COMPENSATION. In addition to (but without duplication of) such
amounts as are required to be paid by the Borrower pursuant to this
Agreement, including, without limitation, SECTIONS 4.1, 4.2, 8.1 and 8.2,
Borrower shall compensate Lender, upon written request by Lender (which
request shall set forth in reasonable detail the basis for requesting such
amounts), for all losses, costs, expenses and liabilities, including,
without limitation, any loss, cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by Lender
to fund or maintain Lender's LIBOR Rate Loans to Borrower which Lender may
sustain (i) if for any reason a borrowing of any LIBOR Rate Loan does not
occur on a date specified therefor in a Notice of LIBOR Activity, including
an oral request for borrowing or conversion/continuation, or if a
successive Interest Period does not commence after notice therefor is given
pursuant to SECTION 4.4(B), (ii) if any voluntary or mandatory prepayment
of any LIBOR Rate Loan occurs for any reason on a date which is not the
last day of an Interest Period, (iii) as a consequence of any required
conversion of a LIBOR Rate Loan to a Reference Rate Loan as a result of any
of the events indicated in SECTION 4.5(D), or (iv) as a consequence of any
other default by Borrower to repay any LIBOR Rate Loan when required by the
terms of this Agreement.
(g) MANNER OF FUNDING OF LIBOR RATE LOANS. Lender shall be entitled to
fund and maintain its funding of all or any part of any LIBOR Rate Loan
requested by Borrower hereunder in any manner it sees fit, it being
understood and agreed, however, that for the purposes of this Agreement,
all determinations hereunder shall be made as if Lender had actually funded
and maintained each LIBOR Rate Loan during each Interest Period for such
Loan through the purchase of deposits in the London interbank market having
a maturity corresponding to such Interest Period and bearing an interest
rate equal to the LIBOR Rate for such Interest Period.
(h) LIBOR RATE LOANS AFTER DEFAULT. Unless the Lender shall otherwise
agree in writing, after the occurrence and during the continuance of an
Unmatured Event of Default or an Event of Default, Borrower may not elect
to have a Loan be made or continued as, or converted to, a LIBOR Rate Loan
after the expiration of any Interest Period then in effect for that Loan.
<PAGE>
SECTION 4.6 INTEREST PAYMENT DATES. Accrued interest on each Reference
Rate Loan shall be payable in arrears on the first Business Day of each month,
and at maturity, commencing with the first of such dates to occur after the date
of the initial Loans. Accrued Interest on each LIBOR Rate Loan shall be payable
in arrears on each LIBOR Interest Payment Date applicable to such Loan and, in
any event, at maturity. After maturity (whether by acceleration or otherwise),
accrued interest on all Loans shall be due and payable on demand. Accrued
interest on Reimbursement Obligations shall be payable upon demand.
SECTION 4.7 SETTING OF RATES. Interest rates hereunder shall be
calculated from time to time by Lender and each such calculation of an interest
rate shall be conclusive and binding on Borrower in the absence of demonstrable
error.
SECTION 4.8 COMPUTATION OF INTEREST. Interest on each Loan and
Reimbursement Obligation shall be computed for the actual number of days elapsed
on the basis of a year consisting of 360 days. In computing interest on any
Loan, the date of the making of the Loan or the first day of an Interest Period,
as the case may be, shall be included and the date of payment of the Loan or the
expiration date of an Interest Period, as the case may be, shall be excluded;
PROVIDED, HOWEVER, that if a Loan is repaid on the same day on which it is made,
one day's interest shall in any event be paid on that Loan. The interest rate
applicable to each Reference Rate Loan and Reimbursement Obligation shall change
simultaneously with each change in the Reference Rate.
SECTION 5 FEES.
SECTION 5.1 REVOLVING LOAN NON-USE FEE. Borrower shall pay to Lender, on
a quarterly basis, a non-use fee for the period from and including the date
hereof to but excluding the Revolving Loan Termination Date (or such earlier
date on which the Revolving Loan Commitment shall be terminated pursuant to
SECTION 2.5 or 13.2 hereof) of one-half of one percent (0.50%) per annum on the
excess of (i) the daily average of the then applicable Revolving Loan Commitment
for the quarter then ending over (ii) the daily average of the aggregate
principal amount of outstanding Revolving Loans for the quarter then ending.
Such nonuse fee shall be payable in arrears on the first day of each January,
April, July and October (commencing on January 1, 1996) and on the Revolving
Loan Termination Date (or such earlier date on which the Revolving Loan
Commitment shall terminate) for any period then ending for which such fee shall
not have been theretofore paid.
SECTION 5.2 WORKING CAPITAL LOAN NON-USE FEE. Borrower shall pay to
Lender, on a quarterly basis, a non-use fee for the period from and including
the date hereof to but excluding the Working Capital Loan Termination Date (or
such earlier date on which the Working Capital Loan Commitment shall be
terminated pursuant to SECTION 2.6 or 13.2 hereof) of one-half of one percent
(0.50%) per annum on the excess of (i) the daily average of the then applicable
Working Capital Commitment OVER (ii) for the quarter then ending (x) the daily
average of the aggregate principal amount of outstanding Working Capital Loans
PLUS (y) the daily average of the aggregate principal amount of the outstanding
Reimbursement Obligations PLUS (z) (without double counting) the daily average
of the LC Utilization (which shall be rebuttably presumed to equal at any time
the excess of the Cap Amount at such time over the then aggregate outstanding
principal amount of the Reimbursement Obligations), unless Lender has actually
received certification from the applicable Issuer to the contrary. Such
<PAGE>
non-use fee shall be payable in arrears on the first day of each January, April,
July and October (commencing on January 1, 1996) and on the Working Capital Loan
Termination Date (or such earlier date on which the Working Capital Loan
Commitment shall terminate) for any period then ending for which such fee shall
not have been theretofore paid.
SECTION 5.3 CLOSING FEE. On the date of the initial Loan, Borrower shall
pay to Lender a non-refundable closing fee of $390,000.
SECTION 5.4 COMPUTATION OF FEES. All fees shall be computed for the
actual number of days elapsed on the basis of a year consisting of 360 days.
SECTION 5.5 LETTER OF CREDIT FEES. Borrower shall pay to Lender a fee
for the period from and including the date hereof to but excluding the Working
Capital Loan Termination Date (or such earlier date on which all of the LC
Guaranties shall no longer be of any force or effect and the originals thereof
are returned by the appropriate Issuer to Lender) of one and one-quarter percent
(1.25%) per annum on the daily average of the aggregate Stated Amounts of
outstanding Permitted LCs (the "LC Utilization"). Such fees shall be payable in
arrears on the first day of each January, April, July and October (commencing on
January 1, 1996) and on the date on which all of the LC Guaranties shall no
longer be of any force or effect. The LC Utilization shall be rebuttably
presumed to equal at any time the excess of the Cap Amount at such time over the
then aggregate outstanding principal amount of Reimbursement Obligations, unless
Lender has actually received certification from the applicable Issuer to the
contrary. All LC Reimbursement Agreements shall require the applicable Issuer to
provide certification of the daily LC Utilization, but in the event such Issuer
fails to comply with such requirement, the preceding sentence shall apply.
SECTION 6 ACCOUNT AGREEMENTS; ACCOUNTS; LIST OF ACCOUNTS AND ACCOUNT
STATEMENTS.
SECTION 6.1 ACCOUNT AGREEMENTS. Prior to the date of the initial Loan,
Borrower, Agent Bank and such other Persons as are designated by Lender shall
enter into a Bank Agency Agreement (herein, as the same may be amended,
restated, modified or supplemented from time to time, called the "Bank Agency
Agreement"). Pursuant to the Collateral Documents, including the Bank Agency
Agreement, Borrower shall grant to Lender a continuing first priority lien upon,
and security interest in, the Master Account and the Operating Account, each
described below (collectively, the "Accounts"), all funds, items, instruments,
investments, securities and other things of value at any time paid, deposited,
credited to or held in the Lockbox or the Accounts (whether for collection,
provisionally or otherwise), and all other Property of Borrower from time to
time in the possession or under the control of, or in transit to, Lender, Agent
Bank or any agent, bailee or custodian therefor, and all proceeds of all of the
foregoing. The Bank Agency Agreement shall specify that throughout the term of
this Agreement, Agent Bank, to the extent any such Person is a party to the Bank
Agency Agreement, (i) shall be pledgee-in-possession (for the benefit of Lender)
of the Accounts described therein, all Cash Instruments of Borrower held by
Agent Bank, and all such funds, items, instruments, investments, securities,
other things of value, Property and proceeds, (ii) shall take such action as
shall be specified in written notice from Lender to enable Lender to exercise
its rights with respect to such lien and security interest, (iii) shall be
entitled to exercise all and any rights which Lender may have under this
Agreement and the Related Documents or applicable law with respect to the
Accounts described therein and such
<PAGE>
other Property and (iv) shall provide Lender with copies of all statements
relating to the Accounts provided by Agent Bank to Borrower. Notwithstanding any
provision of this SECTION 6.1, Lender shall have no obligation to reconcile or
verify, at any time or for any purpose, any balance in any Account or any other
account maintained by Agent Bank as agent for Lender.
SECTION 6.2 ACCOUNTS.
(a) MASTER ACCOUNT AND LOCKBOX. Lender shall maintain at Agent Bank
the account identified as the "Master Account" in the Bank Agency Agreement
(herein called the "Master Account") and Borrower shall maintain a lockbox
with the Agent Bank (herein called the "Lockbox"). The Master Account and
the Lockbox shall be under the sole dominion and control of Lender, and
Borrower shall not have any right of withdrawal therefrom.
(b) OPERATING ACCOUNT. Borrower shall maintain the controlled
disbursement operating account at Agent Bank described in the Bank Agency
Agreement (such account being herein called the "Operating Account").
(c) OTHER ACCOUNTS. Borrower shall not maintain any operating account
(other than the Operating Account), and agrees that it will not maintain
any bank investment or other account of any kind whatsoever with any other
brokerage house or financial institution; PROVIDED, HOWEVER, that (i) so
long as no Event of Default shall have occurred and be continuing, Borrower
may maintain the petty cash and payroll accounts listed on SCHEDULE II
hereto at the financial institutions indicated thereon, provided that the
aggregate amount of funds on deposit in each such (A) petty cash account
shall not exceed $10,000 and (B) payroll account shall not at any time
exceed the sum of all accrued payroll and payroll taxes then payable by
Borrower on account of payroll obligations payable from such account and
(ii) until February 29, 1996 Borrower may maintain the checking accounts
listed on SCHEDULE II hereto at the financial institutions indicated
thereon provided that Borrower does not write any checks on such accounts
from and after the Closing Date; and PROVIDED, FURTHER, that (i) Borrower
shall have irrevocably instructed the relevant financial institution, at
the request of Lender, to provide Lender with information concerning such
accounts, (ii) such financial institution shall acknowledge such
instructions in writing for the benefit of Lender, and (iii) at any time
when an Event of Default has occurred and is continuing Borrower shall, at
Lender's request, promptly cause each such financial institution to provide
Lender with daily reports of the balance in each such account.
SECTION 6.3 LIST OF ACCOUNTS AND ACCOUNT STATEMENTS. All Accounts of
Borrower and all payroll and petty cash accounts of Borrower are described on
SCHEDULE II. In the event Borrower opens any new accounts or closes any account
in accordance with the terms of this Agreement, Borrower shall deliver to Lender
a revised version of SCHEDULE II showing any changes thereto within three (3)
Business Days of any such change. Borrower shall instruct all banks listed on
SCHEDULE II to provide Lender with copies of all statements issued by such banks
with respect to the accounts described on SCHEDULE II.
SECTION 7 PROCEEDS OF COLLATERAL; APPLICATION OF FUNDS; DEEMED LOANS.
<PAGE>
SECTION 7.1 PROCEEDS OF COLLATERAL; NOTICES TO ACCOUNT DEBTORS; LOCKBOX.
Borrower shall direct all Account Debtors to pay all Accounts Receivable and
other proceeds of Collateral directly to the Lockbox for application to the
Master Account. In addition, Borrower shall take all such actions as Lender in
good faith deems necessary or appropriate to ensure that at all times on and
after the date hereof all proceeds of Collateral (including, without limitation,
all Cash Instruments) are sent directly to the Lockbox. If, notwithstanding the
actions provided for in the preceding sentences of this SECTION 7.1, Borrower
shall receive, or any financial institution shall receive for the account of
Borrower, any Cash Instruments, Borrower shall, or shall cause such financial
institution to, transmit in the form received, before the close of business on
the next succeeding Business Day, all such Cash Instruments (properly endorsed,
where required, so that all items delivered may be collected by Agent Bank) to
Agent Bank for deposit in the Master Account. Borrower shall not, nor shall
Borrower permit or cause any such financial institution to, commingle any Cash
Instrument so received except in the Master Account, and Borrower shall hold
separate and apart from all other Property, all such Cash Instruments in express
trust for the benefit of Lender until delivery thereof is made to Agent Bank.
Pursuant to, and subject to the terms and conditions of, the Bank Agency
Agreement, items deposited in the Lockbox shall be credited to the Master
Account.
SECTION 7.2 APPLICATION OF FUNDS AVAILABLE FOR OPERATING EXPENSES. At the
opening of business on each Business Day, Agent Bank shall calculate the amount
of collected funds on deposit in the Master Account (herein, with respect to the
Master Account for any day, called the "Collected Balances" for such day).
Promptly upon such calculation (and in any event prior to 10:00 A.M. Chicago
time on such day), if no Event of Default shall have occurred and be continuing
and to the extent of Collected Balances available to do so, Agent Bank shall
transfer from the Master Account to the Operating Account such amounts as shall
permit all checks drawn on such Operating Account presented for payment at Agent
Bank as of the preceding Business Day and, provided Borrower has given Lender
notice of the amount of such wire transfers by 10:00 A.M. Chicago time no later
than 1 Business Day and no sooner than 5 Business Days prior to the date of such
wire transfers, all wire transfers authorized on such date for payments
permitted hereunder, to be honored and leaving a zero balance in the Operating
Account after payment and transfer of such items from the Operating Account.
SECTION 7.3 APPLICATION OF FUNDS AVAILABLE FOR LOAN REPAYMENTS. Promptly
after any disbursements pursuant to SECTION 7.2 are made, Agent Bank promptly
shall transfer to Lender in integral multiples of $5,000 the remaining Collected
Balances but leaving a balance of at least $50,000 but not more than $55,000 in
the Master Account. Any amounts received by Lender pursuant to this SECTION 7.3
shall be applied to the outstanding obligations of Borrower in the following
order of priority: FIRST, to interest then accrued on the Reimbursement
Obligations; SECOND, to interest then due and payable on the Working Capital
Loans; THIRD, to interest then due and payable on the Revolving Loans; FOURTH,
to interest then due and payable on the Term Loan, FIFTH to principal of the
Reimbursement Obligations; SIXTH, to principal of the Working Capital Loans then
due and payable; SEVENTH, to principal of the Revolving Loans then due and
payable; EIGHTH, to principal of the Term Loan then due and payable; NINTH to
any fees hereunder then due and payable, in such order as Lender may elect;
TENTH, to the unpaid principal amount of the Working Capital Loans not otherwise
due and payable at such time (PROVIDED, HOWEVER, that prior to the termination
of the Working Capital Commitment, the unpaid principal amount of the Working
Capital Loans shall never be less than $1,000);
<PAGE>
ELEVENTH, to the unpaid principal amount of the Revolving Loans not otherwise
due and payable at such time (PROVIDED, HOWEVER, that prior to the termination
of the Revolving Loan Commitment, the unpaid principal amount of the Revolving
Loans shall never be less than $1,000); TWELFTH, to the unpaid principal amount
of the Term Loan not otherwise due and payable at such time; THIRTEENTH to the
payment of any other Liabilities then due and payable to Lender; and FOURTEENTH,
any remainder shall be retained in the Master Account.
SECTION 7.4 APPLICATION UPON AN EVENT OF DEFAULT. If an Event of Default
shall have occurred and be continuing, and notwithstanding the foregoing SECTION
7.3, at the request of Lender Agent Bank from time to time shall transfer all
Collected Balances in the Master Account to Lender for application to the
Liabilities in such order as Lender, in its sole discretion, shall elect. Agent
Bank shall be entitled to rely on a written statement of Lender to the effect
that an Event of Default has occurred and is continuing.
SECTION 7.5 DEEMED LOANS.
(a) Notwithstanding any provision contained herein to the contrary,
if at any time or from time to time the balance in the Master Account is
less than $10,000, Borrower shall, if Lender so elects, be deemed to have
given the notice required by SECTION 2.3 (and to have made all of the
representations set forth in a Borrowing Certificate) of a proposed
borrowing equal to the lesser of (i) the amount (which shall be $5,000 or
an integral multiple thereof) necessary to increase such balance to at
least $50,000, but not more than $55,000 and (ii) the remaining
availability under the Commitments, and, in the event of such election,
Lender shall lend to Borrower such amount, the proceeds of which shall be
deposited by Lender in the Master Account. Such Loan shall be a Revolving
Loan bearing interest at the rate described in SECTION 4.1(A) to the extent
of unused availability of the Revolving Loan Commitment and, if the
availability under the Revolving Loan Commitment is not sufficient to make
such Loan in its full principal amount, it shall be, to the extent of such
insufficiency, a Working Capital Loan bearing interest at the rate
described in SECTION 4.2(A) to the extent of availability of the Working
Capital Commitment.
(b) Notwithstanding any provision contained herein to the contrary,
and in addition to, and not in limitation of, any of the other rights or
remedies of Lender set forth herein, including, without limitation,
pursuant to SECTION 7.4, at the sole option of Lender, in order to
facilitate timely payment hereunder of all Liabilities in respect of (i)
payments of principal and interest due on any Loans or Reimbursement
Obligations , (ii) payments of cash, fees and expenses due and payable by
Borrower to Lender hereunder or under any of the Related Documents and
(iii) payments by Lender of any amount due and payable under the Bank
Agency Agreement or any other agreement entered into by Lender and Agent
Bank in connection with this Agreement (including, without limitation, any
amount resulting from the return, dishonor or other non-payment of items
deposited with Agent Bank by or on behalf of Borrower), then, whether or
not there is availability under any Commitment, Borrower shall be deemed
automatically to have made a request for, and upon such payment Lender
shall be deemed to have made, a Revolving Loan or a Working Capital Loan
(or any combination thereof, as determined by Lender in its sole and
absolute discretion) in the full amount of such payment. Lender shall use
its best efforts to give reasonable prior notice to Borrower
<PAGE>
of the making of such Loan, PROVIDED that the failure to give such notice
shall not affect the obligations of Borrower with respect to such Loan nor
give rise to or result in any liability of Lender. Borrower acknowledges
that such Loan may cause Borrower to have exceeded a Commitment, in which
event Borrower shall be obligated to immediately make a prepayment pursuant
to SECTION 2.8(D).
SECTION 8 INCREASED COSTS AND OTHER SPECIAL PROVISIONS.
SECTION 8.1 INCREASED COSTS. If, after the date hereof, the adoption of
any applicable law, rule or regulation generally applicable to a financial
institution in the business of making and holding commercial loans, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority or agency charged with the interpretation or
administration thereof, or compliance by Lender with any request or directive
(whether or not having the force of law) of any such authority or agency, shall
subject Lender to any tax, duty or other charge or capital adequacy requirement
with respect to, or shall otherwise increase the effective cost of, the Loans,
the Reimbursement Obligations, the LC Guaranties or Lender's obligation to make,
issue or maintain the Loans, the Reimbursement Obligations or the LC Guaranties,
or shall change the basis of taxation of payments to Lender of the principal of
or interest on the Loans, the Reimbursement Obligations or any other amounts due
under this Agreement in respect of the Loans, the Reimbursement Obligations or
the LC Guaranties, or Lender's obligation to make, issue or maintain the Loans,
the Reimbursement Obligations or the LC Guaranties (except for changes in the
rate of tax on the overall net income of Lender), or shall impose on Lender any
other condition affecting the Loans, the Reimbursement Obligations or the LC
Guaranties or Lender's obligation to make the Loans or the Reimbursement
Obligations or maintain the LC Guaranties, and the result of any of the
foregoing is to increase the cost to Lender of making, issuing or maintaining
the Loans, or to reduce the amount of any rate of return or any sum received or
receivable by Lender under this Agreement or under the Notes with respect
thereto, then upon written notice of such occurrence to Borrower by Lender
(which notice shall contain a statement setting forth a description of such
occurrence), Borrower shall pay to Lender such additional amount or amounts as
will compensate Lender for such increased cost or such reduction.
SECTION 8.2 FUNDING LOSSES. Borrower agrees that if Lender receives a
notice (whether written or oral) of borrowing or repayment pursuant to this
Agreement and Borrower fails to borrow or repay strictly in accordance
therewith, then, upon demand by Lender (which demand shall be accompanied by a
statement setting forth the basis for the calculations of the amount being
claimed) Borrower will indemnify Lender against any net loss or expense which
Lender may sustain or incur (including, without limitation, any net loss or
expense incurred by reason of the liquidation or reemployment of funds acquired
by Lender to fund or maintain Loans), as reasonably determined by Lender, as a
result of any failure of Borrower to borrow or repay any Loan on a date
specified therefor in a notice (whether written or oral) of borrowing or
repayment pursuant to this Agreement. For this purpose, all notices to Lender
pursuant to this Agreement shall be deemed to be irrevocable.
SECTION 8.3 CONCLUSIVENESS OF STATEMENTS; SURVIVAL OF PROVISIONS. In
making the determinations contemplated by this SECTION 8, Lender may make such
reasonable estimates, assumptions, allocations and the like that Lender in good
faith determines to be appropriate; and, subject to the foregoing clause,
determinations and statements of Lender pursuant to this SECTION 8 shall be
conclusive absent demonstrable error. The provisions of
<PAGE>
this SECTION 8 shall survive termination of this Agreement.
SECTION 8.4 DISCRETION OF LENDER AS TO MANNER OF FUNDING. Notwithstanding
any provision of this Agreement to the contrary, Lender shall be entitled to
fund and maintain its funding of all or any part of the Loans in any manner it
sees fit.
SECTION 9 COLLATERAL SECURITY
SECTION 9.1 BORROWER. Concurrently with or prior to the making of the
initial Loan, Borrower shall execute and deliver to Lender the following:
9.1.1. PERSONAL PROPERTY. A Security Agreement in form and substance
satisfactory to Lender (herein, as the same may be amended, restated,
modified or supplemented from time to time, called the "Security
Agreement") and an Aircraft Mortgage and Security Agreement in form and
substance satisfactory to Lender (herein, as the same may be amended,
restated, modified or supplemented from time to time, called the "Aircraft
Security Agreement").
9.1.2. REAL ESTATE. Leasehold mortgages or assignments of leases
covering all real estate leased by Borrower, in form and substance
reasonably satisfactory to Lender (herein, as the same may be amended,
restated, modified or supplemented from time to time with Lender's prior
written consent, collectively called the "Leasehold Mortgages" and
individually called a "Leasehold Mortgage"), and fee mortgages, deeds to
secure debt or deeds of trust covering all real estate owned by Borrower,
in form and substance satisfactory to Lender (herein, as the same may be
amended, restated, modified or supplemented from time to time with Lender's
prior written consent, collectively called the "Mortgages" and individually
called a "Mortgage").
9.1.3. PLEDGE AGREEMENT. A Pledge Agreement from Parent to Lender
covering all of the Borrower Equity Interests, in form and substance
satisfactory to Lender (herein, as the same may be amended, restated,
modified or supplemented from time to time, called the "Pledge Agreement").
SECTION 9.2 CHANGE OF LOCATION OR NAME. So long as any of the Liabilities
shall remain outstanding or Lender shall continue to have any Commitment,
Borrower shall not change (a) the location of its principal place of business,
chief executive office, major executive office, chief place of business or its
records concerning its business and financial affairs, or (b) its name or the
name under or by which it conducts its business, in each case without first
giving Lender at least 30 days' advance written notice thereof and having taken
any and all action required or desirable to maintain and preserve the first
perfected Lien in favor of Lender on all property thereof free and clear of any
Lien whatsoever except for Permitted Liens; PROVIDED, HOWEVER, that
notwithstanding the foregoing, Borrower shall not change its principal place of
business, chief executive office, major executive office, chief place of
business or the location of its records concerning its business and financial
affairs to any place outside the contiguous continental United States of
America.
SECTION 9.3 DELIVERIES; FURTHER ASSURANCES. Borrower agrees that it will,
at its sole expense, (a) without any request by Lender, immediately deliver or
cause to be delivered to Lender, in due form for transfer (I.E., endorsed in
blank or accompanied by duly executed undated blank stock or bond powers), all
securities, chattel paper, instruments and
<PAGE>
documents, if any, at any time representing all or any of the Collateral, (b)
upon request of Lender furnish or cause to be furnished to Lender such surveys,
mortgagee title commitments or policies, appraisals (provided an Event of
Default has occurred and is continuing), opinions of counsel and other documents
as Lender may specify, (c) without request by Lender, cause the Lien granted to
Lender hereunder and under the Collateral Documents to be at all times duly
noted on any certificate of title issuable with respect to any of the Collateral
and forthwith deliver or cause to be delivered to Lender each such certificate
of title, and (d) execute and deliver, or cause to be executed and delivered, to
Lender in due form for filing or recording (and pay the cost of filing or
recording the same in all public offices deemed necessary or advisable by
Lender) such assignments (including, without limitation, assignments of life
insurance), security agreements, mortgages, deeds of trust, pledge agreements,
consents, waivers, financing statements, stock or bond powers, and other
instruments and documents, and do such other acts and things, all as may from
time to time be necessary or desirable to establish and maintain to the
satisfaction of Lender a valid perfected Lien in all assets of Borrower now or
hereafter existing or acquired (free of all other Liens whatsoever other than
Permitted Liens) to secure payment and performance of the Liabilities.
SECTION 9.4 SUBSEQUENTLY ACQUIRED PROPERTY. As further security for the
payment, performance and observance of the Liabilities, so long as any of the
Liabilities shall remain outstanding or Lender shall continue to have any
Commitment, Borrower shall:
(a) acquire and maintain its respective properties in a manner which
will enable Borrower to allow such property to become subject to the Liens
of the Collateral Documents;
(b) obtain and maintain the consent or approval of any Person whose
consent or approval is required to the granting of a Lien on any such
property to Lender, including a consent to each Leasehold Mortgage in form
and substance satisfactory to Lender from the landlord under each lease of
real property under which Borrower is the lessee;
(c) execute and deliver from time to time within ten (10) days after
the purchase or acquisition by Borrower of any real property or leasehold
interest in real property or of property subject to a titling statute or of
any other personal property, asset or other right with a fair market value
in excess of $25,000, additional Collateral Assignment of Lease or
Mortgages and such amendments and supplements to the Collateral Documents
in form and substance satisfactory to Lender, and in such number of
counterparts as Lender may require, by which such Person shall pledge,
mortgage and grant a perfected Lien on such property, asset or right to
Lender;
(d) execute and deliver to Lender, in form and substance satisfactory
to Lender and in such number of counterparts as Lender may require, (i) an
assignment of such Person's rights under any contract to construct any
property with a fair market value in excess of $25,000 promptly upon
entering into such contract, and (ii) such other agreements and instruments
(including, without limitation, acknowledgements by other contract parties)
as may be necessary to grant a Lien on such Person's rights and interests
under such contract and each such property, whether under construction or
otherwise, to Lender; and
<PAGE>
(e) execute and deliver to Lender, in form and substance satisfactory
to Lender and in such number of counterparts as Lender may require,
assignments of such Person's rights under each lease to which such Person
is a party as landlord or sublandlord, promptly upon entering into such
lease, to Lender.
SECTION 9.5 ASSET SALES AND EQUITY SALES. The parties hereto intend the
assets of Borrower shall be subjected to Liens in favor of Lender, to secure the
Liabilities (except that the Mortgages and the leasehold mortgages filed in the
State of Georgia are intended to secure the Liabilities arising in connection
with the Term Loan only). Accordingly, Borrower shall not consummate any Asset
Sales or Equity Sales without the prior written consent of Lender, which consent
may be given or withheld in the sole and absolute discretion of Lender with
respect to Asset Sales and shall not be unreasonably withheld with respect to
Equity Sales, and may be based, without limitation, on Lender's evaluation of
the adequacy of the consideration proposed to be received by Borrower or Parent
in connection with any such disposition and the effect of such disposition on
Borrower's net worth, and on Net Income, Net Cash Generated, interest coverage
ratios or other financial criteria. Without limiting the generality of the
foregoing, and without limiting the right of Lender to require any other
application of proceeds or modification of this Agreement and the Related
Documents, or any greater payment of Loans, Reimbursement Obligations or
reduction of Commitments, it is the present anticipation of the parties that all
Asset Sale Proceeds and Equity Sale Proceeds will be applied as a mandatory
prepayment of the Loans pursuant to SECTION 2.8 and that the Commitments shall
be automatically and permanently reduced in the amount of such prepayments to
the extent provided in SECTION 2.5, SECTION 2.6 and SECTION 2.7.
SECTION 10 REPRESENTATIONS AND WARRANTIES.
To induce Lender to enter into this Agreement and to make Loans and other
financial accommodations hereunder, Borrower represents and warrants to Lender
that:
SECTION 10.1 DUE ORGANIZATION, AUTHORIZATION. Borrower is a
corporation duly existing and in good standing under the laws of the
jurisdiction of its incorporation and is duly qualified and in good
standing in each jurisdiction where, because of the nature of its activities or
properties, such qualification is required or the failure so to qualify would
have a reasonable probability of having a Material Adverse Effect (which
jurisdictions shall include, without limitation, those jurisdictions listed in
Part 1 of SCHEDULE VII). The execution, delivery and performance by Borrower of
this Agreement and the Related Documents to which Borrower is a party, and the
consummation of the Related Transactions, are within Borrower's corporate
powers, have been duly authorized by all necessary corporate action (including,
without limitation, shareholder approval), have received all necessary
governmental and other consents and approvals (if any shall be required), and do
not and will not contravene or conflict with, or create a Lien or right of
termination or acceleration under, any Requirement of Law or Contractual
Obligation binding upon any of them. This Agreement and each of the Related
Documents to which Borrower is a party are (or when executed and delivered will
be) the legal, valid, and binding obligations of Borrower enforceable against
Borrower in accordance with their respective terms, except as limited by general
principles of equity and applicable bankruptcy, reorganization, insolvency or
similar laws affecting the enforcement of creditors' rights.
<PAGE>
SECTION 10.2 CERTAIN AGREEMENTS. Borrower has furnished or caused
to be furnished to Lender true, correct and complete copies of each of the
Related Documents, the Lamar Merger Instruments, the Acquisition Instruments,
the Merger Instruments, the Selling Shareholders Instruments, the Management
Agreement and the Subordinated Loan Instruments (including all schedules and
written disclosures in connection therewith). At the time of the initial Loan
which shall be made immediately following the Merger, all warranties of Borrower
set forth in this Agreement and the Related Documents and all warranties of
Borrower and to Borrower's knowledge, all warranties of the other parties
thereto, set forth in the Lamar Merger Instruments, the Acquisition Instruments,
the Merger Instruments and the Subordinated Loan Instruments are true and
correct in all material respects without any waiver or modification thereof and
no default of any party exists thereunder.
SECTION 10.3 FINANCIAL INFORMATION; FINANCIAL CONDITION. Except as set
forth in SCHEDULE XI, all balance sheets, all statements of operations, of
shareholders' equity and of changes in financial position, and other financial
data (other than projections) which have been or shall hereafter be furnished to
Lender for the purposes of or in connection with this Agreement, the Related
Documents or the Related Transactions (including the financial information
referred to below, except for the projections referred to in CLAUSE (D) below)
have been and will be prepared in accordance with GAAP consistently applied
throughout the periods involved and do and will present fairly the financial
condition of the entities involved as of the dates thereof and the results of
their operations for the periods covered thereby, provided that the foregoing
representation with respect to such financial data of GMH is made by the
Borrower to its best knowledge. All projections (including, without limitation,
the projections described in CLAUSE (D) below) which have been or shall be
furnished to Lender for purposes of or in connection with this Agreement, the
Related Documents or the Related Transactions have represented and will
represent at the time made management's best estimates of future performance,
based upon historical financial information and reasonable assumptions of
management. Such financial data include, without limitation, the following
financial statements and reports which have been furnished to Lender prior to
the date hereof:
(a) the audited consolidated balance sheet of GMH as of December 31,
1994 and the related statements of earnings, stockholders' equity and
changes in financial position for the year ending on such date;
(b) the audited balance sheet and unaudited statements of earnings,
stockholders' equity and cash flow statement of GMH, certified by the
president of Borrower, for the ten month period ending October 31, 1995 and
for the month of October 1995;
(c) pro forma balance sheet of Borrower as of the Closing Date after
giving effect to all Related Transactions;
(d) cash flow projections for Borrower for the Fiscal Years 1996
through 2000 after giving effect to all Related Transactions; and
(e) projected balance sheets, and statements of earnings,
stockholders' equity and changes in financial position for Borrower for
each month in Fiscal Year 1995 and each month or quarter in Fiscal Year
1996 after giving effect to all Related Transactions.
To Borrower's best knowledge after due inquiry, except as set forth on SCHEDULE
XIV there has been, and on the date of the initial Loan there will
<PAGE>
have been, no material adverse change since December 31, 1994 in the financial
condition, operations, assets, business or prospects of GMH and Lamar other than
as a result of the Related Transactions, from that reflected in the financial
information referred to in CLAUSES (A) and (B).
On the Closing Date and after giving effect to the Related Transactions,
(i) the assets of Borrower, including Intangible Assets, at a fair valuation,
will exceed its liabilities, including contingent liabilities, but excluding
Repurchase Obligations, (ii) the capital of Borrower will not be unreasonably
small to conduct its business and (iii) Borrower has not incurred debts, or
intends to incur debts, beyond its ability to pay such debts as they mature. For
purposes of this SECTION 10.3, "debt" means any liability on a claim, and
"claim" means a (x) right to payment, whether or not such right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured; or (y) right to an
equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.
SECTION 10.4 LITIGATION AND CONTINGENT OBLIGATIONS. Except as set forth
(including estimates of the dollar amounts involved) in SCHEDULE III hereto and
except for claims as to which the insurer has admitted coverage in writing and
which are fully covered by insurance, no claims, litigation (including, without
limitation, derivative actions and litigation with respect to any Employee
Benefit Plan), arbitration, governmental investigation or proceeding or inquiry
is pending or, to the best of Borrower's knowledge, threatened against Borrower,
or to Borrower's best knowledge, GMH or Lamar or any Employee Benefit Plan
fiduciaries or other Employee Benefit Plan service providers which would, if
adversely determined, have a reasonable probability of having a Material Adverse
Effect. Other than any liability incident to such claims, litigation or
proceedings, Borrower has no material Contingent Obligations not provided for or
referred to in the financial statements delivered under SECTION 10.3(A) OR (B)
or in SCHEDULE X hereto.
SECTION 10.5 LIENS. At all times on and after the making of the initial
Loan, none of the assets of Borrower will be subject to any Lien, except for
Permitted Liens which (except for Permitted Prior Liens) are junior to the Lien
of the Collateral Documents. Except as described in Part 1 of SCHEDULE X and
except for Permitted Prior Liens, Lender will obtain, as security for the
Liabilities, (a) a legally valid and binding first Lien on all real property and
interests in real property described in the Mortgages and the Leasehold
Mortgages, and (b) a first perfected Lien on all other property described in the
Collateral Documents as being pledged, assigned or granted thereby. The legal
descriptions attached to the Mortgages, together with the descriptions of other
property described in the Collateral Documents, correctly describe all property
used in the business or operations of Borrower in a manner sufficient to create
an enforceable Lien on or security interest in such property.
SECTION 10.6 ABSENCE OF DEFAULT. Borrower is not in material default
under any contract or contracts (a) to which it is a party or by which it is
bound, and (b)(i) pursuant to which Borrower provides goods or services to a
customer which contributed more than $100,000 of gross revenue during the prior
Fiscal Year of Borrower or which is reasonably expected to contribute more than
$100,000 of gross revenue during the current Fiscal Year of Borrower, or (ii)
pursuant to which Borrower incurs Lease Obligations in excess of $100,000 during
any Fiscal Year, or (iii) which cannot be replaced without material expense,
delay or interruption of
<PAGE>
business (including, without limitation, any Material Intellectual Property
Right).
SECTION 10.7 EMPLOYEE BENEFIT PLANS.
(a) Neither Borrower nor any member of its Controlled Group have
incurred any liability with respect to any Pension Plan or Multiemployer
Plan other than to pay premiums to the PBGC and make contributions to any
such Pension Plan (provided that any such contributions and premiums which
have been due have been paid).
(b) With respect to each Pension Plan, full and timely payment has
been made of all amounts required under Code Section 412, Section 302 of
ERISA and under the terms of each such plan; no event or condition has
occurred which has or could reasonably be expected to result in the
imposition of a lien or an accumulated funding deficiency (whether or not
waived) under Code Section 412 or Section 302 of ERISA; and no security has
been posted or is required to be posted under Section 401(a)(29) of the
Code or Section 307 of ERISA.
(c) No steps have been taken to terminate any Pension Plan or to
withdraw from any Multiemployer Plan.
(d) No Reportable Event has occurred with respect to any Pension
Plan.
(e) Neither Borrower nor any member of its Controlled Group has any
material contingent liability with respect to any post-retirement benefits
under a Welfare Plan (other than liability for health care continuation
coverage in compliance with the requirements of Part 6 of Subtitle B of
Title I of ERISA or Section 4980B of the Code).
(f) Each Employee Benefit Plan (i) complies in form with any
requirements of ERISA and has been operated and administered in a manner so
as not to result in any liability to Borrower or any member of its
Controlled Group for failure to comply with ERISA, (ii) if intended to
qualify under the Code, is in form and has been administered in a manner so
as not to result in any liability to Borrower or any member of its
Controlled Group for failure to comply with the applicable provisions
thereof, and (iii) has no other conditions existing or events or
transactions which have occurred with respect to such plan which could
reasonably be expected to result in the incurrence by Borrower or any
member of the Controlled Group of any liability, except as may (x) be
funded or adequately reserved on the balance sheet of Borrower or one of
its Controlled Group members, or (y) not result in the incurrence of any
liability by Borrower or any member of its Controlled Group in excess of
$100,000 (in the aggregate).
(g) Borrower is not an Employee Benefit Plan, Borrower's assets do
not constitute assets of an Employee Benefit Plan and the execution,
performance and delivery of this Agreement or the execution of any Related
Transactions will not involve any prohibited transaction, as defined in
Section 406 of ERISA or Section 4975 of the Code, for which an exemption is
unavailable.
SECTION 10.8 INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT.
Borrower is not an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act
<PAGE>
of 1940, as amended, or a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company," within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
SECTION 10.9 REGULATIONS G, U AND X. Borrower is not engaged principally,
or as one of its important activities, in the business of extending credit for
the purpose of purchasing or carrying margin stock (within the meaning of
Regulation G, U or X of the Board of Governors of the Federal Reserve System).
Neither Borrower nor any of its Affiliates or any Person acting on its behalf
has taken or will take action to cause the execution, delivery or performance of
this Agreement or the Notes, the making or existence of the Loans or the use of
proceeds of the Loans to violate Regulation G, U or X of the Board of Governors
of the Federal Reserve System.
SECTION 10.10 PROCEEDS. The proceeds of the initial Revolving Loans,
Working Capital Loans, Subordinated Loans and Initial Equity Contribution will
be used for (a) the payment in full of the obligations of Borrower pursuant to
the Acquisition and the Merger, (b) the payment of the costs, expenses, fees and
taxes incurred by Borrower and Parent in connection therewith, including,
without limitation, costs, expenses, fees and taxes incurred pursuant to SECTION
14.4, (c) the payment in full of the Indebtedness to be Refinanced and (d)
working capital purposes. The proceeds of subsequent Loans will be used for
working capital purposes, to pay for capital improvements, and for other
purposes permitted hereunder.
SECTION 10.11 LAMAR MERGER INSTRUMENTS, ACQUISITION INSTRUMENTS AND
MERGER INSTRUMENTS. At the time of the making of the initial Loan: (a) the
Acquisition will have been consummated in accordance with the Acquisition
Instruments; (b) all consents and approvals of, and filings and registrations
with, and all other actions in respect of, all governmental agencies,
authorities or instrumentalities required in order to make or consummate the
Acquisition will have been obtained, given, filed or taken and shall be in full
force and effect, and all required waiting periods will have elapsed, except as
set forth on SCHEDULE XV with respect to which the failure to obtain, give, file
or take the same or wait for the required period would not have a Material
Adverse Effect; (c) all actions pursuant to the Acquisition Instruments or in
furtherance of the Acquisition, will have been taken in compliance with all
Requirements of Law, (d) the Lamar Merger and Merger will have been consummated
in accordance with the Lamar Merger Instruments and Merger Instruments,
respectively; (e) all consents and approvals of, and filings and registrations
with, and all other actions in respect of, all governmental agencies,
authorities or instrumentalities required in order to make or consummate the
Lamar Merger and Merger will have been obtained, given, filed or taken and shall
be in full force and effect, and all required waiting periods will have elapsed,
except as set forth on SCHEDULE XV with respect to which the failure to obtain,
give, file or take the same or wait for the required period would not have a
Material Adverse Effect; and (f) all actions pursuant to the Lamar Merger
Instruments and Merger Instruments or in furtherance of the Lamar Merger and
Merger, will have been taken in compliance with all Requirements of Law.
SECTION 10.12 INSURANCE. SCHEDULE IV hereto sets forth a true and correct
summary of all insurance carried by Borrower. Borrower is adequately insured for
its benefit under policies issued by insurers of recognized responsibility. No
notice of any pending or threatened cancellation has been received by Borrower
with respect to any of such insurance policies. Borrower is in compliance with
all conditions contained in such insurance policies.
<PAGE>
SECTION 10.13 MATERIAL DISRUPTIONS. Neither the business nor the
properties of Borrower is affected, or anticipated to be affected, by any
existing event of Force Majeure or other existing casualty which has a
reasonable probability of having a Material Adverse Effect.
SECTION 10.14 PATENTS, TRADEMARKS Borrower owns and possesses, or is
licensed under valid and enforceable license agreements, all such patents,
patent rights, trademarks, trademark rights, trade names, trade name rights,
service marks, service mark rights, trade secrets, mask works and copyrights as
are necessary for the conduct of its businesses as now conducted or presently
proposed to be conducted without any infringement upon rights of others which
has a reasonable probability of having a Material Adverse Effect, and, except as
set forth in Part 1 of SCHEDULE V, there is no individual patent, patent right,
trademark, trademark right, trade name, trade name right, service mark, service
mark right, trade secret, mask work or copyright the loss of which has a
reasonable probability of having a Material Adverse Effect (any such item,
whether or not set forth on SCHEDULE V, being herein called a "Material
Intellectual Property Right"). Parts 1 and 2 of SCHEDULE V together contain a
complete list of all patents, registered trademarks, registered copyrights,
service marks, mask works and license agreements relating to patent rights,
trademark rights, trade name rights, service mark rights, trade secrets, mask
works and registered copyrights held by Borrower under license agreements.
SECTION 10.15 OWNERSHIP OF PROPERTIES; PROPERTY SCHEDULE. On the date of
the initial Loan and after giving effect to all Related Transactions, Borrower
will have good and marketable title to all of its properties and assets, real
and personal, of any nature whatsoever. SCHEDULE VI contains descriptions of all
real and personal property (a) in which Borrower has an interest as of the date
hereof, (b) with respect to which the Collateral Documents will not create a
valid and perfected first lien and security interest and (c) which cannot be
replaced without material expense, delay or interruption of business.
SECTION 10.16 BUSINESS LOCATIONS; TRADE NAMES. SCHEDULE VII contains (a) a
list of each of the locations where Borrower maintains an office, a place of
business or any records, (b) a list of each name under or by which Borrower, or
to Borrower's best knowledge after due inquiry, GMH or Lamar conducts its
business or has conducted business at any time during the five year period prior
to the Closing Date and (c) a complete and accurate address and legal
description of each parcel of real estate owned by Borrower.
SECTION 10.17 ACCURACY OF INFORMATION. All factual information heretofore
or contemporaneously herewith furnished by or on behalf of Borrower to Lender
for purposes of or in connection with this Agreement or any transaction
contemplated hereby is, and all other such factual information hereafter
furnished by or on behalf of Borrower to Lender will be, true and accurate in
every material respect on the date as of which such information is dated or
certified and not incomplete by omitting to state any material fact necessary to
make such information not misleading; provided, however, that all such
information with respect to GMH or Lamar shall be true and accurate and not
incomplete to Borrower's best knowledge after due inquiry.
SECTION 10.18 SUBSIDIARIES. Borrower has no Subsidiaries.
SECTION 10.19 HAZARDOUS MATERIALS. Except as disclosed in SCHEDULE
<PAGE>
VIII hereto, (a) neither Borrower nor, to Borrower's knowledge, any other Person
has ever caused or permitted any Hazardous Material to be released, treated,
stored or disposed of in a manner which could reasonably form the basis for any
claim, demand, proceeding or action by any Person, past, present or future on,
under or at any real property legally or beneficially owned (or any interest or
estate in real property which is owned) or operated by Borrower (including,
without limitation, any property owned by a land trust the beneficial interest
in which is owned in whole or in part by Borrower), (b) no such real property
has ever been used (by Borrower or, to Borrower's knowledge, any other Person)
as (i) a disposal site for any Hazardous Material or (ii) a storage site for any
Hazardous Material, and (c) neither Borrower nor, to Borrower's knowledge,
Manager, any of Borrower's predecessors or Affiliates, excluding the Affiliate
Group, has ever caused or permitted any Hazardous Material to be transported,
released, treated, stored or disposed of at any location other than those
identified in SCHEDULE VIII in a manner which could reasonably form the basis
for any claim, demand, proceeding or action by any Person.
SECTION 10.20 AGENT'S FEES. Except as set forth in SCHEDULE XII, no agent,
broker, investment banker, Person, or firm acting on behalf of Borrower or any
of its Affiliates, or under the authority of any such Person, is or will be
entitled to any broker's or finder's fee or any other commission or similar fee,
directly or indirectly, from any of the parties hereto in connection with any of
the transactions contemplated herein.
SECTION 10.21 TAXES. Except as set forth on SCHEDULE III, Borrower has
filed all tax returns that are required to be filed by it or on behalf of any
Employee Benefit Plan, and has paid or provided adequate reserves for the
payment of all taxes, including, without limitation, all payroll taxes and
federal and state withholding taxes, and all assessments payable by it that have
become due, other than those that are not yet delinquent or that are disclosed
on SCHEDULE III and are being contested in good faith by appropriate proceedings
and with respect to which adequate reserves have been established, and are being
maintained, in accordance with GAAP. Except as set forth on SCHEDULE III, there
is no ongoing audit or other governmental investigation of the tax liability of
Borrower or any Employee Benefit Plan and there is no unresolved claim by a
taxing authority concerning Borrower's tax liability (or by any governmental
authority with respect to any Employee Benefit Plan), for any period for which
returns have been filed or were due. To Borrower's best knowledge, the liability
stated for taxes as of December 31, 1994 in the financial statements for
Borrower described in SECTION 10.3(A) is sufficient in all material respects for
all taxes as of such date. As used in this SECTION 10.21, the term "taxes"
includes all taxes of any nature whatsoever and however denominated, including,
without limitation, excise, import, governmental fees, duties and all other
charges, as well as additions to tax, penalties and interest thereon, imposed by
any government or instrumentality, whether federal, state, local, foreign or
other.
SECTION 10.22 SECURITIES LAWS. Neither Borrower nor any Affiliate of
Borrower other than any member of the Affiliate Group, nor anyone acting on
behalf of any such Person, has directly or indirectly offered any interest in
the Notes, any of the other Liabilities or the LC Guaranties for sale to, or
solicited any offer to acquire any such interest from, or has sold any such
interest to any Person that would subject the issuance or sale of the Notes, any
of the other Liabilities or the LC Guaranties to registration under the
Securities Act of 1933, as amended.
SECTION 10.23 GOVERNMENTAL AUTHORIZATIONS. Borrower has all licenses,
franchises, permits and other governmental authorizations
<PAGE>
necessary for all businesses presently carried on by it (including owning and
leasing the real and personal property owned and leased by it), except where
failure to obtain such licenses, franchises, permits and other governmental
authorizations (a) is not related to any use, storage, transport, release or
disposal by Borrower of any Hazardous Material and (b) would not have a
reasonable probability of (i) subjecting Borrower or any of its officers to
criminal liability or (ii) having a Material Adverse Effect.
SECTION 10.24 COMPLIANCE WITH LAWS. Borrower (a) is not in violation of
any law, ordinance, rule, regulation, order, policy, guideline or other
requirement of any governmental authority, which violation would have a
reasonable probability of subjecting Borrower, or any of its officers, to
criminal liability or have a Material Adverse Effect and, to Borrower's
knowledge, no such violation has been alleged, (b) except as set forth on
SCHEDULE III, has not failed to file in a timely manner all reports, documents
and other materials required to be filed by it with any governmental bureau,
agency or instrumentality (and the information contained in each of such filings
is true, correct and complete in all respects), except where such failure would
not have a reasonable probability of having a Material Adverse Effect and (c)
has not failed to retain all records and documents required to be retained by it
pursuant to any law, ordinance, rule, regulation, order, policy, guideline or
other requirement of any governmental authority, except where such failure would
not have a reasonable probability of subjecting it or any of its officers to
criminal liability or have a Material Adverse Effect.
SECTION 10.25 EMPLOYEES AND LABOR. There is no unfair labor practice
complaint against Borrower pending before the National Labor Relations Board or
any state or local agency nor is there a labor strike or other labor dispute,
pending or, to Borrower's knowledge, threatened, affecting any of the foregoing
which if adversely resolved would have a reasonable probability of having a
Material Adverse Effect; there is no existing representation question respecting
the employees of Borrower nor are there organizational attempts affecting any of
the employees of any of the foregoing which would have a reasonable probability
of having a Material Adverse Effect; there is no grievance pending or threatened
against Borrower; and no labor disputes or work stoppages involving Borrower are
pending or, to Borrower's knowledge, threatened which would have a reasonable
probability of having a Material Adverse Effect. To Borrower's knowledge, no
customer or supplier of Borrower is involved in, or threatened with or affected
by, any labor dispute, arbitration, lawsuit or administrative proceeding which
would have a reasonable probability of having a Material Adverse Effect.
SECTION 11 COVENANTS.
Until the expiration or termination of the Commitments and thereafter until
the Notes and all other Liabilities are paid in full, Borrower agrees that,
unless at any time Lender shall otherwise expressly consent in writing, it will:
SECTION 11.1 REPORTS, CERTIFICATES AND OTHER INFORMATION. Furnish or
cause to be furnished to Lender:
11.1.1. INITIAL BALANCE SHEET. As soon as practicable, and in any
event no later than January 31, 1996, a balance sheet as of the Closing
Date (and after giving effect to all Related Transactions) of Borrower
certified by an authorized officer of Borrower and, except as may be
consented to by Lender, without significant variation from the
<PAGE>
balance sheet referred to in SECTION 10.3(C).
11.1.2. AUDIT REPORT. As soon as available, but in any event within
90 days after the end of each Fiscal Year: (i) copies of the balance sheets
of Borrower as at the end of such Fiscal Year and the related statements of
earnings, stockholders' equity and cash flows for such Fiscal Year, in each
case setting forth in comparative form the figures for the previous year
and in the current business plan and containing a narrative discussion of
variances reflected by such comparisons, prepared in reasonable detail and
in accordance with GAAP applied consistently throughout the periods
reflected therein, certified, without a going concern or like qualification
or qualification arising out of the scope of the audit, by Arthur Andersen
LLP (or such other independent certified public accountants of recognized
standing as shall be selected by Borrower with Lender's approval); and (ii)
a certificate from the accountants identified in CLAUSE (I) of this SECTION
11.1.2 containing a computation of, and showing compliance with, each of
the financial ratios and restrictions contained in SECTION 11, and to the
effect that, in making the examination necessary for the signing of the
annual audit report of Borrower by such accountants, they have not become
aware of any non-compliance by Borrower, or any Event of Default or
Unmatured Event of Default, under this Agreement or the Related Documents.
11.1.3. QUARTERLY REPORTS. As soon as available, but in any event
within 45 days after the end of each Fiscal Quarter of Borrower copies of
the unaudited balance sheets of Borrower as at the end of such Fiscal
Quarter and the related unaudited statements of earnings, stockholders'
equity and cash flows for such Fiscal Quarter and the portion of the Fiscal
Year through such Fiscal Quarter, in each case setting forth in comparative
form the figures for the corresponding periods of the previous Fiscal Year
and in the current business plan and containing a narrative discussion of
variances reflected by such comparisons, prepared in reasonable detail and
in accordance with GAAP applied consistently throughout the periods
reflected therein and certified by the chief financial officer of Borrower
as presenting fairly the financial condition and results of operations of
Borrower (subject to normal year-end audit adjustments).
11.1.4. MONTHLY REPORTS. As soon as available, but in any event
within 30 days after the end of each month beginning with December, 1995,
copies of the unaudited balance sheets of Borrower as at the end of such
month and the related unaudited statements of earnings and cash flows for
such month and the portion of the Fiscal Year through such month, in each
case setting forth in comparative form the figures for the corresponding
periods of the previous Fiscal Year and in the current business plan and
containing a narrative discussion of variances reflected by such
comparisons, prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and certified
by the chief financial officer of Borrower as presenting fairly the
financial condition and results of operations of Borrower (subject to
normal year-end audit adjustments).
11.1.5. BUSINESS PLAN. As soon as available, but in any event: (i)
within 30 days after the beginning of each Fiscal Year of Borrower
beginning with Fiscal Year 1997, a copy of the plan and forecast (including
a projected closing balance sheets, income statements and funds flow
statements) of Borrower for such Fiscal Year; and (ii) within 30 days after
the end of the second Fiscal Quarter of
<PAGE>
Borrower in each Fiscal Year, an update of each plan and forecast delivered
with respect to the Fiscal Year in which such Fiscal Quarter occurs, to the
extent there are any material changes in such plan resulting from actual
and then anticipated results and forecasts.
11.1.6. COMPLIANCE CERTIFICATES; MANAGEMENT REPORTS.
Contemporaneously with the furnishing of a copy of each annual audit report
and of each set of statements provided for in SECTIONS 11.1.2, 11.1.3 and
11.1.4, (i) a duly completed certificate in substantially the form of
EXHIBIT H (each a "Compliance Certificate"), signed by the chief financial
officer of Borrower, containing, among other things, a computation of, and
showing compliance with, each of the applicable financial ratios and
restrictions contained in this SECTION 11 and the Subordination Agreement
and to the effect that as of such date no Event of Default or Unmatured
Event of Default has occurred and is continuing and (ii) a report of an
executive officer of Borrower satisfactory to Lender describing the
financial performance of Borrower during the period covered by the
statements provided for in SECTIONS 11.1.2, 11.1.3 and 11.1.4 and setting
forth any significant events occurring during such period affecting
Borrower.
11.1.7. AUDITORS' MATERIALS. Promptly upon receipt thereof, copies of
all detailed financial and management reports regarding Borrower submitted
to Borrower by independent public accountants in connection with each
annual or interim audit report made by such accountants of the books of
Borrower.
11.1.8. REPORTS TO SEC AND TO SHAREHOLDERS. Promptly upon the filing
or making thereof, copies of each filing and report made by Borrower with
or to any securities exchange or the Securities and Exchange Commission and
of each written communication from Borrower to its shareholders generally.
11.1.9. NOTICE OF DEFAULT, LITIGATION, INTELLECTUAL PROPERTY AND
ERISA MATTERS. Forthwith upon learning of the occurrence of any of the
following, written notice thereof, describing the same and the steps being
taken by Borrower with respect thereto: (i) the occurrence of an Event of
Default or an Unmatured Event of Default, (ii) the institution of, or any
adverse determination or materially adverse development in, any litigation,
arbitration proceeding or governmental proceeding which could have a
Material Adverse Effect, (iii) the occurrence of a Reportable Event with
respect to a Pension Plan, (iv) the institution of any steps to terminate
any Pension Plan, (v) the institution of any steps to completely or
partially withdraw from any Multiemployer Plan, (vi) the failure of
Borrower or any member of its Controlled Group to make a required
contribution to a Pension Plan if such failure is sufficient to give rise
to a lien under Section 412 of the Code or Section 302 of ERISA, (vii) the
adoption of any amendment which would require Borrower or any member of its
Controlled Group to provide security to the Plan under Section 401(a)(29)
of the Code or Section 307 of ERISA, (viii) the incurrence of any increase
in the contingent liability of Borrower or any member of its Controlled
Group or any other conditions, events or transactions with respect to any
present (or future) Employee Benefit Plan which (a) is not reserved on the
balance sheet of Borrower or one of its Controlled Group members and (b)
could reasonably be expected to result in the incurrence by Borrower or any
member of its Controlled Group of any liability in excess of $100,000 (in
the aggregate), (ix) the commencement of any dispute which might lead to
the modification, transfer, revocation, suspension or termination of
<PAGE>
any Related Document, (x) any expectation of the termination (without
renewal), loss, suspension or other impairment of Borrower's rights under
any Material Intellectual Property Right or (xi) any event or events which
could have a Material Adverse Effect.
11.1.10. INSURANCE REPORTS. (i) Within 90 days after the end of each
Fiscal Year, a certificate signed by its chief financial officer that
summarizes the insurance policies carried by Borrower (such certificate to
be in form and substance reasonably satisfactory to Lender), and (ii)
written notification 30 days prior to any cancellation or material change
of any such insurance by Borrower and within 5 days after receipt of any
notice (whether formal or informal) of cancellation, reduction in coverage,
shortening of policy period or material adverse change by any of its
insurers.
11.1.11. WITHDRAWAL LIABILITY. With respect to each Multiemployer
Plan, (i) no less frequently than annually, a written estimate (which shall
be based on information received from each such plan, it being expressly
understood that Borrower shall take all reasonable steps to obtain such
information) of the withdrawal liability that would be incurred by Borrower
or any member of its Controlled Group in the event that all companies in
the Controlled Group were to completely withdraw from that plan, and (ii)
written notice thereof, as soon as it has reason to believe (on the basis
of the most recent information available to it) that the sum of (a) the
withdrawal liability that would be incurred by the Controlled Group if all
companies in the Controlled Group completely withdrew from all
multiemployer plans as to which any company in the Controlled Group has an
obligation to contribute, and (b) the aggregate amount of the outstanding
withdrawal liability (without unaccrued interest) incurred by the
Controlled Group to multiemployer plans, would exceed $100,000.
11.1.12. LIST OF OFFICERS AND DIRECTORS. (i) Not more than 10
Business Days after each anniversary date of the initial Loan, a complete
list of the officers and directors of Borrower, and (ii) within 15 Business
Days of any change in the information provided pursuant to the foregoing
CLAUSE (I), written notice of such change.
11.1.13. BORROWING BASE REPORT. On the fifteenth day of each
calendar month, a statement, certified by the chief financial officer of
Borrower of the daily closing balances of the aggregate outstanding
principal amount of Working Capital Loans during the preceding month in
form reasonably satisfactory to Lender; PROVIDED, HOWEVER, that at any time
after Borrower shall have violated SECTION 11.20 twice in the period
covered by one of the reports required by this SECTION 11.1.13, Borrower
shall, from and after receiving Lender's request, provide Lender on the
first Business Day of each week with the daily closing balances of the
aggregate outstanding principal amount of Working Capital Loans during the
preceding week.
11.1.14. TAX RETURNS AND RECEIPTS. Within: (i) 30 days after the
filing thereof, copies of all tax returns filed by Borrower or Parent with
any Federal or state taxing authority; and (ii) 30 days after receipt
thereof by Borrower, evidence of payment of property taxes.
11.1.15. OTHER INFORMATION. From time to time, such other information
concerning Borrower as Lender reasonably may request.
SECTION 11.2 CORPORATE EXISTENCE; FOREIGN QUALIFICATION. Do and
<PAGE>
cause to be done at all times all things necessary to (a) maintain and preserve
its corporate existence, (b) be duly qualified to do business and in good
standing as a foreign corporation in each jurisdiction where the nature of its
business makes such qualification necessary, except any such jurisdiction where
the failure to so qualify would not have a reasonably probability of having a
Material Adverse Effect (which jurisdictions shall include, without limitation,
those jurisdictions listed in Part I of SCHEDULE VII) and (c) comply with all
Contractual Obligations and Requirements of Law binding upon such entity, except
to the extent that the failure to comply therewith would not have a Material
Adverse Effect.
SECTION 11.3 BOOKS, RECORDS AND INSPECTIONS. (a) Maintain complete and
accurate books and records; (b) permit access at reasonable times by Lender to
its books and records; (c) permit Lender to inspect at reasonable times its
properties and operations; and (d) permit Lender to discuss its business,
operations and financial condition with its officers.
SECTION 11.4 INSURANCE. (a) Maintain such insurance as may be required by
law, or by the Collateral Documents or otherwise reasonably required by Lender,
all to such extent and against such hazards and liabilities, as is customarily
maintained by prudent companies similarly situated, (b) maintain a sufficient
amount of insurance so that neither it nor Lender will be considered a co-
insurer or co-insurers, (c) with respect to each liability insurance policy, (A)
cause such policy to provide, pursuant to endorsements in form and substance
reasonably satisfactory to Lender, that Lender is named as an additional insured
and that the insurer will give Lender 30 days' prior written notice of the
termination of such policy and (B) notify Lender within 5 days after obtaining
any new policy, or increasing coverage under any existing policy, describing in
detail in such notice any such new policy or increase, and (d) with respect to
each physical damage or casualty policy and each life insurance policy, (A)
cause such policy to provide, pursuant to endorsements in form and substance
reasonably satisfactory to Lender, that Lender is named as a loss payee as to
personal property and a mortgagee as to real property and that the insurer will
give 30 days' prior written notice of the termination of such policy, (B) cause
such policy to provide, pursuant to endorsements in form and substance
reasonably satisfactory to Lender, that the insurance shall not be invalidated
as against Lender by any action or inaction of any Person other than Lender,
regardless of any breach or violation of any warranty, declaration or condition
contained in such policy, (C) as against Lender, the insurers shall waive any
rights of subrogation to the extent that the named insured has waived such
rights (and Borrower hereby irrevocably and unconditionally waives any right of
subrogation against Lender, except for claims arising out of the gross
negligence or willful misconduct of Lender), and (D) notify Lender within 5 days
of obtaining any new policy or increasing coverage under any existing policy,
describing in detail in such notice any such new policy or increase.
SECTION 11.5 TAXES AND LIABILITIES. Pay when due all taxes, assessments and
other material liabilities except as contested in good faith and by appropriate
proceedings with respect to which adequate reserves have been established, and
are being maintained, in accordance with GAAP if and so long as forfeiture of
any part of the Collateral will not result from the failure to pay any such
taxes, assessments or other material liabilities during the period of any such
contest.
SECTION 11.6 CURRENT RATIO. Maintain at all times a Current Ratio of not
less than the ratio set forth below opposite the applicable period:
Applicable
<PAGE>
PERIOD RATIO
Closing Date to March 31, 1998 1.00
April 1, 1998 to December 31, 1998 1.25
January 1, 1999 to January 1, 2001 1.50
SECTION 11.7 ADJUSTED NET WORTH. Maintain an Adjusted Net Worth on the last
day of each month during each period listed below (or in the case of the period
ending January 31, 1996, the period from the Closing Date to January 31, 1996)
of at least the amounts set forth opposite such period:
Minimum
Adjusted
Net Worth
PERIOD (IN $ MILLIONS)
1/1/96 to 3/31/96 10,200
4/1/96 to 6/30/96 10,900
7/1/96 to 9/30/96 11,500
10/1/96 to 12/31/96 12,300
1/1/97 to 3/31/97 13,000
4/1/97 to 6/30/97 13,700
7/1/97 to 9/30/97 14,500
10/1/97 to 11/30/97 15,200
12/1/97 to 12/31/97 15,600
1/1/98 to 3/31/98 17,700
4/1/98 to 6/30/98 19,000
7/1/98 to 9/30/98 20,400
10/1/98 to 12/31/98 22,000
1/1/99 to 3/31/99 23,800
4/1/99 to 6/30/99 26,300
7/1/99 to 9/30/99 28,100
10/1/99 to 12/31/99 30,000
1/1/2000 to 3/31/2000 31,900
4/1/2000 to 6/30/2000 34,100
7/1/2000 to 9/30/2000 36,300
10/1/2000 to 12/31/2000 38,500
SECTION 11.8 EMPLOYEE BENEFIT PLANS. (i) Maintain, and cause each member of
the Controlled Group to maintain, each Pension Plan as to which it may have any
liability, in compliance in all material respects with all applicable
Requirements of Law or as required pursuant to a collective bargaining
agreement, or if intended to qualify under Section 401(a) or 501(a) of the
Internal Revenue Code, in form and administered in a manner so as not to result
in any material liability to Borrower for failure to comply with the applicable
provisions thereof, and (ii) not institute any actions which could reasonably be
expected to give rise to any of the following, unless the liability to Borrower
arising from the same will not exceed $100,000 or is adequately reserved on the
balance sheet of Borrower or one of its Controlled Group members: (a) a
Reportable Event with respect to a Pension Plan, (b) the complete or partial
withdrawal from any Multiemployer Plan, (c) an amendment, modification or
termination of a Pension Plan or the entering into of any new Employee Benefit
Plan (whether or not resulting in the posting of a security under Section
401(a)(29) of the Internal Revenue Code or Section 307 of ERISA), (d) an
obligation to file a notice of intent to terminate a Pension Plan under ERISA,
(e) a lien under Section 412 of the Internal Revenue Code or Section 302 of
ERISA, (f) the institution of proceedings to terminate a Pension Plan by the
Pension
<PAGE>
Benefit Guaranty Corporation, or (g) other than in the ordinary course, the
incurrence of any increase in the contingent liability of Borrower or any other
conditions, events or transactions with respect to any present (or future)
Employee Benefit Plan.
SECTION 11.9 COLLATERAL DOCUMENTS. Cause the Collateral Documents, as
security for the payment, performance and observance of all of the Liabilities,
to be and remain valid, perfected Liens on and security interests in all assets
of Borrower now or hereafter existing or acquired (free of all other Liens
whatsoever other than Permitted Liens).
SECTION 11.10 COMPLIANCE WITH LAWS. Comply with all Federal, state and
local laws, rules and regulations related to its business, including but not
limited to any laws regarding the employment of Persons by Borrower, if the
failure so to comply would have a reasonably probability of having a Material
Adverse Effect.
SECTION 11.11 MAINTENANCE OF PERMITS. Maintain all permits, licenses and
consents as are required for the conduct of its business by any state, federal
or local government agency or instrumentality (including, without limitation,
any such license, consent or permit relating to Hazardous Materials or the
disposal thereof) if the failure to maintain such licenses, permits and consents
would have a reasonably probability of having a Material Adverse Effect.
SECTION 11.12 INTENTIONALLY DELETED.
SECTION 11.13 NET CASH RATIO. Not permit the ratio (as measured on the last
day of any month beginning with the month ending on January 31, 1996) of Net
Cash Generated to Total Fixed Charges for the twelve months ending on the last
day of such month during each period listed below (or in the case of months
ending on or before December 31, 1996, for the period from the Closing Date to
the last day of such month treated as a single accounting period) to be less
than the ratio listed below opposite such period:
Minimum
PERIOD RATIO
1/1/96 to 1/31/96 0.50
2/1/96 to 3/31/96 0.80
4/1/96 to 6/30/96 0.80
7/1/96 to 9/30/96 0.80
10/1/96 to 12/31/96 0.80
1/1/97 to 3/31/97 0.80
4/1/97 to 6/30/97 0.80
7/1/97 to 9/30/97 0.80
10/1/97 to 12/31/97 0.85
1/1/98 to 3/31/98 0.90
4/1/98 to 6/30/98 0.90
7/1/98 to 9/30/98 0.90
10/1/98 to 12/31/98 0.90
1/1/99 to 3/31/99 0.90
4/1/99 to 6/30/99 1.05
7/1/99 to 9/30/99 1.05
10/1/99 to 12/31/99 1.05
1/1/2000 to 3/31/2000 1.15
4/1/2000 to 6/30/2000 1.20
7/1/2000 to 9/30/2000 1.40
10/1/2000 to 12/31/2000 1.60
<PAGE>
SECTION 11.14 TOTAL LIABILITIES RATIO. Not permit the ratio of (a) Total
Liabilities to (b) Adjusted Net Worth to exceed on the last day of any month
during any period set forth below, the ratio set forth opposite such period
below:
Maximum
PERIOD RATIO
1/1/96 to 3/31/96 5.00
4/1/96 to 6/30/96 5.00
7/1/96 to 9/30/96 4.50
10/1/96 to 12/31/96 4.00
1/1/97 to 3/31/97 3.75
4/1/97 to 6/30/97 3.50
7/1/97 to 9/30/97 3.25
10/1/97 to 12/31/97 2.75
1/1/98 to 3/31/98 2.50
4/1/98 to 6/30/98 2.25
7/1/98 to 9/30/98 2.00
10/1/98 to 12/31/98 2.00
1/1/99 to 3/31/99 1.75
4/1/99 to 6/30/99 1.75
7/1/99 to 9/30/99 1.75
10/1/99 to 12/31/99 1.75
1/1/2000 to 3/31/2000 1.50
4/1/2000 to 6/30/2000 1.50
7/1/2000 to 9/30/2000 1.50
10/1/2000 to 12/31/2000 1.50
SECTION 11.15 ANNUAL INTEREST COVERAGE RATIO. Not permit the Interest
Coverage Ratio Number 1 measured on January 31, 1996 and on the last day of any
month thereafter for any twelve consecutive months ending on such last day (or
in the case of any month ending on or before December 31, 1996, for the period
from the Closing Date to the last day of such month treated as a single
accounting period) to be less than the ratio listed below for the period during
which such month occurs:
Minimum
PERIOD RATIO
Closing Date to 3/31/96 1.40
4/1/96 to 6/30/96 1.70
7/1/96 to 9/30/96 1.80
10/1/96 to 12/31/96 1.90
1/1/97 to 3/31/97 2.00
4/1/97 to 6/30/97 2.10
7/1/97 to 9/30/97 2.15
10/1/97 to 12/31/97 2.15
1/1/98 to 3/31/98 2.75
4/1/98 to 6/30/98 3.00
7/1/98 to 9/30/98 3.25
10/1/98 to 12/31/98 3.75
1/1/99 to 3/31/99 4.00
4/1/99 to 6/30/99 4.00
7/1/99 to 9/30/99 4.50
10/1/99 to 12/31/99 4.50
1/1/2000 to 3/31/2000 5.00
4/1/2000 to 6/30/2000 5.00
7/1/2000 to 9/30/2000 5.00
<PAGE>
10/1/2000 to 12/31/2000 5.00
SECTION 11.16 QUARTERLY INTEREST COVERAGE RATIO. Not permit the Interest
Coverage Ratio Number 2 for any period comprised of three consecutive calendar
months (or in the case of the period ending on or before March 31, 1996, for the
period from the Closing Date to the last day of such month treated as a single
accounting period) and ending during any period specified below to be less than
the ratio listed below for such period:
Minimum
PERIOD RATIO
1/1/96 to 3/31/96 1.50
4/1/96 to 6/30/96 1.75
7/1/96 to 9/30/96 1.75
10/1/96 to 12/31/96 2.10
1/1/97 to 3/31/97 2.10
4/1/97 to 6/30/97 2.10
7/1/97 to 9/30/97 2.20
10/1/97 to 12/31/97 2.20
1/1/98 to 3/31/98 3.00
4/1/98 to 6/30/98 3.25
7/1/98 to 9/30/98 3.25
10/1/98 to 12/31/98 3.25
1/1/99 to 3/31/99 4.00
4/1/99 to 6/30/99 4.00
7/1/99 to 9/30/99 4.00
10/1/99 to 12/31/99 4.00
1/1/2000 to 3/31/2000 4.00
4/1/2000 to 6/30/2000 4.00
7/1/2000 to 9/30/2000 4.00
10/1/2000 to 12/31/2000 4.00
SECTION 11.17 PURCHASE, REDEMPTION, DIVIDEND, INTEREST AND PAYMENT
RESTRICTIONS. Not (a) purchase, redeem or otherwise acquire any shares of its
capital stock, declare or pay any dividends thereon or make any distribution or
payment to any of its stockholders (in their capacity as such), (b) make any
payment on or in respect of the Subordinated Loans or (c) make any other payment
of any nature whatsoever to any of its Affiliates or stockholders (in their
capacity as such), PROVIDED, HOWEVER, that:
(i) Borrower may make payments, in the form of dividends or
otherwise, to Parent from time to time for the payment of Borrower's
portion of the aggregate federal and state income tax liabilities
(including estimated tax liabilities) of the affiliated group filing
consolidated returns of which Parent is the common parent and Borrower is a
member for any taxable year, PROVIDED that such payments shall not exceed
with respect to any year the federal and state income tax liabilities of
Borrower for such year determined as if Borrower were not a member of such
affiliated group filing consolidated returns but rather as if Borrower
filed its returns on a separate company basis for such year and all prior
years;
(ii) to the extent permitted by the Subordination Agreement, Borrower
may (A) make payments of accrued and unpaid interest on the Subordinated
Loans, (B) declare and pay the Preferred Dividends and (C) make payments of
Incentive Management Fees; and
<PAGE>
(iii) Borrower may make payments permitted pursuant to SECTION 11.29
hereof.
SECTION 11.18 GROSS CAPITAL EXPENDITURES. Not, directly or indirectly (by
way of the acquisition of the securities of a Person or otherwise), make Gross
Capital Expenditures, except that Borrower may, so long as no Event of Default
or Unmatured Event of Default shall exist or would result therefrom, make Gross
Capital Expenditures in the ordinary course of business in an aggregate amount
not to exceed (a) $500,000 for any Fiscal Year of Borrower other than the Fiscal
Year ending December 31, 1995 and (b) $83,000 for the Fiscal Year ending
December 31, 1995; PROVIDED, that in the event Borrower does not make Gross
Capital Expenditures during any Fiscal Year, except for the Fiscal Year ending
December 31, 1995, up to the amounts specified above, then the Gross Capital
Expenditures permitted to be made in the succeeding Fiscal Year shall be
increased by a positive amount, up to a maximum of $100,000, equal to (y) the
applicable limit specified above MINUS (z) the actual amount of Gross Capital
Expenditures expended during such prior Fiscal Year.
SECTION 11.19 GUARANTIES, LOANS, ADVANCES OR INVESTMENTS. Not become or be
a guarantor or surety of, or otherwise incur any Contingent Obligation or become
or be responsible in any manner (whether by agreement to purchase any
obligations, stock, assets, goods or services, or to supply or advance any
funds, assets, goods or services, or otherwise) with respect to, any undertaking
of any other Person, or make or permit to exist any loans or advances to, or
investments in, any other Person, except for (a) the endorsement, in the
ordinary course of collection, of instruments payable to it or to its order, (b)
investment in Cash Equivalents, (c) Contingent Obligations under the LC
Reimbursement Agreements, (d) the Bond Guaranty and (e) the Repurchase
Obligations.
SECTION 11.20 WORKING CAPITAL COMMITMENT. Not permit the aggregate
principal amount of Working Capital Loans outstanding at any time to exceed the
Working Capital Commitment at such time.
SECTION 11.21 MERGERS, ACQUISITIONS, CONSOLIDATIONS, SALES. Not (a) be a
party to any merger or consolidation, or purchase or otherwise acquire all or
substantially all of the assets or stock of any class of, or any partnership or
joint venture interest in, any other Person or (b) sell or assign with or
without recourse any Account Receivable or enter into any agreement providing
for or consummate any Asset Sales or Equity Sales.
SECTION 11.22 LEASES. Not incur or permit to exist any Lease Obligations
(other than leases which are cancelable at the option of Borrower without
penalty and on no more than 90 days' notice) which require the payment of
amounts of rental in excess of (a) $600,000 in the aggregate for any Fiscal Year
other than the Fiscal Year ending December 31, 1995 and (b) the product of (x)
$600,000 multiplied by (y) the Fiscal Year 1995 Percentage for the Fiscal Year
ending December 31, 1995.
SECTION 11.23 UNCONDITIONAL PURCHASE OBLIGATIONS. Not enter into or be a
party to any contract for the purchase of materials, supplies or other property
or services, if such contract requires that payment be made by it regardless of
whether delivery is ever made of such materials, supplies or other property or
services.
SECTION 11.24 REGULATIONS G, U AND X. Not use or permit any proceeds of the
Loans or Reimbursement Obligations to be used, either directly or indirectly,
for the purpose, whether immediate, incidental or ultimate, of
<PAGE>
"purchasing or carrying margin stock" within the meaning of Regulations G, U and
X of the Board of Governors of the Federal Reserve System, as amended from time
to time.
SECTION 11.25 SUBSIDIARIES. Not create or permit to exist any Subsidiary.
SECTION 11.26 NO AMENDMENT OF CERTAIN DOCUMENTS. Not enter into or permit
to exist any amendment or modification of its articles of incorporation or by-
laws (which articles or by-laws shall provide for an observatory seat on the
board of directors of Borrower for Lender), the Subordinated Loan Instruments,
the Lamar Merger Instruments, the Acquisition Instruments, the Merger
Instruments, the Employment Agreements, the Management Agreement or the
Repurchase Agreements.
SECTION 11.27 OTHER AGREEMENTS. Not enter into or permit to exist any
agreement containing any provision which would be violated or breached by the
performance of its obligations hereunder or under any instrument or document
delivered or to be delivered by it hereunder or in connection herewith.
SECTION 11.28 BUSINESS ACTIVITIES. Not engage in any type of business
except the businesses described in SCHEDULE IX and the activities incidental and
related thereto.
SECTION 11.29 TRANSACTIONS WITH AFFILIATES. Except for the transactions set
forth on SCHEDULE XVI, not enter into, or cause, suffer or permit to exist:
(a) any arrangement or contract with any of its Affiliates or any
Affiliate of Parent requiring any payments to be made by Borrower to an
Affiliate of Borrower or Parent with respect to services, where
compensation is due whether or not such services shall be received by
Borrower; or
(b) any other transaction, arrangement or contract (including,
without limitation, any employment contract or agreement as to payment of a
director's fees) with any of its Affiliates or Affiliates of Parent which
is on terms which are less favorable than those otherwise reasonably
attainable on an arm's-length basis from, any Person which is not one of
its Affiliates or Affiliates of Parent, PROVIDED, HOWEVER, that Borrower
may enter into the Management Agreement with Manager and pay the Base
Management Fees to Manager.
SECTION 11.30 ENVIRONMENTAL LIABILITIES. Not violate any Requirement of Law
regarding Hazardous Material; and, without limiting the foregoing, not, and not
permit any Person to, dispose of any Hazardous Material into or onto, or (except
in accordance with applicable law) from, any real property owned or operated by
it nor allow any lien imposed pursuant to any law, regulation or order relating
to Hazardous Materials or the disposal thereof to be imposed or to remain on
such real property.
SECTION 11.31 INDEBTEDNESS. Not incur or permit to exist any Indebtedness
or accounts payable except (a) the Loans and the other Liabilities, (b) the
Subordinated Loans, (c) deferred taxes, (d) current accounts payable arising in
the ordinary course of business and not overdue, (e) non-current accounts
payable which it is contesting in good faith and by appropriate proceedings
diligently conducted, and with respect to which adequate reserves have been
established, and are being maintained, in accordance with and as required by
GAAP, (f) Indebtedness shown on PART
<PAGE>
1 of SCHEDULE X, (g) Indebtedness in respect of the deferred payment of
insurance premiums, PROVIDED that the aggregate amount of such premiums which
may be deferred in any Fiscal Year shall not exceed $5,000, (h) other
Indebtedness hereafter incurred in connection with Permitted Liens, (i)
Indebtedness in respect of unpaid Reimbursement Obligations in respect of
drawings under Permitted LCs, provided that no such unpaid Reimbursement
Obligations shall be outstanding for more than one Business Day after the
delivery of notice by Lender to Borrower of such Reimbursement Obligation and
(j) the Selling Shareholders Indebtedness, PROVIDED such Selling Shareholders
Indebtedness is repaid in full from the proceeds of draws on or cash collateral
securing the Selling Shareholders Letters of Credit not later than January 26,
1996.
SECTION 11.32 LIENS. Not create or permit to exist any Lien with respect to
any assets now or hereafter existing or acquired, except Permitted Liens.
SECTION 11.33 FISCAL YEAR. Not change its Fiscal Year from a Fiscal Year
ending on the last day of December.
SECTION 12 CONDITIONS.
The obligation of Lender to make the Loans and of financial accommodations
hereunder is subject to the following conditions precedent or concurrent:
SECTION 12.1 INITIAL REVOLVING LOAN. The obligation of Lender to make its
initial Revolving Loan shall be subject to the prior or concurrent satisfaction
(in form and substance satisfactory to Lender) of each of the conditions
precedent set forth below.
12.1.1. LAMAR MERGER, ACQUISITION AND MERGER. Lender shall have
received evidence that (i) each of the Lamar Merger, Acquisition and Merger
has been consummated in accordance with the terms of the Lamar Merger
Instruments, the Acquisition Instruments, the Merger Instruments, all
Requirements of Law and as contemplated by this Agreement, including the
payment by Acquisition Corp. of not more than $46,000,000 in cash or
installment notes for the GMH Equity Interests and $541,000 in cash or
demand notes to the Selling Shareholders pursuant to Section 3(c) of the
Stock Purchase Agreement, (ii) Borrower has acquired good and marketable
title to all Property necessary for the operation of its business, free and
clear of all Liens other than Permitted Liens, (iii) the Lamar Merger
Instruments, Acquisition Instruments and Merger Instruments are in full
force and effect and (iv) none of the parties to the Lamar Merger
Instruments, Acquisition Instruments or Merger Instruments shall have
failed to perform any material obligation or covenant required by any Lamar
Merger Instrument, Acquisition Instrument or Merger Instrument to be
performed or complied with by it on or before the Closing Date.
12.1.2. NO DEFAULT. No Event of Default, or Unmatured Event of
Default, shall have occurred and be continuing or will result from the
making of such Loan.
12.1.3. WARRANTIES AND REPRESENTATIONS. All warranties and
representations of Borrower or Parent contained in this Agreement and the
Related Documents shall be true and correct in all material respects as of
the date of such Loan, with the same effect as though made on the date of
such Loan.
<PAGE>
12.1.4. LENDER APPROVAL OF CERTAIN DOCUMENTS. The terms and provisions
of the Lamar Merger Instruments, the Acquisition Instruments, the Merger
Instruments, the Subordinated Loan Instruments, the Employment Agreements,
the Management Agreement and the Parent Equity Documents shall have been
approved by Lender.
12.1.5. LITIGATION. In the opinion of Lender, in its reasonable
discretion, (i) no litigation (including, without limitation, derivative
actions), arbitration, governmental investigation or proceeding or inquiry
shall, on the date of the initial Loan, be pending, or to the knowledge of
Borrower, threatened which seeks to enjoin or otherwise prevent the
consummation of, or to recover any damages or to obtain relief as a result
of, the Related Transactions, or would be materially adverse to, or be
detrimental to the interests of, any of the parties to this Agreement or
the Related Documents or any of the Related Transactions, and (ii) no
material adverse development shall have occurred in any litigation
(including, without limitation, derivative actions), arbitration,
government investigation or proceeding or inquiry disclosed in SCHEDULE
III.
12.1.6. FEES. The fees referred to in SECTION 5 which are due and
payable on or prior to the date of the initial Loan shall have been paid.
12.1.7. ESTABLISHMENT OF ACCOUNTS. The Accounts shall have been
established pursuant to SECTION 6.2 and the financial institutions at which
the Accounts have been established shall have furnished Lender with the
acknowledgment referred to in SECTION 6.3.
12.1.8. INDEBTEDNESS TO BE REFINANCED. The obligations of Borrower
under the Acquisition Instruments and all other indebtedness of Borrower
identified on PART 2 of SCHEDULE X (herein called "Indebtedness to be
Refinanced"), together with all interest accrued thereon and all prepayment
premiums and other amounts payable in connection therewith, shall have been
refinanced in full from the proceeds of the Loans and the Subordinated
Loans and Lender shall have received (i) the certificate of the President
or a Vice President of Borrower, dated the date of the initial Revolving
Loan to such effect and to the further effect that an aggregate amount of
no more than $1,000,000 was required to make such payments, (ii) a letter
from each of the holders of the Indebtedness to be Refinanced setting forth
in each case (x) the amount of principal and accrued interest thereon due
such holder as of the date of such letter, (y) the per diem interest rate
on unpaid principal thereunder as of such date, and (z) payment
instructions relative to the payment of such Indebtedness to be Refinanced,
and enclosing in escrow any and all Uniform Commercial Code termination
statements, mortgage releases and releases of security interests in
patents, trademarks and copyrights, in form and substance satisfactory to
Lender, sufficient to terminate all Liens securing any of the Indebtedness
to be Refinanced.
12.1.9. DOCUMENTS. Lender shall have received all of the following,
each duly executed and dated the date of the initial Loan (or such earlier
date as shall be satisfactory to Lender), in form and substance
satisfactory to Lender:
(a) CERTAIN RELATED DOCUMENTS. The Notes, the Subordination
Agreement, the Bank Agency Agreement, the Security Agreement, the
Aircraft Security Agreement, the Pledge Agreement, the Mortgages, the
Leasehold Mortgages and certificates representing all of the
<PAGE>
capital stock of Borrower, together with appropriate duly executed
stock powers.
(b) LEASES AND LANDLORD CONSENTS. Copies of all leases of real
property to which Borrower is subject, certified by Borrower as true
and correct, and a consent from the landlord under each such lease.
(c) TITLE MATTERS. With respect to each parcel of real property
or interest in real property described in the Mortgages or Leasehold
Mortgages, the following items:
(i) a lender's title insurance policy with respect to the
real property owned in fee and described in the Mortgages and the
real property leased and described in the Leasehold Mortgages in
form and issued by a title insurance company satisfactory to
Lender subject to no exceptions other than Permitted Liens and
containing the following endorsements: comprehensive endorsement
no. 1, contiguity (if applicable), usury, doing business,
variable rate, multiple secured properties loss, restrictions
(where applicable), encroachment (where applicable), 3.1 zoning,
including parking, survey, variable rate and such other
endorsements as Lender shall reasonably require;
(ii) copies of all underlying documents referred to in the
title insurance policies;
(iii) a survey, prepared in accordance with ALTA/ACSM
standards by a surveyor satisfactory to Lender, containing a
flood plain certification; and
(iv) certified copies of all leases (including ground
leases) and other contracts affecting such property or interest ;
(d) RESOLUTIONS. Certified copies of resolutions of the
shareholders and Board of Directors of (i) Acquisition Corp. and GMH
authorizing or ratifying the execution, delivery and performance of
the Acquisition Instruments and the Merger Instruments and (ii)
Borrower and Parent authorizing or ratifying the execution, delivery
and performance of this Agreement, the Related Documents, the
Subordinated Loan Instruments and the Management Agreement to which
such entity is a party.
(e) CONSENTS, ETC. Certified copies of all documents evidencing
any necessary corporate action, consents and governmental approvals
(if any) with respect to this Agreement, the Related Documents, any
other document provided for hereunder and the Related Transactions.
(f) INCUMBENCY AND SIGNATURES. A certificate of the Secretary or
an Assistant Secretary of Borrower and Parent, certifying the names of
the individual or individuals authorized to sign this Agreement and
the Related Documents to which such entity is a party, together with a
sample of the true signature of each such individual.
(g) OPINIONS OF COUNSEL. The opinion of Nixon, Hargrave, Devans
& Doyle LLP, counsel for Borrower, addressed to Lender, in form and
substance satisfactory to Lender, local opinions of
<PAGE>
counsel in form and substance satisfactory to Lender as Lender may
request and opinions of counsel regarding the Acquisition as Lender
may reasonably request.
(h) EVIDENCE OF FINANCIAL CONDITION. A certificate of an
executive officer of Borrower, relying on such financial information
as may be satisfactory to Lender, to the effect that, as of the date
of the initial Loan and after giving effect to the Related
Transactions: (i) Borrower's assets, including goodwill, at fair
valuation, determined on a going concern basis, will exceed the total
liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities) of Borrower, (ii) Borrower will have an
aggregate equity capitalization of at least $10,000,000, (iii)
Borrower will have sufficient cash flow to enable it to pay its debts
as they mature, and (iv) Borrower will not have an unreasonably small
capital with which to engage in its anticipated businesses.
(i) ARTICLES AND BY-LAWS. Certified copies of the articles of
incorporation and by-laws of Borrower and Parent (which articles or
by-laws shall provide for an observatory seat on the board of
directors of Borrower and Parent for Lender) and Acquisition Corp. and
GMH.
(j) INSURANCE. Evidence that Borrower is maintaining insurance
of the type required by this Agreement and the Collateral Documents
(including without limitation casualty, liability, worker's
compensation and "key man" insurance), together with certificates of
insurance naming Lender as an additional insured and/or loss payee and
specifying, among other things, such matters as shall be required by
SECTION 11.4. Such evidence shall include, without limitation, a
certificate, in form and substance satisfactory to Lender and signed
by the chief financial officer of Borrower, summarizing the insurance
policies carried by Borrower.
(k) ACQUISITION INSTRUMENTS AND MERGER INSTRUMENTS. Copies,
certified by the Secretary of State of the appropriate jurisdictions,
of the Lamar Merger Certificate, the Merger Certificate (or other
proof satisfactory to Lender that the Lamar Merger and the Merger have
taken place), and copies of the Lamar Merger Instruments, Acquisition
Instruments and Merger Instruments certified by an appropriate officer
of Borrower.
(l) SUBORDINATED LOAN INSTRUMENTS. Copies, certified by an
appropriate officer of Borrower, of the Subordinated Loan Instruments.
(m) LIST OF DIRECTORS AND OFFICERS. A complete list of the
officers and directors of Borrower as at the date of the initial
Revolving Loan.
(n) GOOD STANDING CERTIFICATES. Certificates of good standing
for Borrower in each jurisdiction in which the business of such entity
requires it to be qualified.
(o) FINANCIAL STATEMENTS. Each of the financial statements
listed in SECTION 10.3.
(p) FINANCING STATEMENTS. Such duly executed Uniform
<PAGE>
Commercial Code financing statements ("Financing Statements") as
Lender may deem necessary to perfect and preserve Lender's Lien on the
Collateral.
(q) EMPLOYMENT AGREEMENTS. Copies, certified by an appropriate
officer of Borrower, of the Employment Agreements.
(r) REPURCHASE AGREEMENTS. Copies, certified to the best of
Borrower's knowledge, by an appropriate officer of Borrower, of the
Repurchase Agreements.
(s) PARENT EQUITY DOCUMENTS. Copies, certified by an appropriate
officer of Parent, of the Parent Equity Documents.
(t) CONFIRMATORY CERTIFICATE. A duly completed certificate
confirming satisfaction of the conditions set forth in SECTIONS 12.1.1
through 12.1.3, and 12.1.7 through 12.1.10, signed by the President or
a Vice President of Borrower.
(u) MANAGEMENT AGREEMENT. A copy, certified by an appropriate
officer of Borrower, of the Management Agreement.
(v) OTHER. Such other documents as Lender reasonably may
request.
12.1.10. SUBORDINATED LOAN INSTRUMENTS. The Subordinated Loan
Instruments shall have been duly executed by the parties thereto, and the
Subordinated Loans shall have been made thereunder.
12.1.11. PARENT EQUITY INTERESTS. The Parent Equity Interests,
including the Parent Preferred Stock, shall have been duly issued by Parent
and Parent shall have received at least $10,250,000 in proceeds from the
issuance of such Parent Equity Interests.
12.1.12. INITIAL EQUITY CONTRIBUTION. Borrower shall have received
the Initial Equity Contribution.
SECTION 12.2 TERM LOAN, INITIAL REVOLVING LOAN AND WORKING CAPITAL LOAN.
The obligation of Lender to make the Term Loan, initial Revolving Loan and
Working Capital Loan shall be subject to the prior or concurrent satisfaction
(in form and substance satisfactory to Lender) of the conditions precedent set
forth below.
12.2.1. LOANS. The Term Loan in the full amount of the Term Loan
Commitment shall be made prior to the initial Revolving Loan. The Term Loan
and Revolving Loan in the full amount of the Term Loan Commitment and the
Revolving Loan Commitment, respectively, shall be made prior to the initial
Working Capital Loan, if any.
12.2.2. NOTES. Lender shall have received the Term Loan Note,
Revolving Note and Working Capital Note duly executed and delivered and
conforming to the requirements hereof.
12.2.3. MAXIMUM LOAN BALANCE AT CLOSING. Lender shall have received
evidence that the Term Loan, the initial Revolving Loan and the Working
Capital Loan, if any, shall be in an aggregate amount of no more than
$22,500,000.
SECTION 12.3 ALL LOANS; LC GUARANTIES. The obligation of Lender to make the
initial Loan and each subsequent Loan or to provide an LC Guaranty
<PAGE>
is subject to the following further conditions precedent that:
12.3.1. NO DEFAULT; REAFFIRMATION OF WARRANTIES AND REPRESENTATIONS.
(a) No Event of Default or Unmatured Event of Default shall have occurred
and be continuing or will result from the making of such Loan or providing
such LC Guaranty, (b) the warranties and representations contained in this
Agreement and the Related Documents shall be true and correct in all
material respects as of the date of such requested Loan or provision of
such LC Guaranty, with the same effect as though made on the date of such
Loan or provision of such LC Guaranty, except to the extent such warranties
and representations expressly relate to an earlier date, and (c) there
shall have been no material adverse change or notice of prospective
material adverse change with respect to insurance maintained by Borrower.
12.3.2. LITIGATION; ADVERSE CHANGES. (a) No claims, litigation
(including, without limitation, derivative actions), arbitration,
governmental proceeding, investigation or inquiry not disclosed in writing
by Borrower to Lender prior to the date of the last previous Loan or
provision of an LC Guaranty, whichever shall have more recently occurred,
shall be pending or known to be threatened against Borrower, (b) no
material development not so disclosed shall have occurred in any claim,
litigation (including, without limitation, derivative actions),
arbitration, governmental proceeding, investigation or inquiry so
disclosed, and (c) no event, condition or development shall have occurred
or developed at any time (whether before or after the making of the last
previous Loan), which (in the case of each of the foregoing CLAUSES (A)
through (C)) in the opinion of Lender would have a reasonably probability
of having a Material Adverse Effect.
12.3.3. BORROWING CERTIFICATE AND OTHER CONFIRMATIONS. Lender shall
have received: (a) not later than the fifteenth Business Day of each month,
a certificate, substantially in the form of EXHIBIT I (the "Borrowing
Certificate") dated the last Business Day of the month in which such Loan
was requested, signed by the President or a Vice President or other
appropriate officer of Borrower, (b) not later than the fifteenth Business
Day of the first calendar month following the conversion/continuation of a
Loan, a Notice of LIBOR Activity dated the last Business Day of the month
in which such Loan was converted/continued, signed by the President or a
Vice President of Borrower, (c) not less than three days prior to the
making of an LC Guaranty, a certificate substantially in the form of
EXHIBIT J (the "LC Guaranty Request") relating to all Permitted LCs to be
covered by an LC Guaranty since the most recent prior LC Guaranty Request,
signed by the President of a Vice President of Borrower and (d) such other
documents as Lender reasonably may request in support of such requested
Loan or LC Guaranty.
12.3.4. MINIMUM LOAN BALANCE. In the case of any Revolving Loan (other
than the initial Revolving Loan), there shall be outstanding Revolving
Loans in a minimum principal amount of $1,000, and in the case of Working
Capital Loans (other than the initial Working Capital Loan), there shall be
outstanding Working Capital Loans in a minimum principal amount of $1,000.
SECTION 13 EVENTS OF DEFAULT AND THEIR EFFECT.
SECTION 13.1 EVENTS OF DEFAULT. Each of the following shall
<PAGE>
constitute an Event of Default under this Agreement:
13.1.1. NON-PAYMENT OF LOANS OR REIMBURSEMENT OBLIGATIONS. Default in
the payment when due, whether by acceleration or otherwise, of any
principal of or interest or premium on any Loan or Reimbursement
Obligation; PROVIDED, HOWEVER, that the failure of Borrower to pay to
Lender any such Reimbursement Obligation shall not be deemed to be an Event
of Default or Unmatured Event of Default until one Business Day after the
delivery of notice by Lender to Borrower of such Reimbursement Obligation.
13.1.2. NON-PAYMENT OF FEES OR OTHER AMOUNTS. Default, and continuance
thereof for 5 Business Days, in the payment when due, whether by
acceleration or otherwise, of any amount payable to Lender hereunder or
under the Related Documents (other than any amount described in SECTION
13.1.1).
13.1.3. NON-PAYMENT OF OTHER INDEBTEDNESS. (i) Default in the payment
when due (subject to any applicable grace period), whether by acceleration
or otherwise, of any other Indebtedness of, or guaranteed by, Borrower, or
(ii) default in the performance or observance of any obligation or
condition with respect to any such other Indebtedness of, or guaranteed by,
Borrower, if, in the case of either CLAUSE (I) or (II) above, the effect of
such default is to accelerate the maturity of (or there is matured and
unpaid) such other Indebtedness aggregating $25,000 or more, or to cause
such other Indebtedness aggregating $25,000 or more to become due and
payable, or to permit the holder or holders of such other Indebtedness of
$25,000 or more, or any trustee or agent for such holders, to cause such
other Indebtedness to become due and payable prior to its expressed
maturity.
13.1.4. OTHER MATERIAL OBLIGATIONS. Default in the payment when due,
or in the performance or observance of, any material obligation of, or
material condition agreed to by, Borrower (subject to applicable cure
periods) with respect to any material purchase or lease of goods or
services or any Material Intellectual Property Right (except only to the
extent that the existence of any such default is being contested by
Borrower in good faith and by appropriate proceedings diligently conducted
and with respect to which Borrower has established, and is maintaining,
adequate reserves therefor in accordance with GAAP).
13.1.5. BANKRUPTCY, INSOLVENCY, ETC. (a) Borrower becomes insolvent or
generally fails to pay, or admits in writing its inability to pay, debts as
they become due; or (b) Borrower applies for, consents to, or acquiesces in
the appointment of, a trustee, receiver or other custodian or similar for
Borrower or for any Property of any thereof, or makes a general assignment
for the benefit of creditors; or (c) in the absence of such application,
consent or acquiescence, a trustee, receiver or other custodian or similar
Person is appointed for Borrower or for a substantial part of the Property
of any thereof, unless (i) Borrower institutes appropriate proceedings to
contest or discharge such appointment within 10 days and thereafter
continuously and diligently prosecutes such proceedings and (ii) such
appointment is in fact discharged within 60 days of such appointment; or
(d) any bankruptcy, reorganization, debt arrangement, or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding is commenced in respect of Borrower, unless (i) such
case or proceeding is not commenced by
<PAGE>
Borrower, (ii) such case or proceeding is not consented to or acquiesced in
by Borrower, (iii) Borrower institutes appropriate proceedings to dismiss
such case or proceeding within 10 days and thereafter continuously and
diligently prosecutes such proceedings and (iv) such case or proceeding is
in fact dismissed within 60 days after the commencement thereof; or (e)
Borrower takes any action to authorize, or in furtherance of, any of the
foregoing.
13.1.6. NON-COMPLIANCE WITH CERTAIN PROVISIONS. Failure of Borrower to
comply with the provisions of each of SECTIONS 6.1, 6.2, 7.1, 9.4, 9.5,
11.2 through 11.7, 11.13 through 11.26, 11.29 through 11.33.
13.1.7. NON-COMPLIANCE WITH OTHER PROVISIONS OF THIS AGREEMENT OR THE
RELATED DOCUMENTS. Failure by Borrower to comply with or to perform any
provision of this Agreement or the Related Documents (and not constituting
an Event of Default under any of the other provisions of this SECTION 13)
and continuance of such failure for 30 days after notice thereof from
Lender to Borrower.
13.1.8. INDEBTEDNESS TO BE REFINANCED. Failure to pay in full the
Indebtedness to be Refinanced concurrently with the making of the initial
Loan.
13.1.9. WARRANTIES AND REPRESENTATIONS. Any written warranty or
representation made by or on behalf of Borrower herein or in any of the
Related Documents or otherwise in connection herewith or therewith is
inaccurate or incorrect or is breached or false or misleading in any
material respect as of the date such warranty or representation is made; or
any certificate, financial statement, written report, written notice or
material schedule furnished by Borrower, or on behalf of Borrower with
Borrower's knowledge, to Lender is false or misleading in any material
respect on the date as of which the facts therein set forth are stated or
certified.
13.1.10. EMPLOYEE BENEFIT PLANS. Except to the extent that any of the
following is expressly permitted hereunder or does not give rise to the
incurrence by Borrower or any member of its Controlled Group of any
liability in excess of $100,000 (in the aggregate), or except to the extent
any of the following is adequately reserved on the balance sheet of the
applicable Borrower or one of its Controlled Group members, the institution
of any steps by Borrower or any other Person, including the PBGC, (a) to
amend, modify or terminate a Pension Plan or to enter into any new Pension
Plan, (b) to cause a complete or partial withdrawal from any Multiemployer
Plan, or (c) other than in the ordinary course, to directly or indirectly
cause to exist any other conditions, events or transaction which could
reasonably be expected to give rise to liability to Borrower or any member
of its Controlled Group with respect to any Employee Benefit Plan.
13.1.11. RELATED DOCUMENTS. At any time after the initial Loan,
Borrower takes any action to discontinue any of the Related Documents or to
contest the validity, binding nature or enforceability of any thereof.
13.1.12. COLLATERAL. Any portion of the Collateral shall be seized or
taken by governmental or similar authority, the loss of which could
reasonably be expected to have a Material Adverse Effect; or Borrower shall
fail to take any action necessary to maintain the
<PAGE>
liens, security interest and priority of the Collateral Documents as
against any Person; or the title and rights of Borrower to any portion or
portions of the Collateral shall have become the subject matter of
litigation which might, in the reasonable opinion of Lender, upon final
determination result in impairment or loss of the security provided by the
Collateral Documents which could reasonably be expected to have a Material
Adverse Effect.
13.1.13. CHANGE IN OWNERSHIP. At any time (a) Parent shall cease to
own one hundred percent (100%) of the Borrower Equity Interests, (b)
Bulldog and Junior Subordinated Lenders collectively cease to own at least
seventy percent (70%) of the voting Parent Equity Interests or (c) any
initial public offering of the Parent Equity Interests shall occur and the
Equity Sale Proceeds thereof are not applied pursuant to SECTION 2.8.
13.1.14. CHANGE IN MANAGEMENT. If the employment of Scott shall be
terminated for any reason and no replacement reasonably satisfactory to
Lender is employed within ninety days of such termination.
13.1.15. SUBORDINATED LOAN INSTRUMENTS. If any Event of Default (as
defined in either Subordinated Note Agreement) shall occur and be
continuing.
13.1.16. LITIGATION. If the sum of all judgments, awards or decrees,
or orders of attachment, garnishment or any other writ, entered against
Borrower exceeds $100,000 at any one time outstanding, excluding judgments,
awards, decrees, orders or writs (i) for which there is full insurance and
with respect to which the insurer has assumed responsibility in writing,
(ii) for which there is full indemnification (upon terms and by
creditworthy indemnitors which are satisfactory to Lender) or (iii) which
have been in force for less than the applicable period for filing an appeal
so long as execution is not levied thereunder (or in respect of which the
applicable Borrower shall at the time in good faith be prosecuting an
appeal or proceeding for review and in respect of which a stay of execution
or appropriate appeal bond shall have been obtained pending such appeal or
review).
SECTION 13.2 EFFECT OF EVENT OF DEFAULT. If any Event of Default described
in SECTION 13.1.5 shall occur, the Revolving Loan Commitment, the Term Loan
Commitment, the Working Capital Commitment and the Letter of Credit Commitment
(if not theretofore terminated) shall immediately terminate and the Notes and
all other Liabilities (including, without limitation, all of Borrower's
contingent reimbursement obligations with respect to LC Guaranties) shall become
immediately due and payable, all without notice of any kind; and, in the case of
any other Event of Default, Lender may declare such Commitments (if not
theretofore terminated) to be terminated and the Notes and all other Liabilities
(including, without limitation, all of Borrower's contingent reimbursement
obligations with respect to LC Guaranties) to be due and payable, whereupon the
such Commitments (if not theretofore terminated) shall immediately terminate and
the Notes and all other Liabilities (including, without limitation, all of
Borrower's contingent reimbursement obligations with respect to LC Guaranties)
shall become immediately due and payable, all without further notice of any
kind. Lender shall promptly advise Borrower of any such declaration but failure
to do so shall not impair the effect of such declaration. Notwithstanding the
foregoing, the effect as an Event of Default of any event described in SECTION
13 may be waived by Lender in
<PAGE>
writing.
SECTION 14 GENERAL.
SECTION 14.1 WAIVER; AMENDMENTS. No delay on the part of Lender or any
holder of a Note or other Liability in the exercise of any right, power or
remedy shall operate as a waiver thereof, nor shall any single or partial
exercise by any of them of any right, power or remedy preclude other or further
exercise thereof, or the exercise of any other right, power or remedy. No
amendment, modification or waiver of, or consent with respect to, any provision
of this Agreement or a Note or any Related Document shall in any event be
effective unless the same shall be in writing and signed and delivered by
Lender, and then any such amendment, modification, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 14.2 CONFIRMATIONS. Borrower and Lender (or any holder of a
Note) agree from time to time, upon written request received by it from the
other, to confirm to the other in writing the aggregate unpaid principal amount
of the Loans then outstanding under such Note and of Reimbursement Obligations.
SECTION 14.3 NOTICES. Except with respect to SECTION 2.4: (a) notices
forwarded by mail shall be deemed to have been given three days after the date
sent if sent by registered or certified mail, postage paid, and:
(i) IF TO BORROWER, addressed to Borrower at its address shown below
its signature hereto; or
(ii) IF TO LENDER, addressed to Lender at the address shown below its
signature hereto; or
in the case of either party, at such other address as such party may, by written
notice received by the other parties to this Agreement, have designated as its
address for notices; and (b) notices given by telegram, telex or facsimile
transmission shall be deemed to have been given when sent if addressed to the
party to whom sent, at its address as aforesaid. Notices of borrowing pursuant
to SECTION 2.4 shall be effective upon receipt by Lender and shall be in writing
(or by telephone to be confirmed in writing by Borrower). Lender shall be
entitled to rely upon all telephone notices and Borrower shall indemnify and
hold Lender harmless from any loss, cost or expense ensuing from any such
reliance, which indemnification shall survive any termination of this Agreement.
SECTION 14.4 COSTS, EXPENSES AND TAXES. Borrower agrees to pay on demand
all out-of-pocket costs and expenses of Lender (including the reasonable fees
and out-of-pocket expenses of counsel for Lender and of local counsel, if any,
who may be retained by said counsel with Borrower's prior approval which shall
not be unreasonably withheld and all costs of appraisals, surveys, environmental
reviews and the like required to be made or completed) in connection with the
preparation, execution and delivery of this Agreement, the Related Documents and
all other instruments or documents provided for herein or delivered or to be
delivered hereunder or in connection herewith. Borrower further agree to pay all
out-of-pocket costs and expenses (including reasonable attorneys' fees and legal
expenses) incurred by Lender in connection with the administration, enforcement,
waiver or amendment of this Agreement, the Related Documents and any such other
instruments or documents. In addition, Borrower agrees to pay, and to save
Lender harmless from all liability for, any document,
<PAGE>
stamp, filing, recording, mortgage or other taxes which may be payable in
connection with the borrowings hereunder or the execution, delivery, recording
or filing of this Agreement, any of the Related Documents or of any other
instruments or documents provided for herein or delivered or to be delivered
hereunder or in connection herewith. All obligations provided for in this
SECTION 14.4 shall survive any termination of this Agreement.
SECTION 14.5 INDEMNIFICATION.
(a) In consideration of the execution and delivery of this Agreement
by Lender and Lender's extension of its Commitments, Borrower hereby agrees
to indemnify, exonerate and hold Lender and each of its officers,
directors, employees, and agents (including, without limitation, Agent
Bank, and herein collectively called "Lender Parties" and individually
called a "Lender Party") free and harmless from and against any and all
claims, demands, actions, causes of action, suits, losses, costs
(including, without limitation, all documentary, recording, filing,
mortgage or other stamp taxes or duties), charges, liabilities and damages,
and out-of-pocket expenses in connection therewith (irrespective of whether
such Lender Party is a party to the action for which indemnification
hereunder is sought), and including, without limitation, attorneys' fees
and disbursements (called in this CLAUSE (A) the "Indemnified
Liabilities"), incurred by Lender Parties or any of them as a result of, or
arising out of, or relating to (i) any transaction financed or to be
financed in whole or in part, directly or indirectly, with the proceeds of
any Loan or Reimbursement Obligation or involving any Loan or Reimbursement
Obligation, or (ii) the execution, delivery, performance or enforcement of
this Agreement, the Related Documents and any instrument, document or
agreement executed pursuant hereto by any of Lender Parties, except for any
such Indemnified Liabilities arising, on account of the relevant Lender
Party's gross negligence or willful misconduct and, to the extent that the
foregoing undertaking may be unenforceable for any reason, Borrower agrees
to make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law.
(b) Without limiting the generality of the indemnity set out in the
preceding CLAUSE (A), Borrower hereby further agrees to indemnify,
exonerate and hold Lender and all Lender Parties free and harmless from and
against any and all claims, demands, actions, causes of action, suits,
losses, costs, charges, liabilities and damages, and out-of-pocket expenses
in connection therewith, including, without limitation, attorneys' fees and
disbursements, of any and every kind whatsoever paid, incurred or suffered
by, or asserted against, Lender or any Lender Party for, with respect to,
or as a direct or indirect result of, (i) the presence on or under, or the
escape, seepage, leakage, spillage, discharge, emission or release from,
any real property legally or beneficially owned (or any estate or interest
which is owned) or operated by Borrower (including, without limitation, any
property owned by a land trust the beneficial interest in which is owned,
in whole or in part, by Borrower) of any Hazardous Material (including,
without limitation, any claims, demands, actions, causes of action, suits,
losses, costs, charges, liabilities and damages, asserted or arising under
the Comprehensive Environmental Response, Compensation and Liability Act,
any so-called "Superfund" or "Superlien" law, or any other Federal, state
or local statute, law, ordinance, code, rule, regulation, order or decree
regulating, relating to or imposing liability or standards of conduct
concerning, any Hazardous Material), and (ii) any of the conditions
disclosed in
<PAGE>
any of the documents listed on SCHEDULE VIII regardless, in the case of
either of CLAUSE (I) or CLAUSE (II), of whether caused by, or within the
control of, Borrower.
(c) Without limiting the generality of the indemnities set out in the
preceding CLAUSES (A) and (B), Borrower hereby further agrees to indemnify,
exonerate and hold Lender and all Lender Parties free and harmless from and
against any claims, demands, actions, causes of action, suits, losses,
costs, charges, liabilities and damages, and out-of-pocket expenses in
connection therewith, including, without limitation, attorneys' fees and
disbursements (called in this CLAUSE (C) the "Indemnified Liabilities")
under Federal or state securities laws or otherwise (i) arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact contained in any registration statement, prospectus or offering
memorandum or in any preliminary prospectus or preliminary offering
memorandum or any amendment or supplement to any thereof or in any other
writing prepared in connection with the offer, sale or resale of any
securities of Borrower (including, without limitation, any offer, sale or
resale pursuant to Lender's enforcement of its rights under the Pledge
Agreement), or (ii) arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated or
necessary to make the statements therein not misleading, except in each
case for information provided by Lender which information was not provided
to Lender by Borrower. If and to the extent that the foregoing undertakings
in this paragraph may be unenforceable for any reason, Borrower agrees to
make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law. In
connection with a public sale or other distribution pursuant to Lender's
enforcement of its rights under the Pledge Agreement, Borrower shall
indemnify any underwriters, their respective successors and assigns, their
respective officers and directors and each Person who controls any such
underwriter (within the meaning of the Securities Act of 1933, as amended)
to the same extent as provided above with respect to the indemnification of
Lender.
(d) Without limiting the generality of the indemnities set out in the
preceding CLAUSES (A), (B) and (C), Borrower hereby further agrees to
indemnify, exonerate and hold Lender and all Lender Parties free and
harmless from and against any claims, demands, actions, causes of action,
suits, losses, costs, charges, liabilities and damages, and out-of-pocket
expenses in connection therewith, including, without limitation, attorneys'
fees and disbursements (called in this CLAUSE (D) the "Indemnified
Liabilities") arising directly or indirectly from or out of the following:
(i) any injury to person or damage to property, known or
unknown, reported or unreported, which results from the use of the
products of Borrower; or
(ii) any obligation or liability arising out of or with respect
to the business or operations of Borrower;
whether any of such matters arise before or after the foreclosure of or
other taking of title to all or any portion of the Collateral by Lender,
provided, however, that Borrower shall not be required to indemnify Lender
or any Lender Party for any Indemnified Liability arising out of Lender's
or such Lender Party's gross negligence or willful misconduct.
<PAGE>
(e) All obligations provided for in this SECTION 14.5 shall survive
any termination of this Agreement and shall not be reduced or impaired by
any investigation made by or on behalf of Lender or any Lender Party.
SECTION 14.6 SUBMISSION TO JURISDICTION. LENDER MAY ENFORCE ANY CLAIM
ARISING OUT OF THIS AGREEMENT OR THE RELATED DOCUMENTS IN ANY STATE OR FEDERAL
COURT HAVING SUBJECT MATTER JURISDICTION AND LOCATED IN CHICAGO, ILLINOIS. FOR
THE PURPOSE OF ANY ACTION OR PROCEEDING INSTITUTED WITH RESPECT TO ANY SUCH
CLAIM, BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS.
BORROWER HEREBY IRREVOCABLY DESIGNATES THE PRENTICE-HALL CORPORATION SYSTEM,
INC., WITH OFFICES ON THE DATE HEREOF AT 33 NORTH LASALLE, SUITE 1925, CHICAGO,
ILLINOIS 60602, TO RECEIVE FOR AND ON BEHALF OF BORROWER SERVICE OF PROCESS IN
ILLINOIS. BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF
SAID COURTS BY MAILING A COPY THEREOF, BY REGISTERED MAIL, POSTAGE PREPAID, TO
BORROWER AND AGREES THAT SUCH SERVICE, TO THE FULLEST EXTENT PERMITTED BY LAW,
(i) SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON IT IN ANY
SUCH SUIT, ACTION OR PROCEEDING AND (ii) SHALL BE TAKEN AND HELD TO BE VALID
PERSONAL SERVICE UPON AND PERSONAL DELIVERY TO IT. NOTHING HEREIN CONTAINED
SHALL AFFECT THE RIGHT OF LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW OR PRECLUDE LENDER FROM BRINGING AN ACTION OR PROCEEDING IN RESPECT
HEREOF IN ANY OTHER COUNTRY, STATE OR PLACE HAVING JURISDICTION OVER SUCH
ACTION. BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER HAVE TO THE LAYING OF THE
VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT LOCATED
IN CHICAGO, ILLINOIS AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
SECTION 14.7 GOVERNING LAW. This Agreement and the Notes shall be a
contract made under and governed by the internal laws of the State of Illinois
without regard to conflict of laws principles. Whenever possible each provision
of this Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement. All obligations of Borrower and rights of Lender and any other holder
of a Note or Liability expressed herein or in the Related Documents shall be in
addition to and not in limitation of those provided by applicable law or in any
other written instrument or agreement relating to any of the Liabilities.
SECTION 14.8 ENTRY INTO AGREEMENT. Borrower represents, warrants and
acknowledges that (i) the its relationship with Lender is solely that of a
borrower and lender, and (ii) Borrower is in sole control of its business and
has entered into this Agreement as its own free act and voluntary deed, based
upon its independent judgment as to its best interests.
SECTION 14.9 LEGAL OPINIONS. Borrower expressly consents to the
rendering by its counsel and of each other counsel specified in SECTION
12.1.9(G) of the opinions to be rendered pursuant thereto, and thereafter to be
rendered from time to time in connection with this Agreement or any Related
Document, and acknowledges that such opinions, when so rendered, shall be deemed
to be rendered at the request and upon the instruction of Borrower, which has,
and will have (prior to the rendering of each opinion), consulted with and been
advised by such counsel as to the
<PAGE>
consequences of such consent, request and instructions.
SECTION 14.10 JURY TRIAL. EACH PARTY HERETO HEREBY EXPRESSLY WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS UNDER THIS AGREEMENT OR ANY RELATED DOCUMENT TO WHICH IT IS A PARTY, OR
UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN
THE FUTURE BE DELIVERED IN CONNECTION THEREWITH OR ARISING FROM ANY RELATIONSHIP
EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY RELATED DOCUMENT, AND AGREES
THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY.
SECTION 14.11 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon Borrower, Lender and their respective successors and assigns, and shall
inure to the benefit of Borrower, Lender and their respective successors and
assigns; PROVIDED, HOWEVER, that Borrower shall not have the right to assign its
rights or delegate its duties under this Agreement. Lender may assign its rights
under this Agreement and the Related Documents to its unaffiliated lenders for
collateral security purposes. This Agreement and the Related Documents contain
the entire agreement of the parties hereto with respect to the matters covered
hereby.
SECTION 14.12 SALE OF NOTES; PARTICIPATIONS. Lender may assign to one
or more banks or other Persons all or any part of, or may grant participations
to one or more banks or other Persons in, any Loan or Loans or the Notes or any
of them, and to the extent of any such assignment or participation (unless
otherwise stated therein) the assignee or participant of such assignment or
participation shall have the same rights and benefits hereunder and thereunder
as it would have if it were Lender hereunder; provided, however, that in any
event (a) Lender shall at all times retain an interest in the Loans of at least
50% in the aggregate and (b) there shall not be more than three assignees or
participants at any one time. To the extent Lender makes an assignment pursuant
to this Section, the term "Lender" in any Related Document, except the Notes,
shall include the assignee of such assignment. Notwithstanding any assignment or
participation, Borrower shall continue to deal solely with Lender in connection
with this Agreement.
SECTION 14.13 CONFIDENTIALITY. Borrower agrees that Lender may disclose
information relating to Borrower to the Master Lenders, the Master Agent and the
Surety Provider, which have agreed to use procedures substantially comparable to
those used by them in respect of non-public information as supplied to them by
or on behalf of Lender to the extent that such information is not and does not
become publicly available and which Lender indicates at the time is to be
treated confidentially; PROVIDED, HOWEVER, that each of the Master Lenders, the
Master Agent and the Surety Provider, as the case may be, is hereby authorized
to deliver a copy of each or any financial statement of Borrower or any other
information relating to the Loans, or the Collateral, which may be furnished to
it hereunder or otherwise to (a) its legal counsel, auditors and other
professional advisors, (b) governmental or regulatory authorities having
jurisdiction over it, (c) independent financial rating agencies (including,
without limitation, the Rating Agencies), (d) any person providing general
liquidity or credit enhancement to the Master Lenders or the Surety Provider,
and (e) subject to obtaining a confidentiality agreement containing the
foregoing confidentiality restrictions, any Person to whom a Master Lender or
Surety Provider proposes to assign all or any part of its interest or grant a
participation in its interest, PROVIDED that the Surety Provider shall have the
right to give participations in its rights under the Insurance and Indemnity
Agreement and to enter into contracts of reinsurance with respect to the Surety
Policy without obtaining a confidentiality agreement from such participant or
reinsurers as the case may be; however, the Surety Provider will advise such
participant or reinsurers as the case may be of the confidentiality provisions
of the Master Credit Agreement. As used herein: "Master Agent" shall mean
Citicorp North America, Inc. and any successor thereto or assignee thereof;
"Master Lender" shall mean any person becoming a "Lender" party to that certain
Credit Agreement dated as of March 24, 1995 (the "Master Credit Agreement")
among First Source Financial, Inc., Lender, Master Agent, such Lenders, Surety
Provider, ET AL; "Surety Provider" shall mean Financial Security Assurance,
Inc., in its capacity as surety provider under the Master Credit Agreement, and
any successor thereto; "Surety Policy" shall mean the financial guaranty policy
dated as of March 24, 1995 issued by the Surety Provider in favor of Master
Agent on behalf of the Master Lenders; "Rating Agencies" shall mean Standard and
Poor's and Moody's Investors Services, Inc.; and "Insurance and Indemnity
Agreement" means the insurance agreement among Lender, Surety Provider and the
other parties thereto.
[remainder of this page intentionally left blank]
<PAGE>
Delivered at Chicago, Illinois, as of the day and year first above written.
GENERAL MANUFACTURED HOUSING, INC.
By:
_________________________________
Name Printed: Gary M. Brost
Its: President
General Manufactured Housing, Inc.
2255 Industrial Boulevard
Waycross, Georgia 31501
Attention: Samuel P. Scott
Telecopy: (912) 285-1397
FIRST SOURCE FINANCIAL LLP
By: First Source Financial, Inc., its
Agent/Manager
By:
______________________________________
Name Printed: Edward A. Szarkowicz, Jr.
Its: Vice President
2850 West Golf Road
5th Floor
Rolling Meadows, Illinois 60008
Attention: Contract Administration
Telecopy: (708) 734-7910
<PAGE>
SCHEDULE I
REVOLVING LOAN COMMITMENT REDUCTION DATES AND AMOUNTS (Section 2.1)
Amount of Revolving
LOAN COMMITMENT 1/ PERIOD
$16,000,000 Closing Date through April 1, 1996
$15,333,000 April 2, 1996 through July 1, 1996
$14,666,000 July 2, 1996 through October 1, 1996
$13,999,000 October 2, 1996 through January 1, 1997
$13,332,000 January 2, 1997 through April 1, 1997
$12,499,000 April 2, 1997 through July 1, 1997
$11,666,000 July 2, 1997 through October 1, 1997
$10,833,000 October 2, 1997 through January 1, 1998
$10,000,000 January 2, 1998 through April 1, 1998
$9,000,000 April 2, 1998 through July 1, 1998
$8,000,000 July 2, 1998 through October 1, 1998
$7,000,000 October 2, 1998 through January 1, 1999
$6,000,000 January 2, 1999 through April 1, 1999
$4,833,000 April 2, 1999 through July 1, 1999
$3,666,000 July 2, 1999 through October 1, 1999
$2,499,000 October 2, 1999 through January 1, 2000
$1,332,000 January 1, 2000 through April 1, 2000
$0 April 2, 2000 and thereafter
SCHEDULED REDUCTION IN REVOLVING LOAN COMMITMENT
REVOLVING LOAN COMMITMENT REDUCTION DATE
$667,000 April 1, 1996
$667,000 July 1, 1996
$667,000 October 1, 1996
$667,000 January 1, 1997
$833,000 April 1, 1997
$833,000 July 1, 1997
$833,000 October 1, 1997
$833,000 January 1, 1998
$1,000,000 April 1, 1998
$1,000,000 July 1, 1998
$1,000,000 October 1, 1998
$1,000,000 January 1, 1999
$1,167,000 April 1, 1999
$1,167,000 July 1, 1999
$1,167,000 October 1, 1999
$1,167,000 January 1, 2000
$1,332,000 April 1, 2000
1/ Less all reductions, and subject to any termination, under SECTIONS
2.5 and 13.2.
<PAGE>
SCHEDULE IA
TERM LOAN COMMITMENT REDUCTION DATES AND AMOUNTS (Section 2.1)
Amount of Term
LOAN COMMITMENT 2/ PERIOD
$4,000,000 Closing Date through July 1, 2000
$2,667,000 July 2, 2000 through October 1, 2000
$1,334,000 October 2, 2000 through January 1, 2000
$ 0 January 1, 2001 and thereafter
SCHEDULED REDUCTION IN TERM LOAN COMMITMENT
TERM LOAN COMMITMENT REDUCTION DATE
$1,333,000 July 1, 2000
$1,333,000 October 1, 2000
$1,334,000 January 1, 2001
2/ Less all reductions, and subject to any termination, under SECTIONS
2.7 and 13.2.
SCHEDULE II
LOCATIONS OF BANK ACCOUNTS (<section><section> 6.2 and 6.3)
Patterson Bank (Waycross, GA):
Checking (to be closed 60
days after closing) 181314
Payroll 181301
Checking (Lamar, SC) (to be
closed 60 days after closing) 582670
Special Account securing
Letter of Credit 58271-9
Petty Cash To be opened at the Patterson Bank
within 90 days of the Closing Date;
account number to be provided to Lender
Carolina Bank & Trust (Lamar, SC):
Payroll 182996
Petty Cash 183010
<PAGE>
SCHEDULE III
LITIGATION (<section><section> 10.4, 10.21, 10.24 and 12.1-5)
A. LITIGATION
For the purposes of this Schedule III, GMH, Inc. shall mean General
Manufactured Housing, Inc.
"Outstanding State Cases" as of November 27, 1995, consisting of consumer
complaints made through state agencies, considered to be in the ordinary course
of business of the Borrower:
SEE ADDENDUM 1 ATTACHED HERETO.
<PAGE>
The following EEOC Notices of Discrimination have been issued by the Savannah
Local Office of the Equal Employment Opportunity Commission:
Amount Being
STATUS CLAIMED HANDLED BY
1) Susan Reynolds: Sex discrimination Pending
charge filed 9/24/93.
2) Nelda Rollins: Sex discrimination, Pending Robert
sexual charges filed 6/10/94. harassment
Thompson, Jr.
(Atlanta, GA)
3) Patrice Woodie: Sex, sexual Pending
harassment discrimination charges
filed 9/16/94.
4) Betty Fritz: Sex discrimination Pending
charge filed 6/20/95.
Other pending and threatened causes of action:
Amount Being
STATUS CLAIMED HANDLED BY
1) Barfield vs. Southern Lifestyle Discovery Stanton,
Homes, Inc. Jones and
General
Manufactured Housing, Inc.: & Smith
Claim for breach of contract and (Hartsville,
warranty, fraud, unfair trade SC)
practices, and negligence filed
June 1995 in South Carolina.
2) GMH, Inc. vs. Jerry Blaxton:
Relating to an alleged liability
of approximately $10,000 for
towing services; Blaxton has
defaulted in this matter.
3) GMH, Inc. vs. Cladwood Division of $39,358.50
Smurfitt Newsprint Corporation
("Cladwood"): Product liability
claim to recover amounts from Cladwood
paid out by GMH, Inc. to settle
warranty claims by homeowners
resulting from defective composite
siding manufactured by Cladwood.
4) Thelma Grant: Threatened South Settlement
Carolina warranty/product in progress
liability action by customer.
<PAGE>
Amount Being
STATUS CLAIMED HANDLED BY
5) Barry Murray vs. GMH, Inc.: Discovery $2,500,000 Kenny Carswell
Employee of Murray Plumbing Co., ($1,000,000 (Jesup, GA)
Inc., a Georgia corporation and covered by --Insurance
subcontractor of Solar Shield, insurance) Company
Inc., a South Carolina corporation Counsel
and contractor engaged by GMH, Inc.,
has Counsel filed a complaint in
connection with a personal injury
resulting from a July 1994 accident
which occurred at a GMH, Inc. plant.
6) Greg A. Hall vs. GMH, Inc. and Discovery Fox & Verenes
others: Warranty claim suit filed (Aiken, SC)
in South Carolina Complaint served
on GMH, Inc. 10/9/95.
7) George Sports: Warranty Claim Claim addressed.
Last inspection
was 11/2/95. Awaiting
letter from N. Carolina
approving inspection.
8) Jamie R. Alexander and Michelle Trial set for $50,000 Byrd &
Norman Alexander vs. GMH, Inc., 4/16/96 Wiser
et al; Warranty Claims. (Biloxi, MS)
9) Janet Lehman and Gabriel Lehman vs. Discovery Byrd & Wiser
GMH, Inc., et al; Warranty Claim. (Biloxi, MS)
10) Vicki A. Curtis: Threatened
personal injury/ negligence claim.
11) George and Rose Roberson: Threatened GMH, Inc.'s
litigation regarding electrical Insurance
defects in mobile home. Carrier
12) John and Patricia Edge: Complaint Complaint $10,000,
for Complaint damages based on filed on rescind
warranty claims. 11/30/95; contract
Answer due tract and
w/in 30 refund purchase
days. price
13) Catherine Frazier: Warranty Claims. Settlement has
been negotiated
but not yet complete.
<PAGE>
Amount Being
STATUS CLAIMED HANDLED BY
14) Actions which are considered to
be in the ordinary course of
business of the Borrower for which
Borrower has received no
communication within the last year:
a) Louise Weeks: Warranty claim.
b) Joycesteen Mack: Warranty claim.
c) David and Jo Ann Brannen: Warranty
claim.
d) Ronald and Leslie Truelove:
Warranty claim.
B. TAXES
I.R.S. audit of 1992, 1993 and 1994 currently in progress.
Borrower has not filed Form 5500 with respect to AFLAC Cafeteria Plan
terminated in 1994.
<PAGE>
SCHEDULE IV
INSURANCE (<section> 10.12)
Group Travel Accident Insurance Policy: ITT Hartford #ETB-102015 (4/27/95-
4/27/96); covering full-time salaried employees.
Commercial General Liability Insurance Policy: Bankers Insurance Co. #GLA 10
S100104-00 (3/31/95 - 3/31/96); covering:
1. 2255 Industrial Blvd, Waycross, GA (non-combustible building,
frame building, non-combustible shop, frame storage shed);
2. 3233 Industrial Blvd, Waycross, GA;
3. 2170 Industrial Blvd., Waycross, GA;
4. 2875 Fulford Rd., Waycross, GA.
Commercial Property Insurance Policy: Pennsylvania Lumbermens #10-G-012-03-95
(3/31/95 - 3/31/96) covering:
1. 2255 Industrial Drive (Plant 1) (non-combustible building, frame
building, non-combustible shop, frame storage shed);
2. 3233 Industrial Blvd, Waycross, GA;
3. 2170 Industrial Blvd., Waycross, GA;
4. 2875 Fulford Rd., Waycross, GA;
5. Airport Hangar Building, Waycross Ware County Airport;
6. 2875 Fulford Rd (Plant r);
7. all inventory (raw materials and finished goods);
8. machinery and equipment at all locations
9. "Unnamed locations."
Commercial Property Insurance Policy: Georgia Casualty & Surety Company #CMP
0003174 (6/17/95 - 6/17/96) covering 3233 Industrial Blvd (Plant 2).
Commercial Property Insurance Policy: Georgia Casualty & Surety Company #CF
3260 (11/17/94 - 11/17/95) covering 2170 Industrial Blvd., Waycross, GA (Plant
3).
Aircraft Insurance Policy: Insurance Company of North America Policy
#S00293714 on 1979 King Air 200, N-561SS (9/17/95 - 9/17/96); loss payee is
Nationsbank of Georgia, N.A.; $950,000 physical damage; $15,000,000 bodily
injury and property damage; medical and voluntary payment for bodily injury.
Workers' Comp/Employer's Liability Ins. Policy: Georgia Casualty & Surety
Company #WC 922721 (4/6/95 - 4/6/96).
Commercial Property Coverage; Pennsylvania Lumbermens Mutual Insurance
Company #39-L-053-01-95; effective 8/17/95 (Borrower is named insured as of
December 15, 1995)
Workers Compensation and Employers Liability Policy; Cincinnati Insurance
Company #6C28-UB-716V318-1-95; effective 9/1/95-1/1/96 (Borrower is named
insured as of December 15, 1995)
General Liability Insurance; Bankers Insurance #GLA39 S100128-00: expires 1/1/96
(Borrower is named insured as of December 15, 1995)
Auto Insurance Policy: Georgia Casualty & Surety Company #BA 922723 (4/6/95 -
4/6/96) covering all vehicles.
Time Insurance Company Policy Number 02220903 insuring the life of Sam Scott in
the face amount of $1,000,000 is owned by Mrs. Sherry Scott and is entitled to
reimbursement therefor on policy payout under a "split-dollar" arrangement; net
benefits accrue to insured's beneficiaries.
<PAGE>
SCHEDULE V
INTELLECTUAL PROPERTY RIGHTS
(<section> 10.14)
Part 1. INTELLECTUAL PROPERTY THE LOSS OF WHICH WOULD HAVE A MATERIAL ADVERSE
EFFECT.
1. Service Mark and design No. S-13433 filed with and issued by State of
Georgia 3/11/94, expiring 3/11/04: "Jaguar Homes 1994 . . . the Year of the
Cat!!!"
Since the inception of the NFL expansion franchise in Jacksonville,
Florida, known as the "Jacksonville Jaguars," use of the "Jaguar" name has
become widespread throughout the region. Borrower makes no representation
as to the exclusivity or registrability of the name in any jurisdiction or
the Borrower's ability to preserve any rights it may have in said name.
Part 2. OTHER INTELLECTUAL PROPERTY.
See 1 above.
<PAGE>
SCHEDULE VI
CERTAIN PROPERTY OF BORROWER
(<section> 10.15)
The Georgia leases contain a usufruct provision.
<PAGE>
SCHEDULE VII
BUSINESS LOCATIONS; TRADE NAMES;
REAL ESTATE (<section><section> 10.1, 10.16 and 11.2)
(a) Locations where Borrower maintains an office, a place of business or
any records:
2255 Industrial Boulevard
Waycross, GA 31501
3233 Industrial Boulevard
Waycross, GA 31501
2170 Industrial Boulevard
Waycross, GA 31501
2875 Fulford Road
Waycross, GA 31501
206 South Railroad Avenue
Lamar, SC 26069
(b) Names under which Borrower, General Manufactured Housing or Lamar conducts
it business or has conducted business at any time during the five year
period prior to the closing date:
General Manufactured Housing and Lamar sometimes refer to themselves, their
respective divisions or their products by the following assumed names:
"General Housing," "Jaguar Homes," "Lamar Housing," "Augustine," "Cougar,"
"Little General," "Governor," or "Senator." These are not registered trade
or fictitious names or marks.
(c) Complete and accurate address and legal description of each parcel of real
estate owned by Borrower:
1. 2255 Industrial Blvd, Waycross, GA (Plant 1).
Legal description of real property:
PLANT NO. 1
All that tract or parcel of land situate, lying and being in Land Lot 125
of the 8th Land District of Ware County, Georgia, described as follows:
Commencing at the South-East corner of said Land Lot 125; thence proceeding
North 34 degrees 31 minutes 44 seconds West, a distance of 1,785.96 feet to
a concrete monument, the point or place of beginning; thence proceeding
North 17 degrees 53 minutes 23 seconds East, a distance of 650.0 feet to an
iron pin; thence proceeding North 72 degrees 05 minutes 55 seconds West, a
distance of 404.46 feet to a concrete monument; thence proceeding South 17
degrees 57 minutes 56 seconds West, a distance of 650.06 feet to a concrete
monument; thence proceeding South 72 degrees 06 minutes 33 seconds East, a
distance of 405.31 feet to a concrete monument, the point or place of
beginning. Said tract containing 6.0420 acres, more or less, more
particularly described by a plat by Franklin Miles, Registered Land
Surveyor No. 1847 dated December 11, 1995, and recorded in the public
records of Ware County, Georgia.
<PAGE>
SCHEDULE VIII
HAZARDOUS MATERIALS (<section><section> 10.19 and 14.5)
The information set forth in the following documents is hereby
incorporated in its entirety herein:
1. Phase I Environmental Site Assessment Report for Plants 1, 2
and 3 dated August 25, 1995;
2. Asbestos Survey, Radon Gas Testing and Sanborn Map Review for
Plants 1, 2, 3 and 4 dated September 18,1995;
3. Phase II Environmental Site Assessment Report for Plants 1,
2 and 3 dated September 21, 1995;
4. Proposal for Additional AST Investigation on Plant No. 1 and
Plant No. 2, dated September 25, 1995;
5. Phase I Environmental Site Assessment Report for Plant 4 dated
October 2, 1995;
6. Proposal for Phase II Environmental Site Assessment on Plant
No. 4, dated October 4, 1995;
7. Phase I Environmental Site Assessment Report for Plant 5, dated
October 11, 195;
8. Report regarding Asbestos Abatement Cost Estimates dated October
12, 1995; and
9. Report regarding the Well Surveys for Plants No. 1 and 2 dated
October 20, 1995.
<PAGE>
SCHEDULE IX
BUSINESS ACTIVITIES (Section 11.28)
The Borrower produces and sells single and double-section manufactured
homes.
<PAGE>
SCHEDULE X
INDEBTEDNESS (INCLUDING INDEBTEDNESS
TO BE REFINANCED); LIENS
(Section 10.5 and 11.31); CONTINGENT OBLIGATIONS (10.4)
Part 1. INDEBTEDNESS NOT TO BE REFINANCED.
Corporate Guaranty of Deed to Secure Debt to Patterson Bank dated 12/30/93 from
Waycross and Ware County Development Authority encumbering Plants 2 and 3 to
secure Promissory Note in the original principal amount of $613,727.63 in
connection with sale and lease-back transaction
LETTERS OF CREDIT:
1) Letter of Credit No. PB020 dated 5/22/95 is issued by The Patterson Bank
in favor of Tim-Bar Corporation in the maximum amount of $207,000 (said
balance declining at the rate of $9,000 per month) as Security Deposit
under Lease between Hi-Tech and Tim-Bar for Plant 4
2) Irrevocable Letter of Credit No. PB013 dated 5/18/93 issued by The
Patterson Bank in favor of Bankers Insurance Company for $50,000 securing
South Carolina Manufacturer's Representative License Bonds
PERSONAL PROPERTY LEASES:
1) Equipment Lease Agreements with Handling System Engineering, Inc. (all
assigned simultaneously with execution by Handling Systems Engineering,
Inc. to Toyota Motor Credit Corporation), all for Toyota Forklifts, as
follows:
<PAGE>
6/2/95 ............... S/N 76092
8/18/93............... S/N 75336
............... S/N 75390
............... S/N 75417
............... S/N 75431
12/16/92 ............... S/N 75016
12/8/93 ............... S/N 75536
............... S/N 75538
Additional Toyota Forklifts are being leased from Handling Systems
Engineering, Inc. by Lamar Housing, L.L.C.; documentation is being
processed by Handling Systems Engineering, Inc.
2) Four (4) each Guttermaker Extruders and Watertite Gutter Machines
Leased pursuant to verbal understanding/arrangement with Fabwel, Inc. in
consideration of $1 annual rent and purchase of raw materials from Fabwel,
Inc.
3) Four (4) Heat Duct Machines leased pursuant to arrangements with AMS of
Indiana, Inc., dated 1995, in consideration of $1 annual rent and purchase
of raw materials from AMS of Indiana, Inc.
4) "Warranty Track" software license/lease (unwritten) from GPR Software
Systems
REAL PROPERTY LEASES
1) Contract of Lease and Rent dated 12/30/93 in connection with sale and
lease-back to/from Waycross and Ware County Development Authority for real
property referred to as Plants 2 and 3, including also general
indemnification in favor of Lessor in Articles IX and XII thereof;
Assignment of Contract of Lease and Rent dated 12/30/93 from Waycross and
Ware County Development Authority to The Patterson Bank
2) Sublease Agreement dated 7/1/95 between HI-TECH PROPERTIES, INC. as
sublessor and GMH for real property referred to as Plant 4; Lease Agreement
dated 5/26/95 between Tim-Bar Corporation and Hi-Tech Properties, Inc. (the
primary lease underlying the sublease to GMH), including also an
environmental indemnity and hold harmless provision in favor of Lessor in
Section 13 of such primary lease; and Contract of Lease and Rent dated
August 1, 1987 between the Waycross and Ware County Development Authority
and Tim-Bar Corporation
3) Lease Agreement with Option to Purchase dated 7/10/95 between R. A. Warr
& Wayne Evans (dba Lamar Warehouse Co.) and Lamar Housing, L.L.C. for Plant
5 in Lamar, South Carolina, including also an environmental indemnity and
hold harmless provision in favor of Lessor in Section 22 thereof
4) Sublease dated October 10, 1995 between Hi-Tech Properties, Inc. and GMH
of vacant land adjacent to Plant 4, to be used for storage of finished
goods, and Lease Agreement dated October 10, 1995, between Waycross and
Ware County Development Authority and Hi-Tech Properties, Inc. (the primary
lease underlying the sublease to GMH)
5) Ground Lease dated 9/19/94 between Ware County and the City of Waycross
as Lessors and GMH for airplane hangar
TITLE COMMITMENTS:
<PAGE>
PLANT 1
All those exceptions to title set forth on Schedule B, Part 11 of the final
commitment to issue title issuance prepared by First American Title Insurance
Company, No. 6767-41 dated as of the date of Closing.
PLANT 2
All those exceptions to title set forth on Schedule B, Part 11 of the final
commitment to issue title issuance prepared by First American Title Insurance
Company, No. 6767-35 dated as of the date of Closing.
PLANT 3
All those exceptions to title set forth on Schedule B, Part 11 of the final
commitment to issue title issuance prepared by First American Title Insurance
Company, No. 6767-43 dated as of the date of Closing.
PLANT 4
All those exceptions to title set forth on Schedule B, Part 11 of the final
commitment to issue title issuance prepared by First American Title Insurance
Company, No. 6767-48C dated as of the date of Closing.
VACANT LAND
All those exceptions to title set forth on Schedule B, Part 11 of the final
commitment to issue title issuance prepared by First American Title Insurance
Company, No. 6767-99 dated as of the date of Closing.
PLANT 5
All those exceptions to title set forth on Schedule B, Part 11 of the final
commitment to issue title issuance prepared by First American Title Insurance
Company, Commitment No. FA-CC-SC-37 (file No.: 9S-079) dated as of the date of
Closing.
UCC-1S ON RECORD
1. Debtor: General Manufactured Housing, Inc.
Secured Party: Wrenn Handling, Inc.
Assignee: Hyster Credit Company
Filing location: Office of Clerk, Superior Court, Ware County,
Georgia
Filing Date: 7/20/90
Maturity Date: 7/1/95.
Collateral: 1 Hyster Model H60XL
S/N:A177B2933OJ, etc.
2. Debtor: General Manufactured Housing, Inc.
Secured Party: Wrenn Handling, Inc.
Assignee: Hyster Credit Company
Filing location: Office of Clerk, Superior Court, Ware County, Georgia
Filing Date: 8/16/90
Collateral: 1 Hyster Model H60XL
S/N:B177B01775L, etc.
3. Debtor: General Manufactured Housing
Secured Party: Fabwel, Inc.
Filing location: Office of Clerk, Superior Court, Ware County, Georgia
Filing Date: 7/7/93
Collateral: 1 Guttermaker Extruder, Model #4050, Serial #2053, etc.
4. Debtor: General Manufactured Housing, Inc.
Secured Party: Toyota Motor Credit Corp.
Assignee: Handling Systems, Eng.
Filing location: Office of Clerk, Superior Court, Ware County, Georgia
Filing Date: 8/29/93
Collateral: For informational purposes only. 4 new Toyota forklifts,
etc.
5. Debtor: General Manufactured Hsg
Secured Party: Fabwel, Inc.
Filing location: Office of Clerk, Superior Court, Ware County, Georgia
Filing Date: 10/29/93
Collateral: 1 5" Watertitle 5" Guttermachine, serial #W1181236, etc.
6. Debtor: General Manufactured Hsg
Secured Party: Toyota Motor Credit Corp.
Assignee: Handling Systems, Eng.
Filing location: Office of Clerk, Superior Court, Ware County, Georgia
Filing Date: 12/10/93
Collateral: For informational purposes only. 2 new Toyota forklifts,
etc.
Part 2. INDEBTEDNESS TO BE REFINANCED.
A. SECURED DEBT OBLIGATIONS:
1) Deed to Secure Debt to BankSouth, Waycross dated 5/25/88 encumbering
Plant 1, securing two Promissory Notes dated 5/25/88 for $400,000 and
$186,793, respectively (personally guaranteed by Sam Scott)
2) Promissory Note in the original principal amount of $600,000 dated
8/24/94 in favor of NationsBank of Georgia, N.A., secured by Security
Agreement dated 8/24/94 encumbering aircraft, engines, propellers,
accessories and parts including UCC and FAA filings.
3) Deed to Secure Debt (second mortgage) dated 3/2/95 encumbering Plant 1
real property, to The Patterson Bank, securing Note for payment of Letter
of Credit in favor of Tim-Bar Corporation in the maximum amount of $209,000
as Security Deposit under Lease between Hi-Tech and Tim-Bar for Plant 4
4) Installment Promissory Notes of GMH Acquisition Corp. to each of
Samuel P. Scott, and Sherry J. Scott, as joint tenants, Drew Eric Scott,
Gregory Keith Scott, and Kelly Scott Herold, as Trustee, due January 15,
1996, in the aggregate principal of $45,000,000.
Part 3. CONTINGENT OBLIGATIONS
REPURCHASE AGREEMENTS:
1) BOMBARDIER CAPITAL INC. Floorplan Repurchase Agreement dated 8/7/92
<PAGE>
2) FORD MOTOR CREDIT Manufacturer Agreement and Addendum dated 11/19/90
3) GREEN TREE FINANCIAL CORPORATION Stock Floorplan Financing Agreement dated
2/24/95 ad Pre-Sold Floor Financing Agreement dated 1/25/94
4) DEERE CREDIT, INC. (A/K/A DEERE CREDIT SERVICES, INC., A/K/A JOHN DERRE
CREDIT) Manufacturer's Financing Agreement and Addendum dated 7/19/94
5) ITT COMMERCIAL FINANCE CORP. Floor Plan Repurchase Agreement dated 3/4/88
6) NATIONSCREDIT COMMERCIAL CORPORATION Inventory Repurchase Agreement dated
7/21/93 and corporate Guaranty by Borrower up to $117,537 on specific invoices,
dated 4/3/95
7) WHIRLPOOL FINANCIAL CORPORATION Repurchase Agreement dated 4/17/90
8) SECURITY PACIFIC SERVICES, INC. Retail Credit Line arrangements dated
10/9/89, including Manufacturer's Invoicing Certification, Manufacturer's
Indemnification Agreement, and personal guaranty (which expired by its own terms
on or about 10/9/94)
9) SOUTHTRUST BANK Repurchase Agreement dated 11/14/91
In addition, the Company has entered into repurchase agreements with numerous
local and regional financial institutions (generally providing
floorplan/inventory financing for a single dealer) which in the aggregate
represent not more than 20% of the Company's total repurchase obligation (in
dollars).
<PAGE>
SCHEDULE XI
FINANCIAL INFORMATION (<section> 10.3)
The following adjustments were made by Arthur Andersen, LLP in connection
with the unaudited statements of earnings, stockholders' equity and changes in
financial position of GMH for the ten month period ending October 31, 1995:
1) $80,000 revaluation of inventory adjustment.
2) $280,000 addition to warranty reserve accrual.
3) $274,000 addition to accrual for Georgia state taxes.
<PAGE>
SCHEDULE XII
AGENT'S FEES (<section> 10.20)
$1,565,000 Larkspur Capital Corporation
$ 500,000 R. Lewis Ray
$ 500,000 Strategic Investments & Holdings, Inc.
$ 300,000 Alliance Corporate Finance Group Incorporated
<PAGE>
SCHEDULE XIII
PARENT EQUITY INTERESTS
ISSUED AND OUTSTANDING STOCK OF THE COMPANY
<TABLE>
<CAPTION>
NUMBER OF SHARES
SERIES A SERIES B CLASS A CLASS B CLASS C
STOCKHOLDER PREFERRED PREFERRED COMMON COMMON COMMON WARRANTS
<S> <C> <C> <C> <C> <C> <C>
Bulldog Holdings LLC 1,400,000
RFE Investment Partners V, L.P. 4,690,351 439,720 714,546
State Treasurer of the State of Michigan,
Custodian of the Michigan Public School
Employees' Retirement System, State
Employees' Retirement System, Michigan
State Police Retirement System, and
Michigan judges Retirement System 3,076,922 288,462 468,750
Sterling Commercial Capital, Inc. 232,727 21,818 35,454
The Equitable Life Assurance Society of
the United States 350,000
Eileen V. Austen 54,687
Paul C. Cronson 54,687
Robert c. Goodwin 54,688
Robert C. Mayer 54,688
Samuel P. Scott and Sherry J. Scott, as
Joint Tenants 92,749
Kelly Scott Herold, as Trustee for the
Kelly Scott Herold Revocable Trust - 1995 71,167
Gregory Keith Scott 71,167
Drew Eric Scott 71,167
Lannis Thomas 28,000
Wayne Roberts 28,000
Thomas M. Vinson 21,000
Bruce Hallock 14,000
Michael O'Gorman 14,000
Benny Bryan 13,125
James H. McClellan 13,125
--------- --------- --------- ------ ------- -------
Total 8,000,000 2,150,000 1,656,250 0 0 568,750
</TABLE>
<PAGE>
SCHEDULE XIV
Material Adverse Change (<section> 10.3)
1) Borrower and Oakwood Mobile Homes, a manufacturer and retailer
headquartered in North Carolina, had an agreement pursuant to which
Borrower was to supply 24 foot, double-wide homes to Oakwood's captive
retail network. Borrower expected to use Plant No. 4 located in
Waycross, Georgia exclusively for the construction of these homes.
Oakwood gave notice to Borrower, on or about August 25, 1995, that it
would not be ordering any further homes from Borrower for the
foreseeable future due to over manufacturing by Oakwood of its own
products, and the desire for their retail network to sell Oakwood's
products before those manufactured by Borrower. All homes that had been
ordered to that time were completed by Borrower and purchased by
Oakwood. Borrower has shifted double-wide production to Plant No. 4 in
order to reduce its considerable backlog of orders. In its notification,
Oakwood characterized this situation as temporary; however, no
assurances can be given that such suspension may not be permanent. Sales
to Oakwood accounted for approximately 10% of Borrower's total revenues
during the first six months of 1995.
2) Lamar Housing LLC, a Georgia limited liability company, was merged into
General Manufactured Housing, Inc. on December 15, 1995. Lamar Housing
LLC ceased to exist as a result of that merger.
3) Barry Murray, an employee of Murray Plumbing Co., Inc., a Georgia
corporation and subcontractor of Solar Shield, Inc., a South Carolina
corporation and contractor engaged by Borrower, has filed a complaint in
connection with a July 1994 accident which occurred at a plant of
Borrower. Plaintiff seeks $2,500,000 for personal injury and loss of
consortium.
<PAGE>
SCHEDULE XV
Lamar Merger Instruments
Acquisition Instruments and
Merger Instruments (<section> 10.11)
NONE
<PAGE>
SCHEDULE XVI
Transactions with Affiliates (<section> 11.29)
Payments under Borrowers Incentive Compensation Plan
Preferred Dividends
Payments under Borrower's Executive Bonus Plan
Payment of Base Management Fees and Incentive Management Fees
RFE option, puts and calls all under the Investors' Rights Agreement
Conversion of shares pursuant to terms of Restated Certificate of
Incorporation of GMH Holdings, Inc.
Exercise of Warrants to purchase stock of Parent
Stock Repurchase pursuant to any Employment Agreement
Any other transfers among shareholders permitted by the Stockholders
Agreement
<PAGE>
SCHEDULE XVII
Accrued Amounts (<section> 2.5)
Payments under Borrower's Incentive Compensation Plan
Payments under Borrower's Executive Bonus Plan
Preferred Dividends
Interest on Junior Subordinated Notes and Senior Subordinated Notes
<PAGE>
EXHIBIT A
(Section 2.1.3)
LC GUARANTY
THIS GUARANTY, dated as of ______________, 19__, is from FIRST SOURCE
FINANCIAL LLP, an Illinois registered limited liability partnership
("Guarantor"), to [APPLICABLE ISSUER], a _________________ ("Bank").
R E C I T A L S:
WHEREAS, General Manufactured Housing, Inc. ("Obligor"), and Bank have
entered into that certain LC Reimbursement Agreement, dated _________, 19__ (the
"Letter of Credit Agreement"); and
WHEREAS, pursuant to the Letter of Credit Agreement, Bank is issuing the
Letters of Credit described in Schedule I hereto, as such schedule may be
amended with the prior written consent of Guarantor from time to time to provide
for additional Letters of Credit, in the stated amounts (such amount with
respect to any such Letter of Credit being herein called its "Stated Amount"),
and for the benefit of such persons, as are specified in such SCHEDULE I (the
foregoing Letters of Credit being herein referred to as the "Credits"); and
WHEREAS, it is a condition precedent to the issuance of the Credits that
Guarantor provide this Guaranty to Bank; and
WHEREAS, Guarantor, for good and sufficient consideration, the receipt of
which is hereby acknowledged, is willing to execute and deliver this Guaranty;
NOW, THEREFORE, Guarantor hereby agrees for the benefit of Bank as follows:
1. GUARANTY. For value received, and to induce Bank to issue the
Credits, Guarantor hereby unconditionally and irrevocably guarantees, as primary
obligor and as surety, whether at stated maturity, by acceleration or otherwise,
the full and punctual payment when due of all reimbursement and other
obligations of Obligor to Bank arising from or related to the Credits
(collectively, the "Obligations"), and agrees to pay any reasonable expenses
(including reasonable counsel fees and expenses) incurred by Bank in enforcing
any right under this Guaranty. The right of recovery against Guarantor under
this Guaranty is, however, limited to the Cap Amount (as hereinafter defined)
plus accrued interest on such amount and plus all expenses of enforcing this
Guaranty. The Cap Amount as of ______________, 199__ (the "Closing Date") shall
be $___________ (the "Cap Amount"); PROVIDED, HOWEVER, that the then current Cap
Amount shall be automatically reduced by the Stated Amount of each Credit when
(i) such Credit terminates or expires, (ii) such Credit has been surrendered by
the beneficiary thereof to Bank, and (iii) subject to SECTION 2(A), if such
Credit has been drawn upon, Bank has been reimbursed in full for its
disbursement thereunder, and provided further that interest accruing more than
thirty (30) days after the date of Bank's honoring of any demand under a Credit
shall not be reimbursed if Bank fails to give the written notice required in
SECTION 2(A) hereof within thirty (30) days after Bank's honoring of the related
demand.
2. GUARANTY ABSOLUTE.
(a) This is a guarantee of payment and not merely of collection.
Guarantor hereby covenants and agrees that in case Obligor shall fail duly
and punctually to pay the Obligations on the date on which such payment is
due, Guarantor will, within five (5) days of the actual receipt of written
notice from Bank to such effect, and of the amount which Obligor has failed
to pay, pay such amount, subject to the penultimate sentence of SECTION 1
hereof. The liability of Guarantor under this Guaranty shall be absolute
and unconditional and shall not be discharged except by valid, final and
irrevocable payment as herein provided, irrespective of: (i) any law,
regulation, or order, or interpretation thereof, now or hereinafter in
effect in any jurisdiction affecting or purporting to affect any of the
terms or
<PAGE>
rights of Bank with respect to the Obligations or with respect to this
Guaranty; (ii) any lack of validity or enforceability of the Letter of
Credit Agreement; (iii) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Obligations; or
(iv) any other circumstances which might otherwise constitute a defense
available to, or a discharge of, Obligor in respect of any of the
Obligations of Guarantor in respect of any obligations under this Guaranty.
This Guaranty shall continue to be effective or be reinstated, as the case
may be, if at any time such payment of any of the Obligations is rescinded
or must otherwise be returned by Bank upon the insolvency, bankruptcy or
reorganization of Obligor or otherwise, all as though such payment had not
been made.
(b) Except for any liability under the last sentence of SUBPARAGRAPH
2(A), the Guaranty shall continue in effect with respect to the Credit
until 4:59 p.m., Chicago time, on the date following seven (7) days after
the then current expiry date of such Credit; PROVIDED, HOWEVER, that this
Guaranty shall continue in effect until no Obligations are owing under the
Credits and the Letter of Credit Agreement.
3. WAIVER. Guarantor hereby unconditionally waives, except as expressly
provided in this Guaranty, in the Letter of Credit Agreement or in any Credit:
(a) promptness, diligence, notice of acceptance and any other notice with
respect to any of the Obligations and this Guaranty; (b) presentment for
payment, notice of nonpayment, demand, protest, notice of protest and notice of
dishonor or default to any party including Guarantor, and any requirement that
Bank protect, secure, perfect or insure any security interest or lien of any
property subject thereto or exhaust any right or take any action against Obligor
or any other person or entity or any collateral; (c) all other notices to which
Guarantor may be entitled but which may legally be waived; and (d) to the
maximum extent provided by law, all rights under any state or federal statute
dealing with or affecting the rights of creditors.
4. NO WAIVERS; REMEDIES. No failure or delay on the part of Bank in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof, or the
exercise of any other right, power or privilege. Failure by Bank to insist upon
strict performance hereof shall not constitute a relinquishment of its right to
demand strict performance at another time. Receipt by Bank of any payment by any
person of the Obligations, with knowledge of a default with respect to any of
the Obligations or of a breach of this Guaranty, or both, shall not be construed
as a waiver of the default or breach. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
5. REPRESENTATIONS AND WARRANTIES. Guarantor hereby represents and
warrants as follows:
(a) Guarantor is duly organized and validly existing and has the power
and authority to execute and deliver, and to perform its obligations under,
this Guaranty.
(b) The execution and delivery of this Guaranty by Guarantor and the
performance of its obligations hereunder have been and remain duly
authorized by all necessary action and do not contravene any provision of
its membership agreement or any law, regulation or contractual
<PAGE>
restriction binding on or affecting it or its property.
(c) All consents, authorizations and approvals required for the
execution and delivery by Guarantor of this Guaranty and the performance of
its obligations hereunder have been obtained and remain in full force and
effect, all conditions thereof have been duly complied with, and no other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for that execution, delivery or performance.
(d) This Guaranty is Guarantor's legal, valid and binding obligation,
enforceable against Guarantor in accordance with its terms, subject to
applicable bankruptcy, insolvency and similar laws affecting creditors'
rights generally, and subject to general principles of equity.
(e) The ultimate determination of all proceedings pending or, to the
best of its knowledge, threatened against Guarantor at law or in equity or
before any governmental instrumentality or in any arbitration will not, in
the aggregate, materially impair its ability to perform its obligations
under this Guaranty, and no such proceeding purports or is likely to affect
the legality, validity or enforceability of this Guaranty.
(f) No proceeding has been instituted in a court seeking a decree or
order (i) for relief in respect of Guarantor in an involuntary case under
any applicable bankruptcy, insolvency or other similar law now in effect,
or (ii) for the appointment of a receiver, liquidator, assignee, custodian,
trustee or sequestrator (or other similar official) of Guarantor, or for
any substantial part of Guarantor's property, in an involuntary case under
any applicable bankruptcy, insolvency or other similar law now in effect,
or (3) for the winding up or liquidation of the affairs of Guarantor.
(g) Guarantor (i) commenced a voluntary case under any applicable
bankruptcy, insolvency or other similar law now in effect, or (ii)
consented to the entry of an order for relief in an involuntary case under
any such law, or (iii) consented to the appointment of or taking possession
by a receiver, liquidator, assignee, custodian, trustee or sequestrator (or
other similar official) of Guarantor or for any substantial part of the
property of Guarantor, or (iv) made a general assignment for the benefit of
creditors, or (v) failed generally to pay its debts as they become due, or
(vi) taken any corporate action in furtherance of any of the foregoing.
6. CONTINUING GUARANTY, TRANSFER; ASSIGNMENT. This Guaranty is a
continuing guaranty and shall (i) be binding upon Guarantor, its successors and
assigns, and (ii) inure to the benefit of and be enforceable by Bank and its
successors, transferees and assigns. Without limiting the generality of the
foregoing, Bank may assign or otherwise transfer any evidence of any of the
Obligations to any other person or entity, and such person or entity shall
thereupon become vested with all the rights in respect thereof granted to Bank
herein or otherwise, PROVIDED, HOWEVER, that each transferee or assignee shall
be bound by all waivers, notices and actions granted, given, taken and made
prior to the time of the assignment or transfer to it. The duties and
obligations of Guarantor may not be delegated or transferred by Guarantor
without the written consent of Bank.
7. VALIDITY; AMENDMENTS. If any provision hereof shall for any reason be
held invalid or unenforceable, no other provision shall be
<PAGE>
affected thereby, and this Guaranty shall be construed as if the invalid or
unenforceable provision had never been a part of it; PROVIDED, HOWEVER, that in
no event shall the liability of Guarantor be greater than as set forth in the
penultimate sentence of SECTION 1 hereof. No amendment or waiver of any
provision of this Guaranty nor consent to any departure by Guarantor therefrom
shall in any event be effective unless the same shall be in writing and signed
by Bank, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. None of the terms or
provisions of the Letter of Credit Agreement may be waived, altered, modified or
amended without the prior written consent of Guarantor and this Guaranty shall
be void as to any such waiver, alteration, modification or amendment purported
to be made without such consent.
8. NOTICES. All notices and other communications provided for hereunder
shall be in writing (including telegraphic communication) and, if to Guarantor,
mailed by first class, certified mail, or telecopied, or delivered to it, in
each case addressed to it at 2850 West Golf Road, 5th Floor, Rolling Meadows,
Illinois 60008, Attention: Contract Administration, with a copy to General
Counsel (telecopy number ___________________); and if to Bank, mailed by first
class, certified mail, or telecopied, or delivered to it, in each case addressed
to it at _________________________, Attention: ________________ (telecopy number
___________________), or as to each party at such other address as shall be
designated by such party in a written notice to the other party. All such
notices and other communications shall be effective three (3) days after being
deposited in the mails (except that a mailed notice pursuant to the second
sentence of SECTION 2(A) hereof shall only be effective upon actual receipt
thereof by Guarantor) or when telecopied (having received the answer back), or
when delivered by hand respectively, addressed as aforesaid.
9. GOVERNING LAW. This Guaranty shall be governed by, and construed in
accordance with, the laws of the State of Illinois, without regard to conflicts
of law principles.
WITNESS the due execution hereof intending to be legally bound.
FIRST SOURCE FINANCIAL LLP
By: First Source Financial, Inc.,
its Agent/Manager
By: ______________________________
Name: ________________________
Title: _______________________
ACCEPTED:
[BANK]
By: ______________________________
Name: ________________________
Title: ________________________
<PAGE>
SCHEDULE I
TO LC GUARANTY DATED AS OF _____________
LETTERS OF CREDIT
NUMBER DATE STATED AMOUNT BENEFICIARY
<PAGE>
EXHIBIT B
(Section 2.1.3)
LC REIMBURSEMENT AGREEMENT
As of _________________, 19___
[BANK]
________________________
________________________
________________________
Attention: _____________
Ladies and Gentlemen:
By its acceptance below, and subject to the terms of this Agreement,
________________ (the "Letter of Credit Issuer") has agreed to issue, at the
request and for the account of General Manufactured Housing, Inc. ("Account
Party"), an irrevocable letter of credit substantially in the form of EXHIBIT I
hereto (as from time to time hereafter amended, the "Letter of Credit"), dated
on or about _____________, 19___, and with an expiry date of ________________,
19___ (as from time to time hereafter extended, the ("Expiry Date") in favor of
(NAME OF BENEFICIARY) (the "Beneficiary") in a maximum face amount equal to
$________________.
The Account Party and the Letter of Credit Issuer hereby agree as follows with
respect to the Letter of Credit:
1. REIMBURSEMENT OBLIGATION. The Account Party hereby irrevocably and
unconditionally agrees with the Letter of Credit Issuer that in the event the
Letter of Credit Issuer shall make any payment to the Beneficiary under the
Letter of Credit, each payment shall constitute, without necessity of further
act or evidence whatsoever, an obligation (arising on the date payment is made
to the Beneficiary by the Letter of Credit Issuer) to reimburse the Letter of
Credit Issuer upon demand (the "Reimbursement Obligation") in the principal
amount equal to the amount of such payment. The Reimbursement Obligation will
bear interest at the rate per annum equal to the Reference Rate (as hereinafter
defined) plus 2% per annum from the date of payment to the Beneficiary under the
Letter of Credit, payable upon demand. To the extent that any monies are
received by the Letter of Credit
<PAGE>
Issuer in respect of the Reimbursement Obligation and other amounts owed to the
Letter of Credit Issuer pursuant to or in connection with this Agreement, such
monies shall be applied in such order of application (whether to the principal
amount of any Reimbursement Obligation or interest, or both, or otherwise) as
the Letter of Credit Issuer may from time to time in its sole discretion elect.
As used herein, the term "Reference Rate" means, at any time, the rate then most
recently announced by the Letter of Credit Issuer at _______________ as its
reference rate.
2. LETTER OF CREDIT FEE. The Account Party agrees to pay or cause to be
paid to the Letter of Credit Issuer a reasonable fee as agreed upon by such
parties, to be payable at such time or times as such parties agree. If any
payment of the fee is not made when due, then such fee shall bear interest until
paid at a rate per annum equal to 1/2 of 1% per annum, payable upon demand.
3. INDEMNIFICATIONS.
(a) The Account Party hereby indemnifies and holds harmless the
Letter of Credit Issuer from and against any and all claims, damages,
losses, liabilities, costs or expenses (including, without limitation,
reasonable attorneys' fees and legal costs) whatsoever which the Letter of
Credit Issuer may incur by reason of or in connection with the execution,
delivery or performance of, or payment under, this Agreement or the Letter
of Credit, except if and to the extent that such claim, damage, loss,
liability, cost or expense shall be caused by (i) the willful misconduct or
gross negligence of the Letter of Credit Issuer in performing its
obligations under this Agreement or the Letter of Credit (including in
determining whether documents presented or delivered under the Letter of
Credit appear to comply with the terms of the Letter of Credit) or (ii) the
Letter of Credit Issuer's payment against a certificate presented under the
Letter of Credit which does not appear on its face to substantially comply
(and, in any event, does not appear on its face to comply in every material
respect) with the terms thereof.
(b) The Account Party further indemnifies and holds harmless the
Letter of Credit Issuer from and against any and all claims, damages,
losses, liabilities, costs or expenses (including, without limitation,
reasonable attorneys' fees and legal costs) which may arise or be created
by the Letter of Credit Issuer's acceptance of telecommunication
instructions from the Guarantor (as herein defined) or the Account Party in
connection with the Letter of Credit, including, but not limited to,
telephonic instructions in connection with any waiver of discrepancies.
4. OBLIGATIONS OF THE ACCOUNT PARTY AND LIABILITY OF LETTER OF CREDIT
ISSUER. Except as provided in SECTION 3 hereof, the Account Party agrees to pay
to the Letter of Credit Issuer all Reimbursement Obligations, interest and fees
and any other amounts payable to the Letter of Credit Issuer hereunder. The
obligation of the Account Party to pay such amounts shall be absolute,
unconditional and irrevocable and shall be paid strictly in accordance with the
terms of this Agreement under all circumstances whatsoever, including, without
limitation, the following circumstances:
(a) the existence of any claim, set-off, defense or other right which
the Beneficiary, the Account Party, the Guarantor, the Letter of Credit
Issuer or other person or entity may have at any time against the
Beneficiary, the Account Party, the Guarantor, the Letter of Credit Issuer
or any other person or entity for any reason whatsoever,
<PAGE>
whether in connection with this Agreement, the Letter of Credit, the
Guaranty (as hereinafter defined) or any agreement or document referred to
in any thereof or in connection with any unrelated transaction;
(b) any certificate presented under the Letter of Credit providing to
be forged, fraudulent or invalid; or
(c) any other circumstance or happening whatsoever whether or not
similar to any of the foregoing.
In addition, neither the Letter of Credit Issuer nor any of its directors,
officers, employees or agents shall have any liability or responsibility of any
kind to the Beneficiary, the Account Party, the Guarantor or any other person or
entity under or in connection with the Letter of Credit, in connection with any
acts or omissions of any of the foregoing persons or entities or in connection
with any payment or failure to make payment thereunder by the Letter of Credit
Issuer under any circumstances whatsoever, except that the Letter of Credit
Issuer shall be liable for the amount of any damages suffered by the Account
Party or the Guarantor which are caused by the Letter of Credit Issuer's willful
misconduct or negligence in performing its obligations under this Agreement or
the Letter of Credit (including in determining whether documents presented or
delivered under the Letter of Credit appear to comply with the terms of the
Letter of Credit). In furtherance and not in limitation of the foregoing, the
Letter of Credit Issuer may accept documents that appear on their face to be in
order, without responsibility for further investigation.
5. INCREASED COSTS/TAXES. If as a result of any law, regulation, treaty
or directive, or any change therein, or in the interpretation or application
thereof or the Letter of Credit Issuer's compliance with any request or
directive (whether or not having the force of law) from any court or
governmental authority, agency or instrumentality, any reserve, premium, special
deposit, special assessment or similar requirements against (a) the Letter of
Credit Issuer's assets, (b) deposits with the Letter of Credit Issuer or for its
account, or (c) credit extended by the Letter of Credit Issuer, are imposed,
modified or deemed applicable and the Letter of Credit Issuer determines that,
by reason thereof, the cost to it of issuing or maintaining the Letter of Credit
is increased, the Account Party agrees to pay to the Letter of Credit Issuer
upon demand (which demand shall be accompanied by a statement setting forth the
basis for the calculation thereof) such additional amount or amounts as will
compensate it for such additional cost. Determinations by the Letter of Credit
Issuer, for the purposes of this SECTION 5, of the additional amounts required
to compensate it in respect of the foregoing shall be conclusive absent manifest
error. The Account Party further agrees to pay any applicable levies or other
taxes imposed in connection with the Letter of Credit other than net income
taxes payable by the Letter of Credit Issuer.
6. GUARANTY. It is a condition precedent to the issuance of the Letter of
Credit that First Source Financial LLP, an Illinois registered limited liability
partnership (the "Guarantor"), execute and deliver to the Letter of Credit
Issuer a Guaranty substantially in the form of EXHIBIT II hereto (as from time
to time thereafter amended, the "Guaranty").
7. MISCELLANEOUS.
(a) All notices, demands and other communications hereunder shall be
in writing, make reference to the Letter of Credit by number thereof and,
in the case of each party hereto, mailed or delivered to
<PAGE>
it addressed:
(i) in the case of the Account Party, at its address set forth
below, WITH A COPY TO:
c/o First Source Financial, Inc.
2850 West Golf Road
5th Floor
Rolling Meadows, Illinois 60008
Attention: Contract Administration
(ii) in the case of the Letter of Credit Issuer, at its address set
forth above; and
(iii) in the case of either party, at such other address as shall be
designated by such party in a written notice to the other party
hereto and complying as to delivery with the terms of this
SUBSECTION 7(A).
All notices, demands and other communications provided for hereunder shall
be effective three days after deposited in the first class mails, postage
prepaid, registered or certified mail, or delivered by hand, addressed as
aforesaid.
(b) All payments to the Letter of Credit Issuer shall be made in
immediately available funds. Funds received after 12:30 p.m., Chicago time,
shall be deemed to have been received by the Letter of Credit Issuer on the
next Business Day. As used herein "Business Day" shall mean a day on which
the Letter of Credit Issuer (at its above address, or if appropriate, its
substitute principal office in _________, ___________) is open for the
purpose of conducting a commercial banking business.
(c) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction. No provision of
this Agreement shall be deemed to require the payment, or permit the
collection, of interest in excess of that permitted by applicable law.
(d) This Agreement (except as to the obligations of the Account Party
to the Letter of Credit Issuer under SECTIONS 1, 3 AND 4 hereof and as to
liability for sums then due and owing and claims under SECTION 2 hereof,
which shall survive) and the Letter of Credit may be canceled by the
Account Party upon delivery of the Letter of Credit for cancellation to the
Letter of Credit Issuer.
(e) This Agreement (except as to obligations of the Account Party to
the Letter of Credit Issuer under SECTIONS 1, 3 AND 4 hereof and as to
liability for sums then due and owing and claims under SECTION 2 hereof,
which shall survive) and the Letter of Credit shall terminate immediately
and be of no further force or effect upon the Letter of Credit Issuer's
close of business at its principal office in ___________, ___________ on
the Expiry Date or, if such day shall not be a Business Day, at the closing
of business on the first Business Day next succeeding said date. Should the
Letter of Credit terminate under the foregoing sentence, then the Account
Party shall return or cause to be returned to the Letter of Credit Issuer
the Letter of
<PAGE>
Credit.
(f) This Agreement shall be deemed to be a contract made under the
internal laws of the State of Illinois, and shall, as to matters not
governed by the Uniform Customs (as hereinafter defined), be construed in
accordance with the laws of said State, without regard to principles of
conflict of law. This Agreement is subject to the Uniform Customs and
Practice for Documentary Credits, International Chamber of Commerce,
Publication No. 500 (the "Uniform Customs"). None of the terms or
provisions of this Agreement or of the Letter of Credit may be waived,
altered, modified, or amended except by an instrument in writing duly
signed for and on behalf of the parties hereto and the Guarantor and, in
the case of the Letter of Credit, the Beneficiary.
(g) This Agreement shall be binding upon, and inure to the benefit of,
the Account Party, the Guarantor and the Letter of Credit Issuer and their
respective successors and assigns.
If the foregoing terms of this letter are in accordance with your understanding
of our agreement, please sign and deliver to us one or more counterparts of this
letter, whereupon this letter shall constitute a binding agreement between the
Letter of Credit Issuer and the Account Party as of the date first above
written.
Very truly yours,
GENERAL MANUFACTURED HOUSING, INC.
By:________________________________
Name Printed:______________________
Its:_______________________________
Address:
___________________________________
___________________________________
___________________________________
___________________________________
Accepted and Agreed to:
[BANK]
By:________________________________
Name Printed:______________________
Its:_______________________________
<PAGE>
EXHIBIT C
(Section 2.2)
WORKING CAPITAL COMMITMENT EXTENSION REQUEST
First Source Financial LLP
2850 West Golf Road
5th Floor
Rolling Meadows, IL 60008
Ladies and Gentlemen:
This Working Capital Commitment Extension Request is furnished pursuant to
the Secured Credit Agreement, dated as of December 21, 1995 (as from time to
time amended, modified or supplemented, the "Secured Credit Agreement"), between
General Manufactured Housing, Inc., a Georgia corporation, and First Source
Financial LLP, an Illinois registered limited liability partnership. Capitalized
terms used but not elsewhere defined herein shall have the respective meanings
ascribed to such terms in the Secured Credit Agreement.
In accordance with SECTION 2.2 of the Secured Credit Agreement, the
undersigned hereby requests an extension of the Working Capital Loan Termination
Date for $___________ of the Working Capital Commitment to the earlier of
__________, 19___ or the Revolving Loan Termination Date (or, in either case, if
such date is not a Business Day, to the next preceding Business Day).
Please indicate your consent to such extension by signing the enclosed copy
of this letter in the space provided below and returning it to the undersigned.
Very truly yours,
GENERAL MANUFACTURED HOUSING, INC.
By:_________________________
Name Printed:_______________
Its:________________________
The undersigned hereby consents this ____ day of _____________, 19__ to the
extension of the Working Capital Loan Termination Date as requested above.
FIRST SOURCE FINANCIAL LLP
By: First Source Financial, Inc.,
its Agent/Manager
By:_________________________
Name Printed:_______________
Its:________________________
<PAGE>
EXHIBIT D
(Section 2.3(a)
NOTICE OF LIBOR ACTIVITY
TO: First Source Financial, Inc., as Servicer
2850 West Golf Road
5th Floor
Rolling Meadows, Illinois 60008
ATTN: Maria C. Pacios/Loan Administration
RE: LIBOR Activity
We refer to that certain Secured Credit Agreement, dated as of
December 21, 1995 (as amended, restated, supplemented or otherwise
modified from time to time, the "Secured Credit Agreement") by and
between GENERAL MANUFACTURED HOUSING, INC., as Borrower, and FIRST
SOURCE FINANCIAL LLP, as Lender. Capitalized terms used but not
otherwise defined herein are used herein as defined in the Secured
Credit Agreement.
Pursuant to __________ and/or ____________ of the Secured Credit
Agreement, Borrower hereby requests Lender to convert and or continue
the Loan(s) indicated below (collectively, the "Requested LIBOR
Activity"):
Please circle relevant transactions/activities
AND COMPLETE REQUESTED INFORMATION
LIBOR CREATE (CONVERSION FROM REFERENCE RATE):
Effective Date:
Term [months] (circle one) 1 3 6
Amount: ____________ [minimum $1,000,000 in increments of $200,000]
Affected Piece: (circle one) Working Capital Revolver
LIBOR MATURING: (circle one)
CONVERSION TO REFERENCE RATE CONTINUATION TO NEW LIBOR RATE
Original Date: _____________
Original Amount:____________
Affected Piece: (circle one) Working Capital Revolver
Effective Date:
Term [months] (circle one) 1 3 6
Amount: ____________ [minimum $1,000,000 in increments of $200,000]
Affected Piece: (circle one) Working Capital Revolver
<PAGE>
Comments:___________________________________________________________________
____________________________________________________________________________
_________________________.
To induce Lender to effect the Requested LIBOR Activity, Borrower hereby
represents and warrants to Lender that:
(a) No Event of Default or Unmatured Event of Default has occurred and is
continuing, or has resulted or will result from such Requested LIBOR
Activity.
(b) The warranties contained in the Secured Credit Agreement and in the
Related Documents are true and correct in all material respects as of
the date hereof, with the same effect as though made on the date
hereof.
(c) No material adverse change has occurred and no notice of prospective
material adverse change has been received with respect to insurance
maintained by Borrower or any of its Subsidiaries.
(d) Since the date of the most recent financial statements delivered to
Lender pursuant to the Secured Credit Agreement, no material adverse
change has occurred in the financial condition, operations, assets,
business or prospects of Borrower or any of its Subsidiaries.
(e) Except as disclosed in the schedules attached hereto (i) no claims,
litigation (including, without limitation, derivative actions),
arbitration, governmental proceedings, investigation or inquiry not
disclosed in writing by Borrower to Lender prior to the date of the
last previous Loan, provision of an LC Guaranty or Requested LIBOR
Activity, whichever shall have more recently occurred, is pending or
known to be threatened against Borrower or any Subsidiary of Borrower,
(ii) no material development not so disclosed has occurred in any
claim, litigation (including, without limitation, derivative actions),
arbitration, governmental proceeding, investigation or inquiry so
disclosed, and (iii) no event, condition or development shall have
occurred or developed at any time (whether before or after the making
of the last previous Loan, provision of an LC Guaranty or Requested
LIBOR Activity, whichever shall have more recently occurred), which,
(in the case of each of the foregoing CLAUSES (I) through (III))
singly or in the aggregate in the opinion of Lender has affected or is
likely to affect materially and adversely the financial condition,
operations, assets, business or prospects of Borrower or any
Subsidiary of Borrower or the ability of Borrower or any Subsidiary of
Borrower to perform its respective obligations in connection with the
Secured Credit Agreement and the Related Documents.
(f) All conditions to the making of such Requested LIBOR Activity as set
forth in the Secured Credit Agreement and the Related Documents have
been satisfied.
Dated this ____ day of ____________, ____.
GENERAL MANUFACTURED HOUSING, INC.
By: __________________________
Print Name: ____________________
Its: __________________________
<PAGE>
SCHEDULE I
FOR FSFI USE ONLY
Rate set for ________________ month LIBOR
Please be advised that the rate set for the LIBOR effective
_________________ (date) for GENERAL MANUFACTURED HOUSING,
INC._________________________ (tranche) has been set as follows:
LIBOR Rate: _________
*Spread _________
All in Rate: _________
Effective: _________
Maturity Date: _________
Total Principal: _________
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAWS. THIS NOTE MAY NOT BE TRANSFERABLE
WITHOUT COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH LAWS UNLESS AN
EXEMPTION OR EXCLUSION FROM REGISTRATION IS AVAILABLE.
EXHIBIT E
REVOLVING NOTE
$16,000,000 Due April 1, 2000
December 21, 1995
FOR VALUE RECEIVED, on or before April 1, 2000 the undersigned hereby
promises to pay to the order of First Source Financial LLP, an Illinois
registered limited liability partnership ("Lender") at the principal office of
The First National Bank of Chicago in Chicago, Illinois the principal amount of
SIXTEEN MILLION AND NO/100 DOLLARS ($16,000,000) or, if less, the aggregate
unpaid principal amount of all Revolving Loans made by Lender pursuant to the
Secured Credit Agreement hereinafter referred to (as shown in the records of
Lender or, at Lender's option, on the schedule attached hereto and any
continuation thereof).
The undersigned further promises to pay interest on the unpaid principal
amount of each Revolving Loan from the date of such Revolving Loan until such
Revolving Loan is paid in full, payable at such rate(s) and at such time(s), as
provided in the Secured Credit Agreement hereinafter
<PAGE>
referred to.
This Note evidences indebtedness incurred under, and is entitled to the
benefits of, that certain Secured Credit Agreement dated as of the date hereof
(and, if amended, all amendments thereto) among the undersigned and Lender
(herein called the "Secured Credit Agreement"), to which Secured Credit
Agreement reference is hereby made for a statement of the terms and provisions
under which this Note may be paid prior to its due date or its due date
accelerated. Reference is hereby made to the Secured Credit Agreement relating
to reductions in the principal amount of this Note. Terms used but not otherwise
defined herein are used herein as defined in the Secured Credit Agreement
hereinabove referred to.
This Note is secured pursuant to the Secured Credit Agreement and the
Related Documents referred to therein, and reference is made thereto for a
statement of terms and provisions.
In addition to and not in limitation of the foregoing and the provisions of
the Secured Credit Agreement hereinabove referred to, the undersigned further
agrees, subject only to any limitation imposed by applicable law, to pay all
expenses, including reasonable attorneys' fees and legal expenses, incurred by
the holder of this Note in endeavoring to collect any amounts payable hereunder
which are not paid when due, whether by acceleration or otherwise.
This Note is made under and governed by the laws of the State of Illinois
without regard to conflict of laws principles.
GENERAL MANUFACTURED HOUSING, INC.
By:
Name Printed:
Its:
Attention:
Telecopy:
Telephone:
<PAGE>
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAWS. THIS NOTE MAY NOT BE TRANSFERABLE
WITHOUT COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH LAWS UNLESS AN
EXEMPTION OR EXCLUSION FROM REGISTRATION IS AVAILABLE.
EXHIBIT F
WORKING CAPITAL NOTE
$6,000,000 December 21, 1995
FOR VALUE RECEIVED, on or before January 1, 1999 (unless extended pursuant
to a Working Capital Commitment Extension Request under Section 2.2 of the
Secured Credit Agreement hereinafter referred to, in which event this Note shall
mature on or before the Working Capital Loan Termination Date, the undersigned
hereby promises to pay to the order of First Source Financial LLP, an Illinois
registered limited liability partnership ("Lender") at the principal office of
The First National Bank of Chicago in Chicago, Illinois the principal amount of
SIX MILLION AND NO/100 DOLLARS ($6,000,000) or, if less, the aggregate unpaid
principal amount of all Working Capital Loans made by Lender pursuant to the
Secured Credit Agreement hereinafter referred to (as shown in the records of
Lender or, at Lender's option, on the schedule attached hereto and any
continuation thereof).
The undersigned promises to pay interest on the unpaid principal amount of
each Working Capital Loan from the date of such Working Capital Loan until such
Working Capital Loan is paid in full, payable at such rate(s) and at such
time(s), as provided in the Secured Credit Agreement hereinafter referred to.
This Note evidences indebtedness incurred under, and is entitled to the
benefits of, that certain Secured Credit Agreement dated as of the date hereof
(and, if amended, all amendments thereto) among the undersigned and Lender
(herein called the "Secured Credit Agreement"), to which Secured Credit
Agreement reference is hereby made for a statement of the terms and provisions
under which this Note may be paid prior to its due date or its due date
accelerated. Reference is hereby made to the Secured Credit Agreement relating
to reductions in the principal amount of this Note. Terms used but not otherwise
defined herein are used herein as defined in the Secured Credit Agreement
hereinabove referred to.
This Note is secured pursuant to the Secured Credit Agreement and the
Related Documents referred to therein, and reference is made thereto for a
statement of terms and provisions.
In addition to and not in limitation of the foregoing and the provisions of
the Secured Credit Agreement hereinabove referred to, the undersigned further
agrees, subject only to any limitation imposed by applicable law, to pay all
expenses, including reasonable attorneys' fees and legal expenses, incurred by
the holder of this Note in endeavoring to collect any amounts payable hereunder
which are not paid when due, whether by acceleration or otherwise.
This Note is made under and governed by the laws of the State of Illinois
without regard to conflict of laws principles.
GENERAL MANUFACTURED HOUSING, INC.
By:
Name Printed:
Its:
Attention:
Telecopy:
Telephone:
<PAGE>
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAWS. THIS NOTE MAY NOT BE TRANSFERABLE
WITHOUT COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH LAWS UNLESS AN
EXEMPTION OR EXCLUSION FROM REGISTRATION IS AVAILABLE.
EXHIBIT G
TERM LOAN NOTE
$4,000,000 Due January 1, 2001
December 21, 1995
FOR VALUE RECEIVED, on or before January 1, 2001 the undersigned hereby
promises to pay to the order of First Source Financial LLP, an Illinois
registered limited liability partnership ("Lender") at the principal office of
The First National Bank of Chicago in Chicago, Illinois the principal amount of
FOUR MILLION AND NO/100 DOLLARS ($4,000,000) or, if less, the aggregate unpaid
principal amount of all Term Loan made by Lender pursuant to the Secured Credit
Agreement hereinafter referred to (as shown in the records of Lender or, at
Lender's option, on the schedule attached hereto and any continuation thereof).
The undersigned further promises to pay interest on the unpaid principal
amount of the Term Loan from the date of hereof until the Term Loan is paid in
full, payable at such rate(s) and at such time(s), as provided in the Secured
Credit Agreement hereinafter referred to.
This Note evidences indebtedness incurred under, and is entitled to the
benefits of, that certain Secured Credit Agreement dated as of the date hereof
(and, if amended, all amendments thereto) among the undersigned and Lender
(herein called the "Secured Credit Agreement"), to which Secured Credit
Agreement reference is hereby made for a statement of the terms and provisions
under which this Note may be paid prior to its due date or its due date
accelerated. Reference is hereby made to the Secured Credit Agreement relating
to reductions in the principal amount of this Note. Terms used but not otherwise
defined herein are used herein as defined in the Secured Credit Agreement
hereinabove referred to.
This Note is secured pursuant to the Secured Credit Agreement and the
Related Documents referred to therein, and reference is made thereto for a
statement of terms and provisions.
In addition to and not in limitation of the foregoing and the provisions of
the Secured Credit Agreement hereinabove referred to, the undersigned further
agrees, subject only to any limitation imposed by applicable law, to pay all
expenses, including reasonable attorneys' fees and legal expenses, incurred by
the holder of this Note in endeavoring to collect any amounts payable hereunder
which are not paid when due, whether by acceleration or otherwise.
This Note is made under and governed by the laws of the State of Illinois
without regard to conflict of laws principles.
GENERAL MANUFACTURED HOUSING, INC.
By:
Name Printed:
Its:
Attention:
Telecopy:
Telephone:
<PAGE>
EXHIBIT H
(Section 11.1.6)
COMPLIANCE CERTIFICATE
TO: First Source Financial LLP
2850 West Golf Road
5th Floor
Rolling Meadows, IL 60008
We refer to the Secured Credit Agreement, dated as of December __, 1995 (as
the same has been amended or modified, the "Secured Credit Agreement"), between
GENERAL MANUFACTURED HOUSING, INC., a Georgia corporation and successor by
merger to GMH Acquisition Corp., a Delaware corporation ("Borrower"), and FIRST
SOURCE FINANCIAL LLP, an Illinois registered limited liability partnership.
Capitalized terms used but not elsewhere defined herein shall have the
respective meanings ascribed to such terms in the Secured Credit Agreement.
Section references used herein refer to such Sections in the Secured Credit
Agreement.
Borrower hereby certifies and warrants to you that the following is a true
and correct computation as at ______, ___ (the "Computation Date") of the
following ratios and/or financial restrictions contained in SECTION 11 and the
Subordination Agreement, as the case may be, for the periods shown:
I. SECTION 11.6 - CURRENT RATIO.
A. balance sheet total current assets
(excluding Intangible Assets) $______
B. cash, Cash Instruments and Cash $______
Equivalents
C. Remainder of A less B $______
(Current Assets)
D. balance sheet total current liabilities $______
E. Current Liabilities attributable
to the Notes, the Subordinated Notes,
capitalized leases, bank overdrafts
(only to the extent repaid on the Business
Day following creation) or any other
<PAGE>
Indebtedness provided under the Secured
Credit Agreement $______
F. Remainder of D less E
(Current Liabilities $______
G. C divided by F (Current Ratio) ___:1
H. Minimum Current Ratio required ___:1
under Section 11.6
II. SECTION 11.7 - ADJUSTED NET WORTH.
A. $10,000,000 $______
B. Net Income PLUS, to the extent the same
are deducted in determining Net Income,
depreciation and amortization expenses
for the period beginning on the Closing
Date to and including the date of
calculation $______
C. all amounts paid by Borrower to
purchase, redeem or otherwise
acquire any Borrower Equity Interests $______
D. The Sum of A plus B less C
(unless C has previously been
subtracted in determining B)
(Adjusted Net Worth) $______
E. Minimum Adjusted New Worth
required under SECTION 11.7 $______
III. SECTION 11.13 - NET CASH RATIO.
Period covered ("Computation Period"):
Twelve Months ending on _______, ___
A. Adjusted Operating Profit $______
B. Gross Capital Expenditures $______
C. The amount of any increase
(or reduction) in Working Capital $______
D. The sum of A less B plus C if
a reduction (or less C if an
increase) (Net Cash Generated) $______
E. Scheduled or accelerated payments
of interest or principal on account
of Indebtedness of Borrower, including
penalties, premiums and fees thereon
(including without limitation any
Scheduled Reduction in the Revolving
Loan Commitment, whether or not such
payment gives rise to the payment
of any Loans) $______
<PAGE>
F. taxes paid or payable directly by
Borrower to any governmental authority $______
G. all amounts paid by Borrower to $______
purchase, redeem or otherwise acquire
any Borrower Equity Interests (to the
extent not subtracted in determining
Net Income)
H. all scheduled payments of Preferred
Dividends $______
I. The sum of E plus F plus G plus
H ("scheduled payments" shall not
include repayments of Loans (i)
pursuant to clauses TENTH, ELEVENTH and TWELFTH
of SECTION 7.3 or (ii) following any
reductions or termination of the
Commitments pursuant to SECTION 2.5
or 2.6) (Total Fixed Charges) $______
J. D divided by I (Net Cash Ratio) ___:1
K. Minimum Net Cash Ratio required
under SECTION 11.13 ___:1
IV. SECTION 11.14 - TOTAL LIABILITIES RATIO.
A. balance sheet liabilities $______
B. Contingent Obligations (excluding the
Repurchase Obligations) other than
those which would constitute
liabilities under A above $______
C. Sum of A and B (Total Liabilities) $______
D. Adjusted Net Worth $______
E. C divided by D ___:1
F. Maximum Total Liabilities Ratio permitted
under SECTION 11.14 ___:1
V. SECTION 11.15 - ANNUAL INTEREST COVERAGE RATIO.
Period covered ("Computation Period"):
twelve month period ending _______, ___
A. Adjusted Operating Profit $______
B. Gross Capital Expenditures $______
C. Remainder of A less B $______
D. Interest Expense $______
E. C divided by D (Interest Coverage
Ratio Number 1) ___:1
<PAGE>
F. Minimum Interest Coverage Ratio Number 1
required under SECTION 11.15 ___:1
VI. SECTION 11.16 - QUARTERLY INTEREST COVERAGE RATIO.
Period covered ("Computation Period")
three month period ending ______, ___
A. Adjusted Operating Profit $______
B. Interest Expense $______
C. A divided by B (Interest Coverage
Ratio Number 2) ___:1
D. Minimum Interest Coverage Ratio Number 2
required under SECTION 11.16 ___:1
VII. SECTION 11.17 - PURCHASE, REDEMPTION, DIVIDEND, INTEREST
AND PAYMENT RESTRICTIONS.
Period covered ("Computation Period"):
______ month period ending ______, ___
A. Payments in respect of Borrower's
portion of the aggregate
federal and state and income tax
liabilities of the affiliated group
filing consolidated terms of which
Parent is the common parent $______
B. To the extent permitted by the
Subordination Agreement
(i) payments of accrued and unpaid interest
on the Subordinated Loans $______
(ii) payments of Preferred Dividends $______
(iii) payments of Incentive Management
Fees $______
C. Payments permitted pursuant to
SECTION 11.29 $______
D. Sum of A plus B plus C $______
VIII. SECTION 11.18 - GROSS CAPITAL EXPENDITURES.
Fiscal Year ending ______, ___
A. Expenditures in respect of the purchase or
other acquisition of fixed or capital assets,
including capitalized leases (without deduction
for trade-ins, salvage values, resales or
similar recoveries) $______
B. Maximum Gross Capital Expenditures
permitted under SECTION 11.18 $______
IX. SECTION 11.22 - LEASES
<PAGE>
Fiscal Year ending ______, ___
A. Lease Obligations during Fiscal Year $______
B. Maximum Lease Obligations
permitted under SECTION 11.22 $______
X. SECTION 11.31 - INDEBTEDNESS.
Fiscal Year ending ______, ___
A. Aggregate amount of insurance premiums
deferred $______
B. Maximum amount of insurance premiums
which may be deferred under
SECTION 11.31 $______
XI. SUBORDINATION AGREEMENT - AVAILABLE CASH TEST
All capitalized terms used but not defined in this
SECTION XI shall have the meanings ascribed to such
terms in the Subordination Agreement.
Applicable Period ending ______, ___
A. income statement net income $______
B. income statement interest expense $______
C. income statement tax expense $______
D. income statement depreciation and
amortization expense $______
E. amount accrued by Borrower related to $______
Incentive Management Fees not to exceed
(i) $62,500 for the Applicable
Period ending April 30, 1996
(ii) $125,000 for the Applicable
Period ending July 31, 1996
(iii) $187,500 for the Applicable
Period thereafter
F. income statement extraordinary
pre-tax gain $______
G. capital expenditures as determined in
conformity with GAAP $______
H. A plus B plus C plus D plus E less F
less G (Total Cash Sources) $______
I. 1.10 1.10
J. H divided by I $______
<PAGE>
K. Non-Subordinated Fixed Charges for the
Applicable Period $______
L. All subordinated Payments actually paid
with respect to the last two Fiscal
Quarters of the Applicable Period (which $______
Subordinated Payments correspond to the
calculation of Available Cash for the
first two Determination dates of such
Applicable Period) (except in the case
of the Determination Date occurring on
July 31, 1996, for the first Fiscal Quarter
M. Remainder of J less K less L. $______
N. (i) Senior Subordinated Payments
due and payable
(a) current $______
(b) accrued and unpaid $______
(ii) Senior Subordinated Payments
permitted pursuant to the
Subordination Agreement $______
(iii) Senior Subordinated Payments
not permitted pursuant to the
Subordination Agreement $______
O. Cash Overage (to be calculated if any
Junior Subordinated Payments, Preferred
Dividends or Incentive Management Fees
have accrued in any prior period and
remain unpaid) $______
P. (i) Junior Subordinated Payments
due and payable
(a) current $______
(b) accrued and unpaid $______
(ii) Junior Subordinated Payments
permitted pursuant to the
Subordination Agreement $______
(iii) Junior Subordinated Payments
not permitted pursuant to the
Subordination Agreement $______
Q. (i) Preferred Dividends due and payable
(a) current $______
(b) accrued and unpaid $______
(ii) Preferred Dividends permitted
pursuant to the Subordination Agreement $______
<PAGE>
(iii) Preferred Dividends
not permitted pursuant to the
Subordination Agreement $______
R. (i) Incentive Management Fees due and payable
(a) current $______
(b) accrued and unpaid $______
(ii) Incentive Management Fees permitted
pursuant to the Subordination Agreement $______
(iii) Incentive Management Fees
not permitted pursuant to the
Subordination Agreement $______
Borrower hereby further certifies and warrants to you that no Event of
Default or Unmatured Event of Default has occurred and is continuing.
IN WITNESS WHEREOF, each Borrower has caused this Certificate to be
executed and delivered by its duly authorized officer this ____ day of ________,
____.
GENERAL MANUFACTURED HOUSING, INC.
By:__________________________________
Name Printed:________________________
Its:_________________________________
<PAGE>
EXHIBIT I
(Section 12.3.3)
BORROWING CERTIFICATE
To: First Source Financial LLP
2850 West Golf Road
5th Floor
Rolling Meadows, Illinois 60008
Attention: Contract Administration
We refer to the Secured Credit Agreement dated as of December 21, 1995
(herein as heretofore amended or modified called the "Secured Credit Agreement")
among General Manufactured Housing, Inc., a Georgia corporation ("Borrower"),
and First Source Financial LLP, an Illinois registered limited liability
partnership. Capitalized terms used but not elsewhere defined herein are used
herein as defined in the Secured Credit Agreement.
Pursuant to Section 12.3.3 of the Secured Credit Agreement, the undersigned
hereby confirms its request that on each day listed on the Detail Loan Statement
attached hereto for the period __________, 199_ to ____________, 199_, Borrower
requested Lender to make Loan(s) ("Requested Loan(s)") to Borrower in the
aggregate principal amount set forth opposite such day on the Detail Loan
Statement.
To induce Lender to make the Requested Loan(s) Borrower hereby represents
and warrants to Lender that:
(a) No Event of Default or Unmatured Event of Default has occurred and is
continuing, or has resulted or will result from the making of any
Requested Loan.
(b) The warranties contained in Section 10 of the Secured Credit Agreement
(excluding, in the case of Loans subsequent to the initial Loan, the
first sentence of Section 10.4) and in the Related Documents are true
and correct in all material respects as of the date hereof, with the
same effect as though made on the date hereof.
(c) There has been no material adverse change or notice of prospective
material adverse change with respect to any insurance maintained by
Borrower.
(d) Since the date of the financial statements referred to in Section 10.3
of the Secured Credit Agreement, no Material Adverse Effect has
occurred.
(e) Except as disclosed in schedules furnished by the undersigned to
Lender prior to the date of the last previous Loan under the Secured
Credit Agreement (or, in the case of the initial Loan, prior to the
date of execution and delivery of the Secured Credit Agreement) (i) no
claims, litigation (including, without limitation, derivative
actions), arbitration, governmental proceeding, investigation or
inquiry is pending or threatened against the undersigned, (ii) no
material development has occurred in any such claim, litigation
(including, without limitation, derivative actions), arbitration,
governmental proceedings, investigation or inquiry so disclosed, and
(iii) no event, condition or development with respect to Borrower's
financial condition or otherwise has occurred or developed at any time
(whether before or after the making of the last previous Loan) which
in the case of each of the foregoing clauses (i) through (iii) has or
is to have a Material Adverse Effect.
(f) All conditions to the making of the Requested Loan(s) have been
satisfied.
Dated this ________ day of ______________________, 199_.
GENERAL MANUFACTURED HOUSING, INC.
By: _________________________________
Name Printed:____________________
Its:_____________________________
<PAGE>
DETAIL LOAN STATEMENT
<PAGE>
EXHIBIT J
(Section 12.3.3)
LC GUARANTY REQUEST
First Source Financial LLP
2850 West Golf Road
5th Floor
Rolling Meadows, IL 60008
Ladies and Gentlemen:
We refer to the Secured Credit Agreement dated as of December 21, 1995 (as
from time to time amended, modified or supplemented, the "Secured Credit
Agreement"), between General Manufactured Housing, Inc., a Georgia corporation,
and First Source Financial LLP, an Illinois registered limited liability
partnership. Capitalized terms used but not elsewhere defined herein shall have
the respective meanings ascribed to such terms in the Secured Credit Agreement.
Pursuant to SECTION 12.3.3 of the Secured Credit Agreement, Borrower hereby
requests that on ___________, 19___ Lender execute an LC Guaranty pursuant to
the terms of the Secured Credit Agreement (the "Requested LC Guaranty") in
connection with the LC Reimbursement Agreement attached hereto as EXHIBIT A with
[APPLICABLE ISSUER].
To induce Lender to issue the Requested LC Guaranty or to consent to the
issuance of the Permitted LC, Borrower hereby represents and warrants to Lender
that:
(a) No Event of Default or Unmatured Event of Default has occurred and is
continuing, or will result from the issuance of the Requested LC
Guaranty or Permitted LC.
(b) The warranties contained in SECTION 10 of the Secured Credit Agreement
and in the Related Documents are true and correct in all material
respects as of the date hereof, with the same effect as though made on
the date hereof, except to the extent of any change in the information
contained in the Schedules to the Secured Credit Agreement as shown in
the schedules attached hereto.
(c) There has been no material adverse change and no notice of prospective
material adverse change has been received with respect to insurance
maintained by any Borrower.
(d) Since the date of the financial statements referred to in SECTION
10.3(A) of the Secured Credit Agreement, no Material Adverse Effect
has occurred .
(e) Except as disclosed in the schedules attached hereto (i) no claims,
litigation (including, without limitation, derivative actions),
arbitration, governmental proceeding, investigation or inquiry not
disclosed in writing by Borrower to Lender prior to the date of the
last previous Loan or provision of an LC Guaranty, whichever shall
have more recently occurred, is pending or known to be threatened
against any Borrower or Parent, (ii) no material development not so
disclosed has occurred in any claim, litigation (including, without
limitation, derivative actions), arbitration, governmental proceeding,
investigation or inquiry so disclosed, and (iii) no event, condition
or development has occurred or developed at any time (whether before
or after the making of the last previous Loan or provision of an LC
Guaranty, whichever shall have more recently occurred), which, (in the
case of each of the foregoing CLAUSES (I) through (III)) has caused or
could reasonably be expected to cause a Material Adverse Effect.
(f) All conditions to the issuance of the Requested LC Guaranty as set
forth in the Secured Credit Agreement and the Related Documents have
been satisfied, including, without limitation, all conditions set
forth in SECTION 12 of the Secured Credit Agreement.
Dated this ____ day of _____________, 19__
IN WITNESS WHEREOF, Borrower has caused this LC Guaranty Request to be
executed and delivered by a duly authorized officer of Borrower as of _________,
199 .
GENERAL MANUFACTURED HOUSING, INC.
By: ___________________________________
Name Printed:______________________
Its:_______________________________
<PAGE>
EXHIBIT 10.23
AIRCRAFT MORTGAGE AND SECURITY AGREEMENT
----------------------------------------
THIS AIRCRAFT MORTGAGE AND SECURITY AGREEMENT, dated as of December
21, 1995 (this "Agreement"), is between GENERAL MANUFACTURED HOUSING, INC.,
a Georgia corporation, ("Debtor"), and FIRST SOURCE FINANCIAL LLP, an
Illinois registered limited liability partnership ("Secured Party").
PRELIMINARY STATEMENT:
A. Secured Party and Debtor have entered into a Secured Credit
Agreement of even date herewith (such Secured Credit Agreement, as the same
may be amended, supplemented or modified from time to time, hereinafter is
referred to as the "Credit Agreement") pursuant to which Secured Party has
agreed to make loans and other financial accommodations to Debtor
(collectively, the "Loans"), subject to the terms and conditions set forth
in the Credit Agreement.
B. One of the conditions precedent to the obligations of Secured
Party under the Credit Agreement is that Debtor shall have executed and
delivered this Agreement.
NOW, THEREFORE, in order to induce Secured Party to make the Loans,
and for other good and valuable consideration, the receipt and sufficiency
of which hereby are acknowledged, Debtor hereby agrees as follows:
1. DEFINITIONS. All capitalized terms used but not elsewhere
defined in this Agreement shall have the respective meanings ascribed to
such terms in the Credit Agreement. As used in this Agreement, the
following terms shall have the following meaning:
AIRCRAFT: the Airframe together with (i) the Parts, (ii) the
Engines, (iii) the Propellers, (iv) spare parts or ancillary equipment
or devices used in connection therewith, (v) all flight manuals,
maintenance manuals, wiring diagrams, parts catalogs, customer
bulletins and service bulletins, logbooks, landing gear service
manuals, training manuals and other logs, manuals and records with
respect thereto and (vi) all substitutions, replacements, renewals and
proceeds of any and all of the foregoing.
AIRFRAME: collectively, (i) the Beechcraft King Air 200, Serial
Number BB464, FAA Registration Number N561SS (except Engines or
engines from time to time installed thereon) and (ii) any and all
Parts so long as the same shall be incorporated in, installed on or
attached to the Airframe, or so long as title thereto shall remain
vested in Debtor after removal from the Airframe.
<PAGE>
ENGINES: collectively, (i) each of the two model PT6A-41 engines
manufactured by Pratt & Whitney bearing serial numbers 80897 and 80900
and initially installed on the Airframe, whether or not from time to
time thereafter no longer installed on the Airframe or installed on
any other aircraft or airframe, each having 750 or more rated take-off
horsepower, and (ii) any replacement engine which may from time to
time be substituted therefor, together in each case with any and all
Parts incorporated or installed in or attached thereto or any and all
Parts removed therefrom so long as title thereto after removal from
such Engine shall remain vested in Debtor.
PARTS: all avionics, appliances, components, parts, instruments,
appurtenances, accessories, furnishings and other equipment of whatever
nature (excluding Engines and Propellers), which may now or from time
to time be incorporated or installed in or attached to, or were
provided by the manufacturer with, the Airframe or any Engine or any
Propeller or, so long as title thereto shall remain vested in Debtor,
if removed from such Airframe or Engine or Propeller.
PROPELLERS: collectively, (i) each of the two Model No. HC-D4N-3A
propellers manufactured by Hartzell bearing serial numbers FY848A and
FY587 and initially installed on the Airframe, whether or not from time
to time thereafter no longer installed on the Airframe or installed on
any other aircraft or airframe, each of which is capable of absorbing
750 or more shaft horsepower, and (ii) any replacement propeller which
may from time to time be substituted therefor.
2. SECURITY INTEREST. In order to secure the performance and payment
of the Liabilities, Debtor hereby grants to Secured Party a security
interest in all of Debtor's right, title and interest in and to the
Aircraft. The Aircraft sometimes hereinafter is referred to as the
"Collateral." The security interest of Secured Party in the Collateral
shall be superior and prior to all other Liens except Permitted Prior Liens.
3. REPRESENTATIONS AND WARRANTIES. Debtor hereby represents and
warrants to Secured Party as follows:
3.1 CITIZENSHIP. Debtor is a citizen of the United States within
the meaning of Section 101(16) of the Federal Aviation Act.
3.2 ENGINE CAPABILITY. The Aircraft's engines have more than 750
rated take-off horsepower or its equivalent.
3.3 PROPELLER CAPABILITY. The Aircraft's propellers are capable
of absorbing 750 or more shaft horsepower.
<PAGE>
3.4 OWNERSHIP OF COLLATERAL. Debtor is the owner of all of
the Collateral, except the portion thereof consisting of after-
acquired Property, and Debtor will be the owner of such after-
acquired Property, free from any Lien except for Permitted Liens.
3.5 PLACES OF BUSINESS. The principal base of the Aircraft is the
Waycross Ware County Airport in Waycross, Georgia.
3.6 FINANCING STATEMENTS. Except for the financing statements of
Secured Party and the financing statement showing NationsBank of
Georgia, N.A. as a secured party, a termination statement for which
will be delivered to Secured Party on the date hereof, no financing
statement covering any Collateral or any proceeds thereof is on file in
any public office.
4. AFFIRMATIVE COVENANTS. Until all of the Liabilities are paid and
performed in full, Debtor agrees that it will:
4.1 TAXES. Pay or cause to be paid promptly when due all taxes,
levies, assessments and governmental charges upon and relating to any
of the Collateral or otherwise for which Debtor is or may be liable,
except to the extent that the failure to pay any of such taxes, levies,
assessments or charges is permitted by the Credit Agreement.
4.2 INSURANCE. At its sole expense, maintain or cause to be
maintained in full force and effect at all times such insurance with
respect to the Collateral as may be required by law or otherwise by
Secured Party.
4.3 COLLATERAL.
4.3.1 MAINTENANCE. At its own expense, cause the Aircraft to
be maintained, serviced, repaired, overhauled and tested, and
cause all parts, replacements, mechanisms, devices and servicing
required therefor to be furnished, so that the value, condition
and operating efficiency thereof will at all times be maintained
and preserved, at not less than the level required by any
governmental body having jurisdiction with respect thereto, and,
in any case, the level necessary to enable the airworthiness
certification of the Aircraft to be maintained in good standing at
all times under the Federal Aviation Act, or as shall be required
by any and all applicable FAA Airworthiness Directives, Operators
Letters and Service Bulletins.
4.3.2 INSURANCE REQUIREMENTS. Cause the Collateral at all
times to be maintained in accordance with the requirements of all
insurance
<PAGE>
carriers which provide insurance with respect to such Collateral so
that such insurance shall remain in full force and effect.
4.3.3 REGISTRATION. Cause the Aircraft to be and remain at
all times duly registered in the name of Debtor in accordance with
the Federal Aviation Act.
4.3.4 BOOKS AND RECORDS. Cause all books, records and
materials required by the FAA to be maintained with respect to the
Aircraft.
4.3.5 OPERATION. Cause the Aircraft to be used in compliance
with all federal, state and local laws, ordinances, requirements
and regulations and all judgments, orders, injunctions and decrees
applicable thereto.
4.4 FINANCING STATEMENTS, FURTHER ASSURANCES. Concurrently with
the execution of this Agreement, and from time to time hereafter as
requested by Secured Party, execute and deliver to Secured Party such
financing statements, continuation statements, termination statements,
amendments to any of the foregoing and other documents, in form
satisfactory to Secured Party, as Secured Party may require to perfect
and continue in effect the security interest of Secured Party granted
pursuant to this Agreement, to carry out the purposes of this Agreement
and to protect Secured Party's rights hereunder. Debtor, upon demand,
shall pay the cost of filing all such financing statements,
continuation statements, termination statements, amendments to any of
the foregoing and other documents.
5. NEGATIVE COVENANTS. Until all of the Liabilities are paid and
performed in full, Debtor agrees that it will not:
5.1 SALES AND TRANSFER OF COLLATERAL. Sell, lease, assign or
otherwise dispose of any of the Collateral.
5.2 LOCATIONS. Change or permit to be changed the principal base
of the Aircraft.
5.3 OPERATION OF AIRCRAFT. Operate the Aircraft or permit the
Aircraft to be operated (i) outside the continental United States, (ii)
in any area excluded from coverage by any insurance required by the
terms of Section 4.2 hereof, (iii) in any way other than in a careful
and proper manner by competent and duly qualified personnel, (iv) in
violation of any governmental laws, rules and regulations relating
thereto, the requirements of the insurance policies required by Section
4.2 hereof or the manufacturer's or supplier's instructions or manuals
with respect to the Aircraft or (v) in any jurisdiction which is
<PAGE>
not a signatory to the Geneva Convention on International Recognition of
Rights in Aircraft or in any area of recognized or threatened hostilities.
5.4 CHANGES TO AIRCRAFT. Make, authorize or permit to be made any
improvement, change, addition or alteration to the Aircraft if such
improvement, change, addition or alteration will impair the originally
intended function or use of the Aircraft, impair the value of the
Aircraft as it existed immediately prior to such improvement, change,
addition or alteration, or violate any applicable governmental rule,
regulation or standard.
6. PROTECTION OF COLLATERAL. In the event of any failure of Debtor
to (i) maintain in force and pay for any insurance or bond which Debtor is
required to provide pursuant to this Agreement or the other Collateral
Documents, (ii) keep the Aircraft in good repair and operating condition,
(iii) keep the Collateral free from all Liens except for Permitted Liens,
(iv) pay when due all taxes, levies and assessments on or in respect of the
Collateral, except as permitted pursuant to the terms of Section 4.1 above,
(v) make all payments and perform all acts on the part of Debtor to be paid
or performed with respect to any of the Collateral, including, without
limitation, all expenses of protecting, storing, warehousing, insuring,
handling and maintaining the Aircraft, and (vi) keep fully and perform
promptly any other of the obligations of Debtor under this Agreement or the
other Collateral Documents with respect to the Collateral, Secured Party, at
its option, may (but shall not be required to) procure and pay for such
insurance, place such Collateral in good repair and operating condition, pay
or contest or settle such Liens or taxes or any judgments based thereon or
otherwise make good any other aforesaid failure of Debtor. Debtor shall
reimburse Secured Party immediately upon demand for all sums paid or
advanced on behalf of Debtor for any such purpose, together with all costs,
expenses and attorneys' fees paid or incurred by Secured Party in connection
therewith and interest at the Default Rate on all sums so paid or advanced
from the date of such payment or advancement until repaid to Secured Party.
All such sums paid or advanced by Secured Party, with interest thereon,
immediately upon payment or advancement thereof, shall be deemed to be part
of the Liabilities secured hereby.
7. EVENT OF DEFAULT. Debtor shall be in default under this Agreement
upon the occurrence of an Event of Default under the Credit Agreement.
8. REMEDIES UPON DEFAULT. Upon the occurrence of an Event of
Default:
8.1 RIGHTS OF SECURED PARTY. Secured Party shall have all of the
rights and remedies of a secured party under the Code and the Federal
Aviation Act and all other rights
<PAGE>
and remedies accorded to Secured Party at equity or law with respect to the
Collateral, including, without limitation, the right to apply for and have
a receiver appointed by a court of competent jurisdiction to manage,
protect and preserve the Collateral and to continue operating and using the
Collateral. Any notice of sale or other disposition of Collateral given not
less than 10 Business Days prior to such proposed action shall constitute
reasonable and fair notice of such action. To the extent permitted by
applicable law, Secured Party may postpone or adjourn any such sale from
time to time by announcement at the time and place of sale stated in the
notice of sale or by announcement of any adjourned sale, without being
required to give a further notice of sale. Any such sale may be for cash
or, unless prohibited by applicable law, upon such credit or installment
terms as Secured Party shall determine. To the extent permitted by
applicable law, Debtor shall be credited with the net proceeds of such sale
only when such proceeds actually are received by Secured Party. Despite the
consummation of any such sale, Debtor shall remain liable for any
deficiency on the Liabilities which remains outstanding following any such
sale. All net proceeds received pursuant to a sale shall be applied in the
manner set forth in Section 7.3 of the Credit Agreement.
8.2 ASSEMBLY OF COLLATERAL. Upon the request of Secured Party,
Debtor shall assemble and make the Collateral available to Secured
Party at a place within the state of Georgia designated by Secured
Party.
8.3 PROCEEDS. At the request of Secured Party, Debtor shall hold
all proceeds of the Collateral collected by Debtor in trust for Secured
Party, and promptly upon receipt thereof, turn over such proceeds to
Secured Party in the exact form in which they were received.
All monies received by Secured Party pursuant to this Section 8 shall be
applied by Secured Party in accordance with the applicable provisions of
Section 7.3 of the Credit Agreement.
9. POWER OF ATTORNEY. To effectuate the rights and remedies of
Secured Party under this Agreement, Debtor hereby irrevocably appoints
Secured Party its attorney-in-fact, in the name of Debtor or in the name of
Secured Party, to execute and file from time to time financing statements,
continuation statements, termination statements and amendments thereto,
covering the Collateral, in form satisfactory to Secured Party. The power
of attorney granted pursuant to this Section 9 is coupled with an interest
and shall be irrevocable until all of the Liabilities have been paid and
performed in full.
<PAGE>
10. CERTAIN AGREEMENTS OF DEBTOR.
10.1 WAIVER OF NOTICE. Debtor hereby waives notice of the
acceptance of this Agreement and, except as otherwise specifically
provided in Section 8.1 above or in the Credit Agreement, all other
notices, demands or protests to which Debtor otherwise might be
entitled by law (and which lawfully may be waived) with respect to this
Agreement, the Liabilities and the Collateral.
10.2 RIGHTS OF SECURED PARTY. Debtor agrees that Secured Party
(i) shall have no duty, beyond the duty to act in a commercially
reasonable manner to protect the Collateral in any action it takes with
respect to the Collateral, as to the collection or protection of the
Collateral or any income thereon, (ii) may exercise the rights and
remedies of Secured Party with respect to the Collateral without resort
or regard to other security or sources for payment and (iii) shall not
be deemed to have waived any of the rights or remedies granted to
Secured Party hereunder unless such waiver shall be in writing and
shall be signed by Secured Party.
10.3 NO DELAY; SINGLE OR PARTIAL EXERCISE PERMITTED. No delay or
omission on the part of Secured Party in exercising any rights or
remedies contained herein shall operate as a waiver of such right or
remedy or of any other right or remedy, and no single or partial
exercise of any right or remedy shall preclude any other or further
exercise thereof, or the exercise of any other right or remedy. A
waiver of any right or remedy on any one occasion shall not be
construed as a bar or waiver of any right or remedy on future
occasions, and no delay, omission, waiver or single or partial exercise
of any right or remedy shall be deemed to establish a custom or course
of dealing or performance between the parties hereto.
11. RIGHTS CUMULATIVE. All rights and remedies of Secured Party
pursuant to this Agreement, the Credit Agreement or otherwise, shall be
cumulative and non-exclusive, and may be exercised singularly or
concurrently.
12. SEVERABILITY. In the event that any provision of this Agreement
is deemed to be invalid by reason of the operation of any law, including,
but not limited to, the rules, regulations and policies of the FAA, or by
reason of the interpretation placed thereon by any governmental body, this
Agreement shall be construed as not containing such provision and the
invalidity of such provision shall not affect the validity of any other
provisions hereof, and any and all other provisions hereof which otherwise
are lawful and valid shall remain in full force and effect.
<PAGE>
13. NOTICES. All notices and communications under this Agreement
shall be in writing and delivered in the manner set forth in the Credit
Agreement.
14. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
assigns of Secured Party and Debtor.
15. CAPTIONS. The headings in this Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which, when taken together, shall be one and the same instrument.
17. SURVIVAL OF AGREEMENT; TERMINATION. All covenants, agreements,
representations and warranties made herein shall survive the execution and
delivery of the Credit Agreement and shall continue in full force and effect
until the Liabilities are paid and performed in full.
18. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. SECURED PARTY MAY
ENFORCE ANY CLAIM ARISING OUT OF THIS AGREEMENT, ANY COLLATERAL OR ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH, OR ARISING FROM OR RELATED TO
ANY CREDIT RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT IN ANY
STATE OR FEDERAL COURT HAVING SUBJECT MATTER JURISDICTION AND LOCATED IN
CHICAGO, ILLINOIS. FOR THE PURPOSE OF ANY ACTION OR PROCEEDING INSTITUTED
WITH RESPECT TO ANY SUCH CLAIM, DEBTOR HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF SUCH COURTS AND ALSO HAS IRREVOCABLY DESIGNATED THE PERSON
WHOSE NAME AND ADDRESS ARE SET FORTH IN THE CREDIT AGREEMENT TO RECEIVE FOR
AND ON BEHALF OF DEBTOR SERVICE OF PROCESS IN ILLINOIS. DEBTOR IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OUT OF SAID COURTS BY MAILING A COPY
THEREOF, BY REGISTERED MAIL, POSTAGE PREPAID, TO DEBTOR AND AGREES THAT SUCH
SERVICE, TO THE FULLEST EXTENT PERMITTED BY LAW, (A) SHALL BE DEEMED IN
EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON IT IN ANY SUCH SUIT, ACTION
OR PROCEEDING AND (B) SHALL BE TAKEN AND HELD TO BE VALID PERSONAL SERVICE
UPON AND PERSONAL DELIVERY TO IT. NOTHING HEREIN CONTAINED SHALL AFFECT THE
RIGHT OF SECURED PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW
OR PRECLUDE SECURED PARTY FROM BRINGING AN ACTION OR PROCEEDING IN RESPECT
HEREOF IN ANY OTHER COUNTRY, STATE OR PLACE HAVING JURISDICTION OVER SUCH
ACTION. DEBTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER HAVE TO THE LAYING OF THE VENUE
OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT LOCATED IN
CHICAGO, ILLINOIS AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH
<PAGE>
PARTY HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, OR ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION WITH THE FOREGOING OR ARISING FROM ANY CREDIT
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY
SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
19. GOVERNING LAW; INTERPRETATION. THIS AGREEMENT HAS BEEN DELIVERED
AT CHICAGO, ILLINOIS, AND SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF ILLINOIS WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAW.
WHEREVER POSSIBLE, EACH PROVISION OF THIS AGREEMENT SHALL BE INTERPRETED IN
SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY
PROVISION OF THIS AGREEMENT SHALL BE PROHIBITED BY OR INVALID UNDER SUCH
LAW, SUCH PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION
OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE
REMAINING PROVISIONS OF THIS AGREEMENT.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
both of the parties hereto by a duly authorized officer of each such party
on the date first set forth above.
GENERAL MANUFACTURED HOUSING, INC.
By: /s Gary M. Brost
--------------------------------
Name: Gary M. Brost
Its: President
Attention: Samuel P. Scott
Telecopy: (912) 285-1397
Telephone: (912) 285-5065
FIRST SOURCE FINANCIAL LLP
By: First Source Financial, Inc., its
Agent/Manager
By: /s/ Edwar A. Szarbowicz, Jr.
-------------------------------
Name: Edward A. Szarbowicz. Jr.
Its: Vice President
<PAGE>
2850 West Golf Road
5th Floor
Rolling Meadows, Illinois 60008
Attention: Contract Administration
Telecopy: (708) 734 7911
Telephone: (708) 734-4040
<PAGE>
EXHIBIT 10.26
After recording return to:
Catherine Patton, Esq.
Katten, Muchin & Zavis
525 W. Monroe Street
Chicago, Illinois 60661
ASSIGNMENT OF LEASES
This ASSIGNMENT OF LEASES (this "Assignment") is made as of
December 21, 1995, by GENERAL MANUFACTURED HOUSING, INC., a
Georgia corporation ("Assignor"), to FIRST SOURCE FINANCIAL LLP,
an Illinois registered limited liability partnership
("Assignee").
RECITALS:
A. Assignor and Assignee have entered into, among other
things, a Secured Credit Agreement of even date herewith (as the
same may be amended or modified from time to time, the "Secured
Credit Agreement"), pursuant to which Assignee has agreed to make
certain loans, advances or other financial accommodations to
Assignor, subject to the terms and conditions set forth in such
Secured Credit Agreement.
B. Assignor is, or is the successor in interest to, each
lessee under those certain leases (individually, each "Lease,"
together, the "Leases"), described on Exhibit A, with the lessors
(the "Lessors") listed on Exhibit B.
C. One of the conditions precedent to Assignee's making of
the loans, advances and other financial accommodations is
Assignor's execution and delivery of this Assignment.
NOW, THEREFORE, in consideration of the foregoing premises
and for other good and valuable consideration, the receipt and
sufficiency of which are acknowledged, Assignor hereby agrees as
follows:
1. Definitions. Capitalized terms used but not elsewhere
defined herein shall have the respective meanings ascribed to
such terms in the Secured Credit Agreement.
2. Assignment. To secure the payment, performance and
observance of the Liabilities, Assignor grants to Assignee a
security interest in and collaterally assigns to Assignee all of
Assignor's right, title and interest in and to the Leases.
3. Representations and Warranties. Assignor represents
and warrants to Assignee that: (a) Assignor is the sole owner of
the entire leasehold interest in each Lease, free and clear of
all Liens, except for Liens created pursuant to, or in connection
with, the Secured Credit Agreement and except for Permitted
Liens, (b) to Assignor's knowledge each Lease is valid and
enforceable and has not been altered, modified or amended in any
manner, except as otherwise disclosed in writing by Assignor to
Assignee; (c) neither Assignor, nor, to Assignor's knowledge, any
<PAGE>
Lessor under the Leases is in default under the applicable Lease,
nor has any event occurred which with the passage of time, giving
of notice or both would constitute a default under such Lease;
(d) no rent reserved under each Lease has been assigned or
prepaid, except for prepaid rent for the current month; and (e)
the current monthly rent, security deposit and the commencement
and expiration date of each Lease is reflected accurately in the
applicable portions of the Leases.
4. Covenants. Assignor covenants to and with Assignee:
(a) to observe and perform all material obligations imposed upon
Assignor as the lessee under each Lease and not to do, or permit
to be done, anything to impair materially Assignor's rights
thereunder; (b) not to assign Assignor's interest under any Lease
or sublet all or any part of the Premises; (c) not to, except in
the ordinary course of Assignor's business, as such business is
currently conducted, alter, modify or change the terms of any
Lease, or cancel or terminate the same, or surrender possession
of the Premises, or any part thereof, without the prior written
consent of Assignee which consent shall not be unreasonably
withheld; (d) not to exercise any option nor elect not to
exercise any option without the prior written consent of Assignee
which consent shall not be unreasonably withheld; and (e) to
enforce the performance by each Lessor under the Leases of all of
such Lessor's material obligations under the applicable Lease.
5. Security. This Assignment is a present and absolute
assignment. So long as no Event of Default has occurred and is
continuing, Assignor shall have the right to retain, use and
enjoy all rights under each Lease.
6. Remedies or Default. Upon the occurrence and during
the continuance of any Event of Default, Assignee, at its option,
without in any way waiving such default and without notice, and
without regard to the adequacy of the security for Assignor's
Liabilities: (a) either in person or by agent, with or without
bringing any action or proceeding, or by a receiver appointed by
a court, may take possession of any or all of the Premises and
may have, hold, manage, lease and operate the same in accordance
with the terms of the applicable Lease or as otherwise agreed by
Assignee and the appropriate Lessor; and (b) in connection with
the exercise of its rights under clause (a) above, may terminate
all of Assignor's right to retain, use and enjoy all rights under
the Leases.
7. Indemnification. Assignee may, but shall not be
obligated to, perform or discharge any obligation, duty or
liability of Assignor under each Lease or under or by reason of
this Assignment, and Assignor shall, and hereby agrees to,
indemnify, defend and hold Assignee harmless from, and against,
any and all liability, loss, cost, damage or expense which may,
or might be, incurred by Assignee, directly, or indirectly, under
any Lease or under or by reason of this Assignment and from any
and all claims and demands whatsoever which may be asserted
against Assignee by reason of any alleged obligations or
undertakings on its part to perform or discharge any of the
covenants or agreements contained in any Lease except that
Assignor shall not be liable for any gross negligence or willful
misconduct of Assignee or any acts or omissions of Assignee after
Assignee obtains physical possession of the Premises. If
<PAGE>
Assignee incurs any such liability under any Lease or under or by
reason of this Assignment or in defense of any such claims or
demands, the amount thereof, including all costs, expenses and
attorneys' fees, shall be added to Assignor's Liabilities and
Assignor shall reimburse Assignee therefor immediately upon
demand. The parties hereto understand further that this
Assignment shall not operate to place responsibility for the
control, care, management or repair of any of the Premises upon
Assignee, or for the carrying out of any of the terms or
conditions of each Lease, and it shall not operate to make
Assignee responsible or liable for any waste committed on the
Premises by Assignor or for any dangerous or defective condition
of the Premises or for any negligence in the management, upkeep,
repair or control of the Premises by Assignor, resulting in loss,
injury or death to any lessee, sublessee, invitee, licensee,
employee, stranger or any other Person.
8. Release of Assignment. Upon payment, performance and
observance in full of Assignor's Liabilities, this Assignment
shall be void and of no further force or effect and Assignee,
upon the written request of Assignor, shall execute such
documents, as may be reasonably requested by Assignor, to confirm
the same; provided, however, that the certificate of any officer
or agent of Assignee certifying that any of Assignor's
Liabilities remain unsatisfied shall constitute conclusive
evidence of the validity, effectiveness and continuing force of
this Assignment and any Person may, and hereby is authorized to,
rely thereon.
9. Remedies Cumulative. No right or remedy of Assignee
hereunder is exclusive of any other right or remedy hereunder or
now or hereafter existing at law or in equity or under the
Secured Credit Agreement or the other Related Documents, but is
cumulative and in addition thereto and Assignee may recover
judgment thereon, issue execution therefor, and resort to every
other right or remedy available at law or in equity or under the
Secured Credit Agreement or the other Related Documents, without
first exhausting or affecting or impairing the security or any
right or remedy afforded under this Assignment. No delay in
exercising, or omission to exercise, any such right or remedy
will impair any such right or remedy or will be construed to be a
waiver of any default by Assignor hereunder, or acquiescence
therein, nor will it affect any subsequent default hereunder by
Assignor of the same or different nature. Every such right or
remedy may be exercised independently or concurrently, and when
and so often as may be deemed expedient by Assignee. No term or
condition contained in this Assignment, may be waived, altered or
changed except as evidenced in writing signed by Assignor and
Assignee.
In case Assignee shall have proceeded to enforce any right
under this Assignment and such proceedings shall have been
discontinued or abandoned for any reason, or shall have been
determined adversely to Assignee, then, and in every such case,
Assignor and Assignee shall be restored to their former positions
and rights hereunder in respect to each Lease, and all rights,
remedies, and powers of Assignee shall continue as though no such
proceedings had been taken.
10. Miscellaneous
<PAGE>
A. Notices. All notices required or permitted to be
given hereunder shall be given as set forth in the Secured Credit
Agreement.
B. Headings. Section and subsection headings in this
Assignment are included herein for convenience of reference only
and shall not constitute a part of this Assignment for any other
purpose or be given any substantive effect.
C. Successors and Assigns; Subsequent Holders Of
Notes. This
Assignment shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns,
except that Assignor may not assign its rights or obligations
hereunder without the written consent of Assignee as provided in
the Secured Credit Agreement.
D. Severability. The invalidity, illegality or
unenforceability in any jurisdiction of any provision in or
obligation under this Assignment, the Secured Credit Agreement or
the other Related Documents shall not affect or impair the
validity, legality or enforceability of the remaining provisions
or obligations under this Assignment, the Secured Credit
Agreement or the other Related Documents or of such provision or
obligation in any other jurisdiction.
E. Amendment. This Assignment may not be amended,
supplemented, terminated or otherwise modified except by written
instrument executed by Assignor and Assignee.
[Remainder of this page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, this Assignment has been made by
Assignor as of the day and year first written above.
ASSIGNOR:
GENERAL MANUFACTURED HOUSING, INC.,
a Georgia corporation
By: /s/ Gary M. Brost
Name: Gary M. Brost
Title: President
Signed, sealed and delivered
in the presence of:
/s/ illegible
Unofficial Witness
/s/ Karen J. Mussillo
Notary Public
<PAGE>
Commission Expiration
Date: stamped
Exact Date of Execution by
Notary Public 12/21/95
[AFFIX NOTARIAL SEAL]
<PAGE>
EXHIBIT A
LEASES
Plants 2 and 3
Contract of Lease and Rent, (with option to purchase),
dated December 30, 1993 by and between Ware County
Development Authority, as Lessor, and General
Manufactured Housing, Inc., as Lessee.
Plant 4
A. Contract of Lease and Rent, (with option to purchase),
dated August 1, 1987 by and between Waycross and Ware
County Development Authority, as Lessor, and Tim-Bar
Corporation, as Lessee.
B. Lease Agreement, (with option to purchase), dated
May 26, 1995 by and between Tim-Bar Corporation, as
Lessor, and Hi-Tech Properties, Inc., as Lessee.
C. Sublease Agreement dated July 1, 1995, as amended, by
and between Hi-Tech Properties, Inc., as Lessor, and
General Manufactured Housing, Inc., as Lessee.
Vacant Land Adjacent to Plant 4
Lease Agreement dated October 10, 1995 by and between
Waycross and Ware County Development Authority, as
Lessor, and Hi-Tech Properties, Inc., as Lessee.
Sublease Agreement dated October 10, 1995 by and
between Hi-Tech Properties, as Lessor and General
Manufacturer Housing, Inc., as Lessee.
<PAGE>
EXHIBIT B
LESSORS
A. Ware County Development Authority. (Plants 2, 3 and 4).
B. Tim-Bar Corporation. (Plant 4).
C. Hi-Tech Properties, Inc. (Sublessor, Plant 4; Lessor,
vacant land adjacent to Plant 4)
<PAGE>
EXHIBIT 10.28
Plant II & III
AFTER RECORDING RETURN TO:
Catherine Patton, Esq.
Katten Muchin & Zavis
525 W. Monroe, Suite 1600
Chicago, ILL 60661-3693
SHORT FORM LEASE
THIS SHORT FORM LEASE, made and entered into as of this
21 day of December, 1995 by and between Waycross and Ware
County Development Authority and (hereinafter called "Lessor")
and General Manufactured Housing, Inc. (hereinafter called
"Lessee");
W I T N E S S E T H :
WHEREAS, Lessor and Lessee entered into a Lease dated
December 30, 1993 (hereinafter called the "Lease") which Lease is
incorporated herein in full as if set forth herein; and
NOW, THEREFORE, know all men by these presents that for
and in consideration of the mutual covenants and agreements
herein contained and other good valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. PREMISES: Lessor has leased and rented and by
these presents does lease and rent unto Lessee, and Lessee has
leased and rented and by these presents does lease and rent from
Lessor for the term commencing December 30, 1993, and ending
December 30, 2008, and at the rental and upon the other
covenants, terms and conditions set forth in the Lease, the real
property described on Exhibit "A" attached hereto and by this
reference made a part hereof (hereinafter called the "Premises").
TO HAVE AND TO HOLD the Premises, together with all
easements, rights, and appurtenances, if any, in connection
therewith and thereunto belonging to Lessor for the term and at
the rental and upon all other covenants, terms and conditions set
forth in the Lease.
2. INCORPORATION OF LEASE AGREEMENT: All covenants,
terms and conditions of the Lease are hereby incorporated by
reference and made a part hereof. In the event of any conflict
between the Lease and this Short Form Lease, the terms and
conditions of the Lease shall control. Nothing contained in this
Short Form Lease shall be deemed to change, modify or in any
other way affect the rights, duties and obligations of Lessor and
Lessee under the Lease and nothing contained herein shall be
deemed a lease agreement or a conveyance of an estate which is in
addition to the Lease and conveyance contained in and effected by
the Lease, it being understood the Lease and this Short Form
Lease shall constitute one and the same lease agreement and
conveyance.
IN WITNESS WHEREOF, the undersigned Lessor and Lessee
have caused this Short Form Lease to be executed and sealed as of
<PAGE>
the day and year first above written:
LESSOR:
WAYCROSS AND WARE COUNTY
DEVELOPMENT AUTHORITY
Signed, sealed and
delivered by Lessor
in the presence of:
By: /s/ [illegible]
/s/ [illegible] Title: Chairman
Unofficial Witness
/s/ Gail G. Williamson Attest: /s/ [illegible]
Notary Public
Title: Secretary
Exact Date of Execution
By Notary Public: [SEAL]
[SEAL]
Commission Expiration Date:
______________________
[AFFIX NOTARIAL SEAL]
LESSEE:
Signed, sealed and
delivered by Lessee General Manufactured Housing,
in the presence of: Inc.
/s/ [illegible] By: /s/ Gary M. Brost
Unofficial Witness
Title: President
/s/ Mary E. Hamm
Notary Witness Attest: /s/ James C. DelZoppo
Exact Date of Execution Title: Assistant Secretary
By Notary Public:
_________________________
Commission Expiration Date:
_________________________
[AFFIX NOTARIAL SEAL]
[SEAL]
<PAGE>
EXHIBIT 10.29
LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES
AND RENTS AND SECURITY AGREEMENT
from
GENERAL MANUFACTURED HOUSING, INC.
to
FIRST SOURCE FINANCIAL LLP
______________________________________
Dated as of December 21, 1995
______________________________________
________________________________________________________________
________________________________________________________________
THIS INSTRUMENT IS TO BE FILED RECORD AND RETURN TO:
AND INDEXED IN THE REAL ESTATE KATTEN MUCHIN & ZAVIS
RECORDS AND IN THE INDEX OF 525 West Monroe
FINANCING STATEMENTS. THIS Suite 1600
INSTRUMENT CONVEYS A SECURITY Chicago, Illinois 60661
INTEREST IN GOODS WHICH ARE OR Attn: Catherine Patton, Esq.
ARE TO BECOME FIXTURES
<PAGE>
THIS LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES AND RENTS AND
SECURITY AGREEMENT ("Mortgage") is made as of the 21st day, of
December, 1995, by GENERAL MANUFACTURED HOUSING, INC., a Georgia
corporation and successor by merger with GMH Acquisition Corp., a
Delaware corporation, with its principal place of business at
2255 Industrial Boulevard, Waycross, Georgia 31501 ("Mortgagor"),
to and for the benefit of FIRST SOURCE FINANCIAL LLP, an Illinois
registered limited liability partnership ("Mortgagee"), with an
office at c/o First Source Financial, Inc., 2850 West Golf Road,
West Tower, 5th Floor, Rolling Meadows, Illinois 60008.
RECITALS:
A. Mortgagor is the Lessee of the Premises (this and all
other capitalized terms used but not elsewhere defined herein are
defined in Section 1.1 or in the Credit Agreement) and Mortgagor
is the owner or lessee of the Improvements.
B. Pursuant to the terms of the Credit Agreement,
Mortgagee has agreed to make certain loans and other financial
accommodations to Mortgagor.
C. The Loans are evidenced by the Notes.
D. One of the conditions precedent to the obligation of
<PAGE>
Mortgagee to make the Loans is the execution and delivery by
Mortgagor of this Mortgage.
ARTICLE I
DEFINITIONS AND DETERMINATIONS
1.1 Definitions. Capitalized terms used but not elsewhere
defined in this Mortgage shall have the meanings ascribed thereto
in the Credit Agreement. When used in this Mortgage, the
following terms shall have the following meanings:
Construction Contracts: any contracts executed by
Mortgagor with any provider of goods or services in
connection with any construction undertaken on, or services
performed in connection with, the Premises or the
Improvements.
Credit Agreement: that certain Secured Credit Agreement
dated as of December 21, 1995 between Mortgagor and
Mortgagee, as the same may be amended, modified or
supplemented after the date hereof.
Deposits: all deposits (i) received by Mortgagor from
third parties (including all earnest money sales deposits)
or (ii) deposited by Mortgagor with Mortgagee or third
parties, including deposits pertaining to utility services,
real estate taxes, special assessments and payment of
insurance premiums.
Documents: any mortgage, deed of trust, assignment of
leases, assignment of rents, note, indemnification
agreement, security agreement, financing statement,
affidavit, assignment of insurance, loss payee endorsement,
mortgage title insurance policy, opinion letter, waiver
letter, estoppel letter, consent letter, insurance
certificate and any other similar documents.
Encumbrances: all Liens, liabilities, claims, debts,
exceptions, security interests, assessments, levies,
charges, taxes and impositions relating to all or any
portion of the Mortgaged Property.
Equipment: all apparatus, machinery, equipment,
furniture, fixtures, fittings, goods, materials, supplies
and chattels of any and every kind and nature whatsoever now
or hereafter used, attached to, installed or located in or
on the Premises and/or the Improvements, including any item
used to supply heat, gas, air conditioning, water, light,
electricity, power, plumbing, refrigeration, sprinkling,
ventilation, mobility, communication, incineration,
recreation, laundry service or any other related services.
Event of Default: each of the Events of Default set
forth in the Credit Agreement.
Future Advances: all advances made by Mortgagee under
the Credit Agreement after the Closing Date to or on behalf
of Mortgagor.
<PAGE>
Imposts: any disbursements made in accordance with the
terms hereof for the payment of taxes, levies or insurance
on the Premises.
Improvements: the buildings and improvements now or
hereafter located on the Premises, all tenements, easements,
rights-of-way, hereditaments and appurtenances now and/or at
any time hereafter situated on such real estate and all
roads, alleys, streets, passages and other public ways
abutting such real estate, whether before or after vacation
thereof and whether in existence as of the date hereof or
created after the date hereof.
Leases: collectively, all (i) present and future
leases, subleases, agreements, tenancies, subtenancies,
licenses, occupancy agreements, concessions and franchises
of Mortgagor's present and future right, title, and interest
in and to the Premises, the Improvements and/or the
Mortgagor Lease (hereinafter defined), (ii) deposits of
money as advance rent or for security under any of the
Leases and (iii) guaranties of performance under the items
described in clauses (i) and (ii) preceding.
Mortgaged Property: collectively, all of Mortgagor's
present and future estate, right, title, and interest in and
to the following:
(a) the leasehold estate(s) created by those
certain lease agreement(s) (as amended "Mortgagor
Lease") described in EXHIBIT A hereto and any and all
rights and options under the Mortgagor Lease, including
but not limited to any option to purchase;
(b) the Premises;
(c) the Improvements;
(d) the Rents;
(e) the Leases;
(f) all Plans;
(g) all Deposits;
(h) all Permits;
(i) all Equipment;
(j) all Construction Contracts;
(k) all present and future judgments, awards of
damages and settlements made as a result or in lieu of
any taking of all or any part of the Premises,
Improvements, Equipment and/or Leases under the power
of eminent domain, or for any damage thereto as a
result of any such taking;
(1) all insurance policies in force or effect
<PAGE>
insuring the Premises, the Improvements, the Rents, the
Leases or the Equipment;
(m) rights arising out of Mortgagor's interest in
the Premises and the Improvements to (i) the payment of
money, (ii) accounts receivable, (iii) reserves, (iv)
deferred payments, (v) refunds and (vi) cost savings;
(n) all development and use rights with respect
to the Premises, the Improvements and/or the Leases;
(o) all chattel paper, instruments, documents,
notes, drafts and letters of credit, other than letters
of credit in favor of Mortgagee, which arise from or
relate to (i) construction on the Premises or (ii) the
Premises and Improvements generally;
(p) all causes of action and proceeds thereof for
any damage or injury to the Premises or the
Improvements or any other portion of the Mortgaged
Property described above, in addition to those
described in clause (k) above, or breach of warranty in
connection with the construction of all or any portion
of the Improvements; and
(q) all proceeds (including condemnation and
insurance proceeds) of, additions to, substitutions
for, and changes in each and every one of the
foregoing.
Mortgage Lien: the Lien in favor of Mortgagee represented by
this Mortgage.
Mortgagor's Obligations: (i) any and all Indebtedness due
or to become due, now existing or howsoever arising of Mortgagor
to Mortgagee pursuant to the terms of the Credit Agreement and
the Related Documents, including, without limitation, all (A)
advances made in accordance with the terms hereof to protect and
preserve the value of the Mortgaged Property and the priority of
the Mortgage Lien and (B) Future Advances and (ii) the
performance of the covenants of Mortgagor contained in the Credit
Agreement and the Related Documents.
Notes: that certain Revolving Note and that certain Working
Capital Note dated December 20, 1995 by and between Mortgagor and
Mortgagee.
Permits: all permits, certificates, approvals, licenses,
applications and authorizations used in the operation of the
Premises, Improvements and/or the Subleases.
Plans: all plans and specifications, designs, surveys,
drawings, soil reports and other matters prepared for any
construction on the Premises.
Premises: the real property legally described in EXHIBIT B.
Rents: all present and future rents, royalties, issues,
avails, profits and proceeds of or from the Premises, the
Improvements, the Subleases and/or the Equipment.
<PAGE>
1.2 Certain Terms. Wherever used in this Mortgage:
1.2.1 And/Or. The term "and/or" means one or the
other or both.
1.2.2 References. All references to "Article",
"Section", "subsection", "Subparagraph", "Clause" or
"Exhibit", unless otherwise stated, shall be deemed to refer
to an Article, Section, subsection, subparagraph, clause or
Exhibit, as applicable, of this Mortgage.
1.2.3 Exhibits. Each reference to an "Exhibit" to
this Mortgage is to an Exhibit which is attached to this
Mortgage, each of which Exhibits is deemed to be a part
hereof.
ARTICLE II
CONVEYANCE
2.1 Granting Clause. To secure to the Mortgagee the
payment of Mortgagor's Obligations and the Liabilities and the
performance of all covenants and conditions contained in the
Credit Agreement and the Related Documents, and in any renewal,
extension or modification thereof, and to secure, in accordance
with Section 29-3-50, as amended, Code of Laws of South Carolina,
1976, all Future Advances, and for TEN AND NO/100 DOLLARS
($10.00) and other valuable consideration paid to Mortgagor, the
receipt and sufficiency of which are hereby acknowledged,
Mortgagor does hereby grant, bargain, sell, alien, remise,
release, convey, assign, transfer, mortgage, hypothecate, pledge,
deliver, set over, warrant and confirm unto the Mortgagee its
successors and assigns forever, all right, title and interest of
the Mortgagor in and to the Mortgaged Property.
TO HAVE AND TO HOLD the same, together with all privileges,
hereditaments, easements and appurtenances thereto belonging, to
Mortgagee and Mortgagee's successors and assigns to secure the
indebtedness herein recited and should the indebtedness secured
hereby be paid according to the tenor and effect thereof when the
same shall be due and payable and should the Mortgagor timely and
fully discharge its obligations hereunder, then the Mortgaged
Property hereby granted, conveyed and assigned shall cease and be
void, but shall otherwise remain in full force and effect.
2.2 Security Agreement and Fixture Filing. This Mortgage
constitutes a security agreement with respect to the portion of
the Mortgaged Property which consists of personal property and a
financing statement filed as a fixture filing under the Uniform
Commercial Code of the State in which the Premises are located,
covering any property which now is or later may become a fixture
attached to the Premises or the Improvements.
2.3 Absolute Assignment. This Mortgage is a present and
absolute assignment with respect to the Leases and the Rents.
2.4 Interest. Interest due and payable under the Notes may
be deferred, capitalized or accrued.
<PAGE>
ARTICLE III
FUTURE ADVANCES; LIMITATION ON AMOUNT SECURED
3.1 Future Advances. This Mortgage is given to secure not
only Mortgagor's Obligations which exist as of the Closing Date,
but also the payment of any and all Future Advances, whether such
Future Advances are obligatory or are to be made at the option of
Mortgagee.
3.2 Limitation on Amount Secured. The total amount of
Indebtedness secured by this Mortgage may decrease or increase
from time to time, but the total unpaid balance so secured at one
time shall not exceed the sum of (i) $26,000,000.00, plus (ii)
interest thereon, plus (iii) any Imposts, plus (iv) any amounts
paid by Mortgagee pursuant to Section 10.2 hereof, plus (v) all
costs and expenses incurred by Mortgagee in enforcing its rights
and remedies under this Mortgage, plus (vi) interest on the
disbursements described in clauses (iii), (iv) and (v) preceding,
which interest shall be calculated at the Default Rate.
THE MAXIMUM PRINCIPAL AMOUNT OF THE INDEBTEDNESS THAT IS OR
MAY UNDER ANY CIRCUMSTANCES BE SECURED UNDER THIS MORTGAGE
IS TWENTY-SIX MILLION AND 00/100 DOLLARS ($26,000,000.00).
3.3 Additional Mortgaged Property. If Mortgagor becomes
the fee owner or holder of any additional rights with respect to
the Premises, this Mortgage automatically shall become a Mortgage
with respect to such interest of Mortgagor in the Premises.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Mortgagor represents and warrants to Mortgagee as follows:
4.1 Title. Mortgagor (i) has full legal power and
authority to mortgage and convey its leasehold interest in the
Premises, (ii) is the holder of a valid and enforceable leasehold
interest in the Premises, as evidenced by the Mortgagor Lease
described on EXHIBIT A, free and clear of all Encumbrances except
Permitted Liens, Permitted Exceptions and (iii) the Mortgagor
Lease is unmodified and in full force and effect and no default
exists thereunder.
4.2 Location, Use of Premises, Improvements and Equipment.
The location and use of the Premises, the Improvements and the
Equipment are in compliance with all applicable laws, rules,
ordinances and regulations, including, but not limited to,
building and zoning laws, and all covenants and restrictions of
record, the failure to comply with which would have a Material
Adverse Effect. No notice of violation of such laws, rules
and/or ordinances has been issued and received by Mortgagor which
remains uncorrected.
4.3 Credit Agreement. All representations and warranties
of Mortgagor set forth in the Credit Agreement are true and
<PAGE>
correct and are deemed to be remade herein, including, without
limitation, those with respect to (i) Encumbrances, (ii)
Hazardous Materials, Environmental Laws and other environmental
matters affecting the Mortgaged Property and (iii) taxes,
assessments, levies, impositions and charges that have been or
hereafter may be imposed or assessed against all or any portion
of the Mortgaged Property.
4.4 Copy of Mortgage. Mortgagor has been furnished with a
true, correct and complete copy of this Mortgage.
4.5 Legal Counsel. Throughout the transaction contemplated
by this Mortgage, Mortgagor has retained and has been represented
by legal counsel of its own choosing.
4.6 Business Loan. The (i) Loans constitute a business
loan transaction and
(ii) proceeds of such Loans are to be utilized solely for the
purpose of carrying on the business of Mortgagor.
4.7 No Agricultural Purposes. No part of the Mortgaged
Property is used principally or primarily for agricultural or
farm purposes.
ARTICLE V
AFFIRMATIVE COVENANTS
Until Mortgagor's Obligations are paid and performed in.
full, Mortgagor agrees it shall:
5.1 Payment and Performance Under the Mortgagor Lease and
of Mortgagor's Obligations. (i) Promptly pay or perform, or
cause to be paid or performed, when due all payments and
obligations under the Mortgagor Lease, (ii) Promptly pay or
perform or cause to be paid on performed, when due all of
Mortgagor's Obligations, and (iii) fully, timely and faithfully
pay and perform all the terms, provisions, agreements and
covenants contained in the Mortgagor Lease.
5.2 Maintenance of Rights. Maintain the standing, right,
power and lawful authority to do the following: (i) possess the
portion of the Mortgaged Property which constitutes real property
and own good title to the portion of the Mortgaged Property which
constitutes personal property, (ii) carry on the business of and
operate the Mortgaged Property, (iii) enter into, execute and
deliver this Mortgage, (iv) convey and assign the interests of
Mortgagor in the Mortgaged Property to Mortgagee, (v) encumber
the Mortgaged Property to Mortgagee as provided herein and (vi)
consummate all of the transactions described in or contemplated
by this Mortgage to be consummated by Mortgagor.
5.3 Acquisition of Additional Mortgaged Property. If
Mortgagor shall acquire fee title to the Premises, execute and
deliver to Mortgagee, concurrently with and as a condition to
Mortgagor's acquisition of such fee interest, an amendment to
this Mortgage, in form reasonably satisfactory to Mortgagee,
extending the Mortgage Lien as a first lien to such fee interest.
<PAGE>
5.4 Maintenance of Permits. Obtain and maintain all Permits
where the failure to obtain and/or maintain any such Permit would
have a Material Adverse Effect.
5.5 Peaceful Possession. Remain in peaceful possession of
the Mortgaged Property and take all actions necessary to maintain
and preserve the Mortgage Lien.
5.6 Payment of Encumbrances. Promptly pay or cause to be
paid, as and when due and payable or when declared due and
payable, any Indebtedness which may become or be secured by any
Encumbrance and, immediately upon request by Mortgagee, deliver
to Mortgagee evidence satisfactory to Mortgagee of the payment
and discharge thereof.
5.7 Repairs. Make all necessary repairs, replacements and
renewals (including the replacement of any items of Equipment) to
the Mortgaged Property so that the value thereof shall not be
impaired, including, without limitation, repairing, restoring or
rebuilding any building or improvement now or hereafter on the
Premises which may become damaged or destroyed, and if any
portion of the Mortgaged Property becomes damaged or destroyed,
Mortgagor permit Mortgagee, and its agents, upon prior notice and
demand, access to the Mortgaged Property for the purpose of
inspection thereof.
5.8 Buildings and Improvements. Pay for and complete,
within a reasonable time, any building or improvement at any time
in the process of being erected upon the Premises.
5.9 Execution of Documents. Immediately upon request by
Mortgagee, at Mortgagor's sole expense, make, execute and deliver
and/or cause to be made, executed and delivered to Mortgagee, in
form and substance acceptable to Mortgagee, all Documents that
Mortgagee deems necessary to evidence, document and/or conclude
the transactions described in and/or contemplated by this
Mortgage, or reasonably required to perfect or continue perfected
the Mortgage Lien.
5.10 Compliance With Laws. Comply with all applicable laws,
rules, ordinances and regulations,including, without limitation,
building and zoning laws, and all covenants and
restrictions of record, the failure to comply with which would
have a Material Adverse Effect.
5.11 Credit Agreement. Comply with all covenants, agreements
and indemnifications contained in the Credit Agreement, including
those with respect to (i) taxes, assessments, levies, impositions
and charges as, they relate to Mortgagor or the Mortgaged
Property, (ii) delivery of financial statements, reports and
other information, (iii) insurance policies to be maintained for
the Mortgaged Property and the settlement, receipt and
application of insurance proceeds arising under such insurance
policies and (iv) Hazardous Materials, Environmental Laws and
other environmental matters as they relate to Mortgagor or the
Mortgaged Property.
5.12 Stamp Tax; Effect of Change in Laws Regarding Taxation.
<PAGE>
5.12.1 Payment of Stamp Tax. If, by the laws of the
United States of America or of any state or subdivision
thereof having jurisdiction over Mortgagor, any tax is due
or becomes due in respect of the issuance of the Notes or
the recording of this Mortgage or the Credit Agreement and
the Related Documents and unless such laws prohibit
Mortgagor from paying such tax, (i) pay such tax in the
manner required by any such law and (ii) reimburse Mortgagee
for any sums which Mortgagee may expend by reason of the
imposition of any tax on the issuance of the Notes.
5.12.2 Payment of Taxes Imposed on Mortgagee. In the
event of the enactment, after this date, of any law,
statute, rule or regulation of the United States of America
or of the State in which the Premises are located or any
other state or subdivision thereof imposing upon Mortgagee
the payment of the whole or any part of the taxes,
assessments or Liens herein required to be paid by
Mortgagor, or changing in any way the laws relating to the
taxation of mortgages or debts secured by mortgages or
Mortgagee's interest in the Premises or any other portion of
the Mortgaged Property, or the manner of collection of
taxes, so as to affect this Mortgage or Mortgagor's
Obligations or the holder thereof, then, and in any such
event, upon demand by Mortgagee, pay such taxes or
assessments or reimburse Mortgagee therefor; provided,
however, that if the opinion of counsel for Mortgagee, (i)
it might be unlawful to require Mortgagor to make such
payment, or (ii) the making of such payment might result in
the imposition of interest beyond the maximum amount
permitted by law, then and in any such event, Mortgagee may
elect, by notice in writing given to Mortgager, to declare
all of Mortgagor's Obligations to be and become due and
payable thirty (30) days from the date of giving of such
notice.
ARTICLE VI
NEGATIVE COVENANTS
Until Mortgagor's Obligations are paid and performed in
full, Mortgagor agrees it will not:
6.1 Additional Limitations. Execute, file or record any
notice limiting the maximum principal amount that may be secured
by this Mortgage.
6.2 Sale or Transfer. Sell, transfer, exchange, convey,
remove or otherwise dispose of all or any portion of the
Mortgaged Property or legal or equitable interest therein, except
to the extent permitted by the Credit Agreement.
6.3 Encumbrances.
6.3.1 Mortgaged Property. Permit any Encumbrances
to exist on the Mortgaged Property except (i) Permitted
Liens and Permitted Exceptions and (ii) Subleases, if any.
6.3.2 Acquisition of Property. Acquire any
<PAGE>
Property subject to any Encumbrances, except those
Encumbrances described in subsection 6.3.1 above.
6.4 Use of Mortgaged Property. Substantially or
materially change the use or character of any portion of the
Mortgaged Property, permit any excavation, construction, site
work or other lienable work to be performed on any portion of the
Mortgaged Property, initiate or acquiesce in any zoning variation
or reclassification of any portion of the Mortgaged Property or
commit or suffer any waste to exist on any portion of the
Mortgaged Property.
6.5 Insurance. Purchase any separate insurance concurrent
in form or contributing in the event of loss with that required
to be maintained under the Credit Agreement and the Related
Documents unless (i) Mortgagee receives prompt notice thereof and
is included thereon under a standard non-contributory mortgagee
clause acceptable to Mortgagee, (ii) such separate insurance
otherwise complies with all of the requirements of the Credit
Agreement and the Related Documents and (iii) Mortgagor delivers
to Mortgagee promptly the original policy or policies of such
insurance.
6.6 Mortgagor Lease. Amend, terminate or reject in
bankruptcy the Mortgagor Lease or surrender possession of the
Mortgaged Property, or any portion thereof, without the prior
written consent of Mortgagee.
ARTICLE VII
INSURANCE
7.1 Adjustment of Losses; Collection of Proceeds. In case
of loss or damage by fire or other insured casualty to all or any
portion of the Mortgaged Property, Mortgagee is authorized and
empowered to (i) make or file proofs of loss, and settle and
adjust any claim under insurance policies which insure against
such risks, or (ii) direct Mortgagor to agree with each insurance
company on the amount to be paid as a result of such loss. If
the insurance proceeds paid for such loss are-equal to or less
than $10,000, Mortgagor may collect such proceeds so long as (x)
Mortgagor uses such proceeds to repair, restore or rebuild the
Mortgaged Property, in such manner and under such conditions as
Mortgagee may require and (y) no Event of Default or Unmatured
Event of Default exists. If the insurance proceeds paid for such
loss are greater than $10,000, or if an Unmatured Event of
Default or Event of Default then exists, then Mortgagee is
authorized to collect such proceeds.
7.2 Application of Proceeds. Mortgagee may elect (i) to
apply insurance proceeds received by Mortgagee to the payment of
Mortgagor's Obligations, whether or not then due, or (ii) after
the payment of all expenses incurred by Mortgagee in connection
with the collection of such insurance proceeds, including,
without limitation, attorneys' fees, to make such insurance
proceeds available to Mortgagor for repair, restoration or
rebuilding of the Mortgaged Property, in such manner and under
such conditions as Mortgagee may require. In the event that
Mortgagee has permitted the insurance proceeds to be used to
restore the Mortgaged Property, Mortgagor shall (x) pay the
amount of any deficiency in such insurance proceeds in order to
restore the Mortgaged Property fully to its condition immediately
prior to the loss or damage to which such insurance proceeds
relate and (y) deliver to Mortgagee any surplus which may remain
out of such proceeds after payment of the cost of restoration to
be applied to the payment of Mortgagor's Obligations.
7.3 Failure to Collect Proceeds. Mortgagee shall not be
held responsible for (i) any failure to collect any insurance
proceeds due under the terms of any policy, regardless of the
cause of such failure, (ii) the amount of any such proceeds
ultimately paid, regardless of any negotiation by Mortgagee of
such amount, or (iii) any use by Mortgagor of such proceeds as
Mortgagee may pay over to Mortgagor.
ARTICLE VIII
CONDEMNATION
8.1 Notice; Assignment of Proceeds. Mortgagor shall notify
Mortgagee immediately of the institution or threat of institution
of any proceeding pertaining to the condemnation of any portion
of the Mortgaged Property. Mortgagee is authorized to settle all
claims for damages to any portion of the Mortgaged Property which
relate to, and collect any proceeds of any award which may be the
result of, any eminent domain or condemnation proceeding and
Mortgagor hereby assigns any and all such proceeds to Mortgagee.
8.2 Application of Proceeds. Mortgagee may elect (i) to
apply the proceeds of the award or claim received by Mortgagee
described in Section 8.1 to the payment of Mortgagor's
Obligations in accordance with the provisions of the Credit
Agreement, whether due or not, or (ii) after the payment of all
expenses incurred by Mortgagee in connection with the collection
of such proceeds, including, without limitation, attorneys' fees,
to make such proceeds available to Mortgagor for replacement of
the condemned portion of the Mortgaged Property, in such manner
and under such conditions as Mortgagee may require. In the event
that Mortgagee has permitted the proceeds of the award or claim
to be used to replace the condemned portion of the Mortgaged
Property, Mortgagor shall (x) pay the amount of any deficiency in
such proceeds in order to complete such replacement and (y)
deliver to Mortgagee any surplus which may remain out of such
proceeds after payment of the cost of replacement to be applied
to the payment of Mortgagor's Obligations.
8.3 Failure to Collect Proceeds. Mortgagee shall not be
held responsible for (i) any failure to collect any condemnation
proceeds, regardless of the cause of such failure, (ii) the
amount of any such proceeds ultimately paid, regardless of any
negotiation by Mortgagee of such amount, or (iii) any use by
Mortgagor of such proceeds as Mortgagee may pay over to
Mortgagor.
ARTICLE IX
LEASES AND RENTS
<PAGE>
9.1 Assignment. As additional security for the Mortgagor's
Obligations, the Mortgagor hereby assigns to Mortgagee all Rents
and all of Mortgagor's rights in and under all Leases. Mortgagor
hereby authorizes and directs the tenants under Leases to pay
Rents to Mortgagee upon written demand by Mortgagee, without
further consent of or notice to Mortgagor.
9.2 License to Collect. Subject to Mortgagee's rights
under Section 11, Mortgagee hereby confers upon Mortgagor a
non-exclusive license to collect and retain the Rents as they
become due and payable.
9.3 Rent Roll, Copies of Leases. Upon Mortgagee's request,
Mortgagor shall deliver to Mortgagee (i) a rent roll pertaining
to all Leases, (ii) copies of all Leases and (iii) such other
matters and information relating to any Lease as Mortgagee may
request.
ARTICLE X
BANKRUPTCY
(a) The lien of this Mortgage shall attach to all of
Mortgagor's rights and remedies at any time arising under or
pursuant to section 365(h) of the Bankruptcy Code, 11 U.S.C.
365(h), including, without limitation, all rights to remain in
possession of each part of the Premises and to enforce all rights
under the Mortgagor Lease.
(b) Mortgagor, as lessee under the Mortgagor Lease, shall
not, without Mortgagee's prior written consent, elect to treat
the Mortgagor Lease as terminated under Subsection 365(h)(1).
Any such election made without Mortgagee's consent shall be void.
(c) Mortgagor, as lessee under the Mortgagor Lease, hereby
unconditionally assigns, transfers and sets over to Mortgagee all
of Mortgagor's (i) claims and rights to the payment of damages
arising from any rejection of the Mortgagor Lease or any other
fee owner (or a trustee in bankruptcy representing the estate
thereof) of all or any part of the Premises under the Bankruptcy
Code, and (ii) rights to elect to either treat the Mortgagor
Lease as terminated under 365(h)(1)(A)(i) of the Bankruptcy Code
or to retain the right of possession and all other rights under
the Mortgagor Lease under 365(h)(1)(A)(ii) of the Bankruptcy
Code. For the purpose of applying 365(h) of the Bankruptcy Code
and Pursuant to 365(h)(1)(D), Mortgagee shall have all the
rights and powers of the lessee. Mortgagee shall have the right
to proceed in its own name or in the name of Mortgagor in respect
of any claim, suit, action or proceeding relating to the
rejection of the Mortgagor Lease including, without limitation,
the right to file and prosecute, without joining or the joinder
of Mortgagor any proofs of claim, complaints, motions,
applications, notices and other documents, in any case with
respect to the lessee, the lessor or any fee owner of all or any
part of the Premises under the Bankruptcy Code. This assignment
constitutes a present, irrevocable and unconditional assignment
of the foregoing claims, rights and remedies, and shall continue
in effect until all of the Indebtedness secured hereby shall have
<PAGE>
been satisfied and discharged in full. Any amounts received by
Mortgagee as damages arising out of the rejection of the
Mortgagor Lease as aforesaid shall be applied first to all costs
and expenses of Mortgagee (including, without limitation,
reasonable attorneys' fees and expenses) incurred in connection
with the exercise of any of its rights or remedies under this
paragraph. Mortgagor shall promptly make, execute, acknowledge
and deliver, in form and substance reasonably satisfactory to
Mortgagee, a UCC Financing Statement (Form UCC-1) and all such
additional instruments, agreements and other documents, as may at
any time hereafter be required by Mortgagee to effectuate and
carry out the assignment pursuant to this paragraph.
(d) If pursuant to Subsection 365(h)(1)(B) of the
Bankruptcy Code, 11 U.S.C. 365(h)(1)(B), Mortgagor shall seek to
offset against the rent reserve in the Mortgagor Lease the amount
of any damages caused by the nonperformance by the lessor or any
fee owner of any of their respective obligations under the
Mortgagor Lease after the rejection by the lessor or any fee
owner of the Lease (or a trustee in bankruptcy representing the
estate thereof) under the Bankruptcy Code, then Mortgagor shall,
prior to effecting such offset, notify Mortgagee of its intent to
do so, setting forth the amount proposed to be so offset and the
basis therefor. Mortgagee shall have the right to object to all
or any part of such offset that, in the reasonable judgment of
Mortgagee, would constitute a breach of the Mortgagor Lease, and
in the event of such objection, Mortgagor shall not effect any
offset of the amounts so objected to by Mortgagee. Neither
Mortgagee's failure to object as aforesaid nor any objection
relating to such offset shall constitute an approval of any such
offset by Mortgagee.
(e) If any action, proceeding, motion or notice shall be
commenced or filed in respect of the lessor under the Mortgagor
Lease or any fee owner of all or any part of the Premises, or any
interest therein, or the Mortgagor Lease in connection with any
case under the Bankruptcy Code, then Mortgagee shall have the
option, exercisable upon notice from Mortgagee to Mortgagor to
conduct and control any such litigation with counsel of
Mortgagee's choice. Mortgagee may proceed in its own name or in
the name of Mortgagor in connection with such litigation, and
Mortgagor agrees to execute any and all powers, authorizations,
consents or other documents required by Mortgagee in connection
therewith. Mortgagor shall, upon demand, pay to Mortgagee all
costs and expenses (including reasonable attorneys' fees and
expenses) paid or incurred by Mortgagee in connection with the
prosecution or conduct of any such proceedings. Mortgagor shall
not commence any action, suit, proceeding or case, or file any
application or make any motion, in respect of the Mortgagor Lease
in any such case under the Bankruptcy Code without the prior
written consent of Mortgagee.
(f) Mortgagor shall, after obtaining knowledge thereof,
promptly notify Mortgagee of any filing by or against lessor or
any fee owner of all or any part of the Premises of a petition
under the Bankruptcy Code. Mortgagor shall promptly deliver to
Mortgagee, following receipt, copies of any and all notices,
summonses, pleadings, applications and other documentation
received by such in connection with any such petition and any
proceedings related thereto.
<PAGE>
(g) If there shall be filed by or against Mortgagor a
petition under the Bankruptcy Code and Mortgagor shall determine
to reject such Lease, pursuant to Section 365(a) of the
Bankruptcy Code, then Mortgagor shall give Mortgagee not less
than twenty (20) days' prior notice of the date on which
Mortgagor shall apply to the Bankruptcy Court for authority to
reject the Mortgagor Lease. Mortgagee shall have the right, but
not the obligation, to serve upon Mortgagor within such twenty
(20) day period a notice stating that Mortgagee demands that
Mortgagor assume and assign the Mortgagor Lease to Mortgagee
pursuant to Section 365 of the Bankruptcy Code. If Mortgagee
shall serve upon Mortgagor, as applicable, notice described in
the preceding sentence, Mortgagor shall not seek to reject the
Mortgagor Lease and shall comply with the demand provided for in
the preceding sentence.
(h) Mortgagor hereby assigns and transfers to Mortgagee a
non-exclusive right, which may be exercised upon the entry of an
order for relief under the Bankruptcy Code with respect to
Mortgagor, to apply to the Bankruptcy Court under subsection
365(d)(4) of the Bankruptcy Code for an order extending the
period during which the Mortgagor Lease may be rejected or
assumed.
(i) As used in this paragraph 10, "Bankruptcy Code" means
title 11 of the United States Code as the same may be hereafter
amended. References to 365(h) or any other specific section,
subsection or paragraph of the Bankruptcy Code shall include (1)
such section, subsection, or paragraph as hereinafter re-numbered
by amendment to the Bankruptcy Code, and (2) any other similar
section, subsection, or paragraph as may be hereafter added to
the Bankruptcy Code.
ARTICLE XI
CERTAIN RIGHTS OF MORTGAGEE
11.1 Documents. In case Mortgagor fails to execute or
obtain any Documents required by Mortgagee for the perfection or
continuation of the Mortgage Lien, Mortgagor hereby appoints
Mortgagee as its true and lawful attorney-in-fact to execute or
obtain any such Documents on its behalf.
11.2 Maintenance of Mortgaged Property. If Mortgagor,
within thirty (30) days after receipt of written demand from
Mortgagee (except in cases of emergency, when no demand shall be
required), shall neglect or refuse to (i) make any payment due
pursuant to the Mortgagor Lease, (ii) keep the Mortgaged Property
in good operating condition and repair, (iii) replace or maintain
the same as herein agreed, (iv) pay the premiums for the
insurance which is required to be maintained hereunder, (v) pay
and discharge all Encumbrances as herein agreed or (vi) otherwise
perform Mortgagor's Obligations within the time periods specified
therefor (including any applicable cure periods), Mortgagee, at
its option and sole election, may cause such repairs or
replacements to be made, obtain such insurance, pay such
Encumbrances or perform such Mortgagor's Obligations. Any
amounts paid by Mortgagee in taking such action, together with
<PAGE>
interest thereon at the Default Rate until repaid by Mortgagor to
Mortgagee, shall be due and payable by Mortgagor to Mortgagee
upon demand, and, until paid, shall constitute a part of
Mortgagor's Obligations secured by this Mortgage. Mortgagee
shall not be liable to Mortgagor for failure or refusal to
exercise any such right. In making any payments pursuant to the
exercise of any such right, Mortgagee may rely upon any bills
delivered to it by Mortgagor or any such payee.
ARTICLE XII
DEFAULT AND REMEDIES
(i) Failure of Mortgagor to comply with Section 6.6 above
or (ii) the occurrence of an Event of Default under the Credit
Agreement shall constitute an Event of Default under this
Mortgage. Upon the occurrence of an Event of Default as
described in (i) immediately above or as described in Subsection
13.1.5 or the Credit Agreement, all of Mortgagor's Obligations
immediately shall mature and become due and payable.
If any other Event of Default occurs, Mortgagee may declare
all of Mortgagor's Obligations immediately due and payable,
whereupon Mortgagor's Obligations immediately shall mature and
become due and payable.
If any Event of Default occurs, Mortgagee, in its sole
discretion and at its sole election, without notice of such
election, and without further demand, may exercise any one or
more of the following rights and remedies:
12.1 Other Remedies. To the extent permitted by applicable
law, Mortgagee may exercise any one or more of the following
remedies, whether or not Mortgagor's Obligations have been
accelerated:
12.1.1 Deposits for Taxes and Insurance. Mortgagee
may require Mortgagor to deposit with Mortgagee, commencing
10 days following such request and on the first day of each
month thereafter, a sum equal to the amount of all insurance
premiums next due in respect of the insurance policies
required to be maintained under the Credit Agreement and the
Related Documents and all general and special real estate
taxes and assessments next due upon or for the Mortgaged
Property (the amount of such insurance premiums, taxes and
assessments next due to be based upon Mortgagee's reasonable
estimate, but shall include all taxes or assessments not
levied, charged, assessed or imposed separately upon the
Mortgaged Property), reduced by the amount, if any, then on
deposit with Mortgagee for such purpose, divided by the
number of months to elapse before one month prior to the
date when such insurance premiums, taxes and assessments
will become due and payable. If such Deposits are
insufficient to pay any such insurance premiums, taxes or
assessments when the same become due and payable, Mortgagor,
within 10 days after receipt of demand therefor from
Mortgagee, shall deposit such additional funds as may be
necessary to pay such insurance premiums in full. If such
Deposits exceed the amount required to pay such insurance
<PAGE>
premiums, taxes or assessments for any year, the excess
shall be credited against the next succeeding deposit or
deposits to be made by Mortgagor. Such Deposits need not be
kept separate and apart from any other funds of Mortgagee,
shall be held without any allowance of interest to Mortgagor
and shall be used for the payment of insurance premiums,
taxes and assessments on the Mortgaged Property next due and
payable when they become due; provided that Mortgagee shall
not be liable for any failure to apply such Deposits to the
payment of such insurance premiums, taxes and assessments
unless Mortgagee shall have received from Mortgagor a
request for payment accompanied by the bills for such
insurance premiums, taxes and assessments not less than
thirty days prior to the date due.
12.1.2 Leases and Rents. Mortgagee may, with or
without taking possession of the Mortgaged Property, as attorney
and agent-in-fact for Mortgagor constituted and appointed by
Mortgagor with full power of substitution (which power is coupled
with an interest and is irrevocable), in the name of Mortgagor,
Mortgagee, or both:
(a) demand, collect, settle, adjust, compromise,
and enforce, by legal proceedings or otherwise, payment
of the Rents, endorse the name of Mortgagor upon any
payments or proceeds of the Rents and deposit the same
for the account of Mortgagee and do all other acts and
things necessary, in Mortgagee's sole discretion, to
obtain control and use of the Rents;
(b) terminate the license granted to Mortgagor
hereunder to collect the Rents and thereafter Mortgagee
shall have all right, title and interest in and to the
Subleases and the Rents by virtue of the present
assignment thereof granted to Mortgagee hereunder;
(c) require Mortgagor to deliver to Mortgagee the
originals of the Subleases, with appropriate
endorsement and/or other specific evidence of
assignment thereto to Mortgagee, which endorsement
and/or assignment shall be in form and substance
acceptable to Mortgagee;
(d) notify any of the obligors under the
Subleases that the Subleases have been assigned to
Mortgagee and direct such obligors thereafter to make
all payments due from them under the Subleases directly
to Mortgagee; and
(e) require Mortgagor to direct all obligors of
the Subleases to make all payments due them under the
Subleases directly to Mortgagee.
Notwithstanding anything in this subsection 11.2.2 to the
contrary, under no circumstances shall Mortgagee have any duty to
produce Rents from the Mortgaged Property. Regardless of whether
or not Mortgagee, in person or by agent, takes actual possession
of the Premises and Improvements, Mortgagee is not and shall not
be deemed to be (i) a "mortgagee in possession" for any purpose;
(ii) responsible for performing any of the obligations of the
<PAGE>
lessor under any Sublease; (iii) responsible for any waste
committed by lessees or any other parties, any dangerous or
defective condition of the Mortgaged Property, or any negligence
in the management, upkeep, repair or control of the Mortgaged
Property; or (iv) liable in any manner for the Mortgaged Property
or the use, occupancy, enjoyment or operation of all or any part
thereof.
12.1.3 Other Remedies. Mortgagee may exercise any other
rights and remedies then available to Mortgagee under this
Mortgage, the Notes, the Credit Agreement and the other Related
Documents and any applicable laws.
12.2 Foreclosure.
12.2.1 Acceleration of Loans; Foreclosure. Upon the
occurrence of an Event of Default the entire balance of the
Loans, including all accrued interest, shall, at the option of
Mortgagee, become immediately due and payable. Upon failure to
pay the Loans in full at any stated or accelerated maturity,
Mortgagee may foreclose the lien of this Mortgage and take such
other actions as provided by law or in the Credit Agreement and
the Related Documents or by judicial proceeding.
12.2.2 Mortgagee's Power of Enforcement. If an Event of
Default shall have occurred, Mortgagee may, either with or
without entry or taking possession as hereinabove provided or
otherwise, proceed by suit or suits at law or in equity or by any
other appropriate proceeding or remedy: (a) to enforce payment of
the Notes or the performance of any term hereof or any other
right; (b) to foreclose this Mortgage and to sell, as an entirety
or in separate lots or parcels, the Mortgaged Property, under the
judgment or decree of a court or courts of competent
jurisdiction; and (c) to pursue any other remedy available to it.
Mortgagee shall take action either by such proceedings or by the
exercise of its powers with respect to entry or taking
possession, or both, as Mortgagee may determine.
12.2.3 Mortgagee's Right to Enter and Take Possession,
Operate and Apply Income.
(a) If an Event of Default shall have occurred,
Mortgagor, upon demand of Mortgagee, shall forthwith surrender to
Mortgagee the actual possession, and if and to the extent
permitted by law, Mortgagee itself, or by such officers or agents
as it may appoint, may enter and take possession of all the
Mortgaged Property, and may exclude Mortgagor and its agents and
employees wholly therefrom, and may have joint access with
Mortgagor to the books, papers and accounts of Mortgagor.
(b) If Mortgagor shall for any reason fail to surrender
or deliver the Mortgaged Property or any part thereof after
Mortgagee's demand, Mortgagee may obtain a judgment or decree
conferring on Mortgagee the right to immediate possession or
requiring Mortgagor to deliver immediate possession of all or
part of the Mortgaged Property to Mortgagee along with all books,
papers and accounts of Mortgagor, the entry of which judgment or
decree Mortgagor hereby, specifically consents.
(c) Mortgagor shall pay to Mortgagee, upon demand, all
<PAGE>
reasonable costs and expenses of obtaining such judgment or
decree and reasonable compensation to Mortgagee, its attorneys
and agents, and all such costs, expenses and compensation shall,
until paid, be secured by the lien of this Mortgage.
(d) Upon every such entering upon or taking of
possession, Mortgagee may hold, store, use, operate, manage and
control the Mortgaged Property and conduct the business thereof,
and, from time to time:
(i) make all necessary and proper maintenance,
repairs, renewals, replacements, additions, betterments and
improvements thereto and thereon and purchase or otherwise
acquire additional fixtures, personalty and other property;
(ii) insure or keep the Mortgaged Property
insured;
(iii) manage and operate the Mortgaged Property and
exercise all the rights and powers of Mortgagor in its name
or otherwise, with respect to the same;
(iv) enter into agreements with others to exercise
the powers herein granted Mortgagee:
all as Mortgagee in its reasonable judgment from time to time may
determine; and Mortgagee may collect and receive all the income,
revenues, rents, issues and profits of the same, including those
past due as well as those accruing thereafter; and shall apply
the monies so received by Mortgagee in such priority as Mortgagee
may determine to (1) the reasonable compensation, expenses and
disbursements of the agents and attorneys; (2) the cost of
insurance, taxes, assessments and other proper charges upon the
Mortgaged Property or any part thereof; (3) the deposits for
taxes and assessments and insurance premiums due; and (4) the
payment of accrued interest on the Notes.
Mortgagee shall surrender possession of the Mortgaged
Property to Mortgagor only when all that is due upon such
interest, tax and insurance deposits and principal installments,
and under any of the terms of this Mortgage, shall have been paid
and all defaults made good. The same right of taking possession,
however, shall exist if any subsequent Event of Default shall
occur and be continuing.
12.2.4 Leases. Mortgagee, at its option, is
authorized to foreclose this Mortgage subject to the rights
of any sub-tenants of the Mortgaged Property, and the
failure to make any such sub-tenants parties defendant to
any such foreclosure proceedings and to foreclose their
rights will not be, nor be asserted by Mortgagor to be, a
defense to any proceedings instituted by Mortgagee to
collect the sums secured hereby or to collect any deficiency
remaining unpaid after the foreclosure sale of the Mortgaged
Property.
12.2.5 Purchase by Mortgagee. Upon any such
foreclosure sale, Mortgagee may bid for and purchase the
Mortgaged Property and, upon compliance with the terms of
sale, may hold, retain and possess and dispose of such
<PAGE>
property in its own absolute right without further
accountability.
12.2.6 Application of Indebtedness Toward Purchase
Price. Upon any such foreclosure sale, Mortgagee may, if
permitted by law, after allowing for the proportion of the
total purchase price required to be paid in cash and for the
costs and expenses of the sale, compensation and other
charges, in paying the purchase price apply any portion of
or all sums due to Mortgagee under the Notes, this Mortgage
or any other instrument securing the Notes, in lieu of cash,
to the amount which shall, upon distribution of the net
proceeds of such sale, be payable thereon.
12.2.7 Waiver of Appraisement, Valuation, Stay,
Extension, and Redemption Laws. Mortgagor agrees to the
full extent permitted by law that in case of an Event of
Default on its part hereunder, neither Mortgagor nor anyone
claiming through or under it shall or will set up, claim or
seek to take advantage of any appraisement, valuation, stay,
extension or redemption laws now or hereafter in force, in
order to prevent or hinder the enforcement or foreclosure of
this Mortgage, or the absolute sale of the Mortgaged
Property or the final and absolute putting into possession
thereof, immediately after such sale, of the purchasers
thereat, and Mortgagor, for itself and all who may at any
time claim through or under it, hereby waives, to the full
extent that it may lawfully so do, the benefit of all such
laws, and any and all right to have the assets comprising
the Mortgaged Property marshalled upon any foreclosure of
the lien hereof and agrees that Mortgagee or any court
having jurisdiction to foreclose such lien may sell the
Mortgaged Property in part or as an entirety.
12.2.8 Receiver. If an Event of Default shall have
occurred, Mortgagee, to the extent permitted by law and
without regard lo the value or occupancy of the security,
shall be entitled as a matter of right if it so elects to
the appointment of a receiver to enter upon and take
possession of the Mortgaged Property and to collect all
rents, revenues, issues, income, products and profits
thereof and apply the same as the court may direct. The
receiver shall have all rights and powers permitted under
the laws of the state where the Land is located and such
other powers as the court making such appointment shall
confer. The expenses, including receiver's fees, attorney's
fees, costs and agent's compensation, incurred pursuant to
the powers herein contained shall be secured by this
Mortgage. The right to enter and take possession of and to
manage and operate the Mortgaged Property, and to collect
the rents, issues and profits thereof, whether by a receiver
or otherwise, shall be cumulative to any other right or
remedy hereunder or afforded by law, and may be exercised
concurrently therewith or independently thereof. Mortgagee
shall be liable to account only for such rents, issues and
profits actually received by Mortgagee, whether received
pursuant to this Paragraph or Paragraph 12.2.2.
Notwithstanding the appointment of any receiver or other
custodian, Mortgagee shall be entitled as secured party
hereunder to the possession and control of any cash,
<PAGE>
deposits, or instruments at the time held by, or payable or
deliverable under the terms of this Mortgage to, Mortgagee.
12.2.9 Suits to Protect the Mortgaged Property.
Mortgagee shall have the power and authority to institute
and maintain any suits and proceedings as Mortgagee may deem
advisable (a) to prevent any impairment of the Mortgaged
Property by any acts which may be unlawful or any violation
of this Mortgage, (b) to preserve or protect its interest in
the Mortgaged Property, and (c) to restrain the enforcement
of or compliance with any legislation or other governmental
enactment, rule or order that may be unconstitutional or
otherwise invalid, if the enforcement of or compliance with
such enactment, rule or order might impair the security
hereunder or be prejudicial to Mortgagee's interest.
12.2.10 Proofs of Claim. In the case of any
receivership, insolvency, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial
proceedings affecting Mortgagor, any person, partnership or
corporation guaranteeing or endorsing any of Mortgagor's
Obligations, its creditors or its property, Mortgagee, to
the extent permitted by law, shall be entitled to file such
proofs of claim and other documents as may be necessary or
advisable in order to have its claims allowed in such
proceedings for the entire amount due and payable by
Mortgagor under the Notes, this Mortgage and any other
instrument securing the Notes, at the date of the
institution of such proceedings, and for any additional
amounts which may become due and payable by Mortgagor after
such date.
12.2.11 Mortgagor to Pay the Notes on Any Default in
Payment; Application of Monies by Mortgagee.
(a) If default shall be made in the payment of
any amount due under the Notes, this Mortgage or any other
instrument securing the Notes, then, upon Mortgagee's
demand, Mortgagor will pay to Mortgagee the whole amount due
and payable under the Notes and all other sums secured
hereby; and if Mortgagor shall fail to pay the same
forthwith upon such demand, Mortgagee shall be entitled to
sue for and to recover judgment for the whole amount so due
and unpaid together with costs and expenses including the
reasonable compensation, expenses and disbursements of
Mortgagee's agents and attorneys incurred in connection with
such suit and any appeal in connection therewith, Mortgagee
shall be entitled to sue and recover judgment as aforesaid
either before, after or during the pendency of any
proceedings for the enforcement of this Mortgage, and the
right of Mortgagee to recover such judgment shall not be
affected by any taking, possession or foreclosure sale
hereunder, or by the exercise of any other right, power or
remedy for the enforcement of the terms of this Mortgage, or
the foreclosure of the lien hereof.
(b) In case of a foreclosure sale of all or any
part of the Mortgaged Property and of the application of the
proceeds of sale to the payment of the sums secured hereby,
Mortgagee shall be entitled to enforce payment of and to
<PAGE>
receive all amounts then remaining due and unpaid and to
recover judgment for any portion thereof remaining unpaid,
with interest.
(c) Mortgagor hereby agrees, to the extent
permitted by law, that no recovery of any such judgment by
Mortgagee and no attachment or levy of any execution upon
any of the Mortgaged Property or any other property shall in
any way affect the lien of this Mortgage upon the Mortgaged
Property or any part thereof or any lien, rights, powers or
remedies of Mortgagee, hereunder, but such lien, rights,
powers and remedies shall continue unimpaired as before.
(d) Any monies collected or received by Mortgagee
under this Paragraph 12.2.11 shall be applied as follows:
(i) First, to the payment of reasonable
compensation, expenses and disbursements of the
agents and attorneys; and
(ii) Second, to payment of amounts due and unpaid
under the Notes, this Mortgage and all other
instruments securing the Notes.
12.2.12 Delay or Omission No Waiver. No delay or
omission of Mortgagee or of any holder of the Notes to
exercise any right, power or remedy accruing upon any Event
of Default shall exhaust or impair any such right, power or
remedy or shall be construed to waive any such Event of
Default or to constitute acquiescence therein. Every right,
power and remedy given to Mortgagee may be exercised from
time to time and as often as may be deemed expedient by
Mortgagee.
12.2.13 No Waiver of One Default to Affect Another.
No waiver of any Event of Default hereunder shall extend to
or affect any subsequent or any other Event of Default then
existing, or impair any rights, powers or remedies consequent
thereon. If Mortgagee (a) grants forbearance or an extension
of time for the payment of any sums secured hereby; (b) takes
other or additional security for the payment thereof; (c) waives
or does not exercise any right granted in the Notes, this Mortgage
or any other instrument securing the Notes; (d) releases any
part of the Mortgaged Property from the lien of this Mortgage or any
other instrument securing the Notes; (e) consents to the
filing of any map, plat or replat of the Mortgaged Property;
(f) consents to the granting of any easement on the
Mortgaged Property; or (g) makes or consents to any
agreement changing the terms of this Mortgage or
subordinating the lien or any charge hereof, no such act or
omission shall release, discharge, modify, change or affect
the original liability under the Notes, this Mortgage or
otherwise of Mortgagor, or any subsequent purchaser of the
Mortgaged Property or any part thereof or any maker,
cosigner, endorser, surety or guarantor. No such act or
omission shall preclude Mortgagee from exercising any right,
power or privilege herein granted or intended to be granted
in case of any Event of Default then existing or of any
subsequent Event of Default nor, except as otherwise
expressly provided in an instrument or instruments executed
<PAGE>
by Mortgagee, shall the lien of this Mortgage be altered
thereby. In the event of the sale or transfer by operation
of law or otherwise of all or any part of the Mortgaged
Property, Mortgagee, without notice to any person, firm or
corporation, is hereby authorized and empowered to deal with
any such vendee or transferee with reference to the
Mortgaged Property or the indebtedness secured hereby, or
with reference to any of the terms or conditions hereof, as
fully and to the same extent as it might deal with the
original parties hereto and without in any way releasing or
discharging any of the liabilities or undertakings
hereunder.
12.2.14 Discontinuance of Proceedings; Position of
Parties Restored. If Mortgagee shall have proceeded to
enforce any right or remedy under this Mortgage by
foreclosure, entry or otherwise, and such proceedings shall
have been discontinued or abandoned for any reason, or shall
have been determined adversely to Mortgagee, then and in
every such case Mortgagor and Mortgagee shall be restored to
their former positions and rights hereunder, and all rights,
powers and remedies of Mortgagee shall continue as if no
such proceeding had occurred or had been taken.
12.2.15 Remedies Cumulative. No right, power or
remedy conferred upon or reserved to Mortgagee by the Notes,
this Mortgage or any other instrument securing the Notes is
exclusive of any other right, power or remedy, but each and
every such right, power and remedy shall be cumulative and
concurrent and shall be in addition to any other right,
power and remedy given hereunder or under the Notes or any
other instrument securing the Notes, or now or hereafter
existing at law, in equity or by statute.
12.2.16 Rights Under Uniform Commercial Code.
Mortgagee may exercise all of the rights and remedies of a
secured party under the Uniform Commercial Code of the State
in which the Premises are located with respect to the
Collateral. Pursuant to Section 9-501(4) of such Uniform
Commercial Code, Mortgagee shall have an option to proceed
with respect to both the real property portion of the
Mortgaged Property and the Collateral, in accordance with
its rights, powers and remedies with respect to the real
property, in which event the remedy and enforcement
provisions of this Mortgage in lieu of the remedy and
enforcement provisions of such Uniform Commercial Code shall
apply. Such Section 9-501(4) also permits Mortgagee to
proceed separately against the Collateral in accordance with
the remedy and enforcement provisions of such Uniform
Commercial Code. If Mortgagee shall elect to proceed
against the Collateral separately from any proceeding with
respect to the real property, Mortgagor agrees that 10 days
notice of the sale of the Collateral shall be reasonable
notice.
12.2.17 State Statutes. Mortgagee may exercise all
rights and remedies under the statutes in the State where
the Premises are located, subject to the following:
(a) if any provision in this Mortgage is
<PAGE>
inconsistent with any applicable statute in the
State where the Premises are located, such statute
shall take precedence over the provisions of this
Mortgage, but shall not invalidate or render
unenforceable any other provision of this Mortgage
that can be construed in a manner consistent with
such statute; and
(b) if any provision of this Mortgage shall grant
to Mortgagee any rights or remedies upon default of
Mortgagor which are more limited than the rights that
otherwise would be vested in Mortgagee under such
statute in the absence of such provision, Mortgagee
shall be vested with the rights granted in such
statute to the full extent permitted by law.
Without limiting the generality of the foregoing, all
expenses incurred by Mortgagee to the extent reimbursable
under such statute, whether incurred before or after any
decrees or judgment of foreclosure, and whether or not
provided for elsewhere in this Mortgage, shall be added to
Mortgagor's Obligations or to the judgment of foreclosure,
as described more fully in Section 12.2.11.
12.31 Deficiency.
12.3.1 Sale and Foreclosure. If the Mortgaged
Property (or any part thereof which remains subject to this
Mortgage) is sold pursuant to foreclosure proceedings, and
if the net proceeds of any such sale are not sufficient to
pay all of Mortgagor's Obligations then outstanding and any
other amounts provided for in any decree or judgment of
foreclosure or provided for by applicable law (the amount of
such deficiency and the deficiency described in subsection
12.3.2 hereinafter collectively referred to as the "Balance
Owed"), then the Indebtedness evidenced by the Notes shall
not be satisfied to the extent of the Balance Owed, but such
Indebtedness shall continue in existence and shall continue
to be evidenced by the Notes and shall continue to be
secured by the Credit Agreement and the Related Documents
which were in existence prior to any such decree or judgment
of foreclosure, except this Mortgage. Subject to the
requirements of applicable law, if Mortgagee shall acquire
the Mortgaged Property as a result of any such foreclosure
sale (whether by bidding all or any of Mortgagor's
Obligations or otherwise), the proceeds of such sale shall
not be deemed to include (and Mortgagor shall not be
entitled to any benefit or credit on account of) proceeds of
any subsequent sale of the Mortgaged Property by Mortgagee.
12.3.2 Foreclosure of Other Credit Agreement and the
Related Documents. Notwithstanding the provisions of
subsection 12.3.1, Mortgagor further agrees that if any
other portion of the Collateral is foreclosed judicially and
such Collateral is sold pursuant to foreclosure proceedings,
and if the proceeds of such sale (after application of such
proceeds as provided for herein and after deducting all
accrued and general and special taxes and assessments) are
not sufficient to pay Mortgagor's Obligations and any other
amounts provided for in the decree or judgment of
<PAGE>
foreclosure or provided for by applicable law, then
Mortgagor's Obligations then outstanding shall not be
satisfied to the extent of such Balance Owed, but such
Indebtedness shall continue in existence and continue to be
evidenced by the Notes and shall continue to be secured by
this Mortgage, the Credit Agreement and the other Related
Documents, which were in existence immediately prior to any
such decree or judgment of foreclosure, except each such
Related Document which pertains to the portion of the
Collateral which was the subject of any such foreclosure
sale.
ARTICLE XIII
RECONVEYANCE
Mortgagee shall release the Mortgaged Property, or such
portion thereof as previously shall not have been sold pursuant
to the terms of this Mortgage, by proper instrument upon payment
and discharge of all of Mortgagor's Obligations.
ARTICLE XIV
MISCELLANEOUS
14.1 Notices. All notices and communications under this Mortgage
shall be in writing and, if (a) forwarded by mail shall be deemed to
have been given three days after the date sent if sent by registered or
certified mail, postage prepaid, and:
(i) if to Mortgagor, addressed to Mortgagor at its address
first set forth above; or
(ii) if to Mortgagee, addressed to Mortgagee at its address
first set forth above; or
in the case of any party, at such other address as such party
may, by written notice received by the other parties to this
Mortgage, have designated as its address for notices; and (b)
notices given by telegram, telex or facsimile transmission shall
be deemed to have been given when sent if addressed to the party
to whom sent, at its address as aforesaid, or to any other
address, as to any such party, as such party shall designate in a
written notice to the other party hereto. All notices sent
pursuant to the terms of this Section 13.1 shall be deemed
received (i) if personally delivered, then on the date of
delivery, (ii) if sent by overnight. express carrier, on the next
Business Day immediately following the day sent, or (iii) if sent
by registered or certified mail, on the earlier of the fifth
Business Day following the day sent or when actually received.
14.2 Covenants Run With Land. All the covenants contained
in this Mortgage shall run with the land. Time is of the essence
for the performance by Mortgagor of its obligations under this
Mortgage.
14.3 GOVERNING LAW. THIS MORTGAGE SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED AS TO VALIDITY, INTERPRETATION,
<PAGE>
CONSTRUCTION, EFFECT AND IN ALL OTHER RESPECTS BY THE LAWS AND
DECISIONS OF THE STATE OF ILLINOIS, EXCEPT THAT THE LAWS OF THE
STATE WHERE THE PREMISES ARE LOCATED SHALL APPLY TO THE CREATION,
PRIORITY, PERFECTION AND MAINTENANCE OF THE MORTGAGE LIEN AND TO
THE ENFORCEMENT OF THE REMEDIES OF MORTGAGEE HEREUNDER AND ANY OF
ITS SUCCESSORS AND ASSIGNS.
14.4 JURISDICTION AND VENUE. SUBJECT TO THE PROVISIONS OF
ANY APPLICABLE STATUTE IN THE STATE WHERE THE PREMISES ARE
LOCATED, MORTGAGOR AGREES THAT MORTGAGEE MAY ENFORCE ANY CLAIM
ARISING OUT OF THIS MORTGAGE IN ANY STATE OR FEDERAL COURT HAVING
SUBJECT MATTER JURISDICTION AND LOCATED IN CHICAGO, ILLINOIS.
FOR THE PURPOSE OF ANY ACTION OR PROCEEDING INSTITUTED WITH
RESPECT TO ANY SUCH CLAIM, MORTGAGOR HEREBY IRREVOCABLY
DESIGNATES THE PRENTICE-HALL CORPORATION SYSTEM, INC. WITH
OFFICES ON THE DATE HEREOF AT 33 NORTH LASALLE STREET, CHICAGO,
ILLINOIS 60602, TO RECEIVE FOR AND ON BEHALF OF MORTGAGOR SERVICE
OF PROCESS IN ILLINOIS. MORTGAGOR FURTHER IRREVOCABLY CONSENTS
TO THE SERVICE OF PROCESS OUT OF SUCH COURTS BY MAILING A COPY
THEREOF, POSTAGE PREPAID, TO MORTGAGOR AND AGREES THAT SUCH
SERVICE, TO THE FULLEST EXTENT PERMITTED BY LAW, (i) SHALL BE
DEEMED IN EVERY RESPECT EFFECTIVE, SERVICE OF PROCESS UPON IT IN
ANY SUCH SUIT, ACTION OR PROCEEDING AND (ii) SHALL BE TAKEN AND
HELD TO BE PERSONAL SERVICE UPON AND PERSONAL DELIVERY TO IT.
NOTHING HEREIN CONTAINED SHALL AFFECT THE RIGHT OF AGENT OR ANY
LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
PRECLUDE AGENT OR ANY LENDER FROM BRINGING AN ACTION OR
PROCEEDING IN RESPECT OF THIS MORTGAGE IN ANY OTHER COUNTRY,
STATE OR PLACE HAVING JURISDICTION OVER SUCH ACTION. MORTGAGOR
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT LOCATED IN CHICAGO, ILLINOIS AND ANY
CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
14.5 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT
OR ANY RELATED DOCUMENT TO WHICH IT IS A PARTY, OR UNDER ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH
MAY IN THE FUTURE BE DELIVERED IN CONNECTION THEREWITH OR ARISING
FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT
OR ANY RELATED DOCUMENT, AND AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
14.6 Successors and Assigns. This Mortgage will be
binding upon and inure to the benefit of the successors and
assigns of each of Mortgagor and Mortgagee.
14.7 Severability. Any provision of this Mortgage that is
unenforceable in any state in which this Mortgage may be filed or
recorded or is invalid or contrary to the law of such state,
shall be of no effect, and in such case all the remaining terms
and provisions of this Mortgage shall continue to be fully
effective in accordance with the terms and provisions of this
Mortgage, all as though no such invalid portion ever had been
included herein.
14.8 Remedies Cumulative. All rights and remedies of
<PAGE>
Mortgagee under this Mortgage, the other Credit Agreement and any
of the other Related Documents are cumulative and concurrent and
may be exercised singularly, successively or concurrently and
Mortgagee shall have all rights, remedies and recourse available
at law or equity.
14.9 Subrogation. To the extent that any of Mortgagor's
Obligations represent funds utilized to satisfy any outstanding
Indebtedness secured by Encumbrances against all or any part of
the Mortgaged Property, to the extent permitted thereby and by
applicable law, Mortgagee shall be subrogated to any and all
Encumbrances owned or claimed by the holder of any such
outstanding Indebtedness so satisfied, regardless of whether such
Liens are assigned to Mortgagee or released by the holder(s)
thereof.
14.10 Indemnification. Mortgagor will save and hold
Mortgagee harmless of and from any and all damage, loss, cost and
expense, including, but not limited to, attorneys' fees, costs
and expenses, incurred by reason of or arising from or on account
of or in connection with any suit or proceeding threatened, filed
and/or pending brought by anyone other than Mortgagee, in or to
which Mortgagee is or may become a party by reason of or arising
from Mortgagor's Obligations, this Mortgage, the Credit Agreement
and any of the other Related Documents.
14.11 Conflicts. In the event of any conflict or
inconsistency between the terms of this Mortgage and the terms of
the Credit Agreement, the terms of the Credit Agreement shall
prevail.
14.12 No Partner, Joint Venturer. Mortgagor and Mortgagee
agree that in no event shall Mortgagee be deemed to be a partner
or a joint venturer with Mortgagor. Without limiting the
foregoing, Mortgagee shall not be deemed to be such a partner or
joint venturer on account of becoming a mortgagee in possession
or exercising any rights pursuant to this Mortgage or pursuant to
any other instrument or document evidencing or securing any of
Mortgagor's Obligations.
14.13 Waivers. Mortgagor, on behalf of itself, its
successors and assigns, to the extent permitted by law, hereby
(i) waives any and all rights of appraisement, valuation, stay,
extension and (to the extent permitted by law) redemption from
sale under any order or decree of foreclosure of this Mortgage,
(ii) waives any equitable, statutory or other right available to
it, pertaining to marshalling of assets hereunder, so as to
require the separate sales of interests in the Mortgaged Property
before proceeding against any other interest in the Mortgaged
Property, (iii) consents to and authorizes, at the option of
Mortgagee, the sale, either separately or together, of any and
all interests in the Mortgaged Property, (iv) agrees that in no
event shall Mortgagee be required to allocate any proceeds
received by Mortgagee from foreclosure sale or otherwise, to any
particular interest in the Mortgaged Property and (v) agrees that
when a sale is consummated under any decree of foreclosure of
this Mortgage, upon confirmation of such sale, the master in
equity, the sheriff or other Person making such sale, or his
successor in office, shall be and is authorized immediately to
execute and deliver to the purchaser at such sale a deed
<PAGE>
conveying the Mortgaged Property, showing the amount paid
therefor, or if purchased by the Person in whose favor the order
or decree is entered, the amount of his bid therefor.
14.14 Remedies Not Exclusive. No right or remedy of
Mortgagee hereunder is exclusive of any other right or remedy
hereunder or now or hereafter existing at law or in equity or
under the Notes, the Credit Agreement or any of the other Related
Documents, but is cumulative and in addition thereto and
Mortgagee may recover judgment thereon, issue execution therefor,
and resort to every other right or remedy available at law or in
equity or under the Notes, the Credit Agreement or any of the
other Related Documents, without first exhausting or affecting or
impairing the security or any right or remedy afforded this
Mortgage. No delay in exercising, or omission to exercise, any
such right or remedy will impair any such right or remedy or will
be construed to be a waiver of any default by Mortgagor
hereunder, or acquiescence therein, and such waiver will not
affect any subsequent default hereunder by Mortgagor of the same
or different nature. Every such right or remedy may be exercised
independently or concurrently, and when and so often as may be
deemed expedient by Mortgagee. No term or condition contained in
this Mortgage may be waived, altered or changed except as
evidenced in writing signed by Mortgagor and Mortgagee.
14.15 No Waiver by Mortgagee. Any failure of Mortgagee to
insist upon the strict performance by Mortgagor of any of the
terms and provisions of this Mortgage shall not be deemed to be a
waiver of any such terms and provisions, and Mortgagee,
notwithstanding any such failure, shall have the right at any
time thereafter to insist upon the strict performance by
Mortgagor of any and all of the terms and provisions hereof.
14.16 No Release. Except as may be provided otherwise by
applicable law, neither Mortgagor, nor any other Person now or
hereafter obligated for the payment of the whole or any part of
Mortgagor's Obligations, shall be relieved of such obligation by
reason of (i) the sale, conveyance or other transfer of the
Mortgaged Property, (ii) the failure of Mortgagee to comply with
any request of Mortgagor, or of any other Person, to take action
to foreclose this Mortgage or otherwise enforce any of the
provisions of this Mortgage, the Notes, the Credit Agreement or
any of the other Related Documents, (iii) the release, regardless
of consideration, of the whole or any part of the Collateral, or
(iv) any agreement or stipulation between any subsequent owner of
the Mortgaged Property and Mortgagee extending the time of
payment under or modifying the terms of the Notes, the Credit
Agreement, any of the other Related Documents or this Mortgage
without first having obtained the consent of Mortgagor or such
other Person. If Mortgagee shall enter into any agreement
described in clause (iv) hereof, then. notwithstanding any such
agreement, Mortgagor and all such other Persons shall continue to
be liable on account of Mortgagor's Obligations and shall
continue to make such payments according to the terms of any such
agreement of extension or modification unless expressly released
and discharged in writing by Mortgagee.
14.17 Release of Security. Mortgagee, without notice, may
release, regardless of consideration, any part of the Collateral,
without impairing or affecting the Mortgage Lien of or the
<PAGE>
priority of such Mortgage Lien over any subordinate Lien.
14.18 Notes Equally Secured. The Notes secured hereby are
equally secured without preference of one over the other by
reason of priority of maturity, negotiation or otherwise.
14.19 Captions. The captions in this Mortgage are inserted
for convenience of reference only and in no way define, describe
or limit the scope or intent of this Mortgage or any of the
provisions hereof.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this
Mortgage, Assignment
of Leases and Rents, and Security Agreement under seal as of the
day and year first above
written.
MORTGAGOR:
Signed, Sealed and GENERAL MANUFACTURED HOUSING,
delivered in the presence of: INC., a Georgia corporation
/s/[illegible] By: /s/ Gary M. Brost
Witness #1 Name: Gary M. Brost
Title: President
/s/[illegible]
Witness #2 [CORPORATE SEAL]
MORTGAGEE:
Signed, Sealed and FIRST SOURCE FINANCIAL LLP,
delivered in the presence of an Illinois Registered Limited
Liability Partnership
/s/[illegible] By: First Source Financial, Inc.
Witness #1 Its Agent Manager
By: /s/ [illegible]
Name: [illegible]
Title: [illegible]
/s/[illegible]
Witness #2 [CORPORATE SEAL]
<PAGE>
STATE OF NEW YORK )
) PROBATE
COUNTY OF NEW YORK)
PERSONALLY appeared before me the undersigned witness and
made oath that (s)he saw the within-named GENERAL MANUFACTURED
<PAGE>
HOUSING, INC., a Georgia corporation by Gary M. Brost its
President sign, seal, and as its act and deed, deliver the
within-written instrument for the uses and purposes therein
mentioned, and that (s)he with the other witness whose signature
appears above, witnessed the execution thereof.
/s/ [illegible]
WITNESS #1
SWORN TO before me this
21st day of December, 1995
/s/ Karen J. Muzzillo
Notary Public for _____________ STAMPED
My Commission Expires: August 31, 1996
STATE OF NEW YORK )
) PROBATE
COUNTY OF NEW YORK )
PERSONALLY appeared before me the undersigned witness
and made oath that (s)he saw the within-named First Source
Financial LLP, an Illinois Registered Limited Liability
Partnership, by First South Financial, Inc., its Agent/Manager,
by [illegible], its Vice President sign, seal, and as its act
and deed, deliver the within-written instrument for the uses and
purposes therein mentioned, and that (s)he with the other witness
whose signature appears above, witnessed the execution thereof.
/s/ [illegible]
WITNESS #1
SWORN TO before me this
21st day of December, 1995
/s/ Karen J. Muzzillo
Notary Public for _____________ STAMPED
My Commission Expires: August 31, 1996
<PAGE>
EXHIBIT A
DESCRIPTION OF LEASE
Lease Agreement with Option to Purchase, as amended, dated
July 10, 1995 by and between R.A. Warr and Wayne Evans, each
individually and doing business as Lamar Warehouse Co., as
Lessors, and Lamar Housing, L.L.C., as Lessee.
<PAGE>
EXHIBIT B
TRACT ONE: All that certain piece, parcel or tract of land,
together with the buildings and improvements thereon, lying,
being and situate in the Town of Lamar, County of Darlington,
State of South Carolina. Said tract being designated as Tract #1
on a plat hereinafter referred to, according to which said tract
contains 4.253 acres, more or less, and is bounded and measures
as follows on the northwest by the right-of-way of Railroad
Avenue and by lands now or formerly of E. H. Seagars and Company
and measured thereon 100 feet, more or less; on the southeast by
the old Seaboard Coast Line Railroad right-of-way, by the McClain
Subdivision, by and lands of the Estate of H. C. Galloway and of
Howard Paul, and measuring thereon 1,852.95 feet; on the
Southwest by lands now or formerly of E. H. Seagars and Company
measuring thereon 100 feet, more or less. SUBJECT HOWEVER, to
existing rights-of-way across the aforesaid property, including
the right-of-way of Railroad Avenue as shown on said plat.
TRACT TWO: All that certain piece, parcel or lot of land,
situate, lying and being in the County of Darlington, State of
South Carolina, being shown and designated as Tract No. Two (2)
on that certain plat prepared by Lind Surveying Co., dated
October 7, 1972, and recorded in the Office of the Clerk of Court
for Darlington County in Plat Book 59, Page 99. Said tract being
triangular in shape and containing 1.034 acres, as shown on said
plat; and being bounded, now or formerly, as follows: On the
north or northwest by a canal separating it from property now or
formerly of Willie J. Carter, a distance of 526.94 feet; on the
east by property now or formerly of E. H. Segrs & Company, a
distance of 182.25 feet, and on the south by Railroad Avenue, on
which it fronts and measures 494.42 feet. Be all measurements a
little more or less, and being the same property conveyed by deed
dated June 26, 1984, and recorded in the Office of the Clerk of
Court for Darlington County in Deed Book 873 at Page 697 on
June 27, 1984.
TRACT THREE: All that certain piece, parcel or lot of land,
situate, lying and being in the Town of Lamar, State of South
Carolina, and shown on that certain plat prepared for
C. H. Segars by M. E. Lind, Jr., Registered Surveyor, dated
February 6, 1980, and recorded in Plat Book _____, Page _____;
this property is bounded and measures as follows, to wit: On the
northwest by property now or formerly of William James Carter for
a distance of 254.09 feet, the boundary between the properties
being the center of a ditch running thereon; on the northeast by
property now or formerly of R. E. Reynolds for a distance of
299.02 feet; on the southeast by Railroad Avenue on which it
fronts and measures 241.61 feet; and on the southwest by property
of James Lewis for a distance of 182.25 feet; all measurements a
little more or less.
This is the same property conveyed to Coker Builders, Inc. by
deed of Southern Bank and Trust Company dated February 28, 1985,
and recorded in the Office of the Clerk of Court for Darlington
County in Deed Book 891 at Page 668 on May 3, 1985.
TRACT FOUR: All that certain piece, parcel or tract of land
lying, being and situate in the Town of Lamar, County of
Darlington, State of South Carolina. Said tract being designated
<PAGE>
as Tract #4 contains 4.5 acres, more or less, and is bounded and
measures as follows: On the northwest by the right of way to
Railroad Avenue and measuring 1,956 feet, more or less; on the
northeast by Tract #1 on said plat and measuring thereon
100 feet; on the southeast by lands of Howard Paul and measuring
thereon 1,956 feet, more or less; on the southwest by a State
Road (S-16-975) and measuring 100 feet.
For a more particular description of said tract, reference may be
had to a plat by the Lind Surveying Company dated October 7,
1972, and revised February 11, 1982, to show the above tract #4
and recorded in the Office of the Clerk of Court of Darlington
County in Plat Book 89 at Page 231.
Said properties having been conveyed to Coker Builders, Inc. by
deed of C. H. Seagars dated February 14, 1982, and recorded in
the Office of the Clerk of Court of Darlington County in Plat
Book 837 at Page 145.
TRACT FIVE: All that certain piece, parcel or lot of land,
situate, lying and being in the County of Darlington, State of
South Carolina, being shown on that certain plat prepared for
E. H. Segars by Lind Surveying Co., Registered Surveyor, dated
October 7, 1972, and recorded in the Office of the Clerk of Court
for Darlington County in Plat Book 89 at Page 231. This property
lies at the fork of two public roads; e.g. Railroad Avenue and
McLain Street which roads comprise the North, East and South
boundaries; on the West by property now or formerly of
E. H. Segars measuring 100 feet along a bearing of S 320 degrees
40' East. Said tract being irregular in shape and comprising
.230 acres together with the buildings and improvements thereon
lying.
<PAGE>
EXHIBIT 10.31
MANAGEMENT AGREEMENT
This Management Agreement, dated as of December 21st, 1995, by and
between General Manufactured Housing, Inc., a Georgia corporation (the
"Company"), and Strategic Investments & Holdings, Inc., a Delaware corporation
("Strategic").
WHEREAS, the Company desires to engage Strategic to render certain
management services to the Company and Strategic desires to provide such
services to the Company.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
Section 1. Services.
1.1 Engagement of Strategic. The Company hereby retains Strategic to
render the management services described in this Section 1 during the term of
this Agreement, and Strategic hereby agrees to provide such services to the
Company during the term hereof.
1.2 Management Services. During the term of this Agreement,
Strategic agrees to:
(a) provide ongoing management and consulting services to the
Company, including strategic planning, marketing, consulting, financial planning
and capital budgeting, executive compensation program analysis and such other
management and consulting services as may, from time to time, be reasonably
requested by the Company;
(b) monitor the business of the Company and conduct periodic
reviews and analyses of such business as reasonably requested by the Company;
and
(c) assist the Company in developing a long-term strategic plan
with respect to the business of the Company and identify, review and analyze
merger and acquisition opportunities for the Company.
1.3 Extent of Services. In carrying out its obligations under this
Section 1, Strategic shall devote such of its time and personnel as may be
reasonably required to discharge its obligations to provide services hereunder
and shall have regard to the objectives of the Company with respect to its
business and any specific instructions from time to time communicated in writing
by the Company to Strategic with respect to the business of the Company and the
services provided hereunder. Strategic shall be free to render similar services
to others.
Section 2. Expense Reimbursement and Compensation.
2.1 Reimbursement of Expenses. Strategic shall be reimbursed within
ten (10) business days after the submission to the Company of a reasonably
detailed invoice for any out-of-pocket expenses reasonably incurred by Strategic
or any of its personnel in connection with the provision of the services
described in Section 1 hereof including, without limitation, travel, meals,
lodging, messengers or couriers; provided, that such fees and expenses shall not
exceed $50,000 per annum. In addition, each of SIHI-GMH LLC, a New York limited
liability company ("SIHI-GMH") and Bulldog Holdings LLC, a New York limited
liability company ("Bulldog") shall be reimbursed within ten (10) business days
after the submission to the Company of a reasonably detailed invoice for any out
of pocket expenses reasonably incurred by either SIHI-GMH or Bulldog in
connection with each of their filing or reporting obligations arising out of
Bulldog's investment in Holdings or SIHI-GMH's being the managing member of
Bulldog, including, without limitation, costs of preparing periodic financial
statements, tax returns and other similar items, and various filing or reporting
fees or state income or franchise taxes; provided, that such fees and expenses,
in the aggregate will not exceed $5,000 per annum.
<PAGE>
2.2 Closing Fee. At the closing of the acquisition of the stock of
the Company by GMH Acquisition Corp., Strategic shall receive from the Company,
a closing fee equal to $500,000 plus reimbursement for all expenses incurred by
it in connection with such acquisition.
2.3 Management Fee. As compensation for the services provided
pursuant to this Agreement, Strategic shall be entitled to receive from the
Company an annual fee in an amount equal to $500,000, payable as follows:
(a) $250,000 per annum (the "Base Fee"), payable in equal quarterly
installments in arrears commencing on March 31, 1996; provided that the first
such payment shall be prorated from the date hereof to such first quarterly
payment date. The Base Fee shall be adjusted annually on January 1 of each year
during the term hereof, commencing in 1997 (each, an "Adjustment Year"). The
adjustment in the Base Fee (the "Adjustment") shall be the lesser of (i) 3% per
annum or (ii) a percentage of the Base Fee equal to the percentage increase or
decrease in the United States Department of Labor, Bureau of Labor Statistics
Consumer Price Index for all Urban Consumers (CPI-U), all items, U.S. City
Average (1982-84 = 100), or any successor or substitute index, between January 1
of the year immediately prior to the Adjustment Year and December 31 of such
prior year (the "Index Year"); provided, however, in no event shall the Base Fee
ever be less than $250,000. The Adjustment shall be calculated as soon as the
Consumer Price Index information for December of the year immediately prior to
the Adjustment Year is made available, and the adjustment shall be effective as
of January 1 of the Adjustment Year. Any adjustment in the Base Fee pursuant to
this Section 2.3 shall be added or subtracted, as the case may be, to the then
current Base Fee being paid to Strategic, and the result thereof shall then
become the Base Fee for each successive year, until further adjusted in
accordance with the provisions of this Section 2.3.
(b) $250,000 per annum (the "Incentive Fee"), payable in equal
quarterly installments in arrears on the last day of each March, June, September
and December of each year, commencing March 31, 1996; provided, that the
Incentive Fee shall be paid pro rata with the dividends payable by GMH Holdings,
Inc. ("Holdings") on its Series A Preferred Stock, so that if, for example, 50%
of the dividends owed on the Series A Preferred Stock were paid, then 50% of the
Incentive Fee would be paid to Strategic. If any quarterly installment of the
Incentive Fee under this Section 2.3(b) hereof is not paid to Strategic when due
hereunder solely because of a restriction contained in any applicable lending
documents to which the Company is a party, such Incentive Fee shall be accrued
by the Company and shall be payable to Strategic by the Company as soon
thereafter as permitted under such lending documents.
Section 3. Termination.
3.1 Term of Agreement. Subject to Section 3.2 hereof, this Agreement
shall become effective on the date hereof and shall continue in force and effect
until December 31, 2010.
3.2 Termination.
(a) Right of Termination. The Company may terminate this Agreement
upon sixty (60) days' prior written notice to Strategic if Strategic is in
material breach of its obligations under this Agreement, and Strategic may
terminate this Agreement upon sixty (60) days' prior written notice to the
Company.
(b) Effect of Termination. From and after the effective date of any
termination, whether pursuant to Section 3.2(a) hereof or at the end of the term
specified in Section 3.1 hereof, the Company shall have no liability to
Strategic for any compensation hereunder (other than compensation accrued prior
to the effective date of termination and remaining unpaid and a reasonable fee
for any final report requested pursuant to this Section), and Strategic shall
have no obligation to perform services hereunder. Upon effectiveness of the
termination of this Agreement, Strategic shall provide the Company all records
<PAGE>
relating to the Company and shall, upon request of the Company, render a final
report to the Company with respect to the services provided hereunder.
Notwithstanding anything to the contrary contained herein, in the event of
termination of this Agreement, the Company shall remain obligated to reimburse
Bulldog and SIHI-GMH for their expenses incurred in accordance with the
provisions of Section 2.1 hereof.
Section 4. Miscellaneous
4.1 SUBORDINATION. STRATEGIC HEREBY ACKNOWLEDGES THAT THE INCENTIVE
FEE PAYABLE TO IT BY THE COMPANY HEREUNDER IS AND SHALL BE SUBORDINATE AND
SUBJECT TO THE CLAIMS AND RIGHTS OF FIRST SOURCE FINANCIAL LLP, HOLDERS OF THE
SENIOR SUBORDINATED NOTES, RFE INVESTMENT PARTNERS V, L.P., THE STATE TREASURER
OF MICHIGAN, AS CUSTODIAN AND STERLING COMMERCIAL CAPITAL, INC. (COLLECTIVELY,
THE "INVESTORS") PURSUANT TO AND TO THE EXTENT PROVIDED IN THE SUBORDINATION
AGREEMENT, DATED AS OF THE DATE HEREOF, BY AND BETWEEN HOLDINGS, THE COMPANY,
STRATEGIC AND THE INVESTORS.
4.2 Assignment. Neither Strategic nor the Company may assign this
Agreement or their respective rights or obligations hereunder to any third
party; provided, however, that Strategic may assign any or all of its rights or
obligations hereunder to an entity which controls, is controlled by, or is under
common control with Strategic.
4.3 Notices. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be sent by registered or
certified mail, postage prepaid, or shall be delivered personally or by
overnight courier, or shall be sent by telecopy or similar means of simultaneous
transmission and receipt to the party to whom it is to be given at the address
or telecopy number of such party set forth below (or to such other address as
the party shall have furnished in writing in accordance with the provisions of
this Section 4.3):
(a) If to the Company, to:
General Manufactured Housing, Inc.
P.O. Box 1449
Waycross, GA 31502-1449
Attention: Gary M. Brost
Telecopy: (912) 285-1397
(b) If to Strategic, to:
Strategic Investments & Holdings, Inc.
The Cyclorama Building
369 Franklin Street
Buffalo, New York 14202
Attention: Gary M. Brost
Telecopy: (716) 857-6490
Notices shall be deemed to have been given on the fifth day after being so
mailed, the next business day after delivery to an overnight courier, when sent
by telecopier (with receipt acknowledged) or upon receipt when delivered
personally.
4.4 Waiver; Remedies. Any waiver by any party of a breach of any
provision of this Agreement shall not operate as or be construed to be a waiver
of any other breach of this Agreement. The failure of a party to insist upon
strict adherence to any term of this Agreement on one or more occasions will not
be considered a waiver or deprive that party of the right thereafter to insist
upon strict adherence to that term or any other term of this Agreement. Any
waiver hereunder must be in writing. All rights and remedies which the Company
or Strategic may have under this Agreement are cumulative and in addition to any
rights or remedies under applicable law or in equity.
4.5 Binding Effect. The provisions of this Agreement shall be
binding upon and inure to the benefit of the Company and Strategic and their
respective successors and permitted assigns.
<PAGE>
4.6 No Third Party Beneficiaries. Except for SIHI-GMH and Bulldog,
this Agreement does not create, and shall not be construed as creating, any
rights enforceable by any person not a party to this Agreement. Each of SIHI-GMH
and Bulldog shall be entitled to enforce this Agreement as if they were parties
hereto.
4.7 Headings. The headings in this Agreement are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
4.8 Counterparts; Governing Law. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. This Agreement
shall be governed by and construed in accordance with the laws of New York,
without giving effect to conflict of laws principles.
4.9 Relationship of Parties. The parties agree that Strategic in the
performance of its duties hereunder is an independent contractor acting as the
agent of the Company, and that nothing contained herein shall constitute either
party as employee or legal representative of the other for any purpose
whatsoever, nor shall this Agreement be deemed to create any form of business
organization, joint venture, or partnership between the parties hereto or as
giving Strategic any type of property interest in the Company, nor is any party
granted any right or authority to assume or create any obligation or
responsibility on behalf of the other party, except as otherwise provided
herein, nor shall any party be in any way liable to the other party for any debt
of the other. The Company acknowledges that neither Strategic nor any of its
principals is registered under any federal or state law, rule or regulation as
an investment advisor or securities broker or dealer and agrees that Strategic,
unless and until registered, shall not be subject to restrictions thereunder in
its relationship with the Company, including without limitation the nature and
amount of compensation received for services hereunder.
4.10 Modification. This Agreement sets forth the entire understanding
of the parties with respect to the subject matter hereof and may be modified
only by a written instrument duly executed by each party hereto.
4.11 Indemnification. The Company hereby agrees to indemnify and hold
Strategic harmless from, against, for and in respect of any loss, obligation,
claim, liability, settlement payment, award, judgment, fine, penalty, interest
charged, expense, damage or deficiency or other charge or expense (including
attorneys fees and disbursements and related court filing fees, court costs,
witness fees and similar matters) incurred or required to be paid as a result of
or arising out of its entering into this Agreement or its providing services
hereunder; provided, however, that Strategic shall not be entitled to any
indemnification pursuant to this Section 4.11 if a court of competent
jurisdiction has finally determined that Strategic is guilty of actual fraud or
willful misconduct.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
GENERAL MANUFACTURED HOUSING, INC.
By: /s/ Gary M. Brost
-------------------------------
Name: Gary M. Brost
Title: President
STRATEGIC INVESTMENTS & HOLDINGS,
INC.
By: /s/ James C. DelZoppo
-------------------------------
Name: James C. DelZoppo
Title: Vice President
<PAGE>
EXHIBIT 10.32
GUARANTY BY CORPORATION
WAYCROSS , GEORGIA
(County) (State)
December 30, 1993
For the good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and to induce THE PATTERSON BANK
(herein, with its participants, successors and assigns, called "Bank"),
at its option, at any time or from time to time to make loans or extend
other accommodations to or for the account of WAYCROSS AND WARE COUNTY
DEVELOPMENT AUTHORITY (herein called "Borrower") or to engage in any other
transactions with Borrower, the undersigned hereby absolutely and
unconditionally guarantees to the Bank the full and prompt payment when due,
whether at maturity or earlier by reason of acceleration or otherwise, of
the debts, liabilities and obligations described as follows:
A. If this [ ] is checked, the undersigned guarantees to Bank
the payment and performance of each and every debt, liability and
obligation of every type and description which Borrower may now
or at any time hereafter owe to Bank (whether such debt,
liability or obligation now exists or is hereafter created or
incurred, and whether it is or may be direct or indirect, due or
to become due, absolute or contingent, primary or secondary,
liquidated or unliquidated, or joint, several or joint and
several; all such debts, liabilities and obligations being
hereinafter collectively referred to as the "Indebtedness").
B. If this [ ] is checked, the undersigned guarantees to Bank
the payment and performance of the debt, liability or obligation
of Borrower to Bank evidenced by or arising out of the following:
ADJUSTABLE RATE INSTALLMENT PROMISSORY NOTE DATED 12/30/93 IN THE
PRINCIPAL SUM OF $613,727.63 and any extensions, renewals or
replacements thereof (hereinafter referred to as the
"Indebtedness").
The undersigned further acknowledges and agrees with Bank that:
1. No act or thing need occur to establish the liability of the
undersigned hereunder, and no act or thing, except full payment and
discharge of all indebtedness, shall in any way exonerate the undersigned
or modify, reduce, limit or release the liability of the undersigned
hereunder.
2. If paragraph A is checked, this is an absolute, unconditional and
continuing guaranty of payment of the Indebtedness and shall continue to be
in force and be binding upon the undersigned, whether or not all
Indebtedness is paid in full, until this guaranty is revoked prospectively
as to future transactions, by written notice actually received by the Bank,
and such revocation shall not be effective as to Indebtedness existing or
committed for at the time of actual receipt of such notice by the Bank, or
as to any renewals, extensions and refinancings thereof. The undersigned
represents and warrants to the Bank that the undersigned has a direct and
substantial economic interest in Borrower and expects to derive substantial
benefits therefrom and from any loans and financial accommodations
resulting in the creation of Indebtedness guaranteed hereby, and that this
guaranty is given for a corporate purpose. The undersigned agrees to rely
<PAGE>
exclusively on the right to revoke this guaranty prospectively as to future
transactions, in accordance with this paragraph, if at any time, in the
opinion of the directors or officers of the undersigned, the corporate
benefits then being received by the undersigned in connection with this
guaranty are not sufficient to warrant the continuance of this guaranty as
to future Indebtedness. Accordingly, so long as this guaranty is not
revoked prospectively in accordance with this paragraph, the Bank may rely
conclusively on a continuing warranty, hereby made, that the undersigned
continues to be benefited by this guaranty and the Bank shall have no duty
to inquire into or confirm the receipt of any such benefits, and this
guaranty shall be effective and enforceable by the Bank without regard to
the receipt, nature or value of any such benefits.
3. If the undersigned shall be dissolved or shall be or become
insolvent (however defined) then the Bank shall have the right to declare
immediately due and payable, and the undersigned will forthwith pay to the
Bank, the full amount of all Indebtedness whether due and payable or
unmatured. If the undersigned voluntarily commences or there is commenced
involuntarily against the undersigned a case under the United States
Bankruptcy Code, the full amount of all Indebtedness, whether due and
payable or unmatured, shall be immediately due and payable without demand
or notice thereof.
4. The liability of the undersigned hereunder shall be limited to a
principal amount of $________________ (if unlimited or if no amount is
stated, the undersigned shall be liable for all Indebtedness, without any
limitation as to amount), plus accrued interest thereon and all attorneys'
fees, collection costs and enforcement expenses referable thereto.
Indebtedness may be created and continued in any amount, whether or not in
excess of such principal amount, without affecting or impairing the
liability of the undersigned hereunder. The Bank may apply any sums
received by or available to the Bank on account of the Indebtedness from
Borrower or any other person (except the undersigned), from their
properties, out of any collateral security or from any other source to
payment of the excess. Such application of receipts shall not reduce,
affect or impair the liability of the undersigned hereunder. If the
liability of the undersigned is limited to a stated amount pursuant to this
paragraph 4, any payment made by the undersigned under this guaranty shall
be effective to reduce or discharge such liability only if accompanied by a
written transmittal document, received by the Bank, advising the Bank that
such payment is made under this guaranty for such purpose.
5. The undersigned will not exercise or enforce any right of
contribution, reimbursement, recourse or subrogation available to the
undersigned against any person liable for payment of the Indebtedness, or
as to any collateral security therefor, unless and until all of the
Indebtedness shall have been fully paid and discharged.
6. The undersigned will pay or reimburse the Bank for all costs and
expenses (including reasonable attorneys' fees and legal expenses) incurred
by the Bank in connection with the protection, defense or enforcement of
this guaranty in any litigation or bankruptcy or insolvency proceedings.
THIS GUARANTY INCLUDES THE ADDITIONAL PROVISIONS ON THE REVERSE SIDE
HEREOF, ALL OF WHICH ARE MADE A PART HEREOF.
This guaranty is [ ] unsecured; [ ] secured by a mortgage or
security agreement dated _______________; [ ] secured by.
IN WITNESS WHEREOF, this guaranty has been duly executed by the
undersigned the day and year first above written
<PAGE>
GENERAL MANUFACTURED HOUSING, INC.
/S/ LANNIS L. THOMAS PRESIDENT
PRESIDENT (TITLE)
/S/ [ILLEGIBLE] SECRETARY (TITLE)
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SAM P. SCOTT The Patterson Bank WAYCROSS AND WARE COUNTY DEVELOPMENT
800 S. FLETCHER BLVD. P.O. Box 218 AUTHORITY
FERNANDINA BEACH, FL 32034 Waycross, Georgia 31502 P.O. BOX 137
WAYCROSS, GA 31502
GUARANTOR'S NAME AND ADDRESS LENDER'S NAME AND ADDRESS
"I" includes each guarantor above, "You" means the Lender,
jointly and severally. its successors BORROWER'S NAME AND ADDRESS
and assigns. "Borrower" means each person above.
</TABLE>
GUARANTY
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and to induce you, at your option,
to make loans or engage in any other transactions with borrower
from time to time, I absolutely and unconditionally guarantee the
full payment of the following debts (as defined herein) when due
(whether at maturity or upon acceleration):
PRESENT DEBT GUARANTY
[X] I absolutely and unconditionally guarantee to you the
payment and performance of the following described debt (including
all renewals, extensions, refinancings and modifications) of the
borrower: LOAN DATED 12/30/93 TO WAYCROSS AND WARE COUNTY
DEVELOPMENT AUTHORITY IN THE PRINCIPAL AMOUNT OF $613,727.63
PRESENT AND FUTURE DEBT GUARANTY
[ ] I absolutely and unconditionally guarantee to you the
payment and performance of each and every debt, of every type and
description, that the borrower may now or at any time in the future
owe you including, but not limited to, the following described
debt(s):
[ ] I absolutely and unconditionally guarantee to you the
payment and performance of each and every debt, of every type and
description, that the borrower may now or at any time in the future
owe you, up to the principal amount of $ plus
accrued interest, attorneys' fees and collection costs referable
thereto (when permitted by law), and all other amounts agreed to be
paid under all agreements evidencing the debt and securing the
payment of the debt. You may, without notice, apply this guaranty
<PAGE>
to such debts of the borrower as you may select from time to time.
DEFINITIONS - As used in this agreement, the terms "I," "we," and
"my" mean all persons signing this guaranty agreement, individually
and jointly, and their heirs, executors, administrators and
assigns.
The term "debt" means all debts, liabilities, and obligations of
the borrower (including, but not limited to, all amounts agreed to
be paid under the terms of any notes or agreements securing the
payment of any debt, liability or obligation, overdrafts, letters
of credit, guaranties, advances for taxes, insurance, repairs and
storage, and all extensions, renewals, refinancings and
modifications of these debts) whether now existing or created or
incurred in the future, due or to become due, or absolute or
contingent, except for any obligations incurred by borrower after
the date of this guaranty for which the borrower meets your
standard of creditworthiness based on the borrower's own assets and
income without the addition of a guaranty, or to which, although
you require the addition of a guaranty, the borrower chooses
someone other than me to guaranty the obligation.
APPLICABLE LAW - This agreement is governed by the law of the state
in which you are located. Any term of this agreement that does not
comply with applicable law will not be effective if that law does
not expressly or impliedly permit variations by agreement. If any
part of this agreement cannot be enforced according to its terms,
this fact will not affect the balance of this agreement.
REVOCATION - I agree that this is an absolute and continuing
guaranty. If this guaranty is limited to the payment of a specific
debt of the borrower described above, this agreement cannot be
revoked and will remain in effect until the debt is paid in full.
If this guaranty covers both the borrower's present and future
debts, I agree that this guaranty will remain binding on me,
whether or not there are any debts outstanding, until you have
actually received written notice of my revocation or written notice
of my death or incompetence.
Notice of revocation or notice of my death or incompetence will not
affect my obligations under this guaranty with respect to any debts
incurred by or for which you have made a commitment to borrower
before you actually receive such notice, and all renewals,
extensions, refinancings, and modifications of such debts. I agree
that if any other person signing this agreement provides a notice
of revocation to you, I will still be obligated under this
agreement until I provide a notice of revocation to you. If any
other person signing this agreement dies or is declared
incompetent, such fact will not affect my obligations under this
agreement.
OBLIGATIONS INDEPENDENT - I agree that I am obligated to pay
according to the terms of this guaranty even if any other person
has agreed to pay the borrower's debt. My obligation to pay
according to the terms of this guaranty shall not be affected by
the illegality, invalidity or unenforceability of any notes or
agreements evidencing the debt, the violation of any applicable
usury laws, forgery, or any other circumstances which make the
indebtedness unenforceable against the borrower.
<PAGE>
I will remain obligated to pay on this guaranty even if any other
person who is obligated to pay the borrower's debt, including the
borrower, has such obligation discharged in bankruptcy,
foreclosure, or otherwise discharged by law. In such situations,
my obligation shall include post-bankruptcy petition interest and
attorneys' fees and any other amounts which borrower is discharged
from paying or which do not otherwise accrue to borrower's
indebtedness due to borrower's discharge. I will also be obligated
to pay you, to the fullest extent permitted by law, any deficiency
remaining after foreclosure of any mortgage or security interest
securing borrower's debt, whether or not the liability of borrower
or any other obligor for such deficiency is discharged by statute
or judicial decision. If any payments by borrower to you are
thereafter set aside, recovered, rescinded, in whole or in part,
are settled by you at your discretion, or are in any way recouped
or recovered from you for any reason (including, without
limitation, the bankruptcy, insolvency, or reorganization of
borrower or any other obligor), then I am obligated to reimburse or
indemnify you for the full amount you so pay together with costs,
interest, attorneys' fees and all other expenses which you incur in
connection therewith. I also agree that if my liability is limited
to a stated principal amount (plus other agreed charges), you may
allow the borrower to incur debt in excess of the specified amount
and apply to the payment of such excess any amounts you receive for
payment of the debt from the borrower or any other person, any
amounts resulting from any collateral, or amounts received from any
other source, without affecting my obligations under this
agreement.
No modification of this agreement is effective unless in writing
and signed by you and me, except that you may, without notice to me
and without the addition of a signed writing or my approval:
(1) release any borrower or other person who may be liable for
borrower's debt, (2) release or substitute any collateral, (3) fail
to perfect any security interest or otherwise impair any
collateral, (4) waive or impair any right you may have against any
borrower or other person who may be liable for borrower's debt,
(5) settle or compromise any claim against the borrower or any
person who may be liable for the borrower's debt, (6) procure any
additional security or persons who agree to be liable for
borrower's debt, (7) delay or fail to pursue enforcement of the
debt, (8) apply amounts you receive from the borrower or other
persons to payment of the debt in any order you select, (9) make
any election with respect to the debt provided by law or any
agreement with any person liable for the debt, (10) exercise or
fail to exercise any rights you have with respect to the debt, (11)
extend new credit to the borrower, or (12) renew, extend, refinance
or modify the borrower's debt on any terms agreed to by you and the
borrower (including, but not limited to, changes in the interest
rate or in the method, time, place or amount of payment) without
affecting my obligation to pay under this guaranty.
WAIVER - I waive presentment, demand, protest, notice of dishonor,
and notice of acceptance of this guaranty. I also waive, to the
extent permitted by law, all notices, all defenses and claims that
the borrower could assert, any right to require you to pursue any
remedy or seek payment from any other person before seeking payment
under this agreement, and all other defenses to the debt, except
payment in full. You may without notice to me and without my
consent, enter into agreements with the borrower from time to time
<PAGE>
for purposes of creating or continuing the borrower's debt as
allowed by this guaranty. I agree that I will be liable, to the
fullest extent permitted by applicable law, for any deficiency
remaining after foreclosure (or repossession) and sale of any
collateral without regard to whether borrower's obligation to pay
such deficiency is discharged by law. If any payments on the debt
are set aside, recovered or required to be returned in the event of
the insolvency, bankruptcy or reorganization of the borrower, my
obligations under this agreement will continue as if such payments
had never been made.
I also waive and relinquish all present and future claims, rights,
and remedies against borrower or any other obligated party arising
out of the creation or my performance of this guaranty. My waiver
includes, but is not limited to, the right of contribution,
reimbursement, indemnification, subrogation, exoneration, and any
right to participate in any claim or remedy you may have against
the borrower, collateral, or other party obligated for borrower's
debts, whether or not such claim, remedy, or right arises in
equity, or under contract, statute or common law.
REMEDIES - If I fail to keep any promise contained in this
agreement or any agreement securing this agreement, you may, make
this agreement and the borrower's debt immediately due and payable,
you may set-off this obligation against any right I have to receive
money from you (however, you may not set-off against any accounts
in which my rights are only as a fiduciary or my IRA or other
tax-deferred retirement account), you may use any remedy you have
under state or federal law, and you may use any remedy given to you
by any agreement securing this agreement. If I die, am declared
incompetent, or become insolvent (either because my liabilities
exceed my assets or because I am unable to pay my debts as they
become due), you may make the debt immediately due and payable.
COLLECTION COSTS - Except when prohibited by law, I agree to pay
the reasonable costs and expenses you incur to enforce and collect
this agreement, including attorneys' fees and court costs.
SECURITY - This guaranty is <square> unsecured <square> secured
by
.
NOTICE TO COSIGNER
You are being asked to guarantee the debts described
above. If you are making a "Present and Future Debt
Guaranty" as identified above, you are being asked to
guarantee PRESENT as well as FUTURE debts of the
borrower entered into with this lender. Think carefully
before you do. If the borrower doesn't pay these debts,
you will have to. Be sure you can afford to pay if you
have to, and that you want to accept this
responsibility.
You may have to pay up to the full amount of these debts
if the borrower does not pay. You may also have to pay
late fees or collection costs, which increase this
amount.
<PAGE>
The lender can collect these debts from you without
first trying to collect from the borrower. The lender
can use the same collection methods against you that can
be used against the borrower, such as suing you,
garnishing you wages, etc. If these debts are ever in
default, that fact may become part of your credit
record.
In witness whereof, I have signed my name and affixed
my seal on this 30 day of DECEMBER, 1993, and, by
doing so, agree to the terms of this guaranty and
acknowledge having read the Notice to Consigner.
/s/ Sam P. Scott (seal)
- -----------------------------------------------------
SAM P. SCOTT
(seal)
- -----------------------------------------------------
(seal)
- ------------------------------------------------------
(seal)
- ------------------------------------------------------
<PAGE>
EXHIBIT 10.33
INDEMNITY AGREEMENT
This Indemnity Agreement made and entered into this the
30th day of December, 1993, by and between GENERAL MANUFACTURED
HOUSING, INC., a Georgia Corporation with offices in Ware County,
Georgia as Indemnitor and WAYCROSS AND WARE COUNTY DEVELOPMENT
AUTHORITY, a body politic, as Indemnitee,
W I T N E S S E T H :
WHEREAS, simultaneously herewith Indemnitor is selling
and conveying to Indemnitee all its right, title and interest in
and to real and personal property described in Exhibit "A"
attached hereto and made a part hereof by reference; and
WHEREAS, also simultaneously herewith Indemnitee is
executing and delivering a Deed to Secure Debt, Security
Agreement, UCC-1 Financing Statement in favor of The Patterson
Bank pledging the real and personal property described in Exhibit
"A" as collateral for a Loan in the amount of $613,727.63; and
WHEREAS, also simultaneously herewith Indemnitor as
Lessee and Indemnitee as Lessor are entering into a Contract of
Lease and Rent ("Lease"); and
WHEREAS, Indemnitee is requiring as a term of the Loan
that Indemnitor save, indemnify and hold harmless Indemnitee from
all liability resulting from any deficiency from the Loan entered
into herewith.
NOW, THEREFORE, for and in consideration of the
premises, the mutual covenants and benefits herein contained, the
Parties hereto do hereby agree as follows:
Indemnification.
Indemnitor hereby agrees to save, hold harmless and
indemnify Indemnitee against any and all liability, loss, or
damage, Indemnitee may suffer as a result of deficiency should
Indemnitor default under the terms and conditions of the Lease.
It is intended and agreed that Indemnitor will pay to Indemnitee
the amount of any such loss or liability in cash. It is further
understood and agreed that Indemnitee as a body politic is
intended to be a "pass through" party and is not intended to
incur liability for the Loan.
IN WITNESS WHEREOF, the Parties have executed this
Agreement by and through their duly authorized officers the day
and year first above written.
GENERAL MANUFACTURED HOUSING, INC.,
Indemnitor
BY: /s/ Lannis L. Thomas Pres
ATTEST: /s/ [illegible] Sec.
Signed, sealed and delivered
<PAGE>
in the presence of:
/s/ [illegible]
WITNESS
/s/ Brenda [illegible]
NOTARY PUBLIC
My commission expires:
SEAL Stamped
WAYCROSS AND WARE COUNTY
DEVELOPMENT AUTHORITY, Indemnitee
BY: /s/ [illegible]
ATTEST: [illegible]
Secretary
Signed, sealed and delivered
in the presence of:
/s/ [illegible]
WITNESS
/s/ Brenda [illegible]
NOTARY PUBLIC
My commission expires:
SEAL Stamped
<PAGE>
EXHIBIT A
PARCEL ONE: All that tract of land in Ware County, Georgia,
being a part of Land Lot No. 125 of the 8th Land District of Ware
County, Georgia, said tract described as follows: BEGINNING at a
point on the western margin of Industrial Boulevard, in the
Waycross-Ware County Industrial Park, at the southwestern corner
of the intersection of Industrial Boulevard and Fulford Road;
thence from said beginning point S 18 1/2 11' W a distance of 1045
feet to a point; thence S 85 1/2 53' W at an interior angle of
112 1/2 18' a distance of 432.3 feet to a point; thence N 18 1/2 11' E at
an interior angle of 67 1/2 42' a distance of 1096 feet to the
southerly margin of Fulford Road; thence S 87 1/2 36' E at an
interior angle of 105 1/2 47' a distance of 415.6 feet to the point
or place of beginning; Said tract of land containing
approximately 9.82 acres of land and bounded on the north by
Fulford Road; on the East by Industrial Boulevard; on the South
by Scapa Drive; and West by other lands of Ware County, Georgia.
Said tract is further described by a survey and plat made by C.
S. Eidson dated 7/24/62, for Waycross and Ware County Development
Authority, recorded in the office of the Clerk of Ware Superior
Court in Plat Book "A", Page 938, to which plat reference is
hereby made for all property purposes.
<PAGE>
SUBJECT TO: an Easement for utilities 30 feet wide, beginning at
the southwest corner of the intersection of Fulford Road and
Industrial Boulevard and extending south of uniform width along
the western margin of Industrial Boulevard to the northwest
corner of the intersection of Industrial Boulevard and Scapa
Drive.
SUBJECT TO: an encroachment for an existing county road across
the southeastern corner of said tract at the intersection of
Scapa Drive and Industrial Boulevard; reference being made to the
above stated plat which sows said encroachment which is
approximately 12 feet at its widest point on Scapa Drive,
diminishing to 1 along Industrial Boulevard at a distance of
approximately 100 feet.
PARCEL TWO: All those plots, pieces parcels or tracts of land
situate, lying and being in the County of Ware, State of Georgia,
more particularly described as follows:
TRACT 1:
All that tract or parcel of land situate, lying and
being in the 125th and 152nd Land Lots of the Eighth Land
District of Ware County, Georgia, and more particularly described
as follows:
To arrive at the Point of Beginning, commence at the
northeast corner of the intersection of Albany Avenue Extension
with Industrial Boulevard and run thence North 17 1/2 53' East along
the east margin a distance of 424 feet to an iron pin at the
POINT OR PLACE OF BEGINNING, continue thence North 17 1/2 53' East a
distance of 400 feet to a concrete monument; run thence South
72 1/2 07' East a distance of 680 feet to a concrete monument; run
thence North 17 1/2 53'41" West a distance of 415 feet; run thence
North 26 1/2 37'41" West a distance of 399.4 feet; run thence South
72 1/2 07' East a distance of 598.65 feet; run thence South 01 1/2 10'
East a distance of 848.87 feet; run thence South 89 1/2 08' West a
distance of 604.97 feet to an axle; run thence South 01 1/2 10' East
a distance of 848.87 feet; run thence South 11 1/2 59' West a
distance of 103.70 feet to a concrete monument; run thence North
72 1/2 07' West a distance of 713.5 feet to the POINT OR PLACE OR
BEGINNING.
TRACT 2:
All of that tract or parcel of land being in Ware
County, Georgia, described as follows: To obtain the starting
point of the property hereby conveyed, begin where the center
line of U.S. Highway #82 would intersect with the eastern right
of way line of Industrial Boulevard, if extended; thence from
this point run North 10 1/2 11' East along the easterly margin of
Industrial Boulevard a distance of 1036.5 feet to a point on the
easterly margin of Industrial Boulevard marked by a concrete
marker, which point is the BEGINNING POINT of the property
described and conveyed; thence from this Beginning Point run
North 18 1/2 11' East along the easterly margin of Industrial
Boulevard a distance of 700 feet to a point marked by a concrete
marker; thence at an inside angle of 90 1/2 run South 71 1/2 49' East a
distance of 400 feet to a point marked by a concrete marker;
thence at an inside angle of 132 1/2 19' run South 24 1/2 18' East a
<PAGE>
distance of 399.4 feet to a point marked by a concrete marker;
thence at an inside angle of 135 1/2 31' run South 18 1/2 11' West a
distance of 415 feet to a point marked by a concrete marker; run
thence North 71 1/2 49 West a distance of 680 feet to the eastern
margin of Industrial Boulevard, the POINT OR PLACE OF BEGINNING.
<PAGE>
1 couch
1 4 ft light fixture
8 large file cabinets
3 desks
1 5 tables
3 small file cabinets
1 counter 6 ft 8 in long
4 plastic file holders
1 telephone
1 IBM Typewriter
3 wire storage baskets
1 table file
1 end table
2 office chairs
2 plastic table files 15x10
1 trash can
1 desk
1 small file cabinet
1 desk chair
1 folding chair
2 trash cans
1 coffee table
1 AM & FM stereo system
2 speakers in wall
1 message board (2 ft x 3 ft)
1 desk
1 office chair
1 round trash can
1 blind
1 speaker in wall
Ceiling damage by water in big office
1 desk
1 wall speaker
1 small file cabinet
1 stack wire storage file
1 large cabinet
1 6 ft desk
2 office chairs
1 med. table
3 blinds
3 curtains
1 wall speaker
1 copy machine
1 Royal commercial vac cleaner
1 mop and bucket
1 wall speaker
1 office chair
7 storage boxes - legal size
3 storage boxes - letter size
1 4 ft light
1 light cover 18 inches
<PAGE>
1 light cover 10 inches
1 table
1 large built in file cabinet
1 built in shelves
4 lights 4 ft
2 4 ft lights - 1 without cover
1 small cabinet 24 x 48
1 wall cabinet 18 x 6 ft
2 lights with covers
2 lights with covers
1 desk pad 58 x 58
5 wall lights
1 ceiling fan with light fixture
3 elec wall heaters
4 4 ft lights
1 small round light
1 wall paper holder
1 square light fixture on hall wall with 6 bulbs
2 6 ft book cases
1 small book case 4 ft x 18 inches
2 lights with covers
2 lights without covers
7 large file cabinets
2 large book shelves 4 x 80 inches
4 lights without covers
2 lights with covers
3 curtains
<PAGE>
EXHIBIT 10.35
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT made and entered into effective the 1st
day of July, 1995 by and between GENERAL MANUFACTURED HOUSING, INC., a
Georgia corporation as Indemnitor, TIM-BAR CORPORATION, a corporation
incorporated under the laws of the State of Pennsylvania, sometimes
referred to as Indemnitee and as Lessor and HI-TECH PROPERTIES, INC. as
Lessee.
RECITALS
1. Lessor and Lessee have entered into a Lease Agreement dated
May 26, 1995, which Lease Agreement is incorporated herein by reference.
2. That Lessor and Lessee have entered into an Amendment to
Lease Agreement effective July 1, 1995, which is also incorporated herein
by reference.
3. That Lessor/Indemnitee has requested and Indemnitor has
agreed to indemnify Lessor with respect to the moving of two vertical beams
located inside the main building up to four (4) feet each, as provided for
in Section Three F of the Amendment to the Lease Agreement.
NOW THEREFORE, in consideration of the premises, the receipt and
sufficiency whereof is hereby acknowledged by Indemnitor, it is agreed as
follows:
SECTION ONE. Indemnitor agrees to indemnify and save Indemnitee
harmless against any and all loss, claims, suits, including costs and
attorney's fees, for or on account of injury to or death of persons, damage
to or destruction of property of Lessor or others occurring by reason of
the moving or relocation of the two vertical beams set forth in Section
Three F of the Amendment to the Lease Agreement.
SECTION TWO. This indemnity shall be effective upon the
execution hereof and shall continue during the term of the Lease Agreement,
and for the period of any applicable statute of limitations following
termination of the Lease Agreement including the statute of limitations for
injury or damage occurring by reason of moving or relocating the two
vertical beams.
SECTION THREE. Indemnitor agrees that as part of this Indemnity
Agreement that it will defend any claim, cause of action brought against
Indemnitee arising from the matters indemnified against herein and shall
bear all costs of litigation.
SECTION FOUR. Any notice required or permitted to be given
pursuant to this Agreement shall be deemed to have been sufficiently given
if delivered personally or if sent by registered mail or certified mail,
postage prepaid, addressed as follows:
To Indemnitor: General Manufactured Housing, Inc.
2255 Industrial Boulevard
Waycross, GA 31503
To Lessee: Hi-Tech Properties, Inc.
2255 Industrial Boulevard
Waycross, GA 31503
To Indemnitee: Tim-Bar Corporation
P.O. Box 449
Hanover, PA 17331
Any of the above addresses may be changed by written notice given
to other parties in the manner stated herein.
SECTION FIVE. This Agreement and the indemnity shall be binding
upon Indemnitor, its successors and assigns, and shall inure to the benefit
of the Indemnitee, its successors and assigns.
SECTION SIX. This Agreement and the indemnity shall be governed
by laws of the State of Georgia.
IN WITNESS WHEREOF the parties have executed this Agreement the
day and year first above written.
GENERAL MANUFACTURED HOUSING INC.,
Indemnitor
BY: /S/ Lannis Thomas
----------------------------------
Signed, sealed and delivered
in the presence of:
/S/ Barbara S. Johnson
- -------------------------------
WITNESS
/S/ Marilyn Hale
- -------------------------------
NOTARY PUBLIC (Seal)
My commission expires 4/12/98
---------
<PAGE>
CONTINUATION OF SIGNATURE PAGE OF INDEMNITY AGREEMENT BETWEEN GENERAL
MANUFACTURED HOUSING, INC., TIM-BAR CORPORATION AND HIGH-TECH PROPERTIES,
INC.
TIM-BAR, Indemnitee/Lessor
BY: /S/ [illegible]
---------------------------------
Signed, sealed and delivered
in the presence of:
/S/ Rachel J. Settle
- --------------------------------
WITNESS
- --------------------------------
NOTARY PUBLIC (Seal)
My commission expires___________
HI-TECH PROPERTIES, INC., Lessee
BY: /S/ [illegible]
---------------------------------
Signed, sealed and delivered
in the presence of:
/S/ Barbara S. Johnson
- --------------------------------
WITNESS
/S/ Marilyn Hale
- --------------------------------
NOTARY PUBLIC (Seal)
My commission expires 4/12/98
-----------
<PAGE>
EXHIBIT 10.36
GMH ACQUISITION CORP.
INSTALLMENT PROMISSORY NOTE
THIS NOTE IS NOT
NEGOTIABLE
$10,457,143 December 21, 1995
FOR VALUE RECEIVED, the undersigned GMH ACQUISITION CORP.
("Acquisition"), a Delaware corporation, hereby promises to pay to the order of
Drew Eric Scott, with an address of 3000-B South Fletcher Avenue, Fernandina
Beach, Florida 32034 (the "Payee"), the principal amount of TEN MILLION FOUR
HUNDRED FIFTY-SEVEN THOUSAND ONE HUNDRED FORTY-THREE DOLLARS ($10,457,143), on
January 25, 1996. Payments of principal shall be made by transfer of immediately
available funds to such account at such bank as Payee shall direct. No
prepayment of all or any part of this Note shall be permitted.
This Note is one of the Installment Promissory Notes issued by
Acquisition in the aggregate principal amount of $45,000,000 (individually, a
"Note" and collectively, the "Notes") in connection with the purchase by
Acquisition of all of the issued and outstanding common stock of General
Manufactured Housing, Inc. ("GMH") pursuant to that certain Stock Purchase
Agreement dated as of October 10, 1995, as amended by a First Amendment to Stock
Purchase Agreement dated December 21, 1995 (the "Stock Purchase Agreement")
among Acquisition, the Sellers (as that term is defined therein) and GMH.
Acquisition, together with its successors and assigns, are collectively referred
to herein as the "Company."
1. INTEREST.
This Note shall bear interest on all outstanding principal at a
fixed rate per annum of 5.57%. Interest shall be payable on the principal
payment date set forth above. If this Note or any payment of principal or
interest hereon shall not be paid when due (whether at stated maturity, by
acceleration or otherwise) the overdue principal, and to the extent permitted by
law, any overdue interest shall bear interest at the rate set forth above plus
2% per annum, which interest shall accrue from the date of such default in
payment to the date payment of such overdue principal and interest shall be
made. Interest on overdue principal and interest shall be payable on demand. All
interest payments required on this Note shall be computed on the basis of a 360-
day year of twelve 30-day months. If any payment on this Note becomes due and
payable on a Saturday, Sunday or other day on which commercial banks in Georgia
or New York are authorized or required by law to close, the maturity thereof
shall be extended to the next succeeding business day, and, with respect to
payments of principal, interest thereon shall be payable
<PAGE>
during such extension at the then applicable rate.
2. SECURITIES REPRESENTATION.
Payee represents that he will not transfer or dispose of all or
any part of this Note in violation of the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
3. TRANSFER OF NOTE.
The holder of this Note shall not sell, assign, pledge, transfer,
hypothecate or in any manner dispose of or part with all or any part of his
right, title and interest in and to this Note without the prior written consent
of the Company PROVIDED, HOWEVER, that the holder may transfer this Note to a
limited partnership or another entity in which Payee has approximately the same
percentage interest as he or she held in GMH, and provided further that such
partnership or other entity may not then transfer this Note, in distribution or
by operation of law or otherwise, to any person or entity except the Payee
herein named.
4. NOTICES.
All notices, consents, demands, requests, approvals and other
communications which are required or may be given hereunder shall be in writing
and shall be deemed to have been duly given (a) when delivered personally, (b)
if sent by telecopy, when receipt thereof is acknowledged at the telecopy number
below, (c) the second day following the day on which the same has been delivered
prepaid to a national air courier service or (d) three business days following
deposit in the mail, registered or certified postage prepaid in each case,
addressed as follows: (i) if to the holder of this Note to whom this Note is
originally issued, to his address set forth in the first paragraph hereof, or at
such other address as may have been furnished to the Company by such holder in
writing, or (ii) if to any other holder of this Note, to such address as may
have been furnished to the Company in writing by such holder, or, until such
other holder furnishes to the Company an address, then to, and at the address
of, the last holder of this Note who has so furnished an address to the Company,
or (iii) if to the Company, at P.O. Box 1449, Waycross, Georgia 31502-1449,
Telecopy: (912) 285-1397. Any notice given pursuant to this Section shall be
effective, whether given by the Company or the holder of this Note, or by either
of their counsel.
5. EVENTS OF DEFAULT. In the event that:
(a) the Company fails to make any payment of principal on this
Note when due or defaults for more than 3 business days in making any payment of
interest required to be
<PAGE>
made on this Note; or
(b) the Company, (i) commences any case, proceeding or
other action (x) under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency, reorganization or
relief of debtors, seeking to have an order for relief entered with respect
to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts,
or (y) seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its assets,
or shall make a general assignment for the benefit of its creditors, or
(ii) is the debtor named in any other case, proceeding or other action of a
nature referred to in clause (i) above which (x) results in the entry of an
order for relief or any such adjudication or appointment or (y) remains
undismissed, undischarged or unbonded for a period of 60 days, or
(iii) takes any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in clause (i) or
(ii) above, or (iv) shall generally not, or shall be unable to, or shall
admit in writing its inability to, pay its debts as they become due;
then, and in any such event, and at any time thereafter, if such default
shall then be continuing, the Payee may, by written notice to the Company,
declare this Note due and payable, whereupon this Note, together with all
accrued and unpaid interest thereon, shall be due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived. In addition, in any such event, the Payee shall
be entitled to recover reasonable attorneys' fees and other costs of
collection incurred.
6. AMENDMENTS AND WAIVERS.
Neither this Note nor any term hereof may be changed,
waived, discharged or terminated orally or in writing, except that any term
of this Note may be amended and the observance of any such term may be
waived (either generally or in a particular instance either retroactively
or prospectively) with (but only with) the written consent of the holder of
this Note.
7. BENEFIT.
All of the covenants, stipulations, promises and agreements
contained in this Note by Acquisition shall be binding upon Acquisition and
its successors and assigns and shall inure to the benefit of and be
enforceable by the holder of this Note and his successors and assigns.
8. LAW GOVERNING.
<PAGE>
This Note shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to conflicts of law principles
thereof.
9. CONSTRUCTION.
Wherever the context may require, any pronoun used herein shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs shall include the plural and vice versa.
10. SECURITY.
As collateral security for the faithful and timely performance of
all of the Company's obligations on this Note, Acquisition has obtained a stand-
by letter of credit from The First National Bank of Chicago, a copy of which is
attached hereto. The Payee shall be entitled to the benefits of such letter of
credit.
11. NO RECOURSE.
The Payee by his acceptance of this Note hereby agrees for
himself and his successors and assigns in favor of any incorporator, officer,
director, stockholder, agent or employee of the Company that this Note and the
obligations of Company to Payee hereunder, if not paid by Company in accordance
with the terms of this Note, shall be payable only out of the proceeds of the
letter of credit obtained by the Company for the benefit of the Payee, and no
recourse shall be had for payment of any amount due hereunder against any such
incorporator, stockholder, officer, director, agent or employee of the Company
or to any assets of the Company or to any other property other than the proceeds
of the letter of credit by virtue of any law or by enforcement of any assessment
or otherwise, all such liability, if any, being, by the acceptance hereof and as
a part of the consideration for the issue hereof, expressly released, other than
as a result of such incorporator's, stockholder's, officer's, director's,
agent's or employee's fraud or willful misconduct.
<PAGE>
IN WITNESS WHEREOF, Acquisition has executed this Note as of the day
and year first written above.
GMH ACQUISITION CORP.
By: /s/ Gary M. Brost
---------------------------
Gary M. Brost
President
<PAGE>
CONFIRMATION OF ASSUMPTION
The undersigned, GENERAL MANUFACTURED HOUSING, INC., a Georgia
corporation ("GMH"), intending to be legally bound, hereby confirms that, as a
result of a merger consummated this date, pursuant to which GMH Acquisition
Corp., a Delaware corporation ("Acquisition"), was merged into GMH with GMH
surviving (the "Merger"), GMH has irrevocably assumed all obligations of
Acquisition under the foregoing promissory note (the "Note") and confirms that
it is bound by and shall perform and observe all of the obligations and
agreements of Acquisition under the Note, fully, promptly and completely, with
the same effect as if the undersigned were named therein as the maker. From this
date forward, the term "Company" in the Note shall be deemed to mean General
Manufactured Housing, Inc. In any action by the holder of the Note to enforce
his or her rights thereunder, neither Acquisition nor any other party shall be
required to be joined as a party nor deemed to be an indispensable party.
DATED: December 21, 1995
GENERAL MANUFACTURED HOUSING, INC.
By: /s/ Gary M. Brost
-------------------------------
Gary M. Brost
President
<PAGE>
EXHIBIT 10.37
December 18, 1995
The Patterson Bank
P. O. Drawer 15
Patterson, Ga. 31557
Dear Sirs:
On May 22, 1995 we received a letter of credit #PB020 in the
principal sum of $198,000.00 with a current balance of
$162,000.00.
Letter of Credit secured by Deed to Secure Debt dated 3/2/95
covering 6.041 acres of land in Land Lot 125 of the 8th Land
District of Ware County, georgia.
We hereby request that the above described collateral be released
and that the following described collateral be substituted
therefore:
Now Account #58271 9 in the current balance of $162,000.00
GENERAL MANUFACTURED HOUSING, INC.
By:[illegible] Secretary-Treasurer
The borrower's request is hereby accepted and the original
collateral released and the above described collateral
substituted therefore.
Dated 12/19/95 The Patterson Bank
By: [illegible]
<PAGE>
EXHIBIT 10.39
GMH ACQUISITION CORP.
INSTALLMENT PROMISSORY NOTE
THIS NOTE IS NOT
NEGOTIABLE
$10,457,143 December 21, 1995
FOR VALUE RECEIVED, the undersigned GMH ACQUISITION CORP.
("Acquisition"), a Delaware corporation, hereby promises to pay to the order of
Gregory Keith Scott, with an address of 3136-A South Fletcher Avenue, Fernandina
Beach, Florida 32034 (the "Payee"), the principal amount of TEN MILLION FOUR
HUNDRED FIFTY-SEVEN THOUSAND ONE HUNDRED FORTY-THREE DOLLARS ($10,457,143) on
January 25, 1996. Payments of principal shall be made by transfer of immediately
available funds to such account at such bank as Payee shall direct. No
prepayment of all or any part of this Note shall be permitted.
This Note is one of the Installment Promissory Notes issued by
Acquisition in the aggregate principal amount of $45,000,000 (individually, a
"Note" and collectively, the "Notes") in connection with the purchase by
Acquisition of all of the issued and outstanding common stock of General
Manufactured Housing, Inc. ("GMH") pursuant to that certain Stock Purchase
Agreement dated as of October 10, 1995, as amended by a First Amendment to Stock
Purchase Agreement dated December 21, 1995 (the "Stock Purchase Agreement")
among Acquisition, the Sellers (as that term is defined therein) and GMH.
Acquisition, together with its successors and assigns, are collectively referred
to herein as the "Company."
1. INTEREST.
This Note shall bear interest on all outstanding principal at a
fixed rate per annum of 5.57%. Interest shall be payable on the principal
payment date set forth above. If this Note or any payment of principal or
interest hereon shall not be paid when due (whether at stated maturity, by
acceleration or otherwise) the overdue principal, and to the extent permitted by
law, any overdue interest shall bear interest at the rate set forth above plus
2% per annum, which interest shall accrue from the date of such default in
payment to the date payment of such overdue principal and interest shall be
made. Interest on overdue principal and interest shall be payable on demand. All
interest payments required on this Note shall be computed on the basis of a 360-
day year of twelve 30-day months. If any payment on this Note becomes due and
payable on a Saturday, Sunday or other day on which commercial banks in Georgia
or New York are authorized or required by law to close, the maturity thereof
shall be extended to the next succeeding business day, and, with respect to
payments of principal, interest thereon shall be payable during such extension
at the then applicable rate.
2. SECURITIES REPRESENTATION.
Payee represents that he will not transfer or dispose of all or
any part of this Note in violation of the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
3. TRANSFER OF NOTE.
The holder of this Note shall not sell, assign, pledge, transfer,
hypothecate or in any manner dispose of or part with all or any part of his
right, title and interest in and to this Note without the prior written consent
of the Company PROVIDED, HOWEVER, that the holder may transfer this Note to a
limited partnership or another entity in which Payee has approximately the same
percentage interest as he or she held in GMH, and provided further that such
partnership or other entity may not then transfer this Note, in distribution or
by operation of law or otherwise, to any person or entity except the Payee
herein named.
4. NOTICES.
All notices, consents, demands, requests, approvals and other
communications which are required or may be given hereunder shall be in writing
and shall be deemed to have been duly given (a) when delivered personally, (b)
if sent by telecopy, when receipt thereof is acknowledged at the telecopy number
below, (c) the second day following the day on which the same has been delivered
prepaid to a national air courier service or (d) three business days following
deposit in the mail, registered or certified postage prepaid in each case,
addressed as follows: (i) if to the holder of this Note to whom this Note is
originally issued, to his address set forth in the first paragraph hereof, or at
such other address as may have been furnished to the Company by such holder in
writing, or (ii) if to any other holder of this Note, to such address as may
have been furnished to the Company in writing by such holder, or, until such
other holder furnishes to the Company an address, then to, and at the address
of, the last holder of this Note who has so furnished an address to the Company,
or (iii) if to the Company, at P.O. Box 1449, Waycross, Georgia 31502-1449,
Telecopy: (912) 285-1397. Any notice given pursuant to this Section shall be
effective, whether given by the Company or the holder of this Note, or by either
of their counsel.
<PAGE>
5. EVENTS OF DEFAULT. In the event that:
(a) the Company fails to make any payment of principal on this
Note when due or defaults for more than 3 business days in making any payment of
interest required to be made on this Note; or
(b) the Company, (i) commences any case, proceeding or other
action (x) under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (y) seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or any
substantial part of its assets, or shall make a general assignment for the
benefit of its creditors, or (ii) is the debtor named in any other case,
proceeding or other action of a nature referred to in clause (i) above which (x)
results in the entry of an order for relief or any such adjudication or
appointment or (y) remains undismissed, undischarged or unbonded for a period of
60 days, or (iii) takes any action in furtherance of, or indicating its consent
to, approval of, or acquiescence in, any of the acts set forth in clause (i) or
(ii) above, or (iv) shall generally not, or shall be unable to, or shall admit
in writing its inability to, pay its debts as they become due; then, and in any
such event, and at any time thereafter, if such default shall then be
continuing, the Payee may, by written notice to the Company, declare this Note
due and payable, whereupon this Note, together with all accrued and unpaid
interest thereon, shall be due and payable without presentment, demand, protest
or other notice of any kind, all of which are hereby expressly waived. In
addition, in any such event, the Payee shall be entitled to recover reasonable
attorneys' fees and other costs of collection incurred.
6. AMENDMENTS AND WAIVERS.
Neither this Note nor any term hereof may be changed, waived,
discharged or terminated orally or in writing, except that any term of this Note
may be amended and the observance of any such term may be waived (either
generally or in a particular instance either retroactively or prospectively)
with (but only with) the written consent of the holder of this Note.
7. BENEFIT.
All of the covenants, stipulations, promises and agreements
contained in this Note by Acquisition shall be binding upon Acquisition and its
successors and assigns and shall inure to the benefit of and be enforceable by
the holder of this Note and his successors and assigns.
8. LAW GOVERNING.
This Note shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to conflicts of law principles
thereof.
9. CONSTRUCTION.
Wherever the context may require, any pronoun used herein shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs shall include the plural and vice versa.
10. SECURITY.
As collateral security for the faithful and timely performance of
all of the Company's obligations on this Note, Acquisition has obtained a stand-
by letter of credit from The First National Bank of Chicago, a copy of which is
attached hereto. The Payee shall be entitled to the benefits of such letter of
credit.
11. NO RECOURSE.
The Payee by his acceptance of this Note hereby agrees for
himself and his successors and assigns in favor of any incorporator, officer,
director, stockholder, agent or employee of the Company that this Note and the
obligations of Company to Payee hereunder, if not paid by Company in accordance
with the terms of this Note, shall be payable only out of the proceeds of the
letter of credit obtained by the Company for the benefit of the Payee, and no
recourse shall be had for payment of any amount due hereunder against any such
incorporator, stockholder, officer, director, agent or employee of the Company
or to any assets of the Company or to any other property other than the proceeds
of the letter of credit by virtue of any law or by enforcement of any assessment
or otherwise, all such liability, if any, being, by the acceptance hereof and as
a part of the consideration for the issue hereof, expressly released, other than
as a result of such incorporator's, stockholder's, officer's, director's,
agent's or employee's fraud or willful misconduct.
<PAGE>
IN WITNESS WHEREOF, Acquisition has executed this Note as of the day
and year first written above.
GMH ACQUISITION CORP.
By: /s/ Gary M. Brost
------------------------------------
Gary M. Brost
President
<PAGE>
CONFIRMATION OF ASSUMPTION
The undersigned, GENERAL MANUFACTURED HOUSING, INC., a Georgia
corporation ("GMH"), intending to be legally bound, hereby confirms that, as a
result of a merger consummated this date, pursuant to which GMH Acquisition
Corp., a Delaware corporation ("Acquisition"), was merged into GMH with GMH
surviving (the "Merger"), GMH has irrevocably assumed all obligations of
Acquisition under the foregoing promissory note (the "Note") and confirms that
it is bound by and shall perform and observe all of the obligations and
agreements of Acquisition under the Note, fully, promptly and completely, with
the same effect as if the undersigned were named therein as the maker. From this
date forward, the term "Company" in the Note shall be deemed to mean General
Manufactured Housing, Inc. In any action by the holder of the Note to enforce
his or her rights thereunder, neither Acquisition nor any other party shall be
required to be joined as a party nor deemed to be an indispensable party.
DATED: December 21, 1995
GENERAL MANUFACTURED HOUSING, INC.
By: /s/ Gary M. Brost
-----------------------------------
Gary M. Brost
President
<PAGE>
EXHIBIT 10.40
GMH ACQUISITION CORP.
INSTALLMENT PROMISSORY NOTE
THIS NOTE IS NOT
NEGOTIABLE
$10,457,143 December 21, 1995
FOR VALUE RECEIVED, the undersigned GMH ACQUISITION CORP.
("Acquisition"), a Delaware corporation, hereby promises to pay to the order of
Kelly Scott Herold, as Trustee of the Kelly Scott Herold Revocable Trust - 1995,
with an address of 1230 Greenridge Road, Jacksonville, Florida 32207 (the
"Payee"), the principal amount of TEN MILLION FOUR HUNDRED FIFTY-SEVEN THOUSAND
ONE HUNDRED FORTY-THREE DOLLARS ($10,457,143), on January 25, 1996. Payments of
principal shall be made by transfer of immediately available funds to such
account at such bank as Payee shall direct. No prepayment of all or any part of
this Note shall be permitted.
This Note is one of the Installment Promissory Notes issued by
Acquisition in the aggregate principal amount of $45,000,000 (individually,
a "Note" and collectively, the "Notes") in connection with the purchase by
Acquisition of all of the issued and outstanding common stock of General
Manufactured Housing, Inc. ("GMH") pursuant to that certain Stock Purchase
Agreement dated as of October 10, 1995, as amended by a First Amendment to
Stock Purchase Agreement dated December 21, 1995 (the "Stock Purchase
Agreement") among Acquisition, the Sellers (as that term is defined
therein) and GMH. Acquisition, together with its successors and assigns,
are collectively referred to herein as the "Company."
1. INTEREST.
This Note shall bear interest on all outstanding principal
at a fixed rate per annum of 5.57%. Interest shall be payable on the
principal payment date set forth above. If this Note or any payment of
principal or interest hereon shall not be paid when due (whether at stated
maturity, by acceleration or otherwise) the overdue principal, and to the
extent permitted by law, any overdue interest shall bear interest at the
rate set forth above plus 2% per annum, which interest shall accrue from
the date of such default in payment to the date payment of such overdue
principal and interest shall be made. Interest on overdue principal and
interest shall be payable on demand. All interest payments required on
this Note shall be computed on the basis of a 360-day year of twelve 30-day
months. If any payment on this Note becomes due and payable on a Saturday,
Sunday or other day on which commercial banks in Georgia or New York are
authorized or required by law to close, the maturity thereof shall be
extended to the next succeeding business day, and, with respect to payments
of principal, interest thereon shall be payable during such extension at
the then applicable rate.
2. SECURITIES REPRESENTATION.
Payee represents that he will not transfer or dispose of all
or any part of this Note in violation of the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
3. TRANSFER OF NOTE.
The holder of this Note shall not sell, assign, pledge, transfer,
hypothecate or in any manner dispose of or part with all or any part of his
right, title and interest in and to this Note without the prior written consent
of the Company PROVIDED, HOWEVER, that the holder may transfer this Note to a
limited partnership or another entity in which Payee has approximately the same
percentage interest as he or she held in GMH, and provided further that such
partnership or other entity may not then transfer this Note, in distribution or
by operation of law or otherwise, to any person or entity except the Payee
herein named.
4. NOTICES.
All notices, consents, demands, requests, approvals and other
communications which are required or may be given hereunder shall be in writing
and shall be deemed to have been duly given (a) when delivered personally, (b)
if sent by telecopy, when receipt thereof is acknowledged at the telecopy number
below, (c) the second day following the day on which the same has been delivered
prepaid to a national air courier service or (d) three business days following
deposit in the mail, registered or certified postage prepaid in each case,
addressed as follows: (i) if to the holder of this Note to whom this Note is
originally issued, to his address set forth in the first paragraph hereof, or at
such other address as may have been furnished to the Company by such holder in
writing, or (ii) if to any other holder of this Note, to such address as may
have been furnished to the Company in writing by such holder, or, until such
other holder furnishes to the Company an address, then to, and at the address
of, the last holder of this Note who has so furnished an address to the Company,
or (iii) if to the Company, at P.O. Box 1449, Waycross, Georgia 31502-1449,
Telecopy: (912) 285-1397. Any notice given pursuant to this Section shall be
effective, whether given by the Company or the holder of this Note, or by either
of their counsel.
<PAGE>
5. EVENTS OF DEFAULT. In the event that:
(a) the Company fails to make any payment of principal on
this Note when due or defaults for more than 3 business days in making any
payment of interest required to be made on this Note; or
(b) the Company, (i) commences any case, proceeding or other
action (x) under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (y) seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or any
substantial part of its assets, or shall make a general assignment for the
benefit of its creditors, or (ii) is the debtor named in any other case,
proceeding or other action of a nature referred to in clause (i) above which (x)
results in the entry of an order for relief or any such adjudication or
appointment or (y) remains undismissed, undischarged or unbonded for a period of
60 days, or (iii) takes any action in furtherance of, or indicating its consent
to, approval of, or acquiescence in, any of the acts set forth in clause (i) or
(ii) above, or (iv) shall generally not, or shall be unable to, or shall admit
in writing its inability to, pay its debts as they become due; then, and in any
such event, and at any time thereafter, if such default shall then be
continuing, the Payee may, by written notice to the Company, declare this Note
due and payable, whereupon this Note, together with all accrued and unpaid
interest thereon, shall be due and payable without presentment, demand, protest
or other notice of any kind, all of which are hereby expressly waived. In
addition, in any such event, the Payee shall be entitled to recover reasonable
attorneys' fees and other costs of collection incurred.
6. AMENDMENTS AND WAIVERS.
Neither this Note nor any term hereof may be changed, waived,
discharged or terminated orally or in writing, except that any term of this Note
may be amended and the observance of any such term may be waived (either
generally or in a particular instance either retroactively or prospectively)
with (but only with) the written consent of the holder of this Note.
7. BENEFIT.
All of the covenants, stipulations, promises and agreements
contained in this Note by Acquisition shall be binding upon Acquisition and its
successors and assigns and shall inure to the benefit of and be enforceable by
the holder of this Note and his successors and assigns.
8. LAW GOVERNING.
This Note shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to conflicts of law principles
thereof.
9. CONSTRUCTION.
Wherever the context may require, any pronoun used herein shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs shall include the plural and vice versa.
10. SECURITY.
As collateral security for the faithful and timely performance of
all of the Company's obligations on this Note, Acquisition has obtained a stand-
by letter of credit from The First National Bank of Chicago, a copy of which is
attached hereto. The Payee shall be entitled to the benefits of such letter of
credit.
11. NO RECOURSE.
The Payee by his acceptance of this Note hereby agrees for
himself and his successors and assigns in favor of any incorporator, officer,
director, stockholder, agent or employee of the Company that this Note and the
obligations of Company to Payee hereunder, if not paid by Company in accordance
with the terms of this Note, shall be payable only out of the proceeds of the
letter of credit obtained by the Company for the benefit of the Payee, and no
recourse shall be had for payment of any amount due hereunder against any such
incorporator, stockholder, officer, director, agent or employee of the Company
or to any assets of the Company or to any other property other than the proceeds
of the letter of credit by virtue of any law or by enforcement of any assessment
or otherwise, all such liability, if any, being, by the acceptance hereof and as
a part of the consideration for the issue hereof, expressly released, other than
as a result of such incorporator's, stockholder's, officer's, director's,
agent's or employee's fraud or willful misconduct.
<PAGE>
IN WITNESS WHEREOF, Acquisition has executed this Note as of the
day and year first written above.
GMH ACQUISITION CORP.
By: /s/ Gary M. Brost
----------------------------------------
Gary M. Brost
President
<PAGE>
CONFIRMATION OF ASSUMPTION
The undersigned, GENERAL MANUFACTURED HOUSING, INC., a Georgia
corporation ("GMH"), intending to be legally bound, hereby confirms that, as a
result of a merger consummated this date, pursuant to which GMH Acquisition
Corp., a Delaware corporation ("Acquisition"), was merged into GMH with GMH
surviving (the "Merger"), GMH has irrevocably assumed all obligations of
Acquisition under the foregoing promissory note (the "Note") and confirms that
it is bound by and shall perform and observe all of the obligations and
agreements of Acquisition under the Note, fully, promptly and completely, with
the same effect as if the undersigned were named therein as the maker. From this
date forward, the term "Company" in the Note shall be deemed to mean General
Manufactured Housing, Inc. In any action by the holder of the Note to enforce
his or her rights thereunder, neither Acquisition nor any other party shall be
required to be joined as a party nor deemed to be an indispensable party.
DATED: December 21, 1995
GENERAL MANUFACTURED HOUSING, INC.
By: /s/ Gary M. Brost
----------------------------------------
Gary M. Brost
President
<PAGE>
EXHIBIT 10.41
GMH ACQUISITION CORP.
INSTALLMENT PROMISSORY NOTE
THIS NOTE IS NOT
NEGOTIABLE
$13,628,571 December 21, 1995
FOR VALUE RECEIVED, the undersigned GMH ACQUISITION CORP.
("Acquisition"), a Delaware corporation, hereby promises to pay to the order of
Samuel P. Scott and Sherry J. Scott, as joint tenants, with an address of 4300
South Fletcher Avenue, Fernandina Beach, Florida 32034 (the "Payee"), the
principal amount of THIRTEEN MILLION SIX HUNDRED TWENTY-EIGHT THOUSAND, FIVE
HUNDRED SEVENTY-ONE DOLLARS ($13,628,571), on January 25, 1996. Payments of
principal shall be made by transfer of immediately available funds to such
account at such bank as Payee shall direct. No prepayment of all or any part of
this Note shall be permitted.
This Note is one of the Installment Promissory Notes issued by
Acquisition in the aggregate principal amount of $45,000,000 (individually, a
"Note" and collectively, the "Notes") in connection with the purchase by
Acquisition of all of the issued and outstanding common stock of General
Manufactured Housing, Inc. ("GMH") pursuant to that certain Stock Purchase
Agreement dated as of October 10, 1995, as amended by a First Amendment to Stock
Purchase Agreement dated December 21, 1995 (the "Stock Purchase Agreement")
among Acquisition, the Sellers (as that term is defined therein) and GMH.
Acquisition, together with its successors and assigns, are collectively referred
to herein as the "Company."
1. INTEREST.
This Note shall bear interest on all outstanding principal at a
fixed rate per annum of 5.57%. Interest shall be payable on the principal
payment date set forth above. If this Note or any payment of principal or
interest hereon shall not be paid when due (whether at stated maturity, by
acceleration or otherwise) the overdue principal, and to the extent permitted by
law, any overdue interest shall bear interest at the rate set forth above plus
2% per annum, which interest shall accrue from the date of such default in
payment to the date payment of such overdue principal and interest shall be
made. Interest on overdue principal and interest shall be payable on demand. All
interest payments required on this Note shall be computed on the basis of a 360-
day year of twelve 30-day months. If any payment on this Note becomes due and
payable on a Saturday, Sunday or other day on which commercial banks in Georgia
or New York are authorized or required by law to close, the maturity thereof
shall be extended to the next succeeding business day, and, with respect to
payments of principal, interest thereon shall be
<PAGE>
payable during such extension at the then applicable rate.
2. SECURITIES REPRESENTATION.
Payee represents that he will not transfer or dispose of all or
any part of this Note in violation of the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
3. TRANSFER OF NOTE.
The holder of this Note shall not sell, assign, pledge, transfer,
hypothecate or in any manner dispose of or part with all or any part of his
right, title and interest in and to this Note without the prior written consent
of the Company PROVIDED, HOWEVER, that the holder may transfer this Note to a
limited partnership or another entity in which Payee has approximately the same
percentage interest as he or she held in GMH, and provided further that such
partnership or other entity may not then transfer this Note, in distribution or
by operation of law or otherwise, to any person or entity except the Payee
herein named.
4. NOTICES.
All notices, consents, demands, requests, approvals and other
communications which are required or may be given hereunder shall be in writing
and shall be deemed to have been duly given (a) when delivered personally, (b)
if sent by telecopy, when receipt thereof is acknowledged at the telecopy number
below, (c) the second day following the day on which the same has been delivered
prepaid to a national air courier service or (d) three business days following
deposit in the mail, registered or certified postage prepaid in each case,
addressed as follows: (i) if to the holder of this Note to whom this Note is
originally issued, to his address set forth in the first paragraph hereof, or at
such other address as may have been furnished to the Company by such holder in
writing, or (ii) if to any other holder of this Note, to such address as may
have been furnished to the Company in writing by such holder, or, until such
other holder furnishes to the Company an address, then to, and at the address
of, the last holder of this Note who has so furnished an address to the Company,
or (iii) if to the Company, at P.O. Box 1449, Waycross, Georgia 31502-1449,
Telecopy: (912) 285-1397. Any notice given pursuant to this Section shall be
effective, whether given by the Company or the holder of this Note, or by either
of their counsel.
5. EVENTS OF DEFAULT. In the event that:
(a) the Company fails to make any payment of principal on this
Note when due or defaults for more than 3 business days in making any payment of
interest required to be made on this Note; or
<PAGE>
(b) the Company, (i) commences any case, proceeding or other
action (x) under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (y) seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or any
substantial part of its assets, or shall make a general assignment for the
benefit of its creditors, or (ii) is the debtor named in any other case,
proceeding or other action of a nature referred to in clause (i) above which (x)
results in the entry of an order for relief or any such adjudication or
appointment or (y) remains undismissed, undischarged or unbonded for a period of
60 days, or (iii) takes any action in furtherance of, or indicating its consent
to, approval of, or acquiescence in, any of the acts set forth in clause (i) or
(ii) above, or (iv) shall generally not, or shall be unable to, or shall admit
in writing its inability to, pay its debts as they become due;
then, and in any such event, and at any time thereafter, if such default shall
then be continuing, the Payee may, by written notice to the Company, declare
this Note due and payable, whereupon this Note, together with all accrued and
unpaid interest thereon, shall be due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived.
In addition, in any such event, the Payee shall be entitled to recover
reasonable attorneys' fees and other costs of collection incurred.
6. AMENDMENTS AND WAIVERS.
Neither this Note nor any term hereof may be changed, waived,
discharged or terminated orally or in writing, except that any term of this Note
may be amended and the observance of any such term may be waived (either
generally or in a particular instance either retroactively or prospectively)
with (but only with) the written consent of the holder of this Note.
7. BENEFIT.
All of the covenants, stipulations, promises and agreements
contained in this Note by Acquisition shall be binding upon Acquisition and its
successors and assigns and shall inure to the benefit of and be enforceable by
the holder of this Note and his successors and assigns.
8. LAW GOVERNING.
This Note shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to conflicts of law principles
thereof.
<PAGE>
9. CONSTRUCTION.
Wherever the context may require, any pronoun used herein shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs shall include the plural and vice versa.
10. SECURITY.
As collateral security for the faithful and timely performance of
all of the Company's obligations on this Note, Acquisition has obtained a stand-
by letter of credit from The First National Bank of Chicago, a copy of which is
attached hereto. The Payee shall be entitled to the benefits of such letter of
credit.
11. NO RECOURSE.
The Payee by his acceptance of this Note hereby agrees for
himself and his successors and assigns in favor of any incorporator, officer,
director, stockholder, agent or employee of the Company that this Note and the
obligations of Company to Payee hereunder, if not paid by Company in accordance
with the terms of this Note, shall be payable only out of the proceeds of the
letter of credit obtained by the Company for the benefit of the Payee, and no
recourse shall be had for payment of any amount due hereunder against any such
incorporator, stockholder, officer, director, agent or employee of the Company
or to any assets of the Company or to any other property other than the proceeds
of the letter of credit by virtue of any law or by enforcement of any assessment
or otherwise, all such liability, if any, being, by the acceptance hereof and as
a part of the consideration for the issue hereof, expressly released, other than
as a result of such incorporator's, stockholder's, officer's, director's,
agent's or employee's fraud or willful misconduct.
<PAGE>
IN WITNESS WHEREOF, Acquisition has executed this Note as of the day
and year first written above.
GMH ACQUISITION CORP.
By: /s/ Gary M. Brost
---------------------------------
Gary M. Brost
President
<PAGE>
CONFIRMATION OF ASSUMPTION
The undersigned, GENERAL MANUFACTURED HOUSING, INC., a Georgia
corporation ("GMH"), intending to be legally bound, hereby confirms that, as a
result of a merger consummated this date, pursuant to which GMH Acquisition
Corp., a Delaware corporation ("Acquisition"), was merged into GMH with GMH
surviving (the "Merger"), GMH has irrevocably assumed all obligations of
Acquisition under the foregoing promissory note (the "Note") and confirms that
it is bound by and shall perform and observe all of the obligations and
agreements of Acquisition under the Note, fully, promptly and completely, with
the same effect as if the undersigned were named therein as the maker. From this
date forward, the term "Company" in the Note shall be deemed to mean General
Manufactured Housing, Inc. In any action by the holder of the Note to enforce
his or her rights thereunder, neither Acquisition nor any other party shall be
required to be joined as a party nor deemed to be an indispensable party.
DATED: December 21, 1995
GENERAL MANUFACTURED HOUSING, INC.
By: /s/ Gary M. Brost
---------------------------------
Gary M. Brost
President
<PAGE>
EXHIBIT 10.42
GENERAL MANUFACTURED HOUSING, INC.
INCENTIVE COMPENSATION PLAN
1. PURPOSES OF THE PLAN
The purposes of this Incentive Compensation Plan (the "Plan") are to
enable General Manufactured Housing, Inc. (the "Company") to retain the services
of key employees and to provide them with increased motivation and incentive to
achieve and exceed the goals of the business consistent with both short term and
long term objectives.
2. DEFINITIONS
The following terms shall have the meanings set forth below:
(a) "Base Amount" means $11 million.
(b) "Board of Directors" means the Board of Directors of the
Company.
(c) "Bonus Pool" means, for each Plan Year, an amount equal to EBIT
in excess of the Base Amount for such fiscal year; provided, however, that such
amount shall not exceed $3.85 million in the aggregate, $1.85 million in the
first Plan Year and $2 million in any subsequent Plan Year.
(d) "EBIT" means, for each applicable Plan Year, the net income of
the Company for such year, before (i) interest expense, (ii) taxes, (iii)
amortization, (iv) amounts paid under the Company's Executive Bonus Plan, (v)
the Management Fee, (vi) reimbursement of the Company's expenses under Section
19 of the Stock Purchase Agreement, (vii) costs incurred by the Company in
remediating the Company's properties pursuant to Section 14(b) of the Stock
Purchase Agreement and (viii) all compensation and benefits payable to
management personnel added after the Effective Date other than at the direction
of the Chief Executive Officer of the Company and other than in the ordinary
course of the Company's business, all as shown on the audited financial
statements of the Company; provided, that EBIT shall be determined in accordance
with generally accepted accounting principles, consistent with those employed by
the Company in 1994 and reflected on its audited financial statements for such
year.
(e) "Effective Date" means January 1, 1996.
(f) "Management Agreement" means the Management Agreement dated
as of December 21, 1995 by and between Strategic Investments & Holdings, Inc.
and the Company.
(g) "Management Fee" means an amount equal to the management fee
paid pursuant to the terms of the Management Agreement.
(h) "Participant" means Samuel P. Scott, Gregory Keith Scott,
Drew Eric Scott and Kelly Scott Herold.
(i) "Participant Percentage" means, for any Plan Year, the
percentage of the Bonus Pool allocated to a Participant.
(j) "Plan Year" means any calendar year commencing after the
consummation of the transactions contemplated by the Stock Purchase Agreement
and ending on or before December 31, 2000.
(k) "Stock Purchase Agreement" means that certain Stock Purchase
Agreement dated as of October 10, 1995 by and among Samuel P. Scott et al. and
GMH Acquisition Corp., as amended.
3. TERM OF THE PLAN
The term of this Plan shall commence on the Effective Date and
terminate on the earlier of (i) December 31, 2000, (ii) the payment to
Participants of $3.85 million under the terms of the Plan, or (iii) the initial
public offering of the common equity of the Company.
4. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Board of Directors. Any
decision by the Board of Directors regarding the administration or
interpretation of any provisions of the Plan shall be binding on all
<PAGE>
Participants.
(b) No member of the Board of Directors shall be liable for any
action taken or omitted to be taken or for any determination made by him or her
in good faith with respect to the Plan, and the Company shall indemnify and hold
harmless each member of the Board of Directors against any cost or expense
(including counsel fees) or liability (including any sum paid in settlement of a
claim with the approval of the Board of Directors) arising out of any act or
omission in connection with the administration or interpretation of the Plan,
unless arising out of such person's own fraud or bad faith.
5. INCENTIVE AWARDS
(a) Based upon the recommendations of the Chief Executive Officer,
the Board of Directors shall determine the Participant Percentage for each
Participant for each Plan Year; provided, however, that 100% of the Bonus Pool
shall be allocated among the Participants each Plan Year.
(b) If EBIT for any Plan Year does not exceed the Base Amount for
such year, the Company shall not allocate any amounts to the Bonus Pool.
(c) If EBIT for any Plan Year exceeds the Base Amount for such year,
the Company shall allocate 100% of the amount of EBIT in excess of the Base
Amount to the Bonus Pool to be allocated among the Participants; provided,
however, that the maximum amount to be allocated to the Bonus Pool in any Plan
Year shall not exceed $1.85 million in the first Plan Year and $2 million in any
subsequent Plan Year and the maximum amount to be allocated to the entire Bonus
Pool shall not exceed $3.85 million.
(d) The Bonus Pool, if any, for any Plan Year shall be calculated and
paid to the Participants, in cash, within thirty (30) days after the Company's
receipt of its audited financial statements for such year but no later than one
hundred fifty (150) days following the end of such year.
(e) In the event that a Participant dies or becomes disabled, any
amounts otherwise payable to such Participant hereunder for the remaining term
of the Plan shall be paid to such Participant's heirs, administrators,
executors, personal representatives or successors. In the event a Participant
breaches any non-competition agreement, covenant or provision binding on such
Participant for the benefit of the Company during any Plan Year, no portion of
the Bonus Pool for such year shall be payable to such Participant but instead
shall be allocated among the remaining Participants proportionately based on
their existing Participant Percentages.
(f) Any and all amounts payable under the Bonus Pool hereunder shall
be subject to applicable federal, state and local tax withholding requirements.
(g) In the event that the Company's common stock is sold in an
initial public offering prior to the end of the term of this Agreement, the
Company will pay, in cash, to the Participants, no later than five (5) days
before the effective date of such initial public offering (the "Accelerated
Payment Date"), an amount equal to 90% of an amount equal to the difference
between $3.85 million and the amounts which have previously been paid to
Participants or set off under the Stock Purchase Agreement (the "Remainder");
provided, however, that if the Accelerated Payment Date occurs within 150 days
following the end of any Plan Year, the Company will pay to the Participants, an
amount equal to 100% of the Remainder.
6. MISCELLANEOUS
(a) No right to receive any incentive compensation under the Plan
shall be transferable except by will or the laws of descent and distribution.
Any purported transfer contrary to this provision will be null and void and
without effect.
(b) Neither the adoption of the Plan nor its operation, nor any
document describing or referring to the Plan, or any part hereof, nor the
designation of any employee as a Participant in the Plan shall confer upon any
Participant any right to continue in the employ of the Company or shall in any
way affect the right and power of the Company to terminate the employment of any
Participant at any time with or without assigning a reason therefor, to the same
extent as might have been done if the Plan had not been adopted.
(c) By acceptance of any incentive compensation under the Plan, the
recipient shall be deemed to agree (a) to execute any and all documents
<PAGE>
reasonably requested by the Company in connection with his or her participation
in the Plan, including an agreement to report any amounts received under the
Plan as compensation and (b) that any compensation paid hereunder will not be
taken into account as "base remuneration", "wages", "salary" or "compensation"
in determining the amount of any contribution to or payment or any other benefit
under any pension, retirement, incentive, profit-sharing or deferred
compensation plan of the Company.
(d) The place of administration of the Plan shall be in the State of
Georgia, and the validity, construction, interpretation, administration and
effect of the Plan and of its rules and regulations, and rights relating to the
Plan, shall be determined solely in accordance with the laws of the State of
Georgia.
(e) The amounts due under the Plan are subject to setoff in
accordance with the terms of the Stock Purchase Agreement and the Escrow
Agreement dated as of December 21, 1995 by and between the Company and Key Bank
of New York.
(f) Each Participant shall agree that as a condition to his or her
receiving any payment of any amount of the Bonus Pool, he or she will agree to
treat any amount received under the Plan as ordinary income for federal, state
and local income tax purposes.
<PAGE>
EXHIBIT 10.43
GENERAL MANUFACTURED HOUSING, INC.
Senior Subordinated Note due December 21, 2002
PPN# 37029* AA 7
No. R-1 New York, NY
$17,243,295 December 21, 1995
GENERAL MANUFACTURED HOUSING, INC., a Georgia corporation (the
"Company"), for value received, hereby promises to pay to THE EQUITABLE
LIFE ASSURANCE SOCIETY OF THE UNITED STATES, or registered assigns, the
principal amount of $17,243,295 on December 21, 2002, with interest (computed
on the basis of a 360-day year of twelve 30-day months) on the unpaid
balance of such principal amount at the rate of (a) for the period from the
date hereof to and including March 31, 2001, 10.87% per annum, and (b) 14.50%
per annum thereafter, payable quarterly on each March 31, June 30,
September 30 and December 31 after the date hereof, commencing March 31, 1996,
until such unpaid balance shall become due and payable (whether at maturity
or at a date fixed for prepayment or by declaration or otherwise), and with
interest on any overdue principal (including any overdue prepayment of
principal) and premium, if any, and (to the extent permitted by applicable
law) on any overdue interest, at the rate of 2.00% per annum plus the
otherwise applicable rate until paid, payable quarterly as aforesaid or, at
the option of the holder hereof, on demand. Payments of principal, premium, if
any, and interest on this Note shall be made in lawful money of the United
States of America at the principal office of The Chase Manhattan Bank,
N.A., in the Borough of Manhattan, the City and State of New York, or at such
other office or agency in such Borough as the Company shall have designated
by written notice to the holder of this Note as provided in the Note and Warrant
Purchase Agreement referred to below.
This Note is one of the Company's Senior Subordinated Notes due
December 21, 2002 (the "Notes"), originally issued in the aggregate principal
amount of $17,243,295 pursuant to the Note and Warrant Purchase Agreement,
dated as of December 21, 1995, as from time to time amended, between the
Company and the institutional investor referred to therein. The holder of this
Note is entitled to the benefits of such Note and Warrant Purchase Agreement
and may enforce the agreements of the Company contained therein and exercise
the remedies provided for thereby or otherwise available in respect thereof.
The obligations evidenced hereby are subordinate in the manner
and to the extent set forth in that certain Subordination Agreement, dated as
of December 21, 1995 (the "Subordination Agreement"), among the Company,
The Equitable Life Assurance Society of the United States, RFE Investment
Partners V, L.P., Sterling Commercial Capital, Inc., the State Treasurer of the
State of Michigan, as Custodian, and First Source Financial LLP (the "Senior
Lender"), to the obligations (including interest) owed by the Company to
the holders of all the Notes issued pursuant to that certain Secured Credit
Agreement, dated as of December 21, 1995, between the Company and the Senior
Lender, as such Secured Credit Agreement has been and hereafter may be
supplemented and amended from time to time; and each holder hereof, by its
acceptance hereof, agrees to be bound by the provisions of the Subordination
Agreement.
This Note is a registered Note and is transferable only upon
surrender of this Note for registration or transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed by the holder
hereof or his attorney duly authorized in writing. References in this Note
to a "holder" shall mean the person in whose name this Note is at the time
registered on the register kept by the Company as provided in such Note and
Warrant Purchase Agreement and the Company may treat such person as the
owner of this Note for the purpose of receiving payment and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
The Notes are subject to required and optional prepayment, in whole
or in part, in certain cases with a premium and in other cases without a
premium, all as specified in such Note and Warrant Purchase Agreement.
In case an Event of Default, as defined in such Note and Warrant
Purchase Agreement, shall occur and be continuing, the unpaid balance of
the principal of this Note may become due and payable to the extent provided
in such Note and Warrant Purchase Agreement.
<PAGE>
This Note is made and delivered in New York, New York, and shall
be governed by the laws of the State of New York.
GENERAL MANUFACTURED HOUSING, INC.
By: /s/ Gary M. Brost
Title:
<PAGE>
EXHIBIT 10.44
CUSTODY AGREEMENT
The First National Bank of Chicago (hereinafter "We",
"Us" or "Our") is requested to open a custody account (the
"Custody Account") for and in the name of General Manufactured
Housing, Inc., (herein after "You" or "Your") and to hold therein
all monies, stocks, bonds, mortgages and other financial
instruments, both foreign and domestic ("Securities"), which We
will agree to accept as custodian and to deliver as You direct,
subject to the following terms and conditions:
We will hold the Securities in Our own vaults
separately from the securities of any other customer except that
We may hold the Securities adequately identified as belonging to
You in bulk with Securities of the same class of the same issue;
further, We may use available Federal Book Entry accounts with
the Federal Reserve Bank of Chicago, commercial paper book entry
or a Bank or Trust Company licensed by the United States or any
State thereof. We may hold the Securities on Your behalf in
accounts maintained by Us with any domestic or foreign depository
that provides handling, clearance or safekeeping services.
We will not provide supervision, recommendations or
advice to You relative to the investment, purchase, sale,
retention or other disposition of the Securities held under this
agreement.
1. Unless We receive contrary written instructions
from You, We are authorized to take the following actions with
regard to the collection and disposition of proceeds of the
Securities:
(a) We will collect all income or other property
payable in connection with the Securities as well as any
principal due upon maturity, redemption (of which We have
received notice pursuant to Section 6 of this agreement) or sale
thereof, in accordance with our usual and customary business
practice, but We shall bear no responsibility for our failure to
make such collections beyond the exercise of due care.
(b) We will deposit any monies so collected to Your
credit, in such accounts with Us as You may designate, or remit
such monies to You as You may direct.
(c) We will debit Your account for the cost of
purchasing Securities for the Custody Account as instructed by
You.
(d) We will present for payment maturing Securities,
interest coupons and Securities called for redemption.
(e) If Securities, which We hold on Your behalf at
depositories or off-site locations, are called for partial
redemption by the issuer, We, in our sole discretion, will allot
the called portion to the respective holders in any manner deemed
to be fair and equitable in our judgment.
(f) To the extent possible, We will convert monies
received with respect to securities of foreign issue into United
<PAGE>
States dollars. In effecting such conversion, We may use any
method or agency available to Us including the facilities of our
own divisions or affiliates. All risk and expense of such
conversion shall be borne by You including, without limitation,
losses arising from fluctuations in exchange rates.
(g) We will exchange temporary for definitive
certificates or effect mandatory exchanges of certificates.
(h) We will execute, in Your name and on Your behalf,
such certificates as may be required to obtain payment with
respect to, or to effect the sale, transfer or other disposition
of the Securities.
2. Securities issued in registered form will be held
in the name of our nominee(s) or the nominee(s) of any agent,
subcustodian or other entity that We may employ for clearance or
safekeeping. Securities registered in the name of any nominee
will not be delivered, except to a broker for immediate sale,
until transferred out of the name of such nominee. All taxes and
other expenses incidental to any transfer to or from the name of
any nominee shall be borne by You.
3.(a) We are authorized to accept and rely on all written
instructions given by You to make sales or purchases or to otherwise deal
with the Securities. Where multiple parties sign the Agreement, any one of
You may give instructions. We may also accept and rely on instructions
transmitted by You or Your authorized agent whether given orally,
by telephone, cable or telex, facsimile transmission or other
electronic means which We reasonably believe to be genuine. We
may electronically record any telephone calls. Written
confirmation of oral instructions provided by You shall in no way
affect any action We take in reliance upon the oral instructions.
(b) For the services described in this paragraph, You
will need to execute additional documents attached hereto. If
You so authorize, We will accept instructions for free delivery
of Securities and capital changes only from individuals who have
been authorized by You on the Disbursement Authorization form
related hereto (Exhibit A). If You intend to wire funds from the
Custody Account, You will complete and deliver to Us prior to any
such wire transfer the appropriate section of the Disbursement
Authorization form confirming Your adherence to the Custodial
Funds Transfer Agreement (Exhibit B). If You elect to instruct
Us electronically, We will furnish You with software for such
purpose, and You will execute an Electronic Trade Instruction
(Exhibit C) prior to using such software. If You wish to use our
automated service for corporate action notices, You will complete
the Corporate Actions Express Service Agreement (Exhibit D) prior
to using such service. We shall be entitled to rely upon the
instructions received by Us from You via the software and may
assume that all instructions were transmitted by You or on Your
behalf, regardless of by whom actually transmitted. If You elect
to use our daily sweep service, You will complete and deliver to
Us prior to using such service the Sweep Service Authorization
(Exhibit E).
(c) Notwithstanding any provision hereunder to the
contrary, We shall rely conclusively on Eligible and Ineligible
Trade Reports received through the Depository Trust Company's
<PAGE>
Institutional Delivery (DTC-ID) system in lieu of Your written
instructions for security transactions utilizing said system.
(d) In the event the DTC-ID system for any reason does
not furnish Us with an Eligible and/or Ineligible Trade Report,
You agree to provide Us with written instructions for the
trade(s) which said Report would have otherwise contained.
(e) The preceding provisions shall not preclude Your
use of written instructions for securities transactions and/or
other matters when You deem it necessary or advisable, and We may
rely conclusively on such instructions.
(f) You assume responsibility for any loss, claim or
expense We incur in following Your instructions except in the
case of our failure to act in good faith or in accordance with
the reasonable commercial standards of the banking business. We
shall not be liable for delays or failure to carry out
instructions due to circumstances beyond Our control. All claims
against Us for failure to properly follow Your instructions must
be brought within 45 days from the date on which We execute Your
instructions. If it is determined that compensation is due you,
it will be paid at the Federal Funds rate.
4(a) We shall collect both income and principal in
accordance with our usual and customary business practices. We
assume no responsibility regarding such collection beyond the
exercise of due care. Losses due to any other cause will be
borne by You. Such losses include, without limitation, those
arising from:
(i) insolvency of any broker, whether
designated by You or employed by Us,
which occurs after delivery of a
security by Us to the broker but
before We receive payment from the
broker;
(ii) insolvency of the issuer of the
Securities;
(iii) default by the issuer of the
Securities; and
(iv) any act or omission of any broker or
similar agent which You may designate
or We may employ to purchase, sell or
perform any act in respect to any
security.
(b) In the event that We credit Your account in
anticipation of Our collection of monies which We are then unable
to collect, You agree to promptly return any such monies to Us in
immediately available funds.
5. All proxies and material pertaining thereto We
receive in connection with Securities and other property held in
the Custody Account, together with all official reports referring
to indentures securing such Securities, will be forwarded in a
timely fashion to You. No other financial statements or reports
<PAGE>
will be forwarded.
6. Except as otherwise provided, We will notify You
of any call for redemption, tender offer, subscription rights or
any other discretionary rights with respect to the Securities of
which We receive timely notice from the issuer of the Securities or
as to which correct and timely notice is published in publications
which We routinely use for this purpose, or as to which We receive
timely notice from You.
7. Notwithstanding any provision hereunder to the
contrary, with respect to Securities which possess so-called put
options or similar characteristics which grant You the option to
redeem such Securities prior to their maturity date ("Put Option
Securities"), including, but not limited to, so-called put bonds,
We shall not have any liability with respect to the exercise or
non-exercise of any such Put Option, except that:
(a) With respect to Put Options which are exercisable
semiannually or less frequently than semiannually, and where such
Put Option Security is actually delivered to Us not less than 15
business days prior to the Put Option exercise date, We will use
our best efforts to notify You of such put option where correct and
timely notification is published in the publications or services
("Notification Sources") We routinely use for this purpose, or as
to which We receive timely notice from You;
(b) Once notified, You must direct the exercise or
non-exercise of such Put Option by written instrument delivered to
Us not less than 5 business days prior to the Put Option exercise
date;
(c) For purposes of this section 7 (a) "business day"
is a day on which We are open for business under the laws of the
State of Illinois; the Notification Sources include, but are not
limited to, J. J. Kenny, The Wall Street Journal and/or Depository
Trust Company of New York, and We reserve the right to utilize
other Notification Sources or discontinue any of the aforementioned
Notification Sources at any time and without notice; and We will
not notify You of Put Options exercisable more frequently than
semiannually.
8. We shall have a lien upon the Securities held under
this Agreement and upon any deposit account of Yours for
compensation, expenses, and commitments We make pursuant to Your
instructions, or any other liabilities of Yours to Us, including,
without limitation, Your obligation to indemnify Us under
Section 11 of this Agreement.
You agree not to execute any pledge of any Securities
until We have been notified of such pledge agreement.
9. For any Securities in Your account, the
Shareholders Communications Act of 1985 and subsequent amendments
to the act authorize us to release to issuer of Securities and to
other security holders of an issue Your name, address and
Securities position if Your Custody Account was opened after
December 28, 1985, unless You state Your objection to Us in writing
(Exhibit F).
<PAGE>
10. You hereby acknowledge that the act of placing a
buy order and a sale order for the same securities which are to
settle on the same date in instances where You do not have in the
Custody Account sufficient funds independent of the sale of such
securities to satisfy fifty percent (50%) or more of the purchase
price (or such other percentage as may be required by applicable
law and regulation) constitutes the practice commonly known as
"free riding" and is prohibited under both Regulation T and
Regulation U of the Board of Governors of the Federal Reserve
System (12 C.F.R. Parts 220 and 221).
You hereby represent and warrant that You have not
engaged in free-riding or any similar practice (each, a "Prohibited
Practice") and expressly agree to refrain from engaging in any such
Prohibited Practice during the term of this Agreement.
Notwithstanding anything to the contrary contained herein, We shall
be entitled to terminate this Agreement immediately upon the
occurrence of any breach of this Section 10.
11. You shall indemnify Us, Our officers and employees
and hold Us and them harmless for and from all claims, losses,
liabilities and expenses, including, without limitation, legal fees
and expenses arising from any claim of any party resulting from
actions We take in accordance with the provisions of this
Agreement.
12(a) We undertake to perform such duties and only such
duties as are specifically set forth in the Agreement, it being
expressly understood that there are no implied duties hereunder.
(b) IN NO EVENT SHALL WE BE LIABLE, DIRECTLY OR
INDIRECTLY, FOR ANY (i) DAMAGES OR EXPENSES ARISING OUT OF THE
SERVICES PROVIDED HEREUNDER, OTHER THAN DAMAGES WHICH RESULT FROM
OUR FAILURE TO ACT IN ACCORDANCE WITH THE REASONABLE COMMERCIAL
STANDARDS OF THE BANKING BUSINESS, OR (ii) SPECIAL OR CONSEQUENTIAL
DAMAGES, EVEN IF WE HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.
13. You will compensate Us for services provided
hereunder in accordance with the schedule of fees which has been
agreed upon. We may change the fees from time to time, such change
to be effective thirty (30) days after We send written notice to
You.
14. This Agreement may be terminated by either party
effective thirty (30) days after receipt of written notice.
15(a) Any delay or failure of either party hereto at any
time to require performance by the other party of any provision of
this Agreement shall in no way effect the right of such party to
require future performance of that or any other provision of this
Agreement and shall not be construed as a waiver of any subsequent
breach of any provision, a waiver of this provision itself or a
waiver of any other right under this Agreement.
(b) Any notice herein required or permitted to be given
may be given, except as otherwise provided by this Agreement, in
writing by depositing same in the United States mail, postage
prepaid, addressed to You at the address set forth beneath Your
signature below and to Us as follows:
<PAGE>
The First National Bank of Chicago
One First National Plaza
Chicago, Illinois 60670-0115
Attention: Account Administration
Suite# 0115, 1 Building, Floor 13
or such other address as the party to be so addressed may
designate in writing.
(c) If any of the provisions of this Agreement are
invalid under any applicable statute or rule of law, they are, to
that extent, to be deemed omitted.
(d) This Agreement (including the exhibits attached
hereto) and supplements hereto, if any, constitute the entire
agreement between You and Us relating to the subject matter hereof,
and supersede all proposals oral or written and all other
communications oral or written between the parties relating to the
subject matter of this Agreement, and except as hereafter provided,
may not be modified, except in writing, signed by the party against
whom the modification is to be enforced.
(e) We may modify the provisions of the Agreement at
any time by written notice delivered to You at least thirty (30)
days prior to the effective date of such modification.
(f) This Agreement shall be governed by the internal
laws of the State of Illinois.
IN WITNESS WHEREOF, You and We have signed this Agreement
as of this _____ day of December, 1995.
GENERAL MANUFACTURED HOUSING, INC.
(CUSTOMER NAME)
By: /s/ Gary M. Brost
Title: President
Address: 2255 Industrial Boulevard
Taxpayer I.D. No. Waycross, Georgia 31501
THE FIRST NATIONAL BANK OF CHICAGO
By:____________________________________
Title:_________________________________
<PAGE>
EXHIBIT 10.45
GENERAL MANUFACTURED HOUSING, INC.
EXECUTIVE BONUS PLAN
1. PURPOSES OF THE PLAN
The purposes of this Executive Bonus Plan (the "Plan") are to
enable General Manufactured Housing, Inc. (the "Company") to retain the
services of key employees and to provide them with increased motivation and
incentive to achieve and exceed the goals of the business consistent with
both short term and long term objectives.
2. DEFINITIONS
The following terms shall have the meanings set forth below:
(a) "Base Amount" means $8.5 million.
(b) "Board of Directors" means the Board of Directors of the
Company.
(c) "Bonus Pool" means, for each fiscal year of the Company, so
long as EBIT equals or exceeds the Base Amount for such fiscal year, 7% of
EBIT.
(d) "EBIT" means, for each fiscal year of the Company, the net
income of the Company for such year, before (i) interest expense, (ii)
taxes, (iii) amortization, (iv) amounts paid under the Company's Incentive
Compensation Plan, (v) reimbursement of the Company's expenses under
Section 19 of the Stock Purchase Agreement, (vi) the Management Fee, (vii)
costs incurred by the Company in remediating the Company's properties
pursuant to Section 14(b) of the Stock Purchase Agreement and (viii) all
compensation and benefits payable to management personnel added after the
Effective Date other than at the direction of the Chief Executive Officer
of the Company and other than in the ordinary course of the Company's
business, all as shown on the audited financial statements of the Company;
provided, that EBIT shall be determined in accordance with generally
accepted accounting principles consistent with those employed by the
Company in 1994 and reflected in its audited financial statements for such
year.
(e) "Effective Date" means January 1, 1996.
(f) "Management Agreement" means the Management Agreement dated
as of December 21, 1995 by and between Strategic Investments & Holdings,
Inc. and the Company.
(g) "Management Fee" means an amount equal to the management fee
paid pursuant to the terms of the Management Agreement.
(h) "Participant" means each of the following management
personnel of the Company: Samuel Scott, Gregory Scott, Drew Scott, Lannis
Thomas and Wayne Roberts.
(i) "Participant Percentage" means, for any Plan Year, the
percentage of the Bonus Pool allocated to a Participant, which shall be 20%
for each Participant.
(j) "Plan Year" means the fiscal year of the Company.
(k) "Stock Purchase Agreement" means that certain Stock Purchase
Agreement dated as of October 10, 1995, among Samuel P. Scott et al. and
GMH Acquisition Corp., as amended.
3. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Board of Directors or
a Compensation Committee thereof. In the event the employment of any
Participant terminates, the Board of Directors or Compensation Committee
shall have the right to designate a substitute Participant or Participants
(having an aggregate Participant Percentage not in excess of that of the
terminating Participant) or otherwise determine the disposition of the
Participant Percentage of any such terminating Participant. Any decision
by the Board of Directors or Compensation Committee regarding the
administration, interpretation or construction of any provisions of the
<PAGE>
Plan shall be final, binding and conclusive.
(b) No member of the Board of Directors or Compensation
Committee shall be liable for any action taken or omitted to be taken or
for any determination made by him or her in good faith with respect to the
Plan, and the Company shall indemnify and hold harmless each member of the
Board of Directors or Compensation Committee against any cost or expense
(including counsel fees) or liability (including any sum paid in settlement
of a claim with the approval of the Board of Directors) arising out of any
act or omission in connection with the administration or interpretation of
the Plan, unless arising out of such person's own fraud or bad faith.
(c) The Plan shall become effective upon the Effective Date.
4. INCENTIVE AWARDS
(a) If EBIT for any Plan Year does not at least equal the Base
Amount for such year, the Company shall not allocate any amounts to the
Bonus Pool. Notwithstanding the foregoing or anything to the contrary
contained herein, the Board of Directors may elect to make discretionary
bonus payments, not paid from any Bonus Pool, in order to reward and retain
such key employees as it shall deem appropriate.
(b) If EBIT for any Plan Year equals or exceeds the Base Amount
for such year, the Company shall allocate 7% of EBIT to the Bonus Pool to
be allocated among the Participants.
(c) The Bonus Pool, if any, for any Plan Year shall be
calculated and paid to the Participants, in cash, within thirty (30) days
after the Company's receipt of its audited financial statements for such
year but not later than one hundred fifty (150) days following the end of
such year; provided, however, that except as provided in paragraph (d)
hereof, no portion of the Bonus Pool shall be paid to any Participant for
any Plan Year if such Participant is not an employee of the Company at the
end of such year.
(d) In the event that a Participant is not an employee of the
Company at the end of a Plan Year because of his death, termination for
disability or retirement during such year, the portion of the Bonus Pool,
if any, payable to such Participant for such Plan Year shall be prorated to
the date of death, date of termination for disability or date of
retirement, and the portion of the Bonus Pool attributable to the part of
the Plan Year prior to such date of death, termination or retirement shall
be determined and paid to such Participant or his legal representative in
accordance with paragraph (c) above. In the event that a Participant is
not an employee of the Company at the end of a Plan Year because such
Participant has either voluntarily terminated his employment or because of
the termination of such Participant for any reason other than death,
disability or retirement during such year, no portion of the Bonus Pool for
such year shall be payable to such Participant.
(e) Any and all amounts payable under the Bonus Pool hereunder
shall be subject to (i) applicable federal, state and local tax withholding
requirements and (ii) the Company's obligations to comply with the
covenants set forth in the Company's agreements with its lenders, and
payment of any and all amounts payable under the Bonus Pool may be deferred
in order to maintain the Company's compliance with such covenants. Such
deferred amounts will be accrued until such time as they are permitted to
be paid under the Company's agreements with its lenders and shall then be
promptly paid with interest as set forth in the immediately following
sentence. Any such deferred amounts will accrue interest at the Prime
Rate, as such rate is quoted from time to time in the Wall Street Journal.
5. MISCELLANEOUS
(a) No right to receive any incentive compensation under the
Plan shall be transferable except by will or the laws of descent and
distribution. Any purported transfer contrary to this provision will be
null and void and without effect.
(b) Neither the adoption of the Plan nor its operation, nor any
document describing or referring to the Plan, or any part hereof, nor the
designation of any employee as a Participant in the Plan shall confer upon
any Participant any right to continue in the employ of the Company or shall
in any way affect the right and power of the Company to terminate the
employment of any Participant at any time with or without assigning a
reason therefor, to the same extent as might have been done if the Plan had
not been adopted.
<PAGE>
(c) By acceptance of any incentive compensation under the Plan,
the recipient shall be deemed to agree (a) to execute any and all documents
requested by the Company in connection with his or her participation in the
Plan, including an agreement to report any amounts received under the Plan
as compensation and (b) that any compensation paid hereunder will not be
taken into account as "base remuneration", "wages", "salary" or
"compensation" in determining the amount of any contribution to or payment
or any other benefit under any pension, retirement, incentive,
profit-sharing or deferred compensation plan of the Company.
(d) The place of administration of the Plan shall be in the
State of Georgia, and the validity, construction, interpretation,
administration and effect of the Plan and of its rules and regulations, and
rights relating to the Plan, shall be determined solely in accordance with
the laws of the State of Georgia.
<PAGE>
EXHIBIT 10.46
[letterhead of Nixon, Hargrave, Devans & Doyle llp]
WRITER'S DIRECT DIAL NUMBER:
(716) 853-8105
December 14, 1995
Samuel P. and Sherry J. Scott Kelly Scott Herold, Trustee
4300 South Fletcher Avenue 1230 Greenridge Road
Fernandina Beach, FL 32034 Jackonsville, FL 32207
Gregory Keith Scott Drew Eric Scott
3136-A South Fletcher Avenue 3000-B South Fletcher Avenue
Fernandina, FL 32024 Fernandina, FL 32024
RE: Stock Purchase Agreement dated October 10, 1995,
as Amended (the "Agreement")
Dear Ladies and Gentlemen:
Reference is made to the above-referenced Agreement. Pursuant to the
Agreement, we are delivering to you installment notes (the "Notes") in the
aggregate principal amount of $45,000,000 which are secured by letters of credit
issued by The First National Bank of Chicago ("First Chicago"). We have agreed
that you will be responsible for the fees, charges, costs and expenses
(including interest expenses) of First Chicago to issue and administer the
letters of credit (the "Letter of Credit Fees"). You have further agreed that
you will reimburse us for the Letter of Credit Fees upon our payment of the
principal and interest on the Notes.
If you are in agreement with the foregoing, please sign this letter
where indicated.
Sincerely,
GENERAL MANUFACTURED HOUSING, INC.
By: /s/ Samuel P. Scott
--------------------------------
Name:
Title:
AGREED AND ACKNOWLEDGED:
/s/ Samuel P. Scott
- ---------------------------
Samuel P. Scott
/s/ Sherry J. Scott
- ---------------------------
Sherry J. Scott
/s/ Gregory Keith Scott
- ---------------------------
Gregory Keith Scott
/s/ Drew Eric Scott
- ---------------------------
Drew Eric Scott
/s/ Kelly Scott Herold
- ---------------------------
Kelly Scott Herold
<PAGE>
EXHIBIT 11.1
GENERAL HOUSING, INC.
Statement re: Computations of Earnings Per Share
for the Nine Months Ended September 30, 1996
<TABLE>
<CAPTION>
Nine
Months Ended
September 30,
1996
-------------
<S> <C>
Average shares outstanding 1,364,313
Additional shares due to:
Warrants 468,500
Series B convertible preferred stock 1,771,033
-------------
Total equivalent shares 3,603,846
=============
Earnings per share:
Net income 5,206,726
less: preferred dividends (741,600)
-------------
Adjusted net income 4,465,126
Total equivalent shares 3,603,846
-------------
Earnings per share on net income $ 1.24
=============
</TABLE>
<PAGE>
EXHIBIT 16
December 30, 1996
Office of the Chief Accountant
SECPS Letter File
Securities and Exchange Commission
Mail Stop 9-5
450 Fifth Street, N.W.
Washington, D.C. 20549
I have read Item 11.(i) included in Amendment No. 1 to Form S-1 to be filed on
January 2, 1997, of General Housing, Inc. filed with the Securities and Exchange
Commission and am in agreement with the statements contained therein.
Earl A. Lawson
Blackshear, Georgia
December 30, 1996
<PAGE>
Exhibit 22
Subsidiaries of the Company
SUBSIDIARY STATE OF INCORPORATION
General Manufactured Housing, Inc. Georgia
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Jacksonville, Florida
December 27, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR OTHER
<FISCAL-YEAR-END> SEP-30-1996 DEC-30-1995 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995 DEC-31-1995
<PERIOD-END> SEP-30-1996 DEC-30-1995 DEC-31-1995
<CASH> 224,282 0 505,227
<SECURITIES> 0 0 0
<RECEIVABLES> 5,866,348 0 4,631,290
<ALLOWANCES> 0 0 0
<INVENTORY> 5,697,659 0 4,590,798
<CURRENT-ASSETS> 12,815,190 0 10,302,503
<PP&E> 4,468,426 0 4,204,748
<DEPRECIATION> 325,924 0 0
<TOTAL-ASSETS> 56,496,142 0 99,659,760
<CURRENT-LIABILITIES> 14,575,440 0 8,977,182
<BONDS> 30,479,263 0 37,702,746
7,741,600 0 7,720,000
2,150 0 2,150
<COMMON> 1,364 0 1,364
<OTHER-SE> 3,155,362 0 (1,171,014)
<TOTAL-LIABILITY-AND-EQUITY> 56,496,142 0 99,659,760
<SALES> 100,823,196 89,291,844 0
<TOTAL-REVENUES> 100,823,196 89,291,844 0
<CGS> 75,627,725 69,572,072 0
<TOTAL-COSTS> 75,627,725 69,572,072 0
<OTHER-EXPENSES> 12,586,694 11,774,090 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 3,552,462 283,159 0
<INCOME-PRETAX> 9,034,726 7,716,133 0
<INCOME-TAX> 3,828,000 465,000 0
<INCOME-CONTINUING> 5,206,726 7,251,133 0
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 5,206,726 7,251,133 0
<EPS-PRIMARY> 1.24 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
